Final Results

SOUTH AFRICAN PROPERTY OPPORTUNITIES PLC

('SAPRO' or the 'Group')

Final results for the year ended 30 June 2011

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 2011.

Matrix Paul Fincham +44 (0)20 3206 7175

Robert Naylor +44 (0)20 3206 7340

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 audited net asset value per share ("NAV") of South African Property Opportunities plc ("SAPRO" or "the Company") as at 30 June 2011 was 109.3 pence as compared with 121.5 pence as at 30 June 2010 (see note 18). The primary reasons for this decrease in NAV were impairments in assets where value is below cost and the provision for the payment of performance fees to the former manager following the settlement of litigation. The impact of these factors was mitigated to an extent by the 5% strengthening in the Rand against Sterling over the period.

The EPRA NAV, which values our assets at fair value (based upon independent valuation) and takes into account the projected costs of selling and distribution, as at 30 June 2011 was £68.6 million (110.1 pence per share), down 18.1 per cent from £83.7 million (134.4 pence per share) as at 30 June 2010 (see note 18).

The reduction in EPRA NAV reflects a fall in fair value of about £6.8 million in our projects, plus net losses of about £4.7 million. The most significant element of the "net losses" was the provision of around £5.8 million for the settlement of the lawsuit with the former manager. For EPRA purposes we have also this year taken into account our estimates of around £3.6 million of future costs for selling assets. The South African property market has been challenging over the last year and CBRE's valuations of the projects in which SAPRO invests have declined by around 8 per cent over the year reflected in a fall in our share of those projects of £8.8 million (R95.7 million).

Most of the declines in appraised value have been in our smaller assets. The most substantial decline was over 31 per cent for Kindlewood Phase 2, which is a function of its feasibility and the South African residential market. Double digit declines were also incurred at Imbonini, Lenasia, Hughes Phase 2 and Emberton. Declines of close to 10 per cent were incurred in connection with Kindlewood Phase 1, Brakpan, Longmeadow, and Rivcroft. No assets were written up over the last year. These changes primarily reflect the heightened impact on land values of a depressed property market.

In October 2010 we appointed a new investment manager, Group Five, a large South African construction and development firm. We canvassed the views of our shareholders and then negotiated a management contract to incentivise Group Five to realise assets at or around the December 2010 CBRE appraised value. Their incentive structure combines an annual fixed component of £500,000 and a success component that rewards Group Five for realisations though does not incentivise forced sales. As part of the contractual negotiations, we agreed with Group Five on a base price for each asset that was based upon the December 2010 CBRE valuations. Realisations in excess of the agreed base price will result in higher percentage performance fees while realisations at a certain level below the base price will result in performance fees at a lower percentage of the realisation amount. Under the arrangement with Group Five, the Board retains complete discretion to approve or reject any proposed sale.

Taking control of SAPRO's large portfolio comprising 18 investments was no easy task and Group Five approached their responsibilities diligently. Most of our assets are held in partnership structures, and Group Five did what was necessary to understand and take control of the partnership structures. As part of their initial efforts they discovered and rectified disadvantageous partnership structures and compensation arrangements. Most important in this regard was a claim by our development partner in the "African Renaissance" project where that partner asserted a claim for professional services in excess of ZAR 45 million (£4 million). That claim was settled after the year-end for the payment of ZAR 13.56 million (£1.25 million), ZAR 1.1 million (£0.1 million) in cash and the remaining ZAR 12.46 million (£1.15 million) as the transfer of some land at the site (12.4 hectares or 8% of the whole) to our development partners. We have also restructured legal and financing arrangements in our structures with development partners, most importantly Gosforth Park, Imbonini 1 and 2, and Kindlewood. Planning permissions and infrastructure requirements have been progressed as needed. Some examples of this include Brakpan, Emberton, and Driefontein. Subsequent to the year end the Group has entered into legally binding agreements in respect of the sales of the following assets: Waltloo for £1,807,202 (ZAR 19,671,750); Hughes for £267,335 (ZAR 2,910,000); 11 units at Acacia Park for £2,186,317 (ZAR 23,798,500); part of Gosforth Park for £6,007,687 (ZAR 65,394,874); part of Imbonini for £123,985 (ZAR 1,349,600) and one unit at Kindlewood for £413,405 (ZAR 4,500,000).

In July 2010 we completed a strategic review and an outcome of that review was the classification of properties between those that will be available for sale and those deemed an interim hold. Following Group Five's appointment in Autumn 2010 a further review was done and the current classification is as noted in the Investment Manager's Report. We will consider offers for any of the properties and accordingly they are now classed as current assets on the balance sheet.

We have had some accomplishments over the last year, but our performance targets for 2011 were in retrospect overly bullish and premised on a more favourable South African economic and political climate. Risk appetite in South Africa as elsewhere has contracted and our assets are on the decidedly risky side of the property spectrum. Most of our property assets are undeveloped land at various stages in the zoning and servicing process. Few of our assets produce income and any income produced is insignificant. In South Africa as elsewhere there is a very limited appetite for non-income producing assets in general and undeveloped land in particular. The days of speculators land banking undeveloped land are gone for now and the natural buyers of our assets, developers, lack sufficient capital to make speculative investments and are unable to obtain bank financing.

SAPRO was conceived as a development company though without sufficient capital to develop the bulk of its assets. It appears the intention was to return to the capital markets for additional capital raises. SAPRO's inadequate resources became quite apparent this past Spring when we were ordered to pay the former manager performance fees of approximately £5 million. These performance fees, the High Court determined, had been earned because of an increase in the appraised value of the Company's property portfolio. None of the current Board was involved in the negotiation of this management contract and it was structured in a way that we found unappealing. The manager was entitled to rewards from short term events such as fluctuations in the appraised value of SAPRO's assets and fluctuations of the Rand as against Sterling. Shareholder returns, by contrast, were linked to successful development, leasing and asset sales, which necessarily would occur over longer periods of time. Although we believed that the contractual incentives were not aligned, the management contract had been agreed to by the former board and summarized in the offering memorandum. The legal dispute was thus limited to whether the former manager had met the contractual hurdle, which was a function of whether the hurdle number was gross or net of taxes. If gross the former manager would win but if net we would win. Our counsel had given us a high probability of prevailing, which is why we pursued the matter, but the High Court thought otherwise, leaving us with a judgment of approximately £5 million plus our adversary's fees. Post the balance sheet date, based on advice of new counsel, we have agreed to settle the claim at £5.78 million which includes all interest due on the settlement. We regard this result as satisfactory under the circumstances.

As announced on 5 August 2011 and in order to satisfy the judgment and still have sufficient working capital to run the business, we took out a ZAR 28.9 million credit facility with Standard Bank in Johannesburg. The facility bears an interest rate of 1% over Standard Bank's prime lending rate, (currently 9%) and is repayable in July 2012. Obtaining the facility was a tortuous process because we had to pledge as security interests in our South African subsidiaries, and audited accounts had never been prepared for those subsidiaries. We brought in a new director, who oversaw the efforts of our local administrator and auditors in completing over fifty audited sets of accounts, and our local executive director took the lead in negotiating the Standard Bank credit facility. This financing arrangement is intended to meet our cash requirements pending receipts from asset sales.

The past year has been difficult, but I believe we have laid a foundation that will lead to shareholder benefits over the next several years. We have a properly incentivised manager in place. We have realigned problematic projects with development partners. We have improved our financial structure. We have strengthened our board, and we have ended the uncertainty of the outstanding litigation. With a little bit of cooperation from South Africa's property markets we should improve our results over the next year.

I would like to thank my Board colleagues for their application and support.

David Hunter

Chairman

9 December 2011

Report of the Investment Manager

South African Economic Situation

Affordability, tight lending criteria, reduced business confidence and potential interest rate increases for first half 2012 remain the key issues. The debt crisis in the Euro Zone and the unsettled global economy have stoked matters further. Should the world move closer to a double dip recession, the South African property market's long awaited recovery will be extended and land values will come under further pressure.

In addition, the property market in South Africa remains unpredictable and exacerbated by several uniquely South African factors. Political uncertainty, uneasy foreign policy, uncontrollable exchange rate fluctuations, inflated household debt levels, higher fuel and food prices, and the significant escalation in utility costs are contributing to a depressed cycle.

Inflation, currently hovering around 4.6%, may breach the 6% upper limit of the domestic target range forcing the start of interest rate hikes. Many businesses are adopting a very conservative approach as they struggle to deal with recessionary pressures. "Downscaling" and "downsizing" are words that best describe the current environment, impacting both supply and demand.

Embedded image removed - please refer to the Company's website www.saprofund.com for a chart depicting consumer price index and Prime overdraft rate.

Review by property sector

Commercial

The South African office sector is still in a challenging position with double-digit vacancies notwithstanding a substantial slowdown in office construction over the last three years. Currently office vacancies have increased in most main business nodes, and rentals have softened. The demand for office space is node-specific and the expectation is that vacancies in many areas will be taken up during 2011/2012.

SAPRO Assets in the commercial property sector include:

·; Brakpan

·; Longland (part)

·; Wedgewood

·; Starleith

Retail

The retail property market is recovering faster than both commercial and industrial sectors. Trends show that spend per head and foot count have increased, whilst vacancies are declining. Bad debts have also reduced. This is more evident in the bigger and dominant regional shopping centres. Stronger retail sales growth and signs of a return to discretionary spending helped to drive capital growth in the retail sector to 4.4% in first quarter 2011, which was the highest for any sector. 

SAPRO Assets in the retail property sector include:

·; African Renaissance (part)

·; Lenasia

·; Longland (part)

Industrial

The industrial property market is driven by manufacturing activity. Manufacturing has shown dismal returns over the last six months, with exports having felt the adverse effects of a strong Rand and lower global demand. The overall strength and stability of any sustained recovery remains uncertain, particularly against the backdrop of both a South African economy that continues to shed jobs and a world economy in flux.

There has been an increasing appetite for warehousing space, driven largely by retailers, whereas smaller mini and midi units of 500m² to 1000m² seem to be lagging behind with higher vacancies.

