REPORTS & FINANCIAL STATEMENTS

Transcription

1 R U R A L B A N K L A K W A P I T E D Your Financial Partner with Flexible Solutions EST REPORTS & FINANCIAL STATEMENTS 2015

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3 R U R A L B A N K L A K W A P Your Financial Partner with Flexible Solutions I T E D EST AKWAPIM RURAL BANK LTD. Reports & Financial Statements 2015

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5 Reports & Financial Statements 2015 OUR VISION Be the Best Bank in our communities by all standards and at all times A K W A P A K W A P R U R A L R U R A L B A N K Your Financial Partner with Flexible Solutions EST B A N K Your Financial Partner with Flexible Solutions EST L L I T E D I T E D OUR MISSION To provide first class financial services to our customers, through our motivated and dedicated team and to create maximum value for shareholders as well as provide responsible service to the community. OUR GOALS Outclass all Rural Banks in Ghana Be the Model Rural Bank in Ghana OUR VALUES RESPONSIVENESS To meet the ever changing needs of our clients and communities HONESTY To be transparent and trustworthy in our operations DEPENDABILITY To be reliable and consistent in our service delivery MOTIVATION To boost the morale of staff by rewarding them for effective, excellent and timely performance. To create an environment that allows individual staff to use their initiative 1

6 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P Your Financial Partner with Flexible Solutions I T E D EST Contents 3 Notice of Annual General Meeting 4 Corporate Information 5 Board Chairman s Report 9 Our Awards 10 Report of the Board of Directors 13 Independent Auditors' Report 15 Statement of Profit or Loss and Other Comprehensive Income 16 Statement of Financial Position 17 Statement of Changes In Equity 19 Statement of Cashflows 20 Employee of the Year Awards (2015) 21 Notes Forming Part of the Financial Statements 30 Corporate Social Responsibility 31 Notes to the Financial Statements 46 Projects Financed by the Bank 47 Staff Durbar, Proxy Authorisation 49 Admission Form 2

7 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P Your Financial Partner with Flexible Solutions I T E D EST NOTICE OF ANNUAL GENERAL MEETING NOTICE is hereby given that the Thirty Fifth (35th) Annual General Meeting of AKWAPIM RURAL BANK LIMITED will be held on Saturday 25 th June 2016 at 10:00 o clock in the forenoon at the Wesley Hall, Methodist Girls Senior High School Mamfe, Akuapem where the following businesses will be transacted: AGENDA 1. To receive the report of the Chairman of the Board of Directors. 2. To receive and consider the report of the Directors, the Statement of Accounts and Financial Position for the year ended 31 st December 2015 and the Auditors report thereon. 3. To declare a dividend. 4. To elect Directors in place of those retiring by rotation. 5. To fix the remuneration of the Directors. 6. To authorize the Directors to fix the remuneration of the Auditors. BY ORDER OF THE BOARD SIGNED KAREN NAI (COMPANY SECRETARY) NOTE: A member is entitled to attend and vote at the meeting or to appoint a proxy to attend and vote in his or her stead. A proxy need not be a member of the Bank. A proxy form is enclosed with the accounts. Completed proxy forms should be lodged with the General Manager/Company Secretary, Akwapim Rural Bank Limited, Head Office, Mamfe, Akuapem not less than two (2) days before the meeting. This advertisement serves as notice to all shareholders to attend. 3

8 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P Your Financial Partner with Flexible Solutions I T E D CORPORATE INFORMATION EST DIRECTORS: George Kwasi Oware - Chairman Gilbert Leibel - Vice Chairman Emma Owusu-Amoah - Member Joshua Offei Bekoe - Member William Adjei Twumasi (Dr.) - Member Frederick Akwei Kpakpo - Member Yvonne Atakora Obuobisa - Member Ernestina Ayisi - Member Kwame Gyeke-Amoako - Member SECRETARY: Karen Nai AUDITORS: Morrison & Associates Chartered Accountants Trinity House, 2nd Floor Ring Road East P. O. Box C2890 Cantonments - Accra REGISTERED OFFICE: Akwapim Rural Bank Limited P. O. Box 5 Banking Premises Mamfe-Akuapem Tel: info@akuapemruralbank.com Website: BANKERS: ARB Apex Bank Limited Barclays Bank of Ghana Limited 4

9 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P Your Financial Partner with Flexible Solutions I T E D EST INTRODUCTION Distinguished Shareholders, Invited Guests, Ladies and Gentlemen, it is my warmest pleasure to welcome you on behalf of the Board of Directors and on my own behalf to the Thirty-Fifth (35th) Annual General Meeting of Akwapim Rural Bank Limited. I hereby present to you a report on the performance of your Bank for the year ended 31st December, Before I proceed let me crave your indulgence to observe a minute silence in memory of the late Mr. Ernest Asare-Buakyi, a former Director who passed on to glory late last year. May His Soul Rest In Peace. 2.0 THE 2015 ECONOMIC ENVIRONMENT The Ghanaian economy in 2015 faced major challenges notably the sharp currency depreciation, deepening energy crisis and rising inflation and interest rates. The Prime Rate saw an increase from 21% at the end of December 2014 to 26% at the end of December Inflation rate also went up marginally from 17.0% to 17.7% during the period. The cedi depreciated against all the major trading currencies throughout the year THE BANKING INDUSTRY BOARD CHAIRMAN S REPORT The rural banking industry is faced with increasing and persistent competition from both universal banks and micro-finance institutions. It is worth noting however, that the recent failure of some microfinance companies in the country has created opportunity for the rural and community banks (RCB s). High interest rates on Government securities rather ensured that most customers invested their monies in Government bills and bonds instead of the bank s deposit products. This resulted in the recording of low levels of deposits in most universal banks and rural and community Banks (RCB s) alike. The profit levels of most banks dipped in 2015 mainly due to high operating costs and high impaired loan portfolios on the back of increased credit default rate. According to Bank of Ghana, defaults in bank loans increased more than 300% in 2015, prompting decision by some banks to cut lending aggressively. As many as about seven (7) major banks recorded losses last year with very huge loan impairment. Their Balance Sheets were also affected 5

10 Reports & Financial Statements 2015 by the economic downturn in 2015 coupled with the energy crisis. A number of banks also witnessed reduction in their bottom lines. Again, the Bank of Ghana Financial Stability report for 2015 indicated that the Ghanaian banking industry recorded negative 5.4% growth signaling a very difficult financial year. 4.0 THE BANK S PERFORMANCE Fellow shareholders, our Bank operated under extremely difficult economic conditions in the year under review as enumerated earlier on. These conditions notwithstanding, the Bank managed to record significant improvement in all major areas of its performance. Profit before Tax recorded an appreciable growth of 48.8 % from GHS 1,991,686 in 2014 to GHS 2,875,110 in This performance also underscores the Bank s increased earning capacity as earnings assets (Loans/Advances and Investment) increased by 34.8% from GHS 26,326,579 in 2014 to GHS 35,476,380 in Total Assets/Liabilities increased by 27% from GHS 32,342,185 in 2014 to GHS 41,103,548 in 2015 on the back of strong deposit growth propelled by our Akusika (Susu) scheme which continued to enjoy massive patronage in all our catchment areas. We appreciate the massive patronage of all our products by our customers who have kept faith in us all this while. The Bank s performance for the last five (5) years is summarized as follows:- YEAR DEPOSITS LOANS PROFIT BEFORE TAX TOTAL ASSETS NETWORTH GHS 000 GHS 000 GHS 000 GHS 000 GHS , , , , , , , , , , , , , , , , , , , , , , , , The Board will continue to work harder to improve upon the performance of the Bank. 4.1 Deposits Deposits grew by 26% from GHS 24,439,216 in 2014 to GHS 30,799,568 in We appreciate our distinguished customers for their continued support and appreciation of the culture of saving and patronage of our products. We cannot leave out our hard-working staff whose drive towards deposits mobilization is yielding positive results for the Bank. We will continue to institute measures and strategies to help sustain and improve on this result whilst mitigating any associated risk. 4.2 Loans and Advances During the year under review, a total amount of GHS 16,550,125 was disbursed as loans of which our flagship product, the Credit with Education, contributed a substantial amount of GHS 7,003,450 representing 42.3% of the total loans disbursed. The Bank s Loans and Advances Portfolio saw a 6

11 Reports & Financial Statements 2015 marginal increase of 4.5% from GHS 11,842,482 in 2014 to GHS 12,379,273 in Amidst stiff competition from other Microfinance Institutions, our Credit with Education product continued to excel. 4.3 Interest Income Net Interest Income increased from GHS 6,452,708 in 2014 to GHS 7,848,487 in 2015 representing 21.6% over the results for the previous year. 4.4 Share Capital The Bank s paid up capital increased from GHS 1,580,373 in 2014 to GHS 1,621,000 in 2015, an increase of 2.6%. We appreciate your patronage of our shares and still appeal to you all to buy more shares to continue to strengthen your bank in terms of paid-up capital. On the back of a strong capital base, as per the requirements of the Bank of Ghana, our Bank will be in a favourable position to expand its branch network. 4.5 Operating and Administrative Expenses The Bank s Operating and Administrative Expenses increased from GHS 4,990,702 in 2014 to GHS 6,010,200 in 2015 representing an increase of 20.4%. In the year under review (2015), Operating and Administrative Expenses constituted 78.6% of Total Income as against 77.3% recorded for The impact of the astronomical increases in utility tariffs and high energy costs was greatly felt in the year under review. Efforts to restructure operation aimed at minimizing costs, will continue to be pursued. 4.6 Dividend For the Year 2015, the Board of Directors will declare a dividend payment of GHS per share as against GHS paid for Thus, for each 1000 shares a dividend of GHS 0.65 will be paid. Dividend payment for 2015 will also see a major boost as the bonus shares issued in 2014 will qualify for dividend. Overall, an amount of GHS 552, has been earmarked for dividend in 2015 as compared to GHS 401, in 2014 representing 37.6% increase and constitutes 20.8% of profit after tax for OTHER DEVELOPMENTS 5.1 Ghana Club 100 As you were promised last year (2014), our Bank rebounded into the membership of the prestigious Ghana Club 100 for the year 2015 as the 64th best performing corporate entity after slipping off in the year This was made possible through hard work and dedication by all stakeholders and efforts would be made to sustain our membership and improve upon our rankings. 5.2 Rating by Bank of Ghana During the year under review, Bank of Ghana inspection team visited us to review our performance. In their report issued, Akwapim Rural Bank Limited was rated STRONG. 7

12 Reports & Financial Statements Opening of a Branch at Madina, Accra As you may recall, plans to expand branch operations to Madina in Accra has been on the bank s drawing board for quite some time now. The bottleneck had been a minimum capital of GHS 1,500,000 which our regulators, the Bank of Ghana required in order to give approval to expand operations to Madina in Accra. I am happy to inform you that a provisional approval has been secured from Bank of Ghana following the attainment of the minimum capital of GHS 1,500,000 and other operational efficiencies. Plans are therefore advanced to open a branch at Madina in Accra by the close of the year We thank you for your patience and continued support. 5.4 Quarterly Ratings by ARB Apex Bank Your bank was ranked 14th by the Efficiency Monitoring Unit (EMU) of the ARB Apex Bank in its last quarter (2015) ratings of the 141 RCB s using about 17 criteria grouped under the target areas of Capital, Asset quality, Asset utilisation, Earnings/Profitability and Liquidity (CAEL). Ranking amongst the top five is our immediate priority and your Board and Management would be working harder to make this dream a reality. 5.5 Recruitment of a New General Manager On behalf of the Board of Directors, I wish to announce to you the recruitment of a new General Manager for the Bank in the person of Mr. Samuel Mbir. Mr. Mbir is a Chartered Accountant and a member of the Institute of Chartered Accountants, Ghana. He also holds an MBA in Finance and a 1st Class Degree in Business Administration (Accounting option) from the University of Ghana, Legon and the Methodist University College Ghana having graduated in 2015 and 2007 respectively. He has been in the service of the bank for 5 years and was the Head of Finance prior to his appointment as the General Manager. 6.0 ACKNOWLEDGEMENTS I wish to express my sincerest thanks to my colleague Board members, Management and Staff of the Bank for their support. I salute you for your continued commitment to work. I would like to also thank all our cherished customers for doing business with us and assure them of our resolve to provide them with efficient and customer-centered services. The fruitful co-operation and support from the Chiefs, Elders, all and sundry in our operational areas is appreciated. I also wish to thank you, our cherished shareholders for the unwavering confidence you have reposed in us. Finally, to Bank of Ghana, ARB Apex Bank, the Association of Rural Banks- Ghana both the National and Eastern Region Chapter and all other stakeholders accept our appreciation for your continued support to this Bank. Thank you for your attention 8

13 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P Your Financial Partner with Flexible Solutions I T E D EST OUR AWARDS 9

14 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P Your Financial Partner with Flexible Solutions I T E D REPORT OF THE BOARD OF DIRECTORS TO THE MEMBERS OF AKWAPIM RURAL BANK LIMITED EST The Board of Directors have pleasure in submitting their annual report for the year ended 31 st December, 2015 to the members as follows: BOARD OF DIRECTORS 1. George Kwasi Oware - Chairman 2. Gilbert Leibel - Vice Chairman 3. Emma Owusu-Amoah - Member 4. Joshua Offei Bekoe - Member 5. William Adjei Twumasi (Dr.) - Member 6. Frederick Akwei Kpakpo - Member 7. Yvonne Atakora Obuobisa - Member 8. Ernestina Ayisi - Member 9. Kwame Gyeke-Amoako - Member In accordance with section 298 (a) of the Companies Act 1963 (Act 179), Gilbert Leibel, Frederick Akwei Kpakpo and Yvonne Atakora Obuobisa retire by rotation. They however offer themselves for re-election as they are eligible to serve further terms on the Board. By virtue of section 298 (f) of the Companies Act 1963 (Act 179) "no person other than a Director retiring at the meeting shall, unless recommended by the Directors, be eligible for election to the office of director at any general meeting unless not less than 3 or more than 28 days before the date appointed for the meeting, shall have been left at the Registered Office of the Company, notice in writing signed by a member entitled to attend and vote at the meeting of his/her intention to propose such person for election, and also notice in writing signed by that person of his/her willingness to be elected". STATEMENT OF DIRECTORS RESPONSIBILITIES IN RELATION TO THE FINANCIAL STATEMENTS The Companies Act, 1963 (Act 179) requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Bank and of the profit or loss for that year. In preparing the financial statements, the Directors are required to: 10

