Educom 2018 Annual report for Client Educom Co-operative Credit Union by Msquared Creative Studios

REACHING HIGHER. GOING FURTHER.

ANNUAL REPORT 2018

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

MISSION To improve the quality of life of our members and their families, through the provision of personalized financial solutions and advice.

VISION EduCom Co-operative Credit Union is a member-centric, financially-sound and technologically-enhanced employer of choice; and is the top Credit Union in Jamaica in member value, compliance and satisfaction.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

iii

Credit Union Prayer

Prayer of St. Francis of Assisi Lord, make me an instrument of thy peace; Where there is hatred, let me sow love; Where there is injury, pardon; Where there is doubt, faith; Where there is despair, hope; Where there is darkness, light; And where there is sadness, joy. Oh Divine Master, grant that I may not So much seek to be consoled as to console; To be understood as to understand; To be loved as to love; For it is in giving that we receive; It is pardoning that we are pardoned; And it is in dying that we are born to eternal life.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

MESSAGE FROM THE CEO

CONTENTS Notice of Meeting Agenda President’s Message Chief Executive Officer’s Message Minutes of Previous Annual General Meeting Directors’ Profile Board of Directors’ Report Treasurer’s Report Supervisory Committee’s Report Credit Committee’s Report Nomination Committee’s Report Delegates’ Report Management Team Management and Staff EduCom in the Community Financial Statements Resolution for Rule Change List of Deceased Members

1 2 3-4 5-6 7-16 17-22 23-30 31-35 37-40 41-42 43-44 45-46 47-48 49-53 55-66 67-150 151 152

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

vii

Notice of

MEETING NOTICE IS HEREBY GIVEN that the 4th Annual General Meeting of EduCom Co-operative Credit Union Limited will be held on Saturday, the 4th day of May 2019 at the Kenneth Rattray Conference Room, Jamaica Conference Centre, 14-20 Port Royal Street, Kingston, commencing at 10:00 am. The purpose of the meeting is to examine the operations of the Credit Union for Year 2018 and to pass appropriate Resolutions. Registration will begin at the venue at 8:30 am, however members will be able to register online by visiting the link below: https://www.educomco-op.com/agm

BY ORDER OF THE BOARD

___________________________ Hector Stephenson Secretary

Dated this 6th day of April 2019

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

AGENDA 1. Ascertaining that a quorum is present

e. Nominations Committee

2. Call to Order

f. Delegates to Jamaica Co-operative Credit Union League

3. Opening Prayer 4. Obituaries

10. Election to:

5. Authority to Convene and Notice of Meeting

a. Board of Directors

6. Apologies for Absence

b. Credit Committee

7. Welcome and Opening Remarks

c. Supervisory Committee

8. Minutes of the last Annual General Meeting

11. Resolutions

9. Reports of:

12. Fixing a Maximum Liability

a. Board of Directors

13. Appropriation of Surplus

b. Treasurer & Auditor

14. Any Other Business

c. Credit Committee

15. Termination

d. Supervisory Committee

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Message from

THE PRESIDENT

C. Leopold Nesbeth

President

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

MESSAGE FROM THE PRESIDENT

FELLOW CO-OPERATORS, As the Credit Union concludes its fourth year in business, it is gratifying for me and indeed for the Board of Directors, that the value we seek to achieve for our members is being attained. The Credit Union’s financial performance over the past 12 months has been commendable – all the more encouraging given the challenges of the competitive environment and other economic conditions under which those results were achieved. Such challenges bring out the best in people, and the Board of Directors was proud to see how everyone; our employees, our volunteers, and our partners, all combined to help our members to realize their goals. By being there for our members, we were able to achieve our predetermined targets with pride, and continue to look forward to the future with optimism. We delivered on our revenues and earnings and made significant progress in both assets and membership. The financial performance we achieved in 2018 was the direct result of continuing to put members first, which is at the core of the business strategy led by our Chief Executive Officer, Elvis King, and his team. One risk attendant with attaining any goal or milestone can be complacency. Despite the results in 2018, we are keenly aware that the work has just begun. We are on a continuous journey of improvement and change. The investments we are making are part of a multiyear transformation to enhance our capabilities and continue to improve the member experience we deliver. We are fortunate to have an extremely committed individual leading this transformation and providing indispensable continuity as we seek to develop the next generation of leaders. On your behalf, we thank the CEO and all the staff for delivering the results they promised. As we continue this journey, it will require a delicate balance to control expenses, while investing heavily in technology and other programs that are required in order to produce future results. The Credit Union impressively achieved that balance in 2018. However, going forward the management will be tasked with the responsibility of delivering an improved efficiency ratio, given the major investments that are required to position the Credit Union in the longterm. The leadership team has a full agenda. They also have

the full support of the Board of Directors. We look forward to working closely with them, as collectively we capitalize on new opportunities and ensure that the Credit Union remains well-positioned for the future. In recognition of our responsibilities, the Board is cognizant of the importance of Enterprise Risk Management (ERM) as an integral component of sound management practice and an essential element of good corporate governance. Our role of providing oversight of EduCom’s strategic direction, focused on growth, service excellence and relationship building, in full recognition that a Credit Union-wide approach to risk and compliance is necessary to achieve our vision and mission. In 2018, we approved three policy papers that will seek to embed a culture of risk and compliance within EduCom. The papers targeted Enterprise Risk Management (ERM), Corporate Compliance, and AntiMoney Laundering and Terror Financing (AML/CFT). Our ERM framework aims to clearly identify, measure, monitor, report and control the spectrum of risks to which the Credit Union is exposed. We recognized all the risks involved in managing the Credit Union and continue to work with the management team to mitigate against all categories; financial, credit, operational, human resource, regulatory, strategic and reputational. Though EduCom’s maturity in ERM is emerging, the Board is confident that the improvements in risk management over the next few years will ensure that we achieve the optimal level. We will seek to provide guidance to management as they invest in areas of strategic growth to ensure that the Credit Union operates within our stated risk appetite. We expect to have a moderate, balanced approach that allows us to maintain consistent and sustainable growth, profitability and earnings from our core business, while maintaining high quality staff and ensuring regulatory compliance is attained. We all take great pride in being associated with EduCom, which ranks among Jamaica’s most respected Credit Unions. As we begin this fifth year, we thank all of our shareholders for your continuing confidence in the Credit Union. For myself as the President, and all of us, as your representatives on the board, it is a privilege to serve you, and on your behalf, pledge to continue striving for a secure financial future.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Message from

THE CEO The growing digital demands of consumers are influencing how people purchase saving and credit services. These changes are driving increased urgency for financial service institutions to adopt real-time financial processes that meet demands for convenience and speed. The financial industry is growing quickly with new technology and innovations, pushing it forward into the future. Behind these innovations, career professionals are utilizing their key experiences and skills to keep clients happy, while helping to drive services, products, and other developments to remain relevant and maintain service delivery. Todayâ&#x20AC;&#x2122;s members expect instant service and gratification. We acknowledge that we must transition the Credit Union to satisfy the changing needs of our membership. We are indeed convinced that we have the vision, strategies and initiatives to succeed in this environment and will continue to leverage our human resources and invest in appropriate technology to deliver the best products and services, based on the changing needs of the membership. The investment in our human capital is one that is ongoing and will continue to improve. On the technology front, we have embarked on a Business Process Review that will set the stage in guiding us toward identifying the operational inefficiencies and ultimately point us to a new banking software that will provide the basis on which we can serve you even better. In an environment that remains challenging for the sector, we have recognized the need to adapt to the changing needs of our membership, we want to embrace the new technologies and digitalization, as we see this as one of the key elements of survival, growth and prosperity. The opportunities of digitalization, above all, to exploit the power of data to reconnect with our members is exciting. Additionally, this transformation is now crucial to protect sustainability. Significant investment in technology is therefore on the horizon.

2018 was another year with its fair share of challenges but we were also able to take advantage of the opportunities that were available to us. It was a year of unprecedented reduction in interest rates, with rates on 90 Day T-Bill starting the year at 4% and closing at 2.05%, reflecting a reduction of almost 50%. We closed the year with a surplus of $126M, a 9.6% increase over that of 2017. The performance of our income statement was due mainly to an increase in our non-interest income which grew by 9.1% over the previous year. Our capital base increased by 6.5%, to improve our strength, a testament of our stability to a business model built on membersâ&#x20AC;&#x2122; need and our own aversion to risk. Despite an extremely competitive marketplace, our membership retention rate was over 99%, which underscores the quality of service, product offerings and the confidence that you have in our stewardship. Membership grew by 5.5% to further indicate that we are continuously attracting prospects and delivering on expectations. As we execute strategies to remain competitive, improve efficiencies, mitigate against risk and ultimately add value to each memberâ&#x20AC;&#x2122;s life, we maintain that we will live our promise. Serving our members by holding strong to our values, is what we do. In the midst of this period of historic change, we are confident that we will continue to seize on the opportunities these changes bring and help to add value to the lives of our members, while seeking to secure a future full of promise for you all. We thank the Board of Directors for their leadership, the Supervisory Committee for its oversight and the Credit Committee for the commitment demonstrated in its role of assessing and approving loans, along with the advice provided to the membership throughout the year. We applaud the staff for their dedication to the cause and their willingness to go the extra mile for the

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

MESSAGE FROM THE CEO

members, as pronounced in the number of emails we have received, applauding the quality of service being meted out to our members each day. We thank you the membership for choosing EduCom as your financial partner. We are cognizant of the many options that you have, yet you have chosen EduCom to help you with the financial solutions you desire. Our promise to you the members, is the consistent delivery of a delightful experience in a reputable and safe institution, as we strive to understand individual needs and provide strategic solutions to meet those needs.

Thank you for the trust you place in us and for being a member of EduCom.

Elvis King

Chief Executive Officer

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Minutes of Previous ANNUAL GENERAL MEETING MINUTES OF THE 3RD ANNUAL GENERAL MEETING OF THE EDUCOM CO-OPERATIVE CREDIT UNION LIMITED HELD ON SATURDAY, MAY 5, 2018 AT THE KENNETH RATTRAY CONFERENCE ROOM, JAMAICA CONFERENCE CENTRE, KINGSTON. MEMBERS OF THE BOARD PRESENT WERE:

Secretary, Sup. Committee

Mr. Clide Nesbeth

President

Dr. Mark Nicely

1st Vice President

Mr. Frederick Mills

Member, Sup. Committee

Mr. Ruel Nelson

2nd Vice President

Mr. Clive McLean

Member, Sup. Committee

Mr. Hector Stephenson

Secretary

Mr. Andrew Smith

Mr. Hilton Blenman

Treasurer

Member, Sup. Committee

Mr. Charles Oâ&#x20AC;&#x2122;Connor

Director

Ms. Sonia Bennett

Director

Ms. Coleen Lewis

Director

Ms. Stacey-Ann Farquharson

Director

Ms. Valerie Hall-Buckle

Director

Mr. Ian McNaughton

Director

The Chairman invited Dr. Mark Nicely to lead the meeting in the invocation.

Mr. Ian Sutherland

Director

AUTHORITY TO CONVENE AND NOTICE OF MEETING

Mr. Hopeton Newell

Director

Also present were:

Ms. Petandra Timoll

Ms. Deloris Mollison

Secretary, Credit Committee

Ms. Sandra Smith-Dockery

Member, Credit Committee

Mr. Carlton Stewart

Member, Credit Committee

Ms. Cheryl Daley

Chairman, Sup. Committee

ASCERTAINMENT OF QUORUM The Chairman reported that the Accreditation Committee advised that there were 205 persons registered, and as such the meeting was properly constituted. CALL TO ORDER The meeting was called to order at 10:15 a.m. by the President, Mr. Clide Nesbeth presiding as Chairman. OPENING PRAYER

The Secretary, Mr. Hector Stephenson read the authority to convene the meeting that was received from the Registrar of Co-operatives and Friendly Societies. He then proceeded to read the notice convening the meeting, which was to be found on page 1 of the Annual Report. APOLOGIES FOR ABSENCE Apologies for absence were tendered on behalf of the following persons: Winston Fletcher (President, Jamaica Co-operative Credit Union League Group), Steviel Steer, Joan Henry, Joshua Henry, Elva Richards, Francina Thomas, Pauline

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

MINUTES OF PREVIOUS ANNUAL GENERAL MEETING

King, Glenville Henry, Olive Maragh, Oral Senior and Debbie Francis. Apologies were also tendered on behalf of the following volunteers: Ms. Janice Green, Mr. Clayton McEwan and Ms. Jennifer Ricketts-Hall who were unable to attend. OBITUARIES The Secretary, Mr. Hector Stephenson directed the meeting’s attention to the list of fellow co-operators of the Credit Union who had passed, which was to be found at the back of the Annual Report. The Secretary mentioned former Director Kenry Jackson, who gave committed and reliable service to the Credit Union and passed on in 2017. Other members who had passed during the year were also noted. He then invited the meeting to observe a minute’s silence as a mark of respect. The Secretary reminded the meeting to observe the parliamentary procedures and invited full participation in the deliberations.

the Jamaican dollar and low interest rates. In terms of challenges, he cited increased competition and an increase in the demand for loans by our members. According to the President, the challenges forced the leadership to utilize the resources of the Credit Union to take advantage of the opportunities, as the Credit Union sought to overcome the issues that it faced. A significant part of the year’s activity involved the onboarding of St. Catherine Co-operative as it merged with the EduCom family. MINUTES OF THE 2ND ANNUAL GENERAL MEETING The Minutes of the 2nd Annual General Meeting held on April 29, 2017 having been circulated, was taken as read on a motion by Ms. Petandra Timoll, duly seconded by Ms. Tanya Cookhorne and carried. The Minutes was confirmed on a motion by Ms. Casita Beckford, duly seconded by Ms. Norma-Lee Lewis and carried. AMENDMENTS TO THE MINUTES

WELCOME AND OPENING REMARKS

The following corrections were highlighted:

The Chairman extended a warm welcome to those present at the third Annual General Meeting of the Educators and Community Co-operative Credit Union (EduCom). He acknowledged the presence of the Board Members, Mr. Elvis King (Chief Executive Officer), members of the management team and staff, members of the Supervisory Committee, members of the Credit Committee, former directors and volunteers of AAMM, UWI Mona and St. Catherine Credit Unions.

Page 8, column 1, paragraph 5, the names Mr. Charles O’Connor and Ms. Janice Green are to be added to the list of former Directors from St. Catherine Co-operative Credit Union who joined the EduCom Board on January 1, 2017.

Continuing, the Chairman proceeded to introduce the specially invited guests as follows: Ms. Lavern Eccleston, Floyd Ebanks and Karen Lyttle (Department of Co-operatives and Friendly Societies), Mr. Robert Kerr and Ms. Katrina D’Aguilar (JCCUL Group), Mr. Marco Williams (CUNA Caribbean Insurance Jamaica), Mr. Ray Howell (President, TIP Friendly Societies and JTA Credit Union), Mr. Ken Wilson and Ms. Jennifer Hibbert (Auditors from BDO), Ms. Georgia Waugh-Richards and Ms. Charmaine Monteith (President and General Secretary respectively from JTA). The Chairman remarked that the Credit Union operated in an environment that was filled with challenges and opportunities. He pointed to positive macro-economic indicators including low inflation, the revaluation of

CONFIRMATION OF THE MINUTES The Minutes was confirmed on a motion by Mr. Derrick Brown, duly seconded by Ms. Nettie Leachman and carried. MATTERS ARISING EduHome Loan Mr. Kenneth Grant sought an update on the EduHome Loan arrangement between EduCom and the National Housing Trust (NHT). The Chief Executive Officer, Mr. Elvis King confirmed that EduCom is a participant in the NHT Home Loan arrangement. The product, EduHome Loan, was designed under the NHT’s Housing Microfinance Programme. NHT contributors are granted access to low priced funds for as low as 6% per annum. This programme is geared towards any home related purpose.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Minutes of Previous ANNUAL GENERAL MEETING Continued Closure of Lluidas Vale Branch Update Mr. Grant also sought an update on the closure of the Lluidas Vale Branch. He was informed that a special line was assigned for the Lluidas Vale members at the Linstead Branch to transact business, and so far, things were flowing smoothly. REVIEW OF REPORTS BOARD OF DIRECTORS’ REPORT The Chairman presented the above-mentioned report and highlighted the following: Legislation - The Credit Union continues its preparation ahead of Bank of Jamaica (BoJ) becoming the regulatory body for Credit Unions. Credit Union Regulations which were initially being drafted to guide the Movement will now be established as the “Bank of Jamaica (Credit Union) Act” instead. This has caused a delay in the legislation, but the Credit Union continues its preparation ahead of this important change in our regulators. He implored the membership to be mindful of the additional requirements and responsibilities of a BoJ regulated Credit Union, and to be receptive of the changes that were being adopted in order to be compliant. International Financial Reporting Standard (IFRS) 9 - The International Accounting Standard Board, IASB, effected the International Financial Reporting Standard statement number 9 (IFRS 9), which became effective on January 1, 2018 and replaced the previous standard, IAS 39. The new Standard requires a forward-looking loan loss provisioning, referred to as expected credit loss (ECL), for all loans and other debt instruments maturing on, or after January 1, 2019. The Standard also requires the implementation of a risk rating model which applies risk scores to all loans and debt instruments from their date of origination in addition to loans written on or after January 1, 2018. EduCom was in an advanced stage of adapting this mandatory standard in the Credit Union.

The Chairman was particularly pleased to report that 2017 was another successful year for the Credit Union in its key performance indicators. The Credit Union experienced growth in the areas of assets, surplus and membership while reducing delinquency levels and increasing member satisfaction. Despite the competitive nature of the financial landscape, the Credit Union performed well organically, reflecting growth of 13.9% in loans, 7.7% in assets and 11% in savings. This impressive organic growth reflected the success of the Credit Union’s continued emphasis on performance excellence. EduCom closed the year with total assets of $8.308B, an increase of 42.4% over 2016’s performance. The major portion of the increase was attributable to the merger of St. Catherine Co-operative into its operations. Delinquency fell to 2.5% from the previous year’s 3.7%, representing a reduction of 31.9%. Operating Income for the period under review, closed at $886.5M, a growth of 40% over the performance of 2016. The inclusion of SCCU contributed substantially to this growth. OPERATIONS The Credit Union, in its effort at maintaining emphasis on member service excellence, continued to expand the use of modern banking and other technology in satisfying the needs of our members. Based on the feedback received, the Credit Union has: • Embarked on an enterprise-wide service excellence program geared at improving every facet of the service delivery. • Increased loan facilities at competitive rates in order to satisfy members current borrowing needs. • Provided a spacious office at the Sovereign Village Plaza, Portmore Pines in St. Catherine and is working on other locations. • Developed a platform for, and increased the use of Online banking in its service delivery. • Provided competitive interest rates on savings.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

MINUTES OF PREVIOUS ANNUAL GENERAL MEETING

MARKETING AND PROMOTION The (strategic focus of the) marketing department continued its 2017 emphasis on promoting the EduCom brand to increase awareness. The initiatives included several radio and television interviews, supported by a radio advertising campaign backed up by the use of social media. The President said that the Credit Union would continue its marketing effort, and that the focus would be increasingly on relationship building and target marketing. The team would be identifying specific groups in the bond and focusing its sales effort towards these persons. The current range of products, should allow members to utilize more of EduCom’s services and as a result, the marketing thrust would also be geared at increasing the share of each member’s wallet. STRATEGIC OBJECTIVES EduCom will continue to grow organically at an average of 10% per annum in the key performance areas. This performance is expected to be enhanced by taking advantage of opportunities for inorganic growth resulting from the trend in mergers caused by the anticipated assumption of regulatory control by the BOJ. Additionally, the operational components of the plan revolve around five themes, namely; 1. Financial Health and Sustainability. 2. Membership Growth, Satisfaction and Welfare. 3. Maintaining Effective Governance and Enterprise Risk Management Framework. 4. Human Capital Development and Cultural Alignment. 5. Leveraging technology to create competitive advantage. The Chairman said that the Credit Union has some issues that it continues to face into 2018 but assured the meeting that the Board and Management is proceeding to work assiduously at correcting the issues. QUERIES FROM THE BOARD REPORT a. International Financial Reporting Standard 9 (IFRS 9) Mr. Kenneth Grant enquired of the Chairman the treatment of unsecured loans and the impact IFRS 9 would have on the administration of unsecured loans.

Mr. Elvis King explained that the Credit Union would have to make 100% provision for the unsecured loans. He further stated that the Credit Union would be more diligent when assessing loans to members and be more rigid in taking on risks. b. Adjustment in Interest Rates on Savings Products A member noted that EduCom offered its savings products at a higher interest rate but upon maturity the interest rate was reduced. Mr. Elvis King advised that the Credit Union endeavours to give the best return on funds invested. However, with the market rates trending down, that also affected the Credit Union’s earnings which may result in the downward adjustment in interest rates paid to members. c. Spanish Town Branch Upgrade Mr. Christopher Hall reported that the Spanish Town Branch’s system needs to be upgraded; and noted the branch space was too small. He commented on the length of time it took to transact business. The Chairman stated that the Board and Management are mindful of the situation at the branch and efforts would be made for significant improvement in that branch. d. Privacy Laws Members reported that they were asked to provide personal information on a data sheet at the registration booth prior to the commencement of the Annual General Meeting. They were of the view that the questions being asked were invading members’ privacy. Especially as, this was happening in an age where cybercrime is prevalent. A member asked whether the data collected was secure and whether someone would be policing it. Mr. Ian Sutherland, Director advised that the Credit Union would put in place systems that were fully secured and that the systems would be audited.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Minutes of Previous ANNUAL GENERAL MEETING Continued There being no further questions on the Board report, it was adopted on a motion by Mr. Ray Howell, duly seconded by Mr. Kenneth Grant, and unanimously carried. Continuing, the Chairman proceeded to invite the Treasurer, Mr. Hilton Blenman to lead the meeting through the following reports: •

Registrar’s Report

•

Auditor’s Report

•

Treasurer’s Report

REGISTRAR’S REPORT The Registrar’s report was tabled and noted. TREASURER AND AUDITOR’S REPORT The Treasurer proceeded to invite the Auditor from BDO, Mr. Ken Wilson to present their findings of their assessment of the Credit Union’s financial affairs. AUDITOR’S REPORT Mr. Ken Wilson read the Independent Auditor’s report on the Credit Union’s financial affairs for the year ended December 2017. The Treasurer invited a motion for the Auditor’s Report to be adopted. On a motion by Mr. Kenneth Grant, duly seconded by Ms. Sonia Smith and carried, the Auditor’s Report was adopted. TREASURER’S REPORT Mr. Hilton Blenman, Treasurer, reported that EduCom had shown fairly good improvement in terms of its overall financial performance when compared to the inaugural year’s financial outturn. The Credit Union overcame challenges confronted within the difficult economic environment and a very competitive marketplace. Despite all the obstacles that the Credit Union faced in 2017, the organization’s results were very good. He proceeded to summarize the financial performance

for the year 2017 as follows: FINANCIAL PERFORMANCE Surplus - The Credit Union generated a surplus of approximately $115M compared to $89M posted in the corresponding period 2016. The increase in surplus levels for the current year when compared with the previous year was attributed mainly to the increase in the loan portfolio due to the merger with St. Catherine Credit Union and non-interest income. Also, there were direct sales through the use of Business Development Officers and the change in culture in respect to sales processing and sales outlook. Delinquency - Management was successful in its objective to reduce the delinquency rate, through the measures that were implemented to combat the very high delinquency rate of 7.7% experienced in 2015. The Credit Union achieved a delinquency rate of 2.5%, which was below the established benchmark of 5%, and compared favourably to 2017 - 3.6%. Operating Expenses - increased to $669.8M in 2017 from $464.8M in 2016. This reflected a 44.1% increase or $205.0M. The main contributing factors of this increase were the additional personnel and administration costs from a bigger operation with four additional branches and the non-recurrent merger related costs. Total Assets - increased to $8.31B in 2017, an overall increase of $2.47B or 42.4% compared to $5.83B in 2016. Members’ Savings increased by $2.28B or 50.1% to $6.67B compared to $4.39B in 2016. EduCom continued to offer attractive rates on savings products in order to reduce the gap between the total loan portfolio and the total members’ savings. Loans – The loan portfolio increased by $1.94B, closing the year at $6.12B compared to $4.17B recorded in 2016. The loan portfolio contributed 91.3% to Income

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

MINUTES OF PREVIOUS ANNUAL GENERAL MEETING

(2016 - 92.1%). This indicated that the Credit Union

CREDIT COMMITTEE’S REPORT

focused substantially on its core business of granting

The Chairman informed that Mr. Clayton McEwan had tendered an apology for absence.

loans to meet the needs of its members, and a slight shift towards income diversification. Income from Investments in financial markets grew by $26.3M or 59%. This was as a result of the merger, reflecting a fairly stable investment portfolio and low to moderate interest rates on investments. QUERIES FROM THE TREASURER’S REPORT OPERATING EXPENSE

On a motion by Ms. Paulette Coley and seconded by Ms. Patrice Leachman, the Credit Committee’s Report was taken as read. The Chairman proceeded to invite questions on the report, and there being none, the report was adopted on a motion by Ms. Elaine RussellKing, duly seconded by Ms. Carol Lawrence and carried. SUPERVISORY COMMITTEE’S REPORT

a. Mr. Everton Daley observed that the operating expense since the merger had almost doubled. Further, he observed that interest earned on loans was 40% while operating expenses was 44%. He was of the view that the operating efficiency of the Credit Union was actually overheating or there was a diminishing return on interest income as opposed to operating expenses. The Treasurer explained that the interest earned on loans was only one aspect of the matter. The other expense included was that from interest. EduCom, he noted, endeavours to maintain a spread between the interest earned on loans and the interest expense, which was based on the funds available. As such, there was an interest spread between the interest on loans and the interest expense, based on the funds that were used to un-lend to members. Continuing, the Treasurer pointed out that operating expense in 2017 was 66% despite the fact of a merger, compared to 79% the previous year. The Treasurer’s report was accepted on a motion by Ms. Sonia Smith, duly seconded by Ms. Normalee Lewis and unanimously carried.

Continuing, he proceeded to seek a motion for the Credit Committee’s Report to be taken as read.

