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OM Kotak Mahindra Life Insurance Company Limited

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BOARD OF DIRECTORS : Uday Kotak (C), Hasan Askari (VC), Shivaji Dam (MD), Dipak Gupta, James Harry Sutcliffe, Vineet Nayyar, Pallavi Shroff,S.S. Thakur, M.G. Diwan.

DIRECTORS’ REPORT

Your Directors take pleasure in presenting their Third Report on the business and operations of the Company together with the Audited FinancialStatements for the year ended March 31, 2003.

FINANCIAL RESULTS

Over the past financial year the Company has expanded it operations substantially. The premium income for the year was Rs. 40.32 cores.

The policyholders account which had a deficit of Rs. 23.43 crores as on March 31, 2002 shows a net deficit of Rs. 42.33 crores for the year endedMarch 31, 2003. The surplus of Rs.9.93 crores generated in the shareholders account was transferred fully to the policyholders account to meet thedeficit generated in the policyholders account.

The Board of Directors, at their meeting held on May 22, 2003 declared an addition to the policyholders accumulation account @ 7.5%, totallingRs. 1,081,124. Since the Company is in the initial stages of its business and there was a deficit for the financial year, the Directors do not recommenddividend for the year.

BUSINESS ENVIRONMENT

The Indian Insurance Market is only 0.4 percent of the Global Insurance Market. In India, only 78 million people out of a total population of 1 billionhave a life insurance policy. Given the size of the Indian population, the insurance sector in India has a huge potential for growth.

It is estimated that the Indian Insurance market could touch $25 billion by 2010 (assuming a 7% real annual growth in GDP) (source: bima online)

With 13 life insurance players having a diverse spectrum of products, the acceptability of life insurance has increased manifold in the past year. Thetotal premium underwritten in India in the year 2002-03 was Rs.12324.83 crores. Increased competition has driven prices down and life insurance isbeing viewed more and more as a necessity.

The Company intends to tap this potential for growth and grow with the industry. Its focus is on sustainable expansion.

In the past financial year, insurance companies have gained greatly from falling interest rates resulting in gains on safer investments like GovernmentSecurities. However, with limited investment avenues available, life insurers would need to invest in equity products to maintain adequate levelof returns.

REGULATORY ENVIRONMENT

With a view to ensure the orderly growth of the insurance industry, the Insurance Regulatory and Development Authority (IRDA) prescribed regulationsfor Brokers, Corporate Agency and Protection of Policyholders. In order to promote bancassurance, IRDA has notified guidelines for ReferralArrangements with Banks.

Regulatory changes pertaining to Brokers, Corporate Agency and Bancassurance will go a long way in promoting the efficient distribution of insuranceproducts and development of the insurance industry.

The IRDA has also prescribed regulations stipulating the manner of collecting premiums to ensure clarity. The rural and social sector obligations ofinsurers have been increased during the period under consideration.

LICENSE

The Authority has renewed the license of the Company to carry on Life Insurance Business for the year 2003-04.

CAPITAL

During the period under review, the Company has increased its Authorised and Paid- up Share Capital to Rs.131.30 crores.

This reiterates the Shareholders commitment towards expanding the organization and facilitating sustainable growth of the Company.

BUSINESS ACTIVITIES

In the period under consideration, the number of policies sold by the Company has increased by 246%. As on March 31, 2003, the Company had40,479 policies on books. The annualized premium for the year was approximately Rs. 35 crores, representing a sum assured of Rs. 932.06 crores(excluding riders).

As on March 31, 2003, the Company had 3,802 life advisors and 60 corporate agents procuring life insurance business. The Company trains its lifeadvisors in-house. As on March 31, 2003, the Company had nine dedicated training centers to train its life advisors.

Last year, the Company had made a commitment to its shareholders to widen its geographical presence, to provide the highest standards of serviceto its customers, to increase the range of its products, to recruit life advisors with superior skills and develop them through intensive training, tostrengthen its alternate distribution channel and exploit technology to its best business advantage.

In keeping with the promise to widen its geographical presence, your Company has opened 17 branches in the past year and currently operatesfrom 30 branches in 28 cities.

During the period under review, the Company has introduced six additional products and two additional riders. The Company now has a full rangeof products from pure insurance to saving products and market-linked products, from children’s insurance to retirement solutions.

The Company made its foray into Retirement Products by introducing the Kotak Capital Multiplier Plan (KCMP) and the Kotak Retirement IncomePlan (in two versions - with cover and without cover) (KRIP). These are marketed under the umbrella of Kotak Preferred Retirement Solutions.



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The Kotak Child Advantage Plan (KCAP) is a product designed specially to insure children. Along with this product the Company also introduced it’sGuardian riders for waiver of premiums.

The Company has introduced the Kotak Preferred Term Plan (in two versions - regular premium and single premium) and the Kotak Preferred TermRider with special premium rates for non-tobacco users to encourage people to avoid tobacco. The Kotak Gramin Bima Yojana has also been revisedto meet the needs of the rural market.

In the area of group insurance, in addition to its term plan and credit term plan, the Company has launched the Kotak Gratuity Grouplan to providegratuity solutions to groups.

During the year, a survey was conducted by AC Neilsen and ORG-Marg for advertising and brand recall in the insurance industry. The survey ranksthe Company fourth in the insurance industry in terms of brand recall with 64% of the target customers exhibiting awareness of the brand. Duringthe year, the Company has revamped its website.

With a view to enhance customer service, the Company introduced the Total Quality Management (TQM) program. The employees of the Companyare continuously being trained in TQM. So far, the TQM programme has been implemented in the Mumbai Branch and in the Central ProcessingCentre. The Company’s commitment to TQM speaks for itself with the reduction in the turnaround time resulting in improved customer service.

FUTURE PROSPECTS

As more and more private players enter the field of life insurance and the competition between them intensifies, the Company expects itself to beamongst the first five private life insurers of the country in terms its products and services. Over the past year, the Company has moved forward fromoffering simple life insurance solutions to providing complex retirement solutions. The Company is also entering the vista of investment assurancethrough its unit-linked product, the Kotak Safe Investment Plan. It proposes to focus on developing more innovative products and focusing on salesof its unit-linked product and mass-market products.

RURAL AND SOCIAL SECTORS

As per the IRDA (Obligations of Insurers to Rural and Social Sectors) Regulations, 2002, the Company’s obligation to the rural sector is 9% of thetotal policies written direct for the financial year 2002-03. The obligation to the social sector was 7,500 lives for the financial year.

The Company has sold 5,169 rural policies in the rural sector representing 14% of the total policies sold by the Company and has covered 32,499lives in the social sector during the year.

During the period under review, not only has the Company fully complied with the revised business obligations prescribed for the Rural and SocialSectors, but has well exceeded the statutorily defined targets, in keeping with its commitment to the underprivileged strata of society. The Companyhas established dedicated rural branches to serve its rural customers better.

HUMAN RESOURCES

The Company believes that its employees define the organization. The Company has recruited high quality manpower and carries out an extensiveinduction training for its operations and sales staff. The Company believes that its growth lies in the growth of its employees. The Company had723 employees on its rolls as on March 31, 2003.

TECHNOLOGY

The Company has established a state-of-the-art network to connect its various offices. The availability of the network has been in excess of 99%.The inter-branch data access through the VPN has been secured using strong encryption. The Company’s centralized internet services provide authenticity,privacy and data integrity for online data transfer/access on the Web.

The Company also has a published Security Policy and implements this policy through a robust Authentication, Authorization & Accounting (AAA)environment.

The Company is in the process of implementing a Business Process Automation solution covering all key business processes, using enabling technologiesof Imaging, Workflow, Forms Processing, Intelligent Character Recognition, Customer Information Management, Web Enablement. This will help theCompany gain a competitive edge in the market place, as Business Processes across the organisation, would be capable of continuous transformation,thereby delivering value and facilitating improvements.

The Company has successfully implemented a comprehensive Point of Sale solution. This enables the Sales Force to generate premium quotations onthe Internet and also on the Company’s corporate website. The Company has also empowered its Life Advisors to effect a faster and more scientificsale by providing high-performing Life Advisors with Palmtops.

RISK MANAGEMENT, INTERNAL CONTROL AND AUDIT

To ensure effective risk management, the management monitors the experience of the Company through annual actuarial valuations and managementinformation systems.

The Company’s Internal Control Department has got the basic policies and procedures in place. These are continuously monitored and reviewed bothby the Internal Control Department and the Internal Auditors. The Internal Auditors report their findings to the Audit Committee periodically. TheCompliance Department of the Company continues to ensure compliance with the prevailing regulatory framework.

INVESTMENTS

All investments were made in accordance with the regulatory norms laid down by IRDA for the period under review. The IRDA had conducted anInvestment Audit of the Company in the last quarter of the year and their report is expected.


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CORPORATE GOVERNANCE

The Company is conscious that the success of the Company is a reflection of the ethos of its Management and Employees. Along with complying withregulatory requirements, the Company endeavours to ensure that the highest standards of professionalism and ethical conduct are maintained at alllevels of the Company. The Company believes in accountability to its Policyholders, its Shareholders, the IRDA, and the general public and has thereforeadhered to the Corporate Governance norms to the extent neccessary, despite these norms not being mandatory for the Company to follow.

Board of Directors and Committees

The Company has nine Directors on its Board, eight of whom are non-executive directors. The Chairman is a non-executive Chairman. Four of thedirectors are independent.

Member of the Board of Directors Audit Committee Investment Banking RemunerationCommittee Committee Committee

Uday Kotak Chairman — — — Chairman

Hasan Askari Vice-Chairman Chairman Member — Member

Shivaji Dam Managing Director Invitee Member Member Member

James Harry Sutcliffe Director — — — —

Dipak Gupta Director Member Chairman Chairman —

S.S. Thakur Independent Director Member — — —

Vineet Nayyar Independent Director — — — —

M.G. Diwan Independent Director Member — — —

Pallavi Shroff Independent Director — — — —

During the year Board Meetings were held on May 23, 2002, September 30, 2002, November 11, 2002, February 6, 2003 and March 19, 2003.

The Audit Committee had been constituted pursuant to the provisions of section 292A of the Companies Act, 1956. The Audit Committee of yourCompany consists of four members – Mr. Hasan Askari, Mr. S.S. Thakur, Mr. Dipak Gupta and Mr. M. G. Diwan. Mr. S. S. Thakur and Mr. M. G. Diwanare Independent Directors. All the members of the Audit Committee are non-executive Directors of the Company. In addition, the Statutory Auditors,Internal Auditors, Managing Director and Chief Financial Officer are permanent invitees to the meetings of the Committee.

The Committee has gone through the audited financial statements and satisfied itself with the accuracy and correctness of these statements.

The Audit Committee meets regularly. During the year Audit Committee Meetings were held on May 22, 2002, July 9, 2002, October 1, 2002 andFebruary 7, 2003.

In addition to the Audit Committee, your Company has an Investment Committee, a Banking Committee and a Remuneration Committee.

The Investment Committee met three times during the year on May 23, 2002, October 1, 2002 and February 7, 2003. Banking Committee Meetingswere held on October 24, 2002, January 2, 2003, March 10, 2003 and March 29, 2003 and the Remuneration Committee met on May 22, 2002and on February 6, 2003.

DIRECTORS

Mr. Uday Kotak and Mr. Hasan Askari were designated as Directors not liable to retire by rotation at the last Annual General Meeting of the Company.Mr. M. G. Diwan and Ms. Pallavi Shroff are liable to retire by rotation at the Annual General Meeting and are eligible for re-appointment.

During the year under review, Mr. Shivaji Dam was re-appointed as the Managing Director of the Company for a period of up to one year with effectfrom January 6, 2003.

AUDITORS

M/s. Bharat S. Raut, Joint Auditors of the Company retire in accordance with the provisions of the Companies Act, 1956 and being eligible, offerthemselves for re-appointment for the financial year ending March 31, 2004.

M/s. Price Waterhouse, Joint Auditors of the Company retire in accordance with the provisions of the Companies Act, 1956 and are unable to act asAuditors of the Company.

M/s. Lovelock & Lewes, Chartered Accountants, Mumbai offer themselves for appointment as Joint Auditors in place of M/s. Price Waterhouse, forthe financial year ending March 31, 2004.

MANAGEMENT REPORT

Pursuant to the provisions of Regulation 3 of the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor’sReport of Insurance Companies) Regulations, 2000, the Management Report forms a part of the financial statements.

STATUTORY INFORMATION

During the period under review, the Company has not accepted any deposits from the public.


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The information required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975,is annexed.

During the year ended March 31, 2003, expenditure in foreign currencies amounted to Rs. 23,621,777.43 on accrual basis. The other particularsprescribed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are not applicable, since the Company isnot a manufacturing company.

DIRECTORS’ RESPONSIBILITY STATEMENT

Based on representations from the Management, the Directors state, in pursuance of Section 217 (2AA) of the Companies Act, 1956, that:

i) the Company has, in the preparation of the annual accounts for the year ended March 31, 2003, followed the applicable accounting standardsalong with proper explanations relating to material departures, if any;

ii) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonableand prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2003 and of the deficit of the Companyfor the financial year ended March 31, 2003;

iii) the Directors have taken proper and sufficient care to the best of their knowledge and ability, for the maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; and

iv) the Directors have prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENTS:

The Directors take this opportunity to thank the Insurance Regulatory and Development Authority and Reserve Bank of India for their continuedsupport. The Directors are abundantly grateful for the continued faith that its policyholders have reposed in the Company. The Directors acknowledgewith thanks the support extended by their shareholders and would like to place on record their appreciation of the efficient services rendered by theemployees of the Company.

For and on behalf of the Board of Directors

Uday KotakChairman

Mumbai, May 22, 2003.


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AUDITORS’ REPORT

To the members ofOM KOTAK MAHINDRA LIFE INSURANCE COMPANY LIMITED

1. We have audited the attached Balance Sheet of OM Kotak Mahindra Life Insurance Company Limited (‘the Company’) as at March 31, 2003, therelated Policyholders’ Revenue Account, the Shareholders’ Profit & Loss Account and the Receipts and Payments Account of the Company for the yearended on that date, annexed thereto which we have signed under reference to this report. These financial statements are the responsibility of themanagement of the Company. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the auditto obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides areasonable basis for our opinion.

3. The Balance Sheet, the Policyholders’ Revenue Account and the Shareholders’ Profit & Loss Account have been drawn in accordance with the InsuranceRegulatory and Development Authority (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations 2002 readwith Section 211 of the Companies Act, 1956.

4. We report that:

(a) We have obtained all the information and explanations, which, to the best of our knowledge and belief were necessary for the purposes of ouraudit and have found them satisfactory;

(b) As the Company’s accounting system is centralised, no returns relating to the financial statements are prepared at the branches of the Company;

(c) The Balance Sheet, Revenue Account, Profit and Loss Account and the Receipts and Payments Account referred to in this report are in agreementwith the books of account;

(d) The actuarial valuation of liabilities for life policies in force is the responsibility of the Company’s Appointed Actuary. The actuarial valuation ofthese liabilities as at March 31, 2003 has been certified by the Appointed Actuary, and in his opinion, the assumptions for such valuation are inaccordance with the guidelines and norms issued by the Insurance Regulatory and Development Authority and the Actuarial Society of India inconcurrence with the Authority. We have relied upon the Appointed Actuary’s certificate for forming our opinion on the financial statements ofthe Company;

(e) On the basis of written representations received from the Directors and taken on record by the Board of Directors of the Company, no Directoris disqualified, as at March 31, 2003, from being appointed as a Director in terms of clause (g) of sub-section (1) of Section 274 of the CompaniesAct, 1956;

(f) In our opinion, and to the best of our information and according to the explanations given to us, proper books of account as required by law havebeen maintained by the Company so far as appears from our examination of those books;

(g) In our opinion, and to the best of our information and according to the explanations given to us, the investments have been valued in accordancewith the provisions of the Insurance Act, 1938 and the Insurance Regulatory and Development Authority (Preparation of Financial Statementsand Auditors’ Report of Insurance Companies) Regulations, 2002;

(h) In our opinion, and to the best of our information and according to the explanations given to us, the accounting policies selected by theCompany are appropriate and are in compliance with applicable accounting standards referred to under sub-section (3C) of Section 211 of theCompanies Act, 1956 and with accounting principles as prescribed in the Insurance Regulatory and Development Authority (Preparation ofFinancial Statements and Auditors’ Report of Insurance Companies) Regulations, 2002 and orders or directions issued by Insurance Regulatoryand Development Authority in this behalf.

(i) In our opinion and to the best of our information and according to the explanations given to us, the Balance Sheet, Revenue Account, Profit andLoss Account and the Receipts and Payments Account together with the notes thereon and attached thereto are prepared in accordance with theprovisions of the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor’s Report of InsuranceCompanies) Regulations 2002, Insurance Act, 1938, the Insurance Regulatory and Development Act, 1999 and the Companies Act, 1956, to theextent applicable and in the manner so required and give a true and fair view in conformity with accounting principles generally accepted inIndia:

(i) of the state of affairs of the Company in so far as it relates to the Balance Sheet as at March 31, 2003;

(ii) of the deficit in so far as it relates to the Revenue Account for the year ended March 31, 2003;

(iii) of the result of activities in so far as it relates to the Profit and Loss Account for the year ended March 31, 2003;

(iv) of the receipts and payments in so far as it relates to the Receipts and Payments Account for the year ended March 31, 2003.


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5. Further, we certify to the best of our knowledge and belief that:

1. On the basis of our examination of books and records of the Company and according to the information and explanations given to us, we havereviewed the management report and have found no apparent mistake or material inconsistencies with the financial statements;

2. On the basis of our examination of books and records of the Company and according to the information and explanations given to us, managementrepresentations and compliance certificates noted by the Audit Committee, nothing has come to our attention which causes us to believe thatthe Company has not complied with the terms and conditions of registration stipulated by the Insurance Regulatory and Development Authority.

K. H. Vachha Akeel MasterPartner Partner

For and on behalf of For and on behalf of

Price Waterhouse Bharat S. Raut & Co.Chartered Accountants Chartered Accountants

Mumbai, May 22, 2003

AUDITORS’ CERTIFICATE TO THE BOARD OF DIRECTORS OF OM KOTAK MAHINDRA LIFE INSURANCE COMPANY LIMITED

In accordance with the information and explanations given to us and to the best of our knowledge and belief and based on our examination of the booksof account and other records maintained by OM Kotak Mahindra Life Insurance Company Limited (‘the Company’), we certify that:

● We have verified the cash balances, to the extent considered necessary and securities relating to the Company’s investments by actual inspection or onthe basis of certificates / confirmations received from Depository Participants appointed by the Company, as the case may be;

● The Company is not the trustee of any trust; and

● No part of the assets of the policyholders’ funds has been directly or indirectly applied in contravention to the provisions of the Insurance Act, 1938relating to the application and investments of the policyholders’ funds.

This certificate is issued to comply with Schedule C of Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor’sReport of Insurance Companies) Regulations 2002 (‘the Accounting Regulations’) read with Regulation 3 of the Accounting Regulations and may not besuitable for any other purpose.

K. H. Vachha Akeel MasterPartner Partner

For and on behalf of For and on behalf of

Price Waterhouse Bharat S. Raut & Co.Chartered Accountants Chartered Accountants

Mumbai, May 22, 2003


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FORM A-RARegistration No. 107; Date of Registration: January 10, 2001REVENUE ACCOUNT FOR THE YEAR ENDED MARCH 31, 2003Policyholders’ Account (Technical Account)(Amounts in thousands of Indian Rupees)

Year ended March 31, 2003 Year ended March 31, 2002

Particulars Schedule Partici- Non- Annuities Total Partici- Non- Totalpating partici- partici- pating partici-

pating pating patingPremiums earned, net(a) Premium 1 249,988 132,190 21,056 403,234 53,260 22,519 75,779(b) Re-insurance ceded (2,623) (3,372) (12) (6,007) (1,684) (379) (2,063)(c) Re-insurance accepted — — — — — — —Income from investments(a) Interest, Dividends & Rent– Gross 1,792 2,350 — 4,142 — — —(b) Profit on sale/ redemption of

investments — — — — — — —(c) (Loss on sale/ redemption of investments) — — — — — — —(d) Transfer/ Gain on revaluation/

change in fair value — — — — — — —Other Income — — — — — — —

TOTAL (A) 249,157 131,168 21,044 401,369 51,576 22,140 73,716

Commission 2 69,849 4,750 1,454 76,053 17,576 546 18,122Operating Expenses related toInsurance Business 3 483,185 77,067 53,524 613,776 340,475 29,377 369,852Provision for doubtful debts — — — — — — —Bad debts written off — — — — — — —Provision for tax — — — — — — —Provisions (other than taxation)(a) For diminution in the value of

investments (Net) — — — — — — —(b) Others — — — — — — —

TOTAL (B) 553,034 81,817 54,978 689,829 358,051 29,923 387,974

Benefits paid (net) 4 1,556 588 — 2,144 — — —Interim Bonuses paid — — — — — — —Change in valuation of liability inrespect of life policies,(a) Gross 82,154 132,640 17,167 231,961 14,299 20,394 34,693(b) Amount ceded in reinsurance — — — — — — —(c) Amount accepted in reinsurance — — — — — — —

TOTAL (C) 83,710 133,228 17,167 234,105 14,299 20,394 34,693

DEFICIT (D)=(A)-(B)-(C) (387,587) (83,877) (51,101) (522,565) (320,774) (28,177) (348,951)

Transfer from Shareholders’ Account (D) 81,414 10,664 7,219 99,297 106,615 8,012 114,627DEFICIT(E)=(A)-(B)-(C)+(D) (306,173) (73,213) (43,882) (423,268) (214,159) (20,165) (234,324)

As required by Section 40-B(4) of the Insurance Act, 1938 we certify that all expenses of Management in respect of life insurance business transactedin India by the Insurer have been fully debited in this Revenue Account.

The Schedules and accompanying notes are an integral part of this Revenue Account.

As per our report of even date

K H Vachha Akeel MasterPartner Partner

For and on behalf of For and on behalf ofPrice Waterhouse Bharat S. Raut & Co.Chartered Accountants Chartered Accountants

MumbaiMay 22, 2003


Uday Kotak Hasan AskariChairman Vice-Chairman

Dipak Gupta Shivaji DamDirector Managing Director

G. Murlidhar Andrew CartwrightChief Financial Officer Appointed Actuary& Company Secretary


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FORM A-PLRegistration No. 107; Date of Registration: January 10, 2001PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2003Shareholders’ Account (Non-technical Account)(Amounts in thousands of Indian Rupees)

Particulars Schedule Year ended Year endedMarch 31, 2003 March 31, 2002

Amounts transferred to Policyholders’ Account (Technical Account)

(a) Participating (81,414) (106,615)

(b) Non-participating (10,664) (8,012)

(c) Annuities – Participating (7,219) —

(99,297) (114,627)

Income from Investments

(a) Interest, Dividends & Rent – [net of interest expended on purchaseof investments, Rs 42,299 (2002 – Rs 35,289)] 101,462 141,091

(b) Profit on sale/ redemption of investments 25,575 —

(c) (Loss on sale/ redemption of investments) (3) (788)

Other Income — —

TOTAL (A) 27,737 25,676

Expenses other than those directly related to the insurance business 791 175

Bad debts written off — —

Provisions (other than taxation)

(a) For diminution in the value of investments (Net) — —

(b) Provision for doubtful debts — —

(c) Others — —

Premium on investments amortized 25,865 25,330

Accumulated fund addition to participating policyholders(Refer Schedule 16 – Note 11) 1,081 171

TOTAL (B) 27,737 25,676

Profit/ (Loss) before tax — —

Provision for taxation — —

Profit/ (Loss) after tax — —

Appropriations

(a) Balance at the beginning of the year 1,229 1,229

(b) Interim dividends paid during the year — —

(c) Proposed final dividend — —

(d) Tax on dividend distributed — —

(e) Transfer to reserves/ other accounts — —

Profit carried to the Balance Sheet 1,229 1,229

The Schedules and accompanying notes are an integral part of this Profit and Loss Account.




MumbaiMay 22, 2003






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FORM A-BSRegistration No: 107; Date of Registration: January 10, 2001BALANCE SHEET AS AT MARCH 31, 2003(Amounts in thousands of Indian Rupees)

Particulars Schedule 2003 2002

SOURCES OF FUNDSShareholders’ FundsShare Capital 5 & 5A 1,306,610 1,005,731Reserves and Surplus 6 521,592 521,592Credit/[Debit] Fair Value Change Account — —

Sub-Total 1,828,202 1,527,323

Borrowings 7 — —Policyholders’ FundsCredit/[Debit] Fair Value Change Account — —Policy Liabilities – Participating 97,640 14,470

– Non-participating 153,034 20,394– Annuities Participating 17,232 —

(Refer Schedule 16 – Note 4)Insurance Reserves – Participating (520,332) (214,159)

– Non-participating (93,378) (20,165)– Annuities Participating (43,882) —

Refer Schedule 16 – Note 21)

(657,592) (234,324)

Provision for Linked Liabilities — —Sub-Total (389,686) (199,460)

Funds for Future Appropriation — —Total 1,438,516 1,327,863

APPLICATION OF FUNDSInvestments– Shareholders’ 8 790,813 1,003,091– Policyholders’ 8A 267,906 34,864Assets Held to Cover Linked Liabilities 8B — —Loans 9 4,769 3,991Fixed Assets 10 200,057 100,261Current AssetsCash and Bank Balances 11 156,695 205,919Advances and Other Assets 12 158,760 82,934

Sub-Total (A) 315,455 288,853

Current Liabilities 13 (132,853) (100,023)Provisions 14 (7,631) (3,174)

Sub-Total (B) (140,484) (103,197)

Net Current Assets (C) = (A-B) 174,971 185,656

Miscellaneous Expenditure (To the extent not written off or adjusted) 15 — —Debit Balance in Profit and Loss Account (Shareholders’ Account) — —

Total 1,438,516 1,327,863

The accompanying notes are an integral part of this Balance Sheet.




MumbaiMay 22, 2003






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Registration No: 107; Date of Registration: January 10, 2001SCHEDULES FORMING PART OF THE FINANCIAL STATEMENTS

SCHEDULE 1

PREMIUM

Particulars 2003 2002Par Non-Par Annuities Total Par Non-Par Total

First year Premiums 201,739 25,021 21,056 247,816 53,260 2,835 56,095

Renewal Premiums 48,249 2,889 — 51,138 — — —

Single Premiums — 104,280 — 104,280 — 19,684 19,684

Total Premiums 249,988 132,190 21,056 403,234 53,260 22,519 75,779

Note: (a) All the premium income relates to business in India.(b) Refer Schedule 16 – Note 2(a)

SCHEDULE 2

COMMISSION


Commission paid

Direct — First year Premiums 68,204 3,347 1,457 73,008 17,884 288 18,172

— Renewal Premiums 2,094 69 — 2,163 — — —

— Single Premiums — 1,747 — 1,747 — 342 342

Sub-total 70,298 5,163 1,457 76,918 17,884 630 18,514

Add: Commission onRe-insurance accepted — — — — — — —Less: Commission onRe-insurance ceded (449) (413) (3) (865) (308) (84) (392)

Net Commission 69,849 4,750 1,454 76,053 17,576 546 18,122

Note: Refer Schedule 16 – Note 2(b)

SCHEDULE 3

OPERATING EXPENSES RELATED TO INSURANCE BUSINESS


Employees’ remuneration andwelfare benefits (Refer Schedule16 – Note 6) 154,614 20,241 13,715 188,570 76,171 5,725 81,896

Travel, conveyance andvehicle running expenses 32,042 4,195 2,842 39,079 14,712 1,106 15,818

Training expenses 22,351 2,926 1,983 27,260 19,653 1,477 21,130

Rents, rates and taxes 38,109 4,889 3,253 46,251 25,541 1,920 27,461

Repairs 7,368 965 654 8,987 2,786 364 3,150

Printing and stationery 9,923 2,165 792 12,880 4,905 1,389 6,294

Communication expenses 18,099 2,826 1,604 22,529 8,869 740 9,609

Legal and professional charges 25,620 3,354 2,272 31,246 9,860 741 10,601

Medical fees 2,348 2,635 101 5,084 2,416 268 2,684

Auditors’ fees, expenses etc.

(a) as auditor 409 54 37 500 269 20 289

(b) as adviser or in any othercapacity , in respect of

— Taxation matters — — — — 89 7 96

— Insurance matters — — — — — — —

— Management services; and — — — — — — —


152

SCHEDULE 3 (Contd.)

OPERATING EXPENSES RELATED TO INSURANCE BUSINESS


(c) in any other capacity — — — — — — —

Advertisement and publicity 91,677 18,625 18,883 129,185 134,395 12,301 146,696

Interest & Bank charges 1,239 162 110 1,511 222 17 239

Depreciation 36,280 4,750 3,218 44,248 17,191 1,293 18,484

Information Technologyexpenses 17,097 2,197 1,734 21,028 11,752 729 12,481

Electricity charges 11,078 1,450 983 13,511 4,748 357 5,105

Recruitment expenses 7,138 935 633 8,706 3,415 257 3,672

Brokerage 2,189 178 194 2,561 488 37 525

Stamp duty 2,497 4,113 241 6,851 502 444 946

Membership fees 242 32 21 295 343 26 369

Preliminary expenses written off — — — — 1,324 99 1,423

Loss on sale of fixed assets — — — — 68 5 73

Other expenses 2,865 375 254 3,494 756 55 811

Total 483,185 77,067 53,524 613,776 340,475 29,377 369,852

Note: Refer Schedule 16 – Note 2(c)

SCHEDULE 4

BENEFITS PAID (NET)


Insurance Claims

(a) Claims by Death 1,981 857 — 2,838 — — —

(b) Claims by Maturity — — — — — — —

(c) Annuities/ Pension payment — — — — — — —

(d) Others – Surrender charges — 74 — 74 — — —

(Amount ceded in reinsurance)

(a) Claims by Death (425) (343) — (768) — — —



(d) Others — — — — — — —

Amount accepted in reinsurance

(a) Claims by Death — — — — — — —



(d) Others — — — — — — —

Total 1,556 588 — 2,144 — — —

Notes: (a) There are no claims outstanding at the year-end.

(b) The Insurer does not have any claims, which are settled and unpaid for more than six months.

(c) All the claims are paid in India.

(d) Refer Schedule 16 – Note 2(e)


153

SCHEDULE 5

SHARE CAPITAL

Particulars 2003 2002

Authorized Capital131,300,000 (2002 – 101,000,000) Equity Shares of Rs 10 each 1,313,000 1,010,000

Issued Capital131,300,000 (2002 – 101,000,000) Equity Shares of Rs 10 each 1,313,000 1,010,000

Subscribed Capital131,300,000 (2002 – 101,000,000) Equity Shares of Rs 10 each 1,313,000 1,010,000

Called-up Capital131,300,000 (2002 – 101,000,000) Equity Shares of Rs 10 each 1,313,000 1,010,000

Less: Calls unpaid — —

Add: Shares forfeited (Amount originally paid up) — —

Less: Par Value of Equity Shares Bought back — —

Less: Preliminary Expenses (4,269) (4,269)

Less: Expenses on subscription of shares (Rights Issue) (2,121) —

Total 1,306,610 1,005,731

Notes: (a) Of the above, 97,162,000 (2002 – 74,740,000) fully paid-up Equity Shares of Rs 10 each fully paid up are held by Kotak Mahindra BankLimited (erstwhile ‘Kotak Mahindra Finance Limited’), the holding company and its nominees.

(b) During the year, the Insurer has issued 30,300,000 (2002: Nil) Equity Shares of Rs 10 each fully paid up at par, by way of rights to its existingshareholders.

SCHEDULE 5A

PATTERN OF SHAREHOLDING(As certified by the Management)

Particulars 2003 2002Shareholder Number of Shares % of Holding Number of Shares % of HoldingPromoters

— Indian 97,162,000 74.00% 74,740,000 74.00%

— Foreign 34,138,000 26.00% 26,260,000 26.00%

Others — — — —

Total 131,300,000 100.00% 101,000,000 100.00%

SCHEDULE 6

RESERVES AND SURPLUS


Capital Reserve — —

Capital Redemption Reserve — —

Share Premium 520,363 520,363

Revaluation Reserve — —

General Reserves

Less: Debit balance in Profit and Loss Account — —

Less: Amount utilized for Buy-back — —

Catastrophe Reserve — —

Balance of profit in Profit and Loss Account 1,229 1,229

Total 521,592 521,592


154

SCHEDULE 7BORROWINGS


Debentures/ Bonds — —

Banks — —

Financial Institutions — —Others — —

Total — —

SCHEDULE 8

INVESTMENTS – SHAREHOLDERS’


LONG TERM INVESTMENTS

Government securities and Government guaranteed bonds includingTreasury Bills 171,420 306,863

Other Approved Securities — —

Other Investments

(a) Shares

(aa) Equity — —

(bb) Preference — —

(b) Mutual Funds — —

(c) Derivative Instruments — —

(d) Debentures/ Bonds — —

(e) Other Securities — —

(f) Subsidiaries — —

(g) Investment Properties – Real Estate — —

Investments in Infrastructure and Social Sector [Refer Note (c) below] 79,785 140,583

Other than Approved Investments — —

251,205 447,446

SHORT TERM INVESTMENTS

Government securities and Government guaranteed bonds includingTreasury Bills 473,431 405,604


Other Investments

(a) Shares

(aa) Equity — —




(d) Debentures/ Bonds — 50,000

(e) Other Securities (Certificates of Deposit) — 29,846



Investments in Infrastructure and Social Sector [Refer Note (c) below] 66,177 70,195


539,608 555,645

Total 790,813 1,003,091

Notes: (a) All the above investments as at March 31, 2003 are quoted.(b) Aggregate market value of quoted investments as at March 31, 2003 is Rs 797,090 (2002 - Rs 571,247). The aggregate book value of

unquoted investments as at March 31, 2003 is Rs Nil (2002 – Rs 438,374).(c) The Insurer has not made any investments in the social sector during the year, as securities of acceptable grade were not available.(d) Refer Schedule 16 – Notes 2(d) and 18.


155

SCHEDULE 8A

INVESTMENTS - POLICYHOLDERS’



Government securities and Government guaranteed bonds includingTreasury Bills 128,220 —


Other Investments

(a) Shares

(aa) Equity — —




(d) Debentures/ Bonds 21,121 19,196




Investments in Infrastructure and Social Sector [Refer Note (d) below] 102,941 15,668


252,282 34,864


Government securities and Government guaranteed bonds includingTreasury Bills — —


Other Investments

(a) Shares

(aa) Equity — —





(e) Other Securities (Certificates of Deposit) — —



Investments in Infrastructure and Social Sector [Refer Note (d) below] 15,624 —


15,624 —

Total 267,906 34,864

Notes: (a) All the above investments are quoted, except for Bonds under Long Term Investments.(b) Aggregate market value of quoted investments as at March 31, 2003 is Rs 249,863 (2002 – Rs 16,813), the net amortised cost of which as

at March 31, 2003 is Rs 246,785 (2002 – Rs 15,668). The aggregate book value of unquoted investments as at March 31, 2003 is Rs 21,121(2002 – Rs 19,196).

(c) As at March 31, 2003 the Insurer has transferred assets, representing further earmarked investments aggregating Rs 233,042 (2002 –Rs 34,864) to the Policyholders. These assets reflect and are matched to the total estimated policyholders’ liabilities on the Balance Sheetdate. As the investments were earmarked on the last day of the financial year, no income thereon is accrued to the policyholders in thefinancial statements. However, income is accrued during the year on investments of Rs 34,864, which were earmarked for policyholders onMarch 31, 2002.

(d) The Insurer has not made any investments in the Social Sector, as securities of acceptable grade were not available.

(e) Refer Schedule 16 – Notes 2(d) and 18.


156

SCHEDULE 8B

ASSETS HELD TO COVER LINKED LIABILITIES





Other Investments

(a) Shares

(aa) Equity — —








Investments in Infrastructure and Social Sector — —


— —




Other Investments

(a) Shares

(aa) Equity — —





(e) Other Securities (Certificates of Deposit) — —


Investment Properties – Real Estate — —

Investments in Infrastructure and Social Sector — —


Total — —


157

SCHEDULE 9

LOANS


SECURITY – WISE CLASSIFICATION

Secured

(a) On mortgage of property

(aa) In India — —

(bb) Outside India — —

(b) On Shares, Bonds, Govt. Securities etc. — —

(c) Loans against policies 789 —

(d) Others — —

Unsecured 3,980 3,991

Total 4,769 3,991

BORROWER-WISE CLASSIFICATION

(a) Central and State Governments — —

(b) Banks and Financial Institutions — —

(c) Subsidiaries — —

(d) Companies — —

(e) Loans against policies 789 —

(f) Others – Employees 3,980 3,991

Total 4,769 3,991

PERFORMANCE-WISE CLASSIFICATION

(a) Loans classified as standard

(aa) In India 4,769 3,991


(b) Non-standard loans less provisions

(aa) In India — —


Total 4,769 3,991

MATURITY-WISE CLASSIFICATION

(a) Short term — —

(b) Long Terms 4,769 3,991

Total 4,769 3,991


158

SCHEDULE 10

FIXED ASSETS

Particulars Cost/ Gross Block Depreciation Net Block

April 1, March April 1, For the On March March March2002 Addition Deduction 31, 2003 2002 year Sale/Adj. 31, 2003 31, 2003 31, 2002

Goodwill — — — — — — — — — —

Intangibles — — — — — — — — — —

Land —Freehold — — — — — — — — — —

Leaseholdproperty — — — — — — — — — —

Buildings — — — — — — — — — —

Furniture &fittings * 34,759 51,219 (30) 85,948 3,325 10,610 (28) 13,907 72,041 31,434

Informationtechnologyequipment(includingsoftware) 51,871 70,231 — 122,102 12,393 26,414 — 38,807 83,295 39,478

Vehicles 8,450 1,749 (814) 9,385 2,200 2,870 (500) 4,570 4,815 6,250

Officeequipment 13,329 18,315 — 31,644 1,457 4,354 — 5,811 25,833 11,872

Total 108,409 141,514 (844) 249,079 19,375 44,248 (528) 63,095 185,984 89,034

Work-in-progress 14,073 11,227

GrandTotal 200,057 100,261

PreviousYear 20,608 88,073 (272) 108,409 891 18,484 — 19,375 89,034 —

* Includes leasehold improvements

Note: Refer Schedule 16 – Notes 2(f) and 2(i)


159

SCHEDULE 11

CASH AND BANK BALANCES


Cash (including cheques on hand, drafts and stamps) 28,813 12,173

Bank Balances

(a) Deposit Accounts

(aa) Short-term (due within 12 months of the date of Balance Sheet) 91,750 150,870

(bb) Others — 40,000

(b) Current accounts 36,132 2,876

(c) Others — —

Money at Call and Short Notice

(a) With Banks — —

(b) With other Institutions — —

Others — —

Total 156,695 205,919

Balance with non-scheduled banks included in above — —

Cash and Bank balance

In India 156,695 205,919

Outside India — —

Total 156,695 205,919

SCHEDULE 12

ADVANCES AND OTHER ASSETS


ADVANCES

Reserve deposits with ceding companies — —

Application money for investments — —

Pre-payments 13,943 572

Advance to Directors/ Officers — —

Advance tax paid and taxes deducted at source (Net of provision for taxation) 13,830 6,948

Advances to suppliers 2,691 2,991

Advances to employees 1,779 922

Total (A) 32,243 11,433

OTHER ASSETS

Income accrued on investments 30,628 35,867

Outstanding Premiums 9,410 1,369

Agents Balances — —

Foreign Agencies Balances — —

Due from other entities carrying on insurance business (including reinsurers) — —

Due from Subsidiaries/ holding company — —

Deposits pursuant to Section 7 of Insurance Act, 1938 5,500 1,000

Security and other deposits 71,908 33,265

Reinsurance premium for future period (net) 9,071 —

Total (B) 126,517 71,501

Total (A + B) 158,760 82,934


160

SCHEDULE 13

CURRENT LIABILITIES


Current Liabilities

Agents’ balances 15,437 187

Balance due to other insurance companies — —

Deposits held on re-insurance ceded — —

Premium received in advance — —

Unallocated premium — —

Sundry creditors 33,065 16,361

Due to subsidiaries/ holding company 4,356 5,076

Claims outstanding — —

Annuities due — —

Due to Officers / Directors — —

Proposal deposits, pending underwriting decision 27,144 16,029

Accrued expenses 27,269 41,500

Balances due to reinsurance companies 14,078 1,671

Taxes deducted at source, payable 9,005 3,347

Statutory dues payable 2,499 1,026

Overdrawn book balances with bank — 14,826

Total 132,853 100,023

SCHEDULE 14

PROVISIONS


For taxation (less payments and taxes deducted at source) — —

For proposed dividend — —

For dividend distribution tax — —

Provision for gratuity 4,063 2,191

Provision for leave encashment 3,568 983

Total 7,631 3,174

SCHEDULE 15

MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)


Discount Allowed in issue of shares/ debentures — —

Others — —

Total — —


161

SCHEDULE 16NOTES TO THE FINANCIAL STATEMENTS

(Amounts in thousands of Indian Rupees unless otherwise stated)

1. BACKGROUND

OM Kotak Mahindra Life Insurance Company Limited (‘the Insurer’) was incorporated on August 31, 2000 as a company under the CompaniesAct, 1956 to undertake and carry on the business of life insurance and annuity. The Insurer has obtained a license from the Insurance Regulatoryand Development Authority (‘IRDA’) dated January 10, 2001 for carrying on the business of life insurance and annuity. The license for the currentyear has also been renewed effective April 1, 2003.

The Insurer expanded its range of life insurance products to its customers in the current year. In addition to endowment assurance policies, theInsurer introduced children endowment policies, term assurance policies and deferred annuities, with the option of purchasing additional riderswith the basic policy. Group term assurance products were also sold during the year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared under the historical cost convention, on accrual basis of accounting, to comply in all material aspects withthe applicable accounting standards issued by the Institute of Chartered Accountants of India, Insurance Regulatory and Development Authority(Preparation of Financial Statements & Auditor’s Report of Insurance Companies) Regulations, 2002 (‘the Accounting Regulations’) and relevantregulations notified by IRDA under the powers granted by the Insurance Act, 1938, the Insurance Regulatory and Development Authority Act,1999 and the Companies Act, 1956 of India, to the extent applicable.

The preparation of the financial statements in conformity with generally accepted accounting principles requires the Management to makeestimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent liabilities asof the date of the financial statements. The estimates and assumptions used in the accompanying financial statements are based upon theManagement’s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from theestimates and assumptions used in preparing the accompanying financial statements.

The significant accounting policies adopted by the Insurer are as follows:

(a) Revenue recognition on Insurance policies

Premium is recognised as income when due from policyholders. Further, in accordance with the insurance policies of the Insurer, uncollectedpremium on lapsed policies is not recognised as income.

Premium payable on re-insurance ceded is accounted at the time of recognition of the premium income in accordance with the treatyarrangements with the re-insurers. Reinsurance premium and commission is recognized over the period of risk.

(b) Acquisition costs

Acquisition costs such as commission and medical fees are costs that vary with and are primarily related to the acquisition of new andrenewal insurance contracts. Such costs are expensed in the year in which they are incurred.

(c) Operating Expenses relating to Insurance Business

Operating expenses relating to insurance business are assigned to participating, non-participating and annuities business segments asfollows:

• Expenses directly identifiable to the business segments are allocated on an actual basis.

• Other expenses, which are not directly identifiable, are apportioned to the business segment on the basis of either (a) total numberof policies issued during the year, or (b) annualized first year premium income, or (c) sum assured during the year, as consideredappropriate by the Management.

(d) Investments

• Investments are made in accordance with the Insurance Act, 1938 and the Insurance Regulatory & Development Authority (InvestmentRegulations, 2000).

• Debt securities including government securities are stated at net amortized cost. The premium/discount, if any, on purchase of debtsecurities is amortized/accrued over the period to maturity on the basis of their intrinsic yield. Inter-fund transfer of debt securities isdone at the net amortized cost. In case of diminution of a permanent nature in the market value of the investments as at the BalanceSheet date, the amount of diminution is recognized as an expense in the Revenue/ Profit and Loss Account.

• Investments intended to be held for a period of less than twelve months or those maturing within twelve months are classified as‘Short term investments’ while those intended to be held for a period of twelve months or above are classified as ‘Long terminvestments.’

• Interest income is recognized on accrual basis. Investments are recorded at cost, and exclude interest paid, if any, on purchase. Gain/Loss on transfer/ sale of investments is the difference between the sale price and the net amortized cost on the date of sale.

(e) Claims

Claims for death, including the reinsurance benefits to the Insurer, are accounted for when intimated. Maturity claims are accounted onthe date of maturity. Surrender expenses are accounted when incurred. Reinsurance on such claims is accounted for in the same period asthe related claims.


162

(f) Fixed Assets and Depreciation

• Fixed assets are stated at cost less accumulated depreciation. The Insurer capitalises all costs relating to acquisition and installation of fixedassets.

• Depreciation on fixed assets is provided under the straight-line method based on the economic useful lives of assets as estimated by theManagement. Depreciation is charged on assets from the month the asset is capitalized. Significant software purchases/ improvementsare capitalized and depreciated over their economic useful lives.

• The Management estimates the economic useful lives of the various fixed assets as follows:Buildings 30 yearsInformation technology equipment (including software) 3 yearsFurniture and fittings (including leasehold improvements) 6 yearsOffice equipment 5 yearsVehicles 3 years

(g) Employee Retirement Benefits

1. Gratuity: The Insurer’s liability toward gratuity - a defined benefit plan, is accounted for on the basis of an actuarial valuation at theyear-end.

2. Provident Fund: The Insurer’s liability toward provident fund – a defined contribution plan, is accrued each month.

3. Superannuation Fund: The Insurer’s liability toward superannuation fund – a defined contribution plan, is accrued for the relevantperiod of employee participation.

4. Leave encashment: The Insurer’s liability toward leave encashment benefits is accounted for on the basis of an actuarial valuation atthe year-end.

(h) Accounting for Operating Leases

Leases where the lessor effectively retains substantially all the risks & benefits of ownership over the leased term are classified as OperatingLeases. Operating lease rentals are recognized as an expense over the lease period.

(i) Foreign currency transactions

Transactions denominated in foreign currency are recorded at the rate of exchange prevailing on the transaction date. Monetaryassets and liabilities denominated in foreign currencies at the Balance Sheet date are translated using the rate of exchange prevailingon that date.

Exchange differences either on settlement or on translation are recognised in the Revenue Account/ Profit and Loss Account, as applicable,except in cases where they relate to the acquisition of fixed assets, in which case, they are adjusted to the carrying cost of such assets.

(j) Segment reporting

1. Business Segments

In accordance with the Accounting Regulations read with Accounting Standard 17 on ‘Segment Reporting’, issued by the ICAI, theInsurer’s business in India is segmented into Participating business, Non-participating business, Annuities Participating business andInvestment of the Shareholders’ funds.

2. Segmental revenues and expenses

All segment revenues are directly attributed to the respective individual segments. There are no inter-segment revenues.

Costs for Participating, Non-participating and Annuity business: Refer 2 (c) above.

3. Segmental assets and liabilities

Segment assets and liabilities include those, which are employed by a segment in its operating activity.

(k) Taxation

Provision for current income tax, if any, is made on an accrual basis after taking credit for allowances and exemptions. Deferred incometax is recognized for future tax consequences attributable to timing differences between income as determined by the financial statementsand the recognition for tax purposes. The effect on deferred tax assets and liabilities of a change in tax rates is recognized using the taxrates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

Deferred tax assets are recognized and carried forward only to the extent that there is a virtual certainty that sufficient fut ure taxableincome will be available against which such deferred tax assets can be realized.

(l) Preliminary expenses and Expenses on subscription of shares

In accordance with the Accounting Regulations, preliminary expenses and expenses on subscription of shares are adjusted under theSchedule of Share Capital.

3. ACTUARIAL ASSUMPTIONS

Liability for policies in force (‘the Liability’) is calculated in accordance with accepted actuarial practice as well as the requirements of the IRDA.The Liability on a policy is calculated based on the ‘Gross Premium Method’, which represents the present value of expected future outgoincluding benefits and expenses, as reduced by the present value of expected future premium and related income. Further a reserve for claimsthat may have been incurred but are not yet reported to the Insurer (‘IBNR Reserve’) is also maintained. The assumptions used for calculating theliability are provided below.


163

Mortality, Morbidity and Accidental Death and Disability rates

Mortality rates are based on the LIC 1994-96 mortality table (adjusted for expected deterioration in mortality due to AIDS). Morbidity andAccidental Death and Disability rates are based on the base rates provided by the re-insurers.

Expenses

• Fixed renewal expenses:Ø Rs 300 increasing @ 5 per cent per annum for regular premium plans; plus Rs 10 per payment, increasing @ 5 per cent per annumØ Rs 52.5 increasing @ 5 per cent per annum for single premium plans

• Renewal commission and commission related expenses are taken as:Ø Actual base commission rates to insurance agentsØ Other sales and acquisition expenses at 40 per cent of the base commission for all policies

• Termination expenses:Death expenses: Rs 600 increasing @ 5 per cent per annumMaturity expenses: Rs 52.5 increasing @ 5 per cent per annumSurrender expenses: Rs 52.5 increasing @ 5 per cent per annumDisability expenses: Rs 1050 increasing @ 5 per cent per annumCritical illness expenses: Rs 2100 increasing @ 5 per cent per annum

Policy lapsesFuture policy lapses have been assumed based on the duration for which the policy has been in force, with higher lapses assumed during initialyears and lower lapses during later years. Different lapse assumptions have been made for different types of policies.

Valuation rateThe valuation rate for computing the reserves is assumed in the range of 5.5 per cent to 7.25 per cent per annum depending on the product.

IBNR ReserveIt is assumed that there will be one month’s time lag in reporting death claims and 3 months time lag in reporting critical illness or disability claimsto the Insurer and, accordingly, the expected outgo is calculated as per the death, critical illness and disability assumptions. As most of the businessis new and in the select underwriting phase, 75 per cent of the assumption is taken.

Margins for deviationMargins for deviation are assumed for inflation, lapse, surrender, mortality, morbidity, disability rates, renewal expenses and interest rates.

Reserves for group businessThe reserves are calculated as the risk premium for the un-expired term of the policy with an allowance for expenses and a margin foradverse deviations.

4. POLICY LIABILITIES(Forming part of Policyholders’ Funds)


Par Non-Par Annuities Total Par Non-Par Total

At start of the year 14,470 20,394 — 34,864 — — —

Add: Change in valuationagainst policies in force(Refer Note 3 above) 82,154 132,640 17,167 231,961 14,299 20,394 34,693

Add: Accumulated FundAddition (ReferNote 11 below) 1,016 — 65 1,081 171 — 171

At end of the year 97,640 153,034 17,232 267,906 14,470 20,394 34,864

5. CONTINGENT LIABILITIES


1. Partly paid-up investments — —

2. Claims, other than against policies, not acknowledged as debts by the company — —

3. Underwriting commitments outstanding (in respect of shares and securities) — —

4. Guarantees given by or on behalf of the Company — —

5. Statutory demands/ liabilities in dispute, not provided for (Income Tax) 8,270 —

6. Reinsurance obligation to the extent not provided for in accounts — —

7. Others – Insurance claim in appeal 300 —

Total 8,570 —


164

6. COMPUTATION OF MANAGERIAL REMUNERATION(i) The Managing Director’s remuneration, which is included under “Employees’ remuneration and welfare benefits,” is classified as follows:


a. Salary 5,694 2,393b. Contribution to provident & superannuation funds 778 288c. Value of perquisites 128 54

Total 6,600 2,735

Note: (a) The above remuneration is in accordance with the requirements of Section 34A of the Insurance Act, 1938 and as approved by the IRDA.Based upon a legal opinion obtained by the Insurer, the provisions of the Companies Act, 1956 in relation to limits on Managerial Remunerationare not applicable.

(b) The remuneration excludes gratuity and leave encashment, which is accrued based on an actuarial valuation for the Insurer’soverall liability.

(ii) Sitting fees paid to Independent Directors amounts to Rs 80 (2002 – Rs 70).

7. CAPITAL COMMITMENTSParticulars 2003 2002

Estimated amount of contracts remaining to be executed on capital account andnot provided for (net of advances) 21,389 7,662

8. RISK RETENTION

During the year ended March 31, 2003, the Insurer wrote policies with sum at risk worth Rs 22,158 million (2002 – Rs 4,590 million), reinsuredtherefrom Rs 9,588 million (2002 – Rs 2,362 million) and thereby retained risk of 56.7 per cent (2002 – 48.5 per cent).

9. BUSINESS, SECTOR-WISE

Particulars 2003 2002Policies Premium Policies Premium

Income Income

Rural Sector (Gramin Bima Yojana) 14.02 per cent 0.29 per cent 7.49 per cent 0.93 per centUrban Sector 85.97 per cent 99.59 per cent 92.49 per cent 99.03 per centSocial Sector 0.01 per cent 0.12 per cent 0.02 per cent 0.04 per cent

The Insurer has issued 1 policy (2002 – 2 policies), covered 32,499 lives (2002 - 6,023 lives) and underwritten gross premium of Rs 488 (2002 –Rs 29) in the social sector.

10. TAXATIONBased upon a legal opinion obtained by the Insurer, the Management believes that no provision for taxation is required in the books of accountsince the special provisions of the Income-tax Act, 1961 relating to the taxation of persons carrying on life insurance business are applicable to it.

11. ACCUMULATED FUND ADDITION TO PARTICIPATING POLICYHOLDERSThe Board of Directors of the Insurer has, at its meeting held on May 22, 2003, declared an accumulated fund addition of Rs 1.08 million, asactuarially determined, to meet an effective 7.5 per cent (2002 – Rs 0.17 million to meet an effective 8 per cent) return on each participatingpolicyholder’s accumulated fund. Based upon a legal opinion obtained by the insurer, this amount has been debited to the Shareholders’ Accountas the Policyholders’ Account for the year has resulted in a deficit.

12. RATIOS (in per cent)Participating Non-participating Annuities

Participating

2003 2002 2003 2002 2003 2002

1. New business premium Not Not Not Notincome growth 378.78 applicable 574.19 applicale applicable applicable

2003 2002

2. Net retention ratio 98.51 97.283. Ratio of expenses of management 152.51 488.974. Commission ratio 19.08 24.435. Ratio of policyholders’ liabilities to shareholders’ funds 14.65 2.286. Growth rate of shareholders’ funds 19.70 0.097. Ratio of surplus to policyholders’ liabilities –245.46 –672.118. Change in net worth –9.47 –15.269. Profit after tax/ Total Income 0.00 0.00

10. (Total real estate + loans)/ (Cash + Invested Assets) 0.39 0.3211. Total Investments/ (Capital + Surplus) 163.13 134.5512. Total affiliated investments/ (Capital + Surplus) 0.00 0.00


165

13. ENCUMBRANCES ON ASSETS

There are no encumbrances on the assets of the Insurer as at the Balance Sheet date.

14. RELATED PARTIES DISCLOSURES

A. Related Parties where control exists

Nature of relationship Related Party

Holding Company Kotak Mahindra Bank Ltd (erstwhile Kotak Mahindra Finance Ltd)

B. Related parties (where transactions have taken place during the years ended March 31, 2003 and March 31, 2002)

(i) Holding Company Kotak Mahindra Bank Ltd (erstwhile Kotak Mahindra Finance Ltd)

(ii) Associate Company/ Joint Venture Partner Old Mutual PlcOld Mutual Life Assurance Company (South Africa) Ltd

(iii) Fellow Subsidiaries Kotak Securities LtdKotak Mahindra Capital Company LtdKotak Mahindra Primus Ltd

(iv) Enterprises in which Directors have significant Aero Agencies Ltdinfluence (‘Others’) K. A. Pandit & Co.

(v) Key management personnel Non-Executive DirectorsMr Uday Kotak, ChairmanMr Hasan Askari, Vice-ChairmanMr James Harry Sutcliffe, DirectorMr Dipak Gupta, DirectorMr S.S. Thakur, Independent DirectorMr Vineet Nayyar, Independent DirectorMr M.G. Diwan, Independent DirectorMs Pallavi Shroff, Independent Director

Executive DirectorMr Shivaji Dam, Managing Director

C. The following are transactions and closing balances of related parties in the ordinary course of business:

Nature of 2003 2002transaction Holding Associate Fellow Others Holding Associate Fellow Others

Company Company Subsidiary Company Company Subsidiary

Expenses/reimbursementfor servicesreceived 21,585* 3,939 33 7,531 40,733 896 175 3,003

PremiumIncome 1,047 — — — — — — —

OutstandingPayables 4,357 4,835 — 157 5,076 896 — 271

Issue ofshare capital 224,220 78,780 — — — — — —

* Relates to rent, information technology infrastructure, tax & legal services and share in corporate advertisements.

D. Refer Note (6) above for the details of managerial remuneration for the details of payments to Directors.

15. OPERATING LEASE COMMITMENTS

The Insurer has taken various office and residential premises on operating lease and leave & license agreements. Lease payments are recognizedin the Revenue Account under ‘Rent, Rates and Taxes.’ The future minimum lease payments under non-cancelable operating leases for suchpremises are as follows:


Not later than one year 27,717 8,353

Later than one year not later than five years 28,907 8,758

Later than five years 529 651


166

16. SEGMENTAL BALANCE SHEET

Particulars Participating Non-Participating Annuities - Shareholders Totalbusiness business Participating

2003 2002 2003 2002 2003 2002 2003 2002 2003 2002

Investments 97,640 14,470 153,034 20,394 17,232 — 790,813 1,003,091 1,058,719 1,037,955

Loans against policies — — 788 — — — — — 788 —

Reinsurance premiumfor future period 4,315 — 4,739 — 17 — — — 9,071 —

Outstanding Premium 8,956 962 454 407 — — — — 9,410 1,369

Unallocated Assets — — — — — — 501,012 391,736 501,012 391,736

Total Assets 110,911 15,432 159,015 20,801 17,249 — 1,291,825 1,394,827 1,579,000 1,431,060

Proposal Deposits 16,829 11,266 8,898 4,763 1,417 — — — 27,144 16,029

Balance due toreinsurance companies 6,147 1,364 7,903 307 28 — — — 14,078 1,671

Policy liabilities 97,640 14,470 153,034 20,394 17,232 — — — 267,906 34,864

Insurance Reserves (520,332) (214,159) (93,378) (20,165) (43,882) — — — (657,592) (234,324)

Unallocated Liabilities — — — — — — 99,262 85,497 99,262 85,497

Shareholders’ Funds 510,627* 202,491* 82,558* 15,502* 42,454* — 1,192,563 1,309,330 1,828,202 1,527,323

Total Liabilities 110,911 15,432 159,015 20,801 17,249 — 1,291,825 1,394,827 1,579,000 1,431,060

* Balancing figure

17. ADDITIONAL SEGMENTAL REPORTING

Particulars Participating Non-Participating Annuities - Shareholders Totalbusiness business Participating

2003 2002 2003 2002 2003 2002 2003 2002 2003 2002

Non-cash expensesother than depreciation

— Liability against lifepolicies 97,640 14,470 153,034 20,394 17,232 — — — 267,906 34,864

— Accumulatedfund additionto policyholders 1,016 171 — — 65 — — — 1,081 171

— Preliminaryexpenses — 1,324 — 99 — — — — — 1,423

— Amortization ofpremium oninvestments — — — — — — 25,865 25,330 25,865 25,330

— Provision for gratuityand leaveencashment 6,257 2,180 819 164 555 — — — 7,631 2,344


167

18. SUMMARY OF FINANCIAL STATEMENTS

Particulars 2003 2002 2001

Policyholders’ Account1. Gross premium income 403,234 75,779 —2. Net premium income 397,227 73,716 —3. Income from investments (net) 4,142 — —4. Other income — — —5. Total Income 401,369 73,716 —6. Commission 76,053 18,122 —7. Brokerage — — —8. Operating expenses related to insurance business 613,776 369,852 28,7399. Total Expenses 689,829 387,974 28,739

10. Payment to policy holders 2,144 — —11. Increase in actuarial liability 231,961 34,693 —12. Surplus/ (Deficit) from operations (522,565) (348,951) (28,739)Shareholders’ Account13. Total income under shareholders’ Account 127,034 140,303 33,14214. Profit/ (Loss) before tax — — 1,22915. Provision for tax — — —16. Profit/ (Loss) after tax — — 1,22917. Profit/ (Loss) carried to Balance Sheet 1,229 1,229 1,229Miscellaneous18. (A) Policyholders’ account:

Total funds 267,906 34,864 —Total Investments 267,906 34,864 —

. Yield on investments (%) 10.05% Not applicable Not applicable(B) Shareholders’ account:

Total funds 1,170,610 1,292,999 1,525,900Total Investments 790,813 1,003,091 1,198,220Yield on investments (%) 8.60% 8.35% 9.21%

19. Yield on total investments 8.64% 8.35% 9.21%20. Paid up equity capital 1,313,000 1,010,000 1,010,00021. Net worth 1,170,610 1,292,999 1,525,90022. Total Assets 1,438,516 1,327,863 1,525,90023. Earnings per share (Rupees) Nil Nil 0.00124. Book value per share (Rupees) 8.92 12.80 15.11

Note: Yield on investments includes return on fixed deposits forming part of ‘Cash and Bank balances’.

19. INVESTMENTSA. All the investments of the Insurer are performing investments in accordance with the directions issued by IRDA.B. There were no investments as at the year-end, which were required to be valued on a ‘fair value’ basis.C. Value of contracts in relation to investments for:

Particulars 2003 2002Purchases where deliveries are pending — —Sales where payments are overdue — —

20. EARNINGS PER SHARE

Earnings Per Share is calculated by dividing the Profit in the Shareholders’ Account by the weighted average number of equity shares outstandingduring the year. The numbers used in calculating basic and diluted earnings per equity share are as follows:

Particulars 2003 2002Profit after taxation and before exceptional items — —Profit after taxation — —Weighted average number of shares 101,996,164 101,000,000Earnings per share before exceptional items (Basic and Diluted) — —Earnings per share (Basic and Diluted) — —Face value per share Rs 10 Rs 10

21. INSURANCE RESERVESThe balances under the head ‘Insurance Reserves’ represent the cumulative deficit in the Revenue Account (Technical Account) as at the year-end.


168

22. ADDITIONAL INFORMATION ON REMUNERATION

Information as per Section 217 (2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975

1. Employed for the full year

Name Gross Exp. Age Date of Last Employment HeldRemuneration Designation Qualifications Years Years commen- (Rs) cement

Nihar Rao 3,608,400 Vice President – IT B.E. (IIT), 19 44 01-Jul-01 Indian Hotels Company Ltd.PGDM (IIM)

G Murlidhar 3,937,874 Chief Financial B. Sc, ACA, 22 42 01-Apr-01 Kotak Mahindra Finance Ltd.Officer and ACS, ICWACompany Secretary

Shivaji Dam* 6,600,296 Managing Director B. Com, ACA, 22 46 06-Jan-01 Kotak Mahindra Finance Ltd. ACS, AICWA

Andrew Cartwright 10,978,417 Appointed Actuary B. Bus. Sc. (Hons), 23 44 01-Jan-01 Kotak Mahindra Finance Ltd.FIA, CFP, FASI,FASSA

K. Madhava Rao 2,567,903 Vice President – HR MA, PMIR (TISS) 26 46 19-Oct-01 Syntel India Ltd.

2. Employed for part of the year

Treman Ahluwalia 4,020,869 Vice President – B. Com, MBA 22 42 30-Dec-00 Kotak Mahindra Finance Ltd.Marketing

Brett Cameron 765,967 Product Actuary B. Bus. Sc., 6 27 17-Dec-02 Old Mutual Life Assurance Co.MBA (Insead), (South Africa) Ltd.CFP, FIA, FASSA

Ashutosh Bishnoi 566,455 Vice President – B. Com., MBA 19 41 20-Jan-03 JM Capital ManagementMarketing Pvt. Ltd.

J Eksteen de Waal 1,107,519 Consultant, Biuris, LLB, FILPA 22 44 06-Jan-03 PFASales Training

James Thompson 5,119,424 Finance Actuary FIA, FIAA 28 56 30-Apr-02 Old Mutual Life Assurance Co.(South Africa) Ltd.

Rajesh Puri 2,481,483 Vice President - BE (Mech.), MMS 16 40 31-May-02 Whirlpool of India Ltd.Tied Agency

Nandip Vaidya 1,134,498 Vice President – B. Tech (IIT), 18 39 01-Nov-02 Kotak Mahindra Finance Ltd.Alternate Channel PGDM (IIM)

Notes:1. Gross remuneration includes salary, house rent allowance, reimbursement of medical expenses and leave travel passage, Company’s contribution to

Provident & Superannuation funds and monetary value of perquisites calculated in accordance with the provisions of the Income Tax Act, 1961 andthe Rules made thereunder.

2. The nature of employment in all cases is non-contractual except in cases marked (*) and the terms and conditions of employment are as per theCompany’s rules.

3. None of the above employees is related to any Director of the Company and holds more than 2% of the total share capital of the Company.

23. PRIOR YEAR COMPARITIVES

Prior year amounts have been reclassified wherever necessary to conform to current year’s presentation. The Insurer has commenced annuitybusiness during the current year and hence no prior year figures for this business are available.


169

24. BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE

I. Registration Details

Registration No. 1 2 8 5 0 3 State Code 1 1

Balance sheet date 3 1 0 3 2 0 0 3

Date Month Year

II. Capital raised during the year (Amount in rupees thousands)

Public issue Rights issue

– 3 0 3 0 0 0

Bonus issue Private placement

– –

III. Position of mobilization and deployment of funds (Amount in rupees thousands)

Total liabilities Total assets

1 4 3 8 5 1 6 1 4 3 8 5 1 6

Source of Funds

Paid-up capital Reserves and surplus

1 3 0 6 6 1 0 5 2 1 5 9 2

Secured loans Unsecured loans

– –

Application of Funds

Net fixed assets Investments

2 0 0 0 5 7 1 0 5 8 7 1 9

Net current assets Miscellaneous expenditure

1 7 4 9 7 1 –

Accumulated losses

–

IV. Performance of Company (Amount in Rupees thousands)

Turnover Total expenditure

Profit before tax Profit after tax

Earning per share in Rs Dividend %

N I L N I L

V. Generic names of three principal products/services of Company (As per monetary terms)

Item Code No. (ITC Code) –

Product Description L I F E I N S U R A N C E A N D A N N U I T Y

Note: The Insurer is in the business of life insurance and hence the accounts are not prepared in accordance with Schedule VI to the Companies Act, 1956.

Further, the Insurance Act, 1938 requires the accounts of the Insurer to be split between Policyholders’ and Shareholders’ Account. In view of this, it

is not possible to give all the information as required under Part IV of Schedule VI to the Companies Act, 1956.


170

Registration No: 107; Date of Registration: January 10, 2001STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED MARCH 31, 2003(Amounts in thousands of Indian Rupees)

Particulars Year ended Year endedMarch 31, 2003 March 31, 2002

Cash Flows from Operating Activities

Premium and Deposits from Policyholders 406,308 88,376

Cash paid to Agents, Suppliers and Employees (647,314) (298,431)

Advances/ Deposits placed (37,052) (19,406)

Reinsurance premium (net) (2,671) 1,671

Claims paid (net of reinsurance) (2,144) —

Deposits held for regulatory purposes (4,500) —

Income-tax paid (8,270) —

Net cash from/ (deployed in) Operating Activities (295,643) (227,790)

Cash Flows from Investing Activities

Purchase of fixed assets (141,198) (84,908)

Interest received on Investments (net of interest expended onpurchase of investments) – See Note (c) below 110,640 126,037

Decrease/ (Increase) in investments (net) (21,056) 134,148

Advances to Suppliers of fixed assets (2,846) (11,226)

Proceeds on sale of fixed assets — 200

Net cash deployed in Investing Activities (54,460) 164,251

Cash Flows from Financing Activities

Proceeds from issue of Share Capital 303,000 —

Expenses on subscription of shares (2,121) —

Net cash from Financing Activities 300,879 —

Net (decrease)/ increase in Cash and Cash Equivalents (49,224) (63,539)

Cash and Cash Equivalents at start of year 205,919 269,458

Cash and Cash Equivalents at end of year 156,695 205,919

Notes: (a) Cash and cash equivalents at the end of the year includes: 2003 2002

Cash (including cheques on hand, drafts and stamps) 28,813 12,173

Bank Balances (including deposits) 127,882 193,746

156,695 205,919

(b) The above Statement of Receipts and Payments has been prepared as prescribed by Insurance Regulatory (Preparation of FinancialStatements & Auditor’s Report of Insurance Companies) Regulations, 2002 under the ‘Direct Method’ laid out in Accounting Standard 3 –‘Cash Flow Statements’ issued by the Institute of Chartered Accountants of India.

(c) Net of tax deducted at source Rs 203 (2002 – Rs 113).

(d) Due to large volume of investments transactions, cash flow is reported on net basis in accordance with Accounting Standard 3 issued by theInstitute of Chartered Accountants of India.




MumbaiMay 22, 2003






171

MANAGEMENT REPORTIn accordance with the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor’s Report of Insurance Companies)Regulations, 2002, the Board of Directors presents its Management Report for the year ended March 31, 2003.1. Validity of Registration: Your Directors confirm that the registration granted by the Insurance Regulatory and Development Authority is valid on this

date.2. Statutory Dues: Your Directors certify that all the dues payable to the statutory authorities have been duly paid.3. Shareholding pattern: Your Directors confirm that the shareholding pattern and the transfer of shares is in accordance with the statutory and

regulatory requirements.4. Investment of policyholders’ funds: As at March 31, 2003, your Company has not directly or indirectly invested outside India the funds of the

holders of policies issued in India.5. Solvency margins: Your Directors confirm that the solvency margins as required by regulations prescribed by Insurance Regulatory and Development

Authority of India have been maintained.6. Values of assets: Your Directors certify that the values of all the assets have been reviewed on the date of the Balance Sheet and that the assets set

forth in the Balance Sheet are shown in the aggregate at amounts not exceeding their realisable or market value under the several headings –“Investments”, “Outstanding Premiums”, “Interest, Dividends and Rents outstanding”, “Interest, Dividends and Rents accruing but not due”, “Advancesand other assets”, “ Cash” and the several items specified under “Other Accounts.”

7. Application of life insurance funds: Your Directors certify that no part of the life insurance fund has been directly or indirectly applied in contraventionof the provisions of the Insurance Act, 1938 (4 of 1938) relating to the application and investment of the life insurance funds.

8. Risk exposure: Your Company recognises the risks associated with the life insurance business and plans to manage it by adopting prudent policiescommensurate with the needs of the life insurance business. The key risks affecting the operations of the Company are underwriting risks andinvestment Risks.The underwriting risk is managed by the Company’s underwriting function and further by establishing reinsurance treaties with various reinsurancecompanies. All risks above the pre-determined retention limits are automatically reinsured.The investment risk is managed by creating a portfolio of different asset classes and of varied maturities so as to spread the risk across a wide categoryof investee companies. Your Company has constituted an Investment Committee, which acts as the policy making body for the investment operations.The Investment Committee lays down various internal policies and norms governing the functioning of the Investment Department. The InvestmentCommittee periodically discusses the investment strategy, portfolio structures, performance of the portfolio and other issues relating to the investmentportfolio.

9. Operations in other countries: Your Directors confirm that during the year ended on March 31, 2003, your Company had no operations in othercountries.

10. Ageing of claims: The Company does not have any outstanding claims as at March 31, 2003. Claims, lodged during the year, were settled within theinternal processing standards.

11. Valuation of investments: Your Company considers its debt securities as ‘held to maturity’ and measures them at historical cost subject to amortisation.Debt securities purchased at a discount are carried at a value after amortising the implicit yield thereon. As at March 31, 2003, your Company had notinvested in shares. Further, the market value of quoted securities is taken at the closing value of the respective securities on the Balance Sheet date.

12. Review of asset quality and performance of investment: Your Company has investments in debt securities issued by the Government of India,public financial institutions, select multinational banks and public sector undertakings with a AAA rating/ guaranteed by the Government. There hasbeen no material change in the quality of your Company’s investments after the Balance Sheet date.

13. Responsibility Statement: Your Directors state that:(a) in the preparation of financial statements, the applicable accounting standards, principles and policies have been followed;(b) the accounting policies have been adopted and applied consistently and the judgements and estimates made are reasonable and prudent so as to

give a true and fair view of the state of affairs of the Company at the end of the financial year and of the operating profit or loss and of the profitor loss of the Company for the period;

(c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the applicable provisions of theInsurance Act 1938 (4 of 1938) / Companies Act, 1956 (1 of 1956), for safeguarding the assets of the Company and for preventing and detectingfraud and other irregularities;

(d) the financial statements are prepared on a going concern basis;(e) an internal audit system commensurate with the size and nature of the business exists and is operating effectively.

14. Schedule of payments made to individuals, firms, companies and organizations in which the Directors are interested:Your Company has made the following payments to individuals, firms, companies and organizations in which the Directors are interested:

Name of Directors Company the Director/s Interested as Amount paid in theis/ are interested in financial year (Rs ‘000)

Uday Kotak, Shivaji Dam and Dipak Gupta Kotak Mahindra Bank Ltd. Director 21,585(erstwhile Kotak Mahindra Finance Ltd.)

Uday Kotak, Pallavi Shroff Aero Agencies Ltd. Director, 7,446Related to a Director

Uday Kotak, Shivaji Dam and Dipak Gupta Kotak Mahindra Primus Ltd. Director 33M. G. Diwan K. A. Pandit & Co. Partner 34

For OM Kotak Mahindra Life Insurance Company Limited

Uday Kotak Shivaji DamChairman Managing DirectorMumbai, May 22, 2003

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