Microcredit organisation “MIKRO ALDI" ­ GORAŽDE Financial statements for the year ended December 31, 2007
Microcredit organisation "MIKRO ALDI" Contents Page Responsibility for the financial statements 2 Independent Auditor's Report 3 General information 4 Ratio analysis 8 Financial Statements: Income Statement Balance sheet Statement of changes in equity Cash flow statement for the year 9 10 11 12 Notes to the Financial Statements 13­34
REVIK D.O.O. SARAJEVO AUDIT, ACCOUNTING AND CONSULTING Branilaca Sarajeva 20 tel./fax (00387) (33) 200­383 and 660­571 e­mail: revik@ bih.net.ba No:200 ­ 34 ­ 01/08 Date: 08.02.2008. Responsibility for the financial statements This statement is issued related to Audit of Financial Statements of Micro landing organisation MIKRO ALDI for the year ended December 31, 2007. For the purpose of expressing of opinion do the financial statements give true and fair view of the financial position of MIKRO ALDI for the year ended December 31, 2007, 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 Gazzette 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 Organization 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 Organization 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 Organization 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 Organization and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Signed on behalf of the Management Ferida Softić, General Director Safija Pleh, Finance manager
2 REVIK D.O.O. SARAJEVO AUDIT, ACCOUNTING AND CONSULTING Branilaca Sarajeva 20 tel./fax (00387) (33) 200­383 and 660­571 e­mail: revik@ bih.net.ba To the Board of directors Micro credit organisation "MIKRO ALDI" Report of the Independent Auditors We have audited the financial statements of Micro credit organisation "MIKRO ALDI" – Goražde for the year 2007. 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. 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. In our opinion. the financial statements present fairly. in all material respects. the financial position of the Micro credit organisation "MIKRO ALDI" ­ Goražde as at December 31, 2007, and of the results of its operations and its cash flows for the year 2007 in accordance with International Financial Reporting Standards. Revik d.o.o. Sarajevo Enver Mulalić , partner Edin Udovčić , certified auditor Sarajevo, 08 February 2008
3 1. General Information Establishment and activities Microcredit organization “MIKRO­ALDI” (hereafter Organization) is established in Federation of Bosnia and Herzegovina in accordance with the Law on microcredit organizations (“Official Gazette of Federation B&H, number 24/00), under the number R1M­5/00 and it has a license issued by the Federal Ministry of Social Affairs, Displaced Persons and Refugees to work as a microcredit 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 postwar recovery. Microcredit project was started as a part of the Association of Citizens for Local Initiatives (ALDI) in Gorazde. Microcredit operations were initiated with the support of the UNHCR loan assets project and technical assistance by the Local Initiatives Department until 1999. After 1999, the microcredit project received additional loan fund from OXFAM and NOVIB. Microcredit organization “MIKRO­ALDI” 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 05­4­35­M1­1796/00 as a nonprofit, nongovernmental and non­deposit organization. In accordance with the Decision on establishment from 2000, ALDI is the founder of the microcredit organization MIKRO­ALDI. 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 500,000. 3. In accordance with the Decision of the Board of Directors, Association of Citizens „ALDI“ as of September 15, 2001 transferred the ownership of KM 104.000 to „MIKRO­ ALDI“ into microcredit fund and the Decision is valid as of October 01, 2001. Main mission and vision of microcredit organization “MIKRO­ALDI” : Mission ­ MIKRO ALDI mission is to provide suitable financial services to economically active population with low­income 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.
Microcredit organisation "MIKRO ALDI" 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 low­income population. Purpose ­ The purpose of MIKRO ALDI existence is to alleviate poverty among population through financial services for start­up and development of a small business in order to contribute the global development of economy. Clients: Mostly women from Bosnian­Podrinja 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 small­scale production. Credit methodology: “MIKRO­ALDI” 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 2­5 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%. Following the new Law on microcredit organizations that was adopted at October 4 th 2006, the Organization plans to adjust its operation with the Law within 12 months after adoption of the Law. By the end of the 2007 organization did not complete mentioned adjustment because legislator delay in adoption suporting low acts .( Note 25 ) .
