South African Property Opportunities Regulatory News (SAPO)

23 December 2016

SOUTH AFRICAN PROPERTY OPPORTUNITIES PLC

('SAPRO' or the 'Group')

Final results for the year ended 30 June 2016

South African Property Opportunities plc (AIM: SAPO), an investment company established to invest in real estate opportunities in South Africa, announces its final results for the year ended 30 June 2016.

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

This announcement contains inside information.

For further information please contact:

Paul Fincham/Jonathan Becher +44 (0) 20 7886 2500

Panmure Gordon

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

Galileo Fund Services Limited

Chairman's Statement

On behalf of the Board I present the results for South African Property Opportunities plc ("SAPRO" or "the Company") and its subsidiaries (the "Group") for the year to 30 June 2016.

Key Post Balance Sheet Events

Two key events have occurred immediately prior to the signing date of these accounts. The outstanding payment of ZAR 40 million (£2.30 million) on African Renaissance was received in full. Simultaneously contracts for the sale of the remaining assets, in the form of the Company's principal South African subsidiary, have been concluded with the same buyer. The contracted price is ZAR 60 million (£3.46 million), of which ZAR 25 million (£1.44 million) has been received, with payment of ZAR 11 million (£0.63 million) due on 28 February 2017 and the remainder due on 30 June 2017. This price reflects a discount of 14% to the last Broll valuation of the assets, which the Board concluded was reasonable. The balance sheet reflects this contracted price.

On receipt of the final payment steps will be taken to wind up the Company. The Board also intends to announce a Distribution at the earliest practicable date.

Performance to 30 June 2016

Net Asset Value ("NAV") has declined by 10 pence per share from 21 pence to 11 pence per share. The decline reflects the distribution of 5 pence per share in October 2015 and a net loss, based on total comprehensive expense for the year, of 5 pence per share. The loss of 5 pence per share arises from foreign exchange losses (1 pence per share), valuation falls (3 pence per share) and operating expenses of 1 pence per share. Statutory earnings per share as reported in note 9 was 3 pence per share.

EPRA net asset value has fallen from 21 pence per share to 11 pence per share. The primary difference in calculation to NAV is the provision for performance fees that may be paid on future sales and distributions.

Cash balances are currently £5.65 million.

The South African Rand was volatile against Sterling, but the net movement was relatively modest, from an exchange rate of ZAR:GBP 19.09 at 30 June 2015 to ZAR:GBP 19.68 at the year end, a 3% fall. Since the year end the Rand has strengthened by 15% against Sterling, following the vote by the UK to leave the EU. The Group does not hedge currency exposure.

Valuations

The value of the remaining assets in the portfolio reflect their degree of liquidity and have again been impacted by a number of factors including low demand for development land, continued difficulty in obtaining planning consents and problems accessing essential services like power and water. For assets held as at 30 June 2016, the fall in value in Rand terms over the year based on the sale contract price was 41%, reflecting a combination of market movement and the illiquidity of the Company's residual portfolio.

Asset sales

The principal sale in the year, the subsidiary holding the African Renaissance property (see note 23), was reported as a post balance sheet event in the 30 June 2015 accounts.

Two further sales took place in the Imbonini 1 asset, with ZAR 6.5 million (£0.3 million) received in the year from these and earlier sales, including Acacia Park.

No other sales took place during the year, although cash receipts arrived on schedule and in line with budget on Emberton, Imbonini and African Renaissance.

David Hunter

Chairman

23 December 2016

Report of the Investment Manager

Introduction

South Africa's economy remained in the doldrums for much of the period under review and did not provide much evidence of an economic acceleration in the second half of the year with the economy expanding an annualised 0.2 percent in the third quarter to September of 2016. The economy continues to be threatened by political turmoil, especially following the dismissal of the country's Finance Minister Nene in December 2015. Subsequently President Zuma has survived a no-confidence vote backed by his party. However, key reforms have been held back and increasing corruption scandals have accentuated calls for Zuma to step down. The instability is deterring investors and putting the country's credit rating at risk which narrowly escaped downgrade by agencies in the later part of 2016. Although gradual improvement in the world economy and potential recovery in commodity prices can bolster the economy next year it will be reliant on the country regaining the political and social stability necessary to take advantage of these stimuli.

Key SA Economic Indicators

South African Property Market

The South African listed property industry rose nearly 9% in the first nine months of 2016, almost double what equities achieved (4.82%). Bonds outperformed with 15.05% while cash achieved around 5.4%. Although listed property has outperformed inflation again continued growth at these levels is increasingly constrained as evidenced by growing volatility in share prices.

Concerns remain around declining affordability and the knock on effect to retail sales which could affect rentals. The office market continues to suffer from overcapacity and higher vacancies with limited confidence around meaningful rental growth. The industrial market remains constrained by persistently slow economic growth although vacancies are holding up on a national level.

South African property groups continued to increase their operations overseas where growth and funding fundamentals are proving more attractive than in South Africa. Eastern Europe has featured as a firm favourite geography amongst the larger REIT funds while various offshore companies also listed in South Africa during the year.

Disposal Progress

Sales activity was very subdued over the period as the effects of a stagnant economy and political instability impacted on developer confidence. The remaining six assets in the portfolio are largely characterised by challenges relating to services, planning approvals and environmental issues which further impacted on their saleability. Individual sales have been very slow and lacked meaningful traction at price levels acceptable to the company. A considerable effort has been applied to marketing the company's portfolio of properties in an effort to find prospective buyers capable of extracting value from the investment and development structure.

Sales Summary (July 2015 - June 2016)

Emberton

SAPRO concluded a sale of the subsidiary company owning the assets of the Emberton Project in the previous reporting period. All of the sales proceeds of ZAR 39 million (£2.0 million) have now been received.

Imbonini 1:

Receipts on four sales to the value of ZAR 6.5 million (£0.3 million) were received during the period. Proceeds from two sales (ZAR 3.3 million) relate to the prior reporting period and two sales (ZAR 3.2 million) are for the current reporting period.

African Renaissance:

The property company was sold on a structured payment basis for a total purchase consideration of ZAR 70 million (£3.6 million). In terms of the sale agreement ZAR 30 million was received on signature with the balance of the proceeds (ZAR 40 million) received on 19 December 2016.

Table 1.1: Portfolio Sales (Jul '15 - Jun '16)

* African Renaissance final payment received on 19 December 2016

** disposal of subsidiary

Sales post reporting date

The company was successful in disposing the entire portfolio by way of a sale of shares of the South African Holding company (SAPSPV Holdings RSA (Pty) Ltd) for ZAR 60 million (£3 million). The sale proceeds are payable in three tranches; ZAR 25 million was received on signature while further payments of ZAR 11 million and ZAR 24 million are secured by way of unconditional bank guarantees from Investec Bank Ltd payable on 28 February 2017 and 30 June 2017 respectively.

Portfolio Valuations

The portfolio was revalued by Broll (CBRE) at 30 June 2016 and then adjusted to match the sale contract as this provided better evidence of the portfolio's net realisable value at 30 June 2016. Portfolio values were reduced on account of sales (ZAR 75 million) and write downs (ZAR 43 million) on the remaining portfolio.

Table 1.2: Valuation movements (Jul '15 - Jun '16)

* Adjustments are made to this valuation in order to prepare the accounts under IFRS

Schedule A: Planning Permission Progress

Brakpan: New environmental legislation introduced in 2014 has forced additional flora, wetland and soil studies. As a result a new environmental impact assessment will be submitted in January 2017. A new tribunal board will only be assembled by the end of January 2017, after which they will start to clear the backlog from July 2016 when the previous board was disbanded.

Lenasia: The conditions of establishment have been drafted and circulated and are awaiting sign off by Council. Thereafter the site will be proclaimed after which the section 101 can be obtained allowing development. Current applications are underway in respect of a second access point on the site and approval to undertake phased development in order to spread the bulk servicing costs.

Clayville: The long awaited service level agreements were finally concluded and approved by Council. Providing bulk services to the site remains expensive and requires collaboration with neighbouring landowners to justify the costs. Electricity remains the biggest issue and a supply from Eskom is not expected for the considerable future. All approvals are now in place.

Driefontein: All approvals are in place and the top soil contamination issue requiring remedial action can be accurately finalised while on site with regular testing as the top surface materials is removed.

Imbonini 1 & 2: All approvals are in place. Registration of various road access servitudes on Imbonini 2 remain in process.

Schedule B: Remaining Portfolio held at 30 June 2016

Bridgehead Real Estate Fund (Pty) Ltd

Investment Manager

23 December 2016

Report of the Directors

The Directors hereby submit their annual report together with the audited consolidated financial statements of South African Property Opportunities plc (the "Company") and its subsidiaries (the "Group") for the year ended 30 June 2016.

The Company

The Company is incorporated in the Isle of Man under the Isle of Man Companies Act 2006 and holds a portfolio of property interests in South Africa.

Currency and debt

The Group does not hedge its exposure in its Rand assets and liabilities.

Divestment strategy

Following a strategic review the Company intends to dispose of the Group's portfolio where acceptable returns can be generated and return excess capital to shareholders.

Results and dividends

The results and position of the Group at the year end are set out on pages 12 to 32 of the financial statements.

One distribution was paid during the year, 5 pence per Ordinary Share on 16 October 2015 (2015: 5 pence per Ordinary Share on 31 October 2014).

Directors

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

Directors and other interests

Save as disclosed in note 22, none of the Directors had any interest during the year in any material contract for the provision of services which was significant to the business of the Company.

Independent auditor

BDO LLP, being eligible, has indicated its willingness to continue in office.

Corporate governance

The Directors recognise the importance of sound corporate governance. The Directors are responsible for overseeing the effectiveness of the internal controls of the Company designed to ensure that proper accounting records are maintained, that the financial information on which business decisions are made and which is issued for publication is reliable and that the assets of the Group are safeguarded.

The Board has established the following committees with specific areas of responsibility.

Audit Committee

The Audit Committee comprises David Saville (Chairman), David Hunter and Stephen Coe. The Audit Committee meets at least twice a year and is responsible for ensuring that the financial performance of the Group is properly reported on and monitored, including reviews of the annual and interim financial statements, results announcements, internal control systems and procedures and accounting policies.

Nomination Committee

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

Remuneration Committee

The Remuneration Committee comprises David Saville (Chairman), David Hunter and Stephen Coe. The Remuneration Committee meets as required and is responsible for determining and agreeing the remuneration for all members of the Board. No director can vote/take part in the discussion of their own remuneration.

Management Engagement Committee

The Management Engagement Committee comprises John Chapman (Chairman) and David Hunter. The Management Engagement Committee meets as required and is responsible for reviewing the performance of the Investment Manager and for ensuring that the Company's management contract is competitive and reasonable for the Company's shareholders. It is also responsible for reviewing the performance of other third party service providers.

On behalf of the Board

Stephen Coe

Director

23 December 2016

Directors' Biographies

The Company has a board of five Directors, all of whom are independent of the Company's Investment Manager and other service providers except for Craig McMurray who is an executive director of the Investment Manager. Details of the Directors are as follows:

David Hunter - Chairman

David Hunter is a UK-based property fund consultant. For twenty years up to 2005 he was a leading property fund manager ultimately responsible for €10bn of property assets across Europe for Arlington Property Investors. David is a fellow of the Royal Institution of Chartered Surveyors, a former President of the British Property Federation, and a member of the Bank of England Property Forum.

John Chapman - Executive Director

John Chapman is a member of the New York State Bar and the CFA Institute. He is currently a director of a number of other quoted investment funds.

Craig McMurray - Executive Director

Craig McMurray is the managing director of Bridgehead Real Estate Fund (Pty) Limited, a private equity real estate investment company. He is also CEO of Respublica (Pty) Ltd which is a developer, owner and manager of a national student accommodation portfolio in South Africa. Respublica Student Living is a joint venture with Redefine Properties Limited a listed REIT on the Johannesburg Stock Exchange (JSE). Previously Craig was head of Credit Projects at Standard Bank of South Africa Limited.

David Saville

David Saville is an Isle of Man based property fund manager currently managing a number of property sector investment vehicles with investments predominantly in the UK and Australia. From 1992 to 2001 David was the Managing Director of Saville Gordon Estates Plc, which he was instrumental in repositioning as a FTSE 250 property company specialising in industrial property. David is a member of the Royal Institution of Chartered Surveyors. 

Stephen Coe

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

Statement of Directors' Responsibilities

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

The Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards ("IFRSs") (as adopted by the European Union). The Directors are also required to prepare the financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing those financial statements it is the Directors' responsibility to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business as explained in note 2.1 to the financial statements, the Directors do not believe the going concern basis to be appropriate and, in consequence, these financial statements have not been prepared on that basis; and

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

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

On behalf of the Board

Stephen Coe

Director

23 December 2016

Independent auditor's report to the members of South African Property Opportunities plc

We have audited the financial statements of South African Property Opportunities plc for the year ended 30 June 2016 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company's members as a body, in accordance with our engagement letter dated 21 December 2016. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, and the Company's members as a body for our audit work, for this report, or for the opinion we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the statement of directors' responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable Isle of Man company law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council's (FRC's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements

In our opinion the financial statements:

• give a true and fair view of the state of the group's affairs as at 30 June 2016 and of its loss for the year then ended; and

• have been properly prepared in accordance with IFRSs as adopted by the European Union.

Emphasis of matter -basis of preparation

In forming our opinion on the financial statements, which is not modified, we draw attention to the disclosures made in note 2.1 to the financial statements concerning the basis on which the financial statements have been prepared. As the Group's objective is the orderly realisation of its assets with a view to returning capital to the shareholders thereafter, the financial statements have been prepared on a basis other than that of a going concern.

BDO LLP

Chartered Accountants

London

United Kingdom

23 December 2016

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

The financial statements on pages 12 to 32 were approved and authorised for issue by the Board of Directors on 23 December 2016 and signed on its behalf by:

David Hunter Stephen Coe

Director Director

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 the orderly realisation of a portfolio of real estate assets in South Africa and the subsequent return of capital to the shareholders.

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

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated.

2.1 Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates (see note 2.2). It also requires management to exercise its judgement in the process of applying the Group's accounting policies.

As the Group's objective is the orderly realisation of its assets with a view to returning capital to the shareholders thereafter, these financial statements have not been prepared on a going concern basis. During the realisation period the Group expects to trade in an orderly fashion and, in the Directors' opinion, the valuation bases applied to the assets and liabilities (as disclosed elsewhere within the accounting policies) are such that there would be no material adjustments to the financial statement if they had been prepared on a going concern basis.

a) New and amended standards adopted by the Group

There were no new standards or interpretations effective for the first time for periods beginning on or after 1 July 2015. None of the amendments to standards that are effective from that date had a significant effect on the Group's financial statements.

Future changes in accounting policies

IASB (International Accounting Standards Board) and IFRIC (International Financial Reporting Interpretations Committee) have issued the following standards and interpretations with an effective date after the date of these financial statements which will or may have an effect on the Group's future financial statements. These standards have not been early adopted by the Group and an assessment of the impact on the future financial statements of the Group has yet to be carried out.

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 been applied in the current period and which may 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) Estimated impairment of inventory

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. These are used in conjunction with the strategic plan for each development in order to determine any impairment of inventory. At 30 June 2016 the valuations were adjusted to the sale proceeds which provided better evidence of the value of the portfolio at 30 June 2016.

The determination of valuations of inventory requires the use of estimates such as future cash flows from developments along with discount rates applicable to those assets, or estimates such as a comparison of the inventory against similar assets. These estimates are based on local market conditions existing at the date of the statement of financial position.

The continuing volatility in the global financial system is reflected in the turbulence in real estate markets across the world. The resulting low level of transaction volumes continued this year. The third party valuers have used their market knowledge and professional judgement and have not relied solely on historical transaction comparables. In these circumstances, there is a greater degree of uncertainty than exists in a more active market in estimating the market values of inventory.

During the year there were impairment charges in relation to inventory (see note 11).

2.3 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in Pound Sterling, which is the Company's functional and the Group's presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the company income statement.

(c) Group companies

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(ii) income and expenses for each income statement are translated at average exchange rates; and

(iii) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to other comprehensive income. When a foreign operation is disposed of, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale. On the partial disposal of a subsidiary that includes a foreign operation, the proportionate share of the cumulative amount of exchange differences recognised in other comprehensive income is re-attributed to the non-controlling interests. In any other partial disposal of a foreign operation, the proportionate share of the cumulative exchange differences recognised in other comprehensive income is reclassified to profit and loss.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

2.4 Revenue and expense recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of inventory in the ordinary course of the Group's activities and rental income received or receivable in relation to operating leases. Revenue is shown net of value added tax.

The Group recognises revenue from the sale of inventory on the transfer of the risks and rewards of ownership, which is when all the contractual conditions of sale have been met.

Operating lease income in respect of rents is recognised in the income statement on a straight-line basis over the period of the lease and relates to leases in which a significant portion of the risks and rewards of ownership are retained by the Group, as lessor, and are classified as operating leases.

Interest income is recognised in the financial statements on a time-proportionate basis using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the period.

Expenses are accounted for on an accruals basis.

2.5 Basis of consolidation

Subsidiaries

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists, the company considers all relevant facts and circumstances including the size of the company's voting rights relative to both the size and dispersion of other parties who hold voting rights, substantive potential voting rights held by the company and by other parties, other contractual arrangements and historic patterns in voting attendance.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and continue to be included until control is lost or ceases.

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

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

Transactions and non-controlling interests

The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised gains/losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

2.6 Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is the person or group that allocates resources to and assesses the performance of the operating segments of an entity. The Group has determined that its chief operating decision-maker is the Board of the Company.

The Board reviews the Group's internal reporting in order to assess performance and allocate resources. Based on this internal reporting to the Board, it has been determined that there is only one operating segment, property development in the Republic of South Africa.

2.7 Intangible assets

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the identifiable net assets (including intangible assets) of the acquired subsidiary.

Goodwill is carried at cost less accumulated impairment losses. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is subsequently not reversed.

2.8 Financial assets and financial liabilities

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. The Board determine the classification of its financial assets at initial recognition. At 30 June 2016 the Group did not have any financial assets at fair value through profit or loss or available for sale.

The Group classifies its financial liabilities in the following categories: at fair value through profit or loss and other liabilities. At 30 June 2016 and 2015 the Group did not have any financial liabilities at fair value through profit or loss. Other liabilities comprise 'loans from third parties' and 'trade and other payables' in the balance sheet (notes 19 and 20).

Loans and receivables

Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.

Significant financial difficulties of the counterparty, probability that the counterparty will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount to be received is impaired. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Cash and cash equivalents

Cash and cash equivalents comprise cash deposited with banks and other short-term highly liquid investments with original maturities of three months or less.

Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently at amortised cost using the effective interest method.

2.9 Inventories

Land and buildings that are being developed for future sale are classified as inventory and recorded at cost on initial recognition. Building costs and borrowing costs in relation to inventory are capitalised. Land and building for development is subsequently carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less selling expenses.

2.10 Assets Held for Sale and Disposal Groups

Assets and disposal groups are classified as held for sale when it is established that management have a committed plan to sell which is unlikely to be significantly changed or withdrawn, the assets are available for immediate sale with an active programme initiated to locate a buyer and are being marketed at a reasonable price in relation to fair value with a sale being highly probable within 12 months of classification.

Assets or disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Any resulting impairment loss is recognised in profit or loss. Once classified as held for sale, these assets are not depreciated and are disclosed separately on the face of the balance sheet within current assets.

2.11 Taxation

The Company is resident for taxation purposes in the Isle of Man and is subject to income tax at a rate of zero per cent. The Group is liable for tax in the Republic of South Africa on the activities of its subsidiaries.

The tax expense represents the sum of the tax currently payable, which is based on taxable profits for the year. The Group's liability is calculated using tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

2.12 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

2.13 Distributions

Distributions are recognised as a liability in the year in which they are declared and approved.

3 Risk management in respect of financial instruments

The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The financial risks relate to the following financial instruments: loans and receivables and other liabilities as detailed in note 2.8.

Foreign currency risk

Foreign currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Group's operations are conducted in jurisdictions which generate revenue, expenses, assets and liabilities in currencies other than Pound Sterling ("the functional currency of the Company"). As a result the Group is subject to the effects of exchange rate fluctuations with respect to these currencies. The currency giving rise to this risk is the South African Rand.

The Group's policy is not to enter into any currency hedging transactions.

The table below summarises the Group's exposure to foreign currency risk in respect of its financial instruments:

At 30 June 2016, had the Pound strengthened/weakened by 15 per cent. against the South African Rand, with all other variables held constant, the impact on equity of the above financial instruments would be a decrease of £275,000 or an increase of £372,000 (30 June 2015: 10 per cent. currency movement, decrease of £135,000 on an increase of £165,000).

Included in the income statement is a foreign exchange loss of £920,318 (2015: loss £1,090,841) which includes a loss of £914,454 (2015: loss £1,083,241) arising on the translation of the loan from the Company to its direct subsidiary, SAPSPV Holdings RSA (Pty) Limited; a loan which is denominated in South African Rand. On consolidation, the corresponding foreign exchange gain (2015: gain) arising on translation of this loan in SAPSPV Holdings RSA (Pty) Limited from the functional currency of South African Rand to the presentation currency of Pound Sterling is included in the foreign currency translation reserve within equity.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group.

The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date. This relates also to financial assets carried at amortised cost.

At the reporting date, the Group's financial assets exposed to credit risk amounted to the following:

The Group manages its credit risk by monitoring the creditworthiness of counterparties regularly. Cash transactions and balances are limited to high-credit-quality financial institutions.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its obligations as they fall due. The Group currently manages its liquidity risk by maintaining sufficient cash and banking facilities as indicated by its cashflow forecasts. The Group's liquidity position is monitored by the Board of Directors.

The residual undiscounted contractual maturities of financial liabilities are as follows:

Interest rate risk

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group is exposed to interest rate risk from the cash held in interest bearing accounts at floating rates or short term deposits of one month or less and on loans from third parties. The Company's Board of Directors monitor and review the interest rate fluctuations on a continuous basis and act accordingly.

During the year ended 30 June 2016 should interest rates have decreased by 100 basis points, with all other variables held constant, the shareholders' equity and loss for the year would have been £13,000 lower (2015: 100 basis points, £21,000 lower).

Capital risk management

The Company's primary objective when managing its capital base is to safeguard its ability to continue as a going concern whilst disposing of the Group's portfolio where acceptable returns can be generated and returning excess capital to shareholders.

Capital comprises share capital (see note 15) and reserves.

No changes were made in respect of the objectives, policies or processes in respect of capital management during the years ended 30 June 2015 and 2016.

4 Segment Information

The entity is domiciled in the Isle of Man. All of the reported revenue, £300,787 (2015: £1,423,564) arises in South Africa.

Revenues of £150,754 (ZAR 3,232,427) and £137,438 (ZAR 2,946,900) were derived from single external customers and were attributable to the Imbonini phase 1 development (30 June 2015: £310,859 (ZAR: 5,600,000), £656,014 (ZAR 11,817,834) and £236,163 (ZAR 4,254,386) were derived from single external customers and were attributable to the Imbonini phase 1 development, the Gosforth Park development and the Kindlewood development respectively).

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 (excluding VAT). Management fees for the year ended 30 June 2016 paid to Bridgehead amounted to £199,500 (30 June 2015: £198,333) including VAT.

Group Five was entitled to a management fee of £290,000 per annum payable monthly in arrears. Management fees for the year ended 30 June 2016 paid to Group Five were £nil (ZAR nil) (30 June 2015: £24,168 (ZAR 435,381)). 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 £77,715 (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 11). Sales fees payable for the year ended 30 June 2016 payable to Group Five amounted to £nil (ZAR nil) (30 June 2015: £25,761 (ZAR 464,074)).

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 for the year ended 30 June 2016 amounted to £79,799 (ZAR 1,603,441) (30 June 2015: £42,447 (ZAR 768,119)).

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. This is settled by Bridgehead out its 1.5% performance fee.

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. The Chairman was entitled to receive 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

John Chapman was entitled to an annual basic salary of £30,000 and Craig McMurray was entitled to an annual basic salary of £20,000. Pursuant to the terms of their service agreements, Craig McMurray and John Chapman are entitled to incentive payments of, respectively, 1.5 per cent. and 0.5 per cent. of all sums distributed to shareholders. Their services 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 year ended 30 June 2016 amounted to £62,293 (30 June 2015: £62,293).

All directors' remuneration and fees

Total fees and basic remuneration (including VAT where applicable) paid to the Directors for the year ended 30 June 2016 amounted to £151,000 (30 June 2015: £151,036) and was split as below. Directors' insurance cover amounted to £16,007 (30 June 2015: £18,086).

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:

There are tax losses carried forward in the underlying subsidiaries of £25,672,688 (ZAR 505,294,981) (30 June 2015: £29,179,210 (ZAR 557,130,326)). There is no expiry date for the carrying forward of these losses. Tax losses are not carried as deferred tax assets in the consolidated balance sheet until the losses have been approved by the South African Revenue Service and the realisation of the related tax benefit through future taxable profits is probable.

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 year.

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

10 Intangible assets

The above goodwill related 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 was determined using fair value less cost to sell. The recoverable amount of goodwill was assessed as £nil (ZAR nil) and the development was reclassified as a disposal group asset, see note 14.

11 Inventories

Current assets

During the year, the Group capitalised costs of £3,117 (ZAR 66,829) (30 June 2015: £20,294 (ZAR 365,591)), in order to develop these assets for future re-sale, and accordingly they were classified as inventory.

At 30 June 2016 the net realisable values of all the developments were lower than cost, therefore, their inventory values have been impaired to a value of £3,187,027 (ZAR 62,727,698) (30 June 2015: African Renaissance, Brakpan, Driefontein, Lenasia, Imbonini and Imbonini phase 2 were impaired to a value of £8,858,873 (ZAR 169,146,000)). Net realisable value has been assessed using valuations determined by Broll (adjusted to match the sale contract) less estimated selling expenses.

The African Renaissance development was reclassified as a disposal group asset at 30 June 2015, see note 14, and sold during the year, see note 23.

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 for purchasers and delays due to obtaining permits.

12 Trade and other receivables

* in relation to the sale of the Emberton development where one final amount of ZAR 9,000,000 (£457,266) was received in August 2016 and the sale of the African Renaissance development where one final amount of ZAR 40,000,000 (£2,032,293) has been received in December 2016.

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

13 Cash at bank

Included within the bank deposit balances figure is an amount of £nil (ZAR nil) (30 June 2015: £46,734 (ZAR 892,306)) represented by bank guarantees retained by the bank under fixed deposit (detailed below). This was 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 £nil (ZAR nil) (30 June 2015: £46,734 (ZAR 892,306)) in connection with senior debt obligations of its subsidiary Imbonini Park (Pty) Ltd.

14 Assets of Disposal Group Classified as Held for Sale

The assets and liabilities of Zwartkoppies Property Investment (Pty) Limited (owning the assets of the African Renaissance Project) were presented as held for sale at 30 June 2015 as the Group was negotiating its sale at the year end. Goodwill with a value of £786,000 was impaired prior to transfer to assets held for sale (see note 10).

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.

One distribution was paid during the year, 5 pence per Ordinary Share on 16 October 2015 (2015: 5 pence per Ordinary Share on 31 October 2014).

16 Reserves

The following describes the nature and purpose of each reserve within equity:

17 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. The EPRA numbers incorporate the directors' valuation and are net of tax.

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

18 Non-controlling interests

The subsidiary received funding of ZAR 70,000 (£3,265) during the year to meet its ongoing commitments.

19 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) Limited, and the Brakpan development.

The above loan is unsecured and repayable on demand.

The fair value of this loan approximates its carrying value.

20 Trade and other payables

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

21 Contingent liabilities and commitments

As at 30 June 2016 the Group had no contingent liabilities or commitments.

22 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. Key management is made up of the Board of Directors who are therefore considered to be related parties. Fees in relation to the Directors are disclosed in note 7.

The former investment manager, Group Five Property Developments (Pty) Limited was considered to be a related party by virtue of its 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. 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.

The principal subsidiary undertakings within the Group as at 30 June 2016 are:-

* this also represents the percentage of ordinary share capital and voting rights held - 2016

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

23 Profit on disposal of subsidiary

During the year the Group disposed of its holding in and intercompany loan with Zwartkoppies Property Investment (Pty) Limited for total consideration of ZAR 70,000,000 (£3,264,667). This resulted in a net gain on disposal of £1,763,580 as follows:

24 Post balance sheet events

The outstanding payment of ZAR 40 million (£2.30 million) on African Renaissance was received in full. Simultaneously contracts for the sale of the remaining assets, in the form of the Company's principal South African subsidiary, have been concluded with the same buyer. The contracted price is ZAR 60 million (£3.46 million), of which ZAR 25 million (£1.3 million) has been received, with the payment of ZAR 11 million (£0.63 million) due on 28 February 2017 and the remainder due on 30 June 2017.