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  • 1. 06 Living Our Brand Credit Union Central of Nova Scotia Annual Report
  • 2. Contents MiSSioN & TAble of Vision NS & NL Credit Union Membership To be an innovative leader contributing to a strong and effective network of credit unions. NL NS ($ Thousands) 224 224 226 228 Mission 169 169 169 169 Through our leadership and the excellence of our people, 57 59 55 55 products and services, we support credit unions in becoming the financial institution of choice. Values Stewardship 2003 2004 2005 2006 We accept the roles of support and leadership defined for us by the credit unions of Nova Scotia and Newfoundland and Labrador, and with them, support the well-being of the NS & NL Credit Union Assets credit union network and the communities it serves. We NL NS ($ Millions) will operate in a socially responsible and profitable manner for the common good of our stakeholders. 2066 1925 1469 Service 1807 1389 597 We are committed to providing professional service to 1706 1318 our stakeholders who include credit unions and their 1254 536 employees, our affiliates and their employees, and to each 489 other. 452 Respect We will conduct ourselves respectfully – respectful of diversity, respectful of ourselves and respectful of others in 2003 2004 2005 2006 order to build and sustain a productive workplace. Accountability We choose to be accountable for our actions and the results Table of Contents we deliver to our stakeholders. We share responsibility for the well-being and success of Credit Union Central of Nova Scotia and the credit unions it serves. 1- Chair of the Board’s Message Continuous Growth and Development 3- President and Chief Executive Officer’s Message We commit to continually strengthening our organization 5- Charitable Giving and services. We will initiate learning and improve personally, departmentally and corporately to enhance our 6- Getting Us There – The Initiatives6 Project contributions for the well-being of our stakeholders and the communities we serve. 9- Providing Options – The Microcredit Program 11- Getting You There – Building Our Brand 13- Management Discussion and Analysis 17- Consolidated Financial Statements 32- CUCNS and Affiliate Boards Living Our Brand
  • 3. Message ChAiR of The boARd’S I n 2005, the credit unions of Nova Scotia and Newfoundland and Labrador made a major decision to fundamentally change our culture and the way we do business. We called this new direction Getting Us There. The achievement of significant advances toward the Getting Us There vision remained a top priority in 2006. Put simply, the Getting Us There vision is about creating a strong credit union network capability that will enable us to meet our brand promise to customer-owners, Getting You There TM. It’s about learning to truly live our brand. It means providing customer-owners access to a full range of financial products and services and giving wise financial guidance. It also means developing rewarding careers for our employees and living up to our commitment to community development. We are working to achieve this vision through the Initiatives6 Project. Initiatives6 will enhance our capabilities and programs in the areas of Human Resources, Products and Services, Youth, Financial Planning, Small Business, and Member & System Development. The transition from vision to reality is not without challenges. Over the past year, we have worked to find the best way to transform our vision into a step-by-step, achievable plan for success. The seven co-operative principles provide a common guidepost for our credit unions but there is recognition that our individual needs often vary. Initiatives6 acknowledges the credit union differences while illustrating the many similar requirements throughout our network. The Board understands that to achieve our Getting Us There vision, the tasks will not be the same for all credit unions. The most ambitious work with regard to the Initiatives6 Project in 2006 was the readiness assessment interviews. These face-to-face meetings provided the first real opportunity to formally introduce Central and League Completion of the readiness assessments was a crucial Savings’ Initiatives6 Project Team to the implementation step in the development of credit union implementation team at each credit union. It positioned credit unions to plans. Since these meetings, which were held in August develop an implementation plan that will ensure credit and September, Central has continued to work one-on-one union staff, management and boards, as well as the with credit unions toward development of implementation Initiatives6 Project Team, have a clear understanding of the plans. It is our goal to help every credit union develop its credit union’s commitment to and timeline for implementing own individual implementation plan by June 2007. Central the Initiatives6 Project. and League Savings will continue playing a crucial support “ ” role, but it will ultimately be up to each credit union to It’s about learning to truly live our brand. 1 Credit Union Central of Nova Scotia
  • 4. ANNUAl RepoRT 06 execute their own plans. Having spent the past year preparing to implement, we understand what credit unions are undertaking is no small task. We are now reaching the NS & NL Credit Union Loans point where credit unions, with their ownership over the NL NS ($ Millions) Initiatives6 Project, will drive it to success. 1552 1453 The Initiatives6 Project has had a number of successes. 1086 1375 1019 Progress has been achieved on all fronts. Indeed, 1258 466 implementation of the Human Resources Initiative’s 971 899 434 Behavioural Competency Framework is now underway at 404 the majority of our credit unions. Standard Core Products and Services were approved by credit unions with 359 final amendments approved early in 2007. A Financial Planning Manager was hired and most recently individual project teams were created to lead implementation plan development in each area. 2003 2004 2005 2006 Effecting cultural change is an extremely ambitious and challenging undertaking. As credit unions enter into what NS & NL Credit Union Surplus may prove to be a most challenging year, we must not lose NL NS ($ Millions) sight of our goal. Through this period of evolution, we must also remember to hold fast to the co-operative values that 13 10.7 10.7 12.5 must always remain the heart of who we are and how we 10.3 9.6 conduct our business. To quote anthropologist Charles 8.0 8.1 Darwin, “It is not the strongest species that survive, nor the 2.7 2.7 2.9 2.6 most intelligent; it is the species that are most responsive to change.” The Board of Directors of Central strongly supports and endorses the direction and vision developed by credit unions in Nova Scotia and Newfoundland and Labrador. I would like to thank the management team under the strong 2003 2004 2005 2006 leadership of President and CEO Bernie O’Neil for their commitment to understanding and responding to the needs of our credit union network. We look forward to working with you on moving our vision into reality in the coming NS & NL Credit Union Deposits years. NL NS ($ Millions) 1895 1781 1332 1680 1276 1586 563 David MacLean 1214 505 Chair of the Board 1156 466 430 2003 2004 2005 2006 Living Our Brand 2
  • 5. Message pReSideNT & Chief exeCUTive offiCeR’S I t seems as though we’ve been talking about change for so long in our credit union network, it’s getting hard to remember what life was like before the Initiatives6 Project. In an effort to move this project forward, we put extremely heavy demands on our staff in 2006. We asked them to take on new roles with regard to the Initiatives6 Project, while offering little or no relief from regular duties. It gives me great pride to report that our employees not only rose to the occasion, we managed to improve our satisfaction rating with credit unions. Central’s overall rating increased from 81.4 per cent in 2005 to an 85.7 per cent satisfaction rate in 2006. This is a tremendous accomplishment, but I also know we cannot continue to expect this level of effort. Despite our focus on the Initiatives6 Project, we must not lose sight of the many other vital services Central provides to credit unions. Enhanced services and innovations in many areas resulted in cost savings and better service to credit unions. I would like to share some examples of our other activities and achievements. Treasury and Payment Services implemented a new web- based money transfer system that allows authorized users to create, view, send and receive wires with credit unions and other financial institutions in Canada and internationally. This new system gives credit unions the advantage and security of sending and receiving wires directly from their desktops as well as reducing their wire transfer fees. All of the traditional accounting functions for Central, League Savings and League Data are now being processed on Exact Software called Globe Enterprise. This includes processing accounts receivable, accounts payable, general Risk Management organized and facilitated a sold-out ledger, asset management and financial reporting. Globe is Money Laundering Forum for Atlantic Credit Unions, while also being implemented at Central Printing to process sales Corporate Services worked directly with the United Nations orders and invoicing, and to manage inventory. Globe will to ensure that meeting logistics went smoothly for a UN enable us to achieve significant efficiencies throughout the Advisory Meeting that took place at Central in November. In coming year. addition, new digital equipment at Central Printing resulted “ in a profitable year with sales close to $1 million. It gives me great pride to report that our employees not ” only rose to the occasion, we managed to improve our satisfaction rating with credit unions. 3 Credit Union Central of Nova Scotia
  • 6. ANNUAl RepoRT 06 We also underwent major renovations of our building on Lady Hammond Road in Halifax to accommodate new staff and changes within departments. The renovations resulted NS & NL Credit Union Equity in the complete relocation of a number of departments NL NS ($ Millions) including Accounting, Asset and Liability Management, Human Resources, Lending Services, Marketing, and 137 League Savings and Mortgage Corporate. 119 113 107 97 Credit Union Central of Nova Scotia is pleased to have 96 90 24 shared in the successes of credit unions over the past year. 81 22 Credit union assets reached approximately $2.1 billion in 17 15 Nova Scotia and Newfoundland and Labrador. The number of customer-owners remained constant at 228 thousand between the two provinces. Our own Central’s non- consolidated equity was $30.6 million in 2006. 2003 2004 2005 2006 We anticipate that 2007 will be every bit as challenging at Central. In addition to the Initiatives6 Project implementation, there will be continued pressure on our financial margin. This pressure is a result of the flat or Transactions CUCNS - Treasury & Payments Services sometimes inverted interest rate yield curve and limited ($ Millions) investment opportunities, while maintaining competitive pricing on loans and deposits to our credit unions. At 39.6 37.5 the same time, our costs of delivering services to credit 35.2 unions are increasing and the regulatory demands and 33.6 risk management requirements continue to grow. We will actively seek opportunities to increase income and control costs. In 2007 it will be necessary to carefully review our priorities. However, the Initiatives6 Project and providing credit unions with excellent service in all areas of operations will remain our top priorities. 2003 2004 2005 2006 I would like to thank Central’s Board and Chair David MacLean for their leadership, support and commitment to the success of Central and the activities that strengthen our credit union network. I would also like to acknowledge Credit Union Central of Nova Scotia Equity (Non-consolidated) the efforts and leadership demonstrated by Central’s ($ Millions) management, and all employees for their professionalism and dedication to the credit union network. Finally, I would like to acknowledge the support and commitment of credit 33.4 33.4 unions to strengthen our network and to improve services 32.9 to our customer-owners and communities. 30.6 Bernie O’Neil President & CEO 2003 2004 2005 2006 Living Our Brand 4
  • 7. Giving ChARiTAble Canadian Blood Services Nova Scotia Hearing and Speech Golf Charity Classic For the past two years, Atlantic Canadian credit unions have taken part in the Canadian Blood Services “Investing in For the past three years, Nova Scotia credit unions have Life” Financial Institution Blood/Plasma Donor Challenge. participated in the largest annual golf tournament in the In 2005, we took first place in the challenge with the largest province, the Charity Classic Golf Tournament. With our number of donors amongst all participating financial help and annual donation, the Nova Scotia Hearing and institutions. We will attempt to reclaim that title in the 2007 Speech Foundation raises approximately $50,000 annually competition. at this event for Hearing and Speech Centres in Nova Scotia. Kids Eat Smart Foundation of Newfoundland and Labrador Nova Scotia Hearing and Speech Centres are committed to providing effective, efficient, comprehensive and quality Kids Eat Smart Foundation of Newfoundland and Labrador speech-language and hearing services that encompass is a charitable organization that supports the education, prevention, promotion, identification, intervention and health, and well-being of school children throughout education. There are 29 centres located in communities Newfoundland and Labrador through support of quality throughout the province, serving over 100,000 Nova nutrition programs. The goal is to provide children with the Scotians of all ages who face communication difficulties nutrition they need to learn, to grow, and to be their best. due to hearing, speech or language impairment. The credit unions of Newfoundland and Labrador are Relay For Life community partners, working to support this program throughout the province. In addition to making monetary As the Provincial Event Sponsor of the Nova Scotia Division donations to the foundation or Kids Eat Smart Clubs in their of the Canadian Cancer Society’s Relay For Life, Nova Scotia communities, many credit unions also hold food drives and credit unions brought their four-year fundraising total to visit local schools to help serve nutritional meals. more than $350,000 in June 2006. With our support, the Nova Scotia Division raised almost $1.5 million to support Nova Scotia Credit Unions cancer research in 2006. Credit unions participated in all Charitable Foundation 18 events across the province in 2006, with approximately 50 per cent of our staff joining relay teams. The Nova Scotia Credit Unions Charitable Foundation provided more than $80,000 in grants to almost 30 Relay For Life is the Canadian Cancer Society’s unique, organizations in 2006. Focusing on supporting provincial hope-filled community event. It is a major fundraising charitable organizations with a focus on health care, event for the society to fund the most promising research education, the environment and the arts, the foundation projects in the country, provide information services and supported organizations including Junior Achievement, support programs in the community, and advocate for Ducks Unlimited, the Maritime Conservatory of Performing public policies that prevent cancer and help those living Arts, Emily Fund, Kids Help Phone, many health with it. organizations, and all provincial transition houses. For the past ten years Nova Scotia credit unions, through the Nova Scotia Credit Unions Charitable Foundation, have partnered with the Nova Scotia Community College (NSCC), providing up to $13,000 in bursaries annually to NSCC students. Through this long-term relationship with the NSCC, the charitable foundation annually provides more support to community college students through bursaries than any other financial institution. Relay For Life 5 Credit Union Central of Nova Scotia
  • 8. Project The iNiTiATiveS6 Getting Us There In 2007, the Products & Services Advisory Committee will begin work required to define Phase II Standard Core Despite the work that lies ahead, we are positioned to Products & Services for the Youth, Financial Planning successfully implement the Initiatives6 and achieve the and Small Business initiatives. They will also investigate Getting Us There vision. This ambitious vision, articulated and recommend an effective process to make changes to through the Initiatives6 Project, establishes a strategic standard core products and services. direction, success indicators and critical actions with timeframes for the implementation of six specific initiatives Small Business Initiative at credit unions by 2009. The overall goal is a credit union network working in unison, capable of meeting all the The Small Business Initiative for small to medium enterprise financial service requirements of our customer-owners, (SME) assessed a commercial loans origination system in supported by a dynamic process for ongoing innovative 2006 and is in the final stages of making a decision to development. purchase. Working with regulators, the SME Initiative identified significant changes required in the regulatory Human Resources Initiative environment. These changes will allow credit unions to enter into, or enlarge their presence in the SME market. Significant progress was made in 2006 with the development of comprehensive Human Resources A new project team was established early in 2007, and this programs to support credit unions: Phase I and II of the team will be responsible for developing a comprehensive Model Policies; Competency Based Recruitment and tactical program to establish the necessary infrastructure to Selection; and development of several programs to support support the implementation of a SME Initiative at League and enhance the continued success of the Competency Savings and Mortgage. This implementation plan will be Based Performance Management implementation. developed with significant input and support from credit unions. Moving into 2007, more than half of the credit unions in Nova Scotia and Newfoundland and Labrador are in the process of implementing Competency Based Financial Planning Performance Management. This program is much broader than performance appraisals and may involve a significant Since the creation of the Financial Planning Department in culture shift at the credit union level. This takes time and October 2006, many Atlantic Canadian credit unions have sustained commitment from management, and employee expressed keen interest in developing a business case for the involvement to reach full implementation. As a result, implementation of a financial planning solution. A business Central is focusing its efforts on developing credit union case has been successfully completed for one credit union, managers and other employees to provide coaching and which is now taking steps to implement a full time financial development assistance to staff. Coaching and mentoring planning solution. The Financial Planning Department is are also critical in supporting Relationship Management now about to engage a second group of credit unions for and Succession Planning. similar discussions with plans to engage four more groups of credit unions throughout the Atlantic region. In 2006, 16 credit unions and 25 managers participated in the Behaviour Event Interviewing Workshop, which enables A financial planning project team is being put in place with credit unions to develop a competency-based Recruitment credit union participation to maximize the effectiveness and Selection process. Central will offer more Behaviour and value of the program for credit unions. Relationships Event Interviewing Workshops in 2007. with system partners, including Credential and Concentra Financial, were also initiated and will continue in 2007. Products & Services Initiative The focus of the Financial Planning Department will be to function as an effective partner to credit unions, further Standard Core Phase 1 of the Products & Services Initiative strengthening their relationship with customer-owners by was approved in June 2006 and final amendments to this enhancing their financial services capabilities. phase (based on a competitive update of the chequing and savings accounts) were approved in January 2007. The Products & Services Project Team is developing support programs to implement these products and services at credit unions during 2007. Living Our Brand 6
  • 9. Project The iNiTiATiveS6 Youth Initiative Valley Credit Union The Youth Forum was successfully piloted at Central’s In the fall of 2005, Valley Credit Union’s Board of Directors Annual General Meeting in April 2006. The Youth approved its credit union’s participation in Competency Initiative also took on the sponsorship of several events. Based Performance Management. Valley was the first credit In October 2006, credit unions supported the Success union to begin implementation of the Human Resources Summit, an interactive conference aimed at ambitious Initiative, and has made significant progress since that young entrepreneurs. In early 2007, the Entrepreneurship time. Olympics – a fun and challenging business competition for Grade 12 Entrepreneurship students – launched in Nova “If you don’t have well trained staff you can bring people Scotia. Credit unions played an integral role in the program in the front door of your credit union, but they will simply acting as judges and developing the credit union marketing step out the back door,” says Mike Wark, President and competition. CEO of Valley Credit Union. “When Central introduced Competency Based Performance Management to the Formal support was given by the Nova Scotia Department credit unions, we felt Valley was in a position to get started of Education to roll out the US National Endowment for right away. We successfully went through the process of Financial Education (NEFE) financial literacy program to developing a sales culture about five years ago and felt the English-speaking schools across the province. Permission competency program would help us raise the bar.” for distribution of the program in Newfoundland and Labrador is anticipated early in 2007. Work has also begun Competency Based Performance Management is a method on translating materials into French with the goal of making of identifying and encouraging the behaviours that all the program available to all schools in both provinces for employees across an organization need to demonstrate in September 2007. order to achieve success. Success can be measured in a number of ways including the ability to attract and retain A program specialist will begin work in 2007 with the quality employees, live up to credit union values, provide newly formed Youth Project Team to develop credit union consistently excellent service to customer-owners, as well implementation plans for all aspects of this initiative. as reach financial goals. Member & System Development Wark says that Valley Credit Union has always supported employee training. Valley has a strong relationship with A formal system decision-making process was approved by CUSOURCE and several employees have received Fellow credit unions at our Special General Meeting in October, of the Credit Union Institute of Canada designations. The 2005. This was a significant step towards our system’s competency program has enabled the credit union to maturity as we recognized the need for binding decisions identify specific skills and training required by individual for all credit unions within the context of each credit employees instead of doing a broad sweep. union’s local autonomy. The decision-making process has been used for considering each of the strategic initiatives “Our management team is very supportive of the Human including the Standard Core Products & Services (Phase I) Resources Initiative and as a result staff are also very keen and provincial sponsorship support within Nova Scotia. and supportive,” says Wark. “Succession planning is crucial for us right now. We’ve identified big gaps at the supervisory Our communication strategy includes annual consultation level in the next five years. The competency program is with credit unions, quarterly updates, a dedicated helping us identify and train existing employees to be ready Initiatives6 section on our website and email address, to move into new positions.” workshops, and interaction at Annual General Meetings and Special General Meetings. We will further develop our As part of their ongoing strategic planning, Valley Credit communication strategy for Initiatives6 as we implement Union set a goal to have 85 per cent of employees display each initiative. The Member & System Development level 2 behaviours for the Results Orientation Competency Initiative will also provide a business proposal with options by December 31, 2007. Valley reached this objective a for services to Newfoundland and Labrador credit unions year ahead of schedule, and as a result added two new by the end of March, 2007. competency goals for 2007 - Customer Service Orientation 7 Credit Union Central of Nova Scotia
  • 10. 06 ANNUAl RepoRT and Listening, Understanding & Responding. In addition, 90 per cent of Valley’s employees completed Competency Assessment Questionnaires, identifying where they are meeting target levels and where further development “ is required. For the first time this year, all employees are also completing learning plans to help them work toward achieving their target levels. Valley Credit Union is no stranger to projects that require If you don’t have well cultural change. Eight years ago, they developed a variable compensation program with the primary purpose of creating trained staff you can a sales culture. bring people in the front “The program has undergone constant refinements over this period, but it works and we can see that our efforts door of your credit union, ” have paid off,” says Bill Falconer, Valley Credit Union’s VP, Organizational Development. “We expect similar results but they will simply step with Competency Based Performance Management.” As part of its succession planning, Valley Credit Union out the back door. now includes questions in their interview process for new hires that help ensure incoming employees understand and support the behavioural competencies. Valley’s next step is to integrate the Behavioural Competencies into the performance management process so employee progress in these areas are addressed as part of quarterly performance reviews. At the same time, care will be taken to ensure assessments aren’t confused with performance evaluations. “While we have made reasonable progress, we recognize this is somewhat of a journey and will require continuous improvement along the way,” adds Falconer. “Anything worthwhile takes hard work and commitment to accomplish.” Living Our Brand 8
  • 11. Program The MiCRoCRediT Providing Options Funding Diversity The Microcredit Program is a joint initiative of the Nova Scotia Co-operative Council, the Federal Rural Secretariat, Growing up in a mixed race household and now raising her Acadia University, Credit Union Central of Nova Scotia and own children in a multi-racial household, Grace Jefferies- Nova Scotia credit unions. Three Nova Scotia credit unions Aldridge knows well the importance of living in peace and began piloting the Microcredit Program in the fall of 2006: respecting other people’s differences. This passion led her Bergengren Credit Union, Community Credit Union and to develop a unique business idea for a home-based e- iNova Credit Union. The program received much media commerce company with the sole purpose of celebrating attention at both the local and national level, as thousands and promoting ethnic diversity. of delegates traveled to Halifax to take part in the Global Microcredit Summit held in November 2006. Credit unions Mosaic Diverse Retail Products offers customers a large showed their support for microcredit as major sponsors of selection of merchandise reflecting a broad range of ethnic, this event. multi-racial and inter-racial families. Everything from dolls, toys, clothing, books, multimedia, educational tools, home “The goal of the Microcredit Program is to put the tools and décor, and greeting cards that represent people of diverse financial resources into the hands of our customer-owners background can be purchased online. so that they can achieve their business goals,” says Willy Robinson, General Manager of iNova Credit Union. “It’s “The idea was always in the back of my mind, but I started about reaching out to the community to raise awareness making it into something real after my second maternity of the program amongst those who do not have access to leave,” says Jefferies-Aldridge. “I wanted to work from home traditional funding and help people turn a good idea into a and to find a way to pursue my personal passion regarding successful business venture.” issues of diversity.” The project is aimed at providing those most in need of Jefferies-Aldridge drew up a business plan and began credit for small business development with access to existing looking for funding. Despite having a solid plan in place, financial services. The program specifically targets rural she found that many doors to traditional financing were communications and groups facing the greatest difficulty closed to her. in securing traditional loans - immigrants, women, people with disabilities and youth - to foster growth of new and “No one seemed very interested in funding an e-commerce existing businesses within Nova Scotia. business. They also weren’t crazy about giving a hand to someone who would be working from home full-time with The Microcredit Program assists Nova Scotian entrepreneurs no other source of income.” with small amounts of funding ($1,000 to $10,000) for a variety of businesses including home-based, seasonal or Upon advice from a colleague, Jefferies-Aldridge part time and experimental start-ups. approached iNova Credit Union about a microcredit loan. Photos by: Michael Creagan 9 Credit Union Central of Nova Scotia
  • 12. 06 ANNUAl RepoRT “They weren’t just looking at the numbers on the page of my business plan,” says Jefferies-Aldridge, in regard to iNova Credit Union. “They took a genuine interest in me and in the concepts of peaceful co-existence I wanted to promote through my business.” She received a microcredit loan from iNova Credit Union for her company Mosaic Diverse Retail Products. With the funding she received, she was able to purchase stock and develop an e-commerce website. The site launched in November 2006, and Jefferies-Aldridge says business has been steady ever since. “When I launched the business, I thought it would be an independent online site through which I would mainly sell to individuals. I am now finding that there is a growing interest from local stores and retailers to purchase items for re-sale in their own businesses. Lots of schools, daycares and even hair salons have contacted me. Moving forward, I see myself diversifying and becoming a small-scale distributor in addition to maintaining the e-commerce site.” In addition to personal success, Jefferies-Aldridge says her business is impacting her family in a real and significant way. “As the mother of two girls who are growing up in an inter- racial family, I found it challenging to locate products that helped give my daughters a feeling of being represented in the world at large. There are multi-racial and inter-racial families across Canada and yet when it came to toys, games, room decorations and more, there was little available that reflected our situation. I feel it is important for children to know that they are normal and this is helped, in part, by feeling represented.” www.mosaicproducts.com MICROCREDIT SUMMIT Living Our Brand 10
  • 13. Brand bUildiNg oUR Getting You There Eagle River Credit Union In September 2004, Atlantic Canadian credit unions joined How do you get a credit union to embrace a new brand together to launch a new regional Brand Initiative, Getting initiative? The same way you initiate any other major You There. The new Brand Initiative brought credit unions change, you start with the General Manager and work your together to form an alluring “bigger picture” in the eyes way down. When the new Atlantic Brand Initiative was of consumers, speaking to the right audience in a relevant launched in the fall of 2004, Eagle River General Manager way. In an industry that experiences frequent change with Alvina O’Brien went branch-to-branch introducing every competitors of near-limitless resources, a strong, consistent single employee to the new brand. As a result, employees brand is needed to instill consumer confidence. It is our quickly embraced the brand and their commitment played ability to move forward as a united entity that will determine a large part in its success. our future – both individually, and as a whole. “It sent a powerful message that we were very serious Credit unions have always been innovative: both in our about the new brand and that head office was not only relationship with those we serve and in the products and committing to the changes, we were taking a leadership services we provide. Over the past three years, the credit role,” says Marketing & Communications Manager Laquita union brand has evolved to better address the needs of those Normore. “We needed to sell the brand to staff the same we serve and we’ve matched this evolution in our approach way we expected them to sell the brand to our customer- to marketing and our interaction with the public. owners.” As we evolve our external profile through our marketing Using a PowerPoint presentation provided by the Atlantic efforts, we also look inward to ensure that our internal Marketing Group, O’Brien led every employee through a practices are also progressive and reflect the same strengths. comprehensive introduction to the new brand. We want to ensure that every interaction with credit unions leaves a lasting, positive impression. When we are “It wasn’t just about the new posters, corporate colours successful in this endeavour, we call this living the brand. and logo. She talked about our brand values and how our actions either support or take away from these values,” says Living the Brand Normore. “Successful brands become part of the corporate culture and she illustrated how we could live the brand in Our brand, in its simplest form, is how we define ourselves. our everyday activities.” It’s what we stand for and how we stand apart from other service providers, and it’s what we aspire to be in the future. Normore, a self-proclaimed brand cop, says the time spent More broadly, our brand is every element that touches and by upper management to explain all aspects of the brand influences someone leading to a quality, trusted, valued has paid off. Policies and procedures were also updated relationship with their credit union. The objective being all to emphasize the brand values such as professionalism, elements of the brand - from signage to living the brand further strengthening the credit union’s commitment to its values - would be in place consistently at all credit unions success. in the region, because the comfort of consistency is required for people to take the first step in establishing a relationship “We followed up with a lot of staff coaching to get everyone with credit unions. used to on-brand versus off-brand language. For example, everyone updated their voicemail replacing ‘friendly staff’ with ‘knowledgeable and professional’. Our employees have truly embraced the new brand. You see them living the brand every day and they hold each other accountable.” Physical changes started taking place at all of Eagle River’s branches almost immediately. Outside signage was updated, and with several branches already slated for renovations, Eagle River took the opportunity to re-brand these locations inside and out. 11 Credit Union Central of Nova Scotia
