DIRECTORS' REPORT Dear Members, We are pleased to present your Company's Twenty Seventh Annual Report, together with the Audited Statement of Accounts, for the year ended March 31, 2016. 1. RESULTS OF OPERATIONS - Financial Results The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("2013 Act"), as applicable and guidelines issued by the Securities and Exchange Board of India ("SEBI"). Accounting policies have been consistently applied except where a newly issued accounting standard, if initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Management evaluates all recently issued or revised accounting standards on an ongoing basis. The Company has nine subsidiary companies across the globe. The Company discloses stand-alone audited financial results on a quarterly and annual basis, consolidated un-audited financial results on a quarterly basis and consolidated audited financial results on an annual basis. a) Consolidated Operations Revenue from consolidated operations for the year was Rs. 348.70 crore, as compared to Rs. 353.14 crore in the previous year. As the Company continued its focus on strategic initiatives for new products, sales and market development and high level people to help drive transformation, the overall operational expense for the year continued to be high at Rs. 318.51 crore, against Rs. 287.83 crore in the previous year. This impacted the Operating Profit (EBITDA) which was at Rs. 30.19 crore, 9% of revenue, against Rs. 65.31 crore, 18% of revenue, in the previous year. Profit after Tax for the year was at ` 32.47 crore, 9% of revenue, against ` 64.71 crore, 18% of revenue, in the previous year. b) Standalone Operations Revenue from the standalone operations of your Company for the year was Rs. 278.17 crore against Rs. 279.04 crore in the previous year. Total operational expense for the year was Rs. 265.24 crore against Rs. 218.06 crore in the previous year, an increase of 22%. Our planned expenditure on strategic initiatives in product, marketing and sales and people resulted in a lower Operating Profit (EBITDA) of Rs. 12.93 crore, 5% of revenue, against Rs. 60.98 crore, 22% of revenue, in the previous year. Profit after Tax for the year was at Rs. 44.66 crore, 16% of revenue, against Rs. 60.74 crore, 22% of revenue in the previous year 2. SHARE CAPITAL Issued and Paid-up Share Capital The paid-up share capital of the Company, as on March 31, 2016, is 32,383,724 equity shares of Rs. 10 each similar to the paid-up share capital as on March 31, 2015. Shares under Compulsory Dematerialization The shares of the Company are under compulsory dematerialization ("Demat") category and are available for trading on both the depositories in India viz. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Of the entire paid up shares, 32,246,178 shares or 99%, are in dematerialized form as at March 31, 2016. The International Securities Identification Number (ISIN) allotted to the Company's shares is INE096B01018 4. LIQUIDITY AND CASH EQUIVALENTS Your Company continues to retain its debt-free status and maintains sufficient cash and cash equivalents to meet future strategic initiatives. The Company has been conservative in its investment policy over the years, maintaining a reasonably high level of cash and cash equivalents which enable the Company to completely eliminate short and medium term liquidity risks, at the same time also help scale up operations at a short notice. The goal of cash management at Nucleus is to: a. Use cash to provide sufficient working capital to manage business operations of the Company to be able to add value to all our stakeholders and continuously enhance the same. b. Maintain sufficient cash as reserves that will aid the Company in capturing meaningful business opportunities, including acquisitions. c. Invest surplus funds in low-risk bank deposits, debt schemes of mutual fund and tax free secured bonds of Public Sector Enterprises. Cash and cash equivalents including current investments at a consolidated level of Rs. 249.00 crore, constitute 54% of the shareholders' funds at the year end, against Rs. 281.25 crore, 64% of the shareholders' funds at the close of the previous year. In addition, the Company holds tax free bonds issued by public sector enterprise on a 'hold to maturity' basis of a face value of Rs. 77.74 crore against Rs. 53.63 crore in the previous year, long-term fixed maturity plans of mutual funds of Rs. 27 crore against Rs. 15 crore last year and preference shares of Rs. 14.91 crore against Rs. Nil last year. DIVIDEND The Dividend Policy of your Company stipulates a dividend payout in the range of 15-30% of the profits available for distribution, subject to: a) Provisions of The Companies Act, 2013 and other applicable laws, and b) Cash flows of the Company We are pleased to state that for the 16th consecutive year, your Company has paid dividend. During the year, the Board of Directors had declared an interim dividend of 50% (Rs. 5.00 per equity share of Rs. 10 each). Last year, the dividend declared (final) and approved by shareholders was also 50% (Rs. 5.00 per equity share of Rs. 10 each). During the year, the Company paid a total dividend of Rs. 32.38 crore, of which Rs. 16.19 crore was paid as final dividend for FY14-15 in July 2015 and Rs. 16.19 crore was paid as interim dividend for the FY15-16 in March 2016. The total payout of Dividend for FY 2015-16 is 36% of standalone profits for the year. No amount was carried to reserves. 6. FIXED DEPOSITS Your Company has not accepted any fixed deposits covered under Chapter V of the Companies Act, 2013 and, as such, no amount of principal or interest was outstanding on the date of the Balance Sheet. 7. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES The Company policy for determining 'Material Subsidiaries' and on 'Related Party Transactions', as approved by the Board can be accessed on the Company website link: <http://www.nucleussoftware.com/investors>. Particulars of contracts or arrangements with related parties in the prescribed Form AOC-2, is provided as Annexure A to this Directors' Report. 8. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are provided in the notes to the Financial Statements. 9. MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION OF THE COMPANY BETWEEN THE END OF FINANCIAL YEAR 2016 AND DATE OF THIS REPORT No material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the Company. 10. CHANGE IN THE NATURE OF BUSINESS There has been no change in the nature of business of the Company. 11. MANAGEMENT DISCUSSION & ANALYSIS As per requirements of Regulation 34 of Securities and Exchange Board of India ( Listing Obligations and Disclosure) Regulations 2015, Management's Discussion and Analysis of the financial condition and results of both standalone and consolidated operations have been provided separately in this Annual Report. 12. REVIEW OF BUSINESS & OUTLOOK Your Company continues its journey as a preferred partner for banking and financial organizations worldwide, providing innovative and pioneering products, services and solutions. Continuing the relentless focus on customer success, your Company launched a range of innovative solutions during the year. Due to the increasing demand for real-time solutions among customers, many retail banks are focusing on moving to agile technology architectures. Mobile technology and analytical inputs based on social media are providing an increasing number of sources for real-time data that can be leveraged to gain a competitive advantage. Delivering great customer experiences and living up to the needs of digital banking are some of the business challenges that banks face today. The pace of technological change will not slow down and the tech sector as a whole must continue to seek the answer to achieving seamless integration and communication between products and platforms. According to the research consultancy IDC, the global information technology (IT) market surpassed $3.7 trillion in 2015 and is on track to reach $3.8 trillion in 2016 (constant currency). The software industry body-National Association of Software and Services Companies (Nasscom) expects the country's information technology (IT) industry to grow at 12-14% during 2016-17. 13. NEW PRODUCT LAUNCHES Your Company soft launched during the year, the world's first offline digital cash solution, PaySe™, designed and created with an aim to democratize money. Along with PaySe™, we have introduced PURSE™, a mobile to carry money, and PalmATM™ a bank teller application to democratize money. PaySe™ utilizes the latest advances in mobility, big data, open source and crypto currency (primarily tokenization) to deliver the world's first secure offline peer to peer payment solution. PaySe™ helps to reduce and offset the costs associated with cash by replacing physical cash notes with digital currency. With fewer notes in circulation, the cost of storing, transporting and processing cash will reduce dramatically. This will also increase the velocity of money. PaySe™ helps address the access challenges faced by banks, micro finance institutions (MFIs) and non banking finance companies (NBFCs) by making basic banking services accessible to the unbanked such as direct benefit transfers (DBT), micro pension, saving deposits, loans, recurring deposits etc. while delivering financial services. Your Company's flagship product FinnOne NeoTM was launched on cloud and is already a success in the domestic market. By providing FinnOne NeoTM on cloud, we are making one of the best lending software more affordable, quickly deployable and scalable as per our customer's business requirements. Your Company also launched a Lending Analytics product during the year. With cutting edge statistical and data analysis capabilities, Nucleus's Lending Analytics is a powerful and user-friendly solution enabling informed decision making through data visualization and business insight generation. The solution uses sophisticated predictive scoring models to allow various financial institution stakeholders to create scorecards that span the entire loan management life cycle Your Company also unveiled a new mobility product module, mApply, as part of the FinnOne NeoTM mobility suite. This mobility app is meant for end customers / prospects who can apply for a loan, track the status, check offers from the comfort of their home or office, or even when they are on the move. The product is a key offering helping banks to digitize their loan sourcing business process. As a part of ongoing development program, your Company also launched FinnAxia™ 3.0, the latest version of its next-generation integrated transaction banking product suite. The new product suite includes extended compliance with global and regional regulations and payment standards, increased capabilities for 'payments on behalf of' and additional features to support bank customers running corporate shared service centres and outsourced receivables management. Your Company remains committed to providing its existing and potential customers with competitive and cutting-edge products and will continue to focus on investments in product innovation and business expansion. NOTABLE ACCOLADES RECEIVED DURING THE YEAR • Named as a 'Model Bank Vendor 2016' Award by Celent for helping multiple clients achieve technology or implementation excellence. • Recognized amongst the 'World's top 5 Mobile Banking Solution Providers' by Forrester Research, Inc. in The Forrester Wave™: Mobile Banking Solutions, Q4 2015. • Corporate LiveWire - FinTech Excellence Awards 2015 in the category "Excellence in Providing Banking Products" SUBSIDIARY COMPANIES Your Company has nine subsidiaries across the globe. There are no associate companies or joint venture companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act"). During the year your Company made a beginning in the direction of acquiring new technologies through acquisitions. The Company acquired 96% stake in Avon Mobility Solutions Pvt. Ltd., a Company based in Chennai, with very good experience in logistics domain and expertise in developing mobile applications. Avon Mobility Solutions Pvt. Ltd. is now a Subsidiary of Nucleus. There has been no material change in the nature of the business of the subsidiaries. A statement containing the salient features of the financial statement of our subsidiaries in the prescribed Form AOC-1 is attached at the end of consolidated financial statements of the Company. The statement also provides the details of performance, financial position of each of the subsidiaries. Further, pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company. a) Nucleus Software Solutions Pte. Ltd. Nucleus Software Solutions Pte. Ltd. (NSS) is based in Singapore. It was incorporated in 1994 to expand the Company's business in South East Asia. Currently, it is the central entity for Asia-Pacific excluding Japan and Australia with responsibility for business development, sales and software development services for customers in the region. b) Nucleus Software Inc. Nucleus Software Inc. (NSI) is based in New Jersey, USA. It was incorporated in 1997 for providing business presence in the Americas. NSI operates as a business development and sales hub for the region. c) Nucleus Software Japan Kabushiki Kaisha Nucleus Software Japan Kabushiki Kaisha (NSJKK) is based in Tokyo, Japan. It was incorporated in 2001 to expand business in the country. NSJKK operates as a business development and sales hub for Japan. Additionally the subsidiary provides software development services, to the local customers in Japan. d) VirStra i- Technology Services Ltd. VirStra i- Technology Services Ltd. is based in Pune, India. It was incorporated in 2004 to provide software development services, targeted at the Japanese market. e) Nucleus Software Netherlands B.V. Nucleus Software Netherlands B.V. (NSBV) is based in Amsterdam, The Netherlands. It was incorporated in 2006 for enlarging business presence in the European market. NSBV is a business development and sales hub for Nucleus in Europe. f) Nucleus Software Ltd. Nucleus Software Ltd. (NSL) has operations in Jaipur with registered office in New Delhi. It was incorporated in 2008 for facilitating delivery to larger clients through operations in a Special Economic Zone. NSL acquired 17.41 acre of land in the Mahindra World Special Economic Zone, Jaipur and, in the first phase, has co-developed a 250-seater facility. g) Nucleus Software Australia Pty. Ltd. Nucleus Software Australia Pty. Ltd. (NSA) is based in Sydney, Australia. It was incorporated in 2014 for tapping the growing business opportunities in ANZ region. NSA operates as a business development and sales hub for the region. Additionally the subsidiary provides software development services, to the local customers in Australia. h) Nucleus Software South Africa Pty. Ltd. Nucleus Software South Africa Pty. Ltd. (NSSA) is based in Johannesburg , South Africa. It was incorporated in 2015 for tapping the growing business opportunities in South African region. NSSA operates as a business development and sales hub for the region. i) Avon Mobility Solutions Pvt. Ltd. Avon Mobility Solutions Pvt. Ltd, is based in Chennai and has very good experience in logistics domain and expertise in developing mobile applications. Avon Mobility Solutions Pvt. Ltd. became subsidiary of your Company on March 17, 2016. 16. INFRASTRUCTURE Your Company along with its subsidiaries has offices at several locations across the globe. The office space and seating capacity of these offices as on March 31, 2016 is detailed below: 17. QUALITY PROCESSES Your Company is committed to ensure the highest level of quality for its products and services. The key focus for this year was to synchronize the quality processes with the transformational journey of the organisation and optimize the cost of quality. Process improvement initiatives were centred on 'Process Optimization'. The FinnEdge implementation methodology has been successfully implemented in multiple projects and has started to pay dividends. FinnEdge covers various aspects of the project from 'Value Creation to Value Realization' and from 'Project Discovery' to 'Project Implementation' to 'Project Upgrade'. A dedicated Quality Assurance team handles the process change management, implementation and it's adherence across the organization. Quality assurance team monitors quality and productivity improvements through audits and dashboard reporting. 18. BRAND VISIBILITY In FY 2016, your Company continued to grow its marketing operations and activities in support of the strategic aspirations of the Company. During the year, the Company moved forward on its agenda of growth into new markets around the world by establishing brand awareness and generating demand from focused target segments. Your Company is continually investing in marketing mandated with the below objectives: • Ensure that your Company is known to provide high quality, innovative lending and transaction banking solutions to the target markets. • Establish your Company as the Industry Thought Leader. • Equip the sales team fully with the material and tools required to sell the product or service they represent. Industry interactions Your Company continued to participate in the leading industry events and business forums. The Company demonstrated how it can help customers achieve their business goals while sharing thoughts on industry best practices in 30 industry forums across 5 continents. These include 11th Annual Loan Origination Excellence Summit 2016 in Australia, ENG's Automotive Finance Summit in Europe, Sibos 2015 in Singapore, 7th Annual Retail Banking Africa 2015 in Africa, ABTEC 2015 in the Middle East and FIBAC 2015 in India. The Company also showcased its expertise in an exclusive webinar on Loan Collections Technology: Accelerating Digital Transformation and Minimizing Loan Delinquencies, organized in association with CEB TowerGroup. Road shows and meetings with Industry leaders were organized to discuss the business opportunities for the Company. Digital Presence & Visibility Your Company continued to also build its presence in traditional media as well as on social media channels. Media activities continued with interactions with worldwide media including television, print, wires and online portals and source excellent media opportunities in various geographies such as Australia, Africa, Middle East and India. Social media has been a focus area, covering a wide range of brand activities and our successes. The Company used social media primarily for activities involving thought leadership blogs, articles, customer video testimonials and other business content marketing purposes. 19. HUMAN RESOURCE MANAGEMENT Your Company is determined to accelerate its growth story by corresponding to the changing needs of diverse workgroup by fostering an engaging work environment, to constantly build the unique capabilities and skills of the people. The global employee strength of the Company, at the end of FY 2016, was 1,565. During the year, there were launches of various organization-wide HR initiatives to ensure high-performing and engaged workforce like: • Creation of a diverse and inclusive work environment through functional leadership and investments in newer markets to ensure global presence. • 2016 Recruitment drive for Talent Pipeline and Leadership Building: 0 Campus to Corporate - Software Engineer Trainee & Graduate Internship Programs (from premier Indian Engineering institutes) for inducting fresh talent from the campuses 0 Talent hiring across all geographies at Leadership level • Nucleus Global Internship Program (NGIP) - Phase 2 of JAPTEL (Japanese Trainees Engagement & Learning) was launched which was a 3-week program dotted with project internship, various industrial & cultural visits - to foster a multicultural work environment and build sustainable partnership with Nucleus and Top Educational Campuses around the world. • Week of Innovative Ideation - Innofest - was launched for participants to come up with innovative ideas on how to 'Uberize Lending' i.e. creating the lending experience of tomorrow. • Strengthening capability through trainings/workshops on Project Management & Technology through Functional/ Behavioral & Technical trainings, YLP (Young Leaders' Program) and LEAD (Leadership @ Engagement, Action and Development) programs Going forward, your Company's focus lies in creating an enviable workplace, driven by high performance culture and a clear career development plan for each employee. The HR roadmap will also focus on 'Collaboration & Acceleration' to stimulate our strategic growth through employee empowerment via employee councils. 20. CORPORATE GOVERNANCE We, at Nucleus, believe that good and effective Corporate Governance is critical to achieve corporate vision and mission of the organization; it is more of an organizational culture than a mere adherence to rules and regulations. Law alone cannot bring changes and transformation, and voluntary compliance both in form and in substance plays an important role in developing good Corporate Governance. Your Company has established and maintained a strong ethical environment, overseen by a fiercely independent Board of Directors, where 6 out of 8 Directors are independent. The Company practices and policies reflect true spirit of Corporate Governance initiatives. Your Company is in compliance of all mandatory requirements of Corporate Governance as stipulated as per Securities and Exchange Board of India ( Listing Obligations and Disclosure) Regulations 2015. Compliance status is provided in the Corporate Governance section of the Annual Report. A certificate issued by the Statutory Auditors of the Company under Regulation 34 of Securities and Exchange Board of India ( Listing Obligations and Disclosure) Regulations 2015 , confirming compliance of the conditions of Corporate Governance, is provided as Annexure C to this Directors' Report. The auditors' certificate for fiscal 2016 does not contain any qualifications, reservations or adverse remark. 21. DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP) In accordance with the provisions of the Companies Act 2013("Act") and the Articles of Association of the Company, Mr. R P Singh, Executive Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible has offered himself for re-appointment. Mr. Janki Ballabh, Mr. Prithvi Haldea, Prof. Trilochan Sastry, Mr. N. Subramaniam and Mrs. Elaine Mathias are Independent Directors as per the Companies Act, 2013, not liable to retire by rotation, to hold office for five consecutive years. They have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Act and there has been no change in the circumstances which may affect their status as Independent Director during the year. During the year, the Board of Directors on the recommendation of Nomination and Remuneration Committee, appointed Mr. S.M. Acharya as a Non-Executive Director (Additional Independent Director) of the Company on March 19, 2016. Mr. S. M. Acharya is a retired IAS officer of the Karnataka cadre. He has held various senior positions in both State and Central Governments in his long and distinguished career and retired as Secretary to the Government of India in the Ministry of Defense in 2009. The resolution seeking approval of the Members for the appointment of Mr. S. M. Acharya as an Independent Director has been incorporated in the notice of the forthcoming Annual General Meeting of the Company along with brief details about him. The Company has received a notice under Section 160 of the Act along with the requisite deposit proposing the appointment of Mr. S. M. Acharya. Mr. Vishnu R. Dusad. CEO and Managing Director had been reappointed as Managing Director w.e.f January 1, 2012 for a period of 5 years. His present term expires on December 31, 2016. The resolution seeking approval of the Members for the reappointment of Mr. Vishnu R. Dusad as CEO and Managing Director has been incorporated in the notice of the forthcoming Annual General Meeting of the Company along with brief details about him. The Company has received a notice under Section 160 of the Act along with the requisite deposit proposing the appointment of Mr. Vishnu R. Dusad. During the year, as per the provisions of Companies Act 2013, Mr.Ashish Nanda was appointed as the Chief Financial Officer and a Key Managerial Person of the Company. Pursuant to provisions of Section 203 of the Companies Act, 2013, Mr. Vishnu R. Dusad, CEO and Managing Director, Mr. Ashish Nanda, Chief Financial Officer and Ms. Poonam Bhasin, Company Secretary are the Key Managerial Personnel of the Company as on March 31, 2016. 22. BOARD EVALUATION The Board of Directors has carried out an annual evaluation of its own performance and performance of the Chairman, Board committees and individual Directors pursuant to the provisions of the Companies Act 2013 and the Corporate Governance requirements under Regulation 25 (4) of Securities and Exchange Board of India (Listing Obligations and Disclosure) Regulations 2015. The Board, along with the Nomination and Remuneration Committee, developed and adopted the criteria and framework for the evaluation of each of the Directors and of the Board and its Committees. The evaluation was then conducted as per the approved process (explained in detail in the Report on Corporate Governance of this Annual report). The Chairman of the Committee also had interactions with each of the Directors and sought their feedback and suggestions on the overall Board Effectiveness and Directors performance. In addition, pursuant to the provisions of Schedule IV to the Companies Act, 2013 the Independent Directors reviewed the performance of the Non-Independent Directors and of the Board as a whole, performance of the Chairman of the Board taking into account the views of all the Directors, and the quality, quantity and timeliness of flow of information between the Company management and the Board and its sufficiency for the Board to effectively perform its duties. The Chairman placed the Evaluation Summary before the committee members. The same was discussed in detail, and the Members recorded their overall satisfaction 23. COMPANY'S POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION The primary responsibility of the Nomination and Remuneration Committee (NRC) is to identify and nominate suitable candidates for Board membership. The Committee also formulate policies relating to the remuneration of Directors, Key Managerial Personnel and other senior employees of the Company. The Committee, while evaluating potential candidates for Board membership, considers a variety of personal attributes, including experience, intellect, foresight, judgment and transparency, and match these with the requirements set out by the Board. The basic responsibilities of NRC with regard to Directors' appointment, are as follows: • Recommending desirable changes in Board size, composition, Committee structure and processes, and other aspects of the Board's functioning. • Formulating criteria for determining qualifications, positive attributes and Independence of a Director. • Conducting search and recommending new Board members in light of resignation of current members or a planned expansion of the Board. • Identifying persons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down, and recommend to the Board their appointment and removal. The policy of the Company for selection of Directors is provided as Annexure D and Remuneration Policy for Directors, Key Managerial Personnel and other employees is provided as Annexure E to this Directors' Report. 24. DECLARATION BY INDEPENDENT DIRECTORS The Company has received declarations from all the Independent Directors that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 25 of Securities and Exchange Board of India ( Listing Obligations and Disclosure) Regulations 2015 . 25. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTOR'S The details of programmes for familiarisation of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters can be accessed on the Company website link : <http://www>. nucleussoftware.com/investors 26. MEETINGS OF THE BOARD OF DIRECTORS The Board met 9 times during the year. The details are provided in the Report on Corporate Governance, a part of this Annual Report. 27. COMMITTEES OF THE BOARD There are currently six Committees of the Board, as follows: • Audit Committee • Compensation Committee • Corporate Governance Committee • Nomination and Remuneration Committee • Stakeholder Relationship Committee • Corporate Social Responsibility Committee 28. VIGIL MECHANISM The Company has a well established whistle blower policy as part of vigil mechanism for Directors and employees to report concerns about unethical behaviour, actual or suspected fraud or violation of the Company's Code of conduct or ethics policy. This mechanism also provides for adequate safeguards against victimization of Director(s)/employee(s) who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee in exceptional cases. 29. SIGNIFICANT AND MATERIAL ORDERS No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future. 30. RISK MANAGEMENT POLICY The Company has developed and implemented a 'Risk Management Policy' that includes identification of elements of risk, which in the opinion of the Board may threaten the existence of the Company. Risk Management Report forms a part of this Annual Report. 31. ADDITIONAL INFORMATION TO SHAREHOLDERS Detailed information to the shareholders is provided in the Shareholders' Referencer, a part of this Annual Report. 32. AUDITORS Statutory Auditors M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, the Statutory Auditors of your Company, hold office upto the conclusion of the forthcoming Annual General Meeting of the Company. In line with the requirement of Sec 139 (1) of the Companies Act, 2013 and Company's Policy for Rotation of Auditors, the Audit Committee considering the qualifications and experience of M/s BSR and Associates, LLP, Chartered Accountants, recommended their appointment as Statutory Auditors of the Company, to the Board. The Board further recommends their appointment as Statutory Auditors to hold office from the conclusion of this Annual General Meeting (AGM) until the conclusion of Annual General Meeting of the Company to be held in Calendar year 2021, to the shareholders' for approval in this AGM. In terms of proviso one of Section 139 of the Companies Act 2013, the appointment of Auditors shall be placed for ratification at every general meeting. M/s BSR and Associates, LLP, Chartered Accountants have furnished a certificate of their eligibility as per Section 141 of the Companies Act, 2013 and have provided their consent for appointment as Statutory Auditors of the Company. Secretarial Auditor As per the Companies Act 2013, Secretarial Audit by a practicing Company Secretary has become mandatory for prescribed companies, and they are required to annex the Secretarial Audit report with their Board Report in the Annual Report. We are pleased to inform that your Company, as a voluntary practice, has been getting Secretarial Audit done for the past several years and also reporting it in the Annual Report. Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board appointed, Sanjay Grover & Associates, Practising Company Secretaries to undertake the Secretarial Audit of the Company. Secretarial Audit Report in the prescribed Form MR 3, is provided as Annexure F to this Directors' Report. The Secretarial Auditors' Report does not contain any qualification, reservation or adverse remark. The Company also adheres to the various Secretarial Standards issued by the Institute of Companies Secretaries of India. 33. INTERNAL FINANCIAL CONTROLS Your Company has in place adequate internal financial controls with reference to the financial statements. During the year, in order to further strengthen the internal financial controls, a renowned professional consultant firm was hired to conduct an assessment of the existent internal financial controls and advise on best practices for adoption. Deloitte Haskins & Sells, the statutory auditors of the Company, have audited the financial statements included in this annual report and have issued unmodified opinion on the adequacy and operating effectiveness of the Company's internal financial controls over financial reporting. 34. CORPORATE SOCIAL RESPONSIBILITY (CSR) Inclusive growth and sustainable development are strong pillars of your Company's responsible corporate citizenship and are a part of the core values and driving force for many of its initiatives. The Company believes that responsible investments in this regard will generate long term value for all the stakeholders. In accordance with requirements of the Companies Act 2013, the Company has a Corporate Social Responsibility Committee comprising of a majority of Independent Directors and chaired by an Independent Director. Prof. Trilochan Sastry is the Chairman of the Committee and Mr. Vishnu R Dusad, Mr. Prithvi Haldea and Mr. S. M. Acharya are the other members. The Committee framed and recommended a CSR Policy to the Board for adoption and instituted a transparent monitoring mechanism for ensuring implementation of the projects / activities to be undertaken by the Company. The CSR Policy may be accessed on the Company website link: <http://www.nucleussoftware.com/investors>. Your Company has set up Nucleus Software Foundation, a Trust for the purposes of undertaking CSR activities of the Company. Nucleus Software Foundation, the CSR arm of the Company, established in 2014, works towards a stated mission: "Empowering underprivileged with essence of education and thereby better livelihood and better life". During the year under review, the Foundation worked towards its aim to take technology aid for enabling Quality Education at the bottom of pyramid. It undertook a project to support the education for the underprivileged children by use of digital games in app format for better engagement and assessments. The schools which were selected for the pilot run were for underprivileged children, managed by NGO's and located in NCR area. The other CSR initiatives undertaken by the Foundation during the year are: ¦ Sponsor of college and hostel fees of two students of IIT Roorkee. ¦ Funding for watershed projects ¦ Donation for flood relief in Chennai During the year, the Company contributed Rs. 1.20 crore towards CSR activities to the Foundation. Out of the total funds received, the Foundation expended Rs. 1.12 crore towards CSR activities. The Foundation is in the process of stabilizing the initiative of digital education for making it a longterm project and thus there is a shortfall in the expenditure done on CSR activities by the Foundation, with regard to the amount mandated as per law. The Annual Report on CSR activities is provided as Annexure G to this Directors' Report. EMPLOYEE STOCK OPTION PLAN (ESOP) Currently, there is only one ESOP scheme prevalent in the Company; ESOP scheme - 2015 (instituted in 2015). As per ESOP scheme 2015, equity shares would be transferred to eligible employees on exercise of options through Nucleus Software Employee Welfare Trust, which is established to carry out activities for the benefit and welfare of its Employees by launching various Schemes in accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014. During the year, the Board of Directors at the recommendation of Compensation Committee terminated the ESOP scheme 1999, ESOP scheme 2002, ESOP scheme 2005 and ESOP scheme 2006. During the year, no stock options were granted to any employee under the above-mentioned ESOP plan and therefore no calculations are required to be made or reported regarding difference between intrinsic value and fair market value of ESOPs granted. 36. PARTICULARS OF EMPLOYEES In terms of the provisions of Section 197 (12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in the Annual Report. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel ) Rules, 2014 are provided in the Annual Report. Having regard to the provisions of the first proviso to Section 136(1) of the Companies Act, 2013 and as advised, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request. The full Annual Report including the aforesaid information is available on the Company's website. 37. DIRECTOR'S RESPONSIBILITY STATEMENT Pursuant to Sec 134 (5) of the Companies Act, 2013, the Directors confirm that: (a) in the preparation of the annual accounts for the financial year ended March 31, 2016, the applicable accounting standards had been followed along with proper explanation relating to material departures; (b) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period; (c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (d) the Directors had prepared the annual accounts on a going concern basis; (e) the Directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory and secretarial auditors, including audit of internal financial controls over financial reporting by the statutory auditors, and the reviews performed by management, the Board is of the opinion that the Company's internal financial controls were adequate and effective during FY 2015-16. 38. EXTRACT OF ANNUAL RETURN Extract of Annual Return of the Company in the prescribed Form MGT-9, is provided as Annexure H to this Directors' Report. 39. ACKNOWLEDGEMENTS Your Directors would like to place on record their gratitude for the co-operation received from the Government of India, State Governments of Delhi, Uttar Pradesh and Rajasthan, Customs and Excise Departments, Department of Scientific and Industrial Research (Ministry of Science and Technology), Software Technology Park-Noida, Software Technology Park-Pune, Special Economic Zone authorities and other government agencies. Your Directors would also like to thank the Company's customers, bankers, vendors, partners and shareholders for their continued support to the Company. In specific, the Board would like to put on record its sincere appreciation of the commitment and contribution made by all employees of the Company. For and on behalf of the Board of Directors Janki Ballabh Chairman Place : New Delhi Date : June 2, 2016 |