5 Microcredit organisation "MIKRO ALDI" Board of directors 1. Ibrahim Imamović President 2. Vesna Nemec – Klisura Member 3. Hasan Đozo Member 4. Mehmed Ćulov Member 5. Adil Tabaković Member 6. Ahmo Ađović Member 7. Elvedina Zec Member Management Board 1. Ferida Softić General director 2. Safija Pleh Financial manager 3. Selma Pilav Credit manager 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
6 Microcredit organisation "MIKRO ALDI" Organizational Structure for 2007
7 Microcredit organisation "MIKRO ALDI" Ratio analysis Efficiency ratios Active loan clients/ number of staff Active clients/number of loan officers Net outstanding portfolio/number of loan officers Percentage total operating expenses/ Average net portfolio Financial ratios Return on assets: Net operational income/average total assets Return on equity: Net operational income/average equity Yield on portfolio: Interest income and/or fees / average net portfolio outstanding 2007 2006 135 156 207 224 370,030 256.663 24,04% 24,52% 2007 2006 7.25 % 16.09% 7.89% 18.72% 31.93% 30.69%
8 Microcredit organisation "MIKRO ALDI" Income Statement (All amounts expressed in KM) Notes Year ended Year ended 31 31 December December 2007 2006 Interest income and loan fee income 3 1,484,423 1,350,684 Interest expense 3 (200,320) (207,261) Operating income 3 1,284,103 1,143,423 Operating expenses Bad and doubtful debts expense 4 6 (810,498) (83,197) (733,661) (38,618) (893,695) (772,279) 44,260 43,262 434,668 414,406 25,115 14,838 459,783 429,244 Operating expenses Other income 7 Net operational income/ expense Grant income Net income after grants 8 The accompanying notes are an integral part of these financial statements
9 Microcredit organisation "MIKRO ALDI" Balance sheet (All amounts expressed in KM) Notes As at 31 As at 31 December 2007 December 2006 ASSETS Cash and cash equivalent Deposits with banks Loans and advances to customers Other assets Tangible assets Intangible assets Total assets 10 11 12 13 14 15 315,874 20,000 5,595,450 39,816 196,433 3,805 6,171,378 95,089 185,633 4,106,606 39,218 174,411 3,429 4,604,386 Other liabilities Deferred income (donations) Liabilities for loans Total liabilities 16 17 18 118,790 85,827 3,309,365 3,513,982 100,766 72,933 2,233,074 2,406,773 Assossiation of citizens "ALDI" Capitalization Retained earnings Total equity 19 128,825 700,000 1,828,571 2,657,396 128,825 700,000 1,368,788 2,197,613 6,171,378 4,604,386 LIABILITIES AND EQUITY Total equity and liabilities 20 The accompanying notes are an integral part of these financial statements
10 Microcredit organisation "MIKRO ALDI" Statement of changes in equity (All amounts expressed in KM) Founder's equity Loan fund Loan Loan Assossiation Assossiation fund Fund Retained of citizens of citizens UNHCR OXFAM earnings "ALDI" "ALDI" /(loss) Total Balance at 31 December 2005 24,825 Net result for the period ­ Balance at 31 December 2006 24,825 Net result for the period ­ Balance at 31 December 2007 24,825 104,000 200,000 ­ ­ 104,000 200,000 ­ ­ 104,000 200,000 500,000 939,544 1,768,369 ­ 429,244 429,244 500,000 1,368,788 2,197,613 ­ 459,783 459,783 500,000 1,828,571 2,657,396 The accompanying notes are an integral part of these financial statements
11 Microcredit organisation "MIKRO ALDI" Cash flow statement (All amounts expressed in KM) December 31, December 31, 2007 2006 459,783 33,625 429,244 32,084 493,408 461,328 (1,488,844) (598) 18,024 (1,471,418) 188,574 2,401 13,442 1,204 205,621 (56,023) (56,023) (37,760) (37,760) 165,633 1,076,291 12,894 1,254,818 15,766 (682,799) 31,877 (635,156) Net increase (decrease) in cash and cash equivalents 220,785 (5,967) Cash and cash equivalents at beginning of year Cash and cash equivalents at end of the year 95,089 315,874 101,056 95,089 Net operational result Depreciation Cash flows from operating profits before changes in operating assets and liabilities Changes in operating assets and liabilities Net (increase)/decrease in loans and advances to customers Net (increase)/decrease in other assets Net increase/(decrease) in other liabilities Disposal of fixed assets Net cash from operating activities Cash flows from investing activities Purchase of property and equipment Net cash from investing activities Cash flow from financing activities Net (increase) / decrease in deposits with banks Net increase /( decrease) in liabilities for loans Net increase of deferred income Net cash from financing activities ­ The accompanying notes are an integral part of these financial statements
12 Microcredit organisation "MIKRO ALDI" 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 available­for­sale 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 plegged to the Euro (EUR 1 = KM 1.95583).
13 Microcredit organisation "MIKRO ALDI" (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 December 31, the principal exchange rate is: (in KM) 1 EUR 1USD 2007 2006 1,95583 1,33122 1.95583 1.485065 (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 deffered. Penalty interest is calculated on a cash basis. Income from basic activity refers to interest income. Financial income irelates 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. Interest income and expenses are recognized in the income statement on an accrual basis.
14 Microcredit organisation "MIKRO ALDI" Interest income is suspended when loans become doubtful of collection by more then 90 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 non­cash 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.
15 Microcredit organisation "MIKRO ALDI" 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 uncollectable, 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 write­down, 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 year­end. General provisionings for loans without arrears are 2 %. The following percentages of provisionings are applied for loans in arrears: Days in arrears Provisionings 2007 2006 1­30 days 31­60 days 61­90 days 91­120 dana 121­180 days >180 days (writte off) 20% 40% 60% 80% 100% 100% 20% 60% 80% 100% ­ ­ (i) Computer development costs Costs associated with maintaining computer software programmes 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 straight­line 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.
16 Microcredit organisation "MIKRO ALDI" (j) Property and equipment Property and equipment is stated in principal at historical cost less depreciation. Depreciation is calculated on the straight­line 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 2007 % 2,0 10­20 15,5 33,33 2006 % 2.0 10 ­ 20 15.5 33.33 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 with the current year
17 Microcredit organisation "MIKRO ALDI" 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 case­by­case 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,
18 Microcredit organisation "MIKRO ALDI" Liquidity risk Liquidity risk arises from the possibility that the Organisation may be unable to satisfy current and future financial commitments, The Organisation is exposed to calls on its available cash resources from maturing loans received by the Organisation and loan drawdowns, 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 (All amounts expressed in KM) Interest income and commision Interest on loans Loan fee income Interest expense Cost of capital from NOVIB Cost of capital from Raiffeisen Bank Sarajevo Cost of capital from NLB CBS Banka Cost of capital from DBF Microcredit fond Cost of capital from BLUE ORCHARD Cost of capital UniCredit Zarebačka Bank Cost of capital Planet Responsibilit Fond Net operating income 2007 2006 1,326,831 157,592 1,484,423 1,259,140 91,544 1,350,684 (71,260) (58,707) (27,628) (3,746) (19,181) (16,075) (3,462) (200,320) (105,526) (37,728) (24,628) (5,824) (33,555) ­ ­ (207,261) 1,284,103 1,143,423 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 defferred during the life time of the loan.
19 Microcredit organisation "MIKRO ALDI" 4. Operating expenses (All amounts expressed in KM) 2007 2006 Staff costs (Note 5) Depreciation Bank services Audit fee Education Maintains of equipment Communication Energy Fuel Insurance of fixed assets Other services Stationery Advertisement Rent Tax on services Membership­AMFI Currency exchange differences incomes Other 597,785 33,625 17,810 4,680 11,352 2,644 22,173 8,503 45,082 7,466 ­ 6,414 6,652 10,742 ­ 4,134 8,782 22,654 538,900 32,084 11,498 4,680 8,829 2,644 17,975 8,977 32,148 7,466 ­ 10,161 6,652 9,254 ­ 2,400 15,766 24,227 Total 810,498 733,661 2007 2006 Wages and salaries (net) Taxes and contribution on salary Travel costs Temporary services contract Food allowance Holliday allowance 320,201 203,831 10,539 17,428 32,176 13,610 267,690 178,589 10,695 9,587 57,711 14,628 Total 597,785 538,900 5. Staff costs (All amounts expressed in KM) The average number of persons employed by the "MIKRO ALDI" during the 2007 year was 23 (2006 ­ 22).
