Mikro_ALDI_AFS_07

8/8/2019 Mikro_ALDI_AFS_07

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Microcredit organisation MIKRO ALDI" - GORADE

Financial statements for the year

ended December 31, 2007


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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 9

Balance sheet 10

Statement of changes in equity 11

Cash flow statement for the year 12

Notes to the Financial Statements 13-34


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REVIK D.O.O. SARAJEVOAUDIT, ACCOUNTING AND CONSULTING

Branilaca Sarajeva 20tel./fax (00387) (33) 200-383 and 660-571

e-mail: revik@ bih.net.ba

2

No:200 - 34 - 01/08Date: 08.02.2008.

Responsibility for the financial statements

This statement is issued related to Audit of Financial Statements of Micro landingorganisation MIKRO ALDI for the year ended December 31, 2007.For the purpose of expressing of opinion do the financial statements give true and fair viewof the financial position of MIKRO ALDI for the year ended December 31, 2007, results ofits operations and cash flow for the period than ended, we as the Management areresponsible for ensuring that financial statements are prepared for each financial year inaccordance with the Law on accounting and Auditing of the Federation of Bosnia andHerzegovina (Official Gazzette of the Federation of Bosnia and Herzegovina No 32/05) inaccordance with International Financial Reporting Standards (IFRS) and InternationalStandards 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 thisreason, the Management continues to adopt the going concern basis in preparing thefinancial statements.In preparing those financial statements, the responsibilities of the Organization includeensuring 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 withreasonable accuracy at any time the financial position of the Organization and must alsoensure that the financial statements comply with the Accounting Law and Audit ofFederation of Bosnia and Herzegovina. The Management is also responsible forsafeguarding 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 Softi, General Director

Safija Pleh, Finance manager


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REVIK D.O.O. SARAJEVOAUDIT, ACCOUNTING AND CONSULTING

Branilaca Sarajeva 20tel./fax (00387) (33) 200-383 and 660-571

e-mail: revik@ bih.net.ba

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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" Gorade 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. ThoseStandards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An audit includesexamining on a test basis,evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significantestimates made by management. as well as evaluating the overall presentation of thefinancial 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" - Gorade as at December 31,2007, and of the results of its operations and its cash flows for the year 2007 in accordancewith International Financial Reporting Standards.

Revik d.o.o. Sarajevo

Enver Mulali , partner

Edin Udovi , certified auditor

Sarajevo, 08 February 2008


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1. General Information

Establishment and activities

Microcredit organization MIKRO-ALDI (hereafter Organization) is established in

Federation of Bosnia and Herzegovina in accordance with the Law on microcreditorganizations (Official Gazette of Federation B&H, number 24/00), under the number

R1M-5/00 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 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 05-4-35-M1-1796/00 as a nonprofit,

nongovernmental and non-deposit organization.

In accordance with the Decision on establishment from 2000, ALDI is the founder of themicrocredit organization MIKRO-ALDI. ALDI provided the following assets:

1. Founders 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 CitizensALDI 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 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.


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Vision - The vision of MIKRO ALDI is to become leading microcredit institution in area ofSoutheast Bosnia and Herzegovina, and to ensure a positive influence to the global trendsof economy development by its long term presence.

Goal - The goal of MIKRO ALDI is to build and develop a long term, self sustainableinstitution 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 inorder to contribute the global development of economy.

Clients:Mostly women from Bosnian-Podrinja and Sarajevo Cantons of Federation of B&H andsoutheastern part of Republic Srpska.

Loans are mostly utilized for financing working capital and equipment. The largest portionof 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 inaccordance 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 (noother 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 adoptionof the Law. By the end of the 2007 organization did not complete mentioned adjustment

because legislator delay in adoption suporting low acts .( Note 25 ) .


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6

Board of directors

1. Ibrahim Imamovi President

2. Vesna Nemec Klisura Member

3. Hasan ozo Member

4. Mehmed ulov Member

5. Adil Tabakovi Member

6. Ahmo Aovi Member

7. Elvedina Zec Member

Management Board

1. Ferida Softi General director

2. Safija Pleh Financial manager

3. Selma Pilav Credit manager

Activities of the Organisation are performed through:

1. Central office Gorade, Panorama bb street2. Branch office Viegrad, Kralja Petra I bb street3. Branch office Pale, Nikole Tesle bb street4. Office Foa, Krajika 20 street


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7

Organizational Structure for 2007


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8

Ratio analysis

Efficiency ratios 2007 2006

Active loan clients/ number of staff 135 156Active clients/number of loan officers 207 224

Net outstanding portfolio/number of loan officers 370,030 256.663Percentage total operating expenses/ Average net portfolio 24,04% 24,52%

Financial ratios 2007 2006

Return on assets: Net operational income/average total assets 7.25 % 7.89%Return on equity: Net operational income/average equity 16.09% 18.72%Yield on portfolio: Interest income and/or fees / average net

portfolio outstanding 31.93% 30.69%


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9

Income Statement

(All amounts expressed in KM)Notes

Year ended31 December

2007

Year ended 31December

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 4 (810,498) (733,661)Bad and doubtful debts expense 6 (83,197) (38,618)

Operating expenses (893,695) (772,279)

Other income 7 44,260 43,262

Net operational income/ expense 434,668 414,406

Grant income 8 25,115 14,838

Net income after grants 459,783 429,244

The accompanying notes are an integral part of these financial statements


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10

Balance sheet

(All amounts expressed in KM) NotesAs at 31

December 2007As at 31

December 2006

ASSETS

Cash and cash equivalent 10 315,874 95,089Deposits with banks 11 20,000 185,633Loans and advances to customers 12 5,595,450 4,106,606Other assets 13 39,816 39,218Tangible assets 14 196,433 174,411Intangible assets 15 3,805 3,429Total assets 6,171,378 4,604,386

LIABILITIES AND EQUITY

Other liabilities 16 118,790 100,766Deferred income (donations) 17 85,827 72,933Liabilities for loans 18 3,309,365 2,233,074Total liabilities 3,513,982 2,406,773

Assossiation of citizens "ALDI" 19 128,825 128,825Capitalization 700,000 700,000Retained earnings 20 1,828,571 1,368,788Total equity 2,657,396 2,197,613

Total equity and liabilities 6,171,378 4,604,386



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11

Statement of changes in equity

(All amounts

expressed in KM)

Founder's

equity

Assossiation

of citizens

"ALDI"

Loan fund

Assossiation

of citizens

"ALDI"

Loan

fund

UNHCR

Loan

Fund

OXFAM

Retained

earnings

/(loss) Total

Balance at 31

December 2005 24,825 104,000 200,000 500,000 939,544 1,768,369Net result for the period - - - - 429,244429,244

Balance at 31December 2006 24,825 104,000 200,000 500,000 1,368,788 2,197,613

Net result for theperiod - - - - 459,783 459,783

Balance at 31December 2007 24,825 104,000 200,000 500,000 1,828,571 2,657,396



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12

Cash flow statement

(All amounts expressed in KM)December 31,

2007December 31,

2006

Net operational result 459,783429,244Depreciation 33,625 32,084Cash flows from operating profits before changes in operatingassets and liabilities 493,408 461,328

Changes in operating assets and liabilities Net (increase)/decrease in loans and advances to customers (1,488,844) 188,574 Net (increase)/decrease in other assets (598) 2,401 Net increase/(decrease) in other liabilities 18,024 13,442Disposal of fixed assets - 1,204

Net cash from operating activities (1,471,418) 205,621

Cash flows from investing activitiesPurchase of property and equipment (56,023) (37,760)Net cash from investing activities (56,023) (37,760)

Cash flow from financing activities Net (increase) / decrease in deposits with banks 165,633 15,766 Net increase /( decrease) in liabilities for loans 1,076,291 (682,799) Net increase of deferred income 12,89431,877Net cash from financing activities 1,254,818 (635,156)

Net increase (decrease) in cash and cash equivalents 220,785 (5,967)

Cash and cash equivalents at beginning of year 95,089 101,056Cash and cash equivalents at end of the year 315,874 95,089



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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 microenterprises 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 costconvention 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 Herzegovinas official

monetary unit, Konvertibilna Marka (KM), which is plegged to the Euro (EUR 1 = KM

1.95583).


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(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 asissued by the Central Bank of the Bosnia and Herzegovina. As of December 31, the

principal exchange rate is:

(in KM) 2007 2006

1 EUR 1,95583 1.95583

1USD 1,33122 1.485065

(d) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheetwhen there is a legally enforceable right to set off the recognised amounts and there is anintention 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.


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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 ofresources to the organization. These grants are recognised as income, whenever there isreasonable 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 incomestatement in the same manner depreciation of the related fixed assets is charged to theincome statement.

There were no non-cash donations.

(g) In kind donation

In - kind donation are benefits or subsidies that the organization receives to supportoperations, 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 downare 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 thatthe Organisation will not be able to collect all amounts due. The amount of the provision isthe difference between the carrying amount and the recoverable amount, being the presentvalue of expected cash flows including amounts recoverable from guarantees and collateral,discounted based on the interest rate at inception.


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The loan loss provision also covers losses where there is objective evidence that probablelosses 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 ratingsallocated 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 relatedprovision for impairments, subsequent recoveries are credited to the bad and doubtful debtexpense 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 numerousfactors including, but not limited to, the financial condition of the borrower, existence andquality of collateral, domestic economic conditions, the composition of the loan portfolioand prior bad debt experience and repayments after year-end.

General provisionings for loans without arrears are 2 %.

The following percentages of provisionings are applied for loans in arrears:

Provisionings Days in arrears 2007 2006

1-30 days 20% 20%

31-60 days 40% 60%

61-90 days 60% 80%

91-120 dana 80% 100%

121-180 days 100% -

>180 days (writte off) 100% -

(i) Computer development costs

Costs associated with maintaining computer software programmes are recognised as anexpense as incurred. However, expenditure that enhances and extends the benefits ofcomputer software programmes beyond their original specifications and lives is recognisedas a capital improvement and added to the original cost of the software. Computer softwaredevelopment costs recognised as assets are amortised using the straight-line method overtheir useful lives but not exceeding a period of five years. Costs associated with themaintenance of existing computer software programmes are expensed as incurred.


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(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:

2007 2006

% %

Buildings 2,0 2.0

Furniture and equipment 10-20 10 - 20

Vehicles 15,5 15.5

Computer equipment 33,33 33.33

Where the carrying amount of an asset is greater than its estimated recoverable amount, it iswritten 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 theincome 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


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2. Risks associated with financial instruments

In the normal course of business, the Organisation provides to its customers a variety offinancial 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 theOrganisation evaluates each customers credit worthiness on a case-by-case basis, Theamount of collateral obtained, if it is deemed necessary by the Organisation upon theextension of credit, is based on credit officer's credit evaluation of the client, Collateral heldvaries but may include guarantees, payment orders and acceptance letters, The Organisationstrives to maintain a credit risk profile that is diverse in terms of industry and borrowerconcentration,

Market risk

In the normal course of business, the Organisation is exposed to market risks, Market risksarise from open positions in interest rate and currency, all of which are exposed to generaland specific market movements,

Currency risk

The Organisation may invest in assets denominated in currencies other than its reportingcurrency, the convertible mark (KM), Consequently, the Organisation is exposed to risksthat the exchange rate of the convertible mark relative to other currencies may change in amanner which has an adverse effect on the reported value of that portion of theOrganisations 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 ofmarket interest rates on its financial position and cash flows, Interest margins may increaseas a result of such changes but may reduce or create losses in the event that unexpectedmovements arise,


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Liquidity risk

Liquidity risk arises from the possibility that the Organisation may be unable to satisfycurrent and future financial commitments,

The Organisation is exposed to calls on its available cash resources from maturing loansreceived by the Organisation and loan drawdowns, The Organisation does not maintain cashresources to meet these needs as experience shows that a minimum level of reinvestment ofmaturing funds can be predicted with a high level of certainty,

Notes to the Income Statement

3. Net operating income

(All amounts expressed in KM) 2007 2006

Interest income and commisionInterest on loans 1,326,831 1,259,140Loan fee income 157,592 91,544

1,484,423 1,350,684

Interest expenseCost of capital from NOVIB (71,260) (105,526)Cost of capital from Raiffeisen Bank Sarajevo (58,707) (37,728)Cost of capital from NLB CBS Banka (27,628) (24,628)Cost of capital from DBF Microcredit fond (3,746) (5,824)Cost of capital from BLUE ORCHARD (19,181) (33,555)

Cost of capital UniCredit Zarebaka Bank (16,075) -Cost of capital Planet Responsibilit Fond (3,462) -

(200,320) (207,261)

Net operating income 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.


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4. Operating expenses


Staff costs (Note 5) 597,785 538,900Depreciation 33,625 32,084Bank services 17,810 11,498Audit fee 4,680 4,680

Education 11,352 8,829Maintains of equipment 2,644 2,644Communication 22,173 17,975Energy 8,503 8,977Fuel 45,082 32,148Insurance of fixed assets 7,466 7,466Other services - -Stationery 6,414 10,161Advertisement 6,652 6,652Rent 10,742 9,254

Tax on services - -Membership-AMFI 4,134 2,400Currency exchange differences incomes 8,782 15,766Other 22,654 24,227

Total 810,498 733,661

5. Staff costs


Wages and salaries (net) 320,201 267,690Taxes and contribution on salary 203,831 178,589Travel costs 10,539 10,695Temporary services contract 17,428 9,587Food allowance 32,176 57,711Holliday allowance 13,610 14,628

Total 597,785 538,900

The average number of persons employed by the "MIKRO ALDI" during the 2007 year was23 (2006 - 22).


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The amount of 3,541 KM for salaries and benefits for apprentices was reimbursed fromBureau 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 representmaterial 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


Loans and advances to customers (note 12e) 83,197 38,61883,197 38,618


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7. Other income


Income from previously write-off loans 23,913 24,072Currency exchange differences expenses 9,625 15.766Reimbursement from insurance company 8,782 655Interest on deposits in banks 473 885

Other - 1,884Collected court fees 1,467 -

Total 44,260 43,262

8. Grant income


Donation from IDB CGAP*14,516 -

Donation from NOVIB for fixed assets** 10,599 14,447Donation from ASSO ENTRADE - 391

Total 25,115 14,838

*In 2007 MIKRO ALDI received a reward for the financial transparency in amount USD10,000 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 theLaw on Micro Finance Organizations, which determines that micro credit organisationsshould be regarded as non-profit organisations.


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Notes to the Balance Sheet

10. Cash and cash equivalents


Cash at hand 585 261CBS NLB Bank 24,771 14,997Raiffeisen Bank, Gorade 141,303 79,511

Nova Bank, Foa 191 320EFSE 122,780 -UniCredit Zagrebaka Bank 26,244 -Total 315,874 95,089

Interest rates on transaction accounts at banks are 0.25 % annually. (2006.:0,3 % annually).

11. Deposits with banks


UniCredit Zagrebaka bank ( Term deposit ) 20,000 -CBS NLB Bank (Term deposit) - 185,633

Total 20,000 185,633

Term deposit represents restricted deposit at UniCredit Zagrebaka Bank, Mostar , contract

number 45-06-006140 at 10.09.2007 and is utilized as a guarantee for a loan received from

UniCredit Zagrebaka 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


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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 nothave 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 annualinterest 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:


Individual production companies 472,764 429,930Individual trade companies 1,683,936 1,253,595

Individual service companies 1,507,390 843,154

Agriculture 2,078,782 1,676,894Total (gross) 5,742,872 4,203,573Specific provision for credit risks (147,422) (96,967)Total (net) 5,595,450 4,106,606

(d) Geographical analysis


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As of 31 December 2007 all loans were disbursed to citizens of, or companies incorporatedin the Federation of Bosnia and Herzegovina and Republika Srpska.


Federation BiH 1,580,387 959,964

Republic Srpska 4,162,485 3,243,609

Total (gross) 5,742,872 4,203, 573

Specific provision for credit risks (147,422) (96,967)Total (net) 5,595,450 4,106,606

(e) Arrears

The amounts of loans in arrears are analysed as follows:


Principal inarrears

Principal inarrears

Current loans 5,641,491 4.166,040

Up to 30 days 62,667 25,277

31 - 60 days 22,087 6,064

61 - 90 days 6,264 6,192

91- 120 days 4,391 -

121-180 days 5,972 -

Total 5,742,872 4,203,573

Arrears include all amounts of loan principal due but not collected.

(f) Provisions


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The movements in provisions for losses are as follows:


Balance at 1 January 96,967 124,615Doubtful debts expense ( Note 6 ) 83,197 38,618Bad debts written off (32,742) (66,266)

Balance at 31 December 147, 422 96,967

Mikro Aldi is writing loan offs after 180 days, which in accordance with the Organizationsbusiness policy.

13. Other assets


Accrued interest receivable 36,413 27,671Prepaid expenses 1,763 6,502Other receivables 846 4,213Consumable stores * 794 832

Total 39,816 39,218

* Consumable stores are written off 50 % when put into use and rest at the end of usingperiod.

14. Property and equipment


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(All amounts expressed in KM)Buildings Furniture &

equipment VehiclesComputerequipment Total

Cost

As at January 1, 2007 106,652 33,391 101,879 47,354 289,276Additions 7,751 2,081 - 43,504 53,336Disposals - (5,233) - (2,581) (7,814)As at December 31, 2007 114,403 30,239 101,879 88,277 334,798

Accumulated depreciation

As at January 1, 2007 7,242 25,142 51,878 30,603 114,865Depreciation 2,173 3,225 15,505 10,411 31,314Disposals - (5,233) - (2,581) (7,814)As at December 31, 2007 9,415 23,134 67,383 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

Mikro ALDI posesses busines premise in Gorade of 142 m2 which net book value is KM

99,410 part of this premise (95m2) 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 8,870 8,870Additions 2,687 -Accumulated depreciation (7,752) (5,441)

Total 3,805 3,429

16. Other liabilities


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Suppliers 24,477 12,456Salaries (net) 43,801 44,768Contributions and taxes on salaries 27,914 28,531Accrued interest payable 17,928 14,296Other 4,670 715

Total 118,790 100,766

17. Deferred income (donations)


Deferred revenue (fee) * 69,817 46,324Deffered revenue (donation of fixed assets) (NOVIB) ** 16,010 26,609

Total 85,827 72,933

* Deffered revenue (fee) represents 2% fee collected at extension of loans that will berecognized as income through repayment period of respective loan (Note 1.e).

Movements during the year are presented bellow:


As at January 1 46,324 -Additions 141,376 120,736Transferred to revenue (Notes 1.e and 3) (117,883) (74,412)

As at December 31 69,817 46,324

** MIKRO ALDI has received a donation in 2002 from NOVIB in amount of KM 80,000for fixed assets. Income from this donation is recorded in the amount of depreciation.

