Annual Report 2008-09_english

Annual Report 2008/2009w w w . n i b l . c o m . n p

An

nu

al R

ep

or

t 2

00

8/2

00

9N

ep

al In

ve

st

me

nt

Ba

nk

Lim

ite

d

Des

ign

and

Proc

esse

d by

: Pow

erCo

m, 5

5529

87

A n n u A l R e p o R t20082009

3

Annual Report 2008-2009

Vision 4Mission Statement 4About Us 4Strategic Objecti ves 5Core values and Ethical Principles 5Chairman's Statement 6Financial Highlights 10Shareholder informati on 10Last 7 years at a Glance 11Management review and discussion 14Corporate Governance 18Risk Management 20Board of directors 24Senior Management Team 30Management Team 31domesti c network 36Global network 38Board of directors report 39Corporate Social responsibility 48Financial Statements 53Principal accounti ng Policies 85notes to account 86

C o n t e n t s

4

Nepa

l Inv

estm

ent B

ank

Lim

ited

To be the most preferred provider of Financial Services in Nepal

Our Vision

Mission StatementWe aspire to be the leading Nepali bank, delivering world class service through a blend of state-of-the-art technology and visionary management in partnership with competent and committed staff, to achieve sound financial health with sustainable value addition to all our stakeholders. We are committed to fulfilling this mission while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance.

About Us

Nepal Investment Bank Ltd. (NIBL), previously Nepal Indosuez Bank Ltd., was established in 1986 as a joint venture between Nepali and French partners. The French partner (holding 50%) of the capital) was Credit Agricole Indosuez, a subsidiary of one of the largest banking groups in the world. When Credit Agricole Indosuez decided to divest, a group of companies comprising of bankers, professionals, industrialists and businessmen acquired 50% of the holdings of Credit Agricole Indosuez in Nepal Indosuez Bank in April 2002. The name of the Bank was changed to Nepal Investment Bank Ltd. upon approval of the Bank’s Annual General Meeting, Nepal Rastra Bank and Company Registrar’s Office. The shareholding structure comprises of:

• A group of companies holding 50% of the Capital.• Rastriya Banijya Bank holding 15% of the Capital.• Rastriya Beema Sansthan holding 15% of the Capital.• The general public holding 20% of the Capital.

We believe that NIBL, being managed by a team of experienced bankers and professionals with a proven track record, can match your particular needs. We are sure that your choice of bank will be guided, among other things, by its reliability and professionalism.

Over the past 7 years, we have grown to become one of the biggest commercial banks in Nepal. Our overall growth record in deposits, lending, net profit and capital base is second to none.

• No.1 lender in Nepal with total loans and advances of NRs. 36.83 billion.

• No. 1 private sector bank in deposits with NRs. 46.7 billion.• Highest paid up capital base of NRs. 2.41 billion.• 7th largest taxpayer in Nepal.• Highest growth rate among banks in Nepal.• 23 years of stable banking.• Non Performing Assets (NPA) at 0.58%.• Customer base of over 270,000 clients.• The highest capital base with NRs. 3.91 billion.• Experienced management & sound corporate governance.• Net Profit growth of 1480% in last 7 years.

5


Strategic Objectives

• To develop a customer oriented service culture with special emphasis on customer care and convenience.

• To increase our market share by following a disciplined growth strategy.

• To leverage our technology platform and pen scalable systems to achieve cost-effective operations, efficient Management Information Systems, improved delivery capability and high service standards.

• To develop innovative products and services that attract our targeted customers and market segments.

• To continue to develop products and services that reduce our cost of funds.

• To maintain a high quality assets portfolio to achieve strong and sustainable returns and to continuously build shareholders’ value.

• To explore new avenues for growth and profitability.

Core Values and Ethical Principles

Our core values tell us, our customers and the communities we serve, who we really are; what we are about; and the principles by which we pledge to conduct business. In essence, we believe that success can only be achieved by being true to our core values and principles:

• Customer Focus: At NIBL, our prime focus is to perfect our customer service. Customers are our first priority and driving force. We wish to gain customer confidence and be their trusted partner.

• Quality: We believe a quality service experience is paramount to our customers and we are strongly committed to fulfilling this ideal.

• Honesty and Integrity: We ensure the highest level of integrity to our customers by creating an ongoing relationship of trust and confidence. We treat our customers with honesty, fairness and respect.

• Belief in our people: We recognize that employees are our most valuable asset and our competitive strength. We respect the worth and dignity of individual employees who devote their careers for the progress of the Bank.

• Teamwork: We are a firm believer in teamwork and feel that loyal and motivated teams can produce extraordinary results. We are driven by a performance culture where recognition and rewards are based on individual merit and demonstrated track record.

• Good Corporate Governance: Effective Corporate Governance procedures are essential towards achieving and maintaining public trust and confidence in any company, more so in a bank. At NIBL, we are committed to following practices which result in good corporate governance.

• Corporate Social Responsibility: As a responsible corporate citizen, we consider it important to act in a responsible manner towards the environment and society. Our commitment has always been to behave ethically and contribute towards the improvement of the quality of life of our people, the community and society at large, of which we are an integral part.

Chairman's Statement

“Nepal Investment Bank Limited

attained a substantial market share

of 8.9%, 10.2% and 8.1% in terms

of Deposits, Loans and Total Bank

Assets.” — PriThivi B. Pandé

6

Nepa

l Inv

estm

ent B

ank

Lim

ited

7


Dear Shareholders,

Your bank has delivered another solid performance during the financial year 2008/09 despite all the continuing political uncertainty and increased competition. Your bank has continued its long term vision to consolidate itself as the leading bank in the country by pursuing a strategy of growth and consolidation while delivering quality services and shareholder returns. Your bank has achieved remarkable growth in all areas, be it in deposits, lending, profit, products, services etc. Because of your Bank’s stellar performance, The Banker Magazine awarded your Bank “The Bank of the Year” award for 2008 for the 3rd time since 2003.

In the fiscal year 2008/09, number of commercial banks rose to 26 from 25 in the previous year. However, despite intense competition among the Banks and challenging economic atmosphere and political uncertainty, Nepal Investment Bank Limited attained a substantial market share of 8.9%, 10.2% and 8.1% in terms of deposits, loans and total bank assets. This year we have proposed a 20% cash dividend from the profit of fiscal year 2007-08.

In order to consolidate the Bank’s existing customer base as well as attract potential clients, your Bank has been active in launching new products and revising existing products and schemes. In FY 2008-09, the Bank added a total of 11 new branches making a total of 30 branches all over Nepal. Among the 11 new branches 5 were opened within Kathmandu valley and 6 in other areas outside Kathmandu. The Bank’s target is to open up to 50 branches by 2010 all over Nepal. We now have 766 staff operating among all 30 branches out of which 327 are female staffs and

71 staff members have completed more than 10 years of service in the institution.

NIBL has pioneered adopting new technology to streamline banking operations and facilitate services to our esteemed customers. In the FY 2008/09, the Bank deployed an additional 23 ATM’s in and outside Kathmandu valley during the year, totaling 57 ATM’s in our consortium. The Bank also leads in card issuance as it issued over 220,000 cards and altogether there are now 320,000 card holders in our network now. We are also in the process of adding MasterCard services in addition to our existing Visa brand. The Bank also implemented the Finacle Core Banking and E-banking Solution from Infosys during FY 2008-09. The system change-over commenced in July 2008 and was completed in November 2008. Going forward, I believe that these technological adoptions will pay off in the future in terms of lower cost and a better bottom line.

With a strategy to strengthen the Bank’s position in the worker’s remittance market, the Bank appointed 45 new remittance disbursement agents during the year raising the total number of remittance disbursement locations to 200 in order to facilitate banking services to Nepali workers overseas.

The operating profit of the Bank grew in Rs. 1310 million from Rs. 1013 million recorded the previous year, an increase of Rs 287 million. Provisions for Tax were Rs 397.98 million, making our Bank one of the top ten tax payers in Nepal, with a resulting after tax profit growth of 29.26%. The Bank has registered a record increase in net profit to Rs. 900.6 million from Rs. 696.7 million, one of the highest net profit increments of any bank in Nepal.

“ In order to

consolidate the

Bank’s existing

customer base

as well as attract

potential clients,

your Bank has been

active in launching

new products and

revising existing

products and

schemes.”

Market share in %

Dep

osit

Lend

ing

Asse

ts

9

108

8

Nepa

l Inv

estm

ent B

ank

Lim

ited

This impressive performance is due to the continuation of our corporate strategy to diversify into fee based income sources and continue consolidating our share of interest income. Our Card Business, Treasury, Remittance and International Banking divisions have had strong organic growth and contributed significantly to our income.

Our deposit base has increased by Rs. 12.2 billion – a growth of 35.6% vis-à-vis last year – giving us a total deposit base of Rs. 46.7 billion, which is the highest deposit base amongst private sector commercial banks in the country. Loans made during this period increased by 33.8% to reach Rs. 36.83 billion making us the highest lender among all banks in the country. Our assets are well managed with a prudent risk management outlook, coupled with local expertise to yield quality credit and investment decisions. As a result, our non-performing loans are now at 0.58% of our total loan portfolio compared to 1.12% in the previous year.

The global financial crisis and collapse of Lehman Brothers, Northern Rock and Wachovia, among others, has underscored the need for adequate capitalization of financial institutions to weather the systemic risks during times of financial crisis. Understanding these risks, NIBL has been periodically increasing its Tier-1 capital over the years. NIBL now has the highest Tier-1 capital among all commercial banks in Nepal. The Bank registered the highest growth in our core and supplementary capital base of any commercial bank in Nepal at Rs. 3.891 billion which puts us in a proper position to face challenges and risks in the future. We also have the largest paid up capital base at Rs. 2.41 billion. Our capital adequacy stands at 11.24% of our risk weighted assets. In order to support enhanced capital requirements due to record growth in our asset base, the Bank has also

focused on retention of profits and has ventured into the domestic bond market. Our Tier 1 core capital ratio at 8.56% is considerably more than the government requirement of 5.5%.

The global economy is still coming in terms with the financial crisis of 2008 and early 2009. The spillover of the financial crisis from Wall Street to Main Street led to a severe economic contraction in major developed and emerging economies. Though economists are arguing that the recession has bottomed out in major developed economies, experts argue that economic recovery will at best be tepid and it will take many years before economic output can reach pre-crisis levels.

On the domestic front, the monetary policy prescribed by the Central Bank has not reduced inflationary pressure despite worldwide decreases in general price levels. The average consumer inflation rose to 13.2% in 2008/09 from 7.7% a year ago. The central bank also needs to monitor financial institutions’ exposure to the real estate market to protect the Banking sector from a domino effect of possible contraction in real estate prices. Moreover, deposit rates need to move towards parity with Indian rates to prevent further capital flight.

Nepal’s GDP expanded by 3.8% in FY 2008-09 compared to 5.3% the previous year. The labor unrest, energy crisis and strikes in the Terai have constrained Nepal’s economic prospects. The business sector has also been reeling under the worst possible energy crisis.

The external sector displayed satisfactory performance in 2008-09. Total exports rose by 13.5% while total imports increased by 28.2%. The depreciation of the Nepali Currency (NPR) vis-à-vis the United States Dollar (USD) was one of the major factors behind the surge in exports.

8

Nepa

l Inv

estm

ent B

ank

Lim

ited

9


Despite the global financial crisis, remittance income witnessed a substantial increment of 47% in 2008/09. The total remittance inflow in 2008/09 was Rs. 209.7 billion which amounts to 22% of Nepal’s Gross Domestic Product (GDP). Huge remittance inflow accounted for the Balance of Payments (BOP) registering a substantial surplus of Rs.41.4 billion in 2008/09. Due to the significant surplus in the BOP, the gross foreign exchange reserves stood at Rs. 220 billion at the end of the 2008/09 which is about 31.7% higher than during the previous year.

After a dip in 2008, China and India are again projected to grow at rapid rates. Political stability coupled with economic reforms to attract foreign investment has been the cornerstone of economic growth in these two emerging giants. However, political instability and lack of serious economic reforms have hampered Nepal’s growth prospects. Lack of foreign direct investment remains a major hurdle to the country’s growth. Sans foreign investment, policymakers need to devise plans to channel remittance inflows towards productive sectors.

Given the state of the economy, the political environment and developments in the banking industry, the year ahead is challenging for the Bank. It is expected that a stable political environment will pave the way for economic growth and prosperity and create a positive investment climate in the country. The Government should also give strong emphasis on agriculture and SME development. Poverty alleviation needs to address the severe regional imbalances within Nepal in terms of socio-ethnic disparities.

Given the state of the economy, the political environment and developments in the

banking industry, the year ahead is challenging for the Bank. It is expected that a

stable political environment will pave the way for economic growth and prosperity

and create a positive investment climate in the country. — PriThivi B. Pandé

The Bank has a strategy for nationwide expansion of opening over 50 branches by 2010 to serve the people’s banking needs. The Bank is in the process of bringing out a slew of new products and services to cater to the needs of our valued customers and create a niche among its competitors. The Bank is also in its final stage of starting a Proprietary Card Network to facilitate prospective commercial banks, development banks and finance companies for issuing and acquiring domestic card related products. We plan to further increase our customer base and market share.

Nepal Investment Bank is looking ahead to the future with confidence. The Bank intends to expand its international operations to tap into remittance flows and improve its range of products. We will continue to strive towards our vision of being the preferred provider of financial services in Nepal, exploring new business opportunities and diversifying into new sectors.

I would like to express my gratitude and appreciation to our energetic and hardworking staff and efficient management team. They have provided the splendid performance in 2009 that has led to the growth and good reputation of Nepal Investment Bank. I would like to thank the Nepal Rastra Bank; Ministry of Finance and all other Government Agencies for providing us support in our endeavors.

I also wish to express my gratitude to my colleagues on the Board for their valuable contributions.

Sincerely,Prithivi B. PandéChief Executive Director

9


“Provisions for

tax were rs

397.98 million,

making our

Bank one of

the top ten

tax payers in

nepal.”

10

Nepa

l Inv

estm

ent B

ank

Lim

ited

NPR in millionsParticulars FY 2008-09 FY 2007-08 Growth in % Growth in nPr

Total Assets 53,010 38,873 36.37% 14,137Total Deposits 46,698 34,452 35.55% 12,246Total Loans and Advances 36,827 27,529 33.78% 9,298Total Investments 7,399 6,874 7.64% 525Total Operating Profit (before 1,477 1,149 28.55% 328provision for possible loss)Total Net Profit 901 697 29.27% 204Non-Performing Assets (in %) 0.58 1.12 - -

• No.1 lender amongst commercial bank with total loan portfolio of Rs. 36.83 billion.• Highest paid up capital among financial institutions in Nepal at Rs. 2.41 billion.• Total assets growth of Rs. 14.14 billion. • 20% cash dividend.• 30.22% cost/income Ratio.• 29.27% increase in Net Profit.• Return on shareholder’s equity (ROE) of 23.06%.• Non-Performing Loans Ratio at 0.58%.• Technology investment: Implementation of Finacle core banking & E-banking Solution from Infosys.• One of the highest growth rates in terms of deposits, lending, profits and market capitalization

for the past 8 years running.

Shareholder information

Promoters

RastriyaBanijya Bank

Rastriya BeemaSansthan

General Public

20%50%

15%

15%

Ownership Structure

Management Efficiency higlights

Particulars FY 2004-05 FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09

Return on Assets (ROA) 1.44% 1.64% 1.82% 1.79% 1.70%Return on Shareholder's Equity (ROE) 19.67% 24.77% 26.68% 25.93% 23.05%Cost to income ratio* 35.66% 32.44% 31.20% 30.33% 30.22%

valuation highlights


Earning Per Share (EPS in NPR) 39.5 59.35 62.57 57.87 37.42Book Value per Share (in NPR) 201 240 234 223 162Market Price Per Share (in NPR) 800 1260 1729 2450 1388P/E Ratio 20.25 21.23 27.63 42.34 37.09P/B Ratio 3.98 5.25 7.39 10.99 8.57Effective Dividend Yield 1.56% 4.40% 1.74% 1.67% 1.44%

Leverage ratio


Debt to Equity Ratio 12.89 14.35 13.95 13.67 12.72

* Cost to income ratio is calculated as operating cost over operating income

Financial Highlights

11


Last 7 years at Glance1,

180

1,41

5 1,87

8

2,68

7

3,90

8

Shareholder's FundGrowth (Rs million)

+18.65%

FY05

FY06

FY07

FY08

FY09

FY04

FY03

729

639

Return on Equity

-2.88%

FY05

FY06

FY07

FY08

FY09

19.6

7%

24.7

7%

26.6

8%

25.9

3%

23.0

5%

FY04

FY03

20.9

3%

18.2

9%

201240 234 223

162

Book Value Per Share(in Rs)

FY05

FY06

FY07

FY08

FY09

-15.844%

FY04

FY03

247216

2.69

%

2.07

%

2.37

%

1.12

%

0.58

%

Non-Performing Assets

FY05

FY06

FY07

FY08

FY09

-0.54%

FY04

FY03

2.47

%

1.98

%

Market Price PerShare (in Rs)

FY05

FY06

FY07

FY08

FY09

-27.67%

800

1,26

0

1,72

9

2,45

0

1,38

8

940

795

FY04

FY03

37.4

2

59.3

5

FY05

FY06

FY07

FY08

FY09

-21.46%

Earning Per Share( in Rs)

39.5

0

62.5

7

57.8

7

FY04

FY03

51.7

39.5

6

12

Nepa

l Inv

estm

ent B

ank

Lim

ited

“We are one of the largest Infrastructure Financiers in the Economy, supporting projects ranging from Steel and Cement to Mining.”

13


14

Nepa

l Inv

estm

ent B

ank

Lim

ited

Economic reviewThe global economy is slowly starting to come out from the worst global economic slump since the Second World War. After shrinking in the first half of the 2009, major economies like United States, Japan, United Kingdom and Germany are expected to register positive growth in the second half of 2009. Likewise, emerging economies like China and India, whose growth was dampened due to the economic crisis, are again expected to register growth in the coming quarters. According to the International Monetary Fund’s (IMF) World Economic Outlook published in October 2009, the world economy is projected to grow at 0.8% in the 4th quarter of 2009 compared to negative growth of 0.1% in the 4th quarter of 2008. Improving equity markets around the world and stable commodity prices also point that the global economic slump has ended. The coordinated efforts of major economies (G-20), massive fiscal stimulus programmes and loose monetary policies have prevented the global economy from spiraling further downwards towards another great depression.

However, despite improving economic indicators, the global economy still faces significant problems. Though the recession might have ended in major economies, unemployment in these countries is still rising. On the one hand, there is a threat that the nascent recovery could stall due to a premature exit from the accommodative fiscal and monetary policy. On the other hand, monetarists are arguing that global economic growth faces danger of high inflation from the dual forces of massive fiscal stimulus and loose monetary policy. A right

balance in fiscal and monetary policy is required to give momentum to current growth without fueling inflation. 1

On the domestic front, economic growth in 2007/08 largely due to power crisis, decline in capital expenditure and unfavorable weather conditions. As a result, after growing at 5.3% in 2007/08, growth dipped back to 4.7% in 2008/09 according to the annual Monetary Policy of the Nepal Rastra Bank (NRB). Dissecting the growth figures, our agriculture sector expanded by a tepid 2.2% while the non-agriculture sector expanded by 4.8%. The agriculture sector showed tepid performance largely due to unfavorable weather conditions. On the non-agriculture side, the industry sector witnessed a slow growth of 1.8% while service sector grew at 5.8%. The financial intermediation sector, which expanded by 13.8% in 2007/08, grew only at 3.3% during 2008/09.Domestic price levels have witnessed a dramatic surge during the past one year. As a result, the Consumer

Management review & discussion

1

3.1%

3.2%

3.7%

5.3%

4.7%

04-05 05-06 06-07 07-08 08-09

Annual GDP Growth in last years

2

04-05 05-06 06-07 07-08 08-09

4.5%

6.4%

7.7%

13.2%

8%

Annual CPI based inflation for last 5 yrs

3

Annual remittance for last 5 yrs (amount in Rs. Billion)

04-05 05-06 06-07 07-08 08-09

209.7

142.7

100.197.9

65.5

14

Nepa

l Inv

estm

ent B

ank

Lim

ited

15

Annual Report 2008-2009Price Index (CPI) based inflation surged to 13.2% in 2008/09 compared to 7.7% in 2007/08. The food and beverage price – which surged by 16.7% during 2008/09 – accounted for the high inflation rate. 2

Total exports went up by 13.5% in 2008/09. Exports to India increased by 6.2% while export to other countries went up by 26.9% in 2008/09. The depreciation of the Nepali Currency (NPR) vis-à-vis United States Dollar (USD) helped domestic exporters. Total imports increased by a 28.2% percent during the review period due to substantial increases in imports from other countries. Despite the widening trade deficit, Balance of Payments (BOP) registered a substantial surplus of Rs. 37.7 billion in 2008/09. The huge surplus in BOP is due to the surge in remittance from overseas workers. Total remittance inflow from overseas workers amounted to Rs. 209.7 billion in 2008/09 compared to Rs.142.68 billion in 2007/08. 3

Due to the significant surplus in the BOP, gross foreign exchange reserves stood at Rs. 280 billion at the end 2008/09 – an increment of 31.7% compared to last year. In terms of US Dollar, the gross foreign exchange reserves went up by 15.6% to US$ 3.59 billion in mid-July 2009. This level of reserves is adequate to finance merchandise imports of 11.8 months and merchandise and service imports of 9.7 months. In comparison to mid-July 2007, the NPR depreciated by 12.24% vis-à-vis USD. The exchange rate of one US dollar stood at Rs. 78.05 in mid-July 2009. Broad Money also registered a growth of 27% in 2008/09.

Snapshot of the nepali Economy 2008/09 2007/08

GDP at Producers Price (Rs Billion) ** 586 560GDP Growth Rate % 4.7 5.3Balance of Payment (BOP) 37.7 29.7Exchange rate Rs/USD (End-Year) 78.05 68.5Gross Foreign Exchange Reserves 3.59 3.10US$ BillionRate of Inflation % 13.2 7.7Growth in Money Supply (M2) % 27 25.2

A total of 1 new commercial bank, 5 new development banks and 3 new micro finance institutions were established in 2008/09. Moreover, the number of commercial bank branches increased by 194 to 752 during the review period.

General Manager's reviewThe Bank has delivered another year of good performance. Our Net Profit has jumped from Rs. 697 million in FY 2007/08 to Rs. 901 million in FY 2008/09 – an increment of 29% over last year. This jump in net profit can largely be attributed to the hard work of our staff and patronage from our valued customers. Over the past one year, we have increased our assets base from Rs. 38.9 billion to Rs. 53 billion, a jump of around 36% during the period. Our total lending has also surged from Rs. 27.5 billion to Rs. 36.8 billion making the Bank the No. 1 lender amongst all commercial banks in the country. Our total paid up capital of Rs. 2.41 billion is also the highest amongst all commercial banks in the country. Moreover, the decrease in the Bank’s Non Performing Loans (NPLs) to 0.58%

435.66%

32.446% 31.20%30.33%

30.22%

Cost to income ratio for last 5 years

04-05 05-06 06-07 07-08 08-09

15


52.69%

04-05 05-06 06-07 07-08 08-09

NPA for last 5 years

2.37%

2.07%

1.12%

0.58%

16

Nepa

l Inv

estm

ent B

ank

Lim

ited

In other to aid other financial institutions run their card business, the Bank has started its own National Payment Network (NPN). NPN will facilitate prospective commercial banks, development banks and finance companies for issuing and acquiring domestic cards related products. Furthermore, the Bank is in the final stage of launching Master Card related products. This will provide wider coverage in availing ATM and POS related services to our customers. Two member financial institutions are already operating under our NPN network and two other members are in the process of doing so. Besides providing online payment of all examination fees, we have been providing Student and Exchange Visitor’s Programme (SEVIS) – a visa fees payment service for students going to the US.

remittance

In order to tap into the burgeoning remittance market and strengthen its position in workers’ remittance inflows, the Bank joined hands with Remitmaster Sdn. Bhd. in Malaysia. Disbursement agents were appointed in 45 different locations during the year raising the total number of the Bank’s remittance disbursement locations to 200. During the year, Bank Albilad Saudi Arabia started sending transactions through their online system which has been integrated with our Prithivi Express online system.

To further broaden its remittance network, the Bank plans to increase the number of remittance disbursement agents in Nepal to 250 by the end of the current fiscal year. Our Bank plans to depute two more staff members in Saudi Arabia and three more in Malaysia and increase the number of our representatives in Qatar and the UAE.

Corporate Banking

The total loans and advances at the end of 2008/09 stood at Rs. 36.83 billion with a growth of 33.8% during the review year. With our total loan portfolio size, the Bank has become the highest lender in the country. The branch network of the Bank possesses a satisfactory share of the Bank’s lending and growth. Despite significant increment in our loan size, we have been able to reduce our NPA to 0.58% from 1.12%. No. of credit files has increased from 856 to 1,026 at the year end of 2008/2009 compared to the year end of 2007/2008. In order to diversity our loan portfolio and tap into emerging and profitable sectors. We have been focusing on cement, hydropower and infrastructure projects.

Trade Finance

Despite the global economic downturn, our trade finance department did substantial business in 2008/09. The total number of import LCs issued in 2008/09 was

16

Nepa

l Inv

estm

ent B

ank

Lim

ited

from 1.12% during the last year underlines the quality of our asset base. 4

Generally when an organization grows in size, its efficiency starts to drop and cost goes up. However, despite our significant growth over the last few years, we have been able to maintain our service levels and decrease our Non Performing Assets indicating healthy and sound growth. Similarly, our decreasing cost-to-income ratio demonstrates that our income is growing at a higher rate than our cost – indicating improved efficiency. 5

Because of the growing number of commercial banks and financial institutions, the year ahead is a great challenge for us. Though Nepal’s domestic economy was largely untouched by the global financial crisis, energy crisis, political uncertainty, and high inflation pose a threat to overall business confidence. These uncertainties and crisis have reduced investment opportunities in our country. Amidst this background, the entry of new commercial banks and financial institutions is expected to undermine profit margin in months ahead. The only option left is to grow within an acceptable risk framework. To support increasing business volume, additional capital has been raised from the debt capital markets as well as from retention of profits.

In the review year, the Bank increased the shareholders fund from Rs. 2.69 billion to Rs. 3.91 billion and at the same time maintained the shareholder’s return on equity at healthy rate of 23.06%.

Performance Overview: retail Bank

Our new and innovative deposit products have propelled us to become the largest deposit holder among private sector banks in Nepal. At the end of FY 2008/09, our deposit base stood at Rs. 46.7 billion compared to Rs. 34.5 billion at the end of the previous year. Our customer base has also grown to 268,345 at the end of 2008/09 from 165,649 during previous year.

Customer mapping is being done on a regular basis that has helped the Bank to study and identify locations for new branches and installation of new ATMs. Currently, we have 58 ATMs in various locations throughout the country. After opening 11 new branches in the FY 2008/09, our total branch network is at 31.

Card Centre

The Bank has issued over 220,000 cards, and continues to be the leader in card issuance in Nepal. As of the end of the review period, there were more than 320,000 card holders in the NIBL network.

17


1518, amounting to a total LC volume of Rs. 18,857 million – a growth of over 44 percent during the review period. Similarly, the total number of bank guarantees issued in 2008/09 was 2009 compared to 1863 bank guarantees in 2007/08. Furthermore, a total number of 45 counter guarantees amounting to USD 14.5 million were issued in 2008/09.

The Bank earned over Rs. 296.18 million as interest income from trust receipt loan, export credit and inward bills in 2008/09. The total commission income from trade finance in the review period was Rs. 80.3 million.

Treasury

This year the Bank’s profit from Treasury operations was Rs. 185.33 million compared to last year’s figure of Rs 165.84 million, an increase of 11.75%. The T-bill portfolio of the Bank at the end of 2008/09 was Rs. 2531 million compared to last year’s figure of Rs. 3155 million. The interest earned on this portfolio was Rs 140.69 Million compared to Rs 99.99 Million in the last fiscal year.

It is indeed noteworthy that we have not been directly affected by the global economic crisis, which was caused by US sub-prime lending. All our investments abroad were safe and protected. The crisis has increased the volatility in the market, providing us with an opportunity to gain advantage through cross currency dealings. The drastic cut in the Fed funds rate has resulted in a slight decrease of our FCY interest income.

The treasury department is fully equipped with state of the art technology for day- to- day dealings. Among other things, the Bank’s treasury department is involved in checking foreign currency position, fund management, forward contract execution and inter-bank placement.

information Technology

To sustain growth in our customer base and branch network, as well as pave the way for future growth and profitability, the Bank has been heavily investing in Information Technology. In the review year, the Bank migrated from existing Pumori software to a new banking software “Finnacle” – a product of Infosys. To facilitate end users and provide faster and reliable service to customers, the Bank also implemented a centralized Management Information System.

Moreover, during the review year the Bank deployed additional ATMs at seven different locations in Putalisadak, Battisputali, Boudha, Chetrapati, Sukuldhoka, Maitidevi and Newroad taking the total number of NIBL’s ATMs to 58.

NIBL’s card network is also the largest in the country. Hence, to facilitate card users, the Bank has migrated to a new card process switch system called Electra from OPUS.

Human Resources

Nepal Investment Bank has built the human resource side over the years and has trained and skilled staff that have been instrumental in driving the Bank forward to what it is today. The Bank will continue to focus on the training needs of its staff to ensure that it is able to develop its skill base to remain ahead of its competitors in service delivery. The Bank has adopted an effective human resource management strategy that unlocks the potential of employees.

As of the end of the FY 2065/066, the Bank’s total staff strength was 766 against 622 in the previous reporting period. Of the total staff, female staff accounted for 327 which is about 43% of the total staff of the Bank. Seventy-one staff members have served the Bank for 10 or more years.

In order to enhance the level of skilled manpower in the Bank, the Bank has been organizing appropriate training both at home and abroad. Considering the paucity of skilled manpower in the Banking industry, training has become an important tool. In the period under review, a total of 307 staff attended 72 different courses both at home & outside. Training / workshops in the areas of credit risk management, information technology, customer service, treasury, marketing, card services and project finance were organized for staff.

Conclusion

Despite the stiff competition from 26 commercial banks, the Bank recorded another solid performance during the financial year 2008/09. Nepal Investment Bank Limited consolidated its position as one of the premiere banks in Nepal. The market share taken by our Bank in deposits and advances are substantial and the Bank is striving to achieve its aim of being the most preferred provider of financial services in Nepal. The Bank now commands 8.9% and 10.2% of the market shares in deposits and loans and advances of the country respectively. The Bank is committed to maintaining its current position and is striving hard to progress even further.

Thank You,Jyoti Prakash PandeyGeneral Manager.

17


18

Nepa

l Inv

estm

ent B

ank

Lim

ited

Board Structure and MembersNepal Investment Bank Ltd (NIBL)’s share structure is divided among four groups. A group of companies holding 50% of the capital, Rastriya Banijya Bank and Rastriya Beema Sansthan holding 15 % each and the remaining 20% is held by the general public. During the last fiscal year, Mr. Rajesh Rajkarnikar, nominee Director from Rastriya Beema Sansthan, vacated the office of Director and in his place, Dr. Shiva Hari Shrestha, Administrator, was nominated as Director on the Board of the Bank by Rastriya Beema Sansthan.

Currently the Bank’s Board of Directors comprises of Mr. Prithivi Bahadur Pandé, Mr. Prajanya Rajbhandari, Mr. Deepak Man Sherchan, Mr. Krishna Prasad Sharma, Dr. Shiva Hari Shrestha, Mr. Surendra Bahadur Singh and Mr. Damodar Prasad Sharma Pandey. Among these, Mr. Damodar Prasad Sharma Pandey is an independent board member and Mr. Surendra Bahadur Singh represents the public shareholders. Mr. Prithivi B. Pandé is the Chairman of the Bank’s Board.

Internal Control Mechanism and various CommitteesThe Bank has an independent Internal Audit and Compliance Department headed by an experienced auditor. The Department performs its functions under the direct supervision and control of the Audit Committee and submits its reports directly to the latter. To supplement the

name of the Committees Members

Audit Committee Damodar Prasad Pandey (Chairman), Deepak Man Sherchan, Shiva Hari Shrestha, Head Internal Audit (Member Secretary)

Human Resource Development Prithivi Bdr. Pandé (Chairman), Committee (HRDC) Krishna Pd. Sharma, Head Human Resource (Member Secretary)

Executive Credit Committee (ECC) Prithivi Bdr. Pandé (Chairman), Surendra Bdr. Singh, and Prajanya Rajbhandari

Construction Committee Deepak Man Sherchan (Chairman), Prithivi Bdr. Pandé, Prajanya Rajbhandari

in-house internal audit department, the Bank has also hired a firm of Chartered Accountants to conduct internal audit functions in the review year. In addition, the Bank has also constituted a ‘Compliance Committee’ comprising of various departmental heads to further strengthen compliance and internal control systems of the Bank. Besides these committees, the Bank has a number of high level committees, namely Executive Credit Committee, Human Resource Development Committee, Construction Committee and Asset Liability Management Committee, each with a defined scope and terms of reference. These Committees comprise of Board members and senior Management officials.

The Bank’s Audit Committee, under the chairmanship of a non-executive director, Mr. Damodar Prasad Sharma Pandey, comprises of Mr. Deepak Man Sherchan and Dr. Shiva Hari Shrestha as Member Directors along with the Bank’s Head of Internal Audit, Mr. Binod Upadhyay, as its Member Secretary. The Committee reviews the Bank’s financial condition, its internal control and risk management systems, statutory and regulatory compliances, audit programmes etc. After detailed discussion on the findings of the internal audit as well as external audit reports, the Committee initiates necessary corrective action. The Committee periodically apprises the Board of Directors of the issues and the corrective measures initiated. During the year, seven such meetings were held.

Corporate Governance

18

Nepa

l Inv

estm

ent B

ank

Lim

ited

19


“We have been assisting the aviation industry and introducing innovative solutions such as e-ticketing via our ebanking platform adding value to our clients and customers.”

20

Nepa

l Inv

estm

ent B

ank

Lim

ited

Being a financial institution, risk management is an integral part of Nepal Investment Bank Limited (NIBL). With the continuing increase in the scale as well as complexity of the Banking sector and the rapid growth in the volume of financial transactions, risk management has become a core part of business. Moreover the current financial crisis due to financial institutions' high exposure to risky assets, and the collapse of large financial institutions such as Lehman Brothers, Wachovia and Bear Stearns, due to their inability to manage risky assets has further emphasized the need for prudent and effective risk management. The management team and board of NIBL manages the overall risk profile, aiming for a balance between risk and returns.

Risk management includes risk identification, measurement and assessment, and its objective is to minimize negative effects that risks can have on the financial result and capital of a bank. Risk management strategies include the transfer of risk, avoidance of risk, reduction of the negative effect of the risk and acceptance of the consequences of a particular risk. The design of our risk management system depends on parameters such as size, capital structure, complexity of functions, technical expertise, and quality of Management Information System (MIS) and is structured to address both banking as well as nonbanking risks to efficiently maximize shareholder value.

The risk management system ensures that the Bank takes well-calculated business risks while safeguarding the Bank’s capital, its financial resources and profitability. The Bank’s primary business activity is commercial banking whereby substantial risk comprises of credit risk. To a lesser extent, commercial banking activities also expose the Bank to market risk arising from repricing, maturity and currency mismatches of assets and liabilities. These mismatches give rise to interest rate risk, liquidity risk and foreign exchange risk. The Board of Directors of NIBL recognizes that a critical factor in the Bank’s continued growth, profitability and stability lies in its effective risk management capabilities and risk-

return trade-off. In this respect, the Bank ensures its risk management capabilities and promotes pro-active risk management in the Bank.

Operational risk Management

Operational risk is the risk of loss resulting from inadequate internal processes, people, and systems, or from external events. Operational risk itself is not a new concept, and banks have been addressing it in their internal controls and corporate governance structures. However, applying an explicit regulatory capital charge against operational risk is a relatively new and evolving idea. Basel II requires banks to hold capital against the risk of unexpected loss that could arise from the failure of operational systems.

The most important types of operational risk involve breakdowns in internal controls and corporate governance. Such breakdowns can lead to financial losses through error, fraud, or failure to perform in a timely manner or cause the interests of the Bank to be compromised in some other way, for example, by its dealers, lending officers or other staff exceeding their authority or conducting business in an unethical or risky manner.

Other aspects of operational risk include major failure of information technology systems or events such as major fires or other disasters. The failure to properly manage operational risk can result in a misstatement of an institution’s risk/return profile and expose the institution to significant losses. Gross income, used in the Basic Indicator Approach is only a proxy for the scale of operational risk exposure of a bank and in some cases can underestimate the need for capital.

NIBL has developed a framework for managing operational risk and evaluating the adequacy of capital covering the Bank’s appetite and tolerance for operational risk, as specified through the policies for managing this risk, including the extent and manner in which operational risk is transferred outside the Bank. It also includes policies outlining the Bank’s approach of identifying, assessing, monitoring controlling and mitigating the risk.

Risk Management

20

Nepa

l Inv

estm

ent B

ank

Lim

ited

21


Credit Risk Management

Credit risk is the major risk that banks are exposed to during the normal course of lending and credit underwriting. Within Basel II, there are two approaches for credit risk measurement: the standardized approach and the internal ratings based (IRB) approach. Due to various inherent constraints within the Nepali banking system, the standardized approach in its simplified form, Simplified Standardized Approach (SSA), has been prescribed in the initial phase.

Credit risk is the probability that a Bank’s borrower or counter party will fail to meet its payment obligations in accordance with the terms of approval of the credit. This includes non-repayment of capital and/or interest within the agreed time frame, at the agreed rate of interest and in the agreed currency. The goal of credit risk management is to maximize a bank's risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. The effective management of credit risk is a critical component of a comprehensive approach to risk management and is essential to the long-term success of any banking organization.

For most banks, loans are the largest and most obvious source of credit risk; however, other sources of credit risk exist throughout the activities of a bank, including in the banking book and the trading book, and both on and off the balance sheet. Banks increasingly face credit risk in various financial instruments other than loans, including acceptances, interbank transactions, trade financing, foreign exchange transactions, and in the extension of commitments and guarantees and the settlement of transactions.

NIBL has developed methodologies to assess the credit risk involved in exposures to individual borrowers or counterparties as well as at the portfolio level. The credit review assessment of capital adequacy, at a minimum, covers risk rating systems, portfolio analysis/aggregation, large exposures and risk concentrations. Internal risk ratings are an important tool in monitoring credit risk and supporting the identification and

measurement of risk from all credit exposures, and are integrated into our overall analysis of credit risk and capital adequacy. The ratings system provides detailed ratings for all assets, not only for problem assets.

Our various branches are the business units of our bank. Each branch forwards business proposals to the head of credit division, Head Office. The credit division critically analyzes the proposal from different perspectives in line with statutory, regulatory and internal guidelines. Thereafter, if the business proposal is found to be credit worthy, it is placed in the credit committee. The Credit Committee is comprised of seasoned bankers who evaluate credit proposals. The committee analyzes in depth financial as well as non financial information regarding the borrower such as business history, market situation, future prospects of the market, managerial capabilities, cash flow and then declines or recommends approval of the designated credit authorities. To ensure proper and adequate risk analysis and timely customer service, our credit policy and procedures guide (CPPG) provides various layers in the credit approval process. The CPPG has conferred specific discretion ranging from the General Managers to the Executive Credit Committee, the penultimate credit authority of the Bank.

• Adoption of international standards via our in-house Credit Policy and Procedures Guide.

• Formation of Credit Quality Control (CQC) unit for monitoring the quality of credit, both at the account level and portfolio level.

• Regular review of the credit portfolio by the senior Management with periodic reporting to the Board of Directors.

• Separate independent audit and inspection of borrowers by internal auditors in addition to audit and inspection by statutory auditors.

• Strict adherence to the guidelines of the Central Bank on Loan Classification, Interest Recognition, Asset Classification, Single Obligor Limit, Sectoral Exposure etc.

• Establishing suitable exposure limits for borrowers and sectors and monitoring the limits on a regular basis.

• Risk mitigation steps with a special emphasis on collateral.

21


22

Nepa

l Inv

estm

ent B

ank

Lim

ited

• Setting counterparty limits based on their financial strength.

• Training of lending and legal officers on documentation and professional valuations.

• Developing skills and expertise of lending officers to scientifically assess project viability and customer integrity.

• Educating the staff on provisions in the Banks and Financial Institution Act and other relevant statues and the regulatory guidelines of the Central Bank.

• Seeking external legal opinion and advice.• Identifying Early Warning Signals (EWS) and

taking prompt action thereon.• Constant posts sanction monitoring with special

independent team for verification of current assets.

Market Risk Management

Market risk is defined as the risk of losses in on-balance sheet and off-balance sheet positions arising from adverse movements in market prices. The major constituents of market risks are:a. The risks pertaining to interest rate related

instruments.b. Foreign exchange risk (including gold positions)

throughout the Bank.c. The risks pertaining to investment in equities

and commodities.

Market risk is also the uncertainty in the future value of the Bank’s on-balance sheet and off-balance sheet financial items resulting from interest rates, foreign currency, equity, and commodity risks. The Asset Liability Management Committee (ALCO) serves as the primary oversight and decision making body that provides strategic directions for the Bank’s management of market risk. The key elements in the market risk management framework are principles and policies, risk limits and risk measures.

The prescribed approach for the computation of capital charge for market risk is very simple and thus may not be directly aligned with the magnitude of risk. Likewise, the approach only incorporates risks arising out of adverse movements in exchange rates while ignoring other forms of risks like interest rate risk and equity risks. NIBL has taken measures to address these various forms of risk and at the same time perform stress tests to evaluate the

adequacy of capital using internal models for the measurement of market risk.

Important Risk Management measures of the Bank to address Market Risk includes:• A pro-active Asset Liability Management

Committee (ALCO) that meets on a weekly basis.

• Review of ALCO decisions by top Management and Board of Directors.

• Conduction of gap analysis, timely re-pricing of products and hedging of exposures.

• Risk management via forward contracts, swaps and currency options.

• Daily monitoring of Credit to Deposit (CD) ratio.• Maintaining the Liquid Assets Ratio with a

contingency buffer.• Constant monitoring of dealer, broker,

counterparty, transaction, product and currency exposure limits.

• Regular monitoring of competitor behavior and building competitor intelligence.

• Maintaining strong relationships with correspondent banks.

• Enhancing fee based income to reduce dependence on fund based income.

• Non-engagement in large scale transactions on a speculative basis.

• Separation of front and back offices at the Treasury department.

Foreign Exchange Risk Management

Foreign Exchange rate risk arises from exchange rate movements which affect the profit of the Bank from its foreign exchange open positions. Because of a bank’s exposure to foreign currency, foreign exchange risk management is a fundamental component in market risk management of the Bank. It involves prudent management of foreign currency positions in order to control, within set parameters, the impact of changes in exchange rates on the financial position of the Bank. The frequency and direction of rate changes, the extent of the foreign currency exposure and the ability of counterparties to honor their obligations to the Bank are significant factors in foreign exchange risk management. This risk is managed by setting pre-determined limits on open foreign positions, the monitoring of the open positions against these limits and the setting and monitoring of our stoploss mechanism. In order to manage the foreign exchange risk and protect the Bank’s financial position, the

22

Nepa

l Inv

estm

ent B

ank

Lim

ited

23


Bank follows the following procedures:• Establish and implement sound and prudent

foreign exchange risk management policies.• Develop and implement appropriate and

effective foreign exchange risk management and control procedures.

Liquidity Risk Management

Liquidity is crucial to the ongoing viability of any financial institution. The capital positions can have a telling effect on an institution’s ability to obtain liquidity, especially in a crisis. NIBL has adequate systems for measuring, monitoring and controlling liquidity risk. We evaluate the adequacy of capital given their own liquidity profile and the liquidity of the markets in which they operate. We also make use of stress testing to determine their liquidity needs and the adequacy of capital.

The objective of liquidity management is to ensure that the bank has sufficient funds to meet its contractual and regulatory financial obligations at all times. Liquidity risk is the probability of loss arising from a situation where (1) there will not be enough cash and/or cash equivalents to meet the needs of depositors and borrowers, (2) sale of illiquid assets will yield less than their fair value, or (3) illiquid assets will not be sold at the desired time due to a lack of buyers. Liquidity risk relates to the ability of the Bank to maintain sufficient liquid assets at a reasonable cost to meet its financial obligations as and when they fall due. Liquidity risk arises from situations in which a party interested in trading an asset cannot do it because nobody in the market wants to trade that asset. Liquidity risk becomes particularly important to parties who are about to hold or currently hold an asset, since it affects their ability to trade.

The Bank’s liquidity policy is to ensure that all contractual commitments can be met by readily available sources of funding. In addition, liquid assets are maintained in relation to cash flows to provide further sources of funding in the event of a crisis. The Bank also has excellent access to financial markets to ensure the availability of funds.

Monitoring and reporting

The Bank has established an adequate system for monitoring and reporting risk exposures and

assessing how the Bank’s changing risk profile affects the need for capital. The Bank’s senior management or board of directors receives on a regular basis reports on the Bank’s risk profile and capital needs. These reports allow senior management to:• Evaluate the level and trend of material risks and

their effect on capital levels;• Evaluate the sensitivity and reasonableness of

key assumptions used in the capital assessment measurement system;

• Determine that the Bank holds sufficient capital against the various risks and is in compliance with established capital adequacy goals; and

• Assess its future capital requirements based on the Bank’s reported risk profile and make necessary adjustments to the Bank’s strategic plan accordingly.

NIBL conducts periodic reviews of its risk management process to ensure its integrity, accuracy, and reasonableness. Key areas that are reviewed include:• Appropriateness of the Bank’s capital assessment

process given the nature, scope and complexity of its activities.

• Identification of large exposures and risk concentrations.

• Accuracy and completeness of data inputs into the Bank’s assessment process.

• Reasonableness and validity of scenarios used in the assessment process.

• Stress testing and analysis of assumptions and inputs.

SUPErviSOrY rEviEW:

Nepal Rastra Bank regularly reviews the process by which a bank assesses its capital adequacy, risk positions, resulting capital levels and quality of capital held by NIBL. Supervisors also evaluate the degree to which NIBL has in place a sound internal process to assess capital adequacy. The emphasis of the review is on the quality of the Bank’s risk management and controls. The periodic review can involve any or a combination of:• On-site examinations or inspections.• Off-site review.• Discussions with bank management.• Review of work done by external auditors

(provided it is adequately focused on the necessary capital issues).• Periodic reporting.

23


24

Nepa

l Inv

estm

ent B

ank

Lim

ited

Board of directors

25


26

Nepa

l Inv

estm

ent B

ank

Lim

ited

deepak Man SherchanDirector

Mr. Deepak Man Sherchan is an architect by profession. He holds a B. Tech Architecture degree from I.I.T Kharagpur, West Bengal, India and has also received a diploma in real estate development from Harvard Design School, USA. Mr. Sherchan is the Managing Director and Chief Architect of C.B.C. (P) Ltd. He is also actively involved in the field of education and local development. He is the Chairman of Malpi International School, Malpi International College, Tukuche Village Development Committee and is associated with many professional and educational institutions.

Prithivi B PandéChairman & CED

Mr. Pandé has over 20 years experience in the field of banking in Nepal with both the public and private sectors. After obtaining a degree in Chartered Accountancy from India in 1978, he worked at various departments of the departments of the Nepal Rastra Bank (Central Bank of Nepal) till 1990, during which he was seconded to the IMF head-office in Washington for two years.

He was appointed in 1990 as the general manager of Rastriya Banijya Bank – the largest commercial bank in Nepal. After financial liberalization started in 1991, Mr. Pandé established ‘Himalayan Bank’, the first private sector commercial bank in Nepal and a joint-venture with Habib Bank. He served as a Stakeholder and Executive Director for a period of 10 years propelling it to the top tier of Nepali banks.

In 2001 leading a diverse private equity group he took on management responsibilities from the Credit Agricole Group of Nepal Indosuez Bank to manage Nepal Investment Bank which has resulted in the Bank’s phenomenal growth in capital, assets, liabilities and profits.

Prajanya RajbhandariDirector

Mr. Prajanya Rajbhandari is an industrialist and holds an engineering degree from Punjab University. He has held directorships at National Structures, Everest Poultry and Enviroplast. Mr. Rajbhandari has actively served in organizations like Nepal Jaycees, ROTARY and FNCCI in various capacities.

26

Nepa

l Inv

estm

ent B

ank

Lim

ited

Board of directors

27

Annual Report 2008-2009Mr. Krishna Prasad SharmaDirector

Mr. Krishna Prasad Sharma, Deputy General Manager of Rastriya Banijya Bank has extensive experience of working in the banking sector for over 24 years. Mr Sharma holds a Master Degree in Management and Social Science and also a BSc in Agriculture Science.

He holds the position of Chairman of NLG Insurance Company and RBB Retirement Fund, and the position of director at National Life Insurance Company.He has also served as a director in the Credit Information Centre, Purbanchal Grameen Bikas Bank, Paschimanchal Grameen Bikas Bank, and Sudur Paschimanchal Grameen Bikas Bank.

dr. Shiva hari ShresthaDirector

Dr. Shiva Hari Shrestha is the General Manager of Rastriya Beema Sansthan. He previously worked for over 20 years in various capacities at Nepal Industrial Development Corporation (NIDC). He holds a Ph. D. in Economics and has been involved in various training programs in Nepal Rastra Bank, Management Association of Nepal (MAN) and the World Bank. Dr. Shiva Hari Shrestha has an M.P.A in Public Administration from Tribhuvan University and also an M.A in Economics from Tribhuvan University, Nepal.

damodar Prasad Sharma PandeyDirector

Mr. Damodar Prasad Sharma Pandey has 23 years of experience in various departments within the Nepal Rastra Bank; serving as an Executive Director in the Department of Mint. Furthermore, he has significant experience working in Bank Supervision, Economic Research, Banking Operations, Finance and in the Credit Information Bureau. Mr. Pandey has a B.A. from the University of Southampton, U.K. and an M.Sc. in mathematical statistics from Lucknow, India. He has also served as the Chairman of Paschimanchal Grameen Bikash Bank, Director at the Deposit Insurance and Credit Guarantee Corporation and a director of the National Productivity and Economic Development Centre.

Surendra Bahadur SinghDirectorPublic Shareholders

Mr. Surendra Bahadur Singh has a Diploma in Hotel Management from the Institute of Tourism & Hotel Management, Klessheim, Salzburg, Austria and specialized in Hotel Management from the International School of Tourism, Rome, Italy and completed his MBA degree from Tribhuvan University, Nepal. He started his career at Rastriya Banijya Bank. He has also worked at Malla Travels & Tours and at Nabil Bank. Mr. Singh has 2 decades of work experience in the tourism industry and has served as the General Manager of Himalaya Hotel and the Grand Hotel.

27


28

Nepa

l Inv

estm

ent B

ank

Lim

ited

“We have supported the hotel and Tourism sectors through debt Financing and Corporate Restructuring.”

29


30

Nepa

l Inv

estm

ent B

ank

Lim

ited

Jyoti P Pandey General Manager

After completing his M.B.A in India, Mr. Pandey joined Nepal Indosuez Bank in 1988 and became Head of the International Banking Department. In 1992, he joined Himalayan Bank and worked as the Head of Marketing, Branch Manager and Head of the Credit Department over a period of 9 years. In 2002, Mr. Pandey joined Nepal Investment Bank as its Deputy General Manager and now handles general bank operations comprising of Human Resources, Administration, Client Relations, Retail, Trade Finance and Corporate Banking.

Rajan AmatyaAssistant General Manager

Having completed a degree in Management, Mr. Amatya started his career with Nepal Bank Limited, the largest commercial bank in Nepal rising to Assistant Branch Manager over a period of 11 years. He then joined Nepal Indosuez Bank in 1986 and has worked in the Cash Department, International Trade Finance Department. Presently he is the head of Retail Banking.

Mr. Bijendra SuwalAssistant General Manager

Mr. Suwal has comprehensive and extensive experience in banking technology software and hardware. After completing his degree in Bachelor of Science, he started his professional career as a programer at Data Systems International (DSI), a pioneer software company in Nepal. Mr. Suwal started his banking career by joining NABIL Bank in 1992 as a programer rising to Department Head in 3 years. He joined Nepal Indosuez Bank in 2000 as IT Manager. Now, he is working as an Assistant General Manager and heading the Information Technology Department.

30

Nepa

l Inv

estm

ent B

ank

Lim

ited

Senior Management Team

31


31


Head-Corporate Banking Anuj Timilsina

Head- Trade Finance deepak K. Shrestha

Head – Legal deepak Shrestha

Head – Operation rabin Sijapati

Head – Branch Co-ordination Cell Shreechandra Bhatta

Head-Cards & Remittance Bikash Thapa

Head – Accounts and Budgeting Sachin Tibrewal

Head – Cash & Transfer Sanjeev Karki

Head- Reconciliation Tul Jung Pandey

Head- Human Resources Prabir SJB Rana

Head- Credit Administration Sammit Bhattarai

Head- Internal Audit and Compliance Binod Upadhyaya

Management Team

Head – Research & Development Shivanth Bahadur Pandé

32

Nepa

l Inv

estm

ent B

ank

Lim

ited

32

Nepa

l Inv

estm

ent B

ank

Lim

ited

Branch Manager Birgunj

Ratna Kumar Limbu

Branch Manager Pokhara

dhiraj Thapa

Branch Manager Seepadole

Uttam Bdr. K.C.

Branch Manager Butwal

ajay K. Kafle

Branch Manager Janakpur

Sajan Shah

Branch Manager Biratnagar

Bishal Thapa

Branch Manager Bhairawaha

Gokarna P. duwadi

Branch Manager Kalimati

Bhaskar n. Joshi

Branch Manager Nepalgunj

Mantri Lal Gupta

Branch Manager Thamel

Ramraj Upadhyay

Branch Manager Birtamod

Sanjit Pokhrel

Branch Manager Battisputali

Bandana Thapa

Branch Manager New Baneshwor

Sujan Ranjit

Branch Manager Tulsipur

dhiraj Singh

Branch Manager Narayangarh

Prakash dhungana

Branch Manager Banepa

Kumar Thapa

33


33


Branch Manager Dhangadi

Subin Sijapati

Branch Manager Gongabu

Purshottam Chalise

Branch Manager Surkhet

Sanket dhungel

Branch Manager Jumla

Eka Raj Mahat

Branch Manager Boudha

Shobha Shrestha

Branch Manager Hetauda

Shekhar Singh

Branch Manager Palpa

Baburam Kandel

Branch Manager Lukla

Keshab Mainali

Branch Manager Tripureshwore

Lok ram Bhattarai

Branch Manager Dhumbarahi

Radhika Singh

Branch Manager Damauli

naresh J Pandey

Branch Manager Bhotahity

Mahesh L. Shrestha

Branch Manager Putalisadak

Manju Basnet

Branch Manager Pulchowk

Barun Shrestha

Branch Manager New Road

nikita Maskey

34

Nepa

l Inv

estm

ent B

ank

Lim

ited

“We believe that Energy and Water Resources are the key to rapid economic growth in the future; we are among the leading banks in financing local Power Projects in nepal.”

35


KAILALI

BANKEDANG

RUPANDEHI

PALPA

KASKI

JUMLA

MAKWANPUR

BARADHANUSHA

MORANG JHAPA

SOLUKHUMBU

KAVREKATHMANDU

BANKE

SURKHET

BHAKTAPUR

LALITPUR

UDAYAPURSARLAHI

PARSA

TANAHUN

36

Nepa

l Inv

estm

ent B

ank

Lim

ited

domesti c network

KATHMANDU HEAD OFFICE: Durbar Marg P.O. Box 3412, Tel: 4228229, 4242530 (DISA)Fax: 977-1-4226349, 4228927,Swift : NIBL NP KT

SEEPADOLE BRANCH: Suryabinayak, BhaktapurTel: 6615617, 6612832Fax: 6616617

BIRGUNJ BRANCH: AdarshanagarP.O. Box 101,Tel (051) 523327, 525277Fax: (051) 525297

PULCHOWK BRANCH: Pulchowk, LalitpurTel: 5010188, 5010042Fax: 5010142

BANEPA BRANCH: Banepa, KavreTel: (011) 664315,662401Fax: (011) 662402

JEETPUR BRANCH: Jeetpur, BaraTel: (053) 520297Fax: (053) 520877

NEWROAD BRANCH: Newroad, KathmanduTel: 4242858, 4230374Fax: 4227050

BIRATNAGAR BRANCH: Golcha Chowk, BiratnagarTel: (021) 534523, 534524, 534525Fax: (021) 534526

BUTWAL BRANCH: Traffi c Chowk, ButwalTel: (071) 549991, 549992, 549993Fax: (071) 549888

BHAIRAHAWA BRANCH: Maitri Road, BhairahawaTel: (071) 526991, 526992Fax: (071) 526990

POKHARA BRANCH: Chiple Dunga,PokharaTel: (061) 538919, 539276Fax: (061) 538920

PUTALISADAK BRANCH: Putalisadak, KathmanduTel: 4445302, 4445303Fax: 4445304

NARAYANGARH BRANCH: Pulchowk, Narayangarh Tel: (056) 532921,532922 Fax: (056) 532925

JANAKPUR BRANCH: Mills Area, JanakpurTel: (041) 527331Fax: (041) 527332

NEPALGUNJ BRANCH: Dhamboji, NepalgunjTel: (081) 525978,525682Fax: (081) 521664

THAMEL BRANCH: Chaksibari, ThamelTel: 4218431,4218434,4218485,4218486Fax: 4218434

KALIMATI BRANCH: Kalimati Chowk, Kalimati Tel: 4672493,4672494,4672495,4672548 Fax: 4272612

BIRTAMOD BRANCH: Traffi c Chowk, BirtamodTel:(023) 543810,543811Fax: (023)543815

BATTISPUTALI BRANCH: Batti sputali, KathmanduTel: 4471690,4471790Fax: 4470202

DHANGADI BRANCH: Chauraha Chowk, DhangadiTel:(091) 523620,523706Fax: (091) 524090

GONGABU BRANCH: Gongabu Chowk, KathmanduTel: 4365318,4365077Fax: 4365302

SURKHET BRANCH: Neta Chowk, SurkhetTel: (083) 524330, 524331Fax: 524332

JUMLA BRANCH: Khalanga Bazaar, Jumla Tel: (087) 520132Fax: 520304

BOUDHA BRANCH: Boudha, KathmanduTel: 4480121,4480122Fax: 4480123

HETAUDA BRANCH: Bank Road, HetaudaTel: (057) 526001, 525946Fax: (057) 526005

PALPA BRANCH: Tansen,PalpaTel: (075) 520832,520833Fax:(075)-520891

KAILALI

BANKEDANG

RUPANDEHI

PALPA

KASKI

JUMLA

MAKWANPUR

BARADHANUSHA

MORANG JHAPA

SOLUKHUMBU

KAVREKATHMANDU

BANKE

SURKHET

BHAKTAPUR

LALITPUR

UDAYAPURSARLAHI

PARSA

TANAHUN

37


LUKLA BRANCH: Chaurikharka, LuklaTel:(038) 550120 Fax: (038) 550220

DHUMBARAHI BRANCH: Pipalbot Chowk, KathmanduTel: 4009006, 4009007 Fax: 4009009

NAYA BANESHWOR BRANCH: Naya Baneshwor, KathmanduTel:4785529,4782289,4782520Fax: 4785537

BHOTAHITI BRANCH: Bhotahiti , KathmanduTel: 4230797, 4230788 Fax: 4230771

TULSIPUR BRANCH: Tulsipur, DangTel:(082)521613,521614 Fax: 521615

TRIPURESHWOR BRANCH: Tripureshwor, KathmanduTel: 4259780, 4259980 Fax: 4260105

DAMAULI BRANCH: Safasadak, Damauli Tel: (065) 562500, 562600 Fax: (065) 562700

MAHARGUNJ BRANCH: Maharajgunj, KathmanduTel:4016151, 4016152Fax:4016155

LALBANDHI BRANCH: Lalbandhi, SarlahiTel: (046) 501583, 501584Fax:(046) 501585

Westpac Banking Corporation, Sydney

Royal Bank of Canada, Toronto

JP Morgan Chase, London

danske Bank, Copenhagen

JP Morgan Chase, Frankfurt

Commerz bank, Frankfurt A.M.

Credit Agricole, Paris

SnS Bank, Amsterdam

Standard Chartered Bank, Frankfurt

Bayerische hypo-Und vereins, Hamburg

Standard Chartered Bank, London

habib allied international Bank Plc, London

Standard Chartered Bank,Kolkatta

hdFC, Mumbai

Global network

ICICI Bank, Mumbai

Citibank, New Delhi

Standard Chartered Bank, Mumbai

Bank of Tokyo, Mitsubishi

Standard Chartered Bank, Tokyo

Svenska handelsbanken,Stockholm, Sweden

United Overseas Bank Ltd. Singapore

Citibank, New York

Bank Of China, Beijing

Commerzbank, Frankfurt

Standard Chartered Bank, New York

Mashreque Bank, New York

JP Morgan Chase,New York

39


Board of director's report For The Financial Year 2065/66 (FY 2008/2009)Presentation by the Chairman to the 23rd Annual General Meeting

Dear Shareholder,It is our pleasure to welcome you at this 23rd Annual General Meeting of Nepal Investment Bank Ltd (NIBL). On this occasion, We present to you the Bank’s activities, Balance Sheet and Profit & Loss account for financial year 2065/66.

1. review of Bank’s Performance for FY 2065-66:The fiscal year 2065-66 was another successful year for the Bank. Despite the continuing political uncertainty and increased competition, our Bank achieved remarkable growth in all areas, be it in deposits, lending, profit, products, services etc. An overview of the Bank’s performance during the review year is presented hereunder:

S.no. Particulars FY FY Growth in Growth 2064-65 2065-66 nPr in %

1. Total Assets 38,873 53,010 14,137 36.42. Total Deposit 34,452 46,698 12,246 35.63. Total Loans and Advances 27,529 36,827 9,298 33.84. Total Investments 6,874 7,399 525 7.65. Total Operating Profit (before 1,149 1,477 328 28.6 provision for possible loss)6. Total Net Profit 697 901 204 29.37. Non-performing Assets (in %) 1.12 0.58 - (0.54)8. Return on Paid-up Capital (in %)* 69.49 49.88 - (19.61)**9. Return on Shareholders’ Fund (in %)* 30.53 27.31 - (3.22)**10. Total Customer Base (in Nos.) 165,649 268,345 102,696 62.011. Market Share in Deposit (in %) 8.8 8.9 - 0.112. Market Share in Lending (in %) 10.4 10.2 - (0.2)

NPR in Million

* Average ** Figures in negative due to increase in paid-up capital

2. impact, if any, of the national and international Situation upon the Business of the CompanyDuring the review period, the financial downturn resulting from the US housing crisis became a global problem. Extraordinary measures by governments around the world helped save the global financial system from collapse. Western Europe and Asia have been hit hard by the collapse in global trade. Nepal has been mostly insulated from the effects of the financial crisis owing partly to sound macroeconomic management and also because of the underdeveloped nature of the financial markets that are not well connected to international markets. Although the global economic slowdown has not yet affected Nepal, some impact is inevitable on exports, remittances, tourism receipts, and external assistance for infrastructure, especially if it is prolonged.

GDP growth is forecast to slow to 3.0% in FY2009 and then pick up somewhat to 3.5% in FY2010 (Asian Development Bank). On the demand side, consumption will stay buoyed by remittances, which are likely to continue rising as a result of new labor agreements with several host countries. However, the slowdown in the outward flow of migrant workers and the increasing repatriation of some workers from certain host countries suggest that remittance inflows will likely slow, especially in FY2010.

The BOP surplus of Rs. 39.06 billion in the eleven months of this fiscal year was better than the Rs 24.67 billion posted in the corresponding period of last fiscal year largely due to an increase in workers’ remittance which increased by 51% against the corresponding period last year. The gross foreign exchange reserves grew by about 28% and stood at Rs. 272 billion compared with the level of last year end (Rs. 213 billion – 25%).

39


40

Nepa

l Inv

estm

ent B

ank

Lim

ited

Review of the first eleven months of 2008/09 indicates a slowdown in the expansion of domestic credit compared with the same period last year (this year 17% against 17.6% last year). Higher resource mobilization relative to expenditure of GON resulted in surplus cash thereby bringing a slowdown in domestic credit expansion. In the first 11-months of 2008/09, deposit mobilization of commercial banks increased by Rs 88.1 billion (about 21%) amounting to Rs 509.6 billion against Rs 67.7 billion (about 20%) in the corresponding period of the previous year.

The external sector displayed a satisfactory performance in the first eleven months of 2008/09 as total exports rose by 15.4%. Total imports soared by 26.3% in the first eleven months of 2008/09 against an increase of 14.3% last year.

Medium-term growth and development prospects in Nepal rest largely on continued macroeconomic stability, a smooth and rapid political transition and the impact of the global slowdown. The global slowdown and the fragile political situation pose significant downside risks.

Lower international oil prices augur well, as the economy is fully dependent on imported fuel. An upswing in oil prices could disrupt supply, which combined with power shortages would have a detrimental impact on the economy. The entry of a large number of financial institutions in the past couple of years poses a major challenge to the Banking industry.

3. achievements/new Products & Services/ new Branches during Current Fiscal Year 2066-67 The Bank opened its 31st branch in Dang (Tulsipur) in the current FY 2066-67.

4. Industrial and Professional relations of the CompanyThe Bank has established a cordial and professional relationship with all the stakeholders. We believe that this cordial relationship with all the stakeholders developed on the basis of professionalism and transparency will be fruitful, and prove to be a successful medium for future progress of the Bank.

5. Changes made in the Board of directors, and reasons thereforeDuring the review year, Mr. Rajesh Rajkarnikar, nominee Director from Rastriya Beema Sansthan, vacated the office of Director and in his place, Dr. Shiva Hari Shrestha, Administrator, was nominated as Director on the Board of the Bank by Rastriya Beema Sansthan.

On behalf of the shareholders, We would like to convey our sincere thanks to the outgoing Director for his invaluable contribution and support to the Management of the Bank, and also welcome the incoming Director who has joined the Bank.

6. Main Factors affecting the BusinessThe main factors affecting the Bank’s business are:• The existing political uncertainty is affecting

all sectors of the economy and the financial system is no exception.

• Heightened competition in the Banking sector has led to shrinking margins.

7. Board Of directors’ reaction to the remarks made, if any, in the audit ReportThere are no adverse remarks in the audit report except comments on routine matters arising in the normal course of business. The Board of Directors has taken note of such comments and

40

Nepa

l Inv

estm

ent B

ank

Lim

ited

41


41


recommendations, and has already initiated requisite steps to regularize the same.

8. The amount recommended for distribution as dividendThe 322nd meeting of the Board of Directors of the Bank has proposed 20% cash dividend from the profit of fiscal year 2065/2066 on the Bank’s paid up capital.

9. number of Shares Forfeited, if any, and Particulars thereofDuring the year, no shares have been forfeited.

10. Progress made in the Business of the Company and its Subsidiary Company during the Previous Financial YearThe Bank does not have any subsidiary company. As regards to the progress of the Company during the previous financial year, please refer to Section 1 above.

11. Main Transactions Between the Company and its Subsidiary Company during the Financial Year and important Changes, if any, thereinThe Bank does not have any subsidiary company.

12. information Furnished to the Company by its Basic Shareholders during the Previous Financial YearNone.

13. Particulars of the Ownership of Shares Taken up by the directors and Office-bearers of the Company during the Previous Financial YearNone.

14. Particulars of information Furnished by any director/ Close relative about his Personal interest in any Agreement Signed by the Company during the Previous Financial YearThere is no any such agreement and consequently, no disclosure in this respect has been made.

15. Particulars of Buy-Back of Shares, if anyThere was no buy-back of shares during the year under review.

16. Whether or not there is an internal Control System, and if there is any such System, details thereofThe Bank has an independent Internal Audit and Compliance Department headed by an experienced auditor. The Department performs its functions under the direct supervision and control of the Audit Committee and submits its reports directly to the latter. To supplement the in-house internal audit department, the Bank has also hired a firm of Chartered Accountants to conduct internal audit functions in the review year. In addition, the Bank has also constituted a ‘Compliance Committee’ comprising of various departmental heads to further strengthen compliance and internal control system of the Bank. Besides these Committee, the Bank has a number of high level committees, namely Executive Credit Committee, Human Resource Development Committee, Construction Committee and Asset Liability Management Committee, each with a defined scope and terms of reference. These Committees comprise of Board members and senior Management officials.

42

Nepa

l Inv

estm

ent B

ank

Lim

ited

17. Particulars of the Total Management Expenses of the Previous Financial YearEmployee Expenses NPR 225.72 million during the Previous FY: Administrative Expenses NPR 413.88 million during the Previous FY:

Total: nPr 639.60 million

18. names of the Members of the audit Committee, remuneration etc. being received by them and Functions discharged/Suggestions Offered by the CommitteeThe Bank’s Audit Committee, under the chairmanship of a non-executive director, Mr. Damodar Prasad Sharma Pandey, comprises of Mr. Deepak Man Sherchan and Dr. Shiva Hari Shrestha as Member Directors along with the Bank’s Head of Internal Audit, Mr. Binod Upadhyay, as its Member Secretary. The Committee reviews the Bank’s financial condition, its internal control and risk management systems, statutory and regulatory compliances, audit programmes etc. After detailed discussion on the findings of the internal audit as well as external audit reports, the Committee initiates necessary corrective action. The Committee periodically apprises the Board of Directors of the issues and the corrective measures initiated. During the year, seven such meetings were held. The Chairman of the Committee is paid NPR 6,000 and member Directors are paid NPR 5,000 each, per meeting, by way of Audit Committee meeting fee.

19. Payments due, if any, to the Company from any director, Executive Chief or Basic Shareholder of the Company, or their Close relatives, or their related EntitiesNo such payments are due to the Company.

20. amount paid as remuneration, allowances and Facilities to the directors, the Executive Chief and other Office-bearers As per Annexure “A” below.

21. dividend yet to be Collected by ShareholdersDividends declared by the Bank but not claimed by the shareholders till the end of FY 2065-66 stood at NPR 40,39,727.

22. any Other Mattersa. New Branches, Products and Services During FY 2065-66:• In the review period, a total of 11 new branches

were added taking the total branch strength to 30 against the target of opening 50 branches by calendar year 2010. Of the 11 new branches, 5 were opened in Kathmandu at Gongabu, Bouddha, Dhumbarahi, Naya Baneshwor and Bhotahity. The remaining 6 were opened in Dhangadi, Surkhet, Jumla, Hetauda, Palpa and Lukla. The 31st branch in Tulsipur was opened in the current fiscal year 2066-67.

• With a view to provide services to our customers and increasing our branch network, we will be establishing an additional 19 branches in different parts of the country by the end of calendar year 2010. All branches will be connected on-line with each other.

• The Bank implemented the Finacle Core Banking & E-banking Solution from Infosys during the review period. The system changeover commenced in Shrawan 2065 and was completed in Kartik 2065. After the system changeover was completed, focus shifted on system stabilization and this process is now completed.

• In the fiscal year under review, the Bank added a total of 23 ATM machines in and outside Kathmandu Valley taking the number of ATM machines to 57. An additional 11 ATM machines are also being added in the next 2-3 months.

• The Bank has issued over 220,000 cards, and continues to be the leader in card issuance in Nepal. There are altogether more than 320,000 cards holders in the NIBL network now.

• To strengthen its position in workers’ remittance market, the Bank appointed 45 new remittance disbursement agents during the year raising

42

Nepa

l Inv

estm

ent B

ank

Lim

ited

43


the total number of remittance disbursement locations to 200.

b. Human Resources: In an increasingly aggressive corporate world, our people play a vital role and are one of the key business enablers. Rapid growth and branch expansion among the Banks has resulted in shortage of banking professionals in this sector. It is due to this fact that in the past year there were a number of movements of staff from one institution to the other. The emergence of new financial institutions has also had an impact in this area.

Nepal Investment Bank has built up on the human resource side over the years and has trained and skilled staff that have been instrumental in driving the Bank to what it is today. The Bank will continue to focus on the training needs of its staff to ensure that it is able to develop its skill as per changing times and remain ahead of its competitors in service delivery. The Bank has adopted effective human resource management strategies that realise the potential of employees and earn their respect and loyalty.

As of the end of the FY 2065/066, the Bank’s total staff strength was 766 against 622 in the corresponding reporting period. Of the total staff, female staff accounted for 327 which is about 43% of the total staff of the Bank.

Seventy-one staff members have served the Bank for 10 or more years.

In order to develop the professional skill of staff to provide skilled manpower in the Bank, the Bank has been organizing appropriate training both at home and abroad. Considering the paucity of skilled manpower in the Banking industry, training has become an important tool. In the period under review, a total of 307 staff attended 72 different courses both at home & outside. Trainings / workshops in the areas of credit risk management, information technology, customer service, treasury, marketing, card services and project finance were organized for staff.

Further, the training issue is likely to be addressed in a more organized manner locally upon establishment of the Banking Training Institute (BTI) in the near future. The institute is promoted by all commercial banks, Nepal Rastra Bank, Asian Development Bank and Rural Microfinance Development Centre Ltd (RMDC). The BTI will be conducting short-term courses, banking examinations and issue diplomas and evolve into a world class institute. All financial institutions are expected to benefit from the establishment of this institute.

c. Social and Community Works: At NIBL, we believe that our prosperity is directly linked with the well-being of the society in which we work. Being a responsible corporate entity, we are very aware of our social responsibilities. As part of our duty towards society, we have made numerous attempts to address social needs. To this effect, the Bank has contributed to various social causes during the fiscal year. To name a few, the Bank donated Rupees Five Lakhs to the Kantipur Rastriya Bipatti Sahayog Kosh and Rupees Two Lakhs to Annapurna Post Badipidit Sahayog Kosh for the relief of the flood victims of Koshi river. Likewise, the Bank donated Rupees Three Lakhs to B. P. Koirala Eye Foundation, a non-profit organization which provides eye related treatments to general people and Rupees Six Lakhs Sixty Thousand to UNHCR for securing the rights and well-being of the Bhutanese refugees in Nepal.

NIBL contributed Rupees One Lakh to Spinal Injury Rehabilitation Centre (SIRC) for providing rehabilitation services to patients with spinal injuries, Rupees One Lakh to Hospital and Rehabilitation Centre for Disabled Children (HRDC), Rupees Five Lakhs to Nepali Federation of Women Living for empowerment and liberation of women in the country and Rupees One Lakh to Centre for Economic and Social Studies, Nepal.

Being a Nepali Bank, NIBL each year invests in programmes that are geared towards promoting awareness amongst the Nepali people for the conservation and preservation of Nepali culture, heritage and environment. In the reporting year, NIBL sponsored Rupees One Lakh to Tenzing Hillary

43


44

Nepa

l Inv

estm

ent B

ank

Lim

ited

Everest Marathon for promoting awareness amongst the people around the world for conservation and preservation of the global environment and Rupees One Lakh to Western Region Development Forum for the development and promotion of traditional Nepali Culture of the region.

The Bank has been equally supportive of the development and promotion of various sports in the country. For instance, the Bank has been supporting various sports institutions like Nepal Golf Association, All Nepal Lawn Tennis Association, Nepal Basketball Association, Nepal Football Association, Nepal Squash Association through sponsorships.

d. Future Plans• New Product and Services: The Bank is in the process

of rolling out a host of new products and services to cater to the needs and aspirations of our valued customers and also to differentiate itself from its competitors.

• Extensive Branch Network: In order to reach out to the un-banked, NIBL will continue to expand its branch network in the current fiscal year also. By the end of calendar year 2010, the Bank expects to have a total of 50 branches country-wide.

• Debit/Credit Cards: - The Bank is looking at expanding the Cards market extensively in order to capitalize on the opportunity now and remain a strong player in the market. A lot of effort is being put in the expansion of members in the Bank’s National Payment Network that will assist the Bank in increasing its customer base and revenue. The Bank has until now concentrated in the Debit card market but it will slowly also expand its Credit card market.

• Greater ATM Penetration: In line with the Bank’s strategy to extend coverage to our customers, the Bank plans to install more ATMs both inside and outside the Valley.

• IT Enabled Services: The Bank aims to provide the latest value added services to its customers through the use of cutting-edge technology. To meet this end, the Bank is working on a number of projects like SMS/Mobile Banking, Mobile Top-up through SMS Banking, various bill payment and e-commerce projects including Public Switch Telephone Network (PSTN) bill payment, CDMA Recharge PIN Purchase,

e-Ticketing and School Bill Payment through e-Banking.

• Remittance: The Bank plans to increase the number of remittance disbursement agents in Nepal to 250 by the end of current fiscal year. Further, the Bank plans to depute additional staff representatives in Saudi Arabia and Malaysia and increase the number of our representatives in Qatar and UAE.

• Other business: Increase in competition in the Banking industry has made Banks look for additional areas for investments to continue to keep up the revenue stream. NIBL is contemplating commencing insurance and micro-finance business, which are expected to help us in improving our revenue streams and shrinking margins.

23. acknowledgmentsOn behalf of the Board, we wish to thank the external auditors for their timely completion of audit and professional suggestions. We also extend sincere thanks to our shareholders for their continued support and encouragement. We sincerely convey our thanks to the Government of Nepal, Ministry of Finance and Nepal Rastra Bank for their continued support and guidance. We would also wish to thank the Management and staff of Nepal Investment Bank Ltd. for their dedication and hard work.

Lastly, we thank all our customers for giving the Bank an opportunity to serve them and without whose support, the development of the Bank and growth in business would not have been possible.

Thank you,

Prithivi B. PandéChairman and Chief Executive Director

Prajanya RajbhandariDirector

Krishna Prasad Sharma Director

Date: Bhadra 16 , 2066.

44

Nepa

l Inv

estm

ent B

ank

Lim

ited

45


45


S.n. Particulars CEd Other Executives/ nPr in Thousands. Managers

1 Basic Salary Rs.7,204 Rs.22,4582 Allowances Rs.6,260 Rs.15,9403 Dashain Allowance Rs.1,122 Rs.2,5324 Provident Fund Rs.720 Rs.21,711

Total number 1 38

Besides Salary and Allowances, following facilities are provided to CED and Other Executives/ Managers:

1. Water/ Electricity & Telephone Bills are reimbursed as per actual to CED & GM.

2. Vehicle with driver and fuel is provided to CED & GM. For other Executives and Managers, vehicle loan/ facilities provided as per Human Resource Policy of the Bank.

3. Bonus - as per Bonus Act. 4. Accident Insurance, Medical Insurance, Life Insurance - as

per Service Regulations and Human Resource Policy of the Bank.

5. Newspapers & Periodicals are provided to CED & GM.

Amount Paid as Remuneration, Allowances and Facilities to the Directors, the Executive Chief and Other Office-bearers

a) directors:1 Prithivi B. Pandé Chairman / Chief Executive Director2 Prajanya Rajbhandari Director3 Deepak Man Sherchan Director4 Krishna Prasad Sharma Director5 Dr. Shiva Hari Shrestha Director6 Surendra B. Singh Director7 Damodar Prasad Sharma Pandey Professional Director

Directors:1. Meeting Fee- Chairman Rs. 6,000 and Directors Rs. 5,000 per meeting.2. Mobile Phone bill reimbursement on actual basis. b) annual Salary, allowances and other Facilities provided to CEd and other Executives /Managers

Annexure A

46

Nepa

l Inv

estm

ent B

ank

Lim

ited

47


“The Agriculture sector employs the largest workforce in nepal; we have financed Farms, Tea Estates, Poultry, agricultural Commodities and Fertilizers.”

48

Nepa

l Inv

estm

ent B

ank

Lim

ited

nepal investment Bank LimitedWe are at an age of capital philanthropy, and it is fast becoming an inevitable part of every business. However, even beyond this, NIBL believes in doing good in society not just out of obligation but for the impact derived from making a difference.

Since its inception, NIBL has been investing in a variety of social causes, the returns of which ordinary Nepalis and the nation gain from. Issues that we have supported range from environmental conservation to health care to education to aiding victims of natural disasters. Some highlights from our CSR efforts are listed here.

"USaid hiv/ aidS awareness Campaign The Bank gave away Rs 20,00,000 for the HIV/ AIDS awareness cause, initiated by USAID. In order to spread awareness at the grass root level, USAID organized a short film competition titled “You’re No Exception", which invited emerging Nepali film makers to submit creative concepts for eight- to nine-minute short films. The selected nine directors produced eight short films in Nepali and regional languages. Each filmmaker had the opportunity to work with an established professional actor, who played a key part in the movies.

nepal Golf associationThe Bank provided Rs 1, 00,000 to Nepal Golf Association to support its annual golf tournament. The association is a signature name in terms of golf promotion in Nepal.

Til Ganga Eye CentreWe gave away Rs 40, 000 to Tilganga Eye Centre to aid their research on ophthalmic diseases in Nepal. Til Ganga Eye Centre is affiliated with Til Ganga Institute of Ophthalmology, which is the implementing body of the Nepal Eye Programme, a nonprofit, community based non-government organization. With an aim to act as a model for treatment research and training, independent of, but in co operation with all other eye care centres and organizations in Nepal.

Centre for Economic and Social Studies, nepalThe Bank supported the publication of Economic journal by Centre for Economic and Social Studies, Nepal with Rs 1, 00, 000. The journal was established on the initiative of Dr Govinda, Dr Pushpa Raj Kandel, Dr Bijay Kumar Poudel, Dr Masta Bahadur Garanja and Dhruba Gautam.

People with Spinal Cord injury:We supported the first National Consultation of People with Spinal Cord Injury held on August 2009 with Rs 1, 00,000. The consultation aimed to

Corporate Social Responsibility

49


draw the attention of the concerned authorities to formulate and bring necessary laws to support and avail employment opportunities to people suffering with Spinal Cord Injury.

People with Spinal Cord Injury works for the welfare of the spinal cord injury victi ms, who are yet to receive appropriate health care faciliti es in Nepal. It is acti vely involved in campaigning the cause.

Kanti pur rastriya Bipatti Sahayog Kosh/ annapurna Post Badhipidit Sahayog KoshThe Bank gave away Rs 5, 00,000 and Rs 2, 00,000 to Kanti pur Rastriya Bipatti Sahayog Kosh and Annapurna Post Badhi Pidit Sahayog Kosh respecti vely to aid with Pradhanmantri Rahat Kosh’s fund for Koshi fl ood victi ms. According to a report published by Government of Nepal, the devastati ng upsurge on August, 2008 aff ected approximately 42, 807 locals from Sunsari district, displacing nearly 40,000 households.

B.P Koirala Eye Foundati onThe Bank donated Rs 3, 00,000 to B P Koirala Eye Foundati on to support its campaign against ophthalmic diseases.

Western region development ForumWe provided Rs 1, 00,000 to Western Region Development Forum for its annual cultural programme. The Development Forum is the local administrati ve authority for the overall development of the region. The cultural programme aimed to raise awareness about the relati onship between culture and development.

Economic Students’ Society (ECOSS)We supported Economic Students’ Society with Rs 5, 000 to help conduct an interacti on programme on “Current Global Financial Crisis and its Impact on Nepali Economy.” The primary goals of the organizati on include facilitati ng dialogue between academics, professionals and stakeholders and publishing arti cles pertaining to nati onal and internati onal economic issues.

Federati on of Contractors associati on of nepalNIBL donated Rs 2, 00,000 to the Federati on of Contractors Associati on of Nepal (FCAN) to support the enhancement of contractors in Nepal. FCAN was established in 1990 with the objecti ve of cataloguing contractors and helping them develop their professional skills further. All registered contractors in Nepal are affi liated to FCAN.

nati onal Trust for nature Conservati onThe Bank supported the publicati on of Nati onal Trust for Nature Conservati on's annual calendar with Rs. 45,000.

50

Nepa

l Inv

estm

ent B

ank

Lim

ited

Media Forum For research and development nepal (MFrd)The Bank contributed Rs. 20,000 to Media Forum for Research and Development Nepal (MFRD). MFRD is a leading national level not for profit media organization involved in promoting the use of mass media in raising public awareness with regards to community development and social mobilization. Though the organization was conceptualized as early as 2003, it only came into formal being in 2006 after being officially registered as an NGO. Since then, MFRD has been working for the protection of human rights, the peace process, good governance and in the fields of institutional capacity building and consultation.

all nepal Lawn Tennis associationThe Bank donated Rs, 2, 00,000 for the annual All Nepal Lawn Tennis tournament. The event organized by All Nepal Lawn Tennis Association affiliated with the Nepal Olympic Committee, promotes tennis which is slowly catching up as a popular sport in Nepal.

hydro Solution – Power Map of nepalThe Bank gave Rs. 10,000 for the publication of Power Map of Nepal, a first of its kind all-inclusive map of Nepal's water resources, geographic and district demarcation, as well as all the power stations, all illustrated within a single frame. The map published by Hydro Solution, also embraces hydroelectric power projects, whose license has been approved by the Government of Nepal. It also indicates the major transmission lines of India in the border area.

Mahendra Bhawan/ rato BangalaThe Bank gave Rs 20, 000 to Mahendra Bhawan School, Gyaneshwor to support its overall educational programme. The school was established in 1914 with the motto 'Pure Heart' by Ms. Elizabeth Franklin. The school stands out as one of the oldest and prominent schools of Kathmandu and is actively involved in various extra-curricular activities.

Similarly, the Bank aided the year book of Rato Bangala School with Rs 7, 000. Rato Bangala School, one of the first schools in Nepal to introduce alternative teaching practices, is committed to grooming analytical and creative minds. The year book encourages creativity by providing a space where childrens' creative work is published. The school believes in building a positive environment which cultivates critically thinking individuals who want to learn and grow into co-operative, loving, confident, concerned global citizens.

Tenzing hillary Everest MarathonThe Bank supported the Tenzing Hillary Everest Marathon 2009 with Rs 1, 00,000. Tenzing Hillary Everest Marathon is an International High Altitude Adventure Sports event held at Mt. Everest Base Camp every year on May 29. The marathon takes place in the Highland Sherpa Trails of Khumbu Valley, to commemorate the historical ascent of Mount Everest by Late Tenzing Norgay Sherpa and Sir Edmund Hillary on May 29, 1953 by Tenzing Norgay Sherpa and Sir Edmund Hillary on May 29, 1953.

51


Shree vishwoshanti Pitrigyan MahaayagyaThe Bank donated Rs 25, 000 to support Shree Vishwoshanti Pitrigyan Mahayagya, a religious ritual performed to promote world peace and pay tribute to the deceased .

Mobile Expo 2008The Bank donated Rs 50, 000 to support the Mobile Expo 2008 organized by Direction Nepal Pvt Ltd. The expo was strategically designed to enable its visitors to gain fresh information and insight into the latest innovations in global mobile technologies. Likewise, the organizers also believe the expo can serve as the perfect forum for mobile service operators, authorized dealers, distributors, service centres and vendors, among others, to significantly boost their businesses through vibrant and dynamic interaction with their target segment.

aSManThe Bank aided ASMAN (Association of St. Mary's Alumnae Nepal) with Rs 25, 000. ASMAN is a non-governmental, non-profit organization devoted to the cause of aiding and supporting underprivileged Nepali women and children since 1990. They are devoted to working in the areas of health, education, cultural awareness and development. The association brings together former students of St. Mary's High School, the most prestigious girls' school in the country.

Federation of nepali Chambers of Commerce and IndustryThe Bank supported “Vision 2020: Hydropower’, a seminar organized by FNCCI with Rs 15, 000. The seminar explored the issues of water resources in Nepal, their geo-physical position and measures to extract optimum benefit from them. The seminar was attended by 200 participants, who presented thematic papers on the topics of Hydropower development.

UnhCrThis year too we supported UNHCR with Rs 6, 60,000 as a part of our ongoing support programme for educational supplies to Bhutanese refugees in Nepal. UNHCR is mandated by the United Nations to lead and co-ordinate international action to protect refugees and to resolve refugee problems worldwide. The organization has been working on securing the rights and well-being of Bhutanese refugees in Nepal for two decades now.

rotary Club, dillibazarThe Bank supported the various social projects of Rotary Club Dillibazar with Rs 20, 000. The club, established in 1998 under the initiative of Mr. Lachhe Bahadur KC, is a pioneer when it comes to social service projects at the grass root level. It is actively involved in conducting free health camps, dental camps, and career and literacy programmes among other projects.

Alliance Francaise The Bank supported the educational and cultural projects of Alliance Francaise with funds worth Rs.1, 27, 000. Alliance Francaise in Kathmandu organizes special French courses for enthusiastic students and is a notable name in terms of organising cultural events.

“Healthcare is one of the most needed sectors in nepal, we have been financing hospitals, Clinics and Pharmaceuticals for the last 24 years, creating a healthier nation.”

AUDITOR’S REPORTTO THE SHAREHOLDERS OF NEPAL INVESTMENT BANK LIMITED

1. We have audited the accompanying Balance Sheet of Nepal Investment Bank Limited as of Ashad 31, 2066 (corresponding to 15 July, 2009), the related Profit and Loss Account and the Cash Flow Statement for the year then ended. These financial statements are the responsibility of the management of the Bank. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with Nepal Standards on Auditing. These Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As per the requirement of the Company Act, 2063 and Bank and Financial Institution Act, 2063, we also report that:

i. We have obtained all the information and explanations, which, to the best of our knowledge and belief were necessary for the purpose of our audit;

ii. In our opinion, proper books of accounts as required by law have been kept by the Bank so far as appears from our examination of such books;

iii. In our opinion, the returns received from branches of the Bank were adequate for the purpose of the audit;

iv. In our opinion, the Balance Sheet, Profit & Loss account and Cash Flow Statement dealt with in this report have been prepared in the format prescribed by Nepal Rastra bank and are in agreement with the books of accounts maintained by the Bank;

v. In our opinion, so far as appeared from our examination of the books, adequate provision for possible loan losses, adequate capital fund and risk bearing fund have been made in accordance with the directives of Nepal Rastra Bank;

vi. In our opinion, so far as appeared from our examination of the books, the business of the Bank has been conducted satisfactorily;

vii. To the best of our information and according to explanations provided to us and from our examination of the books of account of the Bank necessary for the purpose of our audit, we have not come across cases where the Board of Directors or any employees of the Bank have acted contrary to the provisions of law, or committed any misappropriation or caused loss or damage to the Bank, violated any directives of Nepal Rastra Bank or acted in a manner to jeopardize the interest and security of the Bank, its depositors and investors.

4. In our opinion, the financial statements give a true and fair view of the financial position of the Bank as of Ashad 31 2066, and of the results of its operations and its cash flows for the year then ended in accordance with Nepal Accounting Standard and comply with the provisions of the Company Act 2063, the Bank and Financial Institution Act 2063, and the directives issued by Nepal Rastra Bank.

Prabhu R. BhandaryManaging Partnerfor Joshi & BhandaryChartered Accountants

Date: August 25, 2009Place: Kathmandu

Chartered Accountants GP.o. Box: 3423

Kosi Compound, Dillibazar

Kathmandu, Nepal

Tel: 977-1-4419364

Tel: 977-1-4423550

Fax: 977-1-4413038

Email: [email protected]

Web: jb.com.np

N E P A L I N V E S T M E N T B A N K L I M I T E D

54

Nepa

l Inv

estm

ent B

ank

Lim

ited

Balance Sheetas at 31 Ashad 2066 (15 July 2009)

Contingent Liabilities Schedule 17Directors' Declaration Schedule 29Statement of Capital Fund Schedule 30 (A1)Statement of Risk Weighted Assets Schedule 30 (B) (C) (D) (E)Principal Indicators Schedule 31Principal Accounting Policies Schedule 32Notes to Accounts Schedule 33Details of Loan Against Promoters Shares Schedule 34Fourth Quarterly Unaudited Results Schedule 35Variance Between Audited & Unaudited results Schedule 36

Schedules 1 to 17 form integral parts of the Balance Sheet.

Auditor Prabhu Ram Bhandary, FCA Managing Partner For, Joshi & Bhandary Chartered Accountants

As per our report of even date

Prithivi Bahadur Pandé Chairman & Chief Executive Director


Dr. Shiva Hari Shrestha Director

Sachin Tibrewal Head - Accounts & Budgeting

Rabin Sijapati Chief Operating Officer

Surendra Bahadur Singh Director

Prajanya Rajbhandari Director

Deepak Man Sherchan Director

Damodar Prasad Sharma Pandey Director

Jyoti P. Pandey General Manager

Binod Upadhaya Head- Internal Audit & Compliance

Capital & Liabilities Schedule Current Year Rs Previous Year Rs

1. Share Capital 1 2,407,068,900 1,203,915,400 2. Reserve & Fund 2 1,500,770,808 1,482,870,648 3. Debentures and Bonds 3 1,050,000,000 1,050,000,000 4. Borrowings 4 38,800,000 - 5. Deposits Liabilities 5 46,698,100,065 34,451,726,191 6. Bills Payable 6 82,338,018 78,838,643 7. Proposed and Dividend Payable 485,453,507 93,468,245 8. Income Tax Liabilities 38,296,736 24,082,669 9. Other Liabilities 7 709,975,092 488,404,288

Total Liabilities 53,010,803,126 38,873,306,084

Assets Schedule Current Year Rs. Previous Year Rs.

1. Cash Balance 8 1,833,462,494 1,464,482,719 2. Balance with NRB 9 4,411,133,083 1,820,006,035 3. Balance with Banks/ Financial Institution 10 1,673,408,313 470,452,814 4. Money at Call and Short Notice 11 - - 5. Investments 12 7,399,811,700 6,874,023,625 6. Loan, Advances & Bills Purchased 13 36,241,206,558 26,996,652,258 7. Fixed Assets 14 1,060,752,482 970,091,759 8. Non-Banking Assets 15 375,000 750,000 9. Other Assets 16 390,653,496 276,846,874

Total Assets 53,010,803,126 38,873,306,084


55


Profit and Loss Accountfor the period July 16, 2008 to July 15, 2009 (Shrawan 1 2065 to Ashad 31 2066)














Schedules 18 to 28 form integral part of this Profit & Loss Account.

Particulars Schedule Current Year Rs Previous Year Rs

1. Interest Income 18 3,267,941,142 2,194,275,7222. Interest Expenses 19 (1,686,973,130) (992,158,398)Net Interest Income 1,580,968,012 1,202,117,3243. Commission and Discount 20 262,791,664 215,292,1934. Other Operating Income 21 87,574,794 66,376,6595. Exchange Profit 22 185,327,111 165,838,748

Total Operating Income 2,116,661,581 1,649,624,924

6. Staff Expenses 23 (225,721,490) (187,149,985)7. Other Operating Expenses 24 (413,883,755) (313,153,795)8. Exchange Loss 22 - -

Operating Profit Before Provision for Possible Loss 1,477,056,336 1,149,321,1449. Provision for Possible Losses 25 (166,201,383) (135,989,237)

Operating Profit 1,310,854,953 1,013,331,90710. Non-operating Income/ Loss 26 2,953,012 7,047,73511. Loss Provision Written Back 27 114,653,009 101,576,771

Profit from Regular Operations 1,428,460,974 1,121,956,41312. Profit/ Loss from extra-ordinary activities 28 - -

Net Profit after considering all activities 1,428,460,974 1,121,956,41313. Provision for Staff Bonus (129,860,089) (101,996,038)14. Income Tax Provision - Current Year (389,580,266) (321,287,519) - Upto Previous Year 7,477,673 - - Deferred Tax Income / (Expense) (15,879,221) (1,941,340)

Net Profit/ Loss 900,619,072 696,731,516


56

Nepa

l Inv

estm

ent B

ank

Lim

ited

Profit & Loss Appropriation Account for the period July 16, 2008 to July 15, 2009

Particulars Current Year Rs. Previous Year Rs.

Income

1. Accumulated Profit up to last year 67,478,694 121,354,299

2. This year's profit 900,619,072 696,731,516

3. Exchange Fluctuation Reserve - - 4. Transfer from Capital Adjustment Fund - -

Total 968,097,766 818,085,815

Expenses 1. Accumulated loss up to last year - - 2. This year's Loss - - 3. General Reserve Fund (180,123,815) (139,800,000)4. Contingent Reserve - - 5. Institutional Development Fund - - 6. Dividend Equilization Fund - - 7. Employees Related Funds - - 8. Proposed Dividend (481,413,780) (90,293,655)9. Proposed Issue of Bonus Shares - (401,305,133)10. Special Reserve Fund - - 11. Exchange Fluctuation Reserve - (1,945,000)12. Capital Adjustment Fund - - 13.Debenture Redemption Fund (150,002,000) (117,263,333)

Total (811,539,595) (750,607,121)

14. Accumulated Profit (Loss) 156,558,171 67,478,694


57


Stat

emen

t of C

hang

es in

Equ

ity

F.Y.

206

5/66

(200

8/09

)

Exch

ange

Deb

entu

re

A

ccum

ulat

ed

Gen

eral

Res

erve

Ca

pita

l Sh

are

Fluc

tuati

on

Oth

er

Rede

mpti

on

Parti

cula

rs

Shar

e Ca

pita

l Pr

ofit/

(Los

s)

Re

serv

e Pr

emiu

m

Fund

Re

serv

es

Fund

D

efer

red

Tax

To

tal

Ope

ning

Bal

ance

(as

at 1

6 Ju

ly 2

008)

1

,203

,915

,400

6

7,47

8,69

4

655

,856

,397

-

-

2

7,83

9,64

0

31,

500

3

30,3

59,2

85

2

,285

,480

,916

Ch

ange

s in

acc

ounti

ng p

olic

y -

-

-

-

-

-

-

-

-

Rest

ated

Bal

ance

-

-

-

-

-

-

-

-

Surp

lus

on R

eval

uatio

n

-

-

-

-

-

-

-

-

of

pro

perti

esD

efici

t on

Reva

luati

on o

f Inv

estm

ent

-

-

-

-

-

-

-

-

Cu

rren

cy tr

ansl

ation

diff

eren

ces

-

-

-

-

-

-

-

-

" N

et G

ains

& L

osse

s no

t re

cogn

ised

in th

e in

com

e st

atem

ent "

-

-

-

-

-

-

-

-

Net

pro

fit fo

r th

e pe

riod

-

9

00,6

19,0

72

-

-

-

-

-

-

9

00,6

19,0

72

Tran

sfer

to G

ener

al R

eser

ve

-

(180

,123

,815

) 1

80,1

23,8

15

-

-

-

-

-

-

D

ecla

ratio

n of

Div

iden

d (p

ropo

sed)

-

(4

81,4

13,7

80)

-

-

-

-

-

-

(4

81,4

13,7

80)

Issu

e of

Sha

re C

apita

l 1

,203

,153

,500

-

-

-

-

-

-

-

1,2

03,1

53,5

00

Defi

cit o

n re

valu

ation

of c

urre

ncie

s

-

-

-

-

-

-

-

-

-

Su

rplu

s on

Rev

alua

tion

of In

vest

men

t -

-

-

-

-

-

-

-

-

Tran

sfer

to E

xcha

nge

Fluc

tuati

on F

und

-

-

-

-

-

-

-

-

-

Capi

tal A

djus

tmen

t Fun

d

-

-

-

-

-

-

-

-

-

D

eben

ture

Red

empti

on F

und

-

(1

50,0

02,0

00)

-

-

-

-

-

150

,002

,000

-

Def

erre

d Ta

x

-

(17,

820,

561)

-

-

-

-

-

-

1

7,82

0,56

1

-

Clos

ing

Bala

nce

( as

at Ju

ly 1

5 20

09)

2,4

07,0

68,9

00

138

,737

,610

8

35,9

80,2

12

-

-

27,

839,

640

3

1,50

0

480

,361

,285

1

7,82

0,56

1

3,9

07,8

39,7

08


58

Nepa

l Inv

estm

ent B

ank

Lim

ited

Cash Flow Statement For the period July 16, 2008 to July 15,2009

Previous Year Rs. Particulars Current Year Rs.

(A) Cash Flow from Operating Activities 2,641,783,322 1. Cash Receipts 3,803,634,711 2,194,275,722 1.1 Interest Income 3,267,941,142 215,292,193 1.2 Commission and Discount Income 262,791,664 165,838,748 1.3 Exchange Gain 185,327,111 - 1.4 Recovery of Loan Written Off - 66,376,659 1.5 Other Income 87,574,794 (1,707,405,447) 2. Cash Payments (2,589,446,318) (992,158,398) 2.1 Interest Expenses (1,686,973,130) (187,149,985) 2.2 Staff Expenses (225,721,490) (230,597,064) 2.3 Office Overhead Expenses (301,385,498) (297,500,000) 2.4 Income Tax Paid (375,366,201) - 2.5 Other Expenses - 934,377,875 Cash Flow Before Changes in Working Capital 1,214,188,393 (9,775,296,207) Increase/(Decrease) of Current Assets (9,885,946,540) 362,970,000 1. (Increase)/Decrease in Money at Call and Short Notice - (349,051,138) 2. (Increase)/Decrease in Short-term Investment (519,363,075) (9,760,204,833) 3. (Increase)/Decrease in Loan and Bills Purchase (9,297,852,674) (29,010,236) 4. (Increase)/Decrease in Other Assets (68,730,791) 10,005,780,260 Increase/(Decrease) of Current Liabilities 12,273,134,884 9,962,870,496 1.Increase/(Decrease) in Deposits 12,246,373,874 - 2.Increase/(Decrease) in Certificate of deposits - - 3.Increase/(Decrease) in Short-Term Borrowings 38,800,000 42,909,764 4.Increase/(Decrease) in Other Liabilities (12,038,990) (303,659,210) (B) Cash Flow from Investing Activities (240,162,782) (24,692,500) 1.(Increase)/Decrease in Long-term Investment (4,325,000) (279,799,210) 2.(Increase)/Decrease in Fixed Assets (including Software)/ NBA (237,443,757) 3.Interest from Long-term Investment 832,500 4.Dividend Income 1,605,975 452,224,650 (C) Cash Flow from Financial Activities 801,848,367 250,000,000 1.Increase/(Decrease) in Long-term Borrowings ( Bond, Debentures etc.) - 202,224,650 2. Increase/(Decrease) in Share Capital 801,848,367 - 3.Increase/(Decrease) in Other Liabilities - - 4.Increase/(Decrease) in Refinance/facilities received from NRB - - (D) Income/Loss from change in exchange rate in cash and bank balances - 1,313,427,368 (E) Current Year's Cash Flow from All Activities 4,163,062,322 2,441,514,200 (F) Opening Balance of Cash and Bank Balances 3,754,941,568 3,754,941,568 (G) Closing Balance of Cash and Bank Balances 7,918,003,890















59


SHARE CAPITAL & OWNERSHIP( As at July 15, 2009)


1. Share Capital 1.1 Authorized Capital 2,000,000,000 A) 40,000,000 Ordinary Shares of Rs. 100 each 4,000,000,000 1.2 Issued Capital 1,203,915,400 A) 24,090,977 Ordinary Shares of Rs. 100 each 2,409,097,700 (of which 13,562,684 Right Share & 9,928,293 bonus shares) 1.3 Paid Up Capital 1,203,915,400 A) 24,070,689 Ordinary Shares of Rs. 100 each 2,407,068,900 (of which 13,542,396 Right Share & 9,928,293 bonus shares)

Schedule 1

SHARE OWNERSHIP( As at July 15, 2009)

Share Capital % Particulars % Share Capital

963,132,300 80% A. Promoters 80% 1,927,278,300 1.1 Nepal Government 1.2 Foreign Institutions 180,587,300 15% 1.3 "A" Class Liscensed Institutions 15% 361,364,600 180,587,300 15% 1.4 Insurance Company 15% 361,364,600 601,957,700 50% 1.5 Organized Institutions 50% 1,204,549,100 - 0% 1.6 Individuals 0% - - 0% 1.7 Others 0% - 240,783,100 20% B. General Public 20% 479,790,600 - -

1,203,915,400 100% Total 100% 2,407,068,900


60

Nepa

l Inv

estm

ent B

ank

Lim

ited

RESERVE FUNDS( As at July 15, 2009)


655,856,397 1. General Reserve Fund 835,980,212 401,305,133 2. Proposed Bonus Shares - 3. Capital Reserve Fund - 4. Capital Redemption Reserve - - 5. Capital Adjustment Fund - 330,390,785 6. Other Reserve Fund 480,392,785 - a. Contingent Reserve - - b. Institution Development Fund - - c. Dividend Equalization Fund - 31,500 d. Special Reserve Fund 31,500 - e. Assets Revaluation Reserve - 330,359,285 f. Debenture Redemption Fund 480,361,285 67,478,693 7. Accumulated Profit/ Loss 156,558,171 27,839,640 8. Exchange Fluctuation Reserve 27,839,640 1,482,870,648 Total 1,500,770,808

Schedule 2

Organized Institution (Group A) % Amount (Rs. in '000)

Maha Laxmi Investment P. Ltd. 8.83 212,678Chhaya Investment P.Ltd 8.2 197,622K.U.P. Investment P. Ltd. 7.81 188,209Sophia Investment P. Ltd 7.42 178,800Annapurna Investment P. Ltd 1.56 37,643Kamala Investment P. Ltd. 1.56 37,643Noble Investment P.Ltd 1.56 37,643Prestine Investment P. Ltd. 1.56 37,643Surya Infosys P. Ltd. 1.56 37,643Star Holding P. Ltd. 1.17 28,231 P. Shanghai Investment P. Ltd 0.78 18,821Apollo Investment 0.78 18,821Lotus Investments 0.78 18,821Pancha Kanya Investment Co 0.78 18,821R. Shangai Investment P. Ltd. 0.78 18,821Singhe Carpets P. Ltd. 0.78 18,821Shrestha Brothers Investment P. Ltd. 0.78 18,821Mercantile Investments P. Ltd. 0.63 15,058Shakya Investments 0.63 15,058S. Shakya Investment 0.55 13,175S.R. Investment P. Ltd. 0.55 13,175

"A" Class Liscensed Institution (Group B) - Rastriya Banijya Bank 15 361,365

Insurance Company (Group C)- Rastriya Beema Sansthan 15 361,365

Details of Shareholders holding 0.5 percent or above shares are mentioned below:


61


DEBENTURES AND BONDS( As at July 15, 2009)

BORROWINGS( As at July 15, 2009)


300,000,000 7.5 % Debentures of Rs. 1000 each issued on 24.11.2003 (2060.08.08) and 300,000,000 maturing on 24.11.2010 (2067.08.07) Outstanding Balance of Redemption Reserve Rs. 257,142,429 250,000,000 6 % Debentures of Rs. 1000 each issued on 26.06.2006 (2063.03.12) 250,000,000 and maturing on 25.06.2013(2070.03.11) Outstanding Balance of Redemption Reserve Rs.110,121,857 250,000,000 6.25 % Debentures of Rs. 1000 each issued on 26.06.2007 (2064.03.12) and 250,000,000 maturing on 25.06.2014(2071.03.11) Outstanding Balance of Redemption Reserve Rs. 74,406,571 250,000,000 8 % Debentures of Rs. 1000 each issued on 09.07.2008 (2065.03.25) and maturing on 08.07.2015 (2072.03.24) 250,000,000 Outstanding Balance of Redemption Reserve Rs. 38,690,428

1,050,000,000 Total 1,050,000,000


- A. Local - 1. Nepal Government - - 2. Nepal Rastra Bank - 3. Repo Obligation - 4. Inter Bank and Financial Institutions 38,800,000 5. Other Financial Institutions - 6. Others - Total 38,800,000 - B. Foreign - 1. Banks 2. Others - Total - Total (A+B) 38,800,000

Schedule 4

Schedule 3


62

Nepa

l Inv

estm

ent B

ank

Lim

ited

DEPOSITS( As at July 15, 2009)


1. Non-Interest bearing accounts 3,138,669,428 A. Current Deposits 3,756,570,350 2,549,721,664 1. Local Currency 2,952,365,333 221,437,320 1.1 Nepal Government 391,996,113 102,141,210 1.2 "A" Class Licensed Institutions 82,099,111 363,682,270 1.3 Other Licensed Institutions 245,424,330 1,638,809,096 1.4 Other Organized Institutions 1,894,533,204 196,594,867 1.5 Individuals 223,010,104 27,056,901 1.6 Others 115,302,471 588,947,764 2. Foreign Currency 804,205,017 49,613 2.1 Nepal Government - 2,864,706 2.2 "A" Class Licensed Institutions - 144,150,246 2.3 Other Licensed Institutions 79,212,781 400,614,486 2.4 Other Organized Institutions 663,861,746 35,741,351 2.5 Individuals 54,971,786 5,527,362 2.6 Others 6,158,704 607,062,707 B. Margin Deposits 727,990,479 - 1. Employess Guarantee - 197,868,529 2. Guarantee Margin 237,599,202 409,194,178 3. Letters of Credit Margin 490,391,277 - C. Others - - 1. Local Currency - - 1.1 Financial Institutions - - 1.2 Other Organized Institutions - - 1.3 Individuals - - 2. Foreign Currency - - 2.1 Financial Institutions - - 2.2 Other Organized Institutions - - 2.3 Individuals -

3,745,732,135 Total Non-Interest Bearing Accounts 4,484,560,829

Schedule 5


63


DEPOSITS (contd...)( As at July 15, 2009)


2. Interest bearing accounts 13,688,766,549 A. Savings Deposits 17,066,252,467 13,060,106,606 1. Local Currency 15,949,380,505 1,489,154,480 1.1 Organized Institutions 738,863,616 11,538,536,206 1.2 Individuals 14,729,221,590 32,415,920 1.3 Others 481,295,299 628,659,943 2. Foreign Currency 1,116,871,962 354,823,088 2.1 Organized Institutions 81,677,754 273,385,867 2.2 Individuals 1,026,322,913 450,988 2.3 Others 8,871,295 7,944,232,558 B. Fixed Deposits 11,633,380,218 5,789,307,926 1. Local Currency 8,144,902,245 4,552,458,360 1.1 Organized Institutions 6,229,532,225 1,235,699,566 1.2 Individuals 1,747,561,040 1,150,000 1.3 Others 167,808,980 2,154,924,632 2. Foreign Currency 3,488,477,973 2,099,969,600 2.1 Organized Institutions 3,486,197,755 54,955,032 2.2 Individuals 2,280,218 - 2.3 Others - 9,072,994,949 C. Call Deposit 13,513,906,551 8,714,204,410 1. Local Currency 13,016,982,339 50,964,624 1.1 "A" Class Licensed Institutions 836,913,734 3,880,022,114 1.2 Other Licensed Institutions 3,409,196,988 4,190,638,066 1.3 Other Organized Institutions 7,516,567,599 588,286,666 1.4 Individual 1,080,216,606 4,292,940 1.5 Others 174,087,412 358,790,539 2. Foreign Currency 496,924,212 3,633 2.1 "A" Class Licensed Institutions - 7,023,075 2.2 Other Licensed Institutions - 315,069,033 2.3 Other Organized Institutions 486,030,368 33,249,798 2.4 Individual 10,061 3,445,000 2.5 Others 10,883,783 - D. Certificate of Deposit - - 2.1 Organized Institutions - - 2.2 Individuals - - 2.3 Others -

30,705,994,056 Total Interest Bearing Accounts 42,213,539,236

34,451,726,191 Total Deposit 46,698,100,065

Schedule 5


64

Nepa

l Inv

estm

ent B

ank

Lim

ited

BILLS PAYABLE( As at July 15, 2009)


39,871,051 1. Local Currency 47,250,276 38,967,592 2. Foreign Currency 35,087,742 78,838,643 Total 82,338,018

Schedule 6

OTHER LIABILITIES( As at July 15, 2009)


12,805,893 1. Pension/ Gratuity Fund 12,352,678 - 2. Employees Provident Fund - - 3. Employees Welfare Fund - 101,996,038 4. Provision for Staff Bonus 129,860,089 47,572,648 5. Interest Payable on Deposits 47,521,866 27,739,118 6. Interest Payable on Borrowings 38,126,172 82,660,617 7. Unearned Discount & Commission 85,130,289 46,051,203 8. Sundry Creditors 129,467,451 - 9. Branch Adjustment Account - 250,000 10. Statutory Auditor's Fee 300,000 169,328,771 11. Others 267,216,547 - - 25,970,232 11.1 Matured Time Deposit 37,529,465 1,941,340 11.2 Deferred Tax Liabilities 17,820,561 141,417,199 11.3 Others 211,866,521 488,404,288 Total 709,975,092

Schedule 7

CASH BALANCE( As at July 15, 2009)


1,434,574,550 1. Local Currency (including coin) 1,763,936,871 29,908,169 2. Foreign Currency 69,525,623 1,464,482,719 Total 1,833,462,494

Schedule 8


65


MONEY AT CALL AND SHORT NOTICE ( As at July 15, 2009)

BALANCE WITH NEPAL RASTRA BANK ( As at July 15, 2009)

BALANCE WITH BANKS/FINANCIAL INSTITUTIONS( As at July 15, 2009)


- 1. Local Currency - - 2. Foreign Currency - - Total -

Previous Year Rs. Particulars Current YearRs. Local Currency Indian Rs. Conv. F.C. Total Grand Total

1,820,006,035 1. Nepal Rastra Bank 4,302,970,881 - 108,162,202 108,162,202 4,411,133,083 1,820,006,035 a. Current Account 4,302,970,881 - 108,162,202 108,162,202 4,411,133,083 - b. Other Account -

Previous Year Rs. Particulars Current YearRs. Local Currency Indian Rs. Conv. F.C. Total Grand Total

70,818,811 1. Local Licensed Institutions 201,520,699 - 290,781 290,781 201,811,480 70,818,811 a. Current Account 201,520,699 - 290,781 290,781 201,811,480 - b. Other Account - 399,634,003 2. Foreign Banks - 212,221,422 1,259,375,411 1,471,596,833 1,471,596,833 399,634,003 a. Current Account - 212,221,422 1,259,375,411 1,471,596,833 1,471,596,833 - b. Other Account - 470,452,814 Total 201,520,699 212,221,422 1,259,666,192 1,471,887,614 1,673,408,313

Schedule 9

Schedule 10

Schedule 11

Foreign Currency in Rs.

Foreign Currency in Rs.

Note : Total Balance as per the confirmations received from respective Banks (including Nepal Rastra Bank ) Rs.5,084,277,848.


66

Nepa

l Inv

estm

ent B

ank

Lim

ited

INVESTMENT IN SHARES DEBENTURES AND BONDS( As at July 15, 2009)

Previous Year Rs. Particulars Purchase Price Market Price Provision Rs.

1. Investment in Shares 3,000,000 1.1 Sudur Paschimanchal Grameen Bikas Bank 3,000,000 NA NA 30,000 Ordinary Shares of Rs.100 paid up 1,500,000 1.2 Paschimanchal Grameen Bikas Bank 15,000 1,500,000 NA NA Ordinary Shares of Rs.100 paid up 3,000,000 1.3 Purbanchal Grameen Bikas Bank 30,000 Ordinary 3,000,000 NA NA Shares of Rs.100 paid up 33,810,000 1.4 Rural Micro Finance Development Centre Ltd. 33,810,000 NA NA 338,100 Ordinary Shares of Rs.100 paid up 2,400,000 1.5 Swabalamban Bikas Bank 66,000 Ordinary 6,600,000 581 NA Shares of Rs.100 paid up 1,235,500 1.6 Credit Information Centre Ltd. 12,355 Ordinary 1,235,500 NA NA Shares of Rs.100 paid up 15,000,000 1.7 Taragaon Regency Hotel Ltd. Ordinary 150,000 15,000,000 78 3,300,000 Shares of Rs.100 paid up 1.8 Nepal Clearing House Ltd. Ordinary 25,000 125,000 Shares of Rs.100, Rs. 5 paid up - 2. Investments in Debentures and Bonds - - - 59,945,500 Total Investment 64,270,500 - 3. Provision for Loss 3.1 Up to Previous year 5,400,000 5,400,000 3.2 Adjustments this year (2,100,000) 5,400,000 Total Provision 3,300,000 - - 54,545,500 Net Investment 60,970,500 -

Schedule 12 (A)

Current Year Rs.

Note: Following Company has not declared and distributed dividend for the last three years: - Sudur Paschimanchal Grameen Bikas Bank - Purbanchal Grameen Bikas Bank - Paschimanchal Grameen Bikas Bank

INVESTMENTS ( As at July 15, 2009)

Previous Year Rs. Particulars Current YearRs. Trading Others

3,155,000,000 1. Nepal Government Treasury Bills - 2,531,300,000 2,531,300,000 - 2. Nepal Government Savings Bond - - - 3. Nepal Government Other Securities - - - - 4. Nepal Rastra Bank Bonds - - - - 5. Foreign Securities - - - 6. Local Licensed Institutions - - 3,664,478,125 7. Foreign Banks - 4,807,541,200 4,807,541,200 59,945,500 8. Corporate Shares - 64,270,500 64,270,500 - 9. Corporate Bonds and Debentures - - - - 10. Other Investment - - - 6,879,423,625 Total Investment - 7,403,111,700 7,403,111,700 5,400,000 Provision - 3,300,000 3,300,000 6,874,023,625 Net Investment - 7,399,811,700 7,399,811,700

Schedule 12

Purpose


67


CLA

SSIF

ICAT

ION

OF

LOA

N A

ND

BIL

LS P

URC

HA

SE A

ND

PRO

VIS

ION

ING

( A

s at

Ju

ly 1

5, 2

00

9)

Sche

dule

13

Insu

red

U

n-in

sure

d

In

sure

d

Un-

insu

red

27,

219,

833,

753

1.

Perf

orm

ing

Loan

-

1,06

8,91

4,30

7 34

,882

,636

,566

16

1,01

7,42

2 36

,112

,568

,295

-

- 34

5,33

5,73

0 15

5,34

5,99

0 50

0,68

1,72

0 36

,613

,250

,015

2

7,17

6,97

3,28

4

1.1

Pass

Loa

n -

1,06

8,91

4,30

7 34

,845

,644

,188

16

1,01

7,42

2 36

,075

,575

,917

-

- 34

5,33

5,73

0 15

5,34

5,99

0 50

0,68

1,72

0 36

,576

,257

,637

42,8

60,4

69

1.

2 Re

stru

ctur

ed

-

36,9

92,3

78

-

36,9

92,3

78

- -

36

,992

,378

309,

470,

983

2.

Non

Per

form

ing

Loan

-

2,82

0,57

6 21

1,08

6,81

8 -

213,

907,

394

-

- -

- -

213,

907,

394

61

,737

,243

2.1

Subs

tand

ard

-

- 10

,765

,503

-

10,7

65,5

03

- -

- -

- 10

,765

,503

20,7

24,4

97

2.

2 D

oubtf

ul

- -

11,4

85,8

60

- 11

,485

,860

-

- -

- -

11,4

85,8

60

22

7,00

9,24

3

2.3

Loss

-

2,82

0,57

6 18

8,83

5,45

5

- 19

1,65

6,03

0

- -

- -

- 19

1,65

6,03

0 2

7,52

9,30

4,73

6 (A

) Tot

al L

oan

- 1,

071,

734,

883

35,0

93,7

23,3

84

161,

017,

422

36

,326

,475

,689

-

- 34

5,33

5,73

0 15

5,34

5,99

0 50

0,68

1,72

0 36

,827

,157

,409

3. L

oan

Loss

Pro

visi

on

27

4,44

9,42

8

3.1

Pass

-

10,6

89,1

43

363,

892,

841

1,61

0,17

4 3

76,1

92,1

58

- -

3,45

3,35

8 1,

553,

460

5,00

6,81

8 38

1,19

8,97

6

5,35

7,55

9

3.2

Rest

ruct

ured

-

4,

661,

540

- 4,

661,

540

-

- -

4,66

1,54

0

15,4

34,3

11

3.

3 Su

bsta

ndar

d -

- 2,

691,

376

- 2,

691,

376

-

- -

- -

2,69

1,37

6

10,4

01,9

37

3.

4 D

oubtf

ul

- -

5,74

2,93

0 -

5,74

2,93

0

- -

- -

- 5,

742,

930

22

7,00

9,24

3

3.5

Loss

-

2,82

0,57

6 18

8,83

5,45

4 -

191,

656,

030

-

- -

- -

191,

656,

030

53

2,65

2,47

8 (B

) Tot

al L

oan

Prov

isio

n -

13,5

09,7

19

565,

824,

141

1,61

0,17

4 58

0,94

4,03

4

- -

3,45

3,35

8 1,

553,

460

5,00

6,81

8 58

5,95

0,85

2

4.

Pr

ovis

ioni

ng u

p

to

Pre

viou

s Ye

ar

173,

495,

470

4.

1 Pa

ss

- 6,

263,

335

264,

234,

005

200,

821

270,

698,

161

- -

2,76

3,30

6 98

7,96

2 3,

751,

268

274,

449,

429

4,

701,

842

4.

2 Re

stru

ctur

ed

- -

5,35

7,55

9

- 5,

357,

559

-

- -

5,35

7,55

9

24,5

72,6

50

4.

3 Su

bsta

ndar

d -

- 13

,265

,780

-

13,2

65,7

80

2,16

8,53

0 -

2,16

8,53

0 15

,434

,310

43,0

84,6

01

4.

4 D

oubtf

ul

- 68

6,09

3 9,

715,

844

- 10

,401

,937

-

- -

- -

10,4

01,9

37

23

6,81

7,95

1

4.5

Loss

-

2,39

5,96

3 22

4,61

3,28

0 -

227,

009,

243

-

- -

- -

227,

009,

243

48

2,67

2,51

4 (C

). T

otal

Pre

viou

s -

9,34

5,39

1 51

7,18

6,46

8 20

0,82

1 52

6,73

2,68

0

- -

4,93

1,83

6 98

7,96

2 5,

919,

798

532,

652,

478

Ye

ar P

rovi

sion

80,2

34,2

71

(D).

Wri

tten

Bac

k

112,

553,

009

Pr

ovis

ion

13

0,21

4,23

7 (E

) Th

is Y

ear's

-

-

-

16

5,85

1,38

3

Add

ition

Pro

visi

on

49,9

79,9

66

Chan

ges

in th

is Y

ear

- 4

,164

,328

48

,637

,673

1,

409,

354

54,2

11,3

55

- -

(1,4

78,4

79)

565,

498

(912

,981

) 53

,298

,374

26,9

96,6

52,2

58

Net

Loa

n (A

-B)

- 1,

058,

225,

164

34,5

27,8

99,2

43

159,

407,

248

35,7

45,5

31,6

55

- -

341,

882,

373

153,

792,

530

495,

674,

903

36,2

41,2

06,5

58

Prio

rity

Dom

esti

cD

omes

tic

A

dvan

ces

Pre

viou

s ye

ar R

s.

cur

rent

yea

r Rs.

P

arti

cula

rs

B

ills

Purc

hase

d/ D

isco

unte

d

Oth

er F

orei

gn F

orei

gnTo

tal

Tota

l O

ther

Prio

rity


68

Nepa

l Inv

estm

ent B

ank

Lim

ited

SECURITIES AGAINST LOAN, ADVANCES AND BILLS PURCHASED( As at July 15, 2009)


27,529,304,736 (A) Secured 36,827,157,409 24,533,059,089 1. Collateral of Movable/Immovable Assets 33,045,926,034 - 2. Local Licensed Institutions Guarantee - - 3. Government Guarantee - - 4. Internationally rated Foreign Banks Guarantee - - 5. Export Documents - 275,965,744 6. Fixed Deposit Receipts 149,838,588 (a) Own FDR 148,758,006 (a) FDR of other Licensed Institutions 1,080,582 10,805,202 7. Government Bonds 13,150,315 - 8. Counter Guarantee - 16,415,689 9. Personal Guarantee 8,641,047 2,693,059,012 10. Other Securities 3,609,601,425 - (B) Unsecured - 27,529,304,736 Total 36,827,157,409

Schedule 13 (A)

FIXED ASSETS( As at July 15, 2009) Schedule 14

Previous Year Particulars Assets Current Year Building Vehicles Machinery Office Others Total Equipment

- 1. At Cost - 610,726,903 A. Previous Year's Balance 173,934,633 137,723,272 - 130,855,686 358,199,877 800,713,468 204,806,035 B. Addition during the Year (+) 12,465,430 26,228,065 - 38,876,908 114,589,505 192,159,908 - C. Revaluation / Written - - - - - - back during the Year (+) (14,819,470) D. This Year Sold (-) - (9,271,300) - - (4,087,767) (13,359,067) - E. This Year Written off (-) - - 800,713,468 TOTAL GROSS VALUE ( A+B+C-D-E ) 186,400,063 154,680,037 - 169,732,594 468,701,615 979,514,309 2. DEPRECIATION 182,794,633 A. Previous Year's Balance 11,397,527 33,230,813 - 39,221,234 160,261,465 244,111,039 70,301,655 B. Depreciation during the Year (+) 3,492,026 19,935,872 - 12,987,326 60,169,040 96,584,264 (8,985,249) C. Total Depreciation on Sold / - (4,356,437) - - (4,087,709) (8,444,146) - Written Off Assets (-) - D. Depreciation on Revaluation - - - - - - / Written back 244,111,039 TOTAL DEPRECIATION ( A+B-C-D) 14,889,553 48,810,248 - 52,208,560 216,342,796 332,251,157 556,602,429 3. REMAINING BOOK VALUE ( 1-2 ) 171,510,510 105,869,789 - 117,524,034 252,358,819 647,263,152 413,489,330 4. Land 413,489,330 5. Capital Construction - 6. LEASEHOLD ASSETS - 970,091,759 TOTAL BOOK VALUE 171,510,510 105,869,789 - 117,524,034 252,358,819 1,060,752,482 ( 3+4+5+6)


69


Non-Banking Assets( As at July 15, 2009)

Total Loss Net In percentage In amount Amount Provision

1,500,000 750,000 750,000 1.Binayak Feed 18/01/2007 1,500,000 75% 1,125,000 375,000 Industries, Bhaktapur 1,500,000 750,000 750,000 Grand Total 1,500,000 75% 1,125,000 375,000

Schedule 15

Name and Address of Borrower or Party

Previous Year Rs. Date of acquisition of Non Banking Assets

Total Amount of Non-Banking Assets

Net Non Banking Assets Rs.

OTHER ASSETS(As at July 15, 2009) Schedule 16


990,932 1. Stock of Stationery 1,740,297 25,099,443 2. Income Receivable on investments 107,854,451 - 106,677,388 3. Accrued Interest on Loan 153,600,871 - (106,677,388) Less: Interest Suspense amount (153,600,871) - - 4. Receivable Commission - 15,846,569 5. Sundry Debtors 17,165,694 (2,074,352) Less : Provision (2,074,352) 15,091,342 62,879,046 6. Staff Loan and Advances 81,289,286 66,676,775 7. Prepayments 13,615,079 - 8. Cash in Transit - - 9. Other Transit items (including cheques) - - 10. Drafts Paid without Notice - 20,782,689 11. Expenses Not Written off 65,858,520 7,182,739 12. Branch Adjustment account - 79,463,033 13. Others 105,204,521 4,632,615 13.1 Receivable from Nepal Rastra Bank 4,994,365 60,120,242 13.2 Premium deposit against Staff Housing Loan 63,218,516 14,710,176 13.3 Others 36,991,640 - 13.4 Deferred Tax Assets -

276,846,874 Total 390,653,496


70

Nepa

l Inv

estm

ent B

ank

Lim

ited

CONTINGENT LIABILITIES(As at July 15, 2009) Schedule 17


- 1. Claims on Institution but not accepted by the Institution - 4,223,147,037 2. Letters of credit (full amount) 6,136,742,629 3,282,807,332 (a) Less than 6 months maturity 4,924,898,407 940,339,705 (b) More than 6 months maturity 1,211,844,222 - 3. Rediscounted Bills - 2,855,680,061 4. Unmatured Guarantees/ Bonds 2,409,149,575 347,985,700 (a) Bid Bonds 583,820,503 1,048,983,322 (b) Performance Bonds 1,602,430,478 1,458,711,039 (c) Other Guarantee/ Bonds 222,898,594 - 5. Unpaid Shares in Investment - 2,170,350 6. Forward Exchange Contract Liabilities 59,504,763 857,189,953 7. Bills under Collection 405,480,033 945,790,546 8. Acceptance and Endorsements 799,418,295 - 9. Underwriting Commitments - - 10. Irrevocable Loan Commitments 3,567,971,517 478,864,346 "11. Guarantee issued against counter guarantee of Internationally Rated Banks" 1,537,290,444 767,491,609 12. Advance Payment Guarantee 1,342,961,931 - 13. Financial Guarantee - 9,209,500 14. Contingent Liabilities on Income Tax 9,209,500 - 15. Others (Loan under Repurchase Agreement) -

10,139,543,402 Total 16,267,728,687

OTHER ASSETS (Additional Statement)(As at July 15, 2009) Schedule 16 (A)

Previous Year Rs. Particulars Current Year Rs. Up to 1 Year 1 to 3 Years Above 3 Years Total

106,677,388 1. Accrued Interest on Loan 46,179,754 4,423,544 102,997,573 153,600,871 - 2. Drafts Paid without Notice 3. Branch Adjustment A/c


71


INTEREST INCOMEfor the period July 16, 2008 to July 15,2009


1,907,261,454 A. On Loan, Advances and Overdrafts 2,906,054,774 1,249,470,914 1. Loan and Advances 1,569,180,560 657,790,540 2. Overdraft 1,336,874,214 99,991,095 B. On Investment 140,697,625 99,991,095 1. Nepal Government Securities 140,697,625 99,991,095 a. Treasury Bills 140,697,625 - b. Development Bonds - - c. National Savings Certificates - - 2. Foreign Securities - - 3. Nepal Rastra Bank Bonds - - 4. Debenture and Bonds - - a.Banks & Financial Institutions - - b.Other Organization - 5. Interst on Inter Bank Lending - 8,892,605 C. On Agency Balances 6,826,224 - 1. Local Banks & Financial Institutions - 8,892,605 2. Foreign Banks 6,826,224 161,035,500 D. On Money At Call and Short Notice 175,142,952 4,118,853 1. Local Banks & Financial Institutions 83,053,093 156,916,647 2. Foreign Banks* 92,089,859 17,095,068 E. On Others 39,219,567 - 1. Certificate of Deposits - 11,895,446 2. Inter-Bank/ Financial Institutions Loan 14,536,307 5,199,622 3. Others 24,683,260

2,194,275,722 Total 3,267,941,142

Schedule 18

*Interest received on investment (placements) made in foreign banks is shown under this heading


72

Nepa

l Inv

estm

ent B

ank

Lim

ited

INTEREST EXPENSESfor the period July 16, 2008 to July 15,2009


916,372,736 A. On Deposit Liabilities 1,596,672,381 402,825,021 1. Fixed Deposits 436,489,351 309,920,132 1.1 Local Currency 340,950,079 92,904,889 1.2 Foreign Currency 95,539,272 285,919,261 2. Savings Deposits 380,818,232 278,368,890 1.1 Local Currency 376,776,488 7,550,371 1.2 Foreign Currency 4,041,744 227,628,454 3. Call Deposit 779,364,798 214,505,554 1.1 Local Currency 769,645,427 13,122,900 1.2 Foreign Currency 9,719,371 - 4. Certificate of Deposits - 75,785,662 B. On Borrowings 90,300,749 53,703,668 1. Debenture and Bonds 73,230,918 - 2. Loan from Nepal Rastra Bank 22,081,994 3. Inter Bank/ Financial Institutions Borrowing 17,069,831 - 4. Other Corporate Institution - 5. Other Loans - C. On Others - 992,158,398 Total 1,686,973,130

Schedule 19

Commission And Discountfor the period July 16, 2008 to July 15,2009


961,695 A. Bills Purchase and Discount 878,308 - 1. Local - 961,695 2. Foreign 878,308 169,705,452 B. Commission 205,298,181 35,917,161 1. Letters of Credit 45,478,281 39,135,473 2. Guarantees 49,833,164 455,481 3. Collection Fee 171,204 21,652,542 4. Remittance Fee 18,328,924 72,324,874 5. Credit Cards/ Debit Cards 91,089,863 - 6. Share Underwriting/ Issues - - 7. Government Transactions - 198,079 8. Agency Commission 189,279 21,841 9. Exchange Fee 207,466 44,625,046 C. Others 56,615,175

215,292,193 Total 262,791,664

Schedule 20


73


Other Operating Incomefor the period July 16, 2008 to July 15,2009

Exchange Gain/Lossfor the period July 16, 2008 to July 15,2009

EXPENSES RELATING TO EMPLOYEESfor the period July 16, 2008 to July 15,2009


8,397,861 1. Rental on Safe Deposit Lockers 9,999,769 551,469 2. Issue and Renewals of Credit Cards 1,217,089 21,479,521 3. Issue and Renewals of ATM Cards/ Debit Cards 23,970,845 13,682,499 4. Telex/ T.T. 26,381,479 - 5. Service Charges - - 6. Renewal Fees - 22,265,309 8. Others 26,005,612

66,376,659 Total 87,574,794


7,761,166 (A) Revaluation Gain/ (Loss) (7,351,506) 158,077,582 (B) Trading Gain (except Exchange Fee) 192,678,617

165,838,748 Total Income/ (Loss) 185,327,111


83,530,575 1. Salary 96,218,358 59,121,476 2. Allowances 76,287,140 7,387,244 3. Contribution to Provident Fund 8,622,679 4,330,860 4. Training Expenses 4,162,374 398,611 5. Uniform 520,561 114,385 6. Medical 251,051 8,854,968 7. Insurance 10,512,211 8,783,605 8. Pension and Gratuity Provision 13,457,093 14,628,261 9. Others 15,690,023 116,100 a. Training Course Remuneration 1,058,257 3,945,092 b. Leave Compensation 697,359 4,531,741 c. Staff Lunch 7,481,159 6,035,328 d. Other incentives 6,453,247

187,149,985 Total 225,721,490

Schedule 21

Schedule 22

Schedule 23


74

Nepa

l Inv

estm

ent B

ank

Lim

ited

OTHER OPERATING EXPENSESfor the period July 16, 2008 to July 15,2009 Schedule 24


42,294,900 1. House Rent 50,310,973 13,489,475 2. Electricity and Water 14,104,240 2,689,817 3. Repair and Maintenance 3,407,473 1,395,731 (a) Building 1,074,632 1,093,037 (b) Vehicles 2,063,854 201,049 (c) Others 268,987 8,235,651 4. Insurance 9,147,598 16,857,413 5. Postage, Telex, Telephone, Fax 18,305,256 8,311,688 6. Office Equipment, Furniture and Repair 10,983,266 11,345,185 7. Travelling Allowances and Expenses 17,612,631 24,898,837 8. Stationery and Printing 26,271,390 316,006 9. Periodicals and Books 461,122 18,352,321 10. Advertisements & Business Promotion 29,758,886 337,285 11. Legal Expenses 1,148,000 349,611 12. Donations 1,375,333 1,185,570 13. Expenses Relating to Board of Directors 1,246,879 1,082,000 (a) Meeting Fees 1,143,000 103,570 (b) Other Expenses 103,879 853,967 14. Annual General Meeting Expenses 596,013 250,000 15. Expenses Relating to Audit 300,000 250,000 (a) Audit Fees 300,000 (b) Other Expenses - - 16. Commission on Remittances - 70,301,655 17. Depreciation on Fixed Assets 96,584,388 12,255,076 18. Amortization of Expenses( Software) 15,913,870 2,916,584 19. Share/Debenture expenses 4,364,712 - 20. Technical Services Fee - 3,821,739 21. Entertainment 6,291,452 - 22. Written Off Expenses - 11,064,540 23. Security Expenses 20,720,008 - 24. Credit Guarantee Premium - - 25. Commission and Discount - 63,026,475 26. Others 84,980,265 7,749,861 (a) Fees for Services Others 9,122,962 - (b) Lease Rent - 9,865,541 (c) Fuel for Vehicle 15,636,275 5,500 (d) Losses shortages written off 1,000 4,401,831 (e) Bank Charges & Fee 6,782,475 - (f) Special Fee (Security Tax) - 33,870,589 (g) Debit/Credit Card Expenses 46,568,106 1,550,736 (h) Vehicle Renewal and other taxes 1,900,156 565,312 (i) Membership Fee 427,000 1,968,024 (j) Office Cleaning & Maintenance 2,356,036 3,049,081 (k) Misc. Expenses 2,186,255

313,153,795 Total 413,883,755


75


Provision for Possible Lossfor the period July 16, 2008 to July 15,2009

Non-Operating Income/Lossfor the period July 16, 2008 to July 15,2009

Loss Provision Written Backfor the period July 16, 2008 to July 15,2009


130,214,237 1. Increase in Loan Loss Provision 165,851,383 5,400,000 2. Increase in Provision for Loss on Investment - 375,000 3. Provision for Non Banking Assets 350,000 - 4. Provision for Other Assets -

135,989,237 Total 166,201,383


- 1. Profit (Loss) on Sale of Investment - 6,215,235 2. Profit (Loss) on Sale of Assets 1,347,037 832,500 3. Dividend (net) 1,605,975 a. Commercial Banks 832,500 b. Grameen Banks 1,605,975 c. Financial Institutions d. Other Organized Institutions (1) Subsidiary Companies (2) Others 4. Subsidies Received from Nepal Rastra Bank a. Reimbursement of losses of specified branches b. Interest Subsidy c. Exchange Counter 5. Others

7,047,735 Total Non-Operating Income /(Loss) 2,953,012


80,234,271 1. Loan Loss Provision Written Back 112,553,009 2,942,500 2. Provision against Non Banking Assets Written Back - 3. Investment Provision Written Back 2,100,000 18,400,000 4. Provision Against Other Assets Written Back -

101,576,771 Total 114,653,009

Schedule 25

Schedule 26

Schedule 27


76

Nepa

l Inv

estm

ent B

ank

Lim

ited

Statement of Loans and Advances Extended to Directors/ Chief Executive/ Promoter/ Employees and Shareholders Holding More Than 1 Percent Shares.for the period July 16, 2008 to July 15,2009 Schedule 29

Statement of Loan Written-Off(F.Y. 2008/2009)

S.N. Types of Loan Written off Type of Basis of valuation Loan Approved by Initiations made Remarks Amount Security of collateral Name/ Designation for recovery

1 Working Capital Loan - 2 Project Loan - 3 Fixed Capital Loan - 4 Personal Loan - 5 Other Loan -

Total -

Schedule 28(A)

Profit/ Loss from Extra Ordinary Activitiesfor the period July 16, 2008 to July 15,2009


- 1. Recovery of write off Loan - - 2. Voluntary Retirement Scheme Expenses - - 3. Loan Write-Offs (28 (A) - - 4. Other Expenses/ Income -

- Total -

Schedule 28

The Statement of amount, included under total amount of Bills Purchased and Discounted, Loans, Advances and Overdraft, provided to the Directors, Chief Executive, Promoters, Employees, Shareholders holding more than 1 percent shares and to the individual members of their undivided family OR against the guarantee of such persons OR to the organizations or companies in which such individuals are managing agent, are as follows:

Name of Promoter/Director/ Chief Executive Principal Interest Principal Interest Addition Principal Interest

(A) Directors - - - - - - -

(B) Chief Executive - - - - - - -

(C) Promoters - - - - - - -

(D) Employees - - - - - - -

(E) Shareholders holding more than 1% - - - - - - -

Total - - - - - - -

Last Years Balance This Year Recovery Balance as of Ashad endThis year


77


CAPITAL ADEQUACY TABLEAs at Ashad end 2066 (July 15,2009)

1. 1 RISK WEIGHTED EXPOSURES Current Period Previous Period a Risk Weighted Exposure for Credit Risk 42,975,192 36,518,503 b Risk Weighted Exposure for Operational Risk 1,941,891 1,488,193 c Risk Weighted Exposure for Market Risk 395,182 230,072

Total Risk Weighted Exposures (a+b+c) 45,312,265 38,236,768

CAPITAL Current Period Previous Period1.2 Core Capital (Tier 1) 3,879,969 2,658,915 a Paid up Equity Share Capital 2,407,069 1,203,915 b Irredeemable Non-cumulative preference shares - c Share Premium - - d Proposed Bonus Equity Shares - 401,305 e Statutory General Reserves 835,980 655,856 f Retained Earnings 156,558 67,479 g Un audited current year cumulative profit - - h Capital Redemption Reserve - - i Capital Adjustment Reserve - - j Dividend Equalization Reserves - - k Debenture Redemption Reserve 480,361 330,359 l Other Free Reserve Less: - - a. Goodwill b Miscellaneous expenditure not written off - - c Investment in equity in licensed Financial Institutions - - d Investment in equity of institutions with financial interests - - e Investment in equity of institutions in excess of limits - - f Investments arising out of underwriting commitments - - g Reciprocal crossholdings - - h Other Deductions - - Supplementary Capital (Tier 2) 1,215,385 1,232,321 a Cumulative and/or Redeemable Preference Share - - b Subordinated Term Debt 1,050,000 1,050,000 Less : 20% discount value to 5YTM Bond/ Debenture (230,000) (120,000) c Hybrid Capital Instruments - - d General loan loss provision 367,514 274,449 e Exchange Equalization Reserve 27,840 27,840 f Investment Adjustment Reserve - g Assets Revaluation Reserve - h Other Reserves 32 32 Total Capital Fund (Tier I and Tier II) 5,095,353 3,891,235

1.3 CAPITAL ADEQUACY RATIOS Current Period Previous Period Tier 1 Capital to Total Risk Weighted Exposures 8.56% 6.95% Tier 1 and Tier 2 Capital to Total Risk Weighted Exposures 11.24% 10.18%

Schedule 30(A1)

Rs in'000

Note: Previous period figures are as per Basel II Parallel Run.

RISK WEIGHTED EXPOSURE FOR CREDIT RISKAs at Ashad end 2066 (July 15,2009)

Current Period Previous PeriodA. Balance Sheet Exposures Specific Eligible Net Risk Weighted Risk Book Value Provision CRM Value Risk Exposures Weighted a b c d=a-b-c Weight f=d*e Exposures

Cash Balance 1,833,462 - - 1,833,462 0% - -Balance With Nepal Rastra Bank 4,411,133 - - 4,411,133 0% - -Gold - - 0% - -Investment in Nepali Government Securities 2,531,300 - - 2,531,300 0% - -All Claims on Government of Nepal - - - - 0% - -Investment in Nepal Rastra Bank securities - - - - 0% - -All Claims on Nepal Rastra Bank - - - - 0% - -Claims on Foreign Government and Central Bank - - - - 0% - -(ECA rating 0-1Claims on Foreign Government and Central Bank (ECA-2) - - - - 20% - -Claims on Foreign Government and Central Bank (ECA -3) - - - - 50% - -Claims on Foreign Government and Central Bank (ECA-4-6) - - - - 100% - -Claims on Foreign Government and Central Bank (ECA -7) - - - - 150% - -Claims On BIS, IMF, ECB, EC and on Multilateral - - - - 0% - -Development Banks (MDB's) recognized by the frameworClaims On Other Multilateral Development Banks - - - - 100% - -Claims on Public Sector Entity (ECA 0-1) - - - - 20% - -Claims on Public Sector Entity (ECA 2) - - - - 50% - -Claims on Public Sector Entity (ECA 3-6) - - - - 100% - -Claims on Public Sector Entity (ECA 7) - - - - 150% - -Claims on domestic Banks that meet capital adequacy requirements 45,539 - - 45,539 20% 9,108 14,164Claims on domestic Banks that do not meet 156,272 - - 156,272 100% 156,272 -capital adequacy requirementsClaims on foreign bank (ECA Rating 0-1) 2,452,409 - - 2,452,409 20% 490,482 365,242Claims on foreign bank (ECA Rating 2) 388,000 - - 388,000 50% 194,000 124,444Claims on foreign bank (ECA Rating 3-6) - - - - 100% - 1,989,012Claims on foreign bank (ECA Rating 7) - - - - 150% - -Claims on foreign bank incorporated in SAARC region operating with 3,438,729 3,438,729 20% 687,746 -a buffer of 1% above their respective regulatory capital requirementClaims on Domestic Corporates 29,250,976 16,708 398,839 28,835,429 100% 28,835,429 22,500,790Claims on Foreign Corporates (ECA Rating 0-1) - - - - 20% - -Claims on Foreign Corporates (ECA Rating 2) - - - - 50% - -Claims on Foreign Corporates (ECA Rating 3-6) - - - - 100% - -Claims on Foreign Corporates (ECA Rating 7) - - - - 150% - -Regulatory Retail Portfolio (Not Overdue) 7,362,274 1,639 934,540 6,426,095 75% 4,819,572 3,261,842Claims fulfilling all criterion of regulatory retail except granularity - - - - 100% - -Claims secured by residental properties - - - - 60% - -Claims not fully secured by residental properties - - - - 150% - -Claims secured by residental properties (Overdue) - - - - 100% - -Claims secured by Commercial Real Estate - - - - 100% - -Past due claims (except for claim secured by residental properties) 213,907 200,090 - 13,817 150% 20,726 84,938High Risk Claims - - - - 150% - -Investment in equity and other capital instruments of 21,600 3,300 - 18,300 100% 18,300 55,718institutions listed in the Stock exchangeInvestment in equity and other capital instruments of 42,671 - - 42,671 150% 64,006 17,400institutions not listed in the Stock exchangeOther Assets (as per attachment) 2,503,129 1,091,126 - 1,412,003 100% 1,412,003 1,243,056

Total 54,651,402 1,312,863 1,333,379 52,005,160 36,707,642 29,656,607

Schedule 30(B)

Rs in'000


RISK WEIGHTED EXPOSURE FOR CREDIT RISK(Contd..) Schedule 30(B)

Rs in'000 Current Period Previous PeriodB. Off Balance Sheet Exposures Specific Eligible Net Risk Weighted Risk Book Value Provision CRM Value Risk Exposures Weighted a b c d=a-b-c Weight f=d*e Exposures

Revocable Commitments - - - - 0% - -Bills Under Collection 405,480 - - 405,480 0% - -Forward Exchange Contract Liabilities 59,505 59,505 10% 5,950 -LC Commitments With Original Maturity Up to 6 months - - 773,641 domestic counterparty 220,618 - 11,663 208,956 20% 41,791 - foreign counterparty (ECA Rating 0-1) 4,234,574 - 423,023 3,811,551 20% 762,310 - foreign counterparty (ECA Rating 2) - - - - 50% - - foreign counterparty (ECA Rating 3-6) 469,706 - 24 ,226 445,480 100% 445,480 - foreign counterparty (ECA Rating 7) - - - - 150% - -L C Commitments With Original Maturity Over 6 months - - - 446,661 domestic counterparty 207,353 - 1,447 205,906 50% 102,953 - foreign counterparty (ECA Rating 0-1) 953,702 - 28,920 924,782 20% 184,957 - foreign counterparty (ECA Rating 2) - - - - 50% - - foreign counterparty (ECA Rating 3-6) 50,789 - 1,111 49,678 100% 49,678 - foreign counterparty (ECA Rating 7) - - - - 150% - -Bid Bond, Performance Bond and Counter guarantee 140,140 (140,140) - - domestic counterparty 2,409,150 - - 2,409,150 50% 1,204,575 663,560 foreign counterparty (ECA Rating 0-1) 224,110 - - 224,110 20% 44,822 94,181 foreign counterparty (ECA Rating 2) 1,311,740 - - 1,311,740 50% 655,870 3,259 foreign counterparty (ECA Rating 3-6) 1,440 - - 1,440 100% 1,440 1,440 foreign counterparty (ECA Rating 7-9) - - - - 150% - -Underwriting commitments - - - - 50% - -Lending of Bank's Securities or Posting of Securities as collateral - - - - 100% - -Repurchase Agreements, Assets sale with recourse - - - - 100% - -Advance Payment Guarantee 1,342,962 - 17,518 1,325,444 100% 1,325,444 2,098,183Financial Guarantee - - - - 100% - -Acceptances and Endorsements 799,418 - 79,942 719,476 100% 719,476 945,791Unpaid portion of Partly paid shares and Securities - - - - 100% - -Irrevocable Credit Commitments (short term) 3,567,972 - - 3,567,972 20% 713,594 1,825,971Irrevocable Credit Commitments (long term) - - - 50% - -Other Contingent Liabilities 9,210 - - 9,210 100% 9,210 9,209

Total 16,267,729 - 727,990 15,539,738 6,267,550 6,861,896

Total RWE for Credit Risk (A)+(B) 70,919,131 1,312,863 2,061,370 67,544,898 42,975,192 36,518,503



80

Nepa

l Inv

estm

ent B

ank

Lim

ited

FORM

NO

.3 E

LIG

IBLE

CRE

DIT

RIS

K M

ITIG

AN

TS

Cred

it E

xpos

ures

D

epos

its

Dep

osit

s w

ith

Gol

d G

ovt.

&

G'te

e of

Se

c/G

'tee

of

G'te

e of

G

'tee

of

Sec/

G'te

e To

tal

Prev

ious

w

ith

Bank

ot

her

bank

s/FI

NRB

G

ovt.

of

Oth

er

dom

esti

c M

DBs

of

For

eign

Per

iod

(a

) (b

) (c

) Se

curiti

es (d

) N

epal

(e)

Sove

reig

ns (f

) ba

nks

(g)

(h)

Bank

s (i)

Tota

l Ba

lanc

e Sh

eet E

xpos

ures

-Ca

sh B

alan

ceBa

lanc

e W

ith N

epal

Ras

tra

Bank

G

old

Inve

stm

ent i

n N

epal

i Gov

ernm

ent S

ecur

ities

All

Clai

ms

on G

over

nmen

t of N

epal

Inve

stm

ent i

n N

epal

Ras

tra

Bank

sec

uriti

esA

ll Cl

aim

s on

Nep

al R

astr

a Ba

nkCl

aim

s on

For

eign

Gov

ernm

ent a

nd C

entr

al B

ank

(ECA

ratin

g 0-

1)Cl

aim

s on

For

eign

Gov

ernm

ent a

nd C

entr

al B

ank

(ECA

-2)

-

Clai

ms

on F

orei

gn G

over

nmen

t and

Cen

tral

Ban

k (E

CA-3

)

-Cl

aim

s on

For

eign

Gov

ernm

ent a

nd C

entr

al B

ank

(ECA

-4-6

)

-

Clai

ms

on F

orei

gn G

over

nmen

t and

Cen

tral

Ban

k (E

CA-7

)

-Cl

aim

s on

Oth

er M

ultil

ater

al D

evel

opm

ent B

anks

-Cl

aim

s on

Pub

lic S

ecto

r En

tity

(ECA

0-1

)

-Cl

aim

s on

Pub

lic S

ecto

r En

tity

(ECA

2)

-

Clai

ms

on P

ublic

Sec

tor

Entit

y (E

CA 3

-6)

-

Clai

ms

on P

ublic

Sec

tor

Entit

y (E

CA 7

)

-Cl

aim

s on

dom

estic

ban

ks th

at m

eet c

apita

l ade

quac

y re

quire

men

ts

-

Clai

ms o

n do

mes

tic b

anks

that

do

not m

eet c

apita

l ade

quac

y re

quire

men

ts

-Cl

aim

s on

fore

ign

bank

(ECA

Rati

ng 0

-1)

-

Clai

ms

on fo

reig

n ba

nk (E

CA R

ating

2)

-

Clai

ms

on fo

reig

n ba

nk (E

CA R

ating

3-6

)

-Cl

aim

s on

fore

ign

bank

(ECA

Rati

ng 7

)

-cl

aim

s on

fore

ign

bank

inco

rpor

ated

in S

AA

RC re

gion

ope

ratin

g w

itha

buffe

r of

1%

abo

ve th

eir

resp

ectiv

e re

gula

tory

cap

ital r

equi

rem

ent

Clai

ms

on D

omes

tic C

orpo

rate

s 9

2,35

1

-

190,

925

9

,119

106

,445

398

,839

2

79,8

56Cl

aim

s on

For

eign

Cor

pora

tes

(ECA

0-1

)

-Cl

aim

s on

For

eign

Cor

pora

tes

(ECA

2)

-

Clai

ms

on F

orei

gn C

orpo

rate

s (E

CA 3

-6)

-

Clai

ms

on F

orei

gn C

orpo

rate

s (E

CA 7

)

-Re

gula

tory

Ret

ail P

ortf

olio

(Not

Ove

rdue

) 5

6,40

7

1,0

81

355

,569

4

,031

517

,668

934

,540

2

65,6

58Cl

aim

s fu

lfilli

ng a

ll cr

iteri

on o

f reg

ulat

ory

reta

il ex

cept

gra

nula

rity

-Cl

aim

s se

cure

d by

resi

denti

al p

rope

rties

-Cl

aim

s no

t ful

ly s

ecur

ed b

y re

side

ntial

pro

perti

es

-

Clai

ms

secu

red

by re

side

ntial

pro

perti

es (O

verd

ue)

-

Clai

ms

secu

red

by C

omm

erci

al re

al e

stat

e

-Pa

st d

ue c

laim

s (e

xcep

t for

cla

im s

ecur

ed b

y re

side

ntal

pro

perti

es)

-

Sch

edul

e 30

(C)

Rs in

'000


81


Cred

it E

xpos

ures

D

epos

its

Dep

osit

s w

ith

Gol

d G

ovt.

&

G'te

e of

Se

c/G

'tee

of

G'te

e of

G

'tee

of

Sec/

G'te

e To

tal

Prev

ious

w

ith

othe

r

NRB

G

ovt.

of

Oth

er

dom

esti

c M

DBs

o

f For

eign

Per

iod

Ba

nk (a

) ba

nks/

FI (b

) (c

) Se

curiti

es (d

) N

epal

(e)

Sove

reig

ns (f

) ba

nks

(g)

(h)

Bank

s (i)

Tota

lH

igh

Risk

cla

ims

-In

vest

men

ts in

equ

ity a

nd o

ther

cap

ital i

nstu

rmen

ts o

f ins

tituti

ons

-

liste

d in

the

stoc

k ex

chan

geIn

vest

men

ts in

equ

ity a

nd o

ther

cap

ital i

nstu

rmen

ts o

f ins

tituti

ons

-

not l

iste

d in

the

stoc

k ex

chan

geO

ther

Ass

ets

(as

per

attac

hmen

t)

-

Off

Bal

ance

She

et E

xpos

ures

-Fo

rwar

e Ex

chan

ge C

ontr

act L

iabi

lities

-LC

Com

mitm

ents

With

Ori

gina

l Mat

urity

Up

to 6

mon

ths

dom

estic

cou

nter

part

y 1

1,66

3

11,

663

-

fore

ign

coun

terp

arty

(ECA

Rati

ng 0

-1)

423

,023

4

23,0

23

354

,941

fore

ign

coun

terp

arty

(ECA

Rati

ng 2

) -

-

fore

ign

coun

terp

arty

(ECA

Rati

ng 3

-6)

24,

226

2

4,22

6

-fo

reig

n co

unte

rpar

ty (E

CA R

ating

7)

-

-

-LC

Com

mitm

ents

With

Ori

gina

l Mat

urity

Ove

r 6

mon

ths

-

-

dom

estic

cou

nter

part

y 1

,447

1

,447

-

fore

ign

coun

terp

arty

(ECA

Rati

ng 0

-1)

28,

920

2

8,92

0

47,

017

fore

ign

coun

terp

arty

(ECA

Rati

ng 2

) -

-

-

fore

ign

coun

terp

arty

(ECA

Rati

ng 3

-6)

1,1

11

1,1

11

-fo

reig

n co

unte

rpar

ty (E

CA R

ating

7)

-

-

Bid

Bond

, Per

form

ance

Bon

d an

d Co

unte

r gu

aran

tee

1

40,1

40

140

,140

6

9,84

8do

mes

tic c

ount

erpa

rty

-fo

reig

n co

unte

rpar

ty (E

CA R

ating

0-1

)

-

-fo

reig

n co

unte

rpar

ty (E

CA R

ating

2)

-

-

fore

ign

coun

terp

arty

(ECA

Rati

ng 3

-6)

-

-

fore

ign

coun

terp

arty

(ECA

Rati

ng 7

)

-

-U

nder

wri

ting

com

mitm

ents

-

-Le

ndin

g of

Ban

k's

Secu

ritie

s or

Pos

ting

of S

ecur

ities

as

Colla

tera

l

-

-Re

purc

hase

Agr

eem

ents

, Ass

ets

sale

with

reco

urse

-

-A

dvan

ce P

aym

ent G

uara

ntee

1

7,51

8

17,

518

1

28,0

20Fi

nanc

ial G

uara

ntee

-

-

-

Acc

epta

nces

and

End

orse

men

ts

79,

942

7

9,94

2

-U

npai

d po

rtion

of P

artly

pai

d sh

ares

and

Sec

uriti

es

-

-

Irre

voca

ble

Cred

it co

mm

itmen

ts

-

-

Oth

er C

ontin

gent

Lia

biliti

es

-

-

FORM

NO

.3 E

LIG

IBLE

CRE

DIT

RIS

K M

ITIG

AN

TS

(con

td...

)

Sch

edul

e 30

(C)

Rs in

'000

The

tota

l am

ount

of E

ligib

le C

RM s

hall

be a

djus

ted

for

the

supe

rvis

ory

hairc

uts

and

floor

s. In

this

rega

rd b

anks

sho

uld

disc

lose

the

tota

l val

ue

of e

ligib

le c

olla

tera

l in

the

resp

ectiv

e co

lum

n of

type

of C

RM a

nd w

hile

sum

min

g up

the

tota

l val

ue n

eces

sary

adj

ustm

ents

hav

e to

be

mad

e.


82

Nepa

l Inv

estm

ent B

ank

Lim

ited

Risk Weight Exposure for Operational Risk

Current Period Previous Period Particulars 2005/06 2006/07 2007/08

Net Interest Income 681,795 899,457 1,202,117Commission and Discount Income 115,943 163,899 215,292Other Operating Income 35,905 47,320 66,377Exchange Fluctuation Income 125,747 135,355 165,839Additional Interest Suspense during the period - 12,499 16,237Gross Income (a) 959,390 1,258,530 1,665,862Alfa (b) 15% 15% 15%Fixed Percentage of Gross Income (c) =(a)*(b) 143,908 188,779 249,879Capital Requirement for operational risk (d) (average of c) 194,189 148,819Risk Weight (reciprocal of capital requirement of 10%) in times (e) 10 10Equivalent Risk Weight Exposure (f)=(d)*(e) 1,941,891 1,488,193

Schedule 30(D)

Rs in'000


83


Market Risk

Previous Period S.No. Currency Open Position Open Position) Relevant Open Relevant Open (FCY) (Rs) Position (Rs) Position (Rs)

1 AED 7,200 146,088 146,088 176,1382 AUD 31,330 1,919,913 1,919,913 2,064,3733 CAD 14,625 997,415 997,415 1,395,4354 CHF 74,437 5,291,016 5,291,0165 CNY 21,434 238,132 238,132 3,9486 DKK 83,785 1,181,369 1,181,369 36,3007 EUR 144,835 15,679,888 15,679,888 40,017,9938 GBP 24,549 3,108,396 3,108,396 6,453,5039 HKD 4,440 44,178 44,178 188,99410 INR 282,730,084 452,368,134 452,368,134 180,115,04711 JPY 10,925,590 8,998,316 8,998,316 6,217,92812 MYR 1 21 21 185,48413 QAR 2,367 48,429 48,429 510,44114 SAR 5,330 108,785 108,785 149,92515 SEK 88,958 870,899 870,899 440,78616 SGD 49,424 1,623,904 1,623,904 1,145,89117 THB 105,060 237,436 237,436 193,29518 USD 3,820,898 296,501,681 296,501,681 220,847,820

Total Open Position (a) 790,363,999 460,143,301

Fixed Percentage (b) 5.00% 5.00%Capital Charge for Market Risk [c=(axb)] 39,518,200 23,007,165 10 10Equivalent Risk Weight Exposure [e=(cxd)] 395,182,000 230,071,650Equivalent Risk Weight Exposure in '000 395,182 230,072

Schedule 30(E)

Current Period


84

Nepa

l Inv

estm

ent B

ank

Lim

ited

5 Years Principal Indicators

Particulars Indicators F/Y 2004/2005 F/Y 2005/2006 F/Y 2006/2007 F/Y 2007/2008 F/Y 2008/2009 (F/Y 061/62) (F/Y 062/63) (F/Y 063/64) (F/Y 064/65) (F/Y 065/66)

1. Percent of Net Profit/ Gross Income Percent 20.26 23.99 25.07 25.33 22.972. Earning Per Share Rs. 39.50 59.35 62.57 57.87 37.423. Market Value Per Share Rs. 800 1,260 1,729 2,450 1,3884. Price Earning Ratio Ratio 20.25 21.23 27.63 42.33 37.105. Dividend (including bonus) on share capital Percent 12.50 55.46 30.00 40.83 20.006. Cash Dividend on Share Capital Percent 12.50 20.00 5.00 7.50 20.007. Interest Income/ Loan & Advances Percent 7.36 7.32 7.33 6.93 7.898. Staff Expenses/ Total operating Expenses Percent 34.65 38.77 37.39 37.41 35.299. Interest Expenses on Total Percent 2.43 2.52 2.71 2.79 3.53 Deposit and Borrowings10.Exchange Gain/ Total Income Percent 8.95 8.06 6.77 6.03 4.7311.Staff Bonus/ Total Staff Expenses Percent 38.22 41.84 49.76 54.50 57.5312.Net Profit/Loan and Advances Percent 2.22 2.66 2.82 2.53 2.4513.Net Profit/Total Assets Ratio 1.42 1.61 1.79 1.77 1.6814.Total Credit/Deposit Percent 73.33 69.63 72.56 79.91 78.8615.Total Operating Expenses**/ Total Assets Percent 1.71 1.43 1.38 1.27 1.1916.Adequacy of Capital Fund on Risk Weighted Assets a. Core Capital Percent 8.52 7.97 7.90 7.71 8.56 b. Supplementary Capital Percent 3.06 4.01 4.26 3.57 2.68 c. Total Capital Fund Percent 11.58 11.97 12.17 11.28 11.2417.Liquidity (CRR) Percent 9.78 13.61 10.47 10.91 10.3218.Non-performing credit/ Total credit Ratio 2.69 2.07 2.37 1.12 0.5819.Weighted Average Interest Rate Spread Percent 4.30 3.90 3.99 4.00 3.9420.Book Net-worth Rs. in '000 1,180,173 1,415,440 1,878,124 2,686,786 3,907,84021.Total Shares No. 5,877,385 5,905,860 8,013,526 12,039,154 24,070,68922.Total Staffs No. 353 390 514 622 76623.Book Value Per Share Rs. 201 240 234 223 162

Schedule 31

** Total Operating Expenses = Staff Expenses+ Office Operating Expenses


85


Schedule 32

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTSa. The financial statements have been prepared

in conformity with generally accepted accounting principles, Nepal Accounting Standards, Company Act 2063, Bank & Financial Institution Act, 2063 and Nepal Rastra Bank Directives.

b. The financial statements are prepared on historical cost convention except where otherwise stated.

c. The Bank follows accrual system of accounting for the preparation of financial statements except where otherwise stated.

d. All the formats of the financial statements are in accordance with the directives of Nepal Rastra Bank.

2. INTEREST AND COMMISSION INCOMEa. Interest on loans and advances are

recognized on cash basis as per Nepal Rastra Bank’s (NRB) directives. (Refer NOTES TO ACCOUNT # 6)

b. Commission and fees are recognized as income on cash basis except commission exceeding Rs 100,000 earned on guarantees covering more than a year is accounted for on accrual basis over the period of the guarantee.

3. FOREIGN CURRENCY TRANSACTIONSa. Foreign currency assets and liabilities held at

Balance Sheet date have been translated at buying rate of exchange on that date.

b. Profit or loss arising from difference in buying and selling rates on foreign currency transactions are recorded as “Trading Gain or Loss”.

c. Profit or loss arising from the fluctuation of foreign currencies is recorded as “Revaluation Gain or Loss” as and when such fluctuation takes place. Out of total Revaluation Gain if any, 25% is transferred to Exchange Fluctuation Fund at the end of the year as per NRB directives.

PRINCIPAL ACCOUNTING POLICIES

4. LOAN LOSS PROVISION & BAD DEBTS WRITTEN OFFa. Provision for loan losses has been made

in accordance with Nepal Rastra Bank’s directives.

b. Provision for loan losses have been deducted from the loan and advances as per the directives of Nepal Rastra Bank & accordingly loan & advances net of provision has been presented in the Balance Sheet.

c. While writing off of Bad Debts it will be charged to Profit & Loss account and Provision made for the same will be written back as per NRB directives.

Procedure for writing off of bad debts will be according to the provision made under Loans Write Off bylaws of the Bank, which has been duly approved by Nepal Rastra Bank.

The Bank has taken a policy of settlement of the bad loan by waiver of reasonable amount of interest. Case to case basis settlement is made based on the justification of each case.

5. DEPRECIATION Fixed Assets are depreciated over estimated life of assets on straight-line basis from the following month of the purchase date. Maintenance and repairs expenses are charged to profit and loss account as incurred.

6. EXPENSES NOT WRITTEN OFFCost of computer software are classified under “Expenses Not Written off” as disclosed in Schedule 16 and relates to cost of computer software which are being amortized over a period of five years from the date of acquisition.

7. NON CAPITALIZED ITEMSCapital items of value below Rs.10,000 are expensed off in the year of purchase itself.

8. NON BANKING ASSETSa. Non Banking Assets acquired till F.Y. 2061/62

are valued at amount equivalent to the outstanding amount of principal and interest due at the time of acquisition. Where the total outstanding amount of principal and interest in the year of acquisition of asset

exceeds the market value of such assets, the assets are valued at the market price of assets and the difference amount is charged to profit and loss account in the year of acquisition according to then NRB directives.

b. From F.Y. 2062/63 Non Banking Assets will be valued at amount equivalent to the outstanding amount of principal due at the time of acquisition and interest receivable of such loan will be set off against interest suspense. Where the total outstanding amount of principal in the year of acquisition of asset exceeds the market value of such assets, the assets are valued at the market price of assets and the difference amount is charged to profit and loss account in the year of acquisition.

c. Where the amount realized upon disposal of the acquired assets vary at a future date, the difference will be adjusted to the Profit & Loss Account in the year of disposal.

9. INVESTMENTa. Investments on securities listed in the Stock

Exchange are valued at the lower of cost or market price.

b. Investments on securities, which are not listed in the Stock Exchange, are valued at cost and provisions are made as per NRB directives.

10. RETIREMENT BENEFITSProvision for liability of gratuity is made on accrual basis, by calculating actual liability of gratuity for entire staff, at the end of the financial year.

11. INCOME TAXProvision for Income Tax is made on the total income at the rate applicable for that year in accordance with the Income Tax Act. Any excess or shortfall in tax provision is adjusted to the profit and loss account in the year, when tax assessment is completed. Further, deferred tax liability has been calculated in accordance with the provisions of Nepal Accounting Standard.

12. CONTINGENT LIABILITYAny liability of contingent nature, if material, is disclosed in separate schedule, forming the part of Balance Sheet.


86

Nepa

l Inv

estm

ent B

ank

Lim

ited

Schedule 33NOTES TO ACCOUNTS

1. STAFF PROVIDENT FUND & GRATUITY PROVISIONStaff Provident Fund has been transferred to NIBL Retirement Fund as provided by Income Tax Act 2058.

Gratuity provision provided in balance sheet refers to the gratuity liability as at 15.07.2004, gratuity payable onwards has been transferred to NIBL Retirement Fund account as provided by Income Tax Act 2058.

2. INCOME-TAX LIABILITYNo provision for the additional income tax liability of Rs 9,209,500 for the financial years 1997/98 to 2000/01 has been made, as it is disclaimed/ disputed and appeals have been filed at the Revenue Tribunal/ Appellate Court by the Bank against the re-assessment of the Bank’s income by Income Tax authority.

Income tax provision amounting to Rs 389,580,266 made for the F.Y. 2065-66 (2008/2009) is subject to tax audit.

After final assessment of tax liability for FY 2061/62 and FY 2062/63 by Income Tax authority, excess tax provision for these years amounting to Rs.74,77,673 has been written back in this year and is shown under prior period tax in the Profit & Loss Account.

Deferred tax liability of Rs 1,78,20,561, for deductible temporary differences up to F.Y. 2065/66, has been shown under other liabilities in the Balance Sheet. The figure has been arrived at by applying the prevailing income tax rate to the Net Temporary Difference figure of Rs.5,94,01,870. Deferred tax expense for FY 2065/66 amounting to Rs 1,58,79,221 has been charged to Profit & Loss Account.

3. EXCHANGE FLUCTUATION FUNDDuring the year, there is a loss on revaluation of foreign exchange amounting to Rs 73,51,506. Hence, no amount has been transferred to foreign exchange fluctuation fund due to loss on revaluation of foreign exchange .

4. CHANGES IN DEPOSIT LIABILITIESThe total deposit of the Bank has increased by Rs 12,246.36 million to Rs 46,698.09 million, from the previous year’s balance of Rs 34,451.73 million as following:

Particulars FY FY Increase/ (Decrease) 2007/2008 2008/2009 Percentage (2064/65) (2065/66)

Current Deposits 3,138.67 3,756.57 19.69Margin Deposits 607.06 727.99 19.92Saving Deposits 13,688.77 17,066.25 24.67Fixed Deposits 7,944.23 11,633.38 46.44Call Deposits 9,072.99 13,513.90 48.94

Total Deposits 34,451.73 46,698.09 35.55

Rs in Million

5. LOANS DISBURSED, RECOVERY AND WRITTEN OFFDuring the year, total loan amounting to Rs 200,954.49 million has been disbursed and Rs 191,656.64 million has been recovered.

6. INTEREST SUSPENSEInterest income from loans and advances are shown in cash basis, total interest receivable from loan and advances as at 15.07.2009 amounting to Rs 153.60 million has been transferred to Interest Suspense Account as per Nepal Rastra Bank’s directives.


87


8. NON BANKING ASSETSNon Banking Assets has not been sold during the year. Provision on Non Banking assets has been made as required by NRB Directives.

9. EXPENSES NOT WRITTEN OFFCost of computer software classified under “Expenses Not Written off” disclosed in Schedule 16 relates to cost of computer software which are being amortized over a period of five years from the date of acquisition. During the year, Rs 1,59,13,870 has been amortized by charging to Profit and Loss account. Of this amount, Rs 44,32,243 relates to the erstwhile banking software PumoriPlus which has been fully written off due to its discontinuance and replacement by a new software Finacle.

10. PROVISION FOR LOAN LOSS & LOSS PROVISION WRITTEN BACKDuring the year Rs 166,201,383 has been charged to Profit and Loss account for loan

7. TABLE OF LIQUIDITY DETAILS Rs in '000

Assets 1-90 Days 91-180 Days 181-270 Days 271-365 Days Above one Year Total Amount

Cash Balance 1,833,462 0 0 0 1,833,462Balance with Banks 6,084,541 0 0 0 0 6,084,541Investment made with Foreign Banks 1,850,981 1,986,560 0 582,000 388,000 4,807,541Investment in HMG Bonds 0 744,900 672,900 1,113,500 0 2,531,300Investment in NRB Bonds 0 0 0 0 0 0InterBank Lending 0 0 0 0 0 0Loans & Advances 15,238,386 5,403,365 5,233,398 3,351,734 7,600,274 36,827,157

Total Assets 25,007,370 8,134,825 5,906,298 5,047,234 7,988,274 52,084,001

Liabilities

Borrowings 38,800 0 0 0 0 38,800Current Deposits 3,756,570 0 0 0 0 3,756,570Saving Deposits 14,719,996 0 0 0 2,346,265 17,066,261Fixed and Call Deposits 14,994,219 3,536,580 627,076 4,775,906 1,213,386 25,147,167Debentures 0 0 0 0 1,050,000 1,050,000

Total Liabilities 33,509,585 3,536,580 627,076 4,775,906 4,609,651 47,058,798

Net Financial Assets (8,502,215) 4,598,245 5,279,222 271,328 3,378,623 5,025,203Cumulative Net Financial Assets (8,502,215) (3,903,970) 1,375,252 1,646,580 5,025,203 0

loss provision as required by Nepal Rastra Bank directives.

Provision amounting Rs 114,653,009 has been written back during the year.

11. PROVISION FOR OTHER ASSETSNone.

12. DEBENTURE ISSUETotal Debenture outstanding of Rs 1050 million includes debenture of Rs 300 million issued on 24.11.2003, Rs 250 million issued on 26.06.2006, Rs 250 million issued on 26.06.2007 and Rs 250 million issued on 09.07.2008.

Out of total Rs 480.36 million in Debenture Redemption Fund Rs 150.00 million (Rs 42.85 million for Rs 300 million Debenture (2067), Rs 35.72 million for Rs 250 million Debenture (2070), Rs 35.72 million for Rs 250 million Debenture (2071) and Rs 35.72 million for 250 million Debenture (2072) on 7 years pro

rata basis) has been transferred from Profit and Loss appropriation account to Debenture Redemption Fund this year.

13. COMPARATIVE FIGURES FOR 2007/2008Previous year’s figures have been regrouped or rearranged wherever required to make them comparable with the current year’s figures.

14. ROUNDING OFFFigures have been rounded off to the nearest rupee.


88

Nepa

l Inv

estm

ent B

ank

Lim

ited

Details of Promoters Shares Pledged by Promoter Shareholders of the BankAs at Ashad end 2066 Schedule 34

S. No. Promoter's Name Remarks Total No. Percentage of Total Name of the Banks & Loan Total Number of of Shares Paid up Captal Financial Institutions Amount Pledge Shares

1 Star Holdings P. LTD. 282,307 1.17 Citizens Bank International Limited 282,307 2 Annapurna Investment P. Ltd 376,425 1.56 Global Bank Limied 219,501 3 Prestine Investment P. Ltd. 376,425 1.56 Nepal Bank/Sanima Bikash Bank Ltd. 250,688 4 Kamala Investment P. Ltd. 376,425 1.56 Nepal Bangaladesh Bank Ltd. 92,280 5 Panchakanaya Investment P. Ltd. 188,211 0.78 Himalayan Bank Limited 62,607 6 Shrestha Brothers Investment P. Ltd 188,211 0.78 Himalayan Bank Limited 62,607 7 Surya Infosys P .Ltd. 376,425 1.56 Sanima Bikash Bank Ltd. 376,425 8 Mercantile Investment P. Ltd. 150,577 0.63 Bank of Kathmandu Limited. 100,385

Promoters Share Owenership Loan Detail


89


Unaudited Financial Results (Quarterly)as at Fourth Quarter (15/07/2009) of the Fiscal Year 2008/2009

S.No. Particulars This Quarter Previous Quarter Corresponding Quarter Ending Ending Previous Year (Audited)

1 Total Capital and Liabilities (1.1 to 1.7) 53,739,438 49,676,622 39,405,959 1.1 Paid Up Capital 2,407,069 2,407,069 1,203,915 1.2 Reserve and Surplus 1,996,140 1,732,406 1,482,871 1.3 Debenture and Bond 1,050,000 1,050,000 1,050,000 1.4 Borrowings 38,800 39,725 - 1.5 Deposit (a+b) 46,697,983 42,476,024 34,451,726 a. Domestic Currency 40,791,621 37,233,720 30,601,002 b. Foreign Currency 5,906,362 5,242,304 3,850,724 1.6 Income Tax Liability 39,414 42,066 24,083 1.7 Other Liabilities 1,510,032 1,929,332 1,193,3632 Total Assets (2.1 to 2.7) 53,739,438 49,676,622 39,405,959 2.1 Cash and Bank Balance 7,918,004 6,137,251 3,754,942 2.2 Money at Call and Short Notice 30,000 - 2.3 Investments 7,403,112 7,526,631 6,874,024 2.4 Loans and Advances (Gross) 36,827,157 34,417,570 27,529,305 2.5 Fixed Assets 1,126,540 1,046,137 970,092 2.6 Non Banking Assets (Net) 375 750 750 2.7 Other Assets 464,250 518,283 276,8473 Profit & Loss Account Up to This Up to Previous Up to Corresponding Quarter Quarter Quarter Previous Year (Audited) 3.1 Interest Income 3,267,104 2,320,272 2,194,276 3.2 Interest Expense (1,686,274) (1,190,105) (992,158) A. Net Interest Income (3.1-3.2) 1,580,830 1,130,167 1,202,118 3.3 Fees, Commission and Discount 241,853 202,381 215,292 3.4 Other Operating Income 76,206 51,781 66,377 3.5 Foreign Exchange Gain/Loss (Net) 213,320 165,514 165,839 B. Total Operating Income (A.+3.3+3.4+3.5) 2,112,209 1,549,843 1,649,625 3.6 Staff Expenses (225,570) (153,782) (187,150) 3.7 Other Operating Expenses (402,754) (323,715) (313,154) C. Operating Profit Before Provision (B.-3.6-3.7) 1,483,885 1,072,346 1,149,321 3.8 Provision for Possible Losses (155,484) (124,140) (135,989) D. Operating Profit (C.-3.8) 1,328,401 948,207 1,013,332 3.9 Non Operating Income/Expenses (Net) (3,086) 713 7,048 3.10 Write Back of Provision for Possible Loss 100,124 73,829 101,577 E. Profit from Regular Activities (D+3.9+3.10) 1,425,439 1,022,749 1,121,957 3.11 Extra-ordinary Income/Expenses (Net) - - - F. Profit before Bonus and Taxes (E.+3.11) 1,425,439 1,022,749 1,121,957 3.12 Provision for Staff Bonus (129,586) (92,977) (101,996) 3.13 Provision for Tax (381,278) (278,931) (323,229) G. Net Profit/Loss (F.-3.12-3.13) 914,575 650,840 696,7324 Ratios At the End of At the End of At the End of Corresponding This Quarter This Quarter Quarter Previous Year (Audited) 4.1 Capital Fund to RWA* 12.10% 11.48% 11.28% 4.2 Non Performing Loan (NPL) to Total Loan 0.82% 1.02% 1.12%

4.3 Total Loan Loss Provision to Total NPL 193.45% 163.76% 172.12%

Schedule 35

Rs. In '000

Note : Previous quarter figure has been regrouped and rearranged whereever necessary.Capital Fund to RWA for current quarter and previous quarter is calculated in accordance with the norms of BASEL II framework.The above figures are provisional and subject to change upon review by Statutory Auditors and Nepal Rastra Bank.


90

Nepa

l Inv

estm

ent B

ank

Lim

ited

Comparision Of Unaudited & Audited Financial Statement as of Ashad end FY 2065/66

S.No. Particulars As per As per Variance Reasons for Variance Unaudited F/S Audited F/S In Amount In %

1 Total Capital and Liabilities (1.1 to 1.7) 53,739,438 53,600,054 139,384 0% 1.1 Paid Up Capital 2,407,069 2,407,069 - 0% 1.2 Reserve and Surplus 1,996,140 1,500,771 495,370 25% See note 1 below 1.3 Debenture and Bond 1,050,000 1,050,000 - 0% 1.4 Borrowings 38,800 38,800 - 0% 1.5 Deposit (a+b) 46,697,983 46,698,100 (117) 0% a. Domestic Currency 40,791,621 40,791,621 0 0% b. Foreign Currency 5,906,362 5,906,479 (117) 0% 1.6 Income Tax Liability 39,414 38,297 1,117 3% See note 2 below 1.7 Other Liabilities 1,510,032 1,867,017 (356,986) -24% See note 3 below2 Total Assets (2.1 to 2.7) 53,739,438 53,600,054 139,384 0% 2.1 Cash and Bank Balance 7,918,004 7,918,004 (0) 0% 2.2 Money at Call and Short Notice - - - 0% 2.3 Investments 7,403,112 7,403,112 - 0% 2.4 Loans and Advances (Gross) 36,827,157 36,827,157 (0) 0% 2.5 Fixed Assets 1,126,540 1,060,752 65,787 6% See note 4 below 2.6 Non Banking Assets (Net) 375 375 - 0% 2.7 Other Assets 464,250 390,653 73,597 16% See note 5 below3 Profit & Loss Account 3.1 Interest Income 3,267,105 3,267,941 (836) 0% See note 6 below 3.2 Interest Expense (1,686,274) (1,686,973) 699 0% See note 7 below A. Net Interest Income (3.1-3.2) 1,580,830 1,580,968 (138) 0% 3.3 Fees, Commission and Discount 241,853 262,792 (20,939) -9% See note 8 below 3.4 Other Operating Income 76,206 87,575 (11,369) -15% See note 8 below 3.5 Foreign Exchange Gain/Loss (Net) 213,320 185,327 27,993 13% See note 9 below B. Total Operating Income (A.+3.3+3.4+3.5) 2,112,209 2,116,662 (4,453) 0% 3.6 Staff Expenses (225,570) (225,721) 151 0% 3.7 Other Operating Expenses (402,754) (413,884) 11,130 -3% C. Operating Profit Before Provision (B.-3.6-3.7) 1,483,885 1,477,056 6,829 0% 3.8 Provision for Possible Losses (155,484) (166,201) 10,717 -7% See note 10 below D. Operating Profit (C.-3.8) 1,328,401 1,310,855 17,546 1% 3.9 Non Operating Income/Expenses (Net) (3,086) 2,953 (6,039) 196% See note 11 below 3.10 Write Back of Provision for Possible Loss 100,124 114,653 (14,529) -15% See note 12 below E. Profit from Regular Activities (D+3.9+3.10) 1,425,439 1,428,461 (3,022) 0% 3.11 Extra-ordinary Income/Expenses (Net) - - - F. Profit before Bonus and Taxes (E.+3.11) 1,425,439 1,428,461 (3,022) 0% 3.12 Provision for Staff Bonus (129,585) (129,860) 275 0% 3.13 Provision for Tax (381,278) (397,982) 16,704 -4% See note 13 below

G. Net Profit/Loss (F.-3.12-3.13) 914,575 900,619 13,956 2%

Schedule 36

Rs. In '000

Notes:

1 Due to Change in Net Profit and proposed dividend2 Due to Change in Net Profit3 Interest accrued but not due netted off with Interest suspense in Audited B/S4 Software shown in other assets in Audited Financial Statements5 Interest accrued but not due netted off with Interest suspense in Audited B/S6 After year end adjustments7 After year end adjustments8 Netting of commission paid to NRB & Bank Charges9 Netting of commission paid to NRB10 Due to addition in loan loss provision upon finalization of financial statements11 Amortization of software of Rs 4.5 Million shown as expense in unaudited resullt and Dividend recevied of 1.6 million shown as income in audited results.12 Excess provision on loan & Investment written back upon finalization of financial statements13 Due to change in loss provision and booking of deffered tax liability in audited financial statements


91


Five Years Financial Summary

Balance Sheet 2061/62 2062/63 2063/64 2064/65 2065/66

Assets 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009Cash & Bank Balance 1,340,481 2,335,521 2,441,514 3,754,942 7,918,004Money at Call & Investment 4,074,189 5,672,869 6,868,650 6,874,024 7,399,812Loans & Advances (Gross) 10,453,164 13,178,152 17,769,100 27,529,305 36,827,157Net Fixed Assets 320,592 343,450 759,456 970,092 1,060,752Other Assets 202,226 201,090 234,797 277,597 391,028

Total Assets 16,390,652 21,732,082 28,073,517 39,405,959 53,596,754

Liabilities Borrowings (including Debentures) 350,000 550,000 800,000 1,050,000 1,088,800Customers' Deposit 14,254,574 18,927,306 24,488,856 34,451,726 46,698,100Other Liabilities 278,796 437,392 423,866 684,794 1,316,063Provision For Loan Loss 327,108 401,944 482,673 532,652 585,951

Total Liabilities 15,210,479 20,316,642 26,195,394 36,719,173 49,688,914

Net Assets 1,180,173 1,415,440 1,878,124 2,686,786 3,907,840Shareholders' FundPaid-Up Capital 587,739 590,586 801,353 1,203,915 2,407,069Reserve Fund 567,511 778,904 955,417 1,415,392 1,344,213Profit & Loss Account 24,924 45,950 121,354 67,479 156,558Total Shareholders' Fund 1,180,173 1,415,440 1,878,124 2,686,786 3,907,840Interest IncomeLoans, Advances & Overdrafts 769,195 964,689 1,302,122 1,907,261 2,906,055Others 117,605 208,053 282,865 287,014 361,886Interest Expenses (354,549) (490,947) (685,530) (992,158) (1,686,973)Exchange Gain 102,518 125,747 135,355 165,839 185,327Commission Income 93,551 115,942 163,899 215,292 262,792Other Operating Income 56,567 46,607 114,096 167,953 202,228Other Non-Operating Income 6,192 391 1,426 7,048 2,953

Total Income 791,079 970,482 1,314,233 1,758,249 2,234,268

Staff Expenses 97,004 120,664 145,371 187,150 225,721Operating Expenses 182,915 190,605 243,431 313,154 413,884Non-Operating Expenses - - - - -Staff Bonus 37,075 50,491 72,338 101,996 129,860

Total Expenses 316,994 361,760 461,139 602,300 769,465

Profit Before Provision & Tax 474,085 608,722 853,094 1,155,950 1,464,802Loss Provision 140,409 103,808 129,719 135,989 166,201Income Tax 101,529 154,378 221,977 323,229 397,982

Net Profit/(Loss) After Tax 232,147 350,536 501,399 696,732 900,619

Rs. In '000

Charts


Profit after Tax(Rs. in million)

901

697

501

351

232

+12.76%

FY06

6

FY06

5

FY06

4

FY06

3

FY06

2

Share holders fund(Rs. in million)

3,90

8

2,68

7

1,87

8

1,41

5

1,10

8

FY06

6

FY06

5

FY06

4

FY06

3

FY06

2

+19.7%

Share holders fund(Rs. in million) Return on Total assets

FY06

6

FY06

5

FY06

4

FY06

3

FY06

2

1.68

%

1.77

%

1.79

%

1.61

%

1.42

%

-0.09%

Return to Shareholders

FY06

6

FY06

5

FY06

4

FY06

3

FY06

2

23%

26%

27%

25%

20%

-3%

Total income

Interest income3,26883%

Comission income263

7%

Other income205

5%

Foreign ExchangeProfit 185

5%

Application of income

Other Reserves419

11%

Dividend481

12%

Income Tax398

10%

Provision296

8%

Expenses2,327

59%

Application of income

Saving Account17,066

36%

Current Account3,757

8%

Margin Account728

2%

Call Account13,514

29%

Fixed deposit11,633

25%

Diposite mix

SECTORAL LOAN DETAILS(F/Y 2065-66)


Industry/ Sector 142.71 Agriculture 176.10 - Mining - 8,353.73 Manufacturing 10,753.67 1,335.39 Construction 1,889.89 325.44 Metal Products, Machinery And Electronics Equipment And Assemblage 297.71 51.17 Production And Assemble Of Transportation Equipment 110.92 1,191.57 Transport, Communication And Public Utilities 1,701.85 4,077.65 Wholesalers And Retailers 4,572.56 2,799.93 Finance, Insurance And Real Estate 4,479.26 3,123.34 Service Industries 3,294.07 269.18 Consumption Loan 455.68 5,859.19 Others 9,095.45

27,529.30 Total 36,827.16

Rs. in Million

GROSS VALUE ADDED STATEMENT FOR THE FISCAL YEAR 2065-66

Previous Year PARTICULARS This Year Rs. Rs. % Rs. Rs. %

SOURCE OF VALUE ADDITION: 2,750.41 Income from Operating and Non-operating activities 3,921.24 1,295.21 Less:Operating, Administrative and Non-Operating expenses 2,080.17 1,455.19 100.00 Gross value added before depreciation 1,841.07 100.00 APPLICATION OF VALUE ADDITION: 289.15 19.87 TO Employees 355.58 19.31 323.28 22.21 TO Government 397.98 21.62 70.30 4.83 TO Repair & Maintenance 96.58 5.25 TO Capital Provider: 75.79 Interest on Borrowings 90.30 491.60 567.38 38.99 Dividend to Shareholders 481.41 571.71 31.05 326.44 TO Expansion, Reserves, & Retention 486.68 (121.35) 205.09 14.10 Less: Last year's accumulated profit (67.48) 419.21 22.77

1455.19 100.00 TOTAL 1,841.07 100.00

Rupees in Million


Des

ign

and

Proc

esse

d by

: Pow

erCo

m, 5

5529

87

Annual Report 2008/2009w w w . n i b l . c o m . n p

An

nu

al R

ep

or

t 2

00

8/2

00

9N

ep

al In

ve

st

me

nt

Ba

nk

Lim

ite

d

Date post:	28-Nov-2014
Category:	Documents
Upload:	shalini-jhunjhunwala
View:	106 times
Download:	0 times