annual report 2007

1Preparing the Way for Greater Impact

2007 Annual Report2


WHO WE ARE

KMBI’s vision is to see people in

communities live in abundance with strengthened

faith in God and in right relationship with their

fellowmen and the rest of creation.

The organization and its people is driven

by its mission of being a Christ-centered development

organization existing to help in transforming

the lives of its clients and develop its human resources

who will provide sustainable microfinance, training,

and demand-driven non-financial services.

All of KMBI’s programs and projects are anchored

on the values of Respect, Integrity, Stewardship,

Commitment to the Poor, Discipline,

Innovation, and Excellence.

In 2007, it began its journey towards Goal 25.250

to reach out to 250,000 Filipino households on its 25th year.

Table of Contents Messages 4

Operational Highlights 6 Accomplishments 8

ENTREP Inspiring Story 15 Microentrepreneurs’ Summit Report 16

Audited Financial Statement 18KMBI History 39

The Board of Trustees 40

The Management Committee 41

2007 Annual Report4

Message from the CHAIRMAN

DR. AMELIA L. GONZALESChairman and President

It is my pleasure to announce that 2007 has been a successful year

for KMBI. Its seven strategic directions that charted its path to full action

leading to greater impact in the next five years are being crossed into and

the road map is being followed. We have remained focused on accomplishing

our mission towards poverty alleviation. More than that, the organization’s

determination in seeing holistic transformation happening in the lives of the

staff and program members up to the communities has increased as plans

were realized. The task of the organization is unique and vital since we are

maximizing women capacities through the delivery of financial and non-

financial products and services, engaging into community development,

enhancing potentials of our human resources and building symbiotic

relationship with local and international partners.

Based on the performance updates, our organization is at par

if not above the other players in the industry. It has almost reached the

final lap, in terms of outreach, of the goal it has set. One of its significant

achievements during the year was the First Microentrepreneurs’ Summit

which was attended by almost 10,000 microentrepreneurs from Luzon. On

the other hand, we were moved to remain steadfast as different challenges

in the operation and with the establishment of the bank were encountered.

As what our Executive Director said, this is our journey. I enjoin

my fellow board members and the management and staff to fulfill our Goal

25.250. The apostle Paul said, “Christ chose some of us to be apostles,

prophets, missionaries, pastors, and teachers, so that his people would

learn to serve and his body would grow strong. This will continue until we

are united by our faith and by our understanding of the Son of God. Then

we will be mature, just as Christ is, and we will be completely like him”

(Eph. 4:11-13). God has called each and every one of us to have a heart

for the poor. And, alongside this calling, He equipped us with talents and

skills to do the work. Let us use the gifts we received from Him in furthering

His Kingdom. Let us continually be obedient to the call and I know God will

never leave us nor forsake us.

To God be the glory!


EDGARDO S. MERCEDESExecutive Director

I would describe the year 2007 not only as another productive year in the last 21 years of KMBI, but also as a year of

confirmation. By the grace of God, KMBI was able to accomplish things which to my mind can only be done by “big boys”

in the profit sector. They were also confirmations of what the organization, by completely depending on God, can do. One

of these was the First Microentrepreneurs’ Summit held at the Araneta Coliseum and attended by almost 10,000 women-

microentrepreneurs. It was the first, and also another milestone, in the organization’s history!

The success of the ME Summit is a confirmation because it is the epitome of what KMBI is envisioning in fighting the

problem of chronic poverty. During the summit, you would see that almost every sector was represented – the government,

business, media, church, women, youth, and the civil society. All the stakeholders gathered together and contributed to the

success of the event. To me, it is a picture of collective effort against the complex problem of poverty. Surely, poverty can

be made history when there is the presence of God and the participation of all the stakeholders.

KMBI never claimed that it can eradicate poverty alone. It always acknowledges not only its dependence on God, but

also its limitations in many ways and its need for partners. When we came up with the theme for the year 2007, “Preparing

the Way for Greater Impact,” we had in our minds doing the tasks along with others doing them. Preparing the way, especially

for God’s Kingdom, can never be monopolized by any earthly entity. We can only choose to take the opportunity to be used

by God as His instrument in facilitating holistic transformation for His Kingdom and thereby create greater impact.

As we leave 2007, I pray that the accomplishments KMBI had will serve as confirmations to many of us – not of what

we can do, but of what God can do – in continuously doing the work of readying the way for greater impact... for it is only then

that we can stride the year 2008.

Message fromthe EXECUTIVE DIRECTOR

2007 Annual Report6

Performance Highlights

In 2006, KMBI slowed down in expanding and

focused instead in maintaining its clients and harnessing

their loyalty. But in fulfillment of its mandate of holistic

transformation and in compliance to its strategic

direction, KMBI set out once again in 2007 and expanded

its reach in Bulacan and Metro Manila. This resulted to

positive development in the organizational performance.

From almost 89,000 clients in 2005, KMBI added to

its fold more than 36,000 women microentrepreneurs

or a 41% growth in its outreach. This brought the

organization greater opportunity to facilitate holistic

transformation in the lives of its clients, and eventually

see ripples of effect happening in their respective

families and communities.

Stewardship is one of KMBI’s core values and thus it

makes sure that it is always observed in managing all

“36,000 women microentrepreneurs... brought the organization

greater opportunity to facilitate

holistic transformation in the lives of its clients,

and eventually see ripples of effect...”

Operational Highlights

COMPARATIVE ORGANIZATIONAL PERFORMANCE

INDICATORS 2007 2006 INCREASE (DECREASE)

Client Outreach 126,282 89,628 36,654

Loan Portfolio P375.98 M P277.83 M P98.15 M

Total Amount Disbursed P1.19 B P920 M P270 M

Average Loan Size Disbursed P5,966.55 P6,187.23 (P220.68)

Portfolio-at-Risk 2.78% 3.34% 0.56%

Total Capital Build-up P211 M P162 M P49 M

Financial Self-sufficiency 131.21% 149.29% (0.18%)

Operational Sustainability 133.07% 150.54% (0.17%)

Number of Branches 37 29 8

Number of Centers 4,017 2,845 1,172

Number of Program Assistants 473 367 106


Financial Highlights

INDICATORS 2007 2006 INCREASE (DECREASE)

Operational Income 67,223,450 71,055,236 (3,831,786)

Asset 620,975,639 452,085,485 168,890,154

Liability 310,892,242 209,225,538 101,666,704

Fund Balance 310,083,397 242,859,947 67,223,450

Grants 9,699,494 5,231,073 4,468,421

COMPARATIVE FINANCIAL PERFORMANCE

its resources. For the year 2007, KMBI managed well not only its

operations but also its finances. It achieved 131.21%, surpassing the

industry PESO standard of 100% for financial self-sufficiency. Another

encouraging result of the institution’s well managed resources is the

37% increase in its asset, which is brought by the 97.22% repayment

rate on the loans it extended to women microentrepreneurs. The

efficiency in the mainstream operation and effective support system

were contributory to the growths achieved during the year.

It may still be a long way to go in seeing Goal 25.250 fulfilled

(that is, “Reaching out to 250,000 Filipino households on its 25th year

of existence”) but by continuously exercising prudence and good

stewardship in managing its resources, KMBI’s prospect to facilitate

holistic transformation in its borrowers’ lives is brighter than ever.

“Stewardship... is always observed

in managing its resources.”

2007 Annual Report8

Taking aggressive initiative to fulfill its core mission, the organization

commenced its journey towards Goal 25.250. New ventures and projects under

the seven-fold strategic directions were started toward the realizations of the

business plan it drew in 2005. These initiatives helped KMBI to withstand

whirlwinds of change in the industry, be financially independent and beef up

its economic and non-economic programs for staff and program members.

Through blending market-based initiatives with strong management capacity

and unparalleled commitment from its staff, the organization acted accordingly

to produce a powerful force of 250,000 transformed individuals ready and able

to impact positive change in Filipino communities all over the archipelago.

Major stops were taken to ensure that a firm, unshakable foundation shall

lead it to its Goal. Disclosed herewith are the SEVEN STOPS.

Trekking the road to Goal 25.250

KMBI believes that without true spiritual transformation

in terms of relationship with God, genuine transformation

cannot take place. Remaining focused on accomplishing this

primary mission, KMBI provided venue for its workforce

to deepen their relationship with God and with fellow

workers through accountability or devotion groups, monthly

family fellowships, area-wide retreats, leadership training,

opportunity ministries and Christmas outreaches to abused

and disabled children.

Aside from these, the staff meet regularly to pray

and hear the Word of God before they visit the centers.

This is elemental since they would facilitate transformation

activities in the communities where they are deployed.

Through this, succession of spiritual intake takes place as

the Word is openly discussed during center meetings. The

staff therefore acts as the member’s mentors and guide to

godly living. With constant and persistent input coupled with

fervent prayers, spiritual transformation happens in the lives

of the members and their families.

During the year, the organization started developing

a more organized transformation module for the members

to use every week. This would be a developmental series

discussing broad range of topics that would lead to holistic

transformation.

FIRST STOP. Active sharing of Christ andthe promotion of

Christian values

“We support the enhancement of spiritual and moral values of the staff

and the program members so that our vision of them having strengthened faith in God will be realized. Then they will affect

and influence their families and communities.”Dr. Amelia L. Gonzales

Chairman & President

2007 Annual Report8


First Micro-entrepreneurs’

Summit. Spurring women to

renewal, KMBI hosted “BAGO:

Babae, Negosyo, Pag-unlad,” a

summit that convened almost 10,000

microentrepreneurs from Cavite,

Laguna, Batangas, Quezon, Bicol,

Bulacan and National Capital Region

in Araneta Coliseum on October 22,

2007. (See page 12 for more.)

Community-Based Enterprise

Development Project (CBEDP).

A tri-partite partnership between

KMBI and Opportunity International

Australia (OIA), with the technical assistance of APPEND,

and through the funding of AusAid was established to bring

sustainable community and microenterprise development

to the marginalized community in Koronadal City and its

surrounding barangays. It is believed that microenterprise

development has an important role to play in the economic

and social development of a community. On this promise, KMBI

and OIA were keen on implementing interventions that will

build entrepreneurial capacity through MED (both agricultural

and non-agricultural related); and form positive values and

character through spiritual-socio-political enhancement.

By synergizing the efforts of the three organizations,

it is expected that the community development initiatives will

enable the target beneficiaries to become more vibrant and

resilient with empowered and responsible members. Further,

if the partnership will prove to be successful, opportunities

to expand throughout SOCSKSARGEN and to offer diversified

services are potential possibilities for both organizations.

Accomplishments


SECOND STOP.Providing

demand-driven and sustainable

non-financial services for the members

Entrepreneurial Nurturing. To

power up the delivery of Enterprise

Development Services (EDS) in the

communities, a Center Leader’s

Conference was initiated in

Koronadal City. Inputs on basic

entrepreneurial skills, effective

management of centers, science of

leadership, and add-on knowledge

on finance management and

other innovations sought to equip

center leaders to become co-

facilitators of EDS since they have

the best access and influence in

the communities.

EDS Unit also began the Entrepreneurship and

Community Organizing Workshop to equip the staff as

they partner in the delivery of entrepreneurial development

services. Another worthwhile program that recognized

successful microentrepreneurs, dubbed as KEY (KMBI

Entrepreneur of the Year) Program, was also started in

the same year.

Microinsurance program. In 2007, a total of Php19.3

million was disbursed to 284 beneficiaries. The microinsurance

program or Karamay sa Buhay Program (KBP) is a service

given to all program members aging up to 63 years old. This

is intented to provide financial aid in case the client or any

member of her family dies.

Annual Mass Wedding. As regular transformation

intervention, KMBI spent PhP377,000 to facilitate mass

weddings in its branches all over the country. 108 program

Trekking the road to Goal 25.250

2007 Annual Report10

Accomplishments

members benefited from the activity. KMBI designed this

to lead members to morally upright lives, to promote the

sanctity of marriage and family life, and to assist in acquiring

legal documents for their future lawful purpose.

Facilitating scholarship for children of program

members. Liberating students from the constraints in

pursuing tertiary education, the organization facilitated

the “Knowledge for Inspiring Leadership Opportunities and

Spirituality” or KILOS scholarship in partnership with Gordon

V. and Helen C. Smith Foundation. The foundation grants

free college education and other value-added programs to

children of program members under the Alliance of Philippine

Partners in Enterprise Development, Inc. (APPEND) network.

Garnering excellent scores during the elimination process, five

children of KMBI members made it to become part of the ten

scholars accepted for the given school year. This foundation

opened this program to provide constructive assistance to

talented people in need.

Areas of

concentration

w e r e

t ho rough l y

defined to

build strategic

bases to

f u r t h e r

a d d r e s s

poverty in

Luzon. From this, three new areas were created - National

Capital Region (NCR), Bulacan and Calabarzon 3.

In NCR and Bulacan areas, eight new branches were

opened. From this expansion came a projected increase of 41%

for total client outreach, 29% for manpower, and 35% for loan

portfolio. The new branches under NCR area are in Camarin,

Pasig, Marikina, Tandang Sora, and West Avenue, while

branches under Bulacan are in Meycauayan, San Jose, and

Valenzuela. KMBI allocated Php184 million for this expansion.

The new branches were strategically located in relation to the

forthcoming establishment of KMBI’s rural banks.

For Calabarzon, a third area was established to focus on

Quezon and Batangas. Branches under this area are Batangas,

Gumaca, Lipa, and Lucena. This makes monitoring manageable

given the area’s geographic breadth, as well as allows operation

to study and concentrate on the area better. Calabarzon 1 and

2 areas focused on Cavite and Laguna, respectively.

Another bold move to prepare for the 2008

expansions in Northern Luzon and Visayas area was through

creating partnerships with private financial institution, and

commercial and thrift banks. Before the year ended, KMBI

signed a PhP330 million line with Landbank of the Philippines,

Planters Development Bank, Development Bank of the

Philippines, Bank of the Philippine Islands, United Coconut

Planters Bank and Oikocredit EDCS UA. This will support the

Php176 million pre-operating and loan fund requirements

for that particular expansion. Aside from this, the amount

will be invested on more proposed projects such as housing,

management information system computerization, capacity

building and asset acquisition.

A systems review and evaluation (SR&E) was

conducted to identify strengths and weaknesses of the

organization in terms of delivering services to the program

members. The output will become reference to its policy

development in 2008. Also, licenses for all computer software/

applications were acquired.

THIRD STOP. Maintained microfinance operations of the NGO.

“Through the non-financial services we offer, we impart to the program members proper education or training on business management.” Mr. Emmanuel de GuzmanVice Chairman & Vice President

“KMBI is continuously emerging and departments should be improved to gear-up for the operation.” Mr. Aurelio C. Llenado, Jr.Corporate Treasurer



FOURTH STOP.Prepared for the

establishment of Bank.

The organization has started the feasibilty study and gathering

of required documents from its proposed directors and key officers for the

bank. It aims to submit to the Bangko Sentral ng Pilipinas the application

for authority to establish a bank on June 2008. Its bank shall provide a

bridge for sustainable development for its program members ushering

them to formal economy, which is one of the goals of microfinance.

Hence, the members’ increasing financial needs brought by the growth

of their businesses will be catered to. This signifies that members are

graduating from being microentrepreneurs to become small and medium

entrepreneurs, an indicator that the organization’s mission of seeing

economic transformations in its members is being realized.

“If we have a bank on our own then the public will be more encouraged to deal with us because they will look up to the bank as a more stable entity.”Atty. Servillano MendozaCorporate Secretary



To intensify development of its human resources towards achieving

Goal 25.250, Php3.2 million was invested to train the Board and staff

through conducting six in-house, 16 local, and three international

training. These training focused on leadership and management

towards technical expertise and social responsibility.

The international training attended by key officers were the

First Asia-Pacific Housing Forum, in Singapore; To the Mainstream:

Capital Structuring for Sustainable Microfinance, India; and 2nd World

Congress on Agriculture and Rural Finance, Thailand. Among the local

training participated was the Philippine Leadership Summit hosted by

Opportunity International Australia. Staff also underwent necessary

branch operating and management training program. Special skills

were also enhanced through participation in various workshops and

exposures.

It is a culture in the organization for staff to share what they

have learned in the seminars or workshops attended. Investments are

not amiss as learning is replicated and applied by many. The organization

is resolute that every staff that joins its workforce will be developed

and molded to excel and lead in their respective fields, and affect and

influence the program members they are serving and the families and

communities where they belong.

FIFTH STOP.

Trained and equipped Board and staff

to become world-class leaders.

“Good corporate governance is anchored on compentency-based training of all members of the organization for a purpose of producing a pool of world class leaders and workers.” Dr. Ricardo JumawanTrustee


Supporting the educational advancement of the staff, the Microfinance

SUCCESS Institute (MSI) enrolled 22 staff in the Master in Business

Administration (MBA) program in coordination with Philippine Christian

University. KMBI primarily established MSI to train and further develop

the staff and program members in various respects to achieve holistic

transformation. This is done in collaboration with like-minded networks

or institutions in developing and delivering training packages.

Other related initiatives for the staff’s personal development

include two spiritual retreats, ownership of laptop computers for key

officers, annual service awards, gratuity pay, new policy on staff

allowances, and policy on accumulated airline miles. Lastly, the 4HG

Multipurpose Cooperative, which offers multi-purpose loans and other

benefits for the member staff, was registered to the Cooperative

Development Authority during the year.

SIXTH STOP.

Provided for the

personal development

of the Board and staff.

“Personal development does not only pertain to provision of educational opportunities for

the Board members and staff. This also means development of the spiritual, social and economic

aspects, which then leads to our mission of holistic transformation.”

Mrs. Damiana ExiomoTrustee


The Training unit was separated from the Human Resource

department to focus on the development of framework and

systems for the upcoming institute. This institute will train

the staff of both the NGO and the Bank and is open for other

microfinance practitioners as well. The training unit has started

the development of policies, guidelines and curriculum which

is in-line with the mission and directions of the organization.

SEVENTH STOP.

Prepared for the

establishment of the

Training Institute. “The training institute will be a venue so that what we believe in KMBI both in the trustbank model and context of transformation will be able to be seen and be on a practical, day to day reality by other institutions.”Mr. Eduardo JimenezTrustee

AWARDS RECEIVED.Opportunity International Certificate of 100%

Financial Sustainability, for demonstrating Excellence

in Financial Sustainability in 2006 given on 22 May 2007,

during the 2007 Global Conference, Santo Domingo,

Dominican Republic.

Plaque of Recognition from People’s Credit and

Finance Corporation, for KMBI’s 21 years of quality service

to the marginalized sector, valuable contribution for the

growth and development of the microfinance industry and

unwavering support and strong partnership with PCFC given

on 22 October 2007, during the 2007 Microentrepreneurs’

Summit, Araneta Coliseum, Quezon City.

