in Asia, Africa and the Middle East Leading the way - Standard ...

in Asia, Africa and the Middle East

Annual Report and Accounts 2008-2009

Leading the way

Leading the way“2008 was a year of extraordinary dislocationand disruption in financial markets. Bankscollapsed or were rescued by governments,markets fell precipitously and economic growthstalled. Given our conservative business model,our clear strategy and our focus on the basics,Standard Chartered has weathered the stormrelatively well. We have not been unscathedbut we have continued to be open for businessfor customers and once again deliveredrecord profits.”Peter SandsGroup chief executive3 March 2009

www.standardchartered.com

Standard Chartered PLC is headquartered in London where it is regulated by the UK’s Financial Services Authority. The Group’s head office providesguidance on governance and regulatory standards. Standard Chartered PLC stock code: 02888.

Note: Within this document ‘the Bank’ and ‘the Group’ refer to Standard Chartered PLC together with its subsidiary undertakings. The Hong Kong Special Administrative Regionof the People’s Republic of China is referred to as Hong Kong and includes Macau; India includes Nepal; The Republic of Korea is referred to as Korea or South Korea; Middle Eastand Other South Asia (MESA) includes, amongst others: Afghanistan, Bahrain, Bangladesh, Egypt, Jordan, Lebanon, Oman, Pakistan, Qatar, Sri Lanka, United Arab Emirates (UAE);and Other Asia Pacific includes, amongst others: Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Mauritius, the Philippines, Taiwan, Thailand and Vietnam.

AsiaAfghanistanAustraliaBangladeshBruneiCambodiaChinaHong KongIndiaIndonesiaJapanKazakhstanLaosMacauMalaysiaMauritiusNepalPakistan

PhilippinesSingaporeSouth KoreaSri LankaTaiwanThailandVietnam

AfricaBotswanaCameroonCôte d’IvoireGhanaKenyaNigeriaSierra LeoneSouth AfricaTanzaniaThe GambiaUgandaZambiaZimbabwe

The Middle EastBahrainEgyptJordanLebanonOmanQatarUAE

EuropeAustriaFranceGermanyGuernseyIrelandItalyJerseyLuxembourgMonacoPolandRomaniaRussiaSpainSwedenSwitzerlandTurkeyUKUkraine

The AmericasArgentinaBahamasBrazilCanadaCayman IslandsChileColombiaFalkland IslandsMexicoPeruUruguayUSVenezuela

Our markets

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© Standard Chartered PLC. All rights reserved.The STANDARD CHARTERED word mark, its logodevice and associated product brand names areowned by Standard Chartered PLC and centrallylicensed to its operating entities. Registered Office:1 Aldermanbury Square, London EC2V 7SB.Telephone +44 (0) 20 7885 8888. Principal place ofbusiness in Hong Kong: 32nd Floor, 4-4A Des Voeux Road,Central, Hong Kong. Registered in England No. 966425.

Contents

Business Review

6 Chairman’s Statement

12 CEO & Director’s Report

16 Our Approach to Corporate Responsibility

22 Our people, Our Strength

26 Our Approach to Corporate Governance

34 Additional Information

38 Board of Directors

39 Management Team

42 Branches and ATM’s

Financial Statements and Notes to Accounts

43 Auditor’s Report

44 Balance Sheet

45 Profit & Loss Account

46 Profit & Loss Appropriation Account

47 Statement of Changes in Equity

48 Cash Flow Statement

49 Schedules

78 Significant Accounting Policies

80 Notes to Accounts

86 Disclosure as per Bank’s disclosure policy under the

Basel –II Capital Accord of Nepal Rastra Bank

89 Nepal Rastra Bank’s Approval and Directions

90 Five Years Financial Summary

Get more on LinePlease visit us on line at www.standardchartered.com/np for more information on the Bank and its full range of banking services.

Our performance

Financial highlights

FYE 2008/09

Non-financial highlights

Operational highlights

2092m

14.70%

1506m

39217

33.58%

40,587m

100%

Operating Income

(in NPR where applicable)

Points of representation

Capital Adequacy

Operating Profit

Employees

Return on equity

Total Assets

Dividend

Strong Income Growth

Strong Profit Growth

Robust balance sheet

Sound capital base

Solid deposit growth

Sustainable business

(Including Bonus Shares)

4 Standard Chartered 2008

Our approachWe have operated for over 150 years in some of theworld’s most dynamic markets, leading the way in Asia,Africa and the Middle East.

Group overview Our business

Standard Chartered PLC, listed on both the London and Hong Kong stock exchanges, ranks among thetop 25 companies in the FTSE 100 by market capitalisation. The Bank has grown substantially in recentyears, primarily as a result of organic growth, supplemented by acquisitions.

Standard Chartered aspires to be the best international bank for its customers. The Bank derives morethan 90 per cent of its operating income and profits from Asia, Africa and the Middle East, generatedfrom its Wholesale and Consumer Banking businesses. The Group has over 1,600 branches and outletslocated in over 70 countries.

Our business

Leading by example to be the right partner for its stakeholders, the Group is committed to building asustainable business over the long term that is trusted worldwide for upholding high standards of corporategovernance, social responsibility, environmental protection and employee diversity. It employs over 70,000people, nearly half of whom are women. The Group’s employees are of 125 nationalities, of which 68 arerepresented among senior management.

Our principles

What we stand for

Brand promise

Approach

Commitment tostakeholders

Values

Strategic intent

Leading by Example to be The Right Partner

ParticipationFocusing on attractive, growingmarkets where we can leverage ourrelationships and expertise

CustomersPassionate about ourcustomers’ success,delighting them withthe quality of ourservice

Our peopleHelping our peopleto grow, enablingindividuals to make adifference and teamsto win

CommunitiesTrusted and caring,dedicated to makinga difference

InvestorsA distinctiveinvestment deliveringoutstandingperformance andsuperior returns

RegulatorsExemplarygovernance andethics whereverwe are

Competitive positioningCombining global capability,deep local knowledge and creativityto outperform our competitors

Management disciplineContinuously improving the way wework, balancing the pursuit of growthwith firm control of costs and risk

ResponsiveCourageous International TrustworthyCreative

To be the world’s best international bankLeading the way in Asia, Africa and the Middle East

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About UsStandard Chartered Bank Nepal Limited has been in operation in Nepal since 1987 when it was initially registered as a joint-venture operation. Today the Bank is an integral part of Standard Chartered Group having an ownership of 75% in the company with 25% shares owned by the Nepalese public. The Bank enjoys the status of the largest international bank currently operating in Nepal.

Standard Chartered has a history of over 150 years in banking and operates in many of the world's fastest-growing markets with an extensive global network of over 1600 branches (including subsidiaries, associates and joint ventures) in over 70 countries in the Asia Pacific Region, South Asia, the Middle East, Africa, the United Kingdom and the Americas. As one of the world's most international banks, Standard Chartered employs around 70,000 people, representing over 125 nationalities, worldwide. This diversity lies at the heart of the Bank's values and supports the Bank's growth as the world increasingly becomes one market.

With 17 points of representation, 21 ATMs across the country and with more than 375 local staff, Standard Chartered Bank Nepal Ltd. is in a position to serve its customers through an extensive domestic network. In addition, the global network of Standard Chartered Group gives the Bank a unique opportunity to provide truly international banking services in Nepal.

Standard Chartered Bank Nepal Limited offers a full range of banking products and services in Wholesale and Consumer banking, catering to a wide range of customers encompassing individuals, mid-market local corporates, multinationals, large public sector companies, government

What we stand for

corporations, airlines, hotels, SME's as well as the DO segment comprising of embassies, aid agencies, NGOs and INGOs.

The Bank has been the pioneer in introducing 'customer focused' products and services in the country and aspires to continue to be a leader in introducing new products in delivering superior services. It is the first Bank in Nepal that has implemented the Anti-Money Laundering policy and applied the 'Know Your Customer' procedure on all the customer accounts.

Corporate Social Responsibility is an integral part of Standard Chartered's ambition to become the world's best international bank and is the mainstay of the Bank's values. The Bank believes in delivering shareholder value in a socially, ethically and environmentally responsible manner. Standard Chartered throughout its long history has played an active role in supporting those communities in which its customers and staff live. It concentrates on projects that assist children, particularly in the areas of health and education. Environmental projects are also occasionally considered. It supports non-governmental organisations involving charitable community activities. The Group launched two major initiatives in 2003 under its 'Believing in Life' campaign- 'Living with HIV/AIDS' and 'Seeing is Believing'.


Chairman’s Statement

Building strong foundations“Our deep understanding of this market, ability to quickly adapt to the changing scenario and the aptitude of our management to execute the Bank’s strategy are continuously propelling our intent to garner a balanced and sustainable growth.” – Neeraj Swaroop, Chairman

It is my pleasure to report that Standard Chartered Bank Nepal Limited has been able to successfully maintain its record of consistent performance and delivered robust financial results for the fiscal year ended 15 July 2009. Our results clearly demonstrate the underlying strength of our businesses and the overall resilience of the Bank. We have been consistent in our strategy, carrying out business in the areas of our strength and with products of our expertise. To deliver record results in this exceptional environment is a great achievement. Full credit goes to the Nepal Team for having achieved this feat in the backdrop of global

7www.standardchartered.com/np

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“We continued to show restraint while leading the best practices for the industry, be it in the area of products sold to customers or in the quality of services rendered to them.”

economic melt down coupled with challenging political and economic environment within the country itself.

Some improvement in the underlying security and political situation has paved way for the Bank to consider investment in footprint expansion and in launching innovative products. These have had a positive effect in the Bank’s performance as evidenced by our FYE 2008/09 numbers. We continued to show restraint while leading the best practices for the industry, be it in the area of products sold to customers or in the quality of services rendered to them. Our deep understanding of this market, ability to quickly adapt to the changing scenario and the aptitude of our management to execute the Bank’s strategy

are continuously propelling our intent to garner a balanced and sustainable growth. Throughout our presence, we have lived our commitment in being the right partner to our people, customers, regulators, industry and the community. This is a firm foundation which prepares us to seize the opportunities even as the business environment becomes increasingly challenging. Our brand is the most valuable asset which is at the heart of our strategic intent i.e, to be the world’s best international Bank, leading the way in Asia, Africa and the Middle East. Standard Chartered is the best brand in this market and we are committed to maintain this position in the future as well.

Results – A Synopsis

Financial Highlights Net Profit after tax rose by 25.18 percent to

Rs.1.025 billion compared to Rs. 818.92 million in the previous year

Earnings per share is lower by Rs. 21.93 due to increase in the number of shares last year

Risk Assets decreased by less than a percent to Rs.13.88 billion

Deposits increased by 20.60 percent to Rs. 35.87 billion

A Consistent PerformanceThe Bank has been continuously delivering on its promises year on year. As a result of another exceptional year, the Bank continues to be one of the highest contributors to the Government Exchequer by contributing Rs. 443 million as compared to Rs. 381 million last year on account of Corporate tax.

In accordance with the statutory requirements, the Board recommends a transfer of Rs. 31,918,164 to Exchange Fluctuation Reserve from current year’s profits and the statutory transfer of Rs. 205,022,907 into General Reserve Fund. In congruence with the revised capital requirements as stipulated by the Central Bank, the Board has proposed to increase the capital by issuing 50 percent Bonus shares for which Rs. 465,983,200 has been allocated from current year profit.

Our Tier 1 and Tier 2 Capital Adequacy Ratios were 13.05 percent and 1.65 percent respectively with an overall ratio of 14.70 percent. Our capital position is more than adequate and exceeds the current Nepal Rastra Bank’s capital adequacy requirement under the new Basel II capital accord of 10.00 percent and also exceeds the international norms.

536

659 692

819

1,025

2004

-05

Profit After Tax In NPR Mn

2005

-06

2006

-07

2007

-08

2008

-09

2,345

3,775

5,900

6,830

6,010

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

Market value per share In Rs.


A Challenging EnvironmentIt appears that the worst of the global financial crisis is mostly over but its effects may remain for quite sometime. Markets seem to be quite cautious about the perplexing turning points of economies as there can be conflicting economic data failing to clearly justify if an economy has hit the bottom and turning around.

The obvious is that the last quarter of 2008 and the first quarter of 2009 were appalling, as exports slumped, inventories were cut and spending plans were put on hold. While many indicators were still poor in the second quarter of 2009, there were signs of improvement. Asia is leading this rebound and even the economies hit hard by the collapse in exports are starting to recover. Latest data suggests that it should become even more apparent and widespread as we progress into the second half of the year.

This year was even more challenging for Nepal in both political and economic fronts as the country transitioned into a republic state. Difficult labor relations and continuous power crisis were the major issues in the manufacturing sector. Poor monsoon hit hard on the agriculture as well. Growth in Remittance remained a major driver in holding the economy.

In FYE 2008/09, Nepal’s GDP growth is expected around 4 percent. During the year, agriculture sector is estimated to have grown by 2.2 percent compared to a growth of 4.7 percent in the previous year.

The growth in non-agricultural sector is estimated at 4.8 percent compared to a growth of 5.6 percent in the previous year.

The government revenue increased by 32.1 percent to Rs. 142.2 billion in FY 2008/09 compared to a growth of 22.7 percent in the previous year. Similarly government expenditure rose by 32.4 percent to Rs. 213.6 billion. Such expenditure had increased by 20.8 percent in the comparable period of the preceding year. The budget deficit amounted to Rs 36.8 billion during the period under review compared to the budget deficit of Rs 21.20 billion in the same period of the preceding year.

The annual average consumer inflation is expected to soar to 13 percent compared to a rise of 7.7 percent in the previous year. The upsurge in inflation was mainly driven by the power cuts, supply disturbances and poor labor relations resulting in low outputs.

The performance of export sector was relatively satisfactory against the backdrop of the global economic crisis. The total export grew by 19.8 percent in the first ten months of FY2008/09 compared to decline of 2.4 percent in the previous year. Likewise total imports increased significantly by 25.4 percent compared to a growth of 16.8 percent in the previous year.

Increased inflow from remittances which grew by 51 percent helped expand country’s total gross foreign exchange reserves to USD 3.59 billion as of mid June 2009. This is sufficient to cover import of merchandise and services for 9.6 months.

In line with the depreciation of the Indian Rupees against the US dollar, the Nepalese Rupee also recorded a weakening trend against USD and depreciated by 14.6 percent during FY 2008/09. Nepalese Rupee has a fixed parity of 1:1.6 with the Indian Rupee.

Outlook for 2009/10The government holds firm plans to attain high growth rate in the economy and contract the double digit inflation rate. However, achievement of such an augmentation will, to a great extent, depend upon the political stability in the country and provision of adequate security. The nation, thus, optimistically awaits the government’s efforts to implement its plans and resuscitate the economy.

Agriculture sector, which is largely dependant on the weather conditions, is expected to witness a depressed momentum. Arrival of late monsoon is likely to have a negative impact this year. However, improvement in the rural security situation is expected to expand cultivation area, enhance distribution of inputs and services, and raise farm productivity. Likewise, the industrial sector is also estimated to grow at a mediocre pace of 4-5 percent in the coming FY. The government’s focus to increase infrastructural expenditure and improve the operating condition in manufacturing sector coupled with a consistent remittance-driven consumer spending are likely to provide stability in the economy.

Service sector growth is likely to remain around 5 percent stemming mainly from higher tourism related activities. Investment in infrastructural projects by private sector is also expected to grow. However, labor and industrial security issues would be key factors to build investors’ confidence. Giving credence to these factors, an overall economic growth of 4% is considered achievable in the coming year.

Chairman’s Statement continued

“ Markets seem to be quite cautious

about the perplexing turning points of

economies as there can be conflicting

economic data failing to clearly justify if an economy has hit the bottom and turning

around. ”


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143.14

175.84167.37

131.92

109.99

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

Earning Per Share In Rs.

Corporate GovernanceGovernance across the Bank is robust. As you can appreciate, banking is a relationship business. We highly value the relationships that we have with our people, regulators, clients and the other stakeholders and we would strive hard to remain The Right Partner for them.

We are committed to ensuring the integrity of governance. In addition to the established committees, we have committees on Diversity and Inclusion, Health and Safety, the Environment, Outserve Plus and Community Partnership. The initiatives taken by these committees have added value to our stakeholders and delighted them. We believe good governance provides clear accountabilities, ensures strong controls, instills the right behaviors and reinforces good performance.

Mr. Arjun Bandhu Regmi representing the public shareholders, Mr. Anurag Adlakha and Mr. Sushen Jhingan, nominated by the Standard Chartered Grindlays Australia and Mr. Ram Bd. Aryal as Professional/Independent Director continue to be in the Board of SCB Nepal Limited. I, Neeraj Swaroop and Mr. Sujit Mundul, continue to represent the Standard Chartered Group on the Board of Standard Chartered Bank Nepal Limited.

During the period, Standard Chartered Group nominated Peter Warbanoff and Aniruddha Bose as Alternate Director to Sushen Jhingan and Neeraj Swaroop respectively replacing Robert Green and Ranjan Ghosh respectively with effect from 1st February 2009. Rajeev Uberoi, Alternate Director to Anurag Adlakha, resigned from Standard Chartered Bank. We are delighted to have new Alternate Directors on our Board. I would like to thank Mr.

Robert Green, Mr. Ranjan Ghosh and Mr. Rajeev Uberoi for their contribution during their tenure as Alternate Directors of the Bank.

In Conclusion A review of the world economy reveals that the crisis is yet to be over. It is therefore important to look beyond the immediate future. While the near-term economic conditions have deteriorated, our markets mainly in Asia remain fundamentally strong and attractive. With the advent of growing middle class, rapid urbanization and continuing industrialization, our markets offer vast potential. We are in the right markets and will stay focused on them.

Nepal experienced a relatively stable condition during the downturn of the major global economies. Apparently, the Nepali financial market does not seem to have been directly impacted by the crisis due mainly to insignificant amount of foreign private capital inflows. However, the country has critical dependence on other larger economies both in terms of imports and exports including remittances. Therefore, the contagion effect of the global economies cannot be underestimated. For Nepal, tourism, foreign aid, big budget projects including FDIs, exports and remittances are areas which could prove to be vulnerable as a result of the global economic meltdown.

Against the backdrop of a difficult overall economic scenario, Nepal recorded a satisfactory growth during the review period as evidenced by FYE 2008/09 economic indicators. In line with this, the Bank was also able to achieve good results due mainly to the efforts, focus and commitment displayed by the management team in creating shareholders value.

The Bank has undertaken various initiatives to make it an employer of choice. Continuous focus is placed on staff’s learning and development. The Bank has embraced Work-life Balance by creating a conducive work environment which could fulfill the different needs of individuals. Ours is probably the only Bank in the country to introduce a five day week, which allows our people to stay on leave on alternate Sundays.

The Diversity and Inclusion Council in the Bank continued to address the different strands of diversity including women, and the differently-abled.

Ministry of Finance and the Central Bank have played important roles in driving the financial sector reforms in Nepal. We appreciate any initiatives that are aimed at driving reforms and strengthening the overall financial system in the country. Support and guidance received from our Regulators and the

“We are committed to ensuring the integrity of governance. In addition to the established committees, we have committees on Diversity and Inclusion, Health and Safety, the Environment, Outserve Plus and Community Partnership. ”

2.46

2.56

2.42

2.46

2.53

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

Return on Total Assets In Percent

1,5821,754

2,116

2,493

3,052

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

Total Shareholder Equity In NPR Mn


Enterprise (SME) portfolio. We are happy the way we are growing and we want to maintain this momentum. We have taken a proactive approach towards managing risks for ensuring that we do not experience “any surprises” in both the businesses. In the meanwhile, we are keeping a firm grip on costs. As in the past, in the coming year, we will stick to our strategy and will continue to focus on deepening our relationships with our clients.

It has been more than a year that the country has seen in place an elected government. The successful holding of Constituent Assembly elections and the formation of an elected government has injected renewed hope for peace, security and economic progress after more than a decade long instability and strife. At this juncture, SCB Nepal intends to make meaningful contribution in accelerating the economic activities of the country and attaining a higher growth trajectory.

On behalf of SCB Nepal’s Board of Directors, I take this opportunity to thank all the stakeholders for being our Right Partner. I express my sincere appreciation to our valued customers and shareholders for guiding and supporting us in our journey. I would also like to express my deepest gratitude to our people for exhibiting their seamless engagement and commitment to take the Bank to insurmountable heights. I am sure we will deliver another year of record performance next year. Let me assure you that we are in a strong position to deal with the emerging challenges and opportunities on an ongoing basis.

Neeraj Swaroop Chairman

high level of governance of the Standard Chartered Group have been the cornerstones for us in consistently delivering good results, in maintaining exemplary governance standards and in providing superior products and services.

Continued support and trust received from our valuable customers, shareholders and other stakeholders has enabled us to remain the Best Bank in Nepal - Leading the Way. I sincerely appreciate their efforts to bestow us with their encouragement, trust and loyalty.

As a leading corporate citizen, our approach has been to take a long-term view of our actions and use our core skills and services to make a positive contribution to the society. Our `Sustainability’ agenda revolves around several pillars, including community investment, environment protection, financial inclusion, tackling financial crime and responsible selling and marketing. Building a sustainable business is an integral part of our long-term strategy to enhance shareholder value.

We are cautious in expanding our risk assets portfolio. Our asset quality is conservative, diverse and tightly secured. We are disciplined in the risks we take. Our Wholesale Banking business comprising of Origination & Client Coverage (OCC) and Financial Markets (FI) exhibited broad-based growth by continuing to benefit from the increasing market share. Consumer banking, on the other hand, also displayed strong growth in all fronts of Auto, Mortgage, Credit Card & Personal Loan including our recently introduced Small and Medium

“Our `Sustainability’ agenda revolves around several pillars, including community investment, environment protection, financial inclusion, tackling financial crime and responsible selling and marketing.”

Chairman’s Statement continued

Leading the way in helping realize

local dreams


The CEO & Director presents this report together with the Balance Sheet and statement of Profit and Loss for the year ended 15 July 2009. The report is in conformity with the provisions of the Companies Act 2063 and Bank & Financial Institution Act 2063 including the directives issued by the Nepal Rastra Bank.

Standard Chartered Bank Nepal is in good shape and we continue to deliver strong financial performance. Through the disciplined execution of our strategy and the hard work of our team, we have delivered another set of strong results. An increase in the net profit after tax of 25.18 percent over last year to Rs. 1.03 billion is commendable in the backdrop of difficult economic and socio-political conditions. This has been achieved by relentless focus on cost and risk management while pursuing limited business growth.

There is a marginal decline in the volume of risk assets compared to the preceding year. The Bank has been able to manage the credit portfolio better as a result of which the loan loss provision balance has contracted to Rs. 201 million this year from Rs. 245 million last year. Similarly the ratio of Non-performing credit to Total credit has reduced from 0.92 percent to 0.66 percent. The provisions made are adequate to cover all the potential credit losses of the Bank as of the balance sheet date.

After transfer to general reserve Rs. 205.02 million, exchange fluctuation reserve Rs. 31.92 million, proposed dividend Rs. 465.98 million and bonus share Rs. 465.98 million, total retained earnings as at 15 July 2009 stood at Rs. 239.49 million. This performance reflects a very good momentum in the

CEO & Director’s Report

In Rs. ‘000s In Rs. ‘000s

15-Jul-09 16-Jul-08 % Change

Operating Profit 1,506,109 1,248,432 20.64%

Transfer to General Loan Loss Provision 56,635 69,885 (18.96)%

Provision for Tax 442,091 374,452 18.06%

Net Profit After Provision and Tax 1,025,115 818,921 25.18%

Issue of Bonus Shares 465,983 310,392 50.13%

Proposed Cash Dividend 465,983 496,627 (6.17)%

underlying businesses and disciplined management of risks and costs.

RepresentationAs at 15 July 2009, the Bank maintained seventeen points of representation which included thirteen branches and four extension counters. In addition to this, services were also extended to our customers through twenty one ATMs located at different parts of the country.

Wholesale BankingWholesale Banking (WB) business grew at an impressive rate with broad spectrum income stream - across the client base and product range. Given the challenging operating environment in terms of political uncertainties and global meltdown – maintaining the credit quality of the portfolio and at the same time supporting clients with enhanced credit facilities were the biggest challenges.

Our focus continued to be on the Clients as we provided solutions under trade finance, cash management, foreign exchange and risk management products offering. Our strategy was to remain or become the core bank to our clients, deepen relationship with them and provide them with a broad range of products. The focused approach and client centric strategy enabled us to dominate our chosen areas of activity like Gold Sale, Trading in FCY and LCY, Structured Trade, Acquisition Financing and Investment Solutions. We continued to build scale cautiously - more so - in the cross border space and catered to client needs by offering sophisticated value added solutions.

Our uncompromising international standard of due diligence was appreciated by our clients as they understood the benefits it brought along. Especially the global financial crises made everyone alert and recognize risk which enabled us to tap the “flight to safety” of deposits. The bank adopted and successfully embedded the Basel II guidelines. It enabled us to effectively use collaterals in managing risk and reduce capital allocation. WB continued to monitor risk / reward using advanced tools and by introducing new parameters like RWA, etc. Booking and sell down of assets were initiated to enhance return for the shareholders. The merger of American

“ Standard Chartered Bank Nepal is in

good shape and we continue to deliver

strong financial performance. ”

– Sujit Mundul, CEO

CEO & Director’s Report


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Express Bank Representative Office in Nepal with the Bank as part of our global acquisition was completed successfully.

Consumer BankingConsumer Banking priorities continue to be customer centric product innovation, service excellence, investment for the future and appropriate risk based pricing.

During FY 2008/09, despite a number of challenges posed by the political conundrum, coupled with sporadic shortage of fuel and acute load shedding, Consumer Banking fared pretty well in growing both quality assets and deposits.

We launched SME business with a focus to develop both asset and liability business in this segment, which is heading in the right direction.

In line with our commitment to expand at the right time and in the right place, we opened two more branches- one each in Narayangarh and Birgunj. With these two additional branches, our branch network has now reached seventeen.

Similarly for the ease of transactions, we installed four more ATMs- one each in Lazimpat, Naya Baneshwar, Narayangarh and Itahari. With these four additional ATMs, our total ATM network has now reached twenty one.

Our commitment to Treating Customers Fairly and our policies on Mis-selling and Mis- representation remain core to our values.

In order to simplify banking we are aggressively educating our customer base for Online Banking

which was launched last year and is now gaining momentum.

In order to enhance the plastic money culture in the country, our suite of plastic money –Rupee and USD Credit Card, Prepaid Rupee and USD Card and Proprietary ATM Cards have provided alternatives to Travellers Cheques and Cash.

The `Voice of Customer’ survey is an integral tool to gauge the level of satisfaction of our customers. The Mystery Shopping Concept that we conducted gave us significant insight into our business and customers’ perception. Further, our strategy to take direct feedback from customers on a regular basis has also helped us in enhancing the value to our customers. This is an ongoing journey and it is our commitment that we will continue to add value to our customers.

We have developed a system whereby each customer’s complaint/feedback gets captured and responses / resolution to each of these issues are provided within an agreed timeline.

In line with the customers’ feedback and our aspiration to extend footprints in the right places, we have plans to open two more branches in the year 2009/10.

Outserve Plus - Continuously Improving the Way We WorkIn line with the Bank’s strategic intent and our commitment to our stakeholders, the Bank has been successful in embedding a culture of continuous improvement to provide a differentiated, quality service to our customers. Continuous efforts in inculcating behavioral changes throughout the Bank

Market Extension: The Bank has launched SME Banking – Holistic Banking Solutions, targeting small and medium scale enterprises.

Branch Expansion Bank expanded its footprint by opening its Narayangarh Branch. Sujit Mundul, CEO, SCB Nepal inaugurated the Bank’s 13th branch located at Lion’s Chowk, Narayangarh, Chitwon.

Branch relocation The Bank has recently relocated its existing branch at Main Road Biratnagar to Hanumandas Road.


have enabled our people to find ways for improving the way we work to achieve Operational Excellence.

We have an Outserve Council in the Bank to ensure that transformational agendas and improvement activities on service and processes are delivered to “delight customers”.

We treat all customer complaints as golden opportunities to better understand what is important to our customers and to drive service improvement priorities. We are working to make our complaint tracking system more effective to gauge our service quality and put in place corrective measures for meeting our customers’ needs and expectations.

We are freeing up capacity to support growth through simplification of processes and elimination of inefficient practices.

We have built a framework to ensure that the Bank’s transformational initiatives being driven by businesses and functions actually deliver on their promises of substantive changes and reasonable benefits.

Future PlansAs mentioned above, we intend to add two more branches in the year 2009/2010. As the political and economic landscape continues to be challenging and the impact of the global meltdown in Nepal particularly in respect of remittances is yet to be fully known, we will continue to be cautious in our approach. Any new investment will depend on how conducive the environment is. Hence our focus will continue to be in improvising on our existing products with focus on quality, customer service and returns for our stakeholders.

Despite a challenging environment from the Bank’s perspective - future holds opportunities. However, we will approach these opportunities with caution. Wholesale Bank will stick to its strategy of becoming the core bank to the existing clients by further deepening the relationships – offering new products and innovative solutions. We also intend to develop new relationships – though on a selective basis. Our differential capabilities stemming from the Group expertise vis-à-vis other players in the market enable us to anticipate and respond to the extraordinary changes that may take place in the future.

The objective is to add value to the client’s businesses at an acceptable risk.

Nepal, which holds a huge potential to become a popular tourist destination, has witnessed a rise in the flow of tourists into the country. This trend is likely to continue. Similarly, the steady economic growth of India and China is likely to offer significant opportunities for Nepal to act as a trade corridor. Appropriate policy decisions to capitalize on these opportunities are expected to have a positive impact in propelling the economic growth of the country and in transforming the lives of common people through their economic development. The formation of a stable government will provide the much needed impetus for economic growth.

The growing trend of inward remittances into the country is likely to play a pivotal role in expanding the consumer market.

CEO & Director’s Report continued

Enhancing plastic money culture With a view to enhance plastic money culture in Nepal, the Bank has since long been offering Credit, Debit and Prepaid cards to the market.

Broadening the market reach With a view to reach out to the Women segment in the market, the Bank has introduced Diva Account built-in with an attractive product packages.

Handling of complex FX transactions Bank has already built its capability to underwrite and manage customer transactions relating to Interest Rate and other Derivatives.

Wholesale trade of gold The Bank is `Leading the Way’ in Wholesale trade (import and sale) of physical gold in Nepal today. The Bank was one of the pioneers in introducing this product to the Nepalese market.

Home Remit SCB Nepal has established itself as a key player for remittance transactions emanating from the Middle East. ‘Standard Chartered Home Remit’ provides an easy solution to our customers in meeting their needs.


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We are making continuous efforts to better our revenue streams through innovation as well as by introducing products which provide value added financial solutions to our customers. Our prime objective is to provide safety to our loyal depositor base by maintaining a healthy net-worth and liquidity position. As a Bank, we are resilient with a good appetite for acceptable risks as we have a strong balance sheet coupled with our expertise in striking a proper balance between risks and growth. We will combine our global capability, deep local knowledge and creativity to outperform the competition.

In line with our brand promise to be The Right Partner, we will continue to invest in our people, processes and systems so as to improve our quality of service for customer delight. For our communities we will endeavor to make a real difference. We will consciously drive and maintain our high level of governance. For our shareholders we shall strive to continue providing them with superior returns.

Credit EnvironmentThe last Financial Year remained very challenging in terms of risk management. Since the onset of the financial crisis about two years ago, there have been catastrophic effects in the major global economies with contraction in GDPs, bankruptcies of large number of corporates and financial institutions and sharply rising unemployment particularly in the developed western world. The instability and uncertainty in the global economy is not yet over. Though Nepal was relatively insulated from the global financial crisis, the sharp and sudden drop in commodity prices globally and severe fluctuations in exchange markets have had adverse impacts in the country’s corporate sector. The continued security concerns and political uncertainty in the country, very high inflation level, growing energy crisis, frequent industrial and transport strikes (bandhs) were some other key elements affecting the country’s credit environment in the last FY.

Unfavorable macroeconomic situation and tough competition in the banking industry also affected the credit environment. Industrial sector recorded a

declining trend. The overall business momentum in the country remained slow owing to the concerns in political stability, security situation, power supply, labour relations and the global economy. Nepal’s economic growth rate in last FY 2008/09 is estimated to have declined as the agriculture sector suffered from adverse weather conditions and non-agriculture sector also could not perform better due mainly to unstable socio-political situations.

Against the backdrop of a difficult economic and political environment, we have been able to maintain our credit quality owing to our robust risk management procedures. We continue to stick to the fundamentals of good banking. Clear strategy, broadening and deepening our relationships with existing clients, rigorous monitoring, debating on risk-return dynamics, etc are pivotal to our ongoing success in risk management.

AuditorCSC & Co; Chartered Accountants, were reappointed as Statutory Auditors for FY 2008/09 by the 22nd Annual General Meeting of the Bank held on 25th of November 2008. They are not eligible for reappointment as Auditors. We would like to thank them for their contribution made during their tenure as Auditors of the Bank. As per the recommendation of the Audit Committee, this meeting will decide on the appointment of the auditor for next year.

Proposed DividendThe 253rd meeting of the Board of Directors of the Bank has proposed dividend to the shareholders of the Bank for the year ended 15 July 2009 at the rate of 50% in cash and issue of bonus share of one for each two shares held.

Sujit MundulDirector and CEO

Outserve Plus- Striving for success Bank staff indulge in the morning or afternoon huddles/storming sessions and brainstorm to find ways to improve both service and product standards with a view of ‘Outserving’ its customers.

Online banking: Bank’s Online Banking has gained popularity in terms of reliability and security as an alternate banking channel. The Bank today has about 10,000 customers subscribing to this facility.


In this context, we believe that our sustainability agenda must take into account the fundamental task of re-establishing confidence and trust in banks whilst continuing to maintain an unwavering focus on addressing the longer-term challenges that the world faces.

So our approach to sustainability focuses both on continuing to manage our core banking practices responsibly and on the seven specific areas which have been at the heart of our sustainability strategy for some years. These are outlined as below:

Access to financial servicesThe Bank is improving access to financial services to majority of population of Nepal and is committed to help bring who are not in realm of financial services into the mainstream economy. This is vital part of promoting economic growth and will help to bring people out of poverty.

The Bank considers that presence of an extensive network of micro finance institutions would, to a

The importance of taking a sustainable approach to businesses can be illustrated by the extraordinary dislocation and disruption in financial markets globally in 2008. Banks with unsustainable business models collapsed or were rescued by governments.

Our Approach to Corporate Responsibility

large extent, mitigate lack of credit delivery system to the unreached population of the country. The Bank’s association with this business has been for long in that SCB Nepal is the promoter of few rural development banks and Rural Microfinance Development Centre (RMDC). The Bank is represented in the Board of RMDC, an eminent wholesale lending micro finance entity. To facilitate onward lending to the rural population for the development of microfinance in Nepal, the Bank has been lending to rural development banks and NGO’s.

Sustainable financeThe world will need to generate twice the energy it does today but with half the carbon. The Bank believes in minimizing the environmental impact of whatever it does thereby influencing its customers and suppliers to do likewise through its sustainable lending practices and procurement processes.

The Bank has a policy in place on Environmental risk in lending since 1995. After 2003, Social and Ethical factors were also included in the policy where each credit application, regardless of its size is required to be identified, evaluated and if necessary, mitigate the Social and Environmental risks.

Tackling financial crimeTo effectively manage risks from financial crime and to minimise the risk of our products and services being used by money launderers, we use a multi-layered approach which starts with ‘Know Your customer’ (KYC)/ Customer Due Diligence (CDD) procedure from the time a customer opens an account. It also includes modern systems to screen suspicious transactions.

Responsible selling and marketingAs a result of the global financial crisis, many people have witnessed the value of their investments

Walkathon 2008 A glimpse of the inauguration ceremony of Bank’s annual fund raising event Walkathon 2008. Such types of fund raising events are organized to give continuity to initatives like `Seeing is Believing’, Living with HIV/AIDS and Other Community activities.

Commitment to communities For the past 7 years in a row, the Bank has been awarding scholarships to 15 meritorious students and outstanding teachers of Shree Mahendra Shanti Madhyamik Vidyalaya, Balkot Bhaktapur.

Leading by touching lives


drop. This has prompted increased customer and regulator awareness around the mis-selling of financial products and further highlights how responsible selling and marketing has to be at the heart of Banking.

Supporting our customers to make the right financial decisions sits at the core of our business. We have always taken the protection of customer’s funds seriously while endeavoring to match individual customer’s risk profiles to the products offered to them.

Great place to workOver the past five years, the number of our employees has substantially increased. We recognize that it is increasingly important to have a diverse, talented and engaged workforce to drive the growth opportunities we have in our markets. With rapid growth across our franchise and changing customer and employee demographics, the Bank believes that our innovative and sustainable approach to managing our people is a source of competitive advantage.

To sustain our success in future, along with the talents, diversity and values of our people, we refreshed awareness of our values as a guiding compass of responsible behaviors in 2008.

In 2007, we made good progress in three key areas as part of our approach to managing our people: Diversity and Inclusion (D&I), Employee Engagement and Health and Safety.

The Brand We place our brand, our most valuable asset, at the heart of our strategic intent to be the world’s best international Bank, leading the way in Asia, Africa and the Middle East. Our brand promise is to be the ‘Right Partner’ to our customers, communities, staff, stakeholders and regulators, and we practice

this through our businesses. To achieve our goal of continuing to be a truly a great brand in the market, we have invested strategically in our brand through various communication vehicles and community initiatives. Key sponsorships include Pro-Am event of the prestigious Surya Nepal Golf Tournament, Senior Nepal National Cricket Team, VOW Top 10 College Women Competition etc.

In line with sharing our best practices and being at the forefront of developing banking standards in the local market and our intent of partnering the regulators in the reform process/policy changes, the Bank sponsored a workshop on ‘World Financial Crisis and its impact in Nepal’ organized by Independent Business News (IBN).

Community InvestmentAs a leading corporate citizen with a responsibility to help ensure the country’s sustained growth and development, our approach is to take a long-term view of our actions and using our core skills and services to make a positive contribution to our society. Our work with local communities also helps

Our Approach to Corporate Responisbility continued

We recognize that it is increasingly

important to have a diverse, talented and

engaged workforce to drive the growth

opportunities we have in our markets.

Environment Day 2009 The Bank organized various programs to mark the World Environment Day 2009. Solar energy exhibition put-up by Environment Committee of the Bank in Naya Baneshwore and Lazimpat premises were major attractions.

Making a difference The Bank extended financial support to the Koshi Flood victims with a view to assist government in providing immediate relief measures. CEO Sujit Mundul handed over a cheque of NPR 500,001 to Finance Minister Baburam Bhattarai at his office in Singhadurbar.

Leading by touching lives SCB Nepal entered into an agreement with Tilganga Eye Centre (TEC) for sponsoring 600 cataract surgeries between period October 2008 to July 2009. Dr Sanduk Ruit, Director TEC and Sujit Mundul, CEO, SCB Nepal exchange agreement after signing the same.

We care With a view to assist Prayash Nepal, a drop-in centre for street children, SCB Nepal handed over a set of computer and stationery items for providing the children’s with an opportunity to learn and develop.


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Go Greeen campaign Under the ‘Go Green’ campaign, SCB Nepal planted approximately 80 saplings of flowers and trees alongside Hariharbhawan Road in Lalitpur. The Executive Chief of Lalitpur Sub-Metropolitan City and Chief Executive Officer of SCB Nepal jointly inaugurated this initiative.

‘Sahayogi Haat Haru’ To assist Koshi Flood victims, the Bank partnered with Annapurna Post in their fund raising initiative `Sahayogi Haat Haru’. On behalf of the Bank, Diwakar Poudel, Head of Corporate Affairs handed over an additional financial assistance of NPR 200,000 under the initiative.

us to engage our employees, provide opportunities for product innovation and differentiate our brand.

With an objective to undertake various community initiatives in Nepal, SCB Nepal has constituted Standard Chartered Nepal Community Partnership Forum (SCNCPF) which has been registered with District Administration Office and has received affiliation from Social Welfare Council.

‘Seeing is Believing’ and ‘Living with HIV’ are the two major initiatives of the Bank under its ‘Believing in Life’ campaign launched in 2003.

Seeing is Believing (SiB)Seeing is Believing is our global programme to help tackle preventable and curable blindness. Launched in 2003, this programme has already reached over five million people in 17 countries, contributing to over two million sight restorations by the end of 2008.

Through the ‘Standard Chartered Nepal Walkathon’, the Bank provides a platform to engage cross sections of our community to raise funds. The Bank

has been conducting Walkathon –an annual fund raising event every year since 2003. Walkathon 2008 witnessed an active support and participation from all our stakeholders’ i.e. staff, vendors, customers and the community and made this event a great success. `Standard Chartered Nepal Walkathon’ continues to remain a signature event of the Bank.

Under the ‘Vitamin A Capsule distribution’ project, volunteers from SCB Nepal joined the teams from Helen Keller International (HKI) and the Nepal Technical Assistance Group (NTAG) to raise awareness and provide support to community health volunteers during the Nepal National Vitamin A Program’s distribution days on 19th & 20th April.

World Sight Day was celebrated on 12th of November 2008. An agreement was signed between the Bank and Tilganga Eye Centre (TEC) for conducting a minimum of 15 screening eye clinics with different community partners and for sponsoring 600 cataract surgeries. The Bank has been instrumental in restoring sights to more than

Vitamin A Capsule Distribution For the past 2 years, Standard Chartered Bank has been supporting Vitamin A Capsule distribution program in Kathmandu Valley through Helen Keller Nepal. The program supports feeding of Vitamin A Capsule to children between the age of 5-60 months.

Give blood... give life With the help of Blood Transfusion Centre, Nepal Red Cross Society, the Bank organized a blood donation camp at its premises in Naya Baneshwore. About 50 customers and staff members donated blood through this camp.

We have a vision- Seeing is Believing Patients after having undergone cataract surgery at a camp jointly organized by Tilganga Eye Centre and SCB Nepal.


Our Approach to Corporate Responisbility continued

4,000 people till date. In FY 2008/09 alone, the Bank helped in restoration of sight to approximately 800 people. 25 Eye Clinics were conducted in different parts of the country through which ~ 9,000 underprivileged people in the community got an opportunity of treatment.

Under the Phase II program of SiB, SCB Group provided a financial assistance of USD 20,400 for procurement of the eye equipments to the Hetauda Community Eye Hospital, Hetauda.

Living with HIVLiving with HIV, is the Bank’s global HIV and AIDS education programme that aims to reduce the number of new HIV infections, reduce stigma associated with HIV, and meet our Clinton Global Initiative (CGI) commitment to educate one million people about HIV and AIDS by 2010.

Giving people the facts about HIV and AIDS enables them to avoid risky behavior and also dispels the myths that drive stigma. Education is part of our Group Policy on HIV. This takes place via face-to-face workshops and is supplemented by an online eLearning module. Education sessions are run by our own staff volunteers; who have undergone `Train the Trainers’ program and termed as “HIV Champions”.

The Bank extended support to Karuna Bhawan (a shelter home for the HIV infected women and children) by facilitating a skill learning training to help HIV infected women learn skills and generate income to support their livelihood.

Similarly, the Bank has been sponsoring the education and living expenses of two HIV- infected children from Maiti Nepal (MN) for three consecutive years.

Various activities were organized by SCB Nepal to mark the World AIDS Day 2008.

Our Focus on Youth, Health, Education and EnvironmentIn line with our effort to be ‘The Right Partner’ to the community where we operate, the Bank undertook various initiatives such as: Supported the Koshi flood victims by making

a contribution of NPR 500,001 to the Prime

Minister’s Relief Fund at a special ceremony held at Ministry of Finance.

Contributed NPR 200,001 in partnership with Annapurna Post (AP), a national daily in support of their initiative `Sahayogi Haat Haru’ as an immediate relief measure to Koshi flood victims. The assistance was channeled through Nepal Red Cross Society to the victims.

For the sixth consecutive year, the Bank continued its support to the deserving students of Shree Mahendra Shanti High School in Bhaktapur by providing incentives/scholarships through VISCOSS programme.

Organised a Blood donation camp with the technical assistance from Nepal Red Cross Society, Blood Transfusion Centre. More than 50 staff members and customers donated blood through this camp.

In the capacity of co-sponsor of Senior Nepal National Cricket Team, SCB Nepal branded the Team for ICC World Cricket League Div 5 Cricket Tournament held in Jersey and for the ACC Trophy held in Kuala Lumpur, Malaysia. The Bank has an exclusive right to brand the Senior National Cricket Team for its entire overseas matches. We are proud to be the co-sponsor of our National Team which has brought many glories to the nation. We are continuing with this sponsorship for year 2009/10 also.

Environment Environment being high on our agenda, the Bank has set up an Environment Committee which undertakes various initiatives for the Environmental conservation and awareness.

In our response to the growing environmental challenges, the Bank launched a Greenery project by planting 80 saplings alongside Hariharbhawan road in Kathmandu. It may be recalled that the Bank had planted 100 trees in Lakeside and New Road area of Pokhara in partnership with Green Pokhara in the year 2007/08.

To mark the Environment Day 2009, several activities were organized which included solar energy exhibition, vehicle de-carbonizing, wearing green, staff holding placards with environmental messages at the Bank’s entrance, car pooling, cycling to office, walking to office etc.

We care... Economic Journalist Gajendra Budathoki receiving a financial assistance of NPR 50,000 for his medical treatment from the CEO of SCB Nepal. Mr. Budathoki had earlier met with a fatal motorcycle accident.

Recognizing outstanding performance National Cricketer Mehboob Alam receiving a cash award of NPR 50,000 from Sujit Mundul, CEO SCB Nepal for his heroic 10 wicket haul in one innings in the ICC World Cup Division 5 Cricket Tournament against Mozambique. SCB Nepal is the sponsor of Senior Nepal National Cricket Team.

Leading with our sustainable

business strategy


Our People, Our Strength

With an aspiration to start and grow their career with an organization that strives to be a Great Place to Work in, a total of 89 new joiners started their journey with the Bank in this fiscal year. As compared to last year, our staff strength was 392 as of July 15, 2009 against 377 full time equivalent staff in July 15, 2008. The current mix of male and female ratio is 62:38.A total of 3 ‘Right Start’ Induction Programs for the 68 New Joiners were conducted during the year. The program helps our new joiners make a great start with the Bank by enabling them to gain an overview of how the company works and also helps them become more quickly integrated into the organization. We believe that this program provides the new joiners the foundation that they need to build a wonderful career and perform at their best.

Driving performance through productivity and engagement Engaging employees is a key to retaining talent and helps to motivate them to ‘go the extra mile’, which is particularly important in today’s environment.

We genuinely believe that in the current challenging environment it is more important than ever to focus on our people. Establishing a strength based organization has been our priority where we know our people and help them to be at their best. We set clear performance expectations so that everyone knows what they are doing and how to perform at their best. We care about what happens to them, both in and outside work and inspire them to learn and grow.

We place particular importance on living the organization’s values embedded in our company culture. We believe that our behavior and culture which come from living our organization’s values are sources of our competitive advantage.

Keeping these priorities in mind the following initiatives/activities were conducted in the year under review:

Feel the Russh‘Feel the Russh’ workshop, which was originally rolled out a few years back was again conducted between 26-29 August for the staff who had not attended the workshop earlier. The workshop aimed at providing clarity to the Bank’s aspiration and strategy and boosting the passion and energy of individuals and teams to achieve the organizational mission.

Annual staff functionThe Bank recognizes the dedication, commitment and engagement of its people for its success and making it a Great Place to Work. Celebrating this at a function organized by the Bank staff members were honored for their dedicated 5, 10, 15 and 20 years of service to the Bank.

Living with HIV weekWe at Standard Chartered Nepal are committed to the pledge that SCB Group has made to the Clinton Global Initiative to educate one million people on HIV/AIDS by 2010.

Feel the Russh Staff actively participating in `Feel the Russh’ workshop organized by the Bank. The workshop was held with a view to provide clarity on SCB Group’s Vision and Strategy.

Diversity & Inclusion Female staff members greeted all their male counterparts in the Bank by presenting them with `palpali dhaka topi’ in celebration of Bhai Tika festival during ‘Tihar’.

Leading the way through our talented

and diverse team


Our People, Our Strength continued

With the objective of educating, creating awareness and removing stigma around HIV/AIDS through our Living with HIV program both to internal and external stakeholders, we increased the number of HIV Champions who conducted many activities to celebrate the ‘Living with HIV Week’ starting from World AIDS Day, 1 December 2008.

Various activities like sharing stories, quotes, thoughts, creating the ambience in the work place was held throughout the week with a very high level of enthusiasm, creativity and engagement by all our people

Blood donation campWith very active participation of staff, a blood donation camp was organized by the Bank in collaboration with Nepal Red Cross Society on January 24, 2009 in the Bank’s Head Office premises.

International Women’s Day 2009 celebration With the objective to make our female colleagues feel special and to appreciate their contribution in the workplace, International Women’s Day 2009 was celebrated by organizing various engaging activities with a good level of cheer and participation of staff.

Vitamin A capsule distribution programTo get more closely associated with the Bank’s ‘Seeing is Believing’ initiative and to understand

more about Vitamin A capsule distribution program in the country which has received financial support from the SCB Group, 11 of our people volunteered to actively participate in this program in Kathmandu.

Wellness Week- May 10-15, 2009Wellness Week was observed in the Bank from May 10-15 with particular focus on Physical, Mental and Emotional Health.

Various activities were organized to mark the Wellness Week which generated a good level of interest and participation from our people in all the branches.

Other engagement programsOur people from various departments and branches participated in the “Soaltee Crowne Plaza Super Sixes Cricket Tournament – 2008” organized by Soaltee Crowne Plaza and in the “Inter Bank Volleyball Tournament 2009” organized by Nepal Rastra Bank (NRB) on the occasion of its 54th Anniversary.

We aim to create an inclusive workplace environment where everyone has the opportunity to maximise their potential and perform to their very best.

Handicraft exhibition Diversity & Inclusion (D & I) Committee put-up an exhibition of handicraft items under a program organized to mark International Women’s Day.

Jubilant after the training Members of staff in jubilant mood after undergoing `Great Managers’ training program organized by the Bank.


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Learning and DevelopmentWe believe that development of our people is crucial for the growth and prosperity of the organization as they are one of the determining factors for the success of the company. We provide our diverse workforce with the skills needed to serve our customers and operate in an international environment. Number of learning opportunities - In-house trainings, Local programs by external trainers/organizations, Global trainings, Short term attachment programs in the Group, On the job learning inside and outside the country were given continuity during the year. A total of 1630 man-days were spent in learning and development programs during the review period.

Building great leadersOur strength based philosophy stands on our belief that we get the maximum contribution of our people by playing to their strengths. Ensuring that we get the best from our people is the responsibility of every leader in the Bank. For this purpose and in our continuous efforts to sharpen and enhance the leadership skills of our managers, the following Leadership Development Programs were conducted in this fiscal year:

• “LeadingTeamsEffectively”• “HowtoBuildaWinningTeam”• “GreatManagersProgram”

Diversity & InclusionIn today’s world the only thing that remains constant is change. Our markets, customer groups and talent pools are constantly changing. Our success depends on our ability to manage these changes, and our approach to Diversity and Inclusion (D&I). D&I lie in the heart of our Values. We focus on inclusion to ensure that each individual feels valued for what they bring to the Bank.

Our country D&I Committee along with the Group’s D&I Council are involved in driving D&I agenda across the Bank.

In addition to the cash rewards, our people’s extraordinary contributions are rewarded by excellence awards, appreciation letters and learning and development opportunities.

Ready for the tournament Members of SCB Nepal Volleyball Team that represented the Bank in Inter Bank Volleyball Tournament ogranised by Nepal Rastra Bank to mark its 54th anniversary.

After the training Participants of training program `How to influence others and win co-operation’ organized by the Bank.


Our approach to corporate governance

A SynopsisDetails relating to steps taken by the management for strengthening Corporate Governance in the organisation.

The Board of Standard Chartered Bank is responsible and accountable to the shareholders and ensures that proper corporate governance standards are maintained.

The Audit Committee meets quarterly to review the internal and external inspection reports, control and compliance issues and provides feedback to the Board as appropriate.

The Manco (Management Committee) represented by all Business and Function Heads is the apex body managing the day to day operations of the Bank. Chaired by the CEO, it meets at least once a month for formulating strategic decisions.

The Annual General Meeting is used as an opportunity to communicate with all shareholders.

To ensure compliance with applicable laws, enhance resilience to external events and avoid reputational risk, the Board has adopted SCB Group policies and procedures.

Ultimate responsibility of effective Risk Management rests with the Board supported by Audit Committee, Manco, Country Operational Risk Group (CORG), Asset and Liability Committee (ALCO) and Credit Risk Management Committee (CRMC)

Embracing exemplary standards of governance and ethics wherever we operate is an integral part of our Strategic Intent. The Group Code

of Conduct is adopted to help us meet this objective by setting out the standards of behavior we must follow with each other and with our customers, communities, investors and regulators.

AnalysisThe Board of Standard Chartered Bank Nepal Limited is responsible for the overall management of the Company and for ensuring that proper corporate governance standards are maintained. The Board is also responsible & accountable to shareholders.

The report describes how the Board has applied the principles and provisions of the Nepal Rastra Bank directives on Corporate Governance and the provisions of Company Act, 2063 and Bank and Financial Institution Act, 2063 (the “Corporate Governance Code”). The directors confirm that: throughout FY 2065/066, the Company

complied with all the provisions of the Corporate Governance Code.

throughout FY 2065/066, the Company complied with the listing rules of Nepal Stock Exchange Limited.

throughout FY 2065/066, the Company complied with the Securities Registration and Issuance Regulation, 2065

the Company has adopted a code of conduct regarding securities transactions by directors on further terms no less than required by the Nepal Rastra Bank Directives and the Company Act and that all the Directors of the Bank complied with the Code of Conduct throughout FY 2065/066.

The BoardAs at the date of this report, the Board is made up of the Non-Executive Chairman, one Executive Director and four Non-Executive Directors of which one is professional /independent Director appointed as per the regulatory requirement and one Director, representing the public shareholders. The Board composition complied with the regulatory requirements. Four Directors including the Non-Executive Chairman are nominated by the SCB Group to represent it in the Board in proportion to its shareholding. The Board meets regularly and has a formal schedule of matters specifically reserved for its decision. These matters include determining and reviewing the strategy of the Company, annual

Annual General Meeting Chairman of Standard Chartered Bank Nepal Limited, Neeraj Swaroop delivering Chairman’s speech in the 22nd Annual General Meeting of the Bank.

Meeting the Hon’ble President Neeraj Swaroop, Chairman of SCB Nepal Board of Directors and Sujit Mundul, CEO, SCB Nepal paying a courtesy call on the Hon’ble President Dr. Ram Baran Yadav.

Leading the way through a

collective vision


budget, overseeing statutory and regulatory compliance and issues related to the Company’s capital. The Board is collectively responsible for the success of the Bank.

During the year under review, the Board held 13 board meetings of which 4 were held by circulations. The Directors are given accurate, timely and clear information so that they can maintain full and effective control over strategic, financial, operational, compliance and governance issues.

The following table shows the number of Board and Audit Committee meetings held during the year:

Audit Board Committee

Number of meetings in FY 2065/066 13 4Neeraj Swaroop 7 -Anurag Adlakha* 8 -Sushen Jhingan* 12 -Sujit Mundul 13 -Ram Bahadur Aryal 13 4Arjun Bandhu Regmi 13 -

* Mr. Anurag Adlakha attended two Board meetings through his

alternate Director Mr. Rajeev Uberoi and Mr. Sushen Jhingan attended

one Board meeting through his alternate Director Mr. Peter Warbanoff.

Audit Committee As required by the local regulations, the Board has formed an Audit Committee with clear terms of reference. The Audit Committee meeting is normally held on a quarterly basis. The Committee reviews internal audit reports, Nepal Rastra Bank Inspection reports, Statutory Audit reports, Bank’s financial condition, internal audit/controls issues, compliance issues, etc. The Committee provides guidance/feedback to the Management through the Board of Directors as appropriate.

The Independent/Professional Director chairs the Committee for ensuring complete independence. The composition of the Audit Committee as on 15/07/2009 is as follows:

Ram Bahadur Aryal - Non Executive Director- Chairman

Anurag Adlakha - Director - Member Sushen Jhingan, Director - Member Gopi Krishna Bhandari - Member Kabir Tamrakar - Member Secretary

All members of the Audit Committee are either non-executive directors or independent of business. The responsibilities of the Committee are in congruence with the framework defined by the NRB Directives and the Company Act.

Management Committee (Manco)The Management Committee (Manco) represented by all Business and Function Heads of the Bank is the apex body that manages the Bank’s operation on a day to day basis. Manco meets formally at least once a month and informally as and when required. The strategies for the Bank are decided and monitored on a regular basis and decisions are taken jointly by this Committee. The CEO chairs the Manco.

As at the date of this report, the composition of the Manco was as follows:

Mr. Sujit Mundul, Chief Executive Officer Mr. Anurag Mishra, Head Wholesale Banking Ms. Anju Sharma, Head Consumer Banking Ms. Rakhi Singh, Chief Financial Officer Mr. Sudesh Khaling, Chief Information Officer Mr. Shobha Bd. Rana, Head Legal and Compliance

& Assurance Mr. Diwakar Poudel, Head Corporate Affairs Ms. Bina Rana, Head Human Resources Mr. Gopi Bhandari, Senior Manager Credit

The effectiveness of the Company’s internal control system is reviewed regularly by the Board, its committees, Management and Internal Audit.

Our Approach to Corporate Governance continued


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Relations with Shareholders The Board recognizes the importance of good communications with all shareholders. There are regular information, both financial as well as non-financial, published by the Company for shareholder’s information. The AGM is used as an opportunity to communicate with all the shareholders.

The notice of the AGM, as required by the Company Act, was sent to shareholders at least 21 days before the date of the meeting at their mailing addresses available in the Company’s records. In addition to that the notice and agenda of the AGM were also published twice in the national level daily newspaper for the shareholders information.

Internal ControlThe Board is committed to managing risks and to controlling its business and financial activities in a manner which enables it to maximize profitable business opportunities, avoid or reduce risks which can cause loss or reputational damage, ensure compliance with applicable laws and regulations and enhance resilience to external events. To achieve this, the Board has adopted the SCB Group policies and procedures of risk identification, risk evaluation, risk mitigation and control/monitoring.

The effectiveness of the Company’s internal control system is reviewed regularly by the Board, its committees, Management and Internal Audit. The Audit Committee has reviewed the effectiveness of the Bank’s system of internal control during the year and provided feedbacks to the Board as appropriate.

The Internal Audit monitors compliance with policies/standards and the effectiveness of internal control structures across the Company through its program of business/unit audits. The Internal Audit function is focused on the areas of greatest risk as determined by a risk-based assessment methodology. Internal Audit reports are periodically forwarded to the Audit Committee. The findings of all audits are reported to the Chief Executive Officer and Business Heads for immediate corrective measures.

Risk Governance Through its risk management framework the Bank seeks to efficiently manage credit, market and liquidity risks which arise directly through the Bank’s commercial activities as well as operational, regulatory and reputational risks which arise as a normal consequence of any business undertaking.

As part of this framework, the Bank uses a set of principles that describe its risk management culture. The principles of risk management followed include: • Balancingriskandreward.• Disciplinedandfocusedrisktakingtogeneratea

return.• Takingriskwithappropriateauthoritiesand

where there is appropriate infrastructures and resource to manage them.

• Anticipatingfuturerisksandensuringawarenessof all risks.

• Efficientandeffectiveriskmanagementandcontrol to take competitive advantage.

Ultimate responsibility of the effective management of the risk rests with the Board. The Audit Committee, within an authority delegated by the Board, reviews risk areas and monitors the activities of Management Committee (Manco), Country Operational Risk Group (CORG), Asset and Liability Committee (ALCO), and Credit Risk Management Committee (CRMC).

To ensure that the key operational risks are managed in a timely and effective manner, a framework of policies, procedures and tools has been established within the Bank to identify, assess, monitor, control and report such risks.


The committee governance structure seeks to ensure that risk management standards and policies are cascaded down through the organization from the Board to business and functional level. Information is communicated through the functional, business committees to the Board which seeks to ensure that key risk issues are addressed at the appropriate level and to provide assurance that standards and policies are being followed.

Credit Risk Credit risk is the risk that counterparty to a financial instrument will cause a financial loss to the Company by failing to discharge an obligation. Credit exposure includes individual borrowers and connected groups of counterparties and portfolios, in the banking and trading books. Standards are approved by the Board and the delegation of credit authorities are overseen by the CEO. Procedures for managing credit risk are determined at the business level with specific policies and procedures being adapted to different risk environment and business goals. Business risk officers are in place to maximize the efficiency on decision making. The Credit Risk Management Committee chaired by the CEO reviews and monitors the Bank’s Assets Portfolio.

Market Risk Market risk is the exposure created by potential changes in market prices and rates. The Bank is exposed to market risk arising principally from customer driven transactions. The objective of the Bank’s market risk policies and processes is to obtain the best balance of risk and return while meeting our customers’ requirements. Market risk is managed by Asset and Liability Committee (ALCO) which agrees policies and levels of risk appetite.

Liquidity Risk Liquidity risk is defined as the risk that the Bank either does not have sufficient financial resources available to meet all its obligations and commitments as they fall due, or can access them only at excessive costs. It is the policy of the Bank to maintain adequate liquidity at all times and for all currencies, and hence, to be in a position to meet all obligations as they fall due. The liquidity risk is managed both on a short term and a medium terms basis. In the short term, the focus is on ensuring

that the cash flow demands can be met through asset maturities supported by customer deposits and wholesale raisings where required. The Asset/Liability Management Committee (ALCO) under the chairmanship of CEO meets at regular intervals to review the Deposit/Investment strategy of the Company and regulatory compliance. The ALCO is responsible for both statutory and prudential liquidity.

Operational RiskOperational Risk is the risk of direct or indirect loss due to an event or action resulting from the failure of internal processes, people and systems, or from external events. To ensure that the key operational risks are managed in a timely and effective manner, a framework of policies, procedures and tools has been established within the Bank to identify, assess, monitor, control and report such risks.

A robust Operational Risk Management and Assurance Framework (ORMAF) has been established as per SCB Group guidelines to supervise and manage the operational risk in the Bank. A Country Operational Risk Group (CORG) under the chairmanship of CEO is in place to supervise and direct the management of operational risk at country level whilst Business and Functional Operational Risk Groups are responsible for managing business and functional level operational risk in the Bank. Similarly, each unit in the Bank has a Unit Operational Risk Manager responsible for managing the operational risk at the unit level.

Bank’s existing operational risk management system has been further strengthened by creating a separate unit viz. Country Operational Risk Management & Assurance headed by a Senior Manager. The unit commenced independent Assurance Reviews and Reporting from April 2008.


The effectiveness of the Company’s internal control system is reviewed regularly by the Board, its committees, Management and Internal Audit.


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Regulatory Risk Regulatory risk includes the risk of non-compliance with the regulatory requirements. The Bank has implemented appropriate compliance framework, policies and procedures and has effectively managed the regulatory risk. While compliance team is responsible for establishing and maintaining the compliance risk, compliance of such policies and procedures is the responsibility of each employee.

Legal Risk Legal risk is the risk of unexpected loss, including reputational loss arising from defective transactions or contracts, claims being made or some other event resulting in liabilities or other loss for the Bank, failure to protect the title to and ability to control the rights to assets of the Bank (including intellectual property rights), changes in the law, or jurisdictional risk. The Bank has appropriate legal framework, policies and procedures in place and has effectively managed the legal risk. Legal risk is managed by the Legal Team.

Reputational Risk Reputational Risk is the risk of failure to meet the standards of performance or behaviors, expected by stakeholders in the way in which business is conducted. It is the Bank policy that, at all times, the protection of the Bank’s reputation should take priority over all other activities, including revenue generation. Reputational risk is not a primary risk, but may arise from the failure to effectively mitigate one or more of credit, liquidity, market, legal and regulatory and operational risk. It also arises from the failure to comply with social, environmental and ethical standards. A Reputational Risk Committee within the Bank has been established which meets at regular intervals to review and monitor this risk. All employees are responsible for day to day identification and management of reputational risk.

Capital Management The Bank’s capital management approach is driven by its desire to maintain a strong capital base to support the development of its business and to meet the regulatory capital requirements at all times.

As Capital is the centerpiece of the Bank’s performance matrix, a sound capital management forms the very core of the overall performance landscape to ensure that the Bank delivers on its

objective of maximizing the shareholder’s value. The senior management of the company is engaged and responsible for prudent capital management at all times.

In compliance with the regulatory requirement of increasing the capital base as prescribed by the Central Bank, the Bank has a well drafted capital plan in place. The Bank is comfortable in meeting the minimum capital requirements and is very strongly positioned to meet the performance benchmarks as outlined in the plan.

The capital plan takes the following into account:• RegulatoryCapitalrequirements• Increaseinthecapitalrequiredduetoprojected

business growth, market uncertainties and stresses.

• Availablesourcesofcapitalandcapitalraisingoptions

Crisis Management The Bank has in place a Crisis Management Plan and a Country Crisis Management Team to manage and resolve effectively serious crisis that may affect the operations of the Bank. In addition to this the, Bank has a detailed Business Continuity Plan (BCP) to manage disruptions of operations and a Disaster Recovery Plan (DRP) to manage Technological problems.

To ensure that the key operational risks are managed in a timely and effective manner, a framework of policies, procedures and tools has been established within the Bank to identify, assess, monitor, control and report such risks.


Health, Safety and SecurityWe consider the health and safety of our people and the integrity of our business as most important aspect of our operations. We regularly conduct audits of Health & Safety and Environment Management and conduct inspections of buildings and departments to provide assurance to all stakeholders that risks are being managed effectively and that there is a healthy and safe working environment for both our staff and our customers. As part of Health & Safety corrective action plans, the Bank during the year has invested in constructing a new emergency escape staircase at our Head Office building and uplifted/renovated the cafeteria facility for the staff apart from redesigning and renovating work areas in many parts of Head Office building in Naya Baneshwore. We replaced our existing chairs with Group recommended safer chairs for our entire staff members.

We believe these actions will undoubtedly help our brand stand out from our competitors. Ultimately they underpin our business and will help us to grow stronger.

Group Code of Conduct – Summary1. Comply with laws, regulations and Group

standards: Staff are individually responsible for complying with the spirit, not just the letter, of laws, regulations and Group standards.

2. Reject bribery and corruption: Staff must not give or accept bribes nor engage in any form of corruption.

3. Avoid being compromised by gifts and entertainment: Staff must not offer, give or accept inappropriate gifts or benefits to or from third parties. Definitive guidelines can be found in the Group Gifts and Entertainment Policy.

4. Speak up: Staff must Speak Up if they suspect, or know of, any actual, planned or potential behaviour that breaks, or may break, any laws, regulations or Group standards. Details are contained in the Speaking Up Guide.

5. Combatting financial crime: Staff must comply with laws, regulations and Group standards on money laundering, terrorist financing and fraud prevention.

6. Avoid conflicts of interest: Staff are responsible for identifying conflicts of interest. Once these have been identified staff must take immediate steps to resolve the problem. Definitive guidelines can be found in the Group and Business Conflicts of Interest Policies and Procedures.

7. Do not deal in shares when in possession of inside information: Staff must comply with the Group’s Personal Account Dealing Policy to eliminate the risk of insider dealing.

8. Treat customers fairly (TCF): Staff must follow the Group’s seven TCF standards.

9. Respect customer confidentiality: Staff should not disclose customer or Group data unless authorised to do so.

10.Treat people fairly and with respect: All employees are entitled to a safe working environment that is free from discrimination, bullying and harassment.

11.Responsibilities to our communities and regulators: Staff must be responsive to their communities and demonstrate exemplary governance at all times.


Leading with innovative products and services


Additional Information as required by section 109 of the Companies Act 2006

Achievements of the current year as of the date

of preparation of the report, and opinion of the

Board of Directors on future actionsUn-audited first month result of the current financial year is as follows:

(Rs.)

Risk Assets: 14.65 billionDeposits: 36.97 billionOperating profit: 117.86 millionProfit before bonus and taxes: 153.31 millionNet profit for the period: 97.56 million

The bank will continue to invest in building the franchise and expand its footprints cautiously. It will continue to strike a fine balance between growth and revenue. Similarly strong vigilance will be maintained over the quality of assets. More innovative products will be introduced to add value to our customers by adhering to their needs. We shall be customer centric rather than product centric and will continue to improve the way we work to delight our customers and other stakeholders. We will continue to invest in our people through cross border placements, trainings and knowledge enhancement and other measures in order to promote a meritocratic work performance culture and with the objective of increasing overall productivity and grooming managers for the future.

A review of the business during the

previous year:Please refer the sections ‘Wholesale Banking’ & ‘Consumer Banking’ under CEO and Director’s Report.

Impact if any to the business of company from

national and international situation:Please refer the Chairman’s statement and sections ‘Wholesale Banking’ & ‘Consumer Banking’ under CEO and Director’s Report.

Industrial or Professional Relations of the

CompanyThe Company maintains a good professional relationship with its customers, people and regulators. Senior managers of the Company represent in number of councils, committees and sub-committees of regulators’, professional organizations, associations, and forums.

The Company is a Member of Nepal Bankers Association, Federation of Nepalese Chamber of Commerce & Industry, Nepal Britain Chamber of Commerce & Industry, Nepal India Chamber of Commerce & Industry, Management Association of Nepal and Nepal Institute of Company Secretary.

Changes made in the Board of Directors, and

reasons thereforePlease refer the section ‘Corporate Governance’ under Chairman’s Statement.

Main factors affecting the businessPlease refer the sections ‘A Challenging Environment’ and ‘Conclusion’ under Chairman’s Statement and ‘Credit Environment’ under CEO & Director’s Report.

Board of Directors’ Reaction to Remarks made,

if any, in the Audit ReportThere are no adverse remarks made in the auditor’s report.


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The amount recommended for distribution as

dividendThe Board has recommended paying Rs. 465,983,200 by way of bonus shares and Rs. 465,983,200 by way of dividend to the shareholders.

Forfeited SharesThere are no shares forfeited during the fiscal year.

Transaction between the Bank and its Subsid-

iary Company and the Progress

made in the Business The Bank does not have a subsidiary company.

Main transactions carried out by the company

and its subsidiary company during the financial

year and any important change in the business

of the company during the periodThe Bank does not have a subsidiary company and there is no significant change in the business of the company during the period.

Information furnished to the company by its

basic shareholders during the previous finan-

cial yearThere are no basic shareholders in the bank as no shareholder, except the SCB Group, holds more than 1% of the paid up capital of the Company. There has been no information received from the SCB Group in this regard.

Particulars of the ownership of shares taken

up by the Directors and office-bearers of the

company during the previous financial year,

and information received by the company from

them about their involvement, if any, in the

transactions of the shares of the companyNIL. Directors and office bearer have not involved in the shares transactions of the bank in FY 2065/66 as per the declaration provided by them to the Company.

Particulars of information furnished by any

Director or any of his close relatives about his

personal interest in any agreement connected

with the company signed during the previous

financial yearThere are no such information furnished by the directors and any of their close relatives.

Purchase of own SharesThe bank has not purchased its own shares in the year under review.

Whether or not there is an internal control

system, and if there is any such system, details

thereof Please refer section ‘Our approach to Corporate Governance’ under CEO & Director’s Report.

Particulars of the total management expenses

of the previous financial yearThe management expenses of the financial year is Rs. 529.38 million (total of Staff Expenses and Other Operating Expenses as per Schedule 4.23 & 4.24 of the Financial Statements.)


A list of members of the Audit Committee,

remunerations, allowances and facilities being

received by them, particulars of functions dis-

charged by the Committee, and particulars of

suggestions, if any, offered by the Committee.Please refer section ‘Our approach to Corporate Governance’ under CEO & Director’s Report.

Remunerations, allowances and facilities:The Committee members and the Chairman have been paid meeting allowance of NPR 5000 and NPR 6000 per meeting respectively, except to the members representing the SCB Group and employees of SCB, Nepal. No remuneration and other facilities were provided to them. The total amount of Audit Committee meeting allowance paid during the fiscal year was NPR 24,000; this was paid to Mr. Ram Bahadur Aryal, the only member eligible to get meeting allowance, for attending the Audit Committee meetings as Chairman of the Committee.

Functions discharged by the Committee: Please refer section ‘Our approach to Corporate Governance’ under CEO & Director’s Report.

Payments due, if any, to the company from any

Director, Managing Director, Executive Chief

or basic shareholder of the company or any of

their close relatives, or from any firm, company

or corporate body in which he is involvedNil

Remunerations, Allowances and Facilities to

the Directors, the Managing Director, the Ex-

ecutive Chief and other Office-bearersDirectors have not been paid any remuneration and no facilities have been provided to them. Meeting allowance is paid at Rs.11,000 to the Chairman and Rs. 10,000

to Directors. However directors representing SCB Group are not entitled to meeting allowance as per the Company’s policy. Meeting allowances paid to the Directors are as follows:

Ram Bahadur Aryal 130,000.00Arjun Bandhu Regmi 130,000.00 Remunerations, allowances and bonus paid to the CEO in FY 065/066, who also was a Director of the Board, is Rs. 21,391,556.00

Dividends yet to Be Collected By ShareholdersTotal dividends yet to be collected by the shareholder amounts to Rs. 10,312,848

Detail of property’s buy or sell as per Clause

141Nil.

Detail of the transactions held between Associ-

ated Companies as per Clause 175Nil.

Any other matter to be mentioned in the Board

of Directors’ report under Companies Act, 2063Nil

Additional Information as required by section 109 of the Companies Act 2006 continued


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Schedule- 13(Related to Sub Rule (1) of Rule 22 of Securities Registration and Issuance Regulation, 2065

1. Report of Board of DirectorsCovered in the same chapter of this annual report.

2. Report of AuditorIncluded in the same chapter.

3. Audited Financial DetailBalance Sheet, Profit & Loss, cash flow detail and related schedules included in this report.

4. Detail relating to Legal Actions(a) If any case filed by Organized Institution in

the quarter, On 2065.06.08 two cases of Likhat Badar and

Jalsaji, on 2065 Bhadra a case of Certiorari and on 2066.01.13 a case of Dishonour of Cheque were filed against the Bank as co defendant.

(b) If any case relating to commission of disobedience or criminal offence filed by or against the Promoter or Director of Organized Institution.

No Such information has been received.

(c) If any case relating to commission of financial crime filed against any Promoter or Director.

No Such information has been received.

5. Analysis of share transaction and progress of

Organized Institution(a) Management view on share transaction of the

Organized Institution happened at Securities Market.

Since price and transactions of the Bank’s shares are being determined by the open share market operations thorough a duly established Stock Exchange, management view on this is neutral.

(b) Maximum, minimum and last share price of Organized Institution including total transacted number of shares and transacted day during each quarter of last year.

Ashwin end:Maximum- Rs. 9,200, Minimum- Rs. 6,627, Last- 7,750, and total transacted number of shares- 41030 respectively.

Poush end:Maximum- Rs. 8,036, Minimum- Rs. 4,350, Last- Rs. 4,733, and total transacted number of shares- 54790 respectively.

Chaitra end:Maximum- Rs. 4,900, Minimum- Rs. 4,100, Last- Rs. 4,699, total transacted number of shares- 61825 and transacted days-56 respectively.

Aashadh end:Maximum- Rs. 6,050, Minimum- Rs. 4,599, Last- Rs. 6,010, total transacted number of shares- 62504 and transacted days-65 respectively.

6. Problem and ChallengeThe inflationary pressure has been a major internal challenge as it continues to push the cost of operations. Furthermore, the retention of talent and staff engagement in such a competitive market is also attracting much attention from the management.

The major external problems pertain to the unstable socio-political situation of the country and the deteriorating risk environment. The frequent strikes are a huge impediment to the smooth functioning of the economy as a whole. Alongside the repercussion of the fluid local business milieu, the contagion of the global financial crisis is also impacting the overall financial environment.

Your bank is well placed to monitor and proactively deal with the challenges posed by internal as well as external factors. We intend to continue being the pioneer in introducing new products and services to better serve the market and deal with the competition. Our portfolio is being managed well by emphasizing more on quality rather than quantity. The employees are engaged into various trainings and programs to continuously upgrade their performance and enhance their motivation level. A crisis management plan is in place to deal with exigencies.

7. Corporate GovernanceIncorporated under the same chapter in this annual report.


Board of Directors

Sujit Mundul, (Chief Executive Officer)Sujit Mundul, the Director & CEO of SCB Nepal holds the degree of M. Sc., BA (Hons) in Economics & English, LLB, CAIIB and AIB. He has also served as a Lecturer in Kolkata and possesses more than 34 years of banking experience in SCB.

Neeraj Swaroop, (Chairman)Neeraj Swaroop, the Chairman of SCB Nepal is an MBA and BE with more than 25 years of experience in the banking sector of which 17 years in Indian Banking industry including Bank of America and HDFC bank. He is currently serving as the Regional Chief Executive, India and South Asia.

Anurag Adlakha, (Director)Anurag Adlakha, Director of the Bank, is a Chartered Accountant by profession. He has over 22 years of professional career of which 17 years in financial services industry including HSBC India. He is presently working as the Chief Financial Officer, India and South Asia.

Ram Bahadur Aryal, (Independent Director)Ram Bahadur Aryal, Independent/ Professional Director is an MA in Economics with more than 37 years experience in Nepal Rastra Bank (Central Bank of Nepal) holding senior positions in banking operation, planning, training, foreign exchange and Human Resources.

Sushen Jhingan (Director)Sushen Jhingan, Director of this Bank, is an MBA with 12 years of banking experience in Strategic Sourcing and Corporate Real Estate Services, government and regulatory relations. He is presently working as a Director - Public Affairs, India.

Arjun Bandhu Regmi (Director representing Public Shareholders)Arjun Bandhu Regmi, Director representing public shareholders, is an MA in Economics and holds a Post Graduate Diploma in Population Studies. He has experience as Associated Professor in Tribhuvan University affiliated campuses and also has more than 22 years experience in the field of media business.

Management Team SudeSh KhalingChief information Officer

gOpi BhandariSenior Manager – Credit

ShOBha Bahadur ranaHead Legal and Compliance & Assurance

Sujit MundulChief Executive Officer

diwaKar pOudelHead – Corporate Affairs

anurag MiShraHead – Wholesale Banking

Bina ranaHead – Human Resources

raKhi Singh Chief Financial Officer

anju SharMaHead - Consumer Banking

Gorakh RanaSenior Relationship Manager

Rajib GiriSenior Relationship Manager

Anil K ShresthaSenior Relationship ManagerDevelopment Organisations

Amit KoiralaSenior Relationship ManagerFinancial Institutions

Dambar B SaruValue Centre GM, Mortgage & Auto

Sudhir SharmaValue Centre GM, Credit Card & Personal Loans

Sanjeev MishraValue Centre GM, SME

Vishnu Manandhar Branch Manager – Lalitpur

Abhishek ShresthaManager – UN Counter

Deepak K CHead – Shared Distribution

Ujjwal DixitAssistant Manager, Share Operations

Sujeet Karn Branch Manager - Biratnagar

Madhab Pd. RegmiCompany Secretary

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Consumer Banking Consumer Banking

Tara Manandhar Branch Manager - Birgunj & Hetauda

Chintamani Rai Branch Manager - Narayangarh

Share Operations

Bishnu PokharelRelationship Manager

Origination & Client Coverage

Arun DevkotaRelationship Manager

Mukesh Paudel Branch Manager - Lakeside & Newroad, Pokhara

Dhan Thapa Branch Manager- Bhairahawa & Butwal

Raj Kumar GurungBranch Manager – Dharan

Netra SubediBranch Manager - Nepalganj

Pushpa RanaHead – Priority Banking

Kishoree ManandharHead Credit – Consumer Banking

Probin AcharyaBranch Manager- Lazimpat

Neelam SharmaBranch Manager- Naya Baneshwore

Navin ManandharRelationship Manager

Sunil PokharelBusiness Development ManagerTransaction Banking

Sandeep WagleRelationship Manager

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SCB Nepal Head Office, New Baneshwor Lalitpur BranchLazimpat Branch

BhairahawaPO Box 14, Budha Chowk ColonyBurmeli Tole, Bhairahawa, Siddhartha Nagar977-71-524029, 524429977-71-524039

BiratnagarPO Box 201, Hanumandas RoadBiratnagar - 8, NepalTel. 977-21-528983Fax. 977-21-528982

ButwalMilan ChowkButwal, Municipality - 11Rupandehi, NepalTel. 977-71-546832Fax. 977-71-546882

DharanPanna Kamala ComplexWard No 7/100Ka, Buddha MargaDharan - 7 Sunsari, NepalTel. 977-25-520505, 530980Fax. 977-25-530981

Head OfficeP.O.Box 3990Naya Baneshwar, Kathmandu, NepalTel. 977-1-4782333, 4783753Fax. 977-1- 4780762

HetaudaBank Road, Hetauda - 4Makwanpur, NepalTel. 977-57-523019, 524972Fax. 977-57-525695

LalitpurPO Box 3990Jawalakhel, Lalitpur, NepalTel. 977-1-5540544, 5540566Fax. 977-1-5523266

LazimpatPO Box 3990Lazimpat, Kathmandu, NepalTel. 977-1-4418456 , 4417428Fax. 977-1- 4417428

NepalgunjSurkhet Raod, Ward No 13Nepalgunj Banke, NepalTel. 977-81-525514, 520022Fax. 977-81-525515

Pokhara, LakesidePO Box 08Lakeside BaidamPokhara, NepalTel. 977-61-462102, 462805, 461746Fax. 977-61-462318

Pokhara, New RoadP.O.Box 08New Road, Pokhara, NepalTel. 977-61-536230Fax. 977-61- 531761

BirgunjAdarsha Nagar-13,Birgunj NepalTel. 977-51-529499Fax. 977-51-529677

NarayangarhLion's Chowk, Ward-4 Narayangarh,BharatpurTel. 977-56-571277Fax. 977-56-571279

Bhairahawa Siddhartha Nagar, Hotel Pawan Building

Boudha, KathmanduBoudha, Near Boudhanath stupa

DharanBP Koirala Institute of Health Science

Itahari Chowk, SunsariBhu Pu Gorkha Departmental Store, Dharan Biratnagar Road Itahari 1, Sunsari

Jawalakhel, LalitpurStandard Chartered Bank Nepal Ltd

Kamladi, KathmanduKashtamandap Departmental Store

Lakeside, PokharaHotel Snowland, Lakeside, Pokhara

Lakeside, PokharaStandard Chartered Bank Nepal Ltd

Lazimpat, KathmanduStandard Chartered Bank Nepal Limited

Maharajgunj ATMShubham Departmental Store

Mangal Bazar, PatanPatan, Mangal Bazar, Lalitpur, Nepal

Nrayangarh, BharatpurStandard Chartered Bank Nepal Limited

Naya Baneshwor, KathmanduStandard Chartered Bank Nepal Limited

New Road, PokharaNew Road, Pokhara, Nepal

New Road, KathmanduBishal Bazar, New Road, Kathmandu, Nepal

Pulchowk, LalitpurNear UNDP Complex, Lalitpur, Nepal

Thamel, KathmanduArcadia Building, Near Yin Yang Restaurant

Thamel, KathmanduKathmandu Guest House

World Trade Center, TripureshworWorld Trade Center, Tripureshwor

Branches ATM sites

Extension CountersUN Counter – LalitpurBP Koirala Medical College – DharanBritish Gurkhas PPO – PokharaManipal Counter - Pokhara

1955, Tanka Prasad Ghumti Sadak Babar MahalPO Box: 4861, Kathmandu, Nepal Tel: +977-1-4259414, 4268798, 4251518Fax: +977-1-4244255 E-mail: [email protected]

Auditors’ Report

To the Shareholders of Standard Chartered Bank Nepal Limited

Financial statements and management’s responsibilityWe have audited the accompanying financial statements of Standard Chartered Bank Nepal Limited which comprise the balance sheet as of July 15, 2009 (Ashadh 31, 2066) and the profit and loss account, statement of changes in equity and cash flow statement for the year then ended and a significant accounting policies and other explanatory notes. These financial statements are the responsibility of the Bank’s management.

Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Nepal Standards on Auditing. 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

Report on the requirements of Banks and Financial Institutions Act 2063 and Company Act 2063We have obtained satisfactory information and explanations asked for, which to the best of our knowledge and belief were necessary for the purpose of our audit; the returns received from the branch offices of the bank were adequate for the purpose of the audit; the financial statements including the Balance Sheet, the Profit and Loss Account and the Cash flow Statement have been prepared in accordance with the methods and format specified by Nepal Rastra Bank, and they are in agreement with the books of accounts of the Bank; and the accounts and records of the Bank are properly maintained in accordance with the prevailing laws.

To the best of our information and according to the explanations given to us, in the course of our audit, we observed that the bank has taken actions for protection of the interest of depositors and investors; the capital fund and risk bearing fund were adequately maintained; loans have been written off as specified; the business of the Bank was conducted satisfactorily and the Bank’s transactions were found to be within the scope of its authority. We did not come across cases where the board of directors or any director or any office bearer of the Bank has acted contrary to the provisions of law or caused loss or damage to the Bank or committed any misappropriation or violated directives of Nepal Rastra Bank.

OpinionIn our opinion, the financial statements give a true and fair view of the financial position of the Bank as of 31 Ashad, 2066 (15 July 2009), and its financial performance and cash flows for the year then ended in accordance with Nepal Accounting Standards, the directives from Nepal Rastra Bank, Bank and Financial Institution Act 2063 and Company Act 2063.

Date : 12 August 2009

Place: Kathmandu

Madan Krishna Sharma

Partner

CSC & Co.

Chartered Accountants

CSC & CoChartered Accountants


Financial Statements and Notes to Accounts continued

Balance Sheetas at 15 July 2009 (31 Ashad 2066)

Capital & Liabilities Schedule This Year Previous Year

Rs. Rs.

1. Share Capital 4.1 931,966,400 620,784,0002. Reserves and Funds 4.2 2,120,503,331 1,871,763,9963. Debentures and Bonds 4.3 - -4. Loans and Borrowings 4.4 300,000,000 -5. Deposit Liability 4.5 35,871,721,127 29,743,998,7946. Bills Payables 4.6 72,941,748 87,397,0217. Proposed and Unpaid Dividend 476,296,048 506,366,9408. Income Tax Liability 4,262,601 2,051,5509. Other Liabilities 4.7 809,776,754 503,426,025

Total Liabilities 40,587,468,009 33,335,788,326

Assets Schedule This Year Previous Year

Rs. Rs.

1. Cash Balance 4.8 463,345,996 414,875,4672. Balance with Nepal Rastra Bank 4.9 1,851,132,637 1,266,273,5243. Balance with Banks/Financial Institutions 4.10 822,684,902 369,094,2234. Money at Call and Short Notice 4.11 2,055,549,000 2,197,537,6005. Investments 4.12 20,236,121,082 13,902,819,0116. Loans, Advances and Bills Purchased 4.13 13,679,756,990 13,718,597,1327. Fixed Assets 4.14 137,292,540 117,272,2588. Non-Banking Assets 4.15 - -9. Other Assets 4.16 1,341,584,862 1,349,319,111

Total Assets 40,587,468,009 33,335,788,326

Schedules 4.1 to 4.17 form integral part of the Balance SheetAs per our report of even date

Rakhi SinghChief Financial Officer

Sujit MundulCEO & Director

Neeraj SwaroopDirector

Madan Krishna SharmaPartnerfor and on behalf of CSC & Co.Chartered Accountants

Arjun Bandhu RegmiDirector

Anurag AdlakhaDirector

Ram Bahadur AryalDirector

KathmanduDate : 12.08.2009

Contingent Liabilities Schedule 4.17Declaration of Directors Schedule 4.29Capital Adequacy Table Schedule 4.30 (Ka 1)Statement of Credit Risk Schedule 4.30 (Kha)Statement of Eligible Credit Risk Mitigation Schedule 4.30 (Ga)Statement of Operational Risk Schedule 4.30 (Gha)Statement of Market Risk Schedule 4.30 (Nga)Key Indicators Schedule 4.31Significant Accounting Policies Schedule 4.32Notes to Accounts Schedule 4.33Statement of Loan Availed by Promoter Shareholdersfrom Other Bank and FIs by Pledging Their Shares Schedule 4.34Unaudited Financial Results (4th Quarter) Schedule 4.35Comparision of Unaudited and Audited Financial Statements Schedule 4.36


Profit and Loss Account for the period 16 July 2009 to 15 July 2009 (1 Shrawan 2065 to 31 Ashadh 2066)

Particulars Schedule This Year Previous Year

Rs. Rs.

1. Interest Income 4.18 1,887,221,257 1,591,195,526 2. Interest Expenses 4.19 543,786,600 471,729,700Net Interest Income 1,343,434,657 1,119,465,826

3. Commission and Discount 4.20 235,468,846 276,432,2554. Other Operating Incomes 4.21 33,191,251 32,594,0855. Exchange Fluctuation Income 4.22 480,030,913 345,653,020Total Operating Income 2,092,125,667 1,774,145,186

6. Staff Expenses 4.23 253,055,504 225,256,1957. Other Operating Expenses 4.24 276,326,674 230,571,4098. Exchange Fluctuation Loss 4.22 - -Operating Profit Before Provision for Possible Loss 1,562,743,489 1,318,317,582

9. Provision for Possible Losses 4.25 56,634,631 69,885,338Operating Profit 1,506,108,858 1,248,432,244

10. Non-Operating Income/ (Loss) 4.26 22,098,317 1,682,50911. Provision for Possible Loss Written Back 4.27 101,075,167 90,634,940Profit from Ordinary Activities 1,629,282,342 1,340,749,693

12. Income/(Expenses) from Extra Ordinary Activities 4.28 (15,356,059) (28,039,437)Net Profit after considering all Activities 1,613,926,283 1,312,710,256

13. Provision for Staff Bonus 146,720,571 119,337,29614. Provision for Income Tax 442,091,176 374,451,952

• Current Year’s 443,119,138 381,493,368 • Upto Previous Year - - • Deferred Tax (1,027,962) (7,041,416)

Net Profit/Loss 1,025,114,536 818,921,008

Schedules 4.18 to 4.28 form integral part of this Profit and Loss AccountAs per our report of even date










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

Particulars Schedule This Year Previous Year

Rs. Rs.

Income 1. Accumulated Profit up to Previous Year 383,287,577 557,724,177 2. This Year’s Profit 1,025,114,536 818,921,008 3. Exchange Fluctuation Fund - - 4. Capital Adjustment Fund upto Previous Year - -

Total 1,408,402,113 1,376,645,185 Expenses

1. Accumulated Loss up to Previous Year - - 2. Current Year’s Loss - - 3. General Reserve Fund 205,022,907 163,784,202 4. Contingent Reserve - - 5. Institutional Development Fund - - 6. Dividend Equalisation Fund - - 7. Employees Related Reserves - - 8. Proposed Dividend 465,983,200 496,627,200 9. Proposed Issue of Bonus Shares 465,983,200 310,392,000 10. Special Reserve Fund - - 11. Exchange Fluctuation Fund 31,918,164 22,554,206 12. Capital Redemption Reserve Fund - - 13. Capital Adjustment Fund - -

Total 1,168,907,471 993,357,608

Accumulated Profit/(Loss) 239,494,642 383,287,577

As per our report of even date











Statement of Changes in EquityFinancial Year 2065/66 (FY 2008/09)

Particulars Share Accumulated General Capital Share Exchange Proposed Capital Capital Profit Reserve Reserve Premium Fluctuation Issue of Adjustment Fund Fund Bonus Shares Fund Total

Opening Balance

as at 16 July 2008 620,784,000 383,287,577 990,293,802 - - 187,790,617 310,392,000 - 2,492,547,996

Adjustments - - - - - - - - -

Restated Balance

as at 16 July 2008 620,784,000 383,287,577 990,293,802 - - 187,790,617 310,392,000 - 2,492,547,996

Surplus/ Deficit on revaluation of properties - - - - - - - - Surplus/ Deficit on revaluation of investments - - - - - - - - Net Profit for the Period - 1,025,114,536 - - - - - 1,025,114,536 Transfer to General Reserve - (205,022,907) 205,022,907 - - - - - Proposed Dividend - (465,983,200) - - - - - (4,65,983,200) Issue of Bonus Share 311,182,400 - - - - - (310,392,000) - 790,400 Proposed Issue of Bonus Shares - (465,983,200) - - - - 465,983,200 - - Issue of Share Capital - - - - - - - - Exchange Fluctuation Fund - (31,918,164) - - - 31,918,164 - - Capital Adjustment Fund - - - - - - -

Closing Balance as at 15 July 2009 931,966,400 239,494,642 1,195,316,709 - - 219,708,780 465,983,200 - 3,052,469,731


Cash Flow Statement for the period 16 July 200 to 15 July 2009 (1 Shrawan 2065 to 31 Ashad 2066)

Previous Year Particulars This Year

Rs. Rs.

(45,233,839) (A) Cash Flow from Operating Activities 6,948,938,465 1,862,221,002 1. Cash Receipts 2,128,177,260

1,295,672,504 1.1 Interest Income 1,480,241,128 272,068,274 1.2 Commission and Discount Income 238,616,592 255,436,198 1.3 Income from Foreign Exchange Transaction 352,358,259 5,867,246 1.4 Recovery of Loan Written off 23,770,030 33,176,780 1.5 Other Income 33,191,251 1,621,292,559 2. Cash Payments 1,963,910,721

474,628,760 2.1 Interest Expenses 521,840,234 223,667,612 2.2 Staff Expenses 254,218,116 206,769,247 2.3 Office Operating Expenses 250,890,193 385,040,406 2.4 Income tax Payment 440,908,086 331,186,534 2.5 Other Expenses 496,054,092 240,928,443 Cash Flow before Changes in Working Capital 164,266,539

(4,364,232,028) Decrease/ (Increase) of Current Assets 233,676,234

(436,386,100) 1. Decrease / (Increase) in Money at Call and Short Notice 141,988,600 - 2. Decrease / (Increase) in Short-term Investment - (3,255,242,077) 3. Decrease / (Increase) in Loan and Bills Purchase 44,154,587 (672,603,852) 4. Decrease / (Increase) in Other Assets 47,533,047 4,078,069,747 (Decrease) /Increase of Current Liabilities 6,550,995,692

5,096,978,038 1. (Decrease) / Increase in Deposits 6,127,722,333 - 2. (Decrease) / Increase in Certificate of Deposits - (348,771,311) 3. (Decrease) / Increase in Short Term Borrowings 285,544,727 (670,136,980) 4. (Decrease) / Increase in Other Liabilities 137,728,632 (16,662,637) (B) Cash Flow from Investment Activities (5,990,481,198)

(323,460,547) 1. Decrease/ (Increase) in Long term Investment (6,333,302,071) (14,116,435) 2. Decrease/ (Increase) in Fixed assets (24,719,699) 319,814,530 3. Interest Income from Long Term Investment 365,061,547 1,099,815 4. Dividend Income 2,479,025 - 5. Others - 901,800 (C) Cash Flow from Financing Activities 790,400 - 1. Increase/ (Decrease) in Long term Borrowings (Bond, Debenture etc) - 901,800 2. Increase / (Decrease) in Share Capital 790,400 - 3. Increase / (Decrease) in Other Liability - - 4. Increase / (Decrease) in Refinance /Facilities received from Nepal Rastra Bank - 90,216,822 (D) Income/Expense from change in exchange rate in Cash and Bank Balance 127,672,654 29,222,146 (E) Current year’s cash flow from all activities 1,086,920,321 2,021,021,068 (F) Opening Cash and Bank Balance 2,050,243,214 2,050,243,214 (G) Closing Cash and Bank Balance 3,137,163,535

As per our report of even date











Schedule 4.1: Share Capital and Ownershipas at 15 July 2009 (31 Ashad 2066)

Share Ownership

Details of the Shareholders holding 0.5 % or more of the Total Shares

Share Capital Share Capital

Rs. % Particulars % Rs.

465,588,000 75.00 A. Promoters 75.00 698,974,800

- - 1.1 Government of Nepal - - 465,588,000 75.00 1.2 Foreign Institutions 75.00 698,974,800 - - 1.3 “Ka” Class Licensed Institutions - - - - 1.4 Other Licensed Institutions - - - - 1.5 Other Entities - - - - 1.6 Individuals - - - - 1.7 Others - - 155,196,000 25.00 B. General Public 25.00 232,991,600

620,784,000 100.00 Total 100.00 931,966,400

Sn Number of Name of the Shareholders % of Total Shares Amount Rs. Shares Held

1 4,659,832 Standard Chartered Grindlays Ltd, Sydney, Australia 50.00 465,983,200 2 2,329,916 Standard Chartered Bank, UK 25.00 232,991,600 3 49,500 Priyanka Agrawal 0.53 4,950,000 4 49,500 Avinash Agrawal 0.53 4,950,000 5 49,500 Komal Agrawal 0.53 4,950,000 6 49,500 Shashi Agrawal 0.53 4,950,000 7 49,500 Shankar Lal Agrawal 0.53 4,950,000 8 49,500 Pashupati Soap Industries 0.53 4,950,000 9 47,375 Arjun Bandhu Regmi 0.51 4,737,500

Previous Year Particulars This year

Rs. Rs.

1. Share Capital

1,000,000,000 1.1 Authorised Capital 1,000,000,000

1,000,000,000 A) 10,000,000 Ordinary Shares of Rs. 100 each 1,000,000,000 - B) - Non-Redeemable Preference Shares of Rs. - each - - C) - Redeemable Preference Shares of Rs. - each - 1,000,000,000 1.2 Issued Capital 1,000,000,000

1,000,000,000 A) 10,000,000 Ordinary Shares of Rs. 100 each 1,000,000,000 - B) - Non-Redeemable Preference Shares of Rs. - each - - C) - Redeemable Preference Shares of Rs. - each - 620,784,000 1.3 Paid Up Capital 931,966,400

620,784,000 A) 9,319,664 Ordinary Shares of Rs. 100 each 931,966,400 - B) - Non-Redeemable Preference Shares of Rs. - each - - C) - Redeemable Preference Shares of Rs. - each -


Schedule 4.3: Debentures and Bondsas at 15 July 2009 (31 Ashad 2066)

Schedule 4.4 : Loans and Borrowingsas at 15 July 2009 (31 Ashad 2066)

Previous Year Particulars This Year Rs. Rs.

- 1. Debentures - - 2. Bond - - Total ( 1+2 ) -


Rs. Rs.

A. Local - 1. Government of Nepal - - 2. Nepal Rastra Bank - - 3. Repo Liabilities - - 4. Inter Bank and Financial Institution 300,000,000 - 5. Other Institutions - - 6. Others -

- Total A 300,000,000 B. Foreign - 1. Banks - - 2. Others -

- Total B -

- Total (A+B) 300,000,000

Schedule 4.2: Reserves and Fundsas at 15 July 2009 (31 Ashad 2066)


990,293,802 1. General Reserve Fund 1,195,316,709 310,392,000 2. Proposed Issue of Bonus Shares 4,65,983,200 3. Capital Reserve Fund - - 4.Capital Redemption Reserve - - 5. Capital Adjustment Fund - - 6. Other Reserves and Funds - - a) Contingent Reserve - - b) Institutional Development fund - - c) Dividend Equalisation Fund - - d) Special Reserve Fund - - e) Assets Revaluation Reserve - - f) Other Free Reserves - - g) Other Reserves - 383,287,577 7. Accumulated Profit/ (Loss) 2,39,494,642 187,790,617 8. Exchange Fluctuation Fund 219,708,780

1,871,763,996 Total 2,120,503,331



Schedule 4.5 : Deposit Accountsas at 15 July 2009 (31 Ashad 2066)


Rs. Rs.

1. Non-Interest Bearing Accounts

6,174,560,842 A. CURRENT DEPOSITS 6,202,861,116

3,855,500,048 1. Local Currency 3,582,919,639

48,089,639 1.1 Government of Nepal 92,567,910 123,931,954 1.2 “Ka” Class Licensed Institutions 137,475,948 9,206,433 1.3 Other Licensed Institutions 21,749,191 3,165,968,610 1.4 Other Organised Institutions 2,890,040,434 456,274,990 1.5 Individuals 393,747,688 52,028,422 1.6 Others 47,338,468 2,319,060,794 2 Foreign Currency 2,619,941,477

- 2.1 Government of Nepal - 11,559,317 2.2 “Ka” Class Licensed Institutions 25,501,017 - 2.3 Other Licensed Institutions - 1,877,548,029 2.4 Other Organised Institutions 2,099,710,655 352,110,544 2.5 Individuals 221,663,863 77,842,904 2.6 Others 273,065,942 474,043,934 B. MARGIN DEPOSITS 377,959,072

1. Employees Guarantee 239,360,196 2. Guarantee Margin 114,647,316 76,797,871 3. Letter of Credit Margin 118,436,904 157,885,867 4. Others 144,874,852 - C. OTHERS -

- 1. Local Currency - - 1.1 Financial Institutions - - 1.2 Other Organised Institutions - - 1.3 Individuals - - 2. Foreign Currency - - 2.1 Financial Institutions - 2.2 Other Organised Institutions - 2.3 Individuals -

6,648,604,776 Total of Non-Interest Bearing Accounts 6,580,820,188


Schedule 4.5: Deposit Accounts (Continued)as at 15 July 2009 (31 Ashad 2066)



Rs. Rs.

2. Interest Bearing Accounts

17,856,134,474 A. SAVING DEPOSITS 19,187,636,692

14,580,554,084 1. Local Currency 15,389,165,289

5,011,067,547 1.1 Organised Institutions 1,980,603,687 9,514,167,068 1.2 Individuals 13,306,329,514 55,319,469 1.3 Others 102,232,088 3,275,580,390 2. Foreign Currency 3,798,471,403

2,361,768,655 2.1 Organised Institutions 1,953,787,903 880,569,361 2.2 Individuals 1,809,147,447 33,242,374 2.3 Others 35,536,053 3,301,013,939 B. FIXED DEPOSITS 7,101,697,629

478,457,766 1. Local Currency 791,923,115

81,269,770 1.1 Organised Institutions 27,340,793 394,787,996 1.2 Individuals 105,071,746 2,400,000 1.3 Others 659,510,576 2,822,556,173 2. Foreign Currency 6,309,774,514

2,391,330,141 2.1 Organised Institutions 5,990,331,061 431,226,032 2.2 Individuals 319,443,453 - 2.3 Others - 1,938,245,605 C. CALL DEPOSITS 3,001,566,618

1,919,285,169 1. Local Currency 2,912,566,877

- 1.1 “Ka” Class Licensed Institutions - - 1.2 Other Licensed Institutions 257,491 1,791,404,856 1.2 Other Organised Institutions 2,480,450,342 127,880,313 1.4 Individuals 431,859,044 - 1.5 Others - 18,960,436 2. Foreign Currency 88,999,741

6,916,000 2.1 “Ka” Class Licensed Institutions - - 2.2 Other Licensed Institutions - 12,044,436 2.3 Other Organised Institutions 88,999,741 - 2.4 Individuals -

- 2.5 Others -

- D. CERTIFICATE OF DEPOSITS -

- 1. Organised Institutions -

- 2. Individuals -

- 3. Others -

23,095,394,018 Total of Interest Bearing Accounts 29,290,900,939

29,743,998,794 Total Deposits (1+2) 35,871,721,127


Schedule 4.6: Bills Payableas at 15 July 2009 (31 Ashad 2066)

Schedule 4.7 : Other Liabilitiesas at 15 July 2009 (31 Ashad 2066)


Rs. Rs.

61,837,684 1. Pension/Gratuity Fund 61,606,523 - 2. Employees Provident Fund - - 3. Employees Welfare Fund - 119,337,296 4. Provision for Staff Bonus 146,720,571 32,552,503 5. Interest Payable on Deposits 54,442,157 - 6. Interest Payable on Borrowings 56,712 28,929,766 7. Unearned Discount and Commission 30,718,324 201,236,901 8. Sundry Creditors 277,233,810 - 9. Branch Adjustment Account - 59,531,875 10. Others 238,998,657 446,000 a) Audit Fees Payable 446,000 59,085,875 b) Others 238,552,657

503,426,025 Total 809,776,754


Rs. Rs.

63,123,816 1. Local Currency 60,773,754 24,273,205 2. Foreign Currency 12,167,994

87,397,021 Total 72,941,748

Schedule 4.8: Cash Balanceas at 15 July 2009 (31 Ashad 2066)


382,753,590 1. Local Currency (including coins) 416,767,782 32,121,877 2. Foreign Currency 46,578,214

414,875,467 Total 463,345,996


Schedule 4.9: Balance with Nepal Rastra Bankas at 15 July 2009 (31 Ashad 2066)

Schedule 4.10: Balance with Banks / Financial Institutionsas at 15 July 2009 (31 Ashad 2066)

Note: Balance as per the confirmation and statement received from respective banks is Rs.1,374,220,555 and the differences have been reconciled.

Previous Year Particulars Local Currency Foreign Currency Rs. Grand Total

Convertible Rs. Rs. INR Foreign Currency Total Rs.

1,266,273,524 1. Nepal Rastra Bank 1,832,777,184 - 18,355,453 18,355,453 1,851,132,637 1,266,273,524 a) Current A/C 1,832,777,184 - 18,355,453 18,355,453 1,851,132,637 - b) Other A/C - - - - -

Previous Year Particulars Local Foreign Currency (Rs.) Grand Total Currency

Convertible Rs. Rs. INR Foreign Currency Total Rs.

49,615,608 1. Local Licensed Institutions 51,292,893 - - - 51,292,893 49,615,608 a. Current Account 51,292,893 - - - 51,292,893 - b. Other Account - - - - - 319,478,615 2. Foreign Banks - 196,183,413 575,208,596 771,392,009 771,392,009

319,478,615 a. Current Account - 196,183,413 575,208,596 771,392,009 771,392,009 - b. Other Account - - - - -

369,094,223 Total 51,292,893 196,183,413 575,208,596 771,392,009 822,684,90



Schedule 4.11: Money at Call and Short Noticeas at 15 July 2009 (31 Ashad 2066)


Rs. Rs.

- 1. Local Currency - 2,197,537,600 2. Foreign Currency 2,055,549,000

2,197,537,600 Total 2,055,549,000

Schedule 4.12: Investmentsas at 15 July 2009 (31 Ashad 2066)

Previous Year Particulars Purpose This Year

Rs. Trading Other Rs.

7,157,731,943 1.Government of Nepal Treasury Bills - 9,050,988,434 9,050,988,434 917,150,000 2.Government of Nepal Saving Bonds - 917,150,000 917,150,000 62,733,235 3. Government of Nepal Others Securities (Special Bond) - 30,615,124 30,615,124 - 4. Nepal Rastra Bank Bonds - - - - 5. Foreign Securities - - - - 6. Local Licensed Institutions - 250,613,524 250,613,524 5,675,042,833 7. Foreign Banks - 9,895,710,500 9,895,710,500 106,043,000 8. Corporate Shares - 106,925,500 106,925,500 8,493,000 9. Corporate Debenture and Bonds - 8,493,000 8,493,000 - 10. Other Investments - - -

13,927,194,011 Total Investments - 20,260,496,082 20,260,496,082

24,375,000 Provision 24,375,000 24,375,000

13,902,819,011 Net Investments - 20,236,121,082 20,236,121,082


NOTE: 1. The following companies have not distributed dividends in the last three years : 1.1 Purwanchal Grameen Bikash Bank Ltd. 1.2 Sudur Paschimanchal Grameen Bikash Bank Ltd. 1.3 Taragaon Regency Hotels Ltd. 2. Out of the total investment above, Nepal Electricity Authority Bond and Purwanchal Grameen Bikash Bank Ltd. shares are listed at the Nepal Stock Exchange Ltd (NEPSE). 3. NA - In the absence of sufficient information and/or listing in NEPSE , the market value of the investments have not been shown.

Schedule 4.12(A): Investment in Shares, Debentures and Bondsas at 15 July 2009 (31 Ashad 2066)

Previous Year Particulars This Year Cost Price Cost Price Market Price Provision

Rs. Rs. Rs. Amount Rs.

106,043,000 1. Investment in Shares 106,925,500 - 24,375,000

3,000,000 1.1 Purwanchal Grameen Bikash Bank Ltd. 3,000,000 NA (Note - 3) 30,000 Ordinary Shares of Rs.100 each fully paid up 3,000,000 1.2 Sudur Paschimanchal Grameen Bikash Bank Ltd. 3,000,000 NA (Note - 3) 3,000,000 30,000 Ordinary Shares of Rs.100 each fully paid up 52,190,000 1.3 Rural Micro Finance Development Centre Ltd. 52,190,000 NA (Note - 3) - 521,900 Ordinary Shares of Rs.100 each fully paid up 353,000 1.4 Credit Information Centre Ltd. 1,235,500 NA (Note - 3) - 14,120 Ordinary Shares of Rs.100 each fully paid up (including 1,765 bonus shares fully paid up) 47,500,000 1.5 Taragaon Regency Hotels Ltd. 47,500,000 NA (Note - 3) 21,375,000 475,000 Ordinary Shares of Rs. 100 each fully paid up 8,493,000 2. Investment in Debentures and Bonds 8,493,000 - -

8,493,000 2.1 Nepal Electricity Authority 8,493,000 NA (Note - 3) - 7.75%; 8,493 bonds of Rs. 1,000 each fully paid up, interest payable semiannually, maturity on 27th March 2013 114,536,000 Total Investment 115,418,500 -

24,375,000 3. Provision for Loss 24,375,000

3,000,000 3.1 Upto Previous year 24,375,000 21,375,000 3.2 Increase/Decrease this Year -

24,375,000 Total Provision 24,375,000

90,161,000 Net Investments 91,043,500



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8,23

1

924

13,

118,

591,

585

4,9

13,8

22 7

57,1

97,6

68

762

,111

,490

13,

880,

703,

075

3.

Loan

Lo

ss P

rovi

sio

n

1

38,3

52,6

40

3.

1 P

ass

-

4,3

53,4

98

125

,921

,992

9

1

30,2

75,4

99

49,

138

7

,571

,977

7

,621

,115

1

37,8

96,6

14

-

3.2

Res

truc

ture

d

-

-

-

6,

226,

536

3.3

Sub

stan

dard

-

8

,605

,511

8,6

05,5

11

-

-

-

8

,605

,511

45,0

06,1

93

3.

4 D

oubt

ful

-

7

,500

,000

2

,175

,654

9,6

75,6

54

-

-

-

9

,675

,654

55,8

01,2

51

3.

5 Lo

ss

-

5

32,6

61

44,

235,

645

44,

768,

306

-

-

-

44,

768,

306

24

5,38

6,62

0

(B) T

ota

l Pro

visi

on

-

12,3

86,1

59

180

,938

,802

9

1

93,3

24,9

70

49,

138

7

,571

,977

7

,621

,115

2

00,9

46,0

85

4. P

rovi

sio

n up

to

P

revi

ous

Yea

r

10

5,93

1,31

2

4.

1 P

ass

-

3,3

80,4

84

127

,978

,901

8

99,1

97

132

,258

,582

1

8,41

3

6,0

75,6

45

6,0

94,0

58

138

,352

,640

-

4.2

Res

truc

ture

d lo

an

-

-

-

4,

113,

494

4.

3. S

ubst

anda

rd

-

6,2

26,5

36

6

,226

,536

-

-

-

6,2

26,5

36

63

,096

,760

4.

4 D

oubt

ful

-

42

,000

,000

3

,006

,193

-

45,

006,

193

-

-

-

45,

006,

193

11

4,36

9,65

6

4.5

Loss

-

844

,289

5

4,95

6,96

2

-

5

5,80

1,25

1

-

-

-

5

5,80

1,25

1

287,

511,

222

(C

) To

tal P

rovi

sio

n

upto

Pre

vio

usYe

ar

-

46

,224

,773

1

92,1

68,5

92

899

,197

2

39,2

92,5

62

18,

413

6

,075

,645

6

,094

,058

2

45,3

86,6

20

90

,634

,940

(D

) P

revi

ous

Yea

r’s

P

rovi

sio

n w

ritt

en b

ack

-

44,2

96,2

15

55,

879,

758

8

99,1

94

101

,075

,167

-

-

-

101

,075

,167

48

,510

,338

(E

) T

his

Year

’s a

dd

itio

nal

p

rovi

sio

n

10,

457,

601

4

4,64

9,96

8

6

55,

107,

575

3

0,72

5

1,4

96,3

32

1,5

27,0

57

56,

634,

631

(4

2,12

4,60

2)

Net

Ad

just

men

ts

o

f th

e Ye

ar

-

(33,

838,

614)

(1

1,22

9,79

0)

(899

,188

) (4

5,96

7,59

2)

30,

725

1

,496

,332

1

,527

,057

(4

4,44

0,53

6)

13

,718

,597

,132

N

et L

oan

(A-B

) -

4

30,9

96,2

72

12,4

94,2

69,4

29

915

12,

925,

266,

615

4,8

64,6

84 7

49,6

25,6

92

754

,490

,375

13,

679,

756,

990


Schedule 4.13(A) :Securities Against Loan, Advance and Bills Purchasedas at 15 July 2009 (31 Ashad 2066)


Rs. Rs.

13,963,983,752 (A) Secured 13,880,703,075

7,949,450,793 1. Movable / Immovable Assets 9,159,793,509 - 2. Guarantee of Local Licensed Institutions - 3. Government Guarantee 198,112,176 4. Guarantee of Internationally Rated Banks 299,204,033 - 5. Export Documents - 6. Fixed Deposit Receipts 369,566,490 (a) Own FDR 193,655,080 742,030,701 (b) FDR of Other Licensed Institutions 400,620,131 762,719,465 7. Government Securities/ Bonds 301,314,808 8. Counter Guarantee 9. Personal Guarantee 3,942,104,127 10. Other Securities 3,526,115,514 - (B) Unsecured

13,963,983,752 Total 13,880,703,075



Sche

dule

4.1

4: F

ixed

Ass

ets

as a

t 15

Jul

y 20

09 (3

1 A

shad

206

6)

Pre

vio

us Y

ear

Par

ticu

lars

A

sset

s T

his

Year

Fr

eeho

ld

Vehi

cles

Mac

hine

ry

Offi

ce

Oth

ers

an

d B

uild

ing

s

E

qui

pm

ent

Leas

eho

ld A

sset

s

R

s.

R

s.

Rs.

R

s.

Rs.

R

s.

Rs.

1. A

t C

ost

405

,040

,040

a.

Bal

ance

upt

o P

revi

ous

Year

3

4,33

4,51

3

42,

882,

636

-

2

76,0

56,0

58

60,

998,

325

4

14,2

71,5

32

14

,069

,522

b.

Add

ition

this

yea

r

1,0

07,3

78

5,2

15,1

92

-

35

,382

,927

1

5,76

6,76

5

57,

372,

262

-

c. R

eval

uatio

n/W

ritte

n-ba

ck th

is y

ear

-

-

(4

,838

,030

) d.

Sol

d th

is y

ear

(1

3,62

3,34

1)

(1,4

50,0

00)

-

(6

,479

,899

) (9

86,6

17)

(22,

539,

857)

-

e. W

ritte

n-of

f thi

s ye

ar

-

-

4

14,2

71,5

32

Tota

l Co

st (a

+b

+c+

d+

e)

21,

718,

550

4

6,64

7,82

8

-

304

,959

,086

7

5,77

8,47

3

449

,103

,937

2. D

epre

ciat

ion

302

,534

,761

a.

Upt

o P

revi

ous

Year

9

,097

,461

3

0,73

4,49

5

2

51,7

71,9

49

31,

627,

982

3

23,2

31,8

87

23

,017

,849

b.

For

this

Yea

r

649

,437

9

,172

,890

10,

455,

766

4

,040

,616

2

4,31

8,70

9

c.

Dep

reci

atio

n on

Rev

alua

tion

/ W

ritte

n-ba

ck

(2,3

20,7

23)

d. D

epre

ciat

ion

adju

stm

ent/

writ

e ba

ck

(4,3

93,1

27)

(1,4

50,0

00)

(6

,479

,899

) (9

86,6

17)

(13,

309,

643)

323

,231

,887

To

tal D

epre

ciat

ion

(a+

b+

c+d

) 5

,353

,771

3

8,45

7,38

5

-

255

,747

,816

3

4,68

1,98

1

334

,240

,953

91

,039

,645

3.

Bo

ok

Valu

e (W

DV

)* (1

-2)

16,

364,

779

8

,190

,443

-

49,2

11,2

70

41,

096,

492

1

14,8

62,9

84

18

,910

,556

4.

Lan

d

15,

034,

556

1

5,03

4,55

6

7,

322,

057

5. C

apit

al W

ork

in P

rog

ess

-

-

-

-

7,3

95,0

00

(To

be C

apita

lised

)

- 6.

Lea

seho

ld A

sset

s

-

-

-

-

-

-

117

,272

,258

To

tal (

3+4+

5+6)

3

1,39

9,33

5

8,1

90,4

43

-

49

,211

,270

4

1,09

6,49

2

137

,292

,540

* W

ritte

n D

own

Valu

e.


Schedule 4.15: Non-Banking Assetsas at 15 July 2009 (31 Ashad 2066)

Schedule 4.16: Other Assetsas at 15 July 2009 (31 Ashad 2066)

Schedule 4.16(A) : Other Assets (Additional Statement)as at 15 July 2009 (31 Ashad 2066)

Previous Name and Date of assuming Total Amount of Provision for Loss Net Non Banking

Year Rs. Address of Non Banking Assets Non-Banking Assets Assets Rs.

Borrower or Party Rs. % Amount Rs.

- - - - - - - - - - - - - -

- Total - - - - -


Previous Year Particulars This Year (Rs.)

Up to 1 1 to 3 Above 3 Rs. Year Years Years Total

115,480,631 1. Accrued Interest on Loans and Advances 64,448,838 5,401,315 47,796,712 117,646,865 - 2. Drafts Paid without Notice - - - - - 3. Branch Adjustment Account - - - -


Rs. Rs.

- 1. Stock of Stationery 5,232,888 177,995,967 2. Income Receivable on Investments 219,914,548 115,480,631 3. Accrued Interest on Loan 117,646,865 - (115,480,631) Less: Interest Suspense Amount (117,646,865) 5,464,261 4. Commission Receivable 2,316,516 69,577,429 5. Sundry Debtors 80,381,635 162,082,419 6. Staff Loan and Advances 182,487,582 64,633,009 7. Prepayments 38,871,378 - 8. Cash in Transit - 767,874,490 9. Other Transit Items (Including Cheques) 536,066,709 - 10. Drafts Paid without Notice - 41,420,592 11. Expenses Not Written-off 36,402,914 - 12. Branch Adjustment Account - 60,040,444 13. Deferred Tax Assets 61,068,405 230,500 14. Others 178,842,287 a) Advance Income Tax (net of Provision) - 230,500 b) Others 178,842,287

1,349,319,111 Total 1,341,584,862


Schedule 4.17: Contingent Liabilitiesas at 15 July 2009 (31 Ashad 2066)


- 1. Claims on Bank but not Acknowledged as Liabilities by the Bank - 1,857,993,804 2. Letters of Credit (Full amount) 3,120,878,804 1,647,335,898 (a) Maturity period of less than 6 months 2,867,156,012 210,657,906 (b) Maturity period of more than 6 months 253,722,792 - 3. Rediscounted Bills - 1,367,342,770 4. Unmatured Guarantees/Bonds 1,484,857,424 22,978,842 (a) Bid Bonds 358,686,280 833,994,982 (b) Performance Bonds 716,145,390 510,368,946 (c) Other Guarantee/Bonds 410,025,754 - 5. Unpaid amount on Investment in Shares 193,985,365 6. Outstanding Liabilities of Forward Exchange Contracts 1,332,125,612 155,926,528 7. Bills for Collection 151,110,615 1,129,471,910 8. Acceptance and Endorsements 1,016,660,739 - 9. Underwriting Commitment - 10. Irrevocable Loan Commitments 1,215,235,221 1,344,662,896 11. Guarantee against Counter Guarantee of Internationally Rated Banks 2,098,631,210 3,901,828 12. Advance Payment Guarantee 97,500 84,559,383 13. Financial Guarantee 103,786,602 - 14. Contingent Liabilities on Income Tax 3,901,166 1,939,847 15. Others 123,808,727

6,139,784,331 Total 10,651,093,620


Schedule 4.18: Interest Incomefor the period 16 July 2008 to 15 July 2009

(1 Shrawan 2065 to 31 Ashad 2066)


Rs. Rs.

872,690,380 A. On Loan, Advances and Overdraft 1,104,047,249

813,194,903 1. Loan and Advances 1,027,707,274 59,495,477 2. Overdrafts 76,339,975 319,814,530 B. On Investment 406,980,129

319,606,116 1. Government of Nepal Securities 406,325,553

259,844,722 a. Treasury Bills 348,126,573 54,288,317 b. Development Bonds 53,955,991 - c. National Savings Certificates - 5,473,077 d. Special Bonds 4,242,989 - 2. Foreign Securities -

- 3. Nepal Rastra Bank Bonds -

208,414 4. Debenture and Bonds 654,576

- 5. Interest on Inter bank Investment -

- a. Financial Institutions - b. Other Organisations 8,590,700 C. On Agency Balances 1,867,239

- 1. Local Banks / Financial Institutions - 8,590,700 2. Foreign Banks 1,867,239 80,316,058 D. On Money at Call and Short Notice 39,051,565

- 1. Local Banks / Financial Institutions - 80,316,058 2. Foreign Banks 39,051,565 309,783,858 E. On Others 335,275,075 - 1. Certificate of Deposits - 2,339,370 2. Inter-Bank / Financial Institution Loan 39,322,576 300,453,278 3. Placement with Foreign Banks 286,022,751 6,991,210 4. Others 9,929,748 1,591,195,526 Total 1,887,221,257



Schedule 4.19: Interest Expensesfor the period 16 July 2008 to 15 July 2009



449,092,662 A. On Deposit Liabilities 520,761,481

118,980,221 1. Fixed Deposits 134,404,092

11,060,210 1.1. Local Currency 11,953,974 107,920,011 1.2. Foreign Currency 122,450,118 279,308,138 2. Savings Deposits 296,105,028

236,501,982 2.1. Local Currency 260,030,008 42,806,156 2.2. Foreign Currency 36,075,020 50,804,303 3. Call Deposits 90,252,361

46,520,407 3.1. Local Currency 84,999,297 4,283,896 3.2. Foreign Currency 5,253,064 - 4. Certificate of Deposits -

18,838,042 B. On Borrowings 18,531,766

- 1.Debentures and Bonds - 2,288,928 2. Loans from Nepal Rastra Bank 1,584,935 16,549,114 3. Inter Bank /Financial Institutions Borrowings 16,946,831 - 4. Other Institutions - - 5. Other Loans - 3,798,996 C. On Others 4,493,353

3,798,996 1. Premium on Development Bonds 4,493,353 - 2. Others (Forwards) -

471,729,700 Total 543,786,600


Schedule 4.20: Commisssion and Discount

for the period 16 July 2008 to 15 July 2009



Rs. Rs. 13,878,858 A. Bills Purchased and Discounted 19,413,965

746,993 1. Domestic 907,464 13,131,865 2. Foreign 18,506,501 97,374,784 B. Commission 113,216,168

8,082,861 1. Letters of Credit 7,280,626 23,031,011 2. Guarantees 33,122,424 3,388,821 3. Collection Fees 3,994,042 34,520,663 4. Remittance Fees 37,049,477 27,035,978 5. Credit Cards 31,469,999 - 6. Share Underwriting/Issues - - 7. Government Transactions - 1,200,000 8. Agency Commission 200,000 115,450 9. Exchange Fees ( Batta Income) 99,600 165,178,613 C. Others 102,838,713

44,844,673 1. Management Fees 6,652,025 31,541,247 2. Loan Processing Fees 29,987,959 37,984,533 3. Ledger and Activity Fees 27,899,001 6,927,780 4. Commission on Travellers Cheque 6,683,471 43,880,380 5. Others 31,616,257

276,432,255 Total 235,468,846

Schedule 4.21: Other Operating Incomefor the period 16 July 2008 to 15 July 2009 (1 Shrawan 2065 to 31 Ashad 2066)


Rs. Rs.

3,287,555 1. Rental on Safe Deposit Locker 3,773,301 8,846,536 2. Issue and Renewals of Credit Cards 8,602,065 8,200,727 3. Issue and Renewals of ATM Cards 8,777,397 9,578,585 4. Telex /T.T. 7,921,513 - 5. Service Charges - 692,858 6. Renewal Fees 456,973 1,987,824 7. Others 3,660,002

32,594,085 Total 33,191,251



Schedule 4.22: Exchange Fluctuation Gain/Lossfor the period 16 July 2008 to 15 July 2009



Rs. Rs. 90,216,822 A. Revaluation Gain 127,672,654 255,436,198 B. Trading Gain (except Batta) 352,358,259

345,653,020 Total Income (Loss) 480,030,913

Schedule 4.23: Staff Expensesfor the period 16 July 2008 to 15 July 2009


Previous Year Particulars This Year Rs. Rs. 137,983,659 1. Salary 165,352,156 873,837 2. Allowances 743,710 7,306,787 3. Contribution to Provident Fund 8,115,518 4,714,722 4. Training Expenses 4,800,913 199,795 5. Uniform 161,355 2,727,883 6. Medical 3,009,449 - 7. Insurance - 16,812,712 8. Pension and Gratuity Provision 12,738,534 54,636,800 9. Others 58,133,869 47,130,719 a) Staff Incentive 50,005,200 7,506,081 b) Others 8,128,669

225,256,195 Total 253,055,504


Schedule 4.24: Other Operating Expensesfor the period 16 July 2008 to 15 July 2009



33,055,294 1. House Rent 39,725,664 11,742,955 2. Light, Electricity and Water 15,394,850 7,356,046 3. Repair and Maintenance 14,691,414 4,983,143 (a) Building 8,889,511 791,453 (b) Vehicles 923,782 1,581,450 (c) Others 4,878,121 6,644,867 4. Insurance 5,585,155 33,003,722 5. Postage, Telex, Telephone, Fax 43,913,129 24,587,579 6. Office Equipment, Furniture and Repair 32,978,690 15,095,414 (a) Office Equipment and Furniture (non capitalised item) 24,518,268 9,492,165 (b) Repairs 8,460,422 12,394,197 7. Travelling Allowances and Expenses 10,489,786 11,403,133 8. Stationery and Printing 11,868,187 1,600,072 9. Periodicals and Books 751,770 10,009,236 10. Advertisement 12,671,068 1,890,964 11. Legal Expenses 1,141,641 - 12. Donations - 416,363 13. Expenses Relating to Board of Directors 524,927 303,000 (a) Meeting Allowance 284,000 113,363 (b) Others Expenses 240,927 1,082,650 14. General Meeting Expenses 1,753,078 1,306,746 15. Expenses Relating to Audit 731,826 1,046,163 (a) Audit Fees 452,000 260,583 (b) Other Expenses 279,826 - 16. Commission on Remittances - 23,017,849 17. Depreciation on Fixed Assets 24,318,709 - 18. Amortization of Pre Operating Expenses - - 19. Share Issue Expenses - 23,490,863 20. Technology Support Cost (Technical Services Fees ) 14,100,098 1,754,151 21. Entertainment 1,837,866 22. Written Off Expenses 179 12,432,830 23. Security Expenses 16,184,618 - 24. Credit Guarantee Premium - 550,824 25. Commission and Discount 199,641 12,831,068 26. Others 27,464,378 1,356,004 (a) Charges on Foreign Currency Notes 2,011,434 206,065 (b) Software Expenses Charged Off 10,391,206 1,057,879 (c) Pest Control and Waste Management 2,550,013 10,211,120 (d) Others 12,511,725

230,571,409 Total 276,326,674



Schedule 4.25: Provision for Possible Lossesfor the period 16 July 2008 to 15 July 2009


Schedule 4.26: Non Operating Income/ (Loss)for the period 16 July 2008 to 15 July 2009



Rs. Rs.

48,510,338 1. Increase in Loan Loss Provision 56,634,631 21,375,000 2. Increase in Provision for Loss on Investments - - 3. Provision for Non-Banking Assets - - 4. Provision for Other Assets -

69,885,338 Total 56,634,631


- 1. Profit (Loss) on Sale of Investment - 582,694 2. Profit (Loss) on Sale of Assets 19,619,292 1,099,815 3. Dividend (Net) 2,479,025 - 4. Subsidies Received from Nepal Rastra Bank - - a. Compensation against Losses of Specified Branches - - b. Interest Indemnity - - c. Exchange Counter - - 5. Others -

1,682,509 Net Non Operating Income/ (Loss) 22,098,317


Schedule 4.27: Provision for Possible Loss Written Backfor the period 16 July 2008 to 15 July 2009



90,634,940 1. Loan Loss Provision Written Back 101,075,167 - 2. Provision against Non-Banking Assets Written Back - - 3 Investment Provision Written Back - - 4. Provision against Other Assets Written Back -

90,634,940 Total 101,075,167

Schedule 4.28: Income / (Expenses) from Extra-Ordinary Activitiesfor the period 16 July 2008 to 15 July 2009



5,867,246 1. Recovery of Loans Written Off 23,770,030 - 2. Voluntary Retirement Scheme Expenses - (33,906,683) 3. Unrecoverable Loan Write Off (Schedule 4.28A) (39,126,089) - 4. Other Expenses/Income -

(28,039,437) Total (15,356,059)



Dur

ing

the

year

, Ban

k ha

s re

cove

red

the

amou

nt a

gain

st th

e cu

rren

t yea

r w

ritte

n of

f loa

ns a

s sh

own

unde

r R

emar

ks c

olum

n. In

resp

ect o

f Aut

o Lo

an, t

he v

alue

of a

veh

icle

, tha

t in

pose

ssio

n of

the

Ban

k is

Rs.

650

thou

sand

( as

per

the

valu

atio

n of

app

rove

d va

luat

ors)

.

Sche

dule

4.2

8 A:

Sta

tem

ent o

f Loa

ns W

ritte

n Of

ffo

r th

e p

erio

d 1

6 Ju

ly 2

008

to 1

5 Ju

ly 2

009

(1 S

hraw

an 2

065

to 3

1 A

shad

206

6)

S.N

Ty

pes

of

Loan

Wri

tten

off

Ty

pe

of

Sec

urit

y an

d

Bas

is o

f Va

luat

ion

Lo

an A

pp

rovi

ng

Init

iati

ons

mad

e

A

mo

unt

Rs.

A

mo

unt

Rs.

o

f S

ecur

ity

Aut

hori

ty /

Des

igna

tio

n f

or

Rec

ove

ry

Rem

arks

1

Wor

king

Cap

ital L

oan

-2

P

roje

ct L

oan

-3

Fi

xed

Cap

ital L

oan

-4

P

erso

nal L

oan

5,8

41,9

46

Non

e N

A

Man

ager

Cre

dit/

Hea

d

Follo

w u

p

Rec

over

ies

from

C

onsu

mer

Ban

k

thro

ugh

phon

e

Cur

rent

yea

r

ca

lls &

lett

ers

writ

e of

f is

Rs.

266

,952

5

Oth

er L

oan

33,2

84,1

43

a) C

redi

t Car

ds

2,74

3,58

3 N

one

NA

M

anag

er C

redi

t/ H

ead

P

hone

cal

ls

Rec

over

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Schedule 4.29:Statement of Loans & Advances Extended to Directors/Chief Executive Officer/Promoters/Staff and Shareholdersas at 15 July 2009 (31 Ashad 2066)

(A) Directors - - -(B) Chief Executive Officer - - - - - - -(C) Promoters - - - - - - -(D) Staff - - - - - - -(E) Shareholders - - - - - - -

Total - - - - - - -

Balance upto Recovery made Additions Balance as at Previous Year This Year during Ashad end

Principal Interest Principal Interest the year Principal Interest Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Name of Promoter/Director/ Chief Executive Officer

The Statement of amount, included under total amount of Bills Purchased and Discounted, Loans, Advances and Overdraft, provided to the Directors, Chief Excecutive Officer, Promoters, Staff, Shareholders and to the individual members of their undivided family or against the guarantee of such persons or to the organisations or companies in which such individuals are managing agent, are as follows:

Note : As per clause 3 of the Nepal Rastra Bank (The Central Bank of Nepal ) Directive No. 6, loans given to executive officers and employees are as per Bank staff rules and hence not disclosed above.



Schedule 4.30 (Ka 1): Capital Adequacy Tableas at 15 July, 2009 (31 Ashad 2066)

1.1 RISK WEIGHTED EXPOSURES This Year Previous Year

A Credit Risk 18,758,432 17,587,870B Operational Risk 2,690,615 2,399,696C Market Risk 254,117 26,510 Total Risk Weighted Exposures (a+b+c) 21,703,164 20,014,076

1.2 CAPITAL FUND This Year Previous Year

Core Capital (Tier 1) 2,832,761 2,304,758

a Paid up Equity Share Capital 931,966 620,784 b Irredeemable Non-cumulative preference shares - - c Share Premium - - d Proposed Bonus equity Shares 465,983 310,392 e Statutory General Reserves 1,195,317 990,294 f Retained Earnings 239,495 383,288 g Un-audited current year cumulative profit - - h Capital Redemption Reserve - - i Capital Adjustment Reserve - - j Dividend Equalization Reserves - - k Other Free Reserve - -

Deductionsa 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) 357,606 326,144

a Cumulative and/or Redeemable Preference Share - - b Subordinated Term Debt - - c Hybrid Capital Instruments - - d General loan loss provision 137,897 138,353 e Investment Adjustment Reserve - - f Assets revaluation reserve - - g Exchange Equilization Reserve 219,709 187,791 h Other Reserves - -

Total Capital Fund (Tier 1 and Tier 2) 3,190,367 2,630,902

1.3 Capital Adequacy Ratios Current Period Previous Period

Tier 1 Capital to Total Risk Weighted Exposures 13.05% 11.52%Tier 1 and Tier 2 Capital to Total Risk Weighted Exposures 14.70% 13.15%

Rs. in '000



Schedule 4.30 (Kha): Credit Risk

As at 15 July, 2009 (31 Ashad 2066)

Book Specific Eligible Net Value Risk Risk Weighted Net Risk Balance Sheet Exposure Value Provision CRM d=a-b-c Weight Exposures Value Weighted

a b c e f=d*e Exposures

15th July, 2009 (31 Asadh 2066) Previous Year

Cash Balance 463,346 - - 463,346 0% - 414,875 - Balance With Nepal Rastra Bank 1,851,133 - - 1,851,133 0% - 1,266,274 - Gold 178,349 - - 178,349 0% - - - Investment in Nepal Government Securities 9,998,754 - - 9,998,754 0% - 8,137,615 - All claims on Government of Nepal 154,044 - - 154,044 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 0-1)Claims on Foreign Government and Central Bank (ECA Rating 2) - - - - 20% - - - Claims on Foreign Government and Central Bank (ECA Rating 3) - - - - 50% - - - Claims on Foreign Government and Central Bank - - - - 100% - - - (ECA Rating 4-6)Claims on Foreign Government and Central Bank (ECA Rating 7) - - - - 150% - - - Claims On BIS, IMF, ECB, EC and on Multilateral Development - - - - 0% - - -Banks (MDBs) recognized by the framework.Claims 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) 83,793 - - 83,793 150% 125,690 407,152 610,727 Claims on domestic banks that meet capital 269,729 - 234,176 35,554 20% 7,111 566,213 113,243 adequacy requirementsClaims on domestic banks that do not meet 32,177 - - 32,177 100% 32,177 18,399 18,399 capital adequacy requirements Claims on foreign bank (ECA Rating 0-1) 11,695,334 - - 11,695,334 20% 2,339,067 7,413,304 1,482,661 Claims on foreign bank (ECA Rating 2) 389,350 - - 389,350 50% 194,675 345,800 172,900 Claims on foreign bank (ECA Rating 3-6) 637,967 - - 637,967 100% 637,967 432,955 432,955 Claims on foreign bank (ECA Rating 7) - - - - 150% - - - Claims on Foreign bank incorporated in SAARC Region - - - 20% - - - operating with a buffer of 1% above their respective regulatory capital requirementClaims on Domestic Corporates 3,680,088 8,033 928,121 2,743,934 100% 2,743,934 2,168,630 2,168,630 Investment on Foreign Corporates (ECA rating 0-1) - - - - 20% - - - Investment on Foreign Corporates (ECA rating 2) - - - - 50% - - - Investment on Foreign Corporates (ECA rating 3-6) - - - - 100% - - - Investment on Foreign Corporates (ECA rating 7) - - - - 150% - - - Regulatory Retail Portfolio (Not Overdue) 4,159,696 0 11,868 4,147,828 75% 3,110,871 2,747,901 2,060,926 Claims fulfilling all criterion of regulatory retail - - - - 100% - - - except granularityClaims secured by residential properties 2,513,718 0 - 2,513,718 60% 1,508,231 2,886,630 2,164,973 Claims not fully secured by residential properties - - - - 150% - - - Claims secured by residential properties (Overdue) 22,184 4,226 - 17,957 100% 17,957 8,875 8,875 Claims secured by Commercial real estate 2,106,506 38,000 - 2,068,506 100% 2,068,506 1,787,455 1,787,455 Past due claims (except for claim secured by 165,054 12,790 - 152,263 150% 228,395 12,971 19,456 residential properties)High Risk claims 1,089,397 0 181,273 908,124 150% 1,362,186 1,376,620 2,064,930 Investment in equity and other capital instruments of 3,000 - - 3,000 100% 3,000 - - institutions listed in the stock exchangeInvestment in equity and other capital instruments of 103,926 24,375 - 79,551 150% 119,326 81,668 122,501 institutions not listed in the stock exchange

Other Assets 1,667,133 880,742 - 786,391 100% 786,391 743,577 743,576

Total 41,264,678 968,166 1,355,438 38,941,073 15,285,484 30,816,914 13,972,207

Assets


Schedule 4.30 (Kha): Credit Risk

As at 15 July, 2009 (31 Ashad 2066)

Book Specific Eligible Net Value Risk Risk Weighted Net Risk Off Balance Sheet Exposure Value Provision CRM d=a-b-c Weight Exposures Value Weighted

a b c e f=d*e Exposures

15th July, 2009 (31 Asadh 2066) Previous Year

Revocable Commitments - - - - 0% - - - Bills Under Collection 151,111 - 151,111 0% - 155,927 - Forward Exchange Contract 1,332,126 - - 1,332,126 10% 133,213 193,985 19,399 LC Commitments With Original Maturity Up to 6 2,867,156 - 1,015,360 1,851,796 20% 370,359 1,590,773 318,155 months (domestic counterparty)Foreign Counterparty ECA Rating 0-1 - - - - 20% - - -Foreign Counterparty ECA Rating 2 - - - - 50% - - -Foreign Counterparty ECA Rating 3-6 - - - - 100% - - -Foreign Counterparty ECA Rating 7 - - - - 150% - - -L C Commitments With Original Maturity Over 6 253,723 - 253,723 - 50% - 188,698 94,349months (domestic counterparty)Foreign Counterparty ECA Rating 0-1 - - - - 20% - - -Foreign Counterparty ECA Rating 2 - - - - 50% - - -Foreign Counterparty ECA Rating 3-6 - - - - 100% - - -Foreign Counterparty ECA Rating 7 - - - - 150% - - -Bid Bond and Performance Bond (domestic counterparty) 658,457 - 55,224 603,233 50% 301,616 330,763 165,381Foreign Counterparty ECA Rating 0-1 511,989 - 409,591 102,398 20% 20,480 103,185 20,637Foreign Counterparty ECA Rating 2 996,563 - 498,281 498,281 50% 249,141 278,862 139,431Foreign Counterparty ECA Rating 3-6 337,252 - - 337,252 100% 337,252 130,000 130,000Foreign Counterparty ECA Rating 7 - - - - 150% - - -Underwriting commitments - - - - 50% - - -Lending of Bank’s Securities or Posting of - - - - 100% - - -Securities as collateralRepurchase Agreements, Assets sale with recourse - - - - 100% - - -Advance Payment Guarantee 589,261 - 331,780 257,481 100% 257,481 250,218 250,218Financial Guarantee 117,699 - 30,450 87,249 100% 87,249 85,149 85,149Acceptances and Endorsements 1,016,661 - 17,221 999,440 100% 999,440 1,097,017 1,097,017Unpaid Portion of Partly paid shares and Securities - - - - 100% - - -Irrevocable credit commitments (short term) 1,215,235 - 116,715 1,098,521 20% 219,704 2,216,387 1,108,193Irrevocable Credit commitments (Long Term) - - - 50% - - -Other Contingent Liabilities 594,056 - 100,965 493,090 100% 493,090 187,735 187,734Claim Received on Guarantee 9,807 - 7,846 1,961 200% 3,923 - -(As per directive 13/065/66)

Total 10,651,096 - 2,837,156 7,813,939 3,472,948 6,808,699 3,615,663

Total RWE for Credit Risk (A) +(B) 51,915,774 968,166 4,192,594 46,755,012 18,758,432 37,625,613 17,587,870


Schedule 4.30 (Ga): Eligible Credit Risk Mitigants

As at 15 July, 2009 (31 Ashad 2066)

Credit Exposures Deposits Deposits Gold Govt. G’tee of Sec/G’tee of G’tee of G’tee of Sec/G’tee Total with with & NRB Govt. of of Other domestic MDBs of Foreign Bank other Securities Nepal Sovereigns banks Banks banks/FI

Balance Sheet Exposures Cash Balance - - - - - - - - - - Balance With Nepal Rastra Bank - - - - - - - - - - Gold - - - - - - - - - -Investment in Nepal Government Securities - - - - - - - - - - All claims on Government of Nepal - - - - - - - - - - Investment in Nepal Rastra Bank securities - - - - - - - - - - All claims on Nepal Rastra Bank - - - - - - - - - - Claims on Foreign Government and Central Bank (ECA Rating 0-1) - - - - - - - - - - Claims in Foreign Government and Central Bank (ECA Rating 2) - - - - - - - - - - Claims in Foreign Government and Central Bank (ECA Rating 3) - - - - - - - - - - Claims in Foreign Government and Central Bank (ECA Rating 4-6) - - - - - - - - - - Claims in Foreign Government and Central Bank (ECA Rating 7) - - - - - - - - - - Claims on Other Multilateral Development Banks - - - - - - - - - - Claims on Public Sector Entity (ECA 0-1) - - - - - - - - - - Claims on Public Sector Entity (ECA 2) - - - - - - - - - - Claims on Public Sector Entity (ECA 3-6) - - - - - - - - - - Claims on Public Sector Entity (ECA 7) - - - - - - - - - - Claims on domestic banks that meet capital - 234,176 - - - - - - - 234,176 adequacy requirementsClaims on domestic banks that do not meet - - - - - - - - - - capital adequacy requirementsClaims on foreign bank (ECA Rating 0-1) - - - - - - - - - - Claims on foreign bank (ECA Rating 2) - - - - - - - - - - Claims on foreign bank (ECA Rating 3-6) - - - - - - - - - - Claims on foreign bank (ECA Rating 7) - - - - - - - - - - Claims on Foreign bank incorporated in SAARC Region - - - - - - - - - - operating with a buffer of 1% above their respectiveregulatory capital requirementClaims on Domestic Corporates 151,023 270,161 - 231,307 - - - - 275,630 928,121 Claims on Foreign Corporates (ECA 0-1) - - - - - - - - - - Claims on Foreign Corporates (ECA 2) - - - - - - - - - - Claims on Foreign Corporates (ECA 3-6) - - - - - - - - - - Claims on Foreign Corporates (ECA 7) - - - - - - - - - - Regulatory Retail Portfolio (Not Overdue) - - - 11,868 - - - - - 11,868 Claims fulfilling all criterion of regulatory retail except granularity - - - - - - - - - - Claims secured by residential properties - - - - - - - - - - Claims not fully secured by residential properties - - - - - - - - - - Claims secured by residential properties (Overdue) - - - - - - - - - - Claims secured by commercial real estate - - - - - - - - - - Past due claims (except for claim secured by residential properties) - - - - - - - - - - High Risk claims 50,365 - - 58,320 - - - - 72,588 181,273 Investment in equity and other capital instruments of - - - - - - - - - - institutions listed in the stock exchangeInvestment in equity and other capital instruments of - - - - - - - - - - institutions not listed in the stock exchangeOther Assets - - - - - - - - - -

Off Balance Sheet ExposuresRevocable Commitments - - - - - - - - - - Bills Under Collection - - - - - - - - - -Forward Exchange Contract - - - - - - - - - - LC Commitments With Original Maturity Up to 6 968,323 - - 47,037 - - - - - 1,015,360 months (domestic counterparty)Foreign Counterparty ECA Rating 0-1 - - - - - - - - - - Foreign Counterparty ECA Rating 2 - - - - - - - - - - Foreign Counterparty ECA Rating 3-6 - - - - - - - - - - Foreign Counterparty ECA Rating 7 - - - - - - - - - -

Continue...


Schedule 4.30 (Ga): Continued...

L C Commitments With Original Maturity Over 253,723 - - - - - - - - 253,7236 months (domestic counterparty) Foreign Counterparty ECA Rating 0-1 - - - - - - - - - - Foreign Counterparty ECA Rating 2 - - - - - - - - - - Foreign Counterparty ECA Rating 3-6 - - - - - - - - - - Foreign Counterparty ECA Rating 7 - - - - - - - - - - Bid Bond and Performance Bond (domestic - - - - - - 3,374 - - 55,224 counterparty) 51,850Foreign Counterparty ECA Rating 0-1 - - - - - - - - 409,591 409,591 Foreign Counterparty ECA Rating 2 - - - - - - - - 498,281 498,281 Foreign Counterparty ECA Rating 3-6 - - - - - - - - - - Foreign Counterparty ECA Rating 7 - - - - - - - - - - Underwriting commitments - - - - - - - - - - Lending of Bank’s Securities or Posting of - - - - - - - - - - Securities as collateralRepurchase agreements, Assets sale with recourse - - - - - - - - - - Advance Payment Guarantee 5 - - - - - - - 331,775 331,780 Financial Guarantee 23,493 - - - - - - - 6,957 30,450 Acceptance and Endorsements 17,221 - - - - - - - - 17,221 Unpaid Portion of Partly paid shares and Securities - - - - - - - - - - Irrevocable Credit commitments (short term) 58,817 3,433 - 11,950 - - - - 42,515 116,715 Irrevocable Credit commitments (long term) - - - - - - - - - - Other Contingent Liabilities 55,909 - - - - - - - 45,056 100,965 Claim Received on Guarantee - - - - - - - - 7,846 7,846 (As per directive 13/065/66)

Deposits Deposits Gold Govt. G’tee of Sec/G’tee of G’tee of G’tee of Sec/G’tee Total with with & NRB Govt. of of Other domestic MDBs Foreign Bank other Securities Nepal Sovereigns banks of Banks banks/FI

Schedule 4.30 (Gha): Operational Risk

As at 15 July, 2009 (31 Ashad 2066)

Previous Years ending on

SN Particulars 15.07.2009 15.07.2008 16.07.2007 15.07.2008

1 Net Interest Income 1,343,435 1,119,466 998,9272 Commission and Discount Income 235,469 276,432 221,2073 Other Operating Income 33,191 32,594 28,7854 Exchange Fluctutation Income 480,031 345,653 309,0875 Additional/ Deduction Interest Suspense during the period 2,166 (66,972) 21,759

Gross Income (a) 2,094,292 1,707,173 1,579,765

Alfa (b) 15% 15% 15%

Fixed Percentage of Gross Income [ c=(a*b)] 314,144 256,076 236,965 Capital Requirement for operational risk(d) (average of c) 269,061 239,970

Risk Weight (reciprocal of capital requirement of 10%) in times (e) 10 10

Equivalent Risk Weight Exposure [f=(d*e)] 2,690,615 2,399,696

Rs. in '000


Schedule 4.30 (Nga): Market Risk As at 15 July, 2009 (31 Ashad 2066)

S. No. Currency Open Position (FCY) Open Position Relevant Open Previous Year Relevant Open (NPR) Position (NPR) Position (NPR) as on 15.07.20081 Indian Rupees 297,719 476,573 476,573 8,610 2 US Dollars 136 10,617 10,617 29,187 3 Pound Sterling 45 5,744 5,744 1,528 4 Euro 20 2,185 2,185 2,191 5 Canadian Dollar 68 4,703 4,703 3,997 6 Danish Kroner 171 2,517 2,517 2,556 7 Chinese Yuan 7 80 80 484 8 Swedish Kroner 54 538 538 803 9 Swiss Franc 1 100 100 348 10 Japanese Yen (400) (333) 333 556 11 Honkong Dollar 167 1,677 1,677 987 12 Singapore Dollar 15 793 793 641 13 Saudi Riyal 12 240 240 401 14 Thai Baht 60 136 136 77 15 Malyasian Ringgit 2 54 54 154 16 UAE Dirham 13 272 272 392 17 Australian Dollar 24 1,489 1,489 40 18 Qatar Riyal 9 184 184 70

Total Open Position (a) 508,235 53,022

Fixed Percentage (b) 5% 5%

Capital Charge for Market Risk [c=(a*b)] 25,412 2,651

Risk Weight (reciprocal of capital requirement of 10%) in times (d) 10 10

Equivalent Risk Weight Exposures [e=(c*d)] 254,117 26,510

As on 15 July, 2009


Schedule 4.31: Key Indicators

Particulars Indicators FY FY FY FY FY

2004/2005 2005/06 2006/07 2007/08 2008/09

1. Net Profit/Gross Income Percent 34.01 37.06 34.55 34.94 36.842. Earning Per Share Rs. 143.14 175.84 167.37 131.92 109.993. Market Value Per Share Rs. 2,345 3,775 5,900 6,830 6,0104. Price Earning Ratio Ratio 16.38 21.47 35.25 51.77 54.645. Dividend (including bonus) on Share Capital Percent 120 140 130 130 1006. Cash Dividend on Share Capital Percent 120 130 80 80 507. Interest Income/Loan & Advances Percent 7.43 6.23 6.49 6.20 7.958. Staff Expenses/Total Operating Expenses Percent 22.53 24.29 23.75 24.28 23.589. Interest Expenses on Total Deposit and Borrowings Percent 1.31 1.31 1.65 1.59 1.5010. Exchange Fluctuation Income/Total Income Percent 17.32 15.95 15.44 14.75 17.2511. Staff (statutory) Bonus/Total Staff Expenses Percent 37.38 35.83 33.71 34.63 36.7012. Net Profit/Loan and Advances Percent 6.85 7.63 6.75 6.24 7.9313. Net Profit/Total Assets Percent 2.46 2.56 2.42 2.46 2.5314. Total Credit/Deposit Percent 43.49 39.92 43.78 46.95 38.7015. Total Operating Expenses/Total Assets Percent 3.03 2.69 2.94 2.78 2.6416. Adequacy of Capital Fund on Risk Weighted Assets a. Core Capital Percent 13.99 12.99 13.77 11.52 13.05 b. Supplementary Capital Percent 2.07 1.94 1.94 1.63 1.65 c. Total Capital Fund Percent 16.06 14.93 15.71 13.15 14.7017. Liquidity (CRR) Ratio 8.77 6.86 5.46 5.84 8.1818. Non-performing Credit/Total Credit Percent 2.69 2.13 1.83 0.92 0.6619. Weighted Average Interest Rate Spread Percent 3.70 4.10 3.95 4.01 3.9820. Book Net-worth Rs’000 1,582,415 1,754,139 2,116,353 2,492,548 3,052,47021. Total Shares No. 3,746,404 3,746,404 4,132,548 6,207,840 9,319,66422. Total Staff No. 302 345 351 377 392

Note : Adequacy of Capital Fund on RWA for FY 2007-08 onwards is as per Basel II Capital Accord of Nepal Rastra Bank.


Schedule 4.32: Significant Accounting Policies

Financial Year 16 July 2008 to 15 July 2009


1. General InformationStandard Chartered Bank Nepal Ltd (the “Bank”) is a limited liability company domiciled in Nepal. The address of its registered office is G.P.O. Box 3990, Naya Baneshwor, Kathmandu, Nepal. The Bank has a primary listing on the Nepal Stock Exchange Limited. The Bank is a subsidiary company of Standard Chartered Bank PLC, London.

The Bank carries out commercial banking activities in Nepal under license from Nepal Rastra Bank (the Central Bank of Nepal) as Class “Ka” licensed institution.

2. Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of the financial statements of the Bank are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Statement of ComplianceThe financial statements have been prepared in accordance with Nepal Accounting Standards (NAS) issued by the Accounting Standards Board of Nepal (ASB) except for exceptions as mentioned below, generally accepted accounting principles, and the provisions of Bank and Financial Institution Act, 2063, directives issued by Nepal Rastra Bank (Central Bank) and the Company Act, 2063.

Recognition of interest income on Loans and advances is on Cash basis, proposed dividend and extraordinary items (if any) are accounted for as per the directives issued by Nepal Rastra Bank.

2.2 Basis of PreparationThe financial statements have been prepared under the historical cost convention. The

preparation of the financial statements in conformity with NAS and generally accepted accounting principles require the use of certain critical accounting estimates. It also requires the management to exercise judgement in the process of applying the Bank’s accounting policies.

2.3 Interest IncomeInterest income on Loans and advances is treated as per Para 2.1.

Interest income on Investments is recognised on accrual basis.

2.4 Commission Income Income from usance export bills is accounted for on accrual basis whereas earning from sight bills is accounted upfront.

Commission income exceeding Rs. 100,000 earned on guarantees covering more than a year is accounted for on accrual basis over the period of the guarantee.

2.5 Dividend IncomeDividend is recognised as income when the right to receive the payment is established.

2.6 Foreign Exchange Transactions Assets and liabilities denominated in foreign currencies at the Balance Sheet date are translated at mid-point exchange rates of the Nepal Rastra Bank after adjustment for effective trading rate.Net difference arising from the conversion of foreign currency assets and liabilities is accounted for as revaluation gain. In conformity with the Directives of Nepal Rastra Bank, 25% of the total revaluation gain is transferred to Exchange Fluctuation Fund by charging to Profit and Loss Appropriation Account.

Income realised from the difference between buying and selling rates of foreign currencies is accounted for as trading gains.

2.7 Interest Expense Interest on deposit liabilities and borrowing from other banks are accounted for on accrual basis.

2.8 Loans and Advances, Overdraft and Bills

Purchased Loans and advances, overdrafts and bills purchased include direct finance provided to the customers such as bank overdrafts, credit card, personal loans, term loans, hire purchase finance and loans to deprived sectors. All loans are subject to regular review and are graded according to the level of credit risk and classified as per Nepal Rastra Bank’s Directives. Loans and advances, overdraft and bills purchased are net of loan loss provisions.

2.9 Staff Loans Loans and advances granted to staff in accordance with the staff loan scheme are reflected under Other Assets.

2.10 Loan Loss Provision Provision is made for possible losses on loans and advances, overdraft and bills purchased at 1% to 100% on the basis of classification of loans and advances, overdraft and bills purchased in accordance with the directives of Nepal Rastra Bank. Additional provisions than the minimum requirement as per Nepal Rastra Bank directives, are made by the management on prudence basis.

2.11 Loans & Advances Write offUnrecoverable loans and advances are written off in accordance with the Loan Write-off Bye Law 2062 of the Bank approved by the Nepal Rastra Bank.

Amounts recovered against loans written off in earlier as well as current year is recognized as income in the profit and loss account in the year of recovery.

2.12 Investments Investment in Treasury Bills, Government of Nepal Development Bonds and Special Bonds are those, which the Bank has purchased with the positive intent and ability to hold until maturity. Such securities are recorded at cost or at cost adjusted for amortisation of premiums or discounts.



Investments in shares held for strategic purpose are stated at lower of cost or market value with additional provisions for possible diminution in value as estimated by the management on prudence basis.

All investments are subject to regular review according to the directives of Nepal Rastra Bank.

2.13 Fixed Assets and Depreciationa. Fixed assets are stated at historical cost

less depreciation. Historical cost includes expenditures that are directly attributable to the acquisition of the assets.

b. Vehicles, equipment, furniture and fixtures with a unit value of Rs. 400,000 or less are expensed off in the year of purchase.

c. Land is not depreciated. Depreciation of other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

d. Costs on improvements and renovation of leasehold premises are depreciated over the remaining period of that lease.

e. For additions during the year, depreciation is charged from the month subsequent to the month of acquisition and for disposal depreciation is charged up to the date of disposal.

2.14 Amortisation Software applications purchased by the Bank, costing greater than Rs. 40,000,000 are amortised over a period of thirty-six months from the month of purchase. Software costs with a unit value of Rs. 40,000,000 or less are expensed off in the year of purchase.

Licence fees paid by the Bank are amortised over the period of the licence.

S.N. Assets Types Life of an Asset

1. Equipment 36 months2. Furniture & Fittings/Fixtures 36 months3. Vehicle 36 months4. Computers – PC, Printer, Laptop etc. 36 months5. Computers – Server 60 months6. Computer – ATM 84 months7. Premises Freehold 600 months

2.15 Lease RentalCommercial and Residential premises are taken as operating leases which are cancellable in nature. The total payments made under operating leases are charged to Other Operating Expenses in the profit and loss account on a monthly basis.

2.16 Retirement Benefits The Bank has schemes of retirement benefits namely Gratuity and Provident Fund. Provision for expenses on account of Gratuity and Provident Fund is made on accrual basis with the amount of gratuity computed by the Bank in accordance with its applicable scheme. Contributions to approved retirement fund are made on a regular basis as per the Retirement Fund rules and regulations.

2.17 Income Taxa.Current Income TaxProvision for current income tax is made in accordance with the provisions of the prevailing Income Tax Act, 2058 and Rules as amended.

b. Deferred TaxDeferred tax is provided on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

The principal temporary differences arise from depreciation of fixed assets, provision for diminution in the value of investment in shares and provisions for gratuity and performance bonus.

Deferred tax assets are recognised where it is probable that future taxable profit will

be available against which the temporary differences can be utilised.

Deferred tax related to temporary differences in opening balances is credited or charged directly to equity and subsequent year differences are recognised in the profit and loss account together with the deferred gain or loss.

2.18 StationeryStationery purchased is accounted for on cost and expended as and when it is issued for consumption on a weighted average basis.

2.19 Non Banking AssetsNon Banking Assets are accounted for as per the directives of Nepal Rastra Bank.

2.20 Provisions, Contingent Liabilities and Contingent AssetsThe Bank creates a provision when there is a present obligation as a result of past events that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change occurs.

Liability on account of derivative contracts are reported under Contingent liabilities under subheading Outstanding Liabilities for Forward Exchange Contract. These include notional principal on outstanding forward rate agreements.

3. Rounding off and Comparative FiguresThe financial statements are presented in Nepalese Rupees, rounded off to the nearest rupee. Where necessary, amounts shown for the previous year have been reclassified to facilitate comparison.


Schedule 4.33: Notes to Accounts

Financial Year 16 July 2008 to 15 July 2009 (1 Shrawan 2065 to 31 Ashad 2066)

Financial Year Cumulative Paid up Remarks Capital Rs.

1987-88 (2044-45 BS) 30,000,000 Opening Share Capital at Rs. 60 paid up 1990-91 (2047-48 BS) 50,000,000 Capitalisation of Reserve Rs. 100 paid up 1992-93 (2049-50 BS) 100,000,000 Issuance of 100% Bonus Shares 1994-95 (2051-52 BS) 150,000,000 Issuance of 50% Bonus Shares 1996-97 (2053-54 BS) 225,571,800 Issuance of 50% Bonus Shares 1997-98 (2054-55 BS) 339,548,800 Issuance of 50% Bonus Shares 2002-03 (2059-60 BS) 374,640,400 Issuance of 10% Bonus Shares 2005-06 (2062-63 BS) 413,254,800 Issuance of 10% Bonus Shares 2006-07 (2063-64 BS) 620,784,000 Issuance of 50% Bonus Shares 2007-08 (2064-65 BS) 931,966,400 Issuance of 50% Bonus Shares


1. Provision for Bonus Provision for bonus has been calculated and provided for at 10% of net profit, after making adjustments for loan loss provision and bonus.

2. Staff Housing Fund As the terms of service of the staff has a provision for extending housing loans to the eligible staff, a separate housing fund has not been created in accordance with Labour Act, 2048.

3.Tax Settlement OutstandingSelf assessment return filed by the Bank for the financial year 2005-06 (2062-63 BS) has been opened by the Large Tax Payers Office (LTPO) and an assessment order has been issued for Rs. 3,901,166 as additional tax. The Bank has contested the assessment order and have applied for an Administrative Review at the Office of the Director General of Inland Revenue Department. Pending resolution of the matter, a contingent liability has been raised for the additional tax amount. Self assessment returns for the financial years 2006-07 (2063-64 BS) and 2007-08 (2064-65 BS) are pending for assessment at the Large Tax Payers Office.

4. Provision for Gratuity During the year, the Bank has provided Rs. 12,738,534 (Previous Year Rs. 16,812,712) on account of gratuity. Out of the amount provided, Rs 10,472,391 has been funded (previous year Rs 13,491,431) and Rs. 3,428,755 (previous year Rs. 1,732,697) has been paid to the staff at the time of separation.

5. Performance BonusThe Bank’s reward programmes recognize world-class performance and behaviour in support of the Bank’s values across all job levels. The Bank’s total reward consists of fixed and variable compensation. Performance Bonus is a variable component based on the Bank’s overall performance and individual employee’s annual performance. It is provisioned on the basis of the individual

targets set and paid in line with the actual achievements. A total of Rs. 42,991,939 has been provided for the performance bonus in this year.

6. Dividend and BonusThe Board has recommended 100% dividend (including bonus shares) out of which, Rs. 465,983,200 to be distributed as cash and balance as bonus issue in the ratio of 2:1 i.e. 1 bonus share for every 2 shares held. This proposal of the Board has been shown under Proposed and Dividend along with the balance of unpaid dividends and under Reserves and Funds schedule respectively.

7. Unpaid DividendAs on the balance sheet date, unpaid dividend over five years amounts to Rs. 2,174,438.

8. Paid up Share CapitalPaid up share capital of the Bank has moved over the years as follows:

9. Sale of Land and Building The Bank has sold its land and building at Biratnagar, Morang during the year for Rs. 32,334,501 at a profit of Rs. 19,228,290.

10. Deferred TaxDeferred tax is calculated on temporary differences using an effective tax rate of 30.00% (previous year rate: 31.50%)

The items attributable to deferred tax assets and liabilities and their movement are as follows:


Additional information:a) Key Management Personnel includes 2 expatriate staff.

b) Key Management Personnel are also provided with the following benefits:

i) Benefits as per Staff Service Bye-laws,

ii) Bonus to local staff as per Bonus Act,

iii) Performance Bonus depending on performance of the individual,

iv) Car Allowance as per Bank’s Car Scheme.

Apart from above Rs. 284,000 was paid as meeting fees to the Public and Professional Directors in the financial year.

The Bank being a subsidiary of an international bank avails of support services from its global support functions governed by approved agreements.

Total of Key Management Personnel

Compensation Rs. 33,384,523

A) Short Term Employee Benefits Rs. 31,966,899 (Salary, Allowance, PF)B) Post Employment Benefits NILC) Other Long Term Benefits NILD) Termination Benefits Rs. 1,417,624E) Share Based Payment NIL

Balance Movement Balance

15 Jul 2008 during the year 15 Jul 2009 Deferred Income Tax Assets

Accelerated Depreciation in Financial Statements 27,463,143 1,621,060 29,084,203Gratuity Provision 19,478,870 (996,913) 18,481,957Provision for Performance bonus 5,420,305 769,440 6,189,745Provision for investment impairment 7,678,125 (365,625) 7,312,500

Total Deferred Tax Assets 60,040,443 1,027,962 61,068,405

Deferred Tax Liabilities - - -

Net – Deferred Tax Asset 60,040,443 1,027,962 61,068,405

The net deferred tax movement during the year is debited / credited to the profit and loss account.

11. Related Party Disclosures Compensation Details for Key Management personnel

12. Operating Lease Commitment The future minimum lease payment under non-cancellable operating leases, where the bank is lessee is NIL.

13. Claims Against the Bank There has been a claim on the Bank by Agriculture Input Corporation on account of a guarantee issued by the Bank against the counter guarantee of Rabo Bank, Netherland. As on the Balance Sheet date, the beneficiary has lodged a claim with the Bank and the Bank in turn has lodged the claim with the counter guarantee provider. Pending settlement, this item has been disclosed under Contingent Liabilities.


16 Summary of Changes in Deposit Liabilities :

Particulars Balance as at 15/07/2008 Received/ (Withdrawn) Balance as at 15/07/2009 Current and Margin Accounts 6,648,605 (67,785) 6,580,820

Saving Account 17,856,134 1,331,502 19,187,636 Call Deposits 1,938,246 1,063,321 3,001,567 Fixed Deposits 3,301,014 3,800,684 7,101,698

Total 29,743,999 6,127,722 35,871,721

Rs. in ‘000

17 Weighted Average Interest Spread:

18 Particulars of Amortised Expenses yet to be Expensed Off:

19 Summary of Concentration of Exposure:

Particulars Rate %

Average Rate of Credit and Investments 5.61 Average Rate on Deposits 1.63 Net Spread 3.98

Rs. in ‘000

Particulars Loans & Advances and Bills Deposits & Borrowings Contingent

Total Amount as on 15 July 2009 13,880,703 35,871,721 10,651,094Highest Exposure to Single unit 379,915 4,649,213 1,055,771Highest % of Exposure to Single unit 2.74 12.96 9.91

Particulars Amount

Software Costs -Licence Fees 1,044Premium on Development Bonds 35,359

Total 36,403

Rs. in ‘000


15 Summary of Loans and Advances Disbursed, Recovered and Principal and Interest Written-off during the year:

Rs. in ‘000

Particulars AmountLoans Disbursed 6,889,692 Loans Recovered 7,129,518 Loans Written-off 39,126 Interest Written-off -

14. Reconciliation Status:

The reasons for differences are fully identified and are being addressed in regular course of business.

Particulars Total Amount ≤ 3 Months > 3 ≤ 9 Months > 9 Months

Branch Adjustments Account - - - -Agency Accounts 584,769 577,023 7,746 -

Rs. in ‘000


20 Classification of Assets and Liabilities based on Maturity:

21 Statement of age-wise agency account reconciliation pending items

22 Borrowing by Bank against the collateral of own assets is Nil.

Particulars 1-90 Days 91-180 Days 181-270 Days 271 Days -1 Year Over 1 Year Total

Assets

Cash Balance 463 463 Balance with Banks 2,674 2,674 Investment in Foreign Banks 7,272 2,968 699 389 623 11,951 Government Securities 3,948 2,224 744 2,429 653 9,998 Nepal Rastra Bank Bonds - Inter Bank Lending 251 251 Loans, Advances & Bills Purchased 4,032 564 817 546 7,721 13,680 Other Assets 1,424 146 1,570

Total Assets 20,064 5,756 2,260 3,364 9,143 40,587 Liabilities

Loans and Borrowings 300 300 Current Deposits 2,106 4,475 6,581 Saving Deposits 4,222 14,966 19,188 Fixed Deposits 7,977 763 100 588 675 10,103 Debentures - Other Liabilities, Capital & Reserves 1.363 3,052 4,415

Total Liabilities 15,968 763 100 588 23,168 40,587 Net Financial Assets 4,096 4,993 2,160 2,776 (14,025) - Cumulative Net Financial Assets 4,096 9,089 11,249 14,025

Rs. in Million

Rs. in ‘000

Particulars Total Amount Upto 1 year 1 to 3 years Above 3 years

Agency Accounts - - - -

Schedule 4.34: Statement of loan availed by bank’s promoter/promoters’ group from other bank and financial institutions by pledging their shares. As at 15th July 2009 (31st Ashad 2066)

S.No. Name of Promoter/ Name of other

Shareholders bank/financial

under institution from Promoters’ Total no. of Percentage of which loan Loan No. of shares

Group shares paid up capital has been taken amount Rs. pledged Remarks

12345

Shares under the ownership of Promoter Description of Loan


Schedule 4.35 Unaudited Financial Results (Quarterly) As at the end of Fourth Quarter (15/07/2009) of the Fiscal Year 2065/66 ( FY 2008-2009)

This Quarter Ending Previous Quarter Corresponding Previous S.N. Particulars (Unaudited) Ending (Unaudited) Year Quarter Ending (Audited)

1 Total Capital and Liabilities (1.1 to 1.7) 40,587,468 38,462,129 33,335,788

1.1 Paid-up Capital 931,966 931,966 620,784 1.2 Reserves and Surplus 2,586,487 2,272,383 1,871,764 1.3 Debenture and Bond - - - 1.4 Borrowings 300,000 200,000 - 1.5 Deposits (a+b) 35,871,721 34,259,002 29,743,999 a Domestic Currency 21,984,022 20,417,797 21,247,387 b Foreign Currency 12,887,700 13,841,205 8,496,612 1.6 Income Tax Liability (Net) 4,262 7,759 2,051 1.7 Other Liabilities 893,032 791,019 1,097,1902 Total Assets (2.1 to 2.7) 40,587,468 38,462,129 33,335,788

2.1 Cash & Bank Balance 3,137,164 2,869,127 2,050,243 2.2 Money at Call and Short Notice 2,055,549 1,788,695 2,197,538 2.3 Investments 20,236,121 18,937,661 13,902,819 2.4 Loans and Advances 13,679,757 13,826,709 13,718,597 2.5 Fixed Assets 137,292 159,949 117,272 2.6 Non Banking Assets - - - 2.7 Other assets 1,341,585 879,988 1,349,319

3 Profit and Loss Account Up to This Up to Previous Up to Corresponding Quarter Quarter Previous Year Quarter

3.1 Interest Income 1,887,221 1,376,643 1,591,196 3.2 Interest Expense 543,787 406,088 471,730

A Net Interest Income (3.1 - 3.2) 1,343,434 970,555 1,119,466

3.3 Fees, Commission and Discount 235,469 162,951 276,432 3.4 Other Operating Income 33,191 22,384 32,594 3.5 Foreign Exchange gain / Loss (Net) 480,031 340,073 345,653

B Total Operating Income (A+3.3+3.4+3.5) 2,092,125 1,495,963 1,774,145

3.6 Staff Expense 253,055 183,623 225,256 3.7 Other Operating Expenses 276,327 207,864 230,571

C Operating Profit Before Provision (B-3.6-3.7) 1,562,743 1,104,476 1,318,318

3.8 Provision for Possible Losses 56,635 41,041 69,885

D Operating Profit (C - 3.8) 1,506,108 1,063,435 1,248,433

3.9 Non Operating Income / Expense ( Net) 22,099 2,570 1,682 3.10 Write back of Provision for Possible Losses 101,075 56,728 90,635

E Profit from Regular Activities (D+3.9+3.10) 1,629,282 1,122,733 1,340,750

3.11 Extraordinary Income/ Expenses ( Net) (15,356) (5,430) (28,040)

F Profit Before Bonus and Taxes (E + 3.11) 1,613,926 1,117,303 1,312,710

3.12 Provision for Staff Bonus 146,720 101,573 119,337 3.13 Provision for Tax 442,091 304,719 374,452

G Net Profit / Loss (F - 3.12 - 3.13) 1,025,115 711,011 818,921

4 Ratios At the End of At the End of At the End of Corresponding This Quarter Previous Quarter Previous Year Quarter

4.1 Capital Fund to RWA 16.85% 14.68% 13.15% 4.2 Non Performing Loan ( NPL) to Total Loan 0.66% 0.70% 0.92% 4.3 Total Loan Loss Provision to Total NPL 220.72% 228.14% 190.64%

Rs. in ‘000


Schedule4.36 : Comparison of Unaudited and Audited Financial Statement As at 2065/66

Variance Reasons for As per Unaudited As per Audited Variance

S.No. Particulars Financial Statement Financial Statement In Amount In %

1 Total Capital and Liabilities (1.1 to 1.7) 40,587,468 40,587,468 0 0

1.1 Paid up Capital 931,966 931,966 0 0.00% 1.2 Reserve and Surplus 2,586,487 2,120,503 465,983 18.02% As per the proposed appropration 1.3 Debenture and Bond 0 0 0 0.00% 1.4 Borrowings 300,000 300,000 0 0.00% 1.5 Deposits (a+b) 35,871,721 35,871,721 0 0.00% a. Domestic Currency 22,984,022 22,984,022 0 0.00% b. Foreign Currency 12,887,700 12,887,700 0 0.00% 1.6 Income Tax Liability 4,263 4,263 0 0.00% 1.7 Other Liabilities 893,031 1,359,015 (465,983) -52.18% As per the proposed appropration2 Total Assets (2.1 to 2.7) 40,587,468 40,587,468 0 0.00% 2.1 Cash and Bank Balance 3,137,164 3,137,164 0 0.00% 2.2 Money at Call and Short Notice 2,055,549 2,055,549 0 0.00% 2.3 Investments 20,236,121 20,236,121 0 0.00% 2.4 Loans and Advances 13,679,757 13,679,757 0 0.00% 2.5 Fixed Assets 137,293 137,293 0 0.00% 2.6 Non Banking Assets 0 0 0 0.00% 2.7 Other Assets 1,341,585 1,341,585 0 0.00%

3 Profit and Loss Account

3.1 Interest Income 1,887,221 1,887,221 0 0.00% 3.2 Interest Expense 543,787 543,787 0 0.00%A. Net Interest Income (3.1 - 3.2) 1,343,435 1,343,435 0 0.00% 3.3 Fees, Commission and Discount 235,469 235,469 0 0.00% 3.4 Other Operating Income 33,191 33,191 0 0.00% 3.5 Foreign Exchange Gain/Loss (Net) 480,031 480,031 0 0.00%

B. Total Operating Income (A+3.3+3.4+3.5) 2,092,126 2,092,126 0 0.00%

3.6 Staff Expenses 253,056 253,056 0 0.00% 3.7 Other Operating Expenses 276,327 276,327 0 0.00%

C. Operating Profit Before Provision (B -3.6 - 3.7) 1,562,743 1,562,743 0 0.00%

3.8 Provision for Possible Losses 56,635 56,635 0 0.00%

D. Operating Profit (C -3.8) 1,506,109 1,506,109 0 0.00%

3.9 Non Operating Income/Expenses (Net) 22,098 22,098 0 0.00% 3.10 Write Back of Provision for Possible Loss 101,075 101,075 0 0.00%

E. Profit from Regular Activities (D+3.9+3.10) 1,629,282 1,629,282 0 0.00%

3.11 Extraordinary Income/Expenses (Net) (15,356) (15,356) 0 0.00%

F. Profit before Bonus and Taxes (E +3.11) 1,613,926 1,613,926 0 0.00%

3.12 Provision for Staff Bonus 146,721 146,721 0 0.00% 3.13 Provision for Tax 442,091 442,091 0 0.00%

G. Net Profit/Loss (F - 3.12 - 3.13) 1,025,115 1,025,115 0 0.00%

Rs. in ‘000


1. Capital structure and capital adequacy a. Tier 1 capital and a breakdown of its

components; As on 15.07.2009 Core Capital (Tier 1) 2,832,760,951a Paid up Equity Share Capital 931,966,400b Proposed Bonus Equity Share 465,983,200c Statutory General Reserves 1,195,316,709d Retained Earnings 239,494,642e Un-audited current year - cumulative profit

b Tier 2 capital and a breakdown of its compo-

nents; As on 15.07.2009Supplementary Capital (Tier 2) 357,605,394

a General loan loss provision 137,896,614b Exchange Equalization Reserve 219,708,780

c. Detailed information about the Subordinated

Term Debts with information on the outstand-

ing amount, maturity, and amount raised during

the year and amount eligible to be reckoned as

capital funds.

•Notapplicable.

d. Deductions from capital; •NIL.

e. Total qualifying capital; NRs 3,190,366,345

f. Capital adequacy ratio; 14.70 %.

g. Summary of the bank’s internal approach to

assess the adequacy of its capital to support

current and future activities, if applicable; and

Board and Senior Management OversightBank management is responsible for understanding the nature and level of risk

taken by the bank and relating the risk to the capital adequacy level. The Credit Risk Committee reviews the Credit Risk, analyzes the trend, assesses the exposure impact on capital and provides a summary report to the Management Committee.

In respect of operational risk, the Consumer Banking, Wholesale Banking and each Support Function Business Operational Risk Manager provide operational loss data to Country Operational Risk Assurance Manager who in turn analyzes the trend and provides a summary report to the CORG & the Management Committee. Finance & Strategic Planning checks the capital charge on operational risk.

With regard to market risk, the Financial Markets Operation maintains net open position of all currencies on a daily basis and provides data to Head WB who reviews and analyzes the trend, assesses the exposure impact on capital and provides a summary report to the Management Committee. The net open position report is also discussed at the ALCO.

Management Committee reviews the summary reports received from CRC, CORAM and the HWB and provides a synopsis to the Board along with its view on the risks exposure and the adequacy of capital, for review and noting.

Sound Capital AssessmentIn order to ensure a sound capital assessment process, all three risks that have direct impact on the capital adequacy level are managed in a structured manner with clear roles and responsibilities. For managing the Credit Risk the Country Underwriting Standards, Country Credit Policy, Credit Policy Manual, and Product Development Documents have been prepared and implemented. Any exception to

the standards get escalated and approved by the appropriate authorities as stipulated in the standards, policy manual and the PDD, with audit trail.

Operational Risk Management & Assurance Framework (ORMAF) has been implemented for managing operational risks. In line with ORMAF, the 3 lines of assurance ensure effective management of all operational risks. In the 3 lines of assurance, business is the first line which is primarily responsible for managing the risk whilst compliance & assurance and Group Audit occupy the second and the third lines respectively to ensure an independent assurance to the Board and Senior Management on the effectiveness of the risk management.

The market risks are managed in line with the Bank’s market risk and other related policies, giving due consideration to the prevalent market conditions.

Comprehensive assessment of risksCredit risk The credit risk of individual borrowers or counterparties as well as at the portfolio level is assessed. The credit review assessment cover risk rating systems, portfolio analysis, large exposures and the risk concentrations. All Corporate and Institutional borrowers including SME borrowers, at individual and group level, are assigned internal credit rating that supports identification and measurement of risk and integrated into overall credit risk analysis.

Operational RiskOperational Risk Management and Assurance Framework (ORMAF) adopted by the bank provides comprehensive risk management tools for managing operational risk. The Operational Risk Management and Assurance Framework (ORMAF) defines how risks are

Disclosure as per Bank’s disclosure policy under the Basel –II Capital Accord of Nepal Rastra Bank


managed, how Operational Risk policies and controls are assured, how effective governance is exercised as well as the key roles required to manage the underlying processes.

The governance structure of OR is as follows:• OperationalRiskgovernanceensures

consistent oversight across all levels regarding the execution and effectiveness of ORMAF.

• Operationalrisksareidentifiedandgradedat the unit level. Mitigating controls are put in place and mitigation progress is monitored. These risks are reported to the Business Operational Risk Group (BORG).

• BORG(asacommittee)assignownership,require actions to be taken and monitor progress of risks identified, in addition to confirming the risk grading provided at the unit level. Risks categorized as High or Medium are reported to the Country Operational Risk Group (CORG) and escalated to Business Operational Risk Committees (ORCs) at the Regional level.

• CORGdeterminesfinalriskgradingandensures appropriateness of risk ownership, required actions and progress to date. Risks graded high, are escalated to Group Operational Risk Committee (GORC) through Group Operational Risk Assurance (GORA) team.

• TheBusiness/FunctionOperationalRiskCommittees (ORCs) at Regional level oversee operational risks within businesses and functions across the Region.

• TheGORCoverseesoperationalrisksatGroup level with the support of the GORA team. The team assesses risks escalated by CORGs and Business / Function ORCs.

Market Risk Risks arising out of adverse movements in exchange rates, interest rates, liquidity and equity are covered under market risk management. In line with capital framework prescribed by NRB, the bank focuses on exchange risk management for managing/computing the capital charge on market risk. In addition the interest rate risk, liquidity risk and equity risk are assessed at a regular interval to strengthen market risk management. The market risk is managed within the tolerance limit set by the Board.

Other risks In addition to the credit, operational and market risk, the bank identifies, assesses

and monitors strategic and reputational risks at a regular interval. While strategic risk is managed by the CEO, the Reputational Risk Committee is responsible for the management of reputational risk.

Monitoring and Reporting All risks, including credit, operational and market risks are identified, escalated, monitored and mitigated to the satisfaction of the risk type owner. The risk type owner is responsible for ensuring that risks are adequately identified, escalated monitored and mitigated. The bank has adequate system for monitoring and reporting risk exposures and assessing how the changing risk profile affects the need for capital. The Credit Risk Committee reviews and assesses the credit risk and provide a report to the Management Committee. Similarly, the CORG provides Country Operational Risk profile and the Reputational Risk Committee provides the Reputational Risk profile to the Management Committee. All other risks are identified and reported by the respective risk type owner.

Internal Control Review The Bank is committed to managing risk and controlling its business and financial activities in a manner which enables it to maximize profitable business opportunities, avoid or reduce risks which can cause loss or reputational damage, ensure compliance with applicable laws and regulations and enhance resilience to external events.

The effectiveness of the Company’s internal control system is reviewed regularly by the Board, its committees, Management and Internal Audit. The Audit Committee has reviewed the effectiveness of the internal control system during the FY 2065/66 and reported on its review to the Board. The Internal Audits monitor compliance with policies and standards and the effectiveness of internal control structures across the Company through its program of business/unit audits. The Internal Audit function is focused on the areas of greatest risk as determined by a risk-based assessment methodology. Internal Audit reports regularly to the Audit Committee. The findings of all adverse audits are reported to the Chief Executive Officer and Business Heads for immediate corrective actions.

h. Summary of the terms, conditions and main

features of all capital instruments, especially

in case of subordinated term debts including

hybrid capital instruments.- Bank has fully paid equity shares as qualifying capital.

hybrid capital instruments.- Bank has fully paid equity shares as qualifying capital.

2. Risk exposures a. Risk weighted exposures for Credit Risk,

Market Risk and Operational Risk

RISK WEIGHTED As on EXPOSURES 15.07.2009

A Risk Weighted Exposure for Credit Risk 18,758,431,918B Risk Weighted Exposure for Operational Risk 2,690,614,405 C Risk Weighted Exposure for Market Risk 254,117,435

Total Risk Weighted Exposures (a+b+c) 21,703,163,759


c. Total risk weighted exposure calculation table; Please refer Schedule 4.30 (Kha), 4.30 (Ga), 4.30 (Gha) and 4.30 (Nga) of the financial statements for details.

d. Amount of NPAs (both Gross and Net) • Restructure/RescheduleLoan NIL• SubstandardLoan Gross value Rs. 34,422,042, Net values

Rs. 25,816,531• DoubtfulLoan Gross value Rs. 11,851,308 Net value Rs

2,175,654• LossLoan Gross value Rs. 44,768,306 Net value: NIL

e. NPA ratios • GrossNPAtogrossadvances0.66%• NetNPAtonetadvances0.20%

f. Movement of Non Performing Assets Year on year downward movement of Rs.

37,678,126.

g. Write off of Loans and Interest Suspense Loans Write off during the year is Rs. 39,126,089 and interest suspense balance as on year end is Rs 117,646,865.

h. Movements in Loan Loss Provisions and

Interest Suspense Year on year downward movement in Loan Loss Provisions of Rs. 44,440,535

Year on year upward movement in Interest suspense of Rs. 2,166,234.

i. Details of additional Loan Loss Provisions Provisions due to growth in the volume have been added. No major additional provisions have been made.

3. Risk Management Function a. For each separate risk area (Credit, Market and Operational risk), banks must describe their risk management objectives and policies, including:

• Strategiesandprocesses;• Thestructureandorganizationofthe

relevant risk management function; • Thescopeandnatureofriskreporting

and/or measurement systems; and • Policiesforhedgingand/ormitigating

risk and strategies, and processes for monitoring the continuing effectiveness of hedges/mitigants.

Credit Risk Management strategies include effectively managing the risk of financial loss arising out of booking an exposure on counterparty and also ensuring independence of the Credit Risk Management function from the origination and sales function.

Credit risk under both consumer banking and wholesale banking is managed through a defined framework which sets out policies and procedures covering the measurement and management of credit risk. There is a clear segregation of duties between transaction originators and the approvers in the risk functions.

An alpha numeric grading system is used for quantifying the risk associated with the counterparty for corporate and institutional clients (including SME). The grading is based on a probability of default methodology, with customers analyzed against a range of quantitative and qualitative measures. In addition to nominal aggregate exposure, Loss Given Default is used in the delegation of credit approval authority and must be

calculated for every transaction to determine the appropriate level of approval. Significant exposures beyond the authority of Credit Officers in both WB and CB are approved by CEO as per the delegation of authority conferred by the SCB Nepal Board after support from the respective credit risk function at the group level.

Credit function in consumer banking uses standard application forms which are processed in central units and credit approval process is guided by product development document (PDD) and credit operating manual. The probably of default is calculated using portfolio delinquency flow rates.

There are risk officers for both Consumer Banking and Wholesale Banking businesses. They have their primary reporting line into the group functional level and CEO Nepal. We have a manual approval process.

The scope and nature of risk reporting and/or measurement procedures are covered in the Country Underwriting Standards approved by the board, PDD and credit operating manual and other group level policies & procedures adopted after the board approval. The Risk Management Committee chaired by the CEO, reviews the portfolio exposure, portfolio quality, country level risk triggers, etc atleast on a quarterly basis.

Country underwriting standards and PDD / credit operating manual outlines the Bank’s policies and processes for hedging and/or mitigating and monitoring risk. Collaterals which are eligible for risk mitigation and valuation of the same are reviewed every year, underwriting standards also prescribe the frequency of valuation for different collateral types. Collateral held against impaired loans is maintained at fair value.

b. Types of eligible credit risk mitigants used

and the benefits availed under CRM.

No. Credit Risk Mitigant As on 15.07.2009

1 Deposits with Bank 1,630,728,7622 Deposits with other banks/FI* 507,770,089 3 Govt. & NRB Securities 360,481,7374 G’tee of Domestic Banks* 3,374,092 5 Sec/G’tee of Foreign Banks* 1,690,238,963

Total 4,192,593,643

* net of supervisory haircut

b. Risk Weighted Exposures under each of 11 categories of Credit Risk

No. Particulars Claim as on RWE as on 15.07.2009 15.07.2009

1 Claims on govt. and central Bank 12,003,929,710 -2 Claims on other financial entities 83,793,000 125,689,5003 Claims on Banks 13,024,557,926 3,210,997,1454 Claims on corporate and securities firm 3,680,088,427 2,743,934,2165 Claims on regulatory retail portfolio 4,159,696,473 3,110,871,3376 Claim secured by residential properties 2,535,902,113 1,526,188,4337 Claims secured by commercial real state 2,106,505,547 2,068,505,5468 Past due Claims 165,053,790 228,395,0969 High risk claims 1,196,322,148 1,484,511,27810 Other Assets 1,667,132,771 786,391,58711 Off Balance sheet Items 10,651,093,620 3,472,947,780

Total 51,274,075,525 18,758,431,918


Nepal Rastra Bank’s Approval and Directions

Nepal Rastra Bank has granted permission to the Bank to publish the Financial Statements along with Balance Sheet; Profit & Loss Account and the related schedules for the Fiscal Year 2065/66 along with the following direction vide Letter no. Bai. Su.Bi /Offsite/AGM 2/066/67 dated 2066/05/08 (24th August 09) and to distribute the Dividend and Bonus Shares on the basis of approval of the Annual General Meeting:

To rectify the comments raised by Statutory Auditor and to ensure that the comments are not repeated.


Five years Financial SummaryBalance Sheet

Five years Financial SummaryBalance Sheet

Particulars 2061-62 2062-63 2063-64 2064-65 2065-66 2004-05 2005-06 2006-07 2007-08 2008-09

Assets Cash & Bank Balances 1,111,117 1,276,241 2,021,021 2,050,243 3,137,164 Money at Call and Short Notice 2,259,691 1,977,271 1,761,152 2,197,538 2,055,549Investments 9,702,553 12,838,555 13,553,233 13,902,819 20,236,121Loans, Advances & Bills Purchased 8,143,208 8,935,418 10,502,637 13,718,597 13,679,757Fixed Assets 71,413 101,302 125,591 117,272 137,293Other Assets 493,697 638,565 633,055 1,349,319 1,341,585

Total Assets 21,781,679 25,767,352 28,596,689 33,335,788 40,587,468

Liabilities Borrowings 27,551 - 400,000 - 300,000 Deposit Liabilities 19,363,470 23,061,032 24,647,021 29,743,999 35,871,721Other Liabilities 808,243 952,181 1,433,315 1,099,242 1,363,277

Total Liabilities 20,199,264 24,013,213 26,480,336 30,843,241 37,534,998

Shareholders’ Equity Paid up Capital 374,640 374,640 413,255 620,784 931,966Proposed Capitalisation of profit 74,928 112,392 206,627 310,392 465,983Reserves (General Reserves including Exchange Reserves) 881,511 896,522 991,746 1,178,084 1,415,025Retained Earnings 251,336 370,585 504,725 383,287 239,495

Total Shareholders’ Equity 1,582,415 1,754,139 2,116,353 2,492,547 3,052,470

Contingent Liabilities Letter of Credit 1,456,762 1,837,398 1,861,944 1,857,994 3,120,879 Guarantees 1,531,069 2,046,063 2,389,969 2,800,467 3,687,373 Forward Exchange Contracts 66,571 362,646 1,121,870 193,985 1,332,126Other Contingent Liabilities 1,023,066 938,720 1,480,339 1,287,338 2,510,716

Total Contingent Liabilities 4,077,468 5,184,827 6,854,122 6,139,784 10,651,094

(figures in Rs. thousands)


Five years Financial SummaryProfit & Loss Account

2061-62 2062-63 2063-64 2064-65 2065-66 Particulars 2004-05 2005-06 2006-07 2007-08 2008-09Interest Income 1,058,678 1,189,603 1,411,982 1,591,196 1,887,221 Interest Expenses 254,127 303,198 413,055 471,730 543,787

Net Interest Income 804,551 886,405 998,927 1,119,466 1,343,435 Commission and Discount 178,651 222,929 221,207 276,432 235,469 Other Operating Incomes 29,293 25,442 28,785 32,594 33,191 Exchange Fluctuation Income 273,044 283,472 309,087 345,653 480,031

Total Operating Income 1,285,539 1,418,247 1,558,006 1,774,145 2,092,126 Staff Expenses 148,586 168,231 199,778 225,256 253,056 Other Operating Expenses 256,649 221,087 228,451 230,571 276,327 Exchange Fluctuation Loss - - - -

Operating Profit Before Provision for Possible Loss 880,304 1,028,930 1,129,776 1,318,318 1,562,743

Provision for Possible Losses 27,726 47,730 36,809 69,885 56,635

Operating Profit 852,578 981,200 1,092,968 1,248,432 1,506,109

Non-Operating Income/ (Loss) 2,957 1,433 9,492 1,683 22,098 Provision for Possible Loss Written Back 33,685 53,090 20,160 90,635 101,075

Profit from Ordinary Activities 889,220 1,035,723 1,122,620 1,340,750 1,629,282

Income/(Expenses) from Extra Ordinary Activities (2,389) (2,411) (4,915) (28,039) (15,356)

Net Profit after considering all Activities 886,831 1,033,312 1,117,705 1,312,710 1,613,926

Provision for Staff Bonus 88,683 93,937 101,610 119,337 146,721 Provision for Income Tax 261,903 280,619 324,427 374,452 442,091

Net Profit/Loss 536,245 658,756 691,668 818,921 1,025,115

Accumulated Profit up to Previous Year 217,586 251,336 370,585 557,724 383,288 This Year’s Profit 536,245 658,756 691,668 818,921 1,025,115 Capital Adjustment Fund upto Previous Year - 74,928

Total 753,831 910,092 1,137,181 1,376,645 1,408,402 General Reserve Fund - - 77,229 163,784 205,023 Proposed Dividend 449,568 487,033 330,604 496,627 465,983 Proposed Issue of Bonus Shares - 37,464 206,627 310,392 465,983 Exchange Fluctuation Fund 15,463 15,011 17,996 22,554 31,918 Capital Adjustment Fund 37,464 - - -

Accumulated Profit/(Loss) 251,336 370,585 504,725 383,288 239,495

(figures in Rs. thousands)

Five years Financial SummaryProfit & Loss Account

Notes:

Disclaimer

Standard Chartered Bank Nepal Limited entities are Equal Employment Opportunity/ Affirmative Action employers. Standard Chartered Bank Nepal Limited is committed to providing equal employment opportunities to every employee and every applicant for employment, regard-less of, but not limited to, such factors as race, color, religion, sex, age, familial or marital status, ancestry, sexual orientation, veteran status or being a qualified individual with a disability; within the legal framework of the country.

Standard Chartered Bank Nepal Limited undertakes no obligation to update any statement in this Annual Report 2008-2009 to reflect events or circumstances after the date on which such statement is made. Information in this Summary Annual Report is as of July 15, 2009.

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