ASPEN GROUP — Interim / Quarterly Report 2011

Feb 27, 2011

Aspen Group – Appendix 4D

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ASPEN GROUP LIMITED

ABN 50 004 160 927

ASPEN PROPERTY TRUST

ARSN 104 807 767

Responsible Entity: Aspen Funds Management Ltd

ABN 48 104 322 278

Appendix 4D

31 December 2010

Aspen Group – Appendix 4D

Results for announcement to the market

Details of reporting periods:
Current period	31 December 2010
Corresponding period	31 December 2009

Revenue and Net Profit for the six months ended 31 December 2010

		Change		Amount
				$’000
Revenue from ordinary activities	Up	7%	to	38,114
Profit after tax	Down	40%	to	7,728
Operating Profit after tax*	Up	6%	to	16,414
Net profit attributable to securityholders of Aspen	Down	40%	to	7,728
Group

• Operating Net Profit after Tax represents net profit after tax excluding non cash items namely movements in fair value of investment properties, equity and hedge instruments and write down of equity accounted investments.

Distributions

Distributions
	31 December 2010 31 December 2009
	Amount per security (cents) Total $’000 Amount per security (cents) Total $’000
Interim distribution – Sept Qtr Interim distribution – Dec Qtr	1.050 1.050 1.050 1.050
	2.100 11,708 2.100 11,702

Payment dates and record dates for determining entitlements	Payment dates and record dates for determining entitlements	to the distributions(dividends)
	Record date	Payment date
-interim distribution (Sept Qtr)	30 September 2010	19 November 2010
-interim distribution (Dec Qtr)	31 December 2010	18 February 2011
Net tangible assets (NTA)		31 December 2010 30 June 2010
-NTA per security (including non dilutive employee shares / options)		$0.68 $0.66
-NTA per security (excluding non dilutive employee shares / options)		$0.68 $0.69
Associate entities

Aspen Group – Appendix 4D

Name	Ownership (%) Share of net profit/(loss) ($’000s)
Aspen Parks Property Fund Aspen Diversified Property Fund Aspen Dunsborough Lakes Ltd Aspen Whitsunday Shores Pty Ltd West Swan Estate Pty Ltd Fern Bay Seaside Village Ltd Aspen Development Fund No 1 Ltd Headline profit from associates Adjusted for: Change in fair value of investment properties held by associates Write down of inventory Changes in fair value of interest rate swaps Profit from associates before significant items	31 December 2010 31 December 2009 31 December 2010 31 December 2009 12.5% 13.8% 1,489 982 35.8% 35.8% 868 265 43.2% 44.2% 469 395 42.1% 42.6% (370) (81) 13.4% 13.4% 238 16 45.4% 45.4% (7,563) 340 47.3% 48.1% (961) (616)
	(5,830) 1,301 (715) - 7,754 - (465) (566)
	744 735

Brief explanation of share of profits from associate entities:

Equity accounted profits from associate entities was ($5.8 million) for the half year (1H10: $1.3 million profit). This take up includes fair value adjustments that in the opinion of the directors should be adjusted to enable security holders to obtain an understanding of the results from the underlying operations.

Brief Explanation of Revenue, Net Profit/(Loss) and Dividends (Distributions):

Key factors contributing to the movement in revenues and profits were:

Refer to attached ASX announcement for a full commentary on the half year result.

Aspen Group

ABN: 50 004 160 927

Interim Financial Report

For the six months ended 31 December 2010

A s p e n G r o u p

Interim Financial Report

For the six months ended 31 December 2010

	Page Number
Company Particulars	3
Directors‟ Report	4
Lead Auditor‟s Independence Declaration	10
Independent Review Report	11
Directors‟ Declaration	13
Consolidated Interim Statement of Comprehensive Income	14
Consolidated Interim Statement of Financial Position	15
Consolidated Interim Statement of Changes in Equity	16
Consolidated Interim Statement of Cash Flows	18
Condensed Notes to the Interim Financial Statements	19

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Company Particulars

Board of Directors

Reg Gillard Independent Chairman Gavin Hawkins Managing Director Terry Budge Non-Executive Director Seng Fai Chan Non-Executive Director Frank Zipfinger Non-Executive Director (appointed 31 January 2011) Matthew McCann Non-Executive Director (resigned 30 July 2010)

Company Secretary

Diniz Cardoso (appointed 22 July 2010) Gavin Hawkins (resigned 21 July 2010)

Registered Office

Level 8, Septimus Roe Square 256 Adelaide Terrace PERTH WA 6000 Telephone: (61 8) 9220 8400 Facsimile: (61 8) 9220 8401 Email: homemail@aspengroup.com.au Web Address: www.aspengroup.com.au

Share Registry

Link Market Services Limited Ground Floor 178 St George Terrace PERTH WA 6000 Australian Telephone: 1300 554 474 International Telephone: (612) 8280 7111 Facsimile: (612) 9287 0303

Auditor

KPMG 235 St Georges Terrace Perth WA 6000 Telephone: (61 8) 9263 7171 Facsimile: (61 8) 9263 7129

Stock Exchange Listing

Aspen Group Limited‟s securities are listed on the Australian Securities Exchange through Aspen Group under the ASX code APZ (stapled securities). Each stapled security comprises one share in Aspen Group Limited and one unit in Aspen Property Trust.

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Directors’ Report

The directors present their report together with the consolidated financial report of Aspen Group for the six months ended 31 December 2010 and the review report thereon. The consolidated financial report of Aspen Group comprises the financial reports of Aspen Group Limited (“the Company” or “AGL”) and its controlled entities and of Aspen Property Trust (“the Trust” or “APT”) which form the consolidated entity (“Aspen Group” or “the Group”).

The directors of AGL and Aspen Funds Management Limited (“AFM”), the Responsible Entity of APT, at any time during or since the end of the half-year are:

Name	Entity of directorship and date of appointment
Non – Executive Directors
Reg Gillard	AGL (appointed: 24/12/2001) and AFM (appointed: 4/4/2003)
Terry Budge	AGL (appointed: 5/5/2005) and AFM (appointed: 5/5/2005)
Seng Fai Chan	AGL (appointed: 1/11/2002)
Frank Zipfinger	AGL (appointed: 31/1/2011) and AFM (appointed: 31/1/2011)
Matthew McCann	AGL (appointed: 6/8/2007) and AFM (appointed: 6/8/2007); AGL and AFM
	(Resigned 30/07/10)
Managing/Executive Director
Gavin Hawkins	AGL (appointed: 31/10/2001) and AFM (appointed: 4/4/2003)

Principal Activities

The principal activities of Aspen Group during the period were investment in commercial, industrial and retail property and funds management activities in the property sector. There was no significant change in the nature of the activities of the Group during the period.

Significant Changes in the State of Affairs

Other than noted elsewhere in the Interim Financial Report, there were no significant changes in the state of affairs of Aspen Group that occurred during the period under review.

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Directors’ Report

Operating and Financial Review

The consolidated entity achieved a profit after tax calculated in accordance with International Financial Reporting Standards (“IFRS”) of $7.7 million for the half-year ended 31 December 2010 (profit of $13.0 million for the half-year ended 31 December 2009). This profit is after several items, that in the opinion of the directors, need adjustment to enable security holders to obtain an understanding of the results from operations (refer table below).

The net profit after tax before significant items, as assessed by the directors, for the half-year was $16.4 million ($15.6 million for the half-year ended 31 December 2009), reflecting a 5.5% increase from the previous corresponding period.

Key financial results for Aspen Group during the period were as follows:

Net Profit/(Loss) after tax Add/(Subtract) significant items: Net movement in fair value of investment properties (Profit)/Loss on sale of investment properties Change in fair value of interest rate swaps Impairment of available for sale investments Equity settled transactions Impairment adjustments of investments in equity associates Write down of inventories in associates Change in fair value of interest rate swaps in associates Other Net Profit after Tax before significant items Basic Earnings per security (cents) Diluted Earnings per security (cents) Basic Earnings per security before significant items (cents) Diluted Earnings per security before significant items (cents) Total Assets Total Equity Net tangible assets per security (cents) Net tangible assets per security - excluding non-dilutive LTI instruments (cents)	Six months ended 31 December 2010 $ ‘000 Six months ended 31 December 2009 $ ‘000 7,728 12,993 - 2,225 124 - (2,003) (583) 6,896 - 357 1,468 (1,740) - 5,428 - (425) (548) 49 -
	16,414 15,555
	1.378 2.333 1.378 2.332 2.928 2.793 2.928 2.791 31 December 2010 30 June 2010 660,522 646,880 388,642 388,615 0.68 0.66 0.68 0.69

• Refer to Note 7 of the accompanying Financial Report for further information regarding earnings per security calculation

** Calculations are as per the Basic and Diluted Earnings per security however adjusted for the significant items listed above

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Directors’ Report

Operating and Financial Review (continued)

Income distributions for the period were as follows:

		Amount Per	Amount Per
		Stapled Security	Stapled Security
		31 December	31 December
Quarter Ended	Record Date	2010	2009
September	30 September 2010	1.050 cents	1.050 cents
December	31 December 2010	1.050 cents	1.050 cents
Total		2.100 cents	2.100 cents

Review of principal businesses

Investment Property Portfolio

The Group‟s investment portfolio continues to perform soundly with a 10.4% increase in net rental income over the previous corresponding period to $18.5 million. Overall, the portfolio has a 92.7% occupancy level and a weighted average lease expiry of 2.4 years.

During the half-year the Group entered into a contract to sell its 564 St Kilda Road investment property for $33.3 million, with settlement occurring on 11 January 2011.

Non-Core Land Assets

Aspen Group is actively pursuing a strategy of recycling non-core, non-income producing assets on its balance sheet, through either their sale or syndication. Aspen has made significant progress in this area through the syndication of land for the Enclave residential development for $12 million. This leaves $29.7 million of non-core land assets on balance sheet (post 31 December 2010), a number of which are actively being marketed for disposal with encouraging interest levels on several assets.

Funds Management

Funds Management remains an integral part of the Group‟s business model contributing $11.4 million to the Group‟s result, an increase of 5%. The $11.4 million result comprises the operating contribution from all funds management income streams, including management fees, equity share of profits and interest income on loans.

The full contribution from the funds management business in FY11 is expected to be weighted to the second half, due to commencement of a number of development projects in the second half and the forecast programme of residential lot settlements.

The Aspen Living division has benefited from the continuing improvement in the residential sectors with strong sales interest across a number of developments. Commercial development activities remain challenging although the pipeline for commercial and residential projects is strong and is expected to generate fee income and equity profits in future years.

Key highlights for the period include:

• Strong operating performance from Aspen Parks Property Fund with strong equity inflows and gearing improving to 48.0% (from 54.0%)

• Launch of the $11.5 million Enclave at St Leonards retail residential syndicate which closed on the 25[th] February 2011 fully subscribed, and with debt facilities secured

• Aspen Group‟s acquisition of the ATO Building (subject to finance) - refer note 1 (c)

• Continued strong sell down of Norwest medical suites by Aspen Development Fund No 1

• Increase in the Weighted Average Lease Expiry in the Aspen Diversified Property Fund from 2.6 years to 4.6 years and increased occupancy from 81.0% to 94.0% by securing long term tenants in key properties

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Directors’ Report

• Achieved 161 settlements at $36.0 million and 131 new sales contracts valued at $31.8 million across the Aspen Living developments

• Successfully contracted the sale of a 1.5ha grouped housing site at Dunsborough Lakes Estate for $2.5 million

Capital Management and Financial Position

The Group‟s gearing position currently stands at 35.7%, up from 34.4% at 30 June 2010. Look through gearing has remained constant at 39.0%.

The total cost of drawn debt as at 31 December 2010 for the consolidated entity inclusive of facility fees was 8.7% pa.

Aspen uses interest rate swaps to hedge its exposure to interest rate risks and at 31 December 2010, 71.8% of the senior debt facility was hedged with a weighted average maturity of 2.6 years.

Subsequent to the half-year end the Group has renegotiated its senior debt banking facilities with its primary banker National Australia Bank. The new facility, which has been credit approved but at the date of this report is subject to completion of formal documentation, will see the maturity date extend from February 2012 to February 2014.

The Group‟s net tangible assets (“NTA”) per security at 31 December 2010 was $0.68.

Group expenses

As noted in the previous period, the Group has focused on its overhead cost structure and the result is that total overheads (excluding equity settled share-based payment transactions) have decreased by 8% from $8.3 million for the previous corresponding period to $7.7 million.

Events Subsequent to Reporting Date

The following material events have occurred between the reporting date and the date of this report:

• a) On 11 January 2011 the Group received $33.3 million in settlement of the sale of 564 St Kilda Road, Melbourne, and as a consequence repaid senior debt of $15.3 million.

• b) In February 2011 the Group entered into an agreement, which is subject to finance, for the acquisition of the Australian Taxation Office Building (“ATO Building”), within the Central Business District of Adelaide, South Australia. Full details of the transaction were outlined in an announcement to the ASX on 16 February 2011.

Under the agreement to acquire the Building the total funding to be secured by Aspen Group is approximately $164 million. The external debt component of the total funding requirement is expected to be approximately $115 million with the remaining $49 million representing the Group‟s equity investment. At the date of this report Aspen Group has already loaned $18 million to ADF towards the construction of the building. Upon securing the external funding and acquiring the Building the $18 million loan will convert to become Aspen Group‟s initial equity investment with the remaining $31 million of equity to be contributed.

While the acquisition is conditional on securing debt funding, Aspen Group has provided guarantees totalling $70 million that support ADF‟s obligations with regard to the development of the building. Of these guarantees, $60 million are to the builder and are required to keep the development timetable on track and will be fully extinguished once debt funding is in place (refer note 1 (c) for additional information).

