Annual Report 2007-2008 (ENG)_20100603063436

Annual Report 2007-08 | �

| Annual Report 2007-08

”“We put in conscious effort to live up to our corporate slogan “We make your life easier

- Sanjay Bahadur ShahChairman

“”

We believe that our satisfied customers make the basis of our success in generating good returns to shareholders,

providing attractive incentives to employees and serving the community through stronger Corporate Social Responsibility (CSR) endeavour

- Radhesh PantManaging Director

From Left: Sanjay Bahadur Shah- Chairman, Radhesh Pant- Managing Director


COVER STORY

Teamwork is the ability to work together towards a common goal.

All of us at BOK look up to our customers and value their needs while we work together as a team creating a family oriented working environment with our synergetic efforts to provide immaculate services to address our customers’ need.

1

23

4

5

6

| Annual Report 2007-08

1. Manish Pandey - Business Bank2. Rizma Rajkarnikar - Clearing & Collection3. Ganesh Lamsal - Branch Operations4. Ishwori Rai - Jawalakhel Branch5. Naresh Das - Business Bank Customer6. Kalpana Karki - Griha Laxmi Bachat Khata Account Holder


”“BOK continues to distinguish itself as an efficient, competitive, safe and a top quality financial institution

MESSAGE

ith fourteen years of presence, Bank of Kathmandu (BOK) has become a prominent name in Nepal.

BOK’s relentless pursuit for excellence is attributed to the dedication of its employees, superior customer service and assurance for its shareholders.

With a branch network of 23 branches and 6 service counters across Nepal, BOK is committed more than ever, in providing diversified and attractive products & services.

Furthermore, BOK’s continuous quest to seek the state-of-the-art technology has given impetus to several new products including BOK Click, SMS banking and provided a secure banking platform.

To diversify its lending and to cater to the growing market need, BOK is focusing more on Consumer and Small and Medium Enterprises (SME) lending, and in providing services to the rural population through wholesale Micro lending.

Living up to its corporate slogan “We make your life easier”, BOK continues to distinguish itself as an efficient, competitive, safe and a top quality financial institution.

W

Radhesh PantManaging Director

Sanjay Bahadur ShahChairman

| Annual Report 2007-082 Annual Report 2007-08 | �

”“

ChAIRMAN’S STATEMENT

Respected Shareholders,

On behalf of the Board of Directors, I would like to welcome all the shareholders, representatives from various regulatory authorities, auditors of the bank and advisors to the fourteenth Annual General Meeting of Bank of Kathmandu Limited.

I believe that the bank has been successful in achieving satisfactory returns for the shareholders and further improving its national and international image and business growth in this fiscal year in the midst of political instability and intense market competition. The bank remains committed in increasing shareholders value and would like to state that your bank has become an important pillar of the national financial economy and has been able to win the hearts of its customers for which, the credit goes to respected shareholders who constantly adviced & suggested us for the betterment of the bank.

Business Growth

It is my pleasure to inform you that the total Loans & Advances has increased by 31.50 percent over the previous fiscal year reaching NPR 12.75 billion while deposits have increased by 27.81 percent reaching NPR 15.83 billion. Though transportation disruptions and insecurity continued to affect business growth, the bank was able to attain remarkable growth rates of 28.36 percent in operating profit and 37.79 percent in net profit (NPR 361 million). The bank had 16 branches as of July 2007; with the opening of 7 new branches in the reporting fiscal year, the bank now has

a total of 23 branches and 6 service counters across the country. The customers can also use the remittance product of the bank, “BOK Money Transfer” with 250 agency locations across the country for sending and receiving money.

Though the Nepali Rupee deppreciated by 6.25 percent over US Dollar in the reporting period, the bank increased forex revenues by 16 percent earning NPR 93.8 million in the fiscal year. Total assets increased from

I believe that the bank has been successfulin achieving satisfactory returns for the shareholders

Jul-07 Jul-08

Comparative Business Growth (In Billion)

�6

�4

�2

�0

8

6

4

2

0

Increase by 31.50%

NPR 9.69 billionas of July 07

Increase by 27.81%

NPR 12.39 billionas of July 07

Loans & Advances Deposit

(July 2007 & July 2008)


NPR 14.58 billion by 21.54 percent reaching NPR 17.72 billion at the fiscal year end 2007/08. Likely, in part of off-balance exposure the bank made a significant growth of approximately 42 percent reaching NPR 3.04 billion in the year end (July 2007). Thus the bank is able to increase its business & return continually over the years and customers can expect further improvement in services through the introduction of technological products like; Internet banking(BOK Click), SMS banking, Utility payment and ATMs.

Non Performing Assets have been reduced from 2.51 percent in the previous year to 1.86 percent in this fiscal year, while the bank has been able to effectively reduce total loan loss provision to total loan from 3.04 percent to 2.24 percent in this fiscal year. Likewise, cost to income ratio in this FY has increased by 24.05 percent.

The bank has been able to bring down the weighted average interest spread to 4.35 percent in the reporting period; down from 4.04 percent in FY 2006/07 and 3.64 percent in FY 2005/06. Interest expense on deposit was also effectively managed at 2.78 pecent in the reporting period. The above facts show the bank is heading towards the progress in its activities and returns. Achievements & Returns:

From the 20 percent of net profit made in the year, NPR 72.3 million has been set aside in the General Reserve, NPR 2.5 million in Exchange Fluctuation Reserve, NPR 28.57 million in Bond Redemption Reserve while NPR 22.15 million has not been distributed, thus retained.

Respected shareholders, I hope that this AGM will approve the proposal of distributing 40 percent bonus shares and 2.11percent cash dividends from the profit of this fiscal year as committed in the previous Annual General Meeting. NPR 12.7 million to be deducted from the proposed bonus shares as 5 percent tax deduction at source [TDS] has been provisioned as cash dividends. I would like to inform all shareholders regarding the facility to open savings account with zero balance is available for this year too.

During the reporting period, your bank has: • Opened seven new branches in Tatopani, Ghorahi, Tulsipur, Surkhet,

Jumla, Balaju and Attaria. • The four storey building undertaken as a non-banking asset in Balaju

Industrial Estate has been utilized as a new branch in the first floor, while the remaining floors are being used as a training center of the bank and storage area for the branches located in Kathmandu Valley.

• BOK Money Transfer, a quick money transfer service has been expanded to 250 locations in Nepal, using an internet platform.

• The bank has made a leap in its IT system by successfully upgrading to the seventh version of FINACLE Software having even more features and has further enhanced its Disaster Recovery Setup and Network.

• The bank has setup ATM services in possibly the highest location of the world, Namche Bazzar.

In the current fiscal year, your bank has: • Introduced VISA Debit Card • Commenced Internet banking services

Business Plans

In the process of further strengthening the bank and making it capableand competitive in the coming years, the following short and long termplans have been envisioned : • Establish at least six new branches in the current fiscal year• Install and operate additional 25 ATMs in the banks branches and

other locations • Introduce credit card services• Special focus on Development Finance • Immediate plans are to make optimum utilization of funds and assets,

effective monitoring of activities, minimization of risks in lending and investments, extension of services and introduction of new products to suit the demands of the customers. In addition to this, improve its IT infrastructure and take maximum advantage, extend relations with international and national banks plus financial institution and strengthen management.

• Long term plans of expanding the bank’s network to provide more accessibility to the common people, promote the bank as a healthy competitor in the free global market, and become professional and a good corporate citizen by abiding to the national and international rules and regulations.

Lastly, I would like to express my sincere gratutide to all respected shareholders, Government of Nepal, Nepal Rastra Bank, Company Registrar Office, Nepal Security Board, Nepal Stock Exchange, various organizations, Directors, employees, auditors, and advisors of the bank for their continous assistance and support and hope to continue receiving the same support in the coming days too.

Thank You.

Sanjay Bahadur Shah Chairman

Operating Profit Net Profit(before loan loss provision)

56%

470

60%

600

Increase in Profit (NPR in Million)

FY 2006/07 FY 2007/08

Non Performing Assets

(From July 2007 to July 2008)

2.51% to 1.86%


BOARD OF DIRECTORS

SanjayBahadur ShahChairman


RadheshPantManaging Director

| Annual Report 2007-086 Annual Report 2007-08 | 7

Rita MallaDirector

Sitaram ThapaliyaDirector

Balram NeupaneDirectorRepresentativeNational Investment Company (P) Ltd


SudarshanRaj PoudyalProfessionalDirector

Santa Bar SinghThapaDirector

Bishnu Prasad BanjadeDirectorRepresentative Nepal Remittance (P) Ltd.


DIRECTORS’ REPORTFourteenth Annual General Meeting

he Directors of Bank of Kathmandu would like to invite you to the fourteenth Annual General Meeting to present the Directors’ Report

and the audited financial statement of FY 2007/08, for your approval. In the FY 2007/08, the country has undergone historic political shifts with the end of Monarchy and the establishment of the Federal Democratic Republic of Nepal. The decade long conflict and insurgency has affected all economic sectors of Nepal including the financial sector. Your bank (BOK) nevertheless was able to overcome the obstacles and grow steadily towards its goals, as a result of its strong foundation, built over the past fourteen years.

It gives us immense pleasure to inform all shareholders on the progress, achievements, future plans, and objectives of the bank. The Board of Directors, representing the shareholders of the bank, would like to take permission to present the detailed report on the bank’s activities in FY 2007/08.

Credit Management

With an increase of 31.50 percent over the previous fiscal year, loans and advances reached NPR 12.75 billion in FY 2007/08. This compares to an increase by 29.45 percent in FY 2006/07 and 21.40 percent in FY 2005/06. Prioritizing lending activities towards small businesses and retail consumers, the bank has been able to sustain its growth. In addition, effective management of the loan portfolio has resulted in a reduction of non-performing loans from 2.51 percent to 1.86 percent, and provision on loans and advances from 3.04 percent to 2.24 percent.

Corporate and Business Loans

A considerable slow-down in the industrial sector contributed to the decline in wholesale lending. Nevertheless, your bank has continued to focus on the corporate sector by advancing fewer but qualitative

T

Total Loans & Advances (In NPR Billion)

NPR9.69

FY 2006/07 FY 2007/08

NPR12.75

Growth by 31.50%

Non-Performing Loans

FY 2006/07 FY 2007/08

2.51%

1.86%

Total Provision to Total Loans & Advances

FY 2006/07 FY 2007/08

3.04%

2.24%

July 2008

Provision for Loss on Corporate Loans – 2.08%


to concentrate on Micro Financing. Your Bank through “Development Credit Unit” has been addressing the credit needs of low income strata, people from disadvantaged communities and youths seeking self employment. With strategic alliances with local cooperatives and micro finance institutions in 17 districts of 11 zones, your bank has initiated and established various micro credit initiatives in rural Nepal.

Amongst others, your bank has supported some successful Micro Financing Programs including; pollution-free electric vehicle (Safa tempos)for women, bio gas units, herb distillation equipments, rickshaws financing to Terai communities, etc.

Consumer Financing

The improvement in living standards and the recent transformation of the lifestyle of Nepalese households has provided financial institutions with added avenues and opportunities in terms of retail lending. Dedicated in making life easier, your bank offers consumer loans such as hire purchase loan, housing loan (construction, and renovation as well as outright purchase of land and building), education loan (for Nepal and abroad) and festivity/personal loan. These loans are payable in equated monthly installment against future income.

With an increment of around 25.00 percent over the previous year, consumer financing now totals NPR 2.40 billion which accounts for approximately 19.00 percent of total lending portfolio of the bank..

Your bank in coordination with the government has drafted the Foreign Employment Loan Policy and became the first bank to provide foreign employment loans mainly to youths from marginalized communities and people with fragile economic background.

syndicated loans. With establishment of newer commercial banks in the market, there has been considerable pressure on the interest rate, thereby promoting unhealthy competition amongst the players. However, your bank has stayed away from unhealthy competition in interest rates and continues to work under a sound management and positive market principles to promote sustainable growth in corporate business.

Micro Finance Loan

Majority of population of Nepal still lack the access to formal financial services and if we are to contribute towards the overall economic development of the country , banks and other financial institutions have

July 2007 July 2008

Deposit (In Billion)

12.39

15.83

Deprived Sector Finance (In Million)

July 2007

16.50

60.30

July 2008

Note: Loans & advances extended to micro finance agenciesworking directly with disadvantages communities from the rural areas.

July 2007

2.42

1.95

July 2008

Consumer Financing (In Billion)

Deposit Management

With more number of financial institution entering the market, there was a competition amongst the commercial bank for deposits thus resulting in higher interest rates. Despite this your bank’s deposit grew by 27.81 percent in the reporting period in comparison to a growth of 18.15 percent in the previous year; reaching a total of NPR 15.83 billion.

During the reporting period, your bank as per the needs of the customers has devised various innovative products like, Foreign Employment Savings Account; 24 Carat Fixed Deposit Account, Hello Savings Account and Share Plus Account. These products have contributed significantly to enhance the overall deposit portfolio of the bank.

It is our pleasure to inform you that the bank now has 23 branches covering all five development regions, giving people access to modern and reliable banking services. Products such as ‘Sajilo Bachat Khata’, a savings account, with any branch banking facility and all other banking

Deprived Sector Lending requirment by NRB

Rs 355,060,465 Deprived Sector Lending of the bank as on Mid July 08# Rs 517,389,128

#Note: including wholesale lending & investment

| Annual Report 2007-08�0 Annual Report 2007-08 | ��

Income from foreign Exchange (In Million)

FY 2006/7

80.8

FY 2007/08

93.8

Revaluation Transactions

89%

11%

Foreign Exchange Income Source

services are guaranteed to provide customers from the small towns and peri-urban areas a different perspective in availing banking services.

Furthermore, the bank’s non interest bearing deposits account marked a growth of 25.75 percent and interest bearing deposits account marked a growth of 28.17 percent in the reporting period.

Foreign Exchange Management

Following the policy guidelines, the management has made prudent and calculated risks of assets and liabilities in foreign currencies. Transaction limit has been set for each & total exposure of foreign currency and a clear authority has been set to perform the transactions. Various hedging techniques and tools are applied from time to time to manage the open foreign currency position of the bank. Sound information system is in place to safeguard against foreign currency fluctuations. Through the

appropriate use of spot and forward transactions and simple derivatives, the bank has been able to make reasonable profits from its foreign currency transaction despite a 6.25 percent depreciation of Nepali Rupees over the US Dollar. In the reporting period, the bank was able to make earnings of NPR 93.8 million, an increase by 16 percent over the previous fiscal year (NPR 80.8 million).

Liquidity Management

Efficient management of Liquidity implies that the bank has access to immediate cash in the amount and at the time needed at a reasonable cost, whereby attenuating the liquidity risk of the bank. On the other hand maintaining excess liquidity to minimize liquidity risk is also not advisable as it hampers the profitability of the bank. Most failures of financial

Capital Fund (In Million)

Core Capital Capital Fund

July 2007

960

July 2008

1290 1310

1640

institutions have occurred in large part due to deficient liquidity resulting from adverse circumstances. Liquidity management involves forecasting funding requirements and maintaining sufficient capacity to meet the needs and accommodate fluctuations in asset and liability levels due to changes in our business operations or unanticipated events.

The bank has been investing in Treasury Bills and Government bonds issued by the Government of Nepal. During the reporting period, weighted average interest rate of 91 days treasury bills increased from 2.44 percent to 4.21 percent and weighted average interest rate of one year Treasury Bills increased from 3.50 percent to 5.49 percent. The bank adopted various dynamic investment strategies through which it has been successful in attaining maximum return on its portfolio.

A portion of foreign currency deposits has been invested in secured international instruments and bonds thereby diversifying the investments and safeguarding the bank from potential interest rate risks with multiple sources of revenue.

Capital Management

Respected shareholders, following the assurance made in the last AGM, the Directors would like to propose to distribute 40 percent bonus shares from this year’s profit, in order to meet the bank’s capital requirement as stipulated by NRB. The bank has issued seven year debenture at 6.00 percent (to end in 2012) worth NPR 20 million to support business growth. Appropriate funds are being set aside annually in the Bond Redemption Reserve for maturity. We would also like to inform all shareholders that the bank has been complying the BASEL II directives of the NRB under Capital Adequacy framework.

91 Days Treasury Bills Avg. Weighted Int Rate 4.21% 364 Days Treasury Bills Avg. Weighted Int Rate 5.49%

Jul/Aug Aug/Sep Sep/Oct Oct/Nov Nov/Dec Dec/Jan Jan/Feb Feb/Mar Mar/Apr Apr/May May/Jun Jun/Jul

3.043.28

4.67

6.45

4.82

6.47

2.143.03

3.86

5.79

4.075.13

Source: Monetary Policy 2065, Nepal Rastra Bank

FY 2007/08

0


GDP Growth Rate % (Production Price)

4.7

3.1

3.73.2

4.7

2003/04 2004/05 2005/06 2006/07 2007/08

Source: Economic Survey 2007/08, Finance Ministry, Government of Nepal

National Economy and Banking Environment

Provisional national Gross Domestic Product (GDP) for the first nine months of the reporting period estimates GDP growth at 4.70 percent; an improvement over the GDP growth rates of the last few years. The agriculture sector which accounts for 32.00 percent of the National GDP recorded a 5.65 percent increase, positively impacting the national GDP. A staggering 7.70 percent inflation was recorded in the reporting period, attributable mainly to the three time hikes in fuel prices resulting in a spiraling effect on food and other commodities The world economy is going through a recession with growth projections as low as 3.70 percent and 3.80 percent for 2008 and 2009 respectively. While all the developed countries are going into a recession, the US economy particularly estimated to grow at a mere 0.50 percent in 2008 and 0.60 percent in 2009 in comparison to 3.60 percent in 2004 and 2.10 percent in 2007. The deepening financial crisis and the recession in the US economy has created a downward spiraling effect in all the major economies around the world. Economic growth of the two neighboring countries, China (9.20 percent) and India (11.40 percent) were very encouraging in 2007 but considering the world wide recession, growth rates are expected to be lower than the previous years.

Title 2003/04 2004/05 2005/06 2006/07 2007/08 Compared This year till Oct/Nov to previous year

Operating Income 440 ��4 �77 677 86� 27.47% ��

Operating Expenses ��4 ��4 �77 208 26� 2�.48% �0�

Operating Profit �06 �60 400 46� 602 28.�6% 2�0

Net Profit after taxes �28 �40 202 262 �6� �7.7�% -

Major Achievements / Results

Title 2003/04 2004/05 2005/06 2006/07 2007/08 Compared This year till Oct/Nov to previous year

Capital 464 464 464 60� 60� 0% 60�

Deposit 7,742 8,�4� �0,48� �2,�8� ��,8�4 27.8�% �6,�02

Loans & Advances 6,008 6,�82 7,48� �,6�4 �2,748 ��.�0% �2,��0

Fixed Property (Net) 84 �� 2� �87 20.�6% 406

Key Portfolio Indicators

Financial highlights of the Reported Period and Current Year

Title 2003/04 2004/05 2005/06 2006/07 2007/08 Compared to previous year

Net Profit/

Operating Income 2�.0�% 27.24% ��.0�% �8.70% 4�.8�% 8.0�%

Operating Expense/ �0.4�% 2�.�6% �0.68% �0.72% �0.24% -�.�6% Operating Income

Return on Equity ��.60% ��.40% 24.�0% 26.�8% 26.�0% �.��%

Return on Assets �.�4% �.42% �.6�% �.80% 2.04% ��.�7%

Permanent Employees �24 �2� �2� �2� 226 86.78%

Branches 8 � �� 6 2� 4�.7�%

Major Indicators:

Your bank has been progressing well despite of various adversities, which is indicated by increase in the profit after tax by 37.79% during the reported period vis-á-vis the preceding year.

In comparison to the previous fiscal year, loans and deposits have increased by 31.50 percent and 27.81 percent respectively as a result of which net profits after taxes has increased by 37.79 percent, a demonstration of the bank’s ability to optimize its fund utilization.

Rs. in Million

Rs. in Million


Business Relationships

BOK Money Transfer

With a network of over 250 agents in 51 districts, BOK Money Transfer is gaining popularity in the domestic remittance arena . The network of local financial institutions and agencies can be used by customers for both domestic and foreign money transfer. It has served as an important network for extending the bank’s services beyond the reach of the bank’s branch network and has assisted deposit growth as a result of higher accessibility.

Correspondent Banking and Payment Mechanisms The foreign remittance market in Nepal has been steadily growing over the last few years with the increasing number of youths going abroad for foreign employment and studies abroad. Easy availability of financing for foreign employment and abroad Studies from financial institutions have been instrumental in the development of this market. With the aim of facilitating the customers, the bank has entered into agreements with corresponding banks in key countries and major international remittance companies such as Money Gram, Xpress Money Service, Placid Express, Nepal Remit, Al-Moosa, Al Fardan Money Exchange, Money Exchange SA (Spain), Alu-Kkas, EZ Remit, Janata Express, National Exchange, Wallstreet Money Exchange, Instant Cash and many others to extend the coverage of the banks remittance services. Special arrangements have been made with banks in India and China that have presence in major cities and major boarders such as Lhasa, China facilitating remittance and trade.

International Relations

The bank has SWIFT Correspondent Banking Relationship with 205 banks, maintaining relationships with all major banks around the globe. To promote international trade, the bank is working in partnership with International Finance Corporation (IFC), a member of the World Bank Group (WB) under their Global Trade Finance Program (GTFP). Under this program, IFC offers confirming banks partial or full guarantees covering payment risk for our trade related transactions to the extent of United States Dollars Two Million. This facility provided has enhanced the bank’s confirmation capacity in Letters of Credit (LC), Guarantees and other International Financial Instruments and has helped customers in their International Trade activities. The bank is also working with IFC South Asia Enterprise Development Facility (SAEDF), a World Bank Group focusing on the needs of small and medium enterprises (SME) to reduce poverty through SME development and with the objective of introducing capacity building programs and partnering to extend loans to SMEs through local banks. Consultant has already been appointed for the speedy implementation of the project.

Likely; special resolution was passed through thirteenth AGM regarding the capital tie up between the bank & IFC. However, detailed homework is yet to be carried out to draft the partnership details between the bank and IFC with regard to future equity investment in bank and technical support. Furthermore, the bank has been continuously searching for avenues whereby it can further strengthen business growth and goodwill in the international financial market.

Board of Directors

During the reporting period, there has been no change in the structure and members of the Board of Directors. The Board of Directors consist of four representatives from the general public, one Professional Director as per bank and financial institution act, and three from promoters group.

On 14th November 2007, the bank had to face a great loss with the demise of a national personality and Founding Chairperson of Bank of Kathmandu,

Dr. Yadav Prasad Pant. We express our sincere heartfelt condolence in the AGM, recalling his vision for the bank and his commitment to the development of the bank from the very beginning.

Factors Affecting the Bank a. Risks emanating from excessive competition as a result of increase in

the number of banks and financial institutions.b. Risks from extending credit facilities e.g. long-term, medium-term,

working capital loans and non-funded facilities like letters of credit and guarantees.

c. Risks from fluctuation in the interest rates. d. Risk from changes in policies related to commercial banks by the

government of Nepal and Nepal Rastra Bank.e. Risks from unexpected changes in monetary and fiscal policy by the

government of Nepal and Nepal Rastra Bank.f. Risks from fluctuation in foreign exchange rates. g. Risks from the changes in interest rates of deposits and loans. h. Risks from delays in recovery of loan and advances. i. Risks from the impact of the global economic recession in the local

market. j. Risk from the volatility in the capital markets. k. Risks from the fluctuations in the economic environment of the

country. The bank has sufficient built-in provisions against possible losses on loans and advances, investments, exchange fluctuations, etc made through careful internal calculations and NRB guidelines.

Response of the Board to the Audit Report

Except for general comments, there are no major issues in the Audit Report for FY 2007/08. The Board of Directors have duly noted the comments and have made necessary arrangements for improving them. Return to the Shareholders

Profit on total assets increased by 13.37 percent in the reporting period due to better recovery of bad loans, reduction in interest expenses, extension of branches, diversification in the loan portfolio and improvement in management information systems. Despite the challenges presented by the slowdown in the economy and financial market, your bank has been able to increase net profit after tax by 37.79 percent in FY 2007/08 incomparison to the previous fiscal year. The bank aims to reduce the percentage of Non Performing Loans from 2.51 percent to 1.86 percent in the fiscal year.

The bank has set aside 20.00 percent from the profit, amounting to NPR 72.30 million in the General Reserve, NPR 2.50 million in Exchange Equalization Fund, NPR 28.60 million for Bond Redemption Reserve and NPR 22.10 million as Retained Earnings.

Approximately NPR 106.7 million was set aside in the Capital Adjustment Reserve up to the last fiscal year, however no addition has been made to this reserve in this fiscal year. Furthermore, no distribution has been made to the shareholders in the last fiscal year. Respected shareholders, as committed in the last AGM and the current proposal, we seek your approval to distribute 40.00 percent bonus shares and 2.11 percent cash dividend (NPR 12.70 million which amounts for 5.00 percent of advance tax adjusted in the cash dividend portion) from the afore mentioned Capital Adjustment Reserves. We would like to inform you that the bank continues to provide all respected shareholders with the facility to open a savings account in your bank at no minimum deposit requirement as in the past.


Share Ownership Structure

FY 2006/07

Provision for Possible Losses (In Million)

82

38

FY 2007/08

Review of the progress made by the bank and its subsidiary companies in the previous fiscal year

The bank does not have any subsidiary company and as regards to the progress of the bank in the last fiscal year, please refer to Section 1 and 3 above.

Transactions and important changes made by the Bank and its subsidiary companies during the reported period

The bank does not have any subsidiary company and as regards to the progress of the bank in the last fiscal year, please refer to Section 1.

Information made available to the company by the Bank’s shareholders during previous financial year.

The shareholders have not provided any information to the bank during the reporting period.

Description and information of the share ownership taken by the directors and officials of the bank during the reporting period.

The bank’s Directors and officials have not taken any shares and have not provided any such information during the reporting period.

Information made available with regard to personal interest of the directors or immediate relatives related to agreements with the bank

None

Description of buy-back of shares

None

Interest Suspense Account (In Million)

July 2007

16.50

July 2008

14.80

Internal Control System

The bank’s Audit Committee comprises of four Directors representing the shareholders. The Internal Audit Department is steered by the Audit Committee and is responsible for internal audits of the bank. The Operation Navigation Committee looks after the operational risks of the bank. For the day today operation , an authority list for the employees has been set to manage the risk. The Compliance Department ensures the conformity of internal and external policies, and whether rules and regulations are being followed. Thus it can be said that the bank has sufficient internal rules and regulations for maintaining control and takes due care to timely inform all staffs on any changes in the rules and regulations.

2003/04

44%

290

39%

360

51%

400

56%

470

60%

600

2004/05 2005/06 2006/07 2007/08

Operating Profit Net Profit as a % of Operating Profit

Composition of Profit (in Million)

Achieving the bank’s objectives is largely dependent on managing the loan portfolio by evaluating the risks involved, Credit Risk Management department has been given the task to closely analyze, monitor and control all lending activities. Effective and efficient management of the inherent risks has enabled the bank to secure reasonable profit for its shareholders.

Promoter42% Public

58%

Jul/Au

gAu

g/Sep

Sep/O

ct

Oct/N

ov

Nov/D

ecDe

c/Jan

Jan/Fe

b

Feb/M

ar

Mar/Ap

r

Apr/M

ay

May/Jun

Jun/Ju

l

Maximum Minimum

Bank of Kathmandu Ltd. Market Share Price in NPR

2�00

2000

��00

�000

[ The bank has not forfeited any shares during the FY ]

Operational Expenditure

Operational expenditure in this fiscal year has increased by 25.48 percent vis-à-vis an increase in operating profit by 28.36 percent over the previous fiscal year. Opening of 7 new branches in the reporting year contributed to the increase but the bank has nevertheless been able to maintain expenditure to income ratio at approximately 30.00 percent. At the end of the reporting period, your bank has 23 operational branches.

An efficient central accounting system, managing of regular activities through contract mechanism and the system of centrally approving expenses has allowed the bank to regulate its expenditure at desired levels. Majority of the administrative purchases are being made centrally to allow the newly set up branches to focus on their core activities. The system has definitely allowed us to save costs and promote standardization.


Designation Remuneration Stipend Benefits Chairman - NPR �0,000 Vehicle and related costs per meeting (driver, maximum of 400 ltrs of fuel and maintenance)

Managing NPR ��4,000 NPR �66,000 Regular facilities of employees, Director per Month month and utility expenses, under accommodation– NPR 8,000 cook, helper, gardener, security guard per meeting and vehicle, driver, fuel and maintenance. Directors - NPR 8,000 None meeting per

All Directors are entitled to accommodation, food and other expenses as approved by the AGM during official visits within or outside the country. In addition, the Directors receive NPR 5,000 as

Communication expenses and NPR 5,000 as Business Promotion expenses per month.

FY 2006/07

Female Male

37%

63%

42%

58%

FY 2007/08

Staff Composition

Audit Committee

The bank has an Audit Committee comprising of four members from the Board of Directors.. The committee supervises the entire control mechanism of the bank and the standard of compliance with applicable laws, policies and directives. Furthermore, the committee reviews the internal audit reports, provides suggestions and also monitors the overall activities on a continuous basis. The committee also has the task to ensure the bank’s management is adhering to all the existing acts, laws, rules and regulations and directives.

Mr. Sitaram Thapaliya is the Coordinator of the committee and the three members are: Ms. Rita Malla, Mr. Balram Neupane and Mr. Bishnu Prasad Banjade. The Coordinator and the Members of the committee receives NPR 8,000 per meeting and 20 meetings were conducted in the reporting period.

Payments due from Directors, Managing Director, Promoters or their close relatives or their related entities.

None. Remuneration, allowances and facilities of the Directors and Managing Director We would like to inform you that the remuneration and facilities of the Managing Director is determined by the Board of Directors. The allowances and facilities of the Directors as stated in Articles of Association are as follows:

Uncollected Dividends

Dividends distributed to shareholders for the fiscal years 2001/02, 2002/03, 2003/04, 2004/05, 2005/06, 2006/07 but yet to be collected amounted to NPR 20,106,270.22 at the end of the reporting period.

Description of Purchase and Sale of Bank Property

In the reporting period, the bank has owned & is using the four storey building located inside the Balaju Industrial Estate by operating a new branch. The ground floor of the building is used exclusively for branch operation and the remaining floors are used as training premises and storage facility for the bank.

Transactions with Subsidiary Companies

The bank does not have any parent or subsidiary companies.

Information Technology

International standard banking software, Finacle forms the backbone of the bank’s operations providing flexibility in maintaining a central database and making anywhere banking possible. The bank has successfully upgraded the entire system to the newer version of Finacle, Finacle 7.0.17 and has made a leap in its IT system with the installation of Disaster Recovery Setup. Furthermore, various Network Enhancements were carried out in the reporting period.

Embracing technology is the key to making progress in today’s competitive era. Substantial investments thus made in network management and its auxiliary systems and management information system have proven to become profitable investments for the bank. The bank is shifting to a paper-less environment thereby promoting efficiency and effectiveness amongst employee. Furthermore, with a view of providing world class banking services to its customers, e-banking has already been adopted and implemented. Thus customers can easily avail internet banking (BOK Click) and SMS banking facilities from any of our branches.

The bank is using a centralized database system whereby all branches across the country are connected via VSAT communications and other technological solutions. This has enabled the bank to provide efficient operational framework and flexibility in monitoring & controlling tasks. Connectivity is being secured by Data Encryption/Decryption technology

whereby preventing data intrusion and security risk.

Disaster Recovery Site safeguards the fully computerized system from any risks and communication backup system (Radio Modem and Fiber Optical Line) is on standby to ensure uninterrupted service and operations.

human Resource Management

The increase in number of branches has proportionately increased the demand for human resource. In the reporting period, the bank has given permanent status to 80 of the 180 contractual staffs, selected through internal competition and individual performance. Competent and hardworking drivers and Messengers have also been confirmed to a permanent status. Retaining and keeping them in line with the bank’s vision and maintaining loyalty among competent and dedicated employees has


become a challenge in today’s dynamic work environment. A Management Information System has been implemented to improve the efficiency of departments. The bank has been encouraging the culture of multi tasking among bank staffs and provides different career development opportunities for outstanding employees. Furthermore, the bank also provides internship platform for college students. Recruitment of young graduates every year has helped to develop culture, knowledge base and inject new energy and perspective to the bank. Compliance Standard

Compliance has always been the foremost priority, thus regular internal and external Audit complemented by our internal compliance department ensures the bank is following all the rules, regulations and directives issued by the various regulatory authorities.

Directives issued by NRB in the reporting period regarding BASEL II seeks to address risks associated with banks and financial institutions in terms of its capital requirements vis. a viz. the riskiness of its assets portfolio The directives specifically instruct banks to meet capital requirement standards at any particular time after October 2008. With all the major preparations behind us, your bank has already commenced training and development of Management Information System in this regard. Also a strict compliance of this standard has been delegated to the bank’s management and employees via various internal circulars and policies.

We would like to bring to your notice that the bank has been conducting internal trainings at regular intervals using internally available resources and calling on external experts on a need basis. Such trainings have been helpful in creating awareness of the various rules and regulations and instigate strict compliance for the same.

Corporate Governance

Good corporate governance is crucial for any organization, more so for the banking sector, due to the nature of its stakeholders and the role it plays in the nation’s economy. Good corporate governance extends beyond the

purview of simply adhering to the rules and regulation, developing a strong culture inside the organization where good corporate governance thrives. Your bank remains committed on promoting good corporate governance at all levels inside the organization.

Majority of the Directors in the Board are General Shareholders

58.00 percent of the shares are held by the general shareholders and are represented by four members in the Board of Directors. Your bank stands out as the only bank in Nepal to have majority of general shareholders in the Board of Directors. Adequate representation of the bank’s general shareholders has ensured the safeguarding of the interests of the general shareholders and the bank’s interests in general.

Appointment of a Professional DirectorFollowing stipulations of the Bank and Financial Institution Act 2006, the bank has appointed a Professional Director selected from the list of experts published by Nepal Rastra Bank, the Central Bank of Nepal. Mr. Sudarshan Raj Poudel, the Professional Director of the bank has years of

experience in the banking sector. It is expected that the bank will benefit duly from his expert guidance and advice. Safeguarding of the General Shareholders and Depositors Interests and Rights

The bank maintains a firm view towards protecting the rights and interests of its shareholders and the depositors. The bank has been making timely disclosure of the bank’s activities, investments, details on asset and liability management and various other operational and non-operations aspects of the bank. The bank has been conducting Annual General Meetings within the stipulated time frames.

Form an effective Audit Committee

A system of check and balance is being maintained by the Audit Committee which comprises of four Directors from the Board representing the general public shareholders. The committee looks after the overall well being and growth of the bank by reviewing the audit reports conducted by the internal and external auditors and provides the management with suggestions and recommendations.

Avoid Related Party Transactions

Sufficient systems and procedures have been devised to check related party transactions. Audit by internal and external auditors and NRB’s regular inspection has been instrumental in discouraging such activities.

Maintain high compliance standards The bank’s policy and procedures have been developed in line with the existing rules and regulations and the Compliance Department and Audit Department monitors its implementation.

Develop and implement effective policies

Clear policies, line of authorities and job responsibilities have been formulated to direct and control affairs of the management and provide ease in overall operation.

Participation of Directors in Strategic Planning The bank’s decisions have proved to be fruitful as a result of the participation of the Directors in business promotion, short and long term planning and thereafter the development of strategic plans.

Expansion of Services

The bank has expanded its branch network covering all the five development regions. At the end of the reporting period, the bank has a total of 23 branches and 6 service counters in addition to the 250 BOK Money Transfer agents providing remittance services. All the branches & service counters are under a single network facilitating central accounting and anywhere branch banking facility. To make optimum utilization of its central database system and to maintain the pace of growth, the bank is planning to further extend its network inside Kathmandu Valley and the Eastern region in the coming year.

Public4

Promoter3

Professional1

July 2007

23

16

July 2008

Branches

| Annual Report 2007-08�6

.......................................................................Mr. Sudarshan Raj Poudyal

Director

.......................................................................Mr. Bishnu Prasad Banjade

Director

Public Group (Representing Nepal Remittance P. Ltd.)

.......................................................................Mr. Balram Neupane

Director

Public Group(Representing National Investment Co. P. Ltd.)

.......................................................................Ms. Rita Malla

Director

Public Group

.......................................................................Mr. Sitaram Thapaliya

Director

Public Group

.......................................................................Mr. Radhesh Pant

MD

Promoter Group

.......................................................................Mr. Sanjay Bahadur Shah

Chairman

Promoter Group

.......................................................................Mr. Santa Bar Singh Thapa

Director

Profesional DirectorPromoter Group

ATM Service With the commencement of ATM Service in 2003 in partnership with STC, your bank now has a total of 12 ATM’s spread all over the Country. Six new ATM counters in Kathmandu Valley and six new ATM counters outside the valley (Pokhara, Nepalgunj, Butwal, Ghorahi, Surkhet and Namche Bazaar) were opened in the reporting period. 25 new ATM service stations will be opened in the bank’s branches and other locations in current fiscal year. With ATM at Namche Bazaar now fully operational, ATM service from one of the highest Location of the world.

The bank has also been able to successfully launch VISA Debit Card, in partnership with VISA, allowing customers to avail POS (Point Of Sale) services in over two hundred thousand (2 Lakh) locations in Nepal and India to purchase goods and services. The card safeguards customers from risk of theft and at the same time provides accessibility to cash at any given moment. With establishment of Card Centre, a new department established in the current fiscal year, plans are already underway for commencement of Credit Card services. Corporate Social Responsibility

As a true corporate citizen, the bank feels it is its duty to mobilize a portion of its earnings to help disadvantage members of the society. The bank has been mainly focusing its social activities in the area of education, health and environment. Some of the social initiatives supported by the bank in the reporting period are as follows: • Financial assistance provided to children without access to formal

education through Help to the Helpless Council, an NGO based in Dharan. • Academic scholarships provided through Development and Equity for

Women Empowerment. • Supported the Second Annual Fund Raising Program organized by

Nepal Children’s Organization for Bal Mandir Orphanage. • Financial support to the Third CMS Abilities Cup organized by Hospital

and Rehabilitation Center for Disabled Children for the treatment and rehabilitation of disabled children.

• Organized Seize the Future – a Visionary Leadership Workshop for Hospital and Rehabilitation Center for Disabled Children (HRDC) to support the disabled children of Nepal.

• Supported Save the Children Kathmandu in it’s initiation to provide quality education in the Far Western Development region.

• Supported a computer training program for disabled children organized by Skill Development and Rehabilitation Center for the Disabled – Nepal with the objective of creating self employment.

• Supported an orthopedic workshop for children and adults with disabilities in the Eastern region, organized by Community Based Rehabilitation (CBR), Biratnagar.

• Distributed clothes for flood victims in Banke through Hridaya Group. • Supported Deep Prajwalan, a fund raising program for equitable justice

and peace for rural women organized by TEWA. • In partnership with Gaushala Traffic Office, the bank supported the

campaign on “Following Traffic Rules” by posting banners in public transport vehicles.

Future Plans and Programs

The bank has given continuity to the following plans and programs with the objective to further improve the bank’s performance in the coming years: • Mobilize funds at the optimum levels and introduce new products and

services offering high returns. • Establish the Bank as a “Customer Oriented Bank” by continuously

improving on the quality of banking services to customers from across the country.

• Expansion of Card Services – Debit Card, Pre-paid Card, Credit Card, etc.

• Continue extending the bank’s network for market accessibility and thereby promoting access to finance.

• Identify opportunities for lending in the small & medium sized business segment which comparatively provides a higher rate of return and reduce the bank’s dependency on corporate loans.

• Strengthen the image of the bank to become a true caring corporate citizen by contributing to the welfare of the society and the nation at large.

• Take optimum advantage of the newly installed software for improving the quality of services and introduce new products in the market.

• Develop essential policies and procedures based on the directives of NRB with regard to capital adequacy and compliance to BASEL II accord.

Respected Shareholders,

Last but not the least, we would like to inform you that we remain committed towards fulfilling the responsibility you have entrusted upon us to the best of our ability. We hope that we will receive the same trust and support from all the shareholders as we have in the past and are able to achieve even better returns in the future.


OUR TEAM

Coming together is the beginning Beingtogetheris progress Working togetheris success

Annual Report 2007-08 | �7

MANAGEMENT TEAM

1. Radhesh Pant Managing Director

2. Sabin Raj Shrestha Chief Business Officer

3. Uday Krishna Upadhyay Chief Operating Officer

4. Prabin Prakash Chhetri Chief Information Officer

5. Chetan Bar Singh Thapa Head Central Logistics & Specialized Asset Management

6. Kiran Bohara Head Central Operations

7. Manish Kumar Singh Head Finance, Corporate Affairs, Treasury & Accounts/Company Secretary

8. Ram Pratap Yadav Head Institutional Banking

9. Anand Pandey Head Business Bank

10. Dibya Chandra Shrestha Head Internal Audit and Compliance

11. Mishree Lal Prasad Yadav Head Legal

12. Anupa Rajbhandary Head Retail Bank

13. himani Pant Head Reconciliation & Treasury Back Office

14. Pranab Dabadi Head Card

15. Anil Ratna Tuladhar Head International Trade Operations

16. Bikas Khanal Head Credit Risk Management

17. Amit Bahadur Chand Head Corporate Credit

18. Raj Rimal Head Corporate Credit

19. Bigyan Ghimire Head Corporate Credit

20. Ganesh Lamsal Head Branch Operations

21. Shailee Joshi Head Accounting & Financial Analysis

2 3

4 6

7 9

10 12

13 15

16 18

19

1

5

8

11

14

17

2021


BRANCh MANAGERS

1. Girija Malla Kamal Pokhari

2. Ajupa Joshi Thamel

3. Thaman Bahadur Khatri New Road

4. Pravesh Raut Butwal

5. Ranjitsore Lal Malla Hetauda

6. Mahesh Mishra Nepalgunj (Regional)

7. Surendra Bahadur Shahi Dhangadi

8. Jit Bahadur Saru Pokhara

9. Sushma Maskey Biratnagar

10. Dipendra Budhathoki Birgunj & Amlekhgunj

11. Chiranjibi Bista Jawalakhel

12. Naresh Upadhyay Baskota Janakpur

13. Anjani Kumar Subedi Itahari

14. Surendra Prashad Madhikarmi Gongabu

15. Kalpana Pudasaini Kohalpur

16. Paban Pant Tatopani

17. Karna Bahadur Bhandari Surkhet

18. Chhabi Kumar Subedi Ghorahi

19. Rajendra Kumar Neupane Tulsipur

20. Praveen Shah Jumla

21. Meena Singh Balaju

22. Yagya Murti Pandit Attariya 13

2

4

7

10

16

3

6

9

12

15

18

21

1

5

8

11

14

17

20

22

19

Annual Report 2007-08 | ��

| Annual Report 2007-0820 Annual Report 2007-08 | 2�

SABIN RAJ ShRESThA

usiness environment in Nepal has had to face challenges since the late 90s as a result of political instability and not-so-conducive

investment climate. The banking sector in particular has enjoyed relatively better days in comparison to other sectors, but sustaining growth has been a challenge considering the sluggish business scenario and the increasing number of financial institutions. Nevertheless, we in particular have been consistently registering double digit growth in business volume and profitability as a result of the dedication of the entire BOK team. To maintain present growth trends, we intend to increase outreach by investing in infrastructure, technology and most of all, what matters most - people. With the opening of five new branches in the reporting period, we now have 23 branches and 6 extension counters as of July 2008 and plan to open 10 more branches in various parts of the country within this fiscal year and 7 more in the subsequent year. The expansion strategy of

the bank will facilitate trade and payment through any branch in all the development regions and provide unbanked Nepalese access to modern banking products and services. Customers have always been at the centre of all our activities since the very beginning. Our business development philosophy translates to each customer interface being an opportunity to add value. The BOK team believes in long term relationship and we strive to take that extra mile to understand and meet customer needs. Branch Managers and the concerned staff are constantly taking stock of customer feedback on ways to improve our services.

Our product portfolio over the years have undergone a change from generic products to specialized products based on demographics and utility. In order to meet the needs of the urban, peri-urban and rural population, we

Chief Business Officer

“ ”Our business development philosophy translates

to each customer interface being an opportunity to add value

B


hope to ‘regionalise’ some of the products and services while maintaining standard real time banking to all the customers. We believe in change and continuous improvement. Product innovation has played a crucial role in our growth and we have been able to introduce value additions through investment in technology and by partnering with like-minded institutions. Our fast growing customer base in terms of deposits as well as lending in corporate, business and retail segments are a testament to our ability to consistently meet the expectations of our customers. On one side of our balance sheet, we are proud to have customers from different walks of lives who have built their trust on our wide array of deposit facilities. In the past, we only had core banking products like current, saving and fixed deposits. We today offer products to suit the needs of every segment of the society. In the coming days, we have plans to bring about more specific and customized products that would cater to the ever increasing need of the customers. On the other side of the balance sheet, majority of our asset is in the form of Corporate and Business lending, which has attained reasonable growth in volumes as a result of careful evaluation of project risk and return. BOK strongly supports ventures where the country has competitive advantages such as in renewable energy and tourism. In addition, we also believe in Nepalese entrepreneurship as being the engine of growth that is sustainable in the long run. That is why we have given special importance to the Micro, Small and Medium Enterprises (MSME) segment.

Retail lending today is also an important asset portfolio that has influenced the Nepalese living standard and accounts for approximately 20 percent of the total Loans and Advances. Financing needs of our customer is being facilitated through flexible terms on the basis of existing and potential income streams. We aim to constantly improve the product benefits to the customers who wish to avail housing loan, vehicle loan, education loan for both domestic and studies abroad, festivity loan and individual entrepreneurship loan.

Establishment of a dedicated department for development financing has been another important milestone. With this initiative, the bank aims to meet the financing needs of the disadvantaged communities by supporting livelihood activities and providing customized banking solutions to the unbanked population. Corporate branding exercise has been a top priority over the past few years. The bank’s corporate identity and slogan have been well entrenched in our customers mind as a result of consistency in all communication channels. Careful planning at all stages of marketing campaigns have been instrumental in the success of our products and services. In the coming years, the marketing team will remain steadfast in working closely with the marketplace, customers and the communities we serve. Thus, it is our firm belief that we will be able to deliver even better results in years to come.

From left: Anand Pandey, Sipa Regmi, Amit B. Chand, Sabin R. Shrestha, Raj Rimal, Anupa Rajbhandary, Ram P. Yadav and Bigyan Ghimire


UDAY KRIShNA UPADhYAY

ll operating systems re-engineering in BOK revolves around developing sound and efficient processes and procedures with the aim of making

life easier for both our internal and external customers. It is our belief that an institution should be driven by systems and procedures and not by any individual. Hence, we have put in place appropriate systems, updated at regular intervals, to suit the changing market conditions which have enabled us to offer superior service delivery mechanism to our customers across branches, without having compromised on the associated risks and regulatory requirements.

Over the years, BOK has been re-engineering its back-end processes to achieve enhanced operating efficiencies and put effective tools of checks

and controls internally in place by moving towards paperless environment with the help of sophisticated technologies and systems. Key operating functions are being centralized at the central office with some functions being taken care at the regional level to avoid over dependency and work overload at the central level. Centralization also avoids inconsistencies and helps maintain uniformity of service delivery across branches. Centralized environment can incorporate and implement frequent changes in external/internal requirement at one go across all branches, as it only requires specialized training to the back-end team at the central or regional offices.

This has allowed branches to concentrate on sales and service activities by focussing their energy and resources in maintaining better customer

Chief Operating Officer

“ ”We have been able to continuously enhance our operating efficiencies

by creating a secure, productive and responsive operating platform

A


relations and delivery of superior customer services. With the support of the robust Information Communication Technology (ICT) network and modern banking applications, all branches now work under a single central database allowing the regional and central office to take care of all back-end processes. At the same time allowing regular monitoring and control over the operations and compliance to internal and external systems and associated rules and regulations.

Central logistics ensures consistency in branch décor and provides all Logistic/administrative support in maintaining uniform identity of the bank across the board. Human Resource takes care of timely recruitments and all training needs for the new branch employees. The Regional & Central Operations takes care of all back-end operations, enabling the newly opened branch to start operations with full range of services to its customers from day one.

As we are rapidly expanding our reach to the semi-urban and rural interiors of the country to provide modern day banking services, to the un-banked population, we are also giving priority to recruit local youths in the

new branches, promoting employment at the local levels. The presence of a local team has also been beneficial to the bank in promoting a sense of ownership and stronghold of the branch in the community.

The Bank considers training as an important risk management tool in addition to the risk management mechanism built into the system. We are thus providing regular training on general and task specific functions to employees as a capacity building measure to mitigate potential risks. Sky is the limit for good performers in BOK. On-going reinforcement of its performance based work culture in the recent past has resulted enhancing efficiencies as well as job satisfaction of the employees across the bank to a great extent.

In summary, it can be rightly said that we have been able to continuously enhance our operating efficiencies by creating a secure, productive and responsive operating platform geared to deliver the customized needs of the modern day customers and in providing greater values to all our stakeholders.

Standing from left: Kiran Bohara, Anil R. Tuladhar, himani Pant, Ganesh Lamsal, Manoj Dahal and Sitting Uday K. Upadhyay


PRABIN PRAKASh ChhETRI

he banking sector, in Nepal and globally, demands real time service without compromising on risks presented by the dynamics of domestic

and global financial markets. Embracing technology and technology enabled operations and services have become the key to business process reengineering and meeting the high standards of services demanded by modern day customers and in achieving our goal communicated through our slogan ‘We make your life easier’.

As BOK is moving towards becoming a complete Information Communication Technology (ICT) enabled banking service provider, our team has been continuously working to introduce ICT infrastructure backed by appropriate

ICT solutions in all banking operations and services. We are confident that all investments and efforts to develop a robust ICT backbone will make life easier for our valued customers.

It is our pleasure to inform you that we have successfully upgraded to the 7th version of FINACLE, banking software developed by Infosys, India considered to be among the best globally. The application is highly efficient and equally reliable as it has been tested in live conditions to handle 2,000 branches and over 5 million customers. With the implementation of the Card Management System and SWITCH, the bank has significantly addressed problems associated with ATM services and now also offers

Chief Information Officer

“ ”We are confident that all investments and efforts to develop

a robust ICT backbone will make life easier for our valued customers

T


VISA/SCT Debit Cards through its own infrastructure. Credit Card services and International Debit Cards are also being introduced later this year. Recently, the bank has also enhanced the capability of its Internet Banking (BOK Click) system allowing BOK account holders to perform banking transactions from any location using the internet.

In addition to the core banking applications, we are also continuously working in coordination with various departments to implement Management Information System and systems that facilitate decision making in areas of market analysis, risk management, operational efficiency. We are also planning to implement supporting applications such as Share Point, a Microsoft product for improving work flow, approval process and resource management.

Developing a robust ICT network has been a priority in the last few years to support the rapidly expanding branch network, centralizing of all banking operations and logistics and anywhere branch banking services. All

branches, even the branch located in Jumla, operates under one secure central database connected by fiber or VSAT. Plan is underway to introduce a dual communication system to ensure uninterrupted 365 days banking services. Our team is in the process of adding voice communications in our network for interbank communications resulting in substantial savings on communication costs.

The focus of the IT department has been to introduce system interfaces to raise the standard of our processes, more convenient transactions for the customers, better customer handling and an efficient back-office system for better control of activities. Some of the projects currently undertaken by the department are customization of FINACLE, SMS banking, upgrading to Share Point, introducing Credit Card services and establishing our own POS network. In the coming years, technology will drive improvement in BOK’s systems and product offers and our bank is definitely technology ready to deliver appropriate banking solutions making life easier for our customers.

Standing from left: Narayan P. Ghimire, Pranab Dabadi, Bhushan R. Bajracharya, Bikram Shrestha and Sitting: Prabin P. Chhetri


ChETAN BAR SINGh ThAPA head - Central Logistics & Specialized Asset Management

he Central Logistics department takes care of all the non-banking functions of the bank such as purchase of stationery and equipments,

lease of branch buildings, design and construction, etc. in line with the annual expenditure plan.

Centralizing the function of non-banking activities has helped to maintain corporate identity, increase productivity of the department and branches as they get to focus on core banking functions and maintaining financial discipline.

Providing access to modern day banking services to the non-banked section of the community has been a priority in BOK. Identifying appropriate locations for establishing our new branches has thus been an important function of the department. We have thus been the first private sector bank to reach the remotest districts of Nepal such as Jumla.

In the present fiscal year, the department has undertaken a major responsibility to develop a state-of-the-art nine storey corporate building in Kamaladi. The new building has allocated more space for general customer service area, with luxurious priority customer rooms while centralizing presently scattered departments under a single roof.

We have been exercising extreme caution to keep expenses within approved limits as a result of which the department was able to make substantial savings on expenses in the previous years. Global recession and increasing market inflation is bound to put even more pressure on the expense side but the department would like to reassure the shareholders and its customers of our commitment to maintain expenses within approved limits.

T


“ ”We are the first private sector bank

to reach the remotest districts of Nepal such as Jumla

From left: Ekraj Rawal, Umesh R. Aryal and Chetan B. S. Thapa


MANISh KUMAR SINGh head – Finance, Corporate Affairs, Treasury & Accounts/Company Secretary

eveloping a strong capital base is essential not only for meeting central bank’s capital requirements but also to support the bank’s business

growth and cushion any unforeseen loses beyond the bank’s control.

Over the years, the bank has made adequate arrangements to meet all short and long term capital requirements through proper capital planning, finalized and approved by the Board of Directors, based on Business Expansion Strategy of the bank.

The bank has achieved optimum returns on its investments year after year through efficient management of the investment portfolio, constant monitoring of market interest rates, and managing overall liquidity

requirement of the bank. Based on the liquidity and interest rate gap analysis, the bank has developed Asset and Liability Management strategies to ensure optimum liquidity and higher return from portfolio in order to contribute towards higher returns for shareholders. Adequate amount of funds are invested in government securities, as a buffer, to meet any unforeseen liquidity requirements. Foreign exchange transactions are attractive sources of revenue but entails substantial risks. Risks in foreign exchange transactions are managed with the help of Treasury Manual, foreign exchange position limits, appropriate dealing authorities and close monitoring of the foreign exchange market with the help of Financial Information Provider (Thompson Reuters’ in

D


our case). Based on the liquidity profile of foreign currency deposits, the bank invests in suitable investment products (placements, bonds, etc) of sound foreign banks. Care is taken to ensure the investments are safe and provide reasonable returns.

The bank has attained good growth in both deposits and loans and advances in the reporting period. Proper Asset Liability Management along

with proper Credit Management has resulted in a significant growth in Net Profit.

The bank uses a centralized database system bringing all branches, even those as remote as Jumla under the same network on real time basis. The system supports the bank’s strategy in ensuring that all braches follow the same accounting practices.

“ ”The bank has been able to give optimum returns toits shareholders through efficient fund management

From left: Niroj Thapa, Shailee Joshi, Ujjwal Gajurel, Manish K. Singh, Parmeshwar Pant and Niranjan Nakarmi


DIBYA ChANDRA ShRESThAhead – Internal Audit and Compliance

he role of internal audit has been redefined over the years and is no longer only limited to fraud detection and compliance. Considered as

one of the four pillars of Corporate Governance, our team of auditors serve as the centre of expertise for managing risks by demonstrating command in risk management and business process improvement.

Our growing volume of business and geographical coverage demands an even stronger system for compliance to internal and external rules and regulations. At the operational level, we have established various policies, guidelines and authority levels which are regularly monitored for compliance. Regular monitoring helps in ensuring internal control are sound and operating effectively.

It is our concern to ensure, that risk management practices are effective and key risks are being managed at acceptable levels. As a result of our effective risk management practices, BOK has a very effective and efficient operations complying with rules and regulations of the bank and of the regulatory authorities.

The task of managing risk is an on-going process and we will develop better systems and monitoring mechanisms though the use of ICT and applications that provide even better security to the shareholders and depositors of our bank.

T

| Annual Report 2007-08�0 Annual Report 2007-08 | ��Annual Report 2007-08 | ��

“ ”BOK has a very effective and efficient internal control mechanism

From left: Jiva Nath Nepal and Dibya Chandra Shrestha


BIKAS KhANALhead - Credit Risk Management

ending, an important function of a financial institution, is the key source of risk. Be it Corporate, SME or Retail, managing risks surfacing

from lending activities takes centre-stage at both policy and operating level activities. The bank is exposed to credit risk at every stage of loans and advances. We closely watch the performance and activities related to loans and work together with the customers and other departments to identify and timely mitigate such risks.

As a credit control function, our team of professionals ensure compliance in the documentation from the time of request for loan until its approval.

Besides evaluating individual loan requests, our team is regularly monitoring micro and macro economic indicators and market trends, vis-à-vis our credit portfolio, to mark a threshold to sectors with inherent risks. In addition to the guidelines of NRB, BOK has also imposed restrictions on certain sectors as a measure to avoid sectoral concentration.

Credit Risk Management is a continuous process and we thus remain ever vigilant of micro and macro economic indicators and follow-up on individual accounts at the time of credit administration. Our team grades each individual accounts on four set parameters namely; industry,

“ ”Our efforts in managing

credit risks have been well rewarded

L


business in question, financial performance of the business and account performance (in case of existing relationship) and use our techniques on assessing early warning signal to assist in identifying potential risks in individual accounts and identify appropriate risk mitigation strategy . These two approaches being adopted by BOK have been particularly effective in working with our customers to timely mitigate potential risks.

The department remains committed in providing up-to-date information on credit risks arising from changes in the national economy and micro

economic environment as well as analysis of the bank’s credit portfolio on a regular basis to guide policy level decisions. Our efforts in managing credit risks have been well rewarded as bad loans have been consistently decreasing over the years. In the reporting period, we were able to reduce bad loans from 2.51 percent to 1.85 percent and hope to reduce it even further through more prudent vigilance.

Standing from left: Sitashma Shrestha, Sachin R. Tuladhar, Sitting from left: Snigdha Morbaita, Junita Paudyal and Bikas Khanal


AShISh BhATTARAIhead - human Resource

eople provide the competitive advantage required for the success of any organisation. It is through their contribution that the bank has

been able to achieve its goal.

With the bank expanding rapidly in the recent time, recruitment has become an important activity and due vigilance is being maintained to ensure transparency and fairness in the recruitment and selection process. The bank has been hiring people at the local level from towns where the branches have been opened. Also with the objective of injecting new

managerial cadres, the bank has continued to hire management trainees every year.

The bank has recently established a training centre in Balaju (Industrial District), with the aim of regularizing in-house training programs. The bank has been providing in-house training on general banking and customer service for all branches and is in the process of devising specialized training on banking. To make best use of the skills within the organization, priority is being given to in-house trainers, however for expertise unavailable

“ ”Satisfied employees are the

foundation to the institution’s bright future

P


internally, it also outsources. While many of the training programs are skill specific, equal importance is given to developing people skills such as communication, leadership, interpersonal relations and team building.

Maintaining high level of employee satisfaction is critical and to ensure their dedication and a positive feeling of equitable treatment, the bank has a system of evaluating individual performance so as to adopt a systematic approach in appraising and rewarding performance and identifying training needs of the employees. Performance based incentives, salary

increments and opportunities for participating in seminars / workshops and in sporting activities has been regularised.

Satisfied employees are the foundation to the institution’s bright future and it is our priority to create a professional and friendly working environment. All is not achieved, and BOK as a team is continuously working towards enhancing its care and support to every member of the family and in making their life easier.

From left: Anupama Darshini Sen, Anju Nakarmi and Ashish Bhattarai

| Annual Report 2007-08�6 Annual Report 2007-08 | �7

ShREEYUKTA ThAPALIYA PANDEY head – Corporate Communication

ustomers today have access to unparalleled information through various channels, which presents a major challenge for sellers to

communicate with customers in the midst of all the clutter. Corporate Communication department at BOK takes up the challenge to communicate its corporate vision, market its products and services to present and potential customers and foster communication within the organization.

We have taken up corporate branding a step forward in the last few years to establish BOK’s corporate identify and corporate slogan in the mind of

our stakeholders. Marketing collaterals in all forms are consistent with our corporate brand guideline, as a result of which, all our employees, customers and stakeholders associate with our corporate logo, colors and slogan ‘We make your life easier’.

Our department maintains a close relationship with all points of customer interface to get cues on the customer needs and thereafter provide important inputs to the product development team. In the process, we have always strived our best to provide value added features and benefits

“ ”As per our CSR commitment,

we constantly endeavour to reach out to those that need most support

C


that are in-line with their needs, lifestyle and utility to live up to our corporate slogan.

The product portfolio at BOK receives the due attention from the Corporate Communication department with marketing campaigns targeted at particular market segments using the right message, appropriate media channels and supporting communication materials. Our strict adherence to consistency in corporate branding in all product marketing campaigns has not only enhanced our corporate branding activities but also created synergy in our marketing efforts resulting in a higher return on marketing investments.

BOK believes that a true corporate citizen needs to think beyond the purview of the organizations functions and benefits. Corporate Social Responsibility is thus a top priority and the department has partnered with various NGOs and communities across the region to support need based social initiatives in health, education and environment with equal participation from the bank’s employees.

Over the years, the bank has made significant contributions to helping the poor and disadvantaged members of the society through direct intervention programs to add on to the various banking activities.

In the last one year, we have closely worked with various NGOs such as Hospital and Rehabilitation Center for Disabled Children (HRDC), Community Based Rehabilitation (CBR)-Biratnagar, Skill Development and Rehabilitation Center for Disables-Nepal, Keta Keti Ashram-Bansbari, Help to Helpless Council-Dharan, Save the Children US in Far Western region, Development and Equity for Women in Empowerment-Nepal,Traffic Police-Gaushala, Naxal Yuva Manch-Nagpokhari to name a few.

Our team understands upholding the corporate mission and vision and corporate slogan goes beyond corporate boundaries and will continue to live by the slogan ‘We make your life easier’ for our customers and the society at large.

From left: Shreeyukta T. Pandey and Ummeed Shrestha


FINANCIAL STATEMENTS

Teamworkdividesthe taskandmultipliesthe Success


e have audited the accompanying Balance Sheet of the Bank Of Kathmandu Limited (hereinafter referred to as ‘the Bank’), as at

Ashadh 31, 2065 (July 15, 2008) and the related Profit & Loss Account and Cash Flow Statement for the year then ended. These financial statements are the responsibility of the bank’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Nepal Standards of Auditing and relevant practices. Those standards and practices require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examination on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

Based on our examination of the financial statements as afore said, we report that:1. We have obtained all information and explanations required for

the purpose of our audit.2. The Balance Sheet, Profit & Loss Account and Cash Flow Statement

thereto are presented in conformity with the formats prescribed by the Nepal Rastra Bank and are in agreement with the accounts maintained by the Bank.

3. The account and records of the Bank have been maintained as required by law and practice.

4. Returns received from the branch offices of the Bank are adequate for the purpose of our audit.

5. The capital fund and risk bearing fund of the bank are adequate considering the Directives issued by the Nepal Rastra Bank.

6. To the best of our information and according to the explanation given to us and from our examination of the books of accounts

AUDITOR’S REPORT TO ThE ShAREhOLDERS OF BANK OF KAThMANDU LIMITED

of the Bank, we have not come across any case where the Board of Directors or any employees of the Bank have acted contrary to the provisions of law, or committed any misappropriation or caused any loss or damage to the Bank and violated Directives issued by the Nepal Rastra Bank or acted in a manner as would jeopardize the interest and security of the Bank and its depositors.

7. The business of the Bank has been conducted satisfactorily and found within its authority.

8. In our opinion and to the best of our information and according to the explanation given to us, the said accounts read together with the Significant Accounting Policies (Schedule 32) and Notes thereon (Schedule 33), give a true and fair view -- in the case of Balance Sheet, of the state of affairs of the Bank as

at Ashadh 31, 2065 (July 15, 2008),- in the case of Profit & Loss Account, of the profit of the Bank for

the year ended on that date, and- in the case of Cash Flow Statement, the cash flows of the Bank

for the year ended on that date.

Gopal P. Rajbahak, FCA For G. P. Rajbahak & Co. Chartered Accountants

Date: September 17, 2008Place: Kathmandu

W


Capital and Liabilities Schedule Current Year Previous Year �. Share Capital � 60�,�4�,�00 60�,�4�,�00 2. Reserves and Surplus 2 7�8,��2,488 ��0,��,�44 �. Debentures and Bonds � 200,000,000 200,000,000 4. Borrowings 4 �00,000,000 7�0,000,000 �. Deposits � ��,8��,7�7,7�� 2,�88,�27,2�4 6. Bills Payables 6 ��,�76,24� 2�,776,722 7. Proposed and Dividend Payables �2,804,204 ��,�7�,2�� 8. Income Tax Liabilities - -

�. Other Liabilities 7 �6�,7��,�� 07,840,82� TOTALCAPITALANDLIABILITIES 17,721,925,187 14,581,394,916

Amt. in NPR

BALANCE SHEETAS AT JULY 15, 2008

Assets Schedule Current Year Previous Year

�. Cash Balance 8 ��6,747,�4� 2��,042,�72 2. Balance with Nepal Rastra Bank � 606,04�,072 88�,4��,84� �. Balance with Banks/Financial Institutions �0 2�7,670,728 2��,�6�,�28 4. Money at Call and Short Notice �� 72,67�,8�6 2��,278,628 �. Investments �2 �,204,067,7�8 2,��2,4��,866 6. Loans, Advances and Bills Purchase �� 2,462,6�7,�4� �,��,�27,6�7 7. Fixed Assets �4 �87,274,�� 20,846,�� 8. Non Banking Assets �� 4�2,�78 �,62�,7�� . Other Assets �6 ��4,�46,0�8 28�,�78,7�4 TOTALASSETS 17,721,925,187 14,581,394,916

Contingent Liabilities Schedule�7

Directors’ Declaration Schedule 2�

Statement of Capital Adequacy Schedule �0

Statement of Risk Weighted Assets Schedule �0 (A)

Principal Indicators Schedule ��

Significant Accounting Policies Schedule �2

Notes to Accounts Schedule ��

Schedules 1 to 17, 32 and 33 form an integral part of this Balance Sheet

As per our report of even date

........................................................Gopal P. Rajbahak, FCAG. P. Rajbahak & Co.

Chartered Accountants

Date: September �7, 2008Place: Kathmandu

.........................................................Manish Kumar Singh

Head - Finance

.........................................................Radhesh Pant

Managing Director

.........................................................Sudarshan Raj Poudyal

Director

.........................................................Santa Bar Singh Thapa

Director

.........................................................Bishnu Prasad Banjade

Director

.........................................................Balram Neupane

Director

.........................................................Sanjay B. Shah

Chairman

.........................................................Rita MallaDirector

.........................................................Sitaram Thapaliya

Director


Schedules 18 to 28, 32 and 33 form an integral part of this Profit & Loss Account

Particulars Schedule Current Year Previous Year �. Interest Income �8 �,0�4,��7,874 8��,00�,�47

2. Interest Expenses �� 4�7,�4�,4�2 ��,�8�,0��

NetInterestIncome 616,614,442 479,822,936 �. Commission and Discount 20 �2�,4��,�82 �7,4��,�2�

4. Other Operating Income 2� 2�,�67,724 ��,002,8�7

�. Exchange Gain 22 ��,76�,0�� 80,826,0��

TotalOperatingIncome 862,962,787 677,082,975 6. Employees Expenses 2� �0,60�,�20 6�,740,�84

7. Other Operating Expenses 24 �70,480,�08 ��8,42�,�4�

8. Exchange Loss 22 - -

OperatingProfitbeforeprovisionforpossiblelosses 601,879,959 468,912,650 �. Provision for Possible Losses 2� �8,4�8,4�8 8�,8�4,�8�

OperatingProfit 563,441,461 387,017,669 �0. Non Operating Income /(Loss) 26 8�0,748 (2,77�,84�)

��. Provision Written Back 27 6�,8�2,��0 �7,�0�,88�

ProfitfromOrdinaryActivities 626,085,159 421,341,705 �2. Profit/(Loss) from extra-ordinary Activities 28 (4�,��6,284) 4��,��0 NetprofitafterincorporatingallActivities 580,688,875 421,752,856 ��. Provision for Staff Bonus �2,78�,8�8 �8,�4�,�6�

�4. Income Tax Expenses �66,402,0�8 �2�,024,706

- Current Tax �62,��,�6� ��,424,706

- Deferred Tax �,866,72� -

- Previous Year’s Additional Tax - �,600,000

NetProfit/(Loss) 361,496,879 262,386,980

Amt. in NPR

PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED ON JULY 15, 2008





Head - Finance

.........................................................Radhesh Pant

Managing Director


Director


Director


Director

.........................................................Balram Neupane

Director

.........................................................Sanjay B. Shah

Chairman



Director


Particulars Current Year Previous Year

INCOME �. Retained Profit upto Previous Year �7,��,266 8,��2,�4� 2. Current Year’s Profit �6�,4�6,87� 262,�86,�80 �. Exchange Fluctuation Reserve - -

4. Transfer from Capital Adjustment Reserve - - �. Adjustment of Deferred Tax Assets on initial adoption of Nepal - ��,2�6,��2 Accounting Standard (NAS) - 0�, Income Taxes

Total 379,488,145 281,995,441

EXPENSES

�. Loss up to Last Year - -

2. Current Year’s Loss - -

�. General Reserve 72,2��,�76 �2,477,��6

4. Contingent Reserve - -

�. Institutional Development Fund - -

6. Dividend Equalization Fund - -

7. Staff Related Reserves - -

8. Proposed Dividend �2,6�7,��4 �20,628,260

�. Proposed Bonus Shares 24�,2�6,�20 -

�0. Special Reserves - -

��. Exchange Equalization Reserve 2,�06,700 2,0�2,�60

�2. Capital Redemption Reserves - -

��. Capital Adjustment Fund - 60,��4,��0

�4. BOK Bond - 206� Redemption Reserve 28,�7�,42� 28,�7�,42�

Total 357,331,959 264,004,175

��. Retained Profit/(Loss) 22,��6,�86 �7,��,266

Amt. in NPR

PROFIT AND LOSS APPROPRIATION ACCOUNTFOR THE YEAR ENDED ON JULY 15, 2008



Head - Finance

.........................................................Balram Neupane

Director

.........................................................Sanjay B. Shah

Chairman

.........................................................Radhesh Pant

Managing Director


Director


Director


Director



Director




Previous Year Particulars Current Year

1,196,283,528 (A)CASHFLOWFROMOPERATINGACTIVITIES 131,216,696

957,415,138 1. Cash Receipts 1,213,828,527

77�,06�,6�4 �.� Interest Income �76,8�8,2�2

�7,4��,�2� �.2 Commission and Discount Income �2�,4��,�82

72,774,�74 �.� Exchange Gain 8�,7�8,2��

4��,��0 �.4 Recovery of written off Loan 6,000

(�,26�,�07) �.� Non-Operating Income 662,6�0

��,002,8�7 �.6 Other Income 2�,�67,724

664,951,336 2. Cash Payments 829,126,260

��,�8�,0�� 2.� Interest Expenses 4�7,�4�,4�2

6�,740,�84 2.2 Employee Expenses �0,60�,�20

��8,42�,�4� 2.� Office Overheads �70,480,�08

- 2.4 Exchange Loss -

��7,600,000 2.� Income Tax Paid ��0,�00,000

- 2.6 Non-Operating Expenses -

- 2.7 Other Expenses -

292,463,802 OPERATINGCASHFLOWBEFOREWORKINGCAPITALADJUSTMENTS 384,702,267

(920,919,694) CHANGES IN CURRENT ASSETS (2,795,185,864)

��4,768,7�0 �. Increase/(Decrease) in Money at Call and Short Notice �86,��8,7�2

8�8,2��,860 2. Increase/(Decrease) in Other Short Term Investments (20�,��,47�)

(2,�40,24�,0�8) �. Increase/(Decrease) in Loans, Advances and Bills Purchase (�,06�,�0�,�24)

46,��6,7�4 4. Increase/(Decrease) in Other Assets 28�,4�8,74�

1,824,739,421 CHANGES IN CURRENT LIABILITIES 2,541,700,293

�,�0�,�68,0�� . Increase/(Decrease) in Deposits �,444,8�0,�0�

- 2. Increase/(Decrease) in Certificate of Deposits -

�76,8��,�� . Increase/(Decrease) in Short Term Borrowings (6�0,000,000)

(2��,648,6��) 4. Increase/(Decrease) in Other Liabilities (27�,��0,2�2)

Amt. in NPR

CASH FLOW STATEMENTFOR THE YEAR ENDED ON JULY 15, 2008

continued.........



(617,614,646) (B)CASHFLOWFROMINVESTINGACTIVITIES (16,680,494)

(4��,�4�,7��) �. Increase/(Decrease) in Long Term Investment (7,720,�77)

(2�0,�0�,��7) 2. Increase/(Decrease) in Fixed Assets (66,427,7�7)

47,��8,2�2 �. Interest income from Long Term Investments �7,��,�82

4�0,0�8 4. Dividend Income �48,0�8

- �. Others -

486,130 (C)CASHFLOWFROMFINANCINGACTIVITIES -

- �. Increase/(Decrease) in Long Term Debt (Bonds, Debentures etc) -

��,�60,400 2. Increase/(Decrease) in Share Capital -

(��,074,270) �. Increase/(Decrease) in Other Liabilities -

- 4. Increase/(Decrease) in Subsidies / Refinance from NRB -

8,051,839 (D)INCOME/(EXPENSES)FROMFLUCTUATIONSINEXCHANGERATE 10,026,800

587,206,851 (E)CURRENTYEAR’SCASHFLOWFROMALLACTIVITIES(A+B+C+D) 124,563,002

728,697,090 (F)OPENINGCASH&BANKBALANCE 1,315,903,941

1,315,903,941 (G)CLOSINGCASH&BANKBALANCE(E+F) 1,440,466,943

Amt. in NPR



Head - Finance

.........................................................Balram Neupane

Director

.........................................................Sanjay B. Shah

Chairman



Director

.........................................................Radhesh Pant

Managing Director


Director


Director


Director




Parti

cula

rs

Shar

e Ca

pita

l Re

tain

ed

Gene

ral R

eser

ve

Capi

tal R

eser

ve

Shar

e

Exch

ange

Ot

her

Rese

rves

To

tal

Prof

it/(L

oss)

Pr

emiu

m

Fluc

tuat

ion

Rese

rve

Open

ing

Bala

nce

as a

t Jul

y 17

, 200

7

603

,141

,300

6

,695

,154

1

97,7

82,4

19

164

,075

-

16

,642

,936

1

57,5

52,8

47

981,

978,

731

Chan

ges

in a

ccou

ntin

g po

licy

Adju

stm

ent o

f Def

erre

d Ta

x As

sets

on

initi

al)

-

��,

2�6,

��2

-

-

-

-

-

�

�,2�

6,��

2ad

optio

n of

NAS

- 0�

(Inc

ome

Taxe

s

Rest

ated

Bal

ance

6

03,1

41,3

00

17,

991,

266

1

97,7

82,4

19

164

,075

-

16

,642

,936

1

57,5

52,8

47

993

,274

,843

Surp

lus

on R

eval

uatio

n of

pro

perti

es

-

-

-

-

-

-

-

-

Defic

it on

Rev

alua

tion

of In

vest

men

t -

-

-

-

-

-

-

-

Exch

ange

Flu

ctua

tion

Rese

rve

-

-

-

-

-

-

-

-

Net G

ains

& L

osse

s no

t rec

ogni

zed

inth

e in

com

e st

atem

ent

-

-

-

-

-

-

-

-

Net p

rofit

for t

he p

erio

d

-

�6�

,4�6

,87�

-

-

-

-

-

�

6�,4

�6,8

7�

Tran

sfer

to G

ener

al R

eser

ve

-

(72,

2��,

�76)

7

2,2�

�,�7

6

-

-

-

-

-

Prop

osed

Divi

dend

/Bon

us

-

(2

��,�

�4,4

�4)

-

-

-

-

24�

,2�6

,�20

(�

2,6�

7,��

4)

Issu

e of

Sha

re C

apita

l -

-

-

-

-

-

-

-

Defic

it on

reva

luat

ion

of p

rope

rties

-

-

-

-

-

-

-

-

Surp

lus

on R

eval

uatio

n of

Inve

stm

ent

-

-

-

-

-

-

-

-

Exch

ange

Flu

ctua

tion

Rese

rve

-

(2

,�06

,700

) -

-

-

2,

�06,

700

-

-

Capi

tal A

djus

tmen

t Fun

d

-

-

-

-

-

-

-

-

Tran

sfer

from

Cap

ital A

djus

tmen

t Fun

d

-

-

-

BOK

Bond

Red

empt

ion

Rese

rve

-

(2

8,�7

�,42

�)

-

-

-

-

28,

�7�,

42�

-

Clos

ing

Bala

nce

asa

tJul

y15

,200

8

603

,141

,300

2

2,15

6,18

6

270

,081

,795

1

64,0

75

-

19,1

49,6

36

427

,380

,796

1

,342

,073

,788

Am

t. in

NPR

STAT

EMEN

T OF

CHA

NGES

IN E

QUIT

YFO

R TH

E YE

AR E

NDED

ON

JULY

15,

200

8



�. ShareCapital

1,000,000,000 1.1 Authorized Capital 1,000,000,000

�,000,000,000 A) �0,000,000 Ordinary Shares of NPR �00 each �,000,000,000

- B) Non-redeemable Preference Shares -

- C) Redeemable Preference Shares -

606,173,300 1.2 Issued Capital 606,173,300

606,�7�,�00 A) 6,06�,7�� Ordinary Shares of NPR �00 each 606,�7�,�00



603,141,300 1.3 Paid Up Capital 603,141,300

60�,�4�,�00 A) 6,0��,4�� Ordinary Shares of NPR �00 each 60�,�4�,�00



Note: Forfeited but not issued number of shares 4,505

Amt. in NPR

SHARE CAPITAL AND OWNERSHIPAS AT JULY 15, 2008

SCHEDULE 1

Share Capital % Particulars % Share Capital

252,170,000 42% 1. Promoter 42% 252,170,000 - - �.� Government of Nepal - - - - �.2 Foreign Institutions - - - - �.� “A” class Licensed Institutions - -

- - �.4 Other Licensed Institutions - - �2,78�,000 2% �.� Other Institutions 2% �2,78�,000 2��,�8�,000 40% �.6 Individuals 40% 2��,�8�,000 - - �.7 Others - - 350,971,300 58% 2. General Public 58% 350,971,300 603,141,300 100% Total 100% 603,141,300

SHARE OWNERSHIP


S.N. Name of Shareholders Paid-up Amount % Type

� SHARDA SINGH 2�,7�7,800 �.�4% Promoter

2 DAMBER BAHADUR MALLA 2�,�42,700 �.64% Promoter

� RANA BAHADUR SHAH ��,��0,200 �.20% Promoter

4 RAMA DEVI PANT �7,7�8,�00 2.��% Promoter

� RITA MALLA ��,��,�00 2.�8% Promoter

6 NEPAL MENTHA PRODUCTS LTD. �2,78�,000 2.�2% Promoter

7 PREM BAHADUR SHRESTHA ��,744,200 �.��% Promoter

8 BHUBNESHWORI SHRESTHA ��,27�,�00 �.87% Promoter

� BIJAY KRISHNA SHRESTHA �0,�8�,000 �.82% Promoter

�0 ALOK SINGH �0,�4�,�00 �.7�% Promoter

�� ANJAY BAHADUR SHAH �,022,000 �.�0% Promoter

�2 AMBIKA SHAH 8,��2,000 �.�4% Promoter

�� NAMRATA SHARMA 7,826,000 �.�0% Promoter

�4 PARATAP BAR SINGH THAPA 4,�72,000 0.82% Promoter

�� SATYA NARAYAN MANANDHAR 4,664,400 0.77% Promoter

�6 GANESH KUMAR AGRAWAL 4,��0,000 0.7�% Promoter

�7 NIRMAL KUMAR AGRAWAL 4,��0,000 0.7�% Promoter

�8 GAURI SHRESTHA 4,�7�,000 0.6�% Promoter

�� PARMESHWOR P. RAUNIYAR �,8�0,400 0.6�% Promoter

20 DEEPAK KUMAR MALHOTRA �,6�0,400 0.6�% Promoter

2� BHUPENDRA KARKI �,�26,400 0.��% Promoter

22 SANTA BAR SINGH THAPA �,�06,�00 0.��% Promoter

2� SHREE BHANDARI �,2�0,000 0.�4% Promoter

24 RAMESH NATH DHUNGEL �,042,000 0.�0% Promoter

2� SHUBHAM INVESTMENT PVT. LTD. ��,�7�,400 �.�8% Public

26 NEPAL MENTHA PRODUCTS LTD. 6,�64,�00 �.0�% Public

27 GAURI SHRESTHA 6,�60,800 �.02% Public

28 CHOP NARAYAN SHRESTHA �,��8,�00 0.8�% Public

2� HARATI INVESTMENT PVT.LTD. 4,��6,400 0.72% Public

�0 DREAMS INVESTMENT PVT.LTD. 4,004,�00 0.66% Public

�� DAMBAR BAHADUR MALLA �,�80,000 0.�6% Public

�2 RITA MALLA �,�80,000 0.�6% Public

�� ANJANA KUMARI AGRAWAL �,��0,000 0.��% Public

List of Shareholders holding more than 0.5% shares



197,782,419 1. General Reserve 270,081,795 - 2. Proposed Bonus Share 241,256,520 164,075 3. Capital Reserves 164,075 - 4. Capital Redemption Reserve - 106,672,221 5. Capital Adjustment Reserve 106,672,220 50,880,627 6. Other Reserves 79,452,056 - A) Contingent Reserve - - B) Institutional Development Fund - - C) Dividend Equalization Fund - - D) Special Reserves - - E) Assets Revaluation Reserve - - F) Other Free Reserves - �0,880,627 G) Bond Redemption Reserve 7�,4�2,0�6 17,991,266 7. Retained Profit/(Loss) 22,156,186 16,642,936 8. Exchange Fluctuation Reserves 19,149,636 390,133,544 Total 738,932,488

Amt. in NPR

RESERVES AND SURPLUSAS AT JULY 15, 2008

Note: No securities have been pledged for issue of BOK Bond.


200,000,000 � 6% BOK Bond - 206� of NPR �,000 each 200,000,000 Issued on October 0�, 200� and maturity at October 04, 20�2 (Balance of Redemption Reserve NPR 7�,4�2,0�6) - 2 ……….% Bond/Debentures of NPR……..…each - Issued on …………… and maturity at ………. (Balance of Redemption Reserve NPR…….)

- � ……….% Bond/Debentures of NPR……..…each - Issued on …………… and maturity at ………. (Balance of Redemption Reserve NPR…….) 200,000,000 Total(1+2+3) 200,000,000

Amt. in NPR

DEBENTURES AND BONDSAS AT JULY , 2008

SCHEDULE 2

SCHEDULE 3



730,000,000 (A) Local 100,000,000

- �. Government of Nepal -

�60,000,000 2. Nepal Rastra Bank (Under Standing Liquidity Facility) -

- �. Repo Obligations -

�70,000,000 4. Inter Bank and Financial institutions �00,000,000

- �. Other Organized Institutions -

- 6. Others -

- (B) Foreign -

- �. Banks -

2. Other

730,000,000 Total(A+B) 100,000,000

Amt. in NPR

BORROWINGSAS AT JULY 15, 2008

Amt. in NPR


1. Non Interest-bearing accounts 1,661,775,129 A.CurrentDeposits 2,092,338,375 1,490,705,139 1. Local Currency 1,908,924,732 2�6,8��,704 �.� Government of Nepal ��8,607,408 6�,�4�,48� �.2 “A” Class Licensed Institutions �76,�7�,�47 47,620,��6 �.� Other Licensed Institutions �46,�8�,��8 ��2,28�,788 �.4 Other Organized Institutions �,047,�64,67� �2�,��,870 �.� Individuals �6�,7�4,�04 22,�0�,�80 �.6 Others �0,06�,000 171,069,990 2. Foreign Currency 183,413,643 - 2.� Government of Nepal - - 2.2 “A” Class Licensed Institutions - - 2.� Other Licensed Institutions - �60,�44,00� 2.4 Other Organized Institutions �7�,620,2�4 �0,�2�,�87 2.� Individuals 8,8��,72� - 2.6 Others �7�,704 169,040,753 B.Margin 152,151,926 - �. Employees Guarantee - ��,7��,0�7 2. Guarantee Margin 77,��2,�24 ��,247,6�6 �. Letter of Credit Margin 74,��,402 27,171,742 C.Other 91,846,124 27,171,742 1. Local Currency 91,846,124 - �.� Financial Institutions - 27,�7�,742 �.2 Other Organized Institutions ��,846,�24 - �.� Individuals - - 2. Foreign Currency - - 2.� Financial Institutions - - 2.2 Other Organized Institutions - - 2.� Individuals - 1,857,987,624 TotalofNon-interestbearingaccounts 2,336,336,425

DEPOSITSAS AT JULY 15, 2008

continued.........

SCHEDULE 4

SCHEDULE 5


Amt. in NPR

Previous Year Particulars Current Year 2. Interest-bearing accounts 5,527,292,363 A.SavingDeposits 6,596,109,679 5,298,797,635 1. Local Currency 6,331,175,738 2�2,48�,��0 �.� Organized Institutions 22�,46�,0�4 4,��8,487,07� �.2 Individuals 6,00�,�8�,�6� 47,82�,226 �.� Others �06,��,�� 228,494,728 2. Foreign Currency 264,933,941 �07,�22,244 2.� Organized Institutions �28,870,�84 �2�,�72,484 2.2 Individuals ��,��6,020 - 2.� Others �47,��7 3,037,170,561 B.FixedDeposits 3,703,175,532 2,216,461,386 1. Local Currency 3,025,238,116 �,6�2,0�0,�7� �.� Organized Institutions 2,�78,00�,�0� 404,070,807 �.2 Individuals 4�6,��,2�� 80,�00,000 �.� Others ��,07�,000 820,709,175 2. Foreign Currency 677,937,416 682,8�8,07� 2.� Organized Institutions ��,464,4�0 ��7,87�,�00 2.2 Individuals 78,472,�66 - 2.� Others - 1,966,476,746 C.CallDeposits 3,198,116,163 1,927,398,657 1. Local Currency 3,095,885,581 �,��7,�� .� “A” Class Licensed Institutions 2�,702,007 �2�,�0�,007 �.2 Other Licensed Institutions 774,��,0�8 �,76�,2�0,676 �.� Other Organized Institutions 2,267,4��,�06 ��,�28,66� �.4 Individuals 28,��2,6�0 �,000 �.� Others - 39,078,089 2. Foreign Currency 102,230,582 �,�6�,607 2.� “A” Class Licensed Institutions - �6,�7�,822 2.2 Other Licensed Institutions - �,��2,660 2.� Other Organized Institutions �02,2�0,�82 - 2.4 Individuals - - 2.� Others - - D.CertificateofDeposit - - �. Organized Institutions - - 2. Individual - - �. Others - 10,530,939,670 TotalofInterestbearingaccounts 13,497,401,374 12,388,927,294 TOTALDEPOSITS 15,833,737,799


�7,6�4,��6 �. Local Currency 2�,�2�,4�6

8,082,�86 2. Foreign Currency 28,4�0,74�

25,776,722 Total 51,576,245

Amt. in NPR

BILLS PAYABLESAS AT JULY 15, 2008

SCHEDULE 6



- �. Pension/Gratuity Fund -

- 2. Employees Provident Fund - - �. Staff Welfare Fund - �8,�4�,�6� 4. Provision for Staff Bonus �2,78�,8�8 �4,0�4,64� �. Interest Payable on Deposits �2,�66,68� 28�,�7� 6. Interest Payable on Borrowings �2,877 6,00�,8�0 7. Interest Payable on BOK Bond 206� 6,008,2�0 �,6�7,48� 8. Unearned Discounts and Commission 4,6�7,��8 7,826,0�� . Sundry Creditors 46,667,��0 - �0. Branch Adjustment Account - �7,6�4,084 ��. Others ��,4�0,�� 6��,000 a. Audit fee 6�0,000 �7,0��,084 b. Others �8,800,�� 107,840,825 Total 161,733,151

Amt. in NPR

OTHER LIABILITIESAS AT JULY 15, 2008


��7,��4,476 �. Local Currency (including coins) ��6,222,7�0 2�,048,0�6 2. Foreign Currency 20,�24,4�� 219,042,572 Total 536,747,143

Amt. in NPR

CASH BALANCEAS AT JULY 15, 2008

Previous Year Particulars Local Currency Foreign Currency Current Year 88�,4��,84� �. Nepal Rastra Bank ��2,47�,76� 606,04�,072 8�0,�8�,�� a. Current Account ��6,4��,224 6�0,076,�� (7,086,078) b. Other Account (4,027,46�) (4,027,46�)

883,495,841 Total 592,471,763 606,049,072

Amt. in NPR

BALANCE WITH NEPAL RASTRA BANKAS AT JULY 15, 2008

INR Convertible Total - ��,�77,�0� ��,�77,�0�

- ��,�77,�0� ��,�77,�0�

- - -

- 13,577,309 13,577,309

SCHEDULE 7

SCHEDULE 8

SCHEDULE 9


Previous Year Particulars Local Currency Foreign Currency Current Year 48,443,328 1. Local Licensed Institutions 85,113,500 85,636,392 48,44�,�28 a. Current Account 8�,��,�00 8�,6�6,��2

- b. Other Account - - 164,922,200 2. Foreign Banks - 212,034,336 �64,�22,200 a. Current Account - 2�2,0�4,��6 - b. Other Account - -

213,365,528 Total 85,113,500 297,670,728

Amt. in NPR

BALANCE WITH BANKS/FINANCIAL INSTITUTIONSAS AT JULY 15, 2008

INR Convertible Total - �22,8�2 �22,8�2 - �22,8�2 �22,8�2 - - -

�8,�80,8�6 ��,4��,480 2�2,0�4,��6

�8,�80,8�6 ��,4��,480 2�2,0�4,��6

- - -

98,580,856 113,976,372 212,557,228

Note: As per the statements of related banks, the balance amount is NPR 1,074,948,720

Differences are near to the year-end transactions, which have been identified & subsequently reconciled .


- �. Local Currency - 2��,278,628 2. Foreign Currency 72,67�,8�6

259,278,628 Total 72,679,836

Amt. in NPR

MONEY AT CALL AND SHORT NOTICEAS AT JULY 15, 2008

Amt. in NPR

Previous Year Particulars Purpose Current Year

�,�87,�88,880 �. Government Treasury Bills �,28�,�8�,�67

- 2. Government Saving Bonds -

�44,6�2,�7� �. Government Securities - Others 8�2,0�7,748

- 4. Nepal Rastra Bank Bonds -

- �. Foreign Securities -

- 6. Local Licensed Institutions -

�72,�82,�7� 7. Foreign Banks �7�,�4�,�8�

2�,�62,000 8. Corporate Shares 28,�24,�00

64,606,8�6 �. Corporate Bonds and Debentures 8�,7�4,�78

- �0. Other Investments -

2,995,192,322 TotalInvestment 3,206,826,174

2,758,456 Provision 2,758,456

2,992,433,866 NetInvestment 3,204,067,718

INVESTMENTSAS AT JULY 15, 2008

Trading Others

- �,28�,�8�,�67

- -

- 8�2,0�7,748

- -

- -

- -

- �7�,�4�,�8�

- 28,�24,�00

- 8�,7�4,�78

- -

- 3,206,826,174

- 2,758,456

- 3,204,067,718

SCHEDULE 10

SCHEDULE 11

SCHEDULE 12


Amt. in NPR

Previous Year Particulars Cost Price Market Price Provision

25,562,000 1. Investment in Shares 28,324,500 29,632,000 1,341,400

�,000,000 �.� Central Region Rural Development Bank Ltd. �,000,000 NA - �0,000 Ordinary Shares of NPR �00/- paid up

�,��,000 �.2 Rural Microfinance Development Centre Ltd. 7,07�,000 NA - 70,7�0 Ordinary Shares of NPR �00/- paid up

�,600,000 �.� Chhimek Bikash Bank Ltd �,600,000 �6,2�8,000 - �6,000 Ordinary Shares of NPR �00/- paid up & 2�,200 bonus shares

��,000 �.4 Credit Information Bureau Ltd. �,2��,�00 NA - �2,�� Ordinary Shares @ NPR �00/- paid up

��,4�4,000 �.� Himalayan Distillery Ltd. ��,4�4,000 ��,4�4,000 �,�4�,400 ��4,�40 Ordinary Shares @ NPR �00/- paid up

64,606,896 2. Investment in Debentures and Bond 85,734,578 68,727,750 1,417,056

64,606,8�6 2.� 4.7�% USD Bond of State Bank of India, (face 68,74�,�78 68,727,7�0 �,4�7,0�6 value USD�,000,000 @ ��.�0 for USD �00 per bond) maturing on December 08, 200�. - 2.2 7.7�% Nepal Electricity Authority Power Bond �6,�8�,000 NA - 206�, (face value NPR �6,�8�,000 @ at NPR �,000 per bond) maturing on Chaitra �4, 206� (March 27, 20��).

90,168,896 TotalInvestment 114,059,078 98,359,750 2,758,456

3. Provision for Loss

�,4�6,200 �.� Up to previous year 2,7�8,4�6 - - (6�7,744) �.2 Addition/Deduction this year - - - 2,758,456 TotalProvision 2,758,456

87,410,440 NetInvestment 111,300,622

INVESTMENTS IN SHARES, DEBENTURES AND BONDSAS AT JULY 15, 2008

Note : Following organizations have not declared dividend since last 3 years.

(a) Himalayan Distillery Ltd.

(b) Central Region Rural Development Bank Ltd.

SCHEDULE 12(A)


Prev

ious

Yea

r Pa

rticu

lars

Lo

ans

& Ad

vanc

es

Bill

Purc

hase

d/Di

scou

nted

Cu

rren

t Yea

r

9,45

0,80

5,70

4 1.

Per

form

ing

Loan

4

1,70

4,06

1

513

,170

,049

1

1,89

7,90

7,97

0

3,1

69,4

00

12,

455,

951,

480

2

6,15

6,90

5

28,

714,

368

5

4,87

1,27

3

12,

510,

822,

753

�,�4

6,80

7,20

� �.

� Pa

ss L

oan

4�,7

04,0

6�

��

,�70

,04�

�

�,82

2,�0

�,4�

0

�,�

6�,4

00

�2,

�80,

��,

000

2

6,��

6,�0

�

28,

7�4,

�68

�

4,87

�,27

�

�2,

4��,

224,

27�

�0�,

��8,

4��

�.2

Rest

ruct

ured

Loa

n

-

-

7�,

��8,

480

-

7

�,��

8,48

0

-

-

-

7�,

��8,

480

243,

296,

250

2. N

on-P

erfo

rmin

g Lo

an

730

,805

4

,219

,079

2

31,9

48,9

65

-

2

36,8

98,8

50

-

-

-

2

36,8

98,8

50

��

,86�

,�42

2.

� Su

b-st

anda

rd

-

-

�00

,�76

,762

-

�

00,�

76,7

62

-

-

-

�00

,�76

,762

�6,�

76,0

8�

2.2

Doub

tful

-

-

��,

246,

76�

-

�

�,24

6,76

�

-

-

-

��,

246,

76�

�66,

8�6,

82�

2.�

Loss

7

�0,8

0�

4,2

��,0

7�

��2

,�2�

,4��

-

�

�7,4

7�,�

��

-

-

-

��7

,47�

,��

9,69

4,10

1,95

4(A

)Tot

alL

oan

4

2,43

4,86

6

517

,389

,129

1

2,12

9,85

6,93

5

3,1

69,4

00

12,

692,

850,

330

2

6,15

6,90

5

28,

714,

368

5

4,87

1,27

3

12,

747,

721,

603

3.

Loa

n Lo

ss P

rovi

sion

��

,�6�

,��0

�.

� Pa

ss

�04

,260

�

,��

,700

�

�8,2

2�,0

��

��,

6�4

�

2�,4

�0,7

�0

26�

,�6�

2

87,�

44

�48

,7��

�

24,0

��,4

62

�2

,��

,8�2

�.

2 Re

stru

ctur

ed

-

-

�,4

4�,8

�0

-

�,4

4�,8

�0

-

-

-

�,4

4�,8

�0

�,

�6�,

8�6

�.�

Sub-

stan

dard

-

-

2

�,04

4,��

0

-

2�,

044,

��0

-

-

-

2

�,04

4,��

0

�8

,288

,042

�.

4 Do

ubtfu

l -

-

�

,62�

,�84

-

�

,62�

,�84

-

-

-

�

,62�

,�84

�60,

��7,

0�7

�.�

Loss

�

82,7

0�

4,2

��,0

7�

��2

,�2�

,4��

-

�

�6,�

27,2

��

-

-

-

��6

,�27

,2��

294,

774,

337

(B)T

otal

Pro

visi

onin

g

286

,961

9

,350

,780

2

74,8

65,9

14

31,

694

2

84,5

35,3

50

261

,569

2

87,1

44

548

,713

2

85,0

84,0

62

4. P

rovi

sion

up

to

earli

er y

ear

70

,8�4

,087

4.

� Pa

ss

�0�

,4�4

�

,4��

,602

8

7,2�

�,�7

8

-

�2,

8��,

074

�

00,�

64

20�

,��2

�

�0,�

�6

��,

�6�,

��0

20,2

�4,4

�6

4.2

Rest

ruct

ured

-

2

,�2�

,0��

�

0,47

0,76

�

-

�2,

��,

8�2

-

-

-

�

2,��

�,8�

2

�7

,�02

,7�0

4.

� Su

b-st

anda

rd

-

-

�,�

6�,8

�6

-

�,�

6�,8

�6

-

-

-

�,�

6�,8

�6

4,

402,

��8

4.4

Doub

tful

-

�0,

284,

�4�

8

,00�

,4��

-

�

8,28

8,04

2

-

-

-

�8,

288,

042

��6,

244,

��2

4.�

Loss

2

,�66

,�8�

4

,222

,82�

�

��,�

67,6

47

-

�60

,��7

,0�7

-

-

-

�

60,�

�7,0

�7

22

9,61

8,34

3(C

)Tot

alP

rovi

sion

2

,268

,083

2

2,53

2,01

7

269

,663

,721

-

294

,463

,821

1

00,9

64

209

,552

3

10,5

16

294

,774

,337

Upt

oLa

stY

ear

(1

3,00

8,56

6)

(D)P

revi

ous

Year

’s

-

-

(47,

123,

950)

-

(47,

123,

950)

-

-

-

(47,

123,

950)

Pro

visi

onW

ritte

nba

ck

78

,164

,560

(E

)Thi

sye

ar’s

(1,9

81,1

22)

(13,

181,

237)

5

2,32

6,14

4

31,

694

3

7,19

5,47

9

160

,605

7

7,59

2

238

,197

3

7,43

3,67

6

add

ition

alp

rovi

sion

65

,155

,994

(F

)Net

adj

ustm

entt

his

year

(1

,981

,122

)(1

3,18

1,23

7)

5,2

02,1

93

31,

694

(9

,928

,471

)1

60,6

05

77,

592

2

38,1

97

(9,6

90,2

75)

�,

��,

�27,

6�7

Net L

oan

(A-B

) 42

,�47

,�04

�0

8,0�

8,�4

� ��

,8�4

,��

,02�

�,

��7,

706

�2,4

08,�

�4,�

80

2�,8

��,�

�6

28,

427,

22�

�

4,�2

2,�6

�

�2,

462,

6�7,

�4�

Am

t. in

NPR

CLAS

SIFI

CATI

ON O

F LO

ANS,

ADV

ANCE

S &

BILL

S PU

RCHA

SE A

ND P

ROVI

SION

ING

AS A

T JU

LY 1

5, 2

008

Dom

estic

Prio

rity

Sect

or

Insu

red

Unin

sure

d *

Othe

r Fo

reig

n To

tal

Dom

estic

Fo

reig

n To

tal

*D

epriv

ed S

ecto

r

SCHE

DULE

13


SECURITY-WISE

LOANS, ADVANCES AND BILLS PURCHASEAS AT JULY 15, 2008


9,694,101,954 (A) Secured 12,747,721,603

7,8�7,62�,068 �. Collateral of Movable/Immovable Assets �0,2��,4�6,260

- 2. Guarantee of Local Licensed Institutions -

6,78�,247 �. Government Guarantee -

�2,42�,000 4. Internationally Rated Bank Guarantee 267,�60,000

�7,270,��6 �. Export Documents �6�,74�,67�

�,�8�,467,�86 6. Fixed Deposit Receipts �84,��,80�

2�4,6�2,6�0 a. Own F.D.R. ��7,��8,7�7 888,8�4,8�6 b. F.D.R. of Other Licensed Institutions 786,42�,084

��,8�6,�26 7. Government Bonds �27,276,468

- 8. Counter Guarantee -

- �. Personal Guarantee -

�60,700,�7� �0. Other Securities 76�,27�,40�

- (B) Unsecured -

9,694,101,954 TOTAL 12,747,721,603

Amt. in NPR

SCHEDULE 13(A)


Pr

evio

us Y

ear

Pa

rticu

lars

As

sets

Cu

rren

t Yea

r

1.

At C

ost

�8�,

�4�,

774

a. Pr

evio

us Y

ear B

alan

ce

60,

8�2,

864

�

4,�6

�,8�

8

-

��8

,0�2

,6�0

�

6,78

7,7�

�

270

,2��

,�6�

�00,

277,

�28

b.

Add

ition

dur

ing

the

Year

�

�,�2

0,2�

2

2�,

��4,

0�4

-

�0,

�6�,

606

4

,0�8

,0�4

7

�,47

�,�0

6

- c.

Reva

luat

ion/

Writ

e ba

ck d

urin

g th

e ye

ar

-

-

-

-

-

-

(�

2,07

�,80

0)

d. Sa

le d

urin

g th

e Ye

ar

-

(6,0

8�,�

�2)

-

-

-

(6,0

8�,�

�2)

(7

,�27

,�40

) e.

Writ

e of

f dur

ing

the

Year

-

(�

22,7

7�)

-

(2,�

0�,0

0�)

-

(2,6

��,7

76)

27

0,21

9,16

2

Tota

lCos

t(a+

b+c+

d+e)

79

,953

,096

7

3,30

7,50

5

-

1

66,8

85,2

95

20,

825,

805

340,

971,

701

2. D

epre

ciat

ion

�0

8,24

�,��

0

a. Up

to P

revio

us Y

ear

�,0

2�,6

2�

20,

77�,

04�

-

8

8,22

�,8�

6

�,8

2�,8

��

�2�

,862

,�2�

27,0

�8,�

8�

b. F

or th

is Y

ear

�,4

��,�

4�

8,6

44,0

88

-

�6,

�0�,

2��

2

,04�

,8�6

�

�,04

�,�0

6

(7

,��

,464

) c.

Depr

ecia

tion

adju

sted

on

sold

ass

ets

-

(4,�

��,2

0�)

-

-

-

(4,�

��,2

0�)

(�

,8�0

,��

) d.

Depr

ecia

tion

on re

valu

atio

n/w

rite

off

-

-

-

(�,8

4�,�

�8)

-

(�,8

4�,�

�8)

12

1,86

2,32

4

Tota

lDep

reci

atio

n6

,481

,578

2

4,82

7,93

6

-

1

03,2

89,0

71

11,

867,

687

1

46,4

66,2

72

14

8,35

6,83

7

3. W

ritte

n Do

wn

Valu

e (1

-2)

73,

471,

518

4

8,47

9,56

9

-

6

3,59

6,22

4

8,9

58,1

18

194

,505

,429

145,

953,

732

4.

Lan

d -

-

-

-

-

145

,953

,732

-

5. P

endi

ng C

apita

lizat

ion

-

-

-

-

-

-

26,5

35,8

26

6. L

ease

hold

Ass

ets

-

-

-

-

46,

814,

992

4

6,81

4,99

2

2�

,44�

,4�4

a.

Prev

ious

Yea

r Bal

ance

-

-

-

-

2

6,��

�,82

6

26,

��,

826

�2

,�0�

,��7

b.

Add

ition

dur

ing

the

Year

-

-

-

-

2

4,�2

4,��

�

24,

�24,

��

(�

�,�2

�,06

4)

c. Tr

ansf

er to

oth

ers

(furn

iture

)

-

-

-

-

(�77

,4�0

) (�

77,4

�0)

(2

,688

,46�

) d.

Amor

tizat

ion

-

-

-

-

(�,6

68,�

��)

(�,6

68,�

��)

32

0,84

6,39

5

TOTA

L(3

+4+5

+6)

73,4

71,5

18

48,

479,

569

-

63,

596,

224

5

5,77

3,11

0

387

,274

,153

Am

t. in

NPR

FIXE

D AS

SETS

AS A

T JU

LY 1

5, 2

008

Bu

ildin

g Ve

hicl

es

Mac

hine

ry

Offic

e Eq

uipm

ents

Ot

hers

SCHE

DULE

14


Pre

viou

s Ye

ar

Na

me

& Ad

dres

s of

Ta

ken

over

To

tal A

mou

nt o

f Lo

ss P

rovi

sion

Cu

rren

t Yea

r

Bo

rrow

er o

r Pa

rty

date

No

n Ba

nkin

g As

sets

Net

�2

4,6�

8 Sh

ree

Man

jush

ree

Chim

ni It

ta B

hatta

Ju

ly �,

200

� �2

4,6�

8 �0

0%

�24

,6�8

-

�4

0,40

0

Anu

Craf

ts

April

�8,

200

4 �4

0,40

0 �0

0%

�40

,400

-

2,

274,

000

Unna

t Ind

ustri

es P

vt. L

td.

July

�, 2

00�

-

�00%

-

-

�,

62�,

000

Th

e Go

rkha

Eng

inee

ring

& Au

gust

2�,

200

0 �,

�2�,

000

�00%

�

,�2�

,000

-

Se

rvic

e In

t’l Pv

t. Lt

d.

27

8,42

�

Bisw

as R

eady

mad

e Ga

rmen

t Ap

ril 2

2, 2

004

278,

42�

�00%

2

78,4

2�

-

72

2,8�

�

Durg

a Oi

l Mill

Ju

ly �4

, 200

� 72

2,8�

� �0

0%

722

,8��

-

�2

,6��

,000

Ja

y Ba

laji

Oil I

nd. P

vt. L

td.

July

�0, 2

00�

-

7�%

-

-

Ja

y Sh

iva S

hakt

i Ric

e M

ill P

vt. L

td.

�,

�4�,

000

Ja

y Ba

laji

Oil I

nd. P

vt. L

td.

July

�0, 2

00�

- 7�

%

-

-

Jay

Shiva

Sha

kti R

ice

Mill

Pvt

. Ltd

.

-

Nepa

lgun

j Eng

inee

ring

Auto

M

arch

�7,

200

8 60

�,�7

0 2�

%

��0

,��2

4

�2,�

78

Indu

strie

s Pv

t. Lt

d.

(��,

��,

�87)

Le

ss :

Prov

isio

n -

- -

- -

3,62

5,71

5

Gran

dTo

tal

5,

595,

272

5

,142

,294

4

52,9

78

NON

BANK

ING

ASSE

TSAS

AT

JULY

15,

200

8

In %

In

Am

ount

Am

t. in

NPR

SCHE

DULE

15


Amt. in NPR

Previous Year Particulars Current Year �,��4,�80 �. Stationery Stock �,402,20�

��,464,�2� 2. Income Receivable on Investments 2�,�2�,828

�7,4�0,004 �. Accrued Interest on Loan �4,78�,�6� -

(�6,��0,��) (Less: Interest Suspense) (�4,78�,�6�)

- 4. Commission Receivable -

�,��,�2� �. Sundry Debtors �,068,�6� 7,�2�,64�

(�,��8,��8) (Less: Provision for loss) (�,��8,��8)

2�,�02,08� 6. Staff Loans and Advances ��,74�,872

8,70�,�� 7. Prepayments ��,880,�07

- 8. Cash in Transit -

68,47�,4�0 �. Other Transit items (including cheques) 20,4�8,�07

- �0. Drafts paid without Notice -

8,��8,�48 ��. Expenses Not Written Off (Computer Software) 24,428,�4�

- �2. Branch Adjustment Account -

�20,�78,�� . Others 28,��,��

�2,��,860 (a) Advance tax 2�,2�4,728

��,2�6,��2 (b) Deferred tax assets 7,42�,�8�

76,�46,�8� (c) Others 2��,000

289,978,754 TOTAL 154,346,018

OTHER ASSETSAS AT JULY 15, 2008

OTHER ASSETS (Additional Statement)AS AT JULY 15, 2008

Previous Year Particulars Current Year �7,4�0,004 �. Accrued Interest on Loan 6,207,�� ,84�,�7� 6,7��,0�� 4,78�,�6� - 2. Drafts paid without Notice - - - - - �. Branch Adjustment Account - - - -

17,490,004 Total 6,207,139 1,841,171 6,735,053 14,783,363

Amt. in NPR

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

SCHEDULE 16

SCHEDULE 16(A)


Amt. in NPR

Previous Year Particulars Current Year 2�,676,�7� �. Claims against the Bank, not acknowledged as liabilities 2�,886,�7�

�,2�7,0�2,7�� 2. Letter of Credit (Full amount) �,�84,876,�7�

�,2�0,48�,4�0 a. Below 6 months �,��,8�6,077

26,�47,�6� b. Above 6 months 44,�80,8�6

- �. Rediscounted Bills -

�7�,��4,420 4. Unmatured Guarantees/Bonds 648,2�6,608

4�,�02,080 a. Bid Bond 40,�28,�64

��0,2�2,�40 b. Performance Bond 607,688,244 - c. Other Guarantee/Bonds -

- �. Unpaid Shares in Investment -

�4,��6,��6 6. Forward Exchange Contracts’ Outstanding Liabilities 86,46�,02�

2�,�68,�8� 7. Bills Under Collection 4�,��,2�7

6�,78�,42� 8. Acceptances and Endorsements 4�2,62�,6�4

- �. Underwriting Commitments -

- �0. Irrevocable Loan Commitments - ��. Guarantee issued against Counter Guarantee -

2�,060,644 of Internationally rated Banks 26,��2,�06

��,�40,4�� 2. Advance Payment Guarantee �4,�68,040

246,�24,074 ��. Financial Guarantee �40,4�6,67�

- �4. Contingent Liabilities on Income Tax - - ��. Others -

2,142,879,501 TOTAL 3,043,333,069

CONTINGENT LIABILITIESAS AT JULY 15, 2008

SCHEDULE 17


Amt. in NPR

Previous Year Particulars Current Year 645,651,315 A. ON LOANS, ADVANCES AND OVERDRAFT 887,298,870

474,�47,47� �. Loans and Advances 67�,��,266

�7�,�0�,840 2. Overdraft 2��,�47,604

112,363,921 B. ON INVESTMENT 90,603,868

�08,��0,200 �. Government Securities 84,�6�,�77

6�,444,876 a. Treasury Bills 4�,042,64�

4�,�4�,�24 b. Development Bonds 4�,��8,728

- c. National Saving Certificates -

- d. ………………………. -

�,��,68� 2. Foreign Securities �,00�,08�

�,��,68� a. State Bank of India USD Bond �,00�,08�

- b. ……………………….. -

- �. Nepal Rastra Bank Bond -

- 4. Debenture and Bonds 404,08�

- a. Financial Institutions -

- b. Other Organizations 404,08�

�78,040 �. Interest on Inter Bank Lending 2,2��,�2�

- C. ON AGENCY BALANCE -

- �. Local Banks -

- 2. Foreign Banks -

31,827,941 D. ON MONEY AT CALL AND SHORT NOTICE 20,935,481

7,�08,0�� . Local Banks 4,626,008

24,��,��0 2. Foreign Banks �6,�0�,47�

29,160,770 E. ON OTHERS 35,319,655

27,�6�,�22 �. Certificate of Deposits 24,�2�,886

- 2. Inter-Bank Loan -

�,��7,247 �. Others �0,��,76�

819,003,947 Total 1,034,157,874

INTEREST INCOMEFOR THE YEAR ENDED ON JULY 15, 2008

SCHEDULE 18


Amt. in NPR

Previous Year Particulars Current Year 320,002,705 A. ON DEPOSIT LIABILITIES 387,994,946

129,167,788 1.FixedDeposits 147,172,636

�6,704,4�8 �.� Local Currency ��2,8��,6�6

�2,46�,��0 �.2 Foreign Currency �4,27�,020

121,063,171 2.SavingDeposits 149,010,516

��6,7�2,470 2.� Local Currency �4�,��,�2�

4,270,70� 2.2 Foreign Currency �,8�7,��

69,771,746 3.CallDeposits 91,811,794

6�,0�8,��7 �.� Local Currency 8�,662,824

7��,20� �.2 Foreign Currency 2,�48,�70

- 4CertificateofDeposits -

19,178,306 B. ON BORROWINGS 29,548,486

�2,000,000 �. Debentures and Bonds �2,000,000

�,��,��4 2. Loan from Nepal Rastra Bank �,2�6,�7�

�,844,7�2 �. Inter Bank/Financial Institutions Borrowing �2,2�2,��

- 4. Other Corporate Bodies -

- �. Other Loans -

- C. ON OTHERS -

- �. .............. -

339,181,011 Total 417,543,432

INTEREST EXPENSESFOR THE YEAR ENDED ON JULY 15, 2008

Amt. in NPR

Previous Year Particulars Current Year 1,767,851 A. BILLS PURCHASED AND DISCOUNTED 1,458,209

6�4,886 �. Local Currency ��4,826

�,��2,�6� 2. Foreign Currency �2�,�8�

58,229,863 B. COMMISSION 67,353,494

��,�6�,�� . Letter of Credit �6,��,4��

8,47�,8�� 2. Guarantee �2,�62,64�

�,�27,866 �. Collection Fee �,286,�0�

24,28�,�6� 4. Remittance Fee 26,��2,��

- �. Credit Cards -

- 6. Share Underwriting/Issues -

- 7. Government Transaction -

�2,46� 8. E.Pra. Commission ��,�4�

8,�26,7�� . Exchange Fee (INR only) �,��6,7��

37,433,415 C. OTHERS 60,603,879

97,431,129 Total 129,415,582

COMMISSION AND DISCOUNTFOR THE YEAR ENDED ON JULY 15, 2008

SCHEDULE 19

SCHEDULE 20


Amt. in NPR

Previous Year Particulars Current Year �47,�00 �. Rent on Safe Deposit Lockers ��,4�0

- 2. Issue and Renewal of Credit Cards -

�,7�8,08� �. Issue and Renewal of ATM Cards �,082,6��

- 4. Telex/T.T. -

��,47�,�4� �. Service Charges ��,887,7�4

- 6. Renewal Fees -

�,�8�,�6� 7. Others �,68�,86�

19,002,897 Total 23,167,724

OTHER OPERATING INCOMEFOR THE YEAR ENDED ON JULY 15, 2008

Amt. in NPR

Previous Year Particulars Current Year 8,0��,8�� . Revaluation Gain �0,026,800

72,774,�74 2. Trading Gain (Except INR Exchange Fee) 8�,7�8,2��

80,826,013 TotalIncome/(Loss) 93,765,039

EXCHANGE GAIN/LOSSFOR THE YEAR ENDED ON JULY 15, 2008

Amt. in NPR

Previous Year Particulars Current Year ��,6��,807 �. Salary ��,222,�0�

�4,6�4,0�� 2. Allowances 22,42�,�06

2,280,7�� . Contribution to Provident Fund 2,�6�,424

764,�2� 4. Training Expenses 8�0,424

- �. Uniform -

�,�20,822 6. Medical Expenses 2,6��,47�

226,��2 7. Insurance 424,�64

6,7��,702 8. Gratuity Provision 4,78�,��8

�,�24,204 �. Others �,�27,�04

69,740,384 TOTAL 90,601,920

EMPLOYEES EXPENSES FOR THE YEAR ENDED ON JULY 15, 2008

SCHEDULE 21

SCHEDULE 22

SCHEDULE 23


Amt. in NPR

Previous Year Particulars Current Year ��,��8,��8 �. House Rent ��,��7,077

6,�40,276 2. Electricity and Water 6,�76,��

2,124,452 3.RepairsandMaintenance 2,723,914

�,��,40� (a) Building �,�42,4�0

�,0��,04� (b) Vehicles �,�7�,004

- (c) Others 6,�00

4,��6,608 4. Insurance 4,486,�4�

�2,��,28� �. Postage, Telex, Telephone, Fax, Swift, Internet, V-Sat etc. ��,72�,�8�

4,��,�68 6. Office Equipment and Furniture - Repairs 4,�66,7��

�,622,�� 7. Travelling Allowances and Expenses 7,��,27�

�,�26,�64 8. Printing & Stationery �,6��,��7

48�,727 �. Periodicals and Books 22�,��

��,267,��7 �0. Advertisement �7,0�2,�28

�,��7,4�� . Legal Expenses �,��,826

40�,4�7 �2. Donations 26�,�2�

2,890,969 13.ExpensesRelatingtoBoardofDirectors 2,865,255

2,64�,000 (a) Meeting Fees 2,�0�,000

24�,�6� (b) Entertainment �64,2��

�,��,�� 4. Annual General Meeting Expenses �,447,0�2

615,000 15.ExpensesRelatingtoAudit 650,000

�6�,000 (a) Audit Fees �80,000

4�0,000 (b) Other expenses 470,000

- �6. Commission on Remittance -

2�,706,8�0 �7. Depreciation on Fixed Assets �4,7��,44�

�,�27,�7� �8. Amortization of Preliminary Expenses (Computer Software) �,74�,488

- ��. Share Issue Expenses (Deferred) -

- 20. Technical Service Fee -

�,�82,�76 2�. Entertainment �,4�0,2��

�0�,86� 22. Written off Expenses 4,76�,8��

8,748,048 2�. Security Expenses ��,7�7,�4�

608,672 24. Credit Guarantee Premium ��,46�

�,��,648 2�. Commission and Discount 2,�44,��7

10,272,907 26.Others 20,935,764

4,676,�78 (a) Fuel Expenses 6,74�,8��

�,�27,846 (b) Professional, Association & Other Consulting Fees etc. �,�0�,022

�,228,8�� (c) Premises & Cleaning �,848,87�

4��,8�2 (d) Rates & Taxes �,242,028

138,429,941 TOTAL 170,480,908

OTHER OPERATING EXPENSESFOR THE YEAR ENDED ON JULY 15, 2008

SCHEDULE 24


Amt. in NPR

Previous Year Particulars Current Year 78,�64,�60 �. Increase in Loan Loss Provision �7,4��,676

- 2. Increase in Provision for Loss on Investment -

�,7�0,42� �. Increase in Provision Against Non-Banking Assets ��,707

- 4. Increase in Provision Against Other Assets 67�,��

81,894,981 Total 38,438,498

PROVISION FOR POSSIBLE LOSSFOR THE YEAR ENDED ON JULY 15, 2008

Amt. in NPR

Previous Year Particulars Current Year - �. Profit/(Loss) on Sale of Investment -

(�,26�,�07) 2. Profit/(Loss) on Sale of Assets 662,6�0 (includes profit on sale of NBA of NPR 6�0,000) 4�0,0�8 �. Dividend �48,0�8

- 4. Subsidies received from Nepal Rastra Bank -

- a. Reimbursement of losses of specified branches -

- b. Interest Subsidy -

- c. Exchange Counter -

- �. Others -

(2,779,849) TotalNon-OperatingIncome/(Loss) 810,748

NON-OPERATING INCOME/LOSSFOR THE YEAR ENDED ON JULY 15, 2008

Amt. in NPR


��,008,�66 �. Loan Loss Provision Written Back 47,�2�,��0

2�,4�7,�7� 2. Non Banking Assets Provision Written Back �4,70�,000

6�7,744 �. Investment Provision Written Back -

- 4. Other Assets Provision Written Back -

37,103,885 Total 61,832,950

LOSS PROVISION WRITTEN BACKFOR THE YEAR ENDED ON JULY 15, 2008

SCHEDULE 25

SCHEDULE 26

SCHEDULE 27


Am

t. in

NPR

Pre

viou

s Ye

ar

Pa

rticu

lars

Cu

rren

t Yea

r

4

��,�

�0

�. R

ecov

ery

of W

ritte

n of

f Loa

n 6

,000

-

2. V

olun

tary

Ret

irem

ent S

chem

e Ex

pens

es

-

-

�. L

oans

Writ

ten-

Off [

28 (a

)] (4

�,40

2,28

4)

-

4. O

ther

exp

ense

s/In

com

e -

411,

150

Tota

l(4

5,39

6,28

4)

PROF

IT/L

OSS

FROM

EXT

RA O

RDIN

ARY

ACTI

VITI

ESFO

R TH

E YE

AR E

NDED

ON

JULY

15,

200

8

SCHE

DULE

28

S.N.

Ty

pes

of

Writ

ten

off

Type

and

Am

ount

Ba

sis

of

Loan

App

rovi

ng

Initi

atio

ns m

ade

Rem

arks

Lo

an

Amou

nt

of S

ecur

ity

Valu

atio

n

Auth

ority

/Des

igna

tion

for

reco

very

�.

Wor

king

Cap

ital L

oan

2,�

46,�

�7

Pers

onal

Gua

rant

ees

Prud

ent P

ract

ice

EVP

Auct

ion

Notic

e Pu

blis

hed,

Bla

ck

Liste

d Ca

se F

iled

at D

RT

2.

Proj

ect L

oan

-

-

-

-

-

- �

. Fix

ed C

apita

l Loa

n 4

2,8�

�,�6

7

Per

sona

l Gua

rant

ees

P

rude

nt P

ract

ice

E

VP

Auct

ion

Notic

e Pu

blis

hed,

Bla

ck

-

Liste

d &

Case

File

d at

DRT

4

. Pe

rson

al L

oan

-

-

-

-

-

�.

Othe

r Loa

n -

-

-

-

-

-

Tota

lLoa

n45

,402

,284

Am

t. in

NPR

STAT

EMEN

T OF

LOA

NS W

RITT

EN-O

FFFO

R TH

E YE

AR E

NDED

ON

JULY

15,

200

8

SCHE

DULE

28

(A)


Nam

e of

Pro

mot

er/

Prev

ious

Yea

r’s B

alan

ce

Curr

ent Y

ear

Reco

very

Cu

rren

t Yea

r Ba

lanc

e as

at J

uly

15, 2

008

Dire

ctor

/Chi

ef E

xecu

tive

(A) D

irect

ors

�. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

2. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

�. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

(B) C

hief

Exe

cutiv

e

�. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

2. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

�. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

(C) P

rom

oter

s

�. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

2. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

�. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

(D) E

mpl

oyee

s

�. A

nil R

atna

Tul

adha

r **

-

-

-

-

2�0

,000

2

0�,0

80

-

2. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

�. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

(E) S

hare

hold

ers

hold

ing

mor

e th

an 1

%

�. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

2. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

�. ...

..........

..........

..........

..........

..........

..........

..........

..........

. -

-

-

-

-

-

-

To

tal

-

-

-

-

2

10,0

00

209

,080

-

Prin

cipa

l In

tere

st

Prin

cipa

l In

tere

st

Addi

tion

Prin

cipa

l In

tere

st

STAT

EMEN

T OF

LOA

NS A

ND A

DVAN

CES

TO D

IREC

TORS

/ CH

IEF

EXEC

UTIV

E/ P

ROM

OTER

/ EM

PLOY

EES

AND

SHAR

EHOL

DERS

(HOL

DING

MOR

E TH

AN 1

% S

HARE

S)AS

AT

JULY

15,

200

8

The

amou

nt o

f Bill

s Pu

rcha

sed

and

Disc

ount

ed, L

oans

, Adv

ance

s an

d Ov

erdr

aft,

prov

ided

to th

e Di

rect

ors,

Chie

f Exe

cutiv

e, Pr

omot

ers,

Empl

oy-

ees,

and

Shar

ehol

ders

hol

ding

mor

e th

an �

per

cent

sha

res

and

to th

e in

divid

ual m

embe

rs o

f the

ir un

divid

ed fa

mily

OR

agai

nst t

he g

uara

ntee

of

suc

h pe

rson

OR

to th

e or

gani

zatio

ns o

r com

pani

es in

whi

ch s

uch

indi

vidua

ls a

re m

anag

ing

agen

t, is

as

follo

ws:

** L

oan

Aga

inst

Gov

ernm

ent B

ond.

SCHE

DULE

29


Amt. in NPR

Particulars Current Year Previous Year

A) CORE CAPITAL 1,310,851,552 964,559,308

�. Paid Up Capital 60�,�4�,�00 60�,�4�,�00

2. Share Premium - -

�. Non-Redeemable Preference Shares - -

4. General Reserve Fund 270,08�,7�� 7,782,4��

�. Retained Profit/Loss 22,��6,�86 �7,��,266

6. Capital Redemption Reserve - -

7. Capital Adjustment Reserve/Proposed Bonus Share �47,�28,740 �06,672,22�

8. Other Free Reserves �64,07� �64,07�

�. Bond Redemption Reserve 7�,4�2,0�6 �0,880,627

Less: Goodwill - -

Investment in excess of prescribed limit - -

Fictitious Assets - -

Investments in securities of companies with financial interest - -

Investment arising out of Underwriting Commitment (�2,072,600) (�2,072,600) B) SUPPLEMENTARY CAPITAL 324,383,665 325,564,795

�. General Loan Loss Provision �24,0��,462 ��,�6�,��0

2. Asset Revaluation Reserve - -

�. Hybrid Capital Instruments - -

4. Unsecured Subordinated Term Debt �68,�86,�0� 200,000,000

�. Exchange Fluctuation Reserve ��,�4�,6�6 �6,642,��6

6. Additional Loan Loss Provision �,44�,8�0 �2,��,8�2

7. Investment Adjustment Reserve - -

8. Provision for Loss on Investment 2,7�8,4�6 2,7�8,4�6

C) TOTAL CAPITAL FUND (A+B) 1,635,235,217 1,290,124,103

D) Minimum Capital fund required to be maintained

on the basis of Risk Weighted Assets

Capital Fund (@ ��.00 Percent for this year) �,�07,260,66� �,�24,88�,��7

Core Capital (@ �.�0 Percent for this year) 7��,6�0,��2 �62,440,66�

CapitalFundExcessby0.93% 127,974,554 165,242,765

CoreCapitalExcessby4.07% 557,221,220 402,118,639

CAPITAL ADEQUACYAS AT JULY 15, 2008

SCHEDULE 30


On Balance Sheet Assets R.W. % Amount R.W. Assets R.W. % Amount R.W. Assets

Cash in Hand 0 2��,042,�72 - 0 ��6,747,�4� -

Gold (Tradable) 0 - - 0 - -

Balance with Nepal Rastra Bank 0 88�,4��,84� - 0 606,04�,072 -

Investment in Government Bonds 0 2,��2,04�,2�� - 0 2,��,22�,�� -

Investment in NRB Bonds 0 - - 0 - -

Loan against own F.D. Receipt (secured) 0 2�4,6�2,6�0 - 0 ��7,��8,7�7 -

Loan against Government Bonds (Secured) 0 ��,8�6,�26 - 0 �27,276,468 -

Accrued Interest on Government Bonds 0 �2,��0,687 - 0 �,2�8,�0� -

Balance with domestic Licensed Banks & Financial Institutions 20 48,44�,�28 �,688,666 20 8�,6�6,��2 �7,�27,278

Loan against other Banks F.D. receipt (secured) 20 888,8�4,8�6 �77,762,�7� 20 786,42�,084 ��7,284,2�7

Balance with Foreign Banks 20 �64,�22,200 �2,�84,440 20 2�2,0�4,��6 42,406,867

Money at Call 20 2��,278,628 ��,8��,726 20 72,67�,8�6 �4,��,�67

Loan against Guarantee of International Rated Banks 20 �2,42�,000 6,48�,000 20 267,�60,000 ��,��2,000

Investments on International Rated Banks 20 6�7,�8�,07� �27,��7,8�4 20 �,048,2��,�� 20�,6�8,7�2

Investments on Share, Debenture & Bonds �00 2�,�62,000 2�,�62,000 �00 4�,�0�,�00 4�,�0�,�00

Other Investments �00 - - �00 - -

Loan, Advances & Bills Purchase/Discount �00 8,�22,�7�,04� 8,�22,�7�,04� �00 ��,�68,�2�,��4 ��,�68,�2�,��4

Fixed Assets �00 �20,846,�� 20,846,�� 00 �87,274,�� 87,274,��

Other Assets �00 24�,884,620 24�,884,620 �00 ��0,0�8,440 ��0,0�8,440

“Net Other Interest Receivable (Gross Int. Receivable - Interest

receivable on Govt. Bonds - Interest Suspense)” �00 7,4��,0�0 7,4��,0�0 �00 �4,�07,727 �4,�07,727

Sub-Total(A) 14,867,631,598 9,324,393,732 17,988,512,977 12,219,960,195

Off-Balance Sheet Items

Bills for Collection 0 2�,�68,�8� - 0 4�,��,2�7 -

Forward Exchange Contract �0 �4,��6,��6 �,4��,6�4 �0 86,46�,02� 8,646,�0�

L/C (Below 6 months maturity) 20 �,2�0,48�,4�0 246,0�7,086 20 �,��,8�6,077 267,�7�,2��

Guarantee against International Bank Guarantee 20 2�,060,644 4,6�2,�2� 20 26,��2,�06 �,270,46�

L/C (Over 6 months maturity) �0 26,�47,�6� ��,27�,68� �0 44,�80,8�6 22,4�0,448

Bid Bonds �0 4�,�02,080 2�,��,040 �0 40,�28,�64 20,264,�82

Performance Bond �0 ��0,2�2,�40 �6�,�26,�70 �0 607,688,244 �0�,844,�22

Advance Payment Guarantee �00 ��,�40,4�� ,�40,4�� 00 �4,�68,040 �4,�68,040

Financial Guarantee �00 246,�24,074 246,�24,074 �00 �40,4�6,67� �40,4�6,67�

Other Guarantee �00 - - �00 - -

Irrevocable Loan Commitment �00 - - �00 - -

Contingent Liability for Tax �00 - - �00 - -

Other Contingent Liability �00 87,46�,��7 87,46�,��7 �00 4�8,��0,22� 4�8,��0,22�

Sub-Total(B) 2,142,879,500 901,800,244 3,043,333,069 1,482,409,471

Total(A+B) 17,010,511,098 10,226,193,976 21,031,846,046 13,702,369,666

Amt. in NPR

Previous Year Current Year

Statement of Risk Weighted AssetsAS AT JULY 15, 2008

SCHEDULE 30(A)


Particulars Indicators FY 01/02 FY 02/03 FY 03/04 FY 04/05 FY 05/06 FY 06/07 FY 07/08

�. Percent of Net Profit/Gross Income Percent �.2�% 22.84% �0.0�% 27.��% ��.��% �8.7�% 4�.8�% 2. Earning Per Share NPR 2.00 �7.72 27.�0 �0.�0 4�.67 4�.�0 ��.�4 �. Market Value Per Share NPR 2�4.00 ��8.00 2��.00 4�0.00 8�0.00 �,�7�.00 2,��0.00 4. Price Earning Ratio Ratio �26.�6 ��.�8 7.20 �4.2� ��.46 ��.6� ��.2� �. Dividend (including bonus) on Share Capital Percent �0.00% �.00% �0.00% ��.00% 48.00% 20.00% 42.��% 6. Capital Adjustment Reserve Percent - �0.00% �0.00% �0.00% �0.00% �0.00% -

7. Cash Dividend on Share Capital Percent �0.00% �.00% �0.00% ��.00% �8.00% 20.00% 2.��% 8. Interest Income/ Loan and Advances Percent �0.26% �0.�4% �0.04% �0.27% �.8�% 8.7�% 8.�0% �. Staff Expenses/ Total Operating Expenses Percent �.26% �0.��% �.�7% �0.�8% �0.�0% ��.08% �2.64% �0. Interest Expenses/ Total Deposit & Borrowing Percent 4.�8% 4.��% �.��% 2.70% 2.74% 2.��% 2.��% ��. Exchange Gain/ Total Income Percent 8.��% �0.60% 8.82% �.�4% 8.��% 7.�8% 7.�2% �2. Staff Bonus/ Total Staff Expenses Percent �.��% 26.26% 42.��% 42.�7% �0.��% �4.�8% �8.27% ��. Net Profit/ Loan and Advances Percent 0.20% �.8�% 2.26% 2.�6% 2.7�% 2.7�% 2.�0% �4. Net Profit/ Total Assets Ratio 0.��% �.�0% �.�4% �.42% �.6�% �.80% 2.04% ��. Total Credit/ Deposit Percent 8�.44% 78.6�% 77.6�% 68.87% 7�.42% 78.2�% 80.��% �6. Total Operating Expenses/ Total Assets Percent 8.�2% 6.72% �.48% �.�6% 4.��% 4.�2% 4.0�% �7. Adequacy of Capital Fund on Risk Weighted Assets (a)CoreCapital Percent 10.08% 10.44% 10.14% 10.02% 10.71% 9.43% 9.57%(b)SupplementaryCapital Percent 4.34% 1.61% 1.02% 1.00% 3.81% 3.18% 2.37%(c)TotalCapitalFund(a+b) Percent 14.42% 12.05% 11.16% 11.02% 14.52% 12.62% 11.93% �8. Liquidity (CRR) Percent �.26% �.8�% 7.��% 7.�6% 7.64% 8.02% 7.�7% ��. Non-performing credit/ Total Credit Ratio 8.��% 8.67% 6.66% 4.��% 2.72% 2.��% �.86% 20. Weighted Average Interest Rate Spread Percent �.80% �.��% �.4�% �.��% �.�7% 4.04% 4.��% 2�. Book Net-worth per share NPR �7�.8� ��2.�2 2�8.�8 2��.60 2�0.67 �64.68 222.�� 22. Total Shares No. 4,6��,80� 4,6��,80� 4,6��,80� 4,6��,80� 4,6��,80� 6,0��,4�� 6,0��,4�� 2�. Total Staff No. ��4 �8� �67 �7� �77 �7� ��0

PRINCIPAL INDICATORS

SCHEDULE 31


Ratios Units Definition

�. Percent of Net Profit / Gross Income Percent Net Profit After Tax / Total Operating Income 2. Earning Per Share NPR Net Profit After Tax / No. of Shares �. Market Value Per Share NPR Traded Price at Nepal Stock Exchange Ltd at Year end 4. Price Earning Ratio Ratio Market Value Per Share / Earning Per Share �. Dividend (including bonus) on Share Capital Percent Proposed Dividend (Cash + Bonus) / Paid up Share Capital 6. Capital Adjustment Reserve Percent Amount Transferred to Capital Adjustment Reserve / Paid Up Share Capital 7. Cash Dividend on Share Capital Percent Proposed Cash Dividend / Paid up Share Capital 8. Interest Income / Loan and Advances Percent Total Interest Income / Loans, Advance & Bills Purchase (Net) �. Staff Expenses / Total Operating Expenses Percent Total Staff Expenses / Total Operating Expenses �0. Interest Expenses / Total Deposit & Borrowing Percent Interest Expenses / Total Deposit & Borrowing ��. Exchange Gain / Total Income Percent Total Exchange Income / Total Income �2. Staff Bonus / Total Staff Expenses Percent Provision for Staff Bonus / Total Staff Expenses ��. Net Profit / Loan and Advances Percent Net Profit / Loans, Advances & Bills Purchase (Net) �4. Net Profit / Total Assets Ratio Net Profit After Tax / Total Assets ��. Total Credit / Deposit Percent Total Loans, Advances & Bills Purchase / Total Deposit �6. Total Operating Expenses / Total Assets Percent Total Operating Expenses / Total Assets �7. Total Capital Fund Percent (Core+Supplementary Capital) / Total Risk Weighted Assets �8. Liquidity (CRR) Percent Average Cash at vault & NRB Balance / Average Deposit ��. Non-performing credit / Total Credit Ratio Total Non-performing Loan / Total Loans, Advances & Bills Purchase 20. Weighted Average Interest Rate Spread Percent Weighted Average Yield - Weighted Average Cost 2�. Book Net-worth per share NPR Share Holder’s Equity / No of Share

Principal Indicator Definition


SIGNIFICANT ACCOUNTING POLICIES

1. General InformationBank of Kathmandu Limited (referred to as ‘BOK or ‘the Bank’ hereinafter) is a limited liability company domiciled in Nepal. Its registered office is at Kamalpokhari, Kathmandu, Nepal. The Bank is listed with Nepal Stock Exchange Ltd. and provides full commercial banking services as licensed by Nepal Rastra Bank (NRB).

The accompanied financial statements have been approved for publication by the Board of Directors of the Bank in its meeting held on September 17, 2008.

2. Basis of Preparation

The financial statements are presented in Nepalese rupees (NPR) and are prepared on historical cost convention basis by applying accrual basis of accounting except as otherwise stated and prepared in accordance with the Nepal Accounting Standards (NAS), Generally Accepted Accounting Principles (GAAP), Bank & Financial Institutions Act, 2063 (BAFIA), directives issued by Nepal Rastra Bank (NRB) and the Company Act, 2063.

3. Fixed Assets and Depreciation

Fixed assets are stated at cost less accumulated depreciation. Cost includes cost of acquisition including incidental expenses related to acquisition. Depreciation on fixed assets is charged to Profit & Loss Account on diminishing value method except in case of leasehold improvements which are depreciated on straight line method so as to amortize the cost of improvements over the period of the respective lease. The rates of depreciation adopted, which is in line with the rates prescribed by the Income Tax Act, 2058, are as follows:

Nature of Assets Depreciation Rate %

Building �

Vehicles 20

Office Equipment 2�

Furniture & Fixtures 2�

Assets costing up to NPR 10,000 are charged directly to Profit & Loss Account.

4. Software Expenses

Expenses for software application incurred by the Bank are capitalized and are amortized over a period of five years from the date of acquisition. 5. Investments

Investment in Treasury Bills and Development Bonds, which the Bank intends to hold till maturity, are carried at cost; or at amortized cost, if purchased at a premium over the face value.

Investment in shares, debenture and bonds are valued at cost / amortized cost (for purchased at discount over the face value) or market value, whichever is lower.

6. Loans and Advances including Bills Purchased and Provision for Loan Loss

Loans and Advances including Bills Purchased are stated at net of provision made for loan loss.All loans, advances including bills purchased are disbursed to the customers as per the Bank’s policy. The outstanding loans, advances and bills purchased are classified into good, sub-standard, doubtful and bad in accordance with the directives issued by Nepal Rastra Bank and adequate provision as prescribed by the said directives has been made for Loan Loss.

7. Loan Write offs

The Bank has “Loan Write off By-Laws, 2062” that provides guidelines for effective and transparent process for writing off non-performing assets. Specific non-performing asset that meets the write off guidelines are written off after the approval of the Board of Directors without prejudice to the Bank’s right of recovery.

8. Staff Loans and Advances

Loans and advances that are provided to the staff in accordance with the Bank’s policy are presented under Other Assets.

9. Non Banking Assets

Collateral securities acquired by the Bank during the process of recovery of loans are transferred to Non Banking Assets. Non Banking Assets are valued at lower of the principal outstanding or distress value of the assets acquired and is stated at net of provision made for such assets.Provision for Non Banking Assets is made in accordance with the directives issued by Nepal Rastra Bank.

SCHEDULE 32


10. Income Taxes

Provision for current tax is made with reference to the profit of the financial year based on the provision of the Income Tax Act, 2058.Deferred Tax is recognized and provided for timing differences between taxable income and accounting income. Deferred tax assets are not recognized unless there is virtual/reasonable certainty that there will be sufficient future taxable income available to realize such assets.

11. Foreign Exchange Transaction

Foreign currency assets and liabilities are translated at the buying rates as on the Balance Sheet date.Gain or loss realized on the foreign exchange transactions is recognized on the date of transaction and included under Exchange Gain/(Loss) as Trading Gain/(Loss).

Gains or loss arising due to fluctuation in exchange rates of different foreign currencies is accounted for and shown as Revaluation Gain/(Loss). 25% of such revaluation gain is transferred to Exchange Fluctuation Reserve through Profit and Loss Appropriation Account as per the directives issued by Nepal Rastra Bank.

12. Interest Income

Interest income on loans and advances are recognized on cash basis as prescribed by NRB Directives, which however is not in accordance with the NAS that prescribes recognition of income on accrual basis.Interest income on investment is recognized on accrual basis.

13. Commission Income

Commission earned on services rendered for a period covering more than one financial year are recognized on accrual basis and proportioned over the period of transaction.

14. Interest Expenses

Interest on interest bearing deposit and borrowings is accounted for on accrual basis.

15. Dividend Income

Dividend on equity shares are recognized on cash basis at net of taxes.

16. Retirement Benefits

Periodic contributions for provident fund are charged to Profit & Loss Account and are contributed to an approved fund. Provision for gratuity for eligible staff is made on accrual basis and is funded to the approved fund, independent of the management of the Bank.

17. Staff Bonus

Provision for staff bonus is made as per the Bonus Act, 2030.

18. Contingent Liabilities

All letter of credit, bank guarantee and forward exchange contract liabilities have been shown in full amount as contingent liabilities in accordance with the directives issued by Nepal Rastra Bank.

Besides above, all known liabilities wherever material are provided for and liabilities, which are material and whose future outcome cannot be ascertained with reasonable certainty, are treated as contingent and disclosed under contingent liabilities.

19. Dividend and Proposed Bonus Shares

Dividend and proposed bonus shares are provided as proposed by the Board of Directors pending approval by NRB and Annual General Meeting.


b. Explanation of the relationship between tax expense and accounting profit

Current Year

Accounting Profit �27,8�8,�77 Tax at the applicable rate of ��.�0% �66,288,�78 Tax effect of expenses/income that are not deductible / included in determining taxable profit

Donation 82,88�

Expenses Written Off 77,67�

Dividend Income (46,6�8) TotalTaxExpenses(includesdeferredtax) 166,402,098

8. Related Parties

Key Management PersonnelKey Management Personnel of the Banks include Managing Director and members of the Board of Directors of the Bank, as follows:Mr. Sanjay Bahadur Shah - ChairmanMr. Sitaram Thapaliya - DirectorMrs. Rita Malla - DirectorMr. Sudarsan Raj Poudyal - DirectorMr. Santa Bar Singh Thapa - DirectorMr. Balram Neupane - Director; Representative of National Investment Co. Pvt. Ltd.Mr. Bishnu Prasad Banjade - Director; Representative of Nepal Remittance Pvt. Ltd.Mr. Radhesh Pant - Managing Director

• Compensation to Key Management Personnel of the Bank Short term employee benefits (including bonus) paid to the Managing

Director amount to NPR 8,594,917 (Previous Year NPR 7,876,608) In addition to the above, a company vehicle and other amenities etc.

have been provided to the Managing Director as per the terms of his appointment.

• Transaction with Key Management Personnel of the Bank The following provides transactions between the Bank and Key

Management Personnel of the Bank during the year.

Nature of Transaction Current Year

Meeting Fees Paid 2,�0�,000

Allowance and other fees 6�6,000

Amt. in NPR

Amt. in NPR

9. Contingent LiabilityBeneficiaries of the bank guarantees issued by the Bank have claimed NPR 25,886,575 (Previous Year NPR 21,676,575) which the Bank has not accepted as liability. There is a legal proceeding for the said claims with appropriate authority and the bank would provide and honour the claim on final disposal of the legal proceeding.

NOTES TO ACCOUNTS

1. Dividend and Proposed Bonus SharesThe Board of Directors has proposed cash dividend of 2.11% and bonus share of 40% per share.

2. Staff housing Fund

Since the Bank has been extending housing loan to the employees under the “Bank of Kathmandu Ltd. Employee By-laws”, provision for staff housing as required by the Labour Act has not been made.

3. General Reserve

As required by the BAFIA, 20% of the current year’s net profit of NPR 72,299,376 has been transferred to General Reserve through Profit and Loss Appropriation Account.

4. Exchange Fluctuation Reserve

As required by NRB directive, 25% of Revaluation Gain of NPR 2,506,700 has been transferred to Exchange Fluctuation Reserve through Profit and Loss Appropriation Account.

5. Bond Redemption Reserve

NPR 28,571,429 has been appropriated through Profit & Loss Account to Bond Redemption Reserve on actual period basis. The balance of the reserve as on July 15, 2008 (Ashad 31, 2065) is NPR 79,452,056.

6. Depreciation and Amortization of Computer Software

Excess depreciation on fixed assets including leasehold improvements and amortization of computer software of NPR 565,185 and NPR 1,236,130 respectively that were charged during the previous financial years has been corrected in the current year by adjusting the depreciation and amortization charge of the current year.

7. Deferred Tax

a. Component of Deferred Tax AssetsThe component of Deferred Tax as on July 15, 2008 (Ashad 31, 2065) is as follows:

Current Year Previous Year

Deferred Tax Asset

On fiscal allowance of fixed assets 4,728,6�� 4,278,�28

On other temporary differences 2,700,768 7,0�7,�84

Deferred Tax Asset 7,42�,�8� ��,2�6,��2

This year being the first year of adoption of Nepal Accounting Standard 09 – Income Taxes issued by the Institute of Chartered Accountants of Nepal,

NPR 11,296,112 representing deferred tax asset up to previous year end-ing on July 16, 2007 (Ashad 32, 2064) has been adjusted to the opening

balance of retained earnings.

Amt. in NPR

SCHEDULE 33


Deposit and Interest Expenses Previous Year Type of Account Current Year Average Deposit Interest Expenses Average Deposit Interest Expenses �,8�0,��6,847 - Current 2,0�7,24�,046 - �,072,4��,670 �2�,06�,�7� Saving 6,220,068,67� �4�,0�0,��6 �,��6,�0�,�47 6�,77�,746 Call 2,��,026,�47 ��,8��,7�4 2,6�4,0�7,��2 �2�,�67,788 Fixed �,�6�,�7�,40� �47,�72,6�6 ��,�72,7�7,2�6 �20,002,70� Total ��,�74,�0�,27� �87,��4,�46

Average Int. Rate 2.77% Average Int. Rate 2.78%

13. Weighted Average Interest Rate SpreadAmt. in NPR

Loans & Investment and Interest Income Previous Year Type of Account Current YearAverage Loan & Interest Income Average Loan & Interest Income Investment Investment 8,�64,��0,040 64�,6��,�� Loans ��,476,87�,�00 887,2�8,870 �,66�,�66,7�� 7�,��2,6�2 Investments �,02�,472,�� 46,8��,004 �2,02�,7�6,7�� 8��,00�,�47 Total �4,�02,��,6�� ,0�4,��7,874 Average Int. Rate 6.8�% Average Int. Rate 7.��% 4.04% Spread 4.��%

10. Reconciliation Status

Amt. in NPR

Transaction Up to 1 year 1 to 3 years Above 3 years Total

Branch Account - - - -

Agency Account �74,88�,��8 (�,66�,0�8) - �7�,228,�20

(Net)

Differences of the transactions pending reconciliation has been identified and is being reconciled.

11. Statement of disbursement, recovery of loans and advances and principal and interest written off

Amt. in NPR

Opening Disbursement Recovery Written off Closing Balance Balance

�,6�4,�0�,��4 ��,�8�,��,�2� 28,482,�0�,��0 4�,402,284 �2,747,72�,60�

In addition to the principal written off above, interest of NPR 4,330,404 has also been written off.

12. Summary of Changes in Deposit Liability

Amt. in NPR

Particulars Previous Year Current Year Changes

Government of Nepal 2�6,8��,70� ��8,607,407 6�,77�,704

Commercial Banks 66,472,40� 202,08�,��4 ��,608,7��

Financial Institutions 208,�0�,�44 �2�,�44,6�4 7�2,24�,470

Other Organizations �,��,68�,0�� 7,0�2,��,47� �,4�2,478,�76

Individuals �,7�7,�67,�88 6,878,��7,047 �,08�,62�,0��

Others 2�0,628,206 �08,��6,�7� �7,�67,�6�

Guarantees Margins ��,7��,0�7 77,��2,�2� 2�,��,428

LC Margins ��,247,6�6 74,��,402 (�8,248,2�4)

TotalDeposits 12,388,927,294 15,833,737,799 3,444,810,505


14. Classification of Assets and Liabilities based on Maturity

Particulars Up to 90 Days 91 to 180 Days 181 to 270 Days 271 to 365 Days Above 1 Year Total

Assets

Cash Balance ��6,747,�4� - - - - ��6,747,�4�

Bank Balance �0�,7��,800 - - - - �0�,7��,800

Investment in 772,84�,�8� - - - 206,700,000 �7�,�4�,�8�Foreign Banks

Money at Call 72,67�,8�6 - - - - 72,67�,8�6

Government Bonds �72,7�6,�� - - �,�08,�8�,0�2 8�2,0�7,748 2,��,22�,��

Placements in FI’s - - - - - -

NRB Bonds - - - - - -

Corporate Bonds - - - - 8�,7�4,�78 8�,7�4,�78& Debentures

Inter bank lending - - - - - -

Loans & advances �,�70,�6�,240 �,�28,7�4,2�� 0�,480,6�2 ��,��4,828 4,6�0,228,60� �2,747,72�,60�

Total Financial Assets 8,028,��0,�� ,�28,7�4,2�� 0�,480,6�2 �,62�,�2�,860 �,7�4,700,�� 7,4��,�70,0�6 Liabilities

Borrowings �00,000,000 - - - - �00,000,000

Current Deposits �,4�6,�82,�06 - - - 6��,��6,26� 2,0�2,��8,�7�

Saving Deposits 4,�00,��,2�� - - - �,6��,��6,440 6,��6,�0�,67�

Fixed Deposits �,270,�48,477 2�4,047,26� ��,�24,�28 804,0��,��7 840,2��,�47 �,70�,�7�,��2

Call Deposits 2,2�7,80�,7�7 - - - �80,��4,446 �,��8,��6,�6�

Other Deposits 24�,��8,0�0 - - - - 24�,��8,0�0

Bonds - - - - 200,000,000 200,000,000

Total Financial �0,�6�,24�,�8� 2�4,047,26� ��,�24,�28 804,0��,��7 4,�72,482,702 �6,��,7�7,7��Liabilities

Net Financial Assets (2,�40,2��,2��) �,2�4,666,�72 (�0,44�,6��) 8��,48�,�4� �,�82,2�8,2�� ,�0�,6�2,2�7

Cumulative Net (2,�40,2��,2��) (84�,626,28�) (8�6,06�,��8) (76,�8�,�7�) �,�0�,6�2,2�7 Financial Assets

Amt. in NPR

15. Change in Accounting Policy

From the current financial year, the Bank has adopted NAS 09 – Income taxes and recognized deferred tax asset. Deferred tax asset up to the previous year of NPR 11,296,112 has been adjusted to the opening retained earning which has further been adjusted by charge to Profit & Loss Account of NPR 3,866,729 in the current year. Due to change in the accounting policy to recognize deferred tax, profit for the year has decreased by NPR 3,866,729 and retained earnings as at the balance sheet date has increase by NPR 7,429,383.


Opening Balance Taken over during the year Sold during the year Closing Balance 2�,�4�,�02 60�,�70 �8,��4,000 �,��,272

Amt. in NPR

Particulars Total Exposure Maximum concentration to a single customer Percentage

Loans & Advances �2,747,72�,60� 476,6��,�� .74%

Deposits ��,8��,7�7,7�� ,�78,8��,0�7 8.7�%

Off Balance Sheet Items �,04�,��,06� 267,22�,8�8 8.76%

16. Summary of concentration of exposure

No balance sheet and off balance sheet transaction have been concentrated to a single person, firm, organization or to a particular sector. Detail of highest exposure to a single person or organization is as follows:

Amt. in NPR

17. Details of Non Banking Assets

Opening Balance Additions during the year Amortization during the year Closing Balance 8,��8,�48 ��,2�6,08� �,74�,488 24,428,�4�

Amt. in NPR

18. Details of Software Application

19. The Bank has taken over the shares of himalayan Distillery Limited of NPR 13,414,000 under underwriting commitment. The Bank has provided 10% of the cost of the shares and remaining 90% has been deducted while calculating core capital.

20. The Bank has not pledged any of its assets for any loans or for issuing Bond.

21. The Bank has forfeited 4,505 number of shares and the same has not been issued.

22. Previous year’s figures have been regrouped or rearranged, wherever necessary in order to facilitate comparison. All figures are rounded off to the nearest rupee.


2. Tier 2 Capital and Breakdown of its Components

SN Particulars Amount

B Supplementary Capital (Tier 2) ��2,�7�,�� Loan Loss Provision on Pass Loan �24,0��,462 2 Unsecured Subordinated Term Debt 200,000,000 � Less: discounted for lesser tenure (��,0��,6��) 4 Exchange Fluctuation Reserve ��,�4�,6�6

Amt. in NPR

3. Detail information about the Subordinated Term Debts with information on the outstanding amount, maturity, amount raised during the year and amount eligible to be reckoned as capital funds:

Bond floated as : Bank of Kathmandu Bond 206� (BOK Bond)

Outstanding amount : NPR 200,000,000

Amount raised during the year : NIL

Maturity Date : Ashwin �8, 206� (October 04, 20�2)

Amount to be reckoned as capital : NPR �68,�86,�0� **

** The eligible bond amount allotted for capital has been calculated on pro rata basis. The bank places NPR 28,571,429 annually on BOK Bond redemption reserve.


� FromCoreCapital Investment arising out of Underwriting Commitment �2,072,600 2 FromSupplementaryCapital Discounted for lesser tenure on unsecured subordinated ��,0��,6�� term debt TOTAL 43,086,299

4. Total deductions from Capital Amt. in NPR

Disclosures under Basel II - Asadh 2065A. Capital Structure & Capital Adequacy as per Basel II1. Tier 1 Capital and Breakdown of its Components :


A Core Capital (Tier �) �,��0,8��,��2

� Paid Up Capital 60�,�4�,�00

2 General Reserve Fund 270,08�,7��

� Cumulative Profit / Loss 20�,0�8,�76

4 Capital Adjustment Reserve �66,�86,��0

� Other Free Reserve �64,07�

6 Bond Redemption Reserve 7�,4�2,0�6

7 Less: Investment arising out of Underwriting Commitment (�2,072,600)

Amt. in NPR



� Core Capital (Tier �) �,��0,8��,��2

2 Supplementary Capital (Tier 2) ��2,�7�,�� TOTAL 1,623,026,951

5. Total Qualifying Capital Amt. in NPR

6. Capital Adequacy Ratio: 10.61%

7. Summary of the bank’s internal approach to assess the adequacy of its capital to support current & future activities

• Preparation of annual budget for risk weighted assets vis-à-vis capital fund• Monitoring of risk weighted assets and capital fund at the periodic interval• Preparing prospective drawdown and repayment plan of loans and advances • Revision of asset deployment strategy as per the requirement• Reporting of capital adequacy ratios on a periodic basis to Nepal Rastra Bank (NRB)

The bank prepares annual budget plan for risk weighted assets and closely monitors the actual against the budget. Prospective drawdown and repayments plans of loans and advances are watched to track the movement in the portfolio. Furthermore, bank keeps a close watch to changing business environment for strategy planning and revision in order to mitigate anticipated adverse impact on its risk assets portfolio. The bank computes capital adequacy ratios on a periodic basis to ensure sufficient coverage of its risk assets by the qualifying capital fund.

Apart from above, the bank also prepares long term capital plans to support its future activities. The capital plan is assessed to ascertain that the financial result attained is in line with the capital plan devised. Based on the actual figures, if the bank feels that the figures could deviate significantly, the bank revises its long term plan.

The bank also constantly monitors its Credit Deposit ratio in order to assess sources of funds and deployment of funds.

8. Summary of terms, conditions and main features of all capital instruments, especially in case of subordinated term debts including hybrid capital instruments

The bank has issued “Bank of Kathmandu Bond, 2069” (BOK Bond) amounting to NPR 200 million as Subordinated Term Debt in Ashwin 2062. Bank has not pledged any securities while issuing BOK bond. The bond has the following features:

• Bond Validity Period : 7 year

• Bond Maturity Date : Ashwin 18, 2069 (October 04, 2012)

• Coupon Interest Rate : 6% p.a.

• Interest Payment Period : Bi-annually (in every six months of Nepali Calendar)

• Interest Payment Timing : Interest is paid on the 1st day of Magh and Shrawan.

• BOK bond can be pledged with other banks and financial institutions to avail loan facility.

• BOK bond is listed with Nepal Stock Exchange Ltd.

• BOK Bond holders will have rights of claim only after the depositors in case of liquidation.

B. Risk Exposures1. Risk Weighted Exposures for Credit Risk, Market Risk & Operational Risks

RISK WEIGHTED EXPOSURES Amount

a Risk Weighted Exposure for Credit Risk �4,��8,4��,264 b Risk Weighted Exposure for Operational Risk 884,862,�� c Risk Weighted Exposure for Market Risk 87,��,004 TotalRiskWeightedExposures(a+b+c) 15,290,608,779

Amt. in NPR



� Claims on government & central bank - 2 Claims on other official entities - � Claims on banks �47,760,6�� 4 Claims on domestic corporate and securities firms �,�6�,087,2�2 � Claims on regulatory retail portfolio �,0��,866,884 6 Claims secured by residential properties 6�4,060,88� 7 Claims secured by commercial real estate �,0��,82�,740 8 Past due claims �22,777,�� High risk claims 268,�02,272 �0 Other assets �8�,�2�,�82 �� Off balance sheet items 2,��,2�2,7�� TOTAL 14,318,431,264

2. Risk Weighted Exposures under each of 11 categories of Credit Risk Amt. in NPR


� Total Risk Weighted Exposure ��,2�0,608,77� 2 Total Core Capital Fund (Tier �) �,��0,8��,��2 � Total Capital Fund (Tier � & Tier 2) �,62�,026,�� 4 Total Core Capital to Total Risk Weighted Exposures 8.�7% � Total Capital to Total Risk Weighted Exposures �0.6�%

3. Total Risk Weighted Exposures calculation tableAmt. in NPR

SN Loan Classification Gross Amount Provision Held Net Amount � Restructured/ Rescheduled Loan 7�,��8,480 �,44�,8�0 66,�48,670 2 Substandard Loan �00,�76,762 2�,044,��0 7�,��2,�7� � Doubtful Loan ��,246,76� �,62�,�84 �,62�,�84 4 Loss Loan ��7,47�,�� 6,�27,2�� 48,�04 TOTAL 312,497,330 161,044,600 151,452,730

4. Amount of NPAs Amt. in NPR


5. NPA Ratios

Gross NPA to Gross Advances: 2.4�% Net NPA to Net Advances: �.22%

SN Non Performing Loan Opening Balance Increment during the year Reduction during the year Closing Balance � Restructured Loan �0�,��8,4�� 8,78�,44� 67,�8�,4�6 7�,��8,480 2 Sub-Standard Loan ��,86�,�42 ��7,620,2�8 �7,�06,878 �00,�76,762 � Doubtful Loan �6,�76,08� 4�,8��,�2� 67,�6�,2�6 ��,246,76� 4 Bad Loan �66,8�6,82� �8,284,87� 67,666,�78 ��7,47�,�� Total 347,294,745 224,530,532 259,327,948 312,497,330

6. Movement of Non-Performing AssetsAmt. in NPR

SN Name Principle Interest Total

� Himalayan T-Commerce Pvt. Ltd. 44,24�,222 4,2��,6�� 48,4�4,�2� 2 Easy Pharmaceuticals �,008,��0 62,7�8 �,07�,708 � Palanchowk Trading 7�,084 ��,8�8 84,�22 4 Potala Travels Nepal P. Ltd. 8�,028 �0� 8�,��7 Total 45,402,284 4,330,404 49,732,688

7. Write Off of Loans & Interest Suspense Amt. in NPR

SN Loan Loss Provision Opening Balance Increment during the year Reduction during the year Closing Balance

� Pass ��,�6�,��0 �0,87�,872 - �24,0��,462 2 Restructured �2,��,8�2 4,848,680 8,��8,682 �,44�,8�0 � Sub-Standard �,�6�,8�6 26,�0�,074 ��,826,720 2�,044,��0 4 Doubtful �8,288,042 24,��7,�6� ��,�82,6�8 �,62�,�84 � Bad �60,��7,0�7 24,784,6�� 68,2�4,482 ��6,�27,2�� Total 294,774,337 112,332,227 122,022,501 285,084,062

8. Movement in Loan Loss Provision & Interest Suspense i. Movement in Loan Loss Provision

Amt. in NPR

Particulars Opening Balance Increment during the year Reduction during the year Closing Balance

Interest Suspense �6,��0,�8� 7,422,6�8 �,�6�,864 �4,78�,�6�

ii. Movement in Interest Suspense Amt. in NPR


SN Particulars Amount in NPR

� Deposits with Banks �28,��,�27 2 Deposits with other Banks/Financial institutions 640,�87,7�0 � Govt. & NRB Securities ��2,�62,8�� 4 Guarantee of Domestic Banks 20,282,000 � Guarantee of Foreign Banks �2�,6�2,8�� TOTAL 1,423,564,787

9. Types of eligible Credit Risk Mitigants (CRM) used and the benefits availed under CRM

Amt. in NPR

C. Risk Management Functions 1. Credit Risk Management (CRM)

The objective of Credit Risk Management is to identify, measure, monitor, manage and report credit risk to maximize a bank’s risk-adjusted rate of return by maintaining credit risk exposure within the acceptable parameters.

Objectives/Functions of credit risk management:Identifying and Quantifying Risk: The bank currently adopts a risk rating technique where by all borrowers are judged based on the four major risks i.e. Industry Risk, Business Risk, Financial Risk and Account Performance Risk in a common form of matrix to arrive at a Credit Grade (CG). A second way out assessment is also carried out to see the Security Coverage (SC). A Risk Category is hence arrived with a combined result of CG and SC. This helps the bank to:

• Identify key credit risk areas of a particular borrower• Watch the change in credit risks of a borrower more closely• Adopt appropriate risk control mechanism• Apply logical pricing based on risk as far as possible• Build a clear, consistent reliable data on risk

Managing and Monitoring Credit Risk:Credit risk is managed with the help of Credit Control, Credit Administration and Credit Processing functions.

Credit Control functions as risk managers to ensure compliance with in-house policies and NRB directives. The bank has been following Credit Policy approved by the Board of Directors. The bank has devised credit circulars and various guidelines in the form of product papers which are in line with the Credit Policy. To ensure smooth process in approving credit proposals, appropriate authority is delegated at various levels.

Credit Administration ensures that all legal documents pertaining to the business proposals are obtained and are updated. It also conducts physical inspection of customers’ projects & stock on regular intervals. Financial statements, stock and receivables statements are also collected and analyzed periodically.

Credit Processing is responsible for credit disbursements, settlement of loans and providing credit reports to relationship managers. It furnishes reports on sector-wise distribution of loan portfolio, provides list of delinquent customers, watch list customers, large borrowers (availing funded facility of more than 10 million) and top 25 borrowers.

Reporting of Risk: List of High Risk Customers is prepared on periodic basis. The bank has a separate circular specifically designed for handling of “High Risk Customer”. In event of customer falling under High Risk category, credit workshop between Relationship Officer and Risk Officer is conducted and specific strategies and action plans are developed. Action plan milestonesare monitored within approved timeframes.

2. Market Risk Management

Market risks basically arise due to changes in interest rates, fluctuation in foreign currency exchange rates and changes in equity and commodity prices. The bank has devised and implemented policies, guidelines and procedures which help to manage market risk.

In order to minimize the risks that could arise from fluctuation in foreign exchange rates, the bank constantly monitors its foreign currency positions ensuring that the foreign currency position does not cross the limit set for each currency. Apart from above, the bank also applies various hedging techniques to manage its open currency position. Some of the techniques applied by the bank for minimizing foreign exchange risks are:

• Integrated mechanism of reporting open foreign currency position of the bank.• Proactive trading in the Spot & Forward market to hedge open posi tions.• Stop – loss mechanism in the spot market to minimize the loss from intra-day trade.• Use of simple derivatives to hedge open positions.• Maintaining buffer for absorbing the unanticipated loss arising from dealing on foreign currencies.

There is asset and liability management committee (ALCO) which manages interest rate risk in banking book with the help of asset and liability management guidelines. The committee focuses on:

• Constant monitoring of market interest rates and revising strategies accordingly.• Efficient management of investment portfolio based on the demand and supply of the available funds.• Maintaining appropriate level of liquid assets.• Monitoring and Managing Liquidity Gap of different time interval.


Investment in equity of financial institutions is not allowed and the fact that our share market predominantly operates in trading of shares of financial institutions, bank holds insignificant portfolio in equity investment.

Since the bank neither trades in commodity nor takes position in commodity, commodity price fluctuation does not have any impact on Bank.

3. Operational Risk Management

The bank has been continuously putting efforts to strengthen the internal control mechanisms to mitigate operating risks. Operating procedures for all operating functions have been formulated and implemented. Internal Audit unit carries out compliance test at regular intervals. Apart from regular internal audit and compliance checks, Branch Operations cell carries out an independent checks and reviews in all the branches to ensure that standard procedures at all levels are implemented and no breaches of compliance are in existence across the branches as the Bank is firmly committed to the highest standards of governance and compliance.

Various trainings/skill enhancement processes are conducted for the staffs at all levels in all the branches on an on-going basis to keep the operational risks at the lowest level possible by upgrading the level of skills of the employees. Besides, manpower assessment based on the dimension/scope of a branch/department/segment is carried out on a regular basis.

The Bank has formulated and implemented its own Know Your Customer (KYC) standard & Anti Money Laundering (AML) policies based on the industry practice, prevailing laws and Nepal Rastra Bank Directives.

In order to ensure the consistency and accuracy in processing a transaction and/or in getting information across the branches, most of the operational functions of the branches have been centralized at Head Office. To ensure and strengthen data & network security, comprehensive IT policies have been formulated and implemented. All aspects of access, password, network and data security have been well addressed in the policy document.


Nepal Rastra Bank has approved to publish Financial Statement of the Bank for the Fiscal Year 2064/65 along with following directives:

1. Redemption reserve in full amount of the bond should be created at end of Ashad of the preceding year of maturity of the bond.

2. Comments made by auditor be rectified and notice of such rectification should be informed to Bank Supervision Department of Nepal Rastra Bank.

Response from the Bank:

1. Bond Redemption reserve plan with plan to create full amount of reserve at the end of 2069 Ashad has already been submitted to Nepal Rastra Bank.

2. Comments made by Auditor will be rectified and the notice of such rectification will be sent to Bank Supervision Department of Nepal Rastra Bank.

NEPAL RASTRA BANK APPROVAL AND DIRECTIONS:


NOTES

Annual Report 2007-2008 (ENG)_20100603063436

Documents

Transcript of Annual Report 2007-2008 (ENG)_20100603063436