ICICI PRUDENTIAL PENSION FUNDS MANAGEMENT COMPANY LIMITED SCHEME E TIER I SCHEME C TIER I SCHEME G TIER I SCHEME E TIER II SCHEME C TIER II SCHEME G TIER II ANNUAL REPORT 2013-2014
CONTENTS 1. BACKGROUND a) THE TRUST... 3 b) SPONSOR... 3 c) PENSION FUND MANAGEMENT COMPANY... 4 d) INVESTMENT STRUCTURE OF THE COMPANY... 4 2. BASIS AND POLICY OF INVESTMENTS... 4 3. ECONOMIC SCENARIO... 5 4. INVESTMENT OBJECTIVE OF THE SCHEME... 7 5. SCHEME PERFORMANCE AND OPERATIONS... 7 6. LIABILITIES AND RESPONSIBILITIES OF THE COMPANY... 11 7. FINANCIAL STATEMENTS OF THE SCHEMES. 11 a) Scheme E Tier I - Equity market instruments b) Scheme C Tier I - Credit risk bearing fixed income instruments c) Scheme G Tier I - Government securities d) Scheme E Tier II - Equity market instruments e) Scheme C Tier II - Credit risk bearing fixed income instruments f) Scheme G Tier II - Government securities 2
To the Subscribers, ICICI Prudential Pension Funds Management Company Limited ( the Company ) presents annual report along with the audited financial statements of the Schemes for the year ended 2014. During the year ending 2014, the Company managed the following 6 schemes under the National Pension System (NPS): Tier I Scheme E - Equity market instruments Tier I Scheme C - Credit risk bearing fixed income instruments Tier I Scheme G - Government securities Tier II Scheme E - Equity market instruments Tier II Scheme C - Credit risk bearing fixed income instruments Tier II Scheme G - Government securities 1. BACKGROUND OF THE TRUST, SPONSORS AND PENSION FUND MANAGEMENT COMPANY a) THE TRUST Pension Fund Regulatory and Development Authority ( PFRDA was established by the Government of India on August 23, 2003 to promote old age income security by establishing, developing and regulating pension funds, to protect the interests of subscribers to schemes of pension funds. The National Pension System Trust ( NPS Trust ) was established by PFRDA ) on February 27, 2008. The NPS Trust has been set up and constituted for taking care of the assets and funds under the National Pension System (NPS) in the interest of the beneficiaries (subscribers). b) SPONSOR The Company is sponsored by ICICI Prudential Life Insurance Company Limited (`the sponsor ) and it is also a wholly owned subsidiary of the Sponsor. ICICI Prudential Life Insurance Company Limited, a joint venture between ICICI Bank Limited and Prudential Corporation Holdings Limited, was incorporated on July 20, 2000. It is licensed by the Insurance Regulatory and Development Authority (`IRDA ) for carrying out life insurance business in India. The Sponsor reaches its customers through 559 offices in 489 locations at 2014 and have over 5,000 partner points of presence. At 2014 the Sponsor had over 10,700 employees and over 171,000 advisors and is thus well equipped to cater to the needs of customers. Assets under management of the Sponsor grew from ` 741.64 billion at 2013 to ` 805.97 billion at 2013. The Sponsor reported a profit after tax of ` 15.67 billion in FY2014 as against profit after tax of ` 14.96 billion in FY2013. 3
c) PENSION FUND MANAGEMENT COMPANY The Company was incorporated on April 22, 2009 and received certificate to commence business on April 28, 2009. The Company is appointed as a Pension Fund Manager ( PFM ) by the NPS Trust for the management of pension Schemes for private sector) under the NPS Trust. The Company has recorded a growth of 144.9% in Assets Under Management (AUM) of the Schemes for the financial year ending 2014. The AUM at 2014 was ` 1,768.2 million up from ` 722.3 million at 2013. d) INVESTMENT STRUCTURE OF THE COMPANY The Company has a multi-tiered investment structure to achieve adequate segregation between control and execution. The Board of Directors of the Company approves the Investment Policy and Risk Management Policy, reviews investments and oversees the risk management. The Investment Committee (Committee) of the Board is responsible for implementation of Investment Policy, building investment strategy, monitoring investment decisions and returns. The Investment team, headed by Chief Executive Officer and Chief Investment Officer, is responsible for market tracking, investment decisions and deal negotiation & conclusion. The Investment Team is also responsible for research, portfolio management and trading. An independent Investment Operations group looks after settlement, investment compliance, valuation, accounting, net asset value ( NAV ) calculation and statutory and management reporting. The activities in the Investment Operations group are clearly segregated as Accounting and NAV computation, Treasury and Mid Office. An external Custodian, appointed by PFRDA, is responsible for custody of the assets, tracking corporate actions and also valuation of securities. Daily investment activities including NAV computation is subject to concurrent audit carried out by an independent audit firm. 2. BASIS AND POLICY OF INVESTMENTS Investment Strategy The overall investment strategy is focused on ensuring adequate returns to subscribers consistent with protection, safety and liquidity of funds while complying with the 4
applicable investment guidelines as prescribed under IMA. The investment strategy is guided by principles of prudent portfolio management and risk management. Pursuant to the new investment guidelines issued by PFRDA on January 29, 2014, Scheme E is an index fund replicating NSE Nifty 50 index. The investment philosophy of the scheme can be summarized as close replication of the underlying index so as to achieve returns as close to the index as possible with low tracking error. The objective of fixed income fund management is to meet return expectations of subscribers through investment in high credit fixed income securities, managing interest rate risk, credit risk and liquidity risk. The funds under the Scheme C (Credit risk bearing fixed income instruments) are invested in fixed deposits, corporate bonds and liquid instruments following the scheme objective and investment universe as defined by PFRDA. Investments in corporate bonds are made in high quality long term debt following internal due diligence and credit rating from independent credit rating agencies. The funds under the Scheme G (Government securities) are invested in long term central and state government securities as per the scheme objective. The scheme is managed actively based on interest rate view backed by extensive research and analysis. 3. ECONOMIC SCENARIO Equity review - FY2014 Indian equity market posted 18% gain in FY2014, despite the slowdown in economy, sticky inflation and rise in interest rates. Nifty remained volatile in the first half of FY2014 with market almost flat on point-to-point basis; the key reason behind this volatility however was the fear of withdrawal of quantitative easing by US Federal Reserve ( Fed ), which led to sell-off in all emerging economy (EM) currencies, including Indian Rupee. However in H2-FY2014, equity market stabilized, helped by RBI bolstering forex reserves through subsidized dollar borrowings. Further improvement in global risk sentiments and rising expectations of a favourable electoral outcome in general elections led to strong inflow of foreign capital in H2-FY2014. The foreign capital inflows into Indian equities were US$ 14 billion during FY2014, as against the capital outflows of US$ 9 billion by domestic institutional investors. Debt review - FY2014 FY2014 was a volatile year for debt markets primarily due to fears of tapering of QE3 program by Fed in the backdrop of weak domestic fundamentals and sticky inflation. The 10 year benchmark Government security rose by almost 84 bps from 7.96% on March 31, 2013 to 8.80% on 2014 after reaching the low of 7.11% in May 2013 and the high of 9.24% in Aug 2013. 5
The financial year started with RBI cutting the Repo rate by 25 bps to 7.25% to promote growth. However, this was reversed with a sharp hike in short term rates to stabilize rupee that weakened sharply on fears of QE3 tapering. While RBI reversed some of the short term liquidity measures taken earlier, the Repo rates was increased by 75 bps to 8.0% during the latter part of the year to control inflation so as to achieve sustainable growth. Consumer price inflation (CPI) moderated from 11.2% in November to 8.3% in March as food inflation reduced. Current account deficit (CAD) was brought under control at around 2% of GDP in FY14 due to slowing growth and restrictions on gold reduced imports. However growth remained on a weak track at sub 5% overall. While government took some measures to address the supply bottlenecks by clearing projects, their impact will be felt with a lag. The government announced a GDP growth target of 6% and a fiscal deficit target of 4.2% for FY2015. The deficit target was in line with market expectations while projected growth was on higher side. Outlook Equity Outlook The equity markets are expected to remain buoyant on the back of hopes of economic revival and favorable political landscape. The release of pent-up demand built up due to uncertainty over last one year, and expectations of fall in inflationary pressures should help cyclical sectors. The election results have led to a stronger government than envisaged and the equity market expects early economic revival on speedy implementation. A lot however hinges on the new government s actions - tough and swift decisions are required on subsidies and other factors holding back interest rates from coming down and growth from picking up. While we remain optimistic, a possibility of weaker-than-average monsoon, due to formation of El Nino effect, can be a shortterm risk factor. However, we believe the negative impact can be contained if the monsoon shortfall is only modest as is being currently the forecast, given the level of water in reservoirs as well as quantum of food stocks reserves with Government. While pick-up in economic growth and corporate earnings might happen with a lag, we expect equity market performance to be front-ended. We expect India s growth rate to reach its potential of high single digit over long run, thus yielding double digit equity returns in the long run. Debt Outlook The debt market too is likely to remain volatile as market sentiments are expected to swing significantly based on various triggers. The fresh supply of government securities and the possibility of below average rainfall is likely to exert upward pressure on the yields in the first half of the financial year 2015. While the first target of RBI s glide path (CPI inflation at 8% by January 2015) appears within reach, the broader objective of lowering CPI inflation to 6% by January 2016 and then to around 4% (as recommended by the Urjit Patel committee) requires significant further disinflation. Although we believe that the abysmally low GDP growth of sub 5% level does not auger well with the 6
economy and the high interest rates are not sustainable over long term however, the outlook for the fixed income market for current financial year would largely be dependent on the sustained downward trajectory of the core CPI inflation and success in containing fiscal deficit. 4. INVESTMENT OBJECTIVE OF THE SCHEME The investment objective of the Scheme(s) managed by ICICI Prudential Pension Funds Management Company Limited based on investment guidelines issued by PFRDA on January 29, 2014. The schemes seeks to provide capital appreciation while maintaining suitable balance between return, safety and liquidity. Sr. No. Name of the Scheme Investment Objective 1 Scheme E Tier I To optimise returns while investing in the NSE Nifty 50 Index. 2 Scheme C Tier I To optimise returns and provide accumulation of income through investment in fixed deposits, corporate bonds and liquid instruments. 3 Scheme G Tier I To optimise returns and provide accumulation of income through investment primarily in government securities (issued by GoI and various state governments). 4 Scheme E Tier II To optimise returns while investing in the NSE Nifty 50 Index. 5 Scheme C Tier II To optimise returns and provide accumulation of income through investment in fixed deposits, corporate bonds and liquid instruments. 6 Scheme G Tier II To optimise returns and provide accumulation of income through investment primarily in government securities (issued by GoI and various state governments). 5. SCHEME PERFORMANCE AND OPERATIONS Scheme E Tier I - Equity market instruments The performance of the scheme is measured by reference to the total return (dividends reinvested) of the NSE Nifty 50 Index. The performance of Scheme E Tier I at 2014 is presented below: Period Returns (%)^ Benchmark Returns (%) # Last 1 year 21.2% 19.3% Last 3 years 6.8% 6.0% Since inception @ 11.1% 10.7% ^ Past performance may or may not be sustained in the future, returns are compounded annualised (CAGR) # Benchmark index: NSE Nifty 50 Index (dividends reinvested) @ Date of Inception: May 18, 2009 7
The Scheme returns have outperformed the benchmark returns over 1 year, 3 years and since inception. The Scheme was actively managing its investments which comprised of underlying stocks that constitute NSE Nifty 50 Index till January 29, 2014. The scheme now replicates NSE Nifty 50 index, in compliance with the revised investment guidelines issued by PFRDA vide its circular no. PFRDA/2014/02/PFM/1 dated January 29, 2014. The net assets of the Scheme at 2014 stood at ` 635.9 million as against ` 236.2 million at 2013, a growth of 169.2%. At 2014, 99.4% of the net assets were invested in equity shares and the balance in liquid mutual funds, cash/cash equivalent & net current assets. Scheme C Tier I - Credit risk bearing fixed income instruments The Scheme invests only in high quality corporate bonds above investment grade, (75% of the bonds are AAA rated) and fixed deposits of large commercial banks. The performance of Scheme C Tier I at 2014 is presented below: Period Returns (%)^ Benchmark Returns (%) # Last 1 year 6.2% 5.4% Last 3 years 10.6% 8.5% Since inception @ 10.5% 7.8% ^ Past performance may or may not be sustained in the future, returns are compounded annualised (CAGR) # Benchmark index: Crisil AAA Combex @ Date of Inception: May 18, 2009 The Scheme returns have outperformed the benchmark returns over 1 year, 3 years and since inception. The returns continue to be healthy since inception of the scheme. The net assets of the Scheme at 2014, increased by over 144%, stood at ` 446.3 million as against ` 182.5 million at 2013. At 2014, 94.9% of the net assets were invested in bonds and non-convertible debentures, 0.1% in fixed deposits, 1.4% in liquid mutual funds and balance 3.6% in cash/cash equivalent & net current assets. Scheme G Tier I - Government securities The performance of Scheme G Tier I at 2014 is presented below: Period Returns (%)^ Benchmark Returns (%) # Last 1 year 1.5% 3.9% 8
Last 3 years 7.0% 7.4% Since inception @ 6.8% 6.1% ^ Past performance may or may not be sustained in the future, returns are compounded annualised (CAGR) # Benchmark index: ISec Gilt Composite Index @ Date of Inception: May 18, 2009 The Scheme returns have underperformed the benchmark returns over 1 year, 3 years and however, it has outperformed the returns since inception. The reason for underperformance was due to high volatility in the domestic and global debt markets which resulted in a steep rise in the yields on long term government securities. In line with the long term nature of pension funds, the funds of the scheme were invested in long term government securities. As the yields rose sharply during the year, these securities underperformed the medium term securities of the benchmark. The net assets of the Scheme at 2014, increased by over 144.7%, stood at ` 471.3 million as against ` 192.6 million at 2013. At 2014, 93.3% of the net assets were invested in central government securities, 5.7% in liquid mutual funds and balance 1.0% in cash/cash equivalent & net current assets. Scheme E Tier II - Equity market instruments The performance of the scheme is measured by reference to the total performance (dividends reinvested) of the NSE Nifty 50 Index. The performance of Scheme E Tier II at 2014 is presented below: Period Returns (%)^ Benchmark Returns (%) # Last 1 year 21.1% 19.3% Last 3 years 6.0% 6.0% Since inception @ 6.7% 7.2% ^ Past performance may or may not be sustained in the future, returns are compounded annualised (CAGR) # Benchmark index: NSE Nifty 50 Index (dividends reinvested) @ Date of Inception: January 11, 2010 The Scheme outperformed the benchmark in FY2014. The Scheme was actively managing its investments which comprised of underlying stocks that constitute NSE Nifty 50 Index till the issuance of the revised investment guidelines The Scheme now replicates NSE Nifty 50 index, in compliance with the revised investment guidelines issued by PFRDA vide its circular no. PFRDA/2014/02/PFM/1 dated January 29, 2014. The net assets of the Scheme at 2014 stood at ` 73.9 million as against ` 28.3 million at 2013, a growth of 161.1%. 9
At 2014, 99.2% of the net assets were invested in equity shares, 0.6% in liquid mutual funds and balance 0.2% in cash/cash equivalent & net current assets. Scheme C Tier II - Credit risk bearing fixed income instruments The Scheme invests only in corporate bonds above investment grade, (77% of the bonds are AAA rated). The performance of Scheme C Tier II at 2014 is presented below: Period Returns (%)^ Benchmark Returns (%) # Last 1 year 6.1% 5.4% Last 3 years 10.6% 8.5% Since inception @ 10.5% 7.9% ^ Past performance may or may not be sustained in the future, returns are compounded annualised (CAGR) # Benchmark index: Crisil AAA Combex @ Date of Inception: January 12, 2010 The Scheme outperformed the benchmark returns over 1 year, 3 years and since inception. The returns continue to be healthy since inception of the scheme. The net assets of the Scheme at 2014 stood at ` 85.9 million as against ` 51.9 million at 2013, a growth of over 65.5%. At 2014, 94.8% of the net assets were invested in bonds / non-convertible debentures, 1.3% in liquid mutual funds and balance 3.9% in cash/cash equivalent & net current assets. Scheme G Tier II - Government securities The performance of Scheme G Tier II at 2014 is presented below: Period Returns (%)^ Benchmark Returns (%) # Last 1 year 1.1% 3.9% Last 3 years 7.2% 7.4% Since inception @ 7.0% 7.2% ^ Past performance may or may not be sustained in the future, returns are compounded annualised (CAGR) # Benchmark index: ISec Gilt Composite Index @ Date of Inception: February 8, 2010 The Scheme underperformed the benchmark returns over 1 year, 3 years and since inception. The underperformance was due to high volatility in the domestic and global debt markets which resulted in a steep rise in the yields on long term government securities. 10
The net assets of the Scheme at 2014 stood at ` 55.0 million as against ` 30.8 million at 2013, a growth of over 78.6% At 2014, 95.6% of the net assets were invested in central government securities, 3.4% in liquid mutual funds and balance 1.0% in cash/cash equivalent & net current assets. Disclaimer: Since the Schemes permit investments in shares, bonds, debentures and other scripts or securities whose value can fluctuate, the price and redemption value of the units of the Schemes and income from them, can go up as well as come down with the fluctuations in the market value of these underlying investments. 6. LIABILITIES AND RESPONSIBILITIES OF THE COMPANY The Company has been appointed by PFRDA as a fund manager for management of investments of the Schemes and, in that capacity, makes investment decisions and manages the Scheme in accordance with the Investment Guidelines, Scheme Objectives, IMA and provisions of the PFRDA guidelines /directions. The transactions entered into by the Company are in accordance with the PFRDA Guidelines, IMA and the code of ethics prescribed by the Trustees. The Company has exercised necessary due diligence and vigilance in carrying out its duties of Investment management and in protecting the rights and interests of the subscribers. Investment decisions have been taken with emphasis on safety and optimum returns. The Company has not dealt in any speculative transactions in dealing for investments. The Company will be responsible for the acts of omissions or commissions of its employees or the persons whose services have been procured by the Company. 7. FINANCIAL STATEMENTS OF THE SCHEMES a) Scheme E Tier I - Equity market instruments b) Scheme C Tier I - Credit risk bearing fixed income instruments c) Scheme G Tier I - Government securities d) Scheme E Tier II - Equity market instruments e) Scheme C Tier II - Credit risk bearing fixed income instruments f) Scheme G Tier II - Government securities 11
ICICI Prudential Pension Funds Management Company Limited - Scheme E Tier I Financial Statements for the year ended 2014
ICICI Prudential Pension Funds Management Company Limited - Scheme E Tier I Financial Statements For the year ended 2014 Contents Auditors Report Balance Sheet Revenue Account Accounting Policies and Notes to Accounts
INDEPENDENT AUDITORS' REPORT To, The Trustees, National Pension System Trust 1 Report on Financial Statements We have audited the accompanying financial statements of NPS Trust A/c ICICI Prudential Pension Funds Management Company Limited, Scheme E - Tier I (Scheme) under the National Pension System Trust (NPS Trust) managed by ICICI Prudential Pension Funds Management Company Limited (PFM) which comprise of the Balance Sheet as at 2014, and the Revenue Account for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements 2 Management of the PFM, in accordance with the Pension Fund Regulatory and Development Authority (PFRDA) Guidelines and the Investment Management Agreement (IMA) with the NPS Trust, is responsible for the preparation of these financial statements that give a true and fair view of the financial position and financial performance of the Scheme in accordance with the accounting standards notified under the Companies Act, 1956 read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013, to the extent made applicable by PFRDA to Scheme. This responsibility includes the design, implementation and maintenance of internal control 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. These financial statements are also approved by the NPS Trust on the recommendation of the Board of Directors of the PFM. Auditor s Responsibility 3 Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. 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 judgement, 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 control relevant
to the PFM's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, 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 financial statements give the information required by PFRDA (Preparation of Financial Statements and Auditors Report of Schemes under National Pension System) Guidelines 2012 and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the Balance Sheet, of the state of affairs of the Scheme as at 2014; (b) in the case of the Revenue Account, of the surplus of the Scheme for the year ended on that date; Report on Other Legal And Regulatory Requirements 7 As required by the PFRDA (Preparation of Financial Statements and Auditors Report of Schemes under National Pension System) Guidelines 2012, as amended, we report that: a) We have obtained all information and explanations which to the best of our knowledge and belief were necessary for the purpose of the audit. b) The Balance Sheet and Revenue account of the Scheme are in agreement with the books of account of the Scheme. c) In our opinion proper books of account of the Scheme, as required by the PFRDA has been maintained by the PFM as far as appears from our examination of those books. d) All transactions expenses in excess of the limits contractually agreed to / approved by the Authority are borne by the Pension Fund (if any) and are not charged to the NAV of the Scheme. e) In our opinion the Balance Sheet and Revenue Account of the Scheme dealt with by this report comply with the PFRDA (Preparation of Financial Statements and Auditor s Report of Scheme under National Pension System) Guidelines-2012 and Accounting Standards notified under the Companies Act, 1956 read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013, to the extent made applicable by PFRDA Guidelines-2012.
8 We further certify that a) Investments have been valued in accordance with the guidelines issued by the Authority. b) Transaction and claims/fee raised by different entities are in accordance with the prescribed fee. For Borkar & Muzumdar Chartered Accountants Firm Registration No. 101569W B M Agarwal Partner M No.: 33254 Place: Mumbai Date: 21 st April, 2014
ICICI PRUDENTIAL PENSION FUNDS MANAGEMENT COMPANY LIMITED - SCHEME E TIER I BALANCE SHEET AT MARCH 31, 2014 Schedule Scheme E Tier I 2014 2013 Sources of funds Unit capital 1 380,286,731 171,428,318 Reserves and surplus 2 255,622,595 64,817,806 Current liabilities and provisions 3 20,023,814 100,369 Borrowings - - Total 655,933,141 236,346,493 Application of funds Investments (long term and short term) 4 637,631,809 234,155,277 Deposits 5 - - Other current assets 6 18,301,333 2,191,216 Total 655,933,141 236,346,493 (a) Net assets as per Balance Sheet (Schedule 4+5+6-3) 635,909,327 236,246,124 (b) Number of units outstanding 38,028,673 17,142,832 (c) NAV per unit (a)/(b) (`) (Refer note 2.8 (II)) 16.7218 13.7810 Significant accounting policies and notes to accounts 7 The notes referred to above form an integral part of the financial statements. As per our report of even date attached. For Borkar & Muzumdar Chartered Accountants Firm Registration No. 101569W For and on behalf of Board of Directors of ICICI Prudential Pension Funds Management Company Limited B M Agarwal Sandeep Bakhshi Sandeep Batra Partner Chairman Director Membership No. 33254 Meghana Baji Vishal Mehta Date : April 21, 2014 Chief Executive Officer Company Secretary Place : Mumbai For and on Behalf of NPS Trust Chairman, NPS Trust Board Chief Executive Officer Date : June 12, 2014 Place : Mumbai
ICICI PRUDENTIAL PENSION FUNDS MANAGEMENT COMPANY LIMITED - SCHEME E TIER I REVENUE ACCOUNT FOR THE YEAR ENDED MARCH 31, 2014 Schedule Scheme E Tier I 2014 2013 Income from investments Interest income - - Dividend income 5,816,351 2,200,419 Net profit/(loss) on sale/redemption of investments (other than interscheme transfer/sale) 10,424,611 (500,679) Net profit/(loss) on inter-scheme transfer/sale of investments - - Unrealised gain on appreciation in investments 76,013,010 17,230,616 Total income (A) 92,253,972 18,930,356 Expenses and losses Unrealised losses in value of investments 2,050,801 7,465,163 Provision for outstanding accrued income considered doubtful - - Provision for doubtful deposits and current assets - - Management fees (including service tax) [Refer Note 2.4] 1,099,126 38,331 Trusteeship/regulatory fees - - Custodian fees 32,734 12,967 Trustee bank fees 154 550 CRA fees 1,741,938 1,088,824 Less : Amount recovered on sale of units on account of CRA charges (1,741,938) (1,088,824) Total expenditure (B) 3,182,814 7,517,011 Net income/(expenditure) for the year (A-B) appropriated to Balance Sheet 89,071,158 11,413,345 Balance at the beginning of the year 12,391,400 978,055 Balance at the end of the year carried to Balance Sheet 101,462,558 12,391,400 Significant accounting policies and notes to accounts 7 The notes referred to above form an integral part of the financial statements. As per our report of even date attached. For Borkar & Muzumdar Chartered Accountants Firm Registration No. 101569W For and on behalf of Board of Directors of ICICI Prudential Pension Funds Management Company Limited B M Agarwal Sandeep Bakhshi Sandeep Batra Partner Chairman Director Membership No. 33254 Meghana Baji Vishal Mehta Date : April 21, 2014 Chief Executive Officer Company Secretary Place : Mumbai For and on Behalf of NPS Trust Chairman, NPS Trust Board Chief Executive Officer Date : June 12, 2014 Place : Mumbai
ICICI PRUDENTIAL PENSION FUNDS MANAGEMENT COMPANY LIMITED - SCHEME E TIER I Schedules forming part of the financial statements Schedule 1: Unit capital Initial capital Scheme E Tier I 2014 2013 - - Unit capital Opening balance 171,428,318 76,694,881 Additions during the year 222,227,492 103,143,314 Deduction during the year (13,369,079) (8,409,877) Closing balance 380,286,731 171,428,318 Number of units of face value ` 10 38,028,673 17,142,832 Schedule 2: Reserves and surplus Scheme E Tier I 2014 2013 Unit premium reserve Opening balance 52,426,406 19,252,168 Additions during the year 108,136,890 36,218,468 Deduction during the year (6,403,259) (3,044,230) Closing balance 154,160,037 52,426,406 Surplus/(deficit) in Revenue account Opening balance 12,391,400 978,055 Additions during the year 89,071,158 11,413,345 Deduction during the year - - Closing balance 101,462,558 12,391,400 General reserve* - - Appropriation account* - - Total 255,622,595 64,817,806 * The balances have been nil throughout the year Schedule 3: Current liabilities and provisions Scheme E Tier I 2014 2013 Current liabilities Sundry creditors 354,836 48,900 Contracts for purchase of investments 19,452,941 - Interest received in advance - - Unclaimed distributed income - - Pending creation of units - - Unit redemption payable 216,038 51,469 Provisions - - Total 20,023,814 100,369
ICICI PRUDENTIAL PENSION FUNDS MANAGEMENT COMPANY LIMITED - SCHEME E TIER I Schedules forming part of the financial statements Schedule 4: Investments Scheme E Tier I 2014 2013 Equity shares 631,790,071 234,155,277 Preference shares - - Debentures and bonds - - Central and state government securities (including treasury bills ) - - Commercial Paper - - Others - Mutual funds 5,841,738 - Total 637,631,809 234,155,277 Schedule 5: Deposits Scheme E Tier I 2014 2013 Deposits with scheduled banks - - Others - - Total - - Schedule 6: Other current assets Scheme E Tier I 2014 2013 Balances with banks in current/saving account 7,932 211,753 Cash on hand - - Sundry debtors - 135,960 Contracts for sale of investments 17,880,458 1,714,897 Outstanding and accrued income - - Advance, deposits etc. - - Shares/debentures/ others application money pending allotment - - Others - Dividend receivable 412,943 128,606 Total 18,301,333 2,191,216
ICICI Prudential Pension Funds Management Company Limited - Scheme E Tier I Schedule 7 Significant accounting policies and notes to accounts for the year ended 2014 1.1 Background ICICI Prudential Pension Funds Management Company Limited ( the Company ) is appointed as a Pension Fund Manager ( PFM ) by the National Pension System Trust ( NPS ). The Company has entered into an Investment Management Agreement ( IMA ) with NPS. The Pension Fund Regulatory and Development Authority ( PFRDA ) guidelines require each PFM to manage subscribers funds made available to it by the Trustee bank along with the data made available by the Central Recordkeeping Agency ( CRA ) at a consolidated level. The Company makes investments as per the IMA, various other circulars/guidelines issued by the PFRDA in this context from time to time and the scheme wise flow of funds. The Company manages six separate schemes under the two tiered structure (Tier I and II) prescribed under the NPS. The schemes are classified as Scheme E, C and G based on the underlying asset class prescribed under the NPS as follows: Scheme E Equity market instruments Scheme C Credit risk bearing fixed income instruments Scheme G Government securities 1.2 Basis of preparation The financial statements have been prepared in accordance with the PFRDA (Preparation of financial statements and Auditor s report of Schemes under National Pension System) Guidelines 2012 ( Guidelines ), Accounting Standards ( AS ) notified under the Companies Act, 1956 read with the General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013 to the extent made applicable by the Guidelines and generally accepted accounting principles. The Guidelines specifically exempt the schemes from the applicability of AS 3 (Cash Flow Statement) and AS 17 (Segmental Reporting). These financial statements have been prepared on an accrual basis, except as otherwise stated. The financials have been prepared for Scheme E Tier I being managed by the Company. 1.3 Investments Purchase and sale of securities are accounted on trade date. Investments are reconciled with the custodian records on daily basis. The holding cost of investments is determined by the weighted average cost method and the cost does not include brokerage and other transaction charges.
ICICI Prudential Pension Funds Management Company Limited - Scheme E Tier I Valuation of Investments All investments are marked to market and are carried in the Balance Sheet at the market value as on Balance Sheet date/date of determination/date of valuation. Unrealised gain/(loss), if any, is transferred to Revenue account. As per directive received from NPS, the valuation of investments is carried out by Stock Holding Corporation of India Limited (SHCIL). The Investment valuation methodology adopted by SHCIL is as follows: Listed equity shares are valued at market value, being the last quoted closing price on the National stock exchange (NSE). If they are not quoted on NSE, then the last quoted closing price on the Bombay stock exchange (BSE) is taken. Non traded rights are valued at the difference of closing market price of the original equity share for the day and the offer price. Traded rights are valued at the closing market price of the rights renunciation till the time of application. In the event of application of rights, the rights entitlement would be valued at the closing market price of the original equity share till the date of allotment/listing. Mutual fund units are valued based on the net asset values of the preceding day of the valuation date. Income earned on Investments Dividend income is recognised on the `ex-dividend date. Bonus shares to which the scheme becomes entitled are recognized only when the original shares on which the bonus entitlement accrues are traded on the stock exchange on an ex-bonus basis. Similarly, rights entitlements are recognized only when the original shares on which the right entitlement accrues are traded on the stock exchange on an ex-rights basis. Profit or loss on sale of equity shares/mutual fund units is the difference between the sale consideration net of expenses, if any and the weighted average book cost. 1.4 Units reconciliation The subscribers units as per Investment management system are reconciled with Central Recordkeeping Agency (CRA) records on daily basis. 1.5 Investment management fees Investment management fees are recognised on daily accrual basis on closing Asset under management (AUM) in accordance with IMA. The Investment management fee is inclusive of brokerage but excludes custodian charges and applicable taxes, if any. 1.6 Other expenses Custody charges are recognised on daily accrual basis in accordance with IMA. Trustee bank charges were recognised when they were debited by the trustee bank on a quarterly basis. The trustee bank has discontinued levying charges with effect from July 01, 2013.
ICICI Prudential Pension Funds Management Company Limited - Scheme E Tier I Notes to accounts 2.1 Contingent liabilities At At 2014 2013 Uncalled liability on partly paid shares Nil Nil Other commitments Nil Nil 2.2 Investments All investments are performing investments. All investments of the scheme are in the name of the NPS Trust. All investments are traded investments. 2.3 Details of transactions with sponsor and its related parties Related parties and nature of relationship. Nature of relationship Name of the related party Pension fund manager ICICI Prudential Pension Funds Management Company Limited Sponsor company ICICI Prudential Life Insurance Company Limited Associates and group companies - Holding company of ICICI Bank Limited sponsor The following represents significant transactions between the Scheme and its related parties. Name of related party Nature of transaction Transactions for the year ended 2014 2013 Amount recoverable/ (payable) At March 31, 2014 At March 31, 2013 ICICI Prudential Pension Funds Management Company Limited Investment management fees 1,099,126 38,331 (332,101) (37,370)
ICICI Prudential Pension Funds Management Company Limited - Scheme E Tier I Aggregate investments made by the scheme in the associates and group companies are as follows: Period Name of the Company Asset type Cost Market value At 2014 ICICI Bank Limited Equity 32,908,819 40,715,625 At 2013 ICICI Bank Limited Equity 14,437,793 15,375,937 2.4 Investment management fees The Company has started charging investment management fee of 0.25% per annum (inclusive of brokerage but excluding custodian charges and applicable taxes), with effect from March 11, 2013, in terms of the Pension Fund Regulatory and Development Authority s circular no. PFRDA/CIR/1/PFM/1 dated August 31, 2012. The investment management fees charged up to March 10, 2013 was 0.0009% per annum. 2.5 Aggregate value of purchase and sale with percentage to average daily net assets Aggregate value of purchase and sale with percentage to average daily net assets is as follows: Year ended 2014 Year ended 2013 Aggregate value of purchase and sale 1,447,383,627 157,257,443 % to average net assets 369.9% 101.2% Aggregate value of purchase and sale (excluding liquid mutual fund)* with percentage to average daily net assets is as follows: Year ended 2014 Year ended 2013 Aggregate value of purchase and sale 616,739,008 142,960,784 % to average net assets 157.6% 92.0% *liquid mutual fund investments are held for day to day cash management, hence excluded. 2.6 Investments falling under each major industry group The total value of investments falling under each major industry group (which constitutes not less than 5% of the total investments in the major classification of the financials) are disclosed as under:
ICICI Prudential Pension Funds Management Company Limited - Scheme E Tier I At 2014 At 2013 Investment % of % of classification Market Market investment investment value value class class Equity 631,790,071 100.00% 234,155,277 100.00% Monetary intermediation of commercial banks, 131,155,939 20.76% 48,537,946 20.73% saving banks Writing, modifying, testing of computer program to meet the 101,481,127 16.06% 32,567,135 13.91% needs Manufacture of cigarettes, cigarette 54,224,929 8.58% 21,921,129 9.36% tobacco Manufacture of refined petroleum products 4,032,1021 6.38% 16,425,671 7.01% Activities of specialized institutions granting credit for house 38,935,795 6.16% 16,508,475 7.05% purchases that also take deposits Manufacture of allopathic pharmaceutical 33,544,444 5.31% 12,186,625 5.20% preparations Others 232,126,816 36.75% 86,008,296 36.73% Mutual Funds 5,841,738 100% - - Net current assets (1,722,482) 100.00% 2,090,846 100.00% Net asset value 635,909,327 100.00% 236,246,124 100.00% 2.7 Statement of portfolio holding as on 2014 Security name Units Acquisition cost Market value Equity 547,918,864 631,790,071 ITC Limited 153,677 45,597,168 54,224,929 Infosys Limited 13,747 40,967,668 45,128,652 ICICI Bank Limited 32,702 32,908,819 40,715,625 Reliance Industries Limited 43,321 36,633,866 40,321,021 HDFC Bank Limited 52,542 32,210,467 39,343,450 Housing Development Finance Corporation 44,050 33,868,099 38,935,795 Larsen & Toubro Limited 23,041 21,970,751 29,305,848 Tata Consultancy Services Limited 13,207 22,706,722 28,172,512 Tata Motors Limited 51,452 16,302,783 20,511,340 State Bank Of India 8,723 14,102,273 16,728,097
ICICI Prudential Pension Funds Management Company Limited - Scheme E Tier I Security name Units Acquisition cost Market value ONGC Corporation Limited 49,942 14,316,642 15,916,515 Axis Bank Limited 8,805 10,491,491 12,859,703 Mahindra & Mahindra Limited 13,017 11,251,793 12,765,772 Sun Pharma Limited 21,526 9,751,757 12,372,069 Hindustan Unilever Limited 19,887 10,414,394 12,042,573 Bharti Airtel Limited 33,739 10,891,753 10,720,567 HCL Technologies Limited 7,619 7,028,609 10,595,743 Wipro Limited 18,447 9,201,867 10,020,410 Dr. Reddy Laboratories 3,636 8,050,747 9,322,340 Kotak Mahindra Bank Limited 10,803 7,172,706 8,437,683 Bajaj Auto Limited 3,788 6,979,996 7,892,677 Hero Motocorp Limited 3,386 6,693,782 7,702,473 Tech Mahindra Limited 4,213 7,728,508 7,563,810 Tata Steel Limited 18,890 6,548,070 7,441,716 Maruti Suzuki India Limited 3,755 5,560,737 7,403,921 Asian Paints Limited 12,782 5,752,847 7,003,897 NTPC Limited 58,130 8,565,848 6,969,787 Sesa Sterlite Limited 35,330 6,603,957 6,661,472 Power Grid Corporation Of India Limited 62,173 6,280,975 6,528,165 Lupin Limited 6,786 5,468,503 6,332,356 Ultratech Cement Limited 2,868 5,195,660 6,272,173 Indusind Bank 12,061 5,088,346 6,052,813 UNITED SPIRITS LIMITED 2,211 5,913,330 5,853,512 Cairn India Limited 16,717 5,316,950 5,566,761 Cipla Limited 14,414 5,457,148 5,517,679 Grasim Industries Limited 1,820 4,950,906 5,256,251 Coal India Limited 17,953 4,758,884 5,183,929 Hindalco Industries Limited 36,487 4,409,812 5,172,032 GAIL (India) Limited 12,678 4,504,354 4,767,562 Tata Power Limited 51,589 3,979,293 4,392,803 Bharat Heavy Electricals Limited 22,299 4,788,681 4,371,719 Ambuja Cements Limited 21,608 3,686,454 4,369,138 Infrastructure Development Finance Limited 35,417 3,980,613 4,329,728 Bank of Baroda 5,404 3,566,775 3,894,933 Associated Cement Companies Limited 2,629 3,067,157 3,679,417 Bharat Petroleum Corp Limited 7,294 2,571,250 3,355,605 Punjab National Bank 4,199 3,038,096 3,123,636 NMDC Limited 22,427 2,930,966 3,122,960 Jindal Steel & Power Limited 10,419 3,821,972 3,047,037
ICICI Prudential Pension Funds Management Company Limited - Scheme E Tier I Security name Units Acquisition cost Market value DLF Limited 12,678 2,360,337 2,237,033 Idea Cellular Limited 15,496 2,508,282 2,129,925 Tata Power Limited - Rights Issue 6,064-152,510 Mutual Funds 5,840,000 5,841,738 IDFC Cash fund Direct Plan - Growth 5,840,000 5,841,738 Total 553,758,864 637,631,809 Statement of portfolio holding as on 2013 Security name Units Acquisition cost Market value Equity ITC Limited 70,839 16,768,533 21,921,129 Infosys Limited 6,244 16,616,444 18,041,101 Housing Development Finance Corporation Limited 19,980 14,258,662 16,508,475 Reliance Industries Limited 21,252 17,894,061 16,425,671 ICICI Bank Limited 14,711 14,437,793 15,375,937 HDFC Bank Limited 23,911 13,020,183 14,952,744 Tata Consultancy Services Limited 6,600 8,017,981 10,399,950 Larsen & Toubro Limited 7,003 10,430,262 9,567,499 ONGC Corporation Limited 22,909 6,521,248 7,133,863 State Bank of India 3,336 7,378,259 6,914,694 Hindustan Unilever Limited 13,292 5,489,004 6,206,699 Tata Motors Limited 22,893 5,610,592 6,161,651 Axis Bank Limited 4,118 5,047,441 5,356,283 Mahindra & Mahindra Limited 5,938 4,565,011 5,114,399 Bharti Airtel Limited 15,490 5,051,591 4,519,208 Sun Pharma Limited 4,870 2,929,583 3,988,287 NTPC Limited 26,688 4,280,243 3,788,362 Kotak Mahindra Bank Limited 4,948 2,717,496 3,231,044 Bajaj Auto Limited 1,737 2,935,368 3,125,818 Dr. Reddy Laboratories 1,637 2,748,453 2,891,761 Asian Paints Limited 586 2,270,249 2,881,509 HCL Technologies Limited 3,409 1,840,090 2,710,155 Tata Steel Limited 8,631 3,861,649 2,700,208 Coal India Limited 8,177 2,755,500 2,527,511 Cipla Limited 6,572 2,269,390 2,495,717 Ultratech Cement Limited 1,313 2,580,510 2,453,931
