LEADING
FINTECH
COMPANY
ANNUAL REPORT 2020
50
4
FINANCIAL
STATEMENTS
12
2
STRATEGIC
REPORT
14
20
24
26
27
31
MARKET OVERVIEW
OPERATIONAL OVERVIEW
FINANCIAL OVERVIEW
STRATEGY AND DEVELOPMENT PLANS
RISK MANAGEMENT
SUSTAINABILITY
4
1
COMPANY
OVERVIEW
6
10
11
COMPANY IN BRIEF
CHAIRMAN’S STATEMENT
CHIEF EXECUTIVE’S REVIEW
32
3
CORPORATE
GOVERNANCE
34
36
37
41
43
47
48
BOARD OF DIRECTORS
KEY MANAGEMENT
DIRECTORS’ REPORT
REMUNERATION REPORT
CORPORATE GOVERNANCE REPORT
SECTION 172 STATEMENT
DIRECTORS’ RESPONSIBILITY STATEMENT
90
5
CORPORATE
INFORMATION
& GLOSSARY
6
COMPANY
IN BRIEF
10
CHAIRMAN’S
STATEMENT
11
CHIEF EXECUTIVE’S
REVIEW
1
COMPANY
OVERVIEW
Company in Brief
Our Vision
The combined effect of tighter of financial regulations
and growing technology-driven complexity has forced
an increasing number of people into a sector where it
is very hard to access financial services, the “no service
zone.” “Unbanked” or “unbankable” individuals are ne-
glected by the mainstream banking system and have no
access to any financial service or support.
We see an opportunity to make a transparent, solid,
healthy and profitable business by creating conditions for
these people to improve their status and progressively
mingle with the world of financial services.
OUR
MISSION
We are focused on developing our
business which generates solutions to the
problems experienced by "unbankable"
individuals. We provide access to financial
services and an Internet-based world
(“online”) to people who are not eligible for
mainstream financial services.
Our Guiding Principles
Any and all services we provide,
now and in the future, are con-
ceived with the highest standards
of transparency, efficiency and
compliance, with the utmost
respect for our customers.
Any and all clients, now and in the
future, are supported and helped
to improve their financial status
and access to the online world.
Our employees are our most
valuable resource and we focus
on creating a comfortable working
environment.
A solid, transparent and profitable
business is the result and conse-
quence of the full and complete
implementation of the above.
Company in Brief
Zaim Credit Systems Plc (ZCS) is the UK holding company of Zaim Express LLC
(“Zaim”), a Russian-based fintech company providing small-sized short-term loans
to customers.
As at 31 December 2020,
Zaim directly operated
3131
stores
Moscow
and the Moscow Region
As at 31 December
2020, the total
number of employees
of the Group was
199199
Zaim has been operating in the microcredit market in
Russia since 2011. Today, Zaim occupies one of the leading
positions in the Russian microcredit market rapidly de-
veloping its online platform.
Zaim currently provides loans with an average size of
8,000 Russian rubles (RUB) (about £80) with a maximum
amount of RUB30,000 (£300) for an average period of
less than one month.
As at 31 December 2020, Zaim directly operated 31 stores.
These stores are generally nearby to densely populated
residential communities in urban areas, as well as in
locations near the transport infrastructure of Moscow
and the Moscow Region.
Since establishment, Zaim has developed a bespoke fully
integrated business platform and operating tools to in-
crease efficiency, driven by automation and a constantly
improving credit scoring system.
The Zaim's platform allows for remote transfer of money
to the client’s own card (can be newly issued by Zaim)
or other receiving facilities (bank accounts or any other
system allowed in the market by Russian authorities)
within minutes of the online application.
Among other products, Zaim has created a pre-paid Mas-
tercard product branded with the Zaim’s logo, to which
Zaim can credit loan amounts directly to customers
who can then spend them online or via POS terminals.
It is also possible for customers to withdraw funds at
ATMs. This card was conceived and implemented to be
the most convenient and cheapest instrument on the
market, and it is aimed at removing the entrance barrier
to the online world.
In 2020, Zaim’s directors and management developed
and implemented an online-focused business strategy,
dramatically increasing volumes of loans issued online
and reducing the number of physical stores. Online oper-
ation now represents the largest portion of the Group’s
business and is continuing to grow.
The total loans outstanding had a carrying value of £1.3
million as at the end of the year (£786k as at 31 Decem-
ber 2019).
As at 31 December 2020, the total number of employees
of the Group was 199 (317 as at 31 December 2019).
6
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
7
Zaim’s History
Zaim Today
2011
Zaim was established
on 14 March 2011, as a
limited liability com-
pany under the laws
of the Russian Feder-
ation.
On 29 August 2011,
Zaim was authorised
to conduct microf-
inance activities in
the Russian Federa-
tion and included in
the State Registry of
Microfinance Organ-
isations maintained
initially by the Russian
Ministry of Finance and
later by the Central
Bank of Russia (“CBR”).
2016
In 2016, Zaim obtained
its current status as
a microcredit com-
pany (“MCC”) which
allows it to engage in
microfinance activity
in the territory of the
Russian Federation.
Zaim in Numbers
Over 1.22
million loans provided
77%
of loans
are to recurring
customers2
1 Loans to customers after expected credit loss allowance.
2 Average for 2020.
8
АNNUAL REPORT 2020
2017
On 20 February 2017,
Zaim’s shareholders
approved the change
of the Company's
name from LLC MO
Zaim-Express to LLC
Zaim-Express.
2019
On 4 November 2019, ZCS, Zaim’s holding
company, made a successful initial public
offering (IPO) of its ordinary shares on
the London Stock Exchange raising gross
cash proceeds of £2.6m.
Successful IPO
on the London Stock
Exchange
Scalable
online business
model
Cash generation
potential
Best corporate
governance practices
Company's
Strengts
10 years
providing services
State-of-art IT
platform
allowing for credit
risk management
Strong
management team
441,018
active customers
Share Capital
The total number
of ordinary shares in issue
436,975,000
436,975,000
£1.3
million loan
book1
as at 31 December 2020
27
directly
managed
outlets
Providing loans in the
amount of over
926
million rubles
a year
(approximately £9.3M)
26,65%
Other Shareholders
1,12%
Simon J. Retter
Shareholding
Structure
73.23%
Zaim Holding SA
LEADING FINTECH COMPANY
9
Chairman’s Statement
Chief Executive’s Review
Dear Shareholders,
It is hard to imagine our life now without digital or online
services. Over the past several years, most of us have
transferred traditional “real-life” activities on-
line. Activities such as shopping, education,
communication, entertainment, ordering
delivery from a restaurant or meeting
any other essential needs can now be
undertaken exclusively online.
Quarantine measures undertaken
by the governments of most coun-
tries during 2020 as a reaction to
the COVID-19 pandemic accelerated
this shift in many cases and generated
substantial additional demand for online
services. Despite this, many of these services
are difficult or even impossible to access without an on-
line banking presence or a bank card. At the same time
as services and activities that can be undertaken online
are rapidly expanding, many people are excluded from
this “online world.” This phenomenon is quite noticeable
in Russia, where in 2020, 65% of the population did not
have a bank deposit account and 85% did not have a
credit card1.
Traditional banks are reluctant to approve credit to a
large percentage of Russian borrowers with poor or no
credit history as well as those from less well-off sec-
tions of society. This creates a significant segment of the
population that is excluded from the online world and the
online standard of living.
Zaim has always built its business on ethical principles. Our
mission is to provide access to financial services in the
age of the Internet to those people who are not eligible for
mainstream financial services. With this mission in mind,
several years ago, Zaim created the Zaim MasterCard, an
inclusivity tool that can be easily issued and delivered to
those who lack the “key” to the modern online world.
With our motto “fast and flawless,” we help people efficiently
resolve their temporary financial difficulties without the need
for collateral or guarantors, with funds usually delivered
within a few minutes. In order to provide our customers
with a quick and easy way to borrow money on transparent
terms, we set a very high standard in customer service and
we give full training to every one of our employees. We strive
to provide financial support to a whole sector of the Russian
population that has been ignored by conventional banks. Our
best-in-class technology offering enables Zaim to do this and
maximise shareholder returns at the same time.
This market still has a great potential. Penetration of the
microfinance industry in the Russian market is less than
2% of the adult population, while in some mature markets,
it ranges between 5% and 10%. Russian household debt
in September 2020 was only 21% of the Russian
GDP compared to 89% in the UK and 78%
in the USA2. Over the past several years,
the microfinance market has grown by
about 25% per annum, with the major-
ity of this growth driven by the online
segment. In addition, online lending in
Russia has been doubling year after
year. During 2020, which was hopefully an
exceptional year for uncertainty and general
economic turmoil, the total balance of Russian
microfinance loans grew by 18% to 249 billion
rubles (ca. £2.5 billion)3.
We used the COVID-19 restrictions and change in habits
of individuals as an opportunity to significantly accel-
erate the online transformation of our business. At the
beginning of the year, we had a dominant share of the
market in the Moscow region where our existing outlet
network was based, even having only a very small-scale
online business at the time. By the end of the year, we
found ourselves in the enviable position of being able to
provide the majority of our loans via remote channels
and we are now able to include the whole of the Russian
population as our market.
During the past few years, Zaim has been developing and
executing a strategy of profitable growth whilst dealing
with some significant headwinds. Zaim has successfully
addressed the tightening of regulatory requirements
experienced between 2016–2019, including a reduction in
the maximum interest charges. In 2020, while our team
focused on the implementation of our post-IPO strategy,
COVID-19 emerged as a truly unforeseeable event but,
once again, the team swiftly amended the strategy and
ensured our prompt return to profitability and a leaner,
more efficient and optimized business.
I would like to thank the management, employees, con-
sultants and my fellow board members for their com-
mitment and hard work in delivering these tremendous
results and navigating the Group to a rapidly growing and
profitable business in the second half of 2020.
We remain committed to strengthening our position as
a leading Russian fintech Group and will strive to keep
delivering a fast and flawless
solution to our customers.
MALCOLM GROAT
Chairman
29 April 2021
1 Source: The Central Bank of the Russian Federation: Survey on the Status of Financial Inclusion in the Russian Federation in 2018, p. 31.
2 According to the Bank for International Settlements
3 According to the Central Bank of the Russian Federation
10
АNNUAL REPORT 2020
Dear fellow Stakeholders,
2020 became the year of great challenges not only
for our company, but for the whole of humanity. I am
extremely proud of our team that has successfully
addressed these global challenges and turned
a potential heavy threat to the business
into an opportunity to increase growth
and undertake an incredibly fast move
to an online model. Our management
has successfully navigated the difficul-
ties connected with COVID-19 and its
consequences as well as the tightening
regulations in the microfinance field in
Russia and has built a solid and reliable
growth platform, generating significant
profits in the second half of the year.
In the middle of 2019, the Russian financial regulator —
the Central Bank of the Russian Federation — tightened
restrictions for all operators in the microfinance mar-
ket by reducing the maximum interest rate by 33%, in
accordance to sector re-organization plan announced in
2016. The new rate is in line with international markets
level. This lower interest rate affected us most signifi-
cantly during 2020, the first full year of its impact, but
despite this, the Group reported an increase in interest
income of 23% during the year. This was driven by an
increase in the amount of loans issued during the year
to £10.4m (2019, £9.0m). During the year, it was observed
that on average, customers held our loans for slightly
longer (67 days; 2019, 52 days), predominantly due to the
lower interest rates, resulting in an increased working
capital requirement.
In 2020, we observed a significant threat to our business,
as did a lot of other traditional businesses across the
globe with the emergence of the COVID-19 pandemic and
associated restrictions imposed by governments. I am
immensely proud of our team at all levels of the organi-
sation who handled the situation in a calm, professional
and conscientious manner and I would like to thank
everybody for their great teamwork that has turned this
significant risk into a successful opportunity to build our
growing, profitable business.
Over the past 10 years, Zaim has developed a bespoke IT
system that allows it to receive and repay loans remote-
ly with an automated scoring process taking less than
10 minutes to approve or reject new applicants. 2020
saw the prioritization of the development of our online
business and subsequent rapid expansion of lending vol-
umes. At the same time, the physical outlet business was
streamlined by reducing the number of outlets to 31 from
91 at the end of December 2020 and then to 27 as at 31
March 2021. As a result, the share of loans issued online
dramatically increased from 9% in December 2019
to 82% in December 2020.
These swift and decisive actions resulted
in an immediate improvement to the
profitability of the Group with profits
achieved on a quarterly basis in both
Q3 and Q4 2020. While in the first
half of 2020 the Group generated an
adjusted EBIT loss of £0.9m, in the
second half, it generated an adjusted
EBIT profit of £0.8m, which is an im-
pressive turnaround in performance.
This trend of strong growth in business
volumes has continued during Q1 2021, with key perfor-
mance indicators indicating healthy growth, and I look
forward to providing more news in the Q1 trading update.
I am glad to note that the switch to an online-focused
business model continues to outperform management’s
expectations and now that the platform has been
successfully deployed and fine-tuned, our attention is
turning to other business development opportunities and
to further enhancements to our existing offerings. As
part of this, the team is focusing on further improving
the level of services, implementing new tools and, on top
of this, we are glad to announce that we are releasing
a mobile app. This gives gives us an opportunity to stay
connected to our clients 24/7 and increase the potential
for our repeat business.
We are now ready to expand our portfolio of services
and raise the fintech profile of the Group. Along with this,
we are currently exploring opportunities with colleges
and universities to create a mechanism for broadening
access to financial services for people who are neglect-
ed by conventional providers. Once again, we confirm
that the key words for our business are inclusivity and
profitability.
I would like to thank the Directors and the management
for navigating the successful return of the Group to
net profitability. We are currently uniquely positioned to
address market challenges and turn them into market
opportunities with our consistent commitment to adding
value and generating profitability for all of our stakehold-
ers.
SIRO DONATO CICCONI
CEO
29 April 2021
LEADING FINTECH COMPANY
11
2
STRATEGIC
REPORT
20
OPERATIONAL
OVERVIEW
27
RISK
MANAGEMENT
26
STRATEGY
AND DEVELOPMENT
PLANS
14
MARKET
OVERVIEW
24
FINANCIAL
OVERVIEW
31
SUSTAINABILITY
Market Overview
The Market for Microfinance in Russia
Microfinance involves providing individuals who do not have access to the banking
system with small credits or loans to help them cover their expenses. These
Microfinance activities in Russia started in the 1990s in the post-Soviet era and until
2010, the provision of consumer loans was largely unregulated.
The Microfinance Business Law adopted in 2010 created
a new special category of financial organisations—micro-
credit companies (MCCs or MFOs). Microcredit companies
were permitted to provide loans subject to strict regula-
tions on a regular basis. Although some banks structured
their consumer lending arms as MCCs, due in part to the
financial crisis in Russia in 2014 and 2015, the banking
sector largely neglected small businesses and the less
well-off sections of society.
Following the introduction of the Microfinance Business
Law and the disengagement of the core banking sector
from the microfinance sector, the microfinance market
grew rapidly from 21 million Russian rubles (approximate-
ly £426,0001) of loans provided in 2012 to 412 billion Rus-
sian rubles (approximately £5 billion2) of loans provided
in 20193.
Historically, the Russian microfinance market has been
growing by approx. 25% per annum with the online seg-
ment growing close to 100% year-on-year.
Rapid market growth is clear evidence of a strong need
for financial services among lower-income segments of
the population combined with the technological capabil-
ity to provide said services in a simple way with conven-
ient conditions.
Russian microfinance market (loans issued), RUB bn
500
400
300
200
100
0
412
300
256
195
2016
2017
2018
2019
Source: Expert RA
Tightening Microfinance Market Regulations Reducing
Competition
Since 2014, the Central Bank of the Russian Federation
(CBR) has been implementing reforms to the microfi-
nance sector to ensure consumer protection, increase
levels of transparency and quality of services in the
sector. This has led to the introduction of KYC proce-
dures, AML and other compliances in line with the best
world practices, minimum capital requirements, econom-
ic ratios for microfinance institutions, requirements in
relation to accounting and risk management procedures,
maximum interest rates and charges, limitation on the
total amount of liability in consumer loan products, etc.
As a result of this, smaller players withdrew from the
market.
According to the CBR statistics, the number of MFOs de-
creased from 4200 as at 31 December 2014 to 1385 as at 31
December 2020, representing a reduction of approximately
67%. Additional restrictions on consumer loans came into
effect on 1 July 2019, reducing the daily interest rate to 1%
and limiting the maximum recovery amount represent-
ing the sum of interest, penalties and other charges and
commissions to 200% of the principal amount of the loan
(“Maximum Recovery Rate”). The Maximum Recovery Rate
was further reduced to 150% of the principal amount of the
loan from 1 January 2020, resulting in a further reduction in
the number of MCCs and MFOs operating in the sector.
1 At the average exchange rate for 2012
2 At the average exchange rate for 2019
3 Expert RA: Results of 2019 and forecast for 2020 for the MFO market: transformation period
Number of microcredit licenses in issue
4,200
3,688
5,000
4,000
3,000
2,000
1,000
0
2,588
2,271
2,002
1,774
1,385
2014
2015
2016
2017
2018
2019
2020
Source: Central Bank of Russian Federation
Reduced Offer of Financial Services from the Banking
Sector
As at 1 January 2020, there were 402 banks operating in
Russia, whereas on 1 January 2013, Russia had a total of
956 banks in operation. Over the past seven years, the
Central Bank of the Russian Federation revoked over 550
banking licenses.
Many low-income households therefore do not have
access to credit from traditional commercial credit
institutions since they do not have enough collateral.
This, combined with weak social security protections in
Russia hastened by the onset of the financial crisis and
the growth of the Russian free-market economy, has
driven those on low or unstable incomes to seek alter-
native sources of finance. This trend is expected to be
amplified further by the economic turmoil caused by the
coronavirus pandemic.
As of 2018, the government’s stake in the Russian banking
sector had increased by two thirds as a result of the
country’s largest banks undergoing financial rehabili-
tation. Reduction in the number of bank licenses and
teller desks widened the “unbankable” segment of the
population.
Number of bank licenses in issue
1,000
800
600
400
200
0
956
923
834
733
623
561
440
402
366
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Central Bank of the Russian Federation
14
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
15
Russian Microfinance Market Potential
Аs a result of the abovementioned factors, Russia has a
far shallower financial services penetration, especially
online, than virtually all other European countries and
many developed countries.
These factors show that the Russian microfinance mar-
ket is still at its initial stage and is expected to grow,
potentially to multiples of its current size.
At the same time, we see a significant reduction in
competition in the microfinance market. The CBR actions
on the microfinance market have caused a dramatic
increase in complexity which has resulted in the reduc-
tion of the number of players in the sector. Given the
specific features of the industry (small transaction size
and very short terms which result in the need to process
thousands of microtransactions every day), all the play-
ers have faced increases to operational costs and/or IT
system CAPEX which have “eaten up” profits of small and
inadequately organised players.
15 %
35.6%
Only 35.6% of the Russian adult
working population had a bank
deposit in 2018, according to the
CBR1
Only 15% of Russian
adults have credit
cards, and they are
primarily used for cash
withdrawal
Penetration of the microfinance industry
in the Russian market is less than 2% of
the adult population, while in some other
markets, it ranges between 5% and 10%
2%
Microfinance Market Dynamics in 2020
21.2%
Russian households’ debt
in September 2020 was
only 21.2% of the GDP
compared to 88.9% in the
UK and 78% in the US2
In 2020, the microfinance sector was under the influence of restrictive measures
introduced as a result of the pandemic, which in turn lead to fluctuations in economic
activity.
After the temporary closure of offices of microfinance
organisations in Q2 2020 and the reduction in the loan
portfolio, the volume of disbursements increased as
restrictive measures were lifted and economic activity
recovered. This was especially evident at the end of
the year, when both the volume of issuances and the
portfolio of microloans increased significantly. At the
same time, the growth rate of the portfolio was lower
than in previous years, and the volume of loans did not
change compared to 2019, although the structure of
the portfolio did change. The increase in the share of
instalment loans in the total portfolio of microloans
was accompanied by an increase in the average loan
size, and in payday loans (PDL). There was also an
increase in the share of online loan issuances. In 2020,
issuances in the small and medium-sized enterprise
segment increased significantly, which contributed
to the support of small and medium-sized businesses
during the pandemic.
1 The Central Bank of the Russian Federation: Survey on the Status of Financial Inclusion in the Russian Federation in 2018, p. 31.
2 According to the Bank for International Settlements
Despite the closure of offices of most microfinance
organisations in April–May 2020 and the tightening of re-
strictive measures due to the pandemic at the end of the
year, the MFO loan portfolio grew by 18% at the end of
the year, to 249 billion rubles. The growth of the portfolio
was facilitated both by high activity in the MFO segment
of entrepreneurial financing and growth in the share of
long-term instalment loans to individuals. The share of
loans in the MFO segment of entrepreneurial finance
comprised almost a quarter of the total portfolio.
The recovery of consumer activity after most of the
restrictive measures introduced in the spring of the
last year were lifted contributed to a renewed demand
for loans issued by MFOs, as well as to an increase in
the average loan size. At the same time, MFOs gradually
adapted their business models to the previously intro-
duced regulatory restrictions: amid the sharply increased
uncertainty during the pandemic, scoring models were
revised towards a more careful selection of borrowers,
and the share of long-term loans increased.
The COVID-19 pandemic, epidemiological restrictions and
changes in risk policies of companies significantly influ-
enced the microfinance market. Among the main trends
are the following:
> The amount of loans provided was almost halved
in the beginning of Q2 2020 and only recovered by
September 2020.
> Following the decline in the volume of microloans
provided, the overall loan portfolio shrank (for the
first time over the entire observation period). Growth
resumed in July, and lending levels for the whole
industry rebounded back to the levels seen at the
beginning of 2020 by November 2020.
The dynamics of the main segments of the microfinance
market in 2020 were multidirectional: the amount of
loans issued in the payday loans segment in Q4 2020
remained at the 2019 level; in the instalment segment, it
exceeded the levels seen in 2019 by 21%; in the small and
medium-sized enterprise (SME) segment, the volume of
loans increased on a quarterly basis .
Dynamics of the portfolio and volume of microloans issued (billion rubles)
2020 (MFO reporting)
2021 (questionnaires)*
120
115
110
105
100
95
90
85
80
75
70
0
2
0
2
.
1
0
.
1
3
50
45
40
35
30
25
20
15
10
5
0
0
2
0
2
.
7
0
.
1
3
.
0
2
0
2
8
0
.
1
3
.
0
2
0
2
9
0
.
1
3
0
2
0
2
0
1
.
1
3
.
0
2
0
2
.
1
1
.
0
3
*
*
0
2
0
2
2
1
.
1
3
.
-0.1%
0.8%
2.5%
0.7%
0.4%
0.6%
1.7%
-23.5%
13.0%
1.7%
10.9%
-1.6%
-3.7%
20.2%
0
2
0
2
2
1
.
7
2
.
1
2
0
2
.
1
0
3
0
.
1
2
0
2
.
1
0
0
1
.
1
2
0
2
.
1
0
.
7
1
1
2
0
2
.
1
0
4
2
.
1
2
0
2
.
1
0
.
1
3
.
1
2
0
2
2
0
.
7
0
.
1
2
0
2
2
0
4
1
.
.
0
2
0
2
3
0
.
1
3
.
0
2
0
2
4
0
0
3
.
.
0
2
0
2
5
0
.
1
3
.
0
2
0
2
6
0
0
3
.
.
0
2
0
2
2
0
9
2
.
Volume of microloans issued (for the period)
Microloan portfolio (on a given date)
* 16 large-scale MFOs (13% of the portfolio).
** Preliminary data.
16
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
17
Portfolio Quality
The level of non-performing loans for over 90 days (NPL
90+) started to decline in the middle of 2020. Recovery
of business activity in the economy and tightening risk
practices of MFOs led to the improvement in the pay-
ment discipline of borrowers.
Dynamics of debts overdue
2020 (MFO reporting)
50
45
40
35
30
25
20
15
10
0
2
0
2
.
1
0
.
1
3
.
0
2
0
2
2
0
9
2
.
.
0
2
0
2
3
0
.
1
3
A decrease in debts overdue was also influenced by the
increase in loans provided: with insignificant fluctuations
in the absolute value of NPL 90+, the share of debt in the
growing portfolio decreased.
2021 (questionnaires)*
0.5 p.p
0.1 p.p
0.2 p.p
0.7 p.p
0.0 p.p
0.1 p.p
-0.3 p.p
0.6 p.p
0.4 p.p
0.0 p.p
0.4 p.p
-0.5 p.p
0.0 p.p
-0.1 p.p
0.4 p.p
0.3 p.p
-0.2 p.p
0.2 p.p
-0.6 p.p
0.0 p.p
-0.3 p.p
.
0
2
0
2
4
0
0
3
.
.
0
2
0
2
5
0
.
1
3
.
0
2
0
2
6
0
0
3
.
0
2
0
2
.
7
0
.
1
3
.
0
2
0
2
8
0
.
1
3
.
0
2
0
2
9
0
.
1
3
0
2
0
2
0
1
.
1
3
.
0
2
0
2
.
1
1
.
0
3
*
*
0
2
0
2
2
1
.
1
3
.
0
2
0
2
2
1
.
7
2
.
1
2
0
2
.
1
0
3
0
.
1
2
0
2
.
1
0
0
1
.
1
2
0
2
.
1
0
.
7
1
1
2
0
2
.
1
0
4
2
.
1
2
0
2
.
1
0
.
1
3
.
1
2
0
2
2
0
.
7
0
NPL 0+
NPL 30+
NPL 90+
* 16 large-scale MFOs (13% of the portfolio).
** Preliminary data.
.
1
2
0
2
2
0
4
1
.
Changes in the Financing Structure
By the end of 2020, the portfolio of raised funds that de-
creased during the period of COVID-19 restrictions almost
reached the levels as at the beginning of the year.
> the share of bank financing in the portfolio reached
33% in December 2020, the portfolio of funds raised
from banks grew by 48%;
At the same time, the structure of funding is gradually
changing as the share of bank financing increased:
> the share of funding from individuals remained stable
throughout the year (16–18%).
Dynamics of the structure of funds raised by MFOs
16%
22%
16%
22%
16%
23%
16%
24%
16%
24%
17%
26%
17%
17%
28%
28%
17%
25%
18%
25%
17%
27%
17%
33%
63%
63%
61%
60%
60%
57%
55%
55%
56%
57%
56%
50%
0
2
0
2
.
1
0
.
1
3
.
0
2
0
2
2
0
9
2
.
.
0
2
0
2
3
0
.
1
3
.
0
2
0
2
4
0
0
3
.
.
0
2
0
2
5
0
.
1
3
.
0
2
0
2
6
0
0
3
.
0
2
0
2
.
7
0
.
1
3
.
0
2
0
2
8
0
.
1
3
.
0
2
0
2
9
0
.
1
3
0
2
0
2
0
1
.
1
3
.
0
2
0
2
.
1
1
.
0
3
0
2
0
2
2
1
.
1
3
.
Juridical persons
Banks
Natural persons
18
АNNUAL REPORT 2020
Decrease in the number of MFOs
On 1 January 2021, there were 1385 MFOs in the state MFO
register. In 2020, twice as many companies were dereg-
istered as per their requests rather than for violations of
the law.
year, only 29 MCCs were able to enter the market (a
decrease of 79%).
A barrier to the registration of "empty" and unscrupulous
companies was set by the implementation 1 July 2020 of
new legal requirements for microcredit companies to
have own equity (capital) requirements in the amount of
not less than 1 million rubles.
At the same time, 164 companies were included in the
register: in the first half of 2020, information about 135
new MFOs was added to the register (including one
microfinance company), while in the second half of the
Dynamics of MFO deregistration (units)*
43
13
.
0
2
0
2
4
0
0
3
.
30
23
.
0
2
0
2
3
0
.
1
3
20
8
.
0
2
0
2
5
0
.
1
3
28
8
.
0
2
0
2
6
0
0
3
.
19
12
0
2
0
2
.
1
0
.
1
3
24
14
.
0
2
0
2
2
0
9
2
.
As per request
Due to violations
37
15
0
2
0
2
.
7
0
.
1
3
23
9
.
0
2
0
2
8
0
.
1
3
24
14
.
0
2
0
2
9
0
.
1
3
40
35
19
17
0
2
0
2
0
1
.
1
3
.
0
2
0
2
.
1
1
.
0
3
37
26
0
2
0
2
2
1
.
1
3
.
* Excluding liquidations.
Future Trends in Microfinance in Russia
According to the Russian statistical agency Rosstat, in
2020, 13.5% of the Russian population lived below the
poverty line; this number increased compared to 2019
by 1.2 percentage points. This has created a significant
segment of the Russian population that could poten-
tially benefit from microlending services. The current
source of finance for Russians on low incomes is often
informal, very often illegal and expensive. Microfinance
represents a transparent, compliant, reliable, cheaper
and safer option. There is a particular need in the Rus-
sian regions further from Moscow as well as in rural ar-
eas where the poorest individuals are concentrated and
where bank coverage is by at least. Therefore, there is
a potential for the microfinance market to grow by at
least 20% per year1.
1 Expert RA: Results of 2019 and forecast for 2020 for the MFO market: transformation period
LEADING FINTECH COMPANY
19
Operational Overview
Zaim’s Business
Zaim’s core service is providing microloans to Russian consumers. Zaim
predominantly provides its loans online to the customer’s own bank account, but also
provides them in cash and to Zaim-Express branded bank cards. Loans are provided
up to a maximum amount of RUB30,000 (equivalent to £300) or, in the case of
online loans, RUB15,000 (equivalent to £150), with a maximum term of 30 days. The
standard interest rate on these loans is 1% per day with a maximum recovery rate
capped by regulators at 150% of the principal advanced. The maximum interest rate
and the maximum recovery rate are set by the market regulator—the Central Bank of
Russia—for all the participants of the microfinance market.
Simple Business Model
1 Single Product
Loan amount
Loan duration
Daily rate
MAXIMUM ALLOWED
AVERAGE
30,000 RUB
(300 £)
7,500 RUB
(75 £)
30
days
1%
20-25
days
1%
Through 2 Distribution Channels
Directly opeated stores
Online
ENTIRE COUNTRY
MOSCOW AND
THE MOSCOW REGION
27
stores
Operated in the entire country
In 2020 Zaim changed its strategic focus towards an
online-centered business model. The Company put signif-
icant effort into development of its online activities which
now represent the most significant part of the business
and is experiencing rapid growth. As a direct result of this
it closed its less efficient outlets reducing the number
from 92 on 1 January 2020 to 31 as at 31 December 2020
and then to 27 as at 31 March 2021. The share of loans
issued online increased from 9% in December 2019 to 82%
in December 2020.
The Zaim Express MasterCard functions in much the
same way as a debit card issued by a traditional bank,
except that the consumer is limited to using the funds
loaded onto the bank card and Zaim does not provide any
overdraft facilities. Zaim’s loans have historically been
distributed by the Group’s existing outlets which predom-
inantly targeted relatively small, densely populated resi-
dential communities; all such outlets being within walking
distance of transport infrastructure and approximately 10
to 30 sq. m in size.
The clients of these outlets typically live very close. On
average, Zaim’s customers take out loans two to three
times per calendar year, and approximately 77% of Zaim’s
customers in 2020 were repeat customers. Although this
provides a stable base, the growth of outlets is limited by
their geographical reach which is typically less than two
miles from the consumer’s residence.
Geographic Footprint
Dubna
Taldom
Redkino
Lotoshino
Klin
Dmitrov
Sergiev Posad
Volokolamsk
Solnechnogorsk
Lobnya
Pushkino
Ivanteevka
Shakhovskaya
Khimki
Mytishchi
Shchelkovo
Noginsk
Istra
Krasnogorsk
Moscow
Ruza
Odintsovo
Reutov
Lyubertsy
Balashikha
Electrostal
Zheleznodorozhny
Pavlovsky Posad
Orekhovo Zuevo
Mozhaysk
Vidnoye
Lytkarino
Butovo
Shrerbinka
Ramenskoye
Shatura
Naro-Fominsk
Domodedovo
Podolsk
Klimovsk
Obninsk
Yegoryevsk
Voskresensk
Chekhov
Kolomna
Serpukhov
Stupino
Lukhovitsy
Kashira
Ozery
Zaraysk
Serebryanye Prudy
20
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
21
Company Infrastructure
A key component of the Zaim’s business offering is its
bespoke IT platform that manages and executes client
acquisition, scoring assessment and financing authori-
sation in less than 5 minutes. All back office functions
are fully automated and managed by this integrated IT
system, which includes the following:
> automatically generated important customer
communications, including notifying customers of the
key repayment date;
> call center personnel provided with instructions to
contact customers regarding overdue payments
on a pre-assigned date in order to assist with debt
collection, some of which being automated; and
> in the event that loans are not repaid and are
considered bad debts or where a consumer is
otherwise declared bankrupt, such claims are
submitted to a relevant court or state agency (as
applicable) for adjudication.
The current level of automation allows Zaim to efficiently
process large volumes of micro transactions. The Group’s
IT system is set up to receive data from the Group’s
preferred credit agency and independent referencing
agencies (including Equifax). These data sources, when
combined with the Zaim’s own scoring algorithm, help
assess the creditworthiness of borrowers.
Weighted Average Default Rate
The Zaim’s scoring algorithm is a mathematical multipa-
rameter regression model that forecasts the likelihood
of default of the client based on information about the
client at the moment of approval of the loan application:
application data, existing database information, informa-
tion provided by the credit bureau and other third-party
sources. Zaim undertakes a regular review of the mod-
el’s parameters to determine whether any finetuning is
required.
This system has been successful in reducing the num-
ber of non-performing loans which have decreased the
weighted average default rate from 22% in February 2017
to between 10 % and 18 % during 2020. The rate naturally
increases with a higher proportion of new customers
that usually carry higher risk of default than repeated
customers and so comparisons between periods are not
always reliable indicators. Growth of default rate post the
IPO has been driven by the Company’s growth rate, which
is being controlled and monitored by the management
and is in line with the business plan. Zaim customers may
repay loans in-store, via its call centres, through its web-
site and internet banking. The Company has developed
a number of convenient alternative methods of making
repayment.
IPO in London
4 November 2019
Zaim MasterCard
In 2015, Zaim entered into an agreement with MasterCard
Circuit to have its own branded and operated MasterCard.
After a long and intensive negotiation with MasterCard
and related Due Diligence, in 2017 Zaim has its own card
“made to measure” to serve its clients’ microfinancing
needs. This card has been specified and customized
by Zaim management in order to have the operational
tools coherent with microfinance market and clients.
It is simple, friendly and with no hidden costs or fees on
transactions.
The card can be used by the low-income segment of the
population to access various digital and online services,
thus becoming the key tool to increase inclusivity. From
the possibility to rent a movie on-stream to buy food
on-line, the absence of a card would severely impact the
lifestyle of people and their ability to participate in the
society.
The card is currently a “vector” for Zaim services but it
could also become a vector to any third party services
as well in the future. It is an especially important product
for elderly people or people with disabilities, who can
receive and repay loans to the card without leaving their
homes. From its launch, Zaim has released over 65,000
branded MasterCards.
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0
8
1
-
n
a
J
8
1
-
r
a
M
8
1
-
y
a
M
8
1
-
l
u
J
8
1
-
p
e
S
8
1
-
v
o
N
9
1
-
n
a
J
9
1
-
r
a
M
9
1
-
y
a
M
9
1
-
l
u
J
9
1
-
p
e
S
9
1
-
v
o
N
0
2
-
n
a
J
0
2
-
r
a
M
0
2
-
y
a
M
0
2
-
g
u
A
0
2
-
p
e
S
0
2
-
t
c
O
0
2
-
v
o
N
0
2
-
c
e
D
Zaim’s customers may also repay their outstanding
loans by using QIWI’s e-wallet, which is one of the
most popular e-wallets in Russia. Customers may load
cash onto their QIWI wallet at various locations includ-
ing POS terminals, ATMs and dedicated QIWI kiosks.
Consumers may also use QIWI’s dedicated kiosks to
repay their loan with Zaim and to undertake a wide
variety of transactions including repayment of bills to
utility companies, mobile phone providers and other
online purchases. QIWI operates approximately 117,000
kiosks throughout Russia and has a customer base of
32 million customers, who pay more than 145 billion
Russian Roubles each month. Zaim is also able to use
QIWI “Contact” Payment System which enables Zaim to
provide an online application to obtain a cash loan in
any region of Russia.
Zaim’s Business Model
Zaim has worked on developing its own unique busi-
ness model based on its bespoke IT system and directly
managed network of stores. Zaim’s 10-year presence in
the microfinance loan market has enabled it to develop
highly effective credit scorecards. Zaim is able to use the
data on its scorecards, loan performance analysis and
underwriting decisions, giving it a significant competitive
advantage over new entrants to the market. As a result,
the Group is well positioned to participate substantive-
ly in the further growth potential of the non-standard
lending market. Sufficient investment has already been
made in Zaim’s systems so that they are able to cope
with a much larger volume of business with only a small
increase in operational expenditure, positioning the
Group well for future growth.
As a result of the COVID-19 рandemic during the current
year, Zaim accelerated the change in its business model
to remote lending via the Internet, which resulted in a
significant decrease in fixed leases and staff costs and
a decrease to the share of lending costs within total
expenses. The Group streamlined its physical store net-
work with the closure of many of its existing stores. As
a result, volumes of the loans issued online increased by
16 times from £0.3m in 2019 to £5.0m in 2020. This growth
was especially notable in H2 2020 vs. H1 2020: an increase
of 540% from £0.7m in H1 2020 to £4.3m in H2 2020. In
December 2020, online lending represented 82% of total
loans issued vs. only 9% in December 2019
Compliance is important to the Group’s business and
culture and is implemented through its customer service
processes and its underwriting and collection proce-
dures. The Group seeks to treat all of its customers fairly
and offers customers in financial difficulty a number of
payment options tailored to their individual circumstanc-
es. For example, Zaim’s policies include never undertak-
ing collections activities or selling on unrecovered debts
to third parties who might seek to collect defaulted
loans. Zaim reviews all of its customer facing employees
at least weekly and operates ongoing refresher training
to ensure that the ethical behaviour and principles of
treating customers fairly are embedded in its culture.
22
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
23
Financial Overview
Loans issued during the period
Interest income
Recurring staff costs
One-off staff costs
Recurring operating expenses
One-off operating expenses
Net profit (loss)
Adjusted EBIT1 for the period
Gross outstanding loans to customers
Total outstanding loans measured at amortised cost
Cash and cash equivalents
2020
£'000
10,392
4,857
1,708
102
1,871
245
(615)
(125)
2019
£'000
9,028
3,941
2,006
2,523
369
(892)
(177)
2H 2020
1H 2020
£'000
6,275
2,112
743
53
818
720
808
£'000
4,117
2,745
965
49
1053
245
(1,335)
(933)
31 December 2020
30 June 2020
31 December 2019
£'000
28,298
1,269
641
£'000
30,844
718
810
£'000
32,078
786
1,583
In 2020, the Group completed an important business
transformation, shifting from a predominantly store-
based business to an online-based business model, which
was accelerated by quarantine measures related to the
COVID-19 pandemic. In doing so, the Group put significant
efforts into the development of its online platform and
closed its less efficient sales offices reducing their num-
ber from 91 as at 31 December 2019, to 31 as at 31 Decem-
ber 2020, and further to 27 by 31 March 2021.
£49k during H1 2020 caused by a reduction in the number
of employees and the hiring of additional staff with fixed-
term contracts who were engaged in collection activi-
ties following court decisions. The Group also recorded
£52k of additional staff costs in H2 2020. As well as this,
non-recurring operational costs during H1 2020 were
caused by collection activities (aimed at collecting bad
debts in the portfolio as of 31 December 2019) comprised
of state duty (£208k) and postal services (£37k).
The amount of loans issued increased in 2020 by 15% to
£10,392k compared to £9,028k in 2019 due to the growth
in loans issued online, especially in H2 2020. The loans
issued in H2 2020 increased by 52% compared to H1 2020
due to the dramatic increase in loans issued online as
a result of the transition to an online-centered busi-
ness model in H2 2020 and the negative influence of the
COVID-19 quarantine measures in Q2 2020.
In Russia, for all the operators in the microfinance mar-
ket, the maximum interest rate is capped by the regula-
tor – the Central Bank of Russia – at 1% per day, or 365%
per year starting from 1 June 2019. The previous maximum
interest rate was 1.5% per day, or 547.5% per year. Despite
lower interest rates in H2 2019 and 2020 vs. H1 2019, in
2020, interest income increased by 23% compared to 2019
due to the increase in the amount of loans issued and
longer average terms of these loans (67 days in 2020 vs.
52 days in 2019).
In H1 2020, the Group recorded one-off restructuring
costs of £294k. This included additional staff costs of
These collection activities recovered £1.62m of the
previously written off debt balance, including the prin-
cipal amount of £453k and £1,167k of accrued interest.
The Group received the largest portion of this amount
(£1,298k, including the principal amount of £373k and
£925k of accrued interest) in the second half of 2020.
Excluding the abovementioned one-off expenses, recur-
ring staff costs decreased by 15% from £2,006k to £1,708k
due to overall business optimization and reductions to
the average headcount of Zaim by 22% from 273 people in
2019 to 212 people in 2020. A relatively lower decrease in
staff costs is partially explained by an increase to Direc-
tors’ pay in 2020 from £325k to £423k as the Group went
public on 4 November 2019 and only 2 months of service
for certain Directors was recovered in 2019 vs. 12 months
in 2020. For more details on the Directors’ pay please see
the Remuneration Report on p. 41. It is worth mentioning
that staff costs decreased by 23% from £965k in H1 2020
to £743k in H2 2020.
1 Adjusted EBIT is calculated by taking loss for the year adding back accrued interest, non-cash share-based payment charges, costs related to the IPO and one-off
restructuring costs which are non-recurring.
Recurring operating expenses excluding the abovemen-
tioned one-off costs in 2020 and the IPO-related costs
in 2019 decreased by 26% from £2,523k to £1,871k, driven
largely by a reduction in rental expenses. Furthermore, in
H2 2020, recurring operating expenses decreased by 22%
from £1,053k to £818k due to the closure of retail outlets
and transition to an online business model.
The net loss generated by the Company decreased from
£892k in 2019 to £615k in 2020 reflecting the transition to
an online business model with greater flexibility of the
business and growing cost efficiency. Importantly, the
Group turned profitable during H2 2020 after the transi-
tion to an online-focused business model in Q2 2020. The
Group recorded a profit of £720k in H2 2020 vs. a loss of
£1,335k in H1 2020.
The adjusted EBIT loss for 2020 improved from £177k to
£125k. This also demonstrates the dramatic turnaround in
H2 2020 from negative £933k in H1 2020 to positive £808k
in H2 2020.
Loans to customers decreased by 12% to £28.3 million
compared to £32.1 million as of 31 December 2019. This
is mainly a reflection of an increase in the exchange
rate of the British pound to the Russian ruble as the
British Pound strengthened from 31 December 2019 to 31
December 2020 by over 23%. Without this effect (at the
exchange rate of 81.146 as of 31 December 2019), loans to
customers as at 31 December 2020 would have amounted
to £34.9 million, growing by 9% in rouble terms.
Total loans to customers measured at amortized cost
increased by 61% from £786k to £1,269k reflecting the
improved quality of the loan book.
Cash and cash equivalents decreased from £1.6 million
on 31 December 2019 to £641k on 31 December 2020 as
2019 IPO proceeds were invested into the business and
the issuance of new loans to the customers.
With the successful transition from an offline-focused to
an online-focused business model Zaim achieved a sig-
nificant milestone and returned to profitability, dramat-
ically reducing its cost base and increasing scalability.
It is now, therefore, well positioned to grow its business
and capture demand from its target customer base. It is
also insured against the potential negative influence of
possible further quarantine measures due to new waves
of COVID-19 as most of the operations are performed on-
line and the customers do not need to leave their homes
to receive and repay the loans.
24
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
25
Strategy and
Development Plans
The Group’s strategy includes a focus on the development of the Group’s online
platform along with the maintenance of its core stores to enable lending to higher
quality customers (with comparably low historic defaults). This online-focused
business model allows for growth in the lending book and the number of loans made
without the capital and operational expenditure of a purely store-based model. In
addition, the Group continues to refine its lending and credit ratings’ criteria based
on experience to reduce default rates and thereby improve operating margins. These
factors enabled the Group to increase revenue and turn profitable in the H2 2020.
Risk
Management
Credit
risk
Market
risk
Foreign currency
exchange risk
Legal
risk
Operatonal
risk
Interest
rate risk
Liquidity
risk
Epidemic
risk
P r o f i t able Growth
Increase
in existing
client base
Growth
of online
offering
Improvement
in debt
collection
Internally developed scoring system
Bespoke IT platform
Existing store network
The Group’s main strategy is therefore to develop and
improve its online offering and to grow the number of
customers obtaining loans online through Zaim’s online
presence. This strategy was successfully executed in
2020 and the growth of online business (16-fold in 2020
vs. 2020 and 6.4-fold in H2 2020 vs. H1 2020) exceeded
management expectations. In December 2020 82% of
loans were issued online while in December 2019 only 9%
of the loans were issued via the online platform.
Zaim manages its risk exposures in respect of financial
risks (credit, market, currency, liquidity and interest rate),
operational and legal risks. The primary objectives of the
financial risk management function are to establish risk
limits, and then ensure that exposure to risk stays within
these limits. The assessment of exposure to risks also
serves as a basis for optimal distribution of risk-adjusted
capital, transaction pricing and business performance
assessment. The operational and legal risk management
functions are intended to ensure proper functioning of
internal policies and procedures to minimise operational
and legal risks.
Credit Risk
The Company is exposed to the credit risk of its custom-
ers as the Company makes unsecured personal loans to
a segment of the population that has difficulty obtaining
credit from mainstream financial institutions. The Group
uses internally developed models for assessing credit risk
and credit worthiness.
Credit risk is the risk of financial loss to Zaim if a counter-
party to a financial instrument fails to meet its contractual
obligations within the specified period. Zaim has policies
and procedures for the management of credit risk expo-
sures (both for recognised financial assets and unrecog-
nised contractual commitments), including requirements
for the establishment and monitoring of loan portfolio
concentration limits.
The credit policy establishes:
> procedures for review and approval of loan
applications,
> methodology for assessment of the borrowers’
solvency,
> credit documentation requirements,
> procedures for the ongoing monitoring of loans and
other credit exposures.
Zaim continuously monitors the performance of individual
loans and regularly reassesses the creditworthiness of
its customers. The review is based on the most recent
delinquency statistics. Zaim applies the expected credit
loss model for the purpose of provisioning for financial
debt instruments, the key principle of which is timely
reflection of deterioration or improvement in the credit
quality of debt financial instruments based on current and
forward-looking information.
The amount of expected credit losses recognised as a
credit loss allowance depends on the extent of credit
quality deterioration since the initial recognition of a debt
financial instrument.
26
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
27
Credit risk classification system.
Each level of credit risk is assigned a certain degree of
solvency, using a single scoring system:
> minimum credit risk – high credit quality with low
expected credit risk, debt is not past due;
> low credit risk – sufficient credit quality with average
credit risk, debt is prolonged and not past due;
> moderate credit risk – average credit quality with
satisfactory credit risk, the debt is from 1 to 30 days
past due;
> high credit risk – low credit quality with unsatisfactory
credit risk, high probability of default, the debt is from
31 to 60 days past due;
> default – assets that meet the definition of default,
the debt is more than 60 days past due.
Expected credit losses on financial assets that are not
impaired are usually measured on the basis of default
risk over one or two different time periods, depending
on whether there has been a significant increase in the
borrower’s credit risk since initial recognition.
Zaim-Express performs a collective assessment of loans
to individuals. This approach provides for aggregation
of the portfolio into homogeneous segments based on
specific information about borrowers, such as delinquent
loans, historic data on prior period losses and for-
ward-looking macroeconomic information.
Collective assessment principles: for assessing risk stages
and estimating ECL on a collective basis, Zaim-Express
combines its loans into segments based on shared credit
risk characteristics, so that exposure within a grouping
had a homogeneous pattern.
Market Risk
Market risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of
changes in market prices. Market risk comprises currency
risk, interest rate risk and other price risks. Market risk
arises from open positions in interest rate, currency and
equity financial instruments which are exposed to gen-
eral and specific market movements and changes in the
Currency Risk
Currency risk is the risk that the fair value or the future
cash flows of a financial instrument will fluctuate because
of changes in foreign currency exchange rates. Zaim ac-
cepts the risk of the effect of foreign currency exchange
rate fluctuations on its financial position and cash flows.
Currency risk arises when the existing or prospective
assets in foreign currencies are greater or lower than the
existing or prospective liabilities in the same currencies.
The main operating subsidiary of the Group, Zaim Express
LLC, operates in Russian Roubles, with the majority of
transactions with customers and suppliers occurring do-
Zaim carries out an affordability assessment on the
borrower before a loan can be paid out. As a separate
exercise, using the knowledge and data from its 10-year
presence in the loan market, each potential loan under-
goes a creditworthiness assessment based on the appli-
cants’ credit history. No formal collateral or guarantees
are held against the borrower.
Zaim manages credit risk by actively managing the blend
of risk in its portfolio to achieve desired impairment rates
in the long term. Zaim aims to achieve the desired risk in
the portfolio by managing its scorecards and the maxi-
mum amount borrowers are able to borrow depending on
their circumstance and credit history. Factors Zaim consid-
ers in monitoring the overall impairment rates include the
total value of the loan, the home owner status of the guar-
antor, whether loans are new or repeat loans and whether
these are pilot lending loans. Using the data and expected
loss curves for the different scorecards, the business can
vary its origination levels to target an expected loss rate,
impairment level and manage balance sheet risk.
In assessing the level of impairment, the business makes
a provision for a percentage of loans that are currently
up to date. As part of its procedures, the Directors expect
that at any time there will be an element of loans that are
currently up to date but where the customer may have an
unreported difficulty in repaying the loan and therefore
Zaim’s practice is to make a provision for the estimated ef-
fect. In addition, should a customer enter into a repayment
plan, Zaim does not reschedule the terms for its internal
reporting. Instead the business calculates the arrears level
with reference to the original terms.
level of volatility of market prices. The Group’s exposure is
primarily to the risk of changes in interest rates.
The objective of market risk management is to manage
and control market risk exposures within acceptable
parameters, while optimising the return on risk.
mestically within the Russian Federation. The Group has its
parent company and head office activities operating in the
United Kingdom and raises finance from shareholders in
Pounds Sterling. The Group is therefore exposed to foreign
exchange risks relating to the both £ and RUB.
Exchange rate exposures are managed within approved
policy parameters. Zaim-Express’s management controls
the exposure to currency risk on a regular basis.
Please see Note 20 to the Financial Statements for further information on
currency risk.
Interest Rate Risk
The Company historically relied on debt finance to fund
its loan book. Such indebtedness may expose the Com-
pany to risks associated with movements in prevailing
interest rates.
Changes in the level of interest rates can affect, among
other things:
> the cost and availability of debt financing and hence
the Company’s ability to achieve attractive rates of
return on its assets;
Liquidity Risk
Liquidity risk arises when the maturity of assets and lia-
bilities does not match. Zaim does not accumulate cash
resources to cover all liabilities mentioned above, as
based on the existing practice it is possible to forecast
with a sufficient degree of certainty the required level of
cash funds necessary to meet the above obligations.
The directors have responsibility for liquidity risk man-
agement. The directors monitor rolling forecasts of the
Company’s liquidity requirements to ensure it has suffi-
cient cash to meet operational needs while maintaining
sufficient headroom on its banking facilities at all times.
To manage its liquidity, Zaim is required to analyze the
level of liquid assets needed to settle the liabilities
when they fall due, provide access to various sources
of financing, draw up plans to solve the problems with
financing and exercise control over compliance of the
liquidity ratios with the statutory laws and regulations.
Liquidity risk is managed by the Group’s central finance
department through daily monitoring of expected cash
flows, ensuring sufficient funds are drawn against the
Group’s finance facilities to meet obligations as they fall
due. The Group’s forecasts and projections, which cover a
period of more than 12 months, take into account expect-
Operational Risk
The Group is exposed to operational risk which is the
risk of losses resulting from inadequate management
and control procedures, fraud, poor business decisions,
system errors relating to employee mistakes and abuse
by employees of their positions, technical failures, settle-
ment errors, natural disasters and misuse of the Group’s
property.
The Group has established internal control systems in-
tended to comply with the CBR’s requirements regarding
operational risk. The Board adopts general risk manage-
ment policy, assesses the efficiency of risk management,
approves the Group’s management structure, adopts
> the debt financing capability of the Zaim business;
This exposure may be reduced by introducing a combina-
tion of fixed and floating interest rates or through the use
of hedging transactions (such as derivative transactions,
including swaps or caps). Interest rate hedging transac-
tions will only be undertaken for the purpose of efficient
portfolio management, and will not be carried out for
speculative purposes.
Please see Note 20 to the Financial Statements for further information on interest
rate risk.
ed originations, collections, and payments and allow the
Group to plan for future liquidity needs.
The CBR sets and monitors liquidity requirements for
microfinance institutions. The Company calculates its
liquidity ratio in accordance with CBR instruction No.
4384-U dated 24 May 2017 "On establishing economic
norms for a microcredit company that attracts funds
from individuals, including individual entrepreneurs who
are founders (participants, shareholders) and/or legal
entities in the form of loans". As at 31 December 2019 and
31 December 2018 the minimum liquidity ratio was 70%.
The Company provides the division of the Central Bank of
Russia that is supervising its activities with information
on the mandatory liquidity ratio in accordance with the
established format on a quarterly basis as of the first
day of each month.
If the liquidity ratio values approach the limit set by the
CBR, this information is communicated to the company's
member. The Company complied with the liquidity ade-
quacy ratio as at 31 December 2019 and as at 31 Decem-
ber 2018.
Please see Note 20 to the Financial Statements for further information on liquidity
risk.
measures designed to ensure continuous business
activities of the Group including measures designed
for extraordinary and emergency situations and super-
vises other executive bodies in respect of operational
risk management. Management generally oversees the
implementation of risk management processes at the
Group including relevant internal policies. It also adopts
internal regulations on the Group’s risk management,
determines limits for monitoring operational risks and
allocates duties among various bodies responsible for
operational risk management.
28
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
29
Legal Risk
Zaim operates in a highly regulated financial services
industry and existing laws and regulations could be
amended at any time. The manner in which laws and
regulations are enforced or interpreted could change
and new laws or regulations could be adopted. Any
breach of applicable regulations could expose the Group
to potential liability and other sanctions, including the
exclusion of Zaim from the Registry and revocation of its
MCC status, thus depriving it of the opportunity to carry
on its business. Furthermore, any changes in regulation
and laws could reduce the potential returns the Group
earns on its lending operations.
Force Majeure and Epidemic Risk
In 2020 the coronavirus (COVID-19) outbreak emerged
with governments across the world taking actions and
measures to contain the spread of infection, this like
most other industry had an impact on the business of
the Group.
The Russian authorities took a number of steps aimed
at containing the spread of COVID-19, including trav-
el restrictions with other countries, social distancing
initiatives and announcing holidays in Russia from 30
March 2020 to 11 May 2020, with a number of further
restrictions in Moscow and the Moscow region that
were to a larger extent lifted mid-June 2020. The Russian
authorities also enacted the closure of non-essential
businesses in Moscow and Moscow Region, where part
of Zaim's main operations are focused and announced
a set of economic measures and subsidies aimed to
help affected business and the wider population. Zaim-
Express’s offices were allowed to continue operating
during the holidays, however, additional restrictions
were implemented during the second and third waves of
COVID-19 and can be implemented in future.
Zaim’s team is well prepared to continue their work
while at the same time ensuring the safety of em-
ployees and clients as a top priority. Zaim proactively
implemented strict health and safety policies specifi-
Zaim was included within the registry of microfinance
institutions when its status as an MCC was obtained; this
inclusion means that the Group is subject to ongoing
monitoring and compliance reporting requirements. If
Zaim’s MCC status is withdrawn or suspended this is
likely to have a materially adverse effect on the Group’s
business, financial condition, results of operations and
prospects.
The Group mitigates legal risk by constantly monitoring
applicable legislation and ensuring that all legal require-
ments are met.
cally tailored to COVID-19, including working from home
for the entire head office staff, taking all necessary
disinfection measures in our stores such as using hand
sanitizers, medical masks and more frequent cleaning
of the customer area. The clients can enter the shop in
compliance with the social distancing prescriptions or
one at a time. Zaim continues to follow all the recom-
mendations of local health authorities and the World
Health Organisation to the best of its ability.
As part of its strategy Zaim has developed a convenient
online platform, allowing customers to receive and re-
pay the loan via the internet or by phone in less than 10
minutes without leaving their homes. This is an especial-
ly important option in the era of social distancing. Zaim
can also deliver its Zaim MasterCard debit card to its
clients and provide the loans to these cards while con-
tinuing to observe these COVID-19 prevention measures.
Although there is a risk that further anti-pandemic
measures in response to COVID-19 or other infections
can be implemented, currently the Group’s business
model is much less dependent on physical stores with
over 80% of loans issued and repaid online. This protects
the Company from potential risks of the pandemic and
any anti-pandemic measures.
Sustainability
The World economy is rapidly moving toward digitalization. The consumption of
online services and products is becoming part of customers’ basic needs. At the same
time, a larger and larger segment of population cannot access the “minimum lifestyle
level” in order to be able to consume these services. The key to enter this online world
is the availability of a bank card.
The COVID-19 pandemic and associated lockdown restric-
tions made and continue to make this inequality even
more prevalent. Being locked inside their houses people
worked, communicated, studied and entertained them-
selves online and via a remote/e-commerce platform.
Significant segments of population are unable to use
these basic services.
A combination of financial burdens with technology has
become the real “Digital Divide”.
Non-availability of bankcards is the main barrier for
lower income segments of the population to join the
world and participate in its future evolutions. This could
become the new segregation wall.
From the possibility to rent a movie on-stream or to buy
food online, the non-availability of financial services will
severely impact the lifestyle of people and their ability to
participate in society.
The Zaim platform is conceived to provide easy access
and solve the divide. This makes Zaim Express Master-
Card and its online products key tools of inclusivity. The
products have been conceived in coherence with the
microfinance clients’ needs: simple, transparent, and with
no hidden costs or fees on transactions.
Lending to heavily neglected people gives them aware-
ness that “they can have a further chance”.
Providing people with bankcards and easy access to
financing allows them to use services that were previ-
ously impossible or extremely complicated to access,
which dramatically improves their lifestyle, especially in
the current “stay at home” environment.
This Strategic Report statement was approved by the
Board of Directors on 29 April 2021 and is signed on its
behalf by:
SIMON RETTER
Finance Director and Company Secretary
29 April 2021
30
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
31
34
BOARD
OF DIRECTORS
37
DIRECTORS’
REPORT
36
KEY MANAGEMENT
41
REMUNERATION
REPORT
43
CORPORATE
GOVERNANCE REPORT
47
SECTION 172
STATEMENT
48
DIRECTORS’
RESPONSIBILITY
STATEMENT
3
CORPORATE
GOVERNANCE
Board of Directors
The Board of Directors of Zaim Credit Systems Plc consists of five members,
including two independent directors. The Directors are responsible for carrying out
the Company’s objectives, implementing its business strategy and conducting its
overall supervision.
The Board provides leadership within a framework of prudent and effective controls.
The Board establishes the corporate governance values of the Company and have
overall responsibility for setting the Company’s strategic aims, defining the business
plan and strategy and managing the financial and operational resources of the
Company.
Zaim strives to have a broad board with members from a diverse set of backgrounds
as well as detailed experience relevaent to the sector in which the Group operates.
As such, directors maintain their skills by various methods, including in house and
external training, corporate governance literature and for the non-executives skills
and experience gained from holding other roles at publicly listed and sector relevant
companies. Given the Group's size and maturity, this is deemed sufficient for a
company such as Zaim.
The Non Executive Director and Chairman are committed to undertake
approximately two days per month or whatever other commitment is required
to satisfactorily undertake the role. The COO is full time and the CEO and FD are
committed to whatever level of time is required to satisfactorily execute the role. This
is maintained under constant review by the Board and will be amended if required.
Malcolm Groat
Non-Executive Chairman
Mr Groat is a Chartered Accountant and MBA graduate. Following an early career with PwC
in London, he held CFO, COO and CEO roles in international businesses, including with the
construction engineering firm that is now Arcadis. Since 2005, Mr Groat has held non-ex-
ecutive board positions, mainly with growth ventures listed on the AIM and the main
market, but also with larger bodies such as the UK’s former Milk Marketing Board, Corps
Security and Baronsmead Second Venture Trust PLC. Mr Groat chaired a Singapore-based
consulting firm (2010–2012) and a UK-based technology group (2013–2015) that enables
secure and fast IT connectivity for financial institutions and military organisations around
the world.
Paul James Auger
Non-Executive Director
With a career of over 30 years in finance and lending, Mr Auger has been a director of an
Essex-based and FCA-regulated microlender TFS Loans Limited ("TFS") for over 10 years.
Established by Paul in 2009, TFS is focused on the guarantor loans market and currently
offers guaranteed loans under £15,000 to retail consumers. Established in 2009, TFS was
initially authorised by the Office of Fair Trading until responsibility was transferred to
the FCA in April 2014 when it was given interim authorisation until full authorisation was
granted by the FCA at the end of 2016.
Siro Donato Cicconi
Chief Executive Officer
Siro is an experienced Italian executive director that has worked for and advised numer-
ous businesses in Italy many of which were in turnaround or distressed situations. In the
late 1990s, Siro advised on fundraisings for strategic R&D projects of many organisations
(including Alfa Gomma Group and Benelli Motors SpA), which involved managing relations
with European, Italian and local financial administrations. He also assisted several other
industrial groups in raising finance for their acquisition plans. From 2005 until 2010, he
provided corporate finance advice to several businesses. Between 2011 and 2013, he was
appointed Managing Director of IMT SpA, a large Italian manufacturer of drilling equip-
ment, to turn around that business. After finishing this role, he became the Managing
Director of EER to fund Zaim and managed the rationalisation of Zaim’s operations and
returned it to profitability.
Vladimir Golovko
Chief Operating Officer
Vladimir was previously the COO of Zaim Express LLC from inception in 2011 prior to
becoming CEO of this Company. At the same time, he serves as the Chief Operating Officer
of Zaim Credit Systems. Prior to joining Zaim, he was General Manager of the Pyaterochka
retail chain (a franchise network) (2004–2011) and had previously been Communications
Director (1999–2011). Vladimir also previously worked for Uniland (the largest wholesale
company in Russia at the time) as a Sales and Marketing Manager; Uniland now operates
as the supermarket chain, DIXY. Vladimir graduated from the Volgograd branch of Moscow
State University of Commerce in 1997 with a degree in Management.
Simon James Retter
Finance Director
Simon started his career at Deloitte & Touche LLP (now known as Deloitte LLP), where
he qualified as a Chartered Accountant specialising in corporate finance transactions.
He has been instrumental in setting up several private and listed companies. Simon has
undertaken numerous IPOs and reverse takeovers and has a wealth of public market
experience. He currently holds the position of Finance Director of SulNOx Group plc which
has developed an innovative fuel conditioner to reduce harmful emissions from diesel
and HFO combustion engines as well as various other board positions of listed companies
across a broad range of industries.
Company Secretary
Simon James Retter is the Company Secretary
of the Company.
34
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
35
Key Management
Directors’ Report
Vladimir Golovko
Chief Executive Officer
Vladimir was previously the COO of Zaim from its inception in 2011 prior to becoming the
CEO. At the same time, he serves as the Chief Operating Officer of Zaim Credit Systems.
Prior to joining Zaim, he was General Manager of the Pyaterochka retail chain (a fran-
chise network) (2004–2011) and had previously been Communications Director (1999–2011).
Vladimir also previously worked for Uniland (the largest wholesale company in Russia at
the time) as a Sales and Marketing Manager; Uniland now operates as a supermarket
chain, DIXY. Vladimir graduated from the Volgograd branch of Moscow State University of
Commerce in 1997 with a degree in Management.
Andrey Katyshkov
Chief Financial Officer
Mr Katyshkov joined Zaim at the beginning of 2018 as CFO and had previously worked
for Basic Element, one of the biggest investment funds in Russia working in corporate
finance. Mr Katyshkov worked with GIP Group in 2011–2012 as an Investment Specialist
within its investment department. Prior to this, Mr Katyshkov worked as an Investment
Analyst with an investment fund, Ost West Group, in 2002–2006. Mr Katyshkov graduated
from Moscow State University of Economics, Statistics and Information Systems in 2003
with a degree in Finance, followed by postgraduate studies at Moscow Financial Industrial
Academy which he completed in 2006.
Alexander Akhmetov
Head of Legal Department
Mr Akhmetov joined Zaim in 2011 first as legal counsel and, starting from 2014, as Head of
the Legal Department. Prior to joining Zaim Express LLC, Mr Akhmetov worked for a law
firm called Yurconri before practicing at the Arbitration Court of the Moscow Region. Mr
Akhmetov graduated from Moscow Engineering Physics Institute in 2007 with a degree in
Accounting and subsequently graduated from Moscow State Law Academy in 2011 with a
degree in Law.
Vildan Vegerio
Head of Network Management
Prior to his appointment as Head of Network Management of Zaim in 2016, Mr Vegerio
had worked with the Company as a Senior Customer Relationship Specialist from 2011. Mr
Vegerio graduated from the International Slavic Institute with a degree in Economics in
2011.
The Directors present their Annual Report on the affairs of Zaim Credit Systems Plc
together with the audited Financial Statements for the year ended 31 December
2020.
Principal Activities
The principal activity of the Group and Company is providing customers with small-size short-term loans.
Financial Review
Financial review of the Group is presented in the “Financial Overview” section of the current Annual Report.
Going Concern
These consolidated financial statements reflect the
Group management’s current assessment of the impact
of the Russian business environment on the opera-
tions and the financial position of the Group. The future
economic direction of the Russian Federation is largely
dependent upon the effectiveness of measures under-
taken by the RF Government and other factors, including
regulatory and political developments which are beyond
the Group’s control. The Group’s management cannot
predict what impact these factors will have on the
Group’s financial position in future. As a result, adjust-
ments related to this risk have not been included in the
accompanying financial statements.
As at 31 December 2020, the Group has an accumulat-
ed deficit of GBP 38,262,611 (2019: GBP 37,648,092), and
incurred a net loss of GBP 614,519 during the year ended
31 December 2020 (2019: GBP 891,589).
The Group’s business activities together with the factors
likely to affect its future development, performance and
position are set out in the Chairman’s Statement on page [4]
and Chief Executive Review on page [6]. In addition note 3
to the Financial Statements includes the Group’s objectives,
policies and processes for managing its capital; its financial
risk management objectives; details of its financial instru-
ments and its exposure to credit and liquidity risk.
Dividends
The Directors do not recommend payment of a dividend
(2019: £Nil).
The Directors recognise the importance of dividends to
Investors and as soon as Zaim’s business is at a ma-
ture stage of development, the Directors will review the
desirability of paying dividends. Income generated by
the Company in the near term is likely to be re-invested
by the Company to implement its strategy. As a holding
company, the Company will be dependent upon dividends
The Financial Statements have been prepared on a going
concern basis. In 2020, the Group changed its business
model to one of remote lending via the Internet, which
resulted in a significant decrease in fixed lease and staff
costs and a decrease in the share of lending costs within
total expenses. The Group is planning to optimise the
network operation, including removal of loss-making out-
lets and enhancement of the Internet channel to attract
customers.
The Group is actively collecting overdue debts, inter alia,
through legal action. Despite temporary suspension
of judicial and enforcement proceedings during the
COVID-19 pandemic, the proceeds from the loans of Stage
3 in 2020 increased by 87% compared to 2019.
The CBR sets the minimum mandatory liquidity ratio at
over 70%. The Subsidiary meets the mandatory liquidity
ratio: as at 31 December 2020 - 153.74% (unaudited) and
as at 31 December 2019 – 132.89% (un- audited).
As a result of considerations noted above, the Directors
have a reasonable expectation that the Group and Com-
pany have adequate resources to continue in operational
existence for the foreseeable future. Thus, they continue
to adopt the going concern basis of accounting in pre-
paring these Financial Statements.
being declared and paid by its subsidiary. The Board does
not anticipate declaring dividends in the short term, but
it may recommend dividends at some future date, de-
pending upon, inter alia, the Zaim Business demonstrat-
ing sustainable profits and the financial position of the
Company. The Board can neither give assurances that it
will pay dividends in the future nor, if dividends are paid,
what the amount of such dividends will be.
36
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
37
Health and Safety
Health and safety of our employees is of paramount impor-
tance to our Company. During the COVID-19 outbreak, Zaim
has been proactively implementing strict health and safety
policies specifically tailored to COVID-19, including working
from home for the entire head office staff and taking all
necessary disinfection measures in our stores, such as
using hand sanitizers, medical masks and more frequent
cleaning of the customer zone. Сlients could enter the shop
in compliance with the social distancing instructions or one
at a time. Subsequently, COVID-19-related restrictions were
eased. A of the date of this report, our customer-facing
employees and our clients are obliged to use medical masks
and gloves and maintain social distancing. We continue fol-
lowing all the recommendations of local health authorities
and the World Health Organisation.
Social, Community and
Human Right Issues and
Policies
The Company does not have formal social, community
and human rights policies.
Environmental Matters
The Company’s activities do not have a negative impact
on the environment as it is a financial services company
and it does not own or operate heavy machinery or air-
or water-polluting equipment. The Company does not
have formal policies on this matter.
Employees
As of 31 December 2020, the Group had 199 employees.
Our employees are our most valuable resource and we
focus on creating a comfortable working environment for
them. Zaim sets high standards for customer service and
conducts regular training for its employees. We see inno-
vation as a tool to ensure customer loyalty and increase
the motivation of our employees. We invest in human
capital through continuous staff training, development of
a personnel reserve system and the career growth of our
employees. Responsibility, honesty, and openness are core
values of our Company.
The Company has the following internal policies:
> On recruitment, evaluation and management of
employees
> On hiring and allocating of employees
> On education, adaptation and evaluation of employees
> On motivation and remuneration of employees
Gender Diversity
Although the Board and top management consists only
of male members, the Company supports diversity in the
Boardroom and the Financial Reporting Council aims to
encourage such diversity. The following table sets out a
breakdown by gender as of 31 December 2020:
Directors
Senior Management
Other employees
Male
5
4
58
Female
0
0
132
Substantial Shareholdings
The Directors are aware of the following substantial
interests or holdings of 3% or more of the Company’s
ordinary called-up share capital as of 29 April 2021.
Shareholder
Zaim SA1
Number of shares
320,000,000
Percentage
73.23%
There was no change in the interests set out above
between 31 December 2020 and 29 April 2021.
Share Capital
Changes in the share capital of the Company, including
the disclosure of earnings per share, are set out in Note
11 to the Financial Statements.
Voting Rights
All the issued shares have equal voting rights.
Directors and Their
Interests
The names of the Directors of the Company at the date
of this report are shown in the “Board of Directors” sec-
tion of this report.
The Directors who served during the year together with their directly beneficial interests in the shares of the Compa-
ny as of 31 December 2020 are as follows:
Director
Malcolm Groat
Paul James Auger
Siro Donato Cicconi
Simon James Retter2
Vladimir Golovko
Date of
appointment
4.11.2019
4.11.2019
22.07.2019
15.06.2018
25.10.2019
2020
Shares
0
0
320,000,000
3,600,000
2020
Option
2,150,000
2,000,000
10,750,000
6,450,000
8,600,000
2019
Shares
0
0
320,000,000
3,600,000
0
2019
Options
2,150,000
0
10,750,000
6,450,000
8,600,000
None of the Directors exercised any share options during the year.
Restrictions on the
Transfer of Securities
Pursuant to a lock-in deed entered into between the
Directors, Optiva Securities Limited, Beaumont Cornish
Limited and the Company have agreed to the following
lock-up arrangements:
(a) for a 12-month lock-up period from 29 October
2019, the Directors have agreed that, subject to certain
customary exceptions, they will not directly or indirectly
transfer the legal and/or beneficial ownership (or any
interest therein or in respect thereof) of any ordinary
shares held by them immediately after admission (or any
ordinary shares which may accrue to them as a result
of such holding) or enter into any transaction with the
same economic effect as any of the foregoing;
(b) for a further 12 months after the initial lock-up period
ends, the Directors have undertaken that, subject to certain
customary exceptions, they will not directly or indirectly
transfer the legal and/or beneficial ownership (or any
interest therein or in respect thereof) of any ordinary shares
held by them immediately after admission (or any ordinary
shares which may accrue to them as a result of such hold-
ing), or enter into any transaction with the same economic
effect as any of the foregoing otherwise than through
Optiva (subject to certain customary exceptions); and
(c) Siro Cicconi has provided an undertaking that, subject
to customary exceptions, he will not directly or indirect-
ly transfer his legal or beneficial interest in the share
capital of Zaim SA for a period of twelve months from
admission.
Accordingly, as from 29 October 2021 the Directors' hold-
ings will no longer be subject to orderly market arrange-
ments.
Relationship Agreement
The Board confirms that on 29 October 2019, Siro Cicconi,
Zaim SA and the Company entered into a relationship
agreement to ensure that the Company is able to carry
on its business independently of Siro Cicconi and Zaim
SA and that all transactions and relationships with Siro
Cicconi and Zaim SA shall be on an arms’ length and
normal commercial basis. Where either of the Founder
Shareholder Parties holds or in aggregate hold 20% or
more of the total voting rights in the Company, Zaim SA
has the right to appoint a representative director. In
addition, where either of the Founder Shareholder Parties
holds or in aggregate hold 15% or more of the total voting
rights in the Company, they have the right to appoint a
Board observer.
The Company complied with the Relationship Agreement
during the period under review. So far as the Company
is aware, the agreement was complied with during the
period under review by the controlling shareholder or
any of its associates; and the procurement obligation
was complied with during the period under review by a
controlling shareholder.
Directors’ Statement
as to the Disclosure of
Information to the Auditor
The Directors who held office at the date of approval of
this Directors’ Report confirm that, so far as they are
individually aware, there is no relevant audit information
of which the Company’s auditor is unaware and the Di-
rectors have taken all the steps that they ought to have
taken to make themselves aware of any relevant audit
information and to establish that the auditor is aware of
the information.
Matters Covered in the
Business Review
The business review and review of KPIs are included
in the “Operational Overview” section of the Strategic
Report.
2 On 9 February 2021, Stonedale Management & Investments Ltd, a company controlled by Simon Retter, Finance Director of the Company, purchased 1,300,000 ordinary
Zaim shares of £0.01 each at a price of 4.4 p per share. Following this transaction, Mr Retter has a beneficial interest in 4,900,000 ordinary shares, representing 1.12% of
the Company's issued share capital.
1 Siro Cicconi’s interest in shares is through Zaim SA, which he wholly owns through his life interest in Excelsior Foundation which wholly owns Zaim SA.
38
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
39
Events after the Reporting
Date
The events after the reporting date are set out in Note 28
to the Financial Statements.
Future Developments
In 2021, the Group will be working towards further
implementation of its online growth strategy. On 1 April
2021, the Group attracted additional financing of RUB50m
(approximately GBP500,000) that, in addition to equity fi-
nancing following the IPO and necessary investments al-
ready made into the online platform, make Zaim well-po-
sitioned to grow its business and capture the demand
from the less well-off part of the Russian population.
Information on Exposure
to Risks
Principal risks and uncertainties are discussed in the
Risk Management section of this report as well as in
Note 20 to the Financial Statements.
Financial Instruments
The financial risk management policies and objectives
are set out in detail in Note 20 to the Financial State-
ments.
Greenhouse Gas Emissions
The Group has as yet minimal greenhouse gas emissions
to report from the operations of the Group and does not
have responsibility for any other emission-producing
sources under the Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations 2014.
Corporate Governance
Please refer to the Corporate Governance Report section
of this document.
Amendment of the
Company's Articles of
Association
The Directors do not have any specific procedures in
place regarding any potential changes to the Company’s
Articles of Association, but should this need arise, it will
be presented to shareholders at a general meeting in
line with the company law.
Appointment and
Replacement of Directors
Subject to the Articles of Association and the Companies
Act, the Company may by ordinary resolution appoint a
person who is willing to act as a Director and the Board
shall have power at any time to appoint any person who
is willing to act as a Director, in both cases either to fill a
vacancy or as an addition to the existing Board.
At the first annual general meeting, all the Directors shall
retire from office and may offer themselves for reap-
pointment by the Shareholders by ordinary resolution.
At every subsequent annual general meeting, any Direc-
tor who (i) has been appointed by the Directors since the
last annual general meeting or (ii) was not appointed or
reappointed at one of the preceding two annual general
meetings must retire from office and may offer them-
selves for reappointment by the Shareholders by ordi-
nary resolution.
Powers of the Company’s
Directors
The Directors do not have any specific procedures in
place regarding any potential changes to the opportunity
for the Company to buy back its own shares, but should
this need arise, they will be presented to the sharehold-
ers at a general meeting in line with company law.
Directors and Officers
Insurance
The Group has not provided Directors and Officers insur-
ance for both the current and prior periods.
Annual General Meeting
The Notice of the Annual General Meeting of the Compa-
ny will be distributed to shareholders together with the
Annual Report. Full details of the business to be consid-
ered at that meeting can be found in the Notice.
Independent Auditor
The auditor, Shipleys LLP, will be proposed for reappoint-
ment in accordance with section 485 of the Companies
Act 2006.
Shipleys LLP has signified its willingness to continue in
office as Auditor.
By Order of the Board,
SIMON RETTER
Company Secretary
29 April 2021
Remuneration Report
The Board of Directors of Zaim Credit Systems Plc formed the Remuneration
Committee that was constituted at a full meeting of the Board held on 29 October
2019 in accordance with the Articles of Association of the Company.
Chief Operating Officer—
Vladimir Golovko
Vladimir Golovko is paid an annual salary of £10,000 by
the Company. Under the terms of an agreement dated
21 December 2017, Vladimir Golovko is also employed by
Zaim for a monthly salary of 700,000 Russian Roubles
(approximately £7,000) and a yearly bonus determined by
the shareholders with reference to the key performance
indicators.
A discretionary quarterly bonus is typically paid in the
amount of the monthly salary (depending on perfor-
mance).
Finance Director—Simon
Retter
Simon Retter is paid an annual salary of £60,000 which
shall escalate to £120,000 per annum if Zaim reaches
EBITDA of £200,000 per calendar month and shall further
escalate to £150,000 per annum if Zaim reaches EBITDA
of £350,000 per calendar month.
Non-executive Director—
Paul Auger
Paul Auger is paid an annual salary of £20,000 which shall
escalate to £27,000 per annum if Zaim reaches EBITDA of
£200,000 per calendar month.
The Committee determines and agrees with the Board
the framework or broad policy for the remuneration of
the Company’s Chairperson and the Executive Directors,
including pension rights and compensation payments.
The remuneration of Non-executive Directors shall be
a matter for the Board or the shareholders (within the
limits set in the Articles of Association). No Director or
Senior Manager shall be involved in any decisions as to
their own remuneration. The Committee recommends
and monitors the level and structure of remuneration for
senior management.
The Group’s policy is to maintain levels of remuneration
so as to attract, motivate and retain Directors and Senior
Managers of the highest calibre who can contribute their
experience to deliver industry-leading performance with
the Group’s operations.
As is common for a company the size of Zaim, there is no
Directors remuneration policy, although the terms of the
Directors contracts are set out in this report.
Below are the summary service contracts and appoint-
ment letters of the Directors:
Non-Executive Chairman—
Malcolm Groat
Malcolm Groat is paid an annual salary of £25,000 which
shall escalate to £35,000 if Zaim reaches EBITDA of
£200,000 per calendar month.
Chief Executive Officer—
Siro Cicconi
Siro Cicconi is paid an annual salary of £100,000 which
shall escalate to £200,000 per annum if Zaim reaches
EBITDA of £200,000 per calendar month and shall further
escalate to £350,000 per annum if Zaim reaches EBITDA
of £350,000 per calendar month.
40
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
41
Below is the summary of remuneration for each Director for 2020:
Salary
£
25,000
100,000
124,361
Malcolm Groat
Siro Donato Cicconi
Vladimir Golovko
Simon James Retter*
60,000
Paul James Auger
Total
20,000
329,361
Other fees/
bonus
Benefits Pension contributions
Share-based
payment
charge
£
-
35,000
3,500
21,000
-
59,500
£
-
-
-
-
-
-
£
-
-
-
-
-
-
£
-
-
32,616
-
1,788
34,404
Total
£
25,000
135,000
160,477
81,000
21,788
423,265
Below is the summary of remuneration for each Director for 2019 when the Directors received their compensation for
two months only—November and December, since the Group went public only on 4 November 2019:
Salary
Other fees
Benefits
Pension contributions
Share-based
payment charge
Malcolm Groat
Siro Donato Cicconi
Vladimir Golovko
Simon James Retter*
Paul James Auger
Total
£
4,167
16,667
149,423
10,000
3,333
183,590
£
-
-
-
40,000
-
40,000
£
-
-
-
-
-
-
£
-
-
-
-
-
-
Total
£
16,386
77,760
155,538
86,656
3,333
£
12,219
61,093
6,115
36,656
-
116,083
339,673
* Includes £40,000 fees charged to Zaim and share-based payment charge of £36,656 in respect of the services provided by the company controlled by Simon Retter
before the acquisition of Zaim by ZCS.
Shares and options held by the Directors are as follows:
Malcolm Groat
Siro Donato Cicconi
Vladimir Golovko
Simon James Retter*
Paul James Auger
Shares held
Share options
Shares held
Share options
2020
320,000,000
3,600,000
2020
2,150,000
10,750,000
8,600,000
6,450,000
2,000,000
2019
-
320,000,000
-
3,600,000
-
2019
2,150,000
10,750,000
8,600,000
6,450,000
-
* On 9 February 2021, Stonedale Management & Investments Ltd, a company controlled by Simon Retter, Finance Director of the Group, purchased 1,300,000 ordinary ZCS
shares and at the date of this report was beneficially interested in 4,900,000 shares.
The only discretionary pay received by the Directors was
related to a performance-related bonus; all other terms
of the Director’s remunerations are fixed as per con-
tracts set out above and are directly linked to the EBIT
generated by Zaim on a monthly basis. As of the end of
2020, none of these milestones had been reached.
The Company issued certain Directors with options exer-
cisable at the issue price of 2.5 p at the date of the IPO
and subsequent options to one Non-executive Director at
2.7 p during 2020. The share-based payment charge was
calculated using the Black Scholes method and included
in the tables above.
There is no LTIP in place other than the unapproved
options scheme and none of the Directors received any
benefits in kind or pension contributions.
Approved on behalf of the Board,
MALCOLM GROAT
Non-Executive Chairman
29 April 2021
Corporate Governance
Report
Corporate Governance
Practices
The Board recognises the importance of sound corporate
governance commensurate with the size of the Company
and the interests of Shareholders. As the Company is
listed in the Standard segment of the Official List of the
LSE, it is not required to comply with the UK Corporate
Governance Code, which is applicable to all companies
whose securities are admitted to trading in the premium
segment of the Official List. The UK Corporate Govern-
ance Code can be found at https://www.frc.org.uk/
directors/corporate-governance-and-stewardship. Nev-
ertheless, the Directors are committed to maintaining
high standards of corporate governance and, so far as is
practicable given the Company’s size and nature, volun-
tarily adopt and comply with the QCA Code. However, at
present, due to the size of the Company, the Directors
acknowledge that adherence to certain provisions of the
QCA Code may be delayed until such time as the Direc-
tors are able to fully adopt them.
The Role of the Board
The Company holds timely Board meetings as issues
arise which require the attention of the Board. The Board
is responsible for the management of the Company,
setting the strategic direction of the Company and es-
tablishing the policies of the Company. It is the Directors’
responsibility to oversee the financial position of the
Company and monitor the business and affairs of the
Company on behalf of the Shareholders, to whom they
are accountable. The primary duty of the Directors is to
act in the best interests of the Company at all times. The
Board also addresses issues related to internal control
and the Company’s approach to risk management.
The Directors established an Audit Committee and a
Remuneration Committee. The Board do not consider
it appropriate to establish a Nomination Committee at
this stage of the Company’s development, and decisions
usually undertaken by those committees will be taken by
the Board as a whole.
Audit Committee
The Audit Committee assists the Board in discharging
its responsibilities with regard to financial reporting,
external and internal controls, including reviewing and
monitoring the integrity of the Group’s annual and inter-
im financial statements, reviewing and monitoring the
extent of the non-audit work undertaken by the Group’s
external auditors, advising on the appointment of such
external auditors, overseeing the Group’s relationship
with its external auditors, reviewing the effectiveness of
the external audit process and reviewing the effective-
ness of the Group’s internal control and review function.
The ultimate responsibility for reviewing and approving
the annual report and accounts and the half-yearly
reports remains with the Board. The Audit Committee will
meet not less than twice a year. The Audit Committee is
chaired by Malcolm Groat, and its other member is Paul
Auger. The Directors consider that Simon Retter has re-
cent and relevant financial experience. In 2020, the Audit
Committee met on 4 June 2020.
The Group does not currently have an internal audit
function, but as the business grows and matures will
look to implement one when appropriate. The group
has increased its finance function since its listing and
continues to grow its capability in line with the size of
the business.
Remuneration Committee
The Group established a Remuneration Committee, which
comprises Malcolm Groat as Chairman and Paul Auger, to
review the performance of the Executive Directors and
set the scale and structure of their remuneration and
the basis of their service agreements with due regard
to the interests of Shareholders. In determining the
remuneration of Executive Directors, the Remuneration
Committee seeks to enable the Group to attract and re-
tain executives of the highest calibre. The Remuneration
Committee also make recommendations to the Board
concerning the allocation of any share awards. No Direc-
tor is permitted to participate in discussions or decisions
concerning their own remuneration. In 2020, the Remu-
neration Committee met on 28 October 2020.
42
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
43
When setting the balance between fixed and variable pay,
Remuneration Committee bears in mind that a significant
proportion of remuneration is structured so as to link
rewards to corporate and individual performance and
is designed to promote the long term success of the
Company.
The Remuneration Committee bears in mind the Compa-
ny’s appetite for risk and align Directors' remuneration
to the Company’s long-term strategic goals. The Re-
muneration Committee ensures that contractual terms
on termination and any payments made are fair to the
individual and the Company; that failure is not rewarded
and the duty to mitigate loss is fully recognised.
When setting remuneration policy for directors of the
Company, the Committee reviews and has regard to the
pay and employment conditions across the company or
group, especially when determining salary increases.
Market Abuse Regulation
The Board adopted a share dealing code that complies
with the requirements of the Market Abuse Regulation.
The Board is responsible for taking all proper and rea-
sonable steps to ensure compliance with the MAR by the
Directors and persons discharging managerial responsi-
bilities. The FCA is the competent authority for the MAR
and has powers to intervene as competent authority and
will be responsible for the investigation and enforcement
of breaches of MAR.
Board Meetings
The core activities of the Board are carried out during
scheduled meetings of the Board. These meetings are
timed to link to key events in the Group’s corporate
calendar and regular reviews of the business are con-
ducted. Additional meetings and conference calls are
arranged to consider matters which require decisions
outside the scheduled meetings.
In 2020, the Board met on eight occasions:
Attendance at meetings:
Malcolm Groat
Siro Donato Cicconi
Simon James Retter
Paul James Auger
Vladimir Golovko
Non-Executive
Chairman
Director and CEO
Finance Director
Non-Executive
Director
Chief Operating
Officer
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
20 January 2020
22 April 2020
27 May 2020
12 June 2020
29 June 2020
17 September 2020
22 October 2020
15 December 2020
Outside the scheduled meetings of the Board, the
Directors maintain frequent contact with each other
to discuss any concerns they may have relating to the
Group or their areas of responsibility and to keep them
fully briefed on the Company’s operations.
Matters Reserved
Specifically for the Board
The Board has a formal schedule of matters reserved
that can only be decided by the Board. The key matters
reserved are the consideration and approval of the
following:
> The Group’s overall strategy;
> Financial Statements and dividend policy;
> Management structure including succession planning,
appointments and remuneration; material acquisitions
and disposal, material contracts, major capital
expenditure projects and budgets;
> Capital structure, debt and equity financing and other
matters;
> Risk management and internal controls;
> The Group’s corporate governance and compliance
arrangements; and
> Corporate policies.
Effectiveness
For the period under review, the Board comprised a Chief
Executive Officer, a non-executive Chairman and three
other Directors, including one independent non-executive
Director. See biographical details in the “Board of Direc-
tors” subsection of the “Corporate Governance” section of
this report.
The Directors are of the view that the Board and its Com-
mittees consist of Directors with an appropriate com-
bination of skills, experience, independence and diverse
backgrounds to enable them to carry out their duties
and responsibilities effectively.
Independence
The Board considers each of the non-executive Directors
to be independent in character and judgement.
Appointments
The Board is responsible for reviewing the structure, size
and composition of the Board and making recommenda-
tions to the Board with regard to any required changes.
Commitments
All the Directors have disclosed any significant com-
mitments to the Board and confirmed that they have
sufficient time to perform their duties.
Induction
All new Directors received an induction as soon as prac-
tical upon joining the Board.
Conflicts of Interest
A Director has a duty to avoid a situation in which he or
she has, or can have, a direct or indirect interest that
conflicts, or may possibly conflict with the interests of
the Group and the Company. The Board has satisfied
itself that there is no compromise to the independence
of those Directors who have appointments on the Boards
of, or relationships with, companies outside the Company.
The Board requires Directors to declare all appointments
and other situations which could result in a possible
conflict of interest.
Board Performance and
Evaluation
The Company has a policy of appraising Board perfor-
mance annually. Having reviewed various approaches
to Board appraisal, the Company has concluded that
for a Company of its current scale, given the COVID-19
restrictions, an internal process of regular videocon-
ference meetings is the most appropriate, in which all
Board members can discuss any issues as and when they
arise in relation to the Board or any individual member’s
performance.
Remuneration Policy
In determining the remuneration policy, the Committee
takes into account all factors which it deems necessary
including relevant legal and regulatory requirements and
the provisions and recommendations of relevant guid-
ance. The objective of such a policy shall be to attract,
retain and motivate the executive management of the
Company without paying more than necessary. The remu-
neration policy bears in mind the Company’s appetite for
risk and is aligned to the Company’s long-term strategic
goals. A significant proportion of remuneration is struc-
tured so as to link rewards to corporate and individual
performance and is designed to promote the log-term
success of the Company.
When setting the remuneration policy for the Directors
of the Company, the Committee reviews and has regard
to the pay and employment conditions across the Com-
pany or the Group, especially when determining salary
increases.
All Remuneration Committee members demonstrate
independent judgement and discretion when determining
and approving remuneration outcomes.
Investing in the Company’s
Workforce
Remuneration system of the Company includes:
1. Guaranteed salary, which is the fixed monetary remu-
neration of an employee.
This amount does not depend on financial situation of the
organisation, personal characteristics of the employee
and other factors. It includes:
> basic salary for the time actually worked
> compensations for overnight and overtime work
> allowances;
2. Variable part of the salary linked to professional
achievements of the employee:
> bonus for overachievement of the plan;
> payment for participation in the training of young
professionals.
Diversity
Although the Board consists of only male Directors, the
Board supports diversity in the Boardroom and the Finan-
cial Reporting Council aims to encourage such diversity.
44
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
45
Accountability
The Board is committed to providing shareholders with a
clear assessment of the Group’s position and prospects.
This is achieved through this report and other periodic
financial and trading statements as required.
External Audit
No significant issues were identified during the external
audit process undertaken by the external auditors. The
Audit Committee reviews the audit process each year
and, in addition, analyses the performance and feedback
from the external auditors as part of the reporting pro-
cess. The Audit Committee assesses the external audi-
tor’s independence, length of service and provision of
non-audit services as part of the review of the suitability
of the external auditors to continue to hold office for the
following year and therefore seek reappointment at the
next AGM. A tender was not submitted for reappointment
of the audit this year as the current external auditors
held office for less than the statutory number of years
prior to a retender process.
The external auditor of the Group is independent and
objective as they do not provide any non-audit services.
Internal controls
The Board of Directors reviews the effectiveness of
the Group’s and Company’s system of internal controls
in line with the requirements of the Code. The internal
control system is designed to manage the risk of failure
to achieve business objectives. This covers internal
financial and operational controls, compliances and risk
management. The Company has necessary procedures
in place for the year under review and up to the date of
approval of the Annual Report and Financial Statements.
The Directors acknowledge their responsibility for the
Group’s and Company’s system of internal controls and
for reviewing its effectiveness. The Board confirms the
need for an ongoing process for identification, evaluation
and management of significant risks faced by the Group.
The Directors carry out a risk assessment before signing
up to any commitments.
The Audit Committee regularly reviews and reports to
the Board on the effectiveness of the system of internal
control. Given the size of the Group and the Company and
the relative simplicity of the systems, the Board consid-
ers that there is no current requirement for an internal
audit function. The procedures that have been estab-
lished to provide internal financial control are considered
appropriate for a Group and Company of its size and
include controls over expenditure, regular reconciliations
and management accounts.
The Directors are responsible for taking such steps as
are reasonably available to them to safeguard the assets
of the Group and to prevent and detect fraud and other
irregularities.
Nomination
Currently, due to the size of the Group, there is no Nomi-
nation Committee.
Shareholder relations
Open and transparent communication with shareholders
is given high priority and there is regular dialogue with
institutional investors, as well as general presentations
made at the time of release of the annual and interim
results. All the Directors are kept aware of changes in
major shareholders in the Company and are available
for conference calls or meetings (subject to COVID-19
restrictions) with shareholders who have specific inter-
ests or concerns. The Group issues its results promptly
to individual shareholders and also publishes them on
the Company’s website: www.zaimcreditsystemsplc.com.
Regular updates to record news in relation to the Group
are included on the Company’s website.
The Directors are available to meet with institutional
shareholders to discuss any issues and gain an under-
standing of the Company’s business, its strategies and
governance. Meetings are also held with corporate gov-
ernance representatives of institutional investors when
requested.
Our AGMs give the Board the opportunity to engage with
investors on the running of their company and to receive
feedback. ZCS plans to conduct its first AGM following
the publication of this annual report, but due to the
exceptional circumstances surrounding COVID-19 and the
Stay at Home measures in force in the United Kingdom,
shareholders will not be permitted to attend.
The Board also considers the views and interests of other
key stakeholders, including clients, employees, regulators
and society as a whole in its discussions.
Annual General Meeting
At every annual general meeting, individual shareholders
are given the opportunity to put forward questions to
the Chairman and to other members of the Board that
may be present. Notice of the annual general meeting
is sent to shareholders at least 21 clear days before the
annual general meeting. Details of proxy votes for and
against each resolution together with the votes withheld
are announced by way of regulatory information service
and are published on the Company’s website as soon as
practical after the annual general meeting.
Section 172 Statement
The Directors of the Company, as those of all UK compa-
nies, must act in accordance with a set of general duties.
These duties are detailed in section 172 of the UK Compa-
nies Act 2006 which is summarized as follows:
“A director of a company must act in the way he consid-
ers, in good faith, would be most likely to promote the
success of the company for the benefit of its stakehold-
ers as a whole, and in doing so have regard (amongst
other matters) to:
(a) the likely consequences of any decision in the long
term;
(b) the interests of the company's employees;
(c) the need to foster the company's business relation-
ships with suppliers, customers and others;
(d) the impact of the company's operations on the com-
munity and the environment;
(e) the desirability of the company maintaining a reputa-
tion for high standards of business conduct; and
(f) the need to act fairly as between stakeholders of the
Company”
As part of their induction, all Directors are briefed on
their duties and they can access professional advice
on these, either from the Company Secretary or, if they
judge it necessary, from an independent adviser. The
Directors fulfill their duties partly through a governance
framework that delegates day-to-day decision-making
to employees of the Company and details of this can be
found in our Governance Report on pages from 43 to 46.
The following paragraphs summarise how the Directors
fulfill their duties:
Risk Management
We provide financial services to our clients, often in com-
petitive and highly regulated environment. As we grow
and develop financial technologies, our risk environment
also become more complex. It is therefore vital that
we effectively identify, evaluate, manage and mitigate
the risks we face, and that we continue to evolve our
approach to risk management.
For details of our principal risks and uncertainties and
how we manage our risk environment, please see pages
27 to 30.
Our People
Our Company is committed to being a responsible
business. Our behavior is aligned with the expectations
of our people, clients, investors, communities and society
as a whole. Client-facing employees are at the heart of
our services. For our business to succeed we need to
manage our people’s performance and develop talent
while ensuring we operate as efficiently as possible. For
that we have developed regular training programs for
our employees. We must also ensure we share common
values that inform and guide our behavior so we achieve
our goals in the right way.
For further details on our people, please see page 45.
Shareholders
The Board is committed to openly engaging with our
shareholders, as we recognize the importance of contin-
uing effective dialogue. It is important to us that share-
holders understand our strategy and objectives, so these
must be explained clearly, feedback heard and any issues
or questions raised properly considered. Our board
members, especially Siro Donato Cicconi, hold a series of
shareholders meetings several times a year on the back
of financial and operational reporting.
For further details on how we engage with our share-
holders please see page 46.
Community and
Environment
The Company’s approach is to use our strengths to cre-
ate positive change for the people and communities with
which we interact. We are providing financial inclusion
solutions for people overlooked by traditional banking
sector. We want to leverage our expertise and enable
colleagues to support the communities around us.
For further details on how we interact with communities
and the environment, please see page 31.
46
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
47
Directors’ Responsibilities
Statement
The Directors are responsible for preparing the Strategic Report, the Annual Report
and the Financial Statements in accordance with applicable law and regulations.
For the year ended 31 December 2020
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law, the
Directors elected to prepare the Group’s and the Compa-
ny’s Financial Statements in accordance with the Interna-
tional Financial Reporting Standards (IFRSs) as adopted
by the European Union. 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 the Company and of the
profit or loss of the Group and the Company for that pe-
riod. The Directors are also required to prepare Financial
Statements in accordance with the rules of the London
Stock Exchange.
In preparing these Financial Statements, the Directors
are required to:
> Select suitable accounting policies and then apply
them consistently;
> Make judgments and accounting estimates that are
reasonable and prudent;
> State whether applicable UK Accounting Standards
have been followed, subject to any material
departures disclosed and explained in the Financial
Statements; and
> Prepare the Financial Statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.
The Directors are responsible for keeping adequate ac-
counting records that are sufficient to show and explain
the Company’s transactions and disclose with reason-
able accuracy at any time the financial position of the
Company and enable them to ensure that the Financial
Statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregulari-
ties.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website. Legislation in the
United Kingdom governing the preparation and dissemi-
nation of financial statements may differ from legislation
in other jurisdictions.
Directors’ Responsibility
Statement
We confirm that to the best of our knowledge:
> The Financial Statements, prepared in accordance
with the relevant financial reporting framework, give
a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the
undertakings included in the consolidation taken as a
whole;
> The Strategic Report includes a fair review of the
development and performance of the business and
the position of the Company and the undertakings
included in the consolidation taken as a whole
together with a description of the principal risks and
uncertainties that they face; and
> The Annual Report and Financial Statements, taken as
a whole, are fair, balanced and understandable and
provide the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy.
This Responsibility Statement was approved by the Board
of Directors on 29 April 2021 and is signed on its behalf
by:
SIMON RETTER
Company Secretary
29 April 2021
48
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
49
4
FINANCIAL
STATEMENTS
Consolidated Financial Statements in accordance with International Financial Reporting Standards for the
year ended 31 December 2020, and Independent Auditor's Report
Zaim Credit Systems Group
CONTENTS
Independent Auditor’s Report to the Shareholders of Zaim Credit Systems plc
Consolidated Financial Statements and Company Financial Statememts
Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Cash Flows
Company Statement of Cash Flows
Notes to the Consolidated financial statements
1. Principal Activities of the Group
2. Operating Environment of the Group
3. Basis of Presentation
4. Summary of Significant Accounting Policies
5. Cash and Cash Equivalents
6. Loans to Customers
7. Lease
8. Other Assets
9. Loans Received
10. Other Liabilities
11. Charter and Additional Capital, Other reserves. Earnings per share
12. Share-based payments
13. Interest Income and Expense
14. Gains less Losses from Dealing in Foreign Currency
15. Allowance for Expected Credit Losses / Impairment of Other Assets
16. Other Operating Income
17. Staff Costs
18. Operating Expenses
19. Income Tax
20. Risk Management
21. Capital management
22. Contingencies
23. Fair Value of Financial Instruments
24. Reconciliation of Classes of Financial Instruments with Measurement Categories
25. Related Party Transactions
26. Business combination
27. Auditor’s remuneration
28. Events after the Reporting Period
53
57
57
58
58
59
59
59
60
60
61
61
63
66
71
72
74
75
75
76
76
78
79
80
80
80
80
80
81
82
86
86
87
87
87
88
89
89
Independent Auditor’s
Report to the
Shareholders of Zaim
Credit Systems plc
Opinion
We have audited the financial statements of Zaim Credit
Systems plc (the ‘parent company)’ and its subsidiaries
(the ‘group’) for the year ended 31 December 2020 which
comprise the Consolidated Statement of Profit or Loss
and Other Comprehensive Income, Consolidated and
Company Statement of Financial Position, Consolidated
and Company Statement of Changes in Equity, Con-
solidated and Company Statement of Cash Flows and
notes to the financial statements, including significant
accounting policies. The financial reporting framework
that has been applied in the preparation of the group
financial statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the
European Union. The financial reporting framework that
has been applied in the preparation of the parent com-
pany financial statements is applicable law and Interna-
tional Financial Reporting Standards (IFRSs) as adopted
by the European Union.
In our opinion:
> the financial statements give a true and fair view of
the state of the group’s and of the parent company’s
affairs as at 31 December 2020 and of the group’s loss
for the year then ended;
> the group and the parent company financial
statements have been properly prepared in
accordance with International accounting standards
in conformity with the requirements of the Companies
Act 2006; and
> the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006; and, as regards the group financial
statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit
of the Financial Statements section of our report. We
are independent of the group and the parent company
in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to
listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded
that the director's use of the going concern basis of
accounting in the preparation of the financial statements
is appropriate.
Our evaluation of the directors’ assessment of the
entity’s ability to continue to adopt the going concern
basis of accounting included carrying out a risk assess-
ment which covered the nature of the group, its business
model and related risks including where relevant the im-
pact of Coronavirus, the requirements of the applicable
financial reporting framework and the system of internal
control. We evaluated the directors’ assessment of the
group’s ability to continue as a going concern, including
challenging the underlying data and key assumptions
used to make the assessment, and evaluated the direc-
tors’ plans for future actions in relation to their going
concern assessment.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the company’s or group’s ability
to continue as a going concern for a period of at least
twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the direc-
tors with respect to going concern are described in the
relevant sections of this report.
52
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
53
Key audit matters
Key audit matters are those matters that, in our profes-
sional judgment, were of most significance on our audit
of the financial statements of the current period and
include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identi-
fied, 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. These matters were addressed in the context of
our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Risk
Impact of COVID-19
There is a risk that the group may not be
considered a going concern as a result of the
impact of COVID-19 (Coronavirus).
Recoverability of loans to customers
Given the extended credit terms that were
provided to customers, judgement is required
to establish how much of the loan receivables
balance is recoverable. There is a risk that
management’s judgements and estimates
over recoverability are inappropriate, when
considering the specific balances and the
requirements of IFRS 9.
Our response to the risk
Our response and observation
We read the Directors’ assessment of the risks and impacts
of COVID-19 on the business. We compared this assessment
to our own understanding of the risks, and the nature of the
group’s operations, products and customer base. We then
conducted a review of going concern in respect of COVID-19
which included reviewing forecasts and current trading
performance, and carrying out stress testing. The work
undertaken considered a period of at least twelve months
from the date of approving these financial statements.
We understood the group’s process for estimating the
expected credit loss provision under IFRS 9. Loans to
customers were tested on a sample basis which included
considering the recoverability of the balances post year end.
Overdue balances were discussed with management and we
assessed whether the accounting provision appropriately
reflects the facts and circumstances.
The disclosures in the financial
statements adequately reflect
the Directors’ conclusions around
the uncertainties and impact of
COVID-19 and, that the going concern
assumption remains appropriate.
We did not identify any evidence
of material misstatement related
to carrying value of receivables.
Management continue to apply an
appropriate expected credit loss
provision.
Risk of fraud in revenue recognition
There is a risk that revenue is materially
understated due to fraud.
We reviewed the group’s revenue recognition policies and how
they are applied. Revenue was then tested on a sample basis
to confirm that transactions have been appropriately recorded
in line with IFRS 15.
Risk that management is able to override
controls
We examined journals posted around the year end, specifically
focusing on areas which are more easily manipulated.
Journals can be posted that significantly alter
the financial statements.
Revenue was recognised in accordance
with the group’s accounting policy
and we concluded that no evidence of
fraud or other understatement was
identified.
We identified no evidence of
management override in respect
of inappropriate manual journals
recorded in any section of the financial
statements.
Our application of
materiality
We define materiality as the magnitude of misstatement
in the financial statements that makes it probable that
the economic decisions of a reasonably knowledgeable
person would be charged or influenced. We use materi-
ality both in planning and in the scope of our audit work
and in evaluating the results of our work.
We determine materiality for the group and the parent
company to be £96,983 and this financial benchmark,
which has been used throughout the audit, was deter-
mined by way of a standard formula being applied to key
financial results and balances presented in the financial
statements. Where considered relevant the materiality is
adjusted to suit the specific risk profile of the group.
Performance materiality is the application of material-
ity at the individual account or balance level set at an
amount to reduce to an appropriately low level the prob-
ability that the aggregate of uncorrected and undetected
misstatements exceeds materiality. Performance mate-
riality for both the group and the parent company was
set at 75% of the above materiality levels, which equates
to £72,737. We agreed with the audit committee that we
would report to the committee all individual audit differ-
ences identified during the course of our audit in excess
of £4,849. We also agreed to report differences below
these thresholds that, in our view warranted reporting on
qualitative grounds.
An overview of the scope of our audit
Our group audit was scoped by obtaining an under-
standing of the group and its environment, including the
group’s system of internal control, and assessing the
risks of material misstatement in the financial state-
ments at the group level.
Whilst Zaim Credit Systems plc is a company registered
in England & Wales and its head office is located in the
UK, the group’s principal operations are located in Russia.
In approaching the audit, we considered how the group
is organised and managed. We assessed the activities of
the group as being the issuance of microfinance loans to
Russian individuals.
Our group audit scope focused on the group’s principal
operating subsidiary, being Zaim Express LLC, which was
subject to a full scope audit together with the parent
company. Shipleys LLP performed the audit of the parent
company and BDO Unicon Aktsionernoe Obshchevstvo
performed the audit of the Russian component.
The group audit team was actively involved in the
direction of the audit and specific audit procedures
performed by the component auditor along with the
consideration of findings and determination of conclu-
sions drawn. As part of our audit strategy, we issued
group audit engagement instructions and discussed
the instructions with the component auditor. A senior
member of the group audit team met with the compo-
nent auditor and local management performed a review
of the component audit files and we discussed the audit
findings with the component auditor.
Other Information
The other information comprises the information included
in the annual report other than the financial statements
and our auditor’s report thereon. The directors are re-
sponsible for the other information contained within the
annual report. Our opinion on the financial statements
does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially in-
consistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears
to be materially misstated. If we identify such material in-
consistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that
there is a material misstatement of this other information,
we are required to report that fact.
In this context, matters that we are specifically required
to report to you as uncorrected material misstatements
of the other information include where we conclude that:
> Fair, balanced and understandable – the statement
given by the directors that they consider the annual
report and financial statements taken as a whole is
fair, balanced and understandable and provides the
information necessary for shareholders to assess the
groups’ position and performance, business model and
strategy, is materially inconsistent with our knowledge
obtained in the audit; or
> Audit committee reporting - the section describing
the work of the audit committee does not
appropriately address matters communicated by us to
the audit committee; or
We have nothing to report in respect of these matters.
Opinions on other
matters prescribed by the
Companies Act 2006
In our opinion the part of the directors’ remuneration re-
port to be audited has been properly prepared in accord-
ance with the Companies Act 2006.
In our opinion, based on the work undertaken in the
course of the audit:
> the information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
> the strategic report and the directors’ report have
been prepared in accordance with applicable legal
requirements
Matters on which we are
required to report by
exception
In the light of the knowledge and understanding of the
group and the parent company and its environment ob-
tained in the course of the audit, we have not identified
material misstatements in the strategic report or the
directors’ report.
We have nothing to report in respect of the following mat-
ters in relation to which the Companies Act 2006 requires
us to report to you if, in our opinion:
> adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
> the parent company financial statements and the part
54
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
55
of the directors’ remuneration report to be audited
are not in agreement with the accounting records and
returns; or
> certain disclosures of directors’ remuneration specified
by law are not made; or
> we have not received all the information and
explanations we require for our audit.
Responsibilities of
directors
As explained more fully in the directors’ responsibilities
statement set out on page 48 , the directors are responsi-
ble for the preparation of the financial statements and for
being satisfied that they give a true and fair view, and for
such internal control as the directors determine is nec-
essary to enable the preparation of financial statements
that are free from material misstatement, whether due
to fraud or error. In preparing the financial statements,
the directors are responsible for assessing the compa-
ny’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 the directors
either intend to liquidate the company or to cease opera-
tions, or have no realistic alternative but to do so.
Auditor’s Responsibilities
for the audit of the
financial statements
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 an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is
not a 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 the
aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of
these financial statements.
Explanation as to what extent the audit
was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compli-
ance with laws and regulations. We design procedures in
line with our responsibilities, outlined above, to detect ma-
terial misstatements in respect of irregularities, including
fraud. Our approach was as follows:
> We obtained an understanding of the legal and
regulatory frameworks that are applicable to the group
and determined the most significant are those that
relate to the reporting framework (IFRS, the Companies
Act 2006) and the relevant tax compliance regulations
in the jurisdictions in which the group operates.
> We understood how Zaim Credit Systems plc is
complying with those frameworks by making enquiries
on management, the Company Secretary, and those
responsible for legal and compliance procedures. We
corroborated our enquiries through our review of board
minutes, papers provided to the Audit Committee,
discussion with the Audit Committee and any
correspondence received from regulatory bodies.
> We assessed the susceptibility of the group’s financial
statements to material misstatement, including how
fraud might occur by enquiring with management and
the Audit Committee during the planning and execution
phase of our audit. We considered the programs and
controls that the group has established to address risks
identified, or that otherwise prevent, deter and detect
fraud and how senior management monitors those
programs and controls. Where the risk was considered
to be higher, we performed audit procedures to address
each identified fraud risk including revenue recognition
as discussed above. These procedures included
testing manual journals and were designed to provide
reasonable assurance that the financial statements
were free from fraud or error.
> Based on this understanding we designed our audit
procedures to identify non-compliance with such laws
and regulations identified in the paragraphs above. Our
procedures involved journal entry testing, with a focus
on manual journals and journals indicating large or
unusual transactions based on our understanding of
the business; enquiries of the Company Secretary and
management; and focused testing, as referred to in the
key audit matters section above.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recog-
nising that the risk of not detecting a material misstate-
ment due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations
or through collusion. There are inherent limitations in the
audit procedures performed and the further removed
non-compliance with laws and regulations is from the
events and transactions reflected in the financial state-
ments, the less likely we are to become aware of it.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at https://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Other matters which we are required to
address
We were initially appointed by the board on 23 October
2019 to audit the financial statements for the period
ending 31 December 2018. Our total uninterrupted period
of engagement is 3 years, covering the periods ending 31
December 2018 to 31 December 2020.
The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the group or the parent
company and we remain independent of the group and the
parent company in conducting our audit.
Our audit opinion is consistent with the additional report
to the audit committee.
Use of our report
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. 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 responsibil-
ity 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.
BENJAMIN BIDNELL
For and on behalf of SHIPLEYS LLP, Chartered Account-
ants and Statutory Auditor
10 Orange Street, Haymarket, London, WC2H 7DQ
29 April 2021
Consolidated Statement of Financial Position as at 31 December 2020
(in British pounds sterling)
Company Registered number 11418575
Note
2020
2019
Assets
Cash and cash equivalents
Loans to customers
Property and equipment
Right-of- use assets under lease agreements
Other assets
Total assets
Liabilities
Loans received
Lease liabilities
Other liabilities
Total liabilities
Equity
Charter capital
Shares to be issued Reserve
Additional capital
Foreign currency translation reserve
Merger reserve
Share options reserve
Accumulated deficit
Total equity
Total liabilities and equity
5
6
7
8
9
7
10
11
26
11,25
11
11, 26
11
11
640,871
1,269,313
5,677
297,925
251,297
2,465,083
735,646
347,216
823,830
1,906,692
4,369,750
800,000
6,078,128
4,390,225
22,964,800
218,099
1,582,751
786,346
11,967
2,549,233
222,117
5,152,414
742,603
2,555,648
664,905
3,963,156
4,369,750
-
6,078,128
4,457,788
23,764,800
166,883
(38,262,611)
(37,648,092)
558,391
2,465,083
1,189,258
5,152,414
SIRO DONATO CICCONI, Chief Executive Officer
SIMON JAMES RETTER, Finance Director
29 April 2021
56
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
57
Company Statement of Financial Position as at 31 December 2020 (in British pounds sterling)
Company Registered number 11418575
Net loss
Note
2020
(614,519)
2019
(891,589)
Assets
Cash and cash equivalents
Other assets
Investment in Subsidiary
Total assets
Liabilities
Other liabilities
Total liabilities
Equity
Charter capital
Shares to be issued Reserve
Additional capital
Share options reserve
Accumulated deficit
Total equity
Total liabilities and equity
Note
2020
2019
5
8
1
10
11
26
11
12
161,163
126,477
10,096,089
10,383,729
1,310,655
68,122
8,705,663
10,084,440
186,739
186,739
162,666
162,666
4,369,750
800,000
6,078,128
218,099
(1,268,987)
10,196,990
10,383,729
4,369,750
6,078,128
166,883
(692,987)
9,921,774
10,084,440
Net other comprehensive income that may be reclassified to profit or loss
Foreign exchange differences arising on translation into presentation currency
Total comprehensive expense
(67,563)
(682,083)
(39,942)
(931,531)
Earnings per share
11
Basic, loss for the year attributable to ordinary equity holders of the parent
Diluted, loss for the year attributable to ordinary equity holders of the parent
0.14p
0.14p
0.77p
0.77p
Consolidated Statement of Changes in Equity for the Year Ended 31 December 2020
(in British pounds sterling)
Balance at 31 December 2018
Reverse acquisition in 2019
Comprehensive loss for 2019
Share-based payments
Charter
capital
2,492,363
1,877,387
-
-
Balance at 31 December 2019
4,369,750
Shares to
be issued
Reserve
Additional
capital
Foreign
currency
translation
reserve (FCTR)
Merger
reserve
Share
options
reserve
Accumulated
deficit
Total
equity
-
-
-
-
-
29,122,880
(23,044,752)
-
-
4,497,731
-
-
23,764,800
(39,942)
-
-
-
-
(36,689,833)
(66,670)
(576,859)
2,530,765
(891,589)
(931,531)
-
-
166,883
-
166,883
6,078,128
4,457,788 23,764,800
166,883
(37,648,092)
1,189,258
The above Company Statement of Financial Position
should be read in conjunction with the accompanying
notes, the loss for the period was £ 576,000 (2019:£
626,317). As permitted by section 408 of the Companies
Act 2006, the statement of comprehensive income of
the Parent Company is not presented as part of these
Financial Statements.
The Financial Statements were authorised for issue by
the Board of Directors on 7 April 2021 and were signed
ON ITS BEHALF
SIRO DONATO CICCONI, Chief Executive Officer
SIMON JAMES RETTER, Finance Director
Consolidated Statement of Profit or Loss and Other Comprehensive Income for the Year Ended 31 December 2020
(in British pounds sterling)
Note
2020
2019
Interest income
Interest expenses
Interest expense – lease liabilities
Net interest income
Allowance for ECL/impairment of loans to customers
Net interest income after allowance for ECL/impairment of loans to customers
Gains less losses from dealing in foreign currency
Other operating income
Operating income
Staff costs
Charge for share based options
Operating expenses
Costs of IPO
Deemed cost of listing
Loss before income tax
Income tax expense
58
АNNUAL REPORT 2020
13
13
6,8,15
14
16
17
12
18
18
26
19
4,857,496
(12,835)
(92,442)
4,752,218
(1,790,718)
2,961,501
(189,127)
590,502
3,362,875
(1,810,443)
(51,216)
(2,115,735)
-
-
(614,519)
-
3,940,747
(28,018)
(243,281)
3,669,448
(231,681)
3,437,767
95,497
790,554
4,323,818
(2,006,265)
(166,883)
(2,523,112)
(369,146)
(150,000)
(891,589)
-
Comprehensive loss for 2020
Contingent consideration
Share-based payments
-
-
-
-
800,000
-
-
-
-
(67,563)
-
(800,000)
-
-
-
51,216
-
-
(614,519)
(682,083)
-
-
-
51,216
Balance at 31 December 2020
4,369,750
800,000
6,078,128
4,390,225 22,964,800
218,099
(38,262,611)
558,391
Company Statement of Changes in Equity for the Year Ended 31 December 2020
(in British pounds sterling)
Shares to be
issued Reserve
Additional
capital
Accumulated
deficit
Share options
reserve
Balance at 31 December 2018
Issue during the year
Expenses on issue of shares
Comprehensive loss for 2019
Share-based payments
Charter
capital
60,000
4,309,750
-
-
-
Balance at 31 December 2019
4,369,750
Comprehensive loss for 2020
Contingent consideration
Share-based payments
-
-
-
-
-
-
-
-
-
-
800,000
-
-
6,406,699
(328,570)
-
-
(66,670)
-
-
(626,317)
-
6,078,128
(692,987)
-
-
-
(576,000)
-
-
Balance at 31 December 2020
4,369,750
800,000
6,078,128
(1,268,987)
Consolidated Statement of Cash Flows for the year ended 31 December 2020
(in British pounds sterling)
Cash flows from operating activities
Interest received
Interest paid
Gains less losses from dealing in foreign currency
Other operating income
Staff costs
Operating expenses
Total
equity
(6,670)
10,716,449
(328,570)
(626,317)
166,883
9,921,774
(576,000)
800,000
51,216
10,196,990
-
-
-
-
166,883
166,883
-
-
51,216
218,099
2020
2019
4,219,635
(105,273)
(7,460)
559,981
(1,854,393)
(1,226,365)
2,332,339
(400,142)
(9,448)
198,600
(2,005,236)
(1,440,487)
Cash flows from/(used in) operating activities before changes in operating assets and liabilities
1,586,125
(1,324,373)
LEADING FINTECH COMPANY
59
Net (increase)/decrease in operating assets
Loans to customers
Other assets
Net decrease in operating liabilities
Other liabilities
Net cash flows from operating activities
Cash flows from investing activities
Purchases of property and equipment
Net cash flows from investing activities
Cash flows from financing activities
Repayment of lease liabilities
Loans received
Repayment of loans received
Issue of ordinary shares (including share premium)
Share issue costs
Net cash flows from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year (Note 5)
Company Statement of Cash Flows for the year ended 31 December 2020
(in British pounds sterling)
Cash flows from operating activities
Loss for the period
Correction for non-cash transaction (charge for share options granted)
2020
2019
(1,848,483)
(109,063)
57,357
(314,064)
-
-
(536,120)
259,266
(259,266)
-
-
(536,120)
(91,696)
(941,880)
1,582,751
640,871
1,259,013
4,126
162,957
101,723
(2,130)
(2,130)
(1,389,284)
653,530
(653,530)
2,716,449
(328,570)
998,594
30,015
1,128,202
454,549
1,582,751
2020
2019
(576,000)
51,216
(626,317)
166,883
Cash flows from/(used in) operating activities before changes in operating assets and liabilities
(524,784)
(459,433)
Adjustments for
Increase in trade and other receivables, VAT
Increase in trade and other payables
Cash generated from operations
Net cash flows used in operating activities
Cash flows from investing activities
Investment in Subsidiary
Net cash flows from investing activities
Cash flows from financing activities
Issue of ordinary shares (including share premium)
Share issue costs
Net cash flows from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year (Note 5)
(58,355)
24,073
(8,122)
95,995
(559,066)
(559,066)
(371,560)
(371,560)
(590,426)
(590,426)
(705,663)
(705,663)
-
-
-
(1,149,492)
1,310,655
161,163
2,716,449
(328,570)
2,387,878
1,310,655
-
1,310,655
Notes to the financial statements for the year
ended 31 December 2020
1. Principal Activities of the Group
The principal activity of Zaim Credit Systems plc (“the
Company”) and its subsidiary Zaim-Express, LLC (together
“the Group”) is the issuance of microloans to individu-
als (retail customers). The Company was incorporated
as Agana Holdings Plc and registered in England and
Wales on 15 June 2018 as a public limited company
with company registration number 11418575 and LEI,
213800Z4MI9KSZA2VW72 and on 22 July 2019 the Company
changed its name to Zaim Credit Systems Plc
The organizational structure of Group:
On 18 September 2019 the Company acquired the entire
issued share capital of Zaim-Express LLC. The Company
is now the holding company of a Russian based finan-
cial services company Zaim-Express LLC (Subsidiary), so
the main function of the Company is to provide holding
company services and undertake management of their
listed activities on the stock exchange. These business
combinations in 2019 was stated in consolidated financial
statements as reverse acquisitions under IFRS 3.
The name of Subsidiary
Zaim-Express LLC
Country of registration
Russia
The share votes of the Company
31.12.2020
100%
31.12.2019
100%
The Subsidiary’s principal activity is the issuance of
microloans through its network of branches in Rus-
sian cities (mainly – in Moscow and Moscow region, St.
Petersburg). The Subsidiary was entered in the state
register of microfinance organisations on 29 August
2011, registration number 2110177000440. The Subsidiary's
assets and liabilities are located in the Russian Federa-
tion. The average number of Subsidiary’s employees is as
follows:
The average number of Subsidiary’s
employees, by groups
Central office
Call center
Other spesialists
Total average number of employees
The average number of parent Company’s employees (directors) is as follows:
The average number of parent Company’s
employees
Directors
2020
47
22
143
212
2020
5
2019
42
23
208
273
2019
3
As at 31 December 2020, the main shareholder of the
Company is Zaim Holdings SA (with a 73.23% equity hold-
ing; 31 December 2019 - with a 73.23% equity holding).
The ultimate controlling party of the Group is an individual -
Mr. Siro Donato Cicconi (Director).
2. Operating Environment of the Group
General
The economy of the Russian Federation continues to
demonstrate certain characteristics of an emerging
market. They include, in particular, inconvertibility of the
Russian rouble in most countries outside of Russia and
relatively high inflation. The current Russian tax, currency
and customs legislation is subject to various interpre-
tations and frequent changes. The country's economy
depends on oil and gas prices. Russia continues to de-
velop the legal, tax and administrative infrastructure to
meet the market economy requirements. The economic
reforms implemented by the government are aimed at
modernization of the Russian economy, development of
high-tech production, improvement of labour productivi-
ty and competitiveness of the Russian products on the
global market.
60
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
61
Due to the consequences of the coronavirus pandemic in
2020, Russia faced the forced introduction of quarantine
measures, the closure of enterprises and borders, and
a sharp collapse in oil prices. At the same time, the eco-
nomic downturn was not so large-scale as in a number
of other states. Experts believe that this is primarily the
result of timely state support measures for businesses
and the population. In addition, 2020 saw the Central
Bank rate plunge to a record-low, significant fluctuations
in exchange rates and surging demand in the real estate
market. The collapse in oil prices that occurred in the
spring had a negative impact on national budget reve-
nues and the dynamics of the national currency. At the
same time, the pandemic did not result in any fundamen-
tal adverse changes in the Russian economy.
In the second half of 2020, as the restrictive measures
imposed due to the pandemic were lifted and eco-
nomic activity recovered, the consumer credit market
experienced an upturn, and microfinance volumes re-
turned to the levels of the start of the year. Most of the
MFI offices that were closed in the spring have resumed
their work. In the context of restrictive measures that
were introduced in April-May 2020 due to the deterio-
ration of the pandemic situation, online sales channels
and customer interaction began to play a special role in
ensuring the continuity of MFI activities. Remote service
channels will remain relevant in the future due to the
pandemic and the continuing measures of social distanc-
ing. An accelerated transition to online service may have
a long-term effect and promote faster implementation
of remote service channels.
In general, the global and Russian economies are in the
state of high uncertainty due to new lockdowns, but
governments, central banks and businesses have already
gained useful experience in dealing with the pandemic.
The results of economic development in the 3rd and 4th
quarters of 2020 in Russia and other countries showed
potential for rapid recovery in the case of a declining
epidemic threat. The financial system has demonstrated
a fairly high degree of sustainability. According to the
Central Bank of Russia, in the future, the risks associated
with the solvency of the corporate sector will gradually
become the highest on the agenda.
Date
31 December 2020
31 December 2019
31 December 2018
31 December 2017
31 December 2016
During the quarantine period, the Group changed its
business model to one of remote lending via the Internet.
All operations necessary for the performance of this ac-
tivity were carried out by the employees remotely, which
allowed the Group to maintain regularity and continuity
of business processes. Based on the analysis conducted,
the Group‘s management believes that the expected
recession will not have any significant negative impact
on the Group's financial performance in the short term.
The management of the Group believes it is taking all the
necessary measures to support the sustainability and
further development of the Group’s business operations
in these circumstances.
As at 31 December 2020, the CBR's key rate was 4.25% (31
December 2019: 6.25%).
The future economic development of the Russian Fed-
eration is largely dependent upon the effectiveness of
economic measures, financial mechanisms and monetary
policies adopted by the Government, together with tax,
regulatory, and political developments.
Inflation
The Russian economy experiences relatively high levels
of inflation. The inflation indices for the last five years
are given in the table below:
The year ended
31 December 2020
31 December 2019
31 December 2018
31 December 2017
31 December 2016
Inflation for the period
4.9%
3.0%
4.3%
2.1%
5.4%
Foreign exchange transactions
Foreign currencies, especially the US Dollar, Euro, and
British pound sterling play a significant role in deter-
mining economic parameters of many economic trans-
actions carried out in Russia. The table below shows the
CBR exchange rates of RUB relative to USD and EUR:
USD
73.8757
61.9057
69.4706
57.6002
60.6569
EUR
90.6824
69.3406
79.4605
68.8668
63.8111
GBP
100.0425
81.146
88.2832
77.6739
74.5595
Management takes all necessary measures to ensure the
sustainability of the Group's operations. However, the fu-
ture impact of the current economic situation is difficult
to predict and management's current expectations and
estimates may differ from actual results.
For the purpose of estimating expected credit losses,
the Group uses forward-looking information, including
projections of macroeconomic variables. The Group takes
these forecasts into account when providing its best
estimate of outcomes. However, as with any economic
62
АNNUAL REPORT 2020
forecast, the projections and likelihoods of their occur-
rence are subject to a high degree of inherent uncertain-
ty and therefore the actual outcomes may be signifi-
cantly different from those projected. Note 6 provides
additional information on how the Group incorporates
forward-looking information in its expected credit loss
models.
Functional and presentation cur-
rency
The functional currency is the currency that mainly
influences sales prices for goods and services (this will
often be the currency in which sales prices for goods
and services are denominated and settled) and which
3. Basis of Presentation
General principles
These consolidated financial statements of the Group
are prepared in accordance with International Financial
Reporting Standards (IFRSs). The Group maintains its re-
cords in compliance with the applicable legislation of the
United Kingdom. These financial statements have been
prepared on the basis of those accounting records and
adjusted as necessary in order to comply, in all material
respects, with IFRSs.
Going concern
These consolidated financial statements reflect the
Group management’s current assessment of the impact
of the Russian business environment on the opera-
tions and the financial position of the Group. The future
economic direction of the Russian Federation is largely
dependent upon the effectiveness of measures under-
taken by the RF Government and other factors, including
regulatory and political developments which are beyond
the Group’s control. The Group’s management cannot
predict what impact these factors will have on the
Group’s financial position in future. As a result, adjust-
ments related to this risk have not been included in the
accompanying financial statements.
As at 31 December 2020, the Group has an accumulat-
ed deficit of GBP 38,262,611 (2019: GBP 37,648,092), and
incurred a net loss of GBP 614,519 during the year ended
31 December 2020 (2019: GBP 891,589).
The Group’s business activities together with the factors
likely to affect its future development, performance and
position are set out in the Chairman’s Statement on pag-
es [4] and Chief Executive Review on page [6]. In addition
note 3 to the Financial Statements includes the Group’s
objectives, policies and processes for managing its cap-
ital; its financial risk management objectives; details of
mainly influences labour, material and other costs of
providing goods or services (this will often be the curren-
cy in which such costs are denominated and settled). The
Group's functional currency is the Russian rouble.
The presentation currency is the currency in which finan-
cial statements are presented.
The consolidated financial statements are presented in
British pounds sterling. The reasons why the functional
currency differs from the presentation currency are the
consolidation of Subsidiary’s financial statements with
the parent Company accounts which have been present-
ed in GBP and investors' interests.
its financial instruments and its exposure to credit and
liquidity risk.
The Financial Statements have been prepared on a going
concern basis. In 2020, the Group changed its business
model to one of remote lending via the Internet, which
resulted in a significant decrease in fixed lease and staff
costs and a decrease in the share of lending costs within
total expenses. The Group is planning to optimize the net-
work operation, including removal of loss-making outlets
and enhancement of the Internet channel to attract
customers.
The Group is actively collecting overdue debts, inter alia,
through legal action. Despite temporary suspension
of judicial and enforcement proceedings during the
COVID-19 pandemic, the proceeds from the loans of Stage
3 in 2020 increased by 87% compared to 2019.
The CBR sets the minimum mandatory liquidity ratio at
over 70%. The Subsidiary meets the mandatory liquidity
ratio: as at 31 December 2020 - 153.74% (unaudited) and
as at 31 December 2019 – 132.89% (unaudited).
As a result of considerations noted above, the Directors
have a reasonable expectation that the Group and Com-
pany have adequate resources to continue in operational
existence for the foreseeable future. Thus, they continue
to adopt the going concern basis of accounting in pre-
paring these Financial Statements.
Basis of consolidation and
business acquisitions
On 18 September 2019 Company acquired the entire
issued share capital of Zaim-Express (LLC) by way of a
share for share exchange. The transaction was treated
as a reverse acquisition and was accounted for using the
merger accounting method as the entities were under
common control before and after the acquisition.
LEADING FINTECH COMPANY
63
A Subsidiary is an entity controlled by the Group. Control
is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee
and has the ability to affect those returns through its
power over the investee.
The Group considers all relevant facts and circumstances in
assessing whether it has power over an investee, including:
> The contractual arrangement with the other vote holders
of the investee.
> Rights arising from other contractual arrangements.
> The Group’s voting rights and potential voting rights.
Consolidation of a subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group
loses control of the subsidiary. Assets, liabilities, income, and
expenses of a subsidiary acquired or disposed of during the
year are included in the consolidated financial statements
from the date the Group gains control until the date the
Group ceases to control the subsidiary.
Other than for the acquisition of the Subsidiary as noted
above, the Group uses the acquisition method of accounting
to account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair
value of the assets transferred, the liabilities incurred, and
the equity interests issued by the Group. The consideration
transferred includes the fair values as of any asset or liabil-
ity resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values as at the acquisition date. Acqui-
sition-related costs are expensed as incurred unless they
result from the issuance of shares, in which case they are
offset against the premium on those shares within equity.
If an acquisition is achieved in stages, the acquisition date
carrying the value of the acquirer’s previously held equity
interest in the acquiree is remeasured to its fair value at the
acquisition date through profit or loss.
Any contingent consideration to be transferred by the fair
value as at the Group is recognised at at the acquisition
date. Subsequent changes to the fair value of the contin-
gent consideration that is deemed to be an asset or a lia-
bility is recognised in accordance with IFRS9 either in profit
or loss or as a change in other comprehensive income.
The unwinding of the discount on contingent consideration
liabilities is recognised as a finance charge within profit or
loss. Contingent consideration that is classified as equity is
not remeasured, and its subsequent settlement is account-
ed for within equity.
The excess of the consideration transferred and the fair val-
ue as at the acquisition date of any previous equity interest
in the acquiree over the fair value of the Group’s share of
the identifiable net assets acquired is recorded as goodwill.
If this is less than the fair value of the net assets of the
subsidiary acquired in the case of a bargain purchase, the
difference is recognised directly in profit or loss.
Inter-company transactions, balances and unrealised gains
on transactions between Group companies are eliminated.
Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies
adopted by the Group.
Investments in subsidiaries are accounted for at cost less
impairment.
Subsidiaries and Acquisitions
The consolidated financial statements incorporate the
financial statements of the the Company and entities
controlled by the Company (its subsidiaries) made up to
31 December each year. Control is recognised where an
investor is expected, or has rights, to variable returns from
its investment with the investee, and has the ability to affect
these returns through its power over the investee. Based
on the circumstances of the acquisition an assessment
will be made as to whether the acquisition represents an
acquisition of an asset or the acquisition of business. In the
event of a business acquisition, the assets, liabilities and
contingent liabilities of a subsidiary are measured at their
fair value at the date of acquisition. Any excess of the cost
of the acquisition over the fair values of the identifiable net
assets acquired is recognised as a “fair value” adjustment.
If the cost of the acquisition is less than the fair value of
the net assets of the subsidiary acquired, the difference is
recognised directly in profit or loss. In the event of an asset
acquisition assets and liabilities are assigned a carrying
amount based on relative fair value.
The results of subsidiaries acquired or disposed of during
the year are included in the statement of comprehensive
income from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies
into line with those used by the Group.
Contingent consideration as a result of business acquisi-
tions is included in the cost at its acquisition date assessed
value and, in the case of contingent consideration classified
as a financial liability, remeasured subsequently through
profit and loss
Critical Accounting Estimates
and Judgments in Applying
Accounting Policies
The Group makes estimates and assumptions that affect
the amounts recognised in the financial statements and the
carrying amounts of assets and liabilities in the next finan-
cial year. Judgements that have the most significant effect
on the amounts recognised in the financial statements and
estimates that can cause a significant adjustment to the
carrying amount of assets and liabilities in the next financial
year include:
Fair value of financial instruments. Information on the fair
value of financial instruments measured on the basis of
assumptions that use observable market prices is disclosed
in Note 23.
ECL measurement. Calculation and measurement of ECLs is
an area of significant judgement, and involves methodology,
models and data inputs. The methodology used by the Group
for assessment of expected credit losses is disclosed in
Note 6. The following components of ECL calculation have a
major impact on the allowance for ECLs: default definition,
significant increase in credit risk (SICR), probability of default
(PD), exposure at default (EAD), loss given default (LGD),
macro-models and scenario analysis for impaired loans. The
Group regularly reviews and validates models and inputs to
the models to reduce any differences between expected
credit loss estimates and actual credit loss experience.
Significant increase in credit risk (SICR). In order to deter-
mine whether there has been a significant increase in credit
risk, the Group compares the risk of a default occurring over
the expected life of a financial instrument at the reporting
date with the risk of default at the date of initial recognition.
IFRS 9 requires an assessment of relative increases in credit
risk rather than the identification of a specific level of credit
risk at the reporting date. In this assessment, the Group
considers a range of indicators, including behavioural indi-
cators based on historical information as well as reasonable
and supportable forward-looking information available with-
out undue cost and effort. The most significant judgments
include identifying behavioural indicators of increases in
credit risk prior to default and incorporating appropriate
forward-looking information into the assessment, either at
an individual instrument, or on a portfolio level.
Due to the coronavirus pandemic, the Group updated the
prospective information used in the models intended for
the assessment of expected credit losses and reassessed
the Probability of default during the 12 months for adequate
reflection of the uncertainties caused by the decrease in
market prices and the spread of the COVID-19 pandemic,
taking into account:
> GDP drop and decline in income of individuals due to
restricted economic activity;
> state support measures;
> real wage level;
> real disposable income of the population.
Determining business model and applying SPPI test. In de-
termining the appropriate measurement category for debt
financial instruments, the Group applies two approaches: a
business model assessment for managing the assets and
the SPPI test based on contractual cash flow characteristics
on initial recognition to determine whether they are solely
payments of principal and interest. The business model
assessment is performed at a certain level of aggregation,
and the Group will need to apply judgement to determine
the level at which the business model condition is applied.
The assessment of the SPPI criterion performed on initial
recognition of financial assets involves the use of significant
estimates in quantitative testing and requires considerable
judgement in determining whether quantitative testing is
required, what scenarios are reasonably possible and should
be considered and in interpreting the outcomes of quanti-
tative testing (i.e. determining what represents a significant
difference in cash flows).
Substantial modification of financial assets. When the
contractual terms of financial assets are modified (e.g.
renegotiated), the Group assesses whether the modifica-
tion is substantial and should result in derecognition of the
original asset and recognition of a new asset at fair value.
This assessment is based primarily on qualitative factors
described in the relevant accounting policy and requires
significant judgment.
Recognition of a deferred tax asset. The recognised de-
ferred tax asset represents the amount of income tax that
can be offset against future income taxes and is recognised
in the statement of financial position. A deferred tax asset is
recognized only to the extent that realisation of the related
tax benefit is probable. The future taxable profits and the
amount of tax benefits that are probable in the future are
based on medium-term forecasts prepared by manage-
ment.
Changes in accounting policies
The revised standards presented below became mandatory
for the Group since 1 January 2020, but had no material
impact on the Group:
For the reporting periods beginning on or after 1 January
2020, the amendments to the standards presented below
shall be effective:
> Amendments to IAS 1 Presentation of Financial
Statements and IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors – Definition of Material
> Amendments to IFRS 3 Business Combinations –
Definition of a Business;
> Amendments to References to the Conceptual
Framework in IFRS Standards;
> Amendments to IFRS 9 “Financial Instruments”, IAS 39
“Financial Instruments: Recognition and Measurement”
and IFRS 7 “Financial Instruments: Disclosures” (issued on
26 September 2019) that provide temporary relief from
specific hedge accounting requirements to hedging
relationships directly affected by the IBOR reform.
64
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
65
The above amendments to the standards had no material
impact on the financial statements.
The IASB issued a number of standards and amendments
to them that will become effective in the next reporting
periods and will not be early applied by the Group. The
most significant ones are as follows:
> Amendments to IFRS 16 Leases – COVID-19-related
Rent Concessions (effective for annual periods
beginning on or after 1 June 2020);
> Interest Rate Benchmark Reform and its Effects on
Financial Reporting – Phase 2 (effective on 1 January
2021);
> Annual Improvements to IFRSs - 2018-2020 cycle of
amendments (effective on 1 January 2022);
> Amendments to IAS 16 Property, Plant and Equipment –
Proceeds before Intended Use (effective on 1 January
2022);
> Amendments to IAS 37 Provisions, Contingent Liabilities
and Contingent Assets – Onerous Contracts – Cost of
Fulfilling a Contract (effective on 1 January 2022);
> IFRS 17 Insurance Contracts (effective on 1 January
2023);
> Amendments to IAS 1 Presentation of Financial
Statements and IAS 8 Accounting Policies, Changes
in Accounting Estimates and Errors – Classification
of Liabilities as Current or Non-Current (effective on
1 January 2023);
Unless otherwise described above, the new standards
and interpretations are not expected to significantly
impact the Group's financial statements.
4. Summary of Significant Accounting Policies
Fair value measurement
The fair value is the price that would be received when
selling an asset, or paid to transfer a liability in an order-
ly transaction in the principal (or most advantageous)
market at the measurement date under current market
conditions (i.e. an exit price) regardless of whether that
price is directly observable or estimated using another
valuation technique.
All assets and liabilities for which a fair value is recog-
nised or disclosed are categorised within the fair value
hierarchy, described as below, based on the lowest level
input that is significant to the fair value measurement as
a whole:
> Level 1 — quoted market prices in an active market
(that are unadjusted) for identical assets or liabilities;
> Level 2 — valuation techniques for which the lowest
level input that is significant to the fair value
measurement is directly or indirectly observable;
> Level 3 — valuation techniques for which the lowest
level input that is significant to the fair value
measurement is unobservable.
For assets and liabilities that are remeasured
in the financial statements at fair value on a
recurring basis, the Group determines whether
transfers have occurred between the Levels in the
hierarchy by re-assessing categorisation (based on
the lowest level input that is significant to the fair
value measurement as a whole) at the end of each
reporting period.
For the purpose of fair value disclosures, the Group
has determined classes of assets and liabilities on
the basis of the nature, characteristics and risks of
66
АNNUAL REPORT 2020
the asset or liability and the level of the fair value
hierarchy as explained below (Note 23).
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand,
current accounts and deposits with banks with
original maturity of three months or less. Cash and
cash equivalents are stated at amortised cost in the
statement of financial position.
Financial instruments
Key measurement terms
Depending on their classification, financial instruments are
carried at fair value or amortised cost, as described below.
Fair value is the price that would be received when selling an
asset, or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Fair
value measurement assumes that the transaction to sell
the asset or transfer the liability takes place in the principal
market for the asset or liability or, in the absence of a principal
market, the most advantageous market for the asset or lia-
bility. Fair value is the current bid price for financial assets or
current ask price for financial liabilities.
Amortised cost is the amount at which the financial asset or
financial liability is measured at initial recognition minus prin-
cipal repayments, plus or minus the cumulative amortisation
using the effective interest method of any difference between
that initial amount and the maturity amount, and for financial
assets, adjusted for any loss allowance.
The gross carrying amount of a financial asset is the am-
ortised cost of a financial asset, before adjusting for any
expected credit loss allowance.
The effective interest method is a method of calculating
the amortised cost of a financial asset or a financial
liability and of allocating or recognising the interest
income or interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts over the
expected life of the financial asset or financial liabili-
ty to the gross carrying amount of the financial asset
or to the amortised cost of a financial liability. When
calculating the effective interest rate, the Group shall
estimate cash flows considering all contractual terms
of the financial instrument but shall not consider future
credit losses. The calculation includes all fees and points
paid or received between parties to the contract that are
an integral part of the effective interest rate, transac-
tion costs, and all other premiums or discounts. There
is a presumption that the cash flows and the expected
life of a group of similar financial instruments can be
estimated reliably. However, in those rare cases when it
is not possible to estimate reliably the cash flows or the
expected life of a financial instrument, the Group shall
use the contractual cash flows over the full contractual
term of the financial instrument.
Initial recognition of financial
instruments
The Group recognises financial assets and financial
liabilities in its statement of financial position when it
becomes a party to the contractual obligations of the
respective financial instrument. The regular way the
purchase and sale of the financial assets and liabilities is
recognised is by using settlement date accounting.
Classification and measurement
of financial instruments
The Group classifies financial assets into the
following categories:
> financial assets at fair value through profit or loss;
> financial assets at fair value through other
comprehensive income;
> financial assets measured at amortised cost.
Classification and subsequent measurement of debt
financial assets depends on:
1) the business model used by the Group to manage the
asset; and
2) characteristics of cash flows on the asset.
The business model is determined for a group of assets
(on a portfolio basis) based on all relevant evidence of
activities that the Group intends to undertake to achieve
the objective set out for the portfolio available as at the
measurement date.
Loans to customers meeting the SPPI criterion are held
for the purpose of collecting contractual cash flows and
are carried at amortised cost.
Reclassifications
Financial assets are not reclassified after initial recogni-
tion unless the Group has changed its business model for
managing financial assets.
Financial liabilities are not reclassified after initial recog-
nition.
Derecognition
A financial asset is derecognised where:
> the rights to receive cash flows from the asset have
expired;
> the Group has transferred its rights to receive cash
flows from the asset, or retained the right to receive
cash flows from the asset, but has assumed an
obligation to pay them in full without material delay to
a third party;
> the Group either has transferred substantially all
the risks and rewards of the asset or has neither
transferred nor retained substantially all the risks and
rewards of the asset but has transferred control of
the asset. If the transferee has no practical ability to
sell the asset in its entirety to an unrelated third party
without needing to impose additional restrictions on
the transfer, the entity has retained control.
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires.
Loans to customers
Based on cash flow characteristics, the Group classifies
loans and advances to customers into the measurement
category:
1. at amortised cost: loans held to collect contractual
cash flows, if these cash flows are SPPI and are not clas-
sified at fair value through profit or loss, are measured
at amortised cost;
Loans to customers are recorded when cash is advanced
to borrowers. Impairment of loans at amortised cost or
at FVOCI is assessed using a forward-looking ECL model.
The Group does not acquire loans from third parties.
Impairment of financial assets:
ECL allowance
The Group assesses, on a forward-looking basis, the ECL for
debt instruments measured at amortised cost and FVOCI and
for the exposures arising from credit related commitments
and financial guarantee contracts. The Group measures ECL
LEADING FINTECH COMPANY
67
and recognises credit loss allowances at each reporting date.
The measurement of ECL reflects:
I. an unbiased and probability weighted amount that is
determined by evaluating a range of possible outcomes,
II. time value of money, and
III. all reasonable and supportable information that is
available without undue cost and effort at the reporting
date about past events, current conditions and forecasts
of future economic conditions.
Debt instruments measured at amortised cost are presented
in the statement of financial position net of the ECL allow-
ance.
The Group applies a three-stage model for impairment,
based on changes in credit quality since initial recognition, in
accordance with IFRS 9.
I. A financial instrument that is not credit-impaired on initial
recognition is classified into Stage 1. Financial assets in
Stage 1 have their ECL measured at an amount equal to
the portion of lifetime ECL that results from default events
possible within the next 12 months (12m ECL).
II. If the Group identifies a significant increase in credit risk
(SICR) since initial recognition, the asset is transferred to
Stage 2 and its ECL is measured based on a lifetime basis
(lifetime ECL). Refer to Note 3 for a description of how the
Group determines when a SICR has occurred.
III. If the Group determines that a financial asset is credit-
impaired, the asset is transferred to Stage 3 and its ECL is
measured as a lifetime ECL. Assets that are more than 60
days past due are considered to be defaulted.
For financial assets that are purchased or originated cred-
it-impaired (POCI assets), the ECL is always measured as a
lifetime ECL.
Note 6 provides information about inputs, assumptions and
estimation techniques used in measuring ECL, including an
explanation of how the Group incorporates forward-looking
information in the ECL models.
Modification of financial assets
Sometimes the Group reviews or otherwise modifies the
contractual terms of financial assets. The Group estimates
that the modification of contractual cash flows is significant
taking into account, among other factors: the existence of
new contractual terms that indicate a significant change in
interest rates, which have a significant effect on the credit
risk associated with the asset, a significant extension of
the loan term in cases where the borrower is in financial
difficulty.
If the modified terms significantly differ so that the rights
to cash flows from the original asset are deemed expired,
the Group derecognizes the original financial asset and
68
АNNUAL REPORT 2020
recognizes the new asset at fair value. The date of renego-
tiation is considered to be the date of initial recognition for
impairment calculation purposes, including determination of
whether credit risk has increased significantly. The Group also
evaluates the compliance of the new loan with the criterion
of making payments solely against principal and interest. In
situations where the renegotiation was caused by the debt-
or's financial difficulties and inability to make the originally
agreed payments, the Group assesses whether the modified
loan is considered impaired on initial recognition. The differ-
ence in the carrying amount is recognised in profit or loss.
If the conditions of the modified asset do not differ signifi-
cantly, the modification does not result in derecognition. The
Group restates its gross carrying amount based on revised
cash flows by discounting the modified cash flows at the
original effective interest rate (or credit-adjusted effective
interest rate for purchased or originated credit-impaired fi-
nancial assets) and recognises a gain or loss on modification
in profit or loss.
Loans received
Loans received include loans received from the participant
and are carried at amortised cost.
Property and equipment
Property and equipment are stated at cost, less accumulated
depreciation and impairment allowance.
At the end of the reporting period the Group assesses wheth-
er there is any an indication of impairment of property and
equipment. If such an indication exists, the Group estimates
the recoverable amount, which is determined as the higher
of an asset’s fair value less costs to sell or its value in use.
Where the carrying amount of property and equipment is
greater than their estimated recoverable amount, it is written
down to their recoverable amount and the difference is
charged as impairment loss to the statement of profit or loss
and other comprehensive income.
Gains and losses on disposal of property and equipment
are determined by reference to their carrying amount and
recorded as operating expenses in the statement of profit or
loss and other comprehensive income.
Repairs and maintenance are charged to the statement
of profit or loss and other comprehensive income when
the expense is incurred.
Depreciation
Depreciation of an asset begins when it is available for
use. Depreciation is charged on a straight-line basis over
the following useful lives of the assets:
> Equipment – 2- 7 years.
Lease
The Group classifies its lease agreements as finance or
operating leases.
The right-of-use asset and the lease liability are recog-
nized by the lessee at the lease commencement date.
The original cost of the right-of-use asset includes the
following:
> the amount of the initial measurement of the lease
liability;
> lease payments at or before the lease commencement
date less any
> lease incentives received;
> any initial direct costs incurred by the Group; and
> an estimate of costs to be incurred by the lessee in
dismantling, removing, restoring the site or restoring
the underlying asset to the condition required by
terms of the lease, unless those costs are incurred to
produce inventories.
The right-of-use asset shall be amortised on a straight-
line basis over the shorter of the asset's useful life and
the lease term.
At the lease commencement date, the Group measures
the lease liability at the present value of the lease pay-
ments that have not yet been made at that date. Lease
payments shall be discounted using the interest rate
implicit in the lease if that rate can be easily determined.
If such rate cannot be easily determined, the Group uses
the incremental borrowing rate at the lease commence-
ment date.
If finance lease agreements provide for lease extension
options, the Group plans to use these options for 3 years.
At the lease commencement date, lease payments that
are included in the measurement of the lease liability
consist of the following payments for the right to use the
underlying asset during the lease term that have not yet
been made at the lease commencement date:
> fixed payments (including in-substance fixed
payments) less any lease incentives receivable;
> variable lease payments that depend on an index or
rate, initially measured using an index or a rate as at
the lease commencement date;
> the amounts expected to be payable by the lessee
under the residual value guarantees;
> the exercise price of a purchase option that the lessee
is reasonably certain to exercise; and
> payments of penalties for terminating the lease, if the
lease term reflects the lessee exercising an option to
terminate the lease.
After initial recognition, the right-of-use assets related to
property, plant and equipment shall be measured by the
Group using the historical cost model less accumulated
depreciation and accumulated impairment losses.
A right-of-use asset shall be assessed for impairment at
the end of each reporting year in accordance with IAS 36
Impairment of Assets.
After initial recognition, the lease liability shall be in-
creased by the amount of accrued interest and de-
creased by the amount of lease payments paid.
The carrying amount of the lease liability shall be
remeasured, if there is a change in future lease payments
resulting from changes in an index or a rate, there is a
change in the amounts expected to be payable under a
residual value guarantee, or, as appropriate, there is a
change in the assessment of whether it is reasonably
certain that the purchase option or the lease extension
option will be exercised, or that the lease termination
option will not be exercised. The lease liability shall be
remeasured to reflect changes in lease payments.
When determining the lease term, the following periods
shall be considered, as well as the Group's management's
assessment of the probability that lease extension op-
tions and lease termination options will be exercised:
> the non-cancellable period of lease not subject to
early termination;
> periods covered by an extension option if exercise of
that option by the lessee is reasonably certain;
> periods covered by a termination option if the lessee is
reasonably certain not to exercise that option.
As at the reporting date, right-of-use assets are disclosed
in the "Right-of-use assets" line item of the statement
of financial position. Lease liabilities are disclosed in the
"Lease liabilities" line item of the statement of financial
position. Finance costs are disclosed in the "Interest
expense - lease liabilities" line item of the statement of
profit or loss and other comprehensive income to provide
a fixed periodic interest rate on the remaining lease lia-
bility for each period. Depreciation of right-of-use assets
is disclosed in the "Operating expenses" line item in the
statement of profit or loss and other comprehensive
income. The cash outflow on the lease interest repaid is
disclosed in the “Cash from operating activities” section
of the statement of cash flows, and the amount of cash
paid to repay the principal is disclosed in the “Cash from
financing activities” section of the statement of cash
flows.
LEADING FINTECH COMPANY
69
Operating lease - the Group as
lessee
A lease is classified as an operating lease if it does not
transfer substantially all the risks and rewards inciden-
tal to ownership. The underlying asset is classified as a
low-value asset based on professional judgement.
Payments for short-term leases and low-value asset
leases are recognised as expenses on a straight-line
basis over the lease term and included into operating
expenses in the statement of profit or loss and other
comprehensive income. A short-term lease has a lease
term of 12 months or less. Low-value assets represent
leased property with the value not exceeding the value
limit determined by the Group’s accounting policy.
Lease payments under short-term leases or leases
where the underlying asset is of low value are recognized
as an expense over the lease term.
Provisions
Provisions are recognised when the Group has a present
legal or constructive obligation as a result of past events,
and it is probable that an outflow of resources embod-
ying future economic benefits will be required to settle
the obligation, and a reliable estimate of the amount of
the obligation can be made.
Taxation
The income tax charge/recovery comprises current tax
and deferred tax and is recorded in the statement of
profit or loss and other comprehensive income. Income
tax expense is recorded in the financial statements in
accordance with the applicable legislation of the Russian
Federation. Current tax is calculated on the basis of the
estimated taxable profit for the year, using the tax rates
enacted during the reporting period.
Current tax is the amount expected to be paid to or
recovered from the taxation authorities in respect of tax-
able profits or losses for the current or prior periods. Tax
amounts are based on estimates if financial statements
are authorised prior to filing relevant tax returns.
Deferred income tax is provided using the balance
sheet liability method for tax losses carried forward and
temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts for
financial statement purposes.
Income and expense recognition
Interest income and expense are recorded in the state-
ment of profit or loss and other comprehensive income
for all debt instruments on an accrual basis using the ef-
fective interest method. The effective interest method is
a method of calculating the amortised cost of a financial
asset or a financial liability and of allocating the interest
income or interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts over the
expected life of the financial instrument to the net car-
rying amount of the financial asset or financial liability.
When calculating the effective interest rate, the Group
estimates cash flows considering all contractual terms
of the financial instrument but does not consider future
credit losses. The calculation includes all commissions
and fees paid or received by the parties to the contract
that are an integral part of the effective interest rate,
transaction costs, and all other premiums or discounts.
When loans become doubtful of collection, they are
written down to their recoverable amounts and interest
income is thereafter recognised based on the rate of
interest that was used to discount the future cash flows
for the purpose of measuring the recoverable amount.
Employee benefits and social
insurance contributions
The Group pays social insurance contributions predomi-
nantly in the Russian Federation. Social insurance contri-
butions are recorded on an accrual basis and comprise
contributions to the Russian Federation state pension,
social insurance, and obligatory medical insurance
funds in respect of the Group’s employees. The Group
does not have pension arrangements separate from the
state pension system of the Russian Federation. Wages,
salaries, contributions to the Russian Federation state
pension and social insurance funds, paid annual leaves
and paid sick leaves, bonuses and non-monetary benefits
are accrued as the Group’s employees render the related
service.
Foreign currency
(a) Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing
at the dates of the transactions or valuation where such
items are re-measured. Foreign exchange gains and
losses resulting from the settlement of such transac-
tions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in
foreign currencies are recognised in profit or loss.
Gains and losses on purchase and sale of foreign curren-
cy are determined as a difference between the selling
price and the carrying amount at the date of the trans-
action.
(b) Group companies
The results and financial position of all the Group’s en-
tities that have a functional currency different from the
presentation currency are translated into the presenta-
tion currency as follows:
1. assets and liabilities for each statement of financial
position presented are translated at the closing rate at
the date of the statement of financial position; 2. each
component of profit or loss is translated at average
exchange rates during the accounting period (unless
this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the trans-
action dates, in which case income and expenses are
translated at the dates of the transactions); and 3. all
resulting exchange differences are recognised in other
comprehensive income.
5. Cash and Cash Equivalents
Group
Cash on hand
Accounts with other banks
Total cash and cash equivalents
Company
Cash on hand
Accounts with other banks
Total cash and cash equivalents
2020
30,811
610,060
640,871
2020
-
161,163
161,163
2019
84,098
1,498,653
1,582,751
2019
-
1,310,655
1,310,655
As at 31 December 2020, the Group has 2 counterparties
(2019: 2 counterparties) with balances exceeding 10% of
total cash and cash equivalents in the amount of GBP
524,431 (2019: GBP 1,310,655).
The table below presents the credit quality analysis of
cash and cash equivalents based on credit risk levels as
at 31 December 2020.
Group
Minimum credit risk
Total cash and cash equivalents, less cash on hand
Company
Minimum credit risk
Total cash and cash equivalents, less cash on hand
Accounts with other banks
610,060
610,060
Accounts with other banks
161,163
161,163
Total
610,060
610,060
Total
161,163
161,163
The table below presents the credit quality analysis of cash and cash equivalents based on credit risk levels as at 31
December 2019.
Group
Minimum credit risk
Total cash and cash equivalents, less cash on hand
Company
Minimum credit risk
Total cash and cash equivalents, less cash on hand
Accounts with other RF banks
1,498,653
1,498,653
Accounts with other RF banks
1,310,655
1,310,655
Total
1,498,653
1,498,653
Total
1,310,655
1,310,655
For the purpose of assessing expected credit losses,
cash and cash equivalent balances are included in
Stage 1. The expected credit losses on these balances
represent insignificant amounts, therefore, the Group
does not create an ECL allowance for cash and cash
equivalents.
70
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
71
Below is the credit quality analysis of cash and cash equivalents as at 31 December 2020 in accordance with ratings of
international agencies:
Group
Fitch A+
Fitch BB
S&P from BB- to BB+
No ratingassigned
Accounts with other banks
Total
Company
54,936
54,936
-
-
-
-
555,124
555,124
Fitch A+
Fitch BB
S&P from BB- to BB+
No rating assigned
Accounts with other banks
Total
54,936
54,936
-
-
-
-
106,227
Total
610,060
610,060
Total
161,163
The ECL allowance for loans and advances to customers
recognised during the period is impacted by various
factors. The table below describes the main changes:
> transfers between Stages 1 and 2 and Stage 3 due to
significant inceases (or decreases) in credit exposure
or impairment during the period and subsequent
increase (or decrease) in the estimated ECL level: for
12 months or over the entire period;
> accrual of additional allowances for new financial
instruments recognised during the period, as well as
reduction in the allowance as a result of derecognition
of financial instruments during the period;
> impact on ECL estimation due to changes in model
assumptions, including changes in the probability of
default, EAD and LGD during the period resulting from
regular updating of the model inputs.
106,227
161,163
Following is the credit quality analysis of loans to customers as at 31 December 2020:
Below is the credit quality analysis of cash and cash equivalents as at 31 December 2019 in accordance with ratings
from international agencies:
Group
Fitch A+
Fitch BB
S&P from BB- to BB+
No rating assigned
Total
Accounts with other banks
Total
Company
528,551
528,551
782,104
782,104
93,047
93,047
94,951
1,498,653
94,951
1,498,653
Fitch A+
Fitch BB
S&P from BB- to BB+
No rating assigned
Total
Accounts with other banks
Total
528,551
528,551
782,104
782,104
-
-
-
-
1,310,655
1,310,655
6. Loans to Customers
Group
Loans to customers
Less: ECL allowance
Total loans to customers at amortised cost
Company
Loans to customers
Less: ECL allowance
Total loans to customers at amortised cost
2020
28,298,290
(27,028,977)
1,269,313
2019
32,078,150
(31,291,804)
786,346
2020
-
-
-
2019
-
-
-
Below is analysis of movements in the ECL allowance during 2020 (by type of loans specified in the first table of the
Note):
Group
ECL allowance as at 1 January 2020
Assets recognised for the period
Assets derecognised or collected
Transfers to Stage 2
Transfers to Stage 3
Net loss on ECL allowance charge/(reversal)
Effect of exchange rate differences
ECL allowance as at 31 December 2020
Stage 1
128,028
697,907
(47 273)
(189,937)
(355,164)
-
(32,067)
201,494
Analysis of movements in the ECL allowance during 2019 is as follows:
Group
ECL allowance as at 1 January 2019
Assets recognised for the period
Assets derecognised or collected
Transfers to Stage 2
Transfers to Stage 3
Net loss on ECL allowance charge/(reversal)
Effect of exchange rate differences
ECL allowance as at 31 December 2019
72
АNNUAL REPORT 2020
Stage 1
139,800
687,271
(95,125)
(206,503)
(409,279)
11,864
128,028
Stage 2
288,985
-
(33,654)
189,937
(187,618)
414,887
(83,237)
589,300
Stage 2
424,712
-
(102,217)
206,503
(326,329)
52,065
34,252
288,985
Stage 3
30,874,790
-
(629,075)
-
542,782
1,377,954
(5,928,268)
26,238,183
Stage 3
27,982,210
-
(842,085)
-
735,608
530,141
2,468,916
30,874,790
Total
31,291,804
697,907
(710,002)
-
-
1,792,841
(6,043,572)
27,028,977
Total
28,546,722
687,271
(1,039,427)
-
-
582,206
2,515,032
31,291,804
Group
Loans to customers
Minimum credit risk
Low credit risk
Moderate credit risk
High credit risk
Defaulted assets
Total loans to customers before allowance
ECL allowance
Total loans to customers after ECL allowance
Stage 1
Stage 2
Stage 3
Total
1,222,507
-
-
-
-
1,222,507
(201,494)
1,021,012
-
177,117
388,723
271,760
-
837,600
(589,300)
248,300
-
-
-
-
26,238,183
26,238,183
1,222,507
177,117
388,723
271,760
26,238,183
28,298,290
(26,238,183)
(27,028,977)
-
1,269,313
Following is the credit quality analysis of loans to customers as at 31 December 2019:
Group
Loans to customers
Minimum credit risk
Low credit risk
Moderate credit risk
High credit risk
Defaulted assets
Total loans to customers before allowance
ECL allowance
Total loans to customers after ECL allowance
The ECL allowance for loans to customers recognized
during the period is impacted by different factors. Infor-
mation on the assessment of expected credit losses is
disclosed in Note 3.
The Group uses the following approach to measurement
of expected credit losses:
> portfolio-based measurement: internal ratings
are assigned individually, but the same credit risk
parameters (e.g. PD, LGD) are applied to similar
credit risk ratings and homogeneous credit portfolio
segments in the process of ELC estimation.
Stage 1
Stage 2
Stage 3
Total
568,567
-
-
-
-
568,567
(128,028)
440,539
374,288
164,962
95,507
634,757
(288,986)
345,771
-
-
-
-
30,874,826
30,874,826
568,567
374,288
164,962
95,507
30,874,826
32,078,150
(30,874,790)
(31,291,804)
36
786,346
This approach provides for aggregation of the portfolio
into homogeneous segments on the basis of specific
information on borrowers, such as delinquent loans,
historic data on prior period losses and forward-looking
macroeconomic information.
The amounts of loans recognised as “past due” represent
the entire balance of such loans rather than the overdue
amounts of individual payments.
LEADING FINTECH COMPANY
73
7. Lease
The Group has agreements for lease of premises.
The Group did not apply a simplified approach to recognise lease modifications allowed due to the COVID-19 pandemic.
The carrying amount of right-of- use assets and its movements during the period are presented below:
Group
As at 1 January 2020
Depreciation charge
Modifications and remeasurement
Derecognition
Effect of translation into presentation currency
As at 31 December 2020
Group
As at 1 January 2019
Additions
Depreciation charge
Effect of translation into presentation currency
As at 31 December 2019
Real Estate
2,549,233
(661,165)
(248,309)
(1,003,208)
(338,626)
297,925
Real Estate
3,407,065
112,021
(1,248,758)
278,905
2,549,233
The carrying amounts of lease liabilities and their movements during the period are set out below:
Group
Lease liabilities
As at 1 January 2020
Interest expense on lease liabilities
Lease payments
Modifications and remeasurement
Derecognition
Effect of translation into presentation currency
As at 31 December 2020
Group
Lease liabilities
As at 1 January 2019
Additions
Interest expense on lease liabilities
Lease payments
Effect of translation into presentation currency
As at 31 December 2019
Real Estate
2,555,648
92,442
(628,563)
(248,309)
(1,080,605)
(343,397)
347,216
Real Estate
3,325,625
108,875
243,281
(1,395,580)
273,447
2,555,648
Total
2,549,233
(661,165)
(248,309)
(1,003,208)
(338,626)
297,925
Total
3,407,065
112,021
(1,248,758)
278,905
2,549,233
Total
2,555,648
92,442
(628,563)
(248,309)
(1,080,605)
(343,397)
347,216
Total
3,325,625
108,875
243,281
(1,395,580)
273,447
2,555,648
The Group exercises options to extend signed lease
agreements for at least 3 years given the ongoing
profitability of the loan outlet (in the ordinary course of
business). During the current period, the Group exercised
lease termination options. There were no early termina-
tion penalties under these agreements.
8. Other Assets
Group
Other non-financial assets
Lease prepayments
Settlements with suppliers
Taxes other than income tax
Other receivables
Less: impairment allowance
Total other non-financial assets
Total other assets
Company
Other non-financial assets
Settlements with suppliers
Taxes other than income tax
Other receivables
Less: impairment allowance
Total other non-financial assets
Total other assets
2020
2019
23,062
35,211
110,980
104,193
(22,149)
251,297
251,297
2020
-
80,732
45,745
-
126,477
126,477
16,603
29,440
139,069
52,937
(15,932)
222,117
222,117
2019
-
68,122
-
-
68,122
68,122
Total
15,932
9,972
(3,754)
22,149
Total
13,117
1,631
1,184
15,932
Analysis of movements in the impairment allowance for non-financial assets during 2020 is presented below:
Group
Non-financial assets
Impairment allowance for other assets as at 1 January 2020
Impairment allowance charge during 2020
Effect of translation into presentation currency
Impairment allowance for other assets as at 31 December 2020
15,932
9,972
(3,754)
22,149
Analysis of movements in the impairment allowance for non-financial assets during 2019 is presented below:
Group
Non-financial assets
Impairment allowance for other assets as at 1 January 2019
Impairment allowance charge during 2019
Effect of translation into presentation currency
Impairment allowance for other assets as at 31 December 2019
13,117
1,631
1,184
15,932
The Group has no collateral for impaired assets recognised within other assets.
9. Loans Received
Group
Loan from related party
Total loans received
2020
735,646
735,646
2019
742,603
742,603
On 31 December 2020, the Group entered into an agree-
ment amending the loan terms – coming into effect from
January 2021, the interest rate on the above loan is set
at 13.42 % per annum, and the loan repayment period is
extended until 31 December 2023.
Company
Loan from related party
Total loans received
2020
-
-
2019
-
-
74
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
75
10. Other Liabilities
Group
Other financial liabilities
Payables
Other settlements with customers on loan’s agreements
Other
Other non-financial liabilities
Taxes other than income tax
Provision for unused vacations
Payables to employees and payroll related taxes
Total other liabilities
Company
Other financial liabilities
Payables
Other
Other non-financial liabilities
Payables to employees and payroll related taxes
Total other liabilities
2020
326,692
200,019
7,195
26,412
104,353
159,159
823,830
2020
119,057
27
67,655
186,739
2019
200,618
97,322
16,732
16,982
144,024
189,227
664,905
2019
126,057
27
36,582
162,666
There are no changes in the structure and amount of the share capital during 2020.
Group and Company
Issued and fully paid
Ordinary shares of £0.01 each
31 Dec. 2020
Number
436,975,000
436,975,000
Amount, £
4,369,750
4,369,750
As at 31 December 2018 the amount of Additional capital
stated in the agreement on in-kind contribution (debt on
the loan) of the Subsidiary was £ 29,122,880.
Amounts of Additional capital as at 31 December 2018
were restated as at the date of the agreement on in-kind
contribution (debt on the loan).
Group
Date of exchange rate for translation to
presentation currency
29.12.2018
Total additional capital at 31 December, 2018
Amount in RUB
Exchange rate
2,561,820,344
87.9659
Amount in GBP
29,122,880
29,122,880
As a result of the reverse acquisition, which was stated
in the consolidated financial statements in 2019, the
Additional capital as at 31 December 2019 of the legal
parent Company was £ 6,078,128.
Below there is reconciliation of movement in Additional
capital (share premium) of legal parent Company during
2019:
11. Charter and Additional Capital, Other reserves. Earnings per
share
As at 31 December 2018 the Charter capital states the
amount of Share capital of the Subsidiary - the author-
ized capital represents the contribution made by the sole
participant of the Subsidiary.
During 2019 the reverse acquisition was stated in the
consolidated financial statements, as a result, the
Charter capital as at 31 December 2019 states the Share
capital of the legal parent Company, totalling £ 4,369,750.
All the shares issued have equal voting rights.
Below is a reconciliation of the movement in the legal parent Company Share capital during 2019:
For the year 2019:
Group and Company
As at 1 January 2019
Premium arising on issue of ordinary shares
Issue costs
As at 31 December 2019
There are no changes in the structure and amount of additional capital during 2020.
Group and Company
Share premium (with consideration of issue costs)
Amount, £
-
6,406,699
(328,570)
6,078,128
Amount, £
6,078,128
6,078,128
Group and Company
Issued and fully paid
Ordinary shares of £0.01 each
For the year 2019 (Ordinary shares issue of £0.01 each):
Group and Company
Consideration shares (acquisition of Subsidiary)
IPO
Fee shares
Group and Company
Issued and fully paid
Ordinary shares of £0.01 each
31 Dec. 2018
Number
6,000,000
Amount, £
60,000
6,000,000
60,000
Number
320,000,000
104,000,000
6,975,000
430,975,000
31 Dec. 2019
Number
436,975,000
436,975,000
Amount, £
3,200,000
1,040,000
69,750
4,309,750
Amount, £
4,369,750
4,369,750
As at 31 December 2020
Other reserves
Group
As at 1 January 2019
Merger reserve
Share based payments
Translation differences
As at 31 December 2019
Contingent consideration
Merger reserve
Share based payments
Translation differences
As at 31 December 2020
Shares to be
issued Reserve
-
-
-
-
800,000
-
-
-
Merger
reserve
-
23,764,800
-
-
23,764,800
-
(800,000)
-
-
Share option
reserve
-
Translation
reserve
4,497,731
-
166,883
-
166,883
-
-
51,216
-
-
-
(39,942)
4,457,788
-
-
-
(67,563)
800,000
22,964,800
218,099
4,390,225
76
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
77
The merger and foreign currency translation reserve as
at 31 December 2019 arose on consolidation as a result of
merger accounting for the acquisition of the entire issued
share capital of the Subsidiary during 2019 and represents
the difference between the value of the share capital is-
sued for the acquisition of the Subsidiary and investments
made in the Subsidiary and that of the acquired share
capital of the Subsidiary.
Share options reserve - this reserve represents cumula-
tive share-based payment expense for the Group's share
option schemes. See Note 12 Share-based payments.
Shares to be issued Reserve - this reserve represents
shares to be issues in respect of contingent consideration,
see note 26 Business Combination for further details.
Currency translation differences relate to the translation
of the Subsidiary that have a functional currency different
from the presentation currency (refer note 2). Movements
in the translation reserve are linked to the changes in the
value of the Russian Ruble against the Pound Sterling: the
business of the Group is located in Russian Federation, and
the Subsidiary's functional currency is the Russian Ruble,
which has substantial volatility against Sterling during the
year.
Accumulated deficit represents retained earnings.
Earnings per share. The basic loss per share of 0.14p loss
per share (2019 loss per share: 0.77p ) is calculated by
dividing the loss attributable to owners of the parent by
the weighted average number of ordinary shares in issue
during the year.
Group
Loss attributable to owners of the parent
Weighted average number of ordinary shares in issue
2020
(614,519)
436,975,000
2019
(891,589)
115,689,178
The basic and diluted loss per share for the years ended 31 December 2020 and 31 December 2019 are the same as
the current year result was a loss, the options and warrants outstanding would be anti-dilutive. Therefore, the dilutive
loss per share is considered the same the basic loss per shares.
Group
Loss attributable to owners of the parent
Weighted average number of ordinary shares in issue outstanding for the effects of
all dilutive potential ordinary shares
2020
(614,519)
436,975,000
2019
(891,589)
115,689,178
12. Share-based payments
In October 2019, a total of 32,250,000 options were issued
to certain directors, senior management and other
advisers in recognition of the work undertaken for Zaim
prior to the IPO. In addition the Company issued a total
of 13,600,000 warrants to advisers in relation to the
funds raised at the time of the IPO. All the options were
issued with an exercise price of 2.5 pence per share and
expire after 5 years from the date of issue. 17,200,000 of
the options vest immediately and have no employment
related conditions, the remaining 15,050,000 vest over 1-2
years from the date of issue and, should the individual
end their employment, the options either expire imme-
diately or are valid for a further 6 months (depending on
the circumstances of the departure of the individual). All
the warrants have a contractual term of 3 years from the
date of issue and have no performance related terms
attached and have a strike price of 2.5 pence per share.
In addition to the options noted above as set out in the
prospectus at the time of the IPO the Directors have the
discretion to issue a further 10,750,000 options to key
employees and consultants of the Group as an incentivis-
ing tool to retain key individuals. As at the date of this re-
port these have not been issued and have therefore not
been included in the calculations. Neither the Company
nor the Group has any legal or constructive obligation to
settle or repurchase the options in cash.
Movements on number of share options and their related exercise price are as follows:
Group
Outstanding at 1 January 2019
Granted
Forfeited
Outstanding at 31 December 2019
Exercisable at 31 December 2019
Number of options& warrants 2019
-
Weighted exercise price 2019, £
-
40,650,000
-
40,650,000
25,600,000
2.50
-
2.50
2.50
On 24 September, 2021 2,000,000 options were issued to
Paul Auger a non-executive director of the company at a
price of 2,7p. The options vest equally over one year from
the date of grant and express after 5 years.
On 26 November, 2021 1,000,000 options were issued to
an employee of the Group at a price of 2,7p. The options
vest equally over 2 years from the date of the grant and
express after 5 years.
Group
Outstanding at 1 January 2020
Granted
Forfeited
Outstanding at 31 December 2020
Exercisable at 31 December 2020
Number of options& warrants 2020
40,650,000
Weighted exercise price 2020, £
2.50
3,000,000
-
43,650,000
34,200,000
-
-
2.50
2.50
The options & warrants outstanding at 31 December 2020
had a weighted average remaining contractual life of 3.8
years.
The parameters used are detailed below.
For the year 2019:
Group and Company
Date of Grant
Weighted average share price
Weighted average exercise price
Weighted average fair value at the measurement date
Expiry date
Options granted
Volatility
Dividend yield
Option life
Annual risk free interest rate
For the year 2020:
Group and Company
Date of Grant
Weighted average share price
Weighted average exercise price
Weighted average fair value at the measurement date
Expiry date
Options granted
Volatility
Dividend yield
Option life
Annual risk free interest rate
The fair value of the share options and warrants was
determined using the Black-Scholes valuation model.
2019
options
29 Oct. 2019
2.50 pence
2.50 pence
0.57 pence
29 Oct. 2024
40,650,000
20%
Nil
5 year
2.83%
2020
Options
29 Oct. 2019
2.60 pence
2.70 pence
0.78 pence
29 Oct. 2024
40,650,000
30%
Nil
5 year
2.83%
78
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
79
13. Interest Income and Expense
Group
Interest income
Loans to customers
Total interest income
Interest expense
Loans received
Lease liabilities
Total interest expense
Net interest income
2020
2019
4,857,496
4,857,496
(12,836)
(92,442)
(105,277)
4,752,218
3,940,747
3,940,747
(28,018)
(243,281)
(271,299)
3,669,448
2019
102,327
(6,830)
95,497
14. Gains less Losses from Dealing in Foreign Currency
Group
Gain/loss on revaluation of financial assets and liabilities
Realised gain/ (loss) from foreign exchange transactions
Total gains less losses from dealing in foreign currency
2020
(181,466)
(7,661)
(189,127)
15. Allowance for Expected Credit Losses / Impairment of Other
Assets
Group
Loans to customers
Other assets
Total allowance for expected credit losses / impairment of other assets
16. Other Operating Income
Group
Agent's fee
Fines received under loan agreements
Financial result from derecognition of lease assets and liabilities
Note
6
8
Taxes other than income tax
Other income
Total other operating income
17. Staff Costs
Group
Salary
Payroll related taxes
Total staff costs
18. Operating Expenses
Group
Depreciation of right-of-use assets
State duty
Advertising and marketing
Investor Relations
Consulting services
Communication
Postal services
80
АNNUAL REPORT 2020
2020
1,780,746
9,972
1,790,718
2020
253,889
158,322
126,091
-
52,200
590,502
2019
230,050
1,631
231,681
2019
150,036
34,846
-
591,965
13,707
790,554
2020
1,429,920
380,523
2019
1,722,792
283,473
1,810,443
2,006,265
2020
661,165
283,523
269,304
181,456
209,828
98,172
91,328
2019
1,248,759
23,036
25,736
-
851,223
87,83
38,491
Banking services
Rental expenses
Material expenses
Security
Office equipment
Repairs
Representative and travel expenses
Other expenses
Total operating expenses
87,558
66,434
33,920
22,023
-
-
-
111,025
43,246
257,639
3,412
42,594
17,274
2,038
81,250
169,730
2,115,735
2,892,258
19. Income Tax
As at 31 December 2020 and 31 December 2019, the Group
has no current income tax expense. The current income
tax rate applicable to the majority of the Group's profit is
20% (2019: 20%).
A reconciliation between the theoretical and the actual taxation charge is provided below.
Group
IFRS loss before taxation
Theoretical tax charge at the applicable statutory rate
Non-deductible expenses and other differences
Unrecognised deferred tax asset
Income tax expense for the year
The Company has a potential deferred tax asset of
£153,847 (2019: £56,987) as a result of trade losses to be
offset against future profits, should they arise.
2020
(614,519)
122,904
29,521
(152,425)
-
2019
(891,589)
178,318
(19,132)
(159,186)
-
Differences between IFRS and statutory taxation reg-
ulations of the Russian Federation give rise to certain
temporary differences between the carrying amount
of certain assets and liabilities for financial statement
purposes and for the Group’s income tax purposes.
Group
Tax effect of deductible temporary differences
Loans to customers
Other assets
Intangible assets
Lease liabilities
Other liabilities
Tax loss
Deferred tax assets
Tax effect of taxable temporary differences
Other liabilities
Property and equipment
Right-of-use assets under lease agreements
Gross deferred tax liabilities
Total net deferred tax asset
Unrecognised tax assets
Recognised tax liabilities
Group
Tax effect of deductible temporary differences
Loans to customers
Other assets
Lease liabilities
2020
51,714
8,390
15,287
69,443
-
3,330,002
3,474,836
(9,942)
(700)
(59,585)
(70,227)
3,404,608
Effect of
exchange rate
differences
Change recognised
in profit and loss
(15,500)
(3,749)
(1,234)
(68,680)
(1,199)
(734,761)
(24,565)
(12,752)
16,521
(373,007)
(8,517)
182,082
(825,123)
(220,238)
2019
91,779
24,891
-
511,130
9,716
3,882,681
4,520,197
-
(1,857)
(509,846)
(511,703)
4,008,494
(4,008,494)
803
287
67,725
68,815
(756,310)
756,310
-
(10,745)
871
382,536
372,663
152,425
(152,425)
(3,404,608)
-
-
2018
97,301
42,397
-
Change
recognised in
profit and loss
Effect of
exchange rate
differences
(13,827)
(20,854)
501,961
8,305
3,348
9,169
2019
91,779
24,891
511,130
LEADING FINTECH COMPANY
81
Group
Other liabilities
Tax loss carried forward
Deferred tax assets
Tax effect of taxable temporary differences
Property and equipment
Right-of-use assets under lease agreements
Gross deferred tax liabilities
Total net deferred tax asset
Unrecognised tax assets
Recognised tax liabilities
20. Risk Management
The risk management function within the Group is
carried out in respect of financial risks (credit, market,
currency, liquidity and interest rate), operational and
legal risks. The primary objectives of the financial risk
management function are to establish risk limits, and
then ensure that exposure to risks stays within these
limits. The assessment of exposure to risks also serves
as a basis for optimal distribution of risk-adjusted
capital, transaction pricing and business performance
assessment. The operational and legal risk management
functions are intended to ensure proper functioning of
internal policies and procedures to minimise operational
and legal risks.
Credit risk. The Group assumes a credit risk, namely
the risk that a counterparty will fail to meet its debt
obligations within the specified period. The Group has
developed policies and procedures for the management
of credit exposures (both for recognised financial assets
and unrecognised contractual commitments), including
requirements for establishment and monitoring of the
loan portfolio concentration limits.
The credit policy establishes:
> procedures for review and approval of loan
applications,
> methodology for assessment of the borrowers'
solvency,
> credit documentation requirements,
> procedures for the ongoing monitoring of loans and
other credit exposures.
The Group continuously monitors the status of individual
loans and regularly reassesses the creditworthiness of
its customers. The review is based on the most recent
loan delinquency statistics.
2018
54,654
3,342,776
3,537,128
(1,688)
-
(1,688)
3,535,440
(3,535,440)
-
Change
recognised in
profit and loss
Effect of
exchange rate
differences
(48,853)
241,480
659,907
(20)
(500,701)
(500,721)
159,186
(159,186)
-
3,915
298,425
323,162
(149)
(9,145)
(9,294)
313,868
(313,868)
-
2019
9,716
3,882,681
4,520,197
(1,857)
(509,846)
(511,703)
4,008,494
(4,008,494)
-
The Group applies the expected credit loss model for the
purpose of provisioning for financial debt instruments,
the key principle of which is timely reflection of deterio-
ration or improvement in the credit quality of debt finan-
cial instruments based on current and forward-looking
information.
The amount of the the ECL recognised as a credit loss
allowance depends on the extent of credit quality
deterioration since initial recognition of a debt financial
instrument.
Credit risk classification system. Each level of credit risk
is assigned a certain degree of solvency, using a single
scoring system:
> minimum credit risk – high credit quality with low
expected credit risk, debt is not past due;
> low credit risk – sufficient credit quality with average
credit risk, debt is prolonged and not past due;
> moderate credit risk – average credit quality with
satisfactory credit risk, the debt is from 1 to 30 days
past due;
> high credit risk – low credit quality with unsatisfactory
credit risk, high probability of default, the debt is from
31 to 60 days past due;
> default – assets that meet the definition of default,
the debt is more than 60 days past due.
Expected credit losses on financial assets that are not
impaired are usually measured on the basis of default
risk over one or two different time periods, depending
on whether there has been a significant increase in the
borrower's credit risk since initial recognition.
The Group performs collective assessment of loans to
individuals. This approach provides for the aggregation of
the portfolio into homogeneous segments based on specific
information about borrowers, such as delinquent loans,
historic data on prior period losses and forward-looking
macroeconomic information.
Collective assessment principles: for assessing risk
stages and estimating ECL on a collective basis, the
Group combines its loans into segments based on shared
credit risk characteristics, so that exposure within a
grouping has a homogeneous pattern.
Market risk. The Group assumes a market risk. Market
risk is the risk that the fair value or future cash flows of
a financial instrument will fluctuate because of chang-
es in market prices. Market risk comprises currency
risk, interest rate risk and other price risks. Market risk
arises from open positions in interest rates, currency
and equity financial instruments, which are exposed to
general and specific market movements and changes in
the volatility levels of market prices.
The objective of market risk management is to manage and
control market risk exposures within acceptable parame-
ters, while optimising the return on risk.
Currency risk. Currency risk is the risk that the fair value or
the future cash flows of a financial instrument will fluctuate
because of changes in foreign currency exchange rates.
The Group accepts the risk of effect of foreign currency
exchange rate fluctuations on its financial position and cash
flows. Currency risk arises when the existing or prospective
assets in foreign currencies are greater or lower than the
existing or prospective liabilities in the same currencies. The
Group’s management controls the exposure to currency risk
on a regular basis.
The table below provides the analysis of the Group's currency risk as at 31 December 2020.
Group
Assets
Cash and cash equivalents
Loans to customers
Property and equipment
Right-of-use assets under lease agreements
Other assets
Total assets
Liabilities
Loans received
Lease liabilities
Other liabilities
Total liabilities
Net balance sheet position
RUB
GBP
EUR
Total
479,708
1,269,313
5,676
297,925
124,821
2,177,443
-
347,216
637,091
984,307
1,193,136
161,095
-
-
-
126,477
287,571
-
-
186,739
186,739
100,832
68
-
-
-
-
640,871
1,269,313
5,676
297,925
251,298
68
2,465,083
735,646
-
-
735,646
347,216
823,830
735,646
1,906,692
(735,578)
558,391
The table below provides the analysis of the Group's currency risk as at 31 December 2019.
Group
Assets
Cash and cash equivalents
Loans to customers
Property and equipment
Right-of-use assets under lease agreements
Other assets
Total assets
Liabilities
Loans received
Lease liabilities
Other liabilities
Total liabilities
Net balance sheet position
RUB
271,229
786,346
11,967
2,549,233
150,525
3,769,300
-
2,555,648
499,077
3,054,725
714,575
USD
867
-
-
-
-
867
-
-
-
-
GBP
1,310,393
-
-
-
68,122
1,378,514
EUR
263
-
-
-
3,470
3,733
Total
1,582,751
786,346
11,967
2,549,233
222,117
5,152,414
-
-
742,603
742,603
-
2,555,648
162,666
162,666
3,162
745,765
664,905
3,963,156
1,189,258
867
1,215,849
(742,032)
82
АNNUAL REPORT 2020
LEADING FINTECH COMPANY
83
The table below presents a change in the financial result
and equity due to possible fluctuations of exchange
rates used at the end of the reporting period if all other
conditions remain unchanged. Reasonable exchange rate
changes for each currency were projected on the basis
of historical information on maximum daily exchange
rate fluctuations in December 2020.
Group
EUR appreciation by 20%
EUR depreciation by 20%
Effect on profit or loss before taxation
(147,129)
147,129
31 December 2020
Effect on equity
(117,703)
117,703
The table below presents a change in the financial result
and equity due to possible fluctuations of exchange
rates used at the end of the reporting period if all other
conditions remain unchanged. Reasonable exchange rate
changes for each currency were projected on the basis
of historical information on maximum daily exchange
rate fluctuations in December 2019.
Group
EUR appreciation by 10%
EUR depreciation by 10%
Effect on profit or loss before taxation
(74,229)
74,229
31 December 2019
Effect on equity
(59,383)
59,383
Liquidity risk. Liquidity risk rises when the maturity of
assets and liabilities do not match. The Group does not
accumulate cash resources to meet calls on all liabilities
mentioned above, as based on the existing practice it is
possible to forecast with a sufficient degree of certainty
the required level of cash funds necessary to meet the
above obligations.
To manage its liquidity, the Group is required to analyse
the level of liquid assets needed to settle the liabilities
when they are mature, provide access to various sources
of financing, draw up plans to solve the problems with fi-
nancing and exercise control over the compliance of the
liquidity ratios with the statutory laws and regulations.
The CBR sets and monitors liquidity requirements for
microfinance organisations. The Group calculates the
liquidity ratio in accordance with Instruction No. 5114-
U of the Central Bank of the Russian Federation "On
establishment of economic standards for a microloan
company attracting loan funds from individuals, including
individual entrepreneurs who are founders (participants,
shareholders), and (or) legal entities" dated 2 April 2019.
As at 31 December 2020 and 31 December 2019, the
minimum liquidity ratio was 70%. The Group provides
the territorial CBR division that supervises its activities
with information on mandatory liquidity ratio in accord-
ance with the set format on a quarterly basis as at the
first day of each month. Also, if the liquidity ratio values
approach the limit set by the CBR, this information is
communicated to the Group's management. The Group
complies with the liquidity ratio as at 31 December 2020
(unaudited) and as at 31 December 2019 (unaudited).
The table below shows the maturity profile of financial
liabilities as at 31 December 2020:
Liabilities
Loans received
Lease liabilities
Other liabilities
Total potential future payments under financial
liabilities
On demand
and less than 1
month
1 to
3 months
From
3 months to
6 months
From
6 months
to 1 year
From
1 to 3 years
Total
-
-
533,909
51,582
83,486
-
77,373
86,451
-
154,745
161,569
-
618,982
31,707
-
902,682
363,213
533,909
533,909
135,068
163,824
316,314
650,689
1,799,804
The table below shows the maturity profile of financial liabilities as at 31 December 2019:
Group
Liabilities
Loans received
Lease liabilities
Other liabilities
Total potential future payments under financial
liabilities
On demand
and less than 1
month
1 to
3 months
From
3 months to
6 months
From
6 months
to 12
years
From
1 to 3 years
Total
742,603
-
-
-
-
742,603
-
396,064
396,064
787,925
3,069,025
4,649,078
351,253
-
-
-
-
351,253
1,093,856
396,064
396,064
787,925
3,069,025
5,742,934
The Group does not use the above undiscounted amounts in the maturity analysis to monitor the liquidity profile.
Instead, the Group monitors the expected maturity limits that are shown in the table below as at 31 December 2020:
On
demand
and less
than 1
month
640,871
1,168,937
-
-
156,712
1,966,520
From 1 to 3
months
From 3 to
6 months
From 6
months to 1
year
More than 1
year
Overdue
No stated
maturity
Total
-
-
-
-
29
29
-
-
-
-
415
415
-
-
-
-
862
862
-
-
-
-
162
162
-
100,376
-
-
-
-
-
5,676
640,871
1,269,313
5,676
297,925
93,118
297,925
251,297
100,376
396,720
2,465,084
-
-
719,477
719,477
27,345
77,397
-
54,270
81,779
-
113,642
157,129
-
540,389
30,911
-
104,742
136,049
270,771
571,300
-
-
-
-
-
-
104,353
104,353
735,646
347,216
823,830
1,906,692
1,247,043
(104,713)
(135,634)
(269,909)
(571,138)
100,376
292,367
558,391
1,247,043
1,142,329
1,006,695
736,787
165,648
266,024
558,391
-
Assets
Cash and cash equivalents
Loans to customers
Property and equipment
Right-of-use assets under
lease agreements
Other assets
Total assets
Liabilities
Loans received
Lease liabilities
Other liabilities
Total liabilities
Net liquidity gap as at 31
December 2020
Cumulative liquidity gap
as at 31 December 2020
The table below present the maturity profile of assets and liabilities as at 31 December 2019:
On demand
and less
than 1
month
1,582,751
786,346
-
-
131,938
2,501,035
742,603
Group
Assets
Cash and cash equivalents
Loans to customers
Property and equipment
Right-of-use assets under
lease agreements
Other assets
Total assets
Liabilities
Loans received
Lease liabilities
Other liabilities
Total liabilities
Net liquidity gap at 31
December 2019
Cumulative liquidity gap
as at 31 December 2019
From 1 to 3
months
From 3 to
6 months
From 6 to 12
months
More than 1
year
Overdue
No stated
maturity
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,218
2,218
-
-
-
-
-
-
-
-
-
-
-
-
-
11,967
1,582,751
786,346
11,967
2,549,233
2,549,233
12,649
12,649
75,312
222,117
2,636,512
5,152,414
-
-
-
-
-
-
144,025
742,603
2,555,648
664,905
144,025
3,963,157
227,558
352,680
725,218
1,250,193
520,880
-
-
-
-
1,263,483
227,558
352,680
725,218
1,250,193
1,237,552
(227,557)
(352,680)
(723,000)
(1,250,193)
12,649
2,492,487
1,189,257
1,237,552
1,009,995
657,315
(65,685)
(1,315,878)
(1,303,229)
1,189,257
-
Interest rate risk. The Group assumes the risk associ-
ated with the effects of fluctuations in market interest
rates on its financial position and cash flows. Interest
margins may increase as a result of such changes but
may also decrease or create losses in the event of unex-
pected movements in interest rates.
The Group is exposed to interest rate risk primarily as
a result of its lending activities at fixed interest rates,
in amounts and for periods which differ from those of
fixed interest rate borrowings (Loans to customers as at
31 December 2020: 1,269,313 and as at 31 December 2019:
786,346 British pounds sterling). In practice, interest rates
are usually set for short periods. In addition, interest
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85
rates recorded in both asset and liability contracts are
often revised by mutual agreement in accordance with
current market conditions. In 2019 the maximum daily
interest rate was limited to 1.5% per day in the first half
of the year and 1% the second half of 2019.
Also, the Group's lease liabilities are exposed to interest
rate risk (as at 31 December 2020: 347,216 and as at 31
December 2019: 2,555,648 British pounds sterling).
Other assets and liabilities are not exposed to interest
rate risk.
21. Capital management
The Group's objectives when managing capital are to
comply with the capital requirements set by the Cen-
tral Bank of Russia, as the main area of business of the
Group is in the Russian Federation, and to ensure the
Group's ability to continue as a going concern and main-
tain a capital base at the level necessary to achieve the
capital adequacy ratio of 5% in accordance with the CBR
requirements.
The Group provides the territorial division of the CBR
supervising its operations with information on the
mandatory capital adequacy ratio in accordance with the
established format quarterly as at the first day of each
month.
The statutory requirements for own funds (equity) as
at 31 December 2020 are set at one million roubles. The
Group is in compliance with the above requirements.
22. Contingencies
Litigations. In the ordinary course of business, the Group
is subject to legal actions and complaints. Management
believes that the ultimate liability, if any, arising from
such actions or complaints will not have a material
adverse effect on the Group’s financial condition or the
results of its future operations.
Tax legislation As the main business of Group is in
Russia, Russian tax legislation is subject to varying
interpretations, and changes, which can occur frequent-
ly. Management's interpretation of such legislation as
applied to the transactions and activities of the Group's
companies may be challenged by the relevant regional
or federal authorities. Current trends in the Russian
Federation suggest that the tax authorities are taking
a more assertive position in their interpretation of the
legislation and assessments. As a result, tax authorities
may challenge transactions and accounting methods for
which they have not previously challenged. As a result,
significant additional taxes, penalties, and fines may be
assessed.
As at 31 December 2020, management believes that its
interpretation of the relevant legislation is appropriate
and the Group's tax, currency and customs positions will
be sustained by the regulatory authorities. Management
believes that the Group has accrued all relevant taxes.
Operating lease commitments. In the course of its business, the Group enters into a number of lease agreements.
These agreements are not irrevocable. The minimum future lease payments under operating leases where the Group
is the lessee are presented below:
Group
Less than 1 year
Total operating lease commitments
31 December 2020
31 December 2019
-
-
66,434
66,434
23. Fair Value of Financial Instruments
A quoted market price in an active market is the best ev-
idence of fair value. As no readily available market exists
for the major part of the Group’s financial instruments,
their fair value is based on current economic conditions
and the specific risks attributable to the instrument. The
estimates presented below are not necessarily indica-
tive of the amounts the Group could realise in a market
exchange from the sale of its full holdings of a particular
instrument.
Below is the estimated fair value of the Group’s financial
instruments as at 31 December 2020 and
31 December 2019:
Group
Financial assets
Cash
Loans to customers
Financial liabilities
Loans received
Other liabilities
Carrying value
Fair value
Carrying value
2020
640,871
1,269,313
735,646
533,907
640,871
1,269,313
735,646
533,907
1,582,751
786,346
742,603
351,253
2019
Fair value
1,582,751
786,346
742,603
351,253
The Group uses the following methods and assumptions
to estimate the fair value of these financial instruments:
at current market rates (the interest rate on loans in
2020 was 1%, and in 2019 - from 1.5% to 1%).
Cash and cash equivalents. The estimated fair value of
cash and cash equivalents does not differ from their
carrying amounts due to the nature of these financial
instruments.
Loans to customers. Loans to customers are reported
net of impairment allowance. The estimated fair value of
loans to customers represents the discounted amount of
estimated future cash flows expected to be received. To
determine fair value, expected cash flows are discounted
Loans received. The fair value of other fixed interest-bearing
borrowed funds is based on discounted cash flows using inter-
est rates for instruments with similar maturity and in similar
currency. The lending rates are equal to the market rates.
To present information on the fair value hierarchy of financial
instruments as required by IFRS 13 Fair Value Measurement,
the management of the Group assigns the above financial
assets and liabilities as at 31 December 2019 and 31 Decem-
ber 2018, excluding cash and cash equivalents (Level 1 = GBP
640,871 at 31 December 2020 and GBP 1,582,751 at 31 December
2019) to Level 3 of the fair value hierarchy of inputs.
24. Reconciliation of Classes of Financial Instruments with
Measurement Categories
In accordance with IFRS 9 "Financial Instruments", the
Group classifies its financial assets and liabilities into
the following categories: (a) financial assets at fair value
through profit or loss; (b) financial assets at fair value
through other comprehensive income; and (c) financial
assets at amortised cost.
At the same time, in accordance with the requirements
of IFRS 7 "Financial Instruments: Disclosures", the Group
discloses various classes of financial instruments.
As at 31 December 2020 and 31 December 2019, all finan-
cial assets and liabilities of the Group are classified as
financial assets and liabilities measured at amortised
cost.
25. Related Party Transactions
For the purposes of these consolidated financial state-
ments, parties are considered to be related if one party
has the ability to control or exercise significant influence
over the other party in making financial or operational
decisions as defined by IAS 24 Related Party Disclosures.
In considering each possible related party relationship,
attention is directed to the economic substance of the
relationship, not merely the legal form.
In the normal course of business, the Group enters into
transactions with its sole participant and directors. These
transactions include settlements, payment of remunera-
tion to employees and loan draw downs. According to the
Group’s policy, the terms of related party transactions
are equivalent to those prevailing in arm’s length trans-
actions.
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87
The outstanding balances at the year end and liability transactions with related parties for 2019 are as follows:
Details of net assets acquired and the deemed cost of the listing were as follows:
Transactions with party under common ultimate control
Loans received (balance)
2020
735,646
2019
742,603
No interest was accrued in 2020 and 2019 (see Note 9 Loans received).
As at 31 December 2020 and at 31 December 2019, the balance on loans received represents the obligation to pay
interest on the loan, which was forgiven In 2018.
Transactions with ultimate beneficiary
Loan to beneficiary
Loan offset
Services rendered
Transactions with parent company
Loan issued
Interest income
Total balance as at 31 December, 2020
2020
(55,559)
55,559
-
2020
45,411
334
45,745
2019
-
-
206,718
2019
-
-
-
For the year ended 31 December 2020, the total remu-
neration of key management personnel of the Subsidiary
was GBP 274,281, including social insurance contributions
of GBP 44,106 (2019: GBP 267,128, including social insur-
ance contributions of GBP 39,765). The Group does not
provide key management personnel with post-employ-
ment and employment termination benefits. The remu-
neration of the Board of Directors of the Group for the
year 2020 was as follows:
Below is the summary of remuneration for each Director
for 2020:
Malcolm Groat
Siro Donato Cicconi
Vladimir Golovko
Simon James Retter
Paul James Auger
Salary, £, for the year
2020
Bonus for the year
2020
Shares held
Stock options
25,000
100,000
124,361
60,000
20,000
-
35,000
3,500
21,000
-
0
320,000,000
0
3,600,000
0
2,150,000
10,750,000
8,600,000
6,450,000
2,000,000
The social insurance contributions, paid by the Company
for the year 2020 on remuneration, was £17,388.
Out of pocket expenses totalling £78,055 were incurred
by Siro Donato Cicconi in 2019 and as at 31 December
2020 £48,055 remained payable (as at 31 December 2019:
£78,055).
26. Business combination
On 19 September 2019 Zaim Credit Systems plc (Parent
Company) became the legal parent of Zaim Express LLC
(Subsidiary) by way of reverse acquisition. The cost of
the acquisition is deemed to have been incurred by Zaim
Express LLC, the legal subsidiary in the form of equity in-
struments issued to the owners of the legal parent. This
acquisition has been accounted for as a reverse acquisi-
tion as described in Note 3, Basis of Preparation.
The fair values of the shares in Zaim Express LLC have
been determined from the admission price of the Zaim
Credit Systems plc shares on re-admission to trading
on the LSE for 2.5 pence per share. The value of the
consideration shares was £8,000,000. The fair value of
the notional number of equity instruments that the legal
subsidiary would have had to have issued to the legal
parent to give the owners of the legal parent the same
percentage ownership in the combined entity is 1.84 per
cent of the market value of the shares after issues, being
£150,000. The difference between the notional consider-
ation paid by Zaim Credit Systems plc for Zaim Express
LLC and the Zaim Credit Systems plc net assets acquired
of £nil has been charged to the Consolidated Statement
of Comprehensive Income as a deemed cost of listing
amounting to £150,000 with a corresponding entry to the
reverse acquisition reserve.
Consideration effectively received
Less net asset required:
Cash and cash equivalents
Debtors and prepayments
Current liabilities
Total net asset required:
Deemed cost of listing
£
150,000
52,055
11,982
(64,037)
-
150,000
The terms of the share purchase agreement between the
Company and Zaim Express LLC were as follows: there
are certain circumstances under which deferred contin-
gent consideration might become payable. Should the
Company record a monthly EBITDA figure in accordance
with IFRS of £200k per month for a continuous period
of four months and there be no reasonable expectation
that this should fall below this level for a further period
of six months then a further 16,000,000 new ordinary
shares in the Company shall become payable. Addition-
al consideration of 16,000,000 shares over and above
that already mentioned shall become payable should
the Company record a monthly EBITDA figure of £350k
per calendar month with the same continuous period
clause as noted above. At the IPO price per share these
deferred contingent considerations would have a value
of £400k each for a combined value of £800k. It has been
considered by the Directors at this time that, in light of
the COVID-19 pandemic it remains difficult to predict if
and when this might occur. This combined with the cur-
rent low probability of these milestones being met in the
current environment, meant that no fair value has been
calculated for such deferred considerations.
Under the terms of the share purchase agreement
between the Com pany and Zaim Express LLC (Subsidiary)
there are certain circumstances under which deferred
contingent consideration might become payable. Should
the Company record a monthly EBITDA figure in accord-
ance with IFRS of £200k per month for a continuous
period of four months and there be no reasonable
expectation that this should fall below this level for a fur-
ther period of six months then a further 16,000,000 new
ordinary shares in the Company shall become payable.
Addition al consideration of 16,000,000 over and above
that already mentioned shall become payable should
the Company record a monthly EBITDA figure of £350k
per calendar month with the same continuous period
clause as noted above. At the IPO price per share these
deferred contingent considerations would have a value
of £400k each for a combined £800k in value. It has been
considered by the Directors that given the improvement
in outlook for the business that this additional consider-
ation is likely to become payable in the near future and
therefore a reserve of shares to be issued has been rec-
ognised and associated increase in carrying value of the
investment in Zaim Express LLC (Subsidiary) as a result of
this consideration.
27. Auditor’s remuneration
Audit
Fees payable to the company’s auditor for the audit of the annual parent
company and consolidated accounts
Fees payable to the company’s auditor for other services provided to the
company and its subsidiaries
The audit of the company’s subsidiaries under legislative requirements
Total audit
28. Events after the Reporting Period
31.12.20
£
40,000
31.12.19
£
40,000
40,000
40,000
Currently the Group does not consider the impact of
COVID-19 to be significant to the business going forward.
unsecured loan of RUB 50M for a period until September
2022 with an interest rate of 15% per annum.
On 6th April 2021, Zaim Express LLC, the Groups wholly
owned Subsidiary, entered into an agreement for an
There are not considered to be any other events after
the reporting date.
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5
CORPORATE
INFORMATION
& GLOSSARY
Corporate Information
Glossary
ISIN: GB00BK5T9G03
SEDOL: BK5T9G0
TIDM: ZAIM
Registered Office:
10 Orange Street
London
United Kingdom
WC2H 7DQ
Principal Place of Business/ Operating
address:
Room No.1 -12, Structure 7
Trekhgorny Lane
Moscow
Russia
123022
Financial Adviser:
Beaumont Cornish Limited
Building 3
566 Chiswick High Road.
London W4 5YA
Company’s Auditors:
Shipleys LLP
10 Orange Street
Haymarket
London
WC2H 7DQ
Registrar:
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
Legal advisers to the Company as to English
law:
Hill Dickinson LLP
The Broadgate Tower
20 Primrose Street
London
EC2A 2EW
an automated teller machine is an electronic telecommunications device that enables customers of financial
ATM
institutions to perform financial transactions, such as cash withdrawals, deposits, funds transfers, or account infor-
mation inquiries, at any time and without the need for direct interaction with bank staff.
CBR
Central Bank of Russian Federation
“Default” means within the guidelines of the Company any loan with no payments to cover either principal or interest
amount for over 90 days after the maturity date.
“Default Rate” means the share of loans with no payments for over 90 days after the maturity day in the amount fund-
ed for the same period.
“Delinquencies” means within the guidelines of the Company any borrower who is late in the repayment of their loan
ECL
expected credit loss
IFRS
International Financial Reporting Standards as adopted by the European Union
“Independent Non-Executive Director” means the non-executive directors of the Board from time to time considered
by the Board to be independent for the purposes of the UK Corporate Governance Code
MAR
the Market Abuse Regulation (EU) No. 596 (2014) of the European Parliament and of the Council;
Legal advisers to the Company as to Russian
law:
MCC microcredit company
MCO microcredit organization
Ingvarr Advisory and Trust LLC
Rochdelskaya Street, 20
Moscow
Russia
123022
“Microfinance Law” Federal Law No. 151-FZ of July 2, 2010 on Microfinance Activity and Microfinance Organizations,
effective January 2011;
MFC
microfinance company
MFI
a microfinance institution
“NA Loan” means the loan agreement dated 17 May 2019 between Zaim and LLC NOAH ARK 500 pursuant to which a
short term loan of 30,000,000.00 Russian Roubles was advanced to Zaim
Legal advisers to the Company as to
Luxembourg Law:
POS Terminal
retail locations
a point of sale terminal (POS terminal) is an electronic device used to process card payments at
Bonn & Schmitt Avocats
148, Avenue de la Faïencerie
L-1511 Luxembourg
QIWI
QIWI plc including its banking subsidiary, Qiwi Bank JSC
UIAS
the Russian Unified Identification and Authentication System
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