EXIMGUARANTY COMPANY GHANA LTD GUARANTEEING CREDIT FOR ECONOMIC GROWTH ANNUAL REPORT

Transcription

1 EXIMGUARANTY COMPANY GHANA LTD GUARANTEEING CREDIT FOR ECONOMIC GROWTH ANNUAL REPORT AND FINANCIAL STATEMENTS

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4 BOARD OF DIRECTORS, OFFICIALS, AUDITORS AND REGISTERED OFFICE CORPORATE INFORMATION DIRECTORS Mr. Felix Ntrakwah - Chairman Mr. Andrew Boye-Doe Ms Yvonne Quansah Mr. George Mensah-Asante Mr Isaac Owusu-Hemeng Mr. Peter Hayibor Mr. Richard Amo -Tachie Mr. Zac Bentum - Managing Director SECRETARY Mrs. Priscilla Budu AUDITORS KPMG 13 Yiyiwa Drive, Abelenkpe PO Box GP242 Accra SOLICITORS Peasah-Boadu & Co. P. O. Box CT 3523 Cantonment, Accra BANKERS Bank of Ghana Ecobank Ghana Limited First Atlantic Bank Limited REGISTERED OFFICE No. 27, Noi Fetreke Street Roman Ridge Ambassadorial Estate Extension Accra 4

5 CONTENT 4 Corporate Infomation 6 Profile of Directors 9 Profile of Executives 10 Chairman s Statement 12 Managing Director s Statement 14 Directors Report 16 Report of the Auditors 17 Statement of Comprehensive Income 18 Statement of Financial Position 19 Statement of Changes in Equity 20 Statement of Cash Flows 21 Notes to the Financial Statements 39 Proxy 5

6 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the 17th Annual General Meeting of will be held at the BOARDROOM OF THE COMPANY, 27 NOI FETREKE STREET, ROMAN RIDGE AMBASSADORIAL ESTATES EXTENSION, ACCRA on Thursday 23rd June 2016 at 11.00am to transact the following business: 1. To receive and consider the Audited Financial Statements for the year ended 31st December together with the Reports of the Directors and Auditors thereon. 2. To authorise the Directors to determine the remuneration of the Auditors. 3. To approve of the fees of the Directors. Dated this 18th day of May 2016 BY ORDER OF THE BOARD PRISCILLA BUDU (MRS) SECRETARY NOTE A member of the company entitled to attend and vote is entitled to appoint a Proxy to attend and vote instead of him/her. A Proxy form is attached. 6

7 PROFILE OF DIRECTORS MR. FELIX NTRAKWAH, CHAIRMAN Mr Felix Ntrakwah is a senior member of the Ghana Bar Association with specialization in corporate commercial law practice. He was for years a director of GCB Limited and the Chairman of its Audit and Finance Committee. He brings unto the board, a wealth of knowledge and experience in corporate governance and corporate finance. He is the founder of the Corporate Law Institute, Ghana and a member of the Chartered Institute of Arbitrators (UK). Mr Ntrakwah is a member of the International Chamber Of Commerce Court of International Commercial Arbitration in Paris. He is also a fellow of the Litigation Counsel of America. He was a member of the Committee of Experts who drafted a new Companies Bill for Ghana. Mr Ntrakwah is the chairman of Financial Investment Trust. He also chairs the Royal Senchi Limited and serves on other boards ANDREW BOYE-DOE Andrew is a lawyer by profession, specializing in international banking and finance. He is a Director and Head of the Legal Department (General Counsel) at the Bank of Ghana. He is a Director of Export Finance Company, a member of the Board of Trustees of the Financial Investment Trust (FIT). He also serves on the Board of the Financial Intelligence Centre. He is a fellow of the Society for Advanced Legal Studies, London and the Chairman of the Legal and Institutional Issues Committee of the West African Monetary Zone (WAMZ). He is a Research Fellow at the Centre for International Documentation on Organized and Economic Crimes and a Resource Person of the Cambridge International Symposium, UK. Mr. Boye-Doe is also a visiting lecturer in Banking and Finance Law, Commercial Law, International Economic Law and Law and Practice of International Finance in both local and foreign universities. MS. YVONNE QUANSAH Yvonne is an economist with good understanding of contemporary macroeconomic, financial sector issues with extensive experience in aid and public debt management having headed the Aid and Debt Management and Financial Sector Divisions of the Ministry. She is a Chief Economics Officer and Director of the External Resources Mobilisation Bilateral Division at the Ministry of Finance. She has also served as a facilitator/resource person as well as conducted and /or participated in a number of studies and reviews, both locally and internationally. GEORGE MENSAH-ASANTE George heads Ecobank Ghana s Domestic Banking business which covers Local Corporates, SME s, Public Sector and Retail banking and is also the Cluster Head for Domestic Banking for the West African Monetary Zone (WAMZ) of the Ecobank Group. Mr. Mensah-Asante is also a member of the Board of Directors of Ecobank Ghana. He is an accomplished banker with over 20 years in treasury management and sales/relationship development. Prior to his appointment as Executive Director of Ecobank, he was the Head, Retail Banking for Ecobank Ghana and was instrumental in growing the bank s branch network and deposit base. He also worked as Deputy Country Treasurer. George holds a BSc in Administration (Accounting) and an Executive MBA in (Finance) from the University of Ghana, Legon. ISAAC OWUSU HEMENG Isaac is a former Managing Director of The Trust Bank Limited (now part of Ecobank Ltd). He is a fellow of the Chartered Institute of Bankers, Ghana, and a member of the West African Nobles Forum with over 37 years banking and finance exposure. He served for two terms as President of the Chartered Institute of Bankers between 2006 and In he was honoured with a Lifetime Achievement award at the Banking Awards by the CIG. He has a vast wealth of experience in risk management and corporate banking and rejoined the Exim Board in September 2012 after serving on the board for 9 years from 2000 to

8 PROFILE OF DIRECTORS MR. PETER HAYIBOR Peter is a Legal Practitioner with over twenty years experience at the Ghana Bar. He is currently the General Manager/General Counsel of the Social Security and National Insurance Trust. He has immense experience in Finance Law, Policy Formulation, Human Resource Management, Litigation, Arbitration, Negotiating and Drafting Commercial Agreements, Mergers and Acquisitions and Pensions Administration. He is member of the Ghana Bar Association, the International Bar Association, Institute of Professional Financial Managers, the Ghana Institute of Directors and the Faculty of Chartered Administrators and Secretaries. Mr. Hayibor is also on the Board of a number of institutions and these include the Global Impact Foundation, Ghana Agro-Food Company Limited (GAFCO) and the Odwen Anoma Rural Bank Limited. MR. RICHARD AMO-TACHIE Richard joined the Board of Eximguaranty Company Limited in August. He heads National Investment Bank s Audit & Bank Inspection Department. He is a Chartered Accountant and a member of the Institute of Chartered Accountants. He holds an ICA (Gh) Professional Certificate and a certificate from the Chartered Institute of Taxation (CIT) Ghana. MR. ZAC BENTUM, MANAGING DIRECTOR Zac is a fellow of ACCA and a FCIB. He is a Council Member of the Chartered Institute of Bankers, and a former Council Member of the Association of Chartered Certified Accountants. Mr. Bentum sits on the Guarantee Fund for Private Investment in West Africa (GARI), Lome, Togo as an Independent Expert and is the West Africa (Alternate) Representative on the Executive Committee of the Association of African Development Finance Institutions (AADFI) based in Cote D Ivoire. Zac, before joining Exim, worked with Ashanti Goldfields Company Ltd, now Anglogold Ashanti. Zac currently is a member of the World Bank Taskforce on: Design, Implementation and Evaluation of Public Credit Guarantees for SMEs in Emerging Markets and Developing Economies. He is also a Member of the Presidential Taskforce for the establishment of Ghana Exim Bank. 8

