The directors are pleased to present the Thirty-fourth Annual Report
 of your Corporation with the audited accounts for the year ended March
 31, 2011.
 
 FINANCIAL RESULTS
 
                                          For the       For the
                                       year ended    year ended
                                   March 31, 2011    March 31, 2010
                                    (Rs. in crores)    (Rs. in crores)
 
 Profit before Tax                      4,866.96       3,915.99
 
 Provision for Tax                      1,332.00       1,089.50
 
 Profit after Tax                       3,534.96       2,826.49
 
 Appropriations have been made as under:
 
 Special Reserve No. II                   625.00         500.00
 
 General Reserve                          816.40         695.01
 
 Additional Reserve (under Section 29C
 of the National Housing Bank Act, 1987)  530.00         432.00
 
 Shelter Assistance Reserve                12.00           9.00
 
 Proposed Dividend
 
 (Rs. 9 per share of face value of 
 Rs. 2 each)                              1,320.20       1,033.60
 
 Additional Tax on Proposed Dividend      214.17         171.67
 
 Additional Tax on Dividend                 1.07         (15.16)
 
 Dividend pertaining to Previous Year paid
 during the year                           16.12           0.37
 
                                        3,534.96       2,826.49
 
 Dividend
 
 Your directors recommend payment of dividend for the year ended March
 31, 2011 of Rs. 9 per equity share of face value of Rs. 2 each. In the
 previous year, a dividend of Rs. 36 per equity share of face value of Rs.
 10 each was paid ( Rs. 7.2 per equity share of face value of Rs. 2 each).
 
 The dividend payout ratio for the current year, inclusive of additional
 tax on dividend will be 43.4% as compared to 42.7% for the previous
 year.
 
 Sub-division of Shares
 
 Pursuant to your approval at the 33rd Annual General Meeting (AGM) of
 the Corporation held on July 14, 2010, the nominal face value of the
 equity shares of the Corporation was sub-divided from Rs. 10 per equity
 share to Rs. 2 per equity share, with effect from August 21, 2010.
 
 To facilitate this sub-division, shareholders were issued 5 equity
 shares of Rs. 2 each in lieu of one equity share of Rs. 10 each held by
 them as on the record date i.e. August 20, 2010, fixed for this
 purpose.
 
 The total number of retail shareholders has increased to over 2,03,000
 representing an increase of 52% post the sub-division of shares.
 
 Warrants
 
 Consequent to the sub-division of the nominal face value of the equity
 shares of the Corporation from Rs. 10 per share to Rs. 2 per share, the
 Warrant Exercise Price was adjusted from Rs. 3,000 per equity share of Rs.
 10 each to Rs. 600 per equity share of Rs. 2 each, to be paid by the
 Warrant holder at the time of exchange of each Warrant at any time on
 or before August 24, 2012. As of date, no Warrants have been lodged
 with the Corporation for exchange into equity shares of the
 Corporation.
 
 Lending Operations
 
 Loan approvals during the year were Rs. 75,185 crores as compared to Rs.
 60,611 crores in the previous year, representing a growth of 24%. Loan
 disbursements during the year were Rs. 60,314 crores as against Rs. 50,413
 crores in the previous year, representing a growth of 20%.
 
 Cumulative loan approvals and disbursements as at March 31, 2011 were Rs.
 3,73,246 crores and Rs. 3,02,533 crores respectively. This is in respect
 of approximately 3.8 million housing units.
 
 The demand for individual home loans continued to be robust, despite
 rising interest rates. Other enabling factors included rising
 disposable incomes and continued fiscal incentives on housing loans.
 During the year, individual approvals grew at 25% and disbursements
 grew by 27% as compared to the previous year. The average size of
 individual loans stood at Rs. 18.6 lakhs.
 
 Sale of Loans
 
 During the year, the Corporation, under the loan assignment route sold
 individual loans of Rs. 4,379 crores to HDFC Bank pursuant to the buyback
 option embedded in the home loan arrangement between the Corporation
 and HDFC Bank. Out of the total loans assigned during the year, Rs. 4,053
 crores qualify as priority sector advances for the bank.
 
 As at March 31, 2011, total loans outstanding in respect of loans sold
 stood at Rs. 12,147 crores. HDFC continues to service the loans sold
 under these transactions and is entitled to the residual interest on
 the loans sold. The residual interest on the individual loans sold is
 1.57% per annum.
 
 The residual income on the loans sold is being recognised over the life
 of the underlying loans and not on an upfront basis. Issues through
 which loans have been sold have been rated by external agencies and
 carry a rating indicating the highest degree of safety.
 
 Repayments
 
 During the year under review, Rs. 36,756 crores were received by way of
 scheduled repayment of principal through monthly instalments as well as
 redemptions ahead of schedule, as compared to Rs. 31,872 crores received
 last year.
 
 Loan Book
 
 As at March 31, 2011, the loan book stood at Rs. 1,17,127 crores as
 against Rs. 97,967 crores in the previous year – an increase of 20%. The
 growth in the loan book would have been higher at 24% if the loans sold
 were included in the loan book.
 
