27th Mar 2008 07:01
South African Property Opps PLC27 March 2008 SOUTH AFRICAN PROPERTY OPPORTUNITIES PLC ('SAPRO' or the 'Company') Interim results for 6 months ended 31 December 2007 South African Property Opportunities plc (AIM: SAPO), an investment company established to invest in real estate opportunities in South Africa, announces its interim results for the six month period ended 31 December 2007. Financial highlights (as at 31 December 2007): - IFRS Net Asset Value of £64.5 million (103.6p per ordinary share), up 3.0% since 30 June 2007 (£62.6 million (100.6p))1 - Adjusted Net Asset Value of £74.3 million (119.2p per ordinary share)2 Operational highlights: - £34.2 million raised in May 2007, bringing total funds raised to £62.6 million (net of placing expenses) - £45.1 million of investment commitments in 13 projects (72% of the Company's net issue proceeds) - Significant transaction under negotiation, which, if completed, would result in the fund being substantially fully invested, failing which expect to be fullyinvested by 30 June 2008 - Investment portfolio spread across mixed use (52%), industrial (32%) and residential (16%) sectors of the market - Increase in staffing at the management level as Company begins post-planning development phase on a number of projects Valuations update - Independent valuers, CB Richard Ellis, valued eight projects as at 31 December 2007 - CB Richard Ellis valuation attributes a £9.7 million uplift (46%) from the cost (£20.9 million) of these eight projects o representing, on a cost basis, less than half of the investments made to date o the first of these projects was only twelve months old Outlook - Long term economic outlook remains favourable given strength of resource sector and investor interest in Africa. The banking sector in South Africa remains buoyant and 'fully open for business'. Commenting on the results, Quentin Spicer, Chairman stated: 'I am pleased to report strong growth in the value of the initial projects in the property portfolio over a very short period of time. This is extremely encouraging for the rest of the investments made to date. This growth far outstrips general returns in the local and global property sectors and in inflation rates. It highlights the quality of the site selection and the impact that achieving planning permissions has in the Company's development strategy. Whilst South Africa is not immune to the issues affecting the global economy, inparticular the impact of the high oil price, given the strength of its natural resources and continued availability of capital from the local banking system, the economy continues to grow. The shortage of real estate development during the Apartheid years has created significant opportunities for the Company and welook forward to further progress this year, particularly as the Company moves into the development phase on a number of its projects.' Principle Capital on behalf of SAPRO Anne Dalen +44 20 7240 3222 Landsbanki Securities Paul Fincham +44 20 7426 9000 Bell Pottinger Dan de Belder +44 20 7861 3232 Notes: 1 Excludes the open market CB Richard Ellis revaluations 2 IFRS Net Asset Value adjusted for the increases in valuation attributed by CBRichard Ellis, in accordance with guidelines produced by the European PublicReal Estate Association (EPRA) Note to Editors: - South African Property Opportunities plc (SAPRO) is acompany investing in the South African property market. Its shares wereadmitted to AIM in October 2006 raising an initial £30 million (before placingexpenses). In May 2007 a further £34.2 million (before placing expenses) wasraised from new and existing investors. - SAPRO was established to invest in the South Africanproperty market with a view to generating attractive returns, principallythrough capital growth. It is targeting opportunities arising from theincreasing wealth that has been generated from greater urbanisation and economicgrowth in South Africa coupled with the rapid emergence of a cross culturalmiddle class. SAPRO is currently focused on investments in brownfield andgreenfield development opportunities. - The Investment Manager is Proteus Property PartnersLimited and the Investment Adviser is Proteus Property Advisors (Pty) Limited.The Investment Manager and Investment Adviser are responsible for identifyingnew investment opportunities. - The Investment Manager and Investment Adviser are 60%owned subsidiaries of Principle Capital Holdings S.A. (AIM: PCX.L). Chairman's Statement Introduction I am very pleased to report the Company's interim results for the six monthperiod ended 31 December 2007. SAPRO has raised funds of £62.6 million (net of placing expenses) in twotranches, one in October 2006 and the second in May 2007. The focus of theCompany has been in committing these funds to a broad range of projects as wellas advancing the earlier projects. The key highlight in this period has been thevery significant uplift in value of SAPRO's first eight projects. In addition,the Company looks set to beat the 18 month target for investing the proceeds ofthe second tranche of the funds raised, as set out in the May 2007 placingdocument. Investments and Valuations The total portfolio investment currently consists of 13 developments split as tomixed use (52%), industrial (32%) and residential (16%). At 31 December 2007,total commitments stood at £45.1 million, which represents 72% of the Company'snet issue proceeds. Of these 13 projects, the Company had taken transfer oftitle on seven at the period end and thereafter secured transfer of one more.The Investment Manager expects title to have been taken on at least 12 of the 13projects by the Company's financial year end (30 June 2008) and that title onthe other project will follow shortly thereafter. The net asset value of the Company calculated in accordance with IFRS stood at£64.5 million at the period end (up from £62.6 million at 30 June 2007).International Accounting Standards do not permit the recognition of increases inland values of certain types of property that are held for development andaccordingly the seven projects on which title transfer had been taken at theperiod end are only valued on a cost basis in that net asset value calculation. However, independent valuers CB Richard Ellis conducted a land valuation ofthese seven projects and a further project (Waltloo Industrial Park on whichtitle transfer is expected to be taken in April 2008), for which the Company'sshare of the projects equated to £30.6 million, a £9.7 million (46%) uplift invalue over their £20.9 million base cost. The most significant revaluations werethe Industrial Park developments at Imbonini (Phase 1) and Clayville whichshowed 93% and 180% uplifts in value respectively and African Renaissance, theresidential development East of Pretoria which showed a 129% uplift. It is also particularly gratifying that these significant uplifts have beenachieved on projects with a cost base of £20.9 million, representing less thanhalf of the commitments made by the Company on projects to date and one third ofthe net issue proceeds from the Company's fund raisings in October 2006 and May2007. In order to demonstrate the potential uplift to shareholders in the net assetvalue arising from these revaluations, the Board has decided to publish anadjusted net asset value in accordance with guidelines produced by the EuropeanPublic Real Estate Association (EPRA). The EPRA net asset value at the periodend was £74.2 million (119.2 pence per ordinary share) and the EPRA triple netnet asset value (which includes a simple assumption on tax rate) was £71.5million (114.8 pence per ordinary share). These valuations are clearly encouraging for the remainder of the investments inthe portfolio and highlight the value created by good site selection and, inparticular, the obtaining of planning permissions, and in the installation ofservices at certain projects. Since the Company expects title to have beentransferred on at least 12 of the 13 projects in the portfolio by the Company'sfinancial year end (30 June 2008) and that title on the other project willfollow shortly thereafter, the Company intends that the whole of the currentportfolio will be revalued by the independent valuers as at that date. Financial Results At the end of the period under review, the Company's net asset value inaccordance with IFRS was £64.5 million which equates to 103.6 pence per ordinaryshare, the EPRA net asset value was £74.2 million (119.2 pence per ordinaryshare) and the EPRA triple net net asset value was £71.5 million (114.8 penceper ordinary share). At the period end, the Company held £38.7 million in cashand cash equivalents, split approximately evenly between Rands and Sterling. Tofinance the investment portfolio, a total of R685 million has been purchased atan average Rand/£ exchange rate of 14.2347, equating to £48.4 million. At theperiod end the exchange rate was 13.6909 or 3.6% stronger than at 30 June 2007(14.1798). Deposit interest earned averaged approximately 5.6 per cent per annumon Sterling balances and 9.8 per cent per annum on Rand balances, generating£1.36 million of finance income. After management, administration fees, otherexpenses and revaluing the Rand from the year end rate, the net profit for theperiod was £1,863,000. At the period end the Imbonini Services Park (Phase 1) project had borrowings of£1.3 million and since the year end the Gosforth Business Estate project hadtaken out a facility of £4.6 million, in both cases to finance the commencementof building works. The Company will be gearing up its investments as requiredpermissions on various other developments come through to facilitate the Companycommencing building work. In line with the Company's focus on achieving capitalreturns and in line with its dividend policy, the Board is not proposing aninterim dividend. Outlook The report of the Investment Manager goes into greater detail on the macroeconomic picture in South Africa. However, given the crises affecting the globaleconomy, it is appropriate for me also to comment. South Africa as a country isa major success story, particularly in light of the severe difficulties thatmore mature and sophisticated economies are experiencing. It is the economic hubof sub-Saharan Africa, a region that is predicted to grow, according to theInternational Monetary Fund, at 8.2% in 2008 (excluding South Africa andNigeria, its two most developed economies). It is home to the only major stockexchange in Africa and has a first world banking system servicing the regionthat has been almost unaffected by the issues facing the developed world. SouthAfrica is an emerging market and suffers from volatility in its currency as wellas experiencing the pains of growth, such as the power shortages thatshareholders will be aware of. But that reflects the exciting environment fromwhich I expect the Company and its management team to benefit in the comingyears. South Africa has had massive underinvestment in its infrastructure in the pastand, on the back of the strong growth in its own economy over the last fiveyears in particular, has created a significant requirement for new property. TheCompany is seeking to take advantage of these conditions and has succeeded todate in doing so. Quentin Spicer Chairman 27 March 2008 Report of the Investment Manager SAPRO is, in our opinion, the first listed overseas property company focusingsolely on opportunities in the South African real estate market. The Company'sinvestment policy is to achieve primarily capital growth from an opportunisticportfolio of real estate assets across the commercial, industrial andresidential sectors in South Africa. The Company's strategy is to target opportunities that will benefit from activemanagement and from the drivers behind South Africa's strong economic growth,particularly meeting the demands of increased urbanisation and associatedinfrastructure requirement as well as the spending power of the country'srapidly emerging cross cultural middle class. Portfolio overview At 31 December 2007, the Company had committed £45.1 million to 13 projects,which have in aggregate an expected development cost of £514.7 million. Thecurrent portfolio is spread across mixed use (52%), industrial (32%) andresidential (16%) developments. We believe that this provides the Company withdiversification benefits across the various real estate asset classes, and wehave focused the investments on the areas of the market where we see appropriatelevels of demand arising in line with the development timetable. However, weshall also consider making shorter-term profits by selling off opportunitieswhere they have exceeded expectations and appropriate opportunities presentthemselves. The bulk of the investments have been made in Gauteng, South Africa's maineconomic and political centre, with four developments in KwaZulu Natal whichcontinues to experience strong growth and where attractive developmentopportunities lie. The following table sets out the constituents of the currentportfolio: Project Name and Sector Sector Interest SAPRO Total Project Projected Exit Investment Expected Year Commitment Development Cost (£ million) (£ million) Imbonini Services Park (Phase 1) Industrial 50% 1.5 4.3 2008Clayville Industrial Park Industrial 100% 1.1 5.0 2012Gosforth Business Estate Industrial 75% 6.1 43.7 2014Hughes Industrial Park Industrial 30% 0.4 4.9 2009Waltloo Industrial Park Industrial 50% 0.6 5.6 2009Longmeadow Mixed Use 49% 6.0 148.6 2016Driefontein Residential Residential 85% 2.8 17.6 2013Lenasia Mixed Use 100% 7.3 40.5 2016Announced as at 30th June 2007 25.8 270.1Imbonini Services Park (Phase 2) Industrial 50% 4.9 11.0 2011African Renaissance Residential 65% 6.1 187.7 2016Kindlewood Nature Estate Residential 65% 2.4 14.1 2011Kyalami Residential Estate Residential 75% 2.0 18.4 2012Emberton Residential 70% 3.9 13.5 2012Announced since 30th June 2007 19.3 244.6 Total 45.1 514.7 £1 = R13.6909 (31st December 2007 rate) Of these 13 transactions, at the period end actual title had only transferred inseven, Imbonini Services Park (Phase 1), Gosforth Business Estate, Longmeadow,Clayville Industrial Park, Driefontein Residential, African Renaissance andLenasia. It is only these seven which are reflected in the Company's balancesheet but they are carried at cost in accordance with International AccountingStandards. However, we are pleased to report the results of an encouraging land valuationby independent valuers, CB Richard Ellis, of those seven projects as at 31December 2007, as well as a valuation of Waltloo Industrial Park (where transferof title is expected to occur by April 2008), as follows: Project Name SAPRO Title SAPRO Share of SAPRO Share of SAPRO SAPRO Interest Transfer Date Land Cost 31.12.07 Land Share of Share of (£ million) Value Uplift Uplift over (£ million) (£ million) Cost Gosforth Business Estate 75% Mar 07 6.0 8.2 2.2 37%Imbonini Services Park (Phase 1) * 50% Apr 07 1.4 2.7 1.3 93%Longmeadow* 49% Jun 07 4.9 6.5 1.5 31%Clayville Industrial Park 100% Jul 07 0.5 1.4 0.9 180%Waltloo Industrial Park 50% Expected 0.5 0.8 0.2 40% Apr 08 Driefontein Residential 85% Jul 07 1.2 1.6 0.5 42%African Renaissance 65% Aug 07 2.1 4.7 2.7 129%Lenasia 100% Aug 07 4.4 4.7 0.4 9%Total 20.9 30.6 9.7 46% £1 = R13.6909 (31st December 2007 rate) * Valuations assume townships will beproclaimed in line with the InvestmentManager's expectations It is important to note that International Financial Reporting Standards do notpermit the recognition of increases in land values on property that is held fordevelopment and sale and accordingly these increases in value are not reflectedin the Company's balance sheet or income statement. However, we set out belowadjusted net asset values of the Company in accordance with the Best PracticePolicy Recommendations of the European Public Real Estate Association (EPRA). Wealso include a comparison with the status at 30 June 2007. This valuation is notintended to replace the net asset value stated in the Company's balance sheet,but instead to provide complementary information to assist shareholders inbetter understanding the Company's performance. Net Asset Value (NAV) Summary 2007 Year End 2008 Interim 30.06.07 31.12.07 IFRS NAV (£ million) 62.6 64.5IFRS NAV (pence per share) 100.6 103.6 Fair value adjustment (£ million) 5.1 9.7EPRA NAV (£ million) 67.7 74.2EPRA NAV (pence per share) 108.7 119.2 Deferred tax adjustment (£ million)* 1.4 2.7 EPRA Triple Net NAV (£ million) 66.3 71.5Triple Net NAV (pence per share) 106.5 114.8 Shares in issue: 62,292,810 * Assumed corporation tax rate of 28% The uplift in values set out above has only been generated on less than one halfof the investment commitments made to date and one third of the net issueproceeds from the Company's fund raisings in October 2006 and May 2007. Further information on all 13 projects in the portfolio is set out below. Residential a) Driefontein Residential Development. This development comprises a 13.2hectare site, 4 miles south of Johannesburg's main international airport. It iscurrently undeveloped but should deliver an estimated 35,000 sqm of grossdevelopable area (GDA) after rights have been granted. SAPRO intends to developa high density residential estate of approximately 500 units targeting theregion's fast growing middle income market. The project is a joint venture inwhich the Company will hold an 85% stake and a local property developer willhold the remaining 15%. Draft Conditions of Establishment have already beenreceived from the local authorities, and it is expected that the township willbe proclaimed in 2008. b) African Renaissance Development. This development comprises a 146.6hectare residential development, with a retail component, in a rapidly growingarea east of Pretoria. Upon completion, the site, of which the majority isundeveloped vacant land, is expected to yield an estimated 252,920 sqm of GDAafter planning has been obtained. The development is a joint venture with threeindividuals, one of whom is a local real estate project manager, one a buildingcontractor and the other a quantity surveyor, who secured the opportunity andconceptualised the development plan over the last two years. SAPRO has a 65%interest in the development vehicle. The joint venture partners have applied forplanning to build approximately 3,200 residential units (apartments and freeholdstands) with a retail and commercial centre on the site. The planningapplication process is on track, with retail and commercial planning granted inthe first quarter of 2008. SAPRO expects full planning to be granted in thesecond quarter of 2008. The east of Pretoria has recently enjoyed significantgrowth, and this is evident in the 129% uplift in the land value postacquisition. It is expected that building will commence in 2009 and that thetotal length of the build-out will be 7 years. c) Kindlewood Nature Estate. This development comprises two adjoiningpieces of land with a combined area of 5.3 hectares in the Kindlewood Estate,Umhlanga, north of Durban, KwaZulu Natal. The site, which is currentlyundeveloped land, is situated adjacent to the prestigious Mount Edgecombe GolfEstate and will be developed into a residential conservation estate featuringnatural wetlands aimed at the upper end of the market. The development is ajoint venture with an experienced local residential developer with SAPRO holdinga 65% stake. The land already has medium density residential zoning rights inplace, and the Company expects to take transfer of the site in the secondquarter of 2008 (the seller has experienced delays in servicing the township dueto excessive rain in KwaZulu Natal). Building will commence shortly after titleto the land is taken, with completion expected within two years. Marketing ofthe first phase of the development was successfully launched in Durban inNovember 2007 and the pre-sales threshold of the lending bank to the project wasreached in March 2008, paving the way for the provision of senior debt. Launchof the second phase is scheduled for the second half of 2008. d) Kyalami Residential Estate. This development comprises an 8.9 hectaresite in Kyalami, north of Johannesburg, Gauteng. The site, which is currentlyundeveloped land, is located within a growing node close to the well knownKyalami Racetrack, and it is intended that it will be developed into aresidential complex aimed at middle market buyers. The development is a jointventure that includes an experienced local residential property developer. SAPROwill hold up to 75% of the equity pending the results of the planningapplication which will determine the maximum density that can be achieved on thesite. The site, title on which was taken in March 2008, is currently zoned as anagricultural holding, but our planning application has already been submittedand we expect that it will receive approval by the third quarter of 2008. TheCompany anticipates being on site in the first quarter of 2009 and completingthe project within two years. Mixed Use a) Longmeadow Development. This development is a significant strategicinvestment which comprises a 15.6 hectare, highly prominent, mixed use site(commercial, residential and retail) in Fourways, Johannesburg. The site, themajority of which is undeveloped vacant land, together with a number of smallcommercial structures, should yield an estimated 132,000m(2) of net lettablearea (NLA) after rights have been granted. It is situated approximately 5 milesto the north of Johannesburg's Sandton Central Business District in the Fourwaysnode. The development is a joint venture with three partners comprising aJohannesburg listed property company and a local contractor (both of whom SAPROhas joint ventured with in previous transactions) and a trust representing thevendor of the land (which will remain as a 27.5% shareholder in the jointventure). SAPRO has a 49.2% interest in the development vehicle. The jointventure partners plan to apply for rights to build high density residentialapartments, commercial office space, hotels, and a niche retail component on thesite. Major hotel operators are currently being approached with a view tobuilding a hotel and commercial component in the first phase of the projectwhere planning rights are expected by the third quarter of 2008. Vacant land inthe Fourways node is scarce which has contributed to the uplift in value (31%)that SAPRO has enjoyed since entering this joint venture. It is expected thatbuilding will commence on the first phase by the third quarter of 2008 and thatthe build-out period for the entire development will be five years. b) Lenasia Development. This development comprises a 12.95 hectareprominent mixed use site (commercial and retail) in Lenasia, Johannesburg. Thesite, the majority of which is undeveloped vacant land, together with acommercial structure on part of the site, should yield an estimated 51,600m(2)of NLA after rights have been granted. It is situated immediately south ofSoweto (which is south west of Johannesburg). The site is opposite a newlydeveloped regional shopping mall, and is directly alongside a major commutingroute into Johannesburg from Lenasia, providing excellent visibility. SAPROplans to apply for rights to build a mixed use retail and commercialdevelopment. Conceptual architects have been retained as a first step inplanning the development, and agreement has been reached with two strategicpartners to joint venture on the development. It is expected that building willcommence in early 2009 and that the build-out period will be three years. c) Emberton Development. This development comprises a 16.5 hectareprominent mixed use site in Hillcrest, approximately 15 km west of Durban. Thesite, an existing golf driving range, is currently zoned for agricultural use.It is situated directly adjacent to the main M13 highway and commuter route intoDurban from the west, providing excellent visibility and exposure. SAPRO is innegotiations with an experienced local contractor who it is proposed wouldacquire a minority stake in the development. The development will comprise anupmarket mixed-use secure estate, with commercial and retail components. It isestimated the project will require a two year township application process toallow SAPRO to commence construction in early 2010. Industrial a) Imbonini Services Park Phase I. This development is a joint venture withlocal developers in which SAPRO has a 50% interest. The joint venture vehiclehas acquired a 36 hectare site located close to the fast growing residential andleisure node of Ballito, just north of Durban, which is being developed forlight industrial use. The site has been platformed and internal services arecurrently being installed. This process should be complete by the first quarterof 2008, after which buyers will be able to take transfer of their stands. Saleshave been very strong and the park is currently substantially sold out. The lackof serviced industrial land in Durban and the proposed relocation of the Durbaninternational airport to a site south of Imbonini have resulted in the verysignificant uplift (93%) in the Imbonini investment's value since the investmentwas made. b) Clayville Industrial Park. This development comprises a 49 hectare sitelocated north west of the Johannesburg international airport. It is intended toservice the site for industrial use and sell stands to owner occupiers. A finalsite layout has been submitted to the local authority as part of the townshipproclamation process. Service installation is expected to commence in the firstquarter of 2009. Whilst a small investment, the CB Richard Ellis revaluationattributed an increase in value of 180% over the cost of this investment. c) Gosforth Business Estate. This is an important strategic propertyinvestment for the Company comprising a 42 hectare prominent industrial sitewith an estimated 150,000 m2 of NLA. It is situated to the south east ofJohannesburg's Central Business District adjacent to the main N3 highway runningbetween Johannesburg and the port at Durban. The development is a joint venturewith two partners, one a local contractor and the other a South African listedproperty fund. SAPRO has a 75% interest in the development vehicle. The Companyintends to service the site and build warehouses and distribution facilities forindustrial users. The installation of bulk services to the site has commenced,and it is expected that the township should be proclaimed by the second quarterof 2008. d) Hughes Industrial Park. This development is an existing project in whichRichard Currie and Ed Raubenheimer (directors of Proteus Property Advisors (Pty)Limited, the South African investment adviser to SAPRO's investment manager)have an interest alongside a local contractor and a South African listedproperty fund. SAPRO is subscribing for a 30% interest in the developmentvehicle. The development comprises a sectional title mini unit developmenttotalling 18,500 m2. e) Waltloo Industrial Park. This development comprises a 4.4 hectare sitelocated east of the Pretoria CBD, and is a 50% joint venture with a localcontractor. It is envisaged that sectional title industrial premises catering tosmall businesses and freehold warehouse premises will be developed on the site,which comprises 21,948 m2 of GDA. The joint venture is expected to take transferof the site by the second quarter of 2008. Bulk services have been installed andthe township is expected to be proclaimed by the first quarter of 2008. f) Imbonini Services Park Phase II. This is the second phase of theImbonini development and will comprise a 77.5 hectare industrial park directlynorth east of and adjoining the Company's current Imbonini Phase I development.The development is a joint venture with the same two partners who invested inPhase I. SAPRO will have a 50% interest in the development vehicle. The jointventure partners are currently applying for planning rights for approximately430,589 sqm of GDA in order to develop an industrial park on the site. It isexpected that servicing of the site will commence in 2009 and that the totallength of the project will be four years. Pipeline At the period end, the Company had committed a total of £45.1 million,representing 72%. of the £62.6 million net issue proceeds raised by the Companyto date. The Company has agreed the terms of a large specific transaction thatwould, if completed, commit remaining proceeds of the funds raised forinvestment by the Company. This remains subject to a number of conditions beingsatisfied, and we should know whether the transaction will proceed by the end ofApril 2008, failing which we remain constantly in the market for interestingtransactions and expect the Company to be fully invested by the end of thesecond quarter of 2008. We are also investigating a further pipeline currentlywith an investment cost of approximately £75 million and in particular we arelooking at some exciting transactions in the Cape region where we currently haveno investments. However, in the event that the Company is fully invested(allowing for potential or expected realizations within the portfolio), we willneed to review with the Company how it might fund further transactions. Economic Outlook(1) The South African economy is expected to undergo a deceleration in 2008 from itsfast pace of growth over the last four years when it averaged 5.1%, inparticular given the conundrum that many world economies are experiencing withhigh commodity and energy costs feeding inflation and keeping interest rateshigh. GDP growth is expected to slow to between 3.5% and 4.5%. South Africa isalso currently experiencing electricity shortages, as current demand exceeds thenational power utility's (Eskom) available reserve capacity. This could serve asa further dampener on expected GDP growth. Inflation is expected to peak at 8.8%in February 2008, however given high interest rates, it is expected to fallbelow its target ceiling (6%) by the middle of 2009. Interest rates are expectedto fall by up to 200 basis points by mid-2009, as South Africa moves past theexpected peak of its interest rate cycle. Currency At the time of writing this report, the Rand has weakened significantly,seemingly on the back of a 'flight to safety' in the global economy. It has alsobeen impacted by the electricity shortages mentioned below, with a result thatforeign investors switched out of South African mining stocks. However, Eskomhas recently agreed more favourable electricity sharing arrangements with themining companies and indeed those companies and the South African economy standto benefit from the strength of commodities prices, gold and platinum inparticular. In addition, while the world is going through an unprecedentedcrisis, South Africa seems well insulated from the problems, in particular giventhe fact that the banking sector is not reliant on the global banking markets. The Rand ought also to benefit from attractive domestic yields as well as thestrength in its resource sectors, gold in particular and currently appearssignificantly undervalued against the US dollar on a purchasing power basis.Notwithstanding the weakness in the Rand, the current portfolio of investmentshas a total development cost (over time) of £518 million, of which £473 millionwill be funded by way of borrowings denominated in Rand and only £45 million byway of equity. This has the effect of limiting the Company's overall currencyrisk. In addition, any cash held in Rand deposits earns interest at currentlysignificantly higher rates than Sterling deposits. Residential Market(2) House price growth rate has slowed to 4.4% (based on a five month movingaverage), the lowest it has been since November 2000; however this is on theback of the surge in house prices since 2000, where house prices have risen onaverage by 16.6% per annum. The high interest rate environment has impactedhouse price affordability. However, the expectation of still solid economicgrowth, in particular as a result of significant increased public sector fixedinvestment, reiterated in the 2008 budget, should provide a positive outlook forresidential property prices over the medium term, which matches the time linesfor the availability of many of our residential projects. We also continue toexpect good demand for our developments given the lack of quality new housingavailable on the market at the price points and in the locations we haveidentified. Industrial Market(3) Strong demand for industrial space, coupled with high and robustly growingreplacement costs, continue to keep upward pressure on market rentals. Vigorous,20% plus year-on-year rental growth rates were recorded in all of the bigindustrial areas, barring Durban, where market rentals for prime industrialspace were up by 18% on the same quarter a year earlier. Real rentals have beenmoving steadily upwards since 2005, implying that the industrial upswing phaseis now entrenched. Commercial / Retail Market3 The excess office supply from 2000 has now effectively been exhausted, withvacancies in all of the major decentralised office nodes below the 5% mark. Thisbodes well for market rental growth over the next few years. On the retail side,retail sales have been losing impetus in recent months, in particular givenrising interest rates and the introduction of more prudent borrowing limits inaccordance with the 2007 National Credit Act. This slowdown in consumption, whencombined with the continued increase in shopping centre completions, willpossibly lead to a slowdown in rentals. Accordingly, the retail elements of ourdevelopments are only as part of mixed use developments where we expect thecreation of office and residential units will create a natural feed to theretail element. Power issues South Africa has experienced electricity supply interruptions in the firstquarter of 2008. Further interruptions to the provision of bulk electricitysupply to new developments is expected to be a feature in South Africa over theshort term. There is some uncertainty on some of our developments as to when wemight receive power and we do expect some delays as a result. However, webelieve the Company is well placed to meet its development milestones on most ofits projects. It is also worth noting that power shortages prospectively serveto increase the value of those projects where we have already secured guaranteedelectricity supply. We certainly don't see power issues being any where near assignificant an issue as those experienced in other developing countries such asIndia as South Africa's power supply is much more sophisticated and has beenexceptionally well developed by comparison. Staffing Within the Proteus Property group, we have identified an experienced projectmanager who will be employed on a full time basis from 1 April 2008. The projectmanager will assist in providing development oversight for the Company'sexisting investments, and will add further depth to the existing managementteam. A second experienced project manager is also being retained on a part-timebasis during 2008, with a view to joining the Proteus Property group full timefrom 2009 as more of the Company's investments progress from the town planningphase. In addition, Ed Raubenheimer, an experienced developer (who previouslyacted as a non-executive director within the Proteus Property group) has beenemployed on a full time basis to set up operations in Cape Town. We areconfident that this presence will lead to increased deal flow from the WesternCape region. Proteus Property Partners Limited Investment Manager Consolidated Income Statement For the period 1 July 2007 to 31 December 2007 For period 1 July 2007 to For period 27 June 2006 to 31 December 2007 31 December 2006 Note £'000 £'000 Turnover - - Investment Manager's fees 4 (631) (110) Other administration fees and expenses 5 (236) (63) Administrative expenses (867) (173) Operating loss (867) (173) Finance income 1,358 308 Foreign exchange gain 1,568 - Finance costs (24) (2) Net finance income 2,902 306 Share of loss of equity accounted investees 8 (25) - Profit before income tax 2,010 133 Income tax expense 6 (147) - Profit for the period 1,863 133 Attributable to: Equity holders of the Company 1,870 133 Minority Interest (7) - 1,863 133 Basic and diluted earnings per share (pence) for profit attributable to the equity holders of the Company during the period 7 5.23 0.44 All items in the above statement derive from continuing operations. All incomeis attributable to the equity holders of South African Property Opportunitiesplc, the parent company. The accompanying Notes form an integral part of these financial statements Consolidated Balance Sheet Note As at 31 December 2007 As at 31 December 2006 £'000 £'000AssetsNon-current assetsInventories 9 18,206 -Loans due from joint venture 8 1,450 -Investments in equity accounted investees 8 6,197 72 25,853 72Current assetsTrade and other receivables 10 606 2,017Cash and cash equivalents 40,688 27,248 41,294 29,265Total assets 67,147 29,337 EquityCapital and reservesattributable to equityholders of the Company:Issued share capital 11 623 300Share premium 12 61,943 28,759Foreign currency translation reserve (8) 133Retained earnings 1,990 62Minority interest (21) -Total equity 64,527 29,254 Current liabilitiesLoans from third parties 15 2,030 -Trade and other payables 14 590 83Total liabilities 2,620 83Total equity & liabilities 67,147 29,337 The accompanying Notes form an integral part of these financial statements Company Balance Sheet Note As at 31 December 2007 As at 31 December 2006 £'000 £'000AssetsNon-current assetsLoans and receivables due from subsidiary 10 26,099 2,079Investment in subsidiaries 8 8,710 - 34,809 2,079Current assetsTrade and other receivables 10 36 21Cash and cash equivalents 31,640 27,248 31,676 27,269Total assets 66,485 29,348 EquityCapital and reservesattributable to equityholders of the Company:Issued share capital 11 623 300Share premium 12 61,943 28,759Retained earnings 3,514 206Total equity 66,080 29,265 Current liabilitiesTrade and other payables 14 405 83Total liabilities 405 83Total equity & liabilities 66,485 29,348 The accompanying Notes form an integral part of these financial statements Consolidated Statement of Changes in Shareholders' Equity For the period from 1 July 2007 to 31 December 2007 Attributable to equity holders of the Company GROUP Share Share Foreign Retained Total Minority Total capital premium Currency earnings interest Translation Reserve £'000 £'000 £'000 £'000 £'000 Balance at 27 - - - - - - -June 2006Shares issued 300 29,700 - - 30,000 - 30,000in the periodForeign - - 62 - 62 - 62exchangetranslationdifferencesShare issue - (941) - - (941) - (941)expensesProfit for the - - - 133 133 - 133periodBalance at 31 300 28,759 62 133 29,254 - 29,254December 2006 Balance at 1 623 61,943 (44) 120 62,642 - 62,642July 2007Acquisition of - - - - - (14) (14)subsidiaryForeign exchange - - 36 - 36 - 36translationdifferencesProfit for the - - - 1,870 1,870 (7) 1,863periodBalance at 31 623 61,943 (8) 1,990 64,548 (21) 64,527December 2007 The accompanying Notes form an integral part of these financial statements Consolidated Cash Flow Statement For the period from 1 July 2007 to 31 December 2007 Note For period 1 July 2007 to For period 27 June 2006 to 31 December 2007 31 December 2006 £'000 £'000 Operating activitiesProfit for the period 1,863 133Adjustments for:Investment income (1,358) (308)Investment expense - 2Income tax 147 -Share of loss of equityaccounted investees 25 - Foreign exchange loss - -Minority interest 7 - Operating gain/(loss)before changes in working capital 684 (173)Purchase of inventory (13,597) -Decrease in trade and otherreceivables 208 41 Increase in trade andother payables 271 83 Cash used in operations (12,434) (49)Interest paid (355) (2)Interest received 2,634 308 Cash (outflows)/inflowsfrom operating activities (10,155) 257 Investing activitiesAcquisition of subsidiary, net of cash received (72) Acquisition of equity accounted investees 8 (219) -Loans to equity accounted investees 8 (36) (134)Loans to third parties (784) (1,862) Cash outflows frominvesting activities (1,039) (2,068) Financing activitiesProceeds from the issue of ordinary share capital 11 - 30,000Share issue expenses - (941) Cash inflows from financingactivities - 29,059 Net (decrease)/increase incash and cash equivalents (11,194) 27,248Cash and cash equivalentsat 1 July 2007 51,797 -Foreign exchange losses oncash and cash equivalents (85) - Cash and cash equivalentsat 31 December 2007 40,688 27,248 The accompanying Notes form an integral part of these financial statements Notes to the Interim Financial Statements 1 General Information South African Property Opportunities plc (the "Company") was incorporated andregistered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004on 27 June 2006 as a public limited company with registered number 117001C. TheCompany's investment objective is to achieve capital growth from a opportunisticportfolio of real estate assets in South Africa. The Company's investment activities are managed by Proteus Property PartnersLimited (the "Manager"). The Company's administration is delegated to GalileoFund Services Limited (the "Administrator"). The registered office of theCompany is Jubilee Buildings, Victoria Street Douglas, Isle of Man, IM1 2SH. Pursuant to a prospectus dated 20 October 2006 there was an original placing ofup to 50,000,000 Ordinary Shares. Following the close of the placing on 26October 2006 30,000,000 Shares were issued. The Shares of the Company were admitted to trading on the Alternative InvestmentMarket of the London Stock Exchange ("AIM") on 26 October 2006 when dealingsalso commenced. As a result of a further fund raising in May 2007 32,292,810 Ordinary Shareswere issued, which were admitted to trading on AIM on 22 May 2007. The Company's agents and the Manager perform all significant functions.Accordingly, the Company itself has no employees. Duration In accordance with the Company's Articles of Association, Shareholders will begiven the opportunity to vote on the life of the Company after approximately 7years. At the annual general meeting of the Company to be held in 2013, the Directorsare obligated to propose an ordinary resolution that the Company continues inexistence. If the resolution is passed then it shall be proposed at every thirdannual general meeting thereafter. If the resolution is not passed then theDirectors shall, within 3 months after the date of the resolution, put forwardproposals to shareholders to the effect that the Company be wound up,liquidated, reorganised or unitised. Financial Year End The financial year end of the Company is 30 June in each year. The firstaccounting period of the Company is for the period ended 30 June 2007. Company Profit In accordance with the provisions of Section 3 of the Isle of Man Companies Act1982, no separate income statement has been presented for the Company. Theamount of the Company's profit for the period recognised in the ConsolidatedIncome Statement is £3,008,595. 2 Summary of Significant Accounting Policies The principal accounting policies applied in the preparation of these financialstatements are set out below. 2.1 Basis of preparation These consolidated interim financial statements have been prepared in accordancewith International Financial Reporting Standards ("IFRS") IAS34 InterimFinancial Reporting. They do not include all of the financial informationrequired for full annual financial statements. The financial statements havebeen prepared under the historical cost convention. There are no critical estimates or assumptions. Notes to the Interim Financial Statements (continued) 2.1 Basis of preparation (continued) In the current period the Group has adopted IFRS7 Financial InstrumentsDisclosures and IAS 1 Amendment Presentation of Financial Statements thatintroduced new disclosures relating to financial instruments but had not changedthe classification or valuation of the Company's financial statements. 2.2 Foreign currency translation South African Rand is the currency of the primary economic environment in whichthe Group's direct and indirect subsidiaries operate ("The functionalcurrency"). Pound Sterling is the currency of the primary economic environment in which theGroup's direct and indirect subsidiaries operate ("The functional currency"). Monetary assets and liabilities denominated in foreign currencies as at the dateof these financial statements are translated to South African Rand at exchangerates prevailing on that date (31 December 2007: ZAR:GBP 13.6909). Expenses aretranslated into South African Rand based on the average exchange ratesprevailing during the year. All resulting exchange differences are recognised inthe income statement. The accounts are presented in Pounds Sterling by translating the assets andliabilities at the exchange rate prevailing on the balance sheet date. Items ofrevenue and expense are translated at the average exchange rates prevailingduring the year. Components of equity are translated at the date of the relevanttransaction and not retranslated and all resulting exchange differences arerecognised in equity. 2.3 Revenue and expense recognition Deposit interest income is recognised in the financial statements on atime-proportionate basis using the effective interest method. Interest expense for borrowings is recognised in the financial statements usingthe effective interest method. The effective interest method is a method of calculating the amortised cost of afinancial assets or financial liability and of allocating the interest income orinterest expense over the period. Expenses are accounted for on an accruals basis. 2.4 Basis of consolidation Subsidiaries Subsidiaries are those enterprises controlled by the Company. Control existswhere the Company has the power, directly or indirectly, to govern the financialand operating policies of an enterprise so as to obtain benefits from itsactivities. The financial statements of the subsidiaries are included in theconsolidated financial statements from the date that control effectivelycommences until the date that control effectively ceases. Transactions and minority interest The Group applies a policy of treating transactions with minority interest attransactions with parties external to the group. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised gains arising fromintra-group transactions, are eliminated in preparing the consolidated financialstatements. Notes to the Interim Financial Statements (continued) 2.4 Basis of consolidation (continued) Associates and joint ventures (equity accounted investees) Associates are those entities in which the Company has a significant influence,but no control, over the financial and operating policies. Joint ventures arethose entities over whose activities the Group has joint control, established bycontractual agreement and requiring unanimous consent for strategic financialand operating decisions. Associates and joint ventures are accounted for usingthe equity method (equity accounted investees). The consolidated financialstatements include the Group's shares of the income and expenses of the equityaccounts investees, after adjustments to align the accounting policies withthose of the Group, from the date that significant influence or joint controlcommences until the date that significant influence or joint control ceases.When the Group's share of losses exceeds its interest in an equity accountedinvestee, the carrying amount of that interest (including any long-terminvestment) is reduced to nil and the recognition of further losses isdiscontinued except to the extent that the Group has an obligation or has madepayments on behalf of the investee. Unrealised gains on transactions between the Company and its equity accountedinvestees are eliminated to the extent of the Company's interest in the equityaccounted investees. Unrealised losses are also eliminated unless thetransaction provides evidence of an impairment of the asset transferred.Accounting policies have been changed where necessary to ensure consistency withthe policies adopted by the Company. Financial statements of foreign operations The assets and liabilities of foreign operations, including goodwill and fairvalue adjustments arising on consolidation, are translated to South African Randat the foreign currency exchange rates ruling at the balance sheet date. Foreignexchange differences arising on translation are recognised directly in equity. 2.5 Segmental reporting The Company has one segment focusing on achieving capital growth throughinvesting in the property market in South Africa. No additional disclosure isincluded in relation to segment reporting, as the Company's activities arelimited to one business and geographical segment. 2.6 Inventories Investment properties that are being developed for future sales are classifiedas inventories at their deemed cost, which is the carrying amounts at the dateof classification. They are subsequently carried at the lower of cost and netrealisable value. Net realisable value it the estimated selling price in theordinary course of business less selling expenses. 2.7 Loans and receivables Loans and receivable are recognised initially at fair value and subsequentlymeasured at amortised cost using the effective interest method. 2.8 Trade and other receivables Trade and other receivables are initially stated at fair value and subsequentlymeasured at amortised cost using the effective interest method. 2.9 Cash and cash equivalents Cash and cash equivalents comprise cash deposited with banks. Notes to the Interim Financial Statements (continued) 2.10 Trade and other payables Trade and other payables are recognised initially at fair value and subsequentlyat amortised cost using the effective interest method. 2.11 Taxation The Company is resident for taxation purposes in the Isle of Man and is subjectto income tax at a rate of zero per cent. A corporate charge is payable, whichamounted to £250 for the 2006/2007 tax year. The Group is liable to tax in South Africa on the activities of itssubsidiaries. The tax expense represents the sum of the tax currently payable, which is basedon taxable profits for the period. The Group's liability is calculated using taxrates applicable at the balance sheet date. 2.12 Share capital Ordinary shares are classified as equity. Incremental costs directlyattributable to the issue of new shares are shown in equity as a deduction, netof tax, from the proceeds. 2.13 Dividends Dividends are recognised as a liability in the period in which they are declaredand approved. There was no dividend declared as at 31 December 2007 (2006: Nil). 3 Preliminary (Formation) Expenses The estimated total costs and expenses payable by the Company in connection withthe Placing and Admission (including professional fees, the costs of printingand the other fees payable including commission payable to the Placing Agent)was estimated as equal to 3% of the gross amount raised based on the Placingbeing fully subscribed. The actual total amount of preliminary expenses paid was£941,262 representing 3.14% of the gross amount raised. The total costs and expenses payable by the Company in connection with thesecondary Placing (including professional fees, the costs of printing and theother fees payable including commission payable to the Placing Agent) was£723,075 representing 2.11% of the gross amount raised. In accordance with the terms of the initial Placing and the secondary Placing,the Placing Agent was to receive from the Company commission equal to 2% of theaggregate value of the amount raised by the Placing. In addition, for theinitial Placing the Placing Agent was to receive a corporate finance fee of 0.5%of the aggregate value of the Placing. The total placing admission costs payable by the Company during the period ended31 December 2007 amounted to £nil (June 2007: £941,262), which has been chargedto equity as a share issue expense. 4 Investment Manager fees Annual fees The Investment Manager receives a management fee of 2% per annum of the netasset value of the Group from Admission, payable quarterly in advance. The Manager is also entitled to recharge to the Group all and any costs anddisbursements reasonably incurred by it in the performance of its dutiesincluding costs of travel save to the extent that such costs are staff costs orother internal costs of the Investment Manager. Accordingly, the Company isresponsible for paying all the fees and expenses of all valuers, surveyors, Notes to the Interim Financial Statements (continued) 4 Investment Manager fees (continued) legal advisers and other external advisers to the Company in connection with anyinvestments made on its behalf. All amounts payable to the Investment Manager bythe Company are paid together with any value added tax, if applicable. Annual management fees payable for the period ended 31 December 2007 £631,569(2006: £110,137). Performance fees The Investment Manager is entitled to a performance fee which is payable byreference to the increase in net asset value per Ordinary Share. The InvestmentManager will become entitled to a performance fee in respect of the period fromAdmission to 30 June 2009 and any subsequent financial period at the end ofwhich the net asset value per Ordinary Share is above the performance feehurdle. The performance fee test for the period ending 30 June 2009 is 100p perOrdinary Share increased at a rate of 12 per cent. per annum, on an annual compounding basis up to the end of the period but adjusted so as to exclude any dividends paid during the period. If the performance hurdle is met the performance fee payable will be an amountequal to 20 per cent. of the amount of the increase in the net asset value perOrdinary Share, multiplied by the time weighted average of the number ofOrdinary Shares in issue since inception or (if later) the end of the lastfinancial period by reference to which a performance fee was earned. Any performance fee will be payable as follows: a) seventy-five percent of the performance fee will be paid tothe Manager in cash within ten Business Days of the publication of the auditedfinancial statements for the relevant period end; and b) twenty-five percent of the performance fee shall be satisfied within tenBusiness Days of the publication of the audited financial statements for therelevant performance period end by the allotment and issue to the Manager ofsuch number of Ordinary Shares which, when multiplied by the Net Asset Value perOrdinary Share on the date of issue, results in a value equal to that of twentyfive percent. of the performance fee. Performance fees payable for the period ended 31 December 2007 amounted to £nil(2006: £nil). 5 Other Administration Fees and Expenses Group £'000Audit 25Directors' Remuneration 47 Included within other administration fees and expenses are the following: Nominated Adviser and Broker fees As Nominated Adviser and Broker to the Company for the purposes of the AIMRules, the Nominated Adviser and Broker receives a Nominated Adviser fee of£15,000 per annum and a Broker fee of £15,000 per annum, both fees payablehalf-yearly in advance. Custodian fees The Custodian receives an annual minimum fee of £5,000, payable quarterly inarrears. The Custodian expects to review and, subject to written agreement between theCompany and the Custodian, may amend the foregoing fees six months afterAdmission and annually thereafter. Notes to the Interim Financial Statements (continued) 5 Other Administration Fees and Expenses (continued) Administrator and Registrar fees The Administrator receives a fee of 10 basis points of the net assets of theCompany between £0 and £50 million; 8.5 basis points per annum of the net assetsof the Company between £50 and £100 million and 7 basis points per annum of thenet assets of the Company in excess of £100 million, subject to a minimummonthly fee of £3,750 and a maximum monthly fee of £10,000 payable quarterly inarrears. The Administrator assists in the preparation of the financial statements of theCompany for which it receives a fee of £1,750 per set. The Administrator provides general secretarial services to the Company for whichit receives a minimum annual fee of £5,000. Additional fees based on time andcharges will apply where the number of Board meetings exceeds four per annum.For attendance at meetings not held in the Isle of Man, an attendance fee of£350 per day or part thereof will be charged. The Administrator may utilise the services of a CREST accredited registrar forthe purposes of settling share transactions through CREST. The cost of thisservice will be borne by the Company. It is anticipated that the cost will be inthe region of £6,000 per annum subject to the number of CREST settledtransactions undertaken. The Administrator expects to review and, subject to written agreement betweenthe Company and the Administrator, may amend the foregoing fees six months afterAdmission and annually thereafter. Offshore Registrar fees The Offshore Registrar receives an annual registration fee from the Company of£2 per shareholder account, subject to an annual minimum charge of £5,500. Sponsor fees The Sponsor receives a fee for the listing of the shares on the Channel IslandsStock Exchange. The Sponsor is paid a fee of £6,000 for the initial listing,charged to equity as a share issue expense, and an annual fee of £1,750 and afee determined by reference to the number of hours spent on the work undertakenby the Sponsor by reference to its standard hourly charging rate. Strategic Adviser fees The Strategic Adviser receives a fee for its services of £40,000 per annum,payable quarterly in advance. The Strategic Advisor agreement was signed on 20October 2006. Directors' Remuneration The maximum amount of remuneration payable to the Directors permitted under theArticles of Association is £200,000 p.a. The Directors are each entitled toreceive reimbursement of any expenses incurred in relation to their appointment. Notes to the Interim Financial Statements (continued) 6 Income Tax Expense Group Group 2007 2006 £'000 £'000Current tax 147 - 147 - The tax on the Group's profit before tax differs from the theoretical amountthat would arise using the weighted average tax rate of the applicable profitsof the consolidated companies as follows: Group Group 2007 2006 £'000 £'000Profit before tax 1,780 133 Tax calculated at domestic tax rates applicable in the Isle of Man (0%) - -Effect of higher rate in South Africa (29%) 147 -Tax charge 147 - 7 Basic and Diluted Earnings per Share Basic and diluted earnings per share are calculated by dividing the profitattributable to equity holders of the Company by the weighted average number ofordinary shares in issue during the period. 31 December 2007 31 December 2006 Profit attributable to equity holders of the Company (£'000) 1,870 133Weighted average number of ordinary shares in issue (thousands) 35,729 30,000Basic and diluted profit per share (pence per share) 5.23 0.44 8 Subsidiaries, Associates and Joint Ventures 8.1 Subsidiaries During the period and for efficient portfolio management purposes, the Companyestablished the following subsidiary company:- Country of Percentage of incorporation shares heldSAPSPV Holdings RSA (Pty) Limited South Africa 100% SAPSPV Holdings RSA (Pty) Limited is a direct subsidiary of South AfricanProperty Opportunities plc. The cost of this investment to the Company is£1,807,000. SAPSV Holdings RSA (Pty) Limited was incorporated on 20 October 2006and the £1,807,000 represents ZAR 101 of share capital and ZAR 24,999,899 ofshare premium. Notes to the Interim Financial Statements (continued) 8 Subsidiaries, Associates and Joint Ventures (continued) During the period, the Company has increased its investment in the directsubsidiary, see table below for details: Date Share Capital Share Premium £ ZAR ZAR30 August 2007 352,614 1 4,999,99915 October 2007 1,339,934 1 18,999,99929 October 2007 1,428,088 1 20,249,99918 December 2007 3,526,143 1 49,999,999 Since inception, SAPSPV Holdings RSA (Pty) Limited established the followingcompanies:- Country of Percentage of incorporation shares heldSAPSPV Clayville Property Investments (Pty) South Africa 100%LimitedSAPSPV Imbonini Property Investments (Pty) South Africa 100%LimitedMadison Park Properties 33 (Pty) Limited South Africa 100%Madison Park Properties 34 (Pty) Limtied South Africa 100%Madison Park Properties 36 (Pty) Limited South Africa 100%Madison Park Properties 40 (Pty) Limited South Africa 100%Royal Albatross Properties 313 (Pty) Limited South Africa 100%Crimson King Properties 378 (Pty) Limited South Africa 100%Breeze Court Investments 31 (Pty) Limited South Africa 100%Breeze Court Investments 35 (Pty) Limited South Africa 100%Business Ventures Investments 1172 (Pty) Limited South Africa 100%Business Ventures Investments 1180 (Pty) Limited South Africa 100%Business Ventures Investments 1189 (Pty) Limited South Africa 100%Wonderwall Investments 18 (Pty) Limited South Africa 100%8 Mile Investments 504 (Pty) Limited South Africa 100%Dream World Investments 551 (Pty) Limited South Africa 100%Business Ventures Investments 1238 (Pty) Limited South Africa 100%Business Ventures Investments 1205 (Pty) Limited South Africa 100%Business Ventures Investments 1152 (Pty) Limited South Africa 100%Business Ventures Investments 1191 (Pty) Limited South Africa 100%Business Ventures Investments 1270 (Pty) Limited South Africa 100%Business Ventures Investments 1268 (Pty) Limited South Africa 100%Business Ventures Investments 1239 (Pty) Limited South Africa 100%Business Ventures Investments 1269 (Pty) Limited South Africa 100%Breeze Court Investments 34 (Pty) Limited South Africa 100%Business Ventures Investments 1237 (Pty) Limited South Africa 100%Business Ventures Investments 1187 (Pty) LImited South Africa 100%Cranes Crest Investments 28 (Pty) Limited South Africa 100%Living 4 U Development (PTY) Ltd South Africa 65% Notes to the Interim Financial Statements (continued) 8 Subsidiaries, Associates and Joint Ventures (continued) 8.2 Associates and Joint Ventures 31 December 2007 31 December 2006 £'000 £'000 Start of the period 5,794 -Acquisition of equity accounted investees 220 72Foreign exchange gain 208 -Share of loss of equity accounted investees (25) -End of the period 6,197 72 In September 2007 the Group acquired 50% of the ordinary share capital ofImbonini Park (Phase 2) (Pty) Limited, a property holding company incorporatedin South Africa, for £220,000 (ZAR 3,000,000). There was goodwill of £220,000(ZAR 2,999,000) as a result of this transaction. Loan due from Joint Venture The Group lent a total of £1,450,000 (ZAR (19,850,000) to its joint venture,Imbonini Park (Pty) Limited. Of this, £1,388,000 (ZAR 19,000,000) is interestbearing at 15% per annum and the remaining £62,000 (ZAR 850,000) is non-interestbearing. Unless agreed to otherwise by the Group the loan will be repayablewithin 2 years. The fair value of this loan approximates its carrying value at 31 December 2007. 9 Inventories Group At 31 December 2007 At 31 December 2006 £'000 £'000At start of period 4,231 -Cost of land acquired 14,795 -Foreign exchange loss (820) -At end of period 18,206 - During the period, the Group acquired land for £14,795,000 (ZAR 210,792,852),which was acquired in order to develop it for future re-sale, and accordingly itwas classified as inventory. 10 Subsidiary Loans and Trade and Other Receivables Group 31 December 2007 31 December 2006 £'000 £'000Notary accounts - 1,862Loans to third parties 146 -Interest on loan to associate (see note 8.2) 167 134Prepayments 10 -VAT receivable 192 -Other receivables 91 21Trade and other receivables 606 2,017 Notes to the Interim Financial Statements (continued) 10 Subsidiary Loans and Trade and Other Receivables (continued) Company 31 December 2007 31 December 2006 £'000 £'000Loan due from SAPSPV Holdings RSA (Pty) 26,099 2,079Limited Prepayments 10 -Other receivables 26 21Trade and other receivables 36 21 £5,289,000 of the loan from the Company to SAPSPV Holdings RSA (Pty) Limited,which represents ZAR 75,000,000, bears interest at JiBar from the date ofadvance to the date of repayment, and the interest is compounded monthly inarrears on the last working day of each month. This loan is repayable as and when the directors of SAPSPV Holdings RSA (Pty)Limited resolve that repayment shall be effected, providing there are sufficientcash resources available to do so. The remaining £13,093,000 (ZAR 185,653,346) of the loan from the Company toSAPSPV Holdings RSA (Pty) Limited bears interest at the Repurchase Rate aspublished by the Reserve Bank of South Africa from the date of the advance tothe date of repayment, which interest shall be compounded monthly in arrears onthe last working day of each month. This loan is repayable as and when the directors of SAPSPV Holdings RSA (Pty)Limited resolve that repayment shall be effected, provided there are sufficientcash reserves available to do so and that prior approval has been obtained fromthe Exchange Control Division of the South African Reserve Bank but in no caselater than 30 June 2013. 11 Share Capital Ordinary Shares of 1p each Number £'000Authorised 150,000,000 1,500Issued 62,292,810 623 At incorporation the authorised share capital of the Company was £2,000 dividedinto 200,000 ordinary shares of 1p each. Pursuant to an ordinary resolution on 19 October 2006 the authorised sharecapital was increased from £2,000 to £500,000 giving in total 50,000,000ordinary shares of 1p each. Pursuant to an ordinary resolution on 18 May 2007 the authorised share capitalwas increased from £500,000 to £1,500,000 giving in total 150,000,000 ordinaryshares of 1p each. The holders or ordinary shares are entitled to receive dividends as declaredfrom time to time and are entitled to one vote per share at meetings of theCompany. On 26 October 2006, the Company raised a gross amount of £30,000,000 followingthe admission of the Company's ordinary shares to the Alternative InvestmentMarket ("AIM"). The Company placed 30,000,000 ordinary shares of £0.01 parvalue, at an issue price of £1.00 per share. Notes to the Interim Financial Statements (continued) 11 Share Capital (continued) On 1 May 2007, the Company placed an additional 50,000,000 ordinary shares of£0.01 par value at a price of £1.06 per share, of which 32,292,810 ordinaryshares have been issued at a price of £1.06 per share. Related transaction costs have been deducted from the proceeds. 12 Share Premium 31 December 2007 31 December 2006 £'000 £'000Share premium arising on issue of ordinary shares 63,607 29,700Transaction costs on issue of ordinary shares (1,664) (941)As at 31 December 2007 61,943 28,759 The Company's share premium has arisen on the issue of the Company's ordinaryshares and represents the difference between the issue prices of £1.00 and £1.06and the par value of £0.01 per share. 13 Net Asset Value per Share Group As at 31 December 2007 As at 31 December 2006 Net assets attributable to equity holders of the Company (£'000) 64,527 29,254Shares in issue 62,292,810 30,000,000NAV per share £1.04 £0.97 The NAV per share is calculated by dividing the net assets attributable toequity holders of the Company by the number of ordinary shares in issue. 14 Trade and Other Payables Group 31 December 2007 31 December 2006 £'000 £'000 Management fees 77 -Income tax 147 -Other payables 366 83 590 83 Notes to the Interim Financial Statements (continued) 14 Trade and Other Payables (continued) Company 31 December 2007 31 December 2006 £'000 £'000Management fees 77 -Other payables 328 83 405 83 15 Loans from Third Parties Loans from third parties consist of £1,240,000 (ZAR 16,976,000) from AbbeydaleBuilding & Civils (Pty) Ltd and £790,000 (ZAR 10,817,000) from Sable HoldingsLimited which relate to the intended future sale of 25% of Crimson KingProperties 378 (Pty) Limited to these two companies. Both of these loans areunsecured and interest free. 16 Contingent Liabilities and Commitments Commitments: The company has committed a total of £45.1 million to the thirteen projects inthe portfolio as at the date of publication of the Interim Report. This figureis unchanged from the figure as at the balance sheet date. Contingent Liabilities: Contingent liabilities existed at the balance sheet date in respect of thefollowing transaction. Waltloo Industrial Park: £0.6 million in favour of the seller. 17 Related Party Transactions Brian Myerson is a director of the Company and the Investment Manager. Hereceived no direct remuneration for these appointments. He is also the ChiefExecutive Officer of Principle Capital Holdings S.A., the ultimate parentcompany of the majority shareholder in the Investment Manager. Richard Currie is a director of the Investment Advisor and a shareholder inCurrie Group, a firm of property agents that has been retained by the Company toprovide lead marketing agent services on Gosforth Business Estate and ClayvilleIndustrial Park at the rate of £15,200 per annum. Brian Padgett is a director of the Company's South African subsidiaries and theInvestment Manager. He received no direct remuneration for these appointments.He is also a director of Principle Capital Holdings S.A., the parent company ofthe majority shareholder in the Investment Manager and a Director of SilexManagement Ltd, a firm that was acquired by Principle Capital Holdings S.A.group in the fourth quarter of 2007 and continues to be retained by the Companyto administer the Company's South African Subsidiaries. James Peggie is a director of the Company's South African Subsidiaries for whichhe received no direct remuneration. He is also a shareholder in PrincipleCapital Holdings S.A., the parent company of the majority shareholder in theInvestment Manager. 18 Post Balance Sheet Events Conditions of establishment were received from the local municipality in respectof the proposed business retail centre and office park that will form part ofthe African Renaissance development. On Gosforth Business Estate, the Company issued a mortgage bond in favour of amajor South African bank securing a borrowing facility of up to £4.6m to financethe continuing development of the site. The Kyalami Residential Estate transferred into the name of the Company on the3rd March 2008 and the deposit of £1.8 million was released in favour of theseller. Further to the initial holding deposit that was paid to secure the KindlewoodNature Estate transaction in August 2007, the balance was paid in February 2008raising the total on deposit to £2.2 million -------------------------- (1) Standard Bank, 8 February 2008; Barnard Jacobs Mellet, 22 January 2008 (2) Standard Bank; Residential Property Gauge; 1 February 2008 (3) Ervin Rode; Rode's Report on the South African Property Market; 2007:4 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
South African Property Opportunities