9 PROFILE OF EXECUTIVE COMMITTEE MR. ZAC BENTUM Managing Director Zac is a fellow of ACCA and a FCIB. He is a Council Member of the Chartered Institute of Bankers, and a former Council Member of the Association of Chartered Certified Accountants. Mr. Bentum sits on the Guarantee Fund for Private Investment in West Africa (GARI), Lome, Togo as an Independent Expert and is the West Africa (Alternate) Representative on the Executive Committee of the Association of African Development Finance Institutions (AADFI) based in Cote D Ivoire. Zac, before joining Exim, worked with Ashanti Goldfields Company Ltd, now Anglogold Ashanti. Zac currently is a member of the World Bank Taskforce on: Design, Implementation and Evaluation of Public Credit Guarantees for SMEs in Emerging Markets and Developing Economies. He is also a Member of the Presidential Taskforce for the establishment of Ghana Exim Bank. MRS. PRISCILLA BUDU Head, Legal/Admin./Company Secretariat Priscilla holds a LLB (Hons) degree from the University of Ghana and a BL Law from the Ghana School of Law as well as an Executive MBA in Human Resource Management from the University of Ghana. She has over fifteen years of experience as a lawyer. Her strengths include drafting, industrial relations and good management practices. Prior to joining Eximguaranty, she was Head of the Legal Department and Secretary to the Board of Directors at ProCredit Savings and Loans Co. Ltd. She is a member of the Ghana Bar Association. ANTHONY K. DWUMAH Head Of Operations Anthony Kofi Dwumah is an International Certified Expert in SME Lending (from Frankfurt School of Finance and Management), SME/Microfinance Practitioner and Development Analyst and holds a Master of Science (M. Sc.) in Development Policy and Planning and BSc. Agriculture (Economics Option) from the Kwame Nkrumah University of Science and Technology (KNUST), Kumasi. He has over a decade experience in SME finance and microfinance operations. Before joining Exim, Mr. Dwumah consulted as a Senior Business Advisor for Medical Credit Fund, a Netherland NGO involved in the provision of credit guarantees to private healthcare facilities. He was responsible for credit underwriting and business plan development for SMEs He also worked as the Head of Operations at HFC Boafo Microfinance Services Ltd from 2009 to 2012 where he facilitated the expansion of branch network from nine to seventeen. Mr. Dwumah started his career with Sinapi Aba Trust (SAT), now Sinapi Aba Savings and Loans as a credit officer and rose through the ranks to become Operations Manager. He spearheaded the creation of the deposit, SME lending and remittances departments at Sinapi Aba. ESTHER KENYENSO Head of Finance Esther Kenyenso is a member of ICA (Ghana). She has an MBA from the University of Hertfordshire in the United Kingdom and a Bachelor of Science degree in Business Administration from the University of Ghana. Esther has over 15 years experience in Financial Management, Accounting and Auditing. Prior to joining Exim she worked with Viasat Ghana and Starwin Products as Financial Controller and Head of Finance respectively; having previously worked with KPMG Ghana. 9

10 BOARD CHAIRMAN S ADDRESS BOARD CHAIRMAN S ADDRESS Distinguished Shareholders and Board Members of Exim, permit me to warmly welcome you all to this very important business our 2016 Annual General Meeting. In, our Company, like several other businesses in Ghana, had to deal with very challenging socio-economic headwinds which adversely affected business operations. However, with our strong systems in place and a firm commitment of leadership, we were able to grow our revenue and profit compared to our outturn. GLOBAL ECONOMIC PERSPECTIVES Reports from the World Bank January 2016 Global Economic Prospects indicate once again a disappointing performance in global growth. Global growth slowed down to 2.4% in and is expected to recover at a slower pace. Growth is projected to reach 2.9% in 2016 as advanced economies continue to recover modestly and economic activity stabilizes among major commodity exporters. The normalization of US monetary policy is also expected to tighten global financial conditions. Sub- Saharan African economies are facing a challenging near-term outlook as commodity prices are expected to stabilize but remain low through Although governments in Sub- Saharan Africa are taking steps to resolve power issues, erratic electricity supply is expected to persist. These factors point to a weaker recovery in After slowing to 3.4% in, activity is expected to pick up to 4.2% in 2016 and 4.7% in in emerging and developing economies. (World Economic Outlook, October ) Ghana s GDP growth for was estimated at 3.9% and projected to hit 4% in In real numbers our GDP for declined by 4% from GHC 38.5 billion in to GHC 37 billion in. Interest rate keeps soaring with end of year monetary policy rate being 26% and inflation at17.7% in. Our per capital income also reduced from USD 1, 426 in to USD 1, 339 in. Ghana s banking sector for the first time in decades also suffered a reduction in total revenue growth from 34.9% in to negative 5.4% in December. Similarly, the Industry s net profit after tax also contracted by 10.5% in December according to the Bank of Ghana. OPERATIONAL AND FINANCIAL HIGHLIGHTS Ladies and Gentlemen, the myriad of challenges that confronted SMEs and Financing Institutions like ours in had a direct impact on our performance. Total value of guarantees issued in declined by 59% and total guarantee fees amounting to GHC 1,448,264 represents a decline of almost 4%. Our overall revenue inched up by 10% from GHC 6,203,527 in to GHC 6,828,648. Our performance in respect of guarantees issued, fees and revenue could have been better but for Ghana Cocobod s decision not to accept guarantees from Non -Bank Financial Institutions. Total investment income grew by 14% from GHC 3,547,535 in to GHC 4,047,244 Total net assets was GHC 16,319,794, a 15.48% drop from GHC 19,310,355 recorded in the previous year. Profit after tax was GHC 150,732, representing a 384% increase over performance. KEY BOARD DECISIONS The commitment and insightful contributions of the Board, Ladies and Gentlemen, impacted strongly in the adoption of effective policies, systems and strategies that strengthened our overall operational performance and corporate governance. 10

11 In line with our Mandate, the Board in reviewed and approved the following: The Eximguaranty/FinGap Agreement Revised Corporate Policies for Departments and Units Consideration of a new Product for SMEs- Letter of Intent Directive to Management to reduce Office space in Takoradi Agency Office Ladies and Gentlemen, the Board continues to maintain an oversight role in the following key areas: Obtaining assurances that the Company s risk is reasonable and that the risk portfolio is well covered and managed. Establishing an efficient enterprise risk management system and Monitoring corporate performance against targets The Board has also instituted the Chairman s Day programme as a refresher for Directors to discuss emerging corporate governance issues. STRATEGY In the light of our unique mandate to provide financing guarantees to SMEs in Ghana, Exim continues to deepen its engagement with key stakeholders particularly those in the financial services industry, EDAIF, USAID/FinGAP, and Contract Awarding agencies. We believe that our continuous engagement will enable us to not only serve our Clients better but also maintain our leadership position in the market. On the external front, we also took steps to activate key protocols, with our external partners. We did this with the clear objective of strengthening our relationship with GARI and AADFI to best support our SME clients. Continuous improvement of Staff knowledge and competence in the areas of product innovation, risks and credit guarantee business will receive the needed attention to drive our strategic orientation and performance in the future. OUTLOOK FOR 2016 Economic forecasts for this year appear positive. Ghana s GDP is projected to inch past 4% with much better fiscal discipline under the IMF programme. Government s investment in the power sector is beginning to pay off and most SMEs are now able to plan and execute their business agenda. The Cedi is relatively stable against the US Dollar. Cost of doing business is still high with Bank of Ghana s monetary policy rate at 26%; interest rate at over 30% and inflation now over 18%. Despite all of this, we are hopeful of a better outlook this year. The Government of Ghana s plan of maintaining tight fiscal discipline, despite being an election year, coupled with AGI s renewed confidence in the economy as well as the IMF s current positive rating of the economy after latest review of its extended credit facility with Ghana makes us hopeful. ESTABLISHMENT OF GHANA EXIM BANK Ladies and Gentlemen, the Government of Ghana s plan of setting up a Ghana Exim Bank to help address the challenge of long term credit for exporters and also accelerate Ghana s drive towards achieving a more diversified economy has become a reality with the passing of the Ghana Export-Import Bank Act, 2016 ( Act 911) by Parliament. The integration process of our Company with EDAIF and Export Finance Company into the new Ghana Exim Bank has begun in earnest. A Technical/Transition Committee is already working on integration modalities for smooth implementation and we are reliably informed the Exim Bank Board has been constituted and we await the announcement soon. Currently, as a Board, we are also doing our best to meet all the legal requirements expected to facilitate this integration process. ACKNOWLEDGEMENT On behalf of my fellow Board Members, I wish to thank our distinguished Shareholders for the support and confidence reposed in us in protecting the Guarantee Fund. To all our business partners and key Stakeholders who continue to support us in various ways to grow our business, we say a BIG thank you as we forge ahead. I also wish to express my heartfelt appreciation to the Management and Staff of Exim for their loyalty and dedication to duty. Thank you. 11