 Foreign Currency Convertible Bonds (FCCB)
 
 In September 2005, the Corporation concluded the issue of USD 500
 million zero coupon FCCB. The bonds were convertible into equity shares
 of the Corporation of the face value of Rs. 10 each up to the close of
 business hours on July 29, 2010 at the option of the holders, at Rs.
 1,399 per equity share, representing a conversion premium of 50% over
 the initial reference share price.
 
 All the bonds were lodged with the Corporation for conversion into
 equity shares on or prior to the last date for conversion. In
 aggregate, the Corporation allotted 1,56,23,732 equity shares of Rs. 10
 each pursuant to the conversion of the FCCB. Hence, there are no
 outstanding FCCB. The increase in net worth as a result of the FCCB
 over the life was Rs. 2,186 crores.
 
 During the year an amount of Rs. 2.83 crores has been credited to the
 Share Capital Account and an amount of Rs. 407.89 crores has been
 credited to the Securities Premium Account.
 
 Resource Mobilisation
 
 Subordinated Debt
 
 During the year, the Corporation raised Rs. 1,000 crores through the
 issue of long-term Unsecured Redeemable Non-Convertible Subordinated
 Debentures. The subordinated debt was assigned a AAA rating from
 both, CRISIL Limited (CRISIL) and ICRA Limited (ICRA).
 
 As at March 31, 2011, the Corporations outstanding subordinated debt
 stood at Rs. 2,875 crores. The debt is subordinated to present and future
 senior indebtedness of the Corporation and has been assigned the
 highest rating by CRISIL and ICRA. Based on the balance term to
 maturity, as at March 31, 2011, Rs. 2,375 crores of the book value of
 subordinated debt is considered as Tier II under the guidelines issued
 by the National Housing Bank (NHB) for the purpose of capital adequacy
 computation.
 
 Non-Convertible Debentures (NCD)
 
 During the year, the Corporation issued NCD amounting to Rs. 13,865
 crores on a private placement basis. The Corporations NCD issues have
 been listed on the Wholesale Debt Market segment of the NSE and have
 been assigned the highest rating of AAA by both, CRISIL and ICRA. As
 at March 31, 2011, NCD outstanding stood at Rs. 41,624 crores.
 
 Loans from Banks
 
 During the year, the Corporation raised loans amounting to Rs. 29,538
 crores from commercial banks, of which Rs. 2,610 crores were under the
 priority sector category of commercial banks.  The Corporation further
 raised Rs. 2,528 crores from the banking sector as FCNR (B) loans.
 
 HDFCs long-term and short-term bank loan facilities have been assigned
 the highest rating of AAA and PR1+ respectively by CARE Limited,
 signifying highest safety for timely servicing of debt obligations.
 
 Refinance from National Housing Bank (NHB)
 
 NHB has an internal rating mechanism for housing finance companies
 (HFCs) and the Corporation has been assigned the highest rating for its
 refinance schemes by NHB. During the year, the
 
 Corporation has drawn refinance amounting to Rs. 687 crores under NHBs
 Refinance Scheme to Housing Finance Companies, 2003.
 
 Deposits
 
 Deposits continued to grow during the financial year under review
 despite strong competition from banks. As at March 31, 2011,
 outstanding deposits stood at Rs. 24,625 crores. The depositor base stood
 at approximately 9.67 lakh depositors.
 
 CRISIL and ICRA have for the sixteenth consecutive year, reaffirmed
 their AAA rating for HDFCs deposits. This rating represents highest
 safety, attractive returns and impeccable service standards as regards
 timely repayment of principal and interest.
 
 The support of the agents and their commitment to the Corporation has
 been instrumental in HDFCs deposit products continuing to be a
 preferred investment for households and trusts.
 
 Unclaimed Deposits
 
 As of March 31, 2011, public deposits amounting to Rs. 250 crores had not
 been claimed by 35,898 depositors.  Since then, 8,595 depositors have
 claimed or renewed deposits of Rs. 68 crores. Depositors were intimated
 regarding the maturity of deposits with a request to either renew or
 claim their deposits. Where the deposit remains unclaimed, reminder
 letters are sent to depositors periodically and follow up action is
 initiated through the concerned distributor/branch.
 
 As per the provisions of Section 205C of the Companies Act, 1956,
 deposits remaining unclaimed for a period of seven years from the date
 they became due for payment have to be transferred to the Investor
 Education and Protection Fund (IEPF) established by the Central
 Government. Accordingly, during the year, despite repeated reminders
 being sent to depositors, an amount of Rs. 31.76 lakhs has been
 transferred to the IEPF. In terms of the said section, no claims would
 lie against the Corporation or the IEPF after the transfer.
 
 Non-Performing Loans
 
 Gross non-performing loans as at March 31, 2011 amounted to Rs. 903.85
 crores.  This is equivalent to 0.77% of the portfolio (as against 0.79%
 in the previous year). This is the twenty-fifth consecutive quarter end
 at which the percentage of non-performing loans have been lower than
 the corresponding quarter in the previous year.
 
 Based on a six months overdue basis, the non-performing loans as at
 March 31, 2011 stood at 0.46% of the loan portfolio as against 0.53% in
 the previous year.
 
