Edom Co-operative Credit Union Annual Report 2018 by Msquared Creative Studios

Protecting your investment. Inspiring growth.

Our Bond Covers 1

Any person 16 years or older who attended a secondary school.

Individuals living or working within a ten kilometer (10 km) radius of an EduCom branch.

Trainee, current and former Teachers of any recognized educational institution.

4 All students (current and former), employees or former employees of secondary and post-secondary, inclusive of tertiary level educational institutions. 5 Current and former employees of: EduCom, any recognized educational institution, The Ministry of Education and its agencies and Government owned/grant aided educational institutions. 6 Anyone who lives, works, having investment or does business within the parish of St. Catherine. 7

All family members in the categories of 1 to 6 inclusive of: children, stepchildren, adopted children, grandchildren, parents, spouses, siblings, aunts, uncles, nieces, nephews, cousins and grandparents.

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.

Mission The Mission of EduCom Co-operative Credit Union is to improve the quality of life of its members and their families, through the provision of personalised financial solutions and advice, delivered by a motivated, competent and committed team of staff and volunteers.

Vision In 2020, EduCom Co-operative Credit Union is member-centric, service-oriented, financially sound and technologically driven; and is the top Credit Union in Jamaica in member value, compliance and satisfaction.

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ANNUAL REPORT 2017

CONTENTS Notice of Meeting, Agenda President’s Message Chief Executive Officer’s Message Minutes of Previous Annual General Meeting Directors’ Profile Board of Director’s 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 Notes

1 3 5 7 17 26 33 39 42 45 47 49 51 57 69 139 140 141

vii

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Notice of

Meeting NOTICE IS HEREBY GIVEN that the 3rd Annual General Meeting of EduCom Co-operative Credit Union Limited will be held on Saturday, the 5th day of May 2018 at the Kenneth Rattray Conference Room, Jamaica Conference Centre, 14-20 Port Royal Street, Kingston, commencing at 10:00 a.m. BY ORDER OF THE BOARD

___________________________ Hector Stephenson Secretary

Agenda 1.

Ascertaining that a quorum is present

2. Call to Order

10. Nominations Report

3. Opening Prayer

11. Election to:

4. Authority to Convene and Notice of Meeting

(a) Board of Directors

5. Apologies for Absence

(b) Credit Committee

6. Welcome and Opening Remarks

7. Minutes of the last Annual General Meeting

(d) Delegates to Jamaica Co-operative Credit Union League

8. Reports of: (a) Board of Directors

12. Fixing a Maximum Liability

(b) Treasurer & Auditor

13. Appropriation of Surplus

14. Any Other Business

(d) Supervisory Committee

15. Termination

(e) Delegates

9. Resolutions

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ANNUAL REPORT 2017

Message from

The President FELLOW CO-OPERATORS, I would like to start by extending warmest welcome and congratulations to the members of the former St. Catherine Co-operative Credit Union (SCCU) who joined the Educators and Community Co-operative Credit Union (EduCom) family on January 1, 2017 and who have therefore, just celebrated their first anniversary as members of EduCom. During 2017, your Credit Union operated in an interesting and challenging environment, characterized by low inflation, falling interest rates, volatile foreign exchange rates, increased competition and an increasing demand for loans. Such an environment presented both challenges and opportunities for the Credit Union Movement and forced the leadership of EduCom to become even more astute in its management of the organizationâ&#x20AC;&#x2122;s welfare as we continue to add value to your lives.

C. Leopold Nesbeth President

MESSAGE FROM THE PRESIDENT

I AM PLEASED TO ADVISE THAT 2017 WAS ANOTHER SUCCESSFUL YEAR FOR EDUCOM WHICH WAS CHARACTERIZED BY THE FOLLOWING ACHIEVEMENTS: 1. GROWTH IN SAVINGS BY 50.1% 2. GROWTH IN LOANS BY 46.7% 3. GROWTH IN ASSETS BY 42.4% 4. GROWTH OF 29.7 % IN PROFITABILITY 5. REDUCTION IN DELINQUENCY FROM 3.7% TO 2.5% 6. THE REVISION AND FINALIZATION OF THE ORGANIZATION’S STRUCTURE 7. IMPROVEMENT IN THE INFRASTRUCTURE OF A NUMBER OF BRANCHES The above were also achieved within the context of an institution that is still in the process of establishing a new corporate culture through the merging of the various talents, practices, cultures and personalities that characterized the three (3) credit unions that now comprise EduCom. They were also achieved in an environment impacted by the impending takeover of the Bank of Jamaica (BOJ) as the regulators of the Credit Union Movement and the possible impact of this change on our operations. Another impact was the efforts made, during the year, to understand and prepare for the possible impact of the implementation of the IFRS 9 accounting standard on EduCom. We anticipate that the impact of the majority of the above changes on the Credit Union will be seen in our operations for 2018 and beyond. In 2017 your Credit Union continued to be represented at the highest level of the Movement in both Jamaica and the region, with Mr. Winston Fletcher, former president of SCCU, being elected President of the Jamaica Co-operative Credit Union League (JCCUL) and Secretary of Caribbean Confederation of Credit Unions (CCCU), while your President was elected the 1st Vice President of JCCUL and a Delegate from Jamaica to the CCCU. By all the indicators, 2018 promises to be an even more challenging year than 2017, but we are confident that with the help of God, your support and the continued commitment of the cadre of volunteers, management and staff, we will again rise to the occasion as we continue to add value to our members’ lives. Let me close by extending sincere thanks and appreciation to the members of the Board, Supervisory and Credit Committees, and the members of the management team and staff for their contribution throughout 2017. The results could never have been achieved without you. Thanks also to you, our members, for your continued commitment to and support of your Credit Union. We know we did not get everything right in 2017 but we promise that 2018 will be better and give you our commitment that we will do all in our power to preserve the worth and value of this great institution.

50.1% GROWTH IN SAVINGS

46.7% GROWTH IN LOANS

42.4% GROWTH IN ASSETS

29.7%

GROWTH IN PROFITABILITY

3.7% TO

2.5%

REDUCTION IN DELINQUENCY 4

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Message from

The CEO

The year 2017 was significant in the life of the Credit Union as we witnessed a number of trends that represent movements in economic variables, technology, demographics, and consumer behaviour. Membersâ&#x20AC;&#x2122; expectations are rapidly shifting with the rise of the millennials, new markets are emerging, and bold new ways of providing financial solutions are being explored. The financial sector has embarked on making necessary changes to keep pace with the demands of the consuming public, especially as it relates to technology. It could easily be argued that we are going through the most significant period of change in relation to banking technology since independence in 1962. By the end of 2017, over two billion mobile device users globally, will engage in some form of mobile commerce transaction. Changes in the market environment have created new imperatives for our operations.

Elvis King Chief Executive Officer

MESSAGE FROM THE CEO

These are the driving forces why we are now laying the foundation for leveraging data and a highly scalable IT platform, to enable us to create new opportunities for our members, mitigate against risks, and improve our efficiencies. We are excited to be embarking on leveraging innovative technological advancements to empower us with robust solutions to advance our competitiveness and create the connectivity that are bound to improve your experiences with us. We live in a time of continuous change and disruption and therefore we have to quickly adapt to the changing needs of our members. Despite these transformations, our mission remains the same. We are here to improve the quality of life of our members and their families through the provision of personalized financial solutions and services delivered by a motivated, competent and committed team of staff and volunteers. We know that when we serve you well, we are helping you to create a secure financial future – a future story that is unique to you, one which you will share with family and friends so they too can live the dream. We are accomplishing our mission in two ways – 1) as a credit union owned by you, everything we do is aligned with the interests of our members; and 2) we approach challenges with an analytical insight, diligence, and resilience. We continue to look at every challenge as an opportunity and we are cautious in our approach to risk. We strive at all times to secure the hard-earned funds that you have placed with us, find the safest ways to provide loan solutions for our net borrowers, while simultaneously investing the difference so that you can get the most competitive returns. EduCom’s 2017 results speak to how we are creating opportunities in challenging times. Our strong financial performance across both our operating income and growing capital base will allow us to recommend payment of a substantial dividend to our members and at the same time retain a considerable amount to capitalize the Credit Union. The latter becomes increasingly important as we enter the phase of International Financial Reporting Standards 9 (IFRS 9). This is a Standard which requires that we make provisions for loan impairment as soon as we have made the decision to lend. With lending being our core business and our strong desire to satisfy your borrowing needs, you can appreciate the decision to recommend the strengthening of the capital base to ensure sustainability. By the same token, we call on all our members to remain diligent in fulfilling your obligations to the Credit Union, especially as we enter this era of IRFS 9, as failure to do so could put us in grave danger.

We are not only growing financially – we are now serving more people how, when, and where they prefer. Throughout 2017, we served our over 68,000 members in many ways. Importantly, we took the decision to take the business to you. With this initiative, a number of our members can boast of being served without entering through our doors. For this, I give kudos to the Marketing Team and by extension, our Business Development Officers (BDOs). Our next major step is to use the technology to facilitate a wider range of transactions and in so doing, create an even more efficient and convenient experience. In 2017 we continued to serve our members by holding strong to our values and turning challenges into opportunities. In the midst of this period of significant transformation, I am confident that we will continue to seize on the opportunities these changes bring and help to secure a financial future full of promise for you. Our goal is not only to serve our members but to also exceed your expectations. We continue to focus on how our employees can make a difference to our members. Our Enterprisewide Service Excellence program was launched in the 4th quarter of the year and we are expecting significant improvements in the quality of service delivery and benefits to our members from this initiative. I am extremely proud of the partnership arrangement that we have with National Housing Trust and we are engaging others, as we are now in dialogue with Development Bank of Jamaica (DBJ) in an effort to provide more opportunities to you our members. We thank you the members, for the trust that you have placed in us and the resources that you have invested in your credit union. We continue to value your membership as we strive to build an increasingly better relationship with you, with the ultimate goal of exceeding your expectations in the services we offer. Special thanks to the Board of Directors and to the Credit & Supervisory Committees for their support throughout the year. I am indeed grateful for the opportunities bestowed on me to lead this empathizing, resilient and hard-working team, and wish for you a successful year ahead. Co-operatively,

Elvis King Chief Executive Officer

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ANNUAL REPORT 2017

Minutes of Previous

Annual General Meeting MINUTES OF THE 2ND ANNUAL GENERAL MEETING OF THE EDUCOM CO-OPERATIVE CREDIT UNION LIMITED HELD ON SATURDAY, APRIL 29, 2017 AT THE KENNETH RATTRAY CONFERENCE ROOM, JAMAICA CONFERENCE CENTRE, KINGSTON. Members of the Board present were:

OPENING PRAYER

Messrs. Clide Nesbeth - President Kenneth Grant - 1st Vice President

The Chairman invited Mr. Christopher Emanuel to lead the meeting in the invocation.

Raymond Eytle - 2nd Vice President

AUTHORITY TO CONVENE AND NOTICE OF MEETING

Hector Stephenson - Secretary

The Secretary invited the attention of the meeting to page 58 of the Annual Report and proceeded to read the authority to convene the meeting that was received from the Registrar of Co-operatives and Friendly Societies.

Hilton Blenman - Treasurer Ruel Nelson - Assistant Treasurer Kenry Jackson - Director Mrs. Valerie Hall-Buckle - Director

He then proceeded to read the notice convening the meeting.

Ms. Coleen Lewis - Director Mr. Christopher Emanuel - Director Mr. Ian McNaughton - Director

APOLOGIES FOR ABSENCE

Also present were:

Apologies for absence were tendered on behalf of the following persons:

Mr. Clayton McEwan - Secretary, Credit Committee Ms. Sandra Dockery - Member, Credit Committee Ms. Deloris Mollison

- Member, Credit Committee

Ms. Alcia Jones - Member, Credit Committee Mr. Glenville Henry - Chairman, Supervisory Committee Ms. Keisha Committee

Bedward

Ms. Sandra Lawrence Committee

Secretary,

Supervisory

Member, Supervisory

Petandra Timoll - Member, Supervisory Committee Ms. Cheryl Daley - Member, Supervisory Committee

Also, apologies were tendered on behalf of the following Directors: Dr. Mark Nicely who was overseas, Ms. Sonia Bennett, Messrs. Charles O’Connor and Winston Fletcher who were unable to attend. OBITUARIES

CALL TO ORDER

The Secretary, Mr. Hector Stephenson directed the meeting’s attention to the passing of fellow co-operators of our Credit Union which was to be found on page 141 of the Annual Report. The Secretary apologized for not including former Credit Union Stalwart, Director Charles Reid who passed away in 2016. He also asked that other members who were inadvertently omitted from the list be added and the following were received:

The meeting was called to order at 10:09 a.m. by the President, Mr. Clide Nesbeth presiding as Chairman.

Sharon Benjamin-Burke and Christine Hepburn-Thomas.

ASCERTAINMENT OF QUORUM The Secretary reported that at 10:00 a.m. there were 199 persons registered, as such the meeting was properly constituted.

Patrick Duncan, Herman Chin, Lori-Ann Mullings, Marcia Palmer, Sharold Rhone, Naomi Douglas, Marblett Bloomfield, Carline McCalla, Kevin Sterling, Doris Edwards, Nickesha Goulbourne and Sarah Wilkinson Eytle.

MINUTES OF PREVIOUS ANNUAL GENERAL MEETING

issues and other challenges that faced the new organization and in so doing, managed to begin to create and make public a new EduCom culture.

Continuing, the Secretary proceeded to read the names listed therein. He then invited the meeting to observe a minute silence as a mark of respect. WELCOME AND OPENING REMARKS The Chairman extended warm welcome to those present at the second Annual General Meeting of the Educators and Community Co-operative Credit Union (EduCom). He introduced himself and members of the Board. He also introduced Mr. Elvis King (Chief Executive Officer), members of the management team and staff, members of the Supervisory Committee and members of the Credit Committee. The Chairman then proceeded to introduce the former Directors from St. Catherine Credit Union who recently joined the EduCom Board as follows: Mr. Christopher Emanuel and Mr. Ian McNaughton. He said the Directors joined EduCom Board on January 1, 2017 when St. Catherine Co-operative Credit Union was merged with EduCom and that their contribution to EduCom’s continued success was significant. Continuing, the Chairman proceeded to introduce the specially invited guests as follows: Mr. Clifton Freeburn and Mr. Michael Webb, representing the Department of Co-operatives and Friendly Societies; Ms. Jennifer Hibbert and Mr. Ken Wilson, Auditors from BDO; Mr. Patrick Smith, Jamaica Teachers Association (JTA) Coop Credit Union and representing the Board of JCCUL; Ms. Vera Lindo, Business Relations Manager of JCCUL; former Directors and other volunteers of AAMM, UWI Mona and St. Catherine Credit Unions. The Chairman remarked that the Annual General Meeting of any institution is perhaps the single most important member event in the institution’s calendar. More so, in the Credit Union Movement, as it gives the leadership the opportunity to update members on the performance of the Credit Union and allows members the opportunity to take an active part in the decision making process. The Chairman declared that 2016 was a special year at EduCom as it marked five significant achievements, which saw: ♦♦

♦♦

The finalization of the process which involved the amalgamation with St. Catherine Cooperative Credit Union which took effect on January 1, 2017 thereby welcoming an additional 35,000 members to membership.

♦♦

The significant reduction in delinquency levels.

♦♦

The significant growth in the levels of savings and assets, and

♦♦

The significant growth in profitability of the Credit Union.

MINUTES OF THE 1ST ANNUAL GENERAL MEETING The Minutes of the 1st Annual General Meeting held on April 30, 2016 having been circulated, was taken as read on a motion by Ms. Tanya Cookhorne, duly seconded by Ms. Althea Edwards and unanimously carried. AMENDMENTS TO THE MINUTES Page 13, The Secretary asked that the name Ms. Patricia Waugh-Reid be deleted and that the name Ms. Patricia Reid-Waugh be substituted. The Secretary at this stage informed that matters arising from the Minutes would be addressed by Mr. Elvis King, Chief Executive Officer. Continuing, he paused to acknowledge the presence of Mr. Lennox Deane, former President of AAMM Credit Union and Mr. Michael Brydson, former Director of AAMM Credit Union. Mr. Deane on a point of order reminded the Secretary that the confirmation of the minutes should be taken first. CONFIRMATION OF THE MINUTES The Minutes was confirmed on a motion by Ms. Casita Beckford, duly seconded by Ms. Norma-Lee Lewis and carried.

The consolidation and emergence of the new EduCom Credit Union brand and culture, as the Board resolved many of the technical

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ANNUAL REPORT 2017

MINUTES OF THE SPECIAL GENERAL MEETING

OPERATIONS

The Minutes of the Special General Meeting held on November 2, 2016 having been circulated, was taken as read on a motion by Ms Paulette Coley, duly seconded by Ms. Verona Hinds and unanimously carried. There being no amendments to the Minutes, it was adopted on a motion by Ms. Una Anderson, duly seconded by Mr. Derrick Brown and carried.

The President said that EduCom continues to constantly find innovative ways to improve the quality of service it delivers to members daily. In an effort to deliver superior service, a significant portion of 2016 was spent on identifying the needs, making the requisite changes and the development of services to satisfy those needs as follows: ♦♦

Increasing unsecured loan facilities, to allow members to borrow up to $1.6M without any form of collateral.

The Chairman, on behalf of the Board, extended a warm welcome to all former members of the St. Catherine Co-operative Credit Union to the EduCom family.

♦♦

Adopting Queue Management System which has significantly enhanced the membership flow in the banking hall. This will be replicated at the larger branches.

REVIEW OF REPORTS

♦♦

Board of Directors Report The Chairman presented the above-mentioned report and highlighted the following:

Improving communication to members through timely website updates, more frequent emails and text messaging.

♦♦

Increasing fund disbursement options by adding Electronic Funds Transfers, which has improved turnaround times and providing greater flexibility to members.

MATTERS ARISING There were no matters arising from the minutes.

LEGISLATION The Credit Union anticipates that the long awaited regulations that would allow the Bank of Jamaica (BOJ) to regulate Credit Unions would be passed soon. With this legislation, BOJ would assume the authority to make decisions that could have significant impact on the Credit Union Movement, particularly in the achievement and maintenance of operating standards. As a result, members would continue to see a number of changes implemented to improve operational performance. He said that measures were being established which would serve to strengthen and secure the organization’s operations. He asked the membership for their continued support and co-operation, as the Credit Union prepared for the regulations and monitoring which would follow. The Chairman reported that the Credit Union experienced a 5.2% growth in the Savings portfolio, moving from $4.17B in 2015 to $4.38B in 2016. Loans declined by 0.7% moving from $4.20B in 2015 to $4.18B in 2016. Worthy of note was the reduction in delinquency moving from 7.7% in 2015 to 3.6% at the end of 2016. This figure was below the established standard 5%. Total Assets recorded a 4.3% growth ending the year at $5.83B. A Surplus of $89M was posted for the year compared to $2.4M in 2015. While Operating Income saw a growth of 9.2%, moving from $579.3M in 2015 to $632.7M in 2016.