Continuing, the Chairman proceeded to invite Ms. Cheryl Daley, Chairman of the Supervisory Committee to present the Committee’s Report. On a motion by Mr. Kenneth Grant and seconded by Ms. Patrice Leachman, the Supervisory Committee’s Report was taken as read. There being no questions on the Supervisory Committee’s report, it was accepted on a motion by Mr. Kenneth Grant, duly seconded by Ms. Veronica Richards and carried. REPORT OF DELEGATES TO THE JAMAICA CO-OP. CREDIT UNION LEAGUE Continuing, the Chairman called the attention of the meeting to the Delegates’ Report which was tabled and noted. The Chairman recommended that members took the time to read and digest the report at their convenience. He invited a motion for the adoption of the report. On a motion by Mr. Kenneth Grant and seconded by Mrs. Sonia Smith, the Delegates’ Report was adopted. RESOLUTION The Chairman, at this stage informed the meeting that there was one resolution tabled with respect to the duration of time that members of the executive may sit or remain in office. He further informed that the purpose of the resolution is to extend the period from four (4) years to five (5) years. He invited members to read pages 139 to 140 of the booklet.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Minutes of Previous ANNUAL GENERAL MEETING Continued He proceeded to invite Mr. Hector Stephenson, Secretary, to lead the meeting through the proposed rule change. The proposed rule change was presented as follows:

XIII, Rule 66, and the said Executive Committee shall hold office until their successors are elected, provided that no member of the Executive Committee shall be allowed to serve more than five (5) years.

RATIONALE FOR RULE CHANGE

Mr. Ray Howell was of the view that EduCom is a young organization and had just completed a merger. Further, he was of the view that a four-year period or a five-year period for executive members might be short. As such; he moved a motion that the proposed rule be amended to read six years.

Whereas the Board of Directors is mandated to elect an executive after each Annual General Meeting consisting of President, Treasurer, Secretary, one or more Vice President(s) in accordance with Article VIII, Rule 66 And Whereas the Executive Committee shall hold office until their successors are elected And whereas the current Article IX Rule 37 states that no member of the Executive Committee shall be allowed to serve more than four years And Whereas the period of four years does not allow for effective succession planning and preparation of successors as all Officers could be removed from the Committee at the same time, thereby depleting the experience needed to forward the growth and strategic direction of the Credit Union Be it resolved that the current Article IX Rule 37 be amended to allow for members of the Executive to serve for no more than five years: Current Rule: Article IX Rule 37 The Executive Committee of the Credit Union shall be a President, one or more Vice are elected President(s), a Treasurer and a Secretary, all of whom shall be elected by the Board of Directors in accordance with Article XIII, Rule 66, and the said Executive Committee shall hold office until their successors are elected, provided that no member of the Executive Committee shall be allowed to serve more than four (4) years.

The Proposed Rule amended to read: Proposed Rule: Article IX Rule 37 The Executive Committee of the Credit Union shall be a President, one or more Vice are elected President(s), a Treasurer and a Secretary, all of whom shall be elected by the Board of Directors in accordance with Article XIII, Rule 66, and the said Executive Committee shall hold office until their successors are elected, provided that no member of the Executive Committee shall be allowed to serve more than six (6) years. The motion was seconded by Mr. Michael Brydson and carried. Mr. Hector Stephenson, Secretary, informed that both resolutions would be put to the vote. He invited Ms. Karen Lyttle, from the Department of Co-operatives and Friendly Societies to preside over the elections. The Presiding Officer advised that of the 317 members present, 75% of the vote was required for the resolution to be passed. She proceeded to invite members to vote on the resolutions starting with the counter proposal by a show of hands. The results were as follows: •

Number voted for: 7

Proposed Rule: Article IX Rule 37

•

Number voted against:

170

The Executive Committee of the Credit Union shall be a President, one or more Vice are elected President(s), a Treasurer and a Secretary, all of whom shall be elected by the Board of Directors in accordance with Article

•

Number of abstention:

•

Number of members present at voting:

312

The Presiding Officer announced that the resolution was not passed.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

MINUTES OF PREVIOUS ANNUAL GENERAL MEETING

Continuing, the Presiding Officer invited members to vote on the original resolution by a show of hands and the results were as follows: •

Number voted for 119

•

Number voted against:

• •

Ms. Sonia Bennett would serve for a term of three (3) years. The other proposed members of the Board and their respective tenures were as follows: •

Ms. Janice Green - Three (3) years

•

Mr. Clide Leopold Nesbeth – One (1) year

Number abstention:

•

Mr. Ian Sutherland – Two (2) years

Number of members present at voting:

317

•

Mr. Hector Stephenson – One (1) year

The Presiding Officer, once again, announced that the resolution was not passed as only 37% voted for the resolution and it required 75% of the votes for it to be carried.

•

Mr. Charles O’Connor – Two (2) years

•

Mr. Ruel Nelson – One (1) year

•

Dr. Mark Nicely – Two (2) years

•

Mr. Ian McNaughton – One (1) year

•

Ms. Stacey-Ann Farquharson –Two (2) years

•

Ms. Coleen Lewis – One (1) year

NOMINATING COMMITTEE’S REPORT Ms. Valerie Hall-Buckle, Chairman of the Nominating Committee, presented the Committee’s Report. The report was taken as read on a motion by Ms. Patrice Leung, duly seconded by Ms. Jennifer Anderson and carried. The other members comprising the Nominating Committee were: •

Mr. Michael Brydson, Member

•

Mr. Noel Morgan, Member

Arising from the merger with St. Catherine Cooperative Credit Union Limited (SCCU) in 2017, four (4) of its directors were added to EduCom’s Board, thereby increasing the membership to fifteen (15) for a period of one (1) year. BOARD OF DIRECTORS The following Directors retired at the Annual General Meeting: •

Mr. Hilton Blenman

•

Mr. Hopeton Newell *

•

Mr. Christopher Emanuel

•

Ms. Valerie Hall-Buckle

•

Ms. Sonia Bennett

CREDIT COMMITTEE Members of the Credit Committee retiring were: •

Ms. Jennifer Ricketts-Hall

•

Mr. Clayton McEwan

•

Ms. Sandra Smith-Dockery

The Committee recommended the following persons and they had expressed their willingness to serve: •

Mr. Clayton McEwan and Mrs. Sandra SmithDockery - would serve for another two (2) years.

The other proposed members of the Credit Committee and their respective tenures were as follows: •

Mr. Hopeton Newell – Two (2) years

•

Ms. Deloris Mollison – One (1) year

•

Mr. Carlton Stewart – One (1) year

* It was reported that Mr. Hopeton Newell was promoted from the Supervisory Committee on September 23, 2017 to fill a vacancy which arose from the death of Mr. Kenry Jackson.

The Committee recommended the following persons and they expressed their willingness to serve:

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Minutes of Previous ANNUAL GENERAL MEETING Continued SUPERVISORY COMMITTEE

BOARD OF DIRECTORS

The following members of the Supervisory Committee were all due for retirement:

NAMES

TENURE

•

Ms. Petandra Timoll

Sonia Bennett

3 Years

•

Mr. Andrew Smith **

Janice Green

3 Years

•

Mr. Frederick Mills

Clide Leopold Nesbeth

1 Year

•

Ms. Cheryl Daley

Ian Sutherland

2 Years

•

Mr. Clive McLean

Hector Stephenson

1 Year

* *It was reported the Mr. Andrew Smith was appointed

Charles O’Connor

2 Years

Ruel Nelson

1 Year

Mark Nicely

2 Years

Ian McNaughton

1 Year

Stacey-Ann Farquharson

2 Years

Coleen Lewis

1 Year

to the Supervisory Committee on January 1, 2018 to fill vacancy which arose from Mr. Hopeton Newell’s promotion to the Board of Directors.

The Committee recommended the following persons who had expressed their willingness to serve for a period of (one) 1 year: •

Mr. Frederick Mills

•

Ms. Erica Haughton

•

Ms. Cheryl Daley

•

Mr. Clive McLean

•

Ms. Tasha Manley

CREDIT COMMITTEE

The Nominating Committee Chairman invited a motion for the Committee’s report to be accepted. On a motion by Ms. Michelle Davis, duly seconded by Ms. Kathandra Reid, and carried, the Nominating Committee’s report was accepted.

NAMES

TENURE

Clayton McEwan

2 Years

Sandra Smith-Dockery

2 Years

Hopeton Newell

2 Years

Deloris Mollison

1 Year

Carlton Stewart

1 Year

ELECTIONS / NOMINATIONS Ms. Karen Lyttle from the Department of Co-operatives and Friendly Societies was invited to preside over the elections. Ms. Lyttle sought a motion for the Nominating Committee’s recommendations for persons to serve on the Board of Directors, Credit Committee and Supervisory Committee to be taken en bloc. On a motion by Mr. Everton Jones, duly seconded by Ms. Winsome Haron-Fearon, she declared the newly elected Board Members and Committee Members as follows:

SUPERVISORY COMMITTEE NAMES

TENURE

Frederick Mills

1 Year

Erica Haughton

1 Year

Cheryl Daley

1 Year

Clive McLean

1 Year

Tasha Manley

1 Year

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

MINUTES OF PREVIOUS ANNUAL GENERAL MEETING

DELEGATES TO THE LEAGUE Continuing, Ms. Karen Lyttle sought a motion for authority to be granted to the Board of Directors to elect its Delegates and Alternate Delegates to the Jamaica Co-operative Credit Union League in keeping with the Rules of the Credit Union. This was moved on a motion by Ms. Casita Pinnock, duly seconded by Ms. Una Anderson and carried. FIXING OF MAXIMUM LIABILITY Ms. Karen Lyttle proceeded to seek the meeting’s permission for the fixing of maximum liability. She mentioned that the rule states that the Credit Union can borrow 16 times its capital in the event of a significant emergency. As such, she recommended that the Maximum Liability be set at $12B. This was approved on a motion by Ms. Trudy Ann Barrett, duly seconded by Mr. Lennox Deane and unanimously carried. APPROPRIATION OF SURPLUS The Chairman invited the Treasurer to present the proposed Appropriation of Surplus. The details were as follows: Dividend on Permanent Shares

$25.0M

IFRS 9 Provisioning

$47.8M

Honoraria

$10.0M

Community Outreach Retained Earnings cfwd Total

$3.7M $28.9M $115.4M

On a motion by Mr. Ray Howell and seconded by Mr. Kenneth Grant, the Appropriation of Surplus was unanimously approved.

salary deductions being remitted to the Credit Union, resulting in members’ accounts falling into arrears. This initiative would aid in keeping delinquency at a minimum level. Building Fund Mr. Kenneth Grant enquired of the Chairman the plans being made to put up an accommodation befitting EduCom. He was informed that the number of properties the Credit Union owns have exceeded the non-earning asset ratio based on the PEARLS standards. This was as a result of the mergers with other Credit Unions. The Board will be correcting the situation by disposing of some of the real estate, and the sale proceeds would be placed into a building fund for that purpose. Cessation of Passbooks Ms. Normalee Lewis stated that the issuance of passbooks had become obsolete, and the receipts issued by Tellers faded in a few weeks. It should be mandatory for statements to be sent to members and not members having to visit the office to request a statement. The Chairman advised that the matter would be reviewed and discussed with the Board. TERMINATION There being no other business, the meeting was terminated at 3:53 p.m. on a motion by Ms. Normalee Lewis, and seconded by Mr. Andrew Smith. Confirmed on motion by: ………………………………………….

ANY OTHER BUSINESS

Seconded by:

Advance Loan Payment Mr. Fabian Vassell reported that whenever a member obtained a loan from the Credit Union they are required to pay the first month instalment upfront and sought explanation on the reason for this requirement. The Chief Executive Officer informed that the Credit Union had been battling delinquency and continues to make provisions for delinquency. As such, this requirement was put in place to safeguard against late

………………………………………… Chairman: …………………………………………

Date: ……………………………..

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Board of

DIRECTORS’ PROFILES

CLIDE LEOPOLD NESBETH President

1st Vice President

Clide Leopold Nesbeth is a Management professional who has specialized in the areas of Administration, Sales and Marketing and General Management for over thirty years, twenty five of which have been at the senior management level. A trained teacher, Mr. Nesbeth has over four years experience in the training of students, at the tertiary level, in the above areas of discipline.

Dr. Nicely was the 49th President of the Jamaica Teachers’ Association and has been an educator for over 16 years. He has served at every level of the education system including Board Chairman at the One Way Group of Schools, External Examiner for the Joint Board of Teacher Education, Lecturer at The Mico University College, Northern Caribbean University, Heart Trust/NTA and International College of the Caribbean. He currently serves on the Board of the Teacher Services Commission and is a Director on the Board of EduCom Co-operative Credit Union. In addition, he has worked with the Ministry of Education to impanel several schools across the country and volunteered to assist with training new principals in school management.

After leaving the teaching profession he was employed to SEPROD where he was promoted to the position of Sales and Marketing Manager of Jamaica Detergents Limited. He has also worked as Group Marketing Manager of CMP Industries Ltd, as Marketing Manager of Jamaica Cane Products, as General Manager of CMA CGM Jamaica Limited and as Chief Marketing Officer at Kingston Freeport Terminal Limited. A committed and knowledgeable cooperator, Mr. Nesbeth currently serves as President of EduCom Cooperative Credit Union and as currently the 1st VicePresident of the Jamaica Co-operative Credit Union League Limited (JCCUL). He also serves on a number of other industry related boards and committees. Among his academic and professional qualifications, Mr. Nesbeth holds a Postgraduate Diploma in Education (UWI), a Masters of Commerce Degree in Marketing from the University of Strathclyde, Scotland and is a member of the Chartered Institute of Marketing.

DR. MARK NICELY

Dr. Nicely served as Principal of the Hayes Primary and Junior High School in Clarendon from 2004-2011 and later as Principal of the William Knibb Memorial High School in Trelawny from 2011 – 2015. He is currently the Deputy Secretary General at the Jamaica Teachers’ Association with portfolio responsibility for Member Services and Industrial Relations and is also a Justice of the Peace for the parish of Kingston.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

BOARD OF DIRECTORSâ&#x20AC;&#x2122; PROFILES

STACEY-ANN FARQUHARSON 2nd Vice President Ms. Stacey-Ann Farquharson is presently a Senior Assistant Registrar of the University of the West Indies where she manages its suite of human resource programmes including recruitment and employee development. She currently serves on the EduCom Board of Directors as 2nd Vice President. Ms. Farquharson is an ardent believer in the spirit of volunteerism and has served various organizations including the Jamaica Cancer Society, Dress for Success Jamaica, the National Youth Service and Youth Opportunities Unlimited. Miss Farquharson holds a Bachelor of Laws Degree, a Masters of Science Degree in Governance, a Bachelor of Sciences in Political Science and Law, a Diploma in Human Resource and a Certified Senior Professional in Human Resource Management from the Society for Human Resource Management. She has received professional training in Atlanta, New York, Florida, Trinidad & Tobago, Wisconsin, Washington and Las Vegas, Nevada.

RUEL NELSON Treasurer Mr. Nelson is a Financial Manager of the University of the West Indies with close to 20 years of Finance and Accounting experience. He holds an MBA from the University of the West Indies, Mona School of Business and is a fellow of the Association of Chartered Certified Accountants (FCCA). He is also a fellow of the Institute of Chartered Accountants of Jamaica. Mr. Nelson currently serves in the capacity of Treasurer on the Board of Directors. He has also served as a member of the Supervisory Committee of EduCom Cooperative Credit Union and the Jamaica Co-operative Credit Union League Limited and was a former Chairman of the Supervisory Committee for UWI (Mona) & Community Co-operative Credit Union Limited. He is currently pursuing a Bachelor of Laws degree.

She is currently pursuing her Legal Education Certificate from the Council of Legal Education, Norman Manley Law School and interns at the law firm Robinson, Gentles & Co., Attorneysat-Law. In her spare time, Ms. Farquharson provides professional development consultations through her brainchild, Farquharson.Image.Confidence.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Board of

DIRECTORS’ PROFILES Continued

HECTOR STEPHENSON

SONIA BENNETT

Secretary

Director

Mr. Stephenson began his professional career as a teacher of Integrated Science at St. Georges College in 1983 after completing his studies in Double Option Science at The Mico College (now Mico University College). During his sojourn at St Georges, he served as Grade Supervisor and Dean of Discipline before being awarded The Peter Hans Kolvenbach Scholarship to pursue a Master’s Degree in Secondary School Supervision and Administration at Boston College University in Massachusetts, USA. While at Boston College, he worked as a Graduate Assistant in the School of Education where he supervised undergraduate student-teachers who were seeking to gain professional teaching certification in the state of Massachusetts.

Ms. Sonia Bennett is the Publishing Manager/ Educational Technologist at Carlong Publishers (Caribbean) Limited. Sonia has over 25 years’ experience in the field of education, from classroom teacher of English and Literature, to Principal at the tertiary level, serving as Director/Principal of the Vocational Training Development Institute (VTDI), a tertiary institution funded by the HEART Trust National Training Agency.

After returning to Jamaica in 1989, Mr. Stephenson was named Dean of Students at St. Georges College, before being promoted to the position of Vice-Principal in 1991 and Principal the following year becoming the first Non-Catholic permanently appointed Headmaster of St. Georges College. During his tenure as Headmaster, Mr. Stephenson also completed diplomas in Human Resources Development and Management Studies at the Institute of Management and Production (IMP) and Jamaica Institute Management respectively. Subsequent to joining the staff of the Overseas Examinations Office as Deputy Director, he served as Acting Executive Director before he was appointed Executive Director and Caribbean Examinations Council (CXC) Local Registrar in 2003.

She is a graduate of Pepperdine University in California with a MA in Educational Technology. She holds a BA in Arts and General Studies – Social Sciences with Language and Literature from the University of the West Indies; a Certificate in Teacher Education majoring in English Language, Literature, Social Studies from Mico Teachers’ College (now Mico University College) and a certificate in Theatre Arts from the Jamaica School of Drama. Sonia has also begun work at the doctoral level in Curriculum and Instruction.

Mr. Stephenson has served on several Boards and Committees including the Boards of the Excellence Coalition on Scholastic Aptitude Test; Edwin Allen High School, St. Hugh’s High School and Clan Carthy Primary School. He has been an active member of the Edwin Allen Past Students Association and a Past President of that body. He is currently a Board member and Secretary of EduCom Cooperative Credit Union. He is also a member of the Caribbean Examinations Council (CXC) National Committee, the CXC Final Awards Committee and the Steering Committee of the National Qualifications Framework of Jamaica.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

BOARD OF DIRECTORS’ PROFILES

IAN MCNAUGHTON

COLEEN LEWIS

Director

Mr. McNaughton is the Managing Director of Barita Investments Limited. With an MBA from Nova Southeastern University and a BSc. in Management Studies from the University of the West Indies, Mona Campus, he possesses over 30 years of experience in the areas of Finance, Information Systems and Human Resource Management, garnered at major international manufacturing, sales and distribution entities.

Ms. Coleen Lewis has over 17½ years of legal experience in the areas of Offshore law, Corporate and Commercial Law, Media Law, Intellectual Property Law, Conveyancing and Company Administration. She has worked in law firms across the Caribbean as well as the Legal Department of Jamaica’s biggest and oldest newspaper, The Gleaner Company. She is presently employed to the University of the West Indies at the Faculty of Law as the Deputy Dean, Undergraduate Affairs Teaching and Learning and a lecturer.

He serves as Company Secretary for Barita Investments Limited and is the Chairman of the Jamaica Stock Exchange and a Director of the Jamaica Central Securities Depository. An avid footballer, Mr. McNaughton also sits on the Board of the Harbour View Football Club.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Board of

DIRECTORSâ&#x20AC;&#x2122; PROFILES Continued

IAN SUTHERLAND

JANICE GREEN

Director

Mr. Ian Sutherland is the Manager of Enterprise Applications at the Mona Information Technology Services at the University of the West Indies, Mona Campus. His experience in the field of Computer Science and Information Technology spans over 20 years, including but not limited to the areas of Data Management, Application Development, Reporting Solutions and Process Engineering. He has extensive knowledge of, and training in Oracle, PeopleSoft, SQL Server Reporting Services and SQL Server Reports Builder application solutions.

Mrs. Janice Green is an Occupational Safety and Health Professional and a Human Resource Practitioner employed to the Jamaica National Group.

With a wide appreciation of Management and Information and Communication Technology (ICT) matters, he is capable of being deployed as a single resource for coverage on a range of matters. He has provided consulting services in the areas of process and application production to several organizations including banks, financial institutions, insurance companies and medical facilities. He is committed to ongoing development of his management and technical expertise. He holds a BSc. (Computer Science, Chemistry and Math), a Postgraduate Diploma in Management Studies, a MSc. In Computer Based Management Information Systems from the University of the West Indies, and is also a certified Project Management Professional. Mr. Sutherland currently serves as a Director on the board of EduCom Co-operative Credit Union Limited. He has also served as a member of the Marketing, Policy, ICT and Delinquency Committees. In addition, he is the current chair of the Business Process Review and Optimization Project Committee and serves on the BOJ readiness committee.

She completed her Masters in Occupational Safety Health at the ILO/University of Turin, Italy. Mrs. Green did her undergraduate studies in Human Resources Management at the University of Technology, Jamaica. At the Mona School of Business, University of the West Indies, Jamaica, she completed post graduate studies and attained a Master in Business Administration. Mrs. Green is actively involved in volunteerism. She is the President of the Jamaica Occupational Health and Safety Professionals Association. She currently serves as a Justice of the Peace for the parish of St. Catherine and was a former Board Director for the St. Catherine Cooperative Credit Union. She now serves on the Board of EduCom Cooperative Credit Union and its sub committees. Despite her extremely busy schedule, she is involved in the mentorship programme at the University of Technology. Mrs. Green is a member of the Society for Human Resources Management, the Human Resources Management Association of Jamaica. Mrs. Green is a member of the International Commission on Occupational Health, where she serves on three of the ICOH Scientific Committees â&#x20AC;&#x201C; Accident Prevention, Work Organization and Psychological Factors, and Musculoskeletal Disorders.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

BOARD OF DIRECTORS’ PROFILES

CHARLES O’CONNOR Director Charles O’Connor is the Chief Executive Officer of Charles O’Connor Consulting Network Limited (COCN), a professional services company with emphasis on Business Process Outsourcing, Web Based/Cloud Accounting Solution, Tax Planning and Business Advisory Services. Mr. O’Connor is a fellow of the Institute of Chartered Accountants of Jamaica (ICAJ) and the Association of Chartered Certified Accountants (ACCA) in the UK. He is also a Registered Public Accountant since 2000. He received training in Fixed Income Securities at the New York Institute of Finance, Treasury Control within banks at The Bank of Jamaica in association with Crown Agents-UK, and Project Management with the University of New Orleans. Over the last 25 years, Mr. O’Connor has held Senior Executive positions in both the Public and Private Sectors. He distinguished himself as General Manager of Finance and Planning at the Transport Authority of Jamaica (2006-2010) and Director - Securities Management in the Debt Management Division of the Ministry of Finance and Planning (1998-2001). In 2018, he successfully completed the Insolvency Practioner Course at the Council of Legal Education, Norman Manley Law School, and is now licensed to practice in Jamaica as an Insolvency Trustee. Mr. O’Connor has served on various boards and is currently a member of the Dispute Resolution Tribunal of the Jamaica Consumer Affairs Commission. He is also a member of the Tax Committee of the Institute of Chartered Accountants of Jamaica.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Board of

DIRECTORS’ REPORT TO THE 4TH ANNUAL GENERAL MEETING FOR THE YEAR ENDED DECEMBER 31, 2018. ECONOMIC, LEGISLATIVE AND SOCIAL OVERVIEW The 2018 calendar year ended with the Bank of Jamaica (BOJ) reporting that inflation closed at 2.4%. The inflation rate recorded for the year showed a significant reduction from the 5.2% recorded in the previous year. The Jamaican dollar depreciated against its major trading partner, USA. At the beginning of the year, the Jamaican dollar was trading at J$125.55 to US$1.00, but closed at J$127.79 to represent a 1.8% depreciation over the period.

The graph below depicts some of the key economic variables over the past three years.

Economic Indicators (2016 - 2018) 14 12.9

Rate (%)

10.4

8.7

6 5.2

2.4

2 0 -2

1.4

0.5

1.7

1.2

GDP

Unemployment 2016

2017

Inflation

2018

Source: Bank of Jamaica GDP grew by an estimated 1.2 percent in 2018, up from the 0.5 percent in 2017, but was still lower than the 1.7% projected at the beginning of the year. After three decades of economic growth that has averaged less than 1 percent a year, Jamaica’s economy revived somewhat in 2018. Growth has been impeded by a bloated public sector, high crime and corruption, red tape, weak rule of law, and a high debt-to-GDP ratio. The government’s main policy objectives are public-sector reforms, including wage restraint and budget austerity measures, the merger of publicsector agencies, and a workforce reduction plan, all of which risk igniting social and political opposition. A rise in violent crime has dampened the growth of tourism. Unemployment closed the year at 8.70%, down from the previous year’s 10.4% Source: https://knoema.com/atlas/Jamaica/Real-GDP-growth

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

BOARD OF DIRECTORS’ REPORT

INTEREST RATES

Treasury Bills Rates - January - December 2018 4.5 4 3.5 3 2.5 2 1.5 1 0.5 JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

90 Days T-Bills Rates

The Figure above provides a graphical representation of interest rate over the past year. For the last quarter of the year, the rates began to trend upwards, contrary to the first 3 quarters when the 90 Day T-Bill declined by 57.5%, to a low of 1.7% in September. LEGISLATION We are anticipating that the long-awaited regulations under which the Bank of Jamaica (BOJ) will assume regulatory control of Credit Unions should be passed in 2019. With this legislation, BOJ will have the authority to make decisions that could have significant impact on the Credit Union movement, particularly in the achievement and maintenance of operating standards. In their effort to satisfy new regulatory requirements, we anticipate that Credit Unions will implement changes that will be aimed at further improvement in their internal operations. These measures will serve to strengthen and secure our operations, improve accountability and in so doing, further protect the interest of you, our members. Members are being asked to continue to support the Credit Union as we implement these changes. 2018’s PERFORMANCE The key indicators used to measure the Credit Union’s performance are: savings, loans, total assets, delinquency and operating income. The table below shows our performance in the key performance indicators for the three-year period, 2016 - 2018.

3-Year Comparative Performance Key Performance Indicators

2016 ($)

2017 ($)

2018 ($)

2018’s Growth %

Savings

4.385B

6.669B

7.388B

10.8

Net Loans

4.176B

6.124B

6.700B

9.3

Total Assets

5.834B

8.308B

9.064B

9.1

Delinquency

7.7%

2.5%

3.0%

(20)

$632.7M

$886.5

$895.5M

1.0

Operating Income

The 2018 performance was 100% organic growth as there were no mergers during the year of review. Despite the very competitive nature of the financial landscape, the Credit Union performed very well as recorded in the changes reflected in the fourth column in the table above. This impressive organic growth again reflects the success of our continued emphasis on performance, our dedication to serve you, through the combined effort of the leadership and our experience and valued team members. EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Board of

DIRECTORS’ REPORT Continued Key Financial Indicators Compared (2016 - 2018) 9

9.064

8.308

7.388 6.669

$ Billions

6.124

6.694 5.834

5 4

4.385

4.176

3 2

1 0 T/Savings

Net Loans 2016

2017

T/Assets 2018

We closed the year with total assets of $9.064B, an increase of 9.1% over 2017’s performance. Savings grew by 10.8% to close at $7.388B over the previous year’s $6.669B. The figure below shows graphically our performance in another key indicator, namely, delinquency.

Delinquency 9

Rate of Delinquency - %

7.7

7 6 5

3.7

2.5

3 2

1 0

2015

2016

2017

2018

Delinquency

One of the major challenges faced by EduCom is in the management of our non- performing loan portfolio as we seek to keep it at the lowest level possible. This has become even more important as we implemented the new IFRS 9 Standards which require us to make provisions on loans on immediate approval, rather than when the loan actually becomes delinquent. We continue to implore members to honour their obligations, so that collectively the membership can benefit from additional loan products.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

BOARD OF DIRECTORS’ REPORT

Though there was an increase in the non-performing loans for 2018 over 2017, we commend the members for your commitment toward your obligations. We also commend the efforts of the Recovery Unit who work assiduously with our members to resolve the challenges they may have in an effort to manage the non-performing portfolio, while simultaneously acknowledging the individual factors that each member faces when they are unable to satisfy their obligations. The figure below shows our performance in our core business over the four-year period, 2015-2018.

Operating Income (2015 - 2018) 900

886.5

895.5

2017

2018

800 700 600

632.7 579.3

500 400 300 200

100 0

2015

2016

$Millions Operating Income for the period closed at $895.5M, a growth of 1% over the performance of 2017. The marginal increase in our operating income is a reflection of declining interest rates experienced throughout the year.

being offered to the membership. Additionally, by developing a risk culture, we are preparing for the inevitable regulations which will be a feature of credit unions’ operations in the near future.

being mindful that without our people we cannot serve you at the desired level, hence our staff must be seen as critical to our success and therefore an integral stakeholder.

STRATEGIC OBJECTIVES

OPERATIONS

At our last strategic retreat, we updated our vision to read; “In 2025, EduCom Co-operative Credit Union is a member-centric, financiallysound and technologicallyenhanced, employer of choice; and is the top Credit Union in Jamaica in member value, compliance and satisfaction.” Our focus on member centricity remains and will continue to be our main strategic imperative. We included “employer of choice”,

Our strategic priorities are key topics of focus for the organization over the next five years. The strategic priorities aim to address the most pertinent issues facing the industry today to help our members successfully move forward in this dynamic economic development landscape.

While continuing our emphasis on member service excellence, we also added risk management as one of our major focal points in 2018. We consider both to be equally important as one complements the other. By emphasizing risk management the team is obliged to think of the big picture of operational excellence that eventually filters through to the quality service

Our two main areas of focus are Service Excellence and Building Relationships. Again, you will recognize the focus on the members.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Board of

DIRECTORS’ REPORT Continued Our overarching strategic focus is to add value to all our members. To this end, the Strategy Statement which will inform our decision making and shape our priorities, seeks to improve the quality of lives for our members and their families by:

•

Practicing an open, collaborative and enabling working environment where we show the necessary CARE for our employees.

•

Practicing prudent governance, risk management, compliance, financial and treasury management.

1. Expanding our membership through target Marketing, direct recruitment of untapped businesses within the existing Bond; and by capitalizing on Merger opportunities.

•

Purpose - driven, strategy focused leadership and management at all levels.

2. Increasing member utilization of our services through effective Public Education on the Cooperative Principles while migrating businesses (members) from elsewhere through an aggressive Sales and Rationalization Strategy. 3. Increasing Member Value by understanding individual needs and providing Personalized Financial Solutions from an expanded suite of products. 4. Increasing the organization’s effectiveness by engendering a culture of analytics and risk and research-based decision-making. 5. Increasing operational efficiencies and service delivery through the effective use of New Media and Online Channels, Process Re-engineering and other Technological Solutions while bolstering our cyber security infrastructure. 6. Strengthening our Execution Capabilities by realigning our People, Governance, Leadership, Organization Structure, Accountability, Culture and Processes to deliver on our above Strategies. Over the next three years, we aim to develop a performance driven culture in the organization by:

•

Employing a competent, motivated and engaged team that understands and executes strategy.

•

Sourcing the right information and technology; identifying business processes to enhance delivery and applying project management skills to execute our strategy.

Through these enablers, the organization will engage, educate, analyze needs and provide financial solutions from an expanded suite of products ultimately, improving; the service delivered, satisfaction levels of stakeholders and improving the lives of our members and their families. Business Process Review & Optimization Reviewing our processes is considered to be of significant importance as we will have to increase efficiencies in order to remain competitive. To this end we have embarked on a Business Process Review and Optimization exercise geared at: •

The identification of the critical internal processes and related business requirements; Reviewing, updates and analysis current State “AS-IS” processes with recommendations for process improvements; designing of Future State “TO-BE”. Processes incorporating all necessary improvements, and finally, identification of ICT enablers for the re-orchestration of processes and the retooling of the organization.

The financial sector has become increasingly competitive. In order to be able to survive and grow in this changing market environment we will have to invest in ICT. Technology is being perceived as an ‘enabling resource’ that can help in developing a more flexible structure that can respond quickly to the dynamics of a fast-changing market scenario. It is also viewed as an instrument of cost reduction and effective communication with people and institutions associated with the financial sector.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

BOARD OF DIRECTORS’ REPORT

Information Technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets.

SAVINGS PRODUCTS

At the leadership level, we are convinced that we have to change the banking software that we are currently using, hence the investment in the Business Process Review & Optimization. OUTREACH In recognition of our commitment to being a good corporate citizen and the guidance of our policy focusing on assisting those who are in greater need, meaningful assistance was provided to members, charitable organizations, other institutions and individuals during 2018. In line with our focus over the years, our Annual Scholarship programme and Albert Street Basic School were the recipients of the greater portion of our budget allocation to the outreach initiative. PRODUCTS & SERVICES Our Wealth Creator, Diamond Reserve and Executive Gold Note continue to be the products in high demand for savers who are building resources for a specific purpose in the medium to long term. The competitive rates offered on these products continue to be unmatched in the industry. As it relates to loans, our Motor Vehicle Loan Facility and the Line of Credit are in high demand. These products have been designed to meet your needs based on the feedback we have received from you, and we continue to welcome your feedback on how we can further improve them. We want to also use this opportunity to remind our members of the very competitive saving instruments that your credit union has on offer. Good financial management requires that you maximize the returns that you get on your savings and we encourage you to ensure that you know the rates that are on offer at your credit union before considering investing elsewhere. Please refer to the list of our product offerings. Kindly visit our website, call and speak with one of our Member Care Representatives, or visit our offices to learn more and benefit from these superior products.

Permanent Share Account

Dividend

Regular Deposits

Competitive interest rate

Executive Gold Note

Competitive interest rate

Diamond Reserve

Interest credited monthly

Special / Fixed Deposits

Competitive interest returns

Wealth Creator

Long-term savings and investment, insured with monthly interest returns

Christmas Savings Club

Monthly savings and interest Christmas encashment

T.E.A.C.H.

Share account for trainee teachers

Y.S.C. (Youth Savers Club)

Savings for children of members with competitive interest returns

LOAN PRODUCTS •

Personal

•

EduCom Special

•

Line of Credit

•

Productive/ Business

•

Educational

•

Home Acquisition & Improvement

•

Motor Vehicle

OTHER SERVICES •

Standing Order

•

Family Indemnity Plan (F.I.P)

•

Health Insurance

•

Internet Banking

•

Access Plus debit card

•

Financial Counseling

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Board of

DIRECTORS’ REPORT Continued VOLUNTEERS The Board of Directors is comprised of 15 members. The following table shows the attendance at meetings. The Board held 12 meetings during the year, four (4) of which were Joint Meetings that included members of the Supervisory and Credit Committees. The Committees reported monthly on their activities and always provides useful suggestions for improvement in the quality of the service provided by the Credit Union. ATTENDANCE OF BOARD MEMBERS - 2018 NAMES

PRESENT

EXCUSED

Clide Nesbeth

Nil

Hilton Blenman

Nil

Ian McNaughton

Ruel Nelson

Nil

Ian Sutherland

Nil

Charles O’Connor

Nil

Hector Stephenson

Janice Green

Nil

Stacey-Ann Farquharson

Sonia Bennett

Nil

Coleen Lewis

Mark Nicely

Supervisory Committee The Committee comprised of: Ms. Tasha Manley (Chairperson), Mr. Frederick Mills, Ms. Cheryl Daley, Mr. Clive McLean and Ms. Erica Haughton (Secretary). The Committee met at least once per month during which they reviewed the governance of the organization, made recommendations, reviewed audits and followed up outstanding matters that (management) are cited in these reports. Credit Committee The Committee comprising Mr. Clayton McEwan, (Chairman), Mr. Hopeton Newell, Ms. Delores Mollison, Mrs. Sandra Dockery, and Mr. Carlton Stewart met weekly and over the year executed an outstanding job in the approval of member’s loans. APPRECIATION The Board of Directors graciously uses this opportunity to place on record our appreciation to the members of the Supervisory and Credit committees, the management and staff, the team of EduCom Ambassadors and all other volunteers for their hard work and commitment throughout the year. Your invaluable contribution played a significant role in the performance of EduCom during 2018. We look forward to your continued support, dedication and involvement in 2019, as together we maintain our role as ambassadors to our Credit Union. 29

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

BOARD OF DIRECTORS’ REPORT

To those volunteers that have retired, we say a special thanks to you for your contribution while we welcome those who have joined our ranks. A number of other persons and organizations supported us throughout the year and we would like to say special thanks to the following: •

The University of the West Indies and all its affiliates

•

The Principals, Bursars and Head Teachers in all our schools

•

The Credit Union League and its subsidiaries

•

Cuna Mutual Insurance Society

•

Jamaica Co-operative Insurance Agency

•

The Office of the Post Master General

•

NCB - Oxford Road

•

BDO & Associates

•

The Registrar of Co-operative and Friendly Societies

•

Samuda & Johnson, Attorneys at Law

•

Usim, Williams & Co.

•

Highgate Systems Ltd, our software provider

•

The National Housing Trust

•

The National Land Agency

For and on behalf of the Board of Directors

..................................................................

Clide Leo Nesbeth President of the Board

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Treasurer’s

REPORT FOR THE YEAR ENDED DECEMBER 31, 2018

OVERVIEW I am very pleased to present the Treasurer’s Report to the fourth Annual General Meeting of EduCom Co-operative Credit Union Limited (EduCom). Your credit union has produced fairly good results in terms of its overall financial performance when compared to the previous year’s financial outturn. We have continued to build on the gains that were realized through the merger of our operation. Conversely, we have had to overcome challenges confronted within the difficult economic environment and a very competitive marketplace. It should be noted that EduCom’s financial performance was achieved against the background of significant changes in the financial market and the entrance of new players. Despite this turbulence, the credit union performed very well in terms of its core business – that of disbursement of loans to members. The result was an increase of 9.4% in the portfolio over the previous year. This was achieved despite fierce competitive pressure by other players in the financial market for loans. In addition, the situation was further exacerbated by low to moderate loan interest rates due to competition from other big players in the market, such as commercial banks. These entities have adopted Credit Union crafted products such as unsecured loans tied to salary deductions, being paid directly by their employers to the respective competitors. The situation was made more challenging by the continuation of the Government’s agreement with the International Monetary Fund (IMF) to correct fiscal in-balance in the Jamaican economy. Hence, our target market (our members) and by extension, the overall economy experienced a reduction in government expenditure, resulting in wage increases to our members that were significantly below expectation and resulted in a decrease in their real disposable income. Despite the challenges encountered, EduCom’s performance met, and in most cases exceeded key financial indicators as measured against the P.E.A.R.L.S. standards used by the Jamaica Co-operative Credit Union League (JCCUL) as a means of assessment.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Ruel Nelson

Treasurer

TREASURER’S REPORT

OPERATING PERFORMANCE It is against the difficult challenge of continuing to develop a new culture for our Credit Union and the implementing of trade practices such as direct sales through the use of Business Development Officers (BDOs), that EduCom realized a surplus for the year of $126.58 million when compared to $115.46 million, the previous year. The 9.6% increase in the surplus for the current year when compared to the previous year, can be attributed mainly to the growth in revenue from an increase in the loan portfolio, non-interest income and a decrease in delinquency expenses. The total gross interest income from members’ loans and investments amounted to $895.5 million when compared to $886.5 million in 2017. This reflected a fairly flat performance in terms of growth in total gross interest income, approximately 1% increase over the previous year. The factors that contributed to this outturn were as follows: 1. The gross interest income from members’ loans increased by 4.3% but this was negatively impacted by the interest income from investments that saw a decline of 34% from the previous period. 2. The prevailing downward trend in the interest rates on investible funds resulted in a significant reduction in earnings. 3. A deliberate action to reduce the very high proportion of unsecured loans within the Credit Union’s loan portfolio from a high of 26% to more manageable range of 10% to 15%. This resulted in a reduction in the number of unsecured loans which are priced at a higher rate. Also, it should be pointed out that whenever a member has not made a payment to his or her loan obligation for a period of ninety (90) days, interest earnings cannot be recorded in the credit union’s income statement for that member’s loan in accordance with Credit Union’s accounting policy. This occurrence would have a double negative effect on your Credit Union’s performance, as coupled with the fact that no interest income would be recorded, an expense in the form of bad debt provision is charged to the income statement. We, therefore, continue to implore our members to be responsible in honouring their obligations to the Credit Union.

The loan portfolio contributed 81% to our income (in 2017-79%), indicating that the Credit Union beneficially focuses on its core business of granting loans to meet the needs of its members. Our 2018 income from investments in financial markets decreased by $25.8 million or 34%, as a result of the phasing out of the repurchase agreement instrument (Repo’s). The result is that we had to resort to very low return investment vehicles such as unit fund. Given the volatility in loan interest rates in the market, and the fact that your Credit Union is very sensitive to downward movements in loan interest rates, your Board (as good stewards) has gradually implemented the strategy to diversify EduCom’s income stream. Your Credit Union has continued to try to defray some of the costs that it would previously absorb, by adding non-interest income to our earnings, using a transactional based approach that would affect only members who utilize the services. With this initiative, EduCom realized total non-interest income of $148.2 million from: loan processing, ATM and management fees on schemes loans, when compared to $135.8 million earned in the previous year. Operating expenses totalled $727.5 million when compared to $669.8 million for the previous year. This reflected an 8.6% increase in total operating expenses or $57.7 million. The main contributing factors to this increase were the additional personnel and administration costs from inflationary factors. EduCom paid to our members $169.2 million in interest expense for voluntary shares, deferred shares and deposits held with your credit union for the current year, when compared to $161.2 million, the previous year. This increase of $8 million was attributed to larger members’ shares and deposits that resulted from measures implemented to increase members’ participation in the products on offering. It should also be noted that during the period under review, EduCom offered very competitive interest rates on members’ savings and deposits. These rates ranged between 1.75% and 4.25% per annum, and were determined by the type of saving products, market condition, amount of funds and tenure. Additionally, EduCom continued the revolving loan agreement with the Credit Union Fund Management Company (CUFMC) in order to meet the high demand

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Treasurer’s

REPORT Continued for loans. This resulted in external interest expense of $9.1 million when compared to $16.4 million in 2017. The following chart shows the comparative financial performance over the past five years, using AAMM Co-operative Credit Union’s audited financial figures as the baseline, given its assigned acquirer status.

EduCom's Income vs Expenditure (2014 - 2018) 1,000 900

$ Millions

800 700 600 500 400 300 200

100 2018

2017

2016

2015

Interest Income Non-Interest Income Operating Expenses Interest Expenses on Savings External Interest Income Surplus for the Year

2014

2018

2017

2016

2015

2014

895.5 148.2

886.5 135.8

632.7 70.9

579.3 49.1

397.1 17.2

727.5

669.8

464.8

469.7

287.7

169.2

161.2

120.3

110.3

75.1

15.0

22.1

27.5

26.8

10.9

126.58

115.46

89.04

2.37

10.46

PORTFOLIO PERFORMANCE Based on EduCom’s financial performance for the year under review, total assets increased by $756.4 million or 9.1% and stood at $9.06 billion as at December 31, 2018. Similarly, net total loans increased by approximately $576.0 million, closing at $6.70 billion to represent a 9.4% increase in the loan portfolio (mainly due to an increase in loan disbursements). Additionally, EduCom realized a Net Loan to Total Assets ratio of 74% for the current year, which was similar to that achieved in 2017. It should be noted that management has been successful in its objective to keep the delinquency rate low, through the measures that were implemented to combat the very high level of delinquency in the order of 7.7% experienced in 2016. Through the concerted efforts of management, volunteers and staff, we have managed to control this very important indicator, by remaining vigilant in monitoring and managing the timely receipt of members’ payments on our loan portfolio. For the year under review, we achieved a delinquency rate of 3.04%, which was below the standard of 5%, though it compares unfavorably to the previous year’s 2.45%. Members’ savings at year-end increased to $7.39 billion when compared to the previous year of $6.67 billion. This represents a 10.8% growth over the period. However, it should be noted that the need to satisfy our loan demand from members’ savings has not yet been achieved. Therefore, we continue to offer attractive rates on EduCom’s saving products, as we seek to maintain the gap between the total loan portfolio and the total members’ savings. We will continue to offer these attractive returns on saving products, creating the opportunities to encourage savings

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

TREASURER’S REPORT

and build individual wealth for our members. It is important to remind you that it is primarily through savings that a person creates wealth. The performance of the key indicators is captured graphically below and illustrates the different rates of increase in loans when compared to the increase in savings.

Key Performance Indicators 9,000 8,000

$ Millions

7,000 6,000 5,000 4,000 3,000 2,000

1,000 2018

2017

2016

2015

2018

2017

2016

2015

Members’ Savings

7,388

6,669

4,385

4,169

Members’ Loans, after provisions for impairment

6,700

6,124

4,176

4,205

Total Assets

9,064

8,308

5,834

5,595

The gap between members’ loan and savings is depicted in the chart below.

Key Performance Indicators 9,000 8,000

$ Millions

7,000 6,000 5,000 4,000 3,000 2,000

1,000 2018

2017

2016

2015

2014

2018

2017

2016

2015

2014

Members’ Savings

7,388

6,669

4,385

4,169

Members’ Loans, after provisions for impairment

6,700

6,124

4,176

4,205

Total Assets

9,064

8,308

5,834

5,595

FUTURE OUTLOOK Your Credit Union is operating in a changing environment, where the integrity and behaviour of some of our members are becoming questionable. They borrow from the Credit Union with no intention to honour their obligations. This has resulted in loans becoming delinquent and being charged off the Credit Union accounting records, resulting in a significant cost to your Credit Union at $55 million for the year. Management has taken steps to pursue these members through the following channels:

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Treasurer’s

REPORT Continued 1. The employment of bailiff services 2. The employment of attorneys-at-law to pursue recourse through the court system to collect sums owing. 3. The foreclosure of real estate properties that have been offered as securities. 4. The provision of names of these delinquent members to the credit bureau to prevent them from accessing further credits from any other institution.

given to EduCom and for entrusting your confidence in the Board of Directors and Management in serving you. We hope to continue to justify the confidence that you have placed in us. I thank and commend all the team members including volunteers, managers, and staff, who consistently applied themselves to EduCom’s continued successful development. On behalf of the Board of Directors, I must express sincere appreciation to the following person/entity:

5. The publication of the names of these delinquent members on notice boards in the branches and on the credit union’s website.

⊲⊲

The Registrar of Co-operative and Friendly Societies for the guidance and good advice provided, especially during the year ,and

6. The publication of the names of delinquent members who cannot be located in the print media.

⊲⊲

The Jamaica Co-operative Credit Union League (JCCUL) for guidance and expert services provided in relation to operational and regulatory matters.

⊲⊲

I also thank the Auditor, BDO for the professionalism displayed in the execution of the audit.

As you may be aware, your Credit Union will soon be regulated by the Bank of Jamaica. This will result in higher cost of operating through enhanced and regular financial reporting requiring dedicated personnel to execute such tasks. Further, in order to obtain an independent assessment of its operations, the Board of Directors has commissioned a business process review (BPR) study. Based on a competitive bidding process Fujitsu Caribbean (Jamaica) Ltd. has been selected to conduct this project. The expected benefits from this BPR are a streamlining of our processes in order to gain operational efficiencies and provison of a roadmap for technology advancement to better serve our members. The estimated cost of the BPR study is $16 million and your Credit Union would like this amount to be taken from the current year’s surplus to cover the cost of this very important project.

We need the continued support of all our members to utilize the services of EduCom as we seek to live our vision, in which EduCom’s operation is member-centric, service-oriented, financially sound and technologicallyenhanced employer of choice; and is the top Credit Union in Jamaica in member value, compliance, and satisfaction.

ACKNOWLEDGEMENTS: I thank God, the members, and fellow board members for affording me the opportunity to serve EduCom in the role of Treasurer. It has been an honour and a privilege to perform the functions. I thank our members for the continued business support that you have

..................................................................

Ruel Nelson Treasurer

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Supervisory

COMMITTEE’S REPORT

TASHA MANLEY Chairman

CHERYL DALEY Secretary

REPORT OF THE SUPERVISORY COMMITTEE FOR THE YEAR ENDED DECEMBER 31, 2018 A YEAR OF CHANGE, ANTICIPATION AND ACTION The work of the Supervisory Committee over the last year was influenced largely by changes in EduCom’s external and internal environment. The highly anticipated legislation to support the supervision of credit unions by Bank of Jamaica (BOJ) was the most significant force driving the organization’s strategic direction. The establishment of a special BOJ Readiness and Licensing Committee (chaired by Ms. Tasha Manley, Chairman of the Supervisory Committee), as well as the engagement of external expertise to undertake a business process review provided clear evidence of the credit union’s commitment to action. In this regard, the Supervisory Committee’s priority was ensuring that management strengthened

ERICA HAUGHTON

FREDERICK MILLS

CLIVE McLEAN

internal controls in order to meet the standards of BOJ licensing. In addition, the audit program targeted areas of identified risk associated with the credit union’s lending business, membership growth and general operations. This report provides a synopsis of the work performed by the Supervisory Committee, its key observations, recommendations and conclusions since the date of its previous Annual Report, issued in April 2018. The conclusion at the end of this report presents the outcome of the Committee’s work in relation to the areas within its responsibility. The conclusion also summarizes the main actions the Committee requests of Management. The Supervisory Committee also highlights some focus areas for its work going forward.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

SUPERVISORY COMMITTEE’S REPORT

ROLE, RESPONSIBILITIES & SCOPE OF WORK The Audit Committee is responsible, by virtue of the established Rules of EduCom Co-operative Credit Union Limited, for exercising oversight in relation to the proper conduct of the credit union’s operations, in particular, with regard to as they relate to risk management and monitoring. The following table represents the four quadrants of the Committee’s mandate: • Inspect the securities, cash, accounts and financial records; • Quarterly examination of the affairs of the Credit Union; Examination & Internal Control

• Receive and investigate complaints; • Annually verify members' accounts against the CU records • Attest to half year Statement • Suspend any officer, member of the Board of Directors or Credit Committee

Discipline & Enforcement

Oversight of the Lending, Appraisal and Approval

Board Reporting

• Call a SGM of the members to consider any violation of rules or any practice which, in the opinion of the Committee is unsafe and unauthorized;

• Examine all applications for loans made during the period under examination; and • Satisfy itself that proper procedures have been followed in keeping with [internal policy] the Act, Regulations including those of the Bank of Jamaica and these Rules

• Report to the Board of Directors 15 days after the end of the previous month

AUDITS & SURVEILLANCE Areas of operation and business processes that were audited during the year ended December 31, 2018 included: •

Loans Processing

•

Human Resources and Administration

•

Branch Operations

•

Finance Department

The audit activities of the Internal Audit Unit were guided by the International Standards for the Professional Practice of Internal Auditing, recommended risk management techniques, The Proceeds of Crime Act and the Bank of Jamaica Guidance Notes. Although not yet enacted, where appropriate, audits were done consistent with the requirements of the proposed Bank of Jamaica (Credit Unions) Regulations.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Supervisory

COMMITTEE’S REPORT Continued KEY OBSERVATIONS As a result of its work performed during 2018 the Supervisory Committee formulated the following key observations. These are namely: • •

•

the importance of continuing to ensure long-term financial strength and sustainability;

The following table gives a profile of members’ attendance at meetings during the year to December 31, 2018.

the need to review and enhance EduCom’s Internal Control and Risk Management Environment in view of the changing size and evolving complexity of the organization’s activities;

C. Daley

EXCUSED ABSENCE 0

P. Timoll

C. McLean

the need to achieve full implementation of best practices including in areas where pervasive compliance gaps remain, and;

F. Mills

E. Haughton

A. Smith

the need to perform a comprehensive review and then revamp the credit approval and related decision-making processes at EduCom.

T. Manley

ASSESSMENT The overall results of our assessment indicate that sufficient assurance can be placed on the Credit Union’s system of internal control. Measures to secure the effective operation of internal controls are suitably designed and are operating effectively as there was general adherence to the policies and procedures. We identified some internal control weaknesses where opportunity for improvements were identified and brought to the attention of Management and the Board of Directors. Management action plans have been obtained for remediation of the issues raised, some of which have already been implemented. The Internal Audit Unit is charged with the follow-up and validation of actions that are implemented by Management and the Board of Directors. MEETINGS AND OTHER INVOLVEMENT The work of the Committee is achieved largely through a consistent schedule of meetings where matters are discussed and recommendations are made to the Board of Directors. The Committee members were diligent in

their attendance and participation, therefore resulting in the high level of performance of the Committee.

NAMES

POSSIBLE PRESENT

Committee members participated and benefited from training which has helped to reinforce the policies, laws and regulations which guide the Credit Union. Training included areas which covered governance, risk, internal control and mandatory training in the Proceeds of Crime Act (POCA) and Anti Money Laundering regulations. This was in keeping with the requirements of the Cooperative Societies Act and with the Bank of Jamaica guidelines. Committee members along with the Internal Auditor, also participated in the Credit Union’s annual strategic retreat, adding value and gaining useful insights into the strategic direction articulated by Management. WHAT DOES THE FUTURE HOLD The regulatory changes which are on the horizon will have far reaching implications for the way in which EduCom operates going forward. Many elements affecting EduCom’s role and its future options will be externally influenced by financial market regulation and political decisions which are taken. The outcome of these uncertainties will undoubtedly shape the future orientation of EduCom.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

SUPERVISORY COMMITTEE’S REPORT

The Supervisory Committee understands that Management’s current focus is on: •

preparations for a new regulatory regime under the supervision of the Bank of Jamaica;

•

readiness to address potential impacts on future business plans, the prioritization of cost discipline and flexibility to manage the cost and revenue base over time; and

•

digitization, automation and seamless business processes, together with close monitoring of the evolution of the Credit Union’s capital adequacy.

To meet these challenges Management is also rethinking its current organizational set up and future strategic orientations. The Supervisory Committee will follow these developments carefully and over the current financial year will focus closely on initiatives undertaken to enhance EduCom’s Internal Control and Risk Management Environment. These will include actions to further develop oversight, the establishment of a complete map of risks, ensuring the three lines of defence model is effectively deployed across the organization, including addressing the findings coming from Internal Audit’s review on the credit risk management. ACKNOWLEDGMENTS The Supervisory Committee wishes to express its gratitude to all members who retired from the Committee during the year. We would like to express our gratitude to Ms. Cheryl Daley, former Chairperson of the Committee who gave sterling contribution as a seasoned internal auditor. The Committee extends its best wishes to Ms. Daley in all her future endeavors. The Committee also welcomed, Mr. Andrew Smith who served up to April 2018 and Mrs. Paula Ferguson, who although appointed for a very short stint (March – April 2019), made a remarkable impact on the Committee’s work. The members of the Committee express gratitude to the Membership for having been allowed the privilege of serving in this capacity. Special thanks are extended to the Board of Directors, Management and staff of the Credit Union and to the Internal Audit team, who have worked hard and provided us with immeasurable support and assistance throughout the year. Thanks are also expressed to my fellow Committee members for their invaluable contribution during the year.

Respectfully submitted,

................................................

Tasha Manley Chair

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Credit

COMMITTEE’S REPORT

CLAYTON McEWAN Chairman

DELORIS MOLLISON Secretary

HOPETON NEWELL

SANDRA SMITH-DOCKERY

CARLTON STEWART

REPORT OF THE CREDIT COMMITTEE FOR THE YEAR 2018 EduCom Co-operative Credit Union continues to thrive to provide products and services to meet our member’s needs. For the year ending December 31, 2018 our loan portfolio stood at $6.73B which represents a net increase of $0.60B or 9.71% increase over the previous financial year. This year the Credit Union disbursed over $631M in our Car Loan Sale-Abration which was one of our main promotional products for the year. Throughout the year the committee offered a number of financial counselling sessions and met with members to assist them in making wise financial decisions which are prudent to ensure a better quality of life. LOAN DISBURSEMENT For the period under review a total of $3.88B was disbursed in new loans for purposes such as education, home improvement and acquisition, motor vehicle purchase, and personal expenses. Below is a reflection of our quarterly loan disbursement: QUARTERS

TOTAL

PERCENTAGE

1st Quarter

$841.0M

21.69%

2nd Quarter

$866.7M

22.35%

3rd Quarter

$1.03B

26.56%

4th Quarter

$1.14B

29.40%

Total

$3.88B

100.00%

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

CREDIT COMMITTEEâ&#x20AC;&#x2122;S REPORT

LOAN PORTFOLIO

Portfolio Mix As At December 31, 2018 0.18%

1.31%

3.03%

0.63% - Unsecured Loans - 22.10% 22.10%

14.98%

- Secured Loans - 41.73% - EduHome - 0.63% - Restructured Loan - 1.31% - Within Savings Loans - 16.05%

16.05%

- Mortgage Loan - 14.98% - Staff Loans - Concessionary Rate - 0.18% - Scheme Loans - 3.03%

41.73%

ATTENDANCE A total of 55 meetings were convened by the committee which included special meetings to review loans issued by the internal team to ensure that same were disbursed in alignment with policy. These meetings were well attended with few cases of excused absence arising from extenuating circumstances. In addition to the committeeâ&#x20AC;&#x2122;s scheduled meetings the members of the committee attended monthly meetings with the Delinquency committee and quarterly meetings with the board. Members

Possible

Actual

Absent with excuse

Deloris Mollison

10*

Sandra Dockery

10*

Carlton Stewart

Clayton McEwan

Jennifer Hall (retired)

Hopeton Newell

*Absence due to extended vacation periods

We want to place on record our appreciation to Mrs. Jennifer Ricketts-Hall who retired from the committee in April 2018. Mrs. Ricketts-Hall provided a good balance to the team with her experience and wealth of knowledge which added value in our discussions and decision-making process. Prepared by:

..................................................................

Clayton McEwan

Credit Committee Chair

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Nominations

COMMITTEE’S REPORT REPORT OF THE NOMINATIONS COMMITTEE TO THE 4TH ANNUAL GENERAL MEETING OF EDUCOM CO-OPERATIVE CREDIT UNION LIMITED The Nominations Committee which held its 1st meeting on January 8, 2019 was chaired by Director Janice Green. Other members of the Committee were Mr. Michael Brydson and Director Mark Nicely. The Committee was mandated to nominate members who it considers appropriate for nomination or appointment to the Board, and the Credit and Supervisory Committees – such persons must be willing and available to serve the Credit Union as volunteers. Preceding the selection of officers who would be proposed for nomination at the Annual General Meeting (AGM), the Committee held seven (7) meetings which included two (2) interview sessions with candidates proposed for nomination. All meetings were attended by the full Committee. In its deliberations, the Committee ensured that its activities were in accordance with the Credit Union’s Rules and its Terms of Reference and that its considerations and decisions came out of a high degree of assessment, integrity and fairness. The Committee is pleased to report that its objectives were successfully achieved. BOARD OF DIRECTORS The following directors will retire at this AGM:

The Committee is recommending that Messrs. Hilton Blenman, Clide Nesbeth, Hector Stephenson, Ruel Nelson and Ian McNaughton be nominated to serve for another three (3) years. The other proposed members of the Board and their respective tenures are as follows: •

Janice Green 2 years

•

Ian Sutherland 1 year

•

Charles O’Connor 1 year

•

Dr. Mark Nicely

•

Stacey-Ann Farquharson

1 year 1 year

CREDIT COMMITTEE Persons are normally elected to serve on this Committee for two (2) years. The Nominations Committee recognizes and appreciates the quality service provided by the members of this Committee, who meet each week to review and make decisions on loans submitted for approval as the Credit Union seeks to satisfy the needs of its members.

•

Hilton Blenman*

•

Clide Nesbeth

•

Hector Stephenson

•

Carlton Stewart

•

Ruel Nelson

•

Deloris Mollison

•

Ian McNaughton

The following Committee members will retire at this AGM:

* Appointed to the Board effective February 21, 2019 to fill a casual vacancy which arose from the resignation of Coleen Lewis, who migrated to pursue further studies overseas.

The Committee acknowledges the sterling contribution of Director Coleen Lewis and her commitment and dedication to their assigned responsibilities.

The Committee acknowledges the sterling contribution of Mr. Stewart. His commitment and dedication to his responsibilities were unparalleled. Having completed its selection of candidates for nomination to the Credit Committee, the Committee has identified Mr. Kurt Vaz to replace Mr. Stewart.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

NOMINATIONS COMMITTEE’S REPORT

The other proposed members and their respective tenures are: •

Clayton McEwan 1 year

•

Hopeton Newell 1 year

•

Sandra Smith-Dockery

1 year

SUPERVISORY COMMITTEE Members of this Committee are elected to serve for one (1) year and as such, all members retire at each AGM. The Committee comprises five (5) members. The volunteers of this Committee have spent significant portions of their time ensuring that proper management control systems are in place for the sustainability of a viable credit union. The Committee acknowledges the sterling contribution of the following volunteers, along with their commitment and dedication to assigned responsibilities. •

Frederick Mills

•

Paula Ferguson** * *Appointed on March 12, 2019 to fill a casual vacancy which arose from Cheryl Daley’s resignation. Miss Daley was on secondment overseas.

The recommended members of this Committee for 2019/20 are: •

Tasha Manley

•

Erica Haughton

•

Andrew Smith

•

Clive McLean

•

Loraine Gordon Pinnock

The Nominations Committee thanks you for the opportunity to serve and looks forward to a very exciting and productive year of service, as all its volunteers, staff and members work towards building brand EduCom.

..................................................................

Janice Green Chair

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Delegates’

REPORT

REPORT OF THE DELEGATES FROM THE JAMAICA CO-OPEARTIVE CREDIT UNION LEAGUE’S 2018 CONVENTION AND 77TH ANNUAL GENERAL MEETING The Convention and legally constituted 77th annual general meeting of the Jamaica Co-operative Credit Union League was held from May 17-20, 2018 at the Hilton Rose Hall Hotel & Spa in Montego Bay. Approximately one hundred and forty (140) delegates, alternate delegates and observers attended the weekend Conference. The schedule of activities included a trade show, reception, workshops, banquet, the annual general meeting and an ecumenical service. THURSDAY, MAY 17

financial report, were presented.

The following activities took place:

Distribution of Surplus

•

The Credit Union Managers’ Association annual general meeting.

•

An afternoon workshop presented by Mr. Donovan Gayle, CEO of DHL Jamaica on “Workplace Wellness and the impact on productivity.”

•

Edutainment Extraordinaire - a session hosted by staff of the League to welcome participants to the Conference.

FRIDAY MAY 18 Friday’s activities got off to a good start with the official opening. Guest of honour, the Honourable Bishop Conrod Peterkin, Custos of St. James, officially opened the conference which later segued into the plenary session. The annual awards dinner ended Friday’s activities. Guest speaker at this event was Hon. Audley Shaw Minister of Industry, Commerce, Agriculture & Fisheries. ANNUAL GENERAL MEETING

Delegates voted for the maximum liability of the League to be set at $5billion. ELECTION OF OFFICERS The Meeting voted to accept the nominations for the following persons to serve on the Board of JCCUL. •

Mr. Norris Gilbert - PWD Credit Union

•

Mr. Anthony Young - Palisadoes Credit Union

•

Mr. Clide Nesbeth - EduCom Credit Union

•

Mr. O’Neil Grant - FHC Credit Union

•

Mr. Lambert Johnson - Gateway Credit Union

•

Mr. Ryan Muir - Lascelles Credit Union

For the Supervisory Committee the following persons were elected: •

The 77th Annual General Meeting was held on May 17, 2018. Delegates from twenty-five (25) Credit Unions attended the meeting. President Mr. Winston Fletcher, chaired the meeting. He welcomed the participants and then gave a summary of the Board report for the year 2017. All other reports including that from the Treasurer, the supervisory and nominating committees, as well as the audited

There was no surplus for distribution and the Treasurer explained this to the participants.

Mrs. Tamara Baugh-Brissett - EduCom Credit Union

•

Mr. Michael Sutherland - C&WJ Credit Union

•

Mrs. Ivy Lawrence - Lascelles Credit Union

•

Ms. Nicola Reid - Palisadoes Credit Union

•

Mr. Delroy James - First Heritage Credit Union

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

DELEGATES’ REPORT

Following the AGM the executive was elected to serve on the League Board for the 2018-2019 year: •

Winston Fletcher - President

•

O’Neil Grant

•

Clide Nesbeth - 1st Vice President

•

Anthony Young

•

Lambert Johnson - 2nd Vice President

•

Michael Anglin

•

Andrea Messam - Treasurer

•

Carol Anglin

•

Jerry Hamilton - Assistant Treasurer

•

Brenda Cuthbert

•

Norris Gilbert - Secretary

•

Pete Smith

•

Patrick Smith

•

Ryan Muir

•

Martin Blackwood

A themed party sponsored by CUNA Caribbean Jamaica, closed the activities on Saturday. The conference ended officially on Sunday May 20 with an ecumenical service.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Management

TEAM

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

MANAGEMENT TEAM

09 1.

ELVIS KING

10 8.

DANE LEWIN Information and Communications Technology Manager

LEWIN BAXTER Internal Audit Manager

Chief Executive Officer 2.

ERIC HESLOP Chief Financial Officer

GARRET Dâ&#x20AC;&#x2122;AGUILAR Chief Operating Officer

CAMILLE CAMPBELL-DRUMMOND Operations Manager

ODENE JAMES Risk and Compliance Manager

MARCIA SCOTT GOLDING Human Resource and Administration Manager

MILLICENT ANDERSON Accounting Manager

10. TANESIA BANDOO Member Relationship Manager 11. DELROY SCARLETT Sales and Marketing Manager 12. NATASHA MILLS Branch Manager - (U.W.I.) 13. CERAPHIA ROPER Branch Manager - (Spanish Town) 14. NIGEL EDWARDS Assistant Information and Communications Technology Manager

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

MANAGEMENT & STAFF LOCATION

DEPARTMENT

NAME

POSITION

Executive Office

Elvis King

Chief Executive Officer

Head Office

Garret Dâ&#x20AC;&#x2122;Aguilar

Chief Operating Officer

UWI

Karette Williams

Administrative Assistant

Head Office

Michell Dixon

Executive Assistant

Head Office

Camise Williams

Credit Officer

Spanish Town

Cassandra McLean

Recovery Officer

UWI

Cyprain Thompson

Credit Officer

Head Office

Hakeem Ellis

Credit Officer

Head Office

Janice Fagan

Credit Officer

Head Office

Judith Richards-Lyons

Administrative Officer

UWI

Kayon Allen

Credit Officer

Portmore

Kemeisha Williams

Credit Officer

Old Harbour

Monique Davis

Credit Officer

UWI

Nasufia Ellis

Securities Officer

Head Office

Natalie Edwards

Credit Officer

Head Office

Nicole Thoms

Senior Recovery Officer

UWI

Norvalee Evans

Junior Recovery Officer

Spanish Town

Pierre-Charles Morgan

Loans Adjudicator

Head Office

Saneka Whitley

Securities Officer

Head Office

Sasha-Gay Codling

Credit Administration Officer

Head Office

Shahna-Kae Fyffe

Clerical Assistant

UWI

Therese Montaque

Credit Officer

UWI

Eric Heslop

Chief Financial Officer

Head Office

Millicent Anderson

Accounting Manager

Head Office

Dalmaine Stuart

Clerical Officer

Head Office

Kedeen Morrison

Accounting Officer 11

Head Office

Navlette Sinclair

Accountant

Head Office

Tamara Wallcom

Accounting Officer 1

Head Office

Yakeisha Gayle

Accounting Officer 1

Head Office

(CURRENT)

Credit

Finance and Investment

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

MANAGEMENT AND STAFF

LOCATION

DEPARTMENT

NAME

POSITION

Human Resource and Administration

Marcia Scott Golding

Human Resource and Administration Manager

Head Office

Andrea Lothian

Human Resource Officer

Head Office

Horace Sinclair

Driver

Spanish Town

Nova Sinclair Hayden

Human Resource Officer

Head Office

Petula Reynolds

Office Attendant

Head Office

Radcliff Daley

Bearer

Head Office

Dane Lewin

Information and Communication Technology Manager

Head Office

Nigel Edwards

Assistant Information and Communication Technology Manager

Head Office

Brendan Phipps

Network Administrator

Head Office

James Benjamin

User Support Officer

Spanish Town

Tevin Bailey

User Support Officer

Head Office

Lewin Baxter

Internal Audit Manager

UWI

Kerson Batchu

Internal Audit Officer

UWI

Omar Bennett

Internal Audit Officer

UWI

Delroy Scarlett

Sales and Marketing Manager

UWI

Anastasia Johns

Business Development Officer

UTECH

Christopher Wisdom

Business Development Officer

Spanish Town

Darrian Bryan

Business Development Officer

Portmore

Lalibella Payne

Marketing Assistant

UWI

Monique Davidson

Public Relations and Communications Officer

UWI

Peta-Gay Campbell

Sales Representative

UWI

Salim Myers

Business Development Officer

Head Office

ShadĂŠ Parchment

Sales Representative

Mandeville

Topaz Johnson

Sales Representative

Montego Bay

Tremaine Morgan

Marketing and Promotions Officer

UWI

(CURRENT)

Information and Communication Technology

Internal Audit

Sales and Marketing

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

MANAGEMENT & STAFF Continued

LOCATION

DEPARTMENT

NAME

POSITION

Member Care

Tanesia Bandoo

Member Relationship Manager

Portmore

Ceraphia Roper

Branch Manager

Spanish Town

Natasha Mills

Branch Manager

UWI

Andrea Sudderam

Branch Supervisor

UTECH

Kirkland Codling

Branch Supervisor

Portmore

Lisa Bent

Branch Supervisor

Montego Bay

Marsha Stephens

Branch Supervisor

Old Harbour

Michelle White

Branch Supervisor

Head Office

Rosa-Lee Kelly-Murphy

Branch Supervisor

Linstead

Stacey-Ann Porter-Davis

Branch Supervisor

UWI

Taneca Whyte

Branch Supervisor

Mandeville

Brandon Kirlew

Member Care Representative - General

Montego Bay

Cavelle Belnavis

Member Care Representative - Telephone

UWI

Chantelle Thomas

Member Care Representative - Receptionist

Portmore

Charnelle Wright

Teller

Spanish Town

Danielle Guthrie

Member Care Representative - General

UWI

Dorothy Williams-Knight

Evening Cleaner

Spanish Town

Ebony Williams

Teller

Montego Bay

Georgiana Morgan

Member Care Representative - Receptionist

Head Office

Icylin Palmer-Bennett

Evening Cleaner

Old Harbour

Jessica Wallace

Member Care Representative - Telephone

UWI

Jodian Holgate

Teller

Old Harbour

Kadene Redwood

Member Care Representative - Receptionist

Head Office

Ki-Ki Ann Francis

Member Care Representative - Telephone

UWI

Kimberlee Boswell

Member Care Representative - General

UTECH

Kimberly Harvey

Member Care Representative - General

UTECH

Kris-Michael Robinson

Teller

Head Office

Latoya Linton

Member Care Representative - General

Spanish Town

Mauvallette Ward

Member Care Representative - General

Montego Bay

Mellicia Brown

Member Care Representative - General

Linstead

Melony Daye

Member Care Representative - General

Head Office

Monique Rose

Member Care Representative - General

Spanish Town

Natalie Cole

Office Attendant - Part Time

UWI

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

(CURRENT)

MANAGEMENT AND STAFF

LOCATION

DEPARTMENT

NAME

POSITION

Member Care

Natoya Nicholson

Member Care Representative

Head Office

Patrice Guest

Member Care Representative - General

UWI

Patrick Morris

Teller

UWI

Patrine Davis-Hansel

Member Care Representative - General

Linstead

Princess Yee

Clerical Assistant

UWI

Rajon Clarke

Teller

Linstead

Rakeesha Ramus

Member Care Representative - General

Old Harbour

Raxon Walker

Teller

Linstead

Renardo Lee

Teller

Head Office

Roberta Watson

Member Care Representative - General

Portmore

Rochelle Henry

Teller

Spanish Town

Rose Marie Hunter

Evening Cleaner

Spanish Town

Shane Stewart

Teller

UWI

Shannell Nelson

Member Care Representative - General

Portmore

Shelly-Ann Bartley

Office Attendant - Part Time

Portmore

Sidonia Hyde

Member Care Representative - General

UWI

Suisj'aila Wilson

Member Care Representative - Receptionist

Head Office

Suzel Whyte

Teller

UTECH

Tarana Howe

Member Care Representative - Telephone

UWI

Tarika Kelly-Bailey

Member Care Representative - General

Spanish Town

Tashna McDaniel

Member Care Representative - Receptionist

Spanish Town

Tassia Ritchie

Teller

Old Harbour

Teisha Bucknor-Baker

Teller

Portmore

Totyana Insular

Member Care Representative - General

Mandeville

Trishanna Masters

Member Care Representative - General

Old Harbour

Venessa McLean

Teller

Old Harbour

Veronica Campbell

Office Attendant

Linstead

Vinnett Smith-Myers

Member Care Representative - Receptionist

Linstead

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

(CURRENT)

MANAGEMENT & STAFF Continued NAME

POSITION

Operations

Camille Drummond

Operations Manager

Head Office

Alisa Bennett

Operations Assistant

Head Office

Azeim Johnson

Registry Clerk

Head Office

Colletta Brown

Operations Assistant

UWI

Charnelle Wright

Clerical Assistant

Spanish Town

Grichen Deans

Operations Assistant

Head Office

Ivanna McKenzie

Operations Officer

Spanish Town

Latoya Lamothe

Clerical Assistant

Spanish Town

Marrifa Terthoffer

Operations Assistant

Head Office

Monique Liking

Operations Assistant

Head Office

Onecia Lennon

Clerical Assistant

Spanish Town

Richard Davy

Operations Assistant

Head Office

Ronald Foote

Registry Clerk

UWI

Roshain Watson

Operations Officer

Head Office

Simone Valentine

Registry Clerk

Head Office

Tameka Foster

Operations Officer

Head Office

Tashauna Lawrence

Clerical Officer

UWI

Trishana Fender

Operations Assistant

Head Office

Velma Logan Kelly

Registry Clerk

Head Office

Vivolyn Walker

Operations Assistant

Head Office

Odene James

Risk and Compliance Manager

UWI

Cadene Lattibeaudiere-Fyffe

Compliance Officer

UWI

Patricia Hemmings

Clerical Assistant

UWI

Samantha Smellie

Clerical Assistant

UWI

Shellique Oâ&#x20AC;&#x2122;Gere

Risk Analyst

UWI

Tasha-Gaye Richards

Risk Analyst

UWI

Risk and Compliance

LOCATION

DEPARTMENT

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

(CURRENT)

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom in the Community

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

The EduCom team out in their numbers at the New Haven S.D.A Early Childhood Centre

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom

IN THE COMMUNITY Continued LABOUR DAY EduCom hosted its annual 2018 Labour Day projects on May 23, 2018 in a number of schools and select institutions across the island. We provided facelifts by way of beautifying the New Haven S.D.A Early Childhood Centre in Kingston and St. Andrew, Porus Primary School in Mandeville, Ensom City Primary School in St. Catherine and the Pregnancy Resource Centre in Montego Bay.

CEO Elvis King (right) and Credit Officer Kayon Allen paint a section of the play area at the New Haven S.D.A Early Childhood Centre.

Board Director, Hopeton Newell applies cement to a section of the Ensom City Primary School in St. Catherine.

Teller for the Montego Branch Brandon Kirlew applies paint to a section of the Pregnancy Resource Centre in Montego Bay.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EDUCOM IN THE COMMUNITY

A view of the Jamaica Conference Centre as the meeting progressed.

HIGHLIGHTS FROM OUR 3RD ANNUAL GENERAL MEETING EduCom hosted its 3rd Annual General Meeting on May 5, 2018 at the Jamaica Conference Centre in the Kenneth Rattray Conference Room beginning at 10:00 am. An estimated 460 members from across the island were in attendance. Physical copies of the Annual Report in print and CD formats were made available to our members. The Annual General Meeting had various companies present to market their products and services. These included: • Credit Info • Caribbean Insurance Jamaica Limited • Jamaica Co-operative Insurance Agency • Sea Garden Beach Resort

Pre si de nt of t he B o a rd of D i re ct o rs C. Leopold Nesbeth looks through the Annual Report with a member.

Members also had the opportunity to view the meeting via a live stream on our Facebook page. The meeting concluded with the election of several new members to the Board of Directors and the respective committees.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom

IN THE COMMUNITY Continued HIGHLIGHTS FROM OUR 3RD ANNUAL GENERAL MEETING CONTâ&#x20AC;&#x2122;D

Sales and Marketing Manager, Delroy Scarlett presents a gift certificate for a two-night stay for 2 from Sea Garden Beach Resort to lucky member, Ms. Kerri-ann Pratt-Ramsay.

Mrs. Sonia Smith poses a question to the Board during the meeting which took place on May 5, 2018.

Branch Supervisor for the U.W.I Branch, Mrs. Stacey-Ann Porter-Davis presents a token to a member as he makes his way to the Kenneth Rattray Conference Room.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EDUCOM IN THE COMMUNITY

COMMITTED TO WORTHY NATIONAL CAUSES EduCom was a proud, committed participant with its focus on such national causes as cancer, primary education, children in the care of the State, or upgrading places of safety, among others, taken on by the annual Sagicor Sigma Corporate Run.

The EduCom team out in their numbers at the 2018 staging of the Sagicor Sigma Corporate Run

SAGICOR SIGMA CORPORATE RUN EduCom participated in the annual staging of the Sagicor Sigma Corporate Run on February 18, 2018 where we had approximately 80 participants, inclusive of representatives from the Board of Directors, staff and volunteers. We also participated in the annual T-shirt Competition.

Members of the team are all smiles after the completion of the race.

Team members, Network Administrator Brendan Phipps and Marketing and Promotions Officer Tremaine Morgan, showcase their medals received for participation.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom

IN THE COMMUNITY Continued

Chief Executive Officer, Mr. Elvis King (right) and President of the Board of Directors Mr. C. Leopold Nesbeth (left) sit among the full cohort of GSAT scholarship recipients at the conclusion of the 2018 Awards ceremony.

EDUCOM CO-OP CREDIT UNION AWARDS 88 SCHOLARSHIPS TO STUDENTS VALUED AT $2.18 MILLION EduCom Co-operative Credit Union awarded 88 scholarships for the 2018/2019 academic year, to students at the primary and tertiary levels across the island. The Annual Awards Ceremony was held on August 15, 2018 at the Knutsford Court Hotel, in Kingston. The EduCom Scholarship Awards Programme selects individuals from its membership who have maintained a minimum “A”average in their external examinations along with demonstrating verifiable financial need. The scholarships valued at $2.18 Million, will allow students to pursue studies at the University of the West Indies, The University of Technology Jamaica, various Community and Teachers’ Colleges as well as at a number of high schools.

Speaking to this year’s recipients, special guest Speaker, Minister of Education, Youth and Information, Senator the Hon. Ruel Reid hailed EduCom for its investment in the education of our youths. Chief Executive Officer, Elvis King encouraged the awardees to look past “the limited resources that may be available... The barriers that challenge your abilities to succeed and continue to achieve your goals”. “Beginning September, go out and make your parents, your families, teachers, and EduCom proud as you take on this new challenge of secondary education.” Of the 88 scholarships granted for the new academic year, 72 of the recipients were GSAT awardees. At the Tertiary level, the EduCom Scholarships will allow 16 students to pursue Degree courses.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EDUCOM IN THE COMMUNITY

Chief Executive Officer, Mr. Elvis King presents Dejauna Campbell with an award for scholastic achievement in the recent Grade Six Achievement Test at EduComâ&#x20AC;&#x2122;s 2018 Annual Scholarship Awards Ceremony.

Chief Executive Officer, Elvis King (right) and President of the Board of Directors, C. Leopold Nesbeth (left) sit among the tertiary scholarship recipients at the awards ceremony held on August 15, 2018.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom

IN THE COMMUNITY Continued CHILD’S MONTH TREAT On May 29, 2018 EduCom hosted our annual Children’s Day Treat at our adopted early childhood Schools in Kingston, Albert Street and Hope S.D.A Basic Schools. The children were treated to refreshments and tokens. We also presented the students with sponsored items in the form of oral packs from our external partner, Kirk Distributors.

Students at the Hope S.D.A Basic School display their oral packs from Kirk Distributors.

Students at the Albert Street Basic School display their oral packs sponsored by Kirk Distributors.

Students at the Albert Street S.D.A Basic School enjoy a meal during EduCom’s Children’s Day treat.

Students and teachers at the Hope S.D.A Basic School pose with donated items during our visit on May 29, 2018.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EDUCOM IN THE COMMUNITY

Team Members of the Old Harbour branch donated items to Mr. Michael Whitely, Manager of the Sunbeam Children’s Home for Boys in St. Catherine.

CREDIT UNION WEEK International Credit Union Week was celebrated during the week of October 14-20, 2018 across all our nine branches. EduCom participated in a number of activities commemorating the week, as we showed appreciation to our members. As part of our efforts to give back, on October 17, 2018, through our Soup N’ Soap Initiative, we visited select Homes to share with the residents and wards of state. We visited the Jamaica National Children’s Home (formerly National Children’s Home) in St. Andrew that caters to children who are neglected or abused, along with those exhibiting severe mental or physical disabilities.

Branch Supervisor for Mandeville,Taneca Whyte (right) presents a cheque to Major Harris of the Hanbury Home for Children during our Soup N’Soap Initiative.

We donated care items, from members of staff and our external sponsors – KIRK Distributors, to the following entities: • Kingston & St. Andrew - Jamaica National Children’s Home (formerly National Children’s Home) • Mandeville – The Salvation Army, Hanbury Home for Children • Montego Bay- The Pregnancy Resource Center • St. Catherine – The Sunbeam Children’s Home for Boys

EduCom’s Public Relations and Communications Officer Monique Davidson (right) presents a donation of items to Mr. Leroy Anderson, Director of the Jamaica National Children’s Home.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom

IN THE COMMUNITY Continued

Team Members at our Montego Bay branch are all smiles on Pink Day.

The Mandeville team was all smiles during Pink Day

Dr. Tana Rooms from the Universityâ&#x20AC;&#x2122;s Health Centre was on hand to brief staff and our members on the importance of doing self-checks and regular screening.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EDUCOM IN THE COMMUNITY

Team members at our Oxford Terrace branch pose for a photo during our Pink Day celebrations.

BREAST CANCER AWARENESS MONTH EduCom embarked on a charity drive across all branches in an effort to raise funds to donate to the Jamaica Cancer Society during the month-long awareness drive. We were able to amass a total of $33,000 through the sale of pins/ribbons and personal donations. We placed Jamaica Cancer Society branded tins at all locations as we encouraged members to donate to this worthy cause. Public Relations and Communications Officer, Monique Davidson (left) presents a cheque to Michael Leslie, Finance Manager at the Jamaica Cancer Society during Breast Cancer Awareness Month.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS 31 December 2018

INDEX Authority to Convene - Registrar of Co-operatives and Friendly Societies Independent Auditorsâ&#x20AC;&#x2122; Report to the Registrar

68 69-71

Financial Statements Statement of Surplus or Deficit and Other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statements of Cash Flows Notes to the Financial Statements

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

72 73 74-76 77 78-150

FINANCIAL STATEMENTS

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

72 to 150

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE UNION LIMITED EduCom Co-Op Credit CREDIT Union Limited Financial Statements STATEMENT OF SURPLUS OR DEFICIT AND OTHERor COMPREHENSIVE INCOME Statement of Surplus Deficit and Other

Comprehensive Income2018 YEAR ENDED 31 DECEMBER Year Ended 31 December 2018 Note INTEREST INCOME: Loans to members Liquid assets Financial investments Reverse repurchase agreements

INTEREST EXPENSE AND OTHER FINANCIAL COSTS: Deposits Voluntary shares Deferred shares External credits Other financial costs

NET INTEREST INCOME Provision for loan impairment

(

2018 $’000

2017 $’000

844,297 4,817 14,229 32,169

809,432 6,091 11,036 59,927

895,512

886,486

130,685 36,915 1,605 9,061 5,947

118,316 39,495 3,391 16,441 5,638

184,213

183,281

711,299 5,366)

703,205 ( 53,811)

NET INTEREST INCOME AFTER PROVISION FOR LOAN IMPAIRMENT Non-interest income

705,933 148,150

649,394 135,847

Operating expenses

854,083 (727,502)

785,241 (669,777)

126,581

115,464

SURPLUS FOR THE YEAR OTHER COMPREHENSIVE INCOME: Item that will not be reclassified to surplus Re-measurement of defined benefit pension plan

( 15,606)

Item that may be reclassified to surplus Unrealised gain on available for sale investment

( 15,606)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

110,975

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

(

2,092) 1,979

(

113) 115,351

EduCom Co-Op Credit Union Limited Financial Statements

Statement of Financial Position Year Ended 31 December 2018

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements STATEMENT OF CHANGES IN EQUITY Statement of Changes in Equity YEAR ENDED2018 31 DECEMBER 2018 31 December

Note Balance at 1 January 2017 Total comprehensive income - Net surplus for the year - Other comprehensive income Transactions with owners - Entrance fees - Dividend - Issue of permanent shares - Shares issued on merger Net equity arising on business combination Transfer to statutory reserve Decrease in other reserve

Non Institutional Capital $’000

812,853

326,864

26 26 25(a)

Balance at 31 December 2017 (as previously reported)

1,169 8,740 79,510 38,608 28,866 -

Balance at 1 January 2018 (restated)

Total comprehensive income - Net surplus for the year - Other comprehensive income

25(b)

1,868 21,249 8,029 31,645 1,032,537

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

1,139,717 115,464 113)

( 50,000) ( 101 ( 28,866) ( 8,004) (

1,169 50,000) 8,841 79,510 38,608 8,004)

355,446 ( 14,724)

969,746

Total $’000

115,464 113) (

(

969,746

Effect of adopting new standard

Transactions with owners - Entrance fees - Dividend - Issue of permanent shares Transfer to statutory reserve Decrease in other reserve

Institutional Capital $’000

1,325,192 (

340,722 126,581 ( 15,606)

14,724) 1,310,468

(

126,581 15,606)

( 24,999) ( ( 388) ( 31,645) ( 61,075) (

1,868 3,750) 7,641 61,075)

333,590

1,366,127

EduCom Co-OpCO-OPERATIVE Credit Union Limited Financial Statements EduCom CREDIT UNION LIMITED

Statement of Changes in INEquity STATEMENT OF CHANGES EQUITY Year Ended 31 December 2018

YEAR ENDED 31 DECEMBER 2018 INSTITUTIONAL CAPITAL

Note Balance at 1 January 2017 Transactions with owners - Entrance fees - Shares issued on merger - Issue of permanent shares Transfer from undistributed surplus Net equity arising on business Combination Balance at 31 December 2017 Transactions with owners - Entrance fees - Dividend - Issue of permanent shares Transfer from undistributed surplus Balance at 31 December 2018

Business Permanent Combination Share Reserve Total $’000 $’000 $’000

Statutory Reserve $’000

Special Reserve $’000

226,650

253,143

83,591

249,469

812,853

1,169 28,866

79,510 8,740 -

1,169 79,510 8,740 28,866

38,608

256,685

253,143

171,841

288,077

969,746

1,868 31,645

21,249 8,029 -

1,868 21,249 8,029 31,645

290,198

253,143

201,119

288,077

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

1,032,537

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Transactions with owners - Dividend - Issue of permanent shares Decrease in retirement benefits Transfer to statutory reserve Transfer to reserves Honorarium Decrease in reserve Balance at 31 December 2018 25 (b) 25 (a)

Balance at 31 December 2017 (as previously reported) Effect of adopting new standard

Balance at 1 January 2018 (restated) Total comprehensive income - Net surplus for the year - Other comprehensive income

25 (b) 25 (a)

Total comprehensive income - Net surplus for the year - Other comprehensive incomeTransactions with owners - Dividend - Issue of permanent shares Increase in retirement benefits Transfer to statutory reserve Decrease in loan loss reserve Honorarium Decrease in reserve

Balance at 1 January 2017

Note

( 388) 3,971

47,800 (47,800) -

4,359

101 -

4,258

Permanent Shares Reserve $’000

Special Reserve $’000

(9,855) -

9,855

Loan Loss Reserve $’000

(12,221) 19,388

31,609

1,656 -

29,953

Retirement Benefit Reserve $’000

3,700 10,000 (13,275) 2,782

2,357

8,000 ( 8,004)

2,361

General Reserve $’000

NON-INSTITUTIONAL CAPITAL

Year Ended 31 December 2018 YEAR ENDED 31 DECEMBER 2018

204,253

Revaluation Reserve $’000

STATEMENT OF CHANGES IN EQUITY Statements of Changes in Equity

EduCom Co-OpEduCom CreditCO-OPERATIVE Union Limited Financial Statements CREDIT UNION LIMITED

( 1,979)

1,979

Fair Value Reserve $’000

115,464 2,092)

( 24,999) 12,221 ( 31,645) ( 51,500) ( 10,000) 103,196

126,581 ( 15,606)

98,144

( 12,745)

110,889

( 50,000) ( 1,656) ( 28,866) 9,855 ( 8,000) -

(

76,184

Undistributed Surplus $’000

(

115,464 113)

( 24,999) ( 388) ( 31,645) ( 61,075) 333,590

126,581 15,606)

340,722

( 14,724).

355,446

( 50,000) 101 ( 28,866) ( 8,004)

(

326,864

Total $’000

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements STATEMENT OF CASH FLOWS

Statement of Cash Flows

YEAR ENDED 31 DECEMBER 2018

Year Ended 31 December 2018 CASH FLOWS FROM OPERATING ACTIVITIES: Net surplus Adjustments for: Interest received Interest income Interest expense Interest paid Depreciation Finance expense Loss on disposal on property, plant and equipment Unrealised foreign exchange gain Pension expense Provision for loan impairment Changes in operating assets and liabilities Saving deposits Voluntary shares Retirement benefit assets Inventories Other assets Loans Payables Decrease in reserves Cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Cash acquired through business combination Purchase of property, plant and equipment Proceed on disposal of property, plant and equipment Reverse repurchase agreements Financial investments Cash provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES: External credits Increase in permanent shares Deferred shares Dividend paid Entrance fees Interest paid on external credit Cash used in financing activities Exchange gain on foreign cash balances . Increase in cash and cash equivalents Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR (note 14)

2018 $’000

2017 $’000

126,581

115,464

901,911 (895,512) 169,205 (155,181) 23,787 9,061 ( 1,169) 2,024 5,366 186,073

866,685 (886,486) 161,202 (140,109) 27,323 16,441 3,540 ( 1,653) 1,502 53,811 217,720

591,866 116,602 ( 5,409) ( 474) 12,844 (624,976) 16,684 ( 13,275)

373,388 302,783 575,762 ( 998) 52,090 (780,085) ( 51,496) ( 8,004).

279,935

100,148

( 13,556) 99,431 30,450

98,545 ( 34,576) 14,252 229,341 (167,826)

116,325

139,736

( 23,165) ( 21,108) ( 535) 1,868 ( 9,061)

( 68,203) 8,841 ( 3,909) ( 50,000) 1,169 ( 16,441)

( 52,001) 344,259 154

(128,543) 111,341. 1,653.

344,413 243,211

112,994 130,217

587,624

243,211

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

CO-OPERATIVE CREDIT UNION LIMITED EduCom EduCom Co-Op Credit Union Limited Financial Statements OF CASH FLOWS Notes to theSTATEMENT Financial Statements

31 December 2018 31 DECEMBER 2018 1.

STATUS AND PRINCIPAL ACTIVITIES: EduCom Co-operative Credit Union Limited (the Credit Union) is incorporated under the laws of Jamaica and is registered under the Co-operative Societies Act. The registered office of the Credit Union is located at 10 Oxford Terrace, Kingston 5, Jamaica. The Credit Union was formed following the merger of A.A.M.M Co-operative Credit Union Limited and UWI (Mona) & Community Co-operative Credit Union Limited on 1 April 2015. On 1 January 2017, the Credit Union merged its operation with St. Catherine Co-operative Credit Union Limited. The main activities of the Credit Union are to promote thrift among its members by affording them an opportunity to accumulate their savings and to create for them a source of credit for provident or productive purposes at reasonable rates of interest. Membership to the Credit Union is obtained by members’ subscribing to a minimum of $2,000 permanent shares and a minimum of $600 voluntary shares. Voluntary shares are deposits available for withdrawals on demand, while permanent shares are paid in cash and invested in risk capital and are redeemable only upon transfer to another member. Individual membership may not exceed 20% of the total of the members’ shares of the Credit Union. The Co-operative Societies Act requires, among other provisions, that at least 20% of the net surplus of the Credit Union be transferred annually to a reserve fund. Section 59 (1) & (11) of the Act provides for the exemption from income tax and stamp duty for the Credit Union. The Credit Union’s operations are located in the parishes of Kingston, St. Andrew, St. Catherine, Manchester and St. James.

FUNCTIONAL CURRENCY: These financial statements are presented in Jamaican dollars which is the Credit Union’s functional currency. Except where indicated to be otherwise, financial information presented are shown in thousands of Jamaican dollars.

SIGNIFICANT ACCOUNTING POLICIES: The principal accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a)

Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards as issued by the International Accounting Standards Board (IASB) and Interpretations (collectively IFRSs). The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain properties and financial assets that are measured at fair value or revalued amounts.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements NOTESto TO the THE FINANCIAL STATEMENTS Notes Financial Statements

31 December 2018 31 DECEMBER 2018 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (a)

Basis of preparation (cont’d) The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Credit Union’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4. New standards, interpretations and amendments effective in the current year Certain new standards, amendments and clarifications to existing standards have been published that became effective during the current financial year. The Credit Union has assessed the relevance of all such new standards, amendments and clarifications and has put into effect the following, which are is immediately relevant to its operations. IFRS 9, ‘Financial Instruments' (effective for accounting periods beginning on or after 1 January 2018). The standard addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial assets and liabilities, including a new expected credit loss model for calculating impairment of financial assets and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. Although the permissible measurement bases for financial assets – amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL) - are similar to IAS 39, the criteria for classification into the appropriate measurement category are significantly different. IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ model, which means that a loss event will no longer need to occur before an impairment allowance is recognized. The adoption of IFRS 9 resulted in changes in the accounting policies and adjustments to amounts recognized in the financial statements. Management has utilized the modified retrospective transition approach and has elected not to restate comparative information in accordance with the transitional provision. As a result, the comparative information provided continues to be accounted for in accordance with the Credit Union’s previous accounting policy. The impact on the financial statements on adoption of the new standard is disclosed in note 29.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom EduCom Co-Op Credit Union Limited Statements CO-OPERATIVE CREDITFinancial UNION LIMITED

Notes toNOTES the TO Financial Statements THE FINANCIAL STATEMENTS 31 December 2018 31 DECEMBER 2018 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (a)

Basis of preparation (cont’d) New standards, interpretations and amendments effective in the current year (cont’d) IFRS 15, ‘Revenue from contracts with Customers’, (effective for annual periods beginning on or after 1 January 2018). IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognized when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the goods or service; so the notion of control replaces the existing notion of risks and rewards. Any bundled goods or services that are distinct must be separately recognised, and discounts or rebates on the contract price must generally be allocated to the separate elements. When the consideration varies for any reason, minimum amounts must be recognized if they are not at significant risk of reversal. Cost incurred to secure contracts with customers have to be capitalized and amortised over the period when the benefits of the contracts are consumed. The adoption of IFRS 15 did not impact the timing or amount of sales from contracts with customers and the related assets and liabilities recognised by the Credit Union. New standards, interpretations and amendments not yet effective There are a number of standards, amendments to standards and interpretations which have been issued by the IASB that are effective in future accounting periods that the Credit Union has decided not to adopt early. The most significant of these are: IFRS 16, ‘Leases’ (effective for annual periods beginning on or after 1 January 2019) IFRS 16 eliminates the classification by a lessee of leases as either operating or finance. Instead all leases are treated in a similar way to finance leases in accordance with IAS 17. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (a)

Basis of preparation (cont’d) New standards, interpretations and amendments not yet effective (cont’d) IFRS 16, ‘Leases’ (effective for annual periods beginning on or after 1 January 2019) (cont’d) Lessees will be required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Lessor accounting under IFRS 16 is substantially unchanged from today’s accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases. IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17. Early application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs. The directors and management have not yet completed the assessment of the impact of the application of the standard on the Credit Union’s financial statements. Amendment to IFRS 9, ‘Financial Instruments on prepayments features with negative compensation’ (effective for annual periods beginning on or after 1 January 2019). This amendment confirms that when a financial liability measured at amortised cost is modified without this resulting in de-recognition, a gain or loss should be recognised immediately in profit or loss. The gain or loss is calculated as the difference between the original contractual cash flows and the modified cash flows discounted at the original effect interest rate. The Credit Union is currently assessing the impact of this amendment. The Credit Union does not expect any other standards or interpretations issued by the IASB, but not yet effective, to have a material impact on the Credit Union.

(b)

Business Combination Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Credit Union. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The Credit Union does not recognize any goodwill or negative goodwill, any difference between the fair value of net assets acquired and deemed purchase consideration, is dealt with as an adjustment to equity.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (c)

Foreign currency translation Transactions entered into by the Credit Union in a currency other than the currency of the primary economic environment in which they operate (their “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognized immediately in surplus or deficit. Exchange gains and losses on non-monetary available for sale financial assets form part of the overall gain or loss recognized in respect of that financial instrument.

(d)

Financial assets A financial asset is any contract that gives rise to both a financial asset in one entity and a financial liability or equity of another entity. Classification From 1 January 2018, the Credit Union classifies its financial assets based on the business model used for managing the financial assets and the asset’s contractual terms measured at either:   

Amortised cost Fair value through other comprehensive income (FVOCI) Fair Value through profit or loss (FVPL)

The available for sale (AFS) category under IAS 39 is no longer applicable. For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. The Credit Union reclassifies debt investments only when its business model for managing those assets changes. Measurement (i)

Debt instruments Measurement of debt instruments depends on the Credit Union’s business model for managing the asset and the cash flow characteristics of the asset. The Credit Union classifies its debt instruments into two measurement categories:

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (d)

Financial assets (cont’d) Measurement (cont’d) (i)

Debt instruments (cont’d) Amortised cost Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in the income statement using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss. Impairment losses are presented as a line item in the income statement. Fair value through profit or loss (FVPL) Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is measured at FVPL is recognised in profit or loss in the period in which it arises.

(ii)

Equity instruments Upon initial recognition, the Credit Union elects to classify irrevocably some of its equity investments as equity instruments at FVOCI when they are not held for trading. Such classification is determined on an instrument-by-instrument basis. Gains and losses on these equity instruments are never recycled to surplus. Dividends from such investments continue to be recognized in surplus when the Credit Union’s right to receive payments is established. Equity instruments at FVOCI are not subject to an impairment assessment. Equity instruments held for trading are measured at FVPL and changes in the fair value are recognized in surplus for the period.

Impairment From 1 January 2018, the Credit Union assesses on a forward looking basis the expected credit losses (ECL) associated with its financial assets classified at amortised cost.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom Co-Op Credit Union Limited Financial Statements EduCom CO-OPERATIVE CREDIT UNION LIMITED

Notes to the Financial Statements NOTES TO THE FINANCIAL STATEMENTS

31 December 2018

31 DECEMBER 2018

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (d)

Financial assets (cont’d) Impairment (cont’d) The ECL will be recognised in surplus before a loss event has occurred. The measurement of ECL reflects an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes. The probability-weighted outcome considers multiple scenarios based on reasonable and supportable forecasts. Under current guidance, impairment amount represents the single best outcome; the time value of money; and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. ECL is calculated by multiplying the Probability of default (PD), Loss Given Default (LGD) and Exposure at Default (EAD). The impairment model uses a three-stage approach based on the extent of credit deterioration since origination: Stage 1 – 12-month ECL applies to all financial assets that have not experienced a significant increase in credit risk since origination and are not nonperforming. The ECL will be computed using a 12-month PD that represents the probability of default occurring over the next 12 months. Stage 2 – When a financial asset experiences a significant increase in credit risk subsequent to origination but is not non-performing, it is considered to be in Stage 2. This requires the computation of ECL based on lifetime PD that represents the probability of default occurring over the remaining estimated life of the financial asset. Provisions are higher in this stage because of an increase in risk and the impact of a longer time horizon being considered compared to 12 months in Stage 1. Stage 3 – Financial assets that have an objective evidence of impairment will be included in this stage. Similar to Stage 2, the allowance for credit losses will continue to capture the lifetime ECL. The Credit Union uses judgement when considering the following factors that affect the determination of impairment:

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements

Notes to the Statements NOTESFinancial TO THE FINANCIAL STATEMENTS 31 December 2018 31 DECEMBER 2018 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (d)

Financial assets (cont’d) Impairment (cont’d) Assessment of Significant Increase in Credit Risk (SICR) The assessment of a significant increase in credit risk is done on a relative basis. To assess whether the credit risk on a financial asset has increased significantly since origination, the Credit Union compares the risk of default occurring over the expected life of the financial asset at the reporting date to the corresponding risk of default at origination, using key risk indicators that are used in the Credit Union’s existing risk management processes. At each reporting date, the assessment of a change in credit risk will be assessed on a collective basis, this would require the segmentation of credit exposure on the basis of shared credit risk characteristics. This assessment is symmetrical in nature, allowing credit risk of financial assets to move back to Stage 1 if the increase in credit risk since origination has reduced and is no longer deemed to be significant. Macroeconomic Factors, Forward Looking Information and Multiple Scenarios The Credit Union applies an unbiased and probability weighted estimate of credit losses by evaluating a range of possible outcomes that incorporates forecasts of future economic conditions. Macroeconomic factors and forward looking information are incorporated into the measurement of ECL as well as the determination of whether there has been a significant increase in credit risk since origination. Measurement of ECLs at each reporting period reflect reasonable and supportable information at the reporting date about past events, current conditions and forecasts of future economic conditions. The Credit Union uses three scenarios that are probability weighted to determine ECL: base, optimistic and pessimistic. Expected Life When measuring ECL, the Credit Union considers the maximum contractual period over which the Credit Union is exposed to credit risk. All contractual terms are considered when determining the expected life.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom Co-Op Credit Union Limited Financial Statements EduCom CO-OPERATIVE CREDIT UNION LIMITED

Notes to the Financial Statements NOTES TO THE FINANCIAL STATEMENTS

31 December 2018

31 DECEMBER 2018

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (d)

Financial assets (cont’d) Impairment (cont’d) Application of the Simplified Approach For other receivables, the Credit Union applies the simplified approach permitted by IFRS 9, which requires that the impairment provision is measured at initial recognition and throughout the life of the receivables using a lifetime ECL. As a practical expedient, a provision matrix is utilised in determining the lifetime ECLs for other receivables. The lifetime ECLs are determined by taking into consideration historical rates of default for each segment of aged receivables as well as the estimated impact of forward looking information. Policy applicable until 31 December 2017 The Credit Union applied IFRS 9 on 1 January 2018 and has elected not to restate comparative information in accordance with the transitional provisions in IFRS 9. As a result, the comparative information provided continues to be accounted for in accordance with the Credit Union’s previous accounting policy. At 31 December 2017, the Credit Union classifies its financial assets in the following categories: loans and receivables and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Loan and receivables Loan and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are classified as such in the financial statements. They arise principally through loans to customers, but also incorporate other types of contractual monetary assets such as liquid assets, cash and bank balances and reverse repurchase agreements. A provision for credit losses is established if there is objective evidence that the Credit Union will not be able to collect all amounts outstanding according to the original contractual terms of the loan. When a loan has been identified as impaired, the carrying amount of the loan is reduced, by recording specific provisions for credit losses, to its estimated recoverable amount, the present value of expected cash flows, including amounts recoverable from guarantees and collateral, discounted at the original effective interest rate of the loans.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (d)

Financial assets (cont’d) Policy applicable until 31 December 2017 (cont’d) Loan and receivables (cont’d) A loan is classified as impaired when, in management’s opinion, there has been deterioration in credit quality to the extent that there is no longer reasonable assurance of timely collection of the full amount of principal and interest. If a payment on a loan is contractually three months in arrears, the loan will be classified as impaired, if not already classified as such. For impaired loans, the accrual of interest income based on the original terms of the loan is discontinued. Interest on non-performing loans is taken into account on the cash basis. IFRS requires the increase in the present value of impaired loans due to the passage of time to be reported as interest income. The difference between the Credit Union’s basis and IFRS was assessed as immaterial. Write-offs are made when all or part of a loan is deemed uncollectible or in the case of debt-forgiveness. Write-offs are charged against previously established provisions for impairment losses and reduce the principal amount of the loan. Recoveries, in part or in full, of amounts previously written-off are recognized as gains in net surplus. The Credit Union’s loan loss provision requirements as stipulated by the Jamaica Cooperative Credit Union League (JCCUL/the League), that exceed the IFRS impairment allowance are dealt with in a non-distributable loan loss reserve as an appropriation of accumulated surplus. Available –for- sale financial assets Available-for-sale financial assets are non-derivatives that are not included in the above category and are included in financial investments in the statement of financial position. Regular purchases and sales of financial assets are recognised on the trade-date — the date on which the Credit Union commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Credit Union has transferred substantially all risks and rewards of ownership.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

CO-OPERATIVE CREDITFinancial UNION LIMITED EduCom EduCom Co-Op Credit Union Limited Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (d)

Financial assets (cont’d) Policy Applicable until 31 December 2017 (cont’d) Available –for- sale financial assets (cont’d) Available-for-sale financial assets are those intended to be held for an indefinite period of time which may be sold in response to needs for liquidity, changes in interest rates or market prices. They are initially recognized at fair value (including transaction costs) and subsequently re-measured at fair value. Unrealized gains and losses arising from changes in fair value of available-for-sale securities are recognized in other comprehensive income. When the securities are disposed of or impaired, the related accumulated unrealized gains or losses included in other comprehensive income are transferred to the income statement. Loans and receivables are initially measured at fair value which is the consideration to originate the loan and are subsequently carried at amortised cost using the effective interest method. The fair values of quoted investments in active markets are based on current bid prices. If there is no active market for a financial asset, it is carried at cost. Financial assets are assessed at each date of the statement of financial position for objective evidence of impairment. A financial asset is considered impaired if its carrying amount exceeds its estimated recoverable amount. The amount of impairment loss for assets carried at amortised cost is calculated as the difference between the asset’s carrying amount and the present value of expected future cash flows discounted at the original effective interest rate. The recoverable amount of a financial asset carried at fair value is the present value of expected future cash flows discounted at the current market interest rate for a similar financial asset. In the case of equity securities classified as available-for-sale a significant or prolonged decline in the fair value below cost is considered an indicator of impairment. Significant or prolonged are assessed based on market conditions and other indicators. If any such evidence exists for available-for-sale financial assets, the cumulative loss, measured as the difference between the acquisition cost and the current fair value, less any impairment losses previously recognized in the income statement, is removed from the other comprehensive income and recognized in the income statement. Investment securities are derecognized when the contractual rights to receive the cash flows from these assets have ceased to exist or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are also transferred (if substantially all the risks and rewards have not been transferred).

