Annual Report 30th September 2016

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“ We will become the best credit union in the UK, providing financial services to members that

are excellent value for money and are supported by a member centric service.

The Credit Union will expand its service to all Police forces across England and Wales, with an

increased product range to meet the changing needs of our members.

We will achieve this by:

Being passionate about the service we provide

Providing an excellent and tailored service to our members

Designing products to meet the niche needs of those working in the Police forces

Reviewing pricing to ensure that rates for both savings and loans are competitive

Using technology to ensure service provision meets changing member expectations

OUR VALUES We created a Statement of Values and Commitments to guide our activities today and in

future. This is how we have always conducted our business. We want to focus on ensuring we

stay true to our values even as we grow and change.

Our Statement of Values and Commitments is not a top-down decree from management,

rather it is the result of a highly consultative process involving all members of our staff.

Our core values are about:

Integrity

Respectfulness

Knowledge

Customer focus

Teamwork

“

OUR MISSION

“

“

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CONTENTS

Chief Executive Officer’s Report ................................................................................................... 3

Chief Finance Officer’s Report ...................................................................................................... 5

Chair’s Report .............................................................................................................................. 8

Directors’ Report ....................................................................................................................... 10

Independent Auditor’s Report .................................................................................................... 12

Revenue Account ...................................................................................................................... 14

Balance Sheet ............................................................................................................................ 15

Statement of Changes in Equity .................................................................................................. 16

Statement of Cash Flows ........................................................................................................... 17

Notes to the Financial Statements .............................................................................................. 18

Detailed Revenue Account ......................................................................................................... 31

Audit Committee Report ............................................................................................................ 33

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CHIEF EXECUTIVE OFFICER’S REPORT

It is my pleasure to address you as the Chief Executive of No1 CopperPot Credit Union.

I am delighted to have met with many of our members and

stakeholders throughout the year, hearing the positive

comments about our business.

The Credit Union remains committed to member service

and this year we have been able to help more members

than ever before with their financial needs.

I am delighted to report that it has been a successful year

for No1 CopperPot and one in which we realised our 30 year anniversary.

A memorable day was held in August at the Greater Manchester Police Museum where we

celebrated the achievements and gave thanks to the Police Officers who had the idea, bravery and

passion to start the Credit Union 30 years ago. Somewhat fitting, the Credit Union also reached

30,000 members during the year, in what has been a year of growth for the Credit Union. I would

like express my thanks to the staff and volunteers of the GMP museum who made the day possible.

Thanks to a generous donation by the Friends of No1 CopperPot Lottery, who run the monthly

members lottery, we have been able to send six members of the team including four staff members

to the World Council of Credit Union Conference in Belfast. The conference provides the opportunity

to interact and share ideas and best practice with credit unions from around the world. One

particular highlight was an opportunity to meet with worldwide Police Credit Unions, at an event

hosted by St Raphael’s Credit Union from Dublin, at which we discovered that despite the

differences we have lots of similarities.

I am also proud to announce that our undergraduate placement student Jo McGrann, who

completed her final year of study during 2016, received the Student Award at the Manchester

Publicity Association awards. Jo graduated with a first in Advertising and Brand Management and

has joined our Marketing Team full time. We have seen further achievements from our two

apprentices Katie Alker and Jake Hornby who both completed their Diplomas in Business

Administration this year. These achievements demonstrate how serious we take investment in our

people and the results gained.

I am also proud to announce that Chris Burrows, our Chairman, was the first to complete the

Chartered Institute of Banker’s Certificate in Credit Union Principles and Practice introduced during

year. This qualification is now compulsory for all Directors, with all either completed or studying

towards the exam.

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Members and the service we provide remains the number one focus for everyone at

No1 CopperPot, we have recruited three new members of the Customer Service Team recently.

Lynette, Emma and Michelle have helped us to strengthen the team, to ensure that you get the

service you deserve every time you phone us. I would very much like to welcome Lynette, Emma

and Michelle to No1 CopperPot.

The Credit Union continues to grow, despite challenges in increased regulation and the low interest

rate environment. We have established a loyal membership base, and it is that membership which is

central to everything we do. I hope that you will share in our successes, helping more members

improve their lives through the financial services which we can provide.

Additional Activities Undertaken by the Credit Union

No1 CopperPot Credit Union provides home finance loans to its members under the activities

described as additional activities by its regulator the Prudential Regulation Authority.

Caroline Domanski

Chief Executive Officer

5

CHIEF FINANCE OFFICER’S REPORT

Summary

This financial year has seen the Credit Union go from strength to strength due to the continual

increase in assets over the year as well as consistent growth in unsecured lending throughout the

financial period.

The year has also seen the Credit Union deliver profit before tax of £3.81m in a time of squeezed

margins following the strategic decision to reduce the unsecured lending rates in July 2015. The

profits delivered will enable the Credit Union to build up a robust balance sheet from which the

Credit Union can operate from going forward, in the uncertain times ahead as the UK exits from the

European Union.

New accounting standards have come into place this year and the financial statements presented in

this booklet are in a different format to the prior year. There are no material changes but there is

more information provided in the notes to the accounts.

Unsecured lending

The rate reduction, as well as the adoption of focussed marketing campaigns, has resulted in an

increase in the unsecured lending book in every month of the financial year as shown in the graph

below:

02

£-

£200,000.00

£400,000.00

£600,000.00

£800,000.00

£1,000,000.00

£1,200,000.00

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Monthly Increases in Unsecured Lending 2015/16

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Despite the increase in the unsecured loan book, the delinquency levels have remained low over the

year with loans fully provided for totalling £558k in the year compared to £637k in the prior year.

The Credit Union’s delinquency rate is less than 1% of the total lending which is an industry low. The

amounts recovered from loans previously written off amounted to £212k which is similar to the

prior year.

Mortgages

The Credit Union has the regulatory permissions to offer home financing to its members, one of only

four credit unions in the country. During the year the Credit Union has helped eleven members

purchase their own home through offering both fixed and standard variable rate mortgages. The

mortgage book currently stands at 139 mortgages totalling £13.65m.

Savings

The shares held by members increased by £3.7m which is in line with strategic plan and is lower than

the increase in the lending book, thus reducing the liquidity risk. The reserve account launched in

the previous financial year has been very successful with our members due to the very competitive

rates being offered. 590 members have opened a reserve account since the launch date.

Cash

There continues to be the focus on reducing the liquid assets, which is the surplus cash held by the

Credit Union, due to decreasing rates being offered in the current market. The growth in the loan

book has meant that the liquid assets have reduced during the financial year by £2.2m compared to

an increase of £4.6m in the prior year.

Capital

The capital position as at the end of the year has increased to £16.3m from £13.4m due to retained

profits from the year, as well as a provision release. The capital position will strengthen the balance

sheet as well as ensuring the Credit Union exceeds the reserve levels required by the regulator.

Financial Results

The financial year has delivered a profit before tax of £3.81m compared to £4.43m in the prior year.

This has been mainly due to the reduction in income from loans following the rate reduction in 2015

as well as the contracting yields on the bank deposits due to the current market low interest rates.

The expenses increased marginally year on year by less than 1% due to the careful monitoring of

costs following the reduction in income.

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Dividend

The profits reported in the financial year will enable the Credit Union to provide competitive

dividend rates on member savings products at a time of low interest rates being offered by the

market following the base rate reduction in the year. The Directors of the Board are pleased to

recommend the following dividends for the year:

Although these rates are lower than last year, they are still very competitive returns for our

members in the current financial market, particularly with base rate at a record low. These rates

reflect the strong financial position of the Credit Union.

Lisa Ridgway

Chief Finance Officer

Member Account

1.4%

Junior Account

1.4%

Security Account

1.4%

Notice Plus Account

2.0%

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CHAIR’S REPORT

It is my pleasure to present the annual report of the

Board of Directors of Number One Police Credit Union,

better known to members as No1 CopperPot, as we

celebrate our 30th Anniversary year.

The financial markets have continued to challenge and surprise

us this year, as the thoughts of increasing interest rates that we

were entertaining at this time last year were reversed following

the vote to leave the European Union. The limited areas that the

Credit Union is allowed to invest in are affected by these interest

rate changes. In spite of this challenging financial environment our

Senior Management Team have excelled in their first full year together in working with the Board of

Directors to ensure that the Credit Union has continued to flourish. The reports by the CEO and CFO

give detail of how our financial position has strengthened and membership continues to grow at a

steady rate.

This year also saw the introduction of the Senior Managers Regime and that, together with an asset

and membership base continuing to grow and putting us further into the same arena as small

building societies, means even more that we need to continue to evolve our governance model.

This year you will see the proposal to adopt a new rule book to allow us to do just that.

We also changed the format of our Audit, Risk and Oversight Committee during the year to focus on

Audit. The members of the Audit Committee now attend all board meetings as advisors to the

Directors with risk being considered in detail on a monthly basis. Steve Ling, who was previously

chair of the Audit Committee stood down during the year and the Audit Committee is now chaired

by Rob Cairns, who is also Chairman of the Board of Directors at Penrith Building Society.

This year also saw changes within the Board of Directors as Sam Norman and Paul Barker stood

down from their positions. In addition Mark Tootill also recently announced his decision to stand

down. They have been replaced by co-opted Directors who are now standing for election at this

year’s AGM. They are Fiona Worrall, a family member, who is Director of Neighbourhoods at

Manchester City Council, our CEO, Caroline Domanski and our CFO, Lisa Ridgway. These moves

follow discussions with the Prudential Regulation Authority regarding board composition and this

will lead to a board consisting of Executive and Non-Executive Directors mirroring those to be found

in other financial institutions.

