TIDMATMA

RNS Number : 3647K

ATLAS Mara Limited

01 September 2021

31 August 2021

Atlas Mara Limited

Atlas Mara audited results for the 14-month period ended 28 February 2021

Principal highlights:

-- On 29 June 2021, the Group announced that it had changed its accounting reference date and financial year end from 31 December to 28 February, effective for the 2020 financial year. As a result of this change, the results and prior year information presented herein on an IFRS basis are not comparable.

-- Adjusted net profit of $1.5 million (2019: $5.8 million) which excludes the impact of IFRS 5 remeasurement of subsidiaries held-for-sale and other transaction and restructuring related expenses.

-- Union Bank of Nigeria ("UBN") contributed associate income of $25.5 million for the 14-month period (2019: $31.2 million). The associate income reported reflects the impact of the currency devaluation in 2020, being translated at an average US dollar FX rate of NGN384.4 compared to NGN306.4 in 2019. This represents a 14-month pro-rated 30% decrease in US dollar terms (12.1% on a constant currency basis)

o Despite the impact of the COVID-19 pandemic and related macro-economic challenges as well as government policy responses, UBN's underlying performance for the 14-month period remained strong, with the NPL ratio decreasing to 4% compared to 5.8% in December 2019.

o Capital adequacy remains strong with total CAR above 17% at period-end.

o BVPS increased by NGN 0.41 to 9.05 as at December 2020.

-- On 14 July 2021 the Group announced that it had successfully executed a binding and comprehensive debt restructuring agreement (the "Support and Override Agreement" or "restructuring agreement") with the majority of the Company's and its subsidiary ABC Holdings Limited's ("ABCH's") creditors. This followed the initial announcement on 29 December 2020 that the Group had entered into a new secured facility agreement and a standstill agreement with certain creditors in respect of the Company's and ABCH's financing arrangements (the "Standstill"). Additional information related to the terms of this agreement are set out in the Company's previous announcement.

-- Successful execution of the restructuring agreement enables the Company to continue its focus on its previously announced strategic priorities. In the period from September 2020 to date, the company has announced divestments in Mozambique, Rwanda, Tanzania and Botswana. The Group continues its efforts to streamline the holding company and centralised cost structures. Additionally, the Company continues to evaluate all options that could include a take-private or delisting of the Company and will keep the market apprised as appropriate.

-- Reported net loss to equity holders of $58.7 million (2019: loss of $143.2 million) or $0.35 per share (2019: loss of $0.84 per share) This result includes a loss from continuing operations of $46.6 million (2019: loss of $8.5 million) and a loss from discontinued operations of $12.0 million (2019: loss of $134.7 million). The loss from continuing operations includes a loss on the monetary position in Zimbabwe of $16.9 million and reflects the impact of the currency devaluation of >100% in Zimbabwe and 20% in Nigeria.

-- The Group's operating businesses evolved in response to the challenges brought by the COVID-19 pandemic as well as the ever- increasing customer expectations, new technologies and a rapidly changing competitive environment. Key changes were implemented in health and safety of clients and employees, Information Technology systems and cyber security, capital and liquidity buffers, internal controls, and robust loan management systems.

-- All operating banks maintained adequate capital adequacy ratios, reflecting stable balance sheets. Continued focus on deposit growth, loan book quality, and growth business lines.

Commenting on these results, Chairman Michael Wilkerson said, "The past financial year was the most challenging in the Company's history. Nonetheless, I am pleased to report that the Group was successful in working with its creditors to complete its debt restructuring. The Company also achieved several milestones in the strategic review aimed at maximizing creditor and shareholder value in the context of extraordinary market disruptions and highly regulated banking environments. D espite the challenging macroeconomic environment in Africa, most of our banks generated positive recurring operating profit during the period. "

Events subsequent to year end

-- Debt Restructuring

o On 14 July 2021 the Group announced the successful execution of the restructuring agreement. Creditors representing 88% of the aggregate amount of debt outstanding under the Company's direct and contingent financial liabilities agreed to enter the Restructuring Agreement.

o This agreement provides for a high level of support from the creditors to enable a long-term stable platform to allow the Company to complete its strategic review and divestiture program.

-- Update on strategic transactions

o On 25 August 2021, the Group announced that after successfully securing the necessary regulatory approvals and consents, and fulfilling all other agreed closing conditions, the transaction for the sale of 62.06% shareholding in Banque Populaire du Rwanda Plc ("BPR") had been completed.

o On 19 May 2021, the Group announced the completion of the sale of its subsidiary African Banking Corporation Mozambique ("BancABC Mozambique"). The transaction was initially announced on 29 September 2020.

o On 19 April 2021, the Group announced that it had entered into definitive agreements for the sale of ABCH's holdings in African Banking Corporation Botswana ("BancABC Botswana"). This transaction has received all requisite regulatory approvals and is expected to close by the end of 2021.

-- Classification of BancABC Botswana as a non-current asset held for sale

o Following the announcement of the planned divestiture of BancABC Botswana, effective 31 August 2021, the Group will be required to classify its investment in BancABC Botswana as a non-current asset held for sale. As required by IFRS 5, this will result in the investment being deconsolidated and remeasured to the lower of its carrying value or fair value less cost to sell. The transaction is expected to result in a loss primarily due to the carrying value of goodwill and intangible assets associated with BancABC Botswana of c$25 - 28 million.

o At completion, this transaction will result in release of translation losses to P&L of c. $13.2 million.

Summary of audited results

Table 1: Adjusted operating profit and reconciliation to IFRS profit for 14-months ended 28 February 2021

 
 $'million                                  14-months ended 28 February 2021   Year ended 31 December 2019    CCY* 
                                                                                                              Var % 
                                                                                                            -------- 
 Adjusted profit after tax                                               1.5                           5.8      2.0% 
-----------------------------------------  ---------------------------------  ----------------------------  -------- 
 Transaction and M & A related items                                  (12.6)                       (109.5)     88.5% 
-----------------------------------------  ---------------------------------  ----------------------------  -------- 
 Reorganisations and restructuring costs                               (4.3)                        (13.1)     67.4% 
-----------------------------------------  ---------------------------------  ----------------------------  -------- 
 Impact of hyperinflation accounting                                  (16.9)                        (11.1)   (45.7%) 
-----------------------------------------  ---------------------------------  ----------------------------  -------- 
 Tax and NCI                                                          (26.4)                        (15.3)     45.5% 
-----------------------------------------  ---------------------------------  ----------------------------  -------- 
 Reported net profit                                                  (58.7)                       (143.2)     61.0% 
-----------------------------------------  ---------------------------------  ----------------------------  -------- 
 
 Reported cost to income ratio                                        114.4%                        115.7% 
-----------------------------------------  ---------------------------------  ----------------------------  -------- 
 Adjusted cost to income ratio                                        106.1%                        106.6% 
-----------------------------------------  ---------------------------------  ----------------------------  -------- 
 
 Reported return on equity                                           (20.5%)                       (28.5%) 
-----------------------------------------  ---------------------------------  ---------------------------- 
 Adjusted return on equity                                              0.9%                          1.2% 
-----------------------------------------  ---------------------------------  ---------------------------- 
 
 Reported return on assets                                            (2.3%)                        (5.5%) 
-----------------------------------------  ---------------------------------  ---------------------------- 
 Adjusted return on assets                                              0.1%                          0.2% 
-----------------------------------------  ---------------------------------  ---------------------------- 
 
 Reported EPS ($)                                                     (0.35)                        (0.84) 
-----------------------------------------  ---------------------------------  ---------------------------- 
 Operational EPS ($)                                                    0.01                          0.03 
-----------------------------------------  ---------------------------------  ---------------------------- 
 
 Book value per share ($)                                               1.99                          2.97 
-----------------------------------------  ---------------------------------  ---------------------------- 
 Tangible book value per share ($)                                      2.01                          2.87 
-----------------------------------------  ---------------------------------  ---------------------------- 
 Total Shares in issue ('000)                                        144,002                       169,191 
-----------------------------------------  ---------------------------------  ----------------------------  -------- 
 

(*) Unaudited

Statement of financial position as at 28 February 2021

 
 $'million                           28 February   FY 2019     Variance (%) 
                                         2021 
                                                            ------------------ 
                                                              Total      CCY 
                                                            --------  -------- 
 ASSETS 
----------------------------------  ------------  --------  --------  -------- 
 Cash and short-term funds              141.9       130.5     8.7%      14.1% 
----------------------------------  ------------  --------  --------  -------- 
 Financial assets at FVTPL              17.3        25.2     (31.3%)   (30.5%) 
----------------------------------  ------------  --------  --------  -------- 
 Loans & advances                       580.5       644.1    (9.9%)    (7.2%) 
----------------------------------  ------------  --------  --------  -------- 
 Investments                            119.6       107.8     10.9%     17.6% 
----------------------------------  ------------  --------  --------  -------- 
 Investment in associates               471.5       582.1    (19.0%)   (19.0%) 
----------------------------------  ------------  --------  --------  -------- 
 Goodwill and other intangible 
  assets                                63.9        73.0     (12.5%)   (10.7%) 
----------------------------------  ------------  --------  --------  -------- 
 Other assets                           112.5       85.1      32.2%     42.2% 
----------------------------------  ------------  --------  --------  -------- 
 Assets included in disposal 
  groups held for sale                 1,101.4      979.6     12.4%     12.4% 
----------------------------------  ------------  --------  --------  -------- 
 Total assets                          2,608.6     2,627.4   (0.7%)     0.8% 
----------------------------------  ------------  --------  --------  -------- 
 
 LIABILITIES 
----------------------------------  ------------  --------  --------  -------- 
 Deposits                               672.5       723.7    (7.1%)    (3.9%) 
----------------------------------  ------------  --------  --------  -------- 
 Borrowed funds                         441.7       366.8     20.4%     21.3% 
----------------------------------  ------------  --------  --------  -------- 
 Other liabilities                      141.3       115.5     22.3%     25.6% 
----------------------------------  ------------  --------  --------  -------- 
 Liabilities included in disposal 
  groups held for sale                 1,022.6      874.2     17.0%     17.0% 
----------------------------------  ------------  --------  --------  -------- 
 Total liabilities                     2,278.1     2,080.2    9.5%      11.1% 
----------------------------------  ------------  --------  --------  -------- 
 
 EQUITY 
----------------------------------  ------------  --------  --------  -------- 
 Equity attributable to parent          286.8       502.5    (42.9%)   (41.9%) 
----------------------------------  ------------  --------  --------  -------- 
 Minority interests                     43.7        44.7     (2.2%)    (2.2%) 
----------------------------------  ------------  --------  --------  -------- 
 Total equity                           330.5       547.2    (39.6%)   (38.6%) 
----------------------------------  ------------  --------  --------  -------- 
 
 Total equity and liabilities          2,608.6     2,627.4   (0.7%)     0.8% 
----------------------------------  ------------  --------  --------  -------- 
 
 Loan to deposit ratio                  86.3%       89.0% 
----------------------------------  ------------  --------  ------------------ 
 NPL ratio                              11.4%       11.4% 
----------------------------------  ------------  --------  --------  -------- 
 Net book value per share - $           1.99        2.97 
----------------------------------  ------------  -------- 
 Tangible book value per share 
  - $                                   2.01        2.87 
----------------------------------  ------------  --------  --------  -------- 
 

ATLAS MARA LIMITED

ANNUAL FINANCIAL REPORT FOR THE 14-MONTH PERIODED 28 FEBRUARY 2021

BUSINESS REVIEW

Additional operational highlights during the period:

-- BancABC Botswana

o Implemented a new Retail Digital Banking platform (SARUMoney) in 2020 before the introduction of mandatory COVID-19 related country-wide lockdowns.

o Digital subscriptions increased by 60% during the year and monthly engagement levels exceed 80% on the platform. The Bank also introduced cardless cash withdrawal on its digital platform. These innovations contributed to the Retail deposit book's increase by over 16% by end of February 2021 compared to December 2019.

o Aligned to the ambition to become a transactional bank for corporate clients, additional functionality was added to the Corporate Banking Online platform, which resulted in significant volume and subscription growth during the year.

o Global Markets profit after tax recorded over 40% year on year increase, supported by a 176% increase in trading income driven by increased client relationships.

o Extended repayment and interest moratoriums were offered to select impacted clients in both the retail and corporate business - mostly small exposures in the tourism sector.

o Tools were provided to staff to enable them to work from home. Allowances were granted to employees to purchase office equipment and internet facilities to improve productivity. This ensured that employees were fully equipped to work during the pandemic.

-- BancABC Zimbabwe

o Digital income contributed 9% to core revenue, a substantial increase from 2019.

o A 348% increase in Visa card holders from 7.5 thousand as at February 2020 to 33.8 thousand as at February 2021. 11% increase between December 2020 (30.5k) and February 2021 (33.8 thousand).

o A 33% increase in mobile banking subscribers from 107 thousand in February 2020 to 164 thousand in February 2021.

o A 63% and 424% increase in mobile transaction volumes and values ($3.7 million vs. $2.3 million) respectively.

o The Bank NPL ratio improved to 1.35% as at February 2021 from 3.10% in February 2020.

o Entered into partnership to open total of 28 kiosks which are a low-cost substitute to branches.

o Launched the local remittance service in September 2020, $2 million sent through the service between September 2020 and February 2021.

o Launched the A360 mobile app in July, 33 thousand registrations by December 2020 and 45 thousand registrations by February 2021.

o Added QR code payment functionality on the A360 mobile app.

o Optimized KYC account opening through the website launched in October 2020.

o As part of the annual #777 CSR Campaign, the Bank donated over 200 litres of sanitiser and detergent, 500 face masks and other PPE to 7 different medical and vulnerable health organisations including an Old Peoples Home, Antenatal Clinic, Children's Hospital and Infectious Diseases Hospital.

-- UBN

o Non-interest income increased by 4% for the 12 months ended 31 December 2020 compared to December 2019, with this trend continuing into Q1 and H1 2021 with UBN reporting a 9.5% and 22.3% increase respectively compared to the comparable period.

o The NPL ratio decreased to 4% at 31 December 2020 compared to 5.8% reported in December 2019. As at 30 June 2021, the NPL ratio has stabilized at 4.3%.

o Active users on digital platforms grew 1.3x and new features were added such as end-to-end account opening and enhanced card services including home delivery of cards, boosting revenues from digital channels by 1.5x.

o UnionDirect network was increased to over 18,000 agents, representing a 6x increase. Transaction volume and value grew 10x and 12x respectively delivering 14x revenue growth.

o Relaunched UnionVibe, UnionLegend and UnionInfinity, a suite of products targeting the key youth and teen demographic; and disbursed over NGN9.4 billion loans with new credit propositions.

o Core systems were upgraded to strengthen the performance, reliability, security and processing capacity of various platforms.

o Measures to prioritize the health and safety of employees, customers and other stakeholders to help weather the challenges of the pandemic.

o One of the first in the Nigerian banking industry to adopt the remote working model, with over 70% of workforce operating remotely at the height of the lockdowns, made possible due to pre-pandemic strategic investments made in digital technologies.

o Investments as part of business continuity measures taken in the face of this crisis including additional tools, measures and investments to facilitate work from home and avoid reduced productivity.

EXECUTIVE CHAIRMAN'S LETTER

Executive chairman's statement

Dear fellow Atlas Mara shareholders,

We entered the 2020 financial year with both optimism and positive momentum for most of our underlying banks. The previously announced strategic transaction in 2019 was intended to strengthen our position in markets where we did not have top five stand-alone market positions, and, through meaningful share ownership in the combined group, provide a broader strategic partnership with one of the region's leading banking franchises. At the same time, a strategic fund-raising was underway to strengthen the Group's balance sheet and to allow the Group to focus on and invest in FinTech and digital banking in its top-performing markets. Both of these opportunities were severely impacted by the unexpected global developments of the first quarter of 2020.

The visible onset of the pandemic caused by SARS-CoV-2, government responses in attempt to contain it, and the resulting period of market panic had a substantial and immediate detrimental impact on our business and on our markets that was outsized relative to other regions, including other emerging markets, and even other industries in the region. For example, during the first quarter of 2020, African equity markets declined by nearly 40%, double the decline of the S&P 500 in the same quarter, and of the African equity markets in the worse quarter of the global financial crisis (4Q08). Foreign exchange markets were similarly impacted, with greater than 20% declines against the dollar in the quarter for local currencies in countries such as Zambia, Zimbabwe, and South Africa. The major currency depreciations across the African markets in which the Group operates resulted in a more than $145 million reduction in the US dollar value of the Company's assets and thus a reduction in the Company's debt capacity. Debt funding and liquidity dried up almost overnight. In our largest market, Nigeria, the equity markets declined by over 25% and the Naira by over 7%, while the sovereign yield blew out by over 110 basis points, foreign currency was unavailable in any size. The equity market decline in Africa was 60% worse than in other emerging markets, reflecting a particular "risk-off" view of Africa investment.

While COVID-19 infections remained relatively low, strict lockdowns and travel restrictions led to a substantial decrease in business activity in the region. Many African central banks struggled to provide the liquidity support necessary for local banks impacted by the crisis, while at the same time political pressures led to the imposition of regulatory restrictions on interest rate increases, imposition of fees and other actions that would ordinarily be available to defend liquidity and capital, if not profitability.

As the year progressed, it became apparent that neither the strategic transaction nor the strategic fundraising and repositioning of the balance sheet would be able to go forward under the circumstances. The Board made the difficult decision to undertake a formal restructuring of the Group's holding company debt and hired legal and financial advisors to assist in the process. At the same time, the Board broadened its review of strategic options to ensure that all possible alternatives to preserve value would be considered.

I am pleased to report that the Group was successful in completing the debt restructuring. In July 2021, the Company announced an agreement with creditors representing 88% of the total outstanding debt of the Group's holding companies. This critical agreement includes forbearance of debt service and other conditions favourable to the Group. The agreement also enabled the Company to continue its strategic review and certain associated divestitures, which are discussed below. The high level of creditor support was an affirmation of the alignment of the Company with its creditors, regulators and other stakeholders. I want to thank our creditors for their constructive engagement in reaching the agreement.

The Company also achieved several milestones in the strategic review aimed at maximizing creditor and shareholder value in the context of highly regulated banking environments. In the past year, we have completed or announced several important divestitures in line with this goal, including the Company's banking subsidiaries in Mozambique, Tanzania, Rwanda, and Botswana. Additionally, the company is in ongoing discussions regarding the Group's Zambian subsidiary. These announced transactions demonstrated the value of the Company's assets and represented the culmination of tremendous effort on the part of our colleagues, for which the Board and I are grateful. Today, the Company has a clear trajectory for completing the strategic review and restructuring that we began more than a year ago.

Despite the challenging macroeconomic environment in Africa, I am also pleased to report resilient operating performance from our underlying banks during the financial year. Most banks generated positive recurring operating profit during the period. Our local management teams demonstrated dedicated - and in some cases heroic - performance during this extraordinary period, and I want to thank our teams for their commitment and hard work.

Digital banking continued its rapid expansion across the footprint, particularly given the disruptions to traditional in-person banking activities, and we expect increasing contribution to income from these channels. UBN achieved an increase in profit from continuing operations (in local currency terms), due in part to improved cost efficiency, and despite the significant hit to Nigeria's economy and very limited access to hard currency.

Across the Group, the banks' balance sheets contracted as expected, given pandemic and lockdown related disruptions, but all banks remained above their minimal required capital adequacy ratios. We believe a stronger macroeconomic turnaround will enable the banks, which have improved operational efficiency in this crisis, to achieve faster growth and improved profitability in the future.

For the moment, the macroeconomic environments in our countries of operation remain precarious. The 2021 recovery seen elsewhere around the world has been slow to come to sub-Saharan Africa. The region's GDP contracted by 2.6% in 2020 and is expected to reach only 3.2% positive growth in 2021 (a respectable figure for Western markets, but far below a normal environment for sub-Saharan Africa). The muted economic activity has had widespread effects, from decreased credit book quality, negative credit growth, and lower interest income due in part to regulatory policy decisions.

With already constrained fiscal environments and relatively limited assistance from central banks, African markets have been unable to mount economic responses as impactful as those in the US or the EU, and local currencies, debt and capital markets remain under considerable pressure.

The Company continues to work with the subsidiaries to maximize value both in operations and, where appropriate, in potential partnerships or divestments. We have received expressions of interest in our remaining banking assets, and the board continues to explore all options to maximize the value of its franchises.

In July 2021, Atlas Mara's ordinary shares were suspended from trading at the Company's request, while critical elements of the strategic review were completed, and while financial results were prepared for publication following the completion of the debt restructuring. Shareholders can expect the shares to resume trading following the publication of the annual results. The Board continues to evaluate all potential options that could include a take-private or delisting of the Company and will keep the market apprised as appropriate.

The past financial year was the most challenging in the Company's history. I am proud of our teams' persistence and unwavering commitment to their customers. We continue to believe in the long-term growth story for Africa and for the banking sector, especially as it relates to financial technology and digital banking. In the short-term we remain focused first and foremost on exploring every available option for value realization. Thank you for your continued support.

Michael Wilkerson

Chairman

FINANCE REVIEW

Chief Financial Officer's review of financial performance

Consistent with the Atlas Mara's continued efforts to monitor and mitigate the effects of the COVID-19 pandemic, the Company implemented measures to prioritise the health and safety of employees, customers, and other stakeholders and activated the business continuity processes. COVID-19 and the scale of its impact on the Group's countries of operations continues to evolve, we remain hopeful that with greater access to vaccinations, the coming months could be a bridge to "normalcy," and many aspects of social and economic life can resume. In 2020, the sub-Saharan Africa ('SSA') region contracted by 2.6% due to the adverse impact of the pandemic and the associated lockdown measures, which disrupted economic activity through multiple channels. Economic growth in the SSA region is expected to rebound by 3.2% in 2021, which is still below typical levels for the region.

Despite these challenges, during the 14-month period ended 28 February 2021, the banking subsidiaries in Botswana and Zambia respectively reported profit after tax of $8.3 million (12-month period ended 31 December 2019: Profit after tax of $11.3 million) and $5.2 million (12-month period ended 31 December 2019: reported loss of $9.8 million), despite the significant headwinds posed by the COVID-19 pandemic.

The banking subsidiary in Zimbabwe, BancABC Zimbabwe, reported a loss of $0.4 million for the 14-month period ended 28 February 2021 (12-month period ended 31 December 2019: Profit after tax of $7.8 million). Performance was impacted by an increase in loss on net monetary position as well as increased operating costs due to hyperinflationary pressures and currency depreciation. As part of balance sheet management, BancABC Zimbabwe invested in inflation and exchange rate hedging assets, which resulted in net asset value increasing to $60.7 million for February 2021 compared to $53.6 million for December 2019.

The Group's performance for the period was negatively impacted by the restrictions on business activity in each of our markets as a result of lockdowns, travel restrictions, and entire sectors of the economy being closed as "non-essential" during the height of the pandemic. Excluding IFRS 5 remeasurement loss of $1.4 million (12-month period ended 31 December 2019: $105.5 million), the Group recorded a loss of $57.3 million for the 14-month period ended 28 February 2021 (12-month period ended 31 December 2019: $37.7 million). In addition to the negative impact of the pandemic on the Group's operations, current period performance was also negatively impacted by additional losses arising from write-off of deferred tax assets of $10.9 million, additional fair value loss of $2.8 million arising on the revaluation of the Group's financial assets measured at FVTPL as well as $6.1 million net monetary loss based on hyperinflation accounting in Zimbabwe. Excluding the impact of these additional losses and that of IFRS 5 remeasurement loss, the reported loss for the

14-month period ended 28 February 2021 remained flat at $37.6 million (12-month period to 31 December 2019: $37.7 million).

Adjusted profit for the 14-month period ended 28 February 2021 was $1.5 million (12-month period ended 31 December 2019: $5.8 million), while the adjusted cost to income ratio remained flat at 106.1% (12-month period to 31 December 2019: 106.6%). Nearly all other key financial performance metrics were negatively impacted with the adjusted ROE declining to 0.9% for the 14-month period ended 28 February 2021 from 1.2% for the 12-month period ended 31 December 2019.

The Group has been stress testing its portfolios in the current environment. As of 28 February 2021, there was a decline in the ECL estimate, thereby keeping the NPL ratio constant at 11.4%. We will continue to monitor the portfolios and act as the situation unfolds.

Change in financial year-end

The Group extended its reported date by two months from 31 December 2020 to 28 February 2021.

New financing

On 29 December 2020, the Company entered into a new secured facility agreement with a fund entity managed by UBS O'Connor LLC. The facility was for a new investment in the principal amount of US$25,824,075 with a duration of 18 months. The facility has been used to fund the near-term operating expenses and working capital requirements of the Group, and to finance the purchase of 26,435,188 ordinary shares of the Company held by the lender at a price of $0.40 per share, reflecting the closing market price on the day the funding was agreed between the parties. The repurchased shares are held in treasury.

Strategic transactions

On 30 September 2020, ABCH entered into a definitive agreement for the sale of the Group's shareholding in African Banking Corporation Mozambique Limited. The transaction was completed on 17 May 2021.

On 26 November 2020, ABCH entered into a definitive agreement for the sale of the Group's 97.3% shareholding in African Banking Corporation Tanzania Limited. The transaction, which has been approved by the Bank of Tanzania, is now subject to fulfilment of customary conditions precedent.

On 26 November 2020, ATMA entered into a definitive agreement for the sale of the Group's 62.06% shareholding in Banque Populaire du Rwanda Plc ("BPR"). The Transaction was completed on 25 August 2021.

On 19 April 2021, ABCH entered into a definitive agreement for the sale of its 78.15% shareholding in African Banking Corporation Botswana Limited. The transaction, which has already been approved by the Bank of Botswana, is now near completion.

African Banking Corporation Zambia limited is, for accounting purposes, still classified as a disposal group held for sale in terms of International Financial Reporting Standard ("IFRS") 5: Non-current assets held for sale and discontinued operations. The discussions with a potential investor for the sale of the subsidiary are ongoing.

Restructuring agreement

On 14 July 2021, the Support and Override agreement was signed by majority of the company lenders representing 88% of the aggregate amount of debt outstanding under the company direct and contingent facilities. The lenders who are a party to the Support and Override Agreement have agreed to forbearances in respect of certain events of default under their relevant facilities, while the Support and Override Agreement is effective, including (i) non-payment of amounts due under the company's financing agreements, (ii) any deterioration in the financial or operational performance of the Group as a result of COVID-19, and (iii) any breach of any financial covenant under the company's financing agreements. The Support and Override Agreement governs and provides a stable framework for company ongoing liquidity needs as the Company continues to work on the milestones set out in the agreement. Details of the restructuring agreement and milestones are set out in the Company's previous announcement. These milestones include Strategic Transactions required for successful implementation of the Support and Override agreement.

Country performance summary

Nigeria

UBN has shown resilient performance which has resulted in profit after tax increasing by 3.1% in local currency for continued operations for 12-month period ended December 2020 in comparison to 12-month period ended December 2019. Including the results of the discontinued operations, profit after tax declined by 6.1% in local currency for 12-month period ended December 2020 in comparison to 12-month period ended December 2019.

Overall, UBN sustained its cost to income ratio to 75.4% for 12-month period ended December 2020 compared to 74.1% reported in December 2019. The NPL ratio has decreased to 4.0% for 12-month period ended December 2020 from 5.8% for 12-month period ended December 2019. The NPL coverage ratio remained strong at 127.5% for the period ended 31 December 2020 (31 December 2019: 138.1%).

Despite the impact of the contraction in earnings, UBN remains well capitalised with its CAR at 17.5% at December 2020, well above the regulatory minimum of 15%.

UBN continues to show resilience in 2021 and is well capitalized over its regulatory minimum, NPL ratio hovering at 4.3% and sustained profitability with cost to income ratio hovering at 76%.

Zimbabwe

Zimbabwe's recession persisted in 2020 amid continued structural economic weaknesses, adverse climate conditions and the outbreak of the COVID-19 pandemic. Inflation reached a peak of 838% year-on-year in July 2020, and then trended downward to 349% year-on-year in December 2020. The economy has benefited from the currency reforms, which led to the adoption of the auction exchange rate system in June 2020.

African Banking Corporation of Zimbabwe Limited reported a loss of $0.45 million for the 14-month period ended February 2021 compared to reported profit of $7.8 million for the 12-month period ended December 2019. The numbers have been impacted by an increase in loss on net monetary position of $5.8 million compared to corresponding period due to hyperinflation. As part of balance sheet management, the Bank invested in inflation and exchange rate hedging assets, which resulted in net asset value being sustained year-on-year.

Botswana

Botswana's economy is estimated to have contracted by a record of 10% during the year as the country suffered from the collapse of international trade, which adversely affected diamond exports and tourism. In response to the pandemic, the Bank of Botswana ("BoB") cut its policy rate by 100 bps in April 2020 to provide sufficient liquidity in the economy.

The banking subsidiary in Botswana reported profit after tax of $8.3 million for the 14 months ended February 2021 compared to profit of $11.3 million for the 12-month period ended December 2019 despite the significant headwinds posed by the COVID-19 outbreak. Profitability was supported by cost reduction and containment measures implemented.

Discontinued operations

Zambia delivered a solid performance for the year after posting a profit after tax of $5.2 million for the

14-month period ended February 2021 compared to a loss of $9.8 million in 2019 largely due to increase in interest income, improved FX trading income and reduction in impairment charge. Interest income was propelled by earnings on short term structured finance deals and improved yields on government securities.

Rwanda reported a profit of $4.8 million for the 14-month period ended February 2021 compared to the profit of $2.6 million for the 12-month period in 2019. This performance has been supported by cost reduction and containment initiatives.

In Tanzania, performance was adversely impacted by the reduction in transactional activity caused by the COVID-19 pandemic and liquidity challenges, partially offset by recoveries of loans written off in previous years.

Performance summary

The Group recorded an adjusted net profit of $1.5 million for the 14-month period ended 28 February 2021 (12-month period 31 December 2019: adjusted profit of $5.8 million).

Statement of comprehensive income review

Total income

Total income at $186.2 for the 14-month period ended 28 February 2021 has shown a decline due to decrease in net interest income.

Table 1: Total income for the year ended 28 February 2021

 
 $'million                 14 months to 28 February 2021       12 months to 31 December 2019 
                         Continuing   Discontinued   Total   Continuing   Discontinued   Total 
                        -----------  -------------  ------  -----------  -------------  ------ 
 Net interest income        1.1           81.1       82.2       11.4          74.8       86.2 
----------------------  -----------  -------------  ------  -----------  -------------  ------ 
 Non-interest revenue       51.7          52.3       104.0      53.7          49.9       103.6 
----------------------  -----------  -------------  ------  -----------  -------------  ------ 
 Total income               52.8         133.4       186.2      65.1         124.7       189.8 
----------------------  -----------  -------------  ------  -----------  -------------  ------ 
 

Net interest income

Net interest income declined by $4 million resulting from an increase in interest expense. This was mainly as a result of an increase in borrowed funds and the impact of liquidity pressures experienced in some of our markets, resulting in more expensive deposits. This is reflected in the increase in the cost of funds to 6.6% for the 14-month period ended 28 February 2021 from 5.9% as reported for the 12-month period ended 31 December 2019.

Non-interest income

Non-interest income increased by $0.4 million resulting from improved earnings from digital channels and offset by a reduction in loan-related fees and foreign currency trading income. Lower loan growth and decline in business activities resulting from the impact of the COVID-19 pandemic negatively impacted the Group's ability to improve non-interest income during the period.

Total expenses

Total expenses declined to $213.1 million ($209.5 million excluding one-offs) for the 14-month period ended 28 February 2021 from $219.5 million reported for the 12-month period ended 31 December 2019, largely due to strategic cost management initiatives across the Group. Cost to income ratio decreased to 114.4% from 115.7% reported in December 2019; however, on an adjusted operating profit basis, cost to income ratio decreased to 106.1% in the 14-month period ended 28 February 2021 from 106.6% for the 12-month period ended 31 December 2019).

Staff costs decreased by 2.4% from $93.0 million reported for the 12-month period ended 31 December 2019 to $90.8 million reported for the current period ended 28 February 2021, while the contribution to total expenses decreased from 42.6% to 42.4%.

The Group continued to focus on reducing holding companies' expenses and for the 14-month period ended 28 February 2021, normalised expenses (net of restructuring costs) holding companies declined by $6.56 million for the 14-month period ended February 2021 compared to the 12-month period ended 31 December 2019. This has been achieved due to reduction in head count across the Holdcos, cost rationalization and process reengineering.

Impairment charges on financial assets

The loan book reduced by 9.9% during the 14-month reporting period ended February 2021, largely due to the conservative credit appetite, as lending was halted in the high-risk sectors and a cautious approach was taken for all new lending. COVID-19 related restrictions including lockdowns and travel restrictions also negatively impacted on Customer drawdown. Notwithstanding the 9.8% reduction in the loan book, the NPL ratio remained constant at 11.4%, however reduced in actual stock by $14.6 million or 10.2% to end the period at $142.6 million. This was due to proactive remedial management strategies and hard collection efforts in some high value cases.

While most of the retail loan portfolio consists of lending to the government sector, constrained incomes have resulted in subdued increase of credit in some markets. Corporate and SME borrowers in sectors such as transport, tourism, hospitality, private education and manufacturing have experienced increasing levels of default which are the main drivers of increases in NPL and impairments. Whilst these loans are collateralized by immovable property, adjustments have been made to the expected recovery rates and time to liquidate these assets, as prices remain under pressure and asset disposals take longer to effect.

Several enhancements were made to the ECL model during the year. Some of these enhancements included development of separate PD term structures for stage 1 and stage 2 loans; improving the ECL code to compute a weighted ECL based on base, best and worse-case scenarios to account for non-linearities in the scenarios and to incorporate forward looking information; development of a macro- economic linkage model to estimate changes in macro-economic factors on PD; introduction of a Floor LGD as a minimum ECL appropriate for each of the country portfolios and segmenting the retail secured and unsecured loan portfolios to accommodate for the different PD behaviour of these portfolios.

Share of profit of associates

This represents the Group's 47.68% share of UBN's profit for the 14-month period ended 28 February 2021. The impact of the amortisation of acquisition-related intangible assets is also included.

The Group booked $25.5 million of profit from UBN for the 14-month period ended Feb 2021 compared to $31.2 million for 12-month period ended Dec 2019. The reduction in profit has been due to the change in exchange rate index from Central Bank Rate to Nafex and devaluation of the currency. (Exchange rate on February 2021: 410 Naira, Exchange rate on December 2019: 306 Naira)

Statement of financial position review

Loans and advances comprise 22.3% of total assets; Cash, short-term funds and marketable securities represent 10.7%; investment in associate (UBN) balance accounts for 18.1%; goodwill and other intangible assets make up 2.4%; other assets (made up of derivatives, property and equipment, investment property, prepayments and other receivables etc.) make up 4.3% of total assets, while assets included in disposal groups account for the balance of 42.2%.

Total assets contracted by 0.7% reflecting the impact of currency movements in the Group's core markets (Botswana and Nigeria) and the slow-down in business operations resulting from the disruptions caused by COVID-19.

Deposits comprise 29.5% of the total liability base and represent 25.8% of the aggregate of liabilities and equity. The loan to deposit ratio for the period was 86.3% (December 2019: 89.0%).

Loans and deposits

Table 2: Loans and deposits composition by country at 28 February 2021

 
            28 February 2021    31 December 2019    Var    CC Var   Var    CC Var 
                  ($'m)               ($'m)          (%)     (%)     (%)     (%) 
            Loans   Deposits    Loans   Deposits       Loans          Deposits 
Continuing operations 
Botswana     549.4      581.5    606.3      662.5   (9.4)   (6.9)  (12.2)   (9.8) 
Zimbabwe      18.4       91.0     22.7       61.2  (18.9)   (9.6)    48.7    65.8 
Other         12.7          -     15.1          -  (15.9)  (15.9)       -       - 
Total        580.5      672.5    644.1      723.7   (9.9)   (7.2)   (7.1)   (3.9) 
---------                      -------                             ------ 
 

Loans and deposits

As presented in Table 2 above, loans and advances to customers declined by 9.9% (7.2% on a ccy basis) while deposits also declined by 7.1% (3.9% on a ccy basis).

Decline in loans and deposits was attributable to the impact of currency devaluation in Botswana and Zimbabwe and the slowdown in business activities due to the COVID-19 pandemic. The economic environment was challenging in the period as a result of the business disruptions caused by the pandemic. Market liquidity constraints in our countries of operations hindered the writing of new loans (as there was a market-wide decline in the demand for credit) and resulted in the loss of some significant deposits.

Term deposits remained the highest contributor to deposits, making up 58.2% of total deposits as at the end of February 2021 (31 December 2019: 72.0%). There was an increase in overnight deposits/interbank borrowings reflecting the tight liquidity situation experienced in Botswana and Zimbabwe.

Credit quality

NPLs as a percentage of the loan book remained constant at 11.4% (31 December 2019: 11.4%). This is due to the impact of the COVID-19 pandemic on business activities which in turn increased the credit risk on the Group's loan portfolio.

Capital position

As at 28 February 2021, all of Atlas Mara's operating banks and affiliates complied with local minimum capital requirements relevant in respective countries, as summarised below.

Table 3: Capital adequacy ratios

 
                          February  December  Regulatory 
                            2021      2019      Minimum 
------------------------  --------  --------  ---------- 
Continuing operations 
------------------------  --------  --------  ---------- 
Botswana                   18.4%     18.6%      12.5% 
------------------------  --------  --------  ---------- 
Zimbabwe                   35.9%     58.7%      12.0% 
------------------------  --------  --------  ---------- 
 
Discontinued operations 
------------------------  --------  --------  ---------- 
Mozambique                 12.1%     19.6%      12.0% 
Rwanda                     23.4%     23.5%      15.0% 
------------------------  --------  --------  ---------- 
Tanzania                   12.9%     16.6%      12.0% 
------------------------  --------  --------  ---------- 
Zambia                     12.8%     14.3%      10.0% 
------------------------  --------  --------  ---------- 
 

Investment in associate: UBN

Our total shareholding in Union Bank of Nigeria was 47.68% as at 28 February 2021 compared to 49.97% as at 31 December 2019. The investment is equity-accounted for in the statement of financial position as an investment in associate, with a closing balance of $469.9 million (December 2019: $580.6 million). Reduction in carrying value is mainly attributable to the dividend income earned from UBN in the year of $8.5 million and the impact of currency translation losses of $114.2 million.

Goodwill and other intangible assets

The statement of financial position incorporates goodwill and intangible assets of $63.9 million at 28 February 2021 (31 December 2019: $73.0 million). The decline in this balance is attributable to the amortisation for the period as well as currency translation losses on the balances reported by Group's foreign operations (UBN and Botswana).

Statement of Equity

The net equity balance of $330.5 million at 28 February 2021 was down from $547.2 million at 31 December 2019. $145.9 million of the reduction was due to FX translation losses taken by the Group during the

14-month period ended February 2021. As of 28 February 2021, the tangible book value of the Group was $2.01 per share (31 December 2019: $2.87 per share) and book value per share of the Group $1.99 (31 December 2019: $2.97).

Segment information

The segmental results and statement of financial position information represents management's view of its underlying operations.

Nigeria : Through our 47.68% stake in UBN and Board representation, Atlas Mara has a footprint in Nigeria, Africa's largest economy. Our share of profit from our stake in UBN is based on UBN's reviewed management accounts for the 14-month period ended 28 February 2021.

Botswana: Represents the Group's 78.15% investment in BancABC Botswana and its subsidiaries. BancABC Botswana has been listed on the Botswana Stock Exchange since 2018. The Group is currently in the process of completing the sale of its stake to Access Bank Plc. This transaction is expected to be completed before the end of the year.

Zimbabwe: Represents the Group's 100% owned investment in BancABC Zimbabwe and its subsidiaries.

Discontinued operations

Our operations in Mozambique, Tanzania, Zambia and Rwanda remain classified as discontinued operations as the Group. On 17 May 2021, the transaction was completed for the sale of African Banking Corporation Mozambique Limited. On 25 August 2021, the transaction was completed for the sale of ATMA shareholding in Banque Populaire du Rwanda Plc ("BPR").

Corporate

Included in this segment are Atlas Mara Limited, the BVI incorporated holding company, Atlas Mara Management Services, the Dubai subsidiary, and all other intermediate Group holding entities, also referred to as the Shared Services and Centre.

Segment report for the year ended 28 February 2021

 
$'million                Group           Continuing operations           Discontinued 
                                                                           operations 
----------------------  -------  --------------------------------------  ------------ 
                                 Botswana  Zimbabwe  Nigeria  Corporate 
----------------------  -------  --------  --------  -------  ---------  ------------ 
Total income              186.2      55.4      51.0        -     (53.6)         133.4 
Impairment charge 
 on financial assets     (12.2)     (0.6)     (0.8)        -        1.5        (12.3) 
----------------------  -------  --------  --------  -------  ---------  ------------ 
Total expenses          (213.1)    (42.5)    (31.1)        -     (16.6)       (122.9) 
----------------------  -------  --------  --------  -------  ---------  ------------ 
Net loss on monetary 
 position                (16.9)         -    (13.0)        -      (3.9)             - 
----------------------  -------  --------  --------  -------  ---------  ------------ 
Share of profits 
 of associate              25.5         -         -     25.5          -             - 
(Loss)/profit before 
 tax                     (30.5)      12.2       6.2     25.5     (72.6)         (1.8) 
Net change on IFRS 
 5 remeasurement          (1.4)         -         -        -          -         (1.4) 
(Loss)/profit after 
 tax and NCI             (58.7)       6.5     (0.4)     25.5     (78.2)        (12.0) 
 
Loans and advances        580.5     549.4      18.4        -       12.7             - 
Total assets            2,608.6     727.9     197.7    470.6      111.0       1,101.4 
----------------------  -------  --------  --------  -------  ---------  ------------ 
Total liabilities       2,278.1     619.9     137.1        -      498.5       1,022.6 
----------------------  -------  --------  --------  -------  ---------  ------------ 
Deposits                  672.5     581.5      91.0        -          -             - 
 
Net interest margin 
 - total assets            3.2%      5.9%      4.2% 
                                                     -------------------------------- 
Net interest margin 
 - earning assets          4.7%      6.0%      6.4% 
----------------------  -------  --------  --------  -------  ---------  ------------ 
Cost to income ratio     114.4%     76.8%     60.9% 
Statutory credit 
 loss ratio                1.2%      0.1%      4.4% 
----------------------  -------  --------  -------- 
Return on equity        (20.5%)      6.0%    (0.7%) 
Return on assets         (2.3%)      0.9%    (0.2%) 
----------------------  -------  --------  -------- 
Loan to deposit ratio     86.3%     94.5%     20.2% 
----------------------  -------  --------  --------  -------  ---------  ------------ 
 

Segment report for the year ended 31 December 2019

 
$'million                       Group           Continuing operations           Discontinued 
                                                                                  operations 
                                        Botswana  Zimbabwe  Nigeria  Corporate 
Total income                     189.8      50.1      38.3        -     (23.2)         124.6 
Loan impairment charge          (11.4)       1.5     (0.2)        -      (0.3)        (12.4) 
Operating expenses             (230.6)    (37.4)    (21.6)        -     (33.6)       (138.0) 
-----------------------------  -------  --------  --------  -------  ---------  ------------ 
Share of profits 
 of associate                     31.1         -         -     31.2      (0.1)             - 
-----------------------------  -------  --------  --------  -------  ---------  ------------ 
Profit/(loss) before 
 tax                            (21.1)      14.2      16.5     31.2     (57.2)        (25.8) 
-----------------------------  -------  --------  --------  -------  ---------  ------------ 
Loss on IFRS 5 remeasurement   (105.5)         -         -        -          -       (105.5) 
Profit/(loss) after 
 tax and NCI                   (143.2)       8.9       7.8     31.2     (56.4)       (134.7) 
 
Loans and advances               644.1     606.3      22.7        -       15.1             - 
Total assets                   2,627.4     856.7     161.3    580.6       49.2         979.6 
Total liabilities              2,080.2     736.1     107.9        -      362.0         874.2 
-----------------------------  -------  --------  --------  -------  ---------  ------------ 
Deposits                         723.7     662.5      61.2        -          -             - 
-----------------------------  -------  --------  --------  -------  ---------  ------------ 
 
Net interest margin 
 - total assets                   3.3%      4.5%      6.1% 
                                                            -------------------------------- 
Net interest margin 
 - earning assets                 4.7%      5.0%     14.4% 
-----------------------------  -------  --------  --------  -------  ---------  ------------ 
Cost to income ratio            115.7%     74.6%     56.4% 
-----------------------------  -------  --------  -------- 
Statutory credit 
 loss ratio                       1.0%    (0.2%)      0.8% 
-----------------------------  -------  --------  -------- 
Return on equity               (28.5%)     11.2%     14.7% 
Return on ----assets            (5.5%)      1.3%      4.8% 
-----------------------------  -------  --------  -------- 
Loan to deposit ratio            89.0%     91.5%     37.1% 
-----------------------------  -------  --------  --------  -------  ---------  ------------ 
 

Omar Khan

Chief Financial Officer

CORPORATE GOVERNANCE REPORT

Introduction

The governance structures and practices detailed in this Report underpin the Company's purpose and strategic objectives. We believe that building a sound corporate governance framework is the bedrock of the Company. Indeed, although the Company is not required to comply with the UK Corporate Governance Code issued by the Financial Reporting Council in 2018 (the 'Code') because of its standard listing, the Company nevertheless has taken the decision to continue to voluntarily apply the provisions of the Code to the greatest extent possible in order to drive sound decision-making and facilitate effective and prudent management of the Company.

Throughout this report, we highlight our progress to date in complying with the recently revised provisions of the Code that came into force on 1 January 2019. A copy of the revised Code can be found on the FRC's website at https://www.frc.org.uk/directors/corporate-governance-and-stewardship/uk-corporate-governance-code.

In addition, the Company also applies the corporate governance regime applicable to the Company pursuant to the laws of the British Virgin Islands ('BVI'). The corporate governance standards outlined in the BVI Business Companies Act 2004 have been incorporated into the Company's memorandum and articles and association. The Board has also voluntarily adopted a share dealing code which incorporates the provisions relating to transactions in securities by directors and persons discharging managerial responsibilities ('PDMRs') contained in the Market Abuse Regulations (EU 596/2014). The Board is responsible for taking all proper and reasonable steps to ensure compliance with these rules by the Directors and PDMRs.

How We Comply with the Principles of the Code

Although Atlas Mara is a standard listed company on the London Stock Exchange, we continue to work towards achieving conformity with the provisions of the Code where feasible, taking into account the Company's size, operations, markets and strategic objectives. Below we highlight the measures we've taken to comply with the principles set out in the Code and also provide explanations for instances where our practices depart from the provisions set out in the Code.

The first table below sets out how we applied the principles of the Code for the financial year ended 28 February 2021, and the second table below identifies and explains areas where we continue to work towards achieving full conformity with the standards of the Code.

 
 Section of the Code                                                           How we comply 
                                                     ----------------------------------------------------------------- 
 Section 1. Board Leadership and Company Purpose 
---------------------------------------------------  ----------------------------------------------------------------- 
 
 A. Generating Long-term Value 
                                                        *    The Board recognises its responsibility for to 
                                                             provide effective oversight of the Company's business 
                                                             for the benefit of all stakeholders. 
 
 
                                                        *    In response to the unprecedented challenges wrought 
                                                             across the globe and our jurisdictions of operation 
                                                             by the COVID-19 pandemic, the Board met frequently to 
                                                             monitor the health and economic effects of the 
                                                             pandemic on our businesses, as well as the effects of 
                                                             the various mandatory lock downs and government 
                                                             policies on our businesses. The Board also monitored 
                                                             the resilience of the businesses in response to the 
                                                             deep stress wrought upon our operations and 
                                                             customers. The Board ensured a range of tools were 
                                                             available to the operations to help weather the 
                                                             health and economic effects of the pandemic, 
                                                             including the appropriate policy, hygiene and 
                                                             technology tools. 
 
 
                                                        *    Every year the Board holds a focused strategy session 
                                                             that provides the Directors with an opportunity to 
                                                             reassess the Company's vision and ensure financial 
                                                             and non-financial targets are set in alignment with 
                                                             the Company's overarching purpose and long-term 
                                                             objectives. As previously reported, in the year 2019, 
                                                             the Board undertook a review of the Company's 
                                                             strategic options, assessing the risks and 
                                                             opportunities in the Company's countries of operation 
                                                             to determine the key strategic priorities and actions 
                                                             for 2019 and beyond to drive shareholder value. The 
                                                             process included a review of each banking operation 
                                                             to ensure that top five market leadership is 
                                                             practicably achievable in the near term, or to 
                                                             explore transactions that will reduce risk exposure 
                                                             where such leadership is unlikely on a stand-alone 
                                                             basis. In parallel, the Company was also engaged in a 
                                                             strategic fundraising initiative targeting both debt 
                                                             and equity, to be utilized to support operations as 
                                                             well as address a balance sheet realignment given 
                                                             debt maturities expected in 2020. The strategic 
                                                             review resulted in a number of strategic initiatives 
                                                             aimed at creating a more sustainable business model. 
                                                             In response to the effects of the COVID-19 pandemic 
                                                             which fundamentally affected the strategic 
                                                             transactions, the Board pivoted the strategic 
                                                             priorities to focus on steps that will assure a 
                                                             stable platform and sustainability. 
 
 
                                                        *    The Board also understands the importance of 
                                                             preserving value through effective risk management 
                                                             and oversight. To this end, the Board continuously 
                                                             works to ensure that internal reporting mechanisms 
                                                             are operating effectively in order to receive timely 
                                                             information relating to emerging material risks 
                                                             affecting the Company's operations, and monitor 
                                                             measures being taken to manage such risks. 
---------------------------------------------------  ----------------------------------------------------------------- 
 B. Aligning Purpose and Culture 
                                                        *    The Board is responsible for setting the right tone 
                                                             at the top and shaping the cultural norms that 
                                                             influence behaviour and decision-making throughout 
                                                             the Company. 
 
 
                                                        *    In addition to the annual strategy session, the Board 
                                                             sets the tone and regularly monitors culture on an 
                                                             ongoing basis throughout the year. Directors receive 
                                                             regular reports from the Head of Human Capital to 
                                                             enable them to oversee staff-related issues or 
                                                             concerns and measures being taken by management to 
                                                             address them. 
 
 
                                                        *    Incentive structures are used to encourage the right 
                                                             culture and behaviour. The Board also receives 
                                                             regular reports from the Group General Counsel and 
                                                             Chief Compliance Officer on compliance or as well as 
                                                             on matters which may signal concerns around culture 
                                                             that require close monitoring and action. 
 
 
                                                        *    Further details on the Company's culture and values 
                                                             can be found under the Corporate Governance Report 
---------------------------------------------------  ----------------------------------------------------------------- 
 C. Effective Controls and Risk Management 
                                                        *    The Audit, Risk and Compliance Committee is 
                                                             responsible for supporting the Board in overseeing 
                                                             the effectiveness of the Company's internal controls 
                                                             and risk management systems. 
 
 
                                                        *    In response to the challenges presented by the 
                                                             COVID-19 pandemic, the Board received frequent stress 
                                                             testing reports and challenged the scenarios on 
                                                             stress testing of the portfolios and operations of 
                                                             the Company and its subsidiaries. The Board also more 
                                                             frequently monitored risk-mitigation strategies and 
                                                             implemented early warning requirements for a range of 
                                                             matters. 
 
 
                                                        *    The Committee receives regular updates from the Chief 
                                                             Risk Officer, Head of Internal Audit, Group General 
                                                             Counsel and Chief Compliance Officer and Chief 
                                                             Financial Officer and closely monitors emerging risks 
                                                             identified by management, and oversees the measures 
                                                             being taken to manage such risks. A comprehensive 
                                                             Risk Report is included below. 
 
 
                                                        *    The Board oversees the Company's digital strategy and 
                                                             monitors the Company's information technology 
                                                             capabilities to ensure effective management of 
                                                             information security, fraud, cyber security risks. 
 
 
                                                        *    The Board also reviews the Company's infrastructure 
                                                             to ensure it is capable of meeting the short and 
                                                             long-term information technology needs of the 
                                                             Company. 
 
 
                                                        *    In addition, through the anonymous whistleblowing 
                                                             line externally managed, the company receives reports 
                                                             on matters of concerns which are thoroughly invested 
                                                             and addressed. 
 
 
                                                        *    In addition, through regular internal and external 
                                                             audits and assessments, the Board oversees areas 
                                                             identified for improvement, which are regularly 
                                                             monitored through reports to the Audit, Risk and 
                                                             Compliance Committee. 
---------------------------------------------------  ----------------------------------------------------------------- 
 D. Effective Stakeholder and Shareholder 
 Engagement                                             *    The Company regularly evaluates its stakeholder 
                                                             engagement practices to identify ways to improve how 
                                                             we connect and communicate with our colleagues, 
                                                             customers, shareholders, regulators, business 
                                                             partners and the communities we operate in. 
 
 
                                                        *    During 2020, the Chairman of the Board and Executive 
                                                             Management met with many of the major shareholders of 
                                                             the Company to interact on various topics on the 
                                                             minds of the shareholders. 
 
 
                                                        *    The Board regularly requests reports from management 
                                                             to ensure that the Non -- Executive Directors have an 
                                                             understanding of the views of major shareholders and 
                                                             senior management regularly provide updates to the 
                                                             Board to ensure awareness of the issues and concerns 
                                                             of major shareholders. 
 
 
                                                        *    The Board leverages the Investor Relations Department 
                                                             to keep abreast of shareholder feedback. 
 
 
                                                        *    The Company's AGM provides an additional platform to 
                                                             engage constructively with our shareholders. The 
                                                             Company's last AGM was held on 30 October 2020. At 
                                                             this meeting, all resolutions put to the shareholders 
                                                             were passed on a poll with votes cast in favour of 
                                                             the proposed resolutions ranging from 82.5% to 100% 
                                                             of the total votes cast. None of the resolutions 
                                                             proposed by the Board at the 2020 AGM received 20% or 
                                                             more votes cast against the resolution. 
---------------------------------------------------  ----------------------------------------------------------------- 
 E. Sound Workforce Policies and Practices 
                                                        *    The Remuneration Committee is responsible for 
                                                             advising the Board in respect of the Company's 
                                                             workforce policies and practices aimed at attracting 
                                                             talented staff and aligning managements with long 
                                                             term interest of the Company. The Committee receives 
                                                             quarterly updates from the Head of Human Capital and 
                                                             monitors how rewards, incentives, terms of employment 
                                                             and disciplinary measures are structured to impact 
                                                             recruitment, retention, development and performance 
                                                             in the workplace. 
 
 
                                                        *    The company has in place comprehensive work force 
                                                             policies and procedures focused on ensuring the right 
                                                             skills and work practices, fostering diversity, 
                                                             preventing harassment and ensuring sustainability of 
                                                             our businesses. 
 
 
                                                        *    The Company has put in place measures for staff 
                                                             members to raise concerns confidentially. An 
                                                             anonymous whistleblowing service provides a secure 
                                                             and confidential means for staff and other 
                                                             stakeholders to raise any concerns regarding criminal 
                                                             or unethical activity. Compliance personnel undertake 
                                                             awareness campaigns to ensure staff are aware of 
                                                             reporting procedures and feel encouraged to speak up 
                                                             and utilize the whistleblowing service. 
 
 
                                                        *    Remuneration Committee as well as the Audit, Risk and 
                                                             Compliance Committee receive regular and 
                                                             comprehensive reports on whistleblowing reports and 
                                                             any issues or internal investigations arising from 
                                                             such reports. The Committee is responsible for 
                                                             monitoring how these issues are being addressed by 
                                                             management. 
---------------------------------------------------  ----------------------------------------------------------------- 
 
 Section 2. Division of Responsibilities 
---------------------------------------------------  ----------------------------------------------------------------- 
 F. Role of the Board Chair 
                                                        *    The Board Chair sets the tone for Board discussions, 
                                                             keeping the full board focused on the organization's 
                                                             mission, vision, and strategic direction and 
                                                             facilitating open and constructive dialogue during 
                                                             the meetings and actively inviting the views of all 
                                                             Non-Executive Directors. The Board Chair is 
                                                             responsible for setting the agenda for meetings and 
                                                             manages the calendar and timetable of meetings, 
                                                             leveraging the assistance of the Company Secretary. 
 
 
                                                        *    The division of responsibilities between the Chair 
                                                             and Chief Executive are clearly defined, however at 
                                                             times the Board has for an interim period deemed it 
                                                             in the best Interest of the Company for the Chair of 
                                                             the Board to act in an executive capacity, in 
                                                             particular given the Board's current focus on the 
                                                             strategic priorities of the Company. 
 
 
                                                        *    Since 30 April 2019, the Chairman of the Board has 
                                                             served as the Executive Chair, thereby taking on an 
                                                             executive role. In this capacity, the Board Chair is 
                                                             fully abreast of emerging issues, organization's 
                                                             goals and strategies and works together with the 
                                                             executive to achieve the goals of the organization. 
---------------------------------------------------  ----------------------------------------------------------------- 
 G. Board Composition and Independence 
                                                       *    The Board is currently composed of five Directors, 
                                                            two of whom are considered independent. 
 
 
                                                       *    The Board delegates certain responsibilities to its 
                                                            Committees to assist in discharging its functions. 
                                                            The duties of the Audit, Risk and Compliance 
                                                            Committee, Remuneration Committee and Nomination 
                                                            Committee are set out in writing in each Committee's 
                                                            Terms of Reference, which are available on the 
                                                            Company's website at 
                                                            http://atlasmara.com/about-us/corporate-governance/board-c 
                                                      ommittees/. 
 
 
 
                                                       *    The Board also delegates the operational management 
                                                            of the Group's business to the Executive Committee, 
                                                            which executes the strategy set by the Board. 
 
 
                                                       *    It is a standard agenda item at most Board meetings 
                                                            for the Chairman to hold a session with Non-Executive 
                                                            Directors without the Executive Management in 
                                                            attendance to openly discuss matters relating to the 
                                                            business of the Company. 
 
 
                                                       *    In 2020, the Chairman held several meetings with the 
                                                            Non-Executive Directors without the Executive 
                                                            Management present, to discuss a number of matters 
                                                            relating to performance and remuneration. 
 
 
                                                       *    Rachel Robbins serves as the Board's Senior 
                                                            Independent Director. The Senior Independent Director 
                                                            and the Independent Directors constructively and 
                                                            rigorously challenge the Executive Management team on 
                                                            matters important to all stakeholders. The 
                                                            Independent Board members also hold regular 
                                                            Interaction with senior management to receive reports 
                                                            on various matters. 
---------------------------------------------------  ----------------------------------------------------------------- 
 H. Time Commitment 
                                                        *    On appointment, Directors are notified of the time 
                                                             commitment expected from them in discharging their 
                                                             duties. Directors are also expected to disclose any 
                                                             jobs, external directorships or similar commitments 
                                                             so that an assessment of available time and 
                                                             commitment can be independently made by the Company. 
 
 
                                                        *    Following their appointment, any external 
                                                             directorships, which may impact on the existing time 
                                                             commitments of the Directors, must be agreed with the 
                                                             Chairman in consultation with the Company Secretary. 
                                                             External appointments held by the Chairman and all 
                                                             the Directors on the Board are disclosed under 
                                                             section Composition of the Board. 
 
 
                                                        *    The Board meets regularly to discharge its duties 
                                                             with meetings held at least once a month, and 
                                                             in-person every quarter. 
 
 
                                                        *    During the reporting period, the Board and Committees 
                                                             held an aggregate of 28 meetings and received 
                                                             frequent written updated in between meetings in order 
                                                             to remain fully abreast of the dynamic and 
                                                             everchanging challenges wrought by the COVID-19 
                                                             pandemic. Meeting attendance by the Directors has 
                                                             been high for all meetings held during this period, 
                                                             as further detailed under section Board and Committee 
                                                             meetings. 
---------------------------------------------------  ----------------------------------------------------------------- 
 I. Information and Support 
                                                        *    Directors have access to independent professional 
                                                             advice to discharge their responsibilities as and 
                                                             when required and also ensure that the Board is kept 
                                                             up to date on regulatory developments and corporate 
                                                             governance requirements. 
 
 
                                                        *    The Board receives monthly written and verbal reports 
                                                             on the performance of the operating businesses, key 
                                                             or emerging risks, engagement with key stakeholders, 
                                                             and progress made in implementing key strategic 
                                                             initiatives. At each monthly Board meeting, the Board 
                                                             has an opportunity to engage and challenge management 
                                                             on these matters. 
---------------------------------------------------  ----------------------------------------------------------------- 
 Section 3. Composition, Succession and Evaluation 
---------------------------------------------------  ----------------------------------------------------------------- 
 J. Appointments to the Board 
                                                       *    The Nomination Committee leads the process for Board 
                                                            appointments and ensures that the Board and its 
                                                            Committees have an appropriate balance of skills, 
                                                            experience, availability, independence and knowledge 
                                                            of the Company to enable them to discharge their 
                                                            responsibilities effectively. 
 
 
                                                       *    The Nomination Committee takes into account a variety 
                                                            of factors including skills and experience needed to 
                                                            enhance diversity on the Board. Each Board candidate 
                                                            is interviewed by the Non-Executive Directors and 
                                                            relevant members of the Executive Committee prior to 
                                                            appointment. 
 
 
                                                       *    During 2020 the Committee spent time reviewing the 
                                                            composition of the Board and its Committees with a 
                                                            keen focus on ensuring that the Board was composed of 
                                                            the appropriate skills to deliver on the strategic 
                                                            initiatives. 
 
 
                                                       *    Amadou Raimi stepped down from the Board in 
                                                            2020.Following this change, it was vital for the 
                                                            Committee to rigorously assess the balance of skills 
                                                            and expertise on the Board and its Committees and 
                                                            make recommendations to the Board on Committee 
                                                            reassignments as necessary, to ensure each Committee 
                                                            was appropriately composed. The Committee concluded 
                                                            that the current number of Board members was the 
                                                            right size to help achieve the Company's goals while 
                                                            also being consistent with corporate governance 
                                                            requirements. 
 
 
                                                       *    The Committee oversaw the nomination process for 
                                                            Jawaid Mirza, to the chairmanship of the Audit Risk 
                                                            and Compliance Committee. 
 
 
                                                       *    The Committee acknowledges the need to continue to 
                                                            improve gender balance and diversity across the Board 
                                                            and senior management team. The Committee will 
                                                            continue to seek opportunities to address diversity 
                                                            and inclusion. 
 
 
                                                       *    The Committee will also continue to ensure that our 
                                                            Directors are well-equipped to provide the 
                                                            appropriate oversight to meet the challenges wrought 
                                                            upon the globe by the COVID-19 Pandemic. 
 
 
                                                       *    The Committees Terms of Reference are available on 
                                                            the Company website at 
                                                            http://atlasmara.cI-us/corporate-governance/board-committe 
                                                      es/ 
---------------------------------------------------  ----------------------------------------------------------------- 
 K. Board Composition and Skills 
                                                        *    The Board is currently composed of five Directors who 
                                                             possess the right mix of skills, background and 
                                                             knowledge relevant to driving the company's strategic 
                                                             imperatives, and the particular challenges and 
                                                             opportunities faced by the Company. Further details 
                                                             on the Directors' backgrounds and experience can be 
                                                             found under section Leadership and is included on the 
                                                             Company website. 
 
 
                                                        *    Michael Wilkerson, the current Chairman of the Board, 
                                                             assumed the position of Board Chair in February 2019 
                                                             and has held the position for less than nine years. 
 
 
                                                        *    Although not applicable to the Company at this time, 
                                                             In accordance with the company's policy, any 
                                                             non-executive Director who has served for more than 
                                                             nine years will be thorough reassessed and only 
                                                             presented for annual re-election if consistent with 
                                                             the strategic requirements. 
---------------------------------------------------  ----------------------------------------------------------------- 
 L. Board Evaluation 
                                                        *    Every year, the Board conducts a formal and rigorous 
                                                             evaluation of its own performance and that of its 
                                                             Committees and individual Directors. The annual 
                                                             evaluation is an important exercise that offers 
                                                             valuable insight into how effectively the Board is 
                                                             working together to achieve its objectives. 
 
 
                                                        *    The Board Chair works with the Group General Counsel 
                                                             and Company Secretary to oversee the annual 
                                                             evaluation process. The Board evaluation is tailored 
                                                             specifically for the Company and designed to elicit 
                                                             constructive feedback and identify areas that are 
                                                             working well and those requiring improvement. 
 
 
                                                        *    Considering the challenges posed by the COVID-19 
                                                             pandemic, the 2020 Board evaluation did not take 
                                                             place. 
---------------------------------------------------  ----------------------------------------------------------------- 
 Section 4. Audit, Risk and Internal Controls 
---------------------------------------------------  ----------------------------------------------------------------- 
 M. Internal and External Audit 
                                                            *    The Audit, Risk and Compliance Committee is 
                                                                 responsible for reviewing and reporting to the Board 
                                                                 on the Group's financial performance, audit matters, 
                                                                 internal controls and risk management systems, the 
                                                                 Company's compliance with legal and regulatory 
                                                                 requirements, and the independence and effectiveness 
                                                                 of the external auditors. 
 
 
                                                            *    The Committee meets regularly throughout the year and 
                                                                 at every meeting receives detailed reports from the 
                                                                 Company's CFO, Head of Internal Audit, Chief Risk 
                                                                 Officer and Group General Counsel and Chief 
                                                                 Compliance Officer. 
 
 
                                                            *    The Chairman of the Committee provides regular 
                                                                 updates to the Board following every Committee 
                                                                 meeting. The Chairman of the Committee also regularly 
                                                                 monitors the Company's financial reporting processes, 
                                                                 meeting with the external auditors every quarter and 
                                                                 providing updates to the Board. In addition, the 
                                                                 Chairman of the Audit Committee receives one-on-one 
                                                                 updates from the Head of Internal Audit, Chief 
                                                                 Financial Officer and Group General Counsel, on a 
                                                                 regular basis. 
 
 
                                                            *    Full details on the Committee's duties and 
                                                                 responsibilities are set out in its Terms of 
                                                                 Reference, which are available on the Company's 
                                                                 website at 
                                                                 http://atlasmara.com/about-us/corporate-governance/bo 
                                                           ard-committees/ 
 
 
 
                                                            *    During the reporting period, the Committee focused on 
                                                                 the following matters, especially as it relates to 
                                                                 the preparation of the consolidated financial 
                                                                 statements of the Atlas Mara Group. 
 
 
                                                           o Provided oversight, ensuring the balanced nature and 
                                                           reliability of accounting estimates. 
                                                           o During the year, the Committee focussed on the following 
                                                           estimates specifically and performed 
                                                           the activities as set out below: 
                                                           Credit impairments 
                                                           o Reviewed, discussed and assessed the detailed credit risk 
                                                           report presented by the head of 
                                                           risk on a quarterly basis. 
                                                           o Received frequent stress-testing reports on the portfolio 
                                                           and operations, especially to 
                                                           mitigate risks in response to the COVID-19 pandemic 
                                                           o Challenged management's assumptions specifically in terms 
                                                           of high risk portfolios and appropriateness 
                                                           of impairments held against specific large exposures. 
                                                           Valuation of financial instruments 
                                                           o The committee reviewed and assessed the report presented 
                                                           by management and challenged management 
                                                           on the appropriateness of the assumptions and inputs 
                                                           applied in determining the calculations. 
                                                           o Valuation of investment in associate 
                                                           o Reviewed and debated the valuation report presented by 
                                                           management. 
                                                           o Challenged management's assumptions and inputs, 
                                                           especially those related to the exchange 
                                                           rate and risk adjusted discount rate. 
                                                           Goodwill impairment assessment 
                                                           o The Committee reviewed the financial forecasts and 
                                                           challenged management's assumptions and 
                                                           inputs, especially those related to the exchange rate and 
                                                           risk adjusted discount rate. 
                                                           o Valuation and ongoing or new classification of the assets 
                                                           and related liabilities included 
                                                           in disposal groups held for sale 
                                                           o Evaluated and challenged assumptions and inputs used by 
                                                           management in determining the classification 
                                                           and fair values of the assets and related liabilities of 
                                                           the disposal groups held for sale 
                                                           in line with IFRS 5 Non-current Assets Held for Sale and 
                                                           Discontinued Operations. 
                                                           Events after the reporting date 
                                                           o Reviewed management's justification for treating the 
                                                           event as a non-adjusting event in the 
                                                           28 February 2021 consolidated financial statement. 
                                                           Going Concern 
                                                           o Reviewed and debated the key risks to the going concern 
                                                           of the Group. 
                                                           o Reviewed and challenged the cash flow forecast presented 
                                                           by management for the holding company 
                                                           and Group. 
                                                           o Reviewed and challenged assumptions in respect of 
                                                           committed obligations and the impact of 
                                                           the terms of debt restructuring agreement concluded on 14 
                                                           July 2021. 
                                                           Assessment of the External Auditor 
                                                           o During the reporting period, the committee monitored the 
                                                           performance, objectivity and independence 
                                                           of the external auditor, KPMG Inc, including: 
                                                           o assessment and determination of the scope of KPMG's Group 
                                                           Audit Plan 
                                                           o approval of the terms of the audit engagement letter and 
                                                           approved, on behalf of the Board, 
                                                           the audit fees payable; 
                                                           o meetings with the KPMG audit partner to discuss external 
                                                           auditor's findings with which KPMG 
                                                           handled the key accounting and audit judgements 
                                                           o assessment of the independence of the external auditor, 
                                                           including a review of the non-audit 
                                                           services provided; 
                                                           o Assessment of any other matters that could potentially 
                                                           affect the independence of the auditor. 
                                                           o As a result of the need for frequent Board meetings in 
                                                           response to the pandemic and the 
                                                           strategic initiatives, the Committee met less frequently on 
                                                           a standalone basis and instead 
                                                           received frequent updates on a full range of audit matters 
                                                           during the full Board meetings. 
---------------------------------------------------  ----------------------------------------------------------------- 
 N. Financial Reporting 
                                                       *    In accordance with its terms of reference, the 
                                                            Committee is also responsible for reviewing the 
                                                            financial accounts of the Company and advising the 
                                                            Board on whether, taken as a whole they are fair, 
                                                            balanced and understandable and provides the 
                                                            information necessary for shareholders to assess the 
                                                            Company's performance, business model and strategy. 
 
 
                                                       *    Every annual report includes a Statement of Directors 
                                                            Responsibilities which explains the responsibility 
                                                            Directors have in preparing the Annual Financial 
                                                            Statements and the Group financial statements in 
                                                            accordance with applicable law and regulations. The 
                                                            Statement of Directors Responsibilities for the 
                                                            reporting period can be found under Statement of 
                                                            Directors Responsibilities. 
 
 
                                                      The Board's responsibilities in financial reporting include 
                                                      assessing the Group's ability 
                                                      to continue as a going concern and disclosing, as applicable, 
                                                      matters related to going concern. 
                                                      A statement from the Directors on the going concern of the 
                                                      Company is set out under section 
                                                      Going concern assessment (audited). 
---------------------------------------------------  ----------------------------------------------------------------- 
 O. Risk Management and Internal Controls 
                                                        *    The Audit, Risk, and Compliance Committee Board 
                                                             assists the Board in Its oversight of current risk 
                                                             exposures and future risk strategy and assists the 
                                                             Board in monitoring and reviewing the effectiveness 
                                                             of the credit and risk functions in the context of 
                                                             Company's overall risk management framework. The 
                                                             Committee also monitors the Company's capability to 
                                                             identify and manage emerging risks and overall 
                                                             effectiveness of the Company's internal financial 
                                                             controls and internal controls and risk management 
                                                             systems. 
 
 
                                                        *    Every annual report includes a comprehensive Risk 
                                                             Report that sets out the Group's risk management 
                                                             objectives, approach to measuring and managing risk, 
                                                             and an assessment of risk covering the applicable 
                                                             reporting period. 
 
 
                                                        *    The Risk Report for the reporting period can be found 
                                                             under section Risk Report 
---------------------------------------------------  ----------------------------------------------------------------- 
 Section 5. Remuneration                              -- 
---------------------------------------------------  ----------------------------------------------------------------- 
 P. Aligning Remuneration Policies and Practices to 
 Long-term Success                                     *    The Remuneration Committee is responsible for setting 
                                                            and overseeing policies on matters relating to 
                                                            remuneration practices and ensuring they remain 
                                                            relevant and aligned with the Company's strategy, 
                                                            talent acquisition, risk appetite, and long-term 
                                                            objectives of the Company. 
 
 
                                                       *    In accordance with its Terms of Reference, the 
                                                            Committee's responsibilities include setting and 
                                                            reviewing the remuneration policy for all directors 
                                                            and the Executive Management team. 
 
 
                                                       *    The Committee also advises the Board on the Company's 
                                                            human resources policies, staff recruitment criteria, 
                                                            staff development, compensation and benefits, health 
                                                            and safety, performance evaluation and promotion 
                                                            criteria, gender equality, discipline and grievance 
                                                            procedures, diversity, and the overall wellbeing of 
                                                            employees. 
 
 
                                                       *    Full details on the Committee's duties and 
                                                            responsibilities are set out in its Terms of 
                                                            Reference, which are available on the Company's 
                                                            website at 
                                                            http://atlasmara.com/about-us/corporate-governance/board-c 
                                                      ommittees/ 
                                                            . 
 
 
                                                       *    During the reporting period, in response to the 
                                                            challenges wrought by the pandemic, the Committee 
                                                            spent time: 
 
 
                                                      o receiving reports on the health and welfare of the employees, 
                                                      and approved policies to facilitate 
                                                      rapid response to the everchanging and dynamic work environment 
                                                      as a result of the pandemic; 
                                                      o monitoring the rates of COVID-19 infections among our 
                                                      employees and received reports on 
                                                      testing and isolation of employees that were affected; 
                                                      o approved policies to facilitate a seamless transition to 
                                                      work-from home. As a result of 
                                                      the policy changes and tools made available to them, although 
                                                      many of our employee were affected 
                                                      by the mandatory work from home policies imposed by governments 
                                                      in several jurisdictions of 
                                                      operation for several consequent months, the employees were able 
                                                      to continue seamlessly continue 
                                                      to work and serve our customers while working from home; and 
                                                      o providing oversight in the application of the Company's 
                                                      remuneration policy to ensure continued 
                                                      alignment with shareholder interests, by determining the 
                                                      appropriate balance between immediate 
                                                      and deferred remuneration for senior management of the Company. 
                                                       *    As a result of the need for frequent Board meetings 
                                                            in response to the pandemic and the strategic 
                                                            initiatives, the Committee met less frequently on a 
                                                            standalone basis and instead received frequent 
                                                            updates on Human Capital matters during the full 
                                                            Board meetings. 
---------------------------------------------------  ----------------------------------------------------------------- 
 Q. Executive Remuneration 
                                                        *    The Remuneration Committee determines the 
                                                             compensation of executive management team, as well as 
                                                             the Executive Chair, and sets policies which create 
                                                             align incentives and rewards with setting the right 
                                                             tone and delivering on strategic goals. 
 
 
                                                        *    The Executive Management do not participate in Board 
                                                             discussions relating to their own remuneration. The 
                                                             Remuneration Committee and the Board meet in an 
                                                             executive session when determining the compensation 
                                                             of the Executive team. 
---------------------------------------------------  ----------------------------------------------------------------- 
 R. Remuneration Policies and Practices 
                                                        *    The Remuneration Committee oversees the remuneration 
                                                             policy of the Company and ensures its alignment with 
                                                             the Company's business strategy and objectives, risk 
                                                             appetite, values, and the long-term interests of the 
                                                             Company and its shareholders. The Committee oversees 
                                                             the Company's human resource policies. 
 
 
                                                        *    The Committee also reviews the design of, and targets 
                                                             for, any performance-related pay schemes, and all 
                                                             share incentive plans operated by the Company. 
 
 
                                                        *    In making compensation decisions, the Committee 
                                                             reviews proposals from management and quantitative 
                                                             market data. The Committee relies on its own 
                                                             knowledge and business judgement to review and 
                                                             challenge management proposals and make compensation 
                                                             decisions. The full terms of reference of the 
                                                             Committee covering the authority delegated to it by 
                                                             the Board are available on the Company's website at: 
                                                             www.atlasmara.com. 
---------------------------------------------------  ----------------------------------------------------------------- 
 

Areas of the Code that the Company Continues to Work On

The table below sets out areas where the Company continues with efforts to achieve conformity with the Code and explanations for any areas of deviation.

 
 Section of the Code               Provision of the Code   Explanation for Areas of Non-Compliance 
                                                          ------------------------------------------------------------ 
 2. Division of Responsibilities   Provision 5 
                                                            *    The corporate governance requirements set out in 
                                                                 section 172 of the Companies Act 2006 do not apply to 
                                                                 Atlas Mara since the Company is incorporated in the 
                                                                 BVI and holds a standard listing on the London Stock 
                                                                 Exchange. 
--------------------------------  ----------------------  ------------------------------------------------------------ 
 2. Division of Responsibilities   Provision 9 
                                                            *    Michael Wilkerson was appointed as Executive Chairman 
                                                                 of the Board effective 6 February 2019. While Michael 
                                                                 Wilkerson is not independent, the Board elected to 
                                                                 appoint him as Chairman of the Board to ensure 
                                                                 continuity in executing the Company's strategic 
                                                                 priorities. With Michael as CEO of Fairfax Africa 
                                                                 Holdings Corporation ("Fairfax Africa"), the largest 
                                                                 shareholder of Atlas Mara, it reflects the commitment 
                                                                 of our largest shareholder to the strategic 
                                                                 priorities to accelerate the transformation of the 
                                                                 Group and create shareholder value. Michael Wilkerson 
                                                                 will remain Chairman of the Board for the foreseeable 
                                                                 future to help oversee the implementation of the 
                                                                 Board's recently announced strategic priorities and 
                                                                 actions. 
--------------------------------  ----------------------  ------------------------------------------------------------ 
 2. Division of Responsibilities   Provision 12 
                                                            *    In accordance with our standard Board evaluation 
                                                                 practices, the Board Chair's performance is appraised 
                                                                 every year when the Directors conduct their annual 
                                                                 Board evaluation. In light of the challenges 
                                                                 presented by the COVID-19 pandemic in 2020, an 
                                                                 appraisal of the Board Chair's performance during did 
                                                                 not take place. 
--------------------------------  ----------------------  ------------------------------------------------------------ 
 3. Composition, Succession and    Provision 17 
 Evaluation                                                 *    The Nomination Committee is currently composed of 
                                                                 four members, two of whom are considered independent. 
                                                                 While less than a majority of the Committee members 
                                                                 are independent, the composition of the Committee is 
                                                                 appropriate in light of recent changes to the Board's 
                                                                 composition as well as the recently announced 
                                                                 strategic priorities of the Board. Importantly, the 
                                                                 Committee has continued to discharge Its duties 
                                                                 effectively, and notably regularly interacting and 
                                                                 contributing to important strategy decisions. As and 
                                                                 when additional Directors are appointed to join the 
                                                                 Board, Committee compositions will be reassessed to 
                                                                 identify opportunities to appoint additional 
                                                                 independent Directors to the Nomination Committee. 
 
 
                                                            *    The Board recognizes the importance of improving 
                                                                 diversity on the Board and senior management team and 
                                                                 remains committed to addressing any gaps in its 
                                                                 future appointments and succession plans. 
--------------------------------  ----------------------  ------------------------------------------------------------ 
 3. Composition, Succession and    Provision 21 
 Evaluation                                                  *    In light of the challenges posed by the COVID-19 
                                                                  pandemic, the 2020 Board evaluation did not take 
                                                                  place. 
--------------------------------  ----------------------  ------------------------------------------------------------ 
 4. Audit, Risk, and Internal      Provision 24 
 Control                                                    *    The Audit, Risk and Compliance Committee is currently 
                                                                 composed of four members, three of whom are 
                                                                 considered independent. While not every member of the 
                                                                 Committee is independent, the Board is satisfied that 
                                                                 at least a majority of the Committee's members are 
                                                                 independent and that the Committee as a whole is 
                                                                 appropriately composed with members that bring the 
                                                                 financial skills and knowledge required to 
                                                                 effectively carry out their duties. 
--------------------------------  ----------------------  ------------------------------------------------------------ 
 5. Remuneration                   Provision 32 
                                                            *    The Remuneration Committee is currently composed of 
                                                                 three members, one of whom is considered independent. 
                                                                 While not every member of the Committee is 
                                                                 independent, the composition of the Committee is 
                                                                 appropriate in light of recent changes to the Board's 
                                                                 composition as well as the recently announced 
                                                                 strategic priorities of the Board. Notably, the 
                                                                 current Committee Chair, Rachel Robbins, is an 
                                                                 independent Director, and the Board is satisfied that 
                                                                 the Committee as a whole brings the knowledge and 
                                                                 experience required to effectively carry out its 
                                                                 duties. Importantly, the Committee has continued to 
                                                                 discharge its duties effectively, and notably 
                                                                 regularly interacting and contributing to important 
                                                                 strategy development and execution decisions, as well 
                                                                 as overseeing efforts to right size the company to 
                                                                 align with the Board's strategic priorities. 
--------------------------------  ----------------------  ------------------------------------------------------------ 
 5. Remuneration                   Provision 34 
                                                             *    As at 28 February 2021, the former Chairman of the 
                                                                  Board, Bob Diamond, held stock options which were 
                                                                  awarded to him as part of a new Management Incentive 
                                                                  Plan that was put in place pursuant to the terms of 
                                                                  the strategic financing transaction executed between 
                                                                  the Company and Fairfax Africa, which closed on 31 
                                                                  August 2017. The current Chairman of the Board, 
                                                                  Michael Wilkerson, does not hold stock options. 
--------------------------------  ----------------------  ------------------------------------------------------------ 
 5. Remuneration                   Provision 41 
                                                             *    As a BVI-incorporated company and with its standard 
                                                                  listing on the LSE, Atlas Mara is not required to 
                                                                  comply with the full disclosure requirements of the 
                                                                  provision and have complied only to the extent 
                                                                  required by IFRS or as disclosed in note 28.3. 
--------------------------------  ----------------------  ------------------------------------------------------------ 
 

Leadership

Overview of governance structures

The Board of Directors oversees the business of Atlas Mara on behalf of the Company's shareholders. The Board is accountable for the long-term success of the Company and delivery of sustainable value to shareholders. The Board sets the right tone and provides leadership of the Company within a framework of prudent and effective controls to appropriately assess and manage risks. The Board has delegated certain responsibilities to Board Committees to assist it with discharging its duties. Additionally, the implementation of matters approved by the Board and oversight of the day-to-day operations of the Company is delegated to the Atlas Mara Executive Committee ('EXCO'), which consists of senior management from the Company's key business lines and functional areas. Following recent changes made at the senior management level, in 2020 Atlas Mara's Executive Committee consisted of Michael Wilkerson, as Chairman of the Executive Committee, Muhammad Omar Khan (Group CFO); Beatrice Hamza Bassey (Group General Counsel); Kenroy Dowers (Group MD Strategy and Corporate Development); Sanjeev Anand (Group MD Retail and Commercial Banking) and Jonathan Muthige (head of Human Capital).

Role of the Board

Specifically, the Board:

-- sets and reviews the strategy and risk appetite for the Company;

-- oversees corporate governance activities of the Company, as well as compliance with the Code and any other corporate governance code the Board considers appropriate from time to time, as well as disclosures on corporate governance in the Annual Report and Accounts;

-- defines the Company's purpose and shared values, and promotes and monitors its culture;

-- approves capital and operating plans presented by management for the achievement of the strategic objectives it has set;

-- selects and evaluates the CEO and selected senior management hires;

-- sets the remuneration policy of the Company and approves the remuneration of the Executive Management team, as well as the remuneration of the Board;

-- is responsible for the Company's preparedness to respond in the event of a crisis;

-- oversees and approves major investments; and

-- reviews annually the Board's terms of reference and its own effectiveness.

The Board is also responsible for ensuring compliance with the general secretarial functions required under the BVI Companies Act and for compliance with the Company's continuing obligations as a company listed on the Official List and trading on the main market of the London Stock Exchange. The Company's company secretarial functions are performed and managed by the General Counsel, who has been approved as Company Secretary pursuant to BVI legal requirements.

Matters reserved for the Board

The Board maintains and periodically reviews a formal schedule of matters that are reserved to, and can only be approved by, the Board. The full schedule is available on the Atlas Mara website at http://atlasmara.com/about-us/corporate-governance/governance-framework/.

This schedule covers areas including:

-- the overall direction and approval of the Group's strategy;

-- changes relating to the Group's capital or corporate structures;

-- major investments, acquisitions and divestments;

-- risk appetite and oversight of risk and internal control;

-- approval of contracts, loans, repayments, borrowings, acquisitions and disposals greater than the thresholds established in the Company's related Schedule of Authorisations; and

-- authorising conflicts of interest where permitted by the Company's Articles of Association.

The matters that have not been expressly reserved to the Board are delegated by the Board to its Committees, as set out in their terms of reference, or to the Executive Committee of the Company. The Executive Committee executes the Company's strategy and is responsible to the Board for the management, development and performance of Atlas Mara and those matters for which the Board has delegated authority.

Composition of the Board

As at 28 February 2021, the Board was comprised of five members: the Chairman and four Non-Executive Directors. Effective 7 October 2020, Amadou Raimi, Chair of the Audit Committee, retired from the Board of Directors of the Company. Following this change, the Board is currently comprised of 5 members: Michael Wilkerson, as Chairman of the Board, and Bob Diamond, Rachel Robbins, , Simon Lee, and Jawaid Mirza as Non-Executive Directors. Further details on the Board of Directors and its composition are set out under section Board and Committee meetings and the Directors' Report.

Meetings of the Board

The Board holds regularly scheduled meetings every month with in-person meetings scheduled each quarter, however, following the impact of the Covid 19 Pandemic related travel restrictions, all meetings were conducted via telephone conference In 2020, special meetings were held in between scheduled meetings as often as necessary in order to enable the Board to fulfil its role or to consider and approve corporate activity of the Company. The Directors allocated sufficient time to the Company to perform their responsibilities effectively which includes time to prepare for Board meetings and review information packs circulated to the Board ahead of each meeting. During the reporting period, the Board and its Committees held 28 meetings in the aggregate. Board and Board Committee meetings are conducted in accordance with the articles of association of the Company.

The Board information packs include detailed reports with updates on the following key areas: financial performance; risk management; Internal Audit; legal, compliance and regulatory matters; banking and operations; Fintech and digital; global markets and treasury; and corporate development and strategic initiatives. The reports shared with the Board are agreed and prepared by in consultation with the Chairman of the Board and Chairs of the respective Committees. The Board also receives quarterly reports from external auditors. The management also makes available ad hoc information at the Board's request and endeavours to do so in a timely manner to ensure the Board has sufficient time to review materials.

In the few instances where Directors are unable to attend meetings due to conflicts in their schedule, they receive papers in the normal manner and have the opportunity to relay their comments in advance of the meeting, as well as follow up with the Chairman if necessary. The same process applies in respect of the various Board Committees.

The tables under section Board and Committee meetings set out the attendance by Directors at Board and Committee meetings during the reporting period.

Committees of the Board

The Board has delegated authority to its Committees to undertake various tasks on its behalf and to ensure compliance with regulatory requirements. This enables the Board to operate efficiently. The Board Committee terms of reference were drafted with the aim of promoting best practice in corporate governance. A summary of the terms of reference for each Committee is set out below. The full terms of reference are available on our website http://atlasmara.com/about-us/corporate-governance/board-committees/ .

 
 Committee                    Role and terms of reference                  Minimum meetings per year 
                                                                          -------------------------------------------- 
 Nomination                   Leads the process for Board appointments     At least twice per year, and more 
                              and ensures that the Board and its           frequently as requirements dictate. 
                              Committees have 
                              an appropriate balance of skills, 
                              experience, availability, independence and 
                              knowledge of 
                              the Company to enable them to discharge 
                              their responsibilities effectively. 
---------------------------  -------------------------------------------  -------------------------------------------- 
 Audit, Risk and Compliance   Reviews and reports to the Board on the      At least four times a year in person at 
                              Group's financial reporting, internal        appropriate intervals in the financial 
                              controls and                                 reporting and 
                              risk management systems, the Company's       audit cycle and otherwise as required. 
                              compliance with legal and regulatory 
                              requirements, 
                              internal audit and the independence and 
                              effectiveness of the external auditors. 
---------------------------  -------------------------------------------  -------------------------------------------- 
                              Advises the Board on developing an overall   At least four times per year, and more 
   Remuneration               remuneration policy that is aligned with     frequently as requirements dictate. 
                              the business 
                              strategy and objectives, risk appetite, 
                              values and long-term interests of the 
                              Company, recognising 
                              the interests of all stakeholders. 
---------------------------  -------------------------------------------  -------------------------------------------- 
 

Board and Committee meetings

The attendance of Directors at Board and Committee meetings during 2020 is set out below.

 
 Board meeting attendance in 2020(1) 
-------------------------------------  -------- 
 Michael Wilkerson                      20 (20) 
-------------------------------------  -------- 
 Robert E. Diamond, Jr.                 21 (21) 
-------------------------------------  -------- 
 Rachel F. Robbins                      21 (21) 
-------------------------------------  -------- 
 Amadou Raimi(2)                          7 (7) 
-------------------------------------  -------- 
 Simon Lee                              19 (20) 
-------------------------------------  -------- 
 Jawaid Mirza                           21 (21) 
-------------------------------------  -------- 
 
   In attendance    Absent 

Note:

   1.   Board meetings in 2020 covers period from 1 Jan 2020 to 28 February 2021. 
   2.   Amadou Raimi stepped down from the Board effective 7 October 2020 
 
 Audit, Risk and Compliance Committee meeting attendance in 2020(1) 
--------------------------------------------------------------------  ------ 
 Amadou Raimi(2)                                                       4 (4) 
--------------------------------------------------------------------  ------ 
 Rachel F. Robbins                                                     5 (5) 
--------------------------------------------------------------------  ------ 
 Simon Lee                                                             5 (5) 
--------------------------------------------------------------------  ------ 
 Jawaid Mirza(3)                                                       5 (5) 
--------------------------------------------------------------------  ------ 
 
   In attendance    Absent 

Note:

   1.   Audit, Risk and Compliance meetings in 2020 covers period from 1 Jan 2020 to 28 February 2021. 
   2.   Amadou Raimi  stepped down from the Board effective 7 October 2020 
   3.   Jawaid Mirza assumed the role of chairman of the Committee effective 7October  2020. 
 
 Remuneration Committee meeting attendance in 2020(1) 
------------------------------------------------------  ------ 
 Rachel Robbins                                          2 (2) 
------------------------------------------------------  ------ 
 Robert E. Diamond, Jr.                                  2 (2) 
------------------------------------------------------  ------ 
 Michael Wilkerson                                       2 (2) 
------------------------------------------------------  ------ 
 
   In attendance    Absent 

Note:

   1.   Remuneration Committee meetings in 2020 covers period from 1 Jan 2020 to 28 February 2021. 
 
 Nomination Committee meeting attendance in 2020(1) 
----------------------------------------------------  ------ 
 Robert E. Diamond, Jr.                                1 (1) 
----------------------------------------------------  ------ 
 Simon Lee                                             1 (1) 
----------------------------------------------------  ------ 
 Rachel F. Robbins                                     1 (1) 
----------------------------------------------------  ------ 
 Jawaid Mirza                                          1 (1) 
----------------------------------------------------  ------ 
 Michael Wilkerson                                     1 (1) 
----------------------------------------------------  ------ 
 
   In attendance    Absent 

Note:

   1.   Nomination Committee meetings in 2020 covers period from 1 Jan 2020 to 28 February 2021. 

What the Board focused its time on in 2020

Strategy and Corporate Development

-- Undertook an assessment of the key priorities and actions for 2020.

-- Considered and approved strategic transactions, including potential M&A transactions involving certain banking assets of the Company.

-- Continued to monitor progress with implementing strategic priorities throughout the year.

-- Ensured strategic objectives were designed to preserve value for shareholders.

-- Considered and approved leadership and organisational changes aimed at repositioning the Company.

-- Reviewed the capital and funding structure of the Group's businesses and assessed strategic proposals for enhancing growth and financial performance.

-- Oversaw the repositioning of the business and discussions aimed at restructuring of the Company's balance sheet.

Financial and operational performance of Retail & Commercial Banking Division

-- Provided leadership and oversight to weather the effects of the challenges presented by the COVID-19 pandemic including frequent stress testing and meetings to provide direction on ever changing environment.

-- Assessed management proposals for addressing key macroeconomic challenges impacting financial performance and addressing the health and economic effects of the pandemic.

-- Received and reviewed regular updates on the operating environment and key drivers of the Company's performance.

-- Assessed and monitored the financial performance of the Company and its operating subsidiaries against the targets set for 2020.

-- Assessed and approved financial statements to be released to the market.

-- Oversaw efforts to further streamline the holding company and remove centralised cost structures

-- Monitored implementation of IFRS 9 requirements.

-- Assessed the liquidity and solvency of the Company.

-- Considered and approved capital injections into subsidiaries to capitalise subsidiaries to meet regulatory capital requirements where needed.

-- Considered and approved cost control and growth initiatives to drive financial performance of the Company.

Risk and Governance

-- Provided oversight and advice on the Company's risk strategy and effectiveness of the overall risk management framework.

-- Reviewed and received reports on risk management and key risk exposures.

-- Considered and discussed proposals to enhance internal controls and risk management systems.

-- Reviewed and monitored effectiveness of the Company's compliance policies and procedures.

-- Provided oversight over the implementation of the Company's compliance program.

-- Monitored adherence to the Board Committee terms of reference.

-- Discussed key regulatory engagement and interactions.

Shareholders and Investors

-- Engaged with shareholders through proactive and Intensive Investor relations programme of conference calls and regular updates.

-- Engaged with shareholders in connection with fundraising initiatives, including prospective divestments targeted at ensuring focus on the core business of the Company.

-- Discussed shareholders' views and concerns on a regular basis.

-- Discussed share price performance and investor feedback.

People, Culture and Values

-- Focused on leadership and culture during challenges wrought by the pandemic.

-- Monitored ongoing implementation of the Company's People Agenda, aimed at embedding the Company's purpose, culture and values across the group, and engaging and re-energising staff around a common vision and unified people proposition.

-- Considered and reviewed compensation structures of senior management to ensure alignment with values and interests of the Company.

-- Monitored implementation of cost-rationalisation projects to ensure operational stability and effective engagement with staff impacted by organisational changes.

-- Provided oversight over the Company's human resource policies and received regular updates on staff recruitment and performance.

-- Monitored ongoing efforts to standardise human capital policies and procedures across the group.

-- Reviewed incentive structures to ensure alignment with the Company's purpose, vision and culture.

Effectiveness

Independence

Following the previously reported changes to the Board's composition during 2019, the Board currently consists of the Chairman and four Non-Executive Directors, three of whom are considered to be independent. The two Independent Non-Executive Directors on the Board are: Rachel F. Robbins and Jawaid Mirza.

Robert E. Diamond, Jr., Non-Executive Director on the Board, is a co-founder of the Company and an affiliate of AFS Partners LLC, one of the Founding Entities of the Company that holds Founder Preferred Shares issued by the Company at the time of its incorporation. Bob Diamond is not considered independent by virtue of his role in founding the Company

Out of the 5 current Board members, two were appointed to the Board pursuant to the terms of the strategic financing transaction executed between the Company and Fairfax Africa in August 2017: Michael Wilkerson and Simon Lee. Under this strategic partnership, Fairfax Africa was granted certain rights to appoint Directors to the Company's Board, which were incorporated into the Articles of the Company and approved by the shareholders of the Company at an extraordinary general meeting held on 14 July 2017. These 2 Directors are not considered independent by virtue of their appointment to the Board by Fairfax Africa, which holds a substantial minority interest in the Company.

Following recent changes to the composition of the Board, half of the Board members, excluding the Chairman, are considered independent as defined by the 2018 Code. In light of ongoing strategic initiatives, the composition of the Board will remain as is, until such time the Board determines appropriate to initiate a search for additional independent Board members.

Director election

The Code recommends that all Directors be subject to annual re-election by the shareholders. At the Company's last AGM, all Directors were submitted for re-election by the shareholders and were re-appointed accordingly.

Diversity

Atlas Mara remains committed to promoting diversity across the Group, however the Board acknowledges the need to improve gender balance across the Board and senior management team. The Company's policy on diversity is embedded in the Group's Human Capital Policy, which outlines key principles and guidelines for enhancing diversity and inclusivity at all levels within the organisation. Achieving balanced representation is important for encouraging meaningful dialogue and empowering staff, Management and Directors to work towards the Company ' s common strategic objectives. Further details on our values and culture, and commitment to diversity in the workplace, can be found under section Corporate Governance.

Accountability

Risk management

The Board recognises its responsibility with respect to risk management with a particular focus on determining the nature and extent of the Company's risk appetite for achieving its strategic objectives.

The Audit, Risk and Compliance Committee takes responsibility for overseeing the effectiveness of sound risk management and setting the framework. The Board is very clear that risks and uncertainties are a necessary facet of the businesses in which we operate. Within this context, the Board trusts and empowers the Company's management and employees to manage risks, providing a framework designed to provide reasonable assurance that our resources are safeguarded and that the risks and uncertainties facing the business are being properly assessed, managed and mitigated.

Internal controls

The Board gives primacy to its responsibility for establishing and maintaining the Group's system of internal controls. The Board receives regular reports from management identifying, evaluating and managing the risks within the business. The system of internal controls is designed to manage, as opposed to eliminate, the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material losses or misstatements. The Audit, Risk and Compliance Committee reviews the system of internal controls by way of reports from the Chief Risk Officer, the General Counsel, the Head of Internal Audit, as well as the Company's external auditors.

During 2020, the Company's management continued efforts to strengthen internal controls and ensure a sound internal controls environment is established and adhered to by all the Company's subsidiaries. The Audit, Risk and Compliance Committee provided close monitoring and review of progress being undertaken by Management to improve internal controls. Management will continue to strive to ensure key issues are brought to the attention of the Committee and the Board.

The Board and the Audit, Risk and Compliance Committee has carried out a review of the effectiveness of the system of internal controls during the period ended 28 February 2021 and for the period up to the date of approval of the consolidated financial statements contained in the Annual Report. The review covered all material controls, including financial, operational and compliance controls, and risk management systems. The Board confirms that the actions it considers necessary have been, or are being, taken to remedy any significant weaknesses identified from its review of the system of internal control. This has involved considering the matters reported to it and developing plans and programmes that it considers are reasonable in the circumstances. The Board also confirms that it has not been advised of material weaknesses in the part of the internal control system that relates to financial reporting.

Relations with shareholders

The Board emphasises the importance of communicating with its shareholders to ensure that its strategy, business model and performance are clearly understood and that it remains accountable to shareholders.

Responsibility for maintaining regular communications with shareholders rests with the CFO and other members of the Executive team, as appropriate. Additionally, Atlas Mara has made available the Chairman of the Board and the Senior Non-Executive Director to investors reflecting our desire to promote shareholder access to the Company. The Company sets itself the target of providing information that is timely, clear and concise. We have a programme of communication with shareholders based on our financial reporting calendar, including the Interim and Annual Report, AGM and the Investor Relations section of the corporate website at http://atlasmara.com/investor-relations/.

Investor activity during the last financial year included:

-- earnings calls for investors, analysts and stakeholders in conjunction with key financial announcements;

-- attendance at various investment bank-sponsored institutional investor conferences;

-- investor briefings and meetings held virtually; and

-- ad hoc meetings with the Chairman of the Board and other Non-Executive Directors on request, where calendar and regulatory requirements allow.

To further support engagement with our shareholders, the senior management team arranged meetings for investors in our countries of operations including meetings with the Company's local management teams.

RISK REPORT

The Group operates in an environment where taking considered business risks within the jurisdictions in which we operate is key to delivering on our strategy and to delivering value to shareholders.

In executing our business strategy, it is important to navigate uncertainties deftly, to optimise growth opportunities and to ensure that attendant risks fall within the Group's risk appetite framework of whichever risk type, with appropriate risk mitigants in place.

Group risk management objectives

The Board recognises that it is ultimately responsible and accountable to shareholders for:

   --              the process of risk management and the systems of internal control; 
   --              identifying, evaluating and managing the significant risks faced by the Group; 

-- ensuring that effective internal control systems are in place to mitigate significant risks faced;

-- ensuring that a documented and tested process is in place to allow the Group to continue its critical business in the event of a severe incident impacting its activities; and

   --              reviewing the efficacy of the internal control system. 

The Group risk management function, as mandated by the Board of Directors is to:

-- coordinate risk management activities across the organisation, by ultimately becoming the custodian of Atlas Mara ' s risk management culture;

   --              analyse, monitor and manage all aspects of exposures across risk classes; 

-- ensure risk parameters and limits are set, approved and implemented and ensure that they are consistently adhered to; and

-- facilitate various risk management committees as part of the Group ' s risk management process.

Group risk management objectives

The Group's approach to risk management involves a number of fundamental elements. The procedures and methodology are enshrined in the evolving Atlas Mara Enterprise-wide Risk Management ('ERM') Framework.

The Group's risk appetite sets out the level of risk that the Group is willing to take in pursuit of its business objectives. This risk appetite is calibrated against the Group's broad financial targets including profitability and impairment targets, dividend coverage and capital levels. The Group's risk methodologies include systems that enable the Group to measure, aggregate and report risk for internal and regulatory purposes in line with best practice.

ERM in business includes the methods and processes used by organisations to manage risks and identify opportunities related to the achievement of their objectives. ERM provides a framework for risk management, which typically involves identifying particular events or circumstances relevant to the organisation's objectives (risks and opportunities), assessing them in terms of likelihood and magnitude of impact, determining a response strategy, and monitoring progress.

The Group's risk management framework defines the risk management Principles and Standards followed by the Group. These Principles and Standards ensure that risks are consistently managed throughout the Group through a set of internal controls. The Principles and Standards also ensure that risk awareness filters down through every level of the Group, and that every employee understands their responsibility in managing risk. At each operating subsidiary entity, the following sub-committees, comprising executives and senior management, are responsible for dealing with the risks facing the Group in a structured manner:

   --              Executive Credit Committee ( ' EXCO Credit ' ) - responsible for credit risk; 

-- Assets and Liability Committee ( ' ALCO ' ) - responsible for interest rate, market, liquidity, counterparty, currency and capital adequacy risk; and

-- Operational Risk Committee ( ' ORCO ' ) - responsible for technology, compliance, legal, human resources, reputational, operational and regulatory risk.

Atlas Mara has adopted the three lines of defence model to address how specific duties related to risk and control can be assigned and coordinated within the various business units. The model's underlying premise is that, under the oversight and direction of senior management and the Board of Directors, three separate groups (or lines of defence) within Atlas Mara are necessary for effective management of risk and control.

The three lines of defence are:

   --              Business operations; 
   --              Risk and control functions; and 
   --              Internal audit. 

Each of the three lines plays a distinct role within Atlas Mara's wider governance framework. When each performs its assigned role effectively, the prospects of Atlas Mara being successful in achieving its overall objectives are highly enhanced.

Role of Atlas Mara Group Risk Management

Atlas Mara Group Risk Management is responsible for maintaining a culture of risk awareness throughout the Group. While each business unit is primarily responsible for managing its own risks, Group Risk Management independently monitors, manages and reports on all risks facing the Group, as mandated by the Board of Directors. It coordinates risk management activities across the Group to ensure that risk parameters are properly set and adhered to across all risk categories and in all Group companies. It also ensures that all risk exposures can be measured and monitored across the Group. Managing risk effectively is one of the key drivers of the Group's continuous investment in technology. Group Risk Management continually seeks new ways to enhance its risk management techniques.

It also updates the Group risk management framework on a regular basis to reflect new policies adopted by the Board of Directors. Group Risk Management overseeing the banking operations regularly reports to the Atlas Mara Executive Committee and the Atlas Mara Board Audit, Risk and Compliance Committee, to provide the Board with assurance that risks are being appropriately identified, managed and controlled. Group Risk Management is headed by an executive manager who reports to the Group CEO of banking subsidiaries who in turn reports to the Executive Chairman.

The Board has approved the Group risk management framework which applies to all Group companies and deals with enterprise-wide risk and governance protocol. Risk management in the Group is underpinned by governance structures as well as risk ownership, identification and evaluation. Ownership and management of risks begins in the business units of each subsidiary, who identify and evaluate risks particular to their function. Group Risk Management reviews actions taken by business units to mitigate identified risks.

Each subsidiary or business unit produces risk reports which along with the detailed risk information provided by Group Risk Management, is discussed by the Board. The risk reports present a balanced assessment of significant risks and the effectiveness of risk management procedures, and management actions in mitigating those risks.

Credit risk

Credit risk is the risk of loss to the Group from the failure of clients, customers or counterparties, to fully honour their obligations to the Group, including the whole and timely payment of principal, interest, collateral and other receivable. Credit risk management is the most significant risk to which the Group is exposed to.

Significant changes in the economy, or in the health of a particular industry segment that represents a concentration in the Group's portfolio, could result in losses that are different from those provided for at the reporting date. Country (or Sovereign) risk is part of overall credit risk and is managed as part of the credit risk management function as it has a major impact on individual counterparties' ability to perform. Management therefore carefully manages its exposure to credit risk.

Credit exposures arise principally in loans and advances, debt securities and other similar instruments. There is also credit risk in off-balance sheet financial arrangements such as loan commitments and guarantees. The Group Risk team reviews subsidiary risk exposures regularly and reports to the Atlas Mara Board of Directors.

Credit risk management and strategy

Credit risk is managed across the Group in terms of its Board approved risk management framework, encompassing credit principles and standards, mandate limits and governance structures.

The governance structures mandated with accountability for loan approvals, monitoring and risk management include the following:

-- In Country Management Committee Credit Committee (Manco Credit Committee) (including BancABC entities and BPR).

   --              In Country Board Credit Committee including (BancABC entities and BPR). 
   --              ABCH Group Credit Committee. 
   --              ABCH Board Credit Committee. 
   --              ABCH Board Loans Review Committee. 

Atlas Mara Group credit risk management objectives are to:

   --              enable sustainable asset growth in line with the Group Risk appetite; 
   --              optimise credit governance and operational structures; 
   --              create a robust control environment; 
   --              invest in skills, training and appropriate experience; 
   --              simplify risk management processes; 
   --              implement and refine appropriate models for credit granting; 
   --              improve early warning, problem recognition and remedial management capability; and 
   --              improve credit policies and governance framework. 

The Board has defined and documented a credit policy for the Group which forms the basis of credit decisions. This policy includes a framework of limits and delegation of credit approval authority which are strictly adhered to. No one individual has the power to authorise credit exposures. Each subsidiary has a credit committee which operates within the defined limits set by the Board. These committees are responsible for the management of credit risk within their country including credit decisions, processes, legal and documentation risk and compliance with impairment policies. The Group Risk Department regularly reviews each subsidiary's adherence to required standards.

The Group Executive Committee ('EXCO') reports to the Board and is responsible for approval of credit decisions that are above country limits, recommendations on exposure limits and impairment policies. There is also a Board Credit Committee that approves any loans above the EXCO limit.

Credit life cycle

The credit life cycle consists of target market identification and quantification, principles of credit evaluation and decisioning, post-sanctioning fulfilment, credit administration, portfolio monitoring, early warning triggers, problem recognition and remedial management. The business, risk and senior management are integrated into the end-to-end credit life cycle. Atlas Mara Group uses a Risk Grading tool for corporate exposures to determine a minimum credit rating for acceptance for credit granting purposes.

The rating is the result of qualitative and quantitative criteria, based on statement of financial position and profit or loss inputs including critical ratios, industry benchmarking, management experience and capability. Risk ratings awarded to obligors are reviewed annually with the latest financial information and account conduct for corporate exposures.

Measuring credit risk

The Group's approach to measuring credit risk aims to align with the requirements set out under IFRS 9, in all substantial aspects, aligned with the standard approach and methodology employed by international financial institutions.

In line with IFRS 9, the Group has adopted the Expected Credit Loss approach effective 1 January 2018. Credit risk is broken down into the common risk components of Probability of Default ('PD'), Exposure at Default ('EAD') and Loss Given Default ('LGD'), modelled at a client, facility and portfolio level. These risk components are used in the calculation of the Expected Credit Loss ('ECL'). The models used by the Group are compliant with Basel II and regulatory requirements. These risk measures would be used as inputs to calculate the collective impairment amounts.

 
 Component                     Definition 
                              ---------------------------------------------------------------------------------------- 
 Probability of default (PD)   The probability that a counterparty will default, over the next 12 months from the 
                               reporting 
                               date (stage 1) or over the lifetime of the product (stage 2). 
                               The PD estimates will fluctuate in line with the economic cycle. The lifetime (or term 
                               structure) 
                               PDs are based on statistical models, calibrated using historical data. 
----------------------------  ---------------------------------------------------------------------------------------- 
 Loss given default (LGD)      The loss that is expected to arise on default, which represents the difference between 
                               the 
                               contractual cash flows due and those that the bank expects to receive. 
                               The Group estimates LGD based on the history of recovery rates and considers the 
                               recovery 
                               of any collateral that is integral to the financial asset. 
----------------------------  ---------------------------------------------------------------------------------------- 
 Exposure at default (EAD)     The expected statement of financial position exposure at the time of default, taking 
                               into 
                               account the expected change in exposure over the lifetime of the exposure. This 
                               incorporates 
                               the impact of drawdowns of committed facilities, repayments of principal and interest, 
                               amortisation 
                               and prepayments. 
----------------------------  ---------------------------------------------------------------------------------------- 
 

To determine the expected credit loss ('ECL'), these components are multiplied together (PD for the reference period (up to 12 months or lifetime) x LGD at the beginning of the period x EAD at the beginning of the period) and discounted to the balance sheet date using the effective interest rate as the discount rate.

Expected credit loss and capital requirements

The three components, PD, EAD and LGD, are building blocks used in a variety of measures of risk across the entire portfolio. ECL is the measurement of loss, which enables the application of consistent credit risk measurement across all retail and corporate credit exposures. LGD, EAD and PD estimates are also used in a range of business applications, including pricing, customer and portfolio strategy and performance measurement. ECL estimates can be compared directly to portfolio impairment figures within the regulatory capital calculation to ensure that the organisation's estimates of ECL from doing business are sufficiently covered by the level of general impairments raised. Any situations in which general impairments are insufficient to cover total ECL in totality have a direct bearing on the Group's capital requirement to ensure that these potential losses are absorbed.

Forbearance and restructuring

Forbearance refers to obligations for which the contractual terms of the facilities availed are modified or formalised into a new transaction. Atlas Mara Group Credit Principles and Standards documents the criteria to be applied in assessing clients that will qualify for restructure. Great emphasis is placed on sustainability of cash flows to repay the restructured instalments.

Restructuring activities include extended payment arrangements or the modification and deferral of payments. If the terms of a loan are modified or an existing loan is replaced with a new loan, then a qualitative as well as quantitative assessment is made to determine whether the original loan should be derecognised. The quantitative test determines whether the net present value of the cash flows under the new terms discounted at the original effective interest rate is at least 10% different from the carrying amount of the original debt. The qualitative test assesses whether there has been a significant change in the terms and conditions of the new loan compared to the original loan.

If it is determined that the expected restructuring will not result in derecognition of the existing loan, then the gain or loss due to modification is computed as the difference between the gross carrying amount of the original loan at the time of the restructure, and the discounted cash flows of the modified loan contract using the original effective interest rate as the discount factor.

If the expected restructuring will result in derecognition of the existing loan, then the expected fair value of the new loan is treated as the final cash flow from the existing loan at the time of its derecognition. This amount is included in calculating the cash shortfalls from the existing loan that are discounted from the expected date of derecognition to the reporting date using the original effective interest rate of the existing loan. These policies are kept under continuous review.

With the onset of the COVID-19 pandemic, assistance was offered to customers by way of granting payment holidays of 2 - 6 months, reducing the instalment amounts and extending loan tenures. Policy guidelines document the criteria to be applied to determine the loans that qualify for a restructure. For the COVID-19 related restructures, the Group determined that the restructuring did not result in the derecognition of the original loan. The gain or loss on modification of the loan was computed as the difference between the gross carrying amount of the original loan at the time of the restructure, and the discounted cash flows of the modified loan using the original effective interest rate as the discount rate.

Risk limit control and mitigation policies

The Group manages, limits and controls concentrations of credit risk in respect of individual counterparties and groups, and to industries and countries. The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis and subject to an annual or more frequent review, when considered necessary. Limits on the level of credit risk by product, industry sector and by country are approved by the Board of Directors (intermediate holding company) and relevant sub-committees and reviewed regularly. Exposure to credit risk is also managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate. Some other specific control and mitigation measures are outlined below.

a. Collateral

The Group employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security for funds advanced, which is common practice.

The Group implements guidelines on the acceptability of specific classes of collateral for credit risk mitigation. The principal collateral types for loans and advances are:

   --              cash collateral; 
   --              charges over assets financed; 
   --              mortgages over residential and commercial properties; 

-- charges over business assets such as premises, inventory and accounts receivable; and

   --              charges over financial instruments such as debt securities and equities. 

Loans and advances to corporates are generally secured. In addition, in order to minimise credit loss, the Group will seek additional collateral from the counterparty as soon as impairment indicators are noticed for the relevant individual loans and advances. Collateral held as security for financial assets other than loans and advances is determined by the nature of the instrument. Debt securities, treasury and other eligible bills are generally unsecured, with the exception of asset-backed securities and similar instruments, which are secured by portfolios of financial instruments.

b. Credit-related commitments

The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit - which are written undertakings by the Group on behalf of a customer authorising a third party to draw drafts on the Group up to a stipulated amount under specific terms and conditions - are collateralised by the underlying shipments of goods to which they relate and therefore carry less risk than a direct loan.

Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Group is potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Group monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments.

c. Derivatives

The Group maintains strict control limits on net open derivative positions (that is, the difference between purchase and sale contracts) by both amount and term. The amount subject to credit risk is limited to expected future net cash inflows of instruments, which in relation to derivatives are only a fraction of the contract, or notional values used to express the volume of instruments outstanding. This credit risk exposure is managed as part of the overall lending limits with customers, together with potential exposures from market movements. Collateral or other security is not always obtained for credit risk exposures on these instruments, except where the Group requires margin deposits from counterparties.

Impairment policies

The Group has adopted standard impairment policies which at a minimum comply with the prudential guidelines of the respective countries' Central Banks. Impairments are determined monthly at subsidiary level and are subject to regular review by EXCO Credit.

The impairments shown in the statement of financial position are measured in line with the expected credit loss model prescribed by IFRS 9. IFRS 9 outlines a 'three-stage' model for impairment based on changes in credit quality since initial recognition. Refer to the table below for further details:

 
 Stage                               Description                               ECL recognised 
                                                                              ---------------------------------------- 
 Stage 1:                            Financial assets that have had no         12-month expected credit losses. 
  12-month ECL                       significant increase in credit risk       Losses expected on defaults which may 
                                     since initial recognition                 occur within the next 12 months. 
                                     or that have low credit risk at the 
                                     reporting date. 
                                     For example: a newly originated loan on 
                                     which repayments are being received and 
                                     there are 
                                     no other indicators of a significant 
                                     increase in credit risk. 
----------------------------------  ----------------------------------------  ---------------------------------------- 
 Stage 2:                            Financial assets that have had a          Lifetime expected credit losses. 
  Lifetime ECL not credit impaired   significant increase in credit risk       Losses expected on defaults which may 
                                     since initial recognition                 occur at any point in a loan's 
                                     but that do not have objective evidence   lifetime. Losses are 
                                     of impairment.                            adjusted for probability weighted 
                                     For example: a loan on which payment is   macroeconomic scenarios. 
                                     30 days overdue. 
----------------------------------  ----------------------------------------  ---------------------------------------- 
 Stage 3:                            Financial assets that are credit          Lifetime expected credit losses. 
  Lifetime ECL credit impaired       impaired or in default and represent      Losses expected on defaults which may 
                                     those that are at least                   occur at any point in a loan's 
                                     90 days past due in respect of            lifetime. Losses are 
                                     principal and/or interest. Financial      adjusted for probability weighted 
                                     assets are considered                     macroeconomic scenarios. 
                                     to be credit impaired where the           Interest income is calculated on the 
                                     obligors are unlikely to pay on the       carrying amount of the loan net of 
                                     occurrence of one or more                 credit allowance. 
                                     observable events that have a 
                                     detrimental impact on the estimated 
                                     future cash flows of the 
                                     financial asset. 
----------------------------------  ----------------------------------------  ---------------------------------------- 
 

Maximum exposure and effects of collateral and other credit enhancements (audited)

The following table shows the maximum exposure to credit risk by class of financial asset (excluding equity instruments which are not subject to credit risk). For on-balance sheet financial assets, the maximum exposure to credit risk equals their carrying amount and is net of the allowance for ECL. For financial guarantees, the maximum exposure is the maximum amount that the Group would have to pay if the guarantees were called upon. For loan commitments and other credit-related commitments, the maximum exposure is the full amount of the committed facilities.

It also shows the total fair value of collateral, any surplus collateral (the extent to which the fair value of collateral held is greater than the exposure to which it relates), and the net exposure to credit risk.

 
28 February 2021         Maximum           Fair value of collateral                           Net exposure 
                         exposure         and credit enhancements held 
 $'000 
                                   ----------------------------------------- 
                                      Cash        Letters   Property   Other  Net collateral 
                                               of credit/        (2)   (1,2) 
                                               guarantees 
 
On balance sheet: 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ---------------- 
Cash and short-term 
 funds (3)                112,339        -              -          -       -               -       112,339 
Loans and advances        580,527    2,918              -    200,207  25,266         228,391       352,136 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
Investment securities 
 at amortised cost        119,223        -              -          -       -               -       119,223 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
Derivative financial 
 assets                     5,543        -              -          -       -               -         5,543 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
Other financial 
 assets (4)                37,708        -              -          -       -               -        37,708 
======================  =========  =======  -------------  ---------  ------  --------------  ------------ 
Total on-balance 
 sheet                    855,340    2,918              -    200,207  25,266         228,391       626,949 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
 
Off-balance sheet: 
Loan commitments            4,868      470              -          -       -             470         4,398 
Financial guarantees       47,300      164         21,941        183       -          22,288        25,012 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
Total liabilities           5,637    4,058              -          -       -           4,058         1,579 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
Total off-balance 
 sheet                     57,805    4,692         21,941        183       -          26,816        30,989 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
 
Total                     913,145    7,610         21,941    200,390  25,266         255,207       657,938 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
 
 

Notes

   4.   Vehicles, machinery, other fixed assets, inventory and trade receivables. 

5. These collateral items are not readily convertible into cash as these items are sold in the market and are dependent on a buyer and seller.

6. Represents bank balances and placements held with other banks and excludes cash in hand. Included in $183.9 million cash and short-term funds balance in the statement of financial position.

7. Excludes prepayments and other non-financial assets. Balance disclosed is included in the $54.6 million other assets balance in the statement of financial position.

 
31 December 2019         Maximum           Fair value of collateral                           Net exposure 
                         exposure         and credit enhancements held 
 $'000 
                                   ----------------------------------------- 
                                      Cash        Letters   Property   Other  Net collateral 
                                               of credit/        (2)   (1,2) 
                                               guarantees 
 
On balance sheet: 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ---------------- 
Cash and short-term 
 funds (3)                117,588        -              -          -       -               -       117,588 
Loans and advances        682,747      612              -    224,507   3,466         228,585       454,162 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
Financial assets 
 at FVTPL                   4,955        -              -          -       -               -         4,955 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
Investment securities 
 at amortised cost        107,667        -              -          -       -               -       107,667 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
Derivative financial 
 assets                     5,692        -              -          -       -               -         5,692 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
Other financial 
 assets (4)                15,588        -              -          -       -               -        15,588 
Total on-balance 
 sheet                    934,237      612              -    224,507   3,466         228,585       705,652 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
 
Off-balance sheet: 
Financial guarantees       19,720    5,345              -          -       -           5,345        14,375 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
Letters of credit           8,578        -          4,913          -       -           4,913         3,665 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
Loan commitments           11,529        -              -          -       -               -        11,529 
Total off-balance 
 sheet                     39,827    5,345          4,913          -       -          10,258        29,569 
----------------------  ---------  -------  -------------  ---------  ------  --------------  ------------ 
 
Total                     974,064    5,957          4,913    224,507   3,466         238,843       735,221 
======================  =========  =======  =============  =========  ======  ==============  ============ 
 
 

Notes

   8.   Vehicles, machinery, other fixed assets, inventory and trade receivables. 

9. These collateral items are not readily convertible into cash as these items are sold in the market and are dependent on a buyer and seller.

10. Represents bank balances and placements held with other banks and excludes cash in hand. Included in $183.9 million cash and short-term funds balance in the statement of financial position.

11. Excludes prepayments and other non-financial assets. Balance disclosed is included in the $54.6 million other assets balance in the statement of financial position.

Credit quality analysis (audited)

The Group manages the credit quality of financial assets using internal credit ratings. Financial assets are segmented into five rating classes. The Group's rating scale, which is shown below, reflects the range of default probabilities defined for each rating class. This means that, in principle, exposures migrate between classes as the assessment of their probability of default changes. The rating tools are kept under review and upgraded as necessary. The Group regularly validates the performance of the rating and their predictive power with regard to default events.

 
 Category          Description 
                  ------------------------------------------------------------------------------------------------ 
 Performing        The credit appears satisfactory. 
----------------  ------------------------------------------------------------------------------------------------ 
 Special mention   The credit appears satisfactory but exhibits potential for inherent weakness which, if not 
                    attended to, may weaken the asset or prospects of collection in full e.g. poor documentation.7 
----------------  ------------------------------------------------------------------------------------------------ 
 Special mention   Special mention 
----------------  ------------------------------------------------------------------------------------------------ 
 Doubtful          Credit facilities with above weaknesses and has deteriorated further to the extent that even 
                    with the existing security, full recovery will not be possible, or 180 days but less than 
                    12 months in arrears. 
----------------  ------------------------------------------------------------------------------------------------ 
 Loss              Facilities considered impossible to collect with little or no realisable security, or more 
                    than 12 months in arrears. 
----------------  ------------------------------------------------------------------------------------------------ 
 

Distribution of financial assets by credit quality

The table below shows the distribution of the Group's financial assets by credit quality:

 
28 February 2021          Performing    Special  Substandard  Doubtful    Loss      Gross         ECL  Net total 
                                        mention                                     total 
 $'000 
                          ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Cash and short-term 
 funds                       112,339          -            -         -       -    112,339           -    112,339 
------------------------  ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Loans and advances           552,481      9,209        7,692     3,711  38,162    611,255    (30,728)    580,527 
------------------------  ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Investment securities 
 at amortised cost           119,481          -            -         -       -    119,481       (258)    119,223 
------------------------  ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Derivate financial 
 assets                        5,543          -            -         -       -      5,543           -      5,543 
------------------------  ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Other financial 
 assets                       37,736          -            -         -       -     37,736        (28)     37,708 
------------------------  ==========  =========  ===========  ========  ======  =========  ==========  ========= 
Total carrying 
 amount on balance 
 sheet                       825,442      9,209        7,692     3,711  38,162    886,354    (31,014)    855,340 
                          ==========  =========  ===========  ========  ======  =========  ==========  ========= 
 
Off-balance sheet 
Financial guarantees          47,393          -            -         -       -     47,393        (93)     47,300 
------------------------  ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Letters of credit              5,637          -            -         -       -      5,637           -      5,637 
------------------------  ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Loan commitments               4,868          -            -         -       -      4,868           -      4,868 
------------------------  ==========  =========  ===========  ========  ======  =========  ==========  ========= 
          Total carrying 
           amount 
           off-balance 
           sheet              57,898          -            -         -       -     57,898        (93)     57,805 
------------------------  ==========  =========  ===========  ========  ======  =========  ==========  ========= 
 
31 December 2019          Performing    Special  Substandard  Doubtful    Loss      Gross         ECL  Net total 
                                        mention                                     total 
 $'000 
                          ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Cash and short-term 
 funds                       117,588          -            -         -       -    117,588           -    117,588 
------------------------  ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Loans and advances           587,585     33,400        5,164    14,607  41,991    682,747    (38,635)    644,112 
------------------------  ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Investment securities 
 at amortised cost           107,667          -            -         -       -    107,667       (377)    107,290 
------------------------  ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Derivate financial 
 assets                        5,692          -            -         -       -      5,692           -      5,692 
------------------------  ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Other financial 
 assets                       15,588          -            -         -       -     15,588           -     15,588 
------------------------  ==========  =========  ===========  ========  ======  =========  ==========  ========= 
Total carrying 
 amount on balance 
 sheet                       834,120     33,400        5,164    14,607  41,991    929,282    (39,012)    890,270 
                          ==========  =========  ===========  ========  ======  =========  ==========  ========= 
 
Off-balance sheet 
Financial guarantees          19,720          -            -         -       -     19,720       (187)     19,533 
------------------------  ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Letters of credit              8,587          -            -         -       -      8,587           -      8,587 
------------------------  ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
Loan commitments              11,529          -            -         -       -     11,529           -     11,529 
------------------------  ==========  =========  ===========  ========  ======  =========  ==========  ========= 
          Total carrying 
           amount 
           off-balance 
           sheet              39,827          -            -         -       -     39,827       (187)     39,640 
------------------------  ----------  ---------  -----------  --------  ------  ---------  ----------  --------- 
 
 

Distribution of loans and advances, financial guarantees and loan commitments by credit quality and stage allocation

The tables below set out the credit quality of loans and advances, financial guarantees and loan commitments, based on the Group's internal credit rating system and by ECL stage allocation. The amounts presented are gross of impairment allowances. For loans commitments and financial guarantees, the amounts in the table represent the amounts committed or guaranteed, respectively.

   i)          Loans and advances 
 
 $'000                           28 February 2021                               31 December 2019 
 
                      Stage 1     Stage 2     Stage 3     Total     Stage 1     Stage 2     Stage 3     Total 
                   ----------  ----------  ----------  --------  ----------  ----------  ----------  -------- 
 Performing           552,481           -           -   552,481     592,203          70           -   592,273 
-----------------  ----------  ----------  ----------  --------  ----------  ----------  ----------  -------- 
 Special mention            -       9,209           -     9,209           -      30,740       1,429    32,169 
-----------------  ----------  ----------  ----------  --------  ----------  ----------  ----------  -------- 
 Sub-standard               -           -       7,692     7,692           -         178       6,123     6,301 
-----------------  ----------  ----------  ----------  --------  ----------  ----------  ----------  -------- 
 Doubtful                   -           -       3,711     3,711           -           -       7,402     7,402 
-----------------  ----------  ----------  ----------  --------  ----------  ----------  ----------  -------- 
 Loss                       -           -      38,162    38,162           -           -      44,602    44,602 
-----------------  ----------  ----------  ----------  --------  ----------  ----------  ----------  -------- 
                      550,343       9,209      49,565   611,255     592,203      30,988      59,556   682,747 
-----------------  ----------  ----------  ----------  --------  ----------  ----------  ----------  -------- 
 
   ii)         Financial guarantees, loan commitments and other off-balance sheet items 
 
 $'000                      28 February 2021                               31 December 2019 
 
                 Stage 1     Stage 2     Stage 3     Total     Stage 1     Stage 2     Stage 3     Total 
              ----------  ----------  ----------  --------  ----------  ----------  ----------  -------- 
 Performing       57,898           -           -    57,898      39,640          70           -    39,640 
------------  ----------  ----------  ----------  --------  ----------  ----------  ----------  -------- 
                  57,898           -           -    57,898     592,203      30,988      59,556    39,640 
------------  ----------  ----------  ----------  --------  ----------  ----------  ----------  -------- 
 

iii) Credit quality analysis for stage 3 loans and advances

 
 $'million                     28 February 2021                                     31 December 2019 
                 Carrying      Fair value of         Over             Carrying         Carrying            Over 
                  amount        collateral     collateralisation       amount           amount       collateralisation 
             ---------------  --------------  ------------------  ---------------  ---------------  ------------------ 
 Retail           9,740           14,458             4,718                              10,173            17,504 
-----------  ---------------  --------------  ------------------  ---------------  ---------------  ------------------ 
 Corporate        17,250          24,441             7,191                              19,362            28,551 
-----------  ---------------  --------------  ------------------  ---------------  ---------------  ------------------ 
                  26,990          38,899            11,909                              29,535            46,055 
-----------  ---------------  --------------  ------------------  ---------------  ---------------  ------------------ 
 

Collateral taken for this category includes cash, mortgages over residential properties, charges over business assets such as premises, inventory and accounts receivable, and charges over financial instruments such as debt securities and equities.

Modified financial assets (audited)

The contractual terms of a loan may be modified for a number of reasons, including changing market conditions, customer retention and other factors not related to a current or potential credit deterioration of the customer. With the onset of the COVID-19 pandemic, assistance was offered to customers by way of granting payment holidays of 2 - 6 months, reducing the instalment amount and extending loan tenures.

The Group considered whether the restructure will result in derecognition of the original loan by applying quantitative as well as qualitative test. The quantitative test determined whether the net present value of the cash flows under the new terms discounted at the original effective interest rate is at least 10% different from the carrying amount of the original debt while the qualitative test assessed whether there has been a significant change in the terms and conditions of the new loan compared to the original loan.

For the COVID-19 related restructures, the Group determined that the restructuring did not result in the derecognition of the original loan. The gain or loss on modification of the loan was computed as the difference between the gross carrying amount of the original loan at the time of the restructure, and the discounted cash flows of the modified loan using the original effective interest rate as the discount rate. Most of the loans that were restructured under the Group's COVID-19 restructure policy were not in arrears at the time of restructure. The Group continues to monitor these loans to assess whether there is a subsequent significant increase in credit risk.

The following table provides information on financial assets that were modified during the reporting period as part of the Group's restructuring activities and the resulting modification loss:

 
                                                28 February 2021 
---------------------------------------------  ----------------- 
 Financial assets modified during the period 
---------------------------------------------  ----------------- 
 Amortised cost before modification                        1,027 
---------------------------------------------  ----------------- 
 Net modification loss                                     (249) 
---------------------------------------------  ----------------- 
 
   a.         Geographical sectors 

The following table breaks down the Group's main credit exposure at their carrying amounts, as categorised by geographical region. For this table, the Group has allocated exposures to regions based on the country of domicile of its counterparties:

 
28 February 2021        Botswana  Mozambique  Tanzania  Zimbabwe  Zambia  Other    Total 
 $'000 
On-balance sheet 
Cash and short-term 
 funds (1)                60,773           -     4,944    44,792          1,855  112,364 
----------------------  --------  ----------  --------  --------  ------  -----  ------- 
Loans and advances       549,363           -    12,733    18,431              -  580,527 
----------------------  --------  ----------  --------  --------  ------  -----  ------- 
Investment securities 
 (2)                      67,265           -         -    51,958              -  119,223 
----------------------  --------  ----------  --------  --------  ------  -----  ------- 
Derivative financial 
 assets                    5,543           -         -         -              -    5,543 
----------------------  --------  ----------  --------  --------  ------  -----  ------- 
Other financial 
 assets (3)                4,290       3,923              11,483  13,155  4,857   37,708 
----------------------  ========  ==========  ========  ========  ======  =====  ======= 
Total on balance 
 sheet                   687,234       3,923    17,677   126,664  13,155  6,712  855,365 
                        ========  ==========  ========  ========  ======  =====  ======= 
 
Off-balance sheet 
                        --------  ----------  --------  --------  ------  -----  ------- 
Financial guarantees       5,022           -         -    42,278       -      -   47,300 
----------------------  --------  ----------  --------  --------  ------  -----  ------- 
Letters of credit          1,579           -         -     4,058       -      -    5,637 
----------------------  --------  ----------  --------  --------  ------  -----  ------- 
Loan commitments           4,398           -         -       470       -      -    4,868 
----------------------  ========  ==========  ========  ========  ======  =====  ======= 
Total off-balance 
 sheet                    10,999           -         -    46,806       -      -   57,805 
                        ========  ==========  ========  ========  ======  =====  ======= 
 
Total                    698,233       3,923    17,677   173,470  13,155  6,712  913,170 
----------------------  ========  ==========  ========  ========  ======  =====  ======= 
 

Notes

1. Represents cash balances and placements held with other banks and excludes cash in hand. Included in $183.9 million cash balance per statement of financial position.

2. Excludes equity instruments. Balance disclosed is included in the $106.6 million investment securities balance per statement of financial position.

3. Excludes prepayments and other non-financial assets. Balance disclosed is included in the $54.6 million other assets balance in the statement of financial position.

 
31 December 2019              Botswana  Tanzania  Zimbabwe   Other    Total 
 $'000 
On-balance sheet 
Cash and short-term funds 
 (1)                            85,693     1,128    29,234   1,533  117,588 
----------------------------  --------  --------  --------  ------  ------- 
Financial assets at FVTPL 
 (2)                             3,925         -     1,030       -    4,955 
----------------------------  --------  --------  --------  ------  ------- 
Loans and advances             606,297     7,368    22,733   7,714  644,112 
----------------------------  --------  --------  --------  ------  ------- 
Investment securities (2)       64,747         -    42,543       -  107,290 
----------------------------  --------  --------  --------  ------  ------- 
Derivative financial assets        109         -         -   5,583    5,692 
----------------------------  --------  --------  --------  ------  ------- 
Other financial assets (3)       3,782    11,805         -       1   15,588 
----------------------------  ========  ========  ========  ======  ======= 
Total on balance sheet         764,553    20,301    95,540  14,831  895,225 
 
Off-balance sheet 
                              --------  --------  --------  ------  ------- 
Financial guarantees             5,264         -    14,269       -   19,533 
----------------------------  --------  --------  --------  ------  ------- 
Letters of credit                8,578         -         -       -    8,578 
----------------------------  --------  --------  --------  ------  ------- 
Loan commitments                 8,414         -     3,115       -   11,529 
----------------------------  ========  ========  ========  ======  ======= 
Total off-balance sheet         22,256         -    17,384       -   39,640 
 
Total                          786,809    20,301   112,924  14,831  934,865 
----------------------------  ========  ========  ========  ======  ======= 
 

Notes

1. Represents cash balances and placements held with other banks and excludes cash in hand. Included in $130.5 million cash balance per statement of financial position.

2. Excludes equity instruments. Balance disclosed is included in the $107.8 million investment securities balance per statement of financial position.

3. Excludes prepayments and other non-financial assets. Balance disclosed is included in the $29.1 million other assets balance in the statement of financial position.

   b.         Industry sectors 

The following table breaks down the Group's main credit exposure at their carrying amounts, as categorised by industry sectors of the counterparties:

 
28 February   Agriculture  Construction  Corporate,  Public    Real      Mining  Financial  Transport  Individuals  Tourism   Other    Total 
 2021                                        retail  sector  estate  and energy   services 
                                          and trade 
 $'000 
On-balance 
 sheet 
Cash and 
 short-term 
 funds (1)              -             -           -       -       -           -    112,341          -            -        -      23  112,364 
------------  -----------  ------------  ----------  ------  ------  ----------  ---------  ---------  -----------  -------  ------  ------- 
Loans and 
 advances           6,342            29      23,860   9,865     388         810      5,640        116      522,523    2,428   8,526  580,527 
------------  -----------  ------------  ----------  ------  ------  ----------  ---------  ---------  -----------  -------  ------  ------- 
Investment 
 securities 
 (2)                    -             -           -   2,272       -           -    116,951          -            -        -       -  119,223 
------------  -----------  ------------  ----------  ------  ------  ----------  ---------  ---------  -----------  -------  ------  ------- 
Derivative 
 financial 
 assets                 -             -           -       -       -           -      5,543          -            -        -       -    5,543 
------------  -----------  ------------  ----------  ------  ------  ----------  ---------  ---------  -----------  -------  ------  ------- 
Other 
 financial 
 assets (3)             -             -           -  11,483       -           -     21,368          -            -        -   4,857   37,708 
------------  ===========  ============  ==========  ======  ======  ==========  =========  =========  ===========  =======  ======  ======= 
Total on 
 balance 
 sheet              6,342            29      23,860  23,620     388         810    261,843        116      522,523    2,428  13,406  855,365 
              ===========  ============  ==========  ======  ======  ==========  =========  =========  ===========  =======  ======  ======= 
 
Off-balance 
 sheet 
              -----------  ------------  ----------  ------  ------  ----------  ---------  ---------  -----------  -------  ------  ------- 
Financial 
 guarantees             -        13,263       5,022       -       -           -     19,999                       -            9,016   47,300 
------------  -----------  ------------  ----------  ------  ------  ----------  ---------  ---------  -----------  -------  ------  ------- 
Letters of 
 credit             4,058             -       1,579       -       -           -          -                       -                -    5,637 
------------  -----------  ------------  ----------  ------  ------  ----------  ---------  ---------  -----------  -------  ------  ------- 
Loan 
 commitments          470             -       3,200       -       -           -          -                   1,198                -    4,868 
------------  ===========  ============  ==========  ======  ======  ==========  =========  =========  ===========  =======  ======  ======= 
Total 
 off-balance 
 sheet              4,528        13,263       9,801       -       -           -     19,999                   1,198            9,016   57,805 
              ===========  ============  ==========  ======  ======  ==========  =========  =========  ===========  =======  ======  ======= 
 
Total              10,870        13,292      33,661  23,620     388         810    281,842        116      523,721    2,428  22,422  913,170 
------------  -----------  ------------  ---------- 
 

Notes

1. Represents cash balances and placements held with other banks and excludes cash in hand. Included in $183.9 million cash balance per statement of financial position.

2. Excludes equity instruments. Balance disclosed is included in the $106.6 million investment securities balance per statement of financial position.

3. Excludes prepayments and other non-financial assets. Balance disclosed is included in the $54.6 million other assets balance in the statement of financial position.

 
28 February   Agriculture  Construction  Corporate,   Public    Real  Mining  Financial  Transport  Individuals  Tourism   Other    Total 
 2021                                        retail   sector  estate     and   services 
                                          and trade                   energy 
 $'000 
On-balance 
 sheet 
Cash and 
 short-term 
 funds (1)              -             -           -        -       -       -    117,588          -            -        -       -  117,588 
------------  -----------  ------------  ----------  -------                  ---------  ---------  -----------  -------  ------  ------- 
Financial 
 assets 
 at FVTPL 
 (2)                    -             -           -        -   1,030       -      3,925          -            -        -       -    4,955 
------------  -----------  ------------  ----------  -------                  ---------  ---------  -----------  -------  ------  ------- 
Loans and 
 advances           4,613         9,973      28,852    6,949  69,224   2,096     22,165      2,546      475,929    6,229  15,536  644,112 
------------  -----------  ------------  ----------  -------                  ---------  ---------  -----------  -------  ------  ------- 
Investment 
 securities 
 (2)                    -             -           -  103,028       -       -      4,262          -            -        -       -  107,290 
------------  -----------  ------------  ----------  -------                  ---------  ---------  -----------  -------  ------  ------- 
Derivative 
 financial 
 assets                 -             -           -        -       -       -      5,692          -            -        -       -    5,692 
------------  -----------  ------------  ----------  -------                  ---------  ---------  -----------  -------  ------  ------- 
Other 
 financial 
 assets (3)             -             -           -        -       -       -          -          -            -        -  15,588   15,588 
------------  ===========  ============  ==========  =======                  =========  =========  ===========  =======  ======  ======= 
Total 
 on-balance 
 sheet              4,613         9,973      28,852  109,977  70,254   2,096    153,632      2,546      475,929    6,229  31,124  895,225 
 
Off-balance 
 sheet 
              -----------  ------------  ----------  -------                  ---------  ---------  -----------  -------  ------  ------- 
Financial 
 guarantees             -        10,066       5,264        3       -       -         29          -            -        -   4,171   19,533 
------------  -----------  ------------  ----------  -------                  ---------  ---------  -----------  -------  ------  ------- 
Letters of 
 credit                 -             -         208    8,370       -       -          -          -            -        -       -    8,578 
------------  -----------  ------------  ----------  -------                  ---------  ---------  -----------  -------  ------  ------- 
Loan 
 commitments            -             -       5,528        -       -       -          -          -        2,886        -   3,115   11,529 
------------  ===========  ============  ==========  =======                  =========  =========  ===========  =======  ======  ======= 
Total 
 off-balance 
 sheet                  -        10,066      11,000    8,373       -       -         29          -        2,886        -   7,286   39,640 
              ===========  ============  ==========  =======                  =========  =========  ===========  =======  ======  ======= 
 
Total                   -        10,066       5,264        3       -       -         29          -            -        -   4,171   19,533 
------------ 
 

Notes

4. Represents cash balances and placements held with other banks and excludes cash in hand. Included in $130.5 million cash balance per statement of financial position.

