Half Yearly Report

Highlights*

·; Adjusted earnings per ordinary share - profit 3.7 pence as at 30 June 2012 (profit 1.2 pence at 30 June 2011).

·; New lettings - 44 new lettings and 19 lease renewals achieved during the six months to 30 June 2012, (represents 8.6% of the estimated rental value of the total portfolio based on the final achievable annual rent including stepped rent).

·; Additional contracted rent- £0.4 million per annum of additional passing rent is contracted to start during the twelve months to 30 June 2013, benefitting cash flow

·; Occupancy improved - the occupancy level by estimated rental value stood at 80.6% as at 30 June 2012, compared with 78.9% as at 31 December 2011

·; Adjusted net asset value per ordinary share- 305 pence as at 30 June 2012 (311 pence at 31 December 2011)

·; Borrowings reduced - bank borrowings reduced by £0.5 million during the six months to 30 June 2012

·; Loan to value stabilised - loan to value ratio on secured borrowings of 67.9% as at 30 June 2012 (68.1% as at 31 December 2011)

3.7p

Adjusted earnings per share ("EPS") of 3.7 pence

44

44 new lettings during the period

305p

Adjusted net asset value ("NAV") of 305 pence per share

£0.5m

Bank borrowings reduced by £0.5 million over the half year

*All reference within the Highlights (unless otherwise stated) excludes CHIP (Six) Limited, a subsidiary of Alpha UK Multi Property Trust Plc. In compliance with IFRS5, the 2011 Group comparatives have been restated, as CHIP (Six) Limited's discontinued operations have been removed from continuing operations.

Contact:

Jonathan Clague

Chairman, Alpha UK Multi Property Trust Plc

01624 681250

Tom Pissarro

Investment Adviser and Manager, Alpha Real Capital LLP

020 7268 0300

For more information on the Company please visit www.alphamultipropertytrust.com 

For more information on the Company's Investment Adviser and Manager please visit www.alpharealcapital.com

FORWARD-LOOKING STATEMENTS

These results contain forward-looking statements which are inherently subject to risks and uncertainties because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements are based on the Board's current view and information known to them at the date of this Statement. The Board does not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Nothing in these results should be construed as a profit forecast.

Company summary and objectives

Objectives

Alpha UK Multi Property Trust Plc ("the Company") (together with its subsidiaries "the Group") was incorporated in the Isle of Man on 10 June 2002 and invests in higher yielding UK commercial property. The key objectives of the Company are:

·; Increase earnings and cash flow - increase occupancy in the portfolio and reduce expenses.

·; Protect and enhance asset values - prudent investment in selected portfolio properties.

·; Strengthen the balance sheet- reduce bank borrowings progressively, consistent with the investment programme for the property portfolio.

Dividends

The Company paid no dividends during the period and no dividend is currently proposed. (2011: £nil).

Listing

The Company is a closed-ended Isle of Man registered investment company which has been declared under the relevant legislation to be an Authorised Closed-Ended Collective Investment Scheme. Its shares are listed on the Official List of the UK Listing Authority and are traded on the London Stock Exchange.

Management

The Company's Investment Adviser and Manager is Alpha Real Capital LLP. Control of the Company rests with the non-executive Isle of Man based Board of Directors. The Board supports the principles of good corporate governance as set out in the UK Corporate Governance Code published by the Financial Reporting Council in May 2010.

ISA/SIPP status

The Company's shares are eligible for Individual Savings Accounts ("ISAs") and Self Invested Personal Pensions ("SIPPs").

Website

www.alphaukmultipropertytrust.com

Financial highlights (notes 14 & 15)

1. The adjusted earnings are presented to provide what the Board believes is a more appropriate assessment of the operational income accruing to the Group's activities. Hence, the Board adjusts basic earnings for income and costs which are not of a recurrent nature or which may be more of a capital nature (see note 14).

2. The adjusted net assets are presented to provide what the Board believes is a more relevant assessment of the Group's net asset position. The Board has determined that certain fair value and accounting adjustments may not be realisable in the longer term (see note 15).

*In compliance with IFRS5, the 2011 Group comparatives have been restated as CHIP (Six) Limited´s discontinued operations have been removed from continuing operations.

Chairman's statement

I am pleased to present the half year report and the condensed consolidated financial statements of Alpha UK Multi Property Trust Plc for the six months ended 30 June 2012.

Property performance

The focus has remained on active asset management within the portfolio with particular emphasis on the retention of tenants and the letting of vacant units to enhance the Group's income. While the secondary property leasing environment continues to be challenging, the Board is pleased to note the progress achieved in the period. There have been 44 new lettings and 19 lease renewals (representing a total of 8.6% of the estimated rental value ("ERV") of the total portfolio) completed since the beginning of 2012 and an improved occupancy level by ERV of 80.6% as at 30 June 2012, compared with 78.9% as at 31 December 2011. Further detail on asset management progress appears in the Investment Adviser and Manager's report.

In the context of a challenging market environment, the portfolio valuation on a like for like basis fell by just £0.5 million (0.6%) to £89.3 million at 30 June 2012.

Results

The adjusted NAV per ordinary share at 30 June 2012 is 305 pence (31 December 2011 restated* 311 pence).The majority of the moderate decline is attributable to the revaluation of investment properties during the period.

