Half Yearly Report

Palace Capital Plc (the "Company")

Interim results for the six months ended 31 July 2013

CHAIRMAN'S STATEMENT

I can report that for the half year ended 31 July 2013, the Company made a loss before tax of £78,821 (2012 - £65,086). The Company will not be declaring a dividend.

Simultaneously with the publication of these results we have today announced the acquisition subject to shareholder approval of the Sequel Portfolio from Quintain Estates & Development PLC. This is a portfolio of 24 secondary high yielding commercial investments situated across the UK. They currently produce a net income of approximately £5.2m per annum and the effective price being paid is £39.25m which gives our Company a net yield of just over 13 per cent.

We will be buying the corporate entity that owns a 98.5 per cent. interest in these properties plus the 1.5 per cent. owned by another party and to facilitate this acquisition we have firstly raised £23.5m of new equity with institutional and other investors and secondly we have secured a 3 year loan of £20m from Nationwide Building Society on what we consider to be reasonable terms.

There are considerable opportunities with this portfolio for active management to increase the yield and capital value and we are excited about this purchase.

This is stage two of our stated strategy which is to purchase high yielding commercial investment properties capable of active management mainly outside London. Stage one was the acquisition of Hockenhull Estates, a portfolio of nine properties in Cheshire which has performed very well in that we have extended a number of leases and currently there are no voids. In the prior interim period the Company benefited from a write back of a provision previously made for a bad debt.

The market is now looking positively at secondary commercial property outside London which, in our view, has vindicated our strategy. We are continuing to look for additional acquisitions which provide the appropriate return and we look to the future with confidence.

Stanley Davis

Chairman

2 October 2013

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Palace Capital Plc

CONSOLIDATED INCOME STATEMENT

for the six months ended 31 July 2013

Palace Capital Plc

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 July 2013

Palace Capital Plc

CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 31 July 2013

Palace Capital Plc

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 31 July 2013

1 BASIS OF PREPARATION

The financial information contained in this interim report does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The figures for the period ended 31 January 2013 have been extracted from the audited statutory accounts. The interim results, which have not been audited or reviewed by the Company's auditors, have been prepared in accordance with applicable International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). These standards are also collectively referred to as "IFRS".

The accounting policies and methods of computations used are consistent with those used in the Group Annual Report for the year ended 31 January 2013 and are expected to be used in the Group Annual Report for the year ended 31 January 2014.

Statutory accounts for the year ended 31 January 2013 were prepared and filed with the Registrar of Companies and received an unqualified audit report.

The interim report was approved by the Board of Directors on 2 October 2013.

As at 31 July 2013, the Group had net current liabilities of £208,584. Included within current liabilities are redeemable preference shares of £65,000 and loan notes of £85,000. These amounts are due to directors of the Company, Stanley Davis and Neil Sinclair or entities controlled by them and Andrew Perloff, who have given undertakings to the group that these amounts will only be payable when there are adequate cash resources within the group so that the group can continue to meet its liabilities as they fall due for the foreseeable future. In addition, Stanley Davis has agreed to continue to support the Company and if and when necessary will provide funds on an interest free basis. With these undertakings, and after considering the group's cash flow forecasts, the directors have prepared these interim results on the going concern basis.

Copies of this statement are available to the public for collection at the Company's Registered Office at 41 Chalton Street, London, NW1 1JD and on the Company's website, www.palacecapitalplc.com.

2 SEGMENTAL ANALYSIS

3 LOSS per share

The loss per share for the period is calculated based upon the following information:

In accordance with IAS 38 where there is a loss for the year, there is no dilutive effect from share options and therefore there is no difference between the basic and diluted loss per share.