Movements during the year are presented bellow:


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As at January 1 26,609 41,056- depreciation of fixed assets (Notes 2,f and 9) (10,599) (14,447)

As at December 31 16,010 26,609

18. Liabilities for loans

a) Analysis by type of loan


NOVIB(1) 552,033 949,067Raiffeisen bank Sarajevo(2) 1,275,000 305,000CBS NLB banka (3) 300,000 500,000UNICREDIT Zagrebaka Bank(4) 400,000 -PLANET RESPONSIBILIT FOND(5) 293,374 -BLUE ORCHARD (6) 195,583 293,374

DBMD (7) - 185,633EFSE(8) 293,375 -

3,309,365 2,233,074

(1) 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 FDE-503123/L-64 was signed foramount 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 NOVIBassets.

(2) Raiffeisen bank Sarajevo


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Mikrocredit organization has signed a ANEX 9 on General contract for a loan and businesscooperation 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 m2) and business premises of its founder U.G. ALDI 207 m2 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) No101068099 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 .No101624269/07 in amount of 300,000 KM with maturity Septembar 11,2008 and interestrate of 7,90 % annualy .Guarantees for this loan are bills of exchange and cession on credit portfolio beneficiary's of

the Organization .

(4) UNICREDIT ZAGREBAKA Bank

In 2007 MIKRO ALDI has signed with UniCredit Zagrebacka bank d.d. Mostar two shortterm 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 atSeptembar 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 ) Mikrofinaz-Fonds )


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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 % annualycontract with Planet Finance ( Responsability SICAV ( LUX ) Mikrofinaz-Fonds ) fromLuxemborg . 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 returnedat 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 CBS-NLB bank. The contract is short term for one year with possibilityof 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 contractedrepayment schedules.

b) Maturity analysis


Up to 1 year (with possibility of prolongation) 2,242,615 1,681,040Over 1 year 1,066,750 552,034

3,309,365 2,233,074


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19. Founders equity

Since the "MIKRO ALDI" is a non-profit organisation. There is no share capital issued, butin accordance with Low about Micro credit organisation it has founders equity,

20. Retained earnings/(loss)

(a) Movement schedule


Balance as at 1 January 1,368,788 939,544 Net result of the year (before donations) 434,668 414,406Donations from NOVIB and others 25,115 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 .


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23. Maturity analysis

The amount of total assets and total liabilities analyzed by maturity at December 31, 2006is as follows (KM):

Demand

(Includingarrears)

Up to 6months

From 6

months to1 year

Over 1year

Total2007

ASSETSCash and cash equivalents 315,874 - - - 315,874

Deposits with banks - - 20,000 - 20,000

Loans and advances to customers 76,427 456,744 983,920 4,078,359 5,595,450

Other assets 36,413 2,609 794 - 39,816

Property, plant and equipment - - - 196,433 196,433

Intangible assets - - - 3,805 3,805

TOTAL ASSETS 428,714 459,353 1,004,714 4,278,597 6,171,378

LIABILITIESOther liabilities 100,862 17,928 - - 118,790

Deferred income (donations) - - 16,010 69,817 85,827

Liabilities for loans 50,000 809,927 1,382,688 1,066,750 3,309,365

TOTAL LIABILITIES 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


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24. Currency analysis

The amount of total assets and total liabilities analysed by currency at December 31, 2006 isas follows (KM):

KM EUR Total

ASSETSCash and cash equivalent 315,874 - 315,874

Deposits with banks 20,000 - 20,000

Loans and advances to customers 5,595,450 - 5,595,450

Other current assets 39,816 - 39,816

Property, plant and equipment 196,433 - 196,433

Intangible assets 3,805 - 3,805

TOTAL ASSETS 6,171,378 - 6,171,378

LIABILITIESOther liabilities 118,790 - 118,790

Deferred income (donations) 85,827 - 85,827

Liabilities for loans 1,975,000 1,334,365 3,309,365

TOTAL LIABILITIES 2,179,617 1,334,365 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 onEUR).

25. Post Balance Sheet Events

In procedure with Federal Ministary of Justice is adoption of Regulation about Regulationchanges , modality's of maintain register foudation and foregin ungoverment organization .

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

Mikro_ALDI_AFS_07

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