 In terms of the prudential norms as stipulated by NHB, the Corporation
 is required to carry a provision in respect of non-performing assets
 and a general provision on outstanding standard non-housing loans. In
 addition, during the year, NHB further stipulated a general provision
 of 0.40% on standard assets under housing loans to non- individuals and
 a 2% provision on standard assets in respect of housing loans granted
 under the Dual Rate Home Loan scheme. This requirement has been partly
 met by utilisation of Rs. 298.59 crores (net) from Additional Reserve
 under Section 29 C of the National Housing Bank Act, 1987. Based on the
 aforesaid as per NHB norms, the Corporation is required to carry a
 total provision of Rs. 813.53 crores.
 
 The balance in the provision for contingencies account as at March 31,
 2011 stood at Rs. 1,124.37 crores, which is equivalent to 0.95% of the
 portfolio.  Thus as at March 31, 2011, the Corporations net
 non-performing loans was nil.
 
 The Securitisation and Reconstruction of Financial Assets and
 Enforcement of Security Interest Act, 2002 (SARFAESI) has proved to be
 a useful recovery tool and the Corporation has been able to
 successfully initiate recovery action under this Act in the case of
 wilful individual and corporate defaulters.
 
 Regulatory Guidelines/Amendments
 
 HDFC has complied with the Housing Finance Companies (NHB) Directions,
 2010 prescribed by NHB regarding accounting standards, prudential norms
 for asset classification, income recognition, provisioning, capital
 adequacy and credit rating. The Corporation is in compliance with the
 concentration of investments and capital market exposure norms other
 than on its investments in HDFC Bank and GRUH Finance Limited. NHB has
 granted the Corporation time for such compliance.
 
 During the year, NHB stipulated that the loan to value ratio (LTV) for
 individual housing loans up to Rs. 20 lakhs should not exceed 90% and for
 loans above Rs. 20 lakhs, the LTV should not exceed 80%.
 
 NHB also amended the risk weights for individual housing loans. Thus
 risk weights on individual housing loans range from 50% to 125%,
 depending on the loan amount and LTV.
 
 HDFCs capital adequacy ratio stood at 14% of the risk weighted assets,
 as against the minimum requirement of 12%. Tier I capital was 12.2%
 against a minimum requirement of 6%.
 
 Codes and Standards
 
 NHB has issued comprehensive Know Your Customer (KYC) Guidelines and
 Anti Money Laundering Standards in the context of recommendations made
 by the Financial Action Task Force on Anti Money Laundering Standards
 and on Combating Financing of Terrorism Standards. During the year, the
 board reviewed and approved the amendments to the Corporations KYC and
 Prevention of Money Laundering Policy as stipulated by NHB. The
 Corporation has adhered to the compliance requirements in terms of the
 said policy relating to monitoring and reporting of cash/suspicious
 transactions.
 
 The Fair Practices Code framed by NHB seeks to promote good and fair
 practices by setting minimum standards in dealing with customers,
 increase transparency so customers have a better understanding of what
 they can reasonably expect of the services being offered, encourage
 market forces through competition to achieve higher operating
 standards, promote fair and cordial relationships between customers and
 the housing finance company and foster confidence in the housing
 finance system. During the year, the board reviewed and approved the
 amendments to the Corporations Fair Practices Code as notified by NHB.
 The Corporation has put in place a mechanism to monitor and review
 adherence to the Fair Practices Code as approved by the Board of
 Directors.
 
 The Corporation has adopted the Model Code of Conduct for Direct
 Selling Agents and Guidelines for Recovery Agents engaged by HFCs as
 stipulated by NHB and duly approved by the Board of Directors.
 
 Risk Management Framework
 
 The Corporation has a Risk Management Framework, which provides the
 mechanism for risk assessment and mitigation. The Risk Management
 Committee (RMC) of the Corporation comprises the Managing Director as
 the chairperson, the Executive Director and some members of senior
 management.
 
 The RMC reviewed the risks associated with the business of the
 Corporation, its root causes and the efficacy of the measures taken to
 mitigate the same, twice during the year. Thereafter, the Board of
 Directors also reviewed the key risks associated with the business of
 the Corporation, the procedures adopted to assess the risks and
 efficacy of the mitigation measures.
 
 Marketing and Distribution
 
 To reach out effectively to customers, the Corporations distribution
 network now spans 289 outlets, which include 71 offices of the HDFCs
 wholly owned distribution company, HDFC Sales Private Limited (HSPL).
 To further augment this network, HDFC covers over 90 additional
 locations through its outreach programmes. HDFC has international
 offices in London, Singapore and Dubai. The Dubai office reaches out to
 its customers across West Asia through its service associates based in
 Kuwait, Qatar, Oman, Sharjah, Abu Dhabi and Saudi Arabia – Al Khobar,
 Jeddah and Riyadh.
 
 HDFCs reach and presence is also enhanced by its distribution
 channels, which include HSPL, HDFC Bank and a third party direct
 selling associates (DSAs). During the year, efforts were focused on
 empanelling financial consultants with a pan-India presence as business
 sourcing associates for HDFC. All distribution channels only source
 loans, while HDFC continues to retain control over the credit, legal
 and technical appraisal, thereby ensuring that the quality of loans
 disbursed is not compromised in any way and is consistent across all
 distribution channels.
 