12 MANAGING DIRECTOR S ADDRESS Dear Shareholders, I take this opportunity to welcome you to today s Annual General Meeting. The year under review () was quite challenging for most businesses in Ghana, particularly for both financing institutions and SMEs. Despite this, your Company maintained its dominance as the preferred Credit Guarantee Company in the Ghanaian market. We took steps to deepen our relationship with key international partners like Guarantee Fund for Private Investments in West Africa( GARI) and Association of African Development Finance Institutions (AADFI )and through that strengthened our corporate image and brand positioning in the AADFI - PSGRS rankings for Africa. Out of the 46 development finance Institutions that participated in Africa, Exim Ghana was placed joint 10th scoring A+. Our business in was adversely affected by the decision of the Ghana Cocoa Board not to accept our Guarantees due to the size of the Fund. Consequently, the total value of Guarantees issued in declined significantly by 59% to GHC 28,051,762 from previous year s GHC 47, 479,138. We have stepped up efforts to address this major challenge by diversifying our products portfolio while we continue to engage COCOBOD on the way forward. ECONOMY The Ghanaian economy in experienced some major challenges that impacted negatively on most businesses and ours was not excluded. The energy crisis affected overall productivity. GDP declined by 4% to GHC 37 billion from GHC 38.5 billion in. Annual inflation also rose to 17.7% from 17% in (Source: Ghana Statistical Service). GDP growth for is estimated at 3.9%. The services sector contributed about 54.4% to overall GDP with industry doing 25.3%. General cost of doing business continues to soar higher as Bank of Ghana s monetary policy rate ended the year at 26%. Average lending rate for most businesses was about 32% or more. The 91-day and 182-day Treasury bill rate as at December was 22.6% and 24.4% respectively. Developments on the foreign exchange market during the year, indicated that the Cedi depreciated by about 18% against the US Dollar. FINANCIAL PERFORMANCE The decision of Ghana Cocobod not to accept guarantees from Non Bank Financial Institutions, including Exim, impacted negatively on our results particularly in the road construction sector. Total gurantees issued dropped by 59%. However, this was compensated for by a 10% growth in total revenue of GHC 6,828,648 as against GHC 6,203,527 in. Total Guarantee fees declined marginally by 3.85% from the figure of GHC 1,506,347 to GHC 1,448,264. Total investment income for was GHC 4,047,244, an appreciable growth of 14% on figure of GHC 3,547,535. Operating profit before tax went up significantly by 333% to GHC 240,901 when compared to recorded figure of GHC 72,355. Total profit after tax for was GHC 150,732, another significant growth of 384% over out turn of GHC 39,233. Total net assets declined by 15.48% from GHC 19,310,355 to GHC 16,319,794 as a result of net claims on the Guarantee Fund. AGENCY OFFICES General business activities in our Agency Offices in Takoradi and Kumasi have been relatively low, a true reflection of the economic slowdown in the Country. It is also worthy to mentioning that majority of our Financing partners and SME decision makers are in Accra and so naturally most business referrals are executed in Accra. Our Operations and Marketing Officers have intensified efforts including media campaigns to generate more businesses for our agency offices. Plans are also far advanced to pilot the introduction of our new SME driven product Letter of Intent at both the Kumasi and Takoradi Offices to drive business activity there. 12

13 PRODUCTS AND SERVICES Exim continues to work with Financing Institutions and Contract Awarding Agencies to offer needed guarantee covers to facilitate SME s growth and development in the productive sectors of the economy. In, 47% of our total guarantees issued were from Advanced Mobilisation/Payment Guarantee. This was followed by Credit Guarantees and Bid Security products. During the year, in order to stay competitive in the Industry, we undertook a Customer Satisfaction Survey and used the findings to improve our processes, turnaround time and overall services delivery. We will continue to invest in research and customer services to strengthen our overall market share and revenue. CORPORATE SOCIAL RESPONSIBILITY As a responsible corporate citizen, our passion to touch lives and improve the well being of the communities in which we do business underpin the focus of our Corporate Social Responsibility. We activated most of our Corporate Social Responsibility projects through either sponsorships or partnering with other credible organizations to affect lives and businesses. During the period, we sponsored the Miss Ghana Foundation, organisers of the Miss Ghana Blood donation exercise, to promote blood donation attitude among Ghanaians and to also restock the Korle Bu Blood bank. We also responded to an appeal made by the Village of Hope Orphanage to pay the medical bill of a young girl diagnosed of Cancer at the Korle Bu Teaching Hospital. As a Company interested in promoting Agribusiness, we donated both cash and agric products to support the National Farmers Day event organized by the Ministry of Food and Agriculture. In partnership with the Organiser s of the Ghana Banking Awards, we also sponsored the Award of Best Bank in Agribusiness. STAFF DEVELOPMENT Your Company continues to invest in developing the capacity of its Staff to reposition our brand leadership on the market and manage our risks portfolio more efficiently and prudently. In pursuance to this objective, some staff members were sponsored by the Company to upgrade their skills in various specialists courses on short term basis during OUTLOOK This year s outlook appears bullish with government s investment in the energy sector yielding positive results for businesses. The unfortunate nightmare ritual of power rationing usually called Dumsor is beginning to give way for SMEs to utilize their full capacities for business development. General business confidence in the economy is improving as projected GDP is expected to grow to almost 4%. The Government of Ghana s decision to reduce the budget deficit to less than 10% should free up some space for the private sector to grow. Being an election year, we expect a disciplined approach to spending in Infrastructual development to drive the economy and as a business concern, Exim will take full advantage through various initiatives to improve our bottom line. With Government s desire to work to bring down inflation and reduce the cost of doing business, we anticipate an improved performance in Mr. Chairman, we are very much aware of the Government s decision to set up an Exim Bank to accelerate the development of an export led economy. The Ghana Exim Bank bill has been passed by Parliament and plans are far advanced to merge our Company with EDAIF and Export Finance Company to form the new Exim Bank. A technical/ transition Committee has been established to work on the modalities for the smooth implementation of this strategic policy of Government. ACKNOWLEDGEMENT I must thank the Board, Management and Staff for their support and commitment they showed in deepening the focus of our business despite a challenging. I wish to also express our appreciation to all our Stakeholders particularly financing institutions, contract awarding agencies, the Ministry of Finance, our loyal Clients and the media for their support. To our valued Shareholders, I wish to assure you of our collective resolve to not only grow our portfolio but also protect the Guarantee Fund in the interest of our economy. Thank you. 13

14 REPORT OF THE DIRECTORS TO THE MEMBERS OF The Directors present their report and the financial statements of the Company for the year ended 31 December. DIRECTORS RESPONSIBILITY STATEMENT The Directors are responsible for the preparation of financial statements that give a true and fair view of Eximguaranty Company (Ghana) Limited, comprising the statement of financial position at 31 December and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, in accordance with International Financial Reporting Standards and in the manner required by the Companies Act, 1963 (Act 179) and the Non-Bank Financial Institutions Act, 2008 (Act 774). In addition, the Directors are responsible for the preparation of the Directors report. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management. The Directors have made an assessment of the ability of the Company to continue as a going concern and have no reason to believe that the business will not be a going concern in the year ahead. The auditor is responsible for reporting on whether the financial statements give a true and fair view in accordance with the applicable financial reporting framework. NATURE OF BUSINESS The principal activities of the Company is to provide credit guarantee cover to financial institutions and other credit awarding agencies to assist them in extending credit facilities to borrowers who may have inadequate or no collateral. The Company is licensed by the Bank of Ghana as a non-bank financial institution under the Non-Bank Financial Institutions Act, 2008, (Act 774). There was no change in the nature of business of the Company during the year. FINANCIAL STATEMENTS AND DIVIDEND The results for the year are as set out in the attached financials, highlights of which are as follows: Profit for the year (attributable to equity holders) 150,732 35,539 to which is added the balance brought forward on retained earnings of 130, , , ,126 out of which is transferred to the mandatory reserve fund, in accordance with the Non-Bank Financial Institutions Act an amount of (75,366) (17,770) and transfers from/(to) credit risk reserve of 114,949 (495,399) giving a total of 320, ,957 less: Interest on preference shares (30,000) (30,000) Resulting in a balance of 290, ,957 less: prior year s dividend paid - (53,383) 290, ,574 less: transfer to Guarantee Fund (58,178) - leaves a balance to be carried forward on retained earnings of 232, ,574 No dividend was declared in the current year (: Nil). The Directors confirm that to the best of their knowledge: the financial statements, prepared in accordance with applicable laws and the Company s financial reporting framework, give a true and fair view of the Company s financial position, performance and cash flows; and the state of the Company s affairs is satisfactory. APPROVAL OF THE FINANCIAL STATEMENTS The financial statements of Eximguaranty Company (Ghana) Limited, as identified in the first paragraph, were approved by the Board of Directors on 18th May 2016 and signed on their behalf by.... DIRECTOR DIRECTOR

15 INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF We have audited the financial statements of Eximguaranty Company (Ghana) Limited, which comprise the statement of financial position at 31 December, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, as set out on pages 16 to 37. DIRECTORS RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and in the manner required by the Companies Act, 1963 (Act 179) and the Non-Bank Financial Institutions Act, 2008 (Act 774), and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. AUDITOR S RESPONSIBILITY Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of financial statements that give a true and fair view 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OPINION In our opinion, these financial statements give a true and fair view of the financial position of Eximguaranty Company (Ghana) Limited at 31 December and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Companies Act, 1963 (Act 179) and the Non-Bank Financial Institutions Act, 2008 (Act 774). REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Compliance with the requirements of Section 133 of the Companies Act, 1963 (Act 179) We have obtained all the information and explanations which, to the best of our knowledge and belief were necessary for the purpose of our audit. In our opinion, proper books of account have been kept, and the statements of financial position and comprehensive income are in agreement with the books of account. 18th May 2016 SIGNED BY: FREDERICK NYAN DENNIS (ICAG/P/1426) FOR AND ON BEHALF OF: KPMG: (ICAG/F/2016/038) CHARTERED ACCOUNTANTS 13 YIYIWA DRIVE, ABELENKPE P O BOX GP 242 ACCRA 15

16 STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER Note ASSETS Property, plant and equipment , ,417 Non-current assets 781, ,417 Short term investments 12 16,276,010 16,687,219 Accounts receivable , ,352 Cash and cash equivalents ,668 1,007,468 Current assets 17,100,927 18,338,039 Total assets 17,882,060 19,160,456 EQUITY Stated capital 17 3,062,900 3,062,900 Preference shares 18 3,000,000 3,000,000 Mandatory reserve fund 19 1,511,108 1,435,742 Retained earnings , ,574 Credit risk reserve , ,243 Total equity 8,390,013 8,327,459 LIABILITIES Deferred income , ,084 Guarantee fund 20 8,036,879 8,879,944 Deferred tax liability 10 51,517 43,905 Non-current liabilities 8,663,956 9,866,933 Income tax liability 9(c,d) 520, ,173 Accounts payable , ,224 Interest payable on preference shares 16 73,667 43,667 Current liabilities 828, ,064 Total liabilities 9,492,047 10,832,997 Total liabilities and equity 17,882,060 19,160,456 DIRECTOR DIRECTOR The notes on pages 20 to 37 are an integral part of this Annual report. 16

17 I STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER Note Guarantee and agency fees 5 1,448,264 1,506,347 Investment income 6 4,047,244 3,547,535 Other Income 7 43,671 44,915 Release from guarantee fund 20 1,289, ,495 Total revenue 6,828,648 6,079,292 Administrative expenses 8 5,298,278 5,026,442 Claims incurred 20 1,289, ,495 Total expenses 6,587,747 6,006,937 Operating profit before taxation 240,901 72,355 Income tax expense 9(a) (90,169) (36,816) Profit for the year and total comprehensive income 150,732 35,539 The notes on pages 20 to 37 are an integral part of this Annual report. 17

18 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER Stated capital Preference shares Mandatory reserve Retained earnings Credit risk reserve Total Balance at 1 January 3,062,900 3,000,000 1,435, , ,243 8,327,459 Total comprehensive income for the year Profit for the year , ,732 Total comprehensive income for the year , ,732 Transactions with equity holders Interest on preference shares (30,000) - (30,000) Total transactions with equity holders (30,000) - (30,000) Regulatory and other reserves Transfer to mandatory reserve fund ,366 (75,366) - - Transfer from credit risk reserve ,949 (114,949) - Total net movements in reserves ,366 39,583 (114,949) - Transfer to guarantee fund (58,178) (58,178) Balance at 31 December 3,062,900 3,000,000 1,511, , ,294 8,390,013 Stated capital Preference shares Mandatory reserve Retained earnings Credit risk reserve Total Balance at 1 January 3,062,900 3,000,000 1,417, , ,844 7,890,349 Adjustment , ,954 3,062,900 3,000,000 1,417, , ,844 8,375,303 Total comprehensive income for the year Profit for the year ,539-35,539 Total comprehensive income for the year ,539-35,539 Transactions with equity holders Dividend on ordinary dividend (53,383) - (53,383) Interest on preference shares (30,000) - (30,000) Total transactions with equity holders (83,383) - (83,383) Regulatory and other reserves Transfer to credit risk reserve (495,399) 495,399 - Transfer to mandatory reserve fund ,770 (17,770) - - Net transfer to reserves ,770 (513,169) 495,399 - Balance at 31 December 3,062,900 3,000,000 1,435, , ,243 8,327,459 The notes on pages 20 to 37 are an integral part of this Annual report. 18

19 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER Note Net cashflow from operating activities Profit after taxation 150,732 35,539 Adjustments: Depreciation , ,678 Profit on sale of property and equipment 14 (5,086) (2,036) Tax expense 9(a) 90,169 36,816 Interest income 6 (4,047,244) (3,547,535) Unrealised exchange difference on cash (1,542) (8,737) (3,547,167) (3,266,275) Changes in: Accounts receivables 156, ,979 Accounts payables 56,756 (356,702) Deferred income (367,524) 266,023 Cash used in operations (3,701,832) (2,595,975) Tax paid 9(c) (307,286) (35,355) Claims paid 20 (1,289,469) (980,495) Claims recovered , ,709 Net cash flow used in operating activities (4,910,361) (3,380,116) Cashflows from investing activities Purchase of property, plant & equipment 14 (224,521) (288,854) Proceeds from sale of property and equipment 14 5,086 18,060 Interest received 3,861,987 3,550,875 Increase in medium term investments (966,527) 2,199,083 Net cashflow from investing activities 2,676,025 5,479,164 Cashflows used in financing activities Dividend paid 22 - (83,383) Net cashflow used in financing activities - (83,383) Net decrease/(increase) in cash and cash equivalents (2,234,336) 2,015,665 Cash and cash equivalents at 1 January 8,110,285 6,085,883 Effect of exchange rate fluctuations on cash held 1,542 8,737 Cash and cash equivalents at 31 December 5,877,491 8,110,285 The notes on pages 20 to 37 are an integral part of this Annual report. 19

20 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 1. REPORTING ENTITY Eximguaranty Company (Ghana) Limited is domiciled in Ghana. The Company s registered office is at No. 27 Noi Fetreke, Roman Ridge, Ambassadorial Estate Extensions Accra. The Company is involved in the provision of credit guarantee cover to financial institutions and other credit awarding agencies to assist them in extending credit facilities to borrowers who may have inadequate or no collateral. The financial statements at and for the year ended 31 December comprise the individual financial statements of the Company. 2. BASIS OF PREPARATION (a) Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and in a manner required by the Companies Act 1963, (Act 179), and the Non-Bank Financial Institutions Act, 2008 (Act 774). (b) Basis of measurement The financial statements are prepared on the historical cost basis. (c) Functional and presentation currency The financial statements are presented in Ghana Cedis () which is the Company s functional and presentation currency. All financial information presented in Ghana Cedis have been rounded to the nearest Cedi, except where otherwise indicated. (d) Use of estimates and judgment The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Estimates and underlying assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on amounts recognised in the financial statements is included in the following notes: o o Note 3(e) determination of fair values Note 4 financial instruments fair values and risk management. 3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these financial statements. (a) Foreign currency (i) Foreign currency transactions Transactions denominated in foreign currency are translated into the functional currency using 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 at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Non-monetary assets and liabilities are translated at historical exchange rates if held at historical cost, or at exchange rates ruling at the date that fair value was determined if held at fair value, with the resulting exchange gain or loss recognised in the income statement or shareholders equity as appropriate. Foreign currency differences arising on retranslation are generally recognized in profit or loss in other income or administrative expenses depending on whether foreign currency movements are in a net gain or loss position. (b) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment (PPE) are measured at acquisition or construction cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components). (ii) Subsequent expenditure The cost of replacing part of an item of property, plant or equipment is recognised in the carrying amount of the item if it is probable that future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of the day-to-day maintenance, repair and servicing expenditures incurred on property, plant and equipment are recognised in income statement. (iii)depreciation Depreciation is recognised in the income statement on a straightline basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives. (iii) Depreciation (cont d) The estimated useful lives of major classes of depreciable property, plant and equipment are: Office Building - 50 years Plant and Machinery - 10 years Motor Vehicles - 4 years Office Equipment - 4 years Furniture and Fittings - 4 years Depreciation methods, useful lives and carrying amount are reassessed at each reporting date. The carrying amounts of property, plant and equipment are assessed whether they are recoverable in the form of future economic benefits. If the recoverable amount of a PPE has declined below its carrying amount, an impairment loss is recognised to reduce the value of the asset to its recoverable amount. In determining the recoverable amount of the asset, expected cash flows are discounted to their present value. Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds from disposal with the carrying amounts of property, plant and equipment and are recognised in the income statement as other income. 20

21 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER (iv) Derecognition Property, plant and equipment are derecognised upon disposal or when no future economic benefits are expected to flow to the Company from either their use or disposal. (c) Intangible assets Software Software acquired by the Company is stated at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred. Amortisation is recognised in the income statement on a straightline basis over the estimated useful life of the software from the date that it is available for use. Intangible assets are derecognised upon disposal or when no future economic benefits are expected to flow to the Company from either their use or disposal. Gains or losses on derecognition of an intangible asset are determined by comparing the proceeds from disposal, if applicable, with the carrying amount of the intangible asset and are recognised directly in profit or loss. (d) Financial instruments (i)non-derivative financial instruments Non-derivative financial instruments comprise account receivables, cash and cash equivalents, short term investments and account payables. Recognition and derecognition of a non-derivative financial instrument The Company classifies its financial liabilities other than financial guarantees and loan commitments as financial liabilities measured at amortised cost. (i) Non-derivative financial instruments - (cont d) The Company initially recognises loans and receivables on the date when they are originated. Financial assets are derecognised when the contractual rights to the cash flows from the assets expire, or it transfers the right to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership are transferred or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognised financial assets that is created or retained by the Company is recognised as a separate asset or liability. Financial liabilities are initially recognised on the trade date when the entity becomes a party to the contractual provisions of the instrument. The Company derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. Non-derivative financial instruments are categorised as follows: Loans and receivables these are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are subsequently recognised at amortised cost using effective interest method less appropriate allowances for doubtful receivables. Allowances for doubtful receivables represents the Company s estimate of incurred losses arising from the failure or inability of customers to make payments when due. These estimates are based on aging of customer s balances, specific credit circumstances and the Company s receivables historical experience. Loans and receivables comprise cash and cash equivalents and account receivables. Cash and cash equivalents - Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in fair value and are used by the Company in the management of its short-term commitments. Held-to-maturity these are non-derivative assets with fixed or determinable payments and fixed maturity that the Company has the positive intent and ability to hold to maturity and which are not designated at fair value through profit or loss or available-for-sale. Held to maturity assets are initially measured at fair value plus incremental direct transaction costs and subsequently measured at amortized cost using the effective interest method. Any sale or reclassification of a significant amount of held to maturity asset not close to their maturity would result in the reclassification of all held to maturity assets as availablefor-sale, and would prevent the Company from classifying investment securities as held-to-maturity for the current and the following two financial years. Differences between the carrying amount (amortized cost) and the fair value on the date of the reclassification are recognized in other comprehensive income. The Company classifies short term investments as held-to-maturity. Financial liabilities measured at amortised cost - this relates to all other liabilities that are not designated at fair value through profit or loss. The Company classifies non-derivative financial liabilities into the other liabilities category. Other financial liabilities comprise account payables. (ii) Share capital Ordinary shares Proceeds from the issue of ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. (e) Determination of fair values Some of the Company s accounting policies and disclosures require the determination of fair value, for both financial and nonfinancial assets and liabilities. The Company regularly reviews significant unobservable inputs and valuation adjustments. When measuring the fair value of an asset or liability, the Company uses market observable data as far as possible. Fair values are categorised into different levels in the fair value hierarchy based on the inputs used in the valuation techniques as follows: o o o Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: inputs for the asset and liability that are not based on observable market data (unobservable inputs). If inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. Further information about the assumptions made in determining fair values is included in Note 4, financial instruments fair value and risk management. 21

22 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER (f) Impairment (i) Financial assets A financial asset is considered impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the income statement. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. (ii) Non-financial assets The carrying amounts of the Company s non-financial assets other than deferred tax assets are reviewed at each reporting date to determine whether there is an indication of impairment. If any such indication exists then the asset s recoverable amount is estimated. (ii) Non-financial assets (cont d) The recoverable amount of an asset or cash generating unit 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 reflect current market assessments of the time value of money and the risk specific to the asset. An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. A previously recognised impairment loss is reversed where there has been a change in circumstances or in the basis of estimation used to determine the recoverable value, but only to the extent that the asset s net carrying amount does not exceed the carrying amount of the asset, after provisions and depreciation, which would have been determined if no impairment loss had been recognised. (g) Mandatory reserve fund In accordance with the industry s legal and regulatory frameworks, a mandatory reserve is established and maintained, to cover the risk of bankruptcy. This is measured at 50% of the net profits after tax, but before dividend and such amount shall accumulate until it reaches the minimum paid-up capital, after which time the applicable percentage reduces to a minimum of 15%. (h) Interest income and expense Interest income and expense are recognized in profit or loss using the effective interest method. When calculating the effective interest rate, the Company estimates future cash flows considering all contractual terms of the financial instrument, but not future credit losses. The calculation includes all transaction costs, 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 or issue of a financial asset or liability. Once a financial asset or a group of similar financial assets have been written down as a result of an impairment loss, interest income is recognized using the rate of interest used to discount future cash flows for the purpose of measuring the impairment loss. (i) Guarantee and agency fees Guarantee and agency fees are generally recognised on an accrual basis when services have been rendered, it is probable that future economic benefits of the transaction will flow to the entity, the revenue can be measured reliably and the costs are identifiable and can be measured reliably. If the guarantees issued under a single arrangement are rendered over different reporting periods, then the guarantee fees are deferred on a straight line basis between the different reporting periods. (j) Employment benefits (i) Defined contribution plans A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions to a separate entity and will have no legal or constructive obligation to pay future amounts. Obligations for contributions to defined contribution schemes are recognised as an expense in the statement of comprehensive income in the periods during which services are rendered by employees. (ii) Short-term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. (iii) Provident fund The Company has a provident fund scheme for all employees who have completed their probation period with the Company. Employees contribute 5.5% of their basic salary to the Fund whilst the Company contributes 13%. Obligations under the plan are limited to the relevant contributions, which are settled on due dates to the Fund Manager. (k) Taxation Income tax expense comprises current and deferred tax. The Company provides for income taxes at the current tax rates on the taxable profits of the Company. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on taxable income for the year using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is measured at tax rates that are expected to be applied to temporary differences when they reverse, based on laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 22

23 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER (l) Provisions A provision is recognised when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at pre-tax rates that reflect current market assessments of the time value of money and where appropriate, risks specific to the liability. (m) Dividend Dividend payable is recognised as a liability in the period in which they are declared. Dividend proposed which is yet to be approved by the shareholders, is disclosed by way of notes. (n) Financial guarantee contracts Financial guarantee contracts are contracts that require the Company to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of the debt instrument. Financial guarantees are initially recognised at fair value and amortised over the useful life of the financial guarantee. The liability is subsequently carried at the higher of the amortised amount and the present value of any expected payments to settle the liability, when payment becomes probable. (o) Grant in support of guarantee fund Grants are received from Export Development and Agricultural Investment Fund (EDAIF) to augment the guarantee fund to further enhance activities in support of the export sector. This grant is accounted for as deferred income and are released to the income statement to offset claims incurred. (p) Subsequent events Events subsequent to the reporting date are reflected in the financial statements only to the extent that they relate to the year under consideration and the effect is material. (q) Comparatives Except when a standard or an international interpretation permits or requires otherwise, all amounts are reported or disclosed with comparative information. Where considered necessary, comparative figures have been adjusted to conform to changes in presentation in the current year. (r) New standards and interpretations not yet adopted There are new or revised Accounting Standards and Interpretations in issue that are not yet effective. These include the following Standards and Interpretations that are applicable to the business of the entity and may have an impact on future financial statements: Standard/Interpretation IFRS 9 IFRS 15 Financial Instruments Revenue from contracts with customers Date issued by LASB Effective date Periods beginning on or after July 1 January 2018 May 1 January 2018 IFRS 9 Financial Instruments IFRS 9 published in July, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018 with retrospective application, with early adoption permitted. The Company is assessing the potential impact on its financial statements resulting from the application of IFRS 9. Given the nature of the Company s operations, this standard is expected to have a significant impact on the Company s financial statements. In particular, calculation of impairment of financial instruments on an expected credit loss basis is expected to result in an increase in the overall level of impairment allowances. IFRS 15 Revenue from Contracts with Customers IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. The Company is assessing the potential impact on its financial statements resulting from the application of IFRS 15, therefore the impact is currently unknown. The following new or amended standards are not expected to have a significant impact on the Company s financial statements. Defined Benefit Plans: Employee Contributions (Amendments to IAS 19). Annual Improvements to IFRSs Cycle. Annual Improvements to IFRSs Cycle. IFRS 14 Regulatory Deferral Accounts. Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11). Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38). Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41). Equity Method in Separate Financial Statements (Amendments to IAS 27). Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28). Annual Improvements to IFRSs 2012 Cycle various standards. 4. FINANCIAL INSTRUMENTS FAIR VALUES AND RISK MANAGEMENT (a) Accounting classification and fair values The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. 23

24 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER December Financial assets not measured at fair value Loans & Receivables Held-tomaturity Other financial liabilities Cash and cash equivalents 337, ,668 Short term investments - 16,276,010-16,276,010 Accounts receivables 145, ,388 Total 483,056 16,276,010-16,759,066 Financial liabilities not measured at fair value Accounts payable , ,083 December Financial assets not measured at fair value Cash and cash equivalents 1,007, ,007,468 Short term investments - 16,687,219-16,687,219 Accounts receivables 387, ,418 1,394,886 16,687,219-18,082,105 Financial liabilities not measured at fair value Accounts payable , ,284 (b) Financial risk management (i) Overview The Company has exposure to the following risks from its use of financial instruments: o o o o credit risk liquidity risk market risks operational risk This note presents information about the Company s exposure to each of the above risks, the Company s objectives, policies and processes for measuring and managing risk, and the Company s management of capital. (ii) Risk management framework The Board of Directors has the overall responsibility for the establishment and oversight of the Company s risk management framework. The responsibilities of the Board of Directors include: setting out the Company s overall risk appetite/tolerance limit, ensuring that the Company s overall risk exposure is maintained at prudent levels and consistent with available capital. They also include; ensuring that executive management as well as individuals responsible for risk management possess sound expertise and knowledge to accomplish the risk management function and ensuring that appropriate policies and procedures for risk management are in place. The Board of Directors, credit committee and the management team oversee implementation of the broad risk management policies and objectives of the Company. The most important components of this financial risk are interest rate risk, equity risk, currency risk, credit risk and liquidity risk. These risks arise from open positions in interest rates which are exposed to general and specific market movements. The risk that the Company primarily faces due to the nature of its investments and liabilities is interest rate risk. 24

25 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER (iii) Credit risk Credit risk stems from outright default due to inability or unwillingness of a client or counterpart to meet commitments in relation to guarantees issued. Resultant losses are written off in the statement of comprehensive income. The credit committee is responsible for implementation of the guarantee risk policy and monitoring credit risk on transactional basis to ensure compliance with guarantee limits approved by the Board. The credit committee is a separate function from the operations department and this ensures credibility and discipline in the guarantee delivery value chain. Managing problem guarantees Monitoring and Recovery department manages delinquent facilities including outright recoveries or nursing of such problem guarantees back to health. At delinquent stage and 360 days past due, where recovery efforts are unsuccessful, the Monitoring and Recovery Department refers the client to the Company s contractual external solicitors. Provisioning for guarantees In conformity with Bank of Ghana s directives, the minimum provision that are held are as follows: Guarantee risk rating minimum provision Required - % Advanced mobilization 1.0 Credit guarantee 1.0 Mobilisation guarantee 1.5 Advance payment guarantee 1.0 Guarantee risk rating minimum provision Required - % Bid bon 0.5 Bid security 0.5 Performance bond/performance security 1.0 Seed fund guarantee 1.0 Syndication guarantee 1.0 Exposure to credit risks The carrying amount of financial assets represents the maximum credit risk exposure. The maximum exposure at the reporting date was: 25

26 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Accounts receivable 145, ,418 Short-term investments 16,276,010 16,687,219 Bank balances 326,767 1,004,431 16,748,165 18,079,068 Off-balance sheet items: Unexpired guarantees outstanding 47,375,085 59,123,006 Concentration by location within Ghana Accounts receivable 145, ,418 Short-term investments 16,276,010 16,687,219 Bank balances 326,767 1,004,431 16,748,165 18,079,068 Off Balance sheet items: Unexpired guarantees outstanding 47,375,085 59,123,006 Concentration by location outside Ghana - - iv) Liquidity Risk Liquidity risk is the risk that the Company either does not have sufficient financial resources available to meet all its obligations and commitments as they fall due, or can access them only at excessive cost. The Company s approach to managing liquidity is to ensure that it will maintain adequate liquidity to meet its liabilities when due. The following are contractual maturities of financial liabilities: Amount 6mths or less 12mths December Non-derivative financial liabilities Accounts payable 182, ,083 - December Non-derivative financial liabilities Accounts payable 161, ,284 - (v) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company s income or the value of its holding of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, whilst optimizing the return. (a) Currency risk The Company is exposed to currency risk in terms of balances denominated in currencies other than the functional currency. The Company s exposure to foreign currency risk was as follows based on notional amounts. US$ Euro GB Assets Cash and bank balances 15, Net exposure 15, Assets Cash and bank balances 1, Net exposure 1,

27 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER (a) Currency risk (cont d) The following significant exchange rates applied during the year: Average rate Reporting rate US$ Euro GBP (b) Sensitivity analysis on currency risks The following table shows the effect of a strengthening or weakening of against all other currencies on equity and profit or loss. This sensitivity analysis indicates the potential impact on equity and profit or loss based upon the foreign currency exposures recorded at 31 December. (See currency risk above) and it does not represent actual or future gains or losses. The sensitivity analysis is based on the percentage difference between the closing exchange rate and the average exchange rate per currency recorded in the course of the respective financial year. A strengthening/weakening of the, by the rates shown in the table, against the following currencies at 31 December would have increased/decreased equity and profit or loss by the amounts shown below: This analysis assumes that all other variables, in particular interest rates, remain constant. At 31 December % Change Proft or loss/equity Proft or loss/ % Proft or loss/ impact Strengthening equity impact equity impact Weakening Change Strengthening Proft or loss/equity impact Weakening Euro ±10% 56 (56) ±10% 53 (53) USD ±10% 5,748 (5,748) ±10% 563 (563) GBP ±10% 15 (15) ±10% 13 (13) (c) Interest rate risk Changes in market interest rates have a direct effect on the contractually determined cash flows associated with floating rate instruments. Interest rate risk relates to the Company s investments in floating or fixed rate deposits and treasury bills. At the reporting date, the interest rate profile of the Company s interest-bearing financial instruments was: Carrying amounts Fixed rate instruments Fixed deposit 11,823,142 11,334,535 Treasury bills 4,452,868 5,352,684 16,276,010 16,687,219 27

28 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER (c) Interest rate risk (cont d) The Company does not account for any fixed rate financial instruments at fair value through profit or loss therefore a change in interest rates at the reporting date would not affect profit or loss. No interest rate sensitivity analysis has thus been disclosed. The Company does not have variable-rate instruments. (vi) Operational risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. It is the risk of loss arising from the potential that inadequate information systems, breaches of internal controls, fraud, technological failure and unforeseen catastrophes may result in unexpected loss or reputational problems. The Company has developed a thorough and consistent framework and policies to control and actively manage its operational risk. (vii) Compliance and regulatory risk In order to strengthen the Company s compliance with regulatory requirements, the Company organizes series of dedicated training on a regular basis to equip staff with compliance and regulatory issues in order to minimize risk emanating there from. (viii) Legal risk The Company is not dependent on any patent or any industrial, commercial or financial contract. The Company s activities are undertaken in a manner which adequately reduces the risks which may arise out of material litigation to be initiated against it (the Company). (ix) Reputational risk The Company conducts its business in a responsible, professional and transparent way. By offering simplified products and following the necessary legal and regulatory processes, the Company safeguards the interest of its clients as well as its reputation. Furthermore, the Company maintains close ties with the communities in which it operates by supporting them in various ways. This is aimed at demonstrating our commitment and fostering a long term relationship with our clients and the public at large. (x) Capital management (a) Capital definition The Company s capital, ordinarily referred to as shareholders fund comprises ordinary share capital raised through direct investment, retained earnings including current year profit and various reserves the Company is statutorily required to maintain. As a non-bank financial institution, the Company also has regulatory capital as defined below. The primary objectives of the Company s capital management are to ensure that the Company complies with the requirement of Bank of Ghana and healthy capital ratios in order to support its business and to maximise shareholders value. (a) Capital definition (cont d) The Company manages its capital structure and makes adjustment to it in the light of changes in the economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend payments to shareholders, or issue additional capital securities. (b) Regulatory Capital Regulatory capital consist of Tier 1 capital, which comprises share capital, share deals account, retained earnings including current year profit, foreign currency translation and minority interests less accrued dividend, net long positions in own share and goodwill. Certain adjustments are made to IFRS-based result and reserves, as prescribed by the Bank of Ghana. The other component of regulatory capital is Tier 2 capital which includes revaluation reserves and preference shares. (c) Capital adequacy The adequacy of the Company s capital is monitored using, among other measures, the rules and ratios established by the Basel Committee on Banking Supervision and adopted by the Bank of Ghana. The Central Bank requires Non-Bank Financial Institutions to: (i) Hold a minimum paid up capital of 15 million (ii) Maintain a minimum capital adequacy ratio of 8% 28

29 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER The capital adequacy ratios of the Company as of 31 December and are shown below: Tier 1 capital Ordinary share capital 3,062,900 3,062,900 Disclosed reserves 2,327,113 2,264,559 Losses not provided for (583,294) (698,243) 4,806,719 4,629,216 Tier 2 capital Preference shares 3,000,000 3,000,000 Total regulatory capital 7,806,719 7,629,216 Adjusted risk-weighted assets 56,414,098 67,452,338 Total capital expressed as a percentage of total risk-weighted assets is 13.84% 11.31% Management provided us with a letter from Financial Investment Trust dated 30 May indicating that the Company is not a Finance House, therefore, its focus should be to grow the Guarantee Fund and not capital. (c) Capital adequacy (cont d) The Company considers this as an exemption from meeting the minimum capital requirement of 15 million, hence, it has not met the minimum capital requirement at the end of the reporting period and at the end of the prior year. 5. REVENUE Guarantee and agency fees 1,448,264 1,506, INVESTMENT INCOME Income from investment 2,812,880 2,503,938 Income on guarantee fund held at Bank of Ghana 1,234,364 1,043,597 4,047,244 3,547, OTHER INCOME Exchange gain 1,112 4,000 Gain on sale of property, plant and equipment 5,086 2,036 Sundry income 12,696 - Interest on staff loan 4,215 5,128 Concessionary interest on staff loan 20,562 33,751 43,671 44,915 29

30 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 8. ADMINISTRATIVE EXPENSES Directors remuneration 403, ,105 Auditor s remuneration 65,000 62,766 Donation 9,810 18,109 Depreciation 265, ,678 Staff cost 2,882,777 2,487,333 Repairs and maintenance 75,614 69,165 Rent 134,653 90,790 Utilities 190, ,905 Bad & doubtful debts 38, ,143 Other administrative cost 1,212,125 1,275,697 Concessionary interest 20,562 33,751 5,298,278 5,026, TAXATION a. Income tax expense Current income tax 70,512 67,100 National Fiscal Stabilization Levy 12,045 3,618 Deferred tax charge 7,612 (33,902) 90,169 36,816 b. Reconciliation of effective tax The tax charge based on the Company s profit before tax differs from the hypothetical amount that would arise using the statutory income tax rate. This is explained as follows: Profit before taxation 240,901 72,355 Tax at applicable tax rate at 25% (: 25%) 60,225 18,089 Non-deductible expenses 76,516 45,717 Tax exempt income (1,272) (509) Tax incentives (57,345) (30,099) National Fiscal Stabilisation Levy 12,045 3,618 Income tax expense 90,169 36,816 Effective tax rate 37% 51% 30

31 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER The movement on the income tax account was as follows: c. Company income tax Balance 1/1/15 Payments Charge for the year Balance 31/12/15 Year of assessment ,258 (51,918) - 142, ,754 (120,693) - 323,061 64,163 (64,163) (70,512) 70, ,175 (307,286) 70, ,401 d. National Fiscal Stabilisation Levy Balance 1/1/15 Payments Charge for the year Balance 31/12/ , ,380 3, , ,045 12,045 42,998-12,045 55, ,173 (307,286) 82, ,444 The National Fiscal Stabilisation Levy Act, 2013 (862) was introduced in 2013 and is effective prospectively from July 2013 with an eighteen (18) months tenure. Under the Act, a 5% levy, which is payable quarterly, is charged on profit before tax of selected entities, including Banks. On 31 December, Act (862) was amended by Act (882) to extend the date of expiration of the national fiscal stabilization levy and to provide for related matters. Under the Amended Act, the levy is payable in respect of profit before tax for the 2013,,, 2016 and 2017 years of assessment. The above tax liabilities are subject to agreement with the Ghana Revenue Authority. 10. DEFERRED TAX Balance at 1 January 43,905 (83,844) Charge for the year 7, ,749 Balance at 31 December 51,517 43, CASH AND CASH EQUIVALENTS Balances with Bank of Ghana 155, ,229 Balances with other banks 171, ,202 Cash on hand 10,901 3,037 Cash and cash equivalents in statement of financial position 337,668 1,007, Day treasury bills and fixed deposit 5,539,823 7,102,817 Cash and cash equivalents in statement of cashflows 5,877,491 8,110,285 31

32 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 12. SHORT-TERM INVESTMENT Treasury bills 4,452,868 5,352,684 Fixed deposit 11,823,142 11,334,535 16,276,010 16,687, ACCOUNTS RECEIVABLE Trade debtors 75, ,387 Sundry debtors - 84,856 Staff debtors 70, ,175 Prepayments 341, , , ,352 The maximum amount due from staff during the year amounted to 121,000 (: 188,000). Loans to staff are granted at an interest rate ranging between 2-3% per annum Prepayments represent the unexpired portion of certain expenditure spread on time basis. 32

33 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 14. PROPERTY, PLANT AND EQUIPMENT Office Building Motor Vehicle Office Equipment Fixtures & Fittings Plant & Machinery Cost Balance at 1 January 435, , , , ,184 1,974,779 Additions - 136,782 42,232 45, ,521 Disposal - (50,772) - (5,736) - (56,508) Total Balance at 31 December 435, , , , ,184 2,142,792 Depreciation Balance at 1 January 84, , , ,365 52,761 1,152,362 Charge for the year 8, ,510 47,366 47,204 12, ,804 Disposal - (50,772) - (5,736) - (56,508) Balance at 31 December 92, , , ,833 64,780 1,361,658 Net Book Value At 31 December 342, ,619 66,341 61,496 55, ,134 Cost Balance at 1 January 435, , , , ,654 1,960,661 Additions - 191,290 45,181 51, ,854 Disposal - (249,826) (12,575) (12,335) - (274,736) Balance at 31 December 435, , , , ,184 1,974,779 Depreciation Balance at 1 January 75, , , ,310 40,709 1,191,396 Charge for the year 8, ,314 43,766 38,841 12, ,678 Disposal - (234,351) (12,575) (11,786) - (258,712) Balance at 31 December 84, , , ,365 52,761 1,152,362 Net Book Value At 31 December 350, ,347 71,475 63,193 67, ,417 33

34 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Disposal of property and equipment Cost 56, ,736 Accumulated depreciation (56,508) (258,712) Net book value - 16,024 Proceeds from disposal 5,086 18,060 Gain on disposal 5,086 2, ACCOUNTS PAYABLE Sundry creditors 41,755 62,485 Accruals 192, , , , INTEREST PAYABLE Balance at 1 January 43,667 43,667 Interest for the year 30,000 30,000 Interest paid - (30,000) Balance at 31 December 73,667 43, STATED CAPITAL No. of Shares Proceeds Authorised: Ordinary shares of no par value 10,000,000 10,000,000 Issued: Issued for cash (ordinary shares) 1,334,182 1,334,182 3,062,900 3,062,900 At 31 December 1,334,182 1,334,182 3,062,900 3,062,900 There is no unpaid liability on any share and there are no calls or installments unpaid. There are no shares in treasury. 34

35 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 18. REDEEMABLE PREFERENCE SHARES No. of Shares Proceeds Issued and fully paid ,000,000 3,000,000 The redeemable preference shares are held by the Government of Ghana acting through its authorised representative, the Ministry of Finance and Economic Planning (MOFEP). The Company is required to pay an interest of 1% on the capital paid. 19. MANDATORY RESERVE FUND Balance at 1 January 1,435,742 1,417,972 Transfer from retained earnings 75,366 Balance at 31 December 1,511,108 1,435,742 This represents the cumulative amounts set aside as a non-distributable reserve from annual net profit after tax in accordance with Section B, Rule 7 (1a) of the Non-Bank Financial Institutions Business Rules. Under this rule, the Company is required to transfer 50% of its net profit after tax until the amount in the Institution s Mandatory Reserve Fund is equal to the minimum capital requirement, after which transfers shall be made of amounts at a rate not less than 15% of net profit after tax for the year. 20. GUARANTEE FUND Balance at 1 January 8,879,944 9,628,730 Claims recovered 388, ,709 9,268,170 9,860,439 Release to income statement (1,289,469) (980,495) Transfer from retained earnings 58,178 - Balance at 31 December 8,036,879 8,879,944 The objective of the Fund is to support the Company in terms of payment of claims as they arise. The Fund has therefore been classified in the statement of financial position as part of liabilities as per IFRS requirement and this is to enable the Company release to income statement the portion of the fund required to offset claims. At December, the Board put in place a policy to transfer up to 20% of the balance on retained earnings to the fund at the end of each financial year effective 1 January. The Company in 2010 obtained from Export Development and Agricultural Investment Fund (EDAIF) a board resolution converting its subordinated loan of 10.5million into a grant for the purposes of augmenting the guarantee fund of the Company. 35

36 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 21. DEFERRED INCOME Balance at 1 January 943, ,061 Amount deferred 556, ,539 Amount released (923,913) (673,516) Balance at 31 December 575, , RETAINED EARNINGS This represents the residual of cumulative annual profits that are available for distribution to shareholders. Balance at 1 January 130, ,587 Profit for the year 150,732 35,539 Dividend paid - (83,383) Interest on preference shares (30,000) - Transfer to mandatory reserve (75,366) (17,770) Transfer from credit risk reserve 114,949 (495,399) Transfer to guarantee fund (58,178) - Balance at 31 December 232, , CREDIT RISK RESERVE This represent Bank of Ghana s total provision on unexpired guarantees. Balance at 1 January 698, ,844 Transfer to retained earnings (114,949) 495,399 Balance at 31 December 583, , DIVIDEND PER SHARE The following dividend were declared and paid by the Company for the year: No dividend was declared in the current year (: Nil) RELATED PARTY DISCLOSURES The total amounts of transactions that have been entered into with related parties during the year and the related outstanding balances at end of the year are as follows: a. Transactions with key management personnel Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Company (directly or indirectly) and comprise the Managing Director and Senior Management of Eximguaranty Company (Ghana) Limited. There were no material transactions with companies in which the Managing Director or other members of key management personnel (or any connected person) is related. 36

37 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Loans No loans were advanced to the Managing Director and Senior Management during the year. There were no balances outstanding on account of loans due from the Managing Director and Senior Management at the year end. Remuneration of key management personnel Salaries and other short-term employee benefits 612, ,582 b. Transactions with non-executive directors Directors fees and allowances 170, , CONTINGENCIES There were contingent liabilities at the end of each financial year in respect of: Unexpired guarantees outstanding 47,375,085 59,123,010 Legal cases against the Company 6,295,612 6,690,780 There was a judgment debt of 6,995,612 against the Company during the year. This was as a result of an action brought by ESM Company Limited for default of Machinery Credit Guarantee by Big Aidoo Construction Limited. The Company made a payment of 700,000 during the year. The court has ruled in favour of ESM Company Limited for a Garnishee order to be placed on the payment of IPC No.11 valued at 4,557,324 to Big Aidoo by the Ministry of Finance. The Company has mortgage of four landed properties valued at 1,982,665 and a Deed of Assignment of Equipment of Big Aidoo valued at 5,439,000 amounting to 7,421,665. On the basis of these arrangements, the Company has not made any provision in respect of this. 37

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