Morningstar India Private Limited Corporate Social Responsibility Policy 1. Overview Section 135 of the Companies Act, 2013 (hereinafter the Act ), read with (i) the Companies (Corporate Social Responsibility Policy) Rules, 2014, issued vide Ministry of Corporate Affairs (hereinafter MCA ) notification dated February 27, 2014, (ii) MCA circular dated June 18, 2014 and all other circulars and notifications issued by MCA subsequently in this regard (the Act, notifications and circulars being hereinafter collectively referred to as the Law ), makes it mandatory for certain classes of companies to implement Corporate Social Responsibility (hereinafter CSR ). The Law also lays down the detailed requirements in this regard, the key requirements among which are as under: A. The Law makes CSR mandatory for all companies that meet at least one of the following criteria: (a) Net worth of Rupees five hundred crore (INR 5,000 mn) or more; (b) Turnover of Rupees one thousand crore (INR 10,000 mn) or more; (c) Net profit of Rupees five crore (INR 50 mn) or more during any financial year. B. The Law requires such companies to do the following, among other things, in respect of CSR: (a) constitute a CSR Committee of its Board of Directors; (b) formulate and implement a CSR policy; and (c) set aside and spend towards CSR activities, in every financial year, at least 2% of its average net profits for the three immediately preceding financial years. Morningstar India Private Limited (hereinafter the Company ), a company incorporated under the erstwhile Companies Act, 1956 (which was replaced in 2013 by the Act), having its registered office at 9th Floor, Platinum Techno Park, Plot No. 17/18, Sector 30A, Vashi, Navi Mumbai 400075, Maharashtra, India, meets criterion A. (c), viz., net profit of Rupees five crore (INR 50 mn) or more during any financial year, and hence falls within the ambit of companies that need to carry out CSR activities in accordance with the Law. In view of the above, on the recommendation of the CSR Committee of the Board of Directors of the Company, this CSR Policy (hereinafter Policy ) is approved and adopted by the Board of Directors with immediate effect. 2. Objectives of the Policy The Policy aims to achieve, at a minimum, the following objectives: (a) Define CSR goals for the Company and spell out the Company s approach towards achieving these goals; (b) List out the types of CSR projects that the Company believes in and would consider undertaking; (c) Identify geographical areas where the Company will undertake its CSR projects;
(d) Serve as a guiding document for executing the Company s CSR projects and monitoring the execution; (e) Define the extent or quantum of amount the Company will set aside for CSR; (f) Explain how the surpluses from the CSR projects of the Company will be handled. 3. CSR Committee (a) Composition of the CSR Committee: The CSR Committee of the Board of Directors of the Company consists of both the Directors of the Company, namely: (i) Mr. Aditya Agarwal (Managing Director) (ii) Mr. Shreyas Shah (Director) (b) Responsibilities of the CSR Committee: (i) Formulating the Policy and recommending it to the Board of Directors of the Company for approval and implementation; (ii) Indicating, through the Policy, the CSR activities/projects that the Company will undertake; (iii) Putting in place, the criteria for selecting partner entities or NGOs for executing its CSR activities; (iv) Approving and implementing CSR projects for the Company in line with the Policy (such projects being hereinafter referred to as CSR Projects ); (v) Recommending to the Board of Directors of the Company, the amount of expenditure to be incurred by the Company on CSR Projects (hereinafter CSR Budget ); (vi) Determining the allocation of the CSR Budget among various CSR Projects and the tranches of disbursement; (vii) Instituting a transparent mechanism for monitoring the implementation of CSR Projects, in line with the Policy; (viii) Monitoring compliance of the Policy from time to time; (ix) Meeting once in six months to review the progress made on implementation of the CSR Projects and compliance of the Policy and (x) Submitting a report to the Board of Directors, on the Company s CSR activities, on a yearly basis, laying emphasis on the status of the CSR Projects along with the impact created by such projects. (Format as per Annexure I). 4. CSR Expenditure (a) CSR Budget As mandated by the Law, the Company shall spend, in every financial year, at a minimum, 2% of its average net profits for the three immediately preceding financial years, in line with the Policy, on CSR Projects.
