First Heritage Co-operative Credit Union - Annual Report 2020 by First Heritage Co-operative Credit Union

Annual Report Recovery

Through Resilience…

…Staying

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Table of Contents

Vision, Mission Statements

Proﬁle - First Heritage Co-operative Credit Union Limited

Notice of Annual General Meeting and Agenda

Products & Services

3 8

Proﬁle of Board of Directors

Executive Team

Treasurer’s Report

Supervisory Committee Report

154

Credit Committee Report

158

Nominating Committee Report

160

Pictorial Highlights

166

Branch & Unit Managers

173

Parliamentary Rules

175

178

Prayer of St. Francis of Assisi

181

Minutes of the 8th Annual General Meeting

Board of Directors’ Report

Management Discussion & Analysis

Financial Statements

1 Report of the Delegates on JCCUL’S AGM

169

Vision To be a world-class ﬁnancial institution focused on enhancing the welfare of members, employees and communities in which we operate.

Mission Statement To offer superior value to our members by providing innovative products and services, through effective and efficient service delivery, while creating opportunities that will motivate team members, and enhance the communities in which we operate.

Notice of Annual General Meeting and Agenda Notice is hereby given that the 9th Annual General Meeting of First Heritage Cooperative Credit Union Limited will be held in a Virtual-only format on Thursday, June 17, 2021 commencing at 2:00 p.m. to allow members to: 1) transact the ordinary business of the society; and 2) consider, and if thought ﬁt, to approve a Resolution submitted by the Board of Directors in respect of amendments to the Rules of First Heritage Co-operative Credit Union Limited for meetings of members of the Society to be conducted by attendance at a physical location, or by virtual-only or by hybrid-meeting. A copy of the full resolution and the 2020 Annual Report are available on our website at www.fhccu.com. Members are invited to register to attend the meeting online due to the COVID-19 pandemic restrictions and protocols and for our mutual health and safety. For more information on registration attendance, participation, and the voting process, you may visit https://www.fhccu.com/index.php/agm, call our Member Care Centre at 876-929-5142 or WhatsApp us at 876-551-8193.

Registration will close on Monday, June 14, 2021.

_________________________ Tamara Francis Riley-Dunn Secretary, Board of Directors

Notice of Annual General Meeting and Agenda Ascertainment of Quorum Resolutions Call to Order and Prayer Chairman’s Opening Remarks and Tributes Reading and Conﬁrmation of the Minutes of the 8th Annual General Meeting held on Thursday, September 17, 2020. REPORTS: Board of Directors Management Treasurer and Auditor Supervisory Committee Credit Committee ELECTIONS: Nominating Committee Report Elections to: Board of Directors Credit Committee Supervisory Committee Any Other Business Vote of Thanks Termination

Profile - First Heritage Co-operative Credit Union Limited First Heritage Co-operative Credit Union Limited (FHC) was formed on August 1, 2012, from the merger of GSB Co-operative Credit Union Limited and Churches Co-operative Credit Union Limited. On March 1, 2015, the business and operations of St. Thomas Co-operative Credit Union Limited were transferred to FHC. FHC’s bond includes: a) All members of any religious bodies and affiliations in Jamaica and their families/relatives; b) All Public Sector Employees, past and present, regardless of their terms of tenure, employed to Ministries/Departments/Agencies/Statutory Bodies/Public Corporations and their families/relatives; c) All Professionals, their families/relatives, their employees and their families/ relatives; d) All members of Professional Associations affiliated to the Public Sector, their families/ relatives and the employees of these Professional Associations and their families/relatives; e) All Public Sector Consultants and their families/relatives; f) All Public Sector Contractors and their families/relatives; g)

Employees, past and present, of the Credit Union and their families/relatives;

All Registered Co-operative Societies and members of these Societies;

All persons of good character of the age permitted by the Co-operative Societies Act;

j) All members and persons eligible to be members of the Credit Union that have merged with this Credit Union, provided that any person is being admitted to membership has attained the age of eighteen (18) years.

The Credit Union has a membership base of approximately 200,000 members across a network of eleven (11) branches strategically located across the island; offering a suite of fortyfour (44) products and services. Our extensive array of products and services include a variety of loans, savings, term deposits for both personal and business purposes. In addition, we have investment and pension options from our subsidiary, FHC Investments Limited (FHCIL). Our products and services are specifically designed to meet the needs of members at every stage of their lives. Micro and Small Business Financing The Micro and Small Business Loan business line reflects a renewed commitment on the part of the Credit Union to foster the growth of entrepreneurship in Jamaica as a major driver of the economy. It also reflects the decision of FHC to widen the scope of its services and diversify its product range in a structured and better controlled manner to provide more specific and targeted entrepreneurial opportunities. This will serve to increase employment, the standard of living of borrowing members and also contribute to the GDP of the country.

Profile The Micro and Small Business Unit was created in 2006. The Unit is a member of the Caribbean Micro Finance Alliance which acts as a catalyst for the development of micro finance in the Caribbean. The Unit was recognized worldwide as a finalist in the Caribbean Micro Finance Competition in 2012 for its impact in Jamaica. Currently, we have representatives located in Kingston, May Pen, Montego Bay, Mandeville, Spanish Town,Portmore and St. Thomas. Jamaicans have a rich entrepreneurial spirit and FHC is the home for financing these opportunities. FHC aims to be a one-stop financial institution with diversified products and services to meet the needs of valued members at every stage of life. The Credit Union’s commitment remains to generate continual benefits to our valued members and other stakeholders. Subsidiary - FHC Investments Limited (FHCIL) FHC Investments Limited (FHCIL), is a limited liability company and a wholly owned subsidiary of FHC, established to provide investment opportunities for members and non-members of the Credit Union. It is located at 20 Dominica Drive, Kingston 5. The company’s products and services may also be accessed through representatives at several FHC branch locations. FHCIL offers competitive rates of return and portfolio management services to its clients by a team of industry experts with over 30 years of combined experience. FHCIL provides a suite of products and services to meet the needs of clients. These include: • Equities (local and foreign) • Bonds (local and foreign) • Managed Funds • Corporate Financing • Money Market Instruments • Portfolio Management • Investment Advisory • Retirement Planning The Investment company has products and services for the conservative investors as well as those with a greater risk appetite, some of which are offered in both foreign and local currency. FHCIL is also the Investment Manager and Administrator of the Credit Union’s Retirement Scheme. Retirement Scheme The FHC Retirement Scheme (formally Churches Co-operative Credit Union retirement Scheme) referred to as “the Scheme” was established by Churches Co-operative Credit Union Limited as a defined contribution plan with effect from June 1, 2004, by Trust Deed to provide pension benefits for members and their beneficiaries at retirement and ancillary benefits in the event of death or termination. The strategic objective of the Scheme is to ensure that more Jamaicans have a retirement plan to which they are consistently contributing, thus safeguarding their retirement.

Proﬁle

THE CREDIT UNION MOVEMENT LOGO As a member of the Jamaica Co-operative Credit Union League Limited, the “hands, family and globe” symbol, represents credit unions worldwide. This trademark represents credit unions in any language. The theme is universal and conveys the image of all credit unions. THE GLOBE - This represents the international network of credit unions.

THE FOUR SILHOUETTES - This represents the family of mankind working for the mutual beneﬁt of all. THE HANDS -This represents the self-help nature of credit unions.

Products and Services

Minutes of the 8th Annual General Meeting MINUTES OF THE 8TH ANNUAL GENERAL MEETING OF FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED HELD ON THURSDAY, SEPTEMBER 17, 2020 AT 2:00 P.M. AT THE JAMAICA CONFERENCE CENTRE 14 – 20 PORT ROYAL STREET, KINGSTON 1. ASCERTAINMENT OF QUORUM AND CALL TO ORDER Having ascertained that a quorum was present, the Chairman, Mr. Balvin Vanriel, called the meeting to order at 2:00 p.m. and invited everyone to stand for the playing of the National Anthem. 2. PRAYER Prayer was oﬀered by Mrs. Karlene Simpson, Assistant General Manager - Operations and Shared Services. 3. READING OF THE NOTICE OF THE MEETING The Chairman then called on 2nd Vice Chairman, Mr. Edmund Jones to convene the meeting with the reading of the Notice. 4. WELCOME, OPENING REMARKS, APOLOGIES AND TRIBUTES The Chairman welcomed all members to the 8th Annual General Meeting (AGM) of the First Heritage Co-operative Credit Union Limited and noted that, under normal circumstances, the AGM would have been convened from the second week in May. However, based on the advent of the COVID-19 pandemic the meeting was delayed. He implored members to maintain the protocols by keeping their masks on throughout the meeting. He encouraged them to cooperate with the established safety guidelines so that the meeting could be completed within two hours. The Chairman advised the meeting of the presence of representatives from the Ministry of Health and Wellness who would be observing, to ensure that protocols were maintained. He reminded members to use the microphones and noted that some participants would be presenting from their seats. He also shared the Wi-Fi access code for the meeting. The Chairman extended a warm welcome to those members utilizing the social media platforms provided and reminded them of the Abridged Version of the Annual Report containing the Minutes and some pages of the Financials. He noted however, that all members would have access to the full information as the tabling of Reports would also be viewed via PowerPoint presentations. He then pointed members to the Parliamentary Rules laid out in the Annual Report on pages 192 through to 195 which would be used to guide the meeting’s proceedings. The Chairman then introduced, by name and position, all Board and Committee Members as well as the Executives and Management Team present at the meeting.

Minutes of the 8th Annual General Meeting From the Board of Directors: 2nd Vice Chairman, Mr. Edmund Jones; Asst. Secretary, Mrs. Tamara Francis Riley-Dunn; Treasurer, Mr. Kevin Forbes; Directors, Ret’d SSP Michael James and Mr. Cranston Ewan. From the Committees: Chairman, Mrs. Althea Daley of the Credit Committee; Ms. Clivia Green and Ms. Shauna-Kaye Gordon of the Supervisory Committee. From the Executive and Management Team he recognized: Chief Executive Officer (CEO), Ms. Roxann Linton; General Manager (GM), Finance and Treasury, Mr. Emil Williams; Assistant General Manager (AGM), Retail Sales and Service, Mrs. Saint Beverley Tomlinson; Assistant General Manager (AGM), Legal Affairs and Corporate Secretary, Ms. Rene Gayle; General Manager (GM), Human Resource Development, Mrs. Christine Bucknor; Assistant General Manager (AGM), Operations and Shared Services, Mrs. Karlene Simpson; Chief Internal Auditor, Mrs. Dennise Edmond-Hastings; General Manager (GM), FHC Investments Limited (FHCIL), Mrs. Karlene Mullings and Assistant General Manager (AGM), Marketing, Communications and Member Experience, Mrs. Juven Montague-Anderson. He thanked all present for attending, despite the pandemic and assured members of a good performance report for 2019. He noted that, with almost nine (9) months gone, the year 2020 was so far a very challenging one, but hastened to advise that he was confident that together we were weathering the storm. The Chairman noted that during the year a number of Members passed away, many of whom had served the movement faithfully. He guided the meeting to pages 196 and 197 to recognize those Members and asked for the observance of one minute of silence for those who had passed on since the last AGM. Chairman Vanriel then invited the Assistant Board Secretary, Mrs. Tamara Francis RileyDunn to take the meeting through the Minutes of the last AGM, introduce any specially invited guests and tender any apologies for absence.

The Assistant Board Secretary made welcome all specially invited guests: Miss Vera Marie Lindo representing the Jamaica Co-operative Credit Union League (JCCUL) and Ms. Sheryl Brown representing the Department of Co-operatives and Friendly Societies. She tendered apologies for those not physically present but were attending virtually. These were: Board Secretary, Mrs. Leodis Douglas; 1st Vice Chairman, Mr. O’Neil W. Grant; Chairman of the Supervisory Committee, Mrs. Camelle Ricketts-Moore; Members of the Credit Committee, Messrs. Donald Williams and Richard Ranger; and General Manager (GM) Credit Administration and Loan Risk, Mr. Quilston Harrison. 5. READING & CORRECTION OF THE MINUTES OF THE LAST AGM Minutes of the 2019 AGM, located on pages 12 through to 37 of the full Report, having been previously circulated were taken as read on a motion moved by Member, Ms. Valrie Smith, and seconded by Member, Mrs. Nadine Loauge-Clarke and carried. Page 14: Last line of 1st paragraph: Add: last name Smith to Denise. There being no further corrections to the Minutes, the motion for the conﬁrmation of the Minutes was moved by Member, A. N. Harris Esq. and seconded by Member, Mrs. Althea Daley and carried.

Minutes of the 8th Annual General Meeting Assistant Board Secretary Riley-Dunn then handed over to the Chairman to address any matters arising from the Minutes. 6. MATTERS ARISING FROM THE MINUTES OF THE 8th AGM The Chairman thanked the Assistant Board Secretary for the presentation and asked if there were any matters arising from the Minutes for discussion or further questions from the floor. There being none, the Chairman then proceeded to present a summary of the Board of Directors’ Report located on pages 44 through to 47. He reminded members with the Abridged Version of the Report to direct their attention to the PowerPoint presentation with the highlights. 7. BOARD OF DIRECTORS’ REPORT The Chairman expressed his delight in presenting the highlights of the Credit Union’s performance and that of its Subsidiary over the financial year ending December 31, 2019. He noted that, based on several creative strategies that were implemented over the period, the following results were achieved: • A surplus of $273.44 Million, resulting in an increase of $31.99 Million or 13.25% over 2018. • An increase in the Credit Union’s accumulated surplus to $206.55 Million. • An increase in Total Assets by 11.83% which represents an increase of $13.66 Billion • An increase in the Loan Portfolio to $8.9 Billion, an increase of 10.70% or $859.70 Million • Deposits stood at $10.57 Billion, representing an increase of 10.12% or $972 Million For the Subsidiary, FHC Investments Limited, the following results were achieved: • Net Surplus grew by $24.07 Million in 2019, up from $3.42 Million in 2018. • Bond Trading activities increased by approximately 12% over 2018; and • Funds under Management grew to $4.7 Billion with Return on Equity at 17.84%. The Chairman at this point reminded members of the challenges of 2020 and noted that the results may not be as exceptional as 2019. However, he assured the meeting that the team continued to use their best efforts to ensure a profitable performance. For the FHC Retirement Scheme, the following results were achieved: • Total Assets stood at $1.41 Billion, representing an increase of $263 Million or 23% over 2018. • Members’ Contribution to the Retirement Scheme totaled $103.7 Million • Total membership stood at 4,691, an increase of 153 new members.

Minutes of the 8th Annual General Meeting He encouraged members to be a part of the Retirement Scheme which is in place to help them to prepare for retirement. For the FHC Foundation Limited: • A total of $1.33 Million was donated to 33 recipients in scholarships and bursaries and $900,000.00 was awarded to three (3) recipients in thentrepreneurial Awards. • The Annual Benefit Performance with the University Singers was also held. The Chairman, on behalf of the Board of Directors, thanked all members for their continued support and loyalty to their Credit Union. He encouraged them to be proactive in speaking to a team member if they experienced financial difficulties before any delinquency occurred, as the role of their Credit Union is to satisfy all their needs as best as possible. He assured the members of his confidence in the Management Team’s ability to continue to advance the strategic agenda and derive strong performance. Amidst a loud applause, the Chairman invited any questions or comments from the Report of the Board of Directors. Member, Mrs. Althea Daley queried when the Bank of Jamaica (BOJ) regulations would be implemented. To this question, he called on the League’s representative to respond. Ms. Vera Lindo informed the meeting that the date was still uncertain but that the activity was still in train. She added that there will be the implementation of the Credit Unions (Special Provisions) Bill as well as adjustments to the Co-operative Societies Act. She assured members that the League and the Credit Union were preparing themselves to be licensed.

Member, A.N. Harris Esq. queried of the Chairman whether the total enrolment of new members to the Retirement Scheme was 135 according to the notice or the 153 reported. The Chairman responded that this would be ascertained. He further sought the percentage of readiness of the Credit Union pending the implementation of the BOJ regulations, to which the Chairman responded that it was estimated to be about 95% ready. There being no further comments on the Report, the motion for the acceptance of the Board of Directors’ Report was moved by Member, Ms. Avis Chuck and seconded by Member, Mrs. Deanna Dixon-Reading and carried. The Chairman then invited the CEO, Ms. Roxann Linton, to present the Management Report. 8. MANAGEMENT REPORT The CEO ﬁrst acknowledged all Co-operators and specially invited guests and thanked everyone for coming out to the 8th Annual General Meeting. She specially acknowledged the Board Chairman and all other members of the FHC Board; the Volunteers; the Executive Team, Management, and Team Members; specially invited guests from the League and its member companies; the Department of Co-operatives and Friendly Societies; CUNA Caribbean Insurance Jamaica Ltd.; other Credit Unions and Auditors, KPMG.

Minutes of the 8th Annual General Meeting She expressed her appreciation to the members physically present as well as those who joined virtually. She noted that this new modus operandi could not have been imagined, but the world has changed in very unpredictable ways since the COVID-19 outbreak. She expressed gratitude to everyone for their cooperation and for ensuring that the business of the Credit Union was ongoing. She made note that the pandemic brought about an interruption in the usual FHC friendly greetings, however due to the masks being worn and physical distancing, team members have adopted the “thumbs up” approach in the branches. Despite the challenges with social distancing and the adherence to the Ministry of Health and Wellness protocols, team members continued to connect, engage and be present with members. She then asked for a motion that the Management Report be taken as circulated and read. This was moved by Member, Mrs. Althea Daley and seconded by Member, Ms. Dawn Williams and carried. The CEO invited the meeting to share in the PowerPoint presentation, highlighting the continuation of the Credit Union’s transformation journey during 2019 She highlighted that with the combination of the best people, the right products and systems to fulfill members’ needs, an impressive surplus of $273.44 Million was achieved; a first for the Credit Union representing an increase of 13.25% over 2018. She noted to the meeting that, not only did the Credit Union grow profitably, but it also grew under prudent management. This, she indicated, was achieved through the disciplined approach taken to risk management, cost management and the development of its people. She added that with a strong capital and liquidity position, the Credit Union was able to remain resilient. This stellar performance was achieved through the blend of consistent execution of strategies, dedicated and committed team members, and the unwavering support of all members. The CEO continued that strategic priorities and purposeful execution guided the Credit Union’s success. She informed the meeting that in 2019, the strategic focus was on deepening member relationships, people development, strong risk culture and the continuous pursuit of operational excellence. The CEO gave recognition to the Member At The Centre philosophy, which inspired the team to deeply focus on the members’ financial well-being. She noted that during the year, the Credit Union continued to develop its team members, its processes, and systems in ways that were instrumental in creating memorable experiences for the membership. This resulted in the development of tailored and innovative products to expand the financial horizon of members. She made specific reference to the “One and Move Taxi Loan” which supported the realization of entrepreneurial ambitions for over 360 members who now own and operate their taxi service. This product proved to be very successful Credit Union to increase its loan disbursement performance to $4.81 Billion for the year. The CEO highlighted the “Grow It Campaign” which was another ongoing initiative that focused on encouraging the members to build consistent thrifty habits through savings. This contributed to an increase in the Credit Union’s deposit base by 10.12% to $10.57 Billion.

Minutes of the 8th Annual General Meeting Relative to the Member Engagement activities, the CEO noted that the following contributed to the advancement of the communities in which we serve: 1. Expansion of the Civil Servants of the Year Awards Programme to include awards to three (3) Civil Servants 2. Hosting of Credit Union Week activities across the branch network 3. Execution of the FHC Christmas Show, and a Fitness Revolution Party 4. Christmas Children’s Treat hosted in the Lawrence Tavern Community for the benefit of members, their families, and friends 5. Implementation of the Member Assistance Programme which was geared specifically to render support and encouragement to members who may be going through financial difficulties since the onset of the pandemic. 6. Implementation of innovative ways to keep members on TRACK representing,Truth, Resilience, Action, Control and Knowledge. The CEO reiterated that the success was made possible by the Credit Union’s talented Team Members who continue to earn the Members’ trust. They executed on the strategies and are committed to continue to focus on building a culture of high performance, continuous improvement and kindness. She noted that learning and development interventions were commissioned, resulting in further development of the FHC leaders, and security and fraud awareness heightened, especially in an environment of increasing security threats. The risk culture of the Credit Union continued to receive focus through the bolstering of the risk management frameworks to better manage the increasingly complex risks that face the Credit Union.

Relative to Information Technology, the CEO reported plans were afoot to modernize the systems and this resulted in the execution of a contract with SMART Solution for the upgrade of the core banking system. She advised that there would be implementation over the next 18 months and an acceleration of plans to digitize operations. Moving beyond 2019, the CEO reiterated conﬁdence in the road ahead. She advised that the Credit Union was well-positioned to manage the COVID-19 economic challenges as was reﬂected in the strong capital and liquidity ratios. She noted that one key area to be strengthened during the last quarter of 2020, was the need to serve the members in new and better ways through the Access Plus Debit Card. This card would be upgraded to include a wide variety of features such as: • Greater provision of security from fraud; • Access to internet banking and bill services through Paymaster; • Direct salary deposits and transfers; • Ability to use the card internationally;

Minutes of the 8th Annual General Meeting • Ability to conduct remittance service; and • Facilitate interconnectivity and access to members’ funds across all Credit Union locations island wide. She assured members of the continued support of The Jamaica Co-operative Credit Union League through the area of project management. She advised them that within the next few months they should look out for communication regarding the upgrade of the debit cards. In closing, the CEO thanked all Members for remaining loyal to their Credit Union, for their unwavering support and for feedback given throughout the year. She also thanked them for the many referrals made to other family members and friends as the Credit Union seeks to strengthen its position. She expressed gratitude to the Board of Directors and Volunteers for their steadfast commitment in making the institution better. To the FHC Team Members, she extended thanks for their stellar contributions throughout 2019 and for remaining committed to the task each and every day. Amidst the applause from the meeting, she then asked for any comments or questions arising from matters raised in the Management Report. Member, Mrs. Althea Daley expressed commendations to the Management Team for the excellent work done and for surpassing the previous years’ performance. She congratulated the team for the effort expended in making FHC an outstanding Credit Union. There being no further comments or questions, the motion was moved for the adoption of the Report by Member, Ms. Avis Chuck and seconded by Member, Ms. Fay Parkinson and carried. The Chairman thanked the CEO for her presentation. He then asked for a motion for the Auditor’s Representative, Ms. Rochelle Stephenson to read the opinion rather than the entire Auditor’s Report. The motion was moved by Member, A.N. Harris Esq. and seconded by Member, Mrs. Nadine Loague-Clarke and carried. 9. AUDITOR’S REPORT KPMG Representative, Ms. Rochelle Stephenson thanked the Chairman and invited the meeting to turn to page 73 of the Annual Report representing the Opinion presented in relation to the audit of the financial statements. She stated that the audit was conducted on both the Financial Statements of the Credit Union as well as the Consolidated Financial Statements of the Credit Union and its Subsidiary, set out on pages 77 through to 162 which comprised the Group’s and Credit Union’s statement of financial position as at December 31, 2019. It also included the Group’s and the Credit Union’s Statement 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. She outlined that the Opinion accompanying the financial statements gave a true and fair view of the financial position of the Credit Union and the Group as at December 31,

Minutes of the 8th Annual General Meeting 2019, as well as their Cash Flows for the year then ended in accordance with International Financial Reporting Standards (IFRS), and the Co-operative Societies Act. 10. TREASURER’S REPORT Treasurer, Mr. Kevin Forbes thanked KPMG’s Representative, Ms. Rochelle Stephenson for going through the Opinion of the Auditors’ Report and thanked them for the time and eﬀort spent each year in completing the audit on time. He then greeted the Members and proceeded for a motion that the Treasurer’s Report, which was presented in the Annual Report from pages 61 through to 69, having been circulated be taken as read. The motion was moved by Member, Mr. Robin Levy and seconded by Member, Ms. Clivia Green and carried. Treasurer, Mr. Forbes highlighted that, in furtherance of the Board’s and CEO’s Reports, where the results for the year were already outlined, he would be covering the performance of the Group, which comprises the Credit Union and its subsidiary, FHC Investments Limited Mr. Forbes expressed great pleasure at the fact that, yet again, in 2019 he was overwhelmingly pleased to report remarkable results based on his promise to deliver improved performance and value to the membership. He reported that total revenue for 2019 was recorded at 13.25%, an increase over 2018 or $273.44 Million, which was the highest in the history of the Credit Union. He continued by reminding members that last year’s report boasted a record performance, however for 2019 the Credit Union had once again exceeded its previous record. The Treasurer also reported that FHC Investments Limited performed well with a proﬁt of $24.07 Million compared to prior year’s $3.42 Million. He noted that a big contribution to the investment portfolio was the buoyancy in the stock market during the year, which resulted in the value of the investment increasing by 19.7% over the previous year. This combined performance resulted in an overall improved capital position, which enhanced the Credit Union’s ability to not only provide and grant loans, but to weather any economic storms and withstand any shocks that may arise.

He stated that loan disbursements were quite robust and stood at $4.81 Billion but quickly added that it would be very diﬃcult to achieve this kind of growth in this current market space. He remarked, however, that it was through the various strategic initiatives that were embarked on a few years ago which included: cost rationalization, team member development, investment in sales and promotional training, the writing of quality loans, and other initiatives, that led to the positive results that the Credit Union was experiencing. The Treasurer informed the meeting that the past due loan rate, whilst still not at the standards expected, moved down from 8.42% to 8.11%, a rate that should still be celebrated as a good one. He added that the strong performance by the Credit Union in such a very competitive market space, was driven primarily by signiﬁcant improvement in the revenue with an overall position increase of 7.1% or $120 Million. At the end of 2019, the Treasurer pointed out that the Credit Union’s Balance Sheet revealed that Total Assets increased by 11.83%, which he considered to be a tremendous

Minutes of the 8th Annual General Meeting performance. Total Assets across the Group also showed growth of 11.95%. When compared to 2018, Total Assets for the Group moved from $12.30 Billion to $13.77 Billion. In his report on Net Loan Portfolio, the Treasurer reported that the Group’s Net Loans increased by 10.70%. Members’ Deposits and Shares, he noted, stood at $10.57 Billion or 10.12%, a substantial increase over the previous period. For this excellent performance he commended the Credit Union for listening to the Members and providing attractive interest rates and products that appealed to them. He made special mention of the ‘Grow It’ deposit initiative which served as a consistent source of capacity to lend and also to cushion the Credit Union. The Treasurer reported that Net Interest Expense was at $215.09 Million or an increase of 14% over the previous period. The Operating Expense also increased, however, this was driven based on marketing activities and incentives aimed at growing our deposits. A look at the regulatory environment revealed that the Credit Union continued to maintain 100% compliance with the JCCUL’s requirements. Of note, was the fact that FHC continues to prepare itself for the BOJ supervision. Accordingly, at the end of the year, FHC’s Regulatory Capital and Institutional Capital to Total Assets, stood at 11.97%, a significant rate compared to the PEARLS and BOJ’s Ratio of 8% and 6%, respectively. The Treasurer highlighted that this performance for 2019 justified that the Credit Union was on a firm foundation which he reiterated was very strong for the institution to navigate the difficulties envisaged for the months ahead in 2020. In concluding, the Treasurer summarized that 2019 was indeed a very good year; one that held the highest level of loan disbursements and surplus to date. It meant that the Credit Union was in good stead with adequate capital and liquidity that were aligned with the benchmark requirements; and that the core business of the Credit Union remained vibrant. He thanked Members for their commitment and encouraged them to continue to reach out to the Credit Union for help especially those who had been impacted by job losses. He noted that the team will continue its quest to find ways to ease the financial burdens. He then opened the floor for any questions or comments to the Treasurer’s Report. There being no comments or questions, the Treasurer asked for a Member to move the motion to adopt the Treasurer’s and the Auditors’ Reports. This was moved by Member, Ms. Lillian Morrison and seconded by Member, Ms. Fay Parkinson and carried. At this point, the Treasurer presented the proposal to the Members for the Distribution of Surplus, of $206 Million as follows: 1. A 4% dividend on all Permanent Shares as at the end of the year amounting to $12.4 Million; 2. $2.5 Million in Honoraria; 3. A total of $1 Million in donations through the FHC Foundation; and 4. Special allocation of $25 Million from the reserves to help with building the Institutional Capital and to help with managing any shocks from 2020 and the COVID-19 pandemic. The Treasurer then asked for a motion to accept the proposal for the Distribution of Surplus

Minutes of the 8th Annual General Meeting which was moved by Member, Ms. Clivia Green and seconded by Member, Ms. Pauline Richards and carried. 11. MAXIMUM LIABILITY ALLOWANCE The Treasurer explained to the meeting that, as was the custom, every year a maximum limit was set by the Membership representing the amount of liability the Credit Union could incur on its books without impairing its position. He then called for a motion to ﬁx the Maximum Liability of the Credit Union at 20 times that of its Share Capital. This was moved by Member, Ms. Avis Chuck, seconded by Member, Ms. Monica Anderson and carried. The Treasurer then thanked all members of the Team, the Board of Directors, and Volunteers who all made the 2019 performance of the Credit Union possible. He thanked Auditor, Ms. Rochelle Stephenson, a Partner at KPMG for working with the FHC Team to meet the audit timelines despite the many challenges of the COVID-19 pandemic. Finally, he thanked the Members and expressed appreciation for the support given throughout 2019 and beyond. The Chairman thanked the Treasurer for his presentation and used the opportunity to welcome the JCCUL’s CEO, Mr. Robin Levy to the meeting. He then invited Mrs. Althea Daley, Chairperson of the Credit Committee to present the Committee’s Report. 12. CREDIT COMMITTEE REPORT On behalf of the Credit Committee, Mrs. Althea Daley welcomed all to the meeting and extended apologies for the absence of Mr. Richard Ranger and Mr. Donald Williams. She noted the sterling performance of the Credit Union for 2019 and indicated that her Report would concentrate on the highlights of the loan performance over the period. She then asked for a motion that the Credit Committee Report be taken as circulated and read. This was moved by Member, Mrs. Saint Beverley Tomlinson and seconded by Member, Mrs. Juven Montague-Anderson and carried.

Mrs. Daley stated that there was excellent growth in the loan portfolio for 2019 despite the competition faced by the Credit Union, as the team was determined to meet the financial needs of the Members. The Committee Chair noted that disbursements for 2019 stood at $4.75 Billion resulting in an increase of 13.10% or $1.21 Billion of the total loan portfolio. She added that the past due rate was quite remarkable, although not yet at the required standard. For Micro and Small Business Loan disbursements, Mrs. Daley reported a phenomenal performance with an increase from $300.70 Million in 2018 to a $670.30 Million in 2019, representing a 123% increase or $369 Million over 2018. She thanked the Members for working with their Credit Union to reduce the past due rate and encouraged them to continue to reach out to the Team Members if they fall on difficult times. She further thanked the FHC Team Members, the Board of Directors, the Supervisory Committee and again the Members for all the assistance and support to the Credit Union. She then opened the floor for comments and questions.

