I) Code of Corporate Governance

II) Composition of the Board

III) Profile of Directors

IV) Board Committees.

V) Listing of shares

VI) Board meetings

VII Share transfer procedure

VIII) Registrar & share Transfer  Agent

 I) Code of Corporate Governance

Corporate Governance is the application of the best management practices, compliance of law and adherence to ethical standards to achieve the Bank’s objective of enhancing shareholders’ value keeping in mind the interest of all stakeholders.

Philosophy of Corporate Governance

The Basic philosophy of Corporate Governance in the Bank is the application of the best management practices that provide stability and growth to the enterprise, transparency, accountability, disclosures and value creation. Your Bank believes that good governance practices ultimately secure the goal of turning the Bank into a value driven organization. Your Bank’s philosophy of Corporate Governance has been aptly embedded in its Mission statement which reads as under

II) Composition of the Board

At present the Board of Directors of the Bank consists of 11 directors including the Managing Director. The constitution of the Board conforms to the provisions of Section 10 B of the Banking Regulation Act, 1949 and the Corporate Governance requirements. The Board consists of eminent persons drawn from specialized fields such as banking, finance, accountancy, law, agriculture and other areas as specified in the BR Act. Except Mr Ananthakrishna, Non-Executive Chairman and Mr P. Jayarama Bhat, Managing Director, all other directors on the Board are independent directors.

None of the Directors on the Board is a member of more than ten (10) Committees and Chairman of more than five (5) Committees across all the companies in which he is a Director. All the Directors have made necessary disclosures regarding Committee positions occupied by them in other companies.

Mr Ananthakrishna and Mr P Jayarama Bhat are non-independent Directors on the Board.

Mr S R Hegde, Mr R V Shastri, Mr U R Bhat, Mr T S Vishwanath, Mr Sitarama Murty, M Mr D Harshendra Kumar, Mr S V Manjunath, Dr H Ramamohan and T R Chandrasekaran are independent Directors on the Board.

The Bank has not entered into any materially significant transactions during the year 2011-12, which could have a potential conflict of interest between the Bank and its, directors, management and/or their relatives, etc. other than the transactions entered into in the normal course of business. The Senior Management have made disclosures to the Board confirming that there is no material financial and/or commercial transactions between them and the Bank which could have potential conflict of interest with the bank at large.

III) Profile of Directors

1) Mr Ananthakrishna

2) Mr P Jayarama Bhat

3) Mr S R Hegde

4) Mr R V Shastri

5) Mr U R Bhat

6) Mr. T S Vishwanath

7) Mr  Sitarama Murty M

8) Mr D Harshendra Kumar

9) Mr S V Manjunath

10) Dr H Ramamohan

11) Mr T R Chandrasekaran

Mr Ananthakrishna

Non Executive Chairman of the Bank

Mr. Ananthakrishna, a seasoned banker, is the Non-Executive Chairman of the bank w e f 13.7.2009.

Born in 1946, he hails from Bantwal in Dakshina Kannada district. He had his initial education at S. V. S. High School, Bantwal. After graduating in Science from St. Aloysius College in Mangalore he did his post-graduation in Mathematics at Mysore University. He began his illustrious career as a teacher at Modankaup in Bantwal Taluk. Later he served as a Lecturer at Manipal Institute of Technology. He moved over to Hindustan Aeronautics Limited (HAL), Bangalore as Junior Programmer before joining Karnataka Bank Ltd as an Officer in 1971. At the Bank he has worked in different capacities both at the Operational Level and in Key Management positions in various functional areas like Treasury and Accounts, Corporate Taxation, Information Technology and Credit Administration. Excellent performance in different capacities resulted in his being promoted as General Manager of the Bank in 1994 and later as Chief General Manager in 1998. He was appointed as Chairman & CEO of the Bank in July 2000 and has successfully completed 9 years in office on 12.7.2009.

He was the Honorary Secretary of Indian Banks’ Association and the President of the Bankers' Club, Mangalore. Widely traveled in India and abroad he is the recipient of PR Person of the year - 2002 awarded by Public Relations Society of India (PRSI), Mangalore - Manipal Chapter, Outstanding Manager Award for the Districts of Dakshina Kannada and Udupi for the year 2004 by Mangalore Management Association, and "Purushothama" by Shri Shri Raghaveshwara Swamiji of Shri Ramachandrapura Mutt, Hosanagara in recognition of his contribution to the society.

Mr P Jayarama Bhat

Managing Director & Chief Executive Officer

Shri P. Jayarama Bhat, aged 60 years is a post graduate in Chemistry (with First Rank) from University of Mysore. He is a Certified Associate of Indian Institute of Bankers (CAIIB). He has banking experience of over 39 years. He joined the Bank as an Officer in the year 1973 and over the period of time promoted to various positions. In the year 2005, he was promoted as Chief General Manager of the Bank and has been entrusted with the responsibilities of overall supervision of operational areas like Credit Administration, Planning and Development, Investments, Information Technology, Treasury transactions, Money Market Operations, HR&IR etc. He took charge as Managing Director of the Bank since July 14th 2009.

Shri P. Jayarama Bhat has rich experience in all the facets of Banking operations. Besides, Shri P. Jayarama Bhat was the Director on the Board of Bharat Overseas Bank Ltd. as a representative of our Bank for a period of 6 years. Before the present appointment, Shri P. Jayarama Bhat was on the Board of Universal Sompo General Insurance Company Ltd., a joint venture of the Bank since 2007. He is also the recipient of "Aryabhata International Award -2010."

Shri P Jayarama Bhat is a member on Management Committee of the Indian Banks Association since August 2010. He is also the Honorary President of Bankers` Club, Mangalore.

Mr P Jayarama Bhat is the Managing Director of the Bank since July 14, 2009.

Mr S R Hegde

Director

Mr.S.R. Hegde, holds B.A. LL.M degrees from Karnataka University. He joined the Reserve Bank of India in the year 1974 as a Legal Officer. He was holding the position of Legal Adviser-in-Charge, Legal Division DNBS before his retirement in the year 2002. At present he is practicing as an Advocate in Bangalore besides being a Panel Advocate and Retainer for several Banks and National level institutions. He is also an independent trustee for Mutual Funds. He has been on the Board of the Bank since 26.3.2005.(since ceased to be director of the Bank w.e.f 2.7.2012 on attainment of upper age limit of 70 years)

Mr R V Shastri

Director

MR R V SHASTRI, former Chairman and Managing Director of Canara Bank and Indian Overseas Bank, joined the Board of our Bank on 28.1.2006. He has over 36 years Banking experience. He was holding a number of representative positions, prominent among them being Deputy Chairman- Indian Banks` Association, President¿ IBA Local Chapter, Bangalore, Advisor-Bankers Training College (RBI), etc. He was the Chairman of the Canara Banks subsidiaries/sponsored entities of the Bank , viz. CanBank Venture Capital Fund Limited, Canbank Factors Ltd, Canbank Computer Services Ltd, Gilt Securities Trading Corporation Ltd, Indo Hong Kong International Finance Ltd, Hong Kong. He was a Director on the Board of Export and Import Bank of India (EXIM Bank) and National Housing Bank.

At present Mr R V Shastri is a Director on the Board of (1) Nagarjuna Construction Company Ltd and (2) Religare Trustee Company Ltd. He is a member- Advisory Committee on Settlements- Syndicate Bank, Advisor- Specified Undertaking of UTI and Trustee Shree Kshethra Dharmasthala Rural Development Project (R).

Mr U R Bhat

Director

Mr. U.R. Bhat is one of India's well-known investment advisors and is presently Managing Director of Dalton Capital Advisors (India) Pvt. Ltd., an investment advisory company of the Dalton group, London, which is a global investment management firm. Prior to this, he was the Chief Investment Officer of Jardine Fleming in India - that later became JP Morgan, India - for 7 years advising the India dedicated funds of the Flemings group.

Mr. U.R. Bhat holds an M.Sc. from Indian Institute of Technology, Kanpur and has attended advanced courses on Finance at the Harvard Business School, Boston. He is a Fellow of the Chartered Institute of Bankers, London. He has published several incisive articles on finance, markets and economics in well-regarded journals and newspapers, in addition to commenting on contemporary economic issues on business TV channels. He has been closely involved in formulating policies for benchmark indices for the Stock Exchange, Mumbai as a member of its Index Committee. He has been the Director of our Bank since 28-01-2006.

At present Mr. U R Bhat is on the Board of 1) Repro India Ltd 2) Edelweiss Asst Management Ltd 3) M/s Subhkam Capital Ventures Pvt Limited 4) M/s Axis Asset Management Company Ltd and 5) M/s IRIS Business Services Limited.

Mr T S Vishwanath

Director

Mr T.S.Vishwanath, aged 64 years, is a Bachelor of Commerce (Honours) from University of Delhi and a Fellow Member of The Institute of Chartered Accountants of India. He has rich experience in the field of Finance and Accountancy. He has been/is associated with many of the Expert/Advisory Committees constituted by IRDA/RBI/SEBI/ Government of India. He is Chair of India side of the Indo-UK Task Force dealing with Accountancy Profession.

Mr T.S.Vishwanath was the President, The institute of Chartered Accountants of India, during the year 1996-97 and President of the South Asian Federation of Accountants in the year 1999. He was Member of the International Accounting Standards Board during 1998-2000. He was Chair of IRDA's Committee on Accounting and Auditing Standards &Regulations for Insurance Companies in India during 1999-2000 and is current Chair of its Standing Committee on Accounting Issues.

At present, Mr. T.S. Vishwanath is Chairman (Non-Executive) on the Board of M/s Areva T&D India Limited and is also on the board of M/s LIC Nomura Mutual Fund Asset Management Company Limited. Mr. T.S.Vishwanath has been on the board of the Bank since 5.1.2007.

Mr  Sitarama Murty M

Director

Mr. Sitarama Murty M., B.Sc.(Hons), M.Sc.(Electronics) and CAIIB joined the Board of our Bank on 30.11.2007. He has over 37 years banking experience in five banks of the State Bank Group including 9 years at the Management level and as Managing Director of State Bank of Mysore, during the period October 2000 to December 2003. He was on the Board of Haryana Vidyut Prasaran Nigam, Chandigarh from 1998 to 2000, when the power sector reforms were put through. He has rich experience in international banking, foreign exchange and money markets, funds management etc. and served with distinction in these fields, at SBI, Paris, during the economic crisis years 1990 to 1993.He participated in several international seminars and meets, including the G-15 meet in Jakarta in 2001.

He was the co-author of the Book 'Computerisation of Banking Operations in India (1990)' and published a paper on 'Forecasting Exchange Rates' in the book 'International Monetary, Banking & Trade Systems & Economic Development' published by NIBM, Pune, in the year 1992. He wrote a book 'Stones and Flowers- A Banker Looks Back (2006)'. He has penned more than 75 articles published in the newspapers - The Economic Times, Financial Express, The Hindu, The Hindu Business Line, The Commerce etc.

At present Mr. Sitarama Murty M. is also on the Board of M/s Aurobindo Pharma Ltd, Hyderabad & 2) M/s G K C Projects Limited.

Mr S V Manjunath

Director

Mr. S.V. Manjunath, B.Sc., is on the Board of our Bank since 25.10.2008. He is an agriculturist. Earlier he had worked as Director of Co-operative Union and as president of Primary Co-operative Agricultural and Rural Development (PCARD) Bank and has rich experience of functioning of these Institutions. He was earlier on the Board of our Bank between 1992 and 2000.

Mr D Harshendra Kumar

Director

Mr. D. Harshendra Kumar, B.A., is on the Board of our Bank since 25.10.2008. He is the younger brother of Shri D Veerendra Heggade, Dharmadhikari, Shri Kshetra Dharmasthala, a famous religious and sacred centre in South India. He is well versed with all aspects of Agriculture and Rural Economy, cooperation and Self Help Group (SHG). He is the Secretary, Rural Development , Self Employment Training Institute , having branches all over India, Trustee Sri Dharmasthala Munjunatheshwara Trust, Dharmasthala and Secretary, SDM Educational Institutions, member, Council for Advancement of People`s and Rural Technology(CAPART).He was earlier on the Board of our Bank between 1992 and 2000.

Dr H Ramamohan

Director

Dr. H. Rama Mohan, MBBS, FCGP, FIAMS, DMag is on the Board of our Bank since 25.10.2008. He is in private practice as family Physician in Kundapura, Udupi District. He is a member of 'Govt. of Karnataka Sustainable Forest maintenance and bio-diversity preservation' committee for Mangalore circle, a programme of Japan Bank of International Cooperation(JBIC). He is also the Chairman, IMA Academy of Medical Specialities, Kundapur Chapter, President, Amateur Artists` Association, Trustee, Seva Sangam Trust, Managing 20 Kindergarten schools, Treasurer, Seva Sangam Vidya Kendra, Thekkatte- A primary and High school, Treasurer, Coondapur Education Society-managing English medium school and PU college, Advisory Committee member, KMC Hospital, Manipal, Member of the Supreme governing body of the Academy of General Education, Manipal, Member, Quality Assessment and advisory committee, Bhandarkars` College, Kundapura, Vice President, Flora and Fauna Club (a nature club).

Dr. H. Rama Mohan is a Rotarian since 26 years, served as President, Rotary club of Kundapura South, served in 32 different district committees, Major Donor to Rotary foundation

Mr T R Chandrasekaran

Director

Mr. T.R. Chandrasekaran, aged 64 years, has been on the Board of our Bank since October 15, 2010. He holds a degree of Bachelor of Commerce, F.C.A., and Diploma in Labour Law and Administration Law. He is presently the Partner of M/s M.C Ranganathan & Co. Chartered Accountants, Chennai. He was earlier the Deputy General Manager (Accounts and Audit) in Indian Bank. He was also deputed to Indian Bank Mutual Find as its Vice President and Director to Indbank Merchant Banking Services Ltd. He has a rich experience in the field of Banking and Finance. He was a part of the Bank faculty at Indian Bank Management Academy for Excellence and Growth (IMAGE). He also act as resource person of IOB Staff Training College, Chennai and Institute of Chartered Accountants of India. He has presented several papers on Bank Audit, LFAR, Tax audit relating to banks, assessment of NPA's and RBI Norms on IRAC, Accounting Standards applicable to banks and disclosure requirements in bank accounts. He has also been a member of various committees of ICAI, New Delhi viz Corporate Governance, Guidance note on audit of banks, Long Form Audit Report etc.. His specialisation now is on International Financial Reporting Standards with specific reference to Banks.

Board Committees.

1. Executive Committee of the Board of Directors (EC):

2. Audit Committee of the Board of Directors (ACB):

3. Shareholders/Investors Grievance Committee:

4. Fraud Monitoring Committee:

5. Integrated Risk Management Committee (IRMC):

6. Nomination Committee:

7. Customer Service Committee:

8. Internal Capital Adequacy Assessment Committee (ICAAC):

9. International Financial Reporting Standard (IFRS) Committee:

10. IT Strategy & Governance Committee:

11. Remuneration Committee:

During the financial year ended March 31, 2012 the Board met 14 times on the following dates;

Details of the attendance of directors at the Board meetings during the year under report and at the last Annual General Meeting and directorships/ committee positions held in other companies are as under:

Note: For the purpose of committee positions held in other public limited companies, only Audit Committee and Shareholders/Investors Grievance Committees are considered.

None of the Directors of the Board serve as members of more than 10 Committees or they act as Chairman of more than 5 Committees across all companies. There is no relationship amongst directors inter-se.

Remuneration of Directors:

Except Shri P Jayarama Bhat, Managing Director, no other director was paid any remuneration except sitting fees for attending the meetings of the Board/Committees of the Board. The details of the remuneration paid to Mr. P Jayarama Bhat during the year ended March 31, 2012 are furnished below:

Contribution to the Provident Fund at 10 per cent of the basic pay and other benefits such as use of car, telephone at residence, reimbursement of medical expenses etc. was also provided to Shri P Jayarama Bhat during the period.

Other directors were paid sitting fees @ Rs 15000 /Rs 10000 for attending the meetings of the Board/Committees of the Board respectively during the year under report, the details of which are furnished hereunder:

No Stock Option has been granted to any of the Directors of the Bank.

COMMITTEES OF THE BOARD:

In compliance with the regulatory requirements and for the operational needs, the Board had constituted several committees, the details of which are given below;

1. Executive Committee of the Board of Directors (EC):

In order to facilitate the Board to concentrate on policy matters and strategic planning, etc., an Executive Committee of Board of Directors constituted earlier, continued its functions during this year also. It met 8 times during the year. The Committee is headed by Mr P Jayarama Bhat, Managing Director. The other members of the Committee are Messrs S R Hegde, R V Shastri and S V Manjunath. Details of the attendance at the meeting are as under;

1. Meetings record

2. Audit Committee of the Board of Directors (ACB):

The Bank had constituted an Audit Committee of the Board (ACB) in 1995 as per the directions of the Reserve Bank of India to look into the matters specified by RBI. The functioning of the ACB was modified to fall in line with the requirements of the Listing Agreement and the Companies Act, 1956. The terms of reference of the ACB include the following:

1. Oversight of the Bank`s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.

2. Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the statutory auditor and the fixation of audit fees.

3. Approval of payment to statutory auditors for any other services rendered by the statutory auditors.

4. Reviewing, with the management, the annual financial statements before submission to the board for approval, with particular reference to:

1. Matters required to be included in the Director’s Responsibility Statement to be included in the Board’s report in terms of clause (2AA) of section 217 of the Companies Act, 1956

2. Changes, if any, in accounting policies and practices and reasons for the same

3. Major accounting entries involving estimates based on the exercise of judgment by management

4. Significant adjustments made in the financial statements arising out of audit findings

5. Compliance with listing and other legal requirements relating to financial statements

6. Disclosure of any related party transactions

7. Qualifications in the draft audit report.

5. Reviewing, with the management, the quarterly financial statements before submission to the board for approval

5A. Reviewing, with the management, the statement of uses / application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized for purposes other than those stated in the offer document/prospectus/notice and the report submitted by the monitoring agency monitoring the utilisation of proceeds of a public or rights issue, and making appropriate recommendations to the Board to take up steps in this matter.

6. Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control systems.

7. Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit.

8. Discussion with internal auditors any significant findings and follow up there on.

9. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the board.

10. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern.

11. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors.

12. To review the functioning of the Whistle Blower mechanism, in case the same is existing.

12A. Approval of appointment of CFO (i.e., the whole-time Finance Director or any other person heading the finance function or discharging that function) after assessing the qualifications, experience & background, etc. of the candidate.

The ACB was headed by Shri T R Chandrasekaran an independent Director. The members of the ACB consisted of Messrs S R Hegde, R V Shastri and U R Bhat. All the members of the ACB are financially literate. The Company Secretary acts as the secretary to the Committee. The Statutory Central Auditors, Chief Compliance Officer and the Head of the Inspection & Audit Department of the Bank were also invited to attend the meetings of the committee. During the year under review 8 meetings of ACB were held on 23.5.2011, 21.6.2011, 30.7.2011, 28.09.2011, 31.10.2011, 17.11.2011 20.1.2012 and 09.02.2012.

Meetings record of the ACB.

3) Shareholders/Investors Grievance Committee:

A sub committee of the Board constituted during the year 2002 to specifically look into the grievances of shareholders/investors continued its functioning during the year ended March 31, 2012 also. The Committee is headed by Mr R V Shastri and the other members of the committee are Messrs U R Bhat and T S Vishwanath. The Committee met twice during the year under report on 23.5.2011 and 27.3.2012 and reviewed all the complaints received from the shareholders and the investors.

Name & designation of the Compliance Officer:

Y V Balachandra. Company Secretary.

A total of 235 complaints were received from the Investors/Shareholders during the year ended March 31, 2012 and all of them have been redressed satisfactorily. As required under the Listing Agreement a separate Email ID – investor.grievance@ktkbankcom has been created exclusively for the purpose of registering complaints by the investors.

4) Fraud Monitoring Committee:

As per the directions of the Reserve Bank of India, the Board had constituted a special Committee on 17.2.2004 exclusively dedicated to the monitoring and following up of cases of fraud involving amounts of Rs.1 crore and above. The terms of reference of the Committee were as under:

1. Identify the systems lacunae, if any, that facilitated perpetration of the fraud and put in place measures to plug the same.

2. Identify the reasons for delay in detection, if any, in reporting to top management of the Bank and RBI.

3. Monitor progress of CBI/Police investigation, and recovery position.

4. Ensure that staff accountability is examined at all levels in all the cases of frauds and staff side action, if required, is completed quickly without loss of time.

5. Review the efficacy of the remedial action taken to prevent recurrence of frauds such as strengthening of internal controls.

6. Put in place other measures as may be considered relevant to strengthen preventive measures against frauds.

The Committee is functioning under the Chairmanship of Mr Ananthakrishna. The other members of the Committee were Messrs P Jayarama Bhat, S R Hegde, S V Manjunath and T R Chandrasekaran.

During the year under report three meetings of the Committee were held on 30.6.2011, 30.7.2011 and 29.11.2011

5. Integrated Risk Management Committee (IRMC):

A Board level sub- committee called the Integrated Risk Management Committee (IRMC) was constituted on 24.12.2004 to devise a policy and strategy for integrated risk management containing various risk exposures of the Bank including credit risk and market risk. The Committee is headed by Mr. Ananthakrishna and other members of the Committee are Messrs P Jayarama Bhat, R V Shastri, Sitarama Murty M and T R Chandrasekaran.

The functions of the Committee include the review of risk profile of the Bank, evaluation of the overall risks faced by the Bank, develop policies and strategies for integrating risk management containing the credit, market and operational risk exposures etc and to ensure a smooth transition to the new Capital Adequacy Framework.

IRMC met 6 times during the year on 08.06.2011, 25.06.2011, 17.08.2011, 17.11.2011 09.02.2012, and 21.3.2012

6. Nomination Committee:

Reserve Bank of India, vide Circular DBOD.No. BC.104/08.139.001/2003-04 dated June 25, 2004 required that

1. Banks in private sector should undertake a process of due diligence to determine the suitability of the persons for appointment /continuing to hold appointment as a director on the Board.

2. The process of due diligence should be undertaken by the banks in private sector at the time of appointment /renewal of appointment.

3. The Boards of the Banks in private sector should constitute Nomination Committee to scrutinize the declarations.

4. Based on the information provided in the signed declarations, Nomination Committee should decide on the acceptance and may make references, where considered necessary to the appropriate authority.

5. Banks should obtain annually a declaration that information already provided has not undergone change and where there is any change, requisite details are furnished by the Directors.

6. The Board of the Bank must ensure in public interest that nominated /elected directors execute the deeds of covenants every year.

Accordingly a Nomination Committee was constituted on 29.7.2004. As on March 31, 2012, the Committee consisted of Messrs Ananthakrishna (Chairman of the Committee), P Jayarama Bhat, S R Hegde, R V Shastri and S V Manjunath. The committee met once on 18.05.2011 during the year under report.

7. Customer Service Committee:

With a view to strengthen the corporate governance structure and also mount innovative measures for enhancing the quality of customer service and improving the level of customer satisfaction for all categories of clientele at all times, the Reserve Bank of India has suggested Banks to constitute a Customer Service Committee of the Board in compliance with the recommendations of Committee on Procedures and Performance Audit on Public Service (CPPAPS). Accordingly Customer Service Committee headed by Chairman and CEO of the Bank was constituted on 25.9.2004. The role of the Committee is to address the formulation of a comprehensive deposit policy, product approval process, annual survey of depositor satisfaction, tri-annual audit of such services and to review the performance of the Ad hoc committee periodically. The Committee continued its functioning during this year also. The Committee is headed by Mr. Ananthakrishna, with Messrs P Jayarama Bhat, D Harshendra Kumar and Dr. H Ramamohan as members. The Committee met twice on 10.8.2011 and 27.3.2012 during the year under report. The Committee also invites a few customers to the meetings to get their feed back about the customer services in the Bank.

8. Internal Capital Adequacy Assessment Committee (ICAAC).

In order to review and recommend to the Board, the capital plan of the Bank and lay down the capital planning process and responsibilities as well as contingency planning for dealing with deviations and unexpected events and matters incidental thereto, ICAAC has been constituted in the Bank. As on March 31, 2012, the Committee is headed by Mr. Ananthakrishna and the other members of the committee are Messrs P Jayarama Bhat, U R Bhat and Sitarama Murty M. P Jairam Hande, General Manager and CFO, who is the head of the ICAAC Function in the bank is also a member of the Committee. Five meetings of the Committee were held during the year under report on 18.4.2011, 16.8.2011, 29.9.2011, 20.1.2012 and 17.02.2012.

9. International Financial Reporting Standard (IFRS) Committee.

In order to enable the Bank to have smooth convergence of Indian Accounting Standards with International Financial Reporting Standards (IFRS), a project steering committee viz. IFRS Committee was constituted during the last year as recommended by the working Group set by the Indian Banks` Association (IBA). The above Committee continued its functioning this year also. The Committee is headed by Mr Ananthakrishna. The other members of the Committee are Mr P Jayarama Bhat and Mr T R Chandrasekaran besides the General Manager in charge Treasury & Accounts & Information Technology and heads of, HR& IR and Risk Management Department. The Committee met once during the year under report on 24.02.2012.

10. Committee for IT strategy and Governance

To study the issues arising out of the increased dependency on Information Technology in Banks, RBI constituted a working Group under the Chairmanship of Sri G Gopalakrishna, Executive Director, RBI. Based on the recommendations of the Gopalakrishna Committee, RBI issued detailed circular vide DBS.CO.ITC.BC.No.6/31.02.008/2010-11 dated 29.4.2011 advising the commercial banks to implement the recommendations of the Committee. The recommendations covered nine major areas of IT such as IT Governance, Information Security, Information System Audit, IT Operations, IT Services Outsourcing, Cyber Fraud, Business Continuity Planning, Customer Awareness Programmes and Legal issues.

The implementation of recommendations need to be Risk based, commensurate with the nature and scope of activities engaged by banks, the technology environment prevalent in the bank and Support rendered by technology to the business processes. Banks with extensive leverage of technology to support business processes would be expected to implement all the stipulations outlined in the circular. Implementation of the RBI guidelines will enhance safety, security, efficiency in banking processes leading to benefits for banks and the customers.

As envisaged in the above guidelines, a Board level Committee on IT Strategy and Governance was constituted on 29.11.2011 to oversee the above areas. The Members of the Committee are Messrs Ananthakrishna, P Jayarama Bhat and U R Bhat. The Committee met once on 27.3.2012.

Some of the roles and responsibilities of this committee include:

• Approving IT strategy and policy documents

• Ensuring that the management has put an effective strategic planning process in place

• Ratifying that the business strategy is indeed aligned with IT strategy

• Ensuring that the IT organizational structure complements the business model and its direction

• Ascertaining that management has implemented processes and practices that ensure that the IT delivers value to the business

• Ensuring IT investments represent a balance of risks and benefits and that budgets are acceptable

• Monitoring the method that management uses to determine the IT resources needed to achieve strategic goals and provide high-level direction for sourcing and use of IT resources

• Ensuring proper balance of IT investments for sustaining bank’s growth

• Becoming aware about exposure towards IT risks and controls. And evaluating effectiveness of management’s monitoring of IT risks

• Assessing Senior Management’s performance in implementing IT strategies

• Issuing high-level policy guidance (e.g. related to risk, funding, or sourcing tasks)

• Confirming whether IT or business architecture is to be designed, so as to derive the maximum business value from IT

• Overseeing the aggregate funding of IT at a bank-level, and ascertaining if the management has resources to ensure the proper management of IT risks

The main objective of IT Governance is to achieve outcome viz., “Value Delivery by IT to business” and “IT Risk Management”. The drivers of this outcome are "IT Strategic Alignment”, “IT Resource Management” and “IT Performance Measurement”.

11. Remuneration Committee

The Reserve of India vide circular No DBOD.No BC. 72/29. 67. 001/2011-12 dated January 13, 2012 has issued guidelines on compensation of Whole Time Directors (WTD)/Chief Executive Officers(CEOs)/Other Risk Takers, control function staff and other employees aiming to ensure effective governance of compensation , alignment of compensation with prudent risk taking and effective supervisory oversight and stakeholder engagement in compensation. As required under the above guidelines, a Remuneration Committee of Directors has been constituted to oversee the framing, review and implementation of the Compensation policy of the Bank on behalf of the Board .RC consists of four member Directors of which three are independent Non-executive Directors including one member from Integrated Risk Management Committee. The Remuneration Committee, inter–alia, shall ensure that the cost/income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio.

As on March 31, 2012, the members of the Committee are Messrs P Jayarama Bhat, S R Hegde, R V Shastri and S V Manjunath. The Committee met twice during the year i.e. on 21.3.2012 and 27.03.2012.

Apart from the above, as on March 31, 2012, there was also a Committee viz. ESOP Committee which looks after the administration of Employee Stock Options Scheme in the Bank.

COMMITTEES OF EXECUTIVES:

Apart from the Board Committees, the Bank has also constituted other committees of executives such as Asset and Liability Management Committee (ALCO), Investment Management Committee (IMC), Credit Management Committee (CMC), Credit Policy Committee (CPC), Operational Risk Management Committee (ORMC), Committee for scrutiny of frauds, staff accountability Committee, New product Approval Committee, IT Steering Committee etc. The Committees meet regularly to take decisions on respective matters.

GENERAL BODY MEETINGS:

Venue and the date of the last three annual general meetings were as under:

Neither any special resolution was passed in the previous year through postal ballot nor is any special resolution proposed to be conducted through postal ballot this year.

DISCLOSURES:

There were no materially significant transactions entered into by the Bank with its directors, management, or relatives conflicting with the interest of the Bank at large during the year ended March 31, 2012. Further it is declared that all the directors and senior management personnel have affirmed the compliance to the code of conduct laid down by the Bank.

