DIRECTORS' REPORT

Dear Members,

Your Directors have pleasure in presenting their Twenty Second Annual Report and the Audited Statements of Accounts for the financial year ended March 31, 2016.

Dividend:

In the absence of profits, your Directors do not recommend payment of any dividend for the Financial Year 2015-2016.

State of Company's Affairs:

Market was edgy and volatile for a major part of the financial year amidst pessimism about growth in the global economy especially after sharp fall in Chinese markets (including Yuan devaluation) which resulted in concerns related to emerging market economies. Moreover status of emerging economies took a backseat with the Fed raising interest rates. With oil touching its lowest level in a decade (~$30 per barrel), allocation of sovereign funds from the oil-rich countries went down leading to FIIs withdrawing funds from India.

During FY16, FIIs withdrew Rs. 14,172 crores from equity markets after remaining net buyers for the last six years (from FY10-FY15). On the contrary, domestic institutional investors during this period purchased shares worth Rs. 80,433 crores aided by rise in mutual fund inflows. Better penetration into smaller towns and falling interest rate in bank FDs attracted more investors to mutual funds. As a result, AUMs of mutual funds rose 14% to Rs. 13.53 lakhs crores in FY16.

The benchmark Nifty index lost ~9% during FY16 with a majority of the sectors being in the negative zone. PSU Banks was the worst performer with 28% loss as mounting bad loans led to higher provisioning that adversely affected earnings amidst low credit growth scenario. Performance of other prominent sectors were not encouraging either - Auto (down 6%), FMCG (down 0.6%), IT (down 6.4%), Metal (down 18%). Media (6%) and Energy (1.9%) were the only sectors to be in the positive zone.

Economic news for the domestic economy remains mixed with inflation being in the comfort zone of the RBI over the past few months. Controlled inflation coupled with gradually improving index of industrial production growth and forecast of good monsoon this year (after two years of drought) augurs well for an improving domestic economy. While shrinking trade deficit is good news for the economy the continued dip in exports due to global slowdown is really worrisome.

The current market outlook presents a mixed bag with positive and negative factors equally balanced thus supporting an overall view of cautious optimism. The country would stand to gain from a benign outlook on the soft prices of crude and has been one of the biggest beneficiaries of the same in the past year. If the government's attempt of getting the GST bill passed succeeds it will be a game changing reform for the economy.

On balance, it is our view that India will remain a very attractive destination for investors in the long term and therefore it would be ideal for investors who seek to achieve their respective financial goals through active participation in the Indian capital markets. The portfolio has been designed to deliver superior returns over a longer term horizon in the realm of 5 years and beyond as the stocks and sectors within it are clear market winners and segment leaders and offer sustainable and reasonable returns from their businesses.

It is our pleasure to declare that the maiden scheme launched by your Company, Shriram Equity & Debt Opportunities Fund (a hybrid equity oriented asset allocation fund) in the year 2013, has declared dividend thrice since inception with dividend of Rs. 1.15 per unit (face value of Rs. 10/-) being the latest in FY 2016 0.25 in FY14 and Rs. 1.05 in FY15). Amidst market volatility the consistency in dividend payment was a result of prudent and moderately conservative investment strategy and supports the fund objective of longer term durable superior risk adjusted returns. The fund has delivered return of 25.041% (at the end of March 2016) since inception, marginally behind its benchmark by 1.03% accompanied by lower levels of volatility.

The fund is ideally suited for the small retail saver and common investors whose principal objective is to build long term wealth within an acceptable level of risk and therefore has an ideal investment horizon of three to five years. Equity investors with a medium-to-long term perspective should not be perturbed with the recent volatility as stable and improving macros (moderate inflation, lower current account deficit, a controlled fiscal deficit and India being one of the largest growing big economies), a very low market cap to GDP ratio that has been constantly falling over the last 7 years, and almost reasonable to fair valuations. Thus, retail investors would do well to maintain their exposure to large liquid and high quality stocks through regular small investments for sustainable growth that will outpace inflation.

The fund has ~24% exposure to defensive sectors such as Software, Consumer durables and non-durables, Pharmaceuticals, which acts as cushion in current turbulent period. Though Banks continue to be the sector with maximum weight of 15% in our portfolio, exposure to PSB is a mere 1.4% through SBI. This is significant as the grueling impact of NPA recognition is more in PSBs compared to Private Banks. Stock selection has been done based on impeccable fundamentals in the form of low financial leverage, strong and capable managements, and businesses that were anchored in strong brands in growing developed and regulated markets.

In view of the strong potential of Indian equities and considering the prevailing market scenario, your Company is also in the process of finalizing and filing new schemes that have a complementary objective to our existing offering and address the need of lower risk adjusted stable returns from the idle funds of investors without compromising liquidity.

Nature of Business:

There was no change in the nature of the business. Share Capital:

During the year under review Company allotted 10 Lakhs Redeemable Non-Convertible Preference Shares (RNCPS) of Rs. 100/- each to the following:

1) Shriram Credit Company Limited - 4,00,000 (Four Lakhs) RNCPS of Rs. 100/- each aggregating to Rs. 4,00,00,000/- (Rupees Four Crores Only).

2) Shriram Insight Share Brokers Limited - 6,00,000 (Six Lakhs) RNCPS of Rs. 100/- each aggregating to Rs. 6,00,00,000/- (Rupees Six Crores Only).

The total paid up Share Capital as on March 31, 2016 was 20 Crores comprising of 60 Lakhs Equity Shares of Rs. 10/-each and 14 Lakhs Redeemable Non-Convertible Preference Shares of Rs. 100/- each.

Material Changes and Commitments:

No material changes or commitments affecting the financial position of the Company have taken place from March 31, 2016 till the date of this report.

Particulars of Loans, Guarantees or Investments:

Company has not given any guarantees or loans covered under the provisions of Section 186 of Companies Act, 2013 (Act). As regards the details of the Investments covered under the provisions of Section 186 of the Act, the same are given in the notes to the financial statements.

Cash Flow Statement:

The Cash Flow statement for the year 2015-16 is attached to the Balance Sheet.

Directors:

In accordance with the provisions of the Act and in terms of the Memorandum and Articles of Association of the Company, Mrs. Jayashree Mahesh retires by rotation at the ensuing AGM and being eligible, offers herself for reappointment. Mr. Dhruv Mehta was appointed as an Independent Director w.e.f. March 01, 2015 for the period of five years by the shareholders by way of Postal Ballot. Mr. Mehta vide letter dated April 13, 2016 expressed desire to be re-designated as Non-Independent Director. The Board of Directors at its meeting held on April 28, 2016 took note of the same.

Necessary proposals for reappointment of the aforesaid Directors have been included in the notice convening the AGM and the respective Resolutions are recommended for your approval.

Requirement of Regulation 21 (1) (d) relating to the composition of the Board in respect of Independent Directors as per Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, will be abided by within the time permitted therefore.

All the Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Act and Regulation 16 (1) (b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, hereinafter referred to as 'Listing Regulations'.

Profile of the Directors, as required under Regulation 36 of the Listing Regulations, are given in the Notice of the 22nd Annual General Meeting.

Fixed Deposits:

During the year under report, your Company has not accepted any fixed deposits.

Board Evaluation:

Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

Policy on Directors' Appointment and Remuneration:

The Board has framed a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of the Company.

The key features of the policy are as follows:

1. Criteria for appointment and removal of Director, Key Managerial Personnel and Senior Management.

2. Criteria for performance evaluation.

3. Criteria for fixing the remuneration of Director, Key Managerial Personnel and Senior Management. The details of this policy are explained in the Corporate Governance Report.

Meetings:

During the year 4 Board Meetings and 4 Audit Committee Meetings were convened and held. The details of the meetings are given in the Corporate Governance Report. The gap between the Meetings was within the period prescribed under the Act and as per Regulation 17(2) and 18 (2) of the Listing Regulations respectively.

Risk Management:

Pursuant to the requirement of Regulation 21 of the Listing Regulations, the Company has constituted Risk Management Committee. The Company has in place a Risk Management Policy, commensurate with its size of operations, which lays down a process for identification and mitigation of risks that could materially impact its performance.

Directors' Responsibility Statement:

Pursuant to the provisions of Section 134(3) (c) of the Act, the Directors confirm that to the best of their knowledge and belief:

a) In the preparation of Annual Accounts and Financial Statements for the year ended March 31, 2016, the applicable Accounting Standards have been followed along with proper explanations relating to material departures, if any;

b) That such accounting policies as mentioned in Notes to the Financial Statements have been selected and applied consistently, and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2016 and of the Loss of the Company for the year ended on that date;

c) That proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) The Annual Accounts have been prepared on an ongoing concern basis;

e) That they have laid down internal financial controls commensurate with the size of the Company and that such financial controls were adequate and were operating effectively;

f) That systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

Related Party Transactions:

During the year, the Company has not entered into any fresh related party agreements. All the previous related party transactions of the Company were at arm's length basis and were in the ordinary course of business. The particulars of contracts or arrangements with related parties in Form AOC -2 are annexed herewith as 'Annexure A'.

Significant and Material Orders Passed by the Regulators or Courts or Tribunals:

During the year under report, there were no significant material orders passed by the Regulators/ Courts/ Tribunals impacting the going concern status and company's operations in future.

Internal Financial Controls and their adequacy:

The Company has put in place adequate internal financial controls with reference to the Financial Statements commensurate with the size of the Company.

Disclosures: Audit Committee:

The Audit Committee comprises of Mr. Prabhakar Karandikar (Independent Director) as Chairman, Mr. Arindom Mukherjee (Independent Director) as Member and Mrs. Jayashree Mahesh (Non- Independent Director) as Member. Mr. Dhruv Mehta was inducted as Member of the Audit Committee on January 28, 2016 and ceased to be the Member on April 28, 2016. All the recommendations made by the Audit Committee were accepted by the Board.

Vigil Mechanism / Whistle Blower Policy:

The Company has established a Vigil Mechanism to deal with instance of fraud and mismanagement, if any. The detail of the Vigil Mechanism is posted on the website of the Company i.e. www.shriramamc.com .

Establishment of Internal Complaints Committee:

The Company has in place an Anti Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition And Redressal) Act, 2013. Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. No complaints of sexual harassment were received during the year.

Auditors and Auditor's Report:

M/s. K.S. Aiyar and Co., (Firm Registration No. 100186W) Chartered Accountants, Kolkata, Statutory Auditors of the Company, retires at the conclusion of the ensuing AGM and are eligible for reappointment. Certificate has been received from them to the effect that their reappointment as Auditors of the Company, if made, would be within the limits prescribed under Section 139 and 141 of the Act. Members are requested to consider their re-appointment.

The Notes on financial statement referred to in the Auditor's Report are self-explanatory and do not call for any further comments. The Auditor's Report does not contain any qualification, reservation or adverse remark.

Secretarial Audit:

Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Suhas S. Ganpule, Practising Company Secretary, Proprietor of M/s. SG & Associates, to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith as "Annexure B". The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Subsidiaries, Joint Ventures or Associate Companies:

During the year under report, there was no change in the associate company. The Company does not have any subsidiary or joint venture.

Corporate Governance:

The Report on Corporate Governance forms part of the Directors' Report and is annexed herewith.

As required by the Listing Regulations, Auditor's Report on Corporate Governance and a declaration by the Managing Director with regards to Code of Conduct are attached to the said Report.

The Management Discussion and Analysis is given as a separate statement forming part of the Annual Report.

As required under Listing Regulations, a detailed report on Corporate Governance along with the Certificate from the Company Auditor's confirming compliance forms an integral part of this Report and certificate duly signed by the Managing Director and Chief Financial Officer (CFO) on the Financial Statements of the Company for the year ended March 31, 2016 was submitted to the Board of Directors at their Meeting held on April 28, 2016. These certificates are attached to the Report on Corporate Governance.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo:

1. Conservation of Energy

The Company has no activity involving Conservation of Energy.

2. Technology Absorption

The Company has no activity involving Technology Absorption.

3. Foreign Exchange earnings and outgo

The Company did not have any foreign exchange earnings or outgo during the year under review.

Extract of Annual Return:

The details forming part of the extract of the Annual Return in Form MGT 9 is annexed herewith as "Annexure C". Particulars of Employees:

During the year under report, your Company has not employed any person who was in receipt of remuneration in excess of the limits specified under Section 197 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

The details required as per Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith as "Annexure D".

Acknowledgement:

The Board of Directors take this opportunity to express their sincere appreciation for the excellent support and co-operation received from the Securities and Exchange Board of India, Association of Mutual Funds of India, Stock Exchange Authorities, Auditors, Bankers, Distributors, other Service providers and Board of Trustees of Shriram Mutual Fund.

The Directors wish to place on record the continued enthusiasm, total commitment, dedication and efforts of the employees of the Company at all levels.

We are also deeply grateful to the Shareholders of the Company and also to the large body of investors of scheme of Shriram Mutual Fund for the continued confidence and the faith reposed in the Fund and look forward to their continued patronage.

By Order of the Board

For Shriram Asset Management Company Limited

Prabhakar Karandikar

Chairman

Place: Mumbai

Date: April 28, 2016