Minutes of the 8th Annual General Meeting There being no comments or questions, Mrs. Daley asked for a motion to accept the Credit Committee Report. This was moved by Member, Ms. Lissan Lobban, and seconded by Member, Mr. Stennett McLean and carried. The Chairman thanked Mrs. Daley and invited the Secretary of the Supervisory Committee, Ms. Shauna-Kaye Gordon to present the Committee’s Report. 13. SUPERVISORY COMMITTEE REPORT The Secretary, on behalf of the Members of the Supervisory Committee, extended greetings to all. She also expressed her commendations to the Management Team, the Team Members, Board Members and Volunteers who made their contribution to the achievements of the Credit Union’s strategic objectives, resulting in the excellent reports tabled at the AGM. She then asked for a motion that the Report be taken as circulated and read. This was moved by Member, A.N. Harris Esq. and seconded by Member, Mrs. Althea Daley and carried. The Secretary highlighted the Supervisory Committee’s role of assisting the Board of Directors in the discharge of its responsibilities, by providing oversight on aspects of the internal control systems through the internal audit function. She advised the meeting of the standing Members of the Committee which were comprised of Committee Chairperson, Mrs. Camelle Ricketts-Moore, Ms. Jacqueline Roberts, Mr. Luke McIntosh, Ms. Geraldine Wright and herself. She reported that there were eight (8) audits on the 2019 Audit Plan of which five (5) were completed as at December 31, 2019; one (1) in progress for that period and two (2) were deferred to 2020. She continued that the five (5) that were completed represented: Loans and Security Management; Anti Money Laundering and the Counter Financing of Terrorism for the year 2018; Human Resource Management; Information Technology; General Control Follow Ups; and Back Office Operations Process and Management. She also reported that the FHC Investments Limited Operations Management Audit as at December 31, 2019 was in progress, but noted that it was almost complete. The Secretary of the Committee also noted that the Liquidity Management and the Anti Money Laundering and Counter Financing of Terrorism Compliance for the year 2019 were deferred to 2020. She highlighted that special investigations continued to be a major activity for the Internal Audit Department and given its sensitive nature, this activity was treated as priority. She reported that 20 special investigation audits were conducted in 2019, an increase of four (4) over 2018. Under General Review, the Secretary pointed out that bank reconciliations were examined and cleared appropriately. She advised that the Supervisory Committee was satisfied with the efforts made to collect and regularize outstanding loan balances from Staff, Volunteers and Connected Parties. The Secretary then expressed thanks to the Nominating Committee; the Members of the Credit Union for appointing them to serve in such an important capacity; the Management and Team Members; the Internal Audit Department and the Board of Directors, for their

Minutes of the 8th Annual General Meeting excellent work over the past year. She then opened the floor for comments and questions. Member, A.N. Harris Esq. queried the meaning of Connected Party. Ms. Gordon responded that Connected Party are persons who are connected by relationship to the Credit Union such as FHCIL would be a Connected Party because they are a Member of the Group. In addition, Chairman Vanriel further added that Volunteers, spouses or immediate family members are also considered as Connected Parties and that their affairs are monitored accordingly. Member, A.N. Harris Esq. noted that he was satisfied that efforts were being made to regularize and collect outstanding loan balances from Staff, Volunteers and Connected Parties. Member, A.N. Harris Esq. further queried how complaints from members were dealt with. Ms. Gordon responded that a process was in place where complaints were referred to Internal Audit Department for special investigations. Member, A.N. Harris Esq. queried whether the Supervisory Committee was satisfied with the special investigations conducted by the Internal Audit Department to which Ms. Gordon responded yes. She noted that the Committee obtains a monthly report relative to work conducted, the findings of the investigations and the actions taken by Management. There being no further comments or questions, Ms. Shauna-Kaye Gordon asked for a motion to adopt the Supervisory Committee Report. This was moved by Member, Ms. Jean Gordon and seconded by Member, Mr. Robin Levy and carried. Chairman, Mr. Balvin Vanriel thanked Ms. Shauna-Kaye Gordon and invited the Chairman of the Nominating Committee, Mr. Edmund Jones to present the Nominating Committee’s Report. 14. NOMINATING COMMITTEE REPORT

The Chairman of the Nominating Committee, Mr. Jones greeted the Members and prior to proceeding with the report, explained to them the role of the Committee as set out in accordance with the provisions of Article XIV, Rule 59 of the Rules of the FHC Credit Union. He then introduced the Committee Members as Mr. Richard Picart, Member Representative; Ms. Roxann Linton, Staﬀ Representative and himself, Mr. Edmund Jones, Committee Chairperson. He then asked for a motion that the Nominating Committee Report be taken as circulated and read. This was moved by Member, Mrs. Dennise Edmond-Hastings and seconded by Member, Mrs. Christine Bucknor and carried. He informed the Members that under consideration were the vacancies created by the retiring Volunteers from the Board of Directors, the Supervisory Committee and the Credit Committee who all indicated their willingness to continue to serve. He reported that the term for Board Members: Mrs. Leodis Douglas and Messrs. Cranston Ewan, Noel Francis and Balvin Vanriel had come to an end but that all Members had expressed their willingness in writing to continue to serve the Credit Union. The following persons were nominated to be elected to the Board of Directors.

Minutes of the 8th Annual General Meeting BOARD MEMBERS

TENURE (YEARS)

Mrs. Leodis Douglas Mr. Cranston Ewan Mr. Noel Francis Mr. Balvin Vanriel

2 2 2 2

Mr. Jones noted that in relation to the Members of the Supervisory Committee all sitting members would be retiring at this AGM, namely: Mrs. Camelle Ricketts-Moore, Ms. ShaunaKaye Gordon, Mr. Luke McIntosh, Ms. Geraldine Wright and Ms. Jacqueline Roberts. He added that all the persons named indicated in writing their willingness to continue to serve. The Committee nominated the following persons to be appointed to the Supervisory Committee: SUPERVISORY COMMITTEE MEMBERS Mrs. Camelle Ricketts-Moore Mr. Luke McIntosh Ms. Geraldine Wright Ms. Jacqueline Roberts Ms. Shauna-Kaye Gordon

TENURE (YEARS) 1 1 1 1 1

For the Credit Committee, Mr. Edmund Jones noted to the meeting that there were three Members up for retirement. They were Mrs. Althea Daley and Messrs. Donald Williams and Stennett McLean, who had all indicated in writing their willingness to continue to serve. The nominated Members for the Credit Committee were as follows CREDIT COMMITTEE MEMBERS Mrs. Althea Daley Mr. Stennett McLean Mr. Donald Williams

TENURE (YEARS) 2 2 2

He then asked for any questions or comments from the Members. Member, A.N. Harris Esq. queried if the nominated Members indicated their willingness to serve in writing. Mr. Jones responded in the aﬃrmative. He further queried if records were in place to indicate so, again to which Mr. Jones responded in the aﬃrmative explaining that all retiring Volunteers were written to informing them of their retiring status and asked that they indicate in writing whether or not they were willing to continue to serve. This, he indicated, they did. There being no further questions or comments, Mr. Edmund Jones asked for the acceptance of the Nominating Committee Report. This was moved by Member, Ms. Claudette Baker and seconded by Member, Mrs. Nadine Loague-Clarke and carried. He then invited the representative of the Department of Co-operatives and Friendly Societies, Mrs. Sheryl Brown to conduct the elections.

Minutes of the 8th Annual General Meeting 15. ELECTION OF OFFICERS Mrs. Brown greeted the Members and informed the meeting of her role as the representative from the Department of Co-operatives and Friendly Societies. She advised that in her capacity, she was responsible for conducting elections for the persons who were nominated to serve on the various committees and the Board. Mrs. Brown reminded the Membership that, according to the Rules of the Credit Union, after the Nominees had been placed before the Members, additional nominations could be made from the floor. If there were no other nominations from the floor, then the persons who were nominated would be duly elected after receiving a mover and a seconder of the motion. Mrs. Brown commenced with the election of the Board of Directors. She stated the names of the Nominees of the Board of Directors and asked for any other nominations from the floor. After the third call, and there being none, she asked for a mover and a seconder to duly elect the Nominees to serve on the Board of Directors. This was moved by Member, A. N. Harris Esq. and seconded by Member, Ms. Karen Boland and carried. She added that in addition to the duly elected Nominees there were five more Directors who would continue to serve on the Board. They were: Messrs: O’Neil W. Grant, Edmund Jones, Kevin Forbes, Ret’d SSP Michael James and Mrs. Tamara Francis Riley-Dunn. Moving to the Supervisory Committee, Mrs. Brown, stated the names of the Nominees of that Committee, and asked for any other nominations from the floor. After the third call, and there being none, she asked for a mover and a seconder to duly elect the Nominees to serve on the Supervisory Committee. This was moved by Member, Ms. Rene Gayle and seconded by Member, Mrs. Althea Daley and carried. She then announced that those nominated had been duly elected to serve on the Supervisory Committee for one (1) year.

For the Credit Committee, Mrs. Brown, having stated the names of the Nominees, asked for any other nominations from the floor. After the third call and there being none, she asked for a mover and a seconder to duly elect the Nominees to serve on the Credit Committee. This was moved by Member, Ms. Marie Radcliffe and seconded by Member, Mrs. Fay Parkinson and carried. She noted that in addition to the duly elected nominees, two (2) additional persons would be serving on the Committee to bring the number to five (5). They were Ms. Clivia Green and Mr. Richard Ranger. Mrs. Brown then reminded the Board of Directors, the Supervisory Committee and the Credit Committee that within ten (10) days of this meeting, they should meet, and select the Officers to serve on the Executive. She also requested that a report with information such as TRN, telephone numbers, and addresses concerning the Members be sent within 14 days to the Department of Co-operatives and Friendly Societies and any other relevant entities. She ended her presentation by thanking the Members and wishing for all a continued productive meeting.

Minutes of the 8th Annual General Meeting The Chairman thanked Mrs. Brown of the Department of Co-operatives and Friendly Societies for conducting the elections and announced that they were now at Any Other Business (AOB). 16. ANY OTHER BUSINESS The Chairman opened the ﬂoor for Any Other Business or comments and invited the Member from the Spanish Town Branch, who had previously raised a question to speak. Member, Mr. Keith Brown mentioned his plight of not being able to withdraw funds from his account due to system failures. He noted that when Members make their deposits, they get a manual receipt and questioned why a similar receipt was not issued for withdrawals as well. He then asked if there was anything that could be done to accommodate their withdrawals when these issues arise. The Chairman responded that his point was noted, but despite the risk element, he would have the Team check to see what could be done. He then called on Ms. Roxann Linton, CEO to further expound on the matter. Ms. Linton highlighted the challenges being experienced, such as the pilfering of cable wires and its impact on Flow, the service provider. These issues she noted, interrupt the Credit Union’s operations which further impact the Members. She extended apologies for the disruptions encountered and assured the Members that the team would ﬁnd ways to ensure a better experience during those times of disruption. Member, Mrs. Nadine Loague-Clarke from the St. Thomas Branch mentioned that it was the third time that she was attending the AGM where her name could not be found on the registration system. She noted that she was not the only person experiencing this and stated that other Members said other persons had registered in their names. Mrs. LoagueClarke asked if this was possible. The Chairman responded that he was not sure what the challenge could be, but noted that Management would look into it. Member, Ms. Ethel Lyons commended the Team Members at the Spanish Town Branch who assisted her in conducting a withdrawal from her account, when she was in need of urgent funds as she did not have her original ID. She noted that she joined the Credit Union in 1972 and would never give up on it as the workers are good people and she wanted it on record. The Chairman thanked Ms. Lyons for her commendation. Member, A. N. Harris Esq. sought clarity from Mrs. Nadine Loague-Clarke concerning the question of someone registering in her name, to which she responded no. The Chairman also responded that Mrs. Loague-Clarke was only sharing what she had overheard. Member, A. N. Harris Esq. stated that this situation reminded him of an incident that was reported two (2) years ago that Members were registering twice. Member. A. N. Harris Esq. mentioned that the Credit Union had promised him two (2) years ago, that consideration would be given for him to park closer to the meeting area. The Chairman noted that it would be looked into. There being no further questions or comments, the Chairman thanked everyone for coming out to the Meeting, despite the pandemic and thanked them for their support. At this juncture, the Chairman advised the Meeting that this would be his last year as Chairman

Minutes of the 8th Annual General Meeting of the Board of Directors, in keeping with the term limit of three (3) years as outlined by the Department of Co-operatives and Friendly Society. As the Meeting came to a close, the Chairman invited Mrs. Juven Montague-Anderson to share the safety measures which were put in place for the departure from the venue. The Members were reminded of the safety protocols and given instructions as they exited the meeting on where to collect their meals and tokens. Mrs. Montague-Anderson noted that the Ministry of Health and Wellness was present at the meeting to observe and ensure that all protocols were being adhered to. There being no further comments, the Chairman called on Director, Mr. Cranston Ewan to move the Vote of Thanks. 17. TERMINATION Subsequent to the Vote of Thanks and there being no further matter for discussion, the meeting was terminated at 4:08 p.m.

_______________________ Tamara Francis Riley-Dunn Secretary, Board of Directors

Proﬁle of Board of Directors

O’Neil W. Grant Chairman

Mr. Grant is the President of the Jamaica Civil Service Association, since June 2011. He has held several positions in various Ministries, and currently sits on the Board of the National Housing Trust. He is a trained Accountant and Financial Analyst and currently holds an Executive MBA from the Mona School of Business. He is the Chairman of the Board of Directors as well as a Director on the Board of the Jamaica Co-operative Credit Union League Limited and the Consumer Aﬀairs and Fair Trading Commission.

Proﬁle of Board of Directors

Leodis Douglas, 1st Vice Chairman

Kevin Forbes, 2nd Vice Chairman

Mrs. Douglas is currently the Human Resource Director and Principal Lecturer at GC Foster College of Physical Education and Sport. Mrs. Douglas is the holder of a Master’s in Business Administration from Florida International University, a B.Sc. in Human Resources Management, graduating summa cum laude and a Diploma in Secondary Education with Honours.

Mr. Forbes is currently employed to Look Beyond Limited as a Financial Controller. He previously served as Financial Manager at Cable & Wireless Limited, Financial Controller for Allied Insurance Brokers Limited, and worked in various management capacities within the Grace Kennedy Company Limited and with Ernst & Young Caribbean.

Mrs. Douglas presently serves as 1st Vice Chairman of the Board of Directors and is the Chairman of the Retirement Scheme’s Board of Trustees.

He holds a Masters of Business Administration in Finance from the Manchester Business School, United Kingdom, and is a Fellow of the Association of Chartered Certiﬁed Accountants as well as a member of the Institute of Chartered Accountants of Jamaica. He is the 2nd Vice Chairman of the Board of Directors and is the 2nd Vice Chairman of the Finance & Operations Committee.

Proﬁle of Board of Directors

Cranston Ewan, Treasurer

Balvin Vanriel, Asst. Treasurer

Mr. Ewan is a Fellow of the Association of Chartered Certified Accountants (ACCA). He also holds a Master’s Degree with a concentration in Finance from the University of Manchester. Mr. Ewan has vast experience in several industries, spanning Accounting, Shipping, Education, Energy Efficiency, and the Distributive Trade. His expertise includes accounting, finance, management consulting, human resources management, facilities management and leadership.

Mr. Vanriel is currently a Partner with the auditing firm BDO Chartered Accountants. He is a qualified Accountant, a Fellow with the Institute of Chartered Accountants of Jamaica and a member of The Association of Chartered Certified Accountants (ACCA).

He is currently the Treasurer of the Board of Directors.

Mr. Vanriel is also a Registered Public Accountant. He serves as an Associate Minister in his denomination. He is the Assistant Treasurer of the Board of Directors and a Director of FHC Investments Limited.

Proﬁle of Board of Directors

Tamara Francis Riley-Dunn, Secretary

Edmund Jones, Asst. Secretary

Mrs. Francis Riley-Dunn is a legal practitioner in Jamaica, having been called to the Bar in 2000. She specializes in commercial law (with an emphasis on debt collection), conveyancing and family law.

Mr. Jones is a retired Civil Servant with his last post being Technical Support Manager at the Ministry of Finance and the Public Service. He currently does contractual work in both the Public and Private Sectors managing projects, teaching She is an honours graduate of the University of the and consulting. West Indies and also of the Norman Manley Law School, where she received her Certiﬁcate of Legal His volunteer service includes Directorships at Education. Quality Networks Co-operative and the Jamaica Paralympic Association. He is also a Council She is the Secretary on the Board of Directors. Member of the Aquatics Sports Association of Jamaica. He is the Assistant Secretary on the Board of Directors and is the Chairman of the Merger and IT Steering Committees.

Proﬁle of Board of Directors

SSP Michael James (Ret’d), Director

Noel Francis, Director

Mr. Francis, a Commissioned Land Surveyor and a Class 1 Hydrographer, is an Associate of the Royal Institution of Chartered Surveyors. His work experience includes the management of the Survey Department as Deputy Director of Surveys, serving as a consultant in Dredging Engineering, Consultant to the He has received numerous awards including the Medal of Commonwealth Secretariat and the United Nations and Honour for Meritorious Service, the Jamaica Constabulary serving as a Lecturer at the University of Technology. Force Distinguished Service Award for the Development of Police Youth Clubs in Jamaica, as well as being named Educated at the University of the West Indies, University the LASCO Police Officer of the Year 2000. He is a Past College London, University of Toronto, Texas A&M President of the Kiwanis Club of St. Thomas. University and Nova Southeastern University. Mr. Francis’ qualifications include a Bachelor’s of Sciences Degree (BSc.) and a Master of Arts in Business Administration (MBA). Mr. James is a Retired Senior Superintendent of Police, a former Executive Member of the Police Officers’ Association and Divisional Commander of St. Thomas. He currently serves as Chairman of the Paul Bogle High School Board of Management.

Mr. Francis currently serves on the Board of the Jamaica Copyright Agency as Treasurer and sits on the Past Due Committee of FHC as well as the Board of Directors. Mr. Francis has been honored by the Jamaican Government with an Order of Distinction.

Board of Directors’ Report The year 2020 was undoubtedly one of the most difficult years that nations, global economies and First Heritage Co-operative Credit Union Limited (FHC) faced in decades. One where we had to pivot in our thinking as well as our execution to ensure that we remained a stable and profitable Credit Union. Despite the many challenges brought on by the global COVID-19 pandemic, we are indeed grateful for our accomplishments, and I am pleased to report that FHC generated a surplus, maintained a strong capital base and experienced significant growth in our assets and deposits. We remain committed to our strategic priorities and to serving our members well while growing the Credit Union. As we managed through the pandemic, our focus was the health, safety and well-being of our members and team members which saw the Credit Union implementing measures in our branches and offices in order to comply with the Government’s infection and prevention control protocols. In addition, we prioritized efforts, through our Member Assistance Program (MAP), to support our members whose finances were negatively impacted by the enormous economic disruption caused by the pandemic. More than ever, robust communication between the Board and Management has been vital as we supported Management as they devised and implemented numerous strategies so that our Members could benefit during this time of great need. Let me use this opportunity to commend the leadership, management and team members for their quick response, creativity and innovation as they came up with solutions during this difficult time. Despite the circumstances faced, we were able to assist our members with new solutions. FINANCIAL PERFORMANCE For the year 2020 we ended with a positive performance as at December 2020. We were able to achieve a surplus of $106.20 Million compared to a prior year surplus of $273.44 Million. Our Credit Union’s asset base increased to $15.15 Billion, an increase of 10.91%. Due to the impact of the pandemic and the economic uncertainties, we saw a change in our members’ borrowing patterns and this impacted our performance. Numerous initiatives were however put in place to ensure that our deposits, loans and asset portfolios continue to experience growth. The Credit Union continued to ensure that a robust risk and compliance structure was maintained throughout the year. As we prepare for the Bank of Jamaica (BOJ) to take up direct supervision of Credit Unions, we continue to ensure that we meet all the monitoring standards as set out by our regulator, the Jamaica Co-operative Credit Union League (JCCUL). STRATEGIC VISION The Board of Directors, Committees and Executives participated in the 2020 Strategic Planning Retreat virtually. We examined the financial landscape, reviewed our 2040 Vision and crafted the 2021-2023 Strategy Map with a view of securing the future of the organization through growth, heightened member experience and technological advancement. As we continue to keep abreast with the dynamic financial landscape, we remain strategically positioned to ensure that market opportunities are seized and that we consistently improve our service delivery. We will ensure that our members remain at the centre of everything we do.

Board of Directors’ Report OUR SUBSIDIARY FHC Investments Limited (FHCIL) The uncertainties and volatility in the financial markets impacted the investment portfolio of FHCIL, resulting in the company reporting a net loss of $5.23 Million when compared with a budgeted loss of $18 Million. The decline in profitability relative to 2019, was primarily driven by fair value losses of ($20.49 Million) on our Equity investment portfolio. All of the investment losses resulted from the impact of the COVID-19 pandemic which caused great uncertainty in both the local and overseas market, and which in turn resulted in sharp reductions in the market value of several of the FHCIL’s investment assets. No significant deterioration in the credit quality of the company’s assets occurred in the financial year. Nonetheless, the company grew its funds under management by 12.31% to $4.68 Billion. This is reflective of the confidence of our clients, albeit during a global pandemic. A new General Manager was recruited late 2020 and is expected to bring a wealth of experience and knowledge to growing the business. Amidst the challenges, FHCIL managed to build its team complement and engaged our clients in creative ways. The Retirement Scheme achieved a major milestone as the regulatory approval for name change to FHC Retirement Scheme was received. During the year a reorganization exercise was completed which aligned the clients with the age appropriate Unitized Investment Fund. Additionally, the asset allocation within the portfolios were revised in keeping with their risk profile. Despite the challenging operating environment however, we achieved growth in our pension line of business, as the team continued to engage existing and new Clients on the importance of planning for their retirement. Clients’ contribution to the Scheme for the year totaled $114.2 Million, an increase of 10.2% over 2019 and 75 new Clients were enrolled bringing the total membership to 4,690. As at December 2020, total assets in our Approved Retirement Scheme stood at $1.362 Billion, a decrease of $60.5 Million or 4.3% over the 2019 period. This decline was primarily as a result of the fair value losses on the Scheme’s equity portfolio which amounted to $157 Million.

The company will continue efforts to expand our range of financial services and products in the 2021 financial year. The strategic initiatives will include applying for a broker’s license from the Jamaica Stock Exchange and a unit trust license from the Financial Services Commission. These will enable the diversification of revenue streams and further strengthen the brand to the benefit of our shareholders. FHC FOUNDATION Having launched the FHC Foundation in 2013, we have consistently lived our mission to promote the development of the Jamaican youth, in particular disadvantaged children and young people in the primary, secondary and tertiary schools. This has been fostered mainly through youth and education as we seek to assist them towards becoming nation builders. For the year 2020, we were able to donate a total of $1.62 Million to 33 recipients towards our annual Scholarships, Bursaries and Grants, namely our Primary Exit Profile (PEP), Oswald Thorbourne and Renald Mason Scholarships. One new scholarship was also added for a University of The West Indies Student majoring in Finance. Three Entrepreneurial Awards were

Board of Directors’ Report granted amounting to $1.5 Million. We congratulate all of our beneﬁciaries; members and YOUTH Savers, and encourage them to continue to work hard. RECOGNITION The Credit Union’s performance under the challenging circumstances of the COVID-19 pandemic are commendable. The Board of Directors would like to express gratitude to all Members, Clients of FHCIL and Team Members of the Credit Union for their loyalty, dedication and continuous support over the years. 2020 was truly a test to all of us, however we endured the challenges and for that we say thanks. OUTLOOK We believe that the year 2021 will continue to prove to be extremely challenging for many of us as we will see a heightened surge in the COVID-19 pandemic. We have however learnt to adjust our sails and believe that with care and innovation we will be able to navigate the winds and turbulent times expected ahead. As we continue to embrace our Member At The Centre Mantra, we will ensure that we focus on our members by providing products and services that will continue to improve their lives. We anticipate that as we comply with the Disaster Risk Management Act implemented by the Government and the roll out of the vaccines, that we will be able to combat the pandemic and return to normalcy. The Board of Directors remain conﬁdent in the ability of the Management of the Credit Union to ensure that we continue to be solid, with a strong performance and at all times focused on our strategic vision.

_______________________________ O’Neil W. Grant Chairman, Board of Directors

Board of Directors’ Report Attendance at Board of Directors meetings

Names

Position

Scheduled

Attended

Excused

O’Neil Grant

Chairman

Leodis Douglas

1st Vice Chairman

Kevin Forbes

2nd Vice Chairman

Cranston Ewan

Treasurer

Tamara Francis Riley-Dunn

Secretary

Edmund Jones

Assistant Secretary

Balvin Vanriel

Assistant Treasurer

Noel Francis

Director

SSP Michael James

Director

Executive Team

Roxann Linton Chief Executive Oﬃcer

Quilston Harrison GM - Credit Administration & Loan Risk

Emil Williams GM - Finance & Treasury

Executive Team

Christine Bucknor GM - Human Resource Development

Karlene Mullings GM - FHC Investments Limited

Juven Montague-Anderson AGM - Marketing, Communications & Member Experience

Karlene Simpson AGM - Operations & Shared Services

Saint Beverley Tomlinson AGM - Retail Sales and Service

Dennise Edmond-Hastings Chief Internal Auditor

Management Discussion & Analysis The year 2020, through the ongoing pandemic, has made it distinctly clear what really matters most in life: our health, our relationships and financial security. First Heritage Co-operative Credit Union Limited (FHC) fully understands this and has been playing an essential role in the lives of those we serve. Throughout the pandemic, we have been diligent in taking the steps to secure the safety and well-being of our members and team members. In addition, we have mobilized resources to protect the sustainability of communities within which we serve. The challenges of the pandemic provided the unprecedented opportunity to test and confirm the Credit Union’s operational resilience and effective risk management processes. We are pleased that the strength of the Credit Union’s financial position enabled us to manage through significant volatility and uncertainty, while we devised ways to assist our members and serve other stakeholders. The effects of the onslaught of the COVID-19 pandemic impacted our ways of doing business, however we embarked on various strategies designed to bring even greater value to our members, so as to ensure that their needs and expectations would be met and surpassed. As we navigated the year, our dedicated team members adapted and adjusted to the new conditions, with the common goal of ensuring that the high level of service that Members were accustomed to was maintained. FINANCIAL PERFORMANCE Despite the challenging economic environment, we are proud to report a Net Surplus of $106.2 Million for 2020. The contraction over the previous year’s Surplus is congruous with the significant economic disruption resulting from the pandemic, which led to increased unemployment and a decline in business activity. Notwithstanding, we were able to assist our members with financial solutions which included loan disbursements totaling $4.21 Billion for the period. OUR STRATEGIC PRIORITIES As we work towards our 2040 Vision, it is very important to ensure that we continue to streamline our strategic priorities to safeguard our success. Our strategic initiatives are constantly reviewed and updated and are geared towards ensuring that all aspects of our business are fully optimized. We are deeply rooted in our Member At The Centre philosophy, which continues to inspire us as we continue to engage our members and our communities. OUR VALUED MEMBERS Deepening Member Relationships Despite a rather challenging year, that saw many of our planned activities being muted, our team was very resilient and strategic in their efforts at navigating and conquering the many obstacles that were faced daily. Our sales negotiations were undoubtedly impacted, as some members sought to suspend discussions in favour of a wait and see attitude. Many were hesitant to commit to new loan obligations, as their employment status became uncertain, as the nature of the pandemic required either closure or reduced working hours for most businesses. In addition, the Credit Union was impacted by curfews and quarantines, with four (4) of our branches closed for over two (2) months.

Management Discussion & Analysis We were, however, innovative and dynamic in our response planning, as we continued to meet the needs of our members. A Sales Centre was set up at the Annex of the Eureka location to accommodate the overflow of sales team members from the closed locations, as well as to actively process members who were seeking help under our Member Assistance Program. This was established to help those members struggling to meet loan payments and assisted greatly in keeping the wheels of production turning. This strategy was very successful and our members were very appreciative of the gesture as they have expressed the feeling of being valued and connected. Notwithstanding the ravishing effects of the COVID-19 pandemic on our economy, and the resulting fiercely competitive banking landscape, our deposit portfolio experienced strong growth. While our loan disbursements experienced some softening, we tailored our offerings to create greater access for members which proved to be attractive and of real value. As we continued to pursue our efforts at improving levels of member service and experience, an enhanced operating structure was introduced at the Member Care Centre. This adjustment sought to refresh the image of the Centre and to heighten the sales and service skills of the team members. This has been generating great results, as the Unit has been meeting and exceeding the monthly targets. Products, Services and Promotions As we sought to preserve our connection with our Members, communication became a critical factor during the period. We knew that the pandemic was having a devastating impact on some of our members and that they needed assistance and assurance. As such, ensuring that our Members knew that our Member Assistance Programme was available was a top priority. With the pandemic containment guidelines in place, we had to change the modus operandi of our Member Engagement activities. We adapted quickly, by embarking upon digital strategies through our monthly Webinars under the “Feeling The Joy” theme. These webinars served as a tool for reinforcing hope, providing peace of mind and also financial education. In addition, relative to business development activities, virtual modalities were also employed with members who were more comfortable with those approaches.

Emphasis was placed on our Alternate Channels as we encouraged our Members to utilize these modalities more and encouraged them to remain safe. Some of the channels included our internet banking platform, iTransact, Access Plus Debit Cards, Bill Express Payment Services, as well as Electronic Bank Transfers. These channels proved to be extremely convenient for our members as we experienced numerous restrictions which directly affected the number of persons we could accommodate in our branches at any given time. Throughout the year, we continued to promote our products and services, as we launched several initiatives and campaigns to help our members. These included: 1. The Member Assistance COVID-19 Relief Programme - Numerous offerings were extended to our members to help to buffer the many challenges that were being experienced. These included waivers, moratoria and other options. 2. The Summer Reset Loan Promotion - This promotion offered Members the opportunity to get back on track and reset their plans through our loan offerings.