STATUTORY COMPLIANCE, PENALTIES AND STRICTURES:

There were no instances of non-compliances by the Bank, penalties and strictures imposed by Stock Exchanges, RBI and SEBI /other regulatory authorities on any matter during the year under report except the penalty of Rs 5 lakh levied by RBI for non-compliance of some of the guidelines relating to derivative transactions.

MEANS OF COMMUNICATION:

The quarterly /half yearly/ annual results are published in the leading national English dailies such as Business Standard, The Hindu Business Line, Financial Express, Economic Times etc and vernacular newspapers such as Udayavani, Samyukta Karnataka. The results were also put on our web site www.karnatakabank.com.In view of this, no separate communication to the shareholders about the half yearly results has been made.

SHAREHOLDERS` INFORMATION:

A. Annual General Meeting:

-Date : August 30, 2012

-Day : Thursday

-Time : 11.30 AM

-Venue : The Karnataka Bank Ltd.

Regd. & Head Office

Mahaveera Circle, Kankanady

Mangalore-575002.

B. Book closure: 11.08.2012 to 30.08.2012 (both days inclusive)

C. Financial Calendar : 1st April to 31st March

1. Quarter ending June, 30 2012 : July, 2012

2. Quarter ending Sept. 30, 2012 : October, 2012

3. Quarter ending Dec. 31, 2012 : January, 2013

4. Quarter ending March 31, 2013 : May, 2013

D. Dividend: The Board of Directors has recommended a dividend of 35% per cent on the paid up capital of the Bank for the year ended March 31, 2012 (i.e. Rs 3.50 per share) and the same will be paid to the shareholders/beneficial holders of shares holding shares as on as per the Register of members /Register of beneficial owners.

Dividend Payment Date : Between 31.08.2012 to 07.09.2012.

As per the provisions of section 205A of the Companies Act, 1956, the unclaimed dividend of Rs 1624136/- for the financial year ended March 2003-2004 has been transferred to the Investor Education and Protection Fund established by the Central Government. The following Table gives the unclaimed dividend from the year 2004-2005 (position as on 31.3.2012) and the last date for transfer to Investor Education and Protection Fund.

Unclaimed shares suspense account: Pursuant to amendments of Clause 5 A of Listing Agreement entered into with the Stock Exchanges, the Bank has sent three reminder letters in respect of unclaimed shares to the shareholders at the addresses available through M/s Integrated Enterprise India Ltd, its Registrar and share Transfer agent. After considering the replies from the shareholders received on or before the last date provided for their response, the Bank has transferred these unclaimed shares to a separate demat suspense account. The summary of shares transferred and released in favour of shareholders is furnished below:

E. Listing of shares:

The shares of the Bank are listed on the following stock Exchanges.

The Bank has paid the annual listing fees for the year 2011-2012 to the above Stock Exchanges.

Stock Code:

Trading symbol on the NSE : KTKBANK

Scrip code on BSE : 532652

ISIN at NSDL/CDSL : INE614B01018

Share transfer procedure:

The shares of the Bank being traded in dematerialized form are transferable through the depository system. The share transfers in physical form are processed by the Share Transfer Agent- M/s Integrated Enterprises (India) Ltd and approved by the Managing Director at least once in a fortnight. There are no share transfer requests pending for transfer as on March 31, 2012.

Shareholdings of Directors as on March 31, 2012

Distribution of shareholding as on 31.3.2012.

Major shareholders

As on March 31, 2012, the followings shareholders hold more than 1% of the paid up capital of the Bank.

Dematerialization of shares:

As per the directives of SEBI, the equity shares of the Bank are compulsorily traded in dematerialized form by all categories of investors with effect from 26.2.2001. The Bank has entered into tripartite agreement with the depositories and M/s Alpha Systems (p) Ltd (since merged with Integrated Enterprises India Ltd). Bangalore for dematerialization of shares. The ISIN allotted for the shares of the Bank is INE614B01018. As on 31.3.2012, 90.00 per cent of the equity shares of the Bank are in demat form.

Registrar & share Transfer Agent:

The Bank has appointed M/s Integrated Enterprises (India) Ltd., as common Share Transfer Agent for both physical and electronic shares. Therefore all correspondence relating to share transfer, dividend, change of address for shares held in physical form and dematerialisation of shares etc are to be addressed to the Registrar and Share Transfer Agent at the following address: