Half Yearly Report

30 March 2015

SOUTH AFRICAN PROPERTY OPPORTUNITIES PLC

('SAPRO' or the 'Group')

Interim results for the six months ended 31 December 2014

South African Property Opportunities plc (AIM: SAPO), an investment company established to invest in real estate opportunities in South Africa, announces its unaudited interim results for the six months ended 31 December 2014.

For further information please contact

Paul Fincham +44 (0) 20 7886 2713

Robert Naylor +44 (0) 20 7886 2714

Panmure Gordon

Ian Dungate/Suzanne Jones + 44 (0) 1624 692600

Galileo Fund Services Limited

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

Chairman's Statement

On behalf of the Board, I am pleased to present the interim results for South African Property Opportunities plc ("SAPRO" or "the Company") for the six months ended 31 December 2014.

Performance

As at 31 December 2014 the unaudited EPRA net asset value per share "NAV" (taking into account property revaluations, estimated sales and distribution costs) was 30 pence compared with 36 pence at 30 June 2014. The fall in NAV primarily relates to the capital payment of 5 pence per share made in October 2014, and the loss on sale of subsidiary of GBP605,654 (excluding GBP575,885 cumulative foreign exchange gains reclassified from equity to profit and loss) or 1 pence per share. Between 30 June 2014 and 31 December 2014 the exchange rate moved from 18.19 ZAR/GBP to 18.03. The Company does not hedge its South African Rand exposure. The Company has no bank debt.

Management

New management arrangements were implemented with effect from 1 July 2014, with Bridgehead Real Estate (Pty) Ltd replacing Group Five. The new arrangements represented a cost saving in terms of fixed fees and were regarded by the Board as advantageous to the Company.

South African Economy and Property Market

The Investment Manager reports on the South African economy in detail on pages 3 to 6. In summary, circumstances remain challenging with no meaningful change forecast.

Valuations

The portfolio was not revalued externally at 31 December 2014, and the figures adopted in the accounts are the CBRE numbers from June 2014, with minor amendments to reflect specific transactions agreed where relevant.

Sales

A number of sales in the period were reported as post balance sheet events in the 30 June 2014 accounts, including the final tranche of Gosforth Park and the remaining assets at Kindlewood, with full settlement of both received in the period.

Post 31 December 2014 the sale of the Emberton asset was concluded, with the first payment tranche of ZAR9m received in February 2015. Further contracted payments are due in 2015 for Emberton and for Acacia Park.

Asset Management

The key efforts of the manager are focused on achieving sales, and on improving the liquidity of the remaining assets. South Africa remains a difficult environment in which to do business, and both infrastructure (mainly supply of power) and planning improvements are difficult to achieve in a reasonable timescale. In addition, legal disputes are not unusual, and the Company has experienced a land ownership claim which, inter alia, covers the African Renaissance site. The Manager is confident that this is spurious, but it is compromising on-going sale discussions on this asset.

Outlook

The Company's remaining assets all have a degree of illiquidity and the Board and Manager continue to take a proactive approach to their realisation including endeavouring to monetize the Company's remaining assets with due regard for market conditions and the Company's running costs.

David Hunter

Chairman

27 March 2015

Report of the Investment Manager

Introduction

The interim report provides an update on the status of asset sales and planning permissions. Sales continue to be achieved against a backdrop of difficulties pertaining to property planning permissions, subdued economic conditions as well as national and local specific risks (Eskom power supply, political and bureaucratic inefficiencies at local and national government). The low business confidence together with the high holding costs, planning and development risks associated with land assets make disposals challenging in the current economic environment. Expectations around any changes to the political and economic headwinds in South Africa do not indicate a likely turnaround anytime soon. The volatility of the SA Rand will continue to remain a threat to the distributable value of realisations going forward.

Key SA Economic Indicators

South African Property Market

2014 saw the listed property sector raise in excess of ZAR40bn of capital compared to ZAR18bn in 2013 while 2015 seems to have got off to an active start indicating another strong year for capital raising in the sector. The listed property market (predominately REIT funds) out-performed all other asset classes in 2014 delivering a total return of 26.6% but 2015 could be more subdued considering the local economic challenges facing the industry.

2015 is expected to produce similar trends in regard to direct commercial, industrial and retail property performance to that experienced in 2014. The increasing interest from institutional investors in the residential sector should continue to gain momentum with new traction from specialist funds aiming to provide investors with focused offerings. This could prove appealing in a market that has undergone substantial consolidation over the last few years leaving fund managers with a limited availability of quality stock and increasing concerns over portfolio compositions that have sacrificed quality in the interest of scale.

Operationally landlords will be forced to engage more actively in property and asset management activities to sweat the most out of their existing portfolios where tenant retention, lease rates on renewals, and operating costs will be under the spot light. In particular the vacancy rates in the office sector will be under increasing pressure considering the overhang of stock in the market, the benign economic outlook and new development space, especially in prime decentralised nodes like Sandton. The rental margin for the best of landlords will be challenged by lower escalations expectations (dropping inflation forecasts) together with high municipal rates and taxes inputs.

Disposal Progress

Sales of the smaller assets in the portfolio (Imbonini 1, Acacia, Driefontein) with a wider buyer audience achieved more interest and sales traction than SAPRO's larger land holdings. Further sales discussions continue. African Renaissance, along with other neighbouring land owners, has just become the subject of a blanket land claim in the area. The merits of the claim are doubtful and regarded by Counsel as unfounded. Once particulars of claim have been provided by the claimants a final risk assessment can be completed.

The Company adopts various sales methods in order to facilitate the orderly sell down of properties at fair market prices including but not limited to; structured and secured payment terms, planning approval conditions, as well as price discounting where appropriate.

Portfolio Valuations

The portfolio was not revalued independently at 31 December 2014, and the values adopted are from the Broll (CBRE) assessments performed as at 30 June 2014. Where applicable values have been adjusted on certain properties to reflect specific sale transactions concluded.

Schedule B: Planning Permission Progress

Brakpan: 

Currently the rezoning to "business 2" for 25,000sqm of commercial rights is in progress. The City Manager is waiting for final comments from Gauteng Provincial Government Department Public Roads, Transport and Works. On receipt of comments the final report will be submitted to the Development Tribunal Committee. Currently there is a 6 to 8 week waiting period for the item to be put on the agenda and then the prescribed 14 day notice period for the hearing. At the hearing a final decision will be provided. If positive the objectors will have the opportunity to appeal the decision and the matter is then referred to the Townships Board where it can take up to 12 months. Once cleared by the Township Boards any further objections/appeals will need to go through the High court which could be up to 3 years. It is anticipated that competitor landlords will object.

Lenasia: 

The City council is currently reviewing all professional reports and recent application submissions and will provide a technical co-ordination report once all internal departments are satisfied. The City Manager is expected to provide approval in principle within 4 months of receipt, around August 2015. The remaining items to achieve the Section 101 certificate (a Section 101 certificate confirms that the applicant has fulfilled all required conditions of establishment and the new township may be registered with the Deeds Office) will take approximately 4 to 5 months, estimated by December 2015.

Clayville: 

Town planning has recently received a copy of the service level agreement to be applied for approval of the three extensions of the Clayville site. This is expected to take until July 2015. Once approved, the Section 125 Amended Scheme (the Section 125 Amended Scheme sets out the approved planning rights (zoning) of the new township into the municipalities overall Town Planning Scheme) will be approved along with the general plan. Section 101 is expected before November 2015.

Driefontein: 

Three approvals are left to complete before a section 101 certificate is achieved, including:

1. Confirmation that the Minister of Minerals and Resources is satisfied to either abandon the surface right permit and or de-registration of any servitudes in their favour.

2. The radon survey and findings to be submitted to GDACE (environmental agency) and

3. The finalisation of the service level agreements.

The section 101 certificate is expected to be finalised by June 2015.

African Renaissance: 

New conditions of establishment are expected by end of April 2015, as the old layout had to be amended. The phasing of the new township will be approved by end of April 2015 and the service level agreements should be finalised before the end of May 2015. General plan will be completed simultaneously along with the Section 125 amendment. Section 101 is anticipated for July 2015.

Sales Summary (July - December 2014)

During the period 1 July 2014 to 31 December 2014 the Company concluded 7 property sales to the value of ZAR47,033,995. The Company has reduced the total number of projects available for sale in its portfolio from 11 to 9.

Table 1.1: Portfolio Sales (July 2014 - December 2014)

*Instalment sale restructured during the period

Sales post reporting date (January 2015 - March 2015)

Since 31 December 2014 the Company has reduced the total number of properties available for sale in its portfolio from 9 to 7. The details of sales concluded are as follows:

Unconditional sales pending

Emberton:

SAPRO concluded a sale of the subsidiary company owning the assets of the Emberton Project. The total sales proceeds of ZAR39million will be received over five (5) payments with the first payment of ZAR9million received on 28 February 2015 and four subsequent tranches ending in August 2016. The purchase price is 2.5% below the carrying value of the property (ZAR40million).

Imbonini 1:

Transfer is pending the registration of a servitude over the property before to be registered with the deeds office (sales receipt of ZAR1.3m).

Acacia Park:

The last sold unit at Acacia Park has been restructured as an instalment sale for ZAR2.9m with the last tranche due by February 2016.

Table 1.2: Portfolio Sales Status (March 2015)

Bridgehead Real Estate Fund (Pty) Ltd

Investment Manager

27 March 2015

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

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 the development and subsequent sale of a portfolio of real estate assets in South Africa.

The Company's property activities were managed by Group Five Property Developments (Pty) Limited ("Group Five"). Bridgehead Real Estate Fund (Pty) Ltd ("Bridgehead") was appointed as the replacement investment manager with effect from 1 July 2014. 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 executive directors.

Financial year end

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

2 Summary of significant accounting policies

2.1 Basis of preparation

Except as described below, the accounting policies applied by the Group in the preparation of these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 30 June 2014.

These interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 30 June 2014 which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

The interim financial statements for the six months ended 31 December 2014 are unaudited. The comparative interim figures for the six months ended 31 December 2013 are also unaudited.

a) New and amended standards adopted by the Group

The Group has adopted 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 2014. This has not had a significant impact on the Group.

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 forecasts that indicate that the Group will be able to meet its financial obligations from existing cash resources 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 valuations performed by Broll (Broll represent CBRE under the terms of a network agreement whereby Broll represent CBRE in those sub-Saharan markets where CBRE do not have a presence of their own. Together with South Africa this includes Nigeria and Ghana) on an annual basis at the end of June each year. The interim valuation is independently assessed by the Investment Manager and any proposed variations are then approved by the SAPRO Board. 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 period there were no impairment charges in relation to inventory (see note 12).

(a) Estimated impairment of goodwill

The Group tests annually for whether goodwill has suffered any impairment, in accordance with its accounting policy. 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 11 for further details.

3 Segment Information

The entity is domiciled in the Isle of Man. All of the reported revenue, £1,339,470 (31 December 2013: £1,470,328), arises in South Africa.

The total of non-current assets other than financial instruments is £785,521 (30 June 2014: £778,822) and all of these are located in South Africa.

For the six months ended 31 December 2014 revenues of £313,451 (ZAR 5,600,000), £662,116 (ZAR 11,829,120) and £238,132 (ZAR 4,254,386) were derived from single external customers attributable to the Imbonini development, Gosforth Park development and the Kindlewood development respectively (31 December 2013: £nil (ZAR nil)).

4 Operating leases

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

5 Cost of sales

6 Investment Manager's fees

Annual fees

Bridgehead was appointed as the replacement investment manager with effect from 1 July 2014 and is entitled to an annual management fee of £175,000 per annum. Management fees for the period ended 31 December 2014 paid to Bridgehead amounted to £98,583.

Group Five was entitled to a management fee of £290,000 per annum payable monthly in arrears. Management fees for the period ended 31 December 2014 paid to Group Five amounted to £24,370 (ZAR 435,381) (31 December 2013: £159,800 (ZAR 2,548,951)). The Group entered into a termination deed on 1 July 2014 with Group Five under which the Group agreed to pay Group Five a termination fee of £78,363 (ZAR 1.4 million) in lieu of notice.

Sales fee

Bridgehead is not entitled to a sales fee under the investment management agreement dated 1 July 2014.

Group Five was 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). This fee was eliminated under the new investment management agreement dated 18 March 2013. These fees were payable on sale and were considered when determining the net realisable value of inventory in prior periods (see note 12). Sales fees payable for the period ended 31 December 2014 payable to Group Five amounted to £14,163 (ZAR 253,035) (31 December 2013: £354,256 (ZAR 5,650,676)).

Performance fees

Bridgehead is entitled to a performance fee of 1.5% of the net proceeds received by the Group following the sale of an asset under the investment management agreement dated 1 July 2014. Performance fees of £35,438 (ZAR 633,119) payable to Bridgehead have been accrued for the period ended 31 December 2014.

The Group accrued a performance fee due to Group Five based upon the market value of the portfolio which only became payable on the eventual sale of these assets so long as the sales values were better than certain agreed benchmarks. Under the new investment management agreement dated 18 March 2013 the performance fee was calculated based on 1.5% on the net proceeds of the sale of each asset.

The Group entered into a termination deed on 1 July 2014 with Group Five under which the Group has agreed to pay Group Five a fee of 0.5% of the net proceeds received by the Group following the sale of an asset until 1 January 2016.

Performance fees of £nil (ZAR nil) payable to Group Five have been accrued for the period ended 31 December 2014 (31 December 2013: reduction of £93,055 (ZAR 1,618,153)).

7 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. During the period of these accounts, the Chairman was entitled to an annual fee of £40,000, Stephen Coe was entitled to an annual fee of £35,000 and David Saville was entitled to an annual fee of £15,000.

Executive Directors' fees

The Executive Directors received annual basic salaries of £40,000. From 1 April 2013 John Chapman reduced his annual basic salary to £30,000. From 1 July 2014 Craig McMurray reduced his annual basic salary to £20,000 per annum. 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. Their service agreements also provide for payments of the same percentages, following termination of their employment, for distributions paid or payable from cash generated during their employment. Total incentive fees for the period ended 31 December 2014 amounted to £62,293 (31 December 2013 £124,586).

All directors' remuneration and fees

Total fees and basic remuneration (including VAT where applicable) paid to the Directors for the period ended 31 December 2014 amounted to £75,766 (31 December 2013: £85,500) and was split as below. Directors' insurance cover amounted to £10,151 (31 December 2013: £15,870).

8 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:

9 Basic and diluted loss per share

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

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

10 Investments in associates

11 Intangible assets

The above goodwill relates entirely to the Group's investment in the shares of Zwartkoppies Property Investment (Pty) Ltd, previously known as 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 recoverable amount has been assessed as £785,521 (ZAR 14,165,068).

12 Inventories

Current assets

During the period, the Group capitalised costs of £12,849 (ZAR 229,547) (30 June 2014: £323,519 (ZAR 5,464,155)) in order to develop these assets for future re-sale, and accordingly they were classified as inventory.

At 31 December 2014 the net realisable values of Brakpan, Driefontein, Emberton, Lenasia, Imbonini and Imbonini phase 2 were lower than cost, therefore their inventory values have been impaired to a value of £11,517,221 (ZAR 207,395,348) (30 June 2014: Brakpan, Driefontein, Emberton, Gosforth Park, Kindlewood, Lenasia, Imbonini and Imbonini phase 2 were lower than cost, therefore their inventory values were impaired to a value of £13,979,393 (ZAR 254,254,412)). Net realisable value has been assessed using valuations determined by Broll as at 30 June 2014 which have been updated by the directors to reflect current levels of interest and any potential offers from third parties less estimated selling expenses.

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 delays due to obtaining permits.

13 Trade and other receivables

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

14 Cash at bank

Included within the bank deposit balances figure is an amount of £48,632 (ZAR 876,974) (30 June 2014: £47,381 (ZAR 861,759)) 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 £48,632 (ZAR 876,974) (30 June 2014: £47,381 (ZAR 861,759)) in connection with senior debt obligations of its associate Imbonini Park (Pty) Ltd.

15 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 (£1,231,414) in dividends declared by Business Venture Investments No 1269 (Pty) Limited. A dividend of ZAR 7,588,039 (£449,268) was declared and paid during the year ended 30 June 2014.

Two distributions were paid during the year ended 30 June 2014, 10 pence per Ordinary Share on 9 August 2013 and 9 pence per Ordinary Share on 23 April 2014 (2013 £nil). One distribution was paid during the period ended 31 December 2014, 5 pence per Ordinary Share on 31 October 2014.

16 Net asset value ("NAV") 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 has retained Broll's Johannesburg office to conduct annual valuations, which are reviewed and adjusted by the directors for the interim accounts. The EPRA numbers incorporate the adjusted Broll valuations and are net of tax.

The below figures also take into consideration any profit share agreements with development partners, fees due on sale of properties (see note 6) and incentive fees due to the Executive Directors (see note 7).

17 Loans from third parties

The loans from third parties are as follows:

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

The above loan is unsecured and carries no fixed terms of repayment.

The fair value of this loan approximates its carrying value.

18 Trade and other payables

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

19 Contingent liabilities and commitments

As at 31 December 2014 the Group has contingent liabilities which have corresponding bank guarantees amounting to £48,632. See note 14 for further details.

20 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 former 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 Group Five are disclosed in note 6 and fees in relation to the Directors are disclosed in note 7.

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 was a loan in respect of the Starleith development which was repaid during the period see note 17.

The replacement investment manager, Bridgehead Real Estate Fund (Pty) Ltd, is a company managed by Craig McMurray, an Executive Director of the Company. Fees in relation to Bridgehead are disclosed in note 6 and fees in relation to the Executive Directors are disclosed in note 7.

Related party transactions with associates are disclosed in note 10.

The principal subsidiary undertakings within the Group as at 31 December 2014 are:-

* this also represents the percentage of ordinary share capital and voting rights held - 2014

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

*** previously known as Living 4 U Developments (Pty) Limited

The following companies were deregistered during the period and therefore no longer form part of the Group:

21 Loss on Disposal of Subsidiary

During the period the Group disposed of its holding in and intercompany loan with Royal Albatross Properties 313 (Pty) Limited for total consideration of ZAR 20,000,000 (£1,119,467). This resulted in a loss on disposal of £605,653 as follows:

22 Post balance sheet events

Subsequent to the period end the Group concluded a sale of Business Venture Investments No 1268 (Pty) Limited owning the assets of the Emberton Project. The total sales proceeds of ZAR 39 million (£2.16 million) will be received over five (5) payments with the first payment of ZAR 9 million (£0.5 million) received on 28 February 2015 and four subsequent tranches ending in August 2016.

Subsequent to the period end, Business Venture Investments No 1180 (Pty) Limited and Madison Park Properties 34 (Pty) Limited were deregistered.