Management Discussion & Analysis 3. Brighter Days Christmas Loan Sale - As we continued to promote our loan products, special features were added to further assist our members during the sale period as we tried to brighten their Christmas holidays. 4. The Family Indemnity Plan & The Family Critical Illness Insurance Plan - Various promotional strategies were engaged in as we encouraged our members to participate in these oﬀerings which oﬀered them peace of mind. Member Engagement Activities Great emphasis was placed on connection as we sought to ensure that we kept our Members engaged during this time of social distancing. Due to the limitations of face to face contact, more attention was placed on our digital strategies via social media, email marketing as well as the use of the webinars. Civil Service Week Civil Servants of The Year Awards - We were once again pleased to sponsor the 2020 Civil Servants of The Year Awards. The winners from the three categories awarded were: NAME

CATEGORY

DEPARTMENT

Mrs. Juliet Lakeman

Management

Ministry of Education, Youth & Information

Mr. Stephen Williams

Middle Management

Ministry of Justice

Ms. Marie Hall

Technical Support

Ministry of Education, Youth & Information

Credit Union Week - Member Appreciation Day activities were held in all branches on International Credit Union Day, on October 15, 2020, under the theme “Inspiring Hope for a Global Community”. A special Webinar was hosted for our Members on the same day under the theme “Inspiring Hope” and feedback received indicated that members were appreciative of the helpful tips provided, which would help them to navigate the uncertainties and difficulties of the pandemic. FHC Christmas Show - The FHC Christmas Show was held virtually on Sunday December 20, 2020. This was a success and saw both team members and friends of FHC performing. Community Outreach Activities - As we continued to assist numerous groups who were affected during the pandemic, assistance was provided through care packages to some students on the University of The West Indies Campus as well as some communities in Kingston and St. Catherine. As the University of The West Indies went into remote learning we were once again able to assist students with data packages so that they could access online platforms to sit their final and end of semester examinations. OUR PEOPLE AND CULTURE Our Resilience Transformational, life-changing, surreal and challenging are just some of the adjectives used by our team members to describe the year 2020. As a work family, we faced many challenges, particularly as a result of the COVID-19 pandemic. Nevertheless, we quickly adapted to the demands of the

Management Discussion & Analysis new work environment and implemented several initiatives to ensure our team remained safe, focused, engaged and productive, closing out yet another successful year. 2020 began with our high-energy Gladiator themed Blast-Oﬀ “Greatness In Action” which challenged our team to be bold, resilient and fearless and, throughout the year, the team demonstrated their true “Gladiator-grit” working through lockdowns and transitioning to new modes of work. FHC Civil Servants of the Year Awards Posing with their many awards are the Civil Servants of the Year, at front (l-r) Management Category-Juliet Lakeman; Middle Management Category - Marie Hall and Technical Category-Stephen Williams. Sharing in the moment are (l-r) FHC Board of Directors, Leodis Douglas, O’Neil W. Grant and CEO of FHC, Roxann Linton and at the back other Nominees share the spotlight.

Our Team Engagement •

Team Member Experience (TME): A major highlight during 2020 was the Zoom Party launch of our Team Member Experience (TME) initiative in July. This initiative focuses on providing a positive experience at work for our team members as we create an environment where they feel motivated and engaged. The Team Member Experience is built on four (4) tenets: Engendering a culture of RESPECT; RECOGNITION of team members who go the extra mile; Provision of REWARD for excellent performance and; Getting team members READY for Work in a holistic manner.

• Thoughtful Thursdays: Conversations with the CEO With the restrictions on physical movement, the team remained connected through scheduled conversations with the CEO over a six (6) week period. During the sessions, team members were able to discuss matters of importance to them and ask questions regarding the business. This engaging initiative was well received and appreciated by the team. •

COVID-19 Pandemic Sensitization In addition to on-going COVID-19 pandemic bulletins aimed at keeping our team informed, we hosted a sensitization session with a medical expert to educate team members on the facts of the virus and reinforce the need for compliance with established health protocols in our workspace. The session was well supported by team members as they got an opportunity to express their concerns and receive information that helped them to protect

Management Discussion & Analysis themselves and their families. •

Our Quarterly Themed Fridays continued despite our inability to gather physically and a fun Four Thursdays of Christmas activity was hosted in lieu of the usual end of year party. These events were beneﬁcial in keeping team spirits high and generating camaraderie.

Our Learning and Development In complying with physical distance measures to safeguard our team, all planned face-to-face training programmes were cancelled early in the year as we embraced new modes of learning. We capitalized on the opportunity to utilize various electronic platforms to deliver impactful and cost-eﬀective training such as: • A Self-Care Webinar, “Staying Grounded in Turbulent Times”, was hosted to equip our people leaders with the techniques to better navigate and care for themselves and their teams during the pandemic; • An all-team training and simulation exercise on Earthquake Awareness & Preparedness for our Safety Wardens and team members; • Data Protection Sensitization webinars to prepare team members to comply with the impending regulations; •

Virtual workshop on Developing Others Through Coaching & Mentoring for emerging leaders as part of our Succession Plan and

• Information Technology Security Awareness training to mitigate our exposure to IT Security risks. Our Online Learning platform was also fully utilized throughout the lockdowns and quarantines as team members seized the opportunity to complete self-development courses to ensure their minds remained active and engaged. Our Corporate Social Responsibility •

Developing Young Minds Through our annual Summer Employment Programme, the Credit Union continued to offer valuable work experience to students enrolled at secondary and tertiary institutions. To comply with physical distance protocols, we were only able to accommodate 17 students over the summer period, nevertheless, both students and the departments benefitted greatly from the programme. In February, we partnered with Junior Achievement Jamaica (JAJ) to host the “Manager For A Day” initiative where we welcomed students from the Holy Childhood High School and exposed them to different career options. The initiative was beneficial to the students and also our team members who acted as Mentors for the day. We also participated in the University of the West Indies’ Career Awareness Month by helping to prepare prospective graduates for job interviews as they enter the world of work. The Credit Union continues to support activities that positively impact young minds.

Management Discussion & Analysis Manager for A Day 2020 Teachers and students of the Holy Childhood High School take a commemorative photo with CEO of First Heritage Co-operative Credit Union, Roxann Linton (center) after learning what it takes to be “Manager for a Day”.

• Care and Compassion Throughout the year, team members continued to contribute to the St. Stephen’s Feeding Programme via salary deductions as we encouraged a spirit of compassion. Although signiﬁcantly curtailed, again because of the pandemic and gathering limits, we were able to provide Care Packages and Lunches to the less fortunate during the Easter and Christmas seasons. Team members also participated in a Talent Exposé & Christmas Charity Event to raise funds for (3) charities of their choice, thereby living our Vision and Mission of enhancing the communities in which we operate.

Indeed, 2020 had its challenges, however as true Gladiators, our team bravely weathered the upheavals and we ended the year on a strong note. No doubt, 2021 will continue to be challenging, however, we remain committed to promoting a positive team member experience as we attract, develop and engage a team of professionals who see FHC as a place where they will be respected, recognized, rewarded and ready to embrace opportunities while advancing the business of the Credit Union. OUR STRONG RISK CULTURE Loan Risk and Credit Administration During 2020, as the pandemic heightened and we began to see the impact on our borrowing members, we were challenged to employ analytical and problem-solving skills to develop successful strategies and approaches, most of which have been incorporated in an interim Credit Policy. The strategies included proactively communicating with our borrowing members, to determine the impact of the pandemic on their salaries, businesses, and industries. Moratoria were widely granted as the main tool to address temporary setbacks, with consolidations and loan restructuring being extended as longer-term solutions. “People Helping People” remained at the heart of our actions.

Management Discussion & Analysis The Centralized Loans Unit doubled their efforts and strategized in ways that saw an overall improvement in meeting the company standards and service quality requirements both to our external and internal customers. The Credit Administration and Loan Risk team continued to focus on enhancing processes to improve turn-around time. The Collections Team embraced the challenge of maintaining delinquency below a projected 10%, ending the year at 8.79%. The Loan Portfolio increased from $9.25 Billion to $9.77 Billion, an increase of 5.62% during the year. The growth was mainly influenced by increases in the Motor Vehicle (18.44%), One & Move Taxi (39.80%), and DBJ Secured (24.90%) loans. We continue to encourage our Members who may be facing difficulties in meeting their loan obligations to seek dialogue with us so that solutions may be formulated. Enterprise Risk Management We remain committed to the principles of sound business practices to create and build value for our members and ensure growth and sustainability of the Credit Union. We recognize that risk management is an integral part of good management practice and is necessary for us to achieve our Vision and Mission. By taking a disciplined approach to risk management, we seek to ensure that our members continue to have confidence in us. In 2020, we undertook a number of activities to enhance our risk management capacity. These included: 1. Enhancement of the Enterprise Risk Management Framework to better facilitate the identification, prioritization and management of risks in a coordinated manner; and 2.

Improved systems of control to facilitate the mitigation or management of risk. The key objectives of our Enterprise Risk Management Framework are: 1. Oversight: To identify, manage and monitor all critical risks under a holistic approach consistent with Board approved risk appetite; 2. Accountability: To assign ownership of risk to Management who shall be responsible for identifying, evaluating, mitigating and reporting risk exposures; and 3. Assurance: To provide reasonable assurance to the Board, Management, Members and Stakeholders that risk is being appropriately managed within deﬁned levels so as to bring value to the Credit Union.

We have identiﬁed 12 key enterprise risks inherent to the activities and business processes of FHC under the risk headings: AML-Compliance, Information Technology, Operational, Credit and Liquidity. Accountability for managing each risk has been assigned to the relevant member of the executive management team. Our overall approach to managing risk is to balance business opportunities with sound risk discipline in order to achieve the mandate of our Vision and Mission. Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) We believe that it is crucial for our team to have a thorough understanding of anti-money laundering and counter ﬁnancing of terrorism requirements. Our culture supports this belief through ongoing training and development to ensure customer due diligence and reporting of transactions that are suspected to involve illicit assets or terrorist activities.

Management Discussion & Analysis In 2020, we continued a number of activities to enhance our AML/CFT capacity. These included: •

Implementation of new systems and process, inclusive of world class Regulatory and Financial Technology to comply with AML/CFT risks; and

•

Review of existing AML/CFT controls.

Emergency Management and Business Continuity Plan In 2020, we undertook a number of activities to enhance our disaster recovery efforts. This included commencing the development of processes to ensure the continuity of our business operations in the event of any significant interruptions to buildings, facilities, systems or employees with the ultimate objective of efficiently restoring the business operations to predisaster levels. The key deliverables of the project include the documentation of the following procedures: 1. Emergency Response Plan; 2. Business Continuity Plan; and 3. Information Technology Disaster Recovery Plan. Foreign Account Tax Compliance Act (FATCA) During 2020, FHC Investments Limited maintained compliance with the reporting obligations under FATCA. FOCUS ON OPERATIONAL EFFICIENCY Support was provided by the Disbursement Unit which played an integral part in the Credit Union in ensuring that the loans were disbursed in an efficient and timely manner. The Securities Unit continued to employ a robust follow-up system aimed at ensuring that our loan collaterals are intact and current. Some progress was made in this area; however, we still experienced challenges with members providing the documents upon request.

With the passing of the Data Protection Act, we commenced work on our Data Protection framework to ensure compliance with the impending Regulations. Significant work was also done in reviewing our Business Continuity Plan to ensure that our business recovery process is most effective and this was actively demonstrated during the period. The Credit Union’s Information Technology Infrastructure saw systems being put in place as well as upgraded to mitigate data and system breaches. Preparations also started for the implementation of the new core banking system Smart Universa in 2021. OUTLOOK Although the COVID-19 pandemic is still very active, we remain hopeful that this will be curtailed soon through the roll out of the vaccination programme. The impact of the pandemic will continue to affect our economic and health sectors, therefore impacting us all. While challenges will persist in the new year, as 2020 demonstrated, FHC has the strength to adapt and will remain focused on delivering value for members, team members and our communities.

Management Discussion & Analysis With foresight and vision, we will continue to assess our organization to ensure that it remains strong and sound, as well as assist our Members throughout the challenges they may face. As the ﬁnancial landscape changes, we continue to prepare and position ourselves for the anticipated oversight of the Bank of Jamaica and the Data Protection legislation. Remaining connected to our membership is a core objective of the Credit Union. Our Member at The Centre Mantra will continue to assist us as we engage our Members so as to become more aware of their needs to create value added products and services. Built on our member experience tenets of valued, connected and trust, we remain committed in ensuring that our Members have access to all the opportunities aﬀorded to them through their Credit Union. With this we look positively towards the future guided by the philosophy of “People Helping People”. GRATITUDE We are extremely grateful for the year 2020, despite all the challenges it brought. We would like to thank all of our Members, our Team Members, Board of Directors and Volunteers who worked tirelessly together to ensure that the year was a success. Our Credit Union is built on resilience and with purposeful planning and execution we will be able to prevail.

_______________________________ Roxann Linton Chief Executive Oﬃcer

Treasurer’s Report Overview It is with pleasure that I present the Treasurer’s Report to the 9th Annual General Meeting of the First Heritage Co-operative Credit Union Limited (FHCCU) for the year ended December 31, 2020. The audited Financial Statements in this Annual Report comprise separate financial statements for the Credit Union and consolidated financial statements for the Group, (which comprises the Credit Union and its wholly-owned subsidiary, FHC Investments Limited (FHCIL)). Summary of Financial Performance For the financial year 2020, the surplus position of FHC was significantly impacted by the economic fall-out of the COVID-19 pandemic. Notwithstanding, FHC realized a surplus of $106.20 Million as compared to prior year surplus of $273.44 Million, representing a 61.16% or $167.24 Million decrease from the prior year. The subsidiary FHCIL, realised a loss of $5.23 Million after taxes as compared to prior year’s profit of $24.07 Million. This year’s performance resulted in an increase in the Accumulated Surplus of $73.69 Million for the Credit Union. The continued investment in our Sales and Service Improvement Initiative has provided some buffer to the decreased appetite of our members for loan products resulting from the economic impact of the COVID-19 pandemic. The loan disbursement outturn, totalled $4.21 Billion relative to $4.81 Billion (12.47% decline from 2019) in an environment characterized by economic downturn and fierce competition. Our members, however, responded to the crisis with increased savings and this contributed to a favourable liquidity position. Of note, the loan quality was relatively contained as the past due ratio moved from 8.11% to 8.79%. The graphs below demonstrate the Credit Union’s Revenue and Net Surplus/Deficit performance for the last five years.

Treasurer’s Report

As at December 31, 2020, FHC Credit Union’s Total Assets of $15.15 Billion represented an increase of 10.91% over prior year’s $13.66 Billion, while the Group had Total Assets of $15.24 Billion as compared to $13.77 Billion (2019) or a 10.69% increase.

The Group’s Net Loan portfolio increased by 5.36% or $477.57 Million over the prior year (2019) from $8.90 Billion to $9.38 Billion. The Group’s Liquid Assets and Investments also grew by $875 Million moving from $3.73 Billion (2019) to $4.60 Billion (2020) as more funds became available based on our signiﬁcant deposit intake. The graph below indicates the Credit Union’s Investments, Loans and Total Assets for the period 2016 -2020:-

Treasurer’s Report Other Investments, Loans and Total Assets Trend

Members’ Deposits increased by $1.38 Billion or 13.01% from $10.57 Billion (2019) to $11.95 Billion (2020). The combination of our highly competitive interest rates oﬀered and the increases in savings by our members, due to the uncertainty of the pandemic, was the primary contributor to the increase. The graph below indicates the Deposit trend over the period 2016- 2020.

Economic Overview Since the COVID-19 pandemic arrived in Jamaica, it has created levels of uncertainty and anxiety leading to social and economic disorder. Estimates from Statistical Institute of Jamaica indicate that for ﬁscal year 2020 the Jamaican economy contracted and had a decline of 9.9% in real Gross Domestic Product over 2019. This was after seven years of consecutive growth. Despite the challenges, the outlook is positive as the vaccination process has started worldwide restoring some amount of conﬁdence.

Treasurer’s Report The Jamaican Dollar depreciated against the United States Dollar by 7.6% (3.8% prior year) in trading year over year ending 2020 at $142.65 ($132.57 prior year). The decline in the tourism sector created a shortfall in supply of United States Dollar and caused the BOJ to intervene in the markets offering liquidity to the market through their FX Intervention Trading Tool (B-FXITT). The exchange rate traded at $151.27 in August 2020. The inflation rate for the calendar year ended at 6.4% and was, for the most part, within the targeted inflation rate of 4% to 6%. The 90-day benchmark Treasury-Bill rate started the year at 1.32%, and moved downwards to 0.77% at year end. The BOJ indicative benchmark policy interest rate remained at 0.5% as at December 2020 which was similar to December 2019 and represented their accommodative policy aimed at supporting economic recovery and inflation control. The unemployment rate as at October 2020 stood at 10.70% compared to 7.20% in October 2019. Regulatory Environment In anticipation of the transition to direct supervision of the Credit Unions by the BOJ, we continue to make the requisite preparation through policy and procedural reviews. As a specified financial institution, the BOJ continues to have oversight of our activities by reviewing our financial reports and conducting periodic audits. Our regulator, the Jamaica Co-operative Credit Union League Limited continues to monitor our performance against International Credit Union Industry financial benchmark standards for safety and soundness (PEARLS). Our performance is also compared to other prudential standards by the BOJ. FHC’s Regulatory Institutional Capital to Total Assets ratio stood at 11.19% as at December 31, 2020 (11.97% 2019), compared to the minimum PEARLS Standard of 8.00%, and a 6.00% minimum requirement for the Bank of Jamaica. Operating Results The social and economic effect of the pandemic on our members and our proactive response by offering concessions to our members impacted our earnings. This coupled with the implementation of infection prevention and control measures and the eroding margins also affected our results.

The Credit Union’s Key Results for the year 2020 were: •

Interest Income of $1.54 Billion (2020) increased by $109.24 Million or 7.60% from $1.44 Billion (2019), this was primarily due to the growth in the loan portfolio. Increased amounts available for Investments over the prior year also contributed to the increase.

•

Non-Interest Income of $227.40 Million (2020) decreased by $134.94 Million or 37.24% from $362.34 Million (2019). This decrease was primarily due to a $45.10 Million decline in our equity stock values in 2020 ($55.40 Million gain in 2019), as the local Stock market suffered a 22.42% decline which was significantly due to the effects of the COVID-19 pandemic.

See graphical depiction of the Credit Union’s performance in Interest Income and Non-Interest Income for 2019 - 2020 below.

Treasurer’s Report

•

Interest Expense increased from $215.10 Million (2019) to $224.59 Million (2020). This increase corresponds to the signiﬁcant take up of the Term Deposits which are our primary source of funding. The Credit Union continues to oﬀer some of the most attractive interest rates available to our members on savings products.

•

Operating Expenses increased by $21.34 Million or 1.72%, from $1.24 Billion (2019) to $1.26 Billion (2020), however our Operating Expenses to Average Asset ratio decreased to 8.76% from 9.59% in 2019.

•

Past Due loans (30 days and over) as a percentage of our Gross Loan portfolio was 8.79% (vs. 8.11% as at December 2019).

•

Provision for Loan Losses for the year, net of recoveries increased to $173.98 Million in 2020 from $62.41 Million in 2019. It became necessary to increase our provisions as the economic circumstances of some of our membership worsened, increasing the probability of loan default. The provisioning for loan losses continued to be adequate to cover potential losses.

•

Accumulated surplus available before distributions increased to $280.25 Million from $206.55 Million, an improvement of $73.69 Million over 2019.

Treasurer’s Report Conclusion The Credit Union’s performance in 2020 is commendable, having had to contend and respond to the eﬀects of the pandemic on our stakeholders both internally and externally. Our Capital and Liquidity positions remained adequate and above benchmark ratios at the ﬁnancial year end 2020 and our performance is directly correlated to our commitment to the execution of our strategies with the ethos of always putting our Members At The Centre. The year 2021 marks the start of the next stage of our strategic period 2021-2023 in aspiring to our 2040 Vision and we remain positive and resolute, despite the challenges. As always, the Credit Union’s success is dependent on the continued support of you our Members, our dedicated Team Members and our Volunteers. Acknowledgements It has been an honour and privilege to serve you as Treasurer. Collectively as Board of Directors and Management we are grateful to you our members for your continued support of our Credit Union and trust that it will only blossom. We acknowledge the work of our Auditors, KPMG, for their professional execution and another timely completion of our audit. To all our valued stakeholders including, especially our Volunteers, Managers and Team Members who consistently apply themselves to the Credit Union’s success, I thank you. We give thanks, God bless you.

__________________________ Cranston Ewan Treasurer

Treasurer’s Report FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED THE TREASURER'S REPORT 31-Dec-20 2020

2019

INCREASE (DECREASE)

$' 000

$' 000 4,026,664 55,433 7,867,300 178,569

WE THE MEMBERS OWN

ORDINARY SHARES INTEREST ACCRUED ON DEPOSITS ORDINARY DEPOSITS OTHER DEPOSITS

12,127,966

3,653,408

373,256

49,173

6,260

996,160

6,871,140 179,102

(533)

10,752,823

1,375,143

845,389

36,425

WE ALSO OWN 881,814 1,391,762 280,247 14,681,789

STATUTORY & LEGAL RESERVES RETAINED EARNINGS & OTHER RESERVES UNDISTRIBUTED SURPLUS/(LOSS)

MAKING THE GRAND TOTAL OWNED BY MEMBERS

1,392,177

(415)

(0)

206,553

73,694

13,196,942

1,484,847

8,904,045

477,570

785,261

22,474

86,439

34,543

WE USED THIS MONEY IN THE FOLLOWING MANNER 9,381,615

LOANS TO US AS MEMBERS

807,735

OTHER RECEIVABLES

120,982

CASH IN HAND AND AT BANK

372,289

TO PURCHASE ASSETS

314,656

57,633

4,463,462

INVESTMENT IN OTHERS

3,564,155

899,307

7,059

TO PURCHASE INVENTORIES

15,153,142

7,991

(932)

(12)

13,662,547

1,490,595

471,352

LESS:AMOUNT WE OWED TO OTHERS AT YEAR END

465,605

5,747

14,681,790

AGREEING OUR NET INVESTMENT WITH OUR GRAND TOTAL OWNED

13,196,942

1,484,848

Treasurer’s Report

FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED THE TREASURER'S REPORT 31-Dec-20

2020

OUR INCOME WAS EARNED FROM

INCREASE (DECREASE)

2019

INTEREST ON

1,411,684 134,211

MEMBERS LOANS INTEREST ON OTHER INVESTMENTS

1,334,450

77,234

102,206

32,005

179

5,063

RENTAL INCOME

4,884

222,341

OTHER INCOME

357,458

(135,117)

(38)

1,798,998

(25,699)

(1)

1,773,299

OUR COST TO OPERATE THE CREDIT UNION WERE

1,147,324

ADMINISTRATION

1,126,513

20,811

70,818

ESTABLISHMENT

63,921

6,897

224,594

FINANCIAL

215,098

9,496

177,110

ALLOWANCE FOR LOAN LOSS & INVESTMENT

65,754

111,356

169

REPRESENTATION & AFFILIATION

50,770

44,403 1,664,249 109,050

1,522,056 LESS: GIVING A SURPLUS(LOSS) OF

(6,367)

(13)

142,193

276,942

(167,892)

(61)

2,500 1,000

(650)

(65)

54,688

(33,448)

(61)

218,754

(133,794)

(61)

FROM WHICH WE SET ASIDE

2,500 350

HONORARIA DONATION

21,240

20% STATUTORY RESERVE

84,960

LEAVING A NET SURPLUS OF TO WHICH WE ADD THE PREVIOUS RESTATED UNDISTRIBUTED

206,553

SURPLUS/(LOSS) CARRIED OVER

44,737

161,816

362

11,265

LESS: TRANSFER TO RESERVES

56,938

(45,673)

(80)

206,553

73,695

MAKING A GRAND TOTAL UNDISTRIBUTED SURPLUS /(LOSS) AVAILABLE FOR DISTRIBUTION

280,248

BY MEMBERS IN THE AGM

Report of the Treasurer

The Family Indemnity Plan

Our family is protected with the BEST funeral insurance plan! CHOOSE FROM 7 PLAN OPTIONS, NO MEDICAL PLANS

MONTHLY PREMIUM

INDIVIDUAL BENEFITS

Plan A

$422.40

$80,000

Plan B

$633.60

$120,000

Plan C

$792.00

$150,000

Plan D

$1320.00

$250,000

Plan E

$2112.00

$400,000

Plan F

$3432.00

$650,000

Plan G

$5280.00

$1,000,000

Now you can also pay your FIP monthly premium at any location or online: paymaster-online.com

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CONDITIONS APPLY

CUNA M UTUAL GROUP

Financial Statements

Financial

Statements

Financial Statements

First Heritage Co-Operative Credit Union Limited Financial Statements December 31, 2020 61

Financial Statements

KPMG Chartered Accountants P.O. Box 436 6 Duke Street Kingston Jamaica, W.I. +1 (876) 922 6640 firmmail@kpmg.com.jm INDEPENDENT AUDITORS’ REPORT To the Registrar of Co-operative Societies FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Report on the Audit of the Financial Statements Opinion We have audited the financial statements of First Heritage Co-operative Credit Union Limited (“the Credit Union”), comprising the separate financial statements of the Credit Union and the consolidated financial statements of the Credit Union 66to to 92, 153 which and its subsidiary (collectively “the Group”) set out on pages 5 comprise the Group’s and Credit Union’s statements of financial position as at December 31, 2020, the Group’s and Credit Union’s 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 and the Group as at December 31, 2020, and of the Group’s and Credit Union’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and the Co-operative 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 International Code of Ethics for Professional Accountants including International Independence Standards (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.

KPMG, a Jamaican partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

R. Tarun Handa Cynthia L. Lawrence Nigel R. Chambers Wilbert A. Spence Rajan Trehan Nyssa A. Johnson Rochelle N. Stephenson Norman O. Rainford W. Gihan C. de Mel Sandra A. Edwards

Financial Statements

Page 2 INDEPENDENT AUDITORS’ REPORT (CONTINUED) To the Registrar of Co-operative Societies FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Report on the Audit of the Financial Statements (Continued) Other information Management is responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditors’ report thereon. The annual report is expected to be made available to us after the date of this auditors’ report. Our opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with IFRS 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. Those charged with governance are responsible for overseeing the Credit Union’s financial reporting process. 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.

Financial Statements

Page 3 INDEPENDENT AUDITORS’ REPORT (CONTINUED) To the Registrar of Co-operative Societies FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Report on the Audit of the Financial Statements (Continued) Auditors’ Responsibilities for the Audit of the Financial Statements (Continued) 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 consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism 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.

Financial Statements

Page 4 INDEPENDENT AUDITORS’ REPORT (CONTINUED) To the Registrar of Co-operative Societies FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Report on the Audit of the Financial Statements (Continued) Auditors’ Responsibilities for the Audit of the Financial Statements (Continued) 

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance 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. Report on additional matters as required by the Co-operative Societies Act In our opinion, proper accounting records have been maintained and the financial statements, which are in agreement therewith are correct, duly vouched and in accordance with the provisions of the Co-operative Societies Act.

Chartered Accountants Kingston, Jamaica March 31, 2021

Financial Statements FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Consolidated Statement of Surplus or Deficit and Other Comprehensive Income December 31, 2020 (Expressed in Jamaica dollars unless otherwise indicated) Notes

2020 $’000

2019 $’000

1,411,684 140,692

1,334,450 110,894

1,552,376

1,445,344

197,062 12,946 4,140 9,155 1,291

189,102 10,976 5,255 8,086 1,699

INTEREST INCOME CALCULATED USING THE EFFECTIVE INTEREST METHOD Loans and advances Investments INTEREST EXPENSE Members’ deposits External credits Deferred shares Members’ voluntary shares Lease liabilities

6 26(a)

224,594 NET INTEREST INCOME Impairment losses on investments Loan impairment losses, net of recoveries

16(c)

NET INTEREST INCOME AFTER IMPAIRMENT LOSSES ON LOANS AND INVESTMENTS NON-INTEREST INCOME Fees and commission income Net (losses)/gains from trading Cambio operations Dividend income Other income NET INTEREST AND OTHER INCOME OPERATING EXPENSES

1,230,226 ( 2,183) ( 62,407)

1,150,027

1,165,636

(

294,518 56,403) 9,333 4,103 11,942

314,567 98,928 18,918 5,552 9,089

263,493

447,054

1,413,520 (1,315,765)

1,612,690 (1,290,640) 322,050 ( 2,500) ( 1,000) (

SURPLUS Honoraria Donations

11(a) 11(b)

( (

97,755 2,500) 350)

SURPLUS BEFORE TAXATION Taxation charge

(

94,905 9,074)

SURPLUS FOR THE YEAR OTHER COMPREHENSIVE INCOME (OCI) Item that will never be reclassified to surplus or deficit: Remeasurement of employee benefits asset Item that may be reclassified to surplus or deficit: Net change in fair value of investment securities measured at fair value through OCI, net of tax

21(g)

Total other comprehensive income TOTAL COMPREHENSIVE INCOME FOR THE YEAR

The accompanying notes form an integral part of the financial statements.

215,118

1,327,782 ( 3,773) ( 173,982)

318,550 5,896)

85,831

312,654

200

20,065

2,956

(

4,615)

3,156

15,450

88,987

328,104

Financial Statements FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Consolidated Statement of Financial Position December 31, 2020 (Expressed in Jamaica dollars unless otherwise indicated) Notes

2020 $’000

2019 $’000

13 14 15 16

2,019,265 2,580,044 9,381,615

7,971 1,551,039 2,172,333 8,904,045

13,980,924

12,635,388

169,600 163,781 7,416 20,287 372,379 42,104 243,577 244,278 67

99,783 147,001 8,368 22,724 314,656 42,114 257,546 234,100 10,483

1,263,489

1,136,775

15,244,413

13,772,163

ASSETS EARNING ASSETS Liquid assets - deposits Resale agreements Financial investments Loans to members Total earning assets NON-EARNING ASSETS Cash in hand and at bank Accounts receivable Inventories Withholding tax recoverable Property, plant and equipment Right-of-use assets Intangible assets Employee benefits asset Deferred tax asset

17 18 19 20 21(a) 22

Total non-earning assets TOTAL ASSETS

The accompanying notes form an integral part of the financial statements.

Financial Statements FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Consolidated Statement of Financial Position (Continued) December 31, 2020 (Expressed in Jamaica dollars unless otherwise indicated) Notes

2020 $’000

LIABILITIES AND EQUITY INTEREST BEARING LIABILITIES Members’ deposits Members’ voluntary shares Deferred shares Lease liabilities External credits

23 24 25 26 27

Total interest bearing liabilities NON-INTEREST BEARING LIABILITIES Accounts payable Tax payable Withholding tax payable

7,922,733 4,026,664 178,569 45,021 201,641

6,920,313 3,653,408 179,102 44,172 197,347

12,374,628

10,994,342

269,231 4,744

261,765 3,106 9,660

273,975

274,531

12,648,603

11,268,873

1,954,426 316,152 325,232

1,892,266 339,118 271,906

2,595,810

2,503,290

15,244,413

13,772,163

Total non-interest bearing liabilities TOTAL LIABILITIES EQUITY Institutional capital Non-institutional capital Accumulated surplus

29 30

Total equity TOTAL LIABILITIES AND CAPITAL

2019 $’000

The financial statements on pages 566 to 92 were approved by the Board of Directors on to 153 March 31, 2021 and signed on its behalf by:

_________________________ Leodis Douglas

Director

_______ ____________________ Director Balvin Vanriel

The accompanying notes form an integral part of the financial statements.

Total other comprehensive income/(loss)

Total comprehensive income/(loss)

57,149

13,487

23,166

13,259 548,061

333,753

1,926 21,240 -

13,259 -

220,753

25,000

195,753

831,521

Institutional capital Retained Business earnings combination reserve reserve $’000 $’000 [note 29(c)] [note 29(d)]

The accompanying notes form an integral part of the financial statements.

Balances at December 31, 2020

Transactions with owners and movements in reserves Permanent shares dividend Issue of permanent shares Entrance fees 20% statutory reserve transfer Transfer to retained earnings reserve Transfer to employee benefits asset reserve Decrease in loan loss reserve

Total comprehensive income

Total other comprehensive income

Other comprehensive income: Remeasurement of employee benefits asset Revaluation of FVOCI investment, net of taxation

524,895

320,494

2,461 54,688

13,487 -

Surplus for the year

Balances at December 31, 2019

Transactions with owners and movements in reserves Permanent shares dividend Issue of permanent shares Entrance fees 20% statutory reserve transfer Transfer to employee benefits asset reserve Increase in loan loss reserve

Other comprehensive income: Remeasurement of employee benefits asset Revaluation of FVOCI investment, net of taxation

467,746

307,007

Statutory reserve $’000 [note 29(b)]

Surplus for the year

Balances at December 31, 2018

Permanent share reserve $’000 [note 29(a)]

Consolidated Statement of Changes in Equity Year ended December 31, 2020 (Expressed in Jamaica dollars unless otherwise indicated)

FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act)

20,338

735

735 -

19,603

334

334 -

19,269

Capital and other reserves $’000 [note 29(e)]

1,954,426

62,160

13,994 1,926 21,240 25,000

1,892,266

70,970

13,821 2,461 54,688

1,821,296

Total $’000

244,278

10,178

10,178 -

234,100

27,786

27,786 -

206,314

Employee benefit asset reserve $’000 [note 30(a)]

1,287

(36,100)

37,387

70,587

2,956

67,631

(4,615)

72,246

Non-Institutional capital Loan loss Investment reserve reserve $’000 $’000 [note 30(b)] [note 30(c)]

316,152

( 25,922)

10,178 ( 36,100)

2,956

339,118

65,173

27,786 37,387

( 4,615)

278,560

Total $’000

325,232

( 32,705)

( 10,178) 36,100

( 12,387) ( 21,240) ( 25,000)

86,031

200

85,831

271,906

(131,691)

( 27,786) ( 37,387)

( 11,830) ( 54,688)

332,719

20,065

312,654

70,878

Accumulated surplus $’000

(

2,595,810

3,533

12,387) 13,994 1,926 -

88,987

3,156

2,956

200

85,831

2,503,290

4,452

11,830) 13,821 2,461 -

328,104

15,450

4,615)

20,065

312,654

2,170,734

Total $’000

Financial Statements

Financial Statements FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Consolidated Statement of Cash Flows December 31, 2020 (Expressed in Jamaica dollars unless otherwise indicated) Notes CASH FLOWS FROM OPERATING ACTIVITIES Surplus for the year Adjustments for: Interest income Interest expense Depreciation and amortisation Capital work in progress write-off Impairment losses on loans to members Impairment losses on investments Employee benefits asset Unrealised exchange gains Unrealised fair value gains on FVTPL investments Tax expense Operating cash flows before movements in working capital Changes in operating assets and liabilities Loans to members Other assets Employee benefits asset contributions Members’ deposits Members’ voluntary shares Other liabilities

2020 $’000 85,831

18,19,20 18 16(c) 21(f) 12(a)

21(c)

Interest received Tax paid Interest paid

( 1,445,344) 215,118 57,541 1,002 62,407 2,182 12,262 ( 5,918) ( 75,313) 5,896

(

923,052)

( 857,513)

( 656,869) ( 13,390) ( 19,098) 996,160 373,256 2,550

( 922,950) ( 2,926) ( 19,983) 612,087 355,607 32,132

( 240,443) 1,561,967 ( 3,356) ( 218,866)

( 803,546) 1,437,513 ( 212,194)

1,099,302 18

Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Issues of permanent shares Dividends paid External credits Entrance fees Lease payments

312,654

( 1,552,376) 224,594 63,150 1,465 173,982 3,773 9,120 ( 7,264) 65,599 9,074

Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment Resale agreements Liquid assets Financial investments

2019 $’000

( 90,920) ( 466,511) ( 471,262)

( 30,512) ( 545,118) 432,007 ( 432,053)

(1,028,693)

( 575,676)

(

13,994 12,387) 4,294 1,926 16,590)

(

8,763)

( 26(b)

Net cash (used)/provided from financing activities

421,773

( (

13,821 11,830) 87,313 2,461 13,371) 78,394

Net increase/(decrease) in cash and cash equivalents Cash and bank balances at beginning of year

61,846 107,754

CASH AND BANK BALANCES AT END OF YEAR

169,600

107,754

169,600 -

99,783 7,971

169,600

107,754

Comprised of: Cash in hand and at bank Deposits

The accompanying notes form an integral part of the financial statements.

(

75,509) 183,263

Financial Statements FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Credit Union Statement of Surplus or Deficit and Other Comprehensive Income Year ended December 31, 2020 (Expressed in Jamaica dollars unless otherwise indicated) Notes

2020 $’000

2019 $’000

1,411,684 134,211

1,334,450 102,206

1,545,895

1,436,656

197,062 12,946 4,140 9,155 1,291

189,081 10,976 5,256 8,086 1,699

6 26(a)

224,594 NET INTEREST INCOME Impairment losses on loan to subsidiary Impairment losses on investments Loan impairment losses, net of recoveries

16(c)

NET INTEREST INCOME AFTER IMPAIRMENT LOSSES ON LOANS AND INVESTMENTS NON-INTEREST INCOME Fees and commission income Net (losses)/gains from trading Cambio operations Dividend income Other income

OPERATING EXPENSES

1,221,558 934 ( 4,281) ( 62,407)

1,144,191

1,155,804

252,030 45,101) 9,333 4,103 7,039

276,366 55,400 18,918 5,552 6,106

227,404

362,342

1,371,595

1,518,146

(1,262,545)

(1,241,204)

(

NET INTEREST AND OTHER INCOME 9

SURPLUS Honoraria Donations SURPLUS FOR THE YEAR OTHER COMPREHENSIVE INCOME (OCI) Item that will never be reclassified to surplus or deficit: Remeasurement of employee benefits asset Item that may be reclassified to surplus or deficit: Net change in fair value of investment securities measured at fair value through OCI

215,098

1,321,301 54 ( 3,182) ( 173,982)

109,050 11(a) 11(b)

( (

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

The accompanying notes form an integral part of the financial statements.

( (

2,500) 1,000)

106,200

273,442

200

20,065

(

228)

1,233

(

28)

21,298

21(g)

Total other comprehensive (loss)/income

2,500) 350)

276,942

106,172

294,740

Financial Statements FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Credit Union Statement of Financial Position December 31, 2020 (Expressed in Jamaica dollars unless otherwise indicated) Notes

2020 $’000

2019 $’000

13 14 15 16

2,019,265 2,402,940 9,381,615 41,257

7,971 1,551,039 1,954,579 8,904,045 50,566

13,845,077

12,468,200

120,982 157,836 17,026 7,059 2,914 372,289 42,104 243,577 100,000 244,278

86,439 141,171 4,770 7,991 5,560 314,656 42,114 257,546 100,000 234,100

1,308,065

1,194,347

15,153,142

13,662,547

ASSETS EARNING ASSETS Liquid assets - deposits Resale agreements Financial investments Loans to members Loan to subsidiary Total earning assets NON-EARNING ASSETS Cash in hand and at bank Accounts receivable Due from subsidiary Inventories Withholding tax recoverable Property, plant and equipment Right-of-use assets Intangible assets Investment in subsidiary Employee benefits asset

17 31(b) 18 19 20 21

Total non-earning assets TOTAL ASSETS

The accompanying notes form an integral part of the financial statements

Financial Statements FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Credit Union Statement of Financial Position (Continued) December 31, 2020 (Expressed in Jamaica dollars unless otherwise indicated) Notes

2020 $’000

2019 $’000

23 24 25 26 27

7,922,733 4,026,664 178,569 45,021 201,641

6,920,313 3,653,408 179,102 44,172 197,347

12,374,628

10,994,342

219,946 4,744

214,426 9,660

224,690

224,086

12,599,318

11,218,428

1,954,426 319,150 280,248

1,892,266 345,300 206,553

2,553,824

2,444,119

15,153,142

13,662,547

LIABILITIES AND EQUITY INTEREST BEARING LIABILITIES Members’ deposits Members’ voluntary shares Deferred shares Lease liabilities External credits Total interest bearing liabilities NON-INTEREST BEARING LIABILITIES Accounts payable Withholding tax

Total non-interest bearing liabilities TOTAL LIABILITIES EQUITY Institutional capital Non-institutional capital Accumulated surplus Total equity TOTAL LIABILITIES AND CAPITAL

29 30

The financial statements on pages 566 to 92 were approved by the Board of Directors on to 153 March 31, 2021 and signed on its behalf by:

73 _____________________________Director Leodis Douglas

____________________________Director Balvin Vanriel

The accompanying notes form an integral part of the financial statements.

Total comprehensive income

57,149

13,487

23,166

13,259 548,061

333,753

1,926 21,240 -

13,259 -

831,521

25,000 25,000 220,753

334

831,521

195,753

20,338

735

735 -

19,603

334 -

19,269

831,521

195,753

Capital and other reserves $’000 [note 29(e)]

Business combination reserve $’000 [note 29(d)]

Retained earnings reserve $’000 [note 29(c)]

The accompanying notes form an integral part of the financial statements.

Balance at December 31, 2020

Transaction with owners and movement in reserves Permanent shares dividend Issue of permanent shares Entrance fees 20% statutory reserve transfer Transfer to retained earnings reserve Transfer to employee benefits asset reserve Decrease in loan loss reserve

Total comprehensive income

Total other comprehensive loss

Other comprehensive income: Remeasurement of employee benefits asset Revaluation of FVOCI investments

524,895

320,494

2,461 54,688

13,487 -

Surplus for the year

Balances at December 31, 2019

Transaction with owners and movement in reserves Permanent shares dividend Issue of permanent shares Entrance fees 20% statutory reserve transfer Transfer to employee benefits asset reserve Increase in loan loss reserve

467,746

307,007

Balances at December 31, 2018

Surplus for the year Other comprehensive income: Remeasurement of employee benefits asset Revaluation of FVOCI investments

Total other comprehensive income

Statutory reserve $’000 [note 29(b)]

Permanent share reserve $’000 [note 29(a)]

Institutional capital

Credit Union Statement of Changes in Equity Year ended December 31, 2020 (Expressed in Jamaica dollars unless otherwise indicated)

FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act)

1,954,426

62,160

13,994 1,926 21,240 25,000

1,892,266

70,970

13,821 2,461 54,688

1,821,296

Total $’000

244,278

10,178

10,178 -

234,100

27,786

27,786 -

206,314

Retirement benefit asset reserve $’000 [note 30(a)]

1,287

(36,100)

37,387

Loan loss reserve $’000 [note 30(b)]

228)

73,585

(

73,813

1,233

72,580

Investment reserve $’000 [note 30(c)]

Non-Institutional capital

228)

319,150

( 25,922)

10,178 ( 36,100)

(

345,300

65,173

27,786 37,387

1,233

278,894

Total $’000

200

280,248

( 32,705)

( 10,178) 36,100

( 12,387) ( 21,240) ( 25,000)

106,400

106,200

206,553

(131,691)

( 27,786) ( 37,387)

( 11,830) ( 54,688)

293,507

20,065

273,442

44,737

Accumulated surplus $’000

(

3,533

12,387) 13,994 1,926 -

106,172

28)

228)

200

106,200

2,553,824

(

4,452

11,830) 13,821 2,461 -

2,444,119

(

294,740

21,298

1,233

20,065

273,442

2,144,927

Total $’000

Financial Statements

Financial Statements FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Credit Union Statement of Cash Flows December 31, 2020 (Expressed in Jamaica dollars unless otherwise indicated) Notes CASH FLOWS FROM OPERATING ACTIVITIES Surplus for the year Adjustments for: Interest income Interest expense Depreciation and amortisation 18,19,20 Capital work in progress write-off 18 Impairment losses on loans to members 16(c) Impairment losses on loan to subsidiary Impairment losses on investments Employee benefits asset 21(f) Unrealised fair value losses/(gains) on FVTPL Investments

2019 $’000

106,200

273,442

(1,545,895) 224,594 63,127 1,465 173,982 54) ( 3,182 9,120 45,101

(1,436,656) 215,098 57,541 1,002 62,407 ( 934) 4,281 12,262 ( 55,400)

Operating cash outflows before movements in working capital

( 919,178)

(

Changes in operating assets and liabilities Loans to members Employee benefits asset Other assets Members’ deposits Members’ voluntary shares Other liabilities

( 656,869) ( 19,098) ( 15,979) 996,160 373,256 603

( 922,950) ( 19,983) 4,400 612,087 355,607 43,253

( 241,105)

( 794,543)

1,555,381 ( 218,868)

1,425,931 ( 211,039)

Interest received Interest paid Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment Resale agreements Liquid assets – short term investments Financial investments

1,095,408 18

Net cash used by investing activities

2020 $’000

CASH FLOWS FROM FINANCING ACTIVITIES Issues of permanent shares External credits Dividends paid Entrance fees Lease payments Net cash (used)/provided by financing activities

CASH AND BANK BALANCES AT END OF YEAR Comprised of: Cash in hand and at bank Deposits

( 30,512) ( 545,118) 432,007 ( 397,846)

(1,060,073)

( 541,469)

13,994 4,294 12,387) 1,926 16,590)

13,821 87,313 11,830) 2,461 13,371)

( (

Net Increase/(decrease) in cash and cash equivalents Cash and bank balances at beginning of year

The accompanying notes form an integral part of the financial statements.

( (

8,763) 26,572 94,410

420,349

( 90,807) ( 466,511) ( 502,755)

( 26(b)

866,957)

78,394 (

42,726) 137,136

120,982

94,410

120,982 -

86,439 7,971

120,982

94,410

Financial Statements FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Notes to the Financial Statements December 31, 2020 (Expressed in Jamaica dollars unless otherwise indicated) 1.

Identification First Heritage Co-operative Credit Union Limited (“the Credit Union”) is registered under the Co-operative Societies Act (“the Act”) and is domiciled in Jamaica with registered office located at 8-10 Eureka Road, Kingston, Jamaica. The Credit Union was formed following the merger of Churches Co-operative Credit Union Limited (Churches) and GSB Co-operative Credit Union Limited (“GSB”), on August 1, 2012. Effective March 1, 2015, the Credit Union merged with St. Thomas Co-operative Credit Union Limited (“STCCU”). Membership in the Credit Union is obtained by the holding of members’ shares, which should be at least one voluntary share and one permanent share. Voluntary shares are deposits available for withdrawal on demand, while permanent shares are paid in cash and invested in risk capital and are transferrable only to another member. Individual membership may not exceed 20% of the total of the members’ shares of the Credit Union. The main activities of the Credit Union are to promote thrift amongst its members by affording them an opportunity to accumulate savings and to create for them a source of credit, for provident or productive purpose at reasonable rates of interest. The Co-operative Societies Act requires, amongst other provisions, that at least 20% of the net surplus made each year by the Credit Union be transferred to a reserve fund. Section 59 of the Act provides for the exemption from income tax and stamp duty for the Credit Union. The Credit Union is a member of the Jamaica Co-operative Credit Union League (“JCCUL” or “League”). The Credit Union’s operations are located in the parishes of Kingston, St. Andrew, Clarendon, St. Catherine, St. James, St. Thomas and Manchester. The Credit Union has a wholly-owned subsidiary, FHC Investments Limited, which is incorporated and domiciled in Jamaica. Its principal activities include investment management services. The Credit Union and its subsidiary are collectively referred to as “the Group”.

Statement of compliance and basis of preparation (a) Statement of compliance: The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS).

Statement of compliance and basis of preparation (continued) (a)

Statement of compliance (continued) New and amended standards that became effective during the year Certain new and amended standards came into effect during the current financial year, The Group has assessed them and has adopted those which are relevant to its financial statements; none of which resulted in any significant impact on amounts recognised or disclosed in the financial statements. New and amended standards and interpretations that are not yet effective At the date of authorisation of these financial statements, certain new and amended standards and interpretations have been issued which were not effective for the current year and which the Group has not early-adopted. The Group has assessed them with respect to its operations and has determined that the following are relevant:

•

Amendments to IFRS 16 Leases is effective for annual periods beginning on or after June 1, 2020 and provides guidance for COVID-19 related rent concessions. The amendments introduce an optional practical expedient that simplifies how a lessee accounts for rent concessions that are a direct consequence of COVID-19. A lessee that applies the practical expedient is not required to assess whether eligible rent concessions are lease modifications, and accounts for them in accordance with other applicable guidance. The resulting accounting will depend on the details of the rent concession. For example, if the concession is in the form of a one-off reduction in rent, it will be accounted for as a variable lease payment and be recognised in profit or loss. The practical expedient will only apply if:

- the revised consideration is substantially the same or less than the original consideration; - the reduction in lease payments relates to payments due on or before 30 June 2021; and - no other substantive changes have been made to the terms of the lease. Lessees applying the practical expedient are required to disclose: - that fact, if they have applied the practical expedient to all eligible rent concessions and, if not, the nature of the contracts to which they have applied the practical expedient; and - the amount recognised in profit or loss for the reporting period arising from application of the practical expedient. No practical expedient is provided for lessors. Lessors are required to continue to assess if the rent concessions are lease modifications and account for them accordingly. The Group does not expect the amendments to have a significant impact on its financial statements.

Statement of compliance and basis of preparation (continued) (a)

Statement of compliance (continued) New and amended standards and interpretations that are not yet effective (continued) 

Amendments to IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance contracts and IFRS 16 Leases, are effective for annual accounting periods beginning on or after January 1, 2021 and address issues affecting financial reporting in the period leading up to interbank offered rates (IBOR) reform. The second phase amendments apply to all hedging relationships directly affected by IBOR reform. The amendments principally address practical expedient for modifications. A practical expedient has been introduced where changes will be accounted for by updating the effective interest rate if the change results directly from IBOR reform and occurs on an ‘economically equivalent’ basis. A similar practical expedient will apply under IFRS 16 Leases for lessees when accounting for lease modifications required by IBOR reform. In these instances, a revised discount rate that reflects the change in interest rate will be used in remeasuring the lease liability. The amendments also address specific relief from discontinuing hedging relationships as well as new disclosure requirements. The Group does not expect the amendments to have a significant impact on its financial statements.



Annual Improvements to IFRS Standards 2018-2020 cycle contain amendments to certain standards and are effective for annual periods beginning on or after January 1, 2022. Those that affect the Group’s operations are IFRS 9 Financial Instruments and IFRS 16 Leases. (i)

FRS 9 Financial Instruments amendment clarifies that – for the purpose of performing the “10 per cent test” for derecognition of financial liabilities – in determining those fees paid net of fees received, a borrower includes only fees paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf.

(ii) IFRS 16 Leases amendment removes the illustration of payments from the lessor relating to leasehold improvements. The Group does not expect the amendments to have a significant impact on its financial statements.

Statement of compliance and basis of preparation (continued) (a)

Statement of compliance (continued) New and amended standards and interpretations that are not yet effective (continued) 

Amendments to IAS 37 Provision, Contingent Liabilities and Contingent Assets is effective for annual periods beginning on or after January 1, 2022 and clarifies those costs that comprise the costs of fulfilling the contract. The amendments clarify that the ‘costs of fulfilling a contract’ comprise both the incremental costs – e.g. direct labour and materials; and an allocation of other direct costs – e.g. an allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract. This clarification will require entities that apply the ‘incremental cost’ approach to recognise bigger and potentially more provisions. At the date of initial application, the cumulative effect of applying the amendments is recognised as an opening balance adjustment to retained earnings or other component of equity, as appropriate. The comparatives are not restated. The Group does not expect the amendment to have a significant impact on its financial statements.



Amendments to IAS 1 Presentation of Financial Statements, will apply retrospectively for annual reporting periods beginning on or after 1 January 2023. The amendments promote consistency in application and clarify the requirements on determining if a liability is current or non-current. Under existing IAS 1 requirements, companies classify a liability as current when they do not have an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period. As part of its amendments, the requirement for a right to be unconditional has been removed and instead, now requires that a right to defer settlement must have substance and exist at the end of the reporting period. A company classifies a liability as non-current if it has a right to defer settlement for at least twelve months after the reporting period. It has now been clarified that a right to defer exists only if the company complies with conditions specified in the loan agreement at the end of the reporting period, even if the lender does not test compliance until a later date. With the amendments, convertible instruments may become current. In light of this, the amendments clarify how a company classifies a liability that includes a counterparty conversion option, which could be recognised as either equity or a liability separately from the liability component under IAS 32. Generally, if a liability has any conversion options that involve a transfer of the company’s own equity instruments, these would affect its classification as current or non-current. It has now been clarified that a company can ignore only those conversion options that are recognised as equity when classifying liabilities as current or non-current. The Group does not expect the amendments to have a significant impact on its financial statements.

Statement of compliance and basis of preparation (continued) (b)

Basis of measurement The financial statements are prepared on the historical cost basis, except for the inclusion of certain investments at fair value and retirement benefit asset which is recognised as plan assets less the present value of the deferred benefit obligation. The methods used to measure and value investments are set out in note 3(g)(v) and 5(e). The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. Although these estimates are based on managements’ knowledge of current events and actions, actual results could differ from those estimates. 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.

(c)

Basis of consolidation A subsidiary is an entity controlled by the Group. The Group controls an entity when it is exposed to, or has variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiary are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary and any related components of equity. Any resulting gain or loss is recognised in surplus or deficit. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of the Credit Union’s subsidiary are consistent with the policies adopted by the Group.

(d)

Functional and presentation currency These financial statements are presented in Jamaica dollars, which is the functional currency of the Group, and are expressed in thousands of dollars unless otherwise stated.

(e)

Comparative information: Wherever necessary, the comparative figures are reclassified to conform to current year’s presentation.

Significant accounting policies (a)

Business combinations The Group uses the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred, and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. In business combinations involving more than two parties, including a newly formed entity, one of the previously existing entities is normally deemed to be the acquirer for accounting purposes. In these situations, referred to as reverse acquisitions, the deemed acquirer uses principles in IFRS 3, to account for the net assets of the deemed acquiree and the newly formed entity. In reverse acquisitions, no goodwill or negative goodwill arises, and any difference between the fair value of net assets acquired and the deemed purchase consideration, is dealt with as an adjustment to equity. In a business combination in which the acquirer and the acquiree (or its former owners) exchange only equity interests, the acquisition-date fair value of the acquiree's equity interests is used to determined goodwill. Transaction costs, other than those associated with the issue of debt or equity securities that the Credit Union incurs in connection with a business combination, are expensed as incurred.

(b)

Interest expense Interest expense is recognised in surplus or deficit for all interest bearing liabilities using the effective interest rate method. The effective interest rate is the rate that exactly discounts the estimated future cash payments through the expected life of the financial liability (or, where appropriate, a shorter period) to the carrying amount of the financial liability. Interest expense presented in the statement of surplus or deficit and other comprehensive income includes interest expense on financial liabilities measured at amortised cost and interest expense on lease liabilities.

(c)

Interest income Interest income is recognised in surplus or deficit using the effective interest rate method. The “effective interest rate” is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial instruments to its gross carrying amount.

Significant accounting policies (continued) (c)

Interest income (continued) When calculating the effective interest rate for financial instruments, the Group estimates future cash flows considering all contractual terms of the financial instrument, but not ECL. The calculation of the effective interest rate includes transaction costs and fees and points paid or received that are an integral part of the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition of a financial asset. The ‘amortised cost’ of a financial asset is the amount at which the financial asset is measured on initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any expected credit loss allowance. The ‘gross carrying amount of a financial asset’ is the amortised cost of a financial asset before adjusting for any expected credit loss allowance. The effective interest rate of a financial asset is calculated on initial recognition. In calculating interest income, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) and is revised as a result of periodic re-estimation of cash flows of floating rate instruments to reflect movements in market rates of interest. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis. For financial assets that were credit-impaired on initial recognition, interest income is calculated by applying the credit-adjusted effective interest rate to the amortised cost of the asset. The calculation of interest income does not revert to a gross basis, even if the credit risk of the asset improves. Interest income calculated using the effective interest method presented in the statement of surplus or deficit and other comprehensive income includes interest on financial assets measured at amortised cost and interest on debt instruments measured at FVOCI.

Financial Statements

FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Notes to the Financial Statements (Continued) December 31, 2020 (Expressed in Jamaica dollars unless otherwise indicated) 3.

Significant accounting policies (continued) (d)

Fee and commission income Fee and commission income from contracts with customers is recognised when the performance obligations are satisfied and is measured based on the consideration specified in a contract with a customer.

Type service Service fees

Nature and timing of satisfaction of performance obligations, Revenue recognition under IFRS significant 15 of including payment terms. The Group provides banking related services to members including account management, execution of customer transactions, loan processing and foreign currency transactions.

Revenue from account services and servicing fees is recognised over time as the services are provided. Loan originated fees are recognised at a point of time once the transaction is completed.

Transaction-based fees such as credit bureau fees, foreign currency Fees for ongoing account transactions and overdrafts are management are charged charged to the customer’s account to the members account when the transaction takes place or when overdraft is determined on a on a monthly basis. customer’s account.

Servicing fees are charged on a monthly basis and are based on fixed rates determined by the Group. (e)

Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the Group entities are measured using the currency of the primary economic environment in which the entity operates. The Credit Union’s primary economic environment is Jamaica, and as such, its functional currency, which is also its presentation currency, is the Jamaica dollar. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rate are recognised in surplus or deficit.

Significant accounting policies (continued) (f)

Taxation Taxation comprises current and deferred tax for the Group’s subsidiary, FHC Investments Limited. Section 59 of the Co-operative Societies Act, which governs the operations of the Credit Union, provides for the exemption from income tax and stamp duty. Current and deferred taxes are recognised as income tax expense or credit in surplus or deficit for the year except, where they relate to items recorded in other comprehensive income, in which case they are also charged or credited to other comprehensive income. (i)

Current taxation Current tax is the expected taxation recoverable or payable on the taxable income for the year, using tax rates enacted at the year-end date, and any adjustment to income tax payable in respect of previous years.

(ii)

Deferred income taxes Deferred tax is recognised for temporary differences between the carrying amounts of assets and liabilities and their amounts as measured for tax purposes, which will result in taxable amounts in future periods. Deferred tax assets are recognised only to the extent it is probable that sufficient taxable surplus will be available against which these assets can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the asset will be realised or the liability will be settled based on enacted rates.

(g)

Financial instruments Financial instruments – Classification, recognition, derecognition and measurement A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. In these financial statements: 

Financial assets comprise deposits, resale agreements, financial investments, loans to members, loan to subsidiary, cash and cash equivalents, accounts receivable and due from subsidiary.



Financial liabilities comprise members’ deposit, members’ voluntary shares, deferred shares, external credits, lease liabilities and accounts payable.

Financial instruments are classified, recognised and measured in accordance with the substance of the terms of the contracts as set out herein.

Significant accounting policies (continued) (g)

Financial instruments (continued) (i)

Recognition and initial measurement The Group recognises a financial instrument when it becomes a party to the contractual terms of the instrument. The Group initially recognises loans to members and other assets on the date when they are originated. All other financial assets and financial liabilities are initially recognised on the trade date. At initial recognition, the Group measures a financial asset or financial liability at its fair value, plus or minus; in case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are incremental and directly attributable to the acquisition or issue of the financial asset or financial liability, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss are expensed in surplus or deficit. Immediately after initial recognition, an expected credit loss allowance (ECL) is recognised for financial assets measured at amortised cost and investments in debt instruments measured at FVOCI, which results in an accounting loss being recognised in surplus or deficit when an asset is newly originated. When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a level 1 input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as a gain or loss. In all other cases, the difference is deferred and the timing of recognition of deferred day one surplus or deficit is determined individually. It is either amortised over the life of the instrument, deferred until the instrument’s fair value can be determined using market observable inputs, or realised through settlement.

85 (ii)

Classification and subsequent remeasurement The Group classifies its financial assets in the following measurement categories:   

Fair value through profit or loss (FVTPL); Fair value through other comprehensive income (FVOCI); or Amortised cost.

Significant accounting policies (continued) (g)

Financial instruments (continued) Financial instruments – Classification, recognition, derecognition and measurement (continued) (iii)

Classification and subsequent remeasurement (continued) Financial assets The classification requirements for debt and equity instruments are described below: (a)

Debt instruments Debt instruments are those instruments that meet the definition of a financial liability from the issuer’s perspective, such as loans, government and corporate bonds and receivables. Classification and subsequent measurement of debt instruments depend on: 

the Group’s business model for managing the asset; and



the cash flow characteristics of the asset.

Based on these factors, the Group classifies its debt instruments into one of the following three measurement categories: 



Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (‘SPPI’), and that are not designated at FVTPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognised and measured as described at [3(j)]. Interest income from these financial assets is included in ‘Interest and similar income’ using the effective interest method. Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets’ cash flows represent solely payments of principal and interest, and that are not designated at FVTPL are measured at fair value through other comprehensive income (FVOCI).

Significant accounting policies (continued) (g)

Financial instruments (continued) Financial instruments – Classification, recognition, derecognition and measurement (continued) (ii)

Classification and subsequent remeasurement (continued) Financial assets (continued) (a)

Debt instruments (continued) 

Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in surplus or deficit and presented in the surplus or deficit statement within ‘Net trading income’ in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading, in which case they are presented separately in ‘Net investment income’. Interest income from these financial assets is included in ‘Interest income’ using the effective interest method.

Business model assessment: the business model reflects how the Group manages the assets in order to generate cash flows. That is, whether the Group’s objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of ‘other’ business model and measured at FVTPL. Factors considered by the Group in determining the business model for a class assets include: 1.

Past experience on how the cash flows for these assets were collected;

How the asset’s performance is evaluated and reported to key management personnel; How risks are assessed and managed; and How managers are compensated.

3. 4.

For example, securities held for trading are held principally for the purpose of selling in the near term or are part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. These securities are classified in the ‘other’ business model and measured at FVTPL.

Significant accounting policies (continued) (g)

Financial instruments (continued) Financial instruments – Classification, recognition, derecognition and measurement (continued) (ii)

Classification and subsequent re-measurement (continued) Financial assets (continued) (a)

Debt instruments (continued) Solely payments of principal and interest (SPPI): Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Group assesses whether the financial instruments’ cash flows represent solely payments of principal and interest (the ‘SPPI test’). In making this assessment, the Group considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. The Group reclassifies debt investments when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change. Such changes are expected to be very infrequent and none occurred during the period.

(b)

Equity instruments Equity instruments are instruments that meet the definition of equity from the issuer’s perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer’s net assets. The Group subsequently measures all equity investments at fair value through profit or loss, except where the Group’s management has elected, at initial recognition, to irrevocably designate an equity investment at fair value through other comprehensive income. The election is made on an investment-by-investment basis. Gains and losses on equity investments at FVTPL are included in the ‘Non-interest income’ caption in the statement of surplus or deficit.

Significant accounting policies (continued) (g)

Financial instruments (continued) Financial instruments – Classification, recognition, derecognition and measurement (continued) (iii)

Classification and subsequent remeasurement (continued) Financial liabilities The Group’s financial liabilities are classified and measured at amortised cost. These financial liabilities include members’ deposits, members’ voluntary shares, deferred shares, lease liabilities, external credits and certain other financial liabilities. Interest on these liabilities, calculated using the effective interest rate method is recognised as an interest expense.

(iv)

Derecognition Derecognition of financial assets The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in other comprehensive income (OCI) is recognised in surplus or deficit. Any cumulative gains or losses recognised in OCI in respect of equity investment securities designated as at FVOCI is not recognised in surplus or deficit on derecognition of such securities. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group is recognised as a separate asset or liability. Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. If an existing financial liability is replaced by another from the same counterparty on substantially different terms, or the terms of the existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability at fair value. The difference in the respective carrying amount of the existing liability and the new liability is recognised as a gain/loss in surplus or deficit.

Significant accounting policies (continued) (g)

Financial instruments (continued) Financial instruments – Classification, recognition, derecognition and measurement (continued) (v)

Measurement and gains and losses The liquid assets’ and financial investments' captions in the statement of financial position includes: -

debt investment securities measured at amortised cost which are initially measured at fair value plus incremental direct transaction costs, and subsequently at their amortised cost using the effective interest method;

debt and equity investment securities mandatorily measured at FVTPL or designated as at FVTPL which are at fair value with changes recognised immediately in surplus or deficit;

equity investment securities designated as at FVOCI.

The Group elects to present in OCI changes in the fair value of certain investments in equity instruments that are not held for trading. The election is made on an instrument-by-instrument basis on initial recognition and is irrevocable. Gains and losses on such equity instruments are never reclassified to surplus or deficit and no impairment is recognised in surplus or deficit. Dividends are recognised in surplus or deficit unless they clearly represent a recovery of part of the cost of the investment, in which case they are recognised in OCI. Cumulative gains and losses recognised in OCI are transferred to accumulated surplus on disposal of an investment. (vi)

Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

(h)

Investment in subsidiary Investment in subsidiary is measured at cost, less impairment losses, in the separate financial statements of the Credit Union.

Significant accounting policies (continued) (i)

Resale and repurchase agreements Securities purchased under agreements to resell the assets at a fixed price on a future date (resale agreements) and securities sold under agreements to repurchase the asset at a fixed price on a future date (repurchase agreements) are treated as collateralised financing transactions. In the case of resale agreements, the underlying asset is not recognised in the Group’s financial statements. In the case of repurchase agreements, the underlying collateral is not derecognised from the Group’s statement of financial position. The difference between the purchase/sale and resale/repurchase consideration is recognised as interest over the life of the agreements using the effective interest method.

(j)

Impairment of financial assets The Group recognises loss allowances for expected credit losses (ECL) on financial assets that are debt instruments and that are not measured at FVTPL. The Group measures loss allowances at an amount equal to lifetime ECL, except for the following, for which they are measured as 12-month ECL: -

debt investment securities that are determined to have low credit risk at the reporting date; and

other financial instruments on which credit risk has not increased significantly since their initial recognition.

The Group considers a debt investment security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade’. The Group does not apply the low credit risk exemption to any other financial instruments.

12-month ECL are the portion of ECL that result from default events on a financial instrument that are possible within the 12 months after the reporting date. Financial instruments for which a 12-month ECL is recognised are referred to as ‘Stage 1 financial instruments’. Life-time ECL are the ECL that result from all possible default events over the expected life of the financial instrument. Financial instruments for which a lifetime ECL is recognised but which are not credit-impaired are referred to as ‘Stage 2 financial instruments’. Measurement of ECL ECL are a probability-weighted estimate of credit losses. They are measured as follows: -

financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive);

Significant accounting policies (continued) (j)

Impairment of financial assets (continued) Measurement of ECL (continued) ECL are a probability-weighted estimate of credit losses. They are measured as follows (continued): -

financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows;

undrawn loan commitments: as the present value of the difference between the contractual cash flows that are done to the Group if the commitment is drawn and the cash flows that the Group expects to received.

Restructured financial assets If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be derecognised and ECL are measured as follows: -

If the expected restructuring will not result in derecognition of the existing asset, then the expected cash flows arising from the modified financial asset are included in calculating the cash shortfalls from the existing asset.

If the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is included in calculating the cash shortfalls from the existing financial asset that are discounted from the expected date of derecognition to the reporting date using the original effective interest rate of the existing financial asset.

Credit-impaired financial assets At each reporting date, the Group assesses whether financial assets carried at amortised costs are credit-impaired (referred to as ‘Stage 3 financial assets’). A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data: -

significant financial difficulty of the borrower or issuer; a breach of contract such as a default or past due event; the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise; it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or the disappearance of an active market for a security because of financial difficulties.

Significant accounting policies (continued) (j)

Impairment of financial assets (continued) Credit-impaired financial assets (continued) A loan that has been renegotiated due to a deterioration in the borrower’s condition is usually considered to be credit-impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment. In addition, a loan that is overdue for 90 days or more is considered credit-impaired even when the regulatory definition of default is different. In making an assessment of whether an investment in sovereign debt is credit-impaired, the Group considers the following factors. -

The market’s assessment of creditworthiness as reflected in the bond yields. The rating agencies’ assessments of creditworthiness. The country’s ability to access the capital markets for new debt issuance. The probability of the debt being restructured, resulting in holders suffering losses through voluntary or mandatory debt forgiveness. The international support mechanisms in place to provide the necessary support as ‘lender of last resort’ to that country, as well as the intention, reflected in public statements of governments and agencies to use those mechanisms. This includes an assessment of the depth of those mechanisms and, irrespective of the political intent, whether there is the capacity to fulfil the required criteria.

Presentation of allowance for ECL in the statement of financial position Allowances for ECL are presented in the statement of financial position as follows: -

(k)

Financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets. Loan commitments and financial guarantee contracts: generally, as a provision. Debt instruments measured at FVOCI: no loss allowance is recognised in the statement of financial position because the carrying amount of these assets is their fair value. However, the loss is recognised in surplus or deficit as a reclassification from OCI.

Impairment of non-financial assets The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. The recoverable amount of nonfinancial assets is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cashgenerating unit to which the asset belongs.

Significant accounting policies (continued) (k)

Impairment of non-financial assets (continued) An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in surplus or deficit. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(l)

Cash and cash equivalents Cash and cash equivalents comprise cash in hand, cash at bank and deposits not held to satisfy requirements of the League. These are measured in the statement of financial position at amortised cost.

(m) Accounts receivable Receivables are measured at amortised cost less impairment losses. (n)

Inventories Inventories are measured at the lower of cost and net realisable value, cost being determined on the first-in-first-out basis.

(o)

Intangible assets (i)

Brand Brand acquired in a business combination is measured at cost less impairment losses and is deemed to have a finite useful life. Amortisation is calculated using the straight line method to allocate the cost of the intangible asset over its estimated useful life of 10 years.

(ii) Trademarks Trademarks acquired in a business combination are measured at cost less impairment and are deemed to have a finite useful life. Amortisation is calculated using the straight-line method to allocate the cost of the intangible assets over their estimated useful lives of 3 years.

Significant accounting policies (continued) (o)

Intangible assets (continued) (iii) Core deposits Core deposits relate to the total cost of maintaining the core deposit base (e.g., interest, servicing costs, fee income, and the opportunity cost of reserve requirements and float) in comparison to the cost of an alternative funding source. These are measured at cost less impairment losses and are deemed to have a finite useful life. Amortisation is calculated using the straight line basis to allocate the cost of the intangible assets over their estimated useful lives of 10 years. (iv) Customer relationships Customer relationships acquired in the business combination are measured at cost less impairment losses and are deemed to have a finite useful life. Customer relationships are the estimated economic benefits derived from the incremental revenues and related cash flows as a direct result of relationships in place, versus having to try and replicate them. Amortisation is calculated using the straight-line method to allocate the cost of the intangible assets over their estimated useful lives of 12 years. (v) Goodwill Goodwill is measured initially at fair value, less any accumulated impairment losses. Goodwill is not amortised but assessed annually for impairment.

(p)

Property, plant and equipment Freehold land and capital work-in-progress are measured at cost and are not depreciated. All other property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Depreciation is calculated on the straight-line basis at annual rates estimated to write down the assets to their residual values over their expected useful lives. The expected useful lives of depreciable property, plant and equipment are as follows: Buildings Computer equipment Furniture, fixtures and equipment Motor vehicles

40 years 5 years 10 years 8 years

Significant accounting policies (continued) (p)

Property, plant and equipment (continued) Property, plant and equipment are periodically reviewed for impairment. Where the carrying amount of the asset is greater than the estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposal of property, plant and equipment are determined by reference to carrying amounts and are recognised in surplus or deficit. Repairs and renewals expenses are charged to surplus or deficit when the expenditure is incurred.

(q)

Leases At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16. At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand‑alone prices. However, for the leases of property the Group has elected not to separate non‑lease components and account for the lease and non‑lease components as a single lease component. The Group recognises a right‑of‑use asset and a lease liability at the lease commencement date. The right‑of‑use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right‑of‑use asset is subsequently depreciated using the straight‑line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right‑of‑use asset reflects that the Group will exercise a purchase option. In that case the right‑of‑use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right‑of‑use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

Significant accounting policies (continued) (q)

Leases (continued) The lease liability is initially measured at the present value of the scheduled lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased. Lease payments included in the measurement of the lease liability comprise the following: -

fixed payments, including in‑substance fixed payments; variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; amounts expected to be payable under a residual value guarantee; and the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in‑substance fixed lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right‑of‑use asset, or is recorded in profit or loss if the carrying amount of the right‑of‑use asset has been reduced to zero. Short-term leases and leases of low-value assets The Group has elected not to recognise right‑of‑use assets and lease liabilities for leases of low‑value assets and short‑term leases. The Group recognises the lease payments associated with these leases as an expense on a straight‑line basis over the lease term.

Significant accounting policies (continued) (r)

Employee benefits Retirement benefits The Group participates in a multi-employer defined benefit pension plan. The pension plan is funded by contributions from employees and by the Group, taking into account the recommendation of independent qualified actuaries. The asset or liability in respect of the defined benefit plan is the difference between the present value of the defined benefit obligations and the fair value of plan assets at the reporting date. Where a pension asset arises, the amount recognised is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in 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 as to spread the regular cost of service over the service lives of the employees. The pension obligation is measured at 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 Group’s obligation as a proportion of the total obligations of the plan. Remeasurements of the net defined benefit asset, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income. The Group determines the net interest income on the net defined benefit asset for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit asset, taking into account any changes during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in surplus or deficit. Vacation leave accrual The Group’s vacation leave policy allows a maximum of six weeks unused vacation leave to be carried forward for all managerial staff and four weeks for non-managerial staff. The charge for outstanding leave is recognised in surplus or deficit over the period that employees become entitled to vacation leave.

(s)

Members’ shares Permanent shares Permanent shares may be transferred by a member to another member but are not available for withdrawal. Permanent shares are classified as equity.

Significant accounting policies (continued) (s)

Members’ shares (continued) Voluntary shares Members’ voluntary shares represent deposit holdings of the Credit Union’s members, for savings, to satisfy membership requirements and to facilitate eligibility for loans and other benefits. These shares are classified as financial liabilities, as they are available for withdrawal at short notice. The amount of the dividends payable on these shares is determined at the discretion of the Credit Union and reported as interest expense in surplus or deficit in the period in which they are approved.

(t)

External credit External credit is initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method.

(u)

Deferred credit Funds received from the Stabilisation Fund is treated initially as deferred credit and transferred to the surplus or deficit when cost associated with the purpose for which it was received is incurred.

(v)

Institutional capital Institutional capital includes the statutory reserve fund, as well as other reserves 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.

Critical accounting estimates and judgements in applying accounting policies 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. In the process of applying the Group’s accounting policies, management has made the following critical accounting estimates or judgements which it believes have a significant risk of causing a material misstatement in these financial statements. (1)

Critical accounting judgments (i)

Classification of financial assets The assessment of the business model within which the assets are held and assessment of whether the contractual terms of the financial asset are solely payments of principal and interest (SPPI) on the principal amount outstanding requires management to make certain judgements on its business operations.

Critical accounting estimates and judgements in applying accounting policies (continued) (1)

Critical accounting judgments (continued) (ii)

Impairment of financial assets Establishing the criteria for determining whether credit risk on the financial asset has increased significantly since initial recognition, determining the methodology for incorporating forward-looking information into the measurement of expected credit loss (ECL) and selection and approval of models used to measure ECL requires significant judgement.

(2)

Key assumptions and other sources of estimation uncertainty (i)

Allowance for impairment losses on financial assets The measurement of the expected credit loss allowance for financial assets measured at amortised cost and FVOCI is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of customers defaulting and the resulting losses). Management also estimate the likely amount of cashflows recoverable on the financial assets in determing loss given default. The use of assumptions make uncertainty inherent in such estimate. Explanation of the inputs, assumptions and estimation techniques used in measuring ECL is further detailed in note 5(a), which also sets out key sensitivities of the ECL to changes in these elements. The use of assumptions make uncertainty inherent in such estimate.

(ii)

Employee benefits obligation The amounts recognised in the statement of financial position and statement of surplus or deficit and other comprehensive income for pension benefits are determined actuarially using several assumptions. The primary assumptions used in determining the amounts recognised include the discount rate used to determine the present value of estimated future cash flows required to settle the pension obligations. The discount rate is determined based on the estimate of yield on long-term government securities that have maturity dates approximating the terms of the Group’s obligations. In the absence of such instruments in Jamaica, it has been necessary to estimate the rate by extrapolating from the longest-tenor security on the market. Any changes in these assumptions will impact the amounts recorded in the financial statements for these obligations.

(iii)

Fair value of financial instruments In the absence of quoted market prices, the fair value of Group’s financial instruments are determined using a generally accepted alternative to quoted market prices. Considerable judgement is required in interpreting market data to arrive at estimates of fair values. Consequently, the estimates arrived at may be significantly different from the actual price of the instrument in an arm’s length transaction.

100

Critical accounting estimates and judgements in applying accounting policies (continued) (2)

Key assumptions and other sources of estimation uncertainty (continued) (iv)

Impairment of intangible assets Goodwill is not amortised but is tested annually for impairment. In completing this assessment, the value-in-use of the cash-generating unit to which the goodwill has been allocated is required. The value-in-use calculation involves estimating the future cash flows of the cash-generating unit and applying a suitable discount rate.

Financial risk management Financial risk factors The Group’s overall risk management programme involves the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. The Group has established risk management policies designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of regularly generated reports. Risk management procedures are closely integrated into all key business processes. The Board of Directors is ultimately responsible for the establishment and oversight of the Group’s risk management framework. It defines the overall risk profile of the Group by approving its financial policies and guidelines, as well as maximum limits for exposure on individual loans. The Group has exposure to the following risks from its use of financial instruments:

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   

Credit risk Liquidity risk Market risk Operational risk

Risk management overview The Board has established committees/functions for managing and monitoring risks as follows: (i)

Supervisory Committee The Supervisory Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Supervisory Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Supervisory Committee.

Financial risk management (continued) Risk management overview (continued) (ii)

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

(iii) Treasury Committee The Treasury Committee is responsible for monitoring the management of the Group’s assets and liabilities and the overall financial structure. It is also primarily responsible for managing the funding and liquidity risks of the Group. (iv)

Finance and Operations Committee The Finance and Operations Committee is responsible for monitoring and formulating investment portfolios and investment strategies for the Group which includes the formulation of appropriate trading limits and reports and compliance controls to ensure that their mandate is properly followed. The Finance and Operations Committee has two sub-committees that monitor treasury and delinquency. Treasury is responsible for monitoring the management of the Group’s assets and liabilities and, by extension, the management of funding and liquidity risks. The Delinquency committee assesses the adequacy of provisions for non-performing loan facilities.

These committees comprise persons independent of management and report to the Board on a monthly basis. The business functions, Lending and Treasury, are responsible for managing risks assumed through their operations and for ensuring that an adequate return for the risks taken is achieved. Operations Risk and Compliance, Credit Administration and Internal Audit are independent from the departments carrying out the Group’s business activities. Operations Risk and Compliance has the overall responsibility for identifying, assessing, monitoring and reporting all types of risk inherent in the Group’s operations. Credit Administration is responsible for assessing and monitoring credit risk in the Group’s lending operations and seeks to ensure that credit proposals are in compliance with established limits and policies. Internal Audit provides an independent evaluation of the control and risk management processes. Based on regular reporting from these departments, the aforementioned committees supervise the Group’s aggregate risk-taking. There have been no significant changes to the Group’s exposure to financial risks or the manner in which it manages and measures these risks.

102

Financial risk management (continued) (a)

Credit risk Credit risk is the most important risk for the Group’s business. Credit risk is the risk that borrowers or other counterparties will cause a financial loss for the Group by failing to discharge their contractual obligations, and that any collateral provided does not cover the Group’s claims. As a consequence of the Group’s mandate and resulting financial structure, this risk arises principally from the Group’s lending activities. For loans, credit 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 Group’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 Group’s mission and strategy. The policy sets the basic criteria for acceptable risk and identifies risk areas that require special attention. Additionally, the Group is exposed to credit risk in its treasury activities, arising from financial assets that the Group uses for managing its liquidity, currency, interest rate and other price risks. There is also credit risk in financial instruments not carried on the statement of financial position, such as loan commitments. Credit review process The Group has established a credit quality review process involving regular analysis of the ability of borrowers and other counterparties to meet interest and capital repayment obligations. Loans

103

The Group assesses the probability of default of individual borrowers using internal ratings. The Group 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 40% to 45%, character profile and the member’s economic stability, based on employment and place of abode. Credit limits The Group manages concentration 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, which assigns each counterparty a risk rating. Risk ratings are subject to regular revision. 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.

Financial risk management (continued) (a)

Credit risk (continued) Collateral The most widely used practice for mitigating credit risk is the taking of security in the form of physical assets, netting agreements and guarantees. 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 properties and motor vehicles. The Group has documented policies which facilitate the management of credit risk on investment securities and resale agreements. The Group’s exposure and credit rating of its counterparties are continually monitored. 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. Financial investments and resale agreements The Group limits its exposure to credit risk by investing mainly in liquid securities, with counterparties that have high credit quality and Government of Jamaica securities. Accordingly, management does not expect any counterparty to fail to meet its obligations. Liquid assets 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 monitored by the finance committee. Impairment The impairment provision shown in the statement of financial position at year-end is derived from the two internal rating grades. However, the majority of the impairment provision comes from the non-performing rating class. Inputs, assumptions and techniques used for estimating impairment (i)

Significant increase in credit risk When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and third party policies including forwardlooking information.

104

Financial risk management (continued) (a)

Credit risk (continued) Impairment (continued) Inputs, assumptions and techniques used for estimating impairment (continued) (i)

Significant increase in credit risk (continued) The objective of the assessment is to identify whether a significant increase in credit risk has occurred for an exposure by comparing: -

the remaining lifetime probability of default (PD) as at the reporting date; with

the remaining lifetime PD for this point in time that was estimated at the time of initial recognition of the exposure (adjusted where relevant for changes in prepayment expectations).

The Group uses three criteria for determining whether there has been a significant increase in credit risk: -

quantitative test based on movement in PD; qualitative indicators; and a backstop of 30 days past due.

Credit risk grades: Borrowers of the Group are segmented into two rating classes. The Group’s rating scale, which is shown below, reflects the range of default probabilities defined for each rating class.

105

Group’s rating

Description of the grade

Grade 1 Grade 2

Performing Non-performing

Each Group rating contains various sub-factors to which percentages or the overall class scores are assigned. Sub-drivers that are deemed to pose a greater risk are assigned lower scores than those that are assessed at lesser risk levels. Historical default information is taken into consideration in the allocation of the sub-driver scores. The credit quality review process allows the Group 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 corporate and personal guarantees.

Financial risk management (continued) (a) Credit risk (continued) Impairment (continued) Inputs, assumptions and techniques used for estimating impairment (continued) (i)

Significant increase in credit risk (continued) Credit risk grades (continued): Credit risk ratings also determine credit limits and collateral, and are systematically reassessed on an annual basis. Reassessment is based on the borrower’s credit worthiness, and on any new information and events that may have an impact on the level of credit risk, whether these arise from the borrower’s own circumstances or from the financial environment, in general. The Group allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of default and applying experienced credit judgement. Credit risk grades are defined using qualitative and quantitative factors that are indicative of risk of default. These factors vary depending on the nature of the exposure and the type of borrower. Each exposure is allocated to a credit risk grade on initial recognition based on available information about the borrower. Exposures are subject to ongoing monitoring, which may result in an exposure being moved to a different credit risk grade. The monitoring typically involves use of the following data: -

Information obtained during periodic review of customer files – e.g. audited financial statements, management accounts, budgets and projections. Examples of areas of particular focus are: gross profit margins, financial leverage ratios, debt service coverage, compliance with covenants, quality of management, senior management changes.

Data from credit reference agencies, press articles, changes in external credit ratings.

Actual and expected significant changes in the political, regulatory and technological environment of the borrower or in its business activities.

External data from credit reference agencies, including industry-standard credit scores.

Payment record, which includes overdue status as well as a range of variables about payment ratios.

Existing and forecast changes in business, financial and economic conditions.

106

Financial risk management (continued) (a)

Credit risk (continued) Impairment (continued) Inputs, assumptions and techniques used for estimating impairment (continued) (i)

Significant increase in credit risk (continued) Determining whether credit risk has been increased significantly: The Group assesses whether credit risk has increased significantly since initial recognition at each reporting date. Determining whether an increase in credit risk is significant depends on the characteristics of the financial instrument and the borrower. Credit risk is deemed to increase significantly where the credit rating of a security decreased four or more levels on the international credit rating scale since the rating at origination date or the issuer of the instrument is experiencing or is very likely to experience one or more adversities and where there are adverse changes in one or more of the credit risk drivers that could increase the likelihood of default since the origination of loans. As a backstop, the Group considers that a significant increase in credit risk occurs no later than when an asset is more than 30 days past due. Days past due are determined by counting the number of days since the earliest elapsed due date in respect of which full payment has not been received. Due dates are determined without considering any grace period that might be available to the borrower.

107

If there is evidence that there is no longer a significant increase in credit risk relative to initial recognition, then the loss allowance on an instrument returns to being measured as 12-month ECL. Some qualitative indicators of an increase in credit risk, such as delinquency or forbearance, may be indicative of an increased risk of default that persists after the indicator itself has ceased to exist. In these cases, the Group determines a probation period during which the financial asset is required to demonstrate good behaviour to provide evidence that its credit risk has declined sufficiently. When contractual terms of a loan have been modified, evidence that the criteria for recognising lifetime ECL are no longer met includes a history of up-to-date payment performance against the modified contractual terms. The Group monitors the effectiveness of the criteria used to identify significant increases in credit risk by regular reviews to confirm that: -

the criteria are capable of identifying significant increases in credit risk before an exposure is in default;

the criteria do not align with the point in time when an asset becomes 30 days past due;

Financial risk management (continued) (a)

Credit risk (continued) Impairment (continued) Inputs, assumptions and techniques used for estimating impairment (continued) (i)

Significant increase in credit risk (continued) The Group monitors the effectiveness of the criteria used to identify significant increases in credit risk by regular reviews to confirm that (continued): -

the average time between the identification of a significant increase in credit risk and default appears reasonable;

exposures are not generally transferred directly from 12-month ECL measurement to credit-impaired;

there is no unwarranted volatility in loss allowance from transfers between 12month PD (Stage 1) and lifetime PD (Stage 2).

the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held);

the borrower is more than 90 days past due on any material credit obligation to the Group; and

it is becoming probable that the borrower will restructure the asset as a result of bankruptcy due to the borrower’s inability to pay its credit obligations.

Definition of default: In assessing whether a borrower is in default, the Group considers indicators that are: -

qualitative: e.g. breaches of covenant; quantitative: e.g. overdue status and non-payment on another obligation of the same issuer to the Group; and based on data developed internally and obtained from external sources.

Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes in circumstances. The definition of default largely aligns with that applied by the Group for regulatory capital purposes.

108

Financial risk management (continued) (a)

Credit risk (continued) Impairment (continued) Inputs, assumptions and techniques used for estimating impairment (continued) (ii)

Incorporation of forward-looking information The Group incorporates forward-looking information into both the assessment of whether the credit risk of an instrument has increased significantly since its initial recognition and the measurement of ECL. The Group uses a forward-looking score card model to estimate the potential of future economic conditions. It formulates three economic scenarios: a base case, which is the median scenario assigned a 50% probability of occurring, and two less likely scenarios, one upside and one downside, each assigned a 20% and 30% probability of occurring, respectively. Each scenario considers the expected impact of inflation interest rates, unemployment rates and gross domestic product (GDP). The base case is aligned with information used by the Group for other purposes such as strategic planning and budgeting. External information considered includes economic data and forecasts published by governmental bodies and monetary authorities in Jamaica, supranational organisations and selected private-sector forecasters.

(iii) Measurement of ECL The key inputs into the measurement of ECL are the term structure of the following variables:

109

probability of default (PD); loss given default (LGD); and exposure at default (EAD).

ECL for exposures in Stage 1 is calculated by multiplying the 12-month PD by LGD and EAD. Lifetime ECL is calculated by multiplying the lifetime PD by LGD and EAD. LGD is the magnitude of the likely loss if there is a default. The Group estimates LGD parameters based on the history of recovery rates of claims against defaulted counterparties. The LGD models consider the structure, collateral, seniority of the claim, counterparty industry and recovery costs of any collateral that is integral to the financial asset. For loans secured by property, loan-to-value amounts are a key parameter in determining LGD. LGD estimates are recalibrated for different economic scenarios and, for real estate lending, to reflect possible changes in property prices. They are calculated on a discounted cash flow basis using the effective interest rate as the discounting factor.

Financial risk management (continued) (a)

Credit risk (continued) Impairment (continued) Inputs, assumptions and techniques used for estimating impairment (continued) (iii) Measurement of ECL (continued) EAD represents the expected exposure in the event of a default. The Group derives the EAD from the current exposure to the counterparty and potential changes to the current amount allowed under the contract and arising from amortisation. The EAD of a financial asset is its gross carrying amount at the time of default. For lending commitments, the EADs are potential future amounts that may be drawn under the contract, which are estimated based on historical observations and forward-looking forecasts. As described above, and subject to using a maximum of a 12-month PD for Stage 1 financial assets, the Group measures ECL considering the risk of default over the maximum contractual period (including any borrower’s extension options) over which it is exposed to credit risk, even if, for credit risk management purposes, the Group considers a longer period. The maximum contractual period extends to the date at which the Group has the right to require repayment of an advance or terminate a loan commitment or guarantee. (iv)

Loss allowance The loss allowance recognised is analysed as follow:

Loans to members: Balance at January 1, 2020 Net remeasurement of loss allowance Balance at December 31, 2020

Loans to members: Balance at January 1, 2019 Net remeasurement of loss allowance Balance at December 31, 2019

The Group and The Credit Union 2020 Stage 1 Stage 2 Stage 3 Total $’000 $’000 $’000 $’000 87,150 34,690

5,500 1,242

309,947 9,099

402,597 45,031

121,840

6,742

319,046

447,628

The Group and The Credit Union 2019 Stage 1 Stage 2 Stage 3 Total $’000 $’000 $’000 $’000 86,299 851

8,293 (2,793)

87,150

5,500

334,788 429,380 ( 24,841) ( 26,783) 309,947

402,597

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Financial risk management (continued) (a)

Credit risk (continued) Impairment (continued) Inputs, assumptions and techniques used for estimating impairment (continued) (iv) Loss allowance (continued)

The Group and the Credit Union 2020 2019 Stage 1 Total Stage 1 Total $’000 $’000 $’000 $’000

Debt securities and other financial assets at amortised cost: Balance at the beginning of the year Net remeasurement of loss allowance Balance at the end of the year

Debt securities – FVOCI: Balance at the beginning of the year Net remeasurement of loss allowance

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Balance at the end of the year

7,992 710

5,530 2,462

8,702

7,992

The Group 2020 2019 Stage 1 Stage 3 Total Stage 1 Stage 3 Total $’000 $’000 $’000 $’000 $’000 $’000 3,206 323 3,529

Debt securities – FVOCI: Balance at the beginning of the year Net remeasurement of loss allowance Balance at the end of the year

7,992 710

565 (

3,771

3) 562

9,025

1,975 11,000

320 (5,819) (1,410) ( 7,229) 4,091

3,206

565

3,771

The Credit Union 2020 2019 Stage 1 Total Stage 1 Total $’000 $’000 $’000 $’000 1,819 ( 271)

1,819 ( 271)

1,548

6,949 6,949 (5,130) (5,130) 1,819

1,819

Financial risk management (continued) (a)

Credit risk (continued) Renegotiated loans Restructuring activities include extended payment arrangements, approved external management plans, 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 most likely continue. These policies are kept under continuous review. Restructuring is most commonly applied to term loans. The Group’s renegotiated loans that would otherwise be past due or impaired totaled $9,061,347 (2019: $20,316,400). There were no renegotiated loans which were deemed impaired within the year. Repossessed collateral The Group is in the process of negotiating the sale of motor vehicles and real estate amounting to $403,564,000 (2019: $409,976,000) which are used as collateral for loans. Title to the above items has not been transferred to the Group. Consequently, the Group has not recognised the assets in the financial statements. Credit risk exposure Maximum exposure to credit risk before collateral held or other credit enhancements: For items on the statement of financial position, the exposures are based on net carrying amounts as reported. For items not on the statement of financial position, the table below reflects the worst case scenario of credit risk exposure to the Group without taking account of any collateral held or other credit enhancements. Credit risk not reflected on the statement of financial position was as follows: The Group and the Credit Union 2020 2019 $’000 $’000 Loan commitments

51,994

66,855

112

Financial risk management (continued) (a)

Credit risk (continued) Credit risk exposure (continued) Maximum exposure to credit risk before collateral held or other credit enhancements (continued): Debt securities Debt securities are summarised as follows: The Group 2020 2019 $’000 $’000

113

The Credit Union 2020 2019 $’000 $’000

Liquid assets – deposits Resale agreements 2,019,265 Government of Jamaica securities 318,699 Jamaica Co-operative Credit Credit Union League Limited Mortgage Fund 110,378 Corporate bonds 399,374 Deferred shares 155,619 Fixed deposits 292,810

7,971 1,551,039

2,019,265

7,971 1,551,039

324,071

308,536

315,517

107,650 182,488 163,202 125,543

110,378 329,348 155,619 292,810

107,650 97,272 163,202 125,543

3,296,145

2,461,964

3,215,956

2,368,194

The following tables sets out information about the maximum exposure to credit risk and the credit quality of financial assets measured at amortised cost and FVOCI debt. Unless specifically indicated, for financial assets, the amounts in the table represent gross carrying amounts. Loans to members Loans to members at amortised cost: The Group and the Credit Union 2020

Credit grade Grade 1 – Low risk Grade 2 – High risk Loss allowance

Stage 1 $'000

Stage 2 $'000

Stage 3 $'000

Total $'000

7,237,950 1,581,900 8,819,850 ( 121,840)

197,019 35,414 232,433 ( 6,742)

596,825 118,567 715,392 (319,046)

8,031,794 1,735,881 9,767,675 ( 447,628)

8,698,010

225,691

396,346

9,320,047

Financial risk management (continued) (a)

Credit risk (continued) Credit risk exposure (continued) Maximum exposure to credit risk before collateral held or other credit enhancements (continued): Loans to members (continued) Loans to members at amortised cost (continued): The Group and the Credit Union 2019

Credit grade Grade 1 – Low risk Grade 2 – High risk Loss allowance

Stage 1

Stage 2

Stage 3

Total

$'000

6,969,648 1446,302 8,415,950 ( 87,150)

169,652 33,511 203,163 ( 5,500)

447,438 173,206 620,644 ( 309,947)

7,586,738 1,653,019 9,239,757 ( 402,597)

8,328,800

197,663

310,697

8,837,160

The following table sets out information about the overdue status of loans in stage 1, 2 and 3. The Group and the Credit Union

114

2020

Neither past due or impaired Past due: 1 month 2 to 3 months More than 3 months

Stage 1

Stage 2

Stage 3

Total

$'000

8,819,850

131,400

8,951,250

124,978 107,455 -

5,484 27,982 550,526

130,462 135,437 550,526

8,819,850

232,433

715,392

9,767,675

Financial risk management (continued) (a)

Credit risk (continued) Credit risk exposure (continued) Maximum exposure to credit risk before collateral held or other credit enhancements (continued): Loans to members ( continued) Loans to members at amortised cost (continued): The Group and the Credit Union 2019 Stage 1 $'000 8,415,950

Neither past due or impaired Past due: 1 month 2 to 3 months More than 3 months

Stage 2 $'000 -

Stage 3 $'000 47,598

Total $'000 8,463,548

91,050 112,113 -

2,589 30,004 540,453

93,639 142,117 540,453

8,415,950

203,163

620,644

9,239,757

Debt securities and other financial assets: The Group 2020

115

2019

Stage 1

Total

Stage 1

Total

$'000

1,948,333 7,992)

1,948,333 ( 7,992)

1,940,341

Credit grade At amortised cost: Non-investment grade Loss allowance Fair value through OCI: Non-investment grade Loss allowance

2,900,059 ( 8,702)

2,891,357

(

441,121 4,091) 437,030

(

441,121 4,091) 437,030

(

551,954 3,771) 548,183

(

551,954 3,771) 548,183

Financial risk management (continued) (a)

Credit risk (continued) Credit risk exposure (continued) Maximum exposure to credit risk before collateral held or other credit enhancements (continued): Debt securities and other financial assets (continued): The Credit Union

The Credit Union

2020

2019

Stage 1

Total

Stage 1

Total

$'000

Credit grade At amortised cost: Non-investment grade Loss allowance

Fair value through OCI: Non-investment grade Loss allowance

2,990,059 ( 8,702)

1,948,333 ( 7,992)

2,891,357

1,940,341

(

360,932 1,548) 359,384

(

360,932 1,548) 359,384

(

458,184 1,819) 456,365

(

458,184 1,819) 456,365

Concentration of risk Loans to members The following table summarises the Group’s credit exposure for loans at their carrying amounts, as categorised by industry sector: The Group and the Credit Union 2020 2019 $’000 $’000

Agriculture, fishing and mining Construction and real estate Debt financing Distribution Manufacturing Micro loans Personal Professional and other services Other

1,009,817 1,029,004 44,802 112,563 850,565 5,641,791 417 1,078,716

1,071,930 1,041,025 40,714 109,530 706,322 5,188,962 2,626 1,078,648

Less: Provision for impairment

9,767,675 ( 447,628)

9,239,757 ( 402,597)

9,320,047 61,568

8,837,160 66,885

9,381,615

8,904,045

Interest receivable

116

Financial risk management (continued) (b)

Liquidity risk Liquidity risk is the risk that the Group is unable to meet payment obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn. The consequences may be the failure to meet obligations to repay depositors and fulfill commitments to lend. Liquidity risk management process The Group’s policy is to maintain liquidity corresponding to its estimated net liquidity requirements for 12 months. The Group’s liquidity management process, as carried out within the Group by the Treasury Committee and monitored by the Finance Committee, includes: (i)

Monitoring future cash flows and liquidity on a daily basis. This incorporates an assessment of the Group’s liquid funds which includes cash balances, bank balances and investment maturities in order to determine its ability to meet payment obligations and commitments for loans;

(ii)

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

(iii) Maintaining committed lines of credit with the League;

117

(iv)

Optimising returns on investments;

(v)

Monitoring liquidity ratios against internal and regulatory requirements. The most important of these is to maintain limits on the ratio of net liquid assets to customer liabilities; and

(vi)

Managing the concentration and profile of debt maturities.

Monitoring and reporting take the form of an analysis of the cash balances and expected investment maturity profiles for the next day, week and month, respectively, as these are key periods for liquidity management. The starting point for these projections is the generation of analyses of loan commitments and the examination of expired credit periods in comparison to the expected collection date of the financial assets. The matching and controlled mismatching of the maturities and interest rates of assets and liabilities are fundamental to the management of the Group. It is unusual for financial entities ever to be completely matched, since business transacted is often of uncertain term and of different types. An unmatched position potentially enhances profitability, but can also increase the risk of loss. 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 Group and its exposure to changes in interest rates and exchange rates.

Financial risk management (continued) (b)

Liquidity risk (continued) Financial liabilities and assets held for managing liquidity risk The tables below present the undiscounted cash flows payable (both interest and principal) of the Group and the Credit Union’s financial liabilities based on contractual repayment obligations: The Group 2020 Within 1 Month $’000

2 to 3 Months $’000

4 to 12 Months $’000

1 to 5 Years $’000

Over 5 Years $’000

Total contractual cash flows $’000

Carrying Amount $’000

Members’ deposits 5,172,979 Members’ voluntary shares 3,639,615 Deferred shares 178,905 Lease liabilities 1,547 Accounts payable 269,231 External credits 6,805

1,232,348 3,819 3,176 12,174

1,572,773 46,454 14,510 52,401

103,087 346,843 27,350 135,112

15,321

8,081,187 4,036,731 178,905 46,583 269,231 221,813

7,922,733 4,026,664 178,569 45,021 269,231 201,641

Total financial liabilities

1,251,517

1,686,138

612,392

15,321

12,834,450

12,643,859

1 to 5 Years $’000

Over 5 Years $’000

Total contractual cash flows $’000

Carrying Amount $’000

7,058,719 3,662,542 183,895 47,944 261,765 228,910

6,920,313 3,653,408 179,102 44,172 261,765 197,347

9,269,082

The Group 2019 Within 1 Month $’000

2 to 3 Months $’000

4 to 12 Months $’000

Members’ deposits 4,175,829 Members’ voluntary shares 3,316,965 Deferred shares 2,513 Lease liabilities 1,258 Accounts payable 261,765 External credits 6,564

1,172,790 2,413 2,569 11,344

1,393,127 46,593 2,166 11,761 46,783

316,973 296,571 179,216 32,356 155,555

8,664

Total financial liabilities

1,189,116

1,500,430

980,671

8,664

11,443,775

11,256,107

7,764,894

The Credit Union 2020 Within 1 Month $’000

2 to 3 Months $’000

4 to 12 Months $’000

1 to 5 Years $’000

Over 5 Years $’000

Total contractual cash flows $’000

Carrying Amount $’000

Members’ deposits 5,172,979 Members’ voluntary shares 3,639,615 Deferred shares 178,905 Lease liabilities 1,547 Accounts payable 219,426 External credits 6,805

1,232,348 3,819 3,176 12,174

1,572,773 46,454 14,510 52,401

103,087 346,843 27,350 135,112

15,321

8,081,187 4,036,731 178,905 46,583 219,426 221,813

7,922,733 4,026,664 178,569 45,021 219,946 201,641

Total financial liabilities

1,251,517

1,686,138

612,392

15,321

2,784,645

12,594,574

9,219,277

118

Financial risk management (continued) (b)

Liquidity risk (continued) The Credit Union 2019 Within 1 Month $’000

2 to 3 Months $’000

4 to 12 Months $’000

1 to 5 Years $’000

Over 5 Years $’000

Total contractual cash flows $’000

Carrying Amount $’000

Members’ deposits 4,175,829 Members’ voluntary shares 3,316,965 Deferred shares 2,513 Lease liabilities 1,258 Accounts payable 214,426 External credits 6,564

1,172,790 2,413 2,569 11,344

1,393,127 46,593 2,166 11,761 46,783

316,973 296,571 179,216 32,356 155,555

8,664

7,058,719 3,662,542 183,895 47,944 214,426 228,910

6,920,313 3,653,408 179,102 44,172 214,426 197,347

Total financial liabilities

1,189,116

1,500,430

980,671

8,664

11,396,436

11,208,768

7,717,555

Assets available to meet all of the liabilities and to cover outstanding loan commitments include cash, deposits, short-term investments, and resale agreements. In the normal course of business, a proportion of customer loans contractually repayable within one year will be extended. The members’ voluntary shares are contractually on call except in cases where these balances are held as security for loan facilities. Items not carried on the statement of financial position At December 31, 2020, the Group’s commitment to extend credit to its members, in respect of loans approved but not yet disbursed, amounted to $51,994,000 (2019: $66,855,000).

119

(c)

Market risk The Group 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 risks mainly arise from changes in foreign currency exchange rates, interest rates and other prices. 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 evaluated using sensitivity analysis. Currency risk Currency or foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates, and arises mainly from the Credit Union’s cambio operations. The Group has no significant exposure to currency risk as less than ½% of net financial assets is maintained in foreign currencies at any given time during the year.

Financial risk management (continued) (c)

Market risk (continued) Currency risk (continued) The Treasury Committee has approved limits on the level of exposure by currency and in aggregate. These limits may vary from time to time as determined by the Treasury Committee. 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 and deposits. Floating rate instruments expose the Group to cash flow interest rate risk, whereas fixed interest rate instruments expose the Group to fair value interest rate risk. The Group’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 liabilities. The Board sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored daily by the Treasury department. The following tables summarise the Group and Credit Union’s exposure to interest rate risk. They include the Group and Credit Union’s financial instruments at carrying amounts, categorized by the earlier of contractual repricing of maturity dates. The Group 2020 Within 1 Month $’000 Financial assets Resale agreements Financial investments Loans to members Cash in hand and at bank Accounts receivable Total financial assets Financial liabilities Members’ deposits Members’ voluntary shares Deferred shares Lease liabilities Accounts payable External credits

2 to 3 Months $’000

4 to 12 Months $’000

1 to 5 Years $’000

Over 5 Years $’000

Non-interest bearing $’000

Total $’000

987,491 30,000 59,234 -

1,031,774 60,000 13,817 -

460,000 504,440 154,633 1,370,971 267,787 4,521,659 4,519,118 169,600 163,781

1,076,725

1,105,591

727,787 5,026,099 4,673,751 1,704,352 14,314,305

5,172,614

1,208,184

1,541,935

4,026,664 178,569 1,556 5,663

3,183 10,925

14,325 47,409

25,957 123,192

14,452

2,019,265 2,580,044 9,381,615 169,600 163,781

7,922,733

269,231 -

4,026,664 178,569 45,021 269,231 201,641

Total financial liabilities 9,385,066 1,222,292 1,603,669 149,149 14,452 269,231 12,643,859 Total interest rate sensitivity gap (8,308,341) ( 116,701) ( 875,882) 4,876,950 4,659,299 1,435,121 1,670,446 Cumulative gap

(8,308,341) (8,425,042) (9,300,924) (4,423,974)

235,325 1,670,446

120

Financial risk management (continued) (c)

Market risk (continued) Interest rate risk (continued) The Group 2019 Within 1 Month $’000

2 to 3 Months $’000

4 to 12 Months $’000

1 to 5 Years $’000

Over 5 Years $’000

Non-interest bearing $’000

Total $’000

Financial assets Liquid assets deposits Resale agreements Financial investments Loans to members Cash in hand and at bank Accounts receivable

7,971 827,213 128,097 -

723,826 26,221 -

143,464 334,500 1,224,280 258,973 4,368,534 4,122,220 -

470,089 99,783 147,001

Total financial assets

963,281

750,047

402,437 4,703,034 5,346,500

716,873 12,882,172

Financial liabilities Members’ deposits Members’ voluntary shares Deferred shares Lease liabilities Accounts payable External credits

4,404,708 3,653,408 2,069 1,258 5,503

1,149,794 1,365,811 2,569 9,335

11,761 38,684

177,033 28,584 135,841

7,984

Total financial liabilities 8,066,946 1,161,698 1,416,256 341,458 7,984 Total interest rate sensitivity gap (7,103,665) ( 411,651) (1,013,819) 4,361,576 5,338,516 Cumulative gap

261,765 -

6,920,313 3,653,408 179,102 44,172 261,765 197,347

261,765 11,256,107 455,108

(7,103,665) (7,515,316) (8,529,135) (4,167,559) 1,170,957 1,626,065

121

7,971 1,551,039 2,172,333 8,904,045 99,783 147,001

1,626,065 -

The Credit Union 2020 Within 1 Month $’000

2 to 3 Months $’000

4 to 12 Months $’000

1 to 5 Years $’000

987,491 30,000 59,234 793 -

1,031,774 60,000 13,817 1,590 -

460,000 267,787 7,201 -

469,733 4,521,659 31,673 -

110,377 4,519,118 -

1,272,830 17,026 120,982 157,836

2,019,265 2,402,940 9,381,615 17,026 41,257 120,982 157,836

Total financial assets carried forward 1,077,518

1,107,181

734,988

5,023,065

4,629,495

1,568,674

14,140,921

Financial assets Resale agreements Financial investments Loans, after provision Due from subsidiary Loan to subsidiary Cash in hand and at bank Accounts receivable

Over 5 Years $’000

Non-Interest Bearing $’000

Total $’000

Financial risk management (continued) (c)

Market risk (continued) Interest rate risk (continued)

The Credit Union 2020

Total financial assets brought forward Financial liabilities Members’ deposits Members’ voluntary shares Deferred shares Lease liabilities Accounts payable External credits Total financial liabilities

Within 1 Month $’000

2 to 3 Months $’000

4 to 12 Months $’000

1 to 5 Years $’000

Over 5 Years $’000

Non-Interest Bearing $’000

Total $’000

1,077,518

1,107,181

734,988

5,023,065

4,629,495

1,568,674

14,140,921

5,172,614

1,208,184

1,541,935

7,922,733

4,026,664 178,569 1,556 5,663

3,183 10,925

14,325 47,409

25,957 123,192

14,452

219,946 -

4,026,664 178,569 45,021 219,946 201,641

9,385,066

1,222,292

1,603,669

149,149

14,452

219,946

12,594,574

4,873,916

4,615,043

1,348,728

1,546,347

197,619

1,546,347

Over 5 Years $’000

Non-Interest Bearing $’000

Total $’000

Total interest rate sensitivity gap

(8,307,548)

( 115,111) ( 868,681)

Cumulative gap

(8,307,548)

(8,422,659) (9,291,340) (4,417,424) 2019

Financial assets Liquid assets deposits Resale agreements Financial investments Loans, after provision for loan impairment Due from subsidiary Loan to subsidiary Cash in hand and at bank Accounts receivable Total financial assets Financial liabilities Members’ deposits Members’ voluntary shares Deferred shares Lease liabilities Accounts payable External credits Total financial liabilities

Within 1 Month $’000

2 to 3 Months $’000

4 to 12 Months $’000

1 to 5 Years $’000

7,971 827,213 -

723,826 -

140,004

311,752

1,158,052

344,771

7,971 1,551,039 1,954,579

128,097 773 -

26,221 1,550 -

258,973 7,032 -

4,368,534 37,752 -

4,122,220 3,383 -

4,770 76 86,439 141,171

8,904,045 4,770 50,566 86,439 141,171

964,054

751,597

406,009

4,718,038

5,283,655

577,227

12,700,580

4,404,708 3,653,408

1,149,794 -

1,365,811 -

6,920,313 3,653,408

2,069 1,258 5,503

2,569 9,335

11,761 38,684

177,033 28,584 135,841

7,984

214,426 -

179,102 44,172 214,426 197,347

8,066,946

1,161,698

1,416,256

341,458

7,984

214,426

11,208,768

4,376,580

5,275,671

362,801

1,491,812

1,129,011

1,491,812

Total interest rate sensitivity gap

(7,102,892)

( 410,101) (1,010,247)

Cumulative gap

(7,102,892)

(7,512,993) (8,523,240) (4,146,660)

122

Financial risk management (continued) (c)

Market risk (continued) Interest rate sensitivity The following table indicates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, on the Group’s net surplus and other components of equity. The sensitivity of the net surplus is the effect of the assumed changes in interest rates on net surplus based on the floating rate financial assets and financial liabilities. The sensitivity of other components of equity is calculated by revaluing fixed-rate availablefor-sale financial assets for the effects 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 each variable, variables had to be tested on an individual basis. It should be noted that movements in these variables are non-linear. The Group

2020

123

Change in basis points: -100 basis points (2019: -100 basis points) +100 basis points (2019: +100 basis points)

2019

Effect on Surplus $’000

Effect on Other Comprehensive Income $’000

Effect on Surplus $’000

Effect on Other Comprehensive Income $’000

15,311

(13,667)

(14,424)

(13,880)

The Credit Union 2020

Change in basis points: -100 basis points (2019: -100 basis points) +100 basis points (2020: -100 basis points)

2019

Effect on Surplus $’000

Effect on Other Comprehensive Income $’000

Effect on Surplus $’000

Effect on Other Comprehensive Income $’000

11,227

13,667

(10,652)

(12,880)

Financial risk management (continued) (c)

Market risk (continued) Interest rate sensitivity (continued) Average effective yields by earlier of the contractual re-pricing or maturity dates: The Group 2020 Immediately rate sensitive % Earning assets Resale agreements Loans to members¹ Financial investments Interest bearing liabilities Members’ deposit ² External credit ² Voluntary shares² Deferred shares²

Within 3 Months %

3 to 12 Months %

1 to 5 Years %

Over 5 Years %

Weighted Average %

3 16 4

3 27 4

33 6

18 8

12 10

3 16 4

2 7 0.25 2

2 7 -

7 -

2 7 0.25 2

Within 3 Months %

3 to 12 Months %

2019 Immediately rate sensitive % Earning assets Liquid assets deposits Resale agreements Loans to members¹ Financial investments Interest bearing liabilities Members’ deposit ² External credit ² Voluntary shares² Deferred shares²

2 3 17 4 2 7 0.25 -

1 to 5 Years %

Over 5 Years %

3 35 4

36 6

28 7

14 10

2 7

Weighted Average %

2 3 17 4 2 7 0.25 2

124

Financial risk management (continued) (c)

Market risk (continued) Interest rate sensitivity (continued) Average effective yields by earlier of the contractual re-pricing or maturity dates (continued): The Credit Union 2020 Immediately Within 3 rate sensitive Months % % Earning assets Resale agreements Loans ¹ Financial investments Interest bearing liabilitiesMembers’ deposit ² External credit ² Voluntary shares² Deferred shares²

3 to 12 Months %

1 to 5 Years %

Over 5 Years %

Weighted Average %

3 16 6

3 27 3

33 5

18 7

12 10

3 16 6

2 7 0.25 2

2 7 -

7 -

2 7 0.25 2

3 to 12 Months %

1 to 5 Years %

Over 5 Years %

Weighted Average % 2 3 17 4

2019 Immediately Within 3 rate sensitive Months % %

125

Earning assets Liquid assets deposits Resale agreements Loans ¹ Financial investments Interest bearing liabilitiesMembers’ deposit ² External credit ² Voluntary shares Deferred shares

2 3 17 4

3 35 4

36 6

28 7

14 10

2 7 0.25 -

2 7

2 7 0.25 2

¹Yields are based on book values, net of allowances for credit losses and contractual interest rates. ²Yields are based on contractual interest rates.

Other price risk Price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices (other than those arising from currency risk and interest rate risk), whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market.

Financial risk management (continued) (c) Market risk (continued) Equity price risk Equity price risk arises from available-for-sale equity securities held by the Group as part of its investment portfolio. Management monitors the mix of debt and equity securities in its investment portfolio based on market expectations. The primary goal of the Group’s investment strategy is to maximise return on investment while minimising risks. The Group’s equity portfolio consists of equities listed on the Jamaica Stock Exchange. A 5% increase and 10% decrease (2019: +/ - 10%) in quoted bid prices at the reporting date would result in an increase in equity by $12,152,700 (2019: $31,272,130) and decrease in equity by $24,304,800 (2019: $31,272,130) for the Group and increase in equity by $7,435,600 (2019: $19,131,300) and decrease in equity by $14,871,200 (2019: $19,131,300) for the Credit Union. (d) Capital management The Group’s objectives when managing institutional capital, which is a broader concept than the ‘equity’ on the face of the statement of financial position, are: Credit Union (i)

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

(ii)

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

(iii) To maintain a ratio of 8% permanent capital to total assets; (iv)

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

(v)

To maintain a strong capital base to support the development of its business through the allocation of 20% of net surplus to institutional capital annually.

FHC Investments Limited (i)

To comply with the capital requirements set by the Financial Services Commission;

(ii)

To maintain a capital to total assets ratio of 6% or greater;

(iii) To maintain a capital base to risk weighted assets ratio of 10% or greater. Capital adequacy and the use of regulatory capital are monitored by the Group’s management, based on the guidelines in its Capital Asset Management Policy.

126

Financial risk management (continued) (d) Capital management (continued) The League currently requires member credit unions to maintain a minimum level of institutional capital at 8% of total assets. The proposed Bank of Jamaica regulations require the League to ensure that member institutions: (i)

Hold a minimum level of the regulatory capital of 6% of total assets; and

(ii)

Maintain a ratio of total regulatory capital to risk-weighted assets at or above 10%.

The table below summarises the Group’s composition of regulatory capital and capital ratios at the reporting date. During the year, the Group complied with all externally imposed capital requirements:

Actual $’000

Total regulatory capital Risk-weighted assets: Total risk weighted assets

127

2020

1,695,898

The Credit Union Required $’000

909,189

12,499,352

Actual $’000

2019

1,635,005

Required $’000

819,753

11,630,064

Risk based capital adequacy ratio

14.82%

10.00%

15.30%

10.00%

Regulatory capital to total assets ratio

11.19%

6.00%

11.97%

6.00%

In determining the Credit Union's capital base (institutional capital), the institutional capital of acquired credit unions as at the date of merger are included. Churches Group Credit Union Limited (Churches) and GSB Group Credit Union Limited (GSB) were merged to form First Heritage Group Credit Union Limited (the Credit Union) on August 1, 2012 and GSB was determined to be the acquiree. St. Thomas Group Credit Union (STCCU) was merged with the Credit Union as at March 1, 2015. As at the date of amalgamation or transfer of engagement, the institutional capital of the acquired entities included the following balances: GSB STCCU $’000 $’000 Statutory reserve Retained earnings reserve

189,533 154,513

70,714 -

344,046

70,714

Financial risk management (continued) (d) Capital management (continued)

Actual $’000

2020

FHC Investments Limited 2019 Required Actual Required $’000 $’000 $’000

Total regulatory capital

141,985

70,805

144,031

Total assets

252,577

254,983

Total risk weighted assets

286,137

298,409

72,016

Capital to total assets

56%

57%

Capital base to risk weighted assets

50%

10%

48%

10%

(e) Fair values of financial instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial instruments are grouped into levels 1 to 3 based on the degree to which the fair value inputs are observable, as follows: 

Level 1: Quoted prices (unadjusted) in active markets for identical instruments.



Level 2: Discounted cash flow techniques using a discount rate from observable market date, i.e., average of several brokers/dealers market indicative yields in active markets for identical assets or liabilities.



Level 3: Valuation techniques using significant unobservable inputs.

There were no transfers between levels during the year. Accounting classifications and fair values The following table shows the carrying amounts and fair values of financial assets and liabilities, including their levels in the fair value hierarchy. The tables do not include fair value information for financial assets and liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

128

Financial risk management (continued) (e)

Fair values of financial instruments (continued) Accounting classifications and fair values (continued)

Financial assets measured at fair value Financial investments (note 15) Financial assets for which fair values are disclosed Loans and advances (note 16) Financial investments measured at amortised cost (note 15)

Financial assets measured at fair value Financial investments (note 15)

129

Financial assets for which fair values are disclosed Loans and advances (note 16) Financial investments measured at amortised cost (note 15)

Financial assets measured at at fair value Financial investments (note 15) Financial assets for which fair values are disclosed Loans and advances (note 16) Financial investments measured at amortise cost (note 15)

Carrying amount $’000

Level 1 $’000

The Group 2020 Fair value Level 2 Level 3 $’000 $’000

1,700,499 243,248 1,370,140

Total $’000

87,111

1,700,499

9,381,615

9,315,089

879,545

895,829

Carrying amount $’000

Level 1 $’000

The Group 2019 Fair value Level 2 Level 3 $’000 $’000

1,783,032 312,722 1,389,534

Total $’000

80,776

1,783,032

8,904,045

8,333,774

389,301

401,519

Carrying amount $’000

The Credit Union 2020 Fair value Level 1 Level 2 Level 3 $’000 $’000 $’000

1,523,395 148,713 1,287,571

Total $’000

87,111

1,523,395

9,381,615

9,315,089

879,545

895,829

Financial risk management (continued) (e) Fair values of financial instruments (continued) Accounting classifications and fair values (continued)

Financial assets measured at at fair value Financial investments (note 15)

Carrying amount $’000

The Credit Union 2019 Fair value Level 1 Level 2 Level 3 $’000 $’000 $’000

1,565,278 191,312 1,293,190

Financial assets for which fair values are disclosed Loans and advances (note 16) 8,904,045 Financial investments measured at amortise cost (note 15) 389,301

Total $’000

80,776

1,565,278

8,333,774

401,519



The fair value of liquid assets, resale agreements, cash and bank balances, accounts receivable and other liabilities maturing within one year is assumed to approximate their carrying amount. This assumption is applied to liquid assets and the short-term elements of all other financial assets and liabilities;



The fair value of time deposits and savings deposits, with no specific maturity is assumed to be the amount payable on demand at the reporting date;



The fair value of variable rate financial instruments is assumed to approximate their carrying amounts, as they are frequently repriced to current market rates; and



The carrying values of deferred shares, repurchase agreements and external credits approximates their fair values, as these liabilities are carried at amortised cost reflecting their contractual obligations and the interest rates are reflective of current market rates for similar transactions.

130

Financial risk management (continued) (e) Fair values of financial instruments (continued) Valuation techniques and inputs The valuation techniques used in measuring level 2 fair values, as well as the significant unobservable inputs used are as follows: Type

131

Valuation technique

Government of Jamaica securities

The valuation model is based on yields derived from pricing services which may include data not observed in actual market transaction but indicative information.

Government of Jamaica US$ Global bonds and other Caricom Government securities

Prices of bonds at reporting date as quoted by broker/dealer, where available.

Corporate bonds

Estimated using bid-prices published by major brokers/dealers.

Investments in unit trusts

Prices of units at reporting date as quoted by broker.

Level 3 fair value measurement Unquoted equities – fair value through OCI These shares represent investments that the Credit Union intends to hold long term for strategic purposes and are not actively traded. These shares were measured at fair value on initial recognition and subsequently where their value cannot be measured reliably, the assets are measured at the carrying amount determined at the last date on which the fair value could be determined reliably. In the current financial year, the fair value of these assets has been estimated taking into consideration of net asset value per share based on the most recent published financials. These assets are categorised at Level 3 in the fair value hierarchy given the lack of visibility of these valuation variables.

Financial risk management (continued) (e) Fair values of financial instruments (continued) Valuation techniques and inputs (continued) Loans and advances The fair values are estimated using valuation models such as discounted cash flow techniques using current market rates as at balance date. For variable rate loans, excluding impaired loans, the amortised cost is a reasonable estimate of the net fair value. The discount rates applied were based on the current benchmark rate for fixed rate loans being offered on terms with a similar remaining period. Financial assets at amortised cost Financial assets – amortised cost comprise of investments and securities where cash flows arise on specified contractual dates, and the underlying terms can range anywhere from short to long term. They are categorised across Level 2 and Level 3 in the fair value hierarchy. Fair value is estimating utilising valuation models such as discounted cash flow techniques using current market rates as at balance date, and observable market data on capital pricing for similar instruments.

Interest expense on external credits

The Group and the Credit Union 2020 2019 $’000 $’000

Development Bank of Jamaica Limited 7.

12,946

10,976

132

Fee and commission income

Loan processing fees Late payment and other fees Accounts maintenance Family indemnity plan Life saving and loan protection Management fees Standing orders Statements and credit information

The Group 2020 2019 $’000 $’000

The Credit Union 2020 2019 $’000 $’000

91,755 46,687 59,329 34,927 8,206 45,068 7,880 666

112,326 50,887 58,782 32,026 8,120 43,523 7,523 1,380

91,755 44,467 59,329 34,927 8,206 4,800 7,880 666

112,326 51,408 58,782 32,026 8,120 4,800 7,524 1,380

294,518

314,567

252,030

276,366

Other income

Foreign exchange gains Rental Other

133

Operating expenses

The Group 2020 2019 $’000 $’000

The Credit Union 2020 2019 $’000 $’000

7,264 2,702 1,976

5,918 1,949 1,222

5,063 1,976

4,884 1,222

11,942

9,089

7,039

6,106

The Group 2020 2019 $’000 $’000

The Credit Union 2020 2019 $’000 $’000

Depreciation – Property, plant and equipment (note 18) 31,732 Depreciation – Right-of-use assets (note 19)17,449 Amortisation of intangible assets(note 20) 13,969 Audit fees 12,443 Data processing 39,027 Insurance 52,928 Legal and professional fees 22,441 Marketing and promotion 33,875 Operating and premises equipment 44,611 Other administration 78,800 Repairs and maintenance 19,022 Representation and affiliation 45,079 Security 27,172 14,142 Stationery and printing supplies Staff costs (note 10) 837,701 Telecommunications and postage 25,374

28,143 15,429 13,969 10,551 28,865 51,923 11,679 49,285 45,392 65,023 24,190 54,359 28,245 15,191 826,288 22,108

31,709 17,449 13,969 10,793 39,027 51,978 22,441 31,046 44,611 70,818 19,022 44,403 27,172 14,142 798,591 25,374

28,143 15,429 13,969 9,051 28,865 50,973 10,329 47,174 45,392 63,921 24,190 50,770 28,245 14,739 788,029 21,985

1,315,765

1,290,640

1,262,545

1,241,204

10. Staff costs

Salaries and wages Statutory contributions Employee benefits [note 21(f)] Other staff benefits

The Group 2020 2019 $’000 $’000

The Credit Union 2020 2019 $’000 $’000

613,658 73,453 9,120 141,470

576,853 67,209 12,262 169,964

582,435 70,173 9,120 136,863

547,030 64,179 12,262 164,558

837,701

826,288

798,591

788,029

Taxation in the subsidiary is based on the surplus for the year adjusted for taxation purposes and comprises: The Group 2020 2020 $’000 $’000 (i) Current year income tax (ii) Deferred income tax (note 22) Tax losses Origination and reversal of temporary differences

250

2,752

1,306 7,518

3,611 ( 467)

8,824

3,144

9,074

5,896

(b) Reconciliation of applicable tax charge to effective tax charge: A charge for income tax arises on the income of the subsidiary. The Credit Union is exempt from tax under Section 59(1) of the Co-operative Societies Act and Section 12 of the Income Tax Act. 2020 $’000

The Group

2019 $’000

Surplus before taxation

94,905

318,550

Tax calculated at a tax rate of 33⅓% Surplus of credit union and other income not subject to tax Expenses not deductible for tax purposes Corporate tax credit Other deductible for tax purpose, net

31,635

106,174

(35,400) 17,235 ( 375) ( 4,021)

( 91,138) 1,149 ( 10,289)

9,074

5,896

(b) Subject to agreement with the Commissioner General, Tax Administration Jamaica, losses available for offset against future taxable surplus of the subsidiary amounted to approximately $10,620,000 (2019: $14,538,000). Tax losses may be carried forward indefinitely. However, the maximum amount that can be utilised in any one year is restricted to 50% of the taxable surplus for that year.

134

7,971

All deposits are expected to mature within 12 months from the end of the financial year. 14. Resale agreements The Group enters into resale agreements collateralised by Government of Jamaica securities. These agreements may result in credit exposure in the event that the counterparty to the transaction is unable to fulfil its collateral obligations. At December 31, 2020, securities totaling $ 2,453,227,405 (2019: $1,622,293,634) for the Group and for the Credit Union, representing Government of Jamaica debt securities were held as collateral for resale agreements. The balance for resale agreements at December 31, 2020 includes interest accrued totaling $9,352,200 (2019: $6,895,400) for the Group and the Credit Union. All resale agreements are expected to mature within 12 months from the end of the financial year. The Group and the Credit Union recognised impairment losses on resale agreements aggregating to $1,639,500 (2019: $898,500) as at the reporting date. Accordingly, an impairment charge of $741,000 (2019: $ 354,000) was recognised in the statement of surplus or deficit and other comprehensive income.

135

15. Financial investments

Fair value through OCI: Government of Jamaica securities (a) Corporate bonds Unquoted equities: Centralised Strategic Services Limited Jamaica Co-operative Insurance Agency Limited Credit Union Fund Management Company Limited Quality Network Co-operative Limited (“QNET”) (b)

The Group 2020 2019 $’000 $’000 318,699 70,026

324,071 182,488

The Credit Union 2020 2019 $’000 $’000 308,536 -

315,517 97,272

648

23,755

23,556

23,755

23,556

27,973

21,839

27,973

21,839

441,121

551,954

360,932

458,184

Impairment provision on investments at amortised cost Maturity: Due within 1 year Due after 1 year No set maturity

(

The Credit Union 2020 2019 $’000 $’000

155,619 329,348

163,202 -

155,619 329,348

163,202 -

110,378 292,810

107,650 125,543

110,378 292,810

107,650 125,543

888,155

396,395

888,155

396,395

34,715 243,248

35,381 312,722

34,715 148,713

35,381 191,312

981,415

882,975

979,035

880,401

1,259,378

1,231,078

1,162,463

1,107,094

2,588,654

2,179,427

2,411,550

1,961,673

8,610) (

7,094) (

8,610) (

7,094)

2,580,044

2,172,333

2,402,940 1,954,579

550,000 659,073 1,370,971

143,464 1,558,780 470,089

550,000 140,004 580,110 1,469,804 1,272,830 344,771

2,580,044

2,172,333

2,402,940 1,954,579

(a)

Government of Jamaica securities include interest receivable amounting to $8,157,818 (2019: $8,040,158) for the Group and $8,018,466 (2019: $7,915,110) for the Credit Union.

(b)

The QNET investment represents a 11.2% ownership investment by the Credit Union. QNET will provide information services to participating credit unions. In total, it is projected that the participating credit unions will account for 80% of the cost of the project and the remaining 20% will be funded by the League.

(c)

These investments represent investments in League’s Mortgage Fund instruments and are used to secure joint mortgage facilities, which are extended to members of the Credit Union.

136

The rules of the League stipulate that a minimum of 1,000,000 shares must be held with the League for the Credit Union to retain membership status.

(e)

The rule of the League stipulate that the Credit Union must invest a minimum of 2% of the member savings deposits in CuCash Money Market Funds.

16. Loans to members (a)

Movement in loans to members during the year: The Group and the Credit Union 2020 2019 $’000 $’000 Balance at beginning of year Disbursements

8,904,045 4,213,056

8,044,332 4,809,032

Repayments

13,117,101 ( 3,349,426)

12,853,364 ( 3,613,607)

Provision for impairment losses

(

Interest accrued

137 Maturity: Due within the 1 year Due after 1 year

(b)

9,767,675 447,628)

(

9,239,757 402,597)

9,320,047 61,568

8,837,160 66,885

9,381,615

8,904,045

The Group and the Credit Union 2020 2019 $’000 $’000 340,838 9,040,777

413,291 8,490,754

9,381,615

8,904,045

Delinquent loans At December 31, 2020, there were 901 (2019: 982) delinquent loans aged two months and over. The total loan loss provision derived below is consistent with the loan loss provisioning rules of the League. The excess of the League’s provision over the IFRS provision is dealt with through a transfer from accumulated surplus to a non-distributable loan loss reserve as indicated in note 16(c).

Loans to members (continued) (b)

Delinquent loans (continued): Delinquent loans are summarised as follows:

Months in Arrears 2 - 2.9 3 - 5.9 6 - 11.9 >12

Months in Arrears 2 - 2.9 3 - 5.9 6 - 11.9 >12 (c)

The Group and the Credit Union 2020 Total Loan Savings Balance Held Exposure $’000 $’000 $’000

Loan Loss Provision $’000

139 233 339 190

103,812 213,167 153,316 282,594

6,880 7,920 4,987 2,063

96,932 205,247 148,329 280,531

10,381 63,950 91,990 282,594

901

752,889

21,850

731,039

448,915

The Group and the Credit Union 2019 Total Loan Savings Balance Held Exposure $’000 $’000 $’000

Loan Loss Provision $’000

147 256 363 216

75,135 113,300 144,853 311,568

3,904 4,138 2,769 1,644

71,231 109,162 142,084 309,924

7,514 33,990 86,912 311,568

982

644,856

12,455

632,401

439,9834

Number of Loans

Impairment allowance and loan loss provision:

Impairment allowance at beginning of the year Additional amounts recognised during the year Bad debts written-off

% 10 30 60 100

The Group and the Credit Union 2020 2019 $’000 $’000 402,597 209,143 (164,112)

429,380 91,238 (118,021)

Allowance for impairment at the end of the year (IFRS) Excess of PEARLS provision over IFRS transfer from accumulated surplus to loan loss reserve [note 30(b)]

447,628

402,597

1,287

37,387

Total loan loss provision

448,915

439,984

209,143 ( 35,161)

91,238 ( 28,831)

173,982

62,407

IFRS impairment losses recognised for the year: Impairment recognised during the year Bad debts recovered Net impairment for the year

138

Accounts receivable

The Group 2020 2019 $’000 $’000 72,098 56,968 20,440 20,226 19,824 14,606 2,012 2,012 49,407 53,189

Prepayments CUETS security deposit Collectors’ fees Rent receivable Other

163,781

The Credit Union 2020 2019 $’000 $’000 69,750 55,796 20,440 20,226 19,824 14,606 2,012 2,012 45,810 48,531

147,001

157,836

141,171

All accounts receivable are expected to be settled within 12 months from the end of the financial year. 18.

Property, plant and equipment

Computer Equipment $’000

The Group Furniture, Fixtures and Equipment $’000

Motor Vehicles $’000

Capital Work in Progress $’000

Total $’000

284,142 -

252,660 5,034 3,379 -

256,144 18,310 4,420 -

2,259 -

10,260 7,168 ( 7,799) ( 1,002)

805,465 30,512 ( 1,002)

At December 31, 2019 Additions Transfers Write-off

284,142 -

261,073 42,624 2,577 -

278,874 7,631 322 -

2,259 -

8,627 40,665 ( 2,899) ( 1,465)

834,975 90,920 ( 1,465)

At December 31, 2020

284,142

306,274

286,827

2,259

44,928

924,430

Accumulated depreciation: At December 31, 2018 Charge for the year

63,923 5,812

219,505 9,257

206,648 13,011

2,100 63

492,176 28,143

At December 31, 2019 Charge for the year

69,735 5,796

228,762 12,421

219,659 13,451

2,163 64

520,319 31,732

At December 31, 2020

75,531

241,183

233,110

2,227

552,051

Net book values: December 31, 2020

208,611

65,091

53,717

44,928

372,379

December 31, 2019

214,407

32,311

59,215

8,627

314,656

Cost: At December 31, 2018 Additions Transfers Write-off

139

Freehold Land and Buildings $’000

Property, plant and equipment (continued)

Computer Equipment $’000

284,142 -

252,660 5,034 3,379 -

256,144 18,310 4,420 -

2,259

284,142

261,073

278,874

42,511 2,577 -

7,631 322 -

At December 31, 2020

284,142

306,161

Accumulated depreciation: At December 31, 2018 Charge for the year

63,923 5,812

At December 31, 2019 Charge for the year At December 31, 2020

Cost: At December 31, 2018 Additions Transfers Write-off At December 31, 2019 Additions Transfers Write-off

19.

The Credit Union Furniture, Fixtures and Motor Equipment Vehicles $’000 $’000

Freehold Land and Buildings $’000

Capital Work in Progress $’000

Total $’000

10,260 7,168 ( 7,799) ( 1,002)

805,465 30,512 ( 1,002)

2,259

8,627

834,975

40,665 ( 2,899) ( 1,465)

90,807 ( 1,465)

286,827

2,259

44,928

924,317

219,505 9,257

206,648 13,011

2,100 63

492,176 28,143

69,735 5,796

228,762 12,398

219,659 13,451

2,163 64

520,319 31,709

552,028

75,531

241,160

233,110

2,227

Net book values: December 31, 2020

208,611

65,001

53,717

44,928

372,289

December 31, 2019

214,407

32,311

59,215

8,627

314,656

Right-of-use assets The Group and The Credit Union 2020 2019 $’000 $’000 Balance at the beginning of the year Recognition of right-of-use assets on initial application of IFRS 16 Additions for the year Depreciation charge for the year Balance at the year-end

42,114

17,439 (17,449)

57,543 (15,429)

42,104

42,114

140

Intangible assets

Goodwill $’000 Cost: December 31,2018,2019 and 2020 Accumulated amortisation: December 31, 2018 Amortisation charge for the year

The Group and the Credit Union Core Customer Brand Trademarks Deposits Relationships $’000 $’000 $’000 $’000

Total $’000

189,942

4,948

34,000

56,406

94,000

379,296

1,895 495

34,000 -

21,620 5,640

50,266 7,834

107,781 13,969

December 31, 2019 Amortisation charge for the year

2,390 495

34,000 -

27,260 5,640

58,100 7,834

121,750 13,969

December 31, 2020

2,885

34,000

32,900

65,934

135,719

Net book values: December 31, 2020

189,942

2,063

23,506

28,066

243,577

December 31, 2019

189,942

2,558

29,146

35,900

257,546

Impairment testing of goodwill is carried out by comparing the recoverable amount of the Group’s cash-generating unit (CGU) to which goodwill has been allocated, to the carrying amount of that CGU. In testing goodwill for impairment, the recoverable amount of CGU is estimated based on its value-in-use. The recoverable amount was arrived at by estimating their future cash flows and discounting those cash flows using long-term discount rates applicable to the country in which the businesses operate. Future sustainable cash flows are estimated based on the most recent forecasts, after taking account of past experience. In all cases projected cash flows are taken over 10 years and the long-term growth rate is applied following the immediately following year, within a terminal value calculated based on the discount rate and growth rate applied. Each cash generating unit is regarded as saleable to a third party at any future date at a price sufficient to recover its carrying amount of goodwill. Key assumptions are set out below:

141

2020 Discount rate Growth rate 21.

22.86% 2.50-5.00%

2019 27.50% 5.00%

Employee benefits asset The Group participates in a joint contributory pension plan, which is open to all permanent employees and operated by the Jamaica Group Credit Union League Limited. The plan provides benefits to members based on average earnings for their final 3 years of service, with the Credit Union and employees each contributing 5 - 12% of pensionable salaries. The plan was closed to new members effective December 31, 2016.

Employee benefits asset (continued) 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 triennially to determine the adequacy of funding. The latest such valuation as at December 31, 2019 revealed that the plan was adequately funded. (a) The employee benefits asset recognised in the statement of financial position was determined as follows: The Group and the Credit Union 2020 2019 $’000 $’000 Fair value of plan assets [note 21(c)] Present value of obligations [note 21(e)] Effect of asset ceiling [note 21(h)]

1,214,750 ( 952,633) ( 17,839)

Asset recognised in the statement of financial position

1,130,688 ( 849,993) ( 46,595)

244,278

234,100

(b) Movements in the net asset recognised in the statement of financial position: The Group and the Credit Union 2020 2019 $’000 $’000 Net assets at beginning of year Employers’ contributions Expense recognised in surplus or deficit (Note 10) Remeasurement recognised in other comprehensive icome [note 21(g)]

234,100 19,098 ( 9,120)

Net assets at end of year

206,314 19,983 ( 12,262)

200

20,065

244,278

234,100

(c) The movement in the fair value of plan assets during the year was as follows: The Group and the Credit Union 2020 2019 $’000 $’000 At beginning of year Interest income on plan assets Actuarial (losses)/gains on plan assets Contributions: Employer Employees Administrative expenses Benefits paid At end of year

1,130,688 85,545 ( 13,610)

( (

19,098 19,104 7,704) 18,371) 1,214,750

1,020,076 71,931 30,176

( (

19,983 19,545 6,501) 24,522) 1,130,688

142

Employee benefits asset (continued) (d) The plan assets are allocated based on the Group’s obligation as a proportion of the total obligation of the plan. The distribution of plan assets, by type of security was as follows:

2020 % Quoted equities Real estate Debentures Resale agreements US$ investments (Debentures and deposits) Other

(e)

The Group and the Credit Union Market value of assets 2019 %

Market value of assets

21 25 31 2 19 2

247,231 307,887 380,086 25,136 227,047 27,363

24 23 33 4 8 8

274,573 263,647 377,311 49,138 85,506 80,511

100

1,214,750

100

1,130,686

The movement in the present value of the defined benefit obligation during the year was as follows: The Group and the Credit Union 2020 2019 $’000 $’000

At beginning of year Current service cost Employees’ contributions Interest cost on plan obligations Actuarial losses/(gains) on obligations - experience adjustments - changes in demographic assumptions - changes in financial assumptions Benefits paid

143

At end of year

849,993 19,689 19,104 63,777

813,762 20,903 19,546 56,789

27,961 ( 9,520) ( 18,371)

( 2,717) 5,149 ( 38,917) ( 24,522)

952,633

849,993

Employer’s contributions to the plan for the year ended December 31, 2020 amount to $19,098,000 (2019: $19,983,000). (f)

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

Current service cost Interest cost on obligations Interest income on plan assets Interest effect of asset ceiling Administrative expenses Total included in staff costs (note 10)

The Group and the Credit Union 2020 2019 $’000 $’000 19,689 20,903 63,777 56,789 (85,545) ( 71,931) 3,495 7,704 6,501 9,120

12,262

Employee benefits asset (continued) (g)

The amounts recognised in other comprehensive income: The Group and the Credit Union 2020 2019 $’000 $’000 18,441 (36,485) 13,610 (30,175) (32,251) 46,595

Actuarial loss/(gain) on obligation Actuarial loss/(gain) on plan assets Change in effect of asset ceiling

(

(h)

(20,065)

Change in effect of asset ceiling The Group and the Credit Union 2020 2019 46,595 3,495 (32,251) 46,595

Effect of assets ceiling at beginning of period Interest on effect of asset ceiling Change in effect of asset ceiling Effect of asset ceiling at the end of period

(i)

200)

17,839

46,595

The principal actuarial assumptions used were as follows: The Group and the Credit Union 2020 2019 Discount rate Future salary increases Future pension increases Price inflation (CPI)

(j)

9.00% 6.50% 4.50% 6.00%

7.50% 5.00% 3.00% 4.00%

Impact on defined benefit obligation of 1% change in key economic assumptions: The change in the defined benefit obligation that would arise from a one percent (1%) change in each of the key economic assumptions is shown below. In determining the impact of each assumption, the others are held constant.

Assumptions Discount rate Future salary increases Future pension increases

Sensitivity Analysis of Key Economic Assumptions 2020 2019 +1% -1% +1% -1% $’000 $’000 $’000 $’000 (151,449) 79,093 103,608

200,565 ( 66,810) ( 86,646)

(139,858) 74,719 95,498

187,037 ( 62,638) ( 79,290)

144

Employee benefits asset (continued) (k)

Liability duration: Liability duration (years) 2020 2019

Category of participant Active members Deferred pensioners Retirees All participants

21.6 21.3 9.2 19.0

22.3 22.0 9.4 19.5

Liability duration can fluctuate significantly from year to year due to the inclusion of transfer values and additional voluntary contributions and differences in assumptions. (l)

Impact on defined benefit obligation of a one (1) year increase in life expectancy: The effect on the defined benefit obligation of an increase of one year in the life expectancy is about $25,340,000 (2019: $22,490,000).

22.

Deferred taxation The movement in deferred tax asset is as follows:

145

Property, plant and equipment Unrealised gains Accounts receivables Accounts payable Investments Tax losses

The Group Recognised Recognised in other in other Recognised comprehensive Recognised comprehensive 2018 in surplus income 2019 in surplus income 2020 $’000 $’000 $’000 $’000 $’000 $’000 $’000 (note 12) (note 12) ( 843) 32 3,086 8,457

474 ( 7) (3,611)

2,895 -

( 369) 25 5,981 4,846

9) ( (7,531) 31 ( 9) (1,306)

(1,592) -

10,732

(3,144)

2,895

10,483

(8,824)

(1,592)

( 9) ( 7,531) ( 338) 16 4,389 3,540 67

The deferred tax charged to other comprehensive income during the year arises on unrealised gains on FVOCI investments.

Members’ deposits

Regular deposits: Balance at beginning of the year Deposits and transfers

3,592,616 12,249,881

3,441,066 16,444,351

15,842,497 (11,848,813)

19,885,417 (16,292,801)

At end of year Special fixed deposits

3,993,684 3,873,616

3,592,616 3,278,524

Interest accrued

7,867,300 55,433

6,871,140 49,173

7,922,733

6,920,313

7,821,668 101,065

6,715,752 204,561

7,922,733

6,920,313

Withdrawals and transfers

Maturity: Due within the 1 year Due after 1 year

24.

Members’ voluntary shares

Balance at the beginning of the year Shares deposited Shares withdrawn Maturity: Due within the 1 year Due after 1 year

25.

The Group and the Credit Union 2020 2019 $’000 $’000

The Group and the Credit Union 2020 2019 $’000 $’000 3,653,408 3,191,207 (2,817,951)

3,297,801 3,264,003 (2,908,396)

4,026,664

3,653,408

3,680,686 345,978

3,357,577 295,831

4,026,664

3,653,408

Deferred shares These shares were issued in 2016 in an effort to increase the Credit Union’s capital. They are not withdrawable before January 31, 2021 and bears interest of 9% per annum in the first year and thereafter, at 100 basis points above the prevailing six-month Treasury bill yield. The deferred shares are included in the capital base of the Credit Union for determining capital adequacy.

146

Deferred shares (continued) The Group and the Credit Union 2020 2019 $’000 $’000 Balance at the beginning of the year Add: Interest accrued

26.

Lease liabilities

Less than one year One to five years

27.

177,032 1,537

177,072 2,030

178,569

179,102

The Group and the Credit Union 2020 2019 $’000 $’000 18,386 26,635

14,704 29,468

45,021

44,172

1,291

1,699

(a)

Amount recognised in profit or loss: Interest on lease liabilities under IFRS 16

(b)

Amount recognised in statement of cash flows Principal repayments Related interest payments

16,590 1,291

13,371 1,699

Total cash outflow for lease

17,881

15,070

External credits

147

The Group and the Credit Union 2020 2019 $’000 $’000

Development Bank of Jamaica Limited (DBJ)

201,641

197,347

Maturity: Due within the 1 year Due after 1 year

60,213 141,428

53,522 143,825

201,641

197,347

These funds are for on-lending to small and medium enterprises to promote entrepreneurship. The payments for the funding to promote entrepreneurship are made on a monthly basis at rates ranging from 2% to 10% (2019: 4% to 10%).

The Credit Union 2020 2019 $’000 $’000

143,178 12,476 51,352 62,225

145,304 14,118 35,626 66,717

92,052 12,476 51,352 64,066

99,315 14,118 35,626 65,367

269,231

261,765

219,946

214,426

Amounts payable are contractually due within 12 months of the end of the financial year. 29.

Institutional capital

Permanent shares (a) Statutory reserve (b) Retained earnings reserve (c) Business combination reserve (d) Capital reserve and other reserves (e)

(a)

The Group and the Credit Union 2020 2019 $’000 $’000 333,753 548,061 220,753 831,521 20,338

320,494 524,895 195,753 831,521 19,603

1,954,426

1,892,266

Permanent shares Permanent shares are paid in cash and are not redeemable, but may be transferred or sold to another member. the Credit Union 2020 2019 $’000 $’000 Balance at the beginning of the year Additions during the year

320,494 13,259

307,007 13,487

333,753

320,494

Permanent shares are issued at a par value of $2,500 per share. They form part of the permanent capital in the Credit Union [note 3(s)]. The Credit Union paid a dividend of $12,387,000 for the current year. In the prior year, $11,830,000 dividends was declared.

148

Institutional capital (continued) (b)

Statutory reserve As required by the Co-operative Societies Act and the rules of the Credit Union, a minimum of twenty percent (20%) of the annual surplus, and amounts collected for entrance fees must be transferred to this reserve.

(c)

Retained earnings reserve This reserve represents amounts transferred annually from accumulated surplus and other appropriations as agreed by the members at the Annual General Meeting, in order to increase the institutional capital of the Credit Union.

(d)

Business combination reserve This represent the difference between the fair value of the net assets acquired and the deemed value for the shares issued on business combination.

(e)

Capital reserve and other reserves 

Capital reserve This reserve represents realised gains arising on the disposal of property, plant and equipment.



Permanent shares reserve This reserve represents a fund to facilitate the transfer of members permanent share capital. An amount is set aside from the surplus each year to build this fund.

149

30.

Non-institutional capital (a)

Employee benefit asset reserve This reserve was created to match the value of employee benefits asset of the Credit Union.

(b)

Loan loss reserve This represents the excess of loan provision required under the League’s regulatory requirements, over that which is required under IFRS. This amount is treated as an appropriation from accumulated surplus [see note 16(c)]. At the reporting date, the loan loss provision under IFRS 9 was less than the loan loss provision required by the League. Therefore, loan loss reserve as at the reporting date was $1,287,000.

Non-institutional capital (continued) (c)

Investment reserve This reserve represents unrealised gain or loss on investments measured at FVOCI, net of expected credit losses.

31.

Related party transactions and balances Related parties include directors and senior executives, all of whom are referred to as key management personnel as well as entities closely connected to them. The Credit Union entered into the following transactions with related parties: (a)

Directors, board committee members and staff members maintained the following balances with the Credit Union: The Group and the Credit Union 2020 2019 $’000 $’000 Directors and committee members: Shares and savings 28,502 28,165 Loans, including interest 118,217 85,023

Staff members: Shares and savings Loans, including interest

The Group and The Credit Union 20202 2019 $’000 $’000 146,390 367,095

102,888 357,767

At December 31, 2020 all loans owing by directors, committee members and staff were being paid in accordance with their loan agreements. (b)

The statement of financial position includes the following balances with related parties: The Credit Union 2020 2019 $’000 $’000 Subsidiary: Loan to subsidiary (i) 42,476 51,841 Due from subsidiary (ii) 17,026 4,770 Accounts payable 3,106 514 (i)

Loan subsidiary represents previously outstanding receivables to the credit union that was converted to a loan payable over ten (10) years through a promissory note.

(ii) Due from subsidiary arises from management services provided. The balance is unsecured, interest free and has no fixed payment date.

150

Related party transactions and balances (continued) (c)

The statement of surplus or deficit and other comprehensive income includes the following transactions with related parties: The Credit Union 2020 2019 $’000 $’000 Subsidiary: Income: Interest 785 1,116 Management fees 4,800 4,800 Rental and maintenance 2,361 2,301 Expense: Management fees and other

(d)

(7,350)

(5,818)

Short-term employee benefits of key management for the year, included in staff costs (note 10), are as follows: The Group and The Credit Union 2019 2019 $’000 $’000 Salaries and wages Statutory contributions Other staff benefits

48,032 3,693 12,854

42,446 3,270 9,166

64,579

54,882

The Credit Union 2020 2019 $’000 $’000

151 Salaries and wages Statutory contributions Other staff benefits

41,416 3,225 10,166

36,899 2,907 8,924

54,807

48,730

Key management comprises the Chief Executive Officer, General Manager-Finance & Treasury, General Manager – Credit Administration & Loan Risk, General Manager – FHC Investments Limited, General Manager – Human Resource Development.

The Credit Union Deposits $’000

Loans $’000

4,026,664 (4,026,664)

7,922,733 (7,922,733)

9,767,675 (9,767,675)

33. Insurance (a) Fidelity Insurance Coverage During the year, the Group had fidelity insurance coverage with CMFG Life Insurance Company Limited. The total premium for the year was $4,506,400 (2019: $5,352,900). (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 Limited. The total premium for the year was $38,686,400 (2019: $36,234,500). 34. Litigation and contingent liabilities The Group is subject to claims, disputes and legal proceedings, as part of the normal course of business. Provision is made for such matters, when, in the opinion of management, it is probable that a payment will be made by the Group, and the amount can be reasonably estimated. In respect of claims asserted against the Group which have not been provided for, management is of the opinion that such claims are either without merit, can be successfully defended or will result in exposure to the Group which is immaterial to both financial position and results of operations. 35. Managed funds The subsidiary acts as agent and earns fees for managing its clients’ funds on a non-recourse basis under management agreements. Although the subsidiary is the custodian of the securities which are purchased on behalf of its clients, and the subsidiary collects and distributes entitlements to the beneficial holders, it has no legal or equitable right or interest in these securities. Accordingly, the clients’ funds and the securities in which the clients' funds are invested have been excluded from the statement of financial position. At December 31, 2020, these funds amounted to $ 4,648,246,000 (2019: $4,169,005,000).

152

Financial Statements FIRST HERITAGE CO-OPERATIVE CREDIT UNION LIMITED (A Society Registered Under the Co-operative Societies Act) Notes to the Financial Statements (Continued) December 31, 2020 (Expressed in Jamaica dollars unless otherwise indicated) 36. Impact from COVID-19 The World Health Organization declared the novel Coronavirus (COVID-19) outbreak a pandemic on March 11, 2020 and the Government of Jamaica declared the island a disaster area on February 27, 2020. The pandemic and the measures to control its human impact have resulted in significant disruptions to economic activities, business operations and asset prices. In light of the heightened concerns and in accordance with the directives of the various governments, the Credit Union activated its Crisis Management Team (CMT) to formally initiate our crisis management plans to minimize the potential exposure to staff and clients, whilst ensuring that any disruption to the business is kept at a minimum. Subsequent to the activation of our CMT on March 9, 2020, specific remote work protocols were established and implemented to minimize the number of employees physically in office. In-office staff are equipped with hand sanitizers, masks and face shields (where necessary), and are required to comply with the social/physical distancing rules mandated by governments in the various jurisdictions. Furthermore, the Credit Union acquired additional equipment, including computer hardware and software, to support the increased flexible working arrangements. The Credit Union continues to monitor the impact of COVID-19 on its members/customers and has implemented forbearance measures inclusive of granting moratoria, which included deferral of loan payments for up to three months as required. The Credit Union ensures that its locations remain compliant with government/public health restrictions and mitigating measures. Under IFRS 9, businesses are expected to include the impact of forward-looking macroeconomic indicators in their Expected Credit Loss (ECL) computation as at December 31, 2020. Management continues to review the effect of developments arising from the pandemic on the risks faced by the Credit Union. Management believes the Credit Union is in a sufficiently strong position to deal with the possible significant economic downturn. However, management is aware that a long duration of the pandemic and the attendant containment measures could have a material adverse effect on the Credit Union, and its customers, employees and suppliers.

153

Supervisory Committee Report

Camelle Ricketts-Moore Chairperson

Jacqueline Roberts Member

Shauna-Kaye Gordon Secretary

Luke McIntosh Member

Geraldine Wright Member

THE COMMITTEE The Supervisory Committee assists the Board of Directors in the discharge of its responsibilities by providing oversight on aspects of the internal control system through the Internal Audit function. The members of the Supervisory Committee are elected from and by the wider membership at the Annual General Meeting. The standing members of the Supervisory Committee are: Mrs. Camelle Ricketts-Moore Ms. Jacqueline Roberts Ms. Shauna-Kaye Gordon Mr. Luke McIntosh Ms. Geraldine Wright

154

Supervisory Committee Report On September 24, 2020, the Committee re-appointed Mrs. Camelle Ricketts-Moore as Chairman and Ms. Shauna-Kaye Gordon as Secretary. ATTENDANCE RECORD There were 12 Supervisory Committee meetings held for the reporting period. The attendance by members is as follows;Names

Attended

Excused

Mrs. Camelle Ricketts-Moore

Ms. Shauna-Kaye Gordon

Mr. Luke McIntosh

Ms. Geraldine Wright

Ms. Jacqueline Roberts

Members of the Committee also attended the Quarterly Joint Meeting of the Board of Directors, Committee and Management. The Chairman also attended the Audit & Risk Management Committee meetings held during the period. Ms. Geraldine Wright represented the Committee at the Credit Union’s Annual Strategic Retreat. AUDIT AND INVESTIGATION ACTIVITIES Overview of Audit Activities

155

The Internal Audit Plan 2020 was partially revised and adjusted to reflect the emerging risks associated with the COVID-19 pandemic. There were seven (7) audits which were scheduled on the 2020 Audit Plan of which five (5) were completed. The status of audit activities as at December 31, 2020 were as follows: Status

Number of Audits

% Completion

Completed

72 %

In Progress - Draft to be ﬁnalized

14 %

In Progress - At Planning Stage

14 %

The Audit Plan was prepared based on a risk and priority assessment, conducted by the Chief Internal Auditor in consultation with the Committee and the CEO. Other routine monthly activities and investigations requested by Management were also conducted.

Supervisory Committee Report The status of each audit is detailed below: Audit No.

Description Status

Audit of FHC Investments Limited Operational Management

Completed

FHC Group Covid-19 Response - Compliance Risk

Completed

FHC Group Covid-19 Response Information Systems Risk

Completed

AML/CFT Compliance 2019 and 2020

Completed

Branch and Operations Process Managemen

Completed

(pandemic period included) 6

Loans Securities Management

Draft Report

(pandemic period included) 7

Liquidity Management

Planning Stage

Summary of the ﬁndings are highlighted below: •

The Credit Union’s response to the COVID-19 pandemic conﬁrmed compliancewith the Group’s regulatory reporting, payment and ﬁling obligations during the review period and with the Ministry of Health and Wellness key workplace protocols.

• There were accelerated eﬀorts in implementing measures to respond to risks associated with remote working. Data Protection training sessions and other sensitization sessions were also held to inform employees of acceptable security practices that should be observed. •

There was overall general compliance with the processes reviewed in the AML/ CFT Programme with continued strong AML/CFT awareness through online training among Team Members and Volunteers.

•

Operationally, some weaknesses were noted in monitoring procedures.

Overall, the Management Team has shown their commitment in addressing the ﬁndings emanating from these audits and has continued on a path towards strengthening the internal control systems of the Credit Union. Where possible, follow-up reviews were conducted by the Internal Audit Department to ensure outstanding recommendations were being addressed.

156

Supervisory Committee Report INVESTIGATION ACTIVITIES Special investigation continues to be a major activity for the Internal Audit Department. Given the sensitive nature of these activities they were treated as priority. A total of 36 investigations were conducted in 2020 (20 in 2019); an increase of 44% over prior year. Approximately 52% of the new cases reported during the year were completed. The status of the investigation activities are as follows: Total

Completed

In-progress

Completion

Carried forward from 2019

100%

New cases

52%

Total

61%

GENERAL REVIEWS Bank Reconciliation Reviews Based on the reports received bank reconciliations were reviewed in a timely manner and reconciling items were cleared appropriately. Staﬀ, Volunteer and Connected Party - Past Due balances According to the reports received by the Committee, eﬀorts are being made to collect, regularize the accounts and reduce outstanding balances from Connected Parties. CONCLUSION

157

We would like to express our thanks to the Nominating Committee for their conﬁdence in selecting us and the members of the Credit Union for appointing us to serve in this important capacity. We would also like to express our gratitude to the Management and Team Members, in particular the Internal Audit Department and the Board of Directors for facilitating and supporting the work of the Committee over the reporting year.

_____________________________ Camelle Ricketts-Moore Chairperson

Credit Committee Report

Althea Daley Chairman

Stennett McLean Member

Donald Williams Secretary

Richard Ranger Member

Clivia Green Member

For the financial year 2020, the Credit Union experienced growth in the loan portfolio, despite an environment of tough competition from other financial institutions and the impact of the COVID-19 pandemic. In the face of these challenges, through consistent, focused efforts, the Credit Union continued to meet the financial needs of its members, assisting them to achieve their financial goals and exceed their expectations. The Credit Union’s total loan disbursements showed some softening moving from $4.75 Billion in 2019 to $4.21 Billion in 2020. Notwithstanding, the loan portfolio grew by 5.6% moving from $9.25 Billion in 2019 to $9.77 Billion in 2020, as a result of the hard work of the team.

158

Credit Committee Report The strategies employed to drive growth included an increase in the borrowing limits of two of our unsecured products, the Easi Pay and Easi Pay Max loans, which resulted in growth of 35.92% and 27.01% respectively. Other growth areas included Micro One & Move Taxi Loan (39.80%), DBJ Secured Loan (24.90%) and Motor Vehicle Loan (18.44%). The growth we saw in the above-mentioned products was as a result of us being innovative which kept our products attractive, competitive and able to meet the needs of our membership. Given the severe economic impact arising from the COVID-19 pandemic, a number of borrowing members experienced diﬃculties in honouring loan obligations as arranged. To provide assistance, extended moratoria were granted to aid some members who experienced ﬁnancial challenges. Notwithstanding, the quality of the loan portfolio was negatively impacted, despite the Credit Risk team’s continued dedication to sound underwriting practices and the consistent monitoring of loans, resulting in an overall increase in the past due rate from 8.11% as at December 2019 to 8.79% as at December 2020. As FHC Members, we are all in this together. We encourage you to assist us by making your monthly instalments promptly, and if you are facing challenges, please speak with a member of our team who will be able to assist you. Committee Meetings and Attendance For the period January to December 2020, a total of forty-two (42) meetings of the Credit Committee were held. Attendance for each member was as follows: Members

159

Attended

Excused

Mrs. Althea Daley

Mr. Richard Ranger

Mr. Donald Williams

Ms. Clivia Green

Mr. Stennett McLean

The Credit Committee is grateful to the dedicated Team at FHC, the Board of Directors, Supervisory Committee and YOU our members, for your continued support and assistance during 2020. We look forward to working with you again in 2021. We look forward to serving you in 2020.

________________________________ Althea Daley (Mrs.) Chairman

Nominating Committee Report In order to present a slate of Volunteers for election at the 9th Annual General Meeting, a Nominating Committee was formed. This Committee was appointed in accordance with the provisions of Article XIV, Rule 59 of the Rules of First Heritage Co-operative Credit Union Limited and comprised: •

Mrs. Leodis Douglas

- Chairperson; Board Representative

•

Mr. Richard Picart

- Member Representative

•

Ms. Roxann Linton

- Staﬀ Representative

Under consideration were the vacancies created by the retiring Volunteers who have all indicated their willingness to continue to serve. This report is now presented to the Membership.

BOARD OF DIRECTORS The Directors retiring at this Annual General Meeting are: 1. Mr. O’Neil W. Grant 2. Mr. Edmund Jones 3. Mr. Kevin Forbes 4. Mrs. Tamara Francis Riley-Dunn 5. Ret’d SSP Michael James The Committee nominates the following persons who have all indicated their willingness to serve: Retiring

Recommended

Term (years)

Mr. O’Neil W. Grant

Mr. Kevin Forbes

Mrs. Tamara Francis Riley-Dunn

Mr. Edmund Jones

Ret’d SSP Michael James

160

Nominating Committee Report SUPERVISORY COMMITTEE The members of the Supervisory Committee all retire at each Annual General Meeting. They are: 1. Mrs. Camelle Ricketts-Moore 2. Ms. Shauna-Kaye Gordon 3. Mr. Luke McIntosh 4. Ms. Geraldine Wright 5. Ms. Jacqueline Roberts Mrs. Camelle Ricketts-Moore and Mr. Luke McIntosh having served the maximum term of ﬁve (5) consecutive years, are not eligible for re-election. We thank both Mrs. Ricketts-Moore and Mr. Luke McIntosh for their service to the Credit Union. The Committee nominates the following persons who have all indicated their willingness to serve:

161

Retiring

Recommended

Term (years)

Ms. Shauna-Kaye Gordon

Ms. Geraldine Wright

Ms. Jacqueline Roberts

New Recruits

Recommended

Ms. Tanisha Thompson

Mrs. Sharon Smickle

Nominating Committee Report CREDIT COMMITTEE The members of the Credit Committee retiring at this Annual General Meeting are: 1. Mr. Richard Ranger 2. Ms. Clivia Green The Committee nominates the following persons, who have all indicated their willingness to serve: Retiring

Recommended

Term (years)

Mr. Richard Ranger

Ms. Clivia Green

PROFILE OF CANDIDATES 1. Board of Directors Mr. O’Neil W. Grant, MBA - Chairman Mr. Grant has been the President of the Jamaica Civil Service Association since June 2011. He has held several positions in various Ministries, and currently sits on the Board of the National Housing Trust. He is a trained Accountant and Financial Analyst and currently holds an Executive MBA from the Mona School of Business. He is the Chairman of the Board of Directors as well as a Director on the Board of The Jamaica Co-operative Credit Union League Limited and the Consumer Aﬀairs and Fair Trading Commission. Mr. Kevin Forbes, MBA - 2nd Vice - Chairman Mr. Forbes is currently employed to Look Beyond Limited as a Financial Controller. He previously served as Financial Manager at Cable & Wireless Limited, Financial Controller at Allied Insurance Brokers Limited, and has worked in various management capacities within the Grace Kennedy Company Limited as well as Ernst & Young Caribbean He holds a Masters of Business Administration in Finance from the Manchester Business School, United Kingdom, is a Fellow of the Association of Chartered Certiﬁed Accountants as well as a member of the Institute of Chartered Accountants of Jamaica. He is the 2nd Vice Chairman of the Board of Directors. Mrs. Tamara Francis Riley-Dunn, Attorney-at-Law - Secretary Mrs. Francis Riley-Dunn is a legal practitioner in Jamaica, having been called to the Bar in 2000. She specializes in commercial law (with an emphasis on debt collection), conveyancing and family law.

162

Nominating Committee Report She is an honours graduate of the University of the West Indies and also of the Norman Manley Law School, where she received her Certificate of Legal Education. She is the Secretary on the Board of Directors. Mr. Edmund Jones - Assistant Secretary Mr. Jones is a retired Civil Servant with his last post being Technical Support Manager at the Ministry of Finance and the Public Service. He currently does contractual work in both the Public and Private Sectors, managing projects, teaching and consulting. His volunteer service includes Directorships at Quality Networks Co-operative and the Jamaica Paralympic Association. He is also a Council Member of the Aquatics Sports Association of Jamaica. He is the Assistant Secretary on the Board of Directors and is the Chairman of the Merger and IT Steering Committees. Ret’d SSP Michael James - Director Mr. James is a Retired Senior Superintendent of Police, a former Executive Member of the Police Officers’ Association and Divisional Commander of St. Thomas. He currently serves as Chairman of the Paul Bogle High School Board of Management. He has received numerous awards including the Medal of Honour for Meritorious Service, the Jamaica Constabulary Force Distinguished Service Award for the Development of Police Youth Clubs in Jamaica, as well as being named the LASCO Police Officer of the Year 2000. He is a Past President of the Kiwanis Club of St. Thomas. He serves as a Director on the Board of Directors. 2. Supervisory Committee Ms. Shauna-Kaye Gordon, MBA, FCCA, CA

163

Ms. Gordon has been a Tax Manager with PwC since January 2017. She also has eighteen (18) years’ experience working with the Government of Jamaica, in various departments including Tax Administration Jamaica and Jamaica Customs Department. Ms. Gordon has extensive knowledge of Jamaican tax laws, international double taxation treaties, and the tax administration system, practices, policies and procedures. She has provided tax advisory and tax compliance services to clients in the retail, manufacturing, hospitality, banking, insurance and bauxite industries. She holds a Master’s Degree in Business Administration (MBA) from Florida International University (FIU) and a Postgraduate Diploma in Tax Audit and Revenue Administration from the Management Institute for National Development (MIND). She is a Fellow of the Association of Certiﬁed Chartered Accountants (FCCA) and a member of the Institute of Chartered Accountants of Jamaica (ICAJ). She is currently the Secretary on the Supervisory Committee.

Nominating Committee Report Ms. Geraldine Wright. MBA, CFE, AICB Ms. Wright has over 32 years of successful management and leadership experience in the areas of forensic accounting/fraud management, risk management, anti-money laundering and internal auditing. She is a Certified Fraud Examiner and holds an MBA from Barry University and a Diploma and Certificate in Banking from the Institute of Canadian Bankers and Institute of Bankers, England respectively. Over the years, Ms. Wright has worked at various commercial banks and has served as the Internal Audit Manager at Grace Kennedy Group and as an Audit Consultant at MICO University College. She has served on the Board of Directors of the Rural Electrification Programme (REP) and the Bellevue Hospital. She is currently a member on the Supervisory Committee. Ms. Jacqueline Roberts, CA, ACCA Ms. Roberts is currently an Assistant Audit Manager with the auditing firm BDO Chartered Accountants. She is a qualified Accountant, a Fellow of the Institute of Chartered Accountants of Jamaica (ICAJ) and the Association of Chartered Certified Accountants (ACCA). Ms. Roberts is also a Registered Public Accountant. She possesses over 25 years of accounting and auditing experience and has performed on assignments within various sectors such as, government, manufacturing, financial, agriculture, retail, non-profit and service organizations. She is currently a member of the Supervisory Committee. Ms. Tanisha Thompson, BA, CIA, CISA Ms. Thompson is a Senior Internal Auditor of eGov Jamaica Limited. She is a qualified Information Technology (IT) Auditor and has over eleven (11) years of experience in the areas of Information Technology, Operations, Compliance Audits, Business Process Reviews and Project Management in the industries of Telecommunication, Banking, Manufacturing, Insurance and Government. Ms. Thompson has a proven track record of sustainable success in managing operations for the Government of Jamaica and has private sector experience, having worked with KPMG Jamaica in the areas of auditing and management services. Mrs. Sharon Smickle, EMEM, Bsc. Mrs. Smickle is a Human Resource professional with over 15 years of experience in the areas of Human Resource Management, Administration and Project Management. She has served in various capacities as Deputy Administrative and Human Resource Manager with Jamaica North South High Way Company Limited, Admissions Supervisor at the University of Commonwealth Caribbean and as an Academy Specialist at J. Wray & Nephew Limited. She has also served as a member of the Supervisory Committee of another Credit Union in the movement and has been trained in the areas of Supervisory Management, Credit Management and Control and Anti-Money Laundering. She holds an Executive Master’s Degree in Education Management from The Mico University College and a Bachelor of Science Degree in Human Resource Management from the University College of the Caribbean.

164

Nominating Committee Report 3. Credit Committee Mr. Richard Ranger, RPA, ACCA, CA Mr. Ranger is a Chartered Accountant, a member of the Association of Chartered Certified Accountants (ACCA) in the United Kingdom and a member of the Institute of Chartered Accountants of Jamaica (ICAJ). He has over fifteen (15) years of experience in external and internal auditing, accounting and business operations. Mr. Ranger has worked with PricewaterhouseCoopers, Boldeck Jamaica Limited and Neal and Massy Group specializing in audit and assurance, accounting and income tax services. While at Boldeck Jamaica Limited, he was involved in business assessments of entrepreneurs seeking loan financing. Currently, he is the Principal of Ranger and Associates, a local audit and accounting firm. He currently serves as a member on the Credit Committee. Ms. Clivia Green, ACIB Ms. Green is an Associate of the Chartered Institute of Bankers (A.C.I.B.) with a First Degree in Management Studies majoring in Management and Accounting. She has over thirty (30) years’ work experience in the financial services industry, including 13 years in commercial banking with the National Commercial Bank Jamaica Limited. She also possesses experience in the Credit Union Movement, having served as General Manager for Grace Co-operative Credit Union Limited as well as experience in agricultural lending as a Manager at the National People’s Co-operative Bank of Jamaica Limited. Ms. Green currently serves as the Manager of the Emancipation Park at the National Housing Trust. She currently serves as a member on the Credit Committee. Signed By:

165

Leodis Douglas Chairperson

Richard Picart Representative

Roxann Linton Staﬀ Representative June 4, 2021

Pictorial Highlights

Annual General Meeting 2020 Members came out to participate in the staging of the 2020 Annual General Meeting despite the COVID-19 pandemic. Members adjusted to the safety and health protocols so they could attend and discuss the business of the credit union’s performance.

166

Blast Oﬀ 2020 Yet another successful Blast Oﬀ ! Team Members cheering on as their colleagues received their awards and recognition for the year 2019.

Pictorial Highlights

FHC Entrepreneur Awards 2020 And the award goes to…… Julie Ann Lewis, Marcus Sewell and Noel McDonald. FHC awarded three young entrepreneurs who were granted $500,000.00 each as capital for their individual businesses.

167

Gibson Relays 2020 Manager – Micro & Small Business Loans Unit, First Heritage Co-operative Credit Union- Jason Ferguson makes a presentation to the winners of the Class 2- 4 x 200m High School Boys from Kingston College at the Gibson Relays.

Pictorial Highlights

FHC Scholarship Awards 2020 Notwithstanding the COVID-19 pandemic, First Heritage Co-operative Credit Union ensured that their PEP and Tertiary Scholarships were still oﬀered to students who showed great academic potential. As we observed the safety and health protocols, presentations were done to a few of the scholarship recipients by the FHC Team of Karlene Simpson, Assistant General Manager - Operations & Shared Services, Christine Bucknor, General Manager - Human Resources Department and Carlene Coley, Senior Marketing Oﬃcer.

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Season of Giving 2020 Presentations being done to Allman Town Primary School and Best Care Special Education School as part of First Heritage Co-operative Credit Union’s Season of Giving donations.

Report of the Delegates on JCCUL’S AGM

Report of the Delegates of JCCUL’S AGM JAMAICA CO-OPERATIVE CREDIT UNION LEAGUE LTD. 79th ANNUAL GENERAL MEETING HELD OCTOBER 3, 2020 HIGHLIGHTS ________________________________________________________________________ The Convention & legally constituted 79th annual general meeting of the Jamaica Co-operative Credit Union League (JCCUL) was held on October 3, 2020 at the Knutsford Court Hotel under the theme ‘Together We Do More’. Due to the COVID-19 pandemic, the League’s annual convention was cancelled and the scheduled AGM date of May 23, 2020 had to be rescheduled. The meeting was delivered using a hybrid method (virtually using Zoom with limited in- person attendees) in accordance with the Government’s COVID-19 public restrictions at the time. There were approximately 53 delegates who attended the meeting in person and approximately 150 delegates through the Zoom platform. The following activities took place: ANNUAL GENERAL MEETING Delegates from twenty-ﬁve (25) Credit Unions attended the 79th annual general meeting.

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President Mr. Winston Fletcher, chaired the meeting. He welcomed the participants and then gave a summary of the Board report for the year 2019. All other reports including that from the Treasurer, the Supervisory and Nominating Committees, as well as the audited ﬁnancial statements were presented. Mr. Lambert Johnson was First Vice President on the 2019 - 2020 Board of Directors and was appointed President subsequent to the AGM on October 3, 2020. He succeeded Mr. Winston Fletcher who retired from the position. DISTRIBUTION OF SURPLUS The Delegates agreed to the distribution of the surplus of $9.09 million. The Delegates voted for the maximum liability of the League to be set at $5 billion. ELECTION OF OFFICERS The Meeting voted to accept the nominations for the following persons to serve on the Board.

Report of the Delegates on JCCUL’S AGM Name

Credit Union

Alexander Bourne

Manchester

Medium- sized

Hector Stephenson

EduCom

At Large

Bornette Donaldson

C&WJ

Mega

Jerry Hamilton

Grace

Medium-Sized

Brenda Cuthbert

NCB Employees

Medium-Sized

Carol Anglin

COK Sodality

Mega

For the Supervisory Committee the following persons were elected: Name

Credit Union

Michael Sutherland

C&WJ Credit Union

Ivy Lawrence

Lascelles Employees & Partners Credit Union

Mr. Delroy James

First Heritage Credit Union

Ms. Nicola Reid

Palisadoes Credit Union

Ms. Paulette Green

Jamaica Police Credit Union

RESOLUTIONS Five (5) congratulatory resolutions were passed at the meeting as follows: Patricia Smith - Retirement, First Regional Co-operative Credit Union Edward Christopher Bond - National Honouree, Grace Co-operative Credit Union Grace Co-operative Credit Union - 50th anniversary Jamaica Police Co-op Credit Union - 65th anniversary Renford Douglas - National Honouree, Service to JCCUL RULE CHANGES There were no rule changes.

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Report of the Delegates on JCCUL’S AGM Following the AGM the executive was elected to serve on the League Board for the 2020-2021 year: Lambert Johnson

President

Andrea Messam

1st Vice President

O’Neil Grant

2nd Vice President

Norris Gilbert

Treasurer

Patrick Smith

Assistant Treasurer

Jerry Hamilton

Secretary

Brenda Cuthbert

Assistant Treasurer

Winston Fletcher

Immediate Past President

Carol Anglin Michael Anglin Martin Blackwood Alexander Bourne Bornette Donaldson Ryan Muir Hector Stephenson

Credit Union of the Year Awards Several awardees were named at the event. However, the awards were presented to the awardees at a later date. 171

Awards MEGA (ASSETS > $2 BILLION) WINNER EduCom Co-operative Credit Union Runner Up First Regional Co-operative Credit Union LARGE (ASSETS > $1 BILLION - $2BILLION) Winner JDF Co-operative Credit Union Runner Up Portland Co-operative Credit Union MEDIUM-SIZED (ASSETS > $300M TO $1B) Winner NCB Employees Co-operative Credit Union Runner Up BJ Staﬀ Co-operative Credit Union SMALL ( ASSETS < $300M ) Winner PWD Co-operative Credit Union

Delegates of JCCUL’S AGM Other Credit Unions that won prizes were: •

JDF Co-operative Credit Union - Highest Asset Growth

•

JPS & Partners Co-operative Credit Union - Highest Solvency

•

Portland Co-operative Credit Union - Highest Net Capital Growth

Other prizes: •

CPD Online Top Performing Credit UnionLascelles Employees & Partners Co-operative Credit Union

•

CPD Online Top Performing Credit Union (Runner up) – Jamaica Police Co-operative Credit Union

•

CPD Online Top User – Nathanha Reid (C&WJ Co-operative Credit Union)

_______________________

__________________________

Roxann Linton Delegates

Balvin Vanriel Delegates

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Branch & Unit Managers BRANCHES

ADDRESS

BRANCH MANAGERS

Kingston & St. Andrew

8-10 Eureka Road Kingston 5

Melissa Miller-Benjamin Senior Branch Manager

Lawrence Tavern Lawrence Tavern P.O. St. Andrew

St. Catherine

20 Dominica Drive

Racquel Walker

10 East Avenue Kingston 4

Trudian Stewart

Lot 57 West Trade Way Portmore Town Centre

Tania Oglesby

Unit 13 Oasis Shopping Centre 6 March Pen Road Spanish Town

Sheldon Christian

Shops 8 & 9, East Side Plaza 35 East Street Old Harbour

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St. Thomas

26 Queens Street Morant Bay, St. Thomas

Jason Ferguson

Clarendon

Shops 5 & 6 Bargain Village Plaza May Pen

Norman Williams

Manchester

2 Perth Road Mandeville

Sharna Hutchinson-Scott

St. James 21 Union Street Montego Bay

Marcia Bailey

Branch & Unit Managers Garﬁeld Pearson Senior Manager - Accounting & Treasury Sophia Harvey Manager - Huaman Resource Development Rosemarie Samuels Manager - Training and Development Kadian Dyke Manager – Micro & Small Business Loans Unit Alleesa Matherson Manager - Centralized Loans Unit Omari Hodelin Manager - Information Technology and Projects Thia Smith Senior Manager - Risk and Compliance

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Parliamentary Rules 1. ORDER OF BUSINESS An agenda shall be prepared by the Chairman and Secretary, and all items. Thereon shall take precedence over all other business. Any member desirous of introducing business for the consideration of the meeting may do so after the business on the agenda has completed, or may give notice of motion to be discussed at a further meeting. 2. SUSPENSION OF STANDING ORDER In the event of any matter of urgency, however, the Chairman may accept a suspension of the Standing Orders. The member moving such suspension must clearly state the nature and urgency of his business, the numbers of the standing orders affected, and the length of time he desires such suspension to last. At the option of the meeting, a further extension may be allowed, but no suspension shall take place except by majority vote of the members present. 3. MINUTES No motion or discussion shall be allowed on the Minutes except in regard to their accuracy. After the confirmation of the Minutes, they shall be signed by the Chairman, and the members shall than be at liberty to ask any questions in regard to matters arising out of them. Such questions shall be allowed for purposes of information only, and no debate on the policy outlined in the Minutes shall take place. 4. All persons desiring the floor shall rise and address themselves to the chair. They shall state their name and the Credit Union which they represent, if recognized by the chair, they shall have the privilege of the floor and all the rights thereof. 5. All speakers are to make use of the Desk and Floor Microphones when addressing the Meeting in order that it be recorded and made a permanent record in the Meeting Proceedings. 6. Should two or more persons rise at the same time, the chair shall decide, without debate, who is entitled to the floor.

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7. SPEECHES No member shall be allowed to speak more than once upon on any motion before the meeting, unless in Committee, or on a point of order, or explanation, except the mover of the Original Motion. But on an amendment being moved, any member even though he has spoken on a Original Motion, may speak again on the amendment. No member shall speak for more than ﬁve minutes at a time. Members wishing to raise points of order or explanation must ﬁrst obtain the permission of the Chairman and must raise immediately the alleged breach has occurred. Any member may formally second any motion or amendment and reserve his speech until a later period in the debate. 8. No person shall interrupt another who is speaking except on a point of order, a parliamentary inquiry, or a point of information. 9. If it should come to pass that a speaker is called to order while speaking, the speaker should take his seat until the question of order is determined.

Parliamentary Rules 10. CHAIRMAN’S RULING The ruling of the Chairman on any question under the Standing Orders, or on points of order or explanation, shall be final, unless challenged by not less than four members, and unless two-thirds of the members present vote to the contrary. 11. INTERRUPTION If any member interrupts another while addressing the meeting, or uses abusive or profane language or causes disturbance at any of the meetings, and refuses to obey the Chairman when called to order, he shall be named by the Chairman. He shall thereupon be expelled from the room and shall not be allowed to enter again until an apology satisfactory to the meeting be given. 12. A question shall not be subject to debate until it has been duly moved and seconded and is stated from the chair. 13. MOTIONS AND AMENDMENTS The first proposition on any particular subject shall be known as the Original Motion, and all succeeding propositions on that subject shall be called amendments. Every motion or amendment must be moved and seconded by members actually present at the meeting before they can be discussed, and, wherever possible, should be set forth in writing. It is permissible for a member to make his speech first and conclude with a motion. When an amendment is moved to an Original Motion, no further amendment shall be discussed until the first amendment is disposed of (Notice of any further amendment must be given before the first amendment is put to the vote). 14. SUBSTANTIVE MOTIONS If an amendment be carried, it displaces the Original Motion and itself becomes the substantive motion, whereupon any further amendment relating to any portion of the substantive motion may be moved, provided it is consistent with the business and has not been covered by an amendment or motion which has been previously rejected. After the vote on each succeeding amendment has been taken, the surviving proposition shall be put to the vote as the main question, and if carried shall then become a resolution of the meeting. 15. RIGHT OF REPLY The mover of the Original Motion shall if no amendment be moved, have the right of reply at the close of the debate upon such motion. When an amendment is moved he shall be entitled to speak thereon in accordance with Standing Order No. 8 and at the close of the debate on such amendment shall reply to the discussion, but shall introduce no new matter. The question shall then be put to the vote immediately, and under no circumstances shall any further discussion be allowed once the question has been put from the Chair. The mover of an amendment shall not be entitled to reply.

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Parliamentary Rules 16. WITHDRAWALS OR ADDITIONS No motion or amendment which has been accepted by the Chair shall be withdrawn without the majority vote of the meeting. Neither shall any addendum or rider be added to a motion which has once been accepted by the Chair without majority vote. Should any member dissent, the addendum must be proposed and seconded, and treated as an ordinary amendment. 17. CLOSING DEBATE The motions for the previous question, next business, or the closure, may be moved and seconded only by members who have not previously spoken at any time during the debate. No speeches shall be allowed on such motions. In the event of the closure being carried, the mover of the Original Motion shall have the right to reply in accordance with Standing Order No.16 before the question is put. Should any one of the motions mentioned in this Standing Order be defeated, thirty minutes shall elapse before it can be accepted again by the Chairman, unless he is of the opinion that the circumstances have materially altered in the meantime. 18. ADJOURNMENT Any member who has not already spoken during the debate may move the adjournment of the question under discussion, or of the meeting, but must conﬁne his remarks to that question and must not discuss any other matter. The mover of the motion upon which the adjournment has been moved, shall be allowed the right to reply on the question of the adjournment, but such reply shall not prejudice his right of reply on his own motion. In the event of such motion being lost, it shall not be moved again, except in accordance with Standing Order 18. 19. Any member may call for a division of the House (that is, for a roll call vote) when there appears to be a reasonable doubt as to the accuracy of the vote as announced by the Chair. 20. A motion to lay on the table shall be put without debate

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21. Whispering, loud talking, or other disturbances calculated to disturb anyone while speaking will not be tolerated.

Carmeta Campbell

Car Aldred

Isolyn Campbell

Antonia Allen

Rose Marie Chambers

Lorna Allen

Kim Chin

Elaine Anderson

Kamau Chionesu

Rosemarie Bailey

William Christian

Michael Baker

Derrick Chung

Patricia Balls

Tracey-Ann Clarke

Linton Barnaby

Noel Coley

Frederick Barnett

Patricia Collins

Sylia Barnett

Hervin Corriah

Gloria Bartley

Hibert Cummings

Lala Bascoine

Calder Daley

Christopher Bascuine

Barry Davids

Pamela Beadle

Marlon Davis

Mahalia Benjamin

Renae Dixon

Nadine Bent

Clarke Dorrell

Allyson Bent

Judith Ellis-Douglas

Corella Blackwood

Everett Esty

Kerry Bowers

Maxine Finlayson-Richards

Melbourne Briscoe

Joslyn Francis

Karlene Brown

Jennifer Francis

Jascinth Brown

Paulette Francis

Charlton Brown

Leonard Gabbidon

Albert Brown

Barrinton Gayle

Reginald Brown

Minalva Genas

Andrew Bruce

Therence Gibson

Silbourne Bryan

Joan Gilﬁllian-McLure

Andrew Burgher

Douglas Gordon

Gloria Byﬁeld

Lascelles Gordon

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179

Marsha Graham

Evelyn Jones

Ann Parchment

Victoria Grant

Marva Kerr

Michael Patterson

Lenox Grant

Marcia Knight

Andrea Patterson-Morris

Vendolin Grant

Daniel Lawes

Fawcett Pauline

Maxine Gray

Lucille Lawes

Royston Peart

Gloria Green-Mowatt

Lorna Lawrence

Christopher Peralta

Shawn Grey

Hope Leach

George Pheonix

Juliet Greyson-Haynes

Andrea Livingston

Marvalley Pinnock

Milton Hanson

Rosamund Logan

Deidre Pinnock

Herman Hardy

Eletta Lowe

Iris Pinnock Jackson

Lesley Hare

Leroy Manderson

Gerald Pitterson

Donovan Harper

Ruby Martin

Javis Pounall

Ephraim Harris

Christine Matheson

Micheal Reid

Ceta Harris-Lowe

Maxine Matthias

Reneive Rhoden

Humane Hartley

Winston McDowell

Hamsel Rhoden

Winnifred Haughton

Lemuel McIntosh

Eva Richards

Deloris Henderson

Kevin McKay

Kimelia Ricketts

Valrie Henry

Joel McLean

George Robinson

Monica Henry

Woneta McLullough

Andreiko Robinson

Hopeton Hepburn

Gwendolyn McPherson

Nickeisha Robinson

Linford Heron

Anthony Mighty

Joseph Samuels

Lorna Hibbert

Vertrice Miles

Eduardo Scott

Rowena Hunter

Dorn Miller

Sylvia Sharpe

Hugh Hutchinson

Hopeton Mitchell

Nadrea Sheriﬀ

Jacqueline Hylton

Kirkwood Mitchell

Robert Shorter

Iris Jackson

Baldwin Morrison

John Simpson

Derrick James

Catherine Mudie

Lascelles Sinclair

Albertha Johnson

Pauline Munroe

Jean Smith

Burlton Johnson

Shernette Nooks-Rainford

Rupert Smith

Lucille Johnson

Samuel Oconnor

Rupert Smith

Register of Deaths Doyley Sophia Peter Spencer Angela Streete Patricia Sturridge Kanique Taﬀe Ainsley Thomas Audrey Thomas Silburn Thompson Mavis Thompson Lucy Thompson Rolan Thompson Natalie Timberlake-baldie Richard Tomlinson Richard Tomlinson Reynolds Vernon David Walker Beverley Walker Mary Watson Angella Watt-Coleman Kenneth Whyte Ruth Elaine Wiiliams Paula Williams Burton Williams Genere Williams-White Glenville Wilson Dorothy Wright Etta Wright

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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. O 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. 181

For it is in giving that we receive; It is in pardoning that we are pardoned; And it is in dying that we are born to eternal life. Amen

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