ctiqiEl.:(l cq fetfZl f.:rftr ~•....--.--.EMPLOYEES'PROVIDENT FUND 0 GANISATION

. NEW I>ELHI

·96th Meeting of he

FINANCE AND INVE TMENTCOMMITTE

[CENTRAL BOARD OF TRUSTEES, EIvIPLOYE ' PROVIDEl'o.'T FUND]

VENUE:

ON .08/10/2009 at 11.00

onference Hall,rd, Floor, EPFO

. Headquarters,Bhavi hya Nidbi Bhawan,14, B ikaiji Cama Place,

NewDellti~ 110066.

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EMPLOYEES' PROVIDENT FUND CRGANISATION

II

A~ENDABOOK

96thMeeting Finance & Investn nt Committee

Date: 08.10.2009 INDEX OF ITEMS time: 11.00 AM

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ItemNo.

1.

Agenda PageNo~

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Confirmation of the Minutes d ~ Meeting of the Finance"0 and In~ment Cpmmittee held on 18.0a:~9 at EPFO :.1 -r ! tiHeadquarter New Delhi "

(, 2. Statement on the· actions. taken on the reccmmendationsof the 95th Finance &·Inv~nt Committee

('\3. Half Yearly "Reyievvof the performance d the portfolio

.managers for the ~I Year ending as on30.09.2009.The item willbe placed on .thetable.

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4. Pattern of Investment notified by the Ministl Y of Financeon 14.08.2008. "

5. Relaxation in investment Guidelines for in estmenis inGovernment Guaranteed Ins1ruments.

( ) 6. Any other item with the permission of the Chai

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Item No.1: Confirmation of the Minutes of 95th ~eting of the Finance andInvestment Committee held on 18.08.2009 at EPFO HeadquarterNew Delhi I ..

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. Minutes of 95th Finance and lnvestment\Committee meeting held on18.08.2009 was circulated vide letter No.lnvest.1/1 ~95~,FICI2009I1s228 dated07.09.2009. No comments have been received on t~ minutes of the above saidmeeting. Copy of the minutes is' enclosed asAnnexure ~ (page No.3toft).·

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. Miout~ may be taken as confirmed ..'

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Draft minutes ,of the 95ffi Meeting of the· finance & Inve,strnentCommittee heldQnJt8.fls.Y, -'·.t '.' . "',;> \,"-'}.-::{/>

.. _ _ : _ _ ~: t. _,- ",: ," "'. ";;' ',"' -:. • ':' -~. , J:!: .. :-", .:. '. "... . .' '.. ' .>,,;. :

. 'The ?5tn meefingof' 'the. Findhce:;6r!d Investr'rlent.CoPrnlt!~~.:S~~~(gt:Board of Trustees, Employees' Provident fund was thetH-6tj~oo 'P_.~ 'orf!\ugust

18, 200r, in the Conference Room, 3rd fJoor,.E~F<?'1~2d ,2tns~~j.~~~,q~N:;;t,. . , .j~,< ',. j", ";. -...., ':"._~,": ""," " .,' -u.• " . '; ... , ...' , . .-.... 1 , .• _ " .••. r. .....

J-~j~l~~§P(~;t~JdJ'i~t':,~:.)j .."'f~~b~(~.I{f.silbIG¥ees--\'~19r-esentative):3'~r't'i~n

r - .... .~.'~r1' -~~r1~f: .I,-4-.-+--D-r.-R--am-T-arneja Member, (Employers' Representoflve}

t- 5.. stmSootoshSaof ·1Menb~. I~~~Y~~;'~!~~;~~~V~I, .~y.tf.<,..•.-:J,~t

-i~6!:tt~hri:Sh8r5d'Pdtil--'~¥'·; ':';r~~mOer;1~~~~~1~~;(~~fB~~~'entative)"

.t.~~.~':~AO~~P~O:,~~~'~;~~V~~~J ~f:>b~,'~(:

Ilt. 7... Shri Ai:>hay!Cr.Singh

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.(b] Th.efallowing were' aso' presenf'ihttie meeting:' ."..... .

1. Shri Vikas, Director (Finance), Ministry of labour and Employment" ',.j .,.;.~ v-~-::'~~~:3"5:.·.,~~--!~,:>

"'2>'Sh~;:~\~~;:;.~~1.~~'i'h::;l,:"n:, <1%:,,,mc, i3. Shri Rdjes~Bansal, ACe (Pension);:0 ... ' . ~•. ' 'i<:,: t>~~~;,~·~~~~,~:1·-·j}~t~.'~">~·:'-~ t: '~.,":"h'"o.; ~.: c. ~'~.\!

4:'Shri RopV 8i5ht~\~~-I;I,JI~~) ••. ":' .V"

5. Shri·8 K.Mishra,RPFC-I! (IMe)

6. ,;srrir Nidhi,Si~ah..RPFCtl·i'!IIMG}• . -y-~_. ,",,",:. ,," .' .' 5.. ~.~, -; ':"'-..'. ~ .:... l

.... .:;:. "-~" -~.

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Shri Krishnan Sitorornon, Director {Crisil) also attended the meeting for a briefperiod for giving a presentation to the Committee.

FiF1<ii\Ee-iig~~stmru,tcommittee':nem~~rn~. ~ S:K~ivastoJ.~,ei, .Sanjeevo Reddy and ShriBN Rai could not attend the meeting.

At the outset FA& CAO.EPFO, intr,oQfJc,~4;:.fhe:fhe~.0hai(mant0, :-the 'coffirYlittee and wel~om~,'him. , .c: ',':'.' < ',':.:, ' "',."

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.-~~..:..>_;, -.:-. .-:,-', . '. ,',.~ ., ••• ~'.'.:._ .._.~: ~'. -:" )c:t">· I.'::,~_, -··-·-t():.~;.'· .. :'-" ,.~.

The Chairman\velcomed aUthe members and others present in the meefinqand invited FA&CAO to introduc~i.1tl~gQ~~I{~!,tp~'·,J1\;e~fiJ.)gf":, Jij'~ ,:>i i ;.: i

~._ _ .' • • o· • '.-,. -". • -, •••••• _. ,".' ••:." .-. t)~ .~I~. , ,

'(;:"ltem:;N()~1: 1·'·,~" ConfrmCitionof th~~~iif~s' of 94rd M~ingorthe 'finance,;;L ;';~;<:(:; .~:.~'Ond,ln'.estine'ht,COitlMIJ~eldon 2&.03.2009 at EPFo HQ,

"';: ';Ne\ii'=Delhi~ . ""'i::V",' :"}\(Ji :1~;

.'.::;...:.: ',. '_ ~;.. '_~ i'ri;~-;L,"~·~:<·:r-· .- ~;?i.:~(··::jJ·.?:-1i(-~ ;.'-!."~'-- .•. <.? ~'f~~·i.·

The tnin~A~s',wer~ uDqry!m9!J~~'t"9AF~tfid,py, 011the members.• <;. ~ •• • •• ._v ,.. , . " • .

Item 'No.2:.: .:

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, ," . ' . ' ..:-~- ,,' , '--::;~'-- ~: ..'..' !.. '~~,~<,l:J /~.~~~.;.,~;,>t .~i:",$t<it-~~ll!~he1A~~en on tlie-lfeeoft1tnend(jlflO'nsof the RC'

• • < •••• ~:. _} •••• ,' 0.. ":-"~{"~'~>;:.~l~'·:·~ ·\·-.,~':~1 ;~:~:-:~~~

The Committee noted the facts.. i , .;

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ftem.No.3: ,~!~~~1!'~~~?,.tr:,ottt~p;~etof .Pr~~~~~\fUo:d:(P.~nsionF'ul1aanCt" fOU Fund ' ' ' , ' ..,,'

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. Dke~fOf"{SS} su.ggested that the figures for lnvesfmentsmedeinPrivoteSector Bonds should be provided separately and should not be dubbed withPSU/PSRcategory investmen1s..Tt)eJ::hoirrn~.~nq,th~'i~om.mitteen1'embers ,'ragreed with the suggestion~

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Item No.4: Quarterly Review of the:~O(m~"~~[p~, ,~~, ·po~folio.- ~~ ••i. i •••.•.. .- ,.' ..• .1 ., .• .- ~t '.

managers for the quarter ending as On 30/06/2009

FA and CAO introduced the item and irwifeqf*; ~,~il~n •.Oir~ct9f.[Crisil], theConsultant of EPFO,to make a presentation before the Committee. ' ,

Mr Krishnan made a comprehensive presentation on performance of the~ ,,"J~ '!! .. , _,<'" - -'1·"'''''·'.-·'

portfolio managers during the period 17jCfJ/2f1.)8'to Jo/06'/2SX:FJ." .

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Shri Sonfosh Sara'. while 00ore cioti no the oood work' of Crisil<:nd thelh~esfh,~f MoMorihgC~1I~f" EPFO'f~~"'rriakind'thep€:rt~rflJanceev'dudtion

i". It t~:>~•. " :~',;04:,,- '.:',:.-(;;..,:.,,: -, ~-;.. ~~... -:~,: . ".' _ •.... ', .: ~ . .: - ..... _.--:-': .'-:::;:'.)' .•••••.. : .'. ",'; -.' _.':., ,,'

.sei-ehtifrC .. sad th<ltthe: portfolio man9Qers,;vth(): ,qre.«;Jnq~rperfgrrni.ng.Jh~benchmark, should be communicdted.'iriWritihg 'the' dissOfisfoction' dfthecommittee on the underperiorrnonce, Other members ~9D9;thf!·Chqil'm"qna9r~e.(:lwifhhiS sUggestion:.. . . r '. ... .. •.••,' ~.' ..

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FA and CAO info·rrn€xffhe··:co~rriHf~e'.that the porffoJie .managers are.monitored on ddly .b<;lsis by thel)1y,es.tfl1~LM9ni!9rin.9. ,C~I!pf,,frfQ :9.IOd·'fu6hthfy'tand •.qtii:iit~~*/friei;fiOgS'Or~·'dt~9.'bet"d:Wit~:~e'juUd:fu{9hqg~r.s·~fQr'.e.,"\,·'dIl,.·. oo:.'.:,...t.·.··,i ..h.·,"iJ.,'.·.,lh.' '~, ·.r.. p.-:·.:.e.\.\:.ffo.,.:,~.v..,··.·.r:'»:m-.'.,... · .. Onc.'·.',.. s.•• - .•·.'e".,:.•... ··,·· .:,.,"~' .: t";.F· ~/,;,,:. '::~ f;· '.: :.;1' I· . !": .• '..

.. ". - .~., ~ - _ ..'; ·:~(;~;·-:1;·i·i1._1 .,:~;/.-~::::,,} :~~:'f; ::_~·!-··••~1 ;;"- .i"·:--·;:~~. ;\:~·C?

.-. . . . .. .' ~>::~i\' ;.;:C~: ~_::" :. <Or Ram Tameia alsooooredated the'evoluofion report for its obiechvifv ~. .... .• ".' " . - .. .... .

·~:"'·'~.5 :r\ '_" ... ,··:;>·:-·F· "::,"} f;:"~:~"'t "......'; ~.~~.. ;-r-;.~;j ..._.::_~;':., (.;:-'~ ~:... :;-:._-::.! ,I: :: ._~.,.;.~~.>(t;(';('f~~I_!-!"fL:.J- r~).rl·~fShrl.AD~:N~gpal sad. that 'the repqrt. ~,ol!lq'hqyE:1been d(ofJ~.in p m9r~~S~-frj~ci~/r$jdhn~fsd~; tg,P~L~~~~t~~;tf~y,:}?'t9'ima~..aJsq.··~~:Pbi~~j~~t~~ffne··j·O· between the best dnd'"the:.wo~f· ci.fol..•. .J nd m.on. .~.J ,bas:">~,,,,'tll~...J?'....• '.'.~;>.. " ".'1 ~...; •....•.........••'.'."~ .....,.' ..•..,1 .. " ..•~..'y..~'~'..D ..;".' ..tt.f ....•..." r',' '~.-:"~"~'l~""" ,..g.."'.I'."'.~"!.". ,!!~,''-'1.,1...~.i"'... ;".'.. '!''\,,, ·l~''qetreose~ov~'tfir~'···uOrte.rs~:Wh.Ict"t '~s'<'-go_qa'.q.uf ·Q.ttle':q(C.9~~tifi90~ciri~·v(!~idAt"'~gh1t(jfin'y.(·'~~" furt1~;":'8bS~e;~f~..tkoi' 'Bt'hds; "r~e';tr'~"::b}f~n>,91 ..s ,'>~t'~.;i., .>~;":':~; ..';; r: " (t~')"nC'I~\,Ci .L·iUC.' :".,> ....,: . :::''it.<~·''~~¥iC)q~·!q

. underpefform,ng.dnd Should .be cauho~.aQC>l!t. JP~,~~e~ll~~~)~.9nr~Q)to.- . ,( - .' •.• .' (' - - 1 ~ ,- '.- "- -' .' • .•...•• f ~....... .._, '-. , .• ' - . _ -'. ••• f

. 'know that how lClef PruAMC was stilt ranked first even as it was a laggard in

.~? ~~t:grtr~e~.~~?rtr(~:~,~!..~:~~'l~~~.~f:PJa!~T?t.th~t.it .~~<:l~'~g#T··Jwt;t;\~~:~9~i~.th?f,o,sq~~.P"~~~~r<;li~~:~~X~$frn.:~~t~....~~e, f?~9f<:i~:llh~~lrn.~;,~!e, m:9nfh',&~rquarter %v!d' hot· ieffe¢f,-signifJ~q!j1!'y In ~D~.Q~iforrJqr1.perl~v9llJqti<;>O:c(y'pog

~'\_:"'".'.p-~'>.:',1i~ .>. '.. -,..... # ·.·,~l'1_-rf:;:-:'·<~.·l~-·~'-~l·;~·':.·'::: i..}\-~~~'. ;·!'t~j;:~ -;~~';-..i~r,.",,~:~_:~;~,{fI r:.iic!,. ..• :.. " : ::-:-.._!

that"' niOntH·or quorter, but would reflect in the' qJmuJatlve performance_. . I. .

~V'~I~~~t~~,~··T!;.j~~e/~gg'.'~,8T;~t~~!'l!e!<?c.~Jng{~p.~4t;?fJSI~~~~,:b"4.s... ·3d\'.

T~e.'A~.enda Ht!mwas'!~liJlWift{itt1~~l~~~':;tf¥if ffi~"~~~~~~~ng=~c;,~:~~'~~':~'~~~1~., f~~m~~'~0~~itrl"""~~·JQ' i~:~oXr':,\~elr

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Item No.6:· Extension of Tenure of Engagement of Crisll'ascon~ultanl for~ofessionally assisting in Performance evaiuation 0 PortfolioMOl1ogeri '(ifEPFOby another year from 17/0'1/2009 to 30/09/2010.

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director {SSl said that earlier it was thouaht thotCri~B·wC;ufd be offerina its,,:, ~. .' ~ _ ," C" .~_,. ".'-. • • •••• • '-" - • I;:. ,:' ",-: . ;'1- "',:

ossistcnce only for orie year, but in cose it is needed, the assignment couldb.e iricredsed furthE# tahoe moreyepr.: . .. . ... ... .. ".. ': .. :,

lFAond CAO 'sddthafeveri though the IDvesirnet;lf Monito~r)Q. <;ell ,.h.9S.•functioning weU, but the need of an extemol protessionca agency fikeCrisWsfUI .existed in many respects-not jyst for pertorrnonce ~vdl\Jqtion ..,' ". : "','" . ~'-..... ~ . ~~~ ... !: .. ' ..:'. '..::: .... . : ;~ ~ :: "':

j:,.,,,~:; "'~:"':~"'~-; .~( ,',,:.• ~:..,:~,.. j#·.,.~·.>I·:· 0 ••• ,••••••• j. :/ r: ; .. '." .' ... ";~ .. .". .~. ..-~_~:','

SIlri AD Nagpals¢id,tnqrev~ th6ugh~risil "!lq)', be ppP9inte.d fpr qnQth.?f:- ?~.:- ;_: ...~•...- ..._:t. -'~"1/"'"' .''':1:''~-~-~'-"':~:'~.;.:; . ': . .':;'.-- :-, -:.:-,_: -: .~~<~'--';'_: :.- ... :, .':.~. -: •.•••. -. ~ .; :\ •. ,~-

yeaf,but the se:rneS000ld' not corneotthe cost ~f I~ly on th~pat ot our.' own monitoring. EPFOhas been untainted till.no~'ari(rshould remdinsoin

future qs well. , ," p. . .... '.: ~.",-:.

The Chairman said thai there ·isno:atleniativeto,intermql monitorinq.cnd no",_-,"'.: r: '..~. ,.' -:-' ,; .;:~.~'~':"~''.~ <...,.~',__. _ ("',: 'i:;;'~ '-:'" -'" .;:~.j ...•.. -.!_::."-.,' " "". .,:~ ".··,:._~):;:;;;r~""'·.7 ::~~ f.; .•~.l,

:<lgetlcy ,w·ould'.,l6ICe· ·careofour tungs_ tt.1e· ..~ciy·w~.G.qn. ·H~)'0i9. t~9f the'IH~!eir,;;eht',·:~o~jt6Whg·~c,~i(·sh~i.,ld~">~'gWi~:'~ut wJth'·ifs··:' ,q~n .J~P()rts .·iil'd.ep~nae;ntly:'WhiI~-ch~,i\~i6ul~fdotheir w6rk ·ihdeP~ci;;;rlttY.~"N~g~t· .'dandj~~d-;~ith;~hl~'ffi(j,.;~ot~~fhdf·ihib·M.6ht!<>ijn~{d~1I··~h9.~J.d.)D~~~~J~ily.:pf~~are!;H~p6rts<·that·tQ~i(f_b~~framed in,:a sjmp'fi$~ "rn9rlner to'· be .~.~ { .' ~r""'" ,;:;-..",~ '~.:~i-'>.:-;._.~ __!~.!~J.'·,.~~: ~:;~.•.r-, :: ...·'.1:·. :'.:L ~'};" .. '''';-;:·'';';.,")''.r' •...comptehensible'fo'Gcommorfmoo:' .,. .. ..~.....

"",_.:: .';~, •. ,' .';.:~;;~ .,"l: . '.; ., ... ~~'i ~:."?~'~"

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The item 'was· accOrdingly" paSsedwithfhe insJrUction: toot th~ .InvestmentMonitory Cell should. qls<?,con,e outwith.,~b9w.:~!r~~~: .,~·:·f~:!.f"rt~~~',-\-.~.~~;.~~...~.,,~?:.:~.;..: ';';~~~"l';.,...-':!"1 't: ~~ ..•~:.~."·~·Jf.'~/'~,~.~.;"j_.:.:' .I --'; ;'-':-;~.' ',;.!'-.·:!~i~.•.i: t':..~:' '-11 . _. '. . .. ,:-- (:.~ ': ••~' ~--;'

~",y:.;;_:.-;,; ;'-:".)":·:·~(-:To,.;.-, .... · ~. -.':,i·i-;-'-~~~-·" J~~ ii-~~~~-·(~_-~,;t-,... :_"':';:~'- ·:;-:.r-·~ ' ...,; .. :,,;-,.~~.;--,;. ·~~'-c.;.t~,:.~<~,-,·,-·:~··_·-~~-(.. ,j~---..He·mHo.'7:·; I\ppointmentofConcurrenf AoditOrfor!EPFO's ~-t(),.

Director (Rn.ol)ce), enquired whether due procedure :.n.as been fqllowed.~':\~lf'<' """'I,~,<) <-f:~ <:), :.~~,,,.(,,.-~-."';.\::".-.~--. <- .:I:l_!·,,~'~~~,-· '-::~.+- \_. :-:' ,:-' :,:T •.is : ;:!:.~- ~·:.;-F·~;·:.·:·-.;.'-'':.;":':- -~.~ -< :'": ~~",~~~~.-;.Wfille·shoo-Ji·stirigtlie fi~msOs ~~po!tecUnJheitem,: fA .c;I~~ <;Ap.:.e~!pin~9J(ltlef611tt~~"t5;<?~e;aaie~qdbPt~t~1i,>s~a.'fh.d+'H ,~9s~~~?ir!b~~tttR~"c.~oY(~i1i~·~~~et~1dti!tff1·i{l~'f'.'E.~··'·:V:·.:", •••-n::·",: "C 1!",,;:,;c, ,<~it>,;,,- ')":~''1-- ..\:'.~" c'.; P~.::;:~.,.i.....:,}

Director (SS) observed that there were~id~ voricitions among the·f~ qUQt~by diff~rent bidders ..\2~~.~ ~....., -~J·~·~i.;~~';··.c.,:~: . ". .- -' !- 0. -. ' .r, ;.~, ;: ~.-~~

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Dr Ram Tarneja said that thelowest-rnoy riot be th<tbestb.idderqOd bence,.we should not necessarily go for L') bidder ..Shn santf>sh .~~~ ogreEKlwifh thesome and said that putting a weak concurrent aUdiftor rryay be,detrimental inthe' ;s'erlse 'h~fmoy' resort to rnisrepbrjirig: Irl:coUOsi()tltWiththe 'Po<l?rtf~no

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FAa.~deA:O.e~PJOihed :tAat,;the,JOle0fthe_CQn1~rr~t q~ditor w~~lc;tJ).especificolly defined to go os per the prescribed rlnvestment Manual and

" r wouldpfQvide ;t)'oe;df the inpotsto4hemenitoring;;c¢lIt' hence.Jh~r~;st.l~Yl~iOe'~no;:app(ehEmsion;'fegadingundue'IeportinQ; onaudite.rts pai~H~,.further.$Qid'·:thot 'dll the:firms;mentionedJin the: agendq'hov-e'"ql!~ifi~"onJhe; bGJ.si§qf1h~ir'technical' bids and as' per th~ relevc.iJht.:gwideft,(l}es;'JUil~e",w~s .•nQ.'Q.t~~r~~~, .

• . • I ". • •• - '. -, • - '.

but to choose the .Iowest bidder, viz.,M/s,join; Clhow~ary arid Co osno. other oidder'ijs'~~llfiM9:':t(}r~tcll,thedrJ;iPid~,,;;.PRS~:(I~)i.~~f\e;~~:1:Jta~,t~~itr .... bidder has hoodled prestigious asSignments·in p~t and 'isfoirty present 'in·,Hl~difl;e'$'ifi'j~~tt:Ye·tcour:lft¥-Li'~.';;"~.'::~)i'::}' ,~;,'~~i:;:,H,:,;:"{j'jd . '.;;:;..~~,;:':;,,)L;.;;ti"f,ii'

..\intJ r Pf;;b."$;:;t;:h.i·:~.~F= ";-"S'N !~;'t·;Jt;;·o;i;'i:>'!",,:';:.~~~:~..\~·· i!'::i1.i/~.1i;;:>,nV~l:';{i~tJ

TheChairman suggested ~at 1..1bidder may be oppolnted, but '0' rid~r should.ee:'{3ftlCed In th:e ;'Q{Jreerhent~·thoh the.;pett:e.r:rnOn~.e;;of fhe 'OlJdito( ·Wp.uIQt--I:?e;·re"ieWeMY·dR d~qGtw:ter1y!basi's" '.An0tBelr ..tid'er ·sJ;1(jolk:ffolso. J:.?,qo;·addecL that .ifthere is any toilorein audit of facts' noticed late~\~~ ,PF"Pfopriote- ocfion

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wouldbe taken against the auditor.'

·The:.ifem~Cis~ssed'vmh instructiontocadd two 'rid.,. inlbe~~9[~.-in~nt.:o.ne.···~;egQtding;~orm~hee reVieW,'of):t~e>auCfttoron:fqurtte.1ybqsis· ;g"s:f;q~~Jter,regarding takingappropric;ite.:actioniri.coSe Qfrnisr~pre.~~ort,pffQ~s.'

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FA and CAO' said·that in' niostofdhe: .ooses. .thezielov wos due-tobostcl. " ' • _. ",.. '; . ..". ~ . ' .. ;: •.. '. ...v '.~" ,-: " , ..•. ". " ;..-: . - .

vagaries. or wrong dispatch and in majorify of' thejccses, even .os principle"':anCfjnfetestamoohfs::h6ve been:'futlyJlec~vered, .th~;!'bGses:;'ore,:s~tiJI',rnQ.tiictoS'ed.

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as the issuers have refused to OOY oenal charaes. which are not .enforoeoble.. • I.. ......,.;; - . : ..~.

"'iii any case.

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Shn ,A>ONClgpal sdd,th'at drqpping these 'cases woulq .become a 111~e.r .of': '", principle and in-moany cosestne number of daYs of ~Iay for exoe~f=J~Q,l0

" d.W~.,Hefurther 'sOidthatfhe concemed Regional C'C;mmissionersshould be"asked'tomoke'personol'.efforfs.so fhatthese'~ues'c()uld'f:>e:Jecoyerea.'r,;.' I'"'

'Di,tecfor'(SS} said·that it- should.be checked on.cese lo:caseibct$j$:wh~therrecoverabfe'dUes, worronted the ornount oheffprtl. if'Y\o.O,ey. (f·(;msw~r.,is:y~s,tJ1en"efforfsfor.rec(}veryof dues must be; made,ei$e,;, the-cose may, bed~<?ppedas'suggestedbYfA<::JJld'CAQ.:::.',,'. : " "i';C _ ,~," -'

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It was decided to write DO leffers to concerned RPF(!s!hi JJse;:th~r99odwiU'f,ocollect the indicated dues in a time bound menner, The Finance, and,,'lhvesfme'm:ComlnHteemould ,then:'be.iapprist!Ci (d,the'OAJt~ed,th.oiggtiQn.In the next m~n9~' the crileria:~for.'drOppingTlSUc.h~·.@JC$t($h~id£qts~:rbedearly delineated for cases where dues were still outstanding, if any •

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'Item 'No. 9C',GiSiof ~Audit'Repd"t,.on :b1vestment,:,~orftoIi()': of . Empl~yees'". ",,;·Ptovidenf fund Organisation for, the;>;p~Q(f Ol/Q412QP6,: to: ,e:, ~l(.03/2007"", ; "","

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Shri A o Nagpal enquired about the action taken by EPFO on the auditrepork;FAc-an'd:CAO ~aicLthat,SIU,has ,bee", writtetil",oi.e.tt~r:iOO: .the.~Q~.$'of;'observatIons'~made' 'by .the..auditor.~.~fhough·"the ;rep~y"of";<'S&J(!QQ~l§i.~~t\otincotpO'rOted' ~'*h':~repfy~fSBrwos. received ori~!\rec~Uy.·>·.:'ib.k,';i.: ..

The Chairman instructed that a tri-partite meeting should be called involvingSBI, the audito'rdnd-SBI"and'responsibilt1y.,should·b~<;fix€fd with SBJ wheneverfound necessary. On the basis of this meeting, a letter to .the Chairman, SBI,shq(Jld:bewritterL.'A'CoPY.ofth~ Ietter.may also besentthrp,l:lgttJh~~Minj~tryof labour to the Govt nominees. , ,;'; .: '",' "-,;i .i:«: "', "'" ". ~. . " ,: .

Thernenib'ersagreedV\:ith the suggestion madeby theChairmori~}';,,~," ... : "'~ .-

The item .was ':accotdingly.deferred:,t~;;fii'st"~d:~,fripartif~:meeUn9 with. SRIand auditor's and to send the findings on notional rosses as impact of

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nealiaencelinoDcroDri~teness in jnvestrnem dec~aions 10 the Chairman. S81...,. ••••• ' , .- ••• -. .. I. - - • ".

and also to .Government nomineesinlheBoard qr S81through theMinisfry of- 0 I 00

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Uem No. 10: Pattern of Investment .Notified by ~e Ministry of finance on14/08/2008 I - eo-

c- _fA and CAO made a presentation before the Cpmmittee t?n prospects ofo Investing inEquities. The Members said that the itetnneeded morediscusslonand a species meeting should be called .to discuss ~heissue exClusively.

(, The item was deferredaccardingly.

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Themeefing ended with vote Of thanks 10 the! Chair.-. •• I

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('Item No 2:

(Statement on the actions taken on the recommendations ofthe9Sth Fin,ance & Investment committee.

Ref: ' Subject

ItemNo.4

II

. ~arter1y Revievv ofthe performance ofthe portfoliomanagers for thequarter. ending ason 3()'0612009.

Decision

H was decided, that theunderperfonning portfoliomanagers should becommunicated in writing toimprove their performance.

Action Taken

EPfO sent a letter.toSSf vide letter No.IMC/16'Action Taken!200&'1n56 . dated08~09.2009; RePly isawaited. ' .

ItemNo.7

Appointment . .ofConcurrent Auditorfor EPFO'~ portfolio

The. ,Hem passed wHh Matter ,.was ,sent ·foinstruction to add tWo' rkters RC/COnf. for placing inin the agreement, one the 67" meeUng. of the 'regarding performance 'Executive . , Committeereview of the aUditor on for approval. • . .quarterly' basis and anotherregarding .taking appropriateaction in case ofmisrepresentation of facts.

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JItemNo.8

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II

II[Item, No.9

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Dropping' pastcases of penalty· onbelated credits

Gist of Audit Reporton InvestmentPortfolio ofEmpfoyees'

. Provident FundOrganisation for theperiod 0110412006 to3110312007

Committee decided that DOletters may be written toconcerned RPFCs to usetheir goodwill to collect theindicated dues in .a timebound manner. The Financeand investment Committeeshould then be apprised ofthe outcome of the action. Inthe next meeting, the crit~riafor dropping such casesshould also be clearlydelineated for cases wheredues were.still outstanding, ifany.The Committee has desiredthat atri-partite meetingshould be called .involvingSBI, the auditor and EPFO toexamine and sort out of AuditObservations.The item was accordinglydeferred.

"

Accordingly, leHers Wassent to All RPFC's ,Region Offices vide.letter No. InveSt.1/(141)/Defaulterl2000/14590-14598 dated 28~08.2009.

Accordingly, letters wassent to S81 :vide letterNo; Invst1/1(02)1C&OI.20091 dated 31.08.2009,10.09.2009 &22.09.2009. Meeting hasbeen scheduled for 5th ..

October, 2009 at 4.PMinMumbai.

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"EMPLOYEES' PROVIDENT fUNO:QRGANISATI(>N(Ministry ofLabOtir& Erl1pl<)yrrieht,Govt~of India)

. . .. '..' Bl)avishya.Nidhl Bhawan~"14, BhikCiiji Cerna Placer:Newbelhi'-ilO·066.

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...... ,.~o.'IMCll.~l~ction·taken/20~8.·__' ~:}L;.~::.' <"'~\~..l .."..'..; "!Oi' -,-'. ""

. '.Shr!'~:Ahj~~B~rua,,Chief'Generaf Manager,;

. ' St~te:Bank.Qflhdia, .".' .' ":MumDafCorp-orate Centre

, . . . . :state :Bank'of india ..' ,.. ·~;UD:t~~.!·,:'.>'",.:':.".' '.'f>·:

perforl11ariceReviewafter.tn~quarteferiding30io6f.2009~Reg~·· •.",. \'. • .:~ - ".: ••••.•. _" ," l .

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", --,". ,"-- -. ::" .~,-.,,:.' .'>. ,'". -', . : , -.~-. ".' ", .~-: -~.~-::.:.~-: , -::.".~ . ~ .. ., ,' ." ~.. ". .The 95~:Jt1e~ting.oftheRl1ctnpeand InyeSthi~ntC()mhiittee:{Fr(D Of the'f:P.FO on .......!~~:~~~.~~~=:petfQtn1.n~6fth¢ portft>~o~an~g~rs.d@hg •.~~ .•perl~ .

'll1~.Col'rill1iti:eenotedwith. concern that sin has .b~e.$'nlyportfdnOMana~e·r' to': '.haveunderperformed -the bencbmark. Yield of 7.28% for the quarterOl/04/2q09 to:3()j06/2009~MOreov~r, on ctimula.tive basi~ii.e.; :to(the period 17/09/200a. to,.30/06/2009('it has stipped. to, ..second position aft:~· IClq. PrU 'AMC, IfQnty·· yielif: :" ,..parametei1s.conc~rnedr and' has slipped to 4th :positidn()Mov~(ailranklrjgjf 'As~ef·

·~··.QliaHqr'and 'Maturity Profile; are alsoconsidered along with :~R.eturns'~.'. . '.'. . May Ihopethattrtiniediate'stepswould betakeritoaddress~he toncems:ofthe .

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Item No.4: Pattern of Investment'Notified by the Ministf'( of Finance on 14/08/2008

The Ministry of Finance issueda draft Investment Pattern on 1~/09/2,OO7to be followed by

the Non-Government Provident Funds, Superannuation Funds. 1he pattern was-dlscussed by

the Finance and Investment Committee in its 89th meeting held on 19/11/2007. The Finance

and Investment Committee made certain observatlons Iplaced as Anne~Ure-l), which we~e

then considered and approved by the.CBT with slight modifications (relevant minutes placed

asAnnexure-2).

The Ministry of Finance hasnow prescribed a new InvestmentPattern for Non-Government

.Provident Funds, Superannuation Funds and Gratuity Funds Vide ·.notifiCationno. 288. dated

14/08/2008 based on the draft investment pattern circ~lated earlier (New Pattern is placed

as annexure-3). There are significant differences between the newly notified pattern and

the existing pattern notifted in 2003 and the same are presented betow:

st. Investment Category as per: % Investment Category as . " RemarksNo. the existing pattern amount per the new pattern amount

to be to be.invested invested

(i) (il Central Government 25% (i)Securities as defined (a) Government securities. Upto Central, Statein Sec. 2 of the Public (b) Other securities the 55% Government andDebt Act, 1944 (18 of principal whereof and Government1944); and lor· units of interest whereon is fully Guaranteedsuch Mutual Funds and unconditionally categories havewhich have been set guaranteed by the Central been merged in aup as dedicated Funds Government or any State single category.for. investment in Government except thoseGovernment cover.ed under (ii) (a)securities and whk:h below.have been approved (c) units of mutual fundsby the Securities and set up as dedicated fundsExchange" Board of for investment inIndia; Government securities and

(ii) regulated by the Securities -(a)Government 15% and Exchange Board ~fSecurities as defined India; Provided that thein Sec. 2 of the Public exposure to a mutual fundDebt Act, 1944 (18 of shall not be more than S%

,

1944); created and of the total portfolio at anyissued by any State point of time.Government; and! or . I

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units of such Mutual -Funds which - havebeen set up asdediCated Funds for

ininvestmentGovernmentsecurities and whichhave been approvedby the Securities andExchange Board ofIndia; and'/or

(b)Any other negotiablesecurities - the-principal whereof andinterest whereon isfully andunconditionallyguaranteed by theCentral Governmentor any StateGovernment except: -those covered under(iii) (a) below

(2) iii (a) --Bonds/ Securities of 'Public 30%Financial Institutions' asspecified under Section 4(1)of the Companies Act; "publicsector companies" as definedin Section 2(36-A} of theIncome Tax Act, 1961induding public sector banks;and/or "Short duration (less than ayear) Term Deposit Receipts(TOR)issued by public sectorbanks

(ii)(a) Debt- securities with Uptomaturity of not less than 40%three years tenure issuedby Bodies Corporateincluding banks and publicfinancial institutions;Provided that at least 75%of the investment in thiscategory is made ininstruments having aninvestment grade rating _from at least one creditrating agency,

(b} Term Deposit Receiptsof not less than one year-duration issued bVscheduled commercialbanks.Provided that thescheduled commercialbanks must meetconditions of -(i) -continuous profitabilityfOI:immediately preceding

TOR investmentsof more thanthree-yeardurationbeen

-haveallowed,

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which is as perearlierrecommendationofCBTalso.

The investmentcategory has beenbroadened toinclude ScheduledCommercial Banksrather than justpublic - sectorbanks.

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three years;(ii) maintaining' a minimumCapital to Risk WeightedAssets Ratio of 9%;(Hi) , having netnon-performing assets ofnot more than 2%' of thenet advances;(iv) having a minimum networth of not less than Rs.200 crores.

(c) Rupee Bonds havif1ganoutstanding maturity ~f atleast 3 years issued byinsti~tions of theInternational Bank for'Reconstruction andDevelopment,International FinanceCorporation and the AsianDevelopment Bank.

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3 (iii)Money market instruments Upto 5%including units of moneymarket mutual funds.

Investments inrupee bonds ofWorld Bank, 1Ft,and ADB havebeen allowed; butthe proposal wasrejected by .' theCBr In its 180th

meeting for wantof furtherclarificationsregarding thenature of theseinstruments/theirguarantees.

New category hasbeen introduced.CBlO and liquidMutual Funds thatwere earlierrecommended bythe CBr' wouldform a part here.

4 (iv)To be invested in any of the 30%above three categories asdecided by their Trustees.

.This flexibility hasbeen taken awayin the new patternand has,been triedto be inbuiltin thecategory-wisemaximuminvestment Jimit.

5 The Trusts, subject to theirassessment of the risk -return prospects, may investup to 1/3rd0 f (iv) above, inprivate sector bonds/securities, ~hich have an

Does not figure r ;

specifically in .thenew pattern anymore as a,treadycovered in (ii) of

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Shares of companies on Uptowhich derivatives are 15%availa~le in BombayStockExchangeor NationalSt~kExchange or equity 'ink~dschemes of mutual fundsregulated by the secunuesand Exchange Board ofIndia.

the new patternabove.

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investment grade rating fromat least two credit ratingagencies.

As .regards theinvestments inequities, the CST,in its 180th

meetingrecommendedthat the sameshoutd ·be treatedas in the previouspattern (2005pattern), . .Le.,should be madeoptional"only..

(iv) ,

Analyzing the New Pattern, the foJlowingobservations may be made:

1. For any trust, which opts against investing in equities Jike in case of CBT,.EPF,'the

category-wise investment limits would become highly inflexible. In fact, it would

result in category-wise requirements at exactly 55%, 40% and 5% in the first three

categories rendering the 'upto' prefix in each of them totally insignificant. It would

be highly improbable to achieve the pattern at the year end in such a scenario.

2. If equity investments are opted against, then the .investment category of

PS·Us/PSH/P.vtSector has been drastically reduced from maximum of 60% in the

present pattern to maximum of 40% only. This may result jn significant reduction in .

the earnings of the trust given to the fact that this category provides the maximum

flexibility and returns. The government securities, on the other hand, have been

given inordinately higher weightage of maximum 55%.

3. The CBr had recommended treating the category wise percentage norms' as

indicative onty and not mandatory, and for doing away with any floor in any single

category, but the same has not been accepted in principle.

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4. The new pattern mentions in the footnote, 'Turnover Ratio (the value of securities

traded in the year /average value of the portfolio at the beginning of the year and

the end of the year) should not exceed 2', alluding to t~e fact that trading would be

allowed, but the same has not been mentioned in the main body making it difficult

to decide that what category of instruments would JI>e allowed, to be traded or

Whether it would be applicable for all the categories. The trading, however, has been

made optional as has been recommended by the CBTin Its 180th meeting.

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5. Even as investments in -TORs having tenure of more; than one year have been

permitted,the investments in short term TORs (of maturity less than one year)

allowed hitherto in the present investment pattern do ",t find a mention in the new

pattern. Short term TORshave proved to bea very significant investment option and

relying solely on money market instruments may not be advisable- for short term

parking of fonds. Short term FOslike 180 days fDs or 364 FOswould also be excluded

if Short Term TORsare totaHy done away with. It is recommended that short term

TORs in Public Sector Banks should be allowed as per the provision in the existing

investment pattern.

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6. The pattern-allows for investments in various mutual fund-schemes, viz., Gilt Funds,

Money Market Mutual Funds and Equity linked Savina Schemes. If mutual fund

investments are-resorted to, the option of exlt must be!allowed as investments in

mutual funds are purchased and redeemed in 'units' traded at 'Net Asset Value'.

7. If CBTopts against investing in equities or equity linked saving schemes as per its

previous decision, it isrecommended that the limit of investments in the rest of

three categories may be fixed as:

• Governmerit Securities, Government Guaranteed Securities, Gilt Funds [i.e.

,'-.. Category (i))

• Debt Instruments, TORs(Category {ii}}

UptoSS%

,Upto5S%

• MoneyMarket [nstruments Upto 10%

This will allow flexibility in making investment decisions for benefit of the funds and, -

'-- subscribers.'-

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8. The new pattern says that the investment pattern may be achieved by the end of the

financial year. It further says that it is expected that throughout the year the

investments are in conformity with the above pattern; however, at no time

investments in any category should exceed by more than 10% of the limit prescribed.

-Thisis a welcome prescription and would greatly help in achievement of pattern at

the year end.

9~ The earlier suggestion of CSTfor allowing investments in POTDRsand NSCsdoes riot

" find a mention in the new pattern.

The pattern was discussed in the 94th .meeting of the Finance and Investment Committ~e,

held on 26/03/2009, wherein it was decided that the issue warranted a wider discussion in

the CST.The views of the members were recorded as fotlows:-

1. Shri A 0 ~agpal- lithe pattern was issued in August 2008 and since then the financial

markets have turned on their head. The Finance Ministry should be asked whether

they still wanted to have 15% exposure in the equities." He also proposed the'

following limits for different categories so as to offer f1~xibilityand maximise the

returns for the subscribers:

• Government Securities, Government Guaranteed Securities,

• Money Market Instruments

Upt045%

Upto 65%

Upto 10%•

, Gilt Funds (i.e. category (i»

Debt Instruments, TORs(category (ii» .

2. ShriB N Rai - lithe Ministry of Finance .shouldbe approached to confirm as to

whether they still favoured investments in equities as the pattern in the present.•.

form could not be accepted".

(Minutes of the meeting placed as Annexure-'1).

The item was presented for discussion in the CST in its 187th meeting held on 04/07/2009.

However, after some discussion the item was referred back to FIC.tt was decided to have a

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presentation on the topic to facilitate further deliberations (Minutes enclosed as Annexure-

5).

A presentation was made by the FAand CAD before the Finance and Investment Committee" '

in its 95th meeting held on 18/08/2009. The members said that looking at the significance of

the item; they needed more time delve on the matter. It was decided to take up the item-

again in the next meeting of the Fie (Minutes enclosed as Annexure 6). '

The New Pattern of Investment along with i.tseomparison with the existing pattern and', ,

'certain observations-made thereon is placed before the Finance and Investment

'Committee for reconsideration and further recommendation to theeentral Board of

Trustees.

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. ;...Tbc ~'OUl ••~i((ce :t(;C'cxd ,~d. (I~CI!~'V~'OS~ to 'liie:a ~s'i.i:la:~~S(' ~Mr.. The' Com~~;(ce'

~so :l~r"C("'d ~h:l(' i;, case of exi&CI~ci~~'~!-,irsnla1 be' ijl~ 'willi \' ••~ =!'pPc-~v:lr',\'f~li':c

::',Ch.~lnn:UI~~1~ich.in:lYiater b~ ':a(iCicd bi the Con:ct\i((«.:, ':, .,"'. '," ' . :;.}

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it';" No. 9 ~.p.'-.~ ch2n"" i" 'he ~~~r.a~ b1~_~~~.i~n~'l"'....•. • •. ..~:.. . ,-: :/i:::"i~1,1•.;·;:.1;' .t;:•.: I" .' -. :':! ~:.. s: ....': -, ' ..

S~u·iVIlO\da"Raj~~ SU~C$t~'dla( the mini~:'~~~:;~~l~~~9f.i~~~~~ ,~~~~~:'. ' __

S~ribes (C~(m &.Staie) ~ld' nOl.be r~'~fn.3sOL~;~d_~ al4bi~gSbt~., ,/ "'" '"'.' "::' :. '.:' ';' .. ' . . :,,:~:-~~:,~l~~~j~~~~)W: "'~fl:";~ll~?M~~f.i;::':"

Go\·cmn\CJ\(S UlaV be adverselY, affected. He filllllC(..said,tlw~3~,.QcX~~~t£!1:,+{, .:~ .'.' ; -' •.. ~-~: ~!l:_~~:''':..r.·~~·t:f1Pt1:~~~:!~1SliF.:~~~'~!~~"~:·'

only be indicative'in nature and not mandalocy. l'tae ,Olainn.u. ~wred from SBI the lcind' , , :

~f r~tumSg~~~cd, ~~.~~ 40~ 'bt~ ~ ~~ iof~~~~,;~;i~:]~'~~:~~~:f~.~e;investment in GO\-("Secunucs was J)ulling dO~l1 lhc over.41 ~elum ,of EPFO, In vie~ ~r dl~,:'Ob,s~atio~ "'.le enqu~(cd:v••hy,th~prol>OSai ~c~·~ ~rFi~~~lO~ld ~~( be ~~~Pled,

;.•o\ve\~: ',Sl~ci'Y~~~;R:\i~1I r~'\Son~,~. i~,~ ..r~t~~ '~~~t:T!~U~l;U!a'p~~~~.' . '".. ... '" ..' . . '"'" .. _.' -:. .1.. f'-

'quaritUlll ofin\'CSlnlChi· in GoV(, securities sboqld·~i,aI..."'OO;{.,.,TI,c'C4Imnii(~ee "ntllly.: ...

d~cid.cd'.(J,~~a'n:n~c"d1I::ti"lCiUluce'Or~;, (ft~:;~K'~~:;~~~.'~ ~~~:~~~~~'~~~t"~~.i:li~.i~·l:l)o~al..- '.' - -'" - . ".:.., .' '. '~•.. '. ::~;~~i~;::·~~i"--:~~i;~·~:;;!!.\~_.,.. ".-~ :~~""'~;'-:'<:~:'.:_";!..,.:;;..•,:qu~n(um of .GovL.securities a( 40% 0011';- :," "," <:', ":';""'I.--'~:':itl~~i"fiiF."~,n:'~\'Sl'bti""ll.~!':"Q·k:' "

""~ .: ,,~,.~"':<:); ::'-:'~~:."'-.• -: " ~.':"I~:~~:~f1f.;~f~~~~~~~f~~f>~~;t(,t~!i~f~~~~~~(~:'.·"As ,.J:t,'ds, invcst\ncnts io sCculitics guara.ol~d by ntuUila~c:cai fundi!'g' *ecQqcS! u~t ' ,'"COl1lmi«c~ olJsccvcd' (Iu\( rur(l'er d:ltiCi.~(ioRS arc 1\ci?U~,r~~u:din~'(I~~ ,,~(u~~~(~li,,~~,:

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;tUo\\'iu: inves"uei,( ill scxu.jaic.s ·Cu:u-an'«.d by multilaccral fundiuC.:lCCllcles. r. '

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.on\y iQdica.~c.~ad ito.t:m.aad~t~iy.:·.Q4"'oi-:_do~aWay,Wit~ I\Rr. no~r.i~ an~ .sin~~e,.. .... "..', .:..... ~-r: .. -.-: ";::-

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dines'mentioned'by set iq April 200S. SBI rep~~yes" ~licf1 in negative.>••• '.. I •• : !•.~'" • • -, •• .•.• _.', .•..••

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R't[·:C (lnvesbucn<) :prop'osed l"~atlb(; i~ '~ujd k 13k~ ~·p.-,agaln,~-bi~e' pr~p~ tile"cO~iiiInCC~~,it'¢pOrt' i~~be'i!i;;~iii1ci~~:n1ectink. '..', .' :' '. '. :,..- .. ""...

.. ' ·~<f~;>~.~:'~~:~t..:~.i.f~~~~~~~:.:~,;.: '·:;:·i:.':-- :,:"~;'!~:~.'.':~~:t..":'.',-'::.:~I;n~Vr~d~~.jft.c1f~1f:lha{.a;)(\~eia~::~~·~e withopl breaching the pattern, {he. ',-. -:·'·~\.::''':6';~·,~·I.. ~ .•. :.:--;'",'" ," -~;........ • . .... .•.. .san\·•..~tiifI'tifiCd ~1·,..10··r:~~~"',.!':'. '.It,.,:••;.~,, .•!, • ','c .; .,." 1 .': .::'. '.:'" : •-:. -' ,

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Th~ ~eeting:ended ~ith:,a.vot.e·ofth~nks to t:h~ Ch·air.) .

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\ ~~;"~~:Ii~~f~ & ~O in~r~~~:;Jtl)~ item J~fO~ljningthe~!l.'!:r~.'~1\;1(~! Revised .invest~ent patter~. ~~~. -r'ecentty;'p'~p~sed by tile:~Mi~.i~tryor"j Fi.n.an~~an~the .Sa~~~was ~iscu~se4 .In. ~I~e~.~~:~<~~~~~p~.Of.:th~'f!n~~c~i and Investment Committee held on 19.1LZOO~:~·'1.He·infonneo. .Board

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.Shri ·w_R. varaoa Rajan exPI~i~ed" ;aU"ffi,~"m.::ombers tlia{the three . '.... ..•. :

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memb.ers·Committee will ·first choose a''-~. . .

. E;PFOin serecnon of Fund Managers.' !.'

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'i. F~ (L & E) refT:la'rk~d.that the: .. .... L "

.nas already passed the' it~' and . '. \:; ,•• -; . • • . -! .

inti••••te about.tIj~'fro~ress\):';;f:

Sh. ~iim~i Ghosh obserVed' th~tit-~~~1~ii~~fr~~.the ~g~n~~:th~t we ! ~" i '-are hiring the same . person. Who; wer~.earlier'. wbnqng in th~' 'ssr, .Th~ . j .' ..

CPFCda.rit.~d .. th~t'·~BT ha~ .ded~~ ~ a:~p~int more- tnan one F~nd. .\:

·Manager.to oversee the' lnvestme.•..•ts~::;.:rti~·.~flanc~...and ~~~e~~~nt.· ,.1• •.•••.• ~""· .•fo" •• t ; ..• ,. ." . "',..- " .. ' 1 :,

Committee has started the procesS'·Qf·:appoantment: o.L a~n.indep'enClent :,' !.. ". :.. .. .. . ~'.~,; -, . .~::~':.'\ .~,;., ';:~",~lt..~<j!·r:.~.;··. .. f "

_"c~nsul~atlt.w~10;w:il"~ng~ge .Mu'ij~~~a~;'~~~.)!~~~(r9~:~pl.9P.9;~tftf.;:;:~i:::...::., •"., .. ...- .- . ' , . '. . ' .. . ," ."i .•...<,~.l.~~ ~.:Iit:.,,,~'!fIf,,,",!, ....•.." .:•.,',.', ,.;CredR•.~P~~l)g A9~!1de~<:!.:~~.~.:(~g.ct~~ ". '. '~'Bi:.s.J~1:J;~;..•·~¥!i.·"aye:.:;:;::',:.'. .)

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about the observation made by .the Finance &. .Investrnent.. i .::'... -; '.:.. I

.. the proposed investment pattern. . ...

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ttl(~.,,(eo()rrlm,en~(]a':101 .1 as s~ggeSt~~r-b~'-tile'.:orn01Kttee:may be C9hveY'~d to.' the MinistrY..<if . .-

• - ·.i;~'"':.~~:''''••.• :.••• ~":'-., _A:': ~.~-r'.'. .' t" - 0" .••• •Firi~nf:~·witti.tI~.fonowing_mqdification.ul'lder Bt:lllet No.5,.:" As reqards '-.". ;.: .. ~. -'. :"': ~.... ..1,. ".-- .. : _I ~~~-

. the Investment ilt'-ci1ulties; lhe Committee recommended that thesame ;

shot!ld be regarded ~~. in ihe;~ous pattern' Issued by the ~i~is&-.;<if \.'

Fi~~nce..a~da~c~'rdi~~~I~,it ShO~ld be mad~~p~io'ftal. ~.~IY.« , .: :.. :". i...... .' .' ;:,.:~~..S)l'· tr..(;~,!! \)::., ." .' " .: '.' l-. ~ll:.ii'~Wr:t\Pflt ;.l!Jt}~;t~.. "..';'·~"'·"·t-ci':'i·< 1'~ , "'. ., '., •••i..;•.,~;. '1

.....·;,-:k.·~;··;p"I!i.~~~·~.. 'eel; '.' ;..' ln~eslinent.in.enuit.i·es should 'be:'mi:id~ .'; .. ;c.~~TP.:i~~~··i~~:tif~:e.·i1~.;r""t I:' " ."\ '" .' '. l '. • .:

. -. ·..ac~~r~~·~td ~th~:·~~e~i~~s.:·p'~~":~~,~·~'(tf)eMini~~rY of Fi.nai:lce in.' l2003 -:and "CCQrdl(19I)';.lt.$ho~fd:,be.made. optional. .1

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'.a(so~:'~~t~~~;~!.~a~_~edd~ a~ainst exer.cisin~.~h·isoption. It \di.d. not.,bar'CaT' to dtsorss the·'P.1.a~~•.again'if needed; . . '. .

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. rate: sllQOld' be'dedared only' on the 'ba'sis

. ·:df:}.'lh~om~.geil~:t¢d.~':·;:·.Qui.~M-.~~:Heh~tfa.SUP~6~~d .his views.. ShrJ: .0- '.i·- ............• s;-,:,IC; ... ;. .•.•. .. .. I

.'v~rad~:'iiajati~id'that'-it ~~ifterent, ~~tter altog·~~er.•• '. -.; - •• " ~ • - I

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.. equltieswas to the ·pa.tte[q and.not the-200S pattern 'of tnvestment, .:. ;', '-" ." '. . ~":.> -r- •.••• ', :; -. :.~:.- '': ':·~'::;':N~:':1::t:·)·.... -

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(b),Term O~sit Receipts '!( nor Iess·~ one.yex dUtarb;. 1ssU~-tiv' ' ,- •-"banks. - :' : .• - : " ". 'i._;: --- ';1 !,!: •• I',.: "!-!~

~t"cMdedthnlhe~cori"neldi"~'~~~of"_~'" i' 0:.•.;.-- (iJ con~ ptofi~abilily !or~~ 'dwee:Yean";"

{ii} maintaWnc ••nlinlmum ~ to-iust wclchted AsR:tS Ratio'(ii)' flavine' net nofl-pedorfaiac ~ tit not moce than'~ of the net .d\/3~t:eS;(fv) h3viaC ••miniriium net worth olnot icsS·th•••.•·RS..200 ~~ •

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(c) RulH!eBonds havinc an outst~ m:ltudty of at -- 3 _tituldoclS~Uonal (bnIt tOrR.eConstiuJ:lion ;and .

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Shares of co~p~es, on wIlich derivatives- are available in Oom~StoclcExchanee or equity .Iini:ed SChem~sof mutual iunds _n:ccGtedExchance 8oat'd ollndb. ,., ~

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¥:~. e. : -" ~ .• ' • ••~~;~=~,.~.:::.:..~.....i~~', ~ 'moneys ~ecei-Jed on the .Jna(1)rity of' ·e3rlier.ln~stments .'t;';lU~.I:U"by Obligator(. QQtgoing. ~11.be-'If'l'Io-r'~,s[E'lIinaCco~d;in<:e-withthisinyestme!ltPalt~~ " ',,~ - ··t<, •. ,-,;-.-::.'I"-li?" -l ;- '

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..;~'." i~.:. .. _.. _~.1.. .. ..m:;ovemm~IIlt.~edjiCit~es"·,as defi~d~ ~n 2(bl~~~~~~~!}1

as defiooo irrSehion 2(h) of ~ SecUrities ;MjI3~-,,!::~P.~~Y-J~uoRnan~a-' l~titutiOOs' 'a~ speqfae.d";~er~ ~'of the Com~niesT'Urnov~r.Ratio (the value of secucities.fra~.the-yearlavecJge

:,<the yea,r and the eod oJ tht: year) 5hould not exceed·2. '..:.: 'I; •• ; ••• •• .*: .. .. ; ..:. . -... .- ~: .. ··i . ..-. .. i .~. . .. .. : ---:: .• _ .. _ " .

"4., Jf ';inyof the instruments mentioned above ~re; rated. an4 theif: ~ting, ~Us,below iny~t gra~ ClS

~__confirmed-by one credit rati~ agency tt.en·the {,ptio.npf ~t do be - _ _ ' '\.

i~.. Theiny~on'e';t patte~n- ~y be~ev1 by the eL ~r ~~·~IO~~ I ';( •• j "~·~~~~,~Z~~utthe~ye~r t~e;inveSlments are in conformitY-wid, the ~bove ~att~~ .~Jei: r r: ' •• , " - . anf qtegocy

1-:,~:~U(~:~X~:d~~Z~~~~~'_1~~,;~t~~~imit~~.~~::;,~~~~~i;'.. .",.., -~~,<. U ,may b.e noted.-however. tbat the inVest~ent -0,1 th~ of-the: "_;;I(ust~es' aOcl··needs -to be exeocised' with appiopriate - ~-soleIY: :4~responsiblc for the in~C-$tmenl detisions telke'Pln aocordance with the •.•."I~~n•.-;

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1'<;"1cAI"y doc Ma.o~cc<. Govt.-of Lt4ta·J'rc=.R"C- P..c:4. t••••~ •• ~....s•••••"'.i'kcd by CIteConuoII<:<of """'ications. Oc.Ihi~ItOOH.

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o"(- AAA rated instruments issued by Public S~torEnt~ties. The suggestion was

'supported by all the members.

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It wasdectded to recomni~nd·:to:t.he·CentiraIBoardvf Trustees to.. ' .. -. . ... - . .~- . .'. , ; • • I • '",

chan~ the existing invest~eJ1tgu'd~_f1es.,for allow~,ng hwestmentSin'! . .,....

Public Sector Undertakings and Publlc:~or.Fln~ncial Institutions up to4C"I.:;' of..their Net worth andIn Pubnc~or Banksup to 450/0 of their

Net worth. The increase in the exposureli.ntt shOUld be restricted only to

J!.AAratedi nstrurnents issued by PublIC',sector Enti!ieS .. For the rest, the

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exlsti ng exposure Iimitswoul~ ·~r;'-v.:~~J1'l:Jr{,,,;'.:.ti!'; ..,.

Item No.7: P?ttern of Inves~m~nt;N1>tified by the Ministry of ~~nanc~on '14,,8. ;lOOS . .' . .

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After the item was introduced, a J?~e~ntatlonwas made by Sh. Brijesh

fvlishr;;J, APFC (IMC)on the New Investment, Pattern notified by the Ministry of, .

\,

Finance. Starting the discussion, Shfi~,~'~~~~l,i$f'~i~~t thepattern was Issued

in August 2008 and since then th~;:fjna~~~f\q~~-,,~?'{eturn~ 01) their head... : -: 1 ....-

The Finance Ministry shoutd be asked yffl~~h~r .they still wanted to have 15%

exposure in the equities. He further, ~l~ ..his concern on .tbefact that the

recommendationsmade by the CBT on .the draft investment pattern were not

considered by the Finance Ministry. He proposed the folloWing lirn.its for different

categories so as to offer flexibility and maxlmlse the returns for the subscribers:. . ,

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v.-. Government securttles;: ;.G9v~nlt.rnem;Gu~ranteed. Securities, Gilt

funds (Le. Category'(i) "I Upto 450/0

+ Debt Instruments, TDRs (categOfY (ii»

+ r"'ooey Market Instruments.

Upto6S0/0

Upto 160/0

He further said that inve~ments.·irl:~~Cs/·PO~DRsshould .atso be allowed.

on which Director (SS) clarified that the Issue had already been taken up by the

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/t·'linlstry! but It was replied that the said instruments Were open for individual

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investors and not for institutional investors;"

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Shri Nagpal further said that" th'e"~t~l)ry; Vvise'ceWng' should be made

indicative only and not mandat()fy:;:~~t~~~m~nd~(f by th~C8T' earlter.: He. .-: , . . .

further said that the TO~ of onlypublk5eGtor Banksst\fotild be considered and

not of al: tf:lE'Scheduled, Commerdal,Banks'as proposed in 'the Investment

Pattern.

Shri B NRai also said that the P4inistry"~f~~nai1Ce'shooldbeapproached to

ccnflrm as to whether,they stiiffavou~lnves~tn~ntS:i~ equttles.Be said 'that the

pattern in the present form could hot be 'acc~P~ed.', , ,~".'I<"i"'·+;"~~ff.

The FA and CAO suggested that pendi~gthe' approval/nqtific~tion of the

neN pattern issued by the '~1inistry 'of Ananee, the one notified in 20qS and

approved by theCBT with' a fewmodificatl!onsbe ,notified by the Ministry.

Director (SS)s,aid 'that as aNew Pattern has 'already been- notified; Jet it" be" (".

discU5Sedbythe CBT. Incase the new:pattetn~snot accepted, the, pattern of

2')05 could be notified. The Chalrpersdn:SU-'ppOrted' his,viewS."Jk1,if/~"~;{;r:>':s,r'. "

It was decided that the issue ~arrahted a-:wider discussion in the, ,

CST. The views of the members of the F-IC\yould'b¢rrecorded andplaced

before theCBT.

Extension of tenure ofPotlfolio Audi~or to conduct audit, , I

for the year 2007;..08. ,I

. ' ", -{i'>fI,FA & CAO while introdudnb"the<~ge,~~a.rtem stated that the' present

. . - I - •••

auditors of-the investment portfolio of CST1 EPFtMIs Chhajed & Doshi have since

completed th~ir audit forthe year 20Q6-07 and havepresented the draft report

and are due to submit their final report after~lidti!l9 the comments of Mis SBI

in this regard. ,In view of the fact that slncetheflrrrrhas already completed their

Item No. S:

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The representatives of the Trade unions observed that if ~ rate at 8.S0k was" I (

dedered, the same should be done while recording their dissent onIy.1•. 'I

. . I .The item to recommend aSOA. interest rate to EPF SUbsaiblfs for the flnandal

year 2009-10 was accordingly passed by the Central Board of Trusteels.

Item No.3: Supplementary Budget for the financial tear 2009-2010towards the expenditure for, providing Modular Furniture in'respect o,t the Regional arid Su~Regional otticbs functioning inOWn Building of theOrganisation. I

The proposal contained in the memOrandum was approved b'j the Board.

Item No.4: Pattern 01 Investment Notified, by the Min~ of Financeon../14.08.2008. V

!

The CPFC introduced the item and Informed the Board that ~ was presently

fcHowing the investment pattern notified in 2003, while the MinIsfrY of Rnance has

subsequently notified two more patterns in 2005 and 2008. He Infonned the members• I

. that a comparative study of the existing pattern and the pattern nQtified in 2008 was

given in the agenda item. He also explained the Board about the·satfent features of the, .

two pattems.

Secretary (L &E) said that the representative from the Financr Ministry~ Dr K. P.

Krishnan (Joint Secretary), was also present and requested him to Ii$m carefully to the, ,

concems of the Board Members regarding.the newly nOtified inv~t pattem.

When Dr. K.P. Krishnan enquired about the concerns, Addl~1 Secretary (L&E)

explained that the major problem lay in shrinking the total aIIoca~ to the PSU/PSFI, ,

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category from 60% maximum 'in the 2003 pattern to a maxjmu~ of just 40% in the new

pattern, especially when this category"was'aa:ording the maximum returns to EPfO.. , I

The. AddItional Secretary (l&E) '~, said that EPFO ~d be forced ~ go to the .low

yielding Government Securities, where the 'categorica' ,'allocation has ~ 'raised to

55%.

Shri W.R. Varada Rajan said that as:EPFO: had decided against investing in

equities, taking ~ 15% allocation to equities.as provided in the new pattern would• • • • I. • .

remove any flexibility in the investmeot patterri.

.The ~irman' remarked that ir:aveStment ~tlerrl to be followed' by.' the EPFO

should ensure the twin objectives of safety and returns.. '. '....

FA &CAO said'that.the draft·pattern issuec;i,by the" Ministry of Anance' before the

newly notified pattern was disa .ssed by the car arid the reoommendations were, . .

forwarded to ,the· Anance .M"lOisby, .but ~ same', were by, and large ignored while

finalising the Pattern. tie 'nfunned the Board' .that an atlOI1la'~ situation has arisen

where some trusts following the csor di~ves have ~the '2008 pattern, while

theexempted trusts under the ~ of erro are Stiu foIl9WiOg 2003 pattern. He

further said that itmay not be prudent 10 aa;ePt ,the proposals of the Ministry of Rnance

i~ a .~ecemea.basis, rather the .~' ~,~~, ~ 'as'a romplete package. 'He

also requested the' ~ 'memberS toiOok: ~fresh .et iiwestments.in equities, which

would broaden the basket of investments ~ EPFO at little. or no ·risk. He put forth the

result of an internal analysis,.which 'showed that the ~ity of loss decreased as the

time one remain. inVested in the indeX ii1o-eased and it also Yielded a very attractive

return in the long run.

Shri W.R. ~arada Riijan said iha~~;J~~.~had'eartierr~the proposal to

invest in equities. He observed that the analysis done by fA&f:.N) was not part of the

agenda and could be -taken up~y by the Board. He recommended that

.14 .

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investments in TORs having tenure of less th~nOne year!should be p~, while the-.":, .: +- .-.". ~..

allocatiOnto different categoriesshould be as following:

G-Secs

PSU/PSFI/PSB category'MoneyMarketInstrurn~

40%

60%

10% .

•. He further said that investments in ~ and·Nfs should a~ be~lIowed, on

which Additional Secretiuy'(L&E) explained that the fj~ Ministry has categorically

said that these instrunents··areonly for the benefit of irdviduals·and not institutional"

investors like EPfO~

. . . .The Chairmanwantedto know as to hoW the sub$criberswould be paid if their .

funds remelnedinvestedin equity market.. FAai1dCI!D ~fied that all the withdrawals

to the subsaibers are settled out of the fresh a~ntri~ only and investments have .'not been touchedSo far for:pa)'ing the dues to the subsaibers. '.

Dr K.P.Kr1sfvlan explainedto members that investil!lg in index insteadof equities

and that too for a long periodshould result in healthy returns at almostnegligible risk as

alluded to by the FA &. CAO. Investing in index would.provide benefit of dfv.ersificatioo

and relatively underperfaming saips would'automatiCaHy be moved out if an index. ,based strategywas adopted. He said that the equitY componentwas introdUced in the

pattern due to heavy~nd from many supeiannuation f1.u1dsonly. Hesuggested thatEPFO should begin with 3-5% inveStments in inCrlCeS.

Secretary (l&E) agreed with the observations made by Dr. Krishnan, but

observed that a detailed note on tne same should have been presented before the

Board members.

AdditionalSecretary(l&E) said that in qroe;-to enhancereturns on investments,. . - ~

EPFO needed to. look· beyond the coov~ set of inv~ent' avenueS, andj

suggestion madeby Dr. Krishnanmerited attention.

31

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The Members raised a ,·pOtnt.~t a ,detailed ptesentatiOrt~orr~'the-~atter was

needed' before they could dedde 00 the -suggestionsfi1xwardedbV Or. Krishnan. Dr., ,

Krishnan was requested to make a detailed presentatl.pn on this subject in the next'

meeting of the Central Board of Trustees" aridJle readily agreed for the same. It was

decided that the aQenda be first disa ~ in the A~ and Investment Committee of

the Board-and then brought to the CST ~'t:i,Ie com,ments aI)d~~ns.

" '

The,item was, therefore, deferred for,the discussJon in the next meeting of the

CST.

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Item No.5:a.a~ges in the Existing Guidelines.

After brief diScussion, ~ proposal, ~ in the memorandum was approved

by the Board. I

Item No.6: Declaration of Appellate "uthori~.tO hear -iilppeals on the~'by RecoveryOtficers.:-- -, '

. £ _.

~- item ~ introduced by the:m=<;:,sivi A.D~~I observed that the item

proposed RPFC'Gr. r as one of the AppeIkte authorities whereas he has been notified as. . .:-- .. -,:.,

the Recovery Officer also. He suggested ~'the MIL 0'fC in the ZOnes may be

dedaredAppel~ Authorities. He' i~ '~ to Seaion ~l a the Act, according

to which the Central Govt. have to notify' ruI~ to' provide fa- manner in which a copy of

the certificate is to be certifi~ for ~ng, ~ the Recoyery Officer. There was an

apparent legal infirmity due to which there could be legal ha$sIes in its implementation.

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With above discussion, the agenda item Waswithdrawn for further examination.,

;..', ~!;;'t . - -. Item No.,7: List of ineligjbJe requeStS ~r waiVer of damages rejected by

Central Provident Fund'Comnissjoner.

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negligencefinappropriateness in investm.~nt decisi,ns to the Chairman, .S81~nd also to Govemmentnominees .in •••. Board 01t" through the Ministry oflabour.

,,.. ,

Item No. 10: Paffern of Investment Notified by thei Ministry of Finance on,14/08/2008

FA and CAO made a presentalion:befqtethe Committee. on prospects ofInvesting in Equities. The Members said thpt the ltem needed more discussioriand a species meeting should b'e called tb.discuss trie issue exclusively.

·1 . !~ - - I

II;The item was deferred accordingly.

The meeting ended wilh vote of fh<inla 10 the Chair.•. l

Item No.S: Relaxation in Investment Guidelines for investm1!nts in Government GuaranteedInstruments

As per the present investment pattern, investments in theGovemment Guaranteed Instrumentsform a part of the 15% category as shown below:

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(ii) (a) ~overnmentSecurities as defined in Sec. 2. of thePu~lic Debt Act,1944 (:i8 of 1944); created and issued by any State ~overnment;and/or units o(such Mutual Funds whiCh have been set up as

•• • • • I

dedicated Funds for investment In Government secudtles andwhich have been approved by the ~curities and-Exchange Board

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. - of India; and lor ' I

{b} Any oUlernegotiabie secUrities the orincioal wh!:.reot and intere$.t ' 15",, whereon is fu/ll! and unconditionallY. guaranteed ~ the CentralGoVernment or a[N. State, GOvernment except these coveredunder"{iii) (a) below

Existing Guideli~ With regardS to Govemment Guaranteed Papers,

As per the existing guidelines regarding the Government Guaranteed Instruments, EPFO is following,tWo pronged approaqt:

.:. In view of instances of defaults in State Government Guar ••nteed Papers and also due toproblems fucedlll!hile invoicing the Guarantee of the concerned State Government, any freshinvestment in State Government Guaranteed Paper is discouraged subject' to the foHowingproviso:

"Portfolio Managers are allowed to appraise the new proposals and also go for investment in, very good issues on merits, to the tune of RS 50 Crores in each such issue subject to:

o Exposure limits lakf down by the CST, EPF; .

'0 Wtthprior i.,timation to EPFO;and

,0 Prior concurrence from FA&CAOwherever possible,

o Sending report in this regard for placing' before ',the Finance and Investment

Committee"

.:. As -regards Investments in instruments guaranteed by theCe'1ltral Government, there is nosuch restriction as regards the quantum. However, fol/owing r~strktion is placed in terms-oftenure of the security:

"As far as possible only short dated securities i.e. maturing within 10 years should beI

purchased from the market. If such ~ecurities are not availabl~ in the secondary market, thePortfolio Manger may go for longer maturing securities by! subscription in the primarymarket"

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Though the restrictions placed on state government guaranteed securities -isjustified in viewof-thereasons stated above, there is a case for relaxing the tenure-wise restriction placed On se~ondary'market purchases of central government guaranteed securtnes. lnthe recent past, a fewaitract;veinvestment opportunities available in the secondary market in IIfCL, which is .acting .as the. nodalagency for th~ central government for infrastructure related projects and is duly'guaranteed by thecentral government, were missed out as EPfO could not invest in 'such securities for :they Werehaving tenure of more than 10years needing primary market to be ~eooly option to explore.

The restriction' thus differentiate~ between. securities purchased from primary market and thosepurchased from secondary m~et, whichm~y at times be coritrary to the interest of EPFO.

.The Recommeridation

·In.view:of the above~it is.·proposed that the restriction on the $~~ary inaik~t:plircha~.of· -.Central Government Guaranteed securities haVint tenure of more than 10 years'be doile.i~yWhh~·It will remove the anomaly of treating such purchases from the primary market and thE! SecondarY'market differently. '. . .

The Item is placed before the finance.and liwestment (:Om~e for consideratiOn and, . retommendation·to the central Board.OfTrustees.

35

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Annual Performance of the Portfolio Man@gers of EPFO

Snapshot of Performance of EPFO's Portfolio Manager~

In terms of cun:ulative yields (adjusted for amortization i~pact) from Sep-08 to Sep-09,~HSBCAMC has given the highest yield of 8.671% followed :by ICICIPru AMC with 8.667%,Retiance Capital AMC at 8.508% and SBI at 8.478%

Without factoring in amortization impact ICiCIPru AMC has given the highest yieldat 8.77% followed by HSBCAMC at 8.74%, SBI at 8.73% and Reliance Capital AMC at8.65%

On a composite basis (adjusting for amortization adju$tment) after factoring in allparameters including asset quality and average maturity, ICICI Pru AMC is top ranked.followed by HSBCAMC, Reliance Capital AMC and 5B!.

On average maturity profite analysis, Reliance Capital AJI,1Chas done better than theothers in aligning its portfolio to the requirements outlined by EPFOwith 581, HS8C AMCand ICICIPru AMC following in that order.

As regards to asset quality, lOCI Pru AMC is ahead, with! 581, HS8C AMC and RelianceCapital AM' following in that order.

Performance of Portfolio Managers VSBenchmark Index

(All portfolio managers have out-performed the yield given by the 8enchmark Index asconstructed by CRISll

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HTMYIELD 8.07 8.07 8.07 8.07Benchmark (0/0)

Actual YIELD till 8.74 8.77 8.65 8.7330/09/2009 (0/0)

Adjusted ActualYIELD till 30/09/2009 8.671 8.667 8.508 8.478(0/0)

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04

CRi5i~FUNOSERVICES

Performance Evaluation ofEPFO's Portfolio ManagersFor the period 17/Sep/2008 to 30/Sep/2009

Submitted to

Employees Provident Fund Organization

39-

Presentation Structure

• Key Messages

• Brief Synopsis of analysis

• Composite Performance Evaluation

• Parameter Wise Analysis- Returns Analysis

- Average Maturity Analysis*

- Asset Quality Parameter*

• Performance Evaluation Methodology

- Parameters and weights

- Constituent Weightages

"

• Portfolio based parameters are analyzed on data as of Aug 09 for S81, which is the latest available as on the report date

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Key Messages• On the basis of the Yield parameter,

- Approach # 1 (after adjusting for amortization effect) HSBC and ICICI Pru AMC havegiven the best performance in the period under consideration with Reliance CapitalAMC and S81 'following behind.

- Approach # 2 (without adjusting for amortization effect) ICICI Pru AMC has given thebest performance in the period under consideration with HS8C AMC, SEtl andReliance Capital AMC following behind.

- Monthly yields, however, have been the lowest among all portfolio managers for ICICIPru AMC for both Aug-09 and Sep-09

• On the basis of the composite evaluation framework- Approach # 1 : ICICI Pru AMC is top ranked, followed by HSBC AMC, Reliance Capital

AMC and S81.

- Approach # 2 : ICICI Pru AMC is top ranked, followed by S81, HS8C AMC andReliance AMC.

• On the basis of Maturity profile parameter- Reliance Capital AMC has done better than the others in aligning its. portfolio to the

requirements outlined by EPFO with S81, HS8C AMC and ICICI Pru AMC following inthat order.

• 'On Asset Quality profile, . .- ICICI Pru AMC is ahead, with SBI, HSBC AMC and Reliance Capital AMC.i • ing in )

4. that order l.f~,- . ,~. -'.- - - '- ~ - - .- - - r~ - .~.4-"'" - ~ ~.~ _. . _ FUNO~ERVICES . ~

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Approach #'1 Approach #2

PortfoHo Final FinalManager Score RankICICI Pru 99.77 1HSBC 99.03 2

Reliance 97.61 3sal 97.36 4

Portfolio Final FinalManager Score RankICICI Pru 99.81 1

SBI 98.79 2HSBC 98.77 3

Reliance 98.01 4

• Under Approach #1- ICICI Pru AMC is ranked the highest. ICICI Pru AMC is followed by HSSC AMC, who

has outperformed all portfolio managers in terms of yields.

• Under Approach #2- ICICI Pru AMC is ranked the·highest. On the Yield and Debt asset quality criteria ICICI

Pru AMC has outperformed all other portfolio managers.

• On the Average Maturity parameter,- Reliance AMC continues to be ranked the highest due to having a maturity profile

having the maximum concentration in the 5 - 20 year bucket. All portfolio managershave shown a portfolio average maturity to be more than 5 years. Maximum proportionof portfolio with less than 1 year exposure is with SSI and maximum portfolio exposureof more than 20 years is for IGICI Pru AMC.

• On the Asset Quality parameter

- ICICI Pru AMC js ranked the highest. d..ue to high.er p.rop.ortion. Of.P.ort~.OIiObe.!inc¥.GiltS.6. . Reliance AMC has under~erf-"rlT1edt~:.~?st In t~rn~sqf A~se} ~al~ty gar~~~~~'J

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Period ended September 09 vIs Period ended June 09• As compared to June 2009 evaluation (Approach # 1), ICICI Pru AMC continues

-, ."- ., _. ,. -. ..- - ' ',.- " .. -to maintain its 1st position, with HSBC AMC, Reliance AMC and 581 continuing tohave the 2nd, 3rd, and 4th positions respectively.

• The key reason for ICICI Pru AMC maintaining its 1st position is sustainedperformance in terms of Cumulative Yields and Asset Quality.

• Under Approach # 2, ICICI Pru AMC and SBI continues to rank first and secondrespectively. Reliance AMC and HSBC AMC both have swapped places withHSBC AMC now at 3rd position and Reliance at 4th position.

• Monthly yields, however, have been the lowest among all portfolio managers fo rICICI Pru AMC for both Aug-09 and Sep-09

• Asset quality criteria has been a key to the ranking order, as the maximumdispersion in scores was experienced under this criteria while compared withother parameters. Even so the dispersion has come down as compared to theperiod ended June 2009 •

" 43 r'f;,:lif:~'jt.,.\ ',l .....•j v.FUNOSERVICf.S

7,

Period ended September 09 vIs Period ended June 09 (contd.)~----

• On the yield criteria (Approach #2), the gap between first and second rankedportfofio managers has come down to 3 bps from 9 bps as observed in anaJysisfor period ended June 2009

- The difference between first and last ranked fund manager on yield criteria hasalso come down to 12 bps from 25 bps

• All portfolio managers (except for HSBC AMC) have registered a fall incumulative yields for the period ended Sept 2009 over June 2009. This is broadlyin line with the fall in benchmark yield for the cumulative period ended Sept 09as compared to the cumulative period ended June 09 (even though the yields forJul to Sep 09were higher than Apr to Jun 09).

• Under Approach #1 the difference in yields between first and second rankedportfolio manager is less than 1bp (as against 3 bps during last period). Theoverall gap in yields between first and last ranked fund manager is 19 bps (as'against 21 bps during last period)

• It is noteworthy that all Portfolio Managers have out performed the 8.5% jRFOrate of interest for the full period under analysis. ..~'~ ..

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Pru Pru581 ICICI ReUance HSBC 581 ICICI ReHance HS8C 581 ICICI Retiance HSBC 581 ICICI Retiance HSBC

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H1 (Approach 1/ 1) H1 (Approach 1/ 2)

Half yearly and Quarterly performance vis-a-vis Benchmark(Actual)

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FUNOSERVCES

Half yearly and Quarterly Performance Comparison

• As-.against.period.01/04/09 to 30/06/09, the yields ..otaILPortfolioManagers, except for HSBC, were higher in period 01/04/09 to30/09/09.

~ This is because of the rise in market yields during 2nd Quarter (July-Sept) ofFY09-10 vis 1st Quarter (April-June) which is also reflected in the increase in thebenchmark yield for period April 09 - Sept 09 vis period April 09 - June 09.

• Just like the Apr-Jun'09 quarter, all portfolio managers, except for S81were able to outperform the benchmark during the period Apr-Sep'09as well, under both the approaches.

• .However, despite such underperformance, SBI has shown the largestimprovement-ofareund90 bps in terms ofyietds durlng-tneperiodApril 09 - Sept 09 as compared to period April 09 - June 09.

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Summary of Performance Evaluation of EPFO's Portfolio Managers

Evaluation assuming a uniform HTM benchmarkPerformance Summary for cumulative period ended 30/09/2009 (Approach #1)

Scaled Scaled Debt-Scaled Score on Avg Debt Asset

Portfolio Score on Yield Avg Maturity Asset Quality Final FinalManager Yield Rank Maturi~ Rank Quality Rank Score Rankicrci Pru 0.9995 2 0.981 4 1.000 1 99.77 1HS8C 1.0000 1 0.985 3 0.918 3 99.03 2 I

Reliance 0.9816 3 1.000 1 0.909 4 97.61 3 I

S81 0.9781 4 0.987 2 0.925 2 97.36 4 i

ICICI Pru is ranked the highest. The parameter on which they out-performed otherportfolio managers Is "Asset Quality" and "Yield".

Performance Summary for cumulative period ended 30/09/2009 (Approach #2)-Scaled Scaled Debt -

~caled__ Score on -Avg -Debt Asset - --- - - - - - - - - - -- --- --- -

Portfolio Score on Yield Avg Maturity Asset Quality Final FinalManager Yield Rank Maturity Rank Quality Rank Score RankICICI Pru 1.0000 1 0.981 4 1.000 1 99.81 1

S81 0.9959 3 0.987 2 0.925 2 98.79 2HS8C 0.9968 2 0.985 3 0.918 3 98.77 3

Reliance 0.9865 4 1.000 1 0.909 4 98.01 4- -

tCtCI Pru is ranked the highest. IClet Pru is followed by S81at Rank 2.

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Cumulative Yield (in 0/0) for the period ended 30 Sept 09 (ie., 17/09/2008 to 30/09/2009)

HSBC IGICI ReliancePortfcllo Manager Pru SBIAMC AMCAMC

HTM YIELD Benchmark ·S.07 8.07 8.07" 8.07Actual YIELD till 30109/2009 $ . 8.74 8.77 8.65 8.73*

Adjusted Actual YIELD till 8.671 8.667 8.508 8.478*30109/2009#

--------------------------------------------------A While the cash-flow adjusted benchmarksfor HSBC AMC, ICICI Pru AMC andSBI arefairly close to the non cash flow adjusted benchmark that /01' Reliance AMC was 56 bps lower-df7.51% due to lheir receiving a relatively larger quantum of funds when the market yields -;"'e;e7~wer$ Without amortization adjustment (Approach #2)# After adjustingfor amortization effect (Approach #1)* For S81, idling adjustment has been done based on data till AUR-09 by assuming Sep-09 idling level to besimilar to that of Aug-09

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Parameter wise analysis - Returns analysis

8.671 8.8018.7978.667

.508 8.6398.478

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Parameter wise analysis - Average Maturity analysis

Portfolio ScaledAvg Score on Avg

Maturity ,_~vg MaturityScore Maturity Ra'nk0.993 1.000 10.980 0.987 20.978 0.985 30.975 0.981 4

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p'o.-,~~~~!.t9+~';::':?~"i:'-'~~~~~fty > Maturity < Maturity >Ma''''~·'·:'a···-·g<'·--···'-r'-<::.'i;-''I'''-''-:;:'''';':':::'-5"1 y 20 -n e _;),:~;,:,:,:-:,:i;6:-:,yr r :t.rReliance I 1.00 I 0.987 I 1.00SBI I 1.00 I 0.982 I 0.98HSBC . I 1.00 I 0.993 I 0.93ICICI Pru I 1.00 I 1.000 I 0.90

• On the Average Maturity parameter, Reliance AMC is ranked thehighest due to a maturity profile more aligned to EPFO's requirernent,having the maximum concentration in the 5 - 20 year bucket.

• All portfolio managers have shown a portfolio average maturity to bemore than 5 years.

• ICICf Pru AMC has the maximum proportion of portfolio more than 20years and S8f in the less than 1 year bucket.

• fCICI Pru AMC ranks the lowest in terms of maturity profile withrelatively higher allocation towards long end of the yield curve

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Parameter wise analysis - Asset Quality analysis

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Porttollo ':'. Asset Asset Quality i. . .. ., . .Ma'nager: Quality Quality RankICICI Pru 3.87 1.000 1S81 4.19 0.925 2HSBC 4.22 0.918 3 -Reliance 4.26 0.909 4 I

On the Asset Quality parameter ICICI Pru )!~MCis ranked the highest.

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Parameters and weights

• HTM Returns analysis - 80%

- 70% weightage has been given to absolute HTNI returns and

- 30% weiqhtaqe to returns relative to the benchmark.

• Average Maturity - 10%

- 500/0 weightage on average maturity being less than 1 year

- 25% weightage on portfolio maturity being more than 5 year and

-25% weightage on portfolio maturity being less than 15 years

• Asset Quality - 100/0

• The relative returns vis-a-vis the benchmark have been consideredassuming a declared rate of return of 8.50/0 to EPFO's subscribers andadjusting with the out-performance or under-performance of theportfolio managers vis-a-vis their respective benchmarks.

• While calculating the yields, idling adjustment has been done byconsidering closing uninvested funds to be idle every day for 1 day .

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Proposal for Revision in constituents in Benchmark Yield

• As a part of its continuous endeavour to provide an appropriatebenchmark, CRISIL reviews the methodology for computing thebenchmark yield on a periodic basis.

• CRISIL had proposed a revision in the methodology for thebenchmark with effect from 1st September 2009

• EPFO approved these changes w.e.f. 1st Sept 2009

.,' Proposed Changes

- G-Sec composition to include 4 securities against 1 security earlier

- Corporate Bonds to include a blend of AAA and AA+ yields as againstonly AAAeatlier

- Allocation of 5% shifted from short term instruments to Public sectorissuers (PSUs). For this purpose, 2.5% each from FOs and CBLO wouldbe reduced and would be added to PSU corporate bonds.

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FUNOSERVICES21.

Proposed Constituent Weightages for HTM Benchmark

• Based on the proposed approach, the revised benchmark has thefollowing constitution: w.e.f. 1st Sept 2009

Investment Category Constituents and compositionGILTs 30% (10yr, 15yr, 20yr G-secs and Oil bond in ratio

3:3:3:1)SDls 15% (taken at 50 bps higher than 10 yr G-Sec

Benchmark),

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Corporate Bonds (PSU) 42.5% (which will include 2.5% for FDs*) with AAAand AA+ bonds in the ratio of 2: 1

Corporate Bonds (Private) 10% (taken at 50 bps over AAA PSU bonds) ,

CBlO 2.5% (average rate for a da~),

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SBI ICICI Reliance HSBC SBI ICICI Reliance HSBC

Sept 09 (Approach # 1) Sept 09 (Approach # 2)

With the proposed changes in effect from 1st Sept 09, none of the portfolio managers havebeen able to outperform the benchmark yield for the month of September 09

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