South African Property Opportunities Regulatory News (SAPO)

24 March 2016

SOUTH AFRICAN PROPERTY OPPORTUNITIES PLC

('SAPRO' or the 'Group')

Interim results for the six months ended 31 December 2015

South African Property Opportunities plc (AIM: SAPO), an investment company established to invest in real estate opportunities in South Africa, announces its unaudited interim results for the six months ended 31 December 2015.

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

For further information please contact

Paul Fincham/ Robert Naylor +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 interim results for South African Property Opportunities plc ("SAPRO" or "the Company") and its subsidiaries (the "Group") for the six months ended 31 December 2015.

Performance

As at 31 December 2015 the unaudited EPRA net asset value per share ("NAV"), taking into account property revaluations, estimated sales and distribution costs was 13 pence compared with 21 pence at 30 June 2015. The fall in NAV primarily relates to the capital payment of 5 pence per share made in October 2015, and a currency loss of 3 pence per share.

Between 30 June 2015 and 31 December 2015 the exchange rate moved from 19.09 ZAR/GBP to 23.11. The Company does not hedge its South African Rand exposure. The Company has no bank debt.

South African Economy and Property Market

Bridgehead Real Estate Fund (Pty) Ltd (the "Investment Manager") reports on the South African economy in detail on pages 3 to 5. In summary, the development land market unsurprisingly continued to languish against a backdrop of steep currency depreciation, inflation, higher interest rates and political instability.

Valuations

The portfolio was not revalued externally at 31 December 2015, and the figures adopted in the accounts are the CBRE/Broll numbers from June 2015, with minor amendments to reflect specific transactions agreed where relevant.

Sales

The principal sale in the period - the subsidiary holding the African Renaisance property - was reported as a post balance sheet event in the 30 June 2015 accounts. The first payment tranche of ZAR 30 million (£3.4 million) was received in the period, with the final ZAR 40 million (£1.9 million) due by 31 December 2016.

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

The ZAR 6.0 million (£0.3 million) second instalment from the Emberton sale was also received during the period.

Asset Management

The key efforts of the Investment Manager are focused on achieving sales, and on improving the liquidity of the remaining assets.

Outlook

As previously reported, the Company's remaining six assets all face challenges and the Investment Manager has been asked to actively seek the sale of individual assets as well as a portfolio sale at an appropriate price.

David Hunter

Chairman

23 March 2016

Report of the Investment Manager

Introduction

South African economic growth slowed for four straight years only achieving 1.3% GDP growth as at December 2015. This happened against the back drop of a depreciating currency, interest rate hike cycle, higher inflation, political instability, lower growth projections for 2016 and the real prospects of a rating agency downgrade. South Africa's currency woes have been shared by its emerging market peers, however, the country specific risks and recent political events have only exacerbated an already fragile economy. General investor sentiment is at a low point and growth prospects for rentals and total investment returns in the real estate sector are under severe pressure. The impact on development land prices has been negative. Many of the local REITs have recently increased their move into offshore markets in search of acquisition prospects, Rand hedge and distribution growth.

Progress on planning approvals was sluggish and sales proved slower than the previous period on the remaining rump of the portfolio. Ongoing interest in the last six project sites as well as prospects of a portfolio sale continue to be actively pursued with a view to winding up sales as soon as market conditions allow.

Key South African Economic Indicators

South African Property Market

South African listed property once again outclassed bonds, cash and equities in 2015. Listed property returned 7.99% to its investors, outstripping cash's 6.46%, equities' 5.13% and bonds' -3.93% (Catalyst Fund Managers).

Growth prospects for 2016 are around 0.5% and unemployment continues to run very high while consumers are faced with administered price hikes and food inflation meaning 2016 could be a tough year for consumers and, as a result, retailers. While retail property performed best in 2015 a few cracks are starting to show as the indebtedness of consumers and inflation take effect. The commercial property (office) market continues to post the highest vacancy rates while a continued decline in manufacturing output (notwithstanding the weakening Rand) does not bode well for industrial property fundamentals.

The ability for REIT's to consistently post inflation-beating dividend payouts to income-hungry investors is no easy feat. This has been aggravated by high operating cost inflation, increased interest costs, a slowdown in property demand and low rental growth. Considering the deteriorating general economy it is unlikely the real estate sector can defy economic gravity and continue to outperform other asset classes for much longer.

A sober outlook on the domestic property market is evidenced by the larger REIT counters who are increasingly looking offshore as they find viable acquisitions in South Africa hard to come by in a highly competitive environment where the ingredients for growth are more difficult to extract in a deteriorating macro economy. The negative leverage effect of higher debt funding costs (9.5% to 10%) against buying physical properties at lower yields (around 8%) is dilutive for the distribution growth of investor portfolios.

The increasing costs of borrowing challenges the feasibility of new development and impacts negatively on residual land values. Municipal service deliveries remain problematic and continue to increase the risk of achieving planning approvals and services delivery on sites.

Disposal Progress

The Company adopts various sales methods in order to facilitate the orderly sell down of properties at fair market prices including, but not limited to: structured and secured payment terms, planning approval conditions, as well as price discounting where appropriate. The Company concluded three property sales to the value of ZAR 73.25 million (£3.5 million) during the six month period reducing the total number of properties available for sale in its portfolio from seven to six. These sales included two land sales at Imbonini 1 as well as the structured sale of African Renaissance. The longest dated receipt of any structured payment transaction remains December 2016.

Sales Summary (June - December 2015)

Emberton:

SAPRO concluded a sale of the subsidiary company owning the assets of the Emberton Project in the previous reporting period. Of the total sales proceeds of ZAR 39 million (£2.2 million), ZAR 24 million has been received to date with the remaining two instalments due in April 2016 (ZAR 9 million) and August 2016 (ZAR 6 million).

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 (£3.4 million). In terms of the sale agreement ZAR 30 million has been received to date with the balance of the proceeds (ZAR 40 million) due by 18 December 2016 and secured by bank guarantee.

Table 1.1: Portfolio Sales (Jul 2015 - Dec 2015)

* African Renaissance final payment due on 18 December 2016

** disposal of subsidiary

Sales post reporting date

As at 31 December 2015 the Company had reduced the total number of properties available for sale in its portfolio to six project sites. Receipt of proceeds (ZAR 2.2 million (£0.1 million)) from sales executed in the prior reporting period relating to the sale of the last mini industrial unit in Acacia Park was received in February 2016. At time of writing no other sales had been executed post the reporting date of 31 December 2015.

Portfolio Valuations

The portfolio was not revalued at the interim reporting period and continues to be held at the carrying values as per the valuations independently performed by Broll (CBRE) at 30 June 2015. Accounting for interim sales in the period the portfolio valuations are adjusted as below.

Table 1.2: Valuation movements (Jun 2015 - Dec 2015)

Planning Permission Progress

Brakpan: The Company is still awaiting a tribunal date to be set for the review of the zoning application. A tribunal date was expected to be scheduled before the end of 2015 and is still pending after which it is hoped the rights will be approved or the objection process can commence.

Lenasia: The Company awaits the development co-operation agreement with the City of Johannesburg Property Company to be concluded. This will allow the City Planner to be satisfied that the sites access and egress issues have been formally sorted out. Thereafter the application for rezoning approval (Section 101) can be made. While the site has electrical capacity for a third of the developable bulk to be built it is not anticipated additional electrical supply will materialise within the short term.

Clayville: The delivery of service level agreements remains outstanding from the local Council. Once completed the amended S125 plan will be approved along with the general plan. Section 101 can be expected thereafter (now Q2 2016). The lack of electrical capacity in the area to service the site remains the major obstacle to a successful sale.

Driefontein: All approvals are in place and the top soil contamination issue requiring remedial action to remove surface materials has been estimated at up to R 4 million (£0.2 million). These can only 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.

Remaining Portfolio

Bridgehead Real Estate Fund (Pty) Ltd

Investment Manager

23 March 2016

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Notes to the Financial Statements

1 General Information

South African Property Opportunities plc (the "Company") was incorporated and registered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004 on 27 June 2006 as a public limited company with registered number 117001C. On 7 January 2011 with the approval of Shareholders in general meeting, the Company was re-registered as a company under the Isle of Man Companies Act 2006 with registered number 006491v. South African Property Opportunities plc and its subsidiaries' (the "Group") investment objective is to achieve capital growth from the development and subsequent sale of a portfolio of real estate assets in South Africa.

The Company's property activities were managed by Group Five Property Developments (Pty) Limited ("Group Five"). Bridgehead Real Estate Fund (Pty) Ltd ("Bridgehead") was appointed as the replacement investment manager with effect from 1 July 2014. The Company's administration is delegated to Galileo Fund Services Limited (the "Administrator"). The registered office of the Company is Millennium House, 46 Athol Street, Douglas, Isle of Man, IM1 1JB.

Pursuant to a prospectus dated 20 October 2006 there was an authorisation to place up to 50 million shares. Following the close of the placing on 26 October 2006, 30 million shares were issued at a price of 100p per share.

The shares of the Company were admitted to trading on the AIM Market of the London Stock Exchange ("AIM") on 26 October 2006 when dealings also commenced. On the same date the shares of the Company were admitted to the Official List of the Channel Islands Stock Exchange (the "CISX").

As a result of a further fundraising in May 2007, 32,292,810 shares were issued at a price of 106p per share, which were admitted to trading on AIM on 22 May 2007.

The Company's agents and its Investment Manager perform all functions, other than those carried out by the Board's executive and non-executive directors. The Group has two executive directors.

Financial year end

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

2 Summary of significant accounting policies

2.1 Basis of preparation

The accounting policies applied by the Group in the preparation of these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 30 June 2015.

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

The interim financial statements for the six months ended 31 December 2015 are unaudited. The comparative interim figures for the six months ended 31 December 2014 are also unaudited.

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 are such that there would be no material adjustments to the financial statements if they had been prepared on a going concern basis.

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. The interim valuation is independently assessed by the Investment Manager and any proposed variations are then approved by the SAPRO Board. These are used in conjunction with the strategic plan for each development in order to determine any impairment of inventory.

During the period there were no impairment charges in relation to inventory (see note 10).

3 Segment Information

The entity is domiciled in the Isle of Man. All of the reported revenue, £168,415 (31 December 2014: £1,339,470), arises in South Africa.

For the six months ended 31 December 2015 revenues of £154,511 (3,217,528) were derived from single external customers attributable to the Imbonini development (31 December 2014: £313,451 (ZAR 5,600,000), £662,116 (ZAR 11,829,120) and £238,132 (ZAR 4,254,386) attributable to the Imbonini development, Gosforth Park development and the Kindlewood development respectively).

4 Cost of sales

5 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 period ended 31 December 2015 paid to Bridgehead amounted to £99,750 (31 December 2014: £98,583).

Group Five was entitled to a management fee of £290,000 per annum payable monthly in arrears. Management fees for the period ended 31 December 2015 paid to Group Five amounted to £nil (ZAR nil) (31 December 2014: £24,370 (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 10). Sales fees payable for the period ended 31 December 2015 payable to Group Five amounted to £nil (ZAR nil) (31 December 2014: £14,163 (ZAR 253,035)).

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 period ended 31 December 2015 amounted to £74,954 (ZAR 1,546,440) (31 December 2014: £35,438 (ZAR 633,119)).

6 Other administration fees and expenses

Included within other administration fees and expenses are the following:

Directors' remuneration

The maximum amount of basic remuneration payable by the Company by way of fees to the Non-executive Directors permitted under the Articles of Association is £200,000 per annum. All Directors are each entitled to receive reimbursement of any expenses incurred in relation to their appointment. During the period of these accounts, the Chairman was entitled to an annual fee of £40,000, Stephen Coe was entitled to an annual fee of £35,000 and David Saville was entitled to an annual fee of £15,000.

Executive Directors' fees

The Executive Directors received annual basic salaries of £40,000. From 1 April 2013 John Chapman reduced his annual basic salary to £30,000. From 1 July 2014 Craig McMurray reduced his annual basic salary to £20,000 per annum. Pursuant to the terms of their service agreements, Craig McMurray and John Chapman are entitled to incentive payments of, respectively, 1.5 per cent. and 0.5 per cent. of all sums distributed to shareholders. Their service agreements also provide for payments of the same percentages, following termination of their employment, for distributions paid or payable from cash generated during their employment. Total incentive fees for the period ended 31 December 2015 amounted to £62,293 (31 December 2014 £62,293).

All directors' remuneration and fees

Total fees and basic remuneration (including VAT where applicable) paid to the Directors for the period ended 31 December 2015 amounted to £75,682 (31 December 2014: £75,766) and was split as below. Directors' insurance cover amounted to £8,051 (31 December 2014: £10,151).

7 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:

8 Basic and diluted loss per share

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

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

9 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 was assessed as £nil (ZAR nil) and the development was reclassified as a disposal group asset, see note 13.

10 Inventories

Current assets

During the period, the Group capitalised costs of £nil (ZAR nil) (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 31 December 2015 the net realisable values of Brakpan, Driefontein, Lenasia, Imbonini and Imbonini phase 2 were lower than cost, therefore their inventory values have been impaired to a value of £4,257,393 (ZAR 98,378,555) (30 June 2015: African Renaissance, Brakpan, Driefontein, Lenasia, Imbonini and Imbonini phase 2 were lower than cost, therefore their inventory values were impaired to a value of £8,858,873 (ZAR 169,146,000)). Net realisable value has been assessed using valuations determined by Broll as at 30 June 2015 which have been updated by the directors to reflect current levels of interest and any potential offers from third parties less estimated selling expenses.

The African Renaissance development was reclassified as a disposal group asset at 30 June 2015, see note 13 and sold during the period ended 31 December 2015, see note 21.

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

11 Trade and other receivables

*in relation to the sale of the Emberton development where two amounts totalling ZAR 15,000,000 (£649,134) are due to be received by the end of August 2016 and the sale of the African Renaissance development where one final amount of ZAR 40,000,000 (£1,731,025) is due to be received on 31 December 2016 for which the Company has received a bank guarantee.

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

12 Cash at bank

Included within the bank deposit balances figure is an amount of £39,099 (ZAR 903,493) (30 June 2015: £46,734 (ZAR 892,306)) represented by bank guarantees retained by the bank under fixed deposit (detailed below). This is the only figure excluded from the above balances for analysing the movements of cash and cash equivalents in the cash flow statement.

Bank guarantees

The subsidiary SAPSPV Holdings RSA (Pty) Ltd has a contingent liability of £39,099 (ZAR 903,493) (30 June 2015: £46,734 (ZAR 892,306)) in connection with senior debt obligations of its subsidiary Imbonini Park (Pty) Ltd.

13 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). The sale took place in the period ended 31 December 2015, see note 21.

14 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 period ended 31 December 2015, 5 pence per Ordinary Share on 16 October 2015 (31 December 2014: one distribution of 5 pence per Ordinary Share on 31 October 2014).

15 Net asset value ("NAV") per share

The NAV per share is calculated by dividing the net assets attributable to equity holders of the Group by the number of ordinary shares in issue.

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

The below figures also take into consideration any profit share agreements with development partners, fees due on sale of properties (see note 5) and incentive fees due to the Executive Directors (see note 6).

16 Non-controlling interests

17 Loans from third parties

The loans from third parties are as follows:

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

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

The fair value of this loan approximates its carrying value.

18 Trade and other payables

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

19 Contingent liabilities and commitments

As at 31 December 2015 the Group has contingent liabilities which have corresponding bank guarantees amounting to £39,099. See note 12 for further details.

20 Related party transactions

Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the other party in making financial or operational decisions. 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 6.

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. 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 5 and fees in relation to the Executive Directors are disclosed in note 6.

The principal subsidiary undertakings within the Group as at 31 December 2015 are:-

* this also represents the percentage of ordinary share capital and voting rights held - 2015

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

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

21 Profit on disposal of subsidiary

During the period the Group disposed of its holding in and intercompany loan with Zwartkoppies Property Investment (Pty) Limited for total consideration of ZAR 70,000,000 (£3,361,506). This resulted in a net gain on disposal of £1,764,194 as follows: