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Financial Statements

BANCO OPORTUNIDADE DE MOÇAMBIQUE

For the year ended 31 December 2014

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BANCO OPORTUNIDADE DE MOCAMBIQUE, SAANNUAL FINANCIAL STATEMENTS - 31 December 2014

PAGES

Directors' approval OF THE ANNUAL FINANCIAL STATEMENTS 1

Independent auditors' Report 2-4

Statement of comprehensive income 5

Statement of financial position 6

Statement of change in equity 7

Statement of cash flows 8

Notes to the financial statements 9-51

BANCO OPORTUNIDADE DE MOQAMBIQUE, SAANNUAL FINANCIAL STATEMENTS - 31 December 2014

Directors' approval

The directors are responsible for the preparation and fair presentation of the annual financial statements of Banco Oportunidadede Mogambique, S.A, comprising the statement of financial position at 31 December 2014, the statement of comprehensiveincome, the statement of changes in equity and statement of cash flows for the year then ended, and the notes to the financialstatements, which include a summary of significant accounting policies and other explanatory notes, in accordance withInternational Financial Reporting Standards.

The directors' responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fairpresentation of these financial statements that are free from material misstatement, whether due to fraud or error; selecting andapplying appropriate accounting policies: and making accounting estimates that are reasonable in the circumstances.

The directors' responsibility also includes maintaining adequate accounting records and an effective system of risk management.

The directors have made an assessment of the Bank's ability to continue as a going concern and have no reason to believe thebusiness will not be a going concern in the year ahead.

Approval of the annual financial statements

The annual financial statements of Banco Oportunidade de Mogambique, SA, as identified in the first paragraph, were approvedby the board of-directors on 29 April 2015 and are signed on its behalf by:

Financial Director Chairman

Ernst & Young Limitada Tel: +258 21 35 3000Rua Beimiro Obadias Muanga. N 179 Fax: +258 21 32 1984Caixa Postal 366, E-mail: Ernst&[email protected] NUIT 400 006 245Building a better Mogambique wwwey.comworking world

INDEPENDENT AUDITORS' REPORT

To the Shareholders

Banco Oportunidade de Mogambique, SA

Report on the financial statements

We have audited the accompanying financial statements of Banco Oportunidade de Mogambique,SA, which comprise the statement of financial position as at 31 December 2014 (reflecting totalassets of 435.957.994 Meticais and total equity of 103 764 14 Meticais, including a loss for theyear of (19.690.520) Meticais, the statement of comprehensive income, the statement ofchanges in equity and the statement of cash flows for the year then ended, and a summary ofsignificant accounting policies and other explanatory notes, as set out on pages 5 to 51 .

Board of Directors responsibility for the financial statements

The company's Board of Directors is responsible for the preparation and fair presentation ofthese financial statements in accordance with International Financial Reporting Standards, andfor such internal control as Management determines is necessary to enable the preparation offinancial statements that are free from material misstatement, whether due to fraud or error.

Auditors' responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with International Standards on Auditing. Those standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from materialmisstatement.

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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 entity'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

entity's internal control. An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of accounting estimates made by the Board of Directors, 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 Banco Oportunidade de Mogambique, SA as at 31 December 2014, and its financial

performance and its cash flows for the year then ended in accordance with International

Financial Reporting Standards.

Emphasis of matter

Without affecting our opinion expressed above, we draw your attention to the fact that, as

mentioned in the Note 4 - (ii) to the financial statements, the Bank presents accumulated losses

of 134.342.528 Meticais (including a loss for the year of 19.690.520 Meticais). As a

consequence, the going concern basis on which the accounts have been prepared is strongly

dependent on the Bank obtaining adequate financial resources from shareholders or new

investors and profitable operations in the future.

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Furthermore, we draw your attention to the fact that the loss of more than half of the capital,places the Bank under the situation stipulated in Article 119 of the Commercial Code, making itimperative to implement measures, to be presented at the General Meeting of Shareholders forapproval of accounts of the financial year 31 December 2014, to mitigate the consequences ofimplementation of measures stipulated in that Article.

Maputo, 29 April 2015

E R &YOUN,L4Imapoto

BANCO OPORTUNIDADE DE MOPAMBIQUE, SA

Statement of comprehensive income for the year ended 31 December 2014

(Values expressed in Meticais)

2014 2013

Interest and similar income 5 131 933 255 122 663 756Interest expense 5 (15 385 926) (14 507 688)

Net interest income - 116547329 108 156068

Fee and commission income 6 16 130 753 11750 165

Net trading income 132 678 082 119906233

Other income 7 33518060 32596432

Operating income 166 196 142 152 502 665

Net impairment on financial assets 15 9 614 178 22967210Personnel expenses 8 76551644 76037770Operating lease expenses 28 7 771 665 6334230Depreciation and amortization 18. 19 19 569 826 21 559 220Other expenses 9 72379351 64111559

Loss before tax (19 690 520) (38 507 324)

Income taxexpense 10 - -

Loss for the year (19 690 520) (38 507 324)

Other comprehensive income for the period net of taxes - -

Total Comprehensive income for the period (19 690 520) (38 507 324)

Basic anddilutedloss per share 11 (2417) (4726)

Nominal number of shares 8651 8148

The Bank does not have any element to be classified under other comprehensive incomes. Therefore nil is shown for both years.

The notes on pages 10 to 51 are an integral part of these financial statements

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BANCO OPORTUNIDADE DE MOPAMBIQUE, SA

Statement of financial position for the year ended 31 December 2014

(Values expressed in Meticais)

Notes 2014 2013

Assets

Cash and balances with Central Bank 12 38 523 343 29383 090Balances and placements with other Banks 13 83 467 355 57716 169Available-for-sale investments 14 2 682 287 2682287Loans and advances to customers 15 251 179 913 203 721 893Other assets 16 2851 521 3028404Tax recoverable 17 2864455 2596777Property and equipment 18 52 767 103 62796479Intangible assets 19 1622017 2543071

Total assets 435957994 364 468 169

Liabilities

Deposits from customers 20 239 482 245 197 585 502Borrowed fimds 21 80107691 37389990Deferred Income 22 758815 10253439Other liabilities 23 10595968 9962291Provisions 24 1249133 1249133

Total liabilities 332 193 853 256 440 354

Equity

Share capital and share premium 25 236594 149 221 167303Legal Reserves 26 1512519 1512519Accumulated loss (134 342 528) (114 652007)

Total Equity 103764140 108027815

Total liabilities and equity 435 957 994 364 468 169


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BANCO OPORTUNIDADE DE MOAMBIQUE, SAStatement of Change in Equity for the year ended 31 December 2014(Values expressed in Meticais)

Share Share Legal Accumulated TotalCapital Premium Reserve Loss

Balance at 1 January 2013 178666173 1791 130 1 512519 (76144685) 105825137Loss for the year - - - (38507324) (38507324)Other comprehensive income

- -Total comprehensive income for the year -- - (38507324) (38507324)

Transactions with owners recorded directly in equityAdditional share capital issued 40710000 - - - 40710000Balance at31 December 2013 219376173 1791 130 1512519 (114 652 009) 108027813Loss for the year

- - - (19690520) (19690520)Other comprehensive income _ _-_-_- -Total comprehensive income for the year - - -19690520) (19690520)

Transactions with owners recorded directly in equityAdditional share capital issued 15426846 - - - 15426846Balance at31 December 2014 234803019 1 791 130 1 512519 (134342529) 103764139Notes

25 25 26


BANCO OPORTUNIDADE DE MOqAMBIQUE, SAStatement of Cash Flows for the year ended 31 December 2014(Values expressed in Meticais)

2014 2013

Cash flows from operating activities

Loss for the period (19 690 520) (38 507 323)Adjustments for:

Depreciation and amortisation 18,19 19 569 826 21 559 220Provision 24 - 1249133Net impairment loss on Loans and advances 15 9614 178 22967210Net interest income receivable (9327 184) (9 260 457)

166299 (1992217)Increase in loans and advances to customers 15 (57 072 198) (9 191 003)Decrease (increase) in other assets 16 176 884 (1 107033)Increase in deposits from customers 20 41 896 743 54 156 759Decrease in other liabilities 23,22 (8860946) (11 938 362)

(23 693 219) 29928 143Interest receivable 10834876 9570446Interest payable 21 (1507691) (309989)Income taxpaid 17 (267679) (211797)

Net cash generated in operating activities (14633713) 38 976 804

Cash flow from investing activities

Purchase of Available-for-sale investments 14 - (1 150 000)Purchase of property and equipment 18 (9 473 160) (13 592 444)Purchase ofintangible assets 19 - (53379)Proceeds from disposal of property and equipment 18 849 451 -Increase in statutory reserve with central Bank 30 (3 872 533) (3 863 161)

Net cash used in investing activities (12 496 242) (18 658 984)

Cash flow from financing activities

Proceeds from borrowed funds 21 42 717 702 (48 296 411)Increase in share capital 25 15426846 40710000

Net cash from financing activities 58144548 (7586 411)

Net increase in cash and cash equivalents 31 014 593 12 731 409

Cash and cash equivalents at 1 January 71 856 115 59124706Cash and cash equiealents at31 December 30 102 870 708 71 856 115


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Banco Oportunidade de Mogambique, SANotes to the financial statements for the year ended 31 December 2014(Values expressed in Meticais)

Page

1. R eporting entity .tity.1................................... ................. .... 0............ ..... .. ...... ......... ............ . ...10........................ 102. B a s is o f p re p a ra tio n .1.................. .... 0......... ...... ...... ....... ............ ...... ..... ... ....... .. ..................... ..... ............ . 03. S ig nificant a cco unting po licies...... .............. ............. ....................... ......... ..... ....... ... ............ .......................... ... 11 I4 . U se of estim ates and judgem ents .... ...................................... -.................... ...... . .. ............... . ....... .......... .... 275. Interest and sim ilar inco m e ............ .... .......... ..... ................. ....... ....................... . ... .. ............. - .......... .............. 286. Fee and C om m ission income2 ...... ................... ............. ... ............................ .......... ........ ...... ... ..... 287 . O th e r In c o m e ........... ........ ........ ...... ............ ....... ............... ... ........... ... .......... -....... .. .... .. ...... ........... 2 88 P ersonnel expense ........en.... .................... ........... ... .. ............. ............ ..... ... ..... ......... 299 O the r ex pe nses ........................ ...... ............. .. ......................... . . .. .......... ... ... ........ 3010. Incom e tax expense............... . .................... . . ............... .... -.. ..... ........ .3 11 1. Loss pe r s ha re 32............................................ ............. ... ... ..... .... .......... ..... .. . ...... 3 212. Cash and balances w ith Central Bank .......... .......... ...... ....... --..... ......... .... ... ..... 3213. Balances and placements with other Banks . ............ 3................ ... ....... . . . ... . ...... 3214. Available-for-sale financial investm ents ........ .......... ........... ........... . ...... 3215. Loans and advances to custom ers.......... ............ 3........... . . .............. ......... -3316. Other assets.. .... ...... ................. .......Oth r. .... ....assets.......... ..... 3417. Tax recoverable ... .................. ................... e.ab. .......... ... .............. ..... 3418. P roperty and equipm ent............................................ .. ......... . ......... .... ... - .. 3419. Intangible as s e ts ................. .......................... ...................... .............. . . .... - 3 520. D eposits from custom ers ................................. .............. ...... ................ . .... 352 1. B orrow ed F unds ................... ................................... 3 ............ ....... 3622. Deferred Incom e ............ ....................... .............. ... .. .............. ... ..... 3623. Other Liabilities ................... .... ............. . ........ 3 ..... .............. ... 7. ..... 3724, P ro v is io ns ............................................................. .... .. ............. .... . ... . . ..... 3 725. Share capital and share prem ium ......................... em......... .. ...................... . . ....... 3726. Legal reserve ......... ................... ........................... .......er.e.. 38... ............... .. . .....38

27 . R ela ted P a rty ................... ............................ ..... ... ..... ......-............ . . ...... 3 828. Lease obligations and other com mitments ........m.m.................... ...... .. ..... ... .. ....... 3929. Financial assets and liabilities .. ......... ....... . ... .. - ................. -...... . ..... 3930. Cash and cash equivalents.. . ....... ..... .. ..... .. .4231. Financial risk management ... ....... ... ....... -... ... ....... .... 4232. Events after the reporting period . . . ...... .. ..... . . .. . .. . . . .. . ...... -51

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Notes to the financial statements for the year ended 31 December 2014

1. Reporting entity

Banco Oportunidade de Mogambique, S.A., (the "Bank") is a Bank incorporated in Mozambique on 16 February 2005 founded byOpportunity International (01) an International Organisation based in the United States of America. The address of Bank's registeredhead office is Maputo, Av. 24 de Julho, 4136. Its principal activities are those of micro-finance lending to small and medium sizedenterprises and individuals and limited investing activities arising from cash and liquidity management

2, Basis of preparation

(a) Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by theintemational accounting Standards Board (IASB). The financial statements were authorized for issue by the board of Directors on 29April 2015.

(b) Basis of measurement

The financial statements have been prepared on a historical cost basis, except where specifically indicated otherwise in theaccounting policies.

(c) Functional and presentation currency

The Bank's functional currency is the Mozambique Metical (MZN), being the currency of the primary economic environment in whichit operates and the currency in which accounting records are maintained.

Except as otherwise indicated, financial information has been rounded to the nearest Metical.

(d) Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect theapplication of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ fromthese estimates.

Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in theperiod in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies thathave the most significant effect on the amount recognised in the financial statements are described in note 4.

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3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

(a) Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currency of the Bank at exchange rates at the dates ofthe transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to thefunctional currency at the exchange rate at that date. All differences are taken to profit or loss. The foreign currency gain or loss onmonetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted foreffective interest and payments during the period and the amortised cost in foreign currency translated at the exchange rate at the endof the period. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translatedat the foreign exchange rate ruling at the date of the transaction.

(b) Interest

Interest income and expense are recognised in profit or loss using the effective interest method. The effective interest rate is the ratethat exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or,where appropriate, a shorter period) to the carrying amount of the financial asset or liability.

The calculation of the effective interest rate includes all fees and points paid or received transaction costs, and discounts or premiumsthat are an integral part of the effective interest rate. Transaction costs are incremental costs that are directly attributable to theacquisition, issue or disposal of financial asset or liability.

(c) Fees and commission

Fees and commission income and expenses that are integral to the effective interest rate on a financial asset or liability are includedin the measurement of the effective interest rate.

Other fees and commission income, including account servicing fees, investment management fees, sales commission, placementfees and syndication fees, are recognised as the related services are performed. When a loan commitment is not expected to result inthe draw-down of a loan, loan commitment fees are recognised on a straight-line basis over the commitment period.

Other fees and commission expense relates mainly to transaction and service fees, which are expensed as the services are received.

(d) Net trading income

Net trading income comprises gains less losses related to trading assets and liabilities, and includes all realised and unrealised fairvalue changes, interest and foreign exchange differences. Trading assets comprises: Loans and receivables, cash and cashequivalent and trading liabilities comprises deposits from customers.



(e) Leases

The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement andrequires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and thearrangement conveys a right to use the asset.

Bank as a lessee:

Leases that do not transfer to the Bank substantially all the risks and benefits incidental to ownership of the leased items areoperating leases.

Payments made under operating leases are recognised in profit and loss on a straight-line basis over the term of the lease. Leaseincentives received are recognised as an integral part of the total lease expense over the term of the lease.

(f) Taxes

(i) Current tax

Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from orpaid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted orsubstantively enacted by the reporting date.

(ii) Deferred tax

Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and theircarrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences,except:

* where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not abusiness combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

* in respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of thereversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in theforeseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses,to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised except:

* where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset orliability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profitnor taxable profit or loss; and

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in respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assetsare recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future andtaxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probablethat sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred taxassets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit willallow the deterred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised orthe liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Current tax and deferred tax relating to items recognised in other comprehensive income or equity are also recognised outside profit orloss. The tax is recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against currenttax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(g) Financial assets and liabilities

(i) Initial recognition and measurement

The Bank determines the classification of its financial assets at initial recognition depending on the purpose andmanagement's intention for which the financial instruments were acquired and their characteristics.

All financial instruments are recognised initially at fair value plus, in the case of investments not at fair value through profit orloss, directly attributable transaction costs.

The Bank initially recognises loans and advances, deposits and subordinated liabilities on the date that they are originated.All other financial assets and liabilities are initially recognised on the trade date at which the Bank becomes a party to thecontractual provisions of the instrument.

The Bank's financial assets include cash and balances with Central Bank, balances and placements with other banks, loansand advances to customers and equity investments. The Bank's financial liabilities consist of deposits from customers andborrowed funds.

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Banco Oportunidade de Mogambique, SANotes to the financial statements for the year ended 31 December 2014

(ii) Subsequent measurement

Available-for-sale financial instruments

Available-for-sale financial instruments are those non-derivative financial assets that are designated as available for sale orare not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Gains and losses arising from a change in the fair value of available-for-sale assets are recognised directly in othercomprehensive income and accumulated in equity. When the financial assets are sold, collected or otherwise disposed of thecumulative gain or loss recognised in equity is recycled through other comprehensive income into profit or loss.

Loans and advances

Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an activemarket and that the Bank does not intend to sell immediately or in the near term.

Loans and advances are initially measured at fair value plus incremental direct transaction costs and

subsequently measured at their amortised cost using the effective interest method less allowance for impairment.

Gains and losses are recognised in profit or loss on impairment and derecognition as well as through the amortisationprocess.

Cash and cash equivalents

Cash and cash equivalents include notes and coins on hand, unrestricted balances held with Central Bank, balances andplacements with other Banks and highly liquid financial assets with original maturities of less than three months, which aresubject to insignificant risk of changes in their fair value and are used by the Bank in the management of its short- termcommitments.

Cash and cash equivalents are subsequently measured at amortised cost.

Deposits from customers and other borrowings

After initial measurement, deposits from customers and other borrowings are subsequently measured at

amortised cost using the effective interest rate. Amortised cost is calculated by taking into account any discount or premiumon the issue and costs that are an integral part of the effective interest rate. Gains and losses are recognised in profit or losson derecognition as well as through the amortisation process.

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Banco Oportunidade de Mogambique, SANotes to the financial statements for the year ended 31 December 2014

(iii) Derecognition

The Bank derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfersthe rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks andrewards of ownership of the financial asset are transferred, Any interest in transferred financial assets that is created orretained by the Bank is recognised as a separate asset or liability.

The Bank enters into transactions whereby it transfers assets recognised on its Statement of Financial Position, but retainseither all risks or rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards areretained, then the transferred assets are not derecognised from the Statement of Financial Position. Transfers of assets withretention of all or substantially all risks and rewards include, for example securities lending and repurchase transactions.

The Bank derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. Where anexisting financial liability is replaced by another from the same lender on substantially different terms, or the terms of anexisting liability are substantially modified, such an exchange or modification is treated as a derecognition of the originalliability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit orloss.

(iv) Offsetting

Financial assets and liabilities are set off and the net amount presented in the Statement of Financial Position when, and onlywhen the Bank has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset andsettle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and lossesarising from a group of similar transactions such as in the Bank's trading activity.

(v) Amortised cost measurement

The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initialrecognition minus principal repayments plus or minus the cumulative amortisation using the effective interest method of anydifference between the initial amount recognised and the maturity amount minus any reduction for impairment.

(vi) Fair value measurement

The bank does not measure any financial instruments at fair value, but discloses the fair value of financial instrumentsmeasured at amortised cost at each reporting date. Fair value is the price that would be received to sell an asset or paid totransfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurementis based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability, or

In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Bank.

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The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset orliability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participants ability to generate economic benefits byusing the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and bestuse.

The Bank uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measurefair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair valuehierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

* Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities* Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or

indirectly observable

* Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities whose fair values are measured on a recurring basis, the Bank determines whether transfers have occurredbetween Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair valuemeasurement as a whole) at the end of each reporting period.

(vii) Identification and measurement of impairment

At each reporting date the Bank assesses whether there is objective evidence that financial assets not measured at fair valuethrough profit and loss are impaired. Financial assets are impaired when objective evidence demonstrates that a loss eventhas occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows of theasset that can be estimated reliably.

Loans and advances

The Bank considers evidence of impairment at both a specific asset and collective level. All significant loans and advances areassessed for specific impairment individually. All significant assets found not to be specifically impaired are then collectively assessedfor any impairment that has been incurred but not yet identified. Loans and advances that are not individually significant are thencollectively assessed for impairment by grouping together loans and advances (measured at amortised cost) with similar riskcharacteristics.

For loans and advances to customers carried at amortised cost, the Bank first assesses whether objective evidence of impairmentexists individually for financial assets that are individually significant, and individually or collectively for financial assets that are notindividually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financialasset whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics andcollectively assesses them for impairment Assets that are individually assessed for impairment and for which an impairment loss is orcontinues to be recognised are not included in a collective assessment of impairment.

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Banco Oportunidade de Mo;ambique, SA


Objective evidence that financial assets are impaired can include default or delinquency by a borrower, restructuring of a loan or

advance by the Bank on terms that the Bank would not otherwise consider, indications that a borrower or issuer will enter bankruptcy,

the disappearance of an active market for a security or other observable data relating to a group of assets such as adverse changes in

the payment status of borrowers or issuers in the group or economic conditions that correlate with defaults in the group.

In assessing collective impairment the Bank uses statistical modelling of historical trends of the probability of default, timing of

recoveries and the amount of loss incurred adjusted for managements judgement as to whether current economic and credit

conditions are such that the actual losses are likely to be greater or less than suggested by historical modelling. Default rates, loss

rates and the expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure that they remain

appropriate.

Impairment losses on financial assets measured at amortised cost are measured as the difference between the carrying amount of the

financial assets and the present value of estimated cash flows discounted at the assets original effective interest rate. Losses are

recognised in profit or loss and reflected in an allowance account against loans and advances. Interest income continues to be

accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose

of measuring the impairment loss.

When a subsequent event causes the amount of impairment loss to decrease, the impairment loss is reversed through profit or loss.

Available-for-sale financial instruments

When a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income and there

is objective evidence that the asset is impaired, the cumulative loss that had been recognised in other comprehensive income is

reclassified from equity to profit or loss as a reclassification adjustment even though the financial asset has not been derecognised

(h) Property and equipment

(i) Recognition and measurement

Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self- constructed assets

includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition

for its intended use. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that

equipment.

When parts of an item of property or equipment have different useful lives, they are accounted for as separate items (major

components) of property and equipment.

The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with

carrying amount of the item of property plant and equipment, and is recognised net within other income in profit or loss.

17



(ii) Subsequent costs

The cost of replacing part of an item of property or equipment is recognised in the carrying amount of the item if it is probablethat the future economic benefits embodied within the part will flow to the Bank and its cost can be measured reliably. The costsof the day-to-day servicing of property and equipment are recognised in profit or loss as incurred.

(iii) Depreciation

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item ofproperty and equipment in order to reduce the carrying amount to residual value at the end of the asset's useful life.

The estimated useful lives for the current and comparative periods are as follows:

L Buildings 50 years

- Leasehold improvements 5-10 years

Equipment 3-5 years

a Vehicles 4-5 years

0 Furniture 3-5 years

Management reviews the estimated useful life and the depreciation method on an annual basis and values are reassessed at thereporting date and adjusted prospectively if necessary.

(i) Intangible assets

Software

Software acquired by the Bank is stated at cost less accumulated amortisation and accumulated impairment losses.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, from the date that it isavailable for use. The estimated useful life of software is three to five years.

Management reviews the estimated useful life, residual value and the amortisation method on annual basis and adjust prospectively ifappropriate.

The gain or loss on disposal of an intangible asset is determined by comparing the proceeds from disposal with carrying amount of theitem, and is recognised within other income in profit or loss.

18

Banco Oportunidade de Moambique, SA


(j) Impairment of non-financial assets

The carrying amounts of the Bank's non-financial assets are reviewed at each reporting date to determine whether there is anyindication of impairment. If any such indication exists then the assets recoverable amount is estimated. An asset's recoverableamount is the higher of an asset's or CGU's fair value less costs of disposal and its value in use. Where the carrying amount of anasset or CGU 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 thatreflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costsof disposal, an appropriate valuation model is used.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Acash generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assetsand groups. Impairment losses are recognised in profit or loss.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses mayno longer exist or may have decreased. If such indication exists, the Bank estimates the asset's or CGU's recoverable amount, Apreviously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset'srecoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the assetdoes not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, hadno impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss.

(k) Provisions

A provision is recognised if as a result of a past event the Bank has a present legal or constructive obligation that can beestimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions aredetermined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the timevalue of money and where appropriate the risks specific to the liability.

(1) Share capital and reserves

The Bank classifies capital instruments as financial liabilities or equity instruments in accordance with the contractual terms of theinstrument.

(m) Grants and donations

(i) Restricted Grants

The Bank records restricted grants as deferred income in the Statement of Financial Position and transfers specific amounts toother income when specific conditions are met. The Bank realizes such income when the expense related to the grant activity isrecognised. For grants relating to assets, the grant income is recognised in profit or loss on a systematic basis over the usefullife of the asset

19

Banco Oportunidade de Mogambique, SANotes to the financial statements for the year ended 31 December2014

(ii) Unrestricted Grants

The Bank records unrestricted grants in profit and loss when they are receivable and is related to expenses.

(n) New and amended standards and interpretations

The accounting policies adopted are consistent with those of the previous financial year, except for the following new andamended / improved IFRS and IFRIC interpretations effective as of 1 January 2014:

The adoption of the standards or interpretations is described below:

IFRIC Interpretation 21 Levies (IFRIC 21)

IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevantlegislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should beanticipated before the specified minimum threshold is reached. IFRIC 21 is effective for annual periods beginning on or after 1 January2014. The new interpretation has not had an impact on the Bank as the Bank has not recognised any levies.

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

These amendments are effective for annual periods beginning on or after 1 January 2014 provide an exception to the consolidationrequirement for entities that meet the definition of an investment entity under IFRS 10. The exception to consolidation requiresinvestment entities to account for subsidiaries at fair value through profit or loss. This amendment is not relevant to the Bank, since theBank as not considered to be an investment entity.

IAS 32 Offsetting FinancialAssets and Financial Liabilities -Amendments to lAS 32

The IASB issued an amendment to clarify the meaning of "currently has a legally enforceable right to set off the recognised amounts"(lAS 32.42(a)). This means that the right of set-off:

- must not be contingent on a future event; and

- must be legally enforceable in all of the following circumstances:

- the normal course of business;

- the event of default; and

- the event of insolvency or bankruptcy of the entity and all of the counterparties. These amendments become effective for annualperiods beginning on or after 1 January 2014. This amendment has had no impact in the financial statements of the Bank as nooffsetting is applied at present.

20



IAS 36 Impairment of Assets

The IASB has issued amendments to IAS 36 - Impairment of Assets, to clarify the disclosure requirements about the recoverableamount of impaired assets if that amount is based on fair value less costs of disposal. The amendments clarify the IASB's originalintention: that the scope of these disclosures is limited to the recoverable amount of impaired assets that is based on fair value lesscosts of disposal. The amendment is effective for pedods beginning on or after 1 January 2014, and has not had an impact on thefinancial statements as no assets have been impaired.

IAS 39 Novation of Derivatives and Continuation of Hedge Accounting

The amendment provides an exception to the requirement to discontinue hedge accounting in situations where over-the-counter (OTC)derivatives designated in hedging relationships are directly or indirectly, novated to a central counterparty (CCP) as a consequence oflaws or regulations. or the introduction of laws or regulations. This amendment is effective for annual periods beginning on or after 1January 2014 and has had no impact on the Bank as it does not apply hedge accounting.

(o) Standards issued but not effective

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Bank's financial statementsare disclosed below. The Bank intends to adopt these standards, if applicable, when they become effective.

IFRS 9 Financial Instruments

In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all phases of the financial instrumentsproject and replaces lAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standardintroduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annualperiods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparativeinformation is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initialapplication is before 1 February 2015. The adoption of IFRS 9 will have an effect on the classification and measurement of the bank'sfinancial assets, but no impact on the classification and measurement of the bank's financial liabilities

IFRS 14 Regulatory Deferral Accounts

IFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of itsexisting accounting policies for regulatory deferral account balances upon its first-time adoption of IFRS. Entities that adopt IFRS 14must present the regulatory deferral accounts as separate line items on the statement of financial position and present movements inthese account balances as separate line items in the statement of profit or loss and other comprehensive income. The standardrequires disclosures on the nature of, and risks associated with, the entity's rate-regulation and the effects of that rate-regulation on itsfinancial statements. IFRS 14 is effective for annual periods beginning on or after 1 January 2016. This standard will have no impact inthe bank's financial statements.

21

Banco Oportunidade de Moqambique, SA


Amendments to lAS 19 Defined Benefit Plans: Employee Contributions

IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. Wherethe contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarifythat, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise suchcontributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions tothe periods of service. This amendment is effective for annual periods beginning on or after 1 July 2014. It is not expected that thisamendment would be relevant to the bank, since the bank does not have defined benefit plans with contributions from employees orthird parties.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 Revenue from Contracts with Customers replaces [AS 11 Construction Contracts, lAS 18 Revenue and related interpretations.IFRS 15 specifies the accounting treatment for all revenue arising from contracts with customers. It applies to all entities that enter intocontracts to provide goods or services to their customers, unless the contracts are in the scope of other IFRSs, such as IAS 17 Leases.

The standard also provides a model for the measurement and recognition of gains and losses on the sale of certain non-financialassets, such as property or equipment. The new standard becomes effective for periods beginning on or after 1 January 2017. Thisnew standard is not expected to have a significant impact on the Bank as financial instruments and other contractual rights orobligations within the scope of IFRS 9 Financial Instruments are excluded from the scope of the standard.

Amendments to lAS 16 and 1AS 38: Clarification of Acceptable Methods of Depreciation and Amortisation

The amendments clarify the principle in lAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are generated fromoperating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As aresult, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limitedcircumstances to amortise intangible assets.

The amendments are effective prospectively for annual periods beginning on or after 1 January 2016, with early adoption permitted.These amendments are not expected to have any impact to the Bank given that the Bank has not used a revenue-based method todepreciate its non-current assets.

Amendments to IAS 27: Equity Method in Separate Financial Statements

The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associatesin their separate financial statements. Entities already applying IFRS and electing to change to the equity method in its separatefinancial statements will have to apply that change retrospectively, For first-time adopters of IFRS electing to use the equity method inits separate financial statements, they will be required to apply this method from the date of transition to IFRS. The amendments areeffective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments will not have anyimpact on the Bank's consolidated financial statements, since the bank as not investment in subsidiaries and associates.

22



lAS 1 Presentation of Financial Statements

The International Accounting Standards Board has issued amendments to IAS 1 as part of the disclosure initiative which aims toimprove the presentation and disclosure requirements. The amendments to lAS 1 include narrow-focus improvements in the followingfive areas:

- Materiality

- Disaggregation and subtotals

- Notes structure

- Disclosure of accounting policies

- Presentation of items of other comprehensive income (OC1) arising from equity accounted investments

The amendments are effective for periods ending on or after 1 January 2016 and are not expected to have an impact on the Bank.

Amendments to IAS 16 and lAS 41 Agriculture: Bearer Plants

The amendments change the accounting requirements for biological assets that meet the definition of bearer plants. Under theamendments, biological assets that meet the definition of bearer plants will no longer be within the scope of IAS 41. Instead, IAS 16 willapply. After initial recognition, bearer plants will be measured under IAS 16 at accumulated cost (before maturity) and using either thecost model or revaluation model (after maturity). The amendments also require that produce that grows on bearer plants will remain inthe scope of IAS 41 measured at fair value less costs to sell.

For government grants related to bearer plants, IAS 20 Accounting for Government Grants and Disclosure of Government Assistancewill apply. The amendments are retrospectively effective for annual periods beginning on or after 1 January 2016, with early adoptionpermitted. These amendments are not expected to have any impact to the Bank as the Bank does not have any bearer plants.

Annual improvements 2010-2012 Cycle

These improvements are effective from 1 July 2014 and are not expected to have a material impact on the bank. They include:

IFRS 2 Share-based Payment

This improvement is applied prospectively and clarifies various issues relating to the definitions of performance and service conditionswhich are vesting conditions, including

* A performance condition must contain a service condition;

* A performance target must be met while the counterparty is rendering service;* A performance target may relate to the operations or activities of an entity, or to those of another entity in the same group;* A performance condition may be a market or non-market condition; and

* If the counterparty, regardless of the reason, ceases to provide service during the vesting period, the service condition is notsatisfied.

23



IFRS 3 Business Combinations

The amendment is applied prospectively and clarifies that all contingent consideration arrangements classified as liabilities (or assets)

arising from a business combination should be subsequently measured at fair value through profit or loss whether or not they fall within

the scope of IFRS 9 (or IAS 39, as applicable).

IFRS 8 Operating Segments

The amendments are applied retrospectively and clarify that:

* An entity must disclose the judgements made by management in applying the aggregation criteria in paragraph 12 of IFRS 8,including a brief description of operating segments that have been aggregated and the economic characteristics (e.g., sales and

gross margins) used to assess whether the segments are 'similar'.

* The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief

operating decision maker, similar to the required disclosure for segment liabilities.

IAS 16 Property, Plant and Equipment and lAS 38 Intangible Assets

The amendment is applied retrospectively and clarifies in lAS 16 and IAS 38 that the asset may be revalued by reference to

observable data on either the gross or the net carrying amount. In addition, the accumulated depreciation or amortisation is the

difference between the gross and carrying amounts of the asset.

lAS 24 Related Party Disclosures

The amendment is applied retrospectively and clarifies that a management entity (an entity that provides key management personnel

services) is a related party subject to the related party disclosures. In addition, an entity that uses a management entity is required to

disclose the expenses incurred for management services.


These improvements are effective from 1 July 2014 and are not expected to have a material impact on the Bank. They include:

IFRS 3 Business Combinations

The amendment is applied prospectively and clarifies for the scope exceptions within IFRS 3 that:

* Joint arrangements, not just joint ventures, are outside the scope of IFRS 3; and

* This scope exception applies only to the accounting in the financial statements of the joint arrangement itself

IFRS 13 Fair Value Measurement

The amendment is applied prospectively and clarifies that the portfolio exception in IFRS 13 can be applied not only to financial assets

and financial liabilities, but also to other contracts within the scope of IFRS 9 (or IAS 39, as applicable),

24



IAS 401nvestmentProperty

The description of ancillary services in IAS 40 differentiates between investment property and owner-occupied property (i.e., property,

plant and equipment). The amendment is applied prospectively and clarifies that IFRS 3, and not the description of ancillary services in

lAS 40, is used to determine if the transaction is the purchase of an asset or business combination,

Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests

The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation, in which the

activity of the joint operation constitutes a business must apply the relevant IFRS 3 principles for business combinations accounting.

The amendments also clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an additional

interest in the same joint operation while joint control is retained. In addition, a scope exclusion has been added to IFRS 11 to specify

that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the

same ultimate controlling party.

The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in

the same joint operation and are prospectively effective for annual periods beginning on or after 1 January 2016, with early adoption

permitted. These amendments are not expected to have any impact to the Bank.


In the 2012-2014 annual improvements cycle, the IASB issued five amendments to four standards, summaries of which are provided

below. The changes are effective 1 January 2016 and are not expected to have an impact on the Bank:

IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations

Assets (or disposal groups) are generally disposed of either through sale or through distribution to owners. The amendment to IFRS 5clarifies that changing from one of these disposal methods to the other should not be considered to be a new plan of disposal, rather itis a continuation of the original plan. There is therefore no interruption of the application of the requirements in IFRS 5. The

amendment also clarifies that changing the disposal method does not change the date of classification. The amendment is appliedprospectively.

IFRS 7 Financial Instruments: Disclosures

Paragraphs 42A - H of IFRS 7 require an entity to provide disclosures for any continuing involvement in a transferred asset that is

derecognised in its entirety. The Board was asked whether servicing contracts constitute continuing involvement for the purposes of

applying these disclosure requirements. The amendment clarifies that a servicing contract that includes a fee can constitute continuing

involvement in a financial asset. An entity must assess the nature of the fee and arrangement against the guidance for continuing

involvement in paragraphs IFRS 7.B30 and IFRS 7.42C in order to assess whether the disclosures are required

25



IFRS 7 Financial Instruments: Disclosures

In December 2011, IFRS 7 was amended to add guidance on offsetting of financial assets and financial liabilities. In the effective dateand transition for that amendment, paragraph 44R of IFRS 7 states that "[Aln entity shall apply those amendments for annual periodsbeginning on or after 1 January 2013 and interim periods within those annual periods." The interim disclosure standard, IAS 34, doesnot reflect this requirement, however, and it is not clear whether those disclosures are required in the condensed interim financialreport

The amendment removes the phrase 'and interim periods within those annual periods' from paragraph 44R, clarifying that these IFRS7 disclosures are not required in the condensed interim financial report, However, the Board noted that lAS 34 requires an entity todisclose '... ] an explanation of events and transactions that are significant to an understanding of the changes in financial position andperformance of the entity since the end of the last annual reporting period'. Therefore, if the IFRS 7 disclosures provide a significantupdate to the information reported in the most recent annual report, the Board would expect the disclosures to be included in theentity's condensed interim financial report. The amendment must be applied retrospectively

IAS 19 Employee benefits

1AS 19 requires an entity to recognise a post-employment benefit obligation for its defined benefit plans. This obligation must bediscounted using market rates on high quality corporate bonds or using government bond rates if a deep market for high qualitycorporate bonds does not exist. The amendment to AS 19 clarifies that market depth of high quality corporate bonds is assessedbased on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is nodeep market for high quality corporate bonds in that currency, government bond rates must be used.

AS 34 Interim Financial Statements

lAS 34 requires entities to disclose information in the notes to the interim financial statements 'if not disclosed elsewhere in the interimfinancial report'. However, it is unclear what the Board means by 'elsewhere in the interim financial report'. The amendment states thatthe required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between theinterim financial statements and wherever they are included within the greater interim financial report (e.g., in the managementcommentary or risk report). The Board specified that the other information within the interim financial report must be available to userson the same terms as the interim financial statements and at the same time. If users do not have access to the other information in thismanner, then the interim financial report is incomplete.

26



4. Use of estimates and judgements

Key sources of estimation uncertainty

(i) Allowance for credit losses

Assets accounted for at amortised cost are evaluated for impairment on a basis described in the accounting policy.

The specific counterparty component of the total allowances for impairment applies to financial assets evaluated individually forimpairment and is based upon management's best estimate of the present value of the cash flows that are expected to bereceived. In estimating these cash flows management makes judgements about counterparty's financial situation and the fairvalue of any underlying collateral. Each impaired asset is assessed on its merits and the workout strategy and estimate of cashflows considered recoverable are independently approved by the Credit risk function.

Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans and advances with similareconomic characteristics when there is objective evidence to suggest that they contain impaired claims but the individualimpaired items cannot yet be identified. A component of collectively assessed allowances is for country risks. In assessingthe need for collective loan loss allowances, management considers factors such as credit quality portfolio size,concentrations and economic factors, In order to estimate the required allowance, assumptions are made to define the wayinherent losses are modelled and to determine the required input parameters based on historical experience and currenteconomic conditions. The accuracy of the allowances depends on how well the estimates of future cash flows for specificcounterparty allowances and the model assumptions and parameters used in determining collective allowances.

(ii) Going concern

The Bank's management has made an assessment of its ability to continue as a going concern and is satisfied that it hasthe resources to continue in business for the foreseeable future. Furthermore, management is not aware of any materialuncertainties that may cast significant doubt upon the Bank's ability to continue as a going concern. Therefore, the financialstatements continue to be prepared on the going concern basis. The Bank had projected to achieve the breakeven in 2014,and start making profits from 2015, The figures for the financial year 2014, shows that the bank managed to reduced thenegative losses of 38,507.323 MTN in December 2013 to the actual 19.690.520 MTN in 2014, showing an improvement,toward the breakeven, which we believe that will be achieved in FY15. Therefore as loans and deposits grow it isforecasted that the Bank will start making profits on a monthly basis starting from February 2015 forward however furthershareholders support will continue to allow the bank to meet with the operational needs and Central Bank capital andprudent requirements.

27



5. Interest and similar income

2014 2013

Interest incomeCash and cash equivalents 1 003 889 628 336Loans and advances to customers 130 929 366 122035 421

Total Interest Income 131 933 255 122 663 756

Interest expenseDeposits from Customers 10 722 945 7 632 010

Borrowed funds 4 662 981 6 875 677

Total Interest expense 15 385 926 14507 688

Net interest income 116 547 329 108 156069

6. Fee and Commission income

2014 2013

Early pay off fees 495216 204975Electronic Fund Transfer Charges 98304 5 180

ATM fees 4 099 076 2614 758Loan Admin and commission fees 11 552 681 8 402 425

Insurance Comissions (114 523) 522 827Total 16130753 11750165

<Insurance commissions relate to fees the bank charges to collect premiums on the behalf of the insurance company.

7. Other Income

2014 2013

Grant income (Note 22) 30259849 29 359 955

Net foreign exchange gains 935751 33513

Other income 2322460 3202965

Total other income 33 518 060 32 596 432

The Other income consists of:

28



2014 2013

Commission received 2 122 702 3 202 965Bad Credit Recovery 199 758 -

Total 2 322 460 3 202 965

8. Personnel expense

2014 2013

Wages and salaries 71 031 644 69 867 041

Compulsory social security obligations 2575604 2515949

Other personnel expenses 2 944 395 3 654 780

Total 76551 644 76 037 770

The average number of employees per category is as follows:

2014 2013

Management 4 5

Technical support staff 198 202

Others 33 33

Total 235 240

29



9. Other expenses

2014 2013

Telecommunications 13 151 746 13543772

Software licensing and other IT 1 273 601 2 629 488

Fuel & Maintenance 10009371 11 580 159

Travel 3892060 5 544 984

Professional fees 6533 319 4 662 538

Office supplies 4624 788 5236 544

Insurance and security 14112415 12159225

Utilities 1 878 415 1 786 468

Other administrative expenses 16903638 6 968 383

72379351 64111559

The other administrative expenses consists of:

2014 2013

Disaster recovery space renta 2 082 586 1 604 875

Representation cost 355 776 378 748

Pulicity and marketing 3 291 424 4 095 766

Municipal taxes and other penalties 11 173 851 888 994

16903637 6 968 383

30



10. Income tax expense

The components of income tax expense for the year ended 31 December 2014 are as follow:

2014 2013Note

Current taxDeferred tax for the period

Reconciliation of effective tax rate

2014 2013

Effective Rate Effective Rate

Loss before tax (19 690 520) (38 507 323)Tax at rate of 32% 32% (6300967) 32% (12 322 343)Non- deductible expenses -64% 12 531 672 -23% 8 835 836Effective Tax -32% 6 230 705 28% (3 486 507)Utilization of tax losses 32% (6 230 705) -9% 3 486 507Taxation -

Tax is calculated at the corporate income tax rate of 32% based on the tax codes, which came into effect from 1 January 2003.

According to the Mozambique tax law, the tax losses can be carried forward up to a maximum of five years and can be off-set

against future taxable profits.

As at 31 December 2014 the bank has MZN 7 158 844 as fiscal losses (2013; MZN 26 671 486). Deferred tax assets that would

have been recognised in the financial statements, if the bank had substantially convincing evidence that future taxable profits will

be available against which they can be deducted from the deferred tax assets amount to MNZ 2 290 830 (2013: 8 534 876). This

represents the total unrecognised deferred tax asset.

In accordance with fiscal legislation, the fiscal losses can be used during five years. Thus, the fiscal losses with reference to 31

December 2014 can be used until the below-mentioned periods.

Year of Amount AmountYear of Origin Expire Fiscal Loss Tax Assets31/12/2014 31/12/2019 7,158,844.39 2,290,830.2031/12/2013 31/12/2018 26,671,486.00 8,534,876.0031/12/2012 31/12/2017 24,625,345.00 71881,070.0031/12/2011 31/12/2016 17,305,622.00 5,537,799.0031/12/2010 31/12/2015 21,716,206.00 6,949,186.00

31



11. Loss per share

The Loss per share of 2 417 (2013: 4 886) is based on a loss of MZN19 690 520 (2013: MZN 38 507 323) over total shares issued of8176 and 8 148 for 2014 and 2013, respectively.

12, Cash and balances with Central Bank

2014 2013

Cash balances 16040215 11084771Balances with the Bank of Mozambique 22483 128 18 298 320

38523343 29 383 091

The balance held with the Bank of Mozambique includes an amount of MZN 19.115.677 (2013: MZN 15.243.144) to enable the Bankto meet the statutory reserve requirement of a daily minimum of 8 % of total qualifying liabilities in terms of notice no. 2/GBM/2012 of04 July 2012. The statutory reserves is non-interest bearing and is not considered as part of the cash and cash equivalents in thestatement of cash flows.

13. Balances and placements with other Banks

2014 2013

Balances with Other banks 26957 888 26 331 093Money Placement with Other Banks 56 509 466 31 385 075

83 467 354 57716169

14. Available-for-sale financial investments

2014 2013

Financial investments 2 682 287 2 682 297

2 682 287 2 692 287

Refers to an investment of 0,5% in SIMO (Sociedade Interbancaria de Mogambique).

32



Given that the fair value cannot be reliably determined and there is no active market, this financial investment was measured at cost.

Furthermore, all relevant information available at the reporting date indicates that there is no objective evidence that could lead to

conclude that this financial asset would be impaired and, as such, no impairment was raised. It is anticipated that if the market

conditions remains the same this asset will be disposed at the cost. However there is currently there no intention to dispose of the

investment.

15. Loans and advances to customers

2014 2013

151 Performing Loans and advances 251 416 814 203 216 767Non-performing loans

less than 30 days 4157047 3820997Above 30 days 10453576 14410507

266027437 221 448271

Impairment allowance (14 847 524) (17 726 378)

Net loan to customers 251 179 913 203 721 893

15.2 Allowance for impairment

Specific allowances for impairment

Balance at January 13705484 10617682Charge for the year 8756634 23130290Write-offs (12 493 033) (20 042 488)

Balance as 31 December 9969085 13705 484

Collective allowance for impairment

Balance at 1 January 4020895 4 183975(Reversal)/Charge for the year 857 544 (163 080)

Balance as 31 December 4878439 4 020 895Total Allowances for impairment 14847 524 17 726 379

15.3 Maturity of loansLess than 3 months 23569256 25373 048From 3 months to 6 months 57406241 54162111From 6 months to 12 months 154 485 793 110 323 527More than 12 months 15688575 13863207

251 149 864 203 721 893

15.4 Loans by productIndividuals loans 217 030 524 183 998 899Trust Banks - 595 422Solidarity Groups 856 027 -

Group Agricultural Loan 10832 194 4402412Employee Loans 12255819 10452989Consumer Loan CrediBom 3051 885 4 272 170

SME's Loans 7123414 -

251 149 863 203 721 892

33



16. Other assets

2014 2013

Prepayments 2480372 2 119579Other receivables 371 148 908 825

2851520 3028404

The Other receivables are receivable on demand.

17. Tax recoverable

2014 2013

Withholding Tax 2 059 232 1,911,777.39Taxprepayments 805 225 684,999.21

2 864 456 2596,776.60

18. Property and equipment

Property and equipmentBuildings Leasehold Equipment Furniture Motor Work in Total

As at 31 December 2014 improvement whicles progress

Opentng canying amount 11 300 220 14477611 13 263 612 3 798 121 12 126 891 7 830024 62796479Additions - - 2228276 933970 - 6310914 9473 160Transfers fromwork in progress - - 3242 761 - - (3242761) -Disposals depreciation - - 6740974 395 133 230 142 - 7366249Disposals cost - - (7491 895) (493 663) (230 142) (8215700)Depreciation (227 514) (6267285) (5 725 664) (1368 149) (5064473) (18 653 084)

Carrying amount 11 072 706 8210326 12 258 065 3 265 412 7 062 418 10898 176 52 767 103

Cost 12 393 505 37764650 41 363 746 10868 522 37046274 10898 176 150 334 874Accumulated depreciation (1 320 799) (29 554 325) (29 105681) (7 603 111) (29 983 856) - (97 567 772)

Carrying amount 11072706 8210326 12258065 3265412 7062418 10898176 52767103

As at 31 December 2013

Opening carrying amount 11527734 20 694 191 17276026 4759773 14946256 891 837 70095 817Additions - - 2 678 172 355 135 3 314 777 ' 244 360 13 592 444Transfers from work in progress - - - 23 728 - (306 173) (282 446)Depreciation (227 514) (6216580) (6690586) (1340515) (6134 142) - (20609337)Carrying amount 11300220 14477611 13263612 3798121 12126891 7830024 62796479

Cost 12393 505 37764650 43 384604 10428215 37276416 7 830024 149077414Accumulated Depreciation (1 093 285) (23 287 039) (30 120 991) (6630095) (25 149 525) - (86 280 935)Carrying amount 11 300 220 14477611 13 263 612 3 798 121 12 126 891 7 830 024 62 796 479

There were no capitalised borrowing costs related to the acquisition of plant and equipment during the year (2014: nil).

The Work in Progress relate to the investment being done in the new Agency to be built in Nhamatanda,

34



19. Intangible assets

2014 2013

SoftwareCostBalance at I January 10 622 824 10287000Transfers from work in progress - 282446

Acquisitions - 53 379

Disposals (43 131) -

Balance at 31 December 10579693 10622824

Amortization and impairment losses

Balance at I January 8 079 753 7 129 870

Amortization for the period 916 741 949 883

Disposals (38 818) -

Balance at 31 December 8 957 676 8079753

Carrying amount as of 31 December 1 622 017 2 543 071

20. Deposits from customers

2014 2013

Term deposits 70432 749 61 623 173

Transaction accounts 100 230 137 84 352 638

Savings accounts 67 535 666 50619 061

238 198 552 196 594 872

Interest payable 1 283 693 990 630

239 482 245 197 585 502

Maturity of term deposits

Less than 3 months 15913705 21920524

From3 months to 6 months 11 264265 6392820

From 6 months to 1 year 43254 777 33309 82970432748 61623173

Transaction accounts and saving accounts are demand deposits. Transaction accounts don't attract any interest and saving accounts

bear marginal interest rates. Time deposits are carried at interest rates between 5% and 12% and mature in 12 months

35



21, Borrowed Funds

2014 2013

Credit linesFARE 45000000 7000000

OTI- PRI 33600000 30080000

78600000 37080001

Interest payable 1 507 691 309 98980107691 37389990

Maturity ofBorrowed Funds

Less than 3 months 1507691 309989

From 3 months to 6 months - 3 500 000

From 6 months to 1 year 33600000 3500000

More than I year 45000000 30080001

80107691 37:389 990

Credit lines

The credit line from FARE 11- Fundo de Apoio a Reabilitiaqio da Economia, Which was received in full in August 2014, will be paid in

full in March 2017, monthly interest fees of around 345,000.00MTN/month, are currently being paid. The Loan from OTI - PRI which is

the major shareholder of the Bank is repayable in full in June 2015, the loan is denominated in USD and its foreign currency exposure

is covered by a term deposit in the same amount placed at Standard Bank.

22. Deferred Income

Deferred Income

2014 UNCDF 01 US 01UK CIDA GATES WB Total

Opening balance - - 4 889 972 - 5363466 10253439Additions - - 21,805,413 1 668 058 - 23473 471Utilisations - - (21 805413) (5799216) - (2655220) (30 259 849)Retuns - - - - (2708246) (2 708 246)

Closing balance - - 758 815 - - 758 815

2013 UNCDF OI us OI UK CIDA GATES WB Total

Opening balance 610309 72987 1774276 16904098 3 546523 3 372 149 26280342Additions - - 2575888 1 385 463 9371 701 13333051Utilisations (610309) (72 987) (4350 1641) (13 399 589) (3 546 523) (7380 384) (29 359 956)

Closing balance - - 4889 972 - 5363466 10253 438

2014 2013

Current 252938 31735787Non-Current 505 877 (21 482 349)

Closing balance 758 815 10253 438

UNCDF United Nation Capital Development Fund0I US Opporiunity International - US01 UK Opportunity International - UKCIDA Canadian International Development Aid

GATES Gates Foundation and Master Card FoundationsWB World Bank

Deferred incomes refer to grants received in cash from the entities listed above to support the Bank mainly in opening new branches.

It is to be utilised on capital expenditures and operational costs.

36



23. Other Liabilities

2014 2013

Creditors and accruals 8724899 8330026

Taxrelated liabilities 1 510 421 1 161 358

Credit Life Insurance 360 649 470 908

10595968 9962 291

Credit life insurance is related to gross premiums collected on loans and payable to the insurance company. This relates to life

insurance policies provided as security by personal loan customers. All other liabilities are on demand as of end of the year and

payable within 30 days.

24. Provisions

The movement in provisions during 2014 is, as follows:

2014 2013

Balance at January 1 1 249 133 -

Charges ofThe Year - 1249133

Utilization - -

Saldo a 31 de Dezembro de 2014 1 249 133 1 249 133

This provision relates to a legal case that has been appealed in the Supreme Court where a former staff member is suing the Bank for

compensation due to unfair dismissal. The amount is the maximum value that the Bank can be liable to pay in case of loss of the case

however the like hood is low.

25. Share capital and share premium

2014 2013 2014 2013

Issued & Authorised Value Value Number of Shares Number of Shares

Opportunity Transformation Investments Inc. 142 152 500 142 152 500 5 593 5 565

Oikocredit Ecum. Develop. Coop. Society U.A. 12 125 000 12 125 000 485 485

CARE Intemational 10 250 000 10250 000 410 410

*Opportunity Microfmance Investments Limited 48 793 907 33 367 061 1502 1 027

*Opportunity Canada Foundation 21 481 612 21481612 661 661

234803019 219376173 8651 8148Non founding Shareholder

Share premium paid in by shareholder

Opportunity Transformation Investments Inc. 1 768 231 1 768 231

CARE International 22 899 22 899

1 791 130 1 791 130Fully paid-in capital 236 594 149 221 167 303

37



The reconciliation of number of shares as follows:

2014 2013

At 1 January 8148 6548Addional shares issued 503 1 600

At 31 December 8651 8148

26. Legal reserve

In terms of Mozambican legislation the Bank must allocate each year to a legal reserve not less than 15% of its prior year's profitafter tax until the reserve is equal to the amount of issued share capital. As of 31 December 2014 the Bank made a loss of MZM 19690 520, and as result, transfer to the legal reserve is not applicable, (as of 31 December 2013, the Bank made a loss of MZN38.507 323 and as a result, transfer to the legal reserve was also not applicable).

27. Related Parties

The following table provides the amount of transactions with related parties, and outstanding balances as at 31 December 2014.

Parent keyCompany* management

personnel

2014 Notes

Transactions under incomeInterest income on loan and advances 5 - 131 933 255Other Income 7 - -

Transactions under operating costsInterest expense 5 1 439622Software licensing and other IT 9 1 273 601 -Management fees and network dues 9 - -Short-Term Employee Benefit 8 - 1 739 543

Oustanding balancesLoans and advances to customers 15.4 - 266 027 437Credit lines 21 78600000 -Interest payable 21 1 507691 -Software licensing and other IT 23 -Management fees and network dues 23 - -

2013

Transactions under incomeInterest income on loan and advances 5 - 212 100Other Income 7 - -Transactions under operating costsInterest expense 5 5304956Software licensing and other IT 9 2 629 488 -Management fees and network dues 9 - -Short-Term Employee Benefit 8 - 1 370 156Oustanding balancesLoans and advances to customers 15.4 - 1 821 851Credit lines 21 30080000 -Interest payable 21 225600 -Software licensing and other IT 23 -1M1anagement fees and network dues 23 -

*The Bank transacted with Opportunity International US, which is the owner of the shareholder OTI.

38



*The Bank transacted with Opportunity International US, which is the owner of the shareholder OTL

The above-mentioned outstanding balances arose from the ordinary course of BOM business. The interest rates charged to and byrelated parties are at normal commercial rates. Outstanding balances at the year-end are unsecured and there have been noguarantees provided or received for any related party receivables or payables. For both the year 2013 and 2014, the Bank does nothave any doubtful debts relating to amounts owned by related parties.

28. Lease obligations and other commitments

The Bank leases office space in Maputo, Chokwe, Dondo, Chimolo, Tete, Mocuba, Gurue and Nampula under operating leases which

expire in the range of 2014 to 2018. On average leases contain an initial non-cancellable period of 5 years and subsequent renewalsare negotiated with the lessor. All lease arrangements are in local currency. The Lease expenses for the year ended 31 December2014 were MZN 7 771 665 (2013: MZN 6 334 230). Future operating lease payments as of 31 December 2014 are as follow:

2014 2013

Less than one year 7 655 176 5 761 612Between one to five years 2 822 097 8461 956

Total 10477274 14223568

The Bank has commitments on system licenses for the banking operations system and financial software. The obligation is

approximately USD 81 673 per year. Future minimum payments as of 31 December 2014:

2014 2013

Less than one year 3600250 2 880 200Between one to five years 10400 000 8 320 000

Total 14 000 250 11200200

29. Financial assets and liabilities

Determination of fair value and fair value hierarchy

The Bank uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly orindirectly.

39



The bank values by the net present value model in order to obtain the fair value of the Government Bonds in available for sale financial

assets. The rates used to discount for the discount factor are market observable, using the Treasury Bills rates amounts to 7.95%.

Level 3: techniques which use inputs that have a significant effect on the recorder fair value that are not based on observable market

data.

Fair value of the quoted notes and bonds is based on price quotations at the reporting date. The fair value of unquoted instruments,

loans from banks and other financial liabilities, as well as other financial liabilities is estimated by discounting future cash flows using

rates currently available for debt on similar terms, credit risk and remaining maturities.

The following table shows an analysis of financial instruments measured at amortised cost but for which fair value is a required

disclosure, with the fair values allocated to the levels of the fair value hierarchy:

2014 1e-l 1 Level 2 Lvel3 Total

Financial assets

Cash and balance with Central Bank - 38.523.343 - 38.523.342.78

Balances and placements with other Banks 83.467.355 83.467.354,69

Loans and advances to customers - 328.173.144 328.173.144,08

- 450.163.842 - 450.163.842

Financial liabilities

Deposits from custoners 234.408.280 234.408.280,44

Borrowed funds - 84.214150 84214149.75

- 318.622.430 - 318.622.430,19

2013 Level 1 Isvel 2 Le-e 3 Total

Financial assets

Cash and balance with Central Bank . 29.383.090 29.383,090,18

Balances and placements with other Banks 57.716 169 57.716.168,77

Loans and advances to customers - 267 668021 - 267.668.020,58

- 354.767.280 - 354.767.280


Deposrts from customers - 169.216 119 169 216 119,07

Borrowed funds 32.021.524 32 021.524,00

- 201.237.643 - 201.237.643

40



Set out below, is a comparison by class of the carrying amounts and fair value of the Bank's financial instruments, other than those

with carrying amounts are reasonable approximations of fair values:

2014 2013Carrying amount Fair value Carrying amount Fair value

Financial assets

Cash and balance with Central Bank 38.523 343 38.523,343 29.383.090 29.383.090

Balances and placements with other Banks 83.467,355 83.467.355 57.716.169 57.716.169

Available For Sale Financial Assets 2.682.287 2.682.287 2.682.287 2682,287

Loans and advances to customers 251.179.913 328.173144 203.721.893 267.668.021

375.852.897 452.846.129 293,503.439 357.449.567


Deposits from customers 239.482.245 234.408.280 197.585.502 169.216.119

Borrowed funds 80 107691 84.214.150 37.389.990 32 021.524

319.589.936 318.622.430 234.975.492 201.237.643

56.262.962 134.223.698 58.527947 156.211.923

The management assessed cash and balance with Central Bank and Due from Banks proximate their carrying amounts largely due to

the short-term maturities of these instruments.

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current

transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

Fair value of financial assets classified as loans and receivables are measured using the net present value model, based on

observable market rates, such as Treasury Bills, at a range of 5,37% to 7,25%.

Financial assets are discounted using the Treasury Bills at a range of 5,37% to 7,25%. Financial liabilities measured at amortised cost

are discounted at the FPC 7,5% in order to determine fair value.

41

Banco Oportunidade de Mo;ambique, SA


30. Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents comprises the following:

Cash and cash equivalent does not include the statutory reserve amount (Note 12).

2014 2013

Cash Balances 16040215 11084771Balance with the Bank of Mozambique 3 358 079 3055 176Balance with other Banks 26 962 947 26331 093Money Placement with Other Banks 56509466 31 385 075

102870707 71 856115

Statutory Reserve 19115677 15243144121986384 87099259

31. Financial risk management

(a) Introduction and overview

The Bank has exposure to the following risks from its use of financial instruments:

* Credit risk

* Liquidity risk

* Market risks

* Operational risks

This note presents information about the Bank's exposure to each of the above risks, the Bank's objectives, policies and processesfor measuring and managing risk and the Bank's management of capital.

Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Bank's risk management framework.

The Bank's risk management policies are established to identify and analyse the risks faced by the Bank to set appropriate risk limitsand controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflectchanges in market conditions, products and services offered. The Bank through its training and management standards andprocedures aims to develop a disciplined and constructive control environment in which all employees understand their roles andobligations.

42



(b) Credit risk

Definition

Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial instrument fails to meet its contractualobligations and arises principally from the Bank's loans and advances to customers and other banks and investment securities. Forrisk management reporting purposes, the Bank considers and consolidates all elements of credit risk exposure (such as individualobligor default risk country and sector risk).

Management of credit risk

The Board of Directors has delegated responsibility for the management of credit risk to senior management. A separate Operationsdepartment is responsible for oversight of the Bank's credit risk including:

* Formulating credit policies in consultation with business units covering collateral requirements credit assessment risk gradingand reporting documentary and legal procedures and compliance with regulatory and statutory requirements.

* Establishing the authorisation structure for the approval and renewal of credit facilities. Authorisation limits are allocated tobusiness unit Officers. Larger facilities require approval by Head Office Credit Committee or the Board of Directors asappropriate.

* Reviewing and assessing credit risk. The Bank's Credit department assesses all credit exposures in excess of designated limitsprior to facilities being committed to customers by the business unit concerned. Renewals and reviews of facilities are subject tothe same review process.

* Limiting concentrations of exposure to counterparties geographies and industries for loans and advances.

* Developing and maintaining the Bank's risk grading in order to categorise exposures according to the degree of risk of financialloss faced and to focus management on the attendant risks. The risk grading system is used in determining where impairmentprovisions may be required against specific credit exposures.

* Reviewing compliance of business units with agreed exposure limits including those for selected industries country risk andproduct types. Regular reports are provided to the Bank's Credit department on the credit quality of local portfolios andappropriate corrective action is taken.

* Providing advice, guidance and specialist skills to business units to promote best practice throughout the Bank in themanagement of credit risk.

Each branch is required to implement the Bank's credit policies and procedures with credit approval authorities delegated from theBank's management. Each business unit has a Credit Supervisor who reports on all credit related matters to the Branch Manager andsenior management. Each business unit is responsible for the quality and performance of its credit portfolio and for monitoring andcontrolling all credit risks in its portfolios including those subject to central approval,

Regular audits of branches and bank credit processes are undertaken by Internal Audit.

43



Exposure to credit risk Loans and advances to Cash and cashcustomers equivalents

2014 2014

Carrying amount neither pastdue nor impaired 251 179914 102870707

Impaired comprises

1-30 days 415704730-60 days 1 408 032 -60-90 days 1 102744 -90-120 days 1 266 405 -120 days + 6913295 -

14847523 -Gross Carrying amount 266 027 437 102 870 707Individually impaired

Allowance for impairment (9 969 085)Collectively impaired

Allowance for impairment (4 878 439)

Total Impairment (14 847 524)Net carrying amount 251 179913 102870707

Exposure to credit risk Loans and advances to Cash and cashcustomers equivalents

2013 2013

Carrying amount neither pastdue nor impaired 204956225 71 856115

Impaired comprises

1-30 days 387692030-60 days 1 568 60360-90 days 1 568 98690-120 days 2348416120 days -+- 8363454

17726379Gross Carrying amount 221 448 271 71856115Individually impaired

Allowance for impairment (13 705 484)Collectively impaired

Allowance for impairment (4 020 895)

Total Impairment (17 726 379)Net carrying amount 203 721 893 71 856 115

44



Impaired loans

Impaired loans are loans for which the Bank determines that it is probable that it will be unable to collect the principal and interestdue according to the contractual terms of the loan.

Past due but not impaired loans

Loans where contractual interest or principal payments are past due but the Bank believes that impairment is not appropriate on thebasis of the level of security/collateral available and/or the stage of collection of amounts owed to the Bank.

Loans with renegotiated terms

Loans with renegotiated terms are loans that have been restructured due to deterioration in the borrower's financial position andwhere the Bank has made concessions that it would not otherwise consider. Once the loan is restructured it remains in this categoryindependent of satisfactory performance after restructuring.

Allowance for impairment

The Bank establishes an allowance for impairment losses that represents its estimate of incurred losses in its loan portfolio. Themain components of this allowance are a specific loss component that relates to individually significant exposures and a collectiveloan loss allowance established for groups of homogeneous assets in respect of losses that have been incurred but have not beenidentified on loans subject to individual assessment for impairment.

31. Financial risk management (continued)

(b) Credit risk (continued)

Wite-off policy

The Bank writes off a loan/security balance (and any related allowances for impairment losses) when Bank's Credit departmentdetermines that the loans/securities are uncollectible. This determination is reached after considering information such as theoccurrence of significant changes in the borrower/ issuer's financial position such that the borrower/issuer can no longer pay theobligation or that proceeds from collateral will not be sufficient to pay back the entire exposure. For smaller balance standardisedloans charge off decisions generally are based on a product specific past due status.

The Bank holds collateral against loans and advances to customers in the form of mortgage interests over property other registeredsecurities over assets and guarantees. Estimates of fair value are based on the value of collateral assessed at the time of borrowingand generally are not updated except when a loan is individually assessed as impaired. Collateral generally is not held over loansand advances to Banks.

45



The Bank monitors concentrations of credit risk by geographic location. An analysis of concentrations of credit risk at thereporting date is shown below:

Loans and advances Loans and advances toto customers customers

2014 2013Province

Maputo 55 370 258 41 024 459Manica 59621 870 46705 113Sofala 50402 684 41 114302Tete 19123288 10628038Zarnbezia 30787814 31269022Narnpula 32 236 989 22 206 294Gaza 3637010 10774664

251 179 913 203 721 893

Concentration by location for loans and advances is measured based on the location of the Bank entity holding the asset which hasa high correlation with the location of the borrower.

Fair value of collateral

Management do not assess the fair value of collaterals as long as they are not legally entitled for the Bank given the type ofcustomers the Bank deals with. Therefore the fair value is considered nil.

(c) Liquidity risk

Liquidity risk is the risk that the Bank will encounter difficulty in meeting obligations from its financial liabilities

Management of liquidity isk

The Bank's approach to managing liquidity is to ensure as far as possible that it will always have sufficient liquidity to meet itsliabilities when due under both normal and stressed conditions without incurring unacceptable losses or risking damage to theBank's reputation.

(c) Liquidity risk (continued)

Head office receives information from other branches regarding the liquidity profile of their financial assets and liabilities and detailsof other projected cash flows arising from projected future business. Head office then maintains a portfolio of short-term liquid assetslargely made up of short-term liquid investment securities to ensure that sufficient liquidity is maintained within the Bank as a whole.

The daily liquidity position is monitored and regular liquidity stress testing is conducted under a variety of scenarios covering bothnormal and more severe market conditions. Daily reports cover the liquidity position of both the Bank and operating branches. Asummary report including any exceptions and remedial action taken is submitted regularly to the Asset and Liabilities Committee.

Banco Oportunidade de Moambique, SA


Maturities of Financial liabilities based on contractual undiscounted repayment obligations:

At31 December 2014 Less than 3 6-12 6-12 months More than Totalmonths months 12 months

Deposits from customers 174 189441 22 544 574 35770971 5693566 238 198 552Borrowed funds 1507692 - 33600000 45000000 80107692

175 697 133 22544574 69370 971 50693566 318306244

At 31 December 2013 Less than 3 3-6 6-12 months More than Totalmonths months 12 months

Deposits from customers 158938456 6680497 27516932 3458987 196594872Borrowed funds 320 839 3 745 000 38 281 200 - 42 347 039

159259295 10425497 65798132 3_458987 238 941911

Exposure to liquidity risk

The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to deposits from customers, For thispurpose net liquid assets are considered only including cash and cash equivalents. A similar but not identical calculation is used tomeasure the Bank's compliance with the liquidity limit established by the Central Bank (Banco de Mogambique). Details of the reportedBank ratio of net liquid assets to deposits from customers at the reporting date and during the reporting period were as follows:

2014 2013

At 31 December 34.00% 44.08%Average for the period 40.00% 51.76%Maximum for the period 33.00% 61.57%Minimum for the period 46.00% 44.05%

(d) Market risks

Market risk is the risk that changes in market prices such as interest rate equity prices foreign exchange rates will affect the Bank'sincome or the value of its holdings of financial instruments. The objective of market risk management is to manage and control marketrisk exposures within acceptable parameters while optimising the return on risk.

Managing of market risks

The Bank separates its exposure to market risk between trading and non-trading portfolios.

47



Exposure to exchange rate risk

The following table demonstrates the sensitivity of the Bank's profit or loss to a reasonably possible change in USD exchange rate,with all other variables held constant.

2014 2013Assets

Balances and placements with other Banks 39761643 33593338

Liabilities

Borrowed funds 33 600 000 30080000Other liabilities 628245 I 625033

34228245 31705033

Net position 5533398 1888305

Effect on Losses Effect on Losses

Change in USD rate by + 20% 1 106680 1027674Change in USD rate by - 20% (1 106680) (1 027 674)

Impact as % of the Loss for the year (5.62) (2.67)

The Bank Loss for the period ended 31 December 2014 would increase/decrease by MZN 1 357 978, equivalent to USD 40.416 (2013:MZN 1.062.674 equivalent to USD 34 200) in case of exchange rate fluctuation by 20%.

(d) Market risks (continued)

Exposure to interest rate risk-non-trading portfolios

The principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair valuesof financial instrument because of a change in market interest rates. Interest rate risk is managed principally through monitoringinterest rate gaps and by having pre-approved limits for repricing bands.

A summary of the Bank's interest rate gap position on non-trading portfolios is as follows in the table below.

48

Banco Oportunidade de Moqambique, SA


On-Statement of financial position items exposed to interest rate fluctuation risk

31 December 2014 Less than 3 3-6 months 6-12 months More than Carryingmonths 12 months amount

AssetsCash and balances with Central Bank 38 523 343 - - - 38 523 343Balances and placements with other Banks 26957888 56509466 - - 83467355Available-for-sale investments - - - - -

Loans and advances to customers 23569256 57406241 154485793 15688574 251 149863

89050487 113915707 154485793 15688574 373 140561Liabilities

Deposits from customers 184963201 11264266 43254777 - 239482245Borrowed funds 1 507 690 - 33 600 000 45000000 80 107 690

186470892 11264266 76854777 45000000 319589935

(97 40405) -12 65 1441 77631015 (29311 426) 53550625

31 December 2013 Less than 3 3-6 months 6-12 months More than Carryingmonths 12 months amount

AssetsCash and balances with banks 29383 090 - - - 29383 090Balances and placements with other Banks 26331093 31385075 - - 57716168Available-for-sale investments - - - - -Loans and advances to customers 25373 048 54162 111 110323 527 15013 207 204 871 893

81087232 85547186 110323527 15013207 291971 152Liabilities

Deposits from customers 156892223 6392820 33309829 - 196594872Borrowed funds 309989 3 500 000 33 580 000 - 37389989

157202212 9892820 66889829 - 233984861

(76 114 980) -7654366 43 433-698 15-013207 57986291

The following table shows the interest sensitivity on assets and liabilities exposed to interest rate fluctuation.

2014 2013

Assets 373140560 291 971 152Liabilities 319589934 233984861Net Position 53550625 57 986 291Effect on Loss es:

Change in interest rate by + 1% 535 506 579 863Change in interest rate by - 1% (535 506) (579 863)

Inpact as % of the Loss for the year 2.72% 1.51%

The Bank Loss for the period ended 31 December 2014 would increase/decrease by MZN 535 506, equivalent to 2.72% (2013: MZN 597863 equivalent to 1.51%) in case of interest rate fluctuation by 1 pp.



(e) Operational risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Bank's processespersonnel technology and infrastructure and from external factors other than credit market and liquidity risks such as those arisingfrom legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all ofthe Bank's operations and are faced by all business entities.

The Bank's objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Bank'sreputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to seniormanagement within each business unit. This responsibility is supported by the development of overall Bank standards for themanagement of operational risk in the following areas:

* Requirements for appropriate segregation of duties including the independent authorisation of transactions

* Requirements for the reconciliation and monitoring of transactions

* Compliance with regulatory and other legal requirements

* Documentation of controls and procedures

* Requirements for the reporting of operational losses and proposed remedial action

* Development of contingency plans

* Training and professional development

* Ethical and business standards

* Risk mitigation including insurance where this is effective.

(f) Capital management

Regulatory capital

Capital adequacy and the use of regulatory capital are monitored regularly by the Bank's management, employing techniques basedon the guidelines set out by the Bank of Mozambique for supervisory purposes according to Notice No. 05/GBM/2007. The requiredinformation is filed with the Central Bank on a monthly basis. The Central Bank requires each bank to:

Hold the minimum level of regulatory capital of 70,000,000 MT (2013:70,000,000 MT); and* Maintain a ratio of total regulatory capitalto the risk-weighted asset (the "capital adequacy ratio') at or above the minimum of 8% (2013: 8%).

The Bank's regulatory capital is calculated in accordance with the applicable regulations, Notice No. 05/GBM/2007 of the Bank ofMozambique, and is divided into two tiers:



Tier 1 capital: share capital (net of any book values of the treasury shares), minority interests arising on consolidation from interestsin permanent shareholders' equity, retained earnings and reserves created by appropriations of retained earnings. The book value ofgoodwill, when applicable, is deducted in arriving at Tier 1 capital; and Tier 2 capital: qualifying subordinated loan capital, collectiveimpairment allowances and unrealised gains arising on the fair valuation of equity instruments held as available for sale

The risk-weighted assets are measured by means of a hierarchy of five risk weights classified according to the nature of, andreflecting an estimate of credit, market and other risks associated with each asset and counterparty, taking into account any eligiblecollateral or guarantees. A similar treatment is adopted for exposures not recognised on the statement of financial position, with someadjustments to reflect the more contingent nature of the potential losses. In implementing current equity requirements Banks mustmaintain a prescribed ratio of total equity to total risk-weighted assets of not less than 8% (2013: 8%). As of 31 December 2014, theBank capital adequacy is as follows:

2014 2013

Equity as per Central Bank ofMozambique 105 383 738 102 892794Risk weighted assets 256 713 720 304 268 318

Capital adequacy ratio 41.05% 33.82%

32. Events after the reporting period

There were no other material facts or events subsequent to the reporting date that could influence the reading and interpretation of thesefinancial statements as at 31 December 2014.

51

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