BOARD OF DIRECTORS - Lakshmi Vilas Bank 2005-06.pdf · of general insurance product and on mutual...

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BOARD OF DIRECTORS

SarvashreeR.M.NAYAK, CHAIRMAN & CHIEF EXECUTIVE OFFICERD.L.Suresh BabuK.B.KrishnanM.P.ShyamR.DhandapaniK.BalajiE.SreedharN.SaiprasadG.Sudhakara GuptaK.Ravindrakumar

SENIOR GENERAL MANAGERS.Rajagopal

GENERAL MANAGERSM.R.SubramanianR.SridharanNaganna PrabhakaranB.Murali Nair, CHIEF TECHNOLOGY OFFICER.

DEPUTY GENERAL MANAGERS

S.R.NarayanamurthyS.RavishankarJ.V.S.ChettyV.SekarN.Parameswara IyerS.Venkateswaran, COMPANY SECRETARY.

ASSISTANT GENERAL MANAGERSL.SadanandamY.JairajB.KalyanavenkataramanR.V.RamanS.ElangovanS.Suresh BabuT.B.SathyanarayananM.SethuramanRM.KumarappanN.DurairajanB.Ranjan BabuS.KannanH.S.Srinivasan

AUDITORSS.ViswanathanChartered Accountants, Chennai

N.B.Shetty & CoChartered Accountants, Mumbai

REGD. & ADMN. OFFICESalem Road, Kathaparai, Karur-639 006,Tamilnadu.Phone : 04324-220051(10 Lines)Fax : 04324-220068 & 220069Website : www.lvbank.comE.Mail : [email protected]

Registrar and Share Transfer AgentM/s.Integrated Enterprises (I) LimitedII Floor, �Kences Towers�,No.1, Ramakrishna Street,North Usman Road, T.Nagar,Chennai � 600 017.Phone : 044-28140801/2/3Fax : 28142479 / 28143378Email : [email protected]

CONTENTSNotice to the Members 02

Report of Directors 04

Report of Auditors 07

Balance Sheet 08

Profit & Loss A/c 09

Schedules 10

Cash flow Statement 19

Auditor�s certificate 20

Balance Sheet Abstract 20

Statement of Progress 25

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1. TO THE MEMBERS

Your Directors have great pleasure in presenting the Seventy NinthAnnual Report on the business and operations of your Bank togetherwith the Audited Accounts for the year ended 31st March, 2006.

2. FINANCIAL PERFORMANCE(Rs. in crores)

For the year ended

31st March 2006 31st March 2005

Deposits 4336.38 3495.93

Advances 2952.82 2317.71

Investments 1279.87 1180.86

Total Income 368.13 336.52

Operating profit 39.92 54.71

Provisions and contingencies 17.45 51.37

Net Profit 22.47 3.34

Your Bank registered appreciable growth in business volumes andprofit that compare favourably with the industry averages. TheBank attained total business turnover of Rs.7289.20 crores fromRs.5813.64 crores as on 31.03.2005, registering a growth rate of25.38%.

The total deposits grew from Rs.3495.93 crores in 2004-05 toRs.4336.38 crores recording a growth of 24.04 %. The total creditexpanded from Rs.2317.71 crores of the previous year to Rs.2952.82crores during the fiscal, an increase of 27.40 %. The priority sectorcredit increased from Rs.950.43 crores to Rs.1078.60 crores andAgri advances reached a level of Rs.429.64 crores from Rs.291.59crores in the previous year. The lendings under other targetedsegments showed good progress.

The total investments of the Bank stood at Rs.1279.87 crores asagainst Rs.1180.86 crores as at 31.03.2005. Your Bank followedprudent investment policy and employed risk mitigation techniquesto insulate the investment portfolio from the negative impact ofvolatile interest rates. Further, the Bank maintained IFR of 9.61%,well above the 5% level stipulated by the RBI.

3. PROFITDuring the year, your Bank posted a net profit of Rs.22.47 crores asagainst Rs.3.34 crores recorded in 2004-05, registering an increaseof 572.75%. As a result, the Return on Assets (ROA) improved from0.08% in 2004-05 to 0.53% as on 31.03.2006.

4. APPROPRIATION(Rs. in Crores)

For the year ended

Particulars 31st March 2006 31st March 2005

Net Profit 22.47 3.34

Profit brought forward 0.22 0.22

Amount available for appropriation 22.69 3.56

Transfer to:

Statutory Reserve 10.00 0.85

Capital Reserve 1.00 2.49

Investment Fluctuation Reserves 4.75 0.00

Other Reserve 1.00 0.00

Proposed Dividend 4.88 0.00

Corporate Dividend Tax 0.68 0.00

Balance of Profit Carried forward 0.37 0.22

DIRECTORS� REPORT

As appropriated above Rs.16.75 crores have been transferred toReserves to strengthen the Net worth of the Bank.

5. DIVIDENDYour Directors are pleased to recommend a dividend of 25% for theyear 2005-06 on the enhanced equity capital. The total amount ofdividend proposed to be distributed is Rs.5.56 Crores (includingdividend distribution tax).

6. EPS/BOOK VALUEThe Earnings Per Share and the Book Value of the share stood atRs.11.50 and Rs.149 respectively as at 31.03.06.

7. NET OWNED FUNDS / CAPITAL ADEQUACY RATIOYour Bank has raised Rs.30 crores by way of Unsecured, Redeemable,Non-convertible Subordinated bonds � Series IV A allotted on31.03.2005 and IV B allotted on 31.05.2005 for Rs.19 crores & Rs.11crores respectively, rated �A� by the rating agency, CARE.

During the financial year 2005-06, your Bank came out with therights issue of equity shares to strengthen Tier I capital which evokedvery good response from the shareholders in keeping with theirdeep patronage. The directors of the Bank thank the shareholdersfor the strong support. 9379 partly paid up equity shares have beenforfeited on which allotment money was not paid.

Consequent to Rights Issue and transfer of Rs.16.75 crores as givenin appropriation account to Reserves, the net worth of your Bankhas increased from Rs.229.98 Crores to Rs.291.05 crores.

As on 31st March, 2006 your Bank�s Capital Adequacy Ratio (CAR)stood at 10.79%, well above the regulatory minimum of 9.00 %stipulated by RBI. The Tier-I and Tier II components of CapitalAdequacy Ratio were 6.94% and 3.85% respectively.

As the management is of the opinion that Contingency Reserve ofRs.3.87 crore, Building Reserve of Rs.4.48 crore and DevelopmentReserve of Rs.14.86 crore totaling Rs.23.21 crore are not requiredto marked items, they are transferred to Statutory Reserve tostrengthen Tier- I capital of the Bank.

The Board has considered rewarding the existing shareholders withthe issue of Bonus shares in the ratio of 1:2 (one share for everytwo shares) by capitalizing the share premium account which isplaced before the shareholders for approval.

The Board has further proposed to enhance the Share Capital ofthe Bank by way of issue of Equity Shares to the existing shareholderson Rights basis at the rate of one equity share for every equityshare held, excluding the proposed bonus.

8. NON PERFORMING ASSETSThe Bank identified NPA management as a thrust area and, duringthe year, galvanized recovery activities at all levels of theorganization for bringing about marked reduction in the level ofNPA. The results were truly gratifying.

The gross NPA was reduced to Rs.124.76 crores from the levels ofRs.187.44 crores in the previous year. In percentage terms, thegross NPA stood at 4.14% as aginst 7.88 % in the previous year. Thenet NPA came down to Rs.55.59 crores in 2005-06 compared toRs.115.05 crores in the previous year. The percentage of net NPAsfell steeply to 1.89% from a high 4.98 % of the previous year.

9. BRANCH NETWORKDuring the year, the Bank has opened two new branches, one atGhatkopar East in Maharastra and another at Kondalampatti (Salem)in Tamilnadu. As on 31.03.2006, the Bank has 227 branches includingfive satellite offices spread across 10 states and one Union Territory.

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The Bank has plans to open twenty more branches in 2006-07 ofwhich five branches at Noida (U.P), T.Nagar (Chennai), Velacherry(Chennai) Karimnagar (Andhra) and Gurgaon (Haryana) have beenopened.

10. RATINGS / RECOGNITIONThe premier credit rating agency of the country CARE has accorded�A� rating to the Bank�s Tier II subordinated bonds.

For achieving operational efficiency, the Bank has put in place acomprehensive Integrated Risk Management System, benchmarkingits practices with the best in the industry. Appreciating theinitiatives taken by the Bank in the area of Risk Management, theRBI has nominated the Bank as a member of the Steering Committeeon Basel II.

11. INTERNATIONAL BUSINESSDuring the year, the Bank achieved foreign exchange businessturnover of Rs.1522.92 crores as against Rs.1421.65 crores duringthe previous year registering a growth of 7.12 %. Lending to exportsector increased from Rs.120.17 crores to Rs.120.45 crores.

12. PARA BANKING / CROSS SALESBank has a bancassurance arrangement with M/s AVIVA Life Insurancefor sale of life insurance products through our branches. Duringthe year 2005-06, around 3000 proposals were procured by branchesfor an insurance coverage of over Rs.66.47 crores involving a grossinsurance premium of around Rs.18.04 crores. Bank received acommission income of Rs.117.04 lacs. Bank had a bancassurancepact with Royal Sundaram Alliance Insurance Co. Ltd for distributionof general insurance product and on mutual agreement, the tie-upwas cancelled.

Bank has distribution arrangement with leading Asset ManagementCompanies like Reliance, Franklin Templeton, SBI, HDFC, Pru-ICICI,Kotak, Sundaram, Chola, UTI, Tata, etc., for making available MutualFund products to the Bank�s customers. Through this arrangement,Bank mobilized around Rs.98.00 crores and earned a commissionincome of Rs.31.08 lacs in the FY 2005-06.

13. SEGMENT REPORTINGThe overall performance of the Bank in major business andoperational segments has been satisfactory.TREASURY OPERATIONSWith clear focus on operational efficiency, treasury operations wereclosely monitored. During the year ended 31.03.2006, the Bankhas earned a total revenue of Rs.89.91 crores with a net result ofRs.11.76 crores (previous year loss of Rs.26.58 crores)

EXPOSURE TO SENSITIVE SECTORThe Bank�s exposures to sensitive sectors including Real Estate andCapital Market were maintained well within the limits of regulatory/Board prescription.

RISKS AND CONCERNS

Taking a comprehensive and holistic view of the complexities andcontours of the business profile of the Bank and the relativeregulatory prescriptions, Bank has initiated pro-active steps forbringing about further improvement in risk management across theOrganization.

Bank has constituted Integrated Risk Management Committees atthe Board and at the Top Management levels for supervising variousrisk management initiatives in the Bank. The Integrated RiskManagement Policy formulated by the Bank enshrines policyframework for management of various types of business andoperational risks for meeting the dynamic challenges in the externaland internal environments in which the Bank operates and formeeting the regulatory compliances in this regard.

The Bank is fully geared to implement the Basel II norms on CapitalAdequacy.

INTERNEL CONTROL SYSTEMS

The Bank has put in place well articulated internal control measuresin tune with the complexity of business operations, organizationsize and supervisory compliance standards. The system of regularinspection, credit inspection, concurrent audit, etc., form theintegral part of the internal control mechanism. As per RBIguidelines, the Bank has introduced Risk Based Internal Audit Systemin 100 Branches. Computerized operations have been subject toSystems/IS Audit. The Audit Committee of the Board is supervisingthe internal audit and compliance function.

14. HUMAN RESOURCESAs on 31st March 2006, the total number of employees of the Bankstood at 1873. The employee productivity measured in terms ofBusiness per employee, increased to Rs.371 lacs from Rs.296 lacsin the previous year. Focusing on training its employees on acontinuous basis, training programs are being conducted by theBank continuously, with internal and external faculty. The Bank�sown Staff Training College was shifted to a more spacious premises,well equipped with technology aided training facility. Industrialrelationship in the Bank has remained cordial.

15. SOCIETAL INITIATIVESBank is running a medical centre at Vengamedu, Karur since 1994catering the medical requirements of needy people under aegis ofKarur Rotary Club.

16. CORPORATE GOVERNANCEThe basic philosophy of Corporate Governance of the Bank hascontinued to base on high standard of ethical values with a view toenhancing and protecting the interest of all the stakeholders. TheBank has fully complied with the code of corporate governance asenumerated in Clause 49 of the Listing Agreement. All the Directorson the Board have executed deed of covenant and undertakingindividually in line with the recommendations of Dr.GangulyCommittee Report.Pursuant to Clause 49 of the Listing Agreement, a ManagementDiscussion and Analysis is presented in Annexure-A, Report on BoardCommittees is furnished in Annexure-B. Composition of the Boardof Directors together with the attendance of Directors at variousmeetings of the Board, its Committees and Annual General Meetingand the number of directorships held by them along with the detailsof Audit Committee and Share Transfer & Investors� GrievancesCommittee are furnished in Annexure-C. General Shareholders�information is furnished in Annexure-D.

17. BOARD OF DIRECTORSMr.N.Malayalaramamirtham and Mr.S.G.Prabhakharan resigned fromthe Board on 20th March, 2006 in compliance of Sec 10 A(2-A) (i) ofBanking Regulation Act, 1949 and Mr.V.Umasankar resigned on 20th

March, 2006 from the Board on personal grounds.

The Directors place on record their appreciation of the valuableservices rendered by Mr.N.Malayalaramamirtham,Mr.S.G.Prabhakharan and Mr.V.Umasankar during their tenure.

Mr.E.Sreedhar was appointed as additional Director on the Boardwith effect from 31st January 2006 pursuant to Section 260 of theCompanies Act, 1956.

Mr.N.Saiprasad, Mr.K.Ravindrakumar and Mr.G.Sudhakara Guptawere appointed as additional Directors on the Board with effectfrom 20th March 2006 pursuant to Section 260 of the CompaniesAct, 1956.

Mr. K.B.Krishnan, Director is due to retire by rotation at the ensuingAnnual General Meeting and being eligible, offers himself forreappointment.

Mr. R.Dhandapani, Director is due to retire by rotation at the ensuing

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Annual General Meeting and being eligible, offers himself forreappointment.

18. DIRECTORS� RESPONSIBILITY STATEMENTAll the Directors on the Board of your Bank confirm that in thepreparation of the annual accounts for the year ended March 31,2006

● the applicable accounting standards have been followedalong with proper explanation relating to materialdepartures, if any;

● the accounting policies framed in accordance with theguidelines of the Reserve Bank of India, were appliedconsistently;

● reasonable and prudent judgment and estimates were madewherever required so as to present a true and fair view ofthe state of affairs of the Bank as at the end of the financialyear and the profit of the Bank for the year ended on March31, 2006;

● proper and sufficient care was taken for the maintenanceof adequate accounting records in accordance with theprovisions of applicable laws governing banks in India ; and

● accounts have been prepared on a �going concern� basis.

19. STATUTORY DISCLOSURE1. The provisions of Section 217(1)(e) of the Companies Act, 1956

relating to conservation of energy and technology absorptiondo not apply to your Bank. The Bank has, however, usedInformation Technology extensively in its operations.

2. The Bank continued to encourage the country�s exports andaccordingly endeavored to enlarge its export financing.

3. None of the Bank�s employees fall within the purview of section217(2A) of the Companies Act, 1956 except Mr.R.M.Nayak, whojoined the Bank as Chairman and CEO on 20th June, 2005. Detailsof his salary are furnished in the Notes on Accounts. He is notrelated to any of the Directors of the Bank.

20. OTHER HIGHLIGHTSBRAND INITIATIVES

The Bank has taken great strides in reaching out to the varioussegments of the society through its innovative products deliveredthrough multiple channels woven around branches in differentgeographies. Without compromising on the traditional values thatare ingrained in its systems, the Bank has constantly endeavoredto reorient its business policies for maintaining high standards ofservice and for meeting the changing demands of its ever growingcustomer base.

With an objective of making a true projection of Bank�s philosophyof �wealth to customers�, the Bank rolled out �Brand enhancementinitiatives�. The new logo makes a classic representation of a modernBank standing on the foundation of age-old trusted values, extendingprosperity to all its stake holders. The roll out is being implementedin phased manner.

TECHNOLOGY ROLLOUT

Bank has been endeavoring to leverage technology in its operations.Towards this end, several software utilities are being developedin-house and provided to branches to enhance the operationalefficiency.

In furtherance of its objective of enhancing the customerconvenience and in pursuit of excellence in service, during theyear, the Bank signed a historic MoU with M/s I-flex Solutions andM/s Wipro Infotech for providing Core Banking Solutions and System

Integration, respectively. The process of implementing a CentralizedCore Banking Solution covering all branches of the Bank is beingundertaken in a phased manner with 60 branches expected to becompleted in 2006-07.

TIE-UPS

The Bank has recently expanded insurance marketing in Maharastra,Gujarat and Karnataka. Plans to distribute personal non-life productssuch as Health Insurance, Accident Insurance, Household Insuranceetc., in the near future are under active consideration. Plans arealso in the anvil for having distribution arrangements with othermarket leaders in the Mutual Fund industry. It is envisaged thatexpanded activities in insurance (both life and non-life) and MFsegments will enable the Bank to achieve quantum increase in otherincome.

CORPORATE GOAL

Encouraged by the strong performance during 2005-06, your Bankhas envisaged to achieve business turnover of Rs.10,000 crores,comprising deposits of Rs.5800 crores and advances of Rs.4200 croresfor the year ending 31.03.2007.

21. MISSION

Over the last many decades, the Bank has built a rewarding andlong lasting relationship with its millions of customers through trust,avowed values and a commitment for high service standards.Without compromising on the traditional values and transparencyin operations, the Bank is endeavoring to meet all the financialrequirements of its customers under one roof. The value basedtradition, adherence to best practices, speedy induction of state-of-the art technology and good corporate governance have beenthe core strengths of the Bank.

The mission of the Bank is to play an integral role in the growth andprosperity of its customers by providing them with high standardservices and innovative products through state-of-the arttechnology.

22. AUDITORS

The statutory audit of the Bank was carried out by M/s.S.Viswanathan, Chartered Accountants, Chennai and M/s. N.B.Shetty & Co, Chartered Accountants, Mumbai whose report isattached to the Annual Report. The Statutory Central and BranchAuditors audited all the branches and other offices of the Bank.

M/s. S.Viswanathan, Chartered Accountants, Chennai and M/s. N.B.Shetty & Co., Chartered Accountants, Mumbai, are eligible toundertake the audit for the current year as well, and have offeredthemselves for re-appointment for another year. Considering theirprofessionalism and the quality of the audit carried out by them,the Board has recommended their re-appointment for another year.

23. ACKNOWLEDGEMENT

Your Directors would like to place on record their profound gratitudefor the committed support received from the share holders,customers and other stake holders of the Bank. Board also gratefullyacknowledges the guidance and co-operation received from theReserve Bank of India and other government and regulatoryauthorities like SEBI, NSE etc.

Your Directors would like to take this opportunity to express theirappreciation of the contribution of the dedicated team of employeesand their sincere efforts in organization building.

For and on behalf of the Board of DirectorsPlace : KARUR R.M. NAYAKDate : 06th July, 2006 Chairman & CEO

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1) We have audited the attached Balance Sheet of THE LAKSHMIVILAS BANK LIMITED, KARUR as at 31st March 2006, theannexed Profit and Loss Account and also the Cash FlowStatement for the year ended on that date in which areincorporated the returns of 41 Branches, 7 Divisional Offices,5 Service Branches and 3 other offices audited by us and180 Branches, 1 Divisional Office and 1 Service Branchaudited by Branch auditors appointed u/s. 228(4) of theCompanies Act, 1956. There are no unaudited branches orother offices. These financial statements are theresponsibility of the Bank�s management. Our responsibilityis to express our opinion on these financial statements basedon our audit.

2) We conducted our audit in accordance with auditingstandards generally accepted in India. Those standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financial statementsare free of material misstatements. An audit includesexamining on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used andsignificant estimates made by management, as well asevaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for ouropinion.

3) The Balance Sheet and the Profit & Loss account have beendrawn up in accordance with the provisions of Section 29 ofBanking Regulation Act, 1949 read with Section 211 of theCompanies Act, 1956.

4) The reports on the accounts of the branches audited byBranch Auditors have been dealt with in preparing our reportin the manner considered necessary by us.

5) We have obtained all the information and explanationswhich, to the best of our knowledge and belief werenecessary for the purposes of our audit and have found themto be satisfactory.

6) The transactions of the Bank, which have come to our notice,have been within the powers of the Bank.

M/S. N.B. SHETTY M/S. S. VISWANATHANCHARTERED ACCOUNTANTS CHARTERED ACCOUNTANTSMUMBAI CHENNAI 600 004

REPORT OF AUDITORS TO THE MEMBERSOF

THE LAKSHMI VILAS BANK LIMITED, KARUR

7) In our opinion, proper books of accounts as required by lawhave been kept by the Bank so far as appears from ourexamination of those books and proper returns adequate forthe purpose of our audit have been received from thebranches of the Bank.

8) The Bank�s Balance Sheet and Profit and Loss Account dealtwith by this report are in agreement with the books ofaccount and audited returns from the branches of the Bank.

9) In our opinion, the Balance Sheet and Profit and Loss Accountdealt with by this report comply with the AccountingStandards referred to in sub-section (3C) of the Section 211of the Companies Act, 1956.

10) On the basis of written representations received from theDirectors and taken on record by the Board of Directors, wereport that none of the directors is disqualified as on 31st

March 2006 from being appointed as a Director in terms ofclause (g) of sub-section (1) of Section 274 of the CompaniesAct, 1956.

11) Subject to Note no. 1(b) of Schedule 17 to the accountsregarding the effect of adjustments arising in tallying ofbalances in the accounts as per General Ledger with thoseof subsidiary ledgers, the quantum of which is notascertained, in our opinion and to the best of our informationand according to the explanations given to us, the saidaccounts together with notes thereon, give the informationrequired by the Companies Act, 1956 in the manner sorequired for Banking Companies and on such basis:

(i) The said Balance Sheet gives a true and fair view of theState of Affairs of the Bank as at 31st March 2006;

(ii) The Profit & Loss Account shows true balance of Profit forthe year ended on that date; and

(iii) The Cash Flow Statement gives a true and fair view of thecash flows for the year ended on that date.

and are in conformity with the Accounting Principles generallyaccepted in India.

for N.B. Shetty for M/s. S. ViswanathanChartered Accountants Chartered Accountants

N.B. Shetty Chella K. RaghavendranPartner Partner

Membership No:16718 Membership No: 208562

Place: KarurDate: 15th May 2006

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(Rs. in 000s)I. CAPITAL & LIABILITIES SCHEDULE AS AT AS AT

31/03/2006 31/03/2005

a. Capital 1 195346 115089

b. Reserves & Surplus 2 2715190 2184783

c. Deposits 3 43363800 34959251

d. Borrowings 4 52998 689437

e. Other Liabilities & Provisions 5 2866474 2585258

T O T A L . . . 49193808 40533818

II. ASSETS

a. Cash & Balances with Reserve Bankof India 6 2001103 2587780

b. Balances with Banks and Money atCall & Short Notice 7 2632897 954597

c. Investments 8 12798668 11808614

d. Advances 9 29528197 23177114

e. Fixed Assets 10 324658 341079

f. Other Assets 11 1908285 1664634

T O T A L . . . 49193808 40533818

Contingent Liabilities 12 9660403 8450419

Bills for collection 1788513 1328269

Significant Accounting Policiesand Notes on Accounts 17

Schedules 1 to 12 and 17 form part of this Balance Sheet.

BALANCE SHEET AS ON 31st MARCH 2006

R. SridharanGeneral Manager

M.R. SubramanianGeneral Manager

S. RajagopalSr. General Manager

R.M. NayakChairman & CEO

Karur15th May 2006

As per our report of date annexedfor M/s. S. ViswanathanChartered Accountants

Chella K. RaghavendranPartner

Membership No:208562

for M/s. N.B. Shetty & CoChartered Accountants

N.B. ShettyPartner

Membership No: 16718

DIRECTORS

D.L.Suresh BabuK.B.KrishnanM.P.Shyam

R.DhandapaniK.Balaji

E.SreedharN.Saiprasad

G.Sudhakara GuptaK.Ravindrakumar

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PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH 2006(Rs. in 000s)

I. INCOME SCHEDULE YEAR ENDED YEAR ENDED31/03/2006 31/03/2005

a. Interest Earned 13 3220564 2982042

b. Other Income 14 460708 383200

T O T A L . . . 3681272 3365242

II. EXPENDITURE

a. Interest Expended 15 2165640 1915357

b. Operating Expenses 16 1116463 902788

c. Provisions & Contingencies 174467 513653

T O T A L . . . 3456570 3331798

III. NET PROFIT FOR THE YEAR 224702 33444

Profit brought forward 2197 2197

T O T A L . . . 226899 35641

IV. APPROPRIATIONS

a. Transfer to Statutory Reserve 100000 8500

b. Transfer to Capital Reserve 10000 24944

c. Transfer to Investment Fluctuation Reserve 47500 0

d. Transfer to Other Reserves 10000 0

e. Proposed Dividend 48836 0

f. Tax on Proposed Dividend 6849 0

g. Balance carried over to Balance Sheet 3714 2197

T O T A L . . . 226899 35641

Earnings Per Share - Basic (Rs.) [Refer Note 7] 11.50 2.91

Schedules 13 to 16 and 17 form part of this Profit & Loss Account

R. SridharanGeneral Manager

M.R. SubramanianGeneral Manager

S. RajagopalSr. General Manager

R.M. NayakChairman & CEO

As per our report of date annexedfor M/s. S. ViswanathanChartered Accountants

Chella K. RaghavendranPartner

Membership No:208562

for M/s. N.B. Shetty & CoChartered Accountants

N.B. ShettyPartner

Membership No: 16718

DIRECTORS

D.L.Suresh BabuK.B.KrishnanM.P.Shyam

R.DhandapaniK.Balaji

E.SreedharN.Saiprasad

G.Sudhakara GuptaK.Ravindrakumar

Karur15th May 2006

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SCHEDULE 1 - CAPITAL(Rs. in 000s)

AS AT AS AT31/03/2006 31/03/2005

AUTHORISED CAPITAL(10,00,00,000 equity shares of Rs.10/- each) 1000000 200000

ISSUED CAPITAL(1,96,80,953 equity shares of Rs.10/- each) 196810 115771

Subscribed, Called-up and Paid Up Capital 195346 115089(1,95,34,569* equity shares of Rs.10/- each)(*Excludes 9379 equity shares of Rs.10/- each allotted in therights issue - 2005, on which Rs.5/- paid forfeited fornon-payment of allotment money due thereon.* includes 2887563 equity shares of Rs. 10/- each issued T O T A L . . . 195346 115089by way of Bonus Shares as fully paid)

(Rs. in 000s)AS AT AS AT

31/03/2006 31/03/2005

I. STATUTORY RESERVE

Opening Balance 1211972 1203472Additions during the year 342159 8500

1554131 1211972II. CAPITAL RESERVE


178347 168347III. SHARE PREMIUM


505537 144194IV. REVENUE & OTHER RESERVESA. INVESTMENT FLUCTUATION RESERVE


407415 359915B. OTHER RESERVES


308205 298158Deductions during the year 242159 0

66046 298158

V. BALANCE IN PROFIT & LOSS ACCOUNT 3714 2197

T O T A L . . . 2715190 2184783


31/03/2006 31/03/2005A. I. DEMAND DEPOSITS

1. From Banks 18227 332122. From Others 4512617 4236750

4530844 4269962II. SAVINGS BANK DEPOSITS 5478580 4685595III. TERM DEPOSITS

1. From Banks 3914828 15946012. From Others 29439548 24409093

33354376 26003694

T O T A L (I + II + III) 43363800 34959251

B (I). DEPOSITS OF BRANCHES IN INDIA 43363800 34959251(II). DEPOSITS OF BRANCHES OUTSIDE INDIA NIL NIL

T O T A L . . . 43363800 34959251

SCHEDULE 3 - DEPOSITS

SCHEDULE 2 - RESERVES & SURPLUS

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SCHEDULE 4 - BORROWINGS(Rs. in 000s)

AS AT AS AT31/03/2006 31/03/2005

I. BORROWINGS IN INDIA1. Reserve Bank of India 0 02. Other Banks 0 03. Other Institutions & Agencies 52998 284137

52998 284137

II. BORROWINGS OUTSIDE INDIA 0 405300

T O T A L . . . (I + II) 52998 689437SECURED BORROWINGSINCLUDED IN I & II ABOVE 0 0


31/03/2006 31/03/2005

I. Bills payable 764125 567098

II. Inter-office adjustments (net) 96556 183255

III. Interest accrued 213409 157616

IV. Unsecured Sub-ordinated Debts 1008000 1098000

V. Deferred Tax Liability (net) 0 0

VI.(i) Others - (including Provisions) 681384 523789

(ii) Contingent Provisions against Standard Assets 103000 55500

(iii) Provision for recognition of loan impairment on 0 090 days norms

T O T A L . . . 2866474 2585258


31/03/2006 31/03/2005

Cash in Hand (including foreign Currency Notes) 446907 420532

Balances with Reserve Bank of Indiai) in current account 1554196 2167248ii) in other accounts 0 0

T O T A L . . . 2001103 2587780


31/03/2006 31/03/2005I. IN INDIA

[i] Balance with Banks

a. in current accounts 288715 171873

b. in other deposit accounts 2219000 625000

2507715 796873[ii] Money at call and short notice

a. with banks 0 0

b. with other institutions 0 0

T O T A L . . . (i + ii) 2507715 796873

II. OUTSIDE INDIA IN CURRENT ACCOUNTS 125182 157724

T O T A L . . . (I + II) 2632897 954597

SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS

SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA

SCHEDULE 7 - BALANCES WITH BANKS & MONEY AT CALL AND SHORT NOTICE

12

SCHEDULE 8 - INVESTMENTS


31/03/2006 31/03/2005

I. INVESTMENTS IN INDIA IN

I. Government Securities [incl. 11676901 10704248treasury bills & zero coupon bonds]

II. Other approved securities 168851 168851

III. Shares 35861 39185

IV. Debentures & Bonds 394048 450890

V. Subsidiaries and Joint Ventures 0 0

VI Others [including Commercial 523007 445440Paper, Mutual Funds, NSC,Units, etc.]

T O T A L . . . 12798668 11808614

GROSS INVESTMENTS IN INDIA 13168566 12228512

LESS : DEPRECIATION 369898 419898

NET INVESTMENTS IN INDIA 12798668 11808614

II. INVESTMENTS OUTSIDE INDIA NIL NIL

T O T A L . . . 12798668 11808614

SCHEDULE 9 - ADVANCES


31/03/2006 31/03/2005

A. I. Bills purchased & discounted 1941615 2095930

II. Cash credits, overdrafts & loans 13632447 12203687 repayable on demand

III. Term loans 13954135 8877497

T O T A L . . . 29528197 23177114

B. PARTICULARS OF ADVANCES

I. Secured by tangible assets 26511272 20656064 [incl. advances against Book Debts]

II. Covered by Bank / Govt. Guarantees 374579 609956

III. Unsecured 2642346 1911094

T O T A L . . . 29528197 23177114

C. SECTORAL CLASSIFICATIONOF ADVANCES

I. Priority Sector 10786012 9504300

II. Public Sector 969463 1495540

III. Banks 49356 97786

IV. Others 17723366 12079488

T O T A L . . . 29528197 23177114

13

SCHEDULE 10 - FIXED ASSETS(Rs. in 000s)

AS AT AS AT31/03/2006 31/03/2005

I. PREMISESAt Cost 228913 213080Additions during the year 9815 15837


238728 228917Depreciation to date 69476 61873

169252 167044II. OTHER FIXED ASSETS (INCLUDING

FURNITURE & FIXTURES)At Cost 562076 489216Additions during the year 38694 73671



148918 167547III. ASSETS ON LEASE

At Cost 130975 130975Additions during the year 0 0



21398 21398Lease adjustment account 14910 14910

6488 6488

T O T A L . . . 324658 341079


31/03/2006 31/03/2005I. Inter-Office Adjustments (Net) 0 0II. Interest Accrued 242871 266565III. Tax Paid in Advance and Tax 966085 874594

Deducted at SourceIV. Deferred Tax Asset (NET) 373393 318908V. Stationery & Stamps 7137 6776VI. Non Banking Assets acquired in satisfaction of claims 17840 17840VII. Others 300959 179951

T O T A L . . . 1908285 1664634


31/03/2006 31/03/2005I. Claims against the Bank not 730918 655994

acknowledged as debtsII. Liability for partly paid Investments 0 0III. Liability on account of outstanding 6278914 5224584

forward exchange contractsIV. Guarantees given on behalf of constituents - in India 965712 1011295

- outside India 264 230V. Acceptances, Endorsements & other obligations 1684595 1556466VI. Other items for which the Bank is 0 1850

contingently liable

T O T A L . . . 9660403 8450419

SCHEDULE 11 - OTHER ASSETS

SCHEDULE 12 - CONTINGENT LIABILITIES

14

SCHEDULE 13 - INTEREST EARNED(Rs. in 000s)

AS AT AS AT31/03/2006 31/03/2005

I Interest / discount on advances / bills 2166688 1868532II. Income on Investments 953351 1075483III. Interest on balance with Reserve Bank of India & 100305 32607

other inter-bank FundsIV. Others 220 5420

T O T A L . . . 3220564 2982042


31/03/2006 31/03/2005

I. Commission, Exchange and Brokerage 311935 288285II. Profit on sale of Investments 51372 49808

Less: Loss on sale of Investments 158350 124510

-106978 -74702III. Profit on sale of land, Buildings & Other Assets 0 851

Less: Loss on sale of land, Buildings & Other Assets 665 634

-665 217IV. Profit on Exchange Transactions 45611 50568

Less: Loss on Exchange Transactions 0 0

45611 50568V. Income earned by way of Dividends 7106 34363

from Companies in India.VI. Lease Rentals 0 0VII. Miscellaneous Income 203699 84469

T O T A L . . . 460708 383200


31/03/2006 31/03/2005

I. Interest on Deposits 2068207 1803527II. Interest on Reserve Bank of India / 5079 18253

Inter-Bank BorrowingsIII. Others 92354 93577

T O T A L . . . 2165640 1915357


31/03/2006 31/03/2005

I. Payments to and Provision for Employees 597011 471664II. Rent, Taxes & Lighting 77304 73407III. Printing & Stationery 15039 12252IV. Advertisement & Publicity 7230 8033V. Depreciation on Bank�s Property 63384 60751VI. Director�s fees, allowances 2025 1685VII. Auditors� fees & Expenses (incl. Branch Auditors) 1736 1698VIII. Law Charges 3386 6721IX. Postage, Telegrams, Telephones, etc., 28526 26522X. Repairs & Maintenance 4828 4077XI. Insurance 35921 28034XII. Other Expenditure 280073 207944

T O T A L . . . 1116463 902788

SCHEDULE 14 - OTHER INCOME

SCHEDULE 15 - INTEREST EXPENDED

SCHEDULE 16 - OPERATING EXPENSES

15

1. GeneralThe financial statements have been prepared in accordance with the historicalcost convention except where otherwise stated and conform to the statutoryprovisions and practices prevailing within the banking industry in India andthe guidelines / instructions of Reserve Bank of India issued from time totime.

2. Foreign Exchange Transactions(a) Foreign Currency Assets and Liabilities have been translated at the

exchange rates prevailing at the close of the year as per the guidelinesissued by FEDAI. The resultant profit or loss is accounted for.

(b) Income and Expenditure in foreign currency are translated at theexchange rates prevailing on the date of the respective transaction.

3. InvestmentsInvestments are categorised under the heads �Held to Maturity�, �Availablefor Sale� and �Held for Trading� and are valued in aggregate for each category,in accordance with the guidelines of the Reserve Bank of India.

4. Advances4.1 In accordance with the prudential norms issued by RBI:(i) Advances are classified into standard, sub-standard, doubtful and loss

assets borrower-wise;(ii) Provisions are made for loan losses, and(iii) General provision for standard advances is made.

4.2 Advances disclosed are net of provisions made for non-performing assets.

5. Fixed Assets(a) Fixed Assets have been accounted for at their historical cost.(b) Depreciation on assets other than computers has been provided for on

the diminishing balance method at the rates specified in Schedule XIVto the Companies Act, 1956.

(c) Depreciation on computers has been provided for on straight-line methodat the rate of 33.33 per cent as per the guidelines issued by the ReserveBank of India.

(d) Operating Software, which is an integral part of hardware, is capitalizedand depreciation is provided for at the rate of 33.33% on straight-linemethod.

(e) For premises, in which land cost and construction cost could not beascertained separately, depreciation is provided for on the total cost.

(f) None of the fixed assets have been revalued during the year.

6. Staff BenefitsAnnual contribution to the approved Employees� Gratuity Fund, approvedPension Fund and provision for Leave Encashment have been made on actuarialbasis. Contribution to Provident Fund is accounted for on actual basis.

7. Taxes on IncomeProvision for taxation is made on the basis of the estimated tax liability withadjustment for deferred tax in terms of the Accounting Standard 22(Accounting for Taxes on Income) formulated by the Institute of CharteredAccountants of India.

8. Recognition of Income and Expenditure(a) Income and expenditure are accounted for on accrual basis.(b) The following items of income are recognized on realization basis, owing

to the significant uncertainty in collection thereof:(i) Interest on non-performing advances, including overdue bills and

dividend income on investments.(ii) Interest on non-performing investments.

(c) Interest on over-due/matured deposits is accounted for at the time ofrenewal.

9. Net profitThe net profit as per the Profit & Loss account is arrived at after necessaryprovisions towards �

1. Taxation.2. Advances and other assets.3. Shortfall in the value of investments4. Retirement benefits.

All provisions have been made as per Reserve Bank of India guidelines and tothe satisfaction of the auditors.

SCHEDULE 17A. Significant Accounting Policies

10. Accounting StandardsAccounting Standards as specified in section 211(3C) of the Companies Act1956, to the extent they are applicable to Banking Companies and as perdirections issued by the RBI from time to time, have been followed.

B. NOTES ON ACCOUNTS1.(a) Reconciliation of inter branch transactions is completed up to

31.12.2005.(b) In a few branches, tallying of the balances in the accounts as per

General Ledger with those of subsidiary ledgers/registers/schedules isin progress. The effect of this on the profit of the Bank is notascertainable.

2. �Payment to and Provision for Employees� includes remuneration paidto Chairman and Chief Executive Officer of the Bank as detailed below:

(Amount in Rs.)

Sri. R.M.Nayak(20.6.05 to31.3.06) 2005-2006 2004-2005Consolidated Pay 18,73,333.33 -Employers� contribution to Provident Fund 70,250.00 -Leave encashment -Gratuity -Monetary value of perquisites # 24,629.00 -Sub total (A) 19,68,212.33 -Sri.A.Krishnamoorthy(1.4.05 to 15.4.05)Consolidated Pay 55000.00 12,73,548Employers� contribution to Provident Fund 5500.00 1,27,355Gratuity -Monetary value of perquisites # - 27954Sub total(B) 60500.00 1428857Total (A+B) 2028712.33 1428857

# (at cost in terms of amended provisions of sec.217 (2A) of the CompaniesAct, 1956)

3.(a) The computation of Income as per provisions of The Income Tax Act,1961 results in a loss for the year under consideration. In thiscomputation, the bank has considered certain deductions based onjudicial pronouncements and legal opinion. The bank has made aprovision of Rs.1.35 Crores towards Income Tax u/s 115JB of IncomeTax Act, 1961 and a deferred tax of Rs.5.45 crores has been recognizedby credit to Profit and Loss account to comply with the provisions ofAccounting Standard 22 issued by Institute of Chartered Accountants ofIndia. The management is of the opinion that it is in order in recognizingthe Deferred Tax Asset as above.

(b) The disputed Income Tax demand outstanding as on 31.03.2006 amountsto Rs.69.05 crores and is included under Item I of Schedule 12(Contingent Liabilities). Of the above, Rs.60.79 crores has been paidor adjusted by the Income Tax Department. No provision is considerednecessary in respect of the disputed liabilities in view of favourabledecisions by various appellate authorities on similar issues.

4. DISCLOSURE REQUIREMENTS4.1 Capital

(Rs. in Crore)

Items 2005-06 2004-05i) CRAR (%) 10.79% 11.32%ii) CRAR - Tier I capital (%) 6.94% 5.67%iii) CRAR - Tier II Capital (%) 3.85% 5.65%iv) Percentage of the shareholding of the NIL NIL

Government of India in nationalized banksv) Amount of subordinated debt raised as 100.80 109.80

Tier-II capital

4.2 Investments(Rs. In crore)

Items 2005-06 2004-05(1) Value of Investments(i) Gross Value of Investments

(a) In India 1316.86 1222.85(b) Outside India, NIL NIL

16

(ii) Provisions for Depreciation(a) In India 36.99 41.99(b) Outside India, NIL NIL

(iii) Net Value of Investments(a) In India 1279.87 1180.86(b) Outside India. NIL NIL

(2) Movement of provisions held towardsdepreciation on investments.(i) Opening balance 41.99 24.78(ii) Add: Provisions made during the year � 60.89(iii) Less: Write-off/ write-back of excess 5.00 43.68

provisions during the year(iv) Closing balance 36.99 41.99

Securities sold 4.00 120.00 18.91 �under repos (7.00) (142.64) (21.95) �

Securities 10.00 250.00 49.67 26.25purchased (10.00) (120.00) (11.92) (NIL)under reverserepos

4.2.1 Repo Transactions(Rs. In crore)

Minimumoutstandingduring the

year

Maximumoutstandingduring the

year

Daily Averageoutstandingduring the

year

As on31st March

2006

4.2.2. Non-SLR Investment Portfolio

i) Issuer composition of Non SLR investments (Rs. in crore)

(1) (2) (3) (4) (5) (6) (7)(i) PSUs 6.34 6.30 1.30 0.30 2.30(ii). FIs 24.75 2.82 0.00 0.00 2.82(iii). Banks 10.16 9.95 3.25 3.25 3.25(iv). Private Corporate 15.41 14.74 8.58 7.08 13.24(v). Subsidiaries/ Joint Ventures - - - - - (vi). Others @ 53.52 - - - -(vii). Provision held towards depreciation (14.89) Total 95.29

@ Others- includes investments in Mutual Funds and RIDF.

No. Issuer Amount Extent of PrivatePlacement

Extent of �BelowInvestment

Grade� SecuritiesExtent of

�Unrated� SecuritiesExtent of

�Unlisted� Securities

ii) Non-performing Non-SLR investments (Rs. in crore)

Particulars AmountOpening balance 14.31Additions during the year since 1st April 2005 �Reductions during the above period 3.76Closing balance 10.55Total provisions held 10.46

4.3 Derivatives4.3.1 Forward Rate Agreement/ Interest Rate Swap

Items 2005-06 2004-05i) The notional principal of swap agreements NIL NILii) Losses which would be incurred if NIL NIL

counterparties failed to fulfil theirobligations under the agreements

iii) Collateral required by the bank upon NIL NILentering into swaps

iv) Concentration of credit risk arising from the swaps NIL NILv) The fair value of the swap book NIL NIL

S.No. Particulars Amount

(i) Notional principal amount of exchange traded Nilinterest rate derivatives undertaken during the year(instrument-wise)a)b)c)

(ii) Notional principal amount of exchange traded Nilinterest rate derivatives outstanding as on31st March, 2006 (instrument-wise)a)b)c)

(iii) Notional principal amount of exchange traded Nilinterest rate derivatives outstanding and not�highly effective� (instrument-wise)a)b)c)

4.3.2 Exchange Traded Interest Rate Derivatives: (Rs. Crore)

(iv) Mark-to-market value of exchange traded interest rate Nilderivatives outstanding and not �highly effective�(instrument-wise)a)b)c)

4.3.3 Disclosures on risk exposure in derivativesQuantitative Disclosures (Rs. in Crore)

(i) Derivatives (Notional Principal Amount) NIL NILa) For hedging NIL NILb) For trading NIL NIL

(ii) Marked to Market Positions [1]a) Asset (+) NIL NILb) Liability (-)

(iii) Credit Exposure [2] NIL NIL(iv) Likely impact of one percentage

change in interest rate (100*PV01)a) on hedging derivatives NIL NILb) on trading derivatives NIL NIL

(v) Maximum and Minimum of 100*PV01observed during the year NIL NILa) on hedging NIL NILb) on trading NIL NIL

Sl.No Particular CurrencyDerivatives

Interest ratederivatives

4.4 Asset Quality4.4.1 Non-Performing Asset (Rs. in Crore)

Items 2005-06 2004-05

(i) Net NPAs to Net Advances (%) 1.89% 4.98%(ii) Movement of NPAs (Gross)

(a) Opening balance 187.45 216.83(b) Additions during the year 11.97 44.19(c) Reductions during the year (74.65) (73.57)(d) Closing balance 124.77 187.45

(iii) Movement of Net NPAs(a) Opening balance 115.05 109.48(b) Additions during the year 11.97 44.19(c) Reductions during the year (71.43) (38.62)(d) Closing balance 55.59 115.05

17

(iv) Movement of provisions for NPAs(excluding provisions on standard assets)(a) Opening balance 61.42 97.32(b) Provisions made during the year 19.35 20.58(c) Write-off/write-back of excess provisions (19.84) (56.48)(d) Closing balance 60.93 61.42

4.4.2 Details of Loan Assets subjected to Restructuring(Rs. in crore)

Item 2005-06 2004-05(i) Total amount of loan assets subjected to 3.27 47.74

restructuring, rescheduling, renegotiation;of which under CDR- 3.27 32.35(Number of accounts) 1 2

(ii) The amount of Standard assets subjectedto restructuring, rescheduling, renegotiation; NIL 23.81of which under CDR- NIL 11.77(Number of accounts) - 1

(iii) The amount of Sub-Standard assetssubjected to restructuring, rescheduling,renegotiation;- 3.27 23.93of which under CDR- 3.27 20.58(Number of accounts) 1 1

(iv) The amount of Doubtful assets subjected torestructuring, rescheduling, renegotiation; NIL NILof which under CDR NIL NILNote: [ (i) = (ii)+(iii)+(iv) ]

4.4.3 Details of debts Restructured of SME Sector Advances: NIL.

4.4.5 Provisions on Standard Asset (Rs. in Crore)

Item 2005-06 2004-05Provisions towards Standard Assets 10.30 5.55

4.5. Business RatiosItems 2005-06 2004-05

(i) Interest Income as a percentage to 7.58 7.66Working Funds

(ii) Non-interest income as a percentage to 1.08 0.98Working Funds

(iii) Operating Profit as a percentage to 0.94 1.40Working Funds

(iv) Return on Assets(%) 0.53 0.08(v) Business (Deposits plus advances) per 3.71 2.96

employee (Rs. in Crs)(vi) Profit per employee (Rs.in lakhs) 1.20 0.17

4.4.4 Details of financial assets sold to Securitisation / ReconstructionCompany for Asset Reconstruction Rs.in crs.

Item 2005-06 2004-05(i) No. of accounts 22 �(ii) Aggregate value (net of provisions) of 19.08 �

accounts sold to SC/RC(iii) Aggregate consideration 11.00 �(iv) Additional consideration realized in respect Nil Nil

of accounts transferred in earlier years(v) Aggregate loss over net book value. 8.08 Nil

4.6 Asset Liability ManagementMaturity pattern of certain items of assets and liabilities

1 to 14 15 to 28 29 days to Over 3 months Over 6 months Over 1 year Over 3 years Over Totaldays days 3 months & up to & up to 1 year & up to & up to 5 years

6 months 3 years 5 yearsDeposits 394.13 441.93 685.14 581.19 724.15 545.18 101.89 862.77 4336.38

(271.14) (145.15) (480.96) (357.53) (502.32) (1386.15) (100.91) (52.53) (3296.69)Advances 241.63 223.59 349.09 276.04 354.19 1194.19 159.23 154.86 2952.82

(171.42) (37.60) (239.58) (213.66) (339.83) (940.08) (176.47) (199.07) (2317.71)Investments 27.24 0.00 0.10 1.36 3.65 62.69 165.57 1019.26 1279.87

(0.00) (0.00) (2.40) (1.80) (5.86) (110.40) (206.19) (854.21) (1180.86)Borrowings 0.00 0.00 0.00 0.36 0.73 2.98 1.23 0.00 5.30

(0.00) (0.00) (65.53) (1.14) (0.58) (0.07) (1.62) (0.00) (68.94)Foreign Currency assets 1.49 0.63 3.92 2.37 0.00 0.00 1.57 � 9.98

(3.54) (0.44) (6.30) (6.92) (0.00) (1.42) (-) � (18.62)Foreign Currency liabilities 7.50 1.18 0.49 1.78 9.42 4.95 0.20 � 25.52

(28.13) (0.33) (20.87) (2.31) (4.65) (9.09) � � (65.38)

Category 2005-06 2004-05a) Direct exposure

(i) Residential Mortgages � 49.41 36.83(ii) Commercial Real Estate � 30.33 10.23(iii) Investments in Mortgage Backed

Securities (MBS) and other securitisedexposures �a. Residential, � �b. Commercial Real Estate. � �

b) Indirect ExposureFund based and non-fund based exposures 66.77 83.26on National Housing Bank (NHB) and HousingFinance Companies (HFCs).Total advance to real estate sector 146.51 130.32

4.7 Lending to Sensitive Sector4.7.1 Exposure to Real Estate Sector (Rs.in crs)

4.7.2 Exposure to Capital Market Rs in CroreItems 2005-06 2004-05

(i) Investments made in equity shares, 0.92 1.08(ii) Investments in bonds/ convertible debentures � �(iii) Investments in units of equity�oriented 11.04 22.11

mutual funds(iv) Advances against shares to individuals for 1.25 1.10

investment in equity shares (includingIPOs/ESOPS), bonds and debentures, units ofequity oriented mutual funds

(v) Secured and unsecured advances to 34.25 -stockbrokers and guarantees issued on behalfof stockbrokers and market makers:

Total Exposure to Capital Market(i+ii+iii+iv+v) 47.46 24.29

(vi) Of (v) above, the total finance extended to - -stockbrokers for margin trading.

Insignificant 48.57 NIL 43.64 NILLow 12.77 NIL 14.79 NILModerate 3.04 NIL 5.41 NILHigh 0 NIL NIL NILVery High 0 NIL NIL NILRestricted 0 NIL NIL NILOff-credit 0 NIL NIL NILTotal 64.38 NIL 63.84 NIL

4.7.3 Risk Category wise Country Exposure (Rs.in Crs)

Risk Category Exposure (net) as at 31.3.06 Provision held as at 31.3.06 Exposure (net) as at 31.3.05 Provision held as at 31.3.05

Rs.in crs.

18

4.7.4 Details of Single Borrower Limit (SGL), Group Borrower Limit (GBL) exceeded by the bank.A. For the period 1.4.05 to 30.09.05 ( Based on the capital funds of Rs.260.29 cr as on 31.03.2005)S.No. Name of the Exposure Ceiling Limit Sanctioned Period during which Amount outstanding Board Sanction Position as on

Borrower (15% of Capital Funds) limit exceeded during the period Details 31.03.2006limit exceeded

1 LIC Housing 39.04 50.00 Apr�05 to Sep�05 50.00 Sanctioned in the 50.00Finance Ltd., Board Meeting

held on 23.8.032 KSR Exports 39.04 43.00 Apr�05 to Sep�05 42.67 Sanctioned in the 2.61

Board Meetingheld on 01.10.04

3 Soundararaja Mills Ltd., 39.04 40.85 Apr�05 to Sep�05 39.42 Sanctioned in the 39.42Board Meetingheld on 16.04.05

4 Sri Saravana Spinning 39.04 53.09 Apr�05 to Sep�05 46.67 Sanctioned in the 34.76Mills Pvt Ltd., Board Meeting

held on 22.12.04

B. For the period 1.10.05 to 31.03.06 (Based on Capital Funds of Rs.296.22 cr as on 30.09.2005)

S.No. Name of the Exposure Ceiling Limit Sanctioned Period during which Amount outstanding Board Sanction Position as on Borrower (15% of Capital Funds) limit exceeded during the period Details 31.03.2006

limit exceeded1 LIC Housing finance Ltd 44.43 50.00 Oct�05 to Mar�06 50.00 Sanctioned in the 50.00

Board meetingheld on 23.8.03

2 Sri Saravana Spinning 44.43 57.50 Oct�05 to Mar�06 46.67 Sanctioned in the 34.76Mills Pvt.Ltd Board Meeting

held on 22.12.04/15.12.05

4.8 Miscellaneous

4.8.1 Amount of Provisions made for Income-tax during the year;(Rs.in Crore)

2005-06 2004-05

Provision for Income Tax(inclusive of DTA) -4.10 -32.04

4.8.2 Disclosure of Penalties imposed by RBINo penalties were imposed by Reserve Bank of India during the year.5. Accounting Standards:In compliance with the guidelines issued by Reserve Bank of India regardingdisclosure requirements of the various Accounting Standards issued by theInstitute of Chartered Accountants of India the following information isdisclosed.

5.1 Accounting Standard 17 � Segment ReportingPart A: Business segments

(Rs. in crore)

Business Segments Treasury Other banking operations Residual Operations Total

Particulars Current Year Previous Year Current Year Previous Year Current Year Previous Year Current Year Previous Year

Revenue 89.91 109.64 278.21 226.89 368.12 336.53Result 11.76 (26.58) 40.65 107.37 52.41 80.79Unallocated expenses 12.50 26.08Operating profit 39.91 54.71Provisions & Contingencies 21.54 83.40Income taxes (4.10) (32.03)Extraordinary profit/ loss - -Net profit 22.47 3.34

Other Information:Segment assets 1319.05 1224.03 3403.57 2655.55 4722.62 3879.58Unallocated assets 196.76 173.80Total assets 4919.38 4053.38Segment liabilities 0.42 40.93 4566.54 3720.09 4566.96 3761.02Unallocated liabilities 61.37 62.38Total liabilities 4628.33 3823.40

Entire Investment portfolio has been considered as Treasury Segment andaccordingly its income and assets are allocated to the segment. All otherincome and allocable assets are considered as pertaining to Other BankingOperations segment. In respect of the funds lent to the Treasury segment,the cost has been allocated on Transfer pricing Method.

Part B: Geographic segments

Since the bank is having domestic operations only, no reporting is necessaryunder this segment.

6. Accounting Standard 18 � Related Party disclosures

The disclosure under AS-18 is furnished in Note no.2 in respect ofremuneration to Key Management Personnel.

7. Accounting Standard 20 � Earnings Per Share (EPS):EPS calculation in accordance with the AS-20 issued by the ICAI is as under:

2005-2006 2004-2005

Net profit after Tax (Rs. in 000) 224702 33444

No. of shares 19534569 11508902

Earnings per share � Basic & diluted (Rs.) 11.50 2.91

Note: There are no potential dilutive equity shares.

8. Accounting Standard 22 � Accounting for Taxes on Income

The bank has accounted for Income Tax in compliance with AS 22.Accordingly, Deferred Tax Assets & Liabilities are recognized. The majorcomponents of Deferred Tax are as under:

Rs.in crs.

19

[Rs. In Crore]

Components Deferred Tax Deferred TaxAssets Liability

Leave Encashment 2.56 -(1.74)

Depreciation on Fixed Assets - 3.66( 3.33 )

Provision for Wage Arrears 2.95 -(2.95) -

Carried forward Loss 35.49(30.53)

Net Deferred Tax Asset (Liability) 37.34(31.89)

Figures in brackets pertain to previous year.

9. Accounting Standard 28 � Impairment of Assets:A substantial portion of the bank�s assets comprise financial assets to whichAccounting Standard 28 is not applicable. In the opinion of the bank,there is no impairment of other assets to any material extent as at31st March 2006 requiring recognition in terms of the said standard.

10. Details of provisions and contingencies made during the year:(Rs.in crores)

Particulars 31.03.2006 31.3.2005Provisions for Standard assets 4.75 0.70Bad and Doubtful Debts 19.36 20.58Taxation (Net of Deferred Tax) -4.10 -32.04Investment Depreciation -5.00 60.89Others/ Contingencies(net) 2.44 1.23Total 17.45 51.36

Provision for Standard Assets 5.55 4.75 - 10.30Bad and Doubtful Debts 61.42 19.35 (19.84) 60.93Investments 41.99 - (5.00) 36.99Taxation 6.12 1.35 - 7.47Wage arrears 8.50 0.30 (8.50) 0.30Miscellaneous provisions. 13.07 13.13 (4.80) 21.40

Particulars Opening as on 01.04.2005 Provision made during the year Provisions reversed/ adjusted Closing as on 31.03.2006

11. Details of movement in provisions in accordance with Accounting Standard 29: Rs.in Crores.

12.The Bank earned a profit of Rs.3.24 Crores on sale of securities underHTM category in the previous year. As per the guidelines of the ReserveBank of India, this profit has to be transferred to Capital Reserve. However,only a sum of Rs.2.50 crores was transferred in the previous year to theCapital Reserve Account on account of inadequate profits available forappropriation. The shortfall of Rs.0.74 crore is appropriated out of thecurrent year�s profit.13. In schedule 2, Reserves and Surplus, Rs. 29.81 Crores shown under �OtherReserves� as on 31st March 2005, comprise the following:a) Contingency reserve Rs. 3.87 crore

b) Building Reserve Rs. 4.48 crorec) Development Reserve Rs. 14.86 crored) Special Reserve Rs. 1.15 croree) Exchange fluctuation Reserve Rs. 5.45 croreIn the aforesaid, Contingency reserve of Rs.3.87 crore, Building Reserve ofRs.4.48 crore and Development reserve of Rs.14.86 crore totaling Rs.23.21crore are transferred to Statutory Reserve as the management is of theopinion that these reserves are not required to marked items.14.Previous year�s figures have been regrouped / reclassified whereverconsidered necessary to conform to the current year�s classification.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH, 2006(Rs. in thousands)

31.03.2006 31.03.2005CASH FLOW FROM OPERATING ACTIVITIES:Net Profit as per Profit & Loss Account 224,702 33,444ADJUSTMENTS FOR:

Provisions & Contingencies 174,467 513,653Depreciation 63,384 60,751Loss on sale of assets 665 (217)Income Tax / T D S paid (86,152) (169,820)

Net cash flow before changes in Working Capital 377,066 437,811

CHANGES IN WORKING CAPITAL :

LIABILITIES : Increase/Decrease inDeposits 8,404,549 2,001,060Refinances (636,439) 387,152Other Liabilities 110,710 (1,269,856)

7,878,820 1,118,356

ASSETS : Increase/Decrease inInvestments 940,054 (1,400,967)Advances 6,356,216 2,420,995Leased-out Assets 0 0Other Assets 170,999 (161,000)

(7,467,269) (859,028)

CASH FLOW FROM INVESTING ACTIVITIES :Purchase of Fixed Assets (48,509) (89,508)Sale of Fixed Assets 884 (47,625) 1,030 (88,478)

CASH FLOW FROM FINANCING ACTIVITIES:Shares issued 441,644 0Tier II Bonds (90,000) 190,000Dividends paid (1,013) 350,631 (57,537) 132,463

Cash flow for the year 1,091,623 741,124Cash & Cash equivalents at the beginning of the year 3,542,377 2,801,253Cash & Cash equivalents at the end of the year 4,634,000 3,542,377

Note: Cash, Balances with Other Banks, Balances with R B I, and Money at Call and Short Notice have been considered as cash and cash equivalents.

20

AUDITORS� CERTIFICATE

We have verified the Cash Flow Statement of The Lakshmi Vilas Bank Limited, Karur for the year ended March 31,2006. This cash flow

statement is the responsibility of the Management of the Bank in accordance with clause 32 of the listing agreement entered into with the

Stock Exchange and is in agreement with the Balance Sheet as at March 31, 2006 and the Profit & Loss Account for the year ended March

31, 2006 dealt with in our report dated May 15, 2006 to the members of The Lakshmi Vilas Bank Limited.

For M/s. S. VISWANATHAN For M/s. N.B.SHETTY & COCHARTERED ACCOUNTANTS CHARTERED ACCOUNTANTS

[CHELLA K.RAGHAVENDRAN] [N.B.SHETTY]PARTNER PARTNERM.No.208562 M.No.16718

KARUR - 639 006.MAY 15, 2006

Auditors� Certificate on Corporate Governance

ToThe Members of May 15, 2006The Lakshmi Vilas Bank LimitedKarur.

We have examined the compliance of conditions of Corporate Governance by The Lakshmi Vilas Bank Limited for the year ended 31st March,2006 as stipulated in clause 49 of the Listing Agreement of the said Bank with Stock Exchanges.

The Compliance of the conditions of Corporate Governance is the responsibility of the management. Our examination was limited toprocedures and implementation thereof, adopted by the Bank for ensuring the compliance of the conditions of Corporate Governance. Itis neither an audit nor an expression of opinion on the financial statements of the Bank.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Bank has complied withthe Conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

As required by the Guidance Notes issued by the Institute of Chartered Accountants of India, we have to state that no investor grievanceis pending for a period exceeding one month against the Bank as per the records maintained by the Share Transfer and Investors� GrievancesCommittee.

We further state that such compliance is neither an assurance as to the future viability of the Bank nor the efficiency or effectiveness withwhich the management has conducted the affairs of the Bank.

For M/s.S.Viswanathan For M/s.N.B.Shetty & CoChartered Accountants Chartered Accountants

(Chella K.Raghavendran) (N.B.Shetty)Partner Partner

M.No.208562 M.No.16718

BALANCE SHEET ABSTRACT AND COMPANY�S GENERAL BUSINESS PROFILEAS PER SCHEDULE VI, PART IV OF THE COMPANIES ACT, 1956 (Rs.in 000s)

A REGISTRATION DETAILSRegistration 01377State 18Balance Sheet Date 31.03.2006

B CAPITAL RAISED DURING THE YEARPublic Issue NilBonus Issue NilRights Issue 81,03,866Private Placement Nil

C POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDSTotal Liabilities 491938,08Total Assets 491938,08

SOURCES OF FUNDSPaid-up Capital 19,53,46Reserves and Surplus 2,71,51,90Secured Loans NILUnsecured Loans 5,29,98

APPLICATION OF FUNDSNet Fixed Assets 32,46,58Investment 12,79,86,68Net Current Assets 36,75,58,11Miscellaneous Expenditure NilAccumulated Losses Nil

D PERFORMANCE OF THE COMPNAYTotal Income 3,68,12,72Total Expenditure 3,45,65,70Profit Before Tax 18,37,17Profit After Tax 22,47,02Earnings Per Share (Rs.) 11.50Dividend Rate 25%

GENERAL NAMES OF THREE PRINCIPAL PRODUCTS OF THE COMPANY(AS PER MONETARY TERMS)

Items Code N.A.Product Descripion Banking Company

21

ANNEXURE AMANAGEMENT DISCUSSION AND ANALYSIS REPORT

a) Industry Structure and Developments

Our Banking industry consists of Nationalized Banks, Old Private SectorCommercial Banks, New Private Sector Commercial Banks, Co-operative Banks,Regional Rural Banks and Foreign Banks. Our Bank was established in 1926 asBanking Company and has been classified as Scheduled Commercial Bank bythe RBI.

The Banking industry, by and large witnessed a marginal increase in NetInterest Margin (NIM). This is despite the hardening of market yield owing toconcerns over liquidity crisis in the money market that had a telling effecton the prices of Government securities. The 10�year benchmark Governmentof India securities closed at 7.49% as on March 2006 as against 7.35% in theprevious year. The fall in size of investment was offset by credit expansion.Many banks resorted to revise upward their prime lending rates due toresources becoming dearer. Reprising of deposits across different maturitiesis carried out as part of ALM.

The industry witnessed a brisk credit off-take for deployment. The totalBank credit excluding inter-bank advances posted a decent growth of 32%.

In the Annual Policy Statement for 2006-07, RBI has projected a lower growthof non-food credit at 20% in 2006-07, a �calibrated deceleration� from over30% in the last two years, thereby signaling to bring growth to a reasonabletrajectory by emphasizing on improvement in quality, but not diluting growth.

The main features and projections of the Monetary Policy are :-

a) Interest rate unchanged ( Reverse repo rate 5.5%, Repo rate 6.5% andBank Rate 6%. RBI further raised Reverse repo rate and repo rate by0.25% on 8th June, 2006)

b) Cash Reserve Ratio unchanged at 6%

c) GDP growth : Economy is projected to grow at 7.5% to 8% this

fiscal.

d) Inflation : Expected to hover around 5% to 5.5%

e) Industrial Growth : Positive outlook

f) Other key measures

a) Interest rate ceiling on non-resident rupee deposits hiked by 25 bps

b) Interest rate ceiling on foreign currency export credit also raisedby 25 bps.

c) Increased risk weight for real estate expenditure to 150 pts from125 pts.

d) Tightening of provisioning norms for loans to capital market andpersonal loans.

The Annual Policy indicates a possible rise in interest rates, in the event ofupturn in inflation due to pass-through of spiraling international oil prices.

b) Opportunities and Threats

Based on the economic factors and performance during the fiscal 2005-06, itis estimated that the aggregate deposits of the commercial banks wouldgrow at around 15% in 2006-07.

The biggest challenge faced by the industry is increasing cost of funds andreduced yield on investment. The menance of NPAs continues to haunt andaffects the profitability of the banks, even though recovery performanceduring the year under review was encouraging. If banks have to reduce costsand improve performance, the issue of NPAs is to be addressed effectively.On transition from �regulatory adequacy� to ̀ market efficiency�, banks needto use product development and differentiation, innovation, business processre-engineering techniques backed by technological up-gradation.

c) Business Segmentation

DEPOSITSAmount in Percentage

(crore of Rs.) to total

1) Demand � 453.08 10.45 %2) Savings � 547.86 12.63 %3) Term � 3335.44 76.92 %

Total � 4336.38 100.00 %

ADVANCESAmount in Percentage

(crore of Rs.) to total1. Manufacturing Sector � 1429.16 48.40

(SSI, Medium & Large Ind)2. Trade & Service Sector � 711.04 24.083. Agricultural sector � 429.64 14.554. Housing Sector � 173.33 5.875. Transport / NSFCS � 10.92 0.376. Personal Segment � 131.11 4.447. Others � 67.62 2.29

Total � 2952.82 100.00

d) OutlookWith real GDP growth at 8.1% in 2005-06, India�s macro economic performanceturned out to be stronger than anticipated and expected to register higherGDP growth rate over the next year with expected good monsoon and increasein demand for bank credit.e) Risk and ConcernsRisk is integral part of the banking business and various types of risks thebanks are exposed to are classified under a) Credit Risk b) Market Risk c)Operational Risk. Banks should put in place a system and procedures, in tunewith RBI guidelines for identification, measurement, monitoring andmanagement of risks, to mitigate their adverse impact.While Banks are presently required to maintain Capital Adequacy under BaselI norms, they will be required to conform to Basel II norms for Capital Adequacyby 31/03/07. The Basel II provisions for capital charge for Market Risk (inrespect of AFS and HFT items) have already become fully effective from 31/03/06. Banks have to provide capital charge for investments under AFS witheffect from 31st March 2006, whereas providing capital charge as per Basel IIfor investments under HFT had already begun from 31st March 2005. UnderBasel II, capital charge for Credit Risk will be initially under the StandardizedApproach. Capital Charge for Operational Risk is not necessary under Basel I,but is stipulated under Basel II. Our bank has put in place the necessarysystems for the parallel computation with effect from April 1, 2006 , ofcapital charge for credit risk, market risk and operational risk, and for andmonitoring of Capital Adequacy Ratio under Basel II guidelines to ensureBasel II compliance by 31st March 2007.In the annual policy, RBI has increased the risk weights for housing loanassets above certain limit with an intention to restrict the flow of resourcesin line with its policy objective of improving quality of assets, but withoutdiluting growth.f) Internal ControlsBank has a separate Audit and Inspection Department which subjects all theBranches including International Division, Investment Cell, Currency Chest,Service Branches and every department of the Administrative Office to regularinspection. Key branches including Investment Cell at Mumbai are underconcurrent audit which covers almost 73.58 % of the Bank�s business. Allcomputerized branches are subjected to a separate security-audit regularly.

Audit Committee of the Board has been constituted in line with RBI guidelines.To meet the requirement of clause 49 of the Listing Agreement, the AuditCommittee reviews the adequacy of the audit and compliance function,including the policies, procedures, techniques.g) Human Resources Development / Industrial RelationsThe paradigm shift that is anticipated in the days to come is the level ofsophistication on technology front in the area of core banking and internetbanking when all the players in the industry are connected through network.Human assets, which are prime movers in any organization, have to keepthis pace and excel to outperform the set industry standard. To face thecompetition and newer challenges with ease, banks continue its focus in thearea of training & development. Against this backdrop, our Bank runs a full-fledged Training College with skilled and experienced faculty to impart job-oriented training at frequent intervals to its staff at various levels. Whereverrequired, specialized courses handled by Guest faculty in the respectivefields are conducted at our Staff Training colleage. Besides this, officers areselected based on the need to attend the training offered by premierinstitutions like NIBM, BTC etc.,h) Discussion on Financial parameters with respect to operational

performanceThe Bank continued its emphasis on �Operating Profit Approach.� The Bankcould record moderate to good performance in terms of various key financialparameters.Deposits increased by 24.04%Advances increased by 27.40%Net Interest income marginally lower by 1.09%Net-worth increased by 26.55 %Number of branches increased to 227 from 225Number of staff: 1873

22

The composition of the Board of Directors, headed by ExecutiveChairman is governed by the provisions of the Companies Act,1956, Banking Regulation Act, 1949 and listing agreement enteredwith NSE. The Board has strength of 10 Directors as on 31.03.2006.The Board consists of eminent persons with considerableprofessional expertise and experience in Banking, Law,Accountancy, Engineering, Small Scale Industry, Agriculture,Networking and Business including Exports. Details of name ofthe Chairman and the Directors of the Board, number of meetingsheld and attendance during the year are provided in annexure C.

The Bank has not entered into any materially significanttransaction which could have a potential conflict of interest withits promoters, directors, management or relatives etc., exceptthe transactions entered into in the normal course of bankingbusiness.

Committees of Directors

The Board has constituted Committees of Directors to deal withmatters, which need special focus and timely monitoring of theactivities falling within the terms of reference of the Committees.The Board Committees are as follow:

Audit Committee

Audit Committee of the Board is chaired by Shri.D.L. Suresh Babu,an Independent Director who is a Chartered Accountant byprofession. Audit Committee provides direction and oversees theoperation of total audit function in the Bank as per RBI guidelines.Details of name of members and chairman, meetings andattendance during the year under review, are provided in annexureC. The terms of reference of Audit are in accordance with RBIguidelines and clause 49 of listing agreement interalia includesthe following:

v Overseeing the Bank�s financial reporting process andensuring correct, adequate and credible disclosure offinancial information.

v Recommending appointment and removal of externalauditors and fixing of their fees.

v Reviewing with management the annual financialstatements before submission to the Board with specialemphasis on accounting policies and practices, compliancewith accounting standards and other legal requirementsconcerning financial statements and

v Reviewing the adequacy of the Audit and Compliancefunction including their policies, procedures, techniquesand other regulatory requirements.

Share Transfer and Investors� Grievances committee

The Share Transfer and Investors� Grievances Committee approvesand monitors share transfers, transmission, issue of duplicateshares, physical shares on remat requests, fixing book closure /

ANNEXURE � BBOARD OF DIRECTORS AND COMMITTEES

record date etc., The Committee monitors the redressal ofcomplaints of investors like Complaints on Share transfer, non-receipt of dividend declared, non-receipt of annual report & otherrelated matters. The Committee also reviews the compliance ofprovisions and requirements of Reserve Bank of India, SEBI, StockExchanges, Registrar of Companies, Depositories, and otherstatutory bodies.

During the year the Bank received �Nil� complaints fromshareholders. Details of name of the Chairman & members of theCommittee, Compliance officer, meetings and attendance duringthe year are provided in annexure C.

Infrastructure Development committee

The committee approves purchase and leasing of premises forthe use of the Bank�s branches and for employees� residences andthe purchase of computer hardware, software, peripherals andaccessories etc.,

Risk Management Committee

The Integrated Risk Management Committee constituted as perRBI guidelines, formulates Bank�s credit and Market risk policiesand reviews the Assets and Liabilities of the Bank based onperiodical structural liquidity and dynamic liquidity statementson outflows and inflows and also analyses the interest ratesensitivity of assets and liabilities.

Remuneration Committee

No committee has been formed as the remuneration of wholetime Director and sitting fees payable to other directors is decidedonly by the Board of Directors. The remuneration of Chairman &CEO was approved by RBI on the recommendations of the Board,details of which is given in the Schedule 17 of the Annual accountsand other directors are paid only sitting fees for Board/ Committeemeetings attended by them.

Fraud Monitoring Committee

Pursuant to the Directions of the Reserve Bank of India, the Bankhas constituted a Fraud Monitoring Committee, exclusivelydedicated to the monitoring and following up of cases of fraudinvolving amounts of Rs.1 crore and more. The objective of thisCommittee is the effective detection of frauds and ensuring ofprompt reporting thereof to regulatory and enforcement agencies.

Customer Service Committee of the Board

Pursuant to the Directions of the Reserve Bank of India, the Bankhas constituted a Customer Service Committee exclusivelydedicated to bring about improvement in the quality of customerservice provided by the bank.

Disclosure

No strictures are passed on the bank by any regulatory authorityfor non- compliance of any laws.

23

ANNEXURE - CComposition of the Board of Directors together with the attendance at meetings of the Board, its Committees and Annual General Meeting and directorship held

Representation Category as Board Audit Share Integrated Risk NPA Infrastructure Fraud Customer Credit Annual No. of CompaniesName of the Director as per per Listing (25 Committee Transfer & Management Review Development Monitoring Service Committee General Other Name in which& No. of Shares held by them Banking Agreement meetings) (8 Investors’ Committee Committee Committee Committee Committee of the Meeting Director- he is the

Regulation Act meetings) Grievances (4 meetings) (3 ( 7 meetings) ( 2 (2 Board (6 ships DirectorCommittee meetings) meetings) meetings) meetings) held(5 meetings)

Mr.R.M.Nayak, Chairman & Majority - Executive - 20 NA NA 4 3 5 2 2 6 YES Nil NilChief Executive Officer Banking Director/Non(No of shares: Nil) IndependentMr.D.L.Suresh Babu Majority - Independent/ 24 8 NA 4 3 NA 2 NA NA YES 1 M/s.Alpha(Chairman - Audit Committee Chartered Non- Financial(No of shares: 250) Accountancy executive Consultancy

Services (P) Ltd.Mr.K.B.Krishnan Majority-SSI Independent / 23 2 NA 4 2 4 NA NA 5 YES 2 M/s.Fountain(No of shares: 10365) Non- Chits (P) Ltd.

executive M/s.Texcel SalesKovai (P) Ltd.

Mr.M.P.Shyam Minority- Non 22 8 5 4 2 7 NA NA 6 YES 5 M/s.Advaith(No of shares: 36069) Business Independent / Marketing (P) Ltd.

Non-executive M/s.CauveryMotors (P) Ltd.M/s.AdvaithMotors (P) Ltd.M/s.AnanyaSoftware Systems(P) Ltd., MysoreVegetable Oil Ltd.

Mr.R.Dhandapani Majority-Agri Independent / 25 6 NA NA NA NA 2 NA NA YES Nil Nil(No of shares:7131) Non-executive

Mr.K.Balaji Majority-SSI Independent / 14 1 NA NA NA NA NA NA NA YES Nil Nil(No of shares: 10002) Non-executiveMr.E.Sreedhar Majority- Independent / 5 1 NA NA NA NA NA NA NA NA 1 M/s.Shell(No of shares: 500) Systems & Non-executive Networks (P) Ltd

TechnologyMr.N.Saiprasad Minority- Non 1 1 Nil NA NA NA NA NA NA NA 1 M/s.Kumbakonam(No of shares:6485) Business Independent / Mutual Benefit

Non-executive Fund Ltd.Mr.G.Sudhakara Gupta Minority- Non 1 1 Nil NA NA NA NA NA NA NA 2 M/s.Holzwerk(No of shares:100) Consultancy Independent / Interior (P) Ltd.

Non-executive M/s.XS RealInternationalSale (P) Ltd.

Mr.K.Ravindrakumar Minority- Non 1 NA NA NA NA NA NA NA NA NA Nil Nil(No of shares: 4634) Business Independent /

Non-executive

ATTENDANCE AT AUDIT COMMITTEE MEETINGS

Name of the Committee Members(Sarvashree)

Meeting details

Held during the tenure ofdirector / invitee Attended % of total

Whether attendedlast AGM (Y/N)

D.L.Suresh Babu, Chairman of the Committee 8 8 100% YESM.P.Shyam 8 8 100% YESR.Dhandapani 6 6 100% YESN.Saiprasad 1 1 100% NAK.Balaji 1 1 100% YESE.Sreedhar 1 1 100% NAG.Sudhakara Gupta 1 1 100% NA

INFORMATION ABOUT SHARE TRANSFER WORK TO A DELEGATED AUTHORITY

Description of delegated authority Full Address of delegated authority TelephoneNumbers Fax Numbers E-Mails ID

Name and designation of officerof the Company

S.Venkateswaran, Company Secretary /Compliance Officer, Lakshmi Vilas Bank Limited,

Regd. & Administrative Office, Salem Road,Kathaparai, Karur � 639 006

04324-220051� 60 220068 & 69 [email protected]

Name of Board Committee andchairman�s name

Share Transfer & Investors� Grievances CommitteeMr. M. P. Shyam, Director,

Lakshmi Vilas Bank Limited, Regd. & Administrative Office,Salem Road, Kathaparai, Karur � 639 006

04324 - 220051-60 220068 & 69 [email protected]

The Registrar and Share TransferAgents

M/s.Integrated Enterprises (India) Ltd.,II Floor, �Kences Towers�

No.1, Ramakrishna Street, North Usman Road,T.Nagar, Chennai � 600 017

044 - 2814080128140802,28140803

2814247928143378

[email protected]

24

ANNEXURE-DGeneral shareholders� Information

Means of CommunicationThe Bank has published its financial - quarterly and annual results in TheHindu Business Line (all editions - English), Dinamalar (Vernacular), The NewIndian Express and Dinamani. The results are displayed on the Bank�s websiteat www.lvbank.com.Management discussion and analysis forms part of the Annual Report whichis posted to the shareholders of the Bank.Financial Calendar 2006-2007:79th Annual General MeetingDate & Time : 14.08.2006, 10.30 A.M.Venue : Registered Office, Salem Road, Kathaparai,

Karur � 639006, Tamilnadu.Information of last three Annual General Meetings heldThe 76th, 77th and 78th AGM were held on 07th August, 2003, 29th July, 2004 and29th September, 2005 respectively.

Special Resolution passed during the last three AGMs.76th AGM � 07/08/2003 � 10.30 a.m. � A.O.Karur.Special Resolution passed : Nil77th AGM � 29/07/2004 � 10.30 a.m. � A.O. Karur.Special Resolution passed to delist the equity shares from MSE.78th AGM � 29/09/2005 � 10.30 a.m. � A.O. Karur.Special Resolution passed:-

i) to amend the Articles of Association to increase the Authorised Capitalto Rs. 100 Crores and

ii) to amend Article to include a new Article 31 that no suit or otherproceedings shall be instituted in any court other than the courts inKarur which is the place of residence of the Bank for this purpose byreason of location of its Registered Office.

No special resolution was put through postal ballot.All the Directors were present on the last AGM.Annual General Meeting (Next Year) August, 2007Board MeetingsResults for the quarter ending June 2006 � 28th July, 2006Results for the quarter ending September 2006 � Last week ofOctober 2006Results for the quarter ending December 2006 � Last week ofJanuary 2007Results for the quarter ending March 2007 � Last week of June 2007Code of ConductThe Board of Directors at its meeting held on 15.04.2005 approved the Codeof Conduct for all the Directors and Senior Management Personnel. The saidCode of Conduct has been placed on the website of the Companywww.lvbank.com.The Annual Report contains a declaration signed by CEO.CEO/CFO CertificationCEO/CFO Certification under the Corporate Governance Guidelines prescribedby SEBI has been submitted to the Board by the CEO and CFO.Unclaimed Dividend:Information in respect of unclaimed dividend and last date for making claimis given below:

Compliance with clause 32 of the Listing AgreementName and address of the Stock Exchange where equity shares of LakshmiVilas Bank Limited is listed:

The National Stock Exchange of India LimitedExchange Plaza, 5th floor,Plot No.C/1, G Block,

Bandra � Kurla Complex, Bandra (E), Mumbai � 400 051.

Bank confirms that the Annual Listing Fee has been paid to National StockExchange.DematerializationThe fully paid Equity Shares (ISIN NO: INE694C01018) of the Bank areadmitted under demat mode with both the depositories of the country i.e.,National Securities Depository Limited and Central Depository Securities(India) Limited.

April 2005 170.00 151.10 884627 2069.30 1902.50May 122.00 99.50 2404388 2087.55 1916.75June 108.00 90.55 807501 2220.60 2064.65July 107.85 91.60 2335076 2319.10 2179.40August 126.40 100.00 1581054 2403.15 2318.05September 119.00 95.20 1734228 2611.20 2405.75October 110.75 93.10 825806 2663.35 2316.05November 103.50 96.15 584717 2712.00 2386.75December 100.50 90.00 712613 2842.60 2660.50January 2006 104.95 92.00 1398068 3001.10 2809.20February 99.85 92.05 766171 3074.70 2940.60March 108.00 91.05 938727 3418.95 3116.70

MonthNSE Listed on 21.06.2000

No. of SharesTraded NSE Nifty

High Low HighHigh Low

Bank has 41696 shareholders as on 31.03.2006 of this 17806 foliosrepresenting 1,36,48,095 (69.83 %) shares are in Demat Form.Distribution of Shareholding in break up as on 31.03.2006 is given below.

CATEGORY SHAREHOLDERSNO. OF SHARES NUMBER % ON TOTAL

Upto 500 34937 83.80501 - 1000 4209 10.091001 - 2000 1585 3.802001 - 3000 410 0.983001 - 4000 193 0.464001 - 5000 76 0.185001 - 10000 162 0.3910001and above 124 0.30

Total 41696 100.00Nomination FacilityShareholders may avail of the Nomination Facility under Section 109A of theCompanies Act, 1956.Bank Account DetailsIn order to avoid fraudulent encashment of dividend warrants, the membersare requested to write their Bank Account details to the Office of our Registrarand Share Transfer Agent.Shares held in Electronic formAll instructions regarding bank account details, which the shareholders wishto be incorporated in their dividend warrant will have to be submitted totheir depository participants.Instructions already given by them in respect of shares held in physical formwill not be automatically applicable to the dividend paid on shares held inelectronic form and the Bank or STA will not entertain any request fordeletion/ change of Bank details already printed on dividend warrants as perinformation received from both the depositories.All instructions regarding change of address, nomination, power of attorneyetc., shall be given directly to their Depository participants and the bank orSTA will not entertain any such requests directly. Shareholders having theholdings partly in demat form and partly in physical form, should follow thesteps narrated above separately.Share Transfer ProcessBank ensures physical shares are processed by the Registrar and Share TransferAgent � M/s. Integrated enterprises (India) Limited and approved by ShareTransfer & Investor�s Grievances Committee and the certificates aredispatched to the transferees with in a maximum period of 4 weeks from thedate of receipt of the transfer documents by M/s. Integrated enterprises(India) Limited, provided if the share documents are valid in all respects.Sharetransfers, dividend payments, demat requests and all other investor relatedactivities are attended to and processed at the office of our Registrar andShare Transfer Agent.Shareholders� Correspondence should be addressed to :

M/s Integrated Enterprises (India) LimitedII floor , �Kences Towers� No.1 Ramakrishna Street

North Usman Road, T.Nagar, Chennai � 600 017Ph: 044-28140801/2/3 Fax: 28142479/28143378

Email: [email protected] RequirementsThe Bank at present has not adopted the Non-Mandatory requirement.

Financial Date of Amount as on Last dateYear Declaration 31.03.2005 in Rs. for claim

1998-99 28.07.1999 5,80,964.00 27.07.20061999-00 29.08.2000 9,46,930.50 28.08.20072000-01 27.07.2001 10,75,041.50 26.07.20082001-02 14.08.2002 11,70,063.00 13.08.20092002-03 07.08.2003 14,64,324.50 06.08.20102003-04 29.07.2004 17,89,290.00 28.07.20112004-05 29.09.2005 No Dividend NA

Stock Market Data

DECLARATION BY CHAIRMAN & CEOThe Board of Directors and the Senior Management Personnel of theBank have affirmed confirming to the code of conduct of the Bank forthe year ended 31.03.2006.Karur R.M. Nayak16th May, 2006 Chairman & Chief Executive Officer.

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