SIGNIFICANT ACCOUNTING POLICIES

1.1. Method of Accounting

The Company follows accrual system of accounting and the financial statements are brpared on historical cost basis, in accordance with generally accepted accounting principles and Reserve Bank of India guidelines as applicable to the Primary Dealers.

1.2. Sales / Purchases of Treasury Bills (including Cash Management Bills) and Government Dated Securities, as disclosed in Statement of Profit and Loss do not include Repo transactions in accordance with revised RBI guidelines.

1.3. Revenue Recognition

i) The difference between the acquisition cost and maturity value of Certificates of Deposit, Commercial Papers, Bills Re-discounted, Treasury Bills (including Cash Management Bills) and Zero Coupon Bonds is apportioned on time basis. The above is recognised as accrued income and included in the carrying cost of the securities.

ii) Interest accrued on Government Dated Securities, Fixed Deposits and Corporate Bonds and Debentures is recognised at its coupon rate and that of Floating Rate Bonds is recognised on the yield of instruments to which these are linked.

iii) Purchase and sale price of Fixed Income Securities is bifurcated into cost and accrued interest paid or realised. Accrued interest paid on purchase and received on sale is netted and reckoned as expense/income.

iv) Profit/loss on sale of securities is accounted on weighted average cost method and is recognised on settlement date. Profit on sale of securities is netted with loss on sale of securities.

v) Brokerage and front-end fee received on subscription of securities is deducted in arriving at the cost of relevant securities. Underwriting fee earned is reduced from the cost of securities devolved/allotted and the remaining amount is directly recognised as income.

vi) For continuing or long term duration activities (e.g. Mutual Fund Distribution), the fee is accrued proportionately as per performance (Proportionate Completion Method). The revenue is recognized only if there is no significant uncertainty regarding the amount of consideration.

vii) For Mutual Fund (MF) Investment, in case of Daily Dividend Reinvestment Plan the income (dividend) is accounted based on the dividend declaration by the Mutual Fund. In case of growth plan, the income is accounted daily on the basis of closing NAV declared by Mutual Fund.

1.4. Expenses Recognition

The brokerage paid in connection with acquisition of securities is added to the cost of acquisition and on sale of securities it is charged to Statement of Profit and Loss. Interest and other expenses are accounted on accrual basis.

1.5. Valuation of Inventories / Investment a. Inventories

i) All securities (except securities under HTM category classified as Non-Current Investment) in which the Company deals are regarded as Inventory (Stock-in-Trade) and grouped as hedged and non-hedged portfolio.

ii) The stock of Central Government Securities, Treasury Bills (including Cash Management Bills), State Development Loans and PSU/Corporate Bonds, Debentures and Equity Shares are valued at weighted average cost or market value, whichever is lower (except securities under HTM category as per RBI circular). Market Value is determined by the prices declared by Fixed Income Money Market and Derivatives Association of India (FIMMDA) as on March 31, 2015, except for Equity Shares. Market value of Equity Shares is determined by the closing rates provided by the stock exchanges as on March 31, 2015. For this purpose, the securities in each category are considered scrip-wise and the cost and market value aggregated for all securities in each category. Net diminution, if any, for each category of securities is provided for and charged to Statement of Profit and Loss. Net apbrciation, if any, is ignored. The diminution in one category of securities is not set off against apbrciation in another category.

iii) Certificates of Deposit, Commercial Papers, Bills Re-discounted and Zero Coupon Bonds held on the Balance Sheet date are valued at carrying cost.

iv) In case of units of Mutual Fund, valuation is done on the basis of closing NAV declared by the Mutual Fund.

v) In case of Hedging Contracts, the diminution/apbrciation of hedged assets will be netted with diminution/ apbrciation of hedging swaps and net diminution if any, is charged to Statement of Profit and Loss and net apbrciation if any, is ignored.

b. Non-Current Investments

The securities under HTM category shall be valued as per the guidelines issued by RBI from time to time, and important provisions are under:

• Securities classified under HTM category need not be Marked-to-Market and will be carried out at the value at which they were transferred to HTM portfolio.

• Transfer to/from HTM category shall be done at the acquisition cost/book value/market value on the date of transfer, whichever is the least, and the debrciation if any, on such transfer shall be fully provided for.

• Investments classified under HTM will be carried at acquisition cost, unless it is more than the face value, in which case the brmium should be amortized over the remaining period to maturity. The book value of the security should continue to be reduced to the extent of the amount amortized during the relevant accounting period.

• The profit on sale of securities, if any from HTM category shall first be taken to the Statement of Profit and Loss and thereafter be appropriated to the Capital Reserve Account (net of tax). Loss on sale shall be recognized in the Statement of Profit and Loss. The balance in the reserve account shall be utilized strictly as per the regulatory guidelines.

1.6 Accounting for Repo Transactions

In conformity with RBI guidelines, securities sold under Repo transactions are not excluded from stock-in-trade and the securities purchased under Reverse Repo are not included in the stock-in-trade. Contra heads are used to reflect the transfer of securities.

Repo seller continues to accrue coupon/ discount on securities as the case may be, even during the repo period while the repo buyer shall not accrue the same.

1.7 Interest Rate Swaps (IRS)

Assets and Liabilities in respect of notional principal amount of IRS are nullified. The related interest is recognized on accrual basis.

i) Trading Swaps

Trading Interest rate swaps outstanding at balance sheet date are Marked-to-Market and the resultant loss, if any, is recorded in Statement of Profit and Loss. Any other charges relating to Trading Interest Rate Swaps are charged to Statement of Profit and Loss.

ii) Hedge Swaps

Hedge Swaps are accounted for on accrual basis. A hedge swap designated to an asset/liability is carried at market value. The resulting Marked-to-Market loss/gain on swap is recorded as an adjustment to the market value of designated Asset/Liability. Gains or losses on the termination / redesignation of hedge swaps is recognized against the offsetting gain or loss recognized on the designated Asset or Liability.

On redesignation of a hedge swap from one item of asset/liability to another item of Asset/Liability, the Marked-to-Market profit/loss of the hedge swap on the day of redesignation is amortized over the shorter of the remaining life of the swap or the remaining life of the Asset/Liability.

1.8. Accounting for Future and Options Transactions

i. Initial Margin payable at the time of entering into Future Contract/sale of Option is adjusted against the deposits with the exchanges in the form of fixed deposits, cash deposits and securities.

ii. Transactions in Future Contracts are accounted as Purchases and Sales at the notional trade value of the contract. The open interest in futures as at the Balance Sheet date is netted by its notional value.

iii. The difference in the settlement price or exchange closing price of the brvious day and exchange closing price of the subsequent day, paid to or received from the exchange is treated as Marked-to-Market Margin. The balance in the Marked-to-Market Margin Account rebrsents the net amount paid or received on the basis of movement in the prices of open interest in Futures Contracts till the Balance Sheet date. Net debit balance in the Marked-to-Market Margin Account is charged off to revenue, whereas net credit balance is shown under Current Liabilities.

iv. Premium paid or received on purchase and sale of Options and the difference paid or received on exercise of Options is accounted as Purchases or Sales. In case of open interest in Options sold as on the Balance Sheet date, provision is made for the amount by which brmium brvailing on the Balance Sheet date exceeds the brmium received for those Options. The excess of brmium received over the brmium brvailing on the Balance Sheet date is not recognized. Similarly, in case of Options bought, provision is made for the amount by which the brmium paid for the Option exceeds the brmium brvailing on the Balance Sheet date and the excess of brmium brvailing on the Balance Sheet date over the brmium paid is ignored. In case of multiple open positions, provision is made or excess brmiums are ignored after netting off the balance in buy as well as sell positions.

1.9. Investment

Long Term Investment in debt is valued at carrying cost. However, provision for diminution is made, when there is a decline other than temporary in the value of long-term investment.

1.10. Deferred Tax

Deferred tax is recognized in accordance with the provisions of Accounting Standard 22 issued by Institute of Chartered Accountants of India on "Accounting for Taxes on Income".

1.11 Debrciation

Debrciation on Fixed Assets is charged as per the useful life brscribed in Schedule II of the Companies Act 2013 on Written Down Value (WDV) basis. Residual value of Land & Building and Vehicles is taken as 5 percent of the original cost, whereas for assets other than those specified above the residual value is taken as Re.1/-.

1.12 Preliminary Expenses

Preliminary expenses are written off in the year in which these are incurred.

1.13 Share Issue Expenses

Share issue expenditure is charged to Statement of Profit and Loss in the year of occurrence.

1.14 Tax on Dividend

Dividend Distribution Tax payable on dividend declared in terms of Section 115-0 of the Income Tax Act, 1961, is accounted for in the year to which the dividend relates.

1.15 Retirement Benefits - Provident Fund, Gratuity & Leave Liability (As per Accounting Standard 15)

i. Gratuity contribution made under the Employee Group Gratuity cum life insurance scheme of LIC is charged to revenue.

ii. Leave Liability is accounted for on actuarial valuation carried at year-end.

iii. Contribution to recognised provident fund is charged to revenue.

1.16 Operating Cycle

As the Company is a trader in Government and Fixed Income Securities, the Company buys and sells securities depending upon the market condition. There is no normal fixed period for sale of stock. However, for the purpose of brparing Balance Sheet and Statement of Profit and Loss (as per the revised guidelines), the Company assumes, one year is the operating cycle period.

1.17 Fixed Assets

Tangible Fixed Assets are stated at their cost of acquisition or construction alongwith the other directly related costs incurred in acquiring the tangible fixed assets and making it ready for its intended use less debrciation and impairment. Intangible assets are amortized over a useful life of the asset. The useful life of intangible asset has been taken as 3 years. Intangible assets are stated at cost of acquisition or construction alongwith the other directly related costs incurred in acquiring the intangible fixed assets less debrciation and impairment.

1.18 Impairment of Assets

The management periodically assesses whether there is any indication that an asset may be impaired. An impairment loss is recognized wherever the carrying value of the asset exceeds its recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or debrciation) had no impairment loss been recognized for the asset in prior years.

NOTE - 2.1 RELATED PARTY INFORMATION

As per Para 9 of the Accounting Standard 18 on Related Party Disclosures, the Company, being a state controlled enterprise, is not required to make disclosures of related party relationships with other state controlled enterprises and transactions with such enterprises. Other information as per the Standard is as under:

• The overall supervision and control of the company vests with the Board of Directors. The Managing Director and Executive Director and CFO of the company, appointed by the Board of Directors, are working full time with the company.

Out of the total Eight Directors on the Board of the company as at March 31, 2015, four are independent Directors. Only the Non-Executive Directors are being paid sitting fees for the Board / Committee Meetings. The sitting fees for attending the Board Meeting is Rs. 10000/- per meeting and for Committee Meeting sitting fee payable is Rs. 5000/- per meeting. During the year the Company has paid a sum of Rs. 11.52 lacs towards sitting fee, including service tax (Prev. Year Rs. 8.96 lacs).

Other information in this regard is available in Corporate Governance Report and Board's report.

NOTE – 2.2 – REAL ESTATE EXPOSURES

Exposure to Real Estate Sector(direct and indirect) is NIL both in current and Prev. Year(as it is not applicable to the company)

NOTE - 2.3 - OTHERS_

• Tax deducted at source on the interest, miscellaneous income and commission and fees during the financial year 2014-15, amounted to X322.42 lacs (Prev. Year X287.23 lacs).

• The Company does not have any foreign currency transactions whether by way of imports, exports or any expenditure. Therefore, no expenditure has been incurred in foreign currency in the current year as well as in the Prev. Year.

• Being a Level-1 enterprise, all the accounting standards are applicable to the company. However on the basis of operations carried out by the Company, AS-7, AS-11, AS-12, AS-14, AS-16, AS-19, AS-23, AS-24, AS-25 and AS-27 do not apply.

• There are no impairment losses. Therefore, the company has not accounted for any impairment losses.

• No expenditure on research and development has been incurred by the company.

• Provisions to the extent known and reasonable have been provided in the books of accounts.

• There are no contingent liabilities.

• There are no trade receivables as on March 31, 2015and also as on March 31, 2014.

• Figures for the Prev. Year have been regrouped and rearranged wherever considered necessary, in order to make them comparable with those of the current period.

 (Gauri Shankar) Director DIN:06764026

(S.K. Dubey) Managing Director DIN:01770805

 (K.V. Brahmaji Rao) Director DIN:06861202

(O.P. Chawla) Director DIN:00026712

(S.K. Soni) Director DIN:00046856

(P.P. Pareek) Director DIN:00615296

(Monika Kochar) Company Secretary Membership No.F6514

 (Sunita Gupta) Executive Director & CFO DIN:06902258

In terms of our report of even date

For Kapoor Tandon & Co.

Chartered Accountants

 (Himanshu Kapoor)

Partner

Membership No.078180 FRN:000952C.

Date: April 29, 2015

Place : New Delhi