the Middle East in Asia, Africa and Leading the way Annual Report and Accounts 2007-2008 Accounts and Report Annual

Annual Report and Accounts 2007-2008 Leading the way in Asia, Africa and the Middle East Leading the way

Standard Chartered Bank Nepal Limited has been in operation in Nepal since 1987. The Bank is an integral part of Standard Chartered Group having an ownership of 75% and the balance owned by the Nepalese public. The Bank is the largest international bank currently operating in Nepal.

Standard Chartered has a history of over 150 years in banking and operates in many of the world’s fastest-growing markets in over 70 countries. Standard Chartered employs almost 75,000 people, representing over 115 nationalities, worldwide. This diversity lies at the heart of the Bank’s values and supports the Bank’s growth as the world increasingly becomes one market.

With 16 points of representation, 17 ATMs and more than 350 local staff, Standard Chartered Bank Nepal Ltd. is in a position to serve its customers through an extensive domestic network. In addition, the global network of Standard Chartered Group gives the Bank a unique opportunity to provide truly international banking services in Nepal.

Standard Chartered Bank Nepal Limited offers a full range of banking products and services in Wholesale and Consumer banking. The Bank has been the pioneer in introducing ‘customer focused’ products and services and aspires to continue to be a leader in introducing new products in delivering superior services.

Corporate Social Responsibility is an integral part of Standard Chartered’s ambition to become the world’s best international bank and is the mainstay of the Bank’s values.

Disclaimer What we stand for Standard Chartered Bank Nepal Strategic Intent Limited entities are Equal Employment Opportunity/ Affi rmative Action To be the world’s best international bank employers. Standard Chartered Bank Leading the way in Asia, Africa and the Middle East Nepal Limited is committed to providing equal employment opportunities to Brand Promise every employee and every applicant for Leading by Example to be The Right Partner employment, regard-less of, but not limited to, such factors as race, color, Values religion, sex, age, familial or marital status, ancestry, sexual orientation, Trustworthy Responsive Creative International Courageous veteran status or being a qualifi ed individual with a disability; and within the Approach legal framework of the country.

Participation Competitive Positioning Management Discipline Focusing on attractive, growing Combining global capability, Continuously improving the way we work, Standard Chartered Bank Nepal Limited markets where we can leverage our deep local knowledge and creativity balancing the pursuit of growth with firm undertakes no obligation to update any relationships and expertise to outperform our competitors control of costs and risk statement in this Annual Report 2007- 2008 to refl ect events or circumstances Commitment to Stakeholders after the date on which such statement is made. Information in this Summary Customers Our People Communities Investors Regulators Passionate about our Helping our people to Trusted and caring, A distinctive investment Exemplary governance Annual Report is as of July 15, 2008. customers’ success, grow, enabling individuals dedicated to making delivering outstanding and ethics wherever delighting them with the to make a difference and a difference performance and we are quality of our service teams to win superior returns Designed & Processed by: PowerComm, 5552987

Printed in Nepal Contents

Business Review

2 Chairman’s Statement 8 Directors Report 12 Our Approach to Corporate Responsibility 18 We believe in and are committed to-our people 22 Our Approach to Corporate Governance 28 Additional Information 32 Board of Directors 33 Management Team 36 Branches

Financial Statements and Notes to Accounts

37 Auditor’s Report 38 Balance Sheet 39 Profi t & Loss Account 40 Profi t & Loss Appropriation Account 41 Cash Flow Statement 42 Statement of Changes in Equity 43 Schedules 68 Signifi cant Accounting Policies 70 Notes to Accounts 74 Disclosure as per Bank’s disclosure policy under the Basel –II Capital Accord of Nepal Rastra Bank 77 Nepal Rastra Bank’s Approval and Directions 78 Five Years Financial Summary

Get more on Line Please visit us on line at www.standardchartered.com/np for more information on the Bank and its full range of banking services. Chairman’s Statement

Building the strong foundations for growth

I am delighted to report that Standard Chartered Bank Nepal Limited has delivered another year of record income and profi ts in FYE 2007/08. The Bank has been demonstrating consistent performance and achieving strong fi nancial results over the last few years. This clearly evidences that our investment program and strategies adopted for this market have been working successfully in accomplishing the desired results. We have yet again delivered on our promises to all our stakeholders. Nepal Team has done an excellent job in delivering these numbers against the backdrop of political and economic uncertainties prevailing in the country.

As a result of some improvement in the encompassing security and other conditions, it was possible for the Bank to invest in the expansion of its footprints and in launching of new and innovative products. These have had a positive impact in the Bank’s performance as refl ected in our FYE 2007/08 results and made it possible for the Bank to reward our loyal and supportive shareholders with high returns. Our deep understanding of the local market and relationships supported by management depth to execute our strategy are driving our ambition to achieve impressive growth on an ongoing basis.

We are now ideally poised to seize growing opportunities emerging from the national and international arena. We are also in a position to grow our geographical reach and to exploit our capabilities developed over the past few years. Standard Chartered continues to remain a strong brand in this market and We are now ideally poised to seize growing opportunities we want to live our brand promise to be The “ Right Partner-Leading by Example in a more emerging from the national and international arena. We are prominent manner in future. also in a position to grow our geographical reach and to exploit our capabilities developed over the past few years. ” Neeraj Swaroop, Chairman

2 Annual Report and Accounts 2007-2008 Results – A Synopsis are taking a toll in most of the emerging and developing economies. Against this backdrop, Financial Highlights Global growth is expected to decelerate in the second half of 2008, before possibly z Net Profi t after tax rose by 18.40% to recovering gradually in 2009. Rs. 818.92 million compared to Rs. 691.67 million in the previous year With declaration of Nepal as a Republic z Earnings per share is lower by Rs. 35.45 and successful completion of Constituent due to increase in the number of shares Assembly Election, FY 2007/08 has been last year a historical year for the country in terms of z Risk Assets increased by 29.41% to political developments. This has created Rs.13.96 billion positive business sentiment, which, along with z Deposits increased by 20.68% to better monsoon, has contributed to superior Rs. 29.74 billion economic growth of the country.

A Consistent Performance Nepal posted a GDP growth of 5.6 percent The Bank has been continuously delivering -- highest in seven years – during the FYE on its promises year on year. As a result of 2007/08. During the year, agriculture grew by another exceptional year, the Bank continues 5.7 percent and non-agriculture sector also to be one of the highest contributors to the expanded by 5.6 percent. This has raised per Government Exchequer by contributing capita income (GDP) to US$ 470. Rs. 381 million as compared to Rs. 324 million last year on account of Corporate tax. Increase in purchasing power due to double digit growth in remittances contributed to In accordance with the statutory requirements, the growth of Wholesale and Retail sectors the Board recommends a transfer of by 6.43 percent. Growth was witnessed in Rs.22,554,206 to Exchange Fluctuation Reserve from current year’s profi ts and the statutory transfer of Rs. 163,784,202 into General Reserve Fund. In congruence with 6,830 the revised capital requirements as stipulated by the Central Bank, the Board has proposed 5,900 to increase the capital by issuing 50% Bonus shares for which Rs.310,392,000 has been allocated from current year profi t. 3,775

2,345 Our Tier 1 and Tier 2 Capital Adequacy Ratios 1,745 were 12.15% and 1.85% respectively with an overall ratio of 14.00%. Our capital position 2003/04 04/05 05/06 06/07 07/08 is more than adequate and exceeds the current Nepal Rastra Bank’s capital adequacy Market Value Per Share requirement of 11.00% and also exceeds the international norms.

2.56 A Challenging Environment The slowdown in global economy, which started in later part of 2007, is expected to 2.46 2.46 continue through the second half of 2008. 2.42 The global economy seems to be in a tough spot having been caught between declining demand in many advanced economies 2.27 and rising infl ation. Whilst fi nancial market 2003/04 04/05 05/06 06/07 07/08 turbulence and the remains of sub-prime are worsening, the investor sentiment in advanced Return on Total Assets economies, rising energy & commodity prices

www.standardchartered.com/np 3 Chairman’s Statement continued

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

various segments of the economy including the percent. The upsurge in infl ation was mainly long-ailing hotel and restaurants sector which driven by signifi cant rises in the prices of food grew by 7.5 percent on the back of a robust and beverages coupled with the higher cost of rebound in tourists’ arrival. This has given a energy. much desired to the economy. However, owing to political uncertainties and deteriorating In FY07/08, total exports increased marginally industrial relations, the manufacturing sector by 2.4 percent in comparison to decline by declined by 1.4 percent. 1.4 percent in the previous year. In contrast, total imports increased signifi cantly by 16.1 The government expenditure rose by 18.5 percent compared to a rise of 12.0 percent percent to Rs. 148.6 billion. Such expenditure in the previous year. Consequently, the total had increased by 23.3 percent in the trade defi cit expanded by 22.2 percent in comparable period of the preceding year. The 07/08 compared to a growth of 19.2 percent budget defi cit (on cash basis) amounted to in last year. Rs. 21.20 billion during the period under review compared to the budget defi cit of Rs 18.8 billion Increased infl ow from remittances expanded in the same period of the preceding year. country’s total gross foreign exchange reserves to USD 3.1 billion (NPR 212.6 billion) as of mid The y-o-y consumer infl ation rose to 12.1 July 2008. This is suffi cient to cover import of percent in mid-July 2008, however the annual merchandise and service for 9.1 months. average consumer infl ation remained at 7.7 With the improved law and order situation in the country, Nepal received Rs. 9.8 billion worth of foreign direct investment 819 commitments in 07/08. 659 692 In line with the depreciation of the Indian 538 Rupees against the US dollar, the Nepalese 536 Rupee also recorded a weakening trend against USD and depreciated by 5.33 percent 2003/04 04/05 05/06 06/07 07/08 during FY 2007/08. Nepalese Rupee has a fi xed parity of 1:1.6 with the Indian Rupee. Owing to widening current defi cit with India Profi t After Tax and the increasing oil payments, market ran short of Indian currency (INR) and hence Nepal Rastra Bank purchased INR worth USD 1.37 billion in 07/08. 2,493 With the above-mentioned political developments, the government’s major focus 2,116 will be on reconstruction, infrastructure & hydropower with a GDP target of about 7 to 1,754 1,496 1,582 8 percent. However, achievement of such a growth rate will, to a great extent, depend upon 2003/04 04/05 05/06 06/07 07/08 political stability in the country.

Total Shareholders Equity Outlook for 2008/09 Agriculture sector is likely to grow by 5 to 6 percent. However, it will be largely dependant on the weather conditions. Improving rural

4 Annual Report and Accounts 2007-2008 security situation is expected to increase cultivation area, enhanced distribution of inputs and services, and raise farm productivity. Likewise, the Industrial sector is expected to grow by more than 4-5 percent in the coming FY. The government’s focus on increased infrastructural expenditures and better operating condition in manufacturing sector coupled with continued strong remittance-based consumer spending are expected to provide the requisite stimulus for the economy.

175.84 Service sector growth is also expected 167.37 to remain above 6 percent due to likely expansion in consumption along with increased 143.55 tourist arrivals in the country. Investment in 143.14 131.92 infrastructure projects by private sector is expected to grow; likewise capital injection is also expected to enhance rural infrastructure, 2003/04 04/05 05/06 06/07 07/08 rehabilitation and reconstruction activities. However, labor and industrial security issues Earning Per Share would be key factors to build investors’ confi dence. Giving credence to these factors, an overall 5-6 percent growth in the economy is considered achievable in the coming FY. In February 2008, we welcomed Mr. Anurag Adlakha and Mr. Sushen Jhingan who have Corporate Governance been nominated by the Standard Chartered Governance across the Bank is robust. Grindlays Australia in the Board of SCB Nepal Banking is relationship business and we highly replacing Mr. Jaspal Bindra and Mr. Shantanu value the relationships which we have with our Mitra respectively. We extend our sincere thanks own people, regulators, clients and the other to Mr. Jaspal Bindra and Mr. Shantanu Mitra for stakeholders and we want to be known as The their valuable contribution made to the Bank Right Partner for them. during their tenure as Chairman and Director on the Board. We are delighted to have Mr. Anurag We are committed to ensuring the integrity Adlakha and Mr. Sushen Jhingan on our Board of governance. In addition to the established who bring with them rich experience and insight committees, we have committees on Diversity in the banking sector. & Inclusion, Health & Safety, the Environment, Outserve Plus and Community Partnership. I, Neeraj Swaroop and Mr. Sujit Mundul, The initiatives taken by these committees have continue to represent the Standard Chartered added value to our stakeholders and delighted Group on the Board of Standard Chartered them. We believe good governance provides Bank Nepal Limited. clear accountabilities, ensures strong controls, instills the right behaviors and reinforces good In Conclusion performance. The global economic upswing seen in 2006, witnessed a clear downturn during 2007. US Mr. Arjun Bandhu Regmi replaced Mr. Niranjan economy was a major victim of this which is K.Tibrewala, to represent public shareholders now facing a period of weaker growth. US in the Board in the capacity of a Director, slowdown is certain to impact the rest of the who retired after completing his tenure on 7th world, dampen global growth and slow the January 2008. Mr. Arjun Bandhu Regmi was pace of trade. Although the overall Asian elected as a Director by the shareholders at the economy may not be an exception to this which 21st AGM held on 5th December 2007 and will will result in slowdown of growth rates, the continue representing the public shareholders in region however enjoys a degree of insulation the capacity of a Director for four years. We are this time due to stronger domestic demand, delighted to have him on our Board. I would economic resurgence in China and India, like to thank Mr Niranjan K Tibrewala for his growing trade links within Asia and stronger contribution during his tenure as a Director of policy responses from the governments and the Bank. authorities.

www.standardchartered.com/np 5 Chairman’s Statement continued

Building a sustainable business is an integral To fulfi ll our ambition of Massively Multiplying our part of our long-term strategy to enhance Leadership“ Capabilities, which is our key priority, we shareholder value. At Standard Chartered, we are determined to lead by example within have already put in place our plans to accelerate the the markets in which we operate. Apart from fi nding ways to drive economic growth, we development of talented people in our organisation. also want to help protect the environment and to have a positive impact on the societies ” where we live and work.

During the period of global economic We are very disciplined in the risks we take. downturn, Nepal however witnessed a We have had an impressive performance on relatively stable situation and recorded a the corporate loan portfolio and maintained a satisfactory growth as evidenced by FYE tight grip on consumer credit. Although there 2007/08 economic data. Consequently, are many potential risks and uncertainties your Bank was also able to come up with both in the national and the international good results primarily due to the focus and markets, our businesses are performing dedication put in by the management team strongly; we will not stop investing given the in creating shareholders value. Similarly, the opportunities we are seeing in our markets. Bank took a lead in gaining advantage in In the year ahead we will stick to our strategy leveraging market opportunities, meeting the and will continue to focus on deepening our international standards and in creating value relationships with our clients. We will continue by adhering to local practices. to be proactive and disciplined in managing our business. In the coming year, our focus We have been nurturing a pool of talented will be to register another year of good people with diverse background and a culture performance. that combines performance and a strong set of shared values. To fulfi ll our ambition We have left behind a decade of strife and of Massively Multiplying our Leadership discord and have ventured into the long Capabilities, which is our key priority, we have awaited era of peace and harmony. The already put in place our plans to accelerate Constituent Assembly elections have the development of talented people in our successfully been held and we are confi dent organisation. that this will pave the way in resolving the political instability as well as in improving Ministry of Finance and the Central Bank the security situation to attain higher level of deserve an appreciation in their efforts to drive economic growth and prosperity for `New fi nancial sector reforms in the country. We Nepal’. Given the positive developments, we welcome any move that is directed towards are optimistic about our future. strengthening and up-scaling the overall fi nancial system in Nepal. Regular guidance On behalf of SCB Nepal’s Board of Directors, and support received from our Regulators and I would like to thank all the stakeholders for the high level of governance of the Standard being our Right Partner. I would once again Chartered Group have been instrumental for like to thank our customers and shareholders us in consistently delivering sound results, for their invaluable & continuous support in maintenance of exemplary governance and our people for their professionalism, standards and in delivering superior range of enthusiasm and commitment. We look products and services in our market. forward to another good year. I reiterate our commitment to holding fi rm to our course I would also like to thank our invaluable in maintaining our lead position of the most customers and shareholders for vesting us profi tably growing commercial bank in the with their persistent encouragement, trust and country. loyalty. Your continued support and trust has enabled us to maintain our status of being the Best Bank in the country - Leading the Way and to live our brand promise of being The Right Partner – Leading by Example. Neeraj Swaroop Chairman

6 Annual Report and Accounts 2007-2008 Leading the way in helping realize local dreams We participated in the expansion project of Bhatbhateni Supermarket, Kathmandu Directors’ Report

In Rs. ‘000s In Rs. ‘000s The Directors present their report together 15-Jul-08 16-Jul-07 % Change with the Balance Sheet and statement of Operating Profi t 1,248,432 1,092,968 14.22% Profi t and Loss for the year ended 15 July 2008. The report is in conformity with the Transfer to General Loan Loss Provision 69,885 36,809 89.86% provisions of the Companies Act 2063 and the Provision for Tax 374,452 324,427 15.42% provisions of the Bank & Financial Institution Net Profi t After Provision and Tax 818,921 691,668 18.40% Act 2063 including the directives issued by Issue of Bonus Shares 310,392 206,627 50.22% the Nepal Rastra Bank. Proposed Cash Dividend 496,627 330,604 50.22% Standard Chartered Bank Nepal is in good shape and we continue to deliver strong fi nancial results. Through the disciplined execution of our strategy and the hard work 0.92%, which is amongst the best in the In addition to this, services were also of our team, we have delivered another industry. The provisions made are adequate extended to our customers through seventeen set of strong results. An increase in the net to cover all the potential credit losses of the ATMs located at different parts of the country. profi t after tax of 18.40% over last year Bank as of the balance sheet date. In line with our strategy to expand our to Rs. 819 million is commendable in the footprints and in response to our customer current business environment. This has been After transfer to general reserve Rs. 163.78 needs, the Bank added two new ATMs - at achieved by relentless focus on cost and risk million, exchange fl uctuation reserve Rs.22.55 Maharajgunj and Bhairahawa. management while pursuing limited business million, proposed dividend Rs. 496.62 million growth. and bonus share Rs.310.39 million, total Wholesale Banking retained earnings as at 15 July 2008 stood at In spite of the operating environment There is an increase of 29.41% in the volume Rs. 383.28 million. This performance refl ects continuing to be a challenging one, Wholesale of risk assets compared to last year (i.e from very good momentum in the underlying Banking Business grew at a fast pace. Rs. 10.79 billion to Rs.13.96 billion). business and disciplined management of risks Political uncertainties & security concerns The Bank has been able to manage the credit and costs. were major impediments & Businesses portfolio better as a result of which the loan faced periodic disruptions – more so in the loss provision balance has reduced to 245 Representation manufacturing sector. Expansion plans & new million this year from 288 million last year, As at 15 July 2008, the Bank maintained initiatives were kept on hold by most business similarly the ratio of Non-performing credit Fifteen points of representation which included houses. However our strategy to leverage to total credit has reduced from 1.83% to eleven Branches and four extension counters. on our Global presence and ability to deliver

Sale of Physical Gold Non Life Insurance Product We took the lead in introducing new features Non-life insurance product was launched to our ‘Sale of Physical Gold’ & introducing during the year in partnership with National new structured deposit products like GYM. Insurance Company (NIC). Through this We have also been scoping the market for product, the Bank has entered into the foray hedging FX, Interest & Price related risk of a range of Bancassurance products. through Derivatives & Options.

8 Annual Report and Accounts 2007-2008 innovative solutions gave us the edge over enhanced level of credit exposure. New competition in closing complex transactions. relationships were booked & big one-off opportunities were tapped successfully Our ability to add value to clients business though only after proper identifi cation of risk & & offer innovative products has been greatly mitigating the same to acceptable levels. The appreciated by our clients. The focus was also strategy has been successful in growing risk on making existing client relationships more asset without compromising on the quality of broad based in terms of product offering. the portfolio. We took the lead in introducing new features to our “Sale of Physical Gold’ & introducing Our challenge is to develop talent and we are new structured deposit products like GYM. investing heavily into training & knowledge We have also been scoping the market for enhancement - with the objective of hedging FX, Interest & Price related risk increasing productivity & grooming managers through Derivatives & Options. We worked for the future. over time to introduce advanced Credit Enhancement products like ECA backed Consumer Banking fi nancing & new products like Asset Backed Consumer Banking priorities continue to be Financing. product innovation, service excellence and investment for the future. The Bank’s ability to handle complex deals was best acknowledged when we won In the FY 2007/08, despite an array of Bank has entered into the foray of a range of the mandate for the Co Lead Arranger for challenges posed by the political conundrum, Bancassurance products (both life and non- one of the most prestigious Hydel Projects and continued shortage of fuel, Consumer life) which has enabled us to provide a whole in Nepal i.e. The Upper Tamakoshi Power Banking continues to focus on investments at gamut of fi nancial services to our customers Project. Likewise, the trust clients have the right pace and at the same time, increase under one roof. in the banks reputation for maintaining productivity and innovation. Even during this confi dentiality came to the fore as we were challenging period, we have managed the In order to revolutionize banking, the Bank the only bank approached for various quality of our assets. launched its state of the art Online Banking “Acquisition Financing” deals & we were able product. to successfully close them. Innovative products and quality of our service set us apart from the competition and Similarly, in order to enhance the plastic In an ever changing business environment delight our customers. In addition to regular money culture in the country, USD Credit Card we have grown faster than one could have improvisation of existing products, the Bank and Rupee Prepaid Card have been launched. aspired, given the sluggish macroeconomic introduced a number of new products. Non- scenario. We have managed to maintain the life insurance product was launched during The Bank also added two additional ATMs at credit quality of our portfolio & at the same the year in partnership with National Insurance Maharajgunj and Bhairahawa bringing the total time we have been supporting clients with Company (NIC). Through this product, the to 17 to cover all key locations.

Online Banking USD Credit Card and Rupee Prepaid Card ATM at Bhairahawa In order to revolutionize banking, the To enhance the plastic money culture in The Bank added its 17th ATM at Bank launched its state of the art Online the country, USD Credit Card and Rupee Bhairahawa in an effort to cover all Banking product. Prepaid Card have been added to the existing the key locations. product range.

www.standardchartered.com/np 9 Directors’ Report continued

In line with our customer feedback and Building Service Excellence - We are aspiration to extend our footprint, we have focusing on the customer in everything we plans to open two more branches in the year do with metrics and measures and taking 2008/09. end - to- end accountability for resolution of service issues that come to us to ensure We are also committed to launch SME better service behaviors’, better complaints business in Nepal. resolution and better customer experience.

The `Voice of Customer’ survey is an integral We are improving processes which are tool to gauge the level of satisfaction of our reducing complexity for our customers and customers. The Mystery Shopping Concept our people and making lives easier. that we launched gave us signifi cant insight to our business and our customers’ perception. Becoming Operationally Excellent - We are This is an ongoing journey and it is our challenging and continuously improving everyone responsible to look for ways of commitment that we will continue to add the ways of working that are ineffective or improving the way we work - challenging the value to our customers. ineffi cient and seeking creative improvement status quo, encouraging active involvement in opportunities by reviewing our processes improvement activities, sharing, collaboration Our brand promise is to be The Right Partner, ‘end - to - end’ to ensure Faster Delivery; and sharing of best practices amongst staff Leading by Example Higher Quality and Greater Effi ciency using members. Communicating and celebrating continuous improvement methods and tools. successes locally and across the Group Outserve Plus We are monitoring and measuring the results network is another way of sharing best Outserve Plus - Continuously Improving the and outcomes of all improvement activities. practices. Way We Work We are truly passionate about our customers Future Plans Outserve Plus & Continuously Improving the and therefore we are as committed to process After the successful holding of the Constituent Way We Work (CIWWW) is central to the improvements as we are to the sales process. Assembly elections, Nepal is now poised to Bank’s brand promise to “Lead by Example This means that operational excellence enter into a new era of political transformation. to be the Right Partner”. CIWWW looks at applies equally to all areas of the Bank. A more peaceful & stable socio-political our processes on an end- to- end basis situation will usher the country’s economic to “delight customers and build customer In this regard, we have in place, a Continuous growth. This will facilitate investment in loyalty PLUS make life easier and simpler for Improvement Implementation Plan (CIIP) to infrastructure sector which will require project both our customers and our staff. To achieve capture and track improvement projects/ fi nancing, resource mobilization and hedging this goal, the Bank is committed to become activities. capabilities. The Bank has invested heavily “Service and Operationally Excellent” and in the development of these capabilities in build a culture that naturally fi nds ways to Building a Continuous Improvement Culture order to deliver the right solutions for the continuously improve. We therefore believe - We are creating a culture across the prospective investors. that we must: Bank that makes continuous improvement 1. Build service excellence integral to everyone’s work and is aligned to Nepal, which has a huge potential to become 2. Become operationally excellent our values and ways of working by making a popular tourist destination, has already 3. Build a continuous improvement culture. witnessed a rise in the fl ow of tourists into

Standard Chartered Home Remit Sales Campaign for Commodity Derivatives The Bank launched standard Chartered Home SCB Nepal gave continuity to its effort to Remit to facilitate remittances emanating introduce Commodity Derivatives in Nepal from the Gulf region. with an objective to create awareness among the sales force of the Bank to enhance client and deals coverage.

10 Annual Report and Accounts 2007-2008 the country. This trend is likely to continue. endeavor to make a real difference. We will Similarly, the stunning economic growth of consciously drive and maintain our high level India and China is likely to offer signifi cant of governance. For our shareholders we shall opportunities for Nepal in the capacity strive to continue providing them with superior of a trade corridor. Appropriate policy returns. decisions to capitalize on these opportunities are expected to have a positive impact in Credit Environment propelling economic growth of the country Credit environment remained very challenging and in transforming the lives of common over the last FY. The adverse changes in people through their economic development. the global economy, security concerns and The formation of a stable government will political uncertainty in the country, rising provide the much needed impetus for infl ation level, increasing oil prices were economic growth. among the key factors impacting the country’s credit environment. Increase in the number procedures which are based on the premise The growing trend of inward remittances into of commercial banks and other fi nancial of clear strategy, focus on products and the country is likely to play a pivotal role in institutions contributed to further intensifying clients, rigorous monitoring, portfolio expanding the consumer market. competition in the industry. The industrialists diversifi cation and risk-return dynamics. and investors were seen to be in ‘wait and We are making continuous efforts to better watch’ mood which is refl ected in slow Auditor our revenue lines through innovation as well as growth in manufacturing sector. Although an CSC & Co; Chartered Accountants, were by introducing products which provide value improved GDP growth was achieved in FYE reappointed as Statutory Auditors for FY added fi nancial solutions to our customers. 2007/08 due primarily to good agricultural 2007/08 by the 21st Annual General Meeting Our prime objective is to provide safety to our production and expansion in tourism and of the Bank held on 5th of December loyal depositor base by maintaining a healthy service sectors, the desired economic growth 2007. They are eligible for reappointment net-worth base and liquidity position. As a is yet to be achieved. as Auditors for one more year. As per the Bank, we are resilient with a good appetite recommendation of the Audit Committee, this for risks as we have a strong balance sheet Besides the rising infl ation level, exports meeting will decide on the appointment of the coupled with our expertise in striking a good continued to decline. Export level of major auditor for next year. balance between risks and growth. We will items such as garments, carpets, vegetable combine our global capability, deep local ghee, plastic etc. witnessed a drop. The Proposed Dividend knowledge and creativity to outperform measures taken by the Indian government The 241st meeting of the Board of Directors competition. for the control of infl ation like import duty of the Bank has proposed dividend to the reduction, ban on exports of certain shareholders of the Bank for the year ended In line with our brand promise to be The commodities, etc also have had a bearing on 15 July 2008 at the rate of 80% in cash and Right Partner, we will continue to invest the Nepalese manufacturing sector. issue of bonus share of one for each two in our people, processes and systems so shares held. as to improve our quality of service for We have been able to maintain our credit customer delight. For our communities we will quality owing to our robust risk management

Straight 2 Bank Storming Session in Progress Mission ‘Outserve Plus’ Standard Chartered’s award-winning Staff of the Bank indulge in the morning or The Bank introduced Service Guarantee electronic platform, Straight 2 Bank afternoon huddles/storming sessions to fi nd for the fi rst time in Nepal covering select delivers more for our clients. ways to improve product and service delivery. products which entitles customers for fi nancial compensation if the products are not delivered within a stipulated time frame.

www.standardchartered.com/np 11 Our Approach to Corporate Responsibility

Building a sustainable business is an integral part of our long-term strategy through enforcement in shareholder value whilst helping to address the signifi cant social, economic and environmental issues the world is facing. By contributing to economic growth through our core business activities, we want to help protect the environment and to have a broader positive impact on the societies in which we live and work.

Increasing Access to Financial Services in Nepal, the Bank has been lending to rural Tackling Financial Crime Committed to bring majority of population development banks and NGO’s. Criminal activity related to fi nancial services of Nepal who are not in realm of fi nancial not only affects the Bank’s business, but also services into the mainstream economy, Sustainable Lending hurts our customers and the communities the Bank is improving access to fi nancial The Bank believes in minimizing the where we do business. Money laundering is services and helping them make an economic environmental impact of whatever it does the process through which the proceeds of contribution. thereby infl uencing its customers and crime are disguised and concealed. suppliers to do likewise through its sustainable The Bank considers that with the set up of lending practices and procurement processes. We strive to minimise the risk of our products more micro fi nance institutions, the lack of and services being used by moneylaunderers the credit delivery system to the unreached Standard Chartered Bank has a policy on by using a multi-layered approach which population of the country will be mitigated. The Environmental risk in lending since 1995. starts with ‘Know Your customer’ (KYC)/ Bank’s association with this business has been After 2003, Social and Ethical factors were Customer Due Diligence (CDD) procedure for long in that SCB Nepal is the promoter also included in the policy where each credit from the time a customer opens an account. of few rural development banks and Rural application, regardless of its size is required It also includes modern systems to screen Microfi nance Development Centre (RMDC). to be identifi ed, evaluated and if necessary, suspicious transactions. During 2007, we To facilitate onward lending to the rural mitigate the Social and Environmental risks. launched revised, more risk-based, ‘Customer population for the development of microfi nance Due Diligence’ (CDD) standards across Consumer Banking.

Micro Finance Summit Nepal 2008 Commodity Derivatives Workshop on UCP 600 In line with SCB Groups’ commitment to A presentation and interaction session on Inline with being at the forefront of developing contribute towards the microfi nance sector ‘Commodity Derivatives’ was organized by the banking standards in the local market, a worldwide, the Bank sponsored ‘Micro Finance Bank to create an awareness on the ‘Commodity workshop on UCP 600 was organised for our Summit Nepal 2008’, held during 14-16 Derivatives’. Girish Agnani - Associate Director –FX customers by the Bank. February 2008, in Kathmandu. Derivatives Sales, Mumbai, made an impact on the audience with his presentation on the subject.

12 Annual Report and Accounts 2007-2008 Leading by touching lives Vitamin A Capsule distribution to children between the age of 6 - 59 months within Kathmandu Valley Our Approach to Corporate Responisbility continued

The Bank believes that it has a responsibility to ensure The Bank sponsored the workshop - ‘Customer Service - Aiming for Excellence’ that it not only provides its customers with transparent which was organized by Minds Nepal. The event was attended by Business leaders, and helpful banking advice and products, but also CEOs of various banks and other local and educates them to better understand and manage their multinational companies. A presentation and interaction session on fi nancial needs as they grow. ‘Commodity Derivatives’ was organized by the Bank to create an awareness on the Responsible Selling and Marketing In 2007, we made good progress in three key ‘Commodity Derivatives’. Girish Agnani Supporting our customers to make the areas as part of our approach to managing - Associate Director –FX Derivatives Sales, right fi nancial decisions sits at the core of our people: Diversity and Inclusion (D&I), Mumbai, made an impact on the audience our business. The Bank believes that it has Employee Engagement and Health and with his presentation on the subject. The a responsibility to ensure that it not only Safety. event, fi rst of its kind in Nepal, was attended provides its customers with transparent and by ~45 corporate clients and Regulators. helpful banking advice and products, but Sharing of Best Practices also educates them to better understand and In line with sharing our best practices and Inline with being at the forefront of developing manage their fi nancial needs as they grow. being at the forefront of developing banking banking standards in the local market, a standards in the local market and our intent workshop on UCP 600 was organised for our In 2005, the policy on Responsible Selling of partnering the regulators in the reform customers by the staff of Bank. and Marketing came into effect after a high- process/policy changes, the Bank conducted level working group reviewed the products workshops/seminars on the following topics: Community Investment and processes and approved policies on For us, to be a successful business in the governance, assurance, data protection, As per our commitment to contribute towards long term, healthy workforce communities complaints handling and mis-selling. We the microfi nance sector worldwide, the Bank and economies are essential. Our work with want to set the standard for openness and sponsored ‘Micro Finance Summit Nepal local communities also helps to engage our transparency with our customers. 2008, held during 14-16 February 2008, in employees, provide opportunities for product Kathmandu. The Summit was organised by innovation and differentiate our brand. We Treatment of Employees Centre for Micro-Finance, Nepal. The event capitalize on our core skills and resources and At Standard Chartered we recognize aimed to unite microfi nance stakeholders have a strong belief that the long-term growth that it is increasingly important to have a in Nepal at one forum. Sujit Mundul- Chief depends not just on fi nancial performance but diverse, talented and engaged workforce Executive Offi cer Nepal, Joseph Silvanus- on working in partnership with stakeholders to drive the growth opportunities we have Regional Head of Development Organization, to build on our brand promise to Lead by in our markets. With rapid growth across South Asia and Anurag Mishra- Head of Example and be The Right Partner in the our franchise and changing customer and Origination and Client Coverage, Nepal, communities in which we operate. employee demographics, the Bank believes participated as the panelists at the three days that our innovative and sustainable approach session. Attended by 800 participants, the SCB Nepal has constituted Standard to managing our people is a source of event was a great success. Chartered Nepal Community Partnership competitive advantage.

VISCOSS Annual Scholarship Fundraising event ‘Walkathon’ Support to Laboratory School Kirtipur For the sixth year in a row, SCB Nepal SCB Nepal and Standard Chartered Nepal Bank supported Laboratory School Kirtipur, supported Village School - College Students Community Partnership Forum jointly conducted with fi ve sets of computers installed with Job Scholarship Programme - Nepal (VISCOSS annual fundraising event ‘Walkathon’ on Access With Speech (JAWS) in an endeavor - Nepal) by rewarding the students of Shree November 17, 2007. to help the visually impaired students to Mahendra Shanti Madhyamik Vidyala, Balkot, be familiar with computer skills and lead a Bhaktapur. dignifi ed professional career.

14 Annual Report and Accounts 2007-2008 Forum (SCNCPF) to undertake various Our work with local communities also helps to engage community initiatives in Nepal, which has been registered with District Administration Offi ce our employees, provide opportunities for product and has received affi liation from Social Welfare Council. This entitles exemption in income tax innovation and differentiate our brand. to individuals/corporates contributing to the entity.

‘Seeing is Believing’ and ‘Living with HIV’ are the two major initiatives of the Bank under its ‘Believing in Life’ campaign launched in 2003. 17, 2007 which witnessed an active support viz. Chhaimale, Keelagal, Panauti, Badegaun, and participation from all our stakeholders i.e, Thimi, Bajrabarahi, Gaushala, Balambu, Jhapa Seeing is Believing (SiB) staff, vendors, customers and the community and Bhairahawa. Having entered into its fi fth year, Seeing and made this event a great success. The is Believing (SiB) is an initiative led by our Bank has been conducting Walkathon –an Under the Phase II program of SiB, SCB employees, which has helped to tackle annual fund raising event every year since Group will be providing a fi nancial assistance preventable blindness and has proved highly 2003. to the extent of ~ USD 20, 000 for purchase successful in engaging staff and raising the of eye equipment for the upcoming profi le of Standard Chartered globally. Out of the 35 projects which have been Community Eye Hospital in Hetauda. indentifi ed to be funded and rolled out in On the SCB global network front, during 17 countries, Standard Chartered Group Taking our SiB initiative one step further, SCB Phase I, SiB restored the eyesight of 56,000 identifi ed Nepal for implementing ‘Vitamin Nepal made an arrangement to contribute people through cataract operations. Phase II A Capsule distribution’ project. The project 0.1% of its net retail transaction on domestic helped restore the sight of a million people. covers feeding of Vitamin A Capsule to Visa/Mastercard to SiB account. The goal of Phase III of SiB was to raise $10 children between the age of 6 – 59 months million by 2010 to make a difference to the within Kathmandu valley in partnership with During the year 2007/08, the Bank supported lives of 10 million people across 20 countries. Helen Keller International Nepal (HKI/N) and Laboratory School Kirtipur, with fi ve sets of We have already met this fundraising target, in collaboration with the Child Health Division computers installed with Job Access With three years ahead of schedule, and have a under MOH and NTAG twice a year-April & Speech (JAWS) in an endeavor to help the portfolio of 35 projects across 17 countries November. visually impaired students to be familiar with with projected benefi ciaries numbering computer skills. 10.3 million. Under the Bank’s Phase IV SiB To mark the World Sight Day on 11th of program, SCB Group has set a new vision of October 2007, an agreement was signed An exhibition cum sale of goods/handicrafts investing USD 20 million in sustainable eye between the Bank and Tilganga Eye Centre produced by visually impaired people of care services to 20 million people from 2008 (TEC) for screening 6000 eye patients and for Technical & Skill Development Centre for Blind to 2013 under the SiB. sponsoring 600 cataract surgeries. The Bank & Disabled was held at three Branches in has been instrumental in restoring sight to ~ Kathmandu to garner support for their income In Nepal, Standard Chartered Nepal 3,300 people till date. In FY 2007/08 alone, generating activities. Community Partnership Forum conducted a the Bank helped in restoration of sight to 700 fundraising event ‘Walkathon’ on November people. Eye camps were conducted in places

Vitamin A Capsule to children Fight against Avoidable Blindness Support for income generating activities Feeding of Vitamin A Capsule to children Dr. Sanduk Ruit, Director of Tilganga Eye An exhibition cum sale of goods/handicrafts between the age of 6 – 59 months within Centre (TEC) and CEO Sujit Mundul exchange produced by visually impaired people of Kathmandu valley with the support of SCB agreements to conduct 600 cataract surgeries to Technical & Skill Development Centre for Blind Group and in partnership with Helen Keller the underprivileged people for the year 2007/08. & Disabled was held at three Branches in International Nepal (HKI/N). Kathmandu to garner support for their income generating activities.

www.standardchartered.com/np 15 Our Approach to Corporate Responisbility continued

Living with HIV One of the Bank’s LwHIV Champion the Team for ICC World Cricket League Div 5 Living with HIV continues to be a key global represented the Bank at a workshop ‘HIV/ Cricket Tournament held in Jersey and for the programme for Standard Chartered. Our work AIDS at the workplace’ organized by FNCCI in ACC Trophy held in Kuala Lumpur, Malaysia. on HIV education through our ‘Living with collaboration with ILO on 5th & 6th December, The Bank has exclusive rights to brand the HIV’ programme are examples of how we 2007. This provided an opportunity to Senior National Cricket Team for its entire are making a difference to the lives of many showcase our LwHIV initiatives undertaken by overseas matches. We are proud to be the people whilst also helping to create healthy the Bank. co-sponsor of our National Team which has and stable workforces, another condition for brought many glories to the nation. sustainable economic growth. Similarly, workshops on LwHIV are being conducted for new joiners of the Bank by Environment In 2007, as part of our Clinton Global Initiative LwHIV Champions at regular intervals. The Bank has set up an Environment commitment to educate one million people Committee which undertakes various by the end of 2010, the Group partnered Our Focus on Youth, Health, Education and initiatives for the Environmental conservation with AIESEC, the world’s largest student Environment and awareness. organisation, to educate 300,000 students. For the sixth consecutive year, the Bank continued its support to the deserving On World Environment Day 2008, about 100 SCB Nepal has a pool of 11 members of students of Shree Mahendra Shanti High trees were planted in the New Road and Lake staff as Living with HIV (LwHIV) Champions School in Bhaktapur by providing incentives/ Side in Pokhara, few trees at Head Offi ce, who are entrusted with the responsibility scholarships through VISCOSS programme. Naya Baneshwore and Biratnagar branch. of extending the Bank’s HIV education In an endeavor to spread awareness on programme with the community so as to raise In an endeavor to support the fi re victims of the subject, our staff members displayed awareness on the pandemic. The Champions Bhutanese refugee camp, staff of the Bank placards with environment messages outside have been conducting HIV/AIDS workshops and their families donated old clothes to the our branch premises at all branches and targeting our customers, college students, affected families. made a pledge based on the Environment Manpower recruiting agencies etc. theme. In support of the victims who were severely SCB Nepal celebrates World Aids Day by affected by the fl oods in various parts of The Bank sponsored a program organised by rolling out number of activities. World AIDS the country in the second half of year 2007, Leadership for Environment & Development Day 2007 was celebrated by organizing the Bank provided relief measures such as – Nepal (LEAD Nepal) to mark the Earth Day various activities within the Bank. clothes, mosquito nets and blankets to the on 22 April which aimed to reduce vehicular victims through CARE Nepal and Nepal emission thereby combating the pollution and In an endeavor to accentuate the importance Red Cross Society. The Bank also made a creating awareness on the environment. of Voluntary Counseling Testing (VCT), donation of NPR 50,000 for this noble cause the senior staff of the Bank and LwHIV through Nepal Bankers’ Association. The Bank also entered into an agreement with Champions led by example and underwent Women Environment Preservation Committee VCT. VCT will be rolled out to our staff In the capacity of co-sponsor of Senior Nepal (WEPCO) for recycle of paper waste members in August 2008. National Cricket Team, SCB Nepal branded generated by the Bank.

Celebrating World Aids Day Sporting Pride Partnership for a cause World AIDS Day 2007 was celebrated by SCB Nepal Cricket Team were Runners up in SCB Nepal joined hands with a local club in organizing various activities within the Bank. the prestigious Soaltee Crowne Plaza Super Baneshwor to manage traffi c at the two key Sixes Tournament 2007. junctions of Kathmandu.

16 Annual Report and Accounts 2007-2008 Leading with our sustainable business strategy Incorporating social and environmental issues in our lending policies We believe in and are committed to-our people

Our People, Our Strength at the right place. Standard Chartered’s (GMP) launched in 2007 is Standard Our performance is a testament to the ‘strengths-based’ philosophy is one of the Chartered’s scalable approach to building strength of our business and more importantly cornerstones of our approach to talent management skills to take our people to our people. management. By identifying on employee’s managers’ performance to the next level. talents and strengths, and then creating the Nepal took the lead by being one of the early Our staff strength as of July 15, 2008 was 377 environment in which these strengths can countries in the SA Region to successfully full time equivalent staff as compared to 351 fl ourish, we enable our employees to do what conduct all the 4 modules of the GMP to full time equivalent staff as on July 16, 2007. they do best, every day. about 75 People Managers. The objective of As of date, the Bank has 14 staff who have the Program is to equip all our managers so completed more than 20 years, 85 staff who We are clear about our strategy and priorities that they bring positive impact on their team have completed more than 15 years and 29 of retaining our talented people and to and the business, staff who have completed more than 10 years massively multiply our leadership capabilities. of service with the Bank. The current male and We have a structured approach and process Learning@SCB Week female ratio of the Bank stands at 61:39. in place to achieve this priority. At Standard Chartered Bank we have always focused on the development and growth During the year under review, the number Through Great Managers Programme, we of our people. Our People are the pillars of of new hires doubled to 58 as compared to are constantly looking at developing and our business and to whom we have always 26 in the previous year. We stepped up our enhancing the knowledge and skill of our delivered on our commitment to help them to recruitment to support our business growth. managers and creating a highly engaged grow, enable individuals to make a difference environment in the Bank. and teams to win. Talent Management and Development Attracting and retaining the best talent, driving Great Managers Program To communicate this and to position Learning performance and engagement and building One of our top priorities is to Massively and Development as a key enabler to leadership capability are critical priorities for Multiply Our Leadership Capability (MMOLC). achieving the Bank’s strategic intent and to the Bank. We continue with our endeavour We believe that employee engagement create a value proposition around learning to leverage on the strengths of our people, is strongly linked to having great people and development for all employees of the having the right person, at the right time, managers. The Great Managers Program Bank and to announce a new online portal,

Outserve with Passion Celebrating Teej Interviewing Skills In our constant endeavour to improve on Our lady staff celebrating Teej, one of the most To enhance the interviewing skills of Hiring our service delivery standards & delight popular festivals of women folk in Nepal. Managers to identify good & talented customers, a workshop on ‘Outserve with resources for the organization, a workshop on Passion’ was held during the year. the `Interviewing Skills’ was held by the Bank.

18 Annual Report and Accounts 2007-2008 Leading the way through our talented and diverse team Making Standard Chartered a great place to work

www.standardchartered.com/np 19 We believe in and are committed to-our people continued

We aim to create an inclusive workplace environment A Great Place to Work We understand that people have a measure of where everyone has the opportunity to maximise their control over when, where and how they work. In order to maintain work life balance, we potential and perform to their very best. have been introducing new initiatives so that an individual’s right to a fulfi lled life inside and outside work, is accepted and respected to the mutual benefi t of the individual, business and society.

a learning week was celebrated successfully programs covered 379 staff with 505 man- In order to maintain a good work life balance from August 21 to 24, 2007. days. and a healthy lifestyle, HAPPY FRIDAY has been introduced during the period under Various engagement activities were organized Diversity and Inclusion review. The aim of this initiative is to create an during the week with overwhelming response Diversity & Inclusion creates a long term environment to allow and encourage people and participation from our people. commitment and forms an integral part of our to leave offi ce on time so that they get an Strategic Intent, brand and values. opportunity to attend to their personal needs As compared to last year, the training man- and to pursue other areas of interest apart days increased signifi cantly in the year under While the working environment in the Bank from banking. review. This year we spent 1665 man-days can be fast paced and demanding, we aim in learning and developmental programs. to create an inclusive workplace environment The Bank has been growing at a rapid pace Learning environment was created in the Bank where everyone has the opportunity to over the last few years and our vision is to by rolling-out In-house trainings, local trainings maximise their potential and perform to their become the World’s Best International Bank, by external trainers/ organizations, on the very best. We have taken quite a few steps in Leading the Way in Asia, Africa and the Middle job, Global trainings and trainings conducted enhancing work life balance. East. Alongside attracting talented individuals, in the country with the help of Organization we continue to focus on creating the right Learning (OL) or Sales Academy Team. In addition to various initiatives driven by environment to retain our employees. This the Bank internally to continuously review process begins from the day an individual Sales Leadership, 5C’s Sales Process, Time and address issues, drive work life balance joins the Bank. The Group has designed a Management, Interviewing Skills, Outserve initiatives/programmes to create awareness, ‘Right Start’ Induction Programme for new with Passion, Great Managers Program, the Bank also partnered with an NGO, joiners which offers each individual a carefully Facilitation Skills, How to be an Impactful Rakshya Nepal to launch an initiative that planned stimulating journey so that they Presenter, SPORT, Corporate Credit focuses on a very common problem - school are quickly integrated into the main-stream Curriculum 3-4, Great Managers Program, bullying. organization. Networking Skills, Managing Career Growth for Managers and Managing Career Growth We believe that D&I will help us sustain strong A total of four Country Induction programs were for Employees were conducted with the business performance and competitive conducted during the year for 52 New Joiner’s support from SCB Organization Learning advantage by not only ‘doing the right’ thing fi scal year covering 78 man-days. Country Team and Sales Academy Team. These global but also making this a `socially responsible Induction programs are facilitated by the initiative’. Management Committee (MANCOM) members.

Training on Leadership Learning @ SCB Seeing is Believing SCB Nepal staff attending a Leadership CEO Sujit Mundul handing over prizes to award SCB Nepal organised an eye camp at the Training Programme organised locally. winning staff during the learning week. Bhutanese Refugee Camp in Jhapa in an effort to further its Seeing is Believing initiative.

20 Annual Report and Accounts 2007-2008 Career Development Opportunities In addition to the cash rewards, our people’s We focus on the career growth of our talented people which has been helping our people to extraordinary contributions are rewarded by excellence plan and develop their career path. awards, appreciation letters and learning and The Group’s internal Job Watch posting provides career opportunity to our staff development opportunities. aspiring to take their career to the international heights. Other than regular short term cross border attachments, about 15 of our people have already had an opportunity to pursue male colleagues extended their appreciation During the period under review, our people their career at other SCB Group points. by joining in this celebration. participated in The Soaltee Crowne Plaza Opportunities are also provided to our people Super Sixes Cricket Tournament, Annapurna to develop their career through cross-functional Similarly, D & I Committee and SCB Cultural Third Corporate Snooker Tournament, Inter- moves. Altogether fi fty one staff were provided Committee of the Bank got together to Bank Volley Ball Tournament, Inter-Bank with an opportunity to learn and grow through celebrate – FUNDAY. The event also coincided Quiz Competition and Fifth DHL Six-A-Side cross-functional moves this year. with the International Women’s Day on March Soccer Tournament. Bank’s Cricket Team 8. The event was fun-fi lled with outdoor bagged the prestigious ‘Runners-Up’ title in Engagement games. Games were also organized for the Soaltee Crowne Plaza Super Sixes Cricket Our brand promise, ‘Leading by Example to children of our staff members. This one day Tournament. be The Right Partner’, means living the Bank’s event provided an opportunity to our people core values. The values are the heart and to completely unwind themselves in the We continue to raise the bar on performance soul of the brand and they make Standard company of their colleagues, their family and by increasing the performance culture within Chartered a great place to work. In the year derive lots of fun. the Bank. Our approach towards rewarding under review we continued to maintain 100% employees is closely aligned to performance. voluntary participation of our people in the A team of 13 staff from various departments In addition to the cash rewards, our people’s Q12 annual engagement survey conducted got the opportunity to participate in the extraordinary contributions are rewarded by by Gallup to measure employee engagement. Regional Standard Chartered Cricket excellence awards, appreciation letters and The overall engagement score for the country Challenge 2008 held in Mumbai from 2 April. learning and development opportunities. improved during the year under review. They also receive recognition for their Other than internal events, our people are also contribution both locally and globally through To build excitement, enjoyment and at the given opportunities to participate in various various internal communication channels same time unleash the hidden potential/talent events organized by other corporate houses. like Newsletters, Weekly Roundups and of our people, the Bank has been conducting The objective of participation from the Bank Community Roundups. In addition, sharing various activities. is essentially to extract fun, engagement and in the Group’s successful performance, our to develop networking with colleagues within people are benefi ting by participating in the The Bank organized and celebrated TEEJ, a and outside the organisation. Group’s Sharesave scheme. unique and important festival for women. The

Fun Day - 2007 Blue & Green Week Staff Engagement Event SCB Nepal staff and their family members SCB Nepal Celeberated Blue & Green Week Staff competing in Table Tennis tournament came together to participate in the events between 23-27 June. During the Staff Townhall, organised to mark Staff Engagement Events. organised to mark Fun Day. CEO felicitated Ms. Susmita Maskey, the team leader of First All Nepal Inclusive Women’s Expedition Team to Mt. Everest.

www.standardchartered.com/np 21 Our approach to corporate governance

The Board of Standard Chartered Bank matters specifi cally reserved for its decision. Audit Committee Nepal Limited is responsible for the overall These matters include determining and As required by the local regulations, the Board management of the Company and for reviewing the strategy of the Company, annual has formed an Audit Committee with clear ensuring that proper corporate governance budget, overseeing statutory and regulatory terms of reference. The Audit Committee standards are maintained. The Board is also compliance and issues related to the meeting is normally held on a quarterly basis. responsible & accountable to shareholders. Company’s capital. The Board is collectively The Committee reviews internal audit reports, responsible for the success of the Bank. Nepal Rastra Bank Inspection reports, Statutory The report describes how the Board has Audit reports, Bank’s fi nancial condition, internal applied the principles and provisions of the During the year under review, the Board held audit/controls issues, compliance issues, etc. Nepal Rastra Bank directives on Corporate 14 board meetings of which 2 were held by The Committee provides guidance/feedback to Governance and the provisions of Company circulations. The Directors are given accurate, the Management through the Board of Directors Act 2063 (the “Corporate Governance Code”). timely and clear information so that they as appropriate. The directors confi rm that: can maintain full and effective control over strategic, fi nancial, operational, compliance The Independent/Professional Director – throughout FY 2064/065, the Company and governance issues. chairs the Committee for ensuring complete complied with all the provisions of the independence. The composition of the Audit Corporate Governance Code. The following table shows the number of Committee as on 15/07/2008 is as follows: Board and Audit Committee meetings held – throughout FY 2064/065, the Company during the year: Ram Bahadur Aryal - Non Executive Director complied with the listing rules of Nepal Stock - Chairman Exchange Limited. Audit Anurag Adlakha - Director - Member Board Committee Sushen Jhingan, Director - Member – the Company has adopted a code of Number of meetings in FY 2064/065 14 Gopi Krishna Bhandari - Member conduct regarding securities transactions Jaspal Bindra * 4/10 - Shobha Bahadur Rana - Member Secretary by directors on further terms no less than Sujit Mundul 14 - required by the Nepal Rastra Bank Directives Shantanu Mitra * 4/10 - All members of the Audit Committee are and the Company Act and that all the Neeraj Swaroop 11 1 either non-executive directors or independent Directors of the Bank complied with the Code Niranjan K Tibrewala * 8/8 - of business. The responsibilities of the of Conduct throughout FY 2064/065. Ram Bahadur Aryal 14 4 Committee are in congruence with the Anurag Adlakha * 2/4 - framework defi ned by the NRB Directives and The Board Sushen Jhingan * 4/4 1 the Company Act. As at the date of this report, the Board is Arjun Bandhu Regmi * 6/6 - made up of the Non-Executive Chairman, one Management Committee * Mr. Anurag Adlakha and Mr. Sushen Jhingan were Executive Director and four Non-Executive The Management Committee (Manco) nominated by the SCGL, Australia in the Board of Directors of which one is independent/ represented by all Business and Function SCB Nepal on 1st February 2008 replacing Mr. professional Director appointed as per the Heads of the Bank is the apex body that Jaspal Bindra and Mr. Shantanu Mitra respectively. regulatory requirement and one Director, manages the Bank’s operation on a day to Mr. Arjun Bandhu Regmi was elected from the public representing the public shareholders. The day basis. Manco meets formally at least once shareholders in the Board of SCB Nepal on 8th Board composition complied with the a month and informally as and when required. January 2008 replacing Mr. Niranjan Tibrewala. Mr. regulatory requirements. Four Directors The strategies for the Bank are decided and Jaspal Bindra attended two Board meetings through including the Non-Executive Chairman are monitored on a regular basis and decisions his alternate Director Mr. P R Somasundaram. Mr. nominated by the SCB Group for four years are taken jointly by this Committee. The CEO Neeraj Swaroop attended four Board meetings term at a time to represent it in the Board Chairs the Manco. in proportion to its shareholding. The Board through his alternate Director Mr. Ranjan Ghosh. meets regularly and has a formal schedule of Mr. Anurag Adlakha attended two Board meetings through his alternate Director Mr. Rajeev Uberoi.

22 Annual Report and Accounts 2007-2008 Leading the way through a collective vision Formulating strategies to lead the way in Nepal Our Approach to Corporate Governance continued

management culture. The principles of risk The effectiveness of the Company’s internal control management followed include: • Balancing risk and reward. system is reviewed regularly by the Board, its • Disciplined and focused risk taking to committees, Management and Internal Audit. generate a return. • Taking risk with appropriate authorities and where there is appropriate infrastructures and resource to manage them. • Anticipating future risks and ensuring As at the date of this report, the composition The effectiveness of the Company’s internal awareness of all risks. of the Manco was as follows: control system is reviewed regularly by the • Effi cient and effective risk management Board, its committees, Management and and control to take competitive advantage. Manco Internal Audit. The Audit Committee has Ultimate responsibility of the effective Mr. Sujit Mundul, Chief Executive Offi cer reviewed the effectiveness of the Bank’s management of the risk rests with the Board. Mr. Anurag Mishra, Head Origination and system of internal control during the year The Audit Committee, within an authority Client Coverage and provided feedbacks to the Board as delegated by the Board, reviews risk areas Ms. Anju Sharma, Head Consumer Banking appropriate. and monitors the activities of Management Mr. Resta Jha, Head Financial Markets Committee (Manco), Country Operational Risk Ms. Rakhi Singh, Chief Financial Offi cer The Internal Audit monitors compliance with Group (CORG), Asset and Liability Committee Mr. Sudesh Khaling, Chief Information Offi cer policies/standards and the effectiveness (ALCO), and Credit Risk Management Mr. Krishna Bhattarai, Head Legal & of internal control structures across the Committee (CRMC). Compliance Company through its program of business/ Mr. Diwakar Poudel, Head Corporate Affairs unit audits. The Internal Audit function is The committee governance structure seeks Ms. Bina Rana, Head Human Resources focused on the areas of greatest risk as to ensure that risk management standards Mr. Gopi Bhandari, Chief Credit Risk Offi cer determined by a risk-based assessment and policies are cascaded down through the methodology. Internal Audit reports are organization from the Board to business and Relations with Shareholders periodically forwarded to the Audit Committee. The fi ndings of all audits are reported to the functional level. Information is communicated The Board recognizes the importance of good through the functional, business committees communications with all shareholders. There Chief Executive Offi cer and Business Heads for immediate corrective measures. to the Board which seeks to ensure that key are regular information, both fi nancial as well risk issues are addressed at the appropriate as non-fi nancial, published by the Company level and to provide assurance that standards for shareholder’s information. The AGM is Risk Governance and policies are being followed. used as an opportunity to communicate with Through its risk management framework all the shareholders. the Bank seeks to effi ciently manage credit, market and liquidity risk which arise directly Credit Risk The notice of the AGM, as required by the through the Bank’s commercial activities as Credit risk is the risk that counterparty to Company Act, was sent to shareholders at well as operational, regulatory and reputational a fi nancial instrument will cause a fi nancial least 21 days before the date of the meeting risks which arise as a normal consequence of loss to the Company by failing to discharge at their mailing address available in the any business undertaking. an obligation. Credit exposure includes Company’s record. In addition to that the individual borrowers and connected groups notice and agenda of the AGM were also As part of this framework, the Bank uses of counterparties and portfolios, in the published twice in the national level daily a set of principles that describe its risk banking and trading books. Standards are newspaper for the shareholders information.

Internal Control The Board is committed to managing risks and to controlling its business and fi nancial activities in a manner which enables it to maximize profi table 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 identifi cation, risk evaluation risk mitigation and control/ monitoring.

Risk Committee Structure

24 Annual Report and Accounts 2007-2008 approved by the Board and the delegation of To ensure that the key operational risks are managed in credit authorities are overseen by the CEO. Procedures for managing credit risk are a timely and effective manner, a framework of policies, determined at the business level with specifi c policies and procedures being adapted to procedures and tools has been established within the Bank different risk environment and business goals. Business risk offi cers are in place to maximize to identify, assess, monitor, control and report such risks. the effi ciency on decision making. The Credit Risk Management Committee reviews and monitors the Bank’s Assets Portfolio. to supervise and manage the operational expected by stakeholders in the way in risk in the Bank. A Country Operational Risk which business is conducted. It is the Bank Market Risk Market risk is the exposure created by potential Group (CORG) is in place to supervise and policy that, at all times, the protection of the changes in market prices and rates. The Bank direct the management of operational risk at Bank’s reputation should take priority over all is exposed to market risk arising principally country level whilst Business and Functional other activities, including revenue generation. from customer driven transactions. The Operational Risk Groups are responsible Reputational risk is not a primary risk, but may objective of the Bank’s market risk policies for managing business and functional level arise from the failure to effectively mitigate one and processes is to obtain the best balance of operational risk in the Bank. Similarly, each or more of credit, liquidity, market, legal and risk and return while meeting our customers’ unit in the Bank has a Unit Operational Risk regulatory and operational risk. It also arises from requirements. Market risk is managed by Asset Manager responsible for managing the the failure to comply with social, environmental and Liability Committee (ALCO) which agrees operational risk at the unit level. and ethical standards. A Reputational Risk policies and levels of risk appetite. Committee within the Bank has been established Bank’s existing operational risk management which meets at regular intervals to review and system has been further strengthened monitor this risk. All employees are responsible Liquidity Risk by creating a separate unit viz. Country for day to day identifi cation and management of Liquidity risk is defi ned as the risk that the Operational Risk Management & Assurance reputational risk. Bank either does not have suffi cient fi nancial headed by a Senior Manager. The unit resources available to meet all its obligations commenced independent Assurance Reviews and commitments as they fall due, or can Capital Management and Reporting from April 2008. access them only at excessive costs. It is the The Bank’s capital management approach policy of the Bank to maintain adequate liquidity is driven by its desire to maintain a strong at all times and for all currencies, and hence, to Regulatory Risk capital base to support the development of its be in a position to meet all obligations as they Regulatory risk includes the risk of non- business and to meet the regulatory capital fall due. The liquidity risk is managed both on compliance with the regulatory requirements. requirements at all times. a short term and a medium terms basis. In the The Bank has implemented appropriate short term, the focus is on ensuring that the compliance framework, policies and procedures As Capital is the centerpiece of the Bank’s cash fl ow demands can be met through asset and has effectively managed the regulatory performance matrix, a sound capital maturities supported by customer deposits risk. While compliance team is responsible for management forms the very core of the overall and wholesale raisings where required. The establishing and maintaining the compliance risk, performance landscape to ensure that the Asset/Liability Management Committee (ALCO) compliance of such policies and procedures is Bank delivers on its objective of maximizing the meets at regular intervals to review the Deposit/ the responsibility of each employee. shareholder’s value. The senior management Investment strategy of the Company and of the company is engaged and responsible for regulatory compliance. The ALCO is responsible Legal Risk prudent capital management at all times. for both statutory and prudential liquidity. Legal risk is the risk of unexpected loss, including reputational loss arising from In compliance with the regulatory requirement of increasing the capital base as prescribed by Operational Risk defective transactions or contracts, claims being made or some other event resulting the Central Bank, the Bank has a well drafted Operational Risk is the risk of direct or indirect in liabilities or other loss for the Bank, failure capital plan in place. The Bank is comfortable in loss due to an event or action resulting from to protect the title to and ability to control meeting the minimum capital requirements and is the failure of internal processes, people and the rights to assets of the Bank (including very strongly positioned to meet the performance systems, or from external events. To ensure intellectual property rights), changes in the law, benchmarks as outlined in the plan. that the key operational risks are managed in or jurisdictional risk. The Bank has appropriate a timely and effective manner, a framework legal framework, policies and procedures in The capital plan takes the following into account: of policies, procedures and tools has been place and has effectively managed the legal • Regulatory Capital requirements established within the Bank to identify, assess, risk. Legal risk is managed by the Legal Team. • Increase in the capital required due monitor, control and report such risks. to projected business growth, market uncertainties and stresses. A robust Operational Risk Management and Reputational Risk Reputational Risk is the risk of failure to meet • Available sources of capital and capital Assurance Framework (ORMAF) has been raising options established as per SCB Group guidelines the standards of performance or behaviors,

www.standardchartered.com/np 25 Our Approach to Corporate Governance continued

Crisis Management Baneshwore. We are also in the process 5. Combatting fi nancial crime: Staff must The Bank has in place a Crisis Management of replacing our existing chairs with Group comply with laws, regulations and Group Plan and a Country Crisis Management Team recommended safer chairs for our entire staff standards on money laundering, terrorist to manage and resolve effectively serious members. fi nancing and fraud prevention. crisis that may affect the operations of the 6. Avoid confl icts of interest: Staff are Bank. In addition to this the, Bank has a We believe these actions will undoubtedly help responsible for identifying confl icts of detailed Business Continuity Plan (BCP) to our brand stand out from our competitors. interest. Once these have been identifi ed manage disruptions of operations and a Ultimately they underpin our business and will staff must take immediate steps to resolve Disaster Recovery Plan (DRP) to manage help us to grow stronger. the problem. Defi nitive guidelines can be Technological problems. found in the Group and Business Confl icts Group Code of Conduct – Summary of Interest Policies and Procedures. Health, Safety and Security 1. Comply with laws, regulations and Group 7. Do not deal in shares when in possession We consider the health and safety of our standards: Staff are individually responsible of inside information: Staff must comply people and the integrity of our business as for complying with the spirit, not just the with the Group’s Personal Account Dealing most important aspect of our operations. letter, of laws, regulations and Group Policy to eliminate the risk of insider We regularly conduct audits of Health & standards. dealing. Safety and Environment Management 2. Reject bribery and corruption: Staff must 8. Treat customers fairly (TCF): Staff must and conduct inspections of buildings and not give or accept bribes nor engage in follow the Group’s seven TCF standards. departments to provide assurance to all any form of corruption. 9. Respect customer confi dentiality: Staff stakeholders that risks are being managed 3. Avoid being compromised by gifts and should not disclose customer or Group effectively and that there is a healthy and entertainment: Staff must not offer, give or data unless authorised to do so. safe working environment for both our staff accept inappropriate gifts or benefi ts to 10. Treat people fairly and with respect: and our customers. As part of Health & or from third parties. Defi nitive guidelines All employees are entitled to a safe Safety corrective action plans, the Bank can be found in the Group Gifts and working environment that is free from during the year has invested in constructing Entertainment Policy. discrimination, bullying and harassment. a new emergency escape staircase at our 4. Speak up: Staff must Speak Up if they 11. Responsibilities to our communities and Head Offi ce building and uplifted/renovated suspect, or know of, any actual, planned regulators: Staff must be responsive the cafeteria facility for the staff apart from or potential behaviour that breaks, or may to their communities and demonstrate redesigning and renovating work areas in break, any laws, regulations or Group exemplary governance at all times. many parts of Head Offi ce building in Naya standards. Details are contained in the Speaking Up Guide.

26 Annual Report and Accounts 2007-2008 Leading with innovative products and services Introducting innovative fi nancial solutions in Nepal

www.standardchartered.com/np 27 Additional Information as required by section 109 of the Companies Act 2006

Achievements of the current year as of the security concerns were major impediments date of preparation of the report, and opinion & Businesses faced periodic disruptions. of the Board of Directors on future actions Expansion plans & new initiatives were kept on hold by most business houses. However Un-audited fi rst month result of the current our strategy to leverage on our Global fi nancial year is as follows: presence and ability to deliver innovative (Rs.) solutions gave us the edge over competition Risk Assets: 13.75 billion in closing complex transactions. Deposits: 31.61 billion Operating profi t: 111.09 million We were able to expand our footprint and Profi t before bonus and taxes: 106.87 million bring about new customer centric products. Net profi t for the period: 66.55 million Similarly the Bank was able to manage its risks very well and has imbibed a strong The Bank shall continue to invest in the right governance culture. platform and continue to expand its footprint. It will continue to strike a good balance Our ability to add value to clients business between growth and revenue. Similarly strong & offer innovative products has been greatly vigilance shall be maintained over quality of appreciated by our clients. The focus was also assets and risks. More innovative products on making existing client relationships more shall be introduced to add value to our broad based in terms of product offering. We customers. Rather than product centric we took the lead in introducing new features to shall be customer centric and will continue our “Sale of Physical Gold” & introducing new to improve the way we work to delight our structured deposit products like GYM. We have customers and other stakeholders. We also been scoping the market for hedging FX, will also continue to invest on our people Interest & Price related risk through Derivatives through cross border placements, training & & Options. We worked over time to introduce knowledge enhancement and other measures advanced Credit Enhancement products like in order to promote a meritocratic work ECA backed fi nancing & new products like performance culture and with the objective of Asset Backed Financing. increasing productivity & grooming managers for the future. The Bank’s ability to handle complex deals was best acknowledged when we won A review of the business during the mandate for the Co Lead Arranger for one of the most prestigious Hydel Projects the previous year in Nepal i.e. The Upper Tamakoshi Power In spite of the operating environment Project. Likewise, the trust clients have continuing to be a challenging one, the Bank in the banks reputation for maintaining has done very well in managing its banking confi dentiality came to the fore as we were operations in entirety. Political uncertainties & the only bank approached for various

28 Annual Report and Accounts 2007-2008 “Acquisition Financing” deals & we were able Changes made in the Board of Directors, and to successfully close them. reasons therefore There have been changes in the Board of In an ever changing business environment Directors. Director Niranjan K Tibrewala we have grown faster than one could have representing Public Shareholders retired aspired, given the sluggish macroeconomic after completion of his tenure and Mr. Arjun scenario. We have managed to maintain the Bandhu Regmi has been elected as Director credit quality of our portfolio & at the same in the 21st AGM of the shareholder. His tenure time we have been supporting clients with as Director of the Company commenced from enhanced level of credit exposure. New 8th January 2008. After resignation of Jaspal relationships were booked & big one-off Singh Bindra, Chairman from the Board, opportunities were tapped successfully the Standard Chartered Grindlays Limited though only after proper identifi cation of risk & Australia (SCGL) nominated Anurag Adlakha mitigating the same to acceptable levels. The as Director to replace him effective from 1st strategy has been successful in growing risk February 2008. SCGL, Australia nominated asset without compromising on the quality of Sushen Jhingan replacing Shantanu Mitra the portfolio. effective from 1st February 2008.

Impact, if any, of the national and international Main factors affecting the business situation upon the business of the company Domestic political, economic climate and The internal political and economic climate security concerns coupled with scarcity of coupled with the increase in oil and food fuel and increased fuel and food prices and prices affected our growth ambitions to some frequent Bandhs impacted our business & extent. Businesses faced periodic disruptions to some extent. Security concerns were major impediments & Businesses faced periodic disruptions – more Board of Directors’ Reaction to Remarks so in the manufacturing sector. Expansion made, if any, in the Audit Report plans & new initiatives were kept on hold by There are no adverse remarks made in the most business houses. However the Bank auditors’ report. owing to its robust governance structure was able to minimize the impact on its business. Our strategy to leverage on our Global The amount recommended for distribution as presence and ability to deliver innovative dividend solutions gave us the edge over competition Rs. 496,627,200 in closing complex transactions. Forfeited Shares Industrial or Professional Relations of the There are no shares forfeited during the fi scal Company year. The Company maintains a good professional relationship with its customers, people and Transaction between the Bank and its regulators. Senior managers of the Company Subsidiary Company and the Progress made represent in number of councils, committees in the Business and sub-committees of regulators’, The Bank does not have a subsidiary professional organizations, associations, and company. forums. Main transactions carried out by the company The Company is a Member of Nepal Bankers Association, Federation of Nepalese Chamber and its subsidiary company during the fi nancial of Commerce & Industry, Nepal Britain year and any important change in the business Chamber of Commerce & Industry, Nepal of the company during the period India Chamber of Commerce & Industry, The Bank does not have a subsidiary Management Association of Nepal and Nepal company and there is no signifi cant change Institute of Company Secretary. in the business of the company during the period.

www.standardchartered.com/np 29 Additional Information as required by section 109 of the Companies Act 2006 continued

Information furnished to the company by Particulars of the total management expenses its basic shareholders during the previous of the previous fi nancial year fi nancial year The management expenses of the fi nancial There are no basic shareholders in the bank year is Rs. 455.83 million ( total of Staff as no shareholder, except the SCB Group, Expenses and Other Operating Expenses as holds more than 1% of the paid up capital of per Schedule 4.23 & 4.24 of the Financial the Company. There has been no information Statements.) received from the SCB Group in this regard. A list of members of the Audit Committee, Particulars of the ownership of shares taken remunerations, allowances and facilities up by the Directors and offi ce-bearers of the being received by them, particulars of company during the previous fi nancial year, functions discharged by the Committee, and and information received by the company particulars of suggestions, if any, offered by from them about their involvement, if any, in the Committee the transactions of the shares of the company NIL. Directors and offi ce bearer have not Composition of the Audit Committee: involved in the shares transactions of the bank The composition of the Audit Committee as in FY 2064/65 as per the declaration provided on 15/07/2008 is as follows: by them to the Company. Ram Bahadur Aryal, Particulars of information furnished by any Non Executive Director - Chairman Anurag Adlakha, Director - Member Director or any of his close relatives about his Sushen Jhingan, Director - Member personal interest in any agreement connected Gopi Krishna Bhandari - Member with the company signed during the previous Shobha Bahadur Rana - Member Secretary fi nancial year There are no such information furnished by All members of the Audit Committee are the directors and any of their close relatives. either non-executive directors or independent of business. The responsibilities of the Purchase of own Shares Committee are in congruence with the The bank has not purchased its own shares in framework defi ned by the NRB Directives and the year under review. the Company Act.

Remunerations, allowances and facilities: Whether or not there is an internal control The Committee members and the Chairman system, and if there is any such system, have been paid meeting allowance of NPR details thereof 5000 and NPR 6000 per meeting respectively, The Bank follows an internal control system except to the members representing the and procedures in line with the SCB Group SCB Group and employees of SCB, Nepal. policies and procedures and local regulatory No remuneration and other facilities were requirements. Internal control systems are provided to them. The total amount of Audit in place and are effectively managed in Committee meeting allowance paid during the Company in terms of effectiveness of the fi scal year was NPR 23,000; this was paid Internal Audit Committee and internal audit to Mr. Ram Bahadur Aryal, the only member/ functions, adequacy and effectiveness of chairman eligible to get meeting allowance, for policies and procedures on credit, operations, attending the Audit Committee meetings as IT security, Treasury management, Branch Chairman and member of the Committee. returns and reporting, controls over fi xed assets, Investment and fund management Functions discharged by the Committee: and controls thereon including acquisition The Committee met four times during the and disposal of investments, delegation of fi scal year and reviewed/noted internal audit authority, information systems and monitoring reports, Nepal Rastra Bank Inspection reports, and control over the investment portfolio. Statutory Audit reports, internal audit/controls

30 Annual Report and Accounts 2007-2008 issues, compliance issues including other allowance as per the Company’s policy. information related to Bank’s operations. The Meeting allowances paid to the Directors are same has been duly communicated to the as follows: Board on a regular basis. The Committee provided ongoing guidance and support for Ram Bahadur Aryal 140,000.00 smooth and independent functioning of the Internal Audit Department throughout the Arjun Bandhu Regmi 60,000.00 year. There were no signifi cant issues to be Elected from 21st AGM effective 8th January 2008. brought to the attention of the Board by the Committee for necessary direction to the Niranjan K. Tibrewala 80,000.00 Management. Retired from 8th January after completion of tenure

Payments due, if any, to the company from Remunerations, allowances and bonus paid any Director, Managing Director, Executive to the CEO in FY 064/065, who also was a Director of the Board, is Rs. 17,765,970.00 . Chief or basic shareholder of the company or any of their close relatives, or from any fi rm, Dividends yet to Be Collected By Shareholders company or corporate body in which he is Total dividends yet to be collected by the involved shareholder amounts to Rs. 9,739,739.00. Rs. 1,421,307 from one company in which one of the directors and his family has major stake. (For Detail of property’s buy or sell as per Clause details, refer to the schedule 4.29 of fi nancial 141 statements.) Nil.

Remunerations, Allowances and Facilities Detail of the transactions held between to the Directors, the Managing Director, the Associated Companies as per Clause 175 Executive Chief and other Offi ce-bearers Nil Directors have not been paid any remuneration and no facilities have been Any other matter to be mentioned in the provided to them. Meeting allowance is paid at Rs.11,000 to the Chairman and Rs. 10,000 Board of Directors’ report under Companies to Directors. However directors representing Act, 2063 SCB Group are not entitled to meeting Nil

www.standardchartered.com/np 31 Board of Directors

Neeraj Swaroop, (Chairman) Sujit Mundul, (Chief Executive Offi cer) Anurag Adlakha, (Director) Neeraj Swaroop, the Chairman of SCB Sujit Mundul, the Director & CEO of SCB Anurag Adlakha, Director of the Bank, is a Nepal is an MBA and BE with more than 24 Nepal holds the degree of M. Sc., BA (Hons) Chartered Accountant by profession. He years of experience in the banking sector of in Economics & English, LLB, CAIIB and AIB. has over 21 years of professional career of which 16 years in Indian Banking industry He has also served as a Lecturer in Kolkata which 16 years in fi nancial services industry including Bank of America and HDFC bank. and possesses more than 33 years of banking including HSBC India. He is presently He is currently serving as the Regional Chief experience in SCB. working as the Chief Financial Offi cer, India Executive, India and South Asia. and South Asia.

Sushen Jhingan (Director) Ram Bahadur Aryal, Arjun Bandhu Regmi Sushen Jhingan, Director of this Bank, is an (Independent Director) (Director representing Public MBA with 11 years of banking experience in Ram Bahadur Aryal, Independent/ Shareholders) Strategic Sourcing and Corporate Real Estate Professional Director is an MA in Economics Arjun Bandhu Regmi, Director representing Services, government and regulatory relations. with more than 36 years experience public shareholders, is an MA in He is presently working as a Director - Public in Nepal Rastra Bank (Central Bank of Economics and holds a Post Graduate Affairs, India. Nepal) holding senior positions in banking Diploma in Population Studies. He has operation, planning, training, foreign experience as Associated Professor in exchange and Human Resources. Tribhuvan University affi liated campuses and also has more than 21 years experience in the fi eld of media business.

32 Annual Report and Accounts 2007-2008 Management Team

RIGHT TO LEFT...

SUJIT MUNDUL Chief Executive Offi cer

GOPI BHANDARI RESTA JHA RAKHI SINGH Senior Manager – Credit Head – Financial Markets Chief Financial Offi cer

ANURAG MISHRA ANJU SHARMA KRISHNA K BHATTARAI Head – Origination & Client Coverage (OCC) Head - Consumer Banking Head - Legal and Compliance

BINA RANA SUDESH KHALING DIWAKAR POUDEL Head – Human Resources Chief Information Offi cer Head – Corporate Affairs

www.standardchartered.com/np 33 Origination & Client Coverage

Gorakh Rana Rajib Giri Anil K Shrestha Arun Devkota Senior Relationship Manager Senior Relationship Manager Senior Relationship Manager Relationship Manager Development Organisations Consumer Banking

Deepak K C Dambar B Saru Sudhir Sharma Sanjeev Mishra Head – Shared Distribution Value Centre GM, Mortgage & Auto Value Centre GM, Credit Card Value Centre GM, SME & Personal Loans Consumer Banking

Pranav Thakur Abhishek Shrestha Sujeet Karn Probin Acharya Branch Manager – Lalitpur Manager – UN Counter Branch Manager - Biratnagar Branch Manager - Lakeside & New Road, Pokhara

Consumer Banking Audit & Operational Risk Assurance Share Operations

Tara Manandhar Shobha B Rana Ujjwal Dixit Madhab Pd. Regmi Branch Manager - Birgunj Country Operational Risk & Assistant Manager, Share Operations Company Secretary Assurance Manager (CORAM) and Head Internal Audit

34 Annual Report and Accounts 2007-2008 Origination & Client Coverage

Sharad Tegi Sudesh Upadhyaya Navin Manandhar Bishnu Pokharel Relationship Manager Business Development Manager Relationship Manager Relationship Manager Transaction Banking Consumer Banking

Pushpa Rana Kishoree Manandhar Bobby Gadtaula Raman Pant Head – Priority Banking Head Credit – Consumer Banking Branch Manager- Lazimpat Branch Manager- Naya Baneshwore Consumer Banking

Vishnu Manandhar Dhan Thapa Raj Kumar Gurung Netra Subedi Branch Manager - Hetauda Branch Manager- Bhairahawa & Branch Manager – Dharan Branch Manager - Nepalganj Butwal

www.standardchartered.com/np 35 Branches ATM sites

Bhairahawa Lalitpur Dharan PO Box 14, Budha Chowk Colony PO Box 3990 Koirala Institute of Health Science Burmeli Tole, Bhairahawa, Siddhartha Nagar Jawalakhel, Lalitpur, Nepal Boudha, Kathmandu 977-71-524029, 524429 Tel. 977-1-5540544, 5540566 Boudha, Near Boudhanath stupa 977-71-524039 Fax. 977-1-5523266 Jawalakhel, Lalitpur Standard Chartered Bank Nepal Ltd Biratnagar Lazimpat PO Box 201, Main Road PO Box 3990 Kamladi, Kathmandu Biratnagar - 3, Nepal Lazimpat, Kathmandu, Nepal Kashtamandap Departmental Store Tel. 977-21-528983 Tel. 977-1-4418456 , 4417428 Lakeside, Pokhara Fax. 977-21-528982 Fax. 977-1- 4417428 Hotel Snowland, Lakeside, Pokhara

Lakeside, Pokhara Butwal Nepalgunj Standard Chartered Bank Nepal Ltd Milan Chowk Surkhet Raod, Ward No 13 Butwal, Municipality - 11 Nepalgunj Banke, Nepal Lazimpat, Kathmandu Rupandehi, Nepal Tel. 977-81-525514, 520022 Standard Chartered Bank Nepal Limited Tel. 977-71-546832 Fax. 977-81-525515 Maharajgunj ATM Fax. 977-71-546882 Shubham Departmental Store Pokhara, Lakeside Mangal Bazar, Patan Dharan PO Box 8 Patan, Mangal Bazar, Lalitpur, Nepal Panna Kamala Complex Lakeside Baidam, Pokhara, Nepal Ward No 7/100Ka, Buddha Marga Tel. 977-61-462102, 462805, 461746 Naya Baneshwor, Kathmandu Dharan - 7 Sunsari, Nepal Fax. 977-61-462318 Standard Chartered Bank Nepal Limited Tel. 977-25-520505, 530980 New Road, Pokhara Fax. 977-25-530981 Pokhara, New Road New Road, Pokhara, Nepal P.O.Box 08, Pokhara, Nepal New Road, Kathmandu Head Offi ce 977-61-536230, 523875, 523876 Bishal Bazar, New Road, Kathmandu, Nepal P.O.Box 3990 977-61- 531761 New Baneshwar, Kathmandu, Nepal Pulchowk, Lalitpur Near UNDP Complex, Lalitpur, Nepal Tel. 977-1-4782333, 4783753 Birgunj Fax. 977-1- 4780762 Adarsha Nagar- 13, Thamel, Kathmandu Birgunj Nepal Arcadia Building, Near Yin Yang Restaurant Hetauda Bank Road, Hetauda - 4 Thamel, Kathmandu Kathmandu Guest House Makwanpur, Nepal Tel. 977-57-523019, 524972 World Trade Center, Tripureshwor Fax. 977-57-525695 World Trade Center, Tripureshwor

Bhairahawa, Siddhartha Nagar Hotel Pawan Building

SCB Nepal Head Offi ce, New Baneshwor Lalitpur Branch Lazimpat Branch

36 Annual Report and Accounts 2007-2008 CSC & Co Chartered Accountants

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

Auditors’ Report

To the Shareholders of Standard Chartered Bank Nepal Limited

Financial statements and management’s responsibility We have audited the accompanying fi nancial statements of Standard Chartered Bank Nepal Limited which comprise the balance sheet as of July 15, 2008 (Ashadh 31, 2065) and the profi t and loss account, statement of changes in equity and cash fl ow statement for the year then ended and a signifi cant accounting policies and other explanatory notes. These fi nancial statements are the responsibility of the Bank’s management.

Auditor’s responsibility Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with Nepal Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

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

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

Opinion In our opinion, the fi nancial statements give a true and fair view of the fi nancial position of the Bank as of 31 Ashad, 2065 (15 July 2008), and its fi nancial performance and cash fl ows for the year then ended in accordance with Nepal Accounting Standards, the directives from Nepal Rastra Bank, Bank and Financial Institution Act 2063 and Company Act 2063.

Madan Krishna Sharma Partner Date : 7 September 2008 CSC & Co. Place: Kathmandu Chartered Accountants Financial Statements and Notes to Accounts continued

Balance Sheet as at 15 July 2008 (31 Ashad 2065)

Capital & Liabilities Schedule This Year Previous Year Rs. Rs. 1. Share Capital 4.1 620,784,000 413,254,800 2. Reserves and Funds 4.2 1,871,763,996 1,703,098,561 3. Debentures and Bonds 4.3 - - 4. Loans and Borrowings 4.4 - 400,000,000 5. Deposit Liability 4.5 29,743,998,794 24,647,020,755 6. Bills Payables 4.6 87,397,021 36,168,332 7. Proposed and Unpaid Dividend 506,366,940 341,744,048 8. Income Tax Liability 2,051,550 5,598,588 9. Other Liabilities 4.7 503,426,025 1,049,804,367 Total Liabilities 33,335,788,326 28,596,689,451

Assets Schedule This Year Previous Year Rs. Rs. 1. Cash Balance 4.8 414,875,467 378,422,542 2. Balance with Nepal Rastra Bank 4.9 1,266,273,524 1,613,757,788 3. Balance with Banks/Financial Institutions 4.10 369,094,223 28,840,738 4. Money at Call and Short Notice 4.11 2,197,537,600 1,761,151,500 5. Investments 4.12 13,902,819,011 13,553,233,464 6. Loans, Advances and Bills Purchased 4.13 13,718,597,132 10,502,637,135 7. Fixed Assets 4.14 117,272,258 125,590,978 8. Non-Banking Assets 4.15 - - 9. Other Assets 4.16 1,349,319,111 633,055,306 Total Assets 33,335,788,326 28,596,689,451

Contingent Liabilities Schedule 4.17 Declaration of Directors Schedule 4.29 Statement of Capital Fund Schedule 4.30 Statement of Risk Weighted Assets Schedule 4.30(A) Key Indicators Schedule 4.31 Signifi cant Accounting Policies Schedule 4.32 Notes to Accounts Schedule 4.33

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

Rakhi Singh Sujit Mundul Neeraj Swaroop Chief Financial Offi cer CEO & Director Director

Arjun Bandhu Regmi Sushen Jhingan Anurag Adlakha Ram Bahadur Aryal Madan Krishna Sharma Director Director Director Director Partner for and on behalf of CSC & Co. Chartered Accountants

Kathmandu Date : 18.08.2008

38 Annual Report and Accounts 2007-2008 Profi t and Loss Account for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Particulars Schedule This Year Previous Year Rs. Rs. 1. Interest Income 4.18 1,591,195,526 1,411,981,867 2. Interest Expenses 4.19 471,729,700 413,055,152 Net Interest Income 1,119,465,826 998,926,715 3. Commission and Discount 4.20 276,432,255 221,207,433 4. Other Operating Incomes 4.21 32,594,085 28,784,880 5. Exchange Fluctuation Income 4.22 345,653,020 309,086,504 Total Operating Income 1,774,145,186 1,558,005,532 6. Staff Expenses 4.23 225,256,195 199,778,473 7. Other Operating Expenses 4.24 230,571,409 228,450,604 8. Exchange Fluctuation Loss 4.22 - - Operating Profi t Before Provision for Possible Loss 1,318,317,582 1,129,776,455 9. Provision for Possible Losses 4.25 69,885,338 36,808,665 Operating Profi t 1,248,432,244 1,092,967,790 10. Non-Operating Income/ (Loss) 4.26 1,682,509 9,492,080 11. Provision for Possible Loss Written Back 4.27 90,634,940 20,159,844 Profi t from Ordinary Activities 1,340,749,693 1,122,619,714 12. Income/(Expenses) from Extra Ordinary Activities 4.28 (28,039,437) (4,914,979) Net Profi t after considering all Activities 1,312,710,256 1,117,704,735 13. Provision for Staff Bonus 119,337,296 101,609,521 14. Provision for Income Tax 374,451,952 324,427,150 • Current Year’s 381,493,368 315,427,150 • Upto Previous Year - 9,000,000 • Deferred Tax (7,041,416) - Net Profi t/Loss 818,921,008 691,668,064

Schedules 4.18 to 4.28 form integral part of this Profi t and Loss Account As per our report of even date

Rakhi Singh Sujit Mundul Neeraj Swaroop Chief Financial Offi cer CEO & Director Director

Arjun Bandhu Regmi Sushen Jhingan Anurag Adlakha Ram Bahadur Aryal Madan Krishna Sharma Director Director Director Director Partner for and on behalf of CSC & Co. Chartered Accountants

Kathmandu Date : 18.08.2008

www.standardchartered.com/np 39 Financial Statements and Notes to Accounts continued

Profi t and Loss Appropriation Account for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Particulars Schedule This Year Previous Year Rs. Rs. Income 1. Accumulated Profi t up to Previous Year 557,724,177 370,584,678 2. This Year’s Profi t 818,921,008 691,668,064 3. Exchange Fluctuation Fund - - 4. Capital Adjustment Fund upto Previous Year - 74,928,080 Total 1,376,645,185 1,137,180,822 Expenses 1. Accumulated Loss up to Previous Year - - 2. Current Year’s Loss - - 3. General Reserve Fund 163,784,202 77,228,800 4. Contingent Reserve - - 5. Institutional Development Fund - - 6. Dividend Equalisation Fund - - 7. Employees Related Reserves - - 8. Proposed Dividend 496,627,200 330,603,840 9. Proposed Issue of Bonus Shares 310,392,000 206,627,400 10. Special Reserve Fund - - 11. Exchange Fluctuation Fund 22,554,206 17,995,632 12. Capital Redemption Reserve Fund - - 13. Capital Adjustment Fund - - Total 993,357,608 632,455,672 Accumulated Profi t/(Loss) 383,287,577 504,725,150

As per our report of even date

Rakhi Singh Sujit Mundul Neeraj Swaroop Chief Financial Offi cer CEO & Director Director

Arjun Bandhu Regmi Sushen Jhingan Anurag Adlakha Ram Bahadur Aryal Madan Krishna Sharma Director Director Director Director Partner for and on behalf of CSC & Co. Chartered Accountants

Kathmandu Date : 18.08.2008

40 Annual Report and Accounts 2007-2008 2,116,353,361 2,169,352,388 2,492,547,996 165,236,411 206,627,400 - 187,790,617 310,392,000 - 165,236,411 206,627,400 - t Reserve Reserve Premium Fluctuation of Issue Adjustment (163,784,202) 163,784,202 (496,627,200) - (310,392,000) ------310,392,000 - - - (496,627,200) - - Adjustments Tax) (Deferred Restated Balance as at 17 July 2007 cit on Surplus/ Defi of properties revaluation 413,254,800 cit on Surplus/ Defi 826,509,600 557,724,177 of investments revaluation t for the Period Net Profi to General Reserve Transfer - - Dividend Proposed 52,999,027 - Issue of Bonus Share Issue of Proposed - - Bonus Shares - 207,529,200 - 818,921,008 Capital Issue of Share - Exchange Fluctuation Fund - Capital Adjustment Fund - - - Closing Balance as at - - 15 July 2008 - - (22,554,206) ------620,784,000 - 990,293,802 383,287,577 ------22,554,206 - - - - (206,627,400) - - 52,999,027 - - - - 818,921,008 901,800 ------Capital Profi Particulars Capital Opening Balance as at 17 July 2007 413,254,800 826,509,600 504,725,150 Share Total Accumulated General Capital Share - Fund Shares Exchange Proposed - Bonus Capital Fund Fund Statement of Changes in Equity 2064/65 (FY 2007/08) Financial Year

www.standardchartered.com/np 41 Financial Statements and Notes to Accounts continued

Cash Flow Statement for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 1,092,749,033 (A) Cash Flow from Operating Activities (45,233,838) 1,572,010,974 1. Cash Receipts 1,862,221,002 1,071,701,495 1.1 Interest Income 1,295,672,504 224,164,421 1.2 Commission and Discount Income 272,068,274 237,103,978 1.3 Income from Foreign Exchange Transaction 255,436,198 1,020,334 1.4 Recovery of Loan Written off 5,867,246 38,020,746 1.5 Other Income 33,176,780 1,631,699,607 2. Cash Payments 1,621,292,559 397,832,097 2.1 Interest Expenses 474,628,760 200,045,248 2.2 Staff Expenses 223,667,612 207,528,139 2.3 Offi ce Operating Expenses 206,769,247 330,025,738 2.4 Income tax Payment 385,040,406 496,268,385 2.5 Other Expenses 331,186,534 (59,688,633) Cash Flow before Changes in Working Capital 240,928,443 (1,351,802,697) Decrease/ (Increase) of Current Assets (4,364,232,028) 216,119,500 1. Decrease / (Increase) in Money at Call and Short Notice (436,386,100) - 2. Decrease / (Increase) in Short-term Investment - (1,589,803,459) 3. Decrease / (Increase) in Loan and Bills Purchase (3,255,242,077) 21,881,262 4. Decrease / (Increase) in Other Assets (672,603,851) 2,504,240,363 (Decrease) /Increase of Current Liabilities 4,078,069,747 1,585,988,674 1. (Decrease) / Increase in Deposits 5,096,978,038 - 2. (Decrease) / Increase in Certifi cate of Deposits - 380,417,495 3. (Decrease) / Increase in Short Term Borrowings (348,771,311) 537,834,194 4. (Decrease) / Increase in Other Liabilities (670,136,980) (421,102,274) (B) Cash Flow from Investment Activities (16,662,637) (714,678,023) 1. Decrease/ (Increase) in Long term Investment (323,460,547) (33,230,334) 2. Decrease/ (Increase) in Fixed assets (14,116,435) 326,549,868 3. Interest Income from Long Term Investment 319,814,530 256,215 4. Dividend Income 1,099,815 - 5. Others - 1,150,360 (C) Cash Flow from Financing Activities 901,799 - 1. Increase/ (Decrease) in Long term Borrowings (Bond, Debenture etc) - 1,150,360 2. Increase / (Decrease) in Share Capital 901,799 - 3. Increase / (Decrease) in Other Liability - - 4. Increase / (Decrease) in Refi nance /Facilities received from Nepal Rastra Bank - 71,982,526 (D) Income/Expense from change in exchange rate in Cash and Bank Balance 90,216,822 744,779,645 (E) Current year’s cash fl ow from all activities 29,222,146 1,276,241,423 (F) Opening Cash and Bank Balance 2,021,021,068 2,021,021,068 (G) Closing Cash and Bank Balance 2,050,243,214

As per our report of even date

Rakhi Singh Sujit Mundul Neeraj Swaroop Chief Financial Offi cer CEO & Director Director

Arjun Bandhu Regmi Sushen Jhingan Anurag Adlakha Ram Bahadur Aryal Madan Krishna Sharma Director Director Director Director Partner for and on behalf of CSC & Co. Chartered Accountants

Kathmandu Date : 18.08.2008

42 Annual Report and Accounts 2007-2008 Schedule 4.1: Share Capital and Ownership as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This year Rs. Rs. 1. Share Capital 1,000,000,000 1.1 Authorised Capital 1,000,000,000 1,000,000,000 A) 10,000,000 Ordinary Shares of Rs. 100 each 1,000,000,000 - B) - Non-Redeemable Preference Shares of Rs. - each - - C) - Redeemable Preference Shares of Rs. - each - 500,000,000 1.2 Issued Capital 1,000,000,000 500,000,000 A) 10,000,000 Ordinary Shares of Rs. 100 each 1,000,000,000 - B) - Non-Redeemable Preference Shares of Rs. - each - - C) - Redeemable Preference Shares of Rs. - each - 413,254,800 1.3 Paid Up Capital 620,784,000 413,254,800 A) 6,207,840 Ordinary Shares of Rs. 100 each 620,784,000 - B) -Non-Redeemable Preference Shares of Rs. - each - - C) -Redeemable Preference Shares of Rs. - each -

Share Ownership

Share Capital Share Capital Rs. % Particulars % Rs. 309,941,100 75.00 A. Promoters 75.00 465,588,000 - - 1.1 Government of Nepal - - 309,941,100 75.00 1.2 Foreign Institutions 75.00 465,588,000 - - 1.3 “A” Class Licensed Institutions - - - - 1.4 Other Licensed Institutions - - - - 1.5 Other Entities - - - - 1.6 Individuals - - - - 1.7 Others - - 103,313,700 25.00 B. General Public 25.00 155,196,000 413,254,800 100.00 Total 100.00 620,784,000

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

Sn Number of Name of the Shareholders % of Total Shares Amount Rs. Shares Held 1 3,103,920 Standard Chartered Grindlays Ltd, Sydney, Australia 50.00 310,392,000 2 1,551,960 Standard Chartered Bank, UK 25.00 155,196,000 3 33,000 Priyanka Agrawal 0.53 3,300,000 4 33,000 Avinash Agrawal 0.53 3,300,000 5 33,000 Komal Agrawal 0.53 3,300,000 6 33,000 Shashi Agrawal 0.53 3,300,000 7 33,000 Shankar Lal Agrawal 0.53 3,300,000 8 33,000 Pashupati Soap Industries 0.53 3,300,000 9 31,583 Arjun Bandhu Regmi 0.51 3,158,300

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Schedule 4.2: Reserves and Funds as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 826,509,600 1. General Reserve Fund 990,293,802 206,627,400 2. Proposed Issue of Bonus Shares 310,392,000 - 3. Capital Reserve Fund - - 4. Capital Redemption Reserve - - 5. Capital Adjustment Fund - - 6. Other Reserves and Funds - - a) Contingent Reserve - - b) Institutional Development fund - - c) Dividend Equalisation Fund - - d) Special Reserve Fund - - e) Assets Revaluation Reserve - - f) Other Free Reserves - - g) Other Reserves - 504,725,150 7. Accumulated Profi t/ (Loss) 383,287,577 165,236,411 8. Exchange Fluctuation Fund 187,790,617 1,703,098,561 Total 1,871,763,996

Schedule 4.3: Debentures and Bonds as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. - 1. Debentures - - 2. Bond - - Total ( 1+2 ) -

Schedule 4.4 : Loans and Borrowings as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. A. Local - 1. Government of Nepal - - 2. Nepal Rastra Bank - 400,000,000 3. Repo Liabilities - 4. Inter Bank and Financial Institution - - 5. Other Institutions - - 6. Others - 400,000,000 Total A - B. Foreign - 1. Banks - - 2. Others - - Total B - 400,000,000 Total (A+B) -

44 Annual Report and Accounts 2007-2008 Schedule 4.5 : Deposit Accounts as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 1. Non-Interest Bearing Accounts 4,794,534,396 A. CURRENT DEPOSITS 6,174,560,842 2,754,832,470 1. Local Currency 3,855,500,048 505,848 1.1 Government of Nepal 48,089,639 89,887,360 1.2 “A” Class Licensed Institutions 123,931,954 6,187,403 1.3 Other Licensed Institutions 9,206,433 2,102,160,783 1.4 Other Organised Institutions 3,170,091,567 487,435,944 1.5 Individuals 452,152,033 68,655,132 1.6 Others 52,028,422 2,039,701,926 2 Foreign Currency 2,319,060,794 - 2.1 Government of Nepal - 15,606,235 2.2 “A” Class Licensed Institutions 11,559,317 - 2.3 Other Licensed Institutions - 1,676,426,765 2.4 Other Organised Institutions 1,908,191,336 234,513,249 2.5 Individuals 321,467,237 113,155,677 2.6 Others 77,842,904 486,101,105 B. MARGIN DEPOSITS 474,043,934 - 1. Employees Guarantee 234,422,530 2. Guarantee Margin 239,360,196 94,834,723 3. Letter of Credit Margin 76,797,871 156,843,852 4. Others 157,885,867 - 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 - 5,280,635,501 Total of Non-Interest Bearing Accounts 6,648,604,776

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Schedule 4.5: Deposit Accounts (Continued) as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 2. Interest Bearing Accounts 15,244,384,575 A. SAVING DEPOSITS 17,856,134,474 12,685,954,950 1. Local Currency 14,580,554,084 3,624,673,130 1.1 Organised Institutions 5,054,831,330 9,001,710,255 1.2 Individuals 9,470,403,285 59,571,565 1.3 Others 55,319,469 2,558,429,625 2. Foreign Currency 3,275,580,390 1,615,020,925 2.1 Organised Institutions 2,400,269,456 926,876,703 2.2 Individuals 842,068,560 16,531,997 2.3 Others 33,242,374 3,196,489,845 B. FIXED DEPOSITS 3,301,013,939 413,217,915 1. Local Currency 478,457,766 38,611,157 1.1 Organised Institutions 81,269,770 371,706,758 1.2 Individuals 394,787,996 2,900,000 1.3 Others 2,400,000 2,783,271,930 2. Foreign Currency 2,822,556,173 637,775,763 2.1 Organised Institutions 793,580,572 2,103,461,154 2.2 Individuals 2,028,975,601 42,035,013 2.3 Others - 925,510,834 C. CALL DEPOSITS 1,938,245,605 913,352,644 1. Local Currency 1,919,285,169 - 1.1 “A” Class Licensed Institutions - - 1.2 Other Licensed Institutions - 862,727,703 1.2 Other Organised Institutions 1,791,404,856 50,624,941 1.4 Individuals 127,880,313 - 1.5 Others - 12,158,190 2. Foreign Currency 18,960,436 6,518,000 2.1 “A” Class Licensed Institutions 6,916,000 - 2.2 Other Licensed Institutions - 5,640,190 2.3 Other Organised Institutions 12,044,436 - 2.4 Individuals - 2.5 Others - - D. CERTIFICATE OF DEPOSITS - - 1. Organised Institutions - - 2. Individuals - - 3. Others - 19,366,385,254 Total of Interest Bearing Accounts 23,095,394,018 24,647,020,755 Total Deposits (1+2) 29,743,998,794

46 Annual Report and Accounts 2007-2008 Schedule 4.6: Bills Payable as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 27,176,995 1. Local Currency 63,123,816 8,991,337 2. Foreign Currency 24,273,205 36,168,332 Total 87,397,021

Schedule 4.7 : Other Liabilities as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 60,249,100 1. Pension/Gratuity Fund 61,837,684 - 2. Employees Provident Fund - - 3. Employees Welfare Fund - 101,609,521 4. Provision for Staff Bonus 119,337,296 35,217,700 5. Interest Payable on Deposits 32,552,503 233,864 6. Interest Payable on Borrowings - 23,751,188 7. Unearned Discount and Commission 28,929,766 199,591,253 8. Sundry Creditors 201,236,901 - 9. Branch Adjustment Account - 629,151,741 10. Others 59,531,875 446,000 a) Audit Fees Payable 446,000 570,404,180 b) Nostro Credit - 58,301,561 c) Others 59,085,875 1,049,804,367 Total 503,426,025

Schedule 4.8: Cash Balance as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 336,374,091 1. Local Currency (including coins) 382,753,590 42,048,451 2. Foreign Currency 32,121,877 378,422,542 Total 414,875,467

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Schedule 4.9: Balance with Nepal Rastra Bank as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars Local Currency Foreign Currency Rs. Grand Total Convertible Rs. Rs. INR Foreign Currency Total Rs. 1,613,757,788 1. Nepal Rastra Bank 1,232,637,012 - 33,636,512 33,636,512 1,266,273,524 1,613,757,788 a) Current A/C 1,232,637,012 - 33,636,512 33,636,512 1,266,273,524 - b) Other A/C - - - - -

Schedule 4.10: Balance with Banks / Financial Institutions as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars Local Foreign Currency (Rs.) Grand Total Currency Convertible Rs. Rs. INR Foreign Currency Total Rs. 28,840,738 1. Local Licensed Institutions 49,615,608 - - - 49,615,608 28,840,738 a. Current Account 49,615,608 - - - 49,615,608 - b. Other Account ------2. Foreign Banks - 73,211,501 246,267,114 319,478,615 319,478,615 - a. Current Account - 73,211,501 246,267,114 319,478,615 319,478,615 - b. Other Account - - - - - 28,840,738 Total 49,615,608 73,211,501 246,267,114 319,478,615 369,094,223

Note: Balance as per the confi rmation and statement received from respective banks is Rs. 541,383,512 and the differences have been reconciled.

Schedule 4.11: Money at Call and Short Notice as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. - 1. Local Currency - 1,761,151,500 2. Foreign Currency 2,197,537,600 1,761,151,500 Total 2,197,537,600

48 Annual Report and Accounts 2007-2008 Schedule 4.12: Investments as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars Purpose This Year Rs. Trading Other Rs. 5,995,101,329 1.Government of Nepal Treasury Bills - 7,157,731,943 7,157,731,943 1,046,076,000 2.Government of Nepal Saving Bonds - 917,150,000 917,150,000 66,759,974 3. Government of Nepal Others Securities (Special Bond) - 62,733,235 62,733,235 - 4. Nepal Rastra Bank Bonds - - - - 5. Foreign Securities - - - - 6. Local Licensed Institutions - - - 6,403,353,161 7. Foreign Banks - 5,675,042,833 5,675,042,833 44,943,000 8. Corporate Shares - 106,043,000 106,043,000 - 9. Corporate Debenture and Bonds - 8,493,000 8,493,000 - 10. Other Investments - - - 13,556,233,464 Total Investments - 13,927,194,011 13,927,194,011 3,000,000 Provision 24,375,000 24,375,000 13,553,233,464 Net Investments - 13,902,819,011 13,902,819,011

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Schedule 4.12(A): Investment in Shares, Debentures and Bonds as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year Cost Price Cost Price Market Price Provision Rs. Rs. Rs. Amount Rs. 44,943,000 1. Investment in Shares 106,043,000 - 24,375,000 3,000,000 1.1 Purwanchal Grameen Bikash Bank Ltd. 3,000,000 NA (Note - 3) - 30,000 Ordinary Shares of Rs.100 each fully paid up 3,000,000 1.2 Sudur Paschimanchal Grameen Bikash Bank Ltd. 3,000,000 NA (Note - 3) 3,000,000 30,000 Ordinary Shares of Rs.100 each fully paid up 38,590,000 1.3 Rural Micro Finance Development Centre Ltd. 52,190,000 NA (Note - 3) - 521,900 Ordinary Shares of Rs.100 each fully paid up 353,000 1.4 Credit Information Centre Ltd. 353,000 NA (Note - 3) - 5,295 Ordinary Shares of Rs.100 each fully paid up (including 1,765 bonus shares fully paid up) 1.5 Taragaon Regency Hotels Ltd. 47,500,000 NA (Note - 3) 21,375,000 475,000 Ordinary Shares of Rs. 100 each fully paid up - 2. Investment in Debentures and Bonds 8,493,000 - - - 2.1 Nepal Electricity Authority 8,493,000 NA (Note - 3) - 7.75%; 8,493 bonds of Rs. 1,000 each fully paid up, interest payable semiannually, maturity on 27th March 2013 44,943,000 Total Investment 114,536,000 - 3,000,000 3. Provision for Loss 24,375,000 3,000,000 3.1 Upto Previous year 3,000,000 - 3.2 Increase (Decrease) this Year 21,375,000 3,000,000 Total Provision 24,375,000 41,943,000 Net Investments 90,161,000

NOTE: 1. The following companies have not distributed dividends in the last three years : 1.1 Purwanchal Grameen Bikash Bank Ltd. 1.2 Sudur Paschimanchal Grameen Bikash Bank Ltd. 1.3 Taragaon Regency Hotels Ltd. 2. Except for Nepal Electricity Authority Bonds, none of the other investments above, are listed at the Nepal Stock Exchange Ltd (NEPSE). 3. NA - In the absence of suffi cient information and/or listing in NEPSE , the market value of the investments have not been shown.

50 Annual Report and Accounts 2007-2008

245,386,620 37 13,835,263,970

603,311,679 13,718,597,132 - 609,405,737 13,963,983,752 - - ,461 609,405,737 13,835,263,970 previous year has also been been regrouped under Other. under Other. year has also been regrouped previous (19,387,853) (27,202,964) 899,109 (45,691,708) (7,234) 3,574,340 3,567,106 (42,124,602) Schedule 4.13: Classifi cation of Loans, Advances and Bills Purchased and Provisioning and Provisioning and Bills Purchased Advances cation of Loans, Classifi 4.13: Schedule as at 15 July 2008 (31 Ashad 2065) to Priority Sectors loans for related Provisions in Priority Sector column includes Deprived loans only. Note: Figures Year Previous Particulars 10,593,131,204 1. Performing Loans Rs. 338,048,365 - 12,797,890,152 89,919,716 13,225,858,233 1,841,276 607,564 Loans & Advances Priority Sector Insured Uninsured Rs. Other Rs. Domestic Foreign and Discounted Bills Purchased Rs. Total Domestic Foreign Rs. Total Rs. This Year Rs. Rs. Rs. Rs. 10,593,131,204 1.1 Pass 197,017,153 2. Non-Performing Loans 16,453,977 66,193,520 - 2.1 Substandard 1.2 Restructured 114,369,656 - 10,790,148,357 42,844,289 Loans (A) Total 2.2 Doubtful 2.3 Loss 85,875,493 105,931,312 3.1 Pass 338,048,365 12,797,890,152 89,919,716 13,225,858,233 1,841,276 607,564,461 - 4,113,494 - 609,405,7 380,892,654 3.3 Substandard 63,096,760 - 12,883,765,645 3.4 Doubtful 114,369,656 128,719,782 89,919,716 3.5 Loss 3. Loan Loss Provision 13,354,578,015 287,511,222 1,841,276 - 3.2 Restructured Provision 607,564,461 (B) Total 42,000,000 - - - 6,012,386 24,906,145 844,289 90,103,479 - - 4.1 Pass 3,380,484 54,956,962 4,123,085 - 62,804,139 - up to - 46,224,773 4. Provision - - 113,831,698 127,978,901 42,000,000 - 4.3. Substandard - 4.4 Doubtful 192,168,592 - 270,862,401 4.5 Loss Year Previous - 899,197 - upto Provision 48,012,386 (C)Total 24,906,145 3,006,193 899,197 - loan 4.2 Restructured 844,289 132,258,582 - - - 6,226,536 239,292,562 55,801,251 20,159,844 18,413 Year's 54,956,962 (D) Previous 128,719,782 - 6,075,645 18,413 - - - - 1,974,630 6,075,645 6,094,058 36,808,665 (E) This Year's - - 60,000,000 6,094,058 101,429,642 - 138,352,640 - PreviousYear 45,006,193 - - - - 16,648,821 3,637,996 Net Adjustments 3,096,760 6,226,536 10,502,637,135 written back Provision 55,801,251 4,113,494 Net Loan (A-B) 88 - 110,731,660 - 103,404,360 - - - additional provision - 20,793,707 - 25,647 - 48,012,386 - 65,612,626 24,906,145 2,501,305 - - - 63,096,760 69,833,999 - 114,369,656 of the Year 219,371,556 2,526,952 55,801,251 4,113,494 334,667,881 - - 12,691,597,053 - 105,931,312 89,020,519 - 13,115,285,453 - 1,822,863 601,488,816 1,405,854 - 88 - - - - 284,984,270 90,627,706 42,631,035 - 45,006,193 - 25,647 - 899,109 - 7,234 - 2,501,305 6,226,536 55,801,251 - 44,935,998 2,526,952 - 287,511,222 - - - - - 63,096,760 3,574,340 114,369,656 7,234 3,574,340 4,113,494 90,634,940 48,510,338

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Schedule 4.13(A) :Securities Against Loan, Advance and Bills Purchased as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 10,790,148,357 (A) Secured 13,963,983,752 6,384,899,292 1. Movable / Immovable Assets 7,949,450,793 - 2. Guarantee of Local Licensed Institutions - - 3. Government Guarantee - 933,378,704 4.Guarantee of Internationally Rated Banks 198,112,176 - 5. Export Documents - - 6. Fixed Deposit Receipts - 498,244,846 (a) Own FDR 369,566,490 303,084,261 (b) FDR of Other Licensed Institutions 742,030,701 449,790,721 7. Government Securities/ Bonds 762,719,465 - 8. Counter Guarantee - 9. Personal Guarantee 2,220,750,533 10. Other Securities 3,942,104,127 - (B) Unsecured - 10,790,148,357 Total 13,963,983,752

52 Annual Report and Accounts 2007-2008 Rs.

ce Others Freehold Vehicles Machinery Offi Vehicles Freehold Schedule 4.14: Fixed Assets Fixed 4.14: Schedule as at 15 July 2008 (31 Ashad 2065) Down Value. * Written Rs. Rs. 371,432,426 65,702,904 Year a. Balance upto Previous b. Addition this year (17,894,988) (14,200,302) d. Sold this year 405,040,040 1. At Cost this year e. Written-off - Cost (a+b+c+d+e) Total this year c. Revaluation/Written-back 316,396,796 38,000,733 18,177,153 Year a. Upto Previous 42,882,636 b. For this Year (32,039,188) 302,534,761 adjustment/ write back d. Depreciation - 2. Depreciation 266,027,936 102,505,279 (a+b+c+d) Depreciation Total Rs. Rs. (WDV)* (1-2) 3. Book Value Rs. Rs. 19,310,556 58,128,735 34,334,513 405,040,040 on Revaluation / Written-back c. Depreciation 4. Land 3,775,143 42,882,636 (3,666,220) Rs. (1,148,914) - in Progess 5. Capital Work 125,590,978 - - 276,056,058 9,492,626 and Buildings 9,097,461 (3+4+5+6) Total 20,931,625 30,734,495 - 60,998,325 25,237,052 414,271,532 be Capitalised) (To 6. Leasehold Assets 12,148,141 - 753,749 251,771,949 - - 243,607,755 - 9,802,870 (1,171,810) - 11,199,932 24,284,109 31,627,982 (1,171,809) 323,231,887 28,502,755 302,534,761 2,869,590 - 29,370,343 - 14,069,522 91,039,645 Equipment 9,336,003 Leasehold Assets 18,910,556 44,147,608 12,148,141 3,125,227 - (4,838,030) 23,017,849 (2,320,723) - - 24,284,109 - 29,370,343 117,272,258 ------7,322,057 - 18,910,556 - Year Previous Particulars Assets This Year

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Schedule 4.15: Non-Banking Assets as at 15 July 2008 (31 Ashad 2065)

Previous Name and Date of assuming Total Amount of Provision for Loss Net Non Banking Year Rs. Address of Non Banking Assets Non-Banking Assets Assets Rs. Borrower or Party Rs. % Amount Rs. ------Total - - - - -

Schedule 4.16: Other Assets as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. - 1. Stock of Stationery - 202,287,476 2. Income Receivable on Investments 177,995,967 182,452,998 3. Accrued Interest on Loan 115,480,631 (182,452,998) Less: Interest Suspense Amount (115,480,631) - 1,100,280 4.Commission Receivable 5,464,262 106,879,688 5. Sundry Debtors 69,577,429 146,780,696 6. Staff Loan and Advances 162,082,419 12,129,130 7. Prepayments 64,633,009 - 8. Cash in Transit - 139,348,820 9. Other Transit Items (Including Cheques) 767,874,490 - 10. Drafts Paid without Notice - 24,229,216 11. Expenses Not Written-off 41,420,592 - 12. Branch Adjustment Account - 300,000 13. Others 60,270,943 - a) Advance Income Tax (net of Provision) - 300,000 b) Others 230,500 - c) Deferred Tax Assets 60,040,443 633,055,306 Total 1,349,319,111

Schedule 4.16(A) : Other Assets (Additional Statement) as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year (Rs.) Up to 1 1 to 3 Above 3 Rs. Year Years Years Total 182,452,998 1. Accrued Interest on Loans and Advances 62,418,605 25,442,729 27,619,297 115,480,631 - 2. Drafts Paid without Notice - - - - - 3. Branch Adjustment Account - - - -

54 Annual Report and Accounts 2007-2008 Schedule 4.17: Contingent Liabilities as at 15 July 2008 (31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs.

- 1. Claims on Bank but n ot Acknowledged as Liabilities by the Bank - 1,861,943,726 2. Letters of Credit (Full amount) 1,857,993,804 1,609,210,508 (a) Maturity period of less than 6 months 1,647,335,898 252,733,218 (b) Maturity period of more than 6 months 210,657,906 - 3. Rediscounted Bills - 727,519,521 4. Unmatured Guarantees/Bonds 1,367,342,770 14,592,130 (a) Bid Bonds 22,978,842 517,756,973 (b) Performance Bonds 833,994,982 195,170,418 (c) Other Guarantee/Bonds 510,368,946 - 5. Unpaid amount on Investment in Shares - 1,121,869,816 6. Outstanding Liabilities of Forward Exchange Contracts 193,985,365 772,007,943 7. Bills for Collection 155,926,528 708,304,325 8. Acceptance and Endorsements 1,129,471,910 - 9. Underwriting Commitment - - 10. Irrevocable Loan Commitments - 1,566,122,062 11. Guarantee against Counter Guarantee of Internationally Rated Banks 1,344,662,896 32,185,504 12. Advance Payment Guarantee 3,901,828 64,142,079 13. Financial Guarantee 84,559,383 - 14. Contingent Liabilities on Income Tax - 26,935 15. Others 1,939,847 6,854,121,911 Total 6,139,784,331

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Schedule 4.18: Interest Income for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 728,588,546 A. On Loan, Advances and Overdraft 872,690,380 665,157,608 1. Loan and Advances 813,194,903 63,430,938 2. Overdrafts 59,495,477 326,549,868 B. On Investment 319,814,530 326,549,868 1. Government of Nepal Securities 319,606,116 241,964,494 a. Treasury Bills 259,844,722 76,064,703 b. Development Bonds 54,288,317 - c. National Savings Certifi cates - 8,520,671 d. Special Bonds 5,473,077 - 2. Foreign Securities - - 3. Nepal Rastra Bank Bonds - - 4. Debenture and Bonds 208,414 - 5. Interest on Inter bank Investment - - a. Financial Institutions - - b. Other Organisations 9,678,419 C. On Agency Balances 8,590,700 - 1. Local Banks / Financial Institutions - 9,678,419 2. Foreign Banks 8,590,700 95,180,940 D. On Money at Call and Short Notice 80,316,058 - 1. Local Banks / Financial Institutions - 95,180,940 2. Foreign Banks 80,316,058 251,984,094 E. On Others 309,783,858 - 1. Certifi cate of Deposits - 838,425 2. Inter-Bank / Financial Institution Loan 2,339,370 244,508,800 3. Placement with Foreign Banks 300,453,278 6,636,869 4. Others 6,991,210 1,411,981,867 Total 1,591,195,526

56 Annual Report and Accounts 2007-2008 Schedule 4.19: Interest Expenses for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 406,198,800 A. On Deposit Liabilities 449,092,662 97,955,113 1. Fixed Deposits 118,980,221 28,414,408 1.1. Local Currency 11,060,210 69,540,705 1.2. Foreign Currency 107,920,011 257,886,856 2. Savings Deposits 279,308,138 236,783,591 2.1. Local Currency 236,501,982 21,103,265 2.2. Foreign Currency 42,806,156 50,356,831 3. Call Deposits 50,804,303 49,889,586 3.1. Local Currency 46,520,407 467,245 3.2. Foreign Currency 4,283,896 - 4. Certifi cate of Deposits - 5,337,706 B. On Borrowings 18,838,042 - 1.Debentures and Bonds - 1,759,461 2. Loans from Nepal Rastra Bank 2,288,928 3,578,245 3. Inter Bank /Financial Institutions Borrowings 16,549,114 - 4. Other Institutions - - 5. Other Loans - 1,518,646 C. On Others 3,798,996 1,518,646 1. Premium on Development Bonds 3,798,996 - 2. Others (Forwards) - 413,055,152 Total 471,729,700

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Schedule 4.20: Commisssion and Discount for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 15,980,983 A. Bills Purchased and Discounted 13,878,858 523,813 1. Domestic 746,993 15,457,170 2. Foreign 13,131,865 114,814,745 B. Commission 120,576,204 20,567,961 1. Letters of Credit 31,284,281 33,723,655 2. Guarantees 23,031,011 3,241,033 3. Collection Fees 3,388,821 28,972,496 4. Remittance Fees 34,520,663 28,008,750 5. Credit Cards 27,035,978 - 6. Share Underwriting/Issues - - 7. Government Transactions - 200,000 8. Agency Commission 1,200,000 100,850 9. Exchange Fees ( Batta Income) 115,450 90,411,705 C. Others 141,977,193 22,478,960 1. Management Fees 44,844,673 19,134,746 2. Loan Processing Fees 31,541,247 13,102,630 3. Ledger and Activity Fees 37,984,533 7,285,526 4. Commission on Travellers Cheque 6,927,780 28,409,843 5. Others 20,678,960 221,207,433 Total 276,432,255

Schedule 4.21: Other Operating Income for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 2,569,126 1. Rental on Safe Deposit Locker 3,287,555 8,088,426 2. Issue and Renewals of Credit Cards 8,846,536 4,995,157 3. Issue and Renewals of ATM Cards 8,200,727 10,160,004 4. Telex /T.T. 9,578,585 - 5. Service Charges - 534,950 6. Renewal Fees 692,858 2,437,217 7. Others 1,987,824 28,784,880 Total 32,594,085

58 Annual Report and Accounts 2007-2008 Schedule 4.22: Exchange Fluctuation Gain/Loss for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 71,982,526 A. Revaluation Gain 90,216,822 237,103,978 B. Trading Gain (except Batta) 255,436,198 309,086,504 Total Income (Loss) 345,653,020

Schedule 4.23: Staff Expenses for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 117,313,206 1. Salary 137,983,659 1,066,141 2. Allowances 873,837 6,810,407 3. Contribution to Provident Fund 7,306,787 3,737,452 4. Training Expenses 4,714,722 149,908 5. Uniform 199,795 2,952,976 6. Medical 2,727,883 - 7. Insurance - 19,202,355 8. Pension and Gratuity Provision 16,812,712 48,546,028 9. Others 54,636,800 40,740,877 a) Staff Incentive 46,832,801 7,805,151 b) Others 7,803,999 199,778,473 Total 225,256,195

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Schedule 4.24: Other Operating Expenses for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 29,193,981 1. House Rent 33,055,294 10,155,915 2. Light, Electricity and Water 11,742,955 12,366,447 3. Repair and Maintenance 9,736,264 7,515,063 (a) Building 6,041,023 1,444,864 (b) Vehicles 791,453 3,406,520 (c) Others 2,903,788 6,461,100 4. Insurance 6,644,867 44,200,157 5. Postage, Telex, Telephone, Fax 33,003,722 21,022,234 6. Offi ce Equipment, Furniture and Repair 23,265,240 15,492,420 (a) Offi ce Equipment and Furniture (non capitalised item) 15,095,414 5,529,814 (b) Repairs 8,169,826 12,061,397 7. Travelling Allowances and Expenses 12,394,197 10,394,729 8. Stationery and Printing 11,403,133 1,393,270 9. Periodicals and Books 1,600,072 11,124,233 10. Advertisement 10,009,236 1,478,274 11. Legal Expenses 1,890,964 696,001 12. Donations 493,551 258,678 13. Expenses Relating to Board of Directors 416,363 200,000 (a) Meeting Allowance 303,000 58,678 (b) Others Expenses 113,363 916,036 14. General Meeting Expenses 1,082,650 702,000 15. Expenses Relating to Audit 1,306,746 452,000 (a) Audit Fees 1,046,163 250,000 (b) Other Expenses 260,583 - 16. Commission on Remittances - 18,177,153 17. Depreciation on Fixed Assets 23,017,849 - 18. Amortization of Pre Operating Expenses - - 19. Share Issue Expenses - 19,515,585 20. Technical Services Fees 23,490,863 2,768,253 21. Entertainment 1,754,151 2,199,509 22. Written Off Expenses 206,065 10,235,152 23. Security Expenses 12,432,830 - 24. Credit Guarantee Premium - 1,159,782 25. Commission and Discount 550,824 11,970,718 26. Others 11,073,573 3,047,372 (a) Charges on Foreign Currency Notes 1,356,004 8,923,346 (b) Others 9,717,569 228,450,604 Total 230,571,409

60 Annual Report and Accounts 2007-2008 Schedule 4.25: Provision for Possible Losses for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 36,808,665 1. Increase in Loan Loss Provision 48,510,338 - 2. Increase in Provision for Loss on Investments 21,375,000 - 3. Provision for Non-Banking Assets - - 4. Provision for Other Assets - 36,808,665 Total 69,885,338

Schedule 4.26: Non Operating Income/ (Loss) for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. - 1. Profi t (Loss) on Sale of Investment - 9,235,865 2. Profi t (Loss) on Sale of Assets 582,694 256,215 3. Dividend (Net) 1,099,815 - 4. Subsidies Received from Nepal Rastra Bank - - a. Compensation against Losses of Specifi ed Branches - - b. Interest Indemnity - - c. Exchange Counter - - 5. Others - 9,492,080 Net Non Operating Income/ (Loss) 1,682,509

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Schedule 4.27: Provision for Possible Loss Written Back for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 20,159,844 1. Loan Loss Provision Written Back 90,634,940 - 2. Provision against Non-Banking Assets Written Back - - 3 Investment Provision Written Back - - 4. Provision against Other Assets Written Back - 20,159,844 Total 90,634,940

Schedule 4.28: Income / (Expenses) from Extra-Ordinary Activities for the period 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

Previous Year Particulars This Year Rs. Rs. 1,020,334 1. Recovery of Loans Written Off 5,867,246 - 2. Voluntary Retirement Scheme Expenses - (5,935,313) 3. Unrecoverable Loan Write Off (Schedule 4.28A) (33,906,683) - 4. Other Expenses/Income - (4,914,979) Total (28,039,437)

62 Annual Report and Accounts 2007-2008 Loan, the value of vehicles, those in posession Bank ess of being reposessed for settlement. ess of being reposessed 24,770,426 24,770,426 Other Loan S.N of Loan Types 1 off Written Capital Loan a) Working of Security and Type 5,472,296 Basis of Valuation Capital Loan b) Working Personal guarantees 2 Loan Approving 2,417,418 - 3 Loan Project 4 Lodgement of Land Fixed Capital Loan Personal Loan Amount Rs. Initiations made 5 Amount Rs. Cards a) Credit 1,246,543 GM - None b) Gramin Prathamik Karja of Security - - - only remain. 243,853 Collateral enforced. c) Auto Loan 2,062,254 None cate. None Ownership Certifi Loan Authority / Designation - for Recovery Total are Promoters NA 22,464,319 33,906,683 - - Remarks Continues to be Vehicle NA NA GM Manager Credit/ - Report from Valuation - Manager Credit/ Head Manager Credit/ Follow up through Head Manager Credit/ settlement Recoveries from Phone calls & letters Notices published loans Phone calls & letters towards Phone calls/ Letters/ Recoveries from Recoveries from of Loans to farmers. Recoveries from touch with the Bank. - absconding and not in - Black-listed. & Valuators Approved Head Consumer Bank cost price at the time of disbursement of Loan Head Consumer Bank phone calls & letters Consumer Bank year writen Current - Visits, Vehicle - Consumer Bank year write off Current sale. Repossession, Auction Auction Notice. is Rs. 4,101,922 year write off Current is s.48,065 off year write off Current Securities sold by is Rs. 352,174 is Rs. 28,146 Schedule 4.28 A: Statement of Loans Written Off Statement of Loans A: 4.28 Schedule for the period 17 July 2007 to 15 2008 (1 Shrawan 2064 to 31 Ashad 2065) of Auto loans as shown under Remarks column. In respect the amount against written off Bank has recovered During the year, in the proc valuators) and vehicles with cost price of Rs. 24.7 million are is Rs. 2 million ( as per the valuation of approved

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Schedule 4.29:Statement of Loans & Advances Extended to Directors/Chief Executive Offi cer/Promoters/Staff and Shareholders as at 15 July 2008 (31 Ashad 2065)

The Statement of amount, included under total amount of Bills Purchased and Discounted, Loans, Advances and Overdraft, provided to the Directors, Chief Excecutive Offi cer, 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 :

Name of Promoter/Director/ Balance upto Recovery made Additions Balance as at Chief Executive Offi cer Previous Year This Year during Ashad end Principal Interest Principal Interest the year Principal Interest Rs. Rs. Rs. Rs. Rs. Rs. Rs. (A) Directors 2,184,493 7,684 767,892 137,241 - 1,416,601 4,706 (B) Chief Executive Offi cer ------(C) Promoters ------(D) Staff ------(E) Shareholders ------Total ------Note : As per clause 3 of the Nepal Rastra Bank (The Central Bank of Nepal ) Directive No. 6, loans given to executive offi cers and employees are as per Bank staff rules and hence not disclosed above. Loans to Directors includes the loan availed by a company named Syncro Media P. Ltd in which one of our directors and his family has major stake.

64 Annual Report and Accounts 2007-2008 Schedule 4.30: Table of Capital Fund as at 15 July 2008 (31 Ashad 2065) Rs. in '000 Previous Year Particulars This Year 1,951,117 A) Core Capital 2,304,758 413,255 1. Paid Up Capital 620,784 - 2. Share Premium - - 3. Non-Redeemable Preference Share - 826,510 4. General Reserve Fund 990,294 504,725 5. Cumulative Profi t/Loss 383,288 - 6. Capital Redemption Reserve - - 7. Capital Adjustment Fund - 206,627 8. Other Free Reserves (Proposed issue of Bonus Shares) 310,392 - Less:- Goodwill - Investment in excess of prescribed limit - Fictitious Assets - Investment in securities of companies with Financial Interest - 274,167 B) Supplementary Capital 350,519 105,931 1. Loan Loss Provision on Pass loan 138,353 - 2. Assets Revaluation Reserve - - 3. Hybrid Capital Instruments - - 4. Unsecured Subordinated Term Debt. - 165,236 5. Exchange Equalization Fund 187,791 - 6. Additional Loan Loss Provision - - 7. Investment Adjustment Reserve - 3,000 8. Provision for Loss on Investment 24,375 2,225,284 C) Total Capital Fund (A+B) 2,655,277 D) Minimum Capital Fund required to be maintained on the basis of Risk Weighted Assets 1,558,526 Capital Fund (@ 11 Percent) 2,086,684 779,263 Core Capital (@ 5.5 Percent) 1,043,342 666,758 Capital Fund (Excess) (@ 3.00 percent) 568,592 1,171,854 Core Capital (Excess) (@ 6.65 percent) 1,261,416

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Schedule 4.30(A): Table of Risk Weighted Assets as at 15 July 2008 (31 Ashad 2065)

Previous Year This Year

Particulars Weightage Amount Risk Weighted Amount Risk Weighted Rs. Rs. Rs. Rs. On- Balance Sheet Assets Cash Balance 0% 378,422,542 - 414,875,467 - Gold (tradable) 0% - - - - Balance with Nepal Rastra Bank 0% 1,613,757,788 - 1,266,273,524 - Investment in Government of Nepal Securities 0% 7,107,937,303 - 8,137,615,178 - Investment in NRB Bonds 0% - - - - Fully Secured Loan against own Fixed Deposit Receipt 0% 498,244,846 - 369,566,490 - Fully Secured Loan against Government of Nepal Securities 0% 449,790,721 - 762,719,465 - Balance with Domestic Banks and Financial Institutions 20% 28,840,738 5,768,148 49,615,608 9,923,122 Fully secured FDR loan against Fixed Deposit Receipt of other Banks 20% 303,084,261 60,616,852 742,030,701 148,406,140 Balance with Foreign Banks 20% - - 319,478,615 63,895,723 Money at Call 20% 1,761,151,500 352,230,300 2,197,537,600 439,507,520 Loan against the Guarantee of Internationally Rated Banks 20% 933,378,704 186,675,741 198,112,176 39,622,435 Other Investments with Internationally Rated Banks 20% 5,834,176,000 1,166,835,200 4,969,499,000 993,899,800 Investment in Shares, Debentures and Bonds 100% 44,943,000 44,943,000 114,536,000 114,536,000 Other Investments 100% 569,177,161 569,177,161 705,543,833 705,543,833 Loan, Advances and Bills Purchased/Discounted 100% 8,605,649,826 8,605,649,826 11,891,554,920 11,891,554,920 Fixed Assets 100% 428,125,739 428,125,739 440,504,145 440,504,145 All Other assets (Except Net of Advance Tax Paid) 100% 430,767,831 430,767,831 1,171,323,144 1,171,323,144 Net Other Interest Receivable (Gross Interest Receivable- Interest Receivable on Government Bonds-Interest Suspense) 100% 178,006,322 178,006,322 69,280,895 69,280,895 Total (A) 29,165,454,282 12,028,796,120 33,820,066,761 16,087,997,677 Off-Balance Sheet Items Bills Collection 0% 772,007,943 - 155,926,528 - Forward Foreign Exchange Contract 10% 1,121,869,816 112,186,981 193,985,365 19,398,536 Letters of Credit with Maturity of less than 6 months (full value) 20% 1,609,210,508 321,842,101 1,647,335,898 329,467,180 Guarantees issued against Counter Guarantee of Internationally Rated Banks 20% 1,566,122,062 313,224,412 1,344,662,896 268,932,579 Letters of credit with maturity of more than 6 months (full value) 50% 252,733,218 126,366,609 210,657,906 105,328,953 Bid Bonds 50% 14,592,130 7,296,065 22,978,842 11,489,421 Performance Bonds 50% 517,756,973 258,878,486 833,994,982 416,997,491 Advance Payment Guarantee 100% 32,185,504 32,185,504 3,901,828 3,901,828 Financial Guarantee 100% 64,142,079 64,142,079 84,559,383 84,559,383 Other Guarantee 100% 195,170,418 195,170,418 510,368,946 510,368,946 Irrevocable Loan Commitment 100% - - - - Contingent Liability in respect of Income Tax 100% - - - - All Other Contingent Liabilities (including Acceptances & Endorsments) 100% 708,331,260 708,331,260 1,131,411,757 1,131,411,757 Total (B) 6,854,121,911 2,139,623,915 6,139,784,331 2,881,856,074 Total Risk Weighted Assets 36,019,576,193 14,168,420,035 39,959,851,092 18,969,853,751

66 Annual Report and Accounts 2007-2008 Schedule 4.31: Key Indicators

Particulars Indicators FY FY FY FY FY 2003/04 2004/05 2005/06 2006/07 2007/08 1. Net Profi t/Gross Income Percent 33.95 34.01 37.06 34.55 34.94 2. Earning Per Share Rs. 143.55 143.14 175.84 167.37 131.92 3. Market Value Per Share Rs. 1,745 2,345 3,775 5,900 6,830 4. Price Earning Ratio Ratio 12.16 16.38 21.47 35.25 51.77 5. Dividend (including bonus) on Share Capital Percent 110 120 140 130 130 6. Cash Dividend on Share Capital Percent 110 120 130 80 80 7. Interest Income/Loan & Advances Percent 8.83 7.43 6.23 6.49 6.20 8. Staff Expenses/Total Operating Expenses Percent 19.51 22.53 24.29 23.75 24.28 9. Interest Expenses on Total Deposit and Borrowings Percent 1.30 1.31 1.31 1.65 1.59 10. Exchange Fluctuation Income/Total Income Percent 17.24 17.32 15.95 15.44 14.75 11. Staff (statutory) Bonus/Total Staff Expenses Percent 38.96 37.38 35.83 33.71 34.63 12. Net Profi t/Loan and Advances Percent 8.51 6.85 7.63 6.75 6.24 13. Net Profi t/Total Assets Percent 2.27 2.46 2.56 2.42 2.46 14. Total Credit/Deposit Percent 31.63 43.49 39.92 43.78 46.95 15. Total Operating Expenses/Total Assets Percent 2.92 3.03 2.69 2.94 2.78 16. Adequacy of Capital Fund on Risk Weighted Assets a. Core Capital Percent 13.76 13.99 12.99 13.77 12.15 b. Supplementary Capital Percent 1.81 2.07 1.94 1.94 1.85 c. Total Capital Fund Percent 15.57 16.06 14.93 15.71 14.00 17. Liquidity (CRR) Ratio 9.46 8.77 6.86 5.46 5.84 18. Non-performing Credit/Total Credit Percent 3.77 2.69 2.13 1.83 0.92 19. Weighted Average Interest Rate Spread Percent 3.76 3.70 4.10 3.95 4.01 20. Book Net-worth Rs’000 1,495,739 1,582,415 1,754,139 2,116,353 2,492,548 21. Total Shares No. 3,746,404 3,746,404 3,746,404 4,132,548 6,207,840 22. Total Staff No. 263 302 345 351 377

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Schedule 4.32: Signifi cant Accounting Policies Income realised from the difference between buying and selling rates of foreign currencies is accounted for as trading gains. Financial Year 17 July 2007 to 15 July 2008 2.7 Interest Expense Interest on deposit liabilities and borrowing (1 Shrawan 2064 to 31 Ashad 2065) from other banks are accounted for on accrual basis.

2.8 Loans and Advances, Overdraft and Bills Purchased Loans and advances, overdrafts and bills purchased include direct fi nance provided to the customers such as bank overdrafts, credit card, personal loans, term loans, hire 1. General Information purchase fi nance and loans to deprived Standard Chartered Bank Nepal Ltd (the also requires the management to exercise sectors. All loans are subject to regular review “Bank”) is a limited liability company domiciled judgement in the process of applying the and are graded according to the level of credit in Nepal. The address of its registered offi ce Bank’s accounting policies. risk and classifi ed as per Nepal Rastra Bank’s is G.P.O. Box 3990, Naya Baneshwor, Directives. Loans and advances, overdraft and Kathmandu, Nepal. The Bank has a primary 2.3 Interest Income bills purchased are net of loan loss provisions. listing on the Nepal Stock Exchange Limited. Interest income on loans and advances is The Bank is a subsidiary company of recognised on cash basis as per the directive Standard Chartered Bank PLC, London. issued by Nepal Rastra Bank, which is 2.9 Staff Loans not in accordance with Nepal Accounting Loans and advances granted to staff in The Bank carries out commercial banking Standards. accordance with the staff loan scheme are activities in Nepal under license from Nepal refl ected under Other Assets. Rastra Bank (the Central Bank of Nepal) as Interest income on Investments is recognised Class A licensed institution. on accrual basis. 2.10 Loan Loss Provision Provision is made for possible losses on loans 2. Summary of Signifi cant Accounting Policies 2.4 Commission Income and advances, overdraft and bills purchased The principal accounting policies applied in Income from usance export bills is accounted at 1% to 100% on the basis of classifi cation the preparation of the fi nancial statements of for on accrual basis whereas earning from of loans and advances, overdraft and bills the bank are set out below. These policies sight bills is accounted upfront. purchased in accordance with the directives have been consistently applied to all the years of Nepal Rastra Bank. Additional provisions presented, unless otherwise stated. Commission income exceeding Rs. 100,000 than the minimum requirement as per Nepal earned on guarantees covering more than a Rastra Bank directives, are made by the management on prudence basis. 2.1 Statement of Compliance year is accounted for on accrual basis over The fi nancial statements have been prepared the period of the guarantee. in accordance with Nepal Accounting 2.11 Loans & Advances Write off Standards (NAS) issued by the Nepal 2.5 Dividend Income Unrecoverable loans and advances are written Accounting Standards Board (ASB) except Dividend is recognised as income when the off in accordance with the by-laws of the Bank recognition of interest income on loans and right to receive the payment is established. approved by the Nepal Rastra Bank. advances as stated in paragraph 2.3 below, Amounts recovered against loans written off in generally accepted accounting principles, and 2.6 Foreign Exchange Transactions earlier years are recognized as income in the the provisions of Bank and Financial Institution Assets and liabilities denominated in foreign profi t and loss account in the year of recovery. Act, 2063, directives issued by Nepal Rastra currencies at the Balance Sheet date are Bank (Central Bank) and the Company Act, translated at mid-point exchange rates of 2063. the Nepal Rastra Bank after adjustment for 2.12 Investments effective trading rate.Net difference arising Investment in Treasury Bills, Government of 2.2 Basis of Preparation from the conversion of foreign currency assets Nepal Development Bonds and Special Bonds The fi nancial statements have been prepared and liabilities is accounted for as revaluation are those, which the Bank has purchased under the historical cost convention. The gain. In conformity with the Directives of Nepal with the positive intent and ability to hold until preparation of the fi nancial statements in Rastra Bank, 25% of the total revaluation gain maturity. Such securities are recorded at conformity with NAS and generally accepted is transferred to Exchange Fluctuation Fund cost or at cost adjusted for amortisation of accounting principles requires the use of by charging to Profi t and Loss Appropriation premiums or discounts. certain critical accounting estimates. It Account.

68 Annual Report and Accounts 2007-2008 Investments in shares held for strategic Licence fees paid by the Bank are amortised The principal temporary differences arise from purpose are stated at lower of cost or market over the period of the licence. depreciation of fi xed assets, provision for value with additional provisions for possible diminution in the value of investment in shares diminution in value as estimated by the 2.15Lease Rental and provisions for gratuity and performance management on prudence basis. The leases entered into by the Bank are bonus. operating leases. The total payments made All investments are subject to regular review under operating leases are charged to Other Deferred tax assets are recognised where according to the directives of Nepal Rastra Operating Expenses in the profi t and loss it is probable that future taxable profi t will Bank. account on a monthly basis. be available against which the temporary differences can be utilised. 2.13 Fixed Assets and Depreciation 2.16 Retirement Benefi ts a. Fixed assets are stated at historical cost The Bank has schemes of retirement Deferred tax related to temporary differences less depreciation. Historical cost includes benefi ts namely Gratuity and Provident Fund. in opening balances is credited or charged expenditures that are directly attributable to Provision for expenses on account of Gratuity directly to equity and subsequent year the acquisition of the assets. and Provident Fund is made on accrual basis differences are recognised in the profi t and with the amount of gratuity computed by loss account together with the deferred gain b. Vehicles, equipment, furniture and the Bank in accordance with its applicable or loss. fi xtures with a unit value of Rs. 400,000 or scheme. Contributions to approved retirement less are expensed off in the year of purchase. fund are made on a regular basis as per the 2.18 Stationery Retirement Fund rules and regulations. Stationery purchased for consumption is c. Land is not depreciated. Depreciation of expended at the time of purchase. other assets is calculated using the straight- line method to allocate their cost to their 2.19 Non Banking Assets residual values over their estimated useful Non Banking Assets are accounted for as per lives, as follows: the directives of Nepal Rastra Bank.

S.N. Assets Types Life of an Asset 3.Rounding off and Comparative Figures 1. Equipment 36 months The fi nancial statements are presented in 2. Furniture & Fittings 36 months Nepalese Rupees, rounded off to the nearest 3. Vehicle 36 months rupee. Where necessary, amounts shown for 4. Computers – PC, Printer, Laptop etc. 36 months the previous year have been reclassifi ed to 5. Computers – Server 60 months facilitate comparison. 6. Computer – ATM 84 months 7. Premises Freehold 600 months d. Costs on improvements and renovation of 2.17 Income Tax leasehold premises are depreciated over the a. Current Income Tax remaining period of the lease. Provision for current income tax is made in accordance with the provisions of the e. For additions during the year, depreciation prevailing Income Tax Act, 2058 and Rules as is charged from the month subsequent to amended. the month of acquisition and for disposal depreciation is charged up to the date of disposal. b. Deferred Income Tax Deferred income tax is provided on temporary differences arising between the tax bases 2.14 Amortisation of assets and liabilities and their carrying Software applications purchased by the Bank, amounts in the fi nancial statements. Deferred costing greater than Rs. 40,000,000, are income tax is determined using tax rates (and amortised over a period of thirty-six months laws) that have been enacted by the balance from the month of purchase. Software costs sheet date and are expected to apply when with a unit value of Rs. 40,000,000 or less are the related deferred income tax asset is expensed off in the year of purchase. realised or the deferred income tax liability is settled.

www.standardchartered.com/np 69 Financial Statements and Notes to Accounts continued

Schedule 4.33: Notes to Accounts Financial Year 17 July 2007 to 15 July 2008 (1 Shrawan 2064 to 31 Ashad 2065)

1. Provision for Bonus 6. Dividend and Bonus Provision for bonus has been calculated and The Board has recommended 130% dividend provided for at 10% of net profi t, after making (including bonus shares) out of which, Rs. adjustments for loan loss provision and bonus. 80 to be distributed as cash and balance as bonus issue in the ratio of 2:1 i.e. one bonus share for every two shares held. 2. Staff Housing Fund As the terms of service of the staff has a provision for extending housing loans to the 7. Unpaid Dividend eligible staff, a separate housing fund has not As on the balance sheet date, unpaid dividend been created in accordance with Labour Act, over fi ve years amounts to Rs. 2,703,589. 2048. 8. Paid up Share Capital 3. Tax Settlement Outstanding Paid up share capital of the Bank has moved Self assessment returns fi led by the Bank over the years as follows: for the fi nancial year 2005-06 (2062-63 BS) Financial Year Cumulative Paid up Remarks and 2006-07 (2063-64 BS) are pending Capital Rs. assessment at the Inland Revenue Offi ce. Assessments of the years prior to those 1987-88 (2044-45 BS) 30,000,000 Opening Share Capital at Rs. 60 paid up mentioned above have been completed and 1990-91 (2047-48 BS) 50,000,000 Capitalisation of Reserve Rs. 100 paid up taxes fully settled. 1992-93 (2049-50 BS) 100,000,000 Issuance of 100% Bonus Shares 1994-95 (2051-52 BS) 150,000,000 Issuance of 50% Bonus Shares 1996-97 (2053-54 BS) 225,571,800 Issuance of 50% Bonus Shares 4. Provision for Gratuity 1997-98 (2054-55 BS) 339,548,800 Issuance of 50% Bonus Shares During the year, the Bank has provided Rs. 2002-03 (2059-60 BS) 374,640,400 Issuance of 10% Bonus Shares 16,812,712 (Previous Year Rs. 19,202,355) 2005-06 (2062-63 BS) 413,254,800 Issuance of 10% Bonus Shares on account of gratuity. Out of the amount 2006-07 (2063-64 BS) 620,784,000 Issuance of 50% Bonus Shares provided, Rs 13,491,431 has been funded (previous year Rs15,833,778) and Rs. 1,732,697 (previous year Rs. 4,060,154) 9. Sale of Land and Building has been paid to the staff at the time of The Bank has sold its land and building at separation. Duhabi during the year for Rs. 3,500,000 at a profi t of Rs. 582,694. 5. Performance Bonus The Bank’s reward programmes recognize 10. Deferred Tax world-class performance and behaviour Deferred income taxes are calculated on in support of the Bank’s values across all temporary differences using an effective tax job levels. The Bank’s total reward consists rate of 31.50% (previous year rate: 31.50%) of fi xed and variable compensations. Performance Bonus is a variable The items attributable to deferred income tax compensation based on the Bank’s overall assets and liabilities and their movement are performance and individual employee’s as follows: 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. 40,555,453 has been provided for the performance bonus in this year.

70 Annual Report and Accounts 2007-2008 Balance Movement Balance 16 Jul 2007 during the year 15 Jul 2008 Deferred Income Tax Assets Accelerated Depreciation in Financial Statements 28, 391,790 (928,647) 27,463,143 Gratuity Provision 18,978,466 500,404 19,478,870 Provision for Performance bonus 4,683,771 736,534 5,420,305 Provision for investment impairment 945,000 6,733,125 7,678,125 Total Deferred Tax Assets 52,999,027 7,041,416 60,040,443 Deferred Income Tax Liabilities - - - Net – Deferred Income Tax Asset 52,999,027 7,041,416 60,040,443

The net deferred tax asset as on 16 July 2007 has been directly credited to equity (retained earnings) and movement during the year is credited to the profi t and loss account.

11. Compensation Details for Key Manage- ment Personnel

Total of Key Management Personnel Compensation Rs. 28,323,371 A) Short Term Employee Benefi ts Rs. 28,323,371 (Salary, Allowance, PF) B) Post Employment Benefi ts NIL C) Other Long Term Benefi ts NIL D) Termination Benefi ts Rs. 2,236,092 E) Share Based Payment NIL

Additional information: a) Key Management Personnel includes 2 expatriate staff. b) Key Management Personnel are also provided with the following benefi ts: i) Benefi ts 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.

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

13 Reconciliation Status: Rs. in ‘000 Particulars Total Amount ≤ 3 Months > 3 ≤ 9 Months > 9 Months Branch Adjustments Account - - - - Agency Accounts 642,774 640,304 2,470 -

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

www.standardchartered.com/np 71 Financial Statements and Notes to Accounts continued

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

Rs. in ‘000 Particulars Amount Loans Disbursed 10,208,820 Loans Recovered 6,467,460 Loans Written-off 33,907 Interest Written-off -

15 Summary of Changes in Deposit Liabilities :

Rs. in ‘000 Particulars Balance as at 16/07/2007 Received/ (Withdrawn) Balance as at 15/07/2008 Current and Margin Accounts 5,280,635 1,367,970 6,648,605 Saving Account 15,244,385 2,611,749 17,856,134 Call Deposits 925,511 1,012,735 1,938,246 Fixed Deposits 3,196,490 104,524 3,301,014 Total 24,647,021 5,096,978 29,743,999

16 Weighted Average Interest Spread:

Particulars Rate % Average Rate of Credit and Investments 5.78 Average Rate on Deposits 1.77 Net Spread 4.01

17 Particulars of Amortised Expenses yet to be Expensed Off:

Rs. in ‘000 Particulars Amount Software Costs - Licence Fees 1,569 Premium on Development Bonds 39,852 Total 41,421

18 Summary of Concentration of Exposure:

Rs. in ‘000 Particulars Loans & Advances and Bills Deposits & Borrowings Contingent Total Amount as on 15 July 2008 13,963,984 29,743,999 6,139,784 Highest Exposure to Single unit 476,074 1,785,809 611,883 Highest % of Exposure to Single unit 3.41 6.00 9.97

72 Annual Report and Accounts 2007-2008 19 Classifi cation of Assets and Liabilities based on Maturity:

Rs. in Million Particulars 1-90 Days 91-180 Days 181-270 Days 271 Days -1 Year Over 1 Year Total Assets Cash Balance 415 415 Balance with Banks 1,635 1,635 Investment in Foreign Banks 2,912 1,412 2,193 1,356 7,873 Government Securities 1,617 3,248 1,029 1,327 917 8,138 Nepal Rastra Bank Bonds ------Inter Bank Lending ------Loans, Advances & Bills Purchased 3,587 1,467 756 603 7,306 13,719 Other Assets 1,349 - - - 207 1,556 Total Assets 11,515 4,715 3,197 4,123 9,786 33,336 Liabilities Loans and Borrowings ------Current Deposits 1,189 5,460 6,649 Saving Deposits 3,348 14,508 17,856 Fixed Deposits 3,563 260 207 606 603 5,239 Debentures ------Other Liabilities, Capital & Reserves 1,099 - - - 2,493 3,592 Total Liabilities 9,199 260 207 606 23,064 33,336 Net Financial Assets 2,316 4,455 2,990 3,517 (13,278) - Cumulative Net Financial Assets 2,316 6,771 9,761 13,278 -

20 Statement of age-wise agency account reconciliation pending items

Rs. in ‘000 Particulars Total Amount Upto 1 year 1 to 3 years Above 3 years Agency Accounts - - - -

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

www.standardchartered.com/np 73 Disclosure as per Bank’s disclosure policy under the Basel –II Capital Accord of Nepal Rastra Bank

1. Capital structure and capital adequacy Board and Senior Management Oversight prepared and implemented. Any exception to a. Tier 1 capital and a breakdown of its Bank management is responsible for the standard get escalated to and approved understanding the nature and level of risk by the appropriate authorities as stipulated in components; taken by the bank and relating the risk to the standards, policy, manual and the PDD As on 15.07.2008 the capital adequacy level. The Credit Risk with audit trail. Core Capital (Tier 1) 2,304,757,379 Committee reviews the Credit Risk, analyze Operational Risk Management & Assurance a Paid up Equity the trend, assess the exposure impact on Share Capital 620,784,000 capital and provide a summary report to Framework (ORMAF) has been implemented b. Proposed Bonus Management Committee. for managing operational risks. In line with Equity Share 310,392,000 ORMAF, the 3 lines of defense ensure effective c Statutory General In respect of operational risk, the Consumer management of all risks including the credit, Reserves 990,293,802 Banking, Wholesale Banking and each operational and market risk. In the 3 lines of d Retained Earnings 383,287,577 Support Function Business Operational Risk defense, business is put in the fi rst line which Manager provide operational loss data to is primarily responsible for the risk. Similarly b. Tier 2 capital and a breakdown of its com- Country Operational Risk Assurance Manager compliance and assurance are in the second ponents; who in turn analyze the trend and provide a and third line of defense which provides summery report to Management Committee. independent assurance to the Board and As on 15.07.2008 Finance & Strategic Planning checks the Senior Management on the effectiveness of Supplementary capital charge on operational risk. the risk management. Capital (Tier 2) 326,143,257 a General loan With regard to market risk, the Financial The market risks are managed in line with the loss provision 138,352,640 Markets Operation maintains net open Liquidity, Market Risk and the Credit Policy of b Exchange position of all currency on daily basis and the Bank. Equalization Reserve 187,790,617 provides data to Head Financial Markets who reviews and analyze the trend, assess the Comprehensive assessment of risks c. Detailed information about the Subordinated exposure impact on capital and provide a Credit risk Term Debts with information on the outstand- summery report to Management Committee. The credit risk of individual borrowers or ing amount, maturity, and amount raised during The net open position report is also discussed counterparties as well as at the portfolio level at the ALCO. the year and amount eligible to be reckoned as is assessed. The credit review assessment cover risk rating systems, portfolio analysis, capital funds. Management Committee reviews the large exposures and the risk concentrations. – Not applicable. summery reports received from CRC, CORAM All Corporate and Institutional borrowers and the HFM and provides a synopsis to including SME borrowers, at individual and d. Deductions from capital; the Board along with its view on the risks group level, are assigned internal credit rating – NIL. exposure and the adequacy of capital, for that supports identifi cation and measurement review and noting. of risk and integrated into overall credit risk e. Total qualifying capital; analysis. Rs. 2,630,900,636 Sound Capital Assessment In order to ensure a sound capital assessment Operational Risk f. Capital adequacy ratio; process, all three risks that have direct impact The ORMAF adopted by the bank provides 13.15 %. on the capital adequacy level are managed comprehensive risk management tools in a structured manner with clear roles and for managing the operational risk. The g. Summary of the bank’s internal approach to responsibilities. For managing the Credit Risk governance structure of OR is as follows: the Country Underwriting Standards, Country assess the adequacy of its capital to support Credit Policy, Credit Policy Manual, and • Potential operational risks are identifi ed current and future activities, if applicable; and Product Development Documents have been and graded at the unit level. Mitigating

74 Annual Report and Accounts 2007-2008 controls are put in place and mitigation interval, is responsible for the management of progress is monitored. These risks are reputational risk. reported to the Business Operational Risk Group (BORG). Monitoring and Reporting • BORG assign ownership, require All risks, including credit, operational and actions to, and monitor progress of risks market risks are identifi ed, escalated, identifi ed, in addition to confi rming the monitored and mitigated to the satisfaction risk grading provided at the unit level. of risk type owner. The risk type owner Risks categorized as High or Medium are is responsible for ensuring that risks are reported to the Country Operational Risk adequately identifi ed, escalated monitored Group (CORG) and escalated to Business and mitigated. The bank has adequate system Operational Risk Committees (ORCs). for monitoring and reporting risks exposures • CORG determines fi nal risk grading and assessing how the changing risk profi le and confi rm appropriateness of risk affects the need for capital. The Credit Risk ownership, required actions and progress Committee review and assess credit risk to date. Risks of High potential impact are and provide a report to the Management escalated directly to the Operational Risk Committee. Similarly, the CORG provides Assurance team. Country Operational Risk profi le and the • At the Function / Business level, risks Reputational Risk Committee provides the determined as being exceptional Reputational Risk profi le to the Management are reported to the Operational Risk Committee. All other risks are identifi ed and Assurance team for further assessment. reported by the respective risk type owner. • Risks that are assessed by Operational Risk Assurance as thematic at Group level Internal Control Review or exceptional are escalated to the Group The Board is committed to managing risk Operational Risk Committee (GORC). and to controlling its business and fi nancial • The GORC assigns ownership and activities in a manner which enables it to required actions to the risk, assesses its maximize profi table business opportunities, potential impact, and informs the Group avoid or reduce risks which can cause loss or h. Summary of the terms, conditions and main Risk Committee (GRC). reputational damage, ensure compliance with features of all capital instruments, especially Market Risk applicable laws and regulations and enhance Risks arising out of adverse movements resilience to external events. in case of subordinated term debts including in exchange rates, interest rates, liquidity hybrid capital instruments. and equity are covered under market risk The effectiveness of the Company’s internal - Bank has fully paid equity shares as management. In line with capital framework control system is reviewed regularly by the qualifying capital. prescribed by NRB, the bank focus on Board, its committees, Management and exchange risk management for managing/ Internal Audit. The Audit Committee has 2. Risk exposures computing the capital charge on market reviewed the effectiveness of the internal a. Risk weighted exposures for Credit Risk, risk. In addition the interest rate risk, liquidity control system during the FY 2064/65 and Market Risk and Operational Risk risk and equity risk are assessed at a reported on its review to the Board. The regular interval to strengthen market risk Internal Audits monitors compliance with RISK WEIGHTED As on management. The market risk is managed policies and standards and the effectiveness EXPOSURES 15.07.2008 within the tolerance limit set by the Board. of internal control structures across the A Risk Weighted Company through its program of business/unit Exposure for Credit Risk 17,587,870,443 Other risks audits. The Internal Audit function is focused B Risk Weighted Exposure In addition to the credit, operational and on the areas of greatest risk as determined for Operational Risk 2,399,695,513 market risk, the bank identifi es, assess by a risk-based assessment methodology. C Risk Weighted Exposure and monitor strategic and reputational risk Internal Audit reports regularly to the Audit for Market Risk 26,510,440 at a regular basis. While strategic risk is Committee. The fi ndings of all adverse audits Total Risk Weighted managed by the CEO, the Reputational are reported to the Chief Executive Offi cer Exposures (a+b+c) 20,014,076,396 Risk Committee, who meets at a bi-monthly and Business Heads for immediate corrective actions.

www.standardchartered.com/np 75 b. Risk Weighted Exposures under each of 11 categories of Credit Risk exposures beyond the authority of Credit No. Particulars Claim as on RWE as on 15.07.2008 Offi cers in both WB and CB are approved by 15.07.2008 CEO Nepal as per delegation of authority by the Board of Directors after support from the 1 Claims on govt. and central Bank 9,403,888,702 - respective credit risk function in group level. 2 Claims on other fi nancial entities 407,172,496 610,727,256 3 Claims on Banks 8,776,671,156 2,220,157,407 4 Claims on corporate and securities fi rm 3,894,979,174 2,168,629,862 Credit origination in consumer banking 5 Claims on regulatory retail portfolio 2,765,092,783 2,080,307,788 uses standard application forms which are 6 Claim secured by residential properties 2,900,466,981 2,173,847,140 processed in central units and credit approval 7 Claims secured by commercial real state 1,838,613,500 1,787,454,629 process is guided by product development 8 Past due Claims 3,847,346 74,038 document (PDD) and credit operating 9 High risk claims 851,766,171 1,231,743,324 manual. The probablity of default is calculated 10 Other Assets 2,786,888,689 1,699,265,413 using portfolio delinquency fl ow rates. 11 Off Balance sheet Items 8,356,171,105 3,615,663,586 There are risk offi cers for both Consumer Total 41,985,558,103 17,587,870,443 Banking and Wholesale Banking businesses c. Amount of NPAs (both Gross and Net) their risk management objectives and policies, that have their primary reporting line into the • Restructure/Reschedule Loan including: group functional level and the CEO Nepal. We NIL have manual approval process. • Substandard Loan • Strategies and processes; Gross value Rs.24, 906,145 Net values • The structure and organization of the The scope and nature of risk reporting and/or Rs. 18,679,609 relevant risk management function; measurement procedures are covered in the • Doubtful Loan • The scope and nature of risk reporting Country Underwriting Standards approved Gross value Rs. 48,012,386 Net value Rs. and/or measurement systems; and by the board, PDD and credit operating 3,006,193 • Policies for hedging and/or mitigating manual and other group level policies & • Loss Loan risk and strategies, and processes for procedures adopted after the board approval. Gross value Rs. 55,801,251 Net value: NIL monitoring the continuing effectiveness of The quarterly Risk Management Committee meeting reviews the portfolio exposure, d. NPA ratios hedges/mitigants. portfolio quality, country level risk triggers, etc. • Gross NPA to gross advances 0.92% Credit Risk Management strategies include Country underwriting standards and PDD / • Net NPA to net advances effectively managing the risk of fi nancial credit operating manual lay down the Bank’s 0.16% loss arising out of taking an exposure on counterparty and also ensuring independence policies and processes for hedging and/or e. Movement of Non Performing Assets mitigating and monitoring risk. Collateral Year on year downward movement of Rs. of the Credit Risk Management function from the origination and sales function. types which are eligible for risk mitigation 68,297,371. and valuation of collateral are reviewed every Credit risk under both consumers banking year in the underwriting standards which f. Write off of Loans and Interest Suspense and wholesale banking is managed through also prescribes the frequency of valuation Loans Write off during the year is Rs. a framework which sets out policies and for different collateral types. Collateral held 33,906,683 and interest suspense balance as procedures covering the measurement and against impaired loans is maintained at fair on year end is Rs 115,480,631. management of credit risk. There is clear value. segregation of duties between transactions g. Movements in Loan Loss Provisions and originators and the approvers in the risk b. Types of eligible credit risk mitigants used Interest Suspense functions. and the benefi ts availed under CRM. Year on year downward movement in Loan Loss Provisions of Rs. 42,124,602. An alpha numeric grading system is used No. Credit Risk MitigantAs on 15.07.2008 for quantifying the risk associated with the 1 Deposits with Bank 863,231,418 Year on year downward movement in Interest counterparty for corporate and institutional 2 Deposits with other suspense of Rs. 66,972,367. clients (including SME). The grading is banks/FI* 599,066,983 based on a probability of default measure, 3 Govt. & NRB h. Details of additional Loan Loss Provisions with customers analyzed against a range Securities 750,345,059 Provisions due to growth in the volume have of quantitative and qualitative measures. In 4 Sec/G’tee of been added. No major additional provisions addition to nominal aggregate exposure, Foreign Banks* 1,269,043,937 have been made. Loss Given Default is used in the delegation Total 3,481,687,398 of credit approval authority and must be 3. Risk Management Function calculated for every transaction to determine * net of supervisory haircut a. For each separate risk area (Credit, Market the appropriate level of approval. Signifi cant and Operational risk), banks must describe

76 Annual Report and Accounts 2007-2008 Nepal Rastra Bank’s Approval and Directions

Nepal Rastra Bank has granted permission to publish the Financial Statements along with Balance Sheet, Profi t & Loss Account and related schedules of the Bank for the Fiscal Year 2064/65 along with the following direction vide Letter No. Bai.Su.Bi./Offsite/AGM 8/065/066 dated 2065/05/26:

To provide the information to this Department after attending the comments raised by the Statutory Auditor.

www.standardchartered.com/np 77 Five years Financial Summary Balance Sheet

(fi gures in Rs. thousands) Particulars 2060-61 2061-62 2062-63 2063-64 2064-65 2003-04 2004-05 2005-06 2006-07 2007-08

Assets Cash & Bank Balances 2,023,164 1,111,117 1,276,241 2,021,021 2,050,243 Money at Call and Short Notice 2,218,600 2,259,691 1,977,271 1,761,152 2,197,538 Investments 11,360,328 9,702,553 12,838,555 13,553,233 13,902,819 Loans, Advances & Bills Purchased 6,410,242 8,143,208 8,935,418 10,502,637 13,718,597 Fixed Assets 136,234 71,413 101,302 125,591 117,272 Other Assets 1,493,492 493,697 638,565 633,055 1,349,319 Total Assets 23,642,060 21,781,679 25,767,352 28,596,689 33,335,788

Liabilities Borrowings 78,283 27,551 - 400,000 - Deposit Liabilities 21,161,442 19,363,470 23,061,032 24,647,021 29,743,999 Other Liabilities 906,596 808,243 952,181 1,433,315 1,099,242 Total Liabilities 22,146,321 20,199,264 24,013,213 26,480,336 30,843,241 Shareholders’ Equity Paid up Capital 374,640 374,640 374,640 413,255 620,784 Proposed Capitalisation of profi t 37,464 74,928 112,392 206,627 310,392 Reserves (General Reserves including Exchange Reserves) 866,048 881,511 896,522 991,746 1,178,084 Retained Earnings 217,586 251,336 370,585 504,725 383,287 Total Shareholders’ Equity 1,495,739 1,582,415 1,754,139 2,116,353 2,492,547 Contingent Liabilities Letter of Credit 1,669,867 1,456,762 1,837,398 1,861,944 1,857,994 Guarantees 1,675,401 1,531,069 2,046,063 2,389,969 2,800,467 Forward Exchange Contracts 163,441 66,571 362,646 1,121,870 193,985 Other Contingent Liabilities 822,947 1,023,066 938,720 1,480,339 1,287,338 Total Contingent Liabilities 4,331,656 4,077,468 5,184,827 6,854,122 6,139,784

78 Annual Report and Accounts 2007-2008 Five years Financial Summary Profi t & Loss Account

(fi gures in Rs. thousands) 2060-61 2061-62 2062-63 2063-64 2064-65 Particulars 2003-04 2004-05 2005-06 2006-07 2007-08 Interest Income 1,042,176 1,058,678 1,189,603 1,411,982 1,591,196 Interest Expenses 275,809 254,127 303,198 413,055 471,730 Net Interest Income 766,366 804,551 886,405 998,927 1,119,466 Commission and Discount 198,948 178,651 222,929 221,207 276,432 Other Operating Incomes 26,531 29,293 25,442 28,785 32,594 Exchange Fluctuation Income 273,050 273,044 283,472 309,087 345,653 Total Operating Income 1,264,895 1,285,539 1,418,247 1,558,006 1,774,145 Staff Expenses 134,685 148,586 168,231 199,778 225,256 Other Operating Expenses 279,694 256,649 221,087 228,451 230,571 Exchange Fluctuation Loss - - - - - Operating Profi t Before Provision for Possible Loss 850,516 880,304 1,028,930 1,129,776 1,318,318 Provision for Possible Losses 23,517 27,726 47,730 36,809 69,885 Operating Profi t 827,000 852,578 981,200 1,092,968 1,248,432 Non-Operating Income/ (Loss) (10,756) 2,957 1,433 9,492 1,683 Provision for Possible Loss Written Back 43,304 33,685 53,090 20,160 90,635 Profi t from Ordinary Activities 859,547 889,220 1,035,723 1,122,620 1,340,750 Income/(Expenses) from Extra Ordinary Activities - (2,389) (2,411) (4,915) (28,039) Net Profi t after considering all Activities 859,547 886,831 1,033,312 1,117,705 1,312,710 Provision for Staff Bonus 85,955 88,683 93,937 101,610 119,337 Provision for Income Tax 235,793 261,903 280,619 324,427 374,452 Net Profi t/Loss 537,800 536,245 658,756 691,668 818,921 Accumulated Profi t up to Previous Year 215,988 217,586 251,336 370,585 557,724 This Year’s Profi t 537,800 536,245 658,756 691,668 818,921 Capital Adjustment Fund upto Previous Year - 74,928 Total 753,788 753,831 910,092 1,137,181 1,376,645 General Reserve Fund 70,183 - - 77,229 163,784 Proposed Dividend 412,104 449,568 487,033 330,604 496,627 Proposed Issue of Bonus Shares - - 37,464 206,627 310,392 Exchange Fluctuation Fund 16,450 15,463 15,011 17,996 22,554 Capital Adjustment Fund 37,464 37,464 - - - Accumulated Profi t/(Loss) 217,586 251,336 370,585 504,725 383,288

www.standardchartered.com/np 79 Notes: Leading the way

Standard Chartered Bank Nepal Limited has been in operation in Nepal since 1987. The Bank is an integral part of Standard Chartered Group having an ownership of 75% and the balance owned by the Nepalese public. The Bank is the largest international bank currently operating in Nepal.

Standard Chartered has a history of over 150 years in banking and operates in many of the world’s fastest-growing markets in over 70 countries. Standard Chartered employs almost 75,000 people, representing over 115 nationalities, worldwide. This diversity lies at the heart of the Bank’s values and supports the Bank’s growth as the world increasingly becomes one market.

With 16 points of representation, 17 ATMs and more than 350 local staff, Standard Chartered Bank Nepal Ltd. is in a position to serve its customers through an extensive domestic network. In addition, the global network of Standard Chartered Group gives the Bank a unique opportunity to provide truly international banking services in Nepal.

Standard Chartered Bank Nepal Limited offers a full range of banking products and services in Wholesale and Consumer banking. The Bank has been the pioneer in introducing ‘customer focused’ products and services and aspires to continue to be a leader in introducing new products in delivering superior services.

Corporate Social Responsibility is an integral part of Standard Chartered’s ambition to become the world’s best international bank and is the mainstay of the Bank’s values.

Disclaimer What we stand for Standard Chartered Bank Nepal Strategic Intent Limited entities are Equal Employment Opportunity/ Affi rmative Action To be the world’s best international bank employers. Standard Chartered Bank Leading the way in Asia, Africa and the Middle East Nepal Limited is committed to providing equal employment opportunities to Brand Promise every employee and every applicant for Leading by Example to be The Right Partner employment, regard-less of, but not limited to, such factors as race, color, Values religion, sex, age, familial or marital status, ancestry, sexual orientation, Trustworthy Responsive Creative International Courageous veteran status or being a qualifi ed individual with a disability; and within the Approach legal framework of the country.

Participation Competitive Positioning Management Discipline Focusing on attractive, growing Combining global capability, Continuously improving the way we work, Standard Chartered Bank Nepal Limited markets where we can leverage our deep local knowledge and creativity balancing the pursuit of growth with firm undertakes no obligation to update any relationships and expertise to outperform our competitors control of costs and risk statement in this Annual Report 2007- 2008 to refl ect events or circumstances Commitment to Stakeholders after the date on which such statement is made. Information in this Summary Customers Our People Communities Investors Regulators Passionate about our Helping our people to Trusted and caring, A distinctive investment Exemplary governance Annual Report is as of July 15, 2008. customers’ success, grow, enabling individuals dedicated to making delivering outstanding and ethics wherever delighting them with the to make a difference and a difference performance and we are quality of our service teams to win superior returns Designed & Processed by: PowerComm, 5552987

Printed in Nepal the Middle East in Asia, Africa and Leading the way Annual Report and Accounts 2007-2008 Accounts and Report Annual

Annual Report and Accounts 2007-2008 Leading the way in Asia, Africa and the Middle East