MARKETING AND PROMOTION The President said that the Credit Union would continue its drive to create awareness, build member loyalty, recruit new members and share its successes among the stakeholders. As such, the focus would be increasingly geared at relationship building and target marketing by identifying specific groups in the bond and focusing sales effort towards those persons. STRATEGIC OBJECTIVES The Credit Union will continue its drive to achieve its vision by focusing on: ♦♦

Financial health and sustainability.

♦♦

Membership growth, satisfaction and welfare.

♦♦

Maintaining an effective governance and Enterprise Risk Management Framework.

♦♦

Human Capital Development and Cultural Alignment.

♦♦

Leveraging technology to create competitive advantage.

Educom’s major growth strategy would be based on inorganic growth through mergers. As a consequence, in 2016, the membership gave the approval for the Credit Union to merge with the St. Catherine Co-

MINUTES OF PREVIOUS ANNUAL GENERAL MEETING

operative Credit Union. With this merger, EduCom would have a greater capacity to satisfy the regulatory requirements of the Bank of Jamaica, increase liquidity and enhance the Credit Union’s ability to effectively compete and exceed members’ expectations.

b) Loan Portfolio Mr. Andrew Smith noted that the Credit Union realized a Surplus of $89M which was good, but was a little concerned about the 0.7% decline in the loan portfolio. However, he would await the presentation of the financial report where more details would be provided as to the reason for the decline.

OUTREACH A number of outreach projects were carried out during the year including the GSAT and tertiary students’ scholarship awards valued at just over $1.4M. APPRECIATION The Chairman extended appreciation and thanks to the Supervisory and Credit Committees, management and staff, the team of EduCom Ambassadors and all other volunteers for their hard work and commitment throughout the year and look forward to their continued support, dedication and involvement in 2017. QUERIES FROM THE BOARD REPORT

There being no further questions on the Board report, it was adopted on a motion by Ms. Norma BernardPowell, duly seconded by Mr. Shawn Bryce, 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

a) Mergers A member enquired whether there would be other mergers in the future.

REGISTRAR’S REPORT

The Chairman advised that there was the likelihood that there would be more mergers as this was one of the Credit Union’s growth strategy.

TREASURER AND AUDITOR’S REPORT

Distribution of Annual Reports

AUDITOR’S REPORT

Mrs. Patricia Reid-Waugh congratulated the Board and Management for the achievements that the Credit Union made in 2016, as the results reported meant that the Credit Union was moving in a positive direction. She commented that the Credit Union was expanding and getting more sophisticated, and the financial reports were more complicated. She pointed out that the Annual Report was not accessible on the website in a timely manner. As such, she was unable to read and digest the report prior to the meeting.

Mr. Ken Wilson read the Independent Auditor’s report on the Credit Union’s financial affairs for the year ended December 2016.

The Chairman informed that the annual report was emailed to all members who provided the Credit Union with an email address. The Chief Executive Officer apologized and stated that he took responsibility for the mishap. He gave the meeting the commitment that future annual reports would be uploaded to the website earlier.

The Registrar’s report was tabled and noted.

The Treasurer proceeded to invite the Auditor from BDO, Mr. Ken Wilson to present the Auditor’s report.

TREASURER’S REPORT The Treasurer, in his report indicated that EduCom had demonstrated significant 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 2016, the organization’s results were very good. He proceeded to present an abridged version of the financials for the year 2016 as follows:

EDUCOM CO -OP CREDIT UN ION

FINANCIAL PERFORMANCE Surplus - The Credit Union generated a Surplus of approximately $89M compared to $2.4M recorded in the corresponding period 2015. The significant increase in Surplus levels for the current year when compared with the previous year was attributed mainly to the non-recurrent one-off merger costs, where EduCom incurred $58.7M in merger costs in 2015, and approximately $6.0M in 2016. The Treasurer pointed out that Management was successful in its objective to reduce the delinquency rate through the measures that were implemented to combat the very high delinquency rate experienced in 2015. The Credit Union achieved a delinquency rate of 3.6%, which was below the established benchmark of 5%, moving from a high delinquency rate of 7.72% that was experienced in 2015. Operating Expenses reduced to $464.8M (in 2016: $469.7M in 2015). This reflected a 1% decline or $4.7M. The main contributing factor to the decrease was the non-recurrence of the one-off merger related costs. Total Assets increased to $5.83B in 2016, an overall increase of $239M or 4% compared to $5.59B in 2015. Members’ Savings increased by $220M or 5% to $4.39B compared to 4.17B in 2015. EduCom continues 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 decreased by $30M, closing the year at $4.18B to represent a 3% reduction in loan demand when compared to the $4.21B in 2015. Despite the fact that loan had declined, a measure had been taken by the Board in order to consolidate the back office operations to ensure that going forward the Credit Union would be in position to manage the level of demand anticipated during 2017 and beyond. QUERIES FROM THE TREASURER’S REPORT a) PEARLS Ratios Ms. Patricia Reid-Waugh pointed out that while the Credit Union was focusing on increasing its savings portfolio, attention needs to be given to loans. A review of the PEARLS Ratios revealed that there were unfavourable ratios in the area of Liquid Assets to Total Assets. She asked that more innovative loan products be looked at, so as to attract greater demand for loans.

ANNUAL REPORT 2017

b) Automated Teller Machine (ATM) Mr. Rohan Clarke reported that the ATM on the UTECH campus was out of service for years and enquired whether there would be a replacement. The Chief Executive Officer, Mr. Elvis King informed that a decision had been taken to assess the need of the ATM, as the investment in these machines was substantial. Also, the CU did not want to invest too much in non-earning assets, so the matter was being reviewed. c) Dividend on Permanent Shares Mr. Kingsley Wray enquired of the Treasurer whether the CU would be paying a dividend to members. The Treasurer advised that dividends were paid only on Permanent Shares. He mentioned that a proposal would be made to the meeting seeking approval to distribute $50M, which was approximately 64% as dividend to members. d) Home Loans A member enquired whether members would be afforded the opportunity to broaden their loan base by offering land as collateral to obtain a loan under the NHT/Credit Union Microfinance Programme. The Chief Executive Officer informed that the Credit Union had commenced discussions with the NHT on the matter and that NHT was considering EduCom as one of its participants. As soon as discussions were concluded and an agreement was signed, better particulars would be communicated to members. Mr. Rexford Jones moved for the acceptance of the Treasurer’s report. This was duly seconded by Ms. Carol Riley and unanimously carried. CREDIT COMMITTEE’S REPORT The Chairman invited Mr. Clayton McEwan from the Credit Committee to present the Credit Committee’s report on behalf of Mrs. Jennifer Ricketts-Hall, Chairman. On a motion by Mr. Andrew Smith and seconded by Ms. Claudette James, the Credit Committee’s Report was taken as read. Mr. McEwan invited questions on the

MINUTES OF PREVIOUS ANNUAL GENERAL MEETING

report, and there being none, the report was adopted on a motion by Ms. Beatrice Hamilton-McDonald, duly seconded by Ms. Paulette Coley and carried. SUPERVISORY COMMITTEE’S REPORT Continuing, the Chairman proceeded to invite Mr. Glenville Henry, Chairman of the Supervisory Committee to present the Committee’s Report. On a motion by Ms. Marcia Sweeney and seconded by Mr. Lloyd Wilson, the Supervisory Committee’s Report was taken as read. There being no questions on the Supervisory Committee’s report, it was adopted on a motion by Ms. Paulette Anderson, duly seconded by Ms. Elaine Russell-King and carried. REPORT OF DELEGATES TO THE JAMAICA CO-OPERATIVE CREDIT UNION LEAGUE Continuing, the Chairman called the attention of the meeting to the Delegates Report which was tabled and noted. In the interest of time, the Chairman recommended that members take the time to read and digest the report at their convenience. There were no questions emanating from the report. RESOLUTIONS The Chairman, at this stage informed the meeting that there were two resolutions tabled pertaining to the Credit Union’s rules for which amendments were being sought. He invited members to pages 139 to 140 of the booklet. He proceeded to invite Mr. Hector Stephenson, Secretary, to lead the meeting through the proposed rule changes. The proposed rule changes were presented as follows: RATIONALE FOR RULE CHANGE 1. Rule 6: Application for Membership The Credit Union (CU) has targeted over four hundred new members monthly as a result of its merger with St. Catherine Co-operative Credit Union (SCCU). Prior to this, the CU was averaging about 120 members monthly and it was proving difficult for the Secretary of the CU to sign the new member’s application in a timely manner. With a projected 300% increase in new applications per month, this will prove more difficult, even impractical. Given the fact that all new applications must be processed by the Risk

and Compliance Department to ensure that KYC requirements are met before they are presented to the Risk and Compliance Committee of the Board and subsequently to the full Board, there is a proposed rule change to Article III: Application for Membership. Current Rule 6 An applicant shall not be registered as a member until:i. It is determined that he is eligible for membership under Article II, Rule 4, of these Rules. ii. It is determined that he satisfies all requirements under the Law and the Act and the Bank of Jamaica Regulations; his application for membership shall have been approved by the Secretary of the Board, and all approved applications shall be ratified by the affirmative vote of the Directors at the next meeting of the Board. Proposed Rule 6 An applicant shall not be registered as a member until:i. It is determined that he is eligible for membership under Article II, Rule 4, of these Rules. ii. It is determined that he satisfies all requirements under the Law and the Act and the Bank of Jamaica Regulations; His application for membership shall have been signed by the Chief Executive Officer, subject to recommendations of the Risk and Compliance Department and all applications shall be approved by the affirmative vote of the Directors at the next meeting of the Board. iii. He has been formally accepted into membership through a procedure established by the Board of Directors and all applications shall be approved by the affirmative vote of the Directors at the next meeting of the Board. Mr. Michael Webb, the Presiding Officer pointed out that there were errors stated in Rule 6(ii) which had to be expunged. This resulted in the proposed rule being amended to read:

EDUCOM CO -OP CREDIT UN ION

Revised Rule 6 An applicant shall not be registered as a member until:i. It is determined that he is eligible for membership under Article II, Rule 4, of these Rules. ii. It is determined that he or she satisfies all requirements under the Law, the Act and the Bank of Jamaica Regulations. iii. He or she has been formally accepted into membership through a procedure established by the Board of Directors and all applications shall be approved by the affirmative vote of the Directors at the next meeting of the Board. The Resolution was passed on a motion by Mrs. Sonia Smith, duly seconded by Mr. Rohan Clarke and carried. The Chairman proceeded to invite members to vote on the resolutions by the showing of their hands. The results were as follows: ♦♦

Number voted for

340

♦♦

Number voted against

♦♦

Number of abstention

♦♦

Number of members present at voting:

344

ANNUAL REPORT 2017

the number of members of the Board of Directors is increased, one-half of such additional members shall be elected for three years and one-half for two years. Thereafter the term of office for its members shall be three years. Proposed Rule 30 The election to the Board of Directors shall constitute for one third (1/3) of the number of Directors to serve for a term of three (3) years, one third (1/3) to serve for two (2) years and one third (1/3) for one year. Whenever the number of members of the Board is increased, one of such additional member shall be elected for three (3) years and the other(s) as recommended by the Nominating Committee. The Resolution was accepted on a motion by Ms. Paulette Coley, duly seconded by Mr. Howard McKenzie. The motion was unanimously carried. The Presiding Officer proceeded to invite members to vote on the resolution by the showing of their hands. The results were as follows: ♦♦

Number voted for

344

♦♦

Number voted against

♦♦

Number of abstention

♦♦

Number of members present at voting:

344

RATIONALE FOR RULE CHANGE 2. Rule 30: Adding Members to the Board The Merger Agreement between EduCom and SCCU allows for the number of members of the Board of Directors of EduCom to increase from 11 to 15 members. According to the Rules, onehalf of such additional directors would serve for 2 years and one-half for 3 years, but this will not achieve a critical objective, which is to have new directors tenured in such a way that no more than a bare majority is retired. To achieve this (rotation each year at succeeding AGMs) bare majority, new directors would be tenured to serve (1/3 for) 3, (1/3 for) 2 and (1/3 for) 1 year respectively. Current Rule 30 At the first Annual General Meeting, a bare majority of the members constituting the Board of Directors shall be elected for a term of three (3) years and the others for a term of two (2) years. Whenever

NOMINATING COMMITTEE’S REPORT Mr. Clide Nesbeth, Chairman of the Nominating Committee, presented the Committee’s Report. The report was taken as read on a motion by Ms. Lavern Johnson, duly seconded by Ms. Jennifer Hall and carried. The other members comprising the Nominating Committee were: Mr. Michael Brydson, Member Mr. Noel Morgan, Member Mr. Elvis King to the Committee.

provided

technical

assistance

MINUTES OF PREVIOUS ANNUAL GENERAL MEETING

BOARD OF DIRECTORS The following Directors retired at the Annual General Meeting: Mr. Kenneth Grant Mr. Raymond Eytle Mr. Kenry Jackson

Mr. Carlton Stewart who would replace Ms. Alcia Jones and Ms. Deloris Mollison. Both persons would serve in office for a period of two (2) years. The other members of the Committee would continue in office for a period of one (1) year: Ms. Sandra Smith Dockery, Mr. Clayton McEwan and Mrs. Jennifer Ricketts-Hall.

Dr. Mark Nicely The Committee recommended the following persons and they had expressed their willingness to serve: Mr. Kenry Jackson and Dr. Mark Nicely would serve for a term of three (3) years, while Ms. Stacey-Ann Farquharson and Mr. Ian Sutherland would replace Directors Grant and Eytle. Both Directors would also serve for a term of three (3) years. Continuing, he reported that due to the merger of St. Catherine Credit Union into EduCom Credit Union, part of the agreement for merger was for EduCom to take four (4) Directors from St. Catherine Credit Union to join the Board of EduCom. Therefore, the number of directors comprising the Board would be increased from eleven (11) members to fifteen (15) members.

SUPERVISORY COMMITTEE The following members of the Supervisory Committee were all due for retirement: Mr. Glenville Henry, Ms. Keisha Bedward, Ms. Sandra Lawrence, Ms. Petandra Timoll, Mr. Ruel Nelson. With the recommendation for Mr. Ruel Nelson to serve on the Board of Directors, the Nominating Committee recommended Ms. Cheryl Daley as his replacement. The Committee recommended the following persons who had expressed their willingness to serve for a period of (one) 1 year: Mr. Frederick Mills, Ms. Petandra Timoll, Ms. Cheryl Daley, Mr. Clive McLean and Mr. Hopeton Newell.

Mr. Christopher Emanuel – 1 year

The Chairman acknowledged the sterling contribution over the years of the Directors and Committee Members demitting office, and for their commitment and dedication to the Credit Union.

Mrs. Janice Green – 1 year

Elections/Nominations

Mr. Ian McNaughton – 2 years

Mr. Michael Webb from the Department of Co-operatives and Friendly Societies was invited to preside over the elections. Mr. Webb explained the election process to the meeting and pointed out that there would not be any nominations from the floor. This was entrenched in the rules where nominations from the floor had ended.

He then proceeded to recommend the following additional Directors to serve on the Board:

Mr. Charles O’Connor – 3 years The other Directors serving on the Board and their respective tenures were as follows: Mr. Hilton Blenman – 1 year Mrs. Valerie Hall-Buckle – 1 year Ms. Sonia Bennett – 1 year Mr. Clide Nesbeth – 2 years Mr. Hector Stephenson – 2 years Ms. Coleen Lewis – 2 years Mr. Ruel Nelson – 2 years CREDIT COMMITTEE Members of the Credit Committee retiring were: Ms. Alcia Jones and Ms. Deloris Mollison. The Committee recommended the following persons and they had expressed their willingness to serve:

Continuing, he proceeded to seek a motion for the Nominating Committee’s recommendations for the nominees to be appointed to the Board of Directors, Credit and Supervisory Committees to be accepted. Mrs. Sonia Smith expressed that she had not seen any advertisements for the vacancies that existed and believes members should be notified accordingly. Mr. Elvis King, Chief Executive Officer advised that the information was posted at all of the branches. Members used the opportunity to recommend potential candidates for varying positions, interviews were done and the recommendations of the committee was as a result of this extended process. Mrs. Patricia Reid-Waugh expressed that members as well as the Board, need to look at a better gender

EDUCOM CO -OP CREDIT UN ION

balance, especially on the Board in the future. The Chairman informed that steps are being made in that direction. On a motion by Mrs. Sonia Smith, duly seconded by Mrs. Patricia Reid-Waugh, and carried, the Nominating Committee’s report was accepted. The newly elected Board Members and Committee Members were as follows: Board of Directors Name

Tenure

Hilton Blenman

1 year

Valerie Hall-Buckle

1 year

Sonia Bennett

1 year

Christopher Emanuel

1 year

Janice Green

1 year

Clide Nesbeth

2 years

Hector Stephenson

2 years

Coleen Lewis

2 years

Ruel Nelson

2 years

Ian McNaughton

2 years

Kenry Jackson

3 years

Dr. Mark Nicely

3 years

Stacey-Ann Farquharson

3 years

Ian Sutherland

3 years

Charles O’Connor

3 years

Credit Committee Name

Tenure

Sandra Smith-Dockery

1 year

Clayton McEwan

1 year

Jennifer Ricketts-Hall

1 year

Deloris Mollison

2 years

Carlton Stewart

2 years

Name

Tenure

Frederick Mills

1 year

Petandra Timoll

1 year

Cheryl Daley

1 year

Clive McLean

1 year

Hopeton Newell

1 year

ANNUAL REPORT 2017

The Presiding Officer reminded the Board and Statutory Committees that they should meet within ten (10) days to elect their respective officers and submit their names and particulars to the Registrar of Co-operatives, the Bank of Jamaica, the Jamaica Co-operative Credit Union League and other external stakeholders. DELEGATES TO THE LEAGUE Continuing, Mr. Michael Webb 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. This was 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 Mr. Michael Webb proceeded to seek the meeting’s permission for the fixing of maximum liability. He referenced that the rule is that the Credit Union can borrow 16 times its capital in the event of a significant emergency. As such, he recommended that the Maximum Liability be set at $5B. This was approved on a motion by Ms. Denise Phillips, duly seconded by Ms. Elaine Russell-King and unanimously carried. APPROPRIATION OF SURPLUS The Chairman presented the proposed Appropriation of Surplus. The details were as follows: Dividend on Permanent Shares

50M

Honoraria

Retained Earnings

$ 31.036M

Total

$89.036M

On a motion by Ms. Fay Jackson and seconded by Ms. Cecelia Ferguson, the Appropriation of Surplus was unanimously carried. ANY OTHER BUSINESS Divulging Account

Supervisory Committee

Information

Pertaining

Member’s

A member enquired whether a person who is not an account holder at the Credit Union could telephone and obtain information on members account, as the incident took place since the merger. Mr. Elvis King, Chief Executive Officer apologized to the member and stated that the incident was a breach in operating procedures as this is not the norm at EduCom. The matter would be investigated.

MINUTES OF PREVIOUS ANNUAL GENERAL MEETING

Permanent Shares Mr. Blake Wong sought clarification as to whether there was a limit to the amount of money one could place on Permanent Shares. He noted the dividend paid on Permanent Shares and enquired whether the trend would continue for the ensuing year. The Chairman advised that dividend on Permanent Shares would be determined based on the success and performance of the Credit Union in the given year. A member stated that it appears there need to be more information given to the members on the nature of the Permanent Shares, how it works and the benefits to be derived. The Chairman advised that the matter would be addressed. Closure of Lluidas Vale Branch A member stated that since the closure of the Lluidas Vale Branch, members have been transacting business at the Linstead Branch and enquired what would be done to assist the elderly in this regard. The Chairman expressed that Management have communicated in writing to every member of the Lluidas Vale family. Management is looking into some ways of dealing with the requirement of the elderly in that area and will communicate with them. Operational Matters In the interest of time, Mr. Elvis King, Chief Executive Officer invited members to call the office to further discuss operational issues with the team. TERMINATION There being no other business, the meeting was terminated at 2:24 p.m. on a motion by Ms. Norma-Lee Lewis, and seconded by Mr. Andrew Smith.

Confirmed on motion by: …………..........………………………………. Seconded by:

…………..........……………………………….

…………..........………………………………. Chairman

…………..........………………………………. Date

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ANNUAL REPORT 2017

Directors’ Profile CLIDE LEOPOLD NESBETH 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 had over four years experience in the training of students, at the tertiary level, in the above areas of discipline. 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 and 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 Co-operative Credit Union and is 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.

MARK NICELY 1st Vice President 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 Cooperative 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 of new principals in school management. Dr. Nicely served as Principal of the Hayes Primary and Junior High School in Clarendon from 2004 -2011 and later became 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.

DIRECTORSâ&#x20AC;&#x2122; PROFILE

RUEL NELSON 2nd Vice President Mr. Nelson is a Financial Manager at 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 on the Board of Directors as 2nd Vice President. He has also served as a member of the Supervisory Committee of EduCom Cooperative Credit Union and the Jamaica 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 Bachelors of Law degree.

HILTON BLENMAN Treasurer Mr. Blenman is a Fellow of the Institute of Chartered Accountants of Jamaica who holds a Master of Science (M.Sc.) Degree in Accounting and a Bachelor of Science (B.Sc.) Degree in Management of Business from the University of the West Indies, Mona Campus. Mr. Blenman has spent over 40 years in the field of accounting where he started as an External Auditor with Touche Ross and later, served as Assistant VicePresident Finance and Accounting, and also Chief Internal Auditor at the Jamaica Mutual Life Assurance Society. He served as Managing Director at Edward Gayle and Company and as the Director of Internal Audit at the Jamaica Public Service Limited for one year. He also served the banking sector as Manager, Accounting at CIBC First Caribbean Bank. In recent years he has been a consultant to various firms. Mr. Blenman has served as a past Treasurer and is a current member of the Board of Directors of the Jamaica Child Evangelism Fellowship Limited.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Directors’ Profile HECTOR STEPHENSON Secretary Mr. Stephenson began his professional career as a teacher of Integrated Science at St. George’s College in September 1983, after completing 3 years of training in Double Option Science at the Mico Teacher’s College (now Mico University College). He was awarded the Peter Hans Kolvenbach Scholarship to pursue further studies at Boston College University in Massachusetts, USA where he completed a Masters Degree in Secondary School Supervision. Mr. Stephenson returned to Jamaica in 1989 and was named Dean of Students at St. George’s College. He was promoted to the position of Vice-Principal in 1991 and was appointed Principal in 1992. 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). After resigning from St. George’s College in 1998, Mr. Stephenson joined the staff at the Overseas Examinations Office, now the Overseas Examinations Commission, as Deputy Director. He served as Acting Executive Director before he was appointed Executive Director and CXC Local Registrar in 2003. Mr. Stephenson has served on several school boards including those of the St. Hugh’s High, Edwin Allen High and Clan Clarthy Primary Schools. He is a member of the Caribbean Examination Council (CXC) National Committee and a member of the National Qualifications Framework of Jamaica.

SONIA BENNETT Director / Asst. Secretary 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. 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.

DIRECTORS’ PROFILE

COLEEN LEWIS Director Ms. Coleen Lewis has over 17 ½ 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 part of the Legal Department of Jamaica’s biggest and oldest newspaper, The Gleaner Company. She is presently employed to the University of the West Indies in the Faculty of Law as the Deputy Dean, Undergraduate Affairs Teaching and Learning and a lecturer.

VALERIE HALL - BUCKLE Director Mrs. Hall–Buckle is the Accounts Payable Manager, UWI Mona Campus. She has been a volunteer with the Credit Union since 1991. In former years, she was a member of the Supervisory Committee of the Jamaica Co-operative Credit Union League Limited (JCCUL) and Treasurer of the UWI (Mona) & Community Co-operative Credit Union Limited for a number of years. She was a member of the Merger Team of EduCom and is a Director of the new entity for 2015/2016. She was exposed to years of training by the JCCUL and served the movement with commitment and diligence.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Directors’ Profile CHRISTOPHER EMANUEL Director Mr. Emanuel is the Chief Executive Officer of the Jamaica Agricultural Society. He holds a Bachelor of Science (B.Sc.) Degree in Accounting and Masters Degrees in Accounting and Business Administration from the University of the West Indies, Mona Campus. He is a Chartered Accountant and a Certified Fraud Examiner. In addition to the Board of EduCom Co-operative Credit Union, he serves on the boards of other private sector entities and is Chairman of the Dunrobin Christian Academy. Outside of professional responsibilities, he is involved with social and charitable organizations.

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 has 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 twenty-five years, Mr. O’Connor has held Senior Executive positions in both the Public and Private Sectors. He has 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). 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.

DIRECTORSâ&#x20AC;&#x2122; PROFILE

STACEY-ANN FARQUHARSON Director Ms. 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 as Director of EduCom and chair of the EduCom HR Committee. 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 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. Ms. Stacey-Ann Farquharson 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., Attorneys-at-Law. In her spare time, Ms. Farquharson provides professional development consultations through her brainchild, Farquharson.Image.Confidence.

JANICE GREEN Director Mrs. Janice Green is an Occupational Safety and Health Professional and a Human Resource Practitioner employed to the Jamaica National Group. She completed her Masters in Occupational Safety Health at the ILO/University of Turin, Italy. Mrs. Green did her undergrad 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 where she 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 and 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. 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 UN ION

ANNUAL REPORT 2017

Directorsâ&#x20AC;&#x2122; Profile IAN SUTHERLAND 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 twenty (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. 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. Computer Based Management Information Systems from the University of the West Indies and he is also a certified Project Management Professional. He currently serves as a Director on the Board of Educom Co-operative Credit Union Limited.

HOPETON NEWELL Director Hopeton Anthony Newell received his post graduate certificates from Edinburgh Business school in Scotland where he is also completing his MBA. He also has a B.A in Philosophy & Political Science and a ASc. in Business Management from the University of the West Indies, Mona Campus. Mr. Newell has worked at the National Water Commission for over twenty-six years in the Accounts and Operations Departments and for the last eight years in the capacity of Water Production Team Leader. Mr. Newell holds certification in Occupational Health and Safety, Advanced Customer Service, Telephone Technique Customer Service and Maintenance Management, Pre-Engineering and has experience in Accounting, Water Quality & Treatment, Computer Repair, Customer Service and Entrepreneurship. Mr. Newell is an executive member of the JPUA, a Trade Union Representative and is a current Director on the Board of the EduCom Cooperative Credit Union Ltd. and holds the office of Justice of the Peace for the parish of St. Catherine.

DIRECTORSâ&#x20AC;&#x2122; PROFILE

IAN MCNAUGHTON 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. 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 UN ION

ANNUAL REPORT 2017

Board of

directors’ Report TO THE 3RD ANNUAL GENERAL MEETING FOR THE YEAR ENDED DECEMBER 31, 2017 ECONOMIC, LEGISLATIVE AND SOCIAL OVERVIEW The 2017 calendar year ended with the Bank of Jamaica (BOJ) reporting that inflation closed at 5.2%. The inflation rate recorded for the year showed a significant increase over the 1.7% recorded in the previous year. There was an appreciation in the Jamaican Dollar against its major trading partner, USA. At the beginning of the year, the Jamaican dollar was trading at J$128.64 to US$1.00, but closed at J$125.55 to represent a 2.4% appreciation over the period. THE GRAPH BELOW DEPICTS SOME OF THE KEY ECONOMIC VARIABLES OVER THE PAST THREE YEARS

the need to address issues of youth unemployment, education and social cohesion. Despite progress in achieving stability in a number of the critical indices that foster economic development, stronger and more resilient growth is needed in the economy to eliminate poverty, while improving distribution. To stabilize the economy, reduce debt and fuel growth, the government is implementing an ambitious reform program that has garnered national and international support. Since 2013, as part of a comprehensive package of support by the World Bank, the International Monetary Fund and the International Development Bank, the country has been provided with more than US$510 million for development assistance with an emphasis on investment financing in support of private sector led growth, resilience to climate change and social and public sector transformation. Despite the macroeconomic challenges faced in 2017 and the level of competition characterizing the financial industry, Credit Unions continued to record impressive performances and make significant strides in their effort at improving customer satisfaction, operational efficiency and managing change. LEGISLATION

Source: Statistical Institute of Jamaica; Bank of Jamaica

GDP grew by an estimated 0.5 percent in 2017, down from 1.4 percent in 2016. The economy is however expected to rebound in 2018 with projected growth of 1.7 percent. The poverty rate was estimated to have increased to 15.9 percent in 2017, but with a projected declining path over 2018–20. Total employment grew by 2.3 percent in 2017. Unemployment fell to 10.4 percent in October 2017 with youth unemployment falling by 7 percent to 25.4, the lowest rate since 2007. Crime and violence levels remain high, emphasizing

The Credit Union continues its preparation ahead of Bank of Jamaica becoming the regulatory arm for credit unions. We were recently advised that the 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. We implore our members to be mindful of the additional requirements and responsibilities of a BoJ regulated Credit Union and to be therefore receptive of the changes that we are adopting in order to be compliant.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

INTERNATIONAL FINANCIAL REPORTING STANDARD (IFRS) 9 The International Accounting Standard Board, IASB, effected the International Financial Reporting Standard statement number 9 (IFRS 9), which takes effect January 1, 2018 and replaces the previous standard, IAS 39. This new standard requires a forward-looking loan loss provision, 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. We are pleased to inform the membership that we are in an advance stage of adapting this mandatory standard in the Credit Union. 2017’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 these critical areas for the three-year period, 2015 - 2017. 3-YEAR COMPARATIVE PERFORMANCE Key Performance Indicators

2015 ($)

2016 ($)

2017 ($)

2017’s Growth %

Savings

4.169B

4.385B

6.669B

52.1%

Net Loans

4.205B

4.176B

6.124B

46.6%

Total Assets

5.595B

5.834B

8.308B

42.4%

Delinquency

7.7%

3.6%

2.5%

31.9%

579.3M

$632.7M

$886.5M

40.1%

Operating Income

The major portion of the 2017 performance recorded in the above table reflects the impact of the inorganic growth resulting from the merger with St. Catherine Cooperative Credit Union (SCCU), which became a part of our operation in January of 2017. However, despite the competitive nature of the financial landscape, the Credit Union has also performed well organically, reflecting growth of 13.9% in loans, 7.7% in assets and 11% in savings. This impressive organic growth reflects the success of our continued emphasis on performance excellence as we improve member experience and add value to the lives of our members.

We closed the year with total assets of $8.308B, an increase of 42.4% over 2016’s performance. The major portion of the increase would have again been attributable to the incorporation of SCCU into our operations. THE FIGURE BELOW SHOWS GRAPHICALLY OUR PERFORMANCE IN ANOTHER KEY INDICATOR, NAMELY 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 are implementing the new IFRS 9 standard which requires

BOARD OF DIRECTORS’ REPORT

us to implement rigid standards in the management of our loan portfolio. This standard requires a provision to be made as soon as a loan is approved, ie provisions are required long before a loan becomes delinquent. Honouring your loan obligations has become even more important now than ever before. The management team along with the Credit and the Risk departments must be commended for their efforts during 2017. These efforts have again resulted in a substantial reduction in the non-performing loans. Delinquency fell to 2.5% from the previous year’s 3.7%, representing a reduction of 31.9%. We commend you the members for your diligence in honouring your obligations and the internal team for their efforts in achieving these results for the year under review. THE FIGURE BELOW SHOWS OUR PERFORMANCE IN OUR CORE BUSINESS OVER THE THREE-YEAR PERIOD, 2015-2017.

Operating Income for the period closed at $886.5M, a growth of 40% over the performance of 2016. The inclusion of SCCU would have again contributed substantially to this growth. You (our members) would have also benefitted from our loan sales which were instrumental in the growth in our income during the year. OPERATIONS In our efforts at maintaining our emphasis on member service excellence we continue to expand the use of modern banking and other technology in satisfying the needs of our members. This we believe is essential in our efforts at maintaining relevance in the lives of our members, managing our operating cost and succeeding in the very competitive financial environment in which we operate. In this regard, and to allow us to effectively address your needs, we encourage you to communicate your concerns, needs and interest to us. As a result of your feedback we have so far:

♦♦

Embarked on an enterprise-wide service excellence program geared at improving every facet of the service that we deliver

♦♦

Increased loan facilities at competitive rates so that you are able to satisfy your current borrowing needs at your credit union

♦♦

Provided a spacious office at the Sovereign Village Plaza, Portmore Pines in St. Catherine and are working on other locations.

♦♦

Developed a platform for and increased the use of online banking in our service delivery.

♦♦

Provided competitive interest rates on savings.

We continue to implore you to use the most convenient means to provide us with feedback, as we continuously strive to improve the service we deliver to you. MARKETING & PROMOTION The Credit Union Movement in Jamaica has developed a suite of similar products and services which they offer to their members. The competitive nature of the marketplace demands that we improve on our member relationship as a means of getting to know you, identify your needs and develop appropriate products to satisfy your needs. In an effort to provide you with competitive products, we have adopted some of the features of the other financial institutions. We are however mindful that we must maintain the unique identity of our credit union. As such, the marketing plan of the credit union does not only concern itself with the marketing of our products, but also on the marketing of the EduCom brand. The process will therefore not only consider the range of products and services aimed at satisfying members’ needs, but also, the image and culture that characterize the institution, thus adding value to the brand. The strategic focus of the marketing department for 2017 was a continuation on our emphasis on promoting the EduCom brand to increase awareness. The initiatives included several radio and television interviews, supported by a radio advertising campaign, all supported by the use of social media. We are cognizant that no paid marketing effort can substitute for the “word of mouth” promotion that you our members are able to share with your colleagues and families, who fall under the credit union’s bond. We therefore urge you to continue to share your

EDUCOM CO -OP CREDIT UN ION

experiences with your relatives and friends and encourage them to join you by becoming a part of the EduCom family. We will, in the foreseeable future, continue to create awareness, build member loyalty, recruit new members, increase efficiencies and share our successes among the stakeholders, as we continue to build a path for a brighter future for all our members. The Marketing Plan was also developed with a focus on growing our assets, savings, loan portfolio, and our membership over the year. The Credit Union took advantage of the expansion in its sales territory and attract new members through member and staff referral system; youth savers, personal selling; sales promotion/ college orientations; financial advisory services; digital and social media selling. Focus was also placed on converting youth savers who have attained majority to full membership and on building membership among members of the tertiary educational institutions. This effort is geared at ensuring that the EduCom brand is made known nationally across all market segments. As we move forward in our marketing effort, our focus will be increasingly geared at relationship building and target marketing. In this endeavor, the team will be identifying specific groups in the bond and focusing our sales effort towards these persons. We are also convinced that our current range of products should allow members to utilize more of EduCom’s services and as a result, our marketing thrust will also be geared at increasing the share of each member’s wallet. We have broadened our EduCom Ambassadorship program to include students at the respective universities and colleges, to play an even greater role in our recruitment and retention activities. This will also aid in our communication and promotion strategies. We are also strengthening our sales team so that the direct marketing and relationship building which are important to our growth, remain a staple in our yearly operational plans. STRATEGIC OBJECTIVES Our vision; “In 2020, EduCom Cooperative Credit Union is member-centric, service-oriented, financiallysound and technologically - driven; and is the top Credit Union in Jamaica in member value, compliance and satisfaction.” continues to drive us and served as a major point of focus throughout 2017. To accomplish this vision, the leadership continues to be committed

ANNUAL REPORT 2017

to a strategic position of differentiation, through service excellence, to maximize our opportunity of developing and maintaining a sustainable competitive advantage. EduCom’s 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 to successfully move forward in this dynamic economic development landscape. Our two main focuses are Growth and Service Excellence. The concentration on growth is in the key performance indicators, namely: assets, loans, savings, membership, and revenues/surplus. We anticipate that 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 us taking advantage of opportunities for inorganic growth resulting from the trend in mergers caused by the anticipated assumption of regulatory control by the BOJ. We therefore see mergers as an important part of our growth strategy as we continue to explore relationships with credit unions to achieve synergies. In addition to our two main strategic focus, the operating component of the plan is organized 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 These themes capture the daily focus of the organization. Each theme is supported by a set of performance indicators which suggests how achievements can be tracked and verified. The future of the Credit Union is in the convenience that we will be able to bring to you. Being mindful of this, we have begun to review our current Information Technology (IT) platform with a view to assessing its present capabilities to determine if it is compatible with the future needs of the organisation and its members.

BOARD OF DIRECTORS’ REPORT

The ultimate objective of this exercise is to determine the extent to which the current platform can assist us in accomplishing our strategic goals and if not, to decide on a platform that will enable us to do so. Even with the increased use of technology we are also mindful that the location of our branches will be integral to our continued success. With this in mind, we are assessing our branch locations with a view to relocating to areas that are convenient for you to visit the branches and transact your business with us. We are mindful of the importance of relationships in the credit union movement and so we assure you that our growth in the use of technology and our expansion in the digital space will not result in the elimination of the human factor. We will however continue to enhance convenience for our members through the use of technology for those members who are so inclined. 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 a number of institutions and individuals during 2017. In line with our focus over the years, support was mainly focused on members’ needs, educational institutions and institutions in which members are involved. Of particular importance is the support we continued to give to the Albert Street Basic School, our annual Scholarship programme and the number of schools that make request on a monthly basis and are facilitated. PRODUCTS & SERVICES Our Wealth Creator, Diamond Reserve and Executive Note continue to be the most sought after products for savers who are building resources for a specific purpose in the medium to long term. The competitive rates offered on these products are unmatched in the industry. As it relates to loans, our EduCom Special and 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 opinion 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 makes it imperative 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. With the aid of the ever-improving technology available to us, you are now able to access the credit union online and execute activities such as; view balances, request statements, make transfers, and initiate loan requests through the use of our online banking platform. We continue in our efforts to improve on this aspect of our operation and encourage you to take advantage of the efficiencies that can be achieved from the use of the technology in both, communicating with your credit union and in executing transactions. We are confident that the increased use of technology will make your business experience more desirable, more convenient and private and that it will add more value to your membership. Below is a 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. SAVINGS PRODUCTS • Permanent Share Account

- dividend

• Regular Deposits

- competitive interest rate

• Executive 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

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

• 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

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 provided useful suggestions for improvement in the quality of the service provided by the credit union. ATTENDANCE OF BOARD MEMBERS - 2017 NAMES

PRESENT

EXCUSED

C. Leopold Nesbeth

Nil

Hilton Blenman

Nil

Ian McNaughton

Ruel Nelson

Nil

Ian Sutherland

Valerie Hall-Buckle

Charles O’Connor

Nil

Hector Stephenson

Janice Green

Nil

Stacey-Ann Farquharson

Sonia Bennett

Christopher Emanuel

Kenry Jackson

Nil

Mark Nicely

Coleen Lewis

Hopeton Newell

Raymond Eytle

Kenneth Grant

Nil

BOARD OF DIRECTORS’ REPORT

Supervisory Committee

♦♦

Samuda & Johnson, Attorneys at Law

The Committee comprised of: Ms. Cheryl Daley (Chairman), Mr. Frederick Mills, Mr. Andrew Smith, Mr. Clive McLean and Ms. Petandra Timoll (Secretary). The Committee met at least once per month during which they reviewed the governance of the organisation.

♦♦

Usim, Williams & Co.

♦♦

Highgate Systems Ltd, our software provider

♦♦

The National Housing Trust

Credit Committee

♦♦

The National Land Agency

The Committee comprising Mr. Clayton McEwan, (Chairman), Mrs. Jennifer Hall, Ms. Delores Mollison, Mrs. Sandra Dockery, and Mr. Carlton Stewart met weekly and over the year has done an outstanding job to approve 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 2017. We look forward to your continued support, dedication and involvement in 2018, as together we maintain our role as ambassadors to our credit union. To those volunteers that have retired, we say a special thanks to you for your contribution, while we welcome those who joined our ranks.

For and on behalf of the Board of Directors

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

C. Leopold Nesbeth President of the Board

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

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

treasurer’s Report FOR THE YEAR ENDED DECEMBER 31, 2017

OVERVIEW I am very pleased to present the Treasurer’s Report to the third Annual General Meeting of EduCom Co-operative Credit Union Limited (EduCom). Your credit union has demonstrated fairly good improvement in terms of its overall financial performance when compared to the previous year’s financial outturn. We grew inorganically through the merger of our operation with that of former St. Catherine Co-operative Credit Union Limited (SCCUL) and added to the EduCom family over 36,000 members. In addition, we have had to overcome challenges confronted within the difficult economic environment and a very competitive marketplace. Despite all the obstacles encountered, EduCom has performed very well in most areas of its operations. 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. It should be noted that EduCom’s financial performance was achieved against the background of a robust growth in its membership from the merger. This resulted in a reversal of the decline in the credit union’s loan portfolio in the previous year, to reflect an increase of 46.7% for the period under review. 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 these entities. Further, the situation was made more challenging by the continuation of Government’s agreement with the International Monetary Fund (IMF) to correct fiscal in-balance in the Jamaican economy. Hence,

Hilton Blenman Treasurer

TREASURER’S REPORT

our target market (our members) and by extension, the overall economy experienced 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. OPERATING PERFORMANCE It is against the difficult challenge of unearthing a new culture for our credit union and the adoption of trade practices such as direct sales through the use of Business Development Officers (BDOs), that EduCom realized a surplus for the year of $115.46 million, when compared to $89.04 million, the previous year. The 29.7%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 and non-interest income. The total gross interest income from members’ loans and investments amounted to $886.49 million, when compared to $632.66 million in 2016. This reflected a 40.1% increase over the previous year and was mainly attributed to growth in loan sales from the merger, especially in the unsecured loan portfolio. Whenever a member has not made a payment for a period of ninety (90) days towards his or her loan obligation, interest earnings would not 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 no interest income would be included and also an expense in the form of bad debt provision would be charged to the income statement. We therefore continue to implore our members to be responsible in honoring their obligations to the credit union. The loan portfolio contributed 91.3% to our income (in 2016-92.1%), indicating that the Credit Union beneficially focuses on its core business of granting loans to meet the needs of its members and a slight shift towards income diversification. Our 2017 income from investments in financial markets grew by $27.35 million or 55% as a result of the merger, reflecting a fairly stable investment portfolio and low to moderate interest rates on investments. 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 these services. We have recouped these expenditures in order to reduce the cost to your credit union for the value added services that we are providing to you. With this initiative, EduCom realized total non-interest income of $135.85 million from; loan processing, ATM and management fees on schemes loans, when compared to $70.9 million earned for the previous year. Operating expenses was $669.78 million, when compared to $464.83 million for the previous year. This reflected a 44.1% increase in total operating expenses or $205.0 million. The main contributing factors to this increase were the additional personnel and administration costs from a bigger operation with four additional branches and the nonrecurrent merger related costs. EduCom paid to our members $161.20 million in interest expense for voluntary shares, deferred shares and deposits held with your Credit Union for the current year, when compared to $121.31 million for the previous year. This increase of $39.89 million over the previous year was attributed to larger members’ shares and deposits that resulted from measures implemented to increase members’ savings. It should be noted that during the period under review, EduCom offered very competitive interest rates on members’ savings and deposits that compared favourable to those in the market and ranged from 1.75% to 7.0% per annum, determined by the type of saving products, market condition, amount of funds and tenure. In addition, qualified members of former SCCU benefitted from a transfer of $1,000 per member, from business combination reserve that totalled $35.1 million. This was approved by the Board of Directors to increase their permanent share from $1,000 (previously required for membership) to the $2,000 requirement for membership in EduCom. Additionally, EduCom has continued the revolving loan agreement with the Credit Union Fund Management

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Company (CUFMC) in order to meet the high demand for loans. This resulted in external interest expense of $16.44 million, when compared to $23.92 million in 2016. THE FOLLOWING CHART SHOWS THE COMPARATIVE FINANCIAL PERFORMANCES OVER THE PAST FIVE YEARS, USING AAMM CO-OPERATIVE CREDIT UNION’S AUDITED FINANCIAL FIGURES AS THE BASELINE GIVEN ITS ASSIGNED ACQUIRER STATUS.

PORTFOLIO PERFORMANCE Based on EduCom’s financial performance for the year under review, total assets increased by $2.47 billion or 42.4% and stood at $8.31 billion as at December 31, 2017. Similarly, net total loans increased by approximately $1.95 billion, closing at $6.12 billion at the end of the year to represent a 46.7% increase in the loan portfolio (mainly due to the merger with former SCCU), when compared to the previous year. Additionally, EduCom realized a Net Loan to Total Assets ratio of 73.7% for the current year, as against 2016 which was at 71.6%. It should be noted that Management has been successful in its objective to reduce the delinquency rate through the measures that were implemented to combat the very high level of delinquency rate, in the order of 7.7% that was experienced for 2015. 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 2.5%, which was below the standard of 5%, and compares favourably to the previous year’s 3.6%. Members’ savings at year-end increased to $6.67 billion, when compared to the previous year of $4.39 billion. This represents a 50.1% 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 reduce the gap between the total loan portfolio and the total members’ savings. We will continue to offer these attractive and innovative saving products, creating the opportunities to encourage savings and build individual wealth for our members. It is important to remind our members that it is primarily through savings that a person creates wealth.

TREASURER’S REPORT

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.

THE GAP BETWEEN MEMBERS’ LOAN AND SAVINGS IS DEPICTED BY THE CHART BELOW.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

FUTURE OUTLOOK Your credit union is operating in a changing environment whereby the integrity and behaviour of some of our members are becoming very questionable; they borrowed 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, which was a significant cost to your credit union at $44 million for the year. Management has taken steps to pursue these members through the following channels: 1. The employment of bailiff services 2. The employment of attorneys-at-law to pursue recourse through the court system to collect sums owing by mean of judgemental debt awards 3. The foreclosure of real estate properties that have been offered as securities. 4. The names of these delinquent members will be sent to the credit bureau to prevent them from accessing further credits from any other institution. 5. The names of these delinquent members will be published on notice board in the branches and on the credit union’s web site. 6. The names of delinquent members who cannot be located will be published in the printed media. 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 with dedicated personnel to execute such tasks. Further, the International Financial Reporting Standards (IFRS) has introduced a new standard that has taken effect from January 1, 2018 denoted as IFRS 9 to replace the existing IAS 39 standard for loan provisioning. This standard is based on the expected credit loss principle rather than the incurred event situation under the previous standard. The Board of Directors and Management having taken expert advice on the effect of this conversion to the new standard and conduct its own review have concluded that your credit union will be required to set aside $47.5 million from current year surplus to absorb this one-time conversion effect. ACKNOWLEDGEMENTS I thank God, the members and colleague 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 given to EduCom and 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: ♦♦

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

♦♦

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

Also, I thank the Auditor, BDO for the professionalism displayed in the execution of the audit. We need the continued support of all our members to utilize the services of EduCom as we seek to live our vision, where EduCom’s operation is member centric, service-oriented, financially sound and technologically driven; and is the top Credit Union in Jamaica in member value, compliance and satisfaction.

TREASURERâ&#x20AC;&#x2122;S REPORT

EDUCOM CO-OPERATIVE CREDIT UNION LIMITED SCHEDULE OF P.E.A.R.L.S. INDICATORS AS AT DECEMBER 31, 2017 CATEGORY

2017

2016

2015

2014

2013

STANDARD

Prov. For loan loss/Delinq.>12mnths.

100

Prov. For loan loss/Delinq.>6-12mnths.

Prov. For loan loss/Delinq.>3-6mnths.

Net loan/Total Assets

73.72%

71.57%

75.16%

72.31

82.40

60-80

Liquid Assets/Total Assets

11.61%

15.30%

13.10%

15.25

10.78

Max 5

Financial Investment/Total Assets

5.83%

3.67%

4.76%

2.76%

2.89%

Max 10

Savings/Total Assets

80.27%

74.16%

74.52%

70.22%

73.13%

70-80

External Credit/Total Assets

1.96%

3.96%

5.39%

3.82%

3.46

Institutional Capital/Total Assets

12.21%

13.93%

11.87%

11.75%

12.13%

Min 10

Deliq.>60 days/Loan Portfolio

2.45%

3.55%

7.72%

6.00%

1.31%

Non-Earnig Assets/Total Assets

8.25%

9.46%

8.49%

10.29%

4.90%

252.36

457.86

>100

PROTECTION

EFFECTIVE FINANCIAL STRUCTURE

ASSETS QUALITY

Zero-Cost Funds/Non-Earning Assets

215.36%

220.86% 236.43%

RATES OF RETURN AND COSTS Net Loan Income/Avg.Net Loan Portfolio

15.72%

13.91%

16.37%

16.23

17.13

Market rates

Financial Investment Income/Avg. fin. Invest.

6.03%

4.92%

6.69%

5.98

5.42

Market rates

Financial Cost:Deposit/Avg. Deposit

2.86%

2.81%

3.08%

3.00

4.93

Market rates

Opearting Expenses/Avg Assets

9.47%

8.13%

8.79%

10.24

8.66

3-10

Gross Margin/Avg. Assets

9.69%

9.66%

10.12%

10.61%

11.04

Enough to cover*

LIQUIDITY

Measures the ability

Total Liquidity/Total Savings

21.56%

24.60%

20.46%

22.75

16.22

20-30

Short-Term Payable/Total Deposit

1.60%

1.79%

1.82%

0.85%

2.83

of the credit

Non-Earning Liquid Assets/Total Assets

1.44%

0.86%

0.26%

0.60%

0.80

union to

SIGNS OF GROWTH

Meet withdrawals

Total Assets

42.40%

4.27%

11.84

9.56

17.60

>Inflation

Membership

5.12

3.2

182.00

5.55

10.81

NOTE: INFLATION

5.2

2.00

3.70

5.50

9.70

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Supervisory Committee -

Annual Report Year 2017

CHERYL DALEY Chairman

FREDERICK MILLS

PETANDRA TIMOLL Secretary

ANDREW SMITH

CLIVE McLEAN

SUPERVISORY COMMITTEE REPORT

REPORT OF THE SUPERVISORY COMMITTEE FOR THE YEAR ENDED DECEMBER 31, 2017 As the environment in which the Credit Union operates changes, so have the responsibilities and relevance of the Supervisory Committee. By way of its supervision of the Internal Audit function, the Committee seeks to achieve its primary objective of requiring that the Board of Directors and Management operate the Credit Union as a safe and sound financial institution, thus ensuring that the interest of the Members are protected. The Committee ensures that the internal controls are enforced to discourage fraud, protect the Credit Union’s resources and guarantee full compliance with laws and regulations. This assures our Members that compliance and accountability are of paramount importance in the operations of EDUCOM. In addition to the audits done by the Internal Audit Unit, the Committee also conducts reviews of aspects of the Credit Union’s operation. INTERNAL AUDIT - SCOPE OF WORK The Internal Audit Unit conducts scheduled and ad hoc reviews of the internal control system and reports its findings to the Supervisory Committee. The Internal Auditors conduct audits on an on-going basis and in accordance with an Audit Plan based on the annual risk assessment. The audits pursued were prioritized according to the risk rating that was assigned to each respective business process. For the year under review, internal audits were done on several areas of the Credit Union’s operations. The Committee’s monthly report to the Board of Directors provided details of the scope of work done. These included the exceptions that were raised, their associated risks to the Credit Union, recommendations to prevent or minimize the occurrence of the risks, along with Management’s responses to the findings and recommendations. 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. These detailed audit reports have proven to be of assistance to the Credit Union’s management and helped the Supervisory Committee to comply with its oversight responsibilities. Areas of operation and

business processes that were audited during the year ended December 31, 2017 were: ♦♦

Branch Audits

♦♦

Spot Checks

♦♦

Investigation into member complaints and fraudulent transactions

♦♦

Application for Account Resignations

♦♦

Deceased Members’ Accounts

♦♦

Branch Cash Counts

Other Activities:♦♦

Preparation and submission of Fraud Statistic report to JCCUL.

♦♦

Prepared Implementation Status of Audit Recommendations (ISOAR) report and submit to management for inclusion of comment on current status.

♦♦

Continued preparation of Internal Audit Procedures Manual.

♦♦

Facilitation of External Auditors and Bank of Jamaica Inspectors

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 SEMINARS The Supervisory Committee met at least once each month to discuss the business of the Credit Union. These meetings were well attended with few cases of excused absence arising from extenuating circumstances. In addition to regular meetings, the Committee also attended quarterly meetings with the Board and the Credit Committee; embarked on several branch visits; and the Chair also attended the meetings of the Risk and Compliance Committee during the period.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

THE FOLLOWING TABLE GIVES A PROFILE OF MEMBERSâ&#x20AC;&#x2122; ATTENDANCE AT MEETINGS DURING THE YEAR TO DECEMBER 31, 2017. Members

Possible

Present

Excused Absence

C. Daley

P. Timoll

C. McLean

F. Mills

H. Newell

A. Smith

G. Henry

K. Bedward

S. Lawrence

Supervisory Committee members and the Internal Auditors attended and participated in presentations and meetings put on by the Credit Union and the Jamaica Cooperative Credit Union League (JCCUL). Committee members also participated and benefited from training which has helped to reinforce the policies, laws and regulations which guide the Credit Union. Training included topics which covered governance, risk, internal control and mandatory training in the Proceeds of Crime Act (POCA) and Anti Money Laundering regulations. This is in keeping with the requirements of the Cooperative Societies Act and with the Bank of Jamaica guidelines. ACKNOWLEDGMENTS The Supervisory Committee wishes to express its gratitude to Mr. Glenville Henry, Mrs. Keisha Bedward and Ms. Sandra Lawrence who retired from the Committee during the year. We would like to express our gratitude to Mr. Hopeton Newell who also retired but was called to serve the Credit Union in another capacity. The Committee extends its best wishes to him in all his future endeavors. The Committee also welcomed its newest member, Mr. Andrew Smith. The members of the Committee express gratitude to the Membership for having been allowed the privilege of serving in this capacity. Special thanks is 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 the support and assistance throughout the year. Thanks is also expressed to my fellow Committee members for their invaluable contribution during the year. Respectfully submitted,

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

Cheryl Daley Chairman

BOARD OF DIRECTORS

Credit Committeeâ&#x20AC;&#x2122;s -

Annual Report Year 2017

CLAYTON McEWAN Chairman

DELORIS MOLLISON Secretary

SANDRA SMITH-DOCKERY

JENNIFER RICKETTS-HALL

CARLTON STEWART

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

REPORT OF THE CREDIT COMMITTEE FOR THE YEAR 2017 The year began with the integration of Saint Catherine Co-operative Credit Union into EduCom. With this merger, our loan portfolio at December 31, 2017 which stood at $4.18B, immediately increased to $5.39B on January 1, 2017. The merger also resulted in a revision of our product offerings, which ultimately led to increased loan limits, reduced rates and a specially designed loan product for our micro borrowers. Buoyed by the competitive landscape, we were able to have a spectacular loan sale dubbed â&#x20AC;&#x153;Car Loan SaleAbrationâ&#x20AC;? which offered our members the opportunity of one hundred percent financing of motor vehicles from 2012 and younger. Under the sale, there were no qualifying shares, no waiting period for new members and reduced interest rates. This initiative was beneficial to many of our members and once again we were able to delight them, whilst increasing and diversifying the loan portfolio. LOAN DISBURSEMENT For the period under review a total of $3.96B 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:

LOAN PORTFOLIO Based on our activities during 2017, the portfolio increased by 46.7%, closing the year with a portfolio balance of $6.135B. The movement in the portfolio is depicted below:

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

ATTENDANCE A total of 45 meetings were convened by the Committee. These meetings were well attended with few cases of excused absence arising from extenuating circumstances. In addition to the regular meetings, the Committee also attended quarterly meetings with the Board and the Supervisory Committee. The Committee was pleased to offer financial counseling and also facilitated discussions with members as they tried to chart their financial future. Members

Possible

Actual

Absent

Excused

Clayton McEwan

Deloris Mollison

*12

Jennifer Hall

Sandra Smith-Dockery

*13

Carlton Stewart

Alcia Jones

*Absence due to extended vacation periods

We want to place on record our appreciation to Ms. Alcia Jones who retired from the committee in April 2017. Ms. Jones provided good balance and support to the team and her vast wealth of knowledge added value in the decision making process. Prepared by:

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

Clayton McEwan Credit Committee Chair

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Nomination

Committee’s Report REPORT OF THE NOMINATIONS COMMITTEE TO THE 3RD ANNUAL GENERAL MEETING OF EDUCOM CO-OPERATIVE CREDIT UNION LIMITED The Nominations Committee which held its 1st meeting on February 9, 2018 was chaired by Director Valerie Hall-Buckle. Other members of the Committee were Messrs. Michael Brydson and Noel Morgan. 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 four (4) meetings which included an interview session 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.

The Committee is recommending that Sonia Bennett 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 – 3 years

♦♦

Clide Leopold Nesbeth – 1 year

♦♦

Ian Sutherland – 2 years

♦♦

Hector Stephenson – 1 year

♦♦

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

BOARD OF DIRECTORS

CREDIT COMMITTEE

Arising from the merger with St. Catherine Co-operative 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.

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.

The following directors will retire at this AGM: ♦♦

Hilton Blenman

♦♦

Hopeton Newell*

♦♦

Christopher Emanuel

♦♦

Valerie Hall-Buckle

♦♦

Sonia Bennett

*Promoted from the Supervisory Committee to the Board effective September 23, 2017 to fill a casual vacancy which arose from the death of Kenry Jackson.

The Committee acknowledges the sterling contribution of Directors Blenman, Hall-Buckle, Emanuel and Newell and their commitment and dedication to their assigned responsibilities.

The following Committee members will retire at this AGM: ♦♦

Jennifer Ricketts-Hall

♦♦

Clayton McEwan

♦♦

Sandra Smith-Dockery

The Committee acknowledges the sterling contribution of Mrs. Ricketts-Hall over the years; her commitment and dedication to her responsibilities were unparalleled

NOMINATION COMMITTEE’S REPORT

The Committee is recommending that Mr. Clayton McEwan and Mrs. Sandra Smith-Dockery be nominated to serve for another two (2) years. The proposed members and their respective tenures are: ♦♦

Clayton McEwan – 2 years

♦♦

Hopeton Newell – 2 years

♦♦

Sandra Smith-Dockery – 2 years

♦♦

Deloris Mollison – 1 year

♦♦

Carlton Stewart – 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. ♦♦

Petandra Timoll

♦♦

Andrew Smith**

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

The recommended members of this Committee for 2018/19 are: ♦♦

Frederick Mills

♦♦

Erica Haughton

♦♦

Cheryl Daley

♦♦

Clive McLean

♦♦

Tasha Manley

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.

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

Valerie Hall-Buckle Chairman

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

DELEGATES’ Report REPORT OF THE DELEGATES FROM THE JAMAICA CO-OPEARTIVE CREDIT UNION LEAGUE’S 76TH ANNUAL GENERAL MEETING The Convention and legally constituted 76th Annual General Meeting of the Jamaica Co-operative Credit Union League was held from May 25-28, 2017 at the Hilton Rose Hall Hotel & Spa in Montego Bay. Approximately one hundred and thirty seven (137) delegates, alternate delegates and observers attended the weekend Convention and Meeting. The schedule of activities included a trade show, workshops, edutainment, a banquet and the annual general meeting. THURSDAY, MAY 25 The following activities took place: ♦♦ ♦♦

♦♦

The Credit Union Managers’ Association annual general meeting.

♦♦

“Building a Culture of Compliance: The Role of Board and Management”. The Presenter was Mr. Robin Sykes, Chief Technical Director of the Financial Investigation Division (FID).

♦♦

“IFRS9: What you need to know” by PriceWaterhouseCoopers.

The annual awards dinner ended the day. Guest speaker at this event was Mr. Owen “Blacka” Ellis, a Jamaican comedienne of note. The following Credit Unions received Credit Union of the year awards: AWARDS

An afternoon workshop presented by Dr. Herbert Gayle, Sociologist and Criminologist. He did a riveting presentation on the topic: “Violence and doing business in Jamaica”. It was a real eye-opener for the large audience which attended.

Mega (Assets > $2 Billion)

Winner

JDF Credit Union

Edutainment was a session hosted by radio personality Jenny-Jenny as part of the reception.

Runner Up

Palisadoes Credit Union

FRIDAY MAY 26 Friday’s activities got off to a good start with the Women’s Global Network Breakfast meeting and the Presidents’ breakfast happening simultaneously. The guest speaker at the Presidents’ breakfast was Mr. Gary Allen, CEO of the RJRGleaner Communications Group. This was followed by the official opening of the conference with Action Coach Marcia Woon Choy being the main speaker. The plenary session was next and that was well attended by delegates and observers. Matters of critical importance to the Movement’s future were discussed.

Two workshops were held on Friday afternoon and they were as follows:

Winner

First Regional Credit Union

Runner Up

Manchester Credit Union

Large (Assets > $1 Billion - $2Billion)

Medium-sized (Assets > $300M to $1B) Winner

NCB Employees Credit Union

Runner Up

Grace Credit Union

Small ( Assets < $300M ) Winner

BJ Staff Credit Union

Runner Up

No runner up was declared

Other Credit Unions that won prizes were: ♦♦

C&WJ Credit union – Highest Asset Growth

♦♦

JDF Credit Union - Highest Solvency

♦♦

C&WJ Credit Union – Highest Net Capital Growth Parish credit unions also won the following:

♦♦

For highest net loan growth - Manchester

♦♦

Highest Return on Assets – First Regional

♦♦

Most Outstanding Parish Credit Union – First Regional

DELEGATE’S REPORT

Others prizes:

Resolutions

CPD Online Top User – Christine Barker – Insurance Employees Credit Union

Six resolutions were passed at the meeting as follows: ♦♦

Congratulatory resolutions were received on behalf of: COK Sodality Credit Unions for 50 years of service. NCB Employees Credit Union for 25 years of service

♦♦

Former JCCUL President Johnathan Brown for receiving a national award: the Badge of Honour for Meritorious service for dedicated service to the Jamaica Co-operative Credit Union League.

The 76th Annual General Meeting was held on May 27, 2018. Twenty-five (25) Credit Unions numbering 137 participants attended the meeting.

♦♦

One Condolence resolution were passed on behalf of Mrs. Rosemarie Vernon, Past Director of the JTA Credit Union.

In line with Parliamentary procedures, the newly elected President Mr. Winston Fletcher, gave a summary of the Board report for the year 2016. The Treasurer did the same for the financial reports and the Chair of the Supervisory Committee also reported.

♦♦

A resolution was passed to fund an Information Technology Project for the Credit Union Movement from the Stabilisation Fund.

♦♦

A late submission of a resolution from First Heritage Credit Union, for past CEO Basil Naar was also passed at the AGM.

CPD Online Highest Performing Credit Union CPD Online Highest Percentage Increase in Usage – BJ Staff Credit Union Service Quality Award Winner – NCB Employees Credit Union Service Quality Award Runner-up – JDF Credit union ANNUAL GENERAL MEETING

Distribution A total possible distribution of $16.7 million for 2016 was identified by the Treasurer compared to $28.14 million in 2015. Of this amount $1M was set aside for a scholarship fund for recognition of the 75th anniversary of the League. The bulk was cash interest as dividend on voluntary shares amounting to $6.3 Million, while dividends on permanent shares amounted to $5.8 Million. Election of Officers The Meeting voted to accept the nominations for the following persons to serve on the Board of JCCUL. ♦♦ Mrs. Brenda Cuthbert ♦♦ Mr. Jerry Hamilton ♦♦ Mr. Delroy Foster ♦♦ Ms. Carol Anglin ♦♦ Mr. Pete Smith ♦♦ Mr. Winston Fletcher ♦♦ Mr. Lambert Johnson They were elected to join the board of JCCUL for a term of 3 years. For the Supervisory Committee the following persons were elected: ♦♦ Mr. Sefton Cummings ♦♦ Mrs. Tamara Baugh-Brissett ♦♦ Mr. Michael Sutherland ♦♦ Mrs. Ivy Lawrence ♦♦ Mr. Lenroy Allen

RULE CHANGES There were no rule changes. Following the AGM the executive was elected to serve on the League Board for the 2017-2018 year: ♦♦ Winston Fletcher - President ♦♦ Clide Nesbeth – 1st Vice President ♦♦ Lambert Johnson – 2nd VP ♦♦ Andrea Messam – Treasurer ♦♦ Jerry Hamilton - Assistant Treasurer ♦♦ Norris Gilbert – Secretary ♦♦ Patrick Smith ♦♦ Martin Blackwood ♦♦ O’Neil Grant ♦♦ Anthony Young ♦♦ Delroy Foster ♦♦ Carol Anglin ♦♦ Brenda Cuthbert ♦♦ Derrick Tulloch ♦♦ Ryan Muir The all- white party on Saturday night, sponsored by CUNA Caribbean Jamaica, was a sensation. The turnout was excellent and party goers enjoyed the music of Fab 5 and Leroy Sibbles until quite late. The conference ended officially on Sunday May 28 with an ecumenical service.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Management Team 5

6 4

1. 2. 3. 4. 5. 6.

ELVIS KING - Chief Executive Officer ERIC HESLOP - Chief Financial Officer DELROY SCARLETT - Sales & Marketing Manager KATRINA YOUNG - Risk and Compliance Manager MARCIA SCOTT GOLDING - Human Resource and Administration Manager PATRICA WILLIAMS-BURKE - Credit Manager

MANAGEMENT TEAM

12 11

7. MILLICENT ANDERSON - Accounting Manager 8. DANE LEWIN - Information and Communications Technology Manager 9. TANESIA BANDOO - Member Relationship Manager 10. CAMILLE CAMPBELL-DRUMMOND - Operations Manager 11. NATASHA MILLS - UWI Branch Manager 12. LEWIN BAXTER - Internal Audit Manager

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Management and staff DEPARTMENT

NAME

POSITION

LOCATION (CURRENT)

Executive Office

Elvis King

Chief Executive Officer

Head Office

Michell Dixon

Executive Assistant

Head Office

Karette Williams

Administrative Officer

Spanish Town

Patricia Williams-Burke

Credit Manager

Head Office

Kayon Allen

Credit Officer

Head Office

Monique Davis

Credit Officer

UWI

Natalie Edwards

Credit Officer

Head Office

Janice Fagan

Credit Officer

Head Office

Omar Hall

Credit Officer

Portmore

Therese Montaque

Credit Officer

UWI

Pierre-Charles Morgan

Credit Officer

Head Office

Cyprain Thompson

Credit Officer

Head Office

Kemeisha Williams

Credit Officer

Old Harbour

Camise Williams

Credit Officer

Spanish Town

Sasha-Gay Codling

Credit Administration Officer

Head Office

Nasufia Ellis

Securities Officer

Head Office

Sasheta Mannings

Securities Officer

Head Office

Saneka Whitley

Securities Officer

Head Office

Eric Heslop

Chief Financial Officer

Head Office

Millicent Anderson

Accounting Manager

Head Office

Shaunakaye Jonas- Stone

Accounting Officer 11

Head Office

Kedeen Morrison

Accounting Officer 11

Head Office

Yakeisha Gayle

Accounting Officer 1

Head Office

Tamara Wallcom

Accounting Officer 1

Head Office

Dalmaine Stuart

Clerical Officer

Head Office

Marcia Scott Golding

Human Resource and Administration Manager Head Office

Nova Sinclair-Hayden

Human Resource Officer

Head Office

Radcliff Daley

Bearer

Head Office

Petula Reynolds

Office Attendant

Head Office

Horace Sinclair

Driver

Head Office

Credit

Finance and Investment

Human Resource and Administration

MANAGEMENT AND STAFF

DEPARTMENT Information and Communication Technology

Internal Audit

Sales and Marketing

Member Care

NAME

POSITION

LOCATION (CURRENT)

Dane Lewin

Information and Communication Technology Manager

Head Office

Nigel Edwards

Senior Information and Communication Technology Officer

Head Office

Tevin Bailey

User Support Officer

Head Office

James Benjamin

User Support Officer

Spanish Town

Brendan Phipps

Network Administrator

UWI

Camille Pottinger

Clerical Assistant

Head Office

Lewin Baxter

Internal Audit Manager

UWI

Steven Channer

Internal Audit Officer

UWI

Omar Bennett

Internal Audit Officer

UWI

Delroy Scarlett

Sales and Marketing Manager

UWI

Tremaine Morgan

Marketing and Promotions Officer

UWI

Monique Davidson

Public Relations and Communication Officer

UWI

Lalibella Payne

Marketing Assistant

UWI

Peta-Gay Campbell

Sales Representative

UWI

Topaz Johnson

Sales Representative

Montego Bay

Shade Parchmment

Sales Representative

Mandeville

Reeshema Johnson

Business Development Officer

Spanish Town

Rosa-Lee Kelly Murphy

Business Development Officer

Spanish Town

Pauline Lewis

Business Development Officer

Spanish Town

Christopher Wisdom

Business Development Officer

Spanish Town

Tanesia Bandoo

Member Relationship Manager

Portmore

Natasha Mills

Branch Manager

UWI

Lisa Bent

Branch Supervisor

Montego Bay

Kirkland Codling

Branch Supervisor

Portmore

Patricia Dawson

Branch Supervisor

Spanish Town

Stacey-Ann Porter Davis

Branch Supervisor

UWI

Ceraphia Roper

Branch Supervisor

Linstead

Marsha Stephens

Branch Supervisor

UTECH

Andrea Sudderam

Branch Supervisor

Old Harbour

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Management and staff cont’d

DEPARTMENT

NAME

POSITION

LOCATION (CURRENT)

Member Care

Michelle White

Branch Supervisor

Head Office

Taneca Whyte

Branch Supervisor

Mandeville

Mellicia Brown

Member Care Representative - General

Linstead

Monique Brown

Member Care Representative - General

Spanish Town

Denvil Buchanan

Member Care Representative - General

Head Office

Patrine Davis Hansel

Member Care Representative - General

Linstead

Melony Daye

Member Care Representative - General

Head Office

Hakeem Ellis

Member Care Representative - General

Portmore

Patrice Guest

Member Care Representative - General

UWI

Danielle Guthrie

Member Care Representative - General

UWI

Totyana Insular

Member Care Representative - General

Mandeville

Tarika Kelly-Bailey

Member Care Representative - General

UWI

Brandon Kirlew

Member Care Representative - General

Montego Bay

Latoya Linton

Member Care Representative - General

Head Office

Shannell Nelson

Member Care Representative – General

Spanish Town

Rakeesha Ramus

Member Care Representative - General

Old Harbour

Monique Rose

Member Care Representative - General

Portmore

Kimberlee Salmon

Member Care Representative – General

UTECH

Mauvallette Ward

Member Care Representative – General

Montego Bay

Teisha Bucknor Baker

Teller

Mandeville

Rajon Clarke

Teller

Linstead

Sudeen Grant

Teller

Spanish Town

Suzel Henry

Teller

Head Office

Sidonia Hyde

Teller

Portmore

Nateisha Johnson

Teller

Old Harbour

Renardo Lee

Teller

UTECH

Trishanna Masters

Teller

Old Harbour

Patrick Morris

Teller

UWI

Alesha Powell Thompson

Teller

Spanish Town

Kris-Michael Robinson

Teller

Head Office

Shane Stewart

Teller

UWI

Raxon Walker

Teller

Linstead

Ebony Williams

Teller

Montego Bay

Cavelle Belnavis

Member Care Representative - Telephone

UWI

MANAGEMENT AND STAFF

DEPARTMENT

Operations

NAME

POSITION

LOCATION (CURRENT)

Kimberly Harvey

Member Care Representative - Telephone

UWI

Tarana Howe

Member Care Representative - Telephone

UWI

Jessica Wallace

Member Care Representative - Telephone

UWI

Lashone Lloyd

Member Care Representative - Receptionist

UWI

Georgiana Morgan

Member Care Representative â&#x20AC;&#x201C; Receptionist

Head Office

Vinnett Smith Myers

Member Care Representative - Receptionist

Linstead

Chantelle Thomas

Member Care Representative - Receptionist

Portmore

Suisj'aila Wilson

Member Care Representative - Receptionist

Head Office

Shelly-Ann Bartley

Office Attendant

Spanish Town

Veronica Campbell

Office Attendant

Linstead

Icylin Palmer Bennett

Office Attendant

Old Harbour

Natalie Cole

Office Attendant - Part Time

UWI

Rose Marie Hunter

Evening Cleaner

Spanish Town

Dorothy Williams Knight

Evening Cleaner

Spanish Town

Conroy Clennon

Bearer

Spanish Town

Camille Drummond

Operations Manager

Head Office

Roshain Watson

Operations Officer

Head Office

Tameka Foster

Operations Officer

Head Office

Ivanna McKenzie

Operations Officer

Spanish Town

Alisa Bennett

Operations Assistant

Head Office

Colletta Brown

Operations Assistant

UWI

Richard Davy

Operations Assistant

Head Office

Grichen Deans

Operations Assistant

Head Office

Trishana Fender

Operations Assistant

Head Office

Monique Liking

Operations Assistant

Head Office

Marrifa Terthoffer

Operations Assistant

Head Office

Vivolyn Walker

Operations Assistant

Head Office

Ronald Foote

Registry Clerk

UWI

Azeim Johnson

Registry Clerk

Head Office

Velma Logan Kelly

Registry Clerk

Head Office

Simone Valentine

Registry Clerk

Head Office

Tashauna Lawrence

Clerical Officer

UWI

Latoya Lamothe

Clerical Assistant

Spanish Town

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Management and staff cont’d DEPARTMENT

Risk and Compliance

NAME

POSITION

LOCATION (CURRENT)

Onecia Lennon

Clerical Assistant

Spanish Town

Suzette McNeil Morrison

Clerical Assistant

UWI

Shanai Paisley

Clerical Assistant

UWI

Aubrey Williams

Clerical Assistant

Spanish Town

Charnelle Wright

Clerical Assistant

Spanish Town

Katrina Young

Risk and Compliance Manager

UWI

Navlette Sinclair

Compliance Officer

UWI

Patricia Williams Coore

Senior Risk Officer

UWI

Cadene Lattibeaudiere Fyffe Risk Officer

UWI

Ann-Marie Rufus

Risk Officer

UWI

Shellique O’Gere

Recovery Officer

UWI

Nicole Thoms

Recovery Officer

Head Office

Norvalee Evans

Junior Recovery Officer

Spanish Town

Cassandra McLean

Junior Recovery Officer

UWI

Kerene Powell

Junior Recovery Officer

UWI

Judith Lyons

Administrative Officer

UWI

Princess Yee

Clerical Assistant

UWI

MESSAGE FROM THE PRESIDENT

Educom in the

community

Representatives from EduComâ&#x20AC;&#x2122;s Sigma Team, including volunteers, strike a pose after participating in the run.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

EduCom in

The Community Contâ&#x20AC;&#x2122;d SAGICOR SIGMA CORPORATE RUN EduCom participated in the annual staging of the Sagicor Sigma Corporate Run on February 19th where we had approximately 100 participants inclusive of representatives from the Board of Directors and other volunteers. EduCom managed to secure a 2nd place finish in the annual T- Shirt Design Competition.

A Sagicor representative presents the trophy for placing 2nd in the T-Shirt Design Competition to Member Care Representative, Hakeem Ellis who collected on behalf of EduCom.

EduCom representatives making their way through the crowd at the 2017 staging of the charity run.

EDUCOM IN THE COMMUNITY

ANNUAL GENERAL MEETING The Annual General Meeting was held on April 29, 2017 at the Jamaica Conference Centre in the Kenneth Rattray Conference Room commencing at 10:00 am. An estimated 465 members attended the meeting which saw us welcoming members of the St. Catherine Co-operative Credit Union following the transfer of their operations effective January 1, 2017.Â The meeting saw the election of several new Directors to the Board along with the passing of a number of changes to the rules governing the Credit Union.

An aerial view of the Annual General Meeting

A member poses a question to the Board of Directors during the meeting. Members peruse the Annual Report during the meeting.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

EduCom in

The Community Cont’d LABOUR DAY EduCom’s Labour Day Project for 2017 saw us lending a hand to select Early Childhood Institutions across the island: The locations were: Kingston and St. Andrew - Albert Street and Hope S.D.A Basic Schools • Montego Bay - Cornwall Gardens Basic School • Mandeville - Bethabara Infant School • St. Catherine - Smartville Kindergarten School.

Sales Representative, Shadé Parchment paints a section of the play area at the Bethabara Infant School in Manchester.

President of the Board of Directors, C. Leopold Nesbeth participates in the painting activities at the Albert Street Basic School.

EDUCOM IN THE COMMUNITY

Members of the EduCom team at the Smartville Kindergarten School in Spanish Town.

The Montego Bay team at the Cornwall Gardens Basic School.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

EduCom in

The Community Cont’d ANNUAL SCHOLARSHIP PROGRAMME The 2017/18 scholarship programme of the EduCom Coop Credit Union made awards to 100 high school and tertiary level students in a special presentation ceremony held on August 9, at the Knutsford Court Hotel. Of the 100 scholarships granted, 83 were GSAT (high school) recipients while we awarded 17 tertiary level students. The programme which is now in its 3rd year will allow the recipients to pursue studies at several high schools and tertiary institutions including the University of the West Indies, The University of Technology and various Community and Teachers’ Colleges. In her address to awardees, guest speaker Dr. Grace McLean, Chief Education Officer in the Ministry of Education, Youth and Information encouraged them to remain focused in their studies and to pursue excellence. Dr. Mclean also announced that the proposed Primary Exit Profile (PEP) programme will be rolled out in the

2018/19 school year. She said the PEP which is to replace GSAT will require students to develop a higher level of thinking skills rather than relying on just recall and memory. Dr. McLean also lauded EduCom for its scholarship programme noting the assistance to students and its partnership with educational institutions will go a far way in moving the education sector forward. For his part, EduCom’s CEO, Mr. Elvis King, challenged the recipients to look beyond whatever constraints they may face because of limited or lack of resources and to instead focus their energies on working hard and achieving their goals. Mr. King pointed out that EduCom’s student scholarship programme and the provision of educational support for members were important initiatives of the company and every effort is made each year in its budget preparation exercise to ensure adequate funds are allocated to support these programmes. The Scholarship Programme for the 2017/18 academic year is funded to the tune of $2Million.

Chief Executive Officer, Elvis King (centre right) and President of the Board of Directors, C. Leopold Nesbeth (centre left) sit among the full cohort of GSAT recipients.

EDUCOM IN THE COMMUNITY

Chief Executive Officer, Elvis King with the GSAT Top Boy Tejano Thompson (right) and GSAT Top Girl Laraine Williams at the ceremony.

Chief Education Officer in the Ministry of Education, Dr. Grace McLean presents an award to one of the GSAT recipients, Leah Burke.

Chief Executive Officer, Elvis King (first row, 4th right) and President of the Board of Directors, C. Leopold Nesbeth (5th right) sit among the tertiary recipients.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

EduCom in

The Community Cont’d CHILD’S MONTH TREAT EduCom visited our two adopted schools to celebrate Child’s Month. We visited the Albert Street and Hope S.D.A Basic Schools on May 30th and provided refreshments and tokens along with select items from our external sponsorsKirk Distributors and Jambisco.

Students at the Albert Street Basic School go through reading material donated by Kirk Distributors while the Principal Ms. Hamilton (right) and the Public Relations and Communications Officer Monique Davidson look on.

Students at the Hope S.D.A. Basic School in Kingston enjoy a snack during our Children’s Day treat at the school in May 2017.

It was all smiles as students of the Hope S.D.A. Basic School displayed tokens received during the EduCom sponsored Children’s Treat.

EDUCOM IN THE COMMUNITY

SOUP Nâ&#x20AC;&#x2122; SOAP INITIATIVE HELPS THE NEEDY To kick start our week of activities, EduCom staff were fully engaged in our Annual Soup and Soap Initiative, which saw elected branches participating in various projects to help those in need with assistance ranging from the provision of cash and the donation of much needed supplies to spending quality time with the residents of various homes for the elderly and at-risk youths. Our main project was the Possibility Programme in Kingston which is an all boys home catering to at risk boys. During our visit, we presented packages of products from one of our external sponsors Kirk Distributors. Other branches were also engaged during Credit Union Week with the Montego Bay Branch visiting the Pregnancy Resource Centre; Mandeville Branch engaged with the Mount Olivet Boys Home, while our St. Catherine Branches visited the St. Monicaâ&#x20AC;&#x2122;s Home for the Elderly.

Sales and Marketing Manager, Delroy Scarlett (left) and Public Relations and Communications Officer Monique Davidson (right) present donated items to Director Ruth Oyebisi of the Possibility Programme in Kingston.

Sales Representative for the Montego Bay Branch Topaz Johnson (right) presents a cheque to the Director of the Pregnancy Resource Centre, Ms. Christina Milford during our visit to the institution during Credit Union Week.

Branch Supervisor for Mandeville Taneca Whyte (centre) presents a cheque valued at $10,000 to Nichola Francis-Daley (left) and Kimberley Elliott of the Mt. Olivet Boys Home.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

EduCom in

The Community Cont’d CREDIT UNION DAY – MEMBERS’ APPRECIATION DAY Members’ Appreciation Day was celebrated across all branches on Credit Union Day, October 19th. Members were feted with refreshments and special tokens, as EduCom displayed its gratitude to our members for their continued loyalty and dedication. We also provided additional services at select locations with the Spanish Town Branch offering free manicures and pedicures to members, while on Friday, October 20th the branch hosted the Lions Club which was on hand to provide free health checks for our members.

Members at the Spanish Town Branch enjoy the services of Cosmetology students from the Jonathan Grant High School.

Say Cheese! A member of the UTECH Branch is all smiles as she poses with her token.

Sales Representative for the Montego Bay Branch, Topaz Johnson (left), presents tokens to members during Members’ Appreciation Day.

EDUCOM IN THE COMMUNITY

BREAST CANCER AWARENESS MONTH â&#x20AC;&#x201C; CHARITY DRIVE During October, observed as Breast Cancer Awareness Month, EduCom joined the Jamaica Cancer Society in celebrating and raising awareness of the disease. Through our Charity Drive we collected donations from members of staff across all our branches as well as from our external members. We also participated in Pink Day in keeping with the list of activities as set out by the Jamaica Cancer Society. We sold pink ribbons and pins to our members both internal and external. We also encouraged members to wear something pink for the day.

Credit Officer Therese Montaque (left) and Sales Representative Peta- Gay Campbell both from the UWI Branch are all smiles on Pink Day.

Marketing and Promotions Officer, Tremaine Morgan (left) presents a cheque valued at $20,000 to Finance Manager at the Jamaica Cancer Society, Michael Leslie.

The members of staff at the Montego Bay Branch wore pink to celebrate the day.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Financial statements

31 December 2o17

Index Independent Auditorsâ&#x20AC;&#x2122; Report to the Registrar

71-73

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

74 75 76-78 79 80-138

Page 1

INDEPENDENT AUDITORS’ REPORT To: The Registrar of Co-operatives and Friendly Societies Re: EduCom Co-operative Credit Union Limited Report on the Audit of the Financial Statements Opinion We have audited the financial statements of EduCom Co-operative Credit Union Limited set out on pages 4 to 70, which comprise the statement of financial position as at 31 December 2017, and the statements of surplus or deficit and other comprehensive income, changes in equity and cash flows for the year then ended, and notes comprising significant accounting policies and other explanatory information. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Credit Union as at 31 December 2017, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and the requirements of the Co-operatives Societies Act. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Credit Union in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and the Board of Directors for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs and the Co-operative Societies Act, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Credit Union’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Credit Union or to cease operations, or has no realistic alternative but to do so. The Board of Directors is responsible for overseeing the Credit Union’s financial reporting process.

Page 2 INDEPENDENT AUDITORS’ REPORT (CONT’D) To: The Registrar of Co-operative and Friendly Societies Re: EduCom Co-operative Credit Union Limited Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: 

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.



Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Credit Union’s internal control.



Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.



Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Credit Union’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Credit Union to cease to continue as a going concern.



Evaluate the overall presentation, structure and content of the financial statements, including the disclosures and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Page 3 INDEPENDENT AUDITORSâ&#x20AC;&#x2122; REPORT (CONTâ&#x20AC;&#x2122;D) To: The Registrar of Co-operatives and Friendly Societies Re: EduCom Co-operative Credit Union Limited Report on additional matters as required by the Co-operative Societies Act We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. In our opinion, proper accounting records have been kept, so far as appears from our examination of those records, and the financial statements, which are in agreement therewith, give the information required by the Co-operative Societies Act, in the manner required.

Chartered Accountants _ 19 April 2018

FINANCIAL STATEMENTS

Page 4

CO-OPERATIVE E D U C O M C O - OEduCom P CRED I T U N I O N LCREDIT I M I T EUNION D F I NLIMITED A N C I A L S TAT E M E N T S

STATEMENT SURPLUS DEFICIT AND INCOME STATEMENT OFOF SURPLUS OR DEFICITOR AND OTHER COMPREHENSIVE OTHER COMPREHENSIVE INCOME YEAR ENDED 31 DECEMBER 2017

YEAR ENDED 31 DECEMBER 2017

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

2017 $’000

2016 $’000

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

582,965 5,075 4,270 40,355

886,486

632,665

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

82,264 38,046 23,924 3,591

183,281

147,825

703,205 ( 53,811)

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

649,394 135,847

482,983 70,879

Operating expenses

785,241 (669,777)

553,862 (464,826)

115,464

89,036

NET INTEREST INCOME Provision for loan impairment

SURPLUS FOR THE YEAR

(

484,840 1,857)

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

(

Item that may be reclassified to surplus Unrealised gain on available for sale investment ( TOTAL COMPREHENSIVE INCOME FOR THE YEAR

2,092)

1,174

1,979

113) 115,351

1,174 90,210

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Page 5 E D U C O M C O - O P C R E D I T U N I O N L I M I T E D F I N A N C I A L S TAT E M E NTS EduCom CO-OPERATIVE CREDIT UNION LIMITED

STATEMENT OF FINANCIAL POSITION 31 December 2017

STATEMENT OF FINANCIAL POSITION 31 DECEMBER 2017 Notes

2017 $’000

2016 $’000

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

79,922 812,614 214,152 4,175,621 -

7,621,998

5,282,309

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

50,295 1,526 102,476 367,402 29,953

685,571

551,652

8,307,569

5,833,961

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

2,180,833 2,203,945 230,822

6,875,903

4,615,600

106,474

78,644

6,982,377

4,694,244

969,746 355,446

812,853 326,864

TOTAL EQUITY

1,325,192

1,139,717

TOTAL LIABILITIES AND CAPITAL

8,307,569

5,833,961

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

9 10 11 12 13

14 15 16 17

TOTAL ASSETS LIABILITIES AND EQUITY: INTEREST BEARING LIABILITIES: Saving deposits Voluntary shares Deferred shares External credits

NON-INTEREST BEARING LIABILITY: Payables

18 19 20 21

TOTAL LIABILITIES EQUITY: Institutional capital Non-institutional capital

23 24

Approved for issue by the Board of Directors on 19 April 2018 and signed on its behalf: _____________________ C. Nesbeth - President

H. Blenman – Treasurer

FINANCIAL STATEMENTS

Page 6

EduCom CO-OPERATIVE CREDIT UNION LIMITED E D U C O M C O - O P C R E D I T U N I O N L I M I T E D F I N A N C I A L S TAT E M E N T S STATEMENT OF CHANGES IN EQUITY STATEMENT OF CHANGES IN EQUITY

Year Ended 31 December 2017 31 DECEMBER 2017 YEAR ENDED

Note Balance at 1 January 2016 Total comprehensive income - Net surplus for the year - Other comprehensive income Transactions with owners - Entrance fees - Bonus issue of permanent shares - Issue of permanent shares Transfer to statutory reserve Transfer to special reserve Decrease in other reserve

25(b) 25(b) 25(a)

Balance at 31 December 2016

Non Institutional Capital $’000

664,448

383,215

1,047,663

89,036 1,174

451 30,000 1,695 22,259 94,000 -

( 30,000) ( 292) ( 22,259) ( 94,000) ( 10) (

812,853

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

Institutional Capital $’000

26 26 25(a)

1,169 8,740 79,510 38,608 28,866 969,746

326,864

Total $’000

451 1,403 10) 1,139,717

115,464 113) (

115,464 113)

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

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

(

355,446

1,325,192

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Page 7

E D U C O M C O - OEduCom P C R E DCO-OPERATIVE I T U N I O N LCREDIT I M I T E UNION D F I NLIMITED A N C I A L S TAT E M E N T S

STATEMENT OF CHANGES IN EQUITY STATEMENT OF CHANGES IN EQUITY Year Ended 31 December 2017

YEAR ENDED 31 DECEMBER 2017 INSTITUTIONAL CAPITAL

Balance at 1 January 2016 Transactions with owners - Entrance fees - Bonus issue of permanent shares - Issue of permanent shares Transfer from undistributed surplus Transfer to statutory reserve Balance at 31 December 2016 Transactions with owners - Entrance fees - Shares issued on merger (note 26) - Issue of permanent shares Transfer from undistributed surplus Net equity arising on business Combination (note 26) Balance at 31 December 2017

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

Statutory Reserve $’000

Special Reserve $’000

203,940

159,143

51,896

249,469

664,448

451 22,259 -

59,536 34,464

30,000 1,695 -

451 30,000 1,695 81,795 34,464

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

(

Balance at 31 December 2017

4,359

Increase in retirement benefits Transfer to statutory reserve Decrease in loan loss reserve Honorarium Decrease in reserve

9,855) -

9,855

1,719

101

4,258

292)

(

8,136

25 (b) 25 (a)

25 (a)

25 (b)

4,550

Loan Loss Reserve $’000

Total comprehensive income - Net surplus for the year - Other comprehensive income Transactions with owners - Dividend - Issue of permanent shares

Balance at 31 December 2016

Increase in retirement benefits Transfer to statutory reserve Transfer to special reserve Decrease in other reserves Transfer to loan loss reserve

Total comprehensive income - Net surplus for the year - Other comprehensive income Transactions with owners - Bonus issue of permanent shares - Transfer to permanent shares

Balance at 1 January 2016

Note

Permanent Shares Reserve $’000

31,609

1,656 -

29,953

5,769 -

24,184

Retirement Benefit Reserve $’000

2,357

8,000 ( 8,004)

2,361

(34,464) ( 10) -

36,835

General Reserve $’000

NON-INSTITUTIONAL CAPITAL

YEAR ENDED 31 DECEMBER 2017

STATEMENT CHANGES IN EQUITY Year Ended 31 OF December 2017

204,253

Revaluation Reserve $’000

STATEMENT OF CHANGES IN EQUITY

EduCom CO-OPERATIVE CREDIT UNION LIMITED

1,979

Fair Value Reserve $’000

115,464 2,092)

110,889

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

( 50,000) -

(

76,184

( 5,769) ( 22,259) ( 59,536) ( 1,719)

( 30,000) -

89,036 1,174

105,257

Undistributed Surplus $’000

E D U C O M C O - O P C R E D I T U N I O N L I M I T E D F I N A N C I A L S TAT E M E N T S

115,464 113)

355,446

( 28,866) ( 8,004)

( 50,000) 101

(

326,864

( 22,259) ( 94,000) ( 10) -

( 30,000) ( 292)

89,036 1,174

383,215

Total $’000

Page 8

FINANCIAL STATEMENTS

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

E D U C O M C O - O P C R E D I T U N I O N L I M I T E D F I N A N C I A L S TAT E MPage ENT 9S EduCom CO-OPERATIVE CREDIT UNION LIMITED

STATEMENT OF CASH FLOWS

STATEMENT Year Ended 31 December 2017OF CASH FLOWS YEAR ENDED 31 DECEMBER 2017 2017 $’000

2016 $’000

115,464

89,036

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

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

617,603 (632,665) 120,310 (127,081) 20,228 23,924 721 1,857 113,933

373,388 302,783 ( 5,250) ( 998) 52,090 (780,085) ( 51,496) ( 8,004). 100,148

194,803 27,256 ( 5,316) 1,182 ( 42,067) 40,770 2,698 ( 10) 333,249

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/ (used in) investing activities

98,545 ( 34,576) 14,252 229,341 (167,826) 139,736

( 14,232) (162,298) ( 32,835) (209,365)

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

( 68,203) 8,841 ( 3,909) ( 50,000) 1,169 ( 16,441) (128,543)

( 71,021) 1,403 451 ( 23,924) ( 93,091)

CASH FLOWS FROM OPERATING ACTIVITIES: Net surplus Adjustments for: Interest received Interest income Interest expense Interest paid Depreciation and amortization Finance expense Loss on disposal on property, plant and equipment Unrealised foreign exchange gain Pension expense Provision for loan impairment

Exchange gain on foreign cash balances . Increase in cash and cash equivalents Cash and cash equivalents at beginning of year

111,341 1,653

30,793. .

112,994 130,217

30,793 99,424

CASH AND CASH EQUIVALENTS AT END OF YEAR (note 14)

243,211

130,217

FINANCIAL STATEMENTS

Page 10

EduCom CO-OPERATIVE CREDIT UNION LIMITED E D U C O M C O - O P C R E D I T U N I O N L I M I T E D F I N A N C I A L S TAT E M E N T S STATEMENT OFSTATEMENTS CASH FLOWS NOTES TO THE FINANCIAL

31 December 2017 1.

31 DECEMBER 2017

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 (Note 26). 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. (a)

Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRS’s). 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 UN ION

ANNUAL REPORT 2017

Page 11

CO-OPERATIVE E D U C O M C O - OEduCom P CRED I T U N I O N LCREDIT I M I T EUNION D F I NLIMITED A N C I A L S TAT E M E N T S

NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 3.

31 DECEMBER 2017

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, revised and amended standards, interpretations that became effective during the year Certain 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 amendments and clarifications and has put into effect the following, which is immediately relevant to its operations. Amendments to IAS 7, ‘Statement of Cash Flows’ (effective for annual periods beginning on or after 1 January 2017). The amendment introduces an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment is part of the IASB’s Disclosure Initiative, which continues to explore how financial statement disclosure can be improved. An entity is required to disclose information that will allow users to understand changes in liabilities arising from financing activities. This includes changes arising from cash flows, such as drawdowns and repayments of borrowings; and non-cash changes, such as acquisitions, disposals and unrealized exchange differences. There was no significant impact from the adoption of this amendment. New standards, interpretations and amendments not yet effective and not early adopted The following new standards, interpretations and amendments which are not yet effective and have not been adopted early in these financial statements, will or may have an effect on the Credit Union’s future financial statements.

FINANCIAL STATEMENTS

Page 12

E D U C O M C O - OEduCom P CRED I T U N I O N LCREDIT I M I T EUNION D F I NLIMITED A N C I A L S TAT E M E N T S CO-OPERATIVE

NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 3.

31 DECEMBER 2017

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

Basis of preparation (cont’d) New standards, interpretations and amendments not yet effective and not early adopted (cont’d) 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 liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics. It contains three principal classification categories for financial assets: amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit and loss (FVPL). There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at FVPL. The Credit Union is in the process of assessing the impact of IFRS 9 on the financial statements. A steering committee was created to oversee the implementation of the project, and it is chaired by a board member and includes two other board members along with members from the management team. The project involves: -

Phase 1: Training to develop knowledge concerning the requirements of IFRS 9, identification of key decisions, deciding on the measurement and classification for all instruments.

Phase 2: Roll out and implementation which includes determination of various forward looking scenarios, estimating probabilities of default (PDs) and expected credit losses (ECL), integrating the new accounting standard into the existing reporting structure, develop disclosures for the financial statements and training of management and staff.

Phase 3: Determine the effect of the adoption of the standard on the capital of the credit union.

The Credit Union has substantially completed Phase 1 and has started some aspects of Phase 2.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Page 13

CO-OPERATIVE E D U C O M C O - OEduCom P CRED I T U N I O N LCREDIT I M I T EUNION D F I NLIMITED A N C I A L S TAT E M E N T S

NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 3.

31 DECEMBER 2017

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

Basis of preparation (cont’d) New standards, interpretations and amendments not yet effective and not early adopted (cont’d) IFRS 9, ‘Financial Instruments’ (effective for accounting periods beginning on or after 1 January 2018) (cont’d). The standard introduces new requirements to determine the measurement basis of financial assets, involving the cash flow characteristics of assets and the business models under which they are managed. The Credit Union will classify its financial assets as follows: - Investment securities: The Credit Union currently classifies its investment securities as available for sale. Based on the conditions for classification under IFRS 9, these instruments will be measured at either amortised cost or FVOCI. The change to amortised cost will result in the reversal of cumulative fair value gains/(losses) for related instruments as at 1 January 2018. There is no impact for investments measured at FVOCI. - Loans and receivables: These will continue to be classified at amortised cost because they are largely held to collect contractual cash flows. - Equity instruments: These are currently classified as available for sale, with the adoption of IFRS 9, trading equity instruments will be measured at FVPL. This will result in the related fair value gains/(losses) being transferred from fair value reserves to accumulated surplus at 1 January 2018. The Credit Union has elected to designate non-trading equity at FVOCI. - Financial liabilities: There will be no impact on the Credit Union’s accounting for financial liabilities. The adoption of IFRS 9 will have a significant impact on the Credit Union’s impairment methodology it replaces the “incurred loss” model in IAS 39 with a forward looking ‘ expected credit loss” (ECL) model. This will require considerable judgement about how changes in economic factors affect ECLs, which will be determined on a probability-weighted basis. The new impairment model will apply to financial assets measured at amortised cost or FVOCI, except for investments in equity instruments. Under IFRS 9, loss allowance will be measured on either of the following basis: - 12-month ECLs: These are ECLs that result from possible default events within the 12 months after the reporting date; and

FINANCIAL STATEMENTS

Page 14

E D U C O M C O - O PEduCom C R E DCO-OPERATIVE I T U N I O N LCREDIT I M I T EUNION D F I LIMITED N A N C I A L S TAT E M E N T S

NOTES TO THE NOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 3.

31 DECEMBER 2017

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

Basis of preparation (cont’d) New standards, interpretations and amendments not yet effective and not early adopted (cont’d) IFRS 9, ‘Financial Instruments’ (effective for accounting periods beginning on or after 1 January 2018) (cont’d). - Lifetime ELCs: These are ELCs that result from all possible default events over the expected life of the financial instruments. Lifetime ECL measurements applies if the credit risk of a financial asset at the reporting date has increased significantly since the initial recognition and 12-month ECL measurement applies if it has not. An entity may determine that a financial asset’s credit risk has not increased significantly if the asset has low credit risk at the reporting date. The Credit Union believes that impairment losses are likely to increase and become more volatile for assets in the scope of IFRS 9 impairment model. The standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Credit Union’s disclosures about its financial instruments particularly in the year of adoption. The Credit Union will apply the modified retrospective approach in transitioning to IFRS 9, it allows cumulative retrospective adjustments to be made against opening accumulated surplus as at 1 January 2018. Comparatives for 2017 will not be restated. 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. 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 standard replaces IAS 18. “Revenue” and IAS 11 “Construction contracts” and related interpretations. The Credit Union is assessing the impact that the amendment will have on its 2018 financial statements.

EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Page 15

E D U C O M C O - O PEduCom C R E DCO-OPERATIVE I T U N I O N LCREDIT I M I T EUNION D F I LIMITED N A N C I A L S TAT E M E N T S

NOTES TO THE NOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 3.

31 DECEMBER 2017

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

Basis of preparation (cont’d) New standards, interpretations and amendments not yet effective and not early adopted (cont’d) Amendments to IFRS 15, ‘Revenue from contracts with customers’ (effective for annual periods beginning on or after 1 January 2018). These amendments comprise clarifications of the guidance on identifying performance obligations, accounting for licenses of intellectual property and the principal versus agent assessment (gross versus net revenue presentation). The IASB has also included additional practical expedients related to transition to the new revenue standard. 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. Under IFRS 16, Leases are recorded on the statement of financial position by recognizing a liability for present value of its obligation to make future lease payments for an asset (comprised of the amount of lease liability plus certain other amounts) either being disclosed separately in the statement of financial position (within right-of –use assets) or together with property, plant and equipment. The most significant effect of the new requirements will be an increase in recognized lease assets and financial liabilities. The Credit Union is currently assessing the impact future adoption of the new standard will have on the financial statements. Amendment to IAS 40, ‘Investment property’ (effective for annual periods beginning on or after 1 January 2018). These amendments clarify that to transfer to, or from investment properties, there must be a change in use. To conclude if a property has changed use there should be an assessment of whether the property meets the definition. This change must be supported by evidence. The Credit Union is currently assessing the impact future adoption of the new standard will have on the financial statements.

(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.

FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 3.

31 DECEMBER 2017

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 The Credit Union classifies its financial assets into 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. 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. (i)

Classification 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. 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.

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 3.

31 DECEMBER 2017

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

Financial assets (cont’d) (i)

Classification (cont’d) Loan and receivables (cont’d) 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 Co-operative 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.

(ii)

Recognition and measurement 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-forsale 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 amortized cost using the effective interest method.

FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 3.

31 DECEMBER 2017

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

Financial assets (cont’d) (ii)

Recognition and measurement (cont’d) 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 amortized 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).

(e)

Financial liabilities 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.

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NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS

31 December 2017

31 DECEMBER 2017 3.

SIGNIFICANT ACCOUNTING POLICIES (CONTâ&#x20AC;&#x2122;D): (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)

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 assetâ&#x20AC;&#x2122;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.

FINANCIAL STATEMENTS

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31 December 2017 3.

31 DECEMBER 2017

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

Property, plant and equipment (cont’d) 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%

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. (k)

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.

(l)

Employee benefits Pension obligations The Credit Union participates in a defined contribution 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.

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 3.

31 DECEMBER 2017

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

Employee benefits (cont’d) Defined benefit plan The Credit Union participates in 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. 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.

(m)

Borrowings Borrowings are recognized initially as the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortized 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.

(n)

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

(o)

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.

FINANCIAL STATEMENTS

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31 DECEMBER 2017

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

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.

(q)

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.

(r)

Revenue recognition Interest income Interest income is recognized in surplus or deficit for all interest-bearing 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.

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31 December 2017 3.

31 DECEMBER 2017

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

Revenue recognition (cont’d) 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. Dividend Dividend income from equity financial investments is recognized when the shareholder’s right to receive payment has been established. Rental income Rental income is recognized on the accrual basis.

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.

FINANCIAL STATEMENTS

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NOTES TO THE FINANCIAL STATEMENTS 31 December 2017 4.

31 DECEMBER 2017

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

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

Fair value estimation (cont’d) 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).

(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)

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 4.

31 DECEMBER 2017

CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINTY (CONTâ&#x20AC;&#x2122;D): (b)

Key sources of estimation uncertainty (contâ&#x20AC;&#x2122;d) (ii)

Impairment losses on loans to members 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.

(iii)

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.

FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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. There have been no substantive changes in the Credit Union’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. (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 Liquid assets Reverse repurchase agreements Cash and bank balances Payables Voluntary shares Deferred shares Saving deposits External credits

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial instruments by category Financial assets Loans and receivables 2017 2016 $’000 $’000 Cash and bank balances Liquid assets Reverse repurchase agreements Loans, after provision for loan impairment Financial investments

119,539 123,672 840,939

50,295 79,922 812,614

6,124,431 7,208,581

4,175,621 -

484,656

214,152

5,118,452

484,656

214,152

Financial liabilities

Payables Saving deposits Voluntary shares Deferred shares External credits

(iii)

Available-for-sale 2017 2016 $’000 $’000

Financial liabilities at amortised cost 2017 2016 $’000 $’000 95,741 3,272,769 3,395,762 44,753 162,619

72,155 2,180,833 2,203,945 230,822

6,971,644

4,687,755

Financial instruments not measured at fair value Financial instruments not measured at fair value include cash and bank balances, liquid assets, reverse repurchase agreements, loans, after provision for impairment, financial investment at cost, saving deposits, voluntary shares, deferred shares and external credits. Due to their short term nature, the carrying amounts of liquid assets, reverse repurchase agreements, cash and bank balances and the short-term elements of all other financial assets and liabilities maturing within one year are assumed to approximate their carrying amount.

FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial instruments not measured at fair value (cont’d) Amounts due to other institutions, voluntary shares, deferred shares and long term portion of loans are carried at amortised cost, which is deemed to approximate their fair values, as these balances attracts rates and terms comparable to market rates and terms for similar transactions. Financial investment which is comprised of unquoted equities classified as availablefor-sale are measured at historical cost less impairment 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). 2017 $’000

Level 1

2016 $’000

Cost Gains: included in statement of comprehensive income Financial assets available for sale

3,884

1,979

At 31 December 2017

5,863

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial instruments measured at fair value (cont’d) The valuation technique used in determining the fair value measurement to level 1 financial instrument is Jamaica Stock Exchange trading rates.

Financial assets measured at fair value Available-for-sale financial investments Government of Jamaica Securities Others

2017 $’000

Level 2

. 2016 $’000

77,742 339,413

23,308 155,341

417,155

178,649

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. 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. (v)

Financial risk factors 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.

FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (cont’d) Five key committees for managing and monitoring risks are as follows: (i)

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.

(ii)

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.

(iii)

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.

(iv)

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.

(v)

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.

100

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NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS

31 December 2017

31 DECEMBER 2017 5.

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

Financial risk factors (cont’d) There have been no significant changes to the Credit Union’s exposure to financial risks or the manner in which it manages and measures these risks. (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. 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.

101

FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Investments and resale agreements 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. The Credit Union has documented policies which facilitate the management of credit risk on investment securities and resale agreements. The Credit Unions exposure and credit ratings of its counterparties are continually monitored. Credit 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. 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 bi-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. Guidelines are implemented regarding the acceptability of different types of collateral. The principal collateral types provided for loans and advances are charges over member balances, real property and motor vehicles. Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the provision for credit losses.

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31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Liquid assets and bank balances Liquid assets and bank balances are held in financial institutions which management regards as strong and there is no significant concentration. The strength of these financial institutions is constantly reviewed by the Finance Committee. Impairment The Credit Union assesses on a monthly basis whether there is evidence of impairment in accordance with the general principles and methodology set out in IAS 39 and the relevant implementation guidance. These procedures include the following steps:      

Identification of events that provide objective evidence that a loan is impaired. Establishment of criteria for assessment on an individual or collective basis. Establishment of group of assets with similar characteristics. Establishing methodology to be used in determining cash flows from impaired loans. Determining interest income recognition. Recoveries.

The main considerations for the loan impairment assessment include whether any payment of principal or interest are overdue by more than 60 days based on the established PEARLS grid recommended by the League or based on any known difficulties in the cash flows of counterparties, credit rating downgrades or infringement of the original terms of the contract. The Credit Union addresses impairment assessment in two areas: individually assessed allowances and collectively assessed allowances. The assessment applied to individually significant accounts normally encompassed collateral held and the anticipated receipts for that individual account. Collectively assessed allowances are determined through the application of PEARLS prescribed percentages to the aging profiles of the loan portfolio.

103

FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Impairment (cont’d) The internal rating tool assists management to determine whether objective evidence of impairment exists, based on the following criteria set out by the Credit Union:     

Delinquency in contractual payments of principal and interest; Cash flow difficulties experienced by the borrower; and Breach of loan covenants or conditions. Initiation of bankruptcy proceedings; and Deterioration in the value of collateral.

The impairment provision shown in the statement of financial position at year end is derived from the two internal rating grades and comes from the nonperforming rating class. The table below shows the Credit Union’s loans and the associated impairment provision for each internal rating class: 2017 2016 $’000 $’000 Performing Neither past due nor impaired 5,128,235 3,568,737 Non-performing Past due but not impaired Impaired

Total Less provision for loan losses

(

950,251 56,376

578,520 35,553

1,006,627

614,073

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

(

4,182,810 21,895) 4,160,915

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Impairment (cont’d) Aged analysis of past due but not impaired loans:

Up to 2 months 2 to 3 months 3 to 6 months 6 to 12 months Over 12 months

2017 $’000

2016 $’000

920,752 18,944 6,044 4,445 66

372,782 74,346 76,583 35,132 19,677

950,251

578,520

There are no financial assets other than loans that are past due. Of the aggregate amount of gross past due but not impaired loans, the fair value of collateral that the company held was $1,186,828,471 (2016 - $1,055,812,566). Renegotiated Loans These are loans that have been restructured due to deterioration in the member’s financial position and where the Credit Union has made concessions that it would not otherwise consider e.g. extended payment arrangements, modification and deferral of payments. Following restructuring, a previously overdue customer account is reset to normal status and managed together with other similar accounts. Restructuring policies and practices are based on indicators or criteria which in the judgment of management indicate that payment will not likely continue. The Credit Union’s renegotiated loans that would otherwise be past due or impaired totaled $30,591,937, which includes past due or impaired loans totaling $20,707,189.

105

FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Credit risk exposure Maximum exposure to credit risk before collateral held or other credit enhancements are as follows: For items on the statement of financial position, the exposures are based on the net carrying amounts as reporting. For items not on the statements of financial position the table below represents a worst case scenario of credit risk exposure to the Credit Union without taking account of any collateral held or other credit enhancements. Credit risk not reflected on the statement of financial position was as follows:

Loan commitments

2017 $’000

2016 $’000

42,419

4,188

Loans The following table summarizes the Credit Union’s credit exposure for loans at their carrying amounts. 2017 2016 $’000 $’000 Educational Real estate Motor vehicle Personal Other

Less: Allowance for loan impairment Interest receivables

(

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

38,544 711,085 486,318 1,044,058 1,902,805

6,134,862

4,182,810

43,805)

(

21,895)

6,091,057 33,374

4,160,915 14,706

6,124,431

4,175,621

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (cont’d) (i)

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

Government of Jamaica (ii)

2017 $’000

2016 $’000

77,742

23,309

Liquidity riskLiquidity 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. Liquidity risk management process The Credit Union’s liquidity management process, as carried out within the Credit Union, includes:

107

(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.

FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (cont’d) (ii)

Liquidity risk (cont’d) 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 determined by retention history.

108

109

(v)

(ii)

95,741 1,941,211 2,400,138 12,180 4,449,270

72,155 1,046,880 1,675,669 24,348 2,819,052

Total financial liabilities (Contractual dates)

As at 31 December 2016: Payables Voluntary Shares Saving deposits External credits

Total financial liabilities (contractual dates)

Within 3 Months $’000

As at 31 December 2017: Payables Voluntary shares Deferred shares Saving deposits External credit

Liquidity risk (cont’d)

Financial risk factors (cont’d)

FINANCIAL RISK MANAGEMENT (CONT’D):

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

1-5 Years $’000

915,370

575,061 204,703 135,606

422,697

366,672 36,333 19,692

578,899

484,732 74,826 19,341

Over 5 Years $’000

4,758,135

72,155 2,218,338 2,214,951 252,691

7,175,638

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

Total No Specific contractual Maturity cash flows $’000 $’000

4,687,755

72,155 2,203,945 2,180,833 230,822

6,971,644

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

Total carrying Amounts $’000

601,016

229,725 298,246 73,045

635,272 1,512,197

149,991 448,740 36,541

3 to 12 Months $’000

3131December 2017 DECEMBER 2017

TO THE FINANCIAL STATEMENTS NOTES NOTES TO THE FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED E D U C O M C O - O P C R E D I T U N I O N L I M I T E D F I N A N C I A L S TAT E M E N T S

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FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (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 2017, the Credit Union’s commitment to extend credit to members, in respect of loans approved but not yet disbursed, amounted to $42,491,000 (2016: $4,188,000).

(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:

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (cont’d) (iii)

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

2017 ’000

Liquid AssetsUSD

2016 ’000

892

Reverse Repurchase AgreementUSD GBP Financial InvestmentUSD

31,215

17,151

5,018

214

12,724

7,868

5,873

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 2017 2017 2016 2016 % $’000 % $’000

111

Currency: USD

2,108

GBP

201

USD

(1,054)

-1

( 345)

GBP

( 100)

-1

(

1,381 13 .

FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (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 available-for-sale investments. The impact of a 15% change in the quoted prices for these equities would be an increase or decrease in the carrying value of $879,441 in other comprehensive income. 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.

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (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. 2017 Within 3 Months $’000

3 to 12 Months $’000

1-5 Years $’000

Over 5 Years $’000

NonInterest Bearing $’000

Total $’000

123,672

833,947 339,718

6,992 21,183

56,559

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

72,266 475,227 22,809

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

Total

613,534

1,461,111

570,302

6,875,903

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

113

4,230,956

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)

6,124,431

67,196 7,573,698

67,196

630,599 697,795

697,795 -

FINANCIAL STATEMENTS

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E D U C O M C O - O PEduCom C R E D ICO-OPERATIVE T U N I O N L I CREDIT M I T E DUNION F I N ALIMITED N C I A L S TAT E M E N T S

NOTES TO THE NOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (cont’d) (iii)

Market risk (cont’d) Interest rate risk (cont’d) 2016 Within 3 Months $’000

3 to 12 Months $’000

1-5 Years $’000

Over 5 Years $’000

NonInterest Bearing $’000

Total $’000

Financial Assets: Liquid assets 79,922 Reverse repurchase agreements 805,583 Financial investments 35,878 Loans, after provisions after impairment 58,614

7,031 65,179

77,592

255,420

1,923,063

Total

979,997

327,630

2,000,655 1,938,524

Financial Liabilities: Saving deposits 1,641,137 Voluntary shares 1,042,325 External credits 22,135

298,246 227,818 66,406

205,711 570,231 123,878

35,739 363,571 18,403

2,180,833 2,203,945 230,822

Total

592,470

899,820

417,713

4,615,600

2,705,597

35,503

1,938,524

Total interest rate Sensitivity gap

(1,725,600) ( 264,840) 1,100,835 1,520,811

Cumulative Gap

(1,725,600) (1,990,440) ( 889,605)

79,922 812,614 214,152 4,175,621

35,503 5,282,309

35,503

631,206 666,709

666,709 -

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31 December 2017 5.

31 DECEMBER 2017

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

Financial risk factors (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. 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. 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 nonlinear. Effect on Net Surplus 2017 $’000 Change in basis points: +100 -100

13 (13) Effect on Net Surplus 2016 $’000

Change in basis points: +100 -150

115

92 (139)

Effect on Equity 2017 $’000 13 (13) Effect on Equity 2016 $’000 92 (139)

FINANCIAL STATEMENTS

Page 46

31 December 2017 5.

31 DECEMBER 2017

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

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.

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31 December 2017 5.

31 DECEMBER 2017

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

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 2017 and 2016. 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 2017 $’000 Total regulatory capital Risk – weighted assets: Total risk-weighted assets Risk weighted capital adequacy ratio

117

1,014,499

Required 2017 $’000 762,200

Actual 2016 $’000 812,852

6,613,377 15%

Required 2016 $’000 583,369

4,512,277 10%

18%

10%

FINANCIAL STATEMENTS

Page 48

31 December 2017 5.

31 DECEMBER 2017

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

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

2017 $’000

2016 $’000

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

1,978 50,315 1,359 17,227

135,847

70,879

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 7.

31 DECEMBER 2017

OPERATING EXPENSES: 2017 $’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 16)

2016 $’000

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

8,386 20,228 5,280 3,636 10,428 7,777 2,180 12,236 1,931 37,853 10,834 32 13,730 14,258 38,527 271,517 5,993.

669,777

464,826

2017 $’000

2016 $’000

288,451 80,384 1,502

215,397 55,399 721

370,337

271,517

123 16

80 24

139

104

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

119

FINANCIAL STATEMENTS

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NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS

31 December 2017

31 DECEMBER 2017 9.

LIQUID ASSETS:

Deposits (maturing within 3 months) Credit Union Fund Management Company 10.

2017 $’000

2016 $’000

123,672

79,922

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 2017 the Credit Union held securities totaling $840,939,072 (2016 $812,613,722) representing Government of Jamaica debt securities as collateral for reverse repurchase agreements. Reverse repurchase agreements include interest receivable amounting to $4,934,278 (2016 $4,761,675).

11.

FINANCIAL INVESTMENTS:

Available-for-sale at fair value Government of Jamaica Securities Victoria Mutual Building Society Credit Union Fund Management Company Scotia Investment Limited (fixed income fund) Jamaica Money Market Brokers (fixed income fund) Quoted equities

Unquoted equities at costJamaica Co-operative Credit Union League (JCCUL) Credit Union Fund Management Company Quality Network (QNET) C.O.K Sodality Co-operative Credit Union Limited Jamaica Co-operative Insurance Agency Limited First Heritage Co-operative Credit Union .

2017 $’000 77,742 177,058 97,317 54,964 10,074 5,863

2016 $’000 23,308 75,383. 79,958 .

423,018

178,649

14,161 13,787 11,383 11,002 1,000 10,305

10,032 11,787 2,182 11,002 500 -

61,638

35,503

484,656

214,152

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 11.

FINANCIAL INVESTMENTS (CONT’D):

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

121

31 DECEMBER 2017

2017 $’000

2016 $’000

360,901 56,559 67,196

101,057 77,592 35,503

484,656

214,152

(a)

Government of Jamaica securities includes interest receivable amounting to $1,183,023 (2016 - $558,623).

(b)

The Victoria Mutual Building Society deposits include Certificate of Deposits of which $14,141,037 is 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)

Quoted equities represent shares held by the Credit Union in Wisynco Group Limited and Victoria Mutual Investments Limited.

(e)

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).

(f)

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.

FINANCIAL STATEMENTS

Page 52

31 December 2017 11.

FINANCIAL INVESTMENTS (CONT’D): (k)

12.

31 DECEMBER 2017

This 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.

LOANS, AFTER PROVISION FOR LOAN IMPAIRMENT: Movement in loans during the year is as follows-

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

2017 $’000

2016 $’000

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

4,221,536 6,580,537

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

10,802,073 ( 6,619,263)

6,134,862 Less: Provision for loan impairment Provision for loan impaired arising through business combination

Accrued interest

Maturity: Due within 1 year Due after 1 year

(

31,633)

(

12,172)

(

43,805)

4,182,810 (

21,895) -

(

21,895)

6,091,057 33,374

4,160,915 14,706

6,124,431

4,175,621

399,160 5,725,271

314,034 3,861,587

6,124,431

4,175,621

The aggregate amount of non-performing loans on which interest was not being accrued amounted to $53,374,227 (2016: $63,092,821). Uncollected interest not accrued in the financial statements on these loans was estimated at $4,737,177 (2016: $6,757,000)

122

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31 December 2017 12.

31 DECEMBER 2017

LOANS, AFTER PROVISION FOR LOAN IMPAIRMENT (CONT’D): Provision for loan impairment The movement in the provision for loan impairment determined under the requirements of IFRS is as follows:

Balance at beginning of year Arising through business combination Charged to revenue during the year Bad debt written off Provision for impairment at year end

2017 $’000

2016 $’000

21,895 12,172 53,811

37,188 1,857

87,878 (44,073)

39,045 (17,150)

43,805

21,895

The provision for loan impairment under the JCCUL regulatory requirement is as follows: As at 31 December 2017: Months in Arrears

123

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

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

FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 12.

31 DECEMBER 2017

LOANS, AFTER PROVISION FOR LOAN IMPAIRMENT (CONT’D): Provision for loan impairment (cont’d) As at 31 December 2016: 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

50 52 113 92

18,907 10,537 17,378 16,271

4,485 4,037 9,456 9,437

14,422 6,500 7,922 6,834

1,891 3,161 10,427 16,271

Totals

307

63,093

27,415

35,678

31,750

The provision for loan impairment under the JCCUL regulatory requirement for 2017 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 – 2017 2016 $’000 $’000 IFRS provision as per above Loan loss reserve (note 24 (b))

13.

43,805 -

21,895 9,855

43,805

31,750

2017 $’000

2016 $’000

INVESTMENT PROPERTY:

Arising through business combination

48,300

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.

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NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS

31 December 2017

31 DECEMBER 2017 13.

INVESTMENT PROPERTY (CONT’D): During the year $13,022,887 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 $155,652.

14.

CASH AND BANK BALANCES:

2017 $’000

2016 $’000

119,539 -

47,378 2,917

119,539

50,295

2017 $’000

2016 $’000

119,539 123,672

50,295 79,922

243,211

130,217

2017 $’000

2016 $’000

Other receivables Provision for bad debt

38,099 -

13,774 ( 1,134)

Payroll receivables Assets held for sale* Prepaid expenses

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

12,640 81,396 8,440

113,568

102,476

Cash Cash at bank and in hand ATM imprest

Cash and cash equivalent in the cash flow comprise:

Cash and bank balances Liquid assets (note 9)

15.

OTHER ASSETS:

*Assets held for sale represents 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 12 months.

125

16.

352,133 332,268

31 December 2016

24,136

9,699 5,664 8,773 -

4,795 4,904

31 December 2017

Net Book Value-

At 31 December 2017

At 31 December 2016 Charge for the year Arising on business combination Eliminated on disposal

Depreciation 1 January 2016 Charge for the year

376,269

341,967 51,467 ( 17,165)

At 31 December 2016 Additions Arising on business combination Disposal

At 31 December 2017

339,795 2,172

At cost 1 January 2016 Transfer Additions

Freehold Land & Buildings $’000

PROPERTY, PLANT AND EQUIPMENT:

16,930

12,009

139,183

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

72,474 8,604

151,192

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

86,493 725 10,790

Computer Equipment & Software $’000

17,896

33,571

75,488

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

45,078 6,543

109,059

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

68,247 1,270

Furniture, Fixtures, Signs & Equipment $’000

31 DECEMBER 2017

308

11,843

10,372

5,026 415 4,931 -

4,849 177

22,215

5,334 11,950 4,931 -

5,334 -

Leasehold Improvement $’000

31THE December 2017 NOTES TO FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

8,395

3,874

1,725 2,244 ( 95)

12,269

. 6,250 . 6,114 ( 95)

Motor Vehicles $’000

NOTES TO THE FINANCIAL STATEMENTS

(

380

380 -

725 725) -

Capital Work-in Progress $’000

E D U C O M C O - O P C R E D I T U N I O N L I M I T E D F I N A N C I A L S TAT E M E N T S

367,402

418,331

253,053

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

127,196 20,228

671,384

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

500,594 14,232

Total $’000

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FINANCIAL STATEMENTS

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EduCom CO-OPERATIVE CREDIT UNION LIMITED E D U C O M C O - O P C R E D I T U N I O N L I M I T E D F I N A N C I A L S TAT E M E N T S NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS

31 December 2017 16.

31 DECEMBER 2017

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– 2017 $’000

17.

2016 $’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 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 $8,965,358 (2016: $10,439,775). 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 open to all permanent employees 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 the Credit Union and employees each contributing 5-10% of pensionable salaries.

127

FINANCIAL STATEMENTS

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31 December 2017 17.

31 DECEMBER 2017

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 2017 revealed that the scheme was adequately funded. (a)

The defined benefit asset recognised in the statement of financial position was determined as follows: 2017 $’000 Fair value of plan assets Present value of obligations Asset recognised in the statement of financial position

(b)

122,258 ( 90,649) 31,609

2016 $’000 102,931 ( 72,978) 29,953

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 .

2017 $’000

2016 $’000

29,953 5,250 ( 1,502)

24,184 5,316 ( 721)

( 2,092)

1,174

31,609

29,953

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 17.

31 DECEMBER 2017

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: 2017 2016 2015 2014 2013 $’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)

122,258 ( 90,649)

102,931 ( 72,978)

84,823 (60,639)

86,443 (56,257)

70,588 (48,254).

31,609

29,953

24,184

30,186

22,334

2,133 ( 1,703)

3,649 ( 1,703)

(11,385) ( 6,695)

563 2,198

( 5,744) ( 1,165)

The principal actuarial assumptions used were as follows:

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

2017 %

2016 %

8.00 8.00

9.00 6.00

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

129

+1% $’000 (18,268) 12,890 9,897

2017

-1% $’000

+1% $’000

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

(14,381) 10,409 7,156

2016

-1% $’000

16,302 ( 6,961) ( 5,222).

FINANCIAL STATEMENTS

Page 62

31 December 2017 17.

31 DECEMBER 2017

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

Liability duration Category of participant

Liability duration (years) 2017 2016

Active members Deferred pensioners Retirees

26.3 16.3 11

26 17 10.8

All participants

24.4

24.0

The significant reduction in the liability duration of the active members is due to a change 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

2016 $’000

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

1,992,801 15,287,014

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

17,279,815 (15,647,780)

Loan scheme deposits Fixed deposits

2,752,214 23,644 456,622

1,632,035 22,440 488,679.

Interest accrued

3,232,480 40,289

2,143,154 37,679

3,272,769

2,180,833

2,749,843 522,926

1,939,383 241,450

3,272,769

2,180,833

Maturity: Due within 1 year Due after 1 year

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 19.

31 DECEMBER 2017

VOLUNTARY SHARES:

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

Maturity: Due within 1 year Due after 1 year

20.

DEFERRED SHARES:

Arising through business combination (variable rate) Withdrawal Interest payable

2017 $’000

2016 $’000

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

2,176,689 1,595,937.

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

3,772,626 (1,568,681)

3,395,762

2,203,945

2,050,198 1,345,564

1,270,143 933,802

3,395,762

2,203,945

2016 $’000

2015 $’000

46,233 ( 3,909) 2,429

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 $2,429,365.

131

FINANCIAL STATEMENTS

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31 December 2017 21.

31 DECEMBER 2017

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

2017 $’000

2016 $’000

114,724 39,550 8,345

195,201 35,621 .

162,619

230,822

44,449 118,170

88,541 142,281

162,619

230,822

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

2017 $’000

2016 $’000

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

43,827 5,311 6,489 13,367 4,507 5,143

106,474

78,644

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EduCom CO-OPERATIVE CREDIT UNION LIMITED E D U C O M C O - O P C R E D I T U N I O N L I M I T E D F I N A N C I A L S TAT E M E N T S NOTES TO THE FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS 31 December 2017

23.

31 DECEMBER 2017

INSTITUTIONAL CAPITAL:

2017 $’000

2016 $’000

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

226,650 28,866 1,169

203,940 22,259 451.

Special reserve

256,685 253,143

226,650 253,143

Members’ permanent shares

509,828 171,841

479,793 83,591

681,669

563,384

288,077

249,469

969,746

812,853

Business combination reserve

(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 percent (20%) of the annual surplus and amounts collected for entrance fees are transferred to this reserve.

(b)

Special reserves The capital and 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.

133

FINANCIAL STATEMENTS

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NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS

31 December 2017

31 DECEMBER 2017 24.

NON-INSTITUTIONAL CAPITAL:

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

(a)

2017 $’000

2016 $’000

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

76,184 9,855 29,953 2,361 204,253 4,258 -

355,446

326,864

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 IAS 39 requirements.

(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 the unrealised surplus on the revaluation of available for sale investments.

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 25.

31 DECEMBER 2017

APPROPRIATIONS TO AND DECREASE IN OTHER RESERVES: (a)

The following payments were made from reserve during the year:

Honorarium Fund outreach

2017 $’000

2016 $’000

8,000 4

8,004 (b)

The following amounts were transferred from accumulated surplus to other reserves as per approval at special general meeting:

Transfer to special reserve Honorarium Transfer to permanent shares fund

26.

2017 $’000

2016 $’000

8,000 -

94,000 30,000

8,000

124,000

BUSINESS COMBINATIONS: EduCom Co-operative Credit Union Limited, by way of special resolution passed and 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 Cooperative Credit Union Limited, effective 1 January 2017. St Catherine Co-operative Credit Union Limited (SCCU) therefore ceased to exist as of 31 December 2016. EduCom was identified as the acquirer as prescribed by IFRS. No consideration was transferred, and the Credit Union and SCCU exchanged only equity interest. 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. 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.

135

FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 26.

31 DECEMBER 2017

BUSINESS COMBINATIONS (CONT’D): 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 $3,526,886 (2016: $2,180,071).

(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 $17,926,031 (2016: 11,765,155).

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 27.

31 DECEMBER 2017

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 $2,414,485 (2016: $1,964,867). 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)

2016 $’000

109,844 142,755

87,660 94,118

34,895 71,972

36,004 47,309

Loan balances (including interest) Board and committee members Members of staff

(b)

2017 $’000

Deposits (including interest) Board and committee members Members of staff

At 31 December 2017 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

2017 $’000

2016 $’000

75,370 8,300

46,366 8,857

83,670

55,223

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.

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FINANCIAL STATEMENTS

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NOTES TO THENOTES FINANCIAL STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2017 29.

31 DECEMBER 2017

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

6,134,862

3,232,480

42,324

3,395,762

171,840

Balance as per members’ Ledger

6,134,862

3,232,480

42,324

3,395,762

171,840

Difference

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EDUCOM CO -OP CREDIT UN ION

ANNUAL REPORT 2017

Resolution for

Rule Change Whereas the Board of Directors 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 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 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. Proposed Rule: Article IX Rule 37 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 five (5) years.

139

List of

Deceased Members Francis Claudia Williams Everton Johnson Patrick E. Williams Sharon A. Campbell Leroy Watson Linnette Wilks Carl Hayles Lynett C. Thompson Vinnette Reid Sheron Smith Eugene Green Myrtle M Cousins Carmen Scarlett-Hall Elaine Thomas Albert Drysdale Denford Oharo Donald Johnson Camilia D.m Vassell Garfield Lloyd Sharon A Burrell Melville P Alberga Elfreda Burrell Herman Georg Gayle Basil B Whyte Peter Harriott Antonette Dussard Delroy Coley-Knowles Launa Myers Hope

Morris Denise Harvey-Watson Agnes Grey-Clarke Lynford Munroe Merle Bartley-Bruce Jean Facey Juliet Bryan Alfanso Thompson Kevin Powell Basil Anthony Bennett Michele Pearson Jhanell Marsh Cyprian Edwards Alice Jackson Kenry G. Petrie Nicholas Mclaughlin Hugh Collins Leonard Parker Crosley Earl Flowers Karen Elliott Vincent L Gardner Loraine Bonner-Hall Norma Richards Kirk Bowen Delzonia Mckenzie Trevor Watt Leebert Wellfair-Fearon Cece Whyte Sheila Elaine 140

EDUCOM CO -OP CREDIT UN ION

Notes

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ANNUAL REPORT 2017