Kumari Bank Annual Report 2v4c67

Kumari Bank Limited

Annual Report 2008/09

w w w. k u m a r i b a n k . c o m

Contents

Vision

2

Mission

2

Introduction

3

Chairman’s Message

4

Board of Directors

6

CEO’s Message

8

KBL Team

10

Director’s Report

12

Food for thought! (Story)

13

Health makes wealth (Story)

15

Hit the nail on the head! (Story)

17

Fueling success! (Story)

19

The power of steel! (Story)

21

Pumped up pride! (Story)

23

Rowing to prosperity! (Story)

25

Auditor’s Report

27

Balance Sheet

28

Profit & Loss

29

Profit & Loss Appropriation

30

Statement of Changes in Equity

31

Cash Flow Statement

32

Schedules

33

Significant ing Policies

54

Notes to s

57

Disclosure as per Basel II Requirement

63

Branch Network

65

1

Vision

• We are customer oriented. Client is always our first priority. • Employees have direct input and control over work processes. • Employees are treated equitably, with respect and good faith. • We are transparent in our dealings and conduct. For this, we identify the core purpose and value of our business. Our traits hold true, when it comes to customer orientation, concern for people, value creation, superior service, innovation and fostering ability, besides team spirit, transparency in all our dealings and integrity is paramount to our business philosophy. We very well understand our customers’ need for a better and efficient services, a better working environment for our employees and sound strategies that enables us to achieve organizational goal.

Mission

• Provide world-class service to our customer at a higher satisfaction level. • Practice total quality management and embrace good governance. • Optimize our assets to achieve sound business growth. Our mission provides us a sense of direction to mobilize and integrate our resources, for excellent delivery of services and products by practicing good governance.

Mission Statement We shall be the preferred provider of financial services to our target clients by embracing good governance, service excellence and professional culture in order to achieve business growth and maximize shareholders value.

Corporate Values Our corporate values serve as the basis business principles, which set foundation to achieve sustainable development. Adoption of these values avial in protecting, sustaining and enhancing human and financial capital of the bank for the future. • Teamwork • Driven • Initiative • Adaptable to changes • Professional • Always striving to improve quality of service • Cost conscious • High ethical standard

Our Focus a. Long term win-win relationship b. Excellence in business c. Managing change d. Need centered product are the KBL product e. Innovative insights

Our Strength Our most valuable strength is the trust customers have on us.

2

Introduction

Kumari Bank Limited is a well-established commercial bank. Its promoters represent a group of highly reputed Nepalese. Managed by experienced and dynamic professionals, Kumari Bank’s competitive banking services have become a hallmark amongst its ever-increasing customer base. As we present this year’s annual report, beyond normal facts and figures, you will also witness a few of the many success stories of our esteemed customers –our partners whose dreams, courage and perseverance are reflected in this year’s annual report. Simply because, we feel that without their representation in our yearly performance, the entire exercise would seem incomplete. More importantly, it reflects the feeling of “afnopan” that our customers have for Kumari Bank.

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Chairman’s Message

Dear Shareholders, I am pleased to inform you that your bank has recorded yet another successful year in of performance amidst all challenging conditions, making it possible to distribute 10% Bonus shares this fiscal year as well. Your bank has continued its long term vision to be the most preferred bank in the country by continuing to deliver innovative products and services across the country through expansion of service distribution network, while cultivating an environment that promotes good corporate governance, proactive risk management practices and corporate social responsibilities. Furthermore, we will continue to guide and encourage the management in adopting best international practices, through the knowledge and dedication of our people, leading to superior results for our shareholders, thereby contributing to the nation’s economy. As we see the days ahead to be more challenging, with sincere gratitude, we seek the same and cooperation from all our stakeholders- customers, employees, shareholders, society and regulators. Thank You, Shiva Ratan Sarada Chairman

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5

Board of Directors

Mr. Shiva Ratan Sarada Chairman Mr. Jagdish P. Chaudhary Director Mr. Samson J.B. Rana Director Dr. S. K. Dhakal Director Mr. Amir Pratap J.B. Rana Director Mr. Santoo Shrestha Director Mr. Rasendra Bahadur Malla Director

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Mr. Samson J.B. Rana

Dr. S. K. Dhakal

Mr. Jagdish P. Chaudhary

Mr. Shiva Ratan Sarada

Mr. Amir Pratap J.B. Rana

Mr. Santoo Shrestha

Mr. Rasendra Bahadur Malla

7

CEO’s Message

Dear Shareholders, I am privileged to be leading Kumari Bank at this juncture on your behalf. As we weather the storm in these most challenging times, I am fully aware of the responsibility you have bestowed upon me and the management team to lead the bank. I can assure you that we are committed to delivering best results and taking the bank to newer heights in spite of the country’s economic challenges we are faced with. In the fiscal year that we just completed, the bank has not only enhanced revenues and business volumes but has managed to do it in conjunction with improvement in its asset quality. This is justified by our NPA levels, one of the best in banking industry. The balance sheet of the bank has increased to Rs 18.50 billion in the fiscal year 2008/09, a growth of 23% compared to previous year’s balance sheet. In the same period our total loans and advances increased to Rs 14.60 billion from Rs 11.30 billion, a growth rate of 29%. Even with such considerable growth in our loans and advances portfolio, we have succeeded in reducing our non performing loans to 0.44% in comparison to 1.32% last year. On the other hand, we have grown our deposit base by 23% which stands at Rs 15.70 billion. Likewise the operating profit after provisions for this fiscal year has increased by 35% to Rs 35.60 billion. Our Earnings Per Share (EPS) stood at Rs 22.04 at the end of this fiscal year compared with EPS of Rs 16.35 at the end of last fiscal year, an increase of 34.80%. Furthermore, we issued 10% Bonus Share. Post issuance of Right Share and the disbursement of Bonus Share proposed this year, the total paid-up capital of the Bank will stand at Rs 1.48 billion. We believe in providing access to finance to all, thus we continue to increase our branch representation all across the country. In addition, we will be leveraging technology as our major channel for service deliveries. As we move forward, you will see that the bank will consciously be looking at a typical businesses through which we are able to generate substantial revenues. Reliance on interest income alone will not be sufficient to achieve extra-ordinary results as competition further continues to stiffen in the banking sector. In summary, Nepal’s currently tumultuous economic scenario notwithstanding, we, as a bank, are well poised to deliver on our goals for this fiscal year. The success of Kumari depends on the persistence and vision of its shareholders and I and my colleagues are deeply grateful for your .

Radhesh Pant Chief Executive Officer

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9

KBL Team Senior Management

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NAME DESIGNATION Radhesh Pant Chief Executive Officer Udaya Krishna Upadhyay Chief Business Officer Geha Nath Dhungana Chief Operations Officer Suresh Kumar Karna Chief Information Officer Tika Ram Chapagain Chief Coordination Officer Binod Narasinha Shrestha Head Sanjay Poudyal Head Saroj Shrestha Head

DEPARTMENT

Ajit Bhattarai Bikas Khanal Narayan Prakash Bhuju Narendra Prasad Chhatkuli Rajesh Shrestha Ashish Bhattarai Manish Timilsina Mridul Mainali Parmeshwar Pant Shreeyukta Thapaliya Pandey Sipa Regmi Milan Kumar Maskey Nirmal Khatiwada Prajwal Pant Vishal Rauniyar

Finance & Planning Credit Risk Management Information Technology Legal & Shares and Company Secretary Card Human Resources and Central Logistics Corporate Credit Risk Approval Treasury & Correspondent Banking Corporate Communications Marketing & Services Foreign Trade Internal Audit Transaction & Retail Services Credit istration & Control Department

Head Head Head Head Head Head Head Head Head Head Head Head Head Head Head

Institutional Banking, Central Remittance and Business Development Corporate Strategy & Development Corporate & Business Banking

KBL Team Branch Managers

Sanjeeb Sainju Binam Kumar Shrestha Biswas Aryal Sudarshan Jung Rana Bishwa Mani Regmi Ambar Bhattacharya Deepak Adhikari Anuradha Choudhary Prabin Jha Roshan Chandra Gautam Niraj Rai Suresh Raj Pandey Bhupendra Khadka Manish Timilsina Badri Kedar Shrestha Biswo Poudel Kanchan Sharma Namita Shakya Akash Dahal Samjhana Rana Renu Koirala

Branch Manager Branch Manager Branch Manager Branch Manager Branch Manager Branch Manager Branch In-Charge Branch Manager Branch Manager Branch Manager Branch Manager Branch Manager Branch Manager Branch Manager Branch Manager Branch Manager Branch Manager Branch Manager Branch In-Charge Branch Manager Branch Manager

Putalisadak Biratnagar Birgunj Pokhara New Road Itahari Dry Port Kumaripati Gongabu Narayangadh Birtamod Damauli Baglung Durbar Marg Bhairahawa Butwal Baneshwor Chabahil Urlabari Budanilkantha Koteshwor

11

Director’s Report

Dear Shareholders,

On behalf of the Bank and the Board of Directors, we take pleasure in welcoming you to this 9th Annual General Meeting of the Bank and would like to present to this august gathering the Bank’s Annual Report for the F/Y 2008/09.

1. Review of Bank’s Financial Performance in Fiscal Year 2008/09 The year under review saw sustained political instability in Nepal and unfavorable economic environment both inside and outside Nepal, a highly competitive banking environment on of the ever increasing numbers of Financial Institutions in Nepal. Despite these and numerous other challenges, the Bank has been able to substantially grow in all dimensions in the year under review, which we are proud to share with vide the enclosed Financial Statements. Major highlights of the financial performance of the Bank are as follows: Financial Highlights

Rs in million F/Y 2008/09

F/Y 2007/08

Increase/ Decrease (Rs)

Growth (%)

18,538.56 15,710.93

15,026.59 12,774.28

3,511.97 2,936.65

23.37 22.99

14,795.26 1,540.83 1374.72 816.20 558.52

11,522.38 2,194.16 957.24 498.73 458.51

3,272.88 (655.33) 417.48 317.47 100.01

28.41 29.77 43.61 63.66 21.81

157.85

108.11

49.74

46.01

302.48 413.89 261.44

237.71 328.91 174.93

64.77 84.98 86.51

27.25 25.84 49.45

Particular Total Asset Deposit Liabilities Loans and Advances (Net) Investment Interest Income Interest Expenses Net Interest Income Other Operating Income Other Operating Expenses Operating Profit Net Profit

Growth in Business The financial statement of the review period shows all round growth which can be judged by the increase in the Bank’s Balance Sheet; the Bank’s Balance Sheet has increased by 23.37% to Rs 18.53 billion in the F/Y 2008/09 compared to last fiscal year. Deposit The deposit of the Bank has increased by 22.99 % to Rs 15.71 billion in the review period. Rs in million 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2.000

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-

2005/6

2006/7

2007/8

2008/9

2009/10

Food for thought! Name it and he has it. Mr. Dayananda Khadgi, the proprietor of M/S Sea Food has made it his business to bring to Kathmandu gastronomical delights. From sea food to cold cuts, frozen peas to potato chips, Sea Food is importer and wholesaler to host of five star eateries and Super markets in Kathmandu. The main meat-processing unit located at Dallu covers an area of 1.8 ropani of land. Owning the entire factory premise, Sea Food has already set up same type of meat processing unit in the name of Ram Nagar Cold Store at Narayanghat Chitwan, which is also involved in trading sea food items to cover a potential market of Narayanghat and Pokhara since past six years. Mr. Dayananda Khadgi as humble as he is states, that in Kumari Bank he found an able partner who helped him realize his vision. Banking with Kumari Bank since 2001, the bank holds him in very high esteem.

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Lending In the FY 2008/09, total Loans and Advances stood at Rs 14.79 billion marking a substantial growth of 28.41%. Although a substantial growth has been observed, the Bank continues to adopt a stringent and selective approach towards its lending portfolio, which can be gauged by the Bank’s success in maintaining Non-Performing Assets (NPA) at one of the lowest levels in the banking industry in Nepal The Non-Performing Loan of the Bank was 0.44% in the FY 2008/09. The comparative figure of Loan and Advances in the last five years is listed below. Rs in million 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2.000 -

2005/6

2006/7

2007/8

2008/9

2009/10

Investment The Bank continues to follow a policy of investing in Risk-Free Government Securities thereby maintaining adequate balance between Profitability and Liquidity. Further, to benefit from opportunities available in the local and international Money Markets, the Bank has been selectively investing in Shares, Bonds and other Financial Instruments both inside and outside Nepal. The total value of such investments is Rs 1.54 billion as at the end of F/Y 2008/09. Profit On of the capital structure being augmented by ploughing back of profit by means of Bonus Shares, the Bank has been able to post Operating Profit and Net Profit of Rs 413.90 million and Rs 261.40 million respectively. The Bank saw a growth of 43.86% in FY 2008/09 with the Gross Operating Income reaching Rs 1.53 billion. The Total Operating Expenditure of the Bank stood at Rs 1.11 billion, an increase of 51.90 % during the review period. Capital Management In the review period, Capital Management of the Bank has been quite satisfactory. After issuance of Bonus Shares, the core and supplementary capital of the Bank at the end of FY 2008/09 were Rs 1.61 billion and Rs 438.10 million, taking the Total Capital value to Rs 2.05 billion. The Bank has been able to maintain capital adequacy ratio at 11.56 % at the year end against the statutory requirement of 10% of Nepal Rastra Bank. It is believed that this will help the Bank expand its Balance Sheet and Net Profit in the coming years

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The Bank’s 8th Annual General Meeting had decided to issue Bonus Shares worth Rs 107.80 million and Right Shares worth Rs 177.90 million. The Bonus Shares thus declared have already been disbursed and the affect of which can be seen in increased capital in the Balance Sheet. However, on of numerous hindrances faced by the Bank during the period under review including frequent changes in the management and other technical issues, the Bank has not been able to issue Rights Share decided in the last Annual General Meeting. We would like to inform that the process of issuance of Right Shares is in its final stages. Post Right Share issuance and the disbursement of Bonus Share proposed this year, the total paid-up capital of the Bank will stand at Rs 1.48 billion.

Health makes wealth! Mr. Balaram Subedi the proprietor of M/S Balaram Dhanwantary Aushadhalaya, Narayangarh having sound business knowledge of medicines and medical items sought a partner that would help him grow in his field of medical and health care. Keeping pace with father’s ambitions his son Mr. Som Raj Subedi with the help of Kumari Bank has expanded the family business from a normal pharmacy to now that offers a mini pathology lab and a minor surgical facility. They also invite the Doctors from Kathmandu on monthly basis to their clinic in order to bring quality health care for people of Narayangarh.

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Contribution in Government Revenue The Bank had paid Rs 102 million to the Government of Nepal as Corporate Tax in FY 2007/08 but this year in view of the growth in Profit, the Bank has paid Rs 113.70 million as Corporate Tax. Products & Services To enable our valued customers have the competitive edge in their respective area of operations, the Bank continues to provide innovative and modern banking products and services leveraged by the latest available technological know-how. Our products and services cover the whole range of banking requirements of our customers, be it in the Retail, SMEs or Corporate areas. In addition to providing brick and mortar banking services, the Bank from its inception has been providing IT based solutions like Internet Banking, SMS Banking and globally accepted electronic VISA Debit Cards. To cater to the ever increasing Nepalese diaspora across the world, the Bank has launched its own e-remittance platform – Kumari Remit, and has received immense reception from remitters The Bank will continue to embrace the latest technological innovations in future to provide value addition to its customers Branch Expansion Acting as a conduit to the economic activities across the country and to cater to the needs of customers, the Bank, over the years, has been opening branches in strategic locations in Nepal. The period under review witnessed the Bank opening up of 3 more branches. With the Bank planning to open additional 11 branches in the running fiscal year, the Bank’s points of representation will reach 30. Additionally the Bank continues to reach out to its varied clientele base through more than 20 ATMs spread throughout the country. Corporate Governance Being in a business which requires a lot of confidence on the part of customers, the Bank is acutely aware of instilling a culture which espouses a high degree of Corporate Governance at all levels in the Bank. The Bank works in an environment which is equitable and transparent. In all its dealings with both the internal and external stakeholders, the Bank practices non-discriminatory policies taking into various salient environmental nuances. The Bank also takes a pro-active approach in Managing Risk and following both the spirit and letter of various rules and regulations. To be able to properly manage various risks inherent to its business and to stimulate a culture of ability, the Board has constituted numerous sub-committees in the Bank, which look after various facets of banking. To further strengthen the Bank and to take it to newer heights, the Board has recently appointed Mr. Radhesh Pant as the CEO. Mr. Pant comes with a distinguished banking background, having been the Managing Director of a well known Nepalese bank in addition to being the President of Nepal Bankers Association – the apex body of banks in Nepal. Risk Management

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Management of Risk forms an integral part of bank’s philosophy. Risk is managed

Hit the nail on the head! Initially a banker by profession, Mr. Robin Rijjal surprised everyone when he resigned from his lucrative job and started a hardware shop in Biratnagar in small scale. When he started his hardware shop, there was a fierce completion amongst the existing hardware shops. However with the financial from Kumari Bank and his desire to excel in business, in just five years time he is giving tough competition to the hardware shops that were in business since decades. Today his surprise move from a banker to a business man has paid off big time.

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pro-actively at all levels starting from the Board of Directors, Sub-committees and across Departmental functions. Additionally, an independent Department able solely to the CEO has also been created which looks at a varied range of Risk from a holistic point of view, to further strengthen the risk taking ability of the Bank.

2. Review of Economic Scenario A large number of developed economies were affected by the global economic recession but were able to limit the negative ramifications of the recession to a certain extent, on of the aggressive Monetary Policies adopted across the world by Central Banks in conjunction with their respective Government. Being a part of a closely knit financial world, banks even in the developing economies were affected by the slowdown in major countries. Nepal also has not been beyond the affects of this fiscal malaise. Signs of slowdown in worker Remittances have started to surface in recent months, triggering fear that it might lead to tightening of the money supply in the country which in turn may have negative consequences for the overall economy. Further, if the global financial situation does not improve, the country stands to lose out in its major source of foreign currency related to the Tourism Industry and also may have an impact on the trade cycle and International Institutional assistance. Taking into consideration the macro economic indicators, country’s GDP growth is estimated to be around 3% in the review period and is expected to grow at 3.5% next year. The GDP growth at basic price is expected to be 3.8% in the FY 2008/09. The agriculture sector that contributes 36% to the GDP grew at 2.2% as against 5.3% of the previous year. Continuous political uncertainties, deteriorating law and order, increasing bandhas and strikes, rising energy crisis gives indication that economic activities would not be accelerated in the coming year. In the FY 2008/09, total export went up by 13.50% in contrast to a nominal decline of 0.20% in the previous year. In FY 2008/09, total imports soared by 28.20% in comparison to an increase of 14% in the previous year. The sharp rise in the remittances and foreign assistance contributed positively in the overall Balance of Payment and Gross Foreign Exchange Reserves of the country at mid-July 2009 stood at Rs 280 billion, an increase of 31.70% compared to the level as at mid-July 2008. The government expenditure increased by 32% to Rs 1,980 billion in FY 2008/09 against an increase of 19.70% of the previous year. The Budget Deficit of the government rose by 16.30% to Rs 26.2 billion in FY 2008/09. Such deficit was Rs 22.50 billion in FY 2007/08. Likewise, the Annual Average Consumer Inflation increased to 13.20% in the review period compared to an increase of 7.70% in FY 2007/08. Banking industry has made new strides in the review period ing positive growth in numbers and transactions volume. With the entry of new players in the market, competition in the banking sector has intensified. The number of A Class licensed institutions has increased to 26 in FY 2008/09 from 25 in previous year. Similarly, the number of B, C and D class licensed institutions has increased to 63, 77 and 76 respectively in the FY 2008/09. Likewise, the total deposits of the commercial banks have increased to Rs 549.80 billion in the FY 2008/09 with 30.40% growth over the previous year.

3. Sub-Committees Pursuant to the existing regulations and the Bank’s own internal guidelines, the following committees and sub-committees are in existence in the Bank: Audit Committee

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In addition to carrying out responsibilities statutorily required, the Audit Committee is involved in the evaluation and recommendation of External Statutory Auditors, defining the scope

Fueling success! In the petrochemical industry, Mr. Bikash Dhamala and Mr. Subodh Koirala’s project would be termed as relatively small. But for them it was dream project of a lifetime. Kumari Bank the sole banker to Koshi Petro Chemical Pvt. Ltd., a mini refinery which manufacturers Diesel financed the project. It manufactures diesel from low viscosity furnace oil/crude oil imported from third country especially Dubai. Today, this is only the industry in Nepal which currently manufactures of 60KL (60,000 liters) of diesel per day. The total production of the unit hardly fulfills 10% of the total demand of Diesel of Sunsari Morang Corridor. With tremendous scope for expansion Koshi Petro Chemical is in process of expanding its production capacity to 120 KL per day.

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and responsibilities of the Internal Audit Department, reviewing the findings in the reports generated by Internal, Statutory and NRB Audit teams and ensuring the Management complies with all the issues highlighted in the reports. The Bank’s Internal Audit Department is directly reportable to the Audit Committee for all its activities. At present, three nonExecutive Directors of the Bank, namely, Mr. Samson JB Rana (Convenor), Mr. Jagadish Prasad Chaudhary and Dr. Shova Kanta Dhakal are in the Committee. Human Resources Sub-Committee An organization is as good as its employees. It is through employees that organizations are differentiated. In view of this, to keep the morale of the employees high in the extreme environment, a HR Sub-committee is in existence in the Bank with three Non-Executive Directors of the Bank, namely, Dr Shova Kanta Dhakal (Convenor), Mr. Amir Pratap JB Rana and Mr. Santoo Shrestha as member The Sub-committee provides strategic guidance to the Management on issues of staff recruitment, staff development and benefits. Executive Sub-Committee To expedite decision making with regards to Credit and other banking issues, an Executive Sub-Committee is in existence in the Bank. The Sub-Committee consists of two NonExecutive Directors, Mr. Santoo Shrestha (Convenor), Mr. Rasendra Bahadur Malla and CEO of the Bank as its third member. The Sub-Committee’s scope, function, role, responsibilities and authority have been clearly spelt out and followed accordingly. Outside of the approved meeting allowances, Conveners and of the Committees and Sub-Committee have not been provided with any additional monetary or non-monetary benefits.

4. Management Level Committees For effective and efficient decision making capabilities in the Bank, various committees have been functioning under the convenorship of the CEO. These committees are responsible for both the day to day activities as well as strategic insights into the Banks functioning. Committees so constituted are, Management Committee, Assets and Liability Management Committee, Bid Committee, Loan Recovery Committee, Discipline and Performance Review Committee.

5. Human Resources The Human Resource policy of the bank is focused on hiring and retaining competent people, and investing in them because the bank strongly believes that it is the people that provide the competitive advantage required to sustain and grow in a highly competitive environment. The bank is also involved in continuously improving and realigning its resources to meet the overall goals and objectives of the bank while cultivating an environment that fosters innovative ideas and promotes good governance.

6. Bank’s Performance In The Current Fiscal Year

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As per Nepal Rasta Bank’s statistics, 26 commercial banks, 63 development banks, 77 finance companies and 76 micro-finance companies are currently in operation in the country. The number of banks and financial institutions illustrate banking and finance business is extremely competitive and challenging in the country. Despite this, the Bank has been able to post

The power of steel! Ambe Steels Pvt. Ltd. is a dream project of three individuals; Mr. Shovakar Neupane, Mr. Ramesh Kumar Agrawal and Mr. Mukunda Prasad Timilsina. It is an re-rolling plant with Thermex Cooling Technology to manufacture 81,000MT per annum TMT steel re-bars and Continuous Casting Machine (Concaster) unit with manufacturing capacity of 160 MT of steel billets per day. Company is second in the country manufacturing steel billets, which is major raw material to manufacture steel re-bars. Its factory is located at Barshauli VDC – 6 (At present Gonaha VDC) Rupendehi is spread over around 8.5 bighas of land. The project was financed under the consortium arrangement with Kumari Bank being the lead bank.

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significant progress in the first three months of current FY. The achievements of first three months are listed below. Financial Highlights of First Three Months of 2009/10 Rs in ‘000 Particular Loan & Advances Interest Income Other Income Interest Expenses Other Expenses Operating Profit

F/Y 2008/09 1,24,93,977 3,69,007 35,399 259,693 57,618 87,095

F/Y 2009/10 1,46,54,828 4,88,463 37,453 320,358 85,840 1,19,718

Growth in percentage 17.29 32.37 5.80 23.36 48.98 37.46

7. Programmes in the Current Fiscal Year Considering the directives of the Nepal Rastra Bank requiring banks to raise their Capital Base to Rs 2 billion by the F/Y 2012/13 and the five years capital plan formulated by the Bank there of, the Bank, after a sustained and thorough discussion is proposing issuance of Bonus Share @10%. We request approval of the same from the floor of the Annual General Meeting. Nepal Rastra Bank’s circular allows existing founder promoters to decrease their share ownership to 51% from the existing levels. In view of the fact that the Bank’s existing founder promoters hold 70% of the shares, a proposal for the reduction of founder promoters share ownership to 51% and convert the remaining portion into General Shares is being put to the Annual General Meeting for approval. Further, a proposal is also being put to the floor’s approval for making necessary amendments in the required clauses of the Bank’s Articles of Association and Memorandum of Association to reflect the new share ownership and composition in the Board Structure. Post AGM approval and on obtaining approval from all the required Governmental bodies, the ownership of Public and Private Shareholders will stand at 51% and 49% respectively.

8. Changes in Board of Directors As you are aware, the previous Annual General Meeting appointed Dr. Shova Kanta Dhakal and Mr. Rashendra Bahadur Malla as Directors of the Bank replacing Mr. Lalit Jung Shahi and Mr. Surendra Bahadur Khadka respectively. We would like to record our sincere words of appreciation for the effort put in by our erstwhile Directors and take this opportunity to welcome the new Directors and wish them an eventful and successful tenure as Directors of the Bank.

9. Dividend Declaration Meeting dated 18/06/2066 (October 4, 2009) of the Board of Directors decided to recommend to the shareholders, distribution of stock dividend @10% and Cash Dividend @0.56% less applicable taxes from the accumulated profit till F/Y 2008/09. This proposal has further been approved by Nepal Rastra Bank on 30/06/2066 (October 16, 2009). In view of this, Rs 125,420,472.00 has been earmarked for the same in the enclosed Annual Report. A separate special proposal on this matter has been tabled in the AGM for your approval.

10. Board of Directors responses to the Auditor’s Report

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No major observations were received from the Bank’s Auditor for the period under review. The Management has been instructed to act on the suggestions made by the Auditors on a few common comments relating to the normal banking activities of the Bank. Further, comments

Pumped up pride! Mr. Sakaldev Raut Kurmi is known as an industrious and honest person. He started his business being a petrol tanker driver with purchase of an old model petrol tanker seven year back. Today, he is the Proprietor of Rishav Oil Store; an authorized dealer of NOC located on the busy Birgunj–Kalaiya road and has completed its three years of operation. Since its inception, Kumari Bank is the sole banker to the unit. Starting with only Rs 1.5 million overdraft facility to meet working capital requirement of the firm, currently Rishav Oil Store enjoys Rs 3.5 million facility. In just a spate of three years, Mr. Sakaldev’s has been able to increase its sales turnover from Rs 34.0 million to above Rs 60.0 million covering the market of Bara and Parsa. Future is nothing but spectacular. With a plan to install another petrol pump named ‘Dilip Oil Store’ at Kalaiya-Nijgadh highway for which Mr. Sakaldev has already acquired a plot of land just 200 meters away from Kalaiya Municipality area.

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and instructions given by Nepal Rastra Bank to the Bank during the approval of the Financial Statements for the F/Y 2008/09 have been published in the enclosed Annual Report for your reference.

11. Forfeited Shares No shares were forfeited during the review period.

12. Performance of the Bank and its Subsidiary Companies Details of the Bank’s performance in the period under review has been detailed in the enclosed Financial Statements. The Bank does not have any Subsidiary Companies till date.

13. Important Information Provided by Valued Shareholder No such information was received.

14. Personal Interest of Directors and his/her Relatives on dealings with bank No such dealings were recorded.

15. Details of share Re-Purchase No such activities were recorded.

16. Details of Bank’s istrative Expenses Following are the major heads under the Bank’s istrative Expenses during F/Y 2008/09: Staff Expenses Other Operating Expenses

: Rs 115,984,919.00 : Rs 186,502,160.00

Detailed breakdown of the above can be found in Schedules 4.23 and 4.24 respectively in the enclosed Financial Statements.

17. Amount to be paid to the Bank by Directors, Managing Director, Chief Executive Officer, Promoters of the Bank and their relatives or firm, company or organized institutions Mr. Dinesh Lal Shrestha, father-in-law of Mr. Santoo Shrestha, a representative from the Promoters Group in the Board of Directors and Mr. Nirmal Pradhan, father-in-law of Mr. Rasendra Bahadur Malla, a representative from the Public Shareholders in the Board of Directors have availed Credit facilities from the Bank.

18. Remuneration, Allowance and Facilities provided to Directors, Managing Director and Chief Executive Officer: Details of allowance received by the Directors as per approved guidelines are as follows:

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Chairman

Directors

Meeting Allowance Rs 10,000.00 Monthly Business Development Allowance Rs 2,000.00 Total

Rs 8,000.00 Rs 2,000.00 Rs 1,911,422.00

Rowing to prosperity! The stories of three proud men; Mr. Sunder Bika, Mr. Tek Bahadur Bhujel and Mr. Maniram Pariyar have a very modest beginning. Engaged in a day-to-day, hand to mouth existence, the boatmen often wondered what the future held in store for them. Fortunately, their hard work and determination found an able partner in Kumari Bank. With financial assistance from Kumari Bank, each of them got their own boat through a simple short-loan procedure. Rowing their way to prosperity, within no time all three successfully repaid their loans and now are proud owners of their livelihoods. Going by the experience with Kumari Bank, Mr. Tek Bahadur Bhujel even today wonders how a bank trusted an illiterate individual from marginal society for a loan. Thankfully, the trust of Kumari Bank in three honest men stands vindicated today.

25

Considering that the current approved Travelling and Dearness Allowances of the Directors are low, the floor is requested to make adequate adjustments in the same. Annual Salary, Allowance and other facilities provided to Chief Executive Officer and Managers / Other Executives. (Rs) S.No Particulars 1. 2. 3. 4. 5. 6. 7.

8.

Salary Allowances Provident Fund Dashain Allowance Total Remuneration Bonus Vehicle, Fuel and Maintenance Allowance, Driver Facility, Personal Loan Scheme, Newspaper and Telephone facility Medical Allowance, Leave Fare Allowance, Accident Insurance, Life Insurance

C.E.O

Managers / Other Executives

2,637,436.00 684,077.00 263,743.60 303,190.00 3,888,446.00

7,242,522.00 1,816,755.00 724,252.20 827,430.00 10,610,959.20 As per the Bonus Act

As per the Contract between the Bank and the CEO

As per bank’s Personal Policies Guidelines

In the period under review, the Board of Directors approved the resignation of, Mr. Kapil Sharma – General Manager of the Bank effective June 14, 2009 and handed over all the responsibilities handled by him to Mr. Bhusan Rana – Deputy General Manager. Subsequent to the approval of Mr. Rana’s resignation from the services of the Bank on July 27, 2009, the Bank appointed Mr. Radhesh Pant as the CEO effective the same day.

19. Uncollected Cash Dividend by shareholders: No such cases recorded.

20. Others: None Acknowledgment We would like to express our sincere gratitude and appreciation to all our shareholders, customers and well wishers for the continued and cooperation bestowed upon us and would like reiterate that we are indebted for their constant invaluable benefaction. We are also thankful to external auditor Mr. Madan Krishna Sharma for his valuable advice and Nepal Rastra Bank for its relentless and guidance. Similarly, we appreciate the efforts of the staff for their relentless hard work in delivering such good results. Thanking you. For and on behalf of the Board of Directors, Shiva Ratan Sarada Chairman Dr. Shova Kanta Dhakal Director

26

CSC & Co Chartered ants

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

Auditors’ Report

To the Shareholders of Kumari Bank Limited Financial statements and management’s responsibility We have audited the accompanying financial statements of Kumari Bank Limited which comprises the balance sheet as of July 15, 2009 (Ashadh 31, 2066) and the profit and loss , statement of changes in equity and cash flow statement for the year then ended and a significant ing policies and other explanatory notes. These financial statements are the responsibility of the Bank’s management.

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

Report on the requirements of Banks and Financial Institutions Act 2063 and company Act 2063 We have obtained satisfactory information and explanations asked for, which to the best of our knowledge and belief were necessary for the purpose of our audit; the returns received from the branch offices of the bank were adequate for the purpose of the audit; the financial statements including the Balance Sheet, the Profit and Loss and the Cash flow Statement have been prepared in accordance with the methods and format specified by Nepal Rastra Bank, and they are in agreement with the books of s of the Bank; and the s and records of the Bank are properly maintained in accordance with the prevailing laws. To the best of our information and according to the explanation given to us, in the course of our audit, we observed that the bank has taken actions for protection of the interest of depositors and investors; the capital fund and risk bearing fund were adequately maintained; loans have been written off as specified; the business of the Bank was conducted satisfactorily and the Bank’s transactions were found to be within the scope of its authority. We did not come across cases where the board of directors or any director or any office bearer of the Bank has acted contrary to the provisions of law or caused loss or damage to the Bank or committed any misappropriation or violated directives of Nepal Rastra Bank.

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

Date : 20 Ashwin, 2066 (6 Oct, 2009) Place : Kathmandu

Madan Krishna Sharma Partner CSC & Co. Chartered ants

27

Kumari Bank Limited Balance Sheet End of Ashad 2066 (15 July 2009) Capital and Liabilities 1. 2. 3. 4. 5. 6. 7. 8. 9.

Schedule

Current Year (Rs)

Previous Year (Rs)

Share Capital 4.1 Reserves and Funds 4.2 Debentures & Bonds 4.3 Borrowing Outstanding 4.4 Deposit Liabilities 4.5 Bills Payable 4.6 Proposed Dividend Payable - Income Tax Liabilities - Other Liabilities 4.7 Total Capital and Liabilities

1,186,099,200 438,853,508 400,000,000 293,420,000 15,710,925,263 70,087,025 6,583,752 234,986 432,361,375 18,538,565,109

1,070,000,000 294,885,269 400,000,000 100,000,000 12,780,153,444 65,296,714 325,914,001 15,036,249,428

Schedule

Current Year (Rs)

Previous Year (Rs)

4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16

549,108,504 1,120,760,644 106,429,652 30,000,000 1,510,828,482 14,593,346,830 247,832,774 - 380,258,223 18,538,565,109

565,641,118 244,576,115 123,624,444 55,360,000 2,138,797,590 11,335,087,939 222,000,872 3,140,779 348,020,571 15,036,249,428

Assets 1. Cash Balance 2. Balance with Nepal Rastra Bank 3. Balance with Banks/Financial Institution 4. Money at Call and Short Notice 5. Investment 6. Loans, Advances and Bills Purchase 7. Fixed Assets 8. Non Banking Assets 9. Other Assets Total Assets Contingent Liabilities Declaration of Directors Capital Adequacy Table Statement of Credit Risk Applicable Credit Risk Mitigants Statement of Operational Risk Statement of Market Risk Principal Indicators Principal ing Policies Notes to s

Schedule 4.17 Schedule 4.29 Schedule 4.30 (A) Schedule 4.30 (B) Schedule 4.30 (C) Schedule 4.3 (D) Schedule 4.30 (E) Schedule 4.31 Schedule 4.32 Schedule 4.33

Details of Loan Availed by Promoters schedule 4.34 Comparative statement of audited & unaudited financial results schedule 4.35. Unaudited Financial Result schedule 4.36. As per our report of even date Radhesh Pant Chief Executive Officer

Shiva Ratan Sarada Chairman

Amir Pratap J.B. Rana Director

Santoo Shrestha Director

Geha Nath Dhungana Chief Operations Officer

Jagdish P. Chaudhary Director

Dr. Shova Kanta Dhakal Director

Rashendra B. Malla Director

Samson J.B. Rana Director

Madan K. Sharma Partner, CSC & Co., Chartered ants

Date: 6 Oct, 2009 Place: Kathmandu

28

Kumari Bank Limited Profit and Loss From 1st Shrawan 2065 to 31 Asadh 2066 (From 16 July 2008 to 15 July 2009) Particulars

Schedule

1. Interest Income 2. Interest Expenses Net Interest Income 3. Commission and Discount 4. Other Operating Income 5. Exchange Fluctuation Income Total Operating Income 6. Staff Expenses 7. Other Operating Expenses 8. Exchange Fluctuation Loss Operating Profit before Provision for Possible Losses 9. Provision for Possible Losses Operating Profit 10. Non Operating Income /(Loss) 11. Loan Loss Provision Written Back Profit from Regular Activities 12. Profit/Loss from Extra-Ordinary Activities Net profit after considering all activities 13. Provision for Staff Bonus 14. Provision for Income Tax * Current Year’s * Upto Previous year * Deferred Tax Net Profit/Loss

4.18 4.19 4.20 4.21 4.22 4.23 4.24 4.22 4.25 4.26 4.27 4.28

Current Year (Rs)

Previous Year (Rs)

1,374,722,467 816,202,890 558,519,577 79,104,277 19,746,723 59,001,781 716,372,358 115,984,919 186,502,160 - 413,885,279 57,403,005 356,482,274 1,111,653 47,021,147 404,615,074 (876,031) 403,739,043 36,703,549 105,592,905 113,669,682 - (8,076,777) 261,442,589

957,245,724 498,734,222 458,511,502 48,494,633 17,805,210 41,807,623 566,618,968 89,570,438 148,143,138 328,905,392 64,023,790 264,881,602 15,588,389 7,240,964 287,710,955 (4,531,068) 283,179,887 25,743,626 82,506,034 80,721,591 1,784,443 174,930,227

Schedule 4.18 to 4.28 and 4.32- 4.35 form integral part of Profit and Loss As per our report of even date Radhesh Pant Chief Executive Officer

Shiva Ratan Sarada Chairman

Amir Pratap J.B. Rana Director

Santoo Shrestha Director

Geha Nath Dhungana Chief Operations Officer

Jagdish P. Chaudhary Director

Dr. Shova Kanta Dhakal Director

Rashendra B. Malla Director

Samson J.B. Rana Director

Madan K. Sharma Partner, CSC & Co., Chartered ants

Date: 6 Oct, 2009 Place: Kathmandu

29

Kumari Bank Limited Profit and Loss Appropriation From 1st Shrawan 2065 to 31 Asadh 2066 (From 16 July 2008 to 15 July 2009) Particulars

Schedule

Current Year (Rs)

Previous Year (Rs)

Income 1. Accumulated Profit up to Last Year 41,357,165 2. This Year’s Profit 261,442,589 3. Exchange Fluctuation Fund 4. Capital Adjustment Fund Total 302,799,754 Expenses 1. Accumulated Loss up to Last Year 2. Current Year’s Loss 3. General Reserve Fund 52,288,518 4. Contingent Reserve 5. Institution Development Fund 6. Dividend Equalization Fund 7. Staff Related Reserves 8. Proposed Dividend 6,583,752 9. Issue of Proposed Bonus Shares 118,836,720 10. Special Reserve Fund 11. Exchange Fluctuation Fund 7,754 12. Capital Redemption Reserve Fund 95,000,000 13. Capital Adjustment Fund 14. Previous Year’s Tax Adjustment 3,063,398 15. Deferred Tax Fund 6,292,334 Total 282,072,476 16. Accumulated Profit/(Loss) 20,727,278

35,031,460 174,930,227 209,961,687

34,986,045

5,675,116 107,827,200 116,161 20,000,000 168,604,522 41,357,165 As per our report of even date

Radhesh Pant Chief Executive Officer

Shiva Ratan Sarada Chairman

Amir Pratap J.B. Rana Director

Santoo Shrestha Director

Geha Nath Dhungana Chief Operation Officer

Jagdish P. Chaudhary Director

Dr. Shova Kanta Dhakal Director

Rashendra B. Malla Director

Samson J.B. Rana Director

Madan K. Sharma Partner, CSC & Co., Chartered ants

Date: 6 Oct, 2009 Place: Kathmandu

30

Kumari Bank Limited Statement of Changes in Equity From 1st Shrawan 2065 to 31 Asadh 2066 (From 16 July 2008 to 15 July 2009) Particulars

Share Capital

Opening Balance

1,070,000,000

41,357,165

119,847,501

5,853,403

127,827,200

1,364,885,270

116,099,200

(20,629,888)

52,288,518

-

-

7,754

112,301,854

260,067,438

Net profit for the period

261,442,589











261,442,589

Transfer to General Reserve

(52,288,518)

52,288,518









-













-

Declaration of Dividend

(6,583,752)











(6,583,752)

Exchange Fluctuation Fund

(7,754)





7,754



-













8,272,000



Adjustments

Capital Adjustment Fund

Accumulated Profit/Loss

Right Share Issued Issue of Bonus Share



General Reserve Fund

8,272,000 107,827,200

Capital Reserve Fund

Share

Exchange Fluctuation Fund

-

Other Reserve & Fund

Total Amount (Rs)









(107,827,200)

-

Proposed Bonus Share

(118,836,720)









118,836,720

-

Capital Redemption Fund

(95,000,000)









95,000,000

-

Previous Year tax Adjustment

(3,063,398)











(3,063,398)

Deferred Tax Fund

(6,292,334)









6,292,334

-

Closing Balance

20,727,278

172,136,019

-

-

5,861,157

240,129,054

1,624,952,708

1,186,099,200

As per our report of even date Radhesh Pant Chief Executive Officer

Shiva Ratan Sarada Chairman

Amir Pratap J.B. Rana Director

Santoo Shrestha Director

Geha Nath Dhungana Chief Operation Officer

Jagdish P. Chaudhary Director

Dr. Shova Kanta Dhakal Director

Rashendra B. Malla Director

Samson J.B. Rana Director

Madan K. Sharma Partner, CSC & Co., Chartered ants

Date: 6 Oct, 2009 Place: Kathmandu

31

Kumari Bank Limited Cash Flow Statement From 1st Shrawan 2065 to 31 Ashad 2066 ( From 16 July 2008 to 15 July 2009)

Particulars

(A) Cash Flow from Operating Activities 1. Cash Received 1.1 Interest Income 1.2 Commission and Discount Income 1.3 Income from Foreign Exchange transaction 1.4 Recovery of loan written off 1.5 Other Income 2. Cash Payment 2.1 Interest Expenses 2.2 Staff Expenses 2.3 Office Overhead Expenses 2.4 Income Tax Paid 2.5 Other Expenses

32

Current Year (Rs)

Previous Year (Rs)

914,637,801 1,533,633,183 1,370,968,716 79,243,277 59,001,781 - 24,419,409 (1,191,574,514) (803,428,742) (152,688,468) (136,686,240) (98,771,064) -

(373,116,233) 1,080,550,334 956,854,479 48,494,633 41,807,623 33,393,599 (809,005,678) (493,513,029) (115,314,064) (113,141,483) (82,506,034) (4,531,068)

Cash Flow before changes in Working Capital 342,058,669 Increase /(Decrease) of Current Assets (2,649,937,224) 1.(Increase)/Decrease in Money at Call and Short Notice 25,360,000 2. (Increase)/Decrease in short term Investment 634,769,108 3. (Increase)/Decrease in Loans, Advances and Bills Purchase (3,273,756,619) 4. (Increase)/Decrease in Other Assets (36,309,713) Increase /(Decrease) of Current Liabilities 3,222,516,356 1. Increase/(Decrease) in Deposits 2,930,771,819 2. Increase/(Decrease) in Certificates of Deposits 3. Increase/(Decrease) in Short Term Borrowings 193,420,000 4. Increase/(Decrease) in Other Liabilities 98,324,537 (B) Cash Flow from Investment Activities (80,452,678) 1. (Increase)/Decrease in Long-term Investment (6,800,000) 2. (Increase)/Decrease in Fixed Assets (74,969,016) 3. Interest income from Long term Investment 1,316,338 4. Dividend Income - 5. Others - (C) Cash Flow from Financing Activities 8,272,000 1. Increase/(Decrease) in Long term Borrowings (Bonds,Debentures etc) - 2. Increase/(Decrease) in Share Capital 8,272,000 3. Increase/(Decrease) in Other Liabilities - 4. Increase/(Decrease) in Refinance/facilities received from NRB - (D) Income/Loss from change in exchange rate in Cash & bank balances - (E) This Year’s Cash Flow from All Activities 842,457,123 (F) Opening Balance of Cash and Bank Balances 933,841,677 (G) Closing Balance of Cash and Bank Balances 1,776,298,800

271,544,656 (2,851,731,892) 316,855,000 (442,511,675) (2,459,947,172) (266,128,045) 2,207,071,003 2,217,189,816 (112,970,000) 102,851,187 (85,155,041) (17,867,500) (67,678,786) 391,245 720,000,000 400,000,000 320,000,000 261,728,726 672,112,951 933,841,677

Schedule 4.1

Kumari Bank Limited Share Capital and Ownership End of Ashad 2066 (15 July 2009) Particulars

Current Year (Rs)

1. Share Capital 1.1 Authorized Capital a) 16,000,000 Ordinary Shares of Rs 100 each b) ………...Non-redeemable Preference Shares of Rs…....each c) …………Redeemable Preference Shares of Rs……….. each 1.2 Issued Capital a) 11,860,992 Ordinary Shares of Rs 100 each b) ………..Non-redeemable Preference Shares of Rs….... each c) …………Redeemable Preference Shares of Rs……….. each 1.3 Paid Up Capital a) 11,860,992 Ordinary Shares of Rs100 each b) ……….Non-redeemable Preference Shares of Rs……..each c) …………Redeemable Preference Shares of Rs………...each

1,600,000,000 1,600,000,000 - - 1,186,099,200 1,186,099,200 - - 1,186,099,200 1,186,099,200 - -

Previous Year (Rs) 1,600,000,000 1,600,000,000 1,080,000,000 1,080,000,000 1,070,000,000 1,070,000,000 -

Kumari Bank Limited Share Ownership End of Ashad 2066 (15 July 2009) Current Year Particulars A. Promoters 1.1 Government of Nepal 1.2 Foreign Institution 1.3 “A” Class Liscensed Institutions 1.4 Other Liscensed Institutions 1.5 Other Institutions 1.6 Personal 1.7 Others B. General Public Total

% 70 - - - - 0.12 69.88 - 30 100

Previous Year (Rs)

830,269,440 - - - - 1,425,600 828,843,840 - 355,829,760 1,186,099,200

% 70 - - - - 0.12 69.88 - 30 100

(Rs) 749,000,000 1,284,000 747,716,000 321,000,000 1,070,000,000

33

Share Capital And Ownership List of Shareholders Holding Share Capital of 0.5% or More

34

S.N.

Name

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43.

Noor Pratap J. B. Rana Laxman Shrestha Amir Pratap J. B. Rana Sabitri Gurung Gaurab Agrawal Rishi Agrawal Sanjay Lama Rajendra Prasad Shrestha Bidhya Krishna Shrestha Govinda Das Shrestha Yagya Pratap Rana Mahabir Prasad Goyel Manju Tapadiya Bhim Krishna Udas Phurba Wangdel Lama Anil Das Shrestha Santoo Shrestha Januki Kumari J. B. Rana Anupam Rathi Nirmal Pradhan Shree Niwas Sharada Shiva Shanker Agrawal Kumud Kumar Dugad Antu Shrestha CIT Atmaram Murarka Pradeep Kumar Murarka Pashupati Murarka Naresh Dugad Bikash Dugad Prava Laxmi Rana Gauri Shrestha Jagadish Prasad Chaudhary Sharmila Aryal Dev Kishan Mudanda Rita KC Vidushi Rana Jamuna Maheshwori Rathi NCM Mutual Fund Sandeep Lama Uttam Prasad Bhattarai Rakshya Pahadi Surender Bhandari

Current Year Amount % 77,220,000.00 71,280,000.00 60,112,800.00 47,520,000.00 36,872,000.00 28,512,000.00 23,760,000.00 23,760,000.00 21,780,000.00 17,820,000.00 17,208,400.00 15,681,600.00 11,989,800.00 11,880,000.00 11,880,000.00 11,880,000.00 11,880,000.00 11,880,000.00 10,692,000.00 10,689,700.00 10,454,400.00 10,406,800.00 10,131,000.00 9,266,400.00 8,910,000.00 8,316,000.00 8,316,000.00 8,316,000.00 8,316,000.00 8,316,000.00 7,920,000.00 7,160,700.00 7,128,000.00 7,128,000.00 7,128,000.00 7,084,000.00 6,890,400.00 6,544,300.00 6,028,000.00 5,940,000.00 5,940,000.00 5,940,000.00 5,940,000.00

6.51 6.01 5.07 4.01 3.11 2.40 2.00 2.00 1.84 1.50 1.45 1.32 1.01 1.00 1.00 1.00 1.00 1.00 0.90 0.90 0.88 0.88 0.85 0.78 0.75 0.70 0.70 0.70 0.70 0.70 0.67 0.60 0.60 0.60 0.60 0.60 0.58 0.55 0.51 0.50 0.50 0.50 0.50

Previous Year Amount 70,200,000.00 64,800,000.00 54,648,000.00 43,200,000.00 29,160,000.00 25,920,000.00 21,600,000.00 21,600,000.00 18,360,000.00 16,200,000.00 18,144,000.00 14,256,000.00 10,800,000.00 10,800,000.00 10,800,000.00 10,800,000.00 10,800,000.00 10,800,000.00 9,720,000.00 10,789,948.00 9,504,000.00 9,460,800.00 7,560,000.00 8,424,000.00 8,100,000.00 7,560,000.00 7,560,000.00 7,560,000.00 7,560,000.00 7,560,000.00 8,640,000.00 7,108,428.00 6,480,000.00 6,480,000.00 6,480,000.00 8,640,000.00 6,264,000.00 8,709,220.00 6,750,000.00 5,400,000.00 5,400,000.00 5,400,000.00 5,400,000.00

% 6.50 6.00 5.06 4.00 2.70 2.40 2.00 2.00 1.70 1.50 1.68 1.32 1.00 1.00 1.00 1.00 1.00 1.00 0.90 1.00 0.88 0.88 0.70 0.78 0.75 0.70 0.70 0.70 0.70 0.70 0.80 0.66 0.60 0.60 0.60 0.80 0.58 0.81 0.63 0.50 0.50 0.50 0.50

Schedule 4.2

Kumari Bank Limited Reserves and Funds End of Ashad 2066 (15 July 2009) Particulars

Current Year Rs

Previous Year Rs

172,136,019 118,836,720 - 115,000,000 - - - - - - - - - 6,292,334 20,727,278 5,861,157 438,853,508

119,847,501 107,827,200 - 20,000,000 41,357,165 5,853,403 294,885,269

1. General Reserve Fund 2. Proposed Bonus Share 3. Capital Reserve Fund 4. Capital Redemption Reserve 5. Capital Adjustment Fund 6. Other Reserve & Funds a. Contingent Reserve b. Institution Development Fund c. Dividend Equalization Fund d. Special Reserve Fund e. Assets Revaluation Fund f. Other Free Reserves g. Other Reserves h. Deferred Tax Fund 7. Accumulated Profit/Loss 8. Exchange Fluctuation Fund Total

Schedule 4.3

Kumari Bank Limited Debenture and Bond End of Ashad 2066 (15 July 2009) Particulars

Current Year (Rs)

1. 8 % “KBL Bond 2070” of Rs1,000 each Issued on June 06, 2008 and to be matured on June 08, 2013 (Outstanding balance of Redemption Reserve Rs115,000,000) 2. ……….% Bond/Debentures of Rs……..…each Issued on …………… and to be matured on ………. (Outstanding balance of Redemption Reserve Rs…….) Total (1+2)

400,000,000 - - - - - 400,000,000

Previous Year (Rs) 400,000,000 400,000,000

Schedule 4.4

Kumari Bank Limited Outstanding Loan (Borrowings) End of Ashad 2066 (15 July 2009) Particulars A. Domestic 1. Government of Nepal 2. Nepal Rastra Bank 3. Repo Obligations 4. Inter Bank and Financial institutions 5. Other Organized Institutions 6. Others Total B. Foreign 1. Banks 2. Others Total Total (A+B)

Current Year (Rs) 293,420,000 - - - 293,420,000 - - 293,420,000 - - - - 293,420,000

Previous Year (Rs) 100,000,000 100,000,000 100,000,000

35

Schedule 4.5

Kumari Bank Limited Deposit End of Ashad 2066 (15 July 2009)

36

Particulars

1. Non-Interest bearing s A. Current Deposit 1. Local Currency 1.1 Government of Nepal 1.2 “A” Class Liscensed Institutions 1.3 Other Liscensed Financial Institutions 1.4 Other Organized Institutions 1.5 Individuals 1.6 Others 2. Foreign Currency 2.1 Government of Nepal 2.2 “A” Class Liscensed Institutions 2.3 Other Liscensed Financial Institutions 2.4 Other Organized Institutions 2.5 Individuals 2.6 Others B. Margin Deposits 1. Employees Guarantee (Locker Margin) 2. Guarantee Margin 3. Margin on Letter of Credit C. Others 1. Local Currency 1.1 Financial Institutions 1.2 Other Organized Institutions 1.3 Individuals 2. Foreign Currency 2.1 Financial Institutions 2.2 Other Organized Institutions 2.3 Individuals Total of Non-Interest Bearing s 2. Interest Bearing s A. Saving Deposits 1. Local Currency 1.1 Organized Institutions 1.2 Individuals 1.3 Others 2. Foreign Currency 2.1 Organized Institutions 2.2 Individuals 2.3 Others B. Fixed Deposits 1. Local Currency 1.1 Organized Institutions 1.2 Individuals 1.3 Others 2. Foreign Currency 2.1 Organized Institutions 2.2 Individuals 2.3 Others C. Call Deposits 1. Local Currency 1.1 “A” Class Liscensed Institutions 1.2 Other Liscensed Financial Institutions 1.3 Other Organized Institutions 1.4 Individuals 1.5 Others 2. Foreign Currency 2.1 “A” Class Liscensed Institutions 2.2 Other Liscensed Financial Institutions 2.3 Other Organized Institutions 2.4 Individuals 2.5 Others D. Certificate of Deposit 1. Organized Institutions 2. Individuals 3. Others Total of Interest Bearing s Total Deposits (1+2)

Current Year (Rs)

Previous Year (Rs)

780,096,899 758,944,958 - 4,151,914 14,882,902 605,221,110 134,689,032 - 21,151,941 - - - 712,769 20,439,172 - 97,890,467 2,682,900 43,841,129 51,366,438 - - - - - - - - -

601,721,057 570,865,953 3,463,370 45,255,821 420,113,592 102,033,170 30,855,104 633,572

4,170,318,071 4,063,131,831 185,253,638 3,877,878,193 - 107,186,240 86,986 107,099,254 - 4,527,051,149 4,506,532,536 4,192,177,035 314,355,501 - 20,518,613 - 20,518,613 - 6,135,568,677 6,088,036,682 1,007,452,663 1,202,008,262 3,201,964,707 676,611,050 - 47,531,995 - 19,558 - 47,512,437 - - - - - 14,832,937,897 15,710,925,263

4,144,681,777 3,968,091,842 142,571,077 3,825,520,765 176,589,935 76,232 176,513,703 3,799,556,049 3,472,970,040 2,864,222,959 608,747,081 326,586,009 326,586,009 4,124,555,812 4,072,911,004

30,221,532 109,638,749 2,317,850 43,867,728 63,453,171 -

1,325,158,227 2,628,405,915 119,346,862 51,644,808 17,000 51,627,808 12,068,793,638 12,780,153,444

Schedule 4.6

Kumari Bank Limited Bills Payable End of Ashad 2066 (15 July 2009) Particulars

Current Year (Rs)

Previous Year (Rs)

64,884,614 5,202,411 70,087,025

64,396,889 899,825 65,296,714

1. Local Currency 2. Foreign Currency Total

Schedule 4.7

Kumari Bank Limited Other Liabilities End of Ashad 2066 (15 July 2009) Particulars

Current Year (Rs)

Previous Year (Rs)

1. Pension/Gratuity Fund 2. Employees Provident Fund 3. Employees Welfare Fund 4. Provision for Staff Bonus 5. Interest Payable on Deposits 6. Interest Payable on Borrowings 7. Unearned Discount and Commission 8. Sundry Creditors 9. Branch Reconciliation 10. Others a. Audit Fees 231,000 b. Others 348,387,204 Total

- - - 36,703,549 36,361,180 54,000 156,500 10,467,942 - 348,618,204 - - 432,361,375

- - 25,743,626 23,608,155 32,877 17,500 9,309,564 119,434 267,082,845 325,914,001

Schedule 4.8

Kumari Bank Limited Cash Balance End of Ashad 2066 (15 July 2009) Particulars 1. Local Currency (Including Coins) 2. Foreign Currency Total

Current Year (Rs)

Previous Year (Rs)

530,557,201 18,551,303 549,108,504

542,398,781 23,242,337 565,641,118

37

Kumari Bank Limited Balance with Nepal Rastra Bank End of Ashad 2066 (15 July 2009) Particulars 1. Nepal Rastra Bank a. Current b. Other

Local Currency

Schedule 4.9

Foreign Currency in equivalent Rs INR

29,717,863 29,717,863 -



Convertible FCY

- - -

Curremt Year (Rs)

Total

29,717,863 29,717,863 -

1,120,760,644 1,120,760,644 -

1,091,042,781 1,091,042,781 -

Previous Year (Rs) 244,576,115 244,576,115 -

Schedule 4.10

Kumari Bank Limited Balance with Bank/Financial Institution End of Ashad 2066 (15 July 2009) Particulars

Local Currency

Foreign Currency in equivalent Rs INR

Convertible FCY

1. Local Licensed Institutions 12,481,430 - a. Current 12,481,430 - b. Other - 2. Foreign Banks - 30,492,939 a. Current - 30,492,939 b. Other - - Total 12,481,430 30,492,939

Total

3,671,404 3,671,404 - 59,783,879 59,783,879 - 63,455,283

3,671,404 3,671,404 - 90,276,818 90,276,818 - 93,948,222

Current Year (Rs)

Previous Year (Rs)

16,152,834 59,218,199 16,152,834 59,218,199 - 90,276,818 64,406,245 90,276,818 64,406,245 - 106,429,652 123,624,444

Note: Total balance for which the confirmations are received from respective Banks is Rs 1,371,746,863.

Schedule 4.11

Kumari Bank Limited Money at Call and Short Notice End of Ashad 2066 (15 July 2009) Particulars

Current Year (Rs)

Previous Year (Rs)

30,000,000 30,000,000

55,360,000

1. Local Currency 2. Foreign Currency - Total

55,360,000

Schedule 4.12

Kumari Bank Limited Investment End of Ashad 2066 (15 July 2009) Purpose Particulars

38

1. Government Treasury Bills 2. Government Saving Certificate 3. Government Other Bonds 4. Nepal Rastra Bank Bonds 5. Foreign Bonds 6. Local Licensed Institutions 7. Foreign Banks 8. Shares of Organized Institutions 9. Bonds and Debentures in Organized Institutions 10. Other Investment Total Investment Provision Net Investment

Trading -

Other

882,519,990 - 197,575,000 - - 200,000,000 212,387,992 1,360,500 16,985,000 - 1,510,828,482 - 1,510,828,482

Current Year (Rs) 882,519,990 197,575,000 200,000,000 212,387,992 1,360,500 16,985,000 1,510,828,482 1,510,828,482

Previous Year (Rs)



1,278,195,002 190,900,000 175,000,000 476,482,088 1,235,500 16,985,000 2,138,797,590 2,138,797,590

Kumari Bank Limited Investment in Shares, Debentures and Bonds End of Ashad 2066 (15 July 2009)

Schedule 4.12 (A)

Particulars

Current Year (Rs)

Previous Year (Rs)

1. Investment in Shares 1,360,500 1.1 Credit Information Centre Limited 1,235,500 14,120 Ordinary Shares of Rs 100 each, fully paid Primary Shares 3,530 Kitta Right Shares 8,825 Kitta Bonus Shares 1,765 Kitta 1.2 Nepal Clearing House Limited 125,000 5 % of committed equity of Rs 2,500,000 2. Investment in Debentures and Bonds 16,985,000 2.1 Nepal Electricity Authority, Electricity Bond 16,985,000 7.75 Percent 16,985 Bonds of Rs 1,000 each - Total Investment 18,345,500 3. Provision for Loss 3.1 Up to previous year - 3.2 Change in current year - Total Provision - Net Investment 18,345,500

1,235,500 1,235,500

16,985,000 16,985,000 18,220,500 18,220,500

Note : Credit Information Center Ltd & Nepal Clearing House Ltd. have not provided any dividend for past 3 years. Schedule 4.13

Kumari Bank Limited Classification of Loans, Advances and Bills Purchase & Provision End of Ashad 2066 (15 July 2009) Loans & Advances

Bills Purchased/Discounted

Domestic Particulars

Priority Sector Insured



1. Performing Loan

Uninsured

Foreign

Other

Total

Domestic

Foreign

Current Year (Rs)

Total

Previous Year (Rs)

- 418,492,133 14,195,230,438

-

14,613,722,571

75,524,247

41,471,740 116,995,987 14,730,718,558 11,369,905,053

1.1

- 418,492,133 14,189,227,519

-

14,607,719,652

75,524,247

41,471,740 116,995,987 14,724,715,639 11,332,148,877

1.2 Restructured

-

-

6,002,919

-

6,002,919

-

-

-

6,002,919

37,756,176

-

-

64,542,683

-

64,542,683

-

-

-

64,542,683

152,475,600

2. Non-Performing Loan



2.1 Sub-Standard

-

-

13,082,971

-

13,082,971

-

-

-

13,082,971

58,320,876



2.2 Doubtful

-

-

31,735,261

-

31,735,261

-

-

-

31,735,261

78,966,480



2.3 Loss

-

-

19,724,451

-

19,724,451

-

-

-

19,724,451

15,188,244



A. Total Loan

- 418,492,133 14,259,773,121

-

14,678,265,254



3. Loan Loss Provision 3.1

-

141,892,275

-

146,077,196



3.2 Restructured

-

-

750,365

-

750,365

-

-

-

750,365

4,719,522



3.3 Sub-Standard

-

-

3,270,743

-

3,270,743

-

-

-

3,270,743

14,580,219



3.4 Doubtful

-

-

30,921,697

-

30,921,697

-

-

-

30,921,697

39,483,240



3.5 Loss

-

-

19,724,451

-

19,724,451

-

-

-

19,724,451

15,188,244

196,559,531

-

200,744,452

201,914,411

187,292,714

4,184,921

755,242

41,471,740 116,995,987 14,795,261,241 11,522,380,653



-

4,184,921

75,524,247

B. Total Provisioning



4. Provisioning up to previous year 4.1

-

109,767,096

-

112,503,014

113,321,489

89,577,026

4.2 Restructured

-

-

4,719,522

-

4,719,522

-

-

-

4,719,522

4,826,507



4.3 Sub-Standard

-

-

14,580,219

-

14,580,219

-

-

-

14,580,219

2,594,619



4.4 Doubtful

-

-

39,483,240

-

39,483,240

-

-

-

39,483,240

19,318,178

4.5 Loss

-



C. Total provision till Last year

-

- 2,735,918

15,188,244

-

15,188,244

186,474,239

-

186,474,239

-

-

-

- 452,546 -

- 365,929 -

818,475

113,321,489





365,929

1,169,959

147,247,155





452,546

414,717

1,169,959



2,735,918

755,242

414,717

- 818,475 -

15,188,244

17,104,037

187,292,714

133,420,367



D. Written Back from last year provision -

(42,781,308)

(7,240,964)



E. Additional Provision in this year

-

1,449,003

10,085,292

-

14,270,213

302,696

48,788

351,484

57,403,005

61,113,311



Change in this year

-

1,449,003

10,085,292

-

14,270,213

302,696

48,788

351,484

14,621,697

53,872,347



Net Loan (A-B)

- 14,063,213,590

-

14,477,520,802

74,769,005

41,057,023 115,826,028 14,593,346,830 11,335,087,939

39

Kumari Bank Limited Security for Loan Advances and Bills Purchased End of Ashad 2066 (15 July 2009) Particulars

Schedule 4.13 (A)

Current Year (Rs)

A. Secured 1. Against Security of Movable/Immovable Assets 2. Against Guarantee of Local Licensed Institutions 3. Against Government Guarantee 4. Against Guarantee of Internationally Rated Bank 5. Against Security of Export Documents 6. Against Security of Fixed Deposit Receipts a. Own FDR b. FDR of Other Licensed Institutions 7. Against Security of Government Bonds 8. Against Counter Guarantee 9. Against Personal Guarantee 10. Against Other Securities B. Unsecured Total

Previous Year (Rs)

14,795,261,241 13,444,857,320 - - - 1,817,000 - 2,787,554 52,571,204 - - - 1,293,228,163 - 14,795,261,241

11,522,380,653 10,565,023,333 - 6,955,361 105,990,568 844,411,391 11,522,380,653

Kumari Bank Limited Fixed Assets End of Ashad 2066 (15 July 2009)

Schedule 4.14

Assets

Particulars



1. Cost Price

Building

Vehicles

Machinery Office Equipment

Others

Current Year (Rs)

Previous Year (Rs)



a. Previous Year’s Balance

5,569,365

54,721,923

135,323,119

18,216,888

213,831,295

178,187,735





b. Addition This Year

6,008,271

56,211,518

158,388

62,378,177

69,592,900





c. Revaluation/Written Back This Year



d. This Year Sold



e. This Year Written Off

(7,550,000)

(735,210)

(755,324) 4,814,041

53,180,194

(755,324)

(20,309,392)

267,168,938

213,831,295



2. Depreciation a. Up to previous year

454,831



b. For this year

229,715

8,166,713

c. Depreciation on revaluation/Written Back

(70,355)

(3,440,844)









-

18,375,276

(13,639,948)

Total Cost (a+b+c+d+e)



190,799,427 68,871,252

7,847,326

92,752,529

28,875,805

3,492,664

40,764,897

92,298,930 28,354,180

(539,740)

(4,050,939)

(27,900,581)

d. Depreciation Adjusment/Add back Total Depreciation



3. Book Value (WDV*) (1-2)



614,191

20,304,989

-

97,207,317

11,339,990

129,466,487

92,752,529

4,199,850

32,875,205

-

93,592,110

7,035,286

137,702,451

121,078,766

85,593,635

85,593,635



4. Land



5. Capital Work In Progress (pending Capitalization)





6. Leasehold Assets





Total (3+4+5+6)

40

-

(8,285,210)



15,579,120

-

-

4,199,850

32,875,205

-

93,592,110

7,035,286

24,536,688

15,328,471

247,832,774

222,000,872

Kumari Bank Limited Non Banking Assets End of Ashad 2066 (15 July 2009) Previous Year (Rs)

Name & Address of Borrower of Party

Acquired Date of Non Banking Assets

Total Amount of Non Banking Assets

Schedule 4.15

Provision for loss Percent

Amount (Rs)

Net Non Banking Asset (Rs)

3,140,779



3,140,779

Grand Total

Kumari Bank Limited Other Assets End of Ashad 2066 (15 July 2009) Particulars

Schedule 4.16

Current Year (Rs)

1. Stock of Stationery 2. Income receivable on Investment 3. Accrued Interest Receivable on Loan Accrued Interest Receivable on Loan Less:Interest Suspense 4. Commission Receivable 5. Sundry Debtors 6. Staff Loan & Advances 7. Pre Payments 8. Cash in Transit 9. Other Transit items (including Cheques) 10. Drafts payment without notice 11. Expenses not written off 12. Branch Reconciliation 13. Deferred Tax Assets 14. Others a. Advance Tax b. Others 132,843,132 Total

Previous Year (Rs)

3,733,594 18,266,753 - 75,082,974 (75,082,974) - 84,943,749 102,297,824 9,950,331 - - - - 21,930,506 6,292,334 132,843,132 - - 380,258,223

3,116,957 15,829,340 59,306,341 (59,306,341) - 14,449,873 46,719,936 7,959,739 259,944,726 9,650,253 250,294,473 348,020,571

Kumari Bank Limited Other Assets (Additional Statement) End of Ashad 2066 (15 July 2009)

Schedule 4.16(A)

Current Year (Rs) Particulars 1. Accrued Interest Receivable on Loan 2. Drafts Payment without notice 3. Branch Reconciliation

Up to 1 Year 62,786,437 - -

1 to 3 Year 12,296,537 - -

Above 3 Years

Total

Previous Year (Rs)

- 75,082,974 - - - -

59,306,341 -

41

Kumari Bank Limited Contingent Liabilities End of Ashad 2066 (15 July 2009) Particulars

Current Year (Rs)

Previous Year (Rs)

1. Claims Lodged but not accepted by the Institution - 2. Letter of Credit (Full Amount) 813,973,672 a. Maturity period up to 6 months 608,688,994 b. Maturity period more than 6 months 205,284,678 3. Rediscounted Bills - 4. Unmatured Guarantees/Bonds 547,659,355 a. Bid Bonds 85,527,713 b.Performance Bonds 462,131,642 c. Other Guarantee/Bonds - 5. Unpaid Shares Investment - 6. Outstanding of Forward Exchange Contract Liabilities - 7. Bills under Collection - 8. Acceptance & Endorsement 139,840,967 9. Underwriting Commitment - 10. Irrevocable Loan Commitment - 11. Guarantees against Counter Guarantee of Internationally Rated Banks 12. Advance Payment Guarantee 116,164,047 13. Financial Guarantee for loan disbursement - 14. Contingent Liabilities on Income Tax - 15. Others -

1,113,996,185 886,717,522 227,278,663 512,512,449 15,725,275 496,787,174 54,757,155 35,096,418 150,573,285 -

Kumari Bank Limited Interest Income From 1st Shrawan 2065 to 31 Ashad 2066 (From 16 July 2008 to 15 July 2009)

Schedule 4.18

Particulars

42

Schedule 4.17

A On Loans, Advances and Overdraft 1. Loans & Advances 2. Overdraft B. On Investment 1. Government Securities a. Treasury Bills b. Development Bonds c. National Saving Certificates 2. Foreign Debt Papers a. ……… b. ……… 3. Nepal Rastra Bank Bonds 4. Debenture & Bonds 5. Interest on Interbank Investment a. Bank/ Financial Institutions b. Other Institutions C. On Agency Balances 1. Domestic Banks/ Financial Institutions 2. Foreign Banks D. On Money at Call and Short Notice 1. Domestic Banks/Financial Institutions 2. Foreign Banks E. On Others 1. Certificate of Deposits 2. Inter-Bank/ Financial Institution Loan 3. Others Total

Current Year (Rs) 1,233,549,009 553,755,728 679,793,281 89,856,012 88,539,674 74,990,179 13,549,495 - - - - - 1,316,338 - - - 967,556 - 967,556 50,349,890 42,610,458 7,739,432 - - - - 1,374,722,467

Previous Year (Rs) 877,009,516 465,122,390 411,887,126 46,978,242 46,586,997 43,361,548 3,225,449 391,245 - 2,113,916 2,113,916 31,144,050 21,189,231 9,954,819 957,245,724

Kumari Bank Limited Interest Expenses From 1st Shrawan 2065 to 31 Ashad 2066 (From 16 July 2008 to 15 July 2009)

Particulars A. On Deposit Liabilities 1. Fixed Deposits 1.1 Local Currency 1.2 Foreign Currency 2. Saving Deposits 2.1 Local Currency 2.2 Foreign Currency 3. Call Deposits 3.1 Local Currency 3.2 Foreign Currency 4. Certificate of Deposits B. On Borrowings 1. Debentures & Bonds 2. Loan from Nepal Rastra Bank 3. Inter Bank /Financial Institutions Borrowing 4. Other Organized Institution 5. Other Loans C. On Others 1. 2. Total

Current Year (Rs)

Previous Year (Rs)

760,503,809 310,276,518 303,943,983 6,332,535 153,388,406 150,717,770 2,670,636 296,838,885 295,635,922 1,202,963 55,699,081 32,000,000 23,699,081 816,202,890

463,374,013 180,664,935 172,131,676 8,533,259 130,199,103 125,515,994 4,683,109 152,509,975 149,286,396 3,223,579 35,360,209 3,951,005 31,409,204

498,734,222

Kumari Bank Limited Commission and Discount Income From 1st Shrawan 2065 to 31 Ashad 2066 (From 16 July 2008 to 15 July 2009) Particulars A. Bills Purchase & Discount 1. Local 2. Foreign B. Commission 1. Letters of Credit 2. Guarantees 3. Collection Fees 4. Remittance Fees 5. Credit Card 6. Share Underwriting/Issue 7. Government Transactions 8. Agency Commission 9. Exchange Fee C. Others Total

Schedule 4.19

Current Year (Rs)

Previous Year (Rs)

1,211,386 1,211,386

1,400,837 1,400,837

24,691,051 8,380,872 7,456,950 339,895 8,477,490

20,290,207 8,597,043 7,638,828 328,914 3,465,109

35,844

260,313

53,201,840 79,104,277

26,803,589 48,494,633

Schedule 4.20

43

Kumari Bank Limited Other Operating Income From 1st Shrawan 2065 to 31 Ashad 2066 (From 16 July 2008 to 15 July 2009) Particulars 1. Safe Deposit Lockers Rental 2. Issue & Renewals of Credit Cards 3. Issue & Renewals of ATM Cards 4. Telex / T. T./ SWIFT 5. Service Charges 6. Renewal Fees 7. Others Total

Current Year (Rs)

Previous Year (Rs)

769,075 - 12,010,454 2,537,666 3,300,568 - 1,128,960 19,746,723

690,075 8,927,977 3,072,861 3,936,498 1,177,799 17,805,210

Kumari Bank Limited Exchange Fluctuation Gain/Loss From 1st Shrawan 2065 to 31 Ashad 2066 (16 July 2008 to 15 July 2009) Particulars a. From Revaluation b. From Trading (except Exchange Fees) Total Gain (Loss)

Current Year (Rs)

Previous Year (Rs)

31,015 58,970,766 59,001,781

464,643 41,342,980 41,807,623

Kumari Bank Limited Expenses Relating to Employees From 1st Shrawan 2065 to 31 Ashad 2066 (16 July 2008 to 15 July 2009) Particulars 1. Salary 2. Allowances a. Normal Allowance b. Inchargeship Allowance c. Relocation Allowance d. Outstation Allowance e. Dashain Allowance f. Vehicle Maintenance Allowance g. Leave Fare Allowance 3. Contribution to Provident Fund 4. Training Expenses 5. Uniform 6. Medical 7. Insurance 8. Pension and Gratuity Provision 9. Others a. Wages b. Teller Risk Fund c. Other Staff Benefits d. Overtime Total

44

Current Year (Rs)

Previous Year (Rs)

54,583,324 32,252,547 16,465,603 52,500 63,533 791,539 5,650,210 283,350 8,945,812 5,128,583 3,068,402 - 3,491,305 3,234,006 7,428,478 6,798,274 1,624,774 346,459 3,343,582 1,483,459 115,984,919

41,126,851 30,185,203 17,713,039 11,690 118,605 459,102 4,524,422 236,440 7,121,905 4,016,353 1,996,501 2,833,882 2,502,788 2,680,562 4,228,298 887,686 300,592 2,356,939 683,081 89,570,438

Schedule 4.21

Schedule 4.22

Schedule 4.23

Kumari Bank Limited Other Operating Expenses From 1st Shrawan 2065 to 31 Ashad 2066 (From 16 July 2008 to 15 July 2009) Particulars 1. House Rent 2. Electricity & Water 3. Repair & Maintenance a. Building 671,083 b. Vehicles 794,650 c. Others 4. Insurance 5. Postage, Telex, Telephone & Fax 6. Office Equipment, Furniture and Repair 7. Travelling Allowances & Expenses 8. Stationery & Printing 9. Periodicals & Books 10. ments 11. Legal Expenses 12. Donations 13. Expenses relating to Board of Directors a. Meeting Fees 1,880,345 b. Other Expenses 31,077 14. Annual General Meeting Expenses 15. Expenses relating to Audit a. Audit Fees 231,000 b. Other Expenses 229,584 16. Commission on Fund Transfer 17. Depreciation on Fixed Assets 18. Amortization of Pre-operating Expenses 19. Share Issue expenses 20. Technical Services (Reimbursment) 21. Entertainment Expenses 22. Written Off Expenses 23. Security Expenses 24. Credit Guarantee 25. Commission & Discount 26. Others a. Transport 6,051,837 b. Professional Fees 1,864,947 c. Public Relation Expenses 1,046,235 d. Banking and Corporate Expenses 2,646,587 e. Correspondent Banking Charges 810,390 f. Fees and Taxes 10,882,378 g. Visa Fees and Charges 7,806,946 h. NRB Charges on FCY Deposit 17,706,998 i. Miscellaneous 443,559 j. Prior Period Expenses - k. Error, Fine and Losses - l. Janitorial 1,320,160 Total

Schedule 4.24

Current Year (Rs)

Previous Year (Rs)

28,416,708 7,894,002 1,465,733 - - - 2,915,674 13,807,390 2,752,513 4,080,693 4,890,221 239,033 2,715,437 835,277 588,911 1,911,422 - - 1,195,626 - 460,584 - - 49,815,920 - 941,905 - 462,320 - 10,532,754 - - 50,580,037 - - - - - - - - - - - - 186,502,160

26,236,814 5,444,706 768,517 2,840,284 11,250,139 1,365,052 4,583,579 4,819,679 258,107 7,013,922 850,973 67,700 2,583,058 860,175 643,497 35,001,655 963,745 176,561 6,933,404 35,481,571 3,384,226 1,946,145 1,379,268 2,121,270 655,450 8,742,767 3,964,295 10,890,574 434,725 845,601 25,793 1,091,457 148,143,138

45

Kumari Bank Limited Provision for Possible Losses From 1st Shrawan 2065 to 31 Ashad 2066 (From 16 July 2008 to 15 July 2009) Particulars

Current Year (Rs)

1. Increase in Provision for Loan Loss 2. Increase in Provision for Loss on Investment 3. Provision for Loss on Non-Banking Assets 4. Provision for Other Assets Total

57,403,005 - - - 57,403,005

Previous Year (Rs) 61,113,311 1,845,155 1,065,324 64,023,790

Kumari Bank Limited Non-Operating Income / Loss From 1st Shrawan 2065 to 31 Ashad 2066 (From 16 July 2008 to 15 July 2009) Particulars

Current Year (Rs)

Previous Year (Rs)

- 678,806 - - - - - 432,847 1,111,653

555,500 15,032,889 15,588,389

1. Profit/ (Loss) on Sale of Investments 2. Profit/ (Loss) on Sale of Assets 3. Dividend 4. Subsidies received from Nepal Rastra Bank a. Compensation for losses of specified branches b. Interest Compensation c. Exchange Counter 5. Others Net Non-Operating Income (Loss)

Kumari Bank Limited Written Back from Provision for Possible Losses (Fiscal Year 2008/09) Particulars 1. Provision for Loan Loss Written Back 2. Provision against Non Banking Assets Written Back 3. Provision for Investment Written Back 4. Provision for other Assets Written Back Total

1. Recovery of Written Off Loan 2. Voluntary Retirement Expenses 3. Irrecoverable Loan Written Off {4.28(A)} 4. Other Expensess/Income 5. ……………………………………………… Total

Current Year (Rs)

Previous Year (Rs)

42,781,308 4,239,839 - - 47,021,147

7,240,964 7,240,964

46

Current Year (Rs) (876,031) (876,031)

Previous Year (Rs)

Schedule 4.26

Schedule 4.27

Kumari Bank Limited Income/ (Expenses) from Extra Ordinary Transactions From 1st Shrawan 2065 to 31 Ashad 2066 ( From 16 July 2008 to 15 July 2009) Particulars

Schedule 4.25

(4,531,068) (4,531,068)

Schedule 4.28

Kumari Bank Limited Statement of Loan Written-Off (Fiscal Year 2008/09) S.N. Types of Loan

1.

Bills Purchase

2.

Hire Purchase Loan

3.

4.

5.

Hire Purchase Loan

Hire Purchase Loan

Written off Amount

131,529

Type of Security

Basis of Valuation Loan Approving Authority/ Level of Collateral

-



Schedule 4.28(A)

Initiations Made for Recovery

Remarks

CEO

Several verbal and written reminders were served. Borrower’s name appears in CICL Blacklist. The remained overdue for more than 5 years and thus had to be mandatorily written off in line with regulatory provisions and Loan Write- off policy of the Bank.

KC & Company

93,757

Voyager Micro Bus

Price Quotation submitted by Authorized Vehicle Distributor

Manager Retail Banking, Manager-Credit, AGM

Several verbal and written reminders fo the settlement of the Loan were served . After several discussions/meetings with micro-bus and transport operators, the vehicle was disposed through mutual consensus.

Hira Kumari Thakuri

3,853

Vehicle Mahindra 576

Price Quotation submitted by Authorized Vehicle Distributor

Manager Retail Banking, Manager-Credit, A G M, CEO

The bank had served several verbal and written reminders to the borrower.Client had approached the Bank seeking waiver of penal Interest. Based on the borrower’s request and commitment of the borrower to settle entire loan, the decision to waive Penal Interest was taken by the Acting CEO.

Ramesh Kumar Khadge

Voyager Micro Bus

Price Quotation submitted by Authorized Vehicle Distributor

Several verbal and written reminders were served. As vehicles sold through the Auction process are barred from Manager-Credit, operating within the Kathmandu valley and there would be, if at all, very few bidders to operate it outside the valley and AGM offer decent price for it. Thus, after several discussions with micro-bus and transport operators, the vehicle was thus disposed through mutual consensus.

Ram Kumar Sunam

Several verbal and written reminders were served to the borrower. A 35 days public notice was also published on 31.03.2008. The borrower had remained out of for a considerable period of time. Apparently the borrower has migrated to U.S. The possibility of receiving bids through Auction was remote considering the fact that the Manager-Credit, collateralized security was located in Terai coupled with A G M, CEO the deteriorating security situation and political unrest in the Terai region. A series of discussions were held with the remaining family and eventually we reached a one time negotiated settlement for Rs 1,810,000.00 ( Rs 132,000.00 more than the Loan principal amount) at Interest of 9.25% p.a stretched over the period of the exposure.

Luna Trade International

418,892

Overdraft Loan

228,000

Total

876,031

Valutation by Land, Stock, Authorized Receivables, Valuator of the PG Bank



Schedule 4.29

Kumari Bank Limited Statement of Loans and Advances Extended to Directors/Chief Executive /Promoters/ Employees and Shareholders 31 Ashad 2066 (15 July 2009)

The Statement of amount,included under total amount of Bills Purchased and Discounted, Loans, Advances and Overdraft, provided to the Directors, Chief Executive,Promoters, Employees, Shareholders and the individual of ‘ their undivided family’ or against the guarantee of such person or to the organization or companies in which such individual are ‘managing agent’ are as follows: (Rs) Name of Promoter/Director/ Chief Executive

Outstanding up to Last Year Principal Interest

Recovered in Current Year Principal Interest

Additional Lending in this year

Outstanding as of Ashad End 2063 Principal Interest

A. Directors 1. …………………………………… 2. ……….……………………...… 3. …………………………………………… B. Chief Executive 1. ……………………………….. 2. ……………………………….. C. Promoters’ Group D. Employee (Family ’ Company) E. Shareholder’s Company Total

47

Kumari Bank Limited Table of Capital Fund End of Ashad 2066 (15 July 2009)

Schedule 4.30 (A)

Rs in ‘000 Particulars 1.1. 1.2.

Risk Weighted Exposures a. Risk Weighted Exposure for Credit Risk b. Risk Weighted Exposure for Operational Risk c. Risk Weighted Exposure for Market Risk Capital Fund (A+B) A. Core Capital (Tier I) a. Paid Up Capital b. Irredeemable Non- cumulative preferenece share c. Share d. Proposed Bonus Share e. General Reserves Fund f. Accumulated Profit/ (Loss) till previous fiscal year g. Net Profit/ (Loss) for current fiscal year h. Capital Redemption Reserve i. Capital Adjustment Reserve j. Dividend Equalization Reserves k. Bond Redemption Reserve l. Other free Reserve m. Less: Goodwill n. Less: Miscellaneous Expenditure not written off o. Less: Investment in equity in licensed Financial Institutions p. Less: Investment in equity of institutions with financial interests q. Less: Investment in equity of institutions in excess of limits r. Less: Investments arising out of underwriting commitments s. Less: Reciprocal crossholdings t. Less: Other Deduction B. Supplementary Capital (Tier II) a. Cumulative and/or Reedemable Preference Share b. Subordinated term debt less: Amortization of Subordinate Term Debt c. Hybrid Capital Instuments d. General Loan Loss provision e. Exchange Equalisation Reserve f. Investment Adjustment Reserve g. Assets Revaluation Reserve h. Other Reserve 1.3 Capital Adequacy Ratios Core Capital/ Total Risk Weighted Exposure (Tier I) Capital Fund/ Total Risk Weighted Exposure (Tier I & Tier II)

48

Current Year 17,743,239 16,983,993 709,435 49,811 2,050,908 1,612,799 1,186,099 - - 118,837 172,136 20,727 - - - - 115,000 - - - - - - - - - 438,108 - 400,000 (115,000) - 147,247 5,861 - - - - 9.09% 11.56%

Previous Year 14,418,707 13,688,722 713,923 16,062 1,858,207 1,359,032 1,070,000 107,827 119,848 41,357 20,000 499,175 400,000 (20,000) 113,321 5,853 9.43% 12.89%

Kumari Bank Limited End of Ashad 2066 (15 July 2009) Credit Risk Exposure



Schedule 4.30 (B)

Rs in ‘000 Current Year Gross Book Value (a)

Particulars

Specific Provision (b)

Eligible CRM (c)

Net Value (d)=(a)-(b)-(c)

Previous year

“Risk Weight Risk Weighted (e)” Exposures (f)=(d)*(e)

Net Value

Risk weighted Exposure

On Balance Sheet Exposures (A) Cash Balance

549,109

-

-

549,109

0%

-

565,641

Balance With Nepal Rastra Bank

1,120,761

-

-

1,120,761

0%

-

244,576

-

Investment in Nepalese Government Securities

1,080,095

-

-

1,080,095

0%

-

1,469,095

-

77,142

13,416

-

All Other Claims on Government of Nepal

-

77,142

-

-

0%

-

Investment in Nepal Rastra Bank Securities

-

-

-

-

0%

-

-

-

All Other Claims on Nepal Rastra Bank

-

-

-

-

0%

-

-

-

Investment in Foreign Government Securities (ECA rating 0-1)

-

-

-

-

0%

-

-

-

Investment in Foreign Government Securities (ECA rating 2)

-

-

-

-

20%

-

-

-

Investment in Foreign Government Securities (ECA rating 3)

-

-

-

-

50%

-

-

-

Investment in Foreign Government Securities (ECA rating 4-6)

-

-

-

-

100%

-

-

-

Investment in Foreign Government Securities (ECA rating 7)

-

-

-

-

150%

-

-

-

Development Banks(MDB’s) Recognised By Standard Framework

-

-

-

-

0%

-

-

-

Claims on Other MDB’s

-

-

-

-

100%

-

-

-

Claims on Public Sector Entity (ECA - 1)

-

-

-

-

20%

-

-

-

Claims on Public Sector Entity (ECA - 2)

-

-

-

-

50%

-

-

-

Claims on Public Sector Entity (ECA 3-6)

-

-

-

-

100%

-

-

-

Claims on Public Sector Entity (ECA - 7)

100,875

-

-

100,875

-

-

Claims on Domestic Banks that meet Capital Adequacy requirements

245,073

-

-

1,079

-

-

Claims on Foreign Bank (ECA Rating 0- 1)

290,616

-

Claims on Foreign Bank (ECA Rating - 2)

11,271

Claims on Foreign Bank (ECA Rating 3-6) Claims on Foreign Bank (ECA Rating - 7)

Claims On BIS, IMF, ECB, EC and Claims On Multilateral...

Claims on Domestic Banks that do not meet Capital Adequacy Requirements

150%

151,313

245,073

20%

49,015

450,151

90,030

1,079

100%

1,079

31,080

31,080

-

290,616

20%

58,123

272,872

54,574

-

-

11,271

50%

5,635

2,258

1,129

-

-

-

-

100%

-

265,758

265,758

-

-

-

-

150%

-

-

-

Claims on foreign bank incorporated in SAARC region operating ... with a buffer of 1 %above their respective regulatory capital requiremente

778

-

6,293,544

-

Claims on Foreign Corporates (ECA 0 - 1)

-

-

-

-

20%

-

-

-

Claims on Foreign Corporates (ECA 2)

-

-

-

-

50%

-

-

-

Claims on Foreign Corporates (ECA 3-6)

-

-

-

-

100%

-

-

-

Claims on Foreign Corporates (ECA - 7)

-

-

-

-

150%

-

-

1,803,218

-

35,838

- - -

-

697

-

9,602

Claims on Domestic Corporates

Regulatory Retail Portfolio (Not Overdue) Claims fulfilling all creterion of regulatory retail except granularity Claims secured by residential properties Claims not fully secured by residential properties Claims secured by residential properties (Overdue) Claims secured by Commercial real estate Past due claims (except for claims secured by residential properties) High Risk claims

1,061,245 - 10,299

- 12,295

39,633

778

20%

156

6,281,248

100%

6,281,248

-

75%

-

35,838

100%

35,838

-

-

-

1,061,245

60%

636,747

2,912,614

2,184,461

100%

-

228,728

6,667,765

1,763,584

-

1,322,688

- 6,667,765

-

171,546

-

100%

9,602

2,405

2,405

2,152,675

-

-

2,152,675

100%

2,152,675

1,038,513

1,038,513

199,038

53,220

-

145,818

150%

218,728

82,099

123,149

3,090,357

-

-

3,090,357

150%

4,635,536

218,347

327,520

-

-

-

1,236

1,853 25,478

Investment in equity and other capital instruments of institutions .. listed in the stock exchange

-

100%

-

Investment in equity and other capital instruments of institutions ... not listed in the stock exchange Cash and Cash Item in Transit Other Assets (as per attachment) Total



1,361

-

-

1,361

150%

2,041

16,985

110,815

-

-

110,815

20%

22,163

-

-

1,045,477

435,894

-

609,583

100%

609,583

642,094

642,094

19,280,666

489,811

18,738,926

-

16,192,170

15,125,634

11,627,355

51,929

49

Schedule 4.30 (B) Continued.... Rs in ‘000 Current Year Gross Book Value (a)

Particulars

Specific Provision (b)

Eligible CRM (c)

Net Value d=a-b-c

Previous year

Risk Weight Risk Weighted (e) Exposures f=d*e

Net Value

Risk weighted Exposure

On Balance Sheet Exposures (B) Revocable Commitments

-

-

-

-

0%

-

-

Bills Collection

-

-

-

-

0%

-

-

-

16,522

-

-

16,522

10%

1,652

-

-

LC Commitments With Original Maturity Up to 6 months domestic counterparty 608,689

-

33,490

575,199

20%

115,040

823,264

164,653

ECA Rating 0-1

-

-

-

-

20%

-

-

-

ECA Rating 2

-

-

-

-

50%

-

-

-

ECA Rating 3-6

-

-

-

-

100%

-

-

-

ECA Rating 7

-

-

-

-

150%

-

L C Commitments With Original Maturity Over 6 months domestic counterparty 205,285

-

11,226

ECA Rating 0-1

-

-

-

-

20%

-

-

-

ECA Rating 2

-

-

-

-

50%

-

-

-

ECA Rating 3-6

-

-

-

-

100%

-

-

-

ECA Rating 7

-

-

-

-

150%

-

-

547,659

-

34,785

ECA Rating 0-1

-

-

-

-

20%

-

-

-

ECA Rating 2

-

-

-

-

50%

-

-

-

ECA Rating 3-6

-

-

-

-

100%

-

-

-

ECA Rating 7

-

-

-

-

150%

-

-

-

Underwriting commitments

-

-

-

-

50%

-

-

-

Lending of Bank’s Securities or Posting of Securities as collateral

-

-

-

-

50%

-

-

-

Repurchase Agreements, Assets sale with recourse

-

-

-

-

100%

-

-

-

116,164

-

-

-

-

-

139,841

-

6,650

Forward Exchange Contract Liabilities

Bid Bond, Performance Bond and counter guarantee domestic counterparty

Advance Payment Guarantee Financial Guarantee Acceptence and Endrosements Unpaid portion of Partly paid shares and securities

-

512,875

107,108 - 133,191

50%

100%

97,029

256,437

107,108

100%

-

100%

-

54,757

- -

Irrevocable Credit Commitments (long term)

-

-

-

-

100%

-

-

Other Contingent Liabilities

-

-

-

-

100%

-

-

-

791,823

4,561,934

2,061,366

16,983,993

19,687,568

13,688,722

Total RWE for Credit Risk (A + B)

21,987,610

489,811

95,207

2,611,737

147,135

21,350,664

- -

-

54,757

-

-

214,557

-

251,871

-

2,706,944

-

20%

503,741

91,705

-

1,072,784

100%

183,411

1,072,784



-

50%

-

Irrevocable Credit Commitments (short term)

Total

50

9,056

194,059



-

2,996,761

1,498,380 -

Schedule 4.30 (C) Kumari Bank Limited Eligible Amount for Credit Risk Mitigation (CRM) End of Ashad 2066 (15 July 2009) Rs in ‘000 Deposit with Deposit with Gold Govt. &NRB bank other bank/FI Securities Particulars Credit Exposures On Balance Sheet Credit exposures Investment in Foreign Government Securities (ECA-2) Investment in Foreign Government Securities (ECA-3) Investment in Foreign Government Securities (ECA-4-6) Investment in Foreign Government Securities (ECA-7) Claim on Other Multilateral Development Banks Claims on Public Sector Entity(ECA-0-1) Claims on Public Sector Entity(ECA-2) Claims on Public Sector Entity(ECA-3-6) Claims on Public Sector Entity(ECA -7) Claims on domestic banks that meet capital adequacy requiremaent Claims on domestic banks that do not meet capital adequacy requiremaent Claims to a Foreign bank (ECA Rating 0-1) Claims to a Foreign bank(ECA Rating 2) Claims to a Foreign bank(ECA Rating 3-6) Claims to a Foreign bank(ECA Rating 7) Claims on foreign bank incorporated in SAARC region operating with a buffer of 1 %above their respective regulatory capital requirement Claims on Domestic Corporates Claims on Foreign Corporates (ECA 0-1) Claims on Foreign Corporates (ECA 2) Claims on Foreign Corporates (ECA 3-6) Claims on Foreign Corporates (ECA 7) Regulatory Retail Portfolio (Not Overdue) Claims fulfilling all creterion of regulatory retail except granularity Claims secured by residential properties Claims not fully secured by residential properties Claims secured by residential properties (Overdue) Claims secured by commercial real estate Past due claims(except for claim secured by residential properties) High Risk Claims Investment in equity and other capital instruments of institutions listed in the stock exchange Investment in equity and other capital instruments of institutions not listed in the stock exchange Other Assets (as per attachment) Off Balance Sheet Exposures Forward Exchange Contract Liabilities LC Commitments With Original Maturity Up to 6 months domestic counterparty ECA Rating 0-1 ECA Rating 2 ECA Rating 3-6 ECA Rating 7 L C Commitments With Original Maturity Over 6 months domestic counterparty ECA Rating 0-1 ECA Rating 2 ECA Rating 3-6 ECA Rating 7 Bid Bond and Performance Bond(Domestic) ECA Rating 0-1 ECA Rating 2 ECA Rating 3-6 ECA Rating 7 Underwriting commitments Lending of Bank’s Securities or Posting of Securities as collateral Repurchase Agreements,Assets salewith resourse Advance Payment Guarantee Financial Guarantee Acceptances and Endorsements Unpaid portion of partly paid shares and securities Irrevocable Credit Commitments Other Contingent Liabilities

(a) - - - - - - - - - - - - - - - - - - - 12, 295 - - - - 23,633 - - - - - - - - - - - - - - - 33,490 - - - - - 11,227 - - - - 34,785 - - - - - - - 9,056 - 6,650 - - -

(b)

(c)

- - - - - - - - - - - - - - - - - - - - - - - - 16,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

(d) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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

G’tee of Sec/G’tee Govt. of of other Nepal Sovereigns (e) (f) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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

G’tee of G’tee of other MDBs Banks (g) (h) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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

Sec/G’tee of Foreign Banks (i) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Total







12,295 39,633 33,490 11,227 34,785 9,056 6,650 -

51

Kumari Bank Limited Risk Weight Exposure for Operational Risk End of Ashad 2066 (15 July 2009) Year 1 (2005/06)

Particulars Net Interest Income Commission and Discount income Other Operating Income Exchange Fluctuation Income Addititonal Interest Suspense during the period Total Gross Income (a) Alfa (b) Fixed Percentage of Gross Income {c= (a*b)} Capital Requirement for operational risk (d) (average of c) Risk Weight ( reciprocal of capital requirement of 10%) in times (e) Equivalent Risk Weight Exposure {f=(d*e)}

Schedule 4.30 (D)

Rs in ‘000

Year 2 (2006/07)

Year 3 (2007/08)

268,471 394,231 458,512 26,281 40,764 48,495 10,003 15,281 17,805 26,374 20,294 41,808 871 32,496 17,185 331,999 503,067 583,804 15% 15% 15% 49,800 75,460 87,571 70,944 10 709,435

S.N.

Particulars

71,392 10 713,923

Rs in ‘000 Open Position (Rs)

1. INR 41,867 67,019 2. USD 65 5,089 3. EUR 36 3,922 4. GBP 75 9,594 5. CHF 1 71 6. AUD 71 4,423 7. CAD 0 0 8. SGD 1 58 9. JPY 1,069 890 10. SEK - - 11. DKK 67 975 12. HKD - - 13. SAR 174 3,611 14. QAR 146 3,131 15. CNY - - 16. MYR 17 373 17. THB 0 0 18. AED 22 464 Total Open Position (a) Fixed Pecentage (b) Capital Charge for Market Risk {c=(a*b)} Risk Weight (reciprocal of capital requiremnet of 10%) in times (d) Equivalent Risk Weight Exposure {e=(c*d)}

52

15%

Schedule 4.30 (E)

Kumari Bank Limited End of Ashad 2066 (15 July 2009) Risk Weight Exposure for Market Risk Open Position (FCY)

Previous Year

Relevant Open Position 67,019 5,089 3,922 9,594 71 4,423 0 58 890 - 975 - 3,611 3,131 - 373 0 464 99,621 5% 4,981 10 49,811

Previous Year Relevant Open Position (Rs) 9,423 4,259 377 107 228 2,236 1,284 2 7,473 4,009 5 1,504 10 1,207 32,124 5% 1,606 10 16,062

Kumari Bank Limited Principal Indicators (For Previous 6 years)



F. Y. 2007/08

F. Y. 2008/09

1. Net Profit/Gross Income % 14.20% 16.26% 15.52% 19.61% 16.18% 2. Earnings Per Share Rs 9.74 17.58 16.59 22.70 16.35 3. Market Value Per Share Rs 369.00 443 830 1,005 4. Price Earning Ratio Ratio 20.99 26.71 36.56 61.47 5. Dividend (including bonus) on share capital % 21.05% 21.05% 10.53% 6. Cash Dividend on Share Capital % 1.05% 1.05% 0.53 7. Interest Income/Loans & Advances % 8.39% 8.33% 5.89% 7.63% 7.61% 8. Employee Expenses/Total Operating Expenses % 11.48% 11.96% 12.32% 17.22% 15.66% 9. Interest Expenses on Total Deposit and Borrowings % 3.41% 4.48% 4.20% 3.69% 3.87% 10. Exchange Fluctuation Gain/Total Income % 4.20% 2.77% 3.95% 2.34% 3.87% 11. Staff Bonus/ Total Employee Expenses % 26.88% 34.24% 24.59% 25.08% 22.32% 12. Net Profit/Loans & Advances % 1.32% 1.55% 1.48% 1.88% 1.52% 13. Net Profit/ Total Assets % 0.89% 1.13% 1.15% 1.43% 1.16% 14. Total Credit/Deposit % 76.91% 90.62% 90.20% 85.84% 90.20% 15. Total Operating Expenses/Total Assets % 4.53% 4.76% 5.39% 4.83% 4.90% 16. Adequacy of Capital Fund on Risk Weightage Assets a. Core Capital % 12.50% 10.20% 11.28% 10.26% 10.40% b. Supplementary Capital % 0.91% 1.01% 1.08% 0.96% 4.01% c. Total Capital Fund % 13.41% 11.21% 12.36% 11.22% 14.41% 17. Liquidity (CRR) Ratio 11.02% 3.44% 2.71% 3.65% 1.91% 18. Non Performing Loans/Total Loans % 0.76% 0.95% 0.92% 0.73% 1.32% 19. Weighted Average Interest Rate Spread % 3.82% 3.85% 4.58% 4.67% 4.30% 20. Book Net Worth Per Share Rs 114 141 149 137 128 21. Total Shares Number 5,000,000 5,000,000 6,250,000 7,500,000 10,700,000 22. Total Employees Number 115 143 177 212 256 23. Others

16.54% 22.04 700 31.76 10.58% 0.55 8.34% 10.37% 5.10% 3.73% 24.04% 1.77% 1.41% 94.17% 6.03%

Particulars

Indicators

F. Y. 2003/04

F. Y. 2004/05

F. Y. 2005/06

F. Y. 2006/07

Schedule 4.31

9.09 2.47 11.56 7.13% 0.44% 4.17% 137 11,860,992 260

53

Kumari Bank Limited Significant ing Policies Financial Year 16 July 2008 to 15 July 2009 (1 Shrawan 2065 to 31 Ashad 2066)

54

Schedule 4.32

1.

General Information Kumari Bank Limited (the “Bank”) is a limited liability company domiciled in Nepal. The address of its ed office is G.P.O. Box 21128, Putalisadak, Kathmandu, Nepal. The Bank is listed on the Nepal Stock Exchange Limited.



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

2.

Summary of Significant ing Policies The Significant ing policies applied in the preparation of the financial statements of the bank are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1

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

2.2

Basis of Preparation The financial statements have been prepared under the historical cost convention. The preparation of the financial statements in conformity with NAS and generally accepted ing principles requires the use of certain critical ing estimates. It also requires the management to exercise judgement in the process of applying the Bank’s ing policies.

2.3

Interest Income Interest income on loans and advances is recognised on cash basis as per the directive issued by Nepal Rasta Bank, which is not in accordance with Nepal ing Standards.



Interest income on Investments is recognised on accrual basis.

2.4

Commission Income Commission income of the bank is ed for on cash basis in general. However, Commission income exceeding Rs 100,000 earned on guarantees covering more than a year is ed for on accrual basis over the period of the guarantee.

2.5

Dividend Income Dividend is recognised as income when the right to receive the payment is established. However, no dividend is received during the year.

2.6

Foreign Exchange Transactions i. Foreign currency assets and liabilities as on 31 Ashad 2066 have been translated at mid rate (average of buying and selling r ate) of exchange prevalent as on 31 Ashad 2066.



ii. Gain/Loss realised in foreign currency transaction is ed for and shown as “Trading Gain” under the head “Exchange Fluctuation Gain/Loss”



iii. Revaluation gain arising due to fluctuation in exchange rate of foreign currencies is ed for and shown as” Revaluation G ain/Loss”. Amount equivalent to 25% of revaluation gain of the current year is transferred to Exchange Fluctuation Fund by w ay of appropriation as per directive issued by Nepal Rastra Bank.

2.7

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

2.8

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

2.9

Staff Loans Staff loan has been provided as per the product papers approve by board and shown under the head other assets.

2.10 Loan Loss Provision Provision is made for possible losses on loans and advances, overdraft and bills purchased at 1% to 100% on the basis of classification of loans and advances, overdraft and bills purchased in accordance with the directives of Nepal Rastra Bank. 2.11 Extra-ordinary Items Disclosure of extraordinary items are made as per the directives issued by Nepal Rastra Bank which is not which is not in accordance with Nepal ing Standards. 2.12 Loans & Advances Write off Unrecoverable loans and advances are written off in accordance with the bye-laws of the Bank approved by the Nepal Rasta Bank.

Amounts recovered against loans written off in earlier years are recognized as income in the profit and loss in the year of recovery. However, there is no such case in this fiscal year.

2.13 Investments Investments in Government Securities are valued at cost. Placements with maturity period more than 7 days are classified as Investment and valued at cost. Similarly, investment in the shares of Credit Information Centre Limited and bond of Nepal Electricity Authority is valued at cost since it has not been listed yet.

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

2.14 Fixed Assets and Depreciation a. Fixed assets are stated at historical cost. Historical cost includes expenditures that are directly attributable to the acquisition of the assets. b. Fixed assets are depreciated in accordance with Income Tax Act 2058 except for lease hold development expenses and machinery. c. Assets are depreciated only after their full capitalisation. d. Computer software cost is amortised over the period of five years in equal instalments. e. Asset under construction for which final settlement has not been made is booked as Asset in Process. f. Lease hold development costs are amortised over a period of 5 years. g. Machinery is depreciated applying the rate of 25% on written down value. 2.15 Proposed Dividend Disclosure of proposed dividend is made as per the directives issued by Nepal Rastra Bank which is not which is not in accordance with Nepal ing Standards. 2.16 Lease Rental The lease agreements entered into by the Bank for office buildings are operating lease agreements. The total payments made under operating leases are charged to Rent Expenses in the profit and loss on a monthly basis. 2.17 Retirement Benefits The Bank has schemes of retirement benefits namely Gratuity and Provident Fund. Provision for expenses on of Gratuity and Provident Fund is made on accrual basis with the amount of liabilities computed by the bank in accordance with its applicable schemes. Contributions to approved retirement fund are made on a regular basis as per the Retirement Fund rules and regulations. 2.18 Income Tax a. Current Income Tax Provision for current income tax is made in accordance with the provisions of the prevailing Income Tax Act, 2058 and Rules as amended. b. Deferred Income Tax Deferred income tax is provided on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. The principal temporary differences arise from depreciation of fixed assets. Deferred tax assets are recognised where it is probable that future taxable profit will be available against which the temporary differences can be utilised.

55

Deferred taxes related to temporary differences of the year are recognised in the income statement together with the deferred gain or loss. 2.19 Stationery Stationery purchased for consumption is expended at the time of consumption. 2.20 Non Banking Assets Non Banking Assets is booked at lower of market price or principle outstanding on the day before booking and provision for the asset has been made as per NRB directive. 2.21 Provisions, Contingent Liabilities and Contingent Assets The Bank creates a provision when there is a present obligation as a result of past events that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. 3.

56

Contingent assets are not recognised in the financial statements.

Rounding off and Comparative Figures Figures are rounded to nearest rupees. Previous year’s figure has been regrouped or rearranged where necessary.

Kumari Bank Limited Notes to s Financial Year 16 July 2008 to 15 July 2009 (1 Shrawan 2065 to 31 Ashad 2066)

Schedule 4.33

1.

Provision for Bonus Provision for bonus has been provided for at 10% of net profit, after making adjustments for loan loss provision and bonus as per the Bonus Act, 2030.

2.

Staff Housing Fund Staff Home Loan is provided as per the bank’s policy. A separate housing fund has not been created in accordance with Labour Act, 2048.

3.

General Reserve As per the requirement of Nepal Rastra Bank, 20% of the current year’s profit has been transferred to General Reserve.

4.

Tax Settlement Outstanding / Contingent Liability Self assessment returns filed by the bank for the fiscal year 2062/63, 2063/64 & 2064/65 are pending for assessment at the Inland Revenue Office.

5.

Provision for Gratuity During the year, the Bank has provided Rs 7,428,478 (Previous Year Rs 2,680,562) on of gratuity. Gratuity is treated as Approved Retirement Fund for the purpose of tax assessment of individual staff.

6.

Dividend and Bonus The Board has proposed 10% bonus share for the current year. Further, 10% bonus share as proposed in the financial year 2064/65 related to the 10,800 kitta right share of blacklisted promoter withheld by bank as per circular of NRB has also been shown under the head proposed issue of bonus share subsequent to the clearance of said promoter from the blacklist.

7.

Unpaid Dividend None

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

Cumulative Paid up Capital

Rs in million

Remarks



2057/58 2058/59 2059/60 2060/61 2061/62 2062/63 2063/64

350,000,000 350,000,000 350,000,000 500,000,000 625,000,000 750,000,000 900,000,000



2064/65

1,007,000,000

In fiscal year 2063/64, the bank has issued right share of Rs 180 million. Out of total issue, Rs 170 million has been capitalized as on balance sheet date. Further Rs 8.272 million has been capitalized as on g date of financial statements.



2065/66

1,186,099,200

In the fiscal year 2064/65, the bank has issued 10 % bonus share and 15% right share. 10% bonus share has been capitalized on Share Capital while right share is not yet issued.

Initial Public Offering of Rs 150 million (4:1) Right share issue of Rs 250 million Issue of Bonus share of Rs 125 million Issue of Bonus Share of Rs 150 million

9. Sale of Land and Building A portion of building owned by the bank having its book value Rs 755,323.80 is demolished during the year and Rs 800,000 is fetched there from. 10.

KBL Bond 2070 Bank has issued KBL Bond 2070 worth Rs 400 million in fiscal year 2064/65. For the redemption of the bond, Capital Redemption Fund has been created on which Rs 95 million is transferred in this year as per NRB instruction.

11.

Deferred Tax Deferred income taxes are calculated on temporary differences using an effective tax rate of 30%.

57

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

12.

Particulars

Balance 15 Jul 2008

Deferred Income Tax Assets Fixed Assets Total Deferred Tax Assets Deferred Income Tax Liabilities Fixed Assets Total Deferred Tax Liabilities Net – Deferred Income Tax Asset/(Liabilities)

- - - (1,784,443) (1,784,443) (1,784,443)

Balance 15 Jul 2009

6,292,334 6,292,334 - 1,784,443 1,784,443 8,076,777

6,292,334 6,292,334 6,292,334 Rs in million

Total Amount

Agency s

Upto 1 Year

(144.56)

Loan Disbursed, recovered, written off and outstanding during the year.



The loan disbursed, recovered and outstanding during the year is given below:



-

-

Rs in million

Total Disbursed

Total Settled

Outstanding

10,883

7,610

14,795

11,522

14.

Summary of Changes in deposit during the year



The financial growth of the deposits during the year is given below: Pre. Year (Rs)

Particulars



1) Current Deposit a) Local Currency b) Foreign Currency 2) Saving Deposit a) Local Currency b) Foreign Currency 3) Fixed Deposit a) Local Currency b) Foreign Currency 4) Call Deposit a) Local Currency b) Foreign Currency 5) Margin Deposit a) Local Currency b) Foreign Currency Total Deposit

602 571 31 4,139 3,962 177 3,800 3,473 327 4,125 4,073 52 110 110 0 12,775

More than 3 Years

1 Year to 3 Years

(144.56)

13.

Opening Balance

Rs in million This Year (Rs)

Changes

780 759 21 4,170 4,063 107 4,527 4,507 21 6,136 6,088 48 98 98 - 15,711

178 188 (10) 31 101 (70) 727 1,034 (306) 2,011 2,015 (4) (12) (12) 2,936

Weighted Average Interest Rate Spread Particulars The weighted average yield on Interest bearing assets for the year The weighted average cost on Interest bearing liability for the year The weighted average Interest Rate Spread

58

Movement during the year

Reconciliation Status Particulars

15.

(Rs)

Percentage 9.98 5.81 4.17

17.

Classification of Assets and Liabilities based on Maturity Rs in million Assets Cash Bank Balance Investment in Foreign Banks HMG Debt Paper NRB Debt Paper Inter bank Loan Loan Total Assets Liabilities Borrowings Current/Call Savings Time Deposit Debt Papers Total Liabilities Net Assets / Liabilities Cumulative Net Assets / Liabilities

18.

1-90 Days

91 - 180 Days

181 - 270 Days

271 - 365 Days

More than 1 Year

Total

549 1,227

212 208 420 - 420 5,872

139 139 0.4 0.4 139 6,011

882 29 911 2,692 2,692 (1,781) 4,230



549 1,227 197 882 442 14,795 18,092

230 10,652 12,658 293 777 6,136 7,206 5,452 5,452

197 3,767 3,964 100 4,170 1,835 6,105 (2,141) 2,089

293 877 10,306 4,527 16,003 2,089

Borrowing by the bank against the collateral of own assets: The bank has no such borrowing in this year.

59

Schedule 4.34

Kumari Bank Limited List of Promoters / Shareholders from Promoter’s Group availing loan from different banks and financial institutions against the security of KBL shares As on 15th July 2009 (31st Ashad 2066) Shares under the ownership

S.N.

Name of promoter/ Shareholders under Promoter Group

Total No. of Shares

Percentage of paid up capital

1. Yaggya Pratap Rana 1,72,084 1.45 2. Rajendra Das Shrestha 23,760 0.20 3. Bhim Krishna Udas 1,18,800 1.00 4. Janak Raj Wagle 4,752 0.04 5. Phurba Wangdel Lama 1,18,800 1.00 6. Govinda Das Shrestha 1,78,200 1.50 7. Bidhya Krishna Shrestha 2,17,800 1.84 8. Anil Das Shrestha 1,18,800 1.00 9. Laxman Shrestha 7,12,800 6.01 10. Antu Shrestha 92,664 0.78 11. Sunil Nand Singh Pradhan 11,880 0.10 12. Madhav Kumar Basnet 11,880 0.10 13. Shiva Shankar Agrawal 1,04,068 0.88 14. Sophie Upadhaya 57,024 0.48 15. Tara Rana 11,880 0.10 16. Pegi Pandey 23,760 0.20 17. Sita Gurung 35,640 0.30 18. Sabitri Gurung 4,75,200 4.01 19. Kamal Thapa 19,008 0.16 20. Atmaram Murarka 83,160 0.70 21. Pradeep Kumar Murarka 83,160 0.70 21. Pashupati Murarka 83,160 0.70 22. Naresh Dugad 83,160 0.70 23. Kumud Kumar Dugad 1,01,310 0.85 24. Bikash Dugad 83,160 0.70 25. Bachha Raj Tated 47,520 0.40 26. Ananda Kumar Ringata 35,640 0.30 27. Jeevan Nepal 23,760 0.20 28. Balram Neupane 23,760 0.20 29. Mahabir Prasad Goyel 1,56,816 1.32 30. Ganga Amatya 49,500 0.42 31. Bhubaneshwori Pant 47,520 0.40

60

Description of loan Name of other banks and financial institutions from which loan has been taken

Loan Details

Nepal Investment Bank Limited, Durbarmarg, Ktm Global Bank Limited Machhapuchhre Bank Limited Sanima Bikash Bank Limited Bigunj Finance Limited, Ktm Nabil Bank Limited, Kantipath, Ktm Lumbini Bank Limited Lumbini Bank Limited Prime Bank Limited Lumbini Bank Limited Global Bank Limited Standard Finance Limited Prudential Finance Limited ILFC Finance Limited Siddhartha Bank Limited Gurkha Development Bank Limited Prudential Finance Limited Lalitpur Finance Limited Lalitpur Finance Limited Nepal Investment Bank Limited Lumbini Bank Limited Siddhartha Bank Limited Reliable Finance Limited Himalayan Bank Limited Nepal Investment Bank Limited, Citizens Bank International Limited Harati Maa Saving and Co-Operative Limited Machhapuchhre Bank Limited Machhapuchhre Bank Limited Machhapuchhre Bank Limited NIC Bank Limited NIC Bank Limited NIC Bank Limited NIC Bank Limited Nepal SBI Bank Limited Bank of Asia Nepal Limited Prime Bank Limited Siddhartha Bank Limited Machhapuchhere Bank Limited Prime Bank Limited ICFC Bittya Sanstha Limited

No. of shares pledged (Kitta) 59,000 5,000 1,000 50,000 2,000 20,000 30,000 45,000 75,000 20,000 30,000 95,000 65,000 1,05,000 5,000 30,000 39,000 5,000 5,000 14,500 24,000 5,000 5,000 5,000 1,80,000 20,000 3,000 35,000 35,000 35,000 35,000 35,000 35,000 20,000 15,000 5,000 5,000 5,000 65,000 25,000 20,000

Remarks

Kumari Bank Limited Principal Indicators (For Previous 6 years) S.N.

Particulars

As per Unaudited As per Audited Financial Statement Financial Statement



Schedule 4.35 Rs in ‘000

Variance In Amount

In %

1 Total Capital and Liabilites (1.1 to 1.7) 18,533,226 18,538,565 (5,339) - 1.1 Paid Up Capital 1,186,099 1,186,099 0 0.00 1.2 Reserve and Surplus 451,800 445,437 6,362 1.41 1.3 Debenture and Bond 400,000 400,000 0 - 1.4 Borrowings 293,420 293,420 0 - 1.5 Deposits (a+b) 15,710,925 15,710,925 0 0.00 a. Domestic Currency 15,514,536 15,514,536 0 - b. Foreign Currency 196,389 196,389 0 0.00 1.6 Income Tax Liability (9,967) 235 (10,202) 102.36 1.7 Other Liabilities 500,950 502,448 (1,499) (0.30) 2 Total Assets (2.1 to 2.7) 18,533,226 18,538,565 (5,339) - 2.1 Cash & Bank Balance 1,776,299 1,776,299 0 - 2.2 Money at Call and Short Notice 30,000 30,000 0 - 2.3 Investment 1,510,828 1,510,828 0 - 2.4 Loans and Advances 14,593,570 14,593,347 223 0.0015 2.5 Fixed Assets 247,833 247,833 0 - 2.6 Non Banking Assets - - - 2.7 Other Assets 374,696 380,258 (5,562) (1.48) 3 Profit and Loss Acccount 3.1 Interest Income 1,375,453 1,374,722 730 0.05 3.2 Interest Expenses 816,203 816,203 0 0.00 A. Net Interest Income (3.1-3.2) 559,250 558,520 730 - 3.3 Fees, Commission and Discount 79,104 79,104 0 - 3.4 Other Operating Income 19,747 19,747 0 - 3.5 Foreign Exchange Gain/ Loss (Net) 59,002 59,002 0 - B. Total Operating Income (A+3.3+3.4+3.5) 717,103 716,372 730 - 3.6 Staff Expenses 114,451 115,985 (1,534) (1.34) 3.7 Other Operating Expenses 186,271 186,502 (231) (0.12) C. Operating Profit Before Provision (B- 3.6-3.7) 416,380 413,885 2,495 - 3.8 Provision for Possible Losses 61,419 57,403 4,016 6.54 D. Operating Profit (C-3.8) 354,961 356,482 (1,522) - 3.9 Non Operating Income/Expenses (Net) 1,091 1,112 (21) (1.89) 3.10 Write Back of Provision for Possible Loss 51,261 47,021 4,240 8.27 E. Profit from Regular Activites (D+3.9+3.10) 407,313 404,615 2,698 - 3.11 Extraordinary Income/Expenses (Net) (876) (876) 0 (0.00) F. Profit before Bonus and Taxes ( E+3.11) 406,437 403,739 2,698 - 3.12 Provision for Staff Bonus 36,949 36,704 245 0.66 3.13 Provision for Tax 101,683 113,670 (11,987) (11.79) G. Net Profit/Loss (F-3.12-3.13) 267,805 253,366 14,439 -

Reasons for Variance

Tax on proposed bonus share and change in income/ expenses as below.

Adjustment of deferred tax assets after statutory audit & changes by tax assessment. Medical and accumulated leave to retired staffs & provision for audit fee

Change in loan loss provision during the statutory audit

Creation of deferred tax assets after audit & adjustment of interest receivable on loans Adjustment of interest receivable

Medical and accumulated leave to retired staffs Statutory audit fee Write back of provision on NBA erroneously included under Provision Write Back on Loans & change in loan loss provision. Adjustment of the amount recovered from staff who left the bank without prior notice write back of provision on NBA erroneously included under Provision Write Back on Loans

Change in net profit before bonus Difference in depreciation and after tax audit

61



Schedule 4.36

Kumari Bank Limited Unaudited Financial Results (Quarterly) As at Fourth Quarter (15 July 2009) of the Fiscal Year 2008/09 Rs in ‘000 S.N. 1. 2. 3.

Particulars

This Quater Ending (Unaudited)

Previous Quater Ending (Unaudited)

Total Capital and Liabilites (1.1 to 1.7) 18,533,226 17,988,143 1.1 Paid Up Capital 1,186,099 1,078,272 1.2 Reserve and Surplus 451,800 477,460 1.3 Debenture and Bond 400,000 400,000 1.4 Borrowings 293,420 87,741 1.5 Deposits (a+b) 15,710,925 15,561,725 a. Domestic Currency 15,514,536 15,338,963 b. Foreign Currency 196,389 222,762 1.6 Income Tax Liability (9,967) (5,837) 1.7 Other Liabilities 500,950 388,781 Total Assets (2.1 to 2.7) 18,533,226 17,988,143 2.1 Cash & Bank Balance 1,776,299 1,868,972 2.2 Money at Call and Short Notice 30,000 125,000 2.3 Investment 1,510,828 1,929,946 2.4 Loans and Advances 14,593,570 13,501,387 2.5 Fixed Assets 247,833 253,630 2.6 Non Banking Assets - 2.7 Other Assets 374,696 309,207 Profit and Loss Acccount Up to Previous Up to This Year Quarter Quarter 3.1 Interest Income 1,375,453 965,876 3.2 Interest Expenses 816,203 585,132 A. Net Interest Income 559,250 380,743 3.3 Fees, Commission and Discount 79,104 52,839 3.4 Other Operating Income 19,747 14,644 3.5 Foreign Exchange Gain/ Loss (Net) 59,002 46,646 B. Total Operating Income (A.+3.3+3.4+3.5) 717,103 494,872 3.6 Staff Expenses 114,451 77,153 3.7 Other Operating Expenses 186,271 126,522 C. Operating Profit Before Provision (B.- 3.6-3.7) 416,380 291,197 3.8 Provision for Possible Losses 61,419 14,283 D. Operating Profit (C-3.8) 354,961 276,914 3.9 Non Operating Income/Expenses (Net) 1,091 1,297 3.10 Write Back of Provision for Possible Loss 51,261 E. Profit from Regular Activites (D+3.9+3.10) 407,313 278,211 3.11 Extraordinary Income/Expenses (Net) (876) (225) F. Profit before Bonus and Taxes ( E. + 3.11) 406,437 277,985 3.12 Provision for Staff Bonus 36,949 25,271 3.13 Provision for Tax 101,683 75,814 G. Net Profit/Loss (F.-3.12-3.13) 267,805 176,900 4. Ratios At the End of At the End of Previous Quater This Quater 4.1 Capital Fund To RWA 11.57% 12.93% 4.2 Non Performing Loan (NPL) to Total Loan 0.43% 0.82% 4.3 Total Loan Loss Provision to Total NPL 313.61% 182.06%

62

Corresponding Previous Year Quater Ending (Audited) 15,026,599 1,070,000 294,885 400,000 100,000 12,774,281 12,188,605 585,676 (9,650) 397,083 15,026,599 933,841 55,360 2,138,798 11,335,088 222,001 3,141 338,370 Up to Corresponding Previous Year Quarter 957,245 498,734 458,511 48,495 17,805 41,807 566,618 89,570 148,143 328,905 64,024 264,881 15,588 7,241 287,710 (4,531) 283,179 25,743 82,506 174,930 At the End of Corresponding Previous Year Quater 14.41% 1.32% 122.83%

Disclosure as per Basel II Requirement 1.

Capital Structure and Capital Adequacy



a. Please refer the Schedule 4.30 (A) b. Subbordinated Term Debt has its maturity on the FY 2070. Interrest rate on the debt is 8% payable on semiannual basis.

2.

Risk Exposures



a. Please refer the Schedule 4.30(A), 4.30(B), 4.30(D) & 4.30(E) b. Total Amount of NPAs

(Rs)

Gross Loan Amount

Restructured Loan Substandard Loan Doubtful Loan Loss Loan Total

Net Loan Amount

6,002,919 13,082,971 31,735,261 19,724,451 70,545,602

5,525,554 9,812,228 15,867,631 0 30,923,413

c. Gross NPA to Gross Advance is 0.44% d. Net NPA to Net Advances is 0.18%. e. Nonperforming loan is reduced by 58% in comparison to the previous fiscal year. f. For loan write off, please refer to Schedule 4.28(A). There is no interest write off during the year. g. Additional loan loss provision during the year is Rs 57,403,005 while loss provision of Rs 42,781,308 is written back during the same year. So, net additional loan loss provision is Rs 14,621,697. h. For investment detail, please ferer Schedule 4.12.1, 4.12.2 & 4.12.3.

3.

Risk Management Function



Risk Assessment / Mitigation Practices at Kumari Bank Limited



Considering the need to establish effective Risk Management and Risk Mitigation practices at Kumari Bank Ltd, we have developed a system of continuous improvement of processes wherein each member of the bank works towards balancing profitability with prudence. The system encomes all banking functions from client interface, to back-office operation, to the strategic decisions formulated by the management committees and the Board of Directors. Each area has its own check and balance procedure to assess and mitigate risks involved. The practices thus observed are as follows:



KBL Organization Structure



The bank’s lending approval authority is divided into two distinct units, namely Credit and Risk Assessment. While the Credit unit or the Business Development Division concentrates more on optimum utility of assets, every lending decision of this Division is reassessed and revaluated by the Risk Assessment Division for final approval. The Risk Assessment Division applies its objective judgment on risk variables deemed appropriate in each instance of lending decision. For this purpose, the Risk Assessment Division has two distinct units, the Risk Approval Department, which facilitates final lending decision after duly adjudging risks as mitigaged to an acceptable level, and the Credit istration and Control Department, which evaluates the endorsed paperwork prior to actual sanction, and also after it.



Depending upon the volume of loans and the nature of risks associated, lending decisions are subject to validation and approval by various levels of the hierarchy, in which some lending decision are to be approved by the General Manager, and other by even the Board of Directors as each case may require.



Risk Measurement Criteria and Mitigation Process Credit risks are evaluated from the initial customer interface on an array of risk variable by the Credit Policy Guidelines of the Bank, as well as on individual intuition of experiences officers. As proposals escalated for approval, judgmental and analytical criteria become broader and more conceptual.



Kumari Bank Ltd uses the best practices in banking, to make its operation secure through a system of procedural crosschecking

63

mechanism in each operational transaction. An Internal Audit Department, which also doubles as a Concurrent Audit Department system, continuously functions to alert bank personnel to the meticulousness required in handling operations in every functional department. A credit monitoring system is well established in the Bank, which created a continious learning and improvement environment, and the Bank’s efficiency goal has been to move towards the most prudent practices in the industry.

Types of eligible credit risk mitigants used and the benefits availed under CRM(Rs)

64

Particulars

Eligible CRM

Deposit with Bank

131,136,332

Deposit with other bank/FI

16,000,000

Total

147,136,332

Branch Network Corporate Office Durbarmarg, Kathmandu Tel: 01-4221311, 4221314 Fax: 01-4226644

Inside KTM Valley

Putalisadak Govinda Bhawan, Putalisadak, Kathmandu Tel: 01-4232112, 4232113 Fax: 01-4231960

Baneshwor Baburam Acharya Sadak, Old Baneshwor, Kathmandu Tel: 01-4499322 Fax: 01-4497120

New Road Pratap Bhawan, New Road, Kathmandu Tel: 01-4238388, 4238385 Fax: 01-4238365

Chabahil Chuchepati, Chabahil, Kathmandu Tel: 01-4484434 Fax: 01-4490978

Kumaripati Kumaripati, Lalitpur Tel: 01-5556024, 5556025 Fax: 01-5556027

Budhanilkantha Narayanthan Milan Chowk, Budhanilkantha, Kathmandu Tel: 01-4377718 Fax: 01-4385644

Gongabu Kantipur Mall, Gongabu, Kathmandu Tel: 01-4385807, 4385809 Fax: 01-4385644 Durbar Marg Durbar marg, Kathmandu Tel: 01-4226629, 4226650 Fax: 01-4226644

Outside KTM Valley

Biratnagar Biratnagar, Goshwara Road, Morang Byapaar Sangh Building Tel: 021-537101, 537102 021-537105 Birgunj Adarsha Nagar, Birgunj Tel: 051-524812, 524813 Fax: 051-521641 Dry Port Birgunj Tel: 051-621025 Fax: 051-621818 National Medical College Birgunj (Extension Counter) Tel: 051-621890 Pokhara New Road, Pokhara Tel: 061-540266, 540267 Fax: 061-541717 Itahari Pathivaraa Market, Dharan Road, Itahari Tel: 025-586661, 586659 Fax: 025-586658 Narayangadh Pulchowk, Narayangadh, Chitwan Tel: 056-523091, 523092 Fax: 056-523090

Koteshwor Tinkune, R.K. Mahal, Kathmandu Tel: 01-4492921, 4499613 Fax: 01-4497325

Birtamode Anarmani-3, Birtamode, Jhapa Tel: 023-541028 Fax: 023-543822 Damauli Damauli - 2, Tanahun Tel: 065-561787 Fax: 065-561788 Baglung Baglung Muncipality -2 , Baglung Tel: 068-522472, 522473 Fax: 068-522474 Mr. Bhupendra Khadka Bhairahawa Siddharthanagar - 8, Bhairahawa, Rupandehi Tel: 071-521008, 521009 Fax: 071-521000 Butwal Butwal - 6, Shreeram Tower Rammandir Line Tel: 071-551546, 551547 Fax: 071-551545 Urlabari Urlabari, Itahari Road Tel: 021-541901 Fax: 021-541902

65

Notes

66