Networks and Partners

Opportunity International Network•

Banking with the Poor (BWTP)•

Consultative Group to Assist the Poor (CGAP)•

Micah Challenge•

Alliance for Philippine Partners for Enterprise •

Development, Inc. (APPEND),

Christian MicroEnterprise Development (CMED), •

Wholistic Transformation Resource Center•

Department of Social Welfare & Development (DSWD), •

Landbank Countryside Development Foundation, •

Microfinance Council of the Philippines, Inc., •

Bicol Microfinance Council, Inc.•

Mindanao Microfinance Council, Inc. •

Oikocredit EDCS UA, •

People’s Credit and Finance Corporation (PCFC), •

Opportunity Microfinance Bank (OMB)•

People Power against Poverty through Micro Enterprise •

(PPP-ME or PinoyME)

Philippine Council of NGO Certification.•


Myrna Ojeñar knew her husband had the skill and gift in making wooden

furniture. It was a skill taught to him by his father. Because she believed

in what her husband can do, she marketed her husband’s products and

afterwards became manager and proprietor of their small furniture business. With

hard work and determination, neighbors, friends and some local engineers began

noticing the quality of her husband’s output, which are mostly made of either

lawaan or narra. Myrna’s efforts paid off. Thus little by little, they were able to

purchase the needed equipment, hire five skilled men to assist in the projects,

and put up a big workshop with bunks and dirty kitchen for their workers. Myrna

was confident that all would go well with their business. Her seven children were

all going to school and she was glad she could help others through employment.

One day, in 2005, she was caught off-guarded. Smoke was coming

from the workshop. The fire spread immediately and the entire shop, with

all the equipment and projects her husband and workers painstakingly

worked on, were all burned to dust. Their dreams were gone... except for the hope in Myrna’s heart.

That time, she was a KMBI program member in her 7th loan cycle. It was there she knew her involvement

to the program had its reason - it was for that time when hope was bleak and they seemed to have nothing at

all. With the additional capital the program offered her, Myrna, with her great management skill, started bringing

her family and business up. She recalls, “That time was so difficult for us, but with the help of

KMBI, we were able to have additional capital. That offered hope for us to start again.”

It has been three years now, and in Myrna’s f a c e ,

no trace of pain or depression brought by the loss o f

their previous investments could be seen. There she was

sitting near one of her husband’s unfinished wooden

cabinets. Other wooded bed frames with carvings lay

in the side of the shop. She said little by little they were

able to save money and purchase new equipment.

They built a new workshop; this time it doesn’t have a

dirty kitchen. They hired three in-house skilled workers;

when many projects are lined-up, they would hire five to

seven more. Her husband and his men also make built-in

wooded furniture for hotels and subdivisions in Naga City,

Bicol. Some of their products reach to as far as Metro Manila.

Currently, Myrna is president in one of the KMBI

centers in Naga City. Four of her children are in college and two

are in secondary school. She reminds other program members to

take good care of their businesses. She says, “Never allow it to fail.”

ENTREP Inspiring Story

What Fire Cannot Snuff Out Three years ago, their furniture business was flourishing, but it was lost

to angry and devious flames.


BAGO: Babae, Negosyo at Pag-unlad

The concept of gathering as many clients as it could in one venue brewed within the management

for years. On October 22, 2007, the dream became a reality - KMBI successfully held at the

Araneta Coliseum the “Bago: Babae, Negosyo, at Pag-unlad,” a microentrepreneurs’ summit

attended by some 10,000 women microentrepreneurs from different parts of Luzon. It was the

first microentrepreneurs’ summit ever held in the “Big Dome,” as well as the first after 21 years of

existence of KMBI, and probably the biggest number of participants in the history of microfinance in

the Philippines. The summit, which was a response to KMBI’s direction of delivering demand-driven

and sustainable non-financial services to the program members (PMs), sought to address the multi-

level needs of the participants, particularly in spiritual, economic, and social aspects.

Invited guest speakers included the well known leadership guru Francis Kong who talked about

Gold Mine; famous broadcaster Karen Davila on the topic of Why Women?; TV personality Chinkee Tan

on Personal Financial Management; and, Rev. Clem Guillermo, senior trainer of Systematic Training

for Effective Parenting, on Family Matters. Former regional director of World Teach, Dr. Phillip Tarroja,

was also invited to shed light on Ephesians 4:11-12, the theme verse of KMBI during the year. Manila

Genesis talents, Maricel Laxa and Alvin Anson, served as masters of ceremony during the morning

and afternoon programmes, respectively. Other TV personalities like Nanette Inventor, Christian

Bautista, Champagne Morales, and Julianne Tarroja were also present to render musical numbers.

KMBI took also the opportunity to make the event as venue for recognizing its outstanding

microentrepreneurs from Luzon and Mindanao through the KEY or KMBI Entrepreneurs of the year

program. They were recognized for their exemplary business performance and accomplishments,

and for serving as inspiration to other microentrepreneurs. Designed similarly with Citigroup’s

Microentrepreneur of the Year (MOTY) awards, the recognition sought to build awareness and support for

microenterprise development as tool for employment generation and poverty reduction. KEY awardees

for 2007 were Anita Consuegra of General Santos City, Gloria Tagyubon of Butuan City and Adelfa

Santillan of Tagum City. Each KEY awardee received cash price of Php10,000 and plaques of recognition.

Another highlight of the summit was the Pangkabuhayan raffle which drew major and

minor prizes to provide business diversification opportunity to all PMs. Winners of major prizes

were Meluhmar Balasabas of General Santos branch (first prize - pangkabuhayan jeepney); Victoria

Castillo of Kidapawan branch (second prize – tricycle); and Baldomera Templa of Digos branch (third

prize - mini-grocery showcase).

The summit was supported and sponsored by Manila Bulletin, Cocolife, Bank of the Philippine

Islands, Landbank of the Philippines, and Reyes Haircutters.

ME Summit Special Report


“It was the first microentrepreneurs’ summit ever held in the “Big Dome”...

probably the biggest number of participants in the history of microfinance in the Philippines.”



INDEPENDENT AUDITOR’S REPORT

The Board of Trustees

Kabalikat para sa Maunlad na Buhay, Inc.

We have audited the accompanying financial statements of Kabalikat Para sa Maunlad na Buhay, Inc. (the Organization), a

nonstock, not-for-profit organization, which comprise the statement of assets, liabilities and fund balance as at December

31, 2007, and the statement of revenue and expenses, statement of changes in fund balance and the statement of cash

flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. The financial

statements of the Organization as of and for the year ended December 31, 2006, which are presented for comparative

purposes, were audited by other auditors whose report dated March 30, 2007 expressed an unqualified opinion on those

statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with

Philippine Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal

control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,

whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that

are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in

accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements

and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material

misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the Organization’s preparation and fair presentation of the financial statements in order

to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on

the effectiveness of the Organization’s internal control. An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall

presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of Kabalikat para sa

Maunlad na Buhay, Inc. as of December 31, 2007, and its financial performance and its cash flows for the year then ended

in accordance with Philippine Financial Reporting Standards.

SYCIP GORRES VELAYO & CO.

Marilou C. Bartolome CPA Certificate No. 91634Partner SEC Accreditation No. 0659-AApril 11, 2008 Tax Identification No. 177-087-426

PTR No. 0022930, January 3, 2008, Makati City

SGV & Co is a member practice of Ernst & Young Global

SyCip Gorres Velayo & Co. Phone: (632) 891-03076760 Ayala Avenue Fax: (632) 819-08721226 Makati City www.sgv.com.phPhilippines BOA/PRC Reg. No. 0001 SEC Accreditation No. 0012-FR-1


Audited Financial Statement

KABALIKAT PARA SA MAUNLAD NA BUHAY, INC.(A Nonstock, Not-for-Profit Organization)

STATEMENT OF ASSETS, LIABILITIES AND FUND BALANCEDECEMBER 31, 2007(With Comparative Figures for 2006)

December 31

2007 2006

ASSETS

Current Assets

Cash and cash equivalents (Note 6) P187,313,484 P124,239,416

Receivables (Note 7) 380,491,434 282,031,433

Financial assets at fair value through profit or loss (Note 8) 317,920 317,920

Prepaid expenses and other current assets (Note 9) 3,733,948 4,067,865 Total Current Assets 571,856,786 410,656,634

Noncurrent Assets

Available-for-sale investments (Note 10) 28,600,000 28,600,000

Property and equipment (Note 11) 16,450,212 10,277,857Other assets (Note 12) 4,068,641 2,550,994 Total Noncurrent Assets 49,118,853 41,428,851

P620,975,639 P452,085,485

LIABILITIES AND EQUITY

Current Liabilities

Accounts payable and accrued expenses (Note 13) P22,259,047 P16,436,917

Current portion of long-term debt (Note 15) 320,733 12,259,234

Notes payable (Note 15) 50,000,000 –

Capital build-up (Note 14) 212,142,772 161,927,505 Total Current Liabilities 284,722,552 190,623,656

Noncurrent Liabilities

Noncurrent portion of long-term debt (Note 15) 10,000,000 10,320,733

Pension liability (Note 16) 16,169,690 8,281,149

Total Noncurrent Liabilities 26,169,690 18,601,882

Fund Balance 310,083,397 242,859,947

P620,975,639 P452,085,485

See accompanying Notes to Financial Statements.


