1. FINANCIAL RESULTS

Created pursuant to Section 45 I c of Reserve Bank of India Act, 1934 as amended in January 1997. This reserve forms part of Free Reserves, Net Owned Funds and Tier I Capital.

COMPANY’S PERFORMANCE

Financial Performance

During the year under review, your Company earned a total income of Rs.9372.68 crore against Rs. 4878.50 crore in the previous year. The Company's profit before dividend, tax, prior period and exceptional items was Rs. 2,882.55 lakhs as against Rs. 2,684.56 lakhs in the previous year. The fall in profit before tax from Rs. 4759.78 lakhs to Rs. 2965.88 lakhs was due to non receipt of any dividend by the Company from its subsidiary STCI Primary Dealer Ltd. (last year Rs. 20 crore) and an exceptional credit of Rs 6.55 crore in the previous year. The performance of the Company was also affected due to unfavorable market conditions.

DIVIDEND

The Board does not recommend any dividend for the year 2009-10.

Business Operations

During the year under review, the Company started lending operations. A mutli-pronged business development effort was launched to create awareness in the market about the Company's lending activity. Target market segments for corporate loans were carefully selected out of rated Small and Medium Enterprises (SMEs) {rated by Small and Medium Enterprise Rating Agencies (SMERA)} , listed small cap and mid cap companies. Besides, potential borrowers in the capital market, viz, for Loans against Shares, Promoter Funding, IPO funding etc were targeted directly as well as through boutique investment
bankers and stock broking houses. In the year under review, your Company disbursed/renewed loans over Rs 300 crore, as against previous year end outstanding of Rs. 50 crore.

Subsidiary Companies

Your Company has the following subsidiaries:

STCI Primary Dealer Ltd (wholly owned subsidiary)
STCI Commodities Ltd (wholly owned subsidiary)

In terms of the provisions of Section 212 of the Companies Act, 1956, the audited statements of account for the year ended 31st March 2010 of the Company's subsidiaries, STCI Primary Dealer Ltd, and STCI Commodities Ltd (wholly owned subsidiaries), the Auditors' Report and the Directors' Report thereon and the statement pursuant to Section 212(e) of the Companies Act are annexed to this report. These reports provide information regarding business undertaken and financial results achieved by the subsidiaries. Your Directors would, however, like to provide the following further information with respect to these subsidiaries.

(i) STCI Primary Dealer Ltd.

During the period under review, this Company posted a profit after tax of Rs. 12.83 crore as against Rs. 69.41 crore in the previous year. The performance of the Company was adversely affected as the rising interest rates with government's large borrowing programme led to difficultBank of Baroda, Greater Mumbai Zone invites sealed tenders for Refurbishment Works of Mumbai Main Branch. Last date: 09.12.2010 trading conditions in the market for fixed income SLR/Non SLR bonds.

(ii) STCI Commodities Ltd

In the year under report, the Company posted a net loss of Rs. 2.27 lakhs as against to Rs.60 lakhs
in the previous year. The networth of the Company as on March, 2010 came down to Rs.131.37lakhs. In the year under report the Company managed to earn cash profit of over Rs 17 lakhs as compared to a cash loss in the previous year.

(iii) Standard Chartered-STCI Capital Markets Ltd (SCSCML)(erstwhile UTI Securities Ltd)

With the sale of stake of 25.9% in December 2008 to Standard Chartered Bank, Mauritius (SCBM), SCSCML ceased to be your Company's subsidiary. In 2010-11, SCBM has a Call option and your Company has a Put Option for the rmaining 25.1 percent stake in SCSCML. Your company has exercised its Put Option in the current year and is awaiting settlement upon completion of regulatory formalities. A provision of Rs. 3.62 crore was made in FY 2008-09 for claims relating to
Income tax appeals and some irregularities at one of the branches of SCSCML, pursuant to the terms of the Share Purchase Agreement & the Share Holder Agreement. Besides, SCBM has made a few more claims aggregating approximately Rs. 30 crore during the year which have been strongly contested by your company.

Board of Directors

As on March 31, 2010, the Board comprised seven Directors, out of whom one is nominated by Bank of India. The brief resume/details relating to Shri T. C. Venkat Subramanian and Shri Vikram Limaye who retire by rotation and offer themselves for reappointment are furnishe as attachment to the notice calling for
the ensuing Annual General Meeting. Shri V. Rajaraman nominee of Bank of India upon his superannuation resigned from the Board of Directors of the Company with effect from 31st December, 2009.The Board placed on record its appreciation for the contribution made by Shri Rajaraman during his tenure as Director. The Board met five times during the period under review.

