* These notes were issued at the level of our subsidiaries for the issue of structured products purposes.

(i) New measurement category of the Group’s financial assets and financial liabilities under IFRS 9

The following table shows the original categories in accordance with IAS 39 and the new measurement categories under IFRS 9 for the Group’s financial assets and liabilities as at date of transition, 01 July 2018.

(ii) Reconciliation of the carrying amounts under IAS 39 to the carrying amounts under IFRS 9 at 01 July 2018

1. Debt instruments previously at amortised cost but which failed the Solely Payments of Principal and Interest (SPPI) test

The Group holds a portfolio of debt instruments that failed the SPPI requirement for amortised cost classification under IFRS 9.This portfolio is bundled with a credit derivative that is linked to the credit risk of a third party.This reference to credit risk of a third party introduces terms that can change the timing or amount of cash flows that is inconsistent with the SPPI requirements. As a result these instruments which amounted to Rs1.0 bn were reclassified to FVPL at date of initial application.

2. Securities within the liquidity portfolio

After assessing its business model for securities within the Group’s liquidity portfolio, which were mostly to collect the contractual cash flows and sell, the Group identified certain securities which are managed separately and for which the past practice has been to hold to collect cash flows. Consequently, the Group assessed the appropriate business model for this group of securities is held to collect. These securities which amounted to MUR 205.0m, and which were previously classified as available-for-sale were classified as amortised cost from date of initial application.The remainder of the Group’s liquidity portfolio is held to collect contractual cash flows and sell.

3. Designation of equity instruments at fair value through other comprehensive income (FVOCI)

The Group has elected to irrevocably designate strategic investments at FVOCI as permitted under IFRS 9. These securities were previously classified as available-for-sale.The changes in the fair value of such securities will no longer be reclassified to profit or loss when they are disposed of.

4. Reclassification from retired categories with no change in measurement

In addition to the above, the debt instruments have been reclassified to new categories under IFRS 9, as their previous categories under IAS 39 were retired
with no changes to their measurement basis:

(i) Those previously classified as available-for-sale are now classified as fair value through other comprehensive income
(ii) Those previously classified as held-to-maturity and now classified at amortised cost

(a) Stated capital

Fully paid ordinary shares carry one vote per share and the right to dividend.
The shares have no par value and rank ‘pari passu’ in all respects with the existing ordinary shares of the Company.

(b) Reserves

(i) Capital reserve

The capital reserve represents the cumulative net change in:

(a) the fair value of investment securities until the securities are derecognised or impaired.
(b) revaluation surplus on land and factory buildings where applicable, until it is derecognised.

(ii) Translation reserve

The translation reserve represents all foreign currency differences arising from the translation of the results and financial position of foreign operations.

(iii) Statutory reserve

Statutory reserve represents accumulated transfers from retained earnings in accordance with relevant local banking legislations.These reserves are not distributable.

(iv) General banking reserve

The Group makes an appropriation to a General banking reserve for unforeseen risks and future losses.

*The Mauritius Commercial Bank Limited received income tax assessments relating to financial years ended 30 June 2007 to 30 June 2015 against which the Bank has objected. The basis of the assessment raised by the Mauritius Revenue Authority (“MRA”) were around a number of areas and during the year, an agreement was reached between the two parties for the income tax assessments relating to financial years ended 30 June 2007 to 30 June 2014. In addition, the Bank received several assessments under the Value Added Tax Act for the periods beginning April 2006 to December 2015 against which the Bank also objected. On the basis of the agreement reached on income tax assessments and ongoing discussions held with the MRA, a provision has been made based on anestimate of the likely charge for the remaining periods. The Bank is of the opinion that the likelihood of incurring additional payment to the MRA beyond the amount provided is not probable for thoseassessments still in front of the Assessment Review Committee. As a result, the maximum liability that could arise from these assessments that have not been provided for amounted to Rs 89.7 million.

(a) Salaries and human resource costs

(b) Other non-interest expense

(c) Share-based payments

During FY 2014, the Group proposed to all employees a Group Employee Share Option Scheme (GESOS).

The Board of Directors has the authority to issue up to 5 million shares to the employees. In October 2018, a further offer of 684,428 options was made on similar terms.

The options outstanding at 30 June 2019 under GESOS have an exercise price in the range of Rs 244.00 to Rs 272.00 and a weighted average contractual life of 3½ months.

The weighted average share price at the date the share options were exercised under GESOS during FY 18/19 was Rs 277.03 (2018:Rs 274.95).
The fair value of services in return for share options granted is based on the fair value of the share options granted measured by the average market price of the share of the last three months, as may be adjusted by the Board of Directors of MCB Group Limited. The fair value at measurement date is Rs 268.00 (2018:Rs 273.50).