kumari bank annual report

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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 Account 29

Profit & Loss Appropriation Account 30

Statement of Changes in Equity 31

Cash Flow Statement 32

Schedules 33

Significant Accounting Policies 54

Notes to Accounts 57

Disclosure as per Basel II Requirement 63

Branch Network 65

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• 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 accountability, 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.

• 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 StatementWe 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 ValuesOur 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 Focusa. Long term win-win relationship

b. Excellence in business

c. Managing change

d. Need centered product are the KBL product

e. Innovative insights

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

Vision

Mission

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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.

Introduction

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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 terms 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 support and cooperation from all our stakeholders- customers, employees, shareholders, society and regulators.

Thank You,

Shiva Ratan SaradaChairman

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Board ofDirectors

Mr. Shiva Ratan SaradaChairman

Mr. Jagdish P. ChaudharyDirector

Mr. Samson J.B. RanaDirector

Dr. S. K. DhakalDirector

Mr. Amir Pratap J.B. RanaDirector

Mr. Santoo ShresthaDirector

Mr. Rasendra Bahadur MallaDirector

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Mr. Shiva Ratan Sarada

Mr. Jagdish P. Chaudhary

Mr. Samson J.B. Rana

Dr. S. K. Dhakal

Mr. Amir Pratap J.B. Rana Mr. Santoo Shrestha

Mr. Rasendra Bahadur Malla

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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 support.

Radhesh PantChief Executive Officer

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NAME DESIGNATION DEPARTMENTRadhesh Pant Chief Executive Officer Udaya Krishna Upadhyay Chief Business Officer Geha Nath Dhungana Chief Operations Officer Suresh Kumar Karna Chief Information OfficerTika Ram Chapagain Chief Coordination Officer Binod Narasinha Shrestha Head Institutional Banking, Central Remittance and Business DevelopmentSanjay Poudyal Head Corporate Strategy & DevelopmentSaroj Shrestha Head Corporate & Business Banking

Ajit Bhattarai Head Finance & PlanningBikas Khanal Head Credit Risk ManagementNarayan Prakash Bhuju Head Information TechnologyNarendra Prasad Chhatkuli Head Legal & Shares and Company Secretary Rajesh Shrestha Head CardAshish Bhattarai Head Human Resources and Central LogisticsManish Timilsina Head Corporate CreditMridul Mainali Head Risk ApprovalParmeshwar Pant Head Treasury & Correspondent BankingShreeyukta Thapaliya Pandey Head Corporate CommunicationsSipa Regmi Head Marketing & ServicesMilan Kumar Maskey Head Foreign TradeNirmal Khatiwada Head Internal AuditPrajwal Pant Head Transaction & Retail ServicesVishal Rauniyar Head Credit Administration & Control Department

KBL TeamSenior Management

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Sanjeeb Sainju Branch Manager PutalisadakBinam Kumar Shrestha Branch Manager BiratnagarBiswas Aryal Branch Manager BirgunjSudarshan Jung Rana Branch Manager PokharaBishwa Mani Regmi Branch Manager New RoadAmbar Bhattacharya Branch Manager ItahariDeepak Adhikari Branch In-Charge Dry PortAnuradha Choudhary Branch Manager KumaripatiPrabin Jha Branch Manager GongabuRoshan Chandra Gautam Branch Manager NarayangadhNiraj Rai Branch Manager BirtamodSuresh Raj Pandey Branch Manager DamauliBhupendra Khadka Branch Manager BaglungManish Timilsina Branch Manager Durbar MargBadri Kedar Shrestha Branch Manager BhairahawaBiswo Poudel Branch Manager ButwalKanchan Sharma Branch Manager BaneshworNamita Shakya Branch Manager ChabahilAkash Dahal Branch In-Charge UrlabariSamjhana Rana Branch Manager BudanilkanthaRenu Koirala Branch Manager Koteshwor

KBL TeamBranch Managers

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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.

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.

DepositThe deposit of the Bank has increased by 22.99 % to Rs 15.71 billion in the review period.

Director’sReport

Rs in millionFinancial Highlights

Particular F/Y

2008/09F/Y

2007/08

Increase/Decrease

(Rs)Growth

(%)

Total Asset 18,538.56 15,026.59 3,511.97 23.37Deposit Liabilities 15,710.93 12,774.28 2,936.65 22.99Loans and Advances(Net) 14,795.26 11,522.38 3,272.88 28.41Investment 1,540.83 2,194.16 (655.33) 29.77Interest Income 1374.72 957.24 417.48 43.61Interest Expenses 816.20 498.73 317.47 63.66Net Interest Income 558.52 458.51 100.01 21.81Other OperatingIncome 157.85 108.11 49.74 46.01Other OperatingExpenses 302.48 237.71 64.77 27.25Operating Profit 413.89 328.91 84.98 25.84Net Profit 261.44 174.93 86.51 49.45

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 account 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:

16,000

14,000

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4,000

2.000

-2009/102008/92007/82006/72005/6

Rs in million

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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.

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 account 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

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 account 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.

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2.000

-2009/102008/92007/82006/72005/6

Rs in million

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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 account 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 accountability, 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

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

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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 support 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 accountable 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 account 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 registering 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

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

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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 non-Executive 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 Non-Executive 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 Members 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

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

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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 upcoming 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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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

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

Rs in ‘000

Particular F/Y

2008/09F/Y

2009/10Growth in

percentage

Loan & Advances 1,24,93,977 1,46,54,828 17.29Interest Income 3,69,007 4,88,463 32.37Other Income 35,399 37,453 5.80Interest Expenses 259,693 320,358 23.36Other Expenses 57,618 85,840 48.98Operating Profit 87,095 1,19,718 37.46

Financial Highlights of First Three Months of 2009/10

significant progress in the first three months of current FY. The achievements of first three months are listed below.

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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 Administrative Expenses

Following are the major heads under the Bank’s Administrative Expenses during F/Y 2008/09:

Staff Expenses : Rs 115,984,919.00 Other Operating Expenses : 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:

Chairman Directors

Meeting Allowance Rs 10,000.00 Rs 8,000.00Monthly Business Development Allowance Rs 2,000.00 Rs 2,000.00Total Rs 1,911,422.00

25

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.

26

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.

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 support 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 support and guidance. Similarly, we appreciate the efforts of the staff members for their relentless hard work in delivering such good results.

Thanking you.

For and on behalf of the Board of Directors,

Shiva Ratan SaradaChairman

Dr. Shova Kanta DhakalDirector

S.No Particulars C.E.O Managers / Other Executives

1. Salary 2,637,436.00 7,242,522.002. Allowances 684,077.00 1,816,755.003. Provident Fund 263,743.60 724,252.204. Dashain Allowance 303,190.00 827,430.005. Total Remuneration 3,888,446.00 10,610,959.206. Bonus As per the Bonus Act7.

8.

Vehicle, Fuel and Maintenance Allowance, Driver Facility, Personal Loan Scheme, Newspaper and Telephone facility

As per the Contract

between the Bank and the

CEO

As per bank’s Personal Policies

Guidelines

Medical Allowance, Leave Fare Allowance, Accident Insurance, Life Insurance

(Rs)

27

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 account, statement of changes in equity and cash flow statement for the year then ended and a significant accounting policies and other explanatory notes. These financial statements are the responsibility of the Bank’s management.

Auditor’s 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 supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

Report on the requirements of Banks and Financial Institutions Act 2063 and company Act 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 Account and the Cash flow Statement have been prepared in accordance with the methods and format specified by Nepal Rastra Bank, and they are in agreement with the books of accounts of the Bank; and the accounts and records of the Bank are properly maintained in accordance with the prevailing laws.

To the best of our information and according to the 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 Accounting 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 SharmaPartner

CSC & Co.Chartered Accountants

1955, Tanka Prasad Ghumti SadakBabar Mahal

PO Box: 4861, Kathmandu, NepalTel :+977-1-4259414, 4268798, 4251518

Fax :+977-1-4244255E-mail: [email protected]

CSC & CoChartered Accountants

Auditors’ Report

28

Kumari Bank LimitedBalance Sheet End of Ashad 2066 (15 July 2009)

Capital and Liabilities Schedule Current Year (Rs) Previous Year (Rs)

1. Share Capital 4.1 1,186,099,200 1,070,000,000 2. Reserves and Funds 4.2 438,853,508 294,885,269 3. Debentures & Bonds 4.3 400,000,000 400,000,000 4. Borrowing Outstanding 4.4 293,420,000 100,000,000 5. Deposit Liabilities 4.5 15,710,925,263 12,780,153,444 6. Bills Payable 4.6 70,087,025 65,296,714 7. Proposed Dividend Payable - 6,583,752 - 8. Income Tax Liabilities - 234,986 - 9. Other Liabilities 4.7 432,361,375 325,914,001 Total Capital and Liabilities 18,538,565,109 15,036,249,428

Assets Schedule Current Year (Rs) Previous Year (Rs)

1. Cash Balance 4.8 549,108,504 565,641,118 2. Balance with Nepal Rastra Bank 4.9 1,120,760,644 244,576,115 3. Balance with Banks/Financial Institution 4.10 106,429,652 123,624,444 4. Money at Call and Short Notice 4.11 30,000,000 55,360,000 5. Investment 4.12 1,510,828,482 2,138,797,590 6. Loans, Advances and Bills Purchase 4.13 14,593,346,830 11,335,087,939 7. Fixed Assets 4.14 247,832,774 222,000,872 8. Non Banking Assets 4.15 - 3,140,779 9. Other Assets 4.16 380,258,223 348,020,571 Total Assets 18,538,565,109 15,036,249,428

Contingent Liabilities Schedule 4.17Declaration of Directors Schedule 4.29Capital Adequacy Table Schedule 4.30 (A)Statement of Credit Risk Schedule 4.30 (B)Applicable Credit Risk Mitigants Schedule 4.30 (C)Statement of Operational Risk Schedule 4.3 (D)Statement of Market Risk Schedule 4.30 (E)Principal Indicators Schedule 4.31Principal Accounting Policies Schedule 4.32Notes to Accounts 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.

Date: 6 Oct, 2009Place: Kathmandu


Rashendra B. MallaDirector

Radhesh Pant Chief Executive Officer

Shiva Ratan Sarada Chairman

Amir Pratap J.B. RanaDirector

Santoo ShresthaDirector

Samson J.B. RanaDirector

Madan K. SharmaPartner,CSC & Co.,Chartered Accountants

Geha Nath DhunganaChief Operations Officer

Jagdish P. ChaudharyDirector

As per our report of even date

29

Particulars Schedule Current Year (Rs) Previous Year (Rs)

1. Interest Income 4.18 1,374,722,467 957,245,724 2. Interest Expenses 4.19 816,202,890 498,734,222 Net Interest Income 558,519,577 458,511,502 3. Commission and Discount 4.20 79,104,277 48,494,633 4. Other Operating Income 4.21 19,746,723 17,805,210 5. Exchange Fluctuation Income 4.22 59,001,781 41,807,623 Total Operating Income 716,372,358 566,618,968 6. Staff Expenses 4.23 115,984,919 89,570,438 7. Other Operating Expenses 4.24 186,502,160 148,143,138 8. Exchange Fluctuation Loss 4.22 - - Operating Profit before Provision for Possible Losses 413,885,279 328,905,392 9. Provision for Possible Losses 4.25 57,403,005 64,023,790 Operating Profit 356,482,274 264,881,602 10. Non Operating Income /(Loss) 4.26 1,111,653 15,588,389 11. Loan Loss Provision Written Back 4.27 47,021,147 7,240,964 Profit from Regular Activities 404,615,074 287,710,955 12. Profit/Loss from Extra-Ordinary Activities 4.28 (876,031) (4,531,068) Net profit after considering all activities 403,739,043 283,179,887 13. Provision for Staff Bonus 36,703,549 25,743,626 14. Provision for Income Tax 105,592,905 82,506,034 * Current Year’s 113,669,682 80,721,591 * Upto Previous year - - * Deferred Tax (8,076,777) 1,784,443 Net Profit/Loss 261,442,589 174,930,227

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

Schedule 4.18 to 4.28 and 4.32- 4.35 form integral part of Profit and Loss Account











Geha Nath DhunganaChief Operations Officer


30

Particulars Schedule Current Year (Rs) Previous Year (Rs)

Income 1. Accumulated Profit up to Last Year 41,357,165 35,031,460 2. This Year’s Profit 261,442,589 174,930,227 3. Exchange Fluctuation Fund 4. Capital Adjustment Fund - Total 302,799,754 209,961,687 Expenses 1. Accumulated Loss up to Last Year 2. Current Year’s Loss 3. General Reserve Fund 52,288,518 34,986,045 4. Contingent Reserve 5. Institution Development Fund 6. Dividend Equalization Fund 7. Staff Related Reserves 8. Proposed Dividend 6,583,752 5,675,116 9. Issue of Proposed Bonus Shares 118,836,720 107,827,200 10. Special Reserve Fund 11. Exchange Fluctuation Fund 7,754 116,161 12. Capital Redemption Reserve Fund 95,000,000 20,000,000 13. Capital Adjustment Fund 14. Previous Year’s Tax Adjustment 3,063,398 - 15. Deferred Tax Fund 6,292,334 Total 282,072,476 168,604,522 16. Accumulated Profit/(Loss) 20,727,278 41,357,165

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











Geha Nath DhunganaChief Operation Officer


31

Opening Balance 1,070,000,000 41,357,165 119,847,501 - 5,853,403 127,827,200 1,364,885,270

Adjustments 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 -

Capital Adjustment Fund -

Declaration of Dividend (6,583,752) (6,583,752)

Exchange Fluctuation Fund (7,754) 7,754 -

Right Share Issued 8,272,000 8,272,000

Issue of Bonus Share 107,827,200 (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 1,186,099,200 20,727,278 172,136,019 - - 5,861,157 240,129,054 1,624,952,708

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 AccumulatedProfit/Loss

GeneralReserve Fund

CapitalReserve Fund

SharePremium

Exchange Fluctuation Fund

Other Reserve& Fund

TotalAmount (Rs)









Geha Nath DhunganaChief Operation Officer


32

Particulars Current Year (Rs) Previous Year (Rs)

(A) Cash Flow from Operating Activities 914,637,801 (373,116,233) 1. Cash Received 1,533,633,183 1,080,550,334 1.1 Interest Income 1,370,968,716 956,854,479 1.2 Commission and Discount Income 79,243,277 48,494,633 1.3 Income from Foreign Exchange transaction 59,001,781 41,807,623 1.4 Recovery of loan written off - - 1.5 Other Income 24,419,409 33,393,599 2. Cash Payment (1,191,574,514) (809,005,678) 2.1 Interest Expenses (803,428,742) (493,513,029) 2.2 Staff Expenses (152,688,468) (115,314,064) 2.3 Office Overhead Expenses (136,686,240) (113,141,483) 2.4 Income Tax Paid (98,771,064) (82,506,034) 2.5 Other Expenses - (4,531,068)

Cash Flow before changes in Working Capital 342,058,669 271,544,656Increase /(Decrease) of Current Assets (2,649,937,224) (2,851,731,892) 1.(Increase)/Decrease in Money at Call and Short Notice 25,360,000 316,855,000 2. (Increase)/Decrease in short term Investment 634,769,108 (442,511,675) 3. (Increase)/Decrease in Loans, Advances and Bills Purchase (3,273,756,619) (2,459,947,172) 4. (Increase)/Decrease in Other Assets (36,309,713) (266,128,045) Increase /(Decrease) of Current Liabilities 3,222,516,356 2,207,071,003 1. Increase/(Decrease) in Deposits 2,930,771,819 2,217,189,816 2. Increase/(Decrease) in Certificates of Deposits 3. Increase/(Decrease) in Short Term Borrowings 193,420,000 (112,970,000) 4. Increase/(Decrease) in Other Liabilities 98,324,537 102,851,187 (B) Cash Flow from Investment Activities (80,452,678) (85,155,041) 1. (Increase)/Decrease in Long-term Investment (6,800,000) (17,867,500) 2. (Increase)/Decrease in Fixed Assets (74,969,016) (67,678,786) 3. Interest income from Long term Investment 1,316,338 391,245 4. Dividend Income - - 5. Others - -(C) Cash Flow from Financing Activities 8,272,000 720,000,000 1. Increase/(Decrease) in Long term Borrowings (Bonds,Debentures etc) - 400,000,000 2. Increase/(Decrease) in Share Capital 8,272,000 320,000,000 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 842,457,123 261,728,726 (F) Opening Balance of Cash and Bank Balances 933,841,677 672,112,951 (G) Closing Balance of Cash and Bank Balances 1,776,298,800 933,841,677

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

33

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

Kumari Bank Limited Share OwnershipEnd of Ashad 2066 (15 July 2009)


1. Share Capital 1.1 Authorized Capital 1,600,000,000 1,600,000,000 a) 16,000,000 Ordinary Shares of Rs 100 each 1,600,000,000 1,600,000,000 b) ………...Non-redeemable Preference Shares of Rs…....each - - c) …………Redeemable Preference Shares of Rs……….. each - - 1.2 Issued Capital 1,186,099,200 1,080,000,000 a) 11,860,992 Ordinary Shares of Rs 100 each 1,186,099,200 1,080,000,000 b) ………..Non-redeemable Preference Shares of Rs….... each - - c) …………Redeemable Preference Shares of Rs……….. each - - 1.3 Paid Up Capital 1,186,099,200 1,070,000,000 a) 11,860,992 Ordinary Shares of Rs100 each 1,186,099,200 1,070,000,000 b) ……….Non-redeemable Preference Shares of Rs……..each - - c) …………Redeemable Preference Shares of Rs………...each - -

Particulars % (Rs) % (Rs)

A. Promoters 70 830,269,440 70 749,000,000 1.1 Government of Nepal - - - - 1.2 Foreign Institution - - - - 1.3 “A” Class Liscensed Institutions - - - - 1.4 Other Liscensed Institutions - - - - 1.5 Other Institutions 0.12 1,425,600 0.12 1,284,000 1.6 Personal 69.88 828,843,840 69.88 747,716,000 1.7 Others - - - - B. General Public 30 355,829,760 30 321,000,000 Total 100 1,186,099,200 100 1,070,000,000

Schedule 4.1

Current Year Previous Year

34

S.N. Name Current Year Previous Year Amount % Amount %

1. Noor Pratap J. B. Rana 77,220,000.00 6.51 70,200,000.00 6.50 2. Laxman Shrestha 71,280,000.00 6.01 64,800,000.00 6.003. Amir Pratap J. B. Rana 60,112,800.00 5.07 54,648,000.00 5.064. Sabitri Gurung 47,520,000.00 4.01 43,200,000.00 4.005. Gaurab Agrawal 36,872,000.00 3.11 29,160,000.00 2.706. Rishi Agrawal 28,512,000.00 2.40 25,920,000.00 2.407. Sanjay Lama 23,760,000.00 2.00 21,600,000.00 2.008. Rajendra Prasad Shrestha 23,760,000.00 2.00 21,600,000.00 2.009. Bidhya Krishna Shrestha 21,780,000.00 1.84 18,360,000.00 1.7010. Govinda Das Shrestha 17,820,000.00 1.50 16,200,000.00 1.5011. Yagya Pratap Rana 17,208,400.00 1.45 18,144,000.00 1.6812. Mahabir Prasad Goyel 15,681,600.00 1.32 14,256,000.00 1.3213. Manju Tapadiya 11,989,800.00 1.01 10,800,000.00 1.0014. Bhim Krishna Udas 11,880,000.00 1.00 10,800,000.00 1.0015. Phurba Wangdel Lama 11,880,000.00 1.00 10,800,000.00 1.0016. Anil Das Shrestha 11,880,000.00 1.00 10,800,000.00 1.0017. Santoo Shrestha 11,880,000.00 1.00 10,800,000.00 1.0018. Januki Kumari J. B. Rana 11,880,000.00 1.00 10,800,000.00 1.0019. Anupam Rathi 10,692,000.00 0.90 9,720,000.00 0.9020. Nirmal Pradhan 10,689,700.00 0.90 10,789,948.00 1.0021. Shree Niwas Sharada 10,454,400.00 0.88 9,504,000.00 0.8822. Shiva Shanker Agrawal 10,406,800.00 0.88 9,460,800.00 0.8823. Kumud Kumar Dugad 10,131,000.00 0.85 7,560,000.00 0.7024. Antu Shrestha 9,266,400.00 0.78 8,424,000.00 0.7825. CIT 8,910,000.00 0.75 8,100,000.00 0.7526. Atmaram Murarka 8,316,000.00 0.70 7,560,000.00 0.7027. Pradeep Kumar Murarka 8,316,000.00 0.70 7,560,000.00 0.7028. Pashupati Murarka 8,316,000.00 0.70 7,560,000.00 0.7029. Naresh Dugad 8,316,000.00 0.70 7,560,000.00 0.7030. Bikash Dugad 8,316,000.00 0.70 7,560,000.00 0.7031. Prava Laxmi Rana 7,920,000.00 0.67 8,640,000.00 0.8032. Gauri Shrestha 7,160,700.00 0.60 7,108,428.00 0.6633. Jagadish Prasad Chaudhary 7,128,000.00 0.60 6,480,000.00 0.6034. Sharmila Aryal 7,128,000.00 0.60 6,480,000.00 0.6035. Dev Kishan Mudanda 7,128,000.00 0.60 6,480,000.00 0.6036. Rita KC 7,084,000.00 0.60 8,640,000.00 0.8037. Vidushi Rana 6,890,400.00 0.58 6,264,000.00 0.5838. Jamuna Maheshwori Rathi 6,544,300.00 0.55 8,709,220.00 0.8139. NCM Mutual Fund 6,028,000.00 0.51 6,750,000.00 0.6340. Sandeep Lama 5,940,000.00 0.50 5,400,000.00 0.5041. Uttam Prasad Bhattarai 5,940,000.00 0.50 5,400,000.00 0.5042. Rakshya Pahadi 5,940,000.00 0.50 5,400,000.00 0.5043. Surender Bhandari 5,940,000.00 0.50 5,400,000.00 0.50

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

35

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

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

Kumari Bank Limited Outstanding Loan (Borrowings) End of Ashad 2066 (15 July 2009)

Particulars Current Year Rs Previous Year Rs

1. General Reserve Fund 172,136,019 119,847,501 2. Proposed Bonus Share 118,836,720 107,827,200 3. Capital Reserve Fund - - 4. Capital Redemption Reserve 115,000,000 20,000,000 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 6,292,334 -7. Accumulated Profit/Loss 20,727,278 41,357,165 8. Exchange Fluctuation Fund 5,861,157 5,853,403Total 438,853,508 294,885,269


1. 8 % “KBL Bond 2070” of Rs1,000 each 400,000,000 400,000,000 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


A. Domestic 293,420,000 100,000,000 1. Government of Nepal - - 2. Nepal Rastra Bank - - 3. Repo Obligations - - 4. Inter Bank and Financial institutions 293,420,000 100,000,000 5. Other Organized Institutions - - 6. Others - -Total 293,420,000 -B. Foreign - - 1. Banks - - 2. Others - -Total - -Total (A+B) 293,420,000 100,000,000

Schedule 4.2

Schedule 4.3

Schedule 4.4

36


1. Non-Interest bearing accounts A. Current Deposit 780,096,899 601,721,057 1. Local Currency 758,944,958 570,865,953 1.1 Government of Nepal - - 1.2 “A” Class Liscensed Institutions 4,151,914 3,463,370 1.3 Other Liscensed Financial Institutions 14,882,902 45,255,821 1.4 Other Organized Institutions 605,221,110 420,113,592 1.5 Individuals 134,689,032 102,033,170 1.6 Others - - 2. Foreign Currency 21,151,941 30,855,104 2.1 Government of Nepal - - 2.2 “A” Class Liscensed Institutions - - 2.3 Other Liscensed Financial Institutions - 633,572 2.4 Other Organized Institutions 712,769 2.5 Individuals 20,439,172 30,221,532 2.6 Others - - B. Margin Deposits 97,890,467 109,638,749 1. Employees Guarantee (Locker Margin) 2,682,900 2,317,850 2. Guarantee Margin 43,841,129 43,867,728 3. Margin on Letter of Credit 51,366,438 63,453,171 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 Accounts 2. Interest Bearing Accounts A. Saving Deposits 4,170,318,071 4,144,681,777 1. Local Currency 4,063,131,831 3,968,091,842 1.1 Organized Institutions 185,253,638 142,571,077 1.2 Individuals 3,877,878,193 3,825,520,765 1.3 Others - - 2. Foreign Currency 107,186,240 176,589,935 2.1 Organized Institutions 86,986 76,232 2.2 Individuals 107,099,254 176,513,703 2.3 Others - - B. Fixed Deposits 4,527,051,149 3,799,556,049 1. Local Currency 4,506,532,536 3,472,970,040 1.1 Organized Institutions 4,192,177,035 2,864,222,959 1.2 Individuals 314,355,501 608,747,081 1.3 Others - - 2. Foreign Currency 20,518,613 326,586,009 2.1 Organized Institutions - - 2.2 Individuals 20,518,613 326,586,009 2.3 Others - - C. Call Deposits 6,135,568,677 4,124,555,812 1. Local Currency 6,088,036,682 4,072,911,004 1.1 “A” Class Liscensed Institutions 1,007,452,663 1.2 Other Liscensed Financial Institutions 1,202,008,262 1,325,158,227 1.3 Other Organized Institutions 3,201,964,707 2,628,405,915 1.4 Individuals 676,611,050 119,346,862 1.5 Others - - 2. Foreign Currency 47,531,995 51,644,808 2.1 “A” Class Liscensed Institutions - - 2.2 Other Liscensed Financial Institutions 19,558 17,000 2.3 Other Organized Institutions - - 2.4 Individuals 47,512,437 51,627,808 2.5 Others - - D. Certificate of Deposit - - 1. Organized Institutions - - 2. Individuals - - 3. Others - - Total of Interest Bearing Accounts 14,832,937,897 12,068,793,638 Total Deposits (1+2) 15,710,925,263 12,780,153,444

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

Schedule 4.5

37

Schedule 4.6

Schedule 4.8

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

Schedule 4.7

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


1. Pension/Gratuity Fund - - 2. Employees Provident Fund - -3. Employees Welfare Fund - - 4. Provision for Staff Bonus 36,703,549 25,743,626 5. Interest Payable on Deposits 36,361,180 23,608,155 6. Interest Payable on Borrowings 54,000 32,877 7. Unearned Discount and Commission 156,500 17,500 8. Sundry Creditors 10,467,942 9,309,564 9. Branch Reconciliation Account - 119,434 10. Others 348,618,204 267,082,845 a. Audit Fees 231,000 - - b. Others 348,387,204 - -Total 432,361,375 325,914,001

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


1. Local Currency (Including Coins) 530,557,201 542,398,781 2. Foreign Currency 18,551,303 23,242,337 Total 549,108,504 565,641,118


1. Local Currency 64,884,614 64,396,8892. Foreign Currency 5,202,411 899,825 Total 70,087,025 65,296,714

38

Schedule 4.9

Schedule 4.10

Schedule 4.11

Schedule 4.12

Kumari Bank Limited Balance with Nepal Rastra Bank End of Ashad 2066 (15 July 2009)

Kumari Bank Limited Balance with Bank/Financial InstitutionEnd of Ashad 2066 (15 July 2009)

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

Kumari Bank Limited InvestmentEnd of Ashad 2066 (15 July 2009)


1. Local Currency 30,000,000 55,360,000 2. Foreign Currency - - Total 30,000,000 55,360,000

1. Government Treasury Bills - 882,519,990 882,519,990 1,278,195,002 2. Government Saving Certificate - - - -3. Government Other Bonds - 197,575,000 197,575,000 190,900,000 4. Nepal Rastra Bank Bonds - - - -5. Foreign Bonds - - - -6. Local Licensed Institutions - 200,000,000 200,000,000 175,000,000 7. Foreign Banks - 212,387,992 212,387,992 476,482,088 8. Shares of Organized Institutions - 1,360,500 1,360,500 1,235,500 9. Bonds and Debentures in Organized Institutions - 16,985,000 16,985,000 16,985,000 10. Other Investment - - - -Total Investment - 1,510,828,482 1,510,828,482 2,138,797,590 Provision - - - -Net Investment - 1,510,828,482 1,510,828,482 2,138,797,590

PreviousYear (Rs)

CurremtYear (Rs)Particulars

LocalCurrency

Foreign Currency in equivalent Rs

1. Nepal Rastra Bank 29,717,863 - 29,717,863 1,120,760,644 1,091,042,781 244,576,115 a. Current Account 29,717,863 - 29,717,863 1,120,760,644 1,091,042,781 244,576,115 b. Other Account - - - - - -

Convertible FCY TotalINR

PreviousYear (Rs)

CurrentYear (Rs)Particulars

LocalCurrency

Foreign Currency in equivalent Rs

1. Local Licensed Institutions 12,481,430 - 3,671,404 3,671,404 16,152,834 59,218,199 a. Current Account 12,481,430 - 3,671,404 3,671,404 16,152,834 59,218,199 b. Other Account - - - - - 2. Foreign Banks - 30,492,939 59,783,879 90,276,818 90,276,818 64,406,245 a. Current Account - 30,492,939 59,783,879 90,276,818 90,276,818 64,406,245 b. Other Account - - - - - - Total 12,481,430 30,492,939 63,455,283 93,948,222 106,429,652 123,624,444

Convertible FCY TotalINR

Previous Year (Rs)Current Year (Rs)Particulars Trading OtherPurpose

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

39


1. Investment in Shares 1,360,500 1,235,500 1.1 Credit Information Centre Limited 1,235,500 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 16,985,000 2.1 Nepal Electricity Authority, Electricity Bond 16,985,000 16,985,000 7.75 Percent 16,985 Bonds of Rs 1,000 each - -Total Investment 18,345,500 18,220,500 3. Provision for Loss 3.1 Up to previous year - - 3.2 Change in current year - - Total Provision - Net Investment 18,345,500 18,220,500

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

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

Schedule 4.12 (A)

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

Schedule 4.13

Loans & Advances Bills Purchased/Discounted

Domestic

Priority SectorOther

Foreign Total Domestic Foreign

CurrentYear(Rs) Total

Insured Uninsured

1. Performing Loan - 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 Pass - 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

2. Non-Performing Loan - - 64,542,683 - 64,542,683 - - - 64,542,683 152,475,600

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 75,524,247 41,471,740 116,995,987 14,795,261,241 11,522,380,653

3. Loan Loss Provision

3.1 Pass - 4,184,921 141,892,275 - 146,077,196 755,242 414,717 1,169,959 147,247,155 113,321,489

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

B. Total Provisioning - 4,184,921 196,559,531 - 200,744,452 755,242 414,717 1,169,959 201,914,411 187,292,714

4. Provisioning up to previous year

4.1 Pass - 2,735,918 109,767,096 - 112,503,014 452,546 365,929 818,475 113,321,489 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 - - 15,188,244 - 15,188,244 - - - 15,188,244 17,104,037

C. Total provision till Last year - 2,735,918 186,474,239 - 186,474,239 452,546 365,929 818,475 187,292,714 133,420,367

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

Previous Year(Rs)

Particulars

40


A. Secured 14,795,261,241 11,522,380,653 1. Against Security of Movable/Immovable Assets 13,444,857,320 10,565,023,333 2. Against Guarantee of Local Licensed Institutions - - 3. Against Government Guarantee - - 4. Against Guarantee of Internationally Rated Bank - - 5. Against Security of Export Documents 1,817,000 - 6. Against Security of Fixed Deposit Receipts - - a. Own FDR 2,787,554 6,955,361 b. FDR of Other Licensed Institutions 52,571,204 105,990,568 7. Against Security of Government Bonds - - 8. Against Counter Guarantee - - 9. Against Personal Guarantee - - 10. Against Other Securities 1,293,228,163 844,411,391B. Unsecured - -Total 14,795,261,241 11,522,380,653

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

Schedule 4.13 (A)

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

Schedule 4.14

Particulars Building Vehicles Machinery Office Equipment Others Current Year (Rs) Previous Year (Rs)

1. Cost Price

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 (7,550,000) (735,210) (8,285,210) (13,639,948)

e. This Year Written Off (755,324) (755,324) (20,309,392)

Total Cost (a+b+c+d+e) 4,814,041 53,180,194 - 190,799,427 18,375,276 267,168,938 213,831,295

2. Depreciation

a. Up to previous year 454,831 15,579,120 - 68,871,252 7,847,326 92,752,529 92,298,930

b. For this year 229,715 8,166,713 28,875,805 3,492,664 40,764,897 28,354,180

c. Depreciation on revaluation/Written Back (70,355) (3,440,844) (539,740) (4,050,939) (27,900,581)

d. Depreciation Adjusment/Add back

Total Depreciation 614,191 20,304,989 - 97,207,317 11,339,990 129,466,487 92,752,529

3. Book Value (WDV*) (1-2) 4,199,850 32,875,205 - 93,592,110 7,035,286 137,702,451 121,078,766

4. Land 85,593,635 85,593,635

5. Capital Work In Progress (pending Capitalization)

6. Leasehold Assets 24,536,688 15,328,471

Total (3+4+5+6) 4,199,850 32,875,205 - 93,592,110 7,035,286 247,832,774 222,000,872

Assets

41

Schedule 4.16Kumari Bank Limited Other Assets End of Ashad 2066 (15 July 2009)


1. Stock of Stationery 3,733,594 3,116,9572. Income receivable on Investment 18,266,753 15,829,3403. Accrued Interest Receivable on Loan - - Accrued Interest Receivable on Loan 75,082,974 59,306,341 Less:Interest Suspense Account (75,082,974) (59,306,341)4. Commission Receivable - - 5. Sundry Debtors 84,943,749 14,449,8736. Staff Loan & Advances 102,297,824 46,719,9367. Pre Payments 9,950,331 7,959,7398. Cash in Transit - -9. Other Transit items (including Cheques) - -10. Drafts payment without notice - -11. Expenses not written off - -12. Branch Reconciliation Account 21,930,506 -13. Deferred Tax Assets 6,292,334 -14. Others 132,843,132 259,944,726 a. Advance Tax - 9,650,253 b. Others 132,843,132 - 250,294,473Total 380,258,223 348,020,571

Schedule 4.16(A)Kumari Bank Limited Other Assets (Additional Statement) End of Ashad 2066 (15 July 2009)

Particulars Up to 1 Year 1 to 3 Year Above 3 Years Total Previous Year (Rs)

1. Accrued Interest Receivable on Loan 62,786,437 12,296,537 - 75,082,974 59,306,341 2. Drafts Payment without notice - - - - -3. Branch Reconciliation Account - - - - -

Current Year (Rs)

Schedule 4.15 Kumari Bank Limited Non Banking Assets End of Ashad 2066 (15 July 2009)

3,140,779

3,140,779 Grand Total

Previous Year(Rs)

Name & Address ofBorrower of Party

Acquired Date ofNon Banking Assets

Total Amount ofNon Banking Assets

Provision for loss NetNon Banking Asset (Rs)Percent Amount (Rs)

42

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

Schedule 4.17


1. Claims Lodged but not accepted by the Institution - -2. Letter of Credit (Full Amount) 813,973,672 1,113,996,185 a. Maturity period up to 6 months 608,688,994 886,717,522 b. Maturity period more than 6 months 205,284,678 227,278,6633. Rediscounted Bills - -4. Unmatured Guarantees/Bonds 547,659,355 512,512,449 a. Bid Bonds 85,527,713 15,725,275 b.Performance Bonds 462,131,642 496,787,174 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 54,757,1559. Underwriting Commitment - -10. Irrevocable Loan Commitment - -11. Guarantees against Counter Guarantee of Internationally Rated Banks 35,096,41812. Advance Payment Guarantee 116,164,047 150,573,28513. Financial Guarantee for loan disbursement - -14. Contingent Liabilities on Income Tax - -15. Others - -

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

Schedule 4.18


A On Loans, Advances and Overdraft 1,233,549,009 877,009,516 1. Loans & Advances 553,755,728 465,122,390 2. Overdraft 679,793,281 411,887,126B. On Investment 89,856,012 46,978,242 1. Government Securities 88,539,674 46,586,997 a. Treasury Bills 74,990,179 43,361,548 b. Development Bonds 13,549,495 3,225,449 c. National Saving Certificates - - 2. Foreign Debt Papers - - a. ……… - - b. ……… - - 3. Nepal Rastra Bank Bonds - - 4. Debenture & Bonds 1,316,338 391,245 5. Interest on Interbank Investment - - a. Bank/ Financial Institutions - -

b. Other Institutions - -C. On Agency Balances 967,556 2,113,916 1. Domestic Banks/ Financial Institutions - - 2. Foreign Banks 967,556 2,113,916D. On Money at Call and Short Notice 50,349,890 31,144,050 1. Domestic Banks/Financial Institutions 42,610,458 21,189,231 2. Foreign Banks 7,739,432 9,954,819E. On Others - - 1. Certificate of Deposits - - 2. Inter-Bank/ Financial Institution Loan - - 3. Others - -Total 1,374,722,467 957,245,724

43

Schedule 4.19

Schedule 4.20

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

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


A. On Deposit Liabilities 760,503,809 463,374,013 1. Fixed Deposits 310,276,518 180,664,935 1.1 Local Currency 303,943,983 172,131,676 1.2 Foreign Currency 6,332,535 8,533,259 2. Saving Deposits 153,388,406 130,199,103 2.1 Local Currency 150,717,770 125,515,994 2.2 Foreign Currency 2,670,636 4,683,109 3. Call Deposits 296,838,885 152,509,975 3.1 Local Currency 295,635,922 149,286,396 3.2 Foreign Currency 1,202,963 3,223,579 4. Certificate of Deposits - B. On Borrowings 55,699,081 35,360,209 1. Debentures & Bonds 32,000,000 3,951,005 2. Loan from Nepal Rastra Bank - 3. Inter Bank /Financial Institutions Borrowing 23,699,081 31,409,204 4. Other Organized Institution - 5. Other Loans - C. On Others - 1. - 2. - Total 816,202,890 498,734,222


A. Bills Purchase & Discount 1,211,386 1,400,837 1. Local 1,211,386 1,400,837 2. Foreign B. Commission 24,691,051 20,290,207 1. Letters of Credit 8,380,872 8,597,043 2. Guarantees 7,456,950 7,638,828 3. Collection Fees 339,895 328,914 4. Remittance Fees 8,477,490 3,465,109 5. Credit Card 6. Share Underwriting/Issue 7. Government Transactions 8. Agency Commission 35,844 260,313 9. Exchange Fee C. Others 53,201,840 26,803,589Total 79,104,277 48,494,633

44

Schedule 4.21

Schedule 4.22

Schedule 4.23

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

Kumari Bank Limited Exchange Fluctuation Gain/Loss From 1st Shrawan 2065 to 31 Ashad 2066 (16 July 2008 to 15 July 2009)

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


1. Safe Deposit Lockers Rental 769,075 690,0752. Issue & Renewals of Credit Cards - -3. Issue & Renewals of ATM Cards 12,010,454 8,927,9774. Telex / T. T./ SWIFT 2,537,666 3,072,8615. Service Charges 3,300,568 3,936,4986. Renewal Fees - -7. Others 1,128,960 1,177,799Total 19,746,723 17,805,210


a. From Revaluation 31,015 464,643b. From Trading (except Exchange Fees) 58,970,766 41,342,980Total Gain (Loss) 59,001,781 41,807,623


1. Salary 54,583,324 41,126,8512. Allowances 32,252,547 30,185,203 a. Normal Allowance 16,465,603 17,713,039 b. Inchargeship Allowance 52,500 11,690 c. Relocation Allowance 63,533 118,605 d. Outstation Allowance 791,539 459,102 e. Dashain Allowance 5,650,210 4,524,422 f. Vehicle Maintenance Allowance 283,350 236,440 g. Leave Fare Allowance 8,945,812 7,121,9053. Contribution to Provident Fund 5,128,583 4,016,3534. Training Expenses 3,068,402 1,996,5015. Uniform - - 6. Medical 3,491,305 2,833,8827. Insurance 3,234,006 2,502,7888. Pension and Gratuity Provision 7,428,478 2,680,5629. Others 6,798,274 4,228,298 a. Wages 1,624,774 887,686 b. Teller Risk Fund 346,459 300,592 c. Other Staff Benefits 3,343,582 2,356,939 d. Overtime 1,483,459 683,081Total 115,984,919 89,570,438

45

Schedule 4.24Kumari Bank Limited Other Operating Expenses From 1st Shrawan 2065 to 31 Ashad 2066 (From 16 July 2008 to 15 July 2009)


1. House Rent 28,416,708 26,236,8142. Electricity & Water 7,894,002 5,444,7063. Repair & Maintenance 1,465,733 768,517 a. Building 671,083 - - b. Vehicles 794,650 - - c. Others - -4. Insurance 2,915,674 2,840,2845. Postage, Telex, Telephone & Fax 13,807,390 11,250,1396. Office Equipment, Furniture and Repair 2,752,513 1,365,0527. Travelling Allowances & Expenses 4,080,693 4,583,5798. Stationery & Printing 4,890,221 4,819,6799. Periodicals & Books 239,033 258,10710. Advertisements 2,715,437 7,013,92211. Legal Expenses 835,277 850,97312. Donations 588,911 67,70013. Expenses relating to Board of Directors 1,911,422 2,583,058 a. Meeting Fees 1,880,345 - - b. Other Expenses 31,077 - -14. Annual General Meeting Expenses 1,195,626 860,17515. Expenses relating to Audit - - a. Audit Fees 231,000 460,584 643,497 b. Other Expenses 229,584 - -16. Commission on Fund Transfer - -17. Depreciation on Fixed Assets 49,815,920 35,001,65518. Amortization of Pre-operating Expenses - -19. Share Issue expenses 941,905 963,74520. Technical Services (Reimbursment) - -21. Entertainment Expenses 462,320 176,56122. Written Off Expenses - -23. Security Expenses 10,532,754 6,933,40424. Credit Guarantee Premium - -25. Commission & Discount - -26. Others 50,580,037 35,481,571 a. Transport 6,051,837 - 3,384,226 b. Professional Fees 1,864,947 - 1,946,145 c. Public Relation Expenses 1,046,235 - 1,379,268 d. Banking and Corporate Expenses 2,646,587 - 2,121,270 e. Correspondent Banking Charges 810,390 - 655,450 f. Fees and Taxes 10,882,378 - 8,742,767 g. Visa Fees and Charges 7,806,946 - 3,964,295 h. NRB Charges on FCY Deposit 17,706,998 - 10,890,574 i. Miscellaneous 443,559 - 434,725 j. Prior Period Expenses - - 845,601 k. Error, Fine and Losses - - 25,793 l. Janitorial 1,320,160 - 1,091,457Total 186,502,160 148,143,138

46

Schedule 4.25

Schedule 4.26

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

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

Schedule 4.27Kumari Bank Limited Written Back from Provision for Possible Losses (Fiscal Year 2008/09)

Schedule 4.28Kumari Bank Limited Income/ (Expenses) from Extra Ordinary Transactions From 1st Shrawan 2065 to 31 Ashad 2066 ( From 16 July 2008 to 15 July 2009)


1. Recovery of Written Off Loan - -2. Voluntary Retirement Expenses - -3. Irrecoverable Loan Written Off {4.28(A)} (876,031) (4,531,068)4. Other Expensess/Income - -5. ……………………………………………… - -Total (876,031) (4,531,068)


1. Increase in Provision for Loan Loss 57,403,005 61,113,3112. Increase in Provision for Loss on Investment - - 3. Provision for Loss on Non-Banking Assets - 1,845,1554. Provision for Other Assets - 1,065,324Total 57,403,005 64,023,790


1. Profit/ (Loss) on Sale of Investments - -2. Profit/ (Loss) on Sale of Assets 678,806 555,5003. Dividend - -4. Subsidies received from Nepal Rastra Bank - - a. Compensation for losses of specified branches - - b. Interest Compensation - - c. Exchange Counter - -5. Others 432,847 15,032,889Net Non-Operating Income (Loss) 1,111,653 15,588,389


1. Provision for Loan Loss Written Back 42,781,308 7,240,9642. Provision against Non Banking Assets Written Back 4,239,839 -3. Provision for Investment Written Back - -4. Provision for other Assets Written Back - -Total 47,021,147 7,240,964

47

Schedule 4.28(A)

Schedule 4.29

(Rs)

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

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

RemarksS.N. Types of Loan

1. Bills Purchase 131,529 -

VoyagerMicro Bus

Vehicle - Mahindra -576

VoyagerMicro Bus

Land, Stock, Receivables, PG

93,757

3,853

418,892

228,000

876,031

Hire Purchase Loan

Hire Purchase Loan

Hire Purchase Loan

Overdraft Loan

Total

2.

3.

4.

5.

Written offAmount

Type ofSecurity

Basis of Valuationof Collateral

Price Quotation submitted by Authorized Vehicle Distributor

CEO

Manager Retail Banking, Manager-Credit, A G M

KC & Company

Hira Kumari Thakuri

Ramesh Kumar Khadge

Ram Kumar Sunam

Luna Trade International

Several verbal and written reminders were served. Borrower’s name appears in CICL Blacklist. The account 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.

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.

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.

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

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 contact 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 collateralized security was located in Terai coupled with the deteriorating security situation and political unrest in the Terai region. A series of discussions were held with the remaining family members 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.

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

Manager-Credit, A G M

Manager-Credit, A G M, CEO



Valutation by Authorized Valuator of the Bank

Loan ApprovingAuthority/ Level

Initiations Made for Recovery

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 members 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:

A. Directors 1. …………………………………… 2. ……….……………………...… 3. ……………………………………………B. Chief Executive 1. ……………………………….. 2. ………………………………..C. Promoters’ GroupD. Employee (Family Members’ Company)E. Shareholder’s CompanyTotal

Name of Promoter/Director/Chief Executive

Outstanding up to Last Year Recovered in Current Year Additional Lendingin this year

Outstanding as of Ashad End 2063Principal InterestPrincipal InterestPrincipal Interest

48

Schedule 4.30 (A)

Rs in ‘000

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

Particulars Current Year Previous Year

1.1. Risk Weighted Exposures 17,743,239 14,418,707 a. Risk Weighted Exposure for Credit Risk 16,983,993 13,688,722 b. Risk Weighted Exposure for Operational Risk 709,435 713,923 c. Risk Weighted Exposure for Market Risk 49,811 16,062 1.2. Capital Fund (A+B) 2,050,908 1,858,207 A. Core Capital (Tier I) 1,612,799 1,359,032 a. Paid Up Capital 1,186,099 1,070,000 b. Irredeemable Non- cumulative preferenece share - - c. Share premium - - d. Proposed Bonus Share 118,837 107,827 e. General Reserves Fund 172,136 119,848 f. Accumulated Profit/ (Loss) till previous fiscal year 20,727 41,357 g. Net Profit/ (Loss) for current fiscal year - - h. Capital Redemption Reserve - - i. Capital Adjustment Reserve - - j. Dividend Equalization Reserves - - k. Bond Redemption Reserve 115,000 20,000 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) 438,108 499,175 a. Cumulative and/or Reedemable Preference Share - - b. Subordinated term debt 400,000 400,000 less: Amortization of Subordinate Term Debt (115,000) (20,000) c. Hybrid Capital Instuments - - d. General Loan Loss provision 147,247 113,321 e. Exchange Equalisation Reserve 5,861 5,853 f. Investment Adjustment Reserve - - g. Assets Revaluation Reserve - - h. Other Reserve - -1.3 Capital Adequacy Ratios - - Core Capital/ Total Risk Weighted Exposure (Tier I) 9.09% 9.43% Capital Fund/ Total Risk Weighted Exposure (Tier I & Tier II) 11.56% 12.89%

49

Schedule 4.30 (B)Kumari Bank Limited End of Ashad 2066 (15 July 2009) Credit Risk Exposure

Rs in ‘000

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 -

All Other Claims on Government of Nepal 77,142 - - 77,142 0% - 13,416 -

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 4-6) - - - - 100% - - -


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

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 - - 100,875 150% 151,313 - -

Claims on Domestic Banks that meet Capital Adequacy requirements 245,073 - - 245,073 20% 49,015 450,151 90,030

Claims on Domestic Banks that do not meet Capital Adequacy Requirements 1,079 - - 1,079 100% 1,079 31,080 31,080

Claims on Foreign Bank (ECA Rating 0- 1) 290,616 - - 290,616 20% 58,123 272,872 54,574

Claims on Foreign Bank (ECA Rating - 2) 11,271 - - 11,271 50% 5,635 2,258 1,129

Claims on Foreign Bank (ECA Rating 3-6) - - - - 100% - 265,758 265,758

Claims on Foreign Bank (ECA Rating - 7) - - - - 150% - - -

Claims on foreign bank incorporated in SAARC region operating ...

with a buffer of 1 %above their respective regulatory capital requiremente 778 - - 778 20% 156 - -

Claims on Domestic Corporates 6,293,544 - 12,295 6,281,248 100% 6,281,248 6,667,765 6,667,765

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% - - -

Regulatory Retail Portfolio (Not Overdue) 1,803,218 - 39,633 1,763,584 75% 1,322,688 228,728 171,546

Claims fulfilling all creterion of regulatory retail except granularity 35,838 - - 35,838 100% 35,838 - -

Claims secured by residential properties 1,061,245 - - 1,061,245 60% 636,747 2,912,614 2,184,461

Claims not fully secured by residential properties - - - - 100% - - -

Claims secured by residential properties (Overdue) 10,299 697 - 9,602 100% 9,602 2,405 2,405

Claims secured by Commercial real estate 2,152,675 - - 2,152,675 100% 2,152,675 1,038,513 1,038,513

Past due claims (except for claims secured by residential properties) 199,038 53,220 - 145,818 150% 218,728 82,099 123,149

High Risk claims 3,090,357 - - 3,090,357 150% 4,635,536 218,347 327,520

Investment in equity and other capital instruments of institutions ..

listed in the stock exchange - - - - 100% - 1,236 1,853

Investment in equity and other capital instruments of institutions ...

not listed in the stock exchange 1,361 - - 1,361 150% 2,041 16,985 25,478

Cash and Cash Item in Transit 110,815 - - 110,815 20% 22,163 - -

Other Assets (as per attachment) 1,045,477 435,894 - 609,583 100% 609,583 642,094 642,094

Total 19,280,666 489,811 51,929 18,738,926 - 16,192,170 15,125,634 11,627,355

ParticularsGross Book

Value (a)Specific

Provision(b)

Eligible CRM (c)

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

Current Year

Risk weightedExposure

Net ValueRisk Weighted Exposures (f)=(d)*(e)

“Risk Weight (e)”

Previous year

50

Rs in ‘000

On Balance Sheet Exposures (B)

Revocable Commitments - - - - 0% - - -

Bills Collection - - - - 0% - - -

Forward Exchange Contract Liabilities 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 - 11,226 194,059 50% 97,029 183,411 91,705

ECA Rating 0-1 - - - - 20% - - -

ECA Rating 2 - - - - 50% - - -

ECA Rating 3-6 - - - - 100% - - -

ECA Rating 7 - - - - 150% - - -

Bid Bond, Performance Bond and counter guarantee domestic counterparty 547,659 - 34,785 512,875 50% 256,437 503,741 251,871

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% - - -

Advance Payment Guarantee 116,164 - 9,056 107,108 100% 107,108 - -

Financial Guarantee - - - - 100% - - -

Acceptence and Endrosements 139,841 - 6,650 133,191 100% - 54,757 54,757

Unpaid portion of Partly paid shares and securities - - - - 100% - - -

Irrevocable Credit Commitments (short term) 1,072,784 - - 1,072,784 20% 214,557 2,996,761 1,498,380

Irrevocable Credit Commitments (long term) - - - - 100% - - -

Other Contingent Liabilities - - - - 100% - - -

Total 2,706,944 - 95,207 2,611,737 - 791,823 4,561,934 2,061,366

Total RWE for Credit Risk (A + B) 21,987,610 489,811 147,135 21,350,664 - 16,983,993 19,687,568 13,688,722

ParticularsGross Book

Value (a)Specific

Provision(b)

Eligible CRM (c)

Net Value d=a-b-c

Current Year

Risk weightedExposure

Net ValueRisk Weighted Exposures

f=d*e

Risk Weight (e)

Previous year

Schedule 4.30 (B) Continued....

51

Schedule 4.30 (C)Kumari Bank Limited Eligible Amount for Credit Risk Mitigation (CRM) End of Ashad 2066 (15 July 2009)

Rs in ‘000

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 12, 295 - - - - - - - - 12,295 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) 23,633 16,000 - - - - - - - 39,633 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 33,490 - - - - - - - - 33,490 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 11,227 - - - - - - - - 11,227 ECA Rating 0-1 - - - - - - - - - - ECA Rating 2 - - - - - - - - - -ECA Rating 3-6 - - - - - - - - - -ECA Rating 7 - - - - - - - - - -Bid Bond and Performance Bond(Domestic) 34,785 - - - - - - - - 34,785 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 9,056 - - - - - - - - 9,056 Financial Guarantee - - - - - - - - - - Acceptances and Endorsements 6,650 - - - - - - - - 6,650 Unpaid portion of partly paid shares and securities - - - - - - - - - - Irrevocable Credit Commitments - - - - - - - - - - Other Contingent Liabilities - - - - - - - - - -

(a) (b) (c) (d) (e) (f) (g) (h) (i) Particulars

Deposit with bank

Deposit with other bank/FI Gold Govt. &NRB

SecuritiesG’tee of Govt. of

Nepal

Sec/G’teeof other

Sovereigns

G’tee ofother

Banks

G’tee ofMDBs

Sec/G’tee ofForeign

BanksTotal

52

Schedule 4.30 (D)

Schedule 4.30 (E)

Kumari Bank Limited Risk Weight Exposure for Operational Risk End of Ashad 2066 (15 July 2009)

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

Rs in ‘000

Rs in ‘000

Net Interest Income 268,471 394,231 458,512 Commission and Discount income 26,281 40,764 48,495 Other Operating Income 10,003 15,281 17,805 Exchange Fluctuation Income 26,374 20,294 41,808 Addititonal Interest Suspense during the period 871 32,496 17,185 Total Gross Income (a) 331,999 503,067 583,804 Alfa (b) 15% 15% 15% 15%Fixed Percentage of Gross Income {c= (a*b)} 49,800 75,460 87,571 Capital Requirement for operational risk (d) (average of c) 70,944 71,392 Risk Weight ( reciprocal of capital requirement of 10%) in times (e) 10 10 Equivalent Risk Weight Exposure {f=(d*e)} 709,435 713,923

ParticularsYear 1

(2005/06)Year 2

(2006/07)Year 3

(2007/08)Previous

Year

1. INR 41,867 67,019 67,019 - 2. USD 65 5,089 5,089 9,423 3. EUR 36 3,922 3,922 4,259 4. GBP 75 9,594 9,594 377 5. CHF 1 71 71 - 6. AUD 71 4,423 4,423 107 7. CAD 0 0 0 - 8. SGD 1 58 58 228 9. JPY 1,069 890 890 2,236 10. SEK - - - 11. DKK 67 975 975 1,284 12. HKD - - - 2 13. SAR 174 3,611 3,611 7,473 14. QAR 146 3,131 3,131 4,009 15. CNY - - - 5 16. MYR 17 373 373 1,504 17. THB 0 0 0 10 18. AED 22 464 464 1,207 Total Open Position (a) 99,621 32,124 Fixed Pecentage (b) 5% 5% Capital Charge for Market Risk {c=(a*b)} 4,981 1,606 Risk Weight (reciprocal of capital requiremnet of 10%) in times (d) 10 10 Equivalent Risk Weight Exposure {e=(c*d)} 49,811 16,062

ParticularsS.N.Open Position

(Rs)Open Position

(FCY)Relevant Open

Position

Previous Year Relevant Open

Position (Rs)

53

Schedule 4.31Kumari Bank Limited Principal Indicators (For Previous 6 years)

1. Net Profit/Gross Income % 14.20% 16.26% 15.52% 19.61% 16.18% 16.54%2. Earnings Per Share Rs 9.74 17.58 16.59 22.70 16.35 22.04 3. Market Value Per Share Rs 369.00 443 830 1,005 700 4. Price Earning Ratio Ratio 20.99 26.71 36.56 61.47 31.76 5. Dividend (including bonus) on share capital % 21.05% 21.05% 10.53% 10.58%6. Cash Dividend on Share Capital % 1.05% 1.05% 0.53 0.55 7. Interest Income/Loans & Advances % 8.39% 8.33% 5.89% 7.63% 7.61% 8.34%8. Employee Expenses/Total Operating Expenses % 11.48% 11.96% 12.32% 17.22% 15.66% 10.37%9. Interest Expenses on Total Deposit and Borrowings % 3.41% 4.48% 4.20% 3.69% 3.87% 5.10%10. Exchange Fluctuation Gain/Total Income % 4.20% 2.77% 3.95% 2.34% 3.87% 3.73%11. Staff Bonus/ Total Employee Expenses % 26.88% 34.24% 24.59% 25.08% 22.32% 24.04%12. Net Profit/Loans & Advances % 1.32% 1.55% 1.48% 1.88% 1.52% 1.77%13. Net Profit/ Total Assets % 0.89% 1.13% 1.15% 1.43% 1.16% 1.41%14. Total Credit/Deposit % 76.91% 90.62% 90.20% 85.84% 90.20% 94.17%15. Total Operating Expenses/Total Assets % 4.53% 4.76% 5.39% 4.83% 4.90% 6.03%16. Adequacy of Capital Fund on Risk Weightage Assets a. Core Capital % 12.50% 10.20% 11.28% 10.26% 10.40% 9.09 b. Supplementary Capital % 0.91% 1.01% 1.08% 0.96% 4.01% 2.47 c. Total Capital Fund % 13.41% 11.21% 12.36% 11.22% 14.41% 11.56 17. Liquidity (CRR) Ratio 11.02% 3.44% 2.71% 3.65% 1.91% 7.13%18. Non Performing Loans/Total Loans % 0.76% 0.95% 0.92% 0.73% 1.32% 0.44%19. Weighted Average Interest Rate Spread % 3.82% 3.85% 4.58% 4.67% 4.30% 4.17%20. Book Net Worth Per Share Rs 114 141 149 137 128 137 21. Total Shares Number 5,000,000 5,000,000 6,250,000 7,500,000 10,700,000 11,860,992 22. Total Employees Number 115 143 177 212 256 26023. Others

Particulars IndicatorsF. Y.

2003/04F. Y.

2004/05F. Y.

2005/06F. Y.

2006/07F. Y.

2007/08F. Y.

2008/09

54

1. General Information Kumari Bank Limited (the “Bank”) is a limited liability company domiciled in Nepal. The address of its registered 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 Accounting Policies The Significant accounting policies applied in the preparation of the financial statements of the bank are set out below. These

policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Statement of Compliance The financial statements have been prepared in accordance with Nepal Accounting Standards (NAS) issued by the Nepal

Accounting Standards Board (NASB) except for exceptions as mentioned below, generally accepted accounting principles, and the provisions of Bank and Financial Institution Act, 2063, directives issued by Nepal Rastra Bank (Central Bank) and the Company Act, 2063.

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

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

2.3 Interest 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 Accounting Standards.

Interest income on Investments is recognised on accrual basis.

2.4 Commission Income Commission income of the bank is accounted for on cash basis in general. However, Commission income exceeding

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

2.5 Dividend 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 rate) of exchange prevalent as on 31 Ashad 2066.

ii. Gain/Loss realised in foreign currency transaction is accounted 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 accounted for and shown as” Revaluation Gain/Loss”. Amount equivalent to 25% of revaluation gain of the current year is transferred to Exchange Fluctuation Fund by way of appropriation as per directive issued by Nepal Rastra Bank.

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

2.8 Loans and Advances, Overdraft and Bills Purchased Loans and advances, overdrafts and bills purchased include direct finance provided to the customers such as bank

overdrafts, 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.

Schedule 4.32Kumari Bank Limited Significant Accounting PoliciesFinancial Year 16 July 2008 to 15 July 2009 (1 Shrawan 2065 to 31 Ashad 2066)

55

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 Accounting 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 account 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 Accounting 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 account on a monthly basis.

2.17 Retirement Benefits The Bank has schemes of retirement benefits namely Gratuity and Provident Fund. Provision for expenses on account of

Gratuity and Provident Fund is made on accrual basis with the amount of 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.

56

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.

Contingent assets are not recognised in the financial statements.

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

57

Schedule 4.33Kumari Bank Limited Notes to Accounts Financial Year 16 July 2008 to 15 July 2009 (1 Shrawan 2065 to 31 Ashad 2066)

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 account 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:

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%.

Fiscal Year Cumulative Paid up Capital Remarks

2057/58 350,000,000 2058/59 350,000,000 2059/60 350,000,000 2060/61 500,000,000 Initial Public Offering of Rs 150 million 2061/62 625,000,000 (4:1) Right share issue of Rs 250 million 2062/63 750,000,000 Issue of Bonus share of Rs 125 million 2063/64 900,000,000 Issue of Bonus Share of Rs 150 million

2064/65 1,007,000,000

2065/66 1,186,099,200

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 signing date of financial statements.

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.

Rs in million

58

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

Agency Accounts (144.56) (144.56) - -

12. Reconciliation Status

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

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

14. Summary of Changes in deposit during the year

The financial growth of the deposits during the year is given below:

15. Weighted Average Interest Rate Spread

Deferred Income Tax Assets Fixed Assets - 6,292,334 6,292,334Total Deferred Tax Assets - 6,292,334 6,292,334 Deferred Income Tax Liabilities - - - Fixed Assets (1,784,443) 1,784,443 - Total Deferred Tax Liabilities (1,784,443) 1,784,443 - Net – Deferred Income Tax Asset/(Liabilities) (1,784,443) 8,076,777 6,292,334

Opening Balance Total Disbursed Total Settled Outstanding

11,522 10,883 7,610 14,795

Particulars

Particulars

Balance 15 Jul 2008

Total Amount

Movementduring the year

1 Year to 3 YearsUpto 1 Year

Balance 15 Jul 2009

(Rs)

More than 3 Years

Rs in million

Rs in million

Rs in million

Pre. Year (Rs) Particulars This Year (Rs) Changes

602 1) Current Deposit 780 178 571 a) Local Currency 759 188 31 b) Foreign Currency 21 (10) 4,139 2) Saving Deposit 4,170 31 3,962 a) Local Currency 4,063 101 177 b) Foreign Currency 107 (70) 3,800 3) Fixed Deposit 4,527 727 3,473 a) Local Currency 4,507 1,034 327 b) Foreign Currency 21 (306) 4,125 4) Call Deposit 6,136 2,011 4,073 a) Local Currency 6,088 2,015 52 b) Foreign Currency 48 (4) 110 5) Margin Deposit 98 (12) 110 a) Local Currency 98 (12) 0 b) Foreign Currency - - 12,775 Total Deposit 15,711 2,936

Particulars Percentage

The weighted average yield on Interest bearing assets for the year 9.98The weighted average cost on Interest bearing liability for the year 5.81The weighted average Interest Rate Spread 4.17

59

Assets 1-90 Days 91 - 180 Days 181 - 270 Days 271 - 365 Days More than 1 Year Total

Cash 549 549Bank Balance 1,227 1,227Investment in Foreign Banks -HMG Debt Paper 197 197NRB Debt Paper 882 882Inter bank Loan 230 212 442Loan 10,652 208 139 29 3,767 14,795Total Assets 12,658 420 139 911 3,964 18,092Liabilities Borrowings 293 293Current/Call Account 777 100 877Savings Account 6,136 4,170 10,306Time Deposit 0.4 2,692 1,835 4,527Debt Papers -Total Liabilities 7,206 - 0.4 2,692 6,105 16,003Net Assets / Liabilities 5,452 420 139 (1,781) (2,141) 2,089Cumulative Net Assets / Liabilities 5,452 5,872 6,011 4,230 2,089

17. Classification of Assets and Liabilities based on Maturity

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

Rs in million

60

Schedule 4.34Kumari Bank Limited List of Promoters / Shareholders from Promoter’s Group availing loan from different banks and financial institutions against the security of KBL sharesAs on 15th July 2009 (31st Ashad 2066)

Name of promoter/Shareholders under Promoter Group

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

Loan DetailsNo. of shares

pledged (Kitta)

Shares under the ownership Description of loan

Remarks Total No.

of Shares

Percentage of paid up

capitalS.N.

1. Yaggya Pratap Rana 1,72,084 1.45 Nepal Investment Bank Limited, Durbarmarg, Ktm 59,000 2. Rajendra Das Shrestha 23,760 0.20 Global Bank Limited 5,000 Machhapuchhre Bank Limited 1,000 3. Bhim Krishna Udas 1,18,800 1.00 Sanima Bikash Bank Limited 50,000 4. Janak Raj Wagle 4,752 0.04 Bigunj Finance Limited, Ktm 2,000 5. Phurba Wangdel Lama 1,18,800 1.00 Nabil Bank Limited, Kantipath, Ktm 20,000 6. Govinda Das Shrestha 1,78,200 1.50 Lumbini Bank Limited 30,000 Lumbini Bank Limited 45,000 7. Bidhya Krishna Shrestha 2,17,800 1.84 Prime Bank Limited 75,000 8. Anil Das Shrestha 1,18,800 1.00 Lumbini Bank Limited 20,000 Global Bank Limited 30,000 9. Laxman Shrestha 7,12,800 6.01 Standard Finance Limited 95,000 Prudential Finance Limited 65,000 ILFC Finance Limited 1,05,000 Siddhartha Bank Limited 5,000 Gurkha Development Bank Limited 30,000 10. Antu Shrestha 92,664 0.78 Prudential Finance Limited 39,000 11. Sunil Nand Singh Pradhan 11,880 0.10 Lalitpur Finance Limited 5,000 12. Madhav Kumar Basnet 11,880 0.10 Lalitpur Finance Limited 5,000 13. Shiva Shankar Agrawal 1,04,068 0.88 Nepal Investment Bank Limited 14,500 14. Sophie Upadhaya 57,024 0.48 Lumbini Bank Limited 24,000 15. Tara Rana 11,880 0.10 Siddhartha Bank Limited 5,000 16. Pegi Pandey 23,760 0.20 Reliable Finance Limited 5,000 17. Sita Gurung 35,640 0.30 Himalayan Bank Limited 5,000 18. Sabitri Gurung 4,75,200 4.01 Nepal Investment Bank Limited, 1,80,000 Citizens Bank International Limited 20,000 19. Kamal Thapa 19,008 0.16 Harati Maa Saving and Co-Operative Limited 3,000 20. Atmaram Murarka 83,160 0.70 Machhapuchhre Bank Limited 35,000 21. Pradeep Kumar Murarka 83,160 0.70 Machhapuchhre Bank Limited 35,000 21. Pashupati Murarka 83,160 0.70 Machhapuchhre Bank Limited 35,000 22. Naresh Dugad 83,160 0.70 NIC Bank Limited 35,000 23. Kumud Kumar Dugad 1,01,310 0.85 NIC Bank Limited 35,000 24. Bikash Dugad 83,160 0.70 NIC Bank Limited 35,000 25. Bachha Raj Tated 47,520 0.40 NIC Bank Limited 20,000 26. Ananda Kumar Ringata 35,640 0.30 Nepal SBI Bank Limited 15,000 27. Jeevan Nepal 23,760 0.20 Bank of Asia Nepal Limited 5,000 28. Balram Neupane 23,760 0.20 Prime Bank Limited 5,000 Siddhartha Bank Limited 5,000 29. Mahabir Prasad Goyel 1,56,816 1.32 Machhapuchhere Bank Limited 65,000 30. Ganga Amatya 49,500 0.42 Prime Bank Limited 25,000 31. Bhubaneshwori Pant 47,520 0.40 ICFC Bittya Sanstha Limited 20,000

61

Schedule 4.35Kumari Bank Limited Principal Indicators (For Previous 6 years)

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 Tax on proposed bonus share and change in income/ expenses as below. 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 Adjustment of deferred tax assets after statutory audit & changes by tax assessment. 1.7 Other Liabilities 500,950 502,448 (1,499) (0.30) Medical and accumulated leave to retired staffs & provision for audit fee2 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 Change in loan loss provision during the statutory audit 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) Creation of deferred tax assets after audit & adjustment of interest receivable on loans3 Profit and Loss Acccount 3.1 Interest Income 1,375,453 1,374,722 730 0.05 Adjustment of interest receivable 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) Medical and accumulated leave to retired staffs 3.7 Other Operating Expenses 186,271 186,502 (231) (0.12) Statutory audit fee 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 Write back of provision on NBA erroneously included under Provision Write Back on Loans & change in loan loss provision. 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) Adjustment of the amount recovered from staff who left the bank without prior notice 3.10 Write Back of Provision for Possible Loss 51,261 47,021 4,240 8.27 write back of provision on NBA erroneously included under Provision Write Back on Loans 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 Change in net profit before bonus 3.13 Provision for Tax 101,683 113,670 (11,987) (11.79) Difference in depreciation and after tax audit G. Net Profit/Loss (F-3.12-3.13) 267,805 253,366 14,439 -

ParticularsS.N. As per Unaudited

Financial Statement As per Audited

Financial Statement Reasons for VarianceIn %In AmountVariance

Rs in ‘000

62

Schedule 4.36

Rs in ‘000

1. Total Capital and Liabilites (1.1 to 1.7) 18,533,226 17,988,143 15,026,599 1.1 Paid Up Capital 1,186,099 1,078,272 1,070,000 1.2 Reserve and Surplus 451,800 477,460 294,885 1.3 Debenture and Bond 400,000 400,000 400,000 1.4 Borrowings 293,420 87,741 100,000 1.5 Deposits (a+b) 15,710,925 15,561,725 12,774,281 a. Domestic Currency 15,514,536 15,338,963 12,188,605 b. Foreign Currency 196,389 222,762 585,676 1.6 Income Tax Liability (9,967) (5,837) (9,650) 1.7 Other Liabilities 500,950 388,781 397,083 2. Total Assets (2.1 to 2.7) 18,533,226 17,988,143 15,026,599 2.1 Cash & Bank Balance 1,776,299 1,868,972 933,841 2.2 Money at Call and Short Notice 30,000 125,000 55,360 2.3 Investment 1,510,828 1,929,946 2,138,798 2.4 Loans and Advances 14,593,570 13,501,387 11,335,088 2.5 Fixed Assets 247,833 253,630 222,001 2.6 Non Banking Assets - 3,141 2.7 Other Assets 374,696 309,207 338,370 3. Profit and Loss Acccount Up to Corresponding

Previous Year Quarter 3.1 Interest Income 1,375,453 965,876 957,245 3.2 Interest Expenses 816,203 585,132 498,734A. Net Interest Income 559,250 380,743 458,511 3.3 Fees, Commission and Discount 79,104 52,839 48,495 3.4 Other Operating Income 19,747 14,644 17,805 3.5 Foreign Exchange Gain/ Loss (Net) 59,002 46,646 41,807B. Total Operating Income (A.+3.3+3.4+3.5) 717,103 494,872 566,618 3.6 Staff Expenses 114,451 77,153 89,570 3.7 Other Operating Expenses 186,271 126,522 148,143C. Operating Profit Before Provision (B.- 3.6-3.7) 416,380 291,197 328,905 3.8 Provision for Possible Losses 61,419 14,283 64,024D. Operating Profit (C-3.8) 354,961 276,914 264,881 3.9 Non Operating Income/Expenses (Net) 1,091 1,297 15,588 3.10 Write Back of Provision for Possible Loss 51,261 7,241E. Profit from Regular Activites (D+3.9+3.10) 407,313 278,211 287,710 3.11 Extraordinary Income/Expenses (Net) (876) (225) (4,531)F. Profit before Bonus and Taxes ( E. + 3.11) 406,437 277,985 283,179 3.12 Provision for Staff Bonus 36,949 25,271 25,743 3.13 Provision for Tax 101,683 75,814 82,506G. Net Profit/Loss (F.-3.12-3.13) 267,805 176,900 174,9304. Ratios

4.1 Capital Fund To RWA 11.57% 12.93% 14.41% 4.2 Non Performing Loan (NPL) to Total Loan 0.43% 0.82% 1.32% 4.3 Total Loan Loss Provision to Total NPL 313.61% 182.06% 122.83%

S.N. ParticularsThis Quater Ending

(Unaudited)Previous Quater Ending

(Unaudited) Corresponding Previous

Year Quater Ending (Audited)

Kumari Bank Limited Unaudited Financial Results (Quarterly) As at Fourth Quarter (15 July 2009) of the Fiscal Year 2008/09

Up to PreviousYear Quarter

Up to This Quarter

At the End of Corresponding Previous Year Quater

At the End ofPrevious Quater

At the End of This Quater

63

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 encompasses 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 re-

assessed 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 Administration 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

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

Gross Loan Amount Net Loan Amount

Restructured Loan 6,002,919 5,525,554 Substandard Loan 13,082,971 9,812,228Doubtful Loan 31,735,261 15,867,631Loss Loan 19,724,451 0Total 70,545,602 30,923,413

(Rs)

Disclosure as per Basel II Requirement1. 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-

64

Particulars Eligible CRM

Deposit with Bank 131,136,332

Deposit with other bank/FI 16,000,000

Total 147,136,332

(Rs)

Types of eligible credit risk mitigants used and the benefits availed under CRM-

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.

65

Corporate Office

Durbarmarg, KathmanduTel: 01-4221311, 4221314Fax: 01-4226644

PutalisadakGovinda Bhawan, Putalisadak, KathmanduTel: 01-4232112, 4232113Fax: 01-4231960

New RoadPratap Bhawan, New Road, KathmanduTel: 01-4238388, 4238385Fax: 01-4238365

KumaripatiKumaripati, LalitpurTel: 01-5556024, 5556025Fax: 01-5556027

GongabuKantipur Mall, Gongabu, KathmanduTel: 01-4385807, 4385809Fax: 01-4385644

Durbar MargDurbar marg, KathmanduTel: 01-4226629, 4226650Fax: 01-4226644

BaneshworBaburam Acharya Sadak,Old Baneshwor, KathmanduTel: 01-4499322Fax: 01-4497120

ChabahilChuchepati, Chabahil, KathmanduTel: 01-4484434Fax: 01-4490978

BudhanilkanthaNarayanthan Milan Chowk,Budhanilkantha, KathmanduTel: 01-4377718Fax: 01-4385644

KoteshworTinkune, R.K. Mahal, KathmanduTel: 01-4492921, 4499613Fax: 01-4497325

BiratnagarBiratnagar, Goshwara Road,Morang Byapaar Sangh BuildingTel: 021-537101, 537102021-537105

BirgunjAdarsha Nagar, BirgunjTel: 051-524812, 524813Fax: 051-521641

Dry Port BirgunjTel: 051-621025Fax: 051-621818

National Medical CollegeBirgunj (Extension Counter)Tel: 051-621890

PokharaNew Road, PokharaTel: 061-540266, 540267Fax: 061-541717

ItahariPathivaraa Market, Dharan Road, ItahariTel: 025-586661, 586659Fax: 025-586658

NarayangadhPulchowk, Narayangadh, ChitwanTel: 056-523091, 523092Fax: 056-523090

BirtamodeAnarmani-3, Birtamode, JhapaTel: 023-541028Fax: 023-543822

DamauliDamauli - 2, TanahunTel: 065-561787Fax: 065-561788

BaglungBaglung Muncipality -2 , BaglungTel: 068-522472, 522473Fax: 068-522474Mr. Bhupendra Khadka

BhairahawaSiddharthanagar - 8, Bhairahawa,RupandehiTel: 071-521008, 521009Fax: 071-521000

ButwalButwal - 6, Shreeram TowerRammandir Line Tel: 071-551546, 551547Fax: 071-551545

UrlabariUrlabari, Itahari RoadTel: 021-541901Fax: 021-541902

Inside KTM Valley

Outside KTM Valley

Branch Network

66

Notes