Amenfiman Rural Bank Ltd. AGM 2018 PAGE

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3 Content Corporate Information Chairman s Report Report of the Directors Statement of Directors Responsibilities Independent Auditors Report Statement of Comprehensive Income Statement of Financial Position Statement of Cash Flows Statement of Changes in Equity 2017 & 2016 Notes to the Financial Statements Capital Allowance and Income Tax Computations Capital Adequacy Liquidity Ratio Schedule Of Appendices Proxy Authorization PAGE 3

4 Corporate Information BOARD OF DIRECTORS Dr. Toni Aubynn Mr. Moses Ampong Mr. Anthony Justice Quaidoo Mr. Eustace Kwesi Haizel Mr. Morgan Setordjie Mad. Agartha Cudjoe Mr. Edmund Afful Dr. Lucas Nana Wiredu Damoah Chairman Vice - Chairman Director / Secretary Co-opted Director Director Director Director MANAGEMENT STAFF: Dr. Alexander Asmah Mr. Frederick Ampomah-Amaning Mr. Evans Aikins Mr. Patrick Darkwa Mr. Anthony Kwaw Adu-Broni Mr. Ebenezer Ankapong Mr. Richard Owusu Mensah Mr. Charles Damoah Mr. Francis Asiamah Ms. Rita Aidoo Ms. Lydia Oduro Chief Executive Officer Chief Internal Auditor Head, Finance And Operations Head, Credit Head, HR & Admin. Head, ITSM Head Micro Finance Acting Head, Branch Network Acting Head, Risk & Compliance Branch Manager / Co-opted Member Branch Manager / Co-opted Member AUDITORS: REGISTERED OFFICE: K and A Accounting Services 49 Boundary Road (Coastal) Off Spintex Road, Baatsona Accra P. O. BOX 8361, Accra North Amenfiman Rural Bank Limited P. O. Box 14, Wasa Akropong, Western Region, Ghana. 4 PAGE

5 Board of Directors DR. TONI AUBYNN CHAIRMAN MR. MOSES AMPONG Vice Chairman. MR. ANTHONY JUSTICE QUAIDOO Director / Secretary. MR. EUSTACE KWESI HAIZEL Director / Solicitor. MR. MORGAN SETORDJIE Director MAD. AGARTHA CUDJOE Director MR. EDMUND AFFUL Director DR. LUCAS NANA WIREDU DAMOAH Director PAGE 5

6 Management Team MR. FREDERICK AMPOMAH-AMANING Chief Internal Auditor MR. EVANS AIKINS Head: Finance & Operations DR. ALEXANDER ASMAH CHIEF EXECUTIVE OFFICER MR. PATRICK DARKWA Head: Credit MR. ANTHONY KWAW ADU-BRONI Head: HR/Administration MR. EBENEZER ANKAPONG Head: ITSM MR. RICHARD O. MENSAH Head: Microfinance MR. CHARLES DAMOAH Acting Head: Branch Network MR. FRANCIS ASIAMAH Acting Head: Risk & Compliance MS. RITA AIDOO Branch Manager / Co-opted Member MS. LYDIA ODURO Branch Manager / Co-opted Member 6 PAGE

7 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN THAT the 34th Annual General Meeting of the Amenfiman Rural Bank Limited will be held on Saturday 7th July, 2018 at 10:00am prompt at the Assembly Hall of the Amenfiman Senior High School, Wasa Akropong. A shareholder of the bank entitled to attend and vote may appoint a proxy to attend and vote in his/ her stead and such proxy need not be a shareholder of the Bank. AGENDA Ordinary Business By Ordinary Resolution 1. To receive the Report of the Chairman of the Board of Directors for the year. 2. To receive and consider the Report of the Directors for the year ended 31st December, To receive and consider the Auditors Report and Approve the Financial Statement for the year ended 31st December, To declare a dividend. 5. To authorize the Directors to fix the remuneration of the Auditors. 6. To approve the remuneration of Directors. 7. To elect Directors in place of those retiring. Note: A shareholder of the bank entitled to attend and vote may appoint a proxy to attend and vote in his/her stead and such proxy need not be a shareholder of the Bank. The instrument appointing such a proxy must be deposited at the registered office, P. O. Box 14 Wasa Akropong not less than 48hours before the appointed time of the meeting. By order of the Board ANTHONY JUSTICE QUAIDOO (Secretary to Board) PAGE 7

8 Report of the Chairman of the Board of Directors to the Members of Amenfiman Rural Bank Limited Distinguished shareholders, Fellow Board Members, Nananom, Ladies and Gentlemen, I am happy to welcome all of you to the 34th Annual General Meeting of Amenfiman Rural Bank Limited, Ghana. It s a great pleasure for me to present to you the Annual Report and Financial Statements of our Bank for the year ended 31st December, Macroeconomic and Political Environment The macro economy of Ghana experienced significant growth during the year The country s GDP more than doubled from 3.6% in 2016 to 8.1% in The growth was largely fueled by oil and gas and mining sectors. The economy also improved on its fiscal deficit position from 9.3% in 2016 to 6% of GDP in The inflationary pressures experienced in 2016 also gave in to a much lower inflation in 2017 with the CPI reducing from 15.4% in 2016 to 11.8% by December The cedi also maintained its stability in most parts of the year 2017 backed by a stronger foreign reserves position. Ironically, the fantastic performance of the macro economy did not reflect in the local economy. The impact of the expanded economy, low inflation and stable foreign exchange rates are yet to be felt by local businesses. The reason being that whereas oil and gas output to the industry sector surged by 80.4% due to the coming on stream of the Sankofa oil and gas field, Agriculture and Services sectors which impact directly on the local economy only grew by 8.4% and 4.3% respectively. As we are all aware Ladies and Gentlemen, agriculture and services are the mainstay of our economy and especially when it comes to the local rural economy where we operate. It is also important to note the sudden ban on the activities of all small-scale mining imparted negatively on local businesses. Although the bank did not finance mining activities directly, the ban impacted negatively on the cash flows of most Micro, Small and Medium Enterprises (MSME), which constitute the core of our customer base. Based on the above, local businesses made up of micro, small and medium enterprises in our catchment areas experienced slowness in business activities due to illiquidity and weak cash flows. As a result, many MSMEs could not generate sufficient cash flows to meet the loan repayment obligations thereby generating high loan impairments for the bank. Business Operating Performance Distinguished Shareholders, ladies and gentlemen, I am happy to inform you that, in spite of the economic factors which negatively affected our customers, our Bank made another impressive performance in 2017, a summary of which key performance indicators I provide below Financial Indicators Percentage GH GH Change Profit Before Taxation 8,225, ,987, (17.64) Investments 88,042, ,815, Advances 58,479, ,094, Total Assets 182,706, ,798, Total Deposits 148,844, ,853, Shareholders Funds 25,679, ,120, PAGE

9 Chairman s Report Cont d. Profit Before Taxation Investments Advances GhC M GhC M GhC M % 8.9% 42% Total Assets GhC M Total Deposits GhC M Shareholders Funds GhC M % 15.5% 11.1% PAGE 9