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (e)

Financial liabilities In both the current and prior period, the Credit Union’s financial liabilities net of transaction costs, are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest method. At the reporting date, the items classified as financial liabilities are members’ voluntary shares, saving deposits, deferred shares, payables and external credits.

(f)

Reverse repurchase agreements The purchase and sales of securities under resale and repurchase agreements are treated as collateral lending and borrowing transactions. The related interest income and expense are recorded on the accrual basis.

(g)

Cash and cash equivalents Cash and cash equivalents are carried in the statement of financial position at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand and in bank and deposits not held to satisfy statutory requirements and short term highly liquid investments with original maturities of three months or less, net of bank overdraft.

(h)

Inventories Inventories are stated at the lower of cost and fair value less cost to sell, cost being determined on the first-in-first-out basis.

(i)

Other assets Other receivables are carried at anticipated realizable value. An estimate is made for doubtful receivables based on all outstanding amounts at year end. Bad debts are written off in the year in which they are identified.

(j)

Asset held for sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell except for assets such as investment property that are carried at fair value.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

CO-OPERATIVE CREDITFinancial UNION LIMITED EduCom EduCom Co-Op Credit Union Limited Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (j)

Asset held for sale (cont’d) An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of derecognition.

(k)

Property, plant and equipment Items of property, plant and equipment are recorded at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Freehold buildings are subsequently carried at fair value, based on periodic valuations by a professionally qualified valuer. These revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. Changes in fair value are recognised in other comprehensive income and accumulated in the revaluation reserve except to the extent that any decrease in value in excess of the credit balance on the revaluation reserve, or reversal of such a transaction, is recognised in profit or loss. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Credit Union and the cost of the item can be measured reliably. The carrying amount of any replaced part is derecognised. All other repairs and maintenance are charged to surplus or deficit during the financial period in which they are incurred. Depreciation is calculated on the straight-line method at annual rates estimated to write off the costs of the assets over the period of their estimated useful lives. Land is not depreciated. Annual rates are as follows: Buildings Leasehold Improvement Computer and Equipment Computer software Furniture and Fixtures Motor vehicles

2½% 14 1/3% 20% 33 1/3% 10% 20%

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (k)

Property, plant and equipment (cont’d) Property, plant and equipment are periodically reviewed for impairment. Where the carrying amount of the assets is greater than the estimated recoverable amount, it is written down immediately to its recovery amount. Gains and losses on disposals of property, plant and equipment are determined by reference to their carrying amounts and are taken into account in determining profit or loss. The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at each reporting date.

(l)

Investment property Investment property is initially recognised at cost and subsequently carried at fair value with changes in the carrying value recognised in the statement of comprehensive income. Fair value is determined every three years by an independent registered valuer, and in each of the two intervening years by the directors. Fair value is based on current prices in an active market for similar properties in the same location and condition. Rent receivable is spread on a straight-line basis over the period of the lease.

(m)

Employee benefits The Credit Union contributes to two separate pension funds on behalf of its employees a defined contribution plan and a defined benefit plan independently administered as follows: Defined contribution plan This is a money purchase plan whereby it pays contributions to a privately administered fund. Once the contributions have been paid, the Credit Union has no further obligations. The regular contributions constitute net periodic costs for the year in which they are due and are included in staff costs. Defined benefit plan This is a multi-employer defined benefit pension scheme. The pension is funded from payments from employee and by the Credit Union, taken into account the recommendation of independent qualified actuaries.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (m)

Employee benefits (cont’d) Defined benefit plan (cont’d) The asset or liability in respect of defined benefit plans is the difference between the present value of the defined benefit obligations and fair value of plan assets at the reporting date. Where a pension asset arises, the amount recognized is limited to the present value of any economic benefits available in the form of funds from the plan or reductions in the future contributions to the plan. The valuation is performed using the projected unit credit method. Under this method, the cost of providing pensions is charged to net surplus so as to spread the regular cost of service over the service lives of the employees. The pension obligation is measured as the present value of the estimated future cash outflows using discount rates based on market yields on government securities which have terms to maturity approximating the terms of the related liability. The pension plan assets are allocated based on the Credit Union’s obligations as a proportion of the total obligations of the plan.

(n)

Borrowings Borrowings are recognized initially as the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective yield method. Any difference between proceeds, net of transaction costs, and the redemption value is recognized in surplus or deficit over the period of the borrowings.

(o)

Saving deposits Saving deposits are recognized initially at the normal amount when funds are received. Deposits are subsequently stated at amortised cost.

(p)

Leases Leases of property where the entity has substantially all the risks and rewards of ownership are classified as finance leases. Finance charges are expensed in the statement of surplus or deficit over the lease period. Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments under operating leases are charged as an expense in the statement of surplus or deficit on the straight- line basis over the period of the lease.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (q)

Shares Permanent shares Permanent shares may be redeemable subject to the sale, transfer, or repurchase of such shares. Dividends may be paid on permanent shares subject to the profitability of the Credit Union. Permanent shares are equity shares and form part of the capital of the Credit Union. Voluntary shares Members’ voluntary shares represent deposit holdings of the Credit Union’s members, to satisfy membership requirements and to facilitate eligibility for loans and other benefits. These shares are classified as financial liabilities. Interest payable on these shares are determined at the discretion of the Credit Union and reported as interest in the statement of income in the period in which they are approved. Deferred shares Deferred shares form part of the capital of the Credit Union. These shares represent placement by members which are not withdrawable for a period of five (5) years. Any redemption before the expiration would result in a penalty being levied. Interest payable on these deferred shares was set at an interest rate of 8% per annum from the date of origination to 30 September 2017. Thereafter, the interest rate payable will be determined by the Bank of Jamaica 90-day Treasury Bill weighted average interest rate plus 1% on a quarterly basis until maturity.

(r)

Institutional capital Institutional capital includes the statutory reserve fund, as well as any other reserve established from time to time which, in the opinion of the directors, are necessary to support the operations of the Credit Union and, thereby, protect the interest of the members. These reserves are not available for distribution.

(s)

Revenue recognition Revenue is income that arises in the course of the ordinary activities of the Credit Union. The Credit Union offers financial services to its approved members. These services are provided on a time and fixed-price contact, with terms ranging from one year to thirty-five years. Revenue is generally recognised at the contractual rates. Accordingly, revenue comprises interest income, fees and commissions, and income and gains from trading and holding financial instruments.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom Co-Op Credit Union Limited Financial Statements EduCom CO-OPERATIVE CREDIT UNION LIMITED

Notes to the Financial Statements NOTES TO THE FINANCIAL STATEMENTS

31 December 2018

31 DECEMBER 2018

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (s)

Revenue recognition (cont’d) (i)

Interest income As at 1 January 2018, interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for: -

Purchased or originated credit-impaired (POCI) financial assets, for which the original credit-adjusted effective interest rate is applied to the amortised cost of the financial asset.

Financial assets that are not ‘POCI’ but have subsequently become credit impaired (or ‘stage 3’), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e., net of the expected credit loss provision).

Under IAS 39, Interest income is recognized in surplus or deficit for all interestbearing instruments on the accrual basis, using the effective interest rate method based, on the actual purchase price. Interest income includes coupons earned on fixed income investments and accrued discounts or premiums on treasury bills and other discounted instruments. Where collection of interest income is considered doubtful, or payment is outstanding for more than 90 days, interest is taken into account on the cash basis. IFRS requires that when receivables 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. (ii)

Fees and commission Fees and commission income are recognized on the accrual basis when the service has been provided. Fees and commission arising from negotiating or participating in the negotiation of a transaction are recognized on completion of the underlying transaction. It is the Credit Union’s policy not to defer loan origination fees over the life of the loan.

(iii)

Dividend Dividend income from equity financial investments is recognized when the shareholder’s right to receive payment has been established.

(iv)

Rental income Rental income is recognized on the accrual basis.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 4.

CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINTY: Judgements and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (a)

Critical judgements in applying the Credit Union’s accounting policies In the process of applying the Credit Union’s accounting policies, management has not made any judgements that it believes would cause a significant impact on the amounts recognized in the financial statements.

(b)

Key sources of estimation uncertainty The Credit Union makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i)

Fair value estimation A number of assets included in the Credit Union’s financial statements require measurement at, and/or disclosure of, at fair value. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Market price is used to determine fair value where an active market (such as a recognized stock exchange) exists as it is the best evidence of the fair value of a financial instrument. The fair value measurement of the Credit Union’s financial and non-financial assets and liabilities utilizes market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorized into different levels based on the degree to which the fair value is observable. The standard requires disclosure of fair value measurements by level using the following fair value measurement hierarchy:

(i)

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.

(ii)

Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 4.

CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINTY (CONT’D): (b)

Key sources of estimation uncertainty (cont’d) (i)

Fair value estimation (cont’d) (iii)

Level 3 - Inputs for the asset or liability that are not based on fdskjjll;lljjobservable market data (that is, derived from prices).

The classifications of an item into the above levels are based on the lowest level of the inputs used that has a significant effect on the fair value measurement of these items. The Credit Union measures a number of items at fair value Financial investments – (note 11) Investment property - (note 13) Revalued building – property, plant and equipment (note 16) (ii)

Retirement benefit obligation The cost of these benefits and the present value of the future obligations depend on a number of factors that are determined by actuaries using a number of assumptions. The assumptions used in determining the net periodic cost or income for retirement benefits include the expected long-term rate of return on the relevant plan assets and the discount rate. Any changes in these assumptions will impact the net periodic cost or income recorded for retirement benefits and may affect planned funding of the pension plan. The Credit Union determines the appropriate discount rate at the end of each year, which represents the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the retirement benefit obligations. In determining the appropriate discount rate, the Credit Union considers interest rate of high-quality corporate bonds that are denominated in local currency and has terms to maturity approximating the terms of the related obligations. Other key assumptions for the retirement benefits are based on current market conditions.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 4.

CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINTY (CONT’D): (b)

Key sources of estimation uncertainty (cont’d) (iii)

Impairment losses on financial assets Expected credit loss allowance under IFRS 9 from 1 January 2018 The measurement of the expected credit loss allowance for financial assets measured at amortised cost requires the use of complex models and significant assumptions about future economic conditions and credit behaviour such as the likelihood of members’ defaulting and the resulting losses. A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as: Determining criteria for significant increase in credit risk Choosing appropriate models and assumptions for the measurement of ECL. Establishing the number and relative weights of forward looking scenarios. Establishing groups of similar financial assets for the purpose of measuring ECL. Further details of the inputs, assumptions and estimation techniques used in measuring ECL is further detailed in note 5, which also sets out key sensitivities of the ECL to changes in these elements. Impairment losses on loans to members under IAS 39 In determining amounts recorded for impairment losses on loans to members in the financial statements, management makes judgements regarding indicators of impairment, that is, whether there are indicators that suggest there may be measurable decrease in estimated future cash flows from loans, for example, through unfavorable economic conditions and default. Management uses estimate based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT: The Credit Union’s activities are principally related to the use of financial instruments, which involves analysis, evaluation and management of some degree of risk or combination of risks. The Credit Union manages risk through a framework of risk principles, organizational structures and risk management and monitoring processes that are closely aligned with the activities of the Credit Union. The Credit Union’s risk management policies are designed to identify and analyze the risks faced by the Credit Union, to set appropriate risk limits and controls, and to monitor risks and adherence to limits by means of regularly generated reports. The Credit Union’s aim is therefore to achieve an appropriate balance between risks and return and minimize potential adverse effects on the Credit Union’s financial performance. The Credit Union has exposure to the following risks from its use of financial instruments: Credit risk Liquidity risk Market risk In common with all other businesses, the Credit Union’s activities expose it to a variety of risks that arise from its use of financial instruments. This note describes the Credit Union’s objectives, policies and processes for managing those risks to minimize potential adverse effects on the financial performance of the Credit Union and the methods used to measure them. (i)

Principal financial instruments The principal financial instruments used by the Credit Union from which financial instrument risk arises, are as follows: -

Financial investments Loans, after provision for impairment Liquid assets Reverse repurchase agreements Cash and bank balances Payables Voluntary shares Deferred shares Saving deposits External credits

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (ii)

Financial instruments by category Financial assets

Assets at Amortised cost $’000

Assets at fair Value through Profit or loss $’000

Assets at Fair value through other comprehensive income $’000

Total $’000

As at 31 December 2018: Cash in hand and bank Liquid assets Reverse repurchase agreements Loans receivables Financial investments

53,365 534,259

738,582 6,700,193 397,333

9,408

51,333

738,582 6,700,193 458,074

8,423,732

9,408

51,333

8,484,473

Loans and receivables $’000

Available for sale $’000

Total $’000

As at 31 December 2017: Cash and bank balances Liquid assets Reverse repurchase agreements Loans receivables Financial investments

53,365 534,259

119,539 123,672

840,939 6,124,431 -

484,656

840,939 6,124,431 484,656

7,208,581

484,656

7,693,237

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

CO-OPERATIVE CREDIT UNION LIMITED EduCom EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (ii)

Financial instruments by category (cont’d) Financial liabilities

Payables Saving deposits Voluntary shares Deferred shares External credits

(iii)

At amortised cost 2018 2017 $’000 $’000 92,357 3,870,822 3,517,053 47,369 139,454

95,741 3,272,769 3,395,762 44,753 162,619

7,667,055

6,971,644

Financial instruments measured at fair value Financial investment which is comprised of unquoted equities classified as measured through other comprehensive income (OCI) and as available-for-sale, in the prior period, are measured at historical cost as their values cannot be reliably determined. The Credit Union has no intention of disposing of them. Fair value is the amount for which an asset could be exchanged, or liability settled, between knowledgeable willing parties in an arm’s length transaction. The following table provides an analysis of Credit Union’s financial instruments held as at 31 December that, subsequent to initial recognition, are measured at fair value. The financial instruments are grouped into level 1 to 3 based on the degree to which the fair values are observable as follows: Level 1 includes those instruments which are measured based on quoted prices in active markets for identical assets or liabilities. Level 2 includes those instruments which are measured using inputs other than quoted prices within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3 includes those instruments which are measured using valuation techniques that include inputs for the instrument that are not based on observable market date (unobservable inputs).

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

100

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iii)

Financial instruments measured at fair value (cont’d) Level 1 $’000

2018 level 2 $’000

. Total $’000

Financial assets at fair Value through other comprehensive income: Unquoted equities

51,333

51,333.

9,408

51,333

60,741

Level 1 $’000

2017 level 2 $’000

. Total $’000

5,863 -

77,742 339,413

5,863 77,742 339,413

5,863

417,155

423,018

Financial assets at fair through profit or loss: Quoted equities

Available for sale: Quoted equities Government of Jamaica Securities Others

The valuation technique used in determining the fair value measurement of level 1 financial instrument is Jamaica Stock Exchange trading rates. Financial investments which have been categorized as level 2 valuation model is based on yields derived from pricing services which may include data not observed in actual market transaction but indicative information.

101

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iii)

Financial instruments measured at fair value (cont’d) Measurement of fair value real estate The fair value of building was determined by independent property values, having appropriate recognized professional qualification and recent experience in the location and categorizing of property. The fair value measurement of building and investment property have been categorized as level 3 for fair value based on inputs to the valuation techniques relating to expected market yields, see note 13 and 16 for further details.

(iv)

Financial risk The Board of Directors is ultimately responsible for the establishment and oversight of the Credit Union’s risk management framework. The Board has established committees for managing and monitoring risks. Five key committees for managing and monitoring risks are as follows: (a)

Supervisory Committee The Supervisory Committee oversees the Internal Audit function of the Credit Union and ensures that internal procedures and controls are adhered to. The Supervisory Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of management controls and procedures, the results of which are reported to the Supervisory Committee.

(b)

Credit Committee The Credit Committee oversees the approval of the credit facilities to members. It is also primarily responsible for monitoring the quality of the loan portfolio.

(c)

Finance Committee The Finance Committee is responsible for overseeing the management of the Credit Union’s assets and liabilities and the overall financial structure. It is also primarily responsible for managing the funding and liquidity risks of the Credit Union.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

102

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (d)

Risk and Compliance Committee The Risk and Compliance Committee monitors the Credit Union’s exposure to business risks, primarily credit risk by ensuring that collaterals used to secure members’ loans are adequate prior to loan approval. It is also responsible for monitoring the Credit Union’s compliance to the rules and regulations governing the Credit Union as well as management’s policies and procedures.

(e)

Delinquency Committee The Delinquency Committee is responsible for overseeing the management of the Credit Union’s delinquency ratios and the recoverability of overdue loan balances. The committee also oversees the disposal of repossessed collateral with the assistance of the Risk and Compliance Committee. These committees comprise persons independent of management and reports to the Board on a monthly basis. The Credit Union’s overall risk management programme seeks to minimize potential adverse effects on the Credit Union’s financial performance.

(i)

Credit risk The Credit Union takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss by being unable to pay amounts in full when due. Credit exposures arise principally in lending activities. For loans, strategic decisions are primarily made by the Board of Directors, with some delegation of credit approval authority to the Credit Committee and certain members of executive management. The Credit Union’s credit policy forms the basis for all its lending operations. The policy aims at maintaining a high quality loan portfolio, as well as enhancing the Credit Union’s mission and strategy. The policy sets the basic criteria for acceptable risk and identifies risk areas that require special attention. Additionally, the Credit Union is exposed to credit risk in its treasury activities, arising from financial assets that the Credit Union uses for managing, its liquidity and interest rate risks, as well as other market risks. There is also credit risk in off-statement of financial position financial items, such as loan commitments.

103

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

CO-OPERATIVE CREDITFinancial UNION LIMITED EduCom EduCom Co-Op Credit Union Limited Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (i)

Credit risk (cont’d) Credit review process The Credit Union has established a credit quality review process involving regular analysis of the ability of borrowers and other counterparties to meet interest and loan repayment obligations. Loans to members The Credit Union assesses the probability of default of individual borrowers using internal ratings. The Credit Union assesses each borrower on four critical factors. These factors are the member’s credit history, ability to pay linked to the industry benchmarked debt service ratio of 75%, character profile and the member’s economic stability, based on employment and place of abode. Borrowers of the Credit Union are segmented into two rating classes, performing and non-performing. The credit quality review process allows the Credit Union to assess the potential loss as a result of the risk to which it is exposed and take corrective action. Exposure to credit risk is managed, in part, by obtaining collateral and personal guarantees. Investments and resale agreements External rating agency grades are used to assess credit quality. These published grades are continuously monitored and updated. Default probabilities and recovery rates are assigned as published by the rating agency. The Credit Union limits its exposure to credit risk by investing mainly in liquid securities, with counterparties that have high credit quality. As a consequence, management’s expectation of default is low. Credit risk limits The Credit Union manages concentrations of credit risk by placing limits on the amount of risk accepted in relation to a single borrower or group of related borrowers, and to product segments.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

104

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements

Notes to the Statements NOTESFinancial TO THE FINANCIAL STATEMENTS 31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (i)

Credit risk (cont’d) Credit risk limits (cont’d) Borrowing limits are established by the use of the system described above. Limits on the level of credit risk by product categories and for investment categories, are reviewed and approved annually by the Board of Directors. Collateral The amount and type of collateral required depends on an assessment of the credit risk of the borrower. With the exception of loans, debt securities are generally unsecured and reverse repurchase agreements are secured by portfolios of financial instruments. Guidelines are implemented regarding the acceptability of different types of collateral. The Credit Union’s policy regarding obtaining collateral have not significantly changed during the reporting period and there has been no significant change in the overall quality of the collateral held by the Credit Union since the prior period. The principal collateral types for loans and advances are: Mortgages over residential and commercial properties Charges over business assets such as premises, Bill of sale over motor vehicles Charges and hypothecations over deposit balances Management monitors the market value of collateral, request additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its annual review of individual credit facilities as well as during its review of the adequacy of the provision for credit losses. Liquid assets and bank balances All Liquid assets and bank balances are held in financial institutions which management regards as strong and reputable and are therefore assessed as having low credit risk at reporting date. The strength of these financial institutions is constantly reviewed by the Finance Committee.

105

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (i)

Credit risk (cont’d) Impairment of financial assets The Credit Union has two (2) types of financial assets that are subject to the expected credit loss model: Loans receivable, and Debt investments carried at amortised cost. While cash and cash equivalents are also subject to the requirements of IFRS 9, all bank balances are assessed to have low credit risk at each reporting date as they are held with reputable banking institution and the identified impairment loss was immaterial. Loan impairment The Credit Union applies the ‘three stage' model under IFRS 9 in measuring the expected credit losses on loans, and makes estimations about likelihood of defaults occurring, associated loss ratios, changes in market conditions and expected future cash flows. This is measured using the Probability of Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD) for a portfolio of assets. Probability of Default - This represents the likelihood of a borrower defaulting on its financial obligation either over the next 12 months (12 months PD). or over the remaining lifetime (Lifetime PD) of the obligation. Exposure at Default - This represents the expected balance at default, taking into account the repayment of principal and interest from the statement of financial position date to the default event together with any expected drawdowns of committed facilities. Loss Given Default - The LGD represents expected losses on the EAD given the event of default, taking into account the mitigating effect of collateral value at the time it is expected to be realized and also the time value of money.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

106

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (i)

Credit risk (cont’d) Loan impairment (cont’d) The ‘three stage' model is used to categorize financial assets according to credit quality as follows: Stage 1 - If a financial asset is subject to low credit risk at the reporting date, an amount equal to 12 month expected losses would be recognized. Stage 2 - If the credit risk increases significantly from initial recognition, an amount equal to lifetime expected credit losses would be recognized. Interest revenue would be on the gross basis. Stage 3 - If the financial asset meets the credit impaired definition, an amount equal to lifetime expected credit losses would be recognized and interest revenue would be on the net basis, rather than on the gross amount. Transfer between stages Loans, at any point in time, are either in stage 1, 2, or 3. At origination all loans are in stage 1 and a lifetime PD established based on the current risk score at that time. At future reporting dates loans are again rated and another lifetime PD establishes based on the remaining term of the loan. This remaining lifetime PD is then compared with the expected remaining lifetime PD to determine if there is any significant increase in credit risk based on the difference, if any, of the two. If there are major differences the loan moves to stage 2. Notwithstanding the above, loans on a watchlist are placed in stage 2. Stage 2 loans are moved to stage 3 if the loan rating result in the borrower being rated as non-performing or in default. If there are no significant increase in credit but the borrower is in for more than 30 days past due then the loan is placed in stage 2. Also, for those in arrears for more than 90 days past due, the loan is placed in stage 3. This rebuttable presumption is an after the fact measure. Stage 3 loans are said to be impaired and are subject to write-offs, cures, or debt consolidation. Transition means the ability to move from one stage (state) to the next.

107

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (i)

Credit risk (cont’d) Loan impairment (cont’d) Forward Transition By forward transition we mean moving from stage 1 to 2, stage 2 to 3, or stage 1 to 3 between reporting and measurement periods. Backward Transition Backward transition means moving from stage 3 to 2, 2 to 1 but not directly from stage 3 to 1. All rehabilitated stage 3 loans, called “cured”, will remain in stage 3 for 6-month in good standing before moving to stage 2 and will have to remain in stage 2 for another 6 months before going to stage 1. Before a backward transition is made all arrears must be fully paid. Cured Loans A “cured” loan is a loan that was in default and has recovered through the following routes or a combination thereof. All past due payments have been made and the borrower has made 6 monthly payment on time. The loan has been restructured with due regards to a new payment plan which reduces the monthly payments by extending the maturity date. Watch List A “watch list” is a mechanism used to track and report on loans from when they first reach stage 2 and, after they fall in arrears of over 30 days. The list also includes loans for which a significant increase in credit risk (SICR) has occurred using both quantitative and qualitative measures.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

108

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Loan impairment (cont’d) Significant increase in credit risk (SICR) The Credit Union considers a financial asset to have experienced a significant increase in credit risk when one or more of the following qualitative criteria have been met:

• • • •

Deterioration in the Borrower's Risk Rating (BRR) below established threshold Failure to comply with provisions of any statute under which the borrower conducts business Actual or expected restructuring Early signs of cash flow/liquidity problems

Loan commitments are assessed along with the category of loan the Credit Union is committed to provide. The assessment of SICR is performed for individual loans, taking into consideration the sector grouping of the individual exposures, and incorporates forward-looking information. This assessment is performed on an annual basis. Backstop Irrespective of the above qualitative assessment the Credit Union presumes that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due. Non-performing The Credit Union defines a financial instrument as non-performing, when it meets one or more of the following criteria: Quantitative criteria The borrower is more than 90 days past due on its contractual payments.

109

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

CO-OPERATIVE CREDIT UNION LIMITED EduCom EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Loan impairment (cont’d) Qualitative criteria The borrower meets unlikeliness to pay criteria as outlined below, which indicates the borrower is in significant financial difficulty: Delinquency in contractual payments of principal and interest; Cash flow difficulties experienced by the borrower; Breach of loan covenants or conditions, and; Initiation of bankruptcy proceedings. The criteria above have been applied to all loans held by the Credit Union and are consistent with the definition of ‘non-performing' used for internal credit risk management purposes. Measuring the ECL- Inputs, Assumptions and Estimation Techniques The ECL is determined by projecting the PD, LCD, and EAD which are multiplied together and discounted back to the reporting date. The discount rate used in the ECL calculation is the original effective interest rate or an approximation thereof. The 12 month PD is calculated by observing the rate of historical default within the first year of a portfolio of loans and adjusted for the expected impact of forward looking economic information. The lifetime PD is calculated by observing the rate of historical default over the life of a portfolio of loans and adjusted for the impact of forward looking economic information.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

110

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Loan impairment (cont’d) Forward looking information The most significant period end assumptions used in determining the ECL as at the reporting date are set out below: Economic factor

Scenarios

Rate

Gross Domestic Product (GDP)

Base Optimistic Pessimistic

1.6% 1.8% 1.4%

Inflation rate

Base Optimistic Pessimistic

1.0% 0.9% 1.1%

Unemployment rate

Base Optimistic Pessimistic

10.0% 9.5% 10.0%

The underlying models and their calibration, how they react to forward-looking economic conditions was based on how the relationship of the Credit Union’s existing portfolio to these variables and remains subject to review and refinement as the Credit Union’s builds data. Other forward-looking considerations not otherwise incorporated within the above scenarios, such as the impact of any regulatory, legislative or political changes, have also been considered, but not deemed to have a material impact and therefore no adjustment has been made to the ECL for such factors. This is reviewed and monitored for appropriateness on an annual basis. Sensitivity Analysis Forward looking indicators having the most significant impact on the ECL are GDP growth and unemployment rate.

111

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

CO-OPERATIVE CREDIT UNION LIMITED EduCom EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Loan impairment (cont’d) Sensitivity Analysis (cont’d) Set out below are the changes to the ECL as at 31 December 2018 that would result from reasonably possible changes in these parameters from the actual assumptions used in the Credit Union's economic variable assumptions. Change in basis points %

Forward Effect on ECL $’000

Change in basis points %

6,159 4,927 1,231

-100bp -100bp -100bp

Forward Effect on ECL . $’000

Forward looking indicator: GDP growth Unemployment rate Inflation rate

+100bp +100bp +100bp

( 6,159) ( 4,927) ( 1,231)

Portfolio Segmentation Expected credit loss provisions are modelled on a collective basis, by grouping exposures on the basis of shared risk characteristics, such that risk exposures within a group are homogeneous. In performing this grouping, there must be sufficient information for the group to be statistically credible. Exposures are grouped according to loan type (Unsecured, mortgage, home equity, Car, line of credit, restructured and other). The appropriateness of groupings is monitored and reviewed on a periodic basis by the Credit Committee. Stage 3 loans are assessed on an individual basis for impairment.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

112

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Loan impairment (cont’d) Maximum exposure to credit risk The Credit Union measures ECL considering the risk of default over the maximum contractual period (including extension options) over which it is exposed to credit risk and not a longer period, even if contract extension or renewal is common practice. The gross carrying amount of financial assets below also represents the Credit Union’s maximum exposure to credit risk on these assets. The following tables contains an analysis of the credit risk exposure of financial instruments for which an ECL allowance is recognised. The gross carrying amount of financial assets below also represents the Credit Union's maximum exposure to credit risk on these assets. Stage 1 12 Months ECL $’000 Performing Non-performing

6,102,630 -

Gross carrying amount 6,102,630 Loan impairment ( 38,059) Carrying amount

113

6,064,571

Stage 2 Lifetime ECL $’000 522,733 -

522,733 ( 11,487) 511,246

2017.

2018 Stage 3 Lifetime ECL $’000

Total $’000

105,417

(

105,417 6,450) 98,967

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

Total $’000

6,625,363 105,417

(

6,730,780 55,996) 6,674,784

5,128,235 1,006,627

(

6,134,862 43,805) 6,091,057

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Loans exposure by product type The following table summarizes the Credit Union’s credit exposure for loans at their carrying amounts. 2018 2017 $’000 $’000 Educational Real estate Motor vehicle Personal Other Less: Allowance for loan impairment

14,297 1,553,460 1,885,183 2,542,150 735,690 (

6,730,780 55,996) 6,674,784

24,418 1,064,598 2,234,600 2,259,598 551,648 (

6,134,862 43,805) 6,091,057

As at 31 December 2018, the fair value of collateral held in respect of nonperforming financial assets is $79,015,924 (2017-$1,186,828,471). Debt Investments The Credit Union uses external credit ratings as published by established rating agencies in its assessment of the probability of default on debt investments. The PDs and LGDs for government bonds have been developed by the rating agencies based on statistics on the default loss and rating transition experience of government bond issuers. The loss allowance on debt investments carried at amortised cost is measured using lifetime PDs. The credit ratings and associated PDs are reviewed and updated on an annual basis. Based on available credit ratings for debt, debt securities were classified in stage 2 as they were below investment grade as defined by reputable rating agencies.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

114

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (ii)

Credit risk (cont’d) Maximum exposure to credit risks The following table summarizes the Credit Union’s credit exposure for debt securities at their carrying amounts, as categorized by issuer:

Government of Jamaica: At amortised cost Available for sale securities

2018 $’000

2017 $’000

58,005 -

77,742

58,005

77,742.

Allowance The loss allowance for debt investments at amortised cost as at 31 December 2017 reconciles to the opening loss allowance on 1 January 2018 and to the closing allowance as at 31 December 2018 as follows: 2018 $’000 At the 1 January 2018 – calculated under IFRS 9 (ii)

3,201

Liquidity risk Liquidity risk is the risk that the Credit Union is unable to meet its payment obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn. The consequence may be the failure to meet obligations to repay depositors and fulfil commitments to lend. The Credit Union’s approach to managing liquidity is to ensure as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damages to the Credit Union’s reputation.

115

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

CO-OPERATIVE CREDIT UNION LIMITED EduCom EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (ii)

Liquidity risk (cont’d) Liquidity risk management process The Credit Union’s liquidity management process, as carried out within the Credit Union, includes: (i)

Monitoring future cash flows and liquidity on a daily basis. This incorporates an assessment of expected cash flows and the availability of high grade collateral which could be used to secure funding if required;

(ii)

Maintaining a portfolio of highly marketable and diverse assets that can easily be liquidated as protection against any unforeseen interruption to cash flow;

(iii)

Optimising cash returns on investments;

(iv)

Managing the concentration and profile of debt maturities.

Monitoring and reporting take the form of an analysis of the cash balances and expected investment maturity profiles for the next day, week and month, respectively, as these are key periods for liquidity management. The starting point for those projections is an analysis of the contractual maturity of the financial liabilities and the expected collection date of the financial assets. The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature, are important factors in assessing the liquidity of the Credit Union and its exposure to changes in interest rates and exchange rates. The tables below present the undiscounted cash flows payable (both interest and principal cash flows) of the Credit Union’s financial liabilities based on contractual repayment obligations. The Credit Union expects that many customers will not request repayment on the earliest date the Credit Union could be required to pay. The expected maturity dates of financial liabilities are based on estimates made by management and determined by retention history.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

116

117

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

(iv)

(ii)

92,357 1,673,055 3,342,554 5,107,966 95,741 1,941,211 2,400,138 12,180 4,449,270

Total financial liabilities (Contractual dates) As at 31 December 2017: Payables Voluntary shares Deferred shares Saving deposits External credit Total financial liabilities (Contractual dates)

Within 3 Months $’000 As at 31 December 2018: Payables Voluntary shares Deferred shares Saving deposits External credit

Liquidity risk (cont’d)

Financial risk (cont’d)

FINANCIAL RISK MANAGEMENT (CONT’D):

635,272

149,991 448,740 36,541

608,747

205,165 395,453 8,129

3 to 12 Months $’000

31 December 31 DECEMBER 2018 2018

1,512,197

887,744 53,488 466,884 104,081

1,288,266

1,001,951 51,190 133,560 101,565

1-5 Years $’000

578,899

484,732 74,826 19,341

858,300

761,771 25,971 70,558

Over 5 Years $’000

NotesNOTES to the Financial Statements TO THE FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements

7,175,638

95,741 3,463,678 53,488 3,390,588 172,143

7,863,279

92,357 3,641,942 51,190 3,897,538 180,252

Total contractual cash flows $’000

6,971,644

95,741 3,395,762 44,753 3,272,769 162,619

7,666,055

92,357 3,517,053 47,369 3,870,822 139,454

Total carrying Amounts $’000

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements TO THE FINANCIAL STATEMENTS Notes to NOTES the Financial Statements

31 December 201831 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (ii)

Liquidity risk (cont’d) Assets available to meet all the liabilities and to cover outstanding loan commitments include cash, deposits short-term investments, reverse repurchase agreements and advances to customers. The members’ voluntary shares are contractually on call except in cases where these balances are held as security for loans. Items not carried on the statement of financial position At 31 December 2018, the Credit Union’s commitment to extend credit to members, in respect of loans approved but not yet disbursed, amounted to $282,491,000 (2017: $42,491,000).

(iii)

Market risk The Credit Union takes on exposure to market risk, which 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 mainly arises from changes in foreign currency exchange rates and interest rates. Market risk is monitored by the Finance Committee which carries out extensive research and monitors the price movement of financial assets on the local and international markets. Market risk exposures are measured using sensitivity analysis. Currency risk Currency or foreign exchange risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Credit Union’s exposure to foreign currency risk at statement of financial position date was as follows:

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

118

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (iii)

Market risk (cont’d) Currency risk (cont’d)

2018 ’000

Liquid AssetsUSD

2017 ’000

Reverse Repurchase AgreementUSD GBP Financial InvestmentUSD

892

45,898

31,215

4,961

5,018

10,396

12,724

4,642

7,868

Cash in hand and at bank USD

Foreign currency sensitivity The following tables indicate the currencies to which the Credit Union had significant exposure on its monetary assets and its forecast cash flows. The change in currency rates below represents management assessment of the possible change in foreign exchange rates. Change in Effect on % Change in Effect on Currency Rate Net Surplus Currency Rate Net Surplus 2018 2018 2017 2017 % $’000 % $’000

119

Currency: USD

2,437

GBP

198

USD

-2

(1,219)

-2

( 1,054)

GBP

-2

(

-2

(

99)

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

2,108 201 .

100)

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements TO THE FINANCIAL STATEMENTS Notes to NOTES the Financial Statements

31 December 201831 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (iii)

Market risk (cont’d) Price risk Price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. The Credit Union is exposed to equity securities price risk arising from its holding of investment measured at fair value through surplus or deficit and in prior year, available-for-sale investments. The impact of a 10% (2017-15%) change in the quoted prices for these equities would result in an increase or decrease in the carrying value of $940,763 (2017$879,441) in surplus. Interest rate risk Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates, and arises mainly from investments, loans, saving deposits, deferred shares, reverse repurchase agreements and external credit. Floating rate instruments expose the Credit Union to cash flow interest risk, whereas fixed interest rate instruments expose the Credit Union to fair value interest risk. The Credit Union’s interest rate risk policy requires it to manage interest rate risk by maintaining an appropriate mix of fixed and variable rate instruments as determined by the Finance Committee. The policy also requires it to manage the maturities of interest bearing financial assets and interest bearing financial liabilities. The Board sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored daily by the Finance department.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

120

CO-OPERATIVE CREDIT Financial UNION LIMITED EduComEduCom Co-Op Credit Union Limited Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (iii)

Market risk (cont’d) Interest rate risk (cont’d) The following tables summarize the Credit Union’s exposure to interest rate risk. They include the Credit Union’s financial instruments at carrying amounts, categorized by the earlier of contractual re-pricing or maturity dates. 2018 Within 3 Months $’000

3 to 12 Months $’000

1-5 Years $’000

Over 5 Years $’000

NonInterest Bearing $’000

Total $’000

534,259

738,582 136,164

56,794

187,925

77,191

738,582 458,074

85,923

195,145

3,156,251

3,262,874

6,700,193

Total

1,494,928

251,939

3,344,176

3,262,874

77,191

8,431,108

Financial Liabilities: Savings deposits Voluntary shares Deferred shares External credits

3,315,838 1,673,055 -

395,453 205,165 7,920

133,560 877,063 47,369 93,137

25,971 761,770 38,397

3,870,822 3,517,053 47,369 139,454

Total

4,988,893

608,538 1,151,129

826,138

7,574,698

Total interest rate Sensitivity gap

(3,493,965) ( 356,599) 2,193,047

2,436,736

77,191

856,410

Cumulative Gap

(3,493,965) (3,850,564) (1,657,517)

779,219

856,410

Financial Assets: Liquid assets Reverse repurchase agreements Financial investments Loans, after provisions after impairment

121

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTES THE FINANCIAL STATEMENTS Notes to theTOFinancial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (iii)

Market risk (cont’d) Interest rate risk (cont’d) 2017 Within 3 Months $’000

3 to 12 Months $’000

1-5 Years $’000

Over 5 Years $’000

Interest Bearing $’000

Total $’000

123,672

833,947 339,718

6,992 21,183

67,196

840,939 484,656

119,321

279,839

2,974,097 2,751,174

1,416,658

308,014

3,030,656

2,751,174

Financial Liabilities: Deposits 2,316,696 Voluntary shares 1,903,148 Deferred shares External credits 11,112

433,147 147,050 33,337

450,660 870,337 44,753 95,361

Total

613,534

Financial Assets: Liquid assets Reverse repurchase agreements Financial investments Loans, after provisions after impairment

56,559

6,124,431

67,196

7,573,698

72,266 475,227 22,809

3,272,769 3,395,762 44,753 162,619

1,461,111

570,302

6,875,903

Total interest rate Sensitivity gap

(2,814,298) ( 305,520) 1,569,545

2,180,872

Cumulative Gap

(2,814,298) (3,119,818) (1,550,273)

Total

4,230,956

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

67,196

630,599 697,795

697,795 -

122

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (iii)

Market risk (cont’d) Interest rate sensitivity The following table indicates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, on the Credit Union’s net surplus and other components of equity. The sensitivity of the net surplus or deficit is the effect of the assumed changes in interest rates on net surplus or deficit based on the floating rate financial assets and financial liabilities. In prior year the sensitivity of equity is calculated by revaluing fixed rate available-for-sale financial assets for the effect of the assumed changes in interest rates. As a result of the new classification, there is no equity effect in the current period. The correlation of variables will have a significant effect in determining the ultimate impact on market risk, but to demonstrate the impact due to changes in variable, variables had to be on an individual basis. It should be noted that movements in these variables are non-linear. Effect on Net Surplus 2018 $’000 Change in basis points: +100 -100

143 (143) Effect on Net Surplus 2017 $’000

Change in basis points: +100 -100

123

Effect on Equity 2017 $’000

(13)

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (v)

Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Credit Union’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Credit Union’s operations. The Credit Union’s objective is to manage operational risks so as to balance the avoidance of financial losses and damage to the Credit Union’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity. The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within each department. This responsibility is supported by the development of overall standards for the management of operational risk in the following areas: •

requirement for appropriate segregation of duties, including the independent authorisation of transactions;

•

requirements for the reconciliation and monitoring of transactions;

•

compliance with regulatory and other legal requirements;

•

documentation of control and procedures;

•

Requirement for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks indentified;

•

Requirements for the reporting of operational losses and proposed remedial action;

•

Development of a contingency plan;

•

Risk mitigation, including insurance where this is effective.

Compliance with the Credit Union’s standards is supported by a programme of periodic reviews undertaken by Internal Audit. The results of internal audit reviews are discussed with the department heads, with summaries submitted to senior management.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

124

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (vi)

Capital management The Credit Union’s objectives when managing institutional capital, which is a broader concept than the ‘equity’ on the face of the statement of financial position. (i)

To comply with the capital requirements set by the Jamaica Co-operative Credit Union League and the Bank of Jamaica for the financial sector in which the Credit Union operates;

(ii)

To safeguard the Credit Union’s ability to continue as a going concern so that it can continue to provide returns and benefits for members;

(iii)

To maintain a 10% ratio of institutional capital to total assets;

(iv)

To maintain a strong capital base to support the development of its business through the allocation of 20% (minimum) of net surplus to institutional capital; and

(v)

To increase the permanent share capital as the main focus of building institutional capital.

Capital adequacy and the use of regulatory capital are monitored by the Credit Union’s management, based on the guidelines in its Capital Asset Management Policy. The table below summaries the composition of regulatory capital and the ratios of the Credit Union as at 31 December 2018 and 2017. The total regulatory capital is comprised of institutional capital and deferred shares. During the year, the Credit Union complied with all externally imposed capital requirements to which they are subject. Actual 2018 $’000 Total regulatory capital Risk – weighted assets: Total risk-weighted assets Risk weighted capital adequacy ratio

125

1,079,906

Required 2018 $’000 678,685

Actual 2017 $’000 1,014,499

6,786,855 16%

Required 2017 $’000 661,238

6,613,377 10%

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

15%

10%

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements 31 DECEMBER 2018 31 December 2018 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (vi)

Capital management (cont’d) In determining the Credit Union’s capital base (institution capital), the institutional capital of the acquired credit unions at their dates of merger were included. UWI Mona & Community Co-operative Credit Union Limited (UWI) and A.A.M.M Co-operative Credit Union Limited (A.A.M.M.) merged to form EduCom Co-operative Credit Union Limited on 1 April 2015. St. Catherine Credit Union Limited (SCCU) merged with EduCom Cooperative Credit Union Limited as at 1 January 2017. As at the date of each merger, the institutional capital of the acquired entities included the following reserves:

Statutory reserve Retained earnings/ (deficit) General reserve

NON-INTEREST INCOME:

Dividends from equity securities Fees Rental income Miscellaneous income

UWI $

SCCU $

163,881,381 22,312,866 24,390,297

154,586,335 (140,711,327) .

210,584,544

13,875,008

2018 $’000

2017 $’000

670 83,420 6,034 58,026

1,573 88,338 4,640 41,296

148,150

135,847

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

126

EduCom DCO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 7.

OPERATING EXPENSES: 2018 $’000 Utilities Depreciation Audit and supervision Repairs and maintenance Telecommunication Printing, stationery and supplies Insurance premium Professional and consulting Subscription Administrative expenses Security Bad debt Members’ security Marketing and promotion Representation and affiliation Staff costs (note 8) Merger expenses

STAFF COSTS:

Employee salaries and allowances Other staff benefits Pension (note 17)

2017 $’000

15,544 23,787 5,180 6,580 20,301 13,763 8,128 19,357 395 55,046 18,997 10,184 22,273 23,933 54,480 429,554 -

17,169 27,323 1,864 5,305 21,142 11,583 8,525 22,752 2,126 50,008 20,307 216 21,287 21,324 51,545 370,337 16,964.

727,502

669,777

2018 $’000

2017 $’000

323,317 104,213 2,024

288,451 80,384 1,502

429,554

370,337

148 4

123 16

152

139

The number of persons employed at December 31: Full-time Contract

127

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

CO-OPERATIVE CREDITFinancial UNION LIMITED EduCom EduCom Co-Op Credit Union Limited Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 9.

LIQUID ASSETS:

2018 $’000

Deposits (maturing within 3 months) Credit Union Fund Management Company Cumax Money Market Fund

10.

2017 $’000

534,259

123,672 .

534,259

123,672

REVERSE REPURCHASE AGREEMENTS: The Credit Union enters into reverse repurchase agreements collaterised by Government of Jamaica securities. These agreements may result in a credit exposure in the event that the counter party to the transactions is unable to fulfill its collateral obligations. At 31 December 2018, the Credit Union held securities totaling $738,581,934 (2017 - $840,939,072) representing Government of Jamaica debt securities as collateral for reverse repurchase agreements. Reverse repurchase agreements include interest receivable amounting to $1,756,311 (2017 -$4,934,278).

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

128

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements

Notes to the Statements NOTESFinancial TO THE FINANCIAL STATEMENTS 31 December 2018 31 DECEMBER 2018 11.

FINANCIAL INVESTMENTS: Assets at Amortised cost $’000 Government of Jamaica Securities Victoria Mutual Building Society Credit Union Fund Management Company Scotia Investment Limited Jamaica Money Market Brokers Quoted equities Special mortgage Jamaica Money Market Brokers Preference Shares Jamaica Co-operative Credit Union League (JCCUL) Quality Network (QNET) C.O.K Sodality Co-operative Credit Union Limited Jamaica Co-operative Insurance Agency Limited C & W Co-operative Credit Union First Heritage Co-operative Credit Union

Maturity: Due within one year Due after one year No set maturity

129

Assets at Fair Assets at value through fair Value other through comprehensive Total Profit or loss income 2018 $’000 $’000 $’000

Available for sale Total 2017 $’000

58,005 155,743

77,742 177,058

98,593 25,237 9,408 -

13,787 -

112,380 25,237 7,576 9,408 20

111,104 54,964 10,074 5,863 -

23,114

14,161 11,383

11,002

9,447

1,000 -

1,000 9,447

1,000 10,305

19,598

250,389

156,352

51,333

458,074

484,656

7,576 20

2018 $’000

2017 $’000

192,958 187,925 77,191

360,901 56,559 67,196

458,074

484,656

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 11.

FINANCIAL INVESTMENTS (CONTâ&#x20AC;&#x2122;D): (a)

Government of Jamaica securities include interest receivable amounting to $623,030 (2017 - $1,183,023).

(b)

The Victoria Mutual Building Society deposits include Certificate of Deposits which are held to secure joint mortgage facilities which are extended to members of the Credit Union.

(c)

Investments with Credit Union Fund Management Company represent deposits and mortgage fund instruments, used to secure joint mortgage facilities which are extended to members of the Credit Union.

(d)

The rules of the League stipulates that a minimum of 1,000,000 shares, each with a par value of $1.00, must be held with the League for the Credit Union to retain membership status. The equivalent of amounts held in the statutory reserve (Note 23 (a) must either be used to purchase League shares or placed in League term deposits (Note 9).

(e)

The QNET amount represents investment by the Credit Union in the company which will provide information services to participating Credit Unions. In total, the participating Credit Unions will account for 80% of the cost of the project and the remaining 20% will be funded by the League.

(f)

FHCCU Investment represents deferred shares held by the Credit Union in First Heritage Co-operative Credit Union. The shares are held for five years on which the Credit Union receives a fixed income.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

130

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 12.

LOANS RECEIVABLES: Movement in loans during the year is as follows-

2018 $’000

2017 $’000

6,124,431 5,741,157

4,182,810 1,216,045 10,584,321

11,865,588 ( 5,134,808)

15,983,176 ( 9,848,314)

Balance at beginning of year Arising through business combination Add: disbursements Less: repayments and transfers

6,730,780 Less: Provision for loan impairment Provision for loan impaired arising through business combination

(

( Accrued interest

Maturity: Due within 1 year Due after 1 year

6,134,862

55,996)

(

31,633)

(

12,172).

55,996)

(

43,805)

6,674,784 25,409

6,091,057 33,374

6,700,193

6,124,431

281,068 6,419,125

399,160 5,725,271

6,700,193

6,124,431

The aggregate amount of non-performing loans on which interest was not being accrued amounted to $142,577,644 (2017: $53,374,227). Uncollected interest not accrued in the financial statements on these loans was estimated at $12,902,292 (2017: $4,737,177)

131

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom EduCom Co-Op Credit Union Limited Statements CO-OPERATIVE CREDITFinancial UNION LIMITED

Notes toNOTES the TO Financial Statements THE FINANCIAL STATEMENTS 31 December 2018

31 DECEMBER 2018

12.

LOANS RECEIVABLES (CONT’D): Provision for loan impairment The movement in the provision for loan impairment determined under the requirements of IFRS is as follows: 2018 $’000

2017 $’000

Balance at beginning of year Restated through opening retained earnings (Note 29) Arising through business combination

43,805 9,544. -

21,895 . 12,172

Impairment losses as at 1 January Increase charged to revenue during the year

53,349 53,166

34,067 53,811

Bad debt written off Impairment losses at year end Loan Loss charge to revenue is as follows:

Increase in loan losses for the year Transfer

106,515 ( 50,519)

53,811 (44,073)

55,996

43,805

2018 $’000

2017 $’000

53,166 (47,800)

53,811 -

5,366

53,811

The provision for impairment losses under the JCCUL regulatory requirement is as follows: As at 31 December 2018: Months in Arrears

Number of accounts in arrears

Total Loan Savings held Balance against loans $’000 $’000

Exposure $’000

Loan Loss Provision $’000

Provision Rate % 10 30 60 100

2 – 3 months 3 – 6 months 7 – 12 months 12 months and over

66 114 181 23

41,518 36,268 46,844 3,732

3,333 4,719 5,143 494

38,185 31,549 41,701 3,238

4,152 10,880 28,106 3,732

Totals

384

128,362

13,689

114,673

46,870

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

132

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 12.

LOANS RECEIVABLES (CONT’D): Provision for loan impairment (cont’d) As at 31 December 2017:

Months in Arrears

accounts in arrears

Number of Total Loan Savings held Balance against loans $’000 $’000

Exposure $’000

Loan Loss Provision $’000

Provision Rate % 10 30 60 100

2 – 3 months 3 – 6 months 7 – 12 months 12 months and over

86 163 122 9

18,944 37,706 27,293 1,931

3,131 3,884 1,741 588

15,813 33,822 25,552 1,343

1,894 11,312 16,376 1,931

Totals

380

85,874

9,344

76,530

31,513

As in prior year, the provision for loan impairment under the JCCUL regulatory requirement for 2018 is less than the provision required under IFRS provisioning rules. Hence, there is no requirement for a transfer from undistributed surplus to a loan loss reserve as follows –

IFRS provision as per above Loan loss reserve (note 24 (b))

13.

2018 $’000

2017 $’000

55,996 -

43,805 -

55,996

43,805

2018 $’000

2017 $’000

48,300 (48,300).

48,300 - .

48,300

INVESTMENT PROPERTY:

Opening balance Arising through business combination Reclassified to assets held-for-sale

This represents land and building at 6 West Street Old Harbour, St. Catherine. On the 28 of September 2014, the Credit Union’s land and building were revalued at $48,300,000 by an independent qualified valuer, C.D. Alexander Realty Limited who have an appropriate recognized professional qualification and recent experience in the location and category of the properties being valued. The valuation surplus was credited to the statement of comprehensive income.

133

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements NOTES TO THE FINANCIAL STATEMENTS

Notes to the Financial Statements 31 DECEMBER 2018 31 December 2018 13.

INVESTMENT PROPERTY (CONT’D): During the year $3,851,931 (2017-$3,022,887) was recognised in the statement of comprehensive income in relation to rental income from the investment properties. Direct operating expenses, including repairs and maintenance, arising from investment property that generated rental income amounted to $95,650 (2017-$155,652). In 2018, The Board of Directors decided to dispose of its investment property. The asset was classified as held for sale, the sale was completed in January 2019.

14.

CASH AND BANK BALANCES: Cash Cash at bank and in hand Cash and cash equivalent in the cash flow comprise:

Cash and bank balances Liquid assets (note 9)

15.

2018 $’000

2017 $’000

53,365

119,539

2018 $’000

2017 $’000

53,365 534,259

119,539 123,672

587,624

243,211

2018 $’000

2017 $’000

13,174 40,726 40,768 6,056

38,099 27,848 40,768 6,853

100,724

113,568

OTHER ASSETS:

Other receivables Payroll receivables Foreclosed properties Prepaid expenses

Foreclosed properties represent the fair value less costs to sell properties previously held as collateral on which the Credit Union has foreclosed. These assets are to be disposed of within three years.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

134

135

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

16.

346,467 352,133

31 December 2017

29,802

At 31 December 2018

Net Book Value31 December 2018

24,136 5,666

At 31 December 2017 Charge for the year

9,699 5,664 8,773 -

376,269

At 31 December 2018

Depreciation 1 January 2017 Charge for the year Arising on business combination Eliminated on disposal

376,269 -

12,009

10,917

144,420

139,183 5,237

81,078 9,664 73,111 ( 24,670)

155,337

151,192 4,145 -

98,008 6,112 78,333 ( 31,261)

341,967 51,467 ( 17,165)

At 31 December 2017 Additions Transfer

Computer Equipment & Software $’000

33,571

32,955

84,000

75,488 8,512

51,621 9,855 26,704 ( 12,692)

116,955

109,059 7,896 -

69,517 9,884 36,386 ( 6,728)

Furniture, Fixtures, Signs & Equipment $’000

31 DECEMBER 2018

31 December 2018

11,843

11,354

12,290

10,372 1,918

5,026 415 4,931 -

23,644

22,215 1,049 380

5,334 11,950 4,931 -

Leasehold Improvement $’000

NOTES TO THE FINANCIAL STATEMENTS

Freehold Land & Buildings $’000

PROPERTY, PLANT AND EQUIPMENT:

At cost 1 January 2017 Additions Arising on business combination Disposal

EduCom CO-OPERATIVE CREDIT UNION LIMITED

Notes to the Financial Statements

8,395

5,941

6,328

3,874 2,454

1,725 2,244 ( 95)

12,269

12,269 -

6,250 6,114 ( 95)

Motor Vehicles $’000

EduCom Co-Op Credit Union Limited Financial Statements

(

380

466

380 466 380)

380 -

Capital Work-in Progress $’000

418,331

408,100

276,840

253,053 23,787

147,424 27,323 115,763 ( 37,457)

684,940

671,384 13,556 - .

514,826 34,576 177,231 ( 55,249)

Total $’000

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements 31 DECEMBER 2018 31 December 2018 16.

PROPERTY, PLANT AND EQUIPMENT (CONT’D): The Credit Union’s land and building were revalued on 4 November 2015, by independent qualified valuers. The valuation surplus was credited to other comprehensive income and is shown in non-institutional capital. The fair value measurement of the building has been categorized as level 3 for fair value, based on inputs to the valuation technique relating to expected market rental growth, yields and rental rates. A reconciliation to the closing fair value balance is as follows – 2018 $’000

17.

2017 $’000

Historical cost Gains included in ‘other comprehensive income’ Gain on property revaluation

135,542 135,542 204,253 204,253

Closing balance (level 3 fair values)

339,795 339,795

PENSION, RETIREMENT BENEFIT ASSETS: The credit union has both a defined contribution pension scheme and a defined benefit pension scheme. Defined Contribution Scheme The Credit Union is a participatory employer in a money purchase pension scheme administered by Sagicor Life Jamaica Limited. The scheme is open to all employees who satisfy eligibility requirements. Contributions are determined by reference to gross salary with minimum contributions of 5% for employees with an option for additional amounts up to 5% and a contribution of 10% by the Credit Union for each employee contributing to the scheme. Employer’s contributions to the pension scheme are expensed annually. Contributions for the year amounted to $13,948,775 (2017: $8,965,358). The most recent actuarial valuation, which was conducted as at 30 June 2016 disclosed a surplus of $10,523,000. Defined Benefit Scheme The Credit Union participates in a joint contributory pension scheme, which is restricted to all former permanent employees of AAMM Co-operative Credit Union and operated by the Jamaica Co-operative Credit Union League Limited. The plan provides benefits to members based on average earnings for their final three years of service, with each employee contributing 5-10% of pensionable salaries and the Credit Union contributing currently 8%.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

136

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 17.

PENSION, RETIREMENT BENEFIT ASSETS (CONT’D): Defined Benefit Scheme (cont’d) The plan is valued by independent actuaries annually for financial reporting purposes using the projected unit credit method. Additionally, the plan is valued by independent actuaries annually to determine the adequacy of funding. The latest such valuation was at 31 December 2018 revealed that the scheme was adequately funded. (a)

The defined benefit asset recognised in the statement of financial position was determined as follows: 2018 $’000 Fair value of plan assets Present value of obligations Asset recognised in the statement of financial position

(b)

19,388

122,258 ( 90,649) 31,609

Movements in the net asset recognised in the statement of financial position:

Net assets at beginning of the year Contributions Income recognised in surplus Re-measurement recognised in other comprehensive income Net assets at the end of the year

137

138,594 (119,206)

2017 $’000

2018 $’000

2017 $’000

31,609 5,409 ( 2,024)

29,953 5,250 ( 1,502)

(15,606)

( 2,092)

19,388

31,609

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements NOTES TO THE FINANCIAL STATEMENTS

Notes to the Financial Statements 31 DECEMBER 2018

31 December 2018 17.

PENSION, RETIREMENT BENEFIT ASSETS (CONT’D): . (c) The movement in the fair value of pension plan assets during the year was as follows: 2018 $’000

(d)

2017 $’000

At beginning of year Interest income on plan assets Actuarial (loss)/gains on plan assets Contributions: Employer Employee Administrative expenses Benefits paid

122,258 10,130 ( 1,641)

102,931 9,638 2,133

5,409 4,171 ( 874) ( 859)

5,250 4,063 ( 767) ( 990)

At the end of the year

138,594

122,258

The movement in the present value of the defined benefit obligation during the year was as follows: 2018 2017 $’000 $’000 At the beginning of the year Current service cost Employees’ contributions Interest cost on plan obligations Past service cost Actuarial (losses)/gains on obligations Benefits paid

90,649 3,895 4,171 7,385 13,965 ( 859)

72,978 2,893 4,063 6,706 774 4,225 ( 990)

At end of the year

119,206

90,649

Expected contributions to the plan for the year ended 31 December 2019 is $5.26 million.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

138

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 17.

PENSION, RETIREMENT BENEFITS ASSETS (CONT’D): (e)

The amounts recognised in surplus for the year are as follows:

Current service cost Interest cost on obligations Income on plan assets Administrative expenses Past service cost Total included in staff costs (note 8) (f)

2017 $’000

3,895 7,385 (10,130) 874 -

2,893 6,706 (9,638) 767 774

2,024

1,502

The amounts recognized in other comprehensive for the year are as follows:

Actuarial loss on net plan assets (g)

2018 $’000

2017 $’000

(15,606)

(2,092)

The pension plan assets are allocated based on the Credit Union’s obligation as a proportion of the total obligation of the plan. The distribution of plan assets was as follows: 2018 %

2017 %

17 25 37 3 5 13

14 17 48 4 4 13

100

Quoted equities Real estate – investment trust and property Government of Jamaica securities Repurchase agreements US$ Bonds Other

139

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 17.

PENSION, RETIREMENT BENEFITS ASSETS (CONT’D): (h)

The five-year trend for the fair value of plan assets, the defined benefit obligation, the surplus in the plan, and experience adjustments for plan assets and liabilities are as follows: 2018 2017 2016 2015 2014 $’000 $’000 $’000 $’000 $’000 Fair value of plan assets Defined benefits obligation Surplus Experience adjustments: Fair value of plan assets Defined benefit obligation

(i)

138,594 (119,206)

122,258 ( 90,649)

102,931 ( 72,978)

84,823 (60,639)

86,443 (56,257).

19,388

31,609

29,953

24,184

30,186

3,649 ( 1,703)

(11,385) ( 6,695)

563 2,198

( 1,641) 1,421

(

2,133 717)

The principal actuarial assumptions used were as follows: 2018 %

2017 %

7.00 7.50

8.00 8.00

Discount rate Future salary increases Expected average remaining working lives of employees (years) (j)

Impact on Defined Benefit Obligation (DBO) of 1% change in key economic assumptions The change in the Defined Benefit Obligation (DBO) that would arise from a one present (1%) change in each of the key economic assumptions is shown below. In determining the impact of each assumption, the others are held constant. Sensitivity Analysis of Key Economic Assumptions Measurement Assumptions Discount rate Future salary increase Future pension increases

+1% $’000 (25,203) 17,057 14,426

2018

-1% $’000

+1% $’000

34,950 (14,062) (11,785)

(18,268) 12,890 9,897

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

2017

-1% $’000

25,256 (10,598) ( 8,052)

140

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements

31 December 2018 31 DECEMBER 2018 17.

PENSION, RETIREMENT BENEFITS ASSETS (CONT’D): (k)

Liability duration Category of participant

Liability duration (years) 2018 2017

Active members Deferred pensioners Retirees

27.4 15.8 11.5

26.3 16.3 11

All participants

25.5

24.4

There was no movement in the liability duration of the active members during the year under review. However, reduction can result from changes in the actuarial assumptions, to include rates of withdrawal from service on grounds other than retirement or death. 18.

SAVING DEPOSITS: Ordinary deposits Balance at 1 January Arising through business combination Deposits and transfers Less withdrawals and transfers

2017 $’000

3,272,769 29,560,996

2,180,833 699,884 32,662,664

32,833,765 (30,100,662)

35,543,381 (32,791,167)

Loan scheme deposits Fixed deposits

2,733,103 441,574 649,669

2,752,214 23,644 456,622.

Interest accrued

3,824,346 46,476

3,232,480 40,289

3,870,822

3,272,769

3,711,291 159,531

2,749,843 522,926

3,870,822

3,272,769

Maturity: Due within 1 year Due after 1 year

141

2018 $’000

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 19.

VOLUNTARY SHARES:

Regular deposits: Balance at 1 January Arising through business combination Share deposited

2017 $’000

3,395,762 4,234,881

2,203,945 889,034 3,710,252.

Share withdrawn

7,630,643 (4,118,279)

6,803,231 (3,407,469)

Interest payables

3,512,364 4,689

3,395,762 .

3,517,053

3,395,762

1,878,220 1,638,833

2,050,198 1,345,564

3,517,053

3,395,762

Maturity: Due within 1 year Due after 1 year

20.

2018 $’000

DEFERRED SHARES:

Balance at 1 January Arising through business combination (variable rate) Withdrawal Interest payable

2018 $’000

2017 $’000

44,753 ( 535) 3,151

46,233 ( 3,909) 2,429

47,369

44,753

These amounts are issued at a par value of $1,000.00. They are not withdrawable for a period of five (5) years and attract interest rate at 8% for the first two years. Thereafter the interest rate will be reset every three (3) months, at the average three (3) months treasury bill yield held prior to the commencement of each payment period, plus one hundred basis point (100). Based on the proposed Bank of Jamaica Credit Union Regulations, deferred shares are treated as institutional capital, and as such are included in the calculation of the capital to asset ratio. They are, however, classified in these financial statements as liabilities in accordance with the requirements of IFRS. Interest accrued on this portfolio amounted to 5,580,582 2017-$2,429,365).

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

142

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 21.

EXTERNAL CREDITS:

Credit Union Fund Management Company Limited – 10.5% Jamaica Co-operative Credit Union League - 7% NHT Micro Financing Facility – 4.5%

Maturity: Due within 1 year Due after 1 year

2018 $’000

2017 $’000

56,396 38,472 44,586

114,724 39,550 8,345

139,454

162,619

101,057 38,397

44,449 118,170

139,454

162,619

The Credit Union has a revolving term loan of $100M with the Credit Union Fund Management Company. The facility is secured by loan receivables of the Credit Union. The Jamaica Co-operative Credit Union League loan is secured by First legal mortgage stamped to cover $ 76.5 million over commercial property located at 10 Oxford Road, Kingston 5, registered at volume 956 Folio 140 in the name of EduCom Cooperative Credit Union limited are charge over loan receivables. The NHT Micro Financing Facility allows members of the Credit Union to apply through the Credit Union to access NHT Housing Financing. The facility is secured by the members’ Loan receivable balances. 22.

PAYABLES:

Accounts payables Staled-dated cheques Withholding tax Others Accrued employee benefits Audit & accounting fees

143

2018 $’000

2017 $’000

13,615 7,868 4,141 88,306 4,053 5,175

14,207 7,301 7,627 69,006 4,533 3,800

123,158

106,474

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

CO-OPERATIVE CREDIT UNION LIMITED EduCom EduCom Co-Op Credit Union Limited Financial Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 23.

INSTITUTIONAL CAPITAL:

2018 $’000

2017 $’000

Statutory and legal reserves Balance brought forward Current year transfer Entrance fee

256,685 31,645 1,868

226,650 28,866 1,169

Special reserve

290,198 253,143

256,685 253,143

Members’ permanent shares

543,341 201,119

509,828 171,841

Business combination reserve

744,460 288,077

681,669 288,077

1,032,537

969,746

(a)

Statutory and legal reserves As required by the Co-operative Societies Act and the rules of the EduCom Co-operative Credit Union Limited, a minimum of twenty-five percent (25%) of the annual surplus and amounts collected for entrance fees are transferred to this reserve.

(b)

Special reserves The special reserves represents amount appropriated by members to strengthen the capital based of the Credit Union and is not available for distribution.

(c)

Members’ permanent shares – Permanent shares are shares issued at no par value, paid up in cash and form a permanent part of the capital of the Credit Union. Permanent shares may be redeemable subject to the sale, transfer, or repurchase of such shares per ‘Rule 16’ of the Credit Union’s Rule Book.

(d)

Business combination reserve This represents the excess of the net assets acquired and the deemed value for shares issued to members in the business combinations.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

144

EduCom Co-Op Credit Union Limited Financial Statements EduCom CO-OPERATIVE CREDIT UNION LIMITED

Notes to the Financial Statements

NOTES TO THE FINANCIAL STATEMENTS

31 December 2018

31 DECEMBER 2018 24.

NON-INSTITUTIONAL CAPITAL:

Undistributed surplus Retirement benefit reserve General reserves Revaluation Reserve for Permanent Shares Fair value reserve

(a)

2018 $’000

2017 $’000

103,196 19,388 2,782 204,253 3,971 -

110,889 31,609 2,357 204,253 4,359 1,979

333,590

355,446

Undistributed surplus: This represents surplus not distributed at the statement of financial position date.

(b)

Loan loss reserve: This was the excess of the loan loss provision over IFRS 9 requirement in the current period and IAS 39 in the prior period.

(c)

Retirement benefit reserve: This represents actuarial gain on plan assets as per annual revaluation.

(d)

General reserves: These represent appropriations for scholarships, donations and for other miscellaneous purposes.

(e)

Revaluation reserve: This represents unrealised gain on the revaluation of the Credit Union’s freehold land and buildings.

(f)

Permanent share reserve: This represents amount set aside from surplus to be ascribed as permanent shares for members. These permanent shares were issued to members during the year. The balance above represents shares bought back by the Credit Union from resigning and deceased members.

(g)

Fair value reserve: This represents unrealised gain or loss on the revaluation of financial assets classified as fair value through Other Comprehensive Income (Available for sale 2017).

(h)

Special revenue: This represents IFRS 9 appropriation approved at the annual general meeting.

145

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom Co-Op Credit Union Limited Financial Statements EduCom CO-OPERATIVE CREDIT UNION LIMITED

Notes toNOTES the TO Financial Statements THE FINANCIAL STATEMENTS 31 December 2018

31 DECEMBER 2018

25.

APPROPRIATIONS TO AND DECREASE IN OTHER RESERVES: (a)

The following payments/ transfers were made from reserve during the year:

Payments: Honorarium Community Outreach Program

2018 $’000

2017 $’000

10,000 3,275

8,000 4

13,275

8,004

12,745 35,055

47,800

IFRS 9 appropriation: 1 January 2018 Amount charged to surplus during the period

(b)

The following amounts were transferred from accumulated surplus to other reserves as per approval at special general meeting: 2018 2017 $’000 $’000 IFRS 9 appropriation Dividend Community Outreach Program Honorarium

26.

47,800 24,999 3,700 10,000

8,000

86,499

8,000

BUSINESS COMBINATIONS: During the prior period, EduCom Co-operative Credit Union Limited in accordance with the provision of Section 53 of the Co-operative Societies Act, accepted the transfer of engagement passed by special resolution on 27 August 2016 by the St. Catherine Co-operative Credit Union Limited, effective 1 January 2017. St Catherine Co-operative Credit Union Limited (SCCU) therefore ceased to exist as of 31 December 2017. EduCom was identified as the acquirer as prescribed by IFRS. No consideration was transferred, and the Credit Union and SCCU exchanged only equity interest. The value so determined was $79,510,000. There was no goodwill or negative goodwill arising on acquisition and any difference between the fair value of the net assets acquired and the deemed value for the shares issued was credited to the business combination reserve in institutional capital.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

146

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements NOTESFinancial TO THE FINANCIAL STATEMENTS Notes to the Statements

31 December 2018 31 DECEMBER 2018 26.

BUSINESS COMBINATIONS (CONT’D): The Credit Union recognised a gain of $38,608,000 as a result of the business combination. The gain is included in the retained earnings in the statement of changes in equity for the year ended 31 December 2017. Acquisition costs of $16,964,161 have been charged to operating expenses in the statement of surplus or deficit and other income for the year ended 31 December 2017. Fair Value $’000 Net tangible assets arising on the acquisition Liquid assets – deposits Reverse repurchase agreements Financial investments Loans to members Cash in hand and at bank Accounts receivables Investment property Property, plant and equipment Savings deposits Voluntary shares Deferred shares Accounts payable and accruals

42,322 257,493 99,734 1,203,873 56,223 63,182 48,300 61,468 ( 699,884) ( 889,034) ( 46,233) ( 79,326)

Deemed value for shares issued

(

Adjustment to business combination reserve

118,118 79,510) 38,608

Cash reserves acquired on acquisition Bank and cash reserves being cash and cash equivalents included in the statement of cash flows. 27.

98,545

INSURANCE: (a)

Fidelity Insurance Coverage During the year the Credit Union had fidelity insurance coverage with British Caribbean Insurance Company Limited. The total premium for the year was $2,557,452 (2017: $3,526,866).

(b)

Life Savings and Loan Protection Coverage During the year the Credit Union had life savings and loan protection coverage with CMFG Life Insurance Company. Total premium for the year was $19,694,896 (2017: 17,926,031).

147

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

EduCom Co-Op Credit Union Limited Financial Statements EduCom CO-OPERATIVE CREDIT UNION LIMITED

Notes to the Financial Statements NOTES TO THE FINANCIAL STATEMENTS

31 December 2018

31 DECEMBER 2018 27.

INSURANCE (CONT’D): (c)

Golden Harvest Premium Insurance Coverage During the year the Credit Union had insurance coverage with CMFG Life Insurance Company. The total premium for the year was $2,578,213 (2017: $2,414,485). These policies remained in force throughout the year with all premiums being paid promptly.

28.

RELATED PARTY TRANSACTIONS: The Credit Union entered into the following transactions with related parties:

(a)

(b)

2018 $’000

2017 $’000

Board and committee members

145,831

109,844

Members of staff

166,270

142,755

Board and committee members

55,096

34,895

Members of staff

92,766

71,972

Loan balances (including interest) -

Deposits (including interest) -

At 31 December 2018 all loans owing by directors, committee members and staff were being repaid in accordance with their loan agreements. (c)

Compensation of key management personnel The remuneration of key members of management during the year was as follows-

Salaries and other short-term benefits Post employment benefits

2018 $’000

2017 $’000

75,654

75,370

5,729

8,300

81,383

83,670

Their remuneration is determined by the Board of Directors, having regard to their performance and prevailing macro economic factors. The remuneration of key members of management is fixed for two (2) years. Post employee benefits represent employee’s contribution to a money purchase pension scheme.

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

148

EduCom CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Op Credit Union Limited Financial Statements

Notes to the Statements NOTESFinancial TO THE FINANCIAL STATEMENTS 31 December 2018 31 DECEMBER 2018 29.

EFFECT OF CHANGE IN ACCOUNTING POLICY: The Credit Union adopted IFRS 9 from 1 January 2018. In accordance with the transitional provisions in IFRS 9, comparative figures have not been restated. Rather, the total impact of the adoption is recognised in the opening statement of financial position at the date of initial application. The following tables show the adjustments recognised for each individual line item. Impact on statement of financial position as at 1 January 2018: 31 December 2017 As previously Presented $’000 ASSETS: EARNINGS ASSETS: Liquid assets Reverse repurchase agreements Financial investments Loans, after provision for impairment Investment property

NON-EARNINGS ASSETS: Cash in hand and at bank Inventories Other assets Property, plant and equipment Retirement benefit asset

1 January 2018 As restated $’000

123,672 840,939 484,656 6,124,431 48,300

( 3,201) ( 9,544)

123,672 840,939 481,455 6,114,887 48,300

7,621,998

(12,745)

7,609,253

119,539 2,524 113,568 418,331 31,609

685,571

TOTAL ASSETS

8,307,569

(12,745)

8,294,824

LIABILITIES AND EQUITY: Savings deposits Voluntary shares Deferred shares External credits

3,272,769 3,395,762 44,753 162,619

6,875,903

NON-INTEREST BEARING LIABILITY: Payables

106,474

EQUITY: Institutional capital Non-institutional capital

969,746 355,446

(12,745)

969,746 342,701

1,325,192

(12,745)

1,312,447

8,307,569

(12,745)

8,294,824

TOTAL LIABILITIES AND EQUITY

149

Effect of IFRS 9 $’000

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

FINANCIAL STATEMENTS

CO-OPERATIVE CREDITFinancial UNION LIMITED EduComEduCom Co-Op Credit Union Limited Statements THE FINANCIAL STATEMENTS Notes toNOTES the TO Financial Statements

31 December 2018 31 DECEMBER 2018 29.

EFFECT OF CHANGE IN ACCOUNTING POLICY (CONT’D): The total impact on the Credit Union’s equity component as at 1 January 2018 is as follows:

Closing accumulated earnings at 31 December 2017- IAS 39

30.

Accumulated Surplus $’000

Fair value Reserve $’000

110,889

1,979

Increase in provision for loan losses Increase in provision for investments losses Reclassification of investment from AFS to FVPL Adjustment to accumulated earnings from adoption of IFRS 9

9,544 3,201 -

- . (1,979)

12,745

(1,979)

Opening retained earnings 1 January 2018

98,144

- .

COMPARISON OF LEDGER BALANCES: The detailed records of balances relating to loans to members, deposits and share capital deferred from their respective control accounts as follows: Loans to Members $’000

Saving Deposits $’000

Deferred Shares $’000

Voluntary Share $’000

Permanent Share $’000

Balance as per general ledger

6,730,781

3,373,769

41,789

3,512,364

201,119

Balance as per members’ Ledger

6,730,781

3,373,769

41,789

3,512,364

201,119

Difference

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

150

Resolution for Transitional

RULE CHANGE RATIONALE FOR PROPOSED TRANSITIONAL RULE CHANGE

And whereas the Bank of Jamaica is advanced in its preparation to become the Regulator of Credit Unions. And whereas Credit Unions have been strongly encouraged to merge in order to benefit from economies of scale and gain efficiencies. And whereas EduCom is holding merger talks with different CUs and in some cases entering into merger agreements. And whereas some of these merger agreements will be concluded in the next 3-4 years. And whereas the CU requires experienced leadership to conduct and finalize these negotiations and stabilize the operations and culture of the CU. And Whereas the Board of Directors of EduCom Cooperative Credit Union is mandated to elect an executive after each AGM consisting of President, Treasurer, Secretary, one or more Vice President(s) in accordance with Article VIII, Rule 30 (ii). And whereas the Executive Committee shall hold office until their successors are elected. And whereas the current Article IX Rule 37 states that no member of the Executive Committee shall be allowed to serve more than four years. And whereas the four-year term of the current leadership expires in 2020 and will deplete the required experience needed to advance merger agreements and bring stability to the new entity, as well as chart the growth path and strategic direction of the Credit Union. Be it resolved that the current Article IX Rule 37 be amended to allow for a transitional rule change to allow for members of the current leadership to serve for no more than 6 years. Be it further resolved that the rule change be only for the transitional period leading to mergers and that the rule be reverted to the original form once this period has ended. CURRENT RULE: ARTICLE IX RULE 37 37. The Executive Committee of the Credit Union shall be a President, one or more Vice President(s), a Treasurer and a Secretary, all of whom shall be elected by the Board of Directors in accordance with Article XIII, Rule 66, and the said Executive Committee shall hold office until their successors are elected, provided that no member of the Executive Committee shall be allowed to serve more than four (4) years. PROPOSED TRANSITIONAL RULE: ARTICLE IX RULE 37 37. The Executive Committee of the Credit Union shall be a President, one or more Vice President(s), a Treasurer and a Secretary, all of whom shall be elected by the Board of Directors in accordance with Article XIII, Rule 66, and the said Executive Committee shall hold office until their successors are elected, provided that no member of the Executive Committee shall be allowed to serve more than six (6) years.

151

EDUCOM CO-OP CREDIT UNION I ANNUAL REPORT 2018

List of

DECEASED MEMBERS Joyce Allen - Griffiths

Donna-Marie Smith

Cecil Harris

Marva Andrea Allen-Brissett

Evine Mclean-Williams

Junior Johnson

Keith Campbell

Sylvia Barber

Twyla Maitland

Shareen Natasha Clarke

Jennifer Lindsay

Fitzroy Marshall

Gwendolyn Grant-Johnson

Annette Williamson

Viviene Shand-Myers

Andrew Bernard Haughton

Avis Cleary

Gwendolyn Haughton

Jennifer James

Herman Oliver Johnson

Winston Davidson

Joseph Agustus Johnson

Bernice Fraser

Alton Mcleod

Faebean Walker

Suzette Ann-Marie Powell-Nelson

Winston Jonas

Alesia Sashae Black

Winifred Ioney Almon

Eucliffe Loague

Kenneth Bailey

Ugar Lloyd Hurd

Baldwin Campbell

Marcia Reid

Maureen Campbell

Hamlet Pennicooke

Clarice Carty

Cordell R. Meggoe

Herman J Chambers

Courtney Taylor

Delorev Agatha Copeland

Oswald Doswell George

Antoinette Frith

Hyacinth Daley

Jacqueline Marie Burke

Sheralyn Pottinger

Tedia Paulett Dixon

Winston Constantine Beckford

Sophia Graham

Owen Gordon

Oaston Oneil Brown

Racquel E. Simmonds

Dawn Gordon-Gyles

Chevaunese Odale Rookwood

Anthony Moore Harvil Payne Mayleen Romena Roberts Frank (Adc) Scott Yvonne Taylor Hubert Walcott

Deslet Clarke

Evan Anthony Walters Stakey Charles Campbell Winston Uriah Watson Vernal George Lewin Hermine Wilson Steve Anthony Martin