JM FINANCIAL SERVICES PRIVATE LIMITED ANNUAL REPORT 2010-2011 DIRECTOR'S REPORT To The Members, The Directors of your Company have pleasure in presenting their Thirteenth Annual Report together with the audited annual accounts for the financial year ended March 31, 2011. FINANCIAL RESULTS (Rupees in lakh) Particulars For the year ended March 31, 2011 March 31, 2010 Gross Income 28,489.69 21,498.89 Profit before Tax 4,864.21 3,377.01 Provision For Tax Current Tax 1610.00 974.37 Deferred Tax (102.95) (4.35) Profit after Tax 3357.16 2,406.99 Tax adjustment in respect of earlier years - (52.29) Balance brought forward from previous year 8808.39 6,922.44 Transfer to Capital Redemption Reserve - (468.75) Surplus carried to Balance Sheet 12165.55 8,808.39 DIVIDEND In order to conserve the reserves of your Company, the Directors did not recommend any dividend on the equity shares for the financial year 2010-11. FINANCIAL HIGHLIGHTS During the year under review, your Company earned a gross income of Rs. 28,489.69 lakh as against Rs. 21,498.89 lakh earned by it in the previous year registering an increase of 32.52%. After accounting Rs. 23,625.48 lakh as expenditure, your Company reported a profit before tax of Rs. 4,864.21 lakh as against the profit before tax of Rs. 3,377.01 lakh reported by it in the previous year. The net profit after tax for the financial year 2010- 11 is higher at Rs. 3,357.16 lakh as against the net profit after tax of Rs. 2,406.99 lakh reported in the previous year. BUSINESS REVIEW The BSE Sensex rose to 19,445 on March 31, 2011 from 17,527 as on March 31, 2010 registering an increase of 10.94% during the FY 2010-11. The Foreign Institutional Investors (FIIs) emerged as the net buyers to the extent of Rs. 1,10,121 crore in the equity market in India during the FY 2010-11. The average daily trading volume on the cash as well as F & O segments increased by 40% during the FY 2010-11 so as to reach Rs. 1,33,521 crore. The increase in trading volume was primarily due to rise in trading volume of options contracts which contributed around 57% of the total trading volume during FY 2010-11 as against the contribution of 37% during the previous financial year. Mutual Funds had assets under management of Rs.5,92,250 crore as on March 31, 2011 compared to Rs. 6,13,979 crore on March 31, 2010. During the year, an amount of Rs. 46,693 crore was raised through 57 public issues of equity shares. During the year under review, your Company continued its focus on secondary equity market, wealth management services (both corporate and private) and distribution of financial products. The performance of various business groups of your company is as under: Equity Broking Group Your Company has increased its reach to 135 top cities during the year under review, as compared to 83 cities in the previous financial year by focusing on increasing the franchisee partners across the country. The contribution of business volume from franchisees was 48% during FY 2010-11. This has helped your Company in achieving a de-risked business model and a widespread presence. Wealth Management Group Your Company's wealth management group caters to high networth individuals and corporates through 'Private Wealth Group' and 'Corporate Wealth Group' providing a complete range of financial products best suited to its clients' needs. Your Company has assets under management of Rs. 24,889 crore and has presence across eight cities viz., Mumbai, Kolkata, Delhi, Chennai, Bangalore, Pune, Ahmedabad and Hyderabad. Your Company's strong relationship management skills have enabled it to have scalable and profitable wealth management business. Independent Financial Advisor Group Your Company mobilised Rs. 22,786 crore in public issue of equity shares by various companies during the year under review with a market share of 10.58% in retail and non-institutional category and is among the top three players in this business. Your Company also mobilised around Rs. 3,043 in fixed deposit schemes and fixed income products of various companies during the year under review. SUBSIDIARIES The audited statement of accounts for the year ended March 31, 2011, together with the reports of the Directors and Auditors thereon of JM Financial Commtrade Limited and JM Financial Insurance Broking Private Limited, the wholly owned subsidiaries of your Company, are attached pursuant to Section 212 of the Companies Act, 1956. SHARE CAPITAL During the year, your Company alloted 3,300,000 equity shares of the face value Rs. 10/- each to JM Financial Products Limited pursuant to the conversion of 3,300,000 Optionally Convertible Non-Cumulative Redeemable Preference Shares (OCPs) held by it in the Company. Additionally, your Company allotted 42,200,000 equity shares to JM Financial Products Ltd. on August 24, 2010 against they subscribing to the said shares pursuant to the offer of rights shares made by your Company. As a consequence, your Company became a subsidiary of JM Financial Products Ltd. w.e.f August 24, 2010. Your Company redeemed 3,012,500 OCPs of the face value Rs. 10/- each held by JM Financial Consultants Pvt. Ltd. during the year. DIRECTORS During the year, Mr. Rajeev Chitrabhanu and Mr. Subodh Shinkar ceased to be the Directors of your Company. Pursuant to the provisions of the Companies Act, 1956, read with Article 125 of the Articles of Association of your Company, Mr. P K Choksi and Mr. H M Kotak, retire by rotation at the forthcoming Annual General Meeting (AGM) and being eligible, offer themselves for re-appointment. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, the Directors state and confirm that: * In the preparation of the annual accounts, the applicable accounting standards have been followed; * They have 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 or loss of the Company for that period; * They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; * They have prepared the annual accounts on a going concern basis. PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars as required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 on Conservation of Energy and Technology Absorption are not applicable to your Company since it is not a manufacturing Company, and hence not furnished. During the year under review, your Company has not earned any foreign exchange (previous year Nil). The foreign exchange spent by your Company during the year is equivalent to Rs. 3,527,537/- (previous year Rs.27,852/-). PARTICULARS OF EMPLOYEES The information required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, is given in the annexure hereto and forms part of this Report. Your Company had 615 employees as on March 31, 2011. There were 9 employees employed throughout the year who were in receipt of a remuneration of more than Rs. 60.00 lakh per annum and 6 employees employed for part of the year who were in receipt of a remuneration of more than Rs. 5 lakh per month. AUDITORS The retiring Auditors, namely, M/s. Deloitte, Haskins & Sells, Chartered Accountants, Mumbai hold office until the conclusion of the ensuing Annual General Meeting and are seeking their re-appointment. Members are requested to consider their appointment and authorise the Board to fix their remuneration. ACKNOWLEDGEMENTS Your Directors wish to thank the Securities and Exchange Board of India, National Stock Exchange of India Limited, Bombay Stock Exchange Limited, MCX Stock Exchange Limited, National Securities Depository Limited, Central Depository Services (India) Limited, Ministry of Corporate Affairs, Registrar of Companies, Maharashtra and all the stakeholders of your Company for the support and guidance provided by them. Your Directors also take this opportunity to place on record, their sincere appreciation for the dedicated services rendered by the employees of your Company at all levels. For and on behalf of the Board Sd/- Nimesh N Kampani Chairman Place: Mumbai Date : May 9, 2011