STATEMENT OF REVENUE AND EXPENSESFOR THE YEAR ENDED DECEMBER 31, 2007(With Comparative Figures for 2006)

Years Ended December 31

2007 2006

REVENUE

Service income (Note 17) P256,073,377 P209,694,295

Donations and contributions 9,699,494 5,231,073

Others 1,522,997 4,663,340

267,295,868 219,588,708

EXPENSES

Operating expenses (Note 18) 156,414,273 121,457,554Administrative expenses (Note 19) 43,658,145 27,075,918

200,072,418 148,533,472

EXCESS OF REVENUE OVER EXPENSES P67,223,450 P71,055,236


STATEMENT OF CHANGES IN FUND BALANCEFOR THE YEAR ENDED DECEMBER 31, 2007(With Comparative Figures for 2006)

Years Ended December 31

2007 2006

Balance at January 1 P242,859,947 P171,804,711

Excess of revenue over expenses 67,223,450 71,055,236

Balance at December 31 P310,083,397 P242,859,947




STATEMENT OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2007(With Comparative Figures for 2006)

Years Ended December 312007 2006

CASH FLOWS FROM OPERATING ACTIVITIES

Excess of revenue over expenses P67,223,450 P71,055,236Adjustments for:

Provision for credit losses on receivables (Notes 18 and 19) 4,992,011 7,132,744

Depreciation and amortization (Notes 11, 18 and 19) 5,227,382 3,389,984

Amortization of software cost (Note 12) 54,959 –

Excess of revenues over expenses before working capital changes 77,497,802 81,577,964

Changes in operating assets and liabilities:

Decrease (increase) in amounts of:

Receivables (103,452,012) (5,132,581)

Prepaid expenses and other current assets 333,917 363,918

Increase in amounts of:

Accounts payable and accrued expenses 5,822,130 2,629,283

Pension liability 7,888,541 5,657,155

Capital build-up 50,215,267 12,053,856

Net cash provided by operating activities 38,305,645 97,149,595

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions of property and equipment (Note 11) (11,419,999) (4,183,626)

Increase in other assets (913,107) (350,812)

Acquisitions of software cost (Note 12) (659,500) –Proceeds from sale of property and equipment 20,263 204,609

Net cash used in investing activities (12,972,343) (4,329,829)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from notes payable (Note 15) 50,000,000 –

Proceeds from long-term debt–

2,500,000Payments of long-term debt (12,259,234) (45,865,169)

Net cash provided by (used in) financing activities 37,740,766 (43,365,169)

NET INCREASE IN CASH AND CASH EQUIVALENTS 63,074,068 49,454,597

CASH AND CASH EQUIVALENTS AT BEGINNINING OF YEAR 124,239,416 74,784,819

CASH AND CASH EQUIVALENTS AT END OF YEAR P187,313,484 P124,239,416


NOTES TO FINANCIAL STATEMENTS(With Comparative Figures for 2006)

Organizational Information1.

Kabalikat para sa Maunlad na Buhay, Inc. (‘the Organization’), a nonstock, not-for-profit organization, which was organized on November 4, 1986 with the objective of assisting the low-income Filipinos in their pursuit for education, culture, civic, physical and economic advancement with the end view that they will become responsible members and assets of society. To attain these objectives, the Organization conducts seminars, lectures and trainings by inviting resource persons who have expertise and knowledge in specialized fields and extends financial assistance at reasonable interest rates to economically active poor people.

On November 26, 2007, the Organization was certified by Philippine Council for NGO Certification as a qualified donee institution in accordance with Revenue Regulations No. 13-98 for a period of five years. Accordingly, it is exempt from payment of income tax it received and the filing of income tax return covering such income. Such exemption, however, does not apply to income of whatever kind and character derived from the use of the Organization’s properties, real or personal, or from any of its activities conducted for profit regardless of the dispositions made of such income.

Being not organized for profit and since no part of its net income inures to the benefit of any private individual or member, the Organization falls under Section 30 (g) of the Tax Reform Act of 1997. Accordingly, income from activities in pursuit of the purpose for which the Association was organized is exempt from income tax.

The registered office of the Organization is located at No. 12 San Francisco Street, Karuhatan, Valenzuela City.

Summary of Significant Accounting2. Policies

Basis of PreparationThe accompanying financial statements have been prepared on a historical cost basis except for financial assets at fair value through profit or loss (FVPL) and available-for-sale (AFS) investments which are measured at fair value. The financial statements are presented in Philippine pesos, which is the Organization’s functional currency.

Statement of ComplianceThe financial statements of the Organization have been prepared in compliance with Philippine Financial Reporting Standards (PFRS).

Changes in Accounting PoliciesThe accounting policies adopted are consistent with those of the previous financial year except as follows:

The Organization has adopted the following applicable PFRS and Philippine Interpretation which became effective beginning January 1, 2007.

PFRS 7, Financial Instruments: Disclosures, and the complementary amendment to Philippine Accounting Standard (PAS) 1, Presentation of Financial Statements: Capital Disclosures PFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, as well as sensitivity analysis to market risk. It replaces PAS 30, Disclosures in the Financial Statements of Banks and Similar Financial Institutions, and the disclosure requirements in PAS 32, Financial Instruments: Disclosure and Presentation. It is applicable to all entities that report under PFRS. As allowed under Financial Reporting Standards Council, the Organization availed of the transition relief with respect to the presentation of comparative information for the new risk disclosures about the nature and extent of risks arising from financial instruments in paragraphs 31-42 of PFRS 7. Accordingly, an entity that applies PFRS 7 for annual periods beginning on or after January 1, 2007 need not present comparative information for the disclosures required by paragraphs 31-42 unless the disclosure was previously required under PAS 30 or PAS 32. The amendment to PAS 1 introduces disclosures about the level of an entity’s capital and how it manages capital. The required new disclosures are reflected in the financial statements of the Organization where applicable.



Foreign currency translationForeign currency-denominated monetary assets and liabilities of the Organization are translated into Philippine pesos based on the Philippine Dealing System (PDS) closing rate prevailing at end of the year and foreign currency-denominated income and expenses are translated based on the PDS weighted average rate for the year. Foreign exchange differences arising from revaluation of foreign currency denominated assets and liabilities are credited to or charged against operations in the period in which the rates change.

Non-monetary items that are measured in terms of historical cost on a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Financial Instruments - initial recognition and subsequent measurementDate of recognitionPurchases or sales of financial assets that require delivery of assets within the time frame established by regulation or market convention are recognized on trade date - the date that the Organization commits to purchase or sell the asset.

Initial recognition of financial instrumentsAll financial assets, including trading and investment securities are initially recognized at fair value. Except for financial assets at fair value through profit or loss (FVPL), the initial measurement of financial assets includes transaction costs. The Organization classifies its financial assets in the following categories: financial assets at FVPL, held-to-maturity (HTM) investments, AFS investments, and loans and receivables. The classification depends on the purpose for which the financial assets were acquired and whether they are quoted in an active market. Financial liabilities are classified into financial liabilities at FVPL and financial liabilities at amortized cost. Management determines the classification of its financial assets at initial recognition and, where allowed and appropriate, re-evaluates such designation at every reporting date.

As of December 31, 2007, and 2006, the Organization has no HTM investments and financial liabilities at FVPL.

Determination of fair valueThe fair value for financial instruments traded in active markets at the statement of assets, liabilities and fund balance date is based on their quoted market price or dealer price quotations, without any deduction for transaction costs. Securities are valued using the latest closing price at the end of the year for securities with trading transaction at the stock exchange or in the absence thereof, the latest bid price. When current bid and asking prices are not available, the price of the most recent transaction provides evidence of the current fair value as long as there has not been a significant change in economic circumstances since the time of the transaction.

Financial assets or financial liabilities designated at FVPLFinancial assets or financial liabilities maybe designated by management on initial recognition when the following criteria are met:

The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from •measuring the assets or liabilities or recognizing gains or losses on them on a different basis; orThe assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed •and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; orThe financial instrument contains an embedded derivative, unless the embedded derivative does not significantly •modify the cash flows or it is clear, with little or no analysis, that it would not be separately recorded.

Designated financial assets and financial liabilities at FVPL are recorded in the statement of assets, liabilities and fund balance at fair value. Changes in fair value are recorded in statement of revenue and expenses. Dividend income is recorded in the statement of revenue and expenses when the right of the payment has been established.

AFS investmentsAFS investments are non-derivative financial assets that are either designated in this category or not designated as financial asset at FVPL, HTM investments or loans and receivables. After initial recognition, AFS investments are re-measured at fair value with gains and losses reported as a separate component of fund balance in the fund balance section of the statement of assets, liabilities and fund balance until the investment is derecognized or until the


investment is determined to be impaired at which time the cumulative gain or loss previously reported in the fund balance section is included in the statement of revenues and expenses.

Loans and receivablesReceivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortized cost using the effective interest rate method less allowance for credit losses.Interest-bearing loans and borrowings

All loans and borrowings are initially recognized at the fair value less directly attributable transaction costs and have not been designated as financial liabilities at fair value through profit or loss. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method.

Gains and losses are recognized in the statement of revenue and expenses when the liabilities are derecognized as well as through the amortization process.

Derecognition of Financial Assets and LiabilitiesFinancial asset A financial asset (or, where applicable a part of a financial asset or part of a group of financial assets) is derecognized where:

the rights to receive cash flows from the asset have expired; or•the Organization retains the right to receive cash flows from the asset, but has assumed an obligation to pay them •in full without material delay to a third party under a “pass-through” arrangement; orthe Organization has transferred its rights to receive cash flows from the asset and either (a) has transferred •substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained the risk and rewards of the asset but has transferred the control of the asset.

Where the Organization has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Organization’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of original carrying amount of the asset and the maximum amount of consideration that the Organization could be required to repay.

Financial liabilitiesFinancial liabilities are derecognized when the obligation under the liability is discharged or cancelled or has expired. Where an existing financial liabilities are replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the statement revenue and expenses.

Offsetting Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount reported in the statement of assets, liabilities and fund balance if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Impairment of Financial Assets The Organization assesses at each statement of assets, liabilities and fund balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the customer or a group of customers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.



ReceivablesFor receivables carried at amortized cost, the Organization first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Organization determines that no objective evidence of impairment exists for individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment.

The Organization’s receivables are assessed for impairment collectively because these receivables are not individually significant.

The carrying amount of receivables is reduced for impairment through the use of an allowance account and the amount of loss is recognized in the statement of revenue and expenses.

Receivables, together with the related allowance, are written off if the accounts are 180 days past due. If a write-off is later recovered, any amounts formerly charged to allowance for credit losses are recorded in the statement of revenue and expenses.

AFS investmentsFor AFS investments, the Organization assesses at each statement of assets, liabilities and fund balance date whether there is objective evidence that a financial asset or group of financial assets is impaired.