• c) On 16 February 2011 the Group obtained agreement for the extension of its existing senior debt facility. The new facility is subject to formal documentation. Key changes to the existing facility are: a) new 3 year term with a maturity date of February 2014; b) total facility LVR covenant reducing from 70% to 60% from 1 July 2011; and additional short term $15 million guarantee facility expiring 1 July 2011 (included in the LVR covenant).

• d) In February 2011, Aspen Group provided a corporate guarantee to a maximum of $30 million in respect of ADF‟s debt facilities. This guarantee is expected to reduce during the term of the facility as development projects within ADF progress and complete.

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Directors’ Report

• e) In October 2010 the Group contracted to sell a parcel of land for $12 million to Enclave at St Leonards Limited, a residential land syndicate established by Aspen Group which is seeking to raise $11.5 million from retail investors. This sale is subject to the syndicate achieving a minimum subscription level of $8.0 million and securing debt finance. As at the date of this report both conditions have been met and the sale of the land is unconditional. The syndication is proceeding with allotment expected in early March 2011 after which the land sale will settle.

• f) On 31 January 2011, the Directors of the Company received a request from Entrust Funds Management Ltd and others (“Requisitioning Securityholders”) holding at least 5% of the votes that may be cast at a general meeting that the Directors call and hold a general meeting of the Company. At the meeting, which is to be held on the 24[th] March 2011, securityholders will vote on seven resolutions. Four of the proposed resolutions are to remove four existing Directors namely Mr Reginald Gillard (Chairman), Mr Gavin Hawkins (Managing Director), Mr Terry Budge (Non-Executive Director) and Mr Frank Zipfinger (Non-Executive Director). Three of the proposed resolutions are to appoint directors nominated by the Requisitioning Securityholders.

Other than the above, there has not arisen any other item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.

Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

A copy of the lead auditor‟s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 10 and forms part of the Directors‟ Report.

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Directors’ Report

Rounding Off

Aspen Group is of the kind referred to in ASIC Class Order 98/100 dated 10 July 1998 (updated by CO 05/641 effective 28 July 2005 and CO 06/51 effective 31 January 2006) and in accordance with the Class Order, amounts in the Interim Financial Report and Directors‟ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Signed in accordance with a resolution of the directors.

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_____ Gavin Hawkins Managing Director PERTH, 26 February 2011

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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of Aspen Group Limited

I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended 31 December 2010 there have been:

• (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and

• (ii) no contraventions of any applicable code of professional conduct in relation to the review.

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KPMG

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[signature] Kevin Smout Partner

Perth

26 February 2011

KPMG, an Australian partnership and a member firm of the KPMG network of in dependent member firms affiliated with KPMG International, a Swiss cooperative.

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Independent auditor’s review report to the stapled security holders of Aspen Group

Aspen Group comprises the consolidation of Aspen Group Limited (“the Company”) and its controlled entities, including Aspen Property Trust (“the Trust”) and its controlled entities, which form the consolidated entity (“Aspen Group” or “the consolidated entity”).

We have reviewed the accompanying interim financial report of Aspen Group, which comprises the condensed consolidated statement of financial position as at 31 December 2010, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the half-year ended on that date, notes 1 to 16 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the Company and the Trust and the entities they controlled at the half-year’s end or from time to time during the half-year.

Directors’ responsibility for the interim financial report

The directors of Aspen Group Limited and the directors of Aspen Funds Management Limited, the Responsible Entity of Aspen Property Trust (collectively referred to as “the directors”) are responsible for the preparation of the interim financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such control as the directors determine is necessary to enable the preparation of the interim financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the interim financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the interim financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of Aspen Group’s financial position as at 31 December 2010 and its performance for the half-year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As auditor of Aspen Group, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of an interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

KPMG, an Australian partnership and a member firm of the KPMG network of in dependent member firms affiliated with KPMG International, a Swiss cooperative.

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Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of Aspen Group is not in accordance with the Corporations Act 2001 , including:

• (a) giving a true and fair view of the Aspen Group’s financial position as at 31 December 2010 and of its performance for the half-year ended on that date; and

• (b) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

Material uncertainty regarding carrying value of interest in associate

Without qualification to the conclusion provided above, we draw attention to note 1(c) of the financial report regarding the ability of Aspen Group to recover the carrying value of certain assets related to an associated entity, Aspen Development Fund No 1 Limited (“ADF”). Specifically we note Aspen Group has entered into an agreement, to acquire, conditional on finance, a significant asset from ADF. As a result of the uncertainty in obtaining funding to execute the transaction as set out in note 1(c), should the acquisition not proceed and ADF is unable to source alternative funding or realise the value of its assets such that it is unable to continue as a going concern, a material uncertainty exists which may cast significant doubt about the ability of Aspen Group to recover its loan to ADF, its investment in ADF and related deferred tax balances of $22.7 million, $35.1 million and $1.6 million respectively at 31 December 2010 and any additional funds advanced since that date or paid out under the guarantees. Since the 31 December 2010 a further amount of $10.2 million has been advanced to ADF.

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KPMG

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Kevin Smout Partner

Perth

26 February 2011

A s p e n G r o u p

Directors’ Declaration

In the opinion of the directors of Aspen Group Limited (“the Company”) and Aspen Funds Management Limited (as responsible entity for the Aspen Property Trust):

1. the financial statements and notes set out on pages 14 to 32 are in accordance with the Corporations Act 2001 including:

2. a) giving a true and fair view of the financial position of the Group as at 31 December 2010 and of its performance, as represented by the results of its operations and cash flows for the half-year ended on that date; and

3. b) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and

4. as set out in Note 1(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the directors

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Gavin Hawkins Managing Director PERTH, 26 February 2011

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Consolidated Interim Statement of Comprehensive Income

For the six months ended 31 December 2010

Note Revenue and other income Rental income from investment properties 3 Funds management revenue 3 Financial income 4 Total revenue and other income Change in fair value of retirement living assets Net movement in fair value of investment properties Impairment of available for sale investments (Loss)/profit on disposal of investment property Property expenses Funds management commission expense Administrative expenses 5 Other expenses Financial expenses 4 Impairment of equity account investees 13 Share of profit/(loss) of equity accounted investees 13 Profit/(Loss) before tax Income tax benefit 6 Profit/(Loss) for the period Total comprehensive income for the period Profit/(Loss) attributable to: Security holders of Aspen Group Profit/(Loss) for the period Other comprehensive income Net change in fair value of available for sale financial assets Other comprehensive income for the period Total comprehensive income for the period Profit/(Loss) attributable to: Security holders of Aspen Group Total comprehensive income attributable to: Security holders of Aspen Group Total comprehensive income for the period Earnings per Security Basic earnings per stapled security 7 Diluted earnings per stapled security 7	31 December 2010 ($ ‘000) 31 December 2009 ($ ‘000)
	27,058 25,110 6,295 6,680 4,761 3,939
	38,114 35,729 1,005 - - (944) (7,160) - (124) - (8,747) (8,530) (494) (281) (7,769) (9,200) (177) (115) (6,114) (5,438) 2,486 - (5,830) 1,301
	5,190 12,522 2,538 471
	7,728 12,993
	7,728 12,993
	7,728 12,993
	7,728 12,993
	- (429)
	- (429)
	7,728 12,564
	7,728 12,993
	7,728 12,564
	7,728 12,564 1.378 2.333
	1.378 2.332

(The Consolidated Statement of Comprehensive Income is to be read in conjunction with the accompanying notes to the financial statements.)

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Consolidated Interim Statement of Financial Position

As at 31 December 2010

Note Current assets Cash and cash equivalents Trade and other receivables Other financial assets Income tax receivable Assets classified as held for sale 8 Prepayments and other current assets Total current assets Non-current assets Trade and other receivables Other financial assets Property, plant and equipment Investment property 9 Investments in equity accounted investees 13 Inventories 10 Intangible assets Deferred tax assets Other investments Other assets Total non-current assets Total Assets Current liabilities Trade and other payables Interest-bearing loans and borrowings 11 Provisions Employee benefits Other financial liabilities Total current liabilities Non-current liabilities Interest-bearing loans and borrowings 11 Other financial liabilities Total non-current liabilities Total Liabilities Net Assets Security holders’ funds Issued capital 12 Other equity Reserves Retained earnings Total security holders’ funds	31 December 2010 ($ ‘000) 30 June 2010 ($ ‘000)
	7,093 4,426 10,353 8,837 7,326 3,504 29 29 163,380 12,238 6,880 9,674
	195,061 38,708
	8,869 12,810 86,812 72,996 2,097 5,416 238,879 379,150 79,056 83,078 19,947 27,216 5,882 5,964 20,386 17,848 2,160 2,135 1,373 1,559
	465,461 608,172
	660,522 646,880
	20,676 20,365 18,320 3,000 5,818 5,849 963 952 2,840 4,843
	48,617 35,009
	222,263 222,256 1,000 1,000
	223,263 223,256
	271,880 258,265
	388,642 388,615
	412,165 408,422 (1,855) (1,855) (8) (8) (21,660) (17,944)
	388,642 388,615

(The Consolidated Statement of Financial Position is to be read in conjunction with the accompanying notes to the financial statements.)

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Consolidated Interim Statement of Changes in Equity For the six months ended 31 December 2010

Opening balance at 1 July 2010 Total comprehensive income for the period Profit for the period Other comprehensive income Total comprehensive income for the period Transactions with owners, recorded directly in equity Contributions by and distributions to owners Distributions to security holders Equity issued during the period Share based payment transactions Total contributions by and distributions to owners Total transactions with owners Closing balance at 31 December 2010	Issued Capital Other Equity Available for Sale Reserve	Net Profit/ (Accumulated Losses)
			Total Security Holders’ Funds
	$ ‘000 $ ‘000 $’000
		$ ‘000	$ ‘000
	408,422 (1,855) (8)	(17,944)	388,615
	- - -	7,728	7,728
	- - -	-	-
	- - -
		7,728	7,728
	- - -
		(11,708)	(11,708)
	3,743 - -
		-	3,743
	- - -
		264	264
	3,743 - -
		(11,444)	(7,701)
	3,743 - -
		(11,444)	(7,701)
	412,165 (1,855) (8)
		(21,660)	388,642

(The Consolidated Interim Statement of Changes in Equity is to be read in conjunction with the accompanying notes to the financial statements.)

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Consolidated Interim Statement of Changes in Equity

For the six months ended 31 December 2009

Opening balance at 1 July 2009 Total comprehensive income for the period Profit for the period Other comprehensive income Cash flow hedge profit transferred to income statement Net change in fair value of available for sale financial assets Total other comprehensive income Total comprehensive income for the period Transactions with owners, recorded directly in equity Contributions by and distributions to owners Distributions to security holders Share based payment transactions Total contributions by and distributions to owners Acquisition of non controlling interest Total transactions with owners Closing balance at 31 December 2009	Issued Capital Other Equity Hedge Reserves Available for Sale Reserve Net Profit/ (Accumulated Losses) Total Security Holders’ Funds $ ‘000 $ ‘000 $ ‘000 $’000 $ ‘000 $ ‘000
	408,397 - (120) (539) (6,829) 400,909 - - - - 12,993 12,993
	- - 61 - - 61 - - - (429) - (429)
	- - 61 (429) - (368)
	- - 61 (429) 12,993 12,625
	- - - - (11,702) (11,702) - - - - 994 994
	- - - - (10,708) (10,708)
	- (1,855) - - - (1,855)
	- (1,855) - - (10,708) (12,563)
	408,397 (1,855) (59) (968) (4,544) 400,971

(The Consolidated Interim Statement of Changes in Equity is to be read in conjunction with the accompanying notes to the financial statements.)

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Consolidated Interim Statement of Cash Flows

For the six months ended 31 December 2010

Cash flows from operating activities Cash receipts from customers Cash payments to suppliers and employees Cash payment in lieu of termination Dividends received Interest received Interest and other costs of finance paid Net cash from operating activities Cash flows from investing activities Acquisition of property, plant and equipment Improvements to investment properties Acquisition of funds management equity investments Acquisition of minority interest Proceeds from sale of investment properties Net cash used in investing activities Cash flows from financing activities Payment for equity securities issue costs Proceeds from borrowings Repayments of borrowings Loans to associates Repayments from associates Repayment from other parties Distributions paid Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 July Cash and cash equivalents at 31 December	31 December 2010 $ ‘000 31 December 2009 $ ‘000
	33,130 35,734 (18,883) (16,547) (1,259) - 1,192 917 2,257 2,155 (6,162) (8,370)
	10,275 13,889
	(99) (102) (5,683) (4,882) (4) (19,526) - (1,091) 3,114 -
	(2,672) (25,601)
	- (7) 15,327 44,711 - (18,453) (17,726) (13,672) 1,500 14,867 3,467 - (7,504) (11,140)
	(4,936) 16,306
	2,667 4,594 4,426 4,662
	7,093 9,256

(The Consolidated Interim Statement of Cash Flows is to be read in conjunction with the accompanying notes to the financial statements.)

18

A s p e n G r o u p

Condensed Notes to the Interim Financial Statements

1. Significant accounting policies

Aspen Group was established for the purpose of facilitating a joint quotation of Aspen Property Trust (“the Trust”) and Aspen Group Limited and its controlled entities on the Australian Securities Exchange. Both the Trust, Aspen Group Limited and its controlled entities are domiciled in Australia. The Constitution of Aspen Property Trust and the Articles of Association of Aspen Group Limited ensure that, for so long as the two entities remain jointly quoted, the number of units in the Trust and the number of shares in the Corporation shall be equal and that Unitholders and Shareholders be identical. Both the Responsible Entity of the Trust and the Corporation must at all times act in the best interests of Aspen Group.

The stapling arrangement will cease to operate on the earlier of:

• either of Aspen Group Limited or Aspen Property Trust resolving by special resolution in general meeting and in accordance with the constitution to terminate the stapling provisions; or

• the commencement of the winding up of either Aspen Group Limited or Aspen Property Trust.

