Leading The Way: in Asia, Africa and The Middle East

Leading the way
in Asia, Africa and the Middle East
Annual Report and Accounts 2009-2010
Our performance
FYE 2009/10
Financial highlights
Operating Income
(in NPR where applicable)
Operating Prot
Total Assets
2298m
Capital Adequacy
1612m
Return on equity
40,213m
Dividend
14.60%
Non-nancial highlights
Points of representation
32.22%
Employees
70%
(Including Bonus Shares)
18
Operational highlights
Stable Income Growth Stable Prot Growth Robust balance sheet
429
Sound capital base Sound risk management Sustainable business
Business review overview

2 8 14 20 Chairmans Statement CEO & Directors Report Our Approach to Corporate Responsibility Here for people, Here for good People Strength:
Corporate Governance
26 32 36 38 40 Our Approach to Corporate Governance Additional Information Board of Directors Management Team Branches and ATMs
Financial Statements and Notes

41 42 43 44 45 46 47 76 78 83 86 87 Auditors Report Balance Sheet Profit & Loss Account Profit & Loss Appropriation Account Statement of Changes in Equity Cash Flow Statement Schedules Significant Accounting Policies Notes to Accounts Disclosure as per Banks disclosure policy under the Basel II Capital Accord of Nepal Rastra Bank Nepal Rastra Banks Approval and Directions Five Years Financial Summary
About Us
Standard 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 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 PLC is a leading international bank, listed on the London, Hong Kong and Mumbai stock exchanges. It has operated for over 150 years in some of the worlds most dynamic markets and earns more than 90 per cent of its income and profits in Asia, Africa and the Middle East. This geographic focus and commitment to developing deep relationships with clients and customers has driven the Banks growth in recent years. With 1,700 offices in 70 markets, Standard Chartered offers exciting and challenging international career opportunities for more than 80,000 staff. It is committed to building a sustainable business over the long term and is trusted worldwide for upholding high standards of corporate governance, social responsibility, environmental protection and employee diversity. The Banks heritage and values are expressed in its brand promise, Here for good. With 18 points of representation, 23 ATMs across the country and with more than 400 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 corporations, airlines, hotels, SMEs 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 Chartereds ambition to become the worlds best international bank and is the mainstay of the Banks Values. 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.
www.standardchartered.com/np
Chairmans Statement
It is with great pleasure I report that Standard Chartered Bank Nepal Limited has once again maintained its track record of consistent performance and has registered an impressive result for the fiscal year ended 16 July 2010. Delivering record results in this challenging economic and socio-political environment is indeed a commendable accomplishment. The foundation of success has been built mainly on our ability to follow a consistent strategy and focus of business in the areas of our strength. During the year under review, the Bank gave continuity to its projects involving footprint expansion. A Branch as well as three new ATMs were added during the year. We also launched various innovative products both under Consumer and Wholesale Banking. These steps have had a positive bearing on our overall performance. During our presence in Nepal for over twenty three years, we have been able to consolidate our position by effectively blending our global capability, deep local knowledge and creativity to outperform our competitors. This ability has helped us to serve our customers well, it also makes us part of their community. Our in-depth understanding of this market, ability to quickly adapt to the changing landscape and the flair of our management to execute Banks strategy has played a crucial role in achieving a sustained growth. Against the back-drop of a rapidly changing world, we have been working very closely with our people, customers, regulators, industry and the community. This has provided us with enormous strength to successfully handle the changing business & economic environment encompassing the country.
Our in-depth understanding of this market, ability to quickly adapt to the changing landscape and the flair of our management to execute Banks strategy has played a crucial role in achieving a sustained growth.
Neeraj Swaroop, Chairman
Profit After Tax in Rs. Mio
Market value per share in Rs.

6,830 3,775 5,900 6,010 2007-08 2008-09 2009-10 3,279 2006-07
I would like to reiterate that our brand is the most valuable asset which is at the heart of our strategic intent i.e, to be the worlds best international Bank, leading the way in Asia, Africa and the Middle East. Recent launch of our new brand promise `Here for good has given our brand a new dimension. While the Bank now has a new brand promise, `Here for good is, in reality, its oldest belief. It is what we have been doing for the past 150 years, and its aims for the next. It complements the Banks strategy, and also its values Trustworthy, International, Responsive, Courageous and Creative. This renewed thrust and commitment will ensure Standard Chartered to continue to remain the best brand in this market.
requirements as stipulated by the Central Bank, the Board has proposed to increase the capital by issuing 15 percent bonus share for which Rs. 209,772,540 has been allocated from current year profit. Our Tier 1 and Tier 2 Capital Adequacy Ratios were 12.61 percent and 1.99 percent respectively with an overall ratio of 14.60 percent, post appropriations. Our capital position is more than adequate to meet our business needs and exceeds the current Nepal Rastra Banks capital adequacy requirement under the Basel II capital accord and also exceeds the international norms.
2005-06
needs to start growing. The global financial crisis made it conspicuous that the financial world is extraordinarily interconnected and interdependent to be viewed in silos. Nepal The volatile political situation coupled with low economic growth, widening trade deficit, high inflation and liquidity crunch in the banking system continued to remain the major challenges. Liquidity crunch was mainly attributed to the slow down in remittances, funds getting locked up in non productive sectors and weakening of confidence resulting in lower deposit mobilization. Owing to political conundrum, the Fiscal Budget for year 2010/11 remains pending. Nevertheless, with the objective of arresting the widening trade deficit, ensuring smooth flow of credit to productive sectors, addressing the illiquid market and boosting both employment & growth, Nepal Rastra Bank announced its annual monetary policy for 2010/11, which, inter alia, projected GDP at 5.5 percent and expects to contain inflation within 7 percent. In FY 2009/10, Nepals GDP grew by 3.5 percent at constant prices. Agriculture, manufacturing and service sectors are estimated to have grown by 1.2 percent, 3.9 percent and 6.9 percent respectively. In the eleven months of 2009/10 ending midJune, revenue mobilization of the government grew by 26.7 percent to Rs. 153.59 billion. Similarly total government expenditure increased by 29.1 percent to Rs. 188.65 billion. The high growth in recurrent as well as capital expenditure accounted for such an increase in the government expenditure. On a monthly basis, exports grew by 14.1 percent during the month of MayJune over
Results A Synopsis
Financial Highlights Net Profit after tax rose by 5.93 percent to Rs.1.086 billion compared to Rs. 1.025 billion in the previous year Earnings per share is lower by Rs. 32.34 due to increase in the number of shares last year Risk Assets increased by 16.54 percent to Rs.16.18 billion compared to Rs. 13.88 billion last year Deposits contracted by 0.5 percent to Rs. 35.18 billion
Economic Environment
Global Scenario We are presently living in an increasingly dynamic economic environment. Apart from being the witness of upheavals of past couple of years, the year 2010 has also experienced an isolated Greek crisis metamorphosed into a pan-euro zone crisis which resulted in the financial sector across the globe, questioning the sovereign debt fundamentals. The timely intervention & prudent approach of regulators seems to be a step in the right direction. Extraordinary liquidity provision, combined with guarantees for bank liabilities, had addressed fears about banks survival. Meanwhile, low interest rates regime has helped in reviving economies and bringing business confidence back. Debate is increasingly focused on timing of Governments withdrawing stimulus which will depend on the confidence that recovery has firmly been established. However, we think that although we are past the worst - but yet to be out of the woods. Our markets Asia, Africa and the Middle East are bouncing back, but to sustain that momentum Western World too
A Consistent Performance
The Bank has been consistently delivering good performance year on year. As a result of another good year, the Bank has contributed an amount of Rs. 466 million to the Government Exchequer as compared to Rs. 443 million last year on account of corporate tax. In accordance with the statutory requirements, the Board recommends a transfer of Rs. 21,381,278 to Exchange Fluctuation Reserve from current years profits and the statutory transfer of Rs. 217,174,339 into General Reserve Fund. In line with the revised capital
Earning Per Share in Rs.

175.85 167.37
Return on Total Assets

2.70
131.92
2.56
109.99
77.65
2005-06
2006-07
2007-08
2008-09
2009-10
2005-06
2006-07
2.42
2007-08
2.46 2008-09
2.56 2009-10
the previous month. However, compared to the corresponding period of previous year, the exports have declined by 9.8 percent to Rs. 55.37 billion. The merchandise imports, on the other hand, grew by 35.2 percent to Rs. 342.99 billion. Despite the rise in trade deficit, the Balance of Payment (BOP) improved gradually from a record high deficit of Rs. 23.53 billion in midMarch to Rs. 15.07 billion by mid-June. This is attributed to a surplus generated in the transfer account that includes grants, pension receipts and remittance. As a result, the level of gross foreign exchange reserve improved to Rs. 247.42 billion in mid-June which is sufficient for financing merchandise imports of 8.1 months and service imports of 6.8 months. The year on year (y-o-y) inflation as measured by the consumer price index moderated to 9.6 percent in mid-June 2010 compared to 12.3 percent in the corresponding period last year. In line with the appreciation of the Indian Rupees against the US dollar, the Nepalese currency vis--vis the US dollar appreciated by 4.62 percent in mid-June 2010 compared to mid-July 2009. Nepalese rupee has a fixed parity of 1:1.6 with the Indian Rupee. The exchange rate of one US dollar stood at Rs. 74.60 in mid-June 2010 compared to Rs. 78.05 in mid-July 2009.
We believe that great opportunities lie ahead as the government is committed to attain accelerated growth rate in the economy and contain inflation. Needless to mention, it will largely depend upon the political stability and the security environment. We have a firm belief that the financial services sector, in which we are a player, will continue to grow and develop into a major pillar of the Nepalese economy. The agriculture sector, which is largely dependent upon the weather conditions, is likely to experience a setback because of the late arrival of monsoon this year. However, this is likely to be mostly compensated by the ongoing expansion of cultivation area and enhancement in distribution of inputs and services in the rural areas owing to improving security situation. The industrial sector is estimated to grow at an average pace in the coming year. For the fact that the government has reiterated its commitment to increase infrastructural expenditure and improvement in the operating environment, some stability in the economy can be envisaged. The year 2011 is being celebrated as `Visit Nepal Year. This is expected to provide some momentum in the tourism related activities.
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. Anurag Adlakha, Mr. Sushen Jhingan and Mr. Sujit Mundul 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, continue to represent the Standard Chartered Group on the Board of Standard Chartered Bank Nepal Limited. As on 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. Director, Mr. Arjun Bandhu Regmi, representing the public shareholders, has submitted his resignation from the post of Public Director citing personal reasons and the same has been accepted in the 264th Board meeting of the Bank held on 5th July 2010. The Board is currently in the process of fulfilling the vacant post as per the provisions of the Companies Act. I would like to thank Mr. Arjun Bandhu Regmi for his contribution during his tenure as Public Director of the Bank.
Governance across the Bank is robust. As you may all appreciate, banking is a relationship business. We highly value the relationships that we have with our people, regulators, clients and the other stakeholders; all efforts will be made to further deepen this relationship. 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
The Year Ahead

SCB Nepals prudent funding, liquidity and high asset quality policies have stood it in good stead during the difficult times. During this period, the bank remained adequately liquid to support the credit needs of the clients from both the businesses viz. Wholesale and Retail. We will continue to manage our balance sheet in a conservative manner, maintaining high liquidity and strong capital ratios.
In Conclusion
The global economy in 2010 started looking better than it did a year ago. Our markets and particularly Asia are better placed than most parts of the world to weather the risks, but they are not immune; so we cannot remain complacent. We must appreciate that the policymakers in most part of Asia have been effective in responding to the twists and turns of the crisis. Whilst the economic
Total Shareholder Equity

3,370
1,754
3,052
2005-06
2006-07
2007-08
2008-09
uncertainties continue, we start the year with a blend of caution and confidence. Based on the data recently released by the government, economic indicators were just seen to be satisfactory during the review period. Key obstacles in resuscitating the weakening economy were seen to be the issues such as taming of inflation, creating investor-friendly environment and pushing the exports up to bridge the widening trade deficit. Despite the challenging situation, the Bank was able to record a satisfactory outcome due mainly to the commitment and focus exhibited by the management team in creating shareholders value. Our top priority is to maintain our track record of delivering superior financial performance. To do this we need to sustain the momentum in both Wholesale and Consumer Banking. We are staying focused on the basics of banking; on the way we manage liquidity, capital, risks and costs. We are deepening our relationships by getting closer to our clients. We are also expanding the product capabilities and solutions we provide to them. For both the businesses, the depth and quality of our customer relationships are critical to our strategy and success. We are cautious in expanding our risk assets portfolio and are satisfied the way we are growing in Wholesale and Consumer Banking. Under both the businesses, we have been following risk management techniques that minimize the likelihood of any surprises. Costs are well controlled. We are committed to stick to our strategy and will continue to focus on deepening our relationships with our clients. Our brand is all about commitment. We are Here for good, to create value for our
2009-10
We are Here for good, to create value for our shareholders, to support and partner our clients and to make a positive contribution to the broader community.
2,116
2,493
shareholders, to support and partner our clients and to make a positive contribution to the broader community. We are here for the long term. Building a sustainable business is an integral part of our long-term strategy to enhance shareholder value. Many of our employees chose to get involved in community activities, and this further underpins our standing as being amongst the most customer and community caring institutions in Nepal. Continued support and trust endowed upon us by our valuable customers, shareholders and other stakeholders has enabled us to remain the best Bank in Nepal. I sincerely appreciate their efforts to bestow us with their encouragement, trust and loyalty. SCB Nepal was the recipient of `Bank of the Year award for 2009 from the Financial Times; it is a testimony of this fact. Our intention is to make meaningful contribution in accelerating the economic activities of the country to attain a higher growth rate. We are looking at the year ahead with cautious optimism. We have to remain vigilant, prudent and focused on the sound management of our balance sheet this will remain key areas of focus. Ministry of Finance and the Central Bank have been playing key roles in driving the financial sector reforms in Nepal. We welcome and appreciate the initiatives that are aimed at strengthening the overall financial system in the country. Support and guidance received from our Regulators and the 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.
Being the only international Bank in the country with strong performance and values culture, SCB Nepal clearly edges past rest of the competition for being the `Employer of Choice. The Bank aims at retaining this coveted position. We have been placing continuous focus on staffs learning & development and in building their leadership capabilities. In an endeavor to address the diverse need of our people and to create a conducive work environment, we have been embracing work-life balance. The Diversity and Inclusion Council, which is playing a key role in taking forward our D & I agenda, continued to address the different strands of diversity including women, and the differently-abled. On behalf of SCB Nepals Board of Directors, I take this opportunity to thank all the stakeholders for their patronage. Let me take this opportunity to express my sincere appreciation towards our valued customers and shareholders for standing by us in our journey. I would also like to thank all our employees for their untiring efforts and loyalty towards the organization. They were instrumental in enabling us to deliver these good results. What we achieved during this year will soon be history. There are good reasons for us to be thrilled about our past laurels but we now need to look forward and concentrate in delivering another good year. Whilst I do not underestimate the challenges and uncertainties before us, I am excited by the opportunities. We are equipped and are in a better position to deal with the emerging challenges.
Neeraj Swaroop Chairman
Leading the way in helping realize local dreams
Krishna Textiles Udhyog
CEO & Directors Report
The CEO & Director presents this report together with the Balance Sheet and statement of Profit and Loss for the year ended 16 July 2010. 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. The Bank is in good shape and we have delivered yet another year of stable financial performance. Our strategy remains the same and through a disciplined execution of our strategy the Bank has been able to deliver on its promises. An increase in the net profit after tax of 6 percent over last year to Rs. 1.09 billion is commendable in the backdrop of an extremely challenging business environment. This has been achieved by relentless focus on cost and risk management while pursuing business growth.
The Bank is in good shape and we have delivered yet another year of stable financial performance.
Sujit Mundul, CEO
There is an increase in the volume of risk assets by 16.54 percent to Rs 16.18 billion compared to Rs 13.88 billion last year. The Bank has been able to manage its credit portfolio better as a result of which the Nonperforming credit to Total credit has reduced from 0.66 percent to 0.61 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.217.17 million, exchange fluctuation reserve Rs 21.38 million, proposed dividend Rs. 769.17 million, proposed issue of bonus shares Rs. 209.77 million and to other regulatory reserves Rs. 77.91 million, total retained earnings as at 16 July 2010 stood at Rs. 29.96 million. This performance reflects a good momentum
Operating Profit Transfer to General Loan Loss Provision Provision for Tax Net Profit After Provision and Tax Issue of Bonus Shares Proposed Cash Dividend
In Rs. 000s 16-Jul-10 1,612,467 76,974 450,496 1,085,872 209,773 769,166
In Rs. 000s 15-Jul-09 1,506,109 56,635 442,091 1,025,115 465,983 465,983
% Change 7% 36% 2% 6% (55)% 65%
Customer Charter Workshop in progress
Launch of Priority Banking card
in the underlying businesses and disciplined management of risks and costs.
Representation
As at 16 July 2010, the Bank maintained eighteen points of representation which included fourteen branches and four extension counters. In addition to this, services were also extended to our customers through twenty three ATMs located at different parts of the country.
that we remain ahead of competition and can respond to the changing dynamics of the market faster than anyone else.
Consumer Banking
Consumer Banking continues to adopt customer and segment focused approach, balancing the banking solutions with appropriate risk control measures. Product and service innovation, sales through service excellence, appropriate risk based pricing and investment for the future are the essential ingredients of our operating business model. During FY 2009/2010, the business continued to encounter numerous challenges stemming from the political conundrum and lackluster economic environment ranging from policy changes to load shedding, impacting adversely the overall operating environment. Whilst these challenges have been there for quite sometime, Liquidity crisis took the center stage decelerating the growth in deposits with further compression in margins. To remain competitive, the Bank had to raise interest rates on its Structured Call and Fixed Deposits. However, given our well managed balance sheet and Credit Deposit Ratio, the business continued to lend despite the liquidity challenges facing the market. SME, Auto, Mortgage, Personal Loans and Credit Cards showed steady growth. Auto and Mortgage loans contributed significantly to the Consumer Banking Lending Portfolio. During the period under review, the Bank opened a branch in New Road and added three more ATMs.
In line with the Consumer Banks transformation agenda, Customer Charter defining customer focus was rolled out to the entire Consumer Banking staff. The Customer Charter primarily focuses on Customers based on the following three principles:

Wholesale Banking
WB delivered another year of strong performance. What was achieved in the last one year is of significance because of the difficult operating environment, characterized by low economic growth, widening trade deficits, tight liquidity coupled with volatile political situation. Opportunities that met our lending criteria were limited. WB was extremely careful in booking new exposures. At the same time we focused on select clients by actively providing enhanced level of facilities and the more sophisticated products viz. FX options, structured deposits, cross currency swaps, supranational trade finance, etc. This enabled our clients to hedge their FX and interest rate risks and undertake business that they would not have been able to close, had such product offerings not been available to them. It would be apposite to mention that we remained open for business as usual even during the most testing situation of liquidity crisis. While it would be challenging to operate successfully in an environment which is expected to remain difficult we are confident of maintaining the upward trajectory and at the same time will ensure that all risks be it credit, market, operational, etc. are well managed. We will continue to review our strategy so
Friendly, Fast and Accurate Service Solution to our Customers financial needs Recognition of overall banking relationship with our Customers
As a testimony of our commitment towards Customer Charter, the Bank, inter alia, has launched the following:
Amulya Bachat Khata - A special Savings Scheme whereby higher interest rate up to the maximum of 6.5 percent p.a is given on the daily balances. Added two more branches under the 365 days banking service - Naya Baneshwar Branch and New Road branch (former opens on all holidays and latter closes only on Saturdays). Extended banking hours by one hour across the branch network between Sunday and Thursday and half an hour on Friday.
In order to gauge the satisfaction level of our customers and to continuously improve the way we work, regular feedback and surveys are undertaken. These feedback and surveys provide us with valuable insights about our products, services and people. This also enables us to improvise and introduce various policies, procedures, products and value added services that meet our customers needs whilst addressing the encompassing risk issues.
SCB Nepal was the recipient of Bank of the Year award for 2009 by The Financial Times, London
CEO addressing a town hall to mark the launch of Banks refreshed brand promise - Here for good.
Our commitment to Treating Customers Fairly and our policies on Mis-selling and Misrepresentation remain core to our values. We will continue to invest in footprint expansion and our chosen segments. However, given the fluidity in the operating environment we will continue to remain cautiously optimistic in our approach. As in the past we will strike a careful balance between risk and reward for a sustainable growth.
Future Plans
We will continue to make appropriate investments in our franchise based on the operating environment. For the year 2010/2011, our key focus will be on Customer Service and SME. Bancassurance is another area where we will be making significant investment for generating fee income. Lending products like Auto, Mortgage, Credit Cards and Personal Loan will continue to be offered to our target segments and improvements in the turnaround time will receive our prime attention. Similarly we will continue to accelerate our deposit drive in order to maintain a better semblance in our balance sheet. We are also committed to providing easy banking solutions to our Visually Challenged customers within the existing framework and constraints. We also intend to enhance our Online banking capabilities by adding additional features thereby obviating the need for customers to visit the bank for their basic banking requirements. Along with this, we will also be driving our e-statement agenda in order to ensure that customers receive their statements in a more efficient manner. Inward remittances, an importance source of foreign currency earning, will continue to play a key role in the expansion of our consumer base. On the WB side, we will continue to offer total solutions to our clientele with new products and seamless services. Our endeavor will be to further deepen our relationships
Outserve Plus - Continuously Improving the Way We Work

Continuously improving the way we work is one of the Banks five strategic priorities. The Bank has an Outserve Plus programme which works as the vehicle for continuously improving the way we work. Through Outserve Plus, we have made great progress in creating a culture of continuous improvement. We have an Outserve Council which over the years, has acted as a catalyst for continuous improvement. Outserve Plus allows us to place greater focus on the underlying infrastructure and processes of the Bank that underpin customer service, productivity and control environment. The ambition for everyone in the Bank therefore is to work Simpler, Faster and Better. Through Outserve Plus we will continue to look for the ways to be more efficient and effective in what we do, ensuring that we are Here for good and Here for customers.
10
The Bank expanded its footprint by adding an ATM at the UN premises in Harihar Bhawan
The Bank has introduced extended banking hours across the branch network.
and achieve core banking status for all the corporate customers. Nepal holds a huge potential to become a popular tourist destination. The year 2011, which is being celebrated as `Visit Nepal Year, is expected to provide momentum to the tourism related activities. The steady economic growth of the two neighboring countries i.e. India and China is likely to offer opportunities for Nepal to act as a trade corridor. Suitable policy decisions to capitalize on these opportunities will help our agenda of achieving higher business growth. We will closely follow the opportunities for investment in infrastructural areas viz. hydropower, agriculture and other service sector industries. In line with our revised brand promise, `Here for good we have full commitment to investing in our people, processes and systems with a view to improve the quality of our service for delighting our customers. As we have been doing in the past, we will continue to make a real difference to our communities. We will consciously drive and maintain our high level of governance. For our shareholders we shall strive to continue providing them with superior returns.
global financial crisis, its lagging effects were seen in the last FY in terms of deceleration in workers remittance, a key component in Nepals GDP, and decline in exports. During the past FY, Nepalese Economy witnessed low economic growth, widening trade deficit and liquidity shortage in the banking system. The continued security concerns and political uncertainty, double-digit inflation, growing energy crisis and nation-wide long strikes were some other key factors that affected the countrys credit environment. Decline in foreign exchange reserves, slowdown in deposit mobilization and reportedly aggressive flow of credit to unproductive sectors led to liquidity crisis, affecting the productive sectors in terms of inadequate credit support and high cost of borrowing. Against the backdrop of a difficult political and economic environment, the Bank has been able to maintain its credit quality owing to its proactive risk management approach. The Bank continues to stick to the fundamentals of good banking. Clear strategy and discipline, strong relationship with the clients, rigors around the quality and debate on risk-return dynamics, etc are the few key elements that contributed to the success in the risk management. We are well disciplined in our liquidity management which is corroborated by our conservative C/D ratio and high capital adequacy.
November 2009. 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 Dividend and Bonus Shares

The 266th meeting of the Board of Directors of the Bank has proposed dividend to the shareholders of the Bank for the year ended 16 July 2010 at the rate of 55 percent in cash and issue of bonus shares at the rate of 15 percent.
Sujit Mundul Director and CEO
Credit Environment
The risk management remained extremely challenging in the last fiscal year. The instability and uncertainty in the global economy brought about by the Western financial crisis persisted till recently. Though Nepal was believed to be relatively insulated from the
Auditor
M/S S. R. Pandey & Co., Chartered Accountants, were appointed as Statutory Auditors for FY 2009/10 by the 23rd Annual General Meeting of the Bank held on 4th
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Leading the way by touching lives
12
13
Our Approach to Corporate Responsibility
Talking sustainability is no longer optional for a bank due to the crisis that the banks have just been through. We have to prove that our business model is sustainable. We have to demonstrate that we make a positive contribution to sustainable growth and development.
We maintained our commitment to building a sustainable business as a bank, simultaneously creating value for our shareholders, supporting our customers and contributing to the communities in which we live and work. This has underpinned our strategy and success for over 150 years across Asia, Africa and the Middle East; and it will be the foundation for our future. Talking sustainability is no longer optional for a bank due to the crisis that the banks have just been through. We have to prove that our business model is sustainable. We have to demonstrate that we make a positive contribution to sustainable growth and development. We believe that through building a sustainable business we can deliver, broadly, three positive outcomes: contributing to the real economy; promoting sustainable finance; and leading the way in our communities. Our commitment, to our clients, investors, regulators, in our markets and to our staff, is to be Here for good.
The Bank is the promoter of few rural development banks and Rural Microfinance Development Centre (RMDC) which underlines the Banks association with this business since long time. The Bank is represented in the Board of RMDC, an eminent wholesale lending micro finance entity. The Bank has also been lending to rural development banks and NGOs to facilitate onward lending to the rural population for the development of microfinance in Nepal.
Responsible selling and marketing

Treating customers fairly has moved to the top of the agenda for many financial regulators around the globe. We welcome this development and will monitor and adopt new rules and regulations as they come into force in the markets in which we operate. Clarity around the segmentation of customers has been increased and we have developed products and services based on clearly identified needs in Consumer Banking. In Wholesale Banking, we place much emphasis on treating our clients fairly and ensuring that they are sold appropriate products for their needs. It is also central to our strategy to become the core bank for more clients.
Contributing to the real economy

The greatest impact we can make as an international financial institution to the societies in which we operate, is through our direct contribution to the real economy. By offering products and services that serve the needs of our customers we can assist individuals, corporates and other financial institutions to act as agents of economic activity.
Tackling financial crime

We tackle financial crime in three ways: we minimize the risk that our products and services can be used by money launderers; we deny suspect terrorists access to our banking systems; and we build robust controls against fraud and corruption.
Access to finance
Many live within communities and their inability to raise finance has a direct impact on economic activity. The Bank is committed to improve access to financial services to such population of Nepal by helping them bring in the realm of financial services.
Great place to work

We are truly a diverse organization with 125 nationalities represented among over 80,000 employees. We have on the ground presence in 70 markets and use our in-depth local knowledge and understanding of cultures to
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At a program organised to celebrate World Environment Day 2010
Bank is the sponsor of prestigious ProAm Surya Nepal Masters 2010 golf tournament
provide a unique service to our clients and customers. Our culture and values are a source of competitive advantage which is hard to replicate. They are a key ingredient in what we believe is a unique emotional connection between the Bank and our employees, and between employees and our customers. In short, they encourage customers and employees to join us and stay with us.
Community Investment
As an international financial institution, the greatest contribution we can make to the societies in which we operate is through our direct contribution to the real economy. We believe in promoting sustainable finance to contribute to the challenges and opportunities presented by social and environmental risk. SCB Nepal has constituted Standard Chartered Nepal Community Partnership Forum (SCNCPF) to undertake various community initiatives in Nepal. It is registered with District Administration Office and has received affiliation from Social Welfare Council. The two major initiatives of the Bank launched in 2003 under its Believing in Life campaign are Seeing is Believing and Living with HIV.
The Vitamin A Capsule (VAC) distribution program for 2010 in Kathmandu valley concluded successfully on 2-3 November 2009 and 19-20 April in April 2010. In line with our Seeing is Believing initiative, our staff members from different branches joined the teams from Helen Keller International/ Nepal (HKI/N) to raise awareness and provide support to community health volunteers during the distribution days after undergoing half a day training at HKI/N. Since 2007, Standard Chartered Banks Seeing is Believing program has worked with HKI/N, the Ministry of Health and Population, and the Nepal Technical Assistance Group to strengthen Vitamin A awareness and distribution systems in the Kathmandu Valley. VAC distribution program in Kathmandu valley is being partially funded by the SCB Group. World Sight Day was celebrated on 8th of October 2009. An agreement was signed between the Bank and Tilganga Eye Centre (TEC) to conduct 700 cataract surgeries to the poor and underprivileged people in different parts of the country in between October 2009July 2010. In addition, an exhibition cum sale of handicraft goods produced by visually impaired people was held at the Banks Head office. The Bank has been instrumental in supporting restoration of sight to ~4,900 people till date, by sponsoring eye camps and intraocular lenses for cataract surgeries in partnership with Tilganga Eye Centre (TEC) and other local hospitals. International Agency for the Prevention of Blindness (IAPB), a working partner of SCB Group under the Seeing is Believing program, signed an agreement on behalf of the Bank with Christian Blind Mission UK (CBM UK) in order for Eastern Regional Eye Care Programme (ERECP), Biratnagar to receive USD 1 million worth of financial assistance
Joining hands with Tilganga Eye Centre to provide eye care services to the poor & under priveleged
Seeing is Believing
Seeing is Believing is a public-private partnership that addresses avoidable blindness. Launched in 2003, the programme has gone from a simple staff led initiative to raise enough money to carry out 28,000 cataract operations to $37 million global funding initiative. In 2008, we launched A New Vision, our latest commitment to Seeing is Believing. We will invest a further $20 million to provide sustainable eye-care services for 20 million people in deprived communities in 20 cities.
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Patients after undergoing eye surgery at an eye camp held in Putali bazar, Syangja
SCB staff volunteering during the Vitamin A Capsule distribution program
Celebrating the festival of Teej with our friends at Karuna Bhawan
from the SCB Group. The assistance will be utilized towards construction, establishment of Eye Care Centres, Outreach Dept and Capacity building for local implementing partners. The project is progressing and SCB Nepal is closely monitoring developments of the project. Standard Chartered Bank Nepal Walkathon is an annual fund raising event through which the Bank provides a platform to engage cross sections of our community to raise funds. We have been conducting this event since 2003 and it continues to remain a signature event of the Bank. As a part of Wholesale Bank initiative, the Bank raised funds worth USD 3,400 through the sale of raffle tickets. The funds raised from the sale of raffle tickets will go to support the Banks Seeing is Believing initiative. Lazimpat Branch organized Football for Hope & Vision, a fund raising event for our Seeing is Believing initiative targeted at raising funds from our staff members by screening World Cup football match live .
by HIV and AIDS, with 6,800 new infections each day; 15-24-year-olds count for 45% of all new HIV infections. This pandemic has a devastating impact on many communities where we do business. Education is a key component of prevention strategies. We have been running a workplace HIV education programme, called Living with HIV since 1999, which currently involves a network of more than 1,150 HIV Champions in 50 countries globally. In Nepal, we have 30 HIV Champions who work to raise awareness of HIV and AIDS in the Bank and with external organizations. The Bank, in partnership with Nepal Bankers Association, rolled out its Living with HIV program to the senior officials of various Banks. The program was successfully conducted by our Banks HIV Champions. All our HIV Champions have been receiving refresher training through Train the Trainer refresher sessions held at different intervals. Like previous year, the Bank continued to support the under privileged women/ girls living with HIV /AIDs residing at Karuna Bhawan by sponsoring the cost of skill training program. The skill training program was
Living with HIV

AIDS remains a global killer with no cure or vaccine. Over 33 million people are infected
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Staff displaying placards on environmental awareness at the Head Office
The Bank supported Mahendra Shanti School, Balkot, Bhaktapur with 20 computers for computer education
imparted to these needy women/children so as to make them self reliant and to be capable of earning their livelihood. The Bank also continued to sponsor education and living expenses of two LwHIV children at Maiti Nepal for three years.
Focus on Youth, Health, Education and Environment

In line with our commitment to reiterate that the Bank is Here for good, we have undertaken various initiatives viz.: The Bank continues to support to the deserving students of Shree Mahendra Shanti High School, Balkot by providing incentives/scholarships through VISCOSS Nepal for the ninth consecutive year. The Bank also supported the school with 20 sets of computers to help them providing computer education to their students. To mark the World Environment Day, Tree Plantation Campaign was organized by the Bank on 5 June to mark the World Environment Day. The staff planted altogether ~500 tree saplings at the Institute of Engineering, Pulchowk Campus. The Bank was actively engaged in the International Cricket Council World Cup-
Div 5 matches held during 20th -27th February. The Bank is the co-sponsor of Nepal Cricket Team with branding rights. Successful conclusion of the Surya Nepal Masters Golf Tournament 2010 which was held from 21-24 April. The event is considered to be one of the biggest professional golf tournaments organized in Nepal and generated good level of visibility for the Brand like in the past. The Bank was the ProAm sponsor of this tournament. The Bank sponsored Vow 6th Top College Women Competition 2009 an event that highlights the achievements of young, talented and versatile women students of Nepal and imparts them a platform to excel in their career. This was done mainly with a view to drive our D & I agenda and to strengthen the Brand amongst the young and college going students in Nepal the Bank has been supporting the event for the last two years. As a part of CB Credit initiative, the Bank raised funds worth USD 6,178 through the sale of raffle tickets. The funds raised from the sale of raffle tickets are intended to be utilized towards the support of under privileged children.
Walking together for a noble cause-Walkathon 2009
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Leading with our sustainable business strategy
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Bhotekoshi Power Company Pvt. Ltd.
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Here for people, Here for good People Strength:
Recognizing the fact that an important part of sustaining business performance and driving productivity comes from engaging and motivating our employees, the Bank focused on employee engagement and proved successful in maintaining the engagement level in spite of a challenging market environment.
New business initiatives supported by transformation created opportunities for new people with diverse background to take up challenging and exciting roles in the Bank. There were a total of 81 new hires to start their career in the Bank, majority inducted through job advertisements posted in our SCB Career Webpage. Our people strength has increased by 7% making a total of 429 staff as of 16 July, 2010 as compared to 392 in 15 July, 2009. The current mix of male and female staff is 63:37. During the year under review 14 of our employees completed 20 years, 4 completed 15 years, 3 completed 10 years and 24 employees completed 5 years of dedicated services to the Bank. The staff members completing their long service periods were felicitated on different occasions by the CEO with certificates and awards. Right Start and Engagement programs for our 59 new joiners were conducted by the Bank at different dates. This was done with a view to motivate our new entrants to welcome them to work in a great place, live our culture and values and provide opportunity to build their career. Our people strategy and priorities have remained consistent over the last few years.
This high participation rate in Gallup Q12 Survey, which we use to measure engagement, reflects a strong commitment from employees to voice their opinions and demonstrates their trust in the process. Our overall score remained strong. We ensure that teams create `action plans and `follow through on their commitments. This involves regular conversations with managers with an objective to clarify what the expectations are thereby addressing the concerns and difficult questions, if any.
Learning Week:
Learning Week was successfully organized in conjunction with the SCB Regional Organization Learning Team targeting all levels of employees in August. Various learning interventions, such as video sessions on Even Eagles need a Push were attended by 191 staff members. 28 of our employees attended a session on Power of Vision.
SCB Drama Mania

A pan Bank drama competition SCB Drama Mania was organized by the Bank during the year under review. A total of eleven teams with staff representation from all Branches and Units of the Bank participated in this popular event. The event created a very high level of engagement, excitement and unravelled enormous amount of hidden talents within the Bank. Preliminary rounds were held during the months of July and August with the finals of the event held in Kathmandu on 7th of August. All performances received great appreciation of the eminent external judges and a house full of audience on both the occasions. This event was followed by the annual staff party.
Engagement:
Recognizing the fact that an important part of sustaining business performance and driving productivity comes from engaging and motivating our employees, the Bank focused on employee engagement and proved successful in maintaining the engagement level in spite of a challenging market environment.
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Volunteers on a blissful note during Clean Rani Pokhari Campaign under Employee Volunteering initiative
Honoring one of the women Gold medalists of 11th South Asian Games
External Extra Curricular Activities:

Nine staff members representing various departments and functions of the Bank participated in the coveted Soaltee Crowne Plaza Super Sixes Cricket Tournament 2009. Health and Safety Campaign week was celebrated in October with an objective to raise awareness and importance of these areas in order to provide our people with awareness, materials and basic tips and training. Ten staff members representing various departments participated in the Inter Bank Volleyball Tournament 2010 organized by the Nepal Rastra Bank (NRB) on the occasion of its 55th Anniversary.
Standard Chartered Nepal Walkathon 2009 A Walk for a brighter tomorrow is the Banks annual fund raising event conducted with an objective to raise funds for our various community initiatives, engage our staff and raise awareness around avoidable blindness, HIV/AIDS and environment. This event was organized successfully on 21st Nov 09 in which 90% of our staff in Kathmandu walked about 5 kms for this noble cause.
Induction Programs are designed for the new joiners to help them gain better understanding about the Bank.
Seeing is Believing:
About 20 staff volunteered 2 days each in October 09 and in April 10 to distribute Vitamin A capsules in conjunction with Helen Keller Intl and Nepal Technical Assistance Group. This is a SCB Group funded project in Nepal. In partnership with Tilganga Eye Centre (TEC) our staff members in Kathmandu volunteered at eye camps held on 5th and 12th of June at Bhaktapur and Sindhupalchowk. Further our staff in branches outside Kathmandu have also volunteered in various eye camps in their areas.
Employee Volunteering:
It is crucial for the Bank to have our employees a deep understanding of the local markets and community where we operate. Our people have been playing a key role in appreciating the challenges and demonstrating the required commitment while working in partnership with the communities to overcome these challenges. As ambassadors of our brand, we have been empowering our employees by providing them opportunities to participate in various community programs through Employee Volunteering (EV) and champion networks. This activity is at the heart of our unique culture and is the reason why many of our people choose to work for us. Employee Volunteering program is an internal initiative of the Bank whereby our staff members are encouraged to participate in community activities. As per the program, the staff are entitled for three days leave in addition to their annual leave to volunteer in the community related activities.
Living with HIV

Our HIV Champions have been constantly volunteering their time to conduct awareness and education sessions on HIV/AIDS on a bi-monthly basis to all new joiners in the Bank and also conducted similar sessions for other external organizations such as schools, colleges, Rotary Clubs, Rotaracts and manpower agencies.
World AIDS Day

World AIDS Day was celebrated with a focus on awareness and educational activities
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Roll out of Know Focus Care & Inspire(KFCI) workshop to staff
SCB Drama Mania: The employees showcased their hidden talent through this event.
Strong leadership is critical to our success. It is through our leaders that we motivate employees, drive performance and impart our unique culture.
through engagement of our staff. Awareness and education workshops were conducted by our staff HIV Champions for our trainees/ new-joiners. Similarly in association with Nepal Bankers Association (NBA), this workshop was rolled-out to the representatives of 15 local banks. Voluntary Counseling and Testing (VCT) was organized for our staff members in the Bank premises. Staff creatively decorated their branches/departments with symbols, posters raising awareness on HIV/AIDS and displayed placards with messages on HIV awareness.
World Environment Day

Various programs were organized to mark the World Environment Day (WED) in June. Our employees made a difference by volunteering to plant 400 saplings at the premises of Pulchowk Engineering College, Pulchowk. Other activities included display of placards at the Bank entrance, Car Pooling and several internal broadcasts on environment to build awareness around the theme.
In order to build leadership from within, we have a number of specific programmes targeted at our high potential employees at each level, which help us to grow and develop them into our future leaders by providing mentors, networking opportunities, career discussions and specific learning opportunities. We provide support and skills to the Managers to help manage their talent pools. Managing Talent in a Changing World - a full day program was conducted for 12 People Managers. Senior Managers participated in the Country Leadership Team meetings conducted in the year under review. Nine of our employees were given opportunities outside Nepal for short term assignments. During the year under review, two employees took up roles in SCB Group points in other countries. Our talents were given opportunities to interact with Senior visitors from the Group to learn about the Groups focus, priorities and leadership skills.
Building leadership capabilities

Strong leadership is critical to our success. It is through our leaders that we motivate employees, drive performance and impart our unique culture. We offer emerging leaders a series of programs and workshops to support their personal development, through one-on-one coaching; through our flagship Leadership Development Programs and our Great Managers workshops. An interactive session on KFCI (Know, Focus, Care and Inspire) Awareness was conducted for 42 managers and 19 of our Managers have completed a course on Leadership Essentials.
Training And Development Opportunities

We strongly believe in the need to Keep Learning, Keep Growing and with this belief Bank has been encouraging staff to actively involve in enhancing their knowledge and skills through various types of learning program be it through classroom programs, web based learning, on the job, self reading, assessments, attachment programs, sharing knowledge amidst each other. 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 organized during this fiscal year through which our staff were able to develop their personal,
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Senior Management in action during the Team Effectiveness session
Going Green: The Bank planted 5,000 trees at Bisankhunarayan in Lalitpur
professional and leadership skills. A total of 995 mandays were spent in learning and development programs during the year under review. Similarly, an impactful session on Team Effectiveness was conducted for the Banks management team.
from 45 days so that they can spend quality time with their newborn babies. Festival of women folks, Teej was celebrated by our female staff by celebrating it in-house and also by visiting the HIV affected women shelter homes and providing them with clothes and sweets. Bhai Tika was celebrated by women colleagues presenting a muffler as a token of friendship and appreciation to all male colleagues in the Bank.
Strengthening performance culture

To reinforce our performance culture, we have launched a new global online system for managing performance which allows all employees to set their annual objectives online. This reinforces the basics of good people management and ongoing performance coaching by ensuring that all employees have stretching job objectives in place and are clear of what is expected of them. The system captures all employee performance and values objectives online so that managers and employees can agree and review them at the click of a button throughout the year. It also provides a structured method to capture progress and feedback from colleagues and managers. This is a key factor in high employee engagement and helps reinforce our culture.
International Womens Day 2010

International Womens Day was celebrated by organizing various activities at the behest of D&I Council. Throughout this day, women wore beautiful scarves presented to them by their male colleagues. To make that special woman in their lives feel valued, staff expressed/dedicated their messages in poetry, quotes etc. An exhibition cum sale was organized in the Banks premises of products made by trafficked children and women rescued by an NGO- The Esther Benjamins Trust. HR Team visited one of the girls college and conducted an hour long interactive session sharing the importance of banking for women. 3 women who won medals at the SAF games were invited and felicitated at a Town Hall. We believe that our strong focus on engaging our people around our brand, further embedding our unique culture and values will continue to provide us competitive advantage.
We believe that our strong focus on engaging our people around our brand, further embedding our unique culture and values will continue to provide us competitive advantage.
Diversity and inclusion

Our focus on diversity and inclusion provides us with a unique competitive advantage and we work hard to maintain this. We constantly strive to improve the way we work so that employees can balance their work and personal commitments, maximize their potential and perform to their best. Keeping this in mind, maternity leave period for our female staff members has been revised to 90
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Leading the way in nurturing the economy
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Rolpa Carpet Industries
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Our approach to corporate governance
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.
A Synopsis
Following are the steps taken by the management for strengthening Corporate Governance in the organization. The Board of Standard Chartered Bank Nepal Limited 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 Risk Management Committee (RMC) 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.
Analysis
The 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 Companies Act, 2063 and Bank and Financial Institution Act, 2063 (the Corporate Governance Code). The directors confirm that: Throughout FY 2066/067, the Company complied with all the provisions of the Corporate Governance Code. The Company complied with the listing rules of Nepal Stock Exchange Limited. Throughout FY 2066/067, the Company was in compliance 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 Companies Act and that all the Directors of the Bank complied with the Code of Conduct throughout FY 2066/067.
The Board
As 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. Director, Mr. Arjun Bandhu Regmi, representing the public shareholders, had submitted his resignation from the post of Public Director citing personal reasons and the same was accepted by the Board at 264th Board meeting of the Bank
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Sharing a presentation with NRB on Risk Management Strategies & Investment Products
23rd AGM of the Bank in progress
Corporate governance
held on 5th July 2010. The Board is currently in the process of fulfilling the vacant post as per the provisions of the Companies Act. 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 budget, overseeing statutory and regulatory compliance and issues related to the Companys capital. The Board is collectively responsible for the success of the Bank. During the year under review, the Board held 14 board meetings of which 1 was held by circulation. 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 illustrates the number of Board and Audit Committee meetings held during the year under review: Audit Board Committee 14 4 12* 4* 9* 14 14 10 1 1 4 -
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, Banks financial condition, internal audit/ controls issues, compliance issues, etc. The Committee provides 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 16th July 2010 was as below: Ram Bahadur Aryal - Non Executive DirectorChairman Anurag Adlakha - Director - Member Sushen Jhingan, Director - Member Gopi Krishna Bhandari - Member Pradip Shrestha - 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 Companies Act.
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
Relations with Shareholders

The Board recognizes the importance of good communications with all the shareholders. There is regular information, both financial as well as non-financial, published by the Company for the shareholders information. The AGM is used as an opportunity to communicate with all the shareholders. The notice of the AGM, as required by the Companies Act, was sent to shareholders at least 21 days before the date of the meeting at their mailing addresses available in the Companys 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.
Number of meetings in FY 2066/067 Neeraj Swaroop Anurag Adlakha Sushen Jhingan* Sujit Mundul Ram Bahadur Aryal Arjun Bandhu Regmi
Internal Control
The Board is committed to managing risks and in 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.
Management Committee (Manco)

The Management Committee (Manco) represented by all Business and Function Heads of the Bank is the apex body that manages the Banks 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.
* Chairman Mr. Neeraj Swaroop attended Six Board meetings through his alternate Director Mr. Aniruddha Bose and Mr. Sushen Jhingan attended two Board meeting through his alternate Director Mr. Peter Warbanoff.
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The effectiveness of the Companys internal control system is reviewed regularly by the Board, its Committees, Management and Internal Audit. The Audit Committee has reviewed the effectiveness of the Banks system of internal control during the year and provided feedback 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 initiating immediate corrective measures.
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 levels and to provide assurance that standards and policies are being followed.
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.
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 is managed by Risk Management Committee, chaired by the CEO. This Committee, inter alia, reviews and monitors the Banks Assets Portfolio.
Operational Risk
Operational 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 risks 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. Banks existing operational risk management system has been further strengthened by creating a new role titled Country Operational Risk Officer with responsibility to ensure end to end operational risk management across businesses and functions in the country and to drive the governance process.
Risk Governance
Through its risk management framework the Bank seeks to efficiently manage credit, market and liquidity risks which arise directly through the Banks 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: Balancing risk and reward. Disciplined and focused risk taking to generate a return. Taking risk with appropriate authorities and where there is appropriate infrastructure and resource to manage them. Anticipating future risks and ensuring awareness of all risks. Efficient and effective risk management and control to gain competitive advantage. Ultimate responsibility of the effective management of risks 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 Risk Management Committee (RMC). 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
Market Risk
Market risk is the exposure created by potential changes/volatility in market prices and rates. The Bank is exposed to market risk arising principally from customer driven transactions. The objective of the Banks 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 relevant 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 borrowings where required. The Asset/Liability Management Committee (ALCO) under the chairmanship of CEO
Regulatory Risk
Regulatory risk includes the risk of noncompliance 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
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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 to effectively manage the legal risk. Legal risk is managed by the Legal Team.
Available sources of capital and capital raising options
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 disruptions.
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 Banks 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 risks. 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.
Health, Safety and Security

We 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 safety embedded working environment for both our staff and our customers. As part of Health & Safety corrective action plans, the Bank during the year has completed redesigning and renovating work areas in many parts of Head office building and other branches as well. We believe these actions will help our brand stand out from our competitors. Ultimately they underpin our business and will help us to grow stronger.
standards on money laundering, terrorist financing and fraud prevention. 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. Do not deal in shares when in possession of inside information: Staff must comply with the Groups Personal Account Dealing Policy to eliminate the risk of insider dealing. Treat customers fairly (TCF): Staff must follow the Groups seven TCF standards. Respect customer confidentiality: Staff should not disclose customer or Group data unless authorised to do so. Treat people fairly and with respect: All employees are entitled to a safe working environment that is free from discrimination, bullying and harassment. Responsibilities to our communities and regulators: Staff must be responsive to their communities and demonstrate exemplary governance at all times.
Capital Management
The Banks 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 Banks 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 shareholders 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 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: Regulatory Capital requirements Increase in the capital required due to projected business growth, market uncertainties and stresses.
Group Code of Conduct Summary

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. Reject bribery and corruption: Staff must not give or accept bribes nor engage in any form of corruption. 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. 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. Combatting financial crime: Staff must comply with laws, regulations and Group
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Leading the way by enhancing industries
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Dabur Nepal Pvt. Ltd.
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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 actions Un-audited first month result of the current financial year is as follows: (Rs.) Risk Assets: Deposits: Operating profit: Profit before bonus and taxes: Net profit for the period: 16.70 billion 33.95 billion 916 million 1013 million 645 million
Industrial or Professional Relations of the Company The 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 therefore Please refer the section Corporate Governance under Chairmans Statement. Main factors affecting the business Please refer the sections A Challenging Environment and Conclusion under Chairmans Statement and Credit Environment under CEO & Directors Report. Board of Directors Reaction to Remarks made, if any, in the Audit Report Please refer the sections A Challenging Environment and Conclusion under Chairmans Statement and Credit Environment under CEO & Directors Report. The amount recommended for distribution as dividend The Board has recommended paying Rs. 209,772,540 by way of bonus shares and Rs. 769,165,980 by way of dividend to the shareholders.
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 Directors Report.
32
Forfeited Shares There are no shares forfeited during the fiscal year. Transaction between the Bank and its Subsidiary 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 period The 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 financial year There 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 company NIL. Directors and office bearer have not involved in the shares transactions of the bank in FY 2066/67 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 year There are no such information furnished by the directors and any of their close relatives. Purchase of own Shares The 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 there of Please refer section Our approach to Corporate Governance under CEO & Directors Report. Particulars of the total management expenses of the previous financial year The management expenses of the financial year is Rs. 60,82,68,808.00 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 discharged by the Committee, and particulars of suggestions, if any, offered by the Committee. Please refer section Our approach to Corporate Governance under CEO & Directors Report. Remunerations, allowances and facilities: The Committee members and the Chairman have been paid meeting allowance of NPR
33
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/chairman eligible to get meeting allowance, for attending the Audit Committee meetings as Chairman and member of the Committee. Functions discharged by the Committee: Please refer section Our approach to Corporate Governance under CEO & Directors 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 involved Nil Remunerations, Allowances and Facilities to the Directors, the Managing Director, the Executive Chief and other Office-bearers Directors 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 Companys policy. Meeting allowances paid to the Directors are as follows: Ram Bahadur Aryal 140,000.00 Arjun Bandhu Regmi 100,000.00 Remunerations, allowances and bonus paid to the CEO in FY 066/067, who also was a Director of the Board, is Rs. 2,28,27,810.00
Dividends yet to Be Collected By Shareholders Total dividends yet to be collected by the shareholder amounts to Rs. 1,20,92,155.40. Detail of propertys buy or sell as per Clause 141 Nil. Detail of the transactions held between Associated Companies as per Clause 175 Nil. Any other matter to be mentioned in the Board of Directors report under Companies Act, 2063 Nil Schedule- 13 (Related to Sub Rule (1) of Rule 22 of Securities Registration and Issuance Regulation, 2065 Details to be incorporated in Annual Report Functions 1. Report of Board of Directors Covered in the previous texts of this annual report 2. Report of Auditor Included in the annual report 3. Audited Financial Detail Balance Sheet, Profit & Loss, cash flow detail and related schedules Included. 4. Detail relating to Legal Actions (a) If any case filed by Organized Institution in the quarter, On 2066.05.30 a case of Mandamus or any other required Order and on 2066.06.01 a case of Mandamus were filed against the Bank
(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 Banks shares are being determined by the open share market operations through 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. 6,500, Minimum- Rs. 3,479, Last- 3,680, and total transacted number of shares- 1,21,138 respectively. Poush end: Maximum- Rs. 3,770, Minimum- Rs. 3,251, Last- Rs. 3,305, and total transacted number of shares- 69,170 respectively. Chaitra end: Maximum- Rs. 3,333, Minimum- Rs. 2,799, Last- Rs. 2,895, total transacted number of shares- 76689 and transacted days-56 respectively.
34
Aashadh end: Maximum- Rs. 3,470, Minimum- Rs. 2,403, LastRs. 3,279, total transacted number of shares60,386 and transacted days-59 respectively. 6.Problem and Challenge The 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 Governance Incorporated in detail under the same chapter previously in this annual report.
35
Board of Directors
36
left to right Ram Bahadur Aryal, (Independent Director)

Ram Bahadur Aryal, Independent/ Professional Director is an MA in Economics with more than 38 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 13 years of banking experience in Strategic Sourcing and Corporate Real Estate Services, government and regulatory relations. He is presently working as a Resident Director - Public Affairs, India.
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 35 years of banking experience in SCB.
Anurag Adlakha, (Director)

Anurag Adlakha, Director of the Bank, is a Chartered Accountant by profession. He has over 23 years of professional career of which 18 years in financial services industry including HSBC India. He is presently working as the Chief Financial Officer, India and South Asia.
Neeraj Swaroop, (Chairman)

Neeraj Swaroop, the Chairman of SCB Nepal is an MBA and BE with more than 26 years of experience in the banking sector of which 18 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.
37
Management Team
38
sitting left to right

Anju ShArmA
Head - Consumer Banking
standing left to right

BinA rAnA
Head Human Resources
gopi BhAndAri
Senior Manager Credit
diwAkAr poudel
Head Corporate Affairs
Sujit mundul
Chief Executive Officer
rAkhi Singh
Chief Financial Officer
ShoBhA BAhAdur rAnA

Head Legal and Compliance & Assurance
AnurAg miShrA
Head Wholesale Banking
SudeSh khAling
Chief Information Officer
39
SCB Nepal Head Office, New Baneshwor
Lazimpat Branch
Lalitpur Branch
New Road Branch
ATM sites
Bhairahawa Siddhartha Nagar, Hotel Pawan Building Boudha, Kathmandu Boudha, Near Boudhanath stupa Dharan BP Koirala Institute of Health Sciences Itahari Chowk, Sunsari Bhu Pu Gorkha Departmental Store,
Branches
Bhairahawa
PO Box 14, Budha Chowk Colony Burmeli Tole, Bhairahawa, Siddhartha Nagar 977-71-524029, 524429 977-71-524039
Hetauda
Bank Road, Hetauda - 4 Makwanpur, Nepal Tel. 977-57-523019, 524972 Fax. 977-57-525695
Jawalakhel, Lalitpur Standard Chartered Bank Nepal Ltd Lakeside, Pokhara Hotel Snowland, Lakeside Lakeside, Pokhara Standard Chartered Bank Nepal Ltd Lazimpat, Kathmandu Standard Chartered Bank Nepal Limited Maharajgunj ATM Shubham Departmental Store Mangal Bazar, Patan Patan, Mangal Bazar Narayangarh, Bharatpur Standard Chartered Bank Nepal Limited Naya Baneshwor, Kathmandu Standard Chartered Bank Nepal Limited New Road, Pokhara New Road, Pokhara New Road, Kathmandu Bishal Bazar, New Road Pulchowk, Lalitpur Near UNDP Complex Pulchowk, Lalitpur UNDP Complex Thamel, Kathmandu Arcadia Building, Near Yin Yang Restaurant Thamel, Kathmandu Kathmandu Guest House World Trade Center, Tripureshwor World Trade Center, Tripureshwor New Road, Khichapokhari People's Plaza (Pako Wing) Durbar Marg Hotel De'l Annapurna
Lalitpur
Biratnagar
PO Box 201, Hanumandas Road Biratnagar - 8, Nepal Tel. 977-21-528983 Fax. 977-21-528982
PO Box 3990 Jawalakhel, Lalitpur, Nepal Tel. 977-1-5540544, 5540566 Fax. 977-1-5523266
Lazimpat
Birgunj
Adarsha Nagar-13, Birgunj, Nepal Tel. 977-51-529499, 529494 Fax. 977-51-529677
PO Box 3990 Lazimpat, Kathmandu, Nepal Tel. 977-1-4418456 Fax. 977-1- 4417428
Nepalgunj
Butwal
Milan Chowk, Butwal, Municipality - 11 Rupandehi, Nepal Tel. 977-71-546832, 549832 Fax. 977-71-546882
Surkhet Raod, Ward No 13 Nepalgunj Banke, Nepal Tel. 977-81-525514, 520022 Fax. 977-81-525515
Pokhara, Lakeside
Dharan
Panna Kamala Complex Ward No 7/100Ka, Buddha Marga Dharan - 7 Sunsari, Nepal Tel. 977-25-520505, 530980 Fax. 977-25-530981
PO Box 08 Lakeside Baidam Pokhara, Nepal Tel. 977-61-462102, 462805, 461746 Fax. 977-61-462318
Pokhara, New Road
Head Office
P.O.Box 08 New Road, Pokhara, Nepal Tel. 977-61-523875, 536230, 523876, 524297 Fax. 977-61- 531676
P.O.Box 3990 Naya Baneshwar, Kathmandu, Nepal Tel. 977-1-4782333, 4783753 Fax. 977-1- 4780762
Narayangarh
Lion's Chowk, Ward-4 Narayangarh,Bharatpur Tel. 977-56-571277, 571278 Fax. 977-56-571279
Extension Counters UN Counter Lalitpur BP Koirala Institute of Health Sciences Dharan British Gurkhas PPO Pokhara Manipal Counter - Pokhara
New Road
P.O.Box 3990 Peoples Plaza (Pako Wing), Pako Newroad, Kathmandu, Nepal Tel. 977-1-4157527,4157528 Fax. 977-1-415730
40
S. R. PANDEY & Co.

Chartered Accountants
Bhakti Thapa Sadak, Bijulibazar Tel.: 4491187, 4462367 P.O. Box No. 2343 Fax : 977-1-4462408 Kathmandu, Nepal E-mail : srpandey@wlink.com.np
Report of the Independent Auditors

To the Shareholders of Standard Chartered Bank Nepal Limited
We have audited the accompanying financial statements of Standard Chartered Bank Nepal Limited, which comprise the Balance Sheet as at Ashad 32, 2067 (July 16, 2010), and the profit and loss account, Statement of Changes in Equity, Cash Flow Statement and Notes to the Annual Account for the year then ended, Summary of significant Accounting Policies and other explanatory notes.
Management's Responsibility for the financial Statements

Management is responsible for the preparation and fair presentation of these financial Statements in accordance with Nepal Accounting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor's responsibility
Our 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 comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depended on our professional judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we considered the internal control relevant to the Bank's preparation and fair presentation of the financial statements in order to design audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an opinion on the Bank's internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements. We believe that our audit evidence we obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
On the basis of our examination, we would like to report that: I. We have obtained all the information and explanations, which were considered necessary for the purpose for our audit. Ii. In our opinion proper books of accounts as required by the law have been kept by the Bank. III. The Bank has accounted Interest Income from Loans & Advances on cash basis as per Nepal Rastra Bank's Directives which is not in line with Nepal Accounting Standard 7- Revenue Recognition that prescribes accrual basis of accounting. iv. The Balance Sheet, Profit and Loss Account, Cash Flow Statement and attached Schedules dealt with by this report are prepared as per Directives of Nepal Rastra Bank and are in agreement with the books of account maintained by the Bank. v. During our examination of the books of account of the Bank, we have not come across the cases where the Board of Directors or any member thereof or any representative or any office holder or any employee of the Bank has acted contrary to the provisions of law or caused loss or damage to the Bank. vi. The returns received from branches of the Bank were adequate for the purpose of our audit. vii. In our opinion, so far as appeared from our examination of the book, the Bank has maintained adequate capital funds and adequate provisions for possible impairment of assets in accordance with the directives of Nepal Rastra Bank; viii. The Bank has written-off loans as per the policy approved by Nepal Rastra Bank ix. The Bank has been functioning as per the directives of Nepal Rastra Bank. x. The Bank has not acted in a manner to jeopardise the interest and security of the depositors and shareholders xi. The operations of the Bank were within its jurisdiction, and xii. We have not come across any fraudulence in the accounts. In our opinion, except for matter referred to in para 4(iii) above, the accompanying financial statements give a true and fair view, in all material respects the financial position of Standard Chartered Bank Nepal Limited as at Ashad 32, 2067 (16 July, 2010) and of the results of its financial performance and its cash flows for the year then ended in accordance with Nepal Accounting Standards and comply with Company Act 2063, Banks and Financial Institutions Act, 2063 and Directives of Nepal Rastra Bank.
S. R. Pandey & Co. Chartered Accountants Place: Kathmandu Date: September 2, 2010 Sudarshan Raj Pandey, FCA Partner
Balance Sheet
As at 16 July, 2010 (32 Ashad 2067)
Rs. Capital & Liabilities 1. Share Capital 2. Reserves and Funds 3. Debentures and Bonds 4. Loans and Borrowings 5. Deposit Liability 6. Bills Payables 7. Proposed Dividend 8. Income Tax Liability 9. Other Liabilities Total Liabilities Schedule 4.1 4.2 4.3 4.4 4.5 4.6 This Year 1,608,256,140 1,761,453,304 35,182,721,454 89,219,655 769,165,980 802,503,393 40,213,319,926
Rs. Previous Year 1,397,949,600 1,654,520,131 300,000,000 35,350,823,711 72,941,748 465,983,200 4,262,601 820,089,602 40,066,570,593
4.7
Rs. Assets 1. Cash Balance 2. Balance with Nepal Rastra Bank 3. Balance with Banks/Financial Institutions 4. Money at Call and Short Notice 5. Investments 6. Loans, Advances and Bills Purchased 7. Fixed Assets 8. Non-Banking Assets 9. Other Assets Total Assets Contingent Liabilities Declaration of Directors Capital Adequacy Table Statement of Credit Risk Statement of Eligible Credit Risk Mitigation Statement of Operational Risk Statement of Market Risk Key Indicators Significant Accounting Policies Notes to Accounts Statement of Loan Availed by Promoter Shareholders from Other Bank and FIs by Pledging Their Shares Comparision of Unaudited and Audited Financial Statements Schedule 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 This Year 509,031,174 819,508,706 600,766,640 1,669,460,000 19,847,511,025 15,956,955,268 118,539,974 691,547,139 40,213,319,926 Schedule 4.17 Schedule 4.29 Schedule 4.30 (Ka 1) Schedule 4.30 (Kha) Schedule 4.30 (Ga) Schedule 4.30 (Gha) Schedule 4.30 (Nga) Schedule 4.31 Schedule 4.32 Schedule 4.33 Schedule 4.34 Schedule 4.35
Rs. Previous Year 463,345,996 1,851,132,637 822,684,902 2,055,549,000 20,236,121,082 13,679,756,990 137,292,540 820,687,446 40,066,570,593
Schedules 4.1 to 4.17 form integral part of the Balance Sheet Rakhi Singh Chief Financial Officer Sujit Mundul CEO & Director Sushen Jhingan Director As per our report of even date Sudarshan Raj Pandey Partner for and on behalf of S.R. Pandey & Co. Chartered Accountants
Ram Bahadur Aryal Director Kathmandu Date :2nd September, 2010
42
Profit and Loss Account

for the period 16 July 2009 to 16 July 2010 (1 Shrawan 2066 to 32 Ashadh 2067)
Rs. Particulars 1. Interest Income 2. Interest Expenses Net Interest Income 3. Commission and Discount 4. Other Operating Incomes 5. Exchange Fluctuation Income Total Operating Income 6. Staff Expenses 7. Other Operating Expenses 8. Exchange Fluctuation Loss Operating Profit Before Provision for Possible Loss 9. Provision for Possible Losses Operating Profit 10. Non-Operating Income/ (Loss) 11. Provision for Possible Loss Written Back Profit from Ordinary Activities 12. Income/(Expenses) from Extra Ordinary Activities Net Profit after considering all Activities 13. Provision for Staff Bonus 14. Provision for Income Tax Current Year's Tax Provision Upto Previous Year's Tax Provision Current Year's Deferred Tax Income/Expenses Net Profit/Loss Schedules 4.18 to 4.28 form integral part of this Profit and Loss Account Rakhi Singh Chief Financial Officer Sujit Mundul CEO & Director Sushen Jhingan Director As per our report of even date Schedule 4.18 4.19 4.20 4.21 4.22 4.23 4.24 4.22 4.25 4.26 4.27 4.28 This Year 2,042,109,322 575,740,660 1,466,368,662 338,298,109 34,479,473 458,564,032 2,297,710,276 312,964,286 295,304,522 1,689,441,468 76,974,254 1,612,467,214 36,268,280 58,292,849 1,707,028,343 (17,024,392) 1,690,003,951 153,636,723 450,495,534 465,685,661 22,675 (15,212,802) 1,085,871,694
Rs. Previous Year 1,887,221,257 543,786,600 1,343,434,657 288,031,446 33,191,251 427,468,313 2,092,125,667 253,055,504 276,326,674 1,562,743,489 56,634,631 1,506,108,858 22,098,317 101,075,167 1,629,282,342 (15,356,059) 1,613,926,283 146,720,571 442,091,176 443,119,138 (1,027,962) 1,025,114,536
Sudarshan Raj Pandey Partner for and on behalf of S.R. Pandey & Co. Chartered Accountants
43
Profit and Loss Appropriation Account

Rs. Particulars Income 1. Accumulated Profit up to Previous Year 2. This Year's Profit 3. Exchange Fluctuation Fund Total Expenses 1. Accumulated Loss up to Previous Year 2. Current Year's Loss 3. General Reserve Fund 4. Contingent Reserve 5. Institutional Development Fund 6. Dividend Equalisation Fund 7. Employees Related Reserves 8. Proposed Dividend 9. Proposed Issue of Bonus Shares 10. Special Reserve Fund 11. Exchange Fluctuation Fund 12. Capital Redemption Reserve Fund 13. Capital Adjustment Fund 14. Deferred Tax Reserve 15. Investment Adjustment Reserve Total Accumulated Profit/(Loss) Schedule This Year
Rs. Previous Year
239,494,642 1,085,871,694 1,325,366,336
383,287,577 1,025,114,536 1,408,402,113
217,174,339 769,165,980 209,772,540 21,381,278 76,281,207 1,626,300 1,295,401,644 29,964,692
205,022,907 465,983,200 465,983,200 31,918,164 1,168,907,471 239,494,642
Rakhi Singh Chief Financial Officer
Sujit Mundul CEO & Director
Sushen Jhingan Director
As per our report of even date Sudarshan Raj Pandey Partner for and on behalf of S.R. Pandey & Co. Chartered Accountants
44
Statement of Changes in Equity

Rs. Accumulated Profit General Reserve Capital Reserve Fund Share Premium Exchange Deferred Tax Fluctuation Reserve Fund Other Reserve & Fund Total
Financial Year 2066/67 (FY 2009/10)
Particulars
Share Capital
Opening Balance as at 16 July 2009 Adjustments Restated Balance as at 16 July 2009 Surplus/ Deficit on revaluation of properties Surplus/ Deficit on revaluation of investments Net Profit for the Period Transfer to General Reserve Proposed Dividend Issue of Bonus Share Proposed Issue of Bonus Shares Issue of Share Capital Exchange Fluctuation Fund Deferred Tax Reserve Investment Adjustment Reserve 239,494,642 239,494,642 1,085,871,694 (217,174,339) (769,165,980) (209,772,540) (21,381,278) (76,281,207) (1,626,300) 29,964,692 1,412,491,048 241,090,057 1,195,316,709 1,195,316,709 217,174,339 219,708,779 219,708,779 21,381,278 -
931,966,400 931,966,400 466,517,200 209,772,540 -
76,281,207
1,626,300 76,281,207 1,626,300
2,586,486,530 2,586,486,530 1,085,871,694 (769,165,980) 466,517,200 -
Closing Balance as at 16 July 2010
1,608,256,140
3,369,709,444
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Cash Flow Statement

Particulars (A) Cash Flow from Operating Activities 1. Cash Receipts 1.1 Interest Income 1.2 Commission and Discount Income 1.3 Income from Foreign Exchange Transaction 1.4 Recovery of Loan Written off 1.5 Other Income 2. Cash Payments 2.1 Interest Expenses 2.2 Staff Expenses 2.3 Office Operating Expenses 2.4 Income tax Payment 2.5 Other Expenses Cash Flow before Changes in Working Capital Decrease/ (Increase) of Current Assets 1. Decrease / (Increase) in Money at Call and Short Notice 2. Decrease / (Increase) in Short-term Investment 3. Decrease / (Increase) in Loan and Bills Purchase 4. Decrease / (Increase) in Other Assets (Decrease) /Increase of Current Liabilities 1. (Decrease) / Increase in Deposits 2. (Decrease) / Increase in Certificate of Deposits 3. (Decrease) / Increase in Short Term Borrowings 4. (Decrease) / Increase in Other Liabilities (B) Cash Flow from Investment Activities 1. Decrease/ (Increase) in Long term Investment 2. Decrease/ (Increase) in Fixed assets 3. Interest Income from Long Term Investment 4. Dividend Income 5. Others (C) Cash Flow from Financing Activities 1. Increase/ (Decrease) in Long term Borrowings (Bond, Debenture etc) 2. Increase / (Decrease) in Share Capital 3. Increase / (Decrease) in Other Liability 4. Increase / (Decrease) in Refinance /Facilities received from Nepal Rastra Bank (D) Income/Expense from change in exchange rate in Cash and Bank Balance (E) Current year's cash flow from all activities (F) Opening Cash and Bank Balance (G) Closing Cash and Bank Balance
Rs. This Year (2,249,622,421) 2,359,799,519 1,605,148,047 338,094,639 373,038,919 9,038,441 34,479,473 2,076,472,587 535,333,144 306,659,170 286,794,401 481,702,672 465,983,200 283,326,932 (1,896,058,135) 386,089,000 (2,321,942,516) 39,795,381 (636,891,218) (168,102,257) (283,722,093) (185,066,868) 955,706,293 388,610,057 19,845,714 541,722,472 5,528,050 534,000 534,000 85,525,113
Rs. Previous Year 6,948,938,465 2,128,177,260 1,480,241,128 238,616,592 352,358,259 23,770,030 33,191,251 1,963,910,721 521,840,234 254,218,116 250,890,193 440,908,086 496,054,092 164,266,539 754,573,650 141,988,600 44,154,587 568,430,463 6,030,098,276 5,606,824,917 285,544,727 137,728,632 (5,990,481,198) (6,333,302,071) (24,719,699) 365,061,547 2,479,025 790,400 790,400 127,672,654
(1,207,857,015) 3,137,163,535 1,929,306,520
1,086,920,321 2,050,243,214 3,137,163,535
Rakhi Singh Chief Financial Officer
Sujit Mundul CEO & Director
Sushen Jhingan Director
As per our report of even date Sudarshan Raj Pandey Partner for and on behalf of S.R. Pandey & Co. Chartered Accountants
46
Schedule 4.1: Share Capital and Ownership

As at 16 July, 2010 (32 Ashad 2067)
Particulars 1. Share Capital
Rs. This Year
Rs. Previous Year
1.1 Authorised Capital A) 20,000,000 Ordinary Shares of Rs. 100 each B) Non-Redeemable Preference Shares of Rs. ........ each C) Redeemable Preference Shares of Rs. ......... each 1.2 Issued Capital A) 13,984,836 Ordinary Shares of Rs. 100 each B) Non-Redeemable Preference Shares of Rs. ...... each C) Redeemable Preference Shares of Rs. ......... each
2,000,000,000 2,000,000,000 1,398,483,600 1,398,483,600 1,398,483,600 1,398,483,600 209,772,540 -
1,000,000,000 1,000,000,000
1,000,000,000 1,000,000,000
1.3 Paid Up Capital A) 13,984,836 Ordinary Shares of Rs. 100 each B) Non-Redeemable Preference Shares of Rs. ........ each C) Redeemable Preference Shares of Rs. ........ each 1.4 1.5 Proposed Bonus Share Calls in Advance
931,966,400 931,966,400
465,983,200 -
Share Ownership Details % 1. 1.1 1.2 1.3 1.4 1.5 1.6 2. Total Domestic Ownership Government of Nepal "Ka" Class Licensed Institutions Other Licensed Institutions Other Entities Individuals Others Foreign Ownership 25.00 1.12 23.79 0.09 75.00 100.00
This Year Share Capital 349,620,900 15,645,600 332,711,700 1,263,600 1,048,862,700 1,398,483,600
% 25.00 0.84 24.07 0.09 75.00 100.00
Rs. Previous Year Share Capital 232,991,600 7,816,100 224,343,700 831,800 698,974,800 931,966,400
Details of the Shareholders holding 0.5 % or more of the Total Shares
Sn 1 2 3 4 5 6 7 8 9
Name of the Shareholders
Number of Shares Held 6,992,418 3,496,209 74,250 74,250 74,250 74,250 74,250 74,250 71,063
% of Total Shares 50.00 25.00 0.53 0.53 0.53 0.53 0.53 0.53 0.51
Rs. Amount 699,241,800 349,620,900 7,425,000 7,425,000 7,425,000 7,425,000 7,425,000 7,425,000 7,106,300
Standard Chartered Grindlays Ltd, Sydney, Australia Standard Chartered Bank, London, UK Priyanka Agrawal Avinash Agrawal Komal Agrawal Sashi Agrawal Shankar Lal Agrawal Pasupati Soap Industries Arjun Bandhu Regmi
47
Financial Statements and Notes to Accounts continued
Schedule 4.2: Reserves and Funds

As at 16 July, 2010 (32 Ashad 2067)
Particulars 1. 2. 3. 4. 5. General Reserve Fund Capital Reserve Fund Capital Redemption Reserve Capital Adjustment Fund Other Reserves and Funds 5.1. Contingent Reserve 5.2. Institutional Development fund 5.3. Dividend Equalisation Fund 5.4. Special Reserve Fund 5.5. Assets Revaluation Reserve 5.6. Deferred Tax Reserve 5.7. Other Free Reserves 5.8. Other Reserves 6. Accumulated Profit/ (Loss) 7. Exchange Fluctuation Fund
Rs. This Year 1,412,491,048 77,907,507 76,281,207 1,626,300 29,964,692 241,090,057 1,761,453,304
Rs. Previous Year 1,195,316,709 239,494,642 219,708,780 1,654,520,131
Total
Schedule 4.3: Debentures and Bonds

As at 16 July, 2010 (32 Ashad 2067)
Particulars 1... Percent Bond/Debentures of Rseach issued on .and Matured on ... (Outstanding balance of Redemption Reserves Rs.. 2. ... Percent Bond/Debentures of Rseach issued on.and Matured on... (Outstanding balance of Redemption Reserves Rs.. Total ( 1+2 )
Rs. This Year
Rs. Previous Year
Schedule 4.4 : Loans and Borrowings

As at 16 July, 2010 (32 Ashad 2067)
Particulars A. 1. 2. 3. 4. 5. 6. Local Government of Nepal Nepal Rastra Bank Repo Liabilities Inter Bank and Financial Institution Other Institutions Others
Rs. This Year
Rs. Previous Year
300,000,000 300,000,000
Total A B. Foreign 1. Banks 2. Others Total B Total (A+B)
300,000,000
48
Schedule 4.5 : Deposit Accounts

As at 16 July, 2010 (32 Ashad 2067)
Particulars 1. Non-Interest Bearing Accounts A. CURRENT DEPOSITS 1. Local Currency 1.1 Government of Nepal 1.2 "Ka" Class Licensed Institutions 1.3 Other Licensed Institutions 1.4 Other Organised Institutions 1.5 Individuals 1.6 Others 2 Foreign Currency 2.1 Government of Nepal 2.2 "Ka" Class Licensed Institutions 2.3 Other Licensed Institutions 2.4 Other Organised Institutions 2.5 Individuals 2.6 Others B. MARGIN DEPOSITS 1. Employees Guarantee 2. Guarantee Margin 3. Letter of Credit Margin 4. Others 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 Total of Non-Interest Bearing Accounts
Rs. This Year
Rs. Previous Year
9,763,154,975 4,942,469,903 80,263,353 57,493,642 6,025,650 4,315,182,370 376,773,123 106,731,765 4,820,685,072 37,030,564 4,413,293,073 217,557,235 152,804,200 251,242,284 85,440,813 73,810,553 91,990,918 10,014,397,259
5,752,096,762 3,361,549,217 92,299,158 137,475,948 21,349,191 2,678,423,732 385,743,314 46,257,874 2,390,547,545 25,501,017 2,099,618,495 219,974,380 45,453,653 377,959,072 114,647,316 118,436,904 144,874,852 6,130,055,834
49
Schedule 4.5: Deposit Accounts (Continued)

As at 16 July, 2010 (32 Ashad 2067)
Particulars 2. Interest Bearing Accounts A. SAVING DEPOSITS 1. Local Currency 1.1 Organised Institutions 1.2 Individuals 1.3 Others 2. Foreign Currency 2.1 Organised Institutions 2.2 Individuals 2.3 Others B. FIXED DEPOSITS 1. Local Currency 1.1 Organised Institutions 1.2 Individuals 1.3 Others 2. Foreign Currency 2.1 Organised Institutions 2.2 Individuals 2.3 Others C. CALL DEPOSITS 1. Local Currency 1.1 "Ka" Class Licensed Institutions 1.2 Other Licensed Institutions 1.3 Other Organised Institutions 1.4 Individuals 1.5 Others 2. Foreign Currency 2.1 "Ka" Class Licensed Institutions 2.2 Other Licensed Institutions 2.3 Other Organised Institutions 2.4 Individuals 2.5 Others D. CERTIFICATE OF DEPOSITS 1. Organised Institutions 2. Individuals 3. Others
Rs. This Year
Rs. Previous Year
12,430,009,193 10,561,340,752 12,458,709 10,548,556,916 325,127 1,868,668,441 10,561,441 1,851,694,718 6,412,282 9,175,070,477 3,603,054,870 1,808,480,190 1,793,174,680 1,400,000 5,572,015,607 5,471,811,962 100,203,645 3,563,244,525 3,552,366,688 200,379,894 2,338,145,668 1,012,677,736 1,163,390 10,877,837 10,877,837 -
19,146,003,630 15,347,532,227 1,978,635,144 13,266,664,995 102,232,088 3,798,471,403 1,953,787,903 1,809,147,447 35,536,053 7,101,697,629 791,923,115 27,340,793 105,071,746 659,510,576 6,309,774,514 5,990,331,061 319,443,453 2,973,066,618 2,884,066,877 257,491 2,451,950,342 431,859,044 88,999,741 88,999,741 -
Total of Interest Bearing Accounts Total Deposits (1+2)
25,168,324,195 35,182,721,454
29,220,767,877 35,350,823,711
50
Schedule 4.6: Bills Payable

As at 16 July, 2010 (32 Ashad 2067)
Particulars 1. Local Currency 2. Foreign Currency Total
Rs. This Year 36,606,241 52,613,414 89,219,655
Rs. Previous Year 60,773,754 12,167,994 72,941,748
Schedule 4.7 : Other Liabilities

As at 16 July, 2010 (32 Ashad 2067)
Particulars 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Pension/Gratuity Fund Employees Provident Fund Employees Welfare Fund Provision for Staff Bonus Interest Payable on Deposits Interest Payable on Borrowings Unearned Discount and Commission Sundry Creditors Branch Adjustment Account Deferred Tax Liability Dividend Payable Others a) Audit Fees Payable b) Others
Rs. This Year 67,911,639 153,636,723 94,906,385 20,464,057 235,630,737 12,092,156 217,861,696 557,500 217,304,196 802,503,393
Rs. Previous Year 61,606,523 146,720,571 54,442,157 56,712 30,718,324 277,233,810 10,312,848 238,998,657 446,000 238,552,657 820,089,602
Total
Schedule 4.8: Cash Balance

As at 16 July, 2010 (32 Ashad 2067)
Particulars 1. 2. Local Currency (including coins) Foreign Currency
Rs. This Year 471,554,724 37,476,450 509,031,174
Rs. Previous Year 416,767,782 46,578,214 463,345,996
Total
51
Schedule 4.9: Balance with Nepal Rastra Bank

As at 16 July, 2010 (32 Ashad 2067)
Particulars 1. Nepal Rastra Bank a) Current A/C b) Other A/C
Local Currency Rs. 677,607,151 677,607,151 -
INR -
Foreign Currency Rs. Convertible Foreign Currency 141,901,555 141,901,555 -
Total 141,901,555 141,901,555 -
Grand Total Rs. 819,508,706 819,508,706 -
Previous Year Rs. 1,851,132,637 1,851,132,637 -
Schedule 4.10: Balance with Banks / Financial Institutions

As at 16 July, 2010 (32 Ashad 2067)
Particulars
Local Currency Rs.
INR
Foreign Currency (Rs.) Convertible Foreign Currency 410,540,848 410,540,848 410,540,848
Total
Grand Total Rs.
Previous Year Rs.
1.
2.
Local Licensed Institutions a. Current Account b. Other Account Foreign Banks a. Current Account b. Other Account
28,647,994 28,647,994 28,647,994
161,577,798 161,577,798 161,577,798
572,118,646 572,118,646 572,118,646
28,647,994 28,647,994 572,118,646 572,118,646 600,766,640
51,292,893 51,292,893 771,392,009 771,392,009 822,684,902
Total
Note: Balance as per the confirmation and statement received from respective banks is NPR 948,671,072 and the differences have been reconciled.
52
Schedule 4.11: Money at Call and Short Notice

As at 16 July, 2010 (32 Ashad 2067)
Particulars 1. 2. Local Currency Foreign Currency
Rs. This Year 1,669,460,000 1,669,460,000
Rs. Previous Year 2,055,549,000 2,055,549,000
Total
Schedule 4.12: Investments

As at 16 July, 2010 (32 Ashad 2067)
Particulars Trading 1. Government of Nepal Treasury Bills 2. Government of Nepal Saving Bonds 3. Government of Nepal Others Securities (Special Bond) 4. Nepal Rastra Bank Bonds 5. Foreign Securities 6. Local Licensed Institutions 7. Foreign Banks 8. Corporate Shares 9. Corporate Debenture and Bonds 10. Other Investments Total Investments Provision Net Investments -
Purpose Other 7,878,573,686 648,150,000 4,795,839 380,000,000 10,844,948,000 106,925,500 8,493,000 19,871,886,025 24,375,000 19,847,511,025
This Year Rs. 7,878,573,686 648,150,000 4,795,839 380,000,000 10,844,948,000 106,925,500 8,493,000 19,871,886,025 24,375,000 19,847,511,025
Previous Year Rs. 9,050,988,434 917,150,000 30,615,124 250,613,524 9,895,710,500 106,925,500 8,493,000 20,260,496,082 24,375,000 20,236,121,082
53
Schedule 4.12(A): Investment in Shares, Debentures and Bonds

As at 16 July, 2010 (32 Ashad 2067)
Particulars
Cost Price Rs.
As per Market Price Rs. NA (Note - 3)
Provision Amount Rs. 24,375,000 -
This Year Rs. 106,925,500 3,000,000
Previous Year Rs. 106,925,500 3,000,000
1. Investment in Shares 106,925,500 1.1 Purwanchal Grameen 3,000,000 Bikash Bank Ltd. 30,000 Ordinary Shares of Rs.100 each fully paid up 1.2 Sudur Paschimanchal Grameen Bikash Bank Ltd. 30,000 Ordinary Shares of Rs.100 each fully paid up 1.3 Rural Micro Finance Development Centre Ltd. 521,900 Ordinary Shares of Rs.100 each fully paid up 1.4 Credit Information Centre Ltd. 14,120 Ordinary Shares of Rs.100 each fully paid up (including 1,765 bonus shares fully paid up) 1.5 Taragaon Regency Hotels Ltd. 475,000 Ordinary Shares of Rs. 100 each fully paid up 2. Investment in Debentures and Bonds 2.1 Nepal Electricity Authority 7.75%; 8,493 bonds of Rs. 1,000 each fully paid up, interest payable semiannually, maturity on 27th March 2013 Total Investment 3. Provision for Loss 3.1 Upto Previous year 3.2 Increase/Decrease this Year Total Provision Net Investments 3,000,000
NA (Note - 3)
3,000,000
3,000,000
3,000,000
52,190,000
NA (Note - 3)
52,190,000
52,190,000
1,235,500
NA (Note - 3)
1,235,500
1,235,500
47,500,000
(Note - 4)
21,375,000
47,500,000
47,500,000
8,493,000 8,493,000
NA (Note - 3)
8,493,000 8,493,000
8,493,000 8,493,000
115,418,500 24,375,000 24,375,000 91,043,500
24,375,000
115,418,500
115,418,500 24,375,000 24,375,000 91,043,500
NOTE: 1. The following companies have not distributed dividends in the last three years : 1.1 Sudur Paschimanchal Grameen Bikash Bank Ltd. 1.2 Taragaon Regency Hotels Ltd. 2. Out of the total investment above, Nepal Electricity Authority Bond and shares of Purwanchal Grameen Bikash Bank Ltd. and Taragaon Regency Hotels Ltd. 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. 4. Last trading price of Taragaon Regency Hotels Ltd. was Rs.78/share, but due to lack of sufficient volume and frequency, provision as per previous year is being maintained.
54
Schedule 4.12.1 : Business Investment (Held For Trading)

As at 16 July, 2010 (32 Ashad 2067)
Particulars
Cost Price Previous Market Current Market This Year Price (a) Price (b) Profit/(Loss) Rs. Rs. Rs (b-a) Rs.
Previous Year) Remarks Profit/(Loss Rs.
1. Nepal Government's Treasury Bills 2. Nepal Government's Saving Bonds 3. Nepal Government's Other Securities 4. Nepal Rastra Bank Bond 5. Foreign Securites 6. Shares of Domestic Licensed Institution 7. Debenture and Bond Domestic Licensed Institution 8. Shares, Debentures and Bond of Domestic Entity 9. Foreign Bank Investment (Placement) 10. Interbank Lending 11. Other Investments Total Investment -
Schedule 4.12.2 :Investment Held To Maturity

As at 16 July, 2010 (32 Ashad 2067)
Particulars
Cost Price Impairment Impairment (a) till Date (b) this year (c) Rs. Rs. Rs. -
This Year Profit/(Loss) (a-b-c) Rs. 7,878,573,686 648,150,000 4,795,839 8,493,000 10,844,948,000 380,000,000
Previous Year Remarks Profit/(Loss) Rs. 9,050,988,434 917,150,000 30,615,124 8,493,000 9,895,710,500 250,613,524
1. Nepal Government's Treasury Bills 7,878,573,686 2. Nepal Government's Saving Bonds 648,150,000 3. Nepal Government's Other Securities 4,795,839 4. Nepal Rastra Bank Bond 5. Foreign Securites 6. Shares of Domestic Licensed Institution 7. Debenture and Bond Domestic Licensed Institution 8. Shares, Debentures and Bond of Domestic Entity 8,493,000 9. Foreign Bank Investment (Placement) 10,844,948,000 10. Other Investments 380,000,000 Total 19,764,960,525
19,764,960,525 20,153,570,582
55
Schedule 4.12.3: Business Investment (Available For Sale)

As at 16 July, 2010 (32 Ashad 2067)
Particulars
Cost Price
Rs. 1. Nepal Government's Treasury Bills 2. Nepal Government's Saving Bonds 3. Nepal Government's Other Securities 4. Nepal Rastra Bank Bond 5. Foreign Securites 6. Shares of Domestic Licensed Institution 7. Debenture and Bond Domestic Licensed Institution 8. Shares, Debentures and Bond of Domestic Entity 9. Foreign Bank Investment (Placement) 10. Other Investments Total
Previous Market Price (a) Rs.
Current Market Price (b) Rs.
This Year fund adj (b-a) Rs.
Previous Year Profit/(Loss) Rs.
Remarks
58,190,000 48,735,500
106,925,500
In the absence of sufficient information and/or listing in NEPSE , the market value of the investments have not been shown.
56
Schedule 4.13: Classification of Loans, Advances and Bills Purchased and Provisioning
Loans & Advances Bills Purchased and Discounted
As at 16 July, 2010 (32 Ashad 2067)
Particulars Other Rs. 58,955,796 185,462,873 58,955,796 185,462,873 Foreign Rs. Total Rs. Domestic Rs. Foreign Rs. Total Rs. This Year Rs.
Domestic Priority Sector Insured Uninsured Rs. Rs.
Previous Year Rs.
1. Performing Loans 1.1 Pass 1.2 Pass Loans Restructured
455,390,258 455,390,258 -
15,332,371,138 15,332,371,138 -
46,266,966 46,266,966 -
15,834,028,362 15,834,028,362 -
244,418,669 16,078,447,031 13,789,661,419 244,418,669 16,078,447,031 13,789,661,419 -
4,553,903 532,661 5,086,564 462,670 589,558 1,854,629 153,323,711 12,735,038 1,087,593 44,487,727 211,634,069 462,670 158,340,284 12,735,038 1,087,593 45,020,388 217,183,303 589,558 1,854,629
532,661 532,661 455,922,919 2,444,187 2,444,187
97,603,066 50,940,153 2,175,186 44,487,727 15,429,974,204
46,266,966
98,135,727 50,940,153 2,175,186 45,020,388 15,932,164,089
58,955,796 185,462,873
98,135,727 91,041,656 50,940,153 34,422,042 2,175,186 11,851,308 45,020,388 44,768,306 244,418,669 16,176,582,758 13,880,703,075 160,784,471 12,735,038 1,087,593 45,020,388 219,627,490 137,896,614 8,605,511 9,675,654 44,768,306 200,946,085
2. Non-Performing Loans 2.1 Substandard 2.2 Doubtful 2.3 Loss (A) Total Loans 3. Loan Loss Provision 3.1 Pass 3.2 Rescheduled/ Restructured 3.3 Substandard 3.4 Doubtful 3.5 Loss (B) Total Provision
4. Provision up to Previous Year 4,353,498 7,500,000 532,661 9 6 462,667 462,661 45,804,296 12,386,159 10,070,065 2,770,470 (7,299,595) 450,836,355 15,218,340,135 30,695,267 73,200,697 42,505,430 180,938,802 193,324,970 52,575,501 76,433,834 23,858,333 15,714,980,786 125,921,992 8,605,511 2,175,654 44,235,645 9 130,275,499 8,605,511 9,675,654 44,768,306 49,138 49,138 540,420 540,420 7,571,977 7,571,977 5,717,348 7,621,115 7,621,115 5,717,348 540,420 (5,176,928) 58,366,238 183,608,244 137,896,614 8,605,511 9,675,654 44,768,306 138,352,640 6,226,536 45,006,193 55,801,251 245,386,620 101,075,167 76,974,254 18,681,405 56,634,631 (44,440,535) 241,974,482 15,956,955,268 13,679,756,990
4.1 Pass 4.2 Rescheduled/Restructured loan 4.3. Substandard 4.4 Doubtful 4.5 Loss
(C)Total Provision upto PreviousYear
(D) Previous Year's Provision written back -
200,946,085 58,292,849
(E) This Year's additional provision
Net Adjustments of the Year
(5,717,348)
Net Loan (A-B)
57
Schedule 4.13(A) :Securities Against Loan, Advance and Bills Purchased

As at 16 July, 2010 (32 Ashad 2067)
Particulars (A) Secured 1. Movable / Immovable Assets 2. Guarantee of Local Licensed Institutions 3. Government Guarantee 4. Guarantee of Internationally Rated Banks 5. Export Documents 6. Fixed Deposit Receipts (a) Own FDR (b) FDR of Other Licensed Institutions 7. Government Securities/ Bonds 8. Counter Guarantee 9. Personal Guarantee 10. Other Securities (B) Unsecured Total
Rs. This Year 16,176,582,758 12,178,299,840 102,566,996 443,393,935 38,771,038 404,622,897 263,466,765 3,188,855,222 16,176,582,758
Rs. Previous Year 13,880,703,075 9,159,793,509 299,204,033 594,275,211 193,655,080 400,620,131 301,314,808 3,526,115,514 13,880,703,075
Schedule 4.14: Fixed Assets

As at 16 July, 2010 (32 Ashad 2067)
Particulars Freehold and Buildings Rs. 1. At Cost a. Balance upto Previous Year b. Addition this year c. Revaluation/Written-back this year d. Sold this year e. Written-off this year Total Cost (a+b+c+d+e) 2. Depreciation a. Upto Previous Year b. For this Year c. Depreciation on Revaluation / Written-back d. Depreciation adjustment/ write back Total Depreciation (a+b+c+d) 3. Book Value (WDV)* (1-2) 4. Land 5. Capital Work in Progess (To be Capitalised) 6. Leasehold Assets Total (3+4+5+6)
* Written Down Value.
Assets Vehicles Machinery Rs. Rs. -
Office Equipment Rs. 304,959,086 12,354,156 (2,068,986) 315,244,256 255,747,816 18,690,274 (2,068,985)
Others Leasehold Assets Rs. 75,778,473 8,915,772 84,694,245 34,681,981 5,059,950 39,741,931 44,952,314
This Year Previous Year Rs. 449,103,937 22,393,517 (2,068,986) 469,428,468 334,240,953 29,647,082 (2,068,985) 361,819,050 107,609,418 10,930,556 Rs. 414,271,532 57,372,262 (22,539,857) 449,103,937 323,231,887 24,318,709 (13,309,643) 334,240,953 114,862,984 15,034,556 7,395,000 137,292,540
21,718,550 46,647,828 1,123,589 -
21,718,550 47,771,417 5,353,771 38,457,385 432,016 5,464,842 -
5,785,787 43,922,227 15,932,763 10,930,556 26,863,319 3,849,190 3,849,190
272,369,105 42,875,151
42,875,151
44,952,314
118,539,974
58
Schedule 4.15: Non-Banking Assets

As at 16 July, 2010 (32 Ashad 2067)
Name and Address of Borrower or Party
Date of assuming Non Banking Assets
Total Amount of Non Banking Assets Rs.
Provision for Loss Net NonBanking Assets Rs. Previous Year Rs.
Amount Rs.
Total
Schedule 4.16: Other Assets

As at 16 July, 2010 (32 Ashad 2067)
Particulars 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Stock of Stationary Income Receivable on Investments Accrued Interest on Loan Less: Interest Suspense Amount Commission Receivable Sundry Debtors Staff Loan and Advances Prepayments Cash in Transit Other Transit Items (Including Cheques) Drafts Paid without Notice Expenses Not Written-off Branch Adjustment Account Deferred Tax Assets Others a) Advance Income Tax (net of Provision) b) Others
Rs. This Year 6,090,784 115,153,351 2,519,986 93,563,395 185,343,913 15,763,967 126,413 31,519,974 76,281,207 165,184,149
Rs. Previous Year 5,232,888 219,914,548 117,646,865 (117,646,865) 2,316,516 80,381,635 182,487,582 38,871,378 15,169,292 36,402,914 61,068,405 178,842,288
136,165,591 (136,165,591)
11,731,735 153,452,414 691,547,139 820,687,446
Total
Schedule 4.16(A) : Other Assets (Additional Statement)

As at 16 July, 2010 (32 Ashad 2067)
Particulars
This Year (Rs.) Up to 1 1 to 3 Year Years 88,094,118 219,745 -
Above 3 Years 47,851,728 -
Total
Previous Year Rs. 117,646,865 -
1. Accrued Interest on Loans and Advances 2. Drafts Paid without Notice 3. Branch Adjustment Account 4. Local/Foreign Agency Account
136,165,591 -
59
Schedule 4.17: Contingent Liabilities

As at 16 July, 2010 (32 Ashad 2067)
Particulars 1. 2. 3. 4. Claims on Bank but not Acknowledged as Liabilities by the Bank Letters of Credit (Full amount) (a) Maturity period of less than 6 months (b) Maturity period of more than 6 months Rediscounted Bills Unmatured Guarantees/Bonds (a) Bid Bonds (b) Performance Bonds (c) Other Guarantee/Bonds Unpaid amount on Investment in Shares Outstanding Liabilities of Forward Exchange Contracts Bills for Collection Acceptance and Endorsements Underwriting Commitment Irrevocable Loan Commitments Guarantee against Counter Guarantee of Internationally Rated Banks Advance Payment Guarantee Financial Guarantee Contingent Liabilities on Income Tax Others
Rs. This Year 2,627,211,864 2,212,780,495 414,431,369 772,222,330 30,734,175 310,893,127 430,595,028 1,223,147,045 223,011,774 426,181,956 1,406,267,137 2,357,068,525 15,200,000 104,338,336 2,605,277 530,070,650 9,687,324,894
Rs. Previous Year 3,120,878,804 2,867,156,012 253,722,792 1,484,857,424 358,686,280 716,145,390 410,025,754 1,332,125,612 672,008,031 1,016,660,739 1,215,235,221 2,098,631,210 97,500 103,786,602 3,901,166 123,808,727 11,171,991,036
5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.
Total
Schedule 4.18: Interest Income

for the period 16 July 2009 to 16 July 2010 (1 Shrawan 2066 to 32 Ashad 2067)
Particulars A. On Loan, Advances and Overdraft 1. Loan and Advances 2. Overdrafts B. On Investment 1. Government of Nepal Securities a. Treasury Bills b. Development Bonds c. National Savings Certificates d. Special Bonds 2. Foreign Securities 3. Nepal Rastra Bank Bonds 4. Debenture and Bonds 5. Interest on Inter bank Investment a. Financial Institutions b. Other Organisations C. On Agency Balances 1. Local Banks / Financial Institutions 2. Foreign Banks D. On Money at Call and Short Notice 1. Local Banks / Financial Institutions 2. Foreign Banks E. On Others 1. Certificate of Deposits 2. Inter-Bank / Financial Institution Loan 3. Placement with Foreign Banks 4. Others Total
Rs. This Year 1,379,283,993 1,265,219,217 114,064,776 436,961,275 436,304,870 381,899,432 53,296,288 1,109,150 656,405 480,823 480,823 4,818,114 4,818,114 220,565,117 72,813,103 117,606,811 30,145,203 2,042,109,322
Rs. Previous Year 1,104,047,249 1,027,707,274 76,339,975 406,980,129 406,325,553 348,126,573 53,955,991 4,242,989 654,576 1,867,239 1,867,239 39,051,565 39,051,565 335,275,075 39,322,576 286,022,751 9,929,748 1,887,221,257
60
Schedule 4.19: Interest Expenses

Particulars A. On Deposit Liabilities 1. Fixed Deposits 1.1. Local Currency 1.2. Foreign Currency 2. Savings Deposits 2.1.Local Currency 2.2.Foreign Currency 3. Call Deposits 3.1. Local Currency 3.2. Foreign Currency 4. Certificate of Deposits B. On Borrowings 1. Debentures and Bonds 2. Loans from Nepal Rastra Bank 3. Inter Bank /Financial Institutions Borrowings 4. Other Institutions 5. Other Loans C. On Others 1. Premium on Development Bonds 2. Others Total
Rs. This Year 561,725,321 138,001,956 39,402,978 98,598,978 291,801,113 276,233,310 15,567,803 131,922,252 125,124,699 6,797,553 9,555,199 4,093,401 5,461,798 4,460,140 4,460,140 575,740,660
Rs. Previous Year 520,761,481 134,404,092 11,953,974 122,450,118 296,105,028 260,030,008 36,075,020 90,252,361 84,999,297 5,253,064 18,531,766 1,584,935 16,946,831 4,493,353 4,493,353 543,786,600
61
Schedule 4.20: Commisssion and Discount

Particulars A. Bills Purchased and Discounted 1. Domestic 2. Foreign B. Commission 1. Letters of Credit 2. Guarantees 3. Collection Fees 4. Remittance Fees 5. Credit Cards 6. Share Underwriting/Issues 7. Government Transactions 8. E. Pra. Commission 9. Exchange Fees ( Batta Income) C. Others 1. Management Fees 2. Loan Processing Fees 3. Ledger and Activity Fees 4. Commission on Travellers Cheque 5. Others (including income from Gold & Derivatives) Total
Rs. This Year 17,823,134 388,883 17,434,251 111,378,883 7,959,235 41,865,371 3,109,664 38,541,783 19,832,330 70,500 209,096,092 6,441,106 51,096,973 28,767,206 7,176,576 115,614,231 338,298,109
Rs. Previous Year 19,413,965 907,464 18,506,501 113,016,168 7,280,626 33,122,424 3,994,042 37,049,477 31,469,999 99,600 155,601,313 6,852,025 29,987,959 27,899,001 6,683,472 84,178,856 288,031,446
Schedule 4.21: Other Operating Income

Particulars 1. 2. 3. 4. 5. 6. 7. Rental on Safe Deposit Locker Issue and Renewals of Credit Cards Issue and Renewals of ATM Cards Telex /T.T. Service Charges Renewal Fees Others
Rs. This Year 4,019,427 10,326,016 9,291,006 7,975,830 505,415 2,361,779 34,479,473
Rs. Previous Year 3,773,301 8,602,065 8,777,397 7,921,513 456,973 3,660,002 33,191,251
Total
62
Schedule 4.22: Exchange Fluctuation Gain/Loss

Particulars A. Revaluation Gain B. Trading Gain (except Batta) Total Income (Loss)
Rs. This Year 85,525,113 373,038,919 458,564,032
Rs. Previous Year 127,672,653 299,795,660 427,468,313
Schedule 4.23: Staff Expenses

Rs. This Year 185,843,691 1,132,786 9,126,093 6,554,738 219,685 4,082,920 32,628,645 73,375,728 59,901,710 13,474,018 312,964,286
Rs. Previous Year 165,352,156 743,710 8,115,518 4,800,913 161,355 3,009,449 12,738,534 58,133,869 50,005,200 8,128,669 253,055,504
Particulars 1. 2. 3. 4. 5. 6. 7. 8. 9. Salary Allowances Contribution to Provident Fund Training Expenses Uniform Medical Insurance Pension and Gratuity Provision Others a) Staff Incentive b) Others
Total
63
Schedule 4.24: Other Operating Expenses

Particulars 1. 2. 3. House Rent Light, Electricity and Water Repair and Maintenance (a) Building (b) Vehicles (c) Others Insurance Postage, Telex, Telephone, Fax Office Equipment, Furniture and Repair (a) Office Equipment and Furniture (non capitalised item) (b) Repairs Travelling Allowances and Expenses Stationery and Printing Periodicals and Books Advertisement Legal Expenses Donations Expenses Relating to Board of Directors (a) Meeting Allowance (b) Others Expenses General Meeting Expenses Expenses Relating to Audit (a) Audit Fees (b) Other Expenses Commission on Remittances Depreciation on Fixed Assets Amortization of Pre Operating Expenses Share Issue Expenses Technology Support Cost (Technical Services Fees ) Entertainment Written Off Expenses Security Expenses Credit Guarantee Premium Commission and Discount Others (a) Software Expenses Charged Off (b) Cleaning, Pest Control and Waste Management (c) Others
Rs. This Year 44,589,574 16,082,080 9,270,563 2,832,224 1,466,807 4,971,532 5,212,446 41,866,562 35,872,647 27,630,107 8,242,540 14,914,492 13,442,417 879,553 13,217,846 411,878 20,001 487,451 264,000 223,451 1,113,456 849,921 565,000 284,921 29,647,082 15,849,770 1,842,046 22,685 20,089,072 8,998,063 20,444,917 4,872,374 5,098,629 10,473,914
Rs. Previous Year 39,725,664 15,394,850 14,582,754 8,889,511 923,782 4,769,461 5,585,155 43,913,129 32,978,690 24,518,268 8,460,422 10,489,786 11,868,187 751,770 12,671,068 1,141,641 200,000 524,927 284,000 240,927 1,753,078 731,826 452,000 279,826 24,318,709 14,100,098 1,837,866 179 16,184,618 8,555,094 19,017,585 10,391,206 2,550,013 6,076,366
4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26.
Total
295,304,522
276,326,674
64
Schedule 4.25 Provision for Possible Losses

Particulars 1. 2. 3. 4. Increase in Loan Loss Provision Increase in Provision for Loss on Investments Provision for Non-Banking Assets Provision for Other Assets
Rs. This Year 76,974,254 -
Rs. Previous Year 56,634,631 -
Schedule 4.26: Non Operating Income/ (Loss)

Particulars 1. Profit (Loss) on Sale of Investment 2. Profit (Loss) on Sale of Assets 3. Dividend (Net) 4. Subsidies Received from Nepal Rastra Bank a. Compensation against Losses of Specified Branches b. Interest Indemnity c. Exchange Counter 5. Others Net Non Operating Income/ (Loss)
Rs. This Year 30,740,230 5,528,050 36,268,280
Rs. Previous Year 19,619,292 2,479,025 22,098,317
Schedule 4.27: Provision for Possible Loss Written Back

Particulars 1. 2. 3 4. Loan Loss Provision Written Back Provision against Non-Banking Assets Written Back Investment Provision Written Back Provision against Other Assets Written Back
Rs. This Year 58,292,849 58,292,849
Rs. Previous Year 101,075,167 101,075,167
Total
65
Schedule 4.28: Income / (Expenses) from Extra-Ordinary Activities

Particulars 1. 2. 3. 4. Recovery of Loans Written Off Voluntary Retirement Scheme Expenses Unrecoverable Loan Write Off (Schedule 4.28A) Other Expenses/Income
Rs. This Year 9,038,441 (26,062,833) (17,024,392)
Rs. Previous Year 23,770,030 (39,126,089) (15,356,059)
Total
Schedule 4.28 A: Statement of Loans Written Off

S.N Types of Loan 1 2 3 4 5 Working Capital Loan Project Loan Fixed Capital Loan Personal Loan Other Loan a) Credit Cards b) Gramin Prathamik Karja c) Home Loan d) Auto Loan
Written off Amount Rs. 6,641,816 19,421,017 1,981,377 1,612,949 15,826,691
Type of Security Basis of Valuation and Amount Rs. of Security
Loan Approving Authority / Designation
Initiations made for Recovery
Remarks
None
NA
Manager Credit/ Head Consumer Bank Manager Credit/ Head Consumer Bank Manager Credit/ Head Consumer Bank Manager Credit/ Head Consumer Bank
Follow up through phone calls & letters Phone calls & letters Phone calls & letters Phone calls/ Letters/Visits, Vehicle Repossession, Auction Notice. Securities sold by Negotiation/ Auction sale.
Recoveries from Current year write off is Rs. 230,600 Recoveries from Current year write off is Rs. 343,540 Recoveries from Current year write off is Rs. 443,487 Recoveries from Current year write off is Rs. 1,483,750
None None Vehicle
NA NA Valuation Report from Approved Valuators & cost price at the time of disbursement of Loan
Total Loan
26,062,833
During the year, Bank has recovered the amount against the current year written off loans as shown under Remarks column. In respect of Auto Loan, the value of a vehicle in posession of the Bank is Rs. 1,990 thousand ( as per the valuation of approved valuators).
66
Schedule 4.29:Statement of Loans & Advances Extended to Directors/ Chief Executive Officer/ Promoters/Staff and Shareholders
As at 16 July, 2010 (32 Ashad 2067)
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: Rs. Name of Promoter/ Director/Chief Executive Officer (A) (B) (C) (D) (E) Balance upto Previous Year Principal Interest Rs. Rs. Recovery made This Year Principal Interest Rs. Rs. Additions during the year Rs. Rs.
Balance as at Ashad end Principal Interest Rs Rs. -
Directors Chief Executive Officer Promoters Staff Shareholders
Total
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.
67
Schedule 4.30 (Ka 1): Capital Adequacy Table

as at 16 July, 2010 (32 Ashad 2067)
1.1 RISK WEIGHTED EXPOSURES A B C Risk Weighted Exposure for Credit Risk Risk Weighted Exposure for Operational Risk Risk Weighted Exposure for Market Risk
This Year 20,779,883 3,058,847 345,855
Rs. in 000 Previous Year 18,758,432 2,690,615 254,117
Adjustments Under Pillar-II Add: 3% of the total RWE due to non Compliance to Disclosure (6.4 a 10) Add: ...% of the total deposits due to insufficient liquid assets (6.4 a 6 ) Total Risk Weighted Exposures (A+B+C) 1.2 CAPITAL FUND Core Capital (Tier 1) a b c d e f g h i j k l m n o p q r s Paid up Equity Share Capital Irredeemable Non-cumulative preference shares Share Premium Proposed Bonus equity Shares Statutory General Reserves Retained Earnings Current year profit/loss Capital Redemption Reserve Capital Adjustment Reserve Dividend Equalization Reserves Other Free Reserve Less: Goodwill Less : Fictitious Assets Less: Investment in equity in licensed Financial Institutions Less: Investment in equity of institutions with financial interests Less: Investment in equity of institutions in excess of limits Less: Investments arising out of underwriting commitments Less: Reciprocal crossholdings Less: Other Deductions 24,184,585 This Year 3,050,712 1,398,484 209,772 1,412,491 29,965 21,703,164 Previous Year 2,832,761 931,966 465,983 1,195,317 239,495 -
Adjustments Under Pillar-II Less: Shortfall in provisions (6.4 a 1) Less: Loans and Facilities extended to related parties and restricted lending (6.4 a 2) Supplementary Capital (Tier 2) a b c d e f g h Cumulative and/or Redeemable Preference Share Subordinated Term Debt Hybrid Capital Instruments General loan loss provision Exchange Equilization Reserve Investment Adjustment Reserve Assets revaluation reserve Other Reserves (Deferred Tax Reserve) 479,781 160,784 241,090 1,626 76,281 3,530,493 Current Period 12.61% 14.60 % 357,606 137,897 219,709 3,190,367 Previous Period 13.05% 14.70%
Total Capital Fund (Tier 1 and Tier 2) 1.3 Capital Adequacy Ratios
Tier 1 Capital to Total Risk Weighted Exposures (After Bank's adjustments of Pillar II) Tier 1 and Tier 2 Capital to Total Risk Weighted Exposures (After Bank's Adjustments of Pillar II)
68
Schedule 4.30 (Kha): Credit Risk

As at 16 July, 2010 (32 Ashad 2067)
Assets Balance Sheet Exposure
Book Value a
509,031 819,509 144,118 8,531,520 207,807 101,093 385,056 23,592 6,073,058 1,420,571 5,592,897
Rs. in 000 16th July, 2010 (32 Asadh 2067) Previous Year Specific Eligible Net Value Risk Risk Weighted Net Value Risk Provision b CRM c d=a-b-c Weight Exposures Weighted e f=d*e Exposures
317,352 509,031 819,509 144,118 8,531,520 207,807 101,093 67,704 23,592 6,073,058 1,420,571 5,592,897 0% 0% 0% 0% 0% 0% 0% 0% 20% 50% 100% 150% 0% 100% 20% 50% 100% 150% 20% 100% 20% 50% 100% 150% 20% 151,640 13,541 23,592 1,214,612 1,420,571 1,118,579 463,346 1,851,133 178,349 9,998,754 154,044 83,793 35,554 32,177 11,695,334 389,350 637,967 125,690 7,111 32,177 2,339,067 194,675 637,967 -
Cash Balance Balance With Nepal Rastra Bank Gold Investment in Nepalese 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 on Foreign Government and Central Bank (ECA Rating 2) Claims on Foreign Government and Central Bank (ECA Rating 3) Claims on Foreign Government and Central Bank (ECA Rating 4-6) Claims on Foreign Government and Central Bank (ECA Rating 7) Claims on BIS, IMF, ECB, EC & on Multilateral Development Banks (MDBs) recognised by the frame work 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 adequacy requirements Claims on domestic banks that do not meet capital adequacy requirements Claims 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% capital requirement above their respective regulatory Capital requirements Claims on Domestic Corporates Claims on Foreign Corporates (ECA rating 0-1) Claims on Foreign Corporates (ECA rating 2) Claims on Foreign Corporates (ECA rating 3-6) Claims on Foreign Corporates (ECA rating 7) Regulatory Retail Portfolio (Not Overdue) 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 Investment in equity and other capital instruments of institutions listed in the stock exchange Investment in equity and other capital instruments of institutions not listed in the stock exchange Other Assets
3,160,808 5,569,522 247,837 3,149,494 25,759 2,601,433 194,729 995,594 50,500 56,426 1,094,953
533 1,735 4,138 33,250 19,187 21,375 3,000 498,086
726,525 58,761 -
2,433,750 5,567,787 247,837 3,149,494 21,621 2,568,183 175,542 936,833 29,125 53,426 596,867
100% 20% 50% 100% 150% 75% 100% 60% 150% 100% 100% 150% 150% 100% 150% 100%
2,433,750 4,175,840 247,837 1,889,696 21,621 2,568,183 263,313 1,405,250 29,125 80,138 596,867
2,743,934 4,147,828 2,513,718 17,957 2,068,506 152,263 908,124 3,000 79,551 786,391
2,743,934 3,110,871 1,508,231 17,957 2,068,506 228,395 1,362,186 3,000 119,326 786,391
Total
40,955,307
581,304 1,102,638 39,271,365
17,654,155 38,941,073 15,285,484
69
Schedule 4.30 (Kha): Credit Risk

Rs. in 000 16th July, 2010 (32 Asadh 2067) Off Balance Sheet Exposures Book Value a Specific Provision b Eligible CRM c Net Value d=a-b-c Previous Year Risk Risk Weighted Net Value Risk Weight e Exposures Weighted f=d*e Exposures
Revocable Commitments Bills Under Collection Forward Exchange Contract LC Commitments With Original Maturity Up to 6 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 L C Commitments With Original Maturity Over 6 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, Performance Bond and Counter Guarantee (domestic counterparty) Foreign Counterparty ECA Rating 0-1 Foreign Counterparty ECA Rating 2 Foreign Counterparty ECA Rating 3-6 Foreign Counterparty ECA Rating 7 Underwriting commitments Lending of Bank's Securities or Posting of Securities as collateral Repurchase Agreements, Assets sale with recourse Advance Payment Guarantee Financial Guarantee Acceptances and Endorsements Unpaid Portion of Partly paid shares and Securities Irrevocable credit commitments (short term) Irrevocable Credit commitments (Long Term) Other Contingent Liabilities Unpaid Guarantee Claims
223,012 1,223,147 2,212,780 414,431 299,668 747,885 301,237 593,496 702,239 115,561 426,182 1,406,268 1,021,419 -
428,876 142,233 35,823 598,308 150,618 384,165 23,624 10,885 166,364 414,817 -
223,012 1,223,147 1,783,904 272,198 263,845 149,577 150,619 593,496 318,074 91,937 415,297 1,239,904 606,602 -
0% 0% 10% 20% 20% 50% 100% 150% 50% 20% 50% 100% 150% 50% 20% 50% 100% 150% 50% 100% 100% 100% 100% 100% 100% 20% 50% 100% 200%
122,315 356,781 136,099 131,923 29,915 75,309 593,496 318,074 91,937 415,297 247,980 606,602 -
672,008 1,332,126 1,851,796 603,233 102,398 498,281 337,252 257,481 87,249 999,440 1,098,520 493,090 1,961
133,213 370,359 301,616 20,480 249,141 337,252 257,481 87,249 999,440 219,704 493,090 3,923
Total Total RWE for Credit Risk (A) +(B) Adjustments under Pillar-II
9,687,325 50,642,632
581,304
2,355,713 3,458,351
7,331,612 46,602,977
3,125,728 20,779,883
8,334,835
3,472,948
47,275,908 18,758,432
Add: 10% of the loan and facilities in excess of Single Obligor Limits (6.4 a 3) Add: 1% of the contract (sale) value in case of the sale of credit with recourse (6.4 a 4) Total RWE for Credit Risk (After Bank's adjustments of Pillar II)
50,642,632
581,304
3,458,351
46,602,977
20,779,883
47,275,908 18,758,432
70
Schedule 4.30 (Ga): Eligible Credit Risk Mitigants

As at 16 July, 2010 (32 Ashad 2067)
Credit exposures
Deposits Deposits Gold Govt. G'tee of Sec/G'tee of G'tee of G'tee of Sec/ with Bank with other & NRB Govt. of Other domestic MDBs G'tee of banks/FI Securities Nepal Sovereigns banks Foreign Banks 217,352 -
Rs. in 000 Total
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 on Foreign Government and Central Bank (ECA Rating 2) Claims on Foreign Government and Central Bank (ECA Rating 3) Claims on Foreign Government and Central Bank (ECA Rating 4-6) Claims on 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 100,000 capital adequacy requirements Claims on domestic banks that do not meet capital adequacy requirements Claims 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 respective regulatory capital requirement Claims on Domestic Corporates 61,328 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) 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 22,553 Investment in equity and other capital instruments of institutions listed in the stock exchange Investment in equity and other capital instruments of institutions not listed in the stock exchange Other Assets 317,352 -
310,580 -
229,242 -
125,375 726,525 36,208 58,761 -
71
Schedule 4.30 (Ga):

Continue...
Rs. in 000 Deposits with Bank Deposits Gold Govt. G'tee of Sec/G'tee of G'tee of with other & NRB Govt. of Other domestic banks/FI Securities Nepal Sovereigns banks
8,014 535,946 81,206 49,866 360,314 3,374 3,374
G'tee of Sec/G'tee of MDBs Foreign Banks

598,308 150,618 384,165 7,856 21,500 46,518
Total
Off Balance Sheet Exposures
Forward Exchange Contract Liabilities LC Commitments With Original Maturity Up to 6 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 L C Commitments With Original Maturity Over 6 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, Performance Bond and Counter Guarantee (domestic counterparty) Foreign Counterparty ECA Rating 0-1 Foreign Counterparty ECA Rating 2 Foreign Counterparty ECA Rating 3-6 Foreign Counterparty ECA Rating 7 Underwriting commitments Lending of Bank's Securities or Posting of Securities as collateral Repurchase agreements, Assets sale with recourse Advance Payment Guarantee Financial Guarantee Acceptance and Endorsements Unpaid Portion of Partly paid shares and Securities Irrevocable Credit Commitments Other Contingent Liabilities Total Eligible CRM
347,670 142,233 32,449 15,768 10,885 86,984 368,299 1,188,169
428,876 142,233 35,823 598,308 150,618 384,165 23,624 10,885 166,364 414,817
1,370,548 3,458,351
72
Schedule 4.30 (Gha): Operational Risk

As at 16 July, 2010 (32 Ashad 2067)
Rs. in 000 SN Particulars 1 2 3 4 5 Net Interest Income Commission and Discount Income Other Operating Income Exchange Fluctutation Income Additional/ Deduction Interest Suspense during the period Gross Income (a) Fixed Percentage (b) Gross Income as per Fixed Percentage[ c=(a*b)] Capital Requirement for Operational Risk(d) (average of c) Risk Weight (reciprocal of capital requirement of 10%) in times (e) Equivalent Risk Weight Exposure for Operational Risk[f=(d*e)] Pillar-II Adjustments If Gross Income for all the last three years is negative (6.4 a 8) Total Credit and investments (net of Specific Provision) Capital Requirement for operational risk (5%) Risk Weight (reciprocal of capital requirement of 10%) in time Equivalent Risk Weight Exposure (g) Equivalent Risk Weight Exposure [(h=f+g)] 3,058,847 2,690,615 16.07.2010 1,466,369 338,298 34,479 458,564 18,519 2,316,229 15% 347,434 305,885 10 3,058,847 15.07.2009 1,343,435 288,031 33,191 427,468 2,166 2,094,291 15% 314,144 15.07.2008 1,119,466 276,432 32,594 345,653 (66,972) 1,707,173 15% 256,076 269,061 10 2,690,615 15.07.2009
73
Schedule 4.30 (Nga): Market Risk

As at 16 July, 2010 (32 Ashad 2067)
Rs. in 000 As on 16 July, 2010 Previous Year Relevant Open Position (NPR) as on 15.07.2009 476,573 10,617 5,744 2,185 4,703 2,517 80 538 100 333 1,677 793 240 136 54 272 1,489 184 508,235 5% 25,412 10 254,117
S. No.
Currency
Open Position (FCY) 362,486 (1,199) (19) (44) 56 134 11 62 (13) 813 101 34 60 42 6 16 36 9
Open Position (NPR) 580,249 (89,708) (2,235) (4,273) 4,029 1,743 116 635 (914) 698 968 1,848 1,195 97 135 322 2,359 187
Relevant Open Position (NPR) 580,249 89,708 2,235 4,273 4,029 1,743 116 635 914 698 968 1,848 1,195 97 135 322 2,359 187 691,711 5% 34,586 10 345,855
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
INR USD GBP EUR CAD DKK CNY SEK CHF JPY HKD SGD SAR THB MYR AED AUD QAR
Total Open Position (a) Fixed Percentage (b) Capital Charge for Market Risk [c=(a*b)] Risk Weight (reciprocal of capital requirement of 10%) in times (d) Equivalent Risk Weight Exposures for Market Risk [e=(c*d)]
74
Schedule 4.31: Key Indicators
Particulars
Indicators
FY 2005/2006 37.06 175.84 3,775 21.47 140 130 6.19 24.29 1.31 15.95 35.83 7.63 2.56 39.92 2.69 12.99 1.94 14.93 6.86 2.13 4.10 1,754,139 3,746,404 345 468.22
FY 2006/2007 34.55 167.37 5,900 35.25 130 80 7.11 23.75 1.65 15.44 33.71 6.75 2.42 43.78 2.94 13.77 1.94 15.71 5.46 1.83 3.95 2,116,353 4,132,548 351 512.12
FY 2007/2008 34.94 131.92 6,830 51.77 130 80 6.65 24.28 1.59 14.75 34.63 6.24 2.46 46.95 2.78 11.52 1.63 13.15 5.84 0.92 4.01 2,492,548 6,207,840 377 401.52
FY 2008/2009 36.84 109.99 6,010 54.64 100 50 8.54 23.58 1.53 15.36 36.70 7.93 2.56 39.27 2.68 13.05 1.65 14.70 8.18 0.66 3.98 3,052,470 9,319,664 392 327.53
FY 2009/2010 36.47 77.65 3,279 42.23 70 55 8.78 26.43 1.64 15.40 32.93 6.91 2.70 45.98 2.94 12.61 1.99 14.60 6.74 0.61 3.44 3,369,709 13,984,836 429 240.95
1. Net Profit/Gross Income 2. Earning Per Share 3. Market Value Per Share 4. Price Earning Ratio 5. Dividend (including bonus) on Share Capital 6. Cash Dividend on Share Capital 7. Interest Income/Loan & Advances 8 Staff Expenses/Total Operating Expenses 9. Interest Expenses on Total Deposit and Borrowings 10. Exchange Fluctuation Income/Total Income 11. Staff (statutory) Bonus/Total Staff Expenses 12. Net Profit/Loan and Advances 13. Net Profit/Total Assets 14. Total Credit/Deposit 15. Total Operating Expenses/Total Assets 16. Adequacy of Capital Fund on Risk Weighted Assets a. Core Capital b. Supplementary Capital c. Total Capital Fund 17. Liquidity (CRR) 18. Non-performing Credit/Total Credit 19. Weighted Average Interest Rate Spread 20. Book Net-worth 21. Total Shares 22. Total Staff 23. Networth Per Share
Percent Rs. Rs. Ratio Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Percent Ratio Percent Percent Rs'000 No. No. Rs.
Note : Adequacy of Capital Fund on RWA for FY 2007-08 onwards is as per Basel II Capital Accord of Nepal Rastra Bank.
75
Schedule 4.32: Significant Accounting Policies Financial Year 16 July 2009 to 16 July 2010 (1 Shrawan 2066 to 32 Ashad 2067)
basis.
2.8 Loans and Advances including Bills Purchased

Loans and advances including 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 Banks Directives. Loans and advances including bills purchased are disclosed net of loan loss provisions.
1. General Information
Standard 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.
policies.
2.3 Interest Income

Interest income on Loans and advances is treated as per Para 2.1. Interest income on Investments is recognised on accrual basis.
2.9 Staff Loans

Loans and advances granted to staff in accordance with the staff loan scheme are reflected under Other Assets.
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.
2.10 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.
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.
2.5 Dividend Income

Dividend is recognised as income when the right to receive the payment is established.
2.11 Loans & Advances Write off

Unrecoverable 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 year of recovery.
2.1 Statement of Compliance

The 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, 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.
2.6 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.
2.12 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. Investments in shares have been classified as Available for Sale due to their undefined maturity. Accordingly 2% of the net value of the portfolio has been created towards
2.2 Basis of Preparation

The 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 Banks accounting
2.7 Interest Expense

Interest on deposit liabilities and borrowing from other banks are accounted for on accrual
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Investment Adjustment Reserve from profit and loss appropriation account and has been included as part of supplementary capital. All investments are subject to regular review according to the directives of Nepal Rastra Bank.
2.15 Lease Rental

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.
be available against which the temporary differences can be utilised.
2.18 Stationery
Stationery purchased is accounted for on cost and expended as and when it is issued for consumption on a weighted average basis.
2.13 Fixed Assets and Depreciation

a. 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:
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.
2.19 Non Banking Assets

Non Banking Assets are accounted for as per the directives of Nepal Rastra Bank.
2.20 Provisions, Contingent Liabilities and Contingent Assets

The 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. Liabilities 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 and currency swap transactions.
2.17 Income Tax

a. Current Income Tax Provision for current income tax is made in accordance with the provisions of the prevailing Income Tax Act, 2058 and Rules as amended. Life of an Asset 36 months 36 months 36 months 36 months 60 months 84 months 600 months
S.N. 1. 2. 3. 4. 5. 6. 7.
Assets Types Equipment Furniture & Fittings/Fixtures Vehicle Computers PC, Printer, Laptop etc. Computers Server Computer ATM Premises Freehold
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 the assets is put to use and for disposed assets, depreciation is charged up to the month immediately preceding the month of disposal.
b. Deferred Tax Deferred 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, provisions for gratuity, performance bonus and premium on development bonds. Deferred tax assets are recognised where it is probable that future taxable profit will
3. Rounding off and Comparative Figures

The financial statements are presented in Nepalese Rupees, rounded off to the nearest rupee. Previous year amounts have been reclassified to facilitate comparison; detail of which is provided in the Notes to Accounts.
2.14 Intangible Assets

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.
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Schedule 4.33: Notes to Accounts Financial Year 16 July 2009 to 16 July 2010 (1 Shrawan 2066 to 32 Ashad 2067)
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.
6. Dividend and Bonus

The Board has recommended 55% cash dividend and 15% bonus shares as appropriation for the reported year. This proposal of the Board has been shown under Proposed Dividend for the cash portion and under Share Capital for the Proposed Bonus Shares issue respectively.
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.
7. Unpaid Dividend
As on the balance sheet date, unpaid dividend over five years amounts to Rs. 2,411,021.
3.Tax Settlement Outstanding

Self assessment return filed by the Bank for the financial year 2005-06 (2062-63 BS) has been opened by the Large Tax Payer Office (LTPO) and an assessment order has been issued for Rs. 2,605,277 as additional tax. The Bank had contested the assessment order and had applied for an Administrative Review at the Office of the Director General of Inland Revenue Department, who upheld the decision of the LTPO. Bank has now filed an Appeal at Revenue Tribunal for the settlement of the case. 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), 2007-08 (2064-65 BS) and 2008-09 (2065-66 BS) are pending for assessment at the Large Tax Payer Office.
8. Paid up Share Capital

Paid up share capital of the Bank has moved over the years as follows: Financial Year 1987-88 (2044-45 BS) 1990-91 (2047-48 BS) 1992-93 (2049-50 BS) 1994-95 (2051-52 BS) 1996-97 (2053-54 BS) 1997-98 (2054-55 BS) 2002-03 (2059-60 BS) 2005-06 (2062-63 BS) 2006-07 (2063-64 BS) 2007-08 (2064-65 BS) 2008-09 (2065-66 BS) Cumulative Paid up Capital Rs. 30,000,000 50,000,000 100,000,000 150,000,000 225,571,800 339,548,800 374,640,400 413,254,800 620,784,000 931,966,400 1,398,483,600 Remarks Opening Share Capital at Rs. 60 paid up Capitalisation of Reserve Rs. 100 paid up Issuance of 100% Bonus Shares Issuance of 50% Bonus Shares Issuance of 50% Bonus Shares Issuance of 50% Bonus Shares Issuance of 10% Bonus Shares Issuance of 10% Bonus Shares Issuance of 50% Bonus Shares Issuance of 50% Bonus Shares Issuance of 50% Bonus Shares
4. Provision for Gratuity

During the year, the Bank has provided Rs. 32,628,645 (Previous Year Rs. 12,738,534) on account of gratuity. Out of the amount provided, Rs 21,166,384 has been funded (previous year Rs 10,472,391) and Rs. 5,157,145 (previous year Rs. 3,428,755) has been paid to the staff at the time of separation.
9. Sale of Land and Building

The Bank has sold its land at Birgunj, Parsa during the year for Rs. 34,844,230 at a profit of Rs. 30,740,230.
10. Deferred Tax

Deferred tax is calculated on temporary differences using an effective tax rate of 30.00%. The items attributable to deferred tax assets and liabilities and their movement are as follows:
5. Performance Bonus
The Banks reward programmes recognize world-class performance and behaviour in support of the Banks values across all job levels. The Banks total reward consists of fixed and variable compensation. Performance Bonus is a variable component based on the Banks overall performance and individual employees 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. 47,569,046 has been provided for the performance bonus in this year.
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Deferred Tax Assets Fixed Assets Gratuity Provision Provision for Performance bonus Provision for investment impairment Premium on Development Bond Total Deferred Tax Assets Deferred Tax Liabilities Net Deferred Tax Asset
Balance 15 Jul 2009 29,084,203 18,481,957 6,189,745 7,312,500 61,068,405 61,068,405
Movement during the year 3,628,959 1,891,535 422,738 9,269,570 15,212,802 15,212,802
Balance 16 Jul 2010 32,713,162 20,373,492 6,612,483 7,312,500 9,269,570 76,281,207 76,281,207
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
Total of Key Management Personnel Compensation A) Short Term Employee Benefits B) Post Employment Benefits C) Other Long Term Benefits D) Termination Benefits E) Share Based Payment Rs. 38,739,828 Rs. 33,989,235 (Salary, Allowance, PF) NIL NIL Rs. 4,750,593 (Gratuity) NIL
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. 264,000 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. Foreign currency funds have mainly been placed with Standard Chartered Bank (SCB) network points. These funds are all under the management of Standard Chartered Group with high governance levels and acceptable country risks and returns. As on the balance sheet date, the amount placed with SCB Group is NPR 7.5 Billion.
12. Operating Lease Commitment

The future minimum lease payment under non-cancellable operating leases, where the bank is lessee is NIL.
13.Restatement of Prior Period Balances

Schedule Reference 4.5 Deposit Liability Proposed and Unpaid Dividend 4.7 Other Liabilities 4.16 Other Assets 4.20 Commission & Discount 4.22 Exchange Fluctuation Income Reported in FY 2008-09 35,871,721,127 476,296,048 809,776,754 1,341,584,862 235,468,846 480,030,913 Restatement (520,897,416) (10,312,848) 10,312,848 (520,897,416) 52,562,600 (52,562,600) Restated Balance in 2009-10 35,350,823,711 465,983,200 820,089,602 820,687,446 288,031,446 427,468,313 Remarks To facilitate comparison Regulatory requirement Regulatory requirement To facilitate comparison To facilitate comparison To facilitate comparison
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14 Reconciliation Status:
Particulars Branch Adjustments Accounts Agency Accounts Total Amount 373,615 < 3 Months 369,228 >3<9 Months 4,387
Rs. in '000 > 9 Months -
The reasons for differences are fully identified and are being addressed in regular course of business.
15 Summary of Loans and Advances Disbursed, Recovered and Principal and Interest Written-off during the year:
Particulars Loans Disbursed Loans Recovered Loans Written-off Interest Written-off
Rs. in '000 Amount 9,317,390 7,020,647 26,063 2,070
16 Summary of Changes in Deposit Liabilities :

Particulars Balance as at 15/07/2009 6,130,056 19,146,004 2,973,066 7,101,698 35,350,824 Received/ Withdrawn) 3,884,341 (6,715,995) 590,179 2,073,372 (168,103)
Rs. in '000 Balance as at 16/07/2010 10,014,397 12,430,009 3,563,245 9,175,070 35,182,721
Current and Margin Accounts Saving Account Call Deposits Fixed Deposits Total
17 Weighted Average Interest Spread:

Particulars a. Weighted average yield on loans and investments & Cash balance b. Average Cost of local currency deposits plus borrowing after factoring CRR c. Spread (Yield -cost) ie. C=b-a Rate % 5.56 2.12 3.44
18 Particulars of Amortised Expenses yet to be Expensed Off:

Particulars Software Costs Licence Fees Premium on Development Bonds Total Rs. in '000 Amount 621 30,899 31,520
19 Summary of Concentration of Exposure:

Particulars Loans & Advances and Bills 16,176,583 608,236 3.76 Deposits & Borrowings 35,182,721 4,482,728 12.74 Rs. in '000 Contingent
Total Amount as on 16 July 2010 Highest Exposure to Single unit Highest % of Exposure to Single unit
9,687,325 937,293 9.68
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20 Classification of Assets and Liabilities based on Maturity:

Particulars 1-90 Days 91-180 Days 181-270 Days 271 Days - 1 Year Over 1 Year Rs. in '000 Total
Assets Cash Balance Balance with Banks Investment in Foreign Banks Government Securities Nepal Rastra Bank Bonds Inter Bank Lending Loans, Advances & Bills Purchased Other Assets Total Assets Liabilities Loans and Borrowings Current Deposits Saving Deposits Fixed Deposits Debentures Other Liabilities, Capital & Reserves Total Liabilities Net Financial Assets Cumulative Net Financial Assets
509 1,420 4,486 4,362 380 3,961 57 15,175
4,657 2,376
1,243 -
1,530 1,145
599 648
873 31 7,937
861 12 2,116
721 8 3,404
9,541 793 11,581
509 1,420 12,515 8,531 380 15,957 901 40,213
2,930 7,160 5,943 1,661 17,694 (2,519) (2,519)
3,006
288
1,758
7,084 5,270 1,743 3,370
10,014 12,430 12,738 5,031 40,213 -
3,006 4,931 2,412
288 1,828 4,240
1,758 1,646 5,886
17,467 (5,886) -
21 Statement of age-wise agency account reconciliation pending items

Rs. in '000 Above 3 years -
Particulars Agency Accounts
Total Amount -
Upto 1 year -
1 to 3 years -
22 Borrowing by Bank against the collateral of own assets is Nil.
Schedule 4.34: Statement of loan availed by bank's promoter/ promoters' group from other bank and financial institutions by pledging their shares.
as on 16th July 2010 (32 Ashad 2067)
Shares under the ownership S.No. Name of Promoter/ Shareholders under Promoters' Group
Description of Loan of Promoter Name of otherbank/ financial institution from which loan has been taken
Total no. of shares
Percentage of paid up capital
Loan amount Rs.
No. of shares pledged Remarks
1 2 3 4 5
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Schedule 4.35 : Comparison of Unaudited and Audited Financial Statement as of FY 2066/67

Rs. in'000 Reasons for Variance In %
S. No. Particulars
As per Unaudited Financial Statement 40,213,320 1,398,484 2,740,392 35,182,722 22,846,284 12,336,438 891,722
As per Audited Variance Financial Statement In Amount 40,213,320 1,608,256 1,761,453 35,182,722 22,846,284 12,336,438 1,660,889
1 1.1 1.2 1.3 1.4 1.5
Total Capital and Liabilities (1.1 to 1.7) Paid up Capital Reserve and Surplus Debenture and Bond Borrowings Deposits (a+b) a. Domestic Currency b. Foreign Currency Income Tax Liability Other Liabilities
- 0.00% (209,773) (15.00%) 978,939 35.72% - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% - 0.00% (769,166) (86.26%)
As per the proposed appropriation As per the proposed appropriation
1.6 1.7
As per the proposed appropriation
2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 3 3.1 3.2 A. 3.3 3.4 3.5
Total Assets (2.1 to 2.7) Cash and Bank Balance Money at Call and Short Notice Investments Loans and Advances* Fixed Assets Non Banking Assets Other Assets Profit and Loss Account Interest Income Interest Expense Net Interest Income (3.1 - 3.2) Fees, Commission and Discount Other Operating Income Foreign Exchange Gain/Loss (Net)
40,213,320 1,929,307 1,669,460 19,847,511 15,956,955 118,540 691,547
40,213,320 1,929,307 1,669,460 19,847,511 15,956,955 118,540 691,547
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2,042,110 575,741 1,466,369 338,299 34,479 458,564 2,297,711 312,964 295,305 1,689,442 76,974 1,612,468 36,268 58,293 1,707,029 (17,024) 1,690,005 153,637 450,496 1,085,872
2,042,110 575,741 1,466,369 338,299 34,479 458,564 2,297,711 312,964 295,305 1,689,442 76,974 1,612,468 36,268 58,293 1,707,029 (17,024) 1,690,005 153,637 450,496 1,085,872
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
B. Total Operating Income (A+3.3+3.4+3.5) 3.6 3.7 Staff Expenses Other Operating Expenses
C. Operating Profit Before Provision (B -3.6 - 3.7) 3.8 Provision for Possible Losses
D. Operating Profit (C -3.8) 3.9 3.10 Non Operating Income/Expenses (Net) Write Back of Provision for Possible Loss
E. Profit from Regular Activities (D+3.9+3.10) 3.11 Extraordinary Income/Expenses (Net)
F. Profit before Bonus and Taxes (E +3.11) 3.12 3.13 Provision for Staff Bonus Provision for Tax
G. Net Profit/Loss (F - 3.12 - 3.13)

* Loans and advances are shown net of provision
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Disclosure as per Banks disclosure policy under the Capital Adequacy Framework of Nepal Rastra Bank
1. Capital structure and capital adequacy

a. Tier 1 capital and a breakdown of its components; Core Capital (Tier 1) a b c d Paid up Equity Share Capital Proposed Bonus Equity Share Statutory General Reserves Retained Earnings As on 16.07.2010 3,050,711,879 1,398,483,600 209,772,540 1,412,491,047 29,964,692
Board and Senior Management Oversight

Bank 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.
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 Banks market risk and other related policies, giving due consideration to the prevalent market conditions.
b.Tier 2 capital and a breakdown of its components; As on 16.07.2010 479,782,034 160,784,471 241,090,057 1,626,300 76,281,207
Supplementary Capital (Tier 2) a General loan loss provision b Exchange Equalization Reserve c Investment Adjustment Reserve d Other Reserve (Deferred Tax Reserve)
c. Detailed information about the Subordinated Term Debts with information on the outstanding amount, maturity, and amount raised during the year and amount eligible to be reckoned as capital funds.
Comprehensive assessment of risks

Credit risk
Not applicable.
d. Deductions from capital;
NIL.
e. Total qualifying capital;
NRs 3,530,493,915
f. Capital adequacy ratio; 14.60%. g. Summary of the banks internal approach to assess the adequacy of its capital to support current and future activities, if applicable; and
Sound Capital Assessment

In 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
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 Risk
Operational Risk Management and Assurance Framework (ORMAF) adopted by the bank provides comprehensive
83
risk management tools for managing operational risk. The Operational Risk Management and Assurance Framework (ORMAF) defines how risks are 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: Operational Risk governance ensures consistent oversight across all levels regarding the execution and effectiveness of ORMAF. Operational risks are identified and graded at 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 (as a committee) assign ownership, 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. CORG determines final risk grading and ensures 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. The Business / Function Operational Risk Committees (ORCs) at Regional level oversee operational risks within businesses and functions across the Region. The GORC oversees operational risks at Group level with the support of the GORA team. The team assesses risks escalated by CORGs and Business / Function ORCs
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
reputational damage, ensure compliance with applicable laws and regulations and enhance resilience to external events. The effectiveness of the Companys 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 2066/67 and reported on its review to the Board. The Internal Audit monitors 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.
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 provides 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
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 EXPOSURES A Risk Weighted Exposure for Credit Risk B Risk Weighted Exposure for Operational Risk C Risk Weighted Exposure for Market Risk Total Risk Weighted Exposures (a+b+c) As on 16.07.2010 20,779,882,793 3,058,846,861 345,855,288
manner which enables it to maximize profitable business opportunities, avoid or reduce risks which can cause loss or
24,184,584,943
b. Risk Weighted Exposures under each of 11 categories of Credit Risk
No. Particulars 1 2 3 4 5 6 7 8 9 10 11 Claims on govt. and central Bank Claims on other official entities Claims on Banks Claims on corporate and securities firm Claims on regulatory retail portfolio Claim secured by residential properties Claims secured by commercial real state Past due Claims High risk claims Other Assets Off Balance sheet Items Total
Claim as on 16.07.2010 9,558,835,525 101,093,000 13,495,174,640 3,160,808,086 5,817,358,443 3,175,253,114 2,601,433,032 194,728,878 1,102,519,673 1,094,953,360 9,687,324,894 49,989,482,644
RWE as on 16.07.2010 Rs. 151,639,500 3,790,895,316 2,433,750,130 4,175,840,295 2,159,154,066 2,568,183,031 263,312,055 1,514,512,572 596,867,589 3,125,728,239 20,779,882,793
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
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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/Reschedule Loan NIL Substandard Loan Gross value Rs. 50,940,153, Net values Rs. 38,205,115 Doubtful Loan Gross value Rs. 2,175,186 Net value Rs 1,087,593 Loss Loan Gross value Rs. 45,020,388 Net value: NIL
The structure and organization of the relevant risk management function; The scope and nature of risk reporting and/or measurement systems; and Policies for hedging and/or mitigating risk and strategies, and processes for monitoring the continuing effectiveness of hedges/mitigants.
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. Credit approval authorities are delegated by Risk Committee to individual risk officer in WB and CB. We have a manual approval process in CB (other than SME) and on-line approval process in WB and SME, CB. The scope and nature of risk reporting and/ or measurement procedures are covered in the Country Portfolio 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 at least on a quarterly basis. Country Portfolio standards and PDD / credit operating manual outlines the Banks 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, Portfolio Standards also prescribe the frequency of valuation for different collateral types. Collateral held against impaired loans is maintained at fair value. The Risk Committee which formed by and received authority from the Management Committee is responsible for ensuring the effective risk governance and management of credit, market and operational risk throughout the bank.
b. Types of eligible credit risk mitigants used and the benefits availed under CRM. No. Credit Risk Mitigant 1 2 3 4 5 As on 16.07.2010
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 in the businesses and the approvers in the risk functions. All credit exposure limits are approved within a defined credit approval authority framework. A standard alphanumeric credit risk grade 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 on behalf of Risk Committee after support from the respective credit risk function at the group level. The SCB Nepal Board delegates its authority to approve credit, market and other risks exposures (Risk Authorities) to the Management Committee for onward delegation of these Risk Authorities to the Risk Committee. 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 probability of default is calculated using portfolio delinquency flow rates and judgement, where applicable.
e. NPA ratios
Gross NPA to gross advances 0.61 % Net NPA to net advances 0.25 %
f. Movement of Non Performing Assets

Year on year upward movement of Rs. 7,094,071.
g. Write off of Loans and Interest Suspense
Loans Write off during the year is Rs. 26,062,833 and interest suspense balance as on year end is Rs 136,165,591.
h. Movements in Loan Loss Provisions and Interest Suspense
Year on year upward movement in Loan Loss Provisions of Rs. 18,681,405. Year on year upward movement in Interest suspense of Rs. 18,518,726.
i. Details of additional Loan Loss Provisions
Provisions due to growth in the volume have been added. No major additional provisions have been made.
j. Details of additional Loan Loss Provisions Investment Portfolio Held For Trading Held To Maturity Available For Sale Net Amount (NPR) NIL 19,764,960,525 82,550,500
Deposits with Bank 1,188,169,863 Deposits with other banks/FI* 535,946,100 Govt. & NRB Securities 360,313,582 G'tee of Domestic Banks* 3,374,092 Sec/G'tee of Foreign Banks* 1,370,548,684 3,458,352,322
Total
* net of supervisory haircut
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: Strategies and processes;
85
Nepal Rastra Banks 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 2066/67 along with the following direction vide Letter no. Bai. Su.Bi /Offsite/AGM 10/067/68 dated 2067/05/28 (13th September 10) and to distribute as proposed by Board, the Cash Dividend of 55% and 15% of 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.
86
Five years Financial Summary

Balance Sheet
(figures in Rs. thousands)
Particulars Assets Cash and Bank Balance Money at Call and Short Notice Investments Loans and Advances Fixed Assets Other Assets Total Assets Liabilities Borrowings Deposits Other Liabilities Total Liabilities Shareholders Fund Paid Up Capital Proposed Bonus Shares Reserve (including Exchange Reserve) Undistributed Profit Total Shareholders Fund Contingent Liabilities Letter of Credit Guarantees Forward Exchange Contracts Other Contingent Liabilties Total Contingent Liabilties
2062-63 2005-06 1,276,241 1,977,271 12,838,555 8,935,418 101,302 638,565 25,767,352
2063-64 2006-07 2,021,021 1,761,152 13,553,233 10,502,637 125,591 633,055 28,596,689
2064-65 2007-08 2,050,243 2,197,538 13,902,819 13,718,597 117,272 1,349,319 33,335,788
2065-66 2008-09 3,137,164 2,055,549 20,236,121 13,679,757 137,293 820,687 40,066,570
2066-67 2009-10 1,929,307 1,669,460 19,847,511 15,956,955 118,540 691,547 40,213,320
23,061,032 952,181 24,013,213
400,000 24,647,021 1,433,315 26,480,336
29,743,999 1,099,242 30,843,241
300,000 35,350,824 1,363,277 37,014,101
35,182,721 1,660,889 36,843,610
374,640 112,392 896,522 370,585 1,754,139
413,255 206,627 991,746 504,725 2,116,353
620,784 310,392 1,178,084 383,287 2,492,547
931,966 465,983 1,415,025 239,495 3,052,470
1,398,484 209,773 1,731,489 29,965 3,369,710
1,837,398 2,046,063 362,646 938,720 5,184,827
1,861,944 2,389,969 1,121,870 1,480,339 6,854,122
1,857,994 2,800,467 193,985 1,287,338 6,139,784
3,120,879 3,687,373 1,332,126 3,031,614 11,171,991
2,627,212 3,248,829 1,223,147 2,588,137 9,687,325
87
Five years Financial Summary

Profit & Loss Account
(figures in Rs. thousands)
Particulars
2062-63 2005-06 1,189,603 303,198 886,405 222,929 25,442 283,472 1,418,247 168,231 221,087 1,028,930 47,730 981,200 1,433 53,090 1,035,723 (2,411) 1,033,312 93,937 280,619 658,756 251,336 658,756 910,092 487,033 37,464 15,011 -
2063-64 2006-07 1,411,982 413,055 998,927 221,207 28,785 309,087 1,558,006 199,778 228,451 1,129,776 36,809 1,092,968 9,492 20,160 1,122,620 (4,915) 1,117,705 101,610 324,427 691,668 370,585 691,668 74,928 1,062,253 77,229 330,604 206,627 17,996 -
2064-65 2007-08 1,591,196 471,730 1,119,466 276,432 32,594 345,653 1,774,145 225,256 230,571 1,318,318 69,885 1,248,432 1,683 90,635 1,340,750 (28,039) 1,312,710 119,337 374,452 818,921 557,724 818,921
2065-66 2008-09 1,887,221 543,787 1,343,435 288,031 33,191 427,468 2,092,125 253,056 276,327
2066-67 2009-10 2,042,109 575,741 1,466,368 338,298 34,479 458,564 2,297,709 312,964 295,305
Interest Income Interest Expenses Net Interest Income Commission and Discount Other Operating Incomes Exchange Fluctuation Income Total Operating Income Staff Expenses Other Operating Expenses Exchange Fluctuation Loss Operating Profit Before Provision for Possible Loss Provision for Possible Losses Operating Profit Non-Operating Income/ (Loss) Provision for Possible Loss Written Back Profit from Ordinary Activities Income/(Expenses) from Extra Ordinary Activities Net Profit after considering all Activities Provision for Staff Bonus Provision for Income Tax Net Profit/Loss Accumulated Profit up to Previous Year This Year's Profit Capital Adjustment Fund upto Previous Year Total General Reserve Fund Proposed Dividend Proposed Issue of Bonus Shares Exchange Fluctuation Fund Capital Adjustment Fund Other Appropriations Accumulated Profit/(Loss)
1,562,743 56,635 1,506,108 22,098 101,075 1,629,282 (15,356) 1,613,926 146,721 442,091 1,025,114 383,288 1,025,115
1,689,440 76,974 1,612,466 36,268 58,293 1,707,027 (17,024) 1,690,003 153,637 450,496 1,085,872 239,495 1,085,872
1,376,645 163,784 496,627 310,392 22,554 -
1,408,402 205,023 465,983 465,983 31,918
1,325,367 217,174 769,166 209,773 21,381 77,908
370,585
429,797
383,288
239,495
29,965
88
Disclaimer Standard Chartered Bank Nepal Limited is an Equal Employment Opportunity/ Afrmative Action employers. Standard Chartered Bank Nepal Limited is committed to providing equal employment opportunities to every employee and every applicant for employment, regardless 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 qualied 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 2009-2010 to reect events or circumstances after the date on which such statement is made. Information in this Annual Report is as of July 16, 2010.
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Leading The Way: in Asia, Africa and The Middle East

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Leading the way

in Asia, Africa and the Middle East

Annual Report and Accounts 2009-2010

(in NPR where applicable)

(Including Bonus Shares)

Business review overview

Financial Statements and Notes

Neeraj Swaroop, Chairman

Annual Report and Accounts 2009-2010

Business review overview

Profit After Tax in Rs. Mio

Market value per share in Rs.

Earning Per Share in Rs.

Return on Total Assets

The Year Ahead

Annual Report and Accounts 2009-2010

Business review overview

Total Shareholder Equity

Neeraj Swaroop Chairman

Leading the way in helping realize local dreams

Annual Report and Accounts 2009-2010

Krishna Textiles Udhyog

CEO & Directors Report

In Rs. 000s 16-Jul-10 1,612,467 76,974 450,496 1,085,872 209,773 769,166

In Rs. 000s 15-Jul-09 1,506,109 56,635 442,091 1,025,115 465,983 465,983

% Change 7% 36% 2% 6% (55)% 65%

Annual Report and Accounts 2009-2010

Business review overview

Customer Charter Workshop in progress

Launch of Priority Banking card

in the underlying businesses and disciplined management of risks and costs.

Outserve Plus - Continuously Improving the Way We Work

Annual Report and Accounts 2009-2010

Business review overview

Proposed Dividend and Bonus Shares

Sujit Mundul Director and CEO

Leading the way by touching lives

Annual Report and Accounts 2009-2010

Our Approach to Corporate Responsibility

Responsible selling and marketing

Contributing to the real economy

Tackling financial crime

Great place to work

Annual Report and Accounts 2009-2010

Business review overview

At a program organised to celebrate World Environment Day 2010

SCB staff volunteering during the Vitamin A Capsule distribution program

Celebrating the festival of Teej with our friends at Karuna Bhawan

Living with HIV

Annual Report and Accounts 2009-2010

Business review overview

Staff displaying placards on environmental awareness at the Head Office

Focus on Youth, Health, Education and Environment

Walking together for a noble cause-Walkathon 2009

Leading with our sustainable business strategy

Annual Report and Accounts 2009-2010

Bhotekoshi Power Company Pvt. Ltd.

Here for people, Here for good People Strength:

SCB Drama Mania

Annual Report and Accounts 2009-2010

Business review overview

External Extra Curricular Activities: