Microcredit foundation MIKRO ALDI" - GORAŽDE. Financial statements for the period. ended 31 December 2008

Transcription

1 Microcredit foundation MIKRO ALDI" - GORAŽDE Financial statements for the period ended 31 December

2 Microcredit organisation "MIKRO ALDI" Contents Page Responsibility for the financial statements 2 Independent Auditor's Report 4 General information 5 Organizational Structure 8 Ratio analysis 9 Financial Statements: Income Statement 10 Balance sheet 11 Statement of changes in equity 12 Cash flow statement for the year 13 Notes to the Financial Statements 14-36

3 Panorama bb Tel: (++ 387) Goražde (++ 387) Bosna i Hercegovina Fax: (++ 387) www. mikroaldi.org mka.aldi@bih.net.ba No: /09 Date: 7 April 2009 Responsibility for the financial statements This statement is issued related to Audit of Financial Statements of Micro landing foundation MIKRO ALDI for the period ended. For the purpose of expressing of opinion do the financial statements give true and fair view of the financial position of MIKRO ALDI as at, results of its operations and cash flow for the period than ended, we as the Management are responsible for ensuring that financial statements are prepared for each financial year in accordance with the Law on accounting and Auditing of the Federation of Bosnia and Herzegovina (Official Gazette of the Federation of Bosnia and Herzegovina No 32/05) in accordance with International Financial Reporting Standards (IFRS) and International Standards of Audit as published by the International Accounting Standards Board (IASB). After making enquiries, the Management has a reasonable expectation that the bank has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Management continues to adopt the going concern basis in preparing the financial statements. In preparing those financial statements, the responsibilities of the foundation include ensuring that: suitable accounting policies are selected and then applied consistently; judgements and estimates are reasonable and prudent; applicable accounting standards are followed, subject to any material departures disclosed and explained in the financial statements; and the financial statements are prepared on the going concern basis unless it is inappropriate to presume that the foundation will continue in business. The Management is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the foundation and must also ensure that the financial statements comply with the Accounting Law and Audit of Federation of Bosnia and Herzegovina. The Management is also responsible for safeguarding the assets of the foundation and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Signed on behalf of the Management Ferida Softić, Director Safija Pleh, Finance manager 2

4 REVIK D.O.O. SARAJEVO AUDIT, ACCOUNTING AND CONSULTING Branilaca Sarajeva 20 tel./fax (00387) (33) and bih.net.ba To the Board of directors Micro credit foundation "MIKRO ALDI" Report of the Independent Auditors Introduction We have audited the financial statements of Micro credit foundation "MIKRO ALDI" Goražde on 31 December. These financial statements are the responsibility of the "MIKRO ALDI" s management. Our responsibility is to express an opinion on these financial statements based on our audit. Scope We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about 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 used and significant estimates made by management. as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Micro credit foundation "MIKRO ALDI" - Goražde as at 31 December and the results of its operations and its cash flows for the period from 1 January to 31 December in accordance with International Financial Reporting Standards. Revik d.o.o. Sarajevo Enver Mulalić, partner Edin Udovčić, certified auditor Sarajevo, 7 April 2

5 1. General Information Establishment and activities Micro credit organization MIKRO-ALDI, as legal predecessor of microcredit foundation MCF "MIKRO- ALDI", is established in Federation of Bosnia and Herzegovina in accordance with the Law on micro credit organizations ( Official Gazette of Federation B&H, number 24/00), under the number R 1 M-5/00 and it has a license issued by the Federal Ministry of Social Affairs, Displaced Persons and Refugees to work as a micro credit institution, which provides loans to micro entrepreneurs (entrepreneurs with low income). This program is part of the overall efforts to stimulate the economic growth and post-war recovery. Microcredit project was started as a part of the Association of Citizens for Local Initiatives (ALDI) in Goražde. Microcredit operations were initiated with the support of the UNHCR loan assets project and technical assistance by the Local Initiatives Department until After 1999, the microcredit project received additional loan fund from OXFAM and NOVIB. Microcredit organization MIKRO-ALDI was registered on December 14, 2000 in accordance with the Law on microcredit organization ( Official Gazette of Federation B&H, number 24/00), under the number M /00 as a non-profit, nongovernmental and non-deposit organization. In accordance with the Decision on establishment from 2000, ALDI is the founder of the microcredit organization MIKRO-ALDI. ALDI provided the following assets: 1. Founder s equity in the amount of KM 24,825 (furniture and equipment) 2. Transfer of all rights and liabilities related to microcredit activities: microcredit fund through contract with UNHCR in the amount of KM 200,000; microcredit fund through contract with OXFAM in the amount of KM 500, In accordance with the Decision of the Board of Directors, Association of Citizens ALDI as of September 15, 2001 transferred the ownership of KM to MIKRO-ALDI into microcredit fund and the Decision is valid as of October 01,