 HDFC organises property fairs across major cities in the country. The
 aim of these fairs is to provide a wide spectrum of approved projects
 under a single roof.  These fairs in turn help customers in making
 their decision to buy a home.  Under India Homes Fair, HDFC brings
 together eminent builders who showcase their properties for the Indian
 Diaspora. During the year, HDFC organised India Homes Fair in London,
 Singapore, Kuwait, Saudi Arabia and Qatar.
 
 Besides running various product-based campaigns during the year, the
 Corporation also ran a brand campaign highlighting its leadership
 position in the Indian mortgage industry.
 
 Cross Selling and Distribution of Financial Products and Services
 
 HDFCs subsidiary companies have strong synergies with HDFC and hence
 efforts are channelled into cross selling so as to offer customers a
 wide range of financial products and services under the HDFC brand.
 
 HDFC is a Composite Corporate Agent for HDFC Standard Life Insurance
 Company Limited (HDFC Life) and HDFC ERGO General Insurance Company
 Limited (HDFC-ERGO). In addition, the distribution networks of HDFC and
 HSPL are used by Credila Financial Services Private Limited, which
 offers education loans.
 
 International Housing Finance Initiatives
 
 HDFCs expertise in housing finance is well regarded and therefore a
 number of existing and new housing finance companies in various parts
 of the world are keen to tap HDFC for training, strategic input and
 technical assistance in housing finance.
 
 During the year, the Corporation under its Technical Services Agreement
 with Housing Development Finance Corporation Plc., Maldives, provided
 technical and consultancy services in key mortgage functions.
 
 Senior executives of the Corporation were invited to Indonesia,
 Maldives, Mauritius and Ghana for seminars, consultancy or training
 assignments in housing finance.
 
 In July 2010, the Frankfurt School of Finance & Management and HDFC
 jointly organised the third Housing Finance Summer Academy in
 Germany, which is a course that aims to provide housing finance
 solutions for emerging markets through a combination of academic
 knowledge and practical experience.
 
 In November 2010, HDFC conducted its own international training
 programme Housing Finance Management at its training centre, Centre
 for Housing Finance, located at Lonavla, India.  Participants from
 different countries across Asia and Africa attended a weeklong
 residential training programme.
 
 Delegates from Bangladesh, Indonesia and Kenya visited the Corporation
 to understand key mortgage finance operations.
 
 Shelter Assistance Reserve (SAR)
 
 HDFC continued to partner and support worthwhile projects undertaken by
 non-government organisations, foundations and local bodies through the
 SAR. During the year, the Corporation disbursed Rs. 11.48 crores from the
 SAR towards a wide spectrum of development programmes and activities.
 
 Corpus contributions were made out of the SAR to the Indian Council for
 Research on International Economic Relations (ICRIER) – New Delhi,
 Armed Forces Flag Day Fund – Mumbai, M. S.  Swaminathan Research
 Foundation – Chennai and Folk Arts – Rajasthan, amongst others. Support
 was also extended towards running a centre for rehabilitation of adults
 affected by cerebral palsy in Pune, partnering The Energy and Resources
 Institute (TERI) in undertaking an integrated development scheme for
 sustainable livelihood across remote villages in Uttarakhand, providing
 scholarships to children from impoverished backgrounds through an
 organisation working with the rural poor in West Bengal and supporting
 the construction of a centre catering to the rehabilitation of hearing
 impaired individuals in New Delhi. The Corporation supported the Indian
 Cancer Society towards meeting the treatment expenses of patients.
 HDFC continued partnering municipal schools to showcase high-performing
 schools through public-private partnerships, through initiatives such
 as the Akanksha School Project, Bhavishya Yaan and Teach for India. The
 SAR was also utilised towards providing relief assistance to victims of
 the Leh cloudburst in August 2010.
 
 During the year, the Corporation disbursed Rs. 2 crores to the Indian
 Institute of Human Settlements (IIHS) – Bengaluru, taking the
 Corporations total contribution to IIHS to Rs. 4 crores.  IIHS is a
 privately funded education institution focusing on various aspects of
 urban practice.
 
 Training and Human Resource Management
 
 The Corporation believes that the ability to keep learning is a key
 sustainable advantage and hence strong emphasis is placed on constantly
 upgrading the skills of its employees.
 
 During the year, all new recruits underwent an induction training
 programme. In addition, employees who were promoted across various
 grades attended Executive Development and Managerial Skills programmes.
 During the year, a leadership programme was designed and conducted by
 the Indian Institute of Management, Ahmedabad, for a select group of
 employees identified on the basis of their performance and future
 potential.
 
 Amongst many others, internal training programmes were conducted in the
 areas of rural housing finance, corporate risk management, negotiative
 selling skills, credit risk management and six sigma.
 
 The Corporation also nominated staff members for a variety of external
 programmes including real estate and housing, education, treasury and
 risk management, information technology, taxation and International
 Financial Reporting Standards.
 