The adjusted EPS shows a profit of 3.7 pence (30 June 2011 restated *: profit of 1.2 pence). Earnings have improved considerably, following an increase in the occupancy level within the Group and an active strategy to reduce expenditure and void costs.

Bank borrowings

During the period the Group has continued its progress on reducing bank borrowings and improving its financial position. Bank borrowings of £ 0.5 million have been repaid during the half year, reducing the Group's borrowings from £61.3 million at 31 December 2011* to £60.8 million at 30 June 2012.

The renegotiation of the Group's facilities with Bank of Scotland and Nationwide which expire in the fourth quarter of 2012, is a priority and is progressing well. The Group is currently in advanced discussions with a number of lenders over the provision of senior bank debt and additional mezzanine finance. Further details are given in note 2 to the condensed consolidated financial statements and within the Investment Adviser and Manager's report.

Further details on the Group's bank borrowings are provided in note 23 to the condensed consolidated financial statements and within the Investment Adviser and Manager's report.

Convertible Unsecured Loan Securities ("CULS")

The Company's CULS are due for repayment on 30 June 2013 and based on the current share price are not expected to be converted. The Board has reasonable expectations that suitable financing arrangements will be implemented within the remaining period to maturity. Further details on the CULS are provided in note 22 to the condensed consolidated financial statements.

Continuation vote

In accordance with the articles of the Company, a continuation vote shall be put to shareholders at the annual general meeting to be held in 2013.

Independent Review report

As a result of the ongoing bank borrowings and CULS negotiations and the upcoming continuation vote in 2013 the auditors are not yet in a position to come to a conclusion on the outcome of the refinance as noted in the Independent Review report on page 9.

CHIP (SIX) Limited

There have been no further developments since the interim management statement on 10 May 2012 when the appointment of Mazars LLP as Liquidator was reported. It is not expected that the liquidation of CHIP (Six) Limited will yield any surplus assets to be attributed to the Company after discharging liabilities to creditors and meeting the costs of liquidation.

*In compliance with IFRS5, the 2011 Group comparatives have been restated as CHIP (Six) Limited´s

 discontinued operations have been removed from continuing operations.

Outlook

The Company's strategy continues to focus on preserving and improving the profile of the income from its property portfolio which improves the Group's position in refinancing its bank borrowings. Going forward the continuing reduction of borrowings from cash flow is a key part of this strategy.

Subject to the satisfactory conclusion of the refinancing negotiations, the Board believes that the Company strategy provides a strong platform from which to rebuild shareholder value over the medium term.

Jonathan Clague

Chairman

Date: 23rd August 2012

Investment Adviser and Manager's report

The Investment Adviser and Manager's strategy to deliver shareholder value will continue to focus on the following objectives:

·; To enhance net rental income - the marketing strategy for vacant units will aim to meet tenant requirements for good quality, affordable accommodation on flexible lease terms.

·; To selectively deploy capital expenditure when 'value add' opportunities are identified - a rolling programme of redecoration will continue to be undertaken however priority will be given to refurbishments where a property can be significantly enhanced to attract additional tenant demand. The Investment Adviser and Manager is also looking to identify opportunities to extend leases and or remove tenant breaks where appropriate value can be unlocked.

·; To undertake limited strategic sales - disposals may be considered where it is believed that the price likely to be achieved is accretive to shareholder returns having considered the current yield and the future realisable capital value.

·; To reduce borrowings through rental surplus and to reduce the loan to value ("LTV") ratio.

The strategy to concentrate on active asset management initiatives within the portfolio offers tangible opportunities to generate strong positive cash flow in the future.

Property Portfolio overview

*Region and sector split restated to remove the properties held by CHIP (Six) Limited in relation to discontinued operations and remains unchanged since June 2011.

The portfolio comprises a well-diversified portfolio of fifty five multi-let properties offering 528 leasable units with a total floor area of approximately 169,700 square metres (approximately 1.8 million square feet) all of which are located in the UK. The properties offer attractively priced accommodation for local and regional occupiers.

Of the total portfolio, approximately 76% is invested in light industrial property, 23% in offices and 1% in retail in terms of capital value.

Tenants have continued to favour shorter term flexible leases and against this background the weighted average lease length is 3.9 years to expiry and 2.5 years to the next tenant break.

Asset management review

The occupational market has continued to be challenging, however, the Group's flexible approach to meeting tenant demand has been successful in reducing the number of vacant units: 44 new lettings and 19 lease renewals were completed during the period, with a further 7 units under offer as at 30 June 2012. In addition tenant retention has improved with only 19 tenants (2.6% of ERV) exercising a lease break or vacating at lease end, compared with 27 tenants (3.7% of ERV) during the same period last year. Many of the leases incorporate stepped increases in rents and there is an additional £0.4 million per annum of contracted rent due to start during the next 12 months which will benefit cash flow.

The number of new lettings and tenant retention is encouraging, and accordingly notable progress has been made in increasing occupancy. Based on ERV, the occupancy level stood at 80.6% on 30 June 2012 compared to 78.9% as at 31 December 2011.

Tenant insolvency has stabilised with a similar number of tenants (7) becoming insolvent as in the same period last year.

Based on the current total portfolio ERV, which is holding up well, there is also a potential additional rent of £2.6 million per annum assuming the portfolio is fully let and income producing.

*Final achievable annual rent including stepped rents.

