NIB INTERNATIONAL BANK S.C.

ANNUAL REPORT
July 2007- June 2008

Head Office
(: 251-011 550 32 88/ 550 33 04/550 29 09
7: 251-011 552 72 13
* : 2439
E-mail: nibbank@ethionet.et
Website: www.nibbank-et.com
SWIFT: NIBIETAA, Ethiopia

November 2008
Annual Report 2007/08 (E.F.Y 2000) 
 TABLE OF CONTENTS
Board of Director’s Report Page
1. BACKGROUND 7

2. BALANCE SHEET DEVELOPMENT 10

3. INCOME STATEMENT DEVELOPMENT 13

4. INTERNATIONAL BANKING OPERATIONS 16

5. HUMAN RESOURCE 17

6. INFORMATION TECHNOLOGY 17

7. BRANCH EXPANSION 17

8. FUTURE PLANS 17

9. VOTE OF THANKS 18

10. AUDITORS’ REPORT 20

 Annual Report 2007/08 (E.F.Y 2000)

 Vision
NIB’s vision is to become an icon of excellence and the leading commercial bank in
Ethiopia.

Mission
NIB’s mission is to provide efficient and effective full fledged commercial banking ser-
vices by utilizing qualified, honest and motivated staff and state-of-the art technology
and thereby optimize stakeholders’ interest.

Values
NIB upholds the following values:

8 Prudent and professional banking practices;

8 Honesty and integrity;
8 Transparency;
8 Accountability;
8 Confidentiality;
8 Loyality;
8 Social responsiveness;
8 Competitive services and sustainable growth;
8 Organizational excellence and
8 Equal opportunity employer

Annual Report 2007/08 (E.F.Y 2000) 

Board of Directors

Ato Lemma H/Giorgiss Ato Getachew Desta

Chairman V/Chairman

Ato Amerga Kassa Dr. Dembel Balcha Ato Mebratu Lemma

Director Director Director

Ato Simmie Kulala Ato Yirga Gabre Dr.Eng. Belay W/Yes

Director Director Director

Ato Lemma Argaw Ato H/Mariam Assefa W/ro Fasika Kebede

Director Director Director
(Representing Nib Insurance) (Representing Ethiopian Red Cross Society)

Ato Alemu Denekew

Director

 Annual Report 2007/08 (E.F.Y 2000)

 Top Management

Ato Amerga Kassa

President

Ato Tassew Demissie Ato Bekele Endalew Ato Hailu Alemu

V/President - Administration & Finance V/President - International Banking Operations V/President - Credit & Branch Operations

Ato Abdella Kemal Ato Legesse Gelan Ato Solomon Goshime

Controller Manager- Branch Operations Department Manager- Accounts and Finance Department

Ato Zerihun Megenta Ato Fresenbet G/Medhin Ato Negussie Ambo

Manager- Legal Services Department Manager- Management Information Manager- HRD & Administration Department
System Department

Ato Solomon Assefa Ato Bogale Kibret

Manager- Planning & Business Development Executive Assistant
Department

Annual Report 2007/08 (E.F.Y 2000) 

1. BACKGROUND
The Board of Directors is pleased to present the Bank’s performance including
financial report to the 9th Annual General Meeting of the shareholders for the year
ended 30th June 2008.

1.1. ECONOMIC ENVIRONMENT AND BUSINESS CONDITIONS

The year under review was in general more of a challenge than an opportunity for
business and investment and particularly so for the banking sector.

The unexpected rise of oil and food prices in the world market has seriously affected
the global economic and business environment during the financial year of 2007/08.
The continued depreciation of US Dollar against major world currencies, such as
Euro, Pound Sterling and Japanese Yen has impacted the domestic economies of
the countries that have linked their exchange rates to USD. The spillover effects of
such negative developments have posed significant challenges on the Ethiopian
economy, particularly by raising the costs of production and depleting the country’s
foreign exchange reserves. In addition, the effect of the shortage of the small rains
in regions where there are normally two harvest seasons and inflationary situation
in the country cannot be underestimated in reducing the propensity to save.

During the period under consideration, the National Bank of Ethiopia (NBE)
adopted various monetary policy measures to combat the effects of the existing
inflationary pressures on the domestic economy. In this regard, in July 2007 it
raised the minimum deposit interest rate from 3% to 4% and the deposit reserve
requirement from 5% to 10%. Furthermore, in April 2008 it increased the deposit
reserve requirement from 10% to 15% and the liquidity requirement from 15% to
25%. These policy measures have restricted the lending capacity of banks on the
one hand and created the piling up of costly unutilized funds on the other hand.

In another development, the soaring costs of construction materials and temporary

power shortages, which occurred during the reporting period severely affected the
timely completion of investment projects and impaired the full capacity operation
of the manufacturing sector. Both have had notable impact on the lending and
collection operations of banks.

Despite such unfavorable developments in the global and domestic environments,

according to information obtained from the Ministry of Finance and Economic
Development, Ethiopia’s economy continued to witness a strong performance
in 2007/08 with real GDP estimated to have grown by 11.3 %. This growth is
reported to be a continuation of the 11.4% and 11.6 % growth recorded in 2005/06
and 2006/07, respectively.

In spite of the various measures carried out by the government, the inflationary
situation continued unabated throughout 2007/08. At the close of the fiscal

 Annual Report 2007/08 (E.F.Y 2000)

 year, the general inflation rose to 25.3%, up from 17.7% in 2006/07 and 12.3%
in 2005/06. Both food and non-food prices have increased significantly, with the
former considerably jumping to 34.9 % from 17.5 % in the preceding fiscal year.
As a result, the real interest rate remained negative.

According to official sources, the value of the Birr depreciated by 5.1 % against the
US Dollar during the year. The rate of depreciation was faster in the parallel market
with quarterly and annual depreciation of 12.5% and 18.0%. Hence, the spread
between the official and the parallel market has widened from its 1.40 % during the
third quarter of last year to 13.5% same period of the current year. This clearly
shows the growing gap between the demand for and supply of foreign exchange.

The country’s performance of export earnings during the fiscal year 2007/08 was
commendable. It grew by about 23.9 % from the previous year level and reached
to the tune of USD 1.5 billion. Although its share continued to decline over the
last few years, coffee remained to be the dominant exportable item claiming
about 32% of the total export proceeds. Even though the volume of coffee export
showed 3.1% decline, its value has increased by 23.8% owing to the improving
prices of coffee in the world market. Exports of some non-traditional agricultural
commodities, notably flowers, have shown a promising prospect. The volume and
the value of exports of cut flower increased by 47.3% and 75.7%, respectively
during the period under consideration.

Imports have been growing tremendously more rapidly than exports, resulting in
large trade deficits. The volume and values of imports have grown by about 26.7%
and 32.9% respectively. The increasing demands for such commodities as fuel,
machineries, industrial raw materials, fertilizer, construction materials, etc as a
result of the expanding investment activities of the private and government sectors
on the one hand and the rising world prices of these items on the other hand
are attributable to the considerable growth observed in import bills. Consequently,
the shortage of foreign exchange has remained a big challenge for the economy
during 2007/08.

1.2 MAJOR ACHIEVEMENTS

Despite the various challenges posed by the business environment, it is gratifying

to note that NIB has continued to register remarkable and impressive achievements
in all aspects of its operations during 2007/08. The results indeed confirm that the
Bank is on the right direction to attain its noble vision of becoming “An Icon
of Excellence and the Leading Commercial Bank in Ethiopia”. It is appropriate
to mention that the Bank’s five-year strategic plan that would be implemented
from 2007/08 to 2011/12 has enabled the Bank to attain its goals in the reporting
period.

Annual Report 2007/08 (E.F.Y 2000) 

 Accordingly, the Bank registered a record high gross profit of Birr 158.8 million and
net profit of Birr 113.0 million, showing a surge of 49% compared to its performance
of the preceding financial year.

Besides, in a bid to ensure the quality of its assets, the Bank gave especial
emphasis to maintain the health of its loans and advances through rigorous credit
processing and strict follow-up. Consequently, it managed to contain the NPLs to
an acceptable level. Furthermore, in an effort to minimize potential risk, the Bank
has made a tremendous effort to reduce the proportion of overdraft facilities to
total loans. The result achieved in this respect was also very encouraging. It is
pleasing to note that the Bank has more than achieved the 30% target set by the
National Bank of Ethiopia.

The Bank’s international banking operation has also showed a commendable

performance through efficient allocation of the limited foreign exchange resources
and improvements in service delivery.

The Bank kept up its momentum in expanding its branch network by opening
twelve additional branches during the reporting period. Such an aggressive move
has contributed greatly in enhancing the overall performance of the Bank.

Furthermore, the Bank has completed the necessary requirements to network

more branches in Addis Ababa. In this regard, the networking of four branches,
namely, Bole, Arada, Habtegiorgis and Teklehaimanote has been finalized. In
addition, the Bank is undertaking a preliminary assessment to introduce electronic
payment systems such as ATM, PoS, Debit and Credit Card.

As per the decision of the 9th extraordinary meeting of shareholders, the Bank
floated new shares amounting to Birr 140 million for existing and new shareholders
during the budget year and the turn up was great. The shares were fully subscribed
in less than two months. Currently, the Bank’s paid-up capital is one of the strongest
among the private banks in the country.

Having considered the existing competition in the banking industry and the
expanding operational activities of the Bank, a consultant is hired to review the
job positions of the Bank as well as salaries & benefits package. The finalization
and proper implementation of the study is expected to further improve the
competitiveness of the Bank and the productivity of its employees.

Hence, it is reasonable to state that the overall performance of our Bank during
the year under consideration was highly satisfactory in all areas of its activities.
In recognition of its outstanding performance, the Editors’ of the renowned USA,
NEW YORK based magazine, Global Finance, has named NIB “The Best Bank
in Ethiopia” for the year 2008 for the third time in a row. In addition, the UK based
“The Banker” has also voted our Bank “The Best Bank in Ethiopia” for 2008.

 Annual Report 2007/08 (E.F.Y 2000)

 These international recognitions are the outcome of efficient banking practices; a
service-orientated performance, the systematic training of staff, a positive working
environment and the harmonious relationship between the Bank’s Shareholders,
Board of Directors, Management and entire staff.

2. BALANCE SHEET DEVELOPMENT

2.1 GENERAL

At the end of June 2008, the total assets of the Bank stood at Birr 3.65 billion. This
exceeded the preceding year by 40%. The Bank’s total liquid assets amounted to
Birr 1.33 billion or about 36.5% of total assets, which is higher than that of last year
by 91.7%. On the other hand, total loans and advances constituted 55.7% of the
total assets during the reporting period. The average annual loan to deposits ratio
dropped modestly from previous year level (93.5%) and reached 89.8% at the end
of the reporting period.

On the other hand, the total liabilities of the Bank grew by 40% over the preceding
year and reached Birr 3.1 billion. Total deposits constituted the lion’s share, which
is 80.9 % of total liability. Capital, reserve and undistributed profit also increased by
41% and reached Birr 598.1 million in 2007/08 from Birr 425.15 million in 2006/07.
Such an impressive growth rate was registered mainly due to the strategic move
made by the Management and the Board of Directors to raise the paid-up capital
and the steady growth of the yearly profit.

2.2 DEPOSIT MOBILIZATION

The total deposits mobilized by the Bank went up by 31.5% from the previous
financial year balance of Birr 1.88 billion to reach Birr 2.47 billion at the end of
2007/08. The increase was attributed mainly to the surge in demand and savings
deposits by 58.6% and 32.5%, respectively. Time deposits, however, declined
marginally by 2.4%. The overall increase in total deposits was a result of the opening
of additional branches during the reporting period. This was further enhanced by
the effort made by the Management and staff to attract more deposits. The details
are shown in the following table:

Annual Report 2007/08 (E.F.Y 2000) 10

Table:1 Breakdown of Deposits
(In ‘000 Birr)
30/06/08 30/06/07 Change
Type of Deposit
Amount % Amount % Absolute %
Demand deposits 670,979 27.1 422,953 22.5 248,026 58.6
Savings deposits 1,436,581 58.2 1,084,627 57.7 351,954 32.5
Time deposits 362,371 14.7 371,354 19.8 (8,983) -2.4
Total 2,469,931 100.00 1,878,934 100.00 590,997 31.5

Out of the total deposits mobilized at the end of the reporting period, the share of inter-
est-bearing deposits was Birr 1.8 billion or 72.9% while non-interest-bearing deposits
accounted for Birr 671 million or 27.1%.
Fig. 1 Composition of Deposits

Fig. 2 Comparison of Deposits

11 Annual Report 2007/08 (E.F.Y 2000)

 2.3 LOANS AND ADVANCES

At the close of the reporting financial year, the Bank’s outstanding loans and ad-
vances stood at Birr 2.11 billion showing an increase of about 16.3% or Birr 296.4
million when compared with the previous year.

Nib International Bank endeavors to finance operations regarded as economically

viable and socially equitable. Accordingly, 27.9% of total loans and advances went
to manufacturing sector followed by domestic trade and services that accounted
for 17.5%, imports 16.7% and building and construction 16.6%. The details of the
distribution of loans and advances by sector are presented in the following table.

Table: 2 Loans and Advances by Economic Sector

(In ‘000 Birr)
30/06/08 30/06/07 Change
Economic Sector
Amount % Amount % Absolute %
Domestic Trade & Services 369,979.5 17.5 286,428.5 15.7 83,551 29.2
Import 352,750.2 16.7 263,102.2 14.5 89,648 34.1
Building & Construction 351,129.9 16.6 277,435.2 15.3 73,695 26.6
Manufacturing 589,877.7 27.9 595,485.1 32.8 -5,607 -0.9
Transportation 106,678.7 5.1 119,915.0 6.6 -13,236 -11.0
Hotels & Tourism 36,101.5 1.7 19,535.5 1.1 16,566 85.1
Agricultural 114,642.1 5.4 60,431.0 3.3 54,211 89.7
Export 184,477.9 8.7 189,156.1 10.4 -4,678 -2.5
Personal 8,177.1 0.4 5,883.8 0.3 2,293 37.3
Total 2,113,814.6 100.0 1,817,372.4 100.0 296,443 16.3

Fig. 3 Loans and Advances by Sector

Annual Report 2007/08 (E.F.Y 2000) 12

 The increments, in the order of importance, were observed in import, domestic
trade and services, and building and construction. The following chart shows
the comparative position of the outstanding loans in the different sectors of the
economy during 2007/08 and 2006/07.

Fig.4 Comparative Growth of Loans & Advances by Sector

2.4 CAPITAL AND RESERVES

In line with the decisions of the 8th General and 9th Extraordinary meetings of
shareholders, additional shares of Birr 140 million were floated to existing
shareholders as well as the public. Accordingly, the shares were subscribed for within
a short period and the paid-up capital of the Bank rose to Birr 416.9 million as at 30
June 2008. This showed an increase of 40.1% compared to the preceding year’s
position. The Bank’s paid-up capital, share premium, reserves and unappropriated
profit in total reached Birr 598.1million as at 30 June 2008, indicating an increase
of 41% compared to Birr 425.1 million of the previous financial year. At the end
of the financial year, the number of shareholders of the Bank stood at 2,943. This
shows a growth of 18% when compared to the previous financial year.

3. INCOME STATEMENT DEVELOPMENT

3.1 INCOME

The Bank managed to generate a record total income of Birr 316.6 million during
the financial year, registering a surge of 52.6% when compared to the total income
realized in the preceding year.

13 Annual Report 2007/08 (E.F.Y 2000)

Table: 3 Breakdown of Income
(In ‘000 Birr)
30/06/08 30/06/07 Change
Item
Amount % Amount % Absolute %
Interest income from loans & adva. 201,821 63.8 139,982 67.4 61,839 44.2
Gain on foreign currency transac- 55,076 17.4 29,608 14.3 25,468 86.0
tions & translations
Commission & service charges 48,276 15.2 26,956 13 21,320 79.1
Interest income from surplus fund 8,177 2.6 7,309 3.5 868 11.9
Other income 3,232 1.0 3,646 1.8 (414) (11.35)
Total 316,582 100.0 207,501 100.0 109,081 52.6

Out of the total income, interest from loans and advances accounted for Birr 201.8
million (63.8%). It showed a marked growth of 44.2% when compared with previous
year. Income generated from foreign banking activities stood at Birr 101.5 million or
32%of the total income. When compared with the performance of the preceding year it
jumped by 71%. This is owing to the strategic move made by the Bank’s management
in the rational utilization of the foreign exchange resources.

Fig. 5 Composition of Income

Fig.6 Income Comparison

Annual Report 2007/08 (E.F.Y 2000) 14

3.2 EXPENSE

The aggregate expenses of the Bank, including provision for doubtful debts for 2007/08
financial year, reached Birr 157.8 million, exceeding that of the previous financial year
figure by 54.6%. The details are presented in the following table.

Table: 4 Breakdown of Expenses

(In ‘000 Birr)
30/06/08 30/06/07 Change
Item
Amount % Amount % Absolute %
Interest expense 62,218 39.4 42,138 41.3 20,080 47.7
Salaries & benefits 35,548 22.5 24,629 24.1 10,919 44.3
General expenses 41,010 26.0 30,305 29.7 10,705 35.3
Provision for doubtful debts 19,035 12.1 4,993 4.9 14,042 281.2
Total 157,811 100.0 102,065 100.0 55,746 54. 6

During the period under consideration, the total interest paid on savings and fixed time
deposits accounted for about 39.4% of the overall expenses. It showed an increment of
Birr 20.1 million or 47.7%. This is a reflection of the increase in the amount of interest
bearing deposits and higher rate paid for time deposits. Salaries and benefits also grew
by Birr 10.9 million or 44.3% mainly as a result of the annual increment of salaries and the
adjustment of cost of living for existing employees and the recruitment of 382 additional
staff during the period under consideration. General expenses grew by 35.3% or by Birr
10.7 million. Additional provisions held amounted to Birr 19.0 million or 12.1%, which is
significantly higher than that of the previous year level of Birr 5 million.

Fig. 7 Composition of Expenses

Fig. 8 Expense Comparison

15 Annual Report 2007/08 (E.F.Y 2000)

 3.3 PROFIT

In 2007/08 financial year Nib International Bank has once again managed to
provide shareholders with handsome financial returns. NIB ends the financial year
with a record gross profit of Birr 158.8 million and net profit of Birr 113 million, i.e.
49.5% or Birr 37.4 million more than that had been realized in 2006/07.

3.4 RETURN ON ASSETS AND PAID-UP CAPITAL

The Bank’s Return on Assets (ROA) expressed as the ratio of profit before tax to
average total assets showed a significant improvement from 4.55% in 2006/07 to
5.08% in the reporting period under consideration.

The return on average paid-up capital employed reached 32.19%. This is slightly
higher than that of last year i.e. 31.9%, even though the Bank injected Birr 140
million to substantially increase its volume of equity capital in order to strengthen
its resistance to exogenous shocks. This action made NIB one of the strongest
banks in terms of equity capital among private banks in the country, which has to
be maintained in the future too. Thus, a share with a par value of Birr 500 earned
Birr 160.95 a little above the previous financial year, signifying excellent perfor-
mance carried out by the Bank.

4. INTERNATIONAL BANKING OPERATIONS

During the reporting period, remarkable achievements were registered in
international banking activities. Accordingly, the aggregate income generated
from international banking activities has surged by 71% compared to the previous
financial year level and reached to Birr 101.5 million at the end of 2007/08. Of
the total income generated from this line of activities, the highest share of Birr
55.1million (54.3%) was generated from gain on foreign currency transactions and
translations. All income components of the international banking services were
higher than those of the previous year.

All in all, international banking operation has contributed about 32% of the Bank’s
total income in 2007/08, an increase by 3.5% from 2006/07.

The Bank has already established correspondent banking relationships with

major international banks in Europe, USA, Asia and Africa. To expand its services
coverage, the Bank has also established relationships with a number of international
money transferring agents during the period under consideration.

Annual Report 2007/08 (E.F.Y 2000) 16

5. HUMAN RESOURCE
To strengthen its human resource capacity, the Bank recruited 382 new employees
during the reporting period, of which 259 are professional and clerical staff and the
remaining 123 are non-clerical. The staff strength of the Bank at the end of the
financial year rose to 1,329, registering a growth of 38.9% from its previous year.

During the period under consideration, 25 training programs were conducted

to cope with the changing business environment and provide efficient banking
services to customers. 487 employees of the Bank have participated in these
programs.

6. INFORMATION TECHNOLOGY
The Bank has successfully completed the pilot testing and the first phase of
the computerization program by automating and networking its ten branches in
Addis Ababa and two head office departments. Furthermore, it has completed
the necessary requirements to network more branches in Addis Ababa. In this
regard, the networking of four branches, namely, Bole, Arada, Habtegiorgis and
Teklehaimanote has been finalized. Besides, the Bank is undertaking a preliminary
assessment to introduce electronic payment systems such as ATM, PoS, Debit
and Credit Card.

7. BRANCH EXPANSION
The Bank was more aggressive in branch opening in 2007/08 than the previous
years. Consequently, it managed to open twelve branches during the reporting
period. Out of which, six are located in Addis Ababa (Raguel, Kotebe, Wollo Sefer,
D’Afrique, Yerer Ber and Bole Medhanealem) and six in regional towns (Dessie,
Bahir Dar, Harar, Emdibir, Aweday and Metema Yohannes). The opening of these
additional branches has enabled the Bank to give services with 40 branches and
two agency offices. Out of the total number of branches, twenty-four branches and
the two agency offices are in Addis Ababa, while the remaining sixteen branches
are operating in different regions.

8. FUTURE PLANS
In an effort to keep the momentum of growth in the coming year, the Bank will give
special attention for the delivery of quality customer service in all aspects of its
operations. In connection with this, close follow-up and monitoring mechanisms
will be put in place to finalize the ongoing computerization program in due time.
Besides, continuous and intensive training programes will be arranged for employ-
ees of the Bank on various fields. The expansion of the branch network in busi-
ness corridors, and promising areas of Addis Ababa and regional towns will also
continue in the coming year.

17 Annual Report 2007/08 (E.F.Y 2000)

 Aggressive mobilization of domestic and foreign financial resources and extension
of quality and sizeable loans will be given strong emphasis during 2008/09.
Furthermore, the Bank will strive to further minimize the risk associated in its
operational activities and maintain the NPLs ratio within a single digit level.

Preparations will also be made to pave the way for the construction of the Head
Office Building. To this end, finalizing the outstanding issues with the Addis Ababa
Municipality regarding securing the land holding certificate and the design work of
the building will be given primary importance during the coming year.

9. VOTE OF THANKS
The Board of Directors would like to recognize the vital role played by various
stakeholders for the success of the Bank during the financial year 2007/08. In this
regard, the Board would like to express its appreciation to the National Bank of
Ethiopia for its able supervision; the management and the entire staff of NIB for
their professionalism, diligence, commitment and dedication; and the esteemed
customers of the Bank for their patronage and loyalty. Last but not least, the Board
conveys its special gratitude to the Bank’s shareholders for their strong support and
understanding, which they unfailingly demonstrated during the reporting year.

Lemma H/Giorgiss
Chairman of the Board of Directors
16 September 2008

Annual Report 2007/08 (E.F.Y 2000) 18

 RT
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Annual Report 2007/08 (E.F.Y 2000) 19

 A.W. Thomas & Co.
Chartered Certified Accountants

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF

NIB INTERNATIONAL BANK SHARE COMPANY

We have audited the accompanying balance sheet of Nib International Bank Share
Company at 30 June 2008, the related profit and loss account and the statement of
cash flows for the year then ended. These financial statements which have been
prepared under the historical cost convention are the responsibility of the Directors
of the Bank. Our responsibility is to express an opinion on these financial statements
based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.

Those 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 the Directors as well as evaluating
the overall financial statement presentation.

We planned and performed our audit so as to obtain all the information and explanations
which we considered necessary in order to provide us with sufficient evidence to give
reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud, irregularity or error. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the balance sheet at 30 June 2008, the related profit and loss account
and the statement of cash flows for the year then ended read in conjunction with
the notes forming part thereof, exhibit a true and fair statement of the affairs of Nib
International Bank S.C., the results of its operations and its cash flows in conformity
with generally accepted accounting principles consistently applied.

We have no comment to make on the report of your directors so far as it relates to

these financial statements and pursuant to Article 375 of the 1960 Commercial Code
of Ethiopia, recommend approval of the above-mentioned financial statements.

A.W. Thomas & Co.

Chartered Certified Accountants Addis Ababa
(Auditors of Nib International Bank S.C.) 17 September 2008

P.O.Box 1162 Addis Ababa, Ethiopia

Tel. 251 011 552 40 85 Fax 251 011 515 83 78
E-mail: Thomas@ethionet.et

20 Annual Report 2007/08 (E.F.Y 2000)

NIB INTERNATIONAL BANK SHARE COMPANY
BALANCE SHEET
AS AT 30 JUNE 2008
Currency: Ethiopian Birr

Notes 2007
ASSETS
CASH AND BANK BALANCES
Cash on hand 341,295,450 146,874,312
Reserve account with NBE 317,916,920 80,916,920
Payment and settlement account with NBE 402,171,911 197,758,297
Deposits with local banks 93,725,297 20,604,640
Deposits with foreign banks 177,576,042 248,908,693
1,332,685,620 695,062,862
Other assets 3 238,108,548 111,303,896
Investment in shares 4 2,652,500 2,653,000
Loans and advances 5 2,033,788,606 1,755,831,156
Fixed assets 2(d) 6 42,875,885 41,745,458
TOTAL ASSETS 3,650,111,159 2,606,596,372
LIABILITIES
DEPOSITS
Demand deposits 670,979,595 422,953,177
Savings deposits 1,436,580,753 1,084,627,147
Fixed deposits 362,370,955 371,354,235
2,469,931,303 1,878,934,559
Margins held on letter of credit 162,822,443 49,871,589
Other liabilities 7 373,500,276 222,912,510
Provision for tax 17 45,732,463 29,731,593
TOTAL LIABILITIES 3,051,986,485 2,181,450,251
CAPITAL AND RESERVES
Share capital 8a 416,901,000 297,573,500
Share premium 8b/c 8,663,900 10,030,900
Legal reserve 91,214,596 62,954,884
Special reserve 9 900,000 800,000
Profit and loss account 80,445,178 53,786,837
598,124,674 425,146,121
TOTAL CAPITAL, RESERVES AND LIABILITIES 3,650,111,159 2,606,596,372

________________________
Ato Lemma H/Giorgiss
Chairman of the Board of Directors

21 Annual Report 2007/08 (E.F.Y 2000)

NIB INTERNATIONAL BANK SHARE COMPANY
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2008
Currency: Ethiopian Birr

Notes 2007
INCOME
Interest income 10 209,998,084 147,290,760
Commission and service charges 48,275,800 26,955,828
Gain on foreign currency transactions and
translation 55,076,142 29,607,784
Other income 3,232,348 3,646,585
316,582,374 207,500,957

EXPENSES

Interest expense 11 62,217,698 42,138,001

Salaries and benefits 35,548,133 24,628,932
Administrative and general expenses 12 40,906,582 30,305,106
Provision for doubtful debts 19,035,151 4,993,195
Audit fee 103,500 80,500
157,811,064 102,145,734

NET PROFIT BEFORE TAXATION 158,771,310 105,355,223

PROVISION FOR TAXATION 17 (45,732,463) (29,731,593)

NET PROFIT AFTER TAXATION 113,038,847 75,623,630

LESS: TRANSFER TO LEGAL RE- (28,259,712) (18,905,907)

SERVE
TRANSFER TO SPECIAL RESERVE (100,000) (100,000)
84,679,135 56,617,723
LESS: DIRECTORS’ 5% ALLOWANCE (4,233,957) (2,830,886)
SURPLUS FOR YEAR 80,445,178 53,786,837

BALANCE, 1 JULY 2007 53,786,837 40,271,366

DIVIDEND PAID (53,786,837) (40,271,366)
- . - .
BALANCE, 30 JUNE 2008 80,445,178 53,786,837

Earning per share 18 161 160

Annual Report 2007/08 (E.F.Y 2000) 22

NIB INTERNATIONAL BANK SHARE COMPANY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2008
Currency: Ethiopia Birr

Notes 2007

Net cash inflow from operating activities 13 527,401,956 179,382,350

Net cash inflow (outflow) from investing

activities 14 (9,029,003) (16,110,882)
Net cash inflow from financing activities 15 64,173,663 67,333,034

Effect of exchange rate changes on cash and cash

equivalents 55,076,142 29,607,784

(Decrease) increase in cash and cash equivalents 637,622,758 260,212,286

Cash and cash equivalents at the beginning of the 695,062,862 434,850,576

year

Cash and cash equivalents at the end of the year 1,332,685,620 695,062,862

23 Annual Report 2007/08 (E.F.Y 2000)

NIB INTERNATIONAL BANK SHARE COMPANY
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008

1. ESTABLISHMENT
The bank is a privately-owned company established in 1999 in accordance with
the Licensing and Supervision of Banking Business Proclamation No. 84/1994 of
Ethiopia to undertake commercial banking activities.The bank obtained its license
from the National Bank of Ethiopia (NBE) on 26 May 1999 and started normal
business activities in the month of October 1999. It operates through its head
office in Addis Ababa and 40 branches, and 2 agency offices for foreign exchange
transactions in and outside Addis Ababa.

2. SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in accordance with the historical cost
convention, generally accepted accounting standards and the laws and regulations
of Ethiopia including the Commercial Code of Ethiopia 1960, Monetary and Banking
Business Proclamation Nos. 83/1994, Licensing and Supervision of Banking
Business Proclamation No. 84/1994 and the Directives of the National Bank of
Ethiopia. The principal accounting policies are set out below:

a) Foreign currencies
i) Foreign exchange transactions during the year are expressed in Birr at the
actual rates prevailing on the transaction dates.
ii) Foreign currencies on hand and correspondent banks’ balances at 30 June
2008 are translated at selling exchange rates for notes and for transactions
respectively.
b) Interest income and interest expense are accounted for on the accrual basis.
However, no interest is recognized on unpaid past due loans and advances.
c) Provision for doubtful debts
The provision is maintained at a level adequate to cover possible losses.
Management determines the adequacy of the provision based upon reviews
of individual advances and loans and other related factors and pursuant to
the Directives of the National Bank of Ethiopia.
d) Fixed assets
i) Depreciation is provided according to the income tax proclamation pooling
system at the following rates applied on the book values of each group
of assets determined by adding additions to and deducting disposal
proceeds from respective opening balances:
Buildings 5%
Computers 25 %
Other assets 20 %
- Vehicles
- Office equipment
- Furniture and fittings
User rights on lease 10 %
ii) Fixed assets in store are not depreciated.

Annual Report 2007/08 (E.F.Y 2000) 24

NIB INTERNATIONAL BANK SHARE COMPANY
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
Currency: Ethiopian Birr
2007
3. OTHER ASSETS
Acquired properties 842,222 5,628,850
Uncleared effects, local 133,251,952 59,113,827
Uncleared effects, foreign 68,414,140 7,885,237
Stationery stock 1,479,829 745,504
Other stock items 2,706,496 1,346,231
Prepaid rents 12,306,356 13,831,120
Other advances 19,465,549 23,950,241
Cheque books and revenue stamps 109,312 69,610
Accrued interest on import and export bills 1,506,998 157,156
240,082,854 112,727,776
Less: Provision for doubtful debts (1,974,306) (1,423,880)
238,108,548 111,303,896

4. INVESTMENT IN SHARES
No. of shares
Nib Insurance Company S.C. 4,505 2,252,500 2,253,000
Aggar Micro Finance S.C. 4,000 400,000 400,000
2,652,500 2,653,000

5. LOANS AND ADVANCES

Domestic trade and services 369,979,540 286,428,520
Imports 352,750,198 263,102,190
Building and construction 351,129,922 277,435,232
Manufacturing 589,877,702 595,485,103
Transportation 106,678,659 119,914,975
Hotels and tourism 36,101,474 19,535,450
Agricultural 114,642,047 60,431,020
Exports 184,477,883 189,156,108
Personal 8,177,142 5,883,794
2,113,814,567 1,817,372,392
Less: Provision for doubtful loans and
advances (80,025,961) (61,541,236)
2,033,788,606 1,755,831,156

5.1 The bank is a party in various legal proceedings in relation to loans and
advances, the ultimate resolution of which is not expected to have a materially
adverse effect on the financial position of the bank or the results of its
operations.

25 Annual Report 2007/08 (E.F.Y 2000)

NIB INTERNATIONAL BANK SHARE COMPANY
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
Currency: Ethiopian Birr
6. FIXEDASSETS
Balance at Balance at
Cost 1 July 2007 Additions 30 June 2008
Leasehold land 9,800,000 - 9,800,000
Fixed assets stock 837,231 (62,758) 774,473
Vehicles 17,646,222 1,951,158 19,597,380
Computers hardware and software 12,159,352 1,873,991 14,033,343
Office equipment 5,600,239 2,076,652 7,676,891
Furniture and fittings 8,118,731 3,423,228 11,541,959
User rights on lease 2,000,000 - 2,000,000
Buildings 1,683,361 162,750 1,846,111
Depreciation 57,845,136 9,425,021 67,270,157
Vehicles 6,948,144 2,529,848 9,477,992
Computers hardware and software 2,127,825 2,976,380 5,104,205
Office equipment 2,760,042 983,370 3,743,412
Furniture and fittings 3,978,499 1,512,691 5,491,190
Users rights on lease 200,000 200,000 400,000
Buildings 85,168 92,305 177,473
NET BOOK VALUE 16,099,678 8,294,594 24,394,272
41,745,458 42,875,885

6.1 The bank acquired in 2005/06 leasehold land of 2,800m2 for its head office,
but the ownership certificate has not yet been obtained, and thus depreciation
for the leased land has not been charged. The land has not yet been formally
allocated to the bank by the Addis Ababa City Administration, and construction
work has not yet been started.

7. OTHER LIABILITIES
2007
Leasehold land liability 7,509,898 7,509,898
Guarantee deposits 3,528,515 4,305,661
Cash Payment Orders issued 139,180,300 88,234,391
Cheques and claims in transit 32,015,723 26,508,655
Exchange commission payable 13,859,674 8,478,958
Current accounts blocked 31,994,531 14,993,761
Other banks 119,023,315 53,268,907
Accrued interest 8,973,285 10,094,039
Telegraphic transfers payable 7,266,530 4,180,774
Board of Directors 5% allowance 4,233,957 2,830,886
Tax payable 1,143,281 504,138
Unclaimed dividends payable 428,052 238,224
Other accruals 2,542,456 1,554,860
Others 1,800,759 209,358
373,500,276 222,912,510

Annual Report 2007/08 (E.F.Y 2000) 26

NIB INTERNATIONAL BANK SHARE COMPANY
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
Currency: Ethiopian Birr
2007
8. SHARE CAPITAL
a) The authorized share capital of Nib International Bank Share Company is Birr
1,000,000,000 comprising 2,000,000 ordinary shares of Birr 500 each, of which
the following amount is:
Subscribed and fully paid 416,901,000 297,573,500
The increase in authorized capital by 1,000,000 shares and issued capital by 280,000
shares was resolved at the extraordinary general meeting in November 2007.
b) The share premium of Birr 10,030,900 collected during the year 2006/7 was
distributed to the shareholders in the year 2007/8 as dividend as per the de-
cision of the shareholders at the 8th ordinary annual general meeting on 24
November 2007.
c) The share premium of Birr 8,663,900 refers to 20% premium obtained from the
sale of 86,639 shares to new shareholders as resolved at the 9th extraordinary
meeting of shareholders.
9. SPECIAL RESERVE
The Bank has created a special reserve of Birr 900,000 (2007, Birr 800,000)
against fidelity risk in accordance with Article 28 of the Licensing and Supervision
of Banking Business Proclamation No. 84/1994.
10. INTEREST INCOME
Loans and advances 201,820,956 139,981,833
Call accounts with correspondent banks 8,177,128 7,308,927
209,998,084 147,290,760
11. INTEREST EXPENSE
Savings deposits 40,914,663 23,919,356
Time deposits 21,245,140 18,112,581
Other bank loans 57,895 106,064
62,217,698 42,138,001

12. ADMINISTRATIVE AND GENERAL EXPENSES

Office rents 13,003,074 9,753,872
Advertising 1,909,440 1,499,328
Depreciation and amortization 8,294,599 5,322,522
Stationery and printing 1,584,293 1,144,505
Communications 2,815,304 2,657,111
Maintenance 1,193,907 1,105,466
Insurance 839,594 513,482
Fuel 989,545 726,751
Others 10,276,826 7,582,069
40,906,582 30,305,106

27 Annual Report 2007/08 (E.F.Y 2000)

NIB INTERNATIONAL BANK SHARE COMPANY
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
Currency: Ethiopian Birr
2007
13. CASH FLOWS FROM OPERATING ACTIVITIES
Net profit before tax 158,771,310 105,355,223

Depreciation and amortization 8,294,594 5,322,522

Provision for doubtful loans and others 19,035,151 4,993,195
Investment income (395,518) (219,000)
Gain on foreign currency transactions and translations (55,076,142) (29,607,784)
Directors’ allowances paid (2,830,886) (2,124,809)
Operating profit before changes in operating assets
and liabilities 127,798,509 83,719,346
Net increase in loans and advances to banks and
customers (296,442,175) (342,775,898)
Net increase in deposits by banks and customer
accounts 590,996,743 427,162,674
Net increase in other assets (127,355,078) 29,426,058
Increase in other liabilities (net of directors allowance)
and margins held on letters of credits 262,135,549 4,924,455
Net cash (outflow) inflow from operating activities
before profit tax 557,133,549 202,456,636
Profit tax paid (29,731,593) (23,074,286)
NET CASH INFLOW (OUTFLOW) FROM
OPERATING ACTIVITIES
527,401,956 179,382,350

14. CASH FLOWS FROM INVESTING ACTIVITIES

Income from Nib Insurance Co. S.C. 395,518 219,000
Investment shares 500 (219,000)
Purchase of fixed assets (9,425,021) (16,110,882)
(9,029,003) (16,110,882)

15. CASH FLOWS FROM FINANCING ACTIVITIES

Share premiums (1,367,000) 10,030,900
Sale of new shares 119,327,500 97,573,500
Dividends paid (53,786,837) (40,271,366)
64,173,663 67,333,034

Annual Report 2007/08 (E.F.Y 2000) 28

NIB INTERNATIONAL BANK SHARE COMPANY
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
Currency: Ethiopian Birr
2007
16. MEMORANDUM ACCOUNTS
i) Contingent liabilities
Guarantees issued to customers 229,180,760 197,466,465
ii) Contingent assets
Accrued interest income on NPL
Interest on loans and advances 3,868,632 702,703
under litigation 15,325,044 5,713,648
19,193,676 6,416,351
iii) Unutilized overdraft balance 98,408,000 58,758,000

iv) Commitments
Letters of Credit 333,694,235 131,427,849
Less: Margin held (162,822,443) (49,871,589)
Inward bills for collection 170,871,792 81,556,260
Outward bills for collection 77,209,667 47,634,857
Computerization capital commit- 33,155,690 9,116,678
ment - 1,630,830
Memorandums on export letters of
credit 117,223,939 27,324,445
398,461,088 167,263,070

17. PROFIT TAX

Profit as per profit and loss account 158,771,310 105,355,223
Add: Representation allowance in excess of
10% of salary - 59,860
General provision on debtors 550,426 - .
550,426 59,860
159,321,736 105,415,083

Less: Interest on foreign deposits * (7,781,610) (7,308,927)

Investment income from Nib Insurance
Co. S.C. (395,518) (219,000)
Taxable profit 151,144,608 97,887,156
30% 30%
45,343,382 29,366,147
* Tax on Birr 7,781,610@5% 389,081 365,446
Provision for tax 45,732,463 29,731,593
The Bank’s tax liabilities have not been formally assessed by the tax authority since 2003.

18. EARNING PER SHARE

The earning per share for the year is calculated on the basis of the average number of
shares outstanding during the period.
19. EMPLOYEES BENEFITS SCHEME
Regarding the provident fund scheme, the bank contributes 12% of basic salary while
employees contribute 6%. These contributions are held for each individual in saving
accounts at the bank. All other employees’ benefits are in accordance with the Labour
Proclamation No. 377/2003 and Labour Amendment Proclamation No. 494/2006.

29 Annual Report 2007/08 (E.F.Y 2000)

 SOME ACTIVITIES IN PICTURES

Shareholders’ Meeting

Exporters’ Day

Branch Inauguration

Staff Get-together Workshop

30 Annual Report 2007/08 (E.F.Y 2000)
 SOME OF THE PROJECTS FINANCED BY THE BANK

BGI-Ethiopia Ayat Real-Estate

Ethio Steel East Africa Pharmaceutical

Floriculture

Abyssinia Natural Spring Water

Annual Report 2007/08 (E.F.Y 2000) 31
Annual Report 2007/08 (E.F.Y 2000) 32