6 Main mission and vision of microcredit foundation MIKRO-ALDI : Mission - MIKRO ALDI mission is to provide suitable financial services to economically active population with low-income rate, in order to improve living conditions within local economies that enables creation of an environment for development of an opened, democratically orientated society with economically independent population. Vision - The vision of MIKRO ALDI is to become leading microcredit institution in area of Southeast Bosnia and Herzegovina, and to ensure a positive influence to the global trends of economy development by its long term presence. Goal - The goal of MIKRO ALDI is to build and develop a long term, self sustainable institution that will provide microfinance services to low-income population. Purpose - The purpose of MIKRO ALDI existence is to alleviate poverty among population through financial services for start-up and development of a small business in order to contribute the global development of economy. Clients: Mostly women from Bosnian-Podrinja and Sarajevo Cantons of Federation of B&H and southeastern part of Republic Srpska. Loans are mostly utilized for financing working capital and equipment. The largest portion of portfolio is invested in agricultural activities followed by trade, service, and small-scale production. Credit methodology: MIKRO-ALDI works in accordance with the solidarity group methodology, as well as in accordance with the individual methodology. Group crediting means forming of solidarity groups made of 2-5 women, microentrepreneurs. All members of the solidarity group are guarantor to each other (no other form of collateral is used). Loan sizes grow with each new loan cycle. Loan cycles are from 3 to 36 months, with monthly repayment of principal and interest (12% up to 18% annually), average 15%. Legal status: New Law on Microcredit organisation was published in Official Gazette of Federation B&H, at 4 October 2006 prescribing that microcredit organisations have obligation to adjust their legal status in accordance with stipulations of this law within 12 months. 4

7 Federal Ministry of Justice issued a decree number /07 at 30 April on registration of Microcredit foundation "MIKRO ALDI" Goražde in Registar of microcredit foundation in Federation B&H. Board of directors 1. Ibrahim Imamović President 2. Vesna Nemec Klisura Member 3. Hasan Đozo Member 4. Mehmed Ćulov Member 5. Elvedina Zec Member Management Board 1. Ferida Softić Director 2. Safija Pleh Financial manager 3. Selma Pilav Credit manager Audit committee 1. Mirsad Žuga President 2. Hazira Živojević Member 3. Mirza Hadžić Member Activities of the Organisation are performed through: 1. Central office Goražde, Panorama bb street 2. Branch office Višegrad, Kralja Petra I bb street 3. Branch office Pale, Nikole Tesle bb street 4. Office Foča, Krajiška 20 street 5. Branch office Trebinje, Trebinjskih brigada 5 street. 5

8 Organizational Structure on 31 December 6

9 Ratio analysis Efficiency ratios December 31, December 31, Active loan clients/ number of staff Active clients/number of loan officers Net outstanding portfolio/number of loan officers 456, ,030 Percentage total operating expenses/ Average net portfolio % 24.04% Financial ratios December 31, December 31, Return on assets: Net operational income/average total assets 6.35 % 7.25 % Return on equity: Net operational income/average equity % 16.09% Yield on portfolio: Interest income and/or fees / average net portfolio outstanding % 31.93% 7

10 Income Statement Notes Year ended 31 December Year ended 31 December Interest income and loan fee income 3 1,952,875 1,484,423 Interest expense 3 (328,380) (200,320) Operating income 3 1,624,495 1,284,103 Operating expenses 4 (891,086) (810,498) Bad and doubtful debts expense 6 (286,216) (83,197) Operating expenses (1,177,302) (893,695) Other income 7 141,752 44,260 Net operational income/ expense 588, ,668 Grant income 8 16,588 25,115 Net income after grants 605, ,783 The accompanying notes are an integral part of these financial statements 8

11 Balance sheet Notes As at 31 December As at 31 December ASSETS Cash and cash equivalent , ,874 Deposits with banks 11 80,000 20,000 Loans and advances to customers 12 7,100,295 5,595,450 Other assets 13 79,846 39,816 Tangible assets , ,433 Intangible assets 15 7,934 3,805 Total assets 7,911,216 6,171,378 LIABILITIES AND EQUITY Other liabilities , ,790 Deferred income (donations) 17 74,781 85,827 Liabilities for loans 18 4,473,143 3,309,365 Total liabilities 4,648,287 3,513,982 Association of citizens "ALDI" , ,825 Capitalization 700, ,000 Retained earnings 20 2,434,104 1,828,571 Total equity 3,262,929 2,657,396 Total equity and liabilities 7,911,216 6,171,378 The accompanying notes are an integral part of these financial statements 9

12 Statement of changes in equity (All amounts expressed in KM) Founder's equity Association of citizens "ALDI" Loan fund Association of citizens "ALDI" Loan fund UNHCR Loan Fund OXFAM Retained earnings /(loss) Total Balance at 31 December , , , , ,544 1,768,369 Net result for the period , ,244 Balance at 31 December , , , ,000 1,368,788 2,197,613 Net result for the period , ,783 Balance at 31 December 24, , , ,000 1,828,571 2,657,396 Net result for the period , ,533 Balance at 31 December 24, , , ,000 2,434,104 3,262,929 The accompanying notes are an integral part of these financial statements 10

13 Cash flow statement Net operational result 605, ,783 Depreciation 45,291 33,625 Cash flows from operating profits before changes in operating assets and liabilities 650, ,408 Changes in operating assets and liabilities Net increase in loans and advances to customers (1,504,845) (1,488,844) Net increase in other assets (40,030) (598) Net decrease /( increase) in other liabilities (18,427) 18,024 Net cash from operating activities (1,563,302) (1,471,418) Cash flows from investing activities Purchase of property and equipment (44,255) (53,333) Purchase of intangible fixed assets (7,610) (2,687) Net cash from investing activities (51,865) (56,023) Cash flow from financing activities Net increase / (decrease) in deposits with banks (60,000) 165,633 Net increase in liabilities for loans 1,163,778 1,076,291 Net increase /( decrease) of deferred income (11,046) 12,894 Net cash from financing activities 1,092,732 1,254,818 Net decrease / (increase) in cash and cash equivalents 128, ,785 Cash and cash equivalents at beginning of year 315,874 95,089 Cash and cash equivalents at end of the year 444, ,874 The accompanying notes are an integral part of these financial statements 11

14 Notes to the financial statements 1. Summary of significant accounting policies The principal accounting policies adopted for the preparation of the Financial Statements of the "MIKRO ALDI" and principal risks which have to be taken into account when assessing these accounting policies are set out below: (a) Risks Concentration of risks that may have a significant impact on the "MIKRO ALDI" is as follows: Credit risk, the loan portfolio of the "MIKRO ALDI" consists only of micro enterprises and citizens; Direct and indirect dependence of micro entrepreneurs on the economic situation in the local environment and wider region (b) Basis of presentation The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements are prepared under the historical cost convention as modified by the fair valuation of available-for-sale securities, financial assets and financial liabilities held for trading and all derivative contracts, if any. The financial statements are stated in the Federation Bosnia and Herzegovina s official monetary unit, Konvertibilna Marka (KM), which is pledged to the Euro (EUR 1 = KM ). 12

15 (c) Foreign currencies Transactions denominated in foreign currencies are translated into KM at the official Central Bank of Bosnia and Herzegovina exchange rate on the date of the transaction. Any gain or loss resulting from the change in rates of exchange subsequent to the date of transaction is included in the Statement of Income as a gain or loss from the revaluation of foreign currency positions. The exchange rates used for the Financial Statements are the official exchange rates as issued by the Central Bank of the Bosnia and Herzegovina. As of May 31 / the principal exchange rate is: (in KM) 1 EUR (d) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. (e) Interest and Fees Income and Expense Interest income and expenditures are recognized in income statement on accrual principles. Anticipated income interest is differed. Income from basic activity refers to interest income. Financial income relates to interest earned on time deposits. Expenses from operational activity are recognized at the moment of increase in liabilities or decrease in assets.financial expenditures are expenditures which include interest on borrowed assets, loan loss cost, etc. 13

16 Interest income and expenses are recognized in the income statement on an accrual basis. Interest income is suspended when loans become doubtful of collection by more then 15 days. Interest income is not recognized until received. Fees consist of fees related to loans. Loan origination fees are amortized to income over the life of the loan. (Note 17.) (f) Donations / Grants Donations / Grants are assistance by government or other parties in the form of transfer of resources to the organization. These grants are recognised as income, whenever there is reasonable assurance that the organisation will comply with the conditions attaching to them (if any) and the grants will be received. Donations of fixed assets are recorded as long term accruals and released to the income statement in the same manner depreciation of the related fixed assets is charged to the income statement. There were no non-cash donations. (g) In kind donation In - kind donation are benefits or subsidies that the organization receives to support operations, but which are paid by a third party, (h) Originated loans and provisions for loan impairment Loans originated by the Agency by providing money directly to the borrower at draw down are categorised as Loans and advances to customers and are carried at amortised cost. Third party expenses are treated as part of the cost of the transaction. All loans and advances are recognised when cash is advanced to borrowers. A credit risk provision for loan impairment is established if there is objective evidence that the Organisation will not be able to collect all amounts due. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows including amounts recoverable from guarantees and collateral, discounted based on the interest rate at inception. 14

