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Directors Report of PNB Gilts Ltd.

Mar 31, 2018

BOARD''S REPORT

Dear Members,

Your Directors are pleased to present the Twenty Second Annual Report together with the Company''s audited financial statements for the financial year ended March 31, 2018.

1. RESULTS OF OUR OPERATIONS AND STATE OF AFFAIRS

The Company''s financial performance, for the year ended March 31, 2018 is summarized below:

(Rs in lacs)

For the year ended 31 .3.2018

For the year ended 31 .3.2017

Total Income

40993.67

50054.47

Less : Total Expenditure

35465.64

24400.36

Profit/(loss) Before Tax

5528.03

25654.11

Less : Provision for Income Tax (including deferred tax)

1870.45

8936.73

Profit /(loss) After Tax

3657.58

16717.38

Add: Balance in Statement of Profit and Loss brought forward

23951 .20

12807.02

Add: Prior Period Income

-

-

Amount available for Appropriation

27608.78

29524.39

Proposed Appropriations

Transfer to Statutory Reserve

731 .52

3343.48

Capital Reserve

331 .08

2229.71

Final Dividend of FY 2016-17

4500.25

-

Dividend Distribution Tax of FY 2016-17

916.15

-

Balance carried forward

21129.78

23951 .20

FY 2017-18 was a challenging year for the debt market. The yields on Government Securities trended upward, with the ten-year benchmark yield rising to 7.40 per cent as on March 31, 2018 as against previous year close of 6.66 per cent. Market remained exposed to intermittent bouts of volatility due to domestic developments as well as uncertainty surrounding the evolution of global financial markets which impacted the market sentiment and liquidity conditions significantly. Domestic factors like increasing inflation rate, fiscal slippage, concerns over increase in the supply of papers in the form of bank recapitalization bonds, low GST collections and additional borrowing played a major role in rise of yields. Internationally, rising crude prices, Fed rate hikes and initiation of balance sheet normalization added to the uncertainty in the market.

Against the backdrop of adverse developments, your Company managed to post a Profit Before Tax of Rs 5528.03 lacs as against Rs 25654.11 lacs in FY 2016-17. The net revenue from operations of your Company during FY 2017-18 stood at Rs 40993.67 lacs vis-a-vis Rs 50054.47 lacs in the previous fiscal and Profit after Tax for FY 2017-18 stood at Rs 3657.58 lacs vis-a-vis Rs 16717.38 lacs in the previous fiscal. Additionally, your Company fulfilled all its obligations as a Primary Dealer in both primary and secondary market. With regard to Treasury Bills commitment, the Company exceeded the stipulated success ratio of 40 per cent, achieving 42.48 per cent and 40.91 per cent in H1 and H2 respectively. In G-sec category, Company fulfilled the underwriting commitments, thereby supporting the government borrowing program.

Material Changes and Commitments

No material changes and commitments affecting the financial position of the Company have occurred after the close of the year till the date of this report.

Capital Adequacy

Capital adequacy ratio as on March 31, 2018 stood at 67.09 per cent as against the RBI stipulation of 15 per cent.

Dividend

Your Board has recommended a dividend of Rs 1/- (i.e. 10 per cent) per equity share (last year Rs 2.50 per equity share) for the financial year ended March 31, 2018, subject to approval in the ensuing Annual General Meeting. The total outflow on account of said dividend shall be Rs 2166.56 lacs (including Dividend Distribution Tax of Rs 370.02 lacs).

Transfer to Reserves

Your Company proposes to transfer Rs 731.52 lacs in Statutory Reserve as required under the provisions of Section 45-IC of the Reserve Bank of India Act, 1934. Rs 331.08 lacs is proposed to be transferred in Capital Reserve in terms of RBI guidelines for Primary Dealers. Further, in terms of the first proviso to Section 123(1) of the Companies Act, 2013, the Company proposes not to transfer any sum in General Reserve.

2. CORPORATE GOVERNANCE

Corporate Governance for your Company means achieving high level of accountability, efficiency, responsibility and fairness in all areas of operations. Our workforce is committed towards the protection of the interest of the stakeholders including shareholders, creditors, investors, customers, employees, etc. Our policies consistently undergo improvements keeping in mind our goal i.e. maximization of value of all the stakeholders.

We comply with the SEBI and RBI guidelines on Corporate Governance. We have documented our internal code on Corporate Governance in compliance of SEBI and RBI guidelines. The Corporate Governance practices followed by the Company are given in the Annual Report. A certificate from M/s Kapoor Tandon & Co. (Firm Reg. No. 000952C), Statutory Auditor of the Company regarding compliance of conditions of Corporate Governance as stipulated in the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is enclosed with the ''Report on Corporate Governance'' forming part of the Board''s Report.

Number of meetings of the Board

The Board met four times during the financial year 2017-18 to review strategic, operational, technological and financial matters besides laying down policies and procedures for operational management of the Company. The details of such meetings are given in the ''Report on Corporate Governance'' that forms part of this Board''s Report.

Directors and Key Managerial Personnel

During the year 2017-18, the members in their Annual General Meeting held on September 16, 2017 approved the appointment of Sh. Sunil Mehta (DIN : 07430460), Additional Director as Director (under Non-Executive and Non-independent category). In terms of Article 98(2) of Articles of Association of the Company, he is the Chairman of the Company.

In the same meeting, the members approved reappointment of Sh. S. K. Dubey (DIN: 01770805) as Managing Director for a period from February 1, 2018 to January 31, 2019. The members also approved the reappointment of Smt. Sunita Gupta (DIN: 06902258) as Whole-time Director (with designation ''Executive Director & CFO'') for a period from September 1, 2017 to August 31, 2020.

Sh. R. S. Ramasubramaniam (DIN : 00008937), Independent Director vide letter dated June 29, 2018, received by the Company on July 3, 2018, has resigned from the directorship of the Company. Accordingly, in terms of Section 168 of the Companies Act, 2013, he ceases to be Director of the Company w.e.f. July 3, 2018. Your Board places on record his valuable contribution as member of the Board and its Committees.

Further, in accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Smt. Sunita Gupta (DIN: 06902258) shall retire by rotation in the ensuing Annual General Meeting and is eligible for reappointment.

Performance Evaluation

The Company has devised a policy for performance evaluation of Board of its own performance, Independent Directors, Non-Independent/Executive Directors and Board level Committees etc. as required under the provisions of the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and also Guidance Note on Board Evaluation as prescribed by SEBI. The evaluation of all the Directors, the Board as a whole and its Committees was conducted based on the criteria and framework adopted by the Board. Copy of said policy, inter-alia, containing the process and criteria for evaluation is available at Company''s website at the link https://pnbgilts.com/data/governence/1523278049.pdf.

Familiarization programme

The details of programme for familiarization of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of industry in which the Company operates, business model of the Company and related matters are placed at Company''s website at the link https://pnbgilts.com/data/governence/1523273950.pdf.

Quarterly updates on relevant statutory changes are also circulated to the Directors. Policy on Directors'' Appointment and Remuneration etc.

The policies of the Company on Directors'' Appointment and Remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under Sub-section (3) of Section 178 of the Companies Act, 2013 is appended as Annexure A to the Board''s Report.

Declaration by Independent Directors

The Company has received declaration pursuant to Section 149(7) of the Companies Act, 2013 from each Independent Director confirming therein the criteria of Independence as prescribed both under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

3. OTHER DISCLOSURES

Audit Committee

The composition of Audit Committee during FY 2017-18 was as under-

Name of Director

Position

Dr. Kamal Gupta

Chairman

Sh. S. K. Soni

Member

Sh. P. P. Pareek

Member

Sh. R. S. Ramasubramaniam

Member

All the recommendations made by the Audit Committee during the year were accepted by the Board.

Corporate Social Responsibility (CSR) Committee

The composition of the CSR Committee during FY 2017-18 was as under -

Name of Director

Position

Sh. K. V. Brahmaji Rao

Chairman

Dr. Kamal Gupta

Member

Sh. S. K. Dubey

Member

The CSR policy of the Company, duly recommended by the CSR Committee and approved by the Board, is available at our website at the link http://pnbgilts.eom/data/governence/1523278002.pdf. The CSR activity of the Company is carried out as per the instructions of the Committee and Board. During the year, the Company has spent 2 per cent of its average net profits of the three immediately preceding financial years on CSR activity.

The annual report on the CSR for the year 2017-18 in the prescribed format is presented at Annexure B to the Board''s Report.

Other details of above said and other Committees of the Board are given in the ''Report on Corporate Governance'' forming part of the Board''s Report.

Whistle Blower Policy (including Vigil Mechanism)

Your Company believes in conducting its affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. Your Company is committed to develop a culture where it is safe for directors and employees to raise concerns about any wrongful conduct.

The Board of Directors has approved a Whistle Blower Policy (including Vigil Mechanism), which provides a framework to promote a responsible and secure whistle blowing. It protects employees wishing to raise a concern about serious irregularities within the Company. The Audit Committee reviews the functioning of this mechanism. No employee / director has been denied access to the Audit Committee. During the year under review, no such matter has been reported to the Audit Committee. The said policy may be accessed on the Company''s website at the link http://pnbgilts.com/data/governence/1409222609.pdf

Contracts and Arrangements with Related Parties

All the contracts/ arrangements/transactions entered by the company are in ordinary course of business and at arm''s length (except those given in form AOC-2 at Annexure C). Further during the year, the Company had not entered into any contract/arrangement/transaction with related parties, which could be considered material in accordance with the Company''s Policy/Standard Operating Procedures (SOP) on Related Party Transactions. The said Policy/ SOP can be accessed at the Company''s website at the link http://pnbgilts.eom/data/governence/1523277954.pdf.

Necessary disclosure in prescribed form AOC-2 is annexed at Annexure C. Subsidiaries

The Company, being a RBI regulated Primary Dealer, is prohibited to form any subsidiary. As such, the Company has not formulated any policy for determining ''material'' subsidiaries under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Further, since the Company is not having any subsidiary or associate or joint venture, it is not required to consolidate the financial statements in terms of Section 129 of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014. However, the financial statements of the Company for FY 2017-18 had already been considered by its parent bank i.e. Punjab National Bank for consolidation.

Directors'' Responsibility Statement

Pursuant to the requirements of Section 134(3)(c) of the Companies Act, 2013, your Directors confirm that:

(a) in the preparation of the annual accounts for the year ended March 31, 2018, the applicable accounting standards read with the requirements set out under the Schedule III to Companies Act, 2013, have been followed and there are no material departures from the same;

(b) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2018 and of the profit and loss of the Company for the year ended on that date;

(c) the Directors had taken proper and sufficient care 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;

(d) the Directors had prepared the annual accounts on a going concern basis;

(e) the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Human Resource Management

Your Company treats its human resources as one of its most important assets. To ensure good human resource management in the Company, the Company focuses on all the aspects of employee lifecycle. During their tenure

in the Company, employees are motivated through various skill development and volunteering programmes. Recreational programmes are also conducted on regular basis so as to create stress-free environment. All the while, the Company also creates effective dialogues through various communication channels like face to face interactions so as to ensure that feedback reach the relevant teams. In house meetings and training sessions are also arranged to engage and develop the employees and to gather ideas around innovation.

The information required to be disclosed under Section 197(12) and Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided at Annexure D.

The information required to be disclosed under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 be treated as NIL as there was no employee, whether employed throughout the year 2017-18 or part thereof, who was in receipt of remuneration beyond the limits laid down in above said Rule. No employee is related to any Director of the Company.

Sexual Harassment at Workplace

Your Company has in place a formal policy for prevention of sexual harassment of its employees at workplace. During the year 2017-18, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Particulars of Loans given, investment made, guarantees given and securities provided

The information required to be disclosed under Section 134(3)(g) of the Companies Act, 2013 may be treated as ''Nil'', as the Company is exempted under Section 186(11) of the Companies Act, 2013.

Extract of the Annual Return

Extract of Annual Return of the Company is annexed herewith as Annexure E to this Report.

Deposits

During the year ended March 31, 2018, the Company has not accepted any deposits from the public within the meaning of the provisions of the Non- Banking Financial Companies (Reserve Bank) Directions, 1977 and RBI''s notification no. DFC.118DG/(SPT)-98 dated January 31, 1998.

Risk Management

In terms of RBI guidelines for NBFCs, a Risk Management Committee, constituted at management level, has been entrusted with the responsibility by the Board in laying down procedures for risk assessment and minimization. The Committee also reviews these procedures periodically to ensure that executive management is implementing and controlling the risks through means of a properly defined risk framework.

The Audit Committee, on periodic basis, oversees all the risks that a company faces such as strategic, financial, market, liquidity, security, property, IT, legal, regulatory and other identified risks alongwith the implementation of risk management policy. There is an adequate risk management infrastructure in place capable of addressing the possible risks.

Risk Management Policy is reviewed annually by the Audit Committee and on the basis of the Committee''s recommendation, the Board approves the same.

Significant and material orders

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.

Issue of Shares

There was no issue of shares during the year neither with differential rights as to dividend, voting or otherwise nor to employees of the company.

Management Discussion and Analysis

Management Discussion and Analysis comprising an overview of the financial results, operations/performance and future aspects form part of this Annual Report.

Secretarial Standards

The Company has complied with all applicable Secretarial Standards.

4. AUDITORS, INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Statutory Auditor

The Comptroller and Auditor General of India had appointed M/s Kapoor Tandon & Co., Chartered Accountants (Firm Reg. No. 000952C) as the Statutory Auditor of the Company for the financial year ended March 31, 2018. The report of the auditor is self-explanatory and does not call for any further comments. Pursuant to the provisions of Section 143(12) of the Companies Act, 2013, the Statutory Auditor of the Company has not reported any incident of fraud during the FY 2017-18. The Auditors'' Report does not contain any qualification, reservation or adverse remark.

Secretarial Auditor

The Board had appointed M/s Pranav Kumar & Associates, Company Secretaries, to conduct the Secretarial Audit for the financial year 2017-18. The Secretarial Audit Report for the financial year ended March 31, 2018 is annexed as Annexure F to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Internal control systems and their adequacy

The Company considers the internal control systems to be a very significant part of its Corporate Governance practices. Your Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company''s policies, the safeguarding of its assets, prevention and detection of frauds etc. The Company''s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. As a part of this control system, your Board appoints Internal Auditor and other auditors as well. Accordingly, these internal controls are routinely tested and certified by the auditors. For the year 2017-18, the Board appointed M/s Lodha & Co. as the Internal Auditor of the Company. The scope of Internal Audit included audit of treasury transactions on a monthly basis and reporting to the Audit Committee of the Board that the company has operated within the limits of various risk parameters laid down by the Board, Reserve Bank of India and other statutory authorities. Besides, the said firm also audited and reviewed the related party transactions on monthly basis and key business processes, including IT systems of the Company, on quarterly basis. All the reports of the Internal Auditors were submitted to the Audit Committee. Timeliness of submission of all the periodic statutory returns/forms etc. to regulatory bodies was also checked by the Auditor. The Audit Committee reviews adequacy and effectiveness of the Company''s internal control environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Company''s risk management policies and systems.

5. DETAILS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The Company is a Primary Dealer as defined and regulated by the Reserve Bank of India and is not a manufacturing company, hence the particulars required to be disclosed with respect to conservation of energy and technology absorption in terms of Section 134(3)(m) of the Companies Act, 2013 and the Rules made thereunder are not applicable/ Nil.

However, every endeavor is made to ensure optimal use of energy, avoid wastages and conserve energy as far as possible. Some of these measures include switching off lights and computer systems when not in use, creating awareness among employees about the necessity of energy conservation etc. Your Company has installed the integrated treasury management software and RBI''s Negotiated Dealing System with the help of The Institute for Development and Research in Banking Technology (IDRBT) and reputed IT companies. The Company recognizes the growing importance of Information Technology in the emerging business environment. The Company has also implemented Business Continuity Plan (BCP) and Disaster Recovery Plan (DRP) with the help of IDRBT (consultants for implementation of BCP and DRP) to identify and reduce risk exposures and proactively manage any contingencies.

Your Company has neither used nor earned any foreign exchange during the year under review. Acknowledgements

Your Directors thank the Government of India, Reserve Bank of India, Securities and Exchange Board of India, National Stock Exchange of India Ltd., BSE Ltd., Parent Bank, Commercial Banks, Cooperative & Regional Rural Banks, Financial Institutions, PF Trusts, Public Sector Undertakings, Private Sector Corporate Bodies and other valued clients for their whole-hearted support. We acknowledge the sincere and dedicated efforts put in by the employees of the Company at all levels.

On behalf of Board of Directors

Date: July 17, 2018

(Sunil Mehta)

Place: New Delhi

Chairman

DIN: 07430460

Annexure A

REMUNERATION POLICY

The Policy reflects the Company''s objectives for good corporate governance as well as sustained long-term value creation for shareholders. The Remuneration Policy is applicable to Independent Directors, Non-independent Directors, Key Managerial Personnel, senior management and other employees. HR Policy including Service Regulations, increment policy etc. of the Company is a part of this Policy.

Purpose and Basic Principles

The Remuneration Policy seeks to ensure adequate remuneration in recognition of their dedication and the responsibility assumed, and in accordance with the remuneration paid in the market by peer group, taking into account the long term interest of all the shareholders. The guiding principle is to offer remuneration systems that make it possible to attract, retain, and motivate the most outstanding professionals in order to enable the Company to attain its strategic objectives within the increasingly competitive environment in which the Company operate.

The Remuneration Policy seeks to:

• Ensure that the remuneration, in terms of structure and total amount, is in line with best practices, as well as competitive vis-a-vis that of comparable entities.

• Establish the remuneration, in accordance with objective standards, based on individual performance and on the achievement of the business objectives of the Company.

• Include a significant annual variable component tied to performance and to the achievement of specific, pre-established, quantifiable objectives in line with the corporate interest and strategic goals of the Company.

• The foregoing should be understood to be without prejudice to the possibility of considering other objectives, especially in the area of corporate governance and corporate social responsibility.

• Foster and encourage the attainment of the strategic goals of the Company through the inclusion of long-term incentives, strengthening continuity in the competitive development of the company, of its directors, and of its management team, and generating a motivating effect that acts as a driving force to ensure the loyalty and retention of the best professionals.

• Set appropriate limits to any short-term or long-term variable remuneration, and establish suitable mechanisms to reconsider the implementation and payment of any deferred variable remuneration when a reformulation occurs that has a negative effect on the Company''s annual accounts, including the potential total or partial cancellation of the payment of deferred variable remuneration if there is a correction of the annual accounts upon which such remuneration was based.

Competent Bodies

The Board of Directors, at the proposal of the Nomination and Remuneration Committee, is the body with authority to determine the remuneration of directors within the overall limit established in the Act.

Limit on Directors'' Remuneration

Pursuant to the provisions of the Act and rules made thereunder, the Directors'' Remuneration shall be within the overall limits defined under Section 197 and other applicable provisions of the Companies Act, 2013 and Schedule V of the Act and Rules made thereunder. The terms of service, including remuneration matters, of Managing Director, Executive Director, other Key Managerial Personnel, senior management and other employees shall be subject to Service Regulations of the Company, which is being reviewed by Nomination & Remuneration Committee and approved by the Board on annual basis.

Structure of remuneration of Managing Director, Executive Director, Key Managerial Personnel and other employees

The remuneration that Managing Director and Executive Director etc. are entitled to receive for the performance of executive duties at the Company is structured as follows:

(a) Fixed Remuneration/CTC -

(i) Fixed Remuneration/CTC of Managing Director and Executive Director -

This portion of the remuneration shall be in line with the remuneration paid in the market by competing companies. Under ordinary circumstances, it includes remuneration by way of salary, perquisites and allowances. The Nomination & Remuneration Committee recommends suitable package to the Board for approval, which is subject to shareholders'' approval and limits specified under Schedule V of the Companies Act, 2013.

(ii) Fixed Remuneration/CTC of Key Managerial Personnel, Senior Management and other employees -

Remuneration of employees largely consists of salary, perquisites, and allowances. The detailed components of the fixed remuneration are defined in the service regulations of the company. Annual increments are given each year in line with the performance parameters defined in the increment policy.

(b) Variable Remuneration

In order to strengthen employees'' commitment to the Company, to retain and promote a better performance of their duties, the Company gives a performance linked incentive. This variable remuneration shall be tied, for the most part, to the achievement of specific and pre-established profit targets and other objectives as a Primary Dealer that are quantifiable and aligned with the corporate interest and with the strategic objectives of the Company. The Nomination and Remuneration Committee will assess the achievement of Company''s objectives vis-a-vis individual performance. The Committee may seek the advice of independent professionals in this regard. The proposal thereof shall be submitted to the Board of Directors for approval on annual basis. While assessing the performance of the employee, the Committee/Board also broadly takes into account the profits earned by the Company for the year.

The recommending authority must ensure appropriate balance between fixed and variable remuneration. Structure of remuneration of Non-Executive / Independent Directors

Remuneration of Non-Executive/ Independent Directors is subject to the provisions of Section 197 of the Companies Act, 2013 & Rules made thereof and Articles of Association of the Company. The Board approves the sitting fee payable to Non-executive/independent Directors. At present, Non-Executive/Independent Directors are entitled to sitting fee of Rs 25000/- for attending each meeting of the Board and Rs 10000/- for attending each meeting of Audit Committee / CSR Committee / Nomination and Remuneration Committee/ Only Independent Directors'' Meeting. Sitting fee for attending each meeting of (a) Share Transfer and Issue of Duplicate Shares Committee; and (b) Stakeholders'' Relationship Committee and the honorarium to be paid to Independent Directors for holding interviews, if any, is Rs 5000/-. In addition, the Company also pays out of pocket expenses incurred by them for attending such meetings.

Principle of Full Transparency

The Board of Directors assumes the commitment to enforce the principle of the fullest transparency of all the items of remuneration received by all directors, providing clear and adequate information as much in advance as required and in line with the good governance practices generally recognised in Indian markets in the area of director remuneration.

For such purpose, the Board of Directors establishes the Remuneration Policy and ensures the transparency of director remuneration by including in the Company''s report a detailed breakup, according to positions and status, of all remuneration received by the directors, whether as such, in their capacity as executives, if applicable, or in any other capacity. The Company''s Remuneration Policy shall be published suitably in the Directors'' report or Annual Report.

General

Any or all provisions of this Policy would be subject to revision/amendment in accordance with the guidelines etc. on the subject as may be issued by Government/regulatory bodies etc., from time to time.

ELIGIBILITY CRITERIA OF DIRECTORS AND POLICY ON BOARD DIVERSITY

Introduction

In pursuance of the provisions of Section 178 of the Companies Act, 2013 and Rules made thereunder read with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (''the Listing Regulations'') and RBI guidelines for NBFCs, the Nomination and Remuneration Committee of the Board (the "Committee") is responsible for evaluating the qualifications of each director candidate and of those directors who are to be nominated for election by shareholders at each annual general meeting and for recommending duly qualified director nominees to the full Board for election. The qualification criteria set forth herein are designed to describe the qualities and characteristics desired for the Board as a whole and for Board members individually.

Director Qualification Review Procedures

The Committee shall evaluate each director and director candidate under the Director Qualification Criteria set forth herein and recommend to the Board for their appointment accordingly.

Director Qualification Criteria

The Committee has not established specific education, and years of business experience or specific types of skills for Board members, but, in general, expects qualified directors to have ample experience and a proven record of professional success, leadership and the highest level of personal and professional ethics, integrity and values.

In evaluating the suitability of individual Board members, the Committee takes into account many factors, including general understanding of the Company''s business dynamics, global business and social perspective, educational and professional background and personal achievements. Thus, the Committee shall consider whether each director candidate and each director possess the following:-

• High level of personal and professional ethics, reputation, integrity and values;

• An appreciation of the Company''s mission and purpose, and loyalty to the interests of the Company and its shareholders;

• The ability to exercise objectivity and independence in making informed decisions;

• The ability to communicate effectively and collaborate with other Board members to contribute effectively to the diversity of perspectives that enhances Board and Committee deliberations, including a willingness to listen and respect the views of others; and

• The skills, knowledge and expertise relevant to the Company''s business, with extensive experience at a senior leadership level in a comparable company or organization, including, but not limited to relevant experience in treasury operations, finance, accounting, strategic planning, technology, human resources, legal matters etc.;

• Directors must possess experience/capability at policy-making and operational levels in large/mid-level organizations that will indicate their ability to make meaningful contributions to the Board''s discussion and decision making in the array of complex issues facing a financial conglomerate;

• Directors should be able to balance the legitimate interests and concerns of all the Company''s stakeholders in arriving at decisions; and

• Directors shall abide with the Code of Conduct for Directors and Senior Management.

In addition, directors must be willing to devote sufficient time and energy in carrying out their duties and responsibilities effectively. They must have the aptitude to critically evaluate management''s working as a part of a team in an environment of collegiality and trust.

The Committee evaluates each individual with the object of having a group that best enables the success of the Company''s business.

Qualifications and tenure of Directors as per Companies Act, 2013

The Act has also prescribed certain criteria for qualification of directors, which has since been adopted by the Company i.e.:

Section 196 and Schedule V (Part-l) (for the appointment of Managing Director, Whole Time Director and Manager),

Section 149 (for appointment of Independent Directors) and any other applicable provisions of Companies Act, 2013 and Rules made thereunder.

Further, a Director should not be disqualified in terms of Section 164 of the Act. What constitutes independence for Directors

For a Director to be considered Independent, the Board determines that the Director does not have any direct or indirect material pecuniary relationship with the company. The Board has adopted guidelines to determine independence, which are in line with the applicable legal requirements as stated in Section 149 of the Companies Act, 2013 and the Rules made thereunder read with Listing Regulations. Apart from the provisions laid down under the Companies Act, 2013 and Listing Regulations, the Board also considers all relevant facts and circumstances, not merely from the standpoint of the Directors but also from that of persons or organizations with which the director has an affiliation in forming an opinion on the independence of the concerned director(s).

The criteria of independence is provided in the Section 149 of the Companies Act, 2013 and Listing Regulations. The Company also obtains an annual declaration from all Independent Directors confirming that they meet the requirements of an Independent Director as per the Companies Act, 2013 and Listing Regulations.

Succession Planning

A planned programme of recruitment and retirement amongst Board members and senior management is of significant importance.

It is an important part of the Board''s work to ensure that there is adequate management development and succession planning particularly at the top levels. Succession planning also involves an assessment of the challenges and opportunities facing the company, and an evaluation of the skills and expertise that will be needed in the future. The Nomination and Remuneration Committee is to provide support on this. Both executive and non-executive requirements shall be considered. The Committee shall satisfy itself that processes and plans are in place for orderly succession for appointments to the Board and to senior management to maintain an appropriate balance of skills on the Board and in the company.

In addition, the annual appraisal assessment process for all the employees including the senior management personnel has succession planning and employee progression as one of the key attributes.

The process is institutionalized in the Company''s HR framework and by design, it is the responsibility of the superiors to identify the succession path and suggest the training and development of skill necessary for the company executives or suggest new recruitment wherever gaps exist.

Board Diversity

In accordance with the requirements of the Listing Regulations, atleast half of the Board shall comprise of Independent Directors. Further, atleast one woman director should also be there. The Committee, along with the Board, reviews on an annual basis, appropriate skills, characteristics and experience required from the Board as a whole and its individual members. The objective is to have a Board with diverse background and experience in business, government, academics, technology and in the areas that are relevant for the Company''s operations.

Thus, the Committee should strive for a diversified Board consisting of executive and non-executive members (more of non-executive). At present, the Board consists of 2 executive members and 6 non-executive members.

The Board of the Company always strives to maintain equilibrium between the Independent Directors and Non-independent Directors.

General

Any or all provisions of this Policy would be subject to revision/amendment in accordance with the guidelines etc. on the subject as may be issued by Government/regulatory bodies etc., from time to time.

On behalf of Board of Directors

Date: July 17, 2018

(Sunil Mehta)

Place: New Delhi

Chairman

DIN: 07430460

Annexure B

REPORT ON CSR ACTIVITIES/ INITIATIVES

[Pursuant to Section 135 of the Act & Rules made thereunder]

1. A brief outline of the company''s CSR policy, including overview of the projects or programmes proposed to be undertaken and reference to the web-link to the CSR Policy and projects or programmes

As a Responsible Corporate Citizen, PNB Gilts Ltd. endeavours to ensure an increased commitment at all levels in the organization to operate its business in an economically and socially sustainable manner, while recognising the interests of all its stakeholders and directly or indirectly taking up programmes that benefit the society at large.

The focus area of CSR activity of the Company is education or research in the field of finance/debt markets and working in the field of education for economically weaker sections.

The Company can also pool funds with the group companies, peer companies in Primary Dealer industry or Fixed Income Money Market and Derivatives Association of India (FIMMDA). It can join the eligible initiatives of CSR by any organ of parent bank and can also make contribution to the Prime Minister''s National Relief Fund etc. For more information, please refer CSR policy of the Company at the link http://pnbgilts.com/data/ governence/1523278002.pdf.

2. Composition of the CSR Committee

The composition of the CSR Committee during FY 2017-18 was as under -

Name of Director

Position

Sh. K. V. Brahmaji Rao

Chairman

Dr. Kamal Gupta

Member

Sh. S. K. Dubey

Member

3. Average Net Profit of the Company for last 3 financial years : Rs 14577.94 lacs

4. Prescribed CSR expenditure (2 per cent of amount) - Rs 291.56 lacs

5. Details of CSR spent during the financial year:

(a) Total amount to be spent during the financial year - Rs 291.56 lacs

(b) Amount un-spent, if any - Nil

(c) Manner in which the amount spent during financial year is detailed below:

Sr. No.

CSR project/ activity identified

Sector in which the Project is covered

Projects/ Programmes 1 . Local area/ others

2. Specify the state and district where project/ programme was undertaken

Amount outlay (budget) project/ programme wise

Amount spent on the project/ programme Sub-heads: 1. Direct expenditure on project/ programme 2. Overheads:

Cumulative expenditure up to the reporting period

Amount spent: Direct/ through implementing agency

1

Contribution to Prime Minister''s National Relief Fund

Rs 291. 56 lacs

Rs 291 .56 lacs (Direct)

Rs 29 1.56 lacs

Direct-Rs 29 1.56 lacs

6. In case the company has failed to spend the 2 per cent of the average net profit of the last 3 financial years or any part thereof, reasons for not spending the amount in its Board Report - Not Applicable.

7. Responsibility Statement by the CSR Committee -

We hereby affirm that CSR policy, as approved by the Board, has been implemented and the CSR Committee monitors the implementation of the CSR projects and activities in compliance with CSR objectives and policy of the Company.

Date : June 12, 2018

(S. K. Dubey)

(Kamal Gupta)

Place : New Delhi

Managing Director

Chairman, CSR Committee

DIN: 01 770805

DIN: 00038490

Form AOC-2

Disclosure of particulars of contracts/arrangements entered into by the Company with related parties referred to in Sub-section (1) of Section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto:

1. Details of contracts / arrangements or transactions entered into during the financial year ended March 31, 2018, which were not at arm''s length basis :

1

Name(s) of the related party and nature of relationship

Punjab National Bank (PNB), parent bank

Punjab National Bank (PNB), parent bank

I Punjab National Bank (PNB), parent bank

I Punjab National Bank (PNB), parent bank

2

Nature of contracts/ arrangements/ transactions

Availing or rendering of any services

Leasing of property (residential premises)

Leasing of property (business premises)

Leasing of property (business premises)

3

Duration of the contracts / arrangements/ transactions

Mutual arrangement on continuous basis for holding various meetings like meetings of Board and its Committees, general meetings and other meetings of the company at the premises of PNB and vice-a-versa.

Residential Flats of the Company to PNB officers as per their entitlement in PNB for a period of 11 months, with two/more extensions.

Business premises from PNB taken on lease / rent sharing arrangement -

Mumbai Branch Office: The lease for 5 years is effective from September, 2016, renewable after every five years.

Business premises from PNB taken on lease / rent sharing arrangement -

Chennai Branch Office: The premises has been provided under a mutual rent sharing arrangement by PNB since 15.05.12 on the basis of area occupied. The said premises has been taken by PNB on lease from Tamil Nadu Khadi and Village Industries Board, Tamil Nadu (State Govt. Department) for a period of 5 years (subject to continuation of their office at this place), extendable for a period as may be decided between the said Board and PNB.

4

Salient terms of the contracts or arrangements or transaction including the value, if any

No transaction value is there as these transactions are being done in view of parent- subsidiary relationship and on mutual understanding.

Residential premises: Rent is as per the lease entitlement of PNB officers in PNB.

Mumbai Branch Office: Rent at present is Rs 273434/- p.m. plus taxes

Chennai Branch Office: Rent at present is Rs 12250/- p.m. plus taxes.

(The rent is subject to enhancement as may be done by above said State Govt Department.)

5

Justification for entering into such contracts or arrangements or transactions

The Company and parent bank are entering into these transactions due to its parent- subsidiary relationship.

The Company and parent bank are entering into these transactions due to its parent-subsidiary relationship. As a matter of policy, the Company does not enter such property related transactions with outside parties. Further, the Company will also be able to get their residential flats vacated at any time they need the same for their officers/ sale.

The Company and parent bank are entering into these transactions due to its parent- subsidiary relationship.

The Company and parent bank are entering into these transactions due to its parent- subsidiary relationship.

6

Date(s) of approval by the Board

03.08.2015

29.01.2015

26.10.2016

30.07.2016

7

Amount paid as advances, if any

Nil

Nil

Nil

Nil

8

Date on which the special resolution was passed in general meeting as required under first proviso to Section 188 of the Act

Not required as the same is below the limit specified under first proviso to Section 188 of the Companies Act, 2013 and Rules made thereunder

Not required as the same is below the limit specified under first proviso to Section 188 of the Companies Act, 2013 and Rules made thereunder

Not required as the same is below the limit specified under first proviso to Section 188 of the Companies Act, 2013 and Rules made thereunder

Not required as the same is below the limit specified under first proviso to Section 188 of the Companies Act, 2013 and Rules made thereunder

2. Details of material contracts or arrangement or transactions at arm''s length basis -

There were no material contracts or arrangement or transactions entered into during the financial year ended March 31, 2018.

On behalf of Board of Directors

Date: July 17, 2018

(Sunil Mehta)

Place : New Delhi

Chairman

DIN: 07430460

Annexure D Particulars of Employees Pursuant to the Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the information is furnished below:

a. The ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year 2017-18

(Rs in lacs)

SI.

No

Name of Director

Director''s Remuneration

Employee Median Remuneration

Ratio (No. of times)

1

Sh. Sunil Mehta

1.00

12.08

0.08

2

Sh. K. V. Brahmaji Rao

1.50

0.12

3

Dr. Kamal Gupta

3.40

0.28

4

Sh. S. K. Soni

3.15

0.26

5

Sh. P. P. Pareek

2.20

0.18

6

Sh. R. S. Ramasubramaniam

3.70

0.31

7

Sh. S. K. Dubey*

82.29**

6.81

8

Smt. Sunita Gupta

65.13**

5.39

* He also receives pension from PNB, being an ex-employee.

** Above remuneration includes variable pay (Performance linked incentive) which is paid based on performance of the company and employee in the last financial year i.e. on deferred basis, as recommended by the Nomination & Remuneration Committee and approved by the Board.

During 2017-18, variable pay of Rs 39.10 lacs and Rs 29.25 lacs (Prev. Year: Rs 7.21 lacs and Rs 5.40 lacs) was paid to the Managing Director and Executive Director & CFO, at SI. No. 7 and 8 above, respectively. Apart from this, benefit on account of leave encashment and gratuity which are provided based on actuarial valuation for the company as a whole, is also available.

Notes: 1. Directors at SI. No. 1 to 6 are Non-Executive Directors and only sitting fee has been paid. Sitting fee of promoter directors at SI. No. 1 and 2 has been paid to Punjab National Bank, who is the promoter of the Company, as per the instructions received from said bank/directors.

2. Out of pocket expenses incurred by them for attending the meetings and service tax not taken into account.

b. The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year:

SI. No

Name of Director and Key Managerial Personnel

% increase in remuneration

1

Sh. Sunil Mehta**

-

2

Sh. K. V. Brahmaji Rao**

7.14

3

Dr. Kamal Gupta**

(19.05)

4

Sh. S. K. Soni**

(8.70)

5

Sh. P. P. Pareek**

(2.22)

6

Sh. R. S. Ramasubramaniam**

1.37

7

Sh. S. K. Dubey

67.62

8

Smt. Sunita Gupta

58.68

9

Smt. Monika Kochar

45.72

* Details not given, as he was not director in the financial year 2016-17.

** received only sitting fee during the year. Sitting fee of Promoter Director at SI. No. 2 has been paid to PNB as per instructions.

Note: Above remuneration includes variable pay (Performance linked incentive) which is paid based on performance of the company and employee in the last financial year i.e. on deferred basis, as recommended by the Nomination & Remuneration Committee and approved by the Board. During 2017-18, variable pay of Rs 39.10 lacs, Rs 29.25 lacs and Rs 7.50 lacs (Prev. Year: Rs 7.21 lacs, Rs 5.40 lacs and Rs 1.32 lacs) was paid to the Managing Director, Executive Director & CFO and Company Secretary, at SI. No. 7, 8 and 9 above, respectively. Apart from this, benefit on account of leave encashment and gratuity which are provided based on actuarial valuation for the company as a whole, is also available.

c. In the financial year 2017-18, there was an increase of 20.68 per cent in the median remuneration of employees.

d. Total number of employees of the Company as on March 31, 2018 were 36 (including 3 employees on deputation from parent bank). The Company has maintained peaceful and harmonious relations with all its employees.

e. Average percentile increase already made in the salaries of employees other than the managerial personnel in FY 2017-18 was 31.51 per cent whereas the increase in managerial remuneration was 63.15 per cent in this period. This was based on the recommendations of Nomination and Remuneration Committee, based on industry benchmarks and the respective employee''s performance and contribution. The Company''s remuneration philosophy is to ensure that it is competitive in the Primary Dealer (PD) industry in which it operates, for attracting and retaining the best talent. Further, the remuneration includes variable pay (Performance linked incentive) which is paid based on performance of the company and employee in the last financial year i.e. on deferred basis. The remuneration is in line with the PD industry benchmarks.

f. It is hereby affirmed that the remuneration paid is as per the Remuneration policy of the Company.

On behalf of Board of Directors

(Sunil Mehta)

Date: July 17, 2018

Chairman

Place: New Delhi

DIN: 07430460

Annexure E

Form No. MGT-9

EXTRACT OF ANNUAL RETURN as on the financial year ended on March 31, 2018 of

PNB GILTS LIMITED

[Pursuant to Section 92(1) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014

I. Registration and other details:

i) Corporate Identity Number (GIN)

L74899DL1996PLC077120

ii) Registration Date

March 13, 1996

iii) Name of the Company

PNB Gilts Limited

iv) Category / Sub-Category of the Company

Public Limited Company

v) Address of the Registered Office and Contact details

5, Sansad Marg, New Delhi, India, PIN -11 0001 Tel : 01 1-23325759, 23325779 Fax : 011-23325751 , 23325763 Email: [email protected] website: www.pnbgilts.com

vi) Whether listed company (Yes/No)

Yes

vii) Name, Address and contact details of Registrar & Transfer Agents (RTA)

MCS Share Transfer Agent Limited (Unit: PNB Gilts) F-65, 1st Floor, Okhla Industrial Area, Phase - 1, New Delhi, India. PIN-1 10 020 Tel.: 01 1-41 4061 49-52 Fax No.: 011-41709881 E-mail : [email protected] website:www.mcsregistra rs.com

II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY

All the business activities contributing 10 per cent or more of the total turnover of the company is as under:-

SI. No.

Name and Description of main products / services

NIC Code of the Product/ service

% to total turnover of the company

1

Securities Trading

6599

100.00

III. PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES -

s.

No.

Name and Address of the company

CIN/GLN

Holding /Subsidiary/ Associate

% of shares held

Applicable Section

1.

Punjab National Bank

PUNB

Holding

74.07

2(46)

(ii) Shareholding of Promoters

SI No.

Shareholder''s Name

Shareholding at the beginning of the year

Share holding at the end of the year

% Change in share holding during the year

No. of Shares

% of total shares of the company

% of Shares Pledged / encumbered to total shares

No. of Shares

% of total shares of the company

% of Shares Pledged / encumbered to total shares

1.

Punjab National Bank

133333333

74.07

0

133333333

74.07

0

0

(iii) Change in Promoters'' Shareholding

SI. No.

Particulars

Shareholding at the beginning of the year

Cumulative Shareholding during the year

No. of shares

% of total shares of

No. of shares

% of total shares of

the company

the company

At the beginning of the year

133333333

74.07

133333333

74.07

Date wise Increase /

Decrease in Promoters

Share holding during the Year specifying the reasons for increase / decrease

NIL

(e.g. allotment / transfer / bonus/ sweat equity etc)

At the end of the year

133333333

74.07

133333333

74.07

(iv) Shareholding Pattern of top ten Shareholders (other than Directors, Promoters and Holders of GDRs and ADRs):

SI.

No.

Name

Shareholding

Date

Increase/ (Decrease) in share- holding

Reason

Cumulative Shareholding during the year (01-04-17 to 31-03-18)

No. of Shares at the beginning (01 -04-1 7)/ end of the year (31-03-2018)

% of total shares of the Company

No. of shares

% of total Shares of the company

1

Morgan Stanley

1753377

0.97

01/04/2017

Mauritius Company

07/04/2017

(5695)

Sale

1747682

0.97

Ltd.

15/09/2017

(53310)

Sale

1694372

0.94

22/09/2017

(183543)

Sale

1510829

0.84

29/09/2017

(169005)

Sale

1341824

0.75

06/10/2017

(58527)

Sale

1283297

0.71

1283297

0.71

31/03/2018

1283297

0.71

2

The Oriental

630866

0.35

01/04/2017

Insurance Company Limited

630866

0.35

31/03/2018

0

Nil

630866

0.35

3

Mala Rajan

585938

0.33

01/04/2017

Bharvani

585938

0.33

31/03/2018

0

Nil

585938

0.33

4

Narnolia Capital

188932

0.11

01/04/2017

Advisors Private

07/04/2017

(7500)

Sale

181432

0.10

Limited

14/04/2017

(5364)

Sale

176068

0.10

21/04/2017

(4500)

Sale

171568

0.10

28/04/2017

(10000)

Sale

161568

0.09

05/05/2017

(4200)

Sale

157368

0.09

12/05/2017

(8000)

Sale

149368

0.08

19/05/2017

(2000)

Sale

147368

0.08

26/05/2017

28110

Purchase

175478

0.10

02/06/2017

48828

Purchase

224306

0.12

09/06/2017

3000

Purchase

227306

0.13

16/06/2017

63808

Purchase

291114

0.16

30/06/2017

(3000)

Sale

288114

0.16

04/08/2017

(5500)

Sale

282614

0.16

11/08/2017

(3000)

Sale

279614

0.16

18/08/2017

(2000)

Sale

277614

0.15

01/09/2017

(1900)

Sale

275714

0.15

08/09/2017

(6000)

Sale

269714

0.15

15/09/2017

(3500)

Sale

266214

0.15

22/09/2017

(15000)

Sale

251214

0.14

29/09/2017

(5000)

Sale

246214

0.14

06/10/2017

39250

Purchase

285464

0.16

20/10/2017

13871

Purchase

299335

0.17

27/10/2017

(2000)

Sale

297335

0.17

31/10/2017

(3000)

Sale

294335

0.16

03/11/2017

(5300)

Sale

289035

0.16

10/11/2017

(34000)

Sale

255035

0.14

17/11/2017

17690

Purchase

272725

0.15

08/12/2017

32000

Purchase

304725

0.17

29/12/2017

18129

Purchase

322854

0.18

05/01/2018

(7000)

Sale

315854

0.18

12/01/2018

(10500)

Sale

305354

0.17

19/01/2018

(7500)

Sale

297854

0.17

26/01/2018

30900

Purchase

328754

0.18

02/02/2018

(6500)

Sale

322254

0.18

09/02/2018

28500

Purchase

350754

0.19

23/02/2018

28000

Purchase

378754

0.21

02/03/2018

(14000)

Sale

364754

0.20

09/03/2018

(24500)

Sale

340254

0.19

23/03/2018

26000

Purchase

366254

0.20

31/03/2018

214128

Purchase

580382

0.32

580382

0.32

31/03/2018

580382

0.32

5

Bengal Vipanapan

440043

0.24

01/04/2017

Pvt. Ltd

440043

0.24

31/03/2018

0

Nil

440043

0.24

6

Vikas Kumar

328037

0.18

01/04/2017

Agarwal

13/10/2017

(6)

Sale

328031

0.18

328031

0.18

31/03/2018

328031

0.18

7

Acatis India

0

0.00

01/04/2017

Value Equities

16/02/2018

74800

Purchase

74800

0.04

23/02/2018

241548

Purchase

316348

0.18

316348

0.18

31/03/2018

316348

0.18

8

Nahar Capital and

225733

0.13

01/04/2017

Financial Services

17/11/2017

25000

Purchase

250733

0.14

Ltd.

08/12/2017

312

Purchase

251045

0.14

15/12/2017

24688

Purchase

275733

0.15

22/12/2017

25000

Purchase

300733

0.17

05/01/2018

(20455)

Sale

280288

0.16

12/01/2018

(25982)

Sale

254306

0.14

19/01/2018

(28573)

Sale

225733

0.13

16/02/2018

85000

Purchase

310733

0.17

310733

0.17

31/03/2018

310733

0.17

9

AJO Emerging

0

0.00

01/04/2017

Markets Small Cap

22/09/2017

165105

Purchase

165105

0.09

Master Fund Ltd.

29/09/2017

147707

Purchase

312812

0.17

06/10/2017

103622

Purchase

416434

0.23

31/10/2017

(7817)

Sale

408617

0.23

03/11/2017

(89890)

Sale

318727

0.18

02/03/2018

(8566)

Sale

310161

0.17

310161

0.17

31/03/2018

310161

0.17

10

General Insurance

300000

0.17

01/04/2017

Corporation of India

300000

0.17

31/03/2018

0

Nil

300000

0.17

11

Dilipkumar Lakhi*

300000

0.17

01/04/2017

12/05/2017

(32108)

Sale

267892

0.15

11/08/2017

(15000)

Sale

252892

0.14

19/01/2018

(12892)

Sale

240000

0.13

240000

0.13

31/03/2018

240000

0.13

12

Edelweiss

274498

0.15

01/04/2017

Custodial Services

07/04/2017

41754

Purchase

316252

0.18

Ltd.*

14/04/2017

8272

Purchase

324524

0.18

05/05/2017

17096

Purchase

341620

0.19

12/05/2017

(1074)

Sale

340546

0.19

19/05/2017

1074

Purchase

341620

0.19

26/05/2017

(6113)

Sale

335507

0.19

02/06/2017

(192042)

Sale

143465

0.08

09/06/2017

3452

Purchase

146917

0.19

16/06/2017

2731

Purchase

149648

0.08

23/06/2017

14864

Purchase

164512

0.09

30/06/2017

35985

Purchase

200497

0.11

07/07/2017

37484

Purchase

237981

0.12

14/07/2017

79691

Purchase

317672

0.18

21/07/2017

64929

Purchase

382601

0.21

28/07/2017

17403

Purchase

400004

0.22

04/08/2017

63786

Purchase

463790

0.26

11/08/2017

(31137)

Sale

432653

0.24

18/08/2017

31137

Purchase

463790

0.26

25/08/2017

(197913)

Sale

265877

0.15

01/09/2017

2374

Purchase

268251

0.15

08/09/2017

3731

Purchase

271982

0.15

15/09/2017

(6581)

Sale

265401

0.15

22/09/2017

(60742)

Sale

204659

0.11

29/09/2017

(22602)

Sale

182057

0.10

30/09/2017

(312)

Sale

181745

0.10

06/10/2017

5400

Purchase

187145

0.10

13/10/2017

(3851)

Sale

183294

0.10

27/10/2017

(113)

Sale

183181

0.10

31/10/2017

9402

Purchase

192583

0.11

03/11/2017

16172

Purchase

208755

0.12

10/11/2017

(24876)

Sale

183879

0.10

17/11/2017

(1697)

Sale

182182

0.10

24/11/2017

(32873)

Sale

149309

0.08

01/12/2017

14979

Purchase

164288

0.09

08/12/2017

33228

Purchase

197516

0.11

15/12/2017

15940

Purchase

213456

0.12

22/12/2017

61840

Purchase

275296

0.15

29/12/2017

(1070)

Sale

274226

0.15

30/12/2017

(716)

Sale

273510

0.15

05/01/2018

(3215)

Sale

270295

0.15

23/02/2018

(35909)

Sale

234386

0.13

09/03/2018

(7218)

Sale

227168

0.13

16/03/2018

5278

Purchase

232446

0.13

31/03/2018

(55322)

Sale

177124

0.10

177124

0.10

31/03/2018

177124

0.10

13

Gaurav Manocha*

260556

0.14

01/04/2017

260556

0.14

31/03/2018

0

Nil

260556

0.14

(v). Shareholding of Directors and Key Managerial Personnel:

s.

No.

Name

Shareholding

Date

Increase/ (Decrease) in Shareholding

Reason

Cumulative shareholding during the year (01-04-17 to 31 -03-1 8)

No. of Shares at beginning (01 -04-1 7) / end of the year (31-03-18)

% of total shares of the Company

No. of Shares

% of total shares of the Company

1

Sh. P. P Pareek, Director

1333

0.00

01/04/2017

NIL

1333

0.00

31/03/2018

0

1333

0.00

The following Directors and Key Managerial Personnel (KMP) did not hold/held any shares during the financial year 2017-18

a. Smt. Usha Ananthasubramanian - Chairperson1

b. Sh. Sunil Mehta - Chairman1

c. Sh. K. V. Brahmaji Rao - Director

d. Dr. Kamal Gupta - Director

e. Sh. S. K. Soni - Director

f. Sh. R. S. Ramasubramaniam - Director

g. Sh. S. K. Dubey - Managing Director (KMP)

h. Smt. Sunita Gupta, Executive Director and CFO (KMP)

i. Smt. Monika Kochar - Company Secretary (KMP)

''directorship held for part of the year.

V. INDEBTEDNESS

Indebtedness of the Company including interest outstanding/accrued but not due for payment

(Rs in lacs)

Particulars

Secured Loans excluding deposits

Unsecured Loans

Deposits

Total Indebtedness

Indebtendness at the beginning of the financial year

i) Principal Amount

155219.24

196173.71

-

351392.95

ii) Interest due but not paid

-

-

-

-

iii) Interest accrued but not due

34.17

51.77

-

85.94

Total (i ii iii)

155253.41

196225.48

-

351478.89

Change in Indebtedness during the financial year

Addition

73982272.47

38844318.67

-

112826591.10

Reduction

73806026.31

38935092.38

-

112741118.65

Net Change

176246.16

(90773.71)

-

85472.45

Indebtedness at the end of the financial year

i) Principal Amount

331465.40

105400.00

-

436865.40

ii) Interest due but not paid

-

-

-

-

iii) Interest accrued but not due

226.58

702.49

-

929.07

Total (i ii iii)

331691.98

106102.49

-

437794.47

VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

A. Remuneration to Managing Director, Whole-time Directors and/or Manager:

(Rs in lacs)

SI. No.

Par

ticulars of Remuneration

Name of MD/WTD/Manager

Total Amount

Sh. S. K. Dubey, Managing Director

Smt. Sunita Gupta, Executive Director & CFO

1.

Gross salary

(a)

Salary as per provisions contained in Section 17(1) of the Income-tax Act, 1961

42.16*

32.28

74.44

(b)

Value of perquisites under Section 17(2) Income-tax Act, 1961

-

-

-

(c)

Profits in lieu of salary under Section 17 (3) of the Income Tax Act, 1 961

2

Stock Option

-

-

-

3

Sweat Equity

-

-

-

4

Commission

-

-

-

a)

as % of profit

-

-

-

b)

others

-

-

-

5

Others -

a)

Company''s contribution to Provident Fund

.

2.09

2.09

b)

Medical facilities

0.15

-

0.15

c)

Child education allowance

-

0.01

0.01

d)

Variable pay (Performance Linked Incentive )

39.10

29.25

68.35

e)

Leave travel concession

0.88

1.50

2.38

Total (A)

82.29

65.13

147.42

Ceiling as per the Act

Rs 775.85 lacs (being 1 0 per cent of the net profits of the Company calculated as per Section 198 of the Companies Act, 2013)

* In addition, he also receives pension from PNB, being an ex-employee.

Note 1: Above remuneration includes variable pay (Performance linked incentive) which is paid based on performance of the company and employee in the last financial year i.e. on deferred basis, as recommended by the Nomination & Remuneration Committee and approved by the Board. During 2017-18, variable pay of Rs 39.10 lacs and Rs 29.25 lacs (Prev. Year: Rs 7.21 lacs and Rs 5.40 lacs) was paid to the Managing Director and Executive Director & CFO, respectively.

Note 2: Apart from above, benefit on account of leave encashment and gratuity which are provided based on actuarial valuation for the company as a whole, is also available.

B. Remuneration to other directors:

(Rs in lacs)

Particulars of Remuneration

Name of Director

Total Amount

Sh Sunil Mehta

Sh K V Brahmaji Rao

Dr Kamal Gupta

Sh S K Soni

Sh P P Pareek

Sh R S Ramasubramaniam

1 Independent Directors

• Fee for attending Board / Committee meetings

.

.

340

315

220

370

1245

• Commission

-

-

-

-

-

-

-

• Others

-

-

-

-

-

-

-

Total (1 )

-

-

340

315

220

370

1245

2 Other Non-Executive Directors (paid to PNB for its nominated directors)

• Fee for attending Board / Committee meetings

1 00

1 50

-

-

-

-

250

• Commission

-

-

-

-

-

-

-

• Others

-

-

-

-

-

-

-

Total (2)

1 00

1 50

-

-

-

-

250

Total (B)=(1 2)

1 00

1 50

340

315

220

370

1495

Total Managerial Remuneration*

16237

Overall Ceiling as per the Act for Directors other than Managing Director and Whole-time Directors is Rs 77.58 lacs (being 1% of the net profits of the Company calculated as per Section 198 of the Companies Act, 2013).

* total remuneration to Managing Director, Whole-time Director and other Directors (being the total of A and B) Note: Service tax/GST on above fees paid extra.

C. Remuneration to Key Managerial Personnel other than MD / Manager/WTD

(Rs in lacs)

SI. No.

Particulars of Remuneration

Key Managerial Personnel

Total Amount

CEO

Smt. Monika Kochar, Company Secretary

CFO

1.

Gross salary

Not

Smt. Sunita

(a) ''Salary as per provisions contained in Section 17(1) of the Income-tax Act, 1961

Applicable

12.98

Gupta, Executive

12.98

(b)

Value of perquisites under Section 17(2) of the Income-tax Act, 1961

1.51

Director is also CFO.

1.51

(c)

Profits in lieu of salary under Section 17 (3) of the Income Tax Act, 1 961

_

Hence, disclosed in A above

_

2

Stock Option

-

-

3

Sweat Equity

-

-

4

Commission

a)

as % of profit

-

-

b)

others

-

-

5

Others -

a)

Company''s contribution to Provident Fund

0.92

0.92

b)

Medical facilities

0.15

0.15

c)

Child education allowance

-

-

d)

Variable pay (Performance Linked Incentive)

7.50

7.50

e)

Leave travel concession

0.32

0.32

Total

23.39

23.39

Note 1: Above remuneration includes variable pay (Performance linked incentive) which is paid based on performance of the company and employee in the last financial year i.e. on deferred basis, as recommended by the Nomination & Remuneration Committee and approved by the Board. During 2017-18, variable pay of Rs 7.50 lacs (Prev. Year: Rs 1.32 lacs) was paid to the Company Secretary.

Note 2: Apart from above, benefit on account of leave encashment and gratuity which are provided based on actuarial valuation for the company as a whole, is also available.

VII. PENALTIES / PUNISHMENT/ COMPOUNDING OF OFFENCES:

Type

Section of the Companies Act

Brief Description

Details of Penalty /Punishment/ Compounding fees imposed

Authority [RD/ NCLT/ COURT]

Appeal made, if any (give Details)

A.

COMPANY

NIL

Penalty

Punishment

Compounding

B.

DIRECTORS

Penalty

Punishment

Compounding

C.

OTHER OFFICERS IN DEFAULT

Penalty

Punishment

Compounding

On behalf of Board of Directors

(Sunil Mehta)

Date: July 17, 2018

Chairman

Place: New Delhi

DIN: 07430460

Annexure F

Form No. MR-3

SECRETARIAL AUDIT REPORT

FOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2018

[Pursuant to Section 204(1) of the Companies Act, 2013 and Rule No.9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014]

To,

The Members,

PNB Gilts Limited,

5, Sansad Marg, New Delhi-110001

We have conducted the Secretarial Audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by PNB Gilts Limited (hereinafter called "the Company") for the audit period covering the financial year ended on March 31, 2018. Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing our opinion thereon.

Based on our verification of the Company''s books, papers, minute books, forms and returns filed and other records maintained by the Company and also the information provided by the Company, its officers, agents and authorised representatives during the conduct of Secretarial Audit, the explanations and clarifications given to us and the representation made by the management, we hereby report that in our opinion, the Company has, during the audit period under consideration complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance-mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

We have examined the books, papers, minute books, forms and returns filed and other records maintained by the Company for the financial year ended on March 31, 2018, according to the provisions of:

(i) The Companies Act, 2013 (''the Act'') and the Rules made thereunder;

(il) The Securities Contracts (Regulation) Act, 1956 (''SCRA'') and the Rules made thereunder;

(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder;

(iv) Foreign Exchange Management Act, 1999 and the Rules and Regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings - Not applicable to the Company during the audit period;

(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992(''SEBI Act''):-

(a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;

(b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015;

(c) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 - Not applicable to the Company during the audit period;

(d) The Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 - Not applicable to the Company during the audit period;

(e) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 -Not applicable to the Company during the audit period;

(f) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client - Not applicable to the Company during the audit period;

(g) The Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 - Not applicable to the Company during the audit period;

(h) The Securities and Exchange Board of India (Buy back of Securities) Regulations, 1998 - Not applicable to the Company during audit period; and

(i) SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015; (vi) Reserve Bank of India Act, 1934 and Guidelines made thereunder; and

(vii) RBI guidelines/Master Directions for NBFCs/Systemically Important Non-deposit taking Non-Banking Financial Companies (NBFC-ND- SI) and Primary Dealers.

We have also examined compliance with the applicable clauses of the following:

(i) Secretarial Standards with respect to Meetings of Board of Directors (SS-1) and General Meetings (SS-2) issued by The Institute of Company Secretaries of India.

During the period under review, the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above and other appicable Acts.

We further report that, based on the information provided and the representation made by the Company and also on the review of the internal compliance reports taken on record by the Board of Directors of the Company, in our opinion, adequate systems and processes exist in the Company to monitor and ensure compliance with the provisions of applicable industry specific Acts, general laws like labour laws and environmental laws etc.

During the audit period, there were no major events which had bearing on the Company''s affairs in pursuance of above referred laws, rules, regulations, guidelines etc.

We further report that, the compliance by the Company of applicable financial laws like direct and indirect tax laws and maintenance of financial records and books of accounts has not been reviewed in this Audit since the same have been subject to review by statutory financial audit and other designated professionals.

We further report that-

The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors, Independent Directors and Woman Director. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.

Adequate notice is given to all Directors to schedule the Board Meetings; agenda and detailed notes on agenda were sent at least seven days in advance, and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

All decisions at the Board Meetings and Committee Meetings were carried out unanimously as recorded in the minutes of the Meetings of the Board of Directors or Committee(s) of the Board, as the case may be.

We further report that there are adequate systems and processes in the Company commensurate with the size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.

For Pranav Kumar & Associates

Company Secretaries

Pranav Kumar

Partner

Place: Ghaziabad

FCS:5013

Date: May 2, 2018

CP No.:3429


Mar 31, 2017

The Directors are pleased to present the Twenty First Annual Report together with the Company’s audited financial statements for the financial year ended March 31, 2017.

1. RESULTS OF OUR OPERATIONS AND STATE OF AFFAIRS

The Company’s financial performance, for the year ended March 31, 2017 is summarized below:

(Rs, in lacs)

For the year ended 31.3.2017

For the year ended 31.3.2016

Total Income

50054.47

34339.65

Less : Total Expenditure

24400.36

29195.04

Add: Prior Period Income

-

2.62

Profit/(loss) Before Tax

25654.11

5147.23

Less : Provision for Income Tax (including deferred tax)

8936.73

1697.58

Profit /(loss) After Tax

16717.38

3449.65

Add: Balance in Statement of Profit and Loss brought forward

12807.02

12786.97

Add: Prior Period Income

-

0.10

Amount available for Appropriation

29524.39

16236.72

Proposed Appropriations

Transfer to Statutory Reserve

3343.48

689.93

General Reserve

-

-

Capital Reserve

2229.71

356.56

Proposed Dividend

-

1980.11

Dividend Distribution Tax

-

403.10

Balance carried forward

23951.20

12807.02

During FY 2016-17, your Company fulfilled all its obligations as a Primary Dealer in both primary and secondary market. With regard to Treasury Bills commitment, the Company exceeded the stipulated success ratio of 40 per cent, achieving 56.07 per cent in both H1 and H2. In G-sec category, Company fulfilled the underwriting commitments, thereby supporting the government borrowing program.

During FY 2016-17, the yields on Government Securities trended down, with the ten-year benchmark yield moving down to 6.66 per cent as on March 31, 2017 as against previous year close of 7.46 per cent. The market remained highly volatile with the yields touching low of 6.14 per cent after demonetization and policy rate cut in October, 2016 and then again moving up after application of the Incremental Cash Reserve Ratio (ICRR) to absorb surplus liquidity. Status quo on monetary policy in December, 2016 and change in stance of RBI from accommodative to neutral in February, 2017 also hardened yields. Inflation was well contained and declined to significantly low levels during November, 2016 - February, 2017. Current Account Deficit was at comfortable levels. Internationally, with strengthening of US economy, the Federal Reserve raised the target federal funds rate twice in December, 2016 and March, 2017 while ECB has kept policy rate unchanged since March, 2016.

The Central Government reduced its market borrowings in Q4 by Rs, 1800000 lacs through dated securities and Rs, 5100000 lacs through T-Bills. Average liquidity surplus in Q2 was Rs, 2930000 lacs which declined to Rs, 630000 lacs in October, 2016. However, after demonetization, currency in circulation declined drastically and this increased the liquidity in the banking system. To manage this excess liquidity RBI did open market sales of

CMBs issued under MSS and variable rate reverse repos of various tenors. The peak level of liquidity absorbed reached Rs, 79560000 lacs on January 4, 2017. The ICRR was in place for one fortnight ending December 9, 2016, which helped in draining liquidity to the extent of Rs, 40000000 lacs. ICRR was withdrawn after increase in limit on issuance of securities under MSS from Rs, 3000000 lacs to Rs, 60000000 lacs. In Q4, with re-monetization at an accelerated pace, the liquidity surplus in the system reduced to Rs, 31410000 lacs by end of March, 2017. Yields got further support by lower fiscal deficit target of 3.2 per cent and reduced government borrowing for 2017-18.

During the FY 2016-17, your Company posted a Profit Before Tax of Rs, 25654.11 lacs as against Rs, 5147.23 lacs in FY 2015-16. The net revenue from operations of your Company during FY 2016-17 stood at Rs, 50054.47 lacs as against Rs, 34339.65 lacs and Profit after Tax for FY 2016-17 stood at Rs, 16717.38 lacs vis-a-vis Rs, 3449.65 lacs in the previous fiscal.

No material changes and commitments have occurred after the close of the year till the date of this report, which affect the financial position of the Company.

Capital Adequacy

Capital adequacy ratio as on March 31, 2017 stood at 54.48 per cent as against the RBI stipulation of 15 per cent. Dividend

Your Board has recommended a dividend of Rs, 2.50 (i.e. 25 per cent) per equity share (last year Rs, 1.10 per equity share) for the financial year ended March 31, 2017, subject to approval in the ensuing Annual General Meeting. The total outflow on account of said dividend shall be Rs, 5416.40 lacs (including Dividend Distribution Tax of Rs, 916.15 lacs).

Transfer to Reserves

Your Company proposes to transfer Rs, 3343.48 lacs in Statutory Reserve as required under the provisions of Section 45-IC of the Reserve Bank of India Act, 1934.Rs, 2229.71 lacs is proposed to be transferred in Capital Reserve in terms of RBI guidelines for Primary Dealers. Further, in terms of the first proviso to Section 123(1) of the Companies Act, 2013, the Company proposes not to transfer any sum in General Reserve.

2. CORPORATE GOVERNANCE

Corporate Governance for your Company means achieving high level of accountability, efficiency, responsibility and fairness in all areas of operations. Our workforce is committed towards the protection of the interest of the stakeholders including shareholders, creditors, investors, customers, employees, etc. Our policies consistently undergo improvements keeping in mind our goal i.e. maximization of value of all the stakeholders.

We comply with the SEBI and RBI guidelines on Corporate Governance. We have documented our internal code on Corporate Governance in compliance of SEBI and RBI guidelines. The Corporate Governance practices followed by the Company are given in the Annual Report. A certificate from M/s Kapoor Tandon & Co. (Firm Reg. No. 000952C), Statutory Auditor of the Company regarding compliance of conditions of Corporate Governance as stipulated in the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is enclosed with the ‘Report on Corporate Governance’ forming part of the Board’s Report.

Number of meetings of the Board

The Board met five times during the financial year 2016-17 to review strategic, operational, technological and financial matters besides laying down policies and procedures for operational management of the Company. The details of such meetings are given in the ‘Report on Corporate Governance’ that forms part of this Annual Report.

Directors and Key Managerial Personnel

During the year 2016-17, the members in their Annual General Meeting held on September 17, 2016 approved the appointment of Sh. R. S. Ramasubramaniam (DIN : 00008937) as an Independent Director for a term of 5 consecutive years effective from February 3, 2016.

Smt. Usha Ananthasubramanian (DIN: 02784580), consequent upon her appointment as Managing Director & CEO of Allahabad Bank, demitted the office of Managing Director & CEO of Punjab National Bank on May 5, 2017. Accordingly, she resigned from the Directorship and Chairpersonship of the Company w.e.f. May 5, 2017. The Board appreciate and thank her for her vision, leadership and guidance, enabling your Company to reach another standard of excellence.

In her place, on the recommendation of Nomination and Remuneration Committee, the Board of Directors appointed Sh. Sunil Mehta (DIN: 07430460), Managing Director & CEO of Punjab National Bank as an Additional Director (in the Non-Executive & Non-Independent category) effective from May 12, 2017. In terms of the Articles of Association of the Company, he will act as Chairman of the Board of your Company.

Further, in accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Sh. K. V. Brahmaji Rao (DIN: 06861202) shall retire by rotation in the ensuing Annual General Meeting and is eligible for reappointment.

Performance Evaluation

The Company has devised a policy for performance evaluation of Board of its own performance, Independent Directors, Non-Independent/Executive Directors and Board level Committees etc. as required under the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The evaluation of all the Directors, the Board as a whole and its Committees was conducted based on the criteria and framework adopted by the Board. Copy of said policy, inter-alia, containing the process and criteria for evaluation is available at Company’s website at the link http://pnbgilts.com/data/governence/1461912736.pdf.

Familiarization programme

The details of programme for familiarization of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of industry in which the Company operates, business model of the Company and related matters are placed at Company’s website at the link http://pnbgilts.com/data/governence/1459924857.pdf.

Quarterly updates on relevant statutory changes are also circulated to the Directors.

Policy on Directors’ Appointment and Remuneration etc.

The policies of the Company on Directors’ Appointment and Remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under Sub-section (3) of Section 178 of the Companies Act, 2013 is appended as Annexure A to the Board’s Report.

Declaration by Independent Directors

The Company has received declaration pursuant to Section 149(7) of the Companies Act, 2013 from each Independent Director confirming therein the criteria of Independence as prescribed both under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

3. OTHER DISCLOSURES -

Audit Committee

The Audit Committee comprises of the following members -

Name of Director

Position

Dr. Kamal Gupta

Chairman

Sh. S. K. Soni

Member

Sh. P. P. Pareek

Member

Sh. R. S. Ramasubramaniam

Member

All the recommendations made by the Audit Committee during the year were accepted by the Board.

Corporate Social Responsibility (CSR) Committee

The composition of the CSR Committee is as under -

Name of Director

Position

Sh. K. V. Brahmaji Rao

Chairman

Dr. Kamal Gupta

Member

Sh. S. K. Dubey

Member

The CSR policy of the Company, duly recommended by the CSR Committee and approved by the Board, is available at our website at the link http://pnbgilts.com/data/governence/1461912787.pdf. The CSR activity of the Company is carried out as per the instructions of the Committee and Board. During the year, the Company has spent 2 per cent of its average net profits of the three immediately preceding financial years on CSR activity.

The annual report on our CSR for the year 2016-17 in the prescribed format is presented at Annexure B to the Board’s Report.

Other details of above said and other Committees of the Board are given in the ‘Report on Corporate Governance’ forming part of the Board’s Report.

Whistle Blower Policy (including Vigil Mechanism)

Your Company believes in conducting its affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. Your Company is committed to develop a culture where it is safe for directors and employees to raise concerns about any wrongful conduct.

The Board of Directors has approved a Whistle Blower Policy (including Vigil Mechanism), which provides a framework to promote a responsible and secure whistle blowing. It protects employees wishing to raise a concern about serious irregularities within the Company. The Audit Committee reviews the functioning of this mechanism.

No employee / director has been denied access to the Audit Committee. During the year under review , no matter has been reported to the Audit Committee. The said policy may be accessed on the Company’s website at the link http://pnbgilts.com/data/governence/1409222609.pdf

Contracts and Arrangements with Related Parties

All the contracts/arrangements/transactions entered by the company are in ordinary course of business and at arm’s length (except those given in form AOC-2 at Annexure C). Further during the year, the Company had not entered into any contract/arrangement/transaction with related parties, which could be considered material in accordance with the Company’s Policy/Standard Operating Procedures (SOP) on Related Party Transactions. The said Policy/SOP can be accessed at the Company’s website at the link http://pnbgilts.com/data/governence/1461912704.pdf.

Necessary disclosure in prescribed form AOC-2 is annexed at Annexure C.

Subsidiaries

The Company, being a RBI regulated Primary Dealer, is prohibited to form any subsidiary. As such, the Company has not formulated any policy for determining ‘material’ subsidiaries under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Further, since the Company is not having any subsidiary or associate or joint venture, it is not required to consolidate the financial statements in terms of Section 129 of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014. However, the financial statements of the Company for FY 2016-17 had already been considered by its parent bank i.e. Punjab National Bank for consolidation.

Directors’ Responsibility Statement

Pursuant to the requirements of Section 134(3)(c) of the Companies Act, 2013, your Directors confirm that:

(a) in the preparation of the annual accounts for the year ended March 31, 2017, the applicable accounting standards read with the requirements set out under the Schedule III to Companies Act, 2013, have been followed and there are no material departures from the same;

(b) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2017 and of the profit and loss of the Company for the year ended on that date;

(c) the Directors had taken proper and sufficient care 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;

(d) the Directors had prepared the annual accounts on a going concern basis;

(e) the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Human Resource Management

Your Company treats its human resources as one of its most important assets. To ensure good human resource management in the Company, the Company focuses on all the aspects of employee lifecycle. During their tenure in the Company, employees are motivated through various skill development and volunteering programmes. Recreational programmes are also conducted on regular basis so as to create stress-free environment. All the while, the Company also creates effective dialogues through various communication channels like face to face interactions so as to ensure that feedback reach the relevant teams. In house meetings and training sessions are also arranged to engage and develop the employees and to gather ideas around innovation.

The information required to be disclosed under Section 197(12) and Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided at Annexure D.

The information required to be disclosed under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 be treated as NIL as there was no employee, whether employed throughout the year 2016-17 or part thereof, who was in receipt of remuneration beyond the limits laid down in above said Rule. No employee is related to any Director of the Company.

During the year 2016-17, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Particulars of Loans given, investment made, guarantees given and securities provided

The information required to be disclosed under Section 134(3)(g) of the Companies Act, 2013 may be treated as ‘Nil’, as the Company is exempted under Section 186(11) of the Companies Act, 2013.

Extract of the Annual Return

Extract of Annual Return of the Company is annexed herewith as Annexure E to this Report.

Deposits

During the year ended March 31, 2017, the Company has not accepted any deposits from the public within the meaning of the provisions of the Non- Banking Financial Companies (Reserve Bank) Directions, 1977 and RBI’s notification no. DFC.118DG/(SPT)-98 dated January 31, 1998.

Risk Management

In terms of RBI guidelines for NBFCs, a Risk Management Committee, constituted at management level, has been entrusted with the responsibility by the Board in laying down procedures for risk assessment and minimization. The Committee also reviews these procedures periodically to ensure that executive management is implementing and controlling the risks through means of a properly defined risk framework.

The Audit Committee, on periodic basis, oversees all the risks that a company faces such as strategic, financial, market, liquidity, security, property, IT, legal, regulatory and other identified risks alongwith the implementation of risk management policy. There is an adequate risk management infrastructure in place capable of addressing the possible risks.

Risk Management Policy is reviewed annually by the Audit Committee and on the basis of the Committee’s recommendation, the Board approves the same.

Significant and material orders

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company’s operations in future.

Issue of Shares

There was no issue of shares during the year neither with differential rights as to dividend, voting or otherwise nor to employees of the company.

Management Discussion and Analysis

Management Discussion and Analysis comprising an overview of the financial results, operations/performance and future aspects form part of this Annual Report.

4. AUDITORS, INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Statutory Auditor

The Comptroller and Auditor General of India had appointed M/s Kapoor Tandon & Co., Chartered Accountants (Firm Reg. No. 000952C) as the Statutory Auditor of the Company for the financial year ended March 31, 2017. The report of the auditor is self-explanatory and do not call for any further comments. Pursuant to the provisions of Section 143(12) of the Companies Act, 2013, the Statutory Auditor of the Company has not reported any incident of fraud during the FY 2016-17. The Auditors’ Report does not contain any qualification, reservation or adverse remark.

Secretarial Auditor

The Board had appointed M/s Pranav Kumar & Associates, Company Secretaries, to conduct the Secretarial Audit for the financial year 2016-17. The Secretarial Audit Report for the financial year ended March 31, 2017 is annexed as Annexure F to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Internal control systems and their adequacy

The Company considers the internal control systems to be a very significant part of its Corporate Governance practices. Your Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company’s policies, the safeguarding of its assets, prevention and detection of frauds etc. The Company’s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. As a part of this control system, your Board appoints Internal Auditor and other auditors as well. Accordingly, these internal controls are routinely tested and certified by the auditors. For the year 2016-17, the Board appointed M/s Lodha & Co. as the Internal Auditor of the Company. The scope of Internal Audit included audit of treasury transactions on a monthly basis and reporting to the Audit Committee of the Board that the company has operated within the limits of various risk parameters laid down by the Board, Reserve Bank of India and other statutory authorities. Besides, they said firm also audited and reviewed the related party transactions on monthly basis and key business processes, including IT systems of the Company on quarterly basis. All the reports of the Internal Auditors were submitted to the Audit Committee. Timeliness of submission of all the periodic statutory returns/forms etc. to regulatory bodies was also checked by the Auditor. The Audit Committee reviews adequacy and effectiveness of the Company’s internal control environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Company’s risk management policies and systems.

5. DETAILS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The Company is a Primary Dealer as defined and regulated by the Reserve Bank of India and is not a manufacturing company, hence the particulars required to be disclosed with respect to conservation of energy and technology absorption in terms of Section 134(3)(m) of the Companies Act, 2013 and the Rules made there under are not applicable/ Nil.

However, every endeavor is made to ensure optimal use of energy, avoid wastages and conserve energy as far as possible. Some of these measures include switching off lights and computer systems when not in use, creating awareness among employees about the necessity of energy conservation etc. Your Company has installed the integrated treasury management software and RBI’s Negotiated Dealing System with the help of The Institute for Development and Research in Banking Technology (IDRBT) and reputed IT companies. The Company recognizes the growing importance of Information Technology in the emerging business environment. The Company has also implemented Business Continuity Plan (BCP) and Disaster Recovery Plan (DRP) with the help of IDRBT (consultants for implementation of BCP and DRP) to identify and reduce risk exposures and proactively manage any contingencies.

Your Company has neither used nor earned any foreign exchange during the year under review. Acknowledgements

Your Directors thank the Government of India, Reserve Bank of India, Securities and Exchange Board of India, National Stock Exchange of India Ltd., BSE Ltd., Parent Bank, Commercial Banks, Cooperative & Regional Rural Banks, Financial Institutions, PF Trusts, Public Sector Undertakings, Private Sector Corporate Bodies and other valued clients for their whole-hearted support. We acknowledge the sincere and dedicated efforts put in by the employees of the Company at all levels.

On behalf of Board of Directors

Date : July 3, 2017 (Sunil Mehta)

Place: New Delhi Chairman

DIN: 07430460


Mar 31, 2015

Dear Members,

The Directors are pleased to present the Nineteenth Annual Report together with the Company's audited financial statements of the company for the financial year ended March 31,2015.

1. RESULTS OF OUR OPERATIONS AND STATE OF AFFAIRS

The Company's financial performance, for the year ended March 31,2015 is summarized below:

(Rs. in lacs)

For the year For the year ended ended 31.3.2015 31.3.2014

Total Income 41001.18 34626.38

Total Expenditure 27611.92 25556.06

Profit/(loss) Before Tax 13389.26 9070.32

Less : Provision for Income Tax 4427.85 2932.13 (including deferred tax)

Profit /(loss) After Tax 8961.41 6138.19

Add: Balance in Statement of Profit and 10103.02 8271.51 Loss brought forward

Less : Adjustment for depreciation for 24.95 - Fixed Assets as per Schedule II of the Companies Act, 2013

Amount available for Appropriation 19039.48 14409.70

Proposed Appropriations

Transfer to Statutory Reserve 1792.28 1227.64

General Reserve - -

Capital Reserve 1072.52 1183.62

Amount spent on CSR activities 134.71 -

Proposed Dividend 2700.15 1620.09

Dividend Distribution Tax 552.85 275.33

Balance carried forward 12786.97 10103.02

During FY 2014-15, your Company fulfilled all its obligations as a Primary Dealer in both primary and secondary market. With regard to Treasury Bills commitment, the Company exceeded the stipulated success ratio of 40 per cent, achieving 42.92 per cent and 49.60 per cent in H1 and H2 respectively. In G-sec category, Company fulfilled the underwriting commitments, thereby supporting the government borrowing program. Company delivered good performance during the year by astutely deriving advantage from volatile G-sec market condition and judicious deployment of funds in high yielding assets. The total Profit Before Tax for FY 2014-15 stands at Rs. 13389.26 lacs as against Rs. 9070.32 lacs in FY 2013-14. During the year, the net revenue from operations of your Company increased by 45.07 per cent, from Rs. 9990.01 lacs to Rs. 14492.48 lacs. Profit After Tax stood at Rs. 8961.41 lacs vis-a-vis Rs. 6138.19 lacs in the previous fiscal, registering a growth of 45.99 percent.

The profitability was boosted by trading performance and judiciously taking advantage of arbitrage opportunity by the Company. During FY 2014-15, Company posted trading income of Rs. 7585.27 lacs as against Rs. 3140.78 lacs in last fiscal i.e. registered growth of 141.51 per cent. The Government Securities yields rallied sharply due to sharp fall in crude prices, moderation in inflation, ultra-accommodative monetary easing in the euro zone and Japan, receding fears of imminent normalization of US monetary policy and strong Fll demand for Government Securities. Rate cuts by Reserve Bank of India (RBI) in two tranches by 25 basis points each also aided the government bonds market and the yields fell further. Amid these factors the yield on 10 year benchmark paper closed the year at 7.74 per cent as against 8.80 per cent as on March 31,2014.

No material changes and commitments have occurred after the close of the year till the date of this report, which affect the financial position of the Company.

Capital Adequacy

Capital adequacy ratio as on March 31, 2015 stood at 65.07 per cent as against the RBI stipulation of 15 per cent.

Dividend

Your Board has recommended a final dividend of Rs. 1.50 (i.e. 15 per cent) per equity share (last year Rs. 0.90 per equity share) for the financial year ended March 31,2015, subject to approval in the ensuing Annual General Meeting. The total outflow on account of said dividend shall be Rs. 3253 lacs (including Dividend Distribution Tax of Rs. 552.85 lacs).

Transfer to Reserves

Your Company proposes to transfer Rs. 1792.28 lacs in Statutory Reserve as required under the provisions of Section 45-IC of the Reserve Bank of India Act, 1934. Rs. 1072.52 lacs is proposed to be transferred in Capital Reserve in terms of RBI guidelines for Primary Dealers. Further, in terms of the first proviso to Section 123(1) of the Companies Act, 2013, the Company proposes not to transfer any sum in General Reserve.

2. CORPORATE GOVERNANCE

Corporate Governance for your Company means achieving high level of accountability, efficiency, responsibility and fairness in all areas of operations. Our workforce is committed towards the protection of the interest of the stakeholders including shareholders, creditors, investors, customers, employees, etc. Our policies consistently undergo improvements keeping in mind our goal i.e. maximization of value of all the stakeholders.

We comply with the SEBI and RBI guidelines on corporate governance. We have documented our internal code on Corporate Governance in compliance of SEBI and RBI guidelines. The Corporate Governance practices followed by the Company are given in the Annual Report. A certificate from M/s Kapoor Tandon & Co. (Firm Reg. No. 000952C), Statutory Auditor of the Company regarding compliance of conditions of Corporate Governance stipulated by Stock Exchanges is enclosed with the 'Report on Corporate Governance' forming part of the Board's Report.

Number of meetings of the Board

The Board met seven times during the financial year 2014-15 to review strategic, operational, technological and financial matters besides laying down policies and procedures for operational management of the Company. The details of such meetings are given in the 'Report on Corporate Governance' that forms part of this Annual Report.

Directors and Key Managerial Personnel

During the year 2014-15, the members in their Annual General Meeting held on August 30, 2014 approved the appointment of Dr. O. P. Chawla (DIN: 00026712), Dr. Kamal Gupta (DIN: 00038490), Sh. S. K. Soni (DIN: 00046856) and Sh. P. P. Pareek (DIN: 00615296) as Independent Directors for a term of five years with effect from August 30, 2014.

In the same Annual General Meeting, members also approved the appointment of Smt. Sunita Gupta (DIN: 06902258) as Whole-time Director with designation 'Executive Director and CFO' effective from June 26, 2014 to August 31,2017.

The members also approved reappointment of Sh. S. K. Dubey (DIN: 01770805) as Managing Director for a period from February 1,2014 to June 30, 2015. Further, on the recommendation of Nomination and Remuneration Committee, the Board in its meeting held on April 29,2015 re-appointed Sh. S.K. Dubey as Managing Director for a period effective from July 1,2015 to June 30, 2016, subject to the shareholders approval in the ensuing Annual General Meeting.

During the year, Sh. K. R. Kamath (DIN: 01715073), Non-Executive Director and Chairman, upon completion of his term as Chairman and Managing Director of Punjab National Bank, resigned from the Directorship and Chairmanship of the Company with effect from October 29, 2014. The Board appreciate and thank him for his vision, leadership and guidance, enabling your Company to reach another standard of excellence.

Sh. P. K. Mohapatra (DIN: 02660553), who was appointed as a Non-Executive Director in the Annual General Meeting held on August 30, 2014, also demitted office effective from March 24, 2015. The Board places on record its appreciation for the services rendered by him during his tenure in the Company.

During the year, on recommendation of Nomination and Remuneration Committee, the Board has appointed -

a. Sh. K. V. Brahmaji Rao (DIN: 06861202), Executive Director - Punjab National Bank as Additional (Non- Executive) Directorw.e.f. November 1,2014.

b. Sh. Gauri Shankar (DIN: 06764026), Managing Director & Chief Executive Officer - Punjab National Bank as Additional (Non-Executive) Directorw.e.f. March 25, 2015.

Further, in accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Smt. Sunita Gupta (DIN: 06902258) shall retire by rotation in the ensuing Annual General Meeting and is eligible for reappointment.

Performance Evaluation

The Company has devised a policy for performance evaluation of Board of its own performance, Independent Directors, Non-Independent/Executive Directors and Board level Committees etc. as required under the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The evaluation of all the Directors, the Board as a whole and its Committees was conducted based on the criteria and framework adopted by the Board. Copy of said policy, inter-alia, containing the process and criteria for evaluation is available at Company's website at the link http://pnbgilts.com/data/governence/1433237578.pdf.

Familiarization programme

The details of programme for familiarization of Independent Directors with the company, their roles, rights, responsibilities in the company, nature of industry in which the company operates, business model of the company and related matters are placed at Company's website at the link http://pnbgilts.com/data/governence/1433236985. pdf.

Quarterly updates on relevant statutory changes are also circulated to the Directors.

Policy on Directors' appointment and Remuneration etc.

The policies of the Company on Directors' appointment and Remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Sub-section (3) of Section 178 of the Companies Act, 2013 is appended as Annexure A to the Board's Report.

Declaration by Independent Directors

The Company has received declaration pursuant to Section 149(7) of the Companies Act, 2013 from each Independent Director confirming therein the criteria of Independence as prescribed both under the Companies Act, 2013 and Clause 49 of the Listing Agreement.

3. OTHER DISCLOSURES - Audit Committee

The Audit Committee comprises of the following members -

Name of Director Position

Dr. Kamal Gupta Chairman

Dr. O. P. Chawla Member

Sh. S. K. Soni Member

Sh. P. P. Pareek Member

Sh. P. K. Mohapatra1 Member

1 Resigned from the directorship of the company w.e.f. March 24, 2015.

All the recommendations made by the Audit Committee during the year were accepted by the Board. Corporate Social Responsibility (CSR) Committee

The CSR Committee was constituted by the Board before enactment of the Companies Act, 2013. After enactment, the Board in its first meeting held on April 26, 2014, reconstituted the CSR Committee.

The composition of the Committee is as under -

Name of Director Position

Sh. K. V. Brahmaji Rao1 Chairman

Dr. Kamal Gupta Member

Sh. S. K. Dubey Member

Sh. P. K. Mohapatra Member

1 Inducted as Chairman on November 1,2014. Till his induction, Dr. Kamal Gupta acted as Chairman and Sh. P. K. Mohapatra acted as member.

The CSR policy of the Company, duly recommended by the CSR Committee and approved by the Board, is available at our website at the link http://pnbgilts.com/data/governence/1433236913.pdf. The CSR activity of the Company is carried out as per the instructions of the Committee and Board. During the year, the Company has spent 2 per cent of its average net profits of the three immediately preceding financial years on CSR activity.

The annual report on our CSR for the financial year 2014-15 in the prescribed format is presented at Annexure B to the Board's Report.

Other details of above said and other Committees of the Board are given in the 'Report on Corporate Governance' forming part of the Board's Report.

Whistle Blower Policy (including Vigil Mechanism)

Your Company believes in conducting its affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. Your Company is committed to develop a culture where it is safe for all employees to raise concerns about any wrongful conduct.

The Board of Directors has approved a Whistle Blower Policy (including Vigil Mechanism), which provides a framework to promote a responsible and secure whistle blowing. It protects employees wishing to raise a concern about serious irregularities within the Company. The Audit Committee reviews the functioning of this mechanism. No employee / director has been denied access to the Audit Committee. The said policy may be accessed on the Company's website at the link http://pnbgilts.com/data/governence/1409222609.pdf

Contracts and Arrangements with Related Parties

All the contracts/ arrangements/transactions entered by the company are in ordinary course of business and generally at arm's length. Further during the year, the company had not entered into any contract/arrangement/ transaction with related parties, which could be considered material in accordance with the Company's Policy/ Standard Operating Procedures (SOP) on Related Party Transactions. The said Policy/SOP can be accessed at the Company's website at the link http://pnbgilts.com/data/shareholder/1417690793.pdf

Necessary disclosure in prescribed form AOC-2 is annexed at Annexure C.

Subsidiaries

The Company, being a RBI regulated Primary Dealer, is prohibited to form any subsidiary. As such, the Company has not formulated any policy for determining 'material' subsidiaries under Clause 49 of Listing Agreement.

Further, since the Company is not having any subsidiary or associate or joint venture, it is not required to consolidate the financial statements in terms of Section 129 of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014. However, the financial statements of the Company for FY 2014-15 had already been considered by its parent bank i.e. Punjab National Bank for consolidation.

Directors' Responsibility Statement

Pursuant to the requirements of Section 134(3)(c) of the Companies Act, 2013, your Directors confirm that:

(a) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards read with the requirements set out under the Schedule III to Companies Act, 2013, have been followed and there are no material departures from the same;

(b) the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31,2015 and of the profit and loss of the company for the year ended on that date;

(c) the Directors had taken proper and sufficient care 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;

(d) the Directors had prepared the annual accounts on a going concern basis;

(e) the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Human Resource Management

Your Company treats its human resources as one of its most important assets. To ensure good human resource management in the Company, the Company focuses on all the aspects of employee lifecycle. During their tenure in the Company, employees are motivated through various skill development and volunteering programmes. Recreational programmes are also conducted on regular basis so as to create stress-free environment. All the while, the Company also creates effective dialogues through various communication channels like face to face interactions so as to ensure that feedback reach the relevant teams. In house meetings and training sessions are also arranged to engage and develop the employees and to gather ideas around innovation.

The information required to be disclosed under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2015 be treated as NIL as none of the employees of the Company draws remuneration in excess of Rs. 5 lacs p.m. No employee is related to any Director of the Company.

The information required to be disclosed under Section 197(12) and Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2015 is provided at Annexure D.

During the year 2014-15, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Particulars of Loans given, investment made, guarantees given and securities provided

The information required to be disclosed under Section 134(3)(g) of the Companies Act, 2013 may be treated as 'Nil', as the Company is exempted under Section 186(11) of the Companies Act, 2013.

Extract of the Annual Return

Extract of Annual Return of the Company is annexed herewith as Annexure E to this Report.

Deposits

During the year ended March 31,2015, the Company has not accepted any deposits from the public within the meaning of the provisions of the Non- Banking Financial Companies (Reserve Bank) Directions, 1977 and RBI's notification no. DFC.118DG/(SPT)-98dated January31, 1998.

Risk Management

In terms of RBI guidelines for NBFCs, a Risk Management Committee, constituted at management level, has been entrusted with the responsibility by the Board in laying down procedures for risk assessment and minimization. The Committee also reviews these procedures periodically to ensure that executive management is implementing and controlling the risks through means of a properly defined risk framework.

The Audit Committee, on periodic basis, oversees all the risks that a company faces such as strategic, financial, market, liquidity, security, property, IT, legal, regulatory and other identified risks alongwith the implementation of risk management policy. There is an adequate risk management infrastructure in place capable of addressing the possible risks.

Risk Management Policy is reviewed annually by the Audit Committee and on the basis of the Committee's recommendation, the Board approves the same.

Significant and material orders

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future.

Issue of Shares

There was no issue of shares during the year neither with differential rights as to dividend, voting or otherwise nor to employees of the company.

Management Discussion and Analysis

Management Discussion and Analysis comprising an overview of the financial results, operations/performance and future aspects form part of this Annual Report.

4. AUDITORS, INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Statutory Auditor

The Comptroller and Auditor General of India had appointed M/s Kapoor Tandon & Co., Chartered Accountants (Firm Reg. No. 000952C) as the Statutory Auditor of the Company for the financial year ended March 31,2015. The report of the auditor is self-explanatory and do not call for any further comments. The Auditors' Report does not contain any qualification, reservation or adverse remark.

Secretarial Auditor

The Board had appointed M/s Pranav Kumar & Associates, Company Secretaries, to conduct the Secretarial Audit for the financial year 2014-15. The Secretarial Audit Report for the financial year ended March 31, 2015 is annexed as Annexure F to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Internal control systems and their adequacy

The Company considers the internal control systems to be a very significant part of its Corporate Governance practices. Your Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies, the safeguarding of its assets, prevention and detection of frauds etc. As a part of this control system, your Board appoints Internal Auditor as well. For the year 2014-15, the Board appointed M/s Ernst & Young LLP as the Internal Auditor of the Company. The scope of Internal Audit included audit of treasury transactions on a monthly basis and reporting to the Audit Committee of the Board that the company has operated within the limits of various risk parameters laid down by the Board, Reserve Bank of India and other statutory authorities. Besides, the said firm also audited and reviewed the related party transactions on monthly basis and key business processes, including IT systems of the Company on quarterly basis. All the reports of the Internal Auditors were submitted to the Audit Committee.

5. DETAILS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

a) Part A pertaining to the conservation of energy is not applicable to the Company.

With regard to Part B pertaining to technology absorption, the Company has installed the integrated treasury management software and RBI's Negotiated Dealing System with the help of The Institute for Development and Research in Banking Technology (IDRBT) and reputed IT companies. The Company recognizes the growing importance of Information Technology in the emerging business environment. The Company has also implemented Business Continuity Plan (BCP) and Disaster Recovery Plan (DRP) with the help of IDRBT (consultants for implementation of BCP and DRP) to identify and reduce risk exposures and proactively manage any contingencies.

b) Foreign Exchange earnings and outgo:

The Company has neither used nor earned any foreign exchange during the year under review.

Acknowledgements

Your Directors thank the Government of India, Reserve Bank of India, Securities and Exchange Board of India, National Stock Exchange of India Ltd., BSE Ltd., Parent Bank, Commercial Banks, Cooperative & Regional Rural Banks, Financial Institutions, PF Trusts, Public Sector Undertakings, Private Sector Corporate Bodies and other valued clients for their whole-hearted support. We acknowledge the sincere and dedicated efforts put in by the employees of the Company at all levels.

On behalf of Board of Directors

Date : June 27, 2015 Place: New Delhi (Gauri Shankar) Chairman DIN:06764026


Mar 31, 2014

Dear Members,

The Directors have pleasure in presenting the Eighteenth Annual Report together with the audited financial statements of the Company for the year ended March 31, 2014.

1. FINANCIAL RESULTS

The financial results for the year ended March 31, 2014 along with comparative figures for the previous year are given below:

(Rs. in lacs) For the year For the year ended 31.3.2014 ended 31.3.2013

Total Income 34626.38 28865.00 Total Expenditure 25556.11 19988.47 Profit/(loss) Before Tax 9070.32 8876.53 Less : Provision for Income Tax (including deferred tax) 2932.13 2751.97 Profit /(loss) After Tax 6138.19 6124.56 Add: Balance in Profit & Loss Account brought forward 8271.51 6057.48 Amount available for Appropriation 14409.70 12182.04 Proposed Appropriations Transfer to Statutory Reserve 1227.64 1224.92 General Reserve - - Capital Reserve 1183.62 1106.09 Proposed Dividend 1620.09 1350.08 Dividend Distribution Tax 275.33 229.44 Balance carried forward 10103.02 8271.51

During FY 2013-14, Company fulfilled all its obligations as a Primary Dealer in both primary and secondary market. With regard to Treasury Bills commitment, Company exceeded the stipulated success ratio of 40 per cent, achieving 40.17 per cent and 46.57 per cent in H1 and H2 respectively. In G-sec category, Company fulfilled the underwriting commitments, thereby supporting the government borrowing program. Company delivered good performance during the year by astutely deriving advantage from volatile G-sec market condition and judicious deployment of funds in high yielding assets. The total Profit Before Tax for FY 2013-14 stands at Rs. 9070.32 lacs as against Rs. 8876.53 lacs in FY 2012-13.

The profitability was boosted by trading performance and judiciously taking advantage of arbitrage opportunity by the Company. During FY 2013-14, Company posted trading income of Rs. 3140.78 lacs under extreme volatility in the bond market. The G-Sec Yields rose due to surging headline inflation, falling domestic currency, apprehensions on U.S stimulus tapering and spike in short term borrowing rates. The commencement of term repo auctions served to infuse adequate liquidity into the market. While short term rates remained under continuous upward pressure due to tight liquidity conditions and hike in policy rates, long term yields rose due to heavy supply over the year. Amid these factors, the yield on 10-yr benchmark paper closed the year at 8.80 per cent after touching a high and low of 9.46 per cent and 7.09 per cent respectively as against 7.95 per cent as on March 31, 2013.

2. CAPITAL ADEQUACY

Capital adequacy ratio as on March 31, 2014 stood at 49.14 per cent as against the RBI stipulation of 15 per cent.

3. BONUS ISSUE

During the year 2013-14, your Board announced a Bonus Issue in the ratio of 1:3 i.e. 1 (one) Bonus Equity Share of Rs. 10/- for every 3 (three) fully paid-up Equity Shares of Rs. 10/- each held. As a result, the paid-up equity capital of the Company increased from Rs. 13500.76 lacs to Rs. 18001.01 lacs.

4. DIVIDEND

Your Board has recommended a final dividend of Rs. 0.90 per share (i.e. 9 per cent) for the financial year 2013-14 on enhanced equity and the proposed dividend amounts to Rs.1620.09 lacs. The total outflow on account of said dividend shall be Rs. 1895.42 lacs (including Dividend Distribution Tax).

5. OTHER MATTERS

5.1. Directors

During the year, the Board of Directors met five times to review strategic, operational, technological and financial matters besides laying down policies and procedures for operational management of the Company against the required minimum of 4 meetings in a year. The Audit Committee of the Board met four times; the Share Transfer Committee met twenty six times and Shareholders''/Investors'' Grievance Committee met twelve times.

Changes during the financial year 2013-14

The following changes took place in the Board of Directors of the Company during the financial year 2013-14:

* Sh P. K. Mohapatra (DIN : 02660553), General Manager - Punjab National Bank, has been appointed as an Additional Director by the Board in its meeting held on August 10, 2013.

* Sh. S. R. Bansal (DIN : 06471984), Executive Director - Punjab National Bank, has resigned from the Directorship of the Company w.e.f. October 4, 2013 on his elevation to the office of Chairman and Managing Director of Corporation Bank.

Retirement of Directors by Rotation

As per Article 99 of the Articles of Association of the Company, Sh. S. K. Dubey (DIN : 01770805) shall retire by rotation in the forthcoming Annual General Meeting and is eligible for reappointment.

Appointment of Independent Directors

In terms of Section 149 of the Companies Act, 2013, your Board proposes to fix tenure of Independent Directors [Dr. O. P. Chawla (DIN : 00026712), Dr. Kamal Gupta (DIN : 00038490), Sh. S. K. Soni (DIN : 00046856) and Sh. P. P. Pareek (DIN : 00615296)] for a period of five years w.e.f. the date of ensuing Annual General Meeting i.e. from August 30, 2014. All these directors have submitted the required declaration of independence as required under Section 149(7) of the Companies Act, 2013. In the opinion of Board, the Independent Directors, proposed to be appointed, fulfill the conditions specified under the Companies Act, 2013 and Rules made thereunder and they are independent of the management.

Corporate Governance

Corporate Governance for the Company means achieving high level of accountability, efficiency, responsibility and fairness in all areas of operations. Our workforce is committed towards the protection of the interest of the

stakeholders including shareholders, creditors, investors, customers, employees, etc. Our policies consistently undergo improvements keeping in mind our goal i.e. maximization of value of all the stakeholders. The Corporate Governance practices followed by the Company are given in the Annual Report. A certificate from M/s S. Mohan & Co. (Firm Registration No. 000608N), Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance stipulated by stock exchanges is enclosed with the ''Report on Corporate Governance''.

5.2. Directors'' Responsibility Statement

Pursuant to Section 217(2AA) of the Companies (Amendment) Act 2000, the Directors confirm that in the preparation of the annual accounts:

> The applicable accounting standards have been followed.

> Appropriate accounting policies have been selected and applied consistently. Judgements and estimates made are reasonable and prudent so as to give true and fair view of the state of affairs of the Company at the end of the financial year ended March 31, 2014 and the Profit and Loss Account for the year ended March 31, 2014.

> Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

> The annual accounts have been prepared on a going concern basis.

5.3. Audit, Internal Control Systems & their adequacy

M/s S. Mohan & Co., Chartered Accountants (Firm Registration No. 000608N), Delhi were appointed as the Statutory Auditors of the Company by the Comptroller and Auditor General of India for the financial year ended March 31, 2014. The report of the auditors is self-explanatory.

The Company considers Internal Audit to be a very significant part of its Corporate Governance practices. For the year 2013-14, the Board appointed M/s Ernst & Young LLP as the Internal Auditor of the Company. The scope of Internal Audit included audit of treasury transactions on a monthly basis and reporting to the Audit Committee of the Board that the Company has operated within the limits of various risk parameters laid down by the Board, Reserve Bank of India and other statutory authorities. Besides, the said firm also audited and reviewed related party transactions on monthly basis and key business processes, including IT systems of the Company, on quarterly basis. All the reports of the Internal Auditors were submitted to the Audit Committee and the monthly audit reports were submitted to Reserve Bank of India as well.

5.4. Human Resources

Total number of employees of the Company as on March 31, 2014 was 33 (including 4 employees on deputation from parent bank). The Company has maintained peaceful and harmonious relations with its employees.

The information required under Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees)(Amendment) Rules, 2011 be treated as NIL as none of the employees of the Company draws remuneration in excess of Rs. 500000/- p.m. No employee is related to any Director of the Company.

During the year 2013-14, the Company has not received any case relating to sexual harassment from its employees.

5.5. Particulars required to be furnished by the Companies (Disclosure of particulars in the report of the Board of Directors) Rules, 1988.

a) Part A pertaining to the conservation of energy is not applicable to the Company.

With regard to Part B pertaining to technology absorption, the Company has installed the integrated treasury management software and RBI''s Negotiated Dealing System with the help of IDRBT and reputed IT companies. The Company recognizes the growing importance of Information Technology in the emerging business environment. The Company has also implemented Business Continuity Plan (BCP) and Disaster Recovery Plan (DRP) with the help of IDRBT (consultants for implementation of BCP and DRP) to identify and reduce risk exposures and proactively manage any contingencies.

b) Foreign Exchange earnings and outgoing:

The Company has neither used nor earned any foreign exchange during the year under review.

5.6. Public Deposits

During the year ended March 31, 2014, the Company has not accepted any deposits from the public within the meaning of the provisions of the Non- Banking Financial Companies (Reserve Bank) Directions, 1977 and RBI''s notification no. DFC.118DG/(SPT)-98 dated January 31, 1998.

5.7. Acknowledgement

Your Directors thank Government of India, Reserve Bank of India, Securities and Exchange Board of India, National Stock Exchange of India Ltd., Bombay Stock Exchange Ltd., Parent Bank, Commercial Banks, Cooperative & Regional Rural Banks, Financial Institutions, PF Trusts, Public Sector Undertakings, Private Sector Corporate Bodies and other valued clients for their whole-hearted support. We acknowledge the sincere and dedicated efforts put in by employees of the Company at all levels.

On behalf of Board of Directors

Date : June 26, 2014 (K. R. Kamath) Place : New Delhi Chairman DIN : 01715073 Address : 20, Rajdoot Marg, Chanakyapuri, New Delhi - 110021


Mar 31, 2012

The Directors have pleasure in presenting the Sixteenth Annual Report together with the audited accounts of the company for the year ended March 31, 2012.

1. FINANCIAL RESULTS

The financial results for the year ended March 31, 2012 along with comparative figures for the previous year are given below:

(Rs. in lacs) For the year For the year ended 31.3.2012 ended 31.3.2011

Total Income 16529.71 10321.28

Total Expenditure 13565.58 5916.88

Profit/(loss) Before tax 2964.13 4404.40

Less : Provision for Income Tax (including deferred tax) 858.87 1346.55

Profit /(loss) After Tax 2105.26 3057.85

Add: Balance in Profit & Loss Account brought forward 5982.82 5503.14

Amount available for Appropriation 8088.08 8560.99

Proposed Appropriations

Transfer to Statutory Reserve 421.05 612.00

General Reserve - 77.00

Capital Reserve 40.46 -

Proposed Dividend 1350.08 1620.09

Dividend Distribution Tax 219.01 269.08

Balance carried forward 6057.48 5982.82

During the year, the company continued to fulfill all its obligations as a Primary dealer in both Primary and Secondary market. In Treasury Bills, the company exceeded the stipulated success ratio of 40 per cent. Due to significant rise in interest rates in general and short term rates in particular, the company's Net Interest Margin was affected. However, to minimize the risks in a rising interest rate environment, the company traded aggressively with the total secondary turnover increasing significantly to Rs. 208982 crore from Rs. 68745 crore in 2010-11. The total Profit Before Tax stood at Rs. 2964.13 lacs as against Rs. 4404.40 lacs in 2010-11.

This was achieved despite the challenging conditions of deteriorating fiscal position, inflationary pressures, tight liquidity and slowing economic growth. Reserve Bank of India hiked the reverse repo and repo rate by 175 basis points each. This put an upward pressure on short term rates significantly. Increase in gross market borrowings by 22.3 per cent over the budgeted amount and significant recourse to Treasury Bills and Cash Management Bills (CMBs) exerted further pressure on the liquidity conditions. The liquidity stress to some extent was handled by the Reserve Bank through CRR cut by 125 basis points and open market operations (OMO) including repos under the LAF, but the sentiments continued to remain cautious with the 10 yr yield moving up to as high as 8.97per cent as against 7.98per cent on March 31, 2011 before closing at 8.57per cent.

2. CAPITAL ADEQUACY

Capital adequacy ratio as on March 31, 2012 stood at 74.42 per cent as against the RBI stipulation of 15 per cent.

3. DIVIDEND

Your Board has recommended a final dividend of Re. 1.00 per share for the financial year 2011-12 amounting to Rs. 1350.08 lacs. The total outflow on account of said dividend shall be Rs. 1569.09 lacs (including Dividend Distribution Tax).

4. OTHER MATTERS

4.1. Directors

During the year, the Board of Directors met six times to review strategic, operational, technological and financial matters besides laying down policies and procedures for operational management of the company against the required minimum of 4 meetings in a year. The Audit Committee of the Board met four times; the Share Transfer Committee met twenty four times and Shareholders' / Investors' Grievance Committee met twelve times.

Changes during the financial year 2011-12

The following changes took place in the Board of Directors of the company during the financial year 2011-12 :

- Sh. A. S. Agarwal and Sh. M. S. Aftab resigned from the Directorship of the company w.e.f. May 20, 2011 and May 21, 2011 respectively.

- Sh. Rakesh Sethi, Executive Director - Punjab National bank has been appointed as an Additional Director by the Board in its meeting held on October 24, 2011.

- Sh P. K. Chhokra, General Manager - Punjab National Bank has been appointed as an Additional Director by the Board in its meeting held on January 28, 2012.

- Sh. D.V.S.S.V. Prasad resigned from Directorship and Managing Directorship on February 1, 2012 due to recall of his services by the parent bank, Punjab National Bank.

- Sh. S. K. Dubey, who is already holding Directorship of the company, has been appointed as Managing Director by the Board w.e.f. February 1, 2012. He retired from Punjab National Bank on December 31, 2011.

Retirement of Directors by Rotation

As per Article 99 of the Articles of Association of the company, Dr. Kamal Gupta and Sh. S. K. Soni shall retire by rotation in the forthcoming Annual General Meeting and are eligible for reappointment.

Corporate Governance

Corporate Governance for the company means achieving high level of accountability, efficiency, responsibility and fairness in all areas of operations. Our workforce is committed towards the protection of the interest of the stakeholders including shareholders, creditors, investors, customers, employees, etc. Our policies consistently undergo improvements keeping in mind our goal i.e. maximization of value of all the stakeholders. The Corporate Governance practices followed by the company are given in the Annual

Report. A certificate from M/s S. Mohan & Co., Statutory Auditors of the company regarding compliance of conditions of Corporate Governance stipulated by stock exchanges is enclosed with the 'Report on Corporate Governance'.

4.2. Directors' Responsibility Statement

Pursuant to Section 217(2AA) of the Companies (Amendment) Act 2000, the Directors confirm that in the preparation of the annual accounts:

- The applicable accounting standards have been followed.

- Appropriate accounting policies have been selected and applied consistently. Judgements and estimates made are reasonable and prudent so as to give true and fair view of the state of affairs of the company at the end of the financial year ended March 31, 2012 and the Profit and Loss Account for the year ended March 31, 2012.

- Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

- The annual accounts have been prepared on a going concern basis.

4.3. Audit, Internal Control Systems & their adequacy

M/s S. Mohan & Co., Chartered Accountants, Delhi were appointed as the Statutory Auditors of the company by the Comptroller & Auditor General of India for the financial year ended March 31, 2012. The report of the auditors is self-explanatory.

The company considers Internal Audit to be a very significant part of its Corporate Governance practices. For the year 2011-12, the Board appointed M/s Deloitte Haskins & Sells as the Internal Auditors of the company. The scope of Internal Audit included audit of treasury transactions on a monthly basis and reporting to the Audit Committee of the Board that the company has operated within the limits of various risk parameters laid down by the Board, Reserve Bank of India and other statutory authorities. Besides, the firm also audited and reviewed key business processes, including IT systems of the company on quarterly basis. All the reports of the Internal Auditors were submitted to the Audit Committee and the monthly audit reports were submitted to Reserve Bank of India as well.

4.4. Human Resources

Total number of employees of the company as on March 31, 2012 was 36 (including 4 employees on deputation from parent bank). The company has maintained peaceful and harmonious relations with its employees.

The information required under Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees)(Amendment) Rules, 2011 be treated as NIL as none of the employees of the company draws remuneration in excess of Rs. 500000/- p.m. No employee is related to any Director of the company.

4.5. Particulars required to be furnished by the Companies (Disclosure of particulars in the report of the Board of Directors) Rules, 1988.

a) Part A pertaining to the conservation of energy are not applicable to the company.

With regard to Part B pertaining to technology absorption, the company has installed the integrated treasury management software and RBI's Negotiated Dealing System with the help of IDRBT and reputed IT companies. The company recognizes the growing importance of Information Technology in the emerging business environment. The company has also implemented Business Continuity Plan (BCP) and Disaster

Recovery Plan (DRP) with the help of IDRBT (consultants for implementation of BCP and DRP) to identify and reduce risk exposures and proactively manage any contingencies.

b) Foreign Exchange earnings and outgoing:

The company has neither used nor earned any foreign exchange during the year under review.

4.6. Public Deposits

During the year ended March 31, 2012, the company has not accepted any deposits from the public within the meaning of the provisions of the Non- Banking Financial Companies (Reserve Bank) Directions, 1977 and RBI's notification no. DFC.118DG/(SPT)-98 dated 31st January 1998.

4.7. Acknowledgement

Your Directors thank Government of India, Reserve Bank of India, Securities and Exchange Board of India, National Stock Exchange Ltd., Bombay Stock Exchange Ltd., Parent Bank, Commercial, Cooperative & Regional Rural Banks, Financial Institutions, PF Trusts, Public Sector Undertakings and Private Sector Corporate Bodies and other valued clients for their whole-hearted support. We acknowledge the sincere and dedicated efforts put in by employees of the company at all levels.

On behalf of Board of Directors

Date : May 29, 2012 (K.R.Kamath)

Place : New Delhi Chairman


Mar 31, 2011

The Directors have pleasure in presenting the Fifteenth Annual Report together with the audited accounts of the company for the year ended March 31, 2011.

1. FINANCIAL RESULTS

The financial results for the year ended March 31, 2011 along with comparative figures for the previous year are given below:

(Rs. in lacs>

For the For the year year ended ended 31.3.2011 31.3.2010

Total Income 10321.28 10172.94

Total Expenditure 5916.88 4569.66

Profit/(loss) Before Tax 4404.40 5603.28

Less : Provision for Income Tax (including deferred tax) 1346.55 1932.83

Profit /(loss) After Tax 3057.85 3670.45

Add: Balance in Profit & Loss Account brought forward 5503.14 4147.21

Amount available for Appropriation 8560.99 7817.66

Proposed Appropriations

Transfer to Statutory Reserve 612.00 735.00

General Reserve 77.00 -

Proposed Dividend 1620.09 1350.08

Dividend Distribution Tax 269.08 229.44

Balance carried forward 5982.82 5503.14



The year 2010-11 was marked by the process of exit from the accommodative monetary policy stance with focus on containing inflation and inflationary expectations. As a result, during 2010-11, RBI raised the policy rates seven times, whereby the repo rate under LAF has cumulatively been increased by 175 basis points to 6.75 per cent and the reverse repo rate by 225 basis points to 5.75 per cent. The Cash Reserve Ratio (CRR) was, however, retained at 6 per cent. In tune with the tight monetary policy stance, the money market rates also hovered around the upper bound of the LAF corridor and the borrowing cost of the company accordingly went higher.

In the Govt securities market, monetary policy, inflation concerns and supply issues were the major factors influencing yields on govt securities. Initially, higher than budgeted collections from auctions of 3 G and BWA licences receded the concerns on fiscal deficit with yield on 10-year G-sec touching a low of 7.35 per cent in mid May from 7.85 per cent as on March 31, 2010. Improved sentiments were, however, offset by high inflation and tight monetary policy stance by RBI and the 10 -year yield rose to as high as 8.23 per cent in mid January before closing the year at 7.98 per cent as on March 31, 2011. Moreover, with consistently tight liquidity conditions prevailing almost throughout the year, the short term rates remained high resulting in a flat yield curve with spread between 1 year and 30 year security declining to 102 basis points from 300 basis points in the beginning of the year. Owing to tight liquidity conditions the borrowing cost remained high which hurt the net interest margin considerably.

Against the above backdrop of tight money market rates and firm G-sec yields, the Profit Before Tax of the company stood at Rs. 44.04 crore in 2010-11 as against Rs. 56.03 crore during FY 2009-10. While Profit After

Tax stands at Rs. 30.58 crore during FY 2010-11 as against Rs. 36.70 crore during FY 2009-10. The networth of the company stands at Rs. 568.92 crore as on March 31, 2011.

2. CAPITAL ADEQUACY

Capital adequacy ratio as on March 31, 2011 stood at 94.42 per cent as against the RBI stipulation of 15 per cent.

3. DIVIDEND

Your Board has recommended a final dividend of Rs. 1.20 per share for the financial year 2010-11 amounting to Rs. 1620.09 lakhs. The total outflow on account of said dividend shall be Rs. 1889.17 lakhs (including Dividend Distribution Tax).

4. OTHER MATTERS

4.1. Directors

During the year, the Board of Directors met five times to review strategic, operational, technological and financial matters besides laying down policies and procedures for operational management of the company against the required minimum of 4 meetings in a year. The Audit Committee of the Board met four times; the Share Transfer Committee met twenty four times and Shareholders’ / Investors’ Grievance Committee met twelve times.

Changes since last Annual General Meeting

The following changes took place in the Board of Directors of the company since last Annual General Meeting :

Sh. Nagesh Pydah, Executive Director - Punjab National Bank, had resigned from Directorship of the company on his elevation as Chairman and Managing Director - Oriental Bank of Commerce.

Retirement of Directors by Rotation

As per Article 99 of the Articles of Association of the company, Dr. O. P. Chawla & Sh. P. P. Pareek shall retire by rotation in the forthcoming Annual General Meeting and are eligible for reappointment.

Corporate Governance

Corporate Governance for the company means achieving high level of accountability, efficiency, responsibility and fairness in all areas of operations. Our workforce is committed towards the protection of the interest of the stakeholders including shareholders, creditors, investors, customers, employees, etc. Our policies consistently undergo improvements keeping in mind our goal i.e. maximization of value of all the stakeholders. The Corporate Governance practices followed by the company are given in the Annual Report. A certificate from M/s S. Mohan & Co., Statutory Auditors of the company regarding compliance of conditions of corporate governance stipulated by stock exchanges is enclosed with the ‘Report on Corporate Governance.

4.2. Directors’ Responsibility Statement

Pursuant to Section 217(2AA) of the Companies (Amendment) Act 2000, the Directors confirm that in the preparation of the annual accounts:

The applicable accounting standards have been followed.

- Appropriate accounting policies have been selected and applied consistently, judgements and estimates made are reasonable and prudent so as to give true and fair view of the state of affairs of the company at the end of the financial year ended March 31, 2011 and the profit and loss account for the year ended March 31, 2011.

- Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

- The annual accounts have been prepared on a going concern basis.

4.3. Audit, Internal Control Systems & their adequacy

M/s S. Mohan & Co., Chartered Accountants, Delhi were appointed as the Statutory Auditors of the company by the Comptroller & Auditor General of India for the financial year ended March 31, 2011. The report of the auditors is self-explanatory.

The company considers Internal Audit to be a very significant part of its corporate governance practices. For the year 2010-11, the Board appointed M/s Deloitte Haskins & Sells as the Internal Auditors of the company. The scope of Internal Audit included audit of treasury transactions on a monthly basis and reporting to the Audit Committee of the Board that the company has operated within the limits of various risk parameters laid down by the Board, Reserve Bank of India and other statutory authorities. Besides, they also audited and reviewed key business processes, including IT systems of the company, on quarterly basis. All the reports of the Internal Auditors were submitted to the Audit Committee and the monthly audit reports were submitted to Reserve Bank of India as well.

4.4. Human Resources

Total number of employees of the company as on March 31, 2011 was 36 (including 5 employees on deputation from parent bank). The company has maintained peaceful and harmonious relations with its employees.

The information required under Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) (Amendment) Rules, 2011 be treated as NIL as none of the employees of the company draws remuneration in excess of Rs 5,00,000 /- p.m. No employee is related to any Director of the company.

4.5. Particulars required to be furnished by the Companies (Disclosure of particulars in the report of the Board of Directors) Rules, 1988.

a) Part A pertaining to the conservation of energy are not applicable to the company.

With regard to Part B pertaining to technology absorption, the company has installed the integrated treasury management software and RBI’s Negotiated Dealing System with the help of IDRBT and reputed IT companies. The company recognizes the growing importance of Information Technology in the emerging business environment. The company has also implemented Business Continuity Plan (BCP) and Disaster Recovery Plan (DRP) with the help of IDRBT (consultants for implementation of BCP and DRP) to identify and reduce risk exposures and proactively manage any contingencies.

b) Foreign Exchange earnings and outgoing:

The company has neither used nor earned any foreign exchange during the year under review.

4.6. Public Deposits

During the year ended March 31, 2011, the company has not accepted any deposits from the public within the meaning of the provisions of the Non- Banking Financial Companies (Reserve Bank) Directions, 1977 and RBI’s notification no. DFC.118DG/(SPT)-98 dated 31st January 1998.

4.7. Acknowledgement

Your Directors thank Government of India, Reserve Bank of India, Securities and Exchange Board of India, National Stock Exchange Ltd., Bombay Stock Exchange Ltd., Punjab National Bank, Commercial, Cooperative & Regional Rural Banks, Financial Institutions, PF Trusts, Public Sector Undertakings and Private Sector Corporate Bodies and other valued clients for their whole-hearted support. We acknowledge the sincere and dedicated efforts put in by employees of the company at all levels.

On behalf of Board of Directors

(K.R.Kamath) Chairman

Date : May 11, 2011 Place : New Delhi


Mar 31, 2010

The Directors have pleasure in presenting the Fourteenth Annual Report together with the audited accounts of the company for the year ended March 31, 2010.

1. FINANCIAL RESULTS

The financial results for the year ended March 31, 2010 along with comparative figures for the previous year are given below:

(Rs. in lacs)

For the year For the year ended 31.3.2010 ended 31.3.2009

Total Income 10172.94 11246.56

Total Expenditure 4569.66 7434.39

Profit/(loss) Before Tax 5603.28 3812.17

Less : Provision for Income Tax (including deferred tax) 1932.83 1362.98

Profit /(loss) After Tax 3670.45 2449.19

Add: Balance in Profit & Loss Account brought forward 4147.21 3451.64

Amount available for Appropriation 7817.66 5900.83

Proposed Appropriations

Transfer to Statutory Reserve 735.00 490.00

General Reserve

Proposed Dividend 1350.08 1080.06

Dividend Distribution Tax 229.44 183.56

Balance carried forward 5503.14 4147.21

During FY 2009-10 yields on G-sec rose consistently indicating market concern over huge government borrowings and inflationary expectations. Nevertheless intermittent easing of yields was also witnessed on account of slow credit off take and easy liquidity conditions. During the year, trading remained highly skewed towards short and medium term papers. Yields firmed up considerably in the second quarter following announcement of revised projection of government borrowing at Rs. 451000 crore as against Rs. 362000 crore estimated in the interim budget. Yields charted up as unabated rise in food inflation and improvement in domestic economic condition weighed on market sentiment. Yields rose traded with a hardening bias during the fourth quarter, as players remained wary of government borrowings for FY 2010-11. However, yields retreated from nearly 18-months high at the close of the year on announcement of lower than expected borrowing quantum for the first half of FY 2010-11. Yield on 10-year benchmark paper firmed up by 84 basis points to close the year at 7.85 per cent as against 7.01 per cent as on March 31, 2009. The company, despite this volatility, made a profit before tax of Rs. 5603.28 lacs during the year ended March 31, 2010 due to prudent funds management and reorientation of trading strategies.

2. CAPITAL ADEQUACY

Capital adequacy ratio as on March 31, 2010 stood at 41.59 per cent as against the RBI stipulation of 15 per cent.

3. DIVIDEND

The Board has recommended a final dividend of Re. 1 per share for the FY 2009-10 amounting to Rs. 1350.08 lacs. The total outflow on account of said dividend shall be Rs. 1579.52 lacs (including Dividend Distribution Tax).

4. OTHER MATTERS

4.1. Directors

During the year, the Board of Directors met seven times to review strategic, operational, technological and financial matters besides laying down policies and procedures for operational management of the company against the required minimum of 4 meetings in a year. The Audit Committee of the Board met five times; the Share Transfer and Issue of Duplicate Shares Certificates Committee met twenty four times and Shareholders / Investors Grievance Committee met twelve times.

Changes since last Annual General Meeting

The following changes took place in the Board of Directors of the company since the date of last Annual General Meeting :

Sh. K. R. Kamath, Chairman and Managing Director- Punjab National Bank, has been appointed as an Additional Director and Chairman by the Board in its meeting held on January 21, 2010.

Sh. S. Ranganathan, General Manager - Punjab National Bank, had resigned from Directorship and Managing Directorship on April 3, 2010 due to recall of his services by the parent bank, Punjab National Bank.

Sh. D.V.S.S.V. Prasad, General Manager-Punjab National Bank, has been appointed as an Additional Director and Managing Director by the Board in its meeting held on May 3, 2010, in place of Sh. S. Ranganathan.

Retirement of Directors by Rotation

As per Article 99 of the Articles of Association of the company, Dr. Kamal Gupta and Sh. S. K. Soni shall retire by rotation in the forthcoming Annual General Meeting and are eligible for reappointment.

Corporate Governance

Corporate Governance for the company means achieving high level of accountability, efficiency, responsibility and fairness in all areas of operations. Our workforce is committed towards the protection of the interest of the stakeholders including shareholders, creditors, investors, customers, employees, etc. Our policies consistently undergo improvements keeping in mind our goal i.e. maximization of value of all the stakeholders. The Corporate Governance practices followed by the company are given in the Annual Report. A certificate from M/s Bansal R. Kumar and Associates, Statutory Auditors of the company regarding compliance of conditions of Corporate Governance stipulated by stock exchanges is enclosed with the ‘Report on Corporate Governance’.

4.2. Directors Responsibility Statement

Pursuant to Section 217(2AA) of the Companies (Amendment) Act 2000, the Directors confirm that in the preparation of the annual accounts:

The applicable accounting standards have been followed.

Appropriate accounting policies have been selected and applied consistently, judgements and estimates made are reasonable and prudent so as to give true and fair view of the state of affairs of the company at the end of the financial year ended March 31, 2010 and the profit and loss account for the year ended March 31, 2010.

Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

The annual accounts have been prepared on a going concern basis.

4.3. Audit, Internal Control Systems & their adequacy

M/s Bansal R. Kumar and Associates, Chartered Accountants, Delhi were appointed as the Statutory Auditors of the company by the Comptroller & Auditor General of India for the financial year ended March 31, 2010. The report of the auditors is self-explanatory.

The company considers Internal Audit to be a very significant part of its corporate governance practices. For the year 2009-10, the Board appointed M/s Ernst & Young Pvt. Ltd. as the Internal Auditors of the company. The scope of Internal Audit included audit of treasury transactions on a monthly basis and reporting to the Audit Committee of the Board that the company has operated within the limits of various risk parameters laid down by the Board, Reserve Bank of India and other statutory authorities. Besides, they also audited and reviewed key business processes, including IT systems of the company, on quarterly basis. All the reports of the Internal Auditors were submitted to the Audit Committee and the monthly audit reports were submitted to Reserve Bank of India as well.

4.4. Human Resources

Total number of employees of the company as on March 31, 2010 was 31 (including 7 employees on deputation from parent bank). The company has maintained peaceful and harmonious relations with its employees.

The information required under Section 217 of the Companies Act, 1956 read with the companies (Particulars of Employees)(Amendment) Rules, 2002 be treated as NIL as none of the employees of the company draws remuneration in excess of Rs 2,00,000/- p.m. No employee is related to any Director of the company.

4.5. Particulars required to be furnished by the Companies (Disclosure of particulars in the report of the Board of Directors) Rules, 1988.

a) Part A pertaining to the conservation of energy are not applicable to the company.

With regard to Part B pertaining to technology absorption, the company has installed the integrated treasury management software and RBIs Negotiated Dealing System with the help of IDRBT and reputed IT companies. The company recognizes the growing importance of Information Technology in the emerging business environment. The company has also implemented Business Continuity Plan (BCP) and Disaster Recovery Plan (DRP) with the help of IDRBT (consultants for implementation of BCP and DRP) to identify and reduce risk exposures and proactively manage any contingencies.

b) Foreign Exchange earnings and outgoing:

The company has neither used nor earned any foreign exchange during the year under review.

4.6. Public Deposits

During the year ended March 31, 2010, the company has not accepted any deposits from the public within the meaning of the provisions of the Non- Banking Financial Companies (Reserve Bank) Directions, 1977 and RBIs notification no. DFC.118DG/(SPT)-98 dated January 31, 1998.

4.7. Acknowledgement

Your Directors thank Government of India, Reserve Bank of India, Securities and Exchange Board of India, National Stock Exchange Ltd., Bombay Stock Exchange Ltd., Punjab National Bank, Commercial, Cooperative & Regional Rural Banks, Financial Institutions, PF Trusts, Public Sector Undertakings and Private Sector Corporate Bodies and other valued clients for their whole-hearted support. We acknowledge the sincere and dedicated efforts put in by employees of the company at all levels.

On behalf of Board of Directors

Date : June 8, 2010 (K. R. Kamath) Place : New Delhi Chairman

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