15 Reports & Financial Statements 2015 Select suitable accounting policies in accordance with International Financial Reporting Standards (IFRS) and to apply them consistently; Make judgments and estimates that are reasonable and prudent; State whether applicable accounting standards have been followed, subject to any material departures, disclosed and explained in the financial statements; Prepare the financial statements on a going concern basis unless it is inappropriate to presume that the company will continue in business. The Directors are responsible for the preparation of the financial statements in accordance with International Financial Reporting Standards (IFRSs) and ensuring that the Bank keeps accounting records which disclose with reasonable accuracy the financial position of the company and which enable them to ensure that the financial statements comply with the Companies Act, 1963 (Act 179) and the Banking Act, 2004 (Act 673) as amended. They are also responsible for safeguarding the assets of the Bank and hence for taking steps for the prevention and detection of fraud and other irregularities, as well as designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free of material misstatements. The above statement, which should be read in conjunction with the report of the Auditors, is made with the view to distinguishing for shareholders the respective responsibilities of the Directors and the auditors in relation to the financial statements. PRINCIPAL ACTIVITIES The principal activities carried out by the Bank during the year under review were within the limits permitted by its regulations. There were no changes in the authorised businesses of the Bank during the year. RESULTS OF OPERATIONS The results of operations for the year ended December 31, 2015 are set out in the Statement of Profit or Loss and Other Comprehensive Income, Statement of Financial Position, Statement of Cash flows, Statement of Changes in Equity and Notes to the financial statements from page 15 to 45. A summary of the results is as follows: GHS GHS Profit before tax 2,875,110 1,991,686 Taxation (222,145) (209,124) Profit after tax 2,682,965 1,782,562 Total Assets 41,103,548 32,342,185 11

16 Reports & Financial Statements 2015 STATED CAPITAL The Bank has complied with the minimum stated capital requirement for Rural Banks as directed by the Bank of Ghana. DIVIDEND The Directors recommend the payment of dividend of GHS per share totaling GHS 552, The Directors consider the Bank s state of affairs to be satisfactory. AUDITORS The Auditors, Messrs Morrison and Associates will continue in office in accordance with Section 134 (5) of the Companies Act, 1963 (Act 179). BY ORDER OF THE BOARD DIRECTOR DIRECTOR 12

17 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P Your Financial Partner with Flexible Solutions I T E D INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF AKWAPIM RURAL BANK LIMITED EST Report on the Financial Statements We have audited the accompanying financial statements of Akwapim Rural Bank Limited, which comprise the Statement of Financial Position as at December 31, 2015, the Statement of Profit or Loss and Other Comprehensive Income, Statement of Cash Flows and Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory notes. Directors Responsibility for the Financial Statements. Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, the Companies Act, 1963 (Act 179) and the Banking Act, 2004 (Act 673) as amended. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. Basis of Opinion 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 whether the financial statements are free of 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 auditors 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 controls relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, 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. 13

18 Reports & Financial Statements 2015 Opinion In our opinion, the financial statements show a true and fair view of the financial position of Akwapim Rural Bank Limited as at December 31, 2015, and of its financial performance and its cash flows for the year then ended in accordance with (IFRS), the Companies Act, 1963 (Act 179) and the Banking Act, 2004 (Act 673) as amended. Report on other Legal and Regulatory Requirements The Companies Act, 1963 (Act 179) and Section 78(2) of the Banking Act, 2004 (Act 673) as amended require that in carrying out our audit we consider and report on the following matters. We confirm that: i. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; ii. Proper books of account have been kept by the Bank, so far as appears from our examination of these books; iii. The Statement of Financial Position, Statement of Profit or Loss and Other Comprehensive Income, the Statement of Changes in Equity and the Statement of Cash Flows are in agreement with the books of account. iv. We have obtained satisfactory returns from the Bank s branches not visited; v. The Bank s transactions were within its powers; vi. The Bank has complied with the provisions of the Banking Act, 2004 (Act 673) as amended by the Banking (Amendment) Act, 2007 (Act 738). CHARTERED ACCOUNTANTS (ICAG/F/2016/097) ACCRA, GHANA 13th May, 2016 PARTICULARS OF PARTNER SIGNING: NAME: SAMUEL WILFRED YAW INKOOM PRACTISING CERTIFICATE NUMBER: ICAG/P/

19 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P Your Financial Partner with Flexible Solutions I T E D EST Statement of Profit or Loss and Other Comprehensive Income FOR THE YEAR ENDED 31ST DECEMBER Notes GHS GHS Interest Income 3 9,003,952 7,184,319 Interest Expense 4 (1,155,465) (731,611) Net Interest Income 7,848,487 6,452,708 Commissions and Fees 5 494, ,448 Other Operating Income 6 337, ,641 TOTAL INCOME 8,680,817 7,346,797 Operating and Admin. Expenses 7 (6,010,200) (4,990,702) Operating Profit Before Impairment Loss 2,670,617 2,356,095 Provision for Impairment Loss 8 204,493 (364,409) Profit Before Tax 2,875,110 1,991,686 Taxation 9 (222,145) (209,124) Profit After Tax 2,652,965 1,782,562 Other Comprehensive Income - - Total Comprehensive Income 2,652,965 1,782,562 15

20 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P Your Financial Partner with Flexible Solutions I T E D Statement of Financial Position AS AT 31ST DECEMBER 2015 EST Notes GHS GHS ASSETS Cash and Bank Balances 10 2,779,936 2,707,787 Investments 11 23,579,090 15,312,212 Equity Investment , ,928 Loans and Advances to Customers 13 11,745,362 10,862,439 Other Assets ,012 1,364,463 Property, Plant and Equipment 15 2,025,220 1,943,356 TOTAL ASSETS 41,103,548 32,342,185 LIABILITIES Customer Deposits 16 30,799,568 24,439,216 Other liabilities 17 1,185,957 1,218,992 Current Tax 9a 86,089 41,913 Deferred Tax 9b 47,593 29,624 Dividend Payable , ,243 TOTAL LIABILITIES 32,592,602 26,122,989 SHAREHOLDERS' FUNDS Stated Capital 19 1,621,000 1,580,373 Income Surplus Account 3,960,231 2,681,841 Statutory Reserve Fund 2,203,696 1,540,455 Capital Surplus 153, ,635 Regulatory Credit Risk Reserve 572, ,892 TOTAL SHAREHOLDERS' FUNDS 8,510,946 6,219,196 TOTAL LIABILITIES AND SHAREHOLDERS' FUNDS 41,103,548 32,342,185 DIRECTOR 12th May, 2016 DIRECTOR 16

21 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P Your Financial Partner with Flexible Solutions I T E D Statement of Changes in Equity AS AT 31ST DECEMBER 2015 EST Stated Income Statutory Capital Regulatory Credit Capital Surplus Reserve Risk Reserve Total GHS GHS GHS GHS GHS GHS Balance at 1st January 1,580,373 2,681,841 1,540, , ,892 6,219,196 Prior Year Adjustment - (18) (18) Balance as restated 1,580,373 2,681,823 1,540, , ,892 6,219,178 Transactions with owners Dividend Declared - (401,824) (401,824) Proceeds from issue of shares 40, ,627 Total transactions with owners 40,627 (401,824) (361,197) Other movements in Equity Total comprehensive Income for the year - 2,652, ,652,965 Tax on Capitalisation Issue Transfer to Stated Capital Regulatory Credit Risk Reserve - (309,492) ,492 - Transfer to Statutory Reserve - (663,241) 663, Total other movements in Equity - 1,680, , ,492 2,652,965 Balance at 31st December 1,621,000 3,960,231 2,203, , ,384 8,510,946 17