  • 14. ANNUAl RepoRT 06 “We mounted large posters displaying Your Money, Your Finance, Your Business and Your Future and placed these in each of our branches so employees and customer-owners are reminded of the major elements of the brand every day,” says Normore. “We utilize all campaign materials provided “ through the Atlantic Marketing Group and are preparing to implement the MemberDirect integrated website, which will further enhance our brand online.” Normore said one of the biggest indicators of the success We needed to sell the of their brand in reaching customer-owners took place in the fall of 2006. Eagle River created a book for grade brand to staff the same school children that introduced them to the fundamentals of saving money. They ran an illustration contest for the way we expected them ” book, asking children to draw pictures that matched the text provided. It was a huge success with more than 1,500 students participating. to sell the brand to our “You could see the branding on almost every child’s entry,” customer-owners. recalls Normore. “The hands and the globe were very prominent, which we expected, but there was one six-year old whose picture inside a branch included our branding posters. They were in the background, but you could recognize them as he had used our brand colours green, 23 rd 07 red, blue and purple. AN NU Mee AL GEN ERA ting L “He may not have figured out exactly what the brand meant at age six, but it caught his attention and he understood the Loca tion L’A Apr –N nse il 20 orth th ern , 20 07 Ligh importance. When you see kids picking up on it, it draws Reg au t In istr Cla n atio ir n– 6:00 PM home the fact that the brand is making a real impact on people.” www.eaglerivercu.com Living Our Brand 12
  • 15. MANAgeMeNT diSCUSSioN ANd Analysis Key Performance Indicators Assets Under Administration On Balance Sheet Off Balance Sheet ($ Millions) One of the key pillars in Central’s mission is to achieve financial success – by ensuring the long term financial 1000 - stability of Central and by contributing to the financial success of the credit union network. In 2006, Central’s results 800 - met most financial targets, including equity requirements, paying competitive rates to our credit union partners, and 600 - continuing significant returns to credit unions. 400 - While financial margin was less than the prior year, this can 200 - be largely attributed to two key factors, paying higher rates on credit union deposits, and League Savings offering more 0- 2002 2003 2004 2005 2006 competitive rates on both mortgages and deposits referred by credit unions. With a focus on customer service and sound financial risk management, we remain committed to the well-being and While the distributions to credit unions by League Savings success of Credit Union Central of Nova Scotia, and the in 2006 were about the same as the prior year (and the credit unions, affiliates, employees and communities it highest ever), Central’s rebates were $400,000 lower than serves. in 2005, and the Central dividend was reduced from 5 per cent to 3 per cent. These payments over the past five years were: Risk Management Risk management is one of the most important responsibilities Payments to Credit Unions (Including Subordinate Debit Interest and Dividends in Thouands) of Credit Union Central of Nova Scotia. Risk management LSM Finance objectives are reflected within the comprehensive risk 7,000 - Trade Dividends and Sub Debt Interest management strategies and policies. 6,000 - Central’s risk management strategies and policies are 5,000 - governed by the principle of optimizing risk for the protection 4,000 - and creation of shareholder value, and are designed to ensure that the company’s risk-taking is consistent with its 3,000 - business objectives and risk tolerance. 2,000 - 1,000 - Credit Union Central of Nova Scotia has an enterprise-wide capability to recognize, understand, measure, assess and 0- manage risks taken across the organization. Authority for 2002 2003 2004 2005 2006 all risk taking activities rests with the Board of Directors, In addition to the system wide initiatives, we continue to which approves risk management policies, delegates limits provide the leadership, products and services to support and regularly reviews management’s risk assessments credit unions in being the financial institution of choice. and compliance with approved policies. Qualified Examples in 2006 include the rollout of a new money professionals throughout Central manage these risks transfer system, and a significant consultation process with through comprehensive and integrated control processes credit unions as part of the development of the League and models, including regular review and assessment of Savings Business Model. risk measurement and reporting processes. The various processes within Central’s risk management framework Central also continues to offer a number of flexible are designed to ensure that risks in the various business intermediation programs, including loan syndications and activities are properly identified, measured, assessed and the mortgage administration programs in League Savings. controlled. Internal Audit reports independently to the Total assets under administration by Central over the past Audit and Conduct Review Committee of the Board on five years are as follows: the effectiveness of the risk management policies and the extent to which internal controls are in place and operating effectively. 13 Credit Union Central of Nova Scotia
  • 16. ANNUAl RepoRT 06 The risks are summarized into the following categories: Central maintains both specific and general allowances capital adequacy, credit, market, liquidity, corporate for credit losses. Specific allowances are established governance, operational, legal and regulatory, and based on management’s knowledge of the property and strategic. The specific risk areas are described in further prevailing conditions. General allowances are maintained detail below. to cover any impairment in the loan portfolio that cannot yet be associated with specific loans. The minimum Capital Adequacy Risk general allowance is determined based on Central’s risk weighted assets, and may be increased if management Capital adequacy risk is the risk of financial loss or feels the allowance is insufficient based on a number of regulatory intervention due to the failure of Central to raise factors including the level of specific allowances, portfolio the necessary capital to support its business plans. quality and concentration, and other economic and market conditions. Central has established capital management policies, which govern the quantity and quality of capital the company will Management regularly monitors Central’s credit risk and maintain. In addition, a capital plan is prepared annually reports to the Board on a quarterly basis. which forecasts the amount of capital required throughout the year and the sources that will be used to fund those Market Risk requirements. The capital policies and plans are reviewed and approved annually by the Board of Directors. Market risk is the risk of loss that results from changes in interest rates, foreign exchange rates, equity prices and Management regularly monitors the company’s capital commodity prices. Market risk exposures are managed position and reports to the Board on a quarterly basis. through policies, standards and limits established by the Board of Directors, which are formally reviewed and Credit Risk approved annually. Credit risk is the potential for loss due to the failure of a Central uses a variety of techniques to identify, measure borrower or counterparty to meet its financial or contractual and control market risk. Derivatives may be used only to obligation. Credit risk arises in Central’s lending operations offset clearly identified risks. The Company has developed and in its investment activities. standards regarding the use of derivative products. To ensure effective credit risk management, the company Interest rate risk is the potential impact on Central’s earnings has established policies and procedures for credit risk. due to changes in interest rates. This risk comes mainly Credit policies are reviewed and approved annually by from differences in the maturities or re-pricing dates of the Board of Directors. Management regularly reviews its assets and liabilities, both on and off-balance sheet. Credit credit procedures to ensure they provide extensive, up-to- union liquidity investments are re-priced on a monthly date guidance for the underwriting and administration of basis. Mortgage and deposit products often have maturities all types of loans. that extend one or more years into the future. Central has developed standards with respect to the matching of assets Procedures are in place governing credit activities: and liabilities. In addition, Central uses a combination of • Application of stringent criteria to all assets prior to static gap and income simulation models to measure and their acquisition monitor interest rate exposure under various interest rate • The use of qualified personnel and the clear scenarios. delegation of decision-making authority • Portfolio diversification to mitigate credit exposure Sensitivity analysis of an interest rate increase and decrease by establishing concentration limits of 100 basis points is disclosed in the table below. • Appropriate pricing of approved credits to ensure adequate compensation is received for the risk Earnings at Risk over the next 12 months as at (Dec 31, 2006) incurred • Oversight by the Board and management (Dollars) 2006 2005 committees before funding is permitted, and once 100 basis point increase $ (538,000) $ (455,000) approved, ongoing credit risk evaluation and 100 basis point decrease 528,000 444,000 assessment Living Our Brand 14
  • 17. MANAgeMeNT diSCUSSioN ANd Analysis Foreign exchange risk is the potential impact on Central’s of the Board to exercise the leadership required by the earnings due to currency movements. Central’s foreign organization. This risk is mitigated through the nomination exchange policies and procedures outline permissible and election process, extensive orientation program, types of transactions, authorizations, limits, and monitoring ongoing director development and training, regular Board and reporting requirements. Central is authorized to hold and committee meetings, the annual strategic planning up to $250,000 CAD in excess of, or short of its foreign process and an annual Board evaluation process. currency liabilities. Central’s exposure to foreign exchange fluctuations is monitored on a daily basis. Operational Risk Equity and commodity risk is the potential impact on Central’s Operational risk is the risk of direct or indirect loss resulting earnings due to movements in equity and commodity from inadequate or failed processes, technology or human prices. Central does not have significant business activities performance, or from external events. Its impact can be in equities or commodities and, as such, is not exposed to financial loss, loss of reputation, loss of competitive position material risk in these areas. or regulatory censure. Management provides quarterly reports to the Board on While operational risk can never be fully eliminated, market risk. Central manages this type of risk through implementation of a comprehensive set of procedures and policies. Elements Liquidity Risk include: • Developing and maintaining a comprehensive Liquidity risk is the risk of being unable to meet financial system of internal controls, encompassing commitments without having to raise funds at unreasonable segregation of functional activities, managerial prices or sell assets on a forced basis. reporting and delegation of authority • Striving to maintain industry best practices in the Central has established policies to ensure the company is area of operational risk management through able to generate sufficient funds to meet all of its financial continued monitoring and evaluation of our commitments in a timely and cost-effective manner. These practices policies are annually reviewed and approved by the Board • Selection and training of highly qualified staff, of Directors. supported by policies that provide for skills upgrading, clear authorization levels and Central’s liquidity management practices include: adherence to an employee code of conduct • Ensuring the quality of investments acquired for • Maintaining adequate insurance to reduce the liquidity purposes meet very high standards impact of any potential losses, supported by a • Matching the maturities of assets and liabilities detailed business continuity plan • Diversifying funding sources • Establishing and maintaining minimum liquidity Legal and Regulatory Risk reserves • Monitoring actual cash flows on a daily basis Legal and regulatory risk is the risk of loss due to the failure • Forecasting future cash flow requirements to adhere to legal and regulatory standards. • Utilizing lines of credit to fund temporary needs and selling or securitizing mortgage pools to meet Central is governed under the Canadian Co-operative longer term requirements Associations Act of Canada and the Credit Union Act of • Scenario testing and contingency planning Nova Scotia, and is regulated federally by the Office of the Superintendent of Financial Institutions (OSFI) and Management monitors Central’s liquidity position daily and provincially by the Superintendent of Credit Unions. League reports to the Board on a quarterly basis. Savings is governed by the Trust and Loan Companies Act of Canada and regulated by OSFI. OSFI regularly reviews the Corporate Governance Risk activities of Central and League Savings and periodically carries out on-site examinations. All correspondence to Corporate governance risk is the risk of financial and/or and from OSFI is reported to the Board of Directors by reputational loss due to failure of the Board of Directors management. League Savings is also a member of the and senior management to comply with their legislative and Canada Deposit Insurance Corporation. fiduciary obligations, as well as a loss due to the inability 15 Credit Union Central of Nova Scotia
  • 18. 06 ANNUAl RepoRT Central maintains a legislative and policy compliance management system in which all legislative and policy requirements are regularly reviewed and reported on. New policies and procedures are developed to address legislative requirements as appropriate. The Board of Directors receives a quarterly compliance report in which any deficiencies and corresponding action plans are identified. Strategic Risk Strategic risk is the risk of loss due to failure to create, implement and monitor an effective strategic plan, including procedures for the development and review of new business initiatives and changing business circumstances. In 2004, Central began holding regular consultation meetings with credit union representatives throughout Nova Scotia and Newfoundland and Labrador. Later in that year, credit unions approved a three-year vision. Subsequently, the Board of Directors approved six strategic initiatives (Initiatives6) necessary to achieve this vision. Business plans and budgets which include the strategic initiatives have been developed by management and are approved by the Board annually. Management reports to the Board on the progress towards achieving the annual business plan at each regular Board meeting. Credit unions are also provided with regular progress reports. Living Our Brand 16
  • 19. Statements CoNSolidATed fiNANCiAl Management’s Responsibility For Financial Statements Management has the responsibility of preparing the Both the federal and provincial regulators of financial accompanying consolidated financial statements and institutions may conduct examinations and makes such ensuring that all information in the annual report is enquiries into the affairs of Central and its subsidiary as consistent with the financial statements. This responsibility they deem necessary to ensure the safety of depositors and includes selecting appropriate accounting principles and members of Central and to ensure that Central is in sound making objective judgements and estimates in accordance financial condition. Their findings are reported directly to with Canadian generally accepted accounting principles. management. In discharging its responsibility for the integrity and Grant Thornton LLP, the independent auditors, have fairness of the financial statement, management designs examined the consolidated financial statements of Central and maintains the necessary accounting systems and in accordance with Canadian generally accepted auditing related internal controls to provide reasonable assurance standards and have expressed their opinion in the that transactions are authorized, assets safeguarded and following report to shareholders. proper records maintained. The board of directors has appointed an audit committee to review the annual consolidated financial statements with management and auditors before final approval by the board. Bernie O’Neil Sharon Arnold, CA President and CEO Vice-President Finance Auditors’ Report To the Members of Credit Union Central of Nova Scotia We have audited the consolidated balance sheet of Credit management, as well as evaluating the overall financial Union Central of Nova Scotia as at December 31, 2006 statement presentation. and the consolidated statements of income, retained earnings and cash flows for the year then ended. These In our opinion, these financial statements present fairly, in financial statements are the responsibility of the all material respects, the financial position of the Company’s management. Our responsibility is to express Company as at December 31, 2006, and the results of its an opinion on these financial statements based on our operations and the changes in its cash flows for the year audit. then ended in accordance with Canadian generally accepted accounting principles. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles Grant Thornton LLP Halifax, Nova Scotia used and significant estimates made by Chartered Accountants January 26, 2007 17 Credit Union Central of Nova Scotia
  • 20. 06 ANNUAl RepoRT Balance Sheet December 31 2006 2005 Assets Cash and cash equivalents $ 9,732,203 $ 28,096,693 Investments (Note 2) 309,340,652 263,437,466 Loans and mortgages (Note 4) 481,556,163 462,341,259 Accrued interest 4,394,100 3,684,877 Fixed assets (Note 3) 3,382,852 3,015,232 Other assets 2,821,949 2,413,508 $ 811,227,919 $ 762,989,035 Liabilities Borrowings (Note 5) $ 4,425,000 $ - Deposits (Note 6) 733,692,937 687,307,520 Accrued interest 8,231,998 6,865,932 Income tax payable - 88,838 Other liabilities 3,653,205 5,045,804 Minority interest in subsidiary (Note 7) 13,945,329 13,945,329 Obligations related to mortgages (Note 8) 411,771 1,081,525 764,360,240 714,334,948 Subordinated debentures (Note 9) 7,434,000 7,434,000 Members' equity Capital (Note 10) 24,048,280 26,952,700 Retained earnings 15,385,399 14,267,387 39,433,679 41,220,087 $ 811,227,919 $ 762,989,035 Commitments and contractual obligations (Note 12) Approved: On Behalf of the Board: Bernie O’Neil Dave MacLean Doug Dewling President and CEO Chair Director See accompanying notes to the consolidated financial statements Living Our Brand 18
  • 21. Statements CoNSolidATed fiNANCiAl Statements of Income and Retained Earnings Year Ended December 31 2006 2005 Financial income Interest on investments $ 11,448,026 $ 8,804,815 Interest on loans and mortgages 27,804,888 27,963,820 39,252,914 36,768,635 Financial expense 27,020,676 23,098,157 Gross financial margin 12,232,238 13,670,478 Provision for losses 134,431 (205,000) Net financial margin 12,097,807 13,875,478 Other financial income 408,493 697,840 Net financial income 12,506,300 14,573,318 Other Income (Note 18) 6,951,097 6,204,893 19,457,397 20,778,211 Expenses Salaries and staff related 8,402,430 7,805,300 Bank charges and brokerage 1,607,954 1,587,681 Property 1,069,833 1,031,324 Democracy 771,480 746,298 Computer services and communications 688,783 672,515 Distributions to credit unions 1,273,900 1,279,612 Other expenses (Note 18) 1,650,354 1,673,089 Initiatives (Note 19) 167,068 853,211 15,631,802 15,649,030 Income before income taxes and minority interest 3,825,595 5,129,181 Income taxes (Note 17) 1,453,144 1,930,029 Net income before minority interest 2,372,451 3,199,152 Minority interest in earnings of subsidiary 697,266 697,266 Net income $ 1,675,185 $ 2,501,886 Retained earnings, beginning of year $ 14,267,387 $ 12,720,908 Net income 1,675,185 2,501,886 Dividends (net of income tax recovery of $228,906; (557,173) (955,407) 2005 -$392,515) Retained earnings, end of year $ 15,385,399 $ 14,267,387 See accompanying notes to the consolidated financial statements See accompanying notes to the consolidated financial statements 19 Credit Union Central of Nova Scotia
  • 22. 06 ANNUAl RepoRT Statement of Cash Flows Year Ended December 31 2006 2005 Increase (decrease) in cash and cash equivalents Operating activities Net income $ 1,675,185 $ 2,501,886 Adjustments: Depreciation 516,395 419,995 Future income taxes (1,949) 55,841 Increase (decrease) in interest payable 1,366,066 (470,936) Increase (decrease) in income taxes payable (88,838) 88,838 Other items, net (2,508,314) 544,061 958,545 3,139,685 Financing activities Obligations related to mortgages, net (669,754) 141,085 Net increase in deposits 46,385,417 27,368,548 Net proceeds from issuance of capital (2,904,420) (31,990) Dividends paid (557,173) (955,407) 42,254,070 26,522,236 Investing activities Net decrease (increase) in investments (45,903,186) (366,944) Net decrease (increase) in loans and mortgages (19,214,904) (1,907,104) Purchase of fixed assets (884,015) (513,420) (66,002,105) (2,787,468) Net increase (decrease) in cash and cash equivalents (22,789,490) 26,874,453 Cash and cash equivalents (net) Beginning of year 28,096,693 1,222,240 End of year $ 5,307,203 $ 28,096,693 Includes: Cash on hand and balances with Financial Institutions 9,732,203 28,096,693 Borrowings (4,425,000) - $ 5,307,203 $ 28,096,693 Supplemental disclosure of cash flow information Amount of interest paid in year $ 25,654,610 $ 23,569,093 Amount of income taxes paid in year 1,258,922 1,646,630 See accompanying notes to the consolidated financial statements See accompanying notes to the consolidated financial statements Living Our Brand 20
  • 23. Statements CoNSolidATed fiNANCiAl Notes to Financial Statements – December 31, 2006 1. Summary of significant accounting policies Revenue recognition The financial statements have been prepared in accordance Interest accrued on loans and mortgages is recognized in with accounting practices generally accepted in Canada. earnings except where a loan is classified as impaired. Loans and mortgages are classified as impaired at the earlier Consolidation of when, in the opinion of management, there is reasonable doubt as to collectibility of principal or interest, or when The consolidated financial statements include the accounts interest or principal is contractually past due 90 days, unless of the subsidiary, League Savings and Mortgage Company. the loan is both well secured and in the process of Significant inter-company transactions and account collection. balances have been eliminated from the consolidated Interest received on an impaired loan is recognized in accounts. earnings only if there is no longer doubt as to the Cash and cash equivalents collectibility of principal. The subsidiary company periodically sells mortgages. Gains or losses, net of a Cash and cash equivalents include cash on hand, and servicing fee, are recognized on transfers of mortgage loans balances with financial institutions. to other parties when the company has transferred the Investments significant risks and rewards of ownership. Investments in co-operative and corporate shares are carried Servicing fees are calculated as a percentage of the carrying at the lower of cost or market. Bonds and debentures are value of the mortgages as at the date of sale. A servicing carried at cost. Premiums or discounts are amortized to liability is recognized as a deferred administration fee and is maturity. Investment income is recognized on an accrual recorded on the balance sheet under Obligations related to basis. Gains and losses on disposals of securities are mortgages. This deferred administration fee is amortized to included in investment income in the year realized. All other income over the average term of the mortgages sold. investments are held for investment purposes. Mortgage securitization Loans and mortgages The Central’s mortgage securitization program expands the Loans and mortgages are carried at the principal amount lending capacity of its subsidiary company, League Savings less allowances established to recognize anticipated losses. and Mortgage Company, whereby eligible mortgages are The amount provided for anticipated loan losses is financed by external investors through an independent determined by reference to specific loans and mortgages in securitization vehicle. arrears and by the judgement of management. These transactions are accounted for as sales when the A general allowance has been established to provide for significant risks and rewards of ownership have been losses on loans and mortgages where past experience and transferred and there is reasonable assurance regarding the existing economic and portfolio conditions indicate that measurement of the consideration derived from the sale. losses have occurred, but where such losses cannot be No gain or loss has been recorded as a result of these specifically identified on an account-by-account basis. The transactions. general allowance is determined based on a calculation of Fees earned to service the securitized mortgages are risk-weighted assets. recognized as services are provided and reported in Real estate held for resale is carried at the lower of the earnings in other income. carrying value of the loan foreclosed, adjusted for revenues The Securitization Agreement provides for the payment to received and costs incurred subsequent to foreclosure, and the Company of the deferred proceeds of sale when the the estimated net proceeds from sale of the assets. interest collected from borrowers exceeds the yield paid to Fixed assets investors on the assets, credit losses, and other costs. Land is carried at cost. Buildings, equipment and Income taxes improvements are carried at cost less accumulated Future tax assets and liabilities are determined based on depreciation. Depreciation is calculated using the straight- differences between the financial reporting and tax bases of line method over the estimated useful lives of the related assets and liabilities, and measured using the substantially assets as follows: enacted tax rates and laws that will be in effect when the Buildings and improvements 2-20% differences are expected to reverse. Equipment 20-33% 21 Credit Union Central of Nova Scotia
  • 24. ANNUAl RepoRT 06 Use of estimates the balance sheet with the exception of loans, receivables, and held-to-maturity investments, which will be measured In preparing these consolidated financial statements, at amortized cost. management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the Changes in fair values of financial assets classified as trading disclosure of contingent assets and liabilities at the date of are reported in earnings, while the changes in value of the financial statements and reported amounts of revenue available for sale financial assets are reported within Other and expenses during the period. Actual results could differ Comprehensive Income (OCI) until the financial asset is from those estimates. disposed of, or becomes impaired. Accumulated OCI is New Accounting Standards reported on the balance sheet as a separate component of Shareholders’ Equity. It will include, on a net of taxes basis, On January 1, 2007 the Company is required to and will the net unrealized gains and losses on available-for-sale adopt the following CICA Handbook Sections: financial assets. Section 3855 – Financial Instruments – Recognition and Similarly, the standards require that all financial liabilities be Measurement measured at fair value on the balance sheet when they are Section 3865 – Hedges held for trading or are derivatives. Other financial liabilities Section 1530 – Comprehensive Income are measured at amortized cost. The standards require that all financial assets be classified as Transition adjustments arising due to revaluing financial trading, available for sale, held-to-maturity or loans and assets classified as available for sale will be recognized in receivables. The standards also require that all financial the opening balance of accumulated other comprehensive assets, including all derivatives, be measured at fair value on income as at January 1, 2007. 2. Investments 2006 2006 2005 2005 Carrying Value Market Value Carrying Value Market Value Short term investments $ 193,235,408 $ 193,096,845 $ 170,191,372 $ 169,421,273 Federal and federally guaranteed bonds 21,441,042 21,322,362 19,495,474 19,361,324 Provincial and provincially guaranteed bonds 26,288,175 26,828,810 31,284,130 31,875,199 Corporate bonds and deposits 41,102,704 41,033,712 31,271,549 31,172,679 Co-operative shares and deposits 27,160,762 27,349,104 11,082,380 11,160,668 Corporate shares 112,561 1,163,900 112,561 1,041,020 $ 309,340,652 $ 310,794,733 $ 263,437,466 $ 264,032,163 3. Fixed Assets 2006 2005 Accumulated Net Net Cost Depreciation Book Value Book Value Land $ 401,522 $ - $ 401,522 $ 401,522 Buildings and improvements 4,433,034 2,435,826 1,997,208 1,883,374 Furniture and equipment 6,157,132 5,173,010 984,122 730,336 $ 10,991,688 $ 7,608,836 $ 3,382,852 $ 3,015,232 Living Our Brand 22
  • 25. CoNSolidATed fiNANCiAl Statements 4. Loans and Mortgages Total Impaired Total Specific Net Loans Loans Allowance Allowance Loans 2006 (included in total allowance) Insured residential mortgages $ 256,287,832 $ - $ - $ - $ 256,287,832 Uninsured residential mortgages 127,285,678 160,384 851,285 - 126,434,393 Loans & non-residential mortgages 112,483,943 749,500 1,398,568 - 111,085,375 Credit unions and affiliates 19,474,238 - - - 19,474,238 Real estate held for sale 243,792 40,000 40,000 40,000 203,792 515,775,483 949,884 2,289,853 40,000 513,485,630 Less: mortgages under administration: Insured residential mortgages 22,630,287 22,630,287 Uninsured residential mortgages 9,299,180 9,299,180 31,929,467 - - - 31,929,467 $ 483,846,016 $ 949,884 $ 2,289,853 $ 40,000 $ 481,556,163 2005 Insured residential mortgages $ 244,686,577 $ - $ - $ - $ 244,686,577 Uninsured residential mortgages 141,189,488 318,998 938,498 - 140,250,990 Loans & non-residential mortgages 101,255,578 1,781,395 1,214,085 - 100,041,493 Credit unions and afffiliates 10,804,268 - - - 10,804,268 Real estate held for sale 648,784 409,609 221,341 221,341 427,443 498,584,695 2,510,002 2,373,924 221,341 496,210,771 Less: mortgages under administration: Insured residential mortgages 22,880,160 22,880,160 Uninsured residential mortgages 10,989,353 10,989,353 Non-residential mortgages (0) (0) 33,869,512 - - - 33,869,512 $ 464,715,183 $ 2,510,002 $ 2,373,924 $ 221,341 $ 462,341,259 Continuity of allowance for loan losses 2006 2005 Allowance, beginning of year $ 2,373,924 $ 2,594,700 Write-offs (242,402) (55,264) Recoveries 23,900 39,488 Provisions for loan losses 134,431 (205,000) Allowance, end of year $ 2,289,853 $ 2,373,924 5. Credit facilities Credit Union Central of Nova Scotia has established an League Savings and Mortgage Company, a subsidiary operating line of credit of $12,000,000 with the Bank of company, has an additional operating line of credit of Nova Scotia and a $10,000,000 operating line of credit $5,000,000 with the Bank of Nova Scotia, bearing interest with a total exposure limit of $108,438,000 with Credit at the Bank’s prime lending rate secured by a general Union Central of Canada. Both lines of credit bear interest assignment of book debts. In addition, the bank charges a at the bank’s prime lending rate. standby fee of 0.15% per annum calculated on the daily unused portion of the credit line. As security the Central has provided a general assignment of receivables, an assignment of securities having a carrying At December 31, 2006, the amount outstanding on these value of $9,900,000 (2005 - $9,900,000), and an operating lines of credit was $4,425,000 (2005 - nil). assignment of its share capital held in Credit Union Central of Canada. 23 Credit Union Central of Nova Scotia
  • 26. ANNUAl RepoRT 06 6. Deposits 2006 2005 Credit union current accounts $ 10,632,449 $ 7,931,191 Credit union liquidity deposits 253,419,143 242,249,554 Registered deposits 176,960,207 180,788,477 Term deposits and debentures 286,012,680 249,060,327 Other deposits 6,668,458 7,277,971 $ 733,692,937 $ 687,307,520 7. Minority interest The minority interest represents the value of the preferred A shares of League Savings and Mortgage Company. 8. Obligations related to mortgages Obligations related to mortgages consist of Deferred Income due in: 2006 2005 the deferred administration fee on 2005 $ - $ 228,536 mortgage sales and monthly remittances 2006 122,796 122,796 due to the purchaser. 2007 122,796 122,796 2008 98,419 98,419 The balances outstanding at December 31 2009 - - are as follows: 344,011 572,547 Monthly Remittances Due 67,759 508,978 Obligations Related to Mortgages $ 411,771 $ 1,081,525 9. Subordinated debentures Series A and Series B debentures are unsecured and subordinated to all other indebtedness of the Company. The interest rate is equal to 1.5 times the dividend rate on the preferred A shares. Both Series A and Series B debentures are convertible into preferred A shares at the option of the holder and redeemable at the option of the Company after the fifth anniversary of the date of issue, subject to the approval of the Office of the Superintendent of Financial Institutions. Maturity Earliest Date Redemption 2006 2005 Issued Amount Issued Amount Series A December 31, 2007 December 31, 2002 332 $ 332,000 332 $ 332,000 Series B December 31, 2024 December 31, 2009 7,102 7,102,000 7,102 7,102,000 7,434 $ 7,434,000 7,434 $ 7,434,000 During the year there were no subordinated debentures issued or redeemed. Living Our Brand 24
  • 27. CoNSolidATed fiNANCiAl Statements 10. Capital Authorized: Issued: 2006 2005 Unlimited common shares 2,075,532 (2005 - 2,115,753) with no par value Common shares $ 20,755,320 $ 21,157,530 10,000,000 Class A non-voting shares 329,296 (2005 - 579,517) with no par value Class A shares 3,292,960 5,795,170 $ 24,048,280 $ 26,952,700 During the year, the following transactions took place: (a) 2,678 common shares were issued for $26,780 cash. (c) 20,533 Class A shares were issued for $205,330 cash. (b) 42,899 common shares were redeemed for $428,990 cash. (d) 270,754 Class A shares were redeemed for $2,707,540 cash. 11. Related party transactions During the normal course of operations the Company and subsidiary, League Savings and Mortgage Company, transact business with League Data Limited, a company subject to significant influence as a result of common credit union ownership. These transactions are measured at the exchange amount and are as follows: 2006 2005 Income and fees related to the management contract $ 60,000 $ 60,000 Rental and other income 110,388 170,581 Computer services and equipment purchased from League Data 347,351 344,629 Deposits held by Central 6,268,472 5,413,785 Accounts receivable from League Data 23,746 25,930 Accounts payable to League Data 22,353 22,219 12. Commitments and contractual obligations a) Letter of credit In turn, reciprocal interest rate swap agreements have been entered into with the respective credit unions. The The Central has issued a letter of credit in the amount of Company has no interest rate swap agreements under this $500,000 (2005 - $500,000) in favour of Credit Union program outstanding at December 31, 2006. Central of Ontario. d) Foreign exchange forward agreements b) Approved mortgages The Central, as intermediary for certain credit unions, has At December 31, 2006, the subsidiary company had entered into various forward agreements in order that the approved mortgages in the amount of $14,623,220 (2005 - credit unions may manage their exposure to foreign $13,745,396) which have not been advanced. currency fluctuations. The terms of the agreements provide that the Central buy or sell a fixed amount of foreign c) Interest rate swap agreements currency, at a fixed exchange rate, on a specified future date. In turn, a reciprocal agreement is entered into with the The Central, as intermediary for certain credit unions, has credit unions, to sell or buy the same amount of foreign entered into various interest rate swap agreements in order currency on the same dates. that the credit unions may manage their exposure to interest rate fluctuations. The following forward rate agreements were outstanding at December 31, 2006: The terms of the agreements provide that the Central pay a Amount Currency Settlement fixed interest rate on notional principal amounts due to $ 300,000 USD January 2007 mature in the future in exchange for variable or short term $ 200,000 USD February 2007 interest rate returns on these same amounts. 25 Credit Union Central of Nova Scotia
  • 28. 06 ANNUAl RepoRT 13. Financial instruments a) Interest rate risk The table below summarizes carrying amounts of balance sheet and off-balance sheet derivative instruments by the earlier of the contractual repricing or maturity dates: Within 3 Months 1 Year Over 5 Non-Interest Average (Reported in $000's) 3 Months to 1 Year to 5 Years Years Sensitive Total Rate 2006 Assets Cash and investments $ 170,157 $ 105,474 $ 29,632 $ 1,261 $ 12,549 $ 319,073 4.16 Loans and mortgages 52,105 88,587 343,154 - (2,290) 481,556 6.17 Other assets - - - - 10,599 10,599 $ 222,262 $ 194,061 $ 372,786 $ 1,261 $ 20,858 $ 811,228 Liabilities and equity Borrowings $ 4,425 $ - $ - $ - $ - $ 4,425 6.00 Deposits 331,895 228,324 162,842 - 10,632 733,693 3.95 Other liabilities - - - - 25,830 25,830 Obligations related to mortgages - - - - 412 412 Equity - - - - 46,868 46,868 $ 336,320 $ 228,324 $ 162,842 $ - $ 83,742 $ 811,228 Subtotal $ (114,058) (34,263) 209,944 1,261 (62,884) 0 Derivatives 10,000 (10,000) - - - - Prepayment estimate 12,868 38,605 (51,473) - - - Excess (deficiency) $ (91,190) (5,658) 158,471 1,261 (62,884) 0 2005 Assets Cash and investments $ 128,585 $ 101,639 $ 20,851 $ 6,142 $ 34,317 $ 291,534 3.51 Loans and mortgages 38,112 87,655 338,948 - (2,374) 462,341 6.03 Other assets - - - - 9,114 9,114 $ 166,697 $ 189,294 $ 359,799 $ 6,142 $ 41,057 $ 762,989 Liabilities and equity Borrowings $ - $ - $ - $ - $ - $ - - Deposits 306,724 167,366 201,175 - 12,043 687,308 3.38 Other liabilities - - - - 25,945 25,945 Obligations related to mortgages - - - - 1,082 1,082 Equity - - - - 48,654 48,654 $ 306,724 $ 167,366 $ 201,175 $ - $ 87,724 $ 762,989 Subtotal $ (140,027) 21,928 158,624 6,142 (46,667) - Derivatives 10,000 - (10,000) - - - Prepayment estimate 12,711 38,131 (50,842) - - - Excess (deficiency) $ (117,316) 60,059 97,782 6,142 (46,667) - An estimate of prepayments has been determined by management and includes the estimated principal portion of regular mortgage payments and full payouts of mortgage loans during their term based upon historical trends for these types of payments. Living Our Brand 26
  • 29. Statements CoNSolidATed fiNANCiAl b) Interest rate swap agreements The Company enters into interest rate swap agreements as a and the ability of the counterparties to meet the terms of the component of its overall risk management strategy. These contract. agreements are contractual arrangements between two parties to exchange a series of cash flows. Interest rate swap agreements are used to manage interest rate risk by modifying the repricing or maturities of assets In an interest rate swap agreement, counterparties generally and liabilities. Income and expenses on interest rate swap exchange fixed and floating rate interest payments based on agreements are recognized over the life of the contract as a notional value. The primary risks associated with these an adjustment to interest expense. Accrued expenses are contracts are the exposure to movements in interest rates recorded in accrued interest payable. Interest rate contracts outstanding at December 31 are as follows: (Reported in $000's) Term to maturity 2006 2005 Total Total Within 3 Months 1 Year Over 5 Notional Market Notional Market 3 Months to 1 Year to 5 Years Years Value Value Value Value rate rate rate rate % % % % Interest rate contracts Fixed / floating swaps Pay fixed $ 10,000 4.93 $ - - $ - - $ - - $ 10,000 $ 15 $ 10,000 $ 125 Receive fixed $ - - $ - - $ - - $ - - $ - $ - $ - $ - c) Fair value The following table presents the fair value of on and off- The fair values disclosed exclude the values of assets and balance sheet financial instruments of the Company based liabilities that are not considered financial instruments such on the valuation methods and assumptions as set out below. as land, buildings and equipment. In addition, items such Fair value represents the amount at which a financial as the value of intangible assets such as customer instrument could be exchanged in an arm’s length relationships which, in management’s opinion add transaction between willing parties under no compulsion to significant value to the Company, are not included in the act and is best evidenced by a quoted market price, if one disclosures below. exists. Due to the judgement used in applying a wide range of Quoted market prices are not available for a significant acceptable valuation techniques and estimations in portion of the Company’s financial instruments. calculating fair value amounts, fair values are not Consequently, the fair values presented are estimates necessarily comparable among financial institutions. The derived using present value or other valuation techniques calculation of estimated fair values is based on market and may not be indicative of the net realizable value. conditions at a specific point in time and may not be reflective of future fair values. 27 Credit Union Central of Nova Scotia
  • 30. ANNUAl RepoRT 06 c) Fair value (continued) 2006 2005 Estimated Estimated Book Value Fair Value Book Value Fair Value Assets Cash and cash equivalents $ 9,732,203 $ 9,732,203 $ 28,096,693 $ 28,096,693 Investments 309,340,652 310,794,733 263,437,466 264,032,163 Loans and mortgages 481,556,163 484,168,892 462,341,259 464,233,642 Accrued interest 4,394,100 4,394,100 3,684,877 3,684,877 Liabilities Borrowing $ 4,425,000 $ 4,425,000 $ - $ - Deposits 733,692,937 742,242,169 687,307,520 694,274,214 Accrued interest 8,222,305 8,222,305 6,836,781 6,836,781 Obligations related to mortgages 411,771 411,771 1,081,525 1,081,525 Derivatives 9,693 14,691 29,151 124,898 14. Capital requirements The Central and League Savings and Mortgage Company are required to maintain a capital ratio that is adequate in relation to their level of business activities. The Office of the Superintendent of Financial Institutions prescribed the following: (i) The Central maintains a liabilities to capital borrowing multiple not to exceed 20 times capital. At December 31, 2006, the Central had a borrowing multiple of 13.6 (2005 – 11.5) times capital. (ii) League Savings and Mortgage Company maintains a minimum required capital ratio of 10% of the risk-weighted value of assets and a maximum allowable assets to capital multiple of 20 times capital. At December 31, 2006, the Company had a capital ratio of 23.2% (2005 – 22.90%) and a capital multiple of 13.84 (2005 – 13.46) times capital. 15. Assets under administration (a) Mortgages and Mutual Funds Assets under administration include mortgages under administration and a mutual fund portfolio, which are not the property of the Company and are not reflected in the balance sheet. (b) Syndicated loans The Company provides a loan syndication program for Credit Unions. These loans, which are under Central’s administration, are not the property of the Company and are not reflected on the balance sheet. Although most of the loan syndications are purchased by Credit Unions, the Central can be a participant if a loan is not fully subscribed to by Credit Unions. When Central participates in the loan syndication the amount is included on the balance sheet as “Co-operative and other loans”. Where a fully subscribed loan syndication has not been distributed to Credit Unions, the undistributed amount is also included on the balance sheet as “Co-operative and other loans”. Assets under administration at December 31: 2006 2005 Mortgages $ 31,021,273 $ 33,869,512 Mutual Funds 12,119,885 12,130,496 Syndicated Loans 22,066,331 23,412,505 Included in Co-operative and other loans 1,208,255 2,836,351 Living Our Brand 28
  • 31. Statements CoNSolidATed fiNANCiAl 16. Segmented information Credit Union Central of Nova Scotia provides services to credit unions through two divisions, Financial Services and Trade. Results for the Central’s major segments are based on the Central’s internal financial reporting systems. Financial Services Trade LS&M Total 2006 Net financial income $ 1,777,431 $ - $ 10,728,869 $ 12,506,300 Other income 5,960,135 (484,372) 1,475,334 6,951,097 7,737,566 (484,372) 12,204,203 19,457,397 Expenses 6,276,272 (7,893) 9,363,423 15,631,802 Income (loss) before income taxes $ 1,461,294 $ (476,479) $ 2,840,780 $ 3,825,595 Assets, December 31 $ 374,755,223 $ 4,441,700 $ 432,030,996 $ 811,227,919 2005 Net financial income $ 3,133,237 $ - $ 11,440,081 $ 14,573,318 Other income 1,986,301 3,065,612 1,152,980 6,204,893 5,119,538 3,065,612 12,593,061 20,778,211 Expenses 1,953,361 4,346,939 9,348,730 15,649,030 Income (loss) before income taxes $ 3,166,177 $ (1,281,327) $ 3,244,331 $ 5,129,181 Assets, December 31 $ 360,461,938 $ 4,159,369 $ 398,367,728 $ 762,989,035 17. Income taxes The components of income tax expense (recoveries) are as follows: 2006 2005 Current income taxes $ 1,455,093 $ 1,874,188 Future income taxes (recovery) (1,949) 55,841 Income taxes $ 1,453,144 $ 1,930,029 The components of the future income tax asset are as follows: 2006 2005 Future income tax assets Property, plant and equipment $ 165,174 $ 172,394 Allowance for impaired loans 819,746 798,583 Allowance for investments 49,172 49,172 Unrealized gain on investments 315,155 278,671 Other 32,593 81,071 Total future income tax assets (included in Other Assets) $ 1,381,840 $ 1,379,891 29 Credit Union Central of Nova Scotia
  • 32. ANNUAl RepoRT 06 17. Income taxes (continued) The provision for income taxes differs from the result which would be obtained by applying the combined Canadian Federal and Provincial statutory income tax rates to income before taxes. This difference results from the following: 2006 2005 Income before income taxes $ 3,825,595 $ 5,129,181 Statutory income tax rate 43.69% 44.65% Expected income tax 1,671,226 2,289,954 Effect on income tax of: Capital taxes 38,734 150,862 New Brunswick Capital Taxes 44,877 - Credit union abatement - - General rate reduction credit (148,751) (256,099) Non-taxable dividends and non-capital losses (77,391) (68,887) Tax deductible dividends (125,773) (215,667) Permanent tax differences 41,093 22,222 Recognition of general reserves and temporary differences 11,077 (55,307) Other - 7,110 Future income tax recovery Effect of change in temporary differences (1,948) 55,841 Total income tax expense $ 1,453,144 $ 1,930,029 18. Other Income and Expenses Other Income and Expenses include the following: 2006 2005 Other income Financial service fees $ 1,276,561 $ 1,296,867 Member assessments 2,236,474 1,766,425 Management fees 60,000 60,000 Printing sales 191,031 140,853 Rental income 136,277 209,338 Mortgage Fees 1,044,354 802,983 Fee for service 889,027 1,032,556 Miscellaneous 1,117,373 895,871 $ 6,951,097 $ 6,204,893 Other expenses Consulting and legal $ 379,089 $ 392,574 Development 76,680 37,092 Marketing and promotion 437,964 482,351 Office 175,511 84,808 Miscellaneous 581,110 676,264 $ 1,650,354 $ 1,673,089 Living Our Brand 30
  • 33. Statements CoNSolidATed fiNANCiAl 19. Initiatives Balances relating to the Initiatives include the following: 2006 2005 Assessments Received $ 1,658,577 $ - Assessments Deferred (in Other Liabilities) 782,024 - Assessments 876,553 - Fee for Service 60,255 - Total Income 936,808 - Salaries and Staff Related 425,518 - Management Fees 583,004 430,000 Other Expenses 95,354 423,211 Total Expenses 1,103,876 853,211 Net Initiatives $ (167,068) $ (853,211) 20. Reclassification of comparative figures Certain of the 2005 comparative figures have been reclassified to conform with the financial statement presentation adopted for 2006. 31 Credit Union Central of Nova Scotia
  • 34. Boards CUCNS ANd AffiliATe Central Board Effective corporate governance remains a priority at Credit Union Central of Nova Scotia. Sound governance and ethical behaviour benefits not only our shareholders, but all stakeholders including credit unions, credit union customer-owners and our employees. Our Board of Directors is responsible for overseeing the Margaret Harvey James Gannon Angela Hickey management of the business and affairs of Central and 2nd, Vice-Chair for providing effective leadership to the credit union network with the objective of enhancing both shareholder and stakeholder value. The directors are responsible for maintaining a high standard of governance and ensuring the ongoing review and assessment of our governance system. In 2006, Central reduced its board from 12 to 11 members, completed several training and development programs, began the review of the corporate code of conduct and began a long term project to review the governance structure of Central, including a comprehensive by-law review. Raymond Surette James MacFarlane Joseph MacNeil Board Composition Effective October 2006, the Board of Directors of Credit Union Central of Nova Scotia was reduced from 12 to 11 representatives, elected by delegates in each of the seven credit union districts. One delegate is elected from the following districts: District 2 (Inverness and Richmond Counties); District 3 (Antigonish, Guysborough, Cumberland and Pictou Counties); District 7 (Credit Union Robert McVeigh Doug Dewling Earl Goski Central of Newfoundland and Labrador); and District 6 (Newfoundland and Labrador Central Alliance). District 1 (Cape Breton County) and District 5 (Annapolis, Kings, The Board meets at least once each fiscal quarter. It also Lunenburg, Queens, West Hants, Digby and Yarmouth meets at other times when matters requiring its approval are Counties) elect two directors and District 4 (Halifax and East raised and cannot wait for the next quarterly meeting. The Hants Counties) elects 3 directors. None of the directors Board of Directors met 10 times in 2006. are members of Central’s management. The following individuals serve as the Board of Directors: Committees of the Board The Board has established four standing committees: Executive, Audit and Conduct Review, Governance and System Credit. Executive Committee: Its six members include the Board Chair, Vice-Chair and 2nd Vice-Chair and three directors elected by a vote of the Board. This committee is responsible for addressing matters between scheduled Board meetings that require immediate attention. The committee also acts as a Compensation Committee. In this capacity, the David MacLean James Johnson committee makes recommendations to the Board on the Chair Vice-Chair President and CEO’s compensation and evaluation and for the annual approval of the variable compensation plan. Living Our Brand 32
  • 35. Boards CUCNS ANd AffiliATe Committee Members: David MacLean (Chair), James to ensure it serves the organization, its member credit Johnson, James MacFarlane, Margaret Harvey, Raymond unions, employees and communities of Nova Scotia and Surette and James Gannon. Newfoundland and Labrador. The Board assumes overall stewardship with respect to Central’s mission and values, its Audit and Conduct Review Committee: It has four long term objectives and the approval of corporate strategies, members. As an Audit Committee, it is responsible to including the Getting Us There vision. Specifically, the ensure that management has designed and implemented Board is responsible for the following: an effective system of financial management and related • The selection, succession and evaluation of the internal controls. It reviews and reports on the audited President and CEO, as well as compensation and financial statements and ensures compliance with certain employment conditions regulatory and statutory requirements. It is also responsible • Establishing and approving Board policies to meet periodically with internal and external auditors. As • Overseeing Central’s internal control framework a Conduct Review Committee, it is responsible to ensure • Developing and approving strategic plans for that management has developed and adheres to conflict of Central interest and related party procedures. • Providing advice to the President and CEO • Evaluating the Board’s performance and overseeing Committee Members: Doug Dewling (Chair), James the ethical, legal and social conduct of the MacFarlane, Earl Goski and Angela Hickey. organization • Reviewing the financial performance and Governance Committee: Its five members are responsible condition of the organization for reviewing and recommending changes, as appropriate, to the governance structure of Central. In addition, this committee ensures Board decisions and positions are Attendance at Board and Committee Meetings appropriately translated into documented policies. The committee reviews minutes of meetings, interprets the The Board of Directors recognizes the importance of each Board’s position on issues and uses management resources individual director’s participation at Board and committee in the development of Board policies. Policies developed meetings. Every director is expected to attend all Board by the committee are forwarded to the Board for its and committee meetings unless specifically exempted consideration and approval. The committee is responsible by the Chair. The table below sets out the attendance of for overseeing the director evaluation process and for each Board member at Board and committee meetings establishing and monitoring the orientation program for throughout 2006: new directors, as well as the monitoring of ongoing training Name Board and Audit/ Executive Governance System and development of Board members. Planning Conduct Committee Committee Credit Session Review Committee Commitee Committee Members: James Johnson (Chair), Joseph MacNeil, Robert McVeigh, Margaret Harvey and Raymond Angela Hickey1 8/10 3/3 - 1/1 - Surette. David MacLean 10/10 - 5/5 - - Doug Dewling 10/10 4/4 - - - System Credit Committee Earl Goski2 9/10 3/3 - 0/1 - James Gannon3 The committee has three members and is responsible for 9/10 1/1 4/4 - 2/2 evaluating and approving all loans above the lending limits James Johnson 8/10 - 5/5 4/4 2/2 of management. James MacFarlane4 8/10 3/3 4/5 - 2/2 Joseph MacNeil 10/10 - - 4/4 - Committee Members: James Gannon (Chair), James Margaret Harvey5 10/10 1/1 5/5 3/3 - Johnson and James MacFarlane. Raymond Surette6 10/10 1/1 5/5 3/3 - Robert McVeigh7 10/10 - - 2/3 - Mandate of the Board of Directors 1 Elected as member of the Audit/Conduct Review Committee in April 2006. While the Board’s fundamental responsibility is to 2 Elected as member of the Audit/Conduct Review Committee in April 2006. 3 Elected as member of the Executive Committee in April 2006. supervise the management of the business and affairs of 4 Elected as member of the Audit/Conduct Review Committee in April 2006. Central, any responsibility that is not specifically delegated 5 Elected as member of the Governance Committee in April 2006. 6 Elected as member of the Governance Committee in April 2006. to the President and CEO remains with the Board. In 7 Elected as member of the Governance Committee in April 2006. particular, the Board oversees Central’s strategic direction 33 Credit Union Central of Nova Scotia
  • 36. ANNUAl RepoRT 06 Gill from the Credit Union Central of Prince Edward Island (term expires 2007). Evolving Governance Processes At Credit Union Central of Nova Scotia, we recognize that CUMIS our governance standards must evolve to respond to changes Credit Union Central of Nova Scotia is a minority shareholder in our company, the credit union network, stakeholder of CUMIS. Shareholders are entitled to nominate directors; expectations and regulatory requirements. The Board however directors are elected at large by all shareholders. monitors ongoing developments in corporate governance practices to ensure that it continues to implement best Ethical Funds Inc. (EFI) practices in Central and provide effective governance to the credit union network in Nova Scotia and Newfoundland The Credit Union Central of Nova Scotia and Credit Union and Labrador. Central of Prince Edward Island jointly own one common voting share of EFI. Nova Scotia, New Brunswick and Prince Affiliate Boards Edward Island are entitled to nominate one director to the Board. The current director for the Maritime Provinces is The following are the terms and expiration dates for Bernie O’Neil. appointments to affiliate Boards of Directors. League Data Canadian Co-operative Association The Nova Scotia directors on the League Data Board The Chair of Credit Union Central of Nova Scotia appoints are elected from each of the five provincial credit union two delegates. The Atlantic delegates elect two directors. districts. The President and CEO of Credit Union Central of James Johnson from the Credit Union Central of Nova Nova Scotia is a dedicated seat on the League Data Board. Scotia was elected director on the CCA Board representing the Maritimes, and will serve until 2007. League Savings and Mortgage Company Credit Union Central of Nova Scotia is entitled to appoint six Concentra Financial members to the League Savings Board. Its current directors The Atlantic Provinces fall under the “minority shareholders” are: Marion Garlick, James Gannon, James MacFarlane, category and are entitled to elect one director to Concentra’s Raymond Surrette, Angela Hickey and Joseph MacNeil. Board of Directors. The minority shareholders consist of Credit Union Central of British Columbia, Credit Union Nova Scotia Co-operative Council Central of Nova Scotia, Credit Union Central of New Brunswick, Credit Union Central of Prince Edward Island The director to the Nova Scotia Co-operative Council and La Federation des Caisses Populaires du Manitoba. The Board is appointed by the Chair of the Board, Credit Union current director representing the minority shareholders is Central of Nova Scotia. Nova Scotia Central Director is Robert McVeigh (term expires 2008). Joseph MacNeil. The Co-operators Nova Scotia Credit Unions Charitable Foundation All five credit union districts elect one Board member to The Credit Union Central of Nova Scotia appoints two the Charitable Foundation. Central’s Board appoints two delegates. The Atlantic Canadian delegates elect three additional members, and Central’s President and CEO directors to the Co-operators’ Board to represent the Atlantic selects one additional member. Board members serve for Region. The present directors are James MacConnell (term one-year terms. Current members are: James King, District expires April 2008), Connie Doucette from the Credit 1, Phyllis Cote (Secretary), District 2, John R. MacDougall Union Central of Prince Edward Island (term expires 2009) (Treasurer), District 3, Terry Moore, District 4, David Fancy and Gilles Menard of the Acadian Federation (term expires (Vice-Chair), District 5 and Robert McVeigh (Chair), James 2007). Johnson, and Bernie O’Neil from the Credit Union Central of Nova Scotia. Credit Union Central of Canada (CUCC) The Atlantic Provinces are entitled to elect two members to CUCC’s Board of Directors. The present directors are Robert McVeigh from our Central (term expires 2009) and Richard Living Our Brand 34
  • 37. PO Box 9200 6074 Lady Hammond Road Halifax, NS B3K 5N3 Telephone: 1-902-453-0680 Toll Free: 1-800-668-2879 Intranet: www.cucns.ca Website: www.nscreditunions.ca Email: info@cucns.ca

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