In case of equity investments classified as ‘AFS investments’, this would include a significant or prolonged decline in the fair value of the investments below its cost. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in the statement of revenue and expenses - is removed from the fund balance and recognized in the statement of revenue and expenses. Impairment losses on equity investments are not reversed through the statement of revenue and expenses. Increases in fair value after impairment are recognized directly in the fund balance.

Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Organization and the

revenue can be reliably measured. The following specific recognition criteria must also be met before the revenue is recognized:

DonationsDonations received are recognized as income in the statement of revenue and expenses upon receipt.

Interest incomeFor all financial asset measured at amortized cost, interest income is recorded at the effective interest rate (EIR), which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or a shorter period, where appropriate, to the net carrying amount of the financial asset. The calculation takes into account all contractual terms of the financial asset (for example, prepayment options), includes any fees (such as service fees) or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses. The adjusted carrying amount is calculated based on the original EIR. The change in carrying amount is recorded as interest income.

Once the recorded value of a financial asset or group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognized using the original EIR applied to the new carrying amount.

Unearned discount is recognized as income over the terms of the receivables using the EIR method and shown as deduction from loans.

Cash and Cash EquivalentsFor the purpose of the statement of cash flows, cash includes petty cash fund and deposits in banks which earn interest at the respective bank deposit rates. Cash equivalents consist of time deposit placements with original maturities of


three months or less from dates of placements and that are subject to insignificant risk of changes in value.

Prepaid ExpensesThese are advance payments to various expenditures related to the business activities of the Organization.Property and EquipmentLand is stated at cost less any impairment and depreciable properties including buildings, leasehold improvements, furniture and equipment and transportation equipment are stated at cost less accumulated depreciation and amortization, and any impairment loss. Such cost includes the cost of replacing part of the property and equipment when that cost is incurred, if the recognition criteria are met but excludes repairs and maintenance costs

The initial cost of property and equipment comprises its purchase price, including taxes and directly attributable costs of bringing the assets to its working condition and location for its intended use. Expenditures incurred after the fixed asset have been put into operation, such as repairs and maintenance, are normally charged against current operations in the period in which costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property and equipment beyond its originally assessed standard of performance, the expenditures are capitalized as additional costs.

When assets are retired or otherwise disposed of, the cost and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the statement of revenue and expenses.Depreciation of property and equipment is computed using the straight-line method over the estimated useful life of the property and equipment. Leasehold improvements, which consist of improvements on leased properties, are being amortized over the shorter of the estimated useful life or the period of lease agreement.

The estimated useful lives of depreciable assets are as follows:

No. of years

Building and improvements 40

Leasehold improvements 3

Furniture and equipment 3

Transportation equipment 5

The useful life and depreciation method are reviewed periodically to ensure that the period and method of depreciation are consistent with the expected pattern of economic benefits from property and equipment.

The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

Impairment of Nonfinancial AssetsAt each statement of assets, liabilities and fund balance date, the Organization assesses whether there is any indication that its nonfinancial assets may be impaired. When an indicator of impairment exists or when an annual impairment testing for an asset is required, the Organization makes a formal estimate of recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is assessed as part of the cash generating unit to which it belongs. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is charged to operations in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is charged to the revaluation increment of the said asset.

If any such indication exist and where the carrying values exceed the estimated recoverable amount, an impairment loss is recognized in the statement of revenue and expenses.



LeasesOperating lease payments are recognized as an expense in the statement of revenue and expenses on a straight-line basis over the lease term.

Retirement CostThe Organization has an unfunded noncontributory defined benefit retirement plan, administered by trustees, covering substantially all of its permanent employees.

The retirement cost of the Organization is determined using the projected unit credit method. Under this method, the current service cost is the present value of retirement benefits payable in the future with respect to services rendered in the current year.

The liability recognized in the statement of assets, liabilities and fund balance in respect of defined benefit pension plans is the present value of the defined benefit obligation at the statement date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses and past service costs. The defined benefit obligation is calculated annually by an independent actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rate on government bonds that have terms to maturity approximating the terms of the related retirement liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are credited to or charged against income when the net cumulative unrecognized actuarial gains and losses at the end of the previous period exceeded 10% of the higher of the defined benefit obligation and the fair value of plan assets at that date. These gains or losses are recognized over the expected average remaining working lives of the employees participating in the plan.

Past service costs, if any, are recognized immediately in statement of revenue and expenses, unless the changes to the pension plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortized on a straight-line basis over the vesting period.

The defined benefit asset or liability comprises the present value of the defined benefit obligation less past service costs not yet recognized and less the fair value of plan assets out of which the obligations are to be settled directly. The value of any asset is restricted to the sum of any past service cost not yet recognized and the present value of any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan.

ProvisionsProvisions are recognized when an obligation (legal or constructive) is incurred as a result of a past event and where it is probable that an outflow of resource embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Contingent Liabilities and Contingent AssetsContingent liabilities are not recognized in the financial statements but are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the financial statements but are disclosed when an inflow of economic benefits is probable.

Subsequent EventsPost-year-end events that provide additional information about the Organization’s position at the statement of assets, liabilities and fund balance date (adjusting events) are reflected in the financial statements. Post-year-end events that are non-adjusting events, if any, are disclosed when material to the financial statements.

Future Changes in Accounting PoliciesThe Organization has not applied the following accounting standards and Philippine Interpretations which are not yet effective for the period ended December 31, 2007:

Amendment to PAS 1, Amendment on Statement of Comprehensive Income (effective for annual periods beginning on or after January 1, 2009).In accordance with the amendment to PAS 1, the statements of changes in equity shall include only transactions with owners, while all non-owner changes will be presented in equity as a single line with details include in a separate statement. Owners are defined as holders of instruments classified as equity.In addition, the amendments to PAS 1 provides for the introduction of a new statement of comprehensive income that


combines all items of income and expenses recognized in the statements of income together with ‘other comprehensive income’. The revision specify what is included in other comprehensive income, such as gains and losses on available-for-sale assets, actuarial gains and losses on defined benefit pension plans and changes in the asset revaluation reserve. Entities can choose to present all items in one statement, or to present two linked statements, a separate statement of revenue and expenses and a statement of comprehensive income. The Organization does not expect this amendment to have a significant impact on the financial statements.

PAS 23, Borrowing Costs (effective for annual periods beginning on or after January 1, 2009) The Standard has been revised to require capitalization of borrowing costs when such costs relate to a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. In accordance with the transitional requirements in the Standard, this change in accounting for borrowing costs shall be accounted for prospectively. Accordingly, borrowing costs will be capitalized on qualifying asset with a commencement date after January 1, 2009. No changes will be made for borrowing costs incurred to this date that have been expensed. The Organization does not expect that the adoption of this Standard will have a significant impact on the financial statements.

PFRS 8, Operating Segments (effective for annual periods beginning on or after January 1, 2009)This PFRS adopts a management approach to reporting segment information. PFRS 8, will replace PAS 14, Segment Reporting, and is required to be adopted only by entities whose debt or equity instruments are publicly traded, or are in the process of filing with the SEC for purposes of issuing any class of instruments in a public market. The Organization does not expect that the adoption of this Standard will have a significant impact on the financial statements.

Philippine Interpretation IFRIC-11, PFRS 2 Group and Treasury Share Transactions (effective for annual periods beginning on or after March 1, 2007)This Interpretation requires arrangements whereby an employee is granted rights to an entity’s equity instruments to be accounted for as an equity-settled scheme by the entity even if (a) the entity chooses or is required to buy those equity instruments (e.g., treasury shares) from another party, or (b) the shareholder(s) of the entity provide the equity instruments needed. It also provides guidance on how subsidiaries, in their separate financial statements, account for such schemes when their employees receive rights to the equity instruments of the parent. The Organization currently does not have any stock option plan and therefore, does not expect this Interpretation to have significant impact to its financial statements.

Philippine Interpretation IFRIC-12, Service Concession Arrangements, (effective for annual periods beginning on or after January 1, 2008)This Interpretation covers contractual arrangements arising from private entities providing public services and is not relevant to the Organization’s current operations.

Philippine Interpretation IFRIC-13, Customer Loyalty Programmes (effective for annual periods beginning on or after July 1, 2008)This Interpretation addresses the accounting by an entity that grants award credits to its customers. The Organization does not expect this Interpretation to have significant impact to its financial statements.

Philippine Interpretation IFRIC-14, PAS 19, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective for annual periods beginning on or after January 1, 2008)This Interpretation provides guidance on how to assess the limit in PAS 19, Employee Benefits, on the amount of the surplus that can be recognized as an asset, and how the pension assets or liability may be affected when there is a statutory or contractual minimum funding requirement. The Organization does not expect this Interpretation to have significant impact to its financial statements.

Significant Accounting Judgments and Estimates3.

The preparation of the financial statements in accordance with PFRS requires the Organization to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosures of contingent assets and contingent liabilities. Future events may occur which will cause the assumptions used in arriving at the estimates to change. The effects of any change in estimates are reflected in the financial statements as they become reasonably determinable.



Judgments and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The following are the critical judgments and key assumptions that have a significant risk of material adjustment to the carrying amounts of assets and liabilities within the next financial year:

JudgmentsFair value of financial instrumentsa) Where the fair values of financial assets and financial liabilities recorded in the statement of assets, liabilities and fund balance cannot be derived from active markets, these are determined using internal valuation techniques using generally accepted market valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimates are used in establishing fair values. These estimates may include considerations of liquidity, volatility and correlation.

Operating leasesb) The Organization has entered into commercial property leases with outside parties wherein the latter retains all the significant risks and rewards of ownership of those properties leased out under operating leases. These operating leases are subject to two to three year terms and are renewable upon agreement of both parties.