SAPRO Assets in the industrial property sector include:

·; Clayville

·; Gosforth Park

·; Hughes Industrial Park

·; Imbonini 1 and 2

·; Acacia Park

·; Waltloo

Residential

The residential development market remains under pressure due to oversupply. The tapering off of new residential development activity and more stringent home loan lending criteria, will ultimately result in a greater degree of equilibrium between supply and demand in this sector. Over the past 12 months alone, housing sales have quartered and are now at their lowest level in more than a decade. Rode & Associates, a respected local property consultancy, expects maximum real home price appreciation of only 2 per cent annually over the next five years. The affordable and low cost sectors of this market continue to be the focus points and are identified as growth catalysts.

SAPRO Assets in the residential property sector include:

·; African Renaissance (part)

·; Lilianton/Driefontein

·; Emberton

·; Kindlewood

·; Kyalami

·; Longland (part)

Conclusion:

The South African property market appears set for a slow recovery, with modest signs of gradual manufacturing output recovery and improved retail sales indicating that the property conditions may improve. However the reality that market rental rates for commercial, industrial and retail have been shrinking in real terms could lead to investors requiring higher minimum returns to invest in property and this would tend to depress market values further, especially land values. On the positive side, projected real economic growth of about 3.2% in 2011 and a relatively stable interest rate environment could prove to be the catalyst for continued economic growth.

Portfolio Activity

Group Five was appointed as the Investment Manager to the SAPRO Property portfolio on 21 October 2010. Following our appointment, we performed and concluded an extensive analysis of company assets, which involved a handover from the former manager, a comprehensive review and classification of assets into assets available for sale and assets held for orderly disposal, review of development rights and development partner agreements and meetings with partners to resolve outstanding issues and plan for the future.

Our classification of assets into those identified as available for sale and held for orderly disposal took account of market appetite, the stage of rights and zoning applications, any additional capital expenditure required to sell or develop the asset in question, latest market valuations and our development partner and shareholder aspirations.

As time has elapsed, certain assets have been reclassified given the fluctuating economic conditions. Our current classification is as follows;

Given the nature of the markets we are prepared to consider offers in respect of any property in the portfolio and in appropriate circumstances would make a recommendation to the Board to sell assets currently classified as held for orderly disposal.

Refinancing arrangements

During the period under review to 30 June 2011 a number of the projects required refinancing. This was due to a combination of the existing facilities reaching maturity and a change in appetite from debt providers given prevailing economic conditions. Banks have taken a view that the financing of vacant land (which predominantly represents the portfolio) is no longer feasible and wherever possible are trying to terminate existing arrangements.

Despite these difficult conditions the Gosforth Park, Imbonini 1 & 2 and Kindlewood facilities have all been successfully refinanced during the period with some bank facilities being moved to alternate providers.

Valuations

Group Five is seeing a negative trend in valuations and this is substantiated by the latest CBRE valuation results for the portfolio. On a portfolio basis, valuations have decreased by 8.4% (R111.3m) since previously reported (31 December 2010). Some assets within the portfolio have remained steady whilst others have decreased in line with prevailing economic conditions. Group Five has interrogated the valuation results in detail and is satisfied that the numbers are fair. Further falls, though, cannot be ruled out in the absence of a property market recovery.

As mentioned earlier, few debt providers are funding vacant land acquisitions and where vacant land is currently funded, they are seeking to exit. This has inevitably created negative sentiment towards vacant land holding which is reflective of 80% of the portfolio. In the latest round of CBRE appraisals the above factors were evident and real.

Implementation and Progress

The process of getting to grips with the portfolio took some time. An arduous handover process, a variety of planning and technical issues that had been left unattended and outstanding development partner issues resulted in a more rigorous and extensive process than what was originally envisaged.

Detailed marketing of those assets identified as available for sale could only thus begin in May 2011. Since then, some considerable progress has been made in aligning assets with the correct purchaser profile. Some traction has certainly been achieved and a number of potential deals remain under discussion.

The challenging global economic volatility did not assist us in our efforts. This is a global phenomenon that is reality. Certain interested purchasers simply placed discussions on hold, whilst others walked away completely.

Nonetheless, we continue to entertain and work on a number of leads and deals that are in varying states of closure. Looking ahead we do have a sense of cautious optimism despite trying economic conditions, tougher liquidity requirements and a volatile market for land purchasers.

Subsequent Events

Subsequent to the year end, the Group has entered into legally binding agreements in respect of the sales of the following assets:

Waltloo - ZAR 19.7m;

Hughes - ZAR 2.9m;

Acacia Park - sale of eleven units - ZAR 23.8m;

Gosforth Park - sale of portion - ZAR 65.4m

Imbonini - sale of portion - ZAR 1.3m and

Kindlewood - sale of a unit - ZAR 4.5m.

Portfolio Management

African Renaissance

Description: Comprises a 146 hectare vacant development site (mainly residential and commercial rights) east of Pretoria.

Action taken or underway: A dispute between the shareholders has been resolved through extensive fee settlement negotiations, and an understanding has been reached between parties on the strategy going forward.

The original residential concept for the site has been reworked to create a product that is more conducive to current market conditions.

A retail project feasibility has been drawn up and a leasing coordinator appointed to package a development scheme to developers and institutional investors.

Sales progress: The retail site continues to attract interest from national developers and institutional investors alike. Interest on the residential site has waned in the current economic climate.

Strategy: Continue to actively market the retail site to investors and developers, while a change in the economic and residential market will be required before interest from credible buyers returns.

Brakpan

Description: Comprises two vacant development stands totalling 6.64 hectares with approximately 25,000 square metres of developable commercial bulk.

Action taken or underway: Addressing planning permission requirements. Established greater clarity of the issues from town council and traffic impact assessments.

Sales progress: Whilst we classify this as held for orderly disposal we are currently in discussions with interested parties.

Strategy: Continue discussions with buyers while progressing planning permissions.

Clayville

Description: Comprises 49 hectares of vacant land located in Olifantsfontein north of Johannesburg.

Action taken or underway: Positive discussions underway with other developers in the area to progress the funding of electricity supply to the area.

Sales progress:None at acceptable prices.

Strategy: To resolve electricity supply issues through the joint commitment with neighbouring developers and build a new substation.

Emberton

Description: Comprises 16.5 hectares of vacant development land (mainly zoned residential with certain commercial rights) in Hillcrest, north of Durban.

Action taken or underway: A positive record of decision was received from council on environmental issues pertaining to the planning permissions.

Sales progress: Offers are being considered.

Strategy: Continue to entertain offers while progressing planning permissions.

Gosforth Park

Description: Comprises a 42 hectare proclaimed industrial and commercial site south east of Johannesburg.

Action taken or underway: Zoning consolidation has been successfully resolved and debt refinanced for 12 months.

Sales concluded on certain sites not affected by road infrastructure which will then allow cash to be utilised for infrastructure.

Sales progress: Our development partners have carved out land and buildings comprising their 25 per cent interest in the project. SAPRO has concluded a sale with a third party developer on a portion of the site and is entertaining offers on the remaining portions.

Strategy: Complete the required infrastructure and sell the remaining sites.

Hughes

Description: Comprises two adjacent industrial sites in the south east of Johannesburg covering 3.69 hectares.

Action taken or underway: Focus on sales.

Sales progress: SAPRO has sold the undeveloped portion (Phase 2) to our development partners while the sale of the completed industrial units (Phase 1) is progressing very slowly.

Strategy: Continue to market Phase 1 units for sale.

Acacia Park

Description: Comprises twenty-two sectional title mini-industrial units on a serviced stand in Imbonini 1.

Action taken or underway: Focus on securing sales at achievable prices. In summary, of the twenty-two industrial units completed;

·; two had been sold in the previous period,

·; three sales have been achieved during the current period

·; eleven sale agreements have been signed since the balance sheet date.

Sales progress: Good interest has been shown of late translating into concluded and provisional sales. Three sales have completed and eleven are pending transfer.

Strategy: Continue sales momentum.

Imbonini Phase 1

Description: Comprises a 36 hectare zoned industrial estate in Ballito north of Durban.

Action taken or underway: Renegotiated the terms and conditions of the prevailing mezzanine loan structure with our joint shareholders. Renewed the debt finance facility for a further 12 months.

Sales progress: Approximately 30% of this phase still to be sold. Some deals being negotiated at present.

Strategy: To find buyers at market values and to enforce the electrical rebate (R 17m) with the local municipality.

Imbonini Phase 2

Description: Comprises a 77 hectare site contiguous with Imbonini 1 and currently zoned agricultural.

Action taken or underway: All planning requirements have been met.

Strategy: Medium term hold. Significant bulk infrastructure costs of circa R130m are required to unlock the site for development.

Kindlewood

Description: Comprises two adjoining projects (Kindlewood Phases 1 and 2) with a combined area of 5.3 hectares. Phase 1 comprises forty-one completed upper income single family homes in a gated suburban community north of Durban. Fourteen of the forty-one houses have been sold. Phase 2 is a difficult site to develop.

Action taken or underway: Price reductions.

Sales progress:The re-pricing appears to be generating interest and one sale was concluded in August 2011 for R4.5m.

Strategy: Continue to sell completed houses at achievable prices and sell Phase 2 site.

Kyalami

Description: Comprises an 8.9 hectare residential site in Kyalami, north of Johannesburg.

Action taken or underway: Shareholder agreements have been satisfactorily concluded.

Sales progress:Held for orderly disposal. Group Five is compiling a feasibility study in order that it may sell a packaged development. Planning permissions are underway in parallel.

Strategy: Seeking to increase densities and rework feasibility.

Lenasia

Description: Comprises a 13 hectare commercial development site in Lenasia, south of Johannesburg.

Action taken or underway: Adopted a phased approach to sell off a portion which has electrical capacity and then utilise free cash to invest in upgrades required to make the remainder saleable. Re-applied for environmental consents, which had expired.

Strategy: Trying to phase the land so as to get an early sale of the one portion which has electricity capacity.

Lilianton/Driefontain

Description: Comprises 11.0 hectares of vacant development land (mainly residential with future plans to rezone a portion for commercial rights) east of Johannesburg.

Action taken or underway: Seeking to improve planning density. In the process of obtaining environmental approvals.

Strategy: Obtain optimum rights (increased density) before selling.

Longland

Description: Comprises a commercial, residential and retail mixed use site in Fourways, Johannesburg. The project has two phases with Phase 1 comprising 12,769 square metres of hotel and commercial space and Phase 2 the development of the remaining undeveloped land. Phase 1 now includes a City Lodge hotel on a long term land lease and a standalone office and retail building (5,979 square metres) - which is about 66 per cent let.

Action taken or underway: Current market conditions make speculative development unattractive so SAPRO is progressing interest from first tier national developers looking to land bank this prime site.

Sales progress:In discussions with potential purchaser to acquire SAPRO's stake.

Strategy: Change in classification from held for orderly disposal to asset available for sale considering the current market conditions. Given the continued protraction of the expected recovery, it is regarded that it will take longer to achieve increased land values and a more optimal return will be got from an earlier sale.

Starleith

Description: A centrally situated residential site with commercial development potential. SAPRO holds a 50 per cent interest.

Action taken or underway: Advanced stages of rezoning to commercial use.

Strategy: Hold to optimise development or sale value.

Waltloo

Description: Comprises six serviced stands on 4.3 hectares of industrial site east of Pretoria.

Action taken or underway: Agreed sale to development partner and sub-division consents sought.

Sales progress: Both sale transactions have been concluded and are now being processed for lodgement and transfer, value £1.8 million (ZAR 19.8 million).

Strategy: Property sold.

Wedgewood

Description: A centrally situated residential development site with commercial potential. SAPRO has a 79 per cent interest.

Action taken or underway: Advanced stages of rezoning to commercial use.

Sales progress:Expressions of interest have been shown.

Strategy: Hold to optimise development or sale value. The company has responded to numerous requests for proposals to develop offices on the site for national tenants and we await their responses.

Group Five Property Developments (Pty) Limited

9 December 2011

Report of the Directors

The Directors hereby submit their annual report together with the audited consolidated financial statements of South African Property Opportunities plc (the "Company") and its subsidiaries (the "Group") for the year ended 30 June 2011.

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.

On 7 January 2011 with the approval of Shareholders in general meeting, the Company was re-registered as a company under the Isle of Man Companies Act 2006.

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.

The Group uses 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, borrowings will be secured against individual projects without recourse to the Company.

Divestment Strategy

Following a strategic review 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.

Results and dividends

The results and position of the Group at the year end are set out on pages 18 to 44 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 (2010: £nil).

Directors

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

Directors and other interests

Save as disclosed above and as detailed in note 8, 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 auditor

PricewaterhouseCoopers LLC, being eligible, has indicated its willingness to continue in office.

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 the following committees with specific areas of responsibility.

Audit Committee

The audit committee comprises David Saville (Chairman), David Hunter and Stephen Coe. 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.

Nomination Committee

The nomination committee comprises David Saville (Chairman) and David Hunter. The nomination committee is responsible for ensuring that the Board consists of members with the range of skills and qualities to meet its principal responsibilities in a way which ensures that the interests of stakeholders are protected and promoted, and the requirements of the AIM rules are complied with.

Remuneration Committee

The remuneration committee comprises David Saville (Chairman) and David Hunter. 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 Saville

Director

9 December 2011

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 CFA Institute. He is currently a director of a number of other quoted investment funds.

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. 

Stephen Coe

Stephen qualified as a Chartered Accountant with Price Waterhouse in 1990 and remained in audit practice, specialising in financial services, until 1997. From 1997 to 2003 he was a director of the Bachmann Group of fiduciary companies and Managing Director of Bachmann Fund Administration Limited, a specialist third party fund administration company. From 2003 to 2006 Stephen was a director with Investec in Guernsey and Managing Director of Investec Trust (Guernsey) Limited and Investec Administration Services Limited. He became self employed in August 2006 providing services to financial services clients and is a director of a number of listed and unlisted investment funds and offshore companies including Raven Russia Limited, Matrix European Real Estate Investment Trust Limited, Kolar Gold Limited and Trinity Capital PLC (and serves as Chairman of the Audit Committee for these companies). He has been involved with offshore investment funds and managers since 1990 with significant exposure to property, debt, emerging markets and private equity investments.

Statement of Directors' Responsibilities

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

The Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards ("IFRSs") (as adopted by the European Union). 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;

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

·; prepare financial statements which give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period.

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 Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group. 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.

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 Saville

Director

9 December 2011

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

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements (the 'financial statements') of South African Property Opportunities plc and its subsidiaries (the "Group") which comprise the consolidated balance sheet as at 30 June 2011 and the consolidated income statement, the consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated cash flow statement 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 and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's 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 our engagement letter dated 16 November 2011 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 auditor's 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 auditor considers 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 financial statements give a true and fair view of the financial position of the Group as of 30 June 2011, 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.

PricewaterhouseCoopers LLC

Chartered Accountants

Isle of Man

9 December 2011

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

* On 7 January 2011, the Company was re-registered as a company under the Isle of Man Companies Act 2006 (see note 17).

Consolidated 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. On 7 January 2011 with the approval of Shareholders in general meeting, the Company was re-registered as a company under the Isle of Man Companies Act 2006 with registered number 006491v. 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 with fee charging commencing with effect from 21 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 authorisation to place 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.

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. 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 Group's accounting policies.

These financial statements have been prepared on a going concern basis, which assumes that the Group will be able to meet its liabilities as and when they fall due for the foreseeable future. See note 2.2 for further information.

a) New and amended standards adopted by the Group

·; Improvements to IFRSs (issued April 2009), effective 1 January 2010, were issued by the IASB as part of the 'annual improvements process' resulting in amendments to 15 standards. The improvements have not had a significant effect on the Group.