 New Initiatives
 
 HDFC RED
 
 During the year, HDFC Real Estate Destination (HDFC RED), an on-line
 real estate portal was launched with the key objective of providing a
 single destination to potential home buyers to search and short-list
 desired properties that suit their requirements. HDFC RED functions as
 a centralised digital platform to bridge the gap between home buyers
 and developers across India. Developers are charged a subscription fee
 to list their projects on HDFC RED and in turn are able to attract
 potential buyers.  HDFC RED is currently operational in six cities in
 India – Bengaluru, Chennai, Hyderabad, Mumbai, New Delhi and Pune.
 
 Awards and Recognitions
 
 During the year, some of the awards and recognitions received by the
 Corporation include:
 
 - HDFC is the only Indian company to be included in the fifth annual
 list of the 2011 Worlds Most Ethical Companies by Ethisphere
 Institute, USA.
 
 - Best Governed Company Award, 2010 – Asian Centre for Corporate
 Governance & Sustainability.
 
 - India Shining Star CSR Award – for outstanding CSR in the Banking
 and Financial Sector.
 
 - HDFC one of Indias Best Managed Companies – Finance Asias 10th
 Annual Poll.
 
 - HDFC the most admired company in the Financial Sector in India –
 Wall Street Journals Asia 200 survey.
 
 Subsidiary Companies
 
 In terms of Section 212(8) of the Companies Act, 1956, the Central
 Government has granted its approval, exempting the Corporation from the
 requirement of attaching to its annual report, the balance sheet,
 profit and loss account and the report of the directors and auditors
 thereon, in respect of all its sixteen subsidiary companies.
 Accordingly, a copy of the balance sheet, profit and loss account,
 report of the Board of Directors and Report of the Auditors of the
 following subsidiary companies of the Corporation – HDFC Developers
 Limited, HDFC Investments Limited, HDFC Holdings Limited, HDFC Asset
 Management Company Limited, HDFC Trustee Company Limited, HDFC Realty
 Limited, HDFC Standard Life Insurance Company Limited, HDFC ERGO
 General Insurance Company Limited, GRUH Finance Limited, HDFC Sales
 Private Limited, HDFC Ventures Trustee Company Limited, HDFC Venture
 Capital Limited, HDFC Property Ventures Limited and Credila Financial
 Services Private Limited and the following step-down subsidiary
 companies - HDFC Asset Management Company (Singapore) Pte. Limited and
 Griha Investments have not been attached to the balance sheet of the
 Corporation for the financial year ended March 31, 2011.
 
 The Annual Report of the Corporation, the annual accounts and the
 related documents of the Corporations subsidiary companies are posted
 on the website of the Corporation, www.hdfc.com. Shareholders who wish
 to have a copy of the annual accounts and detailed information on any
 subsidiary company can download the same from the website or may write
 to the Corporation for the same. Further, the said documents shall be
 available for inspection by the shareholders at the registered office
 of the Corporation.
 
 The Corporation has not made any loans or advances in the nature of
 loans to any of its subsidiary or associate company or companies in
 which its directors are deemed to be interested, other than in the
 ordinary course of business.
 
 Review of Key Subsidiary and Associate Companies
 
 HDFC Bank Limited (HDFC Bank)
 
 HDFC and HDFC Bank continue to maintain an arms length relationship in
 accordance with the regulatory framework. Both organisations, however,
 capitalise on the strong synergies through a system of referrals,
 special arrangements and cross selling in order to effectively provide
 a wide range of products and services under the HDFC brand name.
 
 As at March 31, 2011, net advances of HDFC Bank stood at Rs.1,59,983
 crores - an increase of 27% over the previous year. As at March 31,
 2011, HDFC Banks distribution network included 1,986 branches and
 5,471 ATMs in 996 cities as against 1,725 branches and 4,232 ATMs in
 779 cities as of March 31, 2010. The bank has a customer base of 21.9
 million as at March 31, 2011.
 
 For the year ended March 31, 2011, HDFC Bank reported a profit after
 tax of Rs. 3,926 crores as against Rs. 2,949 crores in the previous year,
 representing an increase of 33%. HDFC Bank recommended a dividend of Rs.
 16.50 per share as against Rs. 12 per share in the previous year.
 
 HDFC together with its wholly owned subsidiaries, HDFC Investments
 Limited and HDFC Holdings Limited holds 23.4% of the equity share
 capital of HDFC Bank.
 
 HDFC Standard Life Insurance Company Limited (HDFC Life)
 
 Gross premium income of HDFC Life for the year ended March 31, 2011
 stood at Rs. 9,004 crores as compared to Rs. 7,005 crores in the previous
 year – a growth of 29%. The sum assured in force for the current year
 was Rs. 98,917 crores as compared to Rs. 72,610 crores in the previous
 year.
 
 The company has a portfolio of 27 retail products and 6 group products
 covering saving, investment, protection and retirement needs of the
 customers, along with 9 optional rider benefits.
 
 HDFC Life covers approximately 495 cities and towns in India through
 its 780 distribution points in the country with approximately 1.36 lakh
 financial consultants appointed by the company.  HDFC Life also has a
 strong association with its bancassurance partners, which has
 contributed significantly to the growth of the company during the year.
 
 HDFC Life has reported a loss of Rs. 99 crores for the year ended March
 31, 2011. Like most life insurance companies in the initial phase, HDFC
 Life has reported losses. This is essentially due to the accounting
 norms applicable to insurance companies wherein the commission expenses
 are charged upfront in the year in which they are incurred while the
 corresponding income is recognised over the entire life of the policies
 issued.  The mismatch between expenses and income has the effect of
 magnifying the initial losses of HDFC Life.
 
