GIB|JOSHI & BHANDARY . crarowa ccomans + oF0,50.20 Kathmandu, Ne Tel: 977-1-4419964 Tel: 977-1-4429550 INDEPENDENT AUDITOR'S REPORT TO. Fax: 977-1-4413038 THE FUND MANAGER AND UNIT HOLDER OF NMB HYBRID’E24"™"12.207.9P Report on the Audit of the Financial Statements Opinion We have audited the accompanying financial statements of NMB HYBRID L-1 (“the Scheme”) which comprise the Statement of Financial Position (SoFP) as at Ashad 31" 2078 (July 15, 2021), the Statement of Profit or Loss (including Other Comprehensive Income), the Statement of Change in Equity and the Statement of Cash Flows for the year then ended on that date and a summary of Significant Accounting Policies and Notes to Account In our opinion and to the best of our information and explanations provided to us, the aforesaid financial statement referred to above present fairly, in all material respects, the financial position of the Scheme, as at 31° Ashad 2078 (July 15, 2021), and its financial Performance, changes in equity, cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, in accordance with Nepal Financial Reporting Standard (NFRS) and other prevailing laws, Basis for Opinion We conducted our audit of the financial statements in accordance with Nepal Standard on Auditing (NSA). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Scheme in accordance with the Handbook of Code of Ethics for Professional Accountants issued by the Institute of Chartered Accountants of Nepal (IAN), together with the independence requirements that are relevant to our audit of the financial Statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the financial statements Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significant in the audit of the financial statements of the current period. Those matters were addressed in the context of the audit of financial statement as a whole, and in forming the auditor opinion thereon, and the auditor does not provide a separate opinion on these matters. We have determined that there are not any key audit matters to communicata in our report Responsibility of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of these financial Rafements in accordance with Nepal Financial Reporting Standards. This responsiblity Includes designing, implementing and maintaining intemal control relevant to the preparation and fair presentation of financial statement that are free from material misstatement whether due to fraud or error and selecting and applying appropriate accounting policy and making accounting estimate that are reasonable in the circumstance. In preparing the financial statements, management is responsible for assessi Scheme's ability to continue as a going concern, disclosing, as applicable, matters t6concer and using the going concern basis of accounting unless management either intends to liquidate the Scheme or to cease operations, or has no realistic alternative but to do so. The Board of Directors / Scheme Managers are responsible for overseeing the Scheme's financial reporting process. Auditor's Responsibility for the Audit of the Financial Statements. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with NSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with NSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. © Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Scheme’s internal control. + Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Scheme’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's Teport. However, future events or conditions may cause the Scheme to cease to continue as a going concern. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including an significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards, Report on Other Legal and Regulatory Requirements Based on our audit, we would like to further report that: 1. We have obtained all the information and explanations, which, to the best of o1 and belief, were considered necessary for the purpose of our audit,2. Proper books of accounts of the scheme as required by law have been kept by the Scheme as far a8 appears from our examination of such books; 3. The Financial Statement dealt by this report are prepared in accordance with Nepal Financial Reporting Standard (NFRS), Securities Act 2063, Securities Board Regulations 2064, Mutual Fund Regulations 2067, Mutual Fund Guidelines 2069 and the same are in agreement with the books of accounts maintained by the Scheme; 4. The Scheme has invested its funds according to Mutual Fund Regulation 2067 and the operations of the Scheme were found satisfactory. 5. To the best of our knowledge and in accordance with explanations given to us and from ‘our examination of the books of accounts of the scheme, necessary for the purpose of ‘our audit, we have not come across any action committed against the interest of unit holders. For, Joshi and Bhandary, Chartered Accountants Place: Dillibazar, Kathmandu Manmohan Raj Kafle, FCA Date: August 20, 2021 Partner UDIN ~ 210823CA00106CnV4)NMB Hybrid Fund L-1 Registered under Securities Act, 2063 & Mutual Fund Regulations, 2067 on 14th Bhadra 2073, & operating under NMB Mutual Fund ‘Statement of Financial Position ‘As on 31° Ashad 2078 [Cash and Cash Equivalents 7 321,108,954 280,677,877 [Financial Assets Held for Trade 2 1,205,481,592 759,121,119 [Receivables 3 20,035,349 19,050,092 [Financial Assets Measured at Ammortized Cost 4 150,000,000 - [Financial Assets Measured at Ammortized Cost 100,000,000 | 10,787,550 7,000,000,000 148,101,538 ‘As per our attached report of even date pitt wy Dev Giri Ashish Raj Pandey Kamal Prasad Nepal Femur a Murarka Accounts Officer Head-Fund Management Officiating CEO Jain nie cassie Subedi Yogendra eee Ra Tips Chhetri Su ea Date: August 16, 2021 Place: Kathmandu, NepalMB Hybrid Fund L-I Registered under Securities Act, 2063 & Mutual Fund Regulations, 2067 on 14th Bhadra 2073 & operating under NMB Mutual Fund Statement of Profit or Loss and Other Comprehensive Income For The Period 1" Shrawan 2077 to 31" Ashad 2078 interest Income from Financial Assets 3 49100347 54,032,509 Dividend Income 9 4,235,212 10,250,891 income From Sale of Financial Assets Hala] 5) for Trade 214,907 445 38,770,694 [Unrealised Gain/(Loss) on Financial Asset ul 377,991,917 64,356,417 [Fund Management, Depository & 24,876,000 487.138 ‘As per our attached report of even date pe HL \ Kapil Dev Giri Ashish Raj Pandey Kamal Prasad Ne ‘Pashupati Murarka Accounts Officer Head-Fund Management Officiating CEO. Chairman cas p> : Manish Jain Harish Chandra Subedi _Yogendra B: ‘Thapa Chhetri Sunity’ Hada Director Director Director Director Date: August 16, 2021 Place: Kathmandu, NepalMB Hybrid Fund L-I Registered under Securities Act, 2063 & Mutual Fund Regulations, 2067 on 14th Bhadsa 2073 ‘& operating under NMB Mutual Fund ‘Statement of Cash Flow For The Period 1" Shrawan 2077 to 31 Ashad 2078 [Net Income for the year 620,875,759 146,873,458 fincrease/ (Decrease) in Payables (3.175.824) 297,365) increase} ‘Decrease in Investments (118,368,856) (246,931,378) (increase) /Decrease in Unrealised Gain on |inancial Assets Held for Trade 677991917) (64356419 Increase) /Decrease in Receivables (4,997,374) As per our attached report of even date te Kapil Dev Giri pene Kamal Prasad Nepal Pate ‘Accounts Officer Head-Fund Management Officiating CEO > Gut Mii ia Harish eae Subedi Yogendra niche Chhetri Sunity Hada Director CA. Manmol eA Joshi & ie eer Date: August 16, 2021 Place: Kathmandu, NepalS 0291 astny ect — oi a “PEEL eM? Aayang, preecs elec poe epeabay $Paqns espUEID YSU ref qsroeyy PR ky gc een a Aapura fx usiasy Sorp t yyt 3e9K MUL 20H SOD IGOR cule ere or 90 meentg pd Pat EC ov SETS ap Fa 1 Peng Pease SNSignificant Accounting Policies and Notes to the Financial Statements for the Year Ended 31" Ashad 2078 A. Background NMB Hybrid Fund L~ I under NMB Mutual Fund is registered under Mutual Fund Regulations, 2067 as a closed — end scheme. ‘The Fund has taken approval from Securities Board of Nepal (SEBON) for operation and issue of the unit scheme on 2073.05.14. The fund issued application from 2073.05.26 and the allotment was made on 2073.07.09. Fund sponsor of NMB Hybrid Fund L-Tis NMB Bank Ltd. and NMB Capital Ltd, a subsidiary of NMB Bank Limited, duly licensed by SEBON has been appointed as the Fund Manager of the Scheme by the Sponsor after obtaining due approval from SEBON. Further, the Fund Manager is also providing Depository services to the unit holders of the Scheme in line with the prevailing regulations on Mutual Fund. ‘The Fund Sponsor on obtaining due approval from SEBON confirmed the appointment of the following distinguished personalities as the Fund Supervisors of the Fund. Mr. Ashok Raj Pandey CA. Nanda Kishor Sharma Dr. Bipin Chandra Adhikari Mr. Krishna Gyawali De. Rishikesh Wagle B. Significant Accounting Policies [Statement of compliance ‘The Financial Statements have been prepared in compliance with Securities Act, 2063, Mutual Fund Regulations, 2067, Mutual Fund Guidelines, 2069 and in accordance with Nepal Financial Reporting Standards (NFRS) to the extent applicable as issued by Accounting Standards Board (ASB), Nepal on 13" September 2013, NAS 39 Financial Instruments: Recognition and ‘Measurement is notified to be applicable for Financial Instruments. Il. Basis of preparation ‘The Financial Statements has been prepared in compliance with the applicable standards. Financial assets held for trade are measured at Fair Value through Profit or Loss. Management uses specific valuation methodologies for unlisted equities (rights shares and IPO shares) and corporate debentures which can have material impact on the financial statements. ‘The figures presented in Financial Statements are rounded to nearest NepMlese Rupee and is the pe wig al B® at1. Cash and Cash Equivalent Cash and Cash Equivalent presented in Statement of financial position and cash flow statement represents the cash at banking and financial institution and cash in hand. Parola ooeNeR | NDR Cann NN Bek Lad sae Ta Kaa Book Eo 360 AMT Clb TE Bare ‘aoe T7428 Sng De Bank Ld ET Te aa ETA asia Sans Sia bea 21358 on inh Bias Beak ES Tasa6Ae eer nana = a nen TEpesas5 25199 Nepal Bagh Bank Lad a : ‘Cashin Hans) 5 95 Tea) | aor | py a ve “ 2 Financial Asset Held for trade Financial instruments are classified at fair value through profit or loss where they are trading securities or where they are designated at fair value through profit or loss by management. ‘The trading securities are debt securities (listed/unlisted) and equity shares (listed /unlisted) acquired for the purpose of selling in certain period of time frame as per the favorable or unfavorable circumstances in the market, generally in the best interest of the fund provider. Such securities are recognized as Financial Assets Held for Trade in the Statement of Financial Position measured at their fair value. Gains and losses arising from changes in their fair value of the trading securities are recognized in Statement of Profit or Loss. ‘The Fair Value of assets traded in active markets are based on the closing price of last trading date and for the assets which doesn’t have active market, management’ prepare valuation methods and use it to value such assets and liabilities until such assets and liabilities are actively traded in the market of any other regulatory body determines its fair value. Financial assets are derecognized when the right to receive cash flows from the assets has expired or where substaptially ll risks ee rewards of ofmership have been trans y)ae i. Listed Equities as on Ashad End 2078 Market Price As | Valuation As on | SN. Name Unit | on Ashad End | Ashad End 2078 2078 (NPR) (NPR) 1_ | Nepal Doossanchar Company Limited 12,280 1314 16,135,920 2_| Nepal Investment Bank Ld, Promoter Share 44946 403 18,115,238, 3_| Lumbini General Insurance Co, Lad, 10,039 780 7,830,420 4 _| Neco Insurance Go. Lid 14,490) 1348 19,532,520 3 _| Siddhartha Insurance Led 9,880 1,058 10,853,040 6 _| Life Insurance Co. Nepal 5.500 2342 12,881,000 7_| National Life Insurance Co. Led 15,840 15 18,231,840 8 _| Citizen Bank Intemational Limired 40,793 386 15,746,098 9 _| Prime Commercial Bank Ltd 56,193 49 26916,447 10_| Siddhartha Bank Limited 51,456 25,933,824 11_| Nepal Bangladesh Bank Limited 30,055, 86 13,103,108 12_| Sana Kisan Bikas Bank Lad 12,810 1,640 21,008,400 13_| Sunsise Bank Limited 56,537 368 203522951 14_| Chhimek Laghubira Bikas Bank Limited 15,982 1,738 27,776,716 15_ | Machhapuchhre Bank Limited 8.075 385 24,283,875 16_| NIG Insurance Company Ld. 16841 4,220 20,546,020, 17_| Prabb Insurance Led 11,084 960 10,640,640 18_| Everest Bank Limited 3747 738 27,414,486 19 | Deprose Laghubirta Bittya Sanstha Limited 9,893 1,686 16,679,598 20_| Mitesi Development Bank Limited 238. 586 14,264,998 21_| Excel Developmest Bank Led 10,650 855 9,108,750 22_| Global IME Bank Limited 60,347 I 26,613,027 23_| Himalayan Bank Limited 15,700 484 7,598,800 24_| NIC Asia Bank Led 33132 998 32933,208, 25 _| Samata Gharelu Laghobita Bitiya Sanstha Limited 1 1,655 1,655 26_| Nerode Laghubita Bikas Bank Limited 897 1,600 14,363,200 27_| Swarojgar Laghu Birta Bikas Bank Lid 10476 1,300 15,714,000 28 _| Sagarmatha Insurance Co, Led 11,667 13a 15,680,448 29_| Nepal SBI Bank Limited 26,269 09 10,744,021, 30__| Prime Life Insurance Company Limited 13,902 958 13,262,508 31_| Shikhar Insurance Co. Le. 54 1952 10,431,488 32__| Taragaon Regency Hotel Limited 16,650 400 6,660,000 33_| First Micro Finance Development Bank Lid 691 823 5,342,093, 34 | Laxmi Laghubitea Bittiya Sanstha Led 7244 2230) 16,588,760 35 _| Swabalamwan Bikash Bank 1038 1,659 17,316,642 36 _| Sania Bank Limited 55421 485 26,879,185 '37_| Nepal Agro Laghubita Biya Sanstha Limited 531 549 291,519 '38_| Ganapati Microfinance Bittiya Sanstha Limited 1 1,780 1,780 39 | Bottless Nepal (Terai) Limited 1,002 10262 10,282,524 40 | Muktinath Bikas Bank Ld. 59991 oF 39,414,087 41_| Shine Resunga Develypment Bank Led 4 0610 “ YI AX42_[ Nabil Bank Limited 1359 43 | Nabil Balanced Fund 2 500,000 14.10 44 | Prabhu Bank Limired 56832 57 45__| Garima Bikas Bank Limited (67426 544 46 | Adhikhola Laghubita Bitiya Sanstha Limited 183 465 47_| Agriculture Development Bank Limited 8760 49 48_| Citizens Mutual Fund -2 500,000 1415 49_| Samaj Laghubita Biniya Sanstha Limited 174 105.10 18,287 50 | Global IME Samunnat Scheme-1 as 2028 10,088,752 51_| NIBL Samsiddhi Fund 1 750,803 1436 10,781,531 52 | Chandragic Hills Limited 1193 1,505 1795465 53_| National Microfinance Bitiya Sanstha Led. 4572 3,603 1672916 54 _| Kumari Equity Fond 200,000 1050 2,100,000 5 Se re — IPO & Unlisted Equities as on Ashad End 2078 H 3,027 608 2_| Sidahartha Insurance Led Bonus | 1,186 1058 [1.254788 3_| Lumbini General lsurance Co Lad Bons 302 Tao | 391560 4_| Nerade LaghobitaBikas Bank Limited Bonus 718 1,600 | 1,148,800 3_| Nepal Agro Laghubita Biya Santha Limited Bonus 7% 50] 40626 @_| Saparmatha Insurance Co Lid Bonus | 1285 aaa | 1724352 7 | Nts Saag Fn Spee ain | __1745 | _aneasm ‘Swabalamwan Bilash Bank Bors | 1964 1659 | 3201,456 | Jeevan Bikas Laghubita Bnya Sanstha Lad wo [| _ 3380 388.29 [131220 ‘Nanalamana Smart Laghubica Bitiya Sastha 10 | Manas 10 sas 1si43] 100701 T_| Union Life Insurance Company Limited wo | 10238 15395 | 1576140 712_| Mailing Khola Jal Vidhyut Company Lrd PO. 1,169 10299 | 120395 Listed Debentures as on Ashad End 2078 = 1 __| 9% NIC Asia Debenture 2081/82 50,000 1018 50,900,000 2 | 1025¥4 NBBL Debenrare 2085, 50.000 115 37,250,000 3 _| 10.25% Machhapuchhre Bank Debenture 2085 49,902 119 55,840,338 4 | 10% Himalayan Bank Debenture 2083 10,000 1,128 11,280,000 Pre hy gi go Ww5] 10% Laxmi Bank Debenture 2086 20,000 1060 21,200,000 | 11% NIC Asia Debenture 082/83 30,000 1.246 37,380,000 10.50% SBI. Debenture 2082 25,295 134 28,605,150 10% Sanima Bank Limited Debenture 30,790 att 34207,690 10% Nepal SBI Bank Debentre 2086 1.617 1,065, 1,722,105 10 _| 10% Prabhu Bank Debenture 2084 11,492, 1,050 12,066,600 11_] 10.25% Sunrise Bank Debenture 2083 1,870 1,086 2,030820 12 [9.5% NCC Debenture 2086 13a75 1,069 14,405,045 1_ | 85% Nepal Bank Debenture 2087 4878 1,000 2 | 85% RBBL Debenture 2083 ‘v. Market Value of Financial Assets Held for Trade as on Ashad End 2078 2073/74 = 200,860,576 206,186,637 (6,326,062) (6,326,062) 2074/75 335,173,500 $28,968,781 (03,795,272), (88469211) 2075/76 447,833,328 540,372,220 (02,538,896) 1.256376 2076/77 759,121,119, 787,303,598; (08,182,479) 4356407 2077/78 1205 481,892 855,672.54 300,800,438 377991,917, vi. Listed Equities as on Ashad End 2077 1__| Adhikhola Laphubitta Bittiva Sanstha Limited 1143 465 531,495 2 _| Agsculnare Development Bank Limited 42,400 385 16,324,000 3__| Bottiess Nepal (Tera) Limited 2,662, 6200, 16,504,400 4 | Chihimek Laghubitt Bikas Bank Limited 19,680 1090 21,451,200 3_| Citizen Bank Intemational Limited 28,683 188 5,383,008 6_| Citizens Mutual Fund 2 500,000, 10 5,000,000 7_| Deprose Laghubita Bitiya Sanstha Limited 8374 866 7.251,884 | Bverest Bank Limited 35,378 5 23,880,150, 9)_| Excel Development Bank Led. 21,904 298 6.527.392 10_| First Micro Finance Development Bank Lid 10,494 355Gandaki Bikas Bank Led 24,000 Garin Bikas Bank Limited 17,599 Global IME Bank Limited Himalayan Bank Limited 15, | Himalayan General Insurance Co. Ld 5572 a0 2.34668 16 | Kumari Bank Limited 16.004 186 2976744 17_| Laxmi Laghbits Biya Santha Led 6299 214 7,646,986 18 | Laambini General Insurance Co. Led 9285 453 4.206.105, 19 _| Machhupuchbre Bank Limited 4026 220) 854,120, 20_| Mite Development Bank Limited 32929 307 10,109,203 21 _| Moktinath Bikas Bank Lad 30924 312 9,648,288 22_| Nabil Balanced Fund 2 300,000 99 4950,000 25_| Nabil Bank Limited 23.859 76 18252135 24_| National Life Insurance Go. Li 12581 662 3325.22 25_| Neco Insurance Co. Lid 16990 or 19313930 26_| Nepal Agro Laghubita Biya Santha Limited 531 720) 382,320 27 _| Nepal Bangladesh Bank Limited 27001 200 5643,209 28_[ Nepal Doorsanchar Company Limited 37.280 os 37,518,400 29 _| Nepal Investment Bank Led. Promoter Share 48517 363 17611 671 30_| Nepal SBI Bank Limited 6748 5, 2934075 31_[ Neale Laghubita Bika Bank Limited 12,154 76h 9290,198 32_[ NIC ASIA Laghubita Biya Sastha Limited 9,609 332 5,111,988 33_| NIG Insurance Company Led 8,085 oF 5311,845 34_| Prabhe Bank Limived 37,120 230 8,537,600 35_[ Prabha Tasurance Le 13404 45 6366500 36_| Prime Commercial Bank Led 40,168 255 10242,840 37_| Prime Life Insurance Company Limited 8226 331 4,308,006 38_| Sagarmatha Insurance Co. Lid 11,167 700 7,816,900, 39 | Sahayog! Bikas Bank Limited 9360 197 1,962,120 40 _| Samata Microfinance Bitya Santa Led 1 660) o “_| Sana Kisan Bias Bank Lod 71 BOL 9927931 2_| Senin Bank Limited 35,838 330 11,826,540 $8_| Shikbar Insurance Co. Lea 4755 1019 4815545 “44_| Shine Resunga Development Bank Lid 28,020 22 6,353,640 45_| Siddhartha Bank Limited 36479 26 10,797,784 46_| Siddhartha Insurance Led 15,380 380) 920,400 47_| Sunrise Bank Limited 38712 2 9,058,608 “8_| Swabalamban Laghubitea Biya Sanatha Limited 7237 1233 4923221 29_| Swacogae Lagh Bia Bias Bank Led 3321 923 7,680,285 30 _| Taraguon Regency Hotel Limited 16,650 187 3.113.550 31_| Universal Power Company Lud 64.256 70 4.497.920Valuation Price | Valwation As & ee Bese | veel |-aren diet | etna . ens | Endy 1 [Hiya ned Honus | 2560 sa) _13e0 2 [Nepal Bangs Bank ind Bons] 1350 29 [a0 3 [Pane Lif sane Go La ome [8 ssi | sss, 4 [ise Devipoea Bank Lal ons | 3.46 26 | 16308 3 Sen Ka is uk a enue | 4007 ior] saa67 [Pati nse ons | 0 3] siaas0 7 [iin Gea Tsuna toms [75 ase [Nel aghbisBias Bank Lined onus] 83 ro | 7303 9 [Dep Lagi Bi Sasha Lind | Bon _| 2968 aco] 2sraaee 10 | NI Saga Fd Cpe Ei aso o00 ior] 2707500 it [ Seabaannn Laghabina Bina Sansa nied | Bom | 3702 as] aa 12 NEG IsranceConpny Ld ph [sas erp aasrao7 1B_[ Sons Lagi Bi Sn Led | WO [ 1427 mae [tata 14 Sin Reinga Developer Bak Lad Bonus [43 maz] peas 15 | Aj sane id FO | ena Tae [ont.n 16 | Hiyan Gener insane Co ad onus [23 wo | sasr 1__| 85% Citizen Bank Bond 2077 35,007,350 2 [oy NIC Asia Debenuze 2081/82 50,000 51,480,000 3 _ [10.2574 NBBL Debenture 2085 50,000 48,338,500 4 | 102594 Machhapuchhee Bank Debenture 2085 | 49,902 $9,892,519 3 | 10% Himalayan Bank Debenture 2083 10,000 10,110 500 6 | 10% Laxmi Bank Debenrare 2086 20,000 19,700,600 7 [41% NIC Asia Debentre 082/83 30,00 31,500,600 8_| 10.50% SBL Debenruze 2082 25,000 25,400,000 9 | 10% Sanima Bank Limited Debenrare 25,000 26,400,000 10 al SBI Bank Debenture 2086 1,000 996,010 3 Receivables Receivables are non-derivative financial assets with fixed or determinable payment that are not quoted in an active market and it is ye all of the initial investment will be Va OX &secovered, other than because of credit deterioration. Receivables comprise interest receivables, dividend receivables, and other receivables. Receivables are ini ly recognized when cash is advanced to the borrowers at fair value. Receivables are derecognized when the right to receive cash flows from the assets has expired or ‘where substantially all risks and rewards of ownership have been transferred. z ‘Bs on Ashad End 2075 ‘son Ashad End 2077 Particulars hos ers Tnerest Receivables 18,310,207 19,010,450 Other Receivables 1,519,100 Dividend Receivables 206082 79,642 Total 20035309 | 19,090,092, 4 Financial Assets Measured at Amortized Cost, Fixed Deposits are non-derivative financial assets with fixed ot determinable payment that are not quoted in an active market and it is expected that substantially all of the initial investment will be recovered, other than because of credit deterioration. Fixed deposits are initially recognized when cash is advanced to the borrowers at fair value. Fixed deposits are debt instruments and are measured at Amortized Cost Method as it meets two tests that are business model test and the cash flow test. 8) Business Made! Test: ‘This test is met where the purpose is to hold the asset to collect the contractual cash flows (rather than to sell it prior to maturity to realize its fair value changes). ‘b) Cash Flow Test: This test will be met when the contractual terms of the asset give rise on specific dates to cash flows that are solely receipts of either the principal or interest. ‘This requires that the fair value of the fixed deposit is measured based upon expected future cash flows discounted at the original effective rate for each fixed deposit. Eg. Measurement of Fixed deposit using amortization cost method for the fixed deposit held at Everest Bank Ltd is of NPR 100,000,000.00. ‘Then calculation is done as shown in the table below: Taterest @11.90% 5,966,301 Pancipal 100,000,000 “Tonal (Interest +Principal) 105,966,301 Discount Factor 09457Valuation of other fixed deposit is done similarly as above. Fixed deposits at banking and financial institutions have been recognized at amortized cost method where interest rate is taken as effective interest rate for discounting, Impairment of financial assets measured at Amortized cost is required and done if the fixed deposit issuer faces financial difficulties and there is doubt regarding the full recovery of the amount due. Fixed Deposit Kamana Sewa Bikas Bank Ltd ‘Shangzla Development Bank Lidl “Muktinath Bikas Bank Led 5 Financial Liabilities Financial Liabilities are measured at amortized cost using effective interest rate. Financial liabilities are subsequently measured at amortized cost, with any difference between proceeds net of directly attributable transaction costs and the redemption value recognized in the statement of profit o: loss over the period of the borrowings using the effective interest method. Financial liabilities are derecognized when the liabilities are discharged. A financial liability is ‘written off when the obligation is discharged, cancelled or expires. “TDS Payable 199,192 Fund Management Fee Payable 7/801 613 Depository Fee Payable 1208515 Supervisor Fee Payable 76,218 SEBON 331462 “Annual Listing Fee Payable 98,500 CDS Software Installation Cost 19,700 Scheme Audit Fee Payable 167,250 NEG Right Payable 485,100 6 Fund Capital ‘The capital pf the Scheme comprises of the following: Wo Yat! Pyeah vyParticulars ‘Ashad End 2078 (NPR) | Ashad End 2077 (NPR) Unit Capital Account 850,000,000 '850,000,000 Unit Seed Capital Account NMB Bank 140,000,000 140,000,000 ‘Seed Capital - NMIB Capital 10,000,000 10,000,000 _ Total 3 +1,000,000,000 1,000,000,000 7 Reserve Retained earnings are the cumulative net earnings or profit after accounting for dividends and are sometimes referred to as the earnings surplus. Retained earnings are the net earnings after dividends that are available for reinvestment in the company’s core business or to pay down its debt. Itis recorded under shareholders’ equity on the balance sheet. ‘Opening Reserve 148,101,538 101,265,759 (Carrent Year Profit 20,875,759 146873458 Dividend Paid (60,000,000) (100,000,000) ior Pesiod Adjustments 33072 67.09) 8 Interest Income frony Financial Assets Interest Income on fixed deposits, call deposits and bonds and debentures are recognized on accrual basis in income statement. Bank Interest Income Unrealized 18,310,207 19,010,450 ‘Bank Interest Income Realized 30,790,141 35,022,059, 9 Dividend Income Divend income on Financial Asets held for uade is recognize, at and when, the dght to receive is established. ‘Dividend Income Realized 4,064,184 10,171,249 Dividend Income Unsealised 171,029 79,64210 Income From Sale of Financial Asset Held for Trade Gain (Loss) on sale of financial assets held for trade is recorded in the income statement. Particulars ‘Rshad End 2078 (NPR) | Ashad End 2077 (NPR) Capital Gain 215,028.19 38,770,604 Capital Loe 5 ‘Net Capital Gain/ (Loss) 38,770,608 AL Unrealized Gain/(Loss) on Financial Asset Held for Trade Changes in fair value of financial assets is recorded as unrealized gain/ (loss) in the income statement. 2073/74 206,186,637 (6,326,062) 6,326,062) 2074/75 335,173,509 | 428,968,781 (03,795,272) (8.469211) 2075/76 7 B33,324 | _—_540,372,220 (02,538,896) 1,256,376 2076/77 759,121,119 | __ 787,303,598 (3,182,479) (64,356,417 2077/78 1,205,481,892 | 855,672,458 349,800,438 377,991,917 12 Fund Management, Depository & Supervisor Fees All expenses are recorded on accrual basis in the income statement. Following fees are incurred by the Scheme. i Fund Management fees: 1.5% of the NAV ii. Fund Supervisor Fees: 0.1% of the NAV. ‘ii Depository Fess: 0.2% of NAV iv.Jmpairment on financial assets measured using amortization cost method is presented in income statement, NAV (Net Auset Value) fr this purpose is computed quarterly on basi of average of meekly NAV forthe period. Fund Management Fee 720,730,000 15,727,500 Depository Fee 2,768,000 3,281,000 Fund Supervisor Fee 4,382,000 1,048,500 13. Annual Operating Expenses All expenses are recor al basis in the income statement. yr ghParticulars: “Ashad End 2078 (NPR) | Ashad End 2077 (NPR) | Arnnval Listing Pee 150,000 170,000 Scheme Audit Fee 109,500 169,500 Auction Form 400 Advertisement 133,896 B28 ‘Good for Payment Change 400.00 Bank Charges 392 2335 ‘CDS Software Installation Cost 20,000" : Application Pee 10,000 ‘CDS Charges 350 150 Toul 487,058 480,053 14 Other Income Particulars | Ashad End 2078 (NPR) | Ashad End 2077 (NPR) ‘Other Income 3975 E ¢ Toual ie Ro Tae C. General Information I. The financial instrument is any contract that gives rise to a financial asset of one entity and a financial lability or equity instrument of another entity. Financial_assets; cash and cash equivalent, assets held for trade, Fixed deposits and receivables are financial assets. Derecognition Financial Assets are derecognised when the contractual right to receive cash or any financial assets has expired or all the risks and rewards of ownership are transferred or there is transfer of control of the assets. TI, Financial Liabilities are measured at amortized cost using effective interest rate. Equity Instruments are intially measured at fair value less any equity issue cost. The issue cost has been written off against the equity share capital Initial Recognition All financial instruments are initially recognized at their fair value. For the instruments that are not carried at fair value through profit or loss, directly attributable transaction cost is capitalized whereas for those instruments which are carried at fair value through profit or loss, directly attributable transaction cost is charged fo profit or loss. elt we a i —oSubsequent Recognition Financial assets and liabilities held at fair value through profit or loss are subsequently measured at their fair value and any gain or loss arising is directly taken to Income Statement as Unrealized Gain/(Loss). Derecognition Financial assets are derecognised when the right to receive cash flows from the assets has expired or where substantially ll risks and rewards of ownership have been transferred. Financial liabilities are derecognised when the liabilities are discharged. A financial liability is “written off when the obligation is discharged, cancelled or expires. NERS 13: Fair Value Measurement: This NFRS defines fair value as the price that would be received to sell an asset of paid to transfer a liability in an orderly transaction between ‘market participants at the measurement date. Financial instrument reported in the financial statements has been measured on fair value basis using Fair value hierarchy ‘Valuation of financial assets and liabilities, Assets and liabilities carried at fair value have been classified into three level of fair value hierarchy according to the methods used in valuation. Level 1 Inputs: Level 1 inputs are quoted price (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Listed Equity Shares, Bonus Shares, Right Shares and Listed Debentures are classified as level 1 input. Level 2 Inputs: Level 2 inputs'are inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly or indirectly. Listed debenture but not traded for last 30 days is valued relatively using appropriate discount rate based on comparable debentures. Level 3 Inputs: Level 3 inputs are inputs are unobservable inputs for the asset or liability. ‘Any adjustment to a Level 2 input that is significant to the entire measurement might result in a fair value measurement categorized within Level 3 of the fair value hierarchy if the adjustment uses significant unobservable inputs. Valuation of Bonus and Right Shares Nepal Stock Exchange makes an adjustment to the share price whenever a listed company offers Bonus and Right Shares. Such adjustments in prices are made immediately after the book closure dates such that the market capitalization of the company remains the same. The adjusted price represents the fair value of the listed shares and the shares being listed after the announcements as the rise in number of shares is offset by the prices adjusted by the Nepal Stock Exchange. Hence, the unlisted Bonus/Right Shares are valued at the adjusted price by Nepal Stock Exchange to Soe a valuation thgt represents fair estimates of Net pore a! byIn case of right shares, the eligible right shares of the right issuing company are applied within the issue open duration. ‘The right shares are included in NAV calculation (as unlisted shares) immediately at the book close date after provisioning the application amount for cligible right shares. The right shares are valued at adjusted price as quoted at the close in Nepal Stock Exchange. The valuation of the company until it gets listed in NEPSE is valued at closing price established at the last trading day of the week/month. The tight is applied within the issue open duration. In case of any diffetences in cligible right shares of the company, adjustments are made accordingly In case of bonus shares, the eligible bonus shares of the company are included in NAV calculation as unlisted shares date and valued at the adjusted price (immediately at the book losure date) as quoted at the close in Nepal Stock Exchange. The valuation of the company until it gets listed in NEPSE is valued at closing price established at the last trading day of the week/month. Valuation of Initial Public Offering (IPO) ‘The shares allotted to NMB Mutual Fund in IPO is valued at Book Value, as book value is the reference that Nepal Stock Exchange uses for providing the range of prices where the first transaction of the IPO shares can be traded. As per the current provision the range of the first transaction in Nepal Stock Exchange is book value on the lower side and three times the book value on the upper side. Hence IPO Shares are valued at the book value until they get traded for the first time. After the IPO shares get traded, the closing price of the stock is used for valuation of those shares. Exception Companies where the scheme has made an investment having book value below their face value is valued at face value as there is no price history of Nepal Stock Exchange that supports newly listed shares trading below par value. ‘Valuation of Open-Ended Mutual Fund Schemes ‘The open-ended mutual fund scheme is valued based on NAV established at the end of the trading week which is published on website. In case of delay in reporting of NAV by the fund manager for the concerned week, the latest published NAV is taken for valuation. Valuation of Bond/Debentures The sub clause (¢) of Clause 22 in Mutual Fund Guidelines, 2069 states that investment in securities which are listed in NEPSE but are not frequently traded, should be valued as per the valuation policy approved by the Board of Directors of the Fund Manager. The scheme values bond/debentures by calculating the present value of the bond’s expected future pow gl hye eo asinterest payments and the bond’s value upon maturity ie. discounting the coupon and face value of the bond by appropsiate discount rate IIL. Securities Transactions Investment securities transactions are accounted for on a trade date basis. The Scheme uses the weighted average cost method for determining the capital gain or loss on sale of investment. The cost of investments includes brokerage transactions charges, central depository services (CDS) related charges and name transfer fees. ‘ransaction Cost for t The transaction costs of financial assets held for trade (brokerage transactions charges, SEBON fees and DP fees) for the period 1* Shrawan 2077 to 31" Ashad 2078 amounts to NPR 2,807,314.62 (NPR Two Million Eight Hundred Seven Thousand Three Hundred Fourteen and 62/100 Only). IV. Risk Management ‘Mutual Fund schemes are exposed to various risks including credit, market and liquidity risk. NMB Capital Limited has adopted certain policies and procedures for eliminating and ‘mitigating certain risks that are unfavorable to the investors and the organization and also acting promptly in order to grab the best possible opportunities available in the market. 1. Market Risk: 7 Unusual movement in market prices of securities and fluctuation in interest rates can expose NMB Capital with the risk of loss in investments. Market Risks lead to the possibility of loss in earnings or economic value of the assets. NMB Capital Limited understands that the effective mechanisms/structures/processes of the institution are vital for close monitoring of the movements and making sound investment related decisions. All investment decisions of NMB Capital are based on review of market at regular intervals by a specialized independent function. This system-based approach has been effective in minimizing improper investment decisions emanating from flaw in market analysis, ad-hoc predictions, speculations, ete. 2. Liquidity Risk: Liquidity risks arise from the inability to sell the securities invested at the desired time at desite price. Liquidity risks arise due to inadequate market depth and lack of mature market for the security. All investments made by NMBCL are in listed secutities or securities which are soon to be listed. Hence, the investments can be traded on the secondary market. In case of investments with limited demand depth the investments made in the secondary market ‘can be pledged with financial institutions as collateral for loan. Dan gh fin gre a |4. Default Risk: Default risks arise when the securities invested by NMBCL are unable to make the required payments (interest + principal) on their debt obligations. Investments in debt securities are done after adequate review, risk return appraisal and analysis of the macroeconomic variables. NMBCL has an independent research arm which provides insights upon the overall market for schemes t0 make a scheme specific investment decision within a predefined framework. In addition, continuous review.and monitoring of the interest rates, ‘market returns and financial profile of invested companies is done on a continuous basis to avoid any unexpected surprises. Operational Risk: Operational risk is defined as the potential for loss resulting from inadequate or failed internal processes, people and systems or from the impact of external events, including legal risks, We seck to minimize our exposure to operational risks, subject to cost trade-offs. Operational risk exposures are managed through a consistent set of management processes that drive risk identification, assessment, control and monitoring. NMBCL has adopted risk management practice that defines how risks are managed and how the risk management policies are assured and how governance is exercised as well as the key roles required ‘managing the underlying process. ‘Taxation Income Tax Act, 2058 has not specifically envisaged corporate tax liability on Mutual Fund Scheme by removing the requirement of withholding tax on interest, dividend income and gain on disposal of shares of Scheme. Accordingly, Mutual Fund Scheme is not considered as tax- entity and corporate tax on Scheme is not considered. Net Asset Value (NAY) per unit ‘The Fund Manager calculates the NAV per unit of the Scheme by deducting the Schemes expenses over market value of the total investment plus investment income divided by number of units on a weekly basis in accordance with the prevailing regulations/ guidelines ‘on mutual funds and publishes the same on its official website: hitp://www.nmbcl.com.np. ‘The said information is also shared with the Board members of the Fund Manager & the Fund Supervisors via e-mail. Further, the NAV per unit calculated on a monthly basis is published on a national daily newspaper and uploaded on the website of the Fund Manager ‘with prior notification of the same forwarded to the Fund Supervisors & SEBON in writing, Reporting ‘The Fund Manager has been reporting its Fund Management Activities to its Board and the Bed Seago ene ame nig dato pops wen forwarded in line with the prevailing i es on mutual Fun;VII. Related Party Transactions (As identified by the management and relied upon by the auditors) Related Parties: ) Fund Sponsor: NMB Bank Limited b) Fund Manager and Depository: NMB Capital Limited ©) Fund Sponsor ie. NMB Bank Limited and Fund Manager and Depository ic. NMB Capital Limited has invested 14% and 1% of the total initial size of the scheme respectively as seed capital The Scheme has a bank balance of NPR 32,921,396 with NMB Bank Ltd. as on Ashad end 2078 The fund management and depository fees paid/payable to Fund Manager and Depository ie. NMB Capital Limited as on Ashad 31, 2078 is as follows: ‘Fund Management Fee | Depository Fee | Total Amount Period i : Starus (a NPR) (aNPR) (io NPR) Ist Quarter 4,387,500 585,000 292,500 | Paid 2nd Quarter 4,653,750 620,500 310,250 | Paid 34 Quarter 5,583,750 744500 372250 | Paid 4 Quarter 6,105,000 14,000 407,000 | Payable Toul 20,730,000 2,764,000 1,382,000 uae VIII. Summary on concentration of Investment Sectors Summary on concéntration of.investment in different sectors are calculated based on the value of securities as per valuation policy of the Fund is given below: Eaten ‘Marka Valuation | Sector Exposure [Cost Amount Commercial Bark 354,314371.00 41% | 20082859415 Development Bank 126,557249.00 147% | 56900,51592 Hote sod Toutam 3855 46500 447,45 86 Hydro Power 120,395.31 11690000, Us ioe 5951488. Besa 94720 Rovlitslaunare 101512.88400 67385,741.94 Micmac 158,001, 0645 T7610.40724 ‘Maal Fand 41457,70352 29989,56009| eee 10,282,524.00 12%| 677422941 procesing ‘Others 1615592000 tom | _asvozien2 aoe Ba2,769,10448 | a0. | 546,390,793.65, IX. Contingent Liability ‘There are no contingent liabilities in respect of underwritin commitments, uncalled li on partly paid shares and other commitments. gy Fas je VW yr wrath a?”X. Dividend Distribution ‘The 103% BOD meeting held on August 16, 2021 has declared cash dividend of NPR 2o0.000.00 (Two Hundred Million Ds Only), 20% on the total + capital of paw