Integrated Report & 2020 Financial Statements EQUITY GROUP HOLDINGS PLC AND SUBSIDIARIES INTEGRATED REPORT & FINANCIAL STATEMENTS / FOR THE YEAR ENDED 31 DECEMBER 2020 20 20 INTEGRATED REPORT AboutAND FINANCIAL STATEMENTS This Report A key aspect of our business conduct is to regularly provide our stakeholders with information on Equity Group Key Concepts Holdings Plc (“Equity”, “Equity Group” or “Group”). We prepare various reports in this respect aimed at addressing stakeholder information requirements and ensuring that Defining Values we remain transparent and accountable. As an ethical and Value creation is the consequence of how we responsible financial services provider, our reports provide apply and leverage our capitals to deliver a mechanism for ongoing deliberations and engagements financial performance (outcomes) and value with various stakeholders. It is this willingness to be (outcomes and outputs) for stakeholders while above board and open that drives our publication of an making trade-offs. Our value creation process annual integrated report. Primarily, we use the Integrated is embedded in our purpose and is described as Report to respond or demonstrate to our financial capital part of our business model and integrated into providers, how we create and share value on a sustainable the way we think and make decisions. basis. This report showcases our ongoing progress and performance, consistent with our overarching intent to produce sustainable value for our stakeholders and best in class customer experience and satisfaction. It is the summary of our strategies, our business, products Materiality & and services and particularly the way we generate and Material Matter distribute value in the short, medium and long term. We apply the principle of materiality in This report covers the financial year from1st January 2020 assessing which information is to be included to 31st December 2020. The financial information presented in our Integrated Report. This report focuses is prepared in line with the International Financial Reporting particularly on those issues, opportunities and Standards (IFRS), while non-financial information is challenges that impact materially on Equity presented in accordance with the International Integrated Group and its ability to be a sustainable business Reporting Council’s (IIRC) guidelines provided in the that consistently delivers value to Shareholders, International Integrated Reporting Framework. prospective investors and our key stakeholders. Our material matters influence our Group’s strategy and inform the content in this report. Purpose of this Report Our Integrated Report provides information that enables Equity Group stakeholders to make an informed assessment of our ability to create sustainable value. The aim of this Integrated Report is to clearly and The Capital concisely tell the story of Equity, who we are, what we do, and how we create value. This report documents our Our relevance as a Group today and in the strategy, opportunities and risks, our business model and future, and our ability to create long-term value governance, and our performance against our strategic is interrelated. It is fundamentally dependent on objectives in a way that gives stakeholders a holistic view of the forms of capital available to us (inputs), how Equity Group and our future prospects. we use these capitals (value-adding activities), our impact on them and the value we deliver (outputs and outcomes). 2 EQUITY GROUP HOLDINGS PLC AND SUBSIDIARIES INTEGRATED REPORT & FINANCIAL STATEMENTS / FOR THE YEAR ENDED 31 DECEMBER 2020 20 20 INTEGRATED REPORT AND FINANCIAL STATEMENTS TABLE OF CONTENTS WHO WE ARE 98 - 99 ETHICS AND SOCIAL RESPONSIBILITY 5 - 6 ABOUT US 99 COMPLIANCE WITH LAWS AND REGULATIONS 7 KEY GROUP HIGHLIGHTS 99 - 100 TRANSPARENCY AND DISCLOSURE 8 GROUP STRUCTURE 100 ACCOUNTABILITY, RISK MANAGEMENT AND INTERNAL CONTROL 9 OUR FOOTPRINT 100 - 101 DIRECTORS’ REMUNERATION REPORT 10 - 11 BUSINESS VALIDATION 101 - 102 THE GROUP BOARD 12 MARKET VALIDATION 103 - 105 BOARD COMMITTEES 1 3- 15 NOTICE OF THE 17TH AGM 105 BOARD CHANGES 16 - 20 MESSAGE FROM THE GROUP CHAIRMAN 106 BOARD EVALUATION 21 - 25 CHIEF EXECUTIVE OFFICER’S STATEMENT 106 TRAINING 26 - 27 GROUP BOARD OF DIRECTORS 106 - 107 MANAGEMENT COMMITTEES 28 - 30 GROUP EXECUTIVE MANAGEMENT 107 COMPANY SECRETARY MANDATE AND ROLE 107 - 108 MEMBERSHIP ASSOCIATIONS OUR BUSINESS 108 REPRESENTATION OF RETAIL SHAREHOLDERS 32 OUR BUSINESS MODEL 108 - 109 PARTICULARS OF SHAREHOLDING 32 OUR STRATEGY 109 - 110 THE LARGEST SHAREHOLDERS OF EQUITY GROUP 33 VALUE CREATION MODEL HOLDINGS PLC 34 - 35 STAKEHOLDERS 110 STATEMENT OF THE RESPONSIBILITY OF DIRECTORS 36 - 38 MATERIAL ISSUES FINANCIALS 2020 BUSINESS PERFORMANCE 113 GROUP AND COMPANY INFORMATION 40 - 42 OPERATING CONTEXT 114 - 116 DIRECTORS’ REPORT 43 - 49 OPERATING ENVIRONMENT 117 –119 DIRECTORS’ REMUNERATION REPORT 50 - 51 BUSINESS HIGHLIGHTS 2020 120 STATEMENT OF DIRECTORS’ RESPONSIBILITIES 52 - 58 SUBSIDIARY PERFORMANCE 2020 121 - 125 INDEPENDENT AUDITOR’S REPORT 59 - 63 PERFORMANCE AGAINST OUR FOCUS AREAS FINANCIAL STATEMENTS OUR CAPITALS 126 CONSOLIDATED STATEMENT OF PROFIT OR LOSS 65 FINANCIAL CAPITAL 127 CONSOLIDATED STATEMENT OF COMPREHENSIVE 66 - 67 HUMAN CAPITAL INCOME 67 - 69 INTELLECTUAL CAPITAL 128 COMPANY STATEMENT OF PROFIT OR LOSS AND 69 - 71 MANUFACTURED CAPITAL OTHER COMPREHENSIVE INCOME 71 - 80 SOCIAL AND RELATIONSHIP CAPITAL 129 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 81 – 84 SUSTAINABLE DEVELOPMENT GOALS (SDGs) 130 COMPANY STATEMENT OF FINANCIAL POSITION 131 - 132 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONTROL ENVIRONMENT 133 COMPANY STATEMENT OF CHANGES IN EQUITY 86 - 88 RISK MANAGEMENT AND COMPLIANCE 134 CONSOLIDATED STATEMENT OF CASH FLOWS 88 - 89 REGULATORY LANDSCAPE 135 COMPANY STATEMENT OF CASH FLOWS 89 – 94 RISK MANAGEMENT AND COMPLIANCE WITHIN THE BUSINESS CONTEXT 137 - 239 NOTES CORPORATE GOVERNANCE DIRECTOR PROFILES 96 - 98 BOARD OPERATIONS & CONTROL 240 - 251 CONSOLIDATED BOARD OF DIRECTORS’ PROFILES 98 RIGHTS OF SHAREHOLDERS 252 - 256 GROUP EXECUTIVE MANAGEMENT PROFILES 98 STAKEHOLDER RELATIONS 3 WHO WE ARE EQUITY GROUP HOLDINGS PLC AND SUBSIDIARIES INTEGRATED REPORT & FINANCIAL STATEMENTS / FOR THE YEAR ENDED 31 DECEMBER 2020 20 20 INTEGRATED REPORT ABOUT US AND FINANCIAL STATEMENTS At the core of our existence is our corporate purpose 7. Our Health interventions help minimize shocks to of “transforming lives, giving dignity and expanding disposable income and business resources opportunities for wealth creation”. Right from inception, We are executing our “Equity 3.0” strategy, which is aimed we set out on a journey to provide integrated financial at leveraging on technology and innovation to achieve services as a means of empowering businesses, people convergence of financial products and services, seamless and communities to improve their lives and livelihoods. integration of channels, enhanced customer experience, With over 37 years in operation, we remain dedicated to disciplined operational controls and societal good. improving the wellbeing of the people of Africa by providing financial and non-financial services, products and tools that In line with our intention to be a leading Pan-African empower them to pursue socio-economic prosperity. financial services provider, we are undertaking a business transformation process that will position us to We are the largest financial services provider in East and better capitalize on opportunities through technology, Central Africa by customer numbers and assets with a total demographic changes and regional expansion. We are of over 14 million customers in the region and assets valued reengineering our business to ensure that it is adaptable to at over one trillion shillings. We have physical presence in future trends and prospects. This will be achieved by offering seven countries - Kenya, Uganda, South Sudan, Tanzania, differentiated, high quality services driven by segmentation Rwanda, the Democratic Republic of the Congo (DRC) and a and cross-selling initiatives and responsiveness to the commercial representative office in Ethiopia (the “regions”). needs of the customers across the different segments and We are cognisant of the responsibility bestowed on us by regions. our leadership position and we aspire to use it to empower people and communities to create wealth. Technology is a key driver of our business model offering widespread access, convenience and affordability. Most We are driven by our social and commercial objectives significantly, our ideals drive us since we believe that true ensuring that our business creates positive impact for all progress is only possible if we are connected to people and stakeholders while remaining profitable. In this regard, a for this reason, placing our customers and communities at foundational pillar to our business model is our Social and the centre of everything we do is of utmost importance. Economic engines that catalyse each other whereby our social programmes build and enhance capacity in the value As a key driver of development in our region, we operate chains and ecosystems that we provide financial services to. in the sectors where we can have the greatest impact on This is illustrated as follows: society, while being profitable. Additionally, through the Equity Group Foundation (EGF), we support social programs 1. Our Financial Literacy programs enable today’s unbanked on Education and Leadership Development, Food and to be tomorrow’s bank