 HDFC holds 72.4% of the equity share capital in HDFC Life.
 
 HDFC Asset Management Company Limited (HDFC-AMC)
 
 HDFC and Standard Life Investment Limited are the co-sponsors of HDFC
 Mutual Fund.
 
 As at March 31, 2011, HDFC-AMC managed 36 debt, equity and exchange
 traded fund schemes of HDFC Mutual Fund. During the year, the average
 assets under management stood at Rs. 95,950 crores (which is inclusive of
 average assets under discretionary portfolio management/advisory
 services). The number of investor accounts increased to over 46 lakhs
 as at March 31, 2011 as compared to 39 lakhs in the previous year.
 
 As at March 31, 2011, HDFC-AMC has points of acceptances in 114
 locations across the country.
 
 For the year ended March 31, 2011, HDFC-AMC reported a profit after tax
 of Rs. 242.18 crores as against Rs. 208.37 crores in the previous year.
 HDFC-AMC paid an interim dividend of Rs. 29 per share for the financial
 year ended March 31, 2011.
 
 HDFC holds 60% of the equity share capital of HDFC-AMC.
 
 HDFC ERGO General Insurance Company Limited (HDFC-ERGO)
 
 For the year ended March 31, 2011, HDFC-ERGO retained the ranking as
 the fifth largest private sector player in the general insurance
 industry.  Continuing its multi-product and multi-channel strategy,
 HDFC-ERGO leverages on its distribution infrastructure developed over
 the years.
 
 The company offers a complete range of insurance products like motor,
 health, travel, home and personal accident in the retail segment and
 customised products like property, marine, aviation and liability
 insurance in the corporate segment. The company continues to leverage
 on the HDFC groups distribution capability to drive its growth and
 relies on the technical capability of ERGO in the field of general
 insurance.  The company has a balanced portfolio mix with the retail
 segment accounting for 57% of the business.
 
 The general insurance industry registered a growth of 23% in FY 2010-
 11 as compared to 13% in the previous year. In comparison, during the
 year, HDFC-ERGO recorded a growth of 40%, with a Gross Written Premium
 (including cessions from the motor pool) of Rs. 1,408 crores as against Rs.
 1,005 crores in the previous year.
 
 After providing for the higher losses from the Indian Motor Third Party
 Insurance Pool (IMTPIP), during the year, the company made a loss of Rs.
 36.4 crores as against a loss of Rs. 94.3 crores in the previous year.
 Loss from IMTPIP was Rs. 69 crores as against loss of Rs. 15 crores in the
 previous year.
 
 HDFC holds 74% of the equity share capital of HDFC-ERGO.
 
 HDFC Property Funds
 
 HDFC Venture Capital Limited (HVCL) is the investment manager to HDFC
 Property Fund, a registered venture capital fund with the Securities
 and Exchange Board of India (SEBI).
 
 HDFC Property Fund currently has two schemes. The first scheme is HDFC
 India Real Estate Fund (HI-REF), with a corpus of Rs. 1,000 crores, which
 has been fully invested. During the year, the scheme fully exited from
 one investment and made partial exits from two other investments.
 
 The second scheme, HDFC IT Corridor Fund has a corpus of Rs. 446.40
 crores.  This scheme has disbursed the entire corpus in rental income
 yielding commercial properties in major cities in India and exits are
 being explored for some investments of the scheme.
 
 During the year, HVCL made a profit after tax of Rs. 12.21 crores. The
 directors of HVCL approved the payment of two interim dividends
 aggregating Rs. 200 per equity share.
 
 HDFC holds 80.5% of the equity share capital of HVCL.
 
 HDFC Property Ventures Limited (HPVL) provides investment advisory
 services to Indian and overseas asset management companies (AMCs). Such
 AMCs in turn manage and advise Indian and offshore private equity
 funds.
 
 During the year, HPVL made a profit after tax of Rs. 3.39 crores. The
 directors of HPVL approved the payment of two interim dividends
 aggregating Rs. 20 per equity share.
 
 HDFC holds 100% of the equity share capital of HPVL.
 
 GRUH Finance Limited (GRUH)
 
 GRUH is a housing finance company with operations primarily in the
 states of Gujarat and Maharashtra and has now expanded its network to
 other states like Karnataka, Madhya Pradesh, Rajasthan, Chhattisgarh
 and Tamil Nadu.  During the year, GRUH disbursed loans amounting to Rs.
 1,211 crores as compared to Rs. 780 crores in the previous year – an
 increase of 55%.
 
 For the year ended March 31, 2011, GRUH reported a profit after tax of
 Rs. 91.51 crores as compared to Rs. 68.96 crores in the previous year - an
 increase of 33%. The company recommended a dividend of Rs. 8.50 per share
 and in addition also recommended a special dividend of Rs. 2.50 per share
 to commemorate the Silver Jubilee of the company, taking the total
 recommended dividend to Rs. 11 per share as compared to Rs. 6.50 per share
 in the previous year.
 
