HDFC PENSION MANAGEMENT COMPANY LTD. Annual Report FY

Transcription

1 HDFC PENSION MANAGEMENT COMPANY LTD. Annual Report FY

2 Board of Directors Dr SA Dave, Non-Executive Independent Director Mr AKT Chari, Non-Executive Independent Director Mr Amitabh Chaudhry, Non-Executive Director Ms Vibha Padalkar, Non-Executive Director Manager [Designated as Chief Executive Officer ] Mr Sumit Shukla Chief Financial Officer Mr Fagun Pancholi Company Secretary & Compliance Officer Mr Nagesh Pai Statutory Auditors M/s Kirtane & Pandit LLP Registered Office 14 th Floor, Lodha Excelus, Apollo Mills Compound N M Joshi Marg, Mahalaxmi, Mumbai Bankers HDFC Bank Limited (For Company accounts) Axis Bank Limited (For Scheme accounts)

3 Directors Report TO THE MEMBERS OF HDFC PENSION MANAGEMENT COMPANY LIMITED The Board of Directors of HDFC Pension Management Company Limited ( Company ) present the 6 th Annual Report on the business and operations of the Company, along with the Audited Financial Statements for FY Financial Performance The financial performance for the FY is summarized as under: (` Thousands) FY FY Gross Income 24,357 23,956 Total Expenses 27,416 23,808 Profit before Tax (3,059) 148 Provision for Tax - 28 Profit after Tax (3,059) 120 Balance of Loss from previous years (5,277) (5,397) Loss Carried Forward To The Balance Sheet Dividend And Reserves (8,336) (5,277) In view of the Company incurring losses, the Directors do not recommend any dividend for the Financial Year. The Company has not carried forward any amount to its Reserves during the financial year under review. Share Capital There was no change in the Company s paid up equity share capital during the year, which stood at ` 28 Crs as on March 31, The entire paid-up capital of the Company is held by HDFC Standard Life Insurance Company Limited and its nominees. Business Review and Outlook During FY , the general business environment had been good for Pension Funds with the industry keeping up the momentum in line with the previous financial year. The overall Assets Under Management ( AUM ) of all the Pension Funds combined, i.e. corporate and retail sector, grew from ` 3,563.9 Crs as on to ` 7,017.7 Crs as on, registering a growth of approximately 98 per cent, which includes PSU Banks wherein the Pension Funds are the three Public Sector Pension Funds. The overall subscriber base of corporate sector grew by nearly 42 per cent, with approx. 1,062 new Corporates joining the National Pension System ( NPS ) architecture. The retail sector grew by almost 103 per cent, with 437,086 subscribers as on, in comparison to 215,411 subscribers as on. During FY , the Company registered an AUM growth of approximately 209 per cent, crossing the milestone of ` 1,000 Crs in the process. As on, the AUM of the Company stood at ` 1,163.0 Crs as compared to ` Crs as on the end of previous financial year. In the Corporate sector NPS, the Company sourced 545 new corporate customers in FY , and recorded a growth of 85 per cent over the previous financial year, thereby commanding more than 50 per cent market share in that particular space. The Company also consolidated itself in the retail sector as well by registering a subscriber growth of 140 per cent. During FY , the Pension Fund Regulatory and Development Authority ( PFRDA ) also granted a license to Karvy Computershare Private Limited to operate as the second Central Recordkeeping Agency ( CRA ) under the NPS architecture, which began operations on February 18, With an increased level of competition, the CRA charges have been drastically reduced, which would have an impact on the total cost of operations in the future. Further, the annual Custodian charges have reduced from per cent of AUM to per cent of AUM. Key Regulatory Changes FY was a year of further regulatory consolidation for the Pension Fund Management Industry. With the Union Budget for 2016 announcing a slew of reforms in February 2016, the PFRDA embarked towards introducing additional measures which would help the overall pension sector. The primary focus of the Government has been to increase coverage under the pension contribution schemes with an objective of creating a pensioned society. The PFRDA also explored the opportunity for investment of pension assets into alternative asset classes such as Alternative Investment Funds, Real Estate Investment Trusts, Mortgage based securities, etc. 1

4 Directors Report In the month of April 2016, the PFRDA vide a Circular allowed Pension Funds to invest in Category I and Category II Alternative Investment Funds having a minimum corpus of ` 100 Crs, subject to a ceiling of 2 per cent of the Pension Fund corpus. Further, as an extension to the Circular, the PFRDA introduced a new Scheme A, comprising of the alternative asset classes, including Alternative Investment Funds, which were effectively introduced from October 10, The PFRDA also introduced two new life cycle funds Aggressive Life Cycle Fund (LC 75) and Conservative Life Cycle Fund (LC 25). With the introduction of the new funds, the subscribers can effectively choose from additional alternatives, in accordance with their risk profile. One of the major regulatory changes during the year under review was the fresh procedure for selection of Pension Funds by the PFRDA through a Request For Proposal ( RFP ) issued on September 17, The RFP, issued under the Pension Fund Regulatory and Development Authority (Pension Fund) Regulations, 2015, aimed at increasing the number of Pension Funds to ten, from the existing eight, and also to revise the Investment Management Fees to be charged by the Pension Funds. The RFP also provided for competitive quotation of Investment Management Fee, subject to a cap of 0.10 per cent of AUM. The technical and commercial bids submitted by HDFC Standard Life Insurance Company Limited ( HDFC Life ) were accepted by the PFRDA. A formal Letter of Appointment is awaited to be issued by the PFRDA to all the shortlisted bidders, including HDFC Life. On the operational front, the PFRDA has also taken certain steps towards digital transition by allowing paperless system of account opening using the esign facility. Further, the minimum contribution requirement for subscribers in a financial year has been reduced to ` 1,000/- from the earlier requirement of ` 6,000/-, which we believe would help the smaller retail subscribers, and has also allowed switching of funds twice a year. Networth The PFRDA (Pension Fund) Regulations, 2015 require a private sector Pension Fund to maintain a minimum positive tangible networth of ` 25 Crs. As on March 31, 2017, the tangible networth of the Company stood at ` Crs. However, the Members may note that the PFRDA had, vide the RFP issued on September 17, 2016, enhanced the requirement to ` 50 Crs. The Company shall be issuing additional shares in due course to comply with the requirements. Board of Directors and Key Managerial Personnel Board of Directors The Board of Directors of the Company ( Board ) oversees the business and operations of the Company. The Company has an optimum mix of non-independent and Independent Directors. As on the date of making this report, the Board of Directors of the Company comprises of four Directors, which include two Independent Directors and two Non- Executive Directors. The Board also consists of a Woman Director. Independent Directors Dr SA Dave and Mr AKT Chari have been appointed as Independent Directors upto June Further, the Independent Directors are not liable to retire by rotation, and therefore shall not be counted for determining the number of Directors liable to retire by rotation. Non-Independent Director Mr Amitabh Chaudhry, being a non-independent Director, is liable to retire by rotation at the forthcoming 6 th Annual General Meeting and is eligible for re-appointment. A resolution for the said purpose along with a brief profile of Mr Amitabh Chaudhry is being included in the Notice of the forthcoming 6 th Annual General Meeting of the Company. Statement on Non-disqualification of Directors None of the Directors are disqualified under Section 164 of the Act, to act as Director. Statement on Declaration by Independent Directors The Independent Directors of the Company have confirmed that they meet the criteria of Independence as provided under Section 149(6) of the Act. Key Managerial Personnel Mr Sumit Shukla, Manager, (designated as Chief Executive Officer), Mr Fagun Pancholi, Chief Financial Officer, and Mr Nagesh Pai, Company Secretary & Compliance Officer, are designated as Key Managerial Personnel of the Company. Mr Nagesh Pai has also been designated as the Compliance Officer under the applicable PFRDA Regulations. 2

5 Directors Report Board Committees The Board of Directors have constituted the following committees in compliance with the requirements of the Act read with the Pension Fund Regulatory and Development Authority (Pension Fund) Regulations, 2015 and the Investment Management Agreement executed with the NPS Trust. The details of the Committees are as follows: Committees Key Terms of Reference Members No of meetings held during the year Investment Committee To formulate, implement and periodically review the Investment Policy of the Company To review changes in the Engagement Team and other matters relating to Investments Mr AKT Chari, Independent Director Mr Amitabh Chaudhry, Non-Executive Director Ms Vibha Padalkar, Non-Executive Director Mr Sumit Shukla, Chief Executive Officer Mr Ashish Narula, Chief Investment Officer 4 Risk Management Committee To formulate and implement and periodically review the Risk Management Policy To oversee the Risk Management functions, disaster recovery and business contingency plans Dr SA Dave, Independent Director; Mr Amitabh Chaudhry, Non Executive Director; Ms Vibha Padalkar, Non-Executive Director; Mr Sumit Shukla, Chief Executive Officer; 4 Mr Ashish Narula, Chief Investment Officer; Mr Nagesh Pai, Company Secretary & Compliance Officer Audit Committee To review the financial statements before submission thereof to the Board of Directors; To recommend the appointment of Statutory Auditors/Internal Auditors review their performance and effectiveness of audit process; Dr SA Dave, Independent Director; Mr AKT Chari, Independent Director Mr Amitabh Chaudhry, Non Executive Director; 4 To approve related party transactions; To evaluate internal financial controls and risk management systems Nomination & Remuneration Committee To formulate and implement a Remuneration Policy; To undertake performance review of every individual performance; To undertake succession planning activity Dr SA Dave, Independent Director; Mr AKT Chari, Independent Director Mr Amitabh Chaudhry, Non Executive Director 1 All meetings held during the financial year were attended by all Directors, except for one meeting wherein leave of absence was granted to Ms Vibha Padalkar. Recommendations by the Audit Committee During the preceding financial year, there were no instances where the recommendations made by the Audit Committee were not accepted by the Board. regarding Conservation Of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo Section 134 of the Act, read with the Companies (Accounts) Rules, 2014, requires disclosure of certain specified information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo in the Directors Report. Conservation of Energy and Technology Absorption The Company has not incurred any expenditure on conservation of energy, research and development or towards technology absorption and therefore there are no disclosures with respect to the same. 3

6 Directors Report Foreign Exchange Earnings and Outgo There were no foreign exchange earnings and outgo during the FY Policy on Appointment and Remuneration of Directors The Company has put in place a Policy on remuneration of Directors, Key Managerial Personnel and other employees. The said Policy is guided by the set of principles and objectives as envisaged under section 178 of the Act, which inter alia include principles pertaining to determining the qualifications, positive attributes, integrity and independence of Director etc. The Nomination & Remuneration Committee of the Board deals with matters related to remuneration of employees of the Company. The Independent Directors remuneration comprise of sitting fees for attending the meetings of Board / Committees of the Board. Performance Evaluation of the Board of Directors Pursuant to Section 149 read with the Schedule IV of the Act, the Company has put in place a mechanism to facilitate evaluation of performance of the Board as a whole, which includes separate evaluation of the performance of Directors and Board Committees, in line with the requirements under the Act. As a part of the aforesaid process, responses were sought from Directors through questionnaire, basis which the Board has carried out an evaluation of its performance and that of its Committees and individual directors. Further, the Independent Directors have also formally discussed, without the participation of Non-Independent Directors and Management, matters as prescribed in Schedule IV of the Act. of Loans, Guarantees and Investments During the year under review, the Company has not given any loans and guarantees which attract the provisions of Section 186 of the Act. For the particulars of investments made during the year, please refer Notes to Accounts. Employees Stock Option During the FY , the Company has not granted stock options to any of its employees. However, the Key Managerial Personnel of the Company have been granted Stock Options by the Holding Company i.e. HDFC Standard Life Insurance Company Limited. During the year, there were no instances of loan granted by the Company to its employees for purchasing / subscribing to its shares. Related Party Transactions As per Section 177, read with Section 188 of the Act, the Audit Committee of the Board of Directors, at its quarterly meeting, approves the related party transactions of the Company. Since all the transactions entered by the Company during FY have been on arms length basis and are in ordinary course of business, the approval of the Board / Shareholders was not required. Deposits The Company has not accepted any Deposits from the Members or from the public during the financial year under review. Auditors M/s Kirtane & Pandit LLP, Chartered Accountants are presently the Statutory Auditors of the Company. As per the PFRDA (Appointment of Auditors) Guidance Note, 2012 read with provisions of the Act, M/s Kirtane & Pandit LLP, Chartered Accountants were appointed for a period of 3 years, i.e. upto the conclusion of the 8 th AGM, at the previous AGM. The provisions of the Act further require that the appointment of the Statutory Auditors should be ratified at every AGM during their tenure as Statutory Auditors. Accordingly, the Shareholders are requested to approve the proposal for ratification of appointment of M/s Kirtane & Pandit LLP, Chartered Accountants for FY The Directors recommend ratification of their appointment. The Statutory Auditors have not made any qualification, reservation or adverse remark or disclaimer in their Audit Report for FY

7 Directors Report The investment operations of the Company are also subject to internal audit, in accordance with the scope prescribed in the PFRDA (Appointment of Internal Auditors) Guidance Note, During the year under review, the term of the existing Internal Auditors, M/s Anil Ashok & Associates, Chartered Accountants, expired on June 30, With effect from July 1, 2016, M/s Majithia & Co, Chartered Accountants were appointed as the Internal Auditors of the Company for a period of three years, in line with the provisions prescribed in the PFRDA (Appointment of Internal Auditors) Guidance Note, Annual Return Extract The extract of Annual Return of the Company in the prescribed form MGT-9 has been annexed to this Report. Secretarial Compliance Certificate As a part of good governance practice, the Company voluntarily undertakes an audit of the Secretarial records and had engaged the services of Mr DM Dalal, Practising Company Secretary, to conduct the audit for FY The Auditor has not made any qualification, reservation or adverse remark or disclaimer in his Secretarial Compliance Certificate. Remuneration of Directors and Other Employees The details of remuneration paid to Directors are mentioned in the below table: risks, develop control strategies, and report the same on timely basis to the Risk Management Committee. Also, the top risks of the company are presented to the Risk Management Committee of the holding company (i.e. HDFC Standard Life Insurance Company Ltd.) on a periodic basis. The Company has put in place a Risk Management Policy ( Policy ), which provides a base for the overall risk management framework of the Company. The Policy is reviewed by the Risk Management Committee and the Board of Directors on a quarterly basis. Internal Audit Framework and Internal Financial Controls The Company has put in place an Internal Audit framework. Internal Audit is conducted by an independent firm of Chartered Accountants as per the scope of audit defined in PFRDA (Appointment of Internal Auditor) Guidance Note The audit process also factors in verifying compliance with process, systems, regulatory guidelines and controls. Internal Audit Reports are placed at each Audit Committee meeting to discuss the audit observations and recommendations. The Internal Auditors and the Audit Committee track the status of implementation of various recommendations / actionables. The Company has institutionalized a robust and comprehensive internal control mechanism across all the major processes. The Management, in addition to ensuring compliance to policies, regulations, processes, etc., also test and report adequacy of internal financial controls with reference to financial reporting/statements. Sr No Name of Director of Remuneration 1 Dr SA Dave Sitting Fees for attending meetings of the Board and Board Committees 2 Mr AKT Chari Sitting Fees for attending meetings of the Board and Board Committees Remuneration paid ` 1,30,000/- ` 1,30,000/- Vigil Mechanism In terms of the provisions of the Act read with the Companies (Meeting and Powers of the Board of Directors) Rules, 2014, the Company is not required to have a Vigil Mechanism in place. Further, during the year under review, the Statutory Auditors have not come across and hence have not reported any incident of fraud to the Audit Committee of the Board of Directors. Risk Management, Internal Audit Framework & Vigil Mechanism Risk Management The Company firmly recognises Risk Management as an integral building block to proactively manage risks and maximize opportunities related to achievement of strategic objectives. The Risk Management team performs activities to identify various risks, assess exposure of the Directors Responsibility Statement In accordance with the requirements of Section 134 of the Companies Act, 2013 ( Act ), the Board of Directors state that: (i) In the preparation of the annual accounts, the applicable Accounting Standards have been followed, along with proper explanation relating to material departures (if any); 5

8 Directors Report (ii) Such accounting policies have been selected and applied consistently, and judgments and estimates made that are reasonable and prudent, so as to give a true and fair view of the Company s state of affairs, as on, and of the Company s loss for the year ended on that date; (iii) Proper and sufficient care has been taken for the maintenance of adequate accounting records, in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) The annual accounts have been prepared on a going concern basis; and (v) Proper systems have been devised to ensure compliance with the provisions of all applicable laws, and such systems were adequate and operating effectively. Material Orders Affecting the Company During the FY , no significant and material orders were passed by the regulators or courts or tribunals that impacted the going concern status and Company s operations in future. It may however be noted that the litigation between the Pension Fund Regulatory and Development Authority and HDFC Standard Life Insurance Company Limited, the Holding Company (to which the Company is also a party), with regards to its Appointment as a Sponsor of a Pension Fund is presently pending in the Supreme Court of India. Material Events From Close of Financial Year There have been no material events impacting the finances of the Company from the close of the financial under review, till the date of this report. Appreciation and Acknowledgement The Board of Directors thanks the subscribers, customers and business associates for reposing their trust in the Company. The Directors also thank the Company s employees for their continued hard work, dedication and commitment; and the Management for continuing success of the business. The Directors further take this opportunity to thank HDFC Standard Life Insurance Company Limited, the Sponsor Company, and the HDFC Group for their invaluable and continued support and guidance. The Directors would also like to thank the Pension Fund Regulatory and Development Authority, and other Government authorities for their support, advice and direction provided from time to time. On behalf of the Board of Directors Mumbai Dr SA Dave Amitabh Chaudhry April 24, 2017 Director Director 6

9 ANNEXURE - 3 Form No MGT-9 Extract of Annual Return As on the financial year ended on [Pursuant to Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014] I. REGISTRATION AND OTHER DETAILS i) CIN U66020MH2011PLC ii) Registration Date 20/06/2011 iii) Name of the Company HDFC Pension Management Company Limited iv) Category / Sub Category of the Company Public Company / Company Limited by Shares v) Address of the Registered office and contact details 14 th Floor, Lodha Excelus, Apollo Mills Compound, N M Joshi Marg, Mahalaxmi, Mumbai Telephone: Fax: hdfcpensioninvest@hdfcpension.com vi) Whether listed company Yes ( ) No ( ) vii) Name, Address and Contact details of Registrar and Transfer Agent Datamatics Financial Services Ltd Plot No. B-5 Part B Cross lane MIDC Andheri (East) Mumbai Telephone No: to Fax no. : investorsqry@dfssl.com II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY All the business activities contributing 10% or more of the total turnover of the Company shall be stated Sl No Name and Description of main products/ services NIC Code of the Product / Service % to total turnover of the Company 1 Pension Fund Management III. PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES Sl No Name and Address of the Company 1 HDFC Standard Life Insurance Company Limited Add.:13 th Floor, LodhaExcelus, Apollo Mills Compound, Mahalaxmi, Mumbai Housing Development Finance Corporation Limited* Add.: Ramon House, 169, Backbay Reclamation, H T Parekh Marg, Mumbai CIN/ GLN Holding/ Subsidiary/ Associate % of shares held Applicable Section U99999MH2000PLC Holding Company Section 2(87) of the Companies Act, 2013 L70100MH1977PLC Holding Company 0.00 Section 2(87) of the Companies Act, 2013 *Housing Development Finance Corporation Limited is the Holding Company of HDFC Standard Life Insurance Company Limited. The Company does not have a Subsidiary Company 7

10 Form No MGT-9 Extract of Annual Return As on financial year ended on IV. SHARE HOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity) i. Category-wise Shareholding Category of Shareholders A. Promoters (1) Indian Number of shares held at the beginning of the year Number of shares held at the end of the year % Change during the year Demat Physical Total % of Total Shares Demat Physical Total % of Total Shares (a) Individual / HUF (b) Central Govt (c) State Govt(s) (d) Bodies Corp 0 2,79,99,994 2,79,99, ,79,99,994 2,79,99, (e) Banks/ FI (f) Any other Sub-total (A) (1) 0 2,80,00,000 2,80,00, ,80,00,000 2,80,00, (1) Foreign (a) NRIs Individuals (b) Other Individuals (c) Bodies Corp (d) Banks / FI (e) Any other Sub-total (A) (2) Total Shareholding of Promoter (A) = (A) (1) + (A) (2) B. Public Shareholding (1) Institutions 0 2,80,00,000 2,80,00, ,80,00,000 2,80,00, (a) Mutual Funds (b) Banks/ FI (c) Central Govt (d) State Govt(s) (e) Venture Capital Funds (f) Insurance Companies (g) FIIs (h) Foreign Venture Capital Funds (i) Others (specify) Sub-total (B) (1) (2) Non- Institutions (a) Bodies Corp Indian - Overseas (b) Individuals - Individual shareholders holding nominal share capital upto ` 1 lakh - Individual shareholders holding nominal share capital in excess of ` 1 lakh

11 Form No MGT-9 Extract of Annual Return As on financial year ended on Category of Shareholders Number of shares held at the beginning of the year Number of shares held at the end of the year % Change during the year Demat Physical Total % of Total Shares Demat Physical Total % of Total Shares (a) Others (specify) Sub-total (B) (2) Total Public Shareholding (B) = (B) (1) + (B) (2) C. Shares held by Custodian for GDRs & ADRs Grand Total (A+B+C) 0 2,80,00,000 2,80,00, ,80,00,000 2,80,00, ii. Shareholding of Promoters Sl No Shareholder s Name Shareholding at the beginning of the year Shareholding at the end of the year % change in Number of % of total & of shares Number of % of total & of shares shareholding shares shares of the Comp any pledged/ encumbered to total shares shares shares of the Company pledged/ during the year encumbered to total shares 1. HDFC Standard Life Insurance Company Limited 2,79,99, ,79,99, Total 2,79,99, ,79,99, iii. Changes in Promoters Shareholding (please specify, if there is no change) Sl No Date wise increase/ decrease in promoters shareholding during the year specifying the Shareholding at the beginning of the year reasons for increase/ decrease (e.g. allotment/ Number transfer/ bonus/ sweat equity etc) of shares % of total shares of the Company % of shares pledged/ encumbered to total shares 1 HDFC Standard Life Insurance Company Limited There was no change in the shareholding of HDFC Standard Life Insurance Company Limited Cumulative Shareholding during the year Number of shares % of total shares of the Company % of shares pledged/ encumbered to total shares iv. Sl No Shareholding Pattern of top ten Shareholders (other than Directors, Promoters and Holders of GDRs and ADRs) For each of the top 10 Shareholders Date wise increase/ decrease in promoters shareholding during the year specifying the reasons for increase/ decrease (e.g. allotment/ transfer/ bonus/ sweat equity etc) Shareholding at the beginning of the year Number of shares % of total shares of the Company Cumulative Shareholding at the during the year Number of shares The entire paid-up share capital of the Company is held by HDFC Standard Life Insurance Company Limited and its Nominees % of total shares of the Company 9

12 Form No MGT-9 Extract of Annual Return As on financial year ended on March 31, 201 v. Shareholding of Directors and Key Managerial Personnel Sl No For each of the Directors and KMP Date wise increase/ decrease in promoters shareholding Shareholding at the beginning of the year during the year specifying the reasons for increase/ decrease (e.g. allotment/ transfer/ bonus/ sweat equity etc) Number of shares % of total shares of the Company 1 Dr SA Dave (Non-Executive Independent Director) Cumulative Shareholding during the year Number of % of total shares shares of the Company At the beginning of the year At the end of the year Mr AKT Chari (Non-Executive Independent Director) At the beginning of the year At the end of the year Mr Amitabh Chaudhry (Non-Executive Director)* At the beginning of the year At the end of the year Ms Vibha Padalkar (Non-Executive Director) * At the beginning of the year At the end of the year Mr Sumit Shukla [Manager (designated as Chief Executive Officer)] At the beginning of the year At the end of the year Mr Fagun Pancholi (Chief Financial Officer) At the beginning of the year At the end of the year Mr Nagesh Pai (Company Secretary) At the beginning of the year At the end of the year *Held as a Nominee for HDFC Standard Life Insurance Company Limited V. INDEBTEDNESS Indebtedness of the Company including interest outstanding/ accrued but not due for payment Secured Loans excluding deposits Unsecured Loans Deposits Total Indebtedness Indebtedness at the beginning of the financial year i) Principal amount ii) Interest due but not paid iii) Interest accrued but not due Total (i+ii+iii) Change in Indebtedness during the financial year - Addition Reduction Net Change Indebtedness at the end of the financial year i) Principal amount ii) Interest due but not paid iii) Interest accrued but not due Total (i+ii+iii)

13 Form No MGT-9 Extract of Annual Return As on financial year ended on VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL A. The details on remuneration to Manager (designated as Chief Executive Officer) are given below: Sl No of Remuneration Mr Sumit Shukla, Manager (designated as Chief Executive Officer) Total Amount 1 Gross Salary: (a) Salary as per provisions contained in section 17(1) of the Income Tax Act, ,64,456 97,64,456 (b) Value of perquisites u/s 17(2) Income Tax Act, ,800 # 28,800 (c) Profits in lieu of salary under section 17(3) Income Tax Act, Stock Options* (Number of Options) 18,000 18,000 3 Sweat Equity Commission: - As % of profits As % of profits Others, please specify - - Total (A) [Total of remuneration does not include Number of Stock Options] 97,93,256 97,93,256 Ceiling as per the Act *The Stock Options have been granted by the Holding Company i.e. HDFC Standard Life Insurance Company Limited # A part of remuneration paid to Mr Sumit Shukla amounting to ` 5,20,000/-(which comprises of the details as mentioned in 1(b) above) has been charged to HDFC Standard Life Insurance Company Limited. (in `) 11

14 Form No MGT-9 Extract of Annual Return As on financial year ended on B. The details on remuneration to other Directors are given below: Sl No of Remuneration Name of Directors Total Amount (in `) 1. Independent Directors Dr SA Dave Mr AKT Chari Fee for attending Board / Committee meetings 1,30,000 1,30,000 2,60,000 Commission Other, please specify Total (1) 1,30,000 1,30,000 2,60, Other Non-Executive Directors Mr Amitabh Chaudhry Ms Vibha Padalkar Fee for attending Board / Committee meetings Commission Other, please specify Total (2) Total (B) = (1) + (2) 1,30,000 1,30,000 2,60,000 Total Managerial Remuneration* 97,93,256 Overall ceiling as per the Act 1,68,00,000 *The Total Managerial Remuneration is exclusive of Sitting Fees paid to Directors and is within the limits specified under Schedule V of the Companies Act, 2013 C. The details on remuneration to Key Managerial Personnel are given below: Sr. No. of Remuneration Mr Fagun Pancholi Chief Financial Officer # 1 Gross Salary: (a) Salary as per provisions contained in section 17(1) of the Income Tax Act, 1961 Mr Nagesh Pai Company Secretary # Total Amount (in `) 15,23,736 25,15,551 40,39,287 (b) Value of perquisites u/s 17(2) Income Tax Act, ,400 32,400 (c) Profits in lieu of salary under section 17(3) Income Tax Act, Stock Options * (Number of Options) 22,000 18,000 40,000 3 Sweat Equity Commission: - As % of profits Others, specify Others, please specify Total (C) [Total of remuneration does not include Number of Stock Options] 15,23,736 25,47,951 40,71,687 *The Stock Options have been granted by the Holding Company i.e. HDFC Standard Life Insurance Company Limited # A part of remuneration paid to Mr Fagun Pancholi amounting to ` 62,26,477/-(which comprises of the details as mentioned in 1(a) and 1(b) above), and to Mr Nagesh Pai amounting to ` 31,51,585/- (which comprises of the details as mentioned in 1(b) above), has been charged to HDFC Standard Life Insurance Company Limited. 12

15 Form No MGT-9 Extract of Annual Return As on financial year ended on VII. PENALTIES/ PUNISHMENT/ COMPOUNDING OF OFFENCES Type Section of the Brief Description Details of Penalty / Authority [RD/ Appeal made, if Companies Act Punishment / NCLT/ Court] any (give details) Compounding fees imposed A. Company Penalty Punishment Compounding N.A N.A N.A B. Directors Penalty Punishment Compounding N.A N.A N.A C. Others Officers in Default Penalty Punishment Compounding N.A N.A N.A 13

16 Independent Auditor s Report TO, THE MEMBERS OF HDFC Pension Management Company Limited Report on the Financial Statements 1. We have audited the accompanying financial statements of HDFC Pension Management Company Limited ( the Company ), which comprise the Balance Sheet as at, the Statement of Profit and Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements 2. The management and Board of Directors of the Company are responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ( the Act ) with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of Companies (Accounts) Rules, This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; design, implementation and maintenance of adequate internal financial controls, that are operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditor s Responsibility 3. Our responsibility is to express an opinion on these financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under. We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company s preparation of the financial statements, that give a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Company s management and Board of Directors, as well as evaluating the overall presentation of the financial statements. 5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion 6. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of Balance Sheet, of the state of affairs of the Company as at ; (b) (c) in case of Statement of Profit & Loss, of the loss for the year ended ; in the case of the Cash Flow Statement, cash flows for the year ended. 14

17 Independent Auditor s Report Emphasis of Matter As also mentioned in the Note 2 (Background) of Notes to Accounts to the Financial Statements, The Company and its Sponsor (HDFC Standard Life Insurance Company Limited) had a litigation pending against the PFRDA for obtaining the Letter of Appointment. However during the year, the PFRDA had issued a fresh Request For Proposal ( RFP ) for selection of Pension Funds for private sector, pursuant to which Sponsor had submitted a Technical and Commercial bid. On November 29, 2016 the PFRDA issued a notice that the Commercial Bid would be opened on November 30, 2016 wherein the name of HDFC Life was included which implies that the Technical Bid of HDFC Life has been accepted. HDFC Pension is also given to understand that the Commercial Bid submitted by HDFC Life has also been accepted by the PFRDA and formal issuance of letter of appointment is awaited. Report on Other Legal and Regulatory Requirements 7. As required by the Companies (Auditor s Report) Order, 2016 ( the Order ) issued by the Central Government of India in terms of Sub-Section (11) of Section 143 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order. 8. As required by Section 143(3) of the Act, we further report that: a) we have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; b) in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; c) the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account; d) in our opinion, the aforesaid financial statements comply with the applicable Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014; e) on the basis of written representations received from the Directors as on and taken on record by the Board of Directors, none of the Directors is disqualified as on March 31, 2017 from being appointed as a director in terms of Section 164(2) of the Act; f) with respect to the adequacy of the internal financial controls over financial reporting of the Company and operating effectiveness of such controls, refer to our separate report in Annexure B ; and g) in our opinion and to the best of our information and according to the explanations given to us, we report as under with respect to other matters to be included in the Auditor s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014: (i) The Company does not have any pending litigations at the end of the financial year; (ii) The Company did not have any long-term contracts including derivative contracts; as such the question of commenting on any material foreseeable losses thereon does not arise; (iii) There has not been an occasion in case of the Company during the year under report to transfer any sums to the Investor Education Fund and Protection Fund. The question of delay in transferring such sums does not arise; (iv) The Company has provided requisite disclosures in the financial statements as to holding as well as dealings in Specified Bank Notes during the period from November 08, 2016 to December 30, Based on audit procedures and relying on the management representation we report that the disclosures are in accordance with books of account maintained by the Company and as produced to us by the Management Refer Note 30 to the financial statements. For Kirtane & Pandit LLP Chartered Accountants Firm Registration No W/ W Sandeep D. Welling Partner Membership No.: Place : Mumbai Date : April 24,

18 Annexure A to the Auditor s Report Annexure A referred to in paragraph 7 of our Report of even date to the members of HDFC Pension Management Company Limited on the accounts of the Company for the year ended. On the basis of such checks as we considered appropriate and according to the information and explanations given to us during the course of our audit, we report that: (i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets ; (b) As explained to us, fixed assets have been physically verified by the management at regular intervals; as informed to us no material discrepancies were noticed on such verification; (c) According to the information and explanation given to us and on the basis of examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company. (ii) The Management has been conducted physical verification of the inventories at reasonable intervals, no major discrepancies were found in the physical verification. All minor discrepancies have been properly dealt with in books of accounts. (iii) The Company has not granted any loans, secured or unsecured to Companies, Firms, LLP or other parties covered in the register maintained under Section 189 of the Companies Act, (iv) In respect of loans, investments, guarantees and security provisions of Section 185 and Section 186 of the Companies Act, 2013 have been complied with. (v) The Company has not accepted any deposits from the public covered under Section 73 to 76 of the Companies Act, (vi) As informed to us, the Central Government has not prescribed maintenance of cost records under Subsection (1) of Section 148 of the Act. (vii) According to the information and explanations given to us and based on the records of the Company examined by us, (a) The Company has been regular in depositing the undisputed statutory dues, including Provident Fund, Employees State Insurance, Income-Tax, Sales-Tax, Service Tax, Custom Duty, Excise Duty and other material statutory dues, as applicable, with the appropriate authorities in India ; (b) According to the information and explanations given to us and based on the records of the Company examined by us, there are no dues of Income Tax, Service Tax, Sales Tax, Customs Duty and Excise Duty which have not been deposited on account of any disputes for more than 6 months; (c) The Company has been regular in transfer of sums to the Investor Education and Protection Fund. (viii) In our opinion, and according to the information and explanations given to us and based on our examination of the records, the Company has not defaulted in repayment of loans or borrowings to a financial institution, bank, government or dues to debenture holders. (ix) In our opinion, and according to the information and explanations given to us, the Company does not raise money by way of initial public offer or further public offer and term loans. (x) During the course of audit, we have not noticed any fraud by the Company or any fraud on the Company by its officers or employees during the year. (xi) The Company is not a public limited Company, hence, para 3 (xi) of the Order is not applicable. (xii) The nature of business is not related to Nidhi Company; hence, this clause is not applicable. (xiii) In our opinion, and according to the information and explanations given to us and based on our examination 16

19 Annexure A to the Auditor s Report of the records of the Company, all transactions with related parties are in compliances with the section 177 & 188 of the Companies Act, 2013 and details have been disclosed in the Financial Statements as required by the applicable Accounting Standards. (xiv) The Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. (xv) The Company has not entered into any non-cash transactions with directors or persons connected with him. (xvi) The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, For Kirtane & Pandit LLP Chartered Accountants Firm Registration No W/ W Sandeep D. Welling Partner Membership No.: Place : Mumbai Date : April 24,

20 Annexure B to the Auditor s Report Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ( the Act ). We have audited the internal financial controls over financial reporting of HDFC Pension Management Company Limited ( the Company ) as of in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date. Management s Responsibility for Internal Financial Controls The Company s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, Auditors Responsibility Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the Guidance Note ) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company s internal financial controls system over financial reporting. Meaning of Internal Financial Controls Over Financial Reporting A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. 18