Half Yearly Report

INDUSTRIAL MULTI PROPERTY TRUST PLC

(the "Company" or together with its subsidiaries the "Group")

HALF YEAR RESULTS

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2014

Highlights

· Adjusted net asset value ("NAV") per ordinary share - 223 pence as at 30 June 2014 (224 pence at 31 December 2013).

· Adjusted earnings per ordinary share ("EPS") - loss of 7.7 pence for the six months to 30 June 2014 (profit of 9.3 pence for the six months to 30 June 2013).

· New lettings - 46 new lettings and 12 lease renewals achieved during the six months to 30 June 2014, (represents 10.8% of the estimated rental value ("ERV") 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 2015, benefitting cash flow.

· Occupancy improved - the occupancy level by estimated rental value stood at 86.2% as at 30 June 2014 compared with 84.6% as at 31 December 2013.

· Portfolio valuation increased - the Group's property portfolio was valued at £78.1 million as at 30 June 2014 (£77.5 million as at 31 December 2013), an increase of £0.6 million (0.8%) during the six month period.

46

46 new lettings completed

86.2%

Occupancy rate increased to 86.2%

223p

Adjusted NAV of 223 pence per share

£78.1 million

Portfolio valuation increase to £78.1 million. 

Contact:

Jonathan Clague

Chairman, Industrial Multi Property Trust plc

01624 681250

Tom Pissarro

Investment Adviser and Manager, Alpha Real Capital LLP

020 7391 4700

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

Industrial Multi Property Trust plc (the "Company" or 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. With effect from 1 July 2014, Alpha UK Multi Property Trust plc has changed its name to Industrial Multi Property Trust plc.

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 dividend during the period and no dividend is currently proposed (2013: £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 that 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.industrialmultipropertytrust.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 14).

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 13).

Chairman's statement

I am pleased to present the half year report and the condensed consolidated financial statements of Industrial Multi Property Trust plc for the six months ended 30 June 2014.

Property performance

The active asset management initiatives within the portfolio have continued to assist in the retention of tenants and improved occupancy. The Group has achieved 46 new lettings and 12 lease renewals increasing the occupancy level across the Group by 1.6%, to 86.2% (by ERV) as at 30 June 2014 compared with 84.6% as at 31 December 2013, enhancing the Group's income. Further detail on asset management progress appears in the Investment Adviser and Manager's report.

On a like for like basis, as no properties were bought or sold, the portfolio valuation, increased by £0.6 million to £78.1 million at 30 June 2014 during the six month period. This represents an increase of 0.8%. An evaluation of the Group's property portfolio performance can be found in the Investment Adviser and Manager's report.

Results

The adjusted NAV per ordinary share at 30 June 2014 is 223.2 pence (31 December 2013: 224.1 pence). The decline is attributable to the loss resulting from the increase in finance costs during the period although this has partially been offset by the increased property portfolio valuation.

The results for the period show an adjusted EPS loss of 7.7 pence (30 June 2013: profit of 9.3 pence). As above, this loss has largely been created by the increased finance costs.

Bank borrowings and financing

The Group completed its refinancing on 5 December 2013. These new loan facilities are for a period of five years expiring in December 2018. A hedging arrangement was entered into on 27 January 2014, which has the effect of fixing the Group's interest rate exposure on £25.1 million of debt until 5 December 2018. Further details can be found in note 17. During the period the Group was compliant with the bank borrowings covenants.

Change of name

With effect from 1 July 2014, Alpha UK Multi Property Trust plc has changed its name to Industrial Multi Property Trust plc. The new name was approved by shareholders at the Company's recent annual general meeting and better reflects the nature of the Company's portfolio of predominantly industrial assets. The ticker symbol has been changed to IMPT for the Company's ordinary shares.

CHIP (Six) Limited

The liquidation of CHIP (Six) Limited remains ongoing. A final meeting will take place on 1 September 2014. Further details can be found in note 23 under events after balance sheet date.

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 2014 have been prepared on the going concern basis. Further detail on the basis of preparation is provided in note 2 to the financial statements.

Outlook

Industrial Multi Property Trust plc continues to focus on making further progress in preserving and improving the profile of income from its property portfolio.

With the new long term financing arrangements in place the Board believes that the Group's strategy provides a strong platform from which to rebuild shareholder value over the medium to long term, however, as expected, the new financing arrangements have resulted in increased finance costs. The Board is confident that the Group will be able to service its debt, and with an improving secondary commercial property market, the Group and therefore the shareholders may see an improvement in the net asset value in the medium to long term.

Jonathan Clague

Chairman

Date: 26 August 2014

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 reduce borrowings and to reduce the loan to value ("LTV") ratio through limited strategic sales - disposals may be considered where it is believed that the price net of costs, likely to be achieved, will benefit shareholder returns.

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

Property Portfolio overview

The portfolio comprises a well-diversified portfolio of 53 multi-let properties offering 507 leasable units with a total floor area of approximately 163,800 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 (by area), approximately 84% is invested in light industrial property and 16% in offices.

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 2.1 years to the next tenant break.

Asset management review

There are signs that the occupational market is continuing to improve, and the Group's flexible approach to meeting tenant demand has been successful in reducing the number of vacant units: 46 new lettings and 12 lease renewals were completed during the period, with a further 4 units under offer for new leases as at 30 June 2014. 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 twelve months which will benefit the Group's 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 86.2% on 30 June 2014 compared to 84.6% as at 31 December 2013.

Tenant insolvency has stabilised with 3 tenants, accounting for 0.7% of ERV, becoming insolvent compared with 5 tenants (0.8% of ERV) in the same period last year.

*Final achievable annual rent including stepped rents.

Based on the current total portfolio ERV, there is also the potential for additional rent of £1.8 million per annum assuming the portfolio were to become fully let and income producing.

Property Sales

In keeping with the Board's strategy to undertake limited strategic sales, the portfolio continues to be reviewed to identify potential disposals where it is believed that the net sales proceeds will benefit shareholder returns. There were no sales completed during the six months ending 30 June 2014.

Valuation

The Group's property portfolio was valued as at 30 June 2014 by DTZ Debenham Tie Leung Limited at £78.1 million (£77.5 million as at 31 December 2013) an increase of £0.6 million (0.8%) during the six month period .The average capital value of the portfolio is £477 per square metre (£44 per square foot).

Financing

As previously reported the Group entered into new financing agreements on 5 December 2013 as follows:

· A £33.5 million senior facility with a five-year term expiring in December 2018 and an initial margin of 3% per annum over 3 month LIBOR, with Royal Bank of Scotland ("RBS").

· A £20.0 million mezzanine loan facility with a five-year term expiring in December 2018 and a coupon of 11% per annum, with Europa Mezzanine Finance SaRL.

· A new £11.5 million unsecured subordinated loan facility with a five-year term expiring in December 2018 and a coupon of 15% per annum with Alpha Real Trust Limited ("ART").

The overall LTV ratio on total borrowings was 82.8% as at 30 June 2014 (83.2% on total borrowings as at 31 December 2013).

On 27 January 2014, the Group entered into an interest rate swap for the amount of £25.1 million with RBS. The interest rate swap has the effect of fixing the Group's interest rate exposure on £25.1 million of these borrowings from 27 January 2014 until 5 December 2018 at 2.0225% per annum, before the margin of 3% per annum.

UK economy

The UK economic recovery has become increasingly broad-based throughout the latter half of 2013 and the early stages of 2014 driven by both the strong consumer sector as well as solid growth of business investment and exports. Estimates from the Office for National Statistics report an increase in gross domestic product ("GDP") of 0.8% in Q1 2014 and again by 0.8% during Q2 2014.

The Bank of England Monetary Policy Committee ("MPC") had set monetary policy to help sustain the economic recovery and to meet the 2% inflation target in the medium term. GDP growth has been consistent in recent quarters and inflation as measured by the Consumer Price Index ("CPI") has fallen to 1.5% for the twelve month period to May 2014. Interest rate policy has been steady with the Bank Rate remaining low at 0.5%. The MPC has indicated that when the Bank Rate does rise, it would do so gradually and to a level below its pre-crisis average rate.

Property Commentary

The first six months of 2014 saw continued capital value improvements for UK commercial real estate market as sentiment continued to favour the sector. Strong total returns relative to other asset classes have led to a resurgence of investor appetite towards commercial property.

Growing investor confidence has caused good quality secondary property to be re-priced as investors increasingly shift their focus away from property offering straightforward income protection, to assets with potentially higher returns and an element of letting risk. As investor risk appetite continues to rise the yield spread between secondary and prime assets is narrowing. Taken in conjunction with the enhanced income returns from secondary assets, there is an expectation that secondary assets will outperform prime assets in the year ahead.

The industrial sector continues to experience strong investor demand and constrained supply at the prime end of the market. This has forced investors to widen their target scope to encompass well-located, good quality secondary property. Improving investment activity has been seen in the multi-let occupational market around the M25, Thames Valley and the South East in recent quarters. Well-located, good quality secondary schemes have seen rents begin to stabilise. Secondary property in more regional locations has yet to experience the same shift in demand and tenants are still able to negotiate attractive terms for themselves.

Conclusion

There are signs that valuations of secondary commercial property, similar to those owned by the Group, are beginning to improve. The increased occupancy and reduced void costs across the portfolio are also encouraging. As previously reported the successful refinancing in December 2013 has provided the Group with the necessary stability to start rebuilding shareholder value. However the new mezzanine and sub-ordinated loan facilities carry a higher interest charge than the previous facilities which has reduced the adjusted earning as compared to 2013. The Investment Adviser and Manager's goal continues to be to increase the level of rent and occupancy throughout the portfolio and to build on the asset management success delivered during the previous six months.

Tom Pissarro

Alpha Real Capital LLP

Investment Adviser and Manager

Date: 26 August 2014

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 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: 26 August 2014 Date: 26 August 2014

Independent Review report to Industrial Multi Property Trust plc

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 2014 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 23. We have read the other information contained in the half year 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.

Scope of Review

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.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements in the half year report for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with International Accounting Standards 34 and the Disclosure and Transparency Rules of the United Kingdom Financial Conduct Authority.

Ernst & Young LLC

Chartered accountants

Douglas

Isle of Man

26 August 2014

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 14 to 32 are an integral part of this statement.

Condensed consolidated balance sheet

The accompanying notes on pages 14 to 32 are an integral part of this statement

These financial statements were approved by the Board of Directors on 26 August 2014 and signed on its behalf by:

The capital reserve includes the distributable capital reserve.

The accompanying notes on pages 14 to 32 are an integral part of this statement.

*Convertible Unsecured Loan Stock ("CULS")

The accompanying notes on pages 14 to 32 are an integral part of this statement.

Notes to the financial statements

For the six months ended 30 June 2014

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 Summary of significant accounting policies

Basis of preparation

The unaudited condensed consolidated financial statements included in the half year report for the six months ended 30 June 2014, 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 2013, 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 2013, which are available on the Company's website (www.industrialmultipropertytrust.com). The Group's financial performance does not suffer materially from seasonal fluctuations.

The condensed consolidated financial statements are made up from 1 January 2014 to 30 June 2014, and have been prepared under the historical cost convention except for investment property and derivative instruments that have 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 2014. Amendments to IFRS 10, IFRS 12, IAS 27 (Investment Entities), amendments to IAS 32 (offsetting Financial assets and Financial Liabilities), IAS 36 (recoverable amount disclosures for Non-Financial Assets, amendments to IAS 39 (novation of derivatives and Continuation of hedge accounting) have become effective from 1 January 2014.

The adoption of the amendments and improvements to the standards and interpretations has had no effect on the accounting policies, 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.

Going concern

The Company and the Group have entered into various loan facilities which will all expire in December 2018. The lenders are Royal Bank of Scotland, Europa Mezzanine Finance SaRL and Alpha Real Trust Limited. These long term borrowings have given the Group the time to continue the asset management initiatives, which shall hopefully lead to the recovery of shareholder value in the Company.

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 2018 to assess whether they are able to meet its liabilities as they fall due and also meet the covenant terms of its loan. These projections include the following assumptions:

· Rental income based on contracted rental income from tenants secured as at 30 June 2014.

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

· Void costs and non-recoverable costs based on the expected occupancy rate.

· Default rates based on expected and historic patterns.

· Interest charges and arrangement fees have been based on the current loan terms.

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

The assessment of the cash flow projections shows that the Group is able to meet its liabilities as they fall due and comply with the covenants of its loan facilities. This is supported by the covenant tests carried out during the period which shows the Group is in compliance.

The Board therefore considers it is appropriate to prepare the condensed financial statements on a going concern basis.

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 of 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.

Investment property is derecognised when it has been disposed of or permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement of disposal property are recognised in the consolidated statement of comprehensive income in the year of retirement or disposal.

3 Segmental analysis

Rental income - segmental analysis*

* The rental information presented by the Investment Adviser and Manager 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 by the Investment Adviser and Manager to the Board is adjusted here to agree with the rental income in the condensed consolidated statement of comprehensive income.

Property valuation - segmental analysis

The Board considers the sector and region analysis above to be the significant segmental basis for the Group. The Board believes that the information is presented more clearly to investors in respect of 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. Long term borrowings are reviewed on a facility basis as per note 20. 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.

4 Income

The Group leases out all of its investment property under operating leases. Leases are typically for terms of 3 to 5 years.

5 Expenditure

6 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.

7 Net gains and losses on loans and receivables

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

9 Finance costs

*Convertible Unsecured Loan Stock ("CULS")

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.

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

value through profit and loss

11 Taxation

The Group's tax expense for the year comprises:

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 2014 the Group had unused tax losses and capital allowances of £9.5 million

(31 December 2013: £8.9 million). During the period no capital allowances were used by the Group (31 December 2013: £nil).

12 Dividends

The Company paid no dividend during the six month period (2013: £nil).

* Convertible Unsecured Loan Stock ("CULS")

Notes to the financial statements (continued)

For the six months ended 30 June 2014

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

*Convertible Unsecured Loan Stock ("CULS")

14 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.

15 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 2014 and 31 December 2013 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 (9th Edition 31 January 2014), was arrived at by reference to market evidence of transaction prices for similar properties, together with valuation techniques and assumptions consistent with those used in the 31 December 2013 valuation. The valuation model is based on comparable market evidence derived from observable and unobservable market data, derived from an active and transparent market. The properties were valued individually. These valuation methods are consistent with the principles in IFRS 13.

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 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 - - 78,095

There are no transfers between the hierarchy levels during the year.

The Group has pledged investment properties valued at £78.1 million as at 30 June 2014 to secure borrowings (note 20).

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 for any difference in the nature, location or condition of the specific asset. Where 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.

The valuation reports produced by the valuers are based on information provided by the Group such as current rents, terms and conditions of lease agreements, service charges and capital expenditure. In addition, the valuation reports are based on assumptions and valuation methods used by the valuers. The assumptions are typically market related, such as yields and discount rates, and are based on their professional judgement and market observation.

Valuation process

The Investment Adviser and Manager verifies all major inputs to the valuation reports, assesses the individual property valuation changes from the prior valuation report and holds discussions with the valuers.

When this process is complete, the valuation report is communicated to the Board, which considers it as part of its overall responsibilities.

The valuers hold meetings with the Board to discuss the valuation processes and outcome at each year end and half year end.

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 the information provided by the Group is used in determining the fair value. In addition there are also a number of unobservable inputs including the estimated rental value, net initial yield, net reversionary yield, state and condition, void periods and the related void rate charges, letting incentives and related letting charges such as marketing and legal costs which are considered by the valuer.

Impact on fair value to changes in significant unobservable inputs

The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of the Group's property portfolio, together with the impact of significant movements in these inputs on the fair value measurement, are shown below:

The table below shows the observable inputs of weighted average passing rent per square foot and weighted average lease length plus the quantifiable unobservable inputs of weighted average estimated rental value per square foot, weighted average net initial yield and weighted average reversionary yield which have been split based on the appropriate sector and region:

16 Trade and other receivables

Payment terms for rental debtors are typically quarterly in advance.

As at 30 June 2014, receivables with a value of £0.2 million (31 December 2013: £0.1million) were impaired and fully provided. During 2014, £0.1 million was provided in the period (31 December 2013: £0.1 million provided).

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

17 Interest rate hedging instruments

The Group uses interest rate hedging arrangements to mitigate its exposure to interest rate changes.

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 an interest rate swap as detailed below.

The Royal Bank of Scotland

On 27 January 2014, CHIP (One) Limited (on behalf of CHIP (Two) Limited, CHIP (Three) Limited, CHIP (Four) Limited and CHIP (Five) Limited) entered into an interest rate swap for the amount of £25.1 million with the Royal Bank of Scotland. The interest rate swap has the effect of fixing the Group's exposure on these borrowings from 27 January 2014 until 5 December 2018 at 2.0225%, per annum, before the margin of 3.0% per annum.

18 Trade and other payables

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

19 Investment Adviser and Manager's incentive fee

 No incentive arrangement is currently in place and therefore no incentive fee is provided for at 30 June 2014 (31 December 2013: £nil) .

20 Long term borrowings

a) The Royal Bank of Scotland loan

This facility is between the bank and subsidiaries, CHIP (One) Limited, CHIP (Two) Limited, CHIP (Three) Limited (and its subsidiaries), CHIP (Four) Limited and CHIP (Five) Limited for an amount of £33.5 million.

Interest is payable at a rate equal to 3 month LIBOR plus a margin of 3.0% per annum. The facility is repayable on 5 December 2018. An event of default (as defined in the facility agreement) is triggered, if, inter alia, the amount of the loan facility exceeds 65% before 5 December 2016 and 60% thereafter of the value of the properties over which Royal Bank of Scotland has security by reference to the bank's own valuation, performed at the time of financing. For the purpose of the test the valuation, which at the bank's discretion can be requested annually at the Group's cost or at any time at the bank's expense and will explicitly exclude the Wareham property and any properties subsequently sold.

In addition, the minimum net rent should not be less than £4.5 million per annum and the net rental income of the secured properties shall not be lower than 225% of the interest for any test period, net rental income from any single tenant shall not exceed 12.5% of the total net rental income of all properties and at no time shall a single property constitute more than 20% of the aggregate market value of the properties.

During the period the Group was compliant with these covenants.

The facility is secured by a debenture over all the assets and legal charge over the property assets of CHIP (One) Limited, CHIP (Two) Limited, CHIP (Three) Limited (and its subsidiaries), CHIP (Four) Limited and CHIP (Five) Limited.

Should any of the covenants be breached then the default margin would increase by a further 2.0% per annum and will remain at this rate until such time that the breach is remedied.

Europa Mezzanine Finance Sàrl loan

This facility is between Europa and subsidiaries, CHIP (One) Limited, CHIP (Two) Limited, CHIP (Three) Limited (and its subsidiaries), CHIP (Four) Limited and CHIP (Five) Limited for an amount of £20.0 million.

Interest is payable at a rate equal to 10.0% interest plus 1.0% PIK interest. The facility is repayable on 5 December 2018. An event of default (as defined in the facility agreement) is triggered, if, inter alia, the amount of The Royal Bank of Scotland and Europa loan facilities exceeds 85% of the value of the properties (based currently on same the valuation used by the bank in the covenant referred to above). For the purpose of the test Europa, at their discretion, can request a valuation annually at the Group's cost or at any time at Europa's expense. At the time of finance Europa and The Royal Bank of Scotland used the same valuer.

Other financial covenants require that the net rental income of the secured properties shall not be lower than 110% of the interest (being the total interest charged by Royal Bank of Scotland and Europa Mezzanine Finance Sárl) for any test period. In addition, net rental income from any single tenant shall not exceed 12.5% of the total net rental income of all properties and at no time shall a single property constitute more

than 20% of the aggregate market value of the properties.

During the period the Group was compliant with these covenants.

b) Alpha Real Trust Limited loan

On 5 December 2013, the Company entered into a new loan agreement in which Alpha Real Trust Limited provided an unsecured loan to the Company for £11.5 million for a period of five years to 4 December 2018. The proceeds of the loan were applied to finance the redemption of the earlier £6.43 million loan from Alpha Real Trust Limited plus interest. The coupon of the loan agreement is 15% per annum, compounded quarterly. No covenant tests apply and Alpha Real Trust Limited has no security over the assets of the Company or the Group.

21 Share capital and related reserves

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.

Preference shares

Following the redemption of the CULS* on 30 June 2013, the attached preference shares were automatically cancelled.

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.

22 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 2013: £0.04 million) were payable to IOMA Fund and Investment Management Limited. As at 30 June 2014 a total amount of £21,799 (31 December 2013: £22,120) 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 £0.5 million (30 June 2013: £0.6 million) were payable to Alpha Real Capital LLP. As at 30 June 2014 a total amount of £0.3.million, including historical fees (31 December 2013: £0.3 million) was outstanding.

Under IAS 24, Alpha Real Trust Limited is considered a related party. Alpha Real Capital LLP (the Investment Adviser and Manager of the Group) is also the Investment Adviser and Manager of Alpha Real Trust Limited. On 5 December 2013, the Group entered into a new related party loan facility agreement in which Alpha Real Trust Limited provided an unsecured loan to the Company for £11.5 million. During the period, interest costs of £0.9 million were charged (31 December 2013: £0.6 million). As at 30 June 2014, a total amount of £0.32 million was outstanding. The Company settled the outstanding interest on 25 July 2014.

The Directors of the Company received total fees as follows:

Six months ended Six months ended

30 June 2014 30 June 2013

Jonathan David Clague £10,000 £10,000

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

Donald Lake £4,500 £7,500

Peter Philip Scales £7,500 £7,500

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

Mark Rattigan £7,500 £3,082

*Convertible Unsecured Loan Stock ("CULS")

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

30 June 2014 31 Dec 2013

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 - -

23 Events after balance sheet date

The liquidators of CHIP (Six) Limited paid a first and final dividend to unsecured creditors in July 2014. A final meeting has been called for 1 September 2014 where the liquidators will be released from their duties and the company is expected to be dissolved in due course.

Financial calendar