Half Yearly Report

AIM: SPFL

Sofia Property Fund Limited ('the Fund', 'the Company' or 'the Group')

Financial results for the six months ended 30 June 2011

Overview

• Valuation of property portfolio at 30 June 2011 is Euro 19.2million, unchanged from 31 December 2010, as amended for sale of one apartment.

• NAV per share of 24.1 pence (Euro cents 26.6) at 30 June 2011 compared to 23.3 pence (Euro cents 27.2) at 31 December 2010.

• The Company has secured a loan of £500,000 from Pluto Partnership, as announced on 29 June 2011.

• Despite obvious threats from the turmoil in the Eurozone, we believe the investment outlook for Bulgaria is still positive.

• There are clear signs of increased activity in the Bulgarian property market.

• We expect a gradual improvement in property prices over the next three years.

• Our strategy is to position the fund so that shareholders can benefit from this improvement.

Chairman's Report

Valuation of property portfolio at 30 June 2011 is Euro 19.2m, unchanged from 31 December 2010, as amended for sale of one apartment.

NAV per share of 24.1 pence (Euro cents 26.6) at 30 June 2011 compared to 23.3 pence (Euro cents 27.2) at 31 December 2010, reflecting the impact of exchange rate movements.

The Company has secured a loan of £500,000 from Pluto Partnership, as announced on 29 June 2011.

Although there are obvious threats from the turmoil in the Eurozone, we believe the investment outlook for Bulgaria is still positive. There are already clear signs of increased activity in the Bulgarian property market and we expect a gradual improvement in property prices over the next three years.

Our strategy is to position the fund so that shareholders can benefit from this improvement.

Charles Burton

22 September 2011

Investment Managers' Report

BULGARIA

Management Update

As reported at the end of June 2011, The Company secured a £500,000 loan from the Pluto Partnership. The Company welcomes the opportunity afforded by the loan to identify and formalise a long term strategic solution to the benefit of all shareholders.

During the first half of 2011 activity in the Bulgarian property market clearly increased. As reported previously the Managers believe that the residential sector of the property market reached a bottom during the last year. Prices now appear to be stable and some sectors of the residential market are showing early signs of lack of supply. The continued expected improvement in the market makes us more optimistic about prospects for marketing or developing our properties over the coming years.

Bulgarian Economy

(Source Oxford Economics)

Quarterly GDP growth at 0.3% in Q2, was only slightly better than the EU average and weaker than expected. Given the more subdued outlook for the EU, Bulgaria's main export destination, as well as the ongoing sluggishness of consumer spending and the high level of uncertainty facing businesses, GDP growth is now forecast to be around 2.2% this year and 2.6% in 2012. However, as the recovery picks up speed, GDP growth in each of the years 2013, 2014 and 2015 is expected to be sharply higher at between 5% to 6%p.a.

The moderate recovery so far has been jobless, and high inflation at the beginning of the year squeezed household budgets further. But unless the external environment becomes really dismal, employment should rise at the start of next year and inflation should continue to decline gradually. This could lift household spending by over 3% in 2012 after an expected rise of just 1.5% this year.

The investment outlook is still positive and should receive a boost in 2012 from public infrastructure spending.

Bulgaria is now even more committed to its tight fiscal stance by putting it into law. The new deficit and debt limits, at 2% and 40% of GDP respectively, are more restrictive than the ones implemented under the EU Stability and Growth Pact.

Bulgarian Property Market Report

Residential (Source: Colliers)

The supply in the mid-plus to high end of the market is now low and is estimated to be 3-4,000 units in the greater Sofia area according to Colliers. No new large-scale projects were launched in 2010. Given that a medium-size residential project takes approx 3 years from initiation to completion, supply in this segment of the market is fast drying up with prices expected to increase accordingly.

Demand is growing for mid-plus and high-end properties. Expectations and requirements are high pushing buyers towards new projects offering high standards of living. The typical profile of a buyer in this segment of the market is a person in a key professional position, often self employed and less dependent on the availability of mortgages. The majority of buyers are Bulgarian.

The price rage according to Colliers, is wide at Euros 1,000 to 1,900 per square metre depending on location and quality.

In the Manager's opinion the market in Sofia may become undersupplied over the next 18 months.

Investment Managers' Report (continued)

During the Managers' recent visits to Bulgaria we noted that there has been a marked improvement in the road infrastructure not just in and around Sofia but across the country as a whole. This suggests that inward EU investment is finally being deployed on the ground. We also noticed that conditions in the ski areas, particularly Bansko have improved; specifically improvements in water supply. There are many fewer uncompleted projects and roads around have been paved. Anecdotal evidence suggests that rental properties in the resort have been fully booked for the last two seasons and that property prices have now bottomed. We therefore expect a gradual improvement in property prices over the next three years.

On the commercial side 2010 saw 4 new shopping centres, bringing the total stock in Bulgaria to 560,000 square metres according to Colliers. Two large projects for Sofia are expected to open their doors in 2011. The first IKEA in Bulgaria located opposite the Sofia Business Park opened recently.

Shopping malls generally have low levels of vacancy - however secondary cities are experiencing some difficulties. Various incentives have been put in place to help retailers through the downturn. On the High Street, vacancy levels in Sofia are around 10%.

Discount retailers continue to be most active. Lidl opened 14 new stores in 2010. The 24 Bulgarian Plus stores acquired by Lidl in 2010 will be rebranded under the Lidl name. Billa opened 15 stores in 2010, Penny Market opened 17 and Kaufland 5.

Despite two difficult years, retailers are optimistic for 2011 with consumption expected to grow at 1.3%. Large international players are sticking to their expansion plans for 2011/2012.

PROPERTY PORTFOLIO

BuySell

As highlighted in our previous report released at the end of June 2011, The Company is still in talks with various parties, including BuySell with a view to resolving its outstanding claims. Although progress has been slow because of the complexities of some of the issues, The Company continues to believe that there is a realistic possibility that the talks will be concluded successfully and hopes to be able to make an announcement detailing progress later in 2011. This would clearly be a positive development for the Company and its shareholders. However at this stage the Group still values the BuySell inventory as nil.

The Company rescinded six contracts with BuySell, a Bulgarian property development company, on 17 April 2009 due to BuySell's non performance of their contractual duty to deliver completed properties in Sofia to the Company by the due date. As a result of BuySell's non-performance the Company is entitled to claim the repayment of its €9.5 million deposit plus penalties of an additional €9.5 million.

Investment Managers' Report (continued)

Westhill

One of the Company's Bulgarian subsidiaries is in dispute with Westhill BG 8 AD, a Bulgarian property development company. The latter submitted an insolvency claim against the Company's subsidiary which, in the Company's opinion, is groundless. The case is expected to come to Court in the fourth quarter of 2011. The Company is confident that this matter will eventually be concluded successfully. Further announcements will be made as appropriate.

Land

Build

Cost €

Valuation €

Area M2

Area M2

30/06/2011

30/06/2011

(Note 1)

1

Goverdartsi (Crystal Vale/ Crystal Glade)

36,562

41,332

5,820,084

4,820,000

2

Beli Iskar (Crystal Heights)

19,432

22,464

1,322,309

1,000,000

3

Razlog/Bansko

18,353

24,301

9,209,372

5,350,000

4

Dolna Banya

48,548

48,713

1,661,695

1,240,000

5

Plovdiv

12,141

12,712

3,890,195

2,450,000

6

Banya

117,774

141,329

3,608,063

3,950,000

7

Sofia Project 55

1,298

567

786,201

368,313

Sub Total

254,108

291,418

26,297,919

19,178,313

8

Buy Sell Rescinded Contracts (Note 2)

48,218

89,967

9,529,477

-

Total

302,326

381,385

35,827,396

19,178,313

Note 1: Some build areas are estimated subject to planning approval.

Note 2: The Group has terminated these contracts with BuySell and accordingly they have been valued at Nil on the balance sheet.

GROUP PROPERTIES

1.GOVERDARCI

CRYSTAL VALE

Crystal Vale has full residential planning approval and is situated inside the Super Borovets project boundary. Super Borovets is a joint venture between the Omani State General Reserve Fund, Equest and the Municipality of Samokov for the development of an enhanced ski resort in the area surrounding Borovets; the project plans call for the investment of up to €500 million in the construction of new hotels, apartments, ski lifts and supporting infrastructure. The Crystal Vale site has a footprint of 16,776 sq m and a build area of 17,589 sq m.

The project has been designed as an exclusive retreat destination and is aimed at the international and domestic leisure market. The 'Clubhouse' building, which will contain 22 apartments and all central facilities for the project (including swimming pool, spa and restaurant), has been partly completed - to the extent that the roof is in place. Construction was halted in September 2009 awaiting a recovery in market conditions

CRYSTAL GLADE

The Crystal Glade project is located approximately one kilometre away from Crystal Vale and has a site footprint and build area of 19,786 sq m. The site has residential planning permission and is intended to be a complementary leisure development to Crystal Vale. It will remain in the land bank until Crystal Vale has been substantially completed.

Investment Managers' Report (continued)

GROUP PROPERTIES (continued)

2. BELI ISKAR

CRYSTAL HEIGHTS

The Fund has purchased 19,432 sq m, currently designated as agricultural land, inside the Super Borovets project area beside the village of Beli Iskar. Residential planning permission for the land will be sought in due course.

3. RAZLOG / BANSKO

PANORAMA VILLAS

This project is located close to the ski resort of Bansko and Phase 1 has reached the stage of rough construction; further work has been suspended pending improved market conditions. Until Phase 1 has been completed the remaining 3 phases will remain in the land bank.

NIRVANA

This undeveloped plot close to the centre of Bansko has residential planning permission and will remain in the land bank.

4. DOLNA BANYA

The Fund owns four plots in and around the town of Dolna Banya; the plots have a total surface area of 48,548 sqm and a build area of 57,621 sq m. One of the plots has a construction permit for residential buildings and a restaurant, while the other three are zoned for residential development. Dolna Banya is famed for its geothermal hot springs and is 16 km from the Boroverts ski resort. The four plots will continue to be held in the land bank.

5. PLOVDIV

The Fund owns 12,151 sq m of land in Plovdiv, split between two separate locations. Both projects have residential planning permission. The first plot ('Plovdiv Reach') is situated two kilometres from the city centre, beside the national rowing centre. The second site ('Roman View') is a disused tobacco factory located in the heart of the city centre. Both plots will be held in the land bank until economic recovery warrants their development or sale.

6. BANYA

The Fund owns 117,774 sq m of land close to the village of Banya which is five kilometres from Bulgaria's main ski resort (Bansko). The site was bought from numerous landowners as agricultural and has since been consolidated into three plots of similar size. Change of use from agricultural to residential has already been obtained on one of the plots whilst the other two have been removed from agricultural. The site will remain in the land bank while neighbouring leisure developments, not owned by the Fund, are completed. The reason this is important is that as neighbouring developments reach completion their ultimate sale of apartments will crystallise value for our plots whilst the importation of utilities close to the site will also improve its attractiveness to potential purchasers.

INVESTING POLICY

• The Fund is restricted to investments in Bulgaria and these investments must be largely (but not exclusively) residential in nature.

• The Fund may invest in early stage residential developments mainly, but not exclusively, in and around Sofia and its adjacent ski resorts.

• The Fund may buy land and seek to develop its land through partnerships with Developers.

• It is the intention of the board subject to shareholder approval to extend the life of the Fund beyond the 27 September 2012.

• The Fund may borrow in order to develop its assets.

• The Fund does not intend to pay a dividend (although the Fund is not restricted from doing so).

Mark Anderson and Loraine Pinel

Investment Managers

September 2011

Unaudited condensed consolidated statement of comprehensive income

for the 6 month period ended 30 June 2011

1 Jan 2010 to 30 Jun 2010

Notes

Revenue

Capital

Total

Total

€

€

€

€

Revenue

Property sales

45,829

-

45,829

-

Cost of sales

(56,687)

-

(56,687)

-

Other income

-

-

-

28,731

Gross (loss) / Profit

(10,858)

-

(10,858)

28,731

Expenses

Administration fees

63,296

-

63,296

71,340

Directors' fees and expenses

15,114

-

15,114

31,497

Salaries and other disbursements

91,658

-

91,658

171,188

Foreign exchange gain

(4,707)

-

(4,707)

(15,396)

Loss on disposal of subsidiaries

-

-

-

116,860

Net change in (gain)/loss on revaluation

of investment properties

-

-

-

(49,848)

Impairment of inventory

4

-

-

-

807,268

Legal and professional expenses

145,012

-

145,012

311,525

Other expenses

76,730

-

76,730

152,910

387,103

-

387,103

1,597,344

Operating loss

(397,961)

-

(397,961)

(1,568,613)

Finance income

80

-

80

530

Finance cost

-

-

(636,313)

Loss before taxation

(397,881)

-

(397,881)

(2,204,396)

Taxation

-

-

-

-

Loss for the period

(397,881)

-

(397,881)

(2,204,396)

Other comprehensive income

Exchange differences arising on

translation of foreign operations

-

-

-

-

Total comprehensive loss

for the period

(397,881)

-

(397,881)

(2,204,396)

Loss per share - basic and

diluted (cents per share)

2

(0.59)

(3.29)

Unaudited condensed consolidated statement of financial position

as at 30 June 2011

Notes

30 June 2011

31 December 2010

€

€

€

€

Non-current assets

Investment properties

3

13,640,000

13,640,000

Current assets

Inventory

4

5,538,313

5,595,000

Trade and other receivables

59,471

52,757

Cash and cash equivalents

102,307

244,838