Half-year Report

30 September 2016

Masawara plc ("Masawara", the "Company" or the "Group")

Interim results for the six months ended 30 June 2016

Masawara, an investment company focused on acquiring interests in companies based in Zimbabwe and the southern African region, is pleased to announce its unaudited results for the half year ended 30 June 2016.

The Company's interim financial statements for the half year ended 30 June 2016 may be viewed on, or downloaded from, the Company's website at www.masawara.com.

Contact details

Masawara plc

(Masawara Zimbabwe (Private) Limited, the Company's Investment Advisor in Zimbabwe)

Rutendo Maziva/Oliver Lutz

+263 4 751805

Cenkos Securities plc (Nominated adviser and broker)

Nicholas Wells/Elizabeth Bowman/Harry Hargreaves

 +44 20 7397 8900

Financial review

The Directors present the interim unaudited results for the six-month period ended 30 June 2016. The results for the six-month period ended 30 June 2016 are set out in the financial statements on pages 7 to 17.

Performance

The Group achieved a profit after tax of $2.3 million for the half year ended 30 June 2016 compared to a profit after tax of $6.1 million during the same period last year. The prior year's results do not include the performance of Sable Chemical Industries Limited ("Sable"), which was an associate until 24 June 2015 when a change in control resulted in the business being consolidated as a subsidiary. A bargain purchase gain of $5.2 million was recognised in the prior year results. After taking into account once -off items and unusual transactions in the current and prior years, the adjusted profit after tax increased from $317,000 to $4.1 million in the six months ended 30 June 2016.

Consolidated unaudited proforma income statement for the six months ended 30 June 2016

Notes

a. These are the line items affected by the inclusion of Sable's results in 2016. Sable was consolidated from 24 June 2015 and had no impact on the prior year's results. Included in other operating income, administrative expenses and finance costs are $1.0 million, $3.1 million and $494,000 respectively, related to Sable.

b. The gain on bargain purchase was as a result of the Group taking control of Sable on 24 June 2015.

c. The interest income on the Telerix Communications (Pvt) Ltd loan notes did not recur in the current year as the loan notes were fully impaired in December 2015.

d. An impairment loss was realised on the Telerix Communications (Pvt) Ltd loan notes in the prior year.

e. The unusual and significant non-recurring items in 2016 and 2015 have been excluded to arrive at the adjusted profit before tax.

Group's performance by segment

Masawara Plc, classifies the Group's business units into different clusters i.e. insurance, hotels, agrochemicals, property (Joina City) and technology for the purpose of monitoring the operating results of business units and resource allocation to business units. The following shows the Group's performance by segment:

Insurance

Most of the insurance sector companies registered growth in profit after tax when compared to the same period in the prior year. This was primarily as a result of the lower claims ratios across all businesses and the introduction of new products in the life assurance business. Minerva Risk Advisors Private Limited also registered strong growth in the healthcare broking line. For the rest of the year, the insurance segment is expected to continue to register growth compared to the previous year, albeit at a lower rate.

For the companies operating in Botswana and Uganda, the results in their functional currencies of Botswana Pula (BWP) and Ugandan Shillings (UGX) were as follows:

The key performance ratios of the insurance businesses for the six months were as follows:

Hotels

The performance of the Zimbabwe hotels incurred a loss after tax in the current year, albeit a 24% improvement on the prior year. There was significant rate cutting in the Zimbabwe hotel market, resulting in a decline in revenue per available room (RevPAR) in order to protect market share. Cresta Marakanelo registered growth in profit after tax, driven by improved profitability of the resort hotel Cresta Mowana, which was at break even during the prior year. The hotel segment is expected to register limited growth for the full year ending 31 December 2016, as a result of the competitive environment in Zimbabwe.

The key performance indicators of the hotel businesses for the half year were as follows:

Agro chemicals

Sable became a subsidiary of the Group on 30 June 2015, prior to that date Sable was accounted for as an associate. The Group's share of Sable's losses for the six months ended 30 June 2015 were not recognised in the Group's accounts as the investment in Sable was impaired. The Sable electrolysis plant was decommisioned during the last quarter of the previous financial year, and has in the current year, moved to a new business model relying on the importation of ammonia in order to manufacture ammonium nitrate fertiliser. The business was under care and maintenance during the period under review. It sold a significant portion of the inventory carried forward from the prior year. Sable has raised some working capital finance and production is expected to recommence during October of 2016. Efforts to raise additional financing are ongoing.

Joina City

Joina City continued to be affected by the liquidity challenges in the market, which in turn had an impact on debtors' collections for the period. Major refurbishments were commenced at Joina City during the first six months of the year hence the non-payment to shareholders in the current period. The remainder of the year will see the completion of the refurbishments with improved occupancies anticipated in 2017. Emphasis will be placed on improving debtors' collections.

The key performance indicators of Joina City for the six months were as follows:

Technology

In July 2015 regulatory approvals were obtained for the merger of the operations of Dandemutande, (a wholly owned subsidiary of Telerix Communications (Private) Limited ("Telerix")), iWay Africa (an associate of the Group) and Africa Online. The merger resulted in an increased revenue base and a broader product and service offering. The business registered a 164% growth in earnings before interest, tax, depreciation and amortization (EBITDA) compared to the same period last year, on the back of the cost rationalization that began after its merger. The strategies employed have moved the business from a loss to a profit position at EBITDA level. The Directors believe the business is now on a firm foundation to grow organically and in-organically through market consolidations.

The Group did not recognize its share of Telerix results for the six months, as the Group's investment in Telerix was reduced to $nil during the year ended 31 December 2012.

Cash flow for the six-month period

The Group recorded an overall increase in cash and cash equivalents of $3.2 million from December 2015. $1.4 million was generated from operating activities, $0.6 million was generated from investing activities and $1.0 million was generated from financing activities.

Net cash flows used in investing activities was mainly attributable to the following investing activities:

· Cash outflow of $3.5 million for the purchase of investment property and an outflow of $0.6 million for the acquisition of property, plant and equipment;

· $2.6 million proceeds received from the disposal of an interest in a subsidiary; and

· net cash inflow of $2.2 million from the sale of financial instruments.

Financial position

Total assets increased from $288.2 million as at 31 December 2015 to $297.8 million as at 30 June 2016. The Group had cash and cash equivalents of $29.1 million as at 30 June 2016 (31 December 2015: $25.9 million). Total liabilities increased from $188.6 million as at 31 December 2015 to $193.8 million as at 30 June 2016. The net asset value per share attributable to equity holders of the parent as at 30 June 2016 was $0.64 (31 December 2015: $0.61).

Principal risks and uncertainties

The principal risks and uncertainties affecting the business relate to the political and economic environment of Zimbabwe, where the investments are predominantly held. There is a further risk that investments made by the Group will not result in the envisaged cash generation or capital appreciation. This risk is managed by the careful evaluation of all proposed investments, with detailed due diligence work being undertaken, before any investments are made and ongoing monitoring of existing investments.

There is a risk that the illiquidity of the Zimbabwean equity and bond markets may affect the valuation of the Group's investment in investment properties in the short to medium term. The prevailing liquidity challenges in Zimbabwe may also affect the Group's ability to remit dividends from the Zimbabwean operations to the off-shore holding companies and the Masawara Plc shareholders. The operating entities may also experience significant delays in remitting payments to offshore suppliers, which may have an adverse impact on the businesses. 

The economic conditions in Zimbabwe have continued to deteriorate, and this is not expected to improve during the rest of the current financial year. The Group's management will continue to focus on finding opportunities to grow and increase

market share. The property segment and the investments in listed equities are expected to be adversely affected by the prevailing conditions in the Zimbabwe market, with possible fair value losses being recorded during the second half of the financial year.

Going concern

Management have prepared cash flow forecasts indicating that there is adequate operating cash for the period to December 2017. The Directors reviewed the cash flow forecasts prepared by management when assessing the ability of the Group to continue operating as a going concern. Based on the review of the Group's cash flow forecasts, the Directors believe that the Group will have sufficient resources to continue to trade as a going concern for a period of at least 12 months from the date of approval of these financial statements and accordingly, the financial statements have been prepared on the going concern basis.

Unaudited interim consolidated income statement for the six months ended 30 June 2016

Unaudited interim consolidated statement of other comprehensive income for the six months ended 30 June 2016

Interim consolidated statement of financial position as at 30 June 2016

MASAWARA PLC

Interim consolidated statement of changes in equity for the six months ended 30 June 2016

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

1 Corporate information

Masawara Plc ("the Company") is an investment company incorporated and domiciled in Jersey, Channel Islands, whose shares are publicly traded on the London Stock Exchange's AIM. The company is managed in Jersey and its registered office is located at Queensway House, Hilgrove Street in St Helier, Jersey.

The Group interim financial statements consolidate those of the Company, its subsidiaries and the Group's interest in associates and a joint venture (together referred to as "the Group").

The investment portfolio of the Company has five reportable segments which are listed below:

· The Joina City segment which comprise of the Group's largest investment property that leases retail and office space at the Joina City building which is located in Harare, Zimbabwe's largest capital city.

· The hotels segment which comprises of the Group's interest in Cresta Zimbabwe (Private) Limited and Cresta Marakanelo Limited.

· The insurance segment comprise of the Group's investment in insurance businesses i.e. Zimnat Life Assurance Company Limited and its subsidiaries and joint venture, Zimnat Lion Insurance Company Limited, Grand Reinsurance (Private) Limited, Botswana Insurance Company Limited, Lion Assurance Company Limited and Minerva Risk Advisors (Private) Limited.

· The agrochemicals segment which comprise of the Group's investment in Sable Chemical Industries Limited and Zimbabwe Fertlizer Company Limited.

· The technology segment comprising Telerix Communications (Private) Limited, a company that is licensed to construct, operate and maintain public data internet access and Voice Over network in Zimbabwe.

2 Basis of preparation

The interim consolidated financial statements for the six months ended 30 June 2016 have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting as adopted by the European Union.

The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's Annual Financial Statements for the year ended 31 December 2015, which have been prepared in accordance with IFRSs as adopted by the European Union. The interim consolidated financial statements have been drawn up using accounting policies and presentation consistent with those applied in the audited accounts for the year ended 31 December 2015, except as described as below.

A number of amendments to IFRSs became effective for the financial year beginning on 1 January 2016 however the Group did not have to change its accounting policies or make material retrospective adjustments as a result of adopting these new standards. The amendments to IFRS effective for periods beginning on 1 January 2016 are as follows:

· Annual improvements 2012-2014 (Amends IFRS 5, IFRS 7, IAS 19, IAS 34)

· Amendments to IFRS 11 - Accounting for acquisitions of interests in joint ventures

· Amendment to IAS 16 and IAS 38 - Clarification of acceptable methods of depreciation and amortisation

· Amendments to IAS 16 and IAS 41 - Agriculture: Bearer plants

· Amendments to IAS 27 - Equity method in separate financial statements

· Amendments to IAS 1 - Disclosure initiative

· Amendments to IFRS 10 and IAS 28 - Investment entities: Applying the consolidation principle (Not yet EU endorsed as of 1 May 2016)

Estimates

In preparing these interim financial statements, the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2015.

Going Concern

Management prepared cash flow forecasts indicating that there is adequate operating cash for the period to December 2017. In assessing the liability of the Group to continue as a going concern, management carried out sensitivity analysis on the cash flow assumptions to reflect a range of other reasonably possible outcomes and concluded that Masawara will be able continue as a going concern. The Directors reviewed the cash flow forecasts prepared by management when assessing the ability of the Group to continue as a going concern. The Directors believe that the Group will have sufficient resources to continue to trade as a going concern for a period of at least 12 months from the date of approval of the financial statements and accordingly, the financial statements have been prepared on the going concern basis.

3 Significant events

The following significant events that have a material effect on the financial statements of the Group took place during the six months period ended 30 June 2016.

3.1 Disposal of interest in a subsidiary without change in degree of control (Botswana Insurance Company Limited)

On 24 January 2016, the Group disposed of a 15% interest out of its 62% interest held in Botswana Insurance Company Limited (BIC) at a consideration of $2.6 million. The carrying amount of non controlling interests in BIC on the date of disposal was $6.5 million (representing 35% interest). The transaction resulted in an increase in non controlling interests of $2.8 million and decrease in equity attributable to owners of the parent of $0.2 million. The effect of changes in ownership interest of BIC is summarized as follows:

3.2 Acquisition of additional interest in a subsidiary without change in degree of control (Lion Assurance Company Limited)

On 24 January 2016, the Group acquired an additional 31% interest in Lion Assurance Limited (LAC) for no consideration. The Group now holds 86% of the equity share capital of LAC. The carrying amount of non controlling interests in LAC on the date of disposal was US$ 1.9 million (representing 43% interest). This resulted in a decrease in non controlling interests and an increase in equity attributable to owners of the parent of US$ 1.4 million both. The effect of changes in ownership interest of LAC is summarized as follows:

3.3 Net impact of transactions with non controlling shareholders on the Group's equity

3.3 Net impact of transactions with non controlling shareholders on the Group's equity (continued)

4 Cash generated from operating activities

June 2016 June 2015

6 Financial assets fair value hierarchy

As detailed per the 31 December 2015 annual report, the fair value hierarchy at which a fair value measurement is categorized is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

The following table provides the fair value measurement hierarchy of the Group's financial assets that are carried at fair value.

There have been no transfers between Level 1, level 2 and level 3 during the period.

30 June 2016

31 December 2015

7 Events after the reporting period

There were no subsequent events or transactions that required recognition or disclosure in the consolidated financial statements.