With the establishment of Aspen Group, the combined group has common business objectives, and operates as a combined entity in the core business of property investment and funds management.

The Aspen Group entities comprising the stapled Group remain separate legal entities in accordance with the Corporations Act 2001 and are each required to comply with the reporting and disclosure requirements of Accounting Standards and the Corporations Regulations 2001.

The Interim Financial Report of Aspen Group comprises the financial report of Aspen Group Limited (“the Company”) and its controlled entities, and the Trust, which form the consolidated entity (“Aspen Group” or “the Group”).

The Interim Financial Report has been prepared based upon a business combination of the parent entity, the Company, and Aspen Property Trust and their controlled entities, in accordance with Australian Interpretation (“AI”) 1013 “Consolidated Financial Reports in relation to Pre-Date-of-Transition Stapling Arrangements”.

The Interim Financial Report was authorised for issue by the directors on 26 February 2011.

(a) Statement of compliance

This general purpose financial report for the interim half-year reporting period ended 31 December 2010 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001 .

This consolidated interim financial report does not include all the information required for a full annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2010 and any public announcements made by the Aspen Group during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001 .

(b) Basis of preparation

The Interim Financial Report is presented in Australian dollars, which is the Group‟s functional currency.

The Interim Financial Report has been prepared on a going concern basis using historical cost except that the following assets and liabilities are stated at their fair value: derivative financial instruments and investment property. Assets classified as held for sale are stated at the lower of carrying amount and fair value less costs to sell.

Aspen Group is an entity of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 (updated by CO 05/641 effective 28 July 2005 and CO 06/51 effective 31 January 2006) and, in accordance with the Class Order, amounts in the Interim Financial Report and Directors‟ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

19

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Condensed Notes to the Interim Financial Statements

(b) Basis of preparation (continued)

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

These accounting policies and key sources of estimation uncertainty have been consistently applied by Aspen Group and are in line with the policies as at and for the year ended 30 June 2010.

(c) Carrying value of associates

Subsequent to the half year, Aspen Group has entered into an Agreement, to acquire, conditional on finance, the ATO Commercial Office project (“the Building”) from an associated entity, Aspen Development Fund No 1 Limited (ADF), of which Aspen Group is a major shareholder and Fund Manager.

Aspen Group, as part of this Agreement has provided guarantees totalling $70 million that support ADF‟s obligations with regard to the development of the Building and a $30 million corporate guarantee. Of the $70 million the maximum amount of the guarantee to the builder is $60 million however this is limited to outstanding construction payments and will be fully extinguished on Aspen Group securing debt finance for the development. A guarantee of $10 million has been provided to the Head Tenant of the Building. Aspen Group has provided the $30 million corporate guarantee to ADF‟s senior debt provider in support of ADF‟s obligations to its primary financier.

Under the agreement to acquire the Building the total funding to be secured by Aspen Group is approximately $164 million. The external debt component of the total funding requirement is expected to be approximately $115 million with the remaining $49 million representing the Group‟s equity investment. At the date of this report Aspen Group has already loaned $18 million to ADF towards the construction of the building. Upon securing the external funding and acquiring the Building the $18 million loan will convert to become Aspen Group‟s initial equity investment with the remaining $31 million of equity to be contributed.

Ultimately should the acquisition not proceed due to the funding condition not being satisfied, Aspen Group can terminate that part of the agreement relating to the building acquisition, which results in the following implications for ADF:

• Requires ADF to return to Aspen Group all funding provided to that time plus interest,

• Leaves ADF with the commitment to fund the ongoing development of the Building. To meet this commitment (and return monies owed to Aspen Group), ADF would need to source alternative funding, or secure an alternative purchaser for the Building,

• Should these alternatives not be available, ADF may need to terminate the construction contract, and may not be able to continue as a going concern and meet its liabilities as they fall due.

In these circumstances the guarantees provided by Aspen Group may also be called upon.

The Directors are confident in the ability to secure a senior finance facility to fund the Building and to proceed with the acquisition.

Should the Aspen Group decide not to continue with the acquisition it is the Director‟s opinion that there are a number of feasible options available to Aspen Group to meet its funding and cash flow obligations arising as a result of not proceeding with the acquisition.

Options available include the sale of either selected investment properties, or non-core land assets, which were previously earmarked for residential or retirement living development. These assets are considered saleable at amounts that approximate their carrying values and the Group has received recent offers on a number of these assets.

Should the acquisition not proceed and ADF is unable to source alternative funding or realise the value of its assets including the part completed Building such that it is unable to continue as a going concern, a material uncertainty exists which may cast significant doubt about the ability of Aspen Group to recover its loan to ADF, its investment in ADF and related deferred tax balances of $22.7 million, $35.1 million and $1.6 million respectively at 31 December 2010 and any additional funds advanced since that date or paid out under the guarantees. Since 31 December 2010 a further $10.2 million has been advance to ADF.

20

A s p e n G r o u p

Condensed Notes to the Interim Financial Statements

2. Operating Segments

The Group has two reportable segments, as described below, which are the Group‟s strategic business units. The strategic business units hold different asset classes and offer different products and services, and are based on the consolidated entity‟s management and internal reporting structure. For each of the strategic business units, the Executive Director reviews internal management reports on at least a quarterly basis. Segment results and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. The following describes the operations in each of the Group‟s reportable segments:

• Property Portfolio - This segment includes net rental income and associated interest expense and other expenditure from all properties held by Aspen Property Trust throughout Australia, and Aspen Communities and Aspen Villages operations and land held for development.

• Funds Management - Property funds management includes fees, interest income, equity profits and associated expenditure from unlisted property funds and syndicates that Aspen Group manages.

Other includes interest from related parties and dividends from investments which cannot be allocated to the segments above.

21

A s p e n G r o u p

Condensed Notes to the Interim Financial Statements

2. Operating Segments (continued)

External revenues Interest Income Total segment revenue Interest Expense Reportable segment profit before income tax and share of profits from investments accounted for using the equity method (and other significant items below) Share of profits from investments accounted for using the equity method (before significant items below) Segment Profit/(Loss) before significant items below Change in fair value of investment properties Gains/(Losses) on Available for sale investments Profit/(loss) on sale of investment properties Impairment adjustments of investments in associates Change in fair value of interest rate swaps Change in fair value of interest rate swaps in associates Writedown of inventory in associates Other Segment Profit/(Loss) after significant items Reportable segment assets Investments in associates	Property Portfolio Funds Management Other Total 31 Dec 2010 $’000 31 Dec 2009 $‟000 31 Dec 2010 $’000 31 Dec 2009 $‟000 31 Dec 2010 $’000 31 Dec 2009 $‟000 31 Dec 2010 $’000 31 Dec 2009 $‟000
	27,058 25,106 6,295 6,680 11 38 33,364 31,824 25 31 4,378 3,539 347 335 4,750 3,905
	27,083 25,137 10,673 10,219 358 373 38,114 35,729
	5,201 3,557 2,950 2,464 - - 8,151 6,021
	12,732 11,133 1,716 1,095 387 348 14,836 12,576 - - 745 735 - - 745 735
	12,732 11,133 2,461 1,830 387 348 15,580 13,311 - (944) - - - - - (944) (7,160) - - - - - (7,160) - (124) - - - - - (124) - - - 2,486 - - - 2,486 - 1,220 344 783 239 - - 2,003 583 - - 465 566 - - 465 566 - - (7,754) - - - (7,754) - - - (42) - - - (42) -
	6,668 10,533 (1,601) 2,635 387 348 5,454 13,516
	421,983 434,649 191,286 174,806 47,253 37,450 660,522 646,905 - - 79,056 89,522 - - 79,056 89,522

22

A s p e n G r o u p

Condensed Notes to the Interim Financial Statements

2. Operating Segments (continued)

Reconciliations of reportable segment revenues, profit or loss and assets

	31 December 2010	31 December 2009
	$ ‘000	$ „000
Revenues
Total revenues for reportable segments	37,727	35,356
Other revenue	387	373
Consolidated revenue	38,114	35,729
Profit or loss
Total profit/(loss) for reportable segments after significant items	5,067	13,168
Other profit and loss	387	348
Equity settled transactions	(264)	(994)
Consolidated profit/(loss) before income tax	5,190	12,522
Income tax benefit	2,538	471
Consolidated profit/(loss) after income tax	7,728	12,993
Assets
Total assets for reportable segments	613,269	609,455
Other assets	47,253	37,450
Consolidated total assets	660,522	646,905

Geographical segments

Aspen Group is an Australian based Company, and as such has its current operating activities spread throughout Australia. No other geographical segments are currently evident.

Major Customers

Revenues from one customer of the Group‟s Property Portfolio represent approximately $8 million of the Group‟s total revenues.

23

A s p e n G r o u p

Condensed Notes to the Interim Financial Statements

3. Revenue

Revenue from trading activities

Revenue from property investments

Funds management fees – asset management fees – asset disposal fees

	31	December 2010	31 December 2009
		($’000)	($’000)
		27,058	25,110
		6,295	6,325
		-	355
		6,295	6,680

4. Net financing costs

Financial income

Interest income – bank deposits – on loans to associates – on loans to related parties

Dividend income

Financial expenses

Net change in cash flow hedge transferred to profit and loss Net change in fair value of financial assets through profit and loss Interest expense on financial liabilities measured at amortised cost Less amounts capitalised to qualifying assets Change in fair value of interest rate swaps

Net Financing Costs

	31	December 2010	31 December 2009
		($’000)	($’000)
		77	127
		4,378	3,494
		295	285
		11	33
		4,761	3,939
		-	(61)
		-	(61)
		(11,088)	(8,124)
		2,971	2,164
		2,003	583
		(6,114)	(5,438)
		(1,353)	(1,499)

5. Administration expenses

Wages and salaries including on-costs Contributions to defined contribution superannuation funds Equity-settled share based payment transactions Other administration costs	31 December 2010 ($’000) 31 December 2009 ($’000)
	5,285 5,442 390 460 264 994 1,830 2,304
	7,769 9,200

24

A s p e n G r o u p

Condensed Notes to the Interim Financial Statements

6. Income tax expense

Numerical reconciliation between tax expense and pre-tax profit Profit/(loss) before income tax Prima facie income tax calculated at 30% Less prima facie income tax on profit from Trust Increase in income tax expense due to: Non-deductible expenses Decrease in income tax expense due to: Income tax (benefit)/expense on pre-tax net profit 7. Earnings per stapled security Basic earnings per security Diluted earnings per security	net	31 December 2010 ($’000) 31 December 2009 ($’000)
		5,190 12,522
		1,557 3,757 (4,340) (4,954) 245 726
		(2,538) (471)
		31 December 2010 (cents) 31 December 2009 (cents)
	(a) (b)	1.378 2.333 1.378 2.332

(a) Basic earnings per stapled security

Basic earnings per stapled security is calculated by dividing profit/(loss) attributable to security holders of Aspen Group by the weighted average number of ordinary securities outstanding during the half-year.

Profit attributable to ordinary stapled security holders (basic) Profit/(loss) attributable to stapled security holders (basic) Weighted average number of securities (basic) Weighted average number of securities as at 31 December(1)	31 December 2010 ($’000) 31 December 2009 ($’000)
	7,728 12,993
	31 December 2010 (No. ’000) 31 December 2009 (No. ’000)
	560,670 556,885

(1) Excludes non-dilutive LTI instruments

(b) Diluted earnings per stapled security

Diluted earnings per stapled security is calculated by dividing profit/(loss) attributable to security holders of Aspen Group by the weighted average number of ordinary securities outstanding during the half-year after adjusting for the effect of dilutive securities granted under share plans accounted for as options and rights granted under employee share plans.

Profit attributable to ordinary stapled security holders (diluted) Profit/(loss) attributable to stapled security holders (diluted) Weighted average number of securities (diluted) Weighted average number of securities (diluted) as at 31 December	31 December 2010 ($’000) 31 December 2009 ($’000)
	7,728 12,993
	31 December 2010 (No. ’000) 31 December 2009 (No. ’000)
	560,670 557,241

25

A s p e n G r o u p

Condensed Notes to the Interim Financial Statements

8. Assets classified as held for sale

At 1 July Acquisition and additions Transfer in from inventories Transfer out to inventories Transfer in from investment properties At 31 December Previously classified as: Investment property Inventories	31 December 2010 ($’000) 30 June 2010 ($’000)
	12,238 - 553 - 12,000 9,238 (3,001) - 141,590 3,000
	163,380 12,238
	141,590 3,000 21,790 9,238
	163,380 12,238

9. Investment property

At 1 July Acquisition and additions Transfer in from inventories Reclassifications Fair value adjustments At 31 December	31 December 2010 ($’000) 30 June 2010 ($’000)
	379,150 368,563 314 6,793 - 15,055 (141,590) (6,200) 1,005 (5,061)
	238,879 379,150

26

A s p e n G r o u p

Condensed Notes to the Interim Financial Statements

9. Investment property (continued

Property Original Acquisition Date Original Acquisition Cost $ ‘000 Latest Independent Valuation Date Latest Independent Valuation $ ‘000	Book Value at 31 Dec 2010 $ ‘000 Book Value at 30 June 2010 $ ‘000
Commercial and Industrial 256 Adelaide Tce (Septimus Roe) – WA Oct 2002 29,648 Dec 2009 87,000 Phoenix Rd, Bibra Lake (Woolstores) – WA Aug 2003 37,483 Dec 2009 52,000 Davy St, Booragoon (Alcoa) – WA Aug 2003 18,329 Dec 2009 28,000 51 Heaton St, Rocklea – Qld Oct 2004 9,184 June 2010 10,500 215 Browns Rd, Noble Park – Vic Oct 2004 22,625 June 2010 19,300 564 St Kilda Road – Vic Dec 2004 26,426 Dec 2009 33,400 55 Currie St – SA June 2006 66,980 Dec 2009 84,000 Vacant site Morrison Rd, Midland – WA June 2007 5,500 Dec 2010 2,900 Accommodation park Karratha Village – WA June 2005 1,000 June 2010 44,000 Retirement living Aspen LV Plus Ballina, Ballina–NSW Nov 2007 3,809 - -	87,068 87,000 52,000 52,000 -(2) 28,000 10,512 10,500 19,349 19,300 -(3) 34,000 -(4) 81,000 -(1) -(1) 44,178 44,000 25,772 23,350
	238,879 379,150

(1) Reclassified as assets held for sale 30 June 2010, then reclassified to inventory 31 Dec 2010

(2) Reclassified as assets held for sale 31 December 2010

(3) Reclassified as assets held for sale 31 December 2010 and subsequently sold in January 2011

(4) Reclassified as assets held for sale 31 December 2010

Property portfolio revaluations :

At 30 June 2010, the Group completed independent valuations on 89% (by value) of all investment properties. At 31 December 2010, the Directors re-assessed the value of the entire investment property portfolio, resulting in no change in the carrying values of the investment properties.

Investment properties are measured at fair value. Fair value is determined on the basis of either an independent valuation prepared by external valuation experts as at the balance sheet date, or directors‟ valuation.

Independent valuations of property investments are obtained at intervals of not more than two years. Independent valuations were performed by registered independent appraisers having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued.

Fair values were determined in accordance with the Accounting Policy set out in Note 1(g) of the Financial Report for the year ended 30 June 2010 and having regard to recent market transactions for similar properties in the same location as the Group‟s investment property.

27

A s p e n G r o u p

Condensed Notes to the Interim Financial Statements

Property portfolio revaluations (continued)

As at 31 December 2010, the weighted average cap rate for the office and commercial portfolio (excl Karratha), including those rental producing assets classified as held for sale, was 9.40%. The cap rate for Karratha was 18.5%. The weighted average lease duration (excluding the Ballina property) was 2.41 years

10. Inventories – Non Current

Property Development Land – residential and retirement	31 December 2010 ($’000) 30 June 2010 ($’000) 19,947 27,216

11. Interest-bearing loans and borrowings

11. Interest-bearing loans and borrowings
Notes Current liabilities Current portion of secured bank loans (1) Non-current liabilities Secured bank loans (1)	31 December 2010 ($’000) 30 June 2010 ($’000)
	18,320 3,000
	18,320 3,000
	222,263 222,256
	222,263 222,256
	240,583 225,256

(1) Under the terms of the new banking facility should any of the assets referred to in note 8 be sold, a percentage of the proceeds will be used to immediately repay the Group‟s senior debt facility. On the basis that assets classified as held for sale are sold within the next 12 months it is expected that approximately $86 million of non-current senior debt would become due and payable in line with the percentage of net proceeds the financier is entitled to receive.

Terms and debt repayment schedule

The terms and conditions of outstanding loans were as follows:

Consolidated

Consolidated
Currency Maturity	Face value at Dec 2010 $ ‘000 Carrying amount at Dec 2010 $ ‘000 Face value at Jun 2010 $ ‘000 Carrying amount at Jun 2010 $ ‘000
Secured bank loan(1) AUD Dec 2013 Secured bank loan AUD Feb 2012 Secured bank loan AUD Dec 2012 Secured bank loan AUD Dec2012	18,000 18,000 19,500 19,500 209,592 209,592 197,000 197,000 7,960 7,960 8,756 8,756 5,031 5,031 - -
	240,583 240,583 225,256 225,256

(1) Amortised at $250,000 per month (Tranche C).

Financing arrangements

At 31 December 2010, the Group‟s total debt consisted of:

• (i) $227.8 million including its Tranche A senior debt facility ($209.8 million) and debt drawn under its Tranche C facility ($18.0 million). These facilities are with National Australia Bank.

• (ii) $13 million under its facility with Bendigo and Adelaide Bank.

28

A s p e n G r o u p

Condensed Notes to the Interim Financial Statements

Financing arrangements (continued)

Tranche A – Key Terms

• Facility Limit of $227.8 million.

• Loan to Value covenant (relating to Tranche A & C) of 69% to maturity.

• Interest coverage ratio covenant of at least 1.5 times investment property net rental income.

• Maturity date of 28 February 2012.

Tranche C – Key Terms

• Project specific facility for the Karratha Accommodation Village.

• The facility is fully drawn and has been amortising at $250,000 per month from January 2009.

• Maturity date of 31 December 2013.

All Tranches are secured over the consolidated entity‟s investment property portfolio, excluding retirement assets. Refer to note 16 for amendments to this facility that have occurred subsequent to the half year end.

The total cost of drawn debt as at 31 December 2010 for the consolidated entity inclusive of facility fees was 8.70% pa.

The key terms of the loan facility with Bendigo and Adelaide Bank are as follows:

• $12 million construction facility for development of the Ballina retirement village (drawn to $8.8 million). Use of funds from this facility is restricted to land and building construction costs for the Ballina retirement village.

• $8.5 million facility for partial reimbursement of equity (nil drawn). Release of this facility is contingent on achieving 48 settlements at the Ballina retirement village.

• Loan to Value (LVR) covenant of 50% to maturity.

• Maturity date of December 2012.

Aspen uses interest rate swaps to hedge its exposure to interest rate risks and at 31 December 2010, 71.8% of the senior debt facility was hedged with a weighted average maturity of 2.56 years.

Financing facilities Secured bank loans Facilities utilised at reporting date Secured bank loans Bank guarantees Facilities not utilised at reporting date Secured bank loans	31 December 2010 ($’000) 30 June 2010 ($’000)
	248,320 253,000
	240,583 225,256 228 1,221
	240,811 226,477
	7,509 26,523

29

A s p e n G r o u p

Condensed Notes to the Interim Financial Statements

12. Issued Capital Issued capital Movements in ordinary units on issue At 1 July 2010 Distribution Reinvestment Plan Share buy back (employee shares) Securities on issue at 31 December 2010(1)	31 December 2010 ($’000) 30 June 2010 ($’000)
	412,165 408,422
	No. ‘000 ($’000)
	579,980 408,422 8,289 3,743 (16,767) -
	571,502 412,165

(1) Included in this balance are 6.3 million securities issued under the Employee Stapled Security Incentive Plan and Executive Director‟s Long Term Incentive Plan. Their securities are treated as options under AASB 2.