I would like to put on record our thanks for the time and commitment to the Credit Union from

Steve, Paul, Sam and Mark.

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Our staff have continued to develop the credit union ethos further with voluntary attendance at a

number of events. Debbie Brown and Lucy Wainwright attended a Development Educators course

and our CEO, Caroline Domanski, attended a Development Educators course in Africa. She has now

been invited to mentor on the 2017 course. These fantastic commitments to the credit union

movement involve using their own time off and the Friends of No1 CopperPot Credit Union Lottery

Committee have provided some financial support to assist them.

In summary we have seen a challenging year with stresses to the financial markets which will

continue for some time to come. Our new governance structure will allow your Directors to address

this and, together with our dedicated staff, we will carry on delivering steady growth and a suite of

products to support our members in the year ahead.

Chris Burrows

Chairman

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DIRECTORS’ REPORT

The Board of Directors present their report and the financial statements for the year

ended 30th September 2016.

The Board of Directors The Board of Directors who held office during the year were as follows:

Mr C Burrows

Mr P Barker (resigned 19 March 2016)

Mr P Read (resigned 14 December 2015)

Mr A Elstone

Mr M Tootill (resigned 23 November 2016)

Mrs H Thomas

Mr P Henson

Mrs F Worrall (appointed 19 March 2016) Principal activities and business review The principal activity of the Credit Union during the year was that of the provision of savings and lending facilities for the benefit of its members. The qualification for admission to membership of the Credit Union is restricted to be that of providing savings and lending facilities to those who participate in the provision of the public service of the Police Service or services associated with such participation, that is to say, Police Staff in the UK. In addition the Credit Union also provide membership to immediate family members of any qualifying member. Results and dividends The accounts show the results for the year’s activities for the combined operations. The surplus for the year, after taxation, amounted to £3,704,040. The dividend is calculated at 1.4% (2015: 1.8%) for the Member Accounts and Junior Accounts, and 2.0% for the Notice Plus Account (2015: 2.8%) which, although the rates are lower than last year, are very competitive returns for our members in the current financial market. The remainder of the surplus is transferred to the general reserve. Directors’ responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in

accordance with applicable law and regulations.

Credit Union law requires the Directors to prepare financial statements for each financial year.

Under that law the Directors have elected to prepare the financial statements in accordance with

United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and

applicable law). Under Credit Union law the Board of Directors must not approve the financial

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statements unless they are satisfied that they give a true and fair view of the state of affairs of the

Credit Union and of the surplus or deficit of the Credit Union for that period. In preparing these

financial statements, the Board of Directors are required to:

select suitable accounting policies and apply them consistently

make judgements and accounting estimates that are reasonable and prudent

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Credit Union will continue in business

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Credit Union’s transactions and disclose with reasonable accuracy at any time the financial position of the Credit Union and enable them to ensure that the financial statements comply with The Co-operative and Community Benefit Societies Act 2014. They are also responsible for safeguarding the assets of the Credit Union and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Disclosure of information to the auditors Each Director has taken steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Credit Union’s auditors are aware of that information. The Directors confirm that there is no relevant information that they know of and which they know the auditors are unaware of. Re-appointment of auditors Hallidays will be recommended for re-appointment at the AGM under The Co-operative and Community Benefit Societies Act 2014.

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INDEPENDENT AUDITOR’S REPORT

We have audited the financial statements of Number One Police Credit Union Limited for the year ended 30 September 2016, set out on pages 14 to 17. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland". This report is made solely to the Credit Union’s members, as a body, in accordance with Section 87, Part 7 of Chapter 14 of The Co-operative and Community Benefit Societies Act 2014. Our audit work has been undertaken so that we might state to the Credit Union’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Credit Union and the Credit Union’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective Responsibilities of the Board of Directors and Auditor As explained more fully in the Board of Directors' Responsibilities (set out on page 10), the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Credit Union’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Board of Directors Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

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Opinion on the financial statements In our opinion the financial statements:

give a true and fair view of the state of the Credit Union's affairs as at 30 September 2016 and of its profit for the year then ended;

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

have been prepared in accordance with the requirements of The Co-operative and Community Benefit Societies Act 2014.

Opinion on other matters prescribed by The Co-operative and Community Benefit Societies Act 2014 In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where The Co-operative and Community Benefit Societies Act 2014 requires us to report to you if, in our opinion:

adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

the financial statements are not in agreement with the accounting records and returns; or

certain disclosures of Board of Directors’ remuneration specified by law are not made; or

we have not received all the information and explanations we require for our audit.

Philip Jones

Senior Statutory Auditor

For and on behalf of Hallidays, Statutory Auditor

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REVENUE ACCOUNT

Note

2016 £

2015 £

Income 3 6,355,448 6,963,361

Administrative expenses (2,552,028) (2,537,174)

Other operating income 4 9,000 -

Operating surplus 5 3,812,420 4,426,187

Other interest receivable and similar income 6 422 - 422 -

Surplus/(Deficit) before tax 3,812,842 4,426,187

Taxation 9 (108,802) (126,857)

Surplus/(Deficit) for the financial year 3,704,040 4,299,330

The above results were derived from continuing operations.

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BALANCE SHEET

Note

2016

£ 2015

£

Fixed assets

Tangible assets 10 1,779,204 1,828,587

Current assets

Debtors 11 78,937,243 71,488,289

Cash at bank and in hand 53,275,053 55,474,856 132,212,296 126,963,145

Creditors: Amounts falling due within one year 12 (3,329,882) (3,112,249)

Net current assets 128,882,414 123,850,896

Net assets 130,661,618 125,679,483

Capital and reserves

Subscribed capital - repayable on demand 13 111,091,016 107,425,754

Other reserves 18,448,222 16,742,385

Appropriation account 1,122,380 1,511,344

Total equity 130,661,618 125,679,483

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16

STATEMENT OF CHANGES IN EQUITY

Subscribed capital

£

Mortgage reserve

£

General reserves

£

Appropriation account

£ Total

£

At 1 October 2015 107,425,754 3,300,000 13,442,385 - 124,168,139

Surplus for the year - - - 3,704,040 3,704,040

Other comprehensive income - (1,178,016) 2,883,853 (1,705,837) -

Total comprehensive income - (1,178,016) 2,883,853 1,998,203 3,704,040

Dividends - - - (875,823) (875,823)

Shares in 62,227,127 - - - 62,227,127

Shares withdrawn (58,561,865) - - - (58,561,865)

At 30 September 2016 111,091,016 2,121,984 16,326,238 1,122,380 130,661,618

Subscribed capital

£

Mortgage reserve

£

General reserves

£

Appropriation account

£ Total

£

At 1 October 2014 106,932,247 3,300,000 11,521,971 - 121,754,218

Surplus for the year - - - 4,299,330 4,299,330

Other comprehensive income - - 1,920,414 (1,920,414) -

Total comprehensive income - - 1,920,414 2,378,916 4,299,330

Dividends - - - (867,572) (867,572)

Shares in 76,481,677 - - - 76,481,677

Shares withdrawn (75,988,170) - - - (75,988,170)

At 30 September 2015 107,425,754 3,300,000 13,442,385 1,511,344 125,679,483

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V

V

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STATEMENT OF CASH FLOWS

Note 2016

£ 2015

£

Cash flows from operating activities

Surplus for the year 3,704,040 4,299,330

Adjustments to cash flows from non-cash items

Depreciation and amortisation 5 49,977 58,476

Finance income 6 (422) -

Taxation provision 9 108,802 126,857

Impairment losses 558,479 637,074 4,420,876 5,121,737

Working capital adjustments

Increase in other debtors 11 (864) (64,124)

Increase in other creditors 12 131,994 48,053

Cash generated from operations 4,552,006 5,105,666

Taxation paid 9 (126,857) (124,360)

Net cash flow from operating activities 4,425,149 4,981,306

Cash flows from investing activities

Interest received 6 422 -

Acquisitions of tangible assets (991) (11,840)

Proceeds from sale of tangible assets 396 -

Net cash flows from investing activities (173) (11,840)

Cash flows from changes in operating assets and liabilities

Dividends paid (2,387,167) (2,220,752)

Cash inflow from subscribed capital 62,227,127 76,481,677

Cash outflow from repaid capital (58,458,171) (75,913,098)

New loans to members (34,673,058) (30,472,778)

Repayment of loans by members 26,666,490 31,777,652

Net cash flows from operating activities (6,624,779) (347,299)

Net (decrease)/increase in cash and cash equivalents (2,199,803) 4,622,167

Cash and cash equivalents at 1 October 55,474,856 50,852,689

Cash and cash equivalents at 30 September 53,275,053 55,474,856

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NOTES TO THE FINANCIAL STATEMENTS

1. General information

The address of the registered office is:

Slater House, Oakfield Road

Cheadle Royal Business Park

Cheadle, Cheshire

SK8 3GX

These financial statements were authorised for issue by the Board on

16th December 2016.

Legal and regulatory framework

The Credit Union is a society established under the Industrial and Provident Societies Act 1965,

whose principal activity is to operate as a Credit Union, within the meaning of the Credit Unions Act

1979. The Credit Union has registered with the FCA under the provisions of the Co-Operative and

Community Benefit Societies Act 2014.