The Group has adopted the following new and amended standards as of 1 July 2010:

·; IFRIC 15, 'Agreements for construction of real estate', effective 1 January 2009 for periods beginning on or after 1 January 2010. This interpretation clarifies which standard (IAS 18, 'Revenue', or IAS 11, 'Construction contracts') should be applied to particular transactions. It is likely to mean that IAS 18 will be applied to a wider range of transactions. Entities that have previously recognised revenue from residential real estate sales under IAS 11 are the most significantly affected and will probably be required to apply IAS 18. This has not affected the Group.

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

·; Annual improvements to IFRSs, effective 1 January 2011, were issued by the IASB as part of the IASB's programme of annual improvements resulting in amendments to 7 standards. The amendment to IAS 34 'Interim Financial Reporting' will be considered by the Group when preparing the interim results for the period ended 31 December 2011. The other improvements will not have a significant effect on 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 retains but simplifies the mixed measurement model and establishes two primary categories for financial assets: amortised cost and fair value. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. 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.

·; IFRS 10, 'Consolidated financial statements', issued in May 2011. This standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements. The standard provides additional guidance to assist in determining control where this is difficult to assess. This standard is applicable for periods beginning on or after 1 January 2013. The Group is yet to assess the full impact of IFRS 10, but the adoption may change the entities that are consolidated as subsidiaries from 1 July 2013. This standard has not yet been endorsed by the EU.

·; IFRS 12, 'Disclosure of interests in other entities', issued in May 2011. This standard includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. This standard will be applicable for periods beginning or after 1 January 2013. The Group, subject to EU endorsement, will adopt this standard from 1 July 2013. It is not expected to have a significant impact on the Group.

·; IFRS 13, 'Fair value measurement', issued in May 2011. This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP. This standard is applicable for periods beginning on or after 1 January 2013. The Group is yet to assess IFRS 13's full impact. This standard has not yet been endorsed by the EU.

·; IAS 1, 'Financial statement presentation' regarding other comprehensive income, issued in June 2011. The amendment changes the disclosure of items presented in other comprehensive income ('OCI') in the statement of comprehensive income on the basis of whether they are potentially recycled to profit or loss (reclassification adjustments). This standard is applicable for periods beginning on or after 1 July 2012. However the standard has not yet been endorsed by the EU. The Group is yet to assess IAS 1'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. 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. When the revised standard is applied, the Group will need to disclose any transactions between its subsidiaries and its associates.

2.2 Critical accounting estimates and assumptions

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) Going concern

These financial statements have been prepared on a going concern basis, which assumes that the Group will be able to meet its liabilities as and when they fall due for the foreseeable future.

The Directors have prepared cash flow forecasts that indicate that the Group will be able to meet its financial obligations through to December 2012 from existing cash resources, the post year end facility granted by Standard Bank and the projected sales proceeds from sale of inventory.

(b) Estimated impairment of inventory, investment in associates and loans to associates

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 any impairment of inventory, investments in associates and loans to associates.

During the year there were impairment charges in relation to loans to associates (see note 11.2) and inventory (see note 13).

(c) 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.

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 consolidated 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 from the sale of inventory when the Group has entered into a legally binding agreement and the sale has become unconditional, i.e. the specific conditions for the sale have been met.

Operating lease income in respect of rents 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 all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. The group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the size of the group's voting rights relative to the size and dispersion of holdings of other shareholders give the group the power to govern the financial and operating policies, etc.

Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

Transactions and non-controlling interests

The Group treats transactions with non-controlling interests as transactions with equity owners of the Group.

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 Operating segments

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.

The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Based on this internal reporting to the Board, it has been determined that there is only one operating segment, property development in the Republic of South Africa. The comparative table has been removed due to the change in segment determination as a result of the change in management reporting implemented by the current investment manager.

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 2011 and 2010 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 2011 and 2010 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 the Republic of 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 enacted or substantially enacted 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 2011, had the Pound strengthened/weakened by 20 per cent against the South African Rand, with all other variables held constant, the impact on equity of the above financial instruments would be an increase/decrease of £466,000 (30 June 2010: 5 per cent, decrease/increase £78,000).

Included in the income statement is a foreign exchange gain of £3,040,456 (2010: £5,472,218) which includes a gain of £3,032,036 (2010: £5,082,950) 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 relate to project investments in land and the Executive Directors do not expect any losses from non-performance by these counterparties. Trade and other receivables relate mostly to the money held in escrow (£5.78 million) pending settlement of the dispute with the former manager, which was settled in October 2011. All investment opportunities are analysed objectively prior to Board approval, including a financial and business due diligence investigation of each potential project.

Included within loans due from associates is the following loan which has been impaired:

The market value of the inventory held by this associate has been considered when determining the impairment in the loan.

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 and banking facilities as indicated by its cashflow forecasts. The Group's liquidity position is monitored by the Executive Directors (see note 2.2(a)).

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 2011 should interest rates have decreased by 100 basis points, with all other variables held constant, the shareholders' equity and profit for the year would have been £128,000 (2010: 100 basis points, £181,000) 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 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 2010 and 2011.

4 Segment Information

The entity is domiciled in the Isle of Man. All of the reported revenue, £968,213 (2010: £4,192,454), is from external customers located in South Africa.

The total of non-current assets other than financial instruments is £9,365,244 (2010: £29,472,470) and all of these are located in South Africa.

Revenues of £181,040 (ZAR 2,017,544) (30 June 2010: £1,349,842 (ZAR 16,221,053)) are derived from a single external customer in relation to Kindlewood.

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 year there was a transition of investment manager from Proteus Property Partners Limited to Group Five Property Developments (Pty) Limited. This occurred with effect from 21 October 2010.

For the period to 20 October 2010 Proteus Property Partners Limited was entitled to a management fee of 2 per cent. per annum of the net asset value of the Group payable quarterly in advance. Management fees for the year ended 30 June 2011 paid to Proteus Property Partners Limited amounted to £513,775 (30 June 2010: £1,522,452). Additional management fees (and associated costs) in relation to earlier periods payable to Proteus Property Partners Limited amounted to £749,842 (see note 24)

From 21 October 2010 Group Five Property Developments (Pty) Limited became the investment manager and a revised Investment Management Agreement came into operation. Their fee as investment manager is £500,000 per annum payable monthly in arrears. Management fees for the year ended 30 June 2011 paid to Group Five Property Developments (Pty) Limited £383,899 (ZAR 4,278,252) (30 June 2010: £nil (ZAR nil)).

During the year, pursuant to the investment management agreements, the investment managers were also entitled to recharge to the Group all and any costs and disbursements reasonably incurred by it in the performance of their duties, including costs of travel save to the extent that such costs are staff costs or other internal costs of the relevant investment manager.

Sales fee

From 21 October 2010 and according to the terms of the revised Investment Management Agreement, Group Five Property Developments (Pty) Limited is entitled to a sales fee of up to 3 per cent of the gross proceeds on disposal of the Group's projects (such fee is net of external brokerage costs incurred). These fees are payable on sale and have been considered when determining the net realisable value of the inventory (see note 13). Sales fees payable for the year ended 30 June 2011 payable to Group Five Property Developments (Pty) Limited amounted to £nil (ZAR nil) (30 June 2010: £nil (ZAR nil)).

Performance fees

During the period to 20 October 2010, Proteus Property Partners Limited was eligible to receive a performance fee which would be payable by reference to the increase in 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 in relation to earlier performance fee periods payable to Proteus Property Partners Limited amounted to £4,961,792 (see note 24).

The Group has accrued a performance fee due to Group Five Property Developments (Pty) Limited based upon the market value of the portfolio which only becomes payable on the eventual sale of these assets so long as the sales values are better than certain agreed benchmarks. Performance fees accrued for the year ended 30 June 2011 amounted to £383,670 (ZAR 4,275,700) (30 June 2010: £nil (ZAR nil)).

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 £40,000 each and the Chairman £75,000.

Executive Directors' fees

The Executive Directors received annual basic salaries of £40,000. Pursuant to the terms of their service agreements, Craig McMurray and John Chapman are entitled to incentive payments of, respectively, 1.5 per cent. and 0.5 per cent. of all sums distributed to shareholders. The agreement also provides for payments of the same percentages, following termination of their employment, for distributions paid from cash generated during their employment. This is provided the distribution is declared within 12 months of termination.

All directors' remuneration and fees

Total fees and basic remuneration (including VAT where applicable) paid to the Directors for the year ended 30 June 2011 amounted to £263,563 (30 June 2010: £230,000) and was split as below. Directors' insurance cover amounted to £49,252 (30 June 2010: £33,644).

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 £23,017,308 (ZAR: 250,548,000) (30 June 2010: £13,504,522 (ZAR 154,855,000)). 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 losses have been approved by the South African Revenue Service and the realisation of the related tax benefit through future taxable profits is probable.

10 Basic and diluted (loss)/earnings per share

Basic (loss)/earnings per share is calculated by dividing the (loss)/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 and loans to associates

11.1 Investments in associates

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:

The Group's share of losses made by associates not recognised in the financial statements as the carrying value of the investment is £nil, is as follows:

11.2 Loans due from associates

11.2 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 four years + one 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, interest was charged at a rate of South African Prime up to 30 June 2010

The fair value of these loans approximates their carrying value.

12 Intangible assets

The above goodwill relates entirely to the Group's investment in the shares of Living 4 U Developments (Pty) Ltd, (the African Renaissance development). 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 £1,712,130 (ZAR 18,636,881) and the third party valuation of the land (which is the value assigned to the key assumption and is valued at £12,264,359 (ZAR 133,500,000) at 30 June 2011) would have to fall by £1,372,454 (ZAR 14,939,439) before impairment needs to be considered.

13 Inventories

Non-current assets

Current assets

During the year, the Group capitalised costs of £2,911,803 (ZAR 32,449,710) (30 June 2010: £7,548,896 (ZAR 90,715,089)), in order to develop it for future re-sale, and accordingly it was classified as inventory. Borrowing costs of £36,056 (ZAR 401,815) (30 June 2010: £702,467 (ZAR 8,441,541)) have been included in the capitalised costs.

At 30 June 2011 the net realisable values of Brakpan, Driefontein, Emberton, Kindlewood, Kyalami, Lenasia and Starleith were lower than cost, therefore, their inventory values have been impaired to a value of £26,428,214 (ZAR 287,676,400) (30 June 2010: Emberton, Kyalami, Lenasia and Starleith were impaired to a value of £14,929,929 (ZAR 171,200,000)). Net realisable value has been assessed using valuations determined by CB Richard Ellis less estimated selling expenses. Included within these selling expenses is a 3 per cent sales fee due to the investment manager on disposal of inventory (see note 7).

The Directors consider all inventories to be current in nature. It is not possible to determine with accuracy when specific inventory will be realised, as this will be subject to a number of issues such as availability of finance and permitting delays.

Security

At 30 June 2011, there are two first rank mortgages secured over the inventory held by Gosforth Park and Kindlewood which totals £20,949,040 (ZAR 228,034,495) (30 June 2010: Gosforth Park and Kindlewood £20,723,716 (ZAR 237,636,779)) (See note 21).

14 Trade and other receivables

The fair value of trade and other receivables approximates their carrying value.

15 Cash at bank

Included within the £578,674 bank deposit balances figure is an amount of £459,339 (ZAR 5,000,000) (30 June 2010: £436,037 (ZAR 5,000,000)) 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

The subsidiary SAPSPV Holdings RSA (Pty) Ltd has a contingent liability of £459,339 (ZAR 5,000,000) in connection with senior debt obligations of its associate Imbonini Park (Pty) Ltd.

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 (the Wedgewood development) 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 (£2,021,093) in dividends declared by Business Venture Investments No 1269 (Pty) Limited.

17 Share premium

On 7 January 2011, the Company was re-registered as a company under the Isle of Man Companies Act 2006. All reserves are now considered to be distributable.

18 Net asset value per share

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.

The Group publishes an adjusted NAV that is calculated in accordance with the guidelines of the European Public Real Estate Association ("EPRA"). The primary difference between EPRA and IFRS is that, in general, under IFRS the Group's development properties are classified as inventory and held at cost while EPRA permits the incorporation of open market valuations. In order to produce the EPRA numbers the Group have retained CBRE's Johannesburg office to conduct semi-annual valuations. The EPRA numbers incorporate the CBRE valuations and are net of tax.

The below figures also take into consideration any profit share agreements with development partners, commission due on sale of properties (see note 7) and incentive fees due to the executive directors (see note 8).

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 subsidiary company, Madison Park Properties 36 (Pty) Ltd, and the Waltloo Industrial Park development.

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

**** in relation to its prospective interest in subsidiary company, Madison Park Properties 34 (Pty) Ltd, and the Kyalami Residential Estate development.

***** in relation to its 25 per cent interest in subsidiary company, 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.

20 Trade and other payables

The fair value of trade and other payables approximates their carrying value at 30 June 2011.

21 Borrowings

Non-current liabilities

Current liabilities

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

Terms and debt repayment schedule

* subsequent to the year end this facility has been renegotiated (see note 24).

The fair value of the borrowings approximate their carrying value.

22 Contingent liabilities and commitments

As at 30 June 2011 the Group has contingent liabilities which have corresponding bank guarantees. See note 15 for further details.

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.

The current investment manager Group Five Property Developments (Pty) Limited and the Directors of the Company are considered to be related parties by virtue of their ability to make operational decisions for the Group. Fees in relation to the current investment manager are disclosed in note 7 and fees in relation to the Directors are disclosed in note 8.

Group Five Property Developments (Pty) Limited is a related party to Group Five Construction (Pty) Limited, which is a partner in the Wedgewood and Starleith developments. There is a loan in respect of the Starleith development which is disclosed in note 19.

Related party transactions with associates are disclosed in note 11.

The principal subsidiary undertakings within the Group as at 30 June 2011 are:-

* this also represents the percentage of ordinary share capital and voting rights held - 2011

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

24 Post balance sheet events

Subsequent to the year end the Group has entered into legally binding agreements in respect of the sales of the following assets: Waltloo for £1,807,202 (ZAR 19,671,750); Hughes for £267,335 (ZAR 2,910,000); 11 units at Acacia Park for £2,186,317 (ZAR 23,798,500); part of Gosforth Park for £6,007,687 (ZAR 65,394,874); part of Imbonini for £123,985 (ZAR 1,349,600) and one unit at Kindlewood for £413,405 (ZAR 4,500,000).

Subsequent to 30 June 2011 the Group negotiated a new facility with Standard Bank with a limit of £2.7m (ZAR 28.9m). The maturity date is 31 July 2012 and the applicable interest rate is South African Prime interest rate plus 1%. The Group pledged its investments in the Starleith, Wedgewood and Clayville projects as security for the facility and a mortgage bond has been registered over the Clayville property.

In October 2011 the Company settled all disputes with its former manager and administrator, in relation to outstanding performance fees and management fees, by paying the former manager £5.78 million and exchanging mutual releases. This money was held in escrow at 30 June 2011 and included within trade and other receivables (note 14).

Subsequent to 30 June 2011 the loan with Nedbank (see note 21) has been renegotiated and moved to Standard Bank. The new facility with Standard Bank has a limit of £5.1m (ZAR 55m). The maturity date is 31 December 2012 and the applicable interest rate is South African Prime interest rate minus 0.25%, capitalised monthly. Mortgage bonds have been registered over the Lenasia and Driefontein properties and a suretyship for £3.0m (ZAR33m) has been provided by SAPSPV Holdings (Pty) Limited as security for this facility.