13. Investments in equity accounted investees

The consolidated entity accounts for investments in associates using the equity method. The consolidated entity has the following investments in associates using the equity method:

Principal activities Ownership 31 Dec 2010 30 Jun 2010	Share of associate’s net assets equity accounted 31 Dec 2010 30 Jun 2010
Aspen Parks Property Fund Tourist park investment 12.5% 13.3% Aspen Diversified Property Fund Commercial property investment 35.8% 35.8% Aspen Dunsborough Lakes Limited Residential property development 43.2% 43.2% Aspen Whitsunday Shores Pty Ltd Residential property development 42.1% 42.1% Fern Bay Seaside Village Ltd Residential property development 45.4% 45.4% St Leonard‟s Estate Pty Ltd Residential property development 13.4% 13.4% Aspen Development Fund No 1 Ltd Diversified property development 47.3% 47.3%	16,986 15,731 12,087 11,664 3,613 3,144 2,385 2,755 5,045 4,855 3,824 3,585 35,116 41,344
	79,056 83,078

The share of associate‟s net profit accounted for using the equity method is as follows:

Consolidated Share of associate profit/(loss) before income tax Share of income tax benefit/(expense) Share of associates‟ net profit accounted for using the equity method Net reversal of impairments of equity accounted investments	31 December 2010 ($’000) 31 December 2009 ($’000)
	(9,338) 1,413 3,508 (112)
	(5,830) 1,301 2,486 -

30

A s p e n G r o u p

Condensed Notes to the Interim Financial Statements

13. Investments in equity accounted investees (continued)

The carrying value of investments in equity accounted investees was reviewed during the half-year ending 31 December 2010. Each investment was treated as a separate cash generating unit and the value-in-use method was used to determine the appropriate impairment. Value-in-use was calculated with reference to independent valuations, and internal management modelling for properties within the associate investments using the fair value principles set out in the accounting policies in the 30 June 2010 financial report, and on the basis that financing requirements will be met to enable the projects to be maintained or completed in accordance with the underlying valuation assumptions.

The pre-tax discount rates used to determine the “value in use” which supports the carrying value of the following investments in associates as at 31 December 2010 are set out below:

investments in associates as at 31 December 2010 are set out below:
Associate	Discount Rate
Aspen Dunsborough Lakes Limited	20%
Fern Bay Seaside Village Ltd	20%
Aspen Development Fund No 1 Ltd	20%

The result of the review is that there was an impairment loss of $5.3m booked in relation to Aspen Group‟s investment in Aspen Development Fund No 1 and a $7.7m reversal of impairment loss in Fern Bay Seaside Village. At 30 June 2010 Fern Bay Seaside Village had not completed its assessment of its carrying value of inventory, Aspen Group assessed its recoverability and recognised an impairment of the carrying value of its investment in the associate. During the period the associate has recognised an impairment of its Assets. At 31 December 2010 Aspen Group has reversed its previous impairment and now recognised its share of the associate‟s loss arising from the impairment. There was no change to the carrying value of investments in any of the other equity accounted associates during the half year ended 31 December 2010 (2009: $nil).

Loans to associates

The loan portfolio of $94.1 million consists of loans to Aspen Group‟s funds management entities. A detailed review was performed on the recoverability of all loans to associates. Subsequent to the carrying value assessments at each syndicate level as noted above, all associates were in net asset positions and therefore any loans outstanding are considered fully recoverable at period end. The following at call loans are from the Group and are outstanding at 31 December 2010. These loans have been classified $7.3 million as current and $86.8 million as non-current ($3.5 million current and $73.0 million non-current at 30 June 2010).

Aspen Diversified Property Fund Aspen Living Aspen Dunsborough Lakes Ltd Aspen Whitsunday Shores Pty Ltd Fern Bay Seaside Village Ltd St Leonards Estate Pty Ltd Aspen Development Fund No.1 Ltd Other	31 December 2010 ($’000) 30 June 2010 ($’000)
	21,192 21,192 20,749 19,798 12,912 12,300 13,074 9,430 3,264 3,264 22,709 10,513 238 3
	94,138 76,500

31

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Condensed Notes to the Interim Financial Statements

14. Related party transactions

Arrangements with related parties continue to be in place. For details of these arrangements, refer to the Financial Report for the year ended 30 June 2010.

15. Financial risk management

The Group‟s financial risk management objectives and policies are consistent with that disclosed in the financial report as at and for the year ended 30 June 2010.

16. Events subsequent to reporting date

The following material events have occurred between the reporting date and the date of this report:

• a) On 11 January 2011 the Group received $33.3 million in settlement of the sale of 564 St Kilda Road, Melbourne, and as a consequence repaid senior debt of $15.3 million.

• b) In February 2011 the Group entered into an agreement, which is subject to finance, for the acquisition of the Australian Taxation Office Building (“ATO Building”), within the Central Business District of Adelaide, South Australia. Full details of the transaction were outlined in an announcement to the ASX on 16 February 2011.

The agreement provides for Aspen Group to purchase the land from Aspen Development Fund No.1 (“ADF”) and fund the construction of the building that will be developed by ADF. The total cost to Aspen Group on completion of the ATO Building is approximately $183.7 million, incorporating holding costs calculated at a rate of 9.0% pa on funds provided to ADF for the development. The total net cash outlay for Aspen Group is approximately $164 million, of which Aspen has already provided $18 million. The debt component of the total funding requirement is expected to be around $115 million.

While the acquisition is conditional on securing debt funding, Aspen Group has provided guarantees totalling $70 million that support ADF‟s obligations with regard to the development of the building. Of these guarantees, $60 million are to the builder and are required to keep the development timetable on track and will be fully extinguished once debt funding is in place (refer note 1 (c) for additional information).

• c) On 16 February 2011 the Group obtained agreement for the extension of its existing senior debt facility. The new facility is subject to formal documentation. Key changes to the existing facility are: a) new 3 year term with a maturity date of February 2014; b) total facility LVR covenant reducing from 70% to 60% from 1 July 2011; and additional short term $15 million guarantee facility expiring 1 July 2011 (included in the LVR covenant).

• d) In February 2011, Aspen Group provided a corporate guarantee to a maximum of $30 million in respect of ADF‟s debt facilities. This guarantee is expected to reduce during the term of the facility as development projects within ADF progress and complete.

• e) In October 2010 the Group contracted to sell a parcel of land for $12 million to Enclave at St Leonards Limited, a residential land syndicate established by Aspen Group which is seeking to raise $11.5 million from retail investors. This sale is subject to the syndicate achieving a minimum subscription level of $8.0 million and securing debt finance. As at the date of this report both conditions have been met and the sale of the land is unconditional. The syndication is proceeding with allotment expected in early March 2011 after which the land sale will settle. Based on applications received to date the Group expects to retain a maximum of 25% interest in the syndicate.

• f) On 31 January 2011, the Directors of the Company received a request from Entrust Funds Management Ltd and others (“Requisitioning Securityholders”) holding at least 5% of the votes that may be cast at a general meeting that the Directors call and hold a general meeting of the Company. At the meeting, which is to be held on the 24th March 2011, securityholders will vote on seven resolutions. Four of the proposed resolutions are to remove four existing Directors namely Mr Reginald Gillard (Chairman), Mr Gavin Hawkins (Managing Director), Mr Terry Budge (NonExecutive Director) and Mr Frank Zipfinger (Non-Executive Director). Three of the proposed resolutions are to appoint directors nominated by the Requisitioning Securityholders.

Other than the above, there has not arisen any other item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.

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