5. Excludes equity instruments. Balance disclosed is included in the $107.8 million investment securities balance per statement of financial position.

6. Excludes prepayments and other non-financial assets. Balance disclosed is included in the $29.1 million other assets balance in the statement of financial position.

Measurement of ECLs

ECL for exposures in stage 1 is calculated by multiplying the 12-month PD by LGD and EAD. Lifetime ECL is calculated by multiplying the lifetime PD by LGD and EAD.

Credit risk grades are a primary input into the determination of the term structure of PD for exposures. The Group collects performance and default information about its credit risk exposures analysed by type of product and borrower as well as by credit risk grading. For some portfolios, information purchased from external credit reference agencies is also used.

The Group employs statistical models to analyse the data collected and generate estimates of the remaining lifetime PD of exposures and how these are expected to change as a result of the passage of time.

LGD is the magnitude of the likely loss if there is a default. The Group estimates LGD parameters based on the history of recovery rates of claims against defaulted counterparties. The LGD models consider the structure, collateral, seniority of the claim, counterparty industry and recovery costs of any collateral that is integral to the financial assets. For mortgages, loan to value ('LTV') ratios are a key parameter in determining LGD. LGD estimates are recalibrated for different economic scenarios and, for mortgage lending, to reflect possible changes in property prices. They are calculated on a discounted cash flow basis using the effective interest rate as the discounting factor.

EAD represents the expected exposure in the event of a default. The Group derives the EAD from the current exposure to the counterparty and potential changes to the current amount allowed under the contract and arising from amortisation. The EAD of a financial asset is its gross carrying amount at the time of default. For lending commitments, the EAD represents the amount of the guaranteed exposure when the financial guarantee becomes payable.

As described above, and subject to using a maximum of a 12-month PD for stage 1 financial assets, the Group measures ECL considering the risk of default over the maximum contractual period (including any borrower's extension options) over which it is exposed to credit risk, even if, for credit risk management purposes, the Group considers a longer period. The maximum contractual period extends to the date at which the Group has the right to require repayment of an advance or terminate a loan commitment or guarantee.

ECLs for retail overdrafts that include both a loan and an undrawn commitment component are measured over a period longer than the maximum contractual period if the Group's contractual ability to demand repayment and cancel the undrawn commitment does not limit the Group's exposure to credit losses to the contractual notice period. These facilities do not have a fixed term or repayment structure and are managed on a collective basis. The Group can cancel them with immediate effect; however this contractual right is not enforced in the normal day-to-day management, but only when the Group becomes aware of an increase in credit risk at the facility level. This longer period is estimated after taking into account the credit risk management actions that the Group expects to take, and that serve to mitigate ECL. These include a reduction in limits, cancellation of the facility and/or turning the outstanding balance into a loan with fixed repayment terms.

Where modelling of a parameter is carried out on a collective basis, the financial instruments are grouped on the basis of shared risk characteristics that include:

   --              instrument type; 
   --              credit risk gradings; 
   --              collateral type; 
   --              LTV ratio for mortgages; 
   --              date of recognition; 
   --              remaining term to maturity; 
   --              industry; and 
   --              geographic location of the borrower. 

The exposures are subject to regular reviews to ensure that exposures within a particular group remain appropriately homogeneous. For portfolios for which the Group has limited historical data, external benchmark information is used to supplement the internally available data.

Definition of default

The Group considers a financial instrument to be in default when:

-- the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held);

-- the borrower is more than 90 days past due on any material credit obligation to the Group. Overdrafts are considered as being past due once the customer has breached an advised limit or been advised of a limit smaller than the current amount outstanding; or

-- it is becoming probable that the borrower will restructure the asset as a result of bankruptcy due to the borrower ' s inability to pay its credit obligations.

In assessing whether a borrower is in default, the Group considers indicators that are:

   --      qualitative: e.g. breaches of covenant; 

-- quantitative: e.g. overdue status and non-payment on another obligation of the same issuer to the Group; and

   --      based on data developed internally and obtained from external sources. 

Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes in circumstances. The definition of default largely aligns with that applied by the Group for regulatory capital purposes.

Credit impaired financial assets

Financial assets that are credit impaired (or in default) represent those that are at least 90 days past due in respect of principal and/or interest. Financial assets are also considered to be credit impaired where the obligors are unlikely to pay on the occurrence of one or more observable events that have a detrimental impact on the estimated future cash flows of the financial asset. It may not be possible to identify a single discrete event but instead the combined effect of several events may cause financial assets to become credit impaired. Evidence that a financial asset is credit impaired includes observable data about the following events:

   --              Significant financial difficulty of the issuer or borrower; 
   --              Breach of contract such as default or a past due event; 

-- For economic or contractual reasons relating to the borrower ' s financial difficulty, the lenders of the borrower have granted the borrower concessions that lenders would not otherwise consider. This would include forbearance actions.

-- Pending or actual bankruptcy or other financial reorganisation to avoid or delay discharge of the borrower ' s obligations;

-- The disappearance of an active market for the applicable financial asset due to financial difficulties of the borrower;

Incorporation of forward-looking information

Forward-looking macroeconomic information has been incorporated into expected loss estimates based on the key macroeconomic variables including GDP growth, inflation and exchange rates. The impact of these variables have been forecasted using quantitative modelling techniques and judgements.

The macroeconomic scenarios are defined by taking into account the macroeconomic conditions prevalent in the Group's countries of operation and their impact on the probability of the default (PD), Exposure at Default (EAD) and Loss Given Default (LGD). Forecasts are developed using a probability weighted scenario-based approach to ensure that the asymmetry of the various economic outcomes is captured in the estimation of ECL. The Group has modelled three scenarios as follows:

Base case scenario

Botswana - Economic growth contracts substantially during 2020 but economic recovery is evident in 2021 (although not quite at prior levels). Government interventions to support the economy, a recovery in the Diamond prices and the gradual roll out of a vaccine support a rebound in GDP growth rates ranging from 3% to 7%. This is considered the most likely scenario.

Zimbabwe - Government and regulator will continue taking steps to contain the spread of the virus and support the economy. No significant change in legislation expected. Inflation is expected to peak at 667.6%. the spread of Covid-19 is limited a further 3-6-week lockdown. Businesses is expected to be back to full capacity in 2021.

Moderate case scenario

Botswana - The economy is expected to rebound quickly in 2021 post the initial COVID crisis with GDP growth reach pre-COVID19 levels. The tourism and hospitality sector is buoyed by increased number of tourists while higher Diamond prices and increased export volumes boost the economy. Unemployment is stemmed. International markets open and regional flows of goods and services resume quickly.

Zimbabwe - COVID 19 is contained. The exchange rate stablises as a result of prudent financial management. Exports rebound as demand for raw materials increases globally resulting in greater economic activity in Zimbabwe. Business growth is further supported by stable input prices. Unemployment is contained.

Worst case scenario

Botswana - Economic recovery is expected to be very slow with output remaining constrained. Job losses continue and sectors such as tourism, transport, hospitality continue to struggle. Government support programs are not enough to stimulate the required economic recovery. The Diamond market remains suppressed. Vacine roll out is delayed and the government is forced to maintain tighter lock down regulations.

Zimbabwe - Inflation is expected to peak at 1500% with persistent hyperinflation. COVID-19 is not contained resulting in low productivity, lower international commodity prices as world economies take longer to recover. The local currency remains under pressure with limited forex in Zimbabwe. Banks withdraw from the interbank market. Business continue to close due to the limited economic activity resulting in higher levels of unemployment and economic hardship.

ECL results are calculated as the probability-weighted average across multiple macroeconomic scenarios. The final ECL results are dependent on the assumptions applied during the process. The scenario probability weightings applied in measuring ECL are as follows:

 
                                            Base case  Moderate case  Worst case 
                                                  85%            10%          5% 
Scenario probability weighting - Botswana         22%            70%          8% 
Scenario probability weighting - Zimbabwe         85%            10%          5% 
 

The Group has identified and documented key drivers of credit risk and credit losses for each portfolio of financial instruments and, using statistical analysis of historical data, has estimated relationships between macro-economic variables and credit risk and credit losses. The key drivers of credit risk for retail portfolios include GDP growth, changes in the prime lending rate, inflation, and exchange rates. The key drivers for credit risk for corporate portfolios are GDP growth, inflation, and exchange rates.

The table below lists the macroeconomic assumptions used in the base, upside and downside scenarios over the three-year forecast period for the Group's key operating markets i.e. Botswana and Zimbabwe. The assumptions represent the absolute percentage for GDP, Inflation, Change in the prime lending rate and exchange rate. The impact of COVID 19 was considered in estimating the forecasts of these macro-economic factors.

   a)         Base case economic assumptions 
 
                                    GDP growth rate    Year-on-Year Inflation   Change in Prime Lending 
                                       year-on-year                      Rate     Rate for next quarter  Exchange Rate 
 
Scenario probability 
 weighting - Botswana                          3.6%                       n/a                    -0.25%            n/a 
Scenario probability 
 weighting - Zimbabwe                           n/a                    350.6%                       n/a            100 
 
   b)         Best case economic assumptions 
 
                                    GDP growth rate    Year-on-Year Inflation   Change in Prime Lending 
                                       year-on-year                      Rate     Rate for next quarter  Exchange Rate 
 
Scenario probability 
 weighting - Botswana                          5.5%                       n/a                    -0.25%            n/a 
Scenario probability 
 weighting - Zimbabwe                           n/a                    350.6%                       n/a             86 
 
   b)         Worst case economic assumptions 
 
                                    GDP growth rate    Year-on-Year Inflation   Change in Prime Lending 
                                       year-on-year                      Rate     Rate for next quarter  Exchange Rate 
 
Scenario probability 
 weighting - Botswana                          1.8%                       n/a                    -0.25%            n/a 
Scenario probability 
 weighting - Zimbabwe                           n/a                    676.6%                       n/a            140 
 

Post-model adjustments and management overlays

Where there is uncertainty due to inherent limitations of the model, additional provisions via post model adjustments are made, through management overlays. Management applies expert judgement to determine the overlay ECL to incorporate the impact of forward-looking information in these cases. Any overlay ECL is based on available information and qualitative risk factors within a governed process. Management will evaluate a range of possible outcomes, taking into account past events, current conditions and the economic outlook. Additional considerations not addressed in the model are incorporated and include: (1) individual loss assessments of large exposures on watchlists; (2) observed model limitations; and (3) stress-test outputs.

Expected credit loss analysis (audited)

Analysis of gross loans and advances and ECL by business segment

The table below presents an analysis of loans and advances at amortised cost by gross exposure, impairment allowance and coverage ratio by stage allocation and business segment.

 
 $'000                          28 February 2021                              31 December 2019 
 
                     Stage 1     Stage 2     Stage 3     Total     Stage 1     Stage 2     Stage 3    Total 
                  ----------  ----------  ----------  --------  ----------  ----------  ---------- 
 Gross exposure 
----------------  ----------  ----------  ----------  --------  ----------  ----------  ---------- 
 Retail              522,653       6,983      30,859   560,495     522,577      31,133      31,174  584,884 
----------------  ----------  ----------  ----------  --------  ----------  ----------  ---------- 
 Corporate            29,828       2,226      18,706    50,760      65,008       2,267      30,588   97,863 
---------------- 
 Total               552,481       9,209      49,565   611,255     587,585      33,400      61,762  682,747 
----------------  ----------  ----------  ----------  --------  ----------  ----------  ---------- 
 
 
Expected credit 
 loss 
Retail            5,827  693  18,931  25,451  5,876  1,072  18,793  25,741 
Corporate           498  130   4,649   5,277  1,465    203  11,226  12,894 
Total             6,325  823  23,580  30,728  7,341  1,275  30,019  38,635 
 
 
Net exposure 
Retail         516,826  6,290  11,928  535,044  516,701  30,061  12,381  559,143 
Corporate       29,330  2,096  14,057   45,483   63,543   2,064  19,362   84,969 
Total          546,156  8,386  25,985  580,527  580,244  32,125  31,743  644,112 
 
 
Coverage ratio 
Retail           1.1%  9.9%  61.3%   4.5%  1.1%  3.4%  60.3%    4.4% 
                                                              ------ 
Corporate        1.7%  5.8%  24.9%  10.4%  2.3%  8.9%  36.7%   13.2% 
                                                              ------ 
Total            1.1%  8.9%  47.6%   5.0%  1.2%  3.8%  48.6%    5.7% 
                                                              ------ 
 

*Compared to the loan staging analysis disclosed in the 2019 financial statements, the 2019 staging analysis for gross and net loan balances have been re-presented in the current period financial statements to align with the final classification disclosed in the statutory financial statements of the Group's banking components. This is a mere reclassification between stages and has no impact on the net loan balance.

Analysis of gross loans and advances and ECL by product classification

The table below presents a breakdown of loans and advances and the ECL allowance with stage allocation by product classification.

 
$'000                                         28 February 2021                          31 December 2019 
 
                                    Stage 1    Stage 2    Stage 3    Total   Stage 1     Stage 2    Stage 3    Total 
Gross exposure 
Retail loans                        522,653      6,983     30,859  560,495    522,577     31,133     31,174  584,884 
Mortgage                             68,474      1,231      9,109   78,814     64,097      5,264      8,287   77,648 
Overdraft                             2,417        147      1,664    4,228      1,899        255      3,642    5,796 
Personal loans (including credit 
 card and other retail lending)     451,762      5,605     20,086  477,453    456,581     25,614     19,245  501,440 
Corporate                            29,828      2,226     18,706   50,760     65,008      2,267     30,588   97,863 
Term loans                           26,850      1,792     17,974   46,616     57,986      1,814     29,839   89,639 
Overdrafts                            2,978        434        732    4,144      7,022        453        749    8,224 
Total - Gross exposure              552,481      9,209     49,565  611,255    587,585     33,400     61,762  682,747 
 
 
 
$'000                                         28 February 2021                          31 December 2019 
 
                                    Stage 1    Stage 2    Stage 3    Total   Stage 1     Stage 2    Stage 3    Total 
Expected credit loss 
Retail loans                          5,827        693     18,931   25,451      5,876      1,072     18,793   25,741 
Mortgage                                460         50         73      583        385         45      1,712    2,142 
Overdraft                               471         32      1,100    1,603         44         32      3,043    3,119 
Personal loans (including credit 
 card and other retail lending)       4,896        611     17,758   23,265      5,447        995     14,038   20,480 
Corporate                               498        130      4,649    5,277      1,465        203     11,226   12,894 
Term loans                              224         32      4,395    4,651      1,172        193     10,638   12,003 
Overdrafts                              274         98        254      626        293         10        588      891 
Total - Expected credit loss          6,325        823     23,580   30,728      7,341      1,275     30,019   38,635 
 
 
 
$'000                                         28 February 2021                          31 December 2019 
 
                                    Stage 1    Stage 2    Stage 3    Total   Stage 1     Stage 2    Stage 3    Total 
Net exposure 
Retail loans                        516,826      6,290     11,928  535,044    516,701     30,061     12,381  559,143 
Mortgage                             68,014      1,181      9,036   78,231     63,712      5,219      6,575   75,506 
Overdraft                             1,946        115        564    2,625      1,855        223        599    2,677 
Personal loans (including credit 
 card and other retail lending)     446,866      4,994      2,328  454,188    451,134     24,619      5,207  480,960 
Corporate                            29,330      2,096     14,057   45,483     63,543      2,064     19,362   84,969 
Term loans                           26,626      1,760     13,579   41,965     56,814      1,621     19,201   77,636 
Overdrafts                            2,704        336        478    3,518      6,729        443        161    7,333 
Total - Net exposure                546,156      8,386     25,985  580,527    580,244     32,125     31,743  644,112 
 
 

Movement in gross exposures and impairment allowance

The following tables present a reconciliation of the opening to the closing balance of the gross loan exposures and ECL allowance as at 28 February 2021.

 
28 February 2021                       Stage 1            Stage 2           Stage 3                Stage 4 
 $'000 
                                    Gross      ECL     Gross     ECL    Gross      ECL          Gross          ECL 
Opening balance                     587,585    7,341    33,400  1,275    61,762   30,019            682,747   38,635 
Transfer to stage 1                  14,228      163  (14,056)  (143)     (172)     (20)                  -        - 
Transfer to stage 2                 (6,729)     (56)     6,822     62      (93)      (6)                  -        - 
Transfer to stage 3                 (8,156)    (121)   (2,383)   (44)    10,539      165                  -        - 
New financial assets originated     286,844    2,502     3,342    488     2,288      439            292,474    3,429 
Repayment and other movements     (297,883)     (90)  (11,063)  (312)  (15,217)  (2,818)          (324,163)  (3,220) 
Impaired accounts written-off           (7)      (7)       (5)    (5)   (4,399)  (4,399)            (4,411)  (4,411) 
Exchange rate adjustment           (23,401)  (3,407)   (6,848)  (498)   (5,143)      200           (35,392)  (3,705) 
Closing balance                     552,481    6,325     9,209    823    49,565   23,580            611,255   30,728 
 
 
31 December 2019                     Stage 1             Stage 2            Stage 3                  Stage 4 
 $'000 
                                 Gross      ECL      Gross      ECL     Gross      ECL           Gross          ECL 
Opening balance                1,080,990    33,253    41,498    5,888   145,071    74,305          1,267,559   113,446 
Transfer to stage 1                6,843     (857)   (6,087)       57     (756)       800                  -         - 
Transfer to stage 2             (28,288)         1    28,955    (683)     (667)       682                  -         - 
Transfer to stage 3             (10,208)   (4,681)   (2,584)      258    12,792     4,423                  -         - 
Business activity in the year    319,161     6,376     1,564        -     1,241         -            321,966     6,376 
Repayment and other movements  (237,260)         -   (3,236)        -   (8,225)         -          (248,721)         - 
Impaired accounts written-off          -   (2,962)         -    (688)     (707)   (3,699)              (707)   (7,349) 
Exchange rate adjustment        (62,401)   (7,732)   (9,159)  (1,583)   (2,681)     (918)           (74,241)  (10,233) 
Reclassified as part of 
 disposal group held for sale  (481,252)  (16,057)  (17,551)  (1,974)  (84,306)  (45,574)          (583,109)  (63,605) 
Closing balance                  587,585     7,341    33,400    1,275    61,762    30,019            682,747    38,635 
 

Measurement uncertainty and sensitivity of ECL estimates to future economic conditions

ECL estimates are sensitive to judgements and assumptions made regarding formulation of forward-looking scenarios and how such scenarios are incorporated into the ECL computations.

The table below shows the loss allowance on loans and advances to corporate and retail customers assuming each forward-looking scenario (e.g. central, upside and downside) were weighted 100% instead of applying scenario probability weights across the three scenarios. For ease of comparison, the table also includes the balances that are reflected in the financial statements.

 
$'000                       28 February 2021 
                          Base case  Best case  Worst case  Carrying 
                                                             amounts 
Gross exposure 
Retail                      551,072    551,072     551,072   551,072 
Corporate                    60,183     60,183      60,183    60,183 
Total                       611,255    611,255     611,255   611,255 
 
Expected credit loss 
Retail                       20,147     21,369      25,110    25,562 
Corporate                    14,079     14,065      14,177     5,166 
Total off-balance sheet      34,226     35,434      39,287    30,728 
 
 

Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its obligations when they fall due as a result of customer deposits being withdrawn, cash requirements from contractual commitments, or other cash outflows, such as debt maturities or margin calls for derivatives. Such outflows would deplete available cash resources for client lending, trading activities and investments.

Analysis of liquidity risk (audited)

Non-derivative cash flow

The table below presents the cash flows payable by the Group under non-derivative financial liabilities and assets held for managing liquidity risk by remaining contractual maturities at the reporting date of the consolidated statement of financial position. The amounts disclosed in the table are the contractual undiscounted cash flows.

 
28 February 2021                  Up to        1-3       3-12      Greater        Total    Effect of      Total 
                                1 month                             than 1                 discount/ 
                                                                      year                 financing 
                                                                                               rates 
 $'000                                      months     months 
Financial assets 
Cash and short-term 
 funds                          136,959          -      4,944           24      141,927            -    141,927 
Financial assets 
 at FVTPL                             -          -      3,385       13,917       17,302            -     17,302 
Loans and advances               24,334      1,075     33,519    1,137,680    1,196,608    (616,081)    580,527 
Investment securities            41,827     12,542          -       68,183      122,552      (2,906)    119,646 
Other financial assets 
 (1)                                144     15,629     15,720        6,215       37,708            -     37,708 
Total financial assets 
 (contractual)                  203,264     29,246     57,568    1,226,019    1,516,097    (618,987)    897,110 
 
Financial liabilities 
Deposits                        234,205      9,261     42,614      398,434      684,514     (11,980)    672,534 
Borrowed funds                  408,196      3,320     25,679       52,479      489,674     (47,970)    441,704 
Lease liabilities                     -          -          -            -            -            -          - 
Other financial liabilities 
 (2)                             18,279      1,437     76,493        6,116      102,325      (2,084)    100,241 
Loan commitments                  4,398        470          -            -        4,868            -      4,868 
Financial guarantee 
 contracts                           83     17,339     24,671          278       42,371            -     42,371 
Total liabilities 
 (contractual)                  665,161     31,827    169,457      457,307    1,323,752     (62,034)  1,261,718 
Liquidity gap                 (461,897)    (2,581)  (111,889)      768,712      192,345 
Cumulative liquidity 
 gap                          (461,897)  (464,478)  (576,367)      192,345 
 

Notes

1. Excludes prepayments and other non-financial assets. Balance disclosed is included in the $54.6 million other assets balance in the statement of financial position.

2. Excludes provisions and other non-financial liabilities. Balance disclosed is included in the $111.4 million other liabilities balance in the statement of financial position.

 
31 December 2020                  Up to        1-3       3-12    Greater      Total   Effect of      Total 
                                1 month                           than 1              discount/ 
                                                                    year              financing 
                                                                                          rates 
 $'000                                      months     months 
Financial assets 
Cash and short-term 
 funds                          130,324          -          -        209    130,533           -    130,533 
Financial assets 
 at FVTPL                             -          -      3,925     21,318     25,243           -     25,243 
Loans and advances               16,436     20,244     88,674    886,474  1,011,828   (367,716)    644,112 
Investment securities            70,344     19,726     11,839      5,960    107,869        (91)    107,778 
Other financial assets 
 (1)                             10,462      5,125          -          1     15,588           -     15,588 
Total financial assets 
 (contractual)                  227,566     45,095    104,438    913,962  1,291,061   (367,807)    923,254 
 
Financial liabilities 
Deposits                        319,782    199,313    180,166     32,656    731,917     (8,191)    723,726 
Borrowed funds                   12,384      9,666    184,738    209,257    416,045    (49,236)    366,809 
Lease liabilities                     -          -          -          -          -           -          - 
Other financial liabilities 
 (2)                             73,054     12,524      3,384          -     88,962           -     88,962 
Loan commitments                  3,115          -          -          -      3,115           -      3,115 
Financial guarantee 
 contracts                        1,282      1,188      3,494      8,316     14,280           -     14,280 
Total liabilities 
 (contractual)                  409,617    222,691    371,782    250,229  1,254,319    (57,427)  1,196,892 
Liquidity gap                 (182,051)  (177,596)  (267,344)    663,733     36,742   (310,380)  (273,638) 
Cumulative liquidity 
 gap                          (182,051)  (359,647)  (626,991)     36,742 
 

Notes

3. Excludes prepayments and other non-financial assets. Balance disclosed is included in the $29.1 million other assets balance in the statement of financial position.

4. Excludes provisions and other non-financial liabilities. Balance disclosed is included in the $97.0 million other liabilities balance in the statement of financial position.

Market risk

This defines the risk that movements in market prices will adversely affect the value of on- or off-balance sheet positions. It encompasses risks arising from changes in investment market values or other features correlated with investment markets, in particular, changes in interest rates, foreign exchange rates, and equity and commodity prices. Market risk is often propagated by other forms of financial risk such as credit and market-liquidity risks.

Analysis of market risk (audited)

Sensitivity analysis of market price

The Group holds, directly or through its subsidiaries, listed equities with a fair value of $1.2 million and unlisted equities of $15.3 million. The Group is therefore exposed to gains or losses related to the variability in the market prices of the equities held.

Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. The exposure to equity price risk is described below.

Equity price risk

The Group's listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group manages the equity price risk through diversification and by placing limits on individual and total equity instruments. The Group's Board of Directors reviews and approves all equity investment decisions.

Further details on key assumptions in valuations, and sensitivity analysis of equity instruments and price risk are shown in note 5.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group's exposure to the risk of changes in foreign exchange rates relates primarily to the Group's operating activities and the Group's net investments in foreign subsidiaries.

The Group takes on exposure due to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows. Group Risk sets limits on the level of exposure by currency and in aggregate for both overnight and intra-day positions, which are monitored daily. The following table summarises the Group's exposure to foreign currency exchange rate risk.

 
28 February 2021              USD      EUR      BWP     ZWL    TZS     ZAR    MZN  AED  Other      Total 
 $'000 
Financial assets 
Cash and short-term 
 funds                     28,845   10,221   71,497  12,868  4,580  12,802      -  545    569    141,927 
Financial assets 
 at FVTPL                  12,569        -        -   3,385  1,348       -      -    -      -     17,302 
Loans and advances         14,883        -  548,885  16,758      -       1      -    -      -    580,527 
Investment securities      33,247        -   67,265  18,889    245       -      -    -      -    119,646 
Derivative financial 
 assets                         -        -    5,543       -      -       -      -    -      -      5,543 
Other financial 
 assets (1)                19,975        1    4,387  11,340      -       2  2,003    -      -     37,708 
Total financial 
 assets                   109,519   10,222  697,577  63,240  6,173  12,805  2,003  545    569    902,653 
 
Financial liabilities 
Deposits                   78,861   16,243  522,794  45,089          8,765                782    672,534 
Borrowed funds            378,051            58,714   4,939                                      441,704 
Derivative financial 
 liabilities                                  5,564                                                5,564 
Other financial 
 liabilities (2)           87,639       45   11,172   1,130     32     220                  3    100,241 
Total financial 
 liabilities              544,551   16,288  598,244  51,157     32   8,985                785  1,220,043 
Net FCY exposure        (435,032)  (6,066)   99,333  12,082  6,141   3,820  2,003  545  (216)  (317,390) 
 

Notes

5. Excludes prepayments and other non-financial assets. Balance disclosed is included in the $54.6 million other assets balance in the statement of financial position.

6. Excludes provisions and other non-financial liabilities. Balance disclosed is included in the $111.4 million other liabilities balance in the statement of financial position.

 
31 December 2019              USD    EUR      BWP    ZWL    TZS     ZAR  MZN    AED     Other      Total 
 $'000 
Financial assets 
Cash and short-term 
 funds                     66,021  2,531   51,979  5,796  1,045     170    5  1,211     1,775    130,533 
Financial assets 
 at FVTPL                  19,860      -    3,925      -  1,439      19    -      -         -     25,243 
Loans and advances          4,968      -  604,832      -  3,866  22,733    -      -     7,713    644,112 
Investment securities      42,702      -   64,747      -    329       -    -      -         -    107,778 
Derivative financial 
 assets                         -      -    5,583    109      -       -    -      -         -      5,692 
Other financial 
 assets (1)                11,806      -    3,782      -      -       -    -      -         -     15,588 
Total financial 
 assets                   145,357  2,531  734,848  5,905  6,679  22,922    5  1,211     9,488    928,946 
 
Financial liabilities 
Deposits                   99,956  2,145  616,118  4,401      -       -    -      -     1,106    723,726 
Borrowed funds                  8     25    5,577      -      -       -    -      -         -      5,610 
Derivative financial 
 liabilities              352,529      -    8,179      -      -   6,101    -      -         -    366,809 
Other financial 
 liabilities (2)            5,493      5   12,789     80      -       -    -      -    70,595     88,962 
Total financial 
 liabilities              457,986  2,175  642,663  4,481      -   6,101    -      -    71,701  1,185,107 
Net FCY exposure        (312,629)    356   92,185  1,424  6,679  16,821    5  1,211  (62,213)  (256,161) 
 

Notes

7. Excludes prepayments and other non-financial assets. Balance disclosed is included in the $54.6 million other assets balance in the statement of financial position.

8. Excludes provisions and other non-financial liabilities. Balance disclosed is included in the $111.4 million other liabilities balance in the statement of financial position.

Sensitivity analysis (audited)

The Group is exposed to a number of currencies as a result of its investments in different countries. The impact of the weakening of the major currencies of the Group's operating components against the US Dollar is presented below:

 
$'000                                       28 February 2021                            31 December 2019 
                               Effect on equity  Effect on profit or loss  Effect on equity   Effect on profit or loss 
EUR: 5% movement (2019: 5% 
 movement)                                  289                       289               (17)                      (17) 
BWP: 5% movement (2019: 10% 
 movement)                              (4,730)                   (4,730)            (8,380)                   (8,380) 
ZWL: 50% movement (2019: 50% 
 movement)                              (4,027)                   (4,027)            (5,607)                   (5,607) 
ZAR: 10% movement (2019: 30% 
 movement)                                (347)                     (347)              (328)                     (328) 
TZS: 1% movement (2019: 1% 
 movement)                                 (61)                      (61)               (66)                      (66) 
MZN: 1% movement (2019: nil)               (20)                      (20)                  -                         - 
All other currencies: 1% 
 movement (2019: 5% movement)               (3)                       (3)              2,905                     2,905 
                                        (8,899)                   (8,899)            (5,886)                   (5,886) 
 

Interest rate risk (audited)

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow risks. Interest margins may increase as a result of such changes but may reduce losses in the event that unexpected movements arise. In order to reduce interest rate risk, the majority of the Group's lending is on a variable interest rate with a term of less than one year. This approach has been adopted as a result of the scarcity of term deposits in the region which limits the Group's ability to build a substantial, stable pool of fixed rate funding.

The table below summarises the Group's total exposure to interest rate risks on financial instruments. It includes the Group's financial instruments at carrying amounts, categorised by the earlier of contractual re-pricing or maturity dates.

 
                                  Up to       1-3      3-12        1-5   Non-interest      Total 
                                1 month    months    months      years        bearing 
Financial assets 
Cash and short-term 
 funds                           98,789         -     4,944          -         38,194    141,927 
Financial assets 
 at FVTPL                             -         -         -          -         17,302     17,302 
Loans and advances              561,115       424     2,674      6,600          9,714    580,527 
Investment securities            84,204    12,587     4,177     18,255            423    119,646 
Derivative financial 
 assets                              96     5,447         -          -              -      5,543 
Other financial assets 
 (1)                                  -         -         -          -         37,708     37,708 
Total financial assets          744,204    18,458    11,795     24,855        103,341    902,653 
 
Financial liabilities 
Deposits                        234,177     9,261    42,614    386,482              -    672,534 
Borrowed funds                  277,150    77,677    22,546     45,240         19,091    441,704 
Derivative financial 
 liabilities                          -         -         -          -          5,564      5,564 
Other financial liabilities 
 (2)                                 83       249       664      4,250         94,995    100,241 
Total financial liabilities     511,410    87,187    65,824    435,972        119,650  1,220,043 
Net interest rate 
 risk gap                       232,794  (68,729)  (54,029)  (411,117) 
Cumulative interest 
 rate gap                       232,794   164,065   110,036  (301,081) 
 

Notes

9. Excludes prepayments and other non-financial assets. Balance disclosed is included in the $54.6 million other assets balance in the statement of financial position.

10. Excludes provisions and other non-financial liabilities. Balance disclosed is included in the $111.4 million other liabilities balance in the statement of financial position.

Net interest income sensitivity to interest rate risk (audited)

The following is an analysis of the sensitivity of the Group's net interest income to increase or decrease in market interest rates. Based on a review of the movements in interest rates, especially as a result of the crisis caused by the COVID-19 pandemic, a 100-basis points ('bps') stress was deemed to be reflective of current interest rate movements.

 
$'000                                              28 February 2021                        31 December 2019 
                                         Increase in rate    Decrease in rate    Increase in rate    Decrease in rate 
                                         Pre-tax  Post-tax   Pre-tax  Post-tax   Pre-tax  Post-tax   Pre-tax  Post-tax 
African Banking Corporation of 
Botswana Limited 
Change in net interest income: 
 +/-100 basis points (2019: +/-100 
 basis points)                           (4,398)   (3,430)     4,398     3,430   (1,944)   (1,517)     1,944     1,517 
As a percentage of total shareholders' 
 equity                                  (4.07%)   (3.18%)     4.07%     3.18%   (1.92%)   (1.50%)     1.92%     1.50% 
African Banking Corporation (Zimbabwe) 
Limited 
Change in net interest income: 
 +/-1000 basis points (2019: +/-1,000 
 basis points)                             1,925     1,449   (1,925)   (1,449)       377       280     (377)     (280) 
As a percentage of total shareholders' 
 equity                                    3.17%     2.39%   (3.17%)   (2.39%)     0.71%     0.53%   (0.71%)   (0.53%) 
 

The table below illustrates the impact of interest rate movements for each banking subsidiary, on the subsidiary. Based on a review of the movements in interest rates at country level, a 100 bps (2019: 100 bps) stress was deemed to be reflective of current interest rate movements, except for ABC Zimbabwe, where a higher rate has been assumed to account for the impact of inflation.

Risks arising from the impact of COVID-19

The COVID-19 pandemic, which developed and was prevalent throughout 2020, with a second wave being experienced in the second half of the year, negatively impacted the Group's customers as well as the performance of the Group for the 14-month period ended 28 February 2021. The second wave, as well as the third wave being experienced across nations has significantly caused uncertainty over how the future development of the outbreak will impact the Group's business and customer demand for its products and services. Whilst COVID-19 vaccine roll-outs gathered momentum around the world, there still remains uncertainty over the impact of the vaccine roll-outs in the markets the Group has footprints in as well as the efficacy of the vaccine against the emerging variants of the COVID-19 virus.

Containment measures taken by governments, including travel bans, border closures, mandatory 'stay at home' policies, quarantines, social distancing, closures of non-essential services and in some countries full lockdown, triggered significant disruptions to businesses activities worldwide and also to the Group's staff, customers and other stakeholders. Global economies as well as the economic environments of the Group's countries of operations were adversely impacted by the slowdown of economic activities caused by the pandemic.

Across the globe, governments and central banks responded with monetary and fiscal interventions, such as stimulus packages, quantitative easing, interest rate cuts, reduction in deposit statutory reserves, reduction in minimum capital adequacy requirements, removal of fees and charges on certain customer transactions, directing all banks to support customers during these uncertain times by providing access to credit, moratorium, and flexibility on repayment of loans, placing embargos on any reduction of workforce during the crisis and injection of liquidity into the markets, amongst other measures, to stabilise economic conditions.

The Group implemented a comprehensive range of measures to support staff and customers, with focus on the health and safety of staff. Some of the measures implemented include work from home policies, reconfiguration of offices, social distancing, provision of masks and other protective gear, periodic testing of staff, virtual meetings and provision of sanitisers. Some of the measures implemented to support customers include the restructuring of customer loans on a case by case basis; improvement of digital platforms, especially mobile and internet banking channels to ease the conduct of banking transactions by customers; provision of working capital to productive sectors and reduction of bank charges especially on digital platforms.

A number of digital innovations were undertaken by the Group. BancABC Zimbabwe launched Ally A.I. Chatbot, which allows customers to conduct transactions on social media platforms such as WhatsApp. In addition, the first virtual branch in Zimbabwe was launched, which makes virtual banking services accessible through channels including Skype, WhatsApp and Telephone Banking, coupled with Dial-A-Visa service and a Virtual Ignition Hub for SMEs. Other subsidiaries enhanced their internet and mobile platforms including offering of SaruMoney application in Botswana.

Across the Group's network of operations, business continuity plans ('BCP') were activated to ensure that business operations continued, while developing resilience against the crisis. Despite the activation of the BCPs, the Group's operations was vulnerable to the business disruptions caused by the pandemic, with attendant impacts on the Group's financial performance and position. Some of the actions taken by the Group such as payment holidays, extension of moratorium and loan restructures negatively impacted the interest income earned on the Group's loans and also resulted in lower fee income on credit. In addition, the rate cuts implemented by some central banks also negatively impacted the interest income earned by the Group during the period.

The effect of the pandemic on business activities also resulted in lower digital transaction volumes, thereby resulting in lower digital fee income. In addition, the economic slowdown impaired the ability of the Group's ability to grow its loan book, largely due to the conservative credit appetite as lending was halted in the high risk sectors and a cautious approach was taken for all new lending. The Group was able to keep the NPL ratio constant by proactively implementing remedial strategies and driving loan recovery efforts.

The weakening of market and macroeconomic indices such as GDP growth forecasts, inflation, exchange rates etc. could trigger impairments of the Group's assets such as investments in subsidiaries and associates (UBN) as well as goodwill and other intangible assets.

The economic outlook in the markets of operation remains uncertain with the longer-term impact on the Group's business, financial position and performance, liquidity and capital position, dependent on the severity and length of the pandemic and the mitigating impact of containment measures imposed by governments and other bodies as well as the success of the vaccination efforts across countries. Throughout this period of uncertainty, the Group will continue to work closely with customers, colleagues, regulators and the government and keep a close eye on the performance of the portfolios with frequent stress testing and scenario analysis.

Operational risk management

Managing operational risk requires timely, reliable as well as a strong control culture. We seek to manage our operational risk through:

-- active participation of all business units in identifying and mitigating key operational risks across the Group;

   --              the training and development of the bank ' s employees; 

-- independent control and support functions that monitor operational risk periodically; and

-- a network of systems and tools throughout the bank to facilitate the collection of data used to analyse and assess our operational risk exposure.

Operational risk is overseen by senior management under the Operational Risk Committee Framework. Our operational risk framework is in part designed to comply with operational risk measurement and assessment rules under Basel II. The Group's operational risk management processes focus primarily on risk assessment, loss data collection and the tracking of key risk indicators. The results of these processes are used to raise awareness of operational risk management and to enhance the internal control environment, with the ultimate aim of reducing losses.

Compliance risk management

Compliance risk is the risk of non-compliance with all relevant regulatory statutes, Central Bank supervisory requirements and industry codes of practice. The compliance function is an integral part of the overall Group Risk Management function. A decentralised compliance function has been implemented within business units and subsidiaries, and compliance officers have been appointed in each operating entity.

Compliance risk is effectively managed through developing and implementing compliance processes, developing effective policies and procedures affecting the respective regulatory frameworks, and providing advice and training on the constantly changing regulatory environment. A key role of compliance officers in the Group is to develop and maintain sound working relationships with its various regulators in the Group's operating countries.

Legal risk management

Group Chief Legal Counsel is responsible for ensuring that legal risk is adequately managed. This is achieved through standard approved legal documentation wherever possible; however, specialised external legal advisers are used when required for non-standard transactions. Group Chief Legal Counsel ensures that only approved legal advisers provide legal opinions or draw up specialised agreements for the Group.

Group internal audit

The primary function of Internal Audit is to give objective assurance to the Board that adequate management processes are in place to identify and monitor risks, and that effective internal controls are in place to manage those risks. Group Internal Audit independently audits and evaluates the effectiveness of the Group's risk management, internal controls and governance processes.

Internal Audit operates under terms of reference approved by the Audit, Risk and Compliance Committee. The terms of reference define the role and objectives, authority and responsibility of the internal audit function. The Group's reporting structures ensure that the Group internal auditor has unrestricted access to the Chairman of the Audit, Risk and Compliance Committee.

At the outset of each financial year, Group Internal Audit carries out a risk assessment for all business units and subsidiaries. A comprehensive audit plan for the year that identifies specific areas of focus is then derived from this assessment. The audit plan is reviewed regularly, and any changes must be approved by the Audit, Risk and Compliance Committee. The areas of focus are confirmed with executive management before being submitted to the Audit, Risk and Compliance Committee for approval.

Going concern assessment (audited)

The Group reported a loss of $57.3 million for the 14-month period ended 28 February 2021 (12-month period ended 31 December 2019: $141.0 million). As at that date, total assets exceeded total liabilities by $330.5 million (31 December 2019: $547.2 million).

The financial statement of the Group for the 14-month period ended 28 February 2021, were prepared on a going concern basis with the following matters identified as events or conditions requiring significant consideration with regards to the appropriateness of the going concern assumption:

-- Strategic options: The ability of the Group and Company to close the on-going strategic transactions which have been announced and thus transform the overall financial status of the Group and Company.

-- Liquidity challenges: Beginning in 2019, the Group launched a review of strategic options to partner in or exit certain markets. In parallel, the Group was also engaged in a strategic fundraising initiative targeting both debt and equity, to be utilised to support operations as well as address a balance sheet realignment given certain debt maturities expected in 2020. This initiative focused only on the holding companies, i.e. ATMA BVI, the Group's ultimate holding company and ABC Holdings Limited ('ABCH'), the intermediate holding company.

The extraordinary economic challenges related to the COVID-19 pandemic resulted in delays in the strategic fundraising initiative, which was paused because of tightening global liquidity. Emerging markets were affected more significantly due to the tightening of global liquidity. Further compounding these challenges, the major currency depreciations across the African markets in which the Group operates resulted in significant reduction in the US dollar value of the Group's assets and thus a reduction in the Group's debt capacity.

The cumulative effect of these challenges, and the pandemic's effects on growth and liquidity of the Group, led to an acceleration of potential transactions, as well as discussions with bilateral lenders towards an overall restructuring of the balance sheet of the holding companies. These discussions explored a range of options to provide stability to position the Group to weather the downturn and continue to pursue its strategic options. These discussions culminated in the standstill agreement announced on 29 December 2020, which was replaced by a long-term restructuring agreement that became effective on 14 July 2021 with the participating lenders in the form of the Support and Override agreement. The Support and Override agreement sets out the terms, milestones and timing of the debt repayments. While the signing of this definitive agreement provided the foundation for the stabilisation of the platform, given that the settlement of the Group's outstanding debt is dependent on a number of milestones, including the strategic transactions as set out below, the successful ongoing implementation of the Support and Override agreement results in a material uncertainty in respect of the going concern assumption.

Strategic transactions

The Group remains focused on executing the publicly announced strategic transactions, as listed below, to maximise value for its lenders and other stakeholders.

On 30 September 2020, ABCH entered into a definitive agreement with Access Bank Plc for the sale of the Group's shareholding in African Banking Corporation Mozambique Limited. The transaction was completed on 17 May 2021.

On 26 November 2020, ABCH entered into a definitive agreement with KCB Group Plc for the sale of the Group's 97.3% shareholding in African Banking Corporation Tanzania Limited. The transaction, which has been approved by the Bank of Tanzania, is now subject to fulfilment of customary conditions precedent.

On 26 November 2020, ATMA entered into a definitive agreement with KCB Group Plc for the sale of the Group's 62.06% shareholding in Banque Populaire du Rwanda Plc ("BPR"). The transaction was completed on 25 August 2021.

On 19 April 2021, ABCH entered into a definitive agreement with Access Bank Plc for the sale of its 78.15% shareholding in African Banking Corporation Botswana Limited. The transaction, which has already been approved by the Bank of Botswana, is now near completion. The Group expects the change of ownership and control to be completed before the end of the year.

African Banking Corporation Zambia limited is, for accounting purposes, still classified as a disposal group held for sale in terms of International Financial Reporting Standard ("IFRS") 5: Non-current assets held for sale and discontinued operations. Discussions with a potential investor for the sale of the subsidiary are at an advanced stage.

Support and override agreement ('SOA')

On 14 July 2021, the SOA was signed by majority of the lenders representing 88% of the aggregate amount of debt outstanding under ATMA BVI ('the Company') and ABCH's direct and contingent facilities. The key terms of the SOA include:

-- The creditors who are a party to the SOA (the ' participating creditors ' ) agreed to forbearances in respect of certain events of default under their relevant facilities while the SOA is effective, including: (i) non-payment of amounts due under certain of the Company's and ABCH's financing agreements, (ii) any deterioration in the financial or operational performance of the Group as a result of COVID-19, and (iii) any breach of any financial covenant under certain of the Company's and ABCH's financing agreements;

-- The participating creditors with direct facilities with the Company have agreed to forbearances in respect of the maturities of their facilities to 30 September 2021, with the possibility of further extension;

-- The participating creditors with direct facilities with ABCH have agreed to waive the maturities of their facilities until 31 December 2022, with the possibility of further extension;

-- Proceeds received in respect of the Group's on-going strategic divestments will be held by Wilmington Trust, acting as Global Agent, to support repayments of the Company and ABCH's creditors in accordance with agreed "waterfall" arrangements;

-- Participating creditors have agreed to either support, or not object to, the Company and ABCH proposing a restructuring procedure if required, including a UK restructuring plan, UK scheme of arrangement or a scheme of arrangement under Part IX of the British Virgin Islands Business Companies Act 2004, to ensure that all of the Company's financial creditors become bound by the terms of the SOA; and

-- The SOA will terminate either automatically, or upon notice from certain participating creditors, if specific criteria are not met, such as divestment milestones or any successful liquidation applications.

The Group, through ABCH, is in discussions with AATIF in relation to its participation in the restructuring. For Norsad, the Group continues to explore a consensual agreement while continuing to contest the petition filed by Norsad. Details on the Norsad litigation are provided under note 35.6 Norsad litigation.

In addition to the matters presented above, the Directors also considered the capital forecast, liquidity and funding position of individual banking entities within the Group, compared with minimum requirements set by banking regulators in each country as well as reasonable commercial headroom or so-called buffers in line with the Group's risk appetite. The Directors also considered forecasts for the parent company itself.

Based on the above, the Directors believe that the use of the going concern assumption in the preparation of the consolidated financial statements of the Group for the period ended 28 February 2021 is appropriate. This assumption is contingent on the availability of funds to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. However, should the SOA not be successfully implemented, a material uncertainty exists which may cast significant doubt on the Group's ability to continue as a going concern.

DIRECTORS' REPORT

Corporate governance and management report

DTR 7.2 requires that certain information be included in a corporate governance statement. The Corporate Governance Report is included in the Company's 2020 Annual Report.

For the purposes of compliance with DTR 4.1, the required content of the 'Management Report' can be found in the Business review, Executive Chairman's letter and Finance review sections of this report and in this Directors' report.

Results

The consolidated statement of profit or loss shows a reported loss of $58.7 million for the year ended 28 February 2021

Dividends

The Directors do not propose paying a dividend in respect of the year ended 28 February 2021.

Events after the reporting date

Please see note 35 the Financial statements, which is incorporated into this Report by reference.

