Capricorn : 2023 Capricorn_Governance_Report

Governance

Report

2023

Table of contents

About this governance report	1
Message from the Chairperson	3
Governance overview and approach	5
Our governance system	5
Our King IV™ journey	6
The role of the board	7
Board member profiles	8
Effective governance structures and practices	12
Board access to independent advice	14
Our stakeholders and how we engage them	20

About this governance report

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About this governance report

This is our third standalone governance report ("the report") for Capricorn Group Ltd ("the Group" or "Capricorn Group").

The report reflects our governance approach and application of the principles contained in the King IV Report on Corporate Governance™ for South Africa, 2016 ("King IV™") . It also adheres to reporting requirements related to:

• The Namibian Companies Act, 28 of 2004 ("Companies Act of Namibia")
• The Namibian Stock Exchange ("NSX") Listing Requirements
• The Namibian Banking Institutions Act, 2 of 1998
• The Botswana Banking Act, 13 of 1995

We focus on the way the board of directors ("board") contributed to the Group delivering on its purpose and ensured that the Group continued to create value for the financial year from 1 July 2022

to 30 June 2023 ("the year"). The report is aimed primarily at providers of financial capital.

The entities that constitute the Group are set out in the integrated annual report.

The governance report forms part of a suite of reports that are referenced throughout this report:

• Integrated annual report with summarised annual financial statements
• Annual financial statements
• Risk report
• King IV™ index

We use King IV™ icons throughout the report to indicate

0 evidence of the application of specific principles. Further disclosures are covered in the other elements of the reporting suite.

This report was compiled with input from the executive leadership team, and finally approved by the board on 12 September 2023. The board acknowledges its responsibility to ensure the integrity of the report, and the members applied their collective minds during the preparation and final approval of the report.

Additional governance information is available online at www.capricorn.com.na. For more information or feedback on this report or any other elements listed above, contact

Hellmut von Ludwiger on [e-mail] or [phone].

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Principle 1: The governing body should lead ethically and effectively.

Principle 2: The governing body should govern the ethics of the organisation in a way that supports the establishment of an ethical culture.

Principle 3: The governing body should ensure that the organisation is and is seen to be a responsible corporate citizen.

Principle 4: The governing body should appreciate that the organisation's core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process.

Principle 5: The governing body should ensure that reports issued by the organisation enable stakeholders to make informed assessments of the organisation's performance, and its short, medium and long-term prospects.

Principle 6: The governing body should serve as the focal point and custodian of corporate governance in

the organisation.

Principle 7: The governing body should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively.

Principle 8: The governing body should ensure that its arrangements for delegation within its own structures promote independent judgement and assist with balance of power and the effective discharge of its duties.

Principle 9: The governing body should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness.

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Principle 10: The governing body should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority

and responsibilities.

Principle 11: The governing body should govern risk in a way that supports the organisation in setting and achieving its strategic objectives.

Principle 12: The governing body should govern technology and information in a way that supports the organisation setting and achieving its strategic objectives.

Principle 13: The governing body should govern compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the organisation being ethical and a good corporate citizen.

Principle 14: The governing body should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term.

Principle 15: The governing body should ensure that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision-making and of

the organisation's external reports.

Principle 16: In the execution of its governance role and responsibilities, the governing body should adopt a stakeholder-inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organisation over time.

Principle 17: The governing body of an institutional investor organisation should ensure that responsible investment is practised by the organisation to promote good governance and the creation of value by the companies in which it invests.

1 Copyright and trademarks are owned by the Institute of Directors in South Africa NPC and all of its rights are reserved.

Governance Report 2023

2	Message from the chairperson

Due to our collective agility and resilience, the Group has effectively navigated a difficult operating environment."

Governance Report 2023

Message from the chairperson

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Message from the chairperson

The Capricorn Group has strong values and a purpose-driven approach. In all board discussions, we consider the Group's purpose: to improve lives through leadership in financial services by being Connectors of Positive Change.

We are proud to present our governance report for 2023. This report is part of our annual reporting suite, which demonstrates our continued dedication to transparent reporting and disclosure. As always, we are open to engaging with our stakeholders to better understand and meet their information needs.

A strong performance for 2023

Despite challenging operating conditions, 2023 was a successful year for Capricorn Group with a solid financial performance and continued execution against strategy. While COVID-19 hindered our performance in 2022, economic recovery was clearly evident across Namibia and Botswana in the current year. Our revenue now exceeds pre-pandemic levels, indicating that we have moved beyond the recovery phase and are now in the growth phase.

Our profit after tax increased by 28.7% to N$1.47 billion

(2022: N$1.15 billion), while our annualised return on equity ("ROE") increased to 17.6%.

While this economic recovery is pleasing, the board is concerned about structural economic challenges in Namibia and Botswana. Some customer segments continue to face financial strains, which can be seen through rising impairments, partly caused by higher interest rates that were raised to bring inflation under control. In Namibia, market liquidity has improved, and the cost of funding has decreased. Botswana operates in a different environment and while the economy is growing faster than that of Nambia, the cost and availability of funding make it a tougher environment for financial services.

In 2023, we completed phase 1 of the #gobeyond programme. The programme achieved its objectives of lowering cost-to-serve while improving the overall customer experience. This year, the Group focuses on redesigning Bank Windhoek and Bank Gaborone's in-branch customer experience and the onboarding journeys for the most common transactional accounts. Here, the aim is to simplify future bank engagements while also improving security through biometrics. The programme, which has delivered results in increased transaction volumes and improved customer satisfaction, has positioned our banks for their next level of growth.

While we have signed off on phase one of #gobeyond, this is just the beginning of our digital transformation journey. The Group, with oversight from the board and Group board IT committee ("GBITC"), is refining what the next steps in this journey will be. This will include leveraging the digital core we have established and exploring new technologies as well as artificial intelligence capabilities. We are confident that our current and future investments in building a strong digital foundation will ultimately lead to the opening of new markets and revenue sources.

Read more about #gobeyond on page 29 of our integrated annual report.

Commemorating the 10th anniversary of our listing on the NSX

In June 2013, Bank Windhoek Holdings listed on the Namibian Stock Exchange ("NSX"), one of the first Namibian banks to make a public offering. Our aim was to create prosperity for Namibians, contribute to the nation's economic growth and unlock value for our employees. As a publicly traded company, we have enabled our employees to share in our success through share trading and investment returns. This created a strong sense of accountability and ownership among employees.

Over the past decade, we have enjoyed the reputational benefits of being a listed business. These benefits include an elevated profile in the media and among the public. Today, we are now well regarded as a trusted, transparent and conscientious corporate citizen. In the ten years after we listed, we have distributed N$3 billion in dividends to shareholders, almost all of whom are Namibians.

Read more about our listing in the integrated annual report on page 3.

Governance in 2023

Capricorn Group has always been well-governed. This strong corporate governance and prudent management provided a solid foundation for consistent growth.

In 2023, the board focused on guiding the group through a difficult macroeconomic environment, assessing progress on the Group's strategy and addressing reputational matters, including a heightened focus on sustainability. Capricorn Group is fortunate to have a stable board, and there were no changes to the board or its committees in 2023. Our annual board evaluation confirmed that our terms of reference are relevant, with no gaps identified. In addition, our board packs and agendas address the major issues and are well executed.

We explain our approach to recruitment and board composition on page 13.

In 2023, we continued to build on our sustainability efforts. At the Board strategy day held in March 2023, we reviewed the Group's strategy and expanded the strategy from three strategic choices to five. The first additional choice relates to an integrated leadership approach across the Group. Importantly, we added sustainability as a new strategic choice. This decision builds on years of board and management focus on sustainability.

Read more about sustainability as a strategic choice on page 36 of our integrated annual report.

Governance Report 2023