Valuation

On a like for like basis, the independent valuation of the portfolio, by DTZ as at 30 June 2012, has decreased by £0.5 million (-0.6%) to £89.25 million, reflecting current market and occupational conditions. The average capital value of the portfolio is £526 per square metre (£49 per square foot). The overall LTV ratio on secured bank borrowings was stable at 67.9% as at 30 June 2012 (31 December 2011*: 68.1%).

Financing

The loan facilities provided by Bank of Scotland (in respect of CHIP (One) Limited, CHIP (Three) Limited, CHIP (Four) Limited and CHIP (Five) Limited) and Nationwide (in respect of CHIP (Two) Limited) are due to expire on 31 October and 23 October 2012 respectively.

The facility provided by Bank of Scotland continues to be amortised via a repayment of £ 0.2 million per quarter, and the loan from Nationwide provided to CHIP (Two) Limited is being partially repaid through a cash sweep mechanism.

The Investment Adviser and Manager continues to pursue a refinancing package on behalf of the Group, and is in advanced discussions with a number of lenders, in order to provide a stable financing platform from which the strategy to deliver shareholder value can be executed.

UK economy

The UK economy in the year ahead is anticipated to fare better than the eurozone area as ongoing sovereign debt issues and concerns about a potential break-up of the eurozone persist. However, the eurozone issues continue to weigh heavily on UK growth and the recently revised International Monetary Fund's forecast suggests weak, but marginally positive, UK growth of 0.2% during 2012.

The UK government continues to be proactive in its attempts to promote growth. During the quarter the economy received further fiscal stimulus as the Bank of England's Monetary Policy Committee ("MPC") voted to increase its asset purchase facility by a further £50 billion. The latest tranche of stimuli now brings the total quantum of the MPC's quantitative easing to £375 billion.

Although trading conditions remain challenging for businesses due to weak domestic demand, the number of business insolvencies stabilised during June. In particular small and medium enterprises were the most improved sector with the greatest reduction in the number of business failures; conversely larger enterprises at the other end of the supply chain reported an increased number of business failures during the month.¹

Business confidence surveys reported an improvement in confidence amongst respondents, in particular from those in small and medium sized businesses². The outlook from respondents for sales, orders and profit expectations has improved from the start of 2012.

Commercial property overview

Prime stock continues to attract the majority of investor interest, however higher yielding better quality assets in good locations are beginning to see a resurgence of interest as investors are becoming increasingly aware of the opportunity for longer term value growth when purchasing at current pricing levels.

The investment market remains subdued as economic uncertainty continues to restrain investor appetite. In particular, secondary assets and regional assets have continued to struggle with weak investor sentiment as thin occupier demand, high vacancy levels and concerns over covenant strengths continue to cause difficulties for these assets.

Capital values declined across all sectors during the half year. However, total returns in the industrial sector have proven to be the most resilient as strong income returns buffer the sector from the continued declines in capital value. The Group's exposure to the industrial sector is 76% by capital value.

Conclusion

Despite the current difficult market conditions good progress continues to be made in retaining tenants and letting up the vacant properties. Accordingly, both overall occupancy levels and adjusted earnings per share have improved. The immediate goal remains to conclude the refinancing programme for the Group, which is at an advanced stage, and continue to build on the asset management success delivered in the first six months of this year.

Tom Pissarro

Alpha Real Capital LLP

Investment Adviser and Manager

Date: 23rd August 2012

¹Experian, SMEs press release 20/07/2012

²Lloyds Business In Britain Report July 2012

Statement of Directors' Responsibilities

Each of the Directors confirms that to the best of each person's knowledge and belief:

(a) the condensed consolidated financial statements comprising the condensed statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed statement of cash flows, and related notes have been prepared in accordance with IAS 34 Interim Financial Reporting.

(b) the interim management commentary includes a fair review of the information required by:

(i) DTR 4.2.7R the Disclosure & Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year;

(ii) DTR 4.2.8R of the Disclosure & Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affect the financial position or performance of the entity during the period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board,

J D Clague P Scales

Chairman Director

Date: 23rd August 2012 Date: 23rd August 2012

Independent Review report

Introduction

We have been engaged by the Company to review the condensed consolidated set of financial statements in the half year financial report for the six months ended 30 June 2012 which comprises the condensed consolidated statement of comprehensive income, condensed consolidated balance sheet, condensed consolidated statement of changes in equity, condensed consolidated cash flow statement and the related notes 1 to 26. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half year financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half year financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual consolidated financial statements of the group are prepared in accordance with IFRS. The condensed consolidated set of financial statements included in this half year financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting".

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed consolidated set of financial statements in the half year financial report based on our review.

Scope of Review

Except as explained in the following paragraph, we conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland), "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review consists of making enquiries of persons responsible for financial reporting and accounting matters and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified during an audit. Accordingly, we do not express an audit opinion.

Basis for disclaimer of review conclusion

The evidence available to us to confirm the appropriateness of preparing the condensed consolidated financial statements on the going concern basis was limited for the reasons explained below. The assumptions made by the directors in forming their conclusions on going concern are set out in note 2, basis of preparation, to the condensed consolidated financial statements. In relation to those assumptions, we have been unable to obtain sufficient appropriate evidence that the company and the group is likely to be able to meet its total funding needs by a) refinancing long term loan facilities and convertible unsecured loan stock that will mature in the next 12 months and b), raising additional finance from mezzanine lenders that is required to bridge the remaining funding gap. As a result, and in the absence of any alternative evidence available to us, we have been unable to form a conclusion, for the purposes of our review, on the applicability of the going concern basis. The condensed consolidated financial statements do not include the adjustments to the condensed consolidated financial statements that would be necessary should the going concern basis of preparation be inappropriate.

In forming our review conclusion we also evaluated the overall adequacy of the presentation of information in the condensed consolidated financial statements.

Because of the possible effect of the limitation in evidence available to us, we are unable to form a review conclusion as to whether:

·; the condensed consolidated financial statements in the half yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

In respect solely of the limitation of our work referred to above we have not obtained all the information and explanations that we considered necessary for our review conclusion.

Ernst & Young LLC

Chartered accountants

Douglas

Isle of Man

23 August 2012

Condensed consolidated statement of comprehensive income

There are no other items that require disclosure in the condensed consolidated statement of comprehensive income.

The accompanying notes on pages 15 to 34 are an integral part of this statement.

* Restated to reclassify the results of CHIP (Six) Limited from continuing operations to discontinued operations.

Condensed consolidated balance sheet  

The accompanying notes on pages 15 to 34 are an integral part of this statement

These financial statements were approved by the Board of Directors on 23 August 2012 and signed on its behalf by:

Condensed consolidated statement of changes in equity

The capital reserve includes the distributable capital reserve.

The accompanying notes on pages 15 to 34 are an integral part of this statement.

Condensed consolidated cash flow statement

The accompanying notes on pages 15 to 34 are an integral part of this statement.

*30 June 2011 Cash Flow statement has been re-presented as if CHIP (Six) Ltd has been discontinued from the start of the comparative period.

Notes to the condensed financial statements

For the six months ended 30 June 2012

1 General information

The Company

The Company was incorporated in the Isle of Man on 10 June 2002. It is a closed-ended investment company and was formed primarily for investment in UK commercial property. The registered office of the Company is IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP. The aim of the Company and its subsidiaries (together "the Group") is to seek to improve income, reduce debt and provide the prospect of long-term capital growth. The Group has no employees.

Adjusted earnings per share and Adjusted net asset value

The adjusted earnings per share and adjusted net assets are presented for the first time in half year financial statements to provide what the Company believes is a more relevant assessment of the Group's earnings and net asset position.

2 Significant accounting policies

Basis of preparation

The unaudited condensed consolidated financial information included in the half year report for the six months ended 30 June 2012, have been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority and International Accounting Standard (IAS) 34, 'Interim Financial Reporting'. The half year report should be read in conjunction with the Group's Annual Report and consolidated financial statements for the year ended 31 December 2011, which have been prepared in accordance with International Financial Reporting Standards (IFRS) and Isle of Man law.

The same accounting policies and methods of computation are followed in these condensed financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2011, which are available on the Company's website (www.alphaukmultipropertytrust.com). The Group's financial performance does not suffer materially from seasonal fluctuations.

The condensed consolidated financial statements are made up from 1 January 2012 to 30 June 2012, and have been prepared under the historical cost convention as modified by the revaluation of investment properties and the mark to market of derivative instruments.

The condensed consolidated financial statements are presented in pounds sterling and rounded to the nearest thousand unless otherwise stated. The functional and presentational currency of the Company and the Group is the pound sterling and there are no foreign exchange transactions.

The Directors considered all relevant new standards, amendments and interpretations to existing standards effective for the half year report for the six months ended 30 June 2012. IAS 12 'Income taxes' is the only amended accounting standard that has become effective since 1 January 2012. The adoption of this amendment does not have any impact on the financial position or performance of the Group.

The preparation of the condensed consolidated financial statements requires Directors to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the condensed consolidated financial statements. If in future such estimates and assumptions, which were based on the Directors' best judgement at the date of the condensed consolidated financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change.

As previously announced in the annual report and accounts, Nationwide appointed Law of Property Act receivers to manage the properties of CHIP (Six) Limited, and the Directors of CHIP (Six) Limited decided to

take steps to commence a creditors' voluntary winding-up. The Group's other banking facility agreement with Nationwide remains unaffected by this event, and the Group's banking facility agreements with Bank of Scotland with four other subsidiaries of the Company also remain unaffected. The CHIP (Six) Limited facility is not cross collateralised with any other subsidiary of the Company, or the Company itself. Therefore the position of CHIP (Six) Limited does not affect the ability of the Group to continue as a going concern.

As a result, CHIP (Six) Limited has been recognised to have left the Group for consolidation purposes. The comparative condensed consolidated statement of comprehensive income for the half year ended has been restated to show the results of the continuing and discontinued operations.

As mentioned in the Investment Adviser and Manager's report the Bank of Scotland loan facility and the Nationwide loan facility are due to expire in October 2012, and therefore need refinancing. Negotiations are ongoing with a number of banks and terms have been received from three banks. Credit committee approval of the terms has been received from one bank. However the terms received from the other lenders are not finalised and remain subject to credit committee approval. As part of the credit committee approval process the banks will undertake due diligence on the Group's cash flow projections and property portfolio and pricing will be finalised at that time. In order to complete the refinancing, the Group shall require an additional injection of capital and different avenues of funding are currently being investigated. Discussions have been held with a number of established mezzanine lenders. The Group is confident that the additional capital will be raised in a manner that is in the best interests of the existing shareholders and other interested outside parties.