10 Chairman s Report Cont d. During the year under review, total deposit of the bank grew by 15.5% from GH million to GH million. Our investment portfolio grew by 8.94% from GH 80.8 million in 2016 to GH 88 million in The bank rather expanded its loan book by growing total advances portfolio by 42.31% from GH 41.0 million to GH 58.4 million. The Bank however made a profit before tax of GH 8.2 million which was a decline of 17.64% from the GH 9.9 million made in Ladies and gentlemen, let me use this opportunity to assure all shareholders that, the Board has made important investments by expanding and opening four new branches in strategic locations during the year under review. I shall return to this later in the report but suffice it to say that these strategic investments will form a very solid basis for outstanding performances in the years ahead. The Board is committed to ensuring the Bank continues to deliver stronger financial and social results as we maintain our leadership in the rural banking sector. The following are the highlights of our financial performance for the year ended 31st December, Operating Income Distinguished Shareholders, the Bank continues to improve on its income generation. Total operating income for the year 2017 stood at GH 36,967,520 compared to GH 30,460,607 in 2016 representing 21% over the previous. The Board and Management are investing in other diversified sources to boost further the income generation of the business in the ensuing years. Again, the just completed business expansion is going to add to our income generation in the medium to long term. Operating Expenses Fellow Shareholders, the cost of doing business in Ghana continue to be on the high side during the year under review as a result of the business expansion we undertook during the year under review. Our operating expenses went up 39% during the year from GH 19,869,019 in 2016 to GH 27,608,219 in In addition to rising operational costs, cost of funds continue to be one of the highest on our expenditure list. The total interest expense rose by 90% from GH 3,407,680 in 2016 to GH 6,485,586. Profitability Distinguished Shareholders, in spite of the high cost of operations during the year under review, the bank recorded another impressive performance. Your bank posted a profit before tax of GH 8,225,821 as against to GH 9,987, representing a decline of 17.64%. The profit after tax for the year was GH 5,132,875 as against GH 8,892,746 representing a decline of 42%. This was due to a higher tax rate of 25% applied for the first time and other adjusting entries made during the year. We maintained our position as the most profitable rural and community bank in Ghana. Fellow Shareholders, our growth and expansion strategy implemented has positioned our bank for higher profitability in the near future and we wish to assure all members of our commitment to work with management to generate the best results out of our investments for the benefit of all members. As you already know, it has always been the priority of this board to work hard to enhance the value of all stakeholders. Deposit Distinguished Shareholders, as indicated earlier in this report, in our quest to extend the provision of world class banking services to other parts of the country and as part of our strategy to increase share-holder value, the bank opened up four new branches during the year and also extend access to credit and savings to most parts of our rural communities. The expansion of our reach has brought further boost to the bank s leadership in rural banking and financial inclusion agenda. As a rural bank, mobilizing customer deposit was a critical part of our objectives for the year Total deposit for the bank grew from GH million in 2016 to GH million representing a growth of 15.5%. The bank chalked this success in spite of extremely high competition from some investment companies; some of which are unlicensed. We will continue to educate our cherished customers and other potential customers of the dangers in investing in unlicensed investment houses. Management has also stepped up its efforts in providing customers with the best savings and investments options improving on its service quality to customers. As indicated in my 10 PAGE

11 Chairman s Report Cont d. report to you last year, the Board and Management are exploring Agency Banking as a strategy to reach out to more depositors as a means of expanding financial access and inclusion, especially to the rural communities. Total Assets Distinguished Shareholders, I am pleased to inform you that the size of our business keeps improving year after year. The year under review saw total assets growth of 15% GH million in 2016 to GH million in The growth was supported by aggressive deposit mobilization, growth in loans and advances, and investments. Shareholders funds also grew from GH 23.1 million in 2016 to GH 25.6 million in 2017, representing percent. With the level of investment made last year, the future looks great for the shareholders of this great bank. Rural Agricultural Financing Distinguished Shareholders, ladies and gentlemen, the bank continued to invest significant amount of money in farming activities and rural enterprises. Our credit support to MSMEs and our farmers, especially cocoa farmers, within our rural communities received significant boost as we granted loans of more than GH 12 million to our farmers during the year. In all, a total loan amount of GH 70 million was disbursed during the year This is helping to boost economic activities and development in our communities. Proposed Dividend Fellow Shareholders, due to an aggressive expansion program embarked upon for the growth and prosperity of the business in the medium to long term, coupled with high cost of doing business, profitability dipped during the year under review. Notwithstanding, the Board believes that shareholders deserve to receive attractive results for their investments. In view of this, it is with much pleasure that I propose a dividend of GH per share. You will recall that, we increased our dividend per share last year from GH per share in line with our general philosophy of sharing the benefit of the successes chalked with shareholders. We are excited to note that the current dividend of GH per share is still a 30% return on your investment considering a share price of GH 0.20 per share. I wish to encourage all current shareholders and prospective investors to consider Amenfiman as your investment destination. We have proven track record of consistent strategy execution, which has led to growth in all sides of the business. We wish to assure you that the Board will continue to make decisions in your best interest. Distinguished shareholders, though we continue to apply attractive dividends to our shareholders year after year, the recent development on the banking landscape with respect to the raising of capital requirement for commercial universal banks by more than 300%, calls for a review of our Bank s stated capital. We will remain strategic and stay ahead of the game by raising our capital levels before any potential directive for a statutory increase in capital. As a first step we would want to encourage our existing shareholders to increase their share values before potential investors from other sources actually come in. As you are well aware, our Bank has attracted a lot of attention from the investing public including institutional investors some of whom continue to express interest in equity participation, but we believe that it is most appropriate to encourage existing shareholders like you and I to increase our respective capital contributions. The Board is targeting an increase in the bank s capital from the current level of GH 2.3 million to GH 10 million in five years to provide a cover for the anticipated growth of the bank. In the short term, the board is working to increase our capital to GH 5 million by Retirement of Directors Distinguished Shareholders, in line with the provisions of section 298(a) of the Companies code 1963, Act 179, two of your Directors are due to retire on rotation basis. The two directors who are expected to retire at this meeting are your chairman Dr. Toni Aubynn and your vice chairman Mr. Moses Ampong. I sincerely wish to recommend these two gentlemen for re-election. In addition, our only female director Ms. Agartha Cudjoe has retired voluntarily due to ill health. In view of the requirement to maintain gender balance on the board, the Board has taken steps to co-opt another female to join the board. PAGE 11

12 Chairman s Report Cont d. Awards and Other Achievements Fellow Shareholders, our bank received several awards and recognitions from local and international organizations for our role in driving financial inclusion in Ghana especially empowering women in our communities. Some of the awards received include: Ghana Club 100 Awards Distinguished Shareholders, for the 4th consecutive time, our Bank was once again awarded the leading Rural Bank by the Ghana Investment Promotion Center in the prestigious Ghana Club100 awards during the year under the year This recognition reaffirms the outstanding financial results, exceptional management and leadership and our contribution to the development of our dear nation. I wish to dedicate this achievements and recognitions to the hardworking staff and management of the bank and to our cherished customers for their continued loyalty to the Amenfiman brand and also thank my colleague directors for their support. Business and Financial Services Excellence Award Distinguished shareholders, our bank also received both regional and national medals in the Gold category during last year s Business and Financial Excellence Awards organized under the auspices of the Ministry of Trade. The Bank was awarded the Best bank in deposit mobilization and the best rural bank in Ghana and NO.1 in the western region. Brand Excellence Award Ladies and gentlemen, having won four prestigious awards including rural bank of the year, best in trade finance and most profitable rural bank at the Brand Excellence Award organized by Premier Brands, Amenfiman Bank was awarded once again as the Super Brand of the year This award was a recognition of five years outstanding performance and a confirmation of strong brand awareness. It is worth nothing that Amenfiman brand is well respected and recognized both locally and internationally. We these recognitions, we shall continue to work harder for the growth of the bank. ARB Apex Bank Performance Ranking and Bank of Ghana Composite Ratings Amenfiman Bank continues to enjoy the recognition and rating as a strong bank in the ARB Apex Bank composite ratings. This reaffirms our position as the leading rural bank in Ghana. International Awards Distinguished Shareholders, our bank received an international award by the World Confederation of Businesses, a business association of over 300 corporate members based in the United States. The prestigious Peak of Success award was a recognition of outstanding business performance, high quality management of a financial institution leading to strong financial results for six consecutive years, high commitment to social responsibility programs and above unparalleled support for the financially excluded groups in our communities. Corporate Social Responsibilities Distinguished Shareholders, you will recall that at our 33rd AGM, the members of this bank approved the Board s proposal to work with Nananom and provide leadership towards the establishment of the Amenfi State University College, a higher education project for the good people of Wasa Amenfi and Ghana as a whole. I am happy to report that the project has received tremendous endorsement by the chiefs and good people of the land. More importantly, His Majesty Tetrete Okuamoah Sekyim II, Wasa Amenfi Manhene, generously allocated land for the project. The sod cutting and commencement of the project has been scheduled to coincide with the Wasa Amenfi Afahye in September The Board is committed to devoting 8% of annual profits after tax towards the fulfilment of this vision. Distinguished Shareholders, the bank did not grant new scholarships to the first year students this year under the Amenfiman scholarship scheme because of the introduction of the free SHS program by the government. However, scholarships were awarded 12 PAGE

13 Chairman s Report Cont d. to continuing students who were already on the scholarship scheme. In addition to the above, the Board provided financial support for various community projects in the areas of health, education, sports and security. A total of Ghc159,000 was spent on various CSR projects during the year under review. Some of the activities include 1. Scholarship and bursary to students. 2. Key sponsor for the Wasa Amenfi Educational Excellence Award for basic schools. 3. Support for the Nkonya community for Computer center. 4. Support for the inter-schools, inter-circuit and interzonal sports festivals for the Wasa Amenfi East. 5. Donation of medical Equipment to Aowin Suame District Health Directorate. 6. Donation to St. John of God Nursing Training College at Sefwi Wiawso. 7. Donation to traditional authorities towards various festivals. Human Resource Development Distinguished Shareholders, Ladies and gentlemen, as a leading rural bank, development of our people remains an important part of our strategic plans. The board strongly believe that the training and development programs designed for our employees set them apart from the competition and positions them favorably in this highly competitive business of banking. In line with our strategic human resource management plans, the first batch of AMERB Talent Academy Program (a-tap) graduated last month. The talent management program, which remains a novelty in the rural banking industry, has provided unprecedented opportunity for the young talents in the bank to receive competency based training in leadership and management to provide a pipeline of talent and leadership for the bank. Ladies and gentlemen, highly skilled and competent workforce is a great source of significant competitive advantage for the highly competitive and dynamic industry we operate in. We will continue to support our staff to develop their professional careers in areas relevant to the execution of our strategy and for the future of the bank. Branch Expansion Distinguished Shareholders, as indicated earlier in this report, we completed and commissioned four new branches during the period under review. These new branches are Sefwi Dwenease, Bekwai, Tarkwa, and Kumasi Abrepo Junction branches. This expansion has brought our total branch network to 17 fully computerized and networked branches in 3 regions. The 18th branch is almost completed at Kumasi Suame Magazine to close our branch expansion program. We also reconstructed and commissioned a new branch office for our Bawdie branch during the year under review. Update of Shares Register and Poll Voting Fellow Shareholders, last year, I announced that as part of measures to clean up our shares register in preparation for the poll voting in future decision making at our meetings, the shares register had been computerized. I would like to repeat my earlier request for all Shareholders to visit the nearest branch of the bank to update their records. It is sad to note that some of our members have not taken advantage to update their shareholding records with the Bank. Some of you would recall the Bank of Ghana s directive for key decisions of AGM to be made by poll voting. In line with this, the ARB Apex Bank and the Association of Rural Banks, in February and March 2018 organized workshops on poll voting for shareholders of rural banks in the Western Region. I am happy to inform you that 15 shareholders were selected to attend the workshop on our behalf. As part of our continuous public awareness campaign, we have put together a team that has been visiting various communities to educate shareholders on poll voting and the need to update your records and also offer opportunities to do so without travelling to the various branches of the Bank. I wish to encourage all of you to fully participate in this programs to pave way for a smooth implementation of poll voting next year as required by the Bank of Ghana. PAGE 13

14 Chairman s Report Cont d. Outlook Distinguished Shareholders, Ladies and Gentlemen, we have made the needed investments in our branch expansion project and have successfully operationalized them. We are going to focus on developing the market and our customers to grow the branches. The next phase is to grow digitally using the appropriate digital financial services platforms. We have successfully installed 7 ATMs in seven locations and we are still exploring the opportunities to expand ATMs. We are aiming at reaching more customers using various ICT platforms. Ladies and gentlemen, about twelve years ago, I made two major requests one each to the Bank of Ghana and the Government. To the Bank of Ghana, I requested that some RCBs be freed from the geographical restrictions of their operations. After several interactions and explanations, this request was granted fours years ago, paving the way for us to operate now in three regions of Ghana. The second request, yet to receive approval, is for government to channel portions of the District Assemblies Common Fund and other earmarked funds to some of the Rural banks. As Banks operating largely in rural areas, we stand ready to partner with various District Assemblies to implement the various government programs, including planting for Food and Jobs, and the One- District, One- Factory project. It is my strong belief that the potential of Rural Banks as partners in development remains to be fully tapped by government. I would therefore like to take this opportunity to repeat my 12- year appeal to Government, and directly to the Local Government Ministry to channel portions of the District Assemblies Common Fund and other earmarked funds to some of the Rural banks, especially Amenfiman Bank. We have proven track record of managing larger funds. We are also closest to the people. The Assemblies come to us when they are in need! They scarcely go to the universal banks. It is however, heart-warming to note that the National Association of Rural Banks have accepted to take the request up to the highest level of Government. We have laid the appropriate foundation to drive business growth, innovations, and efficiency in order to provide better returns to our shareholders. We shall continue to focus on Micro, Small and Medium Enterprises and farmers, especially women in business. We shall develop more innovative products to serve our market. Conclusion Nananom, Fellow Shareholders, Ladies and Gentlemen, we have achieved extraordinary results in the past year and with the kind of investments that we have done so far, we are even more confident in our future. I want to thank the Board members, Management and Staff and all Shareholders for your commitment and support which have brought us this far. I would like to single out our Omanhene, His Majesty Tetrete Okumoah Sekyim II, for his extraordinary commitment to the bank and motherly support and advice to the board. I believe I can continue to count on all of you to support our efforts to remain the NO.1 in rural banking in Ghana. Amenfiman Bank, your success, our pride. God bless us all. Thank you. 14 PAGE

15 Report of the Directors to the Members of Amenfiman Rural Bank Limited The Directors have the pleasure in submitting their Twenty-third annual report together with the Statement of Financial Position as at 31st December 2017; the Statement of Comprehensive Income for the year ended December 2017, the Statement of Cash flows as at 31st December 2017 and the Statement of Changes in Equity as at 31st December Directors Responsibilities The Companies Act of Ghana 1963 (Act 179), the Banking Act, 2004 (Act 673) as amended by the Banking (Amendment) Act 2007 (Act 738), the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930) requires the directors to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the Bank as at the end of the financial year and of the profit and loss of the Bank for that period. In preparing those financial statements, the directors are required to: Select suitable accounting policies and apply them consistently; Make judgments and estimates that are reasonable and prudent; State whether applicable accounting standards have been followed; and Prepare the financial statements on a going concern basis, unless it is inappropriate to presume that the Bank will continue in business. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy, the financial position of the Bank and which enable them to ensure that the financial statements comply with the Companies Act 1963 (Act 179), the Banking Act, 2004 (Act 673) as amended by the Banking (Amendment) Act 2007 (Act 738), the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930) and the International Financial Reporting Standards (IFRS). They are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the Bank and prevent and detect fraud and other irregularities. The above statement which should be read in conjunction with the statement of the auditors responsibilities set out on page 1 is with the view of distinguishing for the shareholders the respective responsibilities of the Directors and the Auditors in relation to the financial statements. PAGE 15

16 Report of the Directors to the Members of Amenfiman Rural Bank Limited Principal Activities The principal activities carried out by the Bank during the year under review are within the limits permitted by its Regulations and also consistent with its strategic focus. There were no changes in the principal activities of the Bank during the year. The directors have no reason to believe that the Bank will not continue to operate in the foreseeable future. Operational Results The results of operations for the year ended 31st December, 2017 are set out in the Statement of Comprehensive Income, Statement of Financial Position, Statement of Cash Flows, Statement of Changes in Equity and the Notes to the financial statements from pages 3 to 24. A summary of the results is as follows: GH GH Profit After Tax 5,132,875 8,892,746 Total Comprehensive Income 43,453,106 33,868,288 Total Assets 182,706, ,798,425 Dividends The Directors recommend the payment of a dividend of GH 0.06 per share for the year ended 31st December, Appointment of Auditors In line with Section 134 and 135 of the Companies Code 1963, Act 179 the appointment of the External Auditors K & A Accounting Services ceases and the Board request members to ratify their retirement and to authorize the directors to appoint new auditors and fix their remuneration.... Chairman Director 16 PAGE

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18 Independent Auditors Report to the Members of Amenfiman Rural Bank Limited Opinion We have audited the financial statements of Amenfiman Rural Bank Limited, which comprise the Statement of Financial Position as at 31st December 2017, the Statement of Comprehensive Income, the Statement of Cash flows, Statement of Changes in Equity and notes to the financial statements, including a summary of significant accounting policies and other explanatory notes for the year then ended as set out on pages 3 to 24. In our opinion, the financial statements present fairly, in all material respects, the financial position of Amenfiman Rural Bank Limited as of 31st December 2017, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and in a manner required by the Companies Act of Ghana, 1963 (Act 179), Section 78 of the Banking Act, 2004 (Act 673), Banking (Amendment) Act 2007 (Act 738) of Ghana and the Banks and Specialized Deposit- Taking Institutions Act, 2016 (Act 930). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Board of Directors for the Financial Statements The Board of Directors is responsible for the preparation of the financial statements in accordance with the Companies Act 1963 (Act 179), the Banking Act, 2004 (Act 673) as amended by the Banking (Amendment) Act 2007 (Act 738), the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930) and the International Financial Reporting Standards (IFRS), and for such internal control as the Board of Directors determines what is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Board of Directors is responsible for assessing the Bank s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so. The Board of Directors is responsible for overseeing the Bank s financial reporting process. Auditor s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate 18 PAGE

19 Independent Auditors Report to the Members of Amenfiman Rural Bank Limited to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank s internal controls. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors. Conclude on the appropriateness of the Board of Directors use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal controls that we identify during our audit. Report on Other Legal and Regulatory Requirements The Ghana Companies Act 1963 (Act 179) requires that in carrying out our audit work 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. In our opinion, proper books of accounts have been kept by Amenfiman Rural Bank Limited, so far as appears from our examination of those books, and iii. The Statement of Financial Position and Statement of Comprehensive Income of the Bank are in agreement with the books of accounts. The engagement partner on the audit resulting in this independent auditor s report is Samuel Wilson Ampah (ICAG/P/1074).... Samuel Wilson Ampah (ICAG/P/1074) For and on behalf of: K and A Accounting services (ICAG/F/2017/089) Chartered Accountants, 49 Boundary Road (Coastal) Off Spintex Road, Baatsonaa- Accra PAGE 19

20 Statement of Comprehensive Income for the year ended 31st December 2017 NOTE GH GH Interest Income 3 38,642,901 30,007,812 Interest Expense 4 (6,485,586) (3,407,680) Net Interest Income 32,157,315 26,600,132 Commissions and Fees 5 3,948,286 3,213,106 Other Operating Income 6 861, ,369 Total Operating Income 36,967,520 30,460,607 Impairment Allowance 7 (1,133,480) (604,218) Other Operating Expenses 8 (27,608,219) (19,869,019) Profit Before Tax 8,225,821 9,987,370 Taxation 17 (2,281,360) (1,064,191) 17(a) (811,586) (30,433) Net Profit After Tax 5,132,875 8,892,746 Transfer to Proposed Dividend - - Transfer to Statutory Reserve (641,609) (1,111,593) Transfer to Income Surplus (2,670,006) (4,158,313) Transfer to Community Development Fund (615,945) (1,067,130) Scholarship Fund (102,657) (177,855) Long Service Award (102,657) (177,855) Building Fund (800,000) (2,000,000) 40th Anniversary Fund (200,000) (200,000) Building Fund (2,000,000.00) (1,193,548.90) Notes 1-27 form an intergral part of these financial statements Independent Auditors Report - Page PAGE

21 Statement of Financial Position as at 31st December 2017 NOTE ASSETS GH GH Cash and Short Term Funds 9 22,151,390 23,927,393 Investments 10(a) 88,042,429 80,815,452 Loans and Advances to Customers 11 56,289,533 41,094,380 Other Assets Account 12 2,936,157 7,314, ,419, ,151,357 Other Investments , ,151 Property, Plant & Equipment 14 13,042,984 5,402,917 TOTAL ASSETS 182,706, ,798,425 LIABILITIES AND SHAREHOLDERS' FUND LIABILITIES Deposits and Current Accounts ,844, ,853,542 Creditors and Accruals 16 5,189,317 6,319,762 Current Tax 17(a) 2,133, ,737 Deferred Tax 17(b) 860,001 48,415 TOTAL LIABILITIES 157,027, ,677,456 SHAREHOLDERS' FUNDS Stated Capital 18 2,230,349 1,754,209 Statutory Reserve 19 4,042,474 3,400,864 Other Funds 20 5,271,226 4,311,084 Income Surplus 21 14,135,398 13,654,812 TOTAL SHAREHOLDERS' FUNDS 25,679,447 23,120,969 TOTAL LIABILITIES AND SHAREHOLDERS' FUNDS 182,706, ,798,425 Approved by the Directors on and signed by;... CHAIRMAN DIRECTOR Notes 1-27 form an intergral part of these financial statements Independent Auditors Report - Page 1-2 PAGE 21

22 Statement of Cashflow for the year ended 31st December CASHFLOW FROM OPERATING ACTIVITIES GH GH Net Profit Before Tax 8,225,821 9,987,370 ADJUSTMENTS TO RECONCILE OPERATING PROFIT TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation and Amortisation 1,576, ,151 Charge for Loan Impairment 1,133, ,218 Deferred Income - 355,582 Other non cash movement 1,001,240 (324,357) NET CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN OPERATING ASSETS AND LIABILITIES 11,937,485 11,524,965 (Increase)/ Decrease in Loans and Advances to Customers (15,733,587) (9,404,232) (Increase)/ Decrease in Other Assets 4,377,975 (5,884,351) Increase/ (Decrease) in Deposits Liability 19,990,954 41,593,996 Increase/ (Decrease) in Creditors and Accruals (1,130,446) 3,978,966 19,442,381 41,809,343 Corporate Tax Paid (2,200,000) (608,454) NET CASH INFLOW FROM OPERATING ACTIVITIES 17,242,381 41,200,889 INVESTING ACTIVITIES Change in Investments (7,226,977) (25,311,187) Purchase of Property, Plant and Equipment (9,217,011) (2,992,793) NET CASH (OUTFLOW) FROM INVESTING ACTIVITIES (16,443,987) (28,303,980) FINANCING ACTIVITIES Capital Reserve (2,189,419) (450,780) Other funds (861,118) (1,380,696) Proceeds from Issue of Shares 476, ,728 NET CASH (OUTFLOW) FROM FINANCING ACTIVITIES (2,574,397) (1,619,748) Net Increase / (Decrease) in Cash and Cash Equivalents (1,776,003) 11,277,161 Cash and Cash Equivalents as at 1/1/ ,927,393 12,650,232 Cash and Cash Equivalents as at 31/12/ ,151,390 23,927, PAGE

23 Statement of Changes in Equity for the year ended 31st December 2017 STATED CAPITAL OTHER FUNDS STATUTORY RESERVES INCOME SURPLUS TOTAL GH GH GH GH GH Balance as at January 1 1,754,209 4,311,084 3,400,864 13,654,812 23,120,969 Adjustment for the Year - (861,118) - (2,189,419) (3,050,537) Restated Balance 1,754,209 3,449,966 3,400,864 11,465,393 20,070,432 Net Profit for the Year ,132,875 5,132,875 Proceeds from Issue of Shares 476, ,140 Transfer to Statutory Reserve ,609 (641,609) - Transfer to Proposed Dividend Transfer to Other Funds - 1,821,260 - (1,821,260) - Balance as at December 31 2,230,349 5,271,226 4,042,474 14,135,398 25,679,447 Statement of Changes in Equity for the year ended 31st December 2016 STATED CAPITAL OTHER FUNDS STATUTORY RESERVES INCOME SURPLUS TOTAL GH GH GH GH GH Balance as at January 1 1,542,481 2,068,940 2,289,271 9,947,278 15,847,970 Adjustment for the Year - (1,380,696) - (450,780) (1,831,476) Restated Balance 1,542, ,245 2,289,271 9,496,498 14,016,495 Net Profit for the Year ,892,746 8,892,746 Proceeds from Issue of Shares 211, ,728 Transfer to Statutory Reserve - - 1,111,593 (1,111,593) - Transfer to Other Funds - 3,622,839 - (3,622,839) - Balance as at December 31 1,754,209 4,311,084 3,400,864 13,654,812 23,120,969 PAGE 23

24 24 PAGE

25 Notes to the Financial Statements for the year ended 31st december CORPORATE INFORMATION 1.1 Registration and Nature of Business The bank was incorporated on May 13, 1980 with registration (No. 16,269) and issued with certificate to commence business and license under the Banking Law 1989, PNDCL 225, now replaced by the Banking Act 2004 (Act 673) as amended by the Banking (Amendment) Act 2007 (Act 738), the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930), on September 26, 1980 with registration (No. 027) and January 10, 1984 respectively. The bank commenced business on September 26, The nature of the business the bank is authorized to carry on includes the provision of current, savings and time deposit accounts for its customers. It also acts as agent of the other financial institutions in the country, accepts and discounts bills of exchange and provides finance for small scale farmers, merchants, industrialists, etc. 1.2 Compliance with International Financial Reporting Standards (IFRSs) The bank s financial statements have been prepared in accordance with IFRSs in force as of the reporting date. International Financial Reporting Standards (IFRSs) comprise IFRS 1 to 15 and International Accounting Standards (IAS) 1 to SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies applied by Amenfiman Rural Bank Limited in the preparation of the financial statements are set out below: 2.1 Basis of Accounting The financial statements have been prepared under the historical cost convention as modified by the adoption of fair value measurement basis for assets and liabilities in compliance with IFRS requirements. 2.2 Functional and Presentation Currency The financial statements are presented in Ghana Cedi (GH ) which is the functional and presentation currency of the Bank. 2.3 Revenue Recognition Revenue is recognized 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. i. Interest Income and expenses are recognized on interest bearing assets and liabilities on accrual basis. ii. Commissions and fees income and expenses that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate. iii. Other fees and commission income, including account servicing fees, investment management fees and placement fees, are recognized as the related services are performed. When a loan commitment is not expected to result in the draw-down of the loan, loan commitment fees are recognized on a straight line basis over the commitment period. Other fees and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received. 2.4 Income Tax Income Tax in the Profit and Loss Account comprises current tax and deferred tax. Current tax is the tax expected to be payable, under the Income Tax Act 2016 (Act 924), on the taxable profit for the year. Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying PAGE 25

26 Notes to the Financial Statements for the year ended 31st december 2017 amounts. Deferred tax liabilities are generally recognized for all taxable temporary differences while deferred tax assets are recognized to the extent that it is probable future taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using the rate expected to be applicable in the period during which the asset will be realized or the liabilities settled. Deferred tax assets and liabilities are offset when they arise in the same tax reporting entities and relate to income taxes of the same taxation authority, and when a legal right to set off exists. The carrying amount of deferred tax assets is reviewed at each balance sheet date and adjusted to the extent that it is no longer probable that sufficient taxable profit will be available for full or partial utilization of the deferred tax asset. 2.5 Financial Instruments (a) Initial Recognition and Measurement Financial instruments are recognized initially when the bank becomes a party to the contractual provisions of the instruments. 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). (b) Subsequent Measurement For purposes of subsequent measurement, financial assets and financial liabilities are classified as: a. financial assets measured at fair value through profit or loss b. financial liabilities at fair value through profit or loss c. financial assets measured at amortised cost d. financial liabilities measured at amortised cost e. financial assets measured at fair value through other comprehensive income. A financial asset is measured at amortised cost if both the following conditions are met: a. The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows b. 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 or financial liability at fair value through profit or loss is one that either: (a). is designated as such upon initial recognition, or (b). meets the recognition of held for trading A financial asset or financial liability is deemed to be held for trading if (i). it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term, (ii). on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or (iii). it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging contract). Financial assets and financial liabilities at amortised cost are measured, subsequent to initial recognition, at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. Financial assets and liabilities at fair value through 26 PAGE

27 Notes to the Financial Statements for the year ended 31st december 2017 profit or loss are measured, subsequent to initial recognition, at fair value with gains or losses recognised in profit or loss. Financial assets and liabilities at fair value through other comprehensive income are measured, subsequent to initial recognition, at fair value with gains or losses recognised in other comprehensive income. The foregoing classification of financial instruments for purposes of subsequent measurement, are spelt out in IFRS 9 Financial Instruments which became effective for annual periods beginning on or after 1st January The adoption of this classification in accordance with IFRS 9 Financial Instruments Disclosures amounts to be early adoption of IFRS 9. The bank s principal financial assets are investments and loans and advances to customers, cash and cash equivalents, while its principal financial liabilities are customer deposits. (c) Derecognition of financial assets and liabilities A financial asset or a portion thereof, is derecognized when the Bank s rights to cash flows has expired or when the Bank 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 derecognized when the obligation is discharged, cancelled or has expired. 2.6 The Amortised Cost of a Financial Asset or 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 at 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 or uncollectibility. 2.7 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. 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 categorised. 2.8 Impairment of financial assets At each balance sheet 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 indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, or the fact that the debt is being restructured to reduce the burden on the borrower. 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 PAGE 27

28 Notes to the Financial Statements for the year ended 31st december 2017 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 allowance 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 cashflows is determined using the financial asset s original effective interest rate. 2.9 Impairment of Non-Financial Assets (Including Property Plant & Equipment (PPE) The Bank assesses at least at each financial year end whether there is any evidence that non-financial assets (including PPE) may be impaired. Where indicators of impairment exist, an impairment test is performed. This requires an estimation of the value in use of the asset or the cash-generating units to which the asset belong. Estimating the value in use amount requires management to make an estimate of the expected future cash flows from the asset or the cash generating unit and also to select a suitable discount rate in order to calculate the present value of those cash flows 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 and the amount meets the materiality threshold set by the Bank. Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. Depreciation is provided on the depreciable amount of each component on a straight-line basis over the anticipated useful life of the asset. 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. The current annual depreciation rates for each class of property, plant and equipment are as follows: Land and Building 5% Office Furniture & Equipment 20% Motor Vehicle 33% Computer 20% Generator Set 25% Motor Cycles 20% Safe 15% Lawn Mower 25% Costs associated with routine servicing and maintenance of assets are 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 or cash-generating units 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 28 PAGE

29 Notes to the Financial Statements for the year ended 31st december 2017 money and the risks specific to the asset. An item of property, plant and equipment is derecognized 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 derecognized Foreign Currency Transactions denominated in foreign currency are translated into cedis at the rates of exchange ruling on the dates of the transactions. Assets and liabilities denominated in foreign currencies are translated into cedis at exchange rates ruling at the balance sheet date. Any gains or losses resulting from foreign currency translation or exchange are dealt with through the profit and loss account for the year Cash & Cash Equivalents For the purposes of the statement of cashflows, cash and cash equivalents include cash on hand, balance with ARB Apex Bank, amounts due from other banks and financial institutions and short term government securities Provisions The bank recognizes 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 recognized 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 recognized as a borrowing cost 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 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 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 period in which the employee renders the related service. The cost of short-term employee benefits are recognized as an expense in the period when the economic benefit is given, as an employment cost. Unpaid short-term employee benefits as at the end of the accounting period are recognized as an accrued expense and any short-term benefit paid in advance are recognized as prepayment to the extent that it will lead to a future cash refund a reduction in future cash payment. Wages and salaries payable to employees are recognized as an expense in the income statement at gross amount. The Bank s contribution to social security fund is also charged as an expense. PAGE 29

30 Notes to the Financial Statements for the year ended 31st december 2017 Social Security and National Insurance Trust (SSNIT) Under a National Deferred Benefit Pension Scheme, the Bank contributes 13% of employees basic salary to SSNIT for employee pensions. The Bank s obligation is limited to the relevant contributions, which are settled on due dates. The pension liabilities and obligations, however, rest with SSNIT. Provident Fund The Bank has a Provident Fund Scheme for all permanent employees. Employees contribute 5% of their basic salary to the Fund whilst the Bank contributes 7.5%. The Bank s obligation under the plan is limited to the relevant contribution which is invested at interest rates agreed by the trustees of the scheme and the Bank New Standards and Interpretations Standards and Interpretations not yet effective The following standard which is relevant to the bank s operations has been published IFRS 9 Financial Instruments This new standard is the first phase of a three phase project to replace IAS 39 Financial Instruments: Recognition and Measurement. Phase one deals with the classification and measurement of financial assets. The following are changes from the classification and measurement rules of IAS 39: Financial assets will be categorised as those subsequently measured at fair value or at amortised cost. Financial assets at amortised cost are those financial assets where the business model for managing the assets is to hold the assets to collect contractual cash flows (where the contractual cash flows represent payments of principal and interest only). All other financial assets are to be subsequently measured at fair value. Under certain circumstances, financial assets may be designated as at fair value. For hybrid contracts, where the host contract is within the scope of IFRS 9, then the whole instrument is classified in accordance with IFRS 9, without separation of the embedded derivative. In other circumstances, the provisions of IAS 39 still apply. Voluntary reclassification of financial assets is prohibited. Financial assets shall be reclassified if the entity changes its business model for the management of financial assets. In such circumstances, reclassification takes place prospectively from the beginning of the first reporting period after the date of change of the business model. Investments in equity instruments may be measured at fair value though. When such an election is made, it may not subsequently be revoked, and gains or losses accumulated in equity are not recycled to profit or loss on derecognition of the investment. The election may be made per individual investment. IFRS 9 does not allow for investments in equity instruments to be measured at cost under any circumstances. The standard was to be effective for annual periods beginning on or after 1st January However, with the completion of the project to replace IAS 39 and the issue on 24th July 2014 of IFRS 9 (2014) as a complete standard, the new effective date for IFRS 9 has been changed to reporting periods beginning on or after 1st January, 2018 with early adoption permitted (subject to local endorsement requirements). This notwithstanding, early adoption of the previous versions is permitted for limited periods to 1st February 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, market risk and liquidity risk. Other risks include operational risk Credit Risk Credit risk arises from the potential that a debtor or counterparty is either unwilling or unable to perform 30 PAGE

31 Notes to the Financial Statements for the year ended 31st december 2017 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. To minimize the risk from these sources the bank only deposits cash, with grants credits and restricts investments to major banks, institutions and individuals of good repute and high credit standing Market Risk Market risk is the potential of losses arising from movements in market prices such as interest rates, exchange rates, and equity and commodity prices. The bank s current operation exposes it to interest rate risk. The interest rate risk is inherent in the bank s investments with other financial institutions which are affected by changes in interest rates by the Bank of Ghana. The bank manages this risk by closely monitoring the inflation rates and other economic indicators that are germane, with a view to avoiding or minimising losses arising from interest rate risk 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 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 Bank s returns submitted to Bank of Ghana regularly Capital Description The Bank s Capital is its Shareholders funds comprising Stated Capital, Reserves and Income Surplus, which includes current and previous year s retained earnings The Level of Capital Adequacy The bank s capital adequacy status is shown in the Long Form Audit Report. For the year ended December 31, 2014 (continued) 26.4 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. PAGE 31

32 32 PAGE

33 Notes to the Financial Statements for the year ended 31st December INTEREST INCOME GH GH Advances 21,232,269 16,076,361 Investment 17,410,632 13,931,452 TOTAL (PAGE 3) 38,642,901 30,007,812 4 INTEREST EXPENSE Interest on Deposit 6,485,586 3,407,680 Interest on Borrowing 0 0 TOTAL (PAGE 3) 6,485,586 3,407,680 5 COMMISSONS AND FEES Commission Received 3,948,286 3,213,106 TOTAL (PAGE 3) 3,948,286 3,213,106 6 OTHER OPERATING INCOME Other Income 861, ,369 TOTAL (PAGE 3) 861, ,369 7 IMPAIRMENT ALLOWANCE Current Provision 2,190,398 1,296,382 Previous Provision 1,296, ,164 Bad Debts Written Off (239,464) 0 1,056, ,164 Charge for the Year (PAGE 3) 1,133, ,218 8 OTHER OPERATING EXPENSES Staff Cost (Appendix I) 16,147,630 11,374,564 Occupancy Costs (Appendix II) 2,286,088 1,652,703 Administrative Expenses (Appendix III) 7,496,650 5,849,994 Directors' Remuneration 69,250 49,990 Audit Fees 21,600 18,000 Depreciation and Amortisation 1,576, ,151 Micro Finance Expenses 10,057 21,617 TOTAL (PAGE 3) 27,608,219 19,869,019 PAGE 33

34 Notes to the Financial Statements for the year ended 31st December CASH AND SHORT TERM FUNDS GH GH Cash on Hand 11,589,983 9,866,022 ARB Apex Bank 9,957,482 13,659,936 Balances with Other Banks 603, ,435 TOTAL (PAGE 4) 22,151,390 23,927, (a) INVESTMENTS IN SHORT TERM SECURITIES Treasury Bills 7,231,664 8,231,664 ACOD 1,000,000 - Other Investments 86,321,176 79,335,855 Unearned Income on Investment (6,510,412) (6,752,067) TOTAL (PAGE 4) 88,042,429 80,815,452 The Accounting Policies for Financial Instruments have been applied to the following line items. 10 (b) FINANCIAL ASSETS BY CATEGORY AT AMORTISED COST FAIR VALUE TPL TOTAL Description 2017 GH GH GH Cash and Short Term Funds - 22,151,390 22,151,390 Investments 88,042, ,042,429 Loans and Advances to Customers 56,289, ,289, ,331,962 22,151, ,483, Cash and Short Term Funds - 12,650,232 12,650,232 Investments 55,504,265-55,504,265 Loans and Advances to Customers 32,321,630-32,321,630 87,825,895 12,650, ,476, (c) FINANCIAL LIABILITIES BY CATEGORY Deposits and Current Accounts ,844, ,844,496 Deposits and Current Accounts ,259,546-87,259, PAGE

35 Notes to the Financial Statements for the year ended 31st December LOANS AND ADVANCES TO CUSTOMERS Analysis by type of Customer: GH GH Individuals 38,925,185 27,211,395 Other private & public enterprises 14,935,740 12,573,593 Staff 4,619,006 2,961,356 58,479,931 42,746,344 Deferred Fee Income - (355,582) Impairment Allowance (2,190,398) (1,296,382) TOTAL (PAGE 4) 56,289,533 41,094,380 Analysis by Sector: Agriculture, Forestry & Fishing 1,978,207 1,358,117 Trading 30,195,509 20,701,243 Transport, Storage & Communication 538, ,528 Miscellaneous 25,767,761 20,101,455 58,479,931 42,746,344 Deferred Fee Income - (355,582) Impairment Allowance (2,190,398) (1,296,382) TOTAL (PAGE 4) 56,289,533 41,094,380 Analysis by type of Advance: Loans 51,513,166 38,119,442 Overdraft 6,966,765 4,626,902 58,479,931 42,746,344 Deferred Fee Income - (355,582) Impairment Allowance (2,190,398) (1,296,382) TOTAL (PAGE 4) 56,289,533 41,094, OTHER ASSET ACCOUNTS Stationery Stocks 137,878 93,206 Prepaid Rent 2,664, ,019 Prepaid Insurance - 14,538 Interbranch Account 22,099 5,252,847 Office Account 70,562 1,043,765 E-Zwich Debit 40,727 3,757 TOTAL (PAGE 4) 2,936,157 7,314, OTHER INVESTMENTS Werba Investment 115, ,293 ARB Apex Bank Shares 128, ,859 TOTAL (PAGE 4) 244, ,151 PAGE 35

36 Notes to the Financial Statements for the year ended 31st December PROPERTY, PLANT AND EQUIPMENT COST / VALUATION Land & Building Motor Vehicle Furniture & Equipment Computers Safe & Lawn Mower Generator Work In Progress TOTAL GH GH GH GH GH GH GH Gross value as at January 1, ,030,690 2,116,552 1,583, ,032 75, ,723-8,468,333 Additions 2,222,967 2,168,898 1,616,051 1,059,532 13, ,004 1,997,109 9,217,011 Gross value as at 5,253,656 4,285,450 3,199,332 1,979,564 88, ,727 1,997,109 17,685,344 December 31, 2017 ACCUMULATED DEPRECIATION Balance as at 01/01/ ,286 1,245, , ,585 40, ,738-3,065,416 Charge for the Year 99, , , ,672 4,832 77,202-1,576,944 Balance as at 289,484 2,215,931 1,042, ,256 45, ,939-4,642,360 31/12/2017 NET BOOK VALUE Balance as at 31/12/2017 Balance as at 31/12/2016 4,964,173 2,069,519 2,156,706 1,332,308 43, ,787 1,997,109 13,042,984 2,840, , , ,448 34, ,985-5,402, PAGE

37 Notes to the Financial Statements for the year ended 31st December DEPOSITS AND CURRENT ACCOUNTS GH GH Savings Accounts 88,520,185 84,095,276 Current Accounts 29,079,439 25,822,001 Time Deposits 31,244,873 18,936,266 TOTAL (PAGE 4) 148,844, ,853, CREDITORS AND ACCRUALS Sundry Creditors 2,383,252 3,957,549 Audit Fee 21,600 15,004 Uncleared Effect 23,673 - Office Accounts 1,758,825 1,595,161 Dividend Payable 1,001, ,048 TOTAL (PAGE 4) 5,189,317 6,319, (a) TAXATION - CURRENT Year "Opening Balance" "Tax Charged" "Tax Paid" Tax Adjustment "Closing Balance" GH GH GH GH GH ,737 - (400,000) 1,596,287 1,652, ,281,360 (1,800,000) - 481, ,737 2,281,360 (2,200,000) 1,596,287 2,133,384 17(a) (b) DEFERRED TAX GH GH Balance as at 1 January 48,415 17,982 Charged for the Year 811,586 30,433 Balance as at 31 December 860,001 48,415 Add/ Deduct: GH GH Profit Before Taxation 8,225,821 9,987,370 Tax at Applicable 25% 2,056,455 10% 998,737 Tax Effect of Non-Deductible Expenses 858, ,606 Tax Effect of Capital Allowances (633,923) 116,152 Add Origination of Temporary Differences 811, , TOTAL TAX EXPENSE 3,092, ,344, Effective Tax Rate 37.60% 13.47% PAGE 37

38 Notes to the Financial Statements for the year ended 31st December STATED CAPITAL The Bank is registered with an authorised capital of 20,000,000 ordinary shares of no par value. During the year under review the bank issued 2,380, ordinary shares for cash consideration of Gh AUTHORISED ORDINARY Number of Shares of No 20,000,000 Par Value ISSUED AND FULLY PAID ORDINARY ORDINARY Number GH Number GH For Cash 9,760,535 1,754,196 8,701,896 1,542,468 Issued for the Year 2,380, ,140 1,058, ,728 Preference Shares 125, , TOTAL (PAGE 4) 12,266,234 2,230,349 9,885,535 1,754,209 There is no share in treasury and no call or instalments unpaid on any share. 19 STATUTORY RESERVE This represents the cumulative amounts set aside as non-distributable reserve from annual net profit after tax in accordance with section 29, of the Banking Act 2004, (Act 673) as amended by the banking (Amendment) Act, 2007 (Act 738). 20 OTHER FUNDS This is made up of appropriations to community development fund, scholarship fund, pension fund, building fund and 40th Anniversary fund. 21 INCOME SURPLUS This represents the residual of cumulative annual profits that is available for distribution to shareholders. 22 CONTINGENCIES AND CAPITAL EXPENDITURE COMMITMENTS There were neither contingent liabilities nor contingent assets as at the balance sheet date. 23 CAPITAL EXPENDITURE COMMITMENTS There were no capital commitments as at the balance sheet date. 24 PROPOSED DIVIDEND The Board of Directors of the Bank have passed a resolution to propose dividend of GH 0.06 per share which amounted to GH 585, in respect of the profit after tax for 2016 financial year, pending the approval of the shareholders at the AGM. 25 RELATED PARTY TRANSACTIONS Advances include the following amounts lent to related parties GH GH Employees 4,619,006 2,961, PAGE

39 Capital Allowance Computation for the Year Ended 31st December 2017 POOL 1 POOL 2 POOL 3 POOL 4 TOTAL GH GH GH GH GH Capital Allowance 40% 30% 20% 10% WDV B / Fwd 211, ,087 1,315,702 2,399,826 4,918,771 Additions 1,059,532 2,168,898 1,768,505 2,222,967 7,219,902 TOTAL 1,270,688 3,160,985 3,084,207 4,622,792 12,138,672 Less: Capital Allowance 508, , , ,279 2,535,691 WDV C / Fwd 762,413 2,212,690 2,467,366 4,160,513 9,602,981 SUMMARY OF CAPITAL ALLOWANCES GH GH Unutilised Allowances B / Fwd 0 0 Capital Allowances 2,535,691 1,161,524 Total Allowances 2,535,691 1,161,524 Less: Allowances Utilised 2,535,691 1,161,524 Unutilised Allowances C / Fwd 0 0 Income Tax Computation for the Year Ended 31st December GH GH Net Profit before Tax 8,225,821 9,987,370 Add Back: Depreciation and Amortisation 1,576, ,151 Provident Fund 724, ,695 Impairment Allowance 1,133, ,218 Assessable Income 11,661,131 11,803,435 Less: Capital Allowance 2,535,691 1,161,524 Chargeable Income 9,125,440 10,641,911 Tax 25% 2,281,360 1,064,191 GH GH Unutilised Allowances B / Fwd 0 0 Capital Allowances 2,535,691 1,161,524 Total Allowances 2,535,691 1,161,524 Less: Allowances Utilised 2,535,691 1,161,524 Unutilised Allowances C / Fwd 0 0 PAGE 39

40 Capital Adequacy for the year Ended 31st December ITEM GH GH 1 Paid-Up Capital 2,230,349 1,754,209 2 Disclosed Reserves 23,449,098 21,366,760 3 Tier 1 Capital (1+2) 25,679,447 23,120,969 Less: 4 Goodwill/Intangibles Preliminary Expenses 5 Losses not Provided For 6 Investments in Unconsolidated Subsidiaries 115, ,293 7 Investment in the capital of other Banks & Fin Insts. 128, ,859 8 Connected Lending of Long Term Nature 9 Net Tier 1 Capital ( ) 25,435,296 22,876,818 Add: 10 Revaluation Reserves 11 Subordinated Term Debt (Limited to 50% of 3) 12 Hybrid Capital 13 Tier 2 Capital ( )(Limited to 100% of 3) 14 ADJUSTED CAPITAL BASE (9 +12) 25,435,296 22,876, TOTAL ASSETS(Less contra items) 182,706, ,798,425 Less: 16 Cash on Hand 11,589,983 9,866,022 Claim on ARB Apex Bank: 17 i. 5% Deposit ARB 6,053,733 5,375, ii. Clearing Account Balance 1,984,612 6,957, iii. ACOD 1,000, iv. REPO 0 0 Claims on Government 21 i) Treasury Securities (Bills and Bonds) 7,231,664 8,231, ii) Stocks Call Account 23 80% of Cheques drawn on other banks 24 Goodwill/Intangibles 25 Investments in Unconsolidated Subsidiaries 115, , Investments in the Capital of Other Banks & Fin Institutions 128, , Connected Lending of Long Term Nature 28 80% of claims on Discount Houses 35,491,325 38,378, % of claims on Other Banks 35,584,064 26,473, % of claims on Other Insts. (Public Sector) 40 PAGE

41 Capital Adequacy for the year Ended 31st December % of loans guaranteed by government 32 80% of loans guaranteed by multilateral banks 33 50% of Residential Mortgage Loans 34 50% of Export Financing Loans 35 Adjusted Total Assets (15-(16+17 to 34) 83,527,110 63,272,288 Add: % of 3yrs Average Annual Gross Income 33,516,070 24,589, ADJUSTED ASSET BASE (35+36) 117,043,181 87,861, " Adjusted Capital Base as percentage of 21.73% 26.04% Adjusted Asset Base: (14/37 x 100) " 39 CAPITAL SURPLUS/DEFICIT (14 (10% of 35) 17,082,585 16,549,589 PAGE 41

42 Liquidity Ratio for the year Ended 31st December GH GH 1 Demand Deposit 29,079,439 25,822,001 2 Savings Deposit 88,520,185 84,095,276 3 Time Deposit 31,244,873 18,936,266 4 Sub-Total (1+2+3) 148,844, ,853,542 A PRIMARY 5 Cash on Hand 11,589,983 9,866,022 6 ACOD 1,000,000-7 Other Banks Balances 10,561,407 14,061,372 8 Sub Total (5+6+7) 23,151,390 23,927,393 B SECONDARY 9 Call Account Other Investments 86,321,176 79,335, Treasury Bills 7,231,664 8,231, Total ( ) 93,552,840 87,567, Primary Reserve % of 8/ Secondary Reserve % of 12/ Required Reserves 15 Primary 13% ( of No. 4) 19,349,785 16,750, Secondary 30% (of No. 4) 44,653,349 38,656,063 EXCESS RESERVES Primary Reserve 17 Available Reserve (No. 8) 23,151,390 23,927, Required Reserve (No. 15) 19,349,785 16,750, Excess Reserve (17-18) (i) 3,801,605 7,176, PAGE

43 Liquidity Ratio for the year Ended 31st December 2017 Secondary Reserve 20 Available Reserve (No. 12) 93,552,840 87,567, Required Reserve (No. 16) 44,653,349 38,656,063 Excess Reserve (20-21) (ii) 48,899,491 48,911,456 TOTAL EXCESS/(DEFICIT) RESERVE Total Excess/(Deficit) Reserves (i) + (ii) 52,701,097 56,087,889 PAGE 43

44 Schedule of Appendixes APPENDIX I GH GH STAFF COST Salaries and Allowances 11,694,845 8,202,499 Social Security Fund Contribution 1,394, ,390 Provident Fund (Tier 3) 724, ,695 Staff Training Expenses 366, ,129 Medical 133, ,509 Other Staff Cost 1,833,388 1,759,343 TOTAL (PAGE 15) 16,147,630 11,374,564 APPENDIX II OCCUPANCY COSTS Electricity and Water 944, ,987 Police Guard 629, ,278 Rent, Rates and Taxes 277, ,322 Generator Running Expenses 155, ,602 Repairs and Maintenance 280, ,513 TOTAL (PAGE 15) 2,286,088 1,652,703 APPENDIX III ADMINISTRATIVE EXPENSES Motor Running Expenses 1,042, ,088 Printing and Stationery 249, ,412 Insurance 314, ,222 Business Promotion 415, ,630 Subscriptions, Periodicals & Calendars 95, ,869 SFC Expenses 51, ,813 Transport and Travelling 1,115, ,256 Specie Expenses 124, ,026 Computerisation Expenses 393, ,311 Directors Sitting Expenses 163,517 89,803 Board Meeting Expenses 19,306 2,216 AGM Expenses 263, ,525 Postage, Telephone & Telegraph 101,493 85,994 Bank Charges 158, ,495 Office Expenses 677, ,607 Legal Expenses 298,169 45,254 Directors Transportation 117,991 88,262 Mobilisation Expenses 595, ,719 Motor Vehicle Repairs and Maintenance 564, ,588 Cleaning & Sanitation 300, ,981 Internal Audit Expenses 82,940 0 Advertising and Publicity 349, ,923 TOTAL (PAGE 15) 7,496,650 5,849, PAGE

45 PAGE 45

46 Notes PAGE

47 Proxy Authorisation ANNUAL GENERAL MEETING of the 33rd Annual General Meeting of the Amenfiman Rural Bank Limited will be held on Saturday 24th June, 2017 at 10.00am prompt at the Assembly Hall of the Amenfiman Senior High School, Wasa Akropong. We... being members of hereby appoint Dr./Hon./Mr./Mrs/.Ms./Rev... with a duly sealed proxy form to attend and vote for us and on our behalf at the Annual General Meeting of the Bank to be held on June 24, Dated this..day of Signature (Authorised Signatory ) Name: Designation Company Seal/Stamp Signature (Authorised Signatory ) Name: Designation.. Company Seal/Stamp Please Cut Along This Line Resolutions from the Board For Against 1. To receive the Report of the Chairman of the Board of Directors for the year. 2. To receive and consider the Report of the Directors for the year ended 31st December, To receive and consider the Auditors Report and Approve the Financial Statement for the year ended 31st December, To declare a dividend. 5. To authorize the Directors to fix the remuneration of the Auditors. 6. To approve the remuneration of Directors. 7. To elect Directors in place of those retiring. Please indicate with an X in the appropriate square how you wish your votes to be cast on the resolutions set out above. Unless otherwise instructed the proxy will vote or abstain from votting his/her discretion. PAGE 47

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