 HDFCs holding in GRUH currently stands at 60.6%.
 
 HDFC Sales Private Limited (HSPL)
 
 HDFC Sales Private Limited (HSPL) continues to strengthen the
 Corporations marketing and sales efforts by providing a dedicated
 sales force to sell home loans and other financial products.
 
 HSPL has a presence in 71 locations.  During the period under review,
 HSPL sourced loans accounting for 46% of individual loans disbursed by
 HDFC.
 
 HSPL is a wholly owned subsidiary of HDFC.
 
 Credila Financial Services Private Limited (Credila)
 
 Credila is Indias first dedicated education loan company, providing
 loans to students pursuing higher education in India and abroad.
 Credila has funded students studying in over 500 educational
 institutes, pursuing higher studies in more than 20 countries.
 
 As at March 31, 2011, Credila had cumulatively disbursed Rs. 190 crores
 in respect of 2,741 loans. The average loan amount disbursed is Rs. 7
 lakhs.
 
 In addition to having its own offices and sourcing applications through
 the web, Credila capitalises on HDFCs distribution network to source
 and market education loans.
 
 The Reserve Bank of India has categorised education loans as priority
 sector lending. Credilas borrowers are entitled to income tax
 exemption under Section 80E of the Income Ta x Act, 1961.
 
 HDFC holds 62.3% of the equity share capital of Credila.
 
 Particulars of Employees
 
 HDFC had 1,607 employees as of March 31, 2011. During the year, 8
 employees employed throughout the year were in receipt of remuneration
 of Rs. 60 lakhs or more per annum.
 
 In accordance with the provisions of Section 217(2A) of the Companies
 Act, 1956 and the rules framed thereunder, the names and other
 particulars of employees are set out in the annex to the Directors
 Report. In terms of the provisions of Section 219(1)(b)(iv) of the
 Companies Act, 1956, the Directors Report is being sent to all the
 shareholders of the Corporation excluding the annex. Any shareholder
 interested in obtaining a copy of the said annex may write to the
 Corporation.
 
 Employees Stock Option Scheme (ESOS)
 
 The Corporation had not granted any stock options during the year. The
 options were last granted in November 2008. Unexercised options as at
 April 1, 2010 relates to ESOS-05, ESOS-07 and ESOS-08.
 
 During the year, options vested aggregated to 1,54,668 and options
 exercised aggregated to 34,36,095.  Pursuant to the said exercise, the
 Corporation received from the employees Rs. 473.54 crores as exercise
 consideration (excluding tax), of which Rs. 3.44 crores was towards share
 capital and Rs. 470.10 crores towards securities premium. During the
 year, pursuant to the exercise of options, 1,71,80,475 equity shares of
 Rs. 2 each have been allotted to the concerned employees.
 
 During the year, 9,736 options lapsed.  Options in force as at March
 31, 2011 stood at 83,22,488. Pursuant to the sub- division of the face
 value of the equity shares of the Corporation from Rs. 10 to Rs. 2, upon
 exercise, each option is entitled to 5 equity shares of Rs. 2 each as
 against one equity share of Rs. 10 each prior to the sub-division.
 
 There has been no variation in the terms of the options granted.
 
 The Corporation had granted the stock options at the market price and
 hence the intrinsic value of the option was nil.  Consequently, the
 compensation cost was nil. As no options were granted during the year,
 the compensation cost under the fair value method was also nil.
 
 The diluted EPS is Rs. 23.66 against a basic EPS of Rs. 24.18.
 
 Unclaimed Dividend
 
 As at March 31, 2011, dividend amounting to Rs. 8.60 crores has not been
 claimed by shareholders of the Corporation. The Corporation has been
 periodically intimating the concerned shareholders requesting them to
 encash their dividend before it becomes due for transfer to the IEPF.
 The Corporation continues to take various initiatives to reduce the
 quantum of unclaimed dividend. These inter alia include periodic
 reminders to shareholders requesting them to claim their dividend,
 including final reminders to those shareholders who have not claimed
 their dividend before the same is due for transfer to the IEPF. The
 Corporation also provides direct credit of unclaimed dividend to the
 shareholders having a bank account with HDFC Bank or whose 9 digit MICR
 code is made available to the Corporation by the Depositories and
 dispatches duplicate dividend warrants directly to the concerned banks
 wherever the details are made available by the Depositories.
 
 As per the provisions of Section 205C of the Companies Act, 1956,
 unclaimed dividend amounting to Rs. 33.96 lakhs for the financial year
 2002-03 was transferred to the IEPF on September 8, 2010. Further, the
 unclaimed dividend amounting to Rs. 47.84 lakhs in respect of the
 financial year 2003-04 must be claimed by August 24, 2011, failing
 which it is required to be transferred to the IEPF within a period of
 30 days from the said date. In terms of said section, no claim would
 lie against the Corporation or the IEPF after the transfer.
 
 Unclaimed Shares
 
 Pursuant to an amendment to Clause 5A of the Listing Agreements, the
 Corporation has identified share certificates issued by it in physical
 form to its shareholders which are lying unclaimed.
 
 The Corporation has sent reminders to the concerned shareholders
 requesting them to contact the Investor Services Department of the
 Corporation to claim their shares, subject to submission and
 verification of requisite documents and compliance with procedures as
 prescribed in the said clause.
 
 Particulars Regarding Conservation of Energy, Technology Absorption and
 Foreign Exchange Earnings and Outgo
 
 The particulars regarding foreign exchange earnings and expenditure
 appear as Item No. 13 in the Notes to the Accounts. Since HDFC does not
 own any manufacturing facility the other particulars relating to
 conservation of energy and technology absorption as stipulated in the
 Companies (Disclosure of Particulars in the Report of the Board of
 Directors) Rules, 1988 are not applicable.
 
 Directors
 
 Mr. D. M. Satwalekar resigned as a director of the Corporation with
 effect from November 13, 2010.  Mr. Satwalekar had joined the
 Corporation in 1979. He was the Managing Director of the Corporation
 from 1993 up to 2000. He was thereafter appointed as the Managing
 Director & Chief Executive Officer of HDFC Standard Life Insurance
 Company Limited (HDFC Life) and was appointed as a non-executive
 director of the Corporation in 2000.
 
 The Board of Directors wish to place on record its sincere appreciation
 and gratitude for the dedicated service and invaluable contribution
 made by Mr. Satwalekar during his tenure with the Corporation and HDFC
 Life.
 
 The Board of Directors, at its meeting held on October 18, 2010,
 re-appointed Mr. Keki M. Mistry as the Managing Director of the
 Corporation (designated as the Vice Chairman & Chief Executive
 Officer) for a period of 5 years, with effect from November 14, 2010,
 subject to the approval of the members at the ensuing AGM.
 
 In accordance with the provisions of the Companies Act, 1956 and the
 Articles of Association of the Corporation, Mr. D. N. Ghosh, Dr. Ram S.
 Tarneja and Dr. Bimal Jalan are liable to retire by rotation at the
 ensuing AGM. They are eligible for re-appointment.
 
 Necessary resolutions for the re-appointment of the aforesaid directors
 have been included in the notice convening the ensuing AGM.
 
 All the directors of the Corporation have confirmed that they are not
 disqualified from being appointed as directors in terms of Section
 274(1)(g) of the Companies Act, 1956.
 
 Auditors
 
 Messrs Deloitte Haskins & Sells, Chartered Accountants, having
 registration number 117366W, statutory auditors of the Corporation and
 branch auditors to audit the accounts at the Corporations branches in
 India and offices in London and Singapore hold office until the
 conclusion of the ensuing AGM and are eligible for re-appointment.
 
 The Corporation has received a confirmation from Messrs Deloitte
 Haskins & Sells to the effect that their appointment, if made, would be
 within the limits prescribed under Section 224(1B) of the Companies
 Act, 1956.
 
 Messrs PKF, Chartered Accountants, having registration number 10 issued
 by the Ministry of Economy, U.A.E. was appointed as the branch auditors
 to audit the accounts of the Corporations branch office in Dubai.
 Their term expires at the end of the ensuing AGM and they are eligible
 for re-appointment.
 
 Directors Responsibility Statement
 
 In accordance with the provisions of Section 217(2AA) of the Companies
 Act, 1956 and based on the information provided by the management, your
 directors state that:
 
 i. In the preparation of annual accounts, the applicable accounting
 standards have been followed;
 
 ii.  Accounting policies selected were applied consistently. Reasonable
 and prudent judgements and estimates were made so as to give a true and
 fair view of the state of affairs of the Corporation as at the end of
 March 31, 2011 and of the profit of the Corporation for the year ended
 on that date;
 
 iii. Proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956 for safeguarding the assets of the Corporation and
 for preventing and detecting frauds and other irregularities;
 
 iv. The annual accounts of the Corporation have been prepared on a
 going concern basis.
 
 Management Discussion and Analysis Report and Report of the Directors
 on Corporate Governance
 
 In accordance with Clause 49 of the listing agreements, the Management
 Discussion and Analysis Report and the Report of the Directors on
 Corporate Governance form part of this report.
 
 Corporate Governance – Voluntary Guidelines
 
 The Board of Directors have taken cognisance of the Corporate
 Governance Voluntary Guidelines 2009 issued by the Ministry of
 Corporate Affairs (MCA) in December 2009. While
 
 the guidelines are recommendatory in nature, the board recognises the
 importance and need to constantly assess governance practices thereby
 ensuring a sustainable business environment that generates long-term
 value to all key stakeholders. The board has adopted several provisions
 of the said guidelines.
 
 Acknowledgements
 
 The Corporation would like to acknowledge the role of all its
 stakeholders - shareholders, borrowers, depositors, key partners and
 lenders for their continuing support to the Corporation.
 
 The directors appreciate the guidance received from various regulatory
 authorities including NHB, RBI, SEBI, MCA, Registrar of Companies,
 Financial Intelligence Unit (India), Foreign Investment Promotion
 Board, the Stock Exchanges and the Depositories.
 
 Your directors value the professionalism of all the employees of the
 Corporation who have relentlessly worked in a challenging environment
 and whose efforts have stood the Corporation in good stead.
 
                             On behalf of the Board of Directors
 
 MUMBAI                                         DEEPAK S. PAREKH
 
 May 10, 2011                                           Chairman