IDFC CAPITAL (USA) INC.

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1 IDFC Capital (USA) Inc. IDFC CAPITAL (USA) INC. Mr. Clifford Goldman - CEO INDEPENDENT AUDITORS Deloitte & Touche LLP PRINCIPAL BANKERS J P Morgan Chase Bank NA REGISTERED OFFICE Regus Business Centre 600 Third Avenue 2nd floor New York, USA tel IDFC ANNUAL REPORT

2 Board's Report TO THE MEMBERS Your Directors have pleasure in presenting the Fourth Annual Report of IDFC Capital (USA), Inc. together with the audited accounts for the year ended March 31, FINANCIAL RESULTS PARTICULARS FOR THE YEAR ENDED MARCH 31, 2015 AMOUNT IN US$ Total Income 549,187 Less: Total Expenses 422,319 Profit before Tax 126,868 Less: Income Taxes 40,989 Net Income 85,879 OPERATIONAL REVIEW AND FUTURE OUTLOOK The US business has seen a good pick up both in terms of coverage as well as activity with the turnaround in the Indian capital markets since January The Company now covers almost 60 clients across US and Canada. The Company was compliant with all regulatory requirements of the US regulator. IDFC Capital (USA), Inc., ( the Company ) is the wholly owned subsidiary of IDFC Securities Limited. It was incorporated in the State of New York on August 3, IDFC Securities Limited, is in turn is a wholly owned subsidiary of IDFC Limited ( IDFC ). On September 15, 2011, the Company became a broker-dealer and as such is registered with the Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority. SHARE CAPITAL During the year, there was no change in the paid up equity share capital of the Company. DIRECTORS During the year Mr. Ravi Lochan Pola resigned as CEO on December 31, 2014 and Mr. Clifford Goldman was appointed as CEO in his place. ACKNOWLEDGEMENTS The Board wishes to thank the clients, custodians Banks and other statutory and regulatory authorities for their support to your Company. The Board also places on record its appreciation for the sincere efforts of the staff. The Board would also like to express its gratitude for the unstinted support and guidance received from IDFC Securities Limited and IDFC, the ultimate parent organization and also other group companies. Clifford Goldman CEO May 18, 2015 IDFC Capital (USA), Inc. 363

3 Independent Auditors' Report To the Board of Directors and Stockholder of IDFC Capital (USA), Inc. We have audited the accompanying statement of financial condition of IDFC Capital (USA), Inc. (the Company ) as of March 31, 2015, and the related statements of operations, cash flows, and changes in stockholder s equity for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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. In our opinion, such financial statements present fairly, in all material respects, the financial position of IDFC Capital (USA), Inc. as of March 31, 2015, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. As described in Notes 1 and 6, the activities of the Company include significant transactions with IDFC Limited and its affiliates that may not necessarily be indicative of the conditions that would have existed or the results of operations if the Company had operated as an unaffiliated business. Our opinion is not modified with respect to this matter. Deloitte & Touche LLP New York May 18, IDFC ANNUAL REPORT

4 Statement of Financial Condition March 31, 2015 Amount in US$ ASSETS Cash 720,280 Due from parent 146,116 Fixed assets-net of accumulated depreciation of $39,328 5,045 Deferred tax asset 62,500 Income tax receivable 1,409 Other assets 16,729 Total assets 952,079 Liabilities and Stockholder's Equity Liabilities: Compensation payable 22,424 Accrued expenses and other liabilities 16,638 Income tax payable 8,354 Total liabilities 47,416 Commitments Stockholder's equity: Common stock($.01 par value; 100,000,000 shares authorized, issued and outstanding) 1,000,000 Accumulated deficit (95,337) Total stockholder's equity 904,663 Total liabilities and stockholder's equity 952,079 See accompanying notes to financial statements. IDFC Capital (USA), Inc. 365

5 Statement of Operations For the Year ended March 31, 2015 Revenue Advisory fees 548,789 Other income 398 Total revenues 549,187 Expenses Employee compensation and benefits 162,864 Consulting and professional fees 103,063 Rent, utilities and other office expenses 39,449 Market data and communications 32,277 Regulatory fees and expenses 4,902 Travel, entertainment and promotional expenses 24,734 Other 29,469 Fixed asset disposition 25,561 Total expenses 422,319 Net income before income taxes 126,868 Income taxes 40,989 Net income 85, IDFC ANNUAL REPORT

6 Statement of Changes in Stockholder s Equity For the Year ended March 31, 2015 Share Common Stock Share Option Reserve Accumulated Deficit Balance, April 1, ,000, ,000,000 95,530 (181,216) 914,314 Net income 85,879 85,879 Share based compensation (95,530) (95,530) Balance, March 31, ,000, ,000,000 (95,337) 904,663 Total IDFC Capital (USA), Inc. 367

7 Statement of Cash Flow For the Year ended March 31, 2015 Cash flows from operating activities Net income 85,879 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 16,767 Deferred tax 31,495 Share based compensation (95,530) Fixed asset disposition 25,561 Decrease (increase) in operating assets Due from parent 11,704 Income tax receivable 8,550 Other assets 7,443 (Decrease) increase in operating liabilities Compensation payable 22,424 Accrued expenses and other liabilities (6,149) Income tax payable 8,354 Net cash provided by operating activities 116,498 Net increase in cash 116,498 Cash Beginning of year 603,782 End of year 720,280 Supplemental disclosures of cash flow information Cash received from tax refunds during the year 7,808 Non cash financing activity Share based compensation cancellation (95,530) See accompanying notes to financial statements. 368 IDFC ANNUAL REPORT

8 Notes forming part of Financial Statements For the Year Ended March 31, Organization IDFC Capital (USA), Inc. (the Company ), a wholly owned subsidiary of IDFC Securities Limited ( the Parent ) was incorporated in the State of New York on August 9, The Parent is a wholly owned subsidiary of IDFC Limited ( the Ultimate Parent ). The Company is a broker-dealer registered with the Securities and Exchange Commission (the SEC ) and is a member of the Financial Industry Regulatory Authority ( FINRA ). The Company s principal business activity is distributing research and market commentary and brokering transactions in Indian equities for U.S. institutional clients. The customers introduced by the Company transact their business on delivery versus payment basis with settlement of the transactions facilitated by an affiliate in India for securities traded in Indian stock markets. 02 Significant accounting policies Basis of Presentation The Company s financial statements were prepared in conformity with accounting principles generally accepted in the United States of America ( GAAP ). Use of Estimates In preparing the financial statements, management makes estimates and assumptions that may affect the reported amounts. Such estimates include assumptions used in determining the provision for income taxes. Actual results could differ from these estimates. Fixed Assets Fixed assets represent equipment and are stated at cost less accumulated depreciation and amortization. Depreciation is computed on a straight-line basis over the assets estimated useful lives of 3 years. Advisory Fees The Company receives fees from the Parent for per forming sales and marketing functions on behalf of the Parent in order to attract institutional customers. The fees are based on expenses incurred by the Company in relation to the marketing activities such as compensation and benefits, professional services, occupancy, travel and other operating costs, plus a transfer pricing agreement profit factor of 6%. Income Taxes Deferred tax assets and liabilities are recognized for the future tax effect of differences between the financial statement carrying amounts of existing assets and liabilities and the irrespective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. In the event it is more likely than not that a deferred tax asset will not be realized, a valuation allowance is recorded. The Company applies a single, comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on its tax returns. Income tax expense is based on pre-tax accounting income, including adjustments made for the recognition or derecognition related to uncertain tax positions. The Company evaluates uncertain tax positions by reviewing against applicable tax law all positions taken by the Company with respect to tax years for which the statute of limitations remains open. A tax benefit from an uncertain tax position will be recognized when it is considered to be more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. Share-Based Compensation The Ultimate Parent grants employee stock options to certain employees of the Company under various Employee Stock Option Plans of the Ultimate Parent. The compensation expense associated with this is generally accrued when earned by the employees and is allocated to the Company by the Ultimate Parent and is recorded through the Share Option Reserve. Delivery of the under lying shares of the Ultimate Parent is conditioned on the grantees satisfying requirements outlined in the award agreements. There were no grants issued during the fiscal year ended March 31, All of the previously granted stock options to the sole participant were cancelled on December 31, 2014 up on the resignation of this participant. The related compensation expense of $ 95,530 previously recognized was reversed in the current year. 03 Income Taxes The components of the income tax expense for the year ended March 31, 2015 are as follows: Tax Provision Current Deferred Total Federal 4,834 13,474 18,308 State and local 4,660 18,021 22,681 9,494 31,495 40,989 IDFC Capital (USA), Inc. 369

9 Notes forming part of Financial Statements For the Year Ended March 31, 2015 Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the Statement of Financial Condition. As of March 31, 2015, the Company has a deferred tax asset of $ 62,500, recorded in the accompanying Statement of Financial Condition, and is a result of temporary differences primarily related to amortization of organization costs. The Company has determined that it is more likely than not that the deferred tax asset will be realized and therefore there is no valuation allowance against the deferred tax asset. The difference between the Company s statutory U.S. tax rate and its effective tax rate is primarily due to state, and local income taxes and meals and entertainment. Based upon the Company s review of its federal, state, local income tax returns and tax filing positions, the Company determined no unrecognized tax benefits for uncertain tax positions were required to be recorded. In addition, the Company does not believe that it has any tax positions for which it is reasonably possible that it will be required to record significant amounts of unrecognized tax benefits within the next twelve months. The Company is not currently under examination by any taxing jurisdiction. The earliest tax year which is subject to examination by state and local tax authorities and the Internal Revenue Service is Concentration of Credit Risk The Company maintains substantially all of its cash balance eat one major financial institution. The Company does not believe that these amounts are exposed to significant risk. 05 Net Capital Requirements The Company is subject to the Securities and Exchange Commission Uniform Net Capital Rule (SEC Rule 15c3-1) ( the Rule ) under the Securities Exchange Act of The Company has elected to use the alternative method permitted by the Rule, which requires the Company maintain minimum net capital, as defined, shall not be less than $250,000 or 2 % of aggregate debit balances arising from customer transactions. At March 31, 2015, the Company had net capital of $ 672,864 which was $ 422, 864 in excess of required minimum net capital of $250,000. The Company is exempt from the provisions of Rule 15c3-3 under the Securities Exchange Act of 1934 as the Company s activities are limited to those set forth in the condition for exemption appearing in paragraph(k)(2)(i). 06 Related Party Transaction The Company entered in to a service level agreement with the Parent on December 26, 2011 where by the Company will distribute research on behalf of the Parent. The Company earned $ 548,789 in advisory fees from the Parent for the year ended March 31, 2015, of which $ 146,116 remained unpaid. 07 Commitments and Contingencies The Company rents office space under an operating lease, which expires August 31, The future minimum annual base rent payments required under this operating lease is $11,145. Total rental expense for the year ended March 31, 2015, was $30,145 and is included in rent, utilities and other office expenses on the Statement of Operations. 08 Fixed Assets Fixed assets consisted of the following at March 31, 2015: Equipment 44,373 Less: accumulated depreciation (39,328) 5,045 Depreciation expense for the year ended March 31, 2015 was $16,767. During the year ended March 31, 2015, the Company disposed of fixed assets that had a net depreciated value of $25, Fair Value of Financial Instruments Substantially all of the Company s assets and liabilities are carried at fair value or contracted amounts which approximate fair value. 10 Subsequent Events The Company has evaluated subsequent events up to the date on which the financial statements are issued. As a result of the Company s evaluation, the Company noted no subsequent events that require adjustment to, or disclosure in, these financial statements. 370 IDFC ANNUAL REPORT

08 IDFC CAPITAL (USA) INC. CHIEF EXECUTIVE OFFICER

08 IDFC CAPITAL (USA) INC. CHIEF EXECUTIVE OFFICER nn Mr. Ravi Lochan Pola INDEPENDENT AUDITORS nn Deloitte & Touche LLP PRINCIPAL BANKER nn J. P. Morgan Chase Bank N.A. REGISTERED OFFICE 350 Fifth Avenue,