22 Reports & Financial Statements 2015 R U R A L B A N K L Statement of Changes in Equity (cont'd) AS AT 31ST DECEMBER 2015 A K W A P Your Financial Partner with Flexible Solutions EST I T E D 2014 Stated Income Statutory Capital Regulatory Credit Capital Surplus Reserve Risk Reserve Total GHS GHS GHS GHS GHS GHS Balance at 1st January 753,426 2,981,634 1,094, , ,819 5,522,329 Prior Year Adjustment - (689,267) (689,267) Balance as restated 753,426 2,292,367 1,094, , ,819 4,833,062 Transactions with owners D)ividend Declared - (393,664) (393,664) Proceeds from issue of shares Total transactions with owners 63, ,613 63,613 (393,664) (330,051) Other movements in Equity Total comprehensive Income for the year Tax on Capitalisation Issue Transfer to Stated Capital Regulatory Credit Risk Reserve Transfer to Statutory Reserve Total other movements in Equity Balance at 31st December - 1,782, ,782,562 - (66,377) (66,377) 763,334 (763,334) , (275,927) - - (445,640) 445, , , ,640 - (275,927) 1,716,185 1,580,373 2,681,841 1,540, , ,892 6,219,196 18

23 Reports & Financial Statements 2015 R U R A L B A N K L Statement of Cashflows FOR THE YEAR ENDED 31ST DECEMBER 2015 A K W A P Your Financial Partner with Flexible Solutions EST I T E D OPERATING ACTIVITIES GHS GHS PROFIT BEFORE TAX 2,875,110 1,991,686 Depreciation and Amortisation 295, ,417 Charge for Loan impairment (204,493) 364,409 Prior year adjustment (18) (689,267) Profit on Sale of Fixed Assets - (16,007) NET CASH INFLOW BEFORE CHANGES IN OPERATING ASSETS AND LIABILITIES 2,965,760 1,886,237 (Increase) in Investment (8,266,878) (3,281,874) (Increase)/Decrease in Loans & Advances to Customers (678,432) 732,452 Decrease in Other Assets 542, ,542 Increase in Customer Deposits 6,360,352 1,653,032 Increase/(Decrease) in Other Liabilities (33,035) (777,876) Corporate Tax Paid (160,000) (270,470) (2,235,541) (1,221,194) NET CASH INFLOW FROM OPERATING ACTIVITES 730, ,043 INVESTING ACTIVITIES Purchase of Fixed Assets (377,025) (509,512) Proceeds from Sale of Fixed Assets - 17,821 (377,025) (491,691) FINANCING ACTIVITIES Proceeds from Issue of Shares 40,627 63,613 Dividend Paid (321,672) (357,837) (281,045) (294,224) NET INCREASE/(DECREASE) IN CASH & CASH EQUIVALENT 72,149 (120,872) CASH & CASH EQUIVALENT AT JANUARY 1 2,707,787 2,828,659 CASH & CASH EQUIVALENT AT DECEMBER 31 2,779,936 2,707,787 19

24 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P R U R A L B A N K L I T E D Your Financial Partner with Flexible Solutions A K W A P EST Your Financial Partner with Flexible Solutions I T E D Employee of the Year Awards (2015) EST SETH AKWA DARKO MARCH 2015 PENROSE OFOSU FORSON APRIL 2015 CYNTHIA MANTEAW AUGUST 2015 HENRY ANOKWA OCTOBER 2015 DANIEL SENYO DUNKU DECEMBER/OVERALL BEST EMPLOYEE, 2015 ENOCH AKOWUAH ASHIE NOVEMBER

25 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P Your Financial Partner with Flexible Solutions I T E D EST Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, REPORTING ENTITY Akwapim Rural Bank Limited (ARB Ltd.) was incorporated in Ghana on August 29, 1980 under the Companies Act, 1963, (Act 179) and regulated under the Banking Act, 2004 (Act 673) as amended by the Banking (Amendment) Act, 2007 (Act 738). It was the 12th Rural Bank to be established in Ghana and the 3 rd in the Eastern Region of Ghana. The Bank is fully owned by Ghanaians mainly local residents on the Akuapem Ridge. Akwapim Rural Bank Limited is domiciled in Ghana and headquartered at Mamfe, Akuapem with its registered office at an unnumbered building, opposite the Mamfe lorry park. The Bank is authorised to carry on the following businesses, viz 1. To provide current and deposit accounts for its customers; 2. To provide savings and time deposits accounts for its customers; 3. To act as agents of other financial institutions in the country; 4. To accept and discount bills of exchange; 5. To accept securities for safe keeping/custody; 6. To act as executors and trustees of wills of small farmers and small merchants; 7. To provide finance for small farmers, merchants, industrialists and co-operatives of such farmers and merchants and industrialists resident in the Akuapem North and South Districts 8. To engage in other commercial or industrial enterprises in the locality. 1.1 Statement of Compliance The Bank s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the IASB in force as of the reporting date. International Financial Reporting Standards (IFRSs) comprise IFRS1 to 16 and International Accounting Standards (IAS) 1 to Authorisation for Publication The financial statements of the Bank for the year ended December 31, 2015 were authorised for issue by a resolution of the Board of Directors on April 20,

26 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies applied by Akwapim Rural Bank Limited in the preparation of the financial statements are set out below. 2.1 Basis of Preparation The financial statements have been prepared under the historical cost Convention as modified by revaluation of property, plant and equipment and by the use of fair value and amortised cost measurement bases for assets and liabilities required to be so measured by relevant IFRSs. 2.2 Functional and Presentation Currency The financial statements are presented in Ghana Cedis (GHS) which is the functional and presentation currency. 2.3 Foreign Currency Transactions Foreign currency transactions are recorded, on initial recognition in Cedis by applying to the foreign currency amount the exchange rate between the Cedi and the foreign currency at the date of the transaction. At the end of the reporting period; Foreign currency items are reported using the closing rate; the closing rate is the ruling exchange rate at the end of the financial year. Non-monetary items, which are carried in terms of historical cost denominated in foreign currency are reported using the exchange rate at the date of the transaction, and Non-monetary items which are carried at fair value denominated in foreign currency are reported using the exchange rates that existed when the values were determined. Exchange differences arising on the settlement of monetary items or on reporting the entities monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, are recognised as income or expenses in the period in which they arise. Ghana Cedi equivalents were paid for all foreign currency transactions. There were no monetary assets and/or liabilities denominated in foreign currencies as at the end of the year. 2.4 Property, Plant and Equipment The Bank recognizes an item of property, plant and equipment as an asset when it is probable that future economic benefits will flow to it, the amount meets the materiality threshold set by the Bank, and can be reliably measured. Property, plant and equipment are initially measured at cost. Cost includes costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to or replace part of it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. 22

27 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Property, Plant and Equipment (cont'd) Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value. Property, plant and equipment are carried at cost or valuation less accumulated depreciation and any impairment losses. The depreciable amount related to each asset is determined as the difference between the cost and the residual value of the asset. The residual value is the estimated amount, net of disposal costs, which the Bank would currently obtain from the disposal of an asset in similar age and condition as expected at the end of the useful life of the asset. Annual depreciation rates of items of property, plant and equipment have been assessed as follows. Computers and Accessories 25% Office Equipment 25% Motor Vehicles 20% Furniture and Fittings 20% Building 5% Generator 10% Leasehold Improvement 10% Costs associated with routine servicing and maintenance of assets is expensed as incurred. Subsequent expenditure is only capitalized if it is probable that future economic benefits associated with the item will flow to the Bank. The carrying values of property, plant and equipment are reviewed for indications of impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount. The recoverable amount of property, plant and equipment is the greater of net selling price and value in use. 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. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item is derecognised. Residual values, useful lives and methods of depreciation for property and equipment are reviewed and adjusted if appropriate, at each financial year end. 23

28 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Employee Benefits Short-Term Benefits Short-term employee benefits are amounts payable to employees that fall due wholly within twelve months after the end of the year in which the employee renders the related service. The costs of short-term employee benefits are recognised as an expense in the period when the economic benefit is given, as an employee cost. Unpaid short-term employee benefits at the end of the accounting year are recognised as an accrued expense and any short-term benefit paid in advance are recognised as prepayment to the extent that it will lead to a future cash refund or a reduction in future cash payment. Wages and salaries payable to employees are recognised as an expense in the income statement at gross amounts. The Bank s contribution to the social security fund is also charged as an expense. Social Security and National Insurance Trust (SSNIT) and Tier 2 Pension Under a National Defined Contribution Pension Scheme, the Bank contributes 13% of employees basic salary to a pension scheme for employee pension. The Bank s obligation is limited to the relevant contributions which are settled on due dates. The pension liabilities and obligation however rest with SSNIT and the private fund manager the Bank has elected to manage part of the total contributions attributable to the pension scheme of employees. Provident Fund The Bank also makes a contribution of 7.5% (while employees contribute 5%) to a provident fund for employees with its obligation limited to the amount contributed in relation to each individual employee. The managers of this fund which is a private Investment Company therefore carries the liability until it is finally settled. 2.6 Taxation Income tax in the Income Statement comprises current tax and deferred tax. Current tax is the tax expected to be payable, under the Internal Revenue Act, 2000 (Act 592), on the taxable profit for the year. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts. Deferred tax liabilities are generally recognised for all taxable temporary differences that are expected to reverse in the foreseeable future while deferred tax assets are recognised to the extent that it is probable future taxable profit will be available against which deductible temporary differences can be utilised. Deferred tax is calculated using the rate expected to be applicable in the period during which the asset will be realised or the liabilities settled. 2.7 Financial Instruments Initial recognition and measurement The Bank recognises a financial asset or a financial liability when, and only when, it becomes a party to the contractual provisions of the instrument. 24

29 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, 2015 The Bank classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the instrument. These are initially measured at fair value (including transaction costs for assets and liabilities not measured at fair value through profit or loss). Subsequent measurement of financial instruments For purposes of subsequent measurement financial assets are classified as follows: Financial assets measured at amortised cost Financial assets measured at fair value through other comprehensive income. Financial assets measured at fair value through profit or loss (a) Financial assets measured at amortised cost A financial asset is measured at amortised cost if it meets the following two (2) conditions: The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A financial asset that meets the two conditions must be measured at amortised cost (net of any write down for impairment). (b) Financial assets measured at fair value through other comprehensive income A financial asset is measured at amortised cost if it meets the following two (2) conditions: (c) The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial asset. The contractual terms of the financial asset give rise on specific dates to cash flows that are solely payments of principal and interest on the principal outstanding. Financial assets measured at fair value through profit or loss A financial asset is measured at fair value through profit or loss if: It is designated as such upon initial recognition, or It does not meet the measurement option of the other two categories Financial Liabilities For purposes of subsequent measurement financial assets are classified as follows: Financial liabilities measured at amortised cost Financial liabilities measured at fair value through profit or loss. 25

30 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, 2015 (a) Financial liabilities measured at fair value through profit or loss A financial liability at fair value through profit or loss is a financial liability that is designated on initial recognition at fair value through profit or loss or liabilities that are held for trading. (b) Financial liabilities at amortised cost These are financial liabilities that are not held for trading and are also not designated on initial recognition at fair value through profit or loss. A financial liability is deemed to be held for trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term. The Bank s principal financial assets are loans and advances to customers, cash and bank balances and Investments. Loans and advances and investments have been classified as financial assets at amortised and are measured at amortised cost. Cash and bank balance has been classified as financial assets at fair value through profit or loss and is measured at fair value with measurement gains and losses recognised in profit or loss. Equity investment has been classified as fair value through other comprehensive income and is measured at fair value with measurement gains and losses recognised in other comprehensive income. The Bank s principal financial liabilities are fixed term investments from customers and demand and savings deposits from customers. The Bank s financial liabilities have been classified as financial liabilities at amortised cost and are measured at amortised cost. The foregoing classification of financial instruments for purposes of subsequent measurement, are spelt out in IFRS 9 Financial Instruments which will be effective for annual periods beginning on or before 1st January The adoption of the above classification amounts to be early adoption of IFRS 9. The amortised cost of a financial asset or a financial liability. The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured on initial recognition minus 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 minus any reduction (directly or through the use of an allowance account) for impairment. Fair Value Measurement The Bank defines fair value as 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. Fair value measurement assumes an orderly transaction between market participants at the measurement date under current market conditions. 26

31 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, 2015 In measuring fair value: The Bank takes into account the characteristics of the asset or liability being measured that a market participant would take into account when pricing the asset or liability at the measurement date. The Bank determines classes of asset or liability for disclosure purposes on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy within which the fair value measurement is categorized. De-recognition of financial assets and liabilities A financial asset or a portion thereof, is derecognized when the bank s rights to cash flows have expired or when it has transferred its rights to cash flows relating to the financial assets, including the transfer of substantially all the risk and rewards associated with the financial assets or when control over the financial assets has passed. A financial liability is derecognised when the obligation is discharged, cancelled or has expired. Impairment of financial assets Framework for measuring impairment of financial assets At each reporting date the Bank assesses whether, as a result of one or more events occurring after initial recognition, there is objective evidence that a financial asset or group of financial assets has become impaired. Evidence of impairment may include significant difficulty of the issuer or obligor, the disappearance of an active market for that financial asset because of financial difficulties, etc. In the case of equity investments, objective evidence would include significant or prolonged decline in the fair value of the investment below its cost. For debt instruments and financial assets measured at amortised cost, if there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of the estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. Assets together with the associated allowances are written off when there is no realistic prospect of future recovery and all collateral have been utilised. If a future write-off is later recovered the recovery is credited to credit loss expense. The present value of the estimated future cash flows is determined using the financial asset s original effective interest rate. 27

32 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Regulatory Credit Risk Reserve Provision for loans and advances has been made based on IFRS principles. However, provisions made should meet Bank of Ghana s criteria for loan provisioning. For the year under review and the comparative period, provision for impairment based on Bank of Ghana s criteria was higher than that based on IFRS principles. To make up for the excess of Bank of Ghana s provision requirements over that based on IFRS principles, a transfer is made from the income surplus to a non - distributable reserve in the Statement of Changes in Equity being the Regulatory Credit Risk Reserve. The non - distributable reserve ensures that Bank of Ghana s established minimum regulatory provisioning for loans and advances is maintained. 2.9 Events after the Reporting Period Events subsequent to the reporting date are reflected only to the extent that they relate directly to the financial statements and the effect is material Cash and Cash Equivalents. Cash and cash equivalents comprise cash in vault and bank balances Provisions The Bank recognises provisions when it has a present obligation (legal or constructive) as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Bank expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost Use of Estimates and Judgements In the preparation of the financial statements, the Bank makes estimates and judgements that could affect the reported amounts of assets and liabilities within the next financial year. Key areas in which judgment is applied include: i. Determination of depreciation rates for property plant and equipment ii. Estimation of Provisions iii. Determination of contingent liabilities and contingent assets iv. Impairment of financial and non-financial assets. 28

33 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Revenue Recognition Revenue is recognised to the extent that the economic benefit will flow to the Bank and can be reliably measured. The following specific income recognition criteria have been applied in the financial statements. Interest Income Interest income is recognised in profit for all interest - bearing financial assets measured at amortised cost, as interest accrues using the effective interest method and at fair value. The Bank s financial assets that give rise to interest income are loans and advances and investments. Commissions and fees Revenue fees that are an integral part of the true interest rate of financial assets and are included in the measurement of the effective interest rate are spread over the period of the financial assets. Commission and fees from the rendering of services are recognised in the income statement when the related services are performed. The company earns commissions and fees from a range of services provided to its customers. Commissions and fees revenue are accounted for as follows: Income earned on customer s current account (commission on turnover) is recognised when charged. Income earned from the provision of cheque clearing services are recognised when the services are provided Interest Expense Interest expense is recognised in profit or loss for all interest -bearing financial liabilities measured at amortised cost. The Bank s financial liabilities that give rise to interest expense are fixed term and savings deposits from customers Accruals and Payables Liabilities are recognized for amounts to be paid in the future, and amounts accrued but payments not yet made. 29

34 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P R U R A L B A N K L I T E D Corporate Social Responsibility Your Financial Partner with Flexible Solutions A K W A P EST Your Financial Partner with Flexible Solutions EST I T E D DONATION TOWARDS FARMERS' DAY CELEBRATION DONATION TO YENSISO METHODIST JHS 30

35 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Interest Income Interest on Loans 3,748,556 3,732,594 Interest on Overdraft 611, ,187 Interest on Investment 4,644,184 2,851,538 GHS GHS 9,003,952 7,184,319 4 Interest Expense Interest on Savings 532, ,707 Interest on Fixed Deposits 622, ,904 1,155, ,611 5 Commissions and Fees Commission on Turnover 216, ,039 Commitment Fees 262, ,169 Cheque Clearing Fees 16,040 15, , ,448 6 Other Operating Income Brokerage 4,363 3,713 Processing Fees 17,258 24,677 Dividend Received - 19,477 Profit on Disposal - 16,007 Sundry Income 239, ,767 Bad Debt Recovered 76, , ,641 7 Operating & Admin. Expenses Directors' Emoluments 226, ,693 Staff Costs 3,565,940 2,908,037 Auditors' Remuneration 20,000 16,215 Depreciation and Amortisation 295, ,417 General and Admin. Expenses 1,902,443 1,603,340 6,010,200 4,990,702 8 Impairment Loss Current Provision 620, ,483 Previous Provision (825,483) (461,074) Charge to Profit or Loss (204,493) 364,409 31

36 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Taxation (a) Balance at Payments Charge for Balance at Year of Assessment 01/01/2015 the Year 31/12/2015 GHS GHS GHS GHS INCOME TAX , , (160,000) 204,176 44,176 41,913 (160,000) 204,176 86,089 (b) Deferred Tax ,624-17,969 47,593 29,624-17,969 47,593 (c) Reconciliation of Tax expense to product of Accounting Profit and Applicable Rate 2, GHS GHS Profit Before Taxation 2,875,110 1,991,685 Tax at applicable rate of 8% 230, ,335 Add/( Deduct): Tax Effect of Non-Deductible Expenses 7,558 51,109 Tax Effect of Capital Allowances (27,257) (26,493) Tax Effect of Origination and Reversal of Temporary 17,969 19,161 Differences Add: Under Provision - 6,012 Deduct Tax Effect of Bad Debt Recovered (6,134) - Tax Expense 222, ,124 Effective tax rate 7.73% 10.50% The amount provided for Income Tax is subject to agreement with the Ghana Revenue Authority GHS GHS 10 Cash and Bank Balances Cash on Hand 928,894 1,180,734 Balances with Banks 1,851,042 1,527,053 2,779,936 2,707,787 32

37 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Short Term Investments GHS GHS 91/182 Day T-Bills at Maturity Value 13,150,500 7,900,500 1 Year Treasury Bill 1,300,000 1,300,000 Fixed Deposits at Cost 7,300,000 5,000,000 Apex Certificate of Deposits 1,850,000 1,000,000 Accrued Interest on Investments 981, ,712 Unearned Discount on T/Bills (1,002,789) (343,000) 23,579,090 15,312, Equity Investment Apex Bank Limited - Shares 151, , Loans and Advances to Customers a ANALYSIS BY TYPE OF LOAN Term Loans 10,718,295 10,295,454 Overdrafts 1,660,978 1,547,028 Gross Loans and Advances 12,379,273 11,842,482 Interest Receivable 296,200 - Interest in Suspense (115,050) - Deferred Commissions/fee income (194,071) (154,561) Impairment Loss (620,990) (825,482) Net Loans and Advances 11,745,362 10,862,439 b ANALYSIS BY TYPE OF CUSTOMER Individuals 8,749,950 8,053,153 Private Enterprises 483, ,760 Public Enterprises & Institutions 133, ,381 Others 3,011,920 2,875,188 Gross Loans and Advances 12,379,273 11,842,482 Interest Receivable 296,200 - Interest in Suspense (115,050) - Deferred Commissions/fee income (194,071) (154,561) Impairment Loss (620,990) (825,482) 11,745,362 10,862,439 33

38 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Other Assets GHS GHS Prepayments 146, ,374 Stationery Stock 64,889 57,569 Sundry Debtors 420, ,324 Uncleared Effects 96, ,080 Inter agency Account 93, , ,012 1,364, Property, Plant and Equipment a. Cost/ Accumulated Carrying Cost/ Accumulated Carrying Valuation Depreciation Amount Valuation Depreciation Amount GHS GHS GHS GHS GHS GHS Building 1,486,910 (343,962) 1,142,948 1,486,910 (270,023) 1,216,887 Furniture and Fittings 235,686 (170,647) 65, ,676 (143,308) 68,368 Office Equipments 569,685 (357,671) 212, ,522 (296,834) 169,688 Computer 370,595 (329,138) 360,865 (302,678) 58,187 Motor Vehicles 472,124 (200,265) 271, ,171 (135,517) 175,654 Plant 197,989 (81,690) 116, ,989 (62,275) 135,714 Capital Work in Progress 85,912-85,912 6,745-6,745 Leasehold Improvements 224,230 (134,538) 89, ,230 (112,117) 112,113 3,643,131 (1,617,911) 2,025,220 3,266,108 (1,322,752) 1,943,356 34

39 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Property, Plant and Equipment (cont'd) b. Reconciliation of opening carrying values with closing carrying values 2015 Opening Balance Additions Transfers Disposals Depreciation Closing Balance GHS GHS GHS GHS GHS GHS Building 1,216, (73,939) 1,142,948 Furniture and Fittings 68,367 24, (27,339) 65,038 Office Equipments 169, , (60,837) 212,015 Computer 58,187 9, (26,460) 41,457 Motor Vehicles 175, , (64,748) 271,860 Plant 135, (19,415) 116,299 Capital Work in Progress 6,745 79, ,913 Leasehold Improvements 112, (22,423) 89,690 1,943, , (295,161) 2,025, Opening Balance Additions Transfers Disposals Depreciation Closing Balance GHS GHS GHS GHS GHS GHS Building 693, ,915 - (46,462) 1,216,887 Furniture and Fittings 60,802 37,684 - (1,267) (28,852) 68,367 Office Equipments 99, , (44,939) 169,688 Computer 67,743 35, (44,794) 58,187 Motor Vehicles 49, ,292 - (547) (36,363) 175,655 Plant 63,338 83, (11,584) 135,714 Capital Work in Progress 502,222 74,438 (569,915) - 6,745 Leasehold Improvements 134, (22,423) 112,113 1,671, ,512 - (1,814) (235,417) 1,943,356 35

40 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, GHS GHS 16 Customer Deposits Demand 7,107,941 5,602,117 Savings 19,395,108 16,146,523 Fixed Term 4,277,319 2,690,576 E-zwich 19,200-30,799,568 24,439, Other Liabilities Provision for Utilities 11,613 18,463 Auditor's Remuneration 20,000 16,215 Sundry Creditors 569, ,627 Controller & Accountant General 170, ,764 Unidentified lodgement 3,029 3,029 Managed Funds 32,249 17,937 Bills Payable/Payment Order 235, ,865 Disbursed Managed Funds 59,098 58,871 Unallocted Transfers 5,471 5,471 Accountancy Fees - 11,750 Accrued Interest 78,884-1,185,957 1,218, Dividend Payable Balance as at 1st January 393, ,416 Declared for the year 401, ,664 Payment during the Year (321,672) (357,837) Balance as at 31st December 473, ,243 36

41 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Stated Capital Number of Shares Proceeds GHS GHS AUTHORISED SHARES Number of Ordinary Shares of no par value 5,000,000,000 5,000,000, ISSUED AND FULLY PAID SHARES For Cash Consideration 68,461,668 67,649, , ,039 Issued for Consideration other than Cash 16,594,216 16,594, , ,334 85,055,884 84,243,345 1,621,000 1,580,373 There are no shares in treasury and no unpaid liability on the shares issued. 20. Contingent Liabilities Based on our review of events of the bank, there were no contingent liabilities as at the Statement of Financial Position date. (2014: Nil) 21. Capital Expenditure Commitments There were no capital expenditure commitments as at the Statement of Financial Position date. (2014: Nil) 22. Related Party Transactions a. Key Management Personnel Key management personnel are defined as those persons having authority and responsibility for planning; directing and controlling the activities of Akwapim Rural Bank Limited (directly or indirectly) and comprise the directors and senior management. For the year under review, key management personnel include: Board of Directors - refer to list on page 1 Other key management personnel Samuel Mbir Augustine Ayinbisah Emmanuel E. T. Sackey - Mensah Edna Laryea (Mrs.) General Manager Head of Finance Head of Banking Operations Head of Credit 37

42 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, 2015 b. Transactions with Key Management Personnel The details of transactions between the company and its key management personnel are as follows: GHS GHS Directors' Emoluments 226, ,693 Salaries and other benefits to Senior Management 182, ,166 Loans to Senior Management 112, , Financial Assets by Category The accounting policies for financial assets have been applied to the items below. CATEGORY Amortised Fair Value Fair Value TOTAL Cost *TOCI *TPL 2015 GHS GHS GHS GHS Loans and Advances 11,745, ,745,362 Treasury Bill 13,447, ,447,711 Other Investments 10,131, ,131,379 Equity Investment 151, ,928 Cash and Bank Balance - - 2,779,936 2,779,936 TOTAL 35,324, ,928 2,779,936 38,256,316 CATEGORY Amortised Fair Value Fair Value TOTAL Cost *TOCI *TPL 2014 GHS GHS GHS GHS Loans and Advances 10,892, ,892,439 Treasury Bill 9,312, ,312,212 Other Investments 6,000, ,000,000 Equity Investment - 151, ,928 Cash and Bank Balance - - 2,707,788 2,707,788 TOTAL 26,204, ,928 2,707,788 29,064,367 *NB: TPL = Through Profit or Loss TOCI = Through Other Comprehensive Income 38

43 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Financial Liabilities by Category The accounting policies for financial liabilities have been applied to the items below Category Description Amortised Cost GHS Customer Fixed Deposits 4,277,319 Customer Demand & Savings Deposits 26,522,249 TOTAL 30,799, Category Description Amortised Cost GHS Customer Fixed Deposits 2,775,435 Customer Demand & Savings Deposits 21,663,781 TOTAL 24,439, Analysis of Income and Expenses by Category of Financial Instruments Interest income of GHS 4,359,768 is in respect of Loans & Advances to customers has been classified as financial assets at amortised cost and are measured at amortised cost. Interest income of GHS 4,644,184 is in respect of investments placed in treasury bills and other investments are classified as financial assets at amortised cost and are measured at amortised cost. Bank charges of GHS 2,966 are in respect of bank balances which are classified as financial assets at fair value through profit or loss and are measured at fair value with measurement gains and losses through profit or loss. Interest expense of GHS 1,155,465 is in respect of customer deposits which have been classified as financial liabilities at amortised cost and are measured at amortised cost Risk Management The nature of the Bank s operations exposes it to various types of risk. The risks emanating from financial instruments to which the Bank is exposed are credit risk, liquidity risk and other business and operating risks. The Bank s risk control processes do not include that for business risks such as changes in the business environment and in the industry in which it operates. These risks are managed through the company s strategic planning processes. 39

44 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Credit Risk Credit risk arises from the potential that a debtor or counterparty is either unwilling or unable to perform an obligation resulting in economic loss to the Bank. The principal sources of credit risk inherent in the Bank s operations are balances with the banks, loans and advances to customers and investments. The Bank manages its credit risk in relation to loans and advances as detailed below. The Bank s Board of Directors is responsible for the overall identification and control of risks. The risk strategies are developed by management and implemented by the responsible management committees. The risk strategies developed are approved by the Board. Operational Risk Sub - Committee (ORSC) Some of the duties of the ORSC are; Ensure that the Bank s overall operational risk exposure is maintained at prudent levels and effective controls are in place to mitigate risk. Ensure that the Bank implements sound fundamental principles that facilitate the identification, measurement, monitoring and control of operational risk. Ensure that adequate resources (material as well as human) are available for and devoted to operational risk management. Ensure that Akwapim Rural Bank Management and individuals responsible for operational risk Management possess sound expertise and knowledge to accomplish the operational risk management function. They meet once a month Credit /Finance Sub - Committee (CFSC) Some of the duties of the CFSC are; Set out the nature, role, responsibility and authority of the credit risk management function of the Bank. Review and oversee the overall lending policy, including monitoring and risk management tools. Review loan applications in excess of Management Credit Committee limit and recommend to the Board in excess of Sub-Committee limit. Review lending practices and quality of loan portfolio. Ensure that there are effective procedures and adequate resources to identify and mitigate credit risk. Monitor and evaluate all issues that may materially impact on the present and future quality of the loan portfolio and credit risk management. Delegate and review lending limits to the sanctioning arms of the Bank. 40

45 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, 2015 They meet twice a month. The following approval limits are relevant for granting of loans. Branch Managers Salary Advances (3 Mths) Management Credit Committee All Loans - 5, Credit/Finance Sub-Committee (Chairman) All loans - 7, Credit/Finance Sub-Committee All loans - 10, Board of Directors All loans - >10, The framework for managing overall risk is the operational manual. The credit risk manual is a guide for the management of credit risk. The credit risk manual spells out the loan approval process, recovery process, target market etc. To minimize the risk from the other sources of credit risk, the Bank only deposits cash and restricts investments to major banks and other financial institutions. The maximum amount of credit risk by class of financial asset as at December 31, 2015 was as follows. CATEGORY Amortised Fair Value Fair Value TOTAL Cost *TOCI *TPL 2015 GHS GHS GHS GHS Loans and Advances 11,939, ,939,433 Treasury Bill 13,447, ,447,711 Other Investments 10,131, ,131,379 Equity Investment - 151, ,928 Bank Balance - - 1,851,042 1,851,042 TOTAL 35,518, ,928 1,851,042 37,521,493 CATEGORY Amortised Fair Value Fair Value TOTAL Cost *TOCI *TPL 2014 GHS GHS GHS GHS Loans and Advances 10,892, ,892,439 Treasury Bill 9,312, ,312,212 Other Investments 6,000, ,000,000 Equity Investment - 151, ,928 Bank Balance - - 1,527,053 1,527,053 TOTAL 26,204, ,928 1,527,053 27,883,632 Collateral held in respect of loans and advances is mainly in the form of cash or cash equivalent, motor vehicles and legal mortgage. 41

46 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, 2015 No collateral is held in respect of the bank balances and investments as the taking of security for such placements is not the practice in the industry. The loans and advances portfolio is further analysed in terms of credit quality as follows: 2015 GHS Neither past due nor impaired 11,428,767 Past due, but not impaired 327,713 Impaired 622,793 TOTAL 12,379, No. of days overdue Carrying amount before impairment loss GHS Impairment GHS , , ,786 33, and beyond 484, ,535 Other Statistics Loan Loss Provision Ratio 5.01% 6.97% Gross Non Performing Loans Ratio 9.96% 15.07% 20 Largest Exposures 25.01% 16.09% 26.2 Liquidity Risk Liquidity risk is the risk that the Bank will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The bank manages liquidity risk through an ongoing review of future commitments and credit facilities. The bank has minimised its liquidity risk by ensuring that it has adequate banking funds. A summary of the company s financial assets and liabilities analysed according to their contractual maturities are as follows; 42

47 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Months 4-6Months 7-12 Months Above 1Year GHS GHS GHS GHS December 31, 2015 Assets Cash and bank balances 2,779, Investments 5,857,741 16,299,264 1,422,085 - Equity investment ,928 Loans and advances 2,867, , ,522 7,056,222 Other assets 745,829 5,860 11,721 58,602 Total Assets 12,251,004 17,144,244 2,416,328 7,266,752 Liabilities Demand and savings 26,522, Time deposits 855,464 1,283, ,598 1,497,061 Other liabilities 1,185, Current tax 95, Deferred tax 47, Dividend payable 473, Total Liabilities 29,180,441 1,283, ,598 1,497,061 Net Liquidity Gap (16,929,437) 15,861,048 1,774,730 5,769, Months 4-6Months 7-12 Months Above 1Year GHS GHS GHS GHS December 31, 2014 Assets Cash and bank balances 2,707, Investments 3,925,161 9,935,480 1,451,571 - Equity investment ,928 Loans and advances 2,437, , ,394 6,863,636 Other assets 1,239,195 29,475 44,212 51,581 Total Assets 10,309,598 10,822,909 2,199,177 7,067,145 Liabilities Demand and savings 21,663, Time deposits 1,654, , , ,691 Other liabilities 1,218, Current tax 41, Deferred tax 29, Dividend payable 393, Total Liabilities 25,001, , , ,691 Net Liquidity Gap (14,692,189) 10,372,209 1,739,367 6,856,454 43

48 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, Operational Risk Operational risk is the potential for loss from failed systems and processes, staff incompetence and misconduct and uncontrolled external events. These risks are monitored and controlled in the Bank through well designed operating manuals that reflect the main operating procedures, business continuity planning, reconciliations, internal audit and timely and reliable management reporting Capital 27.1 The Objectives of Capital Management The primary objective of capital management in the Bank is to ensure that:- It complies with the minimum stated capital requirement of Bank of Ghana It complies with the regulatory capital requirement that enables it to meet the minimum Capital Adequacy Ratio requirements of Bank of Ghana Its operations would assure it of increasing level of profitability and shareholder value The achievement of the above objectives is monitored through regular reports on the performance of the Bank and the ARB Limited s returns submitted to Bank of Ghana regularly Capital Description The Bank s Capital is its Shareholders funds comprising Stated Capital, Statutory Reserves, Income Surplus, (which includes current and previous year s retained earnings) and other reserves. The current level of the Bank s capital complies with the existing minimum stated capital requirement of Bank of Ghana. Stated Capital This is made up of issue of shares for cash and transfer of funds from income surplus Income Surplus The amount recognised represents cumulative annual profits less transfers to statutory reserves. Capital Surplus This represents revaluation gains on property, plant and equipment and increase in equity shares in ARB Apex Bank Limited. Regulatory Credit Risk Reserve This is an amount transferred from income surplus account to a non-distributable reserve account in order to meet the minimum regulatory requirements in respect of impairment allowance for non - performing loans and advances to customers. 44

49 Notes Forming Part of the Financial Statements FOR THE YEAR ENDED 31ST DECEMBER, 2015 Statutory Reserve The amount represents transfers from year end profits as a non-distributable reserve in accordance with regulatory requirements. The transfer to the reserve is in compliance with section 29 of the Banking Act, 2004 (Act 673) as amended Capital Adequacy The company s capital adequacy status is shown in the table below Tier 1 Capital 7,784,927 5,538,628 Tier 2 Capital 153, ,635 Total Regulatory Capital 7,938,562 5,692,263 Adjusted Capital Base (a) 7,786,634 5,692,263 Adjusted Asset Base (b) 23,141,620 19,615,049 Capital Adequacy Ratio (a/b) % Capital Surplus (Adjusted capital base less 10% of the adjusted asset base) GHS GHS 5,472,472 3,730,758 The Company s regulatory capital meets the required minimum for both the current year and the previous year Corporate Social Responsibility Amount spent in fulfilling corporate social responsibility obligation are: GHS GHS Community Development 46,130 61,458 45

50 Reports & Financial Statements 2015 L L A A R R U U R R N N A A K K B B M M I I L L Projects Financed by the Bank A K W A P A K W A P Financial Financial Your Your Partner Partner with with Flexible Flexible Solutions Solutions EST. EST I I M M I I T T E E D D 46

51 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P R U R A L B A N K L I T E D Staff Durbar, 2015 Your Financial Partner with Flexible Solutions A K W A P EST Your Financial Partner with Flexible Solutions EST I T E D 47

52 Reports & Financial Statements 2015 OUR PRODUCTS & BRANCHES STRATEGIC PRODUCTS Credit With Education Akusika Savings Scheme Medoba Savings Scheme Students Savings Scheme Asore Nkoso Loan Fixed Deposit Plus Akuplus Fixed Deposit GENERIC PRODUCTS Current Account Savings Account Fixed Deposit Salary Loan Shares COMMERCIAL LOANS Trade Loans Agricultural Loan Institutional Loan Transport Loan Hospitality Industry Loan Cottage Industry Loan AUXILIARY PRODUCTS E-Zwich Western Union Money Gram Apex Link MTN Mobile Money HEAD OFFICE Tel: MAMFE AKUAPEM Tel: NSAWAM Tel: ADUKROM Tel: KOFORIDUA Tel: ABURI Tel: AGENCIES Larteh Adawso 48

53 Reports & Financial Statements 2015 R U R A L B A N K L A K W A P Your Financial Partner with Flexible Solutions I T E D EST Proxy Authorisation I/We...being member(s) of AKWAPIM RURAL BANK LIMITED hereby appoint...of...or failing him/her...of...my/our Proxy to vote on my/our behalf at the Annual General Meeting of The Bank to be held on Saturday 25 th June 2016 at 10:00 o clock and at any adjournment thereof. Signed...this...day of Shareholders Signature AKWAPIM RURAL BANK LIMITED ADMISSION FORM ANNUAL GENERAL MEETING to be held at the Wesley Hall, Methodist Girls' High School, Mamfe Akuapem on Saturday 25 th June 2016 at 10:00 o clock in the morning. Full name and address of the Shareholder(s) Proxy Number of share held... IMPORTANT: This admission form must be produced by the Shareholder of his/her proxy in order to obtain entrance to the Annual General Meeting. 49

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56 R U R A L B A N K L A K W A P I T E D EST Your Financial Partner with Flexible Solutions design & print: Buck Press Ltd Akwapim Rural Bank Limited P. O. Box 5, Mamfe Akuapem Tel: +233 (0) info@akuapemruralbank.com