Financial assets not quoted in an active market c) The Organization classifies financial assets by evaluating, among others, whether the asset is quoted or not in an active market. Included in the evaluation on the whether the asset is quoted in an active market is the determination on whether the quoted prices are readily and regularly available, and whether those prices represent actual and regularly occurring market transactions on an arm’s length basis.

EstimatesAllowance for Credit Losses on Receivablesa) The Organization maintains allowances for impairment losses at a level considered adequate to provide for probable uncollectible receivables. The level of this allowance is evaluated by management on the basis of factors that affect the collectibility of the accounts. These factors include, but are not limited, to the client’s payment behavior and known market factors. The Organization reviews the age and status of receivables, and identifies accounts that are to be provided with allowances on a continuous basis.

As of December 31, 2007 and 2006, allowance for credit losses on loans and receivables amounted to P9.6 million and P7.8 million, respectively. As of December 31, 2007 and 2006, carrying values of loans and receivables amounted to P380.5 million and P282.0 million, respectively (see Note 7).

Impairment of AFS equity investmentsb) The Organization determines that AFS equity investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. This determination of what is significant or prolonged requires judgment. In making this judgment, the Organization evaluates among other factors, the normal volatility in share price. In addition, impairment may be appropriate when there is evidence of deterioration in the financial health of the investee, industry and sector performance, changes in technology, and operational and financing cash flows.

AFS equity investments are carried at P28.6 million as of December 31, 2007 and 2006 (see Note 10).

Present value of pension liabilityc) The cost of defined benefit pension plan and other post employment benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases.

As of December 31, 2007 and 2006, the present value of pension obligation amounted to P29.3 million and P21.8 million, respectively (see Note 16).

Impairment of nonfinancial assetd) Property and equipmentThe Organization assesses impairment on assets whenever events or changes in circumstances indicate that the


carrying amount of an asset may not be recoverable. The factors that the Organization considers important which could trigger an impairment review include the following:

significant underperformance relative to expected historical or projected future operating results;•significant changes in the manner of use of the acquired assets or the strategy for overall business; and•significant negative industry or economic trends.•

The Organization recognizes an impairment loss whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is computed using the value in use approach. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit to which the asset belongs.

As of December 31, 2007 and 2006, the carrying value of the property and equipment amounted to P16.5 million and P10.3 million, respectively (see Note 11).

Estimated useful lives of property and equipmente) The Organization reviews annually the estimated useful lives of property and equipment based on the period over which the assets are expected to be available for use and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence. It is possible that the future results of operations could be materially affected by changes brought about by changes in the factors mentioned. A reduction in the estimated useful lives of property and equipment would increase the recorded depreciation expense and decrease property and equipment.

Refer to item (d) above for the carrying value of property and equipment.

Fair Value Measurement4.

The methods and assumptions used by the Organization in estimating the fair value of the financial instruments are:

Assets for which the fair value approximates carrying value - For financial assets and financial liabilities that are liquid or having short-term maturity, it is assumed that the carrying amounts approximate their fair values. These include cash and cash equivalents, receivables, and current liabilities.

Equity securities - Fair values are based on quoted prices published in markets. For equity investments that are not quoted, the investments are carried at cost less allowance for impairment losses due to the unpredictable nature of future cash flows and the lack of suitable methods of arriving at a reliable fair value.

Receivables - Fair values of the Organization’s receivables are estimated using the discounted cash flow methodology, using current incremental lending rates for similar types of loans. Where the instrument reprices on a quarterly basis or has a relatively short maturity, the carrying amounts approximate fair values.

Liabilities - Fair values are estimated using the discounted cash flow methodology using the Organization’s current incremental borrowing rates for similar borrowings with maturities consistent with those remaining for the liability being valued, if any.

Set out below is a comparison by category of carrying amounts and fair value of the Organization’s financial instruments as of December 31, 2007 and December 31, 2006.

2007 2006

Carrying Value Fair Value Carrying Value Fair value

Financial AssetsFinancial assets at FVPL P317,920 P317,920 P317,920 P317,920AFS investments 28,600,000 28,600,000 28,600,000 28,600,000Loans and receivables Receivables 380,491,434 380,491,434 282,031,433 282,031,433 Cash and cash equivalents 187,313,484 187,313,484 124,239,416 124,239,416



Financial Liabilities

Accounts payable and accrued expenses 22,097,017 22,097,017 16,323,167 16,323,167

Notes payable 50,000,000 50,000,000 – –

Current portion of long-term debt 320,733 320,733 12,259,234 12,259,234Capital build-up 212,142,772 212,142,772 161,927,505 161,927,505Noncurrent portion of long-term debt 10,000,000 10,000,000 10,320,733 10,320,733Pension liability 16,169,690 16,169,690 8,281,149 8,281,149

Financial Risk Management Objectives and Policies5.

The Organization’s financial instruments consist of cash and cash equivalents, financial assets at FVPL, AFS investments, loans receivable and bank loans. The main risks arising from the use of these financial instruments are credit risk, liquidity risk and market risk.

Credit RiskCredit risk is the risk of financial loss to the Organization if a counterparty to a financial instrument fails to meet its contractual obligations. The Organization has established controls and procedures in its credit policy to determine and monitor credit worthiness of customers and counterparties.

Maximum exposure to credit risk before collateral held or other credit enhancementsAn analysis of the maximum exposure to credit risk relating to on-balance sheet assets without taking into account of any collateral held or other credit enhancements is shown below:

2007 2006Cash in banks

P187,187,484 P124,137,416Financial assets at FVPL 317,920 317,920AFS investments 28,600,000 28,600,000

Receivables (Note 7) 380,491,434 282,031,433

P596,596,838 P435,086,769

The Organization assessed that it has no significant credit risk exposures relating to off-balance sheet items.

Neither past due nor impaired loans amounting to P365.5 million were granted to women who are among the economically active poor in communities with high population densities and levels of microeconomic activity.

Liquidity RiskThe Organization manages liquidity risk by maintaining a balance between continuity of funding and flexibility. Treasury controls and procedures are in place to ensure that sufficient cash is maintained to cover daily operational and working capital requirements. Management closely monitors the Organization’s future and contingent obligations and sets up required cash services as necessary in accordance with internal policies.

The table below shows the maturity profile of the financial liabilities based on contractual undiscounted cash flows:

On demand1 to 3

months3 to 6

months6 to 12months

Beyond 1year Total

Accounts payable and accrued expenses P– P22,259,047 P– P– P– P22,259,047Current portion of long-term debt – 321,910 – – – 321,910Notes payable – 42,631,517 8,674,892 – – 51,306,409Capital build-up 212,142,772 – – – – 212,142,772Noncurrent portion of long-term debt – 300,000 300,000 600,000 10,400,000 11,600,000Pension liability – – – – 16,169,690 16,169,690

P212,142,772 P65,512,474 P8,974,892 P600,000 P26,569,690 P313,799,828

Market RiskMarket risk is the risk to earnings or capital arising from adverse movements in factors that affect the market value of financial instruments. The Organization focuses on two (2) market risk areas such as interest rate risk and foreign currency risk.


Interest Rate RiskThe Organization’s exposure to the risk for changes in market rate relates primarily to its long-term debt obligations with variable interest rates. However, most of the Organization’s existing debt obligations are based on fixed interest rates with relatively small component of the debts that are subject to interest rate fluctuation.

Foreign currency riskThe Organization has minimal exposure to foreign exchange risk but the Organization also monitors market movements in regard to foreign exchange along with the stock market and macro-economic indicators, for information purposes.

Since the Organization only has minimal exposure to foreign exchange risk, the effect of the foreign currency fluctuations is insignificant therefore the sensitivity analysis was not presented.

Cash and Cash Equivalents6.

This account consists of:2007 2006

Cash on hand and in banks P40,844,732 P64,229,228

Short-term investments (Note 20) 146,468,752 60,010,188

P187,313,484 P124,239,416

Cash in banks include deposits in peso-denominated demand account, peso-denominated regular savings account and United States (US) dollar currency-denominated account which earn an of 0.5% per annum.

Short-term investments represent thirty-day cash placements which earn interest of 2.9% to 7.0% and 5.0% to 7.5% in 2007 and 2006, respectively.

Receivables7.

This account consists of:

2007 2006

Loans receivable P375,976,760 P278,064,840

Other receivable 8,624,922 8,475,310

Interest receivable 5,525,360 3,275,448

390,127,042 289,815,598

Less allowance for credit losses 9,635,608 7,784,165

P380,491,434 P282,031,433

Loans receivable earn an interest of 20% for one loan cycle or a period of six months.

Loans receivable consist of loans granted to women who are among the economically active poor in communities with high population densities and levels of microeconomic activities.Loans receivable include past due receivables amounting to P10.5 million and P6.5 million as of December 31, 2007 and 2006, respectively.The movements in allowance for credit losses follow:

2007 2006

Balance at beginning of year P7,784,165 P2,594,519

Provisions for credit losses during the year 4,992,011 7,132,744

Accounts written-off (3,140,568) (1,943,098)

Balance at end of year P9,635,608 P7,784,165

Financial Assets At Fair Value Through Profit or Loss8.

This account consists of investment in shares of stock with market value of P0.3 million.



Prepaid Expenses and Other Current Assets9.

This account consists of:

2007 2006

Unused office supplies P2,600,494 P2,949,851

Prepaid expenses 1,133,454 1,118,014

P3,733,948 P4,067,865

Available-for-Sale Investments10.

In 2000, the Organization, together with the other member-partners of the Alliance of Philippine Partners in Enterprise Development, Inc. (APPEND) established a micro-finance bank wherein the Organization will fully participate as a lead partner with an initial cash investment of P0.1 million.

As of December 31, 2007 and 2006, the Organization has a total investment of P28.6 million or 286,000 shares of stocks representing 12.79% interest in Opportunity Microfinance Bank (OMB).

Property and Equipment11.

