Chairman's Message -

The outlook on the mutual fund industry remains positive given thegrowth potential and under penetration of mutual funds in the country.

Dear Shareholders

The financial year gone by will go down as one of the most unusual andchallenging years in living memory.

The world experienced unprecedented setbacks due to COVID-19 whichresulted in the global economy witnessing one of the worst contractions since World WarII. The Indian economy too contracted by 7.3% in FY 20-21 an event seen only for thesecond time since Independence and the first since the economic liberalisation in 1991.

As expectations of a sharp recovery started gaining ground

India bore the brunt of the second wave from March 2021.

With localised lockdowns and varying degrees of restrictions imposed bystate and local governments the recovery remains fragile and prospects of any sharperuptick remain largely reliant on the pace of vaccination. Inoculating a population as vastas India's is no doubt a mammoth task but it is the only way to overcome the crisis.

Since the outbreak the RBI has taken several steps to reduce theboosting liquidity and providing relief/restructuring options on loans that came underduress due to the pandemic. The government has implemented several counter measures inphases to provide relief to the vulnerable sections of society revive growth and create aroadmap to make India self-reliant. In the Union Budget 2021-22 the government renewedits thrust on infrastructure development and improving healthcare infrastructure. Backedby synchronised fiscal and monetary policy measures along with acceleration in thevaccination drive the Indian economy should be able to get back to its growth trajectorysooner than later. Despite the strong headwinds throughout the year the

Indian mutual fund industry continued to grow and scaled an all-timehigh of Rs. 30 lakh crore in Assets Under Management (AUM). With the pandemic reinforcingthe importance of financial savings among Indian households and given the underpenetrationof mutual funds the industry outlook remains buoyant. Over the last five years India hasbeen among the fastest growing mutual fund markets in terms of AUM. However India'sMF AUM to GDP ratio remains significantly low at 15% as compared to a global average of75%. Similarly equity AUM to market cap stood at 5% as against a global average of 30%.Another way of looking at penetration is to measure MF AUM against bank deposits. Forinstance in 2014 MF AUM was equivalent to 10% of bank deposits currently MF AUM standsat 20% of bank deposits. Despite the sharp growth penetration levels by any measureremain considerably lower compared to other large economies. India has more than 50 croreincome tax Permanent Account Numbers (PANs) but only 2.2 crore mutual fund investors.This reaffirms my belief that the industry has the potential to grow exponentially. Anemerging opportunity that asset management companies should capitalise on is globalcapital. Foreign Portfolio Investors as a group are the second largest after promoters interms of ownership of India's market capitalisation. Most of these fund managers arebased overseas from where they manage Indian assets. The government has taken positivesteps to attract these managers/funds with various incentives through India'sinternational financial services centre GIFT City. The regulatory framework isprogressive and should facilitate the relocation of foreign funds to GIFT City. Globalagencies admire SEBI's Mutual Fund regulatory framework and consider the MF industryamong the top in terms of global best practices. I hope we can capitalise on this and makeour domestic mutual funds accessible internationally.

Unlike certain businesses within the financial services space assetmanagement by its nature tends to be much more volatile especially in the short term asit is highly correlated with the equity markets. HDFC AMC did see a contraction in itsequity AUM in March 2020 due to the steep fall in markets triggered by the suddenness ofthe pandemic and the resultant national lockdown. However this trend reversed asconfidence returned and equity markets revived. Although the pandemic has adverselyaffected several businesses large or small SIP flows in the last fiscal year wererelatively stable. This validates the effectiveness of the financial literacy campaign bythe MF industry and the Association of Mutual Funds in India (AMFI). The campaign focusedmaking people aware of the importance of proactivity over reactivity while avoidingimpulsive decisions based on temporary events. I compliment AMFI for not only instillingdiscipline at an industry level but also for its constructive communications with theregulator and other stakeholders to ensure orderly growth in the industry.

The framework put in place by SeBI has enabled the industry to follow a‘customer first' approach and instil confidence among investors in mutual fundsand other capital market oriented products. SEBI's emphasis on transparency anddisclosure standards is laudable. With a highly experienced team well-establisheddistribution robust IT infrastructure and digital network and a bouquet of products withgood long-term track record HDFC AMC is on a strong footing to capitalise on theopportunities in the Indian savings landscape. We look forward to further expanding ourbusiness and setting new benchmarks. HDFC AMC has been at the forefront in terms of itssocial footprint and governance standards. We were the first and only one to date tolaunch a mutual fund dedicated for a social cause.

On behalf of HDFC AMC I thank all our shareholders for their continuedsupport and belief in our business. We are also grateful to our customers for theirunwavering trust and confidence in us even during these challenging times. We willcontinue to strive towards our goal of spreading financial literacy increasing theacceptance of capital market-oriented products and deepening mutual fund penetrationlevels in the country.

As you are aware Milind Barve who was the Managing

Director of HDFC AMC since its inception in 1999 retired during theyear. Under Milind's leadership we emerged as the leading asset manager and achievedmany milestones.

I take this opportunity to thank Milind on behalf of all of you forleaving behind such a great legacy and wish him the very best for his retired life.Navneet Munot has taken over the reins. I am confident that Navneet's leadershipqualities and ^{multi-faceted business experience will take the Company to} evengreater heights with his thought process value systems and people-first approach beingaligned with that of the HDFC Group.

Let me also acknowledge the continued dedication and efforts of all ouremployees distribution partners and service providers for pursuing the mission of being awealth enabler and creator for every Indian. Let us hope and pray that the world is ableto overcome this pandemic soon and look forward to better times ahead.

Dear Shareholders

It gives me immense pleasure to write my first letter to you as MD& CeO of HDFC AMC an organisation I have always admired from outside.

At the outset I would like to express my sincerest gratitude to youand the Board of Directors for giving me the opportunity to steer this esteemedorganisation. Over the past two decades HDFC AMC has crossed many milestones under theable leadership of my predecessor Mr. Milind Barve. We have built a franchise that hassize and scale and is amongst industry leaders in terms of AUM and profitability. Todaynearly one out of every four mutual fund investors in India is invested with us. Howeverthe other way to look at is 3 out of 4 are not. We thus have a long way to go in ourjourney of helping customers manage their investments efficiently.

The past 15 months have tested our resilience to the maximum. As Iwrite this note uncertainty still prevails with the second wave of the pandemic hittingIndia even harder. Throughout the pandemic we have remained focused on ensuringwell-being of our employees while continuing to deliver to our customers. With extremegrief I would like to mention that two of our colleagues succumbed to the virus. And weare doing our best to assist both the families to manage this utmost difficult period.

Maintaining growth momentum in a volatile environment

The economy and markets were impacted materially at the start of thefinancial year. The Government's focus on fighting the pandemic and aiding economicrecovery yielded positive results. The RBI took decisive and innovative monetary measuresto keep financial conditions benign ensure orderly evolution of the yield curve andsustain growth on a durable basis. SeBI took steps for uninterrupted functioning of thecapital markets while managing risks effectively. The mutual fund industry continued itsgrowth trajectory with annual average industry AUM rising by 8.6%; total industry AUM asof March 31 2021 stood at Rs. 31.4 Lakh Crore. Systematic

Investment Plan (SIP) flows stayed resilient. B-30 (beyond the top 30)cities continue to contribute to the growth of the industry. We closed FY 20-21 with anAUM ofRs. 3.96 Lakh Crore 53 Lakh unique customers 90 Lakh live accounts servicedthrough 227 branches of which 149 are in B-30 cities. We continue to enjoy a favourablemix of 43% equity-oriented assets and 57% non-equity oriented assets as compared to theindustry mix of 41% and 59% respectively. It would be worth a mention that we are themost preferred choice of individual investors with a market share of 13.7% of theindividual MAAUM (monthly average assets under management) for March 2021. Our totalincome grew 3% y-o-y to Rs. 2202 Crore. We focused on rationalising costs to navigatethrough these challenging times which resulted in an 8% drop in expenses to Rs. 453crore.

We thus delivered another year of profitable growth with a profit aftertax (PAT) of Rs. 1326 Crore.

Managing investments in the new normal

Investment management is all about developing a culture of doing rightfor the customer. We are the fiduciary to our customers – their interests clearlysupersede. Transparency and good governance are the key pillars in upholding the higheststandards of fiduciary responsibilities. Our customers entrust us with their savings witha strong belief that we would help them achieve their financial goals. Our culturereflects deep sense of trusteeship towards them.

Today we offer a broad range of products across asset classes/ riskspectrum which addresses varied customers' needs. We constantly evaluateopportunities but refrain from creating a product/solution unless we strongly believe thatit will add value to our customers' portfolios over the long term.

During FY 20-21 we launched the HDFC Dividend Yield Fund whichreceived positive response during the New Fund Offer (NFO) period and has been seeingcontinued traction since. We also launched the HDFC Banking eTF. With equity markets nearrecord highs and interest rates at the lower end of the spectrum investors are searchingfor the right balance to optimise their portfolio returns. Our hybrid funds and assetallocation-oriented products enable investors to balance their asset allocation optimiseportfolio returns and ride out market gyrations. In the next few quarters we would liketo expand our equity product portfolio to cover sector/specific themes internationalmarkets and passive strategies.

Looking ahead

The second wave of COVID-19 hit us just when the growth momentumstarted reviving. However the COVID curve is showing signs of flattening strain onhealthcare infrastructure is easing and the nationwide vaccination drive is gatheringsteam. Keeping this in mind I believe the economy should come back to a steady recoverypath. The markets are clearly exhibiting confidence signalling better times ahead. Ourpeople are well equipped with top class digital infrastructure to function seamlessly. Wehave created the tools to provide best-in-class User Interface and User experience to ourcustomers and partners. We will continue to strengthen our digital capabilities with afocus on delivering customer delight.

More importantly despite strong growth in the past decade mutual fundpenetration remains extremely low in India.

At HDFC AMC we are well positioned to capitalise on the aopportunities with Pedigree People Processes Products Performance PresencePartnerships and Platform. While maintaining a highly cost-conscious culture we will notshy away from investing in the future. As India continues on its growth journey we aspireto be a wealth creator for every Indian with an audacious vision: to be the most respectedasset manager in the world.

I thank you once again for your trust and confidence in HDFC

AMC. I also take this opportunity to thank our customers distributionpartners service providers and above all our people for their unwavering commitment. Wewould like to thank SEBI for continued guidance and direction for an orderly a growth ofour industry.