RELIANCE SECURITIES LIMITED (FORMERLY KNOWN AS R TRADE SECURITIES LIMITED) ANNUAL REPORT 2006-2007 DIRECTOR'S REPORT To The Members, Your Directors have pleasure in presenting the Second Annual Report together with the audited statement of accounts of the Company for the year ended March 31, 2007. Financial Result: (Rupees) For the Year ended For the Period ended March 31, 2007 March 31, 2006 Gross Income 99,079,496/- 13,510,201/- Profit / (Loss) Before Taxation (99,585,251/-) (22,913,989/-) Provision for Taxation 1,787,930/- 574,056/- Net Profit / (Loss) (101,373,181/-) (23,488,045/-) Balance carried forward (124,861,226/-) (23,488,045/-) Dividend: Your Directors have not recommended any dividend on the Equity Shares for the year under review. Your Directors have also not recommended any dividend on the 10% Cumulative Redeemable Preference Shares for the year under review. Deposits: The Company neither invites nor accepts deposits from the public. Registration as a Depository Participant: During the year under review the Company has been admitted as a Depository Participant of the Central Depository Services (India) Limited (CDSL) and has been registered as a Depository Participant by the Securities and Exchange Board of India under the provisions of the Securities and Exchange Board of India Act, 1992, the SEBI (Depository Participants) Regulations, 1996 for a period of five years from May 10, 2006 to May 9, 2011 (Both the days inclusive). Share Capital: In order to strengthen its financial position and to generate long term resources for accelerating its future growth and business expansion plans during the year under review, subsequent to the receipt of the required statutory and regulatory approvals, the Authorised and Paid-up Share Capital of the Company has been increased pursuant to the Resolutions passed by the Members at the General Meetings and by the Board of Directors at the Board Meetings as per the following details: a) Increase in the Authorised Share Capital: The Authorised Share Capital of the Company has been increased from Rs.10,00,00,000/- (Rupees Ten Crores only) divided into 1,00,00,000 (One Crore) Equity Shares of Rs.10/- (Rupees Ten only) each, to Rs.25,00,00,000/-(Rupees Twenty Five Crores only) divided into 2,50,00,000 (Two Crore Fifty Lakhs) Equity Shares of Rs.10/- (Rupees Ten only) each, and from Rs. 25,00,00,000/- (Rupees Twenty Five Crores only) to Rs.50,00,00,000/-(Rupees Fifty Crores only) divided into 5,00,00,000 (Five Crore) Equity Shares of Rs.10/- (Rupees Ten only) each, at the Extraordinary General Meetings held on October 9, 2006 and December 20, 2006 respectively. The Authorised Share Capital of the Company has been further increased from Rs. 50,00,00,000/- (Rupees Fifty Crores only) divided into 5,00,00,000 (Five Crore) Equity Shares of Rs.10/- (Rupees Ten only) each, to Rs.125,00,00,000/-(Rupees One Hundred Twenty Five Crores only) divided into 5,00,00,000 (Five Crore) Equity Shares of Rs.10/- (Rupees ten only) each, aggregating to Rs.50,00,00,000/-(Rupees Fifty Crores only) and 7,50,00,000 (Seven Crore Fifty Lakhs) Redeemable Preference Shares of Rs.10/-(Rupees Ten only) each, aggregating to Rs. 75,00,00,000/- (Rupees Seventy Five Crores only) at the Extraordinary General Meeting held on March 19, 2007. b) Increase in the Paid-up Share Capital: The Paid-up Share Capital of the Company has been increased by issue and allotment of 1,50,00,000 (One Crore Fifty Lakhs) Equity Shares of Rs.10/- (Rupees Ten only) each, fully paid up at par, aggregating to Rs.15,00,00,000/- (Rupees Fifteen Crores only) to Reliance Share & Stock Brokers Private Limited at the Board Meeting held on October 19, 2006. The Paid-up Share Capital of the Company has been further increased by issue and allotment of 6,10,00,000 (Six Crore Ten Lakhs) 10% Cumulative Redeemable Preference Shares of Rs.10/-(Rupees Ten only) each, fully paid up at par, aggregating to Rs.61,00,00,000/- (Rupees Sixty one Crores only) to Reliance Capital Limited at the Board Meeting held on March 26, 2007. Change of Name: The Company was incorporated on June 17, 2005 in the name of 'R Trade Securities Limited'. Pursuant to the Resolution passed by the Members of the Company at the Extraordinary General Meeting held on June 26, 2006 and subsequent to the receipt of the requisite approvals from the Registrar of Companies, Maharashtra, Mumbai (ROC), the name of the Company has been changed from 'R Trade Securities Limited' to 'Reliance Securities Limited' with effect from July 17, 2006. The fresh Certificate of Incorporation from the ROC consequent upon change of name, has been duly received. Membership in the Derivative Segment of the Bombay Stock Exchange Limited: During the year under review the Company has been admitted as a Trading-cum Clearing Member in the Derivative Segment of the Bombay Stock Exchange Limited and has also been registered by the Securities and Exchange Board of India (SEBI) as Trading Member and Clearing Member i.e. Stock Brokers under the provisions of the Securities and Exchange Board of India Act, 1992, the SEBI (Stock-brokers and Subbrokers) Rules, 1992 and the SEBI (Stock-brokers and Sub-brokers) Regulations, 1992 with effect from October 12, 2006. Director: Mr. Ramesh Shenoy, Director of the Company retires by rotation and being eligible offers himself for re-appointment at the ensuing Annual General Meeting. Mr. Ramesh Shenoy has filed his consent to act as the Director of the Company, if re-appointed. The Company has received notice in writing from a Member of the Company under Section 257 of the Companies Act, 1956 proposing the candidature of Mr. Ramesh Shenoy for the office of Director liable to retire by rotation. Directors' Responsibility Statement: Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to the Directors' Responsibility Statement, it is hereby confirmed that: - In the preparation of the annual accounts for the financial year ended March 31, 2007, the applicable accounting standards have been followed along with proper explanation and there are no material departures; - The Directors have selected such accounting policies and applied consistently and have 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 as at March 31, 2007 and the loss of the Company for the financial year ended March 31, 2007 ; - The Directors 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; and - The Directors have prepared the annual accounts of the Company on a going concern basis. Auditors & Auditors' Report: M/s. RSM & Co., Chartered Accountants and the Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting of the Company. The Company has received a letter from M/s. RSM & Co., Chartered Accountants expressing their unwillingness to be reappointed as Auditors. Your Directors have therefore proposed to appoint M/s. Price Waterhouse, Chartered Accountants as the Auditors of the Company, subject to approval of Members of the Company at the ensuing Annual General Meeting. M/s. Price Waterhouse, Chartered Accountants have confirmed their eligibility under Section 224 of the Companies Act, 1956 and offer themselves for appointment. The Auditors' Report and the Notes on Accounts referred to in the Auditors' Report are self-explanatory and no comments are required. Subsidiary Companies: Particulars as required under Section 212 of the Companies Act, 1956 in respect of the wholly owned subsidiary companies, Reliance Commodities Limited, Reliance Financial Limited and Reliance Money Limited have been annexed to the accounts of the Company. Particulars of Employees: The Company has no employee in the category specified under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended. Conservation of Energy, Technology absorption, Foreign Exchange Earnings and Outgo: Particulars required to be furnished under the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are as under: 1) Part A and B pertaining to conservation of energy and technology absorption are not applicable to your Company. 2) Foreign Exchange Earnings and Outgo : a. Earnings- Nil b. Outgo- Rs.149,415/- On behalf of the Board of Directors Sd/- Sd/- Place: Mumbai Sudip Bandyopadhyay Ramesh Shenoy Date : April 21, 2007 Director Director