17 The loan loss provision also covers losses where there is objective evidence that probable losses are present in components of the loan portfolio at the balance sheet date. These have been estimated based upon historical patterns of losses in each component, the credit ratings allocated to the borrowers and reflecting the current economic climate in which the borrowers operate. When a loan is uncollectible, it is written off against the related provision for impairments, subsequent recoveries are credited to the bad and doubtful debt expense in the income statement. If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is credited to the bad and doubtful debt expense, In determining the overall level of the provisions required management considers numerous factors including, but not limited to, the financial condition of the borrower, existence and quality of collateral, domestic economic conditions, the composition of the loan portfolio and prior bad debt experience and repayments after year-end. The following percentages of provisioning are applied for loans in arrears: Provisioning Days in arrears 1-15 days 2% days 15% 20% days 50% 40% days 80% 60% days 100% 80% days 100% 100% >180 days (written off) 100% 100% (i) MIS development costs MIS development costs are recognised as an expense as incurred. However, expenditure that enhances and extends the benefits of computer software programmes beyond their original specifications and lives is recognised as a capital improvement and added to the original cost of the software. Computer software development costs recognised as assets are amortised using the straight-line method over their useful lives but not exceeding a period of five years. Costs associated with the maintenance of existing computer software programmes are expensed as incurred. 15

18 (j) Property and equipment Property and equipment is stated in principal at historical cost less depreciation. Depreciation is calculated on the straight-line method to write off the cost of each asset to their residual values over their estimated useful life as follows: % % Buildings Furniture and equipment Vehicles Computer equipment Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposal of property and equipment are determined by reference to their carrying amount and are taken into account in determining operating profit. Repairs and renewals are charged to the income statement when the expenditure is incurred. (k) Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise of balances with maturity less than 90 days including cash and amounts due from other banks. (l) Provisions Provisions are recognised when the Organisation has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. (m) Reclassification Certain amounts in the previous year financial statements have been reclassified to conform to the current year 16

19 2. Risks associated with financial instruments In the normal course of business, the Organisation provides to its customers a variety of financial instruments. These financial instruments involve various degrees of risk as follows: Credit risk In conducting business activities, the Organisation is exposed to the possibility that borrowers may default on their obligations to the Organisation, To minimize this risk the Organisation evaluates each customer s credit worthiness on a case-by-case basis, The amount of collateral obtained, if it is deemed necessary by the Organisation upon the extension of credit, is based on credit officer's credit evaluation of the client, Collateral held varies but may include guarantees, payment orders and acceptance letters, The Organisation strives to maintain a credit risk profile that is diverse in terms of industry and borrower concentration, Market risk In the normal course of business, the Organisation is exposed to market risks, Market risks arise from open positions in interest rate and currency, all of which are exposed to general and specific market movements, Currency risk The Organisation may invest in assets denominated in currencies other than its reporting currency, the convertible mark (KM), Consequently, the Organisation is exposed to risks that the exchange rate of the convertible mark relative to other currencies may change in a manner which has an adverse effect on the reported value of that portion of the Organisation s assets which are denominated in currencies other than the convertible mark, Interest rate risk The Organisation takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows, Interest margins may increase as a result of such changes but may reduce or create losses in the event that unexpected movements arise, Liquidity risk Liquidity risk arises from the possibility that the Organisation may be unable to satisfy current and future financial commitments, 17

20 The Organisation is exposed to calls on its available cash resources from maturing loans received by the Organisation and loan drawdown, The Organisation does not maintain cash resources to meet these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty, Notes to the Income Statement 3. Net operating income Interest income and commission Interest on loans 1,751,936 1,326,831 Loan fee income 190, ,592 Penalty interest 10,495-1,952,875 1,484,423 Interest expense Cost of capital from NOVIB (36,993) (71,260) Cost of capital from Raiffeisen Bank Sarajevo (78,061) (58,707) Cost of capital from NLB CBS Banka (32,939) (27,628) Cost of capital from DBF Microcredit fond - (3,746) Cost of capital from BLUE ORCHARD (21,550) (19,181) Cost of capital UniCredit Zarebačka Bank (39,896) (16,075) Cost of capital Planet Responsibility Fond (42,744) (3,462) Cost of capital EFSE (67,404) - Cost of capital from INTESA banka d.d. Sarajevo (3,978) - Cost of capital from ABS banka d.d. Sarajevo (2,933) - Cost of capital from PBS banka d.d. Sarajevo (1,882) - (328,380) (200,320) Net operating income 1,624,495 1,284,103 All income arises within Federation of Bosnia and Herzegovina and Republika Srpska. Income from loan fees is charged as 2% of the loan amount when loan is issued, and that income is deferred during the life time of the loan. 18