The composition of and movements in this account follow:

2007

LandBuilding and

ImprovementsFurniture and

EquipmentTransportation

EquipmentLeasehold

Improvement Total

CostBalance at beginning of year P1,050,000 P5,553,366 P9,643,972 P2,008,352 P4,720,663 P22,976,353Additions – 4,820,782 4,733,709 – 1,865,508 11,419,999Disposals/others – (1,123,500) (160,537) (1,500) (480,535) (1,766,072)Balance at end of year 1,050,000 9,250,648 14,217,144 2,006,852 6,105,636 32,630,280

Accumulated depreciation

Balance at beginning of year – 2,069,745 6,829,123 310,688 3,488,940 12,698,496Depreciation and amortization – 1,417,406 2,448,738 402,251 958,987 5,227,382Disposals/others – (1,123,500) (115,865) (1,500) (504,945) (1,745,810)Balance at end of year – 2,363,651 9,161,996 711,439 3,942,982 16,180,068Net book value as of December 31, 2007 P1,050,000 P6,886,997 P5,055,148 P1,295,413 P2,162,654 P16,450,212

2006

LandBuilding and

ImprovementsFurniture and

EquipmentTransportation

EquipmentLeasehold

Improvement Total

CostBalance at beginning of year P1,050,000 P5,425,116 P7,926,929 P1,827,947 P3,687,468 P19,917,460Additions – 128,250 1,893,618 1,128,563 1,033,195 4,183,626Disposals/others – – (176,575) (948,158) – (1,124,733)Balance at end of year 1,050,000 5,553,366 9,643,972 2,008,352 4,720,663 22,976,353Accumulated depreciation

Balance at beginning of year – 1,602,460 5,313,128 790,0162,523,032

10,228,636Depreciation and amortization – 467,285 1,691,674 265,117 965,908 3,389,984Disposals/others – – (175,679) (744,445) – (920,124)Balance at end of year – 2,069,745 6,829,123 310,688 3,488,940 12,698,496Net book value as of December 31, 2007 P1,050,000 P3,483,621 P2,814,849 P1,697,664 P1,231,723 P10,277,857

As of December 31, 2006, certain properties are used as collateral for the Organization’s long-term debt (see Note 15).

Depreciation and amortization is recognized in the statement of revenue and expenses as follow:

2007 2006

Operating expense (Note 18) P1,970,208 P1,874,725

Administrative expense (Note 19) 3,257,174 1,515,259

P5,227,382 P3,389,984


Other Assets12.


Other assets P3,403,100 P2,550,994

Software cost 604,541 –

Non Micro Enterprise Development (MED) assets 61,000 –

P4,068,641 P2,550,994

The movements in software cost follow:

Acquisitions during the year P659,500Amortization (Note 19) 54,959

Balance at end of year P604,541

Accounts Payable and Accrued Expenses13.


Accounts payable P12,817,389 P10,373,631

Accrued expenses 5,827,699 3,349,536

Unearned service income 162,030 113,750

Micro insurance payable 3,451,929 2,600,000

P22,259,047 P16,436,917

Capital Build-Up14.

This represents initial membership contribution of P200 and the mandatory weekly capital build-up (CBU) amounting to P40 per client that earn interest at the prevailing bank rate on savings deposits plus 1.0% per annum. Capital build-up will be returned to clients when they leave the program.

Notes Payable and Long-Term Debt15. Notes payablea)

Loans from Land Bank of the Philippines (LBP)On September 28, 2007, the Organization obtained a loan from LBP amounting to P20.0 million payable on January 30, 2008 at 9.5% per annum.

On November 14, 2007, the Organization obtained another loan from LBP amounting to P30.0 million payable on April 30, 2008 at 9.5% per annum.

Long-term debtb) Details of the outstanding long-term debt follow:

2007 2006

Taytay sa Kauswagan, Inc. (TSKI) P10,000,000 P10,000,000

People’s Credit and Finance Corporation (PCFC) 320,733 1,579,967

Oikocredit Foundation Philippines, Inc. (Oikocredit) – 11,000,000

10,320,733 22,579,967

Less current portion of long-term debt 320,733 12,259,234

P10,000,000 P10,320,733

Loan from TSKIOn May 1, 2004, the Organization obtained a loan facility from TSKI amounting to P11.0 million of which P10.0 million was already received as of December 31, 2004. The loan is payable at annual interest rate of 10.0% for the



first two (2) years, 11.0% for the third year and 12.0% for the fourth and fifth tears. The agreement requires the Organization to open a microfinance branch in Parañaque in behalf of TSKI, named Kabalikat sa Kaunlaran Project.

Loan from PCFCIn February 2006, the Organization obtained an institutional loan from PCFC amounting to P2.5 million which bears 3% annual interest and is payable quarterly until February 14, 2008. Proceeds from the loan shall be used for granting of sub-loans to microfinance-enterprise or livelihood projects of qualified sub-borrowers. The loan is secured by post-dated checks issued by the Organization in behalf of PCFC.

As of December 31, 2007, the outstanding balance of the loan amounted to P0.3 million.

Loan from OikocreditOn June 23, 2004, a loan was availed from Oikocredit amounting to P55.0 million. The interest for the loan during the first year is at 12.16% while the succeeding interest will be based on the treasury bills rate. The loan is payable semi-monthly over a period of three years.

The loan is secured by the following:a first mortgage on real property of the Organization located in Karuhatan, Valenzuela with an area of 300 a. square meters and improvements thereon;a first mortgage on the shares of capital stock of OMB, a partner, equivalent to 158,999 shares with a par b. value of P100 each;assignment of loan portfolio and related securities which, at all times, shall have a face value of at least P9 c. million; a promissory note in form and substance acceptable to the lender; andcontinuing deed of assignment of loan portfolio and related securities equivalent to 120% of the outstanding d. loan balance.

As of December 31, 2007, the said loan has been fully paid.

Retirement Benefits16.

The Organization has an unfunded noncontributory retirement plan covering all regular employees. Retirement expense is recognized in the statement of revenues and expenses as follow:

2007 2006

Operating expense (Note 18) P7,244,125 P5,196,808

Administrative expense (Note 19) 644,416 460,347

P7,888,541 P5,657,155

As of December 31, 2007 and 2006, the actuarial present value of pension obligation amounted to P29.3 million and P21.8 million, respectively.

The principal actuarial assumptions used in determining pension liability for the Organization’s retirement plan as of January 1, 2007 and 2006 are shown below:

2007 2006

Discount rate 8.29% 14.0%Future salary increases 10.0 10.0

The amounts recognized in the statement of assets, liabilities, and fund balance are as follows:

2007 2006

Present value of unfunded obligation P29,322,485 P21,787,944

Fair value of plan assets – –

Present value of unfunded obligation 29,322,485 21,787,944

Unrecognized actuarial losses (13,152,795) (13,506,795)

Net pension liability P16,169,690 P8,281,149


The movements in the pension liability recognized in the statement of assets, liabilities, and fund balance follow:

2007 2006

Balance at beginning of year P8,281,149 P2,623,994

Retirement expense (Notes 18 and 19) 7,888,541 5,657,155

P16,169,690 P8,281,149

Changes in the present value of the defined benefit obligation are as follows:

2007 2006Balance at beginning of year P21,787,944 P2,623,994Current service cost 5,728,320 5,289,796Interest cost 1,806,221 367,359Actuarial loss – 13,506,795Balance at end of year P29,322,485 P21,787,944

Total retirement expense included in the statement of revenue and expenses are as follows:

2007 2006

Current service cost P5,728,320 P5,289,796

Interest cost 1,806,221 367,359

Net actuarial loss recognized during the year 354,000 –

P7,888,541 P5,657,155

Amounts for the current and previous years are as follows:

2007 2006

Present value of obligation P29,322,485 P21,787,944Experience adjustment on plan liabilities – (8,281,149)

Service Income17.

Service income consists of loan fees representing interest on loans, membership fees and processing fees and related fees from clients.

Operating Expenses18. This account consists of:

2007 2006

Salaries and wages P66,394,892 P44,988,395

Employee benefits and allowances 30,848,201 20,308,439

Rent (Note 21) 9,859,734 7,682,528

Transportation and travel 8,467,862 7,429,613

Retirement 7,244,125 5,196,808

Financing cost 7,051,076 8,736,478Social Security System (SSS), Medicare, ECC and Home Development Mutual Fund (HDMF) contribution 6,001,484 3,720,244

Communication, light and water 4,749,630 4,723,828

Provision for credit losses on receivables 4,135,954 7,132,744

Printing 2,927,410 1,913,436

Supplies 2,827,510 2,768,671

Depreciation and amortization 1,970,208 1,874,725

Repairs and maintenance 1,217,214 241,227

Meetings, trainings and conferences 965,701 3,037,011

Insurance 668,848 638,047



Taxes and licenses 507,565 403,897

Legal, audit and other professional fees 50,000 123,555

Security services 45,240 76,242

Donations and contributions 30,918 37,051

Advertisement and promotion 8,395 9,861

Membership dues – 3,000

Representation and entertainment – 2,912

Miscellaneous 442,306 408,842

P156,414,273 P121,457,554

Administrative Expenses19. This account consists of:

2007 2006

Meetings, trainings and conferences P10,518,745 P6,194,512

Salaries and wages 10,099,278 6,055,125

Employee benefits and allowances 4,116,040 3,333,019

Non MED 3,403,809 639,399

Depreciation and amortization 3,257,174 1,515,259

Transportation and travel 2,427,681 2,811,541

Communication, light and water 1,809,430 1,973,421

Supplies 1,032,692 822,657

Provision for credit losses on receivables 856,057 –

Legal, audit and other professional fees 824,439 84,317

Printing 665,883 1,237

Retirement 644,416 460,347

SSS, Medicare, ECC and HDMF contribution 643,809 342,730

Representation and entertainment 609,778 518,133

Advertisement and promotion 479,147 94,106

Security services 311,750 150,000

Taxes and licenses 196,089 62,277

Gasoline and oil 166,926 139,402

Repairs and maintenance 165,182 71,300

Donations and contributions 142,317 448,823

Insurance 89,534 95,424

Membership dues 65,799 563,745

Amortization of software cost (Note 12) 54,959 –

Miscellaneous 1,077,211 699,144

P43,658,145 P27,075,918

Related Party Transactions20.

Significant transactions with OMB are as follows:a.

2007 2006

Short-term investments P4,644,361 P4,409,967

Interest income 234,394 236,310

The key management personnel compensations representing short-term employee benefits amounted to P5.4 b. million and P2.7 million in 2007 and in 2006, respectively.

Total remuneration of key management personnel included in “Salaries and Wages” amounted to P15.6 million and c. P10.5 million in 2007 and in 2006, respectively.


Lease Commitments21.

The Organization leases office spaces for its 37 branches and 24 branches in 2007 and 2006, respectively, in Luzon and Mindanao for a period of two to three years, with options to renew the lease. Rent expense in 2007 and 2006 amounted to P9.9 million and P7.7 million, respectively.

The future minimum lease payments under the above lease contracts are as follows:

2007 2006

Less than one year P1,398,848 P2,078,209

Between one and five years 13,081,544 –

P14,480,392 P2,078,209

Commitments and Contingent Liabilities22.

In the normal course of the Organization’s operations, there are various outstanding commitments and contingent liabilities which are not reflected in the accompanying financial statements. No material losses are anticipated as a result of these transactions.

Subsequent Events23.

On January 18, 2008, the Board of Trustees approved the closure of the Compostela Valley branch due to problem in peace and order. As of March 31, 2008, outstanding loan balance (gross of allowance) and CBU balance amounted to P3.0 million and P0.8 million, respectively. As of December 31, 2007, outstanding loan balance (gross of allowance) and CBU balance amounted to P12.1 million and P7.2 million, respectively.

On February 14, 2008, the Organization settled its long-term debt with PCFC amounting to P2.5 million (see Note 15).

Approval of the Release of the Financial Statements24.

The accompanying financial statements were approved and authorized for issue by the Organization’s Board of Trustees on April 11, 20086


KMBI’s history began in a small church choir room in 1985 as a

church-based credit program with only one worker and a six

square-meter work area.

From an informal set-up, Kabalikat para sa Maunlad na Buhay, Inc.

(KMBI) was formally launched on the 27th of November 1986 as a non-

stock, non-government development organization. KMBI worked with an

initial capitalization of PhP132,000.00. During its initial operation, KMBI

assisted 37 microentrepreneurs with loans totalling to PhP145,000.00. It

also provided cash management training to 20 microentrepreneurs.

KMBI started expanding its operations in Southern Mindanao in 1999,

standardized its structure and system of operations in 2002, and further

expanded its Mindanao and Luzon operations in 2003 and 2004. It launched

its micro-insurance program in 2005.

Currently, the organization provides non-financial services through the

implementation of the Enterprise Development Services (EDS) program. This

includes a wide array of services such as, but not limited to entrepreneurial / livelihood skills development

and community development. This innovation sprung when KMBI saw the need to enhance the general

“traditional buying and selling” business activity of program members into a more vibrant small to medium-

scale enterprises. These enterprises are capable of increasing profitability, productivity and sustained growth

in various aspects (i.e. social, financial and spiritual).

As KMBI believes in the holistic sense of development, Transformation program completes its three-

pronged approach. The program particularly aims to elicit awareness and active participation in facilitating

transformation through social, environmental, and spiritual interventions, such as leadership trainings,

outreach projects, and opportunity ministries (volunteerism).

At present, KMBI is facing the bigger challenge of reaching to 250,000 Filipino households by

2011.

Looking Back to Where We StartedKMBI History

History is a guide to navigation in perilous times. History is who we are and why we are the way we are. David C. McCullough


The BOARD OF TRUSTEES

DR. AMELIA L. GONZALESChairman and President

ATTY. SERVILLANO C. MENDOZATrustee and Corporate Secretary

EMMANUEL M. DE GUZMAN Vice Chairman & Vice President

DAMIANA D. EXIOMOTrustee

AURELIO C. LLENADO, JR.Trustee & Corporate Treasurer

EDUARDO C. JIMENEZTrustee

RICARDO B. JUMAWANTrustee


The MANAGEMENT

EDGARDO S. MERCEDESExecutive Director

LIZA D. ECODeputy Director - SSG

ANNALIE D. CONCEPCIONAdministration Manager

SANCHO A. MONTAOS IIFinance & Accounting Manager

CARMELA N. PORRAS Operations Manager (Luzon)

VENCENT A. ABRAHAMOperations Manager (Mindanao)

SELVEN A. RAGUROResearch & Development Manager

RIZALDY R. DUQUEResource Mobilization & Com. Manager

HAZEL CHRISTINE Z. ROSACIA Enterprise Development Services Head

MADELYN P. FRIJILLANOSenior Auditor

CHARIS KEN C. LAYAWANTransformation Coordinator


DirectoryBATANGAS2/F 153 Ferrel II Bldg. Dy Silang St. Batangas City (043) 722 2443

BIÑAN 178 Bonifacio St. Canlalay, Binan, Laguna (049) 411 5958

BUTUAN2/F Rudy Tiu Bldg. 3, Montilla St., Butuan City(085) 342 1816

CALAMBA 3/F Sajitec Bldg. Crossing,Calamba, Laguna (049) 545 5875

CAMARIN 3/F Reyes Bldg., No. 68 West Ave., Quezon City CENTRAL CAVITE 3/F Lolo Berong Bldg. Nueno Ave. Imus, Cavite (046) 472 0423

COMPOSTELA VALLEY2/F Mico PharmacyArebejo St., Nabunturan(084) 376-0802

DAET 3/F Manlapaz Bldg. Gov. Panoles Ave., Daet (054) 440 7788

DAVAO PROVINCE 2/F ERGB Bldg. Dalisay Gante Road Tagum City (084) 218 5643

DIGOS2/F Delsar Trading Rizal Ave. Digos, Davao (082) 553 9084

GENSAN Door 1 & 2 Aquino Bldg. J. Catolico Ave. Gen. Santos City (083) 554 5908

GUMACA2/F AQC Bldg Brgy. PenafranciaQuezon 042) 317 7456

IRIGA 2/F Tans Bldg. San Roque Iriga City(054) 456 6012

KIDAPAWAN 2/F Prudenciado Bldg Jose Abad Santos St. Kidapawan, North Cotabato(064) 278 3129

KORONADAL 2/F Del Rosario Bldg. Gen Santos Dr. cor Aquino St. Koronadal(083) 228 6298

LEGAZPI2/F Rosario Salavador Bldg. Rizal St. Legaspi City (052) 473 1926

LIPA2/F Ornasco Trading Bo. Maraouy Lipa City (043) 756 5104

LOWER CAVITE3/F Orchids Bldg. Daang Amaya 1 Tanza Cavite (046) 885 2378

LUCENA3/F HR Bldg. Quezon Ave. corner Gomez St. Lucena City (042) 710 8775

MARIKINA3/F DUM Ruque Bldg. Brgy. Tanong, Marikina City (02) 997 5874

METRO DAVAO 12/F VAB Bldg. Mac Arthur Hi - way Ulas, Davao City(082) 297 4113

METRO DAVAO 2 Door 31 & 32 Carlos Villa Abrelle Bldg. JP Laurel St. Quirino, Davao (082) 224 6514

MEYCAUAYAN 3 /F Mancon Bldg. Mc Arthur Hi - way Meycauayan, Bulacan (044)935 3960

Metro Manila South - 1 2/F Rudex Bldg. Baclaran St. Pasay City (02) 851 3582

Metro Manila South - 2 2/F B. Nenita Bldg. 8124 Dr, A. Santos Ave. Sucat, Parañaque (02) 820 0855

NAGA 2/F Thomas Enrile Bldg. Penafrancia Ave. Naga City(054) 811 8116

PASIG 3/F RN Bldg., No 17 shaw Blvd., Pasig City(02) 636 3174

SAN FRANCISCO2/F Gift Gallery Brgy. I Bravo Comp. San Francisco, Agusan Del Sur (085) 839 3348

SAN JOSE DEL MONTE 2/F Umerez Bldg. Tungko, San Jose Del Monte City, Bulacan (044)815 0076

SAN PABLO Burgos Corner Flores St. San Pablo City (049) 562 1308

STA. CRUZ Jogshaw Bldg. Mabini St. Sta Cruz, Laguna (049) 808 6674

SURIGAO 2/F Elipe Bldg. Cor. Narciso & Kaimo St. Surigao City (086) 826 2442

TACURONG 2/F Bernardo, Gen. Ramon Magsaysay Ave. Tacurong (064) 477 0169

TANDANG SORA DND Royal Midway Plaza 419 Tandang Sora Ave., Culiat Quezon City (02) 932 8214

UPPER CAVITE 12 Aguinaldo Hi - way Sampaloc 1, Dasmarinas Cavite (046) 416 2041

VALENZUELA 3/F JEM Bldg, Corner P. Gomez st., Maysan road Valenzuela City (02) 294 9098

WEST AVENUE Unit F 3/F Carbal Bldg., No. 68 West Ave., Quezon City (02) 376 6346


KMBI prepares the way for greater impact


Kabalikat para sa Maunlad na Buhay, Inc.12 San Francisco Street, Karuhatan, Valenzuela City 1441 Philippines

Tel No. (02) 291.1484 to 86, Fax No. (02) 292.2441www.kmbi.org.ph

annual report 2007

Documents

nonfinancial services

delivery of financial

nonfinancial products

audited financial statement

human resources

greater impactwho

successful year

son of god