In forming their view on whether it is appropriate to adopt the going concern basis in preparing the condensed consolidated financial statements, the Board have reviewed cash flow projections to December 2014 to assess whether they are able to meet the covenant terms included in the indicative terms received from the banks. The projections include assumptions on the following:

·; new financing will be in place by October 2012 based on the indicative terms received to date

·; rental income based on contracted rental income from tenants secured as at 30 June 2012

·; rental income from some of the void properties becoming occupied based on historic and anticipated vacancy periods

·; void costs and non recoverable costs reducing

·; default rates based on expected and historic patterns

·; interest charges and arrangement fees have been based on existing loan terms and the indicative loan terms proposed by the banks in current negotiations

·; raising of additional capital

However, there is uncertainty as to whether these assumptions will be met which could impact the Group's ability to refinance or meet the covenant terms.

The Board has reasonable expectation of meeting the funding requirements of the Group and on that basis, a continuation vote shall be put to shareholders at the annual general meeting to be held in 2013.

The CULS are due for repayment on 30 June 2013, and based on the current share price are not expected to be converted. Cash flow forecasts have been prepared on the assumption that the CULS will be either be repaid after a refinancing or the CULS terms are renegotiated with Alpha Real Trust Limited (formerly Alpha Tiger Property Trust Limited). The Board are of the opinion that a suitable solution will be implemented within the ten month period remaining to maturity, although no formal discussions have been conducted.

The Board has concluded that the circumstances surrounding the refinancing of the bank facilities, existing CULS, additional funding and the continuation vote represent material uncertainties that cast significant doubt upon the Group's and the Company's ability to continue as a going concern. However, whilst recognising these uncertainties, the Board has a reasonable expectation that new facilities will be successfully completed as well as finding the additional capital. Following their refinance process the Board believes shareholders will approve the continuation of the Group and therefore it is appropriate to prepare the condensed consolidated financial statements on a going concern basis. The condensed consolidated financial statements do not reflect any adjustments that would have to be made should this not be the case.

Basis of consolidation

The condensed consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 30 June each year. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. CHIP (Six) Limited was excluded from the consolidation scope as the Group has lost the power to govern the financial and operating policies of CHIP (Six) Limited.

All intra-group balances, transactions and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

3 Discontinued operations

A discontinued operation is a composition of the entity that either has been disposed of, or is classified as held for sale and:

- represents a separate major line of business or geographical area of operations;

-is a part of a single-coordinated plan to dispose of a separate major line of business or geographical area of operations; or

Prior year profit or loss from discontinued operations is presented in a single amount in the condensed consolidated of comprehensive income. This amount comprises the post tax profit or loss of discontinued operations (see note 18). The relevant notes for the prior period have been re-stated to assist comparison.

The gain on deemed disposal is calculated as the difference between proceeds received (£nil) and the net liabilities of CHIP (Six) Limited at the date of the deemed disposal.

 4 Revenue

Rental income - segmental analysis*

1 The rental information presented to the Board is in the form of the annual rent passing at the period end rather than being the rent spread on a straight line basis over the term of the lease in the way prescribed by IAS 17. Consequently the rent passing information presented to the Board is adjusted here to agree with the rental income in the condensed consolidated statement of comprehensive income.

 *Restated to reclassify the rental income of CHIP (Six) Limited from continuing operations to discontinued operations.

5 Other Income

Other income relates to insurance commission rebates negotiated by the Investment Adviser and Manager on behalf of the Group. These commission rebates continue to be shared between the Group, the Investment Adviser and Manager and the rent collection agent.

6 Segmental analysis

Property valuation - segmental analysis

The Board considers the sector and region analysis above to be the significant segmental basis for the Group. The information disclosed in this note has changed from the prior year. The category of "industrial and office" has been discarded and the properties, which made up this category, have been reallocated to either office or light industrial. This is due to a change in the way the underlying information is presented to the Board. The Board believes that the information is now presented more clearly to investors in respect of the key segmental information.

Expenses are reviewed on a total basis split between property expenses and other expenses. The Board of Directors do not believe it is cost beneficial for the Group to consider the allocation of these costs between the operating segments mentioned above.

Trade and other receivables and trade and other payables are reviewed on a total basis. Bank loans are reviewed on a facility basis as per note 23. The Board of Directors do not believe it is cost effective for the Group to consider the allocation of these assets and liabilities between the operating segments mentioned above.

7 Finance Income

The above interest income arises from financial assets classified as loans and receivables (including cash and cash equivalents) and has been calculated using the effective interest rate method.

8 Net gains and losses on loans and receivables

9 Net gains and losses on financial assets and liabilities at fair value through profit and loss

* Restated to reclassify the finance income, net gains and losses on loans & receivables, net gains and losses on financial assets and liabilities at fair value of CHIP (Six) Limited from continuing operations to discontinued operations.

10 Finance costs

* Restated to reclassify the finance costs of CHIP (Six) Limited from continuing operations to discontinued operations.

The above interest costs arise on financial liabilities measured at amortised cost using the effective interest rate method. No other losses have been recognised in respect of financial liabilities at amortised cost other than those disclosed above.

11 Total interest income and total interest expense on financial assets and financial liabilities not at fair

value through profit and loss

* Restated to reclassify bank total interest income and interest expenses on financial assets and financial liabilities of CHIP (Six) Limited from continuing operations to discontinued operations

 12 Taxation

The Group is resident in the Isle of Man for income tax purposes. The standard rate of tax on company profits in the Isle of Man is 0% except where profits are derived from Isle of Man land and property or banking business, where the standard rate is 10%. The Group is subject to Isle of Man income tax at a rate of 0% on its profits.The Group's subsidiary companies are subject to UK non-resident landlord tax at a rate of 20% on their rental profits from UK property. The Group calculates its tax in respect of UK non resident landlord tax on a subsidiary by subsidiary basis; no group reliefs are available for non-resident landlords.

Deferred taxation

The Company has not recognised a deferred tax asset in relation to the losses carried forward due to the uncertain nature of future taxable profits.

As at 30 June 2012 the Group had unused tax losses and capital allowances of £9.7 million

(31 December 2011: £9.1 million*). During the period no capital allowances were used by the Group. (31December 2011: £nil)

*Restated to reclassify the tax charge of CHIP (Six) Limited from continuing operations to discontinued operations

13 Dividends

The Company paid no dividends during the six month period. (2010: £nil).

14 Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

* Restated to reclassify the earnings per share of CHIP (Six) Limited from continuing operations to discontinued operation.

The adjusted earnings are presented to provide what the Board believes is a more appropriate assessment of the operational income accruing to the Group's activities. Hence, the Board adjusts basic earnings for income and costs which are not of a recurrent nature or which may be more of a capital nature.

The market to market movement of the interest rate hedging instruments are adjusted where the hedged facilities are currently in compliance of their banking covenants and are therefore unlikely to break prior to the expiry of the instrument.

The Group has issued CULS (see note 22) that could potentially dilute basic earnings per share in the future, but have not been included in the calculation of diluted earnings per share because they are antidilutive for the period presented.

15 Net asset value per share

The adjusted net assets are presented to provide what the Board believes is a more relevant assessment of the Group's net asset position. The Board has determined that certain fair value and accounting adjustments, as adjusted in the above table, may not be realisable in the longer term.

16 Investment properties

The fair value of the Group's investment property at 30 June 2012 and 31 December 2011has been arrived at on the basis of valuation carried out at that date by DTZ Debenham Tie Leung, independent valuers not connected with the Group. The valuation, which was carried out in accordance with the Royal Institute of Chartered Surveyors ("The Red Book") Appraisal and Valuation Standards (8th Edition 31 March 2012), was arrived at by reference to market evidence of transaction prices for similar properties, together with valuation techniques consistent with those used in the 31 December 2011 valuation. The properties were valued individually.

The approved RICS definition of market value is the "estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion."

The Group has pledged investment properties valued at £89.3 million to secure borrowings (note 23).

17 Trade and other receivables

Payment terms for rental debtors are typically quarterly in advance.

As at 30 June 2012, receivables with a value of £0.2 million (31 December 2011: £0.1million) were impaired and fully provided. During 2012, £0.1 million was provided in the year (31 December 2011: £0.1 million provided).

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

18 Discontinued operations & net gain on disposal of CHIP (Six) Limited

As previously announced, CHIP (Six) Limited is no longer controlled by the Group and has been deconsolidated as a consequence with effect from 28 February 2012. The results of CHIP (Six) Limited for the half year ended 30 June 2011 and the period to 28 February 2012 are included in discontinued operations in the Group's condensed consolidated statement of comprehensive income. A single amount is shown on the face of the condensed consolidated statement of comprehensive income comprising the post-tax result of discontinued operations. As a result, the income and expenses of CHIP (Six) Limited are reported separately from the continuing operations of the Group. The table below provides further details of the amount shown on the condensed consolidated statement of comprehensive income for the half year ended 30 June 2011 and 30 June 2012, which conforms with the style of presentation of IFRS 5.

During the half year ended 30 June 2011, discontinued operations contributed to a net inflow of £0.46 million to the Group's net operating cash flows, a net outflow of £0.01 million to the Group's net investing activities and a net outflow of £0.63 million to the Group's net financing activities.

During the half year ended 30 June 2012, discontinued operations to the 28 February 2012 contributed to a net outflow of £0.07 million to the Group's net operating cash flows and zero to the Group's net financing and investing activities. Those flows, together with the deconsolidation of the cash held by CHIP (Six) Limited at 28 February 2012 (below) are shown as a single cash flow on the condensed consolidated cash flow.

Nationwide has utilised CHIP (Six) Limited blocked cash of £0.25 million to settle the interest payment that was due in January 2012.

Net gain on disposal of CHIP (Six) Limited

The difference between proceeds received (£nil) and the negative net asset value of CHIP (Six) Limited of £131k at 28 February 2012 is reflected as a gain on the deemed disposal of CHIP (Six) Limited in the condensed consolidated statement of comprehensive income.

19 Interest rate hedging instruments

The Group uses interest rate hedging arrangements to mitigate its exposure to interest rate changes. There has been no change to the hedging arrangements during the period, apart from the sale of the cap instrument held by CHIP (One) Limited.

The Directors have elected not to apply hedge accounting rules under IAS 39 on the hedging arrangements. Any gains or losses in the fair value of these derivatives are recognised immediately in the condensed consolidated statement of comprehensive income.

The exposure of the Group to movements in interest rates has been mitigated by the Group's subsidiaries entering into interest rate swaps and an interest rate cap as detailed below.

Bank of Scotland

The interest rate swap for the amount of £47.0 million entered into by CHIP (Four) Limited (on behalf of itself, CHIP (One) Limited, CHIP (Three) Limited and CHIP (Five) Limited) has the effect of fixing the Group's exposure on certain borrowings from 29 December 2010. The interest rate swap runs until 31 October 2012 and fixes the rate at 2.25% before the margin and mandatory costs. As at 30 June 2012, the market value of this swap was a liability of £0.23 million (31 December 2011*: £0.5 million).

The interest rate cap for the amount of £47.0 million entered into by CHIP (Four) Limited (on behalf of itself, CHIP (One) Limited, CHIP (Three) Limited and CHIP (Five) Limited) has the effect of capping the Group's exposure on certain borrowings from 31 October 2012. The interest rate cap ran until 31 October 2015 and capped the rate at 5.00% before the margin and mandatory costs. In the first quarter of 2012, the market for interest rate swaps suggested there was little medium term benefit in holding the interest rate cap, and the interest rate cap was sold for £ 48,000 on 6th March 2012, resulting in a loss of £32,000. As at 31 December 2011 the market value was £0.1 million.

Nationwide

The interest rate swap for the amount of £8.0 million entered into by CHIP (Two) Limited has the effect of fixing the Group's exposure on certain borrowings from 15 October 2009. The interest rate swap runs until 23 October 2012 and fixes the rate at 2.79% before the margin and mandatory costs. As at 30 June 2012, the market value of this swap was a liability of £0.05 million (31 December 2011: £0.1 million).

20 Trade and other payables

Trade payables are non-interest bearing and are settled within normal business terms.

21 Investment Adviser and Manager's incentive fee

An incentive arrangement will come into effect either upon the Shareholders voting to continue or wind up the Group at a meeting of the Company to be held on or after 30 June 2013. At that time if the annual rate of return has been 15% or more for the period from 10 August 2010 until 30 June 2013, then the Investment Adviser and Manager will be entitled to 20% of the excess above that target level of return.

No incentive fee is provided for at 30 June 2012 (30 June 2011: £nil) as the target level of return to Shareholders was not achieved.

22 Convertible unsecured loan stock

The Company accounts for CULS as a compound financial instrument, which comprises a liability and equity component. The liability component is presented within the liabilities section and the equity component is included within the equity section of the condensed consolidated balance sheet.

The liability element of the CULS was measured by determining the net present value of all the future cash flows under the instrument, discounted at the market rate at the time of issue. The discount rate of 13% was determined by reference to similar mezzanine lending transactions at that time.

The table shows the opening position of the CULS including associated issue costs, followed by the subsequent issue of CULS in satisfaction of interest payments, the accrual for the 18% premium and the amortisation of the associated issue costs.

The CULS bears interest at the rate of 4.75% per annum payable quarterly, in arrears, on a compounded basis on 1 January, 1 April, 1 July and 1 October. The Company may, at its sole discretion, choose to satisfy any interest payment in cash or by the issue of further CULS.

The CULS can be converted to ordinary shares at any time on or before 30 June 2013 at a price of £3.10 per share.

If the CULS are not converted the Company shall redeem any outstanding CULS (together with any CULS issued in satisfaction of interest payments) on 30 June 2013 in full at par plus a payment of a premium of 18%.

23 Bank borrowings

Nationwide Building Society loans

A facility agreement has been entered into between the Nationwide Building Society ("Nationwide") and CHIP (Two) Limited whereby Nationwide has made available a term loan facility for up to £9.8 million. Of this total loan £8.0 million has been fixed at the rate of 2.79% plus a margin of 2.5% per annum; the balance is subject to interest at LIBOR plus a margin of 2.5% per annum. The facility is repayable on 23 October 2012. An event of default (as defined in the facility agreement) is triggered if, inter alia, the amount of the loan facility exceeds 75% before 31 March 2011 and 65% thereafter of the value of the properties over which Nationwide has security. In addition, the ratio of gross rental income to interest shall not be less than 160%. The facility is secured by a legal charge and debenture over the property assets of CHIP (Two) Limited. As at 30 June 2012 the LTV stood at 63.5% (31 December 2011: 64.7%), and the gross rental income to interest ratio was compliant. The facility requires CHIP (Two) Limited to use surplus rents to reduce the outstanding debt on a quarterly basis. Surplus rent of £0.1 million has been used to repay the facility during the period (June 2011: £0.26 million).

In addition CHIP (Two) Limited was required to deposit £0.2 million (June 2011 and Dec 2011:£0.2 million) in a blocked account over which Nationwide has sole signing rights. Withdrawals from these blocked accounts will be permitted only at Nationwide's sole discretion. The funds placed in these blocked deposit accounts have been included in "Restricted cash" in the condensed consolidated balance sheet.

Bank of Scotland loans

The facility is between the Bank and the Company and its subsidiaries, CHIP (One) Limited, CHIP (Three) Limited, CHIP (Four) Limited and CHIP (Five) Limited for an amount up to £54.1 million.

Interest is payable at a rate equal to LIBOR, plus the mandatory costs of Bank of Scotland, plus a margin of 2.6% per annum. The facility is repayable on 31 October 2012 although, if an event of default (as defined in the facility agreement) were triggered, it would be repayable on first demand by Bank of Scotland. The facility agreement contains standard events of default and covenants for bank facilities of this nature. An event of default (as defined in the facility agreement) will be triggered if, inter alia, the amount of the loan facility exceeds 90% of the value of the underlying security. The facility is secured by a legal charge and debenture over the property assets of the relevant subsidiaries. As at 30 June 2012 the LTV stands at 68.7% (31 December 2011: 68.8%).

Other financial covenants require that the net rental income of the secured properties shall not be lower than 125% of interest for any test period. During the period the net rental income to interest ratio covenant was adhered to. The facility also requires quarterly loan repayments of £0.2 million. During the period, £0.4 million was repaid (June 2011: £0.4 million, Dec 2011:£0.8 million).

Should any of these covenants be breached then the margin of the new funding will increase by a further 2.6% per annum and will remain at this rate until such a time the breach is remedied.

24 Share capital and related reserves

An option has been granted to Alpha Real Trust Limited enabling it to purchase 4 million Ordinary Shares at £0.50 per share, subsequently varied to 0.4 million shares at £ 5.00 per share under the terms of the option agreement for the effect of the share consolidation 1 July 2011. The current fair value of this option is deemed to be insignificant due to the fact the current quoted price and NAV per share is below the option value of £5.00 per share.

* Following the share consolidation that took place on 1 July 2011, the ordinary shares and preference shares are restated

Deferred shares

The deferred shares rank after ordinary and deferred shares and carry no voting rights. At the Company's Extraordinary General Meeting on 9 August 2010 the shareholders approved composite resolutions effecting a 100 for 1 subdivision of the Company's deferred shares with consequential effect on the numbers of deferred shares.

Preference shares

The preference shares rank pari passu with ordinary shares save that they shall not be entitled to receive a dividend. On return of capital their par value shall be repaid in priority to holders of the ordinary shares (but shall not be entitled to any other capital return) and shall carry one vote on all resolutions other than those relating to listing or prospectus rules. Based on this the preference shares do not meet the criteria under IAS 32 in order to be classified as equity and therefore have been classified as a financial liability and included with trade and other payables.

Voting and other rights

Holders of Ordinary shares and Preference shares are entitled to one vote for each share held. Deferred shares carry no voting rights.

Dividends

Holders of Ordinary shares are entitled to receive dividends as and when declared by the Company.

Winding up

On a winding-up, the surplus assets remaining after payment of all creditors, including payment of bank borrowings and repayment of par value to Preference share holders, shall be divided pari passu among the holders of Ordinary shares in proportion to the capital paid up on the shares held at the commencement of the winding-up. Deferred shares holders will be entitled to an amount equal to their nominal holding.

Distributable capital reserve

This is a distributable reserve out of which distributions can be made to the shareholders and arose on the cancellation of the share premium account.

Capital redemption reserve

This is a non-distributable reserve that is required under Isle of Man Companies Act 1931 and arises on cancellation of issued share capital.

Other reserves

This is the equity element of the convertible unsecured loan stock (see note 22).

25 Related party transactions

Mr Philip Scales, a director of the Company, is also a director and an employee of IOMA Fund and Investment Management Limited (the Administrator and Registrar). During the period net fees of £0.05 million (30 June 2011: £0.1 million) were payable to IOMA Fund and Investment Management Limited. As at 30 June 2012 a total amount of £27,750 (31 December 2011: £29,059) was outstanding.

Mr Phillip Rose, a director of the Company, is also chief executive officer of Alpha Real Capital LLP (the Investment Adviser and Manager). During the period net fees of £0.7 million (30 June 2011: £0.8 million) were payable to Alpha Real Capital LLP. As at 30 June 2012 a total amount of £0.5 million, including historical fees (31 December 2011: £0.7 million) was outstanding. Mr Rose is also a director of Alpha Real Trust Limited ("Alpha Real"). Alpha Real Capital LLP is also a major investor in Alpha Real. During the period the Company issued a further £0.12 million (30 June 2011: £0.1 million) of CULS and attached preference shares to Alpha Real as detailed in notes 22 and 24.

The Directors of the Company received total fees as follows:

Six months ended Year ended

30 June 2012 31 Dec 2011

Jonathan David Clague £10,000 £20,000

Geoffrey Paul Raineri Black £7,500 £15,000

Donald Lake £7,500 £15,000

Peter Philip Scales £7,500 £15,000

Phillip Rose £7,500 £15,000

The Directors' interests in the shares of the Company are detailed below:

30 June 2012 31 Dec 2011

shares held shares held

Jonathan David Clague 15,500 15,500

Geoffrey Paul Raineri Black 7,000 7,000

Donald Lake 32,900 32,900

Peter Philip Scales - -

Phillip Rose - -

26 Events after balance sheet date

On 10 July 2012 the Group paid £90,704 to Nationwide in respect of the quarterly repayment of debt from surplus rent for its subsidiary Chip (Two) Limited. This repayment reduced the outstanding debt under the loan facility to £8.8 million.

On 13 July 2012 the Group paid £0.2 million to Bank of Scotland as its quarterly repayment of debt under the loan facility. This repayment reduced the outstanding debt under the loan facility to £51.6 million.

Directors and Advisers

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