21 4. Operating expenses Staff costs (Note 5) 617, ,785 Depreciation 45,290 33,625 Bank services 23,232 17,810 Audit fee 6,201 4,680 Education 5,773 11,352 Maintains of equipment 7,575 2,644 Communication 28,398 22,173 Energy 10,022 8,503 Fuel 37,602 45,082 Insurance of fixed assets 7,598 7,466 Stationery 8,397 6,414 Advertisement 8,285 6,652 Rent 16,358 10,742 Membership-AMFI 4,800 4,134 Promotion services 12,577 - Currency exchange differences incomes - 8,782 Communal and republic fees 7, Fees paid to Bank Agency of Federation BiH and Republic of Srpska 7,605 - Tax after deduction and other tax and fees 12,681 - Other 24, Total 891, , Staff costs Wages and salaries (net) 342, ,201 Taxes and contribution on salary 220, ,831 Travel costs 2,443 10,539 Temporary services contract ,428 Food allowance 31,416 32,176 Holliday allowance 12,962 13,610 Fees for maternity leave 2,095 - Other fees 5,503 - Total (Note 4) 617, ,785 19

22 The average number of persons employed by the "MIKRO ALDI" on 31 December was 25 ( - 23). The Foundation does not have any other retirement packages expect the one through the retirement system of the Federation of Bosnia and Herzegovina and Republic of Srpska. According to this system, the employer is obliged to calculate the current contributions in a percentage from current gross salaries, and expenses debit the income statement in a period in which employees earned their salaries. The Foundation does not have any obligations to pay out retirement checks to employees in the future. Foundation does not have obligation to pay out retirement checks to employees on 31 December. Foundation is calculated provision regarding expecting future payments to the employees after retirement in amount of 3 monthly salary's on the level Foundation, but did not made liabilities because management have opinion that amount of provision does not represent material significant item.(0.73 % Foundation's profit before taxation for the period from 1 January to 31 December ). In future, Foundation will calculate provision in accordance with MRS 19 Employee Benefits. 6. Bad and doubtful debts expense December 31, Loans and advances to customers (Note 12.f.) 257,655 83,197 Interest (Note 13.a.) 28, ,216 83,197 20

23 7. Other income Release of provision for credit risks * 112,810 - Income from previously write-off loans 21,911 23,913 Income from previously write-off interest Reimbursement from insurance company 2,322 9,625 Currency exchange differences expenses - 8,782 Interest on deposits in banks Collected court fees 2,750 1,467 Prepaid loans Total 141,752 44,260 Based on decision of Board of Directors of MCF MIKRO ALDI number: /08 dated 19 May, Foundation has recorded income relating to release of provision for credit risks in amount of 112,810 KM, incurred in previous period. 8. Grant income Donation from IDB CGAP - 14,516 Donation from NOVIB for fixed assets* 16,010 10,599 Donation from EFSE Total 16,588 25,115 * See Note Taxation The Foundation is tax exempted in respect of corporate tax according to the Law on Micro Finance Organizations, which determines that micro credit foundations should be regarded as non-profit organisations. 21

24 Notes to the Balance Sheet 10. Cash and cash equivalents Cash at hand EFSE 2, ,780 INTESA bank, Sarajevo 121,783 - ABS bank, Goražde 80,328 - PBS bank, Goražde 82,365 - Raiffeisen Bank, Goražde 56, ,303 UniCredit Zagrebačka Bank 44,040 26,244 CBS NLB Bank 57,552 24,771 Nova Bank, Foča Transfer account (426) - Total 444, ,874 Interest rates on transaction accounts at banks on 31 December are 0.10 % annually. (.:0,25 % annually). 11. Deposits with banks UniCredit Zagrebačka bank ( Term deposit ) * 20,000 20,000 NLB Tuzlanska banka (oročena sredstva) ** 60,000 - Total 80,000 20,000 *Term deposit represents restricted deposit at UniCredit Zagrebačka Bank, Mostar, and contract number ND-1/08 at and is utilized as a guarantee for a loan received from UniCredit Zagrebačka Bank, number KK-1/08. Interest on a term deposit is 2.35% annually, with maturity of one year (see note 18.a.4.) 22

25 ** Specialty interest-free deposits at the bank NLB Tuzla dd Tuzla under contract no /NZ as of 08. October. year, which serves as an instrument to allow payment long-term loans for business activities no at the Bank (See Note 18.a.3.) 12. Loans and advances to customers (a) Portfolio Organization offers four loan products: - Business loans - Extra loan - Loan for other purposes - Agricultural loan Every loan product has its own sub-products for various types of business like agriculture, fixed or current assets for other businesses. Loans are granted for the period up to 48 months (2006: generally due within 36 months) but average repayment period is 23 months (: 19 months). Foundation does not have renewed loans. Number of active clients is 3,143 (.:3,100). Total number of disbursed loans 2,460 (.:2,809). The percentage of female clients is 75 % (.: 78 %) and male clients 25 % (.:22 %). (b) Analysis by interest rates Interest rate on all extended loans is 12 % to18 % p.a. Organization is calculating the interest rate according to declining method. The annual interest rate is charged monthly and is ranging from 1% to 1.5%, depending on the loan product and loan cycle. 23

26 c) Analysis by type of borrower Economic sector risk concentrations within the customer loan portfolio were as follows: Individual production companies 430, ,764 Individual trade companies 2,233,564 1,683,936 Individual service companies 2,000,575 1,507,390 Agriculture 2,260,823 2,078,782 Other 385,664 - Total (gross) 7,310,708 5,742,872 Specific provision for credit risks (210,413) (147,422) Total (net) 7,100,295 5,595,450 (d) Geographical analysis As of 31 December all loans were disbursed to citizens of, or companies incorporated in the Federation of Bosnia and Herzegovina and Republika Srpska. Federation BiH 1,902,571 1,580,387 Republic Srpska 5,408,137 4,162,485 Total (gross) 7,310,708 5,742,872 Specific provision for credit risks (210,413) (147,422) Total (net) 7,100,295 5,595,450 24

27 (e) Arrears The amounts of loans in arrears are analysed as follows: Principal in arrears Principal in arrears Current loans 6,816,931 5,641, days 131, days 97,475 62, days 121,347 22, days 55,193 6, days 88,335 10,363 over Total 7,310,708 5,742,872 Arrears include all amounts of loan principal due but not collected. (f) Provisions The movements in provisions for loan losses are as follows: Balance at 1 January 147,422 96,967 Doubtful debts expense - loan ( Note 6 ) 257,655 83,197 Bad debts written off (81,854) (32,742) Release of specific provisions for loans (Note 7) (112,810) - Balance at 31 May/December 210, , 422 Micro Aldi is writing loan offs after 180 days, which in accordance with the Foundation s business policy. 13. Other assets 25

28 December 31, Accrued interest receivable 61,398 36,413 Prepaid rent expenses* 23,144 1,763 Prepaid expenses for processing of loan applications** 10,323 - Other receivables (refundation of fees for maternity leave) 1, Consumable stores *** ,479 39,816 Specific provision for interest (16,633) - Total 79, * Prepaid expenses refers to: rent expenses for offices in Sarajevo, Pale and Trebinje. ** This item represents prepaid expenses for processing of loan applications to EFSE in amount of KM 7,823 and NLB Tuzlanska Bank in amount of KM 2,500. *** Consumable stores are written off 100 % when put into use and rest at the end of using period. (a) Provisions for interest The movements in provisions for interest losses are as follows: Balance at 1 January - - Doubtful debts expense - interest ( Note 6 ) 28,561 - Bad debts written off (11,928) - Balance at 31 December 16, Property and equipment 26

29 Furniture & Buildings equipment Vehicles Computer equipment Total Cost As at January 1, 114,403 30, ,879 88, ,798 Additions - 17,249 21,685 5,321 44,255 Writte off's - (1,667) - (9,679) (11,346) As at Accumulated depreciation As at January 1, 9,415 23,134 67,383 38, ,365 Depreciation 2,291 1,628 15,123 22,768 41,810 Writte off's - (1,667) - (9,679) (11,346) As at 11,706 23,095 82,506 51, ,829 Net book value as at 31 December 102,697 22,726 41,058 32, ,878 Net book value as at 31 December 104,988 7,105 34,496 49, ,433 Micro ALDI possesses business premise in Goražde of 142 m 2 which net book value is KM 99,410; part of this premise (95m 2 ) was pledged as collateral to Raiffeisen Bank for a loan. Organization has insurance contracts with Sarajevo Osiguranje against risks of theft, fire and water accidents. 15. Intangible assets Software 11,557 8,870 Additions 7,610 2,687 Accumulated depreciation (11,233) (7,752) Total 7,934 3, Other liabilities 27

30 Salaries (net) 17,176 43,801 Contributions and taxes on salaries 6,131 27,914 Suppliers 15,348 24,477 Accrued interest payable 55,243 17,928 Accrued other costs 465 4,670 Total 100, , Deferred income (donations) Deferred revenue (fee) * 74,781 69,817 Deferred revenue (donation of fixed assets) (NOVIB) ** - 16,010 Total 74,781 85,827 * Deferred revenue (fee) represents 2% fee collected at extension of loans that will be recognized as income through repayment period of respective loan (Note 1.e). Movements during the year are presented bellow: As at January 1 69,817 46,324 Additions during year 145, ,376 Transferred to revenue (Notes 1.e and 3) (140,366) (117,883) As at December 31 74,781 69,817 ** MIKRO ALDI has received a donation in 2002 from NOVIB in amount of KM 80,000 for fixed assets. Income from this donation is recorded in the amount of depreciation. Movements during the year are presented bellow: 28

31 As at January 1 16,010 26,609 Depreciation of fixed assets donated by NOVIB (Notes 2.f. and 9) 16,010 (10,599) As at December 31-16, Liabilities for loans a) Analysis by type of loan NOVIB(1) 312, ,033 Raiffeisen bank Sarajevo(2) 275,000 1,275,000 CBS NLB banka (3) 525, ,000 UNICREDIT Zagrebačka Bank(4) 600, ,000 PLANET RESPONSIBILIT FOND(5) 293, ,374 BLUE ORCHARD (6) 195, ,583 EFSE(7) 1,173, ,375 Intesa Sanpaolo bank Sarajevo (8) 498,000 - PBS DD filijala Goražde (9) 200,000 - ABS DD filijala Goražde (10) 400,000-4,473,143 3,309,365 (1) NOVIB MIKRO ALDI signed contract with NOVIB for amount of EUR 512,000 on March 25, 29

32 2002. Interest rate is 9 % p.a. Maturity of the loan is 5 years and 9 months with grace period of 2 years. Repayment started on An additional contract with NOVIB under number FDE /L-64 was signed for amount of EUR on 1 February The main condition of the contract is that the purpose of the loan is lending of loans only to the target population. Interest rate is 8 %. Maturity of the loan is 5 years with grace period of 1 year on principal. The guarantee for the both of loan is the portfolio which is separately recorded as NOVIB assets. (2) Raiffeisen bank Sarajevo Mikrocredit organization has signed an ANEX 9 on General contract for a loan and business cooperation with Raiffeisen bank d.d Sarajevo at 12 December number OU /03 and approved: Short term loan number 14275/07 at in amount of 500,000 KM with interest rate 7,35 % annually Long term loan number 06766/07 at June 01, in amount of 500,000 KM with interest rate 8 % and with maturity June, 01,2009 Long term loan number 10224/07 at 3 September in amount of 400,000 KM with interest rate 8 % annually and with maturity 3 September 2009 Guarantees for this loan are property of the Organization MIKRO ALDI (part of business premises 95 m 2 ) and business premises of its founder U.G. ALDI 207 m 2 and portfolio from Raiffeisen bank funds. (3) NLB Tuzlanska bank MKF MIKRO Aldi is concluded as at 12 August. year with NLB Tuzla BANK d.d. Tuzla agreement on long-term loan number in the amount of KM 600,000 (EUR ,13) for a period of 24 months at a rate of 6-month EURIBOR + 4% per year. Guarantee for this loan are: bills Foundation, assignment for the benefit of all bank claims from the users of credit in the ratio of 1:1,5 and 10% interest-free deposit from the first tranche loan of 60,000 KM (see Note 11). (4) UNICREDIT ZAGREBAČKA Bank 30

33 At 8 February, Foundation concluded a new short term loan agreement number: 09//0342, for period of 12 months and interest rate at 7,3%. Guarantees for this loan are: bills of exchange of the Foundation (5), cession to the bank. Fuundation was concluded as at 05 September. under the number 09//0342 new short-term loan in the amount of KM 200,000 for a period of 12 months and interest rate of 8% (see Note 11). (5) Planet Finance ( Responsibility SICAV ( LUX ) Mikrofinanz-Fonds ) September 11, MIKRO ALDI has signed a short term loan for the financing credit portfolio in amount of 150,000 EUR ( KM ) with interest rate of 9 % annually contract with Planet Finance ( Responsibility SICAV ( LUX ) Mikrofinanz-Fonds) from Luxemburg. Guarantees for this loan are cession to the lender. (6) BLUE ORCHARD MIKRO ALDI has at April 27, signed a contract with BLUE ORCHARD on short term loan in amount of 100,000 EUR with interest rate six months EUROLIBOR plus 6.75 % p.a. This credit was returned at 27 April. Blue Orchard is at April 28, approved a new loan to the Organization in amount of 100,000 EUR with interest rate six months EUROLIBOR plus 5.50 % p.a. There are no guarantees for this loan. (7) EFSE Mikrocredit organization based on General contract with European Fund for Southeast Europe (EFSE) at 13 December has signed a long term loan contract No.XXBAS ALDI 001 in amount of 600,000 EUR. Loan is approved with interest rate of 8.47 % on 3 years and 15 mounts grace period, with maturity 22 March MIKRO ALDI repays principal and interest for these loans according to the contracted repayment schedules. (8) Intesa Sanpaolo bank Sarajevo 31

34 Microcredit Foundation is concluded with Intesa Sanpaolo bank dd Sarajevo Agreement on short-term borrowings by the principle of current account as follows: Contract no. KM KK/08 as of 28 October. year to 166,000 KM, with interest rate 3-month EURIBOR / Reuters / % year; Contract No. KM KK/08 as of 17. Novembar. year to 166,000 KM, with interest rate 3-month EURIBOR / Reuters / % per year Contract no. KM KK/08 as of 04. Decembar. year to 166,000 KM, with interest rate 3-month EURIBOR / Reuters / % per year Guarantees for this loan are bills and cession of the credit portfolio to the lender (9) PBS DD branch office Goražde MKF MIKRO Aldi is concluded 26. Novembar. year with PBS DD branch Goražde agreement on short-term loan for the current operation no. IV /08 amounting to 200,000 KM at a rate of 10% per year. Collateral for this loan are: bills Foundation and the cession od the credit portfolio to the lender in the amount of 400,000 KM. (10) ABS DD branch office Goražde Fundation is concluded 28.Novembar. year with ABS banka dd - branch Goražde agreement on short-term loan no. 054-Kp-043/08 amounting to 400,000 KM at a rate of 8.80% per annum Collateral for this loan are: bills Foundation and the cession od the credit portfolio to the lender b) Maturity analysis 32

35 Up to 1 year (with possibility of prolongation) 3,065,812 2,242,615 Over 1 year 1,407,331 1,066,750 4,473,143 3,309, Founder s equity Since the MKF "MIKRO ALDI" is a non-profit organisation, there is no share capital issued, but in accordance with Law on Micro credit organisation it has founders' equity, 20. Retained earnings/ (loss) (a) Movement schedule Balance as at 1 January 1,828,571 1,368,788 Net result of the year (before donations) 588, ,668 Donations from NOVIB and EFSA 16,588 25,115 Balance as at 31 December 2,434,104 1,828,571 (b) Distribution of the profit The profit of the micro credit Fondation has to be used for the micro credit activities. 21. Related party transactions As at 31 December. the Foundation had transactions with the Managing Board and Audit Committee as related parties on the basis of compensation as shown in the note 22. Foundation does not have internal loans. Foundation has rules about conflict of interests which does not allow issuing of loans to employees or to members of the Boards of Directors and Audit Commitee. 22. Directors remuneration 33

36 A listing of the members of the Management Board is shown on page 7 of the Financial Statements. In the period from 1 January to 31 december the total remuneration of the management was in amounts of KM (: KM 115,880). The Board of Directors and Audit Commitee as shown on page 6 of the Financial Statements has received in period from 1 January to 31 December compensations in amount of KM Maturity analysis The amount of total assets and total liabilities analyzed by maturity at is as follows: Demand (Including arrears) Up to 6 months From 6 months to 1 year Over 1 year Total ASSETS Cash and cash equivalents 444, ,263 Deposits with banks ,000-80,000 Loans and advances to customers 256,489 1,401,650 1,775,280 3,666,876 7,100,295 Other assets 47,955 7,880 9,456 14,555 79,846 Property, plant and equipment , ,878 Intangible assets ,934 7,934 TOTAL ASSETS 748,707 1,409,530 1,864,736 3,888,243 7,911,216 LIABILITIES Other liabilities 100, ,363 Deferred income (donations) 2,242 24,264 20,316 27,959 74,781 Liabilities for loans 32,011 1,485,838 1,547,963 1,407,331 4,473,143 TOTAL LIABILITIES 134,616 1,510,102 1,568,279 1,435,290 4,648,287 TOTAL ASSETS -/- LIABILITIES 614,091 (100,572) 296,457 2,452,953 3,262, Currency analysis 34

37 The amount of total assets and total liabilities analysed by currency at is as follows: KM EUR Total ASSETS Cash and cash equivalent Deposits with banks Loans and advances to customers Other current assets Property, plant and equipment Intangible assets TOTAL ASSETS LIABILITIES Other liabilities Deferred income (donations) Liabilities for loans TOTAL LIABILITIES TOTAL ASSETS -/- LIABILITIES ( ) Having in mind that local currency (KM) is linked to EURO, there is no foreign exchange risk exposure (Bosnia and Herzegovina applies Currency Board Principle that is based on EUR). 25. Post Balance Sheet Events 35

38 No any events have occurred since the balance sheet date, which significantly affect the state of affairs of the Organisation at the balance sheet date or which require additional disclosure. 36