Branches

In respect of the year 2020, Atlas Mara had subsidiaries and investment vehicles domiciled and/or operating in Botswana, Germany, Luxembourg, Mauritius, Mozambique, Nigeria, Rwanda, Tanzania, United Arab Emirates, Zambia and Zimbabwe.

Financial risk management objectives and policies

Details on financial risk management are set out in the Risk Report and are incorporated into this Report by reference.

Change of control

The Company is party to the following contracts that are subject to change of control provisions in the event of a takeover bid. In connection with the placement of senior secured convertible notes initially due 2020 (and now extended by agreement to 2021) and the placement of secured bonds due 2021 (the "Bonds"), the Company is party to contracts that give Bondholders the right to require redemption of their Bonds upon a change of control. In addition, a change of control triggers a downward adjustment to the conversion applicable to the Convertible Bonds due 2020 (but extended to 2021), for a limited period of time following the change of control. The Company is also party to facility agreements that give the Lenders the right to declare all amounts outstanding under the loans immediately due and payable upon a change of control. There are no agreements between the Company and its Directors or employees providing compensation for loss of office or employment that occurs because of a takeover bid. However, if options are granted to senior executive officers, the vesting of issued options is accelerated in the case of a change of control.

Significant contracts

Details of related party transactions are set out under note 28 Related Parties and is incorporated into this Report by reference.

Going concern

The going concern of the Company is dependent on successfully funding the balance sheet of Atlas Mara and its subsidiaries ('the Group') and maintaining adequate levels of capital. In order to satisfy themselves that the Company has adequate resources to continue to operate for the foreseeable future, the Directors have considered a number of key dependencies relating to funding, liquidity and capital. Having considered these, the Directors consider that it is appropriate to adopt the use of the going concern assumption in the preparation of the consolidated financial statements of the Group for the period ended 28 February 2021.This assumption is contingent on the successful execution of the restructuring agreement the Company entered into with the majority of its creditors on July 14, 2021 ( the "SOA") and other factors, as described in the risk report and financial statements. Should the SOA not be successfully implemented, a material uncertainty exists which may cast significant doubt on the Group's and Company's ability to continue as going concerns. (A fuller discussion of the going concern assessment is provided in the section going concern assessment in the risk report).

Directors

The names of the current members of the Board of Directors of the Company, as at 31 August 2021, are listed in the table below. The Directors' interests in shares in the Company are provided below. The composition of the Board and dates of appointment are shown in the table below:

 
Director(1)             Date of appointment 
Robert E. Diamond, Jr.  3 December 2013 
Rachel F. Robbins       3 December 2013 
Michael Wilkerson       3 October 2017 
Simon Lee               24 April 2018 
Jawaid Mirza            1 April 2019 
 

Note:

1. Amadou Raimi, who was appointed to the Board in January 2015, stepped down from the Board, effective 7 October 2020.

Directors' indemnities

As at the date of this Report, indemnities granted by the Company to the Directors are in force to the extent permitted under BVI law. The Company also maintains Directors' and Officers' liability insurance, the level of which is reviewed annually.

Rights to appoint and remove Directors

On 31 August 2017, the Company entered a strategic financing transaction with Fairfax Africa (now 'Helios Fairfax Partners'), which resulted in Fairfax Africa acquiring a 42.4% ownership stake in the Company (the 'Strategic Financing'). On 22 December 2017 Fairfax Africa acquired additional ordinary shares of Atlas Mara, increasing its ownership stake to 43.3%. Pursuant to the terms of the Strategic Financing, Fairfax Africa was granted certain rights to appoint and remove directors to the Company's Board, which were incorporated into the Articles of the Company and approved by the shareholders of the Company at an extraordinary general meeting held on 14 July 2017. The amended Articles of the Company are available for inspection at the Company's registered office.

In December 2020, Fairfax Africa's holdings in the Company were transferred to Fairfax Financial Holdings Limited ('Fairfax Financial') along with certain rights to appoint and remove Directors pursuant to the Strategic Financing agreement. Fairfax Financial has the right to nominate four persons as Directors of the Company (the 'Investor Directors'), and the Directors shall appoint such persons to the Board, subject to the BVI Companies Act and the Articles. In the event Fairfax Financial notifies the Company to remove an Investor Director from the Board, the Directors shall remove such Investor Director, and Fairfax Financial shall have the right to nominate an Investor Director to fill such vacancy. For so long as Fairfax Financial has the right to appoint four Directors to the Board, the Directors retain the right, acting by majority, to nominate five persons as Directors of the Company (the 'Non-Investor Directors').

Following completion of the Strategic Financing, and subsequent to the changes in the governance arrangements of the Company, a holder of Founder Preferred Shares (being a Founding Entity together with its affiliates) owning 20% or more of the Founder Preferred Shares in issue, is no longer entitled to nominate a person as a Director of the Company.

Powers of the Directors

Subject to the provisions of the BVI Companies Act and the Articles, the business and affairs of the Company shall be managed by, or under the direction or supervision of, the Directors. The Directors have all the powers necessary for managing, and for directing and supervising, the business and affairs of the Company. The Directors may exercise all the powers of the Company to borrow or raise money (including the power to borrow for the purpose of redeeming shares) and secure any debt or obligation of or binding on the Company in any manner including by the issue of debentures (perpetual or otherwise) and to secure the repayment of any money borrowed, raised or owing by mortgage charge pledge or lien upon the whole or any part of the Company's undertaking property or assets (whether present or future) and also by a similar mortgage charge pledge or lien to secure and guarantee the performance of any obligation or liability undertaken by the Company or any third party.

Substantial shareholders

As at 31 August 2021, the Company has been notified of the following significant holdings (being 5% or more of the voting rights in the Company) in the Company's ordinary share capital.

 
Shareholder                         % fully diluted interest(1)  Transaction 
                                                                     date(1) 
Fairfax Financial Holdings Limited                         42.3   08/12/2020 
Wellington Management Company, LLP                          9.9   19/01/2017 
Citigroup                                                   5.0   12/02/2020 
 

Note:

   1.   Per public TR-1 filings with the Financial Conduct Authority. 

Share capital

General

As at 29 February 2021, the Company had in issue 174,618,767 ordinary shares of no-par value and 1,250,000 Founder Preferred Shares of no-par value. As at 31 August 2021 (the latest practicable date prior to the publication of this document) the Company had a total number of 174,618,767 ordinary shares in issue, of which 26,653,711 are held in treasury and 3,298,298 are held in escrow as part of the contingent consideration for the acquisition of Finance Bank Zambia Limited.

Founder Preferred Shares

Details of the Founder Preferred Shares can be found in note 3 and are incorporated into this Report by reference.

Directors' interest in shares

The Directors' beneficial shareholding in the Company, as of 31 August 2021 (the latest practicable date prior to the publication of this document) is as follows:

 
Directors                Number of ordinary shares held  % ownership 
Robert E. Diamond, Jr.                        3,948,991        2.73% 
Rachel F. Robbins                               315,113        0.22% 
Michael Wilkerson                               508,927        0.35% 
Simon Lee                                       206,881        0.14% 
Jawaid Mirza                                    193,471        0.13% 
 

Note:

   1.   Amadou Raimi stepped down from the Board, effective 7 October 2020. 

Securities carrying special rights

Save as disclosed above in relation to the shares held by Fairfax and the Founder Preferred Shares, no person holds securities in the Company carrying special rights with regard to control of the Company.

Voting rights

Holders of ordinary shares will have the right to receive notice of and to attend and vote at any meetings of members. Each holder of ordinary shares being present in person or by proxy at a meeting will, upon a show of hands, have one vote and upon a poll each such holder of ordinary shares present in person or by proxy will have one vote for each ordinary share held by him.

In the case of joint holders of a share, if two or more persons hold shares jointly each of them may be present in person or by proxy at a meeting of members and may speak as a member, if only one of the joint owners is present he may vote on behalf of all joint owners, and if two or more joint holders are present at a meeting of members, in person or by proxy, they must vote as one.

Restrictions on voting

No member shall, if the Directors so determine, be entitled in respect of any share held by him to attend or vote (either personally or by proxy) at any meeting of members or separate class meeting of the Company or to exercise any other right conferred by membership in relation to any such meeting if he or any other person appearing to be interested in such shares has failed to comply with a notice requiring the disclosure of shareholder interests and given in accordance with the Articles within 14 calendar days, in a case where the shares in question represent at least 0.25% of their class, or within seven days, in any other case, from the date of such notice. These restrictions will continue until the information required by the notice is supplied to the Company or until the shares in question are transferred or sold in circumstances specified for this purpose in the Articles.

Transfer of shares

Subject to the BVI Companies Act and the terms of the Articles, any member may transfer all or any of his certificated shares by an instrument of transfer in any usual form or in any other form which the Directors may approve. The Directors may accept such evidence of title of the transfer of shares (or interests in shares) held in uncertificated form (including in the form of depositary interests or similar interests, instruments or securities) as they shall in their discretion determine. The Directors may permit such shares or interests in shares held in uncertificated form to be transferred by means of a relevant system of holding and transferring shares (or interests in shares) in uncertificated form. No transfer of shares will be registered if, in the reasonable determination of the Directors, the transferee is or may be a Prohibited Person (as defined in the Articles) or is or may be holding such shares on behalf of a beneficial owner who is or may be a Prohibited Person. The Directors shall have power to implement and/or approve any arrangements they may, in their absolute discretion, think fit in relation to the evidencing of title to and transfer of interests in shares in the Company in uncertificated form (including in the form of depositary interests or similar interests, instruments or securities).

Independent auditor and audit information

Each person who is a Director at the date of approval of this report confirms that, so far as the Director is aware, there is no relevant audit information of which the Company's auditor is unaware and each Director has taken all the steps that he or she ought to have taken as a Director to make himself or herself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Annual General Meeting

The AGM of the Company will be held on a date to be announced in due course in New York City at 477 Madison Avenue, 22nd Floor, New York, NY, 10022. All shareholders have the opportunity to attend and vote, in person or by proxy, at the AGM. The Notice of the AGM will be mailed out and made available on the Company's website at least 20 working days prior to the date of the AGM. The Notice of the AGM sets out the business of the meeting and explanatory notes on all resolutions. Separate resolutions will be proposed in respect of each substantive issue. The Chairman of the Board and the Chairpersons of the Board Committees will be available to answer shareholders' questions.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Annual Financial Statements and the Group financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare Group financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of their profit or loss for that period. In preparing each of the Group Company financial statements, the directors are required to:

-- select suitable accounting policies and then apply them consistently;

-- make judgements and estimates that are reasonable, relevant and reliable;

-- state whether they have been prepared in accordance with IFRSs as adopted by the EU;

-- assess the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

-- use the going concern basis of accounting unless they either intend to liquidate the Group or to cease operations or have no realistic alternative but to do so.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a Strategic report, Risk report and Directors' report that complies with that law and those regulations.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the directors in respect of the annual financial statements

We confirm that to the best of our knowledge:

-- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the group and the undertakings included in the consolidation taken as a whole; and

-- the management report, Risk report and Directors' report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Signed on behalf of the Board

Michael Wilkerson

Chairman

31 August 2021

INDEPENT AUDITOR'S REPORT

1 Our opinion is unmodified

We have audited the financial statements of Atlas Mara Limited ("the Group") for the period ended 28 February 2021 which comprise the consolidated statement of financial position, consolidated statement of profit and loss, consolidated statement of other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows and related notes, including the accounting policies in note 1, as well as the credit risk, liquidity risk and market risk information identified as "audited" in the risk report and the going concern assessment marked as audited.

In our opinion:

-- the financial statements give a true and fair view of the state of the Group's affairs at 28 February 2021 and of the Group's loss for the period then ended; and

-- the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the audit committee.

We were first appointed as auditor by the directors on 3 December 2013. The period of total uninterrupted engagement is for the eight financial years ended 28 February 2021. We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided.

2 Material uncertainty related to going concern

 
                               The risk                       Our response 
Going concern                  Disclosure quality             Our procedures included: 
 We draw attention              The financial statements       Assessing transparency: 
 to the going concern           explain how the Board          Considering whether 
 assessment on page             has formed a judgement         the going concern 
 32 of the published            that it is appropriate         disclosure in the 
 financial statements           to adopt the going             going concern assessment 
 (included in the Risk          concern basis of preparation   on page 32 of the 
 Report) which indicates        for the Group.                 published financial 
 that the ability to            That judgement is              statements (included 
 settle the Group's             based on an evaluation         in the Risk Report) 
 outstanding debt is            of the inherent risks          to the financial statements 
 dependent on a number          to the Group's business        gives a full and accurate 
 of milestones, including       model and how those            description of the 
 the strategic transactions     risks might affect             Directors' assessment 
 and the successful             the Group's financial          of going concern, 
 execution of the support       resources or ability           including the identified 
 and override agreement.        to continue operations         risks and, dependencies, 
 These events and conditions,   over a period of at            and related sensitivities. 
 along with the other           least a year from              Our assessment of 
 matters explained              the date of approval           management's going 
 in the going concern           of the financial statements.   concern assessment 
 assessment on page             There is little judgement      also included: 
 32 of the published            involved in the Directors'     Our sector experience: 
 financial statements           conclusion that risks          Reviewing the cash 
 (included in the Risk          and circumstances              flow forecasts and 
 Report), constitute            described in note              assumptions in line 
 a material uncertainty         1 and the going concern        with current market 
 that may cast significant      assessment on page             conditions and pending 
 doubt on the Group's           32 of the published            transactions. 
 ability to continue            financial statements           Evaluating assumptions: 
 as a going concern.            (included in the Risk          Evaluating whether 
 Our opinion is not             Report) to the financial       the assumptions, used 
 modified in respect            statements represent           in the cash flow forecasts, 
 of this matter.                a material uncertainty         are realistic and 
                                over the ability of            achievable, and consistent 
                                the Group to continue          with the external 
                                as a going concern             and/or internal environment 
                                for a period of at             and other matters 
                                least a year from              identified in the 
                                the date of approval           audit. 
                                of the financial statements. 
                                However, clear and             Funding assessment: 
                                full disclosure of             Evaluating management's 
                                the facts and the              assessment of compliance 
                                Directors' rationale           with debt covenants. 
                                for the use of the             This included reviewing 
                                going concern basis            levels of capital 
                                of preparation, including      and liquidity and 
                                that there is a related        understanding the 
                                material uncertainty,          extent of breaches 
                                is a key financial             during the year. 
                                statement disclosure           Reviewing regulatory 
                                and so was the focus           correspondence which 
                                of our audit in this           included evaluating 
                                area. Auditing standards       whether regulatory 
                                require that to be             capital requirements 
                                reported as a key              have been met as well 
                                audit matter.                  as the approval of 
                                                               some of the strategic 
                                                               transactions. 
                                                               Evaluating Directors' 
                                                               intent: 
                                                               Challenging management's 
                                                               plans for future actions, 
                                                               and assessed the reliability 
                                                               and relevance of data 
                                                               including cash flows 
                                                               from strategic initiatives 
                                                               and the expected timing 
                                                               of current liabilities 
                                                               and expenses. 
                                                               Reviewing the "Support 
                                                               and Override Agreement" 
                                                               as signed on 14 July 
                                                               2021 and challenged 
                                                               the likelihood of 
                                                               meeting the necessary 
                                                               milestones. 
                                                               Our results: 
                                                               We found the going 
                                                               concern disclosure 
                                                               on page 32 (going 
                                                               concern assessment) 
                                                               of the published financial 
                                                               statements (included 
                                                               in the Risk Report) 
                                                               with a material uncertainty 
                                                               to be acceptable (2019 
                                                               result: We found the 
                                                               going concern disclosure 
                                                               with no material uncertainty 
                                                               to be acceptable). 
 

3 Other key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. Going concern is a significant key audit matter and is described in section 2 of our report.

We summarise below the other key audit matters (unchanged from 2019), in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.

 
Impairment of loans and advances 
 Refer to accounting policies: (iii) Financial assets and liabilities 
 as well as notes 10 and 12 to the financial statements. 
Key audit matter                                                   How the matter was addressed 
                                                                    in our audit 
       The Group's core business involves                                 Our procedures included the following: 
       providing loans and advances                                       We evaluated the design and implementation, 
       to corporate and retail customers.                                 and where applicable, the operating 
       In the consolidated financial                                      effectiveness of key controls 
       statements, gross loans and advances                               over the loan impairment process, 
       amount to USD 611 million and                                      focusing on the identification 
       the expected credit losses amount                                  of the ECL, the governance processes 
       to USD 31 million as at 28 February                                implemented for credit models 
       2021.                                                              and inputs, and management's 
       The expected credit loss (ECL)                                     oversight over the ECL. 
       model applied to measure impairment                                We evaluated the design and implementation 
       requires management to exercise                                    and the operating effectiveness 
       significant judgement in the                                       of controls relating to the Group's 
       determination of expected credit                                   loan origination process and 
       losses.                                                            credit reviews. 
       Management calculates the ECL                                      Where expected credit losses 
       using statistical models. The                                      were calculated on a modelled 
       following inputs to these models                                   basis, we performed the following 
       require significant management                                     procedures, in conjunction with 
       judgement:                                                         our credit risk specialists: 
        *    Determination of significant increase in credit risk          *    We critically assessed the ECL models developed by 
             (SICR);                                                            management by using our credit risk specialists in 
                                                                                the evaluating the appropriateness of the ECL model, 
                                                                                data, inputs and the resultant outputs. This include 
        *    Determination of macroeconomic inputs and forward            d 
             looking information into the SICR assessment and ECL               assessing the ability of the model to reflect the 
             measurement; and                                                   impact of COVID-19 through appropriate calibration; 
 
 
        *    Estimation of the probability of default, the                 *    We assessed the completeness, accuracy and validity 
             exposure at default and the loss given default.                    of data and inputs used during the development and 
                                                                                application of the ECL models; and 
 
 
       In addition to the above, judgement                                 *    We challenged the parameters and significant 
       is also applied to determine                                             assumptions applied in the calculation models which 
       whether any post model overlays                                          included SICR, the estimated probability of default, 
       are required for credit risk                                             exposure at default and loss given default by 
       elements which are not captured                                          evaluating these assumptions against internal 
       by the models.                                                           business practices, industry norms and our own 
       Due to the significance of the                                           independent assumptions. 
       loans and advances and the increased 
       significant estimation uncertainty 
       and judgement involved in determining 
       the ECL, the impairment of loans                                   We assessed how management have 
       and advances was considered to                                     considered the uncertainties 
       be a key audit matter.                                             of COVID-19 in the estimate of 
                                                                          ECL, specifically regarding macro-economic 
                                                                          forecasts and behaviors of borrowers 
                                                                          subject to payment holidays as 
                                                                          well as the criteria set by management 
                                                                          for determining whether there 
                                                                          has been a SICR. 
                                                                          We evaluated the appropriateness 
                                                                          of management's additional post 
                                                                          model overlays by independently 
                                                                          assessing the reasonability of 
                                                                          these assumptions. 
                                                                          We evaluated the adequacy of 
                                                                          the financial statement disclosures 
                                                                          against the requirements of IFRS 
                                                                          9: Financial Instruments and 
                                                                          IFRS 7: Financial Instruments 
                                                                          Disclosures. 
                                                                          We concluded that the Group's 
                                                                          ECL provisions were reasonable 
                                                                          and recognised in accordance 
                                                                          with IFRS 9. 
 
 
Valuation of goodwill 
 Refer to note 17 to the financial statements. 
Key audit matter                                                  How the matter was addressed 
                                                                   in our audit 
       Goodwill has been allocated to                             Our procedures include: 
        two cash-generating units (CGUs)                           We compared the current methods 
        for the purposes of impairment                             and significant assumptions with 
        testing, namely Botswana and                               the methods and assumptions used 
        West Africa.                                               in previous impairment testing 
                                                                   and valuations for consistency. 
        An annual impairment test was                              We performed a forecast comparison 
        performed on goodwill by determining                       of the current year forecasts 
        the recoverable amounts of the                             compared to forecasts received 
        CGUs based on their value in                               in the prior year. 
        use.                                                       We evaluated management's assumptions 
                                                                   on growth rates and discount 
        Management's determination of                              rates by comparing them to known 
        the value in use required the                              market and industry trends. 
        application of significant judgements                      We evaluated the adequacy of 
        in the following areas:                                    the disclosures made in the financial 
         *    future cash flows;                                   statements against the requirements 
                                                                   of IAS 36 Impairment of Assets. 
                                                                   We found the resulting estimate 
         *    discount rate applied;                               of goodwill to be acceptable. 
 
 
         *    the assumptions underlying the forecast growth and 
              terminal growth rates. 
 
 
 
        The judgements applied by management 
        have a significant impact on 
        the valuation on the CGU's. Consequently, 
        the valuation of goodwill was 
        therefore considered to be a 
        key audit matter. 
 
 
Disposal groups classified as held for sale 
 Refer to note 32 to the financial statements. 
Key audit matter                                How the matter was addressed 
                                                 in our audit 
On 30 April 2019, the Group publicly            Our procedures included the following: 
 announced its intention to dispose 
 of its investments in the following             We assessed the appropriateness 
 subsidiaries: African Banking                   of the classification of the 
 Corporation (Tanzania) Limited,                 investments/disposal group as 
 African Banking Corporation (Moçambique)   held for sale by assessing the 
 S.A., African Banking Corporation               terms and conditions of the offer 
 Zambia Limited and Banque Populaire             term sheets or signed agreements. 
 du Rwanda Limited. 
                                                 As relates to the Tanzania, Mozambique 
 On 29 September 2020, the Group                 and Rwanda sales, we inspected 
 announced that it had entered                   the signed sale agreements and 
 into definitive agreements with                 confirmed that the offer price 
 Access Bank Plc for the sale                    represented the lower of carrying 
 of the Group's banking asset                    value and fair value less costs 
 in African Banking Corporation                  to sell. 
 Mozambique, subject to regulatory 
 approval and other customary                    As relates to the Zambia sale, 
 conditions precedent.                           we interrogated and compared 
                                                 the accuracy of the inputs, used 
 On 26 November 2020, the Group                  to determine the lower of carrying 
 announced that it had entered                   value and fair value less costs 
 into an agreement with KCB Group                to sell, against the signed term 
 Plc for the sale of the Group's                 sheet and third party comparable 
 banking assets in African Banking               data. 
 Corporation (Tanzania) Limited 
 and Banque Populaire du Rwanda                  We evaluated the accuracy of 
 Limited, pending regulatory approvals           the consolidation journal entries 
 and other customary conditions.                 between continued and discontinued 
                                                 operations to assess the appropriate 
 Atlas Mara Limited successfully                 application of IFRS 5. 
 completed the sale of 100% of 
 its shareholding in African Banking             We evaluated the adequacy of 
 Corporation (Moçambique)                   the financial statement disclosures 
 S.A on 17 May 2021 and the sale                 against the requirements of IFRS 
 of 62.06% of its shareholding                   5. 
 in Banque Populaire du Rwanda 
 Limited on 25 August 2021. The                  We found the Group's classification 
 change of control was effective                 and disclosure of disposal groups 
 on the same dates.                              classified as held for sale to 
                                                 be acceptable. 
 The application of IFRS 5, Non-current 
 assets held for sale (IFRS 5) 
 as a result of the announcements 
 had a significant effect on the 
 profit or loss, the carrying 
 values of its assets and on the 
 presentation of results, and 
 as such this was considered to 
 be a key audit matter. 
 

4 Our application of materiality and an overview of the scope of our audit

Materiality for the group financial statements as a whole was set at USD 7.3 million (2019: USD 7.8 million), determined with reference to a benchmark of total assets of continued assets.

In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole.

Performance materiality was set at 65% (2019: 65%) of materiality for the financial statements as a whole, which equates to USD 4.7 million (2019 : USD 5.1 million) for the group. We applied this percentage in our determination of performance materiality based on the increased aggregation risk.

We agreed to report to the audit committee any corrected or uncorrected identified misstatements exceeding USD 0.29 million (2019: 0.3 million), in addition to other identified misstatements that warranted reporting on qualitative grounds.

Scope

The group team performed the audit of the group as if it was a single aggregated set of financial information. The audit was performed using the materiality levels set out above.

5 Going concern basis of preparation

The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or to cease its operations, and as they have concluded that the Group's financial position means that this is realistic for at least a year from the date of approval of the financial statements ("the going concern period"). As stated in section 2 of our report, they have also concluded that there is a material uncertainty related to going concern.

An explanation of how we evaluated management's assessment of going concern is set out section 2 of our report.

Our conclusions based on this work:

-- we consider that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate

However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group will continue in operation.

6 Fraud and breaches of laws and regulations - ability to detect

Identifying and responding to risks of material misstatement due to fraud

To identify risks of material misstatement due to fraud ("fraud risks") we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:

-- Enquiring of directors, as to the Group's high-level policies and procedures to prevent and detect fraud, as well as whether they have knowledge of any actual, suspected or alleged fraud.

   --           Reading the Board and Audit, Risk and Compliance Committee minutes. 
   --           Using analytical procedures to identify any unusual or unexpected relationships. 

-- Using our own forensic specialists to assist us in identifying fraud risks based on discussions of the circumstances of the Group.

We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. This included communication from the group to full scope component audit teams of relevant fraud risks identified at the Group level and request to full scope component audit teams to report to the Group audit team any instances of fraud that could give rise to a material misstatement at group.

As required by auditing standards, we perform procedures to address the risk of management override of controls and the risk of fraudulent revenue recognition.

We also identified a fraud risk related to the overlays on the ECL and the accuracy of the selling price of the disposal group classified as held for sale given the level of judgement applied by management.

Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, and through discussion with the directors and other management (as required by auditing standards), and from inspection of the Group's regulatory and legal correspondence and discussed with the directors and other management the policies and procedures regarding compliance with laws and regulations.

As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity's procedures for complying with regulatory requirements.

We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. This included a request for full scope component auditors to report to the group team any instances of non-compliance with laws and regulations that could give rise to a material misstatement at group.

Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.

Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.

In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

7 We have nothing to report on the other information in the Annual Financial Statements

The directors are responsible for the other information presented in the Annual Financial Statements together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.

8 We have nothing to report on the other matters on which we are required to report by exception

We have nothing to report in these respects.

9 Respective responsibilities

Directors' responsibilities

As explained more fully in their statement set out in the Statement Of Directors' Responsibilities, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities .

10 The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company's members, as a body. 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 opinions we have formed.

KPMG Inc

Pierre Fourie

Chartered Accountant

85 Empire Road

Parktown

Johannesburg

2193

31 August 2021

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

for the period ended 28 February 2021

 
$'000                                            14 months to 28 February 2021        12 months to 31 December 2019 
                                        Note  Continuing  Discontinued    Total    Continuing  Discontinued    Total 
Interest and similar income              15     81,418      143,787      225,205     77,085      133,643      210,728 
Interest and similar expense             8     (80,274)     (62,694)    (142,968)   (65,712)     (58,846)    (124,558) 
Net interest income                             1,144        81,093      82,237      11,373       74,797      86,170 
Impairment credit/(charge) on 
 financial assets                       12        79        (12,290)    (12,211)      967        (12,388)    (11,421) 
Net interest income after loan 
 impairment charges                             1,223        68,803      70,026      12,340       62,409      74,749 
Non-interest income                      23     51,743       52,345      104,088     53,741       49,925      103,666 
Share of profit of associates            16     25,510         -         25,510      31,101         -         31,101 
Total operating income                          78,476      121,148      199,624     97,182      112,334      209,516 
Operating expenses                       24    (90,240)    (123,923)    (214,163)   (81,405)    (136,732)    (218,137) 
Transaction and integration expenses              -          1,000        1,000        -         (1,350)      (1,350) 
Loss on monetary position                      (16,872)        -        (16,872)    (11,081)        -        (11,081) 
Net movement on IFRS 5 remeasurement              -         (1,435)      (1,435)       -        (105,461)    (105,461) 
(Loss)/profit before tax*                      (28,636)     (3,210)     (31,846)     4,696      (131,209)    (126,513) 
Income tax expense                      25.1   (18,393)     (7,042)     (25,435)    (12,459)     (2,061)     (14,520) 
Loss for the period                            (47,029)     (10,252)    (57,281)    (7,763)     (133,270)    (141,033) 
 
Attributable to: 
Ordinary shareholders                          (46,593)     (12,006)    (58,599)    (8,451)     (134,768)    (143,219) 
Non-controlling interests                       (436)        1,754        1,318       688         1,498        2,186 
Loss for the period                            (47,029)     (10,252)    (57,281)    (7,763)     (133,270)    (141,033) 
 
Basic loss per share ($)                 26     (0.28)       (0.07)      (0.35)      (0.05)       (0.79)      (0.84) 
Diluted loss per share ($)               26     (0.28)       (0.07)      (0.35)      (0.05)       (0.79)      (0.84) 
 

* The IFRS 5 remeasurement loss was incorrectly presented after the profit/(loss) before tax line for the year 2019 but has been correctly reported for the current year. Refer to note 34 for further details of the correction of this prior year error current year. Refer to note 34 for further details of the correction of this prior year error

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

for the period ended 28 February 2021

 
$'000                                           14 months to 28 February 2021         12 months to 31 December 2019 
                                              Continuing  Discontinued    Total    Continuing  Discontinued    Total 
                                             ----------- 
Loss for the period                           (47,029)      (10,252)    (57,281)    (7,763)      (133,270    (141,033) 
 
Other comprehensive income/(loss) 
                                             ----------- 
Items that may be reclassified to profit or 
 loss:                                        (122,830)     (28,805)    (151,635)    11,239      (11,613)      (374) 
                                             ----------- 
Exchange differences on translating foreign 
 operations                                   (119,534)     (28,469)    (148,003)   (1,163)      (11,663)    (12,826) 
                                             ----------- 
Net change in FVOCI reserves (net of tax         (19)        (336)        (355)      (150)          50         (100) 
                                             ----------- 
Share of OCI of equity-accounted investees 
 (net of tax)                                  (3,277)         -         (3,277)     12,552         -         12,552 
                                             ----------- 
 
Items that will not be reclassified to 
 profit or loss:                                  -            -            -        (414)          -          (414) 
                                             ----------- 
Revaluation of land and buildings (net of 
 tax)                                             -            -            -        (414)          -          (414) 
                                             ----------- 
Total other comprehensive (loss)/income, 
 net of tax                                   (122,830)     (28,805)    (151,635)    10,825      (11,613)      (788) 
                                             ----------- 
 
Total comprehensive (loss)/income for the 
 period                                       (169,859)     (39,057)    (208,916)    3,062      (144,883)    (141,821) 
                                             ----------- 
 
Attributable to: 
                                             ----------- 
Ordinary shareholders                         (168,897)     (39,074)    (207,971)    1,666      (145,045)    (143,379) 
                                             ----------- 
Non-controlling interests                       (962)          17         (945)      1,396         162         1,558 
                                             ----------- 
Total comprehensive (loss)/income for the 
 period                                       (169,859)     (39,057)    (208,916)    3,062      (144,883)    (141,821) 
                                             ----------- 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 28 February 2021

 
$'000                                                                 Notes  28 February 2021  31 December 2019 
Assets 
Cash and short-term funds                                              14        141,927           130,533 
Financial assets at fair value through profit or loss                   9         17,302            25,243 
Loans and advances                                                    10         580,527           644,112 
Investment securities                                                  11        119,646           107,778 
Derivative financial assets                                            13         5,543             5,692 
Investment in associates                                               16        471,496           582,141 
Property and equipment                                                 18         36,768            41,232 
Investment property                                                    19         11,644            6,586 
Goodwill and intangible assets                                         17         63,864            73,005 
Current tax assets                                                    25.3          78              2,243 
Deferred tax assets                                                   25.4        2,388              149 
Other assets                                                           20         56,012            29,052 
                                                                                1,507,195         1,647,766 
Assets included in disposal groups classified as held for sale         32       1,101,383          979,645 
Total assets                                                                    2,608,578         2,627,411 
 
Liabilities 
Deposits                                                                7        672,534           723,726 
Borrowed funds                                                          6        441,704           366,809 
Derivative financial liabilities                                       13         5,564             5,610 
Current tax liabilities                                               25.3        1,157              767 
Deferred tax liability                                                25.4        25,629            12,107 
Other liabilities                                                      21        108,867            96,974 
                                                                                1,255,455         1,205,993 
Liabilities included in disposal groups classified as held for sale    32       1,022,648          874,235 
-Total liabilities                                                              2,278,103         2,080,228 
 
Equity 
Founder preference shares                                               3         11,300            11,300 
Ordinary share capital                                                  3        993,192           993,192 
Capital reserves                                                                 (31,101)          (38,478) 
Accumulated loss                                                                (195,972)         (128,951) 
Fair value through OCI reserves                                                    (36)              310 
Foreign currency translation reserve                                            (457,190)         (311,450) 
Treasury shares                                                                  (33,426)          (23,393) 
Equity attributable to ordinary shareholders                                     286,767           502,530 
Non-controlling interest                                                          43,708            44,653 
Total equity                                                                     330,475           547,183 
 
Total equity and liabilities                                                    2,608,578         2,627,411 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

for the period ended 28 February 2021

 
$'000                                          14 months to 28 February 2021        12 months to 31 December 2019 
                                            Continuing  Discontinued    Total    Continuing  Discontinued    Total 
Cash flow from operating activities: 
(Loss)/profit before tax(i)                  (28,636)     (3,210)     (31,846)     4,696      (131,209)    (126,513) 
Adjusted for: 
Foreign exchange gain                        (15,851)     (18,469)    (34,320)    (21,866)     (14,755)    (36,621) 
Impairment (credit)/charge on financial 
 assets                                        (79)        12,290      12,211      (967)        12,388      11,421 
Depreciation and amortisation                 9,378        17,016      26,394      8,649        16,729      25,378 
Fair value loss/(gain) on derivative 
 financial instruments                          86           -           86        (296)        (110)        (406) 
Fair value (gain)/loss on financial 
 instruments at FVTPL                        (1,609)         -         (1,609)     3,084          -          3,084 
Share of profit of associates                (25,510)        -        (25,510)    (31,101)        -        (31,101) 
Fair value loss/(gain) on investment 
 property                                      315         (184)         131      (4,586)         -         (4,586) 
Revaluation loss on property and equipment    2,440          -          2,440        -            -            - 
(Gain)/loss on disposal of property and 
 equipment                                      -           (85)        (85)        (21)         115          94 
Gain on disposal of investment property         -            -            -          -         (1,164)      (1,164) 
Write-off of intangible asset                   -            -            -          -          1,848        1,848 
Equity-settled share-based payment 
 transactions                                 4,754          -          4,754      4,682          -          4,682 
IFRS 5 remeasurement loss(ii)                   -          1,435        1,435        -         105,461      105,461 
Net cash flow from operating activities 
 before changes in operating funds           (54,712)      8,793      (45,919)    (40,766)     (16,106)    (56,872) 
Net change in operating funds                 22,390      158,571      180,961    (60,923)     171,321      110,398 
Decrease/(increase) in operating assets       62,542       41,018      103,560     38,548      (31,843)      6,705 
Increase/(decrease) in operating 
 liabilities                                 (40,152)     117,553      77,401     (99,471)     203,164      103,693 
Tax paid                                     (3,553)      (3,953)      (7,506)    (3,040)      (5,409)      (8,449) 
Net cash from operating activities           (35,875)     163,411      127,536   (101,689)     155,215      53,526 
Cash flow from investing activities 
Purchase of property and equipment           (3,067)      (6,513)      (9,580)    (2,888)      (27,587)    (30,475) 
Purchase of investment property               (879)          -          (879)     (1,572)       (768)       (2,340) 
Purchase of intangible assets                (4,061)      (2,610)      (6,671)    (4,618)      (4,353)      (8,971) 
Additions to associates                         -            -            -       (5,877)         -         (5,877) 
Dividend received from associate              8,521          -          8,521        -            -            - 
Disposal/(purchase) of financial assets 
 held at FVTPL                                4,135          -          4,135     (3,942)         -         (3,942) 
Net (purchase)/disposal of investment 
 securities                                  (19,952)     (77,767)    (97,719)     39,083      (65,887)    (26,804) 
Proceeds from disposal of property and 
 equipment                                      -           173          173        284          175          459 
Proceeds from disposal of investment 
 property                                       -            -            -          -          2,531        2,531 
Net cash from investing activities           (15,303)     (86,717)    (102,020)    20,470      (95,889)    (75,419) 
Cash flow from financing activities 
Net proceed from new borrowings              130,554       79,812      210,366     96,277        313        96,590 
Repayment of borrowings                      (26,018)     (35,897)    (61,915)    (20,499)     (12,228)    (32,727) 
Lease payments                               (1,019)      (4,364)      (5,383)     (996)       (4,925)      (5,922) 
Proceeds from partial disposal of 
 shareholding in subsidiary                     -            -            -        2,142          -          2,142 
Dividends paid to noncontrolling interests      -            -            -        (490)          -          (490) 
Net purchase of treasury shares              (10,033)        -        (10,033)     (918)          -          (918) 
Net cash from financing activities            93,484       39,551      133,035     75,516      (16,840)     58,676 
Increase/(decrease) in cash and cash 
 equivalents                                  42,306       116,245     158,551    (5,703)       42,486      36,783 
Cash and cash equivalents at the beginning 
 of the year                                 130,533      245,685      376,218    161,577      220,411      381,988 
Effect of exchange rate fluctuations on 
 cash and cash equivalents held              (30,912)     (53,142)    (84,054)    (25,341)     (17,212)    (42,553) 
Cash and cash equivalents related to 
 disposal groups classified as held for 
 sale                                           -        (308,788)    (308,788)      -        (245,685)    (245,685) 
Cash and cash equivalents at the end of 
 the year                                    141,927         -         141,927    130,533         -         130,533 
Analysed as follows: 
Cash and cash equivalents                    133,821         -         133,821    129,102         -         129,102 
Statutory reserve balances                    8,106          -          8,106      1,431          -          1,431 
                                             141,927         -         141,927    130,533         -         130,533 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the period ended 28 February 2021

 
$'000                 Founder  Ordinary      Capital     FVOCI       FCTR   Treasury  (Accumulated        Equity  Non-controlling      Total 
                   Preference     share  reserves(1)  reserves             shares(2)         loss)  attributable        interests     equity 
                       Shares   capital                                                              to ordinary 
                                                                                                    shareholders 
Opening 
 balance 
 as at 1 
 January 
 2020                  11,300   993,192     (38,478)       310  (311,450)   (23,393)     (128,951)       502,530           44,653    547,183 
 
(Loss)/profit 
 for the 
 period                     -         -            -         -          -          -      (58,599)      (58,599)            1,318   (57,281) 
 
Other 
comprehensive 
income: 
Exchange 
 differences 
 on translating 
 foreign 
 operations                 -         -            -         -  (145,740)          -             -     (145,740)          (2,263)  (148,003) 
Movement 
 in FVOCI 
 reserves                   -         -            -     (355)          -          -             -         (355)                -      (355) 
Equity-accounted 
 investees 
 - OCI                      -         -            -         -          -          -       (3,277)       (3,277)                -    (3,277) 
Total 
 comprehensive 
 loss for 
 the period                 -         -            -     (355)  (145,740)          -      (61,876)     (207,971)            (945)  (208,916) 
 
Transactions 
 within equity 
Employee 
 share awards               -         -        4,754         -          -                        -         4,754                -      4,754 
Shares buy-back             -         -            -         -          -   (10,574)             -      (10,574)                -   (10,574) 
Movements 
 within reserves            -         -        2,623         9          -        541       (5,145)       (1,972)                -    (1,972) 
Closing 
 balance 
 as at 28 
 February 
 2021                  11,300   993,192     (31,101)      (36)  (457,190)   (33,426)       195,972       286,767           43,708    330,475 
 
Opening 
 balance 
 as at 1 
 January 
 2019                  11,300   993,192     (38,314)       488  (299,252)   (23,551)         2,981       646,844           42,094    688,938 
 
(Loss)/profit 
 for the 
 year                       -         -            -         -          -          -     (143,219)     (143,219)            2,186  (141,033) 
 
Other 
comprehensive 
income: 
Exchange 
 differences 
 on translating 
 foreign 
 operations                 -         -            -         -   (12,198)          -             -      (12,198)            (628)   (12,826) 
Movement 
 in FVOCI 
 reserves                   -         -            -     (100)          -          -             -         (100)                -      (100) 
Equity-accounted 
 investees 
 - OCI                      -         -            -         -          -          -        12,552        12,552                -     12,552 
Revaluation 
 of property 
 and equipment              -         -           80         -          -          -         (494)         (414)                -      (414) 
Total 
 comprehensive 
 income for 
 the year                   -         -           80     (100)   (12,198)          -     (131,161)     (143,379)            1,558  (141,821) 
 
Transactions 
 within equity 
Employee 
 share awards               -         -        3,983         -          -        699             -         4,682                -      4,682 
Shares buy-back             -         -            -         -          -      (918)             -         (918)                -      (918) 
Share of 
 equity in 
 subsidiary 
 transferred 
 to NCI                     -         -          650         -          -          -             -           650            1,491      2,141 
Dividends 
 paid to 
 NCI                        -         -            -         -          -          -             -             -            (490)      (490) 
Movements 
 within reserves            -         -      (4,877)      (78)          -        377         (771)       (5,349)                -    (5,349) 
Closing 
 balance 
 as at 31 
 December 
 2019                  11,300   993,192     (38,478)       310  (311,450)   (23,393)     (128,951)       502,530           44,653    547,183 
 
 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODED 28 FEBRUARY 2021

This section describes the Group's significant accounting policies and critical accounting estimates and judgements that relate to the financial statements and notes as a whole. If an accounting policy or a critical accounting estimate relates to a specific note, the applicable accounting policy and/or critical accounting estimate is contained within the relevant note.

1. Significant accounting policies

REPORTING ENTITY

These financial statements have been prepared for Atlas Mara Limited (the 'Company'), a company domiciled in the BVI, and its subsidiaries (the 'Group'). The Group is a financial services provider, engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services.

COMPLIANCE WITH IFRS

The consolidated financial statements of the Group (the 'financial statements') have been prepared in accordance with International Financial Reporting Standards ('IFRS') and IFRS Interpretations Committee ('IFRIC') interpretations as issued by the International Accounting Standards Board ('IASB') and as adopted by the European Union ('EU'). The financial statements of all material subsidiaries and associates are prepared in accordance with IFRS as issued by the IASB and there are no material inconsistencies in the accounting policies applied.

IFRS as endorsed by the EU may differ from IFRSs as issued by the IASB if, at any point in time, new or amended IFRSs have not been endorsed by the EU. As at 28 February 2021, there were no unendorsed standards effective for the period ended 28 February 2021 that affect these consolidated financial statements, and there was no difference between IFRSs endorsed by the EU and IFRSs issued by the IASB in terms of their application to the Group.

BASIS OF PREPARATION

The financial statements have been prepared under the historical cost convention adjusted for the effects of inflation where entities operate in hyperinflationary economies and for the revaluation of certain financial instruments, property and equipment, investment property and non-current assets held for sale to fair value. All amounts disclosed in the financial statements and notes have been rounded off to the nearest thousand currency units unless otherwise stated.

Change of financial year-end

The financial year end of the Group was changed from 31 December to 28 February, driven by the ongoing strategic review of the Group's operations.

Accordingly, these consolidated financial statements present the statements of financial position as at 28 February 2021 and 31 December 2019, and the results of operations for the 14 months ended 28 February 2021 and 12 months ended 31 December 2019. The comparative figures stated in the income statement, statement of changes in equity, cash flow statement and the related notes are not comparable.

Going concern

The financial statements have been prepared on a going concern basis, as the directors have a reasonable expectation that the Group will continue to have the necessary resources to continue in business for the foreseeable future.

When considering the going concern basis of the Group, the Directors have referenced the Financial Reporting Council's Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks, as was published in April 2016. The assessment of the appropriateness of the going concern basis of accounting for the Group's annual report and accounts has been subject to a thorough process involving analysis and discussion by Management, the Executive Committee, the Audit, Risk and Compliance Committee and the Board. As a result of the assessment, the Directors identified certain events and conditions which may cast significant doubt about the Group's ability to continue as a going concern.

Refer to the Going concern assessment included in the Risk Report for further information on these conditions that indicate the existence of a material uncertainty which may cast significant doubt over the Group's ability to continue as a going concern. The Directors believe that actions taken by the Group to resolve the uncertainty are sufficient to support the position that the use of the going concern assumption is appropriate.

ACCOUNTING POLICIES

The Group's significant accounting policies relating to specific financial statement items, together with a description of the accounting estimates and judgements that were critical to preparing them, are set out under the relevant notes. Accounting policies that affect the financial statements as a whole are set out below:

Consolidation

The Group applies IFRS 10 Consolidated financial statements. The consolidated financial statements combine the financial statements of Atlas Mara Limited and all its subsidiaries. Subsidiaries are entities over which the Group has control. The Group has control over another entity when the Group has all of the following:

-- power over the relevant activities of the investee, for example through voting or other rights;

-- exposure to, or rights to, variable returns from its involvement with the investee; and

-- the ability to affect those returns through its power over the investee.

The assessment of control is based on the consideration of all facts and circumstances. The Group reassesses whether it controls an investee

if facts and circumstances indicate that there are changes to one or more of the three elements of control.

Intra-group transactions and balances are eliminated on consolidation. Consistent accounting policies are used throughout the Group for the purposes of the consolidation. Changes in ownership interests in subsidiaries are accounted for as equity transactions if they occur after control has already been obtained and they do not result in loss of control.

Foreign currency translation

Functional and presentation currency

The Directors consider US dollars ($) as the currency that represents the economic effects of the underlying transactions, events and conditions. The financial statements of the Company are presented in US dollars, which is also the Company's functional currency. The presentation currency of the Group is also US dollars ($).

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains or losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at closing rates, are recognised in the statement of profit or loss.

Foreign operations

The results and the financial position of Group subsidiaries and associates which are not accounted for as entities which operate in hyperinflationary economies and that have a functional currency that is different from the presentation currency of the Group are translated into the presentation currency as follows:

-- Assets and liabilities, including goodwill and fair value adjustments arising on acquisition, are translated into US dollars at the spot exchange rates at the reporting date.

-- Income and expenses are translated into US dollars at the at the average exchange rates for the period presented; and

-- All resulting translation differences are recognised in other comprehensive income and presented as a separate component of equity in the foreign currency translation reserve (FCTR).

The results and the financial position of Group entities which operate in hyperinflationary economies and that have a functional currency that is different from the presentation currency of the Group are translated into US Dollars at the exchange rates ruling at the reporting date.

When a foreign operation is disposed of or sold and the Group loses control of or significant influence over a foreign operation, all of the exchange differences accumulated in equity in respect of that operation attributable to the equity holders of the Group are reclassified to the statement of profit or loss. On partial disposal of a foreign subsidiary, where a change occurs in the absolute ownership percentage held by the Group and control is not lost, a proportionate share of all related exchange rate differences recognised in other comprehensive income is re-attributed to the non-controlling interests in that foreign operation. On partial disposal of a foreign associate, where a change occurs in the absolute ownership percentage held by the Group and significant influence is not lost, a proportionate share of all related exchange rate differences recognised in other comprehensive income are reclassified from equity to the statement of profit or loss.

Hyperinflation

The results and the financial position, including comparative amounts, of Group entities whose functional currencies are the currencies of hyperinflationary economies are adjusted in terms of the measuring unit current at the end of the reporting period.

As the presentation currency of the Group is that of a non-hyperinflationary economy, comparative amounts are not adjusted for changes in the price level or exchange rates in the current year. Differences between these comparative amounts and the hyperinflation adjusted equity opening balances are recognised in equity.

Items in the statement of financial position not already expressed in terms of the measuring unit current at the reporting period, such as non-monetary items carried at cost or cost less depreciation, are restated by applying a general price index. The restated cost, or cost less depreciation, of each item is determined by applying to its historical cost and accumulated depreciation the change in a general price index from the date of acquisition to the end of the reporting period. An impairment loss is recognised in profit or loss if the restated amount of a non-monetary item exceeds its estimated recoverable amount.

Losses on the net monetary position are recognised separately on the statement of profit or loss.

All items recognised in the statement of comprehensive income are restated by applying the change in the general price index from the dates when the items of income and expenses were initially earned or incurred.

At the beginning of the first period of application, the components of owners' equity, except retained earnings, are restated by applying a general price index from the dates the components were contributed or otherwise arose. Restated retained earnings are derived from all other amounts in the restated statement of financial position.

At the end of the first period and in subsequent periods, all components of owners' equity are restated by applying a general price index from the beginning of the period or the date of contribution, if later.

All items in the statement of cash flows are expressed in terms of the general price index at the end of the reporting period.

Financial assets and liabilities

The Group applies IFRS 9 Financial Instruments to the recognition, classification and measurement, and derecognition of financial assets and financial liabilities and the impairment of financial assets

Initial recognition, measurement and derecognition

Financial assets and liabilities are recognised initially when the Group becomes a party to the contractual provisions of the instruments. Trade date or settlement date accounting is applied depending on the classification of the financial asset.

The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement

At initial recognition, the Group measures all financial assets and liabilities at fair value plus or minus, in case of a financial asset or financial liability not at fair value through profit or loss, transactions costs that are incremental and directly attributable to the acquisition or the issue of the financial asset or financial liability, such as fees and commissions. Transaction costs on financial assets and liabilities at fair value through profit or loss are immediately recognised in profit or loss. The fair value of a financial instrument at initial recognition is generally its transaction price.

Immediately after initial recognition, an expected credit loss allowance (ECL) is recognised for financial assets measured at amortised cost and investments in debt instruments measured at FVOCI, which results in an accounting loss being recognised in profit or loss when an asset is newly originated.

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Financial assets are derecognised when rights to receive cash flows from the financial asset have expired or where the Group has transferred substantially all contractual risks and rewards of ownership. On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in OCI is recognised in profit or loss.

The Group derecognises financial liabilities when its contractual obligations are discharged, cancelled, or expire.

Financial assets - Classification and subsequent measurement

The Group's financial assets comprise cash and short-term funds, financial assets at fair value through profit or loss (FVTPL), derivative financial assets, loans and advances to customers, other assets and investment securities. The Group classifies all its financial assets on the basis of two criteria:

-- the business model within which financial assets are managed, and

-- their contractual cash flow characteristics (whether the cash flows represent 'solely payments of principal and interest' (SPPI)).

Business model assessment

The Group assesses the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed, and information is provided to management. The information considered includes:

-- the stated policies and objectives for the portfolio and the operation of those policies in practice;

-- how the performance and risks of the portfolio are managed, evaluated and reported to the Group's management; and

-- the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales activity.

SPPI

The contractual cash flow characteristics of financial assets are assessed with reference to whether the cash flows represent SPPI. In assessing

whether contractual cash flows are SPPI compliant, interest is defined as consideration primarily for the time value of money and the credit risk of

the principal outstanding. The time value of money is defined as the element of interest that provides consideration only for the passage of time

and not consideration for other risks or costs associated with holding the financial asset. Terms that could change the contractual cash flows so that it would not meet the condition for SPPI are considered, including:

-- (i) contingent and leverage features,

-- (ii) non-recourse arrangements and

-- (iii) features that could modify the time value of money.

The classification requirements for debt and equity instruments are as described below:

Debt instruments

Amortised cost: Financial assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest ('SPPI'); and that are not designated at FVTPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognised. Interest income from these financial assets is included in 'Interest income' using the effective interest rate method.

Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets' cash flows represent solely payments of principal and interest ('SPPI'); and that are not designated at FVTPL, are measured at fair value through other comprehensive income. Movements in carrying amounts are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument's amortised cost which are recognised in profit or loss. When the asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss. Interest income from these financial assets is included in 'Interest income' using the effective interest rate method.

Fair value through profit or loss (FVTPL): Financial assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at FVTPL because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets. In addition, on initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. Subsequent changes in fair value for these financial assets are recognised in the statement of profit or loss within 'Non-interest income".

Equity instruments

Equity instruments are instruments that meet the definition of equity from the issuer's perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer's net assets.

The Group subsequently measures all equity instruments at fair value through profit or loss, except where the Group's management has elected, at initial recognition, to irrevocably designate an equity instrument at FVOCI. When this election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. Impairment losses (and reversal of impairment losses) are not reported separately from other changes in fair value.

Impairment

The Group assesses on a forward-looking basis the expected credit loss (ECL) associated with its debt instruments carried at amortised cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Group recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects:

-- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;

-- The time value of money; and

-- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

Reclassifications

Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Group changes its business model for managing financial assets.

Financial liabilities - Classification and subsequent measurement

Financial liabilities are classified as financial liabilities at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis, except for financial liabilities at fair value through profit or loss. For financial liabilities measured at amortised cost, transaction costs are included in the initial measurement and accounted for in profit or loss as part of the effective interest while that of financial liabilities measured at FVTPL are expensed immediately.

Financial liabilities at fair value through profit or loss are classified as such where the financial liability is either held for trading (derivative financial liabilities) or it is designated as at fair value through profit or loss (borrowed funds).

Financial liabilities comprise other liabilities, deposits, derivative financial liabilities and borrowed funds. The Group derecognises financial liabilities when its contractual obligations are discharged, expired or cancelled.

Interest income and expense

Interest income and expense for all financial instruments, excluding those classified as held for trading or designated at fair value, are recognised in 'Interest income' and 'Interest expense' in the statement of profit or loss using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period. When calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of the financial instrument, excluding credit losses. Interest on credit impaired financial assets is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Derivative financial assets and liabilities

Derivative instruments are contracts whose value is derived from one or more underlying financial instruments or indices defined in the contract. They include swaps and forward-rate agreements. Derivatives are normally recorded in the statement of financial position at fair value. Notional amounts of the contracts are not recorded on the statement of financial position. Derivatives held by the Group are for risk management purposes and are used to hedge interest rate and exchange rates risks.

Derivatives are classified as assets when their fair value is positive or as liabilities when their fair value is negative. Derivative assets and liabilities arising from different transactions are only offset where there is a legal right of offset of the recognised amounts and the parties intend to settle the cash flows on a net basis or realise the asset and settle the liability simultaneously.

Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value with changes in fair value recognised in profit or loss.

Compound instruments

Convertible Bonds entitle bondholders to convert their bonds into a fixed number of shares of the issuing company usually at the time of their maturity. Convertible bonds are compound financial instruments. This implies the instrument has the characteristics of both liability and equity.

On initial recognition the liability component of the instrument is measured at fair value (in terms of IFRS 13 Fair Value) and the equity component is the residual amount which is the issued price less the fair value of the liability component.

Subsequently, the liability will be accounted for at amortised cost using the effective interest method. The equity component will not be remeasured. On conversion of the instrument, the liability component is reclassified to equity. No gain or loss is recognised in profit or loss.

Write-off

Loans and debt securities are written off (either partially or in full) when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. This is generally the case when the Group determines that the borrower does not have the assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. This assessment is carried out at the individual asset level.

Recoveries of amounts previously written off are included in 'impairment charges on financial instruments' in the statement of profit or loss.

Financial assets that are written off could still be subject to enforcement activities in order to comply with the Group's procedures for recovery of amounts due.

Offsetting financial instruments

Financial assets and liabilities are offset, and the net amount is reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. Deferred loan income reduces the outstanding loans and advances balance on the basis that the revenue will be recognised over the terms of the loans. During the current period, there was no offsetting of financial assets and liabilities.

NEW AND AMED STANDARDS AND INTERPRETATIONS

The accounting policies adopted are consistent with those of the previous financial year. A number of new standards are effective from 1 January 2020, but they do not have a material effect on the Group's financial statements.

STANDARDS AND INTERPRETATIONS ISSUED AND NOT YET APPLICABLE

The following amendments, issued by the IASB, are not yet effective and are not expected to have a significant impact on the Group's consolidated financial statements:

   -- Amendment to IAS 37:      Onerous contracts - cost of fulfilling a contract 
   -- Amendment to IFRS 16:    COVID-19 related rent concessions 
   -- Amendment to IAS 16:      Property, Plant and Equipment: proceeds before intended use 
   -- Amendment to IFRS 3:      Reference to conceptual framework 
   -- Amendment to IAS 1:        Classification of liabilities as current or non-current. 

USE OF ESTIMATES AND JUDGEMENTS

In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. The Group's estimates and assumptions are based on historical experience and expectation of future events and are reviewed periodically. Further information about key assumptions concerning the future, and other key sources of estimation uncertainty, are set out in the relevant disclosure notes for the following areas:

-- fair value of financial instruments (note 5);

-- assessment of the investment in associates for impairment (note 16);

-- assessment of control over equity-accounted investment (note 16)

-- assessment of goodwill and intangible assets for impairment (note 17);

-- impairment charges (note 12);

-- share-based payment valuations (note 33);

-- recognition of deferred tax assets (note 25);

-- fair value of investment properties (note 19); and

-- fair value of assets and liabilities included in disposal groups held for sale (note 32).

OTHER DISCLOSURES

To improve transparency and ease of reference, by concentrating related information in one place, certain disclosures required under IFRS have been included within the Risk review section as follows:

Credit risk

Liquidity risk

Market risk

These disclosures are covered by the Audit opinion where referenced as audited.

2. Segmental reporting

Segment information

Segment results that are reported to the Group's Executive Committee (EXCO - being the chief operating decision maker) include items that are directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly of corporate assets (primarily the Group's headquarters), head office expenses and tax assets and liabilities.

For management purposes, the Group is organised into business units based on the countries of operation of its components as follows: Botswana, Zimbabwe, Nigeria, Mozambique, Tanzania, Zambia and Rwanda. All entities and/or consolidation adjustments not part of operating banks, are included as 'Corporate'.

The operations of Mozambique, Tanzania, Zambia and Rwanda have been reclassified and reported as discontinued operations in line with the Group's strategic decision to dispose of its interests in these entities.

Transfer prices between operating segments are on an arm's-length basis in a manner similar to transactions with third parties. The Group's transfer pricing policy is in line with OECD requirements and also in line with both Group and country-level tax and regulatory best practice.

Revenue from external parties reported to the EXCO is measured in a manner consistent with that in the consolidated statement of profit or loss.

As the banking operations comprise of stand-alone banks, each banking operation is funded with Tier I and II Capital from the holding and intermediate holding company.

Other material items of income or expense between the operating segments comprise of management fees and dividends.

The Group's management reporting is based on a measure of operating profit comprising net interest income, loan impairment charges, net fee and commission income, non-interest income and operating expenses.

The CFO's review of financial performance describes the impact of non-recurring items of income and expenses.

The information provided about each segment is based on the internal reports about segment profitability, assets and liabilities composition, and other information, which are regularly reviewed by the EXCO.

An analysis of the Group's performance by countries of operation has been presented below:

Statement of profit or loss for the 14-month period ended 28 February 2021

 
$'000                                      Continuing operations               Total 
                                 Botswana  Zimbabwe  Nigeria  Corporate(1) 
Interest and similar income        72,166    11,271        -       (2,019)    81,418 
Interest and similar expense     (29,518)   (2,922)        -      (47,834)  (80,274) 
Net interest income/(expense)      42,648     8,349        -      (49,853)     1,144 
Impairment (charge)/credit on 
 financial assets                   (625)     (805)        -         1,509        79 
Net interest income after loan 
 impairment charges                42,023     7,544        -      (48,344)     1,223 
Non-interest income                12,706    42,659        -       (3,623)    51,742 
Total operating income             54,729    50,203        -      (51,967)    52,965 
Operating expenses               (42,525)  (31,055)        -      (16,660)  (90,240) 
Loss on net monetary position           -  (12,951)        -       (3,921)  (16,872) 
Net income from operations         12,204     6,197        -      (72,548)  (54,147) 
Share of profit of associates           -         -   25,470            40    25,510 
Profit/(loss) before tax           12,204     6,197   25,470      (72,508)  (28,637) 
Income tax expense                (3,932)   (6,617)        -       (7,843)  (18,392) 
Profit/(loss) for the year          8,272     (420)   25,470      (80,351)  (47,029) 
Non-controlling interest          (1,808)         -        -         2,243       435 
Profit/(loss) attributable to 
 ordinary shareholders              6,464     (420)   25,470      (78,108)  (46,594) 
Note: 
 1. Corporate segment includes Dubai, Germany, BVI, 
 Mauritius and all other regions. 
 

Statement of profit or loss for the 14-month period ended 28 February 2021

 
$'million                                                                Discontinued operations               Total 
                                                    Mozambique  Tanzania       Zambia    Rwanda  Other(1) 
Interest and similar income                             19,336    18,455       69,028    46,344   (9,375)    143,788 
Interest and similar expense                           (8,217)   (8,569)     (32,971)  (14,730)     1,793   (62,694) 
Net interest income                                     11,119     9,886       36,057    31,614   (7,582)     81,094 
Impairment charge on financial assets                  (1,013)       316      (7,506)   (4,087)         -   (12,290) 
Net interest income after loan impairment 
 charges                                                10,106    10,202       28,551    27,527   (7,582)     68,804 
Non-interest income                                      8,397     1,719       33,030     9,199         -     52,345 
Total operating income                                  18,503    11,921       61,581    36,726   (7,582)    121,149 
Total expenses                                        (18,725)  (13,651)     (52,197)  (30,046)   (8,305)  (122,924) 
(Loss)/profit before tax                                 (222)   (1,730)        9,384     6,680  (15,887)    (1,775) 
Income tax expense                                     (1,089)      (63)      (4,168)   (1,929)       207    (7,042) 
(Loss)/profit after tax                                (1,311)   (1,793)        5,216     4,751  (15,680)    (8,817) 
Net movement on IFRS 5 remeasurement                         -         -            -         -   (1,435)    (1,435) 
Loss for the period                                    (1,311)   (1,793)        5,216     4,751  (17,115)   (10,252) 
Non-controlling interest                                     -        49            -   (1,802)         -    (1,753) 
(Loss)/profit attributable to ordinary 
 shareholders                                          (1,311)   (1,744)        5,216     2,949  (17,115)   (12,005) 
      Note: 
       1. Others include intercompany eliminations between continuing and 
       discontinued operations. 
 
 

Statement of profit or loss for the year ended 31 December 2019

 
$'000                                     Continuing operations               Total 
                                Botswana  Zimbabwe  Nigeria  Corporate(1) 
Interest and similar income       69,170    12,560        -       (4,645)    77,085 
Interest and similar expense    (30,889)   (2,790)        -      (32,033)  (65,712) 
Net interest income               38,281     9,770        -      (36,678)    11,373 
Loan impairment charges            1,455     (180)        -         (308)       967 
Income/(loss) from lending 
 activities                       39,736     9,590        -      (36,986)    12,340 
Non-interest income               11,809    39,569        -         2,363    53,741 
Total operating income            51,545    49,159        -      (34,623)    66,081 
Operating expenses              (37,392)  (21,569)        -      (22,444)  (81,405) 
Loss on monetary position              -  (11,081)        -             -  (11,081) 
Net income from operations        14,153    16,509        -      (57,067)  (26,405) 
Share of profit of associates          -         -   31,230         (129)    31,101 
Profit/(loss) before tax          14,153    16,509   31,230      (57,196)     4,696 
Income tax expense               (2,834)   (8,688)        -         (937)  (12,459) 
Profit/(loss) for the year        11,319     7,821   31,230      (58,133)   (7,763) 
Non-controlling interest         (2,440)         -        -         1,752     (688) 
Profit/(loss) attributable 
 to ordinary shareholders          8,879     7,821   31,230      (56,381)   (8,451) 
Note: 
 1. Corporate segment includes Dubai, Germany, 
 BVI, Mauritius and all other regions. 
 

Statement of profit or loss for the year ended 31 December 2019

 
$'million                                                                Discontinued operations               Total 
                                                    Mozambique  Tanzania      Zambia    Rwanda   Other(1) 
Interest and similar income                             21,997    17,597      64,749    37,686    (8,386)    133,643 
Interest and similar expense                          (10,252)   (8,318)    (31,544)  (10,118)      1,386   (58,846) 
Net interest income                                     11,745     9,279      33,205    27,568    (7,000)     74,797 
Loan impairment charges                                  2,363     (535)     (9,597)   (3,742)      (877)   (12,388) 
Income/(loss) from lending activities                   14,108     8,744      23,608    23,826    (7,877)     62,409 
Non-interest income                                      8,201     2,352      28,569    10,803          -     49,925 
Total operating income                                  22,309    11,096      52,177    34,629    (7,877)    112,334 
Operating expenses                                    (26,049)  (14,835)    (60,970)  (27,639)    (8,589)  (138,082) 
(Loss)/profit before tax                               (3,740)   (3,739)     (8,793)     6,990   (16,466)   (25,748) 
Income tax expense                                       1,422      (63)     (1,011)   (2,425)         16    (2,061) 
(Loss)/profit after tax                                (2,318)   (3,802)     (9,804)     4,565   (16,450)   (27,809) 
Loss on remeasurement to fair value less costs 
 to sell                                                     -         -           -         -  (105,461)  (105,461) 
(Loss)/profit for the year                             (2,318)   (3,802)     (9,804)     4,565  (121,911)  (133,270) 
Non-controlling interest                                     -       103           -   (1,732)        131    (1,498) 
(Loss)/profit attributable to ordinary 
 shareholders                                          (2,318)   (3,699)     (9,804)     2,833  (121,780)  (134,768) 
      Note: 
       1. Others include intercompany eliminations between continuing and 
       discontinued operations. 
 
 

Segment assets and liabilities comprise the majority of items appearing in the consolidated statement of financial position.

Statement of financial position for the period ended 28 February 2021

 
$'000                          Continuing operations            Discontinued operations  Group total 
                     Botswana  Zimbabwe  Nigeria  Corporate(1) 
Loans and advances    549,363    18,431        -        12,733                        -      580,527 
Total assets          777,052   197,747  470,630        61,766                1,101,383    2,608,578 
Deposits              581,491    91,043        -             -                        -      672,534 
Total liabilities     669,098   137,098        -       449,259                1,022,648    2,278,103 
 

Note:

1. Corporate segment includes Dubai, Germany, BVI, Mauritius and all other regions .

Statement of financial position for the year ended 31 December 2019

 
$'000                          Continuing operations            Discontinued operations      Group 
                                                                                             total 
                     Botswana  Zimbabwe  Nigeria  Corporate(1) 
Loans and advances    606,297    22,733        -        15,082                        -    644,112 
Total assets          856,680   161,262  580,622        49,202                  979,645  2,627,411 
Deposits              662,487    61,239        -             -                        -    723,726 
Total liabilities     736,112   107,904        -       361,977                  874,235  2,080,228 
 

Note:

1. Corporate segment includes Dubai, Germany, BVI, Mauritius and all other regions .

3. Capital and reserves

SHARE CAPITAL

Founder Preferred Shares and ordinary share capital are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction from the proceeds.

OTHER RESERVES

Other reserves excluding capital reserves and treasury shares reserves recorded in equity (other comprehensive income) on the Group's statement of financial position include:

   1)   Foreign currency translation reserve 

The currency translation reserve represents the cumulative gains and losses on the retranslation of the Group's net investment in foreign operations.

   2)   Fair value through OCI reserve 

The fair value reserve represents the changes in the fair value of FVOCI investments since initial recognition.

3.1. Authorised and issued share capital

 
                                     28 February 2021       31 December 2019 
                                     No. of      $'000  No. of shares      $'000 
                                     shares                      '000 
                                       '000 
Opening balance(1)                  171,321    993,192        171,321    993,192 
Shares held in escrow(2)              3,298          -          3,298          - 
Total shares in issue               174,619    993,192        174,619    993,192 
Shares in issue excluding escrow 
 shares                             171,320          -        171,320          - 
Founder preference shares(3)          1,130     11,300          1,130     11,300 
                                    172,450  1,004,492        172,450  1,004,492 
 

Note:

   1.   Comprises ordinary shares. 

2. Shares held in escrow are part of the contingent consideration for the acquisition of Finance Bank Zambia and has no voting rights associated to it.

3. As allowed, under Article 5.2 of the Company's Articles, a holder of Founder Preferred Shares (FPS) has the right to request for conversion of FPS into Ordinary Shares at any time, by providing notice in writing to the Company requiring such conversion of FPS into an equal number of ordinary shares.

3.2. Issued and fully paid

 
$'000                    28 February  31 December 
                                2021         2019 
Ordinary share capital       993,192      993,192 
 

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 the AGM of the Company.

TERMS OF THE FOUNDER PREFERRED SHARES

The Founder Preferred Shares do not carry the same voting rights as are attached to the ordinary shares. The Founder Preferred Shares do not carry any voting rights except in respect of any variation or abrogation of class rights or on any Resolution of Members required, pursuant to BVI law, to approve either an acquisition or, prior to an acquisition, a merger or consolidation.

Once the average price per ordinary share is at least $11.50 for 10 consecutive trading days, the holders of Founder Preferred Shares will be entitled to receive an 'annual dividend amount', payable in ordinary shares, equal in value to 20% of the increase each year, if any, in the market price of the ordinary shares multiplied by the then outstanding number of ordinary shares. On the last day of the seventh full financial year following completion of the BancABC acquisition, the Founder Preferred Shares will automatically convert to ordinary shares on a one-for-one basis.

The shares have a monetary value, and the fair value is based on future performance of the share price. Given the limited market data available that would be required to measure the shares, it is impractical to assign a value to the shares. IFRS 2 allows for valuing the shares at the intrinsic value in circumstances where a fair value cannot be reliably determined. Given that no dividend has been paid as yet and the trigger has not been met, the intrinsic value of the optionality is deemed to be $nil.

4. Capital planning

For the purpose of the Group's capital management, capital includes issued share capital, convertible preference shares, share premium and all other equity reserves attributable to the equity holders of the Company.

The Group's principal objectives when managing capital are:

-- to optimise business activities and ensure return on capital targets is achieved through efficient capital management and allocation;

-- to ensure the Group and operating banks hold sufficient risk capital in compliance with regulatory requirements in relevant jurisdictions;

-- to ensure that the Group's ability to operate as a going concern and to provide returns to shareholders is safeguarded; and

-- to support the development of the Group's business by maintaining a strong and sustainable capital base.

These objectives are delivered through regular reviews of the capital position of operating banks both in-country and at Group. Group management closely monitors capital adequacy and the use of regulatory capital and is actively involved in country level discussions to ensure compliance with local supervisory requirements. An annual capital plan is prepared by each operating entity and submitted to Group for review and approval as part of the annual budget process. A buffer of 2% above regulatory minimum capital limit is generally set and monitored by country management and Group as part of the Asset and Liability Management Committee ('ALCO'). In addition, operating entities carry out stress testing of capital position as part of the Internal Capital Adequacy Assessment Process ('ICAAP').

Subject to compliance with laws and regulations in relevant jurisdictions, no significant restrictions exist on transfer of funds and regulatory capital within the Group.

Capital adequacy computations - 28 February 2021

 
$'000                            Continuing operations                       Discontinued operations 
                              ABC Botswana  ABC (Zimbabwe)  ABC Zambia  ABC (Tanzania)  ABC (Moçambique)       BP 
                                   Limited         Limited     Limited         Limited                    S.A   Rwanda 
Tier I capital 
Share capital and premium           20,367          34,651      47,028          53,026                 26,541   45,149 
Capital reserves and 
 retained earnings                  87,586               -    (11,203)        (36,596)               (10,686)    4,087 
Intangible assets 
 (software)/deferred 
 charges                           (9,105)           7,453     (6,801)               -                (3,147)      744 
Deferred tax asset                       -               -           -         (4,439)                      -        - 
Prepayments                              -           7,584     (2,127)           (440)                      -        - 
Exposures to insiders                    -             177           -               -                (2,102)        - 
Total qualifying for 
 tier I capital                     98,848          49,865      26,897          11,551                 10,606   49,980 
 
Tier II capital 
Shareholder's loan                  24,777               -       2,923               -                  4,004        - 
General debt provision               6,295             367           -               -                     15        - 
Fair value revaluation                   -               -           -               -                    211        - 
Revaluation reserves                     -               -           -               -                      -        - 
 (limited to tier I 
 capital) 
Profit for the year                  8,606               -           -               -                      -        - 
Total qualifying for 
 tier II capital                    39,678             367       2,923          11,551                  4,230        - 
Total capital 
 
Risk weighted assets(1) 
Market risk                        184,986          12,441           -           3,789                  1,550    1,096 
Operational risk                    66,177          54,016           -           7,904                  2,761   18,886 
Credit risk                        503,617          73,474     232,864          77,637                117,836  193,897 
Total risk weighted 
 assets                            754,780         139,931     232,864          89,330                122,147  213,879 
 
Capital adequacy ratio               18.4%           35.9%       12.8%           12.9%                  12.1%    23.4% 
Minimum regulatory 
 capital adequacy ratio             12.50%          12.00%      10.00%          12.00%                 12.00%   15.00% 
 

Note:

1. Weighting of assets is based on the nature of the asset and the weighting as prescribed by the relevant regulatory authority.

Capital adequacy computations - 31 December 2019

 
$'000                          Continuing operations                       Discontinued operations 
                            ABC Botswana  ABC (Zimbabwe)  ABC Zambia  ABC (Tanzania)  ABC (Moçambique)       BP 
                                 Limited         Limited     Limited         Limited                    S.A   Rwanda 
Tier I capital 
Share capital and premium         20,934          27,924      72,829          53,504                 32,341   47,525 
Capital reserves and 
 retained earnings/ 
 (accumulated loss)               76,360          23,873    (24,292)        (31,513)                (7,498)    1,590 
Intangible assets 
 (software)/deferred 
 charges                         (7,855)               -    (10,484)               -                (4,530)  (1,879) 
Deferred tax asset                     -               -           -         (6,722)                      -        - 
Prepayments                            -               -     (1,591)           (557)                      -        - 
Exposures to insiders                  -             (1)           -               -                  (543)        - 
Total qualifying for 
 Tier I capital                   89,439          51,796      36,462          14,712                 19,770   47,236 
 
Tier II capital 
Shareholder's loan                16,184               -       3,434               -                  4,442        - 
General debt provision             7,233             322           -               -                     15        - 
Revaluation reserves 
 (limited to Tier I 
 capital)                              -               -           -               -                    800        - 
Profit for the year               11,460          18,429           -               -                      -        - 
Total qualifying for 
 Tier II capital                  34,877          18,751       3,434               -                  5,257        - 
Total capital                    124,316          70,547      39,896          14,712                 25,027   47,236 
 
Risk weighted assets(1) 
Market risk                       29,029           2,285           -           2,099                  2,061   10,296 
Operational risk                  63,234          18,663           -           7,890                  3,763   24,256 
Credit risk                      576,875          99,132     279,336          78,419                122,046  166,197 
Total risk weighted 
 assets                          669,138         120,080     279.336          88,408                127,870  200,749 
 
Capital adequacy ratio             18.6%           58.7%       14.3%           16.6%                  19.6%    23.5% 
Minimum regulatory 
 capital adequacy ratio            15.0%             12%         10%           12.0%                  11.0%      15% 
 
 

Note:

1. Weighting of assets is based on the nature of the asset and the weighting as prescribed by the relevant regulatory authority.

5. Fair value of financial instruments

Fair value determination

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm's-length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

The Group classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

-- quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);

-- inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (level 2); and

-- inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

-- The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustments based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

Fair value determination as included in the measurement and disclosure requirements of IFRS 13 is applicable to all elements of the statement of financial position, and not only financial instruments.

Critical accounting estimates and judgements

The valuation of financial instruments often involves a significant degree of judgement and complexity, in particular where valuation models make

use of unobservable inputs ('Level 3' assets and liabilities). This note provides information on these instruments, including the related unrealised

gains and losses recognised in the period, a description of significant valuation techniques and unobservable inputs, and a sensitivity analysis.

The following table shows the Group's assets and liabilities that are held at fair value disaggregated by fair value hierarchy:

 
28 February 2021                      Quoted  Significant    Significant     Total at 
                                               observable   unobservable   fair value 
                                                   inputs         inputs 
 $'000                                prices 
                                       Level      Level 2        Level 3 
                                           1 
Assets measured at fair value: 
Fair value through profit or 
 loss 
  Listed equities                      1,168            -              -        1,168 
  Unlisted equities                        -            -         13,917       13,917 
  Unlisted debentures                      -            -              4            4 
  Property units                           -            -          2,214        2,214 
 
Derivative financial assets                -           96          5,447        5,543 
 
Investment securities at FVOCI: 
 unlisted equities                         -            -            422          422 
 
Fair value hierarchy for financial 
 assets measured at fair value         1,168           96         22,004       23,268 
 
Liabilities measured at fair 
 value: 
Derivative financial liabilities           -           98          5,466        5,564 
 
Borrowed funds                             -       19,690              -       19,690 
 
Fair value hierarchy for financial 
 liabilities measured at fair 
 value                                     -       19,788          5,466       25,254 
 

There were no transfers between levels in the current period.

 
31 December 2019                      Quoted  Significant    Significant     Total at 
                                               observable   unobservable   fair value 
                                                   inputs         inputs 
 $'000                                prices 
                                       Level      Level 2        Level 3 
                                           1 
Assets measured at fair value: 
Fair value through profit or 
 loss                                    803        3,925         20,515       25,243 
 Money market funds                        -        3,925              -        3,925 
  Listed equities                        803            -              -          803 
  Unlisted equities                        -            -         19,467       19,467 
  Unlisted debentures                      -            -             18           18 
  Property units                           -            -          1,030        1,030 
 
Derivative financial assets                -          109          5,583        5,692 
 
Investment securities at FVOCI: 
 unlisted equities                         -            -            488          488 
 
Fair value hierarchy for financial 
 assets measured at fair value           803        4,034         26,586       31,423 
 
Liabilities measured at fair 
 value: 
Derivative financial liabilities           -          100          5,510        5,610 
 
Borrowed funds                             -       24,857              -       24,857 
 
Fair value hierarchy for financial 
 liabilities measured at fair 
 value                                     -       24,957          5,510       30,467 
 

There were no transfers between levels in the period.

Level 3 fair value movements

The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in level 3 of the fair value hierarchy:

 
28 February 2021             Debt or equity  Derivative  Total assets    Derivative  Total liabilities 
                                              financial            at     financial                 at 
                                                 assets                 liabilities 
 $'000                          investments                fair value                       fair value 
Opening balance                      21,003       5,583        26,586         5,510              5,510 
Total gains or losses 
  - in profit/(loss)                (3,556)          14       (3,542)           101                101 
  - in other comprehensive 
   income                                64           -            64             -                  - 
Exchange rate adjustment              (954)       (150)       (1,104)         (145)              (145) 
Closing balance                      16,557       5,447        22,004         5,466              5,466 
 
 
31 December 2019                   Debt or  Derivative  Total assets    Derivative  Total liabilities 
                                    equity   financial            at     financial                 at 
                                                assets                 liabilities 
 $'000                         investments                fair value                       fair value 
Opening balance                     23,635       5,376        29,011         5,444              5,444 
Total gains or losses 
  - in profit/(loss)               (2,790)       (102)       (2,892)            14                 14 
  - in other comprehensive 
   income                             (26)           -          (26)             -                  - 
Exchange rate adjustment               184         309           493            52                 52 
Closing balance                     21,003       5,583        26,586         5,510              5,510 
 

Total gains or losses for the period in the above table are presented in the statement of profit or loss and statement of other comprehensive income as follows:

 
28 February 2021                         Debt or  Derivative     Total    Derivative  Total liabilities 
                                          equity   financial    assets     financial            at fair 
                                                      assets   at fair   liabilities              value 
                                                                 value 
 $'000                               investments 
Total gains or losses recognised 
 in profit/loss for the year             (3,556)          14   (3,541)           101                101 
Total gains or losses recognised 
 in other comprehensive income                64           -        64             -                  - 
 
 
31 December 2019                        Debt or  Derivative     Total    Derivative  Total liabilities 
                                         equity   financial    assets     financial 
                                    investments      assets   at fair   liabilities 
                                                                value 
 $'000                                                                                         at fair 
                                                                                                 value 
Total gains or losses recognised 
 in profit/loss for the year            (2,790)       (102)   (2,892)            14                 14 
Total gains or losses recognised 
 in other comprehensive income             (26)           -      (26)             -                  - 
 

Description of significant unobservable inputs to valuation

The table below sets out information about significant unobservable inputs used at year end in measuring financial instruments categorised as level 2 and 3 in the fair value hierarchy.

 
Type of financial instrument  Valuation technique           Significant                   Range of estimates 
                                                             unobservable input           (weighted average) for 
                                                             .                            unobservable input 
                              Market comparison technique: 
                               The valuation model is 
                               based on market multiples 
                               derived from 
                               quoted prices of companies 
                               comparable to the investee 
                               on actual Earnings before 
                               Interest, 
                               Tax, Depreciation and 
                               Amortisation (EBITDA). The 
                               estimate is adjusted for 
                               the effect of the 
                               non-marketability of the 
                               equity securities. 
 
                               Dividend discount model: 
Unlisted equity and            This valuation model 
 investment securities         estimates the value of the 
 measured at FVOCI and         Company based on 
 borrowed funds                future dividends payable by  Adjusted price to book 
 Unlisted equity, unlisted,    the Company, discounted       ratio. Adjusted Enterprise 
 property units and unlisted   back to the present value     value (EV)/EBITDA, Discount 
 debentures measured at        using the cost                rate, Terminal 
 FVTPL                         of equity.                    growth rate.                 12 % - 25% 
                              Each Credit Default Swap 
                               (CDS) is BWP denominated 
                               and is valued by 
                               discounting the expected 
                               payments of the CDS to the 
                               valuation date. 
                               The discount factors for 
                               the cash flows for each 
                               future payment date are 
                               calculated off a BWP Bond 
                               curve. This is the most 
                               liquid risk-free curve 
                               available for Botswana. 
                               In addition to the 
                               calculation of the 
                               risk-neutral value, the 
                               Group also calculates a 
                               credit 
                               and debt value adjustment 
                               for each CDS. A 
                               semi-analytical approach 
                               was used to generate the 
                               various potential fair 
                               values of the CDS margin 
                               payments to their maturity, 
                               based on option 
                               pricing theory. In this 
                               approach, volatilities are 
                               used to calculate future 
                               fair values, which 
                               in turn are used to 
                               approximate the Expected 
                               Positive Exposures (EPE) 
                               and Expected Negative 
                               Exposure (ENE). These are 
                               then used in the             Recovery rates, Credit 
Derivative financial assets    calculation of fair value     ratings for BancABC and 
 and liabilities               balances.                     each of its counterparties.  20% - 40% 
 

Sensitivity analysis

Unlisted financial assets - equities, debentures and property units.

For unlisted financial assets measured at fair value, changes at the reporting date to one of the significant unobservable inputs, holding other inputs constant, would have the following effects:

 
$'000                                    28 February 2021                        31 December 2019 
                                Profit or loss          Equity          Profit or loss          Equity 
                              Increase  Decrease  Increase  Decrease  Increase  Decrease  Increase  Decrease 
Average price to book ratio 
 (5% movement)                      51      (51)        51      (51)        52      (52)        52      (52) 
Book value 
 (2% movement)                       4       (4)         4       (4)        21      (21)        21      (21) 
Adjusted EV/EBITDA 
 (5% movement)                      51      (51)        51      (51)        52      (52)        52      (52) 
EBITDA 
 (2% movement)                       4       (4)         4       (4)        21      (21)        21      (21) 
 

Sensitivity analysis - derivative financial instruments

Credit valuation adjustment ('CVA') and debit valuation adjustment ('DVA') are incorporated into derivative valuations to reflect the impact on fair value of counterparty credit risk and the Group's own credit quality respectively: CVA for the asset and DVA for the liability. CVA and DVA are calculated using estimates of exposure at default, probability of default and recovery rates, at a counterparty level. CVA is calculated as the discounted product of the counterparties' marginal Probability of Defaults ('PDs'), Loss Given Defaults ('LGDs') and Expected Positive Exposures at every node while DVA is calculated as the discounted product of the Group's marginal PDs, LGDs and Expected Negative Exposures at every node.

Because of the uncertainty attached to recovery rates, the sensitivity analysis of the fair values of derivatives have been performed for a range of possible recovery rates (20%, 30% and 40%).

Derivative financial asset

 
$'000    28 February 2021        31 December 2019 
          20%    30%    40%     20%     30%    40% 
20%      (12)   (12)   (12)     (21)   (21)   (21) 
30%      (11)   (11)   (11)     (19)   (19)   (19) 
40%       (9)    (9)    (9)     (16)   (16)   (16) 
 

Derivative financial liability

 
$'000    28 February 2021        31 December 2019 
          20%    30%    40%     20%     30%    40% 
20%        12     12     12      7       7      7 
30%        11     11     11      6       6      6 
40%         9      9      9      5       5      5 
 

Comparison of carrying amounts and fair values for assets and liabilities not held at fair value:

The following tables show the breakdown of carrying amounts and fair values of financial assets and financial liabilities by class and category of financial instrument measured at amortised cost, where the carrying values differ from the fair values

 
$'000                              28 February 2021       31 December 2019 
                                 Carrying  Fair value   Carrying  Fair value 
                                  amount    (Level 2)    amount    (Level 2) 
Financial assets measured 
 at amortised cost 
Loans and advances                580,527     503,616    644,112     644,112 
Investments securities held 
 at amortised cost                119,223     112,637    107,290     106,548 
Financial liabilities measured 
 at amortised cost 
Deposit                           672,534     674,201    723,726     723,726 
Borrowed funds                    422,014     419,947    341,952     333,797 
 
 

Other financial instruments not carried at fair value are typically short term in nature and reprice to current market rates frequently. Accordingly, their carrying amount is a reasonable approximation of fair value. They include cash and short-term funds, loans and advances to customers, deposits, other assets and other liabilities.

The fair values of the financial instruments not carried at fair value disclosed in the table above were determined as follows:

i. Loans and advances

The fair value of loans and advances, for the purpose of this disclosure, is derived from discounting expected cash flows in a way that reflects the current market price for lending to issuers of similar credit quality.

ii. Investment securities held at amortised cost

Fair value is estimated using quoted market prices for securities with similar credit, maturity and yield characteristics.

iii. Borrowed funds

The estimated fair value of borrowed funds is based on discounted cash flows using interest rates for new debts with similar remaining maturity.

iv. Deposits

Deposit balances are made up of deposits that are short-term in nature or have interest rates that reprice frequently, hence the fair values of such deposits have been assessed to approximate their carrying values. The fair value for deposits with longer-term maturities, mainly term deposits, are estimated using discounted cash flows applying either market rates or current rates for deposits of similar remaining maturities.

6. Borrowed funds

Refer to accounting policy pertaining to financial instruments.

 
$'000                      28 February  31 December 
                                  2021         2019 
Convertible bonds (a)*          91,518       80,016 
Other borrowed funds (b)       350,186      286,793 
Total                          441,704      366,809 
 

*Included in other borrowed funds balance in the 31 December 2019 financial statement was $16,705 convertible bonds balance relating to Fairfax. This has been correctly disclosed as part of other convertible bonds in the 2019 comparative in this year's financial statement. This is a mere reclassification between borrowed funds and has no impact on the total borrowed funds balance.

The following table illustrates the carrying value compared to the fair value of the borrowed funds:

 
$'000                                      Carrying value              Fair value 
                                      28 February  31 December  28 February  31 December 
                                             2021         2019         2021         2019 
Convertible bonds - liability 
 component                                 91,518       80,016       91,518       77,069 
Fairfax Financial Holdings 
 Limited                                   46,412       41,061       46,412       40,809 
Afrexim bank                               45,948       49,098       45,948       46,726 
Helios Fairfax Partners Corporation        43,576            -       43,576            - 
U.S. International Development 
 Finance Corporation ('DFC')               27,651       40,207       26,417       37,715 
Nineteen77 Global Multi-Strategy 
 Alpha Master Ltd.                         21,811            -       21,811            - 
Export Development Canada 
 ('EDC')                                   20,876       19,816       20,863       19,798 
Standard Chartered                         19,690       24,857       19,690       24,857 
Africa Agriculture and Trade 
 Investment Fund S.A.                      18,029       21,039       18,029       21,080 
HFP Investments Limited                    17,130       14,033       17,130       14,874 
Nineteen77 Capital Solutions 
 A LP                                      15,026       12,948       15,026       13,388 
Other                                      74,037       63,734       73,217       62,338 
Total                                     441,704      366,809      439,637      358,654 
 

a. Convertible bonds

The following section presents the details of the convertible bonds outstanding as of 28 February 2021:

-- On 1 October 2015 Atlas Mara placed $63.4 million five-year senior secured convertible bonds with a maturity date in 2020. The bonds carry a coupon of 8.0% and were issued at an issue price of 82.7% of their principal amount, have a maturity date of 31 December 2020 and are convertible into the ordinary shares of Atlas Mara at a price of $11.00 per share at the option of the bondholder.

-- The fair value of the liability at inception was determined using a market-based rate of 17.7% calculated using the US five-year treasury rate adjusted for the average yield on similar instruments with similar risk exposure to discount the contractual cash flows.

-- The equity component was determined as the residual value after deducting the fair value of the liability component from the receipts of the issue of the bond. The equity portion of $14 million is included in capital reserves.

-- On 22 April 2017, following discussions with both existing and prospective investors, including reverse inquiries, and given remaining capacity under the bonds' structure, Atlas Mara placed a further $17.4 million of its 8.00% senior secured convertible notes due in 2020. The additional issuance was undertaken on identical terms to the October 2015 tranche, except that these bonds were issued at a price of $84, as opposed to $82.7 in October, to account for the intervening passage of time.

-- As of 28 February 2021, the convertible bond has a balance of $71.2million (31 December 2019: $63.3 million).

-- On 24 April 2018, the Group reached an agreement in principle for a $36 million debt facility by issuing bonds to Fairfax Africa Holdings Investments Limited, the Company's largest shareholder. Tranche A of $16 million, which was structured as convertible bonds issued by Atlas Mara limited, was drawn down on 17 May 2018 and has a maturity date of 31 December 2020. The bonds accrue interest at the rate of 11%, payable on maturity and are convertible to ordinary shares by dividing the principal amount of the Bond by 90% of the 30-day volume weighted average price (VWAP) of the ordinary shares calculated on the dealing day prior to final maturity date. The facility was amended during the year, with maturity date extended to December 2021.

-- As of 28 February 2021, the convertible bonds issued to Fairfax has a balance of $20.3 million (31 December 2019: $16.7 million).

b. Other borrowed funds

 
$'000                                                28 February  31 December 
                                                            2021         2019 
Borrowed funds - At fair value through profit/loss        19,690       24,857 
Borrowed funds - Amortised cost                          422,014      261,936 
                                                         441,704      286,793 
 

The following represents a summary of significant Group borrowed funds, i.e. funding obtained to support business growth other than through banking products and customer accounts, rather third-party lenders supporting the liability side of the consolidated statement of financial position.

Afrexim Bank Limited

This relates to loan for $54 million advanced in November 2018 to ABCH by Afrexim Bank Limited. The loan attracts interest of 3 months LIBOR + 7.3%, payable quarterly, with the principal amount to be repaid over four years, which includes a grace period of one year from the closing date of the transaction. In October 2019, $5 million was repaid out of the loan principal amount. On 4 August 2020, a new facility of $15 million was availed to the Group under Afrexim's COVID-19 relief fund.

Africa Agriculture and Trade Investment Fund S.A.

A loan agreement was entered with AATIF in December 2018 with the repayment of the outstanding principal of $20 million commencing on 30 June 2020 until the maturity date of 30 June 2022 with five equal semi-annual repayments of $4 million each at an interest rate of LIBOR plus 6.5%.

Standard Chartered

The loan from Standard Chartered is a US dollar denominated loan obtained to finance the funding from ADC to UGPL, on 19 July 2012. The loan was repayable in December 2020; however, the termination date was extended to 31 December 2021. The loan can be further extended further based on mutual agreement. The loan is measured at fair value based on the determined fair value of the UBN shares at NGN5.35 per share as of 28 February 2021.

Nineteen77 Capital Solutions A LP

This represents $20 million secured bonds issued in November 2018 and due in 2021 to the bondholder - Nineteen77 Capital Solutions A LP. The bond attracts an interest rate of 9% per annum, with the interest payable half-yearly on 30 June and 31 December.

Nineteen77 Global Multi-Strategy Alpha Master Limited

On 28 December 2020, the Group secured a $25.8 million facility due in June 2022 from Nineteen77 Global Multi-Strategy Alpha Master Limited. The facility attracts an interest rate of 15% per annum for the first 12 months after which interest increases to 20% per annum. The interest is capitalised and added to principal amount on which interest is accrued. The facility is secured by a portion of the Company's shareholding in Union Bank of Nigeria.

United States International Development Finance Corporation "DFC" (previously Overseas Private Investment Corporation)

In March 2017, Banc ABC Botswana finalised a $40 million Fintech and Financial Inclusion Debt Facility provided by DFC. The funding is part of the $200 million multi-country facility the DFC approved for Atlas Mara's banks in Botswana, Zambia and Mozambique in August 2015. The debt facility was used to provide access to finance for SME's and support the company's efforts to accelerate its digital finance initiatives, which are key areas of the Company's strategy. The loan has a seven-year tenor with a three-year moratorium on capital. Interest is paid quarterly during the three years and capital is paid in 16 equal instalments after year three. The rate is three-month LIBOR plus a margin of 4.5%.

During the year, the Group entered into an amendment agreement with DFC to defer the principal payments for the period August 2020 till February 2021 for ABC Zambia DFC facility. After the year end, DFC signed the Support and override agreement. Refer to note 35 for further details.

Export Development Canada ('EDC')

On 11 December 2018, the Group secured a three-year $20 million debt facility from Export Development Canada ('EDC') for general corporate purposes. The first tranche of the facility $13.6 million, was drawn on 18 December 2018 and the second draw down of $6.4 million in April 2019. The facility attracts an interest rate of 9.0%, payable half yearly. The facility is secured by a portion of the Company's indirect shareholding in Union Bank of Nigeria.

Helios Fairfax Partners Corporation (previously Fairfax Africa Holdings Corporation)

On 26 March 2020, the Group entered into another $40 million loan facility agreement with Fairfax Africa holdings Corporation Fairfax secured against BancABC Botswana shares owned indirectly by Group (and directly by ABC Holdings Limited). The facility accrues interest at the rate of 10% per annum, payable quarterly and matures in March 2021 with the option to extend further by mutual agreement. This loan was not repaid since Fairfax Africa Holdings Corporation had entered into the Standstill agreement with the Group.

Fairfax Financial Holdings Limited

On 26 June 2019, the Group obtained a $40 million secured loan facility from Fairfax Financial Holdings Limited. The loan accrues interest at the rate of 10%, payable quarterly with a new maturity date of June 2022. The original maturity date was 30 June 2020.

HFP Investments Limited (previously Fairfax Africa Holdings Investments Limited)

On 24 April 2018, the Group reached an agreement in principle for a $36 million debt facility by issuing convertible bonds to Fairfax Africa Holdings Investments Limited. The agreement was amended and restated on 5 July 2018 and on 6 November 2018, with a further amendment to the deed poll on 11 December 2018. The facility is analysed as follows:

-- Tranche A $16 million convertible bonds: The tranche was drawn down on 17 May 2018 and is repayable in December 2020. The facility accrues interest at the rate of 11%, payable on maturity. Refer to the convertible bonds note in section a above for further details.; and

-- Tranche B $20 million facility: The tranche was obtained on 6 July 2018, with a three-year term maturing in July 2021 and an interest rate of 9%, payable half-yearly - 30 June and 31 December. The facility is secured over UBN shares and was amended during the year, with maturity date extended to December 2021.

Other

Other borrowings relate to medium to long-term funding from international financial institutions for working capital financing and onward lending to the Group's clients. Included in other are:

-- Norsad loan of $10 million attracting quarterly interest at six-month Libor plus 7.5%, which matured in December 2020 but is yet to be settled;

-- TLG Limited ('TLG') loan of $10 million with semi-annual interest payments at an interest rate of 9.8% with $5 million maturing in January 2021 and the balance due in March 2021. The loan is deemed to have been settled subsequent to year end, after TLG assumed ownership of the UBN shares pledged as collateral under the facility agreement;

-- Sanlam loan of $5 million attracting quarterly interest at three-month Libor plus 7%, maturing in December 2021. The loan is deemed to have been settled subsequent to year end, after Sanlam assumed ownership of the UBN shares pledged as collateral under the facility agreement; and

-- TLG Credit Opportunities Fund loan of $8 million which was guaranteed by Fairfax Africa Holdings Corporation, maturing in January 2021. The loan was settled by Fairfax Africa Holdings Corporation upon maturity after the lender called-in the guarantee. Refer to note 35.3 for further details.

Following the assessment of the cashflow position of ATMA and its main subsidiary, ABCH, prior to the end of the year 2020, the Group engaged majority of its lenders in a bid to refinance its debts and provide a stable runway and time for the Company and its lenders at ATMA and ABCH group levels to work on a common solution with the goal of preserving value for the stakeholders. This resulted in the signing of the standstill agreement, which precluded ATMA and ABCH from making interest payments and/or principal repayments in preference to any lender. Norsad and TLG did not sign and the standstill agreement, and as a result of the default, they subsequently initiated winding up proceedings against ABCH and ATMA respectively. Refer to notes 35.5 and 35.6 for further details on the TLG and Norsad litigations. This action relates only to ATMA and ABCH obligations and have no effect on the debts of the operating subsidiaries.

Standstill agreement

On 29 December 2020, the Group publicly announced that it had entered into a Standstill agreement ("Standstill") or similar bilateral agreements with certain participating lenders in respect of the Group's financing arrangements. Parties to the Standstill then proceeded with negotiations to agree and final documentation for a binding Support and Override agreement.

The participating lenders under the standstill agreement agreed not to exercise certain rights, or otherwise take actions, in respect of rights and repayments that may arise under the facilities as a result of the Group not making principal and interest payments until termination of the Standstill. These agreements relate to the holding companies only, ATMA and ABCH, and exclude facilities of the Group's operating subsidiary companies. The Standstill was replaced by a long-term restructuring agreement signed on 14 July 2021 with the participating lenders in the form of a Support and Override agreement.

Support and override agreement ("SOA")

On 14 July 2021, the SOA was signed by a majority of the Group's lenders. The lenders who are a party to the SOA have agreed to forbearances in respect of certain events of default under their relevant facilities, while the SOA is effective, including (i) non-payment of amounts due under the financing agreements, (ii) any deterioration in the financial or operational performance of the Group as a result of COVID-19, and (iii) any breach of any financial covenant under the financing agreements. Refer to note 35.2 for further details on the SOA.

Maturity analysis

The table below presents the maturity analysis based on contractual maturity.

 
$'000                      28 February  31 December 
                                  2021         2019 
On demand to one month         307,096          390 
One to three months              2,862          606 
Three months to one year        86,506      146,915 
Over one year                   45,240      218,898 
Total                          441,704      366,809 
 

7. Deposits

Refer to accounting policy pertaining to financial instruments.

 
$'000                           28 February  31 December 
                                       2021         2019 
Deposits from banks                  20,527       18,893 
Deposits from other customers       652,007      704,833 
                                    672,534      723,726 
 
 
Current       281,434      687,056 
Non-current   391,100       36,670 
 

The table below presents the analysis of deposits by segment:

 
$'000                                 28 February 2021                    31 December 2019 
                                  Payable   Term and    Total     Payable           Term and    Total 
                                on demand    savings            on demand   savings deposits 
                                            deposits 
Corporate customers               106,934    250,161  357,095      69,656             87,830  157,486 
Public sector                      35,827     79,641  115,468      24,707            162,862  187,569 
Retail customers                  102,632     33,360  135,992      75,521             41,262  116,783 
Other financial institutions       15,514     27,938   43,452      18,178            224,817  242,995 
Banks                              20,527          -   20,527      14,590              4,303   18,893 
                                  281,434    391,100  672,534     202,652            521,074  723,726 
 

8. Interest and similar expense

Refer to accounting policy pertaining to financial instruments.

 
$'000                  14 months to 28 February              12 months to 31 December 
                                 2021                                  2019 
                  Continuing  Discontinued      Total   Continuing  Discontinued      Total 
                  operations    operations              operations    operations 
Deposits            (23,990)      (53,495)   (77,485)     (24,775)      (47,697)   (72,472) 
Borrowed funds      (54,648)       (8,260)   (62,908)     (39,846)       (9,941)   (49,787) 
Other                (1,636)         (939)    (2,575)      (1,091)       (1,208)    (2,299) 
                    (80,274)      (62,694)  (142,968)     (65,712)      (58,846)  (124,558) 
 

Other interest expense includes $1.3 million (2019: $1.8million) relating to IFRS 16 lease interest expenses.

9. Financial assets at fair value through profit or loss

Accounting for financial assets at fair value through profit or loss

Refer to accounting policy pertaining to financial instruments.

 
                      28 February  31 December 
$'000                        2021         2019 
Money market fund               -        3,925 
Listed equities             1,168          803 
Unlisted equities          13,917       19,467 
Unlisted debentures             4           18 
Property units              2,213        1,030 
                           17,302       25,243 
 
Current                         -        3,925 
Non-current                17,302       21,318 
 

10. Loans and advances

Accounting for loans and advances

Refer to accounting policy pertaining to financial instruments.

Critical accounting estimates and judgements

The measurement of the expected credit loss allowance for loans and advances is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of customers defaulting) and the resulting losses.

A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as:

-- determining criteria for significant increase in credit risk ('SICR');

-- choosing appropriate models and assumptions for the measurement of ECL; and

-- establishing groups of similar financial assets for the purposes of measuring ECL.

When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and expert credit assessment. The objective of this assessment is to identify whether a SICR has occurred for an exposure by comparing:

-- the remaining lifetime PD as at the reporting date; with

-- the remaining lifetime PD for this point in time that was estimated at the time of initial recognition of the exposure (adjusted where relevant for changes in prepayment expectations).

The Group uses three criteria for determining whether there has been a SICR:

-- quantitative test based on movement in PD;

-- qualitative indicators; and

-- a backstop of 30 days past due.

The Group monitors the effectiveness of the criteria used to identify SICR by regular reviews to confirm that:

-- the criteria are capable of identifying SICR before an exposure is in default;

-- the criteria do not align with the point in time when an asset becomes 30 days past due;

-- the average time between the identification of a significant increase in credit risk and default appears reasonable;

-- exposures are not generally transferred directly from 12-month ECL measurement to credit impaired; and

-- there is no unwarranted volatility in loss allowance from transfers between 12-month PD (stage 1) and lifetime PD (stage 2).

 
$'000                      28 February  31 December 
                                  2021         2019 
Gross loans and advances       611,255      682,747 
Expected credit loss          (30,728)     (38,635) 
Net loans and advances         580,527      644,112 
 
 
Current        39,372      152,629 
Non-current   541,155      491,483 
 

11. Investment securities

Accounting for investment securities

Refer to accounting policy pertaining to financial instruments

 
$'000                                       28 February  31 December 
                                                   2021         2019 
Amortised cost: 
 Treasury bills                                  87,892       97,540 
 Corporate bonds                                  2,443            - 
 Government bonds                                29,146       10,127 
Amortised cost - gross balance                  119,481      107,667 
Less: Expected credit loss                        (258)        (377) 
Amortised cost - net balance                    119,223      107,290 
Fair value through OCI: unlisted equities           423          488 
Total - investment securities                   119,646      107,778 
 
Current                                          40,005      101,837 
Non-current                                      79,641        5,941 
 

Included in investment securities at amortised cost are pledged assets of $22.7 million (31 December 2019: $35.4 million).

12. Impairment charges on financial assets

Accounting for the impairment of financial assets

Refer to accounting policy pertaining to financial instruments.

Critical accounting estimates and judgements

The Group reviews its loan portfolios to assess impairment at least on a monthly basis. In determining whether an impairment loss should be recorded in the statement of profit or loss, the Group makes judgements as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the Group. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed monthly to reduce any differences between loss estimates and actual loss experience.

 
$'000                           14 months to 28 February             12 months to 31 December 
                                           2021                                 2019 
                            Continuing  Discontinued     Total   Continuing  Discontinued     Total 
                            operations    operations             operations    operations 
Stage 1 - 12-month 
 ECL                               331         (156)       175        1,120       (3,970)   (2,850) 
Stage 2 - Lifetime 
 ECL not credit impaired         (391)            74     (317)        1,122       (3,390)   (2,268) 
Stage 3 - Lifetime 
 ECL credit impaired           (1,934)      (13,626)  (15,560)      (3,347)       (5,443)   (8,790) 
Net movement in ECL 
 on loans and advances         (1,994)      (13,708)  (15,702)      (1,105)      (12,803)  (13,908) 
Recoveries of bad debts 
 previously written-off          2,917         2,134     5,051        1,951         3,300     5,251 
Other                            (844)         (716)   (1,560)          121       (2,885)   (2,764) 
                                    79      (12,290)  (12,211)          967      (12,388)  (11,421) 
 

Analysed as follows:

 
Continuing operations      14 months to 28 February       12 months to 31 December 
 $'000                                2021                           2019 
                         Impairment  Recoveries  Total  Impairment  Recoveries  Total 
                             charge                         charge 
Loans and advances          (1,994)       2,917    923     (1,105)       1,951    846 
Investment securities 
 at amortised cost            (155)           -  (155)        (48)           -   (48) 
Other financial assets 
 at amortised cost            (689)           -  (689)         169           -    169 
                            (2,838)       2,917     79       (984)       1,951    967 
 
 
Discontinued operations       14 months to 28 February          12 months to 31 December 
 $'000                                  2021                              2019 
                          Impairment  Recoveries     Total  Impairment  Recoveries     Total 
                              charge                            charge 
Loans and advances          (13,708)       2,134  (11,574)    (12,803)       3,300   (9,503) 
Investment securities 
 at amortised cost             (592)           -     (592)     (2,885)           -   (2,885) 
Other financial assets 
 at amortised cost             (124)           -     (124)           -           -         - 
                            (14,424)       2,134  (12,290)    (15,688)       3,300  (12,388) 
 

13. Derivative financial instruments

Accounting for derivative financial instruments

Refer to accounting policy pertaining to financial instruments.

The table below shows the fair values of derivative financial instruments recorded as assets or liabilities together with their notional amounts. The notional amount, recorded gross, is the amount of a derivative's underlying asset, reference rate or index and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at the year-end and are indicative of neither the market nor the credit risk.

 
$'000                            28 February 2021               31 December 2019 
                           Assets  Liabilities  Notional  Assets  Liabilities  Notional 
                                                  amount                        amount 
Derivatives held for 
 trading 
Forward foreign exchange 
 contracts                     96           98         8     109          100         9 
Derivatives designated 
 at fair value through 
 profit or loss 
Credit default swap         5,447        5,466     4,988   5,583        5,510     5,127 
                            5,543        5,564     4,996   5,692        5,610     5,136 
 

Credit default swaps (CDS)

Credit default swap contracts involve an arrangement between the Group and various counterparties which allows one party to protect against losses incurred as a result of credit default. The two parties to the transaction are referred to as (i) the buyer of protection and (ii) the seller of protection. The buyer of protection makes periodic premium payments to the seller of protection in exchange for the seller of protection's promise to make payments if certain defined credit events occur.

The CDS contract involves an arrangement between ABC Botswana and other counterparties. In the first leg of the transaction which resulted in the recognition of the derivative liability, ABC Botswana is the seller of credit protection and earns periodic premiums at the rate of 13% annually. In the second leg of the transaction which resulted in the derivative asset, ABC Botswana is the buyer of credit protection, paying a premium of 11% per annum.

The table below presents the cash flows payable by the Group for derivative financial liabilities by remaining contractual maturities at the date of the consolidated statement of financial position. The amounts disclosed in the table are the contractual undiscounted nominal currency swap cash flows for the liability leg of such swaps, whereas the Group manages the inherent liquidity risk based on expected undiscounted cash inflows:

 
$'000                             28 February 2021          31 December 2019 
                                 Up to    1 - 3  Total     Up to   3 - 12  Total 
                               1 month   months          1 month   months 
Forward foreign exchange 
 contracts                          98        -     98       100        -    100 
Credit default swap                  -    5,466  5,466         -    5,510  5,510 
Total derivatives financial 
 liabilities                        98    5,466  5,564       100    5,510  5,610 
 

With the exception of swaps where ongoing cash flows are settled on a gross basis, all derivative financial liabilities are settled on a net basis.

14. Cash and short-term funds

Accounting for cash and short-term funds

Cash and cash equivalents comprise of balances with banks that are short-term highly liquid investments with an original maturity of three months or less that are readily convertible into known amounts of cash. Cash and cash equivalents are carried at amortised cost in the statement of financial position.

Statutory reserve balances are restricted minimum statutory balances not available for the banking operations' daily operations. These balances do not accrue interest.

 
$'000                                     28 February  31 December 
                                                 2021         2019 
Cash on hand                                   21,455       11,514 
Balances with central banks                    17,684       16,531 
Balances with other banks                      59,543       30,067 
Money market placements maturing within 
 three months                                  35,139       70,990 
Cash and cash equivalents                     133,821      129,102 
Statutory reserve balances                      8,106        1,431 
Cash and short-term funds                     141,927      130,533 
 

15. Interest and similar income

Accounting for interest and similar income

Refer to accounting policy pertaining to financial instruments

 
$'000                            14 months to 28 February            12 months to 31 December 
                                           2021                                2019 
                             Continuing  Discontinued    Total   Continuing  Discontinued    Total 
                             operations    operations            operations    operations 
Interest income calculated using effective interest method: 
Cash and short-term funds           902         4,466    5,368          779         4,629    5,408 
Investment securities 
 at amortised cost                4,384        31,683   36,067        6,650        19,290   25,940 
Investment securities 
 at fair value through 
 OCI                                  -         2,466    2,466            -         4,924    4,924 
Loans and advances               75,695       105,172  180,867       69,026       104,800  173,826 
Total interest income 
 calculated using EIR 
 method                          80,981       143,787  224,768       76,455       133,643  210,098 
Other interest income               437             -      437          630             -      630 
                                 81,418       143,787  225,205       77,085       133,643  210,728 
 

Interest income includes $12.6 million (31 December 2019: $2.3 million) accrued on impaired loans.

16. Investment in associates

Accounting for investment in associate

Associates are entities in which the Group has significant influence, but not control, over the operating and financial policies.

The Group's investments in associates are recognised using the equity method. These investments are initially recorded at cost and increased (or decreased) each year by the Group's share of the post-acquisition profit (or loss). The Group ceases to recognise its share of the losses of equity accounted associates when its share of the net assets and amounts due from the entity have been written off in full, unless it has a contractual or constructive obligation to make good its share of the losses. When the Group acquires an additional share in the investment, while still maintaining significant influence, the investment is accounted for at cost. The incremental fair value adjustments of the assets and liabilities of the investment is determined and included in the carrying amount of the investment.

Impairment losses

After application of the equity method, including recognising the associate's losses, the entity applies IAS 36 Impairment of Assets to determine whether it is necessary to recognise any additional impairment loss with respect to its net investment in the associate or joint venture.

The entity also applies IAS 36 to determine whether any additional impairment loss is recognised with respect to its interest in the associate or joint venture that does not constitute part of the net investment and the amount of that impairment loss.

Goodwill forms part of the carrying amount of an investment in an associate and is not separately recognised, it is therefore not tested for impairment separately by applying the requirements for impairment testing goodwill in IAS 36 Impairment of Assets. Instead, the entire carrying amount of the investment is tested for impairment in accordance with IAS 36 as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, whenever there are indications that the investment may be impaired.

An impairment loss recognised in those circumstances is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment in the associate. Accordingly, any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

In determining the value in use ('VIU') of the investment, an entity estimates its share of the present value of the estimated future cash flows expected to be generated by the associate, including the cash flows from the operations of the associate and the proceeds from the ultimate disposal of the investment. The recoverable amount of an investment in an associate shall be assessed for each associate, unless the associate does not generate cash inflows from continuing use that are largely independent of those from other assets of the entity.

Assets of the associate

The investor should measure its interest in an associate's identifiable net assets at fair value at the date of acquisition of an associate. If the value that the investor attributes to the associate's net assets differs from the carrying value amounts in the associate's books, the investor should restate any impairment losses recognised by the associate.

Investment in the associate

As well as applying the equity method, IAS 28 requires an investor to apply the requirements of IAS 36 to determine whether any impairment loss should be recognised with regards to the investor's net investment in the associate.

Intangible assets

Included in the fair value of UBN are intangible assets of $3.4 million (31 December 2019: $5.9 million).

Share of profit and OCI

The value of equity accounted earnings in the statement of comprehensive income for Atlas Mara represents the reported profit and other comprehensive income for UBN, based on the estimated profit of UBN for the 14-month period ended 28 February 2021.

Critical accounting estimates and judgements

Determination of control over the associate

Determining whether the Group has control of an entity is generally straightforward based on ownership of the majority of the voting capital. However, in certain instances, this determination will involve significant judgement, particularly in the case of UBN where the Group has approximately 47.68% (2020: 49.78%; 2019: 48.99%) shareholding and has representation on the Board of Directors.

Based on the assessment performed by management, UBN is not a controlled entity of the Group because the Group is not exposed, and has no right, to variable returns from this entity and is not able to use its power over the entity to affect those returns.

 
$'000                         28 February  31 December 
                                     2021         2019 
Opening balance                   582,141      532,233 
Share of profits                   25,510       31,101 
Share of OCI                      (3,277)       12,552 
Exchange rate adjustment        (114,203)            - 
Dividend income                   (8,521)            - 
Disposals during the period      (10,170) 
Additions during period                16        6,255 
Investment in associates          471,496      582,141 
 

Investment in Union Bank of Nigeria ('UBN')

The Group effectively holds total direct and indirect share of UBN's voting rights of 47.68% as at 28 February 2021. The investment in UBN is equity accounted using the management accounts of UBN for the period ended 28 February 2021. The local currency of UBN is the Nigerian Naira.

The following table presents the summarised financial information of UBN for the period ended 28 February 2021. The financial information for the years ended 31 December 2020 and 2019 were extracted from UBN's published annual financial statements for 2020 and 2019 respectively, while the financial information for the 14-month period ended 28 February 2021, were based on the estimate of UBN's financial performance derived from a combination of the published annual financial statements for 2020 and the Q1 2021 published unaudited financial statement.

 
$'000                                     28 February  31 December        31 December 
                                                 2021         2020               2019 
Cash and cash equivalents                     700,838      676,210          1,045,034 
Loans and advances                          1,695,028    1,730,580          1,796,454 
Investment securities                       1,076,810    1,259,164            980,610 
Other assets                                1,716,644    1,807,097          2,286,323 
Total assets                                5,189,320    5,473,051          6,108,421 
 
Deposits from customers                     2,716,875    2,813,396          2,891,560 
Borrowed funds                                649,649      655,454            499,103 
Other liabilities                           1,180,206    1,343,949          1,894,457 
Total liabilities                           4,546,730    4,812,799          5,285,120 
 
Group's share of equity (47.68%) (2020: 
 49.78%; 2019: 48.99%)                        297,996      320,387            400,772 
Intangible assets                               4,826        4,978              5,930 
Share of total identifiable net assets        302,822      325,365            406,702 
 
Carrying value of the investment in 
 associate including intangible assets        469,945      481,866            580,622 
 
 
$'000                                      28 February  31 December          31 December 
                                                  2021         2020                 2019 
Net interest income                            169,584      150,244              171,399 
Non-interest income                            131,593      116,419              139,798 
Impairment credit/(charges) on financial 
 instruments                                     5,942        6,701                (600) 
Total expenses                               (232,124)    (205,379)            (231,764) 
Profit for the period                           54,861       48,872               64,862 
Other comprehensive income for the 
 period                                        (6,746)          963               25,116 
Total comprehensive income for the 
 period                                         48,115       49,835               89,978 
 

The risks directly associated with the investment are foreign exchange risk, equity pricing risk and the country risk. UBN is a banking entity in Nigeria and, accordingly, Atlas Mara is exposed to the key underlying risks of UBN, namely credit risk, liquidity risk, market risk and operational risk.

Impairment testing

At 28 February 2021, the Group performed an impairment test on the carrying amount of the investment in UBN. The test confirmed that there was no impairment at 28 February 2021. The table below illustrates the value-in-use ('VIU'), carrying value and fair value of the Group's 47.68% (31 December 2019: 49.97%) investment in UBN:

 
$'000                         28 February 2021               31 December 2019 
                            VIU  Carrying  Fair value      VIU  Carrying  Fair value 
                                  amount*                        amount* 
Union Bank of Nigeria   485,753   483,028     297,996  614,981   598,143     285,171 
 

*Carrying amount includes the investment in associate balance of $469.9 million (31 December 2019: $580.6 million) and associated goodwill balance of $13.1 million (31 December 2019: $17.5 million).

Basis of recoverable amount

The impairment test was performed by comparing the recoverable amount of the Group's investment in UBN with the carrying amount. The recoverable amount, calculated as value in use ("VIU"), has been determined using cash flow predictions based on financial budgets approved by UBN's management, covering a five-year period. Forecast risk weighted assets have been calculated to ensure that the bank maintains the capital adequacy requirements in order to calculate the movement in regulatory reserve requirements. This movement has been deducted from forecast cash flows.

Key assumptions in VIU calculation

The key assumptions used in the calculation of value in use were as follows. The values assigned to the key assumptions represent management's assessment of future trends in the earnings of UBN and have been based on historical data from both external and internal sources.

 
                          28 February 2021  31 December 2019 
Discount rate                        28.5%             31.1% 
Long-term growth rate                 2.3%              2.3% 
Exchange rate (USD/NGN)              410.5             306.5 
 

Long-term growth rate

The long-term growth rate is used to extrapolate the cash flows in perpetuity. This has been derived as the lower of the forecast GDP growth rate for Nigeria and the long-term compound annual profit before taxes, depreciation and amortisation growth rate estimated by management.

Discount rate

The discount rate is a pre-tax rate, derived using the capital asset pricing model ('CAPM'). CAPM depends on a number of inputs reflecting financial and economic variables, including the risk-free rate and a premium to reflect the inherent risk of the business being evaluated.

The VIU based on the above assumptions was computed as $499.8 million (2019: $615.0 million); resulting in a headroom of $4.5 million (2019: $16.8 million).

Sensitivity of VIU to changes in key assumptions

The tables below illustrate the impact of changes in the key assumptions on VIU, especially given the shock to the market resulting from the COVID-19 outbreak. This reflects the sensitivity of the VIU to each key assumption on its own, while keeping other inputs constant. It is possible that more than one favourable and/or unfavourable change may occur at the same time. The selected rates of reasonably possible changes to key assumptions are largely based on external analysts' forecasts.

Exchange rate sensitivity

As at 28 February 2021, if exchange rates move in the directions specified in the table below, the adjusted carrying value of the Group's investment in UBN will be as follows:

 
$'000                          VIU 
Devaluation to NGN410.5/$1   485,753 
Devaluation to NGN440.0/$1   453,163 
Devaluation to NGN460.0/$1   433,460 
Devaluation to NGN480.0/$1   415,399 
Devaluation to NGN500.0/$1   398,783 
 

Changes in other assumptions - 1% change in discount rate and long-term growth rate

 
                        Favourable change            Unfavourable change 
                   Revised     VIU    Headroom  Revised    VIU    (Impairment) 
                     rate                         rate 
Long-term growth 
 rate                3.3%    492,127   9,099     1.3%    479,848    (3,169) 
Discount rate       27.5%    504,113   21,085    29.5%   468,659    (14,369) 
 
 

A reduction in the forecast cash flows of 10% per annum is estimated to reduce the recoverable amount by $48.6 million.

Reduction in ATMA's shareholding in Union bank of Nigeria

Following the Group's default on its debts, TLG and Sanlam exercised their rights to assume ownership of the portion of the Group's shares in UBN pledged as collateral under their respective facility agreements. As at 28 February 2021, TLG assumed ownership of 616,500,000 units of UBN shares representing 2.11% shareholding, effectively reducing the Group's shareholding in UBN to 47.68% as at that date (2020: 49.78%; 2019: 48.99%).

Subsequent to the reporting date, additional 187,083,320 units of UBN shares, representing 0.64% shareholding were transferred to TLG, totalling 803,583,320 units of UBN shares transferred to TLG, while 442,747,459 units were transferred to Sanlam, representing 1.51% shareholding in UBN. On a total basis, the Group transferred 1,246,330,779 units of UBN shares, representing 4.26% of the Group's shareholding in UBN, to both lenders to fully settle the obligation to these lenders. The Group's shareholding currently sits at 45.56% after completion of the transfer of shares post-period end.

17. Goodwill and intangible assets

Goodwill

Goodwill arises on the acquisition of subsidiaries and associates and represents the excess of the fair value of the purchase consideration over the fair value of the Group's share of the assets acquired and the liabilities and contingent liabilities assumed on the date of the acquisition. Goodwill arising on the acquisition of subsidiaries and associates is measured at cost less accumulated impairment losses. Goodwill has an indefinite useful life. An annual impairment evaluation is performed in respect of goodwill, or more frequently when there are indications that an impairment may be necessary. The evaluation involves comparing the carrying value of goodwill with the present value of the pre-tax cash flows, discounted at a rate of interest that reflects the inherent risks, of the cash-generating unit ('CGU') to which the goodwill relates, or the CGU's fair value if this is higher.

Intangible assets

Intangible assets other than goodwill are accounted for in accordance with IAS 38 Intangible Assets. Intangible assets include trade names, customer relationships, core deposits, core overdrafts, software, licences and other contracts. They are initially recognised when they are separable or arise from contractual or other legal rights, the cost can be measured reliably and, in the case of intangible assets not acquired in a business combination, where it is probable that future economic benefits attributable to the assets will flow from their use.

Intangible assets are stated at cost (which is, in the case of assets acquired in a business combination, the acquisition date fair value) less amortisation and provisions for impairment, if any, and are amortised over their useful lives in a manner that reflects the pattern to which they contribute to future cash flows, generally over 10 years. Intangible assets are reviewed for impairment when there are indications that an impairment may be necessary.

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

The intangible assets have the following amortisation method and useful lives:

 
                       Goodwill   Other intangibles 
Useful lives         Indefinite  From 3 to 10 years 
Amortisation method         n/a       Straight-line 
 

Critical accounting estimates and judgements

The Group assesses goodwill for impairment on an annual basis based on value in use calculations. Significant estimates and judgements are applied in projecting the future pre-tax cash flows, the appropriate growth and discount rates as set out below.

 
                                 28 February  31 December 
$'000                                   2021         2019 
Goodwill                              40,623       45,827 
Software and other intangibles        23,241       27,178 
                                      63,864       73,005 
 

The table below shows the movement in goodwill and intangible assets balance for the year

 
$'000                                28 February 2021                      31 December 2019 
                           Goodwill  Other intangible     Total  Goodwill  Other intangible      Total 
                                               assets                                assets 
Cost 
Opening balance              45,827            74,986   120,813    82,941           141,808    224,749 
Exchange rate adjustment    (5,204)           (3,280)   (8,484)   (2,899)             3,523        624 
Additions during the 
 period                           -             4,061     4,061         -             8,971      8,971 
Disposals during the 
 period                           -                 -         -  (34,215)          (79,316)  (113,531) 
Closing balance              40,623            75,767   116,390    45,827            74,986    120,813 
Impairment losses and 
 amortisation 
Opening balance                   -          (47,808)  (47,808)   (2,936)          (62,793)   (65,729) 
Exchange rate adjustment          -               266       266       440             (634)      (194) 
Amortisation during 
 the period                       -           (4,984)   (4,984)         -          (11,819)   (11,819) 
Disposals during the 
 period                           -                 -         -     2,496            27,438     29,934 
Closing balance                   -          (52,526)  (52,526)         -          (47,808)   (47,808) 
Carrying value at period 
 end                         40,623            23,241    63,864    45,827            27,178     73,005 
 

Goodwill has been allocated to the Group's CGUs (operating banks) as follows:

 
$'million         28 February 2021         31 December 2019 
                        Allocation               Allocation 
                     Retail  Corporate        Retail  Corporate 
Botswana       27.5    15.2       12.3  28.3    15.6       12.7 
West Africa    13.1       -       13.1  17.5       -       17.5 
Total          40.6    15.2       25.4  45.8    15.6       30.2 
 

Impairment testing

IFRS requires annual impairment testing of goodwill, or more frequently when there is an indication that the CGU may be impaired. Where there is no impairment trigger, there is no need for the two-step approach.

The annual impairment test was performed for goodwill. A comprehensive assessment of the underlying CGUs has taken place. This assessment included a review of the forecast financial information. The review and testing of goodwill for impairment inherently requires significant management judgement as it requires management to derive the best estimates of the identified CGUs' future cash flows.

The recoverable amounts for the CGUs have been calculated based on their value in use (VIU), determined by discounting the future cash flows expected to be generated from the continuing use of the CGUs' assets. No impairment losses were recognised during the period ended 28 February 2021 (31 December 2019: nil) because the recoverable amounts of these CGUs were determined to be higher than their carrying amounts.

The principal assumptions considered in determining the VIUs were as follows:

Future cash flows - The forecast periods adopted reflect a set of cash flows that, based on management judgement and expected market conditions, could be sustainably generated over such a period. The cash flow projections covering a five-year period were based on financial budgets approved by management.

Discount rates - The CoE percentages were derived from an equity pricing model deemed appropriate based on the entities under review. The risk-free rate used to determine the CoE has been derived from the 10-year US treasury bonds as at 28 February 2021. The future cash flows are discounted using the CoE assigned to the appropriate CGUs and by nature can have a significant effect on their valuations.

The following table summarises the key inputs used in testing the Group's goodwill for current and prior years.

 
                             28 February 2021       31 December 2019 
                           Botswana  West Africa  Botswana  West Africa 
Discount rate (%)             16.1%        28.5%      20.0         31.1 
Terminal growth rate (%)       5.1%         2.3%       4.4          2.3 
Forecast period (years)           5            5         5            5 
 

The key assumptions described above may change as economic and market conditions change. The Group estimates that for Botswana, 1% change in the discount rate or terminal growth rate would increase the recoverable amount by $20.7 million (31 December 2019: $14.5 million) and $38.9 million (31 December 2019: $8.9 million) respectively or decrease the recoverable amount by $17.1 million (31 December 2019: $12.7 million) and $26.9 million (31 December: $7.8 million), respectively. A reduction in the forecast cash flows of 10% per annum would reduce the recoverable amount by $17.7 million (31 December 2019: $16 million). Changes in these assumptions would not cause the recoverable amount of the Botswana CGU to decline below the carrying amount.

West Africa segment goodwill

A goodwill test was also performed in respect of the West Africa segment. This segment houses the investment in associate. Refer to note 17 for details of the valuation performed to determine the value-in-use of the investment. As at 28 February 2021, the carrying value of the investment of $495.3 million is less than the VIU of $499.8 million and therefore no impairment is required.

Other intangible assets

The other intangible assets have been assessed for indications of impairment and at 28 February 2021, there were no indications of impairment.

18. Property and equipment

Accounting for property and equipment

Land and buildings are shown at fair value based on annual valuations by external independent valuers under hyperinflationary economies, otherwise at least once every three years. However, management conducts annual assessments, to ensure that the carrying amount of land and buildings is not significantly different from fair value. Surpluses and deficits arising thereon are transferred to the property revaluation reserve included under capital reserves in equity.

All other items of property and equipment are stated at cost less accumulated depreciation and impairment losses. Where parts of an item of property and equipment have different useful lives, they are accounted for as separate items of property and equipment. Owner-occupied properties are held for use in the supply of services or for administrative purposes.

Depreciation is charged to the statement of profit or loss on a straight-line basis over the estimated useful life of the property and equipment. Land is not depreciated.

The estimated useful lives are as follows:

   --  Buildings:                                                                    20-50 years; 
   --  Motor vehicles:                                                           4 years; 
   --  Computer and office equipment:                           3-5 years; and 
   --  Furniture and fittings:                                                4-10 years. 

The assets' residual values, depreciation methods and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date. Subsequent costs are included in the asset's carrying amount or are recognised as a separate asset, as appropriate only when it is probable that future economic benefits associated with the item will flow to the Group. The cost of day-to-day servicing of property and equipment are recognised in the statement of profit or loss as incurred.

Any gain or loss on disposal of an item of property and equipment is recognised within non-interest income in the statement of profit or loss.

The tables below show the movement in property and equipment balance for the current and prior years

 
At 28 February 2021                Land and  Motor vehicles     Computer      Furniture     Total 
                                  buildings                   and office   and fittings 
                                                               equipment 
 $'000 
Cost or valuation 
Opening balance at 1 January 
 2020                                42,729           1,772       19,791         11,697    75,989 
Exchange rate adjustment 
 including hyperinflation 
 impact                               2,438            (38)        (361)          (265)     1,774 
Additions during the period             523              41        2,140            363     3,067 
Revaluation                         (2,440)               -            -              -   (2,440) 
Reclassification to investment 
 property                           (3,041)               -            -              -   (3,041) 
Cost or valuation at 28 
 February 2021                       40,209           1,775       21,570         11,795    75,349 
 
Accumulated depreciation 
Opening balance                    (10,969)         (1,348)     (14,719)        (7,721)  (34,757) 
Exchange rate adjustment 
 including hyperinflation 
 impact                                  58              24          205            135       422 
Reclassification to investment 
 property                               148               -            -              -       148 
Charge for the period               (2,225)            (30)      (1,264)          (875)   (4,394) 
Accumulated depreciation 
 at 28 February 2021               (12,988)         (1,354)     (15,778)        (8,461)  (38,581) 
Carrying value at 28 February 
 2021                                27,221             421        5,792          3,334    36,768 
 

As at 28 February 2021, property and equipment included right-of-use assets of $5.4 million (31 December 2019: $6.4 million) related to leased branches and office premises. Refer to note 31 for further details.

Land and building with a market value of $3.4 million has been pledged as security for the Botswana Building Society loan of $0.6 million, included as part of the other borrowed funds balance. Principal and interest amounts are repayable monthly. The loan matures on 30 December 2022.

 
At 31 December 2019                  Land and  Motor vehicles     Computer      Furniture      Total 
                                    buildings                   and office   and fittings 
                                                                 equipment 
 $'000 
Cost or valuation 
Opening balance at 1 January 
 2019                                  70,236           5,434       43,549         25,061    144,280 
Recognition of right-of-use 
 asset on initial application 
 of IFRS 16                            18,597             384            -              -     18,981 
Adjusted balance at 1 January 
 2019                                  88,833           5,818       43,549         25,061    163,261 
Exchange rate adjustment 
 including hyperinflation 
 impact                                 6,465             260        4,962            356     12,043 
Additions during the year              17,359             806        8,597          3,713     30,475 
Revaluation                             (563)               -            -              -      (563) 
Write-off                             (1,061)               -         (56)            (6)    (1,123) 
Reclassification from investment 
 property                                 405               -            -              -        405 
Disposal during the year                (173)           (703)      (7,163)        (2,977)   (11,016) 
Reclassified as part of 
 disposal groups held for 
 sale                                (68,536)         (4,409)     (30,098)       (14,450)  (117,493) 
Cost or valuation at 31 
 December 2019                         42,729           1,772       19,791         11,697     75,989 
 
Accumulated depreciation 
Opening balance                      (15,512)         (4,228)     (32,032)       (14,091)   (65,863) 
Exchange rate adjustment 
 including hyperinflation 
 impact                               (4,655)           (376)      (3,696)          (616)    (9,343) 
Disposals during the year                 102             658        7,131          2,571     10,462 
Write-off                                 703               -           22              -        725 
Reclassified as part of 
 disposal groups held for 
 sale                                  14,943           2,840       17,800          7,238     42,821 
Charge for the year                   (6,550)           (242)      (3,944)        (2,823)   (13,559) 
Accumulated depreciation 
 at 31 December 2019                 (10,969)         (1,348)     (14,719)        (7,721)   (34,757) 
Carrying value at 31 December 
 2019                                  31,760             424        5,072          3,976     41,232 
 

19. Investment property

Accounting for investment property

Investment property is initially measured at cost and subsequently at fair value, with any change therein recognised in profit or loss within non-interest income.

Any gain or loss on disposal of investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.

When the use of a property changes such that it is reclassified as property and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

Critical accounting estimates and judgements

The Group obtains independent valuations for its investment properties at least annually. At the end of each reporting period, the directors update their assessment of the fair value of each property, taking into account the most recent independent valuations. The directors determine a property's value within a range of reasonable fair value estimates.

The fair values of the investment properties at 28 February 2021 have been determined based on the valuations performed by accredited independent valuers. The Group has no restrictions on the realizability of its investment properties and no contractual obligations to either purchase, construct or develop investment properties or for repairs, maintenance and enhancements.

Valuation technique and significant unobservable inputs

The fair values of the investment properties have been determined using the market sales comparison approach, which uses the market prices from recent sale of similar properties to value the investment properties. The fair values of investment properties have been categorised under level 3 in the fair value hierarchy based on the inputs used. These inputs include:

-- Sales price of comparable properties

-- Replacement costs of a building

-- Adjustments due to specific building components

-- Rental rates per square meter: $3.50 - $4.50

-- Market yields: 6% to 10%

The estimated fair value would increase/(decrease) if:

-- Expected market rental growth were higher/(lower)

-- The occupancy rates were higher (lower)

 
$'000                                          28 February  31 December 
                                                      2021         2019 
Opening balance                                      6,586       12,414 
Exchange rate adjustment                             1,601      (2,017) 
Fair value gain                                      (315)        4,586 
Additions during the period                            879        2,341 
Reclassifications from/(to) property and 
 equipment                                           2,893        (405) 
Disposals during the period                              -      (1,367) 
Reclassified as part of disposal groups held 
 for sale                                                -      (8,966) 
Closing balance                                     11,644        6,586 
 

20. Other assets

Accounting for other assets

Included in other assets are prepayments, security deposits and other receivables. Except for prepayments and some balances included in other receivables, other assets are financial assets carried at amortised cost. Refer to the accounting policy on financial instruments for further details. Prepayments are non-financial assets and are stated at their nominal values.

 
$'000                                          28 February  31 December 
                                                      2021         2019 
Other financial assets measured at amortised 
 cost 
Accounts receivable                                 13,273        5,100 
Security deposits                                        3           28 
Legacy debt receivable                              11,367       10,443 
Other receivables (i)                               13,065           17 
                                                    37,708       15,588 
Other non-financial assets 
Prepayments                                         17,073        4,967 
Other assets (ii)                                    1,231        8,497 
                                                    56,012       29,052 
 
 
Current       47,859  23,622 
Non-current    8,153   5,430 
 

Notes:

i) Other receivables relate mainly to balances due from Group entities classified as disposal groups.

ii) Other assets include stationery and other inventory balances.

21. Other liabilities

Accounting for other liabilities

Other liabilities include financial and non-financial liabilities. For other financial liabilities, refer to accounting policy pertaining to financial instruments.

Non-financial liabilities are made up mainly of provisions. Refer to note 21.1 below for details of the Group's policy on provisions.

 
$'000                                               28 February  31 December 
                                                           2021         2019 
Other financial liabilities measured at amortised 
 cost 
Accruals                                                  6,412        8,361 
Accounts payable(i)                                      76,127       68,322 
Lease liability                                           6,171        6,670 
Other liability accounts                                 11,531        5,189 
                                                        100,241       88,542 
Other non-financial liabilities 
Provisions (note 21.1)                                    8,294        8,222 
Other liabilities                                           332          210 
                                                        108,867       96,974 
 
 
Current       103,687  94,185 
Non-current     5,180   2,789 
 

Notes:

1. Included in accounts payable are balances due to Group entities classified as disposal groups. This was included as part of other liability accounts in the prior year financial statement but has now been reclassified in the prior year balance included in the current period financial statement.

21.1. Provisions

Accounting for provisions

The Group applies IAS 37 Provisions, Contingent Liabilities and Contingent Assets in accounting for non-financial liabilities. Provisions are recognised for present obligations arising as consequences of past events where it is more likely than not that a transfer of economic benefit will be necessary to settle the obligation, which can be reliably estimated.

The table below sets out the movement in provisions:

 
$'000                            28 February 2021                                   31 December 2019 
                   Retention  Restructuring        Other    Total   Retention     Restructuring        Other     Total 
                   and bonus           cost   provisions            and bonus              cost   provisions 
                         pay                                              pay 
At 1 January           5,178            910        2,134    8,222       4,778                 -       11,644    16,422 
Additions              3,076          4,819        1,276    9,171       5,648             3,017          950     9,615 
Amounts utilised           -        (4,229)      (1,845)  (6,074)     (2,607)                 -      (1,088)   (3,695) 
Unused amounts 
 reversed            (2,338)              -         (96)  (2,434)     (1,979)           (2,107)            -   (4,086) 
Exchange and 
 other movements     (1,718)              -        1,127    (591)       (662)                 -      (9,372)  (10,034) 
At 31 December         4,198          1,500        2,596    8,294       5,178               910        2,134     8,222 
 

Included in other provisions are leave pay provision, provisions on off-balance sheet items and others.

22. Off-balance sheet items

Loan commitments and other financial facilities

The timing profile of the contractual amounts of the Group's off-balance sheet financial instruments that commit it to extend credit to customers and other facilities for the period ended 28 February 2021 are summarised below:

 
$'000                            28 February  31 December 
                                        2021         2019 
Financial guarantees                  47,393       19,720 
Letters of credit                      5,637        8,578 
Loan commitments                       4,868       11,529 
Gross balance                         57,898       39,827 
Expected credit loss allowance          (93)        (187) 
Net balance                           57,805       39,640 
 
Maturity analysis 
Less than one year                    50,838       29,304 
Between one and five years             1,371       10,336 
Over five years                        5,596            - 
Total                                 57,805       39,640 
 

b. Capital commitments

The Groups capital commitments for the period ended 28 February 2021 are summarised below. Funds to meet these commitments will be provided from existing Group resources.

 
$'000                             28 February  31 December 
                                         2021         2019 
Approved and contracted for             1,493        1,181 
Approved but not contracted for         7,041       15,823 
Total                                   8,534       17,004 
 

23. Non-interest income

Accounting for non-interest income

Fees and commission

Fees and commission income and expense that are integral to the effective interest rate on a financial asset or financial liability are included in the measurement of the effective interest rate.

Other fees and commission income - including account servicing fees, investment management fees, sales commission, placement fees and syndication fees - are recognised as the related services are performed. If a loan commitment is not expected to result in the draw-down of a loan, then the related loan commitment fees are recognised on a straight-line basis over the commitment period.

Other fees and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received.

Net trading income

Net trading income comprises gains less losses related to trading assets and liabilities, and includes all realised and unrealised fair value changes, interest, dividends and foreign exchange differences.

 
$'000                                          14 months to 28 February            12 months to 31 December 
                                                         2021                                2019 
                                           Continuing  Discontinued    Total   Continuing  Discontinued    Total 
                                           operations    operations            operations    operations 
Net fee and commission income:                 30,213        29,625   59,838       19,365        30,367   49,732 
  Fee income on loans and 
   advances                                     5,371         7,187   12,558        6,294         9,943   16,237 
  Fee income from trust and 
   fiduciary activities                           706           307    1,013          735         5,821    6,556 
  Cash transaction fees                        13,381         5,705   19,086        2,903         5,664    8,567 
 Fee income on digital transactions             8,677         5,236   13,913        1,414         4,359    5,773 
 Account maintenance fees                       3,521         8,154   11,675        2,948         4,368    7,316 
  Other fee income                              2,236         4,192    6,428        5,071         1,194    6,265 
  Fee and commission expense                  (3,679)       (1,156)  (4,835)            -         (982)    (982) 
 
Net gains/(losses) on financial 
 instruments at FVTPL:                          1,609             -    1,609      (3,084)             -  (3,084) 
  Financial assets at FVTPL                   (3,556)             -  (3,556)      (1,574)             -  (1,574) 
  Financial liabilities at 
   FVTPL                                        5,165             -    5,165      (1,510)             -  (1,510) 
 
Net trading income:                            22,025        19,639   41,664       31,033        15,054   46,087 
  Gains on foreign exchange 
   transactions                                15,851        18,469   34,320       30,375        14,755   45,130 
  Other net income from non-proprietary 
   trading                                      6,174         1,170    7,344          658           299      957 
 
Other non-interest income:                    (2,104)         3,081      977        6,427         4,504   10,931 
  Dividends received                              816             4      820        1,166           368    1,534 
  Gains/(losses) on disposal 
   of property and equipment                        -            85       85           21         (115)     (94) 
  Gains/(losses) on disposal 
   of investment property                     (2,433)                (2,433)            -         1,164    1,164 
  Gains on derivatives                              -             -        -          296           110      406 
  Rental income on investment 
   property                                       158         1,216    1,374           30         1,174    1,204 
  Gain on revaluation of investment 
   property                                     (315)           184    (131)        4,586             -    4,586 
  Other income                                  (330)         1,592    1,262          328         1,803    2,131 
 
                                               51,743        52,345  104,088       53,741        49,925  103,666 
 

24. Operating expenses

 
$'000                                14 months to 28 February              12 months to 31 December 
                                               2021                                  2019 
                                Continuing  Discontinued      Total   Continuing  Discontinued      Total 
                                operations    operations              operations    operations 
Administrative expenses           (38,501)      (50,479)   (88,980)     (31,265)      (62,243)   (93,508) 
Property lease rentals               (364)       (1,395)    (1,759)        (930)         (516)    (1,446) 
Staff costs (note 24.1)           (36,456)      (54,326)   (90,782)     (36,337)      (56,662)   (92,999) 
Auditor's remuneration (note 
 24.2)                             (2,423)         (707)    (3,130)      (1,242)         (582)    (1,824) 
Depreciation                       (4,394)      (11,074)   (15,468)      (3,314)      (10,245)   (13,559) 
Amortisation charge                (4,984)       (5,942)   (10,926)      (5,335)       (6,484)   (11,819) 
Directors' remuneration 
 (note 28.3)                       (3,118)             -    (3,118)      (2,982)             -    (2,982) 
                                  (90,240)     (123,923)  (214,163)     (81,405)     (136,732)  (218,137) 
 

24.1. Staff costs

Accounting for staff costs

The Group applies IAS 19 Employee Benefits in its accounting for most of the components of staff costs.

Short-term employee benefits - Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Post-retirement benefits - The Group operates a defined contribution scheme and recognises contributions due in respect of the accounting period in the income statement. Any contributions unpaid at the balance sheet date are included as a liability.

 
$'000                            14 months to 28 February             12 months to 31 December 
                                            2021                                 2019 
                             Continuing  Discontinued     Total   Continuing  Discontinued     Total 
                             operations    operations             operations    operations 
Salaries                       (26,063)      (40,224)  (66,287)     (23,203)      (46,419)  (69,622) 
Employer contributions 
 to post-retirement funds       (2,123)       (2,459)   (4,582)      (1,884)       (2,802)   (4,686) 
Other staff costs               (8,270)      (11,643)  (19,913)     (11,250)       (7,441)  (18,691) 
                               (36,456)      (54,326)  (90,782)     (36,337)      (56,662)  (92,999) 
 

Notes:

1. Total equity-settled share-based payments costs of $2.3 million (2019: $2.5 million) have been included in other staff costs. Other staff costs comprise incentive pay, medical aid contributions, staff training and other staff-related expenses.

24.2. Auditor's remuneration

 
$'000                                    14 months to 28 February            12 months to 31 December 
                                                   2021                                2019 
                                     Continuing  Discontinued    Total   Continuing  Discontinued    Total 
                                     operations    operations            operations    operations 
Fees paid to external auditors          (2,423)         (707)  (3,129)      (1,242)         (582)  (1,824) 
 
Fees paid for audit services            (2,057)         (655)  (2,711)      (1,131)         (582)  (1,713) 
Fees paid for non-audit services:         (366)          (52)    (418)        (111)             -    (111) 
 Taxation-related services                 (43)          (35)     (78)         (52)             -     (52) 
 Other assurance services                 (323)          (17)    (340)         (59)             -     (59) 
 

25. Taxation

Accounting for taxation

Income tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case the tax is recognised in the same statement as the related item appears.

Current tax is the tax expected to be payable on the taxable profit for the year and any adjustment to tax payable in respect of previous years. Potential current tax liabilities that may arise on the basis of the amounts expected to be paid to the tax authorities are provided for. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the statement of financial position, and the amounts attributed to such assets and liabilities for tax purposes. Deferred tax is calculated using the tax rates expected to apply in the periods in which the assets will be realised or the liabilities settled. Current and deferred tax is calculated based on tax rates and laws enacted, or substantively enacted, at the reporting date.

Critical accounting estimates and judgements

The recognition of a deferred tax asset relies on an assessment of the probability and sufficiency of future taxable profits, future reversals of existing taxable temporary differences and ongoing tax planning strategies. In the absence of a history of taxable profits, the most significant judgements relate to expected future profitability and to the applicability of tax planning strategies, including corporate reorganisations. The Group has concluded that the deferred tax assets will be recoverable using the estimated future taxable income based on the approved business plans and budgets of the affected subsidiaries. The subsidiaries are expected to generate taxable profit from 2021 onwards. This estimate would be most sensitive to a change in the underlying projected profits, where a change of $1 million would have an approximate impact on the carrying value of +/- 25% (based on average tax rate for entities in tax jurisdictions).

25.1 Income tax expense

 
$'000                           14 months to 28 February                    12 months to 31 December 
                                          2021                                        2019 
                       Continuing  Discontinued              Total      Continuing  Discontinued       Total 
                       operations    operations                         operations    operations 
Current tax expense 
Current period tax 
 expense                  (4,446)       (2,928)            (7,374)             162         (915)       (753) 
Withholding tax           (1,436)       (1,606)            (3,042)           (288)       (1,298)     (1,586) 
Bank levies               (1,110)             -            (1,110)               -             -           - 
                          (6,992)       (4,534)           (11,526)           (126)       (2,213)     (2,339) 
Deferred tax 
Impairment losses           (769)             -              (769)         (3,798)         3,883          85 
Property and 
 equipment                (3,437)           235            (3,202)         (1,398)       (3,894)     (5,292) 
Gains/(losses) from 
 investments                  776             -                776           (419)             -       (419) 
Utilisation of 
 assessed losses                -       (3,367)            (3,367)           (635)         1,837       1,202 
Write-off of 
 deferred tax 
 assets                  (10,086)         (808)           (10,894)               -             -           - 
Currency revaluation      (2,595)             -            (2,595)         (3,829)       (4,114)     (7,943) 
Other                       4,710         1,432              6,142         (2,254)         2,440         186 
Total deferred tax       (11,401)       (2,508)           (13,909)        (12,333)           152    (12,181) 
Total tax expense 
 per statement 
 of profit or loss       (18,393)       (7,042)           (25,435)        (12,459)       (2,061)    (14,520) 
 
Reconciliation of 
effective 
tax charge: 
(Loss)/profit before 
 tax*                    (28,636)       (3,210)           (31,846)           4,696     (131,209)     (126,513) 
Income tax using 
 corporate 
 tax rates                 12,515       (4,698)              7,817         (4,126)         3,299         (827) 
Non-taxable income          3,595             -              3,595           (362)             -         (362) 
Tax exempt revenues       (4,104)             -            (4,104)           3,374            34         3,408 
Bank levies               (1,110)             -            (1,110)               -             -             - 
Non-deductible 
 expenses                   6,282           390              6,672            (41)       (1,928)       (1,969) 
Income tax at 
 different rates                -       (1,373)            (1,373)               2         (432)         (430) 
Unrecognised 
 deferred tax               (606)         (250)              (856)        (10,291)             -      (10,291) 
Impact of IAS 29 
 application              (7,303)             -            (7,303)               -             -             - 
Tax and fair value 
 losses 
 of prior years 
 claimed                    (426)          (64)              (490)             280             -           280 
Write-off of 
 deferred tax 
 assets                  (10,086)         (808)           (10,894)               -             -             - 
Other (1)                (17,150)         (239)           (17,389)         (1,295)       (3,034)       (4,329) 
Current tax expense 
 per statement 
 of profit or loss       (18,393)       (7,042)           (25,435)        (12,459)       (2,061)      (14,520) 
Effective tax rate          64.2%        219.4%              79.9%          265.3%          1.6%         11.5% 
 
 

(1) (Loss/profit) before tax line is restated. Refer to note 34.1 for further details of the restatement.

(2) Other relates to legal fees, entertainment charges, depreciation and amortization not deductible and effects of tax rate on foreign income

25.2. Income tax effects relating to components of other comprehensive income

 
14 months to           Continuing operations            Discontinued operations                    Total 
 28 February 2021 
 $'000 
                      Before      Tax      After        Before      Tax     After         Before      Tax      After 
                         tax   charge        tax           tax   charge       tax            tax   charge        tax 
Exchange 
 differences 
 on translating 
 foreign 
 operations        (119,534)        -  (119,534)      (28,469)        -  (28,469)      (148,003)        -  (148,003) 
Share of 
 associate 
 OCI                 (3,277)        -    (3,277)             -        -         -        (3,277)        -    (3,277) 
Movement in FVOCI 
 reserves                (8)     (11)       (19)         (349)       13     (336)          (357)        2      (355) 
                   (122,819)     (11)  (122,830)      (28,818)       13  (28,805)      (151,637)        2  (151,635) 
 
 
12 months to 31          Continuing operations           Discontinued operations                    Total 
 December 2019 
 $'000 
                        Before       Tax    After        Before       Tax     After        Before       Tax     After 
                           tax    charge      tax           tax    charge       tax           tax    charge       tax 
Exchange differences 
 on translating 
 foreign operations    (1,163)         -  (1,163)      (11,663)         -  (11,663)      (12,826)         -  (12,826) 
Share of reserves 
 in associate           12,552         -   12,552             -         -         -        12,552         -    12,552 
Movement in fair 
 value reserves          (149)       (1)    (150)            62      (12)        50          (87)      (13)     (100) 
Revaluation of 
 land and buildings      (563)       149    (414)             -         -         -         (563)       149     (414) 
                        10,677       148   10,825      (11,601)      (12)  (11,613)         (924)       136     (788) 
 

25.3. Current tax assets and liabilities

Movements on current tax assets and liabilities were as follows:

 
$'000                                              28 February  31 December 
                                                          2021         2019 
Balance at the beginning of the year                     1,476          753 
Exchange rate adjustment                                 (529)      (1,522) 
Statement of profit or loss charge                     (6,992)      (2,549) 
Corporate income tax paid                                3,553        8,098 
Prior year over/(under) provision                        1,413        5,460 
Income tax relating to disposal group classified 
 as held for sale                                            -      (8,764) 
Closing balance                                        (1,079)        1,476 
 
Disclosed as follows: 
Current tax asset                                           78        2,243 
Current tax liability                                  (1,157)        (767) 
Total                                                  (1,079)        1,476 
 

25.4 Deferred tax assets and liabilities

Movements on deferred tax assets and liabilities were as follows:

 
$'000                                                28 February  31 December 
                                                            2021         2019 
Balance at the beginning of the year                    (11,958)       22,118 
Exchange rate adjustment                                     129        1,897 
Statement of profit or loss charge (note 25.1)          (11,401)     (12,181) 
Deferred tax on amounts charged to equity (note 
 25.2)                                                      (11)          136 
Deferred tax relating to disposal group classified 
 as held for sale                                              -     (23,928) 
Closing balance                                         (23,241)     (11,958) 
 
Disclosed as follows: 
Deferred tax asset                                         2,388          149 
Deferred tax liability                                  (25,629)     (12,107) 
Total                                                   (23,241)     (11,958) 
 
Tax effects of temporary differences: 
Impairment losses                                          2,816        3,383 
Property and equipment                                   (6,680)      (3,495) 
Investment property                                        (782)        (406) 
Unrealised gains on investment                           (3,347)      (1,322) 
Revaluation surplus                                      (1,567)      (2,878) 
Other                                                   (13,681)      (7,240) 
                                                        (23,241)     (11,958) 
 

26. Earnings per share

Accounting for earnings per share

The Group presents basic and diluted EPS data for its ordinary shares. Basic earnings per ordinary share is calculated by dividing the profit attributable to ordinary shareholders of the parent company by the weighted average number of ordinary shares outstanding, excluding own shares held. Diluted earnings per ordinary share is calculated by dividing the basic earnings, which require no adjustment for the effects of dilutive potential ordinary shares, by the weighted average number of ordinary shares outstanding, excluding own shares held, plus the weighted average number of ordinary shares that would be issued on conversion of dilutive potential ordinary shares.

 
$'000                                         14 months to                        31 December 2019 
                                             28 February 2021 
                                    Continuing  Discontinued     Total   Continuing  Discontinued      Total 
                                    operations    operations             operations    operations 
Loss attributable to ordinary 
 shareholders                         (46,593)      (12,006)  (58,599)      (8,451)     (134,768)  (143,219) 
 
Basic and diluted earnings            (46,593)      (12,006)  (58,599)      (8,451)     (134,768)  (143,219) 
 
Weighted-average ordinary 
 shares (number of shares) 
Recognised as treasury shares          (5,395)       (5,395)   (5,395)      (1,327)       (1,327)    (1,327) 
Ordinary shares in issue               172,450       172,450   172,450      172,450       172,450    172,450 
Total weighted-average ordinary 
 shares (number of shares)             167,055       167,055   167,055      171,123       171,123    171,123 
 
Diluted number of ordinary 
 shares (number of shares) 
Diluted shares                             343           343       343          362           362        362 
Total diluted number of ordinary 
 shares (number of shares)             167,399       167,399   167,399      171,485       171,485    171,485 
 
Basic loss per share - $                (0.28)        (0.07)    (0.35)       (0.05)        (0.79)     (0.84) 
Diluted loss per share - $              (0.28)        (0.07)    (0.35)       (0.05)        (0.79)     (0.84) 
 

27. Analysis of changes in financing during the period

Reconciliation of movements of liabilities to cash flows arising from financing activities

 
$'000                     28 February 2021               31 December 2019 
                                                                              ------- 
                                 Borrowings    Leases  Borrowings       Leases 
Balance at 1 January                          366,809       6,670    410,157   18,981 
 
Changes from financing cash flows 
Proceeds from borrowings                      131,223           -     97,645        - 
Transaction costs related to borrowings         (669)           -    (1,055)        - 
Repayment of borrowings                      (26,018)           -   (32,727)        - 
Lease payments                                      -     (1,019)          -  (5,922) 
Total changes from financing cash 
 flows                                         96,170     (1,019)     63,863  (5,922) 
Other changes 
Interest expenses                              54,648         565     49,787    1,757 
Interest paid                                (22,662)       (455)   (30,101)    (309) 
Fair value adjustments                        (5,165)           -      1,510        - 
Reclassified as part of disposal 
 groups held for sale                               -           -   (96,705)  (7,270) 
Foreign exchange and other movements         (56,462)         410   (31,702)    (567) 
Total other changes                          (29,641)         520  (107,211)  (6,389) 
 
Closing balance                               441,704       6,171    366,809    6,670 
 
 

28. Related parties

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions, or one other party controls both. Related parties of the Group include subsidiaries, associates, and key management personnel ('KMP'). KMPs are defined as those persons having authority and responsibility for planning, directing and controlling the activities of Atlas Mara Limited (directly or indirectly) and comprise the Directors and senior management.

Parent company

The parent company, which is also the ultimate parent company, is Atlas Mara Limited.

Subsidiaries and associates

The main subsidiaries include:

-- ABC Holdings Limited ('ABCH'): This is the holding company of the ABC Group subsidiaries made up of African Banking Corporation of Botswana Limited; African Banking Corporation (Zimbabwe) Limited, Tanzania Development Finance Company Limited; and the subsidiaries held for sale: African Banking Corporation (Moçambique) S.A.; African Banking Corporation (Tanzania) Limited and African Banking Corporation Zambia Limited.

-- Banque Populaire du Rwanda Limited ('BPR').

-- Atlas Mara Financial Services Limited ('AMFS').

The Group also has investment in Union Bank of Nigeria which is accounted for as an investment in associate.

28.1 Transactions and balances with related parties

Related party transactions

 
$'000                                  14 months to 28 February                  12 months to 31 December 
                                                  2021                                      2019 
                              Management       Interest  Others     Total  Management  Interest  Others    Total 
                                    fees        income/                          fees   income/ 
                                                expense                                 expense 
Transactions between 
 Atlas Mara and ABCH                   -          2,787       -     2,787     (1,881)     2,580     827    1,526 
Transactions between 
 Atlas Mara and ABC 
 Group subsidiaries                    -        (1,468)       -   (1,468)       2,451   (2,136)       -      315 
Transactions between 
 Atlas Mara and Atlas 
 Mara Digital Ltd                      -              -     179       179           -         -      66       66 
Transactions between 
 Atlas Mara and founder 
 shareholders' affiliated 
 companies                             -              -      34        34           -         -   (632)    (632) 
Transactions between 
 Atlas Mara and shareholder 
 companies (1)                         -       (17,464)   (137)  (17,601)           -   (5,974)   (256)  (6,230) 
                                       -       (16,145)      76  (16,069)         570   (5,530)       5  (4,955) 
 

Related party balances

 
$'000                                      28 February 2021                             31 December 2019 
                                   Loans        Loans    Other      Total       Loans        Loans    Other     Total 
                                to Group   from Group                        to Group   from Group 
                               companies    companies                       companies    companies 
Balances between 
 Atlas Mara and ABCH                 470            -        -        470      15,692            -        -    15,692 
Balances between 
 Atlas Mara and Banc 
 ABC subsidiaries                      -     (13,432)  (3,289)   (16,721)           -     (11,964)      917  (11,047) 
Transactions between 
 Atlas Mara and Atlas 
 Mara Digital Ltd                      -            -      118        118           -            -     (61)      (61) 
Balances between 
 Atlas Mara and founder 
 shareholders' affiliated 
 companies                             -            -    (838)      (838)           -            -  (1,514)   (1,514) 
Balances between 
 Atlas Mara and shareholder 
 companies (1)                         -    (137,045)     (79)  (137,124)           -     (71,799)        -  (71,799) 
Other related party 
 balances (BPR, AMFS 
 and Eagle)                            -            -        -          -         190            -    (147)        43 
                                     470    (150,477)  (4,088)  (154,095)      15,882     (83,763)    (805)  (68,686) 
 

Note:

1. Transactions and balances with shareholder companies relate to transactions with Fairfax Africa Holdings Corporation and Fairfax Financial Holdings Limited.

All outstanding balances with these related parties, apart from the balances with shareholder companies, are to be settled in cash within twelve to twenty-four months (two years) of the reporting date. None of the balances are secured. Please refer to note 6 on borrowed funds for details of the balances with Fairfax Africa Holdings Corporation and Fairfax Financial Holdings Limited.

28.2 Transactions with key management personnel

 
$'000                             14 months            12 months 
                                         to                   to 
                                28 February          31 December 
                                       2021                 2019 
Short-term employee benefits          2,284                3,118 
Post-employment benefits                304                  183 
Share-based payment expenses            861                1,510 
Other benefits                        2,621                1,941 
                                      6,070                6,752 
 

28.3 Directors' remuneration

 
$'000                                             14 months     12 months 
                                                         to            to 
                                                28 February   31 December 
                                                       2021          2019 
Executive Directors 
Salary, performance-related remuneration and 
 other                                                (292)         (500) 
Non-Executive Directors 
Fees as Director of holding company                 (2,826)       (2,482) 
Total directors' remuneration                       (3,118)       (2,982) 
 

Notes:

-- The executive directors' fees include the cash component of $145.8k (2019: $171.9k) and share based component of $145.8k (2019: $183k).

-- Non-executive directors' fees include a cash component of $654.2k (2019: $475k), share based component of $291.2k (2019: $419k) and share options of $1.7 million (2019: $1.59 million).

29. Funds under management

 
$'000                    28 February  31 December 
                                2021         2019 
Funds under management        87,697       36,777 
 

The Group provides asset management and unit trust activities to pension funds, individuals, trusts and other institutions, whereby it holds and manages assets. The Group receives a management fee for providing these services. The Group is not exposed to any credit risk relating to such placements as these do not represents assets held by the Group.

30. Collateral

Liabilities for which collateral is pledged:

 
$'000                     28 February  31 December 
                                 2021         2019 
Deposits from banks               856        4,530 
Deposits from customers           134        1,859 
Borrowed funds                 29,870       52,743 
                               30,860       59,132 
 

Assets pledged to secure these liabilities are as follows:

 
$'000                       28 February  31 December 
                                   2021         2019 
Advances                         43,005       45,122 
Financial assets at FVTPL             -        3,925 
Investment securities            22,612       35,418 
Property and equipment            3,170        3,258 
                                 68,787       87,723 
 

These transactions are conducted under terms that are usual and customary to standard lending and borrowing activities.

31. Leases

Accounting for leases

The Group applies IFRS 16 using the modified retrospective in accounting for its leases.

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At commencement or on modification of a contract that contains a lease component, the Group allocates consideration in the contract to each lease component on the basis of its relative standalone price. However, for leases of branches and office premises the Group has elected not to separate non-lease components and accounts for the lease and non-lease components as a single lease component.

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove any improvements made to branches or office premises.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. The Group determines its incremental borrowing rate by analysing its borrowings from various external sources and makes certain adjustments to reflect the terms of the lease and type of asset leased.

Lease payments included in the measurement of the lease liability comprise the following:

-- fixed payments, including in-substance fixed payments;

-- variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

-- amounts expected to be payable under a residual value guarantee; and

-- the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets in 'property and equipment' and lease liabilities in 'Other liabilities' in the statement of financial position

31.1 Right-of-use assets

Right-of-use assets relate to leased branch and office premises that are presented as part of Land and buildings, within property and equipment.

 
$'000                                          28 February  31 December 
                                                      2021         2019 
Balance at 1 January                                 6,391       18,981 
Additions                                                -           33 
Depreciation charge for the period                 (1,222)      (4,548) 
Foreign exchange adjustment                            235        (617) 
Reclassified as part of disposal groups held 
 for sale                                                -      (7,458) 
                                                     5,404        6,391 
 

31.2 Lease liabilities

 
$'000         28 February  31 December 
                     2021         2019 
Current             1,329        1,173 
Non-current         4,842        5,497 
                    6,171        6,670 
 

31.3 Amounts recognised in the statement of cash flow

 
$'000                           28 February  31 December 
                                       2021         2019 
Total cash outflow for leases         1,474        5,921 
 

31.4 Amounts recognised in the statement of profit or loss

 
$'000                                           28 February  31 December 
                                                       2021         2019 
Depreciation charge on right-of-use assets            1,222        5,122 
Interest expense on lease liabilities                   565        1,757 
Lease expenses included in operating expenses             -          266 
 

32. Disposal groups classified as held for sale and discontinued operations

Critical accounting estimates and judgements

In determining the fair value less costs to sell of the disposal groups held for sale, the Group makes use of estimates based on the proposed multiples as part of the on-going negotiation with potential buyers. The fair value of the disposal groups has been determined as the estimated recoverable amount based on negotiations with potential buyers. The non-recurring fair value measurement for the disposal group has been categorised as a level 3 fair value based on the inputs to the valuation technique used.

On 30 April 2019, the Group publicly announced its intention to dispose of its investments in the following subsidiaries: African Banking Corporation (Moçambique) S.A.; African Banking Corporation (Tanzania) Limited; African Banking Corporation Zambia Limited; and Banque Populaire du Rwanda Limited ('BPR'). The assets and associated liabilities of the disposal groups were classified as held for sale at that date and reported at the lower of fair value less to sell.

Current year update on sale transaction

On 29 September 2020, the Group through its subsidiary, ABCH, entered into a definitive agreement with Access Bank Plc for the sale of the Group's 100% shareholding in African Banking Corporation Mocambique S.A. Following regulatory approvals and conclusion of other customary conditions precedent, the transaction was completed and ownership as well as control transferred to Access Bank Plc on 17 May 2021. Of the assets and related liabilities of the disposal groups classified as held for sale as at 28 February 2021, the fair value of assets relating to ABC Moçambique was $199.9 million while the related liabilities was $183.5 million.

On 26 November 2020, the Group entered into a definitive agreement with KCB Group Plc for the sale of the Group's 97.3% shareholding in African Banking Corporation Tanzania Limited and 62.06% shareholding in BPR. The transactions have been approved by the respective regulatory authorities and in the case of BPR, the sale was subsequently finalised on 25 August 2021 and control of the subsidiary transferred to KCB as at that date. Sale of ABC Tanzania is expected to be concluded before the end of the year. Of the assets and related liabilities of the disposal groups classified as held for sale as at 28 February 2021, the fair value of assets relating to BPR was $433.9 million while the related liabilities was $401.0 million.

The Group is still actively engaged in negotiations with other potential buyers for African Banking Corporation Zambia Limited, with a view to completing the disposal of the subsidiary by or before the end of the year; hence it still remains classified as a disposal group held for sale in line with IFRS 5: Non-current assets held for sale and discontinued operations .

The assets included in disposals groups classified as held for sale and the associated liabilities are presented in the table below:

 
$'000                                                28 February  31 December 
                                                            2021         2019 
Assets included in disposal groups classified 
 as held for sale 
Cash and short-term funds                                308,788      245,685 
Loans and advances                                       392,444      371,489 
Investment securities                                    224,317      181,453 
Property and equipment                                    50,984       64,358 
Investment property                                        6,671        8,965 
Current tax assets                                         8,152        5,192 
Deferred tax assets                                        3,465       13,685 
Other assets                                             106,562       88,818 
                                                       1,101,383      979,645 
Liabilities included in disposal groups classified 
 as held for sale 
Deposits                                                 832,826      697,063 
Borrowed funds                                           126,118       96,705 
Current tax liabilities                                    1,671           17 
Deferred tax liability                                     4,438        7,212 
Other liabilities                                         57,595       73,238 
                                                       1,022,648      874,235 
Net assets directly associated with disposal 
 group                                                    78,735      105,410 
 

33. Share-based payment transactions

Accounting for share-based payments

Employees (including senior executives) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions). Employees working in the business development group are granted share appreciation rights, which are settled in cash (cash-settled transactions).

Equity-settled transactions

The CoE-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. That cost is recognised, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The statement of profit or loss expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.

No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting is conditional upon a market or non-vesting condition. These are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

When the terms of an equity-settled award are modified, the minimum expense recognised is the expense had the terms not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction or is otherwise beneficial to the employee as measured at the date of modification.

Cash-settled transactions

The cost of cash-settled transactions is measured initially at fair value at the grant date using a binomial model. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to and including the settlement date, with changes in fair value recognised in employee benefits expense.

Critical accounting estimates and judgements

Atlas Mara has entered into equity-settled share-based payment arrangements with its employees and Directors as compensation for services provided. The grant-date fair value of share-based payment awards - i.e. stock options - granted to employees is recognised as personnel expenses, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the awards.

The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

Fair value is determined by using appropriate valuation models. Vesting conditions include service conditions. Vesting conditions are not taken into account in the initial estimate of the fair value at the grant date. They are taken into account by adjusting the number of equity instruments included in the measurement of the share-based payment transaction. In determining the grant date fair value of the equity-settled share-based payments, the Group has made key assumptions in relation to inputs included in the valuation methodology, the most significant thereof, relating to the expected volatility of the Atlas Mara shares. In making these assumptions the following were taken into account to determine a proxy volatility:

   --      Volatility of the traded shares of the significant investments held by the Group. 
   --      Volatilities of peer group companies in the same markets as the significant investments 

Description of share-based payment arrangements

Atlas Mara currently operates three share-based remuneration arrangements for key management, directors and employees. These programmes are limited to Directors, key management and senior employees. The key terms and conditions related to these arrangements are listed below. All options/grants are settled by the physical delivery of shares. A number of options were granted to employees to buy Atlas Mara shares, as traded on the London Stock Exchange, in the future at a predetermined price (strike price).

Employee/consultant options

These options were granted to employees and consultants of Atlas Mara. These options were granted under terms similar to the Atlas Mara Global Share Plan. Under this plan the employee/consultant is required to remain employed or engaged with the Group during the vesting period. Requirements are subject to Board discretion. One-third of the options vests on the grant date (8 September 2014 and 15 November 2014 respectively), one-third of the options vests on the first anniversary of the grant date and the remaining third vests on the second anniversary of the grant date. All vested options expire seven years from the grant date. Management indicated that the employees are not entitled to dividends (if any) prior to the vesting date, nor will they receive the value of the dividends that they would have earned if they had been the owner of the shares from grant date.

Summary of Share Awards Scheme operation

Awards C - M

The employee must remain in the employment of the Group for the duration of the vesting period in order to be eligible to receive the shares.

The vesting of the shares occurs on variable dates as summarised below.

The employees are not entitled to dividends (if any) prior to the vesting date, nor will they receive the value of the dividends that they would have earned if they had been the owner of the shares from grant date.

 
            Share Options Scheme 
            Employee options 
                Award      Award        Award      Award   Award   Award   Award     Award     Award 
                    C          D            E          F       G       H       I         J         K 
            31-Mar-15  19-Nov-15    11-Jan-16  11-Jan-16  27 Apr  25 Aug  03 Oct  4-Oct-17  1-May-18 
Grant date                                                    16      16      17 
Vesting     31-Mar-15  19-Nov-15    11-Jan-16  11-Jan-16  27 Apr  25 Aug  03 Oct  4-Oct-22  1-Nov-19 
 dates                                                        17      16      22 
            31-Mar-16  19-Nov-16     1-Mar-16  11-Jan-17  27 Apr  25 Aug                    1-May-23 
                                                              18      17       -         - 
            31-Mar-17  19-Nov-17    11-Jan-17  11-Jan-18  27 Apr  25 Aug 
                                                              19      18       -         - 
                                     1-Mar-17                  -       -       -         - 
                                    11-Jan-18                  -       -       -         - 
Expiry         31 Mar     19 Nov       11 Jan     11 Jan  27 Apr  25 Aug  04 Oct  4-Oct-27  4-May-28 
 date              22         22           23         23      23      23      27 
 
 
         Share Awards Scheme 
          Award   Award   Award   Award   Award   Award   Award   Award   Award   Award   Award      Award        Award 
              A       C       D       E       F       G       H       I       J       K       L          M            M 
Grant     8 Sep  31 Mar  19 Nov  14 Dec  11 Jan  11 Jan  27 Apr  27 Apr  27 Apr  27 Apr  25 Aug  22-Mar-17    22-Mar-17 
 date        14      15      15      15      16      16      16      16      16      16      16 
Vesting   8 Sep  31 Mar   1 Mar  14 Dec   1 Mar   1 Mar  27 Apr  27 Apr  27 Apr   1 Mar   1 Mar  22-Mar-17     1-Apr-17 
 dates       14      15      16      15      16      17      17      16      16      17      17 
          1 Apr  31 Mar   1 Mar   1 Mar   1 Mar   1 Mar  27 Apr  27 Apr   1 Mar   1 Mar   1 Mar  22-Mar-18     1-Apr-18 
             15      16      17      17      17      18      18      17      17      18      18 
          1 Apr  31 Mar   1 Mar   1 Mar   1 Mar          27 Apr  27 Apr  27 Apr           1 Mar  22-Mar-19     1-Apr-19 
             16      17      18      18      18       -      19      18      17       -      19 
          1 Apr                                                           1 Mar 
             17       -       -       -       -       -       -              18       -       -          -            - 
Expiry                                                                   27 Apr 
 date         -       -       -       -       -       -       -              18       -       -          -            - 
 
 

Reconciliation of outstanding share options

The following table illustrates the number and weighted average exercise prices ('WAEP') of, and movements in, share options during the year:

 
                                28 February 2021     31 December 2019 
                               Number of  WAEP ($)     Number of  WAEP 
                                 options                 options   ($) 
Outstanding at 1 January      12,950,666      3.43    14,783,999  3.31 
Granted during the period              -         -             -     - 
Forfeited during the period            -         -   (1,800,000)  2.36 
Expired during the period              -         -      (33,333)  7.18 
Outstanding at period-end     12,950,666      3.43    12,950,666  3.43 
Exercisable at period-end      7,555,666      4.20     7,555,666  4.20 
 

The options outstanding at 28 February 2021 had an exercise price in the range of $2.00-11.50 (31 December 2019: $2.00-11.50) and a weighted-average contractual life of 4.7 years (31 December 2019: 5.89 years).

Measurement of fair values of options granted

The fair value of the share grants have been measured using the binomial model. Service conditions attached to the transactions were not taken into account in the measurement of fair value. The fair value of a share award is based on the share price at the date of the grant. The model and key assumptions used in the valuation are as follows:

 
Expected volatility (%)                     25.63/38.17 
Risk-free interest rate (%)              0.90/1.20/1.70 
Expected life of share options (years)              <10 
Weighted average share price ($)                   3.59 
 

The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.

Share options outstanding at the end of the year have the following expiry dates, exercise prices and fair values:

 
Grant date           Expiry date    Exercise  Fair value     Spot  Share options  Share options 
                                      Price    per option   price    28 February    31 December 
                                                                            2021           2019 
                     08 September 
08 September 2014     2021           11.00       2.29       10.10        436,333        436,333 
                     15 November 
15 November 2014      2021            9.50       2.41        9.50        145,000        145,000 
                     26 March 
26 March 2015         2022            7.18       1.69        7.00        416,000        416,000 
                     26 March 
26 March 2015         2025            7.18       1.69        7.00        500,000        500,000 
                     19 November 
19 November 2015      2022            5.68       1.68        5.68        313,333        313,333 
                     11 January 
11 January 2016       2023            5.00       1.49        5.25        700,000        700,000 
                     27 April 
27 April 2016         2023            4.28       1.24        4.30        925,000        925,000 
                     25 August 
25 August 2016        2023            3.05       0.81        3.00         20,000         20,000 
                     3 October 
3 October 2017        2026            2.36       2.17        3.53      8,100,000      8,100,000 
                     4 October 
4 October 2017        2027            2.36       1.99        3.56      1,395,000      1,395,000 
                                                                      12,950,666     12,950,666 
Weighted average remaining contractual                                      4.72     5.90 years 
 life (years) 
 

The spot prices are the prices per Atlas Mara share as traded on the London Stock Exchange, as at the respective grant dates, and were sourced from Bloomberg.

Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows:

 
                                              14 months     12 months 
                                                     to            to 
                                            28 February   31 December 
                                                   2021          2019 
Expenses relating to staff share options      2,726,817     2,427,351 
Expenses relating to staff share awards               -        51,390 
                                              2,726,817     2,478,741 
 

34. Correction of prior period error

34.1 IFRS 5 remeasurement loss

During the year, management realised that the IFRS 5 remeasurement loss was incorrectly presented after the profit/(loss) before tax line on the consolidated statement of profit or loss for the year 2019. This constitutes a prior year error in terms of IAS 8. As a result of this error, "profit/(loss) before tax" presented in the consolidated statements of profit or loss and cash flows, was overstated in 2019 but has now been corrected. The impact of the correction of this error on the consolidated statements of comprehensive income and cash flow has been shown in the table below:

   a)   Consolidated statement of comprehensive income 
 
$'000                       Previously 
                              reported  Adjustments   As restated 
IFRS 5 remeasurement loss    (105,461)            -     (105,461) 
Profit/(loss) before tax      (25,748)    (105,461)     (131,209) 
 
Loss for the year            (133,270)            -     (133,270) 
 
   b)   Consolidated statement of cash flows 
 
$'000                                        Previously 
                                               reported  Adjustments   As restated 
Profit/(loss) before tax                       (25,748)    (105,461)     (131,209) 
IFRS 5 remeasurement loss                             -      105,461       105,461 
 
Net cash outflow from operating activities 
 before changes in operating funds            (104,748)            -     (104,748) 
 

35. Events after the reporting date

Sale of African Banking Corporation of Botswana Limited

On 19 April 2021, the Group announced that it has entered into definitive agreements with Access Bank Plc for the sale of the remaining 78.15% shareholding in African Banking Corporation Botswana. The transaction is subject to fulfilment of various customary conditions precedent. The transaction is expected to conclude before the end the year. Based on management's assessment as at reporting date, the subsdiairy did not meet the requirements to be classified as held for sale in line with IFRS 5 as management was not fully committed to the plan to sell the subsidiary until regulatory approval was obtained.

Support and override agreement ("SOA")

On 14 July 2021, the SOA was signed by majority of the Group's lenders The lenders who are a party to the SOA have agreed to forbearances in respect of certain events of default under their relevant facilities, while the Support and Override Agreement is effective, including (i) non-payment of amounts due under the financing agreements, (ii) any deterioration in the financial or operational performance of the Group as a result of COVID-19, and (iii) any breach of any financial covenant under the financing agreements.

Below are the lenders that have accepted to the revised terms and signed the SOA:

-- Nineteen77 Global Multi-Strategy Alpha Master Limited

-- Convertible bonds - CERVO (Majority)

-- Nineteen77 Capital Solutions A LP

-- HFP Investments Limited

-- Helios FairFax Partners Corporation

-- Fairfax Financial Holdings Limited

-- Export Development Canada ('EDC')

-- U.S. International Development Finance Corporation ('DFC')

-- Afrexim Bank Limited

Under the new restructuring agreement, the debt and repayment profile of the lenders that signed the SOA are as follows:

Nineteen77 Global Multi-Strategy Alpha Master Limited

In accordance with the SOA, all recoveries from sale of UBN shares shall be distributed to the first lien UBN secured creditors based on the proportion of the UBN Shares held as security. Nineteen77 Global Multi-Strategy Alpha Master Limited hold 8.7% of first lien UBN Security and 13.4% of second lien UBN Security. Nineteen77 Global Multi-Strategy Alpha Master Limited qualifies for 21.5% of fund recovery from the proceeds received by the Group with respect to the UBN share disposal, which will be utilised to repay the lenders dues, as per the first lien UBN security.

If funds under second Lien UBN recoveries are insufficient to repay the Nineteen77 Global Multi-Strategy Alpha Master Limited in full, the Nineteen77 Global Multi-Strategy Alpha Master Limited shall recover excess UBN recoveries in its capacity as an unsecured ATMA Creditor.

Convertible bonds - CERVO (Majority)

Majority of the convertible bondholders under the SOA implies that participating bondholders are in aggregate at least 60% of the principal amount outstanding under the Convertible Bonds. Convertible Bondholders are secured bondholders under first lien UBN security, holding 12.8% of shares in UBN as first lien UBN security and 8.7% of second lien UBN Security. Pursuant to the agreement, 31.7% of recoveries from disposal of UBN Shares due to the Group will be utilised to settle the Bondholders under first lien UBN security. Under the Convertible bond second Lien UBN Security, any excess UBN Recoveries attributable to Nineteen77 Global Multi-Strategy Alpha Master Limited First Lien UBN Security will be repaid to the Convertible Bond Trustee provided that Nineteen77 Global Multi-Strategy Alpha Master Limited facility is settled in full. In addition, bondholders will be eligible for recoveries from redemption of the preference share instrument issued to ABCH by its subsidiary, ABC Tanzania, as part of a recapitalisation of ABC Tanzania, subject to priority given to Nineteen77 Global Multi-Strategy Alpha Master Limited and ranking pari passu with EDC with respect to these proceeds.

In the event that the funds of the Convertible Bond Second Lien UBN Recoveries is not enough to repay the Convertible Bonds in full, the Convertible Bond Trustee shall only be entitled to recover excess UBN Recoveries on behalf of the Convertible Bondholders in its capacity as an unsecured ATMA Creditor.

Nineteen77 Capital Solutions A LP

The Nineteen77 Capital Solutions A LP bondholders hold a proportion of 6.7% of UBS bonds first lien UBN security because of which 16.6% of funds recovered by the Group from UBN share disposal shall be distributed to settle Nineteen77 Capital Solutions A LP outstanding balance.In the event, where the funds from UBN Recoveries under first lien are not enough to repay the entire liability of Nineteen77 Capital Solutions A LP, the lender shall recover excess UBN Recoveries in its capacity as an unsecured ATMA Creditor.

HFP Investments Limited (previously Fairfax Africa Holdings Investments Limited)

Fairfax Convertible Bondholders hold 6.7% of UBN shares under first lien UBN security. According to the restructuring terms, 16.6% proceeds received by the Group from sale of UBN Shares shall be allocated to settle the Bondholders under the first lien UBN security. In circumstances, where the amount recovered from UBN proceeds under first lien are inadequate to repay the HFP Investments Limited facility entirely, the lender is entitled to recover excess UBN Recoveries in its capacity as an unsecured ATMA Creditor.

Helios Fairfax Partners Corporation "HFP" (previously Fairfax Africa holdings Corporation) and HFP TLG Guarantee

0.7% of UBN shares are collateralised to HFP under first lien UBN security. In line with the restructuring terms, 1.7% recoveries by the Group from the sale of UBN Shares will be utilised to pay off the Helios Fairfax Partners Corporation outstanding liability under first lien UBN security. The remaining balance of Fairfax Africa holdings Corporation and TLG Guarantee paid by HFP is due to be settled from 90% of the net upfront recoveries from ABC Botswana Proceeds in the proportions agreed among the ABC Botswana Secured Creditors.

Fairfax Financial Holdings Limited

Based on the SOA, 90% of the net upfront recoveries from ABC Botswana Proceeds (net of the intercompany debt owed by ABCH to ABC Botswana) will be distributed to the discharge liabilities from ABC Botswana Secured Creditors such as Fairfax Financial Holdings Limited in the proportions agreed among the ABC Botswana Secured Creditors and notified to the ABC Global Agent.

Export Development Canada ('EDC')

In agreement with the terms, 4.8% of UBN shares are held as security to EDC under first lien UBN security, due to which, 11.9% of UBN proceeds received by the Group will be distributed to EDC to settle the outstanding balance. Furthermore, funds obtained from redemption of the preference share instrument issued to ABCH by its subsidiary, ABC Tanzania, as part of a recapitalisation of ABC Tanzania, subject to priority given to Nineteen77 Global Multi-Strategy Alpha Master Limited and ranking pari passu with the Convertible Bondholders, will be applied to discharge the remaining EDC liability.

U.S. International Development Finance Corporation ('DFC')

With reference to the SOA, $7.5 million of BPR recoveries shall be distributed to ABC Zambia by ABCH for issuance of a preference share instrument by ABC Zambia in favour of ABCH to effect a recapitalisation of ABC Zambia in accordance with the terms of the sale and purchase agreement with respect to the disposal of ABC Zambia.This consideration shall be utilised by ABC Zambia for settlement of the DFC Zambia Facility in order to complete the disposal of ABC Zambia. The remaining balance to be settled from DFC from ABC Zambia sale proceeds. In case the DFC ABC Zambia milestone is not achieved, all BPR recoveries (other than the funds for working capital assigned to Group as per SOA), shall be paid to DFC.

Afrexim Bank Limited, AATIF and Norsad Finance Limited

As specified under the terms of the SOA, settlement of ABCH creditors will be in staggered installments with 10% of the net upfront proceeds from the disposal of ABC Botswana (after offset of the intercompany debt owed by ABCH to ABC Botswana) applied towards the discharge of liability from AFREXIM, AATIF and Norsad, on a pari passu basis.

The remaining balance to be settled from 50% of the earn out recoveries from ABC Botswana, ABC Mozambique proceeds (after adjustment the Central Bank of Mozambique Claim), ABC Tanzania proceeds, TDFL proceeds utilised to repay AFREXIM, AATIF and Norsad, on a pro rata and pari passu basis. In addition to this, ABC Zimbabwe recoveries shall be paid to Afrexim to discharge ABC Zimbabwe's guarantee obligations under the Afrexim facility agreement.

Of the three ABCH lenders, only Afrexim Bank Limited consented to the restructuring terms and signed the SOA.

35.3 Settlement of debt obligation to TLG Credit Opportunities Fund ("TLG Credit")

On 31 December 2019, the Group reached a $20 million loan agreement with TLG Credit, out of which $8 million was drawn down in 2020. The loan was secured against BancABC Botswana shares owned indirectly by Group (and directly by ABC Holdings Limited) and backed by a guarantee from Fairfax Africa Holdings Corporation. The loan accrued interest at the rate of 10%, payable half-yearly every 30 June and 31 December, maturing in January 2021.

On 7 December 2020, TLG Credit issued a notice to the Group and Fairfax Africa demanding repayment of the total outstanding commitment and subsequently called in the guarantee on 8 January 2021. Fairfax Africa Holdings Corporation discharged its obligation as a guarantor and settled the outstanding dues to TLG Credit Opportunities Fund.

35.4 Demand for settlement of AATIF Facility

On 8 June 2021, Group received a notice from AATIF for repayment of outstanding balance due to AATIF of $16.9 million. The Group is in discussions with AATIF to find a mutually acceptable resolution since the SOA prevents the Group from repayment to any lenders unless explicitly stated in the SOA.

35.5 TLG litigation against ATMA

On 17 February 2021, TLG filed an application with the High Court of Justice (Commercial Division) in the British Virgin Islands Court against Atlas Mara Limited, seeking to appoint joint liquidators. The Group successfully defended the TLG Application. On 21 July 2021, the High Court of Justice dismissed the Application in all respects.

35.6 Norsad litigation against ABCH

On 9 April 2021, Norsad filed a petition in terms of the Botswana Companies Act [Cap 42:01] seeking that the Group's subsidiary, ABCH be placed under provisional winding up. This action relates to ABCH and does not affect the operating subsidiaries.

The Group, through ABCH, opposes the request for a winding-up order and has appealed that the Court dismiss the liquidation application citing that the liquidation application invokes the interest of numerous stakeholders whose interests extend beyond the mere commercial relationship between the applicant and defendant.

The Group is in discussions with Norsad to find a mutually acceptable resolution. A procedural hearing in relation to Norsad's application is scheduled for September 2021 before the High Court of Botswana.

35.7 Sale and transfer of ownership of disposal groups held for sale

During the period ended 28 February 2021, the Group completed the sale process for two (2) out of the four (4) subsidiaries classified as disposal groups held for sale. These subsidiaries include African Banking Corporation (Moçambique) S.A and Banque Populaire du Rwanda Limited. Details of the sale are summarised below:

   i.     Sale of ABC Mozambique 

The Group successfully completed the sale of 100% of its shareholding in African Banking Corporation (Moçambique) on 17 May 2021. The transfer of control to Access Bank Mozambique was effective on the same date. Details of the sale of the subsidiary are shown below:

 
$'000                                                      17 May 2021 
Cash                                                            11,915 
Fair value of deferred consideration                             7,367 
Total consideration                                             19,282 
Carrying value of ABC Mozambique's net assets as at date 
 of disposal                                                    18,220 
Gain on disposal                                                 1,062 
Reclassification of foreign currency translation reserve       (8,286) 
Net impact of disposal                                         (7,224) 
 
   ii.    Sale of BPR 

The Group successfully completed the sale of its 62.06% shareholding in BPR to KCB on 25 August 2021. The transfer of control to KCB was effective as at that date. Details of the sale of the subsidiary are shown below:

 
$'000                                                       25 August 2021 
Cash                                                                33,028 
Fair value of deferred consideration                                 2,831 
Total consideration                                                 35,859 
Carrying value of BPR's net assets as at date of disposal           32,922 
Gain on disposal                                                     2,937 
Reclassification of foreign currency translation reserve 
 (net of NCI)                                                        8,085 
Net impact of disposal                                              11,022 
 

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September 01, 2021 03:51 ET (07:51 GMT)

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