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2 Board of Directors Management Team Head Office Mr. Govinda Babu Tiwari Chief Executive Officer Mr. Surendra Bhushan Shrestha Deputy General Manager Tirtha Man Sakya Chairman Mr. Raghu Krishna Shrestha Chief, Head Office Credit Department Mr. Sanjay Kumar Rimal Chief, General Service Department Treasury and International Department Mrs. Ratna Tara Baidya Chief, Information Technology Department Mr. Prabinkar Adhikari Deputy Manager Head Office Credit, Department Mr. Awatar Neupane Company Secretary & Chief Share & Legal Department Mr. Navaraj Khaniya Deputy Manager Head Office Credit, Department Mr. Suresh Devkota Chief Accounts Department Mr. Balkrishna Shrestha Assistant Manager Credit Risk Management Department- Branch Mrs. Saroja Koirala Assistant Manager Human Resource Department Mr. Sudhir Mool Incharge Internal Audit Department Laxmi Bahadur Shrestha Director Mohammad Lutfar Rahman IFIC Bank Ltd Dhaka, Bangladesh Director Erfanuddin Ahmed (Bank Asia Ltd, Dhaka, Bangladesh) Director Mr. Gopal Sharma, Incharge, Putalisadak Branch Mr. Anir Shrestha, Deputy Manager, Putalisadak Branch Mr. Ujwal Bajracharya, Incharge, Main Branch Mr. Kailash Tripathi, Assistant Manager, Main Branch Mr. Binod Ranjit, Incharge, Newroad Branch Mr. Rajendra Prasad Adhikari, Incharge, Birgunj Branch Mr. Niraj Lamsal,Incharge, Butwal Branch Mr. Binod Kumar Mahat, Incharge, Biratnagar Branch Mr. Rishi Ram Gyawali, Incharge, Lalitpur Branch Mr. Santosh Bhattarai,Incharge, Nepalgunj Branch Mr. Ashok Shakya, Incharge, Bhainsepati Branch Mr. Harish Shrestha, Incharge, Kalimati Branch Mr. Dinesh Prasad Khatiwada,Incharge, Dhangadhi Branch Mr. Naresh Kayastha,Incharge, Janakpur Branch Mr. Nabin Prasad Shrestha,Incharge, Hetauda Branch Mrs. Krishna Amatya,Incharge, Bhaktapur Branch Mr. Satyendra Aryal, Incharge, Pokhara Branch Mr. Kumar Dahal, Incharge, Dharan Branch Mr. Sanjeev Sharma, Incharge, Tatopani Branch Mr. Bishnu Hari Adhikari, Incharge, Battar Branch Hetauda Branch Pokhara Branch Battar Branch Kalimati Branch New Road Branch Putalisadak Branch Head Office, Main Branch, New Baneshwor, Kathmandu Bhaktapur Branch Lalitpur Branch Dharan Branch Bhainsepati Branch Amrit Nath Regmi Director Bishnu Raj Adhikari Director Indra Bahadur Thapa Director Kailali Dhangadi Branch Banke Rupandehi Kaski Makawanpur Parsa Nuwakot Sindhupalchowk Dhanusha Tatopani Branch Sunsari Morang Nepalgunj Branch Butwal Branch Birgunj Branch Biratnagar Branch Janakpur Branch Auditor: CA Mukunda Dev Adhikari Banskota & Co. Chartered Accountants Company Secretary: Awatar Neupane Head Office New Baneshwor, Kathmandu Tel.: , Fax No.: , Main Branch New Baneshwor, Kathmandu Tel.: , , Fax No.: , Putalisadak Branch Tel.: , Fax No.: , NB Bank Networking: Virtually Everywhere New Road Branch Tel.: , , Fax No.: , Battar Bazar Branch Tel.: Fax No.: Janakpur Branch Tel.: , , Fax No.: Bhainsepati Branch Tel.: Fax No.: Kalimati Branch Tel.: , Fax No.: Hetauda Branch Tel.: Fax No.: Butwal Branch Tel.: , Fax No.: Birgunj Branch Tel.: , Fax No.: Nepalgunj Branch Tel.: , Fax No.: Pokhara Branch Tel.: , Fax No.: Biratnagar Branch Tel.: , , Fax No.: Tatopani Branch Tel.: , Fax No.: Dhangadhi Branch Tel.: , Fax No.: Lalitpur Branch Tel.: , Fax No.: (Ext. 222) Dharan Branch Tel.: Fax No.: Bhaktapur Branch Tel: Fax No:

3 Table of Content S.N. Par culars Page No. 1. About us 1 2. Deposit Products 2 3. Interna onal Partners 3 4. Chairman Speech Auditors Report Detail Financial Report Basal Discloser Approval of Nepal Rastra Bank 55

4 Margins Savings Current 59% STD 12% Fixed 1 2

5 Nepal Bangladesh Bank Limited Notice of 16th Annual General Meeting Respected Shareholders, This notice is published to inform all the shareholders of the Bank about the 16th Annual General Meeting which is going to be held as per the decision of the Board of Directors of the Bank dated 2067/9/8 on the following date, time and venue to discuss the below mentioned agendas. Date, Time and Venue of the meeting: Date: Friday, 30th Poush Time: 11:00 AM. Venue: City Hall (Rastriya Sabha Ghriha), Exhibition Road, Kathmandu. Agendas for the Discussion: (a) General Resolution: 1. Approval of the Report of the Board of Directors 2066/ Approval of the Audit Report including Balance Sheet, Profit Loss Account and Cash flow statement of the fiscal year 2066/ Appointment and fixing the fee of the Auditor for the Fiscal Year 2067/68 as recommended by Audit Committee. (Present Auditor Mr. Mukunda Dev Adhikari (Baskota & Company) is qualified for reappoint) (b) Special Resolution: (c) 1. Approval of the amendment of the Article and Memorandum of the Association of the Bank and authorization to the Board of the Directors for necessary change if any required by the regulators like, Nepal Rastra Bank, Office of the Company Registrar, etc. 2. Approval of the allowances of the foreign directors who presents in the meeting of the Board of Directors. Miscellaneous: By the Order of the Board of Directors Company Secretary 3 4

6 Annual Report of the Fiscal Year 2066/67 of the Board of the Directors of Nepal Bangladesh Bank Limited Respected Shareholders, First of all I would like to extend heartily greetings to all shareholders presented in this 16th Annual General Meeting (AGM) NB Bank Limited. Half time of the fiscal year was already passed while we had concluded 12 th, 13 th, 14 th, 15 th, AGM, on 29 th Poush last year constituting present Board of Director. The economy of the Nation was slow and in dilemma and we also had challenge to formulate proper business policy and achieve expected results within sort period of time but with the help of the regulators, well wish of the shareholders and dutifulness of the staff of the bank we became able to achieve expected result and I am feeling proud to share this fact with all of you. In this occasion, I present Balance Sheet, Profit and Loss Account and Other financial statement of fiscal year 2066/67 (Year ending Ashad 2067) and request you for approval. This Annual report is prepared as per the provision of the Bank and Financial Institution Act 2063 Company Act 2063 and Directive Nepal Rastra Bank. 1. Analysis of Nation's Economy Condition: From the perspective of the economy activities, fiscal year 2066/67 remain very difficult where most of the indicators of the economy were negative. The National Economy has faced problems like poor management of the Agriculture Sector which is major Sector of Economy, Lack of Investment Friendly Environment, Inappropriate Utilizations of Remittance, Increase in the Consumption despite Low Economy Growth, Lack of Domestic Productive Employment Opportunities, narrow down of the basic Economic Activities, growth of the Unequal Distribution of the Income, Abstraction in the Transportation System, etc. These all contributed the cost of investment and reduced the competitiveness of the economy. Contribution of the Public Finance in the economic activities was not Satisfactory due to lack of necessary instrument of the capital but increase of the general expenditure due to growth of the revenue mobilization raised question in the stability and balance of overall economy. Loss of public dept, dependency in the foreign aid, mismatching in the domestic saving and investment, and double digit price hick continued from the last two years are also contributing factor for this. In such critical situation of the economy, banking sector as recorded numerical growth. Tapering economic activities in one side and increasing number of the Bank and Financial Institutions has made banking sector more competitive and difficult. At the same time the capital market has also showed slow trends. In external sector, fiscal year 2066/67 has record the negative growth in export and high growth in Import caused. This caused high trade deficit consequently, the balance of the payment also became negative. The growth rate of the economy was limited only 3.5 % but in the other side the inflation was around 10.5%. Trade deficit was around 318 Billion (Arab) and negative balance of payment has as reduced the foreign exchange balance which can afford import goods and service only for seven month. By this way fiscal year 2066/67 has failed to provide any growth or reform in economy. The political instability and uncertainty remain the main cause for all these. The effect of this National environment was all round. Banking Sector also doesn't remain aloof from this effect. Luckily the effect of this situation was negligible in our own context. 2. Activities of the Bank in fiscal year 2066/67 Despite the above mentioned critical economic situation, the Bank has able to achieve satisfactory result in its annual projected activities. Especially, in profit and management of nonperforming loan, we have achieved our target. But due to change made by Nepal Rastra Bank in the loan classification and loan loss provisioning system from Shrawan 1, 2067 (NRB directive No 2) the performance in nonperforming loan management was not seen effective. The following table shows the comparative situation of the some particular of the Bank in fiscal year 2065/066 and 2066/067. Table: 1 S.N 2066 Ashadh 2067 Ashadh 1. Total Assets Deposit Total Loan and Advance Total Investment Operating Profit Net Profit (After Tax) % 7. Capital Adequacy Ratio Number of Branch ATM Service 12 6 Figures are in Million The markable reduction has seen in operating profit and net profit due to change in nonperforming loan and loan loss provisioning system. Due to necessary precaution, the Bank remain non effective from the negative effect of real estate and margin landing by which whole banking sector is affected. Likewise, due to precaution taken in nonperforming loan recovery and new investment the Bank remain as an Inter Bank Lander at the time of crises of liquidity. Following Table shows some financial particular of first quarter of this fiscal year. Table: 2 S.N Ashwin Total Assets 14, Deposit 10, Total Loan and Advance 9, Total Investment 2, Operating Profit Net Profit (After Tax) Capital Adequacy Ratio 11.85% 8. Number of Branch ATM Service 15 Figures are in Million 3. Remittance Service: NB Remit is in operation from last fiscal year to strength Bank's Remittance Service and management is trying to make this service more effective. In the process of extending this service an agreement with Oman International Exchange was concluded last year and the remittance from Oman is coming through this channel and other business contact is in progress. In addition to this, Bank is also working as an agent of different remittance company. We have concluded a contract with CG Finco under Western Union to restart remittance and preparation for this is almost complete. This service will be available at the end of Magh. 4. Merger and Extension of Branch: 18 different branches are operating in different part the country growing monetization and banking habit of Nepalese people has compelled us to think about the extension of our branch network. In this context, Necessary study is going on for the extension of the branches as mentioned in monetary policy of this year. The merger Process with Nepal Sri Lanka Merchant Bank and finance limited is in operation after getting Letter of Intent (LOI) from Nepal Rastra Bank as per the decision of 11th AGM. It is expected that after merger of this Institution the number of branches of bank will reach 19and the Paid up Capital will Increase, this will help to extend the business of the bank. 5 6

7 5. Extension of Service and Development of Technology: Six different ATM are in operation and software of the Bank has updated with the objective of operating centralized data system. The Locker Service is extended in Bhaktapur, Birgunj and Nepalgunj. A new Branch is in operation Sallagari Bhaktapur and all the customers of the Bank are receiving E-banking service. 6. New Deposit Scheme: Following three new deposit schemes are in operation to provide new and competitive services and facility to the customer. "5 Benefits of 5" Special Fixed Deposit NB 16th Anv. Saving Account Shareholder Saving Account In addition to this, earlier deposit scheme like Grihini Saving Account, NB Saral Saving Account, NB Saving Plus are continue with necessary modifications a per the need of the time. The encouraging participant of the customer in these different accounts has showed considerable contribution in deposit of the bank. The new deposit schemes specially "5 Benefits of 5" Special Fixed Deposit and NB 16th Anv. Saving Account is fully successful in view of management. 7. Corporate Social Responsibility: Ten set of wheel-chair has been provided to Nepal Orthopedic Hospital, Jorpati Kathmandu and Rs was donated to the Siddhi Salikram Old age House as corporate social responsibility of the bank during fiscal year 2066/ Future Plan and Program: From This fiscal year bank has determined long term and midterm target being based on the competitiveness of the market, need of general public, direction of the Monetary Policy of the year 2067, need of the investor. During current fiscal year the Bank has planned to: a. Implement strategy to double the investment within three years in the productive, energy, tourism, agriculture and small business sector as expected by Nepal Rastra Bank through monetary policy. b. Strengthen the risk management system in the business of the Bank. c. Strengthening saving accounts as main source of capital maintaining its present high contribution. d. Implementation of SME Basket as new credit product targeting small and medium business and industries. e. Reducing the NPA by management and recovery of the restructured loan which fall non performing loan category due to change in the NRB Directives. f. Establishment and operation of subsidiary company for the business of merchant banking business. 9. Human Resource: Training to all staffs of the bank is always in our priority and this will continue in future too. Proper management model will be maintained to retain, keep and motivate qualified manpower in the Bank. 10. Construction of the Building: It is planned to operate banking business of the Hetuda Branch of the Bank after construction of own building in land situated in Hetuda. The work for structural design is in progress for this. Process of procurement of the land/building for the corporate office is also already initiated. Purchasing the land for this will be concluded within this fiscal year and work for design will be start. 11. Corporate Governance: The Board of the Directors and management are always aware and committed to ensure corporate governance in the Bank. The Bank has always followed the guidelines of good corporate governance. Bank is always working to maintain corporate governance by ensuring transparence in the activities. In this context, the job internal auditing has been outsourced to the T. R. Upadhaya and Co. to make this more effective. The off-site inspection desk has been strengthened in internal audit department. It is planned to implement the code of the conduct for employees at the end of Magh, The Board of Directors: The Board of Director elected by the annual general meeting concluded in 29 Poush, 2066 is working presently. The directors among themselves elected Mr. Tirtha Man Shakya as chairman of the Board. The constitution of the Board of Directors is as follows: S.N. Name of the Director Group of Shareholders representing 1. Mr. Tirtha Man Shakya Promoter, Group B 2. Mr. Laxmi Bahadur Shrestha Promoter, Group B 3. Mr. Mohammad Lutfar Rahman Promoter, Group A 4. Mr. Erfanuddin Ahemed Promoter, Group A 5. Mr. Amrit Nath Regmi Public Shareholder Group C 6. Mr. Bishnu Raj Adhikari Public Shareholder Group C 7. Mr. Indra Bahadur Thapa Public Shareholder Group C We also want to extend sincere thanks to the Follow-up Team (Anugaman Samitte) Nepal Rastra Bank for their contribution in the management of the Bank before this Board of Director. 13. Audit Committee: The Audit Committed constituted under the chairmanship of non executive director and other two members of director continuously reviewing Financial situation, international control, risk management, and auditing program. The audit committee is providing necessary suggestion to the management about the comments of both internal and external audit report. 14. Necessary Information related to Section 109 of the Companies Act, 2063 are incorporated in Schedule Expression of Gratitude: At the End, I would like to my sincere thanks to respectable customers, Government of Nepal, Ministry of Finance, Nepal Rastra Bank, Office of Company Registrar, Securities Board, Nepal Stock Exchange and all those who have directly or indirectly helped us provided suggestions for uplifting the effectiveness of the performance of the Bank and upgrading of the service of the Bank. We are confident that this will continue in future too. We also express our thanks to the employees and management of the Bank for their continued devotion and loyalty towards Bank. On Behalf of the Board of Directors Tirtha Man Shakya Chairman Date 2067/9/30 7 8

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9 NEPAL BANGLADESH BANK LIMITED BALANCE SHEET Capital and Liabilities Schedule Rs. Rs. 1. Share Capital 1 1,860,315,000 1,860,315, Reserves and Surplus 2 273,257,976 (748,072,516) 3. Debentures and Bonds Borrowings Deposits 5 10,052,182,377 9,997,697, Bills Payables 6 15,401,690 12,628, Proposed Dividend Income Tax Liabilities - 6,728, Other Liabilities 7 329,885, ,254,758 Total Liabilities 12,531,042,840 11,964,552,621 Assets Schedule Rs. Rs. 1. Cash Balance 8 422,008, ,402, Balance with Nepal Rastra Bank 9 1,423,257,127 1,869,815, Balance with Banks/Financial Institutions ,033, ,199, Money at Call and Short Notice 11-1,000, Investments 12 2,112,751,395 2,222,431, Loan, Advances and Bills Purchases 13 7,809,544,311 6,704,943, Fixed Assets ,327, ,198, Non-Banking Assets Other Assets ,120, ,561,698 Total Assets 12,531,042,840 11,964,552,621 Contingent Liabilities Schedule 17 Declaration of Directors Schedule 29 Statement of Capital Fund Schedule 30 Statement of Risk Weighted Assets Schedule 30A, 30B, 30C & 30D Principal Indicators Schedule 31 Principal Accounting Policies Schedule 32 Notes to Accounts Schedule 33 Schedules 1 to 17 form integral part of this Balance Sheet. As per our attached report of even date NEPAL BANGLADESH BANK LIMITED PROFIT & LOSS ACCOUNT FOR THE PERIOD FROM SHRAWAN 1, 2066 (JULY 16, 2009) TO ASHAD 32, 2067 (JULY 16, 2010) Schedule Current Previous Year () Year () 1. Interest Income 18 1,167,627,965 1,337,112, Interest Expenses ,787, ,775,968 Net Interest Income 690,840, ,336, Commission and Discount ,796, ,393, Other Operating Income 21 50,496, ,074, Exchange Fluctuation Income 22 49,839,664 80,547,926 Total Operating Income 936,972,686 1,255,351, Personnel Expenses ,641, ,423, Other Operating Expenses ,765, ,306, Exchange Fluctuation Loss Operating Profit Before Provision for Possible Losses 661,565, ,620, Provision for Possible Losses ,389, ,319,461 Operating Profit 513,175, ,301, Non Operating Income/(Loss) 26 18,384,645 22,933, Loan Loss Provision Written-Back 27 1,318,048,637 1,905,860,170 Profit from Regular Activities 1,849,609,239 2,639,095, Profit/Loss From Extra -Ordinary Activities 28 (523,481,793) (14,989,755) Net Profit After Considering All Activities 1,326,127,446 2,624,105, Provision For Staff Bonus 120,557, ,555, Provision For Income Tax 184,190, ,446,466 Current Tax 167,800, ,262,156 Deferred Tax (Surplus) 2,994,210 3,041,621 's 13,396,134 (10,857,311) Net Profit/Loss 1,021,380,061 Schedules 18 to 28 form integral part of this Profit and Loss Account. 2,158,104,141 As per our attached report of even date Suresh Devkota Govinda Babu Tiwari Tirtha Man Sakya Mukunda Dev Adhikari, CA Manager - Accounts General Manager Chairman Partner Banskota & Co. Chartered Accountants Suresh Devkota Govinda Babu Tiwari Tirtha Man Sakya Manager-Accounts General Manager Chairman Laxmi Bahadur Shrestha Erfanuddin Ahamed Mosharraf Hossain Director Director Director Mukunda Dev Adhikari, CA Partner Banskota & Co. Chartered Accountants Laxmi Bahadur Shrestha Erfanuddin Ahamed Mosharraf Hossain Director Director Director Amrit Nath Regmi Indra Bahadur Thapa Bishnu Raj Adhikari Director Director Director Place: Bijulibazar, Kathmandu, Nepal Date: November 21, 2010 Amrit Nath Regmi Indra Bahadur Thapa Bishnu Raj Adhikari Director Director Director Place: Bijulibazar, Kathmandu, Nepal Date: November 21,

10 NEPAL BANGLADESH BANK LIMITED PROFIT AND LOSS APPROPRIATION ACCOUNT FOR THE PERIOD FROM SHRAWAN 1, 2066 (JULY 16, 2009) TO ASHAD 32, 2067 (JULY 16, 2010) Schedule Current Previous Year () Year () Incomes: 1. Accumulated Profit up to Last Year This Year's Profit 1,021,380,061 2,158,104, Exchange Fluctuation Reserve - - Total 1,021,380,061 2,158,104,141 Expenses: 1. Accumulated Loss up to Last Year 1,664,761,106 3,386,818, This Year's Loss General Reserve 204,276, ,620, Contingent Reserve Institutional Development Fund Dividend Equalization Fund Staff Related Reserve Funds Proposed Dividend Proposed issue of Bonus Share Special Reserve Fund Exchange Fluctuation Fund 826,361 4,376, Capital Redemption Fund Capital Adjustment Fund Deferred Tax Reserve - 49, Investment Adjustment Reserve 1,094,650 - Total 1,870,958,129 3,822,865, Accumulated Profit/(Loss) (849,578,068) (1,664,761,106) As per our attached report of even date Suresh Devkota Govinda Babu Tiwari Tirtha Man Sakya Mukunda Dev Adhikari, CA Manager-Accounts General Manager Chairman Partner Banskota & Co. Chartered Accountants NEPAL BANGLADESH BANK LIMITED CASH FLOW STATEMENT FOR THE PERIOD FROM SHRAWAN 1, 2066 (JULY 16, 2009) TO ASHAD 32, 2067 (JULY 16, 2010) A. CASH FLOW FROM OPERATING ACTIVITIES (537,495,648) (564,104,991) 1. Cash Receipts 1,414,520,219 1,681,879, Interest Income 1,167,627,965 1,337,112, Commission and Discount Income 145,796, ,393, Income from Foreign Exchange Transaction 49,839,664 80,547, Recovery from Written Off Loans 5,891,099 6,500, Other Income 45,364, ,326, Cash Payments 926,889, ,572, Interest Expenses 476,787, ,775, Staff Expenses 124,084, ,142, Office Overhead Expenses (less non-cash expenses) 108,868, ,579, Income Tax Paid 217,148, ,074, Other Expenses - - CASH FLOW before Change in Working Capital 487,630, ,306,993 Increase/(Decrease) of Current Assets (441,942,554) (457,489,299) 1. (Increase)/Decrease in Money at Call and Short Notice 1,000, (Increase)/Decrease in Other Short Term Investment 106,204,318 (825,382,409) 3. (Increase)/Decrease in Loans, Advances and Bills Purchases (517,959,876) 317,636, (Increase)/Decrease Changes in Other Assets (31,186,996) 50,256,406 Increase/(Decrease) of Current Liabilities (583,183,591) (955,922,685) 1. Increase/(Decrease) in Deposits 54,484,947 (885,955,152) 2. Increase/(Decrease) in Certificate Deposits Increase/(Decrease) in Short Term Borrowing Increase/(Decrease) in Other Liabilities (637,668,538) (69,967,533) B CASH FLOW FROM INVESTING ACTIVITIES 24,377,250 94,087, (Increase)/Decrease in Long Term Investments (Increase)/Decrease in Fixed Assets (including NBA) 23,616,805 93,871, Interest Income on Long Term Investments Dividend Income 760, , Others - - C CASH FLOW FROM FINANCING ACTIVITIES - 1,118,586, Increase/(Decrease) in Long Term Borrowing (Bond, Debenture etc.) Increase/(Decrease) in Shareholders Capital - 1,148,586, Dividend Paid Increase/(Decrease) in Refinance/ Facilities Received from NRB - (30,000,000) D. Income and Loss from change in Exchange Rate in Cash and Bank Balances - - E. 's CASH FLOW from All Activities (513,118,398) 648,568,845 F. Opening Cash and Bank Balances 2,571,417,193 1,922,848,348 G. Closing Cash and Bank Balances 2,058,298,795 2,571,417,193 As per our attached report of even date Laxmi Bahadur Shrestha Erfanuddin Ahamed Mosharraf Hossain Director Director Director Amrit Nath Regmi Indra Bahadur Thapa Bishnu Raj Adhikari Director Director Director Place: Bijulibazar, Kathmandu, Nepal Suresh Devkota Govinda Babu Tiwari Tirtha Man Sakya Manager-Accounts General Manager Chairman Laxmi Bahadur Shrestha Erfanuddin Ahamed Mosharraf Hossain Director Director Director Mukunda Dev Adhikari, CA Partner Banskota & Co. Chartered Accountants Amrit Nath Regmi Indra Bahadur Thapa Bishnu Raj Adhikari Director Director Director Place: Bijulibazar, Kathmandu, Nepal Date: November 21,

11 NEPAL BANGLADESH BANK LIMITED Statement of Changes in Shareholders Equity FOR THE PERIOD FROM SHRAWAN 1, 2066 (JULY 16, 2009) TO ASHAD 32, 2067 (JULY 16, 2010) Figures in Rs. Total Other Free Reserve Deferred Tax Reserve Exchange Fluctuation Reserves Share Premium Capital Adjustment Fund General Reserves Accumulated Profit/(Loss) Share Capital Balance at 16 July ,860,315,000 (1,664,761,106) 752,568,605 72,000,000 35,869,938 56,200,478 49,569-1,112,242,484 Changes in Accounting Policy Restated Balance 1,860,315,000 (1,664,761,106) 752,568,605 72,000,000 35,869,938 56,200,478 49,569-1,112,242,484 Surplus on Revaluation of Properties - Deficit on Revaluation of Investment - Currency Translation Differences - Net Gains & Loss Not recognised in the income Statement - Net Profit for the Period 1,021,380,061 1,021,380,061 Transfer to General Reserve (204,276,012) 204,276,012 - Declaration of Dividend - Issue of Share Capital - Deficit on Revaluation of Properties - Surplus on Revaluation of Investments - Exchange Fluction Reserves (826,361) 826,361 - Capital Adjustment Fund - - Others (49,569) (49,569) Balance at 16 July ,860,315,000 (848,483,418) 956,844,617 72,000,000 35,869,938 57,026, ,133,572,976 As per our attached report of even date Mukunda Dev Adhikari, CA Partner Banskota & Co. Suresh Devkota Govinda Babu Tiwari Tirtha Man Sakya Manager-Accounts General Manager Chairman Chartered Accountants Laxmi Bahadur Shrestha Erfanuddin Ahamed Mosharraf Hossain Director Director Director Amrit Nath Regmi Indra Bahadur Thapa Bishnu Raj Adhikari Director Director Director Place: Bijulibazar, Kathmandu, Nepal Date: November 21, SHARE CAPITAL AND OWNERSHIP Schedule 1 1. Share Capital 1.1 Authorised Capital 3,000,000,000 3,000,000,000 A) 30,000,000 Ordinary Rs. 100 each 3,000,000,000 3,000,000,000 B).. Non-redeemable Rs... each - - C).. Redeemable Rs. each Issued Capital 2,000,000,000 2,000,000,000 A) 20,000,000 Ordinary Rs 100 each 2,000,000,000 2,000,000,000 B)... Non-redeemable Rs.....each - - C) Redeemable Rs. each Paid Up Capital 1,860,315,000 1,860,315,000 A) 18,603,150 Ordinary Rs. 100 each 1,860,315,000 1,860,315,000 B). Non-redeemable Rs... each - - C). Redeemable Rs... each Proposed Bonus Shares Calls In Advance - - SHARE OWNERSHIP % % Share Ownership 1. Local Ownership ,399,065, ,399,065, Government of Nepal 1.2 "A" Category Licensed Institutions 1.3 Other Licensed Institutions 1.4 Other Institutions ,128, ,899, General Public ,554, ,554, Others ,382, ,610, Foreign Ownership ,250, ,250,000 Total ,860,315, ,860,315,000 DETAILS OF SHAREHOLDER HOLDING 0.5 % OR MORE SHARES S.No % of holding Amount 1 M/s Bank Asia Ltd., Bangladesh ,750,000 2 M/s IFIC Bank Ltd., Bangladesh ,500,000 3 M/s Capital Investment and Securities Pvt. Ltd ,379,200 4 M/s Manaslu Investment Pvt. Ltd ,222,000 5 Mr. Laxmi Bahadur Shrestha ,107,100 6 Mr. Jit Bahadur Shrestha ,454,000 7 Mr. Purna Bahadur Shrestha ,006,200 8 Mr. Nabin Shrestha ,740,000 9 M/s Bipul Developers Pvt. Ltd ,000, Mr. Babu Kaji Shrestha ,008, Mrs. Rama Gyawali ,750, M/s Bagmati Investment Pvt. Ltd ,090, M/s Dhaulagiri Holdings Pvt. Ltd ,512, M/s KSD Investment Pvt. Ltd ,500, M/s Sangrila Investment Pvt. Ltd ,000, Mr. Surendra Bahadur K.C. (Khadka) ,890,000 16

12 RESERVES AND SURPLUS Schedule 2 1 General Reserve Fund 956,844, ,568,605 2 Capital Reserve Fund 35,869,938 35,869,938 a. Share Premium 35,869,938 35,869,938 3 Capital Redemption Reserve Capital Adjustment Fund 72,000,000 72,000,000 5 Other Reserve and Fund 1,094,650 49,569 a. Contingent Reserve - - b. Institution Development Fund - - c. Dividend Equalization Fund - - d. Special Reserve Fund - - e. Assets Revaluation Fund - - f. Deferred Tax Reserve - 49,569 g. Other Free Reserve - - h. Other Reserve - - i. Investment Adjustment Reserve 1,094,650-6 Accumulated Profit/Loss (849,578,068) (1,664,761,106) 7 Exchange Fluctuation Fund 57,026,839 56,200,478 DEBENTURES AND BONDS Schedule 3 1 Local % Bond/Debenture issued on.and Mature on.. Redemption reserve upto the period 2 % Bond/Debenture issued on and Mature on.. Redemption reserve upto the period BORROWINGS Schedule 4 A Local Total (1+2+3) 1 Government of Nepal Nepal Rastra Bank (Refinance) Repo Liability Inter Bank and Financial Institution Other Organized Institutions Others - - Total ( ) - - B Foreign Banks Others - - Total - - Total (A+B)

13 DEPOSITS Schedule 5 I. INTEREST FREE DEPOSITS A. Current Deposits 1,247,576,919 1,082,919, Local Currency 1,068,704, ,702, Government of Nepal 3,612,933 10,856, "A" Class Licensed Institutions 938, , Other Licensed Financial Institutions 108,422, ,261, Other Organized Institutions 548,635, ,358, Individuals 235,852, ,348, Others 171,243,302 75,966, Foreign Currency 178,872, ,216, Government of Nepal "A" Class Licensed Institutions 2,108,995 15, Other Licensed Financial Institutions 219, , Other Organized Institutions 101,058, ,198, Individuals 74,950, , Others 534,532 1,481,156 B. Margin Deposits 231,049, ,317,843 1 Employees Guarantee - 1,618, Guarantee Margin 131,134,608 78,583, Letters of Credit Margin 99,914, ,115,049 C. Others 1,134, ,902, Local Currency 1,134, ,902, Financial Institutions - 51,939, Other Organized Institutions 1,107, ,278, Individual 27, , Foreign Currency 2.1 Financial Institutions Other Organized Institutions Individual - - Total of Interest Free Deposits (A+B+C) 1,479,760,997 1,684,139,666 BILLS PAYABLE Schedule 6 1 Local Currency 15,401,690 12,628,976 2 Foreign Currency - - Total 15,401,690 12,628,976 OTHER LIABILITIES Schedule 7 1 Pension/Gratuity Fund Employees Provident Fund Employees Welfare Fund 500,656 16,930,137 4 Provision for Staff Bonus 120,791, ,555,061 5 Interest Payable on Deposits 216,587 85,258 6 Interest Payable on Borrowings Unearned Discount and Commission Sundry Creditors 26,725, ,201,020 9 Branch Reconciliation Account - 417,011, Deferred Tax Liability 2,994, Dividend Payable 1,371,094 1,397, Others 177,287,060 59,074,379 a. TDS Payable 8,788,540 5,649,371 b. Matured Deposits 23,349,594 7,461,531 c. Miscellaneous 145,148,926 45,963,477 Total 329,885, ,254,

14 CASH BALANCE Schedule 8 1 Local Currency (including coin) 402,204, ,445,465 2 Foreign Currency 19,803,698 10,956,918 Total 422,008, ,402,383 BALANCE WITH NEPAL RASTRA BANK Schedule 9 Local Currency Foreign Currency INR Convertible FCY Total 1 Nepal Rastra Bank 1,416,257,216-6,999,911 6,999,911 1,423,257,127 1,869,815,145 a. Current Account 1,403,788,717-6,999,911 6,999,911 1,410,788,628 1,856,758,161 b. Other Account 12,468, ,468,499 13,056,984 Note: Total Balance as per the confirmation statements is Rs. 1,391,609, INVESTMENTS Schedule 12 Purpose Trading Other 1. Government Treasury Bills 1,521,831,260 1,521,831,260 1,317,174, Government Savings Bond 357,387, ,387, ,654, Other Government Securities Nepal Rastra Bank Bonds Foreign Securities Local Licensed Institutions 130,000, ,000, ,000, Foreign Banks 74,850,000 74,850,000 77,950, Organized Institutions' Shares 54,732,500 54,732,500 51,118,500 9 Organized Institutions' Bonds and Debentures Other Investments Total Investments - 2,138,801,395 2,138,801,395 2,244,897,713 Provision 26,050,000 26,050,000 22,466,000 Net Investments - 2,112,751,395 2,112,751,395 2,222,431,713 BALANCE WITH BANKS/FINANCIAL INSTITUTIONS Schedule 10 INR Convertible FCY Total 1 Local Licensed Institutions 44,994, , ,906 45,770,187 33,386,440 a. Current Account 44,994, , ,906 45,770,187 33,386,440 b. Other Account Foreign Banks - 32,650, ,612, ,263, ,263, ,813,225 a. Current Account - 32,650, ,612, ,263, ,263, ,813,225 b. Other Account Total 44,994,281 32,650, ,388, ,039, ,033, ,199,665 Note: Total Balance as per the confirmation statements is Rs. 330,186, MONEY AT CALL AND SHORT NOTICE Schedule 11 Local Currency Foreign Currency 1 Local Currency - 1,000,000 2 Foreign Currency - - Total - 1,000,000 INVESTMENT IN SHARES, DEBENTURES AND BONDS Schedule 12 (A) Purchase Price Market Price Provision Net Value NRs NRs NRs NRs NRs 1 Investment in Shares 54,732,500 64,414,600 26,050,000 28,682,500 51,118, Himalayan Distillery Ltd. 13,414,000 13,414,000-13,414,000 13,414, ,140 Ordinary shares of Rs 100 each fully paid up N.B. Insurance Company Ltd. 15,000,000 34,050,000 15,000,000-15,000, ,000 Ordinary shares of Rs 100 each fully paid up Nepal Credit and Commerce Bank Ltd. 9,700,000 15,300,600 9,700,000-7,286,000 97,000 Ordinary shares of Rs 100 each fully paid up Pashchimanchal Gramin Bikash Bank Ltd. 3,000,000 N/A - 3,000,000 3,000,000 33,000 Ordinary shares of Rs 100 each fully paid up - (including 3,000 Bonus Shares) Madhayamanchal Gramin Bikash Bank Ltd. 3,500,000 N/A - 3,500,000 3,500,000 35,000 Ordinary shares of Rs 100 each fully paid up Rural Microfinance Development Centre Ltd. 4,531,000 N/A - 4,531,000 4,531,000 45,310 Ordinary shares of Rs 100 each fully paid up Nepal Clearing House Ltd. 125,000 N/A - 125, ,000 25,000 Ordinary shares of Rs 5 each partly paid up National Hydropower Company Ltd. 3,000,000 1,650,000 1,350,000 1,650,000 3,000,000 30,000 Ordinary shares of Rs 100 each fully paid up Credit Information Center Ltd. 1,262,500 N/A - 1,262,500 1,262,500 12,625 Ordinary shares of Rs 100 each fully paid up National Baking Training Institute Ltd. 1,200,000 N/A - 1,200,000-12,000 Ordinary shares of Rs 100 each fully paid up - 2 Investments in Debentures and Bonds Company Pvt./ Ltd. -..% Debenture/Bond each Debenture/Bond.Rs. - Total Investment 54,732,500 64,414,600 26,050,000 28,682,500 51,118,500 3 Provision for Loss 3.1 Up to 22,466,000 25,000, Additions This Year 3,584,000 (2,534,000) Total Provision 26,050,000 22,466,000 Net Investment 28,682,500 28,652,500 Note: Except the Companies mentioned in 1.4 and 1.6 have not declared and distributed dividend for more than 3 years

15 HELD FOR TRADING Schedule 12.1 Original Previous Present 's 's Remarks Value Market Value Market Value Profit/(Loss) Profit/(Loss) 1. Government Treasury Bills 2. Government Savings Bond 3 Other Government Securities 4 Nepal Rastra Bank Bonds 5 Foreign Securities 6 Shares of Local Licensed Institutions 7 Debentures and Bonds of Local Licensed Institutions 8 Shares, Debentures and Bonds of Local Institutions 9 Placements 10 Interbank Lending 11 Other Investments Total Investments HELD TO MATURITY Schedule 12.2 Original Loss till Loss for 's 's Remarks Value date this Year Profit/(Loss) Profit/(Loss) 1. Government Treasury Bills 1,521,831, Government Savings Bond 357,387,635 3 Other Government Securities 4 Nepal Rastra Bank Bonds 5 Foreign Securities 6 Shares of Local Licensed Institutions 7 Debentures and Bonds of Local Licensed Institutions 8 Shares, Debentures and Bonds of Local Institutions 9 Placements 204,850, Other Investments Total Investments 2,084,068, AVAILABLE FOR SALE Schedule 12.3 Original Previous Present 's 's Remarks Value Market Value Market Value Adjustment Reseve Profit/(Loss) 1. Government Treasury Bills 2. Government Savings Bond 3 Other Government Securities 4 Nepal Rastra Bank Bonds 5 Foreign Securities 6 Shares of Local Licensed Institutions 7 Debentures and Bonds of Local Licensed Institutions 8 Shares, Debentures and Bonds of Local Institutions 54,732,500 9 Placements 10 Other Investments Total Investments 54,732, CLASSIFICATION OF LOANS, BILLS PURCHASED AND PROVISIONING Schedule 13 Advances Bills Purchased/Discounted Domestic Priority Insured Uninsured Total Foreign Total Domestic Foreign Other 1. Performing Loan 361,217,544 8,030,702,149-8,391,919,693 37,328,140 99,873, ,201,422 8,529,121,115 7,323,119, General Loan 361,217,544 7,166,646,852-7,527,864,396 37,328,140 99,873, ,201,422 7,665,065,818 6,741,960, Restructured/Rescheduled Pass Loan - 864,055, ,055, ,055, ,159, Non-Performing Loan 60, ,670, ,730, , , ,971,707 1,807,385, Substandard Loan - 14,709,736-14,709, ,709,736 31,734, Doubtful Loan - 5,508,003-5,508, ,508,003 30,478, Loss Loan 60, ,453, ,513, , , ,753,968 1,745,172,888 (A) Total Loan 361,277,544 8,620,373,063-8,981,650,607 37,328, ,114, ,442,215 9,119,092,822 9,130,505, Loan Loss Provision 3.1 Pass/General 3,612,175 94,209,554-97,821, , ,733 1,372,014 99,193, ,189, Restructured/Rescheduled - 634,169, ,169, ,169, ,027, Substandard - 3,677,434-3,677, ,677,434 7,933, Doubtful - 2,754,001-2,754, ,754,001 15,239, Loss 60, ,453, ,513, , , ,753,968 1,745,172,888 (B) Total Provision 3,672,175 1,304,263,529-1,307,935, ,281 1,239,526 1,612,807 1,309,548,511 2,425,562, Provisioning up to P/Y 3.1 Pass/General - 31,691, ,742, ,434,589 2,149, ,164 2,754, ,189, ,939, Restructured/Rescheduled - 24,316, ,710, ,027, ,027, ,312, Substandard - 5,926,138 2,007,526-7,933, ,933,664 13,606, Doubtful - 4,151,008 11,088,155-15,239, ,239,163 53,363, Loss - 1,337,988, ,598,210-1,733,587,100-11,585,788 11,585,788 1,745,172,888 2,867,601,817 (C) Total P/Y Provision - 1,404,074,655 1,007,147,416-2,411,222,071 2,149,701 12,190,952 14,340,653 2,425,562,724 4,011,823,468 (D) Wirtten Back from P/Y ,116,014,213 1,586,260,744 (E) Additions this Year (F) Net Additions/Written Back (1,116,014,213) (1,586,260,744) Net Loan (A-B) - 357,605,369 7,316,109,534-7,673,714,903 36,954,859 98,874, ,829,408 7,809,544,311 6,704,943,

16 SECURYWISE LOAN, ADVANCES AND BILLS PURCHASED Schedule 13 (A) A. Secured 9,119,092,822 8,847,131,423 1 Movable/Immovable Assets 7,896,486,429 7,538,245,183 2 Guarantee of Local Licensed Institutions 40,000,000-3 Government Guarantee International Rated Bank's Guarantee Export Documents 97,608,369 68,865,069 6 Fixed Deposit Receipts 145,995,625 96,672,472 a. Own FDR 145,995,625 96,672,472 b. FDR of other Licensed Institutions Government Bonds - 850,000 8 Counter Guarantee Personal Guarantee 435,675, ,200, Other Securities 503,326, ,298,659 B. Unsecured - 283,374,415 Total 9,119,092,822 9,130,505,838 FIXED ASSETS Schedule 14 Assets Building Vehicles Machinery Office Equi. Others 1. At Cost a. Balance 6,206,390 37,065, ,883, ,155, ,134,676 b. Addition during the Year - 18,305,333-15,435,645-33,740,978 11,035,617 c. Revaluation/Write back this Year d. Sold during the Year - (6,872,800) (6,872,800) (7,015,000) e. Write off during the Year Total Cost (a+b+c+d+e) 6,206,390 48,497, ,319, ,023, ,155, Depreciation a. Up to 1,484,045 25,510, ,730, ,725, ,728,068 b. For this Year 236,117 4,874,065 11,602,068-16,712,250 15,218,942 c. Depreciation on Revaluation/Written off d. Depreciation Adjustment/Written Back - (4,063,495) (4,063,495) (3,221,590) Total Depreciation 1,720,162 26,321, ,332, ,374, ,725, Book Value (1-2) 4,486,228 22,176,382-40,986,686-67,649,296 53,429, Land ,077,900 83,077, Capital Construction (pending capitalization) Leasehold Assets ,600,409 2,691,128 Total ( ) 4,486,228 22,176,382-40,986, ,327, ,198,903 Non Banking Assets Schedule 15 Borrower or Party's Name and Address Date of NBA Acquired Total NBA Provision % Amount Net NBA Jean Garment Pvt. Ltd. 30/04/2003 9,278, % 9,278,600-9,278,600 Hill Top Resort 30/06/ % - - 2,817,649 NB Garment Pvt. Ltd. 12/07/ ,604, % 38,604,510-38,604,510 TSG Nepal Pvt. Ltd. 13/01/2005 2,501, % 2,501,000-2,501,000 Naya Chintan Monthly 10/07/ % ,000 National Pharmacem (Outside Consortium) 09/07/ ,056, % 11,056,788 - Jogai International House 27/06/2002 3,136, % 3,136,056-3,136,056 Shree Saibaba Vidhya Garment 27/06/2002 3,519, % 3,519,936-3,519,936 Bikram Baba Farm Pvt. Ltd. 13/07/2001 5,619, % 5,619,870-5,619,870 Nepothechem Industries Pvt. Ltd. 13/07/2001 4,745, % 4,745,508-4,745,508 Radhika Handicraft 16/07/2003 2,948, % 2,948,048-2,948,048 MIC Garment Industries Pvt. Ltd. 16/07/ ,306, % 15,306,723-15,306,723 RSD International 21/05/ % - - 5,503,000 Heritage Café Pvt. Ltd. 16/06/2004 1,211, % 1,211,555-1,211,555 Khumbu Construction 17/11/2004 8,672, % 8,672,000-8,672,000 Om Sai Fashion 12/04/2005 3,154, % 3,154,669-3,154,669 Dhaneshwori Cotton Mills 13/04/2006 5,857, % 5,857,000-5,857,000 Padma Cine Complex 13/04/ ,710, % 32,710,492-32,710,492 Vivid Textile Pvt. Ltd. 23/05/2006 6,150, % 6,150,961-6,150,961 Palanchowk Bhagawati Cold Storage 26/06/ , % 707, ,929 Silver Fibre Textile Mills Pvt. Ltd. 10/07/ ,500, % 32,500,000-32,500,000 Production & Export Nepal Carpet 27/05/2004 9,013, % 9,013,000-9,013,000 Bishnu Shakti Rice Mill, Bidur - 8, Nuwakot 12/07/ , % 810, ,915 Udaya Shree Plastic Pvt. Ltd. 13/04/ % - - 8,807,527 M/S Om Photo Frame Ind. Pvt. Ltd. 17/06/2004 1,518, % 1,518,819-1,518,819 M/S Surya Chhap Chhapal Udhyog 17/06/ % - - 1,359,508 Bhagirathi Grill Udhyog 20/04/ % - - 1,084,660 Santosh Khadhya 20/04/ % - - 1,483,931 Shuvakamana Payal 06/06/ % ,346 New Mahat Kirana 06/06/ , % 906, ,838 Pravat Kasta Udhyog 06/06/ % - - 1,733,811 Om Santi Rice Mill 03/07/2003 1,257, % 1,257,655-1,257,655 Shree Krishna Gharelu Udyog 29/06/ % ,117 D.B. Electricals 29/06/ % - - 1,059,325 Steel House 29/06/ , % 391, ,000 Bhimsen Maharaj 29/05/ % ,044 Bishal Metal 29/05/ % ,000 Bishal Poultry 29/05/ , % 275, ,000 Devi Khadhanna 29/05/ , % 344, ,273 Narayani Feed 13/04/2006 4,167, % 4,167,000-4,997,300 Lama Kirana 13/04/ % - - 1,000,000 Kalika Dana Udhyog 13/04/ % - - 1,036,976 Banjara Traders 13/04/ , % 783, ,000 Chuda Shree Supplier 04/04/ % - - 1,760,000 General Auto Parts 12/06/ % ,362 Bindabasini Khadya Udhyog 16/03/2006 2,582, % 2,582,737-2,582,737 Dingla Pharmaceuticals Pvt. Ltd. 04/07/2004 2,607, % 2,607,588-2,607,588 New Mamta Enterprises 12/04/ % - - 1,209,000 Himal Steel & Himal Salem 07/07/2006 7,041, % 7,041,000-7,041,000 Himal Steel & Himal Salem 28/06/2007 1,227, % 1,227,500-1,227,500 Lekhi Raj Limbu Subba 25/04/ % - - 3,107,990 Kanchan Rice & Flour Mill 05/05/ , % 402, ,051 Sankar Prasad Saha 14/03/ % ,505 Keshab Prasad Bhattarai 14/03/ % ,009 Super Creative Electrical Industry 14/03/ % ,405 Mani Ram Dahal 14/03/ , % 280, ,643 Gyankala Readymade Enterprises 15/07/ % - - 1,882,737 Ananta prasad Pandey 10/07/ , % 299, ,246 Mitra Bahadur Karki 10/07/2005 1,060, % 1,060,295-1,060,295 Purwanchal Nursing Home 13/07/ ,301, % 10,301,883-10,301,883 Madhusudan Upadhyaya 11/07/ % ,092 Binayak Kant Pant 11/07/ % ,385 Babu Prasad Yadav 11/07/ % ,621 Ram Narayan Yadav 11/07/ % ,070 Pramila Devi Yadav 11/07/ % ,188 Madhav Kumar Pokharel 11/07/ % ,755 Rohit Kumar Maskey 11/07/ % ,367 C-Mech Plus E. Cunsultancy 11/07/ , % 491, ,162 Papa Confectionery Udhyog 15/07/2005 1,958, % 1,958,445-1,958,445 Bony Stiger Udhyog 15/07/ % ,771 Jai Bageshwori Enterprises 16/07/ % - - 3,609,184 Grand Total 235,401, ,401, ,439,542 Note: In previous Fiscal Year 2065/066, the total amount of Non Banking Assets (NBA) was Rs. 271,439,542 on which 100% provision was made

17 OTHER ASSETS Schedule 16 1 Stock of Stationery 4,088,797 4,628,311 2 Income Receivable on Investments 14,352,356 20,683,450 3 Accrued Interest Recivable (AIR) on Loan 639,537,963-1,013,590,065 Less: Interest Suspense (639,537,963) (1,013,590,065) 4 Commission Receivable Sundry Debtors 13,921,745 11,956,254 6 Staff Loan and Advances 211,463, ,139,734 7 Pre-Payments 1,761,733 2,178,027 8 Cash in Transit Other Transit Items (including cheques) 83,359, ,594, Drafts Paid Without Notice 16,447,974 21,846, Deferred Revenue Expenditures (DRE) 2,811,224 3,773, Branch Reconcilation Account 10,627, Deferred Tax Assets - 49, Others 36,286,619 - a. Tax Deducted at Source 1,719 31,647 b. Security Depoist 4,616,238 4,358,689 c. Adjustment Account 60,555 6,369 d. Advance Income Tax (Net of Provision) 29,281,066 - e. Others 2,327,041 6,314,835 Total 395,120, ,561,698 OTHER ASSETS (ADDITIONAL STATEMENT) Schedule 16(A) This Year () Total Up to 1 Yrs. 1 to 3 Yrs. Above 3 Yrs. 1. Accrued Interest on Loan 68,119,894 88,829, ,588, ,537,963 1,013,590, Drafts paid without Notice 34,767,678 (10,935,619) (7,384,086) 16,447,973 21,846, Branch Reconciliation Account (10,072,422) 30,060,483 (9,360,708) 10,627,353 (417,009,362) 4. Domestic and Foreign Agency Account 185,659,233 (42,874,705) 25,870, ,655,466 - CONTINGENT LIABILITIES Schedule 17 1 Claims on Institution but not accepted by the institution Letters of Credit (full amount) 757,506, ,202,822 a. Less than 6 months maturity 620,805, ,472,603 b. More than 6 months maturity 136,700,509 38,730,219 3 Rediscounted Bills Unmatured Guarantees/Bonds 3,242,952,352 2,487,183,498 a. Bids Bonds 1,178,807, ,851,104 b. Performance Bonds 1,957,455,794 1,553,632,394 c. Other Guarantees/Bonds 106,689,000 79,700,000 5 Unpaid shares in investment Forward Exchange Contract Liabilities Bills under Collection 95,725,345 95,208,004 8 Acceptance and Endorsements 70,140,515 21,376,000 9 Underwriting Commitments Irrevocable Loan Commitments 126,017, Counter Guarantee of Internationally Rated Banks 2,530, Advance Payment Guarantee 2,490,285,109 1,720,383, Financial Guarantee 49,920,000 47,536, Contingent liabilities on Income Tax* 68,807,839 28,827, Others 106,548 7,044,026 Total 6,903,991,821 5,239,761,755 *Additional Tax liability imposed by Inland revenue Department for FY 2054/055, 2055/56, 2056/57 and 2060/61 angainst which Bank has appled in the Revenue Tribunal, Kathmandu 27 28

18 INTEREST INCOME Schedule 18 FOR THE PERIOD FROM 16 JULY, 2009 TO 16 JULY, 2010 A ON LOAN, ADVANCES AND OVERDRAFT 1,032,334,028 1,216,645, Loan and Advances 704,550, ,483, Overdraft 327,783, ,161,575 B ON INVESTMENTS 132,977, ,501, Government Securities 121,526, ,559,453 a. Treasury Bills 94,534,531 81,314,864 b. Development Bonds 26,992,237 23,244,589 c. National Savings Certificates Foreign Securities Nepal Rastra Bank Bonds Debenture and Bonds - - a. Bank/Financial Institutions - - b. Other Organisation Interbank Lendings 11,450,981 14,942,356 a. Banks/Financial Institutions 11,450,981 14,942,356 b. Other Institutions - - C ON AGENCY BALANCES 272, , Local Banks/Financial Institutions Foreign Banks 272, ,478 D ON MONEY AT CALL AND SHORT NOTICE 2,044, , Local Banks/Financial Institutions Foreign Banks 2,044, ,926 E ON OTHERS Certificate of Deposits Inter-Bank/Financial Institutions Loan Others - - Total 1,167,627,965 1,337,112,308 INTEREST EXPENSES Schedule 19 FOR THE PERIOD FROM 16 JULY, 2009 TO 16 JULY, 2010 A ON DEPOSIT 476,600, ,227,237 1 Fixed Deposits 69,552,888 53,647, Local Currency 69,509,072 52,046, Foreign Currency 43,816 1,601,189 2 Saving Deposits 357,408, ,850, Local Currency 356,193, ,378, Foreign Currency 1,215,026 1,472,678 3 Call Deposits 49,639,031 36,729, Local Currency 49,002,884 36,711, Foreign Currency 636,147 17,355 4 Certificate of Deposits - - B ON BORROWINGS 187, , Debenture and Bonds Loan from Nepal Rastra Bank Inter-Bank/Financial Institution Borrowings 187, , Other Organized Institutions Others - - C ON OTHERS - 12,236 Total 476,787, ,775,968 COMMISSION AND DISCOUNT Schedule 20 FOR THE PERIOD FROM 16 JULY, 2009 TO 16 JULY, 2010 A BILLS PURCHASE & DISCOUNTED 8,558,975 6,234, Local 4,070,113 3,894, Foreign 4,488,862 2,340,575 B COMMISSION 128,867, ,340, Letters of Credit 16,266,002 13,551, Guarantees 95,909,042 70,321, Collection Fees 1,770,953 3,602, Remittance Fees 8,813,520 15,509, Credit Card Share Underwriting/Issues Government Transactions 4,962,775 4,870, Agency Commission 16,635 25, Exchange Fee 1,128, ,898 C OTHERS 8,369,700 7,817,446 Total 145,796, ,393,

19 Other Operating Income Schedule 21 FOR THE PERIOD FROM 16 JULY, 2009 TO 16 JULY, Safe Deposit Lockers Rental 861, ,752 2 Issue and Renewals of Credit Cards Issue and Renewals of ATM Cards 913, ,657 4 Telex/T.T./ABBS Charges 6,953,409 7,735,164 5 Service Charges 24,818,609 84,587,414 6 Renewal Fees 7,403,440 5,905,521 7 Others 9,546,222 25,286,514 Total 50,496, ,074,022 EXCHANGE GAIN/(LOSS) Schedule 22 FOR THE PERIOD FROM 16 JULY, 2009 TO 16 JULY, 2010 A Revaluation Gain 3,305,444 17,504,549 B Trading Gain (Except Exchange Fee) 46,534,220 63,043,377 Total Income/(Loss) 49,839,664 80,547,926 PERSONNEL EXPENSES Schedule 23 FOR THE PERIOD FROM 16 JULY, 2009 TO 16 JULY, Salary 49,163,020 51,768,233 2 Allowances 48,756,714 52,580,421 3 Contribution to Provident Fund 4,558,261 4,526,224 4 Training 355,745 1,047,599 5 Uniform 1,933,344 1,951,581 6 Medical 3,969,991 3,965,286 7 Insurance 2,950,883 3,048,768 8 Pension and Gratuity Provision 22,358,413 10,281,415 9 Others 12,595,059 9,254,262 Total 146,641, ,423,789 OTHER OPERATING EXPENSES Schedule 24 FOR THE PERIOD FROM 16 JULY, 2009 TO 16 JULY, House Rent 28,781,384 25,861,172 2 Electricity & Water 5,489,288 5,184,541 3 Repair & Maintenance 1,595,292 a. Building - b. Vehicles 924,470 1,372,777 c. Others 670, ,447 4 Insurance 6,201,787 6,488,062 5 Postage, Telex, Telephone & Fax 3,803,416 4,257,925 6 Office Equipment and Furniture Repair 3,123,981 2,269,915 7 Travelling Allowances & Expenses 2,889,640 3,198,163 8 Printing & Stationery 6,689,100 4,832,475 9 Periodicals & Books 356, , Advertisements 3,896,566 2,074, Legal Expenses 2,227,914 1,857, Donations 742, , Expenses Relating to Board of Directors 291,401 - a. Meeting Fees 231,500 b. Other Expenses 59, Annual General Meeting Expenses 1,174, Expenses Relating to Audit 742,184 a. Audit Fees 259, ,600 b. Other Expenses 482, , Commission on Remittances - 3, Depreciation on Fixed Assets 18,154,214 17,486, Amortisation of Deferred Expenses 1,742,736 3,241, Share Issue Expenses Technical/Professional Services Fee 768, , Entertainment 1,950, , Written Off Expenses Security Expenses 2,025,513 1,174, Credit Guarantee Premium Commission & Discount 4,613,226 6,662, Others 31,505,768 34,392,969 a. Fuel & Lubricants 4,824,468 5,278,783 b. Businesss Promotion 50, ,000 c. Rates and Taxes 778,459 1,686,269 d. Wages 2,374,082 2,376,461 e. Membership Fees 471,586 2,939,599 f. Swift Expenses 3,968,880 4,264,033 g. Internet Expenses 546, ,702 h. FCY Discount 4,671,510 3,104,050 i. PDFA related Expenses 189,782 7,941,537 j. Annual Lease Line Charge 7,979,182 - k. Miscellaneous 5,651,102 5,924,535 Total 128,765, ,306,

20 PROVISION FOR POSSIBLE LOSSES Schedule 25 FOR THE PERIOD FROM 16 JULY, 2009 TO 16 JULY, Increase in Loan Loss Provision 144,805, ,814,460 2 Increase in Provision for Loss on Investment 3,584,000-3 Provision for Non-Banking Assets - 1,547,984 4 Provision for Other Assets - 27,957,017 Total Income/(Loss) 148,389, ,319,461 INCOME/(EXPENSE) FROM EXTRA-ORDINARY ACTIVITIES Schedule 28 FOR THE PERIOD FROM 16 JULY, 2009 TO 16 JULY, Recovery of Write Off Loan 5,891,099 6,500,000 2 Voluntary Retirement Scheme (VRS) Expenses - 3 Bad Loan Written Off (Schedule 4.28 Ka) (529,372,892) (21,489,755) 4 Other Expenses/Income - - Total (523,481,793) (14,989,755) NON-OPERATING INCOME/(LOSS) Schedule 26 FOR THE PERIOD FROM 16 JULY, 2009 TO 16 JULY, Profit/(Loss) on Sale of Investment 108,000 4,613,800 2 Profit/(Loss) on Sale of Assets 22,647,638 7,852,725 a) Profit/(Loss) on Sale of Assets 1,339,408 - b) Profit/(Loss) on Sale of NBA 21,308,230 7,852,725 3 Dividend 760, ,222 4 Subsidies Received from Nepal Rastra Bank - - a. Compensation for losses of specified branches - - b. Interest Indemnity - - c. Exchange Counter Others (5,131,438) 10,252,187 Net Non-Operating Income/(Loss) 18,384,645 22,933,934 WRITTEN BACK FROM PROVISION Schedule 27 Fiscal Year 2066/067 1 Write Back from Loan Loss Provision 1,260,819,839 1,840,075,204 2 Write Back from Non-Banking Assets Provision 47,094,634 60,250,966 3 Write Back from Provision for Investment - 5,534,000 4 Write Back from Provision for Other Assets 10,134,164 - Total 1,318,048,637 1,905,860,170 STATEMENT OF LOANS WRITTEN OFF Fiscal Year 2066/067 S.No. Types of Loan Wrritten Off Amount 1 Project Loan 345,441,645 2 Overdraft Loans 54,171,815 3 Hire Purchase Loans 5,300,891 4 Other Loans 124,458,541 Total Loan 529,372,892 Types of Security & Amount Basis of Security Valuation Valuation done by enlisted valuator Loan Approving Officer /Level Initiations made for Recovery Follow-ups & Reminders sent, 35 days notice publised, Managing Director Morgaged properties auctioned, case filed at DRT. STATEMENT OF LOANS AND ADVANCES EXTENDED TO DIRECTORS/CHIEF Schedule 28(A) Remarks EXECUTIVE/PROMOTER/EMPLOYEES AND SHAREHOLDERS Schedule 29 The statement of amount included under total amount of Bills Purchased and Discounted, Loans, Advances and Overdrft, provoded to Directors, Chief Executive, Promotors, Employees, Shareholders and to the individual members of their undivided family or against the guarantee of such persons or to the organizations or companies in which such individuals are managing agent, as follows: (A) (B) (C) Directors Chief Executive Promoters Last Year's Balance This Year Recovery This Year Balance as of Ashad End Principal Interest Principal Interest Additions Principal Interest (D) Employees 150,000 70, ,000 70, (E) Name of Promoter/Director/Chief Executive Shareholders TOTAL 150,000 70, ,000 70, Note: 1. Loans given to executives, officers and employees as per Bank staff rules in compliance with the Nepal Rastra Bank Directives are not disclosed above

21 CAPITAL ADEQUACY Schedule 30(A1) (in '000) 1. 1 RISK WEIGHTED EXPOSURES 14,997,900 12,932,486 a. Credit Risk 13,598,113 11,561,846 b. Operational Risk 1,348,200 1,215,480 c. Market Risk 51, ,161 Adjustments under Pillar II Add: 3% of the total RWE due to non compliance to Disclosure Requirement (6.4 a 10) Add:.% of the total deposit due to insufficient liquid Assets (6.4 a 10) 1.2 CAPITAL FUND 1,894, ,301 Core Capital (Tier I) 1,759, ,664 a. Paid-Up Equity Share Capital 1,860,315 1,860,315 b. Irredeemable Non-Cumulative Preference Shares - - c. Share Premium 35,870 35,870 d. Proposed Bonus Equity Shares - - e. Statutory General Reserves 956, ,569 f. Retained Earnings upto (1,664,761) (3,386,819) g. 's Profit/(Loss) 815,183 1,722,107 h. Capital Redemption Reserve - - i. Capital Adjustment Reserve 72,000 72,000 j. Dividend Equalization Reserve - - k. Debenture Redemption Reserve l. Other Free Reserves - - Deduction: a. Amount of Goodwill b. Miscellaneous Expenditure not Written Off (2,811) (3,773) c. Investment in equity in Licensed Financial Institutions (9,700) (7,286) d. Investment in equity of Institutions with Financial Interests (15,000) (15,000) e. Investment in equity of Institutions in Excess of Limits - - f. Investments arising out of Underwriting Commitments (13,414) (13,414) g. Reciprocal Crossholdings h. Other Deductions - - i. Loans to NB Group Pvt. Ltd. (274,553) (459,755) ii. Loans to Staff's Relatives - (150) Adjustments under Pillar II Less: Shortfall in Provision (6.4 a 1) Less: Loans and Facilities extended to Related Parties and Restricted Lendings (6.4 a 2) Supplementary Capital (Tier II) 134, ,637 a. Cumulative and/or Redeemable Preference Shares b. Subordinated Term Debt - - c. Hybrid Capital Instruments d. General Loan Loss Provision 76,651 67,437 e. Exchange Equalization Reserve 57,027 56,200 f. Investment Adjustment Reserve 1,095 - g. Assets Revaluation Reserve - - h. Other Reserves CAPITAL ADEQUACY RATIOS Core Capital/Total Risk Weighted Exposures (Tire I) 11.73% 4.30% Supplementary Capital/Total Risk Weighted Exposures (Tire I & Tire II) 12.63% 5.26% Schedule 30(A) CREDIT RISK Risk Weighted Exposures f=d*e Eligible CRM c Net Value d=a-b-c Specific Provision b A. Balance Sheet Exposures Book Value a Cash Balance 422,008, ,008, Balance With Nepal Rastra Bank 1,423,257, ,423,257, Gold - - Investment in Nepalese Government Securities 1,879,218, ,879,218, All Claims on Government of Nepal - - Investment in Nepal Rastra Bank securities - - All claims on Nepal Rastra Bank - - Claims on foreign government and central bank (ECA 0-1) - - Claims on foreign government and central bank (ECA -2) - - Claims on foreign government and central bank (ECA -3) - - Claims on foreign government and central bank (ECA 4-6) - - Claims on foreign government and central bank (ECA -7) - - Claims On BIS, IMF, ECB, EC and on Multilateral Development Banks (MDB's) recognised by framework - - Claims on Other Multilateral Development Banks - - Claims on Public Sector Entity (ECA 0-1) - - Claims on Public Sector Entity (ECA 2) - - Claims on Public Sector Entity (ECA 3-6) - - Claims on Public Sector Entity (ECA 7) 174,384, ,384, ,577, Claims on domestic banks that meet capital adequacy requirements 173,030, ,030, ,606, Claims on domestic banks that do not meet capital adequacy requirements 42,739, ,739, ,739, Claims on foreign bank (ECA Rating 0-1) 145,357, ,264, ,092, ,618, Claims on foreign bank (ECA Rating 2) 61,247, ,247, ,623, Claims on foreign bank (ECA Rating 3-6) 11,762, ,762, ,762, Claims on foreign bank (ECA Rating 7) - - Claims on foreign bank incorporated in SAARC region operating with a buffer of 1% above their respective regulatory capital requirement 13,747, ,747, ,749, Claims on Domestic Corporates 2,910,753, ,262, ,878,490, ,878,490, 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) 2,108,648, ,022, ,038,625, ,528,969, Claims fulfilling all criterion of regulatory retail except granularity - - Claims secured by residential properties 408,946, ,946, ,368, Claims not fully secured by residential properties 15,868, ,868, ,802, Claims secured by residential properties (Overdue) 35,317, ,871, ,446, ,446, Claims secured by Commercial real estate 57,123, ,123, ,123, Past due claims (except for claim secured by residential properties) 1,730,412, ,215,300, ,111, ,667, High Risk claims 1,635,373, ,168, ,593,204, ,389,806, Investments in equity and other capital instruments of institutions listed in the stock exchange 9,500, ,500, ,500, Investments in equity and other capital instruments of institutions not listed in the stock exchange 7,118, ,118, ,677, Other Assets (as per attachment) 2,703,187, ,967,416, ,771, ,771, TOTAL (A) 15,969,003, ,188,588, ,719, ,633,696, ,094,301,

22 Eligible Amout For Credit Risk Mitigation (CRM) (in '000) Total Sec/G'tee of Foreign Banks G'tee of MDBs G'tee of domesti c banks Sec/G'tee of Other Sovereign G'tee of Govt. of Nepal Govt.& NRB Securities - Gold - Deposits with other banks/fi - Schedule 30(B) Deposits with Bank Credit exposures s (a) (b) (c) (d) (e) (f) (g) (h) (i) Balance Sheet Exposures Claims of foreign government and central banks (ECA -2) - Claims of foreign government and central banks (ECA -3) - Claims of foreign government and central banks (ECA 4-6) - Claims of foreign government and central banks (ECA -7) - Claims on Other Multilateral Development Banks - Claims on Public Sector Entity (ECA 0-1) - Claims on Public Sector Entity (ECA 2) - Claims on Public Sector Entity (ECA 3-6) - Claims on Public Sector Entity (ECA 7) - Claims on domestic banks that meet capital adequacy requirements - Claims on domestic banks that do not meet capital adequacy requirements - Claims on foreign bank (ECA Rating 0-1) 2,264,914 2,264,914 Claims on foreign bank (ECA Rating 2) - Claims on foreign bank (ECA Rating 3-6) - Claims on foreign bank (ECA Rating 7) - Claims on foreign bank incorporated in SAARC region operating with a buffer of 1% above - their respective regulatory capital requirement Claims on Domestic Corporates 28,326,716 3,936,281 32,262,997 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) 68,625,700 1,397,000 70,022,700 Claims fulfilling all criterion of regulatory retail except granularity - Claims secured by residential properties - Claims not fully secured by residential properties - Claims secured by residential properties (Overdue) - Claims secured by Commercial real estate - Past due claims (except for claim secured by residential properties) - High Risk claims 42,168,600 42,168,600 Investments in equity and other capital instruments of institutions listed in the stock exchange Investments in equity and other capital instruments of institutions not listed in the stock exchange Other Assets (as per attachment) - - Off Balance Sheet Exposures - Forward Exchage Contract liabililties - LC Commitments With Original Maturity Up to 6 months domestic counterparty 72,650,166 72,650,166 Foreign Counterparty ECA Rating Foreign Counterparty ECA Rating 2 - Foreign Counterparty ECA Rating Foreign Counterparty ECA Rating 7 - LC Commitments With Original Maturity Over 6 months domestic counterparty 505, ,094 Foreign Counterparty ECA Rating Foreign Counterparty ECA Rating 2 - Foreign Counterparty ECA Rating Foreign Counterparty ECA Rating 7 - Bid Bond, Performance Bond and counter guarantee domestic counterparty 54,101,518 54,101,518 Foreign Counterparty ECA Rating 0-1 2,024,013 2,024,013 Foreign Counterparty ECA Rating 2 - Foreign Counterparty ECA Rating Foreign Counterparty ECA Rating 7 - Underwriting commitments - Lending of Bank's Securities or Posting of Securities as collateral - Repurchase Agreements, Assets sale with recourse - Advance Payment Guarantee 81,734,255 81,734,255 Financial Guarantee 324, ,000 Acceptances and Endorsements 40,330,015 40,330,015 Unpaid portion of Partly paid shares and Securities - Irrevocable Credit commitments - Other Contingent Liabilities - Total 398,388, Operational Risk Schedule 30(C) (in '000) s of 2067 Ashad End Ashad End Year 1 Year 2 Year Net Interest Income 927, , , ,840 Commission and Discount Income 122, ,300 85, ,797 Other Operating Income 125, , ,653 50,496 Exchange Fluctuation Income 80,548 90,111 40,962 49,840 Addition/Deduction Interest Suspense during the period (178,069) (59,376) 68,218 (374,052) Gross income (a) 1,077, , , ,921 Alfa (b) 15% 15% 15% Fixed Percentage of Gross Income [c=(a b)] 161, , ,305 Capital Requirement for operational risk (d) (average of c) 134,820 Risk Weight (reciprocal of capital requirement of 10%) in times (e) 10 Equivalent Risk Weight Exposure [f=(d e)] 1,348,200 PILLAR II ADJUSTMENTS If Gross Income for all the last three years is negative (6.4 a 8) Total Credit and Investment (net of Specific Provision) Capital Requirement for Operational risk (5%) Risk Weight (reciprocal of capital requirement of 10%) in times 10 Equivalent Risk Weight Exposure (g) Equivalent Risk Weight Exposure [h=f+g] MARKET RISK Schedule 30(D) S.N. Currency (in '000) Position Exchange rate Position Actual Position FCY NPR NPR NPR 1 US DOLLAR (USD) , , Great Britan Pound (GBP) , , CHF , , Australiyan Dollar (AUD) , , Canadian Dollar (CAD) Singapore Dollar (SGD) Japanese Yen (JPY) 4, , , Hong Kong Dollar (HKD) DKK SEK Saudiarabian Riyal (SAR) Quatari Riyal (QAR) UAE Diram (UAED) Thai Bhat (THB) Malasian Ringit (MYR) Chinese Yen (CNY) 1, , , Euro Dollar (EUR) Indian Rupee (INR) 21, , , Total Open Position (a) 103, , Fixed Percentage (b) 5% Capital Charge for Market Risk [c=(a b)] 5, Risk Weight (reciprocal of capital requirement of 10%) in times (d) 10 Equivalent Risk Weight Exposure [e=(c d)] 51,

23 PRINCIPAL INDICATORS SN Schedule 31 Indicators 2062/ / / / / / / / / /10 1. Percent of Net Profit/Gross Income Percent N A NA 23.15% 60.30% 45.87% 2. Earning Per Share Rs. N A NA Market Value Per Share Rs Price Earning Ratio Ratio N A NA Dividend (including bonus) on Share Capital Percent 0% 0% 0% 0% 0% 6. Cash Dividend on Share Capital Percent 0% 0% 0% 0% 0% 7. Interest Income/Loan & Advances Percent 7.74% 10.71% 8.75% 14.38% 12.80% 8. Staff Expenses/Total Operating Expenses Percent 18.06% 17.08% 21.32% 14.50% 16.28% 9. Interest Expenses on Total Deposit and Borrowing Percent 3.96% 4.49% 3.65% 3.92% 4.76% 10. Exchange Gain/Total Income Percent 6.70% 3.28% 7.31% 2.26% 1.82% 11. Staff Bonus/Total Staff Expenses Percent 0.00% 0.00% 54.10% % 82.21% 12. Net Profit/Loan and Advances Percent 0.00% 0.00% 6.30% 23.64% 11.20% 13. Net Profit/Total Assets Percent 0.00% 0.00% 6.35% 18.04% 8.15% 14. Total Credit/Deposits Percent 75.27% 87.01% 87.01% 91.33% 78.26% 15. Total Operating Expenses/Total Assets Percent 6.65% 9.09% 7.04% 7.98% 7.19% 16. Adequacy of Capital Fund on Risk Weighted Assets a. Core Capital Percent % % % 4.42% 11.73% b. Supplementary Capital Percent 0.00% 0.00% 0.00% 1.13% 0.90% c. Total Capital Fund Percent % % % 5.55% 12.63% 17. Liquidity (CRR) Percent 8.90% 6.55% 9.24% 18.70% 14.16% 18. Non-Performing Assets (Overdue Credit)/Total Credit Percent 27.12% 39.76% 31.73% 19.80% 6.47% 19. Weighted Average Interest Rate Spread Percent 2.10% 4.90% 3.95% 8.09% 5.56% 20. Book Net-Worth (per Share) Rs Total Shares '000 Nos Total Number of Staffs Nos Total Number of Branches Nos A) General Information Principal Accounting Policies Schedule 32 Nepal Bangladesh Bank Limited ( the Bank ) is a limited liability company domiciled in Nepal. The registered office of the Bank is situated at Bizulibazar, Kathmandu, Nepal. The Bank is listed on the Nepal Stock Exchange Limited. The principal activities of the Bank consist of the business of commercial banking and other financial services in Nepal. The Financial Statements for the year ended on 16 th July 2010 (Ashad 32, 2067) were authorised for issue by the management on 21 st November B) Statement of Compliance The Financial Statements have been prepared in accordance with Nepal Accounting Standards ( NAS ) issued by the Nepal Accounting Standard Board except otherwise stated, Bank & Financial Institutions Act 2063, presentation requirement of Nepal Rastra Bank directives and in conformity with the Companies Act These policies have been consistently applied to all the years presented except otherwise stated. C) Basis of Preparation The Financial Statements are prepared on the historical cost basis except for foreign currency items and applied consistently with no adjustments being made for inflationary factors affecting the Financial Statements. They are presented in Nepalese Rupees and have been rounded to the nearest Rupee. D) Use of Estimates, Assumptions & Judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amount of assets and liabilities, income and expenses. Estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future period affected. E) Interest Income Interest income on Loans and Advances are recognized on cash basis as per the Nepal Rastra Bank Directive. Recognizing income on cash basis is not in line with the Nepal Accounting Standards, NAS 7 (Revenue Accounting), which prescribes that the revenue should be recognized on accrual basis. Interest income on Investments is accounted for on accrual basis. F) Commission Income Commission and fee income mainly comprises fees receivable from customers for guarantees, letter of credit and other services provided by the bank. Such income is recognised as revenue on a cash basis at the time the services are provided. G) Dividend Income Dividends from shares are recognised as income when right to received is established. H) Foreign Exchange Transactions Foreign currency assets and liabilities are translated into Nepalese Rupees at the prevailing mid exchange rate ruling on the Balance Sheet date. Income realised from the difference between buying and selling rates of Foreign Exchange transactions is accounted for on a daily basis and shown as Trading Gain under Exchange Gain in Schedule 22. Gains/losses arising due to fluctuation in exchange rate of different foreign currencies is accounted for on a daily basis and shown as Revaluation Gain. 25% of such revaluation gain of 39 40

24 826, is transferred to Exchange Fluctuation Fund through Profit and Loss Appropriation Account as per Nepal Rastra Bank Directives. I) Interest Expenses Interest on deposit liabilities and borrowings from other banks are accounted for on accrual basis. J) Loans and Advances including Bills Purchased Loans and Advances including bills purchased are stated in the Balance Sheet net of provisions for loan losses. These loans and advances including bills purchased are classified as per the Nepal Rastra Bank s Directives. K) Loan Loss Provision Provision for possible losses is made to cover the risks inherent in Bank s assets portfolio. Provision for possible losses from loans, advances and bills purchased are made at the rates ranging from 1% to 100% according to classification of such risk assets as per Nepal Rastra Bank Directive. L) Staff Loans Loans and advances granted to staff in accordance with the Employee s Rules of the Bank are shown under Other Assets. M) Loan Write-Off Loans are written off in the books as per Loan Write-Off Bye Law of the Bank approved by Nepal Rastra Bank, without prejudice to Bank's right to recovery. N) Investments Investments in Treasury Bills and Nepal Government s Development Bonds are those, which the Bank purchased with the positive intent and ability to hold until maturity. Investments in shares are accounted for and valued as per Nepal Rastra Bank s Directives. Full provision has been made for equity investment in Nepalese Financial Institutions not divested as instructed by NRB. Investments on unlisted companies' shares are valued at cost. The full value of Investments created due to underwriting commitment, invested in the institution having financial interest and investment in financial institution are deducted from core capital while calculating Capital Fund. All Investments are subject to regular review as required by Nepal Rastra Bank Directives. O) Fixed Assets and Depreciation a. Fixed assets are stated at historical cost less accumulated depreciation. b. Depreciation is charged to Profit & Loss Account on a Written Down Value method over the estimated useful lives of fixed assets. Land is not depreciated. The depreciation rates applied for various asset categories are as follows: Building - 5% Office Equipment/Furniture & Fixture /Computer and Accessories - 25% Vehicles - 20% c. In Schedule 4.14, value of Office Equipment/Furniture & Fixture /Computer and Accessories has been shown under the head Office Equipment. d. Leasehold improvements are depreciated over the period of five years. e. Items of capital nature purchased amounting to less than Rs. 2,000/- are expensed off under the head "Miscellaneous Expenses." P) Intangible Assets a. Basis of Recognition An intangible asset is recognised if it is probable that the future economic benefits that are attributable to the assets will flow to the Bank and the cost of the assets can be measured reliably. b. Measurement Software: Software represents the value of computer application software licensed for use of the Bank, other than software applied to the operation software system of computers. These intangible assets are carried at its cost, less accumulated amortisation and any impairment losses. These assets are included under the account head Deferred Revenue Expenditure in Schedule 16 and amortized accordingly. Q) Non-Banking Assets (NBAs) Non-Banking Assets represent properties that are acquired in full or partial satisfaction of debts. The Bank has adopted a policy of acquiring properties that are placed as collateral in full or partial satisfaction of debts as per prevailing laws and guidelines. The value of such properties shall be the lower of the market value or gross receivable from the customer due up to the day before such acquisition date. Non-Banking Assets are stated net of provision for losses in the Balance Sheet. R) Retirement Benefits The Bank has scheme of retirement benefits namely provident fund and gratuity. Provision for gratuity is made on accrual basis determined by the management as per Staff Service Rule of the Bank taking the proportion of service period served by permanent employees and periodic contribution to the provident fund have been expensed off and accounted for as income of the concerned staff. Provident fund contribution is being deposited with the approved retirement fund on monthly basis whereas gratuity is accumulated as provision and deposited in separate account maintained for that purpose which is handled by retirement fund management committee. S) Staff Bonus Staff bonus is provided at 10% of net profit before tax (after deducting bonus) as per the provisions of NRB Directives. T) Staff Leave Encashment The Bank offers leave encashment facility to its confirmed employees accumulated leave in excess of 120 days is en-cashed each year as per the Employees Service Rules and balance is payable at the time of separation from the service. Accumulated staff leave liability is accounted for on accrual basis. U) Stationery Stock Stationery purchased are stated at cost and charged to revenue at the time of consumption. V) Provision for Taxation Provision for taxation has been made on the basis of the Income Tax Act 2058 and amendments thereto. W) Deferred Tax Deferred taxes are accounted using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities, and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled based on the laws that have been enacted or subsequently enacted by the reporting date. Deferred tax assets arising from temporary difference are disclosed in the Financial Statements. Deferred tax assets & liabilities are netted off and presented under Assets or Liabilities as per Nepal Accounting Standards 9 and NRB directives

25 Notes to Accounts 1. Total loan disbursement, recovery and write off Total loan disbursed during the year Total loan recovery during the year Loans written off during the year (principal) Interest written off during the year Recovery from Write off Loans 2. Changes in deposit liabilities under each category Non interest bearing accounts Current Account Margin Account Others Interest bearing accounts Savings Account Fixed Account Call Account Certificate of Deposit Change (%) 1, Change (%) 7, (Figures in million ) Current 1, Amount Current 5, , , , , Schedule 33 (Figures in million ) Year % % % (Figures in million ) Year % % % Classification of Assets and Liabilities based on Maturity Period 1-90 days days days year Figures in million NRs Above 1 year Assets Cash Balance Balance with Banks 1, , Investment in Foreign Bank Investment in Government Securities , Investment in Government Bond Inter-Bank Lending Loans & Advances and Bills Purchased 2, , , , Total Assets 4, , , , , Liabilities Borrowings Current Deposit 1, , Saving Deposit 7, , Fixed Deposit , Debentures/Bonds Total Liabilities 8, , Net Financial Assets -4, , , , , Cumulative Net Financial Assets -4, , , , Weighted Average Interest Spread Particular Rate Total 3. Concentration of Bank's Assets and Liabilities Total exposure as on Ashad end 2067 (July 16, 2010) Figure in million NRs 9, Average Rate of Credits and Investments Average Rate on Deposits & Borrowings Net Interest Spread 6. Expenses Not Written Off Individual Highest exposure to single individual Percentage of exposure 0.83 % Firm Highest exposure to single unit Percentage of exposure Organization Highest exposure to single unit Percentage of exposure Single Sector Highest exposure to single secto Percentage of exposure % % % 2, % The bank has recorded various software acquisition expenses, licensing fees; ABBS installation charges etc. under Deferred Revenue Expenditure (DRE) account. The account has a balance of Rs 2,811,244/- at the date of Balance Sheet after amortization of Rs 1,742,736/- during the year. 7. Borrowing against collateral of its own assets The Bank has not borrowed any sum against collateral of its own assets. 8. Reconciliation Status Inter Branch Accounts Agency Accounts (Figure in million ) Upto 1 Year More than 1 Year (10.07) (17.00) Note: Highest exposure in single sector represent production/manufacturing sector. The abovementioned categories are independent of one another

26 9. Reconciliation of total loan loss provision outstanding as at Ashad End 2067 (Schedule 13) Figure in Amount Total loan loss provision up to 2,425,562,724 Loan loss provision made during the Year (1,116,014,213) Loan loss provision outstanding as shown in Schedule 13 1,309,548,511 Loan written-off during the year (Principal) as shown in Schedule-28 (A) 529,372,892 Interest written-off during the year 409,217, Staff Housing Fund Provision for creating a separate staff-housing fund has not been made as per the Labour Act, 2048 considering the practice followed by similar other financial institutions. However, the bank is providing housing loan to eligible staffs at subsidized rate. 11. Corporate Tax Provision of Rs. 184,190,344/- (including deferred tax liability of Rs. 2,924,210) has been made towards Income Tax liability for the year. Similarly, additional provision Rs. 13,396,134/- (due to short provision) of FY 2065/066 has also been adjusted in the current year. During the year, final assessment review from Large Taxpayer Office (LTO) for FY 2062/063 has been completed. 12. Deferred Tax Assets & Liabilities Deferred tax assets and liabilities have been computed in accordance with NAS 9, Income Taxes and are attributable to the following: Assets Carrying Amount Tax Base Temporary Difference Fixed Assets 155,327, ,960,007 (7,367,598) Other Assets 395,120, ,309,510 (2,811,224) Total Assets 550,448, ,269,517 (10,178,822) Liabilities Other Liabilities 329,885, ,687,676 (198,121) Total Liabilities 329,885, ,687,676 (198,121) Net Assets (Liability) (9,980,701) Deferred Tax Liability (Asset) 30.0% 2,994, Detail of Non-Banking Assets Amount (Rs.) Opening Balance 271,439,542 Addition during the Year 11,056,788 Less: Sold during the Year (47,094,635) Less: Written-off during the Year 0.00 Total Non- Banking Assets 235,401,695 Total Provision 235,401,695 Net Non- Banking Assets Provision for Staff Bonus The Bank has made Rs million as provision for staff bonus form the profit of the year. 16. Provision for Staff Gratuity and Leave Encashment During the year, the Bank has made additional contribution Rs. 22,358,413/- and Rs. 198,121/- towards NB Bank Staff Retirement Fund (Gratuity) and Staff Leave Encashment Account respectively for the accrued liability upto Ashad End Sale of Shares of NCCB During the previous year 2065/066, the bank had sold 27,140 promoter shares of Nepal Credit and Commerce Bank (NCCB) Ltd. and recorded a profit of Rs. 4,613,800/- in the Profit and Loss Account. However during the year 2066/067, due to the refusal by Securities Board of Nepal for conversion of those promoter shares into ordinary shares, the bank has to return whole bid amount with interest to the bidder. During the course, profit recorded in previous year also has to be reversed. The bank has shown such reversed profit under Schedule 26 - Non Operating Income (Loss). 18. Re-grouping s figures are regrouped and reclassified whenever necessary. The Deferred Tax Assets with similar Deferred Tax Reserve balance upto previous year was Rs. 49,569/- As per the above statement, there is a Deferred Tax Liability for the current year so previous year s Deferred Tax Asset has been adjusted with its reserve and current year s Deferred Tax Liability has been charged to the current year s income statement. 13. Provision for Loan Loss The Bank has written back loan loss provision of Rs. 1, million during the current year, which includes written back of single obligor limit (SOL) provision Rs million and provision of write off loans Rs million. As the bank s capital adequacy is in line with the NRB requirement so all the loan and advances are within the SOL hence, the total loan loss provision doesn t contain any SOL provision

27 Details of Loans taken by promoter/promoter group by keeping shares as collateral security in other Bank & Financial Institutions Existing Holding Loan Detail Name of Shareholder No. of % of Name of loan Loan No. of Mortgaged (Promoter/Promoter Group) S.N. Shares Holding provider B/FI Amount Shares 1 Jit Bahadur Shrestha 614, Nepal Housing and Merchant Finance Ltd. 400,726 NSLMB Finance Ltd. 132,962 World Merchant Baking & Finance Ltd. 75,000 2 Purna Bahadur Shrestha 420, NSLMB Finance Ltd. 210,000 Economic Saving and Credit Cooperative 210,000 3 Capital Investment and Securities Pvt. Ltd. 1,463, Prudential Finance Co. Ltd. 70,000 Manakamana Development Bank Ltd. 714,792 NDEP Bank Ltd. 379,000 Nepal Investment and Securities 150,000 Suvekchha Development Bank Ltd. 150,000 4 Manaslu Investment Pvt. Ltd. 1,452, Manakamana Development Bank Ltd. 602,220 NDEP Bank Ltd. 400,000 Suvekchha Development Bank Ltd. 150,000 Prudential Finance Co. Ltd. 300,000 5 Uttam Rajkarnikar 9, Samjhana Finance Ltd. 8,619 6 Babukaji Shrestha 220, Standard Finance Ltd. 100,000 NSLMB Finance Ltd. 114,000 Schedule 34 Remarks S.N. As of 16th July 2010 Previous Quarter Ending 13th April 2010 Schedule 35 Rs. in '000 Corresponding Ended 15 July 2009 (Audited) 1 Total Capital and Liabilities 13,849,950 14,680,697 14,390, Paid-Up Capital 1,860,315 1,860,315 1,860, Reserves and Surplus 269,257 47,752 (748,073) 1.3 Debenture and Bond Borrowings Deposits (a+b) 10,052,182 9,318,284 9,997,698 a Domestic Currency 9,791,650 9,177,009 9,817,115 b Foreign Currency 260, , , Income Tax Liability - 110,195 6, Other Liabilities 1,668,196 3,344,151 3,273,446 2 Total Assets 13,849,950 14,680,697 14,390, Cash & Bank Balance 2,049,244 1,118,901 2,571, Money at Call and Short Notice - 80,000 1, Investments 2,121,806 1,681,624 2,222, Loans and Advances 9,119,094 10,033,524 9,130,506 a. Real Estate Loan 424, ,905 b. Home / Housing Loan 588, ,636 c. Margin Type Loan - - d. Term Loan 1,586,826 1,240,200 e. Overdraft Loan / TR Loan / WC Loan 4,623,442 5,874,399 f. Others 1,895,673 1,989, Fixed Assets 155, , , Non Banking Assets (Net) Other Assets 404,478 1,613, ,562 3 Profit and Loss Account 3.1 Interest Income 1,167, ,070 1,337, Interest Expense 476, , ,776 A Net Interest Income 690, , , Fees, Commission and Discount 145,797 86, , Other Operating Income 50,485 37, , Foreign Exchange gain/loss(net) 49,840 40,776 80,548 B Total Operating Income 936, ,493 1,255, Staff Expense 146,642 92, , Other Operating Expense 128,765 84, ,307 C Operating Profit Before Provision 661, , , Provision for Possible Losses/NBA 136, , ,319 D Operating Profit 524, , , Non Operating Income/Expense (Net) 24,261 14,129 22, Write Back of Provision for possible losses 778, ,722 1,905,860 E Profit from Regular Activities 1,327, ,622 2,639, Extraordinary Income Expenses (Net) - - (14,990) F Profit Before Bonus and Taxes 1,327, ,622 2,624, Provision for Staff Bonus 120,703 90, , Provision for Tax 189, , ,446 G Net Profit/Loss 1,017, ,825 2,158,104 4 Ratios Unaudited Financial Results (Quarterly) As at 4th Quarter (16/07/2010) of the Fiscal Year 2066/067 ( ) Upto this Quarter At the End of This Quarter Upto Previous Quarter At the End of Previous Quarter Upto Corresponding Quarter At the End of Corresponding Quarter 4.1 Capital Fund to RWA 12.99% 11.50% 8.08% 4.2 Non Performing Loan (NPL) to Total Loan 4.06% 14.97% 19.30% 4.3 Total Loan Loss Provision to Total NPL % % % 4.4 Average Cost of Fund 4.76% 4.69% 3.92% 4.5 Average Yield 10.31% 9.14% 12.01% 4.6 Net Interest Spread 5.55% 4.45% 8.09% 4.7 CD Ratio (Calculated as per NRB Directives) 78.55% 93.53% 91.33% 4.8 Return on Equity 47.77% 41.71% % 4.9 Return on Assets 7.35% 5.42% 15.00% 47 48

28 Comparision of Unaudited and Audited Financial Statements Fiscal Year 2066/067 S.N. As per Unaudited Financial As per Audited Financial Statements Variance In Amount In % 1 Total Capital and Liabilities (1.1 to 1.7) Statements 12,552,150 12,531,042 (21,108) (0.17) 1.1 Paid-Up Capital 1,860,315 1,860, Reserves and Surplus 269, ,258 4, Debenture and Bond Borrowings Deposits (a+b) 10,052,182 10,052, a Domestic Currency 9,791,650 9,791, b Foreign Currency 260, , Income Tax Liability Other Liabilities 370, ,287 (25,109) (6.78) 2 Total Assets (2.1 to 2.7) 12,552,150 12,531,044 (21,106) (0.17) 2.1 Cash & Bank Balance 2,049,244 2,058,299 9, Money at Call and Short Notice Investments 2,121,806 2,112,751 (9,055) (0.43) 2.4 Loans and Advances 7,821,294 7,809,545 (11,749) (0.15) 2.5 Fixed Assets 155, , Non Banking Assets Other Assets 404, ,121 (9,357) (2.31) 3 Profit and Loss Account Interest Income 1,167,628 1,167, Interest Expense 476, , A Net Interest Income ( ) 690, , Fees, Commission and Discount 145, , Other Operating Income 50,485 50, Foreign Exchange gain/loss(net) 49,840 49, B Total Operating Income (A ) 936, , Staff Expense 146, , Other Operating Expense 128, , C Operating Profit Before Provision (B ) 661, , Provision for Possible Losses/NBA 136, ,389 11, D Operating Profit (C-3.8) 524, ,177 (11,749) (2.24) 3.9 Non Operating Income/Expense (Net) 24,261 18,385 (5,876) (24.22) 3.10 Write Back of Provision for possible losses 778,542 1,318, , E Profit from Regular Activities (D ) 1,327,729 1,849, , Extraordinary Income Expenses (Net) - (523,482) (523,482) - F Profit Before Bonus and Taxes (E+3.11) 1,327,729 1,326,129 (1,600) (0.12) 3.12 Provision for Staff Bonus 120, ,557 (146) (0.12) 3.13 Provision for Tax 189, ,190 (5,507) (2.90) G Net Profit/Loss (F ) 1,017,329 1,021,382 4, Schedule 36 Rs. in '000 Reasons for Variance Difference is due to representation of assets and liabilities and adjustment as per instruction of statutory auditor. Changes in Profitability is due to additional provision as instructed by Statutory Auditor, certain adjustment after year end and presentation of write off loans. Additional Disclosure (As per Capital Adequacy Framework 2008 (Basel II)) The extracts of the Basel II reporting of the fourth quarter (2066/067) has been exhibited below: 1. Capital Structure and Capital Adequacy Tier 1 Capital and a breakdown of its components: (Rs. In 000) Core Capital (Tier 1) 2,076,547 a. Paid up Equity Share Capital 1,860,315 b. Share Premium 35,870 c. Statutory General Reserves 956,845 d. Retained Earnings (1,664,761) e. Audited current year profit 816,278 f. Capital Adjustment Reserve 72,000 Tier 2 Capital and a breakdown of its components: (Rs. In 000) Supplementary Capital (Tier 2) 159,728 a. General Loan Loss Provision 76,651 b. Investment Adjustment Reserve 26,050 c. Exchange Equalization Reserve 57,027 Detailed Information About Subordinated Term Debts Bank does not have subordinated term debts. Deductions from Core Capital (Rs. In 000) Deductions From Core Capital 315,478 a. Miscellaneous expenditure not written off 2,811 b. Investment in equity in licensed Financial Institutions 9,700 c. Investment in equity of Institutions with Financial Interests 15,000 d. Loans extended to shareholders holding more than 1% percent shares 274,553 e. Investments arising out of underwriting commitments 13,414 Total Qualifying Capital (In Rs. 000) Total Qualifying Capital 1,920,797 a. Tier 1 Capital Less Deductions 1,761,069 b. Tier 2 Capital 159,728 Capital Adequacy Ratio a. Tier 1 Capital to Total Risk Weighted Exposures 11.74% b. Tier 1 and Tier 2 Capital to Total Risk Weighted Exposures 12.81% Summary of the bank s internal approach to assess the adequacy of its capital to support current an future activities Quality Capital is the Backbone of the Bank. Bank's Management is aware of the nature and level of risk tha the Bank takes and its impact on the capital adequacy of the Bank. Regular review of the capital adequac enables the bank to ensure that it has adequate overall capital in relation to its risk profile. Summary of the terms, conditions and main features of all capital instruments, especially in case o subordinated term debts including hybrid capital instruments. Not applicable

29 2. Risk Exposures Risk Weighted Exposures for Credit, Market and Operational Risk (Rs. In 000) Total Risk Weighted Exposures 14,997,899 a. Risk Weighted Exposure for Credit Risk 13,598,112 b. Risk Weighted Exposure for Operational Risk 1,348,200 c. Risk Weighted Exposure for Market Risk 51,587 Risk Weighted Exposures under each of 11 Categories of Credit Risk (Rs. In 000) Total Risk Weighted Exposures for Credit Risk 13,598,112 a. Claims on government and central Bank - b. Claims on other official entities 261,577 c. Claims on Banks 151,098 d. Claims on corporate and securities firms 2,878,491 e. Claims on regulatory retail portfolio 1,528,969 f. Claims secured by residential properties 298,617 g. Claims secured by commercial real estate 57,124 h. Past due claims (except for claim secured by residential properties) 772,668 i. High risk claims 2,389,807 j. Other Assets 755,949 k. Off Balance sheet items 4,503,811 Total Risk Weighted Exposure Calculation Table (Rs. In 000) S.N. Amount a. Total Risk Weighted Exposure 14,997,899 b. Total Core Capital Fund 1,761,069 c. Total Capital Fund (Tier I and Tier II Capital) 1,920,797 d. Tier 1 Capital to Total Risk Weighted Exposures 11.74% e. Tier 1 and Tier 2 Capital to Total Risk Weighted Exposures 12.81% Amount of NPA s (Both Gross and Net) (Amount in Rs.) S.N Gross Amount Loan loss Provision Net Amount a. Restructured/Reschedule Loan 864,055, ,169, ,885,932 b. Substandard Loan 14,709,736 3,677,434 11,032,302 c. Doubtful Loan 5,508,003 2,754,001 2,754,002 d. Loss Loan 569,753, ,753,968 - Total 1,454,027,004 1,210,354, ,672,236 NPA Ratios S.N. Ratios % a. Gross NPA to Gross Advances b. Net NPA to Net Advances 3.12 Movement of Non - Performing Assets (Amount in Rs.) Change (%) Non Performing Assets (NPA) 1,454,027,004 2,388,544,947 (39.12) Write off of Loans and Interest Suspense During the Year (Amount in Rs.) S.N. Borrower Principal Interest 1 M/s Kaushala Iron & Steel Ind. Pvt. Ltd. 130,473, ,589,433 2 M/s Birat Leather 86,937,137 69,978,502 3 M/s Birat Shoe 65,929,904 74,167,554 4 M/s Triveni Garments Pvt. Ltd. 48,307,734 8,321,882 5 M/s Silver Fiber 35,130,842 49,786,358 6 M/s Standard Tanning Industries 25,467,368 9,268,052 7 M/s National Pharmachem 23,840,281 4,953,194 8 M/s Direct Home System 20,228,073 23,219,712 9 M/s Balaju Apparels Pvt. Ltd. 15,945, Mr. S. Jamim Shah 14,420,464 15,968, M/s Entepe Food Industries Pvt. Ltd. 13,628,920 6,447, M/s Bagmati Uni Dhago Katai Pvt. Ltd. 8,786,644 10,544, M/s Entertainment Channel 6,514,073 7,694, M/s Easywear Exports Pvt. Ltd. 5,200, , M/s The Himalayan Tepich 4,380,500 4,663, M/s Kartika Construction Pvt. Ltd. 4,285,556 5,984, M/s Koshi Chiya Udhyog 4,011,550 1,977, M/s Taragoun Regency Hotel (Book Adjustment) 3,334, Mr. Prajjwal Pradhan 3,014,073 2,212, Mr. Pema Sherpa 2,416, , M/s Dhaulisati Garments Udyog 2,320, M/s Neshu Stores 1,092, M/s Hills Garden School Pvt. Ltd. 664, , M/s Balaji Iron Industries 656, Mr. Indra Narayan Mallik 457, , M/s Sai Krishna F. For H.& M.S.P.L. 405,207 50, M/s RND Chemicals 309, , Mr. Surendra Bahadur Shrestha 255, Mr. Bhawani Goel 89,260 74, M/s Shree Fashion Industries 86, M/s G.P. Oil Center 78,750 48, Mr. Pankaj Maskey 78,366 40, M/s MRS Enterprises 77, Mr. Nagendra Ghimire 61, , Mr. Ram Narayan Shah 61,118 38,69 36 Mr. Narayan Bahadur Rai 54,977 11, Mr. JIwan Kumar Bista 51, , Mr. Sanjaya Hamal 47, , Mr. Roshan Bajracharya 42,619 6, M/s Ajal Kharid Bikri Kendra 40,518 16, Mr. Sanjaya Kumar Pokhrel 38, , Mr. Dilip Kumar Aryal 33,381 22, Mr. Hasmudin Miya 29,210 4, Mr. Manohar Shrestha 22,703 40, Mr. Bhimsen Rai 18,443 29, Mr. Rajesh Lohani 14,360 19, Mr. Daya Sindhu Yadav 9,396 3, Mr. Ram Chandra Saha Sudi 8,530 1, M/s Kanchan Rice & Floor Mill 5, , Mr. Lok Bahadur Karki 3, M/s Udati Enterprises Pvt. Ltd. 1,000 96, M/s R.J. Traders 1,000 81, Mr. Ambika Bhandari 802 1, Mr. Komal Nath Shrestha 802 1,083 Total 529,372, ,217,

30 Movements in Loan Loss Provisions and Interest Suspense Change (%) Loan Loss Provision 1,309,548,511 2,425,562,724 (46.01) Interest Suspense 639,537,963 1,013,590,065 (36.90) Details of additional loan loss provisions Borrower Name Loan Amount Existing Additional Additional Category Provision (%) Amount Birat Pharma Lab Pvt. Ltd. 3,490,000 Pass 99% 3,455,100 Bimala Subba Khapung 151,715 Pass 99% 150,197 Umanath Sharma Niraula 27,866 Pass 99% 27,587 Gokul Diet Food Industries 18,647,188 Pass 99% 18,460,716 Reliance Thermopoly 1,563,033 Pass 1.36% 21,314 Binod Kumar Rijal Re-structured 87.5% 125,917 Sushil Narayan S. Thapa Re-structured 87.5% 318,303 Total 243,387,482 22,559,135 Investment Portfolio (Amount in Rs.) Held To Maturity Available for Sale Investment on Treasury Bills 1,521,831,260 Investment on Government Bonds 357,387,635 Placement (USD) 74,850,000 Placement (NRS) 130,000,000 Investment on Shares Commercial Bank 9,700,000 Rural Development Bank 6,500,000 Rural Micro-Finance Development Center 4,531,000 Insurance Companies 15,000,000 Others 19,001,500 Total 2,084,068,895 54,732, Risk Management Function Nepal Bangladesh Bank ltd. (hereinafter called Bank) is committed to the identification, monitoring and management of risks associated with its business activities. Management is ultimately responsible to the Board for the Bank's system of internal controls and risk management. In order to enhance efficiency and effective internal control Bank has already started the process for outsourcing the Internal Audit Service. The internal audit of the Bank's branches and departments shall then be carried out by one of the reputed chartered accountant firm in Nepal. Further, up gradation of software has been a value addition in effective internal control with more additional security for financial data. Bank adheres to shareholders value maximization which is achieved through appropriate trade - off between risk and return. In order to maintain balance between risk and return Bank has put in place various risk management practices and processes for proper identification, measurement, monitoring/control and mitigation of the risks which are in line with the various guidelines and circulars issued by Nepal Rastra Bank from time to time. Credit Risk Credit risk is the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The goal of credit risk management is to maximize a bank's risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. For proper management of credit risk the Bank has put in place a well structured Procedural Manual Credit and Trade Finance and Loan Monitoring and Recovery manual duly approved by the Board which are supplemented by internal circulars in case conflict arise between existing provisions and the circular issued by NRB. The manuals document credit appraisal procedure, monitoring of loans and advances, loan documentation monitoring, disbursement monitoring, credit facility review, loan recovery etc. Loan sanctioning procedure passes through three level of scrutiny, first at the branch level, thereafter at head office level and finally at management level. For proper monitoring and control of credit risk, separate credit risk management department headed by Manager is in existence. The credit risk management department monitors the quality of loan portfolio identifies problem and takes necessary steps to correct deficiencies. Market Risk Market risk is the risk of loss resulting from changes in the value of assets and liabilities (including off-balance sheet assets and liabilities) due to fluctuations in risk factors such as interest rates, foreign exchange rates and stock prices and the risk of loss resulting from changes in earnings generated from assets and liabilities. Management of the Bank attaches importance to market risk management, fully recognizing that the lack of such an approach could seriously hinder attainment of strategic objectives. The Bank has put in place Board approved International Business Operation Manual, for effective management of market risk in the Bank. Further, Asset Liability Management Committee which meets on a regular basis is headed by CEO of the Bank with departmental heads from Accounts, Credit, and Treasury Departments respectively. Operational Risk The risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. In order to minimize operational risk Bank has been following its operational Manual strictly along with NRB Directives and circulars. In addition to strengthen internal control of the Bank we are outsourcing Internal Audit Service, which shall be carried out by reputed/experienced chartered accountant firm. Further, we have already upgraded our software to Pumori IV which has helped to strengthen MIS reporting and injected positive contribution in minimizing operational risks. Further, Bank has been using various risk mitigates so as to minimize operational risk such as insurance coverage, proper data backups, maintenance of sufficient capital adequacy as required by NRB, risk transfer through risk mitigation products etc. The Bank has framed Know Your Customer (KYC) Policy and Anti Money Laundering (AML) Policy in order to mitigate risk arising from money laundering activities. To cope with the challenges in banking operation and risks associated with it, Bank has been following its operational manual, IT Policy including Data recovery management along with stringent internal controls in place. In addition, Bank has established Research and Development Department, functioning under direct supervision and controls of the General Manager, which will inter alia monitor risks, associated with the banking business and develop/amend new/existing policies. Credit Risk Mitigations During the last year Bank has claimed CRM Benefits amounting to Rs. 398,388,272. The benefit has been claimed in accordance with the Basel II guidelines issued by Nepal Rastra Bank. The eligible financial collaterals are made fully use of to reduce the credit exposure in computation of risk weighted asset for credit risk. All types of securities eligible for mitigation are easily realizable financial securities

31 Note: 55 56

32