ANNUAL REPORT | 2017-18

...for a better future

Sunrise Plaza, Gairidhara Kathmandu Metropolitian City-2 TEL.: 01-4004560, 4004562, 4004563, 4004564 TOLL.: 16600 122444 FAX.: 01-4422475 SWIFT: SRBLNPKA E-MAIL: [email protected] www.sunrisebank.com.np Covering the period 16th July 2017 to 16th July 2018, this annual report comprehensively covers the performance of Sunrise Bank Limited and its subsidiary, Sunrise Capital, for the reporting period and includes among other matters; an analysis of the operational results, a review of the financial performance and an overview of the Bank’s corporate governance, risk management and compliance frameworks.

The Report includes forward-looking statements, which relate to the possible future financial position and results of the operations of Sunrise Bank Limited. These statements by their nature involve an element of risk and uncertainty, as they relate to future events that are not predictable. However, we do not undertake to update or revise any of these forward-looking statements publicly, whether to reflect new information or future events or otherwise.

2 SUNRISE BANK LIMITED Our motto of "Rising to Serve" drives all the efforts of Sunrise Bank to emerge as market leader with a business that is founded on strong fundamentals supported by state-of- art banking technology, and motivated staffs whose skills are continuously enhanced.

ANNUAL REPORT | 2017-18

ANNUAL REPORT | 2017-18 3 REPORT OBJECTIVES The consolidated as well as standalone financial statements, prepared in accordance with NFRS, remain the primary source of communication with stakeholders. The purpose is to show how we are working to improve every aspect of our business for the benefit of stakeholders.

4 SUNRISE BANK LIMITED Contents

STRATEGIC REPORT An Overview 10 Financial Highlights & Review 14 Macroeconomic Outlook 16

CORPORATE GOVERNANCE Governance at a Glance 24 Board of Directors 26 Chairman's Statement 30 CEO’s Perception 32 Management Team 34 Department Heads 38 Corporate Governance 40

RISK REVIEW Board Level Committees 44 Risk Management Committees 47

CORPORATE SOCIAL RESPONSIBILITY Social Responsibilty 54 CSR Activities 56

HUMAN RESOURCE MANAGEMENT Human Resource 60

PRODUCTS & SERVICES Sunrise Swasthya Yojana 66 Technology Driven 70 Schemes 76 Corporate Banking 80

FINANCIAL STATEMENTS Director's Report 88 Auditor’s Report 97 Financial Statement 98 Disclosure 204

INVESTOR'S RELATIONSHIP Shareholder’s Information 210 Disclose under Rule 26 213

BANK'S PERFORMANCE Analysis 216 Remittance Network 220 Branch Network 223 ATM Lists 226

ANNUAL REPORT | 2017-18 5 EMBRACING INNOVATION Innovation has, is and will always be the cornerstone of our success. Itsupports our efforts to build tangible and intangible infrastructure and to integrate relevant economic, social and environmental issues into our strategic planning process and day-to-day operations.

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8 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Strategic Report

Sunrise Bank’s secret of continued Equally important to our long-term success growth and success is it’s highly is our cost structure. Ongoing cost controls efforts are aimed at reducing our cost-to- diversified and well-balanced business income ratio, which, combined with top line model. Being among the preferred growth, are instrumental in meeting bottom banks in , we have always taken line targets. We have always understood that a proactive stance towards improving supporting our ambitious plans will most certainly depend how well we manage our strategic alignment to drive stronger capital requirements now and in the future. growth and deliver the highest returns Based on this premise, we are in the process on stakeholder value. to raise NPR 1 Bn through an unsecured, subordinated and redeemable debenture, In the year under review, we embraced a which will strengthen the Bank’s Tier II broader performance-driven strategy to capital by mid July 2019. transform all key business pillars and support services, and to sharpen their alignment We constantly question the status quo to with our vision to ‘Establish Sunrise Bank find new and better ways to do things. With as a lead bank in all places of our branch fresh eyes, we seek out new ways to meet locations and nation-wide’. At the heart of customer needs and help shape their own our strategy is the marriage of our corporate path, through innovative products, insightful goals with the aspirations of stakeholders, advice and invigorating attitude. In doing which prompted us to leverage on four key so, we have leveraged on innovation to build pivots; strengthen top line, enhance digital a fully integrated multi-channel banking capability, boost core capital and expand system that combines traditional and digital the bottom line. To grow the top line in channels, giving rise to an unprecedented 2018, we continued to orient ourselves level of customer convenience. Innovation more consistently toward both Retail and has helped us to simplify our procedures, SME customers in all core markets. At reduce organizational layers and delegate the same time, to strengthen our roots as more decision making powers to branches, a commercial bank, we adopted a two- enabling us to respond to customers’ needs pronged approach; firstly to increase our faster than ever before. Meanwhile, amidst penetration and capture market share in the growing risk of cyber security threats, selected retail segments and secondly to be we have begun to emphasize on innovation the first-mover to promote unique, as well to preserve both customer privacy and data as structured solutions to capture the Retail security. and Corporate segment.

Hand-in-hand with this volume driven strategy we enhanced digital capabilities, for which our IT transformation programme became the key enabler. Our IT transformation programme also spearheads our efforts to differentiate ourselves from peers. Further, investments in digital technology were aimed at enhancing customer service, augmenting the risk management framework and improving employee productivity.

ANNUAL REPORT | 2017-18 9 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

An Overview

VISION You & Us. Together We Can Build.

MISSION SUNRISE BANK LIMITED, a as CEO. This team of seasoned Establish Sunrise Bank as a lead leading financial institution, banking and management bank in all places of our branch was established as the 23rd professionals is dedicated locations and nationwide. commercial bank in Nepal on towards establishing an 12 October 2007. Its corporate institution determined to cater STRATEGY office is located at the Gairidhara to the needs of all categories of Our strategies are long-term Crossing, in Kathmandu. Sunrise clients. and our commitment towards Bank is driven by its motto corporate sustainability is absolute. "Rising to Serve" and offers Sunrise Bank’s continued growth innovative products and services and success is founded on a to all categories of clients. It highly diversified and well- also offers products that can balanced business model. The contribute towards the economic Bank has had balanced growth development needs of the throughout its first decade and country. is now poised to expand into new markets. The Bank's ever The Bank is continuously growing geographical coverage supervised by the Board of has enabled it to serve a OBJECTIVES Directors that has members spectrum of customer segments, The overall objective of the bank with extensive knowledge and including retail, middle market, is to contribute to nation building entrepreneurial experience. small and medium enterprises, and meeting the expectation of its The Chairman of the Bank, and large corporations. The Bank shareholders, depositors, customers Mr. Motilal Dugar is a business has been continuously upgrading and other stakeholders. The Bank leader with extensive interests in its services using state-of-art will make concerted efforts to both industry and the services Core Banking technology, while realize its goal by leading the sector. The management team remaining vigilant on risks and banking sector in every front with: comprises of five members risk management. with Mr. Ratna Raj Bajracharya n Expanding presence of the Bank within and outside the country, n Targeting under-served or The Bank serves a spectrum of customer segments, potential services like SMEs and including retail, large corporate, middle market, Small and retail businesses, n Reshaping and restructuring Medium Enterprises (SMEs) and Deprived Sectors. Sunrise bank's infrastructure and Bank’s continued growth and success is founded on a highly systems, diversified and well-balanced business model and a robust n Service provision through multi-channel environment. efficient and knowledgeable staffs supported by automated procedures, and Sunrise Bank keeps pushing its limits and continuously n High degree of compliance and endeavors to be a market leader, thanks to a strategy based risk management. on innovation and service differentiation

10 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

CORE OPERATIONAL VALUES HIGHLIGHTS

SOUND CAPITAL STRUCTURE, The Bank remained a strong player in the by maintain minimum Capital Adequacy market throughout 2017/2018. The market requirement under BASEL – III and indicators for fiscal year was bolstered by, meeting the NRB requirement of minimum paid-up capital. n Good revenue generation despite the cut throat competition in the market and liquidity crisis. EFFICIENT OPERATIONAL BASE, n Prudent risk management system to by establishing state of art servicing minimize financial and operational risks facilities to serve its client through and eliminate losses. improved systems, procedures and n Remarkable growth in balance sheet with infrastructures. a good composition of capital and liquid assets. n Diverse credit portfolio to minimize credit GOOD ASSETS QUALITY, risk and maximize returns. by maintaining good quality of assets n Surge in investment and sizable incomes with lowest Non-performing Assets from investments. (NPA) level in the industry through n Integrated team efforts from the ground effective appraisal and monitoring level to top management, and mechanism and penetration to un-served n Reinvention of products and services to and potential areas of business. cater diverse needs of customers.

STANDARD CUSTOMER SERVICES, by providing state of art services to its clients, including technical support to assess their business operations and market responsive cost.

STAFFING STANDARD AND CAREER, by providing competitive compensation CODE OF packages and career development CONDUCT opportunity to its staff. Commitment to the highest standards of transparency, reliability and ethical business conduct are well-established GOOD CORPORATE GOVERNANCE, guiding principles within the Bank. These by fully complying with regulatory are articulated in a comprehensive policy requirement, improved risks and a Code of Conduct communicated to management systems, continuous and understood by all employees. monitoring of compliances and reliable reporting mechanism.

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12 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

SrBL Performance ALIGNMENT WITH STRATEGIES

OVER ITS JOURNEY of 11 The major force driving The Bank recognizes that years, Sunrise Bank has built growth at Sunrise Bank customer-led innovation is a solid foundation to face the are its core values and crucial in the rapidly changing challenges and opportunities. enhanced digital capabilities, digital space. This explains The Bank has a successful both of which are vital for its efforts to continuously history, a distinctive culture continued progress. While engage in developing and a shared pride in integrating technology the customer focused concepts performance, which is the Bank continuously strives and platforms, more of which foundation for its growth to create a culture that will be introduced in the exemplifies service excellence, coming years. Across the Bank, its simplification of interfaces employees place great between customers and the Engaging stakeholders is value on working together Bank, and creating secure another core component and share a genuine desire transactional platforms. of the Bank's strategy to best serve customers. implementation process. By SrBL is confident that its Sunrise Bank has emerged developing and maintaining strategy is sound and that as a trusted bank in Nepal meaningful relationships, proper execution of its plans and will keep investing in the Bank has been able to can help towards ensuring its highly customer-centric continuously improve its meaningful progress needed strategies. SrBL values the relations with stakeholders for creating long-term value trust customers have placed and in building the trust for all stakeholders, including on it, which is the rationale needed for expanding customers. This approach for investments in the right business. Sunrise Bank trusts has driven Sunrise Bank to technology and teams to that its vision, and products truly live up to its brand protect customer information and services that cater more proposition. while also delivering faster to its customers to remain and more reliable services. as the pillars in its path to progress.

TABLE OF SECTORAL LENDING (NPR MILLION)

SECTOR 2016/17 2017/18 GROWTH

Industry 9,509 12,587 32.37% Trade 11,181 12,628 12.95% Agriculture 3,721 5,550 49.16% Others 27,923 30,562 9.45% Total 52,334 61,326 17.18%

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Financial Highlights

TOTAL DEPOSITS (In NPR Million) TOTAL ASSETS (In NPR Million) CAGR (Last 3 years) : 10.40% CAGR (Last 3 years) : 11.91%

69,493 61,013

51,650 59,067 71,859 82,783

15/1616/17 17/18 15/16116/17 7/ 18

GROSS LOANS AND ADVANCES (In NPR Million) TOTAL REVENUE (In NPR Million) CAGR (Last 3 years) : 11.54% CAGR (Last 3 years) : 32.85%

61,326 8,563 52,334 44,197 6,107 3,652

15/16

16/17

15/16 16/17 17/18 17/18

TOTAL OPERATING COST (In NPR Million) NET PROFIT (In NPR Million) CAGR (Last 3 years) : 27.56% CAGR (Last 3 years) : 15.79% 1,477 1,622 17/18 1,113 951 1,210 16/17

782 15/16 15/16 16/17 17/18

14 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Financial TOTAL ASSETS CAGR (Last 3 years): 11.91% The year 2017/18 showed a Review remarkable growth of NPR 10,924 million in total assets

TOTAL DEPOSITS CAGR (Last 3 years): 10.40% Our innovative products and deposit mobilisation strategies also yielded good results with increase in deposits base by NPR 8,480 million during the review yeart

TOTAL REVENUE CAGR (Last 3 years): 32.85% Our stakeholder's contribution to our revenue increased by NPR 2,456 million during the review year .

GROSS LOANS AND ADVANCES CAGR (Last 3 years): 11.54% Bank financed 8,992 million more in various sectors and contributed towards holistic growth

NET PROFIT CAGR (Last 3 years): 15.79% This year net profit showed a significant increment by 33%. This is the result of increase in revenue, cost control and decrease in non performing loan

TOTAL OPERATING COST CAGR (Last 3 years): 27.56% With internal cost control mechanism and addition of 21 new branches, the increment in total operating cost has been limited to NPR 412 million including growth in number of staffs by 203.

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Macroeconomic Outlook

ECONOMIC GROWTH and development Political instability (following the decade was expected to jump-start once the long insurgency), high inflation, lack of country’s transitional political situation continuous power supply (Grid) and other stabilized following the formation of infrastructures including industrial security federal, provincial and local governments. had hindered economic growth. Most of GDP growth rate in Nepal has averaged these hindering factors have now been 4.48% between 1993 and 2018 reaching an overcome including improvement in power all-time high of 8.22% in 1993-94 and supply. The growth rate in agricultural record low of 0.12% in 2001-02. GDP growth output has spurred growth supplemented for FY 2017/18 was 6.30%. The budget by rapid expansion of bank branches for FY 2018 set the GDP growth target at in rural and suburban areas to result in 8.00%. robust credit demand especially from the agriculture, clean energy and SME sectors. This increased credit demand has actually outpaced the growth rate of money supply in the financial system often leading to financing issues. Banks have not been able meet the credit demands for the last three fiscal years owing to the cash crunch which is why central bank has now allowed external commercial borrowing by banks.

16 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Major macroeconomic concern for the Introduction of the Interest Rate Corridor financial markets has been the slow pace by the central bank (NRB) was a step of deposit growth. The widening import towards stabilizing the short-term rates bills and slow growth of exports have as well the money market. Consolidation widened the trade gap and this has lead of banks and financial institutions through to BoP deficits. Even though inward mergers and acquisition has also helped remittances have grown year on year, this to make the banking system stronger. has been outpaced by imports. Despite Similarly, the introduction of interbank everything, the country has robust foreign payment and upcoming RTGS settlement exchange reserves, almost about 1/3rd of can lift the national payment system to GDP. Inflation has now slowed down to international standards. single digits. Though the equity indices are in the red, the base of equity capital The financial frictions seen in recent markets has expanded. The central bank’s decision to increase the capital base of months have improved significantly. commercial banks to NPR 8 billion has The gap between deposit and credit made the banking system more resilient to growth has narrowed. The comfortable risk exposures. level of central bank liquidity has also contributed to easing the financial situation. The upward trend in market FY 2017-18 interest rates has been arrested. The increased level of capital, the 6.3% GROWTH IN GDP introduction of a fixed interest rate corridor in the monetary policy 8.6% REMITTANCES INCREASED statement and macro-prudential tools in place are measures aimed at making 26.7% TRADE DEFICIT financial sector more resilient and 19.2% GON REVENUE INCREASED stable going forward.

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According to estimates by the International Monetary Fund (IMF), global real GDP grew 3.6 percent in 2017, the fastest pace in five years.

3.7% GLOBAL GROWTH IN GDP

6.3% NEPAL GROWTH IN GDP

GLOBAL PERSPECTIVE

The end of the fiscal year 2017-18 will by the International Monetary Fund (IMF), mark a decade since the world economy global real GDP grew 3.6% in 2017, the was dragged into a downward spiral that highest in five years. was initially sparked by risky mortgages in the United States. The mortgage crisis, With economic activity gathering pace on however, was not the only challenge in the both sides of the Atlantic and the Asian intervening years. The world experienced growth engine ploughing ahead alongside Europe’s debt crisis, emerging markets’ the Pacific Rim, the global economy seems vulnerability to volatile capital flows, oil poised for a strong head start this year. It price fluctuations, and geopolitical events would, however, be foolhardy to imagine such as the Arab Spring and Brexit all a world without risks. Increasing private of which added to the uncertainty. The sector debt levels, geopolitical risks, and tide, however, seems to be turning of late, rising protectionist rhetoric could reverse especially since last year when the world the positive trends. economy reverted. According to estimates

18 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Developed economies continue to benefit from accommodative monetary policy. The balance sheets of the central banks of four major economies—the United States, Euro Area, the United Kingdom, and Japan—alone have quadrupled from GDP growth rate of Nepal has pre-crisis levels to reach almost $16 trillion, averaged 4.48% from 1993 till approaching 20% of world GDP. Despite 2018 reaching an all-time high four policy rate hikes in the United States, of 8.82% in FY 1993-94 and the Federal Reserve’s interest rate path has record low of 0.12% in been gradual and will likely remain so in FY 2017-18. 2019. In the Eurozone, the European Central Bank (ECB) has been at the forefront of the fight against yields, thereby easing the fiscal pain for debt-ridden economies. Key emerging economies have also eased policy in recent quarters; Turkey and Mexico are notable exceptions.

Higher global liquidity and easy monetary If there is a protagonist in the global policy have aided credit growth with growth story of 2017, it is trade. According emerging economies outpacing the to the IMF, the total volume of global developed ones. A likely reason for exports is estimated to have grown by 4.1% the surge in emerging economies is in 2017, up from 2.3% in 2016. This was the large portfolio inflows from developed fastest growth in exports since 2011 and economies in search of higher earnings, the first time in three years that exports that have aided in the sharp rise of growth outpaced global GDP growth. Asia corporate and household credit in the has been a key contributor to trade growth latter. since late 2016, with European economies also contributing last year. Germany, for Adding to the list of concerns is the rising example, recorded double-digit exports protectionist rhetoric and a move away growth in Q3 2017 for the first time in eight from a multilateral trading order. While years. the question mark hanging over the North American Free Trade Agreement has been Strong growth in international trade also resolved, negotiations for a smooth Brexit reveals a high degree of resilience despite have suffered in recent days. Businesses uncertainty about trade and investment are therefore in an uneasy terrain. Should relations, and rising protectionist rhetoric. manufacturers move factories? Will Asian economies, for example, are financial services in Europe relocate increasingly trading with one another, from London? Who should retailers bank taking advantage of growing demand on: the tried-and-tested US consumers within the region. Similarly, withdrawal of or the happy spenders in Asia? For the United States from the Trans-Pacific businesses, adding to the discomfort will be Partnership (TPP) has not shaken the technology-related disruptions and rising resolve of the remaining 11 nations to geopolitical risk in the Korean peninsula continue with a trade pact, albeit on a and the Middle East. smaller scale. And as a shot in the arm for these nations, the United Kingdom has expressed interest to join the TPP as it tries to offset trade losses arising from Brexit. This may encourage other non-Pacific nations to follow suit.

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Customer Centric Business Model

SUNRISE BANK recognizes that footprint in order to fulfill the needs of today’s customers have less and less new and emerging market segments. time to visit its branches, even though their needs are greater than ever. The Bank's goal is to create an Modern consumers are moving away from conventional banking and are immediate rapport with new clients demanding more conveniences, better and encourage them to choose service quality and technology-enabled Sunrise Bank as their primary ways to access services 24/7. bank. Meanwhile, the Bank's

Sunrise Bank has already begun to listening practices have continued transform its business model to match to help it to better understand this change. This required a rethink of its customers’needs and respond customer fundamentals and establishing promptly to their concerns. stronger customer ties. The Bank communicates more frequently with To facilitate multi-device access, the current and potential customers and Bank has taken steps to enhance this has helped it to better understand the customer-centricity and user- their needs for delivering products friendliness in its digital banking and services that match the changing processes. It has also continued expectations and needs. The Bank physical outreach and diversification believes that every customer has the of distribution to take the Bank closer right to expect sound and superior to customers. It is already become banking solutions, backed by the latest a 'Bank with a Voice' (Toll free call technology and excellent customer center) and has an expanding branch service. network and ATM coverage . Grievance handling system at the Bank has also Over the years, the Bank has consciously been continuously improved to increase diversified its business model to portray efficiency and effective responses to a greater degree of customer-centricity complaints. The Bank also plans to in its offerings. It has successfully spend considerable time and resources combined both conventional brick- to reinforce the skills of frontline staff, and-mortar banking concepts with the and reinforce call center operations, to latest developments in global banking ensure effective service delivery. to deliver a superior banking experience. The Bank also continues to emphasize Additional steps that the Bank plans the importance of strengthening its to undertake to remain on top of IT backbone as the basis of achieving competition are creating a learning service excellence. This approach has culture that promises both individual resulted in a definitive competitive and organizational development, and edge. It addition, the Bank has also over promoting innovation and maximum the years, strategically expanded its value creation for customers.

20 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

ANNUAL REPORT | 2017-18 21 CORPORATE GOVERNANCE

Sunrise Bank believes in sound corporate governance as a key operational strategy to beat competition. It has several units led by the board to oversee governance and ensure that its practices result in a bank that is agile, secure and trusted by customers.

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Governance at A Glance

THE GOVERNANCE UNIT of the bank Sound companies are made of staffs who comprises of the heads of operations, are satisfied with their jobs. The Bank's compliance, human resources and legal units governance systems extend to continuously and is responsible for monitoring compliance listening to grievances and forwarding issues on a monthly basis. The committee identifies to a top-ranking staff. The Grievance Cell governance issues, suggests mitigation and at the Bank resolves outstanding issues. reports along with its recommendation. Its Customers at the Bank can also submit guiding philosophy is that effective governance grievances/ complaints that are handled is at the core of all successful banks. promptly. In the past year there were four staff grievances and 224 customer The Bank also has one Board-level as well as complaints that were resolved amicably. management level committees to look after the money laundering and terrorist financing The Bank also has a system of keeping staff issues. The Money Laundering Prevention records updated by requiring every staff Committee, a board level committee, comprises member to fill in Know Your Employees of at least one board member along with (KYE) forms, which includes information the heads of the compliance and operation on both social and financial status of the departments as members. This committee employees, such as the assets details for meets as required, and also every quarter to officer and higher ranking staff. The directors discuss money laundering, terrorist financing, of the Bank are also required to make suspicious transactions, and needs and efficacy disclosure of their assets, networks and of the system of the bank to tackle the issues. engagements outside the company.

The Bank organizes knowledge sharing All in all, the feedback system of the sessions and provides training/orientations on good governance unit and grievance AML and good governance to directors, top management and staffs on a regular basis. The cell has enabled continuous monitoring training/orientations are routinely organized of the situation of both the staff to make all staff aware about their AML/ CFT and customers. This has been vital related responsibilities and regulations and for devising corrective measures. related laws. Compliance workshops and orientations are mandatory for staff handling Every branch of Sunrise Bank has a 17 different banking operations to ensure there is Complaints and Suggestion Box for STAFF timely reporting of deviations from accepted customers. The content of these boxes GRIEVANCES standards. The Bank has a zero tolerance are reviewed every month to ensure environment in governance and compliance related matters, and this has remained a strong timely corrections. 224 CUSTOMER deterrent for deviant behavior. The Bank has in COMPLAINTS place a comprehensive KYC, AML, CFT policies & procedures. RESOLVED AMICABLY

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ANNUAL REPORT | 2017-18 25 MR. MOTI LAL DUGAR MR. MOTI LAL DUGAR MR. MOTI LAL DUGAR

MR. MOTI LAL DUGAR MR. MOTI LAL DUGAR

26 SUNRISE BANK LIMITED MR. MOTI LAL DUGAR MR. MOTI LAL DUGAR MR. MOTI LAL DUGAR

BOARD OF DIRECTORS

FROM LEFT TO RIGHT: Mr. Deepak Nepal, Director; Mr. Malchand Dugar, Director; Dr. Bhogendra K. Guragain, Director; Mr. Motilal Dugar, Chairman; Er. Bachh Raj Tater, Director; Mr. MR.Jyoti MOTIKumar BeganiLAL DUGAR, Director; Mr. Om Krishna Joshi, Director & Dr. Deepak Prasad Bhattarai, Director MR. MOTI LAL DUGAR ANNUAL REPORT | 2017-18 27 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

Profile of Directors

Mr. Motilal Dugar Dr. Bhogendra Er. Bachh Raj Tater Mr. Malchand Dugar CHAIRMAN K. Guragain DIRECTOR DIRECTOR DIRECTOR

Mr. Motilal Dugar is also Dr. Bhogendra Guragain, Chairman of the Tater Mr. Malchand Dugar comes the Chair of the MV Dugar a Tribhuvan University Group, Er. Bachh R. from one of Nepal's largest Group, one of Nepal’s largest graduate with an MBBS Tater is a well-known business families. He, along private enterprises. Mr. Dugar degree, also holds an businessman and a with his father – Late Mr. pioneered the automobile M.Sc. (Epidemiology) pioneer in private Tolaram Dugar (founder business in Nepal and has from the Erasmus hydropower development Chairman of Sunrise more than 50 years of University Rotterdam, in Nepal. A former Bank Limited, Gurans experience and representing Netherlands. He has over banker, Mr. Tater has Life Insurance Company renowned companies like 19 years of experience also been serving as Limited and TM Dugar Mahindra, John-Deere, in civil service and the Chairman of South Group), has established Royal Enfield, Piaggio, Leica, international leadership, Asia Infrastructure a number of successful Minemaster, Kirloskar, etc. and has been a director Development Pvt. Ltd., industries in Nepal. The group is developing since establishment. An Ridi Khola Hydropower hydropower projects that extensive traveler, Dr. Development Co. Ltd., As Chairman of the TM will generate 317 MW and Guragain has also worked and Vishal Plastocab Dugar Group, he heads make it among the largest as International Program Industries Pvt. Ltd. He several companies private sector hydropower Advisor for Medical is also a director of the including Dugar Foods and developers in the country. Foundation, London and Arun Valley Hydropower Beverages Pvt Ltd., Advikk He is the former Chairman of as visiting professor in Development Company Exim International Pvt Gurans Life Insurance Co. Ltd. more than a dozen of Ltd. As a civil engineer, Ltd., Shrish Warehousing Mr. Dugar is also the President universities in Europe and he had worked for a year Solutions Pvt Ltd., of The Bhagawan Mahavir North America (USA and at the Department of Pooja Warehousing Jain Niketan, and the Vice Canada). He also served Irrigation, Government of Solutions Pvt Ltd., Amrit President of the Nepal USA as an advisor at the World Nepal and was involved Pulses Industries, Shrish Chamber of Commerce and Health Organization and for 24 years as Chief of Cold Storage, Navkar Veerayatan Nepal. He also has worked with various Construction Section, International, Nepal Sal owns Kohinoor Cold Storage, UN agencies. Nepal's Agricultural Development Seed Oil Pvt Ltd., and the largest such undertaking BOSS magazine had Bank Ltd., Nepal. Bikas Intercontinental, etc. in Nepal. voted him as Nepal’s top He is a former Director of 50 personalities in 2004 Gurans Life Insurance Co. and 2005. He is executive Mr. Dugar is a well-known Ltd. Mr Dugar has 45 years chairman of Ngadi Group industrialist and business of experience in business Power Ltd. and Chairman person in Nepal with and has also served on of Siuri Ngadi Power P. engagements in establishing the Board of Sunrise Bank Ltd., Shuvam Power Ltd. and operating manufacturing Limited for several years. and Kathmandu Fun Valley and service industries for over P. Ltd. and a Director of 55 years. He has remained Barun Hydropower Co. Ltd. a director of SrBL since its establishment.

28 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Dr. Deepak Prasad Mr. Deepak Nepal Mr. Jyoti Kumar Begani Mr. Om Krishna Joshi Bhattarai DIRECTOR DIRECTOR INDEPENDENT DIRECTOR DIRECTOR

Dr. Bhattarai represents Mr. Deepak Nepal is a Mr. Jyoti K. Begani Mr. Om K. Joshi is an the public shareholders representative of public represents the public independent director. Mr. in the Bank’s board. shareholders in the Bank’s in the Bank’s board. Mr. Joshi had been a director A founder member of board. He is a Diploma Begani is the proprietor of in erstwhile Narayani the Nepal Engineering Holder in Commerce from Sadasukhi Enterprises and National Finance Ltd. for College, Dr. Bhattarai is Tribhuvan University. Mr. is also involved in social more than 3 years before also a visiting professor Nepal has been involved service. He served a term being appointed as a at the Institute of in the corporate sector for as the Chairman of Nepal director at the Bank. He Engineering, Tribhuvan last 36 years and also was Jain Council, Bhagwan served for over nine years University. He is a member a Director at Gurans life Mahabir Jain Niketan- as a Managing Director of Academic Council, insurance Co. Ltd. for more Kathmandu, Shree Jain at Narayani Finance Ltd, Pokhara University than six years. He was Shwetambar Terapanthi and also a five year term and also serves as an also an active Executive Shabha-Kathmandu as Finance Director at advisor at Kist Medical Member in Nepal Foreign and the Lions Club of the Nepal Agriculture College and Tourism Trade Association for Kathmandu. He has also Research Council. He & Hotel Management four years. He has also served as the secretary worked for more than 27 College. Dr. Bhattarai is worked as a representative of the World Hindu years at the Agriculture a senior consultant at of Nepal Foreign Trade Federation. He is also a Development Bank Nepal Construction Management Association in the capacity former Director at Gurans Ltd. Mr. Joshi holds a Technologies Pvt. Ltd. and of president of its' tax Life Insurance Co. Ltd. Master of Commerce has published three books committee with Nepal degree from Tribhuvan on different aspects Government Revenue University, and a Bachelor of engineering, and Committee. of Law degree from the numerous articles in both same university. He had national and international also served as a director journals. of Sagarmatha Insurance Co. Ltd.

ANNUAL REPORT | 2017-18 29 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

The Bank has remained as a good corporate citizen and has continuously remained committed to the welfare of society.

30 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Chairman’s Statement

Dear Fellow Shareholders, The Bank has remained as a good corporate citizen and has continuously It is my privilege to write to you as the remained committed to the welfare of Chairman of your Bank. I feel honored to society. It has contributed towards many accept the responsibility of chairing the initiatives that have resulted in tangible and Board. On behalf of the Board of Directors intangible benefits to people deprived from of SrBL, I express my sincere gratitude both education and health. to all of you for your continuous support and cooperation during the past 11 years. The Bank provided Bal Mandir, I am also happy to report that we have delivered admirable financial performance Naxal – a school for orphaned in FY 2017/18 (FY 2074/75) with loans and children -- food and clothing, and advances of NPR 60.21 billion, Deposit of assisted the procurement of skin NPR 69.5 billion and Profit of NPR 1477 grafting equipment (Dermatome) million. The Total Assets of the Bank has for the Burn Ward of the government- increased to NPR 82.78 billion. run Kanti Children’s Hospital. We have expanded our network to 103 branches and 114 ATMs. Another 20 new Finally, I would like to congratulate all of branches and an equal number of ATMs you for completing 11 years of successful are in the process of being set up -- 10 operations. Our trusted shareholders, of them will be operational by mid-July valued customers, dedicated employees, 2019. We have also extended our reach to directors and executives, both past and 18 far-flung areas in the country as village present, deserve a big round of applause! branches as per our commitment to have I specially thank all the employees at presence nationwide. Sunrise Bank for the hard work they have put in to attain the results. There will be challenging circumstances in business and The Bank has already crossed the NPR 8 the operating environment as we progress billion paid-up capital requirement as it but I firmly believe that we will hold ground increased its paid-up capital to NPR 8.15 and will continue to move forward, always billion. The Bank has, therefore, proposed a striving to achieve quality for delivering cash dividend of 11.5% this year out of the satisfying results. This is possible when profit and reserve instead of bonus shares, business and compliance go hand-in-hand, as per the aspiration of our shareholders. which is also what we call ethical business.

SrBL has attained significant growth which Thank You, is evident from this Annual Report. The

financials for this year have been prepared Motilal Dugar as per the Nepal Financial Reporting CHAIRMAN Standard (NFRS) and is different from the earlier financial reports.

ANNUAL REPORT | 2017-18 31 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

32 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

CEO’s Statement

THE IMPROVED PERFORMANCE The political success has yet to be the banks unaware. Yet, the retained The year in perspective has also seen transformed in economic front. In earnings arising out of recognition of Sunrise Bank moving into a righteous banking, the situation of “shortage such “accrued profit” has yet to be path with satisfactory expansion in in loanable funds” in the system has permitted for inclusion under bank’s resource mobilization and business surfaced again. Demand for credit capital. lending as well as profitability. Deposit has largely outpaced the growth in resources have increased by 17.6% resources. It is largely attributed to the HUMAN RESOURCE MANAGEMENT while lending growth has remained failure on the part of the government Due to opening of large number of at 18% thus maintaining the pace to spend, increased consumption branches by each bank, as well as along with the increment in resources. of the general public putting more aggressive operational movements Profitability has recorded positive pressure on outgo of funds by way of some banks during the period, growth with 32.7% over last year. The of imports, and huge surge in the the industry’s supply of manpower return on equity has improved to demand for credit generated in the situation has aggravated. The NPR 18.13 (previous year NPR 16.96 system, which again is attributed industry’s staff turnouts remain heavy. ) per share. The return on equity still towards the large number of branch We are not spared either. To cater to does not sound attractive. However, network spread out by the financial such a situation a vivid manpower a consideration has to be made to sector resulting in enhanced “reach to recruitment and training policy and the fact that the bank has increased finance” even at rural areas. practices have been put in place, its equity fourfold during last two which is working satisfactorily. The situation is perceived to last for a years, from NPR 2,000 million to DIVIDEND NPR 8,000 million at the behest of longer period simply due to lack of any foreseeable policy measures proposed This year, the bank has proposed Cash regulatory directives. A justified level dividend for the first time during last of business growth and profit has yet by the government to ensure appropriate amount of funds flow into 5 years at 11.5% amounting to NPR to be achieved to commensurate with 937 million. Hitherto the bank has the increased capital. Our best efforts the system. The banks, including us, would require remaining more vigilant been distributing “stock” dividend towards enhancement in business continuously since last three years volume in the coming years that would pursuing a more prudent practice in resource mobilization and lending. to support enhancement in requisite ensure proper return on shareholders’ capital. Since growth in banking capital will continue. CONVERSION INTO NFRS business has to be supported by Effective this fiscal year, Banks were proportionate increase in its capital, HARDENED ECONOMIC REALITY Nepal has turned into a federal instructed to prepare their financial a distinctive dividend policy will need governance structure. The most statements in NFRS standard. The consideration for future. positive aspect this year has been major departure in the existing and changed accounting policy has been APPRECIATION the completion of all three levels of The bank is moving forward with elections and formation of stable shifting of recognition of income from “cash basis” to “accrual basis”. great amount of confidence. The governments with comfortable vision “YOU & US … TOGETHER WE majorities at the central and provincial The resulting effect has an impact of cash outflow of nearly 40% of CAN BUILD” has been shared and houses of parliaments. Due to this practiced among us all. I am placing political stability a great amount such “accrued income” in the form of payment of “staff bonus” and “income on record my sincere appreciation to of confidence level in the minds all stakeholders for their contributions of general public has arisen giving tax” on the revenue which is yet to be realized! Also, banks were also taxed in building this bank more vibrant and high hopes in business/economic stronger. prospects. Yet the delay in formalizing on the “assumed accrued profit” on the mechanism in the operations of “restructured profit” of previous years Thank You, federal structure has cast doubts arising on account of conversion of about its successful transformation the financial statements into NFRS. Ratna Raj Bajracharya soon. The upfront cost has occurred and hit CEO

ANNUAL REPORT | 2017-18 33 Mr. Apachh Kumar Yadav, DGM

Mr. Ratna Raj Bajracharya, CHIEF EXECUTIVE OFFICER

MANAGEMENT TEAM

34 SUNRISE BANK LIMITED FROM LEFT TO RIGHT: Mr. Sarbendra Mishra, Mr. Robin Nepal, Mr. Apachh Kumar Yadav, DGM; AGM/CFO DGM Mr. Ratna Raj Bajracharya, CHIEF EXECUTIVE OFFICER; Mr. Sarbendra Mishra, AGM/CFO; Ms. Asha Rana Adhikary, SENIOR DGM; Mr. Robin Nepal, DGM

Ms. Asha Rana Adhikary, SENIOR DGM

ANNUAL REPORT | 2017-18 35 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

The Bio of Management

Mr. Ratna Raj Bajracharya Ms. Asha Rana Adhikary CHIEF EXECUTIVE OFFICER SENIOR DGM

Mr. Ratna Raj Bajracharya joined Ms. Asha Rana Adhikary Ms. Adhikary is a Gold Medalist, Sunrise Bank Ltd. as Chief possesses more than 30 years First Class First in MBA and Executive Officer in May 2015. Just of banking experience. She was a recipient of the Mahendra before joining the Bank, he had started as an Accounting Bidya Bhushan Gold Medal been working as Chief Executive Assistant at Stanford University, and Nepal Bank Limited Sardar Officer of Global IME Bank Ltd., California, USA in the year 1985 Gunjamansingh Gold Medal. another Class“A”commercial bank, and subsequently as a Joint She also secured First position where he worked for 4 years. He Account Officer at Rastriya among the girl candidates in also successfully completed his Banijya Bank Ltd., Nepal from Nepal in the Certificate Level - tenure as Chief Executive Officer 1988 to 1993. During this period, Intermediate and had received in yet another Class“A”commercial she also worked with ERNST the Aishwarya Bidya Padak. She bank of the country, namely, Nepal and YOUNG in 1990 under was awarded with King Birendra- Credit and Commerce Bank Ltd. the aegis of Commercial Bank Aishwarya Scholarship for He worked at Nepal Bank Ltd., a Problem Analysis and Strategy pursuing Bachelor in Commerce government-private sector joint Study (CBPASS) and with studies. venture bank and the oldest bank BOOZlALLEN & HAMILTON in of Nepal, under management 1992. Later, she worked fromthe contract, as the Chief Financial position of Senior Officer to Officer. He began his career with Senior Manager at Himalayan Nepal Rastra Bank, the central Bank Ltd. from December 1993 bank of Nepal, where he spent to September 2007 before 20 years in different capacities. starting her career at Sunrise Mr. Bajracharya has experience of Bank Limited as Assistant over 40 years in the banking and General Manager. the financial sector. Ms. Adhikary has attended A senior Chartered Accountant, several professional training Mr. Bajracharya has served as the programs and has also imparted president of Association of the several trainings. She had Chartered Accountants of Nepal, attended‘Program for Cross president of Institute of Chartered Cultural Management (PCCM) Accountants of Nepal, director of in Tokyo, Japan conducted by Securities Board of Nepal, etc. AOTS, Japan in 2004. She had also attended Bank Management Course (BMC) in Stockholm, Sweden in 1991, including its Follow-up Asia Program in the Philippines in 1999.

36 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Mr. Apachh Kumar Yadav Mr. Robin Nepal Mr. Sarbendra Mishra DGM DGM AGM/CFO

Mr. Apachh Kumar Yadav served Mr. Robin Nepal started his Mr. Sarbendra Mishra is Sunrise Bank Ltd. since July 2015. career with Sunrise Bank a seasoned professional He also served as an Assistant Ltd. in November 2009 as with more than 23 years of General Manager at Machhapuchhre a Chief Manager. He also banking/finance experience. Bank Ltd., Deputy Manager at served as a Deputy Manager; He started his banking Nepal SBI Bank Ltd. and Deputy Head-Risk Management career at Nabil Bank in the Chief Credit Officer at Nepal Bank Department at Himalayan 1990s and worked there Ltd. Mr. Yadav was a Member Bank Ltd. Mr. Nepal has for about 15 years in core of ICC Management Team for banking experience of about operation, trade finance, the restructuring of Nepal Bank 2 decades and has served credit cards, corporate credit Ltd. under the Financial Sector various senior management and treasury. He joined Technical Assistance Project. He roles in corporate lending Sunrise Bank in 2007, and also served as an Accounting and risk management. He in 2010 moved to Civil Bank Consultant for "The Private Sector started his banking career at as Chief Operating Officer. Support Program"- A World Nepal Grindlays Bank Ltd., He has also undertaken Bank Project. He also served as a now Standard Chartered various leadership roles. He Group Coordinator for the Special Bank Nepal Ltd. He holds a has rejoined Sunrise Bank Audit & Accounts Reconstruction Masters degree in Business as AGM/CFO. He is a former Work in "Rastriya Banijya Bank Administration. member of the Society Account Reconstruction Project". ofTechnical Analysts, London; He was also Business Process & and the Canadian Securities Mr. Nepal has attended various Portfolio Management Specialist in Institute. He is an active professional trainings inside Agricultural Development Bank Ltd. member of the Association and outside the country. for Finance Professional He obtained training on (AFP), Bethesda, Maryland, A Chartered Accountant, Mr. Yadav Integrated Risk Management USA. He holds first class secured third position in Bachelors from B.D.P. Consultants, Pune Master’s Degree in Business in Commerce, Tribhuvan University and Centralization of Trade with majors in Multinational and forth position in Intermediate Finance from Habib Bank, Corporate Finance. in Commerce, Tribhuvan University. Karachi. He attended seminar He has wide experience in audit in International banking, of commercial banks, finance Commerzbank Frankfurt; and companies, insurance companies, on Project Finance, Reserve hotels and manufacturing Bank of India, among others. companies.

ANNUAL REPORT | 2017-18 37 DEPARTMENT HEADS

STANDING FROM LEFT TO RIGHT: Mr. Pritam Lal Shrestha, Mr. Prakash Paudel, Mr. Praveen Acharya, Ms. Pragya Adhikari, Mr. Anup Koirala, Mr. Rajendra Pd. Timsina, Mr. Deepak Raj Joshi, Mr. Ishwar K Pathak

SITTING FROM LEFT TO RIGHT: Ms. Nikky Basnet, Mr. Ganesh Regmi, Ms. Kanchan Joshi, Ms. Rabina Acharya

38 SUNRISE BANK LIMITED STANDING FROM LEFT TO RIGHT: Mr. Abinash Prabhakar, Mr. Hari Prasad Acharya, Ms. Pooja Pradhan, Mr. Rajesh Kumar Manandhar, Mr. Dipen Man Singh Pradhan, Mr. Bibek Risal, Mr. Bishnu Pd. Upreti, Mr. Suman Thapa

SITTING FROM LEFT TO RIGHT: Mr. Keshab Prasad Subedi, Ms. Prabhavati Bista, Mr. Rajendra Pd. Joshi, Ms. Sandhya Atri, Mr. Dileep Mainali, Mr. Vijay Krishna Shrestha

ANNUAL REPORT | 2017-18 39 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

Corporate Governance

The corporate governance standards are Alongside the efforts to strengthen high. The Bank operates in a very highly corporate governance, the Bank also has in regulated environment locally, and also place a strong automated system to prevent globally, and is committed to abide by money laundering and terrorist financing. the international rules and regulations The AML/CFT system assists in tracking and such as Basel Accord, UCPDC, URDG, controlling unusual/suspicious transactions FATF Guidelines, requirements of our and reporting the same to regulatory correspondents, among others. Sunrise bodies. The Bank also has a data update/ Bank has been strictly following the purification unit which updates KYC of policies, guidelines and directives issued customers in the CBS. Further, SrBL has in by regulators. It also has in place its own place automated SWIFT sanction screening standards for compliance as well as those for monitoring cross border fund transfers of international correspondent banks. The through SWIFT. This is a fully technology- Bank monitors and controls compliance driven platform involving cloud computing. requirements on a daily basis using state of art banking and AML software. The Bank has a strong and independent system of Risk Management, with a The Board of Directors provides overall policy guidance and oversight to the Bank's Chief Risk Officer and a separate and operations, aided by Board-level committees independent Risk Management Division formed as per the regulatory as well as to look after integrated risks. the bank's own requirements. The Board and Board-level committee meetings are convened as and when required and within the regulatory norms.

40 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

BUSINESS ETHICS has a personal goal to meet. It also carries out AND COMPLIANCE surprise checks in different departments and branches to ensure compliance and smooth Sunrise Bank adheres to the highest banking operations. standards when it comes to doing business. It has a policy of zero tolerance for non-compliance to the values of corporate governance. It deals The Bank has zero tolerance to non-compliance with all customers equally and fairly, and provides and compromises made in the course of doing equal opportunities of employment to people business. This policy has been put in place to from all social groups, particularly women. ensure that the services provided are of the highest quality.

BOARD STRUCTURE The Bank has eight directors in the Board that SHAREHOLDERS INFORMATION will be reduced to seven from 13 January 2019. The promoters of the Bank hold 51.1% of Currently, the Board has one independent the shares and public shareholders own the Director and 50% each of the remaining directors remaining 48.9% shares of the company. The come from the promoter and public groups. The company is listed in the Nepal Stock Exchange promoter and public directors are appointed under the symbol SrBL. The average share price for a term of four years through election held for the past year was NPR 562 and the earning during the Annual General Meeting whereas the per share last year was NPR 16.76. independent director is appointed by the Board for a term of four years. The Annual General Meeting for this year is scheduled on 13th EMPLOYEES January 2019. Employees are treated as the human capital and the Bank understands that only satisfied employees can increase productivity. The staffs STAKEHOLDER'S RELATIONSHIP are provided an environment where they can The Bank prioritizes the management of continue learning with support from the Bank, stakeholder relationship. It treats both in some cases, and also provides continuous shareholders and customers fairly and equitably in-house training and capacity enhancement while maintaining cordial relationship with opportunities. regulators. The Bank has a subsidiary company called Sunrise Capital Ltd., which is also the Sunrise Bank had 956 staff members in July Share Registrar and Transfer Agent of the 2017. The staffing at Sunrise Bank comprises Bank. The Bank has an excellent mechanism of permanent employees, those on probation, for collection and resolution of customer and contractual employees and also associates shareholder grievances. performing outsourced functions. All staff members have been exposed to one training or another for ensuring common understanding of INTERNAL CONTROL values, in additional to instructions on specialized All Banks in Nepal are required to know their skills needed for specific jobs. During the last employees and maintain updated information on 11 years, Sunrise Bank has grown to more than them. Sunrise Bank has a Know Your Employees 1,159 staffs as on mid July 2018 across its 103 (KYE) policy that is updated with information branches. The Bank has plans to add another 20 of staffs and their families. Staff declarations branches as it takes its services deeper in areas and disclosures on their professional & personal unreached by commercial banks. The penetration life and assets are updated annually. Knowing of the Bank in small urban and semi urban areas people working at the Bank and their aspirations is also key to resource mobilization. can allow management to support them, where needed, to ensure that it remains a tightly The Bank also has a policy of rewarding high- knit family. The Bank has a system of annual performing staffs, and sanctioning those who performance evaluations to ensure that everyone compromise ethics and corporate values.

ANNUAL REPORT | 2017-18 41 RISK REVIEW

Risk review and mitigation is a top priority at Sunrise Bank. A committee of Directors is responsible for continuously assessing different risks faced in banking to ensure that they are restrained at manageable levels.

42 SUNRISE BANK LIMITED ANNUAL REPORT | 2017-18 43 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

Board Level Committee

The Board comprises of a Chairman, three AUDIT COMMITTEE directors from among promoters, three public directors and one professional The Board of Directors has established an director representing the promoter and Audit Committee under a non-executive public shareholders as per the provision of Director. This committee reviews the Company Act, 2063. Bank’s financial condition, its internal controls, and audit program, and issues The Board represents and protects the necessary guidelines to management rights of members/investors. It interacts with after detailed discussion of the findings of the CEO periodically where the directors the internal audit. The external as well as assess the overall direction and strategy internal auditors have direct access to this of the Bank for establishing policy based Committee. The Board of Directors regularly governance systems, and for ensuring that discusses the reports of the auditors and the corporate governance standards prescribed Committee. As per the policy and practice, by the regulatory authorities are met. The the Chief Executive has not been included as CEO ensures that the daily banking activities the member of the Audit Committee. are carried in compliance with applicable laws, directions of regulatory bodies and The composition of the committee is as principles of corporate governance. follows:

As per the provision of Nepal Rastra NAME DESIGNATION Bank, there are four board level standing committees in the Bank, viz.; The Audit Dr. Deepak Prasad Bhattarai Coordinator Committee, The Risk Management Dr. Bhogendra Guragain Member Committee, The Employee Compensation Mr. Malchand Dugar Member and Benefit Committee, and the Money Laundering Prevention Committee. They S.A.R Associates, Internal Auditor Member

are headed by one of the non-executive Mr. Ishwar K Pathak Member directors and includes non-executive Secretary/ CRO directors and senior officials of the Bank. Apart from these, the Bank may also have other ad-hoc board level committees, formed as a special purpose vehicle, with task-specific deadlines.

44 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

ANNUAL REPORT | 2017-18 45 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

RISK MANAGEMENT EMPLOYEE COMPENSATION COMMITTEE AND BENEFIT COMMITTEE (ECBC) The Risk Management Committee aims to assist the Board of Directors in its The ECBC was formed in order to develop responsibility to oversee the adequacy of and look after the compensation and the risk management process & framework. amenities of, and policies related to, the The Committee works to make sure that the employees of the Bank. The committee Bank possesses efficient and effective risk is involved in forming the overall human management system that covers all types resources strategy aligned with the business of risks. In addition, the Committee is also strategy of the Bank. responsible for setting, assessing, reducing, monitoring and reporting risk levels for the The composition of the ECBC is as follows: attention of the Board of Directors.

NAME DESIGNATION The composition of the committee is as Er. Bachh Raj Tater, Director Coordinator follows: Mr. Ratna Raj Bajracharya, CEO Member

Mr. Sarbendra Mishra, AGM Member/AGM NAME DESIGNATION Ms. Prabhavati Bista, Member Dr. Bhogendra Guragain Coordinator Head - Human Resources Dept. Secretary

Dr. Deepak P. Bhattarai Member

Mr. Apachh K. Yadav Member /DGM

Mr. Robin K. Nepal, DGM Member/DGM

Mr. Ishwar K Pathak Member Secretary/ CRO

46 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Risk Management Committee

THE BANK’S Risk Management Committee of Risk Appetite, ensures that SrBL maintains (RMC) was formed to assist the Board of an appropriate level and quality of capital Directors in overseeing the risk management and liquidity in line with the risks inherent in process at the appropriate level. The its activities, and oversees the identification, Committee was established to make sure management, monitoring and reporting that bank possesses efficient and effective of risks inherent in SrBL operations. Such risk management plans covering all types oversight includes, but is not limited to, the of risks. In addition, the Committee is also points discussed below: responsible for setting, assessing, reducing, monitoring and reporting risk levels for the n To update and advise the Board on attention of the Board of Directors. adequacy and effectiveness of existing risk identification, assessment, control, RMC monitors and provides mitigation and management system recommendations to the Board on the and further improvement of the risk SrBL business risk strategy, monitors the management framework. alignment of SrBL risk profile with risk appetite as defined in the Board Statement n To advise the Board following regular review and monitoring of risk level in business activities, risk tolerance limit; risk mitigation, management and development of strategies, policy and procedures for maintaining prudent level of risk management.

n To discuss and advise the Board regularly after obtaining risk management reports from management and reviewing the risk assessment, measurement, mitigation and monitoring processes.

n To notify and advise the Board on capital adequacy based on risk weighted assets, ICAAP; adequacy of policies & procedures, and risk tolerance limit for supporting business risk strategies under risk management framework.

n To advise the Board on risk management issues following NRB Directives and Guidelines and setting internal limits and maintaining of necessary risk management framework.

ANNUAL REPORT | 2017-18 47 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

n To regularly review and discuss stress The composition of the SRBL risk testing results, and advise the Board management committee in 2018 was follows: on the effect and requirement of future changes, and developments of policies NAME DESIGNATION and framework. Dr. Bhogendra K. Guragain Coordinator n To review of limits/authorities delegated Dr. Deepak P. Bhattarai Member by Board and reasonableness thereof for proper use and further assessment Mr. Apachh K. Yadav Member/DGM

for future changes and amendments as Mr. Robin K. Nepal Member/DGM required. Mr. Ishwar K. Pathak Member Secretary/ CRO n To report to the Board quarterly following assessment and review of ALCO decisions and determination of asset composition, During 2017/18, the committee held six asset placement, income generation meetings and NRs. 76,500/- (after deduction capacity and position of asset quality of TDS) was paid as fee to the director upgrade or decline. members of the committee. n To regularly update the Board on overall economic situation and developments. Monitor changes anticipated for the economic and business environment, including consideration of emerging trends and other factors considered relevant to SrBL’s risk profile and risk appetite, and to report on mitigation of effects of anticipated changes on financial position of the Bank. n To review and update the Charter at least annually and recommend changes to the Board for approval. n To ensure that the Bank has a strong management information system relating to reporting. n To recommend to the Board on any other matters related to risk management to the extent RMC considers necessary.

RMC membership and coordinator is determined from time to time by the Board. RMC consists of a minimum of four and a maximum of five members. A non-Executive Director is appointed as Coordinator of the committee. The Audit Committee Coordinator is an ex-Officio member, along with the head of the Operation Division. The Chief Risk Officer is the member secretary.

48 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Risk Management and Control Environment

THE BANK aims to ensure informed The major strategy of the Bank’s Risk decision-making and strong risk awareness Management function are: throughout the organization. Over the n Application of transparent, responsible, last few years, it has invested heavily in accountable, independent risk analysis developing a comprehensive and robust system, both in operations and business risk management infrastructure. This functions includes credit, market and operational risk identification processes; risk measurement n Strengthen risk management systems, models and rating systems; and a strong and business processes to monitor and control these risks. n Efficient compliance addressing mechanisms. As an independent risk-assessing unit under the regular supervision and guidance The Bank uses several measures for of Chief Risk Officer (CRO), the Risk minimizing and managing risks, which are Management Department (RMD) focusses discussed below: on assessing, monitoring and minimizing different types of risks that are identified. STRATEGIC RISK RMD works to ensure management as Effective management of strategic risk envisaged in the Risk Management Policy requires the Bank to establish prudent Guidelines as well as in the Directives of policies, procedures and limits approved by the NRB. It works to ensure that the Bank the Board to ensure objective evaluation takes well-calculated business risks while and responsiveness to the Bank’s business safeguarding it capital, financial resources environment. and profitability. The major objective of RMD is to minimize the negative impact of the The Bank has formulated and approved a occurrence of any risk event. five-year strategic plan to define its direction, and to guide decision making on allocating The major objectives of the Bank’s risk resources to pursue the defined strategy. management function are: Further, the strategic plan is continuously n Monitoring of the Risk Management monitored and evaluated against actual Policy framework and managing risks results. including Credit risk, Operation risk, Market risk and other risks. CREDIT RISK Credit risk is the likelihood that a borrower n Driving the Bank towards maintaining or financial instrument issuer is unwilling or good standards of corporate governance unable to pay interest or repay the principal in line with the statutes and regulations according to the terms specified in a credit set by the regulatory bodies. agreement that could result in economic loss to the Bank. n Regular up-grading of Internal Risk Grading system to make it more effective and efficient.

ANNUAL REPORT | 2017-18 49 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

Exposure to credit risk arises from a wide The Bank has in place Assets Liability range of customers and product types, and Management (ALM) Policy, and Assets the risk grading systems in place to measure Liabilities Management Committee (ALCO) and monitor these risks are correspondingly that monitor risks arising from changes in diverse. Senior management receives a variety interest rates. ALCO ascertains appropriate of reports on credit risk exposures including interest rates on deposits and premiums on loan impairments, total exposures and Risk loan products. Weighted Assests (RWAs), as well as updates on specific portfolios that are considered to FOREIGN EXCHANGE RATE RISK have heightened credit risk. Foreign exchange rate risk is the potential impact of adverse currency rate movements The Bank adopts different methodologies for on earnings and economic value. This involves assessing credit risk involved in the exposure to settlement risk, which arises when the Bank individual borrowers or counterparties as well incurs financial loss due to foreign exchange as at the portfolio level. The Bank maintains an positions taken in both the trading and banking Internal Risk Grading System (IRGS) for its loan books. and advances underlying the credit quality. In line with the capital framework prescribed Further, review of credit by RMD is based on by NRB, the bank focuses on foreign exchange group exposure of the customer. Individual rate risk management for managing / credit files with group exposure of more than computing the capital charge on market risk. NPR 30 million are routed through RMD during The Treasury Middle Office (TMO) performs the approval process. Portfolios of loans that the risk review function in relation to foreign do not require routing through RMD during exchange risk. The TMO regularly reconciles approval are reviewed by RMD on a quarterly positions of traders to ensure that these are basis. within assigned limits.

LIQUIDITY AND FUNDING RISK Foreign Exchange Risks are discussed at Liquidity and funding risk is the potential ALCO meetings and also at the division level for loss to the Bank arising from either its on open position on daily basis. The limits for inability to meet obligations as they fall due or open position are controlled, level wise which to fund increases in assets without incurring ensures in-depth knowledge of the market and unacceptable cost or losses. movement before taking decisions.

The Bank has an effective liquidity risk MARKET (PRICE) RISK management system for analyzing on and Market (Price) risk is the risk that a Bank may off-balance sheet positions to forecast future experience loss due to unfavorable movements cash flows for ascertaining how the funding in market prices. It arises from the volatility requirements would be met. The Bank’s of positions taken in the four fundamental liquidity risk management involves systems economic markets: to identify, measure, monitor and control its n Interest-sensitive debt securities, liquidity exposures. n Equities, n Currencies, and INTEREST RATE RISK n Commodities. Interest rate risk is the exposure of the Bank's financial condition to adverse movements in The volatility of each of these markets exposes interest rates. Accepting this risk is a normal the Bank to fluctuations in the price or value part of banking and can be an important of on and off-balance sheet marketable source of profitability and shareholder value. financial instruments. Changes in the prices However, excessive interest rate risk taking can of equity instruments, commodities and other pose significant threats to a bank's earnings instruments create a price risk and the potential and capital base. for loss arising from the process of revaluing equity or investment positions.

50 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

The Bank has mechanisms for COMPLIANCE RISK investment and disinvestment Compliance risk is the risk of of equities in accordance with legal or regulatory sanctions; the changing circumstances and material financial loss or damage business requirements in the to reputation that a Bank may SrBL Investment Policy, 2014. suffer as a result of failure to comply with laws, regulations, OPERATIONAL RISK rules, regulator’s directives, Operational risk is the risk of self-regulatory organization’s loss resulting from inadequate standards and applicable codes internal processes, people and of conduct. systems and external events. Globalization, together with Compliance risk management increased financial innovation, not only deals with compliance is making the activities of banks with regulatory requirements and thus their risk profile more but also with the Bank’s self- complex. These developments regulatory standards and have made operational risk more code of conduct. The Bank pronounced. has a separate compliance department that identifies The Bank has an independent the compliance requirements operational risk management and submits optimized function under the RMD that is responses. This department responsible for identification, aims to provide assurance of assessment and mitigation compliance with internal and of material operational risks. external requirements to the This function is primarily management and ensures responsible for implementation adequate measures to manage/ of operational risk management mitigate compliance risk. It also framework across the Bank. provides governance advisory service to the management thereby establishing a zero n AML/CFT Compliance Risk tolerance culture in the Bank. There is growing sensitivity about money laundering and terrorism financing. As a REPUTATION RISK result there is a need to focus Reputation risk is the potential on these areas where related that negative publicity regarding risks are relatively high in the Bank's business practices, order to allocate resources in which can cause a decline the most effective ways. in the customer base, costly Accordingly, the Bank has litigation, or revenue reductions. separate units for compliance Reputation risk management is of AML/CFT regulations. handled on an on-going basis. The division is headed by senior officer with adequate The Bank has developed a access to the daily report, reputation data base and operational processes and identifies key controls and has the right to recommend tracking reports through the changes in the system suggestion boxes maintained and procedures. at its branches, and information officer.

ANNUAL REPORT | 2017-18 51 CORPORATE SOCIAL RESPONSIBILITY

Sunrise Bank is a good corporate citizen and believes in contributing towards overall development of the society it serves. It has given back to society at every opportunity and will continue this partnership for change.

52 SUNRISE BANK LIMITED ANNUAL REPORT | 2017-18 53 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

Corporate Social Responsibility

The Bank's social responsibility initiatives The Bank's CSR activities have also supported are win-win engagements that not only children residing at Veerayatan Nepal, Sanepa -- an orphanage. It has supported the appeal to socially conscious consumers organization by sponsoring the education, food and employees but also make an impact and overall development of the children for a on the lives of ordinary people. year.

Blood donation initiatives are organized by The Bank has provided financial support branches in areas where there are shortages. to "Teach for Nepal Fellowship" in order to Other CSR measures include providing canes support formal education of children in rural to support the visually impaired and other areas. This support can enable children from support systems; Walkathon, Bagmati Sarsafai, areas with government schools to get an and plantation of fruit trees under a Central education that prepares them to compete with Bank notice that requires one employee to children from other parts of Nepal. plant one fruit tree. Another on going activity at the Bank that The Bank's Narianapur branch provided engages people are public meetings (mass- financial support to the flood victims for melas) organized to explain the benefits of procuring tents and plastic sheets. banking, and to also pass on information about its unique products and services. The Bank installed CCTV and solar lights at Shree Shristi Kanta Lokeshwor Karuna Another Bank scheme, "Sunrise Surakshit Ghar Maya Temple, Bhaktapur Nala. The Bank has Karja", supports the insurance of home loan provided scholarships to nine students at clients, where the insurance company pays off different schools. the assured loan amount in case of the death of the borrower. This scheme not only provides Another CSR initiative was a Walkathon protection to the borrower throughout the loan organized in coordination with Nepal Cancer tenure but also assures a capital return upon Survivors Society (NCSS). The purpose was maturity of the loan. to make people aware of cancer. Another activity included financial support to a Shelter Finally, the Bank's branches in different parts of Ashraya Nepal (SAN) that works to support Nepal organize orientation sessions on financial street children to help them lead dignified lives. literacy, basic accounting and tax policy for With the Bank's support SAN provides street existing and prospective SME clients. Such children basic amenities, education and food; orientations assist participants in compliance it also uses the fund to organize various skills with government policies while running their development trainings. businesses.

Another CSR initiative of the bank was During the year, the Bank carried out 40 providing a skin grafting machine (Dermatome) financial literacy programs through its for the Burns Ward of Kanti Children’s Hospital. branches across the country.

54 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

CORPORATE CSR BUSINESS ETHICS POLICIES

Trust and integrity are two foundations on Sunrise Bank is a good social citizen and which most banks are built. A high level of is very clear on its obligations to society. trust can develop when customers perceive The Bank promises to do what is right, to that a company is exhibiting unwavering take a long-term view and support clients, commitment to ethical business practices. customers, and the communities in areas This trust is essential for people to entrust a where it operates. The Bank has always Bank with their savings. Sunrise Bank if fully worked with and upheld fundamental values committed to run the company responsibly such as honesty and sincerity for creating a and to serve the long-term interests of sustainable and valuable business that not customers, employees and communities it only enables it to benefit while providing serves. services, but also creates opportunities for it to contribute towards the social and The Bank has a transparent set of economic development of the country. rules, practices and processes that keep The Bank's corporate social responsibility the best interests of the customers (CSR) activities are primarily aimed at as guiding principle. The Bank is working in collaboration with customers, responsive and accountable for its shareholders, investors and employees actions. It has made equitable and to engage in activities that can benefit communities. The range of activities it has inclusive growth values to aspire for, supported under CSR include environmental abides by law, and is committed to protection, conservation of Nepali culture, upholding rule of law. These are values arts and history; supporting educational and that drive corporate governance at health related activities among people from underprivileged groups, providing financial Sunrise Bank. and material support to differently-abled people, and other activities that allow it to These principles of corporate governance engage with communities. provide the Bank the framework within which it seeks to attain its objectives. The values guide every sphere of management, The CSR activities are founded on the from action plans and internal control notion that helping to build strong measures to performance measurement and communities can also help the Bank corporate disclosures. These governance to become stronger. This is motivated guideposts guide the Bank in setting and pursuing objectives in the context of the by the belief that 'we are what our social, regulatory and market environment. community is' and that it is also our High standards and adherence to the rules collective future. In addition to this, has assisted the Bank to weather crises and the Bank’s CSR policies are also in reduce the possibility of fraud and scandals. It is this trust in the market that has made accordance with provisions defined in the Sunrise brand a strong player in Nepal's the central bank’s circular dealing with highly competitive banking and financial CSR. sector.

ANNUAL REPORT | 2017-18 55 1 2

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56 SUNRISE BANK LIMITED 3 4 SUNRISE CSR ACTIVITIES

1. Bank provided Dermatome machine (Skin Grafting machine) to the Burn ward of Kanti Children Hospital.

2. Handing over flood relief fund amounting NPR 15 lakh to Image Channel

3. Walkathon-Cancer Awareness Program for Nepal Cancer Survivors Society ( NCSS)

4. Handing over various kitchen utensils, warm clothes to infants and toddlers, bed sheets with pillow case and food items to the children of Bal Mandir

5. Sunrise Bank has sponsored a Fellow of Teach For Nepal amounting to NPR 500,000 which covers the cost of recruitment, pre-service training, on-going support and leadership workshop and stipend.

6. Finacial support to Veerayatan Nepal and it’s noble undertaking by sponsoring in education, food 6 and overall development of the children residing in the organization’s shelter in Sanepa for a year.

7. Scholarship to 9 students for 10 years

8. Blood Donation Program during bank's 10th years anniversary 9

9. Sunrise Bank had installed CCTV and solar lights at Shree Shristi Kanta Lokeshwor Karuna Maya Temple, Bhaktapur Nala

8

ANNUAL REPORT | 2017-18 57 HUMAN RESOURCE MANAGEMENT

Sunrise Bank believes in the abilities of the women and men of Nepal to help attain its goals. This is the philosophy behind the continuous learning opportunities it offers to staff in the organization.

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Human Resource Overview

Any organization is as good as the To ensure this Sunrise Bank defines the people that work there. A professionally roles and responsibilities of staffs and managed experienced workforce is critical management and provides employees an to the success of any enterprise. Sunrise environment where they can be innovative, Bank's most valuable assets are its human and perform at the level needed to beat the resources, the operational leadership teams competition. at the corporate, divisional and branch levels, and its core management. The Bank has Despite efforts, it is clear that human excellent mix of banking professionals who have become the part of the Sunrise family. resource management will remain a challenge at the Bank given the intense Sunrise Bank began operations with 130 competition in the sector. To offset the employees and now has a staff body of 1159 impact of staff shortages, the Bank in the last 11 years it has been in business. has begun investing in Information It has also grown from 6 to 103 branches across 7 provinces of the country. Technology to stream line workflows, and to attain a level of automation and Staff turnover is a major issue in Nepal's digitalization of processes and functions banking sector but Sunrise Bank has 164 to match that expected from a 21st Total Number managed to ensure that its core team Of Trainings remains intact through sound human century bank. resources interventions such as employee capacity development opportunities and rewards and sanctions based on performance appraisals. 3,189 Total The development of staff capacity to ensure Beneficieries continued growth in business is the focus of the Bank's human resources strategy. It aims to attain this goal by maintaining the right number of staff with the right skills in different business functions. Total Training, till Ashad End, 2075

TRAINING NUMBER OF TRAINING TOTAL PARTICIPANT The main focus of human resource managers is to retain a team of high performing, skilled Internal 76 2,846 and motivated staff committed to attain External 75 315 organizational growth in accordance with International 13 28 the overall mission and objective of the Bank. Total 164 3,189

60 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Total Number of Staffs CONTRIBUTION TOWARDS HR (Till Ashad End 2075): 1159 The HR Department understands the value of capable human resources and organizes capacity building interventions as part of 101 its 5-year human resources development Outsourcing 865 21 strategy. Permanent Contract 172 Probation The activities include standardizing procedures for selecting staff who could be high performers in the industry, and to provide them opportunities to develop within the organization. Its activities are guided by the following:

n Standardize procedures for selecting potential high performers in the industry and provide them opportunity to develop within the organization. n Maintain good employee relationship and instill a sense of belongingness in the institution. n Ensure equitable and market-based compensation packages. n Provide career development opportunities, and n Support in-house capacity development through training, transfer opportunities from operations to business areas and vice-versa.

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HR Policies

Human resources define and future leaders. This not only provides shape the future of the Bank and growth opportunity for employees but also serves as a foundation for the this is possible with well-defined wellbeing of the Bank. objectives and vision for managing the workforce. The human resource QUALITY WORK LIFE management policies include, The human resources department works to ensure the safety, health and welfare of our employees. The main TRAINING AND DEVELOPMENT goal is to foster a safe and healthy Continuous training and staff work environment. The Bank complies development is an important for with the local law and has measures to effectively managing competent human take reasonable care about the health resources. Human resource management and safety of employees. Staff medical at Sunrise Bank includes learning and accidental cost are covered under processes in-house, external or overseas. employee insurance schemes. The Bank These training programs contribute also encourages work-life balance with towards sharpening skills, introducing appropriate working hours and leave/ new concepts, and changing attitudes vacation policies. in addition to gaining knowledge to enhance overall staff performance. GRIEVANCE HANDLING A recent initiative for handling PERFORMANCE APPRAISAL grievances includes a formal process to Performance of each individual address each grievance with personal staff member contributes to overall visit to the employee by members of performance of the Bank. Therefore, the the Grievance Cell for fact-finding. Bank assesses the performance of each Timely management of grievances has employee individually or as a team. helped in ensuring sound relationships among employees and a better work TRANSFERS/ASSIGNMENT environment. Human resource development is also possible through acquiring knowledge by undergoing job rotations, transfers KNOW YOUR and assignment in various functions EMPLOYEE INITIATIVES Considering the risks in banking, of the Bank. Regular transfers of staff the Bank has put in place a Know also contribute towards enhancing Your Employee process that involves competence. documenting information on all employees. While this has helped SUCCESSION PLANNING the Bank to know its employees at The Bank supports succession planning a personal level it has also helped to for employees with demonstrated control staff-related risks in banking. potential and grooms them to become

62 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

ANNUAL REPORT | 2017-18 63 PRODUCTS & SERVICES

Innovation drives the design and delivery of bespoke products at Sunrise Bank. Ease of access to banking services, supported by strong back-end infrastructure, is the foundation for its services.

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Sunrise Swasthya Yojana

Sunrise Bank Limited has developed B. ACCIDENTAL/DEATH a “Health Insurance Facility” and INSURANCE FACILITY: 108 “Accidental/Death Insurance Facility” The accidental insurance facility is an TOTAL TIED UP which can be availed by every saving attempt to incorporate the possible risk PRIVATE HOSPITALS account holder. of accidental death and/or permanent disability of the account holder. The 232 A. SUNRISE HEALTH future is uncertain, so the prime objective of this facility is to cover the TOTAL INSURANCE FACILITY: BENEFICIARIES Health insurance facility is designed to possible expenses/risks born by family TILL DATE facilitate the saving account holders to members of account holder during avail the medical treatment with ease, accidental death and/or permanent and assists them to recover their health disability. expenses. i. Eligibility: i. Eligible Customer: All natural person with a saving deposit n All saving Deposit Account holders at the bank are eligible for this facility n The facility is limited to the saving ii. Benefit to customer: deposit holder as an individual. The Insurance coverage is limited to four insurance coverage does not cover times the balance on saving account any dependents. maintained on preceding day end of the n Treatment can be sought from both accident or NPR 500,000 whichever is government and private hospitals less. that are tied to the scheme. n The account holders are eligible for the facility from the day 1 of account opening.

ii. Benefit to customer: The health insurance facility extends up to 25% of weighted average deposit during the last 365 days of saving account or the bill amount whichever is lower, with a maximum limit of Rs. 100,000.

DISCOUNT IN TIE-UP HOSPITAL The account holders can avail discounts that have been agreed with partner hospitals using an identification as a Sunrise Bank account holder.

66 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

FAQ

1. WHAT IS SUNRISE HEALTH 5. WHAT IS THE MAXIMUM AMOUNT 11. HOW MANY DAYS DOES INSURANCE FACILITY? THAT CAN BE CLAIMED UNDER SRBL THE CUSTOMER NEED TO BE It is a unique facility that is linked HEALTH INSURANCE FACILITY? HOSPITALIZED TO CLAIM SRBL with all our saving accounts wherein NPR 100,000 HEALTH INSURANCE FACILITY? customers can benefit in two ways as Minimum of one night hospitalization below: is required. However, in case of 150 6. AFTER HOW MANY DAYS OF day care surgeries, the claim can be n Saving Account holders can claim ACCOUNT OPENING WILL THE done even if the account holder is not Health Insurance for up to 25% of CUSTOMER BE ELIGIBLE FOR THE hospitalized. weighted average deposit during FACILITY? last 365 days of saving deposit From the account opening date itself. or the bill amount whichever is 12. WHAT IS THE NUMBER OF lower, with a maximum limit of Rs. HOSPITAL THAT ARE TIED UP 7. IN CASE OF JOINT ACCOUNT, 1,00,000 only hospitalized case or WITH SUNRISE BANK LIMITED FOR CAN BOTH THE ACCOUNT 150 exclusion daycare treatments HEALTH INSURANCE FACILITY TILL HOLDERS CLAIM FOR SRBL HEALTH once in a year. DATE? INSURANCE FACILITY AT A TIME? n All customers can avail discount 100+ Hospitals No, only one of the account holders facilities ranging from 5% to 20% in can claim for Health Insurance per over 100 tied up hospitals country year, which will be on first come first 13. HOW LONG DOES THE BANK wide. serve basis. However, both are eligible TAKE TO REIMBURSE THE CLAIMED for the discount in the hospitals which AMOUNT? 2. WHAT ARE THE 4 SPECIAL are tied up with us. Not more than 7 working days. BENEFITS THAT SUNRISE BANK SAVING ACCOUNT HOLDER GETS? n Accidental Insurance up to 5 Lakhs 8. HOW MANY TIMES CAN AN 14. WHICH DAILY BALANCE IS TAKEN or 4 times of balance whichever is ACCOUNT HOLDER CLAIM FOR TO CALCULATE AVERAGE BALANCE lower. HEALTH INSURANCE FACILITY IN A FOR A YEAR? n Health Insurance up to 1 Lakhs or YEAR? Daily Closing Balance Hospital Bill or 25% of weighted Once a year average balance whichever is lower n 5% to 20% discount in more than 15. WITHIN HOW MANY DAYS AFTER 100 tied up hospitals. 9. WHICH COMPANY IS OUR DISCHARGE SHOULD A CUSTOMER n Maximum benefit up to 31%. INSURANCE PARTNER? CLAIM SRBL HEALTH INSURANCE? (Interest rate 6% and Health Shikhar Insurance Company Ltd 15 days Insurance 25%)

3. WHICH CUSTOMERS ARE ELIGIBLE 10. CAN A SAVING ACCOUNT 16. CAN FAMILY MEMBERS OF THE FOR SUNRISE HEALTH INSURANCE? HOLDER CLAIM SRBL HEALTH ACCOUNT HOLDER ENJOY SRBL All our saving account holders are INSURANCE IF TREATMENT IS HEALTH INSURANCE FACILITY? eligible to apply for Health Insurance DONE IN HOSPITALS OTHER THAN No, only the account holder can enjoy Claim. However, all our accountholders THOSE TIED UP WITH US OR SIKHAR the facility. Separate account needs can get discount from 5%-20% in over INSURANCE CO. LTD? to be opened in the name of family 100 hospitals tied up with Sunrise No, the treatment must be done in the members in order to be eligible for the Bank. hospitals tied up with us or Shikhar facility. Insurance Company Limited. However, claims of all Government Hospital Bills 4. ARE CURRENT HOLDERS ELIGIBLE of Nepal are eligible. FOR HEALTH INSURANCE CLAIM? No. Only saving account holders. However, current account holders are also eligible for the discount in the hospitals which are tied up with us.

ANNUAL REPORT | 2017-18 67 Our Saving Deposit Customers Receiving Insurance Amount Under Sunrise Swasthya Yojana

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Technology Driven

TECHNOLOGY is the driving force customer experiences. All multi-channel for innovation and banking. The use experiences on desktop, mobile, tablet of digital technologies in banking is and other devices are planned for growing exponentially with new uses integration into one multi-experience being developed at a fast pace. Sunrise platform. Digitization can improve Bank places technology at the heart customer engagement by making of banking, guided by a vision of a channels more interactive and easy to transformed society with cutting edge use for services like opening or closing technology to support the transition. an account, applying for loans, tracking The Bank has used technology both applications, fund transfer, paying bills, internally and externally by capitalizing enquiries, customer self services, etc. on the benefits of technological advancements. As the Bank has a vision of delighting customers by fulfilling diverse banking The Bank is "Rising to Serve" by requirements, it is in the process of defining new levels of customized revamping the overall technology platform to enhance efficiency, banking products and services to augment security and facilitate client cater the needs of customers, and capabilities. In retail baking, the Bank for creating the new markets in has launched online account opening banking. service and introduced new payment options. Some recent achievements in ICT use are discussed below. The Bank has been seeking digital transformation in order to maintain its competitiveness, efficiency and cost saving. The main goal is to provide customers more convenient and faster banking services through alternate delivery channels like ATM, point of sale (POS), online banking, mobile banking, social media, etc. Digital banking is the future and Sunrise Bank is in the process of rendering multichannel experiences to customers and staff through investments in IT for improving the integration of ICT in business processes and operations. The Bank is focusing on multi-channel approaches to marketing, selling, and serving customers in a way that creates an integrated and seamless

70 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

CORE BANKING SYSTEM implemented worldclass warehousing The Bank has upgraded the Core infrastructure in Htrunk and Hadoop's Banking Solutions (CBS) to Finacle big data environment. It is working 10 for first time in Nepal. CBS is the with a top class infrastructure backbone IT application that not provider and international partner to only maintains accounting and holds maintain effective and highly efficient customer data, but also facilitates data warehousing. different transaction requirements. Finacle 10 is a software that is top DISASTER RECOVERY (DR) ranked internationally and has highly The Bank has a robust disaster flexible infrastructure. It supports 24 recovery site. This ensures the hours banking and extends possibility continuous protection of Bank's of almost all types of channel data and customer information. It banking through its Application is maintained with all modern-day Program Interface (API) service. standards and located in a different With implementation of the CBS seismic zone. A complete business application, the Bank hopes to delight continuity plan exists to help confirm its customers with astonishing digital that the DR resources work perfectly banking experiences. when the need arises.

DATA CENTER CALL CENTER The Bank has hosted its core system The Bank has started its own call in a managed cloud environment. center service and has become This has helped to avoid any the 'Bank With Voice'. It is used for compromise on the standard of handling transactional interactions, the data center. This data center informational calls, and addressing has world-class certifications and more complex issues, including sales compliance requirements. The strong and purchase-related activities. infrastructure has high availability, This system aims to serve as a allows real time replications and is primary point for remote customer resilient to system failures. interactions. It also provides opportunities for cross-selling and The Bank has adopted the strategy of up-selling products. It is designed to outsourcing most of the technological help deliver a multichannel experience products with the motive of achieving to customers. The Bank believes that quick technology adoption and the call center service will be crucial security of information. in increasing customer satisfaction and improving overall customer DATA WAREHOUSING experience, and has received positive In last three years, the Bank has feedback on the service from undergone through a number of customers. strategic mergers and acquisitions. In addition, it has worked to adapt BUSINESS PROCESS AUTOMATION the robust CBS and migrated data The Bank has a definite roadmap to from different organizations into the move to a fully digitized environment. main CBS. With implementation of Apart from the application for new systems, the challenge is the delivery of services to customers, maintenance of the legacy system and it intends to run its operations in a protection of information assets. For fully digitized environment. Business achieving the availability of the data Process Automation is one of the in the legacy system, the Bank has top strategic moves of the Bank in

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which it evaluates the possibility of customers a bank-less banking converting all of its internal processes environment. It is equipped with to a digital environment. It has acquired enhanced security features and strong many applications including software authentication mechanisms that assure for human resource management, the protection of customer credentials, assets management, KYC and AML, passwords and information. document management, inventory management, conference video call, MISSED-CALL BANKING etc. While outsourcing is the principal The Bank has introduced a simple and strategy, the Bank has also developed innovative product called Missed Call an internal general workflow and Banking for the first time in the banking tracking system with intranet that industry in Nepal. This service allows has proved to be beneficial. It is also banking even without the internet. This considering implementing full-fledged has been of particular use to serve workflow management, loan processing customers in rural area who do not have system, performance management, and internet services and people who do other systems to realize full benefits of not possess smart phones or are not complete digitization. used to mobile banking. Missed-call banking services include a wide range Complete office automation and of services such as balance enquiry, mini paperless office are the targets of the statement, top-up facility and instant Bank. As achieving paperless processing help service. The Bank has a plan to add requires availability and sufficiency of other features on this platform. the technology, it has taken a gradual adaptation policy that will be completed over time.

DIGITAL CHANNEL-ENABLING OPERATIONS Customers expect uniform experience across all digital channels of interaction. The Bank is now in the process of streamlining the front end and back end of different platforms so that customers get the same experience across all delivery channels. It has also created a new customer experience layer (mobile first approach) on top of existing core systems. The digitalization strategy of the Bank can improve customer engagement by making the channels more interactive and easy to use for activities like opening or closing of account, applying for loan, tracking deals, fund transfer, paying bills, inquiry and transaction, managing standing instructions, etc.

INTERNET BANKING The Bank has implemented sophisticated international internet banking system that can offer

72 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

MOBILE BANKING CREDIT CARD Mobile is the present and future The Bank also has credit card of IT enabled platforms. It is services in addition to the existing close to the individual and has debit cards. This allows customers become indispensible, while its to do transactions even if they do capability has increased. The Bank not have a deposit balance in their has added number of features in accounts. its mobile banking applications. The payment channels have 3D SECURE ONLINE been increased including that TRANSACTION of electricity bills. Many other Bank has introduced the online features are also in the process of payment features on the VISA implementation. Recently, the Bank network. The customer can has implemented a new version of now enjoy the online shopping mobile banking (Bank Smart V5) experience and ecommerce that is capable of extending more transactions with 3D secure features to customers, including capability. more detailed information such as QR code based payments, self- NEW WEBSITE DEVELOPMENT registration, self-management, etc. Keeping in line with ongoing The Bank is also in the process improvement of the technology of making this platform more infrastructure, the Bank is currently informative and the features more developing a new website that will intensive. be more robust and interactive and will include advanced features for ATM TRANSACTIONS enhancing customer experiences. The Bank has a wide network of ATM terminals. It has also PAYMENT CHANNELS enhanced its ATM infrastructure for Augmenting the cash-free chip security and fraud deterrence transaction environment, the with EMV compliant cards, which Bank has implemented different is one of the requirements of the payment channels covering a wide Central Bank. The Bank has also range of areas and merchant sets. automated the ATM reconciliation Whereas, the Bank is the member process that has reduced manual of Nepal Clearing House Limited interventions in the reconciliation (NCHL) and has implemented its procedures. services for online inter-banking payment system, it is also keen on CARD SYSTEM collaborating with other payment The Bank offers a variety of partners in the industry. Along debit cards and credit cards with this, the Bank is providing with enhanced security features. the services for payments through It values both the security and different third party applications convenience of customers. All cards like: IME Pay, Khalti, Esewa, etc. of Sunrise Bank are EMV compliant, which reduces the possibility of BRANCH-LESS BANKING fraud and compromise of customer The Bank has deployed a number information. of branchless banking services where it does not have physical presence.

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Sunrise g martart Bankin Banking

MANAGEMENT IT POLICY INFORMATION SYSTEM Sunrise Bank recently published a The introduction of the CBS has helped robust IT Policy with the purpose of the Bank integrate the tools for a strong providing comprehensive reference Management Information System that to mitigate IT security risks, organize helps it to identify the requirement of IT within the bank, educate, and customers and manage its business adopt global standards. It also helps processes. This system uses CBS data the individual employees to obtain and generates operational, managerial guidance on the standard norms. and strategic information used by different units in the Bank. TRAINING The Bank has made significant THIRD PARTY INTEGRATION investment in upgrading technology The Bank has improved its ability and training people. It believes that for quick and secure integration an arsenal of technology and trained with the third party channels. With human resources can help the Bank implementation of Finacle Core grow. It has adopted online training via Banking Solutions and its extensive video conferencing and online materials Finacle Integrator API, the Bank has and examinations. Bank also has hired prepared the integration environment resources to facilitate and expedite the for approved and strategic channels. process of digitation. The integration capability has been built over the open architecture and The Bank has a pool of qualified the flexible technological platform has technical experts in all required proved to be efficient for collaboration technological platforms. The staff have with third parties. also been trained on technology use.

74 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

ONLINE ACCOUNT OPENING Bank has started alerts and feeds The Bank has started an online account through SMS, email and mobile GSM/ opening facility through its website. internet push. This service is expected Now customers can fill in the required to keep the customer informed and information through Bank’s website alert of their financial and nonfinancial and open desired saving account dealings with the Bank. without even visiting the branch. Besides, the Bank is in the process for CYBER SECURITY adding online LC and Bank guarantee The Bank periodically conducts opening, etc. In addition, Bank has the audit of information security started the DMAT Account opening for assessing risks related to the through DP-secure for supporting information system and infrastructure. the digitization drive for secure This type of assessment includes both transactions. the Bank-managed and outsourced services, covering of datacenter ONLINE VALIDATION infrastructure including disaster The Bank has started the service of recovery site, digital channels, validating the Bank Guarantees through technologies in use and mechanism its website. This enables government deployed; and also prioritizes offices and other principals to confirm information assets based on business that the Bank’s undertaking is not risk. The Bank had conducted a forged and remains valid, adding both security assessment that covered reliability and trust. It is also planning public domain reconnaissance, social to extend this kind of service on other engineering / phishing, layers of instruments to help deter the fraud. network security assessment, etc. Developing the adequate information ONLINE AND ALERT SERVICES security policies and enforcing them, Acquiring information has become cyber maturity assessments, and a habit for people. Customers need improving incident response across suitable information regularly in all the business functions are major relation to their business affairs. The targets of security assessment exercise.

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Deposits

THE BANK knows the value of groups of customers. For example n Maha Bachat Khata money to customers and their the Pink Saving Account is aimed Sunrise Maha Bachat Khata expectations for the services and at empowering women, the Sunrise offers competitive interest rates returns. The deposits are tailored Disable Saving Account seeks to customers who are interest for different purposes to serve the to motivate the differently abled sensitive. This account also has varied needs of customers. The people; and Senior Citizen Saving other attractive features. schemes also suit the requirements Account for seniors. The different of international customers who can savings options available at the bank n Sunrise Pink Bachat Khata open accounts online and also use are as follows. This product targets female remittance services. The deposits customers taking into account are also designed to serve the CSR, n Normal Saving their unique saving habit. This particularly the Sunrise Disable The normal saving deposits saving increases their access to Saving Account. Deposits can are meant for individuals and productive resources. be saving, fixed, call and current households who save from their deposit, and range from non-interest regular earnings and use it when n Sunrise Payroll Account bearing accounts to normal savings they require funds. With no limits This product aims to provide and high yielding fixed deposits. in deposits and withdrawals, the financial services to salaried product serves the convenience of staffs of organizations and seeks DEPOSIT customers. to facilitate smooth payments of salaries. Deposit mobilization is one of the primary functions of the Bank. Deposits mobilized play a key role not only as an important source of funds but also as instrument for promoting saving and banking habit among people. The Bank is making efforts to mobilize deposits in both rural and urban areas.

TYPES OF DEPOSIT Deposits at SrBL are categorized as follow:

A. LCY SAVING DEPOSIT PRODUCTS The Bank believes in mobilizing small savings to build deposits. There are no limits to deposits and they can result in a good return for customers. The Bank has a number of saving products to serve different

76 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

n Sunrise Fat Saving n Sunrise Branchless Banking D. CALL ACCOUNTS This account targets high net (BLB) Saving Account Call accounts provide certain worth clients who are interest BLB Saving Account is designed interest rate on deposits and are sensitive and who also give to encourage unbanked more flexible than fixed deposits. priority to the different features communities to save their It provides the facility of savings that come along with the earnings. This service is provided accounts through accrual of interest. product. to people served through The interest rate on the call account Branchless Banking points. depends on the nominal interest n Sunrise Bal Bachat Kosh rate on savings at the bank. Call The account is aimed at n Relief Saving Account accounts are available for both encouraging children to save and Relief Saving Account was individual and corporate clients. increase their seed money that started to encourage victims of grows to significant amounts the 2015 earthquake to collect n Normal Call Account over time. earthquake relief funds through This Call Account is an interest the banking channels. bearing account designed n Sunrise Senior Citizen especially for institutions with Saving Account B. FCY SAVING DEPOSIT stable deposits. Since Current The Senior Citizen Savings PRODUCTS Account is non-interest bearing, Account serves individuals who Sunrise Bank Limited introduced Call Account can earn an interest are 50 years old and older. The the foreign currency deposits to while the primary account will account provides safety of the cater to the niche market of foreign remain as a current account. capital, assured returns and workers in Nepal, Nepalese involved regular payouts with emphasis on in foreign trade, and those working n Social Security Fund Account personalized services. in foreign organizations. The Social Security Fund Account is designed for people receiving n Suryodaya Remit Bachat Khata SrBL offers three types of FCY social security allowances of Suryodaya Remit Bachat saving deposit products: various categories such as that Khata has been designed for old age, disability, for single to solicit deposits of Nepali 1. USD Saving Account women, and other special groups citizens working abroad, and is 2. EUR Saving Account who receive payments from the targeted towards remitters and 3. GBP Saving Account Government of Nepal. beneficiaries of remittance. 4. Suryodaya Remit Bachat Khata (USD) n Retirement Fund Account n Sunrise Share Dhani Khata This account is designed for the Sunrise Share Dhani Khata has C. FIXED DEPOSITS people who are provided with been developed for shareholders The Bank also encourages retirement benefit. of Sunrise Bank Limited customers to deposit idle funds for targeting customers who had a longer period of time and obtain n Sunrise Portfolio Management been allotted shares in the Initial the best possible returns. The Bank Service (PMS) Deposit Account Public Offering of the Bank. This offers a competitive interest rate, The Sunrise PMS Deposit account product also serves shareholders agreed at the time of account involves managing money of who have purchased SrBL shares opening. The interest rate for the customers under the expert from secondary market. fixed deposit depends on the size of guidance of portfolio managers. the deposits and the maturity date. This product is developed for n Sunrise Disability Saving Account The Bank has different fixed deposit customers willing to take the This special account is a part of schemes to serve the varied needs Portfolio Management Service CSR initiative of SrBL. Apart from of customers, these include: for investment in instruments attractive interest rates, the Bank 1. Individual Fixed Deposit that provide maximum returns at also gives special attention to 2. Institution Fixed Deposit minimum risk. providing other banking services 3. Sunrise Maha Muddati to these customers efficiently.

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Retail Banking

SUNRISE BANK LIMITED has that covers EDUCATION LOAN completed 11 years of its operation the borrower's The Bank provides education loans and has continuously been striving family in case to support quality education in the towards providing better services of unforeseen country and abroad. The Education to customers. Retail lending is a events. This Loan provided by the Bank is profitable sector in Nepali banking loan is tied up available to students seeking to and the Bank has been lending with the endowment life insurance pursue higher/technical/professional to individual customers both for policy of the borrower. This scheme education both in Nepal and abroad. consumption and for business/ provides life insurance protection productive purposes. Retail loans to the borrower throughout MARGIN LENDING comprise of around 38 per cent of the loan tenure and also covers This product allows individuals, firms the total loan portfolio. The Bank has the borrower’s family from the or companies to borrow money prepared comprehensive documents outstanding loan and ensures from the Bank without hassles by describing each of the retail product retention of the property in case of pledging shares of the companies and has also been designing new any unforeseen incident. In addition, listed in the Nepal Stock Exchange products and upgrading the existing the scheme also provides capital (NEPSE). ones to match the changing market return in the form of bonus from the dynamism and customer needs. insurance company to the borrower SIGNATURE LOAN upon the maturity of the loan. This is a type of personal loan that Following are the major retail the bank extends to professionals products offered by the Bank. HIRE PURCHASE LOAN on a non-revolving basis. Such loans, The attitude towards borrowing has up to NPR 1.5 million, are provided HOME LOAN changed over time and households without fixed asset collateral. This product has been devised have begun to upgrade their living standards by leveraging their future in accordance with the vision of CREDIT CARD income. In view of this changing SrBL: “Together We Can Build”. A The Bank offers VISA credit cards to consumer pattern, the Bank has home is not only desired by many customers for secure withdrawals, been extending Hire Purchase Loans Nepalese but also the major area purchase and online payment for the purchase of new vehicles of investment. The Bank has been solutions. providing Home Loan to individuals both for consumer and commercial to fulfill their financial requirement purposes, equipments, and privately LOAN AGAINST FIXED for acquiring/construction/ used vehicles to both individuals DEPOSIT RECEIPT maintenance of residential property. and businesses. This product has been devised with The loan is also provided for existing the intent to address some financial building/apartments leveraged SAJILO KARJA/PERSONAL LOAN emergencies of businesses and against the value of property. The have varied individuals to fulfill their intended and unique cultures and traditions. requirements without ending The Bank has been financing Sajilo SUNRISE SURAKSHIT GHAR KARJA the fixed deposit prematurely. Karja/Personal Loan to needy Sunrise Surakshit Ghar Karja is a Customers can draw up to 90 per individuals to access finance for unique and flourishing retail product cent of the fixed deposit amount as covering various legitimate personal of SrBL. After the devastating loan. earthquake of 25 April 2015 there financial needs on fully collateralized has been a growing demand for basis. an additional scheme in home loan

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Remittance

REMITTANCE has taken the workers use formal channels to send Sunrise Bank Ltd. was also centre stage in Nepal’s economic their earnings home. among the first banks to development. Migration of Nepali provide mobile banking facilities youth to the Gulf region and Sunrise Bank Ltd., established its' other countries in search of work Remittance Department in 2009 to migrant workers abroad, to has been the major source of to facilitate inward remittances. enable them to access personal remittances entering the country. It has since been continuously accounts from their mobile The financial flows generated by expanding its international and phones. This has not only these migrants are substantial. domestic networks. The Bank has According to official data, about 1.7 remittance business arrangements helped them monitor activity million Nepalese are working in 40 with 20 foreign remittance in their account but also allows different countries, excluding India companies / banks in 14 countries them to top-up mobile phones where it is estimated that there are and a domestic network of more of family members, make utility an equal number of Nepalese who than 7000 agents spread across have gone there through various Nepal. The Bank also begun payments, fund transfers to unofficial channels. remittance business arrangements other financial institutions, buy with multiple domestic remittance movie tickets, etc. The Bank Financial institutions and money companies / banks to provide a has plans to incorporate Fixed transfer companies have not one stop solution for remittances only helped the country to bring entering Nepal through formal Deposit application forms, remittances through formal sources. Dmat account opening forms, channels but have also helped etc., into Mobile Banking which towards increasing the foreign The Bank has also pioneered retail will allow migrant workers to exchange reserves at the Central loans to family members of migrant avail additional services easily by Bank. However, it is estimated workers based on their income that only around 40% of migrant sources abroad. using Mobile Banking.

INTERNATIONAL REMITTANCE NETWORK

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Corporate Banking & Trade Payments

AT SUNRISE BANK LTD. we offer various not only meet the requirement of the kinds of financing and banking services for domestic corporate sector but also that of corporations, projects and infrastructures. global corporates. The Corporate Banking & Trade Payments Department has four functions - Corporate The Bank offers Fixed Term Loans for Banking, Mid Market Banking, Project & financing existing or new projects to create Infrastructure Financing and Trade Payments fixed assets. The facility is also available to Services. Corporate Banking handles all finance plant, machineries and equipment, corporate clients with exposure above land and buildings. The repayment tenure of Rs. 100 million, Mid Market with exposure the loan is fixed as per the project duration above Rs. 40 million to Rs. 100 million, and and to ensure that the financial obligations the Project and the Infrastructure function are met through cash flow generated by the handles all credit exposures falling under its project. domain. The Bank finances working capital Under Trade Payments functions, the Bank requirements through its overdraft facility. provides all types of trade related services, It finances working capital (stock & including advisory services, for Import receivables) requirements by providing other and export businesses through a separate kinds of working capital credit facilities on dedicated Trade Payment Desk at the flexible repayment terms. The Bank also Head Office and selected branches. The provides short-term pledge loans that can services may include processing of letter of be obtained by pledging stocks under the credit (LC) applications, credit sanctioning, lock of Bank. Customers can sell their stock document screening, document purchase after settling the short-term pledge loan. and collection services, follow-ups for LC document payment, settlement, etc. The Demand loans assist customers to build up department not only facilitates funding their stock and receivables to a desired level, requirements of clients but also provides against which the loan is disbursed. The advisory services for improving their borrower agrees to the repayment period for financial performance and compliance to this loan at the time of application and that regulatory requirements. has to be justifiable in terms of the business activities. Corporate Banking & Trade Payments covers an extensive area of banking. It assists clients Through export finance, the Bank finances to invest in a project, meet working capital various export requirements such as pre- requirements, facilitate or finance on export and post-shipment loans, documents or import, and for other requirements. The negotiation/documentary bill purchase, etc. Bank is always ready to work and grow The Bank has also been providing export with customers as a strong financial partner refinancing facility under Nepal Rastra Bank in terms of business, industrialization, and provision to encourage exports. infrastructure development. In this age of globalization, the corporate lending schemes

80 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

The Bank has an import loan facility to finance domestic and international trade transactions through LC, telegraphic transfer, demand drafts, DAP (Documents Against Payment) and DAA (Documents Against Acceptance). The Bank finances import of goods in the form of Trust Receipt up to a percentage of the import document value as decided by the management. Repayment of this facility is generally linked with the cash conversion cycle of the goods imported or as decided by the management from time to time.

The Bank coordinates with other banks and financial institutions; participates as Lead Bank or a Joint/Co-Lead Bank to provide consortium loans for high value funding requirements both as fixed term and working capital loans (Both funded as well as non- funded loans). Customers can avail this loan for establishment, capacity addition, up- gradation of existing facilities as well as for acquisition/ takeover of existing facilities. The loan is available to both manufacturing and service sectors.

The Bank also extends loan in foreign currency. Such facilities are provided to the tourism sector, hospitals, export and other Industries/ projects as guided by Nepal Rastra Bank. The foreign currency credit facilities can be short or long term based on repayment capacity of customers.

Import letter of credit (Foreign and Local) facilities are offered by the Bank is in accordance with customers' procurement contracts/proforma invoices and this facilitates import of goods and services, and local purchases. The Bank also provides export letter of credit facilities to improve sales in both domestic and international markets.

Bank guarantees issued by the Bank not only facilitate the bidding requirements for various contracts but also help to ensure the performance of the related party in terms of execution of contractual performance (supplies and/or assigned job/services). It also provides surety of return of advances mobilized for performance of any given contract.

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Microfinance

AS A PART of its long-term strategy to shift DSB has also plans to target other sectors more weight from large-scale corporate to increase its portfolio and diversify at the credit towards consumer and small business same time. Such sector would be dairy credit and diversify loan portfolio, the Bank sector/ Livestock farming, Agriculture/ has continuously devised new/innovative Herbal products, etc. business products and reengineered existing ones to remain competitive. There has been Sunrise bank has prioritized agriculture an incredibly intense competition for small lending not to just meet just 10% portfolio business lending and SrBL has designed and set out by Nepal Rastra Bank (NRB) but launched several business loan products for also to make an impact in individuals rural populations. livelihood that would have an impact on economic of the country. Financing in The strength of Sunrise Bank is its branch agriculture is a growing concept and is very network, particularly branches located different than other sectors. As a bank we outside Kathmandu that can play a vital are trying to make sure our investment are role in serving the rural populations. effective to expand agriculture business in As most of microfinance players and Nepal, which is fruitful for the clients and cooperatives are located outside the country. To reach clients in rural areas Kathmandu Valley, it may be an opportunity directly, Sunrise Bank has opened number for Deprived Sector Banking Department of branches in rural areas and has assigned (DSB) and branches of Sunrise Bank to separately deprived sector banking staff and grow together with rural lending. agriculture marketing staff for this purpose.

For deprived sector banking, Sunrise Bank The government and the NRB are working Limited has devised deprived sector loans to classify this sector as development in two forms. They are deprived sector finance and therefore the Bank can gain wholesale lending and individual deprived distinct mileage by getting involved in sector lending. Under wholesale lending this period. The promotional efforts would the Bank provides loan to Microfinance have to emphasize the bank’s vision (D Class Bank), and Co-operatives while and commitment towards economic under individual deprived sector lending, it development of the country. The efforts can provides underprivileged and rural people also be directed towards cross-selling other loans for small business, agriculture and banking products. Other promotional efforts other productive sectors. SrBL has also e.g. personal relationships, sponsorships of designed and rolled out products like “Srbl events, joint training programs, commercial Laghu Byabsaya Karja, which also falls under advertisement in media can also serve as deprived sector loan. The main purpose of effective tools. this loan product is to provide the financial solutions to borrowers to create fixed assets as well as to meet the requirements for small The Bank plans to use its branch business enterprises. network for distribution to increase the DSB loan portfolio in the coming days.

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SME Banking

SUNRISE BANK has been continuously striving Purchase/Discount services, etc. These products towards providing better services to customers. assist customers to fulfill their working capital In this competitive environment, it is essential for requirements. any bank to introduce new products or expand the customer base of existing products in order The Bank also provides non-funded facilities to grow. Small and medium enterprises (SMEs) to customers. These include LC and bank comprise an important lending sector that are guarantees. The bank guarantees facilitate served through different products. bidding requirements of various contracts and also help to ensure the performance of the Under funded facilities the Bank provides related party in terms of execution of contractual obligations. They also provide surety of return Term Loan and Working Capital Loan. of advances mobilized for performance of a Term Loan is provided to cover fixed assets contract. Similarly, the Bank also provides supply financing (land and building), financing credit guarantee, retention guarantee, deferred for capital items (CapEx), construction payment guarantee etc. equipment, and civil construction Apart from providing financial services, the works, etc. for a maximum period of 10 Bank also organizes orientation programs on years, repayable on EMI or EQI basis. general accounting and taxation frequently The repayment schedule of the loan is for promoters and staff of small and medium customized to match the requirement. businesses across the county to enhance their understanding of taxation and contribute to improved bookkeeping skills. Working Capital facilities include Overdrafts, Demand Loan, Installment Credit Facility, Contract Loan, Import/Export Credit, and Bills STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

Branchless Banking C-ASBA Branchless Banking (BLB) on behalf of banks and financial The “Centralized Application enables banks and financial institutions to their customers. for ASBA-based issuance institutions to provide services Branchless Banking represents Applications Supported by through hand held devices known significantly cheaper alternative Blocked Amount” (C-ASBA) as POS/Tab with the help of a to conventional branch-based was developed by CDS & Business Correspondent. It assists banking and allows financial Clearing Ltd. and is used for banks and financial institutions institutions to offer financial share applications online. To to spread their footprint without services outside the traditional apply, a customer has to visit a setting up a physical branch. bank premises by using delivery bank branch to register in the In this modality of banking, channels like retails agents, C-ASBA system with verified commercial outlets such as small mobile phone, etc. BLB can be bank account and DMAT grocery shops, medical shops, used to substantially increase the account number to obtain the etc. can act in some capacity to financial services to unbanked C-ASBA Registration Number provide basic banking services communities. (CRN). The CRN is mandatory for verifying share applications.

C-ASBA is essentially an authorization to block the money committed in the bank account for buying shares. If an investor is applying through C-ASBA, his/her application money is blocked in the bank account. After allotment, only the part of money as per the allotment is debited from the applicant's account and remaining amount is unblocked.

The Securities Board of Nepal (SEBON) has issued guidelines regarding Issue of Securities, where it addresses the ASBA application charges. Accordingly, the maximum charge that can be levied is NRs. 100. The bank charges NRs. 25 per application for customers applying for shares at a branch, while it is free of cost for customers applying through the MERO SHARE portal. The application charge to be paid to the Issue Manager is NRs. 10 per application.

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Mobile DEMAT Banking Account Services Mobile banking allows customers to conduct The term DMAT stands for Dematerialization or the financial transactions remotely using a mobile process in which paper share certificates and other device such as a smartphone or tablet. It uses securities in the physical form are converted into application software called an app, provided by electronic form, and credited in the depository. DMAT the financial institution for the purpose. Mobile helps in eliminating the problem of physical handling banking is one banking channel that is available of securities. A depository is similar to a bank. It at all times. holds shares, which belong to investors, in electronic form. The investor has to open an account with the Mobile banking reduces the cost of handling depository, through a Depository Participant (DP). transactions by reducing the need for customers These Depository Participants (DP) are authorized to visit a bank branch for non-cash withdrawals agents to operate DMAT accounts. These DP acts as an and deposit transactions. agent between the investors and the company. Shares and securities are held electronically in a dematerialized (or DMAT) account, instead of the investor having Sunrise Bank's mobile banking is called physical possession of certificates. Sunrise Bank Smart, which is a unified digital banking solution that provides customers with the services of mobile banking and digital payments while providing a multimedia rich and cost effective environment for the Bank to carry out instant marketing/promotional campaigns, and communicate with customers.

Lower Customers can enjoy a vast array of available transaction features on an interactive mobile app carefully Hassle free costs designed for easy navigation.

Sunrise Bank Smart is currently available DEMAT for Android and iOS applications and No risk ACCOUNT Easy supports both the SMS and GPRS channels of losing transfer of e physical share securities giving customers the option to use either certificates one depending upon the availability of network and internet access. Share splits & bonus shares automatically credited to account

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Despite operating in a highly competitive market, Sunrise Bank has grown consistently every year. Its wide network across the country now provides the foundation to do better and grow faster.

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Director’s Report REVIEW OF BANK’S OPERATION FOR FISCAL YEAR 2017-18

THE BOARD OF DIRECTORS of Sunrise On behalf of the Board of Directors, I Bank Ltd. has pleasure in presenting their would like to welcome all of you to the 11th Annual Report on the state of affairs Annual General Meeting of Sunrise Bank of the Company to the shareholders of Ltd. Since its inception, the Bank has been Sunrise Bank Ltd. for the financial year able to attain continuous, balanced growth ended 17th July 2018, together with the through innovation, adoption of high-tech audited Financial Statements of the Bank, solutions and development of innovative Consolidated Financial Statements of the financial products. We take your permission Group for that year and the Auditors’ Report to present the Bank’s achievement in the FY on those Financial Statements, conforming 2017/18 (FY 2074/75) to the requirements of the Nepal Rastra Bank Directives, Companies Act 2063 and the Banking and Financial Institutions Act 2073. The Financial Statements were reviewed and approved by the Board of Directors on 29 November 2018.

88 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

A. KEY FINANCIAL HIGHLIGHTS C. ATM NETWORK The Bank offers a variety STATEMENT OF FINANCIAL POSITION NPR Million of debit and credit cards to customers with enhanced PARTICULARS FY 2017/18 FY 2016/17 GROWTH % security features. All cards of Share Capital 8,153 8,081 1 Sunrise Bank are EMV compliant Reserve & Surplus 3,402 2,717 25 that reduces the possibility Total Deposits 69,493 61,167 14 of fraud, and compromise of Total Loans and Advances 60,213 51,271 17 customer information, to almost Investment Securities 9,720 6,169 58 nil. The Bank has a wide network of ATM terminals and all of Placement with Bank and Financial Institutions 3,870 3,358 15 these are being made ready Total Assets 82,783 71,859 15 for chip security and fraud Net Worth Value per share 141.73 138.72 2 deterrence. The Bank has 115 ATMs across the country and The Bank achieved growth of 15% during the year in total assets, reaching NPR customers can also benefit from 82.7 billion. It has also achieved sustainable growth of 14% in Total Deposits, the common ATM network of totaling NPR 69.5 billion, and 17% in Total Loans and Advances, totaling NPR 60 NEPS member banks. billion. The Bank has mobilized its resources well. Each year, the Bank continues to implement financial strategies that enhance its Financial Capital to enable it In addition, the Bank has to carry out day-to-day business activities. Growth in key parameters also shows revamped the overall that the Bank is in progressing along with its customers. technology platform to enhance efficiency, augment security, and facilitate client capabilities. STATEMENT OF PROFIT OR LOSS NPR Million In retail baking, the Bank has launched online account PARTICULARS FY 2017/18 FY 2016/17 GROWTH % opening services and also offers Net Interest Income 2,871 2,314 24 clients innovative payment Fee/Commission & Other Operating Income 848 666 27 options. Significant investment Total Operating Income 3,559 2,819 26 has gone towards upgrading Personnel Expenses 908 689 32 technology and training human Operating Expenses 555 360 54 resources. This is because we Operating Profit 2,047 1,695 21 believe that only state-of-art Profit for the Period 1,477 1,113 33 technology and qualified human resources can help a bank to Earnings per Share grow in this day and age. Basic Earnings per Share 18.13 17.26 Diluted Earnings per Share 18.13 17.26 D. REMITTANCES Sunrise Bank Ltd. has been Driven by strong revenue growth, the Bank’s bottom line grew by 33%, compared providing remittance services to the previous year. since its inception through its web-based remittance product named “Suryodaya Remit”. It B. KEY FINANCIAL HIGHLIGHTS now has over 4,500 payout The Bank now has 103 full-fledged branches, 6 province offices, 3 extension agents, in addition to its 103 counters, and 24 branch-less banking outposts that serve customers at branches across the country almost every business center. The national network covers all major business to facilitate the disbursement centers in Nepal. In the international front we have an extensive network of of remittances received from correspondent banking counter parties in all major global financial hubs. The around the globe. Sunrise Bank Bank has a strategy of opening branches not only at the urban centers but maintains its presence in USA, also in the rural municipalities across the country.

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UK, Italy, Australia, Israel, Malaysia, Qatar, been providing merchant banking services Bahrain, Oman, Kuwait, UAE, Japan, Korea as a subsidiary of Sunrise Bank Limited. It is and India for tapping into the remittance Nepal's premier investment services company, business. Besides, the Bank has also been with several decades of experience in helping serving people wanting to send remittances people protect and increase their wealth. within the country through the branch No other firm can match the depth of its network. Customers using the service to send experience and its dedication to personal and receive money can do that at more than service. It has been providing customized 4,500 locations nationwide. and extraordinary financial services ranging from merchant banking, advisory, and E. MOBILE FINANCIAL SERVICES assets management services to depository The mobile phone has been evolving into an participant functions. The strength of our intimate platform that brings together many parent company, together with our network technological possibilities. It is personal and and experience has enabled it to become the therefore suited for banking operations. The premier provider of customer-centric and Bank has added a number of features in its innovation-driven investment banking services mobile banking application. The payment in Nepal. channels have been increased and customers can now use it to directly pay their electricity G. MAJOR ACTIVITIES bills. More features are in the process of being DURING THE YEAR: added. This can make banking with Sunrise 1. Information Technology and Bank a seamless experience for customers. Digital Banking: Sunrise Bank has been the first bank to implement Finacle Core Sunrise Bank's mobile banking platform Banking Software while other banks 'Sunrise Smart Banking' is a unified digital are still in the planning phase. With this, banking solution that provides customers the Bank has achieved a new height in with banking services on their fingertips. It Nepal’s banking industry. The Bank now allows banking and digital payments in a has a definite roadmap to move to a fully multimedia rich interface, while also providing digitized environment. Sunrise Bank intends a cost-effective means for the Bank to to use digitization not only for delivering maintain stakeholder relations and undertake services to customers but also to transition marketing/promotional campaigns. to a fully digitized banking environment. Business Process Automation is one of the key strategic moves of the Bank Sunrise Smart Banking is currently available where it has been continuously evaluating for Android and IOS applications and the possibility of taking all of its internal supports both short messaging services processes to the fully digital platform. (SMS) and GPRS giving customers the option The Bank has acquired many applications, to use either one depending on network including software, for human resource availability and internet access. management, assets management, Know Your Customer (KYC) and anti-money F. ACTIVITIES OF THE laundering (AML), document management, BANK’S SUBSIDIARY inventory management, conference Sunrise Capital Limited is the subsidiary video calls, etc. It is also considering the company of the Sunrise Bank Limited. implementation of workflow management, Previously, NIDC capital market had set up a performance management, automatic subsidiary company named NCM merchant tracking system and other systems in the Banking limited to provide merchant banking coming days to attain complete digitization activities under the direction of NRB and of business processes. It has hired human guidelines of SEBON. After NIDC Capital resources to facilitate and expedite this Markets Limited was acquired by Sunrise digital transformation. Bank on 10 Feb, 2017 (28th Magh, 2073) and renamed Sunrise Capital Limited, it has

90 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Sunrise Bank has implemented a Sunrise Bank has also introduced Viber- sophisticated Internet banking system Banking services whereby the customers at par with international standards to can avail various facilities for free through offer customers a bank-less banking the Public Group in Viber. environment. It has enhanced security features with strong authentication 2. Call Centre: For the first time in Nepal, mechanisms that guarantee the protection Sunrise Bank started its own call center of customer's credentials, passwords and and has now become the “Bank With a information. Voice”. The call center has been very crucial for handling transactional interactions, The Bank has started online account informational calls, and for addressing opening facility through its website, which complex issues, including sales and is one of many initiatives undertaken purchase-related activities. The call center to transform the way a customer does is the first point of contact for remote banking. Customers can now fill in all the customer interactions. It also provides required information through the Bank’s opportunities for cross-selling and up- website and open the desired account selling financial products and services. without the need to visit a branch. It is designed to deliver multiple ways for customers to connect with the Bank, The Bank has also started the service which it believes can play a crucial role in of validating Sunrise Bank issued bank enhancing customer satisfaction. guarantees through its website. This enables government offices and other 3. Remittance: Sunrise Bank Ltd., established principals to confirm that the Bank’s the Remittance Department in 2009 undertakings are valid. This has reinforced with the intention of channelizing inward its reliability and trust. remittances from various countries. It has since been continuously increasing Recently, the Bank implemented a new its international as well as domestic version of the mobile banking (Bank remittance networks. At present the Bank Smart V5) which is capable of extending has remittance business arrangements more features to the customers, more with 20 foreign remittance companies detailed information, including QR code / banks covering 14 countries and a based payments, self-registration, self- domestic network of 4,500 agents spread management, etc. The Bank has plans to across Nepal. The Bank has also initiated upgrade this platform to a higher version remittance business arrangements with 20 by making it more informative and feature domestic remittance companies / banks intensive. with the aim of providing one stop solution for any remittance entering the country from formal sources. Sunrise Bank introduced a very simple but innovative product called Missed Call Banking -- the first in the banking industry 4. Establishment of Branches and ATMs: With in Nepal. This product was welcomed by the establishment of 21 branches during customers. The center of this product is the year, and 11 new branches during the banking service even without the Internet. current fiscal year, total Branch network It has been a success because the Bank has increased to 103 (including 18 Rural has a lot of customers in rural area who Branches). Similarly, total number of ATMs do not have proper Internet services. Also operated by the Bank is 114. many people do not own smart phones or are not used to mobile banking because of 5. Corporate Social Responsibility: Sunrise age factors and others to rely only on the Bank is a good corporate citizen and Internet. believes in contributing towards overall development of the society it serves. It has

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given back to society at every opportunity the review year compared to a growth of and will continue this partnership for 4.6% in the previous year. However, the ratio change. A separate section of the Annual of workers' remittances to-GDP declined to Report discusses the Bank’s CSR activities. 25.10% in 2017/18 from 26.3% in 2017/18. The net transfer receipts increased by 1.5% to NPR H. MACROECONOMIC OUTLOOK 864.67 billion in the review year. Such receipts Estimates of Central Bureau of Statistics had increased by 9.5% in the previous year. (CBS) show the growth in the real GDP (at producers' price) at 6.30% in 2017/18 Government revenue increased by 19.2% to compared to 7.9% in the preceding year. NPR 726.80 billion in 2017/18. The revenue Similarly, the real GDP at basic price was collection met 99.50% of the budget target of estimated to grow by 5.9% compared to a NPR 730.60 billion. Government expenditure, growth of 6.90% in the previous year. Good on cash basis, increased by 26.2% to NPR monsoon rains, improved power supply and 1029.20 billion in 2017/18 compared to an normal supply situation helped accelerate increase of 40.20% to NPR 815.7 billion growth from the low base of the preceding in 2016/17. Budget deficit on cash basis year. The growth in real GDP at producers' increased to NPR 268.85 billion from NPR price was 6.30% in 2017/18. 188.69 billion in 2016/17. The ratio of budget deficit-to-GDP stood at 8.9% in the review The growth rate in agricultural output was year. 2.9% and that of the non-agricultural sector was 4.9%. The service sector was estimated The GON resorted to gross domestic to grow by 9.0% compared to a growth of borrowing of NPR 107.19 billion in 2017/18. This 6.9% in the previous year. Increased number is 3.6% of GDP. Gross domestic borrowing of tourists, and expansion of trade and of NPR 88.34 billion was mobilized in the communication accounted for the rise in previous year. The GoN repaid NPR 37.56 service sector. billion domestic debt in 2017/18. The GoN maintained a cash balance of NPR 126.15 The annual average consumer price inflation billion at NRB at the end of 2017/18. At the was 4.2% in 2017/18 from 4.5% in the previous end of the previous fiscal year, such balance year. The annual average inflation of 2017/18 was NPR 106.27 billion. has been the lowest since 2004/05. The higher base price of the preceding year, The outstanding foreign loan of the GoN improved supply situation and lower global stood at NPR 503.63 billion in mid-July 2018. prices including that of India contributed to The outstanding domestic debt of the GoN the easing inflation in the review year. increased from NPR 283.71 billion of mid July 2017 to NPR 390.90 billion in mid July 2018. Merchandise trade deficit widened 26.7% to The total government debt amounted to NPR Rs 1,161.64 billion in 2017/18. The export-import 894.53 billion, which stood at 29.7% of GDP. ratio declined to 6.5% in the review year from Likewise, the total debt servicing/revenue 7.4% in the previous year. ratio stood at 9.9% in mid July 2018.

The year-on-year unit value export price index Domestic credit expanded by 24.9% in the based on customs data increased to 10.3% review year compared to a growth of 20.6% while import price index increased to 12.5% in the previous year. Deposits at Banks and in 2017/18. Consequently, the terms of trade Financial Institutions (BFIs) increased by (TOT) index decreased to 7.1% compared to 19.20% in the review year compared to an 9.1% in the previous year. increase of 14% in the previous year.

Remittances from Nepalese working abroad The weighted average 91-day Treasury Bill rate increased by 8.6% to NPR 755.60 billion in increased to 3.74% in the 12 months of 2017/18

92 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

from 0.71% a year ago. The weighted average 2018 from 1582.7 points in mid-July 2017. inter-bank transaction rate among commercial The stock market capitalization, on y-o-y banks, which was 0.64% a year ago, increased basis, decreased by 22.70% to NPR 1,435.14 to 2.96% in the review month. However, the billion in mid-July 2018. The ratio of market weighted average inter-bank rate increased capitalization-to-GDP stood at 47.70% in mid- to 5.40% from 4.47% a year ago. The total July 2018. number of BFIs licensed by NRB was 151 in mid-July 2018 from 149 a year ago. In mid- For the past 15 years there has been steady July 2018, Nepal had 28 commercial banks, growth in the balance sheets of bank and 33 development banks, 25 finance companies financial institutions. The growth has been and 65 microfinance institutions. The branch fuelled by broad money derived from network expanded to 6,651 in mid-July remittance inflows. Remittance inflows that 2018 from 5,068 a year ago. In all 162 BFIs have grown almost every year began slowing (including ‘D ’ class) were involved in mergers down in the second quarter of the fiscal and acquisitions during the review period. year 2016-17. Meantime the trade deficit has Because of this the number of companies continued to widen resulting in a balance of listed at the NEPSE decreased to 196 in mid- payments deficit. Government expenditure, July 2018 from 208 in mid-July 2016. Of listed particularly the capital budget has largely companies, 147 are BFIs (including insurance remained under spent. But revenue collection companies). remained at a record high and remained unspent in the treasury accounts. The slow Financial frictions seen in recent months have spending, slowdown in remittances and significantly improved. The gap between a widening trade gap led to a decrease deposit and credit growth has narrowed. The in money supply and a slowdown in bank comfortable level of central bank liquidity deposits. has eased the financial situation. The upward trend in market interest rates has been Besides macroeconomic factors such as arrested. The increased level of capital, the the trade and current account deficits, introduction of fixed interest rate corridor in slower capital expenditure by government, the recent monetary policy statement, and and slowing rate of remittance inflows also macro-prudential tools now in place are the contributed to deceleration of deposit measures aimed at making financial sector expansion. The resources at banks (deposit more resilient and stable going forward. growth) had slowed down but banks continued to aggressively expand loans and The current account slipped to a deficit of advances at levels well above the available NPR 245.22 billion in 2017/18 as compared deposits in the market. to deficit of NPR 10.13 billion in the previous year. The Balance of Payments recorded a There was also shift in the market with surplus of NPR 0.96 billion in the review year customers converting their savings accounts compared to a surplus of NPR 82.15 billion in into fixed deposits pushing the cost of funds the previous year. upwards. Lending rates also increased but the banks could not go higher than certain Recurrent expenditure increased by 32.4% levels owing to the stiff competition. This led to NPR 680.31 billion compared to a growth to general fall in interest spread and the net of 40.9% in the preceding year. Capital interest income of the banking industry as a expenditure increased by 20.4% to NPR 239.91 whole. billion compared to its growth of 72.2% in the previous year. Financial expenditure increased The Bank attained decent growth in business by 5.8% to NPR 108.80 billion. volume during the first quarter of 2018/19. Total deposits have increased to NPR 75.79 The NEPSE index, on y-o-y basis, decreased billion and net loans to NPR 66.59 billion. by 23.4% to 1,212.4 points in mid-July Sunrise Bank has already attained the

ANNUAL REPORT | 2017-18 93 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

statutory target of having a minimum NPR laundering and terrorist financing risks. In 8 billion as paid up capital. Despite the order to look after the risks associated with negative macroeconomic indicators, the banking, the Bank has appointed a Chief Bank has continued to attain the planned Risk Officer who has been working towards growth targets for 2018/19. The anticipated building a risk management culture in the profitability targets were unmet in the first Bank alongside the identification, measuring quarter due to festival season towards the end and mitigation of risks related to credit, of the quarter that slowed down the collection operations, market, foreign exchange, liquidity of interests. Payments were recovered during and reputation risks, etc. The Bank has the subsequent quarter and the Bank is been very aggressive in capacity building confident to be able to deliver both robust of employees by supporting trainings and business growth and a decent profit volume workshops to enhance their skills on using at the end of the fiscal year. the tools required for risk assessment and aversion. I. ISSUANCE OF DEBENTURE The Bank has planned to issue Debenture L. HUMAN RESOURCES worth NPR 1 Billion by the third quarter of The Bank has a workforce of about 1159 FY 2018/19 to augment the supplementary employees, which is a growth from 956 in capital as well as to strengthen CCD Ratio. 2017/18. The Bank believes that its success NRB approval has already been obtained and rests on the performance of its employees SEBON’s approval is awaited. and has been prioritizing the maintenance of a well-trained and qualified workforce J. MUTUAL FUND SPONSOR through capacity development interventions The Bank has also planed to sponsor the at all levels. The capacity development proposed Mutual Fund of NPR 1 Billion to interventions focus on developing a be issued by its subsidiary, Sunrise Capital workforce of dedicated and professional Limited. staff with qualities such as honesty, integrity, professional capability, creativity, and cooperation. Because staff capacity building K. CUSTOMER RELATIONS is directly related to employee productivity AND RISK MANAGEMENT and customer delight, the Bank has also been The Bank has had a steady growth of sending employees to attend national and customers. The customer base increased from international training programs. Nepal Rastra about 441,912 in July 2018 to 476,000 in four Bank (NRB) has directed all banks to spend months. Both the number of accounts and at least 3% of the total employee expenses in deposits has been growing satisfactorily since training and capacity building, which the Bank mid-July. has adhered to fully.

The Bank has always been guided by the principles of customer satisfaction, and M. CORPORATE GOVERNANCE The Board of Directors and management of customer-in-priority. It was the pioneer in SrBL are committed to high level of corporate launching customized products and high governance across the organization. All quality services in both loans and deposits. members of the Board have fully complied Further, the Bank has now adopted the with the directives issued by the NRB principle of moving beyond customer pertaining to corporate governance and satisfaction towards "customer delight". The the associated code of conduct. The Bank Bank has fully adhered to the KYC norms has an Audit Committee as well as a Risk and AML principles, and international best Management Committee to look after the practices. It has a full-fledged Compliance audit and risk-related issues. Further, the Department at the corporate level and a Bank also has a Money Laundering Prevention Compliance Officer at each branch. Further, Committee to continuously monitor money the Compliance Department has a separate laundering and terrorism financing-related AML section to keep close watch on money

94 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

issues. SrBL believes that regular disclosures shares to shareholders. The Bank is looking promote transparency, which in turn fosters forward to providing attractive dividends to its corporate good governance. shareholders also in the coming years.

N. CONTRIBUTION TO REVENUE R. CHANGE IN BOARD The Bank has paid NPR 986.7 million as various COMPOSITION AND ELECTION taxes to Government of Nepal, which includes After the enactment of BAFIA 2073, the board NPR 490 million as corporate tax, NPR 361.3 of a bank or financial institution can have only million as interest tax on deposits, NPR 67.6 5 to 7 members. The article of association of million as employee income tax, and NPR 7.87 the Bank had provision of 9 members in the million as house rent tax. The Bank also pays board, in line with BAFIA 2063, which the Bank reverse VAT on procurements of goods and proposes to reduce to 7. After the amendment services from outside the nation. of memorandum of association and article of association, there will be the provision of 7 O. COMMITTEES directors (3 each from promoter and public The Bank has formed various board-level groups and 1 independent director.) committees for implementing, controlling and monitoring policy decisions. These include the S. APPOINTMENT OF THE AUDITOR Audit Committee, Risk Management Committee, M/s P. L. Shrestha and Company, Chartered and Human Resources Management Committee. Accountants was appointed as the auditor More recently, the Bank has formed Money of the Bank for fiscal year 2074/75 BS by (Assets) Laundering Prevention Committee, last year’s Annual General Meeting under the which is coordinated by a non-executive recommendations of the Audit Committee. The director. Each committee has a specific Terms same company has been recommended by the of Reference. The members of the committees Audit Committee as auditor for the fiscal year comprise of non-executive directors and senior 2075/76 BS for approval of the general meeting. executives. Besides, there also are several other management-level committees: The CEO Finally, we would like to express our sincere heads the Management Committee, with senior gratitude towards all who have directly or executives as members. Other committees indirectly worked towards the betterment of include the Assets Liability Committee, Human the Bank and who have provided their valuable Resources Management Committee, and comments and suggestions for improvement Procurement Committee. of its product and services, as well as services delivery. We would also like to thank our P. FINANCIAL STATEMENT valued customers, shareholders, Government The Bank has presented the financial of Nepal, Ministry of Finance, Nepal Rastra statements including balance sheet as on 32 Bank, Securities Board of Nepal, Office of the Asar 2075 B.S., profit and loss statement of Company Registrar, Nepal Stock Exchange fiscal year 2074/75, cash flow statement, related Ltd., and the Bank’s tireless employees. annexure and consolidated financial statements We will continuously strive to improve the including that of its subsidiary Sunrise Capital service standards of SrBL and provide better Ltd. to the general meeting for approval. services to customers and higher returns to shareholders. The Bank is fully committed to abide by the instructions of NRB provided at the time of Thank you! AGM clearance as well as during the audit. Motilal Dugar Q. DIVIDEND CHAIRMAN The board of the Bank has approved 11.5% cash dividend to its shareholders. In the last Dr. Bhogendra Guragain fiscal year, the Bank had provided 15% bonus DIRECTOR

ANNUAL REPORT | 2017-18 95 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

COMPLIANCE STATEMENT

The Financial Statements of the Bank have been prepared in accordance with Nepal Financial Reporting Standards and carve-outs issued by the Institute of Chartered Accountants of Nepal on September 20, 2018 on NFRS requirement, which allowed alternative treatments.

Financial information recorded in compliance with directives of Nepal Rastra Bank and relevant business practices followed by the bank unless as adjusted for compliance with NFRS.

PERFORMANCE REVIEW

Interest income increased by of 40.89% during 2017-18. Interest expenses have also significantly grown by 53.41% during 2017-18 and net-interest income increased by 24.05%. Fees, Commission & 40.89% other operating income have increased by 24.05% while the staff & Interest income Operating Expenses have increased by 39.48%. increased

BANK PARTICULARS FY 2017/18 FY 2016/17 PERCENT

Net Interest Income 2,871 2,314 24 Fee/Commission & Other Operating Income 848 666 27 53.41% Interest expenses Total Operating Income 3,559 2,819 26 increased Personnel Expenses 908 689 32 Operating Expenses 555 360 54 Operating Profit 2,047 1,695 21 Profit for the Period 1,477 1,113 33 Earnings per Share 24.05% Net interest Basic Earnings per Share 18.13 17.26 income increased Diluted Earnings per Share 18.13 17.26

DURING 2017-18

96 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

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98 SUNRISE BANK LIMITED

STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

STATEMENT OF FINANCIAL POSITION As on 16 July, 2018 (32 Asar, 2075)

GROUP BANK 16/JUL/18 15/JUL/17 16/JUL/18 15/JUL/17 16/JUL/16 RESTATED RESTATED RESTATED PARTICULARS NOTE 32/03/2075 31/03/2074 32/03/2075 31/03/2074 01/04/2073

Assets Cash and Cash Equivalents 4.1 2,586,532,195 2,278,225,290 2,442,007,615 2,060,959,540 2,772,391,178 Due from Nepal Rastra Bank 4.2 5,033,055,545 7,496,218,748 5,033,055,545 7,496,218,748 3,809,870,298 Placement with Bank and Financial Institutions 4.3 3,939,629,863 3,299,928,896 3,869,629,863 3,358,047,347 2,618,168,668 Derivative Financial Instruments 4.4 - 804,900 - 804,900 24,625,457 Other Trading Assets 4.5 24,959,135 19,805,977 - - - Loans and Advances to BFIs 4.6 999,587,580 1,113,357,496 999,587,580 1,113,357,496 955,546,373 Loans and Advances to Customers 4.7 59,213,551,390 50,158,059,904 59,213,551,390 50,158,059,904 42,360,640,660 Investment Securities 4.8 9,720,458,385 6,168,650,705 9,720,458,385 6,168,650,705 5,845,165,201 Current Tax Assets 4.9 47,686,848 168,515,048 43,085,259 164,593,723 27,774,490 Investment in Subsidiaries 4.10 157,142,000 78,570,981 Investment in Associates 4.11 - - - Investment Property 4.12 119,254,047 161,448,497 119,254,047 161,448,497 103,907,648 Property and Equipment 4.13 733,539,802 538,320,422 730,247,831 534,388,879 435,533,216 Goodwill and Intangible Assets 4.14 76,776,984 58,533,970 76,415,384 58,533,970 5,892,829 Deferred Tax Assets 4.15 51,953,563 - 53,146,995 Other Assets 4.16 328,875,325 511,550,835 325,328,298 505,235,904 107,967,937 Total Assets 82,875,860,662 71,973,420,688 82,782,910,192 71,858,870,594 59,067,483,955

Moti Lal Dugar Dr. Bhogendra Guragain Er. Bachchharaj Tater Malchand Dugar As per our report of even date CHAIRMAN DIRECTOR DIRECTOR DIRECTOR

Dr. Dipak Psd Bhattarai Dipak Nepal Jyoti Kumar Begani Om Krishna Joshi DIRECTOR DIRECTOR DIRECTOR DIRECTOR

CA Rajesh Poudel, Partner Sarbendra Mishra Apachh K Yadav Ratna Raj Bajracharya P.L. Shrestha & Co., CHIEF FINANCIAL OFFICER DEPUTY GENERAL MANAGER CHIEF EXECUTIVE OFFICER Chartered Accountants

PLACE: Kathmandu DATE: 29 November, 2018

100 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Contd... STATEMENT OF FINANCIAL POSITION

GROUP BANK 16/JUL/18 15/JUL/17 16/JUL/18 15/JUL/17 16/JUL/16 RESTATED RESTATED RESTATED PARTICULARS NOTE 32/03/2075 31/03/2074 32/03/2075 31/03/2074 01/04/2073

Liabilities Due to Bank and Financial Institutions 4.17 2,126,890,375 3,880,814,202 2,126,890,375 3,880,814,202 1,819,765,220 Due to Nepal Rastra Bank 4.18 526,567,379 - 526,567,379 - - Derivative Financial Instruments 4.19 23,324,347 - 23,324,347 - - Deposits from Customers 4.20 67,193,215,276 57,168,040,996 67,366,127,515 57,286,159,447 49,981,295,235 Borrowings 4.21 - - - - - Current Tax Liabilities 4.9 - - - - - Provisions 4.22 - - - - - Deferred Tax Liabilities 4.15 - 28,300,421 - 25,736,338 8,483,721 Other Liabilities 4.23 1,353,450,682 1,102,888,337 1,185,662,469 930,766,449 692,282,883 Debt Securities Issued 4.24 - - Subordinated Liabilities 4.25 - - Total Liabilities 71,223,448,059 62,180,043,957 71,228,572,085 62,123,476,436 52,501,827,060 Equity Share Capital 4.26 8,152,555,851 7,018,104,701 8,152,555,851 7,018,104,701 3,976,046,341 Share Premium 127,161,065 - 127,161,065 - - Retained Earnings 977,590,216 1,370,545,311 941,855,312 1,349,474,048 1,787,863,993 Reserves 4.27 2,340,415,129 1,375,464,658 2,332,765,879 1,367,815,408 801,746,561 Total Equity Attributable to Equity Holders 11,597,722,260 9,764,114,670 11,554,338,107 9,735,394,158 6,565,656,895 Non Controlling Interest 54,690,343 29,262,061 - - - Total Equity 11,652,412,603 9,793,376,731 11,554,338,107 9,735,394,158 6,565,656,895 Total Liabilities and Equity 82,875,860,662 71,973,420,688 82,782,910,192 71,858,870,594 59,067,483,955 Contingent Liabilities and Commitments 4.28 37,637,909,885 29,399,476,614 37,637,909,885 29,399,476,614 19,977,904,651 Net Worth per share 142.26 139.13 141.73 138.72 165.13

Moti Lal Dugar Dr. Bhogendra Guragain Er. Bachchharaj Tater Malchand Dugar As per our report of even date CHAIRMAN DIRECTOR DIRECTOR DIRECTOR

Dr. Dipak Psd Bhattarai Dipak Nepal Jyoti Kumar Begani Om Krishna Joshi DIRECTOR DIRECTOR DIRECTOR DIRECTOR

CA Rajesh Poudel, Partner Sarbendra Mishra Apachh K Yadav Ratna Raj Bajracharya P.L. Shrestha & Co., CHIEF FINANCIAL OFFICER DEPUTY GENERAL MANAGER CHIEF EXECUTIVE OFFICER Chartered Accountants

PLACE: Kathmandu DATE: 29 November, 2018

ANNUAL REPORT | 2017-18 101 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

STATEMENT OF PROFIT OR LOSS For the year ended on 16 July, 2018 (32 Asar, 2075)

GROUP BANK FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17 RESTATED RESTATED PARTICULARS NOTE FY 2074/75 FY 2073/74 FY 2074/75 FY 2073/74

Interest Income 4.29 7,665,882,082 5,427,830,619 7,647,361,187 5,427,830,619 Interest Expense 4.30 4,758,167,715 3,108,710,613 4,776,433,114 3,113,432,728 Net Interest Income 2,907,714,367 2,319,120,006 2,870,928,074 2,314,397,891 Fee and Commission Income 4.31 630,890,254 525,689,944 619,913,935 517,251,423 Fee and Commission Expense 4.32 156,832,524 160,951,054 159,339,397 161,126,207 Net Fee and Commission Income 474,057,730 364,738,890 460,574,537 356,125,216 Net Interest, Fee and Commisson Income 3,381,772,097 2,683,858,896 3,331,502,611 2,670,523,107 Net Trading Income 4.33 (4,213,288) (15,039,447) - - Other Operating Income 4.34 228,220,735 161,767,072 227,687,940 148,444,059 Total Operating Income 3,605,779,544 2,830,586,521 3,559,190,551 2,818,967,166 Impairment Charge/ (Reversal) for Loans and Other Lossess 4.35 48,592,743 74,914,523 48,592,743 74,914,523 Net Operating Income 3,557,186,801 2,755,671,998 3,510,597,807 2,744,052,643 Operating Expense Personnel Expenses 4.36 922,548,218 699,371,977 908,491,597 688,899,187 Other Operating Expenses 4.37 449,742,801 318,879,547 442,241,660 312,593,742 Depreciation & Amortisation 4.38 113,892,669 48,866,519 112,414,993 47,529,783 Operating Profit 2,071,003,112 1,688,553,954 2,047,449,558 1,695,029,931 Non Operating Income 4.39 68,202,348 31,719,267 68,202,348 13,917,746 Non Operating Expense 4.40 164,382,029 85,922,276 164,382,029 85,922,276 Profit Before Income Tax 1,974,823,432 1,634,350,946 1,951,269,877 1,623,025,401 Income Tax Expense 4.41 479,188,636 512,967,882 474,298,024 510,173,471 Current Tax 621,264,344 454,034,370 615,003,079 447,435,702 Deferred Tax (142,075,707) 58,933,512 (140,705,055) 62,737,769 Profit for the Period 1,495,634,796 1,121,383,063 1,476,971,853 1,112,851,929 Profit Attributable to: - - Equity-holders of the Bank 1,491,635,514 1,116,867,702 - - Non-Controlling Interest 3,999,282 4,515,361 - - Profit for the Period 1,495,634,796 1,121,383,063 1,476,971,853 1,112,851,929 Earnings per Share Basic Earnings per Share 18.36 17.39 18.13 17.26 Diluted Earnings per Share 18.36 17.39 18.13 17.26

Moti Lal Dugar Dr. Bhogendra Guragain Er. Bachchharaj Tater Malchand Dugar As per our report of even date CHAIRMAN DIRECTOR DIRECTOR DIRECTOR

Dr. Dipak Psd Bhattarai Dipak Nepal Jyoti Kumar Begani Om Krishna Joshi DIRECTOR DIRECTOR DIRECTOR DIRECTOR

CA Rajesh Poudel, Partner Sarbendra Mishra Apachh K Yadav Ratna Raj Bajracharya P.L. Shrestha & Co., CHIEF FINANCIAL OFFICER DEPUTY GENERAL MANAGER CHIEF EXECUTIVE OFFICER Chartered Accountants

PLACE: Kathmandu DATE: 29 November, 2018

102 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

For the year ended on 16 July, 2018 STATEMENT OF OTHER COMPREHENSIVE INCOME (32 Asar, 2075)

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Net Profit for the year 1,495,634,796 1,121,383,063 1,476,971,853 1,112,851,929 Other Comprehensive Income, Net of Income Tax a) Items that will not be reclassified to profit or loss n Gains/(losses) from investments in equity instruments measured at fair value 218,118,395 34,470,617 218,118,395 34,470,617 n Gains/(losses) on revalution - - - - n Atuarial gains/(loss) on defined benefit plans (12,045,984) 513,956 (12,045,984) 513,956 n Income tax relating to above items (61,821,723) (10,495,372) (61,821,723) (10,495,372) Net other comprehsive income that will not be reclassified to profit or loss 144,250,687 24,489,201 144,250,687 24,489,201 b) Items that are or may be reclassified to profit or loss n Gains/(losses) on cash flow hedge - n Exchange gains/(losses) (arising from translating financial assets of foreign operation) - n Income tax relating to above items - n Reclassify to profit or loss Net other comprehsive income that are or may be reclassified to profit or loss - - - - c) Share of other comprehensive income of associate accounted as per equited method Other Comprehensive Income for the Period, Net of Income Tax 144,250,687 24,489,201 144,250,687 24,489,201 Total Comprehensive Income for the Period 1,639,885,483 1,145,872,264 1,621,222,541 1,137,341,130 Total Comprehensive Income attributable to: Equity-Holders of the Bank Non-Controlling Interest 3,999,282 4,515,361 Total Comprehensive Income for the Period 1,635,886,201 1,141,356,903 1,621,222,541 1,137,341,130

Moti Lal Dugar Dr. Bhogendra Guragain Er. Bachchharaj Tater Malchand Dugar As per our report of even date CHAIRMAN DIRECTOR DIRECTOR DIRECTOR

Dr. Dipak Psd Bhattarai Dipak Nepal Jyoti Kumar Begani Om Krishna Joshi DIRECTOR DIRECTOR DIRECTOR DIRECTOR

CA Rajesh Poudel, Partner Sarbendra Mishra Apachh K Yadav Ratna Raj Bajracharya P.L. Shrestha & Co., CHIEF FINANCIAL OFFICER DEPUTY GENERAL MANAGER CHIEF EXECUTIVE OFFICER Chartered Accountants

PLACE: Kathmandu DATE: 29 November, 2018

ANNUAL REPORT | 2017-18 103 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

STATEMENT OF CHANGES IN EQUITY For the year ended on 16 July, 2018 (32 Asar, 2075)

GROUP ATTRIBUTABLE TO EQUITY-HOLDERS OF THE BANK NON- TOTAL PARTICULARS SHARE SHARE GENERAL EXCHANGE REGULATORY FAIR VALUE REVALUATION RETAINED OTHER TOTAL CONTROLLING EQUITY CAPITAL PREMIUM RESERVE EQUALISATION RESERVE RESERVE RESERVE EARNING RESERVE INTEREST

Balance at Shrawan 01, 2073 5,301,395,141 - 774,260,314 21,181,584 - - - 15,996,590 31,832,466 6,144,666,095 - 6,144,666,095 Adjustment/Restatement (1,325,348,800) ------1,771,867,403 (25,527,803) 420,990,800 420,990,800 Adjustment/Restated Balance as at Shrawan 01, 2073 3,976,046,341 - 774,260,314 21,181,584 - - - 1,787,863,993 6,304,663 6,565,656,895 6,565,656,895 Comprehensive Income for the year - - Profit for the year 1,121,383,063 1,121,383,063 1,121,383,063 Other Comprehensive Income, Net of Tax - - - - - 24,129,432 - - 359,769 24,489,201 24,489,201 Gains/(losses) from investments in equity instruments measured at fair value 24,129,432 24,129,432 24,129,432 Gains/(losses) on revalution - - Atuarial gains/(losse) on defined benefit plans 359,769 359,769 359,769 Gains/(losses) on cash flow hedge - - Exchange gains/(losses) (arising from translating financial assets of foreign operation) - - Total Comprehensive Income for the year - - - - - 24,129,432 - 1,121,383,063 359,769 1,145,872,264 1,145,872,264 Transfer to Reserves during the year 235,217,747 1,786,864 - - (311,054,005) (64,033,109) (138,082,503) 29,262,061 (108,820,442) Transfer from Reserves during the year ------Transactions with Owners, directly recognized in Equity - - Right Share Issued 1,564,892,700 1,564,892,700 1,564,892,700 Share Based Payments - - Dividend to Equity-Holders - - Bonus Shares Issued 1,325,348,800 (1,325,348,800) - - Cash Dividend Paid - - Addition from acquisition during the year 151,816,860 148,047,816 - - 102,895,190 97,701,060 125,314,387 625,775,314 625,775,314 Total Contributions by and Distributions - - Balance at Asar 31, 2074 7,018,104,701 - 1,157,525,877 22,968,448 - 127,024,622 - 1,370,545,311 67,945,710 9,764,114,669 29,262,061 9,793,376,730 Balance at Shrawan 01, 2074 7,018,104,701 - 1,157,525,877 22,968,448 - 127,024,622 - 1,370,545,311 67,945,710 9,764,114,669 29,262,061 9,793,376,730 Adjustment/Restatement (513,956) (513,956) (513,956) Adjustment/Restated Balance as at Shrawan 01, 2074 7,018,104,701 - 1,157,525,877 22,968,448 - 127,024,622 - 1,370,031,355 67,945,710 9,763,600,713 29,262,061 9,792,862,774 Comprehensive Income for the year - - Profit for the year 1,495,634,796 1,495,634,796 1,495,634,796 Other Comprehensive Income, Net of Tax - - - - - 152,682,876 - - (8,432,189) 144,250,687 - 144,250,687 Gains/(losses) from investments in equity instruments measured at fair value 152,682,876 152,682,876 152,682,876 Gains/(losses) on revalution - - Atuarial gains/(losse) on defined benefit plans (8,432,189) (8,432,189) (8,432,189) Gains/(losses) on cash flow hedge - - Exchange gains/(losses) (arising from translating financial assets of foreign operation) - - Total Comprehensive Income for the year - - - - - 152,682,876 - 1,495,634,796 (8,432,189) 1,639,885,483 - 1,639,885,483 Transfer to Reserves during the year - 295,394,371 4,173,321 526,481,883 - - (838,499,900) 8,451,024 (3,999,301) 25,428,282 21,428,981 Transfer from Reserves during the year ------13,800,816 (13,800,816) - - Transactions with Owners, directly recognized in Equity - - Right Share Issued 71,074,300 127,161,065 - 198,235,365 198,235,365 Share Based Payments - - - Dividend to Equity-Holders - - Bonus Shares Issued 1,063,376,850 (1,063,376,850) - - - Cash Dividend Paid - - - Total Contributions by and Distributions - - Balance at Asar 31, 2075 8,152,555,851 127,161,065 1,452,920,248 27,141,769 526,481,883 279,707,498 - 977,590,216 54,163,730 11,597,722,260 54,690,343 11,652,412,603

104 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

GROUP ATTRIBUTABLE TO EQUITY-HOLDERS OF THE BANK NON- TOTAL PARTICULARS SHARE SHARE GENERAL EXCHANGE REGULATORY FAIR VALUE REVALUATION RETAINED OTHER TOTAL CONTROLLING EQUITY CAPITAL PREMIUM RESERVE EQUALISATION RESERVE RESERVE RESERVE EARNING RESERVE INTEREST

Balance at Shrawan 01, 2073 5,301,395,141 - 774,260,314 21,181,584 - - - 15,996,590 31,832,466 6,144,666,095 - 6,144,666,095 Adjustment/Restatement (1,325,348,800) ------1,771,867,403 (25,527,803) 420,990,800 420,990,800 Adjustment/Restated Balance as at Shrawan 01, 2073 3,976,046,341 - 774,260,314 21,181,584 - - - 1,787,863,993 6,304,663 6,565,656,895 6,565,656,895 Comprehensive Income for the year - - Profit for the year 1,121,383,063 1,121,383,063 1,121,383,063 Other Comprehensive Income, Net of Tax - - - - - 24,129,432 - - 359,769 24,489,201 24,489,201 Gains/(losses) from investments in equity instruments measured at fair value 24,129,432 24,129,432 24,129,432 Gains/(losses) on revalution - - Atuarial gains/(losse) on defined benefit plans 359,769 359,769 359,769 Gains/(losses) on cash flow hedge - - Exchange gains/(losses) (arising from translating financial assets of foreign operation) - - Total Comprehensive Income for the year - - - - - 24,129,432 - 1,121,383,063 359,769 1,145,872,264 1,145,872,264 Transfer to Reserves during the year 235,217,747 1,786,864 - - (311,054,005) (64,033,109) (138,082,503) 29,262,061 (108,820,442) Transfer from Reserves during the year ------Transactions with Owners, directly recognized in Equity - - Right Share Issued 1,564,892,700 1,564,892,700 1,564,892,700 Share Based Payments - - Dividend to Equity-Holders - - Bonus Shares Issued 1,325,348,800 (1,325,348,800) - - Cash Dividend Paid - - Addition from acquisition during the year 151,816,860 148,047,816 - - 102,895,190 97,701,060 125,314,387 625,775,314 625,775,314 Total Contributions by and Distributions - - Balance at Asar 31, 2074 7,018,104,701 - 1,157,525,877 22,968,448 - 127,024,622 - 1,370,545,311 67,945,710 9,764,114,669 29,262,061 9,793,376,730 Balance at Shrawan 01, 2074 7,018,104,701 - 1,157,525,877 22,968,448 - 127,024,622 - 1,370,545,311 67,945,710 9,764,114,669 29,262,061 9,793,376,730 Adjustment/Restatement (513,956) (513,956) (513,956) Adjustment/Restated Balance as at Shrawan 01, 2074 7,018,104,701 - 1,157,525,877 22,968,448 - 127,024,622 - 1,370,031,355 67,945,710 9,763,600,713 29,262,061 9,792,862,774 Comprehensive Income for the year - - Profit for the year 1,495,634,796 1,495,634,796 1,495,634,796 Other Comprehensive Income, Net of Tax - - - - - 152,682,876 - - (8,432,189) 144,250,687 - 144,250,687 Gains/(losses) from investments in equity instruments measured at fair value 152,682,876 152,682,876 152,682,876 Gains/(losses) on revalution - - Atuarial gains/(losse) on defined benefit plans (8,432,189) (8,432,189) (8,432,189) Gains/(losses) on cash flow hedge - - Exchange gains/(losses) (arising from translating financial assets of foreign operation) - - Total Comprehensive Income for the year - - - - - 152,682,876 - 1,495,634,796 (8,432,189) 1,639,885,483 - 1,639,885,483 Transfer to Reserves during the year - 295,394,371 4,173,321 526,481,883 - - (838,499,900) 8,451,024 (3,999,301) 25,428,282 21,428,981 Transfer from Reserves during the year ------13,800,816 (13,800,816) - - Transactions with Owners, directly recognized in Equity - - Right Share Issued 71,074,300 127,161,065 - 198,235,365 198,235,365 Share Based Payments - - - Dividend to Equity-Holders - - Bonus Shares Issued 1,063,376,850 (1,063,376,850) - - - Cash Dividend Paid - - - Total Contributions by and Distributions - - Balance at Asar 31, 2075 8,152,555,851 127,161,065 1,452,920,248 27,141,769 526,481,883 279,707,498 - 977,590,216 54,163,730 11,597,722,260 54,690,343 11,652,412,603

ANNUAL REPORT | 2017-18 105 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Contd... STATEMENT OF CHANGES IN EQUITY

BANK ATTRIBUTABLE TO EQUITY-HOLDERS OF THE BANK TOTAL PARTICULARS SHARE SHARE GENERAL EXCHANGE REGULATORY FAIR VALUE REVALUATION RETAINED OTHER TOTAL EQUITY CAPITAL PREMIUM RESERVE EQUALISATION RESERVE RESERVE RESERVE EARNING RESERVE

Balance at Shrawan 01, 2073 5,301,395,141 - 774,260,314 21,181,584 - - - 15,996,590 31,832,466 6,144,666,095 6,144,666,095 Adjustment/Restatement (1,325,348,800) ------1,771,867,403 (25,527,803) 420,990,800 420,990,800 Adjustment/Restated Balance as at Shrawan 01, 2073 3,976,046,341 - 774,260,314 21,181,584 - - - 1,787,863,993 6,304,663 6,565,656,895 6,565,656,895 Comprehensive Income for the year - - Profit for the year 1,112,851,929 1,112,851,929 1,112,851,929 Other Comprehensive Income, Net of Tax - - - - - 24,129,432 - - 359,769 24,489,201 24,489,201 Gains/(losses) from investments in equity instruments measured at fair value 24,129,432 24,129,432 24,129,432 Gains/(losses) on revalution - - Atuarial gains/(losses) on defined benefit plans 359,769 359,769 359,769 Gains/(losses) on cash flow hedge - - Exchange gains/(losses) (arising from translating financial assets of foreign operation) - - Total Comprehensive Income for the year - - - - - 24,129,432 - 1,112,851,929 359,769 1,137,341,130 1,137,341,130 Transfer to Reserves during the year 235,217,747 1,786,864 - - (332,125,268) (71,682,358) (166,803,015) (166,803,015) Transfer from Reserves during the year ------Transactions with Owners, directly recognized in Equity - - - Share Issued 1,564,892,700 1,564,892,700 1,564,892,700 Share Based Payments - - Dividend to Equity-Holders - - Bonus Shares Issued 1,325,348,800 (1,325,348,800) - - Cash Dividend Paid - - Addition from acquisition during the year 151,816,860 148,047,816 - 102,895,190 106,232,194 125,314,387 634,306,448 634,306,448 Total Contributions by and Distributions - - Balance at Asar 31, 2074 7,018,104,701 - 1,157,525,877 22,968,448 - 127,024,622 - 1,349,474,048 60,296,461 9,735,394,157 9,735,394,157 Balance at Shrawan 01, 2074 7,018,104,701 - 1,157,525,877 22,968,448 - 127,024,622 - 1,349,474,048 60,296,461 9,735,394,157 9,735,394,157 Adjustment/Restatement (513,956) - (513,956) (513,956) Adjustment/Restated Balance as at Shrawan 01, 2074 7,018,104,701 - 1,157,525,877 22,968,448 - 127,024,622 - 1,348,960,092 60,296,461 9,734,880,201 9,734,880,201 Comprehensive Income for the year - - Profit for the year 1,476,971,853 1,476,971,853 1,476,971,853 Other Comprehensive Income, Net of Tax - - - - - 152,682,876 - - (8,432,189) 144,250,687 144,250,687 Gains/(losses) from investments in equity instruments measured at fair value 152,682,876 152,682,876 152,682,876 Gains/(losses) on revalution - - Atuarial gains/(losse) on defined benefit plans (8,432,189) (8,432,189) (8,432,189) Gains/(losses) on cash flow hedge - - Exchange gains/(losses) (arising from translating financial assets of foreign operation) - - Total Comprehensive Income for the year - - - - - 152,682,876 - 1,476,971,853 (8,432,189) 1,621,222,541 1,621,222,541 Transfer to Reserves during the year - 295,394,371 4,173,321 526,481,883 - (834,500,599) 8,451,024 0 0 Transfer from Reserves during the year - - 13,800,816 (13,800,816) - - Transactions with Owners, directly recognized in Equity - - Share Issued 71,074,300 127,161,065 198,235,365 198,235,365 Share Based Payments - - Dividend to Equity-Holders - - Bonus Shares Issued 1,063,376,850 (1,063,376,850) - - Cash Dividend Paid - - Total Contributions by and Distributions - - Balance at Asar 31, 2075 8,152,555,851 127,161,065 1,452,920,248 27,141,769 526,481,883 279,707,498 - 941,855,312 46,514,480 11,554,338,107 11,554,338,107

Moti Lal Dugar Dr. Bhogendra Guragain Er. Bachchharaj Tater Malchand Dugar CHAIRMAN DIRECTOR DIRECTOR DIRECTOR

Dr. Dipak Psd Bhattarai Dipak Nepal Jyoti Kumar Begani Om Krishna Joshi DIRECTOR DIRECTOR DIRECTOR DIRECTOR

106 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

BANK ATTRIBUTABLE TO EQUITY-HOLDERS OF THE BANK TOTAL PARTICULARS SHARE SHARE GENERAL EXCHANGE REGULATORY FAIR VALUE REVALUATION RETAINED OTHER TOTAL EQUITY CAPITAL PREMIUM RESERVE EQUALISATION RESERVE RESERVE RESERVE EARNING RESERVE

Balance at Shrawan 01, 2073 5,301,395,141 - 774,260,314 21,181,584 - - - 15,996,590 31,832,466 6,144,666,095 6,144,666,095 Adjustment/Restatement (1,325,348,800) ------1,771,867,403 (25,527,803) 420,990,800 420,990,800 Adjustment/Restated Balance as at Shrawan 01, 2073 3,976,046,341 - 774,260,314 21,181,584 - - - 1,787,863,993 6,304,663 6,565,656,895 6,565,656,895 Comprehensive Income for the year - - Profit for the year 1,112,851,929 1,112,851,929 1,112,851,929 Other Comprehensive Income, Net of Tax - - - - - 24,129,432 - - 359,769 24,489,201 24,489,201 Gains/(losses) from investments in equity instruments measured at fair value 24,129,432 24,129,432 24,129,432 Gains/(losses) on revalution - - Atuarial gains/(losses) on defined benefit plans 359,769 359,769 359,769 Gains/(losses) on cash flow hedge - - Exchange gains/(losses) (arising from translating financial assets of foreign operation) - - Total Comprehensive Income for the year - - - - - 24,129,432 - 1,112,851,929 359,769 1,137,341,130 1,137,341,130 Transfer to Reserves during the year 235,217,747 1,786,864 - - (332,125,268) (71,682,358) (166,803,015) (166,803,015) Transfer from Reserves during the year ------Transactions with Owners, directly recognized in Equity - - - Share Issued 1,564,892,700 1,564,892,700 1,564,892,700 Share Based Payments - - Dividend to Equity-Holders - - Bonus Shares Issued 1,325,348,800 (1,325,348,800) - - Cash Dividend Paid - - Addition from acquisition during the year 151,816,860 148,047,816 - 102,895,190 106,232,194 125,314,387 634,306,448 634,306,448 Total Contributions by and Distributions - - Balance at Asar 31, 2074 7,018,104,701 - 1,157,525,877 22,968,448 - 127,024,622 - 1,349,474,048 60,296,461 9,735,394,157 9,735,394,157 Balance at Shrawan 01, 2074 7,018,104,701 - 1,157,525,877 22,968,448 - 127,024,622 - 1,349,474,048 60,296,461 9,735,394,157 9,735,394,157 Adjustment/Restatement (513,956) - (513,956) (513,956) Adjustment/Restated Balance as at Shrawan 01, 2074 7,018,104,701 - 1,157,525,877 22,968,448 - 127,024,622 - 1,348,960,092 60,296,461 9,734,880,201 9,734,880,201 Comprehensive Income for the year - - Profit for the year 1,476,971,853 1,476,971,853 1,476,971,853 Other Comprehensive Income, Net of Tax - - - - - 152,682,876 - - (8,432,189) 144,250,687 144,250,687 Gains/(losses) from investments in equity instruments measured at fair value 152,682,876 152,682,876 152,682,876 Gains/(losses) on revalution - - Atuarial gains/(losse) on defined benefit plans (8,432,189) (8,432,189) (8,432,189) Gains/(losses) on cash flow hedge - - Exchange gains/(losses) (arising from translating financial assets of foreign operation) - - Total Comprehensive Income for the year - - - - - 152,682,876 - 1,476,971,853 (8,432,189) 1,621,222,541 1,621,222,541 Transfer to Reserves during the year - 295,394,371 4,173,321 526,481,883 - (834,500,599) 8,451,024 0 0 Transfer from Reserves during the year - - 13,800,816 (13,800,816) - - Transactions with Owners, directly recognized in Equity - - Share Issued 71,074,300 127,161,065 198,235,365 198,235,365 Share Based Payments - - Dividend to Equity-Holders - - Bonus Shares Issued 1,063,376,850 (1,063,376,850) - - Cash Dividend Paid - - Total Contributions by and Distributions - - Balance at Asar 31, 2075 8,152,555,851 127,161,065 1,452,920,248 27,141,769 526,481,883 279,707,498 - 941,855,312 46,514,480 11,554,338,107 11,554,338,107

Ratna Raj Bajracharya Sarbendra Mishra As per our report of even date CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER

Apachh K Yadav PLACE: Kathmandu DEPUTY GENERAL MANAGER DATE: 29 November, 2018 CA Rajesh Poudel, Partner P.L. Shrestha & Co., Chartered Accountants

ANNUAL REPORT | 2017-18 107 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

STATEMENT OF CASH FLOWS For the year ended on 16 July, 2018 (32 Asar, 2075)

GROUP BANK FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17 RESTATED RESTATED PARTICULARS FY 2074/75 FY 2073/74 FY 2074/75 FY 2073/74

Cash Flows from Operating Activities Interest Received 7,264,058,495 5,149,858,859 7,264,058,495 5,149,858,859 Fee and Other Income Received 621,104,241 540,029,064 621,104,241 540,029,064 Dividend Received - - - - Receipts from Other Operating Activities 291,880,117 178,140,312 276,534,441 155,670,991 Interest Paid (4,762,032,994) (2,959,722,613) (4,762,032,994) (2,959,722,613) Commissions and Fees Paid (159,339,397) (161,126,207) (159,339,397) (161,126,207) Cash Payment to Employees (827,022,828) (624,187,028) (813,501,982) (612,087,619) Other Expenses Paid (712,435,953) (555,263,502) (703,809,176) (548,345,064) Operating Cash Flows before Changes in Operating Assets and Liabilities 1,716,211,680 1,567,728,884 1,723,013,627 1,564,277,411

(Increase) Decrease in Operating Assets (8,935,917,233) (8,479,876,732) (8,938,685,136) (8,481,828,729) Due from Nepal Rastra Bank - - - - Placement with Banks and Financial Institutions (511,582,516) (739,878,679) (511,582,516) (739,878,679) Other Trading Assets - - - - Loans and Advances to BFIs 113,769,916 (157,811,123) 113,769,916 (157,811,123) Loans and Advances to Customers (9,004,783,523) (7,723,080,437) (9,004,783,523) (7,723,080,437) Other Assets 466,678,889 140,893,507 463,910,987 138,941,511

Increase (Decrease) in Operating Liabilities 8,937,008,493 10,042,967,033 8,994,515,609 10,046,014,313 Due to Banks and Financials Institutions (1,753,923,827) 2,061,048,982 (1,753,923,827) 2,061,048,982 Due to Nepal Rastra Bank 526,567,379 - 526,567,379 - Deposit from Customers 10,026,218,926 7,315,018,826 10,079,968,068 7,304,864,212 Borrowings - - Other Liabilities 138,146,015 666,899,226 141,903,990 680,101,120 Net Cash Flow from Operating Activities before Tax Paid 1,717,302,939 3,130,819,185 1,778,844,100 3,128,462,996 Income Tax Paid (498,960,828) (575,360,282) (491,882,126) (567,004,452) Net Cash Flow from Operating Activities 1,218,342,111 2,555,458,904 1,286,961,974 2,561,458,544

Cash Flows from Investing Activities Purchase of Investment Securities (3,720,415,526) (1,021,388,398) (3,632,493,920) (1,008,680,823) Receipts from Sale of Investment Securities - - Purchase of Property and Equipment (306,811,081) (217,642,156) (305,611,381) (216,948,278) Receipts from Sale of Property and Equipment - - Purchase of Intangible Assets (17,881,413) (52,641,141) (17,881,413) (52,641,141) Purchase of Investment Properties - - Receipts from Sale of Investment Properties - - Interest Received 186,049,783 123,081,881 186,049,783 123,081,881 Dividend Received - - - - Net Cash Used in Investing Activities (3,859,058,237) (1,168,589,815) (3,769,936,931) (1,155,188,361)

108 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Contd... STATEMENT OF CASH FLOWS

GROUP BANK FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17 RESTATED RESTATED PARTICULARS FY 2074/75 FY 2073/74 FY 2074/75 FY 2073/74

Cash Flows from Financing Activities Receipts from Issue of Debt Securities - - Repayments of Debt Securities - - Receipts from Issue of Subordinated Liabilities - - Repayments of Subordinated Liabilities - - Receipt from Issue of Shares 1,361,612,215 2,920,241,500 1,261,612,215 2,890,241,500 Dividends Paid (15,000,000) (28,000,000) - Interest Paid - - Other Receipts/Payments (877,445,669) (1,328,326,976) (877,445,669) (1,328,326,976) Net Cash from Financing Activities 469,166,545 1,563,914,524 384,166,545 1,561,914,524

Net Increase (Decrease) in Cash and Cash Equivalents (2,171,549,581) 2,950,783,613 (2,098,808,411) 2,968,184,707 Cash and Cash Equivalents at Shrawan 01, 2073 9,774,444,038 6,816,512,970 9,557,178,288 6,581,846,126 Effect of Exchange Rate fluctuations on Cash and Cash Equivalents Held 16,693,283 7,147,455 16,693,283 7,147,455 Closing Cash and Cash Equivalents 7,619,587,739 9,774,444,038 7,475,063,160 9,557,178,288

Moti Lal Dugar Dr. Bhogendra Guragain Er. Bachchharaj Tater Malchand Dugar As per our report of even date CHAIRMAN DIRECTOR DIRECTOR DIRECTOR

Dr. Dipak Psd Bhattarai Dipak Nepal Jyoti Kumar Begani Om Krishna Joshi DIRECTOR DIRECTOR DIRECTOR DIRECTOR

CA Rajesh Poudel, Partner Sarbendra Mishra Apachh K Yadav Ratna Raj Bajracharya P.L. Shrestha & Co., CHIEF FINANCIAL OFFICER DEPUTY GENERAL MANAGER CHIEF EXECUTIVE OFFICER Chartered Accountants

PLACE: Kathmandu DATE: 29 November, 2018

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NOTES TO FINACIAL STATEMENT

1. SUNRISE BANK e-banking products, remittances, foreign currency operations and other financial LIMITED services to its customers through its branches, extension counters, strategic business units, ATMs and network of agents.

1.1. GENERAL Ownership of Subsidiary as at 16th July 2018 is given below: Sunrise Bank Limited (hereinafter referred to as “the Bank”) is a public NAME PRINCIPAL ACTIVITIES FY 2017/18 FY 2016/17 limited liability company domiciled in Nepal with its registered office at Sunrise Capital Management of public offerings, portfolio 78.571% Limited management, underwriting of securities, shareholding Gairidhara, Kathmandu. The Bank’s management of mutual fund schemes. shares are listed and traded in Nepal Stock Exchange Limited. The Bank carries out commercial banking Subsidiary activities and other financial services The principal activities of the Subsidiary are to provide merchant/investment in Nepal under the license from Nepal banking services that include management of public offerings, portfolio Rastra Bank (NRB), the Central Bank management, underwriting of securities, fund management of mutual fund of Nepal, as Class “A” licensed financial schemes, depository participant's service under Central Depository Service (CDS) institution under the Bank and and administration and record keeping of securities of its clients. Financial Institution Act, 2017.

1.2 FINANCIAL STATEMENTS 2. BASIS OF PREPARATION The Financial Statements of the Bank for the year ended 16 July 2018 2.1 STATEMENT OF COMPLIANCE comprises Statement of Financial The Financial Statements of the Bank have been prepared in accordance with Position, Statement of Profit or Loss, Nepal Financial Reporting Standards and carve-outs issued by the Institute of Statement of Other Comprehensive Chartered Accountants of Nepal on September 20, 2018 on NFRS requirement, Income, Statement of Changes in which allowed alternative treatments and the bank adopted following carve outs: Equity, Statement of Cash Flows, a. NAS 17: Lease, Notes to the Financial Statements, b. NAS 39: Financial Instruments: Recognition and measurement, Significant Accounting Policies of the - Impairment accounting, Company and Statement of Financial - Calculation of interest income as per effective interest rate Position and reconciliation as at the - Calculation of interest income on amortized cost transition date (i.e. 17 July, 2016). Disclosure of carve-outs is provided in para 3.16 for Lease (NAS 17) and para 2.4.3, The Consolidated Financial Statements 3.1, 3.4.2, 3.4.6 and 3.13 for Financial Instruments: Recognition and measurement comprises Parent “Sunrise Bank” and (NAS39). its subsidiary “Sunrise Capital Limited” which together is referred to as the Financial information recorded in compliance with directives of Nepal Rastra Group. Bank and relevant business practices followed by the bank unless as adjusted for compliance with NFRS. 1.3 PRINCIPAL ACTIVITIES AND OPERATIONS 2.2 REPORTING PERIOD AND APPROVAL OF FINANCIAL STATEMENTS

Bank 2.2.1 Reporting Period The principal activities of the Bank The accounting policies set out below have been applied consistently to all periods are to provide commercial banking presented in these financial statements and in preparing the opening NFRS services including agency services, statement of financial position as 16 July 2016, which is the opening date of the trade finance services, investment and previous financial year for the purposes of the transition to NFRSs, unless otherwise treasury operations, card services, stated.

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The Bank follows the Nepalese financial year based on the Nepalese calendar. The corresponding dates for the English calendar are as follows:

RELEVANT FINANCIAL STATEMENT NEPALESE CALENDAR ENGLISH CALENDAR DATE / PERIOD DATE / PERIOD

Opening NFRS SFP* date 1 Shrawan 2073 16 July 2016

Comparative SFP* Date 31 Ashadh 2074 15 July 2017 Comparative reporting period 1 Shrawan 2073 - 31 Ashadh 2074 16 July 2016 - 15 July 2017

First NFRS SFP* Date 32 Ashadh 2075 16 July 2018 First NFRS reporting period 1 Shrawan 2074 - 32 Ashadh 2075 16 July 2017 - 16 July 2018

*SFP = Statement of financial position

2.2.2 Responsibility for that affect the application of 2.4.2 Fair Value of Financial Statements accounting policies and the reported Financial Instruments The Board of Directors is responsible amounts of assets, liabilities, income Where the fair values of financial for the preparation and presentation and expenses. Actual results may differ assets and financial liabilities recorded of Financial Statements of Sunrise from these estimates. in the statement of financial position Bank Limited as per Nepal Financial can be derived from active markets, Reporting Standards (NFRS). Estimates and underlying assumptions they are derived from observable are reviewed on an ongoing basis. market data. However, if this is not 2.2.3 Approval of Financial Revisions to accounting estimates are available, judgment is required to Statements by Directors recognized in the period in which the establish fair values. The valuation of The accompanied Financial estimate is revised and in any future financial instruments is described in Statements have been authorized periods affected. more details in Note 5.1 under “Fair by the Board of Directors vide Value of financial assets and liabilities”. its resolution dated 2075/08/13 The most significant areas of (2018/11/29) and recommended for estimation, uncertainty and critical 2.4.3 Impairment of Financial its approval by the Annual General judgments in applying accounting Assets – Loans and Receivables Meeting of the shareholders. policies that have most significant The Bank reviews its individually effect in the Financial Statements are significant loans and advances at each 2.3 FUNCTIONAL AND as follows: statement of financial position date PRESENTATION CURRENCY to assess whether an impairment loss should be recorded in the income The Financial Statements of the Bank 2.4.1 Going Concern statement. In particular, judgment of are presented in Nepalese Rupees The Board of Directors has made the management is required in the (Rs), a functional and presentation an assessment of the Bank’s ability estimation of the amount and timing currency, which is the currency of to continue as a going concern and of future cash flows when determining the primary economic environment is satisfied that it has the resources the impairment loss. in which the Bank operates. Financial to continue in business for the information are presented in Nepalese foreseeable future. Furthermore, the Rupees. There was no change in Board of Directors is not aware of any These estimates are based on Bank’s presentation and functional material uncertainties that may cast assumptions about a number of currency during the year under review. significant doubt upon Bank’s ability to factors and actual results may differ, continue as a going concern and they resulting in future changes to the 2.4 USE OF ESTIMATES, do not intend either to liquidate or to impairment allowance. ASSUMPTIONS AND JUDGMENTS cease operations of it. Therefore, the The preparation of Financial Financial Statements continue to be Loans and advances that have Statements in conformity with Nepal prepared on the going concern basis. been assessed individually and Financial Reporting Standards (NFRS) all individually insignificant loans requires the management to make and advances are then assessed judgments, estimates and assumptions collectively, in groups of assets

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with similar risk characteristics, to are considered for incurred loss model uncertainties that exist with respect determine whether provision should impairment which approximately to the interpretation of the applicable be made due to incurred loss events comes at 35% of total portfolio. tax laws, at the time of preparation of for which there is objective evidence, these Financial Statements. but the effects of which are not yet The bank has opted to apply carve- evident. The collective assessment out on impairment of loans and Deferred tax assets are recognized takes in to account data from the loan receivables. Accordingly, individual in respect of tax losses to the extent portfolio such as levels of arrears, and collective impairment loss amount that it is probable that future taxable credit quality, portfolio size etc. and calculated as per NFRS is compared profit will be available against which judgments based on current economic with the impairment provision required the losses can be utilized. Judgment conditions. under NRB directive no. 2, higher is required to determine the amount of the amount derived from these of deferred tax assets that can be The Bank has categorized total loan measures is taken as impairment loss recognized, based upon the likely into 5 products namely Term Loan, for loans and receivables. timing and level of future taxable Personal Loan, Home Loan, Hire profits, together with future tax Purchase, Short Term Loan. The loan 2.4.4 Impairment of Financial planning strategies. has been classified into various period Instruments designated at fair value on the basis of due days as follows: through other comprehensive income 2.4.6 Defined Benefit Plans The Bank reviews its debt securities The cost of the defined benefit AGEING designated at fair value through obligations and the present value of other comprehensive income, their obligations are determined using CURRENT at each reporting date to assess actuarial valuations. 01-30 DAYS whether they are impaired. Objective 31-60 DAYS evidence that an debt security The actuarial valuation involves making designated at fair value through 61-90 DAYS assumptions about discount rates, other comprehensive income is future salary increments, mortality 91-120 DAYS impaired includes among other things rates and possible future pension 121-150 DAYS significant financial difficulty of the increments if any. Due to the long- issuer, a breach of contract such as term nature of these plans, such 151-180 DAYS a default or delinquency in interest estimates are subject to uncertainty. 180 DAYS AND ABOVE or principal payments etc. The Bank All assumptions are reviewed at each also records impairment charges on reporting date. equity investments designated at fair The Loss rate on each period has value through other comprehensive been calculated by multiplying In determining the appropriate income where there is significant or Probability of Default (PD) with Loss discount rate, management considers prolonged decline in fair value below Given Default (LGD). Probability of the interest rates of Nepal government their cost. The determination of what Default has been calculated on the bonds with maturities corresponding is ‘significant’ or ‘prolonged’ requires basis of probability matrix by taking to the expected duration of the judgment. The Bank generally treats 48 months loan data as the basis. For defined benefit obligation. The ‘significant’ as 20% and ‘prolonged’ as the purpose of calculation of Loss mortality rate is based on publicly greater than six months. In addition, Given Default (LGD), the loan which available mortality tables. Future salary Bank evaluates, among other factors, has been categorized as loss as per increment and pension increment historical share price movements, NRB directive, has been taken and the are based on expected future salary duration and extent up to which the recovery history of the same has been increment rates of the Bank. fair value of an investment is less than analyzed upon to reach the LGD. The its cost. individually impaired loan has been 2.4.7 Fair Value of Property, subtracted from the total loan and Plant and Equipment 2.4.5 Taxation the same has been multiplied by loss The freehold land and buildings of the The Bank is subject to income tax and rate to calculate collective impairment. bank are not reflected at fair value and judgment is required to determine Total impairment is the sum of the no revaluation has been carried at the the total provision for current, collective and individual impairment. reporting date. Under NFRS 1, a first- Loans and advances above 40 million deferred and other taxes due to the

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time adopter may elect to use a previous GAAP revaluation of an item of property, capital appreciation or both and plant and equipment at, or before, the date of transition to NFRSs as deemed cost which generates cash flows largely at the date of the revaluation, if the revaluation was, at the date of the revaluation, independently of the other assets broadly comparable to: held by the Bank is accounted for a. Fair value; or as investment properties. On the b. Cost or depreciated cost in accordance with NFRSs, adjusted to reflect, for other hand, a property that is used example, changes in a general or specific price index for operations or in the process of providing services or for administrative 2.4.8 Useful Life-time of the Property, Plant and Equipment purposes and which do not directly The Bank is following the cost model for recognition of Property, Plant and generate cash flows as a standalone Equipment. The Bank reviews the residual values, useful lives and methods of assets are accounted for as property, depreciation of property, plant and equipment at each reporting date. plant and equipment. The Bank assesses on an annual basis the Land is not depreciated. Depreciation of other assets is calculated using the written accounting classification of its down value method to amortize their cost over their estimated useful lives, as properties taking into consideration follows: the current use of such properties. Currently the Bank does not have any S. N. ASSETS TYPES LIFE OF AN ASSET (IN YEARS) investment property.

1. Building 50 2. Furniture & Fixtures 10 2.5 CHANGES IN 3. Office Equipments 10 ACCOUNTING POLICIES 4. Plant & Machinery 10 Accounting policies are the specific 5. Vehicles 7 principles, bases, conventions, rules 6. Computers and Accessories 7 and practices applied by the bank in 7. Intangible Assets 5 preparing and presenting financial 8. Leasehold Assets 10 statements. The bank is permitted 9. Deferred Furnishing 3 to change an accounting policy only if the change is required by a Costs of refurbishment and renovation of leasehold premises are depreciated over standard or interpretation; or results the remaining period of that lease or 10 years, whichever is less. in the financial statements providing reliable and more relevant information about the effects of transactions, For additions during the year, depreciation is charged from the month the assets other events or conditions on the is put to use and for disposed assets, depreciation is charged up to the month entity's financial position, financial immediately preceding the month of disposal. performance, or cash flows. The bank uses the same accounting policies Licence fees for the software paid by the Bank are amortized over the period of the in its opening NFRS statement of licence. Profit or loss on disposal of fixed assets is recognized in the profit and loss financial position and throughout all of the year. periods presented in its first NFRS financial statements. Those accounting 2.4.9 Commitments and Contingencies policies comply with each NFRS All discernible risks are accounted for in determining the amount of all known effective at the end of its first NFRS liabilities. Contingent liabilities are possible obligations whose existence will be reporting period. confirmed only by uncertain future events or present obligations where the transfer of economic benefit is not probable or cannot be reliably measured. Contingent 2.6 New Standards in issue liabilities are not recognized in the Statement of Financial Position but are disclosed but not yet effective unless they are remote. Standards issued but not yet effective up to the date of issuance of the 2.4.10 Classification of Investment Properties financial statements are set out below. Management requires using its judgment to determine whether a property The Bank will adopt these standards qualifies as an investment property. The Bank has developed criteria so it can when they become effective. exercise its judgment consistently. A property that is held to earn rentals or for

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NFRS 9- Financial Instruments: 2.7 NEW STANDARDS AND at carrying amount i.e. amount NFRS 9 states a logical principle base INTERPRETATION NOT ADOPTED disbursed to borrower and amount to classify financial assets and financial The bank has adopted applicable received from the lender by the liabilities which is driven by cash flow Nepal Financial Reporting Standards bank. characteristics and the business model which are effective as on the date of in which an assets or liability is held. preparation of this financial statement. 3.2 BASIS OF CONSOLIDATION Further this standard recommends the assessment of impairment based on 2.8 DISCOUNTING 3.2.1 Business Combinations more timely recognition of incurred When the realization of assets and and Goodwill losses as referred in NAS 39 and settlement of obligation is for more Business combinations are accounted entities are required to account for than one year, the Bank considers for using the acquisition method incurred credit losses from the initial the discounting of such assets and as per the requirements of Nepal recognition of financial instruments. liabilities where the impact is material. Financial Reporting Standard - NFRS Various internal and external factors 03 (Business Combinations). The Bank IFRS 9 became effective on 1 January have been considered for determining measures goodwill as the fair value of 2018 and will have an effect on the discount rate to be applied to the the consideration transferred including classification and measurement of cash flows of company. the recognized amount of any non- the Bank’s financial assets. NFRS 9, as controlling interest in the acquiree, less issued reflects the first phase of work the net recognized amount (generally on replacement of NAS 39 and applies 3. SIGNIFICANT fair value) of the identifiable assets to classification and measurement of ACCOUNTING POLICIES acquired and liabilities assumed, financial assets and liabilities. all measured as of the acquisition date. When the excess is negative, a The accounting policies set bargain purchase gain is immediately IFRS 15- Revenue from out below have been applied recognized in the profit or loss. contract with customers: consistently to all periods presented The IASB issued a new standard for in these Financial Statements, unless revenue recognition which overhauls otherwise indicated. The Bank elects on a transaction-by the existing revenue recognition transaction basis whether to measure standards. The standard requires the non-controlling interest at its fair value, 3.1 BASIS OF MEASUREMENT following five step model framework to or at its proportionate share of the The Financial Statements of the Bank be followed for revenue recognition: recognized amount of the identifiable have been prepared on the historical net assets, at the acquisition date. cost basis, except for the following The consideration transferred does a. Identification of the contracts with material items in the Statement of not include amounts related to the the customer Financial Position: b. Identification of the performance settlement of pre-existing relationships. obligations in the contract Such amounts are generally recognized a. Investment designated at fair value c. Determination of the transaction in profit or loss. Transactions costs, through other comprehensive price other than those associated with the income (quoted) is measured at fair d. Allocation of the transaction price to issue of debt or equity securities, that value. the performance obligations in the the Bank incurs in connection with a b. Liabilities for defined benefit contract (as identified in step ii) business combination are expensed as obligations are recognized at the e. Recognition of revenue when the incurred. present value of the defined benefit entity satisfies a performance obligation less the fair value of the obligation. The Bank has applied Exemptions for plan assets. NFRS 3 as follows: c. Financial assets and financial The new standard would be effective liabilities held at amortized cost at for annual periods starting from 1 measured using a rate that is a close A first-time adopter may elect not January 2018 and early application is approximation of effective interest to apply NFRS 3 retrospectively to allowed. The management is assessing rate. However, the bank has opted past business combinations (business the potential impact on its financial to apply carve-out and measure combinations that occurred before the statements resulting from application the financial assets and liabilities date of transition to NFRSs). However, of IFRS 15. if a first-time adopter restates any

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business combination to comply with The acquired identifiable assets, between the subsidiary and the bank NFRS 3 it shall restate all later business liabilities are measured at their cost at (profits or losses resulting from intra- combinations and shall also apply the date of acquisition. After the initial group transactions that are recognized NFRS 10 from that same date. measurement, the Bank continues in assets, such as inventory and fixed to recognize the investments in assets, are eliminated in full). 3.2.2 Non-Controlling Interest (NCI) subsidiaries at cost. The group presents non-controlling 3.3 CASH AND CASH interests in its consolidated statement The subsidiary of the Bank is EQUIVALENTS of financial position within equity, incorporated in Nepal. Cash and Cash Equivalents include separately from the equity of the cash in hand, balances with banks owners of the parent. The group 3.2.4 Loss of Control and money at call and at short notice. attributes the profit or loss and each When the Bank loses control over a These are subject to insignificant risk component of other comprehensive Subsidiary, it derecognizes the assets of changes in their fair value and are income to the owners of the parent and liabilities of the former subsidiary used by the Bank in the management and to the non-controlling interests. from the consolidated statement of of short term commitments. The proportion allocated to the financial position. The Bank recognizes SUNRISE Bank and non-controlling any investment retained in the former Details of the Cash and Cash interests are determined on the basis subsidiary at its fair value when control Equivalents are given in Note 4.1 to the of present ownership interests. is lost and subsequently accounts for Financial Statements. it and for any amounts owed by or to The group also attributes total the former subsidiary in accordance 3.4 FINANCIAL ASSETS AND comprehensive income to the owners with relevant NFRSs. That fair value FINANCIAL LIABILITIES of the Bank and to the non-controlling shall be regarded as the fair value on interests even if this results in the non- initial recognition of a financial asset 3.4.1 Initial Recognition controlling interests having a deficit in accordance with relevant NFRS or, balance. when appropriate, the cost on initial A. Date of Recognition recognition of an investment in an All financial assets and liabilities associate or joint venture. The Bank 3.2.3 Subsidiaries are initially recognized on the recognizes the gain or loss associated Subsidiaries are entities that are trade date, i.e. the date on which with the loss of control attributable to controlled by the Bank. The Bank is the Bank becomes a party to the former controlling interest. presumed to control an investee when the contractual provisions of it is exposed or has rights to variable the instrument. This includes returns from its involvement with 3.2.5 Special Purpose Entity (SPE) ‘regular way trades’. Regular way the investee and has the ability to An entity may be created to trade means purchases or sales affect those returns through its power accomplish a narrow and well-defined of financial assets that required over the investee. At each reporting objective (eg. to effect a lease, delivery of assets within the time date the Bank reassesses whether research and development activities frame generally established by it controls an investee if facts and or a securitization of financial assets). regulation or convention in the circumstances indicate that there are Such a special purpose entity (‘SPE’) market place. changes to one or more elements of may take the form of a corporation, control mentioned above. trust, partnership or unincorporated B. Recognition and Initial entity. Measurement of Financial The Financial Statements of subsidiary Instruments are fully consolidated from the date The Bank does not have any special The classification of financial on which control is transferred to the purpose entity. instruments at the initial Bank and continue to be consolidated recognition depends on their until the date when such control 3.2.6 Transaction elimination purpose and characteristics and ceases. The Financial Statements of on consolidation the management’s intention the Bank’s subsidiary are prepared In consolidating a subsidiary, the group in acquiring them. All financial for the same reporting year as per eliminates full intra-group assets and instruments are measured initially the Bank, using consistent accounting liabilities, equity, income, expenses at their fair value plus transaction policies. and cash flows relating to transactions costs that are directly attributable

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to acquisition or issue of such derivative financial instruments liabilities or both, which are financial instruments except in entered into by Bank that are not managed and their performance the case of such financial assets designated as hedging instruments evaluated on a fair value basis, in and liabilities at fair value through in hedge relationships as defined accordance with a documented profit or loss, as per the Nepal by Nepal Accounting Standards risk management or investment Accounting Standard - NAS 39 (NAS) 39 “Financial Instruments: strategy. (Financial Instruments: Recognition Recognition and Measurement”. n The assets contain one or more and Measurement). Transaction embedded derivatives that costs in relation to financial assets Financial assets held for trading significantly modify the cash and financial liabilities at fair value are recorded in the Statement flows that would otherwise through profit or loss are dealt with of Financial Position at fair have been required under the the Statement of Profit or Loss. value. Changes in fair value are contract. recognized in ‘Net trading income’. 3.4.2 Classification and Subsequent Dividend income is recorded in Financial assets designated at Measurement of Financial Instruments ‘Net trading income’ when the fair value through profit or loss right to receive the payment has are recorded in the Statement of Classification and Subsequent been established Financial Position at fair value. Measurement of Financial Assets Changes in fair value are recorded in ‘Net gain or loss on financial At the inception, a financial asset is Bank evaluates its held for instruments designated at fair classified into one of the following: trading asset portfolio, other value through profit or losses’ than derivatives, to determine in the Statement of Profit or a. Financial assets at fair value whether the intention to sell Loss. Interest earned is accrued through profit or loss them in the near future is still under ‘Interest income’, using the b. Financial assets held for trading appropriate. When Bank is effective interest rate method, c. Financial assets designated at fair unable to trade these financial while dividend income is recorded value through profit or loss assets due to inactive markets under ‘Other operating income’ d. Held to Maturity Financial Assets and management’s intention when the right to receive the e. Loans and Receivables to sell them in the foreseeable payment has been established. f. Financial assets designated future significantly changes, at fair value through Other the Bank may elect to reclassify Comprehensive Income these financial assets. Financial The Bank has not designated assets held for trading include any financial assets upon initial The subsequent measurement of instruments such as government recognition as designated at fair financial assets depends on their securities and equity instruments value through profit or loss. classification. that have been acquired principally for the purpose of selling or b. Held to Maturity Financial Assets a. Financial Assets at Fair Value repurchasing in the near term. Held to Maturity Financial Assets are through Profit or Loss non-derivative financial assets with A financial asset is classified as fair ii. Financial Assets Designated at fixed or determinable payments and value through profit or loss if it is held Fair Value through Profit or Loss fixed maturities which the Bank has for trading or is designated at fair Bank designates financial assets at the intention and ability to hold to value through profit or loss. fair value through profit or loss in maturity. After the initial measurement, the following circumstances: held to maturity financial investments are subsequently measured at i. Financial Assets Held for Trading amortized cost using the effective Financial assets are classified as n Such designation eliminates interest rate, less impairment. The held for trading if they are acquired or significantly reduces amortization is included in ‘Interest principally for the purpose of measurement or recognition income’ in the Statement of Profit selling or repurchasing in the inconsistency that would or Loss. The losses arising from near term or holds as a part of a otherwise arise from measuring impairment of such investments are portfolio that is managed together the assets. recognized in the Statement of Profit for short-term profit or position n The assets are part of a group or Loss. taking. This category also includes of Financial assets, financial

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c. Loans and Receivables neither classified as ‘Held for Trading’ In the normal course of business, the from Customers nor ‘Designated at fair value through fair value of a financial instrument on Loans and receivables include non- profit or loss’. Debt securities in this initial recognition is the transaction derivative financial assets with fixed or category are intended to be held price (that is, the fair value of the determinable payments that are not for an indefinite period of time and consideration given or received). quoted in an active market, other than: may be sold in response to needs for In certain circumstances, however, liquidity or in response to changes in the fair value will be based on n Those that the Bank intends to sell the market conditions. other observable current market immediately or in the near term and transactions in the same instrument, those that the Bank, upon initial After initial measurement, financial without modification or repackaging, recognition, designates as fair value investments designated at fair value or on a valuation technique whose through profit or loss. through other comprehensive income variables include only data from n Those that the Bank, upon initial are subsequently measured at fair observable markets, such as interest recognition, designated at fair value. Unrealized gains and losses are rate yield, option volatilities and value through other comprehensive recognized directly in equity through currency rates. When such evidence income ‘Other comprehensive income / exists, the Bank recognizes a n Those for which the Bank may not expense’ in the ‘Fair Value reserve’. trading gain or loss on inception of recover substantially all of its initial When the investment is disposed of the financial instrument, being the investment through contractual the cumulative gain or loss previously difference between the transaction cash flows, other than because of recognized in equity is recognized in price and fair value. credit deterioration. the Statement of Profit or Loss under ‘Other operating income’. Interest When unobservable market data have After initial measurement, loans earned whilst holding ‘ financial a significant impact on the valuation and receivables are subsequently investments designated at fair value of financial instruments, the entire measured at amortized cost using the through other comprehensive income’ initial difference in fair value from the effective interest rate, less allowance is reported as ‘Interest income’ using transaction price as indicated by the for impairment. The amortization the effective interest rate. Dividend valuation model is not recognized is included in ‘Interest Income’ in earned whilst holding ‘financial immediately in the income statement. the Statement of Profit or Loss. The investments designated at fair value Instead, it is recognized over the life losses arising from impairment are through other comprehensive income’ of the transaction on an appropriate recognized in ‘Impairment charge / are recognized in the Statement of basis, when the inputs become reversal for loans and other losses’ in Profit or Loss as ‘other operating observable, the transaction matures or the Statement of Profit or Loss. income’ when the right to receive the is closed out, or when the Bank enters payment has been established. The into an offsetting transaction. However, the bank has opted to apply losses arising from impairment of carve-out provided by the Institute such investments are recognized in Classification and Subsequent of Chartered Accountants of Nepal the Statement of Profit or Loss under Measurement of Financial Liabilities and recognize interest income at ‘Impairment charge for loans and other At the inception, Bank determines the the coupon rate and continually losses’ and removed from the ‘fair classification of its financial liabilities. measured the carrying amount of value reserve’. Accordingly financial liabilities are loans and receivable at cost/fair value classified as: less repayment and allowance for Financial assets designated at fair impairment. value through other comprehensive a. Financial liabilities at fair value income that are monetary securities through profit or loss d. Financial Assets designated denominated in a foreign currency i. Financial liabilities held for at fair value through Other – translation differences related to trading Comprehensive Income changes in the amortized cost of the ii. Financial liabilities designated Financial Assets designated at fair security are recognized in income at fair value through profit or value through Other Comprehensive statement and other changes in the loss Income include equity and debt carrying amount are recognized in b. Financial liabilities at amortized securities. Equity Investments other comprehensive income. cost classified here are those which are

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a. Financial Liabilities at Fair n The liability contains one or 3.4.3 Reclassification Value through Profit or Loss more embedded derivatives of Financial Instruments Financial Liabilities at fair value that significantly modify the through profit or loss include financial cash flows that would otherwise a. Reclassification of Financial liabilities held for trading and financial have been required under the Instruments ‘At fair value liabilities designated upon initial contract. through profit or loss’, recognition as fair value through Bank does not reclassify derivative profit or loss. Subsequent to initial b. Financial Liabilities at financial instruments out of the fair recognition, financial liabilities at Amortized Cost value through profit or loss category fair value through profit or loss are Financial instruments issued by Bank when it is held or issued. measured at fair value and changes that are not classified as fair value therein are recognized in profit or loss. through profit or loss are classified Non-derivative financial instruments as financial liabilities at amortized designated at fair value through profit cost, where the substance of the i. Financial Liabilities or loss upon initial recognition is not contractual arrangement results in Held for Trading reclassified subsequently out of fair Bank having an obligation either to Financial liabilities are classified as value through profit or loss category. held for trading if they are acquired deliver cash or another financial asset principally for the purpose of to another Bank, or to exchange Bank may, in rare circumstances selling or repurchasing in the financial assets or financial liabilities reclassify financial instruments out near term or holds as a part of a with another Bank under conditions of fair value through profit or loss portfolio that is managed together that are potentially unfavorable to category if such instruments are for short-term profit or position the Bank or settling the obligation by no longer held for the purpose of taking. This category includes delivering variable number of Bank’s selling or repurchasing in the near derivative financial instrument own equity instruments. term notwithstanding that such entered into by Bank that are not financial instruments may have been designated as hedging instruments After initial recognition, such acquired principally for the purpose in hedge relationships as defined financial liabilities are subsequently of selling or repurchasing in the near by Nepal Accounting Standard measured at amortized cost using term. Financial assets classified as - NAS 39 (Financial Instruments: the effective interest rate method. fair value through profit or loss at Recognition and Measurement). Within this category, deposits and the initial recognition which would debt instruments with fixed maturity have also met the definition of ‘Loans period have been recognized at ii. Financial Liabilities and Receivables’ as at that date amortized cost using the method that Designated at Fair Value is reclassified out of the fair value very closely approximates effective through Profit or Loss through profit or loss category only if interest rate method. The amortization Bank designates financial liabilities Bank has the intention and ability to is included in ‘Interest Expenses’ in the at fair value through profit or loss hold such asset for the foreseeable Statement of Profit or Loss. Gains and at following circumstances: future or until maturity. losses are recognized in the Statement of Profit or Loss when the liabilities are n Such designation eliminates The fair value of financial instruments derecognized. or significantly reduces at the date of reclassification is measurement or recognition treated as the new cost or amortized However, the bank has opted to apply inconsistency that would cost of the financial instrument after carve-out provided by the Institute otherwise arise from measuring reclassification. Any gain or loss of Chartered Accountants of Nepal the liabilities. already recognized in respect of the and recognise interest expense at the n The liabilities are part of a group reclassified financial instrument until coupon rate and continually measured of Financial assets, financial the date of reclassification is not the carrying amount of loans and liabilities or both, which are reversed to the Statement of Profit or receivable at cost/fair value less managed and their performance Loss. evaluated on a fair value basis, in repayment. accordance with a documented If a financial asset is reclassified, and risk management or investment if Bank subsequently increases its strategy

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estimates of the future cash receipts the date of reclassification is However, if Bank were to sell or as a result of increased recoverability amortized to profit or loss over the reclassify more than an insignificant of those cash receipts, the effect remaining life of the investment amount of held to maturity of that increase is recognized as an using the effective interest rate. If investments before maturity [other adjustment to the effective interest the financial asset is subsequently than in certain specific circumstances rate from the date of the change in impaired, any previous gain or permitted in Nepal Accounting estimate rather than an adjustment to loss that has been recognized in Standard - NAS 39(Financial the carrying amount of the asset at other comprehensive income is Instruments: Recognition and the date of change in estimate. reclassified from equity to profit Measurement)], the entire category or loss. would be tainted and would have to be b. Reclassification of Financial reclassified as ‘Financial Instruments Instruments designated at fair value ii. Financial assets designated at fair value through other through other comprehensive income without fixed maturity: comprehensive income’. Furthermore, Bank may reclassify financial assets Gain or loss recognized up to Bank would be prohibited from out of financial assets designated the date of reclassification is classifying any financial assets as at fair value through other recognized in profit or loss only ‘Held to Maturity’ during the following comprehensive income category as a when the financial asset is sold two years. These reclassifications result of change in intention or ability or otherwise disposed of. If the are at the election of management or in rare circumstances that a reliable financial asset is subsequently and determined on an instrument by measure of fair value is no longer impaired, any previous gain or instrument basis. available. loss that has been recognized in other comprehensive income is 3.4.4 De-recognition of Financial A financial asset designated at fair reclassified from equity to profit Assets and Liabilities value through other comprehensive or loss. income that would have met the a. De-recognition of Financial Assets definition of loans and receivables If a financial asset is reclassified, Bank derecognizes a financial asset at the initial recognition may be and if Bank subsequently increases (or where applicable a part of financial reclassified out of financial assets its estimates of future cash asset or part of a group of similar designated at fair value through other receipts as a result of increased financial assets) when: comprehensive income to the loans recoverability of those cash and receivables category if Bank has receipts, the effect of that increase n The rights to receive cash flows the intention and ability to hold such is recognized as an adjustment from the asset have expired; or asset for the foreseeable future or until to the effective interest rate from n Bank has transferred its rights to maturity. the date of the change in estimate receive cash flows from the asset rather than an adjustment to the or The fair value of financial instruments carrying amount of the asset at the n Bank has assumed an obligation at the date of reclassification is date of change in estimate. to pay the received cash flows in treated as the new cost or amortized full without material delay to a cost of the financial instrument after c. Reclassification of ‘Held to third party under a ‘pass-through’ reclassification. Difference between Maturity’ Financial Instruments arrangement and either Bank has the new amortized cost and the As a result of a change in intention transferred substantially all the maturity value is amortized over or ability, if it is no longer appropriate risks and rewards of the asset the remaining life of the asset using to classify an investment as held to or it has neither transferred nor the effective interest rate. Any gain maturity, Bank may reclassify such retained substantially all the risks or loss already recognized in Other financial assets designated at fair and rewards of the asset, but has Comprehensive Income in respect of value through other comprehensive transferred control of the asset. the reclassified financial instrument is income and re- measured at fair accounted as follows: value. Any difference between the On de-recognition of a financial asset, carrying value of the financial asset the difference between the carrying i. Financial assets before reclassification and fair value amount of the asset (or the carrying with fixed maturity: is recognized in equity through other amount allocated to the portion of the Gain or loss recognized up to comprehensive income. asset derecognized) and the sum of

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the consideration received (including exchange or modification is treated as over the life of the agreement using any new asset obtained less any new de-recognition of the original liability the effective interest rate. If securities liability assumed) and any cumulative and the recognition of a new liability. purchased under agreement to resell gain or loss that had been recognized are subsequently sold to third parties, in other comprehensive income is The difference between the carrying the obligation to return the securities recognized in profit or loss. value of the original financial liability is recorded as a short sale within and the consideration paid is ‘Financial liabilities held for trading’ When Bank has transferred its recognized in profit or loss. and measured at fair value with any rights to receive cash flows from gains or losses included in ‘Net trading income’. an asset or has entered into a pass- c. Repurchase and Reverse through arrangement and has neither Repurchase Agreements transferred nor retained substantially Securities sold under agreement 3.4.5 Fair Value Measurement all of the risks and rewards of the asset to repurchase at a specified future ‘Fair value’ is the price that would be nor transferred control of the asset, date are not de-recognized from the received to sell an asset or paid to the asset is recognized to the extent Statement of Financial Position as transfer a liability (exit price) in an of the Bank’s continuing involvement the Bank retains substantially all of orderly transaction between market in the asset. In that case, Bank also the risks and rewards of ownership. participants at the measurement date recognizes an associated liability. The The corresponding cash received in the principal or, in its absence, the transferred asset and the associated is recognized in the Statement of most advantageous market to which liability are measured on a basis that Financial Position as a liability with the Bank has access at that date. The reflects the rights and obligations that a corresponding obligation to return fair value of liability reflects its non- Bank has retained. it, including accrued interest under performance risk. When available, the ‘Securities sold under repurchase Bank measures the fair value of an When Bank’s continuing involvement agreements’, reflecting the instrument using the quoted price in that takes the form of guaranteeing transaction’s economic substance to an active market for that instrument the transferred asset, the extent of the the Bank. The difference between the (Level 01valuation). A market is continuing involvement is measured sale and repurchase prices is treated regarded as active if transactions for at the lower of the original carrying as interest expense and is accrued the asset or liability take place with amount of the asset and the maximum over the life of the agreement using sufficient frequency and volume to amount of consideration received by the effective interest rate. When the provide pricing information on an Bank that Bank could be required to bank has the right to sell or re-pledge ongoing basis on an arm’s length basis. repay. the securities, the Bank reclassifies those securities in its Statement of If there is no quoted price in an active When securities classified as financial Financial Position as ‘Financial assets market, then the Bank uses valuation instruments designated at fair value held for trading pledged as collateral techniques that maximize the use through other comprehensive income or ‘Financial assets designated at fair of relevant observable inputs and are sold, the accumulated fair value value through other comprehensive minimize the use of unobservable adjustments recognized in other income pledged as collateral, as inputs. The chosen valuation technique comprehensive income are reclassified appropriate. incorporates all of the factors that to income statement as gains and market participants would take into losses from investment securities. Conversely, securities purchased account in pricing a transaction. under agreements to resell at future b. De-recognition of date are not recognized in the The best evidence of the fair value Financial Liabilities Statement of Financial Position. The of a financial instrument at initial A financial liability is derecognized consideration paid, including accrued recognition is normally the transaction when the obligation under the liability interest, is recorded in the Statement price - i.e. the fair value of the is discharged or cancelled or expired. of Financial Position, under “Reverse consideration given or received. If the Where an existing financial liability is repurchase agreements’ reflecting the Bank determines that the fair value replaced by another from the same transaction’s economic substance to at initial recognition differs from the lender on substantially different terms the Bank. The difference between the transaction price and the fair value is or the terms of an existing liability purchase and resale prices is recorded evidenced neither by a quoted price are substantially modified, such an as ‘Interest income’ and is accrued in an active market for an identical

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asset or liability (Level 01 valuation) 3.4.6 Impairment of Financial Assets assesses them for impairment. nor based on a valuation technique Bank assesses at each reporting However, assets that are individually that uses only data from observable date, whether there is any objective assessed for impairment and for which markets (Level 02 valuation), then evidence that a financial asset or an impairment loss is or continues to the financial instrument is initially group of financial assets not carried be recognized are not included in a measured at fair value, adjusted to at fair value through profit or loss collective assessment of impairment. defer the difference between the fair is impaired. A financial asset or value at initial recognition and the group of financial assets is deemed If there is an objective evidence transaction price. Subsequently, that to be impaired if and only if there is that an impairment loss has been difference is recognized in profit or objective evidence of impairment as a incurred, the amount of the loss is loss on an appropriate basis over the result of one or more events, that have measured as the difference between life of the instrument but not later occurred after the initial recognition the assets’ carrying amount and the than when the valuation is wholly of the asset (an ‘incurred loss event’) present value of estimated future supported by observable market data and that loss event (or events) has an cash flows (excluding future expected or the transaction is closed out. impact on the estimated future cash credit losses that have not yet been flows of the financial asset or group incurred). The carrying amount of the Fair values reflect the credit risk of the of financial assets that can be reliably asset is reduced through the use of an instrument and include adjustments estimated. allowance account and the amount of to take account of the credit risk of the loss is recognized in the income the Bank entity and the counterparty Evidence of impairment may include: statement. Interest income continues where appropriate. Fair value indications that the borrower or a to be accrued on the reduced carrying estimates obtained from models are group of borrowers is experiencing amount and is accrued using the adjusted for any other factors, such as significant financial difficulty; the rate of interest used to discount the liquidity risk or model uncertainties; probability that they will enter future cash flows for the purpose of to the extent that the Bank believes a bankruptcy or other financial measuring the impairment loss. third-party market participant would reorganization; default or delinquency take them into account in pricing a in interest or principal payments; and i. Individually Assessed transaction. where observable data indicates that Financial Assets there is a measurable decrease in the The criteria used to determine The fair value of a demand deposit estimated future cash flows, such whether there is objective evidence is not less than the amount payable as changes in arrears or economic of impairment include and not on demand, discounted from the first conditions that correlate with defaults. limited to: date on which the amount could be required to be paid. a. Impairment of Financial Assets n Known Cash Flow difficulties carried at Amortized Cost experienced by the borrowers: A fair value measurement of a non- For financial assets carried at n Past due contractual payments financial asset takes into account a amortized cost, such as amounts of either principal or interest; market participant’s ability to generate due from banks, held to maturity n Breach of loan covenants or economic benefits by using the asset investments etc., Bank first assesses conditions; in its highest best use or by selling it to individually whether objective n The probability that the another market participant that would evidence of impairment exists for borrower will enter bankruptcy use the asset in its highest and best financial assets that are individually or other financial reorganization; use. significant or collectively for financial and assets that are not individually n A significant downgrading in significant. In the event Bank The Bank recognizes transfers credit rating by an external determines that no objective evidence between levels of the fair value credit rating agency. of impairment exists for an individually hierarchy as of the end of the assessed financial asset, it includes the reporting period during which the If there is objective evidence that asset in a group of financial assets with change has occurred. an impairment loss on financial similar credit risk characteristics such assets measured at amortized as collateral type, past due status and cost has been incurred, the other relevant factors and collectively amount of the loss is measured by

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discounting the expected future business model and their AS PER NRB 2074/75 cash flows of a financial asset capacity to trade successfully Loan Loss Provision 1,112,849,682 at its original effective interest out of financial difficulties and Charged to P& L 393,293,979 rate and comparing the resultant generate sufficient cash flows to present value with the financial service debt obligations; Incurred but not yet identified asset’s current carrying amount. n The amount and timing impairment The impairment allowances on of expected receipts and Individually assessed financial individually significant accounts recoveries; assets for which no evidence of are reviewed more regularly n The extent of other creditors loss has been specifically identified when circumstances require. ‘commitments ranking ahead of, on an individual basis are grouped This normally encompasses re- or pari-pasu with the Bank and together according to their credit assessment of the enforceability the likelihood of other creditors risk characteristics for the purpose of any collateral held and the continuing to support the of calculating an estimated timing and amount of actual and company; collective loss. This reflects anticipated receipts. Individually n The realizable value of security impairment losses that the bank assessed impairment allowances and likelihood of successful has incurred as a result of events are only released when there is repossession; occurring before the reporting reasonable and objective evidence date, which the Bank is not able to of reduction in the established ii. Collectively Assessed identify on an individual loan basis loss estimate. Interest on impaired Financial Assets and that can be reliably estimated. assets continues to be recognized Impairment is assessed on through the unwinding of the a collective basis in two These losses will only be discount. circumstances: individually identified in the future. As soon as information becomes Loans together with the associated n To cover losses which have been available which identifies losses on allowance are written off when incurred but have not yet been individual financial assets within there is no realistic prospect of identified on loans subject to the group, those financial assets future recovery and all collateral individual assessment; and are removed from the group and has been realized or has been n For homogeneous groups of assessed on an individual basis for transferred to the Bank. If, in a loans those are not considered impairment. subsequent year, the amount of individually significant. the estimated impairment loss The collective impairment increases or decreases because The bank has opted to apply allowance is determined after of an event occurring after the carve-out on impairment of loans taking into account: impairment was recognized, the and receivables. Accordingly, previously recognized impairment individual and collective n Historical Loss Experience in loss is increased or reduced by impairment loss amount calculated portfolios of similar credit risk; adjusting the allowance account. If as per NFRS is compared with and a future write off is later recovered, the impairment provision required n Management’s experienced the recovery is credited to the under NRB directive no.2, higher judgment as to whether current impairment charges for loans and of the amount derived from these economic and credit conditions other losses. measures is taken as impairment are such that the actual level of loss for loans and receivables. inherent losses at the reporting When impairment losses are date is like to be greater or determined for those financial Impairment losses under both less than that suggested by assets where objective evidence options are presented hereunder; historical experience. of impairment exists, the following common factors are considered: AS PER NFRS 2074/75 Homogeneous groups of Individual 154,981,713 Financials Assets n Bank’s aggregate exposure to Collective 173,753,081 Statistical methods are used to the customer; Total 328,734,794 determine impairment losses on a n The viability of the customer’s Charge to P/L (157,584,702) collective basis for homogenous

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groups of financial assets. Losses and regulations to be subject to an individual or in these groups of financial assets n Property prices collective impairment assessment, are recorded on an individual basis n Payment status calculated using the loan’s original when individual financial assets are effective interest rate (EIR). written off, at which point they are iii. Reversal of Impairment removed from the group. If the amount of an impairment vi. Collateral Valuation loss decreases in a subsequent The Bank seeks to use collateral, Bank uses the following method to period and the decrease can be where possible, to mitigate its calculate historical loss experience related objectively to an event risks on financial assets. The on collective basis: occurring after the impairment collateral comes in various forms was recognized, the excess is such as cash, securities, letters written back by reducing the After grouping of loans on the of credit/guarantees, real estate, financial asset Impairment basis of homogeneous risks, the receivables, inventories, other allowance account accordingly. Bank uses net flow rate method. non-financial assets and credit The write-back is recognized in the Under this methodology the enhancements such as netting Statement of Profit or Loss. movements in the outstanding agreements. The fair value of balance of customers into default collateral is generally assessed, at categories over the periods are iv. Write-off of Financial Assets a minimum, at inception and based used to estimate the amount of Carried At Amortized Cost on the guidelines issued by the financial assets that will eventually Financial assets (and the related Nepal Rastra Bank. Non-financial be irrecoverable, as a result of impairment allowance accounts) collateral, such as real estate, is the events occurring before the are normally written off either valued based on data provided by reporting date which the Bank is partially or in full, when there is third parties such as independent not able to identify on an individual no realistic prospect of recovery. valuator and audited financial loan basis. Where there is no realistic prospect statements. of recovery. Where financial assets are secured, this is generally after Under this methodology, loans are vii. Collateral Legally Repossessed receipt of any proceeds from the grouped into ranges according or Where Properties have realization of security. to the number of days in arrears Devolved to the Bank and statistical analysis is used to Legally Repossessed Collateral estimate the likelihood that loans v. Impairment of Rescheduled represents Non-Financial Assets in each range will progress through Loans and Advances acquired by the Bank in settlement the various stages of delinquency Where possible, the Bank seeks of the overdue loans. The assets and ultimately prove irrecoverable. to restructure loans rather than are initially recognized at fair to take possession of collateral. value when acquired. The Bank’s This may involve extending the policy is to determine whether a Current economic conditions payment arrangements and the repossessed asset is best used and portfolio risk factors are also agreement of new loan conditions. for its internal operations or evaluated when calculating the Once the terms have been should be sold. The proceeds appropriate level of allowance renegotiated, any impairment is are used to reduce or repay the required covering inherent loss. measured using the original EIR as outstanding claim. The immovable These additional macro and calculated before the modification property acquired by foreclosure portfolio risk factors may include: of terms and the loan is no longer of collateral from defaulting considered past due. Management customers, or which has devolved n Recent loan portfolio growth continually reviews renegotiated on the Bank as part settlement of and product mix loans to ensure that all criteria are debt, has not been occupied for n Unemployment rates met and that future payments are business use. n Gross Domestic Production likely to occur. The loans continue (GDP)Growth to be subject to a criteria are met These assets are shown as Legally n Inflation and that future payments are Repossessed Collateral under n Interest rates likely to occur. The loans continue “Other Assets.” n Changes in government laws

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b. Impairment of Financial Assets through other comprehensive income 3.6 DERIVATIVES ASSETS AND designated at fair value through other is recognized in other comprehensive DERIVATIVE LIABILITIES comprehensive income income. A derivative is a financial instrument For financial investments designated whose value changes in response to at fair value through other Bank writes-off certain financial the change in an underlying variable comprehensive income, Bank assesses investments designated at fair value such as an interest rate, commodity or at each reporting date whether there is through other comprehensive income security price, or index; that requires objective evidence that an investment when they are determined to be no initial investment, or one that is is impaired. uncollectible. smaller than would be required for a contract with similar response to changes in market factors; and that is In the case of debt instruments, Bank 3.4.7 Offsetting of settled at a future date. assesses individually whether there Financial Instruments is objective evidence of impairment Financial assets and financial based on the same criteria as financial liabilities are offset and the net Forward contracts are the contracts assets carried at amortized cost. amount presented in the Statement to purchase or sell a specific quantity However, the amount recorded for of Financial Position when and only of a financial instrument, a commodity, impairment is the cumulative loss when Bank has a legal right to set off or a foreign currency at a specified measured as the difference between the recognized amounts and it intends price determined at the outset, with the amortized cost and the current fair either to settle on a net basis or to delivery or settlement at a specified value, less any impairment loss on that realize the asset and settle the liability future date. Settlement is at maturity investment previously recognized in simultaneously. Income and expenses by actual delivery of the item specified the Income Statement. Future interest are presented on a net basis only when in the contract, or by a net cash income is based on the reduced permitted under NFRSs or for gains settlement. carrying amount and is accrued using and losses arising from a group of the rate of interest used to discount similar transaction such as in trading All freestanding contacts that are the future cash flows for the purpose activity. considered derivatives for accounting of measuring the impairment loss. If, purposes are carried at fair value on in a subsequent period, the fair value 3.4.8 Amortized Cost Measurement the statement of financial position of a debt instrument increases and The Amortized cost of a financial regardless of whether they are held the increase can be objectively related asset or liability is the amount at for trading or non-trading purposes. to a credit event occurring after the which the financial asset or liability is Changes in fair value on derivatives impairment loss was recognized, the measured at initial recognition, minus held for trading are included in impairment loss is reversed through principal repayments, plus or minus net gains/ (losses) from financial the Income Statement. the cumulative amortization using instruments in fair value through profit the effective interest method of any or loss on financial assets/ liabilities at In the case of equity investments difference between the initial amount fair value through profit or loss. designated at fair value through other recognized and the maturity amount, comprehensive income, objective minus any reduction for impairment. 3.7 PROPERTY, PLANT evidence would also include a AND EQUIPMENT ‘significant’ or ‘prolonged’ decline in 3.5 TRADING ASSETS the fair value of the investment below One of the categories of financial 3.7.1 Recognition its cost. Where there is evidence assets at fair value through profit Property, plant and equipment are of impairment, the cumulative loss or loss is “held for trading” financial tangible items that are held for measured as the difference between assets. All financial assets acquired use in the production or supply of the acquisition cost and the current or held for the purpose of selling in services, for rental to others or for fair value, less any impairment loss on the short term or for which there is administrative purposes and are that investment previously recognized a recent pattern of short term profit expected to be used during more in profit or loss is removed from equity taking are trading assets. than one period. The Bank applies the and recognized in the Statement of requirements of the Nepal Accounting profit or loss. However, any subsequent Standard - NAS 16 (Property, Plant and increase in the fair value of an impaired Equipment) in accounting for these equity security designated at fair value assets. Property, plant and equipment

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are recognized if it is probable that increase in the carrying amount is recognized in ‘Other comprehensive income’ future economic benefits associated and accumulated in equity, under capital reserve or used to reverse a previous with the asset will flow to the entity revaluation decrease relating to the same asset, which was charged to the and the cost of the asset can be Statement of Profit or Loss. In this circumstance, the increase is recognized as measured reliably measured. income to the extent of previous write down. Any decrease in the carrying amount is recognized as an expense in the Statement of Profit or Loss or debited to the 3.7.2 Measurement Other Comprehensive income to the extent of any credit balance existing in the An item of property, plant and capital reserve in respect of that asset. equipment that qualifies for recognition as an asset is initially The decrease recognized in other comprehensive income reduces the amount measured at its cost. Cost includes accumulated in equity under capital reserves. Any balance remaining in the expenditure that is directly attributable revaluation reserve in respect of an asset is transferred directly to retained earnings to the acquisition of the asset and on retirement or disposal of the asset. cost incurred subsequently to add to, replace part of an item of property, 3.7.5 Subsequent Cost plant& equipment. The cost of self- The subsequent cost of replacing a component of an item of property, plant and constructed assets includes the cost equipment is recognized in the carrying amount of the item, if it is probable that of materials and direct labor, any other the future economic benefits embodied within that part will flow to the Bank and costs directly attributable to bringing it can be reliably measured. The cost of day to day servicing of property, plant and the asset to a working condition for equipment are charged to the Statement of Profit or Loss as incurred. its intended use and the costs of dismantling and removing the items 3.7.6 Depreciation and restoring the site on which they Depreciation is calculated by using the written down value method on cost or are located. Purchased software that valuation of the Property & Equipment other than freehold land and leasehold is integral to the functionality of the properties. Depreciation on leasehold properties is calculated by using the straight related equipment is capitalized as line method on cost or valuation of the property. The rates of depreciations are part of computer equipment. When given below: parts of an item of property or

equipment have different useful lives, Rate of Depreciation per annum (%) they are accounted for as separate PARTICULARS FOR THE FY ENDED ON REMARKS items (major components) of property, MID JULY 2017 & 2018 plant and equipment. Building 5 Office Equipments/ Furniture 15 3.7.3 Cost Model Vehicle 15 Property and equipment is stated Computer Hardware 20 Computer Software 20 Depreciated in 5 years at cost excluding the costs of day– using Straight Line Method to–day servicing, less accumulated Leasehold - Lease period depreciation and accumulated Deferred Furnishing 33.33 Depreciated in 3 years impairment in value. Such cost using Straight Line Method includes the cost of replacing part of the equipment when that cost is incurred, if the recognition criteria are 3.7.7 Changes in Estimates met. The asset’s methods of depreciation are reviewed, and adjusted if appropriate, at each financial year end. 3.7.4 Revaluation Model The Bank has not applied the 3.7.8 Capital Work in Progress revaluation model to the any class of These are expenses of capital nature directly incurred in the construction freehold land and buildings or other of buildings, major plant and machinery and system development, awaiting assets. Such properties are carried at a capitalization. Capital work-in-progress would be transferred to the relevant asset previously recognized GAAP Amount. when it is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Capital On revaluation of an asset, any work-in-progress is stated at cost less any accumulated impairment losses.

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3.7.9 Borrowing Costs item that was initially recognized as an expense by the Bank in previous annual Borrowing costs directly attributable Financial Statements or interim Financial Statements are not recognized as part of to the acquisition, construction or the cost of an intangible asset at a later date. production of an asset that necessarily takes a substantial period of time to 3.8.2 Computer Software & Licenses get ready for its intended use or sale Cost of purchased licenses and all computer software costs incurred, licensed for are capitalized as part of the cost of use by the Bank, which are not integrally related to associated hardware, which can an asset. All other borrowing costs be clearly identified, reliably measured, and it’s probable that they will lead to future are expensed in the period in which economic benefits, are included in the Statement of Financial Position under the they occur. Borrowing costs consist category ‘Intangible assets’ and carried at cost less accumulated amortization and of interest and other costs that the any accumulated impairment losses. Bank incurs in connection with the borrowing of funds. 3.8.3 Subsequent Expenditure Expenditure incurred on software is capitalized only when it is probable that this 3.7.10 De-recognition expenditure will enable the asset to generate future economic benefits in excess The carrying amount of an item of of its originally assessed standard of performance and this expenditure can be property, plant and equipment is measured and attributed to the asset reliably. All other expenditure is expensed as derecognized on disposal or when incurred. no future economic benefits are expected from its use. The gain or Goodwill is measured at cost less accumulated impairment losses. Bank doesn’t loss arising from de-recognition of an have any goodwill in its books of accounts. item of property, plant and equipment is included in the Statement of 3.8.4 Amortization of Intangible Assets Profit or Loss when the item is Intangible Assets, except for goodwill, are amortized on a straight–line basis in derecognized. When replacement the Statement of Profit or Loss from the date when the asset is available for use, costs are recognized in the carrying over the best of its useful economic life based on a pattern in which the asset’s amount of an item of property, economic benefits are consumed by the bank. Amortization methods, useful lives, plant and equipment, the remaining residual values are reviewed at each financial year end and adjusted if appropriate. carrying amount of the replaced part The Bank assumes that there is no residual value for its intangible assets. is derecognized. Major inspection costs are capitalized. At each such capitalization, the remaining carrying ASSET CATEGORY FOR THE YEAR ENDED FOR THE YEAR ENDED amount of the previous cost of 16 JULY 2018 15 JULY 2017 inspections is derecognized. Computer Software 5 years 5 years Licenses 5 years or the period of license, 5 years or the period of license, 3.8 GOODWILL AND whichever is less whichever is less INTANGIBLE ASSETS

3.8.5 De-recognition of Intangible Assets 3.8.1 Recognition The carrying amount of an item of intangible asset is derecognized on disposal An intangible asset is an identifiable or when no future economic benefits are expected from its use. The gain or non-monetary asset without loss arising on de recognition of an item of intangible assets is included in the physical substance, held for use in Statement of Profit or Loss when the item is derecognized. the production or supply of goods or services, or for administrative 3.9 INVESTMENT PROPERTY purposes. An intangible asset is Investment property is property (land or a building or part of a building or both) recognized if it is probable that the held (by the owner or by the lessee under a finance lease) to earn rentals or for future economic benefits that are capital appreciation or both but not for sale in the ordinary course of business. attributable to the asset will flow to the entity and the cost of the asset can be measured reliably. An intangible asset is initially measured at cost. Expenditure incurred on an intangible

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3.10 INCOME TAX n In respect of taxable temporary Deferred tax assets and liabilities are As per Nepal Accounting Standard- differences associated with measured at the tax rates that are NAS 12 (Income Taxes) tax expense investments in subsidiaries, where expected to apply in the year when is the aggregate amount included the timing of the reversal of the the asset is realized or the liability in determination of profit or loss for temporary differences can be is settled, based on tax rates (and the period in respect of current and controlled and is probable that tax laws) that have been enacted or deferred taxation. Income Tax expense the temporary differences will not substantively enacted at the reporting is recognized in the statement of reverse in the foreseeable future. date. Profit or Loss, except to the extent it relates to items recognized directly Deferred tax assets are recognized for Current and deferred tax assets in equity or other comprehensive all deductible temporary differences, and liabilities are offset only to the income in which case it is recognized carried forward unused tax credits extent that they relate to income in equity or in other comprehensive and unused tax losses (if any), to the taxes imposed by the same taxation income. The Management periodically extent that it is probable that the authority. evaluates positions taken in tax returns taxable profit will be available against which the deductible temporary with respect to situations in which 3.11 DEPOSITS, DEBT SECURITIES differences, carried forward unused tax applicable tax regulation is subject to ISSUED AND SUBORDINATED interpretation. It establishes provisions credits and unused tax losses can be LIABILITIES where appropriate on the basis of utilized except: Deposits, debt securities issued and amounts expected to be paid to tax subordinated liabilities are the Bank’s authorities. n Where the deferred tax asset sources of funding. Deposits include relating to the deductible non-interest bearing deposits, saving 3.10.1 Current Tax temporary differences arising from deposits, term deposits, call deposits Current tax assets and liabilities the initial recognition of an asset or and margin deposits. The estimated consist of amounts expected to be liability in a transaction that is not fair value of deposits with no stated recovered from or paid to Inland a business combination, and at the maturity period is the amount Revenue Department in respect of time of transaction, affects neither repayable on demand. The fair value the current year, using the tax rates the accounting profit nor taxable of fixed interest bearing deposits is and tax laws enacted or substantively profit or loss. considered as the interest receivable enacted on the reporting date and any n In respect of deductible temporary on these deposits plus carrying adjustment to tax payable in respect differences associated with amount of these deposits. The fair of prior years. investments in Subsidiaries, value of debt securities issued is also deferred tax assets are recognized considered as the carrying amount 3.10.2 Deferred Tax only to the extent that it is probable of these debt securities issued. Deferred tax is provided on temporary that the temporary differences will Subordinated liabilities are liabilities differences at the reporting date reverse in the foreseeable future subordinated, at the event of winding between the tax bases of assets and and taxable profit will be available up, to the claims of depositors, debt liabilities and their carrying amounts against which the temporary securities issued and other creditors. for financial reporting purposes. difference will be utilized. Deferred tax liabilities are recognized 3.12 PROVISIONS The carrying amount of deferred tax for all taxable temporary differences A provision is recognized if, as a assets is reviewed at each reporting except: result of a past event, the Bank date and reduced to the extent that has a present legal or constructive it is probable that sufficient profit will n Where the deferred tax liability obligation that can be estimated be available to allow the deferred tax arises from the initial recognition of reliably, and it is probable that an asset to be utilized. Unrecognized goodwill or of an asset or liability in outflow of economic benefits will deferred tax assets are reassessed a transaction that is not a business be required to settle the obligation. at each reporting date and are combination, and at the time of The amount recognized is the best recognized to the extent that it has transaction, affects neither the estimate of the consideration required become probable that future taxable accounting profit nor taxable profit to settle the present obligation at the profit will allow the deferred tax asset or loss. reporting date, taking in to account to be recovered. the risks and uncertainties surrounding

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the obligation at that date. Where a The bank has opted to apply carve- 3.14 INTEREST EXPENSE provision is measured using the cash out and recognize interest income on For financial liabilities measured at flows estimated to settle the present accrual basis applying the coupon rate, amortized cost using the rate that obligation, its carrying amount is which is variable rate of interest. closely approximates effective interest determined based on the present rate, interest expense is recorded value of those cash flows. 3.13.2 Fee and Commission Income using such rate. EIR is the rate that Fees earned for the provision of exactly discounts estimated future A provision for onerous contracts services over a period of time are cash payments or receipts through is recognized when the expected accrued over that period. These fees the expected life of the financial benefits to be derived by the Bank include Service fees, commission instrument or a shorter period, where from a contract are lower than the income. Loan syndication fees are appropriate, to the net carrying unavoidable cost of meeting its recognized as revenue when the amount of the financial asset or obligations under the contract. The syndication has been completed financial liability. provision is measured as the present and the Bank retained no part of the value of the lower of the expected loan package for itself, or retained 3.15 EMPLOYEE BENEFITS cost of terminating the contract and a part at the same effective interest Employee benefits include: the expected net cost of continuing rate as for the other participants. with the contract. Provision are not Portfolio and other management a. Short-term employee benefits such recognized for future operating losses. advisory fees and service distribution as the following, if expected to be fees are recognized based on the settled wholly before twelve months Before a provision is established, the applicable contracts, usually on a time after the end of the annual reporting Bank recognizes any impairment apportionment basis. period in which the employees render loss on the assets associated with the related services: that contract. The expense relating 3.13.3 Dividend Income to any provision is presented in the Dividend income is on equity i. Wages, salaries and social Statement of Profit or Loss net of any instruments are recognized in the security contributions; reimbursement. statement of profit and loss within ii. Paid annual leave and paid sick other income when the Bank’s right to leave; 3.13 REVENUE RECOGNITION receive payment is established. iii. Profit sharing and bonuses, Revenue is recognized to the extent and that it is probable that the economic 3.13.4 Net Trading Income iv. Non-monetary benefits (such benefits will flow to Bank and the Net trading income comprises as medical care) for current revenue can be reliably measured. The gains less losses relating to trading employees; following specific recognition criteria assets and liabilities, and includes must also be met before revenue is all realized interest, dividend and Short term employee benefits are recognized. foreign exchange differences as wells measured on an undiscounted basis as unrealized changes in fair value of and are expenses as the related service 3.13.1 Interest Income trading assets and liabilities. is provided. A liability is recognized For all financial assets measured for the amount expected to be paid at amortized cost, interest bearing 3.13.5 Net Income from other under short term cash bonus or profit financial assets designated at fair financial instrument at fair value sharing plans if the Bank has present value through other comprehensive through Profit or Loss legal or constructive obligation to pay income and financial assets designated Trading assets such as equity shares this amount as a result of past service at fair value through profit or loss, and mutual fund are recognized at fair provided by the employee and the EIR is the rate that exactly discounts value through profit or loss. No other obligation can be estimated reliably. estimated future cash payments or financial instruments are designated at receipts through the expected life of fair value through profit or loss. b. Post-employment benefits, such as the financial instrument or a shorter the following: period, where appropriate, to the net The bank has no income under the carrying amount of the financial asset heading net income from other i. Retirement benefits (eg: or financial liability. financial instrument at fair value gratuity, lump sum payments on through profit or loss. retirement); and

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ii. Other post-employment a. Gratuity of Profit or Loss under ‘Personnel benefits such as post- In compliance with Labor Act, 2017, Expenses’ together with the net employment life insurance provision is made in the account interest expense. Bank recognizes year of service, for gratuity payable the total actuarial gain and loss that c. Other long term employee benefits to employees who joined bank on arises in calculating Bank’s obligation and a permanent basis. An actuarial in respect of gratuity in other valuation is carried out every year comprehensive income during the d. Termination benefits to ascertain the full liability under period in which it occurs. gratuity.

Post employments benefits are as The demographic assumptions follows: Bank’s obligation in respect of defined underlying the valuation are retirement benefit obligation is calculated by age (58 years), early withdrawal from estimating the amount of future service and retirement on medical 3.15.1 Defined Contribution Plans benefit that employees have earned grounds. A defined contribution plan is a post- for their service in the current and employment benefit plan under which prior periods and discounting that an Bank pays fixed contribution into b. Unutilized Accumulated Leave benefit to determine its present value, a separate Bank Account (a fund) Bank’s liability towards the then deducting the fair value of any and will have no legal or constructive accumulated leave which is expected plan assets to determine the net obligation to pay further contributions to be utilized beyond one year from amount to be shown in the Statement if the fund does not hold sufficient the end of the reporting period is of Financial Position. The value of a assets to pay all employee benefits treated as other long term employee defined benefit asset is restricted to relating to employee services in the benefits. Bank’s net obligation the present value of any economic current and prior periods, as defined in towards unutilized accumulated benefits available in the form of Nepal Accounting Standards – NAS 19 leave is calculated by discounting refunds from the plan or reduction on (Employee Benefits). the amount of future benefit that the future contributions to the plan. employees have earned in return for In order to calculate the present value their service in the current and prior The contribution payable by the of economic benefits, consideration periods to determine the present value employer to a defined contribution is given to any minimum funding of such benefits. The discount rate plan in proportion to the services requirement that apply to any plan in is the yield at the reporting date on rendered to Bank by the employees Bank. An economic benefit is available government binds that have maturity and is recorded as an expense under to Bank if it is realizable during the life dates approximating to the terms ‘Personnel expense’ as and when they of the plan, or on settlement of the of Bank’s obligation. The calculation become due. Unpaid contributions are plan liabilities. is performed using the Projected recorded as a liability under ‘Other Unit Credit method. Net change in Liabilities’. Bank determines the interest expense liability for unutilized accumulated on the defined benefit liability by leave including any actuarial gain and Bank contributed 10% on the salary applying the discount rate used to loss are recognized in the Statement of each employee to the Employees’ measure the defined benefit liability of Profit or Loss under ‘Personnel Provident Fund. The above expenses at the beginning of the annual period Expenses’ in the period in which they are identified as contributions to to the defined benefit liability at arise. ‘Defined Contribution Plans’ as defined the beginning of the annual period. in Nepal Accounting Standards – NAS The discount rate is the yield at 3.16 LEASES 19 (Employee Benefits). the reporting date on government The determination of whether an bonds that have maturity dates arrangement is a lease, or it contains 3.15.2 Defined Benefit Plans approximating to the terms of Bank’s a lease, is based on the substance A defined benefit plan is a post- obligations. of the arrangement and requires an employment benefit plan other than a assessment of whether the fulfillment defined contribution plan. Accordingly, The increase in gratuity liabilities of the arrangement is dependent on staff gratuity has been considered as attributable to the services provided the use of a specific asset or assets defined benefit plans as per Nepal by employees during the year ended and the arrangement conveys a right Accounting Standards – NAS 19 16th July, 2018 (current service cost) to use the asset. (Employee Benefits). has been recognized in the Statement

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3.16.1 Finance Lease When Bank is the lessee, leased assets exchange rates at the date when the Agreements which transfer to are not recognized on the Statement fair value was determined. counterparties substantially all of Financial Position. the risks and rewards incidental to Foreign exchange differences arising the ownership of assets, but not The bank has opted to apply carve on the settlement or reporting of necessarily legal title, are classified as out and recognise rentals payable and monetary items at rates different from finance lease. When Bank is the lessor receivable under operating leases are those which were initially recorded are under finance lease, the amounts due accounted for on accrual basis based dealt with in the Statement of Profit under the leases, after deduction of on agreement and are included in or Loss. unearned interest income, are included ‘Other operating expenses’ and ‘Other in ‘Loans to & receivables from other operating income’, respectively. Forward exchange contracts are customers’, as appropriate. Interest valued at the forward market rates income receivable is recognized in ‘Net In case of straight line basis of ruling on the reporting date. Both interest income’ over the periods of accounting additional NPR 10,323,943 unrealized losses and gains are the leases so as to give a constant rate had to be charged in FY 2074/75. reflected in the Statement of Profit or of return on the net investment in the Loss. leases. 3.17 FOREIGN CURRENCY TRANSLATION, TRANSACTIONS 3.18 FINANCIAL GUARANTEE When Bank is a lessee under AND BALANCES AND LOAN COMMITMENT finance leases, the leased assets are All foreign currency transactions are A financial guarantee contract is capitalized and included in ‘Property, translated into the functional currency, a contract that requires the issuer plant and equipment’ and the which is Nepalese Rupees, using the to make specified payments to corresponding liability to the lessor exchange rates prevailing at the dates reimburse the holder for a loss it incurs is included in ‘Other liabilities’. A when the transactions were affected. because a specified debtor fails to finance lease and its corresponding make payment when due. Financial liability are recognized initially at the Monetary assets and liabilities guarantee contracts may have various fair value of the asset or if lower, the denominated in foreign currencies legal forms, such as a guarantee, some present value of the minimum lease at the reporting date are translated types of letter of credit, etc. Where payments. Finance charges payable to Nepalese Rupees using the spot the bank has confirmed its intention are recognized in ‘Interest expenses’ foreign exchange rate ruling at that to provide funds to a customer or over the period of the lease based on date and all differences arising on non- on behalf of a customer in the form the interest rate implicit in the lease so trading activities are taken to ‘Other of loans, overdrafts, etc. whether as to give a constant rate of interest on Operating Income’ in the Statement cancellable or not and the bank had the remaining balance of the liability. of Profit or Loss. The foreign currency not made payments at the reporting gain or loss on monetary items is date, those instruments are included The bank does not have finance lease the difference between amortized in these financial statements as transactions at the reporting dates. cost in the functional currency at the commitments. beginning of the period, adjusted for 3.16.2 Operating Lease effective interest and payments during 3.19 SHARE CAPITAL All other leases are classified as the period, and the amortized cost in AND RESERVES operating leases. When acting as foreign currency translated at the rates Share capital and reserves are different lessor, Bank includes the assets subject of exchange prevailing at the end of classes of equity claims. Equity claims to operating leases in ‘Property, plant the reporting period. are claims on the residual interest in and equipment’ and accounts for them the assets of the entity after deducting accordingly. Impairment losses are Non-monetary items in a foreign all its liabilities. Changes in equity recognized to the extent that residual currency that are measured in terms during the reporting period comprise values are not fully recoverable and of historical cost are translated using income and expenses recognized the carrying value of the assets is the exchange rates as at the dates of in the statement of financial thereby impaired. the initial transactions. Non-monetary performance; plus contributions items in foreign currency measured from holders of equity claims, minus at fair value are translated using the distributions to holders of equity claims.

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3.20 EARNINGS PER SHARE operating segments. the reporting date is disclosed as an Bank presents basic and diluted event after the reporting date. Interim Earnings per share (EPS) data for The bank has identified the key Dividend is deducted from equity its ordinary shares. Basic EPS is segments of business on the basis when they are declared and is no calculated by dividing the profit and of nature of operations that assists longer at the discretion of the Bank. loss attributable to ordinary equity the Executive Committee of the holders of Bank by the weighted bank in decision making process 3.24 CASH FLOW STATEMENT average number of ordinary shares and to allocate the resources. It will The cash flow statement has been outstanding during the period. help the management to assess prepared using ‘The Direct Method’, the performance of the business whereby gross cash receipts and gross Diluted EPS is determined by adjusting segments. All operations between cash payments of operating activities, both the profit and loss attributable the segments are conducted on pre- finance activities and investing to the ordinary equity holders and the determined transfer price. Treasury activities have been recognized. weighted average number of ordinary department acts as the fund manager shares outstanding, for the effects of of the Bank. 3.25 COMPARATIVE FIGURES all dilutive potential ordinary shares, The comparative figures and phrases if any. 3.22 IMPAIRMENT OF have been rearranged wherever NON-FINANCIAL ASSETS necessary to conform to the current Earnings per share is calculated and The Bank assesses at each reporting year’s presentation. presented in consolidated statement date whether there is an indication of profit or loss. that an asset may be impaired. If 3.26 FIRST TIME any indication exists, or when annual ADOPTION OF NFRS 3.21 SEGMENT REPORTING impairment testing for an asset is As stated in Note 2.1, these are the An operating segment is a component required, the Bank estimates the Bank’s first financial statements of an entity: asset’s recoverable amount. An asset’s prepared in accordance with NFRS. recoverable amount is the higher of an asset’s or the fair value of the Cash n that engages in business activities The accounting policies set out in Generating Units (CGU) fair value less from which it may earn revenues Note 3 have been applied in preparing costs to sell and its value in use. Where and incur expenses (including the Financial Statements for the year the carrying amount of an asset or revenues and expenses relating ended 15th July 2018, the comparative CGU exceeds its recoverable amount, to transactions with other information presented for the year the asset is considered impaired and components of the same entity), ended 16th July 2017and in the is written down to its recoverable n whose operating results are preparation of an opening NFRS based amount. regularly reviewed by the entity’s Statement of Financial Position at 16th chief operating decision maker to July 2016 (the date of transition). make decisions about resources to In assessing value in use, the estimated future cash flows are discounted to be allocated to the segment and Exemptions their present value using a pre–tax assess its performance, and NFRS 1 First- time adoption of Nepal discount rate that reflects current n for which discrete financial Accounting Standards allows first time market assessments of the time value information is available. adopters certain exemptions from the of money and the risks specific to the retrospective application of certain asset. In determining fair value less Not every part of an entity is NFRS. necessarily an operating segment or costs to sell, appropriate valuation model is used. part of an operating segment. For The Bank and has taken the following example, a corporate headquarters exemptions. or some functional departments 3.23 DIVIDEND ON may not earn revenues or may earn ORDINARY SHARES i. Business Combinations revenues that are only incidental to Dividend on ordinary shares are Business combinations are not the activities of the entity and would recognized as a liability and deducted applied for subsidiaries, which are not be operating segments. For the from equity when they are approved considered business for NFRS, or purposes of this NFRS, an entity’s by the Bank’s shareholders. Dividend in interest in associates and joint post-employment benefit plans are not for the year that is approved after

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ventures that occurred before 17th 3.27 OTHER DISCLOSURES previously recognized in NAS based July 2016. accounts. The movement between the a. Staff Loans measured at fair value impairment balances of two years was Use of this exemption means Under previous NAS, staff loans were recognized in the Income Statement that the NAS carrying amounts recorded at cost less repayments net as an impairment charge. of assets and liabilities, which of loan loss provision, if any. Under are required to be recognized NFRS, the Bank has to measure c. Financial Investments designated under NFRS, is their deemed cost the staff loans granted below the at fair value through other at the date of the acquisition. market interest rate at their fair value, comprehensive income After the date of the acquisition, calculate based on the market interest Under previous NAS, the Bank measurement is in accordance rate of similar products. recognized its investment portfolios with NFRS. Assets and liabilities which are not held for trading that do not qualify for recognition The fair value of such loans as at activities at their cost. Under NFRS, under NFRS are excluded from Ashad 31 2075 the fair value of staff the Bank has designated such the opening NFRS statement of loan was Rs. 315.49 million and their investments as financial instruments financial position. previous NAS carrying amount was designated at fair value through other Rs. 437.22 million. The difference comprehensive income and measured The Bank did not recognize or between the fair value and NAS at fair value. Such investment includes exclude any previously recognized carrying amount was Rs. 121.73 million equity investments, Mutual Funds. amounts as a result of NFRS has been netted off against staff loans recognition requirements. NFRS & recognized as pre-paid staff cost in At the date of transition to NFRS, 1 also requires that the local NAS other assets. there were no investments in the carrying amount of goodwill quoted securities for which fair value must be used in the opening On transition date Shrawan 1, 2073 was were to be recognized. NFRS statement of financial Rs 158.09 million and their previous position (apart from adjustments NAS carrying amount was Rs 205.59 As at Ashad 31, 2074 the fair value of for goodwill impairment and million. The difference between the the investment was Rs. 427.25 million recognition or de-recognition of fair value and NAS carrying amount and NAS carrying amount was Rs. intangible assets). has been netted off from staff loans 393.77 million. The difference between & recognized as pre-paid staff cost in the instruments fair value and NAS ii. The Bank has elected to other assets. carrying amount was Rs. 34.47 million disclose the following amounts has been recognized in the fair value prospectively from the date of b. Adjustment on loan impairment reserve and movement was charged to transition (i) the present value of In compliance with the NRB Directives Other Comprehensive Income. the defined benefit obligation, the and subsequent amendment there fair value of the plan assets and to, specific loan loss provision were As at Ashad 31 2075 the fair value the surplus or deficit in the plan; made based on the arrears time period of the investment was Rs. 737.91Mn and (ii) the experience adjustments and General provision were made at and NAS carrying amount was Rs. arising on the plan liabilities and a specified rate given by NRB time to 519.80 million The difference between the plan assets. time. the instruments fair value and NAS carrying amount was Rs. 218.12 million iii. The Bank has designated Loan loss provision amounting to Rs. has been recognized in the fair value quoted and unquoted equity 880.42 million was recognized as per reserve and movement was charged to Instruments held as at 15th NAS 39 impairment provision comes Other Comprehensive Income. July 2018 and 16th July 2017 as to Rs. 266.46 million as at Shrawan 1, financial instruments designated 2073,. The deferred tax liability has been at fair value through other created @30% on such income and comprehensive income. As at Ashad 31 2075 the impairment routed through statement of profit provision of Rs. 1,121.68 million was or loss account to retained earning recognized against sum total of consequently decreasing the fair value Rs. 525.1 million loan loss provision reserve by such amount.

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d. Interest Income e. Personnel Cost i. Bonus to staffs –10% bonus has Income amounting to Rs 5,427.83 An additional expense of Rs. 48.40 been calculated on Profit before million was recognized for financial million was recognized as Personnel tax (after including such Bonus). year 2016/17 for accrual of interest on expenses as result of actuarial loans, Interest benefit for staff loans as valuation and, amortization of prepaid ii. Tax – tax has been computed an impact of interest unwinding. staff loan for Financial Year 2016/17. on the basis of profit computed from NFRS. The difference due to Income amounting to Rs. 7,647.36 An expense of Rs. 28.34 million was previous year has been booked in million was recognized for financial reversed as Personnel expenses as deferred tax. year 2017/18 for accrual of interest on result of actuarial valuation and, loans, Interest benefit for staff loans as amortization of prepaid staff loan for an impact of interest unwinding. Financial Year 2017/18.

4. NOTES TO SOFP AND SOPL

CASH AND CASH EQUIVALENT 4.1

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Cash in Hand 1,535,255,221 1,473,431,130 1,535,255,221 1,473,431,130 1,167,577,937 Balances with BFIs 1,051,276,974 804,794,160 906,752,394 587,528,410 1,604,813,241 Money at Call and Short Notice - - - - - Other - - - - - Total 2,586,532,195 2,278,225,290 2,442,007,615 2,060,959,540 2,772,391,178

Cash and cash equivalents include cash at vault and agency Bank account balances, which are subject to an insignificant risk of changes in value. The fair value of cash is the carrying amount.

Cash at vault is adequately insured for physical and financial risks. The amount of cash at vault is maintained on the basis fo the regulatory, liquidity and business requirements. To that extent there are regulatory and liquidity restrictions placed on the cash at vault. Cash held in FCY is subject to risk of changes in the foreign exchange rates. These are closely monitored, and risks, are promptly managed.

Balance with BFIs, and money at call and short notice have been classified as loans and receivablesand are subsequently measured at amortized costs. Risks associated with these assets are regularly assessed.

DUE FROM NEPAL RASTRA BANK 4.2

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Statutory Balances with NRB 5,032,987,845 7,496,218,748 5,032,987,845 7,496,218,748 3,809,454,948 Securities purchased under Resale Agreement - - - - - Other Deposit and Receivable from NRB 67,699 - 67,699 - 415,350 Total 5,033,055,545 7,496,218,748 5,033,055,545 7,496,218,748 3,809,870,298

Statutory balances with NRB includes the CRR balance maintained with NRB.

The fair value of balance with the Nepal Rastra Bank is the carrying amount. Balance with central bank is categorized as loans and receivables to be subsequently measured at amortised cost.

ANNUAL REPORT | 2017-18 133 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Balance with the central bank is principally maintained as a part of the regulatory cash reserve ratio required by the central bank. There are regulatory and liquidity restrictions placed on the level of balance with central bank.

PLACEMENT WITH BANKS AND FINANCIAL INSTUTIONS 4.3

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Placement with Domestic BFIs 70,000,000 60,000,000 - - - Placement with Foreign BFIs 3,869,629,863 3,239,928,896 3,869,629,863 3,358,047,347 2,618,168,668 Less: Allowances for Impairment - - - - - Total 3,939,629,863 3,299,928,896 3,869,629,863 3,358,047,347 2,618,168,668

DERIVATIVE FINANCIAL INSTRUMENTS 4.4

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Held for Trading - - Interest Rate Swap - - - - - Currency Swap - - - - - Forward Exchange Contracts - - - - - Others - - - - - Held for Risk Management - - Interest Rate Swap - - - - - Currency Swap - - - - - Forward Exchange Contracts - 804,900 - 804,900 24,625,457 Others - - - - - Total - 804,900 - 804,900 24,625,457

Derivatives Financial Instruments is the net of forward debit and forward credit transacted for the purpose of risk management. It is revalued everyday on the basis of average forex rate.

OTHER TRADING ASSETS 4.5

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Treasury Bills - - - - - Government Bonds - - - - - NRB Bonds - - - - - Domestic Corporate Bonds - - - - - Equities 24,959,135 19,805,977 - - - Other - - - - Total 24,959,135 19,805,977 - - -

134 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

LOANS AND ADVANCES TO BFIS 4.6

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Loans to Micro-Finance Institutions 995,121,876 1,112,942,459 995,121,876 1,112,942,459 955,332,206 Other 4,465,704 415,037 4,465,704 415,037 214,167 Less: Allowances for Impairment - - - - - Total 999,587,580 1,113,357,496 999,587,580 1,113,357,496 955,546,373

ALLOWANCES FOR IMPAIRMENT 4.6.1

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Balance at Shrawan 01 - - - - - Impairment Losss for the year: - - - - - Charge for the year - - - - - Recoveries/Reversal - - - - - Amount Written Off - - - - - Balance at Asar End - - -

LOANS AND ADVANCES TO CUSTOMERS 4.7

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Loans and Advances measured at Amortized Cost 60,326,401,072 51,220,201,623 60,326,401,072 51,220,201,623 43,241,059,664 Less: Impairment Allowances - Collective Impairment (616,144,874) (563,840,428) (616,144,874) (563,840,428) (460,877,710) Individual Impairment (496,704,808) (498,301,291) (496,704,808) (498,301,291) (419,541,294) Net Amount 59,213,551,390 50,158,059,904 59,213,551,390 50,158,059,904 42,360,640,660 Loans and Advances measured at FVTPL - - Total 59,213,551,390 50,158,059,904 59,213,551,390 50,158,059,904 42,360,640,660

Following process has been adopted AGEING The Loss rate on each period has by the Bank to calculate loss as per been calculated by multiplying CURRENT incurred loss model. Probability of Default (PD) with Loss The Bank has categorized total loan 01-30 DAYS Given Default (LGD). Probability of into 5 products namely Term Loan, 31-60 DAYS Default has been calculated on the Personal Loan, Home Loan, Hire basis of probability matrix by taking 61-90 DAYS Purchase, Short Term Loan. The loan 48 months loan data as the basis. For has been classifed into various period 91-120 DAYS the purpose of calcualtion of Loss on the basis of due days as follows: 121-150 DAYS Given Default (LGD), the loan which has been categorized as loss as per 151-180 DAYS NRB directive has been taken and the 180 DAYS AND ABOVE recovery history of the same has been analyzed upon to reach the LGD.

ANNUAL REPORT | 2017-18 135 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

The individually impaired loan has been substracted from the total loan and the same has been multiplied by loss rate to calculate collective impairment. Total impairment is the sum of the collective and individual impairment. Loans and advances above 40 million are considered for incurred loss model impairment which approximately come at 35% of total portfolio. Accrued Interest Receivable on loans have been considered under Loans and Advances measured at Amortized Cost.

ANALYSIS OF LOANS AND ADVANCES - BY PRODUCT 4.7.1

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Product Term Loans 8,511,179,712 6,002,251,943 8,511,179,712 6,002,251,943 4,193,427,504 Overdraft 12,680,678,356 11,650,209,057 12,680,678,356 11,650,209,057 11,127,779,336 Trust Receipt/Import Loans 1,340,111,534 850,832,584 1,340,111,534 850,832,584 1,421,982,853 Demand and other Working Capital Loans 7,691,405,393 5,580,866,374 7,691,405,393 5,580,866,374 9,078,464,259 Personal Residential Loans 8,126,224,951 6,703,095,699 8,126,224,951 6,703,095,699 4,297,442,503 Real Estate Loans 3,564,842,036 3,703,270,987 3,564,842,036 3,703,270,987 2,339,989,172 Margin Lending Loans 1,916,942,664 2,469,806,993 1,916,942,664 2,469,806,993 1,839,992,494 Hire Purchase Loans 5,158,223,654 5,067,377,757 5,158,223,654 5,067,377,757 3,865,502,113 Deprived Sector Loans 3,233,706,408 2,812,900,444 3,233,706,408 2,812,900,444 1,939,100,452 Bills Purchased 10,985 74,435,059 10,985 74,435,059 78,033,811 Staffs Loans 365,533,346 240,729,169 365,533,346 240,729,169 283,094,545 Other 7,327,391,819 5,711,396,448 7,327,391,819 5,711,396,448 2,612,081,594 Sub-Total 59,916,250,858 50,867,172,513 59,916,250,858 50,867,172,513 43,076,890,637 Interest Receivable 410,150,215 353,029,110 410,150,215 353,029,110 164,169,026 Grand Total 60,326,401,072 51,220,201,623 60,326,401,072 51,220,201,623 43,241,059,664

Gross Loans and Advances excluding Impairment has been considered above for analysis.

ANALYSIS OF LOANS AND ADVANCES - BY CURRENCY 4.7.2

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Nepalese Rupee 59,654,004,798 51,211,285,323 59,654,004,798 51,211,285,323 43,228,619,764 Indian Rupee - - - - - United States Dollar 645,910,265 8,916,300 645,910,265 8,916,300 12,439,900.00 Great Britain Pound - - - - - Euro 26,486,010 - 26,486,010 - - Japanese Yen - - - - - Chinese Yuan - - - - - Other - - - - - Grand Total 60,326,401,072 51,220,201,623 60,326,401,072 51,220,201,623 43,241,059,664

136 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

ANALYSIS OF LOANS AND ADVANCES - BY COLLATERAL 4.7.3

Loans and advances to customers are backed by collateral securities to mitigate default risk. The type of the collaterals corresponding to the loans and advances to customers are given in the table below:

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Secured Moveable/Immoveable Assets 57,361,822,766 47,161,448,744 57,361,822,766 47,161,448,744 39,694,068,614 Gold and Silver 14,941,371 338,595,368 14,941,371 338,595,368 394,973,926 Guarantee of Domestic BFIs - - - - - Government Guarantee - - - - - Guarantee of International Rated Bank - - - - - Collateral of Export Document - - - - - Collateral of Fixed Deposit Receipt 497,790,629 523,967,480 497,790,629 523,967,480 211,272,471 Collatereal of Government Securities - - - - 55,395,911 Counter Guarantee - - - - - Personal Guarantee 41,479,129 38,447,225 41,479,129 38,447,225 38,675,797 Other Collateral 2,388,402,268 3,149,276,195 2,388,402,268 3,149,276,195 2,846,672,945 Subtotal 60,304,436,163 51,211,735,011 60,304,436,163 51,211,735,011 43,241,059,664 Unsecured 21,964,909 8,466,612 21,964,909 8,466,612 Grand Total 60,326,401,072 51,220,201,623 60,326,401,072 51,220,201,623 43,241,059,664

ALLOWANCE FOR IMPAIRMENT 4.7.4

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Specific Allowance for Impairment Balance at Shrawan 01 498,301,291 419,541,295 498,301,291 419,541,295 717,725,619 Impairment Loss for the year (1,596,481) 78,759,996 (1,596,481) 78,759,996 (298,184,324) Charge for the year 340,989,535 275,418,953 340,989,535 275,418,953 69,703,037 Recoveries/Reversals during the year (342,586,016) (196,658,957) (342,586,016) (196,658,957) (367,887,361) Write-Offs - - - - - Exchange Rate Variance on Foreign Currency - - - - - Other Movement - - - - - Balance at Asar End 496,704,810 498,301,291 496,704,810 498,301,291 419,541,295 Collective Allowances for Impairment - Balance at Sharawan 01 563,840,428 460,877,710 563,840,428 460,877,710 294,243,967 Impairment Loss for the year 52,304,444 102,962,718 52,304,444 102,962,718 166,633,743 Charge/(Reversal) for the year - - - Exchange Rate Variance on Foreign Currency - - - Other Movement - - - Balance at Asar End 616,144,872 563,840,428 616,144,872 563,840,428 460,877,710 Total Allowances for Impairment 1,112,849,682 1,062,141,719 1,112,849,682 1,062,141,719 880,419,005

ANNUAL REPORT | 2017-18 137 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

INVESTMENT SECURITIES 4.8

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Investment Securities measured at Amortized Cost 9,139,682,907 5,823,145,191 9,139,682,907 5,823,145,191 5,455,125,337 Investment in Equity measured at FVTOCI 580,775,479 345,505,514 580,775,479 345,505,514 390,039,864 Total 9,720,458,385 6,168,650,705 9,720,458,385 6,168,650,705 5,845,165,201

INVESTMENT SECURITIES MEASURED AT AMORTIZED COST 4.8.1

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Debt Securities - - Government Bonds 5,941,300,000 4,013,800,000 5,941,300,000 4,013,800,000 3,114,625,000 Government Treasury Bills 1,353,010,455 1,368,215,700 1,353,010,455 1,368,215,700 680,928,998 Nepal Rastra Bank Bonds - - - - 1,630,350,000 Nepal Rastra Bank Deposit Instruments 1,639,480,000 293,275,000 1,639,480,000 293,275,000 - Other 205,892,451 147,854,491 205,892,451 147,854,491 29,221,339 Foreign Currency Bond 111,150,776 107,038,188 111,150,776 107,038,188 - Interest Receivables 94,741,676 40,816,303 94,741,676 40,816,303 29,221,339 Less: Specific Allowances for Impairment - - - - - Total 9,139,682,907 5,823,145,191 9,139,682,907 5,823,145,191 5,455,125,337

Treasury bills have been classifed as financial assets designated at fair value through statement of profit or loss (SoPL). Valuation of these instruments is assessed on the basis of similar bills on issue. These bills have the maturity period of less than one year and no variation has been observed from subsequent bills on issue, that have been considered as observable inputs. These instruments have been considered as risk free instruments. Considering the short maturity period of these instruments, risks as a result of changes in macro economic conditions is assessed to be nominal. These are highly liquid instruments and can be converted into cash immediatley on requirement. Government bonds have been classifed as held to maturity instrument as the Bank has intention and capacity to hold these instruments until their maturity. These instruments are carried at amortised costs. These instruments are issued by the government. Bank considers that the fixed return on these bonds adequately compensate for associated risks. Interest receivable includes interest accrued on above classified investment securities.

INVESTMENT IN EQUITY MEASURED AT FVTOCI 4.8.2

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Equity Instruments Quoted Equity Securities 559,809,479 267,694,359 559,809,479 267,694,359 370,280,864 Unquoted Equity Securities 20,966,000 77,811,155 20,966,000 77,811,155 19,759,000 Total 580,775,479 347,620,734 580,775,479 345,505,514 390,039,864

These include equity instruments in different companies. None of these investments result in control or significant influence over the invested entities. These instruments have been classified as available for sale assets. The movement in fair value of these instruments have been adjusted through other comprehensive income.

138 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE - - - - 4.8.3 817,022 817,022 1,668,590 1,668,590 2,408,767 2,408,767 5,784,000 5,784,000 4,386,000 4,386,000 28,384,584 68,976,900 197,917,300 197,917,300 - - FAIR VALUE

- - COST 2015/16 (72/73) 2015/16 58,932 235,975 2,408,767 4,386,000 23,732,930 19,858,400 15,930,000 - 88,518

- - 691,268 691,268 962,390 962,390 6,767,520 6,767,520 22,918,192 22,918,192 2,408,767 2,408,767 4,386,000 4,386,000 - 107,708,332 FAIR VALUE

- - COST (73/74) 2016/17 88,518 58,932 461,575 461,575 2,408,767 11,633,600 4,386,000 19,858,400 -

- - - - 344,100 344,100 929,754 929,754 4,315,310 3,242,800 3,242,800 171,143,148 171,143,148 8,976,000 18,032,080 63,632,580 63,632,580 FAIR VALUE 128,700,000

------COST 88,518 (74/75) 2017/18 58,932 58,932 461,575 2,408,767 11,633,600 4,386,000 19,858,400

------691,268 962,390 962,390 6,767,520 6,767,520 22,918,192 2,408,767 4,386,000 107,708,332 FAIR VALUE

------COST 88,518 (73/74) 2016/17 58,932 461,575 461,575 2,408,767 11,633,600 4,386,000 19,858,400 ------GROUP BANK 344,100 3,242,800 171,143,148 171,143,148 8,976,000 18,032,080 63,632,580 FAIR VALUE - 128,700,000 4,315,310 929,754 929,754

------COST (74/75) 2017/18 58,932 58,932 2,408,767 11,633,600 19,858,400 4,386,000 - 88,518 461,575 461,575

Each 100 Rs. of Shares Shares

PARTICULARS

Sagarmatha Insurance Limited Insurance Sagarmatha of Rs. 100 Each Shares Promoters 209,691 316,580 Shares of Rs. 100 Each 316,580 Shares 269,093 Promoters Shares of Rs. 100 Each Shares Promoters 269,093 INFORMATION RELATING TO INVESTMENT IN EQUITIES INVESTMENT INFORMATION RELATING TO EQUITY QUOTED IN INVESTMENT Insurance Life Gurans of Rs. 100 Each Shares 208,334 Ordinary Units pf Rs. 10 Each 2,373,293 8,066 Shares of Rs. 100 Each Shares 8,066 Global Samridhi Yojana Global Samridhi 47,487 Shares of Rs. 100 Each Shares 47,487 Limited Insurance of Rs. 100 Each Shares 35,873 42,393 Shares of Rs. 100 Each Shares 42,393 89,760 Promoters Shares of Rs. 100 Each Shares Promoters 89,760 of Rs. 100 Each Shares 5,896 Prabhu Insurance Co. Limited Co. Insurance Prabhu of Rs. 100 Each 3,856 Shares NLG Insurance Limited Insurance NLG 847 of Rs. 100 Each Shares 931 of Rs. 100 Each Shares 370 247,500 Ordinary Shares of Rs. 100 Each Shares Ordinary 247,500 Limited Company Development Investment Hydro of Rs. 100 Each Shares Ordinary 159,300 of Rs. 100 Each Shares 6,768 116,336 Ordinry Shares of Rs. 100 Each Shares 116,336 Ordinry 1,413 Shares of Rs. 100 Each Shares 1,413 Nepal Insurance Limited Nepal Insurance of Rs. 100 Each Shares 673

ANNUAL REPORT | 2017-18 139 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

------16,332 2,305,781 2,305,781 1,509,662 2,038,408 2,038,408 23,163,347 23,163,347 30,904,171 30,904,171 FAIR VALUE

------1,642 COST 2015/16 (72/73) 2015/16 686,210 1,738,900 1,400,005 18,986,350 23,590,970

- 1,751,375 1,351,834 1,032,012 1,032,012 1,032,993 1,032,993 2,488,765 4,674,048 4,674,048 2,060,597 12,543,495 10,274,070 27,978,890 43,530,946 FAIR VALUE

- - COST (73/74) 2016/17 60,363 60,363 64,590 686,210 105,300 1,738,900 12,619,210 2,480,925 1,400,005 42,719,280 23,590,970 10,274,070

- - - - 2,132,118 2,132,118 1,618,271 - 9,251,671 1,764,984 2,401,648 5,632,510 5,632,510 5,553,655 9,246,663 3,243,450 3,243,450 12,228,014 24,888,473 37,464,809 FAIR VALUE

- - - - COST (74/75) 2017/18 64,590 165,663 165,663 1,738,900 12,619,210 2,480,925 2,480,925 1,400,005 10,274,070 42,719,280 23,590,970 - - - 1,751,375 1,351,834 1,351,834 1,032,012 1,032,012 1,032,993 1,032,993 2,488,765 4,674,048 2,060,597 12,543,495 10,274,070 27,978,890 43,530,946 FAIR VALUE

- - COST (73/74) 2016/17 64,590 686,210 105,300 12,619,210 2,480,925 1,400,005 1,738,900 10,274,070 42,719,280 23,590,970 - 60,363 60,363

- - - GROUP BANK 2,132,118 2,132,118 1,618,271 - 9,251,671 1,764,984 2,401,648 5,632,510 5,632,510 5,632,510 5,553,655 9,246,663 3,243,450 3,243,450 12,228,014 24,888,473 37,464,809 FAIR VALUE -

------COST (74/75) 2017/18 64,590 165,663 165,663 5,632,510 1,738,900 12,619,210 2,480,925 2,480,925 1,400,005 10,274,070 42,719,280 42,719,280 23,590,970 Each 10 Each Rs. 100 of Rs. of Units INFORMATION RELATING TO INVESTMENT IN EQUITIES INVESTMENT RELATING TO INFORMATION Shares Shares

PARTICULARS

Neco Insurance Co. Ltd. Co. Insurance Neco of Rs. 100 Each Shares 1,052 of Rs. 100 Each Right Shares 1053 of Rs. 100 Each 3,821 Shares 563,251 Units of Rs. 10 Each 10 Rs. of Units Fund Equity NABIL 563,251 Com. (NLIC) Insurance Nepal Life of Rs. 100 Each Shares 2,176 of Rs. 100 Each Shares 3,089 Fund Pragati NIBL of Rs. 10 Each Units 1,027,407 Global IME Samutti Fund 1 of Rs. 10 Each Units 1,898,835 NMB Sulav Investment NMB Sulav of Rs. 10 Each Units 140,110 Scheme Oriented Siddhartha Equity of Rs. 10 Each Units 2,359,097 Samridhi Fund NIBL of Rs. 10 Each Units 173,890 of Rs. 10 Each Units 4,271,928 NMB Hybrid Fund of Rs. 10 Each Units 1,261,921 Bottler's Nepal Terai Ltd. Bottler's Nepal Terai of Rs. 100 Each 409 Shares Rural Micro Finance Limited Finance Micro Rural 12 Contd... Fund Balance NABIL of Rs. 10 Each 68,621 Units 967,748 967,748

140 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE ------2,851,500 1,200,000 1,200,000 15,000,000 15,000,000 FAIR VALUE -

------COST 2015/16 (72/73) 2015/16 2,851,500 1,200,000 15,000,000

- - - - - 10,075 148,770 148,770 4,939,110 4,939,110 1,200,000 1,200,000 2,402,400 15,000,000 15,000,000 FAIR VALUE 2,951,500.00 2,951,500.00

- - - - 1,642 COST (73/74) 2016/17 58,768 58,768 182,600 158,600 1,200,000 1,200,000 15,000,000 15,000,000 - 2,951,500.00 2,951,500.00

- 8,489 156,180 156,180 62,000 62,000 375,678 375,678 206,550 599,000 306,000 306,000 2,951,500 2,951,500 1,604,400 1,200,000 1,200,000 47,381,655 47,381,655 15,000,000 15,000,000 FAIR VALUE

- - - - 1,642 COST (74/75) 2017/18 58,768 58,768 50,000 50,000 182,600 158,600 2,951,500 2,951,500 1,200,000 1,200,000 58,495,870 58,495,870 15,000,000 15,000,000 ------10,075 148,770 148,770 4,939,110 4,939,110 2,951,500 1,200,000 1,200,000 2,402,400 15,000,000 15,000,000 FAIR VALUE -

------1,642 COST (73/74) 2016/17 58,768 58,768 182,600 158,600 2,951,500 2,951,500 1,200,000 1,200,000 15,000,000 15,000,000 - - - GROUP BANK 8,489 156,180 156,180 62,000 375,678 375,678 206,550 599,000 306,000 2,951,500 2,951,500 1,604,400 1,200,000 1,200,000 47,381,655 47,381,655 15,000,000 15,000,000 FAIR VALUE

- - - - - 1,642 COST (74/75) 2017/18 58,768 58,768 50,000 50,000 182,600 158,600 2,951,500 2,951,500 1,200,000 1,200,000 58,495,870 58,495,870 15,000,000 INFORMATION RELATING TO INVESTMENT IN EQUITIES INVESTMENT RELATING TO INFORMATION

PARTICULARS

5,990 Shares of Rs. 100 Each 5,990 Shares Ltd Centre Development Microfinance Rural od Rs. 100 Each 13 Shares Ltd. Hotel Taragoan of Rs. 100 Each Shares 570 Ltd. Co. Insurane United of Rs. 100 Each 1,680 Shares Contd... (Promoter) Ltd. Company Insurance NLG of Rs. 100 Each 3,326 Shares Soaltee Hotel Limited Hotel Soaltee of Rs. 100 Each 1,546 Shares Premier Insurance Company Insurance Premier of Rs. 100 Each Shares 272 Laxmi Equity Fund Laxmi Equity of Rs. 10 Each Units 5,849,587 Insurance General Himalayan of Rs. 10 Each Shares 459 Shree Ram Sugar Mill Shree of Rs. 100 Each 500 Shares EQUITY IN UNQUOTED INVESTMENT Nepal Clearing House Limited of Rs. 100 Each Shares 28,515 Ordinary 35,418 Ordinary Shares of Rs. 100 Each Shares Ordinary 35,418 Banking Institute National of Rs. 100 Each Oridinary Shares 12,000 Nepal Electronic Payment System Payment Nepal Electronic of Rs. 100 Each Shares Ordinary 150,000

ANNUAL REPORT | 2017-18 141 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE ------5,000 5,000 202,500 202,500 500,000 500,000 FAIR VALUE 390,039,864 390,039,864 390,039,864

------COST 5,000 5,000 2015/16 (72/73) 2015/16 106,234 202,500 500,000 132,968,833 132,968,833 ------10,000 10,000 229,500 58,495,870 FAIR VALUE 345,505,514 345,505,514

- - - COST 3,200 (73/74) 2016/17 10,000 10,000 57,409 57,409 50,000 50,000 179,842 179,842 106,234 229,500 1,142,820 1,142,820 500,000 500,000 58,495,870 220,596,111 220,596,111 220,596,111 220,596,111

------10,000 10,000 229,500 1,575,000 1,575,000 FAIR VALUE - 580,775,479 580,775,479 580,775,479 580,775,479

- COST 3,200 (74/75) 2017/18 10,000 10,000 57,409 57,409 179,842 179,842 106,234 229,500 1,142,820 1,142,820 500,000 500,000 1,575,000 1,575,000 221,484,901 221,484,901 221,484,901 221,484,901 ------10,000 10,000 229,500 58,495,870 58,495,870 FAIR VALUE 345,505,514 345,505,514

- - COST 3,200 (73/74) 2016/17 10,000 10,000 57,409 57,409 50,000 179,842 179,842 106,234 229,500 1,142,820 1,142,820 500,000 500,000 58,495,870 58,495,870 220,596,111 220,596,111 220,596,111 220,596,111 -

------GROUP BANK 10,000 10,000 229,500 1,575,000 1,575,000 FAIR VALUE 580,775,479 580,775,479 580,775,479

- - - COST 3,200 (74/75) 2017/18 10,000 10,000 57,409 57,409 179,842 179,842 106,234 229,500 1,142,820 500,000 500,000 1,575,000 1,575,000 221,484,901 221,484,901 221,484,901 221,484,901 INFORMATION RELATING TO INVESTMENT IN EQUITIES INVESTMENT RELATING TO INFORMATION

PARTICULARS

Nepal Stock Exchange Limited. Exchange Nepal Stock of Rs. 100 Each Shares 500 Ordinary 880 Ordinary Shares of Rs. 100 Each Shares 880 Ordinary Pvt. Limited. Tyres Gorakhali 100 Ordinary Shares of Rs. 100 Each Shares 100 Ordinary CICL of Rs. 100 Each 4,666 Shares 5,716 Shares of Rs. 100 Each Shares 5,716 Birat Shoe Ltd. Shoe Ltd. Birat of Rs. 100 Each Shares 11,350 Spinning Mill Butwal of Rs. 100 Each 20 Shares Jyoti Spinning Mill Jyoti of Rs. 100 Each 386 Shares Fund Laxmi Equity of Rs. 10 Each Units 5,849,587 Air Limited. Necon of Rs. 100 Each 828 Shares Ram Sugar Mill Shree of Rs. 100 Each 500 Shares Subarna Pharmaceuticals Limited. Subarna Pharmaceuticals of Rs. 100 Each Shares 10,000 Suva Bihani Microfinance Suva of Rs. 100 Each Shares 15,750 Net Carrying Amount Investment Total Contd...

142 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Contd... INFORMATION RELATING TO INVESTMENT IN EQUITIES

All financial instruments are measured i. Financial assets held for trading deliver cash or another financial asset initially at their fair value plus ii. Financial assets designated at to another Bank, or to exchange transaction costs that are directly fair value through profit or loss financial assets or financial assets with attributable to acquisition or issue of B. Financial assets at amortized cost another Bank under conditions that such financial instruments except in are potentially unfavorable to the Bank the case of such financial assets and Financial assets at fair value through or settling the obligation by delivering assets at fair value through profit or profit or loss include financial assets variable number of Bank’s own equity loss, as per the Nepal Accounting held for trading and financial assets instruments. Standard - NAS 39 (Financial designated upon initial recognition Instruments: Recognition and as fair value through profit or loss. After initial recognition, such Measurement). Transaction costs in Subsequent to initial recognition, financial assets are subsequently relation to financial assets and financial financial assets at fair value through measured at amortized cost using assets at fair value through profit or profit or loss are measured at fair value the effective interest rate method. loss are dealt with the Statement of and changes therein are recognized in Within this category, deposits and Profit or Loss. profit or loss. debt instruments with fixed maturity period have been recognized at At the inception, Bank determines the Financial instruments issued by Bank amortized cost using the method that classification of its financial assets. that are not classified as fair value very closely approximates effective Accordingly financial assets are through profit or loss are classified interest rate method. The amortization classified as: as financial assets at amortized is included in ‘Interest Expenses’ in the cost, where the substance of the Statement of Profit or Loss. Gains and A. Financial assets at fair value contractual arrangement results in losses are recognized in the Statement through profit or loss Bank having an obligation either to of Profit or Loss when the assets are derecognized.

CURRENT TAX ASSETS 4.9

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Current Tax Assets 48,693,154 169,384,181 43,085,259 164,593,723 1,094,658,245 Current year Income Tax Assets 48,693,154 169,384,181 43,085,259 164,593,723 1,094,658,245 Tax Assets of Prior Periods - - - - - Current Tax Liabilities 1,006,306 869,133 - (1,066,883,755) Current year Income Tax Liabilities 1,006,306 869,133 (1,066,883,755) Tax Liabilities of Prior Periods - Total 47,686,848 168,515,048 43,085,259 164,593,723 27,774,490

INVESTMENT IN SUBSIDIARIES 4.10

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Investment in Quoted Subsidiaries - - - Investment in Unquoted Subsidiaries - - 157,142,000 78,570,981 - Total Investment - - 157,142,000 78,570,981 - Less: Impairment Allowances - - - - - Net Carrying Amount - - 157,142,000 78,570,981 -

Fair value of investment in subsidiary is taken at cost.

ANNUAL REPORT | 2017-18 143 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

INVESTMENT IN QUOTED SUBSIDIARIES 4.10.1

2017/18 (74/75) 2016/17 (73/74) PARTICULARS COST FAIR VALUE COST FAIR VALUE

------Total - - - -

INVESTMENT IN UNQUOTED SUBSIDIARIES 4.10.2

2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73) PARTICULARS COST FAIR VALUE COST FAIR VALUE COST FAIR VALUE

Sunrise Capital Limited 785710 Shares of Rs. 100 Each 78,570,981 78,570,981 1571419.8 Shares of Rs. 100 Each 157,142,000 157,142,000 - - Total 157,142,000 157,142,000 78,570,981 78,570,981 - -

INFORMATION RELATING TO NON CONTROLLING INTEREST SUBSIDIARIES OF THE BANK 4.10.3 OF THE SUBSIDIARIES 4.10.4

BANK GROUP PERCENTAGE OF OWNERSHIP PERCENTAGE OF OWNERSHIP HELD BY BANK 78.57% HELD BY BANK NIDC Ltd 2017/18 2016/17 Equity Interest held by NCI (%) 21.43% Sunrise Capital Limited 78.57% 78.57% Profit (Loss) allocated during the year 3,999,282 Accumulated Balances of NCI as on Asar End 54,690,343 Total 78.57% 78.57% Dividend Paid to NCI 2073/74 NIDC Ltd Equity Interest held by NCI (%) 21.43% Profit (Loss) allocated during the year 4,515,361 Accumulated Balances of NCI as on Asar End 29,262,061 Dividend Paid to NCI

INVESTMENT IN ASSOCIATES 4.11

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Investment in Quoted Associates - - - - - Investment in Unquoted Associates - - - - - Total Investment - - - - - Less: Impairment Allowances - - Net Carrying Amount - - - - -

144 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

INVESTMENT IN QUOTED ASSOCIATES 4.11.1

GROUP BANK 2017/18 2016/17 2017/18 2016/17 PARTICULARS COST FAIR VALUE COST FAIR VALUE COST FAIR VALUE COST FAIR VALUE

------Total ------

INVESTMENT IN UNQUOTED ASSOCIATEST 4.11.2

GROUP BANK 2017/18 2016/17 2017/18 2016/17 PARTICULARS COST FAIR VALUE COST FAIR VALUE COST FAIR VALUE COST FAIR VALUE

Not Applicable ------Total ------

INFORMATION RELATING TO EQUITY VALUE OF ASSOCIATES OF THE BANK 4.11.3 ASSOCIATES 4.11.4

GROUP BANK GROUP PERCENTAGE OF OWNERSHIP PERCENTAGE OF OWNERSHIP PERCENTAGE OF OWNERSHIP HELD BY BANK HELD BY BANK HELD BY BANK 2017/18 2016/17 2017/18 2016/17 CURRENT YEAR PREVIOUS YEAR

Not Applicable Not Applicable

INVESTMENT PROPERTIES 4.12

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Investment Properties measured at Fair Value Balance as on Shrwawan 01 161,448,497 103,907,648 161,448,497 103,907,648 104,765,597 Addition/(Disposal) during the year (42,194,449) 57,540,849 (42,194,449) 57,540,849 (857,949) Net Changes in fair value during the year - - - - - Adjustment/Transfer - - - Net Amount 119,254,047 161,448,497 119,254,047 161,448,497 103,907,648 Investment Properties measured at Cost Balance as on Shrwawan 01 - - - - - Addition/(Disposal) during the year - - - - - Net Changes in fair value during the year - - - - - Adjustment/Transfer - - - - - Net Amount - - - - - Total 119,254,047 161,448,497 119,254,047 161,448,497 103,907,648

ANNUAL REPORT | 2017-18 145 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

PROPERTY AND EQUIPMENT

GROUP PARTICULARS LAND BUILDING LEASEHOLD COMPUTER VEHICLES FURNITURE MACHINERY EQUIPMENT TOTAL ASAR TOTAL ASAR PROPERTIES & ACCESSORIES & FIXTURES & OTHERS END 2074 END 2073

Cost As on Shrawan 2073 60,008,399.05 20,766,818.60 206,446,757.04 74,808,038.69 146,471,825.00 102,787,202.63 162,006,370.49 37,626,632.59 810,922,044.10 Addition during the year 30,274,999.95 6,111,943.00 25,833,165.81 28,258,174.12 37,359,420.00 19,363,909.47 30,821,396.41 3,630,542.00 181,653,550.76 Acquisition 30,274,999.95 6,111,943.00 25,833,165.81 444,652.04 3,464,886.00 304,697.74 484,985.22 658,460.00 67,577,789.76 Capitalization - - - 27,813,522.08 33,894,534.00 19,059,211.73 30,336,411.19 2,972,082.00 114,075,761.00 Disposal during the year - - (672,577.59) (20,363,393.00) (1,233,599.02) (4,933,600.18) (2,748,232.00) (29,951,401.79) Adjustment/Revaluation ------Balance as on Asar end 2074 90,283,399.00 26,878,761.60 232,279,922.85 102,393,635.22 163,467,852.00 120,917,513.08 187,894,166.72 38,508,942.59 962,624,193.07 Addition during the Year 29,640,000.05 4,160,000.00 72,273,448.77 33,227,670.70 55,913,017.41 37,213,450.01 49,714,949.15 2,980,477.50 285,123,013.59 Acquisition - Capitalization 29,640,000.05 4,160,000.00 72,273,448.77 33,227,670.70 55,913,017.41 37,213,450.01 49,714,949.15 2,980,477.50 285,123,013.59 Disposal during the year (24,598,798.86) (23,962,379.75) (5,869,728.36) (6,808,795.46) (1,750,110.67) (62,989,813.10) Adjustment/Revaluation 68,111.25 68,111.25 Balance as on Asar end 2075 119,923,399.05 31,038,761.60 304,621,482.87 111,022,507.06 195,418,489.66 152,261,234.73 230,800,320.41 39,739,309.42 221,453,608.74 953,517,495.34

Depreciation and Impairment As on Shrawan 01. 2073 - 15,948,012.99 108,100,536.69 52,904,928.98 50,833,395.31 57,691,321.71 115,727,237.33 24,783,691.29 425,989,124.31 Depreciation charge for the year - 1,165,673.30 23,045,513.49 5,982,730.61 17,600,631.60 6,802,068.55 13,728,826.95 2,249,852.19 70,575,296.69 Impairment for the year ------Disposals - - - (1,010,794.84) (11,645,761.31) (1,149,223.70) (2,319,514.00) (2,054,773.23) (18,180,067.08) Adjustment - (15,948,012.99) - (5,467,113.28) (9,365,863.31) (6,946,735.79) (14,020,813.35) (2,332,044.17) (54,080,582.88) As on Asar end 2074 - 1,165,673.30 131,146,050.18 52,409,751.48 47,422,402.29 56,397,430.77 113,115,736.93 22,646,726.08 424,303,771.04 Depreciation charge for the year 1,354,987.76 10,723,746.10 612,748.69 19,959,872.93 141,861.00 37,828,107.23 2,507,676.55 73,129,000.26 Impairment for the year - Disposals (12,431,235.59) (32,691,705.80) (1,024,127.29) (46,147,068.69) Adjustment - As on Asar end 2075 - 2,520,661.06 141,869,796.28 53,022,500.17 54,951,039.63 56,539,291.77 118,252,138.36 24,130,275.34 26,981,931.57 424,303,771.04 Capital Work in Progress Net Book Value 119,923,399.05 28,518,100.54 162,751,686.59 57,770,444.06 138,888,820.03 94,945,564.95 112,548,182.06 14,901,633.61 730,247,830.89 As on Asar end 2073 60,008,399.05 20,766,818.60 98,346,220.35 27,116,773.81 104,997,502.12 52,529,693.15 58,127,780.76 18,214,429.82 440,107,617.67 As on Asar end 2074 90,283,399.00 25,713,088.30 101,133,872.67 49,983,883.75 116,045,449.71 64,520,082.30 74,778,429.79 15,862,216.51 538,320,422.03 534,388,879.03 As on Asar end 2075 119,923,399.05 28,518,100.54 162,751,686.59 58,000,006.90 140,467,450.03 95,721,942.95 112,548,182.06 15,609,034.08 733,539,802.20

146 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

4.13

GROUP PARTICULARS LAND BUILDING LEASEHOLD COMPUTER VEHICLES FURNITURE MACHINERY EQUIPMENT TOTAL ASAR TOTAL ASAR PROPERTIES & ACCESSORIES & FIXTURES & OTHERS END 2074 END 2073

Cost As on Shrawan 2073 60,008,399.05 20,766,818.60 206,446,757.04 74,808,038.69 146,471,825.00 102,787,202.63 162,006,370.49 37,626,632.59 810,922,044.10 Addition during the year 30,274,999.95 6,111,943.00 25,833,165.81 28,258,174.12 37,359,420.00 19,363,909.47 30,821,396.41 3,630,542.00 181,653,550.76 Acquisition 30,274,999.95 6,111,943.00 25,833,165.81 444,652.04 3,464,886.00 304,697.74 484,985.22 658,460.00 67,577,789.76 Capitalization - - - 27,813,522.08 33,894,534.00 19,059,211.73 30,336,411.19 2,972,082.00 114,075,761.00 Disposal during the year - - (672,577.59) (20,363,393.00) (1,233,599.02) (4,933,600.18) (2,748,232.00) (29,951,401.79) Adjustment/Revaluation ------Balance as on Asar end 2074 90,283,399.00 26,878,761.60 232,279,922.85 102,393,635.22 163,467,852.00 120,917,513.08 187,894,166.72 38,508,942.59 962,624,193.07 Addition during the Year 29,640,000.05 4,160,000.00 72,273,448.77 33,227,670.70 55,913,017.41 37,213,450.01 49,714,949.15 2,980,477.50 285,123,013.59 Acquisition - Capitalization 29,640,000.05 4,160,000.00 72,273,448.77 33,227,670.70 55,913,017.41 37,213,450.01 49,714,949.15 2,980,477.50 285,123,013.59 Disposal during the year (24,598,798.86) (23,962,379.75) (5,869,728.36) (6,808,795.46) (1,750,110.67) (62,989,813.10) Adjustment/Revaluation 68,111.25 68,111.25 Balance as on Asar end 2075 119,923,399.05 31,038,761.60 304,621,482.87 111,022,507.06 195,418,489.66 152,261,234.73 230,800,320.41 39,739,309.42 221,453,608.74 953,517,495.34

Depreciation and Impairment As on Shrawan 01. 2073 - 15,948,012.99 108,100,536.69 52,904,928.98 50,833,395.31 57,691,321.71 115,727,237.33 24,783,691.29 425,989,124.31 Depreciation charge for the year - 1,165,673.30 23,045,513.49 5,982,730.61 17,600,631.60 6,802,068.55 13,728,826.95 2,249,852.19 70,575,296.69 Impairment for the year ------Disposals - - - (1,010,794.84) (11,645,761.31) (1,149,223.70) (2,319,514.00) (2,054,773.23) (18,180,067.08) Adjustment - (15,948,012.99) - (5,467,113.28) (9,365,863.31) (6,946,735.79) (14,020,813.35) (2,332,044.17) (54,080,582.88) As on Asar end 2074 - 1,165,673.30 131,146,050.18 52,409,751.48 47,422,402.29 56,397,430.77 113,115,736.93 22,646,726.08 424,303,771.04 Depreciation charge for the year 1,354,987.76 10,723,746.10 612,748.69 19,959,872.93 141,861.00 37,828,107.23 2,507,676.55 73,129,000.26 Impairment for the year - Disposals (12,431,235.59) (32,691,705.80) (1,024,127.29) (46,147,068.69) Adjustment - As on Asar end 2075 - 2,520,661.06 141,869,796.28 53,022,500.17 54,951,039.63 56,539,291.77 118,252,138.36 24,130,275.34 26,981,931.57 424,303,771.04 Capital Work in Progress Net Book Value 119,923,399.05 28,518,100.54 162,751,686.59 57,770,444.06 138,888,820.03 94,945,564.95 112,548,182.06 14,901,633.61 730,247,830.89 As on Asar end 2073 60,008,399.05 20,766,818.60 98,346,220.35 27,116,773.81 104,997,502.12 52,529,693.15 58,127,780.76 18,214,429.82 440,107,617.67 As on Asar end 2074 90,283,399.00 25,713,088.30 101,133,872.67 49,983,883.75 116,045,449.71 64,520,082.30 74,778,429.79 15,862,216.51 538,320,422.03 534,388,879.03 As on Asar end 2075 119,923,399.05 28,518,100.54 162,751,686.59 58,000,006.90 140,467,450.03 95,721,942.95 112,548,182.06 15,609,034.08 733,539,802.20

ANNUAL REPORT | 2017-18 147 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Contd... PROPERTY AND EQUIPMENT

BANK PARTICULARS LAND BUILDING LEASEHOLD COMPUTER VEHICLES FURNITURE MACHINERY EQUIPMENT TOTAL ASAR TOTAL ASAR PROPERTIES & ACCESSORIES & FIXTURES & OTHERS END 2073 END 2072

Cost As on Shrawan 01, 2071 185,509,136 61,935,901.89 106,964,553 88,169,364.24 127,887,139.9 37,964,306 608,430,401 Addition during the year - Acquisition 37,196,500 30,494,270 67,690,770 Capitalization - Disposal during the year (24,145,936) (6,184,539.00) (30,330,475) Adjustment/Revaluation - Balance as on Asar end 2072 - - 185,509,136 61,935,902 120,015,117 88,169,364 152,196,871 37,964,306 645,790,696 Addition during the Year 60,008,399 36,714,832 20,937,621 14,970,079 60,596,765 25,259,171 21,707,282 9,116,678 249,310,827 Acquisition 60,008,399 36,714,832 20,937,621 7,920,731.2 17,242,265.4 11,275,622.3 19,463,840.4 9,104,539.5 182,667,851 Capitalization 7,049,347.5 43,354,500.0 13,983,548.7 2,243,441.8 12,138.0 66,642,976 Disposal during the year (405,970.0) (27,540,285.0) (4,352,326.4) (49,135.0) (5,763,762.0) (38,111,478) Adjustment/Revaluation - Balance as on Asar end 2073 60,008,399 36,714,832 206,446,757 76,500,011 153,071,597 109,076,209 173,855,018 41,317,222 211,199,349 645,790,696

Depreciation and Impairment As on Shrawan 01, 2071 89,086,652 41,460,898.8 49,666,941 49,188,040.35 88,531,701 21,539,719 339,473,952 Depreciation charge for the year 9,615,480 2,452,663 12,068,143 Impairment for the year - Disposals (15,407,182) (15,407,182) Adjustment - Balance as on Asar end 2072 - - 89,086,652 41,460,899 43,875,239 49,188,040 88,531,701 23,992,382 336,134,912.9 Depreciation charge for the year 19,013,884.84 3,707,964.34 12,619,897 3,225,824.536 13,618,427.13 2,035,908 54,221,906 Impairment for the year - Disposals (276,146.8907) (15,763,039) (2,960,517.744) (33,422) (4,590,307) (23,623,433) Adjustment 15,948,013 5,538,750.91 9,365,863 7,884,735 13,610,532 2,375,549 54,723,443 Balance as on Asar end 2073 - 15,948,013 108,100,537 50,431,467 50,097,960 57,338,082 115,727,237 23,813,532 421,456,828 336,134,912.9 Capital Work in Progress Net Book Value 60,008,399 20,766,819 98,346,220 26,068,543 102,973,637 51,738,127 58,127,781 17,503,689 435,533,216 As on Asar end 2071 - - 96,422,484 20,475,003.09 57,297,612.00 39,355,439.02 16,424,587 229,975,125 As on Asar end 2072 - - 96,422,484 20,475,003 76,139,878 38,981,324 63,665,170 13,971,924 309,655,783 309,655,782.8 As on Asar end 2073 60008399 20,766,819 98346220 - 153,071,597 0 0 103,340,180.8 435,533,216

148 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

BANK PARTICULARS LAND BUILDING LEASEHOLD COMPUTER VEHICLES FURNITURE MACHINERY EQUIPMENT TOTAL ASAR TOTAL ASAR PROPERTIES & ACCESSORIES & FIXTURES & OTHERS END 2073 END 2072

Cost As on Shrawan 01, 2071 185,509,136 61,935,901.89 106,964,553 88,169,364.24 127,887,139.9 37,964,306 608,430,401 Addition during the year - Acquisition 37,196,500 30,494,270 67,690,770 Capitalization - Disposal during the year (24,145,936) (6,184,539.00) (30,330,475) Adjustment/Revaluation - Balance as on Asar end 2072 - - 185,509,136 61,935,902 120,015,117 88,169,364 152,196,871 37,964,306 645,790,696 Addition during the Year 60,008,399 36,714,832 20,937,621 14,970,079 60,596,765 25,259,171 21,707,282 9,116,678 249,310,827 Acquisition 60,008,399 36,714,832 20,937,621 7,920,731.2 17,242,265.4 11,275,622.3 19,463,840.4 9,104,539.5 182,667,851 Capitalization 7,049,347.5 43,354,500.0 13,983,548.7 2,243,441.8 12,138.0 66,642,976 Disposal during the year (405,970.0) (27,540,285.0) (4,352,326.4) (49,135.0) (5,763,762.0) (38,111,478) Adjustment/Revaluation - Balance as on Asar end 2073 60,008,399 36,714,832 206,446,757 76,500,011 153,071,597 109,076,209 173,855,018 41,317,222 211,199,349 645,790,696

Depreciation and Impairment As on Shrawan 01, 2071 89,086,652 41,460,898.8 49,666,941 49,188,040.35 88,531,701 21,539,719 339,473,952 Depreciation charge for the year 9,615,480 2,452,663 12,068,143 Impairment for the year - Disposals (15,407,182) (15,407,182) Adjustment - Balance as on Asar end 2072 - - 89,086,652 41,460,899 43,875,239 49,188,040 88,531,701 23,992,382 336,134,912.9 Depreciation charge for the year 19,013,884.84 3,707,964.34 12,619,897 3,225,824.536 13,618,427.13 2,035,908 54,221,906 Impairment for the year - Disposals (276,146.8907) (15,763,039) (2,960,517.744) (33,422) (4,590,307) (23,623,433) Adjustment 15,948,013 5,538,750.91 9,365,863 7,884,735 13,610,532 2,375,549 54,723,443 Balance as on Asar end 2073 - 15,948,013 108,100,537 50,431,467 50,097,960 57,338,082 115,727,237 23,813,532 421,456,828 336,134,912.9 Capital Work in Progress Net Book Value 60,008,399 20,766,819 98,346,220 26,068,543 102,973,637 51,738,127 58,127,781 17,503,689 435,533,216 As on Asar end 2071 - - 96,422,484 20,475,003.09 57,297,612.00 39,355,439.02 16,424,587 229,975,125 As on Asar end 2072 - - 96,422,484 20,475,003 76,139,878 38,981,324 63,665,170 13,971,924 309,655,783 309,655,782.8 As on Asar end 2073 60008399 20,766,819 98346220 - 153,071,597 0 0 103,340,180.8 435,533,216

ANNUAL REPORT | 2017-18 149 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Contd... PROPERTY AND EQUIPMENT

BANK PARTICULARS LAND BUILDING LEASEHOLD COMPUTER VEHICLES FURNITURE MACHINERY EQUIPMENT TOTAL ASAR TOTAL ASAR PROPERTIES & ACCESSORIES & FIXTURES & OTHERS END 2074 END 2073

Cost As on Shrawan 01, 2072 - - 185,509,136 61,935,902 120,015,117 88,169,364 152,196,871 37,964,306 645,790,696 Addition during the year 60,008,399 36,714,832 20,937,621 14,970,079 60,596,765 25,259,171 21,707,282 9,116,678 249,310,827 Acquisition 60,008,399 36,714,832 20,937,621 7,920,731 17,242,265 11,275,622 19,463,840 9,104,540 182,667,851 Capitalization - - 7,049,348 43,354,500 13,983,549 2,243,442 12,138 66,642,976 Disposal during the year - (405,970) (27,540,285) (4,352,326) (49,135) (5,763,762) (38,111,478) Adjustment/Revaluation (15,948,013) (5,213,664.106) (9,359,072) (7,433,812) (11848647.6) (5,371,488.522) (55,174,698) Balance as on Asar end 2073 60,008,399 20,766,819 206,446,757 71,286,347 143,712,525 101,642,397 162,006,370 35,945,733 801,815,346 Addition during the Year 30,275,000 6,111,943 25,833,166 28,258,174 37,359,420 19,363,909 30,821,396 3,630,542 181,653,551 Acquisition 30,275,000 6.111.943 25,833,166 444,652.0393 3,464,886 304,697.7416 484,985.2191 658,460 67,577,790 Capitalization 27,813,522.08 33,894,534 19,059,211.73 30,336,411.19 2,972,082 114,075,761 Disposal during the year (672,577.59) (20,363,393) (1,233,599.02) (4,933,600.18) (2,748,232) (29,951,402) Adjustment/Revaluation - Balance as on Asar end 2074 90,283,399 26,878,762 232,279,923 98,871,943 160,708,552 119,772,707 187,894,167 36,828,043 151,702,149 801,815,346

Depreciation and Impairment As on Shrawan 01. 2072 - - 89,086,652 41,460,899 43,875,239 49,188,040 88,531,701 23,992,382 336,134,913 Depreciation charge for the year - - 19,013,885 3,707,964 12,619,897 3,225,825 13,618,427 2,035,908 54,221,906 Impairment for the year - Disposals - - - (276,147) (15,763,039) (2,960,518) (33,422) (4,590,307) (23,623,433) Adjustment - 15,948,013 - 5,538,751 9,365,863 7,884,735 13,610,532 2,375,549 54,723,443 As on Asar end 2073 - 15,948,013 108,100,537 50,431,467 50,097,960 57,338,082 115,727,237 23,813,532 421,456,828.4 Depreciation charge for the year 1,165,673.3 23,045,513.49 5,982,730.612 17,600,631.6 6,802,068.549 13,728,826.95 2,249,852.19 70,575,296.69 Impairment for the year - Disposals (1,010,794.839) (11,645,761.31) (1,149,223.696) (2,319,514.003) (2054773.23) (18,180,067.08) Adjustment (15,948,013) (6,109,972.07) (9,365,863.309) (6,946,735.788) (14,020,813.35) (2,332,044) (54,723,441.67) As on Asar end 2074 - 1,165,673 131,146,050 49,293,431 46,686,967 56,044,191 113,115,737 21,676,567 419,128,616 421,456,828.4 Capital Work in Progress Net Book Value 90,283,399 25,713,088 101,133,873 49,578,512 114,021,585 63,728,516 74,778,430 15,151,476 534,388,879 As on Asar end 2072 As on Asar end 2073 60,008,399 4,818,806 98,346,220 20,854,879 93,614,565 44,304,315 46,279,133 12,132,201 380,358,518 As on Asar end 2074 90,283,399 25,713,089 101,133,873 - 160,708,552 - - 156,549,967 534,388,880

150 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

BANK PARTICULARS LAND BUILDING LEASEHOLD COMPUTER VEHICLES FURNITURE MACHINERY EQUIPMENT TOTAL ASAR TOTAL ASAR PROPERTIES & ACCESSORIES & FIXTURES & OTHERS END 2074 END 2073

Cost As on Shrawan 01, 2072 - - 185,509,136 61,935,902 120,015,117 88,169,364 152,196,871 37,964,306 645,790,696 Addition during the year 60,008,399 36,714,832 20,937,621 14,970,079 60,596,765 25,259,171 21,707,282 9,116,678 249,310,827 Acquisition 60,008,399 36,714,832 20,937,621 7,920,731 17,242,265 11,275,622 19,463,840 9,104,540 182,667,851 Capitalization - - 7,049,348 43,354,500 13,983,549 2,243,442 12,138 66,642,976 Disposal during the year - (405,970) (27,540,285) (4,352,326) (49,135) (5,763,762) (38,111,478) Adjustment/Revaluation (15,948,013) (5,213,664.106) (9,359,072) (7,433,812) (11848647.6) (5,371,488.522) (55,174,698) Balance as on Asar end 2073 60,008,399 20,766,819 206,446,757 71,286,347 143,712,525 101,642,397 162,006,370 35,945,733 801,815,346 Addition during the Year 30,275,000 6,111,943 25,833,166 28,258,174 37,359,420 19,363,909 30,821,396 3,630,542 181,653,551 Acquisition 30,275,000 6.111.943 25,833,166 444,652.0393 3,464,886 304,697.7416 484,985.2191 658,460 67,577,790 Capitalization 27,813,522.08 33,894,534 19,059,211.73 30,336,411.19 2,972,082 114,075,761 Disposal during the year (672,577.59) (20,363,393) (1,233,599.02) (4,933,600.18) (2,748,232) (29,951,402) Adjustment/Revaluation - Balance as on Asar end 2074 90,283,399 26,878,762 232,279,923 98,871,943 160,708,552 119,772,707 187,894,167 36,828,043 151,702,149 801,815,346

Depreciation and Impairment As on Shrawan 01. 2072 - - 89,086,652 41,460,899 43,875,239 49,188,040 88,531,701 23,992,382 336,134,913 Depreciation charge for the year - - 19,013,885 3,707,964 12,619,897 3,225,825 13,618,427 2,035,908 54,221,906 Impairment for the year - Disposals - - - (276,147) (15,763,039) (2,960,518) (33,422) (4,590,307) (23,623,433) Adjustment - 15,948,013 - 5,538,751 9,365,863 7,884,735 13,610,532 2,375,549 54,723,443 As on Asar end 2073 - 15,948,013 108,100,537 50,431,467 50,097,960 57,338,082 115,727,237 23,813,532 421,456,828.4 Depreciation charge for the year 1,165,673.3 23,045,513.49 5,982,730.612 17,600,631.6 6,802,068.549 13,728,826.95 2,249,852.19 70,575,296.69 Impairment for the year - Disposals (1,010,794.839) (11,645,761.31) (1,149,223.696) (2,319,514.003) (2054773.23) (18,180,067.08) Adjustment (15,948,013) (6,109,972.07) (9,365,863.309) (6,946,735.788) (14,020,813.35) (2,332,044) (54,723,441.67) As on Asar end 2074 - 1,165,673 131,146,050 49,293,431 46,686,967 56,044,191 113,115,737 21,676,567 419,128,616 421,456,828.4 Capital Work in Progress Net Book Value 90,283,399 25,713,088 101,133,873 49,578,512 114,021,585 63,728,516 74,778,430 15,151,476 534,388,879 As on Asar end 2072 As on Asar end 2073 60,008,399 4,818,806 98,346,220 20,854,879 93,614,565 44,304,315 46,279,133 12,132,201 380,358,518 As on Asar end 2074 90,283,399 25,713,089 101,133,873 - 160,708,552 - - 156,549,967 534,388,880

ANNUAL REPORT | 2017-18 151 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Contd... PROPERTY AND EQUIPMENT

BANK PARTICULARS LAND BUILDING LEASEHOLD COMPUTER VEHICLES FURNITURE MACHINERY EQUIPMENT TOTAL ASAR TOTAL ASAR PROPERTIES & ACCESSORIES & FIXTURES & OTHERS END 2074 END 2073

Cost As on Shrawan 2073 60,008,399 20,766,819 206,446,757 71,286,347 143,712,525 101,642,397 162,006,370 35,945,733 801,815,346 Addition during the year 30,275,000 6,111,943 25,833,166 28,258,174 37,359,420 19,363,909 30,821,396 3,630,542 181,653,551 Acquisition 30,275,000 6,111,943 25,833,166 444,652 3,464,886 304,698 484,985 658,460 67,577,790 Capitalization - - - 27,813,522 33,894,534 19,059,212 30,336,411 2,972,082 114,075,761 Disposal during the year - - (672,578) (20,363,393) (1,233,599) (4,933,600) (2,748,232) (29,951,402) Adjustment/Revaluation ------Balance as on Asar end 2074 90,283,399 26,878,762 232,279,923 98,871,943 160,708,552 119,772,707 187,894,167 36,828,043 953,517,495 Addition during the Year 29,640,000 4,160,000 72,273,449 32,790,731 55,913,017 37,086,777 49,714,949 2,796,388 284,375,311 Acquisition - Capitalization 29,640,000 4,160,000 72,273,449 32,790,731 55,913,017 37,086,777.01 49,714,949 2,796,388 284,375,311 Disposal during the year (24,598,799) (23,962,380) (5,869,728.36) (6,808,795) (1,750,111) (62,989,813) Adjustment/Revaluation 68,111.25 68,111 Balance as on Asar end 2075 119,923,399 31,038,762 304,621,483 107,063,875 192,659,190 150,989,756 230,800,320 37,874,320 1,174,971,104 953,517,495

Depreciation and Impairment As on Shrawan 01. 2073 - 15,948,013 108,100,537 50,431,467 50,097,960 57,338,082 115,727,237 23,813,532 421,456,828 Depreciation charge for the year - 1,165,673 23,045,513 5,982,731 17,600,632 6,802,069 13,728,827 2,249,852 70,575,297 Impairment for the year ------Disposals - - - (1,010,795) (11,645,761) (1,149,224) (2,319,514) (2,054,773) (18,180,067) Adjustment - (15,948,013) - (6,109,972) (9,365,863) (6,946,736) (14,020,813) (2,332,044) (54,723,442) As on Asar end 2074 - 1,165,673 131,146,050 49,293,431 46,686,967 56,044,191 113,115,737 21,676,567 419128616.3 Depreciation charge for the year 1,354,988 10,791,857 118,821,67.88 19,514,638 10,124,807 15,753,021 2,320,247 71,741,725 Impairment for the year - Disposals (23,379,343) (12,431,236) (4,514,893) (4,797,470) (1,024,127) (46,147,069) Adjustment - As on Asar end 2075 - 2,520,661 141,937,907 37,796,256 53,770,370 61,654,105 124,071,288 22,972,686 444,723,273 419128616.3 Capital Work in Progress Net Book Value 119,923,399 28,518,101 162,683,575 69,267,619 138,888,820 89,335,651 106,729,032 14,901,634 730,247,831 As on Asar end 2073 60,008,399 20,766,819 98,346,220 26,068,543 102,973,637 51,738,127 58,127,781 17,503,689 435,533,216 As on Asar end 2074 90,283,399 25,713,088 101,133,873 49,578,512 114,021,585 63,728,516 74,778,430 15,151,476 534,388,879 534,388,879 As on Asar end 2075 119,923,399 28,518,101 162,683,575 69,267,619 138,888,820 89,335,651 106,729,032 14,901,634 730,247,831

152 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

BANK PARTICULARS LAND BUILDING LEASEHOLD COMPUTER VEHICLES FURNITURE MACHINERY EQUIPMENT TOTAL ASAR TOTAL ASAR PROPERTIES & ACCESSORIES & FIXTURES & OTHERS END 2074 END 2073

Cost As on Shrawan 2073 60,008,399 20,766,819 206,446,757 71,286,347 143,712,525 101,642,397 162,006,370 35,945,733 801,815,346 Addition during the year 30,275,000 6,111,943 25,833,166 28,258,174 37,359,420 19,363,909 30,821,396 3,630,542 181,653,551 Acquisition 30,275,000 6,111,943 25,833,166 444,652 3,464,886 304,698 484,985 658,460 67,577,790 Capitalization - - - 27,813,522 33,894,534 19,059,212 30,336,411 2,972,082 114,075,761 Disposal during the year - - (672,578) (20,363,393) (1,233,599) (4,933,600) (2,748,232) (29,951,402) Adjustment/Revaluation ------Balance as on Asar end 2074 90,283,399 26,878,762 232,279,923 98,871,943 160,708,552 119,772,707 187,894,167 36,828,043 953,517,495 Addition during the Year 29,640,000 4,160,000 72,273,449 32,790,731 55,913,017 37,086,777 49,714,949 2,796,388 284,375,311 Acquisition - Capitalization 29,640,000 4,160,000 72,273,449 32,790,731 55,913,017 37,086,777.01 49,714,949 2,796,388 284,375,311 Disposal during the year (24,598,799) (23,962,380) (5,869,728.36) (6,808,795) (1,750,111) (62,989,813) Adjustment/Revaluation 68,111.25 68,111 Balance as on Asar end 2075 119,923,399 31,038,762 304,621,483 107,063,875 192,659,190 150,989,756 230,800,320 37,874,320 1,174,971,104 953,517,495

Depreciation and Impairment As on Shrawan 01. 2073 - 15,948,013 108,100,537 50,431,467 50,097,960 57,338,082 115,727,237 23,813,532 421,456,828 Depreciation charge for the year - 1,165,673 23,045,513 5,982,731 17,600,632 6,802,069 13,728,827 2,249,852 70,575,297 Impairment for the year ------Disposals - - - (1,010,795) (11,645,761) (1,149,224) (2,319,514) (2,054,773) (18,180,067) Adjustment - (15,948,013) - (6,109,972) (9,365,863) (6,946,736) (14,020,813) (2,332,044) (54,723,442) As on Asar end 2074 - 1,165,673 131,146,050 49,293,431 46,686,967 56,044,191 113,115,737 21,676,567 419128616.3 Depreciation charge for the year 1,354,988 10,791,857 118,821,67.88 19,514,638 10,124,807 15,753,021 2,320,247 71,741,725 Impairment for the year - Disposals (23,379,343) (12,431,236) (4,514,893) (4,797,470) (1,024,127) (46,147,069) Adjustment - As on Asar end 2075 - 2,520,661 141,937,907 37,796,256 53,770,370 61,654,105 124,071,288 22,972,686 444,723,273 419128616.3 Capital Work in Progress Net Book Value 119,923,399 28,518,101 162,683,575 69,267,619 138,888,820 89,335,651 106,729,032 14,901,634 730,247,831 As on Asar end 2073 60,008,399 20,766,819 98,346,220 26,068,543 102,973,637 51,738,127 58,127,781 17,503,689 435,533,216 As on Asar end 2074 90,283,399 25,713,088 101,133,873 49,578,512 114,021,585 63,728,516 74,778,430 15,151,476 534,388,879 534,388,879 As on Asar end 2075 119,923,399 28,518,101 162,683,575 69,267,619 138,888,820 89,335,651 106,729,032 14,901,634 730,247,831

ANNUAL REPORT | 2017-18 153 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

GOODWILL AND INTANGIBLE ASSETS 4.14

GROUP SOFTWARE PARTICULARS GOODWILL PURCHASED DEVELOPED OTHER TOTAL ASAR END

Cost As on Shrawan 01 2073 - 47,343,763 - - 47,343,763 Addition during the year - 23,485,422 - - 23,485,422 Acquisition - - - - Capitalization - 23,485,422 - - 23,485,422 Disposal during the year - - - - Adjustment/Revaluation - - - - Balance as on Asar end 2074 - 70,829,184 - - 70,829,184 Addition during the Year - - - - Acquisition - - - - Capitalization - 33,618,638 - - 33,618,638 Disposal during the year - (7,820,534) - - (7,820,534) Adjustment/Revaluation - - - - Balance as on Asar end 2075 96,627,289 - - 96,627,289

Amortisation and Impairment As on Shrawan 01. 2073 - 41,450,933 - - 41,450,933 Amortisation charge for the year - 7,128,569 - - 7,128,569 Impairment for the year - - - - Disposals - - - - Adjustment - (36,284,288) - - (36,284,288) As on Asar end 2074 12,295,214 - - 12,295,214 Impairment for the year - - - - Amortisation charge for the year - 16,769,878 - - 16,769,878 Disposals - (9,214,786) - - (9,214,786) Adjustment - - - - As on Asar end 2075 - 19,850,305 - - 19,850,305 Capital Work in Progress Net Book Value 76,776,984 76,776,984 As on Asar end 2073 - 5,892,829 - 5,892,829 As on Asar end 2074 - 58,533,970 - 58,533,970 As on Asar end 2075 - 76,776,984 - 76,776,984

154 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

Contd... GOODWILL AND INTANGIBLE ASSETS

BANK SOFTWARE PARTICULARS GOODWILL PURCHASED DEVELOPED OTHER TOTAL ASAR END

Cost As on Shrawan 01 2073 - 47,343,763 - - 47,343,763 Addition during the year - 23,361,122 - - 23,361,122 Acquisition - - - - Capitalization - 23,361,122 - - 23,361,122 Disposal during the year - - - - Adjustment/Revaluation - - - - Balance as on Asar end 2074 - 70,704,884 - - 70,704,884 Addition during the Year - - - - Acquisition - - - - Capitalization - 33,166,638 - - 33,166,638 Disposal during the year - (7,820,534) - - (7,820,534) Adjustment/Revaluation - - - - Balance as on Asar end 2075 96,050,989 - - 96,050,989

Amortisation and Impairment As on Shrawan 01. 2073 - 41,450,933 - - 41,450,933 Amortisation charge for the year - 7,004,269 - - 7,004,269 Impairment for the year - - - - Disposals - - - - Adjustment - (36,284,288) - - (36,284,288) As on Asar end 2074 12,170,914 - - 12,170,914 Impairment for the year - - - - Amortisation charge for the year - 16,679,478 - - 16,679,478 Disposals - (9,214,786) - - (9,214,786) Adjustment - - - - As on Asar end 2075 - 19,635,605 - - 19,635,605 Capital Work in Progress Net Book Value 76,415,384 76,415,384 As on Asar end 2073 - 5,892,829 - 5,892,829 As on Asar end 2074 - 58,533,970 - 58,533,970 As on Asar end 2075 - 76,415,384 - 76,415,384

ANNUAL REPORT | 2017-18 155 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

------4.15 1,140,889 1,140,889 20,426,198 20,426,198 (1,016,055) TAX ASSETS TAX TAX ASSETS TAX (8,483,721) 10,296,879 10,296,879 (9,624,610) (19,921,489) /(LIABILITIES) /(LIABILITIES) (49,314,958) (81,440,256) NET DEFERRED NET NET DEFERRED NET

(19,921,489)

- - - - 51,659,126 - - - 19,264,150 ------BANK BANK LIABILITIES LIABILITIES (1,016,055) (3,214,808) ASAR END 2074 (49,314,958) (81,440,256) 1 SHRAWAN, 2073 1 SHRAWAN,

DEFERRED TAX DEFERRED TAX

------DEFERRED DEFERRED 23,641,006 ASSETS TAX ASSETS TAX

- 42,905,155 (52,529,766) - (9,624,610) - - - - 19,264,150 ------(979,060) (2,601,079) ASSETS TAX ASSETS TAX /(LIABILITIES) /(LIABILITIES) (81,440,256) NET DEFERRED NET NET DEFERRED NET

51,659,126 51,659,126

GROUP GROUP LIABILITIES LIABILITIES (1,016,055) (2,601,079) (81,440,256) ASAR END 2074 DEFERRED TAX DEFERRED TAX 2073 1 SHRAWAN,

36,995 36,995 DEFERRED DEFERRED 51,659,126 TAX ASSETS ASSETS TAX TAX ASSETS ASSETS TAX or loss differences on temporary Lease Liabilities Lease Provisions and Equipment Property Lease Lease Liabilities Investment Securities Investment and Equipment Property Properties Investment Investment Investment Securities Customers to and Advances Loans Investment Investment Properties Loans and Advances to BFIs to and Advances Loans Customers to and Advances Loans Loans and Advances to BFIs to and Advances Loans

PARTICULARS PARTICULARS Deferred Tax (expense)/income recognized directly in equity in directly recognized (expense)/income Tax Deferred in profit recognized (expense)/income Tax Deferred Deferred Tax (expense)/income recognized in OCI in recognized (expense)/income Tax Deferred year during the Origination/(Reversal) 2072 01, on Shrawan Liabilities as (Asset)/ Tax Deferred of 2072/73 end year on as (Liabilities) Asset Tax Closing Net Deferred Adjustment to opening to Adjustment of 2072/73 end year on as (Liabilities) Asset Tax Net Deferred changes in tax rate due to tax Deferred tax Deferred of unused tax losses carry forward on tax Deferred Differences Other Temporary Defined Benefit Plan Employees'

Defined Benefit Plan Employees'

DEFERRED TAX items following on differences on temporary tax Deferred items following on differences on temporary tax Deferred

156 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE ------3,245,327 3,245,327 3,894,392 3,894,392 78,883,332 78,883,332 52,242,398 52,242,398 TAX ASSETS TAX TAX ASSETS TAX 53,146,995 53,146,995 (61,821,723) /(LIABILITIES) /(LIABILITIES) (10,495,372) (26,044,167) (25,736,338) (25,736,338)

NET DEFERRED NET NET DEFERRED NET (26,506,060)

140,705,056

62,737,769

- - 390,233 - - - 75,555,602 - - - - - 1,166,456 - - - - BANK BANK LIABILITIES LIABILITIES ASAR END 2074 ASAR END 2075 (26,044,167)

DEFERRED TAX DEFERRED TAX

------3,245,327 DEFERRED DEFERRED 3,894,392 3,894,392 ASSETS TAX ASSETS TAX

------3,245,327 3,245,327 3,894,392 51,953,563 51,953,563 80,253,985 80,253,985 (1,462,394) 76,738,562 76,738,562 ASSETS TAX ASSETS TAX (61,821,723) (10,495,372) /(LIABILITIES) /(LIABILITIES) (48,438,140) (25,944,935) (28,300,421) (28,300,421) NET DEFERRED NET NET DEFERRED NET

142,075,708

(48,438,140)

(32,194,813) 52,825,582 (82,456,311) (29,630,730)

- 390,233 390,233 - 75,725,332 75,555,602 - - - - 1,166,456 1,166,456 - - GROUP GROUP LIABILITIES LIABILITIES (1,568,846) (26,044,167) ASAR END 2074 ASAR END 2075 DEFERRED TAX DEFERRED TAX

- - - - - 99,232 106,452 106,452 390,233 1,166,456 3,245,327 3,245,327 DEFERRED DEFERRED 3,894,392 3,894,392 76,321,249 (27,613,013) 48,708,237 75,945,835 (26,044,167) 49,901,668 TAX ASSETS ASSETS TAX TAX ASSETS ASSETS TAX 75,725,332 or loss or loss differences differences on temporary on temporary DEFERRED TAX Provisions Lease Liabilities Lease and Equipment Property Investment Securities Investment Properties Investment Customers to and Advances Loans Provisions BFIs to and Advances Loans

PARTICULARS PARTICULARS in profit recognized (expense)/income Tax Deferred Deferred Tax (expense)/income recognized directly in equity in directly recognized (expense)/income Tax Deferred year during the Origination/(Reversal) Deferred Tax (expense)/income recognized in OCI in recognized (expense)/income Tax Deferred 2074 01, on Shrawan Liabilities as (Asset)/ Tax Deferred of 2074/75 end year on as (Liabilities) Asset Tax Net Deferred changes in tax rate due to tax Deferred Differences Other Temporary tax Deferred of unused tax losses carry forward on tax Deferred

in profit recognized (expense)/income Tax Deferred Deferred Tax (expense)/income recognized directly in equity in directly recognized (expense)/income Tax Deferred Defined Benefit Plan Employees' year during the Origination/(Reversal) Deferred Tax (expense)/income recognized in OCI in recognized (expense)/income Tax Deferred 2073 01, on Shrawan Liabilities as (Asset)/ Tax Deferred of 2073/74 end year on as (Liabilities) Asset Tax Net Deferred changes in tax rate due to tax Deferred

Differences Other Temporary tax Deferred of unused tax losses carry forward on tax Deferred Contd... items following on differences on temporary tax Deferred

ANNUAL REPORT | 2017-18 157 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

OTHER ASSETS 4.16 The other assets that fall under the classification of financial instruments are carried at amortized costs and those other assets that do not fall within the definition are carried at cost. These instruments are regularly monitored for impairment.

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Assets held for Sale - - - - - Other Non-Banking Assets - - - - - Bills Receivable - - - - - Accounts Receivable 96,139,934 52,823,547 94,933,780 47,541,340 79,767,242 Accrued Income - - - - - Prepayments and Deposits 44,030,764 36,077,186 43,510,209 35,613,903 15,074,987 Income Tax Deposit - - - - - Deferred Employee Expenditure - - - - - Other Assets 188,704,626 422,650,102 186,884,310 422,080,661 13,125,708 Total 328,875,325 511,550,835 325,328,298 505,235,904 107,967,937

DUE TO BANKS AND FINANCIAL INSTITUTIONS 4.17

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Money Market Deposits - - - - - Interbank Borrowing - - - - - Other Deposits from BFIs 2,126,890,375 3,880,814,202 2,126,890,375 3,880,814,202 1,819,765,220 Settlement and Clearing Accounts - - - - - Other Deposits from BFIs - - Total 2,126,890,375 3,880,814,202 2,126,890,375 3,880,814,202 1,819,765,220

DUE TO NEPAL RASTRA BANK 4.18

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Refinance from NRB 523,732,510 - 523,732,510 - - Standing Liquidity Facility - - - - - Lender of Last Resort facility from NRB - - - - - Securities sold under repurchase agreements - - - - - Other Payable to NRB 2,834,869 - 2,834,869 - - Total 526,567,379 - 526,567,379 - -

158 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

DERIVATIVE FINANCIAL INSTRUMENTS 4.19

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Held for Trading Interest Rate Swap - - - Currency Swap - - - Forward Exchange Contracts - - - Others - - - Held for Risk Management Interest Rate Swap - - - Currency Swap - - - Forward Exchange Contracts. 23,324,347 23,324,347 - - Others - - - Total 23,324,347 - 23,324,347 - -

DEPOSITS FROM CUSTOMERS 4.20

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Institutional Customers: Term Deposits 24,903,251,412 23,254,072,829 25,008,251,412 23,372,191,280 20,256,612,881 Call Deposits 3,578,948,054 2,329,616,726 3,646,860,293 2,329,616,726 4,254,812,381 Current Deposits 3,175,622,327 1,594,990,792 3,175,622,327 1,594,990,792 1,529,453,739 Others 1,112,269,041 1,044,705,240 1,112,269,041 1,044,705,240 1,020,654,548 Individual Customers Term Deposits 14,042,160,657 12,120,954,655 14,042,160,657 12,120,954,655 5,280,067,195 Saving Deposits 19,786,710,542 16,382,387,511 19,786,710,542 16,382,387,511 17,163,701,327 Current Deposits 439,721,189 261,904,191 439,721,189 261,904,191 244,300,618 Others 154,532,054 179,409,052 154,532,054 179,409,052 231,692,547 Total 67,193,215,276 57,168,040,996 67,366,127,515 57,286,159,447 49,981,295,235

CURRENCY WISE ANALYSIS OF DEPOSIT FROM CUSTOMERS 4.20.1

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Nepalese Rupee 66,044,113,727 55,551,336,362 66,044,113,727 55,551,336,362 48,722,121,085 Indian Rupee - - United States Dollar 1,302,418,263 1,710,287,408 1,302,418,263 1,710,287,408 1,235,974,515 Great Britain Pound 13,000,576 3,136,551 13,000,576 3,136,551 1,069,071 Euro 6,594,949 21,399,127 6,594,949 21,399,127 22,130,564 Japanese Yen - - Chinese Yuan - - Other - - Total 67,366,127,515 57,286,159,447 67,366,127,515 57,286,159,447 49,981,295,235

ANNUAL REPORT | 2017-18 159 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

BORROWINGS 4.21

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Domestic Borrowings Nepal Government - - - - - Other Institutions. - - - - - Other - - - - - Sub Total - - - Foreign Borrowings Foreign Banks and Financial Institutions - - - - - Multilateral Development Banks - - - - - Other Institutions - - - - - Sub Total - - - Total - - - - -

PROVISIONS 4.22

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Provisions for Redundancy - - - Provisions for Restructuring - - - - - Pending Legal Issues and Tax Litigation - - - - - Onerous Contracts - - - - - Other - - Total - - - - -

MOVEMENT IN PROVISION 4.22.1

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Balance at Shrawan 01 Provisions made during the year - - - - - Provisions used during the year - - - - - Provisions reversed during the year - - - - - Unwind of Discount - - - - - Balance at Asar end - - -

160 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

OTHER LIABILITIES 4.23 Non Financial liabilities are recorded and reported at cost based on legal and constructive obligation to the bank. Provisions are recognised when the bank has a present legal or constructive obligation as a result of past events, it is more likely that not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Liabilities for emloyees defined benefit obligations 168,675,501 113,285,330 167,044,821 112,333,570 93,894,361 Liabilities for long service leave 77,289,026 59,863,515 77,289,026 59,863,515 52,981,981 Short term employee benefits - - - - - Bills payable 23,715,576 17,204,029 23,715,576 17,204,029 19,516,359 Creditors and accruals 16,779,354 20,673,903 - - - Interest payable on deposits - - - - - Interest payable on borrowing - - - - - Liabilities on defered grant income - - - - - Unpaid Dividend 104,189,435 109,423,455 44,195,398 44,509,037 40,760,303 Liabilities under Finance Lease - - - - - Employee bonus payable 197,482,343 173,073,288 195,126,988 170,436,789 174,576,162 Other Liabilities 765,319,446 609,364,818 678,290,660 526,419,509 310,553,717 Total 1,353,450,682 1,102,888,337 1,185,662,469 930,766,449 692,282,883

DEFINED BENEFIT OBLIGATION 4.23.1 The amounts recognised in the statements of financials positions are as follows :

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Present value of unfunded obligations 244,333,847 172,197,085 244,333,847 172,197,085 146,876,342 Present value of funded obligations - - Total present value of obligations 244,333,847 172,197,085 244,333,847 172,197,085 146,876,342 Fair value of plan assets - - - Present value of net obligations 244,333,847 172,197,085 244,333,847 172,197,085 146,876,342 Recognised liability for defined benefit obligations - -

PLAN ASSETS 4.23.2

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Equity securities - - - - - Government bonds - - - - - Bank deposit - - - - - Other - - - - - Total - - - - -

Actual return on plan assets

ANNUAL REPORT | 2017-18 161 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

MOVEMENT IN THE PRESENT VALUE OF DEFINED BENEFIT OBLIGATIONS 4.23.3

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Defined benefit obligations at Sawan 1 172,197,085 146,876,342 172,197,085 146,876,342 76,099,513 Actuarial losses 17,820,180 (4,454,163) 17,820,180 (4,454,163) 51,018,768 Benefits paid by the plan (6,672,902) (8,828,910) (6,672,902) (8,828,910) (2,293,963) Current service costs and interest 60,989,484 38,603,816 60,989,484 38,603,816 22,052,024 Defined benefit obligations at Asar end 244,333,847 172,197,085 244,333,847 172,197,085 146,876,342

MOVEMENT IN THE FAIR VALUE OF PLAN ASSETS 4.23.4

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Fair value of plan assets at Sawan 1 - - - - - Contributions paid into the plan - - - - - Benefits paid during the year - - - - - Actuarial (losses) gains - - - - - Expected return on plan assets - - - - - Fair value of plan assets at Asar end - - - - -

AMOUNT RECOGNISED IN PROFIT OR LOSS 4.23.5

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Current service costs 53,362,141 23,361,393 53,362,141 23,361,393 41,547,044 Interest on obligation 13,401,539 11,302,216 13,401,539 11,302,216 5,995,945 Expected return on plan assets - - - - - Total 66,763,680 34,663,609 66,763,680 34,663,609 47,542,989

AMOUNT RECOGNISED IN OTHER COMPREHENSIVE INCOME 4.23.6

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Acturial (gain)/loss 12,045,984 (513,956) 12,045,984 (513,956) 25,527,803 Total 12,045,984 (513,956) 12,045,984 (513,956) 25,527,803

ACTUARIAL ASSUMPTIONS 4.23.7

BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75)

Discount rate 9% 8% 8% Expected return on plan asset 0% 0% 0% Future salary increase 10% 10% 10% Withdrawal rate 11% 11% 11%

162 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

DEBT SECUTITIES ISSUED 4.24

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Debt securities issued designated as at fair value through profit or loss - - - - - Debt securities issued at amortised cost - - - - - Total - - - - -

SUBORDINATED LIABILITIES 4.25

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Redeemable preference shares - - - - - Irredemable cumulative preference shares (liabilities component) - - - - - Other - - - - - Total - - -

SHARE CAPITAL 4.26 Financial instruments issued are classified as equity when there is no contractual obligation to transfer cash, other financial assets or issue available number of own number of instrumens. Incremental costs directly attributable to the issue of new shares are shown in equity as deduction net of taxes from the proceeds. Dividends on ordinary shares and preference shares classifed as equity are recognised in equity in the period in which they are declared.

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Ordinary shares 8,152,555,851 7,018,104,701 8,152,555,851 7,018,104,701 3,976,046,341 Convertible preference shares (equity component only) - - - - - Irredemable preference shares (equity component only) - - - - - Perpetual debt (equity component only) - - - - - Total 8,152,555,851 7,018,104,701 8,152,555,851 7,018,104,701 3,976,046,341

ANNUAL REPORT | 2017-18 163 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

ORDINARY SHARES 4.26.1

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Authorized Capital 50,000,000 Ordinary share of Rs. 100 each (2072/73) 5,000,000,000 100,000,000 Ordinary share of Rs. 100 each 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 Issued capital 39,760,498 Ordinary share of Rs. 100 each (2072/73) 3,976,049,741 70,891,757 Ordinary share of Rs. 100 each (2073/74) 7,018,104,701 7,018,104,701 81,525,558 Ordinary share of Rs. 100 each (2074/75) 8,152,555,851 8,152,555,851 Subscribed and paid up capital 39,760,464 Ordinary share of Rs. 100 each (2072/73) 3,976,046,341 70,181,047 Ordinary share of Rs. 100 each (2073/74) 7,018,104,701 7,018,104,701 81,525,558 Ordinary share of Rs. 100 each (2074/75) 8,152,555,851 8,152,555,851 Total 8,152,555,851 7,018,104,701 8,152,555,851 7,018,104,701 3,976,046,341

ORDINARY SHARE OWNERSHIP 4.26.2

2017/18 (74/75) 2016/17 (73/74) PARTICULARS PERCENT AMOUNT PERCENT AMOUNT

Domestic ownership Nepal Government "A" class licensed institutions Other licensed intitutions Other Institutions Public 48.90% 3,986,599,811 48.49% 3,402,770,940 Other 51.10% 4,165,956,040 51.51% 3,615,333,761 Foreign ownership Total 100% 8,152,555,851 100% 7,018,104,701

164 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

RESERVES 4.27 The reserve include regulatory and free reserve

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Statutory general reserve 1,452,920,248 1,157,525,877 1,452,920,248 1,157,525,877 774,260,314 Exchange equilisation reserve 27,141,769 22,968,448 27,141,769 22,968,448 21,181,584 Corporate social responsibility reserve 20,211,911 11,760,887 20,211,911 11,760,887 - Capital redemption reserve - - - - - Regulatory reserve 526,481,883 - 526,481,883 - - Investment adjustment reserve 16,585,000 23,105,225 16,585,000 23,105,225 17,798,572 Capital reserve 7,649,249 7,649,249 - - - Assets revaluation reserve - - - - - Fair value reserve 279,707,498 127,024,622 279,707,498 127,024,622 - Dividend equalisation reserve - - - - - Actuarial gain (8,072,420) 359,769 (8,072,420) 359,769 (25,527,803) Special reserve - - - - - Other reserve 17,789,989 25,070,580 17,789,989 25,070,580 14,033,894 Total 2,340,415,129 1,375,464,658 2,332,765,879 1,367,815,408 801,746,561

There is a regulatory requirement to set aside 20% of the net profit to the general reserve until the reserve is twice the paid of share capital and thereafter minimum 10% of the net profit. The reserve is the acuumulation of setting aside of the profits over the period. There is a regulatory requirement to set aside 25% of the foreign exhange revaluation gain on the translation fo the foreign currency to the reporting currency. The reserve is the acuumulation of setting aside of the profits over the period. Movement in the reserves are given in detail in the Statement of Changes in Equity.

CONTINGENT LIABILITIES AND COMMITMENTS 4.28 Contingent liabilities: Where the Bank undertake to make a payment on behalf of its customers for guarantees issued, such as for performance bonds or as irrecovable letters of credit as part of the Bank's transaction banking business for which an obligation to make a payment has not arisen at the reporting date, those are included in these financial statement as contingent liabilities. Other contingent liabilites primarily include recocable letters of credit and bonds issued on behalf of customers to customs, for bids or offers. Commitments: Where the Bank has confirmed its intention to provide funds to a customer or on behalf of a customer in the form of loans, overdrafts, future guarantees, whether cancellable or not, or letters of credit and the Bank has not made payments at the reporting date, those instruments are included in these financial statment as committments.

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Contingent liabilities 24,749,879,404 19,131,639,640 24,749,879,404 19,131,639,640 14,216,052,312 Undrawn and undisbursed facilities 12,867,453,357 10,255,318,679 12,867,453,357 10,255,318,679 5,746,474,773 Capital commitment 8,058,829 - 8,058,829 - - Lease Commitment - - - - - Litigation 12,518,295 12,518,295 12,518,295 12,518,295 15,377,566 Total 37,637,909,885 29,399,476,614 37,637,909,885 29,399,476,614 19,977,904,651

ANNUAL REPORT | 2017-18 165 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

CONTINGENT LIABILITIES 4.28.1

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Acceptance and documentary credit 4,329,410,484 2,910,867,424 4,329,410,484 2,910,867,424 3,187,589,148 Bills for collection 656,511,726 77,333,142 656,511,726 77,333,142 612,226,357 Forward exchange contracts 3,020,875,000 2,166,150,000 3,020,875,000 2,166,150,000 2,174,597,282 Guarantees 16,743,082,194 13,977,289,074 16,743,082,194 13,977,289,074 8,241,639,525 Underwriting commitment - - - - - Other commitments - - - - - Total 24,749,879,404 19,131,639,640 24,749,879,404 19,131,639,640 14,216,052,312

UNDRAWN AND UNDISBURSED FACILITIES 4.28.2

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Undisbursed amount of loans - - - - - Undrawn limits of overdrafts 12,867,453,357 10,255,318,679 12,867,453,357 10,255,318,679 5,746,474,773 Undrawn limits of credit cards - - - - - Undrawn limits of letter of credit - - - - - Undrawn limits of guarantee - - - - - Total 12,867,453,357 10,255,318,679 12,867,453,357 10,255,318,679 5,746,474,773

CAPITAL COMMITMENTS 4.28.3 Capital expenditure approved by relevant authority of the bank but provision has not been made in financial statements

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Capital commitments in relation to Property and Equipment Approved and contracted for 8,058,829 8,058,829 - - Approved but not contracted for - - - - Sub total 8,058,829 - 8,058,829 - - Capital commitments in relation to Intangible assets Approved and contracted for - - - - - Approved but not contracted for - - - - - Sub total - - - - - Total 8,058,829 - 8,058,829 - -

166 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

LEASE COMMITMENTS 4.28.4

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Operating lease commitments "Future minimum lease payments under non cancellable operating lease, where the bank is lessee" Not later than 1 year - - - - - Later than 1 year but not later than 5 years - - - - - Later than 5 years - - - - Sub total - - - - - Finance lease commitments "Future minimum lease payments under non cancellable operating lease, where the bank is lessee" Not later than 1 year - - - - - Later than 1 year but not later than 5 years - - - - - Later than 5 years - - - - - Sub total - - - - - Grand total - - - - -

LITIGATION 4.28.5

GROUP BANK PARTICULARS 2017/18 (74/75) 2016/17 (73/74) 2017/18 (74/75) 2016/17 (73/74) 2015/16 (72/73)

Contingent Tax Liabilities 12,518,295 12,518,295 12,518,295 12,518,295 15,377,566

INTEREST INCOME 4.29

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Cash and cash equivalent - 33,201 - 33,201 Due from Nepal Rastra Bank - - - - Placement with bank and financial institutions 92,075,710 30,941,314 73,554,816 30,941,314 Loan and advances to bank and financial institutions - - - - Loans and advances to customers 7,228,983,242 5,200,800,651 7,228,983,242 5,200,800,651 Investment securities 308,761,792 170,887,432 308,761,792 170,887,432 Loan and advances to staff 36,061,338 25,168,021 36,061,338 25,168,021 Other Interest Income - - - - Total interest income 7,665,882,082 5,427,830,619 7,647,361,187 5,427,830,619

Interest income is recognized in accrual basis using the rate that closely approximates the EIR because the bank considers that the cost of exact calculation of effective interest rate (EIR) method exceeds the benefit that would be derived from such compliance. As a part of first convergence exercise to NFRS, the bank has not considered the accrued interest as income for those identifiable parties which got reversed in subsequent year which amounts to NPR 234,624,050 in FY 2072/73 and NPR 284,714,723 in FY 2073/74.

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INTEREST EXPENSES 4.30

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Due to bank and financial institutions - - - - Due to Nepal Rastra Bank 4,915,420 - 4,915,420 - Deposits from customers 4,747,964,440 3,106,141,502 4,766,229,839 3,110,863,617 Borrowing 5,287,854 2,569,111 5,287,854 2,569,111 Debt securities issued - - - - Subordinated liabilities - - - - Other Charges - - - - Total Interest expense 4,758,167,715 3,108,710,613 4,776,433,114 3,113,432,728

FEES AND COMMISSION INCOME 4.31

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Loan administration fees - - - - Service fees 229,401,022 224,263,589 229,401,022 224,263,589 Consortium fees - - - - Commitment fees - - - - DD/TT/Swift fees 15,507,843 9,654,251 15,507,843 9,654,251 Credit card/ATM issuance and renewal fees 86,024,731 90,164,782 86,024,731 90,164,782 Prepayment and swap fees - - - - Investment banking fees 4,176,724 4,837,082 - - Asset management fees 106,535 - - - Brokerage fees - - - - Remittance fees 12,977,783 7,990,499 12,977,783 7,990,499 Commission on letter of credit 44,786,829 41,138,574 44,786,829 41,138,574 Commission on guarantee contracts issued 159,686,349 124,530,733 159,686,349 124,530,733 Commission on share underwriting/issue 4,434,438 1,835,325 - - Locker rental 5,210,560 5,475,155 5,210,560 5,475,155 Other fees and commision income 68,577,441 15,799,954 66,318,819 14,033,840 Total Fees and Commission Income 630,890,254 525,689,944 619,913,935 517,251,423

Fees and commissions are generally recognized on an accrual basis when the service has been provided or significant act is performed. Service processing fees on loan is recognized as fees and commission income by the bank and the same in recognized by the bank upfront and is not deferred with the tenure of loan.

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FEES AND COMMISSION EXPENSE 4.32

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

ATM management fees 67,730,922 62,945,241 67,730,922 62,945,241 VISA/Master card fees - - - - Guarantee commission - - - - Brokerage - - - - DD/TT/Swift fees. - - - - Remittance fees and commission - - - - Other fees and commission expense 89,101,602 98,005,813 91,608,476 98,180,966 Total Fees and Commission Expense 156,832,524 160,951,054 159,339,397 161,126,207

Fees and commission expense relates mainly to the transaction and service fees, which are expenses as the services are received.

NET TRADING INCOME 4.33

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Changes in fair value of trading assets - - - - Gain/loss on disposal of trading assets (4,213,288) (15,039,447) - - Interest income on trading assets - - - - Dividend income on trading assets - - - - Gain/loss foreign exchange transation - - - - Other - - - - Net trading income (4,213,288) (15,039,447) - -

Gains and losses arising from changes in fair value of financial instruments held at fair value through profit and losses are included in the statement of profit or loss in the period in which they arise. Gains and lossed arising from changes in the fair value of available for sale financia assets are recognised directly in equity, until the financial assets are derecognised. Dividends on equity instruments are recognised in the statement of profit or loss within other income when the Bank has right to receive payment is established.

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OTHER OPERATING INCOME 4.34

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Foreign exchange revauation gain 16,693,283 7,147,455 16,693,283 7,147,455 Gain/loss on sale of investment securities - 13,435,964 - 13,435,964 Fair value gain/loss on investment properties - - - - Dividend on equity instruments 13,448,885 1,082,592 12,916,090 1,082,592 Gain/loss on sale of property and equipment (2,662,564) 13,779,654 (2,662,564) 456,641 Gain/loss on sale of investment property - - - - Operating lease income 3,412,434 3,329,009 3,412,434 3,329,009 Gain/loss on sale of gold and silver - - - - Other Operating Income 197,328,697 122,992,399 197,328,697 122,992,399 Total 228,220,735 161,767,072 227,687,940 148,444,059

All other operating income not specifically provided under the income heads above is booked and presented under this head. This include foreign exchange revaluation gain, gain/loss on sale of available for sale securities, dividend on available for sale securities, gain/loss on sale of property and equipment, gain/loss on sale of investment properties, operating lease income, gain/loss on sale of gold and silver, finance income of finance lease etc.

IMPAIRMENT CHARGE/(REVERSAL) FOR LOAN AND OTHER LOSSES 4.35

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Impairment charge/(reversal) on loan and advances to BFIs - - - - Impairment charge/(reversal) on loan and advances to customers 50,707,963 74,338,808 50,707,963 74,338,808 Impairment charge/(reversal) on financial Investment (2,115,220) 575,715 (2,115,220) 575,715 Impairment charge/(reversal) on placement with BFIs - - - - Impairment charge/(reversal) on property and equipment - - - - Impairment charge/(reversal) on goodwill and intangible assets - - - - Impairment charge/(reversal) on investment properties - - - - Total 48,592,743 74,914,523 48,592,743 74,914,523

Loans and advances are assessed individually and collectively as per incured loss model which is then compared with the loss provision prescribed by NRB directive no. 2.Higher of the loss as per incurred loss model and NRB directive is considered for impairment. Loans and advances above 40 million are considered for incurred loss model impairment which approximately come at 35% of total portfolio.

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PERSONNEL EXPENSES 4.36

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Salary 319,432,693 181,539,256 307,869,427 173,802,965 Allowances 255,670,480 204,103,040 255,670,480 204,103,040 Gratuity Expense 46,186,750 41,081,761 46,186,750 41,081,761 Provident Fund 24,946,072 17,223,215 24,946,072 17,223,215 Uniform 2,125,009 7,761,400 1,987,009 7,661,400 Training & development expense 16,218,107 12,504,528 16,218,107 12,504,528 Leave encashment 26,572,207 13,782,448 26,572,207 13,782,448 Medical - - - - Insurance 7,554,691 31,308,270 7,554,691 31,308,270 Employees incentive - - - - Cash-settled share-based payments - - - - Pension expense - - - - Finance expense under NFRS 26,359,865 22,834,267 26,359,865 22,834,267 Other expenses related to staff - - - - Subtotal 725,065,875 532,138,185 713,364,609 524,301,894 Employees Bonus 197,482,343 167,233,792 195,126,988 164,597,293 Grand total 922,548,218 699,371,977 908,491,597 688,899,187

Short term employee benefits are measured on an undiscounted basis and are expenses as the related service is provided. The contribution payable by the employer to a defined contribution plan in proportion to the services rendered to Bank by the employees and is recorded as an expense under ‘Personnel expense’ as and when they become due. Unpaid contribution are recorded as a liability under ‘Other Liabilities’.

OTHER OPERATING EXPENSE 4.37

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Directors' fee 1,942,000 2,004,000 1,942,000 2,004,000 Directors' expense 1,095,680 1,007,626 1,095,680 1,007,626 Auditors' remuneration 1,285,940 1,276,900 1,130,000 1,130,000 Other audit related expense 324,162 800,000 324,162 800,000 Professional and legal expense 12,551,385 8,374,562 12,097,325 8,052,033 Office administration expense 159,281,091 68,476,519 158,014,041 68,022,280 Operating lease expense 87,935,180 73,584,632 86,161,430 71,934,632 Operating expense of investment properties - - - - Corporate social responsibility expense 6,318,694 1,396,409 6,318,694 1,396,409 Onerous lease provisions - - - - Other Expenses 179,008,668 161,958,899 175,158,328 158,246,762 Total 449,742,801 318,879,547 442,241,660 312,593,742

Operating lease expense has been recongnised on accrual basis. In case of straight line basis of accouting additional NPR 10,323,943 has to be charged.

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DEPRECIATION AND AMORTISATION 4.38

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Depreciation on property and equipment 62,427,544 48,866,519 60,949,868 47,529,783 Depreciation on investment property - - - - Amortisation of intangible assets 51,465,125 - 51,465,125 - Total 113,892,669 48,866,519 112,414,993 47,529,783

Depreciation is calculated by using the written down value method on cost or valuation of the Property & Equipment other than freehold land and leasehold properties. Depreciation on leasehold properties is calculated by using the straight line method on cost or valuation of the property. Intagible asset contains software which has been amortised over 5 years.

NON OPERATING INCOME 4.39

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Recovery of loan written off 22,400,570 - 22,400,570 - Other income 45,801,779 31,719,267 45,801,779 13,917,746 Total 68,202,348 31,719,267 68,202,348 13,917,746

NON OPERATING EXPENSES 4.40

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Loan written off 163,834,555 85,025,124 163,834,555 85,025,124 Redundancy provision - - - - Expense of restructuring - - - - Other expense. 547,474 897,152 547,474 897,152 Total 164,382,029 85,922,276 164,382,029 85,922,276

INCOME TAX EXPENSES 4.41

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Current tax expense 621,264,344 454,034,370 615,003,079 447,435,702 Current year 619,651,855 452,822,459 613,390,590 446,223,791 Adjustments for prior years 1,612,489 1,211,911 1,612,489 1,211,911 Deferred tax expense (142,075,707) 58,933,512 (140,705,055) 62,737,769 Origination and reversal of temporary differences (142,075,707) 58,933,512 (140,705,055) 62,737,769 Changes in tax rate - - - Recognition of previously unrecognised tax losses - - - Total income tax expense 479,188,636 512,967,882 474,298,024 510,173,471

Income Tax expense is recognized in the statement of Profit or Loss, except to the extent it relates to items recognized directly in equity or other comprehensive income in which case it is recognized in equity or in other comprehensive income.

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RECONCILIATION OF TAX EXPENSES AND ACCOUNTING PROFIT 4.41.1

GROUP BANK PARTICULARS FY 2017/18 FY 2016/17 FY 2017/18 FY 2016/17

Profit before tax 1,974,823,432 1,634,350,946 1,951,269,877 1,623,025,401 Tax amount at tax rate of 30% 592,447,030 490,305,284 585,380,963 486,907,620 Add: Tax effect of expenses that are not deductible for tax purpose 79,760,973 88,720,848 79,388,097 70,213,035 Less: Tax effect on exempt income (3,874,827) (324,778) (3,874,827) (324,778) Add/less: Tax effect on other items (47,869,790) (127,638,548) (47,503,644) (112,331,739) Total income tax expense 620,463,385 451,062,807 613,390,589 444,464,138 Effective tax rate 31.42% 27.60% 31.44% 27.38%

STATEMENT OF DISTRIBUTABLE PROFIT OR LOSS As on 16 July, 2018 (32 Asar 2075)

BANK RESTATED PARTICULARS 16 JULY 2018 15 JULY 2017

Net profit or (loss) as per statement of profit or loss 1,476,971,853 1,112,851,929 Appropriations: a. General reserve (295,394,371) (235,217,747) b. Foreign exchange fluctuation fund (4,173,321) (1,786,864) c. Capital redemption reserve d. Corporate social responsibility fund (14,769,719) (11,760,887) e. Employees' training fund f. Other - - Profit or (loss) before regulatory adjustment 1,162,634,443 864,086,431 Regulatory adjustment: a. Interest receivable (-)/previous accrued interest received (+) (346,008,422) - b. Short loan loss provision in accounts (-)/reversal (+) - - c. Short provision for possible losses on investment (-)/reversal (+) - - d. Short loan loss provision on Non Banking Assets (-)/reversal (+) (119,254,047) - e. Deferred tax assets recognised (-)/ reversal (+) (53,146,995) - f. Goodwill recognised (-)/ impairment of Goodwill (+) g. Bargain purchase gain recognised (-)/resersal (+) h. Acturial loss recognised (-)/reversal (+) (8,072,420) - i. Other (+/-) Distributable profit or (loss) 636,152,559 864,086,431

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5. DISCLOSURES 5.1.2 Market Risk by senior management/ALCO and AND ADDITIONAL Bank risk management committee approved by the Board of Directors. has approved the market risk policy The bank utilizes flow measures to INFORMATION of the Bank. As for the monitoring determine its cash position. A maturity of market and liquidity risk, the Bank ladder analysis estimates a bank’s 5.1 RISK MANAGEMENT has an active Assets and Liability inflows and outflows and thus net Sunrise Bank has specific internal Management Committee (ALCO) deficit or surplus (GAP) over a time review mechanism to assess its in place which meets regularly and horizon. A maturity ladder is a useful position regarding each separate risk takes stock of the Bank’s assets and device to compare cash inflows and area including Credit Risk, Market Risk liability position and profile of assets outflows both on a day-to-day basis and Operational Risk. & liabilities, monitors risks arising from and over a series of specified time changes in exchange rates in foreign periods as presented in the NRB Ni.Fa. 5.1.1 Credit Risk currencies. All foreign exchange No.5.1 under NRB Directives No. 5. The Bank has its own Credit Policy positions are managed by treasury Guidelines to handle the Credit consisting of front office dealers 5.1.4 Fair value of financial Risk Management philosophy that with specific dealing limits and an assets and liabilities involves a continual measurement independent back office. The back Fair value is a market-based of probability of default/loss; office executes the deals made by the measurement, not an entity specific identification of possible risks dealers and also monitors the liquidity measurement. For some assets and mitigations. The provisions of position of the Bank. For the purpose and liabilities, observable market Capital Adequacy Framework -2015 of proper check and control, the front transactions or market information are compiled in line to line basis to dealing room of treasury and the back might be available. For other assets overcome the Credit Risk. In order to office has different reporting line. and liabilities, observable market manage and eliminate the credit risk, transactions and market information the Bank has a practice of maintaining 5.1.3 Liquidity Risk might not be available. However, the the best quality assets in its book. Liquidity risk is the potential for objective of a fair value measurement The Bank’s Credit Policy elaborates loss to a bank arising from either its in both cases is the same – to detailed procedures for proper risk inability to meet its obligations or to estimate the price at which an orderly management. The Bank has delegated fund increases in assets as they fall transaction to sell the asset or to credit approval limits to various due without incurring unacceptable transfer the liability would take place officials to approve and sanction cost or losses. Liquidity is the ability between market participants at the various amount of credit request of an institution to transform its measurement date under current based on their individual expertise and assets into cash or its equivalent in a market conditions (i.e. an exit price risk judgment capability. timely manner at a reasonable price at the measurement date from the to meet its commitments as they fall perspective of a market participant Regular monitoring of the credit due. Liquidity risk is considered a that holds the asset or owes the portfolio ensures that the Bank does major risk for banks. It arises when the liability). not run the risk of concentration of cushion provided by the liquid assets portfolio in a particular business sector are not sufficient enough to meet its Fair values are determined according or a single borrower. Similarly the Bank obligation. In such a situation banks to the following hierarchy: also exercises controlled investment often meet their liquidity requirements policy with adequately equipped from market. Funding through market Level 1 input resource looking after the investment depends upon liquidity in the market Level 1 inputs are quoted prices decisions. and borrowing bank’s liquidity. (unadjusted) in active markets for identical assets or liabilities To cap these all, the Bank has a strong The board has ensured that the that the entity can access at Credit Committee in place comprising bank has necessary liquidity risk the measurement date. Held for of various Directors from the Board management framework and bank is trading and financial instruments of the Bank which reviews all credit capable of confronting uneven liquidity designated at fair value through proposals beyond a specified amount scenarios. The bank has formulated other comprehensive income liquidity policies, contingency funding investments have been recorded planning which are recommended using Level 1 inputs.

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Level 2 inputs 5.2 CAPITAL MANAGEMENT Bank which includes managing, Level 2 inputs are inputs other assessing, identifying, monitoring than quoted prices included within A. Qualitative Disclosures and reducing pertinent global, Level 1 that are observable for the macro and micro-economic asset or liability, either directly or level business risks that could i. Board and senior indirectly. interfere with Banks objective management oversight and goals and whether the Bank Bank management is responsible is in substantial compliance with Level 3 inputs for understanding the nature and its internal operating policies Level 3 inputs are unobservable level of risk being taken by the and other applicable regulations inputs for the asset or liability. bank and how this risk relates to and procedures, external, adequate capital levels. It is also legal, regulatory or contractual 5.1.5 Operational Risk responsible for ensuring that requirements on a continuous As a part of monitoring operational the form and sophistication of basis. Further, CRO ensures risks, the Bank has devised operational the risk management processes integration of all major risk in manuals for various Banking functions, is commensurate with the capital assessment process. which are reviewed and modified time complexity of its operations. A to time as per the changing business sound risk management process, context. thus, is the foundation for an iv. Risk Management Committee effective assessment of the (RMC) Board level risk management The Bank has adopted dual control adequacy of a bank’s capital committee has been set up under mechanism in its all operational position. The decisions made by NRB Directive for ensuring/ activities where each and every the management are regularly reviewing bank's risk appetite is in financial and non financial transaction reviewed by the BOD. line with the policies. is subject to approval from an authority higher than the transaction ii. Sound capital assessment initiator. Regular review meetings are Crucial component of an effective v. Monitoring conducted to assess the adequacy ICAAP is the assessment of capital. Monitoring and reporting of all of risk monitoring mechanism and In order to be able to make a risks, including credit, operational required changes are made as and sound capital assessment, the bank and market risks are identified, when felt necessary. Independent have the following: escalated, monitored and reconciliation unit is established to mitigated to the satisfaction of conduct daily reconciliation of all n Policies and procedures the risk type owner. The risk type Nostro/agency accounts, Inter-Branch designed to ensure that the owner is responsible for ensuring and Inter-Department account under bank identifies, measures, and that all the risks are adequately direct supervision of Chief Financial reports all material risks; identified, escalated, monitored Officer. The Bank has independent n A process that relates capital to and mitigated. The Bank has an internal audit, which reports to the the level of risk; adequate system in place for Audit Committee of the Bank. The n A process that states capital monitoring and reporting risk Audit Committee meets frequently adequacy goals with respect exposures and assessing how and reviews the business process and to risk, taking account of the the changing risk profile affects financial position of the Bank. In order bank’s strategic focus and the need for capital. The senior to have better focus on managing business plan; and management and board of operational risks across branches and n A process of internal control directors on a regular basis receive to monitor them from Head Office reviews and audits to ensure the report regarding the risk profile level, the Bank has separate Branch the integrity of the overall of the bank and its capital needs. Operation and Control & Compliance management process. All the material risks are identified, Department at Head Office. The Bank measured, monitored and reported has strong MIS in place to monitor the iii. Comprehensive assessment by the respective risk type owner. regular operational activities. of risks Chief Risk Officer (CRO), along vi. Internal Control Review with his team, is responsible for The internal control structure of overall risk management of the the Bank is essential for sound

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capital assessment process. Effective ix. Maker-Checker Policy control of the capital assessment The Bank has adopted Maker-Checker Policy in all of the transactions. Each process includes an independent review and every transaction is entered and authorized in CBS by two different and involvement of both internal as well individuals for better control and any deviations are closely monitored. The as external audits wherever appropriate. activities of any personnel can be monitored centrally through an integrated The Bank is committed conduct the system which helps in minimizing the risk of misconduct. regular review of its risk management process to ensure its integrity, accuracy, B. Quantitative Disclosures and reasonableness. The effectiveness of the Bank’s internal control system 1. Capital Structure and Capital Adequacy is reviewed regularly by the Board, its committees, Management and Internal i. Tier 1 Capital and breakdown of its Components Audit.

S.N. PARTICULARS AMOUNT (NPR MILLIONS) The Internal Audit monitors compliance a Paid up Capital 8,152.56 with policies and standards and b Share Premium / Capital Reserve 127.16 the effectiveness of internal control c Proposed Bonus Shares 0.00 structures across the Bank through d Statutory General Reserve 1,452.92 its program of business/unit audits. e Retained Earnings 941.86 The Internal Audit function is focused f Un-audited Current Year Cumulative Profit 0.00 on the areas of greatest risk as g Other Free Reserves 17.79 h Less: Deferred Tax Assets 58.60 determined by a risk-based assessment i Less: Fictitious Assets 76.42 methodology. Internal Audit reports j Less: Investment in equity of institutions with financial interests 264.85 regularly to the Audit Committee. k Less: Purchase of land & building in excess of limit and unutilized 32.61 The findings of all adverse audits are Core (Tier-1) Capital 10,265.25 reported to the Chief Executive Officer and Business Heads for immediate ii. Tier 2 Capital and breakdown of its Components corrective actions.

S.N. PARTICULARS AMOUNT (NPR MILLIONS) vii. Assets and Liability a General Loan Loss Provision 616.14 Committee (ALCO) b Exchange Equalization Reserve 27.14 The ALCO, chaired by Chief Executive c Investment Adjustment Reserve 16.58 Officer, ensures functioning of the Supplementary (Tier-2) Capital 659.87 banking business in line with the set procedures and processes and iii. Details of Subordinated Term Debts recommends for necessary steps Bank doesn’t have any subordinated term debts. to address the risk associated with liquidity, movement in interest rate, exchange rate and equity price and iv. Deductions from Capital other risks. n Investment made in Gurans Life Insurance Company Limited of NPR viii. Stress Testing 107.71 million and investment in Sunrise Capital Limited NPR 157.14 million Stress Testing is a risk management (Investments in equity of institutions with Financial Interest) technique used to evaluate the n Rs 32.61 million for land and building not in use by bank that includes land potential effects on an institution’s purchased at Bharatpur, Chitwan (Rs 25.75 Million) not brought into use and financial condition, of a set of specified proportionate WDV of buildings not used by bank and rented out to other changes in risk factors, corresponding parties (Rs 6.86 million) to exceptional but plausible events. n Fictitious Assets of Rs 76.4 Million. The Bank conducts the stress test on quarterly basis and reports to senior management as well as to Nepal Rastra Bank.

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v. Total Qualifying Capital

S. N. PARTICULARS AMOUNT (NPR MILLIONS) a Common Equity Tier 1 Capital 10,265.25 b Core Capital 10,265.25 c Supplementary Capital 659.87 Total Capital 10,925.13

vi. Capital Adequacy of the Bank The capital adequacy of the bank (After Bank's adjustments of Pillar II) has been detailed below:

S. N. PARTICULARS % a Common Equity Tier 1 Capital to Total Risk Weighted Exposures 12.58% b Tier 1 Capital to Total Risk Weighted Exposures 12.58% c Total Capital to Total Risk Weighted Exposures 13.38%

vii. Summary of the bank’s internal approach to assess the adequacy of its capital to support current and future activities, if applicable: Bank’s current paid up capital amounts to Rs 8.15 Billion. The Bank complies with the Capital Increment plan of NRB which has also helped the Bank to be in steady and strong capital position. The overall strategy of the bank has been formulated with the special consideration to the capital adequacy requirement according to BASEL-III.

viii. Summary of the terms, conditions and main features of all capital instruments, especially in case of subordinated term debts including hybrid capital instruments. Bank does not have any other capital instruments except fully paid equity shares as qualifying capital.

2. Risk Exposures

a. Risk Weighted Exposures All material risks faced by the bank have been addressed in the capital assessment process. However, bank has developed a process to estimate risks with reasonable certainties. All the three risks that have direct impact on the capital adequacy level have been managed in a structured manner with clear roles and responsibilities. In order to make a comprehensive assessment of risks, the process has, at minimum, addressed the forms of risks covered below:

S.N. PARTICULARS AMOUNT (NPR MILLIONS) a Risk Weighted Exposure for Credit Risk 74,851.54 b Risk Weighted Exposure for Operational Risk 3,289.00 c Risk Weighted Exposure for Market Risk 209.65 RWA Before Pillar 2 adjustment 78,350.19

All risks, including credit, operational and market risks are identified, escalated, monitored and mitigated to the satisfaction of the risk type owner. The risk type owner is responsible for ensuring that all the risks are adequately identified, escalated, monitored and mitigated. The Bank has an adequate

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system in place for monitoring and reporting risk exposures and assessing how 5.3 CLASSIFICATION OF FINANCIAL the changing risk profile affects the need for capital. The senior management ASSETS AND FINANCIAL LIABILITIES and board of directors on a regular basis receive the report regarding the risk NAS 39 requires financial assets to profile of the bank and its capital needs. All the material risks are identified, be classified in one of the following measured, monitored and reported by the respective risk type owner. categories: b. Credit Risk under 11 Categories n Financial assets at fair value through The Credit Risks under the 11 categories as per the Capital Adequacy profit or loss Framework, 2015 and Basel –III has been detailed below: n Financial assets designated at fair value through other comprehensive income S.N. RISK CLASSIFICATION NET BOOK VALUE RWE n Loans and receivables (NPR MILLION) n Held to maturity investments a Claims on Govt. and Central Bank 14,061.37 - b Claims on other Financial Entities Financial assets at fair value through profit c Claims on Banks 4,858.26 1,491.19 or loss have two sub-categories: d Claims on Corporate and Securities Firm 23,962.02 23,962.02 e Claims on Regulatory Retail Portfolio 22,171.39 16,628.54 f Claims secured by Residential Properties 8,131.31 4,917.79 n Financial asset that is designated g Claims secured by Commercial Real State 2,051.36 2,051.36 on initial recognition as one to be h Past due Claims 572.57 858.86 measured at fair value with fair value i High Risk Claims 2,557.72 3,836.58 changes in profit or loss. j Other Assets 3,978.53 2,277.04 n Held for trading k Off balance sheet items 36,941.67 18,828.17 Total 119,286.20 74,851.54 NAS 39 recognizes two classes of financial liabilities: c. Total Risk Weighted Exposure Calculation Table

n Financial liabilities at fair value through S.N. RISK WEIGHTED EXPOSURE AMOUNT (NPR MILLIONS) profit or loss a Risk Weighted Exposure for Credit Risk 74,851.54 n Other financial liabilities measured b Risk Weighted Exposure for Operational Risk 3,289.00 at amortized cost using the effective c Risk Weighted Exposure for Market Risk 209.65 interest rate method Adjustments under Pillar II Add: 1% of the NII to RWA for ALM Policy and Practice 21.93 3% additional risk weight for Operational Risk 906.02 The category of financial liability at fair 3% adjustment on Total RWE for Overall Risk 2,350.51 value through profit or loss has two sub- Total Risk Weighted Exposure 81,628.64 categories: d. Detail of Non-Performing Loans n Financial liability that is designated by the entity as a liability at fair value PARTICULARS GROSS VALUE NET VALUET (NPR MILLION) through profit or loss upon initial recognition Restructured Loans - n Held for trading Sub-Standard Loans 119.97 89.98 Doubtful Loans 324.77 162.38 Loss Loans 304.33 - The classification of financial assets or Total NPA 749.07 252.36 liabilities is given in detail in Note 3.4. e. Ratio of Non-Performing Loans 5.4 OPERATING SEGMENT INFORMATION PARTICULARS CURRENT YEAR PREVIOUS YEAR Gross NPA 1.24% 1.37% Net NPA 0.42% 0.41% 1. General Information An operating segment is a component of an entity:

178 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

n that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), n whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and n for which discrete financial information is available.

Not every part of an entity is necessarily an operating segment or part of an operating segment. For example, a corporate headquarters or some functional departments may not earn revenues or may earn revenues that are only incidental to the activities of the entity and would not be operating segments. For the purposes of this NFRS, an entity’s post-employment benefit plans are not operating segments.

2. Information about profit or loss, assets and liabilities Amount in Mn.

PARTICULARS CREDIT TREASURY TRANSACTION ALL OTHER TOTAL ADMINISTRATION BANKING

a. Revenues from external customers 7,494 380 391 296 8,561 b. Intersegment revenues - 4,830 - - 4,830 c. Net Revenue 7,494 5,210 391 296 13,391 d. Interest revenue - - - - - e. Interest expense 4,830 4,776 - - 9,607 f. Net interest revenue(b) 2,664 434 391 296 3,784 g. Depreciation and amortization 98 5 5 4 112 h. Segment profit /(loss) 2,566 429 385 292 3,672 i. Entity's Interest in the profit or loss of associates accounted for using equity method - - - - - j. Other material non-cash items: - - - - - k. Impairment of assets (1,113) - - - (1,113) l. Segment assets 61,324 13,611 119 7,729 82,782 m. Segment liabilities - 61,167 - 21,615 82,782

3. Measurement of operating segment profit or loss, assets and liabilities The bank has identified the key segments of business on the basis of nature of operations that assists the Executive Committee of the bank in decision making process and to allocate the resources. It will help the management to assess the performance of the business segments. The Segment has been identified on the basis of geographic location of the branches. Investment balances, NRB balance, income from investment, forex income are reported in Head office under Province 3. Intra segment revenue and costs are accounted as per the policy of the bank and eliminated in the Head Office

4. Reconciliations of reportable segment revenues, profit or loss, assets and liabilities

a. Revenue b. Profit or Loss

Amount in Mn. Amount in Mn.

Total revenues for reportable segments 13,391 Total profit or loss for reportable segments 3,380

Other revenues 296 Other profit or loss 292

Elimination of intersegment revenues 4,830 Elimination of intersegment profits 64

Entity’s Revenue 8,561 Unallocated amounts: -

Other Operating expense 1,785

Profit before income tax 1,951

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c. Assets 5.5 SHARE OPTIONS AND SHARE BASED Amount in Mn. PAYMENT A share-based payment is a transaction in which Total assets for reportable segments 75,065 the bank receives goods or services either as Other assets - consideration for its equity instruments or by

Unallocated amounts 7,717 incurring liabilities for amounts based on the price of the entity's shares or other equity instruments of Entity's Assets 82,782 the entity. The bank does not have any share option and share based payment. d. Liabilities Amount in Mn. 5.6 CONTINGENT LIABILITIES AND COMMITMENT Total liabilities for reportable segments 61,179

Other liabilities - 5.6.1 Contingent Liabilities: Unallocated liabilities 21,603 Where the Bank undertakes to make a payment on behalf of its customers for guarantees issued, such Entity's Liabilities 82,782 as for performance bonds or as irrevocable letters of credit as part of the Bank’s transaction banking 5. Information about product and services business for which an obligation to make a payment Amount in Mn. has not arisen at the reporting date, those are

S.N REVENUE 13,391 included in these financial statements as contingent a Loans related Services 7,494 liabilities. b Treasury related services 5,210 c Transaction Banking related services 391 Other contingent liabilities primarily include d Other services 296 revocable letters of credit and bonds issued on behalf of customers to customs, for bids or offers. 6. Information about geographical areas Revenue from following geographical areas 5.6.2 Commitments: Amount in Mn. Where the Bank has confirmed its intention to provide funds to a customer or on behalf of a a. Domestic 9,050 customer in the form of loans, overdrafts, future Province 1 1,626 guarantees, whether cancellable or not, or letters of Province 2 564 credit and the Bank has not made payments at the reporting date, those instruments are included in Province 3 5,370 these financial statement as commitments. Province 4 318

Province 5 617 Please refer Note No. 4.28.1 to 4.28.4 for the detail of contingent liabilities and commitments as at 16 July Province 6 9 2018. Province 7 439

b. Foreign - 5.6.3 Litigations Litigations are anticipated in the context of business Total 9,050 operations due to the nature of the transactions involved. The Bank and the Group are involved in various such legal actions and the controls have 7. Information about Major Customer been established to deal with such legal claims. Revenue from single customer doesn’t exceed 10% of total revenue There are pending litigations existing as at the end of the reporting period against the Large Taxpayers Office, resulting through normal business operations.

The details of litigations are presented in 4.28.5.

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5.7 RELATED PARTIES DISCLOSURES 5.9 ADDITIONAL DISCLOSURES OF NON-CONSOLIDATED A. Transaction with related party ENTITIES Amount in Mn. Not applicable PARTICULARS FY 2017/2018 Deposit Maintained by Sunrise Capital 172.91 5.10 EVENTS AFTER REPORTING Interest Paid to Sunrise Capital 18.26 PERIOD Expenses reimbursement to subsidiary 2.06 There are no material events that have

Commission and fees paid to Sunrise capital occurred subsequent to 16 July, 2018 till RTS Fee 0.35 the signing of this financial statement Bonus De-mat Fee 0.29 on 29 November 2018. Tender Issue Fee 0.05 Tender Collection Commission 0.73 The Board has decided to propose B Key Managerial Personnel 11.5% Cash Dividend to its shareholders, Key Management Personnel of the Bank include members of the Board, Chief subject to approval of the 11th Annual Executive Officer and all managerial level executives. Followings are a list of Board General Meeting. In view of the of Directors and CEO bearing office at 16 July 2018. acquisition benefit extended by the Income Tax Act, 2058, the shareholders KEY MANAGEMENT PERSONNEL RELATION who have acquired the shares after the Mr. Motilal Dugar Chairman date of acquisition (2073/10/28) shall Dr. Bhogendra Guragain Director be liable to pay applicable dividend tax. Er. Bachchharaj Tater Director

Mr. Malchand Dugar Director Dr. Deepak Prasad Bhattarai Director

Mr. Dipak Nepal Director

Mr. Jyoti Kumar Begani Director

Mr. Om Krishna Joshi Director

Mr. Ratna Raj Bajracharya Chief Executive Officer

C. Compensation to Board of Directors All members of the Board are non-executive directors and no executive compensation is paid to the directors. Specific non-executive allowances paid to directors are as under: Board Meeting fees Rs. 1,942,000 Other benefits Rs. 1,095,680

5.8 MERGER AND ACQUISITION The Bank has not entered into any merger or acquisition activity for the fiscal year ended on 16 July 2018.

Investment in Associates and Joint Ventures Associates are those entities in which the Bank has significant influence, but not control, over the financial and operating policies. Investments in associate entities are accounted for using the equity method (equity-accounted investees) and are recognized initially at cost. The cost of the investment includes transaction costs.

The Bank doesn’t have any associates or joint ventures.

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DISCLOSURE EFFECT OF TRANSITION FROM PREVIOUS GAAP TO NFRSS 5.11

1. Reconciliation of equity

EXPLANATORY AS AT 01.04.2073 AS AT 31.03.2074 (END OF PARTICULARS NOTE * (DATE OF TRANSITION) LAST PERIOD PRESENTED UNDER PREVIOUS GAAP)

Total equity under Previous GAAP 6,144,666,095 9,467,298,305 Adjustments under NFRSs: Impairment on loan and advances - Fair value & employees benefit accounting of staff loan - - Lease accounting - - Measurement of investment securities at fair value 1.1 257,177,264 - Revaluation of property & equipment - - Recognition of investment property - - Amortisation of debt securities issued - - Deferred tax 1.2 (25,673,952) (55,467,856) Defined benefit obligation of employees 1.3 (78,803,352) (86,574,668) Goodwill/Bargain purchase gain - - Interest income 1.4 164,383,193 271,467,521 Other - - Legally repossed Asset 1.5 103,907,648 161,448,497 Unearned Commission 1.6 - (22,777,641) Total Adjustment to equity 420,990,800 268,095,853 Total Equity under NFRSs 6,565,656,895 9,735,394,158

2. Reconciliation of profit or loss

EXPLANATORY FOR THE YEAR ENDED PARTICULARS NOTE * 31.03.2074 (THE LATEST PERIOD PRESENTED UNDER PREVIOUS GAAP) Profit/(Loss) for the year Previous GAAP 1,176,088,732 Adjustments under NFRSs: Interest income 2.1 107,084,328 Impairment of loan and advances - Employees benefit amortisation under staff loan Defined benefit obligation of employee 2.2 (33,813,075) Operating lease expense Amortisation expense of debt securities Other operating income Interest expense Depreciation & Amortisation Other Unearned Commission & Discount 2.3 (22,777,641) Fair Value measurement of foreign bond 2.4 - Deferred Tax 2.5 (40,289,275) NBA Reserve 2.6 (73,441,139) Total Adjustment to profit or loss (63,236,803) Profit or loss under NFRSs 1,112,851,929 Other Comprehensive Income Total Comprehensive income under NFRSs 1,112,851,929

182 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE ------78,570,981 78,570,981 25,736,337 25,736,337 PER NFRSS 58,533,970 58,533,970 164,593,723 164,593,723 AMOUNT AS AMOUNT 1,112,942,459 1,112,942,459 534,388,880 534,388,880 666,684,399 666,684,399 930,766,449 930,766,449 7,018,104,701 7,018,104,701 1,367,815,408 1,367,815,408 7,496,218,748 7,496,218,748 6,168,650,705 6,168,650,705 1,349,474,048 1,349,474,048 3,880,814,202 3,880,814,202 3,358,047,347 3,358,047,347 9,735,394,158 9,735,394,158 50,158,474,941 50,158,474,941 2,060,959,540 2,060,959,540 57,286,159,447 57,286,159,447 62,123,476,435 62,123,476,435 71,858,870,593 71,858,870,593 71,858,870,593 71,858,870,593 9,735,394,157.82 9,735,394,157.82 - - - - 804,900 ------NFRSS 25,736,337 25,736,337 (4,301,170) EFFECT OF EFFECT (29,731,519) 188,897,253 244,018,764 272,397,022 109,352,309 135,088,646 403,184,499 403,184,499 268,095,853 CUMULATIVE AS AT 31.03.2074 31.03.2074 AS AT TRANSITION TO 268,095,852.82

------GAAP 29,731,519 29,731,519 PREVIOUS 78,570,981 78,570,981 821,414,140 821,414,140 58,533,970 58,533,970 164,593,723 164,593,723 1,372,116,578 1,372,116,578 422,665,635 422,665,635 1,112,942,459 1,112,942,459 534,388,880 534,388,880 7,018,104,701 7,018,104,701 7,496,218,748 1,077,077,026 1,077,077,026 6,168,650,705 6,168,650,705 3,880,814,202 3,880,814,202 3,358,047,347 3,358,047,347 2,060,959,540 57,286,159,447 57,286,159,447 9,467,298,305 9,467,298,305 61,988,387,789 61,988,387,789 49,969,577,688 49,969,577,688 71,455,686,095 71,455,686,095 71,455,686,094 71,455,686,094 9,467,298,305.00 9,467,298,305.00

------8,483,721 8,483,721 5,892,829 5,892,829 FINANCIAL 27,774,490 27,774,490 211,875,585 211,875,585 801,746,561 801,746,561 435,533,216 435,533,216 692,282,883 692,282,883 955,332,206 955,332,206 2,772,391,178 2,772,391,178 2,618,168,668 1,819,765,220 1,819,765,220 5,845,165,201 5,845,165,201 1,787,863,993 1,787,863,993 3,976,046,341 3,976,046,341 3,809,870,298 3,809,870,298 6,565,656,895 6,565,656,895 49,981,295,235 49,981,295,235 STATEMENT OF STATEMENT 42,360,854,826 52,501,827,060 52,501,827,060 59,067,483,955 59,067,483,955 OPENING NFRSS 59,067,483,955 59,067,483,955 6,565,656,895.02 6,565,656,895.02 POSITION - - - - 24,625,457 804,900 ------8,483,721 8,483,721 NFRSS TO 211,883,921 211,883,921 EFFECT OF EFFECT 78,803,352 78,803,352 (17,190,231) 87,287,074 87,287,074 257,177,264 257,177,264 56,406,920 56,406,920 446,518,603 446,518,603 TRANSITION 508,277,874 508,277,874 508,277,874 508,277,874 (25,527,803) 01.04.2073 AS AT 420,990,800 420,990,800.02 420,990,800.02

------GAAP 5,892,829 5,892,829 PREVIOUS 27,774,490 27,774,490 435,533,216 435,533,216 613,479,530 613,479,530 155,468,665 827,274,364 827,274,364 955,332,206 955,332,206 2,772,391,178 2,618,168,668 1,819,765,220 1,819,765,220 3,809,870,29 1,341,345,390 1,341,345,390 3,976,046,341 3,976,046,341 5,587,987,938 5,587,987,938 6,144,666,095 6,144,666,095 49,981,295,235 49,981,295,235 42,148,970,905 42,148,970,905 52,414,539,986 52,414,539,986 58,559,206,081 58,559,206,081 58,559,206,081 58,559,206,081 6,144,666,095.00 6,144,666,095.00 17,190,231 17,190,231

24,625,457

3.1 3.2 3.7 3.3 3.3 3.5 3.4 3.6 NOTE* EXPLANATORY interest Assets Cash and cash equivalent Due from Nepal Rastra Bank Nepal Rastra Due from with Bank and Financial Institutions Placement financial instruments Derivative assets Other trading Loan and advances to B/FIs to and advances Loan customers to and advances Loans Investment securities Investment tax assets Current Investment in susidiaries Investment in associates Investment property Investment Property and equipment and Property Goodwill and Intangible assets tax assets Deferred Other assets Assets Total Liabilities Bank and Financial Instituions Due to Due to Nepal Rastra Bank Nepal Rastra Due to financial instruments Derivative customers Deposits from Borrowing Current Tax Liabilities Tax Current Provisions Deferred tax liabilities Deferred Other liabilities Debt securities issued Subordinated Liabilities Subordinated Total liabilities Total Equity capital Share premium Share Retained earnings Retained Reserves Total equity attributable to equity holders to equity attributable Total Non-controlling Non-controlling equity Total Total liabilities and equity liabilities and Total

3. Effect of NFRSs adoption for the statement of financial position statement for the of NFRSs adoption 3. Effect

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4. Effect of NFRSs adoption for statement of profit or loss and other comprehensive income

EXPLANATORY FOR THE YEAR ENDED NOTE * 31.03.2074 (THE LATEST PERIOD PRESENTED UNDER PREVIOUS GAAP) PARTICULARS PREVIOUS CUMULATIVE EFFECT OF AMOUNT AS GAAP TRANSITION TO NFRSS PER NFRSS

Interest income 4.1 5,306,155,662 121,674,957 5,427,830,619 Interest expense 3,113,432,728 - 3,113,432,728 Net interest income 2,192,722,934 121,674,957 2,314,397,891 Fee and commission income 4.2 540,029,064 (22,777,641) 517,251,423 Fee and commission expense 4.3 161,126,207 - 161,126,207 Net fee and commission income 378,902,857 (22,777,641) 356,125,216 Net interest, fee and commission income 2,571,625,791 98,897,316 2,670,523,107 Net trading income - - - Other operating income 148,444,059 - 148,444,059 Total operating income 2,720,069,850 98,897,316 2,818,967,166 Impairment charge/(reversal) for loans and other losses (1,473,384) (73,441,139) (74,914,523) Net operating income 2,718,596,466 25,456,177 2,744,052,643 Operating expense Personnel expenses 4.4 640,495,483 48,403,704 688,899,187 Other operating expenses 312,593,742 - 312,593,742 Depreciation & Amortisation 47,529,783 - 47,529,783 Operating Profit 1,717,977,458 (22,947,527) 1,695,029,931 Non operating income 13,917,746 - 13,917,746 Non operating expense 85,922,276 - 85,922,276 Profit before income tax 1,645,972,928 (22,947,527) 1,623,025,401 Income tax expense 469,884,196 - 510,173,471 Current Tax 447,435,702 - 447,435,702 Deferred Tax 22,448,494 - 62,737,769 Profit for the year 1,176,088,732 (22,947,527) 1,112,851,929 Other comprehensive income 24,489,201 Total Comprehensive 1,176,088,732 (22,947,527) 1,137,341,130

4. Effect of NFRSs adoption for statement of Cash Flows

EXPLANATORY FOR THE YEAR ENDED NOTE * 31.03.2074 (THE LATEST PERIOD PRESENTED UNDER PREVIOUS GAAP) PARTICULARS PREVIOUS CUMULATIVE EFFECT OF AMOUNT AS GAAP TRANSITION TO NFRSS PER NFRSS

Net cash flows from operating activities 2,568,605,999 - 2,568,605,999 Net cash flows from investing activities (1,155,188,361) - (1,155,188,361) Net cash flows from financing activities 1,561,914,524 - 1,561,914,524 Net increase/(decrease) in cash and cash equivalent 2,975,332,162 - 2,975,332,162 Cash and cash equivalent at the beginning of the period 6,581,846,126 - 6,581,846,126 Cash and cash equivalent at the end of the period 9,557,178,288 9,557,178,288

184 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

1. Explanatory Notes to Reconciliation to Equity

PARTICULARS AS AT 01.04.2073 AS AT 31.03.2074 (END OF (DATE OF TRANSITION) LAST PERIOD PRESENTED UNDER PREVIOUS GAAP)

1.1. Measurement of investment securities at fair value Fair Value of Investment As per GAAP 132,968,834 109,238,723 Fair Value of Investment As per NFRS 390,146,098 109,238,723 Additional Fair Value 257,177,264 -

From FY 2073/74 investments in equity shares are valued at market price as per NRB directive no. 8. However, in case of foreign bond investment bond premium was deferred with the life of bond. For NFRS compliance it has been considered as transaction cost and amortized using effective interest method

1.2. Deferred Tax Asset/(Liabliites) due to in LLP - - Asset/(Liabliites) due to in AIR (49,314,958) (81,440,256) Asset/(Liabliites) due to Gratuity Provision 20,281,416 23,689,811 Asset/(Liabliites) due to Leave Provision 3,359,590 2,282,590 Total (25,673,952) (55,467,856)

1.3. Defined benefit obligation of employees Provision for Gratuity as per GAAP 26,289,642 33,367,535 Provision for Gratuity as per NFRS 93,894,361 112,333,570 Total Additional Gratuity Provision (67,604,719) (78,966,035) Provision for Leave Encashment as per GAAP 41,783,347.51 52,254,881.58 Provision for Leave Encashment as per NFRS 52,981,981.00 59,863,515.00 Total Additional Leave Encashment Provision (11,198,633) (7,608,633) Total Provision (78,803,352) (86,574,668)

1.4. Interest income Accrued Interest as per GAAP 399,007,243 556,182,244 Less : Interest Accrued on Loan written off 234,624,050 284,714,723 Total 164,383,193 271,467,521

1.5. Legally repossed Asset Provision for Non Banking Asset 103,907,648 161,448,497

1.6. Unearned Commission (22,777,641)

As per the policy of the bank if the commission on bank guarantee and LC is less than NPR 50,000 or the period the the guarantee and LC is less than 1 year than total commission received is recognised on cash basis. To comply NFRS commission recognised on cash basis has been recalculated as per accrual basis.

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2. Explanatory Note to Reconciliation of profit or loss

PARTICULARS AS AT 01.04.2073 AS AT 31.03.2074 (END OF (DATE OF TRANSITION) LAST PERIOD PRESENTED UNDER PREVIOUS GAAP)

2.1 Interest income Closing Interest accrued 271,467,521 Opening Interest Accrued 164,383,193 Interest accrual during the year 107,084,328

2.2 Defined benefit obligation of employee 2072/73 2073/74 Provision for Gratuity as per GAAP (26,289,642) (33,367,535) Provision for Leave Encashment as per GAAP (41,783,348) (52,254,882) Provision for Gratuity as per NFRS 93,894,361 112,333,570 Provision for Leave Encashment as per NFRS 52,981,981 59,863,515 Actuarial loss/(Gain) on Gratuity (25,527,803) 513,956 Actuarial loss/(Gain) on Leave Encashment (25,490,965) 3,940,207 Total 27,784,584 91,028,831

2.3 Unearned Commission & Discount (22,777,641)

2.4 Fair Value measurement of foreign bond Interest revsersal on bond - Amortization of bond - Total -

2.5 Deferred Tax 2072/73 2073/74 Opening Deferred Tax Asset/(Liabilities) as per NFRS (25,673,952) (55,467,856) Charge to P& L (29,793,904)

3. Explanatory Note on Effect of NFRSs adoption for the statement of financial position

PARTICULARS AS AT 01.04.2073 AS AT 31.03.2074 (END OF (DATE OF TRANSITION) LAST PERIOD PRESENTED UNDER PREVIOUS GAAP)

3.1 Loans and advances to customers Loans and advances as per GAAP 42,148,970,905 49,969,577,688 Accrued Interest 164,383,193 271,467,520.96 Remeasurement of Staff Loan 47,500,728 (82,570,267) Total 42,360,854,826 50,158,474,941

3.2 Investment securities Fair Value of Investment As per GAAP 132,968,834 109,238,723 Fair Value of Investment As per NFRS 390,146,098 109,238,723 Total 257,177,264 -

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Contd... Explanatory Note on Effect of NFRSs adoption for the statement of financial position

PARTICULARS AS AT 01.04.2073 AS AT 31.03.2074 (END OF (DATE OF TRANSITION) LAST PERIOD PRESENTED UNDER PREVIOUS GAAP)

3.3 Deferred Tax Deferred Asset/(Liabilities)Tax as per GAAP 17,190,231 29,731,519 Deferred Asset/(Liabilities)Tax as per NFRS (25,673,952) (55,467,856) Closing Deferred Asset/(Liabilities)Tax as per NFRS (8,483,721) (25,736,337)

3.4 Other assets Other Asset as per GAAP 155,468,665.40 422,665,635 Non Banking Asset 103,907,647.95 161,448,496.61 Staff Loan amortization (47,500,728) 82,570,267 Total 211,875,585 666,684,399

3.5 Other liabilities Other Liabilities as per GAAP 613,479,530 821,414,140 Additional Provision of Gratuity 67,604,719 78,966,035 Additional Provision of Leave 11,198,633 7,608,633 Unearned Commission 22,777,641 Total 692,282,883 930,766,449

3.6 Retained earnings Opening retained earning as per GAAP 1,341,345,390 1,077,077,026 Unearned Commission - (22,777,641) Transfer to Reserve-Share issue cost - 4,660,939 Transfer to Regulatory Reserve (189,910,996) (81,556,525) Defined Benefit Obligation (53,275,549) (86,934,438) Foreign Bond Amortization 10,341,185 Interest Accrual 164,383,193 271,467,521 AFS & NBA Reserve 361,084,912 161,448,497 Deferred Tax (25,673,952) (55,467,856) Total 1,787,863,993 1,349,474,048

3.7 Reserve Opening Reserve as per GAAP 827,274,364 1,372,116,578 Fair Value Reserve - - Non Banking Asset Provision - - Transfer from Regulatory Reserve - - Actuarial reserve (25,527,803.00) 359,769 Transfer from Reserve-Share issue cost (4,660,939) Total 801,746,561 1,367,815,408

ANNUAL REPORT | 2017-18 187 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

4. Reconciliation of Effect of NFRSs adoption for statement of profit or loss and other comprehensive income

PARTICULARS AS AT 01.04.2073 AS AT 31.03.2074 (END OF (DATE OF TRANSITION) LAST PERIOD PRESENTED UNDER PREVIOUS GAAP)

4.1 Interest Income Opening Interest Income as per GAAP 5,306,155,662 Accrued Interest On loans & Advances 107,084,328 Interest reversal of foreign bond - Amortized interest in staff loan 14,590,629 Total 5,427,830,619

4.2 Fee and commission income Openign Fee and commission income as per GAAP 540,029,064 Unearned commission on LC and Guarantee (22,777,641) Total 517,251,423

4.3 Fees and Commission expense Opening as per GAAP 161,126,207 Add :Excess Bond amortization reversal - Total 161,126,207

4.4 Personnel expense Opening as per GAAP 640,495,483 Amortized interest in staff loan 14,590,629 Defined Benefit obligation 33,813,075 Total 688,899,187

Staff bonus of NPR 164,597,293 has been recategorised in opening of GAAP personnel expense

4.6 Deferred Tax Opening Deferred Tax 22,448,494 Deferred Tax asset due to NFRS adjustment (56,719,974) Deferred Tax Liabilities due to NFRS adjustment 86,513,877 Net 29,793,904 Closing Deferred Tax 52,242,398

188 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

CAPITAL ADEQUACY TABLE (SUMMARY) As on 16 July, 2018 (32 Asar, 2075)

1.1 PARTICULARS CURRENT YEAR PREVIOUS YEAR NPR NPR

a Common Equity Tier 1 Capital 10,265,254,426 9,117,773,671 b Tier 1 Capital 10,265,254,426 9,117,773,671 c Tier 2 Capital 659,871,641 736,938,000 d Total Capital 10,925,126,067 9,854,711,671 e Risk Weighted Exposures 81,628,642,815 68,112,366,000 Regulatory Ratios a Leverage Ratio (Regulatory Requirement >= 4%) 8.54% 9.03% b Common Equity Tier 1 to Risk Weighted Exposure Ratios 12.58% 13.39% c Tier 1 to Risk Weighted Exposure Ratios 12.58% 13.39% d Total Capital to Risk Weighted Exposure Ratio 13.38% 14.47%

CAPITAL ADEQUACY TABLE As on 16 July, 2018 (32 Asar, 2075)

1.1 RISK WEIGHTED EXPOSURE CURRENT YEAR PREVIOUS YEAR NPR NPR

a Risk Weighted Exposure for Credit Risk 74,851,539,175 62,878,374,000 b Risk Weighted Exposure for Operational Risk 3,289,001,420 2,552,530,000 c Risk Weighted Exposure for Market Risk 209,649,240 81,250,000 Adjustments under Pillar II - ALM policies & practices are not satisfactory, add 1% of net interest income to RWE 21,927,229 15,036,000 3% additional risk weight for Operational Risk 906,020,056 619,811,000 3% adjustment on Total RWE 2,350,505,695 1,965,365,000 Total Risk Weighted Exposures (After Bank's adjustments of Pillar II) 81,628,642,815 68,112,366,000

1.2 CAPITAL CURRENT YEAR PREVIOUS YEAR NPR NPR

Tier 1 Capital (Core Capital) (CET 1 + AT1) 10,265,254,426 9,117,773,671 Common Equity Tier 1 (CET 1) 10,265,254,426 9,117,773,671 a Paid up Equity Share Capital 8,152,555,851 7,018,105,000 b Equity Share Premium 127,161,065 - c Proposed Bonus Equity Shares 1,063,377,000 d Statutory General Reserves 1,452,920,248 1,157,526,000 e Retained Earnings 941,855,312 13,700,000 f Un-audited current year cumulative profit - - g Capital Redemption Reserve - - h Capital Adjustment Reserve - - i Dividend Equalization Reserves - - j Bargain Purchase Gain k Other Free Reserve 17,789,989 29,732,000 l Less: Goodwill - - m Less: Intangible Assets (76,415,384) (3,890,000) n Less: Deferred Tax Assets (53,146,995) (29,732,000)

ANNUAL REPORT | 2017-18 189 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

1.2 CAPITAL CURRENT YEAR PREVIOUS YEAR NPR NPR

o Less: Fictitious Assets p Less: Investment in equity in licensed Financial Institutions - - q Less: Investment in equity of institutions with financial interests (264,850,332) (98,429,000) r Less: Investment in equity of institutions in excess of limits - - s Less: Investments arising out of underwriting commitments - - t Less: Reciprocal crossholdings - - u Less: Purchase of land & building in excess of limit and unutilized (32,615,329) (32,615,329) v Less: Cash Flow Hedge w Less: Defined Benefit Pension Assets x Less: Unrecognized Defined Benefit Pension Laibilities y Less: Negative Balance of Reserve Accounts z Less: Other Deductions Adjustments under Pillar II a Less: Shortfall in Provision (6.4 a 1) - - b Less: Loans & Facilities extended to Related Parties & Restricted lending (6.4 a 2) - - Additional Tier 1 (AT1) - - a Perpetual Non Cumulative Preference Share Capital - - b Perpetual Debt Instruments - - c Stock Premium - - Supplementary Capital (Tier 2) 659,871,641 736,938,000 a Cumulative and/or Redeemable Preference Share b Subordinated Term Debt c Hybrid Capital Instruments d Stock Premium e General loan loss provision 616,144,872 563,840,000 f Exchange Equalization Reserve 27,141,769 22,968,000 g Investment Adjustment Reserve 16,585,000 150,130,000 h Assets Revaluation Reserve i Other Reserves Total Capital Fund (Tier 1 & Tier 2) 10,925,126,067 9,854,711,671

1.3 CAPITAL ADEQUACY RATIOS CURRENT YEAR PREVIOUS YEAR

Tier 1 Capital to Total Risk Weighted Exposures (After Bank's adjustments of Pillar II) 12.58% 13.39% Tier 1 and Tier 2 Capital to Total Risk Weighted Exposures(After Bank's adjustments of Pillar II) 13.38% 14.47%

190 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE - RISK WEIGHT RISK EXPOSURE (D *E) EXPOSURE ------214,378,664 185,650,350 225,263,494 23,962,020,072

865,899,690 0% 0% 0% 0% 0% 0% 0% 0% 0% 20% 20% 20% 20% 20% 20% 50% 50% 50% 50% 150% 150% 150% 100% 100% 100% 100% 100% 100% 100% RISK WEIGHT (E) WEIGHT RISK (D) (A-B-C) (D) NET VALUE VALUE NET 1,535,255,221 1,126,317,471 1,731,799,379 928,251,752 94,525,051 ------8,933,790,455

------5,033,055,545 ------1,071,893,321 - - - - CURRENT YEAR CURRENT ELIGIBLE CRM

------& VALUATION & VALUATION ADJUSTMENTS (B) ADJUSTMENTS SPECIFIC PROVISION SPECIFIC PROVISION - 91,602,753 23,962,020,072

As on 16 July, 2018 (32 Asar 2075) 2018 on 16 July, As of VALUE (A) VALUE 928,251,752 GROSS BOOK BOOK GROSS 1,535,255,221 1,126,317,471 with a buffer 1,731,799,379 94,525,051 24,053,622,824 8,933,790,455 5,033,055,545 operating

capital requirement 1,071,893,321 of Nepal Securities Government Bank (ECA 0-1) and Central Government Bank (ECA -2) and Central Government Bank(ECA -3) and Central Government Bank(ECA-4-6) and Central Government Bank(ECA -7) and Central Government Government on Banks Development Other Multilateral Bank on Nepal Rastra Bank Nepal Rastra With on Foreign on Foreign on Foreign on Foreign on Foreign on Entity (ECA 0-1) on Public Sector Entity (ECA 2) on Public Sector Entity (ECA 3-6) on Public Sector Entity (ECA 7) on Public Sector 2) bank (ECA Rating on foreign 3-6) bank (ECA Rating on foreign 0-1) bank (ECA Rating on foreign Corporates on Domestic 7) bank (ECA Rating on foreign (ECA 0-1) Corporates on Foreign in SAARC region bank incorporated on foreign (ECA-2) Corporates on Foreign (ECA 3-6) Corporates on Foreign claims EXPOSURE A. BALANCE SHEET

Bank securities in Nepal Rastra Investment RISK WEIGHTED EXPOSURE FOR CREDIT RISK FOR CREDIT WEIGHTED EXPOSURE RISK Cash Balance All Claims Balance Gold All in Nepalese Investment Claims Claims Claims Claims Claims Claims On BIS, IMF, ECB, EC and on Multilateral Development Development on Multilateral EC and ECB, IMF, On BIS, Claims the framework by recognized Banks (MDB's) Claims Claims Claims Claims Claims Claims on domestic banks Claims on domestic that meet capital requirements adequacy do not meet banks that domestic on Claims requirements capital adequacy Claims Claims Claims Claims regulatory their respective 1% above Claims Claims Claims Claims Claims

ANNUAL REPORT | 2017-18 191 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE RISK WEIGHT RISK 452,101,147 EXPOSURE (D *E) EXPOSURE 1,664,618,074 - - - - - 97,497,144 56,023,372,115 16,628,539,599 2,051,359,709 128,868,959 3,836,577,432 858,858,785 31,449,000 4,820,289,996

0% 75% 20% 60% 60% 150% 150% 150% 150% 150% 100% 100% 100% 100% 100% RISK WEIGHT (E) WEIGHT RISK - (D) (A-B-C) (D) NET VALUE VALUE NET 22,171,386,132 82,344,533,980 82,344,533,980 214,781,598 1,664,618,074 2,557,718,288 572,572,523 97,497,144 2,051,359,709 8,033,816,660 - - -

90,808,437 452,101,147

- - - - - 20,966,000 - - - - CURRENT YEAR CURRENT ELIGIBLE CRM 508,239,000 1,413,886

- - 415,222,362 - 1,552,911 & VALUATION & VALUATION 1,360,628,393 ADJUSTMENTS (B) ADJUSTMENTS SPECIFIC PROVISION SPECIFIC PROVISION

- VALUE (A) VALUE 90,808,437 99,050,055 336,516,250 121,734,652 GROSS BOOK BOOK GROSS 559,809,479 107,708,332 2,141,956,676 477,338,601 2,557,718,288 1,069,138,305 495,151,896 2,051,359,709

22,586,608,494 178,108,000 157,142,000 84,213,401,374 8,033,816,660 - collection of estate Overdue) securities government receivables) card retail of regulatory in the process cash items on exchange credit exchange other criterion granularity (ECA 7) Corporates on Foreign RISK WEIGHTED EXPOSURE FOR CREDIT RISK CREDIT FOR WEIGHTED EXPOSURE RISK

EXPOSURE A. BALANCE SHEET

Contd... properties residential by Claims secured properties residential by Claims not fully secured except Claims fulfilling all Claims (Overdue) properties residential by Claims secured by claim secured for claims (except due Past properties) residential in equity of and other capital instruments institutions Investments in equity of and other capital instruments institutions Investments property residential by secured Loan Staff Other Assets in the stock listed in the stock not listed TOTAL TOTAL (Not Portfolio Retail Regulatory and Cash in transit real Commercial by Claims secured equity investments, private capital, claims (Venture High Risk personal loans and receivable/claim Interest

192 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

- RISK WEIGHT RISK 74,851,539,175 74,851,539,175 74,851,539,175 74,851,539,175 18,828,167,060 18,828,167,060 4,187,342,151 EXPOSURE (D *E) EXPOSURE 12,518,295 898,553,811 ------6,776,018,590 1,248,502,449 84,352,724

4,758,782,500

0% 0% 10% 302,087,500 20% 20% 20% 20% 560,009,040 20% 50% 50% 50% 50% 50% 50% 150% 150% 150% RISK WEIGHT (E) WEIGHT RISK

- - - - - 50% 100% (D) (A-B-C) (D) VALUE NET 36,941,665,978 119,286,199,959 119,286,199,959 12,518,295 100% 42,176,362 200% 6,776,018,590 100% - 100% - 100% - 100% - - - 100% - - - - 100% - - - - 100% - -

656,511,726

- - - 4,492,769,055 - - 8,374,684,302 - 1,248,502,449 100% - - - 3,020,875,000 CURRENT YEAR CURRENT 730,361,439 730,361,439 ELIGIBLE CRM 1,238,600,439 1,238,600,439 1,238,600,439

111,878,152

337,620,453 9,517,565,000

280,862,834 2,800,045,200

- - - SPECIFIC PROVISION (B) PROVISION 1,360,628,393 1,360,628,393 1,360,628,393

VALUE (A) VALUE 12,518,295 42,176,362 GROSS BOOK BOOK GROSS 9,855,185,452 1,248,502,449 6,887,896,742 8,374,684,302 4,492,769,055 121,885,428,791 656,511,726 121,885,428,791 37,672,027,418 - 3,020,875,000 3,080,908,035 counterparty) (6.4 a 4) with recourse credit collateral of Obligor Limits (6.4 a 3) - of Single of the sale 6 months (domestic Over of Securities as case repo) reverse (including repo/ with recourse excess or Posting sale Assets Original Maturity Guarantee (Short term) commitments (long term) commitments With and Securities paid shares of Partly in value contract(sale) commitments party) counter counterparty) Guarantee of Bank's Securities Claims Guarantee -7) (ECA Rating counterparty 3-6) (ECA Rating counterparty (ECA Rating-7) counterparty 0-1) (ECA Rating counterparty (ECA Rating-2) counterparty 3-6) (ECA Rating counterparty (ECA Rating-7) counterparty 0-1) (ECA Rating counterparty (ECA Rating-2) counterparty 3-6) (ECA Rating counterparty 0-1) (ECA Rating counterparty 2) (ECA Rating- counterparty RISK WEIGHTED EXPOSURE FOR CREDIT RISK CREDIT FOR WEIGHTED EXPOSURE RISK

EXPOSURE B. OFF BALANCE SHEET

Total Total Risk (A) +(B) credit for RWE Total under Pillar II Adjustments in Add: 10% of the loan and facilities Add: 1% of the of Pillar II) Bank's adjustments Risk (After credit for RWE Total Credit Irrevocable Other Contingent Liabilities Unpaid Unpaid portion Credit Irrevocable and Endorsements Acceptances Financial Agreements, Repurchase Payment Advance Lending foreign Underwriting foreign foreign guarantee Bond and Counter Performance Bid Bond, (domestic foreign foreign foreign foreign LC Commitments foreign foreign foreign foreign foreign Contd... Bills Under Collection Liabilities Contract Exchange Forward 6 months Up to Original Maturity With LC Commitments (domestic Commitments Revocable

ANNUAL REPORT | 2017-18 193 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE ------TOTAL TOTAL 91,602,753 91,602,753 415,222,362 (i) BANKS SEC/G'TEE SEC/G'TEE

OF FOREIGN

(h) MDBS G'TEE OF G'TEE

(g) BANKS G'TEE OF G'TEE DOMESTIC

(f) OTHER OF SEC/G'TEE

SOVEREIGNS

(e) (e) NEPAL G'TEE OF G'TEE GOVT. OF GOVT.

(d) SECURITIES GOVT.& NRB GOVT.&

(c) (c) GOLD 91,602,753 91,602,753 401,694,876 401,694,876

(b) (b) BANKS/FI DEPOSITS DEPOSITS OTHER WITH

(a) As on 16 July, 2018 (32 Asar 2075) 2018 on 16 July, As DEPOSITS DEPOSITS WITH BANK 13,527,486

their respective of 1% above with a buffer the framework by recognized Banks (MDB's) Development adequacy requirements requirements adequacy adequacy requirements requirements adequacy operating regulatory regulatory capital requirement

CREDIT EXPOSURES EXPOSURES CREDIT

ELIGIBLE CREDIT RISK MITIGANTS RISK ELIGIBLE CREDIT Balance Sheet Exposures Sheet Exposures Balance Cash Balance Balance with Nepal Rastra Bank with Nepal Rastra Balance Gold Investment in Nepalese Government Securities Government in Nepalese Investment All Claims on Government of Nepal Government on All Claims Investment in Nepal Rastra Bank securities in Nepal Rastra Investment All claims on Nepal Rastra Bank on Nepal Rastra claims All Claims on Foreign Government Securities (ECA 0-1) Securities (ECA 0-1) Government on Foreign Claims Claims on Foreign Government Securities (ECA -2) Government on Foreign Claims Claims on Foreign Government Securities (ECA -3) Securities (ECA -3) Government on Foreign Claims Claims on Foreign Government Securities (ECA-4-6) Government on Foreign Claims Claims on Foreign Government Securities (ECA -7) Securities (ECA -7) Government on Foreign Claims Claims On BIS, IMF, ECB, EC and on Multilateral on Multilateral EC and ECB, IMF, On BIS, Claims Banks Development Other Multilateral on Claims Claims on Public Sector Entity (ECA 0-1) Entity (ECA 0-1) on Public Sector Claims Claims on Public Sector Entity (ECA 2) on Public Sector Claims Claims on Public Sector Entity (ECA 3-6) on Public Sector Claims Claims on Public Sector Entity (ECA -7) Entity (ECA -7) on Public Sector Claims Claims on domestic banks Claims on domestic that meet capital Claims on domestic banks Claims on domestic do that not meet capital Claims on foreign bank (ECA Rating 0-1) 0-1) bank (ECA Rating on foreign Claims Claims on foreign bank (ECA Rating 2) bank (ECA Rating on foreign Claims Claims on foreign bank (ECA Rating 3-6) bank (ECA Rating on foreign Claims Claims on foreign bank (ECA Rating- 7) bank (ECA Rating- on foreign Claims Claims on foreign bank incorporated in SAARC region in SAARC region bank incorporated on foreign Claims Claims on Domestic Corporates Corporates on Domestic Claims Claims on Foreign Corporates (ECA 0-1) (ECA 0-1) Corporates on Foreign Claims Claims on Foreign Corporates (ECA 2) Corporates on Foreign Claims Claims on Foreign Corporates (ECA 3-6) Corporates on Foreign Claims (ECA -7) Corporates on Foreign Claims Overdue) (Not Portfolio Retail Regulatory (Overdue) Portfolio Retail Regulatory

194 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE ------TOTAL TOTAL 1,413,886 1,413,886 508,239,000 337,620,453 337,620,453 280,862,834 BANKS SEC/G'TEE SEC/G'TEE

OF FOREIGN

MDBS G'TEE OF G'TEE

BANKS G'TEE OF G'TEE DOMESTIC

OTHER OF SEC/G'TEE

SOVEREIGNS

NEPAL G'TEE OF G'TEE GOVT. OF GOVT.

SECURITIES GOVT.& NRB GOVT.&

GOLD 493,297,629

BANKS/FI DEPOSITS DEPOSITS OTHER WITH

1,413,886 1,413,886 DEPOSITS DEPOSITS 14,941,372 WITH BANK 280,862,834 337,620,453 337,620,453

retail of regulatory criterion RISK WEIGHTED EXPOSURE FOR CREDIT RISK CREDIT FOR WEIGHTED EXPOSURE RISK (A) except except granularity properties) residential receivables) card credit personal loans and exchange in the stock not listed institutions exchange in the stock listed institutions (domestic counterparty) counterparty) (domestic (domestic counterparty) counterparty) (domestic guarantee (domestic counter party) counter (domestic guarantee Securities as collateral collateral Securities as

CREDIT EXPOSURES EXPOSURES CREDIT

Contd... Claims fulfilling all properties residential by Claims secured properties residential by Claims no fully secured (Overdue) properties residential by Claims secured estate real Commercial by Claims secured Past due claims (except for claim secured by by claim secured for claims (except due Past High Risk claims (Venture capital, private equity investments, equity investments, private capital, claims (Venture High Risk Investments in equity of and other capital instruments Investments Investments in equity of and other capital instruments Investments (as per attachment) Other Assets Total Total Sheet Exposures Off Balance Revocable Commitments Revocable Bills Under Collection Forward Exchange Contract Liabilities Contract Exchange Forward LC Commitments With Original Maturity Up to 6 months Up to Original Maturity With LC Commitments foreign counterparty (ECA Rating 0-1) 0-1) (ECA Rating counterparty foreign foreign counterparty (ECA Rating-2) (ECA Rating-2) counterparty foreign foreign counterparty (ECA Rating 3-6) (ECA Rating counterparty foreign foreign counterparty (ECA Rating- 7) (ECA Rating- counterparty foreign LC Commitments With Original Maturity Over 6 months Over Original Maturity With LC Commitments foreign counterparty (ECA Rating 0-1) 0-1) (ECA Rating counterparty foreign foreign counterparty (ECA Rating 2) (ECA Rating counterparty foreign foreign counterparty (ECA Rating 3-6) (ECA Rating counterparty foreign foreign counterparty (ECA Rating -7) -7) (ECA Rating counterparty foreign Bid Bond, Performance Bond and Counter Bond and Counter Performance Bid Bond, foreign counterparty (ECA Rating 0-1) 0-1) (ECA Rating counterparty foreign foreign counterparty (ECA Rating -2) (ECA Rating counterparty foreign foreign counterparty (ECA Rating 3-6 ) (ECA Rating counterparty foreign foreign counterparty (ECA Rating- 7) (ECA Rating- counterparty foreign Underwriting commitments commitments Underwriting Lending of Lending Bank's of Securities or Posting

ANNUAL REPORT | 2017-18 195 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE ------TOTAL TOTAL 111,878,152 111,878,152 730,361,439 730,361,439 1,238,600,439 1,238,600,439 - - BANKS SEC/G'TEE SEC/G'TEE

OF FOREIGN - - MDBS G'TEE OF G'TEE

- - BANKS G'TEE OF G'TEE DOMESTIC

- - OTHER OF SEC/G'TEE

SOVEREIGNS 0% 0% NEPAL G'TEE OF G'TEE GOVT. OF GOVT.

- - SECURITIES GOVT.& NRB GOVT.&

- GOLD 493,297,629 493,297,629

- - of 1% BANKS/FI DEPOSITS DEPOSITS OTHER WITH

with a buffer DEPOSITS DEPOSITS WITH BANK 111,878,152 111,878,152 745,302,811 745,302,811 730,361,439 730,361,439 operating in SAARC region bank incorporated on foreign RISK WEIGHTED EXPOSURE FOR CREDIT RISK CREDIT FOR WEIGHTED EXPOSURE RISK (including repo/ reverse repo) repo) reverse (including repo/ capital requirement regulatory their respective above

CREDIT EXPOSURES EXPOSURES CREDIT

Repurchase Agreements, Assets sale with recourse with recourse sale Assets Agreements, Repurchase Advance Payment Guarantee Guarantee Payment Advance Financial Guarantee Guarantee Financial Acceptances and Endorsements Acceptances Unpaid portion of Partly paid shares and Securities paid shares of Partly Unpaid portion (Short term) commitments Credit Irrevocable (long term) commitments Credit Irrevocable Claims Other Contingent Liabilities Total (B) Total (C=A+B) Total Grand Contd...

196 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

FORM NO.5 OTHER ASSETS As on 16 July, 2018 (32 Asar 2075)

CURRENT YEAR (NPR) S.NO. ASSETS GROSS AMOUNT SPECIFIC PROVISION NET BALANCE & VALUATION ADJUSTMENTS

1 Cash and Cash Items in Transit - 2 Expense not Written off 1,300,776 1,300,776 3 Fixed Assets 1,174,971,104 477,338,601 697,632,503 4 Interest Receivable on Other Investment 31,903,572 31,903,572 5 Interest Receivable on Loan 414,615,919 414,615,919 6 Non Banking Assets - 7 Reconciliation Account - 8 Draft Paid Without Notice - 9 Sundry Debtors - 10 Advance payment and Deposits - 11 Staff Advance 150,751,749 150,751,749 12 Stationery - 13 Other 368,413,557 368,413,557 Total 2,141,956,676 477,338,601 1,664,618,074

RISK WEIGHTED EXPOSURE FOR OPERATION RISK As on 16 July, 2018 (32 Asar 2075)

PARTICULARS FY 2071/72 FY 2072/73 FY 2073/74 FOR PREVIOUS YEAR

Net Interest Income 1,106,300,000 1,503,572,000 2,192,722,934 Commission and Discount Income 119,378,000 160,773,000 210,471,287 Other Operating Income 187,273,000 279,039,000 329,557,777 Exchange Fluctuation Income 80,316,000 115,336,000 130,139,854 Additional/Deduction in Interest Suspense during the period (1,367,239) 7,316,216 157,175,001 Gross income (a) 1,491,899,761 2,066,036,216 3,020,066,853 - Alfa (b) 15% 15% 15% 15% Fixed Percentage of Gross Income [c=(a×b)] 223,784,965 309,905,433 453,010,028 309,906,000 Capital Requirement for operational risk (d) (average of c) 328,900,142 255,253,000 Risk Weight (reciprocal of capital requirement of 10%) in times (e) 10 10 Equivalent Risk Weight Exposure [f=(d×e)] 3,289,001,420 2,552,530,000 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 - - Equivalent Risk Weight Exposure [g] - - Equivalent Risk Weight Exposure [h=f+g)] 3,289,001,420 2,552,530,000

ANNUAL REPORT | 2017-18 197 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

RISK WEIGHTED EXPOSURE FOR MARKET RISK As on 16 July, 2018 (32 Asar 2075)

ASHADH END 2074 PREVIOUS YEAR CURRENCY OPEN POSITION (FCY) RATE OPEN POSITION (LCY) RELEVANT OPEN POSITION RELEVANT OPEN POSITION

INR 235,677,182.78 1.6008 377,260,250 377,260,250 125,522,000 USD 287,087.79 109.8500 31,536,594 31,536,594 28,175,000 GBP 1,783.98 144.9376 258,566 258,566 1,151,000 EUR 905.28 128.0588 115,929 115,929 1,270,000 THB 17,512.10 3.2378 56,700 56,700 38,000 CHF - 109.5338 - - 107,000 AUD 12,019.47 81.3886 978,248 978,248 871,000 CAD 1,204.95 83.4037 100,497 100,497 339,000 SGD 66.00 80.4769 5,312 5,312 4,000 JPY 2,716,383.23 0.9724 2,641,446 2,641,446 2,053,000 HKD 1,240.23 13.9074 17,248 17,248 13,000 DKK 296,820.87 17.0307 5,055,062 5,055,062 2,044,000 SEK - 12.3332 - - - SAR 18,544.43 28.9109 536,136 536,136 283,000 QAR 3,737.99 29.7601 111,243 111,243 29,000 AED 13,880.84 29.5082 409,599 409,599 133,000 MYR 3,665.33 26.8776 98,515 98,515 209,000 KRW - 0.0948 - - - CNY 2,876.87 16.2407 46,722 46,722 31,000 KWD 194.50 361.9585 70,401 70,401 213,000 BHD - 289.2872 - - - Total Open position (a) 419,298,468 162,485,000 Fixed Percentage (b) 5% 5% Capital Charge for Market Risk [c=(axb)] 20,964,924 8,124,250 Risk weight (reciprocal of capital requirement of 10%) in times (d) 10 10 Equivalent Risk Weight Exposure[e=(cxd)] 209,649,240 81,242,500

198 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

BASEL DISCLOSURES

1. CAPITAL STRUCTURE & CAPITAL ADEQUACY OF THE BANK

i. Tier 1 Capital and breakdown of its Components

PARTICULARS AMOUNT (NPR MILLIONS) PARTICULARS PERCENTAGE

a. Paid up Capital 8,152.56 a. Common Equity Tier 1 Capital to b. Share Premium / Capital Reserve 127.16 Total Risk Weighted Exposures 12.58 c. Proposed Bonus Shares - b. Tier 1 Capital to d. Statutory General Reserve 1,452.92 Total Risk Weighted Exposures 12.58 e. Retained Earnings 941.86 c. Total Capital to f. Un-audited Current Year Cumulative Profit - Total Risk Weighted Exposures 13.38 g. Other Free Reserves 17.79 h. Less: Deferred Tax Assets 76.42 vii. Summary of the bank’s internal i. Less: Fictitious Assets 53.15 approach to assess the adequacy of its j. Less: Investment in equity of institutions with financial interests 264.85 capital to support current and future k. Less: Purchase of land & building in excess of limit and unutilized 32.62 activities, if applicable: Core (Tier-1) Capital 10,265.25 Bank’s current paid up capital amounts to Rs 8.15 Billion. The Bank complies with ii. Tier 2 Capital and breakdown of its Components the Capital Increment plan of NRB which has also helped the Bank to be in steady PARTICULARS AMOUNT (NPR MILLIONS) and strong capital position. The overall a. General Loan Loss Provision 616.14 strategy of the bank has been formulated b. Exchange Equalization Reserve 27.14 with the special consideration to the c. Investment Adjustment Reserve 16.59 capital adequacy requirement according Supplementary (Tier-2) Capital 659.87 to BASEL-III.

iii. Details of Subordinated Term Debts viii. Summary of the terms, conditions Bank doesn’t have any subordinated term debts. and main features of all capital instruments, especially in case of iv. Deductions from Capital subordinated term debts including n Deferred Tax Assets of Rs 53.15 Million. hybrid capital instruments. n Investment made in Gurans Life Insurance Company Limited of NPR Bank does not have any other capital 107.71 million and investment in Sunrise Capital Limited NPR 157.14 million instruments except fully paid equity (Investments in equity of institutions with Financial Interest) shares as qualifying capital. n Rs 32.62 million for land and building not in use by bank that includes land purchased at Bharatpur, Chitwan (Rs 25.75 Million) not brought into use and 2. RISK EXPOSURES proportionate WDV of buildings not used by bank and rented out to other parties (Rs 6.86 million) a. Risk Weighted Exposures n Intangible Assets of Rs 76.42 Million. All material risks faced by the bank have

been addressed in the capital assessment v. Total Qualifying Capital process. However, bank has developed

PARTICULARS AMOUNT (NPR MILLIONS) a process to estimate risks with reasonable certainties. All the three risks a. Common Equity Tier 1 Capital 10,265.25 that have direct impact on the capital b. Core Capital 10,265.25 adequacy level have been managed in c. Supplementary Capital 659.87 a structured manner with clear roles Total Capital 10,925.13 and responsibilities. In order to make a comprehensive assessment of risks, the vi. Capital Adequacy of the Bank process has, at minimum, addressed the The capital adequacy of the bank (After Bank's adjustments of Pillar II) has been forms of risks covered below: detailed below:

ANNUAL REPORT | 2017-18 199 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

PARTICULARS AMOUNT (NPR MILLIONS)

a Risk Weighted Exposure for Credit Risk 74,851.54 b Risk Weighted Exposure for Operational Risk 3,289.00 c Risk Weighted Exposure for Market Risk 209.65 RWA Before Pillar 2 adjustment 78,350.19

All risks, including credit, operational and market risks are identified, escalated, monitored and mitigated to the satisfaction of the risk type owner. The risk type owner is responsible for ensuring that all the risks are adequately identified, escalated, monitored and mitigated. The Bank has an adequate system in place for monitoring and reporting risk exposures and assessing how the changing risk profile affects the need for capital. The senior management and board of directors on a regular basis receive the report regarding the risk profile of the bank and its capital needs. All the material risks are identified, measured, monitored and reported by the respective risk type owner.

b. Credit Risk under 11 Categories The Credit Risks under the 11 categories as per the Capital Adequacy Framework, 2015 and Basel –III has been detailed below:

RISK CLASSIFICATION NET BOOK VALUE RWE (NPR MILLION) (NPR MILLION)

a. Claims on Govt. and Central Bank 14,061.37 - b. Claims on other Financial Entities - - c. Claims on Banks 4,858.26 1,491.19 d. Claims on Corporate and Securities Firm 23,962.02 23,962.02 e. Claims on Regulatory Retail Portfolio 22,171.39 16,628.54 f. Claims secured by Residential Properties 8,131.31 4,917.79 g. Claims secured by Commercial Real State 2,051.36 2,051.36 h. Past due Claims 572.57 858.86 i. High Risk Claims 2,557.72 3,836.58 j. Other Assets 3,978.53 2,277.04 k. Off balance sheet items 36,941.67 18,828.17 Total 119,286.20 74,851.54

c. Total Risk Weighted Exposure Calculation Table

RISK WEIGHTED EXPOSURE AMOUNT (NPR MILLIONS)

a. Risk Weighted Exposure for Credit Risk 74,851.54 b. Risk Weighted Exposure for Operational Risk 3,289.00 c. Risk Weighted Exposure for Market Risk 209.65 Adjustments under Pillar II Add: 1% of the NII to RWA for ALM Policy and Practice 21.93 3% additional risk weight for Operational Risk 906.02 3% adjustment on Total RWE for Overall Risk 2,350.51 Total Risk Weighted Exposure 81,628.64

200 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

d. Detail of Non-Performing Loans

RISK CLASSIFICATION GROSS VALUE NET VALUE (IN NPR MILLION) (IN NPR MILLION)

Restructured Loans - - Sub-Standard Loans 119.97 89.98 Sub-Standard Loans 324.77 162.38 Doubtful Loans 304.33 - Total NPA 749.07 252.36

e. Ratio Of Non-Performing Loans

PARTICULARS THIS YEAR PREV YEAR CHANGE (%)

Gross NPA 1.24% 1.37% -0.13% Net NPA 0.42% 0.41% 0.01%

f. Movement of Non-Performing Assets (Gross) During the year Non-Performing Accounts (NPA) decreased by NPR 39.83 Million.

PARTICULARS THIS YEAR PREV YEAR CHANGE (IN NPR MILLION) (IN NPR MILLION) Non Performing Assets (Amount) 749.07 709.24 39.83

g. Write Off of Loans & Interest Suspense

PARTICULARS NPR MILLIONS

Current Year 749,066 Previous Year 709,240 Change 39,826 Change% 5.62%

h. Movement of Loan Loss Provision and Interest Suspense As per NRB Directives, all interest accruals on loans and advances, irrespective of loan category, are transferred to interest suspense account until the interest accrued and due is realized in cash. Details of Interest Suspense Movement are as follows:

PARTICULARS THIS YEAR PREV YEAR CHANGE (NPR) (NPR) % Loan Loss Provision 1,112,849,680 1,062,141,713 4.77 Interest Suspense 346,008,422 556,182,244 (37.79)

i. Details of Additional Loan Loss Provisions:

ADDITIONAL LLP FOR THE YEAR NPR

Pass 96,506,730 Watch-List (44,202,282) Restructured - Sub-Standard 14,119,162 Doubtful (934,825) Loss (14,780,819) Total 50,707,967

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j. Segregation of investment portfolio: the Bank which includes managing, assessing, identifying, monitoring and reducing pertinent INVESTMENT AMOUNT (NPR MILLIONS) global, macro and micro-economic level Held For Trading - business risks that could interfere with Banks Held Till Maturity 12,885 objective and goals and whether the Bank Available For Sale 738 is in substantial compliance with its internal operating policies and other applicable Total Investment 13,623 regulations and procedures, external, legal, regulatory or contractual requirements on 3. RISK MANAGEMENT FUNCTION a continuous basis. Further, CRO ensures integration of all major risk in capital assessment process. a. Summary of the bank’s internal approach to assess the adequacy of its capital to support all the risks in business and achieve better risk iv. Risk Management Committee (RMC) management techniques in monitoring and Board level risk management committee has managing risks been set up under NRB Directive for ensuring/ reviewing bank's risk appetite is in line with the policies. i. Board and senior management oversight Bank management is responsible for understanding the nature and level of risk being Credit Risk taken by the bank and how this risk relates to The Bank’s Credit Policy Guidelines has adequate capital levels. It is also responsible for adopted a Credit Risk Management philosophy ensuring that the form and sophistication of the that involves a continual measurement. risk management processes is commensurate with the complexity of its operations. A Market Risk sound risk management process, thus, is the The Bank has in place Assets Liability foundation for an effective assessment of Management (ALM) Policy, and Assets Liability the adequacy of a bank’s capital position. Management Committee (ALCO), which The decisions made by the management are monitors risks arising from changes in exchange regularly reviewed by the BOD. rates in foreign currencies; liquidity profile of assets and liabilities, investment activities of the ii. Sound capital assessment bank etc. Another crucial component of an effective ICAAP is the assessment of capital. In order to Operational Risk be able to make a sound capital assessment, Board and senior management of the bank the bank has, at minimum, have the following: places high priority on effective operational n Policies and procedures designed to ensure risk management and adherence to sound that the bank identifies, measures, and operating controls. The Bank has developed reports all material risks; and implemented various manuals, operating n A process that relates capital to the level of procedures and guidelines for monitoring and risk; controlling Operational Risks in the Bank. n A process that states capital adequacy goals with respect to risk, taking account of the Most significant steps adopted by the Bank for Bank’s strategic focus and business plan; handling Operational Risks are as follows: and n A process of internal control reviews and Independent reconciliation department audits to ensure the integrity of the overall accustomed to conducting daily reconciliation management process. of all agency accounts and Inter-Branch accounts. Transaction Stack System is in place iii. Comprehensive assessment of risks on amount limit basis. Exception and MIS Chief Risk Officer (CRO), along with his team, reports are generated by the system on a ‘Live’ is responsible for overall risk management of

202 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

basis, where account activity can be monitored The Internal Audit monitors compliance with as and when they occur. General Authority policies and standards and the effectiveness schedule is in place to delegate authority to of internal control structures across the Bank staff across all levels. Independent Internal through its program of business/unit audits. Audit has been appointed to carry out review The Internal Audit function is focused on the of internal controls and compliance. Output in areas of greatest risk as determined by a risk- all transactions is checked by a higher authority based assessment methodology. Internal Audit level. Disaster Recovery Server is in place to reports regularly to the Audit Committee. The ensure full restoration of Bank’s data. findings of all adverse audits are reported to the Chief Executive Officer and Business Heads for Other Risk immediate corrective actions. In addition to credit, credit concentration, operational and market risk the Bank identifies, vii. Assets and Liability Committee (ALCO) assess and monitors other risks such as The ALCO, chaired by Chief Executive Officer, strategic risk and reputational risks at regular ensures functioning of the banking business in interval. line with the set procedures and processes and recommends for necessary steps to address v. Monitoring the risk associated with liquidity, movement in Monitoring and reporting of all risks, including interest rate, exchange rate and equity price credit, operational and market risks are and other risks. identified, escalated, monitored and mitigated to the satisfaction of the risk type owner. The viii. Stress Testing risk type owner is responsible for ensuring that Stress Testing is a risk management technique all the risks are adequately identified, escalated, used to evaluate the potential effects on an monitored and mitigated. The Bank has an institution’s financial condition, of a set of adequate system in place for monitoring and specified changes in risk factors, corresponding reporting risk exposures and assessing how the to exceptional but plausible events. The Bank changing risk profile affects the need for capital. conducts the stress test on quarterly basis and The senior management and board of directors reports to senior management as well as to on a regular basis receive the report regarding Nepal Rastra Bank. the risk profile of the bank and its capital needs. All the material risks are identified, measured, ix. Maker-Checker Policy monitored and reported by the respective risk The Bank has adopted Maker-Checker Policy type owner. in all of the transactions. Each and every transaction is entered and authorized in CBS vi. Internal Control Review by two different individuals for better control The internal control structure of the Bank is and any deviations are closely monitored. The essential for sound capital assessment process. activities of any personnel can be monitored Effective control of the capital assessment centrally through an integrated system which process includes an independent review and helps in minimizing the risk of misconduct. involvement of both internal as well as external audits wherever appropriate. The Bank is b. Types of eligible credit risk mitigants used committed conduct the regular review of its and the benefits availed under CRM risk management process to ensure its integrity, accuracy, and reasonableness. The effectiveness CREDIT RISK AMOUNT MITIGANTS (NPR MILLIONS) of the Bank’s internal control system is reviewed regularly by the Board, its committees, 1. Deposit with Bank 745.30 Management and Internal Audit. 2. Deposits with other banks/FI - 3. Gold 493.30 4. Govt. & NRB Securities - Total Credit Risk Mitigants 1,238.60

ANNUAL REPORT | 2017-18 203 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE impairment LLP charged NFRS deposit deposit and of BFI of BFI rate of market profit depreciation in of interest Decrease REASON FOR VARIANCE REASON FOR - reclassificatio booking reclassificatio

- reclassification additional rectification NFRS Impairment reversal booking of interest receivable receivable of interest booking restated Bank Balance

IN % As on 16 July, 2018 (32 Asar 2075) 2018 on 16 July, As -1.32% -1.47% VARIANCE

- - - 0 68 (0) 0.00% 880 0.12% (141) -0.03% 17,315 0.18% 19,746 4.91% 163,103 7.16% IN AMOUNT 2,299,363 221.84% (1,111,342) (1,431,708) -2.32% (1,283,674) -27.40% (2,126,890) -3.06% (1,230,596)

- 76,415 157,142 157,142 421,561 526,567 730,248 8,152,556 8,152,556 3,401,782 3,335,877 9,720,458 8,902,685 8,902,685 60,213,139 2,442,008 67,366,128 82,782,910 82,782,910 82,663,656 82,663,656 AS PER AUDITED FINANCIAL STATEMENT FINANCIAL

- 76,415 157,142 157,142 401,814 729,368 526,708 1,036,514 8,152,556 8,152,556 8,902,617 8,902,617 9,703,144 2,278,905 4,685,457 61,644,847 69,493,018 83,894,252 83,894,252 83,894,252 83,894,252 AS PER UNAUDITED FINANCIAL STATEMENT FINANCIAL POSITION OF FINANCIAL STATEMENT

Interest Non Controlling Capital And Liabilities Total Bond And Debenture Other Liabilities And Provisions Borrowings Deposits Capital And Liabilities Up Capital Paid And Surplus Reserves Assets Total Other Assets Goodwill And Intangible Assets And Equipment Property Investment in Subsidiaries Investment Securities Investment And Advances Loan Due From NRB And Placements with BFIs NRB And Placements Due From COMPARISION OF UNAUDITED & AUDITED FINANCIAL STATEMENTS OF UNAUDITED & AUDITED FINANCIAL COMPARISION Assets Cash And Equivalent

204 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE expense expense expense expense expense operating tax deferred operating income/ operating operating overbooked on loans and advances other of non of insurance of non of non of insurance of AIR of interest REASON FOR VARIANCE REASON FOR

to reclassification to personal expense expense personal to from personal expense expense personal from - IN % 0.98% -8.18% -8.18% -7.43% -3.79% -9.45% -9.45% -0.67% -0.95% -11.04% -12.33% VARIANCE

(91) 0.00% reversal 3,412 1.52% reclassification 12,872 12,872 35,683 6.88% reclassification 23,709 -66.31% NFRS Impairment reversal 70,238 78.83% reclassification 52,093 9.17% reclassification 45,802 167,094 -52.31% and NFRS LLP impairment in profit Decrease 247,672 -124.41% NFRS Impairment reversal (18,145) (19,390) -0.25% adjustment (29,475) -3.14% reclassification (19,299) (87,888) -15.63% and in profit decrease (34,031) (287,911) (154,221) (154,221) (242,110) (130,512) (130,512) IN AMOUNT (281,703)

48,593 619,914 159,339 474,298 227,688 554,657 (96,180) (12,046) 908,492 460,575 460,575 (152,332) 3,559,191 3,559,191 7,647,361 1,951,270 1,951,270 1,476,972 1,476,972 1,476,972 1,476,972 4,776,433 3,510,598 3,510,598 1,464,926 1,464,926 1,464,926 1,324,640 1,324,640 2,870,928 2,870,928 2,047,450 2,047,450 AS PER AUDITED FINANCIAL STATEMENT FINANCIAL

89,102 518,974 567,821 562,186 478,719 478,719 224,276 937,966 (319,425) (35,755) (141,981) 1,311,768 1,311,768 1,631,193 1,631,193 1,631,193 1,631,193 7,666,751 (199,079) 2,193,379 2,193,379 2,335,361 2,335,361 4,776,524 3,792,301 3,792,301 1,595,438 1,595,438 1,595,438 3,593,222 3,593,222 2,890,227 2,890,227 AS PER UNAUDITED of Subsidiary of Subsidiary FINANCIAL STATEMENT FINANCIAL on Profit on Profit Other Losses COMPARISION OF UNAUDITED & AUDITED FINANCIAL STATEMENTS UNAUDITED & AUDITED FINANCIAL OF COMPARISION Expenses Operating Income Operating Interest of Non-Controlling Interest of Non-Controlling OR LOSS OF PROFIT STATEMENT

Adjustments Regulatory after (Loss) Profit/ Free Income Comprehensive Total Share of NCI Share after Income Comprehensive Total Profit Distributable Loss or as per Profit (Loss) Net Profit/ Share as per NRB Directive Adjustment Regulatory Add/Less: Profit /(Loss) For the Period For the /(Loss) Profit Income Other Comprehensive and fees and commission expense expense and and commission fees Tax Before Profit Tax Income Profit Operating Income/Expenses Non-Operating Other Income Operating Net Expenses Personnel expense expense Income Operating Total Impairment Charge/(Reversal) and Loans for Income and Commission Net Fees Other Expense and Commission Fees Income Net Interest Income and Commission Fees Expense Interest Contd... Income Interest

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DISCLOSURE OF INFORMATION UNDER SECTION 109 (4) OF COMPANIES ACT 2063

1. An overview of the business during the 9. Information on shares forfeited if any during Previous Year: the year: Incorporated in the respective segments of No shares were forfeited during the year. annual report. 10. Transactions between the Bank and its 2. Transaction affected by national and subsidiary company and progress made in the international circumstances: business: Incorporated in the respective segments of The progress in the Bank’s transaction has been annual report. included in the Director’s Report. Consolidated financial statements including consolidated 3. Achievements of the current year as of the balance sheet, consolidated profit and loss date of preparation of the report and opinion account and consolidated cash flow statement of the Board of Directors on future actions: of its’ subsidiary company, Sunrise Capital Ltd., Incorporated in the respective segments of also reflects the true and fair position of its annual report. parent and subsidiary company.

4. Industrial or Professional relations of the 11. Main transactions carried out by the Bank Bank: and its subsidiary company during the fiscal Bank has maintained a cordial and professional year and any important change in the business relation with its stakeholders, customers and of the company during the period: regulators. a. Sunrise Bank Limited: Those transactions that are allowed for a “A” class licensed institution like 5. Changes made in the composition of Board collection of deposits, advancing loans, of Directors and reasons thereof: international financial transactions, Incorporated in the respective segments of electronic transactions, remittance annual report. services and other banking activities has been performed by the Bank. 6. Main factors affecting the business: b. Sunrise Capital Limited: a. Stiff and cutthroat competition among its Transactions related to merchant banking competitors. like public issue, investment management, b. Instable political situation and lack of security guarantee and depository investible fund in the economy due to less participant services. expenditure from the government level. c. Increased cost of fund etc. 12. Information furnished to the Bank by its basic shareholders during the previous fiscal 7. Response by Board of Directors on the year: remarks given in the audit report, if any: No such information has been furnished by its Besides the normal remarks on the banking basic shareholders during the review period. transactions, there weren’t any other remarks given in the audit report on FY 2017/18. The 13. Particulars of the ownership of shares remarks have come into notice of the Board of taken up by the Directors and office bearers Directors and arrangements have been made of the company during the previous year to take corrective actions so that such mistake and information received by the Bank from does not repeat in future. them about their involvement, if any, in the transactions of the shares of the Bank: 8. The amount recommended for the Directors and office bearers, except provided distribution as dividend: below have not involved in the share The board has recommended paying 11.5% cash transaction of the Bank: dividend amounting NPR 937,543,923 to the shareholders from the profit and reserves of fiscal year 2017/18.

206 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

S.N POSITION NAME SHARE CATEGORY NO OF SHARES TOTAL

1. Chairman Motilal Dugar Promotor 3,526,252 4,839,952 Public 1,313,700 2. Director Malchand Dugar Promotor 2,663,727 3,888,278 Public 1,224,551 3. Director Er. Bachha Raj Tater Promotor 1,463,175 2,008,275 Public 545,100 4. Director Dr. Bhogendra Guragain Promotor 665,932 914,022 Public 248,090 5. Director Jyoti Kumar Begani Promotor 438,950 602,481 Public 163,531 6. Director Dr. Deepak Prasad Bhattarai Promotor - 6,788 Public 6,788 7. Director Deepak Nepal Promotor - 4,733 Public 4,733 8. Independent Om Krishna Joshi Promotor - 15,642 Director Public 15,642

14. Particulars of information furnished by any 17. Particulars of the total management Director or any of his close relatives about his expenses of the previous financial year: personal interest in any agreement connected Total management expenses of the previous with the company signed during the previous financial year have been detailed as below: fiscal year: There is no such information furnished by the PARTICULARS AMOUNT (NPR) directors and any of their close relatives. Staff Expenses 908,491,597 Other Operating Expenses 713,996,050 15. Buy back of own shares: The Bank has not purchased its own shares in 18. A list of members of the Audit Committee; the year under review. remunerations, allowances and facilities provided to the members; particulars of 16. Whether or not there is an internal control functions discharged by the committee and system and if there is any such system, details suggestions, if any, offered by the committee: thereof: Audit committee of the Bank is comprised of a. To run smoothly and to operate day to day following members: business bank has devised financial policy, a. Dr. Deepak Prasad Bhattarai-Coordinator employee bye laws, Loan write off policy, b. Mr. Malchand Dugar- Member credit policy and other different polices on c. Dr. Bhogendra Guragain- Member need basis. d. SAR Associates-Member b. To control and monitor the activities of e. Mr. Ishwar Kumar Pathak- Member the Bank different committees like Risk Secretary Management Committee, Audit Committee and Human Resource Management Excluding the employee member of the Committee under the membership of committee other members of the committee various directors has been formulated. are paid NPR 10,000/- per meeting. During the c. Audit Committee analyzes the financial previous year audit committee meeting was position, internal control and risk held 8 times. From the review of the internal management of the Bank on regular audit report, necessary suggestions are provided basis. The committee also provides through the Board meeting. Similarly, the recommendation and suggestions on the external audit report and annual financial reports internal and external audit reports and are presented to the Board after being reviewed. comments of NRB supervision.

ANNUAL REPORT | 2017-18 207 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

19. Payments due, if any, to the company from DETAILS OF TRANSACTION AMOUNT (NPR) REMARKS any director, managing director, executive chief Shares Held 157,142,000 Bank has investment in 1,571,420 or basic shareholder of the company or any of their close relatives, or from any firm, company shares of sunrise capital or corporate body in which he is involved: Deposit Liabilities 172,912,239 Deposits Held by Sunrise Capital in No such amount is due for payment. Various Accounts of Sunrise Bank Interest Expenses 18,265,399 Interest paid by Sunrise Bank to 20. Remuneration, allowances and facilities to Sunrise Capital the Directors, Managing Director, Executive Other Operating Income 2,064,322 Reimbursed Expenses by Sunrise Chief and other office bearers: Capital for Rent, Electricity and Water a. The Directors were paid NPR 1,942,000 as Share Registrar Fee 350,000 Expenses by Sunrise Bank for meeting allowances after deduction of tax Share Registrar Service at source according to the Income Tax Act. Others 1,086,117 Paid to Sunrise Capital against b. The details of the salary, allowances and CDS, Dematerialization, Registrar facilities paid to the Chief Executive Officer to Shares and Bonus Shares and other managerial level staffs are as follows: Sunrise bank has deputed 10 staffs at Sunrise Capital, regarding salary POSITION AMOUNT (NPR ‘000) and benefits to them salary and benefits is paid as per the decision of CEO 14,913 Sunrise Capital only. In case of “lower” emoluments than those prevailing Managerial Level Staffs 105,443 in Sunrise Bank as per their positions, the shortfall is made good by the Bank. Similarly, as a staff member of Sunrise Bank, any facility which is Chief Executive Officer of the Bank is provided not offered by Sunrise Capital e.g., vehicle loan, are provided through the vehicle facility as well. Besides, as per the parent company. prevalent Bonus Act, CEO is eligible for Bonus from the profits of the Bank. n Bank has invested NPR 19.85 million in the 247,500 shares of Gurans Life Insurance Ltd. Bank hasn’t earned income from such investments and hasn’t invested any additional amount during the year. 21. Dividends yet to be collected by the shareholders: As of 16th July 2018, dividends yet to be 24. Any other matter to be mentioned in the Board of Directors report collected by the shareholders were NPR under Companies Act 2063 and other prevalent laws: 44,195,398. All such related matters have been incorporated in the respective segments of the annual report.

22. Details of property purchased or sold as per clause 141: 25. Other details Not Applicable. Incorporated in the respective segments of the annual report.

23. Details of transactions between associated companies as per clause 175. n Transaction with Subsidiary Company: Bank has held investment of 78.58% in sunrise capital hence sunrise bank is holding company of the Sunrise Capital. Details of transaction with sunrise capital till the end of Ashad end is as follows.

208 SUNRISE BANK LIMITED STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

ANNUAL REPORT | 2017-18 209 INVESTOR'S RELATIONSHIP

The Bank maintains regular communication with shareholders as it believes in sharing the efforts in business for producing the highest possible returns.

210 SUNRISE BANK LIMITED ANNUAL REPORT | 2017-18 211 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

DIRECTIVES FROM NEPAL RASTRA BANK WHILE APPROVING THE DIVIDEND DECLARATION/ DISTRIBUTION AND FINANCIAL STATEMENTS PUBLICATION

Based on the financial statements and other documents submitted by the Bank, the provisions of Sub-section 2 of Section 47 of Banks and Financial Institutions Act 2073 are seen to have been complied; therefore as per Subsection 1 of the said Section, approval has been granted for proposed cash dividend of Rs. 937,543,922.87 subject to fulfillment of other prevailing legal provisions and approval of the same by the annual general meeting of the Bank. Additionally, consent has been granted for publication of the financial statements of FY 2017/18 for tabling it for approval at the Bank’s annual general meeting along with the below directives.

1. Arrangement should be made for full compliance of the observations/ exceptions noted by the auditors in their report and for ensuring that such observations/exceptions do not repeat in future.

2. To withhold proposed cash dividend of promoter shareholders till compliance of point number 7 of directive number 10 of the Unified Directive 2075 issued by Nepal Rastra Bank is observed regarding holding of promoter shares up to 15% of paid up capital in a Bank & Financial Institution and up to 1 % of paid up capital in other Bank and Financial Institutions.

Above directives should be published as a separate page in the annual report of the Bank.

212 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

TAXATION ON DIVIDENDS AND SHARES

CASH AND CAPITAL GAINS ON BONUS DIVIDENDS DISPOSAL OF SHARES The tax on dividend received by the Pursuant to clause (a) of Section 95A (2) shareholders is subject to withholding tax of the Income Tax Act, 2002 (amended at the rate of 5% pursuant to Section 88(2) by Finance Ordinance 2018), the gain on of the Income Tax Act 2002. The tax is disposal of shares listed in the Securities final withholding tax as per Section 92(1) Board of Nepal computed as per Section (a) of the Act and need not require further 37 of the Act is subject to withholding tax assessment while filing annual tax return at the rate of 7.5%, if the beneficiary of the under Section 96. However, the dividend gain is resident natural person and at the distributed by the Bank from the dividend rate of 10%, in case the beneficiary of the earned by the resident company is not gain is resident entity and 25% to other than subject to tax at the time of distribution as resident natural person and resident entity. per Section 54(3). Capitalization of profits is Shares of Sunrise Bank are listed both in the deemed as distribution under Section 53(1) Securities Board of Nepal and Nepal Stock (b) of the Act and hence, issuance of bonus Exchange Ltd. for the purpose of public shares by the Bank from the profits earned trading and therefore the gain on disposal of (excluding dividend received) is subject Bank’s shares is subject to withholding tax in to withholding tax at the rate of 5% under accordance to clause (a) of Section 95A (2). Section 88(2.) Gain or loss arising from disposal of shares under Section 37 of the Act shall be the amount that is determined by reducing the amount incurred while acquiring the shares with the amount that is received at the time of its disposal. The amount of disposal in case the Sunrise Bank’s shares sold through stock exchange shall be the net amount received from the buyer less brokerage and other costs incurred during the transaction. The costs incurred for the shares by the way INFORMATION ABOUT of an acquisition through stock exchange ANNUAL GENERAL MEETING shall be the amount paid to the beneficiary plus all costs attributable to the acquisition.

Further, the costs incurred for the shares The 11th Annual General Meeting (AGM) by the way of transfer from the deceased of the Bank has been scheduled to person shall be the market value prevailing convene on 13th January 2019 at 10:00 immediately before the death of the hours at AmritBhog Caterers, Kalikasthan, transferor. The tax being withheld on the Kathmandu, Nepal to discuss and approve gains arising from disposal of shares is an various agendas including the financials and advance tax and the tax credit is available at 11.5% cash dividend to shareholders. the time of filing annual tax returns.

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VALUE ADDED STATEMENT

VALUE ADDED

PARTICULARS 2018 2017

Interest & Other Operating Income 8,495 6,094 Cost of Services (5,368) (3,553) Value Added By Banking Services 3,127 2,541

Non Banking Income 68 14 Provision Against Non Performing Assets (213) (161) Value Added 2,982 2,394

DISTRIBUTION

To employees Remuneration, provident funds and other benefits 908 689

To government Income tax 474 510

To providers of capital Interest on borrowings 10 3 Dividend to shareholders 938 1,063 Total 948 1,066

To expansion and growth Depreciation & amortizations 112 79 Capital/Retained earnings/Reserves 539 49 Total 652 129

Total Value Added 2,982 2,394

214 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

DISCLOSURE RELATED TO SUB RULE (2) OF RULE 26 OF SECURITIES REGISTRATION AND ISSUANCE REGULATION, 2073

1. Report of Board of Directors: PARTICULARS 1STQTR 2NDQTR 3RDQTR 4THQTR Included in the Annual Report under respective heading. Maximum Price (NPR) 408 354 267 281 Minimum Price (NPR) 309 258 225 216 2. Auditor’s Report: Final Price (NPR) 331 263 244 230 Included in the Annual Report under No. of Transactions 654,709 862,565 463,011 692,361 respective heading. Total Trading Days 56 57 56 63

3. Audited Financial Statements: 6. Problems and Challenges Included in the Annual Report under Increasing competition among banks, challenge of increasing paid up respective heading. capital, increasing inflation rate or decreasing area of investment are major challenges faced but with the help of internal control mechanism, 4. Details relating to Legal Actions: better strategies, diversified business, better service standards, a. Law Suits filed by/against the employees’ ability enhancement, we are able to cope up with the Bank during the review period. controllable problems and challenges. No law suits except business cases related to loans and loan recovery. 7. Corporate Governance b. Law Suits filed by/against the The Bank has adopted strong policies for maintaining corporate promoters/directors involving governance. In regards to corporate governance, bank is fully charge of regulatory violations or compliant with the directions of Nepal Rastra Bank, Banks and criminal offenses Financial Institution Act 2073 and Securities Exchange Act 2063 and is No such cases filed. committed to comply in the days to come. c. Cases filed against any promoters/directors for financial 8. Statement of difference between prospectus and audited financial fraud. statement by 20% or more No such Information has been NA received. 9. Details of special events or circumstances 5. Analysis of share transaction and a. Amendment in the bye laws of the organized institution progress of Organized Institution: Due to acquisition of NIDC Capital Markets Ltd, issued and paid up a. Management view on share capital of the Bank has changed. transactions of the Bank on Nepal Stock Exchange b. Changes in BOD/Senior Management of the organized institution As the share price determination i. New appointment in the Board and share transaction are carried NAME: Er. Shailendra Guragain through open market operations DATE OF APPOINTMENT: 13th January 2019 at Nepal Stock Exchange under the supervision of Securities NAME: Ms. Sharada Sharma Pudasaini Board of Nepal, the management DATE OF APPOINTMENT: 13th January 2019 is neutral on the matter. c. Declaration of dividend and change in share composition b. Maximum, minimum and n Capital of the Bank has increased with declaration of 33.33% closing share price of organized bonus shares vide 9th AGM of the Bank held on 7th Kartik 2073 institution including total for fiscal year 2072/73. transacted number of shares n During the previous year Sunrise Bank Limited acquired NIDC and transacted days during the Capital Markets Ltd. by issuing 65 per shares against their shares yearThe details in reference to the having face value of 100. website of Nepal Stock Exchange n 30% right shares have been issued as decided by the 9th AGM of are given in table below: the bank held on 7th Kartik 2073.

ANNUAL REPORT | 2017-18 215 BANK'S PERFORMANCE

Horizontal and Vertical Analysis

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HORIZONTAL ANALYSIS

STATEMENT OF FINANCIAL POSITION

PARTICULARS 16-JUL-18 % 15-JUL-17 % 16-JUL-16

Assets Cash and Cash Equivalents 2,442 18 2,061 (26) 2,772 Due from Nepal Rastra Bank 5,033 (33) 7,496 97 3,810 Placement with BFIs 3,870 15 3,358 28 2,618 Derivative Financial Instruments - (100) 1 (97) 25 Other Trading Assets - - - - - Loans and Advances to BFIs 1,000 (10) 1,113 17 956 Loans and Advances to Customers 59,214 18 50,158 18 42,361 Investment Securities 9,720 58 6,169 6 5,845 Current Tax Assets 43 (74) 165 493 28 Investment in Subsidiaries 157 100 79 - - Investment in Associates - - - - - Investment Property 119 (26) 161 55 104 Property and Equipment 730 37 534 23 436 Goodwill and Intangible Assets 76 31 59 893 6 Deferred Tax Assets 53 - - - - Other Assets 325 (36) 505 368 108 Total Assets 82,783 15 71,859 22 59,067

PARTICULARS 16-JUL-18 % 15-JUL-17 % 16-JUL-16

Liabilities Due to Bank and Financial Institutions 2,127 (45) 3,881 113 1,820 Due to Nepal Rastra Bank 527 - - - - Derivative Financial Instruments 23 - - - - Deposits from Customers 67,366 18 57,286 15 49,981 Borrowings - - - - - Current Tax Liabilities - - - - - Provisions - - - - - Deferred Tax Liabilities - (100) 26 203 8 Other Liabilities 1,186 27 931 34 692 Debt Securities Issued - - - - - Subordinated Liabilities - - - - - Total Liabilities 71,229 15 62,123 18 52,502 Equity Share Capital 8,153 16 7,018 77 3,976 Share Premium 127 - - - - Retained Earnings 942 (30) 1,349 (25) 1,788 Reserves 2,333 71 1,368 71 802 Total Equity Attributable to Equity Holders 11,554 19 9,735 48 6,566 Non Controlling Interest - - - - 0 Total Equity 11,554 19 9,735 48 6,566 Total Liabilities and Equity 82,783 15 71,859 22 59,067

218 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

STATEMENT OF PROFIT & LOSS

PARTICULARS FY 2017/18 % FY 2016/17 % FY 2015/16

Interest Income 7,647 41 5,428 75 3,096 Interest Expense 4,776 53 3,113 96 1,592 Net Interest Income 2,871 24 2,314 54 1,504 Fee and Commission Income 620 20 517 22 423 Fee and Commission Expense 159 (1) 161 219 50 Net Fee and Commission Income 461 29 356 (4) 372 Net Interest, Fee & Commission Income 3,332 25 2,671 42 1,876 Net Trading Income - - - - - Other Operating Income 228 53 148 12 132 Total Operating Income 3,559 26 2,819 40 2,008 Impairment Charge/ (Reversal) for Losses 49 (35) 75 (132) (235) Net Operating Income 3,511 28 2,744 22 2,243 Operating Expense - - - - - Personnel Expenses 908 32 689 40 493 Other Operating Expenses 442 41 313 0 312 Depreciation & Amortisation 112 137 48 (25) 64 Operating Profit 2,047 21 1,695 23 1,375 Non Operating Income 68 390 14 957 1 Non Operating Expense 164 91 86 2,560 3 Profit Before Income Tax 1,951 20 1,623 18 1,373 Income Tax Expense 474 (7) 510 21 421 Profit for the Period 1,477 33 1,113 17 951

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VERTICAL ANALYSIS

STATEMENT OF FINANCIAL POSITION

PARTICULARS 16-JUL-18 % 15-JUL-17 % 16-JUL-16 %

Assets Cash and Cash Equivalents 2,442 3 2,061 3 2,772 5 Due from Nepal Rastra Bank 5,033 6 7,496 10 3,810 6 Placement with BFIs 3,870 5 3,358 5 2,618 4 Derivative Financial Instruments - - 1 0.1 25 0.1 Other Trading Assets ------Loans and Advances to BFIs 1,000 1 1,113 2 956 2 Loans and Advances to Customers 59,214 72 50,158 70 42,361 72 Investment Securities 9,720 12 6,169 9 5,845 10 Current Tax Assets 43 0.1 165 0.2 28 0.1 Investment in Subsidiaries 157 0.2 79 0.1 - - Investment in Associates ------Investment Property 119 0.1 161 0.2 104 0.2 Property and Equipment 730 1 534 1 436 1 Goodwill and Intangible Assets 76 0.1 59 0.1 6 0.1 Deferred Tax Assets 53 0.1 - - - - Other Assets 325 0.4 505 0.7 108 0.2 Total Assets 82,783 100 71,859 100 59,067 100

PARTICULARS 16-JUL-18 % 15-JUL-17 % 16-JUL-16 %

Liabilities Due to Bank and Financial Institutions 2,127 3 3,881 5 1,820 3 Due to Nepal Rastra Bank 527 1 - - - - Derivative Financial Instruments 23 0.1 - - - - Deposits from Customers 67,366 81 57,286 80 49,981 85 Borrowings ------Current Tax Liabilities ------Provisions ------Deferred Tax Liabilities - - 26 0.1 8 0.1 Other Liabilities 1,186 1 931 1 692 1 Debt Securities Issued ------Subordinated Liabilities ------Total Liabilities 71,229 86 62,123 86 52,502 89 Equity Share Capital 8,153 10 7,018 10 3,976 7 Share Premium 127 0.2 - - - - Retained Earnings 942 1 1,349 2 1,788 3 Reserves 2,333 3 1,368 2 802 1 Total Equity Attributable to Equity Holders 11,554 14 9,735 14 6,566 11 Total Liabilities and Equity 82,783 100 71,859 100 59,067 100

220 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

STATEMENT OF PROFIT & LOSS

PARTICULARS FY 2017/18 % FY 2016/17 % FY 2015/16 %

Interest Income 7,647 89 5,428 89 3,096 85 Interest Expense 4,776 56 3,113 51 1,592 44 Net Interest Income 2,871 34 2,314 38 1,504 41 Fee and Commission Income 620 7 517 8 423 12 Fee and Commission Expense 159 2 161 3 50 1 Net Fee and Commission Income 461 5 356 6 372 10 Net Interest, Fee & Commission Income 3,332 39 2,671 44 1,876 51 Net Trading Income ------Other Operating Income 228 3 148 2 132 4 Total Operating Income 3,559 42 2,819 46 2,008 55 Impairment Charge/ (Reversal) for Losses 49 1 75 1 (235) (6) Net Operating Income 3,511 41 2,744 45 2,243 61 Operating Expense ------Personnel Expenses 908 11 689 11 493 13 Other Operating Expenses 442 5 313 5 312 9 Depreciation & Amortisation 112 1 48 1 64 2 Operating Profit 2,047 24 1,695 28 1,375 38 Non Operating Income 68 1 14 0 1 0 Non Operating Expense 164 2 86 1 3 0 Profit Before Income Tax 1,951 23 1,623 27 1,373 38 Income Tax Expense 474 6 510 8 421 12 Profit for the Period 1,477 t17 1,113 18 951 26

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REMITTANCE NETWORK

Sunrise Bank has extended remittance business throughout the Persian Gulf countries and in other destinations of Nepali workers. The Remittance Department has been continuously seeking and soliciting new avenues for the Bank's remittance business. The existing international remittance network is given below :

INTERNATIONAL PARTNER

COUNTRY PARTNER BANK / REMITTANCE COMPANY

Oman Al Jadeed Exchange Modern Exchange Asia Express Exchange Qatar Habib Qatar International Exchange Al Zaman Exchange Al Jazeera Exchange UAE Al Ahalia Exchange Progoti Exchange GCC Exchange Al Ansari Exchange Noor Ahalia Exchange Kuwait Bahrain Exchange Company (BEC) Bahrain Bex Money Bahrain Express Exchange Israel WIC Worldcom Finance Italy National Exchange CO.S.R.L UK Netfox LTD NEC Money Transfer India IDBI Bank Republic Of South Korea Industrial Bank of Korea (IBK) KB Kookmin Bank Hanpass USA / Middle East Trans-Fast Remittance Japan Easylink Remittance Pvt. Ltd Worldwide CG Remittance

222 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

The services offered by the Remittance Sunrise Capital service from abroad: Department internationally include: n Opening of DMAT account from abroad. n Providing DMAT Cheque Book and ASBA Online remittance which includes : Forms (if share issuer is Sunrise Capital). n Remittance Payment against Identification. n SrBL Account Credit Remittances. Other Functions abroad: n Other Bank Account Credit Remittances. n Promoting Sunrise Bank and its products in the international market targeting Partial Banking Facility abroad : Nepali workers. n Opening Suryodaya Remit Account. n Marketing campaign in various countries n Providing Mobile Banking / Internet for various products. Banking Facility. n Banking awareness programs to educate n Solicitation of Fixed Deposits. Nepali workers to remit funds through n SrBL Visa Cards distribution country wise. banking channels. n Issuance of Account Mandate & Debit Authority. n Solicitation of loan customers and obtaining required legal documents.

DOMESTIC REMITTANCE PARTNERS

PARTNER BANK / REMITTANCE COMPANY

1. City Express Money Transfer 2. Prabhu Money Transfer 3. IME Ltd 4. Western Union Money Transfer 5. Samsara - Money Gram 6. SDBL Remit 7. Net Remit 8. CG Money Remit (MTA) 9. Easy Link Remittance 10. Best Remit 11. JME Remit 12. Reliable Remit

OVERSEAS REPRESENTATIVE STAFFS

COUNTRY CONTACT NUMBER EMAIL ID

South Korea +821021770733 [email protected] South Korea +821074593291 [email protected] Israel +972549288928 [email protected] UAE +971529251568 [email protected]

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CORRESPONDENT NETWORK AND CORRESPONDENT BANKING SERVICE

The Bank maintains a full-fledge The Correspondent Banking Department Correspondent Banking Department under is in constant communication with all its Treasury and Correspondent Banking international correspondent banks, SWIFT Department at the Head Office in Gairidhara, department, Trade Finance departments, Kathmandu. The department is dedicated and all the branches. Maintaining a good to provide prompt services to all the units relationship is the key to providing seamless of the Bank on international payments, service as it allows for better responsiveness inward remittance, letter of credit advising, and flexibility in meeting the needs of clients. settlements and all other correspondent banking-related issues. For reliable transfer SrBL has a comprehensive network of of funds and providing prompt services Correspondent Banks. Its customers can to customers, the Bank has maintained benefit from the wide international reach, nostro accounts with 18 banks in different relationship-based approach, and the wide currencies. The Bank also has a Relationship range of global correspondent banking Management Application (RMA) services. Further, the customers can remit arrangement with more than 134 banks that funds from their account to any of our enables communication between various Correspondent Banks listed below. financial institutions via SWIFT thus helping in free flow of information.

STANDARD SETTLEMENT INSTRUCTIONS (SSI) OF SUNRISE BANK LIMITED (SWIFT: SRBLNPKA)

CURRENCY CORRESPONDENT BANK COUNTRY CITY SWIFT/BIC

1. AUD SBI Sydney Australia Sydney SBINAU2S 2. DKK Danske Bank A/S Denmark Copenhagen DABADKKK 3. EUR Standard Chartered Bank Germany Frankfurt am Main SCBLDEFX 4. GBP Standard Chartered Bank Great Britain London SCBLGB2L 5. INR Axis Bank Ltd India Mumbai AXISINBB004 6. INR HDFC Bank Ltd India Mumbai HDFCINBB 7. INR Mashreq Bank PSC India Mumbai MSHQINBB 8. INR Standard Chartered Bank India Mumbai SCBLINBB 9. INR IDFC Bank Limited India Mumbai IDFBINBB 10. INR IDBI Bank Limited India Mumbai IBKLINBB 11. CNY Bank of China China Shanghai BKCHCNBHS00 12. CNY Standard Chartered Bank China Shanghai SCBLCNSX 13. JPY Standard Chartered Bank Japan Tokyo SCBLJPJT 14. USD K B Kookmin Bank South Korea Seoul CZNBKRSE 15. USD Habib American Bank United States New York HANYUS33 16. USD Industrial Bank of Korea South Korea Seoul IBKOKRSE 17. USD MashreqBank PSC United States New York MSHQUS33 18. USD Standard Chartered Bank United States New York SCBLUS33

224 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

OUR BRANCH NETWORK

PROVINCE NO.1 PROVINCE NO.2

BARAHAPOKHARI BRANCH (GAUPALIKA) ILAM BRANCH AURAHI BRANCH (GAUPALIKA) Dhartung, Barahpokhari Nikunja Path, Ilam Deuri Parwaha, Aurahi Rural Municipality-04, Khotang, Municipality-07, Ilam, Rural Municipality-2, Dhanusha, Tel: +977-027-521717/521720 Tel: +977-041-620055 BHADRAPUR BRANCH Hulak Road, Bhadrapur BRANCH BARDIBAS BRANCH Municipality-05, Jhapa, Itahari Central Plaza, Itahari Main Road, Bardibas Tel: +977-023-520132/520133 Sub-Metropolitan City-06, Sunsari, Municipality-01, Mahottari, Tel: +977-025-586924/587622 Tel: +977-044-550563/550564 BRANCH Biratchowk, Sundarharaicha JHUMKA BRANC BINDABASINI BRANCH (GAUPALIKA) Municipality-10, Morang, Jhumka Bazar, Ramdhuni Bahuarwabhatta, Bindabasini Tel: +977-021-546102/546430 Municipality-1, Sunsari, Rural Municipality-2, Parsa, Tel: +977-025-562353/562653 Tel: +977-9755001213 BRANCH Hanumandas Road, Biratnagar KAKARVITTA BRANCH BIRGUNJ BRANCH Metropolitan City-08, Morang, Kakarvitta, Mechinagar Adarshnagar Chowk, Birgunj Tel: +977-021-440695/440696 Municipality-06, Jhapa, Metropolitan City-07, Parsa, Tel: +977-023-562083/562502 Tel: +977-051-524784/524785 BIRTAMOD BRANCH Muktichowk, Birtamod MAIWAKHOLA BRANCH (GAUPALIKA) CHANDRANIGAHAPUR BRANCH Municipality-4, Jhapa, Sanghu Bazar, Maiwakhola Chandranigahpur, Chandrapur Tel: +977-023-546080/541069 Rural Municipality-03, Taplejung, Municipality-04, Rautahat, Tel: +977-021-696488 Tel: +977-055-540536/540636 BUDHABARE BRANCH Budhabare, Buddhashanti MOLUNG BRANCH (GAUPALIKA) DURGA BHAGWATI BRANCH (GAUPALIKA) Rural Municipality-03, Jhapa, Prapcha Deurali, Molung Gangapipra Bazar, Durgabhagwati Tel: +977-023-555418/555478 Rural Municipality-03, Okhaldhunga, Rural Municipality-01, Rautahat, Tel: +977-9741428889 Tel: +977-055-400049 DAMAK BRANCH Ganganagari Gorkha Department Store 2nd Floor, SIDDHICHARAN BRANCH GAUR BRANCH -05, Jhapa, Ramilodanda, Siddhicharan B.P Chowk, Gaur Tel: +977-023-582360/582361 Municipality-11, Okhaldhunga, Municipality-03, Rautahat, Tel: +977-037-520701/520702 Tel: +977-055-521413 DHANKUTA BRANCH Hulak Tole, Dhankuta BRANCH JANAKPUR BRANCH Municipality-7, Dhankuta, Jhapa Road, Kankai Bajrang Chowk, Janakpur Tel: +977-026-520221/520222 Municipality-03, Jhapa, Sub-Metropolitan City-08, Dhanusha, Tel: +977-023-550880/550881 Tel: +977-041-527245/527246 BRANCH Mahendra Path, Dharan TERHATHUM BRANCH LAHAN BRANCH Sub-Metropolitan City-12, Sunsari, Myanglung Bazar, Myanglung In front of Police station, Thana Chowk, Lahan Tel: +977-025-532841/532842 Municipality-01, Terhathum, Municipality-08 , Siraha, Tel: +977-026-460720/460721 Tel: +977-033-562403/562423 DUHABI BRANCH Dharan Road, UDAYAPUR BRANCH MIRCHAIYA BRANCH -5, Sunsari Jaljale, Triyuga Thana Chowk, Mirchaiya Tel: +977-025-541486/541488 Municipality-06, Udayapur, Municipality-05, Siraha, Tel: +977-035-411016/9753003729 Tel: +977-033-550596/684 GAIGHAT BRANCH Pipalchowk,Triyuga RAJBIRAJ BRANCH Municipality-11, Udayapur, Gajendra Chowk, Rajbiraj Tel: +977-035-420778/420779/420780 Municipality-04, Saptari, Tel: +977-031-520727/520721

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PROVINCE NO.3

ATTARKHEL BRANCH GONGABU BRANCH LUVU BRANCH Nepal Medical College (NMC Chowk), Gongabu Chowk, Kathmandu Luvu Bazar, Mahalaxmi Gokarneshwor Municipality-8, Kathmandu, Metropolitan City-26, Kathmandu, Municipality-08, Lalitpur, Tel: +977-01-4913704 Tel: +977-01-4388505/4388506/4388507 Tel: +977-01-5580361/5580461

BAMTIBHANDAR BRANCH (GAUPALIKA) GOTHATAR BRANCH MAHABHARAT BRANCH (GAUPALIKA) Ratnajyoti Bazar, Umakunda Rural Pepsi Cola Town Planning, Kathmandu Bankhu Saleeni, Mahabharat Municipality-02, Ramechhap, Metropolitan City-32, Kathmandu, Rural Municipality-6, Kavre, Tel: +977-9741428893 Tel: +977-01-4992706 Tel: +977-9741468043

BANIYATAR BRANCH GOTIKHEL BRANCH (GAUPALIKA) MAHARAJGUNJ BRANCH Jalpa Chowk Tokha, Tokha Gotikhel Bazar, Mahankal Rural Narayan Gopal Chowk, Kathmandu Municipality-08, Kathmandu, Municipality-03, Lalitpur, Metropolitan City-03, Kathmandu, Tel: +977-01-5158066/5158161 Tel: +977-9741428871 Tel: +977-01-4720346/4721352

BHAINSEPATI BRANCH HETAUDA BRANCH MAIN BRANCH Khokana Dobato Bhainsepati, Lalitpur Kantirajpath, Hetauda Gairidhara, Kathmandu Metropolitan City-25, Lalitpur, Sub-Metropolitan City-02, Makwanpur, Metropolitan City-2, Kathmandu, Tel: +977-01-5592930/5592931 Tel: +977-057-525921/522731 Tel: +977-01-4004560-64

BHAKTAPUR BRANCH JYATHA BRANCH MANAMAIJU BRANCH Sukuldhoka, Bhaktapur Jyatha, Kathmandu Jarankhu, Tarakeshwor Municipality-05, Bhaktapur, Metropolitan City-27, Kathmandu, Municipality-08, Kathmandu, Tel: +977-01-6619240/6619241 Tel: +977-01-4260654/4259174 Tel: +977-01-4025515

BHARATPUR BRANCH KALANKI BRANCH NARAYANGHAT BRANCH Hakim Chowk, Bharatpur Kalanki Chowk, Kathmandu Lions Chowk, Bharatpur Metropolitan City-10, Chitwan, Metropolitan City-14, Kalanki, Metropolitan City-03, Chitwan, Tel: +977-056-528121/533261/525155 Tel: +977-01-5234795/5234796 Tel: +977-056- 570341/570313/570442/570 543/570230/570913/570345/571953/57105 BOUDHA BRANCH KALIKASTHAN BRANCH 4/571452 Bouddha, Kathmandu Kalikasthan, Kathmandu Metropolitan City-06, Kathmandu, Metropolitan City-29, Kathmandu, NEW ROAD BRANCH Tel: +977-01-4916395 Tel: +977-01-4422554/4422555 Newroad, Kathmandu Metropolitian City-22, Kathmandu, BUDHANILKANTHA BRANCH KALIMATI BRANCH Tel: +977-01-4239470/4239471/4239472 Narayanthan Chowk, Budhanilkantha Salt Trading Corporation Ltd Kalimati, Municipality-03, Kathmandu, Kathmandu Metropolitan City-13, Kathmandu, PAKO BRANCH Tel: +977-01-4378275 Tel: +977-01-4278694/4278709 Pako, Kathmandu Metropolitian City-22, Kathmandu, CHABAHIL BRANCH KAMAL POKHARI BRANCH Tel: +977-01-4228380/4242302 Chabahil (Saraswati Nagar), Kathmandu Kamalpokhari, Kathmandu Metropolitan City-07, Kathmandu, Metropolitan City-1, Kathmandu, PANAUTI BRANCH Tel: +977-01-4822466/4822766 Tel: +977-01-4421652/4423219/4425343 Kushadevi Marga, Panauti Municipality-07, Kavre, GABAHAL BRANCH KHUSIBU BRANCH Tel: +977-011-440601/440602 Ratnakar Mahabihar, Lalitpur Kaldhara Chowk, Kathmandu Metropolitan City-16, Lalitpur, Metropolitan City-17, Kathmandu, PHARPING BRANCH Tel: +977-01-5005014/5005015/5005212 Tel: +977-01-4382950/4382952 Pharping, Dakshinkali Municipality-05, Kathmandu, GAUSHALA BRANCH LAGANKHEL BRANCH Tel: +977-01-4710865/4710943 Pingalasthan, Kathmandu Lagankhel Bus Park, Lalitpur Metropolitan City-08, Kathmandu, Metropolitan City-12, Lalitpur, Tel :+977-01-4113667/4113668 Tel: +977-01-5553480/5526178

226 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

PROVINCE NO.4 PROVINCE NO.5

PRITI BRANCH (GAUPALIKA) BAGAR BRANCH BHAIRAHAWA BRANCH Chyadalu Priti, Umakunda Bagar, Kaski Bank Road, Siddharthanagar Rural Municipality-04, Ramechhap, Pokhara Metropolitan City-01, Kaski Municipality-5, Rupandehi, Tel: +977-9748647183 Tel: +977-066-520129/520329 Tel: +977-071-520703/520373/520706

PUTALISADAK BRANCH BESISAHAR BRANCH BUTWAL BRANCH Putalisadak, Radhakuti Arcade, Kathmandu Jhyang Khola, Besisahar Milanchowk, Butwal Metropolitan City-29, Kathmandu, Municipality-08, Lamjung, Sub-Metropolitan City-09, Rupandehi, Tel: +977-01-4010595/4421662 Tel: +977-066-520129/520329 Tel: +977-071-551572/551573

SANEPA BRANCH DAMAULI BRANCH DHURKOT BRANCH (GAUPALIKA) Sanepa, Ringroad, Lalitpur Balmandir Marga, Neemchowk, Vyas Dhurkot, Dhurkot Metropolitan City-02, Lalitpur, Municipality-03, Tanahun, Rural Municipality-04, Gulmi, Tel: +977-01-5542897/5542898 Tel: +977-065-561800 Tel: +977-9741468011

SHANKHAMUL BRANCH DEURALI BRANCH (GAUPALIKA) KOHALPUR BRANCH Dibya Complex Shankhamul Chowk, Kathmandu Deurali Bazar, Rupa Newroad, Kohalpur Metropolitan City-10, Kathmandu, Rural Municipality-5, Kaski, Municipality-11, Banke, Tel: +977-01-4783996/4783073/4781182 Tel: +977-061-620845 Tel: +977-081-542064/542067

SITAPAILA BRANCH DUMRE BRANCH NARAINAPUR BRANCH (GAUPALIKA) Triratna Tamrakar Complex Sitapaila, Nagarjun Dumre Bazar, Bandipur Narainapur, Narainapur Municipality-04, Kathmandu, Rural Municipality-01, Tanahun, Rural Municipality-04, Banke, Tel: +977-01-4034996/4034997 Tel: +977-065-580355/580356 Tel: +977-081-695065

TANDI BRANCH POKHARA BRANCH NEPALGUNJ BRANCH Tandi, Ratnanagar Newroad, Pokhara Karkado, Nepalgunj Municipality-02, Chitwan, Metropolitan City-9, Kaski, Sub-Metropolitan City-18, Banke, Tel : +977-056-562993/562953 Tel: +977-061-537845 Tel: +977-081-522484/523636

TAUKHEL BRANCH SUNDAR BAZAR BRANCH NISDI BRANCH (GAUPALIKA) Taukhel Chowk, Godawari Tallo Bazar, Sundarbazar Dhunganabesi, Nisdi Municipality- 03, Lalitpur, Municipality-07, Lamjung, Rural Municipality-05, Palpa, Tel: +977-01-5560574/5560635 Tel: +977-066-402061/62 SUNWAL BRANCH TINKUNE BRANCH WALING BRANCH Sunwal, Sunwal Neupane Tower Tinkune, Kathmandu Pipal Bot, Waling Municipailty-1, Nawalparasi, Metropolitan City-35, Kathmandu, Municipality-08, Syangja, Tel: +977-078-570473 Tel: +977-01-4111554/4111854/4111929 Tel: +977-063-440119 TULSIPUR BRANCH Nga line, Tulsipur Sub-Metropolitan City-5, Dang, Tel: +977-082-523455

ANNUAL REPORT | 2017-18 227 STRATEGIC REPORT GOVERNANCE RISK REVIEW CORPORATE RESPONSIBILITY HUMAN RESOURCE

PROVINCE NO.6 PROVINCE NO.7 PROVINCE NO.1

B. P Koirala institute of Health and Science, BIRENDRANAGAR BRANCH CHAINPUR BRANCH DHARAN Hulak Line, Birendranagar Chainpur Bazar, Jayprithivi Municipality-06, Surkhet, Municipality-10, Bajhang, BHADRAPUR BRANCH Tel: +977-083-523825/523490 Tel: +977-092-421493/421494 BIRATCHOWK BRANCH

GUTHICHAUR BRANCH (GAUPALIKA) CHURE BRANCH (GAUPALIKA) BIRATNAGAR AIRPORT Jharjwala, Guthichaur Sahajpur, Chure BIRATNAGAR BHATBHATENI (Dharan Road) Rural Municipality-05, Jumla, Rural Municipality-3, Kailali, Tel: +977-9758005524 Tel: +977-9749162992 BIRATNAGAR BRANCH

BIRTAMODE BRANCH JUMLA BRANCH DADELDHURA BRANCH Khalanga Bazar, Chandannath Bagbazar, Amargadhi BUDHABARE BRANCH Municipality-05, Jumla, Municipality-05, Dadeldhura, Tel: +977-087-520596/520597 Tel: +977-096-420723/420724 DAMAK BRANCH DHANKUTA BRANCH SANIBHERI BRANCH (GAUPALIKA) DARCHULA BRANCH Simli, Sanibheri Khalanga Bazar, Mahakali DHARAN BRANCH Rural Municipality-09, Rukum (West), Municipality-04, Darchula, DUHABI BRANCH Tel: +977-081-694916 Tel: +977-093-420123/420223 GAIGHAT BRANCH DHANGADHI BRANCH HOTEL B&Y BIRTAMOD (Birtamod Buspark) Ratopul, Dhangadhi Sub-Metropolitian City-02, Kailali, HOTEL HARISSION (Banjara Chowk) Tel: +977-091-524850/522898/523897 ILLAM BRANCH

LAMKI BRANCH ITAHARI BRANCH Lamki Bazar, Lamki Chuha Municipality-01, Kailali, JHUMKA BRANCH Tel: +977-091-540548/540549 KAKARVITTA BRANCH

MAHENDRANAGAR BRANCH SURUNGA BRANCH Special Line (Main Market), Bhimdatta TERATHUM BRANCH Municipality-04, Kanchanpur, Tel: +977-099-520850/520898 UDAYPUR BRANCH

MARMA BRANCH (GAUPALIKA) Latinath, Marma PROVINCE NO.2 Rural Municipality-03, Darchula, Tel: + 977-9741428892 BARDIBAS BRANCH

BIRGUNJ BRANCH SUKHAD BRANCH Sukhad Bazar, Ghodaghodi CHANDRANIGAHPUR BRANCH Municipality-01, Kailali, Tel: +977-091-403012/403013 GAUR BRANCH JANAKPUR BRANCH TIKAPUR BRANCH Kanchhi Bazar, Tikapur LAHAN BRANCH Municipality-01, Kailali, LAHAN, PROVINCE OFFICE-2, Tel: +977-091- 560370/561012 Opposite to Army office Gate

MIRCHAIYA BRANCH

228 SUNRISE BANK LIMITED PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE

ATM LOCATIONS

RAJBIRAJ BRANCH -1 KHUSIBU BRANCH DAMAULI BRANCH

RAJBIRAJ BRANCH -2 LAGANKHEL BRANCH DANCING BOAT POKHARA

LAZIMPAT LOUNGE DUMRE BRANCH

PROVINCE NO.3 LUVU BRANCH POKHARA BRANCH

ATTARKHEL BRANCH MAHARAJGUNJ BRANCH POKHARA LAKESIDE LOUNGE

BALAJU CHOWK ATM MANAMAIJU BRANCH SUNDARBAZAR BRANCH

BANIYATAR BRANCH NARAYANGHAT -1 SUNWAL BRANCH

BATTISPUTALI LOUNGE NARAYANGHAT -2 WALING BRANCH

BHAISIPATI BRANCH NARSINGH CHOWK LOUNGE-1

BHAKTAPUR BRANCH NARSINGH CHOWK LOUNGE-2 PROVINCE NO.5

BHARATPUR - HAKIM CHOWK NEW BANESHWOR LOUNGE BHAIRAHAWA BRANCH

BOUDHA LOUNGE NEWROAD BRANCH BUTWAL BRANCH

BUDANILKANTHA BRANCH NEWROAD POOL KOHALPUR BRANCH

CENTRAL PARK (Central Park Apartment, PADMA COLONY NEPALGUNJ BRANCH Bishalnagar) PAKO NEWROAD TULSIPUR BRANCH CHABAHIL BRANCH PHARPING BRANCH CHIRAYU NATIONAL HOSPITAL (Basundhara) PUTALISADAK BRANCH PROVINCE NO.6 CITY VIEW APARTMENT (Sanepa) ROADHOUSE (Thamel) BIRENDRANGAR BRANCH CMC EXTENSION COUNTER (Bharatpur) ROSE VILLAGE APARTMENT (Balkot) JUMLA BRANCH CMC HOSTEL (Bharatpur) Sallaghari Complex, Sallaghari, Bhaktapur GABAHAL BRANCH SANEPA BRANCH PROVINCE NO.7 GAIRIDHARA -1 SANKHAMUL BRANCH CHAINPUR BRANCH GAIRIDHARA -2 SITAPAILA BRANCH DADELDHURA BRANCH GAIRIDHARA -3 SUNCITY APARTMENT (Gothatar) DARCHULA BRANCH GAIRIDHARA -4 TAUKHEL BRANCH DHANGADI BRANCH GAUSHALA BRANCH THAMEL LOUNGE LAMKI BRANCH GOTHATAR BRANCH TINKUNE BRANCH -1 MAHENDRANAGAR BRANCH HETAUDA BRANCH TINKUNE BRANCH -2 SUKHAD BRANCH HOTEL GARUDA LOUNGE (THAMEL) TIKAPUR BRANCH JAIN BHAWAN LOUNGE (KAMLAPOKHARI) PROVINCE NO.4 JYATHA BRANCH BAGAR BRANCH KALANKI BRANCH BANDIPUR ATM KALIKASTHAN BRANCH BARAHI CHOWK LAKESIDE POKHARA KALIMATI BRANCH BESISAHAR BRANCH KAMALPOKHARI BRANCH

ANNUAL REPORT | 2017-18 229 STRATEGIC REPORT AREAS OF ACTIVITIES

Budhanilkantha

Maharajgunj Baniyatar Attarkhel N MB Gairidhara Boudha Khusibu Chabahil Kathmandu Gaushala

Jyatha GOVERNANCE Kamal Pokhari Gothatar Putalisadak Manamaiju Kalikasthan Gongabu Sitapaila Tinkune Newroad Sankhamul Kalimati Sanepa Gabahal Bhaktapur Kalanki Lagankhel Darchula Bhainsepati Pharping Marma Luvu RISK REVIEW Dadeldhura Lalitpur Jumla Chainpur Taukhel Guthichaur Chure Mahendranagar Sukhad Gotikhel

Dhangadi Lamki Sanibheri Birendranagar Bagar Besisahar CORPORATE RESPONSIBILITY Pokhara Tikapur Sundarbazar Kohalpur Waling Damauli Nepalgunj Dumre Tulsipur Narainapur Nisdi Deurali Butwal Bharatpur Bamtibhandar Siddhicharan Dhurkot Bhairahawa Narayanghat Priti Tandi Gaighat Panauti Hetauda Terhathum Mahabharat Molung Maiwakhola Surunga Sunwal chandranigahapur Udayapur Dhankuta Bindabasini Bardibas Dharan Illam Barahapokhari HUMAN RESOURCE Jhumka Itahari Kakarvitta Birgunj Lahan Aurahi Mirchaiya Duhabi Buddhabare Biratchowk OUR NETWORKS Gaur Birtamod Durga Bhagwati Rajbiraj Janakpur Bhadrapur Branches ATMs Biratnagar 103 117 Damak PRODUCTS & SERVICES FINANCIAL STATEMENT INVESTOR'S RELATIONSHIP BANK'S PERFORMANCE ANNUAL REPORT | 2017-18

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