In accordance with the regulatory environment for credit unions, deposits from members can be

made by subscription for redeemable shares, deferred shares and interest-bearing shares. At

present the Credit Union has only issued redeemable shares.

2. Accounting Policies

Summary of significant accounting policies and key accounting estimates

The principal accounting policies applied in the preparation of these financial statements are set out

below. These policies have been consistently applied to all the years presented, unless otherwise

stated.

Statement of compliance

These financial statements were prepared in accordance with Financial Reporting Standard 102 'The

Financial Reporting Standard applicable in the UK and Republic of Ireland'.

Basis of preparation

These financial statements have been prepared in accordance with FRS102 ‘The Financial Reporting

Standard Applicable in the UK and Republic of Ireland’ and also with The Co-Operative and

Community Benefit Societies Act 2014.

The financial statements are prepared on the historical cost basis.

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First-time adoption of FRS 102

These are the Credit Union's first financial statements to comply with FRS 102. The date of transition

to FRS 102 is 1 October 2014.

The transition to FRS 102 has resulted in a small number of accounting policy changes compared to

those applied previously. Note 19 to the financial statements describes the differences between the

retained earnings and surplus or deficit presented previously, and the amounts as restated to

comply with the accounting policies selected in accordance with FRS 102 for the reporting period

ended at 30 September 2015 (ie. comparative information), as well as the retailed earnings

presented in the opening balance sheet (ie. at 1 October 2015). It also describes all the required

changes in accounting policies made on first-time adoption of FRS 102.

Going concern

The financial statements have been prepared on a going concern basis.

Income

Loan interest receivable and similar income: Interest on both loans to members and loans to banks

(ie. cash and cash equivalents held on deposit with other financial institutions) is recognised using

the effective interest method, and is calculated and accrued on a daily basis.

Fees and commissions receivable: Fees and charges either arise in connection with a specific

transaction, or accrue evenly over the year. Income relating to individual transactions is recognised

when the transaction is completed.

Tax

The tax charge for the year reflects current tax payable. Current tax is the expected corporation tax

payable for the year, using tax rates in force for the year. The Credit Union is not liable to

corporation tax payable on its activities of making loans to members, and investing surplus funds, as

these are not classified as a trade. However, corporation tax is payable on investment income.

As a result of the limited activities of the Credit Union from which profits are chargeable to

corporation tax, it is unlikely that deferred tax will arise.

The current income tax charge is calculated on the basis of tax rates and laws that have been

enacted or substantively enacted by the reporting date in the countries where the Credit Union

operates and generates taxable income.

Tangible assets

Tangible assets are stated in the statement of financial position at cost, less any subsequent

accumulated depreciation and subsequent accumulated impairment losses.

The cost of tangible assets includes directly attributable incremental costs incurred in their

acquisition and installation.

20

Depreciation

Depreciation is provided to write off the cost of each item of property, plant and equipment, less its

estimated residual value, on a straight line basis over its estimated useful life. The categories of

property, plant and equipment are depreciated as follows:

Asset class Freehold property Fixtures and fittings Computer equipment

Depreciation method and rate 2% on cost 15% straight line 33.33% straight line

Financial assets - loans and advances to members

Loans to members are financial assets with fixed to determinable payments, and are not quoted in

active market. Loans are recognised when cash is advanced to members and measured at amortised

cost using the effective interest method.

Loans are derecognised when the right to receive cash flows from the asset have expired, usually

when all amounts outstanding have been repaid by the member. The Credit Union does not transfer

loans to third parties.

Impairment of financial assets

The Credit Union assesses, at each balance sheet date, if there is objective evidence that any of its

loans to members are impaired. The loans are assessed collectively in groups that share similar

credit risk characteristics, because no loans are individually significant. In addition, if, during the

course of the year, there is objective evidence that any individual loan is impaired, a specific loss will

be recognised.

Any impairment losses are recognised in the revenue account, as the difference between the

carrying value of the loan and the net present value of the expected cash flows.

The provision for doubtful debts is made in accordance with guidance issued by the PRA/FCA.

Financial liabilities - subscribed capital

Members’ shareholdings in the Credit Union are redeemable and therefore are classified as financial

liabilities, and described as subscribed capital. They are initially recognised at the amount of cash

deposited and subsequently measured at amortised cost.

Employee benefits

Defined contributions plans: The amounts charged as expenditure for the defined contribution plan

are the contributions payable by the Credit Union for the relevant period.

Other employee benefits: Other short and long term employee benefits, including holiday pay, are

recognised as an expense over the period they are earned.

Reserves

Retained earnings are the accumulated surpluses to date that have not been declared as dividends

returnable to members.

21

Use of estimates and judgements

The preparation of financial statements requires the use of certain accounting estimates. It also

requires the Directors to exercise judgement in applying the Credit Union's accounting policies.

3. Revenue

The analysis of the Credit Union's revenue for the year from continuing operations is as follows:

2016

£ 2015

£

Loan interest receivable from members 5,478,519 5,975,860

Bank interest receivable on cash and liquid deposits 535,010 624,180

Donations 70,788 93,000

Other revenue 271,131 270,321

6,355,448 6,963,361

4. Other operating income

The analysis of the Credit Union's other operating income for the year is as follows:

2016

£

Rental income 9,000

5. Operating profit

Arrived at after charging/ (crediting)

2016 £

2015 £

Depreciation expense 50,003 58,476

22

6. Other interest receivable and similar income

2016 £

Other finance income 422

7. Staff costs

The aggregate payroll costs (including Directors' remuneration) were as follows:

2016

£ 2015

£

Wages and salaries 866,108 798,622

Other employee expense 31,751 37,677

Honoraria 58,258 58,261 956,117 894,560

The average number of persons employed by the Credit Union (including Directors) during the year, analysed by category was as follows:

2016 No.

2015 No.

Administration and support 30 28

Directors paid honoraria 13 13 43 41

8. Auditors’ remuneration

2016

£ 2015

£

Audit of the financial statements 10,620 12,606

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9. Taxation

Tax charged/(credited) in the income statement

2016

£ 2015

£

Current taxation UK corporation tax 108,802 126,857

10. Tangible assets

Land and buildings

£

Furniture, fittings and equipment

£ Total

£

Cost or valuation

At 1 October 2015 2,158,293 566,126 2,724,419

Additions - 991 991

Disposals - (1,977) (1,977)

At 30 September 2016 2,158,293 565,140 2,723,433

Depreciation

At 1 October 2015 347,240 548,592 895,832

Charge for the year 38,466 11,512 49,978

Eliminated on disposal - (1,581) (1,581)

At 30 September 2016 385,706 558,523 944,229

Carrying amount

At 30 September 2016 1,772,587 6,617 1,779,204

At 30 September 2015 1,811,053 17,534 1,828,587

Included within the net book value of land and buildings above is £1,772,587 (2015 - £1,811,053) in respect of freehold land and buildings.

24

11. Debtors

2016

£ 2015

£

Loans to members 78,385,297 70,937,207

Prepayments 551,946 551,082

Total current and other debtors 78,937,243 71,488,289

12. Creditors

Note 2016

£ 2015

£

Due within one year

Juvenile deposits 2,891,438 2,787,744

Accrued expenses 329,642 197,648

Corporation tax 9 108,802 126,857 3,329,882 3,112,249

13. Share capital

Allotted, called up and fully paid shares

2016 2015 No. £ No. £

Ordinary Shares of £1 each 111,091,016 111,091,016 107,425,754 107,425,754

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14. Financial risk management

The Credit Union manages its subscribed capital and loans to members so that it earns income from

the margin between interest receivable and interest payable. The main financial risks arising from

the Credit Union activities are credit risk, liquidity risk, market risk and interest rate risk. The Board

reviews and agrees policies for managing each of these risks, which are summarised below.

Credit risk: Credit risk is the risk that a borrower will default on their contractual obligations relating

to repayments to the Credit Union, resulting in financial loss to the Credit Union. In order to manage

this risk the Board approves the Credit Union's lending policy, and all changes to it. All loan

applications are assessed with reference to the lending policy in force at the time. Subsequently

loans are regularly reviewed for any factors that may indicate that the likelihood of repayment has

changed. There is also the risk that the Credit Union's surplus cash held as deposits may be lost due

to financial institution failure. The Credit Union mitigates this risk by holding deposits in a range of

financial institutions and undertaking regular due diligence on the financial stability of these

institutions.

Liquidity risk: The Credit Union's policy is to maintain sufficient funds in liquid form at all times to

ensure that it can meet its liabilities as they fall due. The objective of the Credit Union’s liquidity

policy is to smooth the mismatches between maturing assets and liabilities and to provide a degree

of protection against any unexpected developments that may arise.

Market risk: Market risk is generally comprised of interest rate risk, currency risk and other price

risk. The Credit Union conducts all its transactions in sterling and does not deal in derivatives or

commodity markets. Therefore the Credit Union is not exposed to any form of currency risk or other

price risk.

Interest rate risk: The Credit Union's main interest rate risk arises from differences between the

interest rate exposures on the receivables and payables that form an integral part of a Credit Union’s

operations. The Credit Union considers rates of interest receivable when deciding on the dividend

rate payable on subscribed capital. The Credit Union does not use interest rate options to hedge its

own positions.

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15. Interest rate risk disclosures

The following table shows the average interest rates applicable to relevant financial assets and

financial liabilities.