Committees of the Board

(i) Audit Committee The Audit Committee has been constituted as per Section 292A of the Companies Act, 1956. As on 31st March, 2010, the Committee comprises Shri D. Basu (Chairman), Dr. N. Balasubramanian, Professor S. K. Barua, Shri V. Sridar and Shri P Sanyal (Managing Director). Three members of the Committee are independent and all except the Managing Director are Non-Executive Directors of the Company. The scope and functions of the Audit Committee are as per the provisions of the Companies Act, 1956 and in particular include the following :

(ii) HRD Committee

The HRD Committee of the Board reviews the Human Resources policy and procedure to be followed by the Company besides the remuneration to be paid to the Managing Director. The HRD Committee was reconstituted on resignation of Shri V. Rajaraman on 31st Deccember, 2009. The present HRD Committee comprises Professor S. K. Barua (Chairman), Shri T.C. Venkat Subramanian,
Shri V Sridar and Shri P Sanyal (Managing Director). The HRD Committee met three times during the year under review.

(iii) NBFC Steering Committee

The Committee provides ongoing guidance to the Management in implementing the project of taking up lending activity as an NBFC (NBFC project) and to provide on behalf of the Board all approvals as may be necessary to implement the project whether in the area of business policy and parameters, creation of IT infrastructure, selection/ recruitment of senior management for implementation of the project and all other matters in connection with the NBFC project. The NBFC Steering Committee comprises of Shri V. Sridar (Chairman), Shri Vikram Limaye, Shri V. Rajaraman and Shri P. Sanyal- Managing Director. The NBFC Steering Committee met twice during the year under review.

(iv) Business Development & Credit Committee

The Board constituted the committee for considering and approving loan and other business proposals, which would eventually be part of the new NBFC activity, pending rolling out of the NBFC Project, to capture new business opportunities that may emerge in the interim. The Business Development & Credit Committee comprises of Shri D. Basu - (Chariman), Shri V. Sridar, Shri V. Rajaraman, Shri Vikram Limaye and Shri P. Sanyal - Managing Director. The Business Development & Credit Committee met five times during the year under review.

(v) Credit and Investment Committee:

At its meeting held on 29th March, 2010, the Board decided to merge NBFC Steering Committee and Business Development & Credit Committee and designate it as "Credit and Investment Committee". The members of this committee are Shri D. Basu (Chariman), Shri T. C. Venkat Subramanian, Shri V. Sridar, Shri Vikram Limaye and Shri P. Sanyal (Managing Director).the committee met 2 times during the year. The committee is authorized to approve loan and investment proposals beyond the delegated authority of the Committee of Executives, subject to limits laid down by the Board for exposures to single borrower and borrower group. The Committee also examines/vet matters relating to credit and investments viz. policies, concept papers, delegation of powers etc and recommend to the Board for approval.

(vi) Nomination Committee

The Nomination Committee of the Board is constituted for selection and appointment of new directors. The Nomination Committee comprises Shri. D. Basu (Chairman), Shri S.K. Barua and Shri P. Sanyal (Managing Director). The Nomination Committee meets as and when a new director is appointed. No meeting of this committee was held during the year.

Management/ Executive Committee

(i) Management Committee

The Management Committee comprises Senior Executives and is headed by the Managing Director.
It deliberates on matters which have a bearing on the Company's operations and functions as a
forum to elicit inputs from departmental heads and also keeps departmental heads aware of
these issues.

(ii) ALCO and Risk Management Committee

The ALCO and Risk Management Committee comprises Senior Executives and is headed by the Managing Director. It is responsible for

(i) ensuring adherence to the prudential limits and guidelines set by the Board and the Audit Committee of Board
(ii) formulating Risk Management Policies within the framework approved by the Board and
(iii) attending to all issues related to Asset- Liability Management.

(iii) Credit Committee

The Credit Committee decides upon fixing of exposure limits for each IPO financing and for loan against shares. The exposure limit for each borrower is also decided by the Credit Committee subject to the ceilings laid down by the Board. This Committee considers and sanctions loan within the powers delegated to it by the Board.

(iv) Grievances Redressal Committee

Grievances Redressal Committee reviews the complaints and grievances of staff and that of Customers/clients.

Regulatory Compliance

The Company has complied with all the applicable guidelines prescribed by RBI for NBFCs regarding accounting standards, income recognition, valuation of securities, capital adequacy, etc.

Credit Rating

The Company continued to enjoