19th Nov 2007 07:01
South African Property Opps PLC19 November 2007 SOUTH AFRICAN PROPERTY OPPORTUNITIES PLC ('SAPRO' or the 'Company') Preliminary Results for the period ended 30 June 2007 South African Property Opportunities plc (AIM: SAPO), an investment company listed on AIM and established to invest in real estate opportunities in South Africa, announces its preliminary results for the period ended 30 June 2007. Highlights: Background - Company launched in October 2006 raising £30 million - Further £34.2 million raised in April 2007 - Total gross funds raised of £64.2 million (£62.6 million net of placing expenses) Investments - Eight projects announced by period end, with £25.1 million of investment commitments - Four further projects announced since period end, taking total investment commitments to £39.7 million, 63 per cent. of net issue proceeds - Expectation is to be substantially invested by Q1 2008, given strength of pipeline - Portfolio of twelve developments covers industrial (36 per cent.), mixed use (33 per cent.) and residential (31 per cent.) sectors of the market Financials and Valuations - IFRS Net Asset Value of £62.6 million (100.6p per ordinary share) excludes the CB Richard Ellis revaluations referred to below - Independent valuers, CB Richard Ellis, valued three projects on which title had been taken by 30 June 2007 and one project on which title was taken in July 2007 (Clayville Industrial Park), all as at 30 June 2007 - CB Richard Ellis valuation attributes a £5.1 million (43 per cent.) uplift from the cost (£11.8 million) of these four valued projects, the first of which is only seven months old - Valuations of eight of the twelve projects in the portfolio to be conducted at 31 December 2007 - Economic outlook remains favourable and Rand/Sterling rate stable Commenting on the results, Quentin Spicer, Chairman stated: 'As the economic hub of sub-Saharan Africa, South Africa's economy continues to go from strength to strength. The spend on infrastructure in the country has had a profound effect on industrial opportunities, with stand values up between 75 per cent. in the Gauteng region and 112 per cent. in Durban. The residentialand office markets have been strong, in particular with the continued demand for housing from South Africa's emerging cross cultural middle class. Whilst we are only a year into the existence of this fund, the revaluations of the initial properties in the portfolio are extremely encouraging for the rest of the investments made to date. The investment team has worked exceptionally hard to put together a balanced portfolio across a wide range of sectors. We remain confident of fully committing the Company's equity capital by the second quarterof 2008.' Principle Capital on behalf of SAPRO Anne Dalen +44 20 7240 3222 Landsbanki Securities Paul Fincham +44 20 7426 9000 Bell Pottinger Dan de Belder +44 20 7861 3232 Note to Editors: - South African Property Opportunities plc (SAPRO) is acompany investing in the South African property market. Its shares wereadmitted to AIM in October 2006 raising an initial £30 million (before placingexpenses). In April 2007 a further £34.2 million (before placing expenses) wasraised from new and existing investors. - SAPRO was established to invest in the South Africanproperty market with a view to generating attractive returns, principallythrough capital growth. It is targeting opportunities arising from theincreasing wealth that has been generated from greater urbanisation and economicgrowth in South Africa coupled with the rapid emergence of a cross culturalmiddle class. SAPRO is currently focused on investments in brownfield andgreenfield development opportunities. - The Investment Manager is Proteus Property PartnersLimited and the Investment Adviser is Proteus Property Advisors (Pty) Limited.The Investment Manager and Investment Adviser are responsible for identifyingnew investment opportunities. - The Investment Manager and Investment Adviser are 60 percent. owned subsidiaries of Principle Capital Holdings S.A. (AIM: PCX.L). Chairman's Statement I am pleased to report the Company's results for the period ended 30 June 2007representing its first seven months of trading. In October last year, theCompany raised £30 million (£29.1 million net of placing expenses) and in Maythis year a further £34.2 million (£33.5 million net of expenses), giving atotal gross funds raised of £64.2 million (£62.6 million net of placingexpenses). There are two key highlights to the period in question. First is theexcellent progress the Company is making in investing its capital and I am,therefore, pleased to report once more that the Investment Manager expects theCompany's capital to be invested well ahead of the 18 month timetable set out inthe second fund raising prospectus issued in May. In fact it expects the Companyto be substantially invested by the first quarter of 2008. Second is the outcomeof a very favourable valuation exercise conducted by independent valuers, CBRichard Ellis, on certain properties in the portfolio. Investments and Valuations The total portfolio currently consists of twelve investments split approximatelyevenly between industrial, residential and mixed use developments. In our firstseven months, the Company successfully committed £25.1 million to eight projectsand since the period end the Company has announced four further projects, takingtotal commitments to £39.7 million, which represents 63 per cent. of theCompany's net issue proceeds. Of these twelve projects, the Company had takentransfer of title on three and since the period end has secured transfer oftitle on a further four. The Investment Manager expects title to have been takenon eight projects by 31 December 2007 with the remaining four by 30 June 2008(subject to the condition on Hughes Industrial Park being satisfied). The net asset value of the Group stood at £62.6 million at the period end.International Financial Reporting Standards do not permit the recognition ofincreases in land values on property that is held for development andaccordingly the three projects on which title transfer had been taken at theperiod end are only valued on a cost basis. Despite this, independent valuers CBRichard Ellis conducted a land valuation of these three projects and a furtherproject (Clayville Industrial Park on which title transfer was taken in July2007), for which the Company's share of the projects equated to £16.8 million, a£5.1 million or 43 per cent. uplift in value over their £11.8 million base cost.As these projects are realised we expect this uplift will be reflected in thenet asset value. Whilst three of these four valued projects were in the booming industrial sectorof the market which has experienced near 100 per cent. growth over the pastyear, these valuations are clearly encouraging for the remainder of theinvestments in the portfolio, particularly given the strength of the economy andthe local real estate market across the board. The Company has instructed CBRichard Ellis to conduct a valuation of the eight projects on which title hasbeen or is expected to have been taken at 31 December 2007. Financial Results At the end of the period under review, the Company's net asset value was £62.6million which equates to 100.6 pence per share. Of this, £51.8 million was heldin cash and cash equivalents, split between Rands and Sterling. To finance theinvestment portfolio, a total of R612.5 million has been purchased at an averageRand/Sterling exchange rate of 14.03, equating to £43.6 million. At the periodend the exchange rate was 14.1798 or 2.6 per cent. weaker than at 31 December2006 (13.8219). Deposit interest earned averaged approximately 5.1 per cent. perannum on Sterling balances and 9.0 per cent. per annum on Rand balances,generating £1.47 million of finance income. After management, administrationfees, other expenses and exchange losses, the net profit for the period was£120,000. The Company had no borrowings at the period end, although it will be starting togear up its investments as the required permissions on various developments comethrough and allow the Company to get onto sites to commence building work. Inline with the Company's focus on achieving capital returns and in line with itsdividend policy, the Board is not proposing a dividend. Quentin SpicerChairman16 November 2007 Report of the Investment Manager South African Property Opportunities plc ("SAPRO") is, to the best of ourknowledge, the first listed overseas property company focusing solely onopportunities in the South African real estate market. The Company's investmentpolicy is to achieve primarily capital growth from an opportunistic portfolio ofreal estate assets across the commercial, industrial and residential sectors inSouth Africa. The Company's strategy is to target opportunities that will benefit from activemanagement and from the drivers behind South Africa's strong economic growth,particularly meeting the demands of increased urbanisation and associatedinfrastructure requirement as well as the spending power of the country'srapidly emerging cross cultural middle class. Portfolio overview Our current portfolio consists of twelve projects spread across industrial (36per cent.), mixed use (33 per cent.) and residential (31 per cent.)developments. We believe that this provides the Company with diversificationbenefits across the various real estate asset classes, and exposure to SouthAfrica's continued macroeconomic growth. The bulk of the investments have beenmade in Gauteng, South Africa's economic powerhouse, with three developments inKwaZulu Natal which has also been experiencing strong growth and whereattractive development opportunities lie. The following table sets out theconstituents of the current portfolio: SAPRO Total Project Investment Expected Commitment Development Expected Project Name and Cost CompletionSector Sector Interest (£ million) (£ million) Year ImboniniServices Park(Phase 1) Industrial 50% 1.5 4.3 2008ClayvilleIndustrialPark Industrial 100% 1.1 5.0 2009GosforthBusinessEstate Industrial 75% 6.0 42.6 2013HughesIndustrialPark Industrial 30% 0.4 4.8 2010WaltlooIndustrialPark Industrial 50% 0.5 5.4 2009Longmeadow Mixed Use 49% 5.8 151.7 2012DriefonteinResidential Residential 85% 2.7 17.1 2010Lenasia Mixed Use 100% 7.1 39.3 2011 ------- -------- --------- --------Announced asat 30th June2007 25.1 270.2ImboniniServices Park(Phase 2) Industrial 50% 4.6 10.4 2009AfricanRenaissance Residential 65% 5.9 181.4 2014KindlewoodNature Estate Residential 65% 2.2 13.3 2009KyalamiResidentialEstate Residential 75% 1.9 17.7 2010 ------- -------- --------- --------Announcedsince 30thJune 2007 14.6 222.8 ------- -------- --------- --------Total 39.7 493.0 At the period end the Company had announced a total of eight projects. However,title had only transferred in respect of three of them, Imbonini Services Park(Phase 1), Gosforth Business Estate and Longmeadow and it is only these threewhich are reflected in the Company's balance sheet. Title to another one(Clayville Industrial Park) was taken in July 2007. We are pleased to report theresults of an encouraging land valuation by independent valuers, CB RichardEllis, of those four projects as at 30th June 2007: Project Name SAPRO SAPRO Increase in 30th June Share of Share of SAPRO Total 2007 Total Land 2007 Land Share of SAPRO Title Land Cost Land Value Cost Value Land Interest Transfer Date (£ million) (£ million) (£ million) (£ million) ValueGosforthBusinessEstate 75% Mar'07 7.899 9.344 5.924 7.008 18%ImboniniServices Park(Phase 1) 50% Apr'07 1.310 4.866 0.655 2.433 271%Longmeadow 49% Jun'07 9.696 12.694 4.772 6.248 31% ClayvilleIndustrialPark 100% Jul'07 0.417 1.150 0.417 1.150 175% ------ ------ ------- -------- -------- ------- -------Total 19.322 28.054 11.768 16.839 43% £1 - R14:1798 (30 June 2007 rate) The valuations on Imbonini Services Park (Phase 1) and Longmeadow include thespecial assumption that Townships will be proclaimed in line with ourexpectations. It is important to note that International Financial Reporting Standards do notpermit the recognition of increases in land values on property that is held fordevelopment and sale and accordingly these increases in value are not reflectedin the Company's balance sheet or income statement. Title has now been taken on the four projects in the table above as well asAfrican Renaissance, Driefontein Residential and Lenasia. Title on WaltlooIndustrial Park is expected by 31 December 2007. These eight properties will bevalued by CB Richard Ellis as at 31 December 2007. Further information on all twelve projects is set out below. Residential a) Driefontein Residential: This development comprises a 13.2 hectaresite, 4 miles south of Johannesburg's main international airport. It iscurrently undeveloped but is expected to deliver an estimated 35,000 sq. m ofgross developable area after rights have been granted. SAPRO intends to developa high density residential estate of approximately 500 units targeting theregion's fast growing middle income market. The project is a joint venture inwhich the Company will hold an 85 per cent. stake and a local property developerwill hold the remaining 15 per cent.. Draft Conditions of Establishment havealready been received from the local authorities, and it is expected that thetownship will be proclaimed in 2008. b) African Renaissance: This development comprises a 146.6 hectareresidential development, with a retail component, in a rapidly growing area eastof Pretoria. Upon completion, the site, of which the majority is undevelopedvacant land, is expected to yield an estimated 252,920 sq. m of grossdevelopable area after planning has been obtained. The development is a jointventure with three individuals, one of whom is a local real estate projectmanager, one a building contractor and the other a quantity surveyor, whosecured the opportunity and conceptualised the development plan over the lasttwo years. SAPRO will have a 65 per cent. interest in the development vehicle.The joint venture partners have applied for planning to build approximately3,200 residential units (apartments and freehold stands) and a retail centre onthe site. It is expected that building will commence in 2008 and that the totallength of the build-out will be 7 years. The planning application process is ontrack, with planning expected to be granted in the first quarter of 2008. c) Kindlewood Nature Estate: This development comprises two adjoiningpieces of land with a combined area of 5.3 hectares in the Kindlewood Estate,Umhlanga, north of Durban, KwaZulu Natal. The site, which is currentlyundeveloped land, is situated adjacent to the prestigious Mount Edgecombe GolfEstate and will be developed into a residential conservation estate aimed at the upper end of the market and featuring the area's natural wetlands. The development will be a joint venture with an experienced local residential developer with SAPRO holding a 65 per cent. stake. The land already has medium density residential zoning rights in place, and building will commence in the first quarter of 2008 with completion expected within two years. Marketing will be launched in Durban in late November 2007. d) Kyalami Residential Estate: This development comprises an 8.9 hectaresite in Kyalami, north of Johannesburg, Gauteng. The site, which is currentlyundeveloped land, is located within a growing node close to the well knownKyalami Racetrack, and it is intended that it will be developed into aresidential complex aimed at middle market buyers. The development is a jointventure that includes an experienced local residential property developer. SAPROwill hold up to 75 per cent. of the equity pending the results of the planningapplication which will determine the maximum density that can be achieved on thesite. The site is currently zoned for agricultural holdings. However, a planningapplication has already been submitted and it is expected to be accepted in thethird quarter of 2008. The Company anticipates being on site in the firstquarter of 2009 and completing the project within two years. Mixed Use a) Longmeadow: This development is a significant strategic investmentwhich comprises a 15.6 hectare highly prominent mixed use site (commercial,residential and retail elements) in Fourways, Johannesburg. The site, themajority of which is currently undeveloped vacant land, together with a numberof small commercial structures, should yield an estimated 132,000 sq. m of netlettable area after rights have been granted. It is situated approximately 5miles to the north of Johannesburg's Sandton Central Business District in theFourways node. The development is a joint venture with three partners comprisinga Johannesburg listed property company and a local contractor (both of whomSAPRO has joint ventured with in previous projects) and a trust representing thevendor of the land (which will remain as a 27.5 per cent. shareholder in thejoint venture). SAPRO has a 49.2 per cent. interest. The joint venture partnersplan to apply for rights to build high density residential apartments,commercial office space, hotels, and a niche retail component on the site.Negotiations are currently being held with a major hotel operator with a view tobuilding a hotel and commercial component in the first phase of the projectwhere we believe planning rights are imminent. Vacant land in the Fourways nodeis scarce which has contributed to the uplift in value that SAPRO has enjoyedsince entering this joint venture. It is expected that building will commence onthe first phase by the middle of 2008 and that the build-out period for theentire development will be five years. According to CB Richard Ellis, the landvalue at Longmeadow enjoyed a 31 per cent. uplift from its cost to 30 June 2007. b) Lenasia: This development comprises a 12.95 hectare prominent mixed usesite (commercial and retail) in Lenasia, Johannesburg. The site, the majority ofwhich is currently undeveloped vacant land, together with a commercial structureon part of the site, should yield an estimated 51,600 sqm of net lettable areaafter rights have been granted. It is situated immediately south of Soweto(which is south west of Johannesburg). The site is opposite a newly developedregional shopping mall and is directly alongside a major commuter route intoJohannesburg from Lenasia, providing excellent visibility. SAPRO plans to applyfor rights to build a mixed use retail and commercial development. Conceptualarchitects have been retained as a first step in planning the development, andapproaches from potential strategic partners are currently being considered andwhich are expected to take SAPRO's interest in the project from 100 per cent.(as in the table above) to 50 per cent. It is expected that building willcommence in early 2009 and will take 3 years to complete. Industrial a) Imbonini Services Park (Phase I): This development is a joint venturewith local developers in which SAPRO has a 50 per cent. interest. The jointventure vehicle has acquired a 36 hectare site located close to the fast growingresidential and leisure node of Ballito, just north of Durban, which is beingdeveloped for light industrial use. The site has been platformed and internalservices are currently being installed. This process should be complete by thefirst quarter of 2008, after which buyers will be able to take transfer of theirstands. Pre-marketing has been very positive to date. The lack of servicedindustrial land in Durban and the proposed relocation of the Durbaninternational airport to a site south of Imbonini have resulted in a verysignificant uplift in the land value on this project (271 per cent.). b) Clayville Industrial Park: This development comprises a 49 hectare sitelocated north west of the Johannesburg international airport. It is intended toservice the site for industrial use and sell stands to owner occupiers. A finalsite layout has been compiled and is currently being submitted to the localauthority as part of the township proclamation process. Service installation andmarketing is expected to commence in 2008. According to CB Richard Ellis, theproject has enjoyed a 175 per cent. uplift in land value. c) Gosforth Business Estate: This is an important strategic propertyinvestment for the Company comprising a 42 hectare prominent industrial sitewith an estimated 150,000 sq. m of net lettable area. It is situated to thesouth east of Johannesburg's Central Business District adjacent to the main N3highway running between Johannesburg and the port at Durban. The development isa joint venture with two partners, one a local contractor and the other a SouthAfrican listed property fund. At the balance sheet date, SAPRO controlled 100per cent. of the development but an agreement to transfer 25 per cent. to twoexperienced local partners is expected to be concluded before the end ofDecember 2007. The Company intends to service the site and build warehouses anddistribution facilities for industrial users. Progress on the site has beenfaster than anticipated, and the local authorities have agreed the draftServices Agreement necessary to commence the installation of bulk services tothe site. These services are currently being installed, and it is expected thatthe township should be proclaimed by the second quarter of 2008. According to CBRichard Ellis, the project has enjoyed an 18 per cent. uplift in land value in avery short period of time. d) Hughes Industrial Park: This development is an existing project inwhich Richard Currie and Ed Raubenheimer (directors of Proteus Property Advisors(Pty) Limited, the South African investment adviser to SAPRO's investmentmanager) have an interest alongside a local contractor and a South Africanlisted property fund. SAPRO will subscribe for a 30 per cent. interest in thedevelopment vehicle. The development comprises a sectional title mini unitdevelopment totalling 20,000 sq. m. SAPRO has committed to this project, savethat there remains one condition to be satisfied by the seller (a deceasedperson's estate) relating to the perfection of title to the land. Should thiscondition not be satisfied, the joint venture (and accordingly SAPRO) will bereleased from its commitment and the project will not proceed. As at the time ofwriting this condition had not yet been satisfied. e) Waltloo Industrial Park: This development comprises a 4.4 hectare sitelocated east of the Pretoria CBD, and is a 50 per cent. joint venture with alocal contractor. It is envisaged that sectional title industrial premisescatering to small businesses and freehold warehouse premises will be developedon the site, which comprises 21,948 sq. m of gross developable area. The jointventure is expected to take transfer of the site in the fourth quarter of 2007.Bulk services have been installed and the township is expected to be proclaimedby the first quarter of 2008. f) Imbonini Services Park (Phase 2): This is the second phase of theImbonini development and will comprise a 77.5 hectare industrial park directlynorth east of and adjoining the Phase 1 development. The development is a jointventure with the same two partners who invested in Phase 1. SAPRO will have a 50per cent. interest in the development vehicle. The joint venture partners arecurrently applying for planning rights for approximately 380,589 sq. m of grossdevelopable area in order to develop an industrial park on the site. It isexpected that servicing of the site will commence in 2008 and that the totallength of the project will be two years. Economic Outlook 2007 has seen a mid-cycle correction within a longer term fundamental growthexpansion in the South Africa economy. Inflation, credit growth and the currentaccount deficit all deteriorated somewhat over the past year. However, in 2008household credit, consumption spending and import growth trends are all expectedto improve. Inflation, which is expected to peak near 7 per cent., should startto fall back towards 4-5 per cent. in 2008/2009. Interest rates will probablyremain elevated in the short term, but are expected to start easing by thesecond quarter of 2008. This should maintain real GDP growth at a sustainableand historically high level of around 5 per cent., but with a changedcomposition relying more on sustainable fixed investment rather than morevolatile household consumption spending (investment growth having acceleratedfrom 4 per cent. in 2002 to over 16 per cent. in 2007 (projected)). South Africacontinues to enjoy strong foreign direct investment (FDI), which has recentlybeen boosted by the purchase of a 20 per cent. stake in South Africa's StandardBank, by China's largest bank (ICBC). Residential Market The 350bp rise in interest rates since mid-2006 has caused average monthlyrepayments on mortgage loans to have risen significantly. The latest 50bpinterest rate hike and introduction of the National Credit Act could affect theaffordability of housing in the short term. However, in the first 3 quarters of2007 nominal year on year house price growth averaged 15.3 per cent., and isexpected to average a strong 14.5 per cent. for the full year. We also believethat more affordable housing stock priced below R800,000 (£56,000) per unit, andspecific niches in the higher end market, will continue to sell strongly. Industrial Market(1) Growth in building costs and land values, low vacancies and strong demand havepushed industrial rentals higher during 2007. Stand values have more thandoubled in the Cape (103 per cent.) and Durban (112 per cent.) over the pastyear on the back of this strong real rental growth, the lack of serviceavailability, and delays in the processing of town planning applications. In theCentral Witwatersrand stand values have increased by 75 per cent. over the sameperiod and by 85 per cent. in the Eastern Cape. Commercial / Retail Market(2) Vacancies are at all time lows, and well located serviced land is currentlyscarce. Rentals are currently rising in the Johannesburg decentralised nodes,where rentals in the second quarter were up 20 per cent. year on year. Projectedbuilding cost inflation is 12 per cent. over the same period. Durbandecentralized rentals were up 10 per cent. and Cape Town decentralized nodes by9 per cent. in 2007. Leaseback escalation rates currently remain close to 8 percent.. As at 1 November 2007 the Company had committed a total of £39.7 million,representing 63 per cent. of the £62.6 million net issue proceeds raised by theCompany to date. The Manager is also continuing to examine a strong pipeline ofpotential opportunities which might be suitable for investment by the Companyand expects the Company to be substantially invested by the first quarter of2008. Proteus Property Partners LimitedInvestment Manager16 November 2007 -------------------------- (1) Ervin Rode; South African Property News; 18 October 2007 (2) Ervin Rode; South African Property News; 18 October 2007 Report of the Directors The Directors hereby submit their annual report together with the auditedconsolidated and company financial statements of South African PropertyOpportunities plc (the "Company") for the financial period 27 June 2006 (date ofincorporation) to 30 June 2007. The Company The Company is incorporated in the Isle of Man and has been established toenable investors to take advantage of opportunities that exist in the SouthAfrican property market. Results and Dividends The results and position of the Group and the Company at the period end are setout on pages 12 and 13 of the financial statements. The Directors intend to manage the Company's affairs to achieve shareholderreturns through capital growth rather than income, and accordingly there can beno certainty that any dividend will be paid. It is not expected that the Companywill pay any significant dividends in the early years of its operations. Howeverthe Directors reserve the right to make dividend distributions to holders ofOrdinary Shares if and when it is considered appropriate. The Directors do notintend to declare a dividend at this time. Directors The Directors during the period and up to the date of this Report were asfollows. There has been no change to the constitution of the Board during theperiod: Appointed Resigned Quentin Spicer (Chairman) 28 June 2006Peter Milton Bester 28 June 2006David John Humbles 27 June 2006Brian Alan Myerson 27 June 2006Richard James Sunley Tice 27 June 2006Sir Paul Judge 28 June 2006 20 October 2006 Directors and Other Interests Brian Myerson is a director of the Investment Manager. None of the directorshave a direct or indirect interest in the shares in the Company. Save as disclosed above, none of the Directors had any interest during theperiod in any material contract for the provision of services which wassignificant to the business of the Company. Independent Auditors The auditors, PricewaterhouseCoopers, were appointed by the Directors and it isproposed that they be re-appointed for the following year. On behalf of the Board Quentin SpicerChairman16 November 2007 Statement of Directors' responsibilities in respect of the Annual Report and theFinancial Statements The directors are responsible for preparing the Annual Report and the financialstatements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for eachfinancial year which give a true and fair view of the state of affairs of theCompany and the Group and of the profit or loss of the Group for that period. Inpreparing 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; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The directors confirm that they have complied with the above requirements inpreparing the financial statements. The directors are responsible for keeping proper accounting records whichdisclose with reasonable accuracy at any time the financial position of theCompany and the Group and to enable them to ensure that the financial statementscomply with the Isle of Man Companies Acts 1931 to 2004. They are alsoresponsible for safeguarding the assets of the Company and the Group and hencefor taking reasonable steps for the prevention and detection of fraud and otherirregularities. The Directors are responsible for the maintenance and integrity of the Company'swebsite. Legislation in the Isle of Man governing the preparation anddissemination of financial statements may differ from legislation in otherjurisdictions. On behalf of the Board Quentin SpicerChairman16 November 2007 Independent auditors' report to the members of South African PropertyOpportunities plc We have audited the accompanying consolidated and parent company financialstatements of South African Property Opportunities plc and its subsidiaries (the'Group') which comprise the consolidated and parent company balance sheets as of30 June 2007, the consolidated income statement, consolidated and parent companystatements of changes in equity and consolidated and parent company cash flowstatements for the period then ended and a summary of significant accountingpolicies and other explanatory notes. Directors' Responsibility for the Financial Statements The directors are responsible for the preparation and fair presentation of thesefinancial statements in accordance with International Financial ReportingStandards as adopted by the European Union and with the requirements of Isle ofMan law. This responsibility includes: designing, implementing and maintaininginternal control relevant to the preparation and fair presentation of financialstatements that are free from material misstatement, whether due to fraud orerror; selecting and applying appropriate accounting policies; and makingaccounting estimates that are reasonable in the circumstances. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements basedon our audit. This report, including the opinion, has been prepared for and onlyfor the company's members as a body in accordance with Section 15 of the Isle ofMan Companies Act 1982 and for no other purpose. We do not, in giving thisopinion, accept or assume responsibility for any other purpose or to any otherperson to whom this report is shown or into whose hands it may come save whereexpressly 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 andperform the audit to obtain reasonable assurance whether the financialstatements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the financial statements. The procedures selecteddepend on the auditors' judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal controlrelevant to the entity's preparation and fair presentation of the financialstatements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includesevaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by the directors, as well asevaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient andappropriate 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 2007, and of its financial performance and its cash flows for the period 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 2007, and its cash flows for the period 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; • the financial statements have been properly prepared in accordance with the Isle of Man Companies Acts 1931 to 2004. PricewaterhouseCoopersIsle of ManChartered Accountants November 2007 Consolidated Income StatementFor the period from 27 June 2006 (date of incorporation) to 30 June 2007 Note £'000 Turnover - -------------- Investment Manager's fees 5 (480)Other administration fees and expenses 6 (382) --------------Administrative expenses (862) -------------- --------------Operating loss (862) -------------- Finance income 1,470Foreign exchange loss (424)Finance costs (4) --------------Net finance income 1,042 -------------- Share of loss of equity accounted investees 9 (33) --------------Profit before income tax 147 -------------- Income tax expense 7 (27) --------------Profit for the period attributable to equity holders 120 -------------- --------------Basic and diluted earnings per share (pence) for profitattributable to the equity holders of the Company duringthe 8 0.34period -------------- All items in the above statement derive from continuing operations. All incomeis attributable to the equity holders of South African Property Opportunitiesplc, the parent company. There are no minority interests. The accompanying Notes form an integral part of these financial statements Consolidated and Company Balance SheetsAT 30 JUNE 2007 Note Group Company £'000 £'000AssetsNon-current assetsInventories 10 4,231 -Loans due from joint venture 9 1,365 -Loans and receivables due from subsidiary 11 - 18,382Investment in subsidiaries 9 - 1,807Investments in equity accounted investees 9 5,794 - -------------- -------------- 11,390 20,189 -------------- --------------Current assetsTrade and other receivables 11 831 99Cash and cash equivalents 51,797 42,810 -------------- -------------- 52,628 42,909 -------------- --------------Total assets 64,018 63,098 -------------- -------------- EquityCapital and reserves attributable toequity holders of the Company:Issued share capital 12 623 623Share premium 13 61,943 61,943Foreign currency translation reserve (44) -Retained earnings 120 399 -------------- --------------Total equity 62,642 62,965 -------------- -------------- Current liabilitiesTrade and other payables 15 1,376 133 -------------- --------------Total liabilities 1,376 133 -------------- --------------Total equity & liabilities 64,018 63,098 -------------- -------------- The financial statements on pages 12 to 28 were approved and authorised forissue by the Board of Directors on 16 November 2007 and were signed on itsbehalf by: Director Director The accompanying Notes form an integral part of these financial statements Statements of Changes in Shareholders' Equity For the period from 27 June 2006 (date of incorporation) to 30 June 2007 GROUP Share capital Share premium Foreign Retained Total Currency earnings Translation Reserve £'000 £'000 £'000 £'000 £'000 Balance at - - - - -beginning ofperiodShares issuedin the period 623 63,607 - - 64,230Foreignexchangetranslationdifferences - - (44) - (44)Share issueexpenses - (1,664) - - (1,664)Profit for theperiod - - - 120 120 ---------- ---------- ---------- ---------- ----------Balance at endof period 623 61,943 (44) 120 62,642 ---------- ---------- ---------- ---------- ---------- COMPANY Share capital Share premium Retained Total earnings £'000 £'000 £'000 £'000 Balance at beginning - - - -of periodShares issued inthe period 623 63,607 - 64,230Share issueexpenses - (1,664) - (1,664)Profit for theperiod - - 399 399 ------------ ------------ ------------ ------------Balance at end ofperiod 623 61,943 399 62,965 ------------ ------------ ------------ ------------ The accompanying Notes form an integral part of these financial statements Consolidated and Company Cash Flow StatementsFor the period from 27 June 2006 (date of incorporation) to 30 June 2007 Note Group Company £'000 £'000Operating activitiesProfit for the period 120 399Adjustments for:Investment income (1,470) (1,593)Investment expense 4 4Income tax 27Share of loss of equity accounted 33 -investeesForeign exchange loss 424 424 -------------- --------------Operating loss before changes in working (862) (766)capitalPurchase of inventory (4,154) -Increase in trade and other receivables (635) (40)Increase in trade and other payables 170 133 -------------- --------------Cash used in operations (5,481) (673)Interest paid (4) (4)Interest received 1,274 1,535 -------------- --------------Cash (outflows)/inflows from operating activities (4,211) 858 -------------- --------------Investing activitiesLoans advanced to subsidiary - (18,498)Acquisition of subsidiary, net of cash received - (1,807)Acquisition of equity accounted investees 9 (5,825) -Loans to equity accounted investees 9 (1,389) -Loans from third parties 1,184 - -------------- --------------Cash outflows from investing activities (6,030) (20,305) -------------- -------------- Financing activitiesProceeds from the issue of ordinary share capital 13 64,230 64,230Share issue expenses (1,664) (1,664) -------------- --------------Cash inflows from financing activities 62,566 62,566 -------------- -------------- Net increase in cash and cash equivalents 52,325 43,119Cash and cash equivalents at 27 June 2006 - -Foreign exchange losses on cash and cash equivalents (528) (309) -------------- --------------Cash and cash equivalents at 30 June 2007 51,797 42,810 -------------- -------------- The accompanying Notes form an integral part of these financial statements Notes to the Financial Statements 1 General Information South African Property Opportunities plc (the "Company") was incorporated andregistered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004on 27 June 2006 as a public limited company with registered number 117001C. TheCompany's investment objective is to achieve capital growth from anopportunistic portfolio of real estate assets in South Africa. The Company's investment activities are managed by Proteus Property PartnersLimited (the "Manager"). The Company's administration is delegated to GalileoFund Services Limited (formally Anglo Irish Fund Services Limited) (the"Administrator"). The registered office of the Company is Jubilee Buildings,Victoria Street, Douglas, Isle of Man, IM1 2SH. Pursuant to a prospectus dated 20 October 2006 there was an original placing ofup to 50,000,000 Ordinary Shares. Following the close of the placing on 26October 2006 30,000,000 Shares were issued. The Shares of the Company were admitted to trading on the Alternative InvestmentMarket of the London Stock Exchange ("AIM") on 26 October 2006 when dealingsalso commenced. As a result of a further fund raising in May 2007 32,292,810 Ordinary Shareswere issued, which were admitted to trading on AIM on 22 May 2007. The Company's agents and the Manager perform all significant functions.Accordingly, the Company itself has no employees. Duration In accordance with the Company's Articles of Association, Shareholders will begiven the opportunity to vote on the life of the Company after approximately 7years. At the annual general meeting of the Company to be held in 2013, the Directorsare obligated to propose an ordinary resolution that the Company continues inexistence. If the resolution is passed then it shall be proposed at every thirdannual general meeting thereafter. If the resolution is not passed then theDirectors shall, within 3 months after the date of the resolution, put forwardproposals to shareholders to the effect that the Company be wound up,liquidated, reorganised or unitised. Financial Year End The financial year end of the Company is 30 June in each year. The firstaccounting period of the Company is for the period ended 30 June 2007. Company Profit In accordance with the provisions of Section 3 of the Isle of Man Companies Act1982, no separate income statement has been presented for the Company. Theamount of the Company's profit for the period recognised in the ConsolidatedIncome Statement is £399,000. 2 Summary of Significant Accounting Policies The principal accounting policies applied in the preparation of these financialstatements are set out below. 2.1 Basis of preparation These financial statements have been prepared in accordance with, and complywith, International Financial Reporting Standards (IFRS). These comprisestandards and interpretations approved by the International Accounting StandardsBoard ("IASB") together with interpretations of the International AccountingStandards and Standing Interpretations Committee approved by the InternationalAccounting Standards Committee ("IASC") that remain in effect, to the extendthat IFRS have been approved by the European Union. The financial statementshave been prepared on a going concern basis under the historical cost convention. The preparation of financial statements in conformity with IFRS requires the use of accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. There are no critical accounting estimates or assumptions. Standards issued but not early adopted by the Company IFRS 7, Financial Instruments: Disclosures, and the complementary Amendment toIAS 1, Presentation of Financial Statements - Capital Disclosures, were issuedin 2006 and apply for accounting periods commencing on or after 1 January 2007.IFRS 7 introduces new disclosures about exposure to risks arising from financialinstruments. In accordance with the requirements of the Amendment to IAS 1,additional disclosures will be provided on the Company's objectives and policiesfor its capital. There is no impact on the classification and measurement of theCompany's capital. 2.2 Foreign currency translation South African Rand is the currency of the primary economic environment in whichthe Group's direct and indirect subsidiaries operate ("The functionalcurrency"). Pounds Sterling is the currency of the primary economic environment in which theCompany operates and as a result the currency in which the annual results arepresented ("The presentational currency"). Monetary assets and liabilities denominated in foreign currencies as at the dateof these financial statements are translated to South African Rand at exchangerates prevailing on that date (30 June 2007: ZAR:GBP 14.1798). Expenses aretranslated into South African Rand based on the average exchange ratesprevailing during the year. All resulting exchange differences are recognised inthe income statement. The accounts are presented in Pounds Sterling by translating the assets andliabilities at the exchange rate prevailing on the balance sheet date. Items ofrevenue and expense are translated at the average exchange rates prevailingduring the year. Components of equity are translated at the date of the relevanttransaction and not retranslated and all resulting exchange differences arerecognised in equity. 2.3 Revenue and expense recognition Deposit interest income is recognised in the financial statements on atime-proportionate basis using the effective interest method. Interest expense for borrowings is recognised in the financial statements usingthe effective interest method. The effective interest method is a method of calculating the amortised cost of afinancial asset or financial liability and of allocating the interest income orinterest expense over the period. Expenses are accounted for on an accruals basis. 2.4 Basis of consolidation Subsidiaries Subsidiaries are those enterprises controlled by the Company. Control existswhere the Company has the power, directly or indirectly, to govern the financialand operating policies of an enterprise so as to obtain benefits from itsactivities. The financial statements of subsidiaries are included in theconsolidated financial statements from the date that control effectivelycommences until the date that control effectively ceases. Transactions and minority interest The Group applies a policy of treating transactions with minority interest astransactions with parties external to the group. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised gains arising fromintra-group transactions, are eliminated in preparing the consolidated financialstatements. Associates and joint ventures (equity accounted investees) Associates are those entities in which the Company has a significant influence,but no control, over the financial and operating policies. Joint ventures arethose entities over whose activities the Group has joint control, established bycontractual agreement and requiring unanimous consent for strategic financialand operating decisions. Associates and joint ventures are accounted for usingthe equity method (equity accounted investees). The consolidated financialstatements include the Group's share of the income and expenses of the equityaccounted investees, after adjustments to align the accounting policies withthose of the Group, from the date that significant influence or joint controlcommences until the date that significant influence or joint control ceases.When the Group's share of losses exceeds its interest in an equity accountedinvestee, the carrying amount of that interest (including any long-terminvestment) is reduced to nil and the recognition of further losses isdiscontinued except to the extent that the Group has an obligation or has madepayments on behalf of the investee. Unrealised gains on transactions between the Company and its equity accountedinvestees are eliminated to the extent of the Company's interest in the equityaccounted investees. Unrealised losses are also eliminated unless thetransaction provides evidence of an impairment of the asset transferred.Accounting policies have been changed where necessary to ensure consistency withthe policies adopted by the Company. Financial statements of foreign operations The assets and liabilities of foreign operations, including goodwill and fairvalue adjustments arising on consolidation, are translated to South African Randat the foreign currency exchange rates ruling at the balance sheet date. Foreignexchange differences arising on translation are recognised directly in equity. 2.5 Segmental reporting The Company has one segment focusing on achieving capital growth throughinvesting in the property market in South Africa. No additional disclosure isincluded in relation to segment reporting, as the Company's activities arelimited to one business and geographic segment. 2.6 Inventories Investment properties that are being developed for future sale are classified asinventories at their deemed cost, which is the carrying amounts at the date ofclassification. They are subsequently carried at the lower of cost and netrealisable value. Net realisable value is the estimated selling price in theordinary course of business less selling expenses 2.7 Loans and receivables Loans and receivables are recognised initially at fair value and subsequentlymeasured at amortised cost using the effective interest method. 2.8 Trade and other receivables Trade and other receivables are initially stated at fair value and subsequentlymeasured at amortised cost using the effective interest method. 2.9 Cash and cash equivalents Cash and cash equivalents comprise cash deposited with banks. 2.10 Trade and other payables Trade and other payables are recognised initially at fair value and subsequentlyat amortised cost using the effective interest method. 2.11 Taxation The Company is resident for taxation purposes in the Isle of Man and is subjectto income tax at a rate of zero per cent. A corporate charge is payable, whichamounted to £250 for the 2006/2007 tax year. The Group is liable to tax in South Africa on the activities of itssubsidiaries. The tax expense represents the sum of the tax currently payable, which is basedon taxable profits for the period. The Group's liability is calculated using taxrates applicable at the balance sheet date. 2.12 Share capital Ordinary shares are classified as equity. Incremental costs directlyattributable to the issue of new shares are shown in equity as a deduction, netof tax, from the proceeds. 2.13 Dividends Dividends are recognised as a liability in the period in which they are declaredand approved. There was no dividend declared as at 30 June 2007. 3 Risk Management The Group's activities expose it to a variety of financial risks: market risk(including currency risk and price risk), credit risk, liquidity risk and cashflow interest rate risk. Market risk Property and property related assets are inherently difficult to value due tothe individual nature of each property. As a result, valuations may be subjectto substantial uncertainty. There is no assurance that the estimates resultingfrom the valuation process will reflect the actual sales price even where suchsales occur shortly after the valuation date. The performance of the Group wouldbe adversely affected by a downturn in the property market in terms of highercapitalisation rates/yields or a weakening of rent levels. Any future propertymarket recession could materially adversely affect the value of the properties. Foreign exchange risk The Group's operations are conducted in jurisdictions which generate revenue,expenses, assets and liabilities in currencies other than Pounds Sterling. As aresult, the Group is subject to the effects of exchange rate fluctuations withrespect to these currencies. The currency giving rise to this risk is primarilySouth African Rand. Assets Liabilities Net Assets £'000 £'000 £'000South African Rand 45,161 (1,244) 43,917Pounds Sterling 18,857 (132) 18,725 ------------------------ ---------- ---------Total 64,018 (1,376) 62,642 ------------------------ ---------- --------- Price risk The Group is exposed to land property price risks in South Africa, as discussedabove. The Group is not exposed to market risk with respect to financialinstruments as it does not hold any financial instruments. Credit risk The maximum exposure to credit risk is represented by the carrying amount ofeach financial asset in the balance sheet. Management does not expect anycounterparty to fail to meet its obligations. Cash transactions are limited tohigh-credit-quality financial institutions. Liquidity risk The Group maintains sufficient cash balances for working capital requirements. Cash flow and fair value interest rate risk The Group is exposed to cash flow interest rate risk as the majority of theGroup's cash is held in interest bearing accounts at floating rates or shortterm deposits of one month or less. The Group is exposed to fair value interestrate risk on its long-term loan receivable from joint venture (note 9.2) whichis at fixed interest rates. 4 Preliminary (Formation) Expenses The estimated total costs and expenses payable by the Company in connection withthe Placing and Admission (including professional fees, the costs of printingand the other fees payable including commission payable to the Placing Agent)was estimated as equal to 3% of the gross amount raised based on the Placingbeing fully subscribed. The actual total amount of preliminary expenses paid was£941,262 representing 3.14% of the gross amount raised. The total costs and expenses payable by the Company in connection with thesecondary Placing (including professional fees, the costs of printing and theother fees payable including commission payable to the Placing Agent) was£723,075 representing 2.11% of the gross amount raised. In accordance with the terms of the initial Placing and the secondary Placing,the Placing Agent was to receive from the Company commission equal to 2% of theaggregate value of the amount raised by the Placing. In addition, for theinitial Placing the Placing Agent was to receive a corporate finance fee of 0.5%of the aggregate value of the Placing. The total placing admission costs payable by the Company during the period ended30 June 2007 amounted to £1,664,337, which has been charged to equity as a shareissue expense. 5 Investment Manager fees Annual fees The Investment Manager receives a management fee of 2% per annum of the netasset value of the Group from Admission, payable quarterly in advance. The Manager is also entitled to recharge to the Group all and any costs anddisbursements reasonably incurred by it in the performance of its dutiesincluding costs of travel save to the extent that such costs are staff costs orother internal costs of the Investment Manager. Accordingly, the Company isresponsible for paying all the fees and expenses of all valuers, surveyors,legal advisers and other external advisers to the Company in connection with anyinvestments made on its behalf. All amounts payable to the Investment Manager bythe Company are paid together with any value added tax, if applicable. Annual management fees payable for the period ended 30 June 2007 amounted to£480,000. Performance fees The Investment Manager is entitled to a performance fee which is payable byreference to the increase in net asset value per Ordinary Share. The InvestmentManager will become entitled to a performance fee in respect of the period fromAdmission to 30 June 2009 and any subsequent financial period at the end ofwhich the net asset value per Ordinary Share is above the performance feehurdle. The performance fee test for the period ending 30 June 2009 is 100p perOrdinary Share increased at a rate of 12 per cent. per annum, on an annual compounding basis up to the end ofthe period but adjusted so as to exclude any dividends paid during the period. If the performance hurdle is met the performance fee payable will be an amountequal to 20 per cent. of the amount of the increase in the net asset value perOrdinary Share, multiplied by the time weighted average of the number ofOrdinary Shares in issue since inception or (if later) the end of the lastfinancial period by reference to which a performance fee was earned. Any performance fee will be payable as follows: a) seventy-five percent of the performance fee will be paid tothe Manager in cash within ten Business Days of the publication of the auditedfinancial statements for the relevant period end; and b) twenty-five percent of the performance fee shall be satisfied within tenBusiness Days of the publication of the audited financial statements for therelevant performance period end by the allotment and issue to the Manager ofsuch number of Ordinary Shares which, when multiplied by the Net Asset Value perOrdinary Share on the date of issue, results in a value equal to that of twentyfive percent. of the performance fee. Performance fees payable for the period ended 30 June 2007 amounted to £nil. 6 Other Administration Fees and Expenses Group £'000Audit 140Directors' Remuneration 89 --------------------- Included within other administration fees and expenses are the following: Nominated Adviser and Broker fees As Nominated Adviser and Broker to the Company for the purposes of the AIMRules, the Nominated Adviser and Broker receives a Nominated Adviser fee of£15,000 per annum and a Broker fee of £15,000 per annum, both fees payablehalf-yearly in advance. Custodian fees The Custodian receives an annual minimum fee of £5,000, payable quarterly inarrears. The Custodian expects to review and, subject to written agreement between theCompany and the Custodian, may amend the foregoing fees six months afterAdmission and annually thereafter. Administrator and Registrar fees The Administrator receives a fee of 10 basis points of the net assets of theCompany between £0 and £50 million; 8.5 basis points per annum of the net assetsof the company between £50 and £100 million and 7 basis points per annum of thenet assets of the Company in excess of £100 million, subject to a minimummonthly fee of £3,750 and a maximum monthly fee of £10,000 payable quarterly inarrears. The Administrator assists in the preparation of the financial statements of theCompany for which it receives a fee of £1,750 per set. The Administrator provides general secretarial services to the Company for whichit receives a minimum annual fee of £5,000. Additional fees based on time andcharges will apply where the number of Board meetings exceeds four per annum.For attendance at meetings not held in the Isle of Man, an attendance fee of£350 per day or part thereof will be charged. The Administrator may utilise the services of a CREST accredited registrar forthe purposes of settling share transactions through CREST. The cost of thisservice will be borne by the Company. It is anticipated that the cost will be inthe region of £6,000 per annum subject to the number of CREST settledtransactions undertaken. The Administrator expects to review and, subject to written agreement betweenthe Company and the Administrator, may amend the foregoing fees six months afterAdmission and annually thereafter. Offshore Registrar fees The Offshore Registrar receives an annual registration fee from the Company of£2 per shareholder account, subject to an annual minimum charge of £5,500. Sponsor fees The Sponsor receives a fee for the listing of the shares on the Channel IslandsStock Exchange. The Sponsor is paid a fee of £6,000 for the initial listing,charged to equity as a share issue expense, and an annual fee of £1,750 and afee determined by reference to the number of hours spent on the work undertakenby the Sponsor by reference to its standard hourly charging rate. Strategic Adviser fees The Strategic Adviser receives a fee for its services of £40,000 per annum,payable quarterly in advance. The Strategic Advisor agreement was signed on 20October 2006 and the first payment was due 10 days after the signing date. Directors' Remuneration The maximum amount of remuneration payable to the Directors permitted under theArticles of Association is £200,000 p.a. The Directors are each entitled toreceive reimbursement of any expenses incurred in relation to their appointment. 7 Income Tax Expense Group £'000Current tax 27 -------------- 27 -------------- The tax on the Group's profit before tax differs from the theoretical amountthat would arise using the weighted average tax rate of the applicable profitsof the consolidated companies as follows: Group £'000Profit before tax 147 Tax calculated at domestic tax rates applicable in the Isle of -Man (0%)Effect of higher rate in South Africa (29%) 27 --------------Tax charge 27 -------------- 8 Basic and Diluted Earnings per Share Basic and diluted earnings per share are calculated by dividing the profitattributable to equity holders of the Company by the weighted average number ofordinary shares in issue during the period. 30 June 2007 Profit attributable to equity holders of the Company (£'000) 120Weighted average number of ordinary shares in issue (thousands) 35,729 ---------------------Basic and diluted profit per share (pence per share) 0.34 --------------------- 9 Subsidiaries, Associates and Joint Ventures 9.1 Subsidiaries During the period and for efficient portfolio management purposes, the Companyestablished the following subsidiary company:- Country of Percentage of incorporation shares held SAPSPV Holdings RSA (Pty) Limited South Africa 100% ---------- ---------- SAPSPV Holdings RSA (Pty) Limited is a direct subsidiary of South AfricanProperty Opportunities plc. The cost of this investment to the Company is£1,807,000. SAPSV Holdings RSA (Pty) Limited was incorporated on 20 October 2006and the £1,807,000 represents ZAR 101 of share capital and ZAR 24,999,899 ofshare premium. During the period, SAPSPV Holdings RSA (Pty) Limited established the followingcompanies:- Country of Percentage of incorporation shares heldSAPSPV Clayville Property Investments (Pty)Limited South Africa 100%SAPSPV Imbonini Property Investments (Pty)Limited South Africa 100%Madison Park Properties 33 (Pty) Limited South Africa 100%Madison Park Properties 34 (Pty) Limtied South Africa 100%Madison Park Properties 36 (Pty) Limited South Africa 100%Madison Park Properties 40 (Pty) Limited South Africa 100%Royal Albatross Properties 313 (Pty) Limited South Africa 100%Crimson King Properties 378 (Pty) Limited South Africa 100%Breeze Court Investments 31 (Pty) Limited South Africa 100%Breeze Court Investments 35 (Pty) Limited South Africa 100%Business Ventures Investments 1172 (Pty) Limited South Africa 100%Business Ventures Investments 1180 (Pty) Limited South Africa 100%Business Ventures Investments 1189 (Pty) Limited South Africa 100%Wonderwall Investments 18 (Pty) Limited South Africa 100%8 Mile Investments 504 (Pty) Limited South Africa 100%Dream World Investments 551 (Pty) Limited South Africa 100% ---------- 9.2 Associates and Joint Ventures 30 June 2007 £'000 Acquisition of equity accounted investees 5,825Foreign exchange gain 2Share of loss of equity accounted investees (33) ---------------------End of the period 5,794 --------------------- In November 2006 the Group acquired 50% of the ordinary share capital ofImbonini Park (Pty) Limited, a property holding company incorporated in SouthAfrica, for £72,000 (ZAR 1,000,000). There was goodwill of £72,000 (ZAR 999,000)as a result of this transaction. In June 2007 the Group acquired 49.22% of the ordinary share capital of LonglandInvestments (Pty) Limited, a property holdings company incorporated in SouthAfrica, for £5,753,000 (ZAR 81,633,000). There was goodwill of £789,000 (ZAR11,180,952) as a result of this transaction. Longland Investments owns 100% ofTangmere Investments Corporation (Pty) Limited and 50% of Rivcroft (Pty)Limited, both of which are property holding companies incorporated in SouthAfrica. The Group's aggregate share of the results of its equity accounted investees,both of which are unlisted, and its aggregate share of their assets andliabilities are as follows: Assets Liabilities Revenues Loss £'000 £'000 £'000 £'000 Total 2,552 881 2 (33) ----------- ----------- ----------- ----------- Loan due from Joint Venture The Group lent a total of £1,365,000 (ZAR (19,350,000) to its joint venture,Imbonini Park (Pty) Limited. Of this, £1,340,000 (ZAR 19,000,000) is interestbearing at 15% per annum and the remaining £25,000 (ZAR 350,000) is non-interestbearing. Unless agreed to otherwise by the Group the loan will be repayablewithin 2 years. The fair value of this loan approximates its carrying value at 30 June 2007. 10 Inventories Group £'000Cost of land acquired 4,154Foreign exchange gain 77 ----------------Total inventories 4,231 ---------------- The Group acquired land in March 2007 for £4,154,000 (ZAR 60,000,000), which wasacquired in order to develop it for future re-sale, and accordingly it wasclassified as inventory. 11 Subsidiary Loans and Trade and Other Receivables Group Company 30 June 2007 30 June 2007 £'000 £'000Loan due from SAPSPV Holdings RSA (Pty) Limited - 18,489Foreign exchange loss - (107) -------------- --------------Loans and receivables due from subsidiary - 18,382 -------------- -------------- Interest on loan to associate (see note 9.2) 63 -Prepayments 25 25VAT receivable 594 -Other receivables 149 74 -------------- --------------Trade and other receivables 831 99 -------------- -------------- £5,289,000 of the loan from the Company to SAPSPV Holdings RSA (Pty) Limited,which represents ZAR 75,000,000, bears interest at JiBar from the date ofadvance to the date of repayment, and the interest is compounded monthly inarrears 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, providing there are sufficientcash resources available to do so. The remaining £13,093,000 (ZAR 185,653,346) of the loan from the Company toSAPSPV Holdings RSA (Pty) Limited bears interest at the Repurchase Rate aspublished by the Reserve Bank of South Africa from the date of the advance tothe date of repayment, which interest shall be compounded monthly in arrears onthe 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 sufficientcash reserves available to do so and that prior approval has been obtained fromthe Exchange Control Division of the South African Reserve Bank but in no caselater than 30 June 2013. 12 Share Capital Ordinary Shares of 1p each Number £'000Authorised 150,000,000 1,500Issued 62,292,810 623 -------------- -------------- At incorporation the authorised share capital of the Company was £2,000 dividedinto 200,000 ordinary shares of 1p each. Pursuant to an ordinary resolution on 19 October 2006 the authorised sharecapital was increased from £2,000 to £500,000 giving in total 50,000,000ordinary shares of 1p each. Pursuant to an ordinary resolution on 18 May 2007 the authorised share capitalwas increased from £500,000 to £1,500,000 giving in total 150,000,000 ordinaryshares of 1p each. The holders or ordinary shares are entitled to receive dividends as declaredfrom time to time and are entitled to one vote per share at meetings of theCompany. On 26 October 2006, the Company raised a gross amount of £30,000,000 followingthe admission of the Company's ordinary shares to the Alternative InvestmentMarket ("AIM"). The Company placed 30,000,000 ordinary shares of £0.01 parvalue, at an issue price of £1.00 per share. On 1 May 2007, the Company placed an additional 50,000,000 ordinary shares of£0.01 par value at a price of £1.06 per share, of which 32,292,810 ordinaryshares have been issued at a price of £1.06 per share. Related transaction costs have been deducted from the proceeds. 13 Share Premium £'000Share premium arising on issue of ordinary shares 63,607Transaction costs on issue of ordinary shares (1,664) ---------------------------As at 30 June 2007 61,943 --------------------------- The Company's share premium has arisen on the issue of the Company's ordinaryshares and represents the difference between the issue prices of £1.00 and £1.06and the par value of £0.01 per share. 14 Net Asset Value per Share Group Net assets attributable to equity holders of the Company £62,641,992Shares in issue 62,292,810 --------------NAV per share £1.01 -------------- The NAV per share is calculated by dividing the net assets attributable toequity holders of the Company by the number of ordinary shares in issue. 15 Trade and Other Payables Group Company 30 June 2007 30 June 2007 £'000 £'000 Loans from third parties 1,206 -Management fees 77 77Income tax 27 -Other payables 66 56 -------------- -------------- 1,376 133 -------------- -------------- Loans from third parties consist of £724,000 (ZAR 10,260,000) from AbbeydaleBuilding & Civils (Pty) Ltd and £482,000 (ZAR 6,840,000) from Sable HoldingsLimited which relate to the intended future sale of 25% of Crimson KingProperties 378 (Pty) Limited to these two companies. Both of these loans areunsecured and interest free. 16 Contingent Liabilities and Commitments Commitments: The Company has committed a total of £39.7 million to the twelve projects in theportfolio as at the date of publication of the Annual Report. The equivalentfigure as at the balance sheet date was £25.1 million. Contingent Liabilities: Contingent liabilities existed at the balance sheet date in respect of thefollowing transactions. Clayville Industrial Park: £0.4 million in favour of the seller upon transfer ofthe property. Driefontein Residential: £1.3 million in favour of the seller upon transfer ofthe property. Gosforth Business Estate: A total of £3.7 million in favour of the former ownerupon satisfactory presentation of key documentation in the planning process. Lenasia: £4.1 million in favour of the seller upon transfer of the property. Waltloo Industrial Park: £0.6 million in favour of the seller upon transfer ofthe property. 17 Related Party Transactions Brian Myerson is a director of the Company and the Investment Manager. Hereceived no direct remuneration for these appointments. He is also the ChiefExecutive Officer of Principle Capital Holdings S.A., the ultimate parentcompany of the majority shareholder in the Investment Manager. Richard Currie is a director of the Investment Advisor and a minorityshareholder in the Investment Manager and the Investment Advisor. He is also ashareholder in Currie Group, a firm of property agents that has receivedcommissions (excluding VAT) totaling £223,700 on three transactions that hadcompleted during the financial year: Gosforth Business Estate (£176,300),Driefontein Residential (£33,500) and Clayville Industrial Park (£13,900).Currie Group has also been retained to provide lead marketing agent services onGosforth Business Estate and Clayville Industrial Park at the rate of £15,200per annum. Brian Padgett is a director of the Company's South African subsidiaries and adirector of the Investment Manager. He received no direct remuneration forthese appointments. He is also a director of Silex Management Ltd, a firm thathas been retained by the Company to administer the Company's South AfricanSubsidiaries. A total of £107,578 has been billed by Silex Management Ltd. inrespect of the financial period ended 30 June 2007. Brian Padgett is also adirector of Principle Capital Holdings S.A., the parent company of the majorityshareholder in the Investment Manager. James Peggie is a director of the Company's South African Subsidiaries for whichhe received no direct remuneration. He is also a shareholder in PrincipleCapital Holdings S.A., the parent company of the majority shareholder in theInvestment Manager." 18 Post Balance Sheet Events African Renaissance was announced on the 10th of July and bank guarantees inrespect of the total consideration of £4.5 million were issued. The propertytransferred into the name of the Company later that month via a share purchasetransaction and £3.4 million was released in favour of the seller. The residual£1.1 million is included within the total commitments above and will becomepayable on satisfactory presentation of key documents in the planning process. Clayville Industrial Park transferred to the Company in July for a totalconsideration of £0.4 million. Driefontein Residential transferred to the Company in July for a totalconsideration of £1.3 million. Gosforth Business Estate S101 planning certificate was received in Septembertriggering the payment of £1.4m additional consideration in favour of the formerowner. Kindlewood Nature Estate was announced on the 28th August and a deposit of £0.07million was placed with the conveyancing attorney. Imbonini Services Park (Phase 1) is progressing at a rapid pace and theinstallation of services on the site, financed by senior debt, began in July.This development is now substantially pre-sold on a freehold basis subject tocontracts that will be concluded following the proclamation of the townshipexpected towards the end of 2007. Imbonini Services Park (Phase 2) was announced on the 18th of September. InOctober payments totaling £0.2 million were made to acquire 50% of the shares inthe development vehicle and to provide working capital. Kyalami Residential Estate was announced on 11th October and a deposit of £1.8million was placed with the conveyancing attorney. Lenasia was announced prior to year end and title transferred to the Company inSeptember upon which the total consideration of £4.1 million was settled infavour of the seller. Waltloo Industrial Park was announced on the 28th of March and secured with asmall deposit (£0.01 million) at the time. A £0.6 million deposit for thebalance of the total consideration payable was placed with the transferringattorney in August. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
South African Property Opportunities