First Annual Report of YES BANK Limited

November 21,2003 to March 31,2005

YES^BANK
EXPERIENCE OtSR EXPERTISE

Annual General Meeting on April 26,2005

 BOARD OF DIRECTORS

Mr. Ashok Kapur, Non - Executive Chairman

Mr. Rana Kapoor, Managing Director & CEO
Mr. Hans ten Cate, Non - Executive Vice Chairman
Mr. Wouter Kolff, Non - Executive Director
Mr. Ajay Lai, Non - Executive Director
Mr. Ashish Dhawan, Non - Executive Director
Mr. Ajay Relan, Non •- Executive Director
Mr. Kashi Memani, Non - Executive Independent Director
Mr. Bharat Patel, Non - Executive Independent Director
Mr. S. L. Kapur, Non - Executive Independent Director
-Mr. Arun K. Mago, Non - Executive Independent Director
Mr. H. Srikrishnan, Executive Director (Designate)

COMPANY SECRETARY

Mr. Danish Shah,

REGISTERED OFFICE

9th Floor, Nehru Centre

Discovery of India
Dr. Annie Besant Road, Worli
Mumbai - 400 018
Tel: 56699000
Fax:24900314
Email: [email protected]
Website: www.yesbankltd.com

AUDITORS

M/s. S.R. Batliboi & Co., Chartered Accountants

REGISTRAR & TRANSFER AGENTS

Karvy Computershare Private Limited

46, Avenue, Street No. 1
Banjara Hills
Hyderabad - 500 034

& Corporate Office: YES BANK Limited, Nehru Centre, 9th Floor, Qiscovery of India, Dr. A.B. Road, Worli, Mumbai 400 018, India.
Tel: +91(22) 2490 0650/2494 8286 Fox: +91(22) 2490 0314 Website: v/ww.yesbonkltd.com
 YES#BANK

DIRECTORS' REPORT

Dear Shareholders,

Your Directors have great pleasure in presenting the First Annual Report of YES BANK
Limited together with the auditors report and audited financial statements for the period
from November 21,2003 to March 31, 2005.

A. FINANCIAL HIGHLIGHTS
(Amounts in Rs '000)
Period ended March 2005
Net interest income 181,298
Other income 181,682
Operating expenses 399,427
Provisions and contingencies (including tax) 1,140
Net Profit / (Loss) (37,587)

For managements overview of the performance for the period ended March 31, 2005 and
future outlook, refer section "Our Business".

B. CORPORATE GOVERNANCE

1. Philosophy

YES BANK is ordained to set the highest standards of Corporate Governance right from its
inception, benchmarked with the best of class practices across the globe. Effective Corporate
Governance is the manifestation of professional beliefs and values, which configure the
organizational values, credo and actions of its employees. Transparency and accountability
are the fundamental principles to sound Corporate Governance, which ensures that the
organization is managed and monitored in a responsible manner for 'creating and sharing
value'.

YES BANK believes that there is a need to view Corporate Governance as more than just
regulatory requirements as there exists a fundamental link with the organization of
business, corporate responsibility and shareholder wealth maximization. Therefore, the
Bank is articulating a multi-stakeholder model (including shareholder value) of
accountability that will manage the symbolic relationship between the various stakeholders.
This approach will be central to the YES BANK'S day-to-day functioning and in
implementation of its business strategy.

2. Board of Directors

The composition of the Board of Directors of YES BANK is governed by the Banking
Regulations Act, 1949, Reserve Bank of India requirements, the Companies Act, 1956, listing
requirements of the stock exchanges and best of class practices. As at March 31, 2005, the
Board consisted of 12 Directors.

Segc/. & Corporate Office: YES BANK Limited, Nehru Centre, 9th Floor, Qiscovery of India, Dr. A.B. Road, Worli, Mumboi 400 018, India.
Tel: +91(22) 2490 0650/2494 8286 Fa*. ->-9!(22) 2490 0314 Website: www.yesbankltd.com
 YES//BAKK

All Directors who were appointed as Additional Directors of the Company during the year
pursuant to the provisions of Section 260 of the Companies Act, 1956, shall vacate their
offices as Directors on the date of the ensuing Annual General Meeting of the Company.
They being eligible for re-appointment, your Board recommends their reappointment.

Mr. Ashok Kapur is the Non Executive Part-time Chairman of the Bank, (refer section on
'Our Promoters and Investors')

Mr. Rana Kapoor is the Managing Director & CEO of the Bank, (refer section on ('Our
Promoters and Investors')

Mr. Hans ten Cate is the Non Executive Vice Chairman of the Bank. He holds a Bachelor's
degree in Business Economics from Nederlandse Economische Hogeschool and an MBA
from Interfaculteit Bedrijfskunde, Delft. He is a Member of the Executive Board, Rabobank
Netherlands, the Chairman of the Supervisory Board of De Lage Landen International B.V.,
Member of the Supervisory Board of Robeco Groep N.V., Chairman of the Supervisory
Board of Beurs Rotterdam N.V., Chairman of the Supervisory Board of Rabo Vastgoed B.V.
and Chairman of the Supervisory Board of Gilde Investment Management B.V. He is a
former Member and Chairman of the Board, AMRO Handelsbank A.G., Germany, General
Regional Director Rotterdam, ABN AMRO Bank N.V. and Director of General Credit and
Special Financing, ABN AMRO Bank N.V.

Mr. Wouter Kolff is a graduate in Economics from the Erasmus University, Rotterdam.
After a 19-year career at ABN Bank, where his roles included Head, Guilder Group
Treasury, General Manager Rotterdam Office and Chairman of the Management Committee
at ABN Belgium, he moved to the international network of Rabobank Netherlands in 1990
and managed the corporate finance arm of Rabobank International. At present he is
responsible for Rabobank International's Food and Agri-business, Asia, Australia and
international retail initiatives. Rabobank International is Rabobank Netherlands'
international corporate and investment banking division.

Mr. Ajay Relan is the Managing Director of Citigroup Venture Capital International, India.
He is a former Chief Executive of Citicorp Securities & Investments Limited, a company
focused on the equity and debt markets in India. He has had several years of corporate and
investment banking experience in India, Saudi Arabia, Tunisia and Switzerland. He has an
MBA from the Indian Institute of Management, Ahmedabad and a BA Honours (Economics)
from the St. Stephen's College, Delhi.

Mr. Ashish Dhawan is the Senior Managing Director, ChrysCapital. He is the co-founder of
ChrysCapital a private equity fund founded in India that manages US$450.0 million of funds
for leading institutional clients. He previously worked in the Proprietary Investment Group
at Goldman Sachs in New York. He was formerly at GP Investments, a private equity fund
in Brazil and prior to that worked at McCown De Leeuw & Co, a private equity firm in the
USA. He holds an MBA with distinction from Harvard University and a dual bachelors
degree (BS/BA) in applied mathematics and economics from Yale University.

Qegd. & Corporate O f f i c e : YES B A N K Limited, N e h r u Centre, 9th Floor, Discovery of India, Dr. A . S . Road, Word, M u m b a i 400 018, India.
Tel: +91(22) 2490 0650/2494 8286 Fax; +91(22) 2490 0314 Website: www.yesbankHd.com
 Ajay Lai based in Hong Kong, is Senior Partner and Managing Director of AIF Capital. He
is responsible for several investments in the telecom, power generation, financial services
and specialty steel sectors across Asia. Prior to joining AIF Capital in 1997, he was India
Country Representative of AIG Investment Corporation. Before moving to the private
equity industry in 1995, Mr. Lai was with Bank of America as Vice President: Head Financial
Institutions Group and Head Multinational Banking amongst other assignments.

Mr. Kashi Memani recently retired as the Chairman and Country Managing Partner, Ernst
& Young, India, where he specialized in business and corporate advisory matters including
foreign taxation, joint venture agreements, foreign exchange, financial consultancy and
audit. He is a former member of the External Audit Committee of the International
Monetary Fund and was also appointed its Chairman. Currently, he is the Chairman of
American Chamber of Commerce in India, the Vice President of PHD Chamber of
Commerce, member of the National Advisory Committee on Accounting Standards, a
statutory authority for specifying mandatory Accounting Standards, and a special invitee of
the National Council of CII. He has also been the President of Indo American Chamber of
Commerce, Federation of Indian Export Organizations and member of managing
committees of Federation of Indian Chambers of Commerce and Industry and PHD
Chamber of Commerce and Industry and a member of the Governing Council of Indo-
French Chamber of Commerce.

Mr. Bharat Patel is non-executive Chairman and a consultant on strategy, policy and
external relations Procter & Gamble India Limited. He obtained an MBA in Marketing from
the University of Michigan, Ann Arbor, Michigan, USA and an MA in Economics from the
University of Notre Dame, South Bend, Indiana, USA. He joined Vicks International, New
York as Marketing Trainee in 1969 and on its merger with Procter & Gamble, moved to
Procter & Gamble and had a long and distinguished career there. He worked in various
capacities for Procter & Gamble including as Operations Director, Associate General
Manager, Category Manager, Country Manager and Executive Vice President.

Mr. Surrinder L. Kapur holds a M.A. (Maths) and is also an LL.B. He is presently working
as an honorary adviser to the President, PHDCCI (a regional Chamber of Commerce
covering 11 Northern States and Union Territories of the Union of India). Besides his duties
as an adviser, he manages a Small Industry and Business Helpline for Small Entrepreneurs
working in the jurisdiction of the Chamber. He retired from the post of a member of the
Board for Industrial and Financial Reconstruction, with a mandate to revive and rehabilitate
the sick industrial enterprises. He has also worked as Secretary to the Government of India,
Department of Small Scale Industries & Agro and Rural Industries (Ministry of Industry)
and Ministry of Food Processing Industries. He has also been a member of the Foreign
Investment Promotion Board. Prior to this, he worked for 25 years in the Government of
Punjab on various assignments including Chief Secretary to the Government of Punjab,
Secretary, Industries and Chairman, Punjab State Industrial Development Corporation,
Chairman of Punjab Tractors Ltd., Punjab Concast Ltd. and Punjab Small Industries
Corporation. He also served as Joint Secretary in Ministry of Industrial Development (in-
charge of Secretariat for Industrial Approvals and Industrial Policy). He has successfully
completed a number of special assignments, including for international organisations like
UNIDO, UNDP and the World Bank.

Z'egd. & Corporate Office: YES BANK Limited, Nehru Centre, 9th Floor, Discovery of India, Dr. .4.8. Road, Worli, Mumbai 400 018, India. .
Tel: +91(22) 2490 0650/2494 8286 Fax: + 9 ! f 2 2 ) 2490 0314 Website: www.yesbankltd.com
 Mr. Arun K. Mago holds a M.Sc. in Physics, M.Phil, in Social Sciences, various diplomas in
Public Administration, Public Finance and International Law and Diplomacy. A retired
Government official, he has served for over 37 years in different capacities with the
Government of India and the Government of Maharashtra, his last post being the Chief
Secretary, Government of Maharashtra. He has also served as the Chairman of the
Maharashtra State Electricity Board; Secretary (Energy), Government of Maharashtra; Joint
Secretary, Ministry of Power, Government of India; Chairman, Mumbai Port Trust;
Metropolitan Commissioner, Mumbai Metropolitan Region Development Authority;
Additional Municipal Commissioner, Municipal Corporation of Greater Mumbai; Principal
Secretary, Government of Maharashtra.

Mr. H. Srikrishnan is an Executive Director (designate) with the Bank. He holds a B.Com
and an MBA from LIBA, Chennai. Prior to joining us, he was the Country Head,
Transactional Banking and Operations, HDFC Bank, Mumbai where he was the part of the
core team which set up the bank with focus on corporate, retail banking, treasury and capital
market infrastructure businesses. He was member of the Boards of HDFC Banks affiliate
companies viz. flexcel International (P) Limited, ADFC Limited and Solutions Net (India)
Limited. He was also the Manager, Projects, Emirates Bank International, Dubai where he
handled the merger/conversion project and branch automation projects. He has also worked
in various branches of the Bank of America in India where he served as the Head,
Operations, Head, Internal Audit and Country Personnel Officer. His appointment is subject
to approval by RBI.

During the period ended March 31, 2005, 9 meetings of the Board of Directors were held on
November 28, 2003, January 12, 2004, March 8, 2004, June 19, 2004, July 12, 2004,
September 13,2004, November 8,2004, December 17,2004 and March 1,2005.

Dates of appointment of Directors and details of attendance at the Board Meetings of the
Bank as at March 31,2005 are as follows:

, N«une'of;directdf , Pate, of appointment . ..Status Board meeHifgs^ttended

during the year
Mr. Ashok Kapur * - November 28,2003 Non Executive 9
Mr. Rarta Kapoor ** November 28, 2003 Executive 9
Mr.WouterKolff November 28,2003 Non Executive 4
Mr. Hans ten Cate March 10,2004 Non Executive 2
Mr. Ajay Relan March 10, 2004 Non Executive 4
Mr. Ashish Dhawan March 10,2004 Non Executive 5
Mr. Ajay Lai March 10,2004 Non Executive 5
Mr. Kashi Memani April 1,2004 Non Executive Independent 5
Mr. Bharat Patel September 13,2004 Non Executive Independent 4
Mr. S.L. Kapur January 27,2005 Non Executive Independent 1
Mr. Arun K. Mago March 14,2005 Non Executive Independent NIL
Mr. H. Srikrishnan # April 7, 2004 Executive 6

* Appointed as Non Executive Part-time Chairman subsequent to RBI approval w.e.f. September 1, 2004
** Appointed as Managing Director & CEO subsequent to RBI approval w.e.f. September 1, 2004
# Appointment subject to RBI approval

3. Board level sub-Committees

Segd. & Corporate Office: YES BANK Limited, Nehru Centre, 9th Floor, Discovery of India, Dr. A.B. Road, Worli, Mumbai 400 018, India.
Tel: + 9 ! f 2 2 ) 2 4 9 0 0 6 5 0 / 2 4 9 4 8286 Fax. + 9 1 ( 2 2 ) 2 4 9 0 03)4 Website: www.yesbankltd.com

c
 In order to comply with statutory norms, establish a sound corporate governance
framework and ensure effective functioning of the Board, various sub-committee's have
been set up with pre defined terms of reference. The composition of all board level sub-
Committees is in compliance with the requirements the Companies Act, 1956, listing
requirements of the stock exchanges, circulars issued by Reserve Bank of India and best of
class practices.

a) Audit and Compliance Committee CA&C)

Terms of reference
The A&C provides directions and oversee the operation of the total audit function in the
Bank (internal as well as external). It creates an open avenue for communication between
the Board of Directors, Internal Auditors and the Independent Auditors. It monitors the
adequacy of the internal control environment including computerized information control
system and security and Management Information Systems (MIS). Further, the A&C
reviews the Annual Financial Statements and analyzes performance of the Bank, along with
the Management, before the same are forwarded to the Board with primary focus on
accounting policies and practices, compliance with accounting standards and legal
requirements having financial statement implications. It scrutinizes reasons for default, if
any, in payments to Depositories, Debenture holders, Shareholders, Creditors, etc. and legal
matters that could have a significant impact on the financial statements. Importantly, the
A&C independently reviews all related party transactions.

Composition
The A&C is chaired by Mr. Kashi Memani, Non Executive Independent Director. During the
period ended March 31, 2005, there were three meetings of the A&C. The details of
composition, attendances of meetings are as follows:

f Najne of irieihber . . Number ofmeetings attended

Mr. Kashi Memani, Chairman 3
Mr. Ashok Kapur 3
Mr. Ajay Lai (upto Dec 17,04) 2
Mr. Hans ten Cate (upto Dec 17, 04) Nil
Mr. BharatPatel (inducted w.e.f. Dec 17, 04) 1

b) Risk Monitoring Committee ('RMC')

Terms of reference
The RMC primarily focuses on identification, monitoring and measurement of the risk
profile of the bank (including market risk, operational and transactional risk and credit risk).
Further, it oversees the Banks integrated risk measurement system and reviews the risk
models as developments take place in the markets. All risk management policies and
structures of risk management are reviewed and approved by the RMC. It assists in
development of an integrated framework for charting/categorizing various types of loans,
investments to determine implications on quality. The committee also develops policies and
procedures for setting of quantitative prudential limits on various products and segments of
the Bank's operations and monitors compliance of various risk parameters by operating
departments.

Composition
legd. & Corporate Office: YES BANK Limited, Nehru Centre, 9th Floor, Discovery of India, Dr. A.B. Road, Worli, Mumbai 400 018, India.
Tel: +91(22) 2490 0650*2494 8286 Fox: +91(22} 2490 0314 Website: www.yesbankltd.com
 YES/7BANK

The RMC is chaired by Mr. Ashok Kapur, Non Executive Director. During the period ended
March 31, 2005, there were three meetings of the RMC. The details of composition,
attendances of meetings are as follows:

Name of-member Number of meetings attended

Mr. Ashok Kapur., Chairman 3
Mr. Rana Kapoor, Vice Chairman 2
Mr. Wouter Kolff (upto Dec 17, 04) Nil
Mr. Ajay Relan 1
Mr. Ajay Lai 3
Mr. Hans ten Cate (inducted w.e.f. Dec 17, 04) Nil

c) Board Remuneration Committee ('BRC')

Terms of reference
The BRC reviews the overall compensation structures and related policies with a view to
attract, motivate and retain employees of the Bank. The committee determines the
company's policies on remuneration packages payable to the Directors including pension
rights, performance/ achievement bonus and perquisites, etc. Further, it considers grant of
stock options to employees and administers and supervises the Employee Stock Option
Schemes. The BRC also establishes the sitting fee payable to Directors for the purpose of
attending board and Board level sub-Committee meetings.

Composition
The BRC is chaired by Mr. Ashish Dhawan, Non Executive Director. During the period
ended March 31, 2005, there was one meeting of the BRC. The details of composition,
attendances of meetings are as follows:

^Name;o"f Jm'eniber . . . . . . Number of meetings attended

Mr. Ashish Dhawan., Chairman 1
Mr. Wouter Kolff 1
Mr. Ajay Relan 1
Mr. Ajay Lai 1
Mr. Rana Kapoor 1

d) Nomination^ Committee CNC)

Terms of reference
The NC reviews the current Board composition, its governance framework, its Committees
as well as determines future requirements and makes recommendations to the board.
Further, it scrutinizes nominations for independent/ non executive directors with reference
to their qualifications, experience, fit and proper criteria and makes recommendations to the
Board for appointment/filling of vacancies.

Composition
The NC is chaired by Mr. Rana Kapoor. During the period ended March 31, 2005, there was
one meeting of the NC. The details of composition, attendances of meetings are as follqws:

Name of member Number of meetings attended

Mr. Rana Kapoor., Chairman 1
Mr. Kashi Memani . 1
Mr. Ashok Kapur (upto Dec 17, 04) 1

<legd. & Corporate Office: YES BANK Limited, Nehru Centre, 9th Floor, Qiscovery of India, Dr. A.B. Road, Worli, Mumbai 400 0 I8, India.
Tel: +91(22) 2490 0650/2494 8286 Fax: +91(22) 2490 0314 Website: www.yesbonkltd.com
 YESyfBANK

Mr. Ashish Dhawan 1

Mr. BharatPatel (inducted w.e.f. Dec 17, 04) Nil

e) Investor Relations Committee (Shareholders'Redressal) CIRC)

Terms of reference
The IRC ensures redressal of complaints from shareholders such as non receipt of dividend,
annual report, transfer of shares, issue of duplicate share certificates, etc. Further, it
monitors transfers, transmissions, dematerialization, rematerialization, splitting and
consolidation of shares and bonds issues by the Bank.

Composition
The IRC is chaired by Mr. Bharat Patel, Non Executive Independent Director. During the
period ended March 31, 2005, there no meeting of the IRC. The details of composition of the
IRC is as follows:

Names of members
Mr. Bharat Patel, Chairman
Mr. Ashok Kapur
Mr. Ajay Relan
Mr. H. Srikrishnan

4. General Body Meetings

The details of the General Meetings of shareholders held during the period ended
March 31,2005 are as follows:

, Meetin&type Date Day/Time Venue *

Statutory Meeting July 12,04 3.00 pm The Vetiver Room, Hotel Taj, Apollo
Bunder, Mumbai 400 039
Extraordinary General Meeting October 27,04 2.00 pm 9th floor, Nehru Centre, Discovery of India
Building, Dr. A.B. Road, Worli, Mumbai -
400 018
Extraordinary General Meeting December 17,04 4.00 pm The Parliament Room, The Chambers,
Hotel.Taj Mansingh, New Delhi -110 011
Extraordinary General Meeting March 1,05 4.00 pm 9* floor, Nehru Centre, Discovery of India
Building, Dr. A.B. Road, Worli, Mumbai -
400 018

5. Sustainability and Social Responsibility

Accountability, transparency, corporate governance, corporate social responsibility (CSR)

and sustainability are fast becoming determinants of corporate brand value, reputation and
indeed in many cases, corporate survival. In this rapidly changing business climate where
the bank's risk profile encompasses a growing exposure to environmental, social and .ethical
risks (which in turn call for innovative business models on the part of banks), banks can only
maintain sustainable profitability through client and risk benchmarking and forward
looking business approaches which imbibe commercial linkages with triple bottom line .
concerns.
£egd. & Corporate Office: YES SANK Limited, Nehru Centre, 9th Floor, ^iscovery of India, Dr. A.S. Road, Worli, Mumbai 400 018, India.
Tel: +91(22) 2 4 9 0 0 6 5 0 / 2 4 9 4 8 2 8 6 Fax: +91(22) 2490 0314 Website: www.yesbankltd.com
 YES/7BANK

Further/ in addition to their commercial role, banks are viewed as the trustees of public
funds and have an inherent "social responsibility" to augment this trust. In recent times, the
collapse of some banks and the resultant erosion of stakeholder value indicates an even
stronger need for initiatives that address issues of corporate governance and wider
responsibility to multiple stakeholders.

YES BANK is pioneering a business approach titled Responsible Banking which integrates
Sustainability and Corporate Social Responsibility (CSR) within the bank's larger
philosophy to banking. Here the bank is:
• adopting a social and economic value generation model and supporting businesses that
do so;
• addressing responsibility to the Bank's various stakeholders;
• recognising the importance of change and managing change through Metanoia;
• operating in a "Sustainability Zone" to mainstream environmental and social issues and
structure bankable projects and provide innovative financial services.

Thus far the traditional focus of banks has been to engage with society through largely
philanthropic initiatives. However, YES BANK believes that in the long run, pure corporate
philanthropy does not promote sustainability. Therefore, the key is to operate in a zone
where the principles of pure profit and philanthropy are synergised to create a dynamic
positioning i.e. a "Sustainability Zone", where wider economic, environmental and social
objectives are met. Indeed, it is this niche that represents a rewarding and balanced market
opportunity. YES BANK believes there are several sunrise sectors that can be profitable on a
stand-alone basis. There is a strong business case for projects that deal with Blue (Air and
Water), Green (Land) and Brown (Waste) Issues. Project opportunities in areas such as
energy (particularly renewables), urban and rural regeneration, sustainable water
management and solid waste management can be remunerative and can add substantial
value to society. Similarly, carbon sequestration is a growing market and carbon services
will increasingly become a critical component of the banking portfolio of services.

At YES BANK, Responsible Banking is being championed through a model that is geared to
identify and provide innovative sustainable finance and services and which synergistically
benefits from a bank-wide vision to develop strong internal governance and CSR processes
and external outreach. More importantly, this model addresses cutting edge sustainability
approaches which may be defined as Second Generation Sustainability (SGS) - a key
component of new age banking. This includes:
• Socially Responsible Investing (SRI) - awareness and social capital building through
sustainable financial literacy, SRI principles and SRI funds;
• Asset Management - SRI approaches, Sustainable Asset Management, assets under
management with high social and environmental benefit;
• Specialised Banking - extending banking services to classes, communities or projects not
traditionally included in the banking fold, e.g. microfinance, NGO banking, etc.

Specific and select initiatives undertaken by YES BANK include:

• Socially Responsible and Sustainable Investing (SRSI) - An MoU has been signed with
BTS Investment Advisors, Switzerland, for sustainable finance and investment in India.

Regd. & Corporate Office: YES BANK Limited, Nehru Centre, 9th Floor, ffrcovery of India, Dr. A.B. Road, Worli, Mumbai 400 016, India.
Tel: +9) [72) 2 4 9 0 0 6 5 0 / 2 4 9 4 8 2 8 6 Fox: + 9 1 ( 2 2 ; 2 4 9 0 0 3 ) 4 Website: www.yesbanhiid.com
 YES//BANK

Under this mandate, YES BANK will focus on tapping market opportunities for
sustainable investments and value added services that increasingly incorporate
principles of sustainability, corporate social responsibility (CSR), ethics and
accountability in financial models and business investment decision making. An SRSI
platform at YES BANK builds both its organisational as well as sectoral comparability
and competitiveness through structured sustainable finance and advisory investment
solutions.

• Green Funds - YES BANK is committed to Sustainable Development and to this end is
setting up the Indian Renewable Energy Enterprise Development (IREED) Fund along
with BTS Investment Advisors, Switzerland and Rabo India Finance Pvt. Ltd. The IREED
Fund is targeted as a USD 30 million fund for equity/quasi-equity investments in
renewable energy projects and companies manufacturing renewable energy equipment
in India. YES BANK is the Strategic Advisor to this fund and would leverage on the
expertise of its personnel in appraising and financing renewable energy projects. This
Fund would also present significant advisory and financing opportunities to YES BANK
in the investee companies.

C SHAREHOLDING PATTERN

As at March 31, 2005, the shareholding pattern of the Bank was as follows:

7.50% 2.88%
750% ^d«^ f^i I Hill II I l l l l l 26.06%

10.00%

20.00% •« ™ ^ B I ^ » — ' 2606%

D Ashok Kapur (including family owned investment companies) D Rana Kapoor (including family owned investment companies)
B Rabobank International Holding B.V. D Citicorp international Finance Corporation
O ChrysCapital IILLC @ AIF Capital Incorporation
• Yes Bank Senior Management

D. DIVIDEND

Being first year of operations of the Bank, your Directors do not recommend any dividend
for the period from November 21, 2003 to March 31,2005.

E. PARTICULARS OF EMPLOYEES

Regd. & Corporate Office: Y£S BANK Limited, Nehru Centre, 9th Floor, pfscovery of India, Dr. A.B. Road, Worli, Mumbai 400 018, India.
Tel: +91(22) 2490 0650/2494 8286 Fax: +9i(22) 2490 0314 Website: www.yesbonidtd.com
 YES // BANK

The information required under Section 217(2A) of the Companies Act, 1956 and the rules
made there under, are given in the annexure appended hereto and forms part of this report.

F. DIRECTORS RESPONSIBILITY STATEMENT

In pursuance of Section 217 (2AA) of the Companies Act, 1956 your Directors confirm that:

1. in the preparation of the annual accounts of the Bank, the applicable accounting
standards have been followed and there has not been any material departures thereof;
2. the Directors have selected such accounting policies and applied them consistently and
made judgments and estimates that are reasonable and prudent so as to give a true and
fair view of the state of affairs of the Bank at the end of the financial year and of the
profit of the Bank for the year under review;
3. the Board of Directors had taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the Companies Act,
1956 for safeguarding the assets of the Bank and for preventing and detecting fraud
and other irregularities and
4. accounts had been prepared on a going concern basis.

G. CONSERVATION OF ENERGY TECHNOLOGY, ABSORPTION, FOREIGN

EXCHANGE EARNING AND OUTGO.

Information pursuant to Section 217 (1) (e) of the Companies Act, 1956, read with the
Companies (Disclosure of particulars in Report of Board of Directors) Rules, 1988 have not
been given since the Company is solely engaged in Banking activities.

H. AUDITORS

M/s. S. R. Batliboi & Company, Chartered Accountants, Statutory Auditors of the Bank
retire at the ensuing Annual General Meeting and, being eligible, offer themselves for rer
appointment.

I. ACKNOWLEDGEMENT

Your Directors takes this opportunity to place on record sincere appreciation and thanks to
its stakeholders including subscribers, shareholders and employees for their excellent
contribution and support towards progress of the organization. Further, the Bank also takes
this opportunity to thank its clients and aistomersjbr_their continued patronage.

phalf of the Board of Directors

iS BANK Limited

AshoM Kapur
Chairman
Place: Mumbai
Dated: April 25, 2005

V.egd. & Corporate O f f i c e : YES BANK Limited, Nehru Centre, 9th Floor, J^scovery of India, Dr. A . B . Rood, Worli, Mumbai 400 0/8, India.
Tel: +91(22) 2490 0650/2494 8286 Fax: T9I(22) 2490 0314 Website: www.yesbankltd.com
 Financial Statements

For the period from November 21,2003 to March 31,2005

YES//BANK
EXPERIENCE OUR EXPERTISE
Financial Statements for the period from November 21,2003 to March 31,2005

TABLE OF CONTENTS

Contents Page

Auditors Report 2of25

Balance Sheet 4of25

Profit and Loss Account 5 of 25

Cash Flows 6 of 25

Schedules forming part of the Balance Sheet and Profit and Loss Account 8 of 25

Notes forming part of the Accounts 15 of 25

Page 1 of 25
 Chartered Accountants Phone : (91-22) 2287 6485/6
S.R. BATLIBOI 6th Floor , Express Towers
Nariman Point
Mumbai • 400 021, India
Fax :(91-22) 2287 6401

Auditors' Report
To the Members of
Yes Bank Limited

AUDITORS' REPORT ON THE FINANCIAL STATEMENTS

UNDER SECTION 30 OF THE BANKING REGULATION ACT, 1949

1. We have audited the attached balance sheet of Yes Bank Limited (the 'Bank') as at March 31, 2005
and also the profit and loss account and cash flow statement for the period from November 21, 2003
to March 31, 2005 annexed thereto. These financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these financial statements based on our
audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those
Standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

3. The balance sheet and profit and loss account are drawn up in conformity with Forms A and B
(revised) of the Third Schedule to the Banking Regulation Act, 1949, read with sub section (3C) of
Section 211 of the Companies Act, 1956.

4. We report that:

a) We have obtained all the information and explanations, which to the best of our knowledge and
belief were necessary for the purposes of our audit and have found them to be satisfactory;

b) In our opinion, the transactions of the Bank which have come to our notice have been within its
powers;

c) In our opinion, proper books of account as required by law have been kept by the Bank so far as
appears from our examination of those books and proper return's adequate for the purposes of our
audit have been received from branches not visited by us;

d) The balance sheet, profit and loss account and cash flow statement dealt with by this report are
in agreement with the books of account;

e) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by
this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of
the Companies Act, read with guidelines issued by the Reserve Bank of India insofar as they
apply to the Bank;
Certified True Copy

For YES BAU^K^MITED

Authorised Signatory

OFFICES: CALCUTTA, NEW DELHI, MUMBAI, CHENNAI, HYDERABAD, BANGALORE & PUNE
 ATUB

Yes Bank Limited

Period ended March 31, 2005
Auditors' Report on the Financial Statements
Page 2 of2

f) On the basis of written representations received from the directors, as on March 31, 2005, and
taken on record by the Board of Directors, we report that none of the directors is disqualified
from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the
Companies Act, 1956;

g) In our opinion and to the best of our information and according to the explanations given to us,
the said accounts give the information required by the Companies Act, 1956 in the manner so
required for banking companies, and give a true and fair view in conformity with the accounting
principles generally accepted in India;

i. in case of the balance sheet, of the state of the affairs of the Bank as at March 31, 2005;

ii. in case of the profit and loss account, of the loss for the period from November 21, 2003 to
March 31, 2005; and

iii. in case of the cash flow statement, of the cash flows for the period from November 21,
2003 to March 31, 2005.

For S.R. Batliboi & Co.

Chartered Accountants

Per Viren H. Mehta

Partner
Membership No.: 048749

Place: Mumbai
Date: April 25, 2005
Financial Statements for the period from November 21,2003 to March 31,2005

Balance Sheet as at March 31,2005

Schedule (Rs. '000)

CAPITAL AND LIABILITIES

Capital 1 2,000,000
Reserves and surplus 2 170,000
Deposits 3 6,630,345
Borrowings 4 3,697,411
Other liabilities and provisions 5 283,973
TOTAL 12,781,729

ASSETS

Cash and balances with Reserve Bank of India 6 413,366

Balances with banks, money at call and short notice 7 116,930
Investments 8 3,948,642
Advances 9 7,609,790
Fixed assets 10 196,424
Other assets 11 496,577
TOTAL 12,781,729

Contingent liabilities 12
Bills for collection

Notes to Accounts 18
As per our report of even date attached

S.R. Batliboi & Co. \ Fo\ and on behalf of the Board of Directors
Chartered Accountants \ YesVBank Limited

» /»*
Per Viren H. Mehta Asl ok Kapur
Partner irman Managing Director & CEO
Membership No.: 048749

Kashi Memani Bharat Patel Danish Shah

Director Director Company Secretary

Mumbai Certified True Copy

April 25,2005
For YES B IMITED
' Page 4 of 25

Authorised Signatory
Financial Statements for the period from November 21,2003 to March 31,2005

Profit and Loss account for the period from November 21,2003 to March 31,2005

Schedule (Rs. '000)

I. INCOME
Interest earned 13 299,787
Other income 14 181,682
TOTAL 481,469

II. EXPENDITURE
Interest expended 15 118,489
Operating expenses 16 399,427
Provisions and contingencies 17 1,140
TOTAL 519,056

III. PROFIT
Net profit/ (loss) for the period (37,587)
TOTAL (37,587)

IV. APPROPRIATIONS
Balance carried over to balance sheet (37,587)
TOTAL (37,587)

Basic and diluted earnings per share (Rs.) 18.4.5 (0.24)

Notes to Accounts 18

As per our report of even date attached

S.R. Batliboi & Co. \ Fqr and on behalf of the Board of Directors
Chartered Accountants
nYes\Bank Limited

Per Viren H. Mehta AMu k Kapur

Partner Chai man g Director & CEO
Membership No.: 048749

Kashi Memani Bharat Patel Danish Shah

Director Director Company Secretary

Mumbai Certified True Conv

April 25,2005
For YES B4NK_LIMITED
Page 5 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

Cash flow statement for the period from November 21,2003 to March 31,2005

(Rs. '000) (Rs. '000)

Cash flow from operating activities

Net profit/(loss) before taxes (55,764)

Adjustment for
Depreciation for the period 12,452
Amortization of premium investments 6,085
General provision against standard assets 19,030
Loss / (Profit) from sale of scrap (222)
Dividend income on mutual funds (20,148)
Capital gains on sale mutual fund units (23,434)
Operating loss before working capital changes (62,001)

Changes in working capital

Deposits accepted (net) 6,630,345
Borrowings accepted (net) 3,697,411
Other liabilities incurred 264,943
Investments made (net) (3,033,727)
Advances disbursed (net) (7,609,790)
Other assets receivable (439,797)

Cash flow from operating activities before taxes (552,616)

Direct taxes paid (1,016)
Net cash flow from operating activities (553,632)

Cash flow from investing activities

Purchase of fixed assets (175,901)
Capital work in progress (32,975)
Investments made (net) (921,000)
Proceeds from sale of scrap 222
Capital gains on sale of mutual fund units 23,434
Dividend income on mutual funds 20,148
Net cash flow from investing activities (1,086,072)

Contd...

Page 6 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

Cash flow statement for the period from November 21,2003 to March 31,2005
(Contd...)
(Rs. '000) (Rs. '000)

Cash flow from financing activities

Proceeds from issuance of share capital 2,000,000

Share premium received thereon 170,000

Net cash flow from financing activities 2,170,000

Net increase in cash and cash equivalents 530,296

Cash and cash equivalents as at November 21,2003

Cash and cash equivalents as at March 31,2005 530,296

For definition of cash and cash equivalents refer note 18.3.11

As per our report of even date attached

S.R. Batliboi & Co. d on behalf of the Board of Directors

Chartered Accountants Yes bank Limited

j kKapur
Per Viren H. Mehta
rman ging Director & CEO
Partner
Membership No.: 048749

Kashi Memani Bharat Fatel Danish Shah

Director Director Company Secretary

Mumbai
Certified True Copy
April 25,2005

For YES BANK LIMITED

Authorised Signatory

Page 7 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

Schedules forming part of the Balance Sheet

(Rs. '000)

SCHEDULE 1 - CAPITAL

Authorized Capital
400,000,000 equity shares of Rs 10/- each 4,000,000

Issued, subscribed and paid-up

200,000,000 equity shares of Rs 10/- each 2,000,000

TOTAL 2,000,000

SCHEDULE 2 - RESERVES AND SURPLUS

I. Share Premium
Balance as at November 21,2003
Additions during the period 170,000
170,000

II. Balance in Profit and Loss Account

TOTAL 170,000

Page 8 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

Schedules forming part of the Balance Sheet

(Rs. '000)

SCHEDULE 3 - DEPOSITS

A. I. Demand Deposits
i) From banks
ii) From others 71,519
II. Savings Bank Deposits 19,765
III. Term Deposits
i) From banks
ii) From others 6,539,061
TOTAL 6,630,345

B. I. Deposits of branches in India 6,630,345

II. Deposits of branches outside India
TOTAL 6,630,345

SCHEDULE 4 - BORROWINGS

I. Borrowings in India
i) Reserve Bank of India
ii) Other banks 2,070,000
iii) Other institutions and agencies * 1,119,879
3,189,879
II. Borrowings outside India 507,532
TOTAL 3,697,411
* includes secured borrowing of Rs. 769,879 thousand

SCHEDULE 5 - OTHER LIABILITIES & PROVISIONS

!• Bills payable 17,478

II. Inter-office adjustments (net)
III. Interest accrued 28,354
IV. Others (including provisions) 238,141
TOTAL 283,973

Page 9 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

Schedules forming part of the Balance Sheet

(Rs. '000)

SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA

I. Cash in hand 2,834
II. Balances with Reserve Bank of India in current accounts 410,532

TOTAL 413,366

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

I. In India
Balances with banks
i) in current accounts 598
ii) in other deposit accounts
Money at call and short notice 100,000
Total 100,598

II. Outside India

i) in current accounts 16,332
ii) in other deposit accounts
iii) Money at call and short notice
Total 16,332

TOTAL 116,930

SCHEDULE 8 - INVESTMENTS (net of provisions)

A. Investments in India in
i) Government securities 2,687,040
ii) Other approved securities
iii) Shares - fully paid
• iv) Debentures a n d bonds 1,256,602
v) Subsidiaries a n d / or joint ventures
vi) Others * 5,000
3,948,642
B. Investments outside India
TOTAL 3,948,642
* comprises equity shares subscribed for, pending allotment

Page 10 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

Schedules forming part of the Balance Sheet

(Rs. '000)

SCHEDULE 9 - ADVANCES

A. i) Bills purchased and discounted 278,385

ii) Cash credits, overdrafts and loans repayable on demand 832,910
iii) Term loans 6,498,495

TOTAL 7,609,790

B. i) Secured by tangible assets 3,698,705

ii) Covered by Bank/Government guarantees 12,616
iii) Unsecured * 3,898,469

* includes advances of Rs. 2,069,326 thousand for which

documentation is either being obtained or being registered

TOTAL 7,609,790

C I. Advances in India
i) Priority sectors (including export finance) 250,000
ii) Public sector
iii) Banks
iv) Others 7,359,790
7,609,790

II. Advances outside India

TOTAL 7,609,790

Page 11 of 25
 Financial Statements for the period from November 21,2003 to March 31,2005

Schedules forming part of the Balance Sheet

(Rs. '000)

SCHEDULE 10 - FIXED ASSETS

I. Premises
II. Other Fixed Assets (including furniture and fixtures)
Cost as at November 21,2003
Additions during the period 175,901
Deductions during the period
Accumulated depreciation to date (12,452)
163,449
Capital Work-in-Progress 32,975
TOTAL 196,424

SCHEDULE 11 - OTHER ASSETS

I. Interest Accrued 79,263
II. Tax deducted at source 3,436
III. Deferred tax asset (Net) 19,193
IV. Others
i) Balance in the Profit and Loss Account 37,587
ii) Others 357,098
TOTAL 496,577

SCHEDULE 12 - CONTINGENT LIABILITIES

I. Claims against the bank not acknowledged as debts 4,332
II. Liability for partly paid investments
III. Liability on account of outstanding forward exchange & derivative contracts 63,881,988
IV. Guarantees given on behalf of constituents
- In India 478,418
- Outside India
V. Acceptances, endorsements and other obligations 590,876
VI Other items for which the bank is contingently liable
- On account of Government Securities 223,063
- Capital Commitments 43,477
TOTAL 65,222,154

<r.\
hci
iU3
Page 12 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

Schedules forming part of the Profit and Loss Account

(Rs. '000)

SCHEDULE 13 - INTEREST EARNED

I. Interest/discount on advances/bills 231447

II. Income on investments 62,430
III. Interest on balances with Reserve Bank of India and other inter-bank funds 5,236
IV. Others 974

TOTAL 299,787

SCHEDULE 14 - OTHER INCOME

I. Commission, exchange and brokerage 78,001

II. Profit on the sale of investments (net) 25,958
III.Profit on the revaluation of investments (net) (61)
IV. Profit on sale of land, building and other assets
V. Profit on exchange transactions (net) 70,179
VI. Income earned by way of dividends etc. from subsidiaries,
companies and/or joint ventures abroad/in India
VII. MisceUaneous income (includes derivative income of Rs. 6,766
thousand) 7,605

TOTAL 181,682

Page 13 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

Schedules forming part of the Profit and Loss Account

(Rs. '000)

SCHEDULE 15 - INTEREST EXPENDED

I. Interest on deposits 88,994
II. Interest on Reserve Bank of India/inter-bank borrowings 29,495
III. Others

TOTAL 118,489

SCHEDULE 16 - OPERATING EXPENSES

I. Payments to and provisions for employees 212,719
II. Rent, taxes and lighting 27,369
III. Printing and stationery 4,480
IV. Advertisement and publicity 24,818
V. Depreciation on Bank's property 12,452
VI. Directors' fees, allowances and expenses 955
VII. Auditors' fees and expenses 1,055
VIII. Law charges 10,232
IX. Postage, telegrams, telephones, etc. 4,870
X. Repairs and maintenance 4,262
XI. Insurance 1,756
XII. Other expenditure 94,459
TOTAL 399,427

SCHEDULE 17 - PROVISIONS & CONTINGENCIES

I. Taxation charge
- Current tax expense 1,016
- Deferred tax benefit (19,193)
II. Wealth Tax 287
III. General provision against standard assets 19,030
TOTAL 1,140

Page 14 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

18. Notes forming part of the Accounts for the period from November 21,2003 to March 31,2005

18.1 Background

YES BANK Limited (the 'Bank' or 'YES BANK') is a private sector Bank promoted by Mr. Ashok
Kapur and Mr. Rana Kapoor. The Bank is financially supported by Rabobank, Nederland and three
institutional private equity investors viz. CVC - Citigroup-New York, AIF Capital - Hong Kong and
ChrysCapital - San Francisco.

The Bank was incorporated as a limited company under the Companies Act, 1956, on November 21,
2003 with its registered office at 9th Floor, Discovery of India Building, Nehru Centre, Dr. A.B. Road,
Worli, Mumbai 400 018. The Bank received the licence to commence banking operations from the
Reserve Bank of India ('RBI') on May 24,2004. Further, YES BANK has been included to the Second
Schedule of the Reserve Bank of India Act, 1934 with effect from August 21, 2004.

18.2 Basis of preparation

The accounting and reporting policies of YES BANK used in the preparation of these financial
statements conform to Generally Accepted Accounting Principles ('GAAP) in India, the guidelines
issued by the RBI from time to time and practices generally prevailing within the banking industry
in India. The Bank follows the accrual method of accounting and historical cost convention.

The preparation of financial statements requires the management to make estimates and
assumptions considered in the reported amounts of assets and liabilities (including contingent
liabilities) as of the date of the financial statements and the reported income and expenses during
the reporting period. Management believes that the estimates used in the preparation of the
financial statements are prudent and reasonable. Future results could differ from these estimates.
The financial statements have been prepared as per Form A and B (revised) of the Third Schedule to
The Banking Regulation Act, 1949.

18.3 Significant accounting policies

18.3.1 Revenue recognition

Revenue is recognised to the extent it is probable that the economic benefits will flow to the Bank
and the revenue can be reliably measured.

• Interest income is recognised in the Profit and Loss Account on accrual basis, except in the case
of non-performing assets. Interest on non-performing assets is recognised upon realization as
per the prudential norms of the RBI. Revenue, in certain transaction so structured where interest
income is partially receivable in advance on a non-refundable basis, is recognized on realisation.
• Dividend income is recognised when the shareholders'/unit holders' right to receive payment is
established.
• Commission on guarantees issued by the Bank is recognized as income over the period of the
guarantee.
• Commission on letters of credit ('LC) issued by the Bank is recognized as income at the time of
issue of the LC.
• Other fees and commission income are recognised on accrual basis.

Page 15 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

18.3.2 Investments

Investments are valued in accordance with the extant RBI guidelines on investment classification
and valuation as under:

(a) Investments are categorised into 'Held to Maturity', 'Available for sale' and 'Held for Trading'.
Reclassifications, if any, between categories are accounted for as per the RBI guidelines. Under
each category, the investments are further classified under (a) Government securities (b) other
approved securities (c) shares (d) bonds and debentures (e) subsidiaries and joint ventures and
(f) others.

(b) 'Held to Maturity' securities are carried at their acquisition cost or at amortised cost if acquired
at a premium over the face value. A provision is made for the other than temporary diminution
in value.

(c) 'Available for sale' and 'Held for Trading' securities are valued periodically as per RBI
guidelines.

Securities are valued scrip-wise and depreciation/appreciation aggregated for each category.
Net appreciation in each category if any, being unrealized, is ignored, while net depreciation is
provided for. For the purposes of determining market values, rates declared by Primary
Dealers Association of India jointly with Fixed Income Money Market and Derivatives
Association ('FIMMDA'), have been used.

The valuation of non-SLR securities, other than those quoted on the stock exchanges, wherever
linked to the Yield to Maturity ('YTM') rates, is with a mark-up (reflecting associated credit risk)
over the YTM rates for government securities put out by FIMMDA. Equity shares are valued at
their closing price on a recognized stock exchange. The unquoted equity shares are valued at
the book value.

(d) Costs such as brokerage, commission etc., pertaining to investments, paid at the time of
acquisition are charged to revenue.

18.3.3 Advances

Advances are classified as performing and non-performing based on RBI guidelines. Advances are
stated net of specific loan loss provisions, interest in suspense, ECGC claims received, Inter-bank
participation certificates and bills rediscounted. Specific loan loss provisions in respect of non-
performing advances are made based on management's assessment of the degree of impairment of
the advances, subject to the minimum provisioning level prescribed in RBI guidelines.

The Bank also maintains general provisions to cover potential credit losses, which are inherent in
any loan portfolio, but not yet identified. These provisions have been made as per RBI guidelines.

18.3.4 Transactions involving foreign exchange

Monetary foreign currency assets and liabilities are translated at the balance sheet date at rates
notified by the Foreign Exchange Dealers' Association of India ('FEDAI'). Foreign exchange
contracts outstanding at the balance sheet date are revalued at rates notified by FEDAI for specified
maturity and at interpolated rates for contract of in-between maturity and resulting profits or losses
are included in the Profit and Loss Account

Contingent liabilities at the balance sheet date on account of outstanding foreign exchange, contracts
are reported at contracted rates, except cross currency forward exchange contracts which are stated
at year end rates.

Page 16 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

Income and expenditure items are accounted for at exchange rates prevailing on the date of the
transaction.

28.3.5 Accounting for derivative transactions

Derivative transactions comprise futures, forwards, swaps and option transactions. The derivative
transactions are undertaken for trading or hedging purposes. Trading transactions are marked to
market on a periodic basis and the unrealised gains/losses are recognised in the Profit and Loss
Account Premium is recorded as a balance sheet item and transferred to the Profit and Loss
Account on maturity/cancellation. In the case of hedging transactions, the net interest receivable/
payable is accounted for on an accrual basis over the life of the swaps.

The requirement for collateral and credit risk mitigation on derivative contracts is assessed based on
internal credit policy. Provisions for overdue customer receivables on derivative contracts are made
as per the RBI provisioning guidelines.

18.3.6 Fixed assets

Fixed assets are stated at cost less accumulated depreciation and impairment. Cost comprises the
purchase price and any cost attributable for bringing the asset to its working condition for its
intended use. The carrying amount of fixed assets are reviewed at each balance sheet date if there
are any indications of impairment based on internal / external factors.

18.3.7 Depreciation

Depreciation is provided on straight line method, over the estimated useful lives of the fixed assets,
at the rates mentioned below which are greater than or equal to the corresponding rates prescribed
in Schedule XIV to the Companies Act, 1956:

Class of asset Rates of depreciation

Office equipment 16.21%
Computer Hardware 33.33%
Computer Software 25.00% or over the period of the licence, whichever is greater
Vehicles 20.00%
Leasehold improvements to Over the lease period
premises

Assets costing less than Rs. 5,000 are fully depreciated in the period of purchase.

18.3.8 Retirement and employee benefits

Gratuity

The Bank provides for gratuity, a defined benefit retirement plan covering all employees. The plan
provides for lump sum payments to employees at retirement, death while in employment or on
termination of employment of an amount equivalent to 15 days salary payable for each completed
year of service. Vesting occurs upon completion of five years of service. The Bank accounts for
liability of future gratuity benefits based on an external actuarial valuation carried out annually at
the balance sheet date.

Page 17 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

Provident fund

In accordance with law, all employees of the Bank are entitled to receive benefits under the
provident fund, a defined contribution plan in which both the employee and the Bank contribute
monthly at a pre determined rate. The Bank has no liability for future provident fund benefits other
than its annual contribution and recognises such contributions as an expense in the year incurred.

There exists no policy for encashment of unutilised leave balance or carry forward of unavailed
leave.

The Bank has instituted a joining employee stock option scheme for all eligible employees. The
intrinsic value of the options, if any, is expended on a straight line basis over the vesting period.

18.3.9 Leases

Leases where the lessor effectively retains substantially all risks and benefits of ownership are
classified as operating leases. Operating lease payments are recognized as an expense in the profit
and loss account on a straight-line basis over the lease term.

18.3.W Preliminary and other miscellaneous expenditure

Costs incurred prior to the date of incorporation are included under 'pre-incorporation expenses'
and costs incurred for the purpose of incorporation of the Bank are included under 'Preliminary
Expenses'. These items have been written off during the period.

18.3.11 Income taxes

Tax expense comprises both current and deferred taxes. Current income taxes are determined in
accordance with the provisions of the Income Tax Act, 1961. Deferred income taxes reflect the
impact of current period timing differences between taxable income and accounting income for the
period and reversal of timing differences. Deferred tax is measured based on the tax rates and the
tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are
recognised only to the extent that there is reasonable certainty that sufficient future taxable income
will be available against which such deferred tax assets can be realised. Deferred tax assets are
recognised on carry forward of unabsorbed depreciation, preliminary expenses and tax losses only
if there is virtual certainty that such deferred tax assets can be realised against future taxable profits.

18.3.12 Earnings per share

Basic and diluted earnings per share are calculated by dividing the net profit or loss for the period
attributable to equity shareholders by the weighted average number of equity shares outstanding
during the period. Diluted earning per equity share has been.computed using the weighted average
number of equity shares and dilutive potential equity shares outstanding during the period, except
where the results are anti-dilutive.

18.3.13 Provisions

A provision is recognised when the Bank has a present obligation as a result of past event; it is
probable that an outflow of resources will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to its present value and are determined
based on best estimate required to settle the obligation at the balance sheet date. These are reviewed
at each balance sheet date and adjusted to reflect the current best estimates.

Page 18 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

18.3.14 Cash and cash equivalents

Cash and cash equivalents include cash in hand, balances with RBI, balances with other banks and
money at call and short notice.

18.4 Notes to Accounts

18.4.1 Deferred tax

The net deferred tax asset of Rs. 19,193 thousand for the period ended March 31, 2005, is included
under other assets and the corresponding credit has been taken to the Profit and Loss Account.

The components that give rise to the deferred tax asset included in the balance sheet are as follows:
(Amount in Rs. '000s)
Particulars
Deferred tax liability
Depreciation (7,601)
Sub-total (7,601)
Deferred tax asset
Preliminary and pre-incorporation expenses 7,645
Provision for gratuity 517
Tax loss carried forward 12,227
General provision against standard assets 6,405
Sub-total 26,794

Net deferred tax asset 19,193

18.4.2 Segment reporting

As per Accounting Standard ('AS') 17 Segment Reporting, issued by the ICAI, the Bank's segment
results are disclosed below:
(Amount in Rs. '000s)
Business Segments Treasury Other banking Residual Total
operations Operations
Revenue 117,966 314,257 49,246 481,469
Interest expense (24,665) (92,483) (1,341) (118,489)
Operating expenses
and Provisions (97,535) (276382) (44,540) (418,457)
Segment result
Taxes 1
• • • • • M M wmmm
(4,234) (54,608) 3,365 (55,477)
17,890
Extraordinary profit
Net profit/(loss)
1
| ••• -
(37,587)

Other information
Segment assets 3,419,237 8,997,580 20,083 12,436,900
Unallocated assets
Total assets
I
| ••••§••• _
344,829
12,781,729

Segment liabilities 7,202,820 3,391,107 10,593,927

Unallocated liabilities
Total liabilities
1
flj mjmm••11111••HE 2,187,802
12,781,729

Page 19 of 25
Financial Statements for the period from November 21, 2003 to March 31,2005

Since the Bank has commenced operations only in August 2004, all the proposed business segments
have not been fully operational as at the Balance Sheet date. The segmental results disclosed,
therefore, reflect the key business segments that are currently operational, as explained below:

Treasury: Includes all financial markets activities undertaken on behalf of the Bank's customers,
proprietary trading, maintenance of reserve requirements and resource raising from other banks
and financial institutions.

Other banking operations: Includes corporate banking activities, investment banking activities,
transaction banking activities and to a limited extent retail banking and third party product
distribution.

Residual operations: Includes investment of capital before the start of banking operations.

The business of the Bank is concentrated in India. Accordingly, geographical segment results have
not been reported.

18.4.3 Related parties

As per AS 18, Related Party Disclosures, issued by the ICAI, the Bank's related parties are disclosed
below:

Individuals having significant influence

• Mr. Ashok Kapur
• Mr. Rana Kapoor

The following represent the significant transactions between the Bank and such related parties:
Payment of professional fee and remuneration to Mr. Ashok Kapur, Non Executive Part-time
Chairman, during the period from November 21,2003 to March 31, 2005 was Rs. 4,206 thousand.
Further, he has also been provided a Bank owned vehicle for his official and personal use.

Outstanding deposit balances as at March 31, 2005 from individuals having significant influence
amounted to Rs. 725 thousand. The maximum outstanding deposit balance and interest accrued on
deposits during the period November 21, 2003 to March 31, 2005 amounted to Rs. 8,580 thousand
and Rs. 66 thousand respectively.

Key Management Personnel ('KMI") (Wholetime Director)

• Mr. Rana Kapoor, Managing Director & CEO

Transactions with the above parties:

Remuneration and professional fee paid to Wholetime Director of YES BANK Limited for the period
from November 21,2003 to March 31, 2005 was Rs. 13,358 thousand. The Wholetime Director has
also been provided a Bank owned vehicle and rented accommodation for his official and personal
use.

Remuneration and professional fee paid to the non-executive part-time Chairman and Managing
Director & CEO are approved by the Bank's Board Remuneration Committee and the Board of
Directors and is sent to Reserve Bank of India for approval.

18.4.4 Operating leases

Lease payments recognised in the Profit and Loss Account for the period aggregate Rs. 22,497
thousand.

Pa g e20of25
Financial Statements for the period from November 21,2003 to March 31,2005

As at March 31, 2005 the Bank has certain leasehold premises and information technology
outsourcing contracts that are outstanding and non-cancelable for the purpose of disclosure. The
future minimum lease obligations against the same are as follows:
(Amount in Rs. '000s)
Lease obligations
not later than one year 38,007
later than one year and not later than five years 99,836
later than five years 1,898
Total 139,741

18.4.5 Earnings per share

Disclosures as required by AS 20, Earnings Per Share ('EPS') issued by the Institute of Chartered
Accountants of India ('ICAI') are provided below:

Basic and diluted

Net profit /(loss) for the period ended March 31,2005 (Rs. '000) 37,587
Weighted average number of shares (Nos.) of face value Rs. 10 156,569,946
Earning per share - Basic (Rs.) (0-24)

18.4.6 Provisions & Contingencies

Disclosures as required by AS 29, Provisions, Contingent Liabilities and Contingent Assets issued
by ICAI are provided below:

As at the Balance Sheet date, there exists a claim against the Bank on account of municipal taxes
due. Based on management's best estimates and management's assessment of underlying
provisions of the Rent Control Act, relevant case laws and judgments on basis of determination of
property tax, the amount of claim that is probable is provided for in the Profit and Loss Account.
Management believes that the balance claim is a present obligation that will not require an outflow
of resources in future. Accordingly, the same is reflected as a 'Contingent Liabilities' as part of
Schedule 12 of the Financial Statements.

18.4.7 joining Stock Option Plan

The Bank has formulated a Joining Employee Stock Option Plan ('JESOF or 'the Plan') for its
employees. The Plan has been reviewed and approved by the Board Remuneration Committee and
subsequently adopted by the Board of Directors and shareholders. The Plan has been made
effective from October 1,2004. The JESOP grants an option to employees to acquire equity shares in
a graded manner. The options need to be exercised within a specified time period. The intrinsic
. value of the options, if any, is expended on a straight line basis over the vesting period.

18.4.8 Share issue expenses and proposed initial public offering

At March 31, 2005, there exists a balance of Rs. 170,000 thousand in Share Premium account, as
reflected in Schedule 2, "Reserves & Surplus". As stipulated by section 78(2)(c) of the Companies
Act, 1956, the Share Premium may be applied by the Bank in writing off the expenses of, or the
commission paid on, any issue of shares by the Bank.

Page 21 of 25
Financial Statements for the period from November 21, 2003 to March 31,2005

As at March 31, 2005, the Bank has filed its Draft Red Herring Prospectus with the Securities
Exchange Board of India (SEBI) for issue of 70,000 thousand shares. The Bank has incurred
Rs 10,667 thousand towards IPO share issue expenses. The expenses have not been debited to the
Profit and Loss Account but have been reflected under Schedule 11 "Other assets" and the same
along with all other IPO share issue expenses to be incurred will be charged to Reserves & Surplus
(Share Premium) on completion of all IPO proceedings.

18.4.9 Intangibles

During the period, the Bank has acquired licensed computer software aggregating Rs. 52,874
thousand. The software is being amortized on a straight line basis at the rate of 25 % per annum or
over the period of the licence, whichever is greater. The accumulated amortization as at
March 31,2005 is Rs. 3,425 thousand.

18.4.10 Other expenditure

C. ' .^Includes preliminary and pre-incorporating expenses Rs 41,618 thousand, equipment hire charges
^ Rs 9,026 thousand, traveling and conveyance expeiises-Rs^i^SSfr "thousand and consultancy fee
Rs 5,276 thousand exceeding 1% of the total income.

18.4.11 Prior period figures

This is the first financial statement of the Bank and therefore no prior period figures have been
reported.

18.5 Statutory disclosures

18.5.1 Capital adequacy ratio

The Bank's Capital adequacy ratio as at March 31, 2005, calculated in accordance with the RBI
guidelines, is as follows:
(Amount in Rs. '000s)
Tier I capital 2,102,600
Tier II capital 19,030
Total capital 2,121,630
Total risk weighted assets 11,279,422
Capital ratios (per cent)
Tier I 18.64
Tier II 0.17
Total capital 18.81

18.5.2 Business Ratios as at March 31,2005

Business Ratios
Interest income as a percentage to working funds 4.49%
Non interest income as a percentage to working funds 2.72%
Operating profit/ (loss) as a percentage to working funds (0.83)%
Return on assets (0.29)%
Business (deposits + net advances) per employee (Rs. 'GOO'S) 68,793
Profit/(loss) per employee (Rs. 'GOO'S) (182)
Net non-performing advances (funded) to net advances (percent) -

Page 22 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

18.5.3 Maturity Pattern

Rupee denominated assets and liabilities as at March 31,2005:
(Amount in Rs. '000s)
Maturity Buckets Loans & Investment Deposits Borrowings
Advances Securities
1 to 14 days 470,571 - 28,601 2,539,879
15 to 28 days 273,771 - 1,575,195 -
29 days to 3 months 962,573 621,418 2,090,227 150,000
Over 3 to 6 months 403,720 97,652 2,051,155 500,000
Over 6 to 12 months 2,020,202 1,154,699 692,751 507,532
Over 1 year to 3 years 2,538,864 506,602 192,416 -
Over 3 years to 5 years 784,890 750,000 -
Over 5 years 155,200 818,271 - -
Total 7,609,791 3,948,642 6,630,345 3,697,411

Foreign currency denominated assets and liabilities as at March 31,2005:

(Amount in Rs. '000s)
Maturity Buckets Assets Liabilities
1-14 Days 16,332 -
15-28 Days - -
29 days to 3 months - -
Over 3 months to 6 months - -
Over 6 months to 12 months - 507,676
Over 1 year to 3 yrs - -
Over 3 years to 5 yrs - -
Over 5 years 32,809 -
Total 49,141 507,676

18.5.4 The Bank has lending to sectors, which are sensitive to asset price fluctuations. Such sectors include
capital market, real estate and commodities. The net position of lending to sensitive sectors as at
March 31,2005 is given in the table below:
(Amount in Rs. '000s)
Capital market sector 1 105,000
Real estate sector
Commodities sector
Total 105,000
* Includes loans to NBFCs.

18.5.5 There were no non-performing and restructured assets as at March 31, 2005 or during the period
ended on that date.

18.5.6 Investments as at March 31, 2005

(Amount in Rs. '000s)
Particulars In India
Gross value 3,948,642
Less: Provision for depreciation and fair value provision
Net value 3,948,642

Page 23 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

18.5.7 Issuer composition ofNon SLR investments:

(Amount in Rs. '000s)
No Issuer Amount Extent of Extent of Extent of Extent of
private 'below 'unrated' 'unlisted'
placement investment securities securities
grade'
securities
1 PSUs 5,000 5,000 - 5,000 -
2 Financial 400,000 400,000 - - -
Institutions
3 Banks - - - - -
4 Private 106,602 106,602 - - -
Corporates
5 Subsidiaries/ - - - - . -
Joint ventures
6 Others 750,000 750,000 - - 750,000
7 Provision held - - - - -
towards
depreciation
Total 1,261,602 1,261,602 - 5,000 750,000

18.5.8 Details of the repos/reverse repos done during the period November 21,2003 to March 31,2005.
(Amount in Rs. '000s)
Minimum Maximum Daily average As on March 31,
outstanding outstanding outstanding 2005
during the during the during the
period period period*
Securities sold under 154,321 3,002
repos
Security purchased
under reverse repo
* The period considered above is from the start of operations of the Bank in August 2004 to
March 2005.

18.5.9 Investment in Equity and other Equity like investments:

(Amount in Rs. '000s)
As on March 31,2005
Equity shares * 5,000
Equity related mutual funds -
Convertible debentures -
Others (loans against collateral, advances to brokers) -
* equity shares subscribed for, pending allotment

18.5.10 Disclosures on risk exposures in derivatives

As per RBI circular No. DBOD.No.BP.BC. 72/21.04.018/2004-05, the following disclosures have
been made with respect to risk exposure in derivatives of the Bank:

(a) Structure: The Board of Directors have constituted a Board level sub-committee, the Risk
Monitoring Committee and delegated to it all functions and responsibilities relating to the
Risk Policy and its supervision thereof.

(b) There is an independent Mid-Office, reporting to the Chief Financial Officer or equivalent,
which is responsible for monitoring, measurement and analysis of treasury related risk.

Page 24 of 25
Financial Statements for the period from November 21,2003 to March 31,2005

(c) The Mid-Office prepares various MIS and Regulatory Risk reports and monitors the risk
limits as laid down in the Policy.

(d) All trading positions are reported daily to the management. The trading position is revalued
on a daily basis for reporting purposes and is recorded in the books on a monthly basis. The
Bank does not have any hedge position as of March 31,2005.

(e) In addition to the above, the potential credit exposure on account of all derivative transactions
is evaluated independently, where risk limits are specified separately for each product, in
terms of both credit exposure and tenor. As recommended in the Credit Policy, the Bank has
an approval structure in place for all treasury related credit exposures.

(Amount in Rs. '000s)

No Particular Currency Interest
derivatives rate
derivatives
1 Derivatives (Notional Principal Amount)
a) For hedging -
b) For trading (Notel) 250,000
2 Marked to market positions
a) Asset (+) 1,228
b) Liability (-) -
3 Credit exposure (Note 2) 11,250
4 Likely impact of one percentage change in interest rate
(100*PV01)
a) on hedging derivatives -
b) on trading derivatives 10,048
5 Maximum and minimum of 100*PV01 observed during the
period
a) on hedging -
b) on trading
Maximum 30,616
Minimum -
Note 1:
There is no trading position in foreign currency swaps. All the foreign currency swaps outstanding in
the books are customer transactions which are fully covered on a back to back basis, except for the
deal disclosed above which is an Indian Rupee swap.
Note 2:
The credit exposure is being calculated on Original Exposure Method as per RBI circular
DBOD.No.Dir.BC.17/13.03.00/2002-03 dated August 22,2003.

or and on behalf of the Board of Directors

Bank Limited

KashiMemani Bharat Patel Danish Shah

iFector&CEO Director Director Company Secretary

Mumbai Certified True Copy

April 25, 2005
For YES BANK LIMITED
Page 25 of 25 /^Bo"
Authorised Signatory