Half Yearly Report

ALPHA UK MULTI PROPERTY TRUST PLC

(THE "COMPANY" OR THE "GROUP")

ALPHA UK MULTI PROPERTY TRUST PLC POSTS RESULTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2013:

Highlights*

· Net asset value per ordinary share- 224 pence as at 30 June 2013 (248 pence at 31 December 2012).

· Adjusted earnings per ordinary share - 9.3 pence as at 30 June 2013 (3.7 pence at 30 June 2012).

· Three sales completed above valuation- three properties were sold at a total sale price of £3.05 million between March and June 2013.

· New lettings - 35 new lettings and 12 lease renewals achieved during the six months to 30 June 2013, (represents 7.04% of the estimated rental value of the total portfolio based on the final achievable annual rent including stepped rent).

· Additional contracted rent- £0.6 million per annum of additional passing rent is contracted to start during the twelve months to 30 June 2014, benefitting cash flow.

· Occupancy improved - the occupancy level by estimated rental value stood at 83.3% as at 30 June 2013 compared with 80.8% as at 31 December 2012.

· Borrowings reduced - bank borrowings reduced by £3.3 million during the six months to 30 June 2013. The Group is currently in active negotiations to refinance its loan facilities within the current extension periods granted by its lenders.

· Loan to value ("LTV") - loan to value ratio on secured borrowings of 72.3% as at 30 June 2013 (71.3% as at 31 December 2012).

9.3p

Adjusted earnings per share of 9.3 pence

83.3%

Occupancy rate increased to 83.3%

224p

Net asset value of 224 pence per share

£3.3m

Bank borrowings reduced by £3.3 million over the half year

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, through rental surplus consistent with the investment programme for the property portfolio.

Dividends

The Company paid no dividends during the period and no dividend is currently proposed. (2012: £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 September 2012 and is applicable for accounting periods commencing on or after 1 October 2012.

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

1. 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).

2. 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).

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 2013.

Property performance

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. In what remains a challenging market the Group has achieved 35 new lettings and 12 lease renewals increasing occupancy levels by ERV across the Group by 2.5% to 83.3% as at 30 June 2013 compared with 80.8% as at 31 December 2012. 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 £3.0 million (-3.6%) to £78.6 million at 30 June 2013 during the six month period. An evaluation of the Group's property portfolio performance can be found in the Investment Adviser and Manager's report.

Results

The NAV per ordinary share at 30 June 2013 is 224.4 pence (31 December 2012: 248.5 pence).The decline is attributable to the revaluation of investment properties during the period.

Results for the period show adjusted EPS of 9.3 pence (30 June 2012: 3.7 pence). Adjusted earnings have improved largely through a reduction in finance costs.

Bank borrowings

The Group remains in discussions with existing lenders, Bank of Scotland and Nationwide Building Society, and alternative banks and providers of capital regarding the refinancing of the Group's loan facilities. While negotiations continue, the Group's facility with Nationwide in respect of the Company's wholly owned subsidiary, CHIP (Two) Limited has been extended to 30 August 2013. CHIP (Two) Limited breached its LTV covenant with Nationwide on 12 June 2013 which was formally recognised by the bank. The Group's facility with Bank of Scotland in respect of the Company's wholly owned subsidiaries, CHIP (One) Limited, CHIP (Three) Limited, CHIP (Four) Limited and CHIP (Five) Limited has been extended to 30 November 2013.

During the period Group debt was reduced by £3.3 million to £56.8 million at 30 June 2013 (December 2012: £60.1 million). Further details on the Group's bank borrowings are provided in note 23 and within the Investment and Adviser and Manager's report.

Convertible Unsecured Loan Securities ("CULS")

In accordance with the subscription agreement with Alpha Real Trust Limited of 13 July 2010, the Company has redeemed all the outstanding CULS (together with any CULS issued in satisfaction of interest payments) on the redemption date of 30 June 2013 in full at par plus the payment of the premium of 18 per cent. This redemption amount was £6.43 million in total.

The preference shares stapled to the CULS have automatically been redeemed and the associated options have expired without being exercised.

In order to finance the redemption of the CULS the Company has entered into a loan agreement in which Alpha Real Trust Limited has provided an unsecured loan to the Company for £6.43 million.

The term of the loan agreement is six months to 31 December 2013, which is extendable by five years to 31 December 2018 by the consent of both the Company and Alpha Real Trust Limited. The Company may voluntarily prepay the loan at any time by giving 5 days' notice. The coupon of the loan is 15% per annum compounded quarterly. Alpha Real Trust Limited has indicated its willingness to support the Company in the refinancing of its loan facilities. There is no binding agreement in place.

Continuation vote

In accordance with the articles of the Company, a continuation vote

was put to shareholders at the annual general meeting held on 18 June 2013. The shareholders voted for the Company to continue trading for another three years until 18 June 2016.

Independent Review Report

As a result of the on-going bank negotiations and the uncertain outcome, the auditors have been unable to form a conclusion on the applicability of the going concern basis as noted in the Independent Review report on page 10.

CHIP (Six) Limited

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. The liquidator remains appointed to CHIP (Six) Limited and there will be no additional expenses to the Group.

The Board

Philip Rose retired from the Group on 17 April 2013 and Mark Rattigan, formerly an alternate director of the Company, was appointed as director on 17 April 2013. 

Going concern

The Board has concluded that the Company and the Group is considered to be a going concern and as a result of this the condensed consolidated financial statements for the six month period ended 30 June 2013 have been prepared on the going concern basis. In concluding that it is appropriate to prepare the financial statements on a going concern basis the Board has made assumptions that the current loan facilities will be refinanced. Further detail on the accounts preparation basis is provided in note 2 to the financial statements.

Outlook

Alpha UK Multi Property Trust Plc is clear on its priorities which were set out in its Annual Report. Our aim and the principal risk of the Group is the securing of the refinancing of its loan facilities and to make further progress in preserving and improving the profile of income from its property portfolio.

Subject to the satisfactory conclusion of the refinancing negotiations, the Board believes that the Group's strategy shall provide a platform from which the Group and Company can rebuild value.

Jonathan Clague

Chairman

Date: 22 August 2013

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 maintenance 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 are 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 will benefit shareholder returns.

· 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

The portfolio comprises a well-diversified portfolio of fifty four multi-let properties offering 509 leasable units with a total floor area of approximately 164,500 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 82% is invested in light industrial property, 17% 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 3.5 years to expiry and 2.3 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: 35 new lettings and 12 lease renewals were completed during the period, with a further 7 units under offer as at 30 June 2013. Many of the leases incorporate stepped increases in rents and there is an additional £0.6 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 83.3% on 30 June 2013 compared to 80.8% as at 31 December 2012.

Tenant insolvency has reduced with 5 tenants, accounting for 0.8% of ERV, becoming insolvent compared with 7 tenants (1.1% of ERV) in the same period last year.

Based on the current total portfolio ERV, there is also a potential additional rent of £2.4 million per annum assuming the portfolio becomes fully let and income producing.

*Final achievable annual rent including stepped rents.

Property Sales

In keeping with the Board's strategy to undertake limited strategic sales, two light industrial units, which formed part of a larger multi-let estates, were sold in March and June 2013 to owner-occupiers. During April 2013 a part vacant multi-let office investment was also sold. The investments, at a combined sale price of £3.05 million, sold in excess of their most recent valuation.

Valuation

The Group's property portfolio was valued at 30 June 2013 by DTZ Debenham Tie Leung Limited at £78.6 million. Three properties were sold between March and June 2013 and therefore on a like for like basis the valuation of the portfolio decreased by £3.0 million (-3.6%) from £81.6 million at 31 December 2012 to £78.6 million on 30 June 2013. The decrease in value reflects current market and occupational conditions. The average capital value of the portfolio is £474 per square metre (£44 per square foot). The overall LTV ratio on secured bank borrowing was 72.3% as at 30 June 2013 (71.3 % as at 31 December 2012).

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 30 November and 30 August 2013 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 and equity or mezzanine finance providers , in order to provide a stable financing platform from which the strategy to deliver shareholder value can be executed.

UK economy

The UK economy showed signs of improving from a period of stable output back to growth in the first six months of the year. Building on the 0.3% growth in GDP reported during the first quarter of the year, preliminary estimates from the Office of National Statistics indicate that the GDP output increased by 0.6% in the second quarter of 2013.

Coinciding with the return to growth in economic output, inflation started to gather momentum in the first half of 2013. Consumer Price Index inflation increased to 2.8% in the year to July 2013, approaching the 3.0% upper limit of the Bank of England's target band. The Monetary Policy Committee continues to steer fiscal policy toward reducing this rate closer to the target level of 2% in the medium term, however the challenge ahead will be to balance the trade-off between growth and inflation in the recovering economy.

The labour market has remained resilient during the six months to June 2013, with 29.71 million people in employment from March to May 2013, a small increase of 16,000 from the preceding three month period and a 336,000 increase compared with the same period in 2012.

Commercial Property

Further signs of recovery were seen during the quarter as both sentiment and occupier demand continued to improve in the UK commercial property market. Market indices reported marginal growth in commercial property values, overall, for the first time in 18 months.

Whilst the majority of secondary regional assets (which best categorises the Group's property portfolio) continued to see declines in value during the period the rate of decline has slowed significantly and values are beginning to stabilise. Selected regions are beginning to see positive growth in value, in particular the office and industrial markets located in the South East.

Investment activity in prime property assets has been robust since the start of the year with CBRE reporting that transactions totalling £13.4 billion overall have completed in the year to May. Central London continues to dominate the transaction market with more than half of transactions by value taking place in the Capital.

Conclusion

There are signs that the occupational market is improving and the increased occupancy across the portfolio is encouraging. Adjusted earnings per share have also continued to improve. However, there has been downward pressure experienced on the Group's property valuation . The immediate goal remains to conclude the refinancing of the Group's portfolio and to build on the asset management success delivered over the first six months of the year.

Tom Pissarro

Alpha Real Capital LLP

Investment Adviser and Manager

Date: 22 August 2013

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 affected 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 P Scales

Chairman Director

Date: 22 August 2013 Date: 22 August 2013

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 2013 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 25. 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 Conduct 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. Because of the matters set out in the Basis for disclaimer of review conclusion paragraph, we were unable to complete 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. A review of interim financial information consists of making enquiries, primarily 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 that will mature in the next 6 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.

Disclaimer of review conclusion

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 set of financial statements in the half yearly financial report for the six months ended 30 June 2013 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 Conduct Authority.

Ernst & Young LLC

Chartered accountants

Douglas

Isle of Man

22 August 2013

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 16 to 36 are an integral part of this statement

Condensed consolidated balance sheet

The accompanying notes on pages 16 to 37 are an integral part of this statement

These financial statements were approved by the Board of Directors on 22 August 2013 and signed on its behalf by:

The capital reserve includes the distributable capital reserve.

The accompanying notes on pages 16 to 36 are an integral part of this statement.

The accompanying notes on pages 16 to 36 are an integral part of this statement.

Notes to the financial statements

For the six months ended 30 June 2013

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 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 2013, have been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct 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 2012, 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 2012, 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 2013 to 30 June 2013, and have been prepared under the historical cost convention except for investment property that has been measured at fair value.

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 is 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 2013. IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Involvement with Other Entities & IFRS 13 Fair Value Measurement have become effective since 1 January 2013.

At the date of approval of these financial statements, IFRS 10, IFRS 11, IFRS 12 and IFRS 13 have now become effective for the financial year and have been adopted.

As expected the adoption of the IFRS 10, 11 & 12 did not have a material impact on the Group's financial statements in the year. However the adoption of IFRS 13 did have an impact on the disclosures of investment properties as noted in note 16.

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.

Going concern

As mentioned in the Investment Adviser and Manager's report the Bank of Scotland loan facility and the Nationwide loan facility expired in October 2012, and have since then been extended to 30 November 2013 and 30 August 2013 respectively. CHIP (Two) Limited breached its LTV covenant with Nationwide on 12 June 2013 which was formally recognised by the bank. Discussions with Bank of Scotland and Nationwide and alternative banks and providers of capital are continuing in order to pursue a further extension to, or refinancing of, the facilities.

Negotiations are on-going with a number of banks and terms have been received from one bank . However the terms received from the lender 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 additional funding, and different avenues are currently being investigated. Discussions have been held with a number of established mezzanine lenders and initial terms have been received. The Board is confident that the additional funding 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 2015 to assess whether they are able to meet the covenant terms included in the indicative terms received from the banks and lenders. These projections include the following assumptions:

· new financing will be in place by November 2013 based on the indicative terms received to date

· rental income based on contracted rental income from tenants secured as at 30 June 2013

· 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

· current property valuations apply, and there is no valuation change assumed from occupancy or market movement.

· raising of additional funding

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 Company has redeemed all the outstanding CULS (together with any CULS issued in satisfaction of interest payments) on the redemption date of 30 June 2013 in full at par plus the payment of the premium of 18 per cent. This redemption amount was £6.43 million. In order to finance the redemption of the CULS the Company has entered into a loan agreement in which Alpha Real Trust Limited will provide an unsecured loan to the Company for £6.43 million. The term of the loan agreement is six months to 31 December 2013, which is extendable by five years to 31 December 2018 by the consent of both the Company and Alpha Real Trust Limited. Alpha Real Trust Limited has indicated its willingness to support the Company in the refinancing of its loan facilities. There is no binding agreement in place.

The Board has concluded that the circumstances surrounding the refinancing of the bank facilities, additional funding from mezzanine lenders and the extension of the loan from Alpha Real Trust Limited beyond 31 December 2013 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. Therefore the Board believes 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 period. 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.

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

Valuation of investment property

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group ensures the use of suitable qualified external valuers to value the investment properties and determine their fair value.

Investment property is initially recognised at purchase cost plus directly attributable acquisition expenses. Investment properties are carried at a revalued amount which is stated at its fair value as determined on an open market basis as at the reporting date. The fair value of investment property is based on valuation by an independent valuer who holds a recognised and relevant professional qualification and who has recent experience in the location and category of the investment property being valued.

The fair value of investment property generally involves consideration of:

· Market evidence on comparable transactions for similar properties;

· The actual current market for that type of property in that type of location at the reporting

date and current market expectations;

· Rental income from leases and market expectations regarding possible future lease terms;

· Hypothetical sellers and buyers, who are reasonably informed about the current market

and who are motivated, but not compelled, to transact in that market on an arm's length

basis; and

· Investor expectations on matters such as future enhancement of rental income or market

conditions.

Gains and losses arising from changes in fair value are included in the Statement of Comprehensive Income in the period in which they arise. Purchases and sales of investment property are recognised when contracts have been unconditionally exchanged and the significant risks and rewards of ownership have been transferred.

An item of investment property is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the Statement of Comprehensive Income in the period the item is derecognised. Investment properties are not depreciated.

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 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.

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 based on property occupational type and location, and is consistent with the information presented to the Board for review.

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

.

10 Finance costs

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

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 2013 the Group had unused tax losses and capital allowances of £8.7 million

(31 December 2012: £9.5 million). During the period no capital allowances were used by the Group. (31 December 2012: £nil).

As reported in the annual report and consolidated financial statements for the year ended 31 December 2012, the Group was in discussion with HMRC over certain claims of intergroup interest as a deductible expense. HMRC has completed its enquiries into the Group subsidiaries for the tax years ending 5 April 2005 to 5 April 2011. These years are now closed with no amendments.

13 Dividends

The Company paid no dividends during the six month period. (2012: £nil).

14 Earnings per share

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

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.

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

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value of the Group's investment property at 30 June 2013 and 31 December 2012 has 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 Institution 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 2012 valuation. The valuation model is based on comparable market evidence derived from observable market data, derived from an active and transparent market. The properties were valued individually.

Valuations are based on what is determined to be the highest and best use. When considering the highest and best use a valuer will consider, on a property by property basis, the highest value which will include its actual and potential uses given current market conditions. Where the highest and best use differs from the existing use, the valuer will consider the cost and the likelihood of achieving and implementing this change in arriving at its valuation.

Fair value methodology

Under IFRS 13, companies now must disclose fair values according to a "fair value hierarchy," which

categorises the inputs used in valuation techniques into three levels. The hierarchy gives the highest priority

(Level 1) to quoted prices in active markets for identical assets or liabilities and the lowest priority (Level 3) to

unobservable inputs

The different levels of the fair value hierarchy are explained below:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date.

Level 2 - Use of a model with inputs (other than quoted prices included within Level 1) that are directly or indirectly observable market data.

Level 3 - Use of a model with inputs that are not based on observable data.

£'000 Level 1 Level 2 Level 3

Total investment property - - 78,580

The Group has pledged investment properties valued at £78.5 million to secure borrowings (note 23).

The current weighted unexpired term to lease expiry is 3.5 years and 2.3 years to the earlier of first tenant break or lease expiry.

The table below presents the sensitivity of the valuation to changes in the most significant assumptions underlying the valuation on completed investment property

Market value is based on active market information, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, alternative valuation methods are used, such as recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices, or discounted cash flow projections. The principal assumptions underlying the estimation of market value are those related to the receipt of contracted rental income, expected future market rental income, void periods, lease incentives, maintenance requirements and appropriate yields/discount rates. These valuations are regularly compared to actual market yield data and actual transactions by the Group and those reported by the market.

In categorising which level of the fair value hierarchy applies to the Group's investment properties, consideration is given to the inputs used by the Group's valuer in determining the fair value. As mentioned above observable market data such as transactions involving similar properties and relevant market yield data is used in determining the fair value. In addition there are also a number of unobservable inputs including the state and condition, expected void period, location, in-place leases, development potential and infrastructure which are considered by the valuer.

As the inputs used are categorised in different levels of the fair value hierarchy, the fair value measurement is categorised in its entirety on the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The below table shows the unobservable inputs of weighted average passing rent per square foot and weighted average estimated rental value per square foot which have been split based on the appropriate sector and region:

17 Trade and other receivables

Payment terms for rental debtors are typically quarterly in advance.

As at 30 June 2013, receivables with a value of £0.031 million (31 December 2012: £0.1million) were impaired and fully provided. During 2013, £0.09 million was provided in the period (31 December 2012: £0.08 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 are included in discontinued operations in the Group's consolidated statement of comprehensive income for the year to 31 December 2012. 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 2012, which conforms with the style of presentation of IFRS 5.

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.

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 £86k 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 has used interest rate hedging arrangements to mitigate its exposure to interest rate changes. There is currently no interest rate swap arrangement or other hedging agreement in place during the extension period.

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 was 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) had the effect of fixing the Group's exposure on certain borrowings from 29 December 2010. The interest rate swap fixed the rate at 2.25% before the margin and mandatory costs. The interest rate swap expired on 31 October 2012.

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) had the effect of capping the Group's exposure on certain borrowings from 31 October 2012. The interest rate cap capped the rate at 5.00% before margin and mandatory costs. There was little medium benefit in holding the interest rate cap and was sold for £48,000 on 6 March 2012. There are no current intentions to enter into any further swap or cap agreements.

Nationwide

The interest rate swap for the amount of £8.0 million entered into by CHIP (Two) Limited had the effect of fixing the Group's exposure on certain borrowings from 15 October 2009. The interest rate swap fixed the rate at 2.79% before margin and mandatory costs. The interest rate swap expired on 23 October 2012. There are no current intentions to enter into a further swap agreement during the extension period.

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 came into effect upon the Shareholders voting to continue or wind up the Group at a meeting of the Company held on 18 June 2013. At that time if the annual rate of return has been 15% or more for the period from 10 August 2010 until 31 December 2013, then the Investment Adviser and Manager will be entitled to 20% of the excess above that target level of return. This annual rate of return was not achieved and therefore no incentive fee was payable.

No incentive fee is provided for at 30 June 2013 (30 June 2012: £nil) as the target level of return to Shareholders was not achieved.

22 Convertible unsecured loan stock and loan from Alpha Real Trust Limited

Convertible unsecured loan stock

Loan from Alpha Real Trust Limited

The Company accounted for CULS as a compound financial instrument, which comprised a liability and equity component. The liability component was 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 could have been converted to ordinary shares at any time on or before 30 June 2013 at a price of £3.10 per share. However, they have not been converted to ordinary shares on 30 June 2013. The loan provided by Alpha Real Trust Limited has been used to redeem any outstanding CULS on 30 June 2013.

In accordance with the subscription agreement with Alpha Real Trust Limited of 13 July 2010, the Company redeemed all the outstanding CULS (together with any CULS issued in satisfaction of interest payments) on the redemption date of 30 June 2013 in full at par plus the payment of the premium of 18 per cent. This redemption amount was £6.43 million.

The preference shares stapled to the CULS have automatically been redeemed and the associated options have expired without being exercised.

On 1 July 2013, the Company entered into a loan agreement in which Alpha Real Trust Limited provided an unsecured loan to the Company for £6.43 million. The proceeds of the loan have been applied to finance the redemption of the CULS.

 The term of the loan agreement is six months to 31 December 2013, which is extendable by five years to 31 December 2018 by the consent of both the Company and Alpha Real Trust Limited. The Company may voluntarily prepay the loan at any time by giving 5 days' notice. The coupon of the loan agreement is 15% per annum compounded quarterly.

The redemption of the CULS and the loan from Alpha Real Trust Limited does not have any impact on the cash flow as they are a non-cash item.

23 Bank borrowings

Nationwide Building Society loans

A facility agreement had 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 was 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. On

22 October 2012, the Company announced that Chip (Two) Limited has entered into an agreement with Nationwide whereby the loan facility is amended such that the term of the facility is extended to 23 January and then subsequently to 30 August 2013. All terms remain the same except the margin which was increased to 4.00% per annum.

The facility was secured by a legal charge and debenture over the property assets of CHIP (Two) Limited. As at 30 June 2013 the LTV stood at 65.9% (31 December 2012: 64.8%), representing a breach, which was recognised by Nationwide on 12 June 2013. The gross rental income to interest ratio covenant was compliant. The facility requires CHIP (Two) Limited to use surplus rents to reduce the outstanding debt on a quarterly basis. Surplus rent of £0.03 million has been used to repay the facility during the period (June 2012: £0.09 million). Discussions continue regarding the refinancing of this facility.

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 was 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 loan facility provided by Bank of Scotland in respect of the Company's wholly owned subsidiaries, CHIP (One) Limited, CHIP (Three) Limited, CHIP (Four) Limited and CHIP (Five) Limited, expired on 31 October 2012. The loan facility was subsequently extended to 31 January 2013 and then to 31 July 2013. On 12 August 2013, the Company announced that CHIP (One) Limited, CHIP (Three) Limited, CHIP (Four) Limited and CHIP (Five) Limited have agreed with Bank of Scotland to amend the loan facility agreement such that the term of the facility was extended to 30 November 2013. This facility extension is subject to certain additional conditions that the Company must undertake regarding capital raising.

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 a

debenture over the property assets of the relevant subsidiaries. As at 30 June 2013 the LTV stands at 73.6%

(December 2012: 72.5%).

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 (December 2012: £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

Deferred shares

The deferred shares rank after ordinary and deferred shares and carry no voting rights. The deferred shares have been cancelled due to capital reorganisation. Previously issued deferred shares have been cancelled and the related capital has been transferred to the capital redemption reserve.

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.

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 shareholders, 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.

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 £0.04 million (30 June 2012: £0.05 million) were payable to IOMA Fund and Investment Management Limited. As at 30 June 2013 a total amount of £22,120 (31 December 2012: £23,246) was outstanding.

Mr Mark Rattigan, a director of the Company, is also chief operating officer and member of Alpha Real Capital LLP (the Investment Adviser and Manager). During the period net fees of £0.6 million (30 June 2012: £0.7 million) were payable to Alpha Real Capital LLP. As at 30 June 2013 a total amount of £0.6.million, including historical fees (31 December 2012: £0.7 million) was outstanding. Mr Rose is a director of Alpha Real Trust Limited ("Alpha Real") and Chief Executive Officer of Alpha Real Capital LLP. Alpha Real Capital LLP is also a major investor in Alpha Real Trust. During the period the Company issued a further £0.13 million (30 June 2012: £0.12 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 Six months ended

30 June 2013 30 June 2012

Jonathan David Clague £10,000 £10,000

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

Donald Lake £7,500 £7,500

Peter Philip Scales £7,500 £7,500

Phillip Rose (1 Jan to 16 April 2013) £4,408 £7,500

Mark Rattigan (17 April to 30 June 2013) £3,082 -

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

30 June 2013 31 Dec 2012

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 - -

Mark Rattigan - -

Financial calendar