2016 2015

Amount

£ Average

interest rate Amount

£ Average

interest rate

Financial assets

Loans to members 79,138,201 6.92% 71,651,705 8.34%

Financial liabilities

Subscribed capital 590,481 1.40% 641,212 1.80%

Notice Plus Account 531,896 2.0% 870,131 2.80%

The interest rates applicable to loans to members are fixed and range from 5.50% to 9.90%.

The interest payable on subscribed capital is determined on the basis of income less administrative

expenses and, as can be seen above, a consistent margin is maintained between interest receivable

and interest payable. As a result, the surplus for the year is not particularly sensitive to interest rate

risk and no sensitivity analysis is presented.

16. Commitments

Capital commitments

The total amount contracted for but not provided in the financial statements was £Nil (2015 - £Nil).

17. Related party transactions

During the year, 1 member of the Board, and 16 members of staff had loans with the Credit Union.

These loans were approved on the same basis as loans to other members of the Credit Union. None

of the Directors, staff or their close family members, have any preferential terms on their loans.

During the year Honoraria totaling £58,258 (2015: £58,261) was paid to the Board of Directors.

During the year Non-Executive Directors fees of £14,445 (2015: £15,310) were paid.

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18. Credit risk disclosures

The carrying amount of the loans to members represents the Credit Union's maximum exposure to

credit risk.

The following table provides information on the credit quality of loan repayments. Where loans are

not impaired it is expected that the amounts repayable will be received in full.

2016 2015

Amount Proportion Amount Proportion

£ % £ %

Not impaired:

Neither past due nor impaired 78,810,101 98.89% 71,347,467 98.68%

Up to 3 months past due 301,973 0.38% 239,178 0.33%

Between 3 and 6 months past due - 0% - 0%

Between 6 months and 1 year past due - 0% - 0%

Over 1 year past due - 0% - 0%

Sub-total: loans not impaired 79,112,074 99.27% 71,586,645 99.01%

Individually impaired:

Not yet past due, but impaired - 0% - 0%

Up to 3 months past due 317,382 0.40% 438,560 0.61%

Between 3 and 6 months past due 248,012 0.31% 234,696 0.32%

Between 6 months and 1 year past due 12,124 0.02% 42,767 0.06%

Over 1 year past due 4,564 0% 1,906 0%

Total loans 582,082 0.73% 717,929 0.99%

Impairment allowance (1,308,859) (1,367,465)

Total carrying value 78,385,297 70,937,207

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19. Transaction to FRS 102

Balance Sheet at 1st October 2014

Note

As originally reported

£ Reclassification

£

Remeasurement

£

As restated

£

Fixed assets

Tangible assets 1,875,222 --- --- 1,875,222

Current assets

Debtors 73,366,113 --- --- 73,366,113

Cash at bank and in hand 50,852,689 --- 50,852,689 124,218,802 --- --- 124,218,802

Creditors: Amounts falling due within one year (2,986,626) --- --- (2,986,626)

Net current assets 121,232,176 --- --- 121,232,176

Net assets 123,107,398 --- --- 123,107,398

Capital and reserves

Subscribed capital - repayable on demand (106,932,247) --- --- (106,932,247)

Revaluation reserve (11,521,971) --- --- (11,521,971)

Other reserves (3,300,000) --- --- (3,300,000)

Revenue reserve (1,353,180) --- --- (1,353,180)

Total equity (123,107,398) --- --- (123,107,398)

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Balance Sheet at 30th September 2015

Note

As originally reported

£ Reclassification

£ Remeasurement

£ As restated

£

Fixed assets

Tangible assets 1,828,587 --- --- 1,828,587

Current assets

Debtors 71,488,290 --- --- 71,488,290

Cash at bank and in hand 55,474,855 --- --- 55,474,855 126,963,145 --- --- 126,963,145

Creditors: Amounts falling due within one year (3,112,249) --- --- (3,112,249)

Net current assets 123,850,896 --- --- 123,850,896

Net assets 125,679,483 --- --- 125,679,483

Capital and reserves

Subscribed capital - repayable on demand (107,425,754) --- --- (107,425,754)

Revaluation reserve (13,442,385) --- --- (13,442,385)

Other reserves (3,300,000) --- --- (3,300,000)

Revenue reserve (1,511,344) --- --- (1,511,344)

Total equity (125,679,483) --- --- (125,679,483)

30

Revenue Account for the year ended 30th September 2015

Note

As originally reported

£ Reclassification

£ Remeasurement

£ As restated

£

Turnover 6,963,361 - - 6,963,361

Administrative expenses (2,537,174) - - (2,537,174)

Operating profit 4,426,187 - - 4,426,187

Profit before tax 4,426,187 - - 4,426,187

Taxation (126,857) - - (126,857)

Profit for the financial year 4,299,330 - - 4,299,330

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DETAILED REVENUE ACCOUNT

2016 £

2015 £

Turnover (analysed below) 6,355,448 6,963,361

Gross profit (%) 100% 100%

Administrative expenses

General administrative expenses (analysed below) 1,943,546 1,841,624

Depreciation costs (analysed below) 50,003 58,476

Impairment losses on loans to members 558,479 637,074 2,552,028 2,537,174

Other operating income (analysed below) 9,000 -

Operating profit 3,812,420 4,426,187

Other interest receivable and similar income (analysed below) 422 -

Profit before tax 3,812,842 4,426,187

11

32

2016

£ 2015

£

Turnover

Interest from loans to members 5,478,519 5,975,860

Bank deposit interest 535,010 624,180

Lottery donation 70,788 93,000

Other income 271,131 270,321 6,355,448 6,963,361

General administrative expenses

Wages and salaries 866,108 798,622

Honoraria 58,258 58,261

Staff training 31,751 37,677

Telephone and fax 42,514 14,669

Office expenses 122,141 130,897

Computer software and maintenance costs 63,997 52,113

Fidelity bond and general insurance 276,150 278,094

Printing, postage and stationery 62,596 69,170

Website update - 27,248

Charitable donations 6,191 5,158

Sundry expenses 11,832 15,881

Travel and subsistence 21,735 26,864

Non-executive director costs 14,445 15,310

Advertising 80,302 79,215

Auditor's remuneration - The audit of the Credit Union's annual accounts 10,620 12,606

Legal and professional fees 95,708 98,450

Association dues and affiliation fees 18,737 16,461

Financial services compensation scheme levy 131,842 83,630

Bank charges 28,619 21,298 1,943,546 1,841,624

Depreciation costs

Depreciation 50,003 58,476

Impairment losses on loans to members

Impairment expense 558,479 637,074

Other operating income

Rent receivable 9,000 -

Operating profit 3,812,420 4,426,187

Other interest receivable and similar income

Other interest receivable 422 -

Profit before tax 3,812,842 4,426,187

33

AUDIT COMMITTEE REPORT

The Audit, Risk and Oversight Committee (AROC), which was

established in April 2014, has now become the Audit Committee.

This committee meets on a quarterly basis, and its membership

consists of 2 Non-Executive Directors appointed by the Board,

one of who chairs the meeting, and a Director nominated by the

Board. The Chief Executive Officer, Chief Financial Officer and

Compliance Officer also attend these meetings by invitation.

In addition, both of the Non-Executive Directors responsibilities

have been extended to attending all Board meetings as advisors

to the Directors.

The Chair of the Audit Committee, Mr Ling, resigned his position in early 2016 due to increased time

commitments. Mr Cairns took up the position as Chairman and has been joined on the Committee

by Mrs Cooke.

The principal purposes of the Committee are to act in the best interests of the members to;

(a) ensure effective and independent internal and external audit procedures exist;

(b) provide the Board of Directors with a continuous appraisal of the overall effectiveness of the

control systems, including proposed changes;

(c) recommend improvements where desirable or necessary;

(d) determine whether the internal controls established by the Board of Directors are being

maintained properly and operated as laid down in the policy, and comply with relevant Acts,

secondary legislation, rules, policies and procedures;

(e) review and report to the Board on significant financial reporting issues and judgements made in

connection with the accounting records;

(f) assess whether financial and operating information supplied to the Board of Directors is accurate,

pertinent, timely, and complete;

(g) provide an independent scrutiny body for other matters which may be referred to the Committee

by the Board of Directors.

12

34

The Committee also reviews the Breach Register, which records all breaches of policies and

procedures and the remedial action, which has been taken.

The Committee have also developed a strategic audit plan, covering all aspects of the Credit Union's

business.

The Audit Committee have reviewed Directors attendance at meetings which is as follows:

Honoraria claims have been reviewed by Beever and Struthers, the appointed independent internal

auditor, in line with the policy. A net figure of £19,983 is proposed to the AGM for acceptance.

This is a reduction on last year’s figure of £36,070 and a further reduction is anticipated in 2016/17

as the honoraria payments include some retired Directors and the Supervisory Committee as they

completed their functions during the year.

Rob Cairns

Melanie Cooke

Audit Committee

Name Meetings Attended

C Burrows 33

M Tootill 14

F Worrall 2

P Henson 18

A Elstone 13

H Thomas 14

P Barker (Retired Director) 5

M Walsh (Retired Supervisor) 3

S Burns (Retired Supervisor) 2

P Read (Retired Director) 1

35

T: 0161 741 3160 E: info@no1copperpot.com W: www.no1copperpot.com

Number One Police Credit Union Limited trading as No1 CopperPot Credit Union is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Firm Reference Number (FRN) 213301. For details visit http://www.fca.org.uk