ICICI Prudential Pension Funds Management Company Limited - Scheme E Tier I Security name Units Acquisition cost Market value Grasim Industries Limited 822 2,229,499 2,312,533 Infrastructure Development Finance Limited 16,006 2,304,621 2,298,462 Maruti Suzuki India Limited 1,712 2,204,941 2,193,414 Cairn India Limited 7,652 2,474,846 2,084,787 Tata Power Limited 20,970 2,243,551 2,023,605 Power Grid Corporation of India Limited 18,329 1,975,928 1,939,208 Lupin Limited 3,078 1,819,993 1,934,677 Hero Motocorp Limited 1,236 2,296,144 1,905,912 GAIL (India) Limited 5,815 2,224,832 1,850,624 Bharat Heavy Electricals Limited 10,229 2,931,951 1,810,533 Jindal Steel & Power Limited 4,958 2,452,191 1,724,145 Ambuja Cements Limited 9,865 1,638,199 1,718,483 Hindalco Industries Limited 16,654 2,262,504 1,525,506 Bank of Baroda 2,178 1,623,651 1,471,021 Wipro Limited 3,239 1,296,082 1,415,929 Associated Cement Companies Limited 1,206 1,445,210 1,397,995 Bharat Petroleum Corp Limited 3,345 1,180,958 1,263,407 Punjab National Bank 1,722 1,550,055 1,236,224 DLF Limited 4,710 1,097,677 1,105,437 Jaiprakash Associates Limited 15,491 1,270,410 1,013,886 Ranbaxy Laboratories Limited 1,997 957,558 876,184 Sesa Goa Limited 5,049 1,085,815 785,120 Reliance Infrastructure Limited 1,752 980,454 568,436 Siemens Limited 558 401,874 306,147 Total 224,244,541 234,155,277 2.8 Key statistics Year ended 2014 Year ended 2013 1. NAV per unit (`) I (based on published NAV) Open 13.7814 12.6378 High 16.7001 14.7294 Low 12.9707 11.5406 End II 16.7001 13.7814
ICICI Prudential Pension Funds Management Company Limited - Scheme E Tier I Year ended 2014 Year ended 2013 2. Closing Assets Under Management (` in Lakhs) End 6,359.09 2,362.46 Average daily net assets (AAUM) III 3,912.86 1,554.76 3. Gross income as % of AAUM IV 4.15% 1.09% 4. Expense ratio a. Total expense as % of AAUM (scheme wise) V 0.2893% 0.0333% b. Management fee as % of AAUM (scheme wise) 0.2809% 0.0247% 5. Net income as % of AAUM VI 3.86% 1.06% 6. Portfolio turnover ratio VII 38.76% 4.75% 7. Total dividend per unit distributed during the period - - 8. Returns: (%) a. Last one year 21.18% 9.05% Benchmark 19.33% 8.72% b. Since inception 67.00% 37.81% Benchmark 63.92% 37.37% c. Compound annualised yield (%) VIII Last 1 year 21.18% 9.10% Last 3 year 6.84% 4.01% Last 5 year NA NA Since launch of the scheme 11.12% 8.66% Launch Date May 18, 2009 I. NAV = (Market value of investment held by scheme + value of current assets - value of current liability and provisions, if any)/(no. of units at the valuation date (before creation/redemption of units) II. The last NAV published was on March 28, 2014 of ` 16.7001 since it was the last business day of the financial year. However, since equity markets were operational on 2014, it was directed by the NPS trust in its review of audit process meeting held on April 09, 2014 to value the investments on prices of 2014 to reflect the correct AUM as on Balance Sheet date. Accordingly, the NAV computed at March 31, 2014 is ` 16.7218. Since 2014 was a non business day, no transactions were conducted by the subscribers and hence the NAV computed for 2014 is for disclosure purpose only and does not have any impact on the subscribers.
ICICI Prudential Pension Funds Management Company Limited - Scheme E Tier I Year ended 2014 Year ended 2013 III. AAUM = Average daily net assets IV. Gross income = Income includes Interest income, Dividend income and Net profit/(loss) on sale of investments V. Total expenses = Expenses include management fees, custody fees, trustee bank charges but excludes unrealised loss VI. Net income = Gross income less Total expenses (excludes unrealised gain/loss) VII. Portfolio turnover = Lower of sales or purchase divided by the average AUM for the period. Investment in liquid mutual fund is excluded from the turnover as the same is primarily for liquidity management. VIII. Compounded annualised yield is to be calculated based on following formula: =((1+ cumulative return)^n) -1 (where n=365/no. of days)
ICICI Prudential Pension Funds Management Company Limited - Scheme E Tier I 2.9 Previous year comparatives Previous year amounts have been regrouped and reclassified wherever necessary to conform to current year s presentation in line with the PFRDA (Preparation of financial statements and Auditor s report of Schemes under National Pension System) Guidelines - 2012. For Borkar & Muzumdar Chartered Accountants Firm Registration No. 101569W For and on behalf of the Board of Directors of ICICI Prudential Pension Funds Management Company Limited B M Agarwal Sandeep Bakhshi Sandeep Batra Partner Chairman Director Membership No. 33254 Meghana Baji Chief Executive Officer Vishal Mehta Company Secretary Date : April 21, 2014 Place : Mumbai For and on Behalf of NPS Trust Chairman, NPS Trust Board Chief Executive Officer Date : June 12, 2014 Place : Mumbai