20 Microcredit organisation "MIKRO ALDI" The amount of 3,541 KM for salaries and benefits for apprentices was reimbursed from Bureau for Employment , and these amount did not burden expenses of salaries and benefits. The Organization does not have any other retirement packages expect the one through the retirement system of the Federation of Bosnia and Herzegovina. 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 Organization does not have any obligations to pay out retirement checks to employees in the future. In 2007 MIKRO ALDI did not establish reservation for the future payment to employees . Organization does not have obligation to pay out retiremnet checks to employees in 2007 . Bank is calculated provision regarding expecting future payments to the employees after retirement in amount of 3 mountly salary's on the level Organization , but did not made liabilities bacause management have opinion that amount of provision does not represent material significiant item . ( 0,68 % Organization's profit before taxation in 2007 ) . In future , organization will calculate provision in accordiance with MRS 19 –Employee Benefits . 6. Bad and doubtful debts expense (All amounts expressed in KM) Loans and advances to customers (note 12e) 2007 2006 83,197 83,197 38,618 38,618
21 Microcredit organisation "MIKRO ALDI" 7. Other income (All amounts expressed in KM) 2007 2006 Income from previously write­off loans Currency exchange differences expenses Reimbursement from insurance company Interest on deposits in banks Other Collected court fees 23,913 9,625 8,782 473 ­ 1,467 24,072 15.766 655 885 1,884 ­ Total 44,260 43,262 2007 2006 Donation from IDB CGAP* Donation from NOVIB for fixed assets** Donation from ASSO ENTRADE 14,516 10,599 ­ ­ 14,447 391 Total 25,115 14,838 8. Grant income (All amounts expressed in KM) *In 2007 MIKRO ALDI received a reward for the financial transparency in amount USD 10,000 from the C GAP – Conto Assist the Poor ( Counsultiv group for the relif those in need ) ** See Note 17. 9. Taxation The Organisation is tax exempted in respect of corporate tax according to article 2 of the Law on Micro Finance Organizations, which determines that micro credit organisations should be regarded as non­profit organisations.
22 Microcredit organisation "MIKRO ALDI" Notes to the Balance Sheet 10. Cash and cash equivalents (All amounts expressed in KM) Cash at hand CBS NLB Bank Raiffeisen Bank, Goražde Nova Bank, Foča EFSE UniCredit Zagrebačka Bank Total 2007 2006 585 24,771 141,303 191 122,780 26,244 315,874 261 14,997 79,511 320 ­ ­ 95,089 Interest rates on transaction accounts at banks are 0.25 % annually. (2006.:0,3 % annually). 11. Deposits with banks (All amounts expressed in KM) 2007 2006 UniCredit Zagrebačka bank ( Term deposit ) CBS NLB Bank (Term deposit) 20,000 ­ ­ 185,633 Total 20,000 185,633 Term deposit represents restricted deposit at UniCredit Zagrebačka Bank, Mostar , contract number 45­06­006140 at 10.09.2007 and is utilized as a guarantee for a loan received from UniCredit Zagrebačka Bank , number 96/2007/0342 . Interest on a term deposit is 1,65 % annualy , with maturity of one year . 12. Loans and advances to customers (a) Portfolio
23 Microcredit organisation "MIKRO ALDI" Organization offers four loan products: ­ Short term loans ­ Loans for startup of business ­ Loan for development of business ­ Loan for VIP clients Every loan product has its own subproducts for various types of business like agriculture, fixed or current assets for other businesses. Loans are granted for the period up to 36 months (2006: generally due within 36 months) but average repayment period is 19 months ( 2006 : 14.5 mounths ) . Organization does not have renewed loans. Number of active clients is 3,100 (2006.:3,590). Total number of disbursed loans – 2,809 (2006.:3,486). The percentage of female clients is 78% (2006.: 81%) and male clients 22% (2006.:19 %). (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. c) Analysis by type of borrower Economic sector risk concentrations within the customer loan portfolio were as follows: (All amounts expressed in KM) Individual production companies Individual trade companies Individual service companies Agriculture Total (gross) Specific provision for credit risks Total (net) 2007 2006 472,764 1,683,936 1,507,390 2,078,782 5,742,872 (147,422) 5,595,450 429,930 1,253,595 843,154 1,676,894 4,203,573 (96,967) 4,106,606 (d) Geographical analysis
24 Microcredit organisation "MIKRO ALDI" As of 31 December 2007 all loans were disbursed to citizens of, or companies incorporated in the Federation of Bosnia and Herzegovina and Republika Srpska. (All amounts expressed in KM) Federation BiH Republic Srpska Total (gross) Specific provision for credit risks Total (net) 2007 2006 1,580,387 4,162,485 5,742,872 (147,422) 5,595,450 959,964 3,243,609 4,203, 573 (96,967) 4,106,606 2007 2006 Principal in arrears Principal in arrears 5,641,491 62,667 22,087 6,264 4,391 5,972 5,742,872 4.166,040 25,277 6,064 6,192 ­ ­ 4,203,573 (e) Arrears The amounts of loans in arrears are analysed as follows: (All amounts expressed in KM) Current loans Up to 30 days 31 ­ 60 days 61 ­ 90 days 91­ 120 days 121­180 days Total Arrears include all amounts of loan principal due but not collected. (f) Provisions
25 Microcredit organisation "MIKRO ALDI" The movements in provisions for losses are as follows: (All amounts expressed in KM) 2007 2006 Balance at 1 January Doubtful debts expense ( Note 6 ) Bad debts written off 96,967 83,197 (32,742) 124,615 38,618 (66,266) Balance at 31 December 147, 422 96,967 Mikro Aldi is writing loan offs after 180 days, which in accordance with the Organization’s business policy. 13. Other assets (All amounts expressed in KM) 2007 2006 Accrued interest receivable Prepaid expenses Other receivables Consumable stores * 36,413 1,763 846 794 27,671 6,502 4,213 832 Total 39,816 39,218 * Consumable stores are written off 50 % when put into use and rest at the end of using period. 14. Property and equipment
26 Microcredit organisation "MIKRO ALDI" (All amounts expressed in KM) Buildings Furniture & Computer equipment Vehicles equipment Total Cost 106,652 7,751 ­ 114,403 33,391 101,879 2,081 ­ (5,233) ­ 30,239 101,879 47,354 289,276 43,504 53,336 (2,581) (7,814) 88,277 334,798 7,242 2,173 ­ 9,415 25,142 51,878 3,225 15,505 (5,233) ­ 23,134 67,383 30,603 114,865 10,411 31,314 (2,581) (7,814) 38,433 138,365 Net book value as at 31 December 2007 104,988 7,105 34,496 49,884 196,433 Net book value as at 31 December 2006 99,410 8,249 50,001 16,751 174,411 As at January 1, 2007 Additions Disposals As at December 31, 2007 Accumulated depreciation As at January 1, 2007 Depreciation Disposals As at December 31, 2007 Mikro ALDI posesses busines 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 (All amounts expressed in KM) Software Additions Accumulated depreciation Total 2007 2006 8,870 2,687 (7,752) 8,870 ­ (5,441) 3,805 3,429 16. Other liabilities
27 Microcredit organisation "MIKRO ALDI" (All amounts expressed in KM) 2007 2006 24,477 43,801 27,914 17,928 4,670 12,456 44,768 28,531 14,296 715 118,790 100,766 2007 2006 Deferred revenue (fee) * Deffered revenue (donation of fixed assets) (NOVIB) ** 69,817 16,010 46,324 26,609 Total 85,827 72,933 Suppliers Salaries (net) Contributions and taxes on salaries Accrued interest payable Other Total 17. Deferred income (donations) (All amounts expressed in KM) * Deffered 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: (All amounts expressed in KM) As at January 1 Additions Transferred to revenue (Notes 1.e and 3) As at December 31 2007 2006 46,324 141,376 (117,883) ­ 120,736 (74,412) 69,817 46,324 ** 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 Microcredit organisation "MIKRO ALDI" (All amounts expressed in KM) As at January 1 ­ depreciation of fixed assets (Notes 2,f and 9) As at December 31 18. Liabilities for loans a) Analysis by type of loan (All amounts expressed in KM) NOVIB(1) Raiffeisen bank Sarajevo(2) CBS NLB banka (3) UNICREDIT Zagrebačka Bank(4) PLANET RESPONSIBILIT FOND(5) BLUE ORCHARD (6) DBMD (7) EFSE(8) (1) 2007 2006 26,609 (10,599) 16,010 41,056 (14,447) 26,609 2007 2006 552,033 1,275,000 300,000 400,000 293,374 195,583 ­ 293,375 3,309,365 949,067 305,000 500,000 ­ ­ 293,374 185,633 ­ 2,233,074 NOVIB MIKRO ALDI signed contract with NOVIB for amount of EUR 512,000 on March 25, 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 December 31, 2004. An additional contract with NOVIB under number FDE­503123/L­64 was signed for amount of EUR 300.000 on February 1, 2004. 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
29 Microcredit organisation "MIKRO ALDI" Mikrocredit organization has signed a ANEX 9 on General contract for a loan and business cooperation with Raiffeisen bank d.d Sarajevo at Decembar 12 , 2007 number OU ­5­ 052/03 and approved :
· Short term loan number 14275/07 at 12.12.2007 in amount of 500,000 KM with interest rate 7,35 % annualy
· Long term loan number 06766/07 at June 01 , 2007 in amount of 500,000 KM with interest rate 8 % and with maturity June , 01,2009
· Long term loan number 10224/07 at Septebar 03, 2007 in amount of 400,000 KM with interest rate 8 % annualy and with maturity Septebar 03 , 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) CBS NLB bank At September 13, 2006 MIKRO ALDI has signed a short term revolving contract with NLB TUZLANSKA BANKA d.d. Tuzla (with possibility of extension of two years) No 101068099 in amount of 500,000 KM at interest rate of 6.45 % annually. Balance of liabilities towards NLB bank at December 31, 2006 was 500,000 KM. Guarantees for this loan are depozit of DBMDF in amount of 125,000 USD and portfolio from NLB Tuzlanska banka funds. Credit is closed and deposit is returned to the DBMDF at September 11,2007 . Organization has signed a new short revolvig contract at Septembar 11,2007 .No 101624269/07 in amount of 300,000 KM with maturity Septembar 11,2008 and interest rate of 7,90 % annualy . Guarantees for this loan are bills of exchange and cession on credit portfolio beneficiary's of the Organization . (4) UNICREDIT ZAGREBAČKA Bank In 2007 MIKRO ALDI has signed with UniCredit Zagrebacka bank d.d. Mostar two short term loan contract for the business financing in individually amount of 200,000 KM ( Contract No.14/2007/0342 at February 02 , 2007 and contract No.96/2007/0342 at Septembar 04 , 2007 ) . These loans are aproved on 12 mounts with interest rate of 7,3% annualy . Guaranees for this loans are : bills of exchange of the Organization ( 5 ) , cession to the bank . (5) Planet Finance ( Responsability SICAV ( LUX ) Mikrofinaz­Fonds )
30 Microcredit organisation "MIKRO ALDI" September 11 , 2007 MIKRO ALDI has signed a short term loan for the financing credit portfolio in amount of 150,000 EUR ( 293.375 KM ) with interest rate of 9 % annualy contract with Planet Finance ( Responsability SICAV ( LUX ) Mikrofinaz­Fonds ) from Luxemborg . Guarantees for this loan is cession to the lender . (6) BLUE ORCHARD MIKRO ALDI has at March 7, 2006 signed a contract with BLUE ORCHARD on short trem loan in amount of 150,000 EUR with interest rate six months EUROLIBOR plus 6.75 % p.a. Balance of the loan at December 31, 2006. is 150,000 EUR. This credit is returned at March 03 , 2007 . Blue Orchard is at April 24 , 2007 with a same codition aproved a new loan to the Organization in amount of 100,000 EUR . There are no guarantees for this loan. (7) DBMDF MIKRO ALDI has signed a contract with Deutsche Bank Microcredit Development Fund at September 9, 2005 with interest rate of 3 % p.a. for issuing a guarantee deposit in amount of 125,000 USD to CBS­NLB bank. The contract is short term for one year with possibility of extension and DBMDF issued a approval for extension of the maturity. (8) EFSE Mikrocredit organization based on General contract with European Fund for Southeast Europe ( EFSE ) at Decembar 13 , 2007 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 March 22 , 2009 . MIKRO ALDI repays principal and interest for these loans according to the contracted repayment schedules. b) Maturity analysis (All amounts expressed in KM) Up to 1 year (with possibility of prolongation) Over 1 year 2007 2006 2,242,615 1,066,750 3,309,365 1,681,040 552,034 2,233,074
31 Microcredit organisation "MIKRO ALDI" 19. Founder’s equity Since the "MIKRO ALDI" is a non­profit organisation. There is no share capital issued, but in accordance with Low about Micro credit organisation it has founders equity, 20. Retained earnings/(loss) (a) Movement schedule (All amounts expressed in KM) 2007 2006 Balance as at 1 January Net result of the year (before donations) Donations from NOVIB and others 1,368,788 434,668 25,115 939,544 414,406 14,838 Balance as at 31 December 1,828,571 1,368,788 (b) Distribution of the profit The profit of the micro credit organisation has to be used for the micro credit activities. 21. Related party transactions There were no related party transactions during the 2006 and 2007. Organization does not have internal loans. Organization has rules about conflict of interests which does not allows issuing of loans to employees or to members of the Boards. 22. Directors’ remuneration A listing of the members of the Management Board is shown on page 7 of the Financial Statements. In 2007 the total remuneration of the management amounts KM 115,880 (2006: KM 114,986). The Board of Directors as shown on page 6 of the Financial Statements has not received any remuneration in 2006 and 2007 years .
32 Microcredit organisation "MIKRO ALDI" 23. Maturity analysis The amount of total assets and total liabilities analyzed by maturity at December 31, 2006 is as follows (KM): Demand From 6 (Including Up to 6 months to Over 1 arrears) months 1 year year Total 2007 ASSETS Cash and cash equivalents Deposits with banks Loans and advances to customers Other assets Property, plant and equipment Intangible assets TOTAL ASSETS 315,874 ­ ­ ­ 315,874 ­ ­ 20,000 ­ 20,000 76,427 456,744 983,920 4,078,359 5,595,450 36,413 2,609 794 ­ 39,816 ­ ­ ­ 196,433 196,433 ­ ­ ­ 3,805 3,805 428,714 459,353 1,004,714 4,278,597 6,171,378 LIABILITIES Other liabilities Deferred income (donations) Liabilities for loans TOTAL LIABILITIES 100,862 17,928 ­ ­ 118,790 ­ ­ 16,010 69,817 85,827 50,000 809,927 1,382,688 1,066,750 3,309,365 150,862 827,855 1,398,698 1,136,567 3,513,982 TOTAL ASSETS ­/­ LIABILITIES 277,852 (368,502) (393,984) 3,142,030 2,657,396
33 Microcredit organisation "MIKRO ALDI" 24. Currency analysis The amount of total assets and total liabilities analysed by currency at December 31, 2006 is as follows (KM): ASSETS Cash and cash equivalent Deposits with banks Loans and advances to customers Other current assets Property, plant and equipment Intangible assets TOTAL ASSETS KM EUR Total 315,874 20,000 5,595,450 39,816 196,433 3,805 6,171,378 ­ ­ ­ ­ ­ ­ ­ 315,874 20,000 5,595,450 39,816 196,433 3,805 6,171,378 118,790 LIABILITIES Other liabilities Deferred income (donations) Liabilities for loans TOTAL LIABILITIES 85,827 1,975,000 2,179,617 ­ ­ 1,334,365 1,334,365 118,790 85,827 3,309,365 3,513,982 TOTAL ASSETS ­/­ LIABILITIES 3,991,761 (1,334,365) 2,657,396 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 In procedure with Federal Ministary of Justice is adoption of Regulation about Regulation changes , modality's of maintain register foudation and foregin ungoverment organization . No 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.
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