(b) Allocation to CSR Projects Within the CSR Budget mentioned in 4. (a) above, the CSR Committee shall have the discretion to determine the following: (i) (ii) Percentage of total amount to be spent on each CSR Project and Tranches of disbursement (c) Included and Excluded Expenditure Any expenditure, including contribution to corpus, for the CSR Projects of the Company in line with the Policy shall be considered as valid CSR Expenditure as per the Policy. Furthermore, salaries paid to employees, if any, who work on CSR activities (in proportion to the time/hours spent specifically on CSR) may be regarded as valid CSR expenditure. The following kinds of expenditure shall not be considered as valid CSR Expenditure, and shall be excluded for the purposes of the Policy: (i) (ii) (iii) (iv) (v) (vi) (vii) Expenditure incurred on any activity that is not in conformity with the Policy; Expenditure incurred on any activity that is not in accordance with the Law; Expenditure incurred on any project or program that benefits only the employees of the Company and their families; Expenditure incurred for one-off events such as marathons, awards, charitable contributions, advertisements, sponsorships of TV programs etc.; Expenses incurred for the fulfillment of any regulation or statue such as labour laws, Land Acquisition Act etc.; Expenditure incurred on activities undertaken in the normal course of business of the Company and Any amount contributed directly or indirectly to any political party. (d) Treatment of Surplus Any surplus arising from the CSR Projects will be treated in the following manner: (i) (ii) Such surplus shall not form part of the business profits of the Company; Such surplus shall be tracked and ploughed back into the CSR Budget or the amount earmarked for CSR Projects, and shall be used for CSR Projects only. (e) Others The CSR Committee may recommend to the Board of Directors to contribute funds for building the CSR capacities of the employees of the Company as well as those of the implementing agencies, if any, through institutions with established track records of at least three financial years, provided that such expenditure, including expenditure on administrative overheads, shall not exceed 5% of the total CSR expenditure of the Company in one financial year.
5. CSR Goals of the Company The CSR goals of the Company include, without limitation, the following: (a) eradicating extreme hunger and poverty; (b) promoting education; (c) promoting gender equality and empowering women; (d) ensuring environmental sustainability; (e) rural development; (f) protection of national heritage, art and culture, including restoration of buildings and sites of historical importance and works of art; (g) setting up of public libraries; (h) promotion and development of traditional arts and handicrafts; (i) measures for the benefit of armed forces veterans, war widows and their dependents; (j) providing training to promote rural sports, nationally recognized sports, and Paralympics sports and Olympic sports; and (k) employment enhancing vocational skills. 6. CSR Projects The Company shall undertake CSR Projects in line with its CSR goals as mentioned in 5. above, and in doing so, will either (i) make contributions to non-profit organizations including specific funds maintained by the Central/State Government of India like the Prime Minister s Relief Fund etc. or (ii) partner with non-profit organizations/ngos that have an impeccable track record, of not less than three years at the very least, of service, performance, governance and accountability, or (iii) engage in a combination of the methods listed in (i) and (ii) above. (a) List of CSR Projects The Company may focus on CSR Projects in one or more areas in line with the CSR Goals of the Company mentioned in 5. above. (b) Process for execution of the CSR Projects The following procedure shall be followed by the Company for executing CSR Projects: (i) The CSR Committee shall, in line with the Policy, select and approve CSR Projects to be undertaken by the Company; (ii) For each such CSR Project, the CSR Committee shall formulate and issue a Sanction Letter and/or Memorandum of Understanding (hereinafter MoU ) with the partnering entity/ngo, detailing the key roles and responsibilities of each of the parties. (iii) Contribution shall be made only towards the specific projects identified and approved by the CSR Committee.
(iv) Before disbursing the contribution amount to the partnering entity/ngo, the CSR Committee shall ensure that the said partnering entity/ngo has all the requisite approvals required under all applicable laws, including but not limited to Section 11 (2) of the Foreign Contribution (Regulation) Act, 2010 and Sections 12AA and 80 G of the Income Tax Act, 1961. (v) The disbursement of contribution will be made only on receipt of a request from the partnering entity/ngo, specifying the amount required and the specific activity for which it is required. Such a request shall be accompanied by a statement of the entity s/ngo s activities. (vi) At the time of making a contribution for a CSR Project, the CSR Committee shall specify the activities for which it is made, and the said amount and any interest earned on such amount shall be utilized towards the said activities only. (c) Implementation Schedule for CSR Projects Each CSR Project shall be implemented within a reasonable time period from the date of initiating the project or partnering with the relevant entity/ngo, such that the project meets the target objective. (d) Monitoring Mechanism for implementation of the CSR Projects With a view to monitoring implementation of each CSR Project, the CSR Committee shall follow the following mechanism: (i) Obtain the following information/documents from the partnering entity/ngo concerned: Audited financial statements, including cash flow statements, within 90 days of the end of the relevant financial year; Progress reports with regard to the CSR Project concerned, on a quarterly basis, along with a consolidated statement of expenses. Copies of any report or document received by the partnering entity/ngo concerned from its auditors relating to its financial position or affairs which is of a material nature; Any information which may affect or jeopardize the implementation of the CSR Project or the activities of the partnering entity/ngo in general. (ii) Depending on the size of the contribution, the partnering entity/ngo, and the CSR Project in itself, the CSR Committee shall carry out one or more of the following activities: Periodic field visits by employees of the Company, as designated for this purpose by the CSR Committee; Sample internal audit of the CSR Project, by employees of the Company, as designated for this purpose by the CSR Committee; Review of the reports submitted by the partnering entity/ngo; Monitoring, inspection, examination and auditing of the partnering entity s/ngo s operations, records and other aspects, including conducting of annual review of the financial and operational condition of the said partnering entity/ngo, by employees of the Company, as designated for this purpose by the
CSR Committee, or through the Company s auditors (internal or external), or through any agent appointed by the Company in this behalf; The CSR Committee may engage external agencies to evaluate the CSR Projects and monitor their progress; however the responsibility of monitoring the implementation of the CSR Projects and utilization of the CSR Budget shall continue to vest in the CSR Committee. 7. Geographical area(s) where the Company will undertake CSR Projects The Company shall give preference to the local area and areas around it, where it operates, for spending the amount earmarked for CSR Projects, in line with the Policy, and shall, in no event, undertake any CSR project outside India. 8. Dissemination of Information (a) The CSR Committee shall report to the Board of Directors, on the Company s CSR activities, on a yearly basis, laying emphasis on the status of the CSR Projects along with the impact created by such projects. (b) The Company shall ensure that the Policy is uploaded on its website, www.morningstar.in. (c) A detailed status report on the CSR Projects undertaken by the Company shall be disclosed every financial year ending on March 31 st as part of the Directors Report in the Annual Report of the Company. This report shall also be uploaded on the website of the Company, www.morningstar.in. (d) The CSR Committee will also make a statement in the Annual Report of the Company that the implementation and monitoring of the Policy are, in letter and spirit, in compliance with the CSR goals of the Company. Annexure I FORMAT FOR THE ANNUAL REPORT ON CSR ACTIVITIES TO BE INCLUDED IN THE BOARD'S REPORT 1. A brief outline of the Company's CSR Policy, including overview of the CSR Projects or programs proposed to be undertaken and a reference to the web-link to the CSR policy and projects or programs. 2. The Composition of the CSR Committee. 3. Average net profit of the Company for last three financial years 4. Prescribed CSR expenditure (two per cent of the amount as in item 3 above) 5. Details of CSR spent during the financial year.
(a) Total amount to be spent for the financial year; (b) Amount unspent, if any; (c) Manner in which the amount spent during the financial year is detailed below: Sr. No. 1. 2. CSR project Identified Sector in which the project is covered Projects or programs: (1) Local area or other (2) Specify the state and district where project/program was undertaken Amount outlay (budget) project or programwise Amount spent on the projects or programs Subheads: (1) Direct expenditure on projects or programs (2) Overheads Cumulative expenditure upto the reporting period Amount spent: Direct or through implementing agency 6. In case the Company has failed to spend 2% of its average net profits for the last three financial years or any part thereof, the Company shall provide the reasons for not spending the amount in its Board report. 7. A responsibility statement of the CSR Committee that the implementation and monitoring of the CSR Policy is in compliance with the CSR objectives and Policy of the Company. Signature (Chief Executive Officer/Managing Director/Director) Signature Chairman, CSR Committee *********************************************************************************