Final Results

SOUTH AFRICAN PROPERTY OPPORTUNITIES PLC

('SAPRO' or the 'Group')

Final results for the year ended 30 June 2010

South African Property Opportunities plc (AIM: SAPO), an investment company established to invest in real estate opportunities in South Africa, announces its final results for the year ended 30 June 2010.

Matrix Paul Fincham +44 (0)20 3206 7175

MHP Communications Tim McCall (office) +44 (0)20 3128 8100

(mobile) +44 (0)7753 561862

A copy of the results announcement will be available on the Company's website at www.saprofund.com

Notes:

Note to Editors:

- South African Property Opportunities plc (SAPRO) is a company investing in the South African property market. Its shares were admitted to AIM in October 2006 raising an initial £30 million (before placing expenses). In May 2007 a further £34.2 million (before placing expenses) was raised from new and existing investors.

Chairman's Statement

The net asset value of South African Property Opportunities plc ("SAPRO" or "the Company") as at 30 June 2010 calculated in accordance with IFRS stood at £75.7 million (121.5 pence per share), up 7.8 per cent from £70.2 million (112.7 pence per share) as at 30 June 2009. The primary reason for this increase in NAV was the strengthening of the Rand, the functional currency of our investment subsidiaries, as against Sterling, our reporting currency.

We also publish an adjusted NAV that is calculated in accordance with the guidelines of the European Public Real Estate Association ("EPRA"). The primary difference between ERPA and IFRS is that, in general, IFRS shows development properties at cost while EPRA permits the incorporation of open market valuations. In order to produce the EPRA numbers we have retained CBRE's Johannesburg office to conduct semi-annual valuations. The EPRA numbers are unaudited, incorporate the CBRE valuations, and are net of tax. The EPRA NAV as at 30 June 2010 was £83.7 million (134.4 pence per share), up 4.0 per cent from £80.5 million (129.2 pence per share) as at 30 June 2009¬. The rise in the EPRA NAV is also primarily a function of the strengthening of the Rand as against Sterling. In Rand terms, values have remained fairly static given the protracted delay in the recovery of the South African property market. Our balance sheet remains strong and we hold cash of £10.2 million (30 June 2009: £15.0 million).

Over the last year SAPRO has continued implementing structural changes to take account of the economic realities in South Africa and elsewhere. As part of this effort we have hired a new administrator in South Africa with responsibility for administering all of our South African subsidiaries and affiliates, and since the period end we have also hired a new investment manager in South Africa. We have made a special effort to reduce costs. The fixed component of the management fee has been reduced from 2 per cent of adjusted NAV, or approximately £1.6 million over the last fiscal year, to £500,000 annually. The cost of local administration has been reduced from £380,000 to £120,000 annually. We have also eliminated the strategic advisor at a saving of £40,000 annually.

This past July we completed and released the results of SAPRO's strategic review. As part of this evaluation, the Board considered each of the sixteen development properties and, with respect to each property, the state of the planning rights, the strengths and capabilities of JV partners, the availability of utilities, primarily electricity, the outlook by sector, the estimated time to completion, the structure of funding, the carrying cost of land and the financial feasibility of development.

Based on these criteria, the Board determined that the portfolio could be segmented into twenty-three assets because properties could be subdivided based on different opportunities. The Board further determined that these twenty-three assets should be further segmented into two groups - those that will be the subject of an orderly sale and those that are deemed an interim hold. The overriding consideration in making this categorisation is whether, in the Board's view, assets present an expected value appreciation over the next three years sufficient to justify the associated holding costs. Assets that fall into the interim hold category are those assets that the Board believes have a realistic potential for upside over and above the forecast sale values by way of either higher land values or development profits depending on market conditions at the time. Fourteen assets fall into the orderly sale category while nine assets fall into the interim hold category. The Board's present intention regarding the assets in the orderly sale category is to return sale proceeds to shareholders as soon as practicable following sale. As part of the review process, the Board has closely reviewed the valuations of all assets in the Group's portfolio and is comfortable with those valuations under either scenario.

In early October we announced that SAPRO had hired Group Five Property Developments (Pty) Limited ("Group Five") to assist the Board in implementing the results of the strategic review. Group Five is one of the largest construction and materials manufacturing groups in Southern Africa and is listed on the Johannesburg Stock Exchange. Given SAPRO's objectives as set forth in the announcement of the results of the strategic review, we agreed on a contract that was heavily incentive based. The key terms of the investment management agreement are an annual management fee of £500,000 and a performance fee based on cash proceeds from sale, compared to the open market valuations, that ranges from nil to 10 per cent depending on the amount realised. The contract is terminable without any penalties on six months' notice during the first year and on three months' notice thereafter. Group Five will also have the opportunity to negotiate participation (on arms' length market terms) as an equity investor (and developer/construction contractor) in any asset that SAPRO decides to develop (existing participation is detailed in note 19).

¬ As disclosed in the announcement dated 11 October 2010

We remain in litigation with our former manager concerning its claim to performance fees (and to management fees calculated from the same adjusted NAV source number). The dispute relates to the proper interpretation of the adjusted NAV used to calculate the performance fee component of their management contract. The former manager is entitled to a performance fee if the third party valuation of the properties reflects a certain uplift on the gross proceeds raised by the Company, as measured from admission of the Company's shares to trading on AIM. The key narrow legal question is whether that uplift should be measured net or gross of deferred taxes. If net, as the Board believes, the performance fee hurdle has not been met and the manager is entitled to no performance fee. If gross, the manager will be entitled to the payment of a performance fee in the region of £5 million. We did not enter into this dispute lightly. We sought the advice of both counsel and a third party expert, and based on that advice we decided to withhold payment of the performance fee (and to management fees calculated from the same adjusted NAV source number). The matter will likely be heard this winter.

South African Economic Overview

The South African economy in general, and property market in particular, remain subdued. South African GDP growth is forecast at 3 per cent for 2010 and 2.3 per cent for 2011 (source: Brait South Africa Limited), quoting the South African Reserve Bank, well below earlier predictions. The fundamentals of household demand such as disposable income, debt levels and employment have deteriorated year over year. Data from Standard Bank shows continuing job losses and unemployment in excess of twenty-five per cent of the eligible population. These factors have constrained demand despite a low interest rate and low inflation environment.

Building statistics released in April 2010 showed a drop of 23.4 per cent year on year in the value of building plans approved for non-residential buildings, (source: Statistic SA). The BER Building Cost Index, a leading indicator of building costs based on tender prices, showed marginal growth of 2.6 per cent in Q1 2010 and then negative growth of -8 per cent Q2 2010 evidencing a slowdown in construction activity, (source: Bureau for Economic Research, Stellenbosch University). The volatility in manufacturing and consumer spending data trends during the year highlight, what we believe to be, an unstable growth environment and lack of overall business confidence.

The South African government has stated that it remains committed to improving infrastructure, including increasing expenditures on public transport, roads and rail networks, school buildings, clinics and other provincial infrastructure projects, municipal infrastructure and bulk water systems. A major focus is the programme of financing low-cost social housing in an attempt to improve the quality of the country's housing stock and raise living conditions. Although, we believe the first home buyers' market remains difficult to penetrate, there is evidence of increased financing for affordable housing.

South African Property Overview and SAPRO's Assets

Residential Property

The latest housing data from South Africa's major banks show that house price growth has slowed much more rapidly than anticipated indicating a protracted recovery to the residential sector (2.9 per cent in September 2010 down from a peak of 13.5 per cent in April 2010, according to ABSA Bank). The average household debt to disposable income ratios are still regarded by some commentators as very high, and evidence suggests while tight employment conditions exist, muted economic growth and flat consumer confidence persist. These seem to suggest future stagnation or even declines in the value of residential housing. SAPRO's projects that are primarily residential include:

African Renaissance, which comprises a 146 hectare vacant development site (mainly residential and commercial rights) east of Pretoria. The scheme has been redesigned to allow a greater element of high density residential stands targeted at the more affordable and middle market home owners where debt funding appears to be more available. Negotiations have progressed with a developer who has made a proposal to acquire the first phase of the residential scheme, which comprises 12 hectares. If consummated, the sale would assist in giving the site visibility and may encourage other developers and end users to acquire the rest of the site. Conceptual design and tenanting work on the retail parcel has progressed and suitable developers and investors are being engaged. African Renaissance has been identified for orderly sale.

Driefontein, which comprises 11.0 hectares of vacant development land (mainly residential with future plans to rezone a portion for commercial rights) east of Johannesburg. A decision is pending on the revised environmental assessment that was submitted to the environmental authorities. Bulk power has been provided to the site and the substation is awaiting link up to the local utility provider. Driefontein has been identified for orderly sale and will continue to be marketed for sale to developers.

Emberton, which comprises 16.5 hectares of vacant development land (mainly zoned residential with certain commercial rights) in Hillcrest, north of Durban. Planning approvals are under application and a decision on the environmental impact assessment study and public objections, delayed on account of changes in town planning legislation in the province, are expected in late 2010 or early 2011. The local municipality bought from SAPRO a 1.1 hectare parcel of the Emberton land at a price per square metre higher than the CBRE valuation for the development of water infrastructure for the area. SAPRO owns 100 per cent of this asset but has extended an option to our development partner to acquire a 20 per cent interest in the property exercisable upon the earlier of 30 June 2011 or upon receiving full planning approvals. Emberton has been identified as an interim hold.

Kindlewood, which comprises two adjoining projects (designated Kindlewood phases one and two) with a combined area of 5.3 hectares. Phase one comprises forty-one completed upper income single family homes in a gated suburban community north of Durban. Thirteen of the forty-one houses have been sold. Market conditions in the target market are difficult. Phase two remains vacant undeveloped land. It is SAPRO's intention to continue marketing completed residential units at appropriate prices and to dispose of the land at an acceptable rate when the market allows. Both phases of Kindlewood have been identified for orderly sale.

Kyalami, which comprises an 8.9 hectare residential site in Kyalami, north of Johannesburg. The site development plan for a higher density scheme has been approved. SAPRO will retain a 90 per cent interest (increased from the original 55 per cent) on account of SAPRO's development partners' inability to fund their participation. Kyalami has been identified for orderly sale.

Commercial Property

a) Retail

Despite the favourable low interest rate environment, growth in retail sales has continued to be disappointing during the year up until August 2010 (actual year on year growth of 4.6 per cent versus an expected 8.5 per cent according to Standard Bank). The recent deceleration in the growth rate of retail sales (-1.4 per cent month on month growth during August 2010) indicates a normalisation of retail sales as World Cup spending faded.

The lower level of building activity and approved retail plans should assist in bringing back equilibrium once the less than favourable economic climate for consumer spending has passed. In the interim, retail rentals continue to be under pressure while tenants are experiencing difficult trading conditions. The market is now expecting that the retail sector will lead the property recovery as confidence returns to consumer spending later in 2011.

b) Office

Still regarded as the most vulnerable of the property sectors, it appears as if the strains of weak economic activity have stabilised and office vacancies in both the decentralised and central business district markets are showing signs of levelling off. In South Africa, rental growth was expected due to contractual annual escalations in leases, but despite this stagnant rentals indicate a definite softening of rental prices achievable (source: Broll Annual Property Report, September 2010).

During Q1 2010 the average growth in decentralised office market rentals across the major metropolis of Cape Town, Durban, Johannesburg and Pretoria were, on average, below that of building-cost inflation (+2.6 per cent) meaning real rentals are currently lower than they were a year ago. It is generally regarded that the office sector will be the last sector to recover, (source: Broll Annual Property Report, September 2010).

GDP figures released during the year reinforced the volatile and uncertain nature of the economic recovery, which seems to have had the effect of causing companies in the services sector to remain cautious about hiring more employees. This could lead to slower take up of vacant office space than may otherwise have been the case.

SAPRO's projects that are primarily commercial include:

Brakpan (a suburb of South Johannesburg), which comprises two vacant development stands totalling 6.64 hectares with approximately 25,000 square metres of developable commercial bulk. Conditions of Establishment have been received from the local municipality for development, and the supply of bulk services has been confirmed. Comments from the provincial authority's Road Department are still awaited in respect of the Traffic Impact and Assessment Study and a positive outcome is anticipated. Once all planning approvals have been achieved, which is believed imminent, market conditions will be reassessed for development or sale. Brakpan has been identified as an interim hold.

Lenasia, which comprises a 13 hectare commercial development site in Lenasia, south of Johannesburg. The decision on the reapplication for amended rights is still pending subject to written confirmation from City Power Johannesburg that an electrical power supply to the property is available. Progress on this persisting problem has been made, and 1.5MW of power has been granted to the site against the original application for 4.5MW. This significantly improves the marketability of the site to developers who can begin developing the site on a phased approach while additional power capacity is procured. Lenasia has been identified for orderly sale and is being marketed to the developer community.

Longland, which comprises a commercial, residential and retail mixed use site in Fourways, Johannesburg. The project has two phases with phase one comprising 12,769 square metres of hotel and commercial space and phase two the development of the remaining undeveloped land. Phase one now includes a City Lodge hotel on a long term land lease and a stand alone office and retail building (5,979 square metres) - which is about 72 per cent let. The building is experiencing tough trading conditions with retail tenants struggling to meet their rental obligations. The remaining land comprising about 16.3 hectares is under various stages of township application for mixed use rights including high density residential, retail, office and hospitality use. It is expected that these rights will be secured during 2011 when market conditions will dictate phase two's development potential. Longland has been identified as an interim hold. SAPRO is a 49.22 per cent minority shareholder in Longland.

Munitoria, where SAPRO has dedicated R13m, or 10 per cent of the total equity investment, towards a bid by a consortium of multinational construction and investment companies for the development of municipal offices in Pretoria at a cost of R1.3bn. The contract was supposed to have been awarded in June 2009. It is not clear when a decision will be reached and latest indications are now March 2011.

Sandton/Starleith, which comprise two adjoining residential sites (totalling 1.3 hectares) in the central business district of Sandton, Johannesburg. The planning process to apply for commercial rights is well under way (approximately 70,000 square metres has been sought) and a decision is expected shortly. SAPRO has a 50 per cent interest in Starleith and 79 per cent interest in Sandton with the same joint venture partners. When full planning consents have been achieved SAPRO will reassess the market and viability of development. Sandton/Starleith have been identified as an interim hold.

Industrial Property

We believe weakness in manufacturing activity and retail sales, the main indicators of the health of the industrial property sector, will likely negatively affect the industrial property sector. The strong Rand can only have negatively affected export growth, while global demand remains muted as the developed world takes stock of continuing financial strains. Since the beginning of 2010 contractions in rentals, rent rebates and defaulting tenants have exerted substantial pressure on rental growth ensuring that rates remain subdued for the remainder of the year.

SAPRO's assets that are primarily industrial include:

Clayville, which comprises 49 hectares of vacant land located in Oliefants Fontein north of Johannesburg. The Conditions of Establishment for three industrial townships has been approved. The land however has not been proclaimed as service level agreements have not been concluded and negotiations with the local council to secure a power supply for the property are still ongoing. It remains uncertain when power will be available. SAPRO will continue pursuing the provision of power and will then assess Clayville's prospects. Clayville has been identified as an interim hold.

Gosforth Park, which comprises a 42 hectares proclaimed industrial and commercial site south east of Johannesburg. The perimeter and entrance infrastructure to the site has been completed and the first phase of the development has encompassed the construction of eight sectional title mini-industrial units. To date two units have been sold and four have been let. Further road infrastructure is being extended within the estate to promote the sale of serviced stands to end users and developers. There are currently stands under offer with conditionality around the purchasers' ability to raise debt finance. SAPRO will continue to market serviced stands to developers and end users and continue gauging the take up of existing completed stock before committing further resources to development. Gosforth Park has been identified as an interim hold where stands remain to be serviced and orderly sale on completed mini-units and serviced stands.

Hughes Industrial Park, which comprises two adjacent industrial sites in the south east of Johannesburg covering a total of 3.69 hectares. SAPRO is a thirty per cent minority shareholder in Hughes Industrial Park. The first site has been developed to include eighteen sectional title mini-industrial units. To date four have been sold while the bulk of the remainder have been let. Considering sales to date SAPRO is reconsidering its participation in the development of the second phase of Hughes Industrial Park and has identified it for orderly sale.

Imbonini 1, which comprises a 36 hectare zoned industrial estate in Ballito north of Durban originally developed to comprise forty-five serviced stands. SAPRO is a fifty per cent minority shareholder in Imbonini 1. To date twelve stands remain available for sale, with a conditional offer accepted on the largest remaining parcel. Sales activity remains sluggish. Imbonini 1 has been identified for orderly sale.

Acacia Park, which comprises twenty-two sectional title mini-industrial units on a serviced stand in Imbonini 1. To date three units have been sold while a majority of the remaining units have been let. As with Imbonini 1 the sales activity at Acacia Park remains difficult. Acacia Park has been identified for orderly sale.

Imbonini 2, which comprises a 77 hectare site contiguous with Imbonini 1 and currently zoned agricultural. The property has received a successful rezoning application that will permit light industrial development. SAPRO is a fifty per cent minority shareholder in Imbonini 2. Considering the high cost of providing utility services infrastructure, SAPRO does not now intend to commit to the provision of bulk services Instead, SAPRO will look for interest from developers at an appropriate value. Imbonini 2 has been identified for orderly sale.

Waltloo, which comprises six serviced stands on a 4.3 hectare industrial site east of Pretoria. SAPRO accepted an offer from the joint venture partners to purchase the western portion of the property (approximately 22,000 square metres or 50 per cent of the entire project) at the CBRE valuation. SAPRO will continue to market the remainder of the site to end users and developers. Waltloo has been identified for orderly sale.

The last year has been a difficult one for the South African property market. Activity has been subdued. Much of our focus has been on designing and implementing structural changes that we believe will strengthen SAPRO, reduce costs, and result in improved shareholder returns. With some cooperation from the South African property market and the requisite shareholder approval we would expect to now commence implementing the results of the strategic review.

David Hunter

Chairman

14 December 2010

Report of the Directors

The Directors hereby submit their annual report together with the audited consolidated and company financial statements of South African Property Opportunities plc (the "Company") and its subsidiaries (the "Group") for the year ended 30 June 2010.

The Company

The Company is incorporated in the Isle of Man and has been established to enable investors to take advantage of opportunities in the South African property market.

Divestment Strategy

The Company intends to dispose of a portion of the Group's portfolio where acceptable returns can be generated and return excess capital to shareholders.

Investment Policy

The Company's investment policy is to achieve capital growth from an opportunistic portfolio of real estate assets which may include commercial, industrial and residential properties in the Republic of South Africa.

Its strategy is to generate acceptable returns by targeting opportunities in the South African property market with a view to benefiting both from active portfolio management and from underlying economic growth. Having made investments, its strategy is to adopt an entrepreneurial approach to unlocking value on sites with profitable trading potential and in so doing allow greater focus on development projects within the portfolio. During the year the Directors have finalised a strategic review which is detailed on a project by project basis in the Chairman's Statement.

The Company intends to invest primarily in the following manner:

·; "greenfield" developments including large mixed-use sites targeted to meet the demands of increased urbanisation;

·; "brownfield" redevelopments targeted mainly at providing housing and amenities for the emerging black middle class;

·; provision of mezzanine finance to existing investors and developers. This should provide access to opportunities at attractive yields; and

·; commercial investment property with attractive income yields.

The Company may also invest in special situation corporate opportunities (whether listed or not) where potential is perceived to generate returns from underlying properties. Investments will be made throughout South Africa but concentrated in and around South Africa's economic hub, Gauteng. Investment elsewhere in Southern Africa may also be considered.

The proportions to be made up of these different elements are likely to fluctuate according to market conditions and the availability of investment opportunities.

There is no fixed period in which the Company is required to make an investment before being obliged to return funds to investors. Pending investment, any cash held by the Company may be held on deposit or invested in money market funds or other near-cash investments.

The Company intends to make use of debt facilities in local currency as and when required, both in funding directly held properties and new developments. The borrowings of the Group secured against portfolio assets will be in Rand.

In effecting local Rand borrowings and using South African assets as security for external borrowings, the South African Exchange Control regulations must be complied with and, in certain circumstances, Exchange Control approval will be required.

The overall level of borrowings on the Company's portfolio, at the date on which any borrowing is incurred, is not expected to exceed 70 per cent. (loan to value) although this may be higher on individual investments (and is not subject to any cap). It is the intention of the Directors that, as far as practicable, all borrowings will be secured against individual projects without recourse to the Company.

Results and dividends

The results and position of the Group and the Company at the year end are set out on pages 13 to 20 of the financial statements.

The Directors intend to manage the Group's affairs to achieve shareholder returns through capital growth rather than income, and accordingly there can be no certainty that any dividend will be paid. However the Directors reserve the right to make dividend distributions to holders of Ordinary Shares if and when it is considered appropriate. The Directors do not intend to declare a dividend at this time (2009: £Nil). In 2010 the Company has conducted a thorough review of all of the projects in order to identify those properties where land sales demonstrate favourable returns relative to full development risk. The Directors will look to dispose of those projects.

Directors

The Directors during the year and up to the date of this Report were as follows:

* Chairman from 1 April 2009 to 30 September 2009

** Chairman from 30 September 2009

Directors and other interests

Save as disclosed above, none of the Directors had any interest during the year in any material contract for the provision of services which was significant to the business of the Company.

Independent auditors

Subsequent to the year-end the Directors received notice from the Group's auditors, PricewaterhouseCoopers, of their intention to resign following the issuance of the audit report for these financial statements. This was as a result of a change in the legal structure of the Isle of Man business of PricewaterhouseCoopers. The existing business of the partnership has been transferred into a new entity, PricewaterhouseCoopers LLC, a limited liability company incorporated in the Isle of Man. The Directors intend to appoint PricewaterhouseCoopers LLC as successor auditor to the Group in accordance with Section 12(7) of the Companies Act 1982.

Corporate governance

The Directors recognise the importance of sound corporate governance. The Directors are responsible for overseeing the effectiveness of the internal controls of the Company designed to ensure that proper accounting records are maintained, that the financial information on which business decisions are made and which is issued for publication is reliable and that the assets of the Group are safeguarded.

The Board has established an audit committee with formally delegated duties and responsibilities, comprising David Saville (Chairman) and David Hunter, who is an independent non-executive director. The audit committee meets at least twice a year and is responsible for ensuring that the financial performance of the Group is properly reported on and monitored, including reviews of the annual and interim financial statements, results announcements, internal control systems and procedures and accounting policies.

The Board has also established a remuneration committee with formally delegated duties and responsibilities, comprising all of the non-executive directors of the Company. The committee meets as required and is responsible for determining and agreeing the remuneration for all members of the Board.

On behalf of the Board

David Hunter

Chairman

14 December 2010

Directors' Biographies

The Company has a board of five Directors, all of whom are independent of the Company's investment manager and other service providers. Details of the Directors are as follows:

David Hunter - Chairman

David Hunter is a UK-based property fund consultant. For twenty years up to 2005 he was a leading property fund manager ultimately responsible for €10bn of property assets across Europe for Arlington Property Investors. David is a fellow of the Royal Institution of Chartered Surveyors, a former President of the British Property Federation, and a member of the Bank of England Property Forum.

John Chapman 

John Chapman is a member of the New York State Bar and the Chartered Financial Analyst Institute. He is currently a director of a number of investment funds, including ACP Capital Limited, The Black Sea Property Fund Limited and The Ottoman Fund Limited.

Craig McMurray

Craig McMurray is the managing director of Bridgehead Capital Management (Pty) Limited, a real estate company managing commercial property in South Africa including Bridgehead Real Estate Fund Limited. Previously Craig was head of Credit Projects at Standard Bank of South Africa Limited.

David Saville

David Saville is an Isle of Man based property fund manager currently managing a number of property sector investment vehicles with investments predominantly in the UK and Australia. From 1992 to 2001 David was the Managing Director of Saville Gordon Estates Plc, which he was instrumental in repositioning as a FTSE 250 property company specialising in industrial property. David is a member of the Royal Institution of Chartered Surveyors. 

Simon Godwin

Simon Godwin is a UK-based entrepreneur, who from 1992 through 2007 was an investment banker with Schroders and BNP Paribas. Simon has a law degree from Cambridge and qualified as a Chartered Accountant while at Deloitte Haskins and Sells, where he began his career as an auditor.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable Isle of Man law.

Company law requires the Directors to prepare financial statements for each financial year. The Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and the Group and the profit or loss of the Group for that period. In preparing those financial statements, the Directors are required to:

·; select suitable accounting policies and then apply them consistently;

·; make judgements and estimates that are reasonable and prudent; and

·; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company and the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Isle of Man Companies Acts 1931 to 2004. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the Isle of Man governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

On behalf of the Board

David Hunter

Chairman

14 December 2010

Independent Auditors' Report to the members of South African Property Opportunities plc

Report on the Consolidated and Parent Company Financial Statements

We have audited the accompanying consolidated and parent company financial statements (the 'financial statements') of South African Property Opportunities plc and its subsidiaries (the "Group") which comprise the consolidated and parent company balance sheets as of 30 June 2010 and the consolidated income statement, the consolidated statement of comprehensive income, consolidated and parent company statements of changes in equity and consolidated and parent company cash flow statements for the year then ended and a summary of significant accounting policies and other explanatory notes.

Directors' Responsibility for the Financial Statements

The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with applicable Isle of Man law and International Financial Reporting Standards as adopted by the European Union. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. This report, including the opinion, has been prepared for and only for the company's members as a body in accordance with Section 15 of the Isle of Man Companies Act 1982 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion:

·; the accompanying consolidated financial statements give a true and fair view of the financial position of the Group as of 30 June 2010, 

and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards

as adopted by the European Union;

·; the parent company financial statements give a true and fair view of the financial position of the parent company as of 30 June 2010, and

its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union

as applied in accordance with the provisions of the Isle of Man Companies Act 1982; and

·; the financial statements have been properly prepared in accordance with the Isle of Man Companies Acts 1931 to 2004.

PricewaterhouseCoopers

Chartered Accountants

Isle of Man

14 December 2010

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

Company Balance Sheet

Consolidated Statement of Changes in Equity

Company Statement of Changes in Equity

Consolidated Cash Flow Statement

Company Cash Flow Statement

Notes to the Financial Statements

1 General information

South African Property Opportunities plc (the "Company") was incorporated and registered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004 on 27 June 2006 as a public limited company with registered number 117001C. South African Property Opportunities plc and its subsidiaries' (the "Group") investment objective is to achieve capital growth from an opportunistic portfolio of real estate assets in South Africa.

Proteus Property Partners Limited (the "Investment Manager") was originally appointed as the Company's manager. Group Five Property Developments (Pty) Limited ("Group Five"), was appointed as the replacement investment manager on 4 October 2010. The Company's administration is delegated to Galileo Fund Services Limited (the "Administrator"). The registered office of the Company is Millennium House, 46 Athol Street, Douglas, Isle of Man, IM1 1JB.

Pursuant to a prospectus dated 20 October 2006 there was an original placing of up to 50 million shares. Following the close of the placing on 26 October 2006, 30 million shares were issued at a price of 100p per share.

The shares of the Company were admitted to trading on the AIM Market of the London Stock Exchange ("AIM") on 26 October 2006 when dealings also commenced. On the same date the shares of the Company were admitted to the Official List of the Channel Islands Stock Exchange (the "CISX").

As a result of a further fundraising in May 2007, 32,292,810 shares were issued at a price of 106p per share, which were admitted to trading on AIM on 22 May 2007.

The Company's agents and its investment manager perform all functions, other than those carried out by the Board's executive and non-executive directors. The Group has two employees.

Financial year end

The financial year end of the Company is 30 June in each year.

Company profit

In accordance with the provisions of Section 3 of the Isle of Man Companies Act 1982, no separate income statement has been presented for the Company. The amount of the Company's profit for the year recognised in the Consolidated Income Statement is £7,373,198 (30 June 2009: £12,439,150).

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated.

2.1 Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The financial statements have been prepared under the historical cost convention and the requirements of the Isle of Man Companies Acts 1931 to 2004. The preparation of financial statements in conformity with IFRS requires the use of accounting estimates (see note 2.2). It also requires management to exercise its judgement in the process of applying the Company and Group's accounting policies.

a) New and amended standards adopted by the Group

The Group has adopted the following new and amended standards as of 1 July 2009:

 ·; IAS 23 (Amendment), 'Borrowing costs' (effective from 1 January 2009). The amendment requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs will be removed. This has not affected the Group significantly as the Group already capitalises its borrowing costs.

·; IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting', with its requirement to determine primary and secondary reporting segments. Under the requirements of the new standard, the Group's external segment reporting will be based on the internal reporting to the Board (in their role as the chief operating decision-maker), which makes decisions on the allocation of resources and assess the performance of the reportable segments. The application of IFRS 8 does not have any material effects for the Group but has an impact on segment disclosure (for example, goodwill allocation) and on the measurement bases within segments.

·; IAS 1 (Revised), 'Presentation of financial statements' effective 1 January 2009. The revised standard prohibits the presentation of items of income and expenses (that is, 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity in a statement of comprehensive income. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. Comparative information has been re-presented so that it also conforms with the revised standard. As the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

·; IFRS 3 (Revised), 'Business combinations' (effective from 1 July 2009). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisition-related costs should be expensed. This has not affected the Group as no payments have been made for business combinations during the year ended 30 June 2010.

·; IAS 23 (Amendment), 'Borrowing costs' (effective from 1 January 2009). The amendment is part of the International Accounting Standards Board's annual improvements project published in May 2008. The definition of borrowing costs has been amended so that interest expense is calculated using the effective interest method defined in IAS 39 'Financial Instruments: Recognition and Measurement'. This eliminates the inconsistency of terms between IAS 39 and IAS 23. This amendment has not had a significant effect on the Group.

·; IAS 27 (Revised), 'Consolidated and separate financial statements' (effective from 1 July 2009). The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting treatment when control is lost. Any remaining interest in the equity is re-measured to fair value, and a gain or loss is recognised in profit or loss. Total comprehensive income is attributable to the controlling and non-controlling interests even if this results in the non-controlling interest having a deficit balance. This revision has been applied prospectively and no restatement is required for reporting periods prior to 1 July 2009.

·; IAS 28 (Amendment), 'Investments in associates' (and consequential amendments to IAS 32, 'Financial Instruments: Presentation', and IFRS 7, 'Financial instruments: Disclosures') (effective from 1 January 2009). The amendment is part of the IASB's annual improvements project published in May 2008. An investment in associate is treated as a single asset for the purposes of impairment testing. Any impairment loss is not allocated to specific assets included within the investment, for example, goodwill. Reversals of impairment are recorded as an adjustment to the investment balance to the extent that the recoverable amount of the associate increases. The Group has applied this amendment from 1 July 2009.

b) Standards, amendments and interpretations to existing standards relevant to the Group, that are not yet effective and have not been early adopted by the Group

·; IFRS 9, 'Financial instruments', issued in November 2009. This standard is the first step in the process to replace IAS 39, 'Financial instruments: recognition and measurement'. IFRS 9 introduces new requirements for classifying and measuring financial assets and is likely to affect the Group's accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. However, the standard has not yet been endorsed by the EU. The Group is yet to assess IFRS 9's full impact.

·; Revised IAS 24 (Revised), 'Related party disclosures', issued in November 2009. It supersedes IAS 24, 'Related party disclosures', issued in 2003. IAS 24 (Revised) is mandatory for periods beginning on or after 1 January 2011. Earlier application in whole or in part, is permitted. However, the standard has not yet been endorsed by the EU. The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. The Group will apply the revised standard from 1 July 2011 subject to endorsement by the EU. When the revised standard is applied, the Group and the Company will need to disclose any transactions between its subsidiaries and its associates.

2.2 Critical accounting estimates

Management makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are addressed below.

(a) Estimated impairment of inventory

The Group obtains third party semi-annual valuations performed by CB Richard Ellis. These are used in conjunction with the strategic plan for each development in order to determine the inventory impairment.

During the year there was an impairment charge (see note 13).

(b) Estimated impairment of goodwill

The Group tests annually for whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.7. The recoverable amount of the cash generating unit has been determined using fair value less cost to sell. This calculation requires the use of estimates, see note 12 for further details.

(c) Performance fee

The former Investment Manager is entitled to performance fees provided a specific hurdle is met. The calculation as to whether the hurdle is met involves the use of third party valuations as detailed in part (a). See note 7 for further details of this calculation and see note 22 for details of the dispute with the former Investment Manager in relation to the fee as at 30 June 2009.

2.3 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in Pound Sterling, which is the Company's functional and the Group's presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

(c) Group companies

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(ii) income and expenses for each income statement are translated at average exchange rates; and

(iii) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to other comprehensive income. When a foreign operation is partially disposed or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

2.4 Revenue and expense recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of inventory in the ordinary course of the Group's activities and rental income received or receivable in relation to operating leases. Revenue is shown net of value added tax.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future benefits will flow to the entity and when specific criteria have been met for each of the Group's activities as described above.

Operating lease income is recognised in the income statement on a straight-line basis over the period of the lease and relates to leases in which a significant portion of the risks and rewards of ownership are retained by the Group, as lessor, and are classified as operating leases.

Interest income is recognised in the financial statements on a time-proportionate basis using the effective interest method.

Interest expense for borrowings is recognised in the financial statements using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the period.

Expenses are accounted for on an accruals basis.

2.5 Basis of consolidation

Subsidiaries

Subsidiaries are those entities controlled by the Group. Control exists where the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.

Transactions and non-controlling interests

The Group applies a policy of treating transactions with non-controlling interests as transactions with parties external to the Group. Up to 30 June 2009 the excess, and any further losses applicable to the non-controlling interests, are allocated against the controlling interest except to the extent that the non-controlling interests have a binding obligation and are able to make an additional investment to cover the losses. If the subsidiary subsequently reports profits, such profits are allocated to the controlling interest until the non-controlling interests' share of losses previously absorbed by the controlling interest have been recovered. From 1 July 2010 non-controlling interests participate in their share of any loss, this is not retrospective and can result in such interests being in a deficit position.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised gains/losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

Associates

Associates are those entities in which the Group has a significant influence, but no control, generally accompanying a shareholding of between 20 per cent and 50 per cent of the voting rights. Associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group's investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. The consolidated financial statements include the Group's share of its associates' profits or losses, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group's share of losses exceeds its interest in an associate, the carrying amount of that interest (including any long-term investment) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

2.6 Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is the person or group that allocates resources to and assesses the performance of the operating segments of an entity. The Group has determined that its chief operating decision-maker is the Board of the Company.

2.7 Intangible assets

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the identifiable net assets (including intangible assets) of the acquired subsidiary. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.

2.8 Financial assets and financial liabilities

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. The Board determine the classification of its financial assets at initial recognition.

At 30 June 2010 and 2009 the Group did not have any financial assets at fair value through profit or loss or available for sale. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current assets. The Group's loans and receivables comprise 'loans due from associates', 'trade and other receivables' and 'cash at bank' in the balance sheet (notes 11.2, 14 and 15).

The Group classifies its financial liabilities in the following categories: at fair value through profit or loss and other liabilities. At 30 June 2010 and 2009 the Group did not have any financial liabilities at fair value through profit or loss. Other liabilities comprise 'loans from third parties', 'trade and other payables' and 'borrowings' in the balance sheet (notes 19, 20 and 21).

2.9 Inventories

Land and buildings that are being developed for future sale are classified as inventory at their deemed cost, which is the carrying amount at the date of classification. Building costs and borrowing costs in relation to inventory are capitalised. Land and building for development is subsequently carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less selling expenses.

2.10 Loans and receivables

Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.

2.11 Trade and other receivables

Trade and other receivables are initially stated at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts to be received. Significant financial difficulties of the counterparty, probability that the counterparty will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount to be received is impaired. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

2.12 Cash and cash equivalents

Cash and cash equivalents comprise cash deposited with banks and other short-term highly liquid investments with original maturities of three months or less.

2.13 Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently at amortised cost using the effective interest method.

2.14 Taxation

The Company is resident for taxation purposes in the Isle of Man and is subject to income tax at a rate of zero per cent. The Group is liable for tax in South Africa on the activities of its subsidiaries and associates.

The tax expense represents the sum of the tax currently payable, which is based on taxable profits for the year. The Group's liability is calculated using tax rates applicable at the balance sheet date.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

2.15 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

Borrowing costs directly attributable to assets in the course of construction are capitalised.

2.16 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

2.17 Dividends

Dividends are recognised as a liability in the year in which they are declared and approved.

3 Risk management in respect of financial instruments

The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The financial risks relate to the following financial instruments: loans and receivables and other liabilities as detailed in note 2.8.

Risk management is carried out by the Executive Directors.

Foreign currency risk

Foreign currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Group's operations are conducted in jurisdictions which generate revenue, expenses, assets and liabilities in currencies other than Pound Sterling ("the functional currency of the Company"). As a result the Group is subject to the effects of exchange rate fluctuations with respect to these currencies. The currency giving rise to this risk is the South African Rand.

The Group's policy is not to enter into any currency hedging transactions.

The table below summarises the Group's exposure to foreign currency risk in respect of its financial instruments:

The Executive Directors monitor and review the Group's currency position on a continuous basis and act accordingly.

At 30 June 2010, had the Pound strengthened/weakened by 5 per cent against the South African Rand, with all other variables held constant, the impact on equity of the above financial instruments would be a decrease/increase of £78,000 (30 June 2009: 5 per cent, £96,000).

Included in the income statement is a foreign exchange gain of £5,472,218 (2009: £9,452,451) which includes a gain of £5,082,950 (2009: £7,882,706) arising on the translation of the loan from the Company to its direct subsidiary, SAPSPV Holdings RSA (Pty) Limited; a loan which is denominated in South African Rand. On consolidation, the corresponding foreign exchange loss arising on translation of this loan in SAPSPV Holdings RSA (Pty) Limited from the functional currency of South African Rand to the presentation currency of Pound Sterling is included in the foreign currency translation reserve within equity.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group.

The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date. This relates also to financial assets carried at amortised cost.

At the reporting date, the Group's financial assets exposed to credit risk amounted to the following:

The Group manages its credit risk by monitoring the creditworthiness of counterparties regularly. Cash transactions and balances are limited to high-credit-quality financial institutions (at least an Aa2 credit rating). Loans due from associates and trade and other receivables relate mostly to project investments in land and the Executive Directors do not expect any losses from non-performance by these counterparties. All investment opportunities are analysed objectively prior to Board approval, including a financial and business due diligence investigation of each potential project.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its obligations as they fall due. The Group currently manages its liquidity risk by maintaining sufficient cash as indicated by its cashflow forecasts. The Group's liquidity position is monitored by the Executive Directors.

The residual undiscounted contractual maturities of financial liabilities are as follows:

Interest rate risk

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group is exposed to interest rate risk from the cash held in interest bearing accounts at floating rates or short term deposits of one month or less, on loans due from associates, loans from third parties and on borrowings. The Company's Board of Directors monitor and review the interest rate fluctuations on a continuous basis and act accordingly.

During the year ended 30 June 2010 should interest rates have decreased by 100 basis points (1 per cent), with all other variables held constant, the shareholders' equity and profit for the year would have been £181,000 (2009: 10 basis points, £21,000) lower.

Capital risk management

The Company's primary objective when managing its capital base is to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders.

Capital comprises share capital, share premium and reserves.

No changes were made in respect of the objectives, policies or processes in respect of capital management during the years ended 30 June 2009 and 2010.

4 Segment Information

The chief operating decision-maker has been identified as the Board. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. It has determined the operating segments based on these reports. The Board considers the business on a project basis by sector. The sectors are Residential, Mixed Use and Industrial.

Tables removed - please refer to the Company's website www.saprofund.com for the segment reporting for the year ended 30 June 2010 and a comparative table for the year ended 30 June 2009.

The entity is domiciled in the Isle of Man. All of the reported revenue, £3,747,103 (2009: £411,803), is from external customers located in South Africa.

The total of non-current assets other than financial instruments and deferred tax assets is £29,472,470 (2009: £56,571,783) and all of these are located in South Africa.

Revenues of £753,516 (ZAR: 9,055,000) (2009: £nil (ZAR: nil)) are derived from a single external customer in relation to Emberton.

Revenues of £1,349,842 (ZAR: 16,221,053) (2009: £nil (ZAR: nil)) are derived from single external customers and is attributable to Kindlewood. For Kindlewood these are made up of three customers representing ZAR 4,894,737, ZAR 7,526,316 and ZAR 3,800,000.

5 Operating leases

The Group leases out certain parts of its inventory under operating leases whilst it is in the process of seeking a buyer. The future minimum lease payments receivable by the Group under non-cancellable leases are as follows:

6 Cost of sales

7 Investment Manager's fees

Annual fees

During the term of the investment management agreement with Proteus Property Partners Limited, the former Investment Manager received a management fee of 2 per cent per annum of the adjusted net asset value of the Group payable quarterly in advance.

The Company, for the purposes of calculating the former Investment Manager's fee, has adopted the net asset value of the Group as calculated in accordance with customary accountancy or industry practices, but including the value of the Group's property assets on an open market basis.

During the term of the investment management agreement, the former Investment Manager was also entitled to recharge to the Group all and any costs and disbursements reasonably incurred by it in the performance of its duties, including costs of travel save to the extent that such costs are staff costs or other internal costs of the Investment Manager. Accordingly, the Company was responsible for paying all the fees and expenses of all valuers, surveyors, legal advisers and other external advisers to the Company in connection with any investments made on its behalf. All amounts payable to the Investment Manager by the Company were paid together with any value added tax, if applicable.

Management fees payable for the year ended 30 June 2010 amounted to £1,522,452 (30 June 2009: £1,618,673).

Performance fees

During the term of the investment management agreement, the Investment Manager was entitled to a performance fee which is payable by reference to the increase in adjusted net asset value per share above a hurdle based on the issue price per share increased at a rate of 12 per cent per annum, but adjusted so as to exclude any dividends paid during the period.

Performance fees payable for the year ended 30 June 2010 amounted to £nil (30 June 2009: £nil). See note 22 for further details.

8 Other administration fees and expenses

Included within other administration fees and expenses are the following:

Directors' remuneration

The maximum amount of basic remuneration payable by the Company by way of fees to the Non-executive Directors permitted under the Articles of Association is £200,000 per annum. All Directors are each entitled to receive reimbursement of any expenses incurred in relation to their appointment. The Non-executive Directors (excluding the Chairman) were entitled to receive an annual fee of £20,000 each, which increased to £40,000 on 1 October 2009; and the Chairman £50,000, which increased to £75,000 on 1 October 2009.

Executive Directors' fees

The Executive Directors received annual basic salaries of £20,000, increased to £40,000 with effect from 1 October 2009. Pursuant to the terms of their respective service agreements, Craig McMurray and John Chapman are entitled to incentive payments of, respectively, 1.5 per cent. and 0.5 per cent. of (a) all sums distributed to shareholders, and (b) all net proceeds of disposals which have not yet been distributed at the time of termination of their respective agreements. The agreements also contain change of control provisions which, from the fourth anniversary of each executive's appointment, trigger payments of the same percentages of any offer price if the Company is acquired. The fees due under the change of control provision are scaled back by 25 per cent. each year if the change of control occurs prior to the fourth anniversary of each executive's appointment.

All directors' remuneration, fees and expenses

Total fees, basic remuneration and expenses paid to the Directors for the year ended 30 June 2010 amounted to £313,176 (30 June 2009: £210,171). This was split as £170,573 to Non-executive Directors (2009: £120,749) and £142,603 to Executive Directors (2009: £89,422) and Directors' insurance cover amounted to £33,644 (30 June 2009: £10,183). The fees for the year ended 30 June 2009 include £71,500 (£62,500 Executive Directors, £9,000 Non-executive Directors) as one-off fees for conducting and completing the strategic review.

9 Income tax expense

The tax on the Group's profit before tax is higher than the standard rate of income tax in the Isle of Man of zero per cent. The differences are explained below:

There are tax losses carried forward in the underlying subsidiaries of £3,946,070 (ZAR: 45,249,186) (30 June 2009: £2,636,442 (ZAR 30,231,816)). There is no expiry date for the carrying forward of these losses. For prudence, tax losses are not carried as deferred tax assets in the consolidated balance sheet until the realisation of the related tax benefit through future taxable profits is probable.

10 Basic and diluted earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group by the weighted average number of shares in issue during the year.

The Company has no dilutive potential ordinary shares; the diluted earnings per share is the same as the basic earnings per share.

11 Investments in subsidiaries and associates

11.1 Investments in subsidiaries

Since inception and for efficient portfolio management purposes, the Company established the following subsidiary company:- 

SAPSPV Holdings RSA (Pty) Limited is a direct subsidiary of South African Property Opportunities plc. SAPSPV Holdings RSA (Pty) Limited was incorporated on 20 October 2006 with a share capital of ZAR 101 and share premium of ZAR 24,999,899.

During the year there has been no change in the Company's investment in the direct subsidiary.

The direct and indirect subsidiaries held by SAPSPV Holdings RSA (Pty) Limited are as follows:-

* this also represents the percentage of ordinary share capital and voting rights held - 2010

** the Group controls the company by means of direct control of the board

In August 2009 the Company disposed of 50 per cent of the ordinary share capital of Breeze Court Investments 31 (Pty) Limited, a property holding company incorporated in South Africa, for £4 (ZAR 50). There was no gain or loss on disposal.

11.2 Investments in associates

During the year ended 30 June 2009 a second payment, £207,732 (ZAR 3,000,000), was made in relation to the initial purchase price of Imbonini Park (Phase 2) (Pty) Limited. This transaction increased the goodwill on the investment in associate to £426,819 (ZAR 5,999,500).

In July 2008 the Group acquired 30 per cent of the ordinary share capital of Blue Waves Properties 2 (Pty) Limited, a property holding company incorporated in South Africa, for £3,029 (ZAR 43,752). There was goodwill of £3,025 (ZAR 43,692) as a result of this transaction.

The Group's share of the results of its principal associates, all of which are unlisted, and its aggregated assets (including goodwill) and liabilities, is as follows:

Loans due from associates

The loans due from associates are as follows:

* repayable after the senior debt funding provided by Investec Bank Limited has been repaid in full

** repayment date is 4 years + 1 day following the receipt of the Recordal from the Development Facilitation Act, 1995 (DFA) Tribunal approving the planning application

*** repayable as and when the directors of Imbonini Park Phase 2 (Pty) Limited resolve that repayment shall be effected, provided there are sufficient cash reserves available to do so and proportionately to each shareholder

**** repayable at the discretion of the directors of Blue Waves

The fair value of these loans approximates their carrying value at 30 June 2010.

12 Intangible assets

The contingent liability of £1,177,142 (ZAR 17,000,000) in relation to the purchase of shares in Living 4 U Developments (Pty) Ltd, which was included in the 2008 annual report, was settled during the year ended 30 June 2009 and increased goodwill accordingly.

The above goodwill relates entirely to the Group's investment in the shares of Living 4 U Developments (Pty) Ltd. The recoverable amount of this cash generating unit has been determined using fair value less cost to sell. The key assumption used to determine the fair value less cost to sell is the third party valuation of the land held. The recoverable amount is currently equal to the carrying amount of £1,526,000 (ZAR 17,500,000) and if the third party valuation of the land were to fall then the goodwill impairment would be equal in value.

13 Inventories

Non-current assets

* impairment is included in cost of sales in the income statement where the net realisable value is lower than the cost (see below)

Current assets

During the year, the Group acquired land and capitalised costs of £7,548,896 (ZAR 90,715,089) (2009: £15,818,133 (ZAR 228,440,730)), in order to develop it for future re-sale, and accordingly it was classified as inventory. Borrowing costs of £702,467 (ZAR 8,441,541) (2009: £285,478 (ZAR 4,122,792)) have been included in the capitalised costs.

At 30 June 2010 the net realisable values of Emberton, Kyalami, Lenasia and Starleith were lower than cost, therefore, their inventory values have been impaired to a value of £14,929,929 (ZAR 171,200,000) (30 June 2009: Emberton, Kindlewood and Kyalami were impaired to a value of £14,149,348 (ZAR 179,949,990)). The net realisable value has been derived as fair value less cost to sell.

At 30 June 2010 the inventories determined to be the subject of an orderly sale by the strategic review have been transferred to current assets.

Security

At 30 June 2010, there are two first rank mortgages secured over the inventory held by Gosforth Park and Kindlewood which totals £20,723,716 (ZAR 237,636,779) (30 June 2009: Gosforth Park and Kindlewood £17,711,743 (ZAR 225,256,173)) (see note 21 for details).

14 Trade and other receivables

The loan from the Company to SAPSPV Holdings RSA (Pty) Limited bears interest at the Prime Rate as published by the Reserve Bank of South Africa from the date of the advance to the date of repayment, which interest is compounded monthly in arrears on the last working day of each month.

This loan is repayable as and when the directors of SAPSPV Holdings RSA (Pty) Limited resolve that repayment shall be effected, provided there are sufficient cash reserves available to do so and that prior approval has been obtained from the Exchange Control Division of the South African Reserve Bank but in no case later than 30 June 2013.

The fair value of the loan approximates its fair value at 30 June 2010.

15 Cash at bank

Included within the £7,509,859 bank deposit balances figure is an amount of £436,037 (ZAR 5,000,000) (30 June 2009: £1,800,108 (ZAR 22,893,585)) represented by bank guarantees retained by the bank under fixed deposit (detailed below). This is the only figure excluded from the above balances for analysing the movements of cash and cash equivalents in the cash flow statement.

Bank guarantees

At 30 June 2009 the indirect subsidiary Royal Albatross Properties 313 (Pty) Limited had a contingent liability of £1,230,045 (ZAR 15,643,585) in connection with its senior debt obligations. The guarantee was released on 17 June 2010.

The subsidiary SAPSPV Holdings RSA (Pty) Ltd has a contingent liability of £436,037 (ZAR 5,000,000) in connection with senior debt obligations of its associate Imbonini Park (Pty) Ltd.

The indirect subsidiary Crimson King Properties 378 (Pty) Ltd ("Crimson") had a contingent liability to contribute up to £176,916 (ZAR 2,250,000) at 30 June 2009. On completion of works in August 2009, the guarantee was released.

16 Share capital

The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

Business Venture Investments No 1269 (Pty) Limited has issued preference shares ZAR 100 to its minority holders. The holders of the preference shares are entitled to the first ZAR 22,000,000 (£1,918,566) in dividends declared by Business Venture Investments No 1269 (Pty) Limited.

17 Share premium

18 Net asset value per share

Group

The NAV per share is calculated by dividing the net assets attributable to equity holders of the Group by the number of ordinary shares in issue.

19 Loans from third parties

The loans from third parties are as follows:

* in relation to their combined ownership of 25 per cent of Crimson King Properties 378 (Pty) Limited and the Gosforth Business Estate development

** in relation to its 50 per cent interest in Madison Park Properties 36 (Pty) Ltd and the Waltloo Industrial Park development

*** in relation to its 50 per cent interest in Madison Park Properties 40 (Pty) Ltd and the Brakpan development

**** in relation to his prospective interest in Madison Park Properties 34 (Pty) Ltd and the Kyalami Residential Estate development

***** in relation to its 25 per cent interest in Breeze Court 31 (Pty) Ltd and the Starleith development

All of the above loans are unsecured and carry no fixed terms of repayment.

The fair value of these loans approximate their carrying value at 30 June 2010.

20 Trade and other payables

21 Borrowings

Current liabilities

Two developments have bank loans which are secured by their inventory (see note 13).

Terms and debt repayment schedule

The fair value of the borrowings approximate their carrying value at 30 June 2010.

22 Contingent liabilities and commitments

As at 30 June 2010 the Group has the following contingent liabilities and commitments:

- contingent liabilities which have corresponding bank guarantees are detailed separately in note 15.

- the management agreement between the Group and its former Investment Manager provided for a performance fee if the Net Asset Value of the Group, as defined in the agreement, exceeded a specified hurdle. In 2010 the Group received a claim from its Investment Manager for payment of £5.083 million based on their own calculation that the hurdle had been achieved as at 30 June 2009. The Directors, having engaged an independent accountant to look at the Investment Manager's calculation and having sought the advice of counsel in interpreting the Investment Management Agreement, are of the opinion that the specified hurdle has not in fact been achieved and did not therefore make any accrual for payment of the performance fee as at 30 June 2009 or at 30 June 2010.

23 Related party transactions

Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the other party in making financial or operational decisions.

Group

The Investment Manager, Proteus Property Partners Limited, and the Directors of the Company are considered to be related parties by virtue of their ability to make operational decisions for the Company. Fees for the year ended 30 June 2010 are disclosed in notes 7 and 8 respectively.

Brian Padgett is a director of the former Investment Manager and of Silex Management Limited (Silex), a company that has provided administration services to the majority of the Group's South African subsidiaries. He is also a director in Principle Capital Holdings S.A. the ultimate parent company of the majority shareholder in the former Investment Manager. Fees invoiced by Silex for the year ended 30 June 2010 are £nil (30 June 2009: £394,000).

Related party transactions with associates are disclosed in note 11.

Company

Related party transactions with subsidiaries are disclosed in note 14.

24 Comparative balances

Impairment of inventory of £112,204 and property expenses of £141,500, which were previously allocated to other administrative fees and expenses have been re-allocated to cost of sales to conform with changes in presentation made in the current year.

25 Post balance sheet events

On 4 October 2010 Group Five Property Developments (Pty) Limited was appointed as Investment Manager to the Company. Group Five Property Developments (Pty) Limited is a related party to Group Five Construction (Pty) Limited, which is a partner in the Sandton and Starleith developments, has a loan in respect of the Sandton development which is disclosed in note 19.

Subsequent to 30 June 2010 an agreement was signed for the sale of a further unit at the Kindlewood development (at a price of £203,484 (ZAR 2,333,333)).

Subsequent to 30 June 2010 agreements were signed for the sale of two units at the Gosforth development and four units have been leased for terms ranging between two and five years. The two sales totalled £363,382 (ZAR 4,166,866).

Subsequent to 30 June 2010 SAPRO accepted an offer from the development partners to purchase the western portion of the Waltloo property (approximately 22,000 square metres or 50 per cent of the entire development) at the value included in the third party valuation performed at 30 June 2010. Sales proceeds will be £863,355 (ZAR 9,900,000).

From November 2010 new terms are being negotiated on the loan from Imperial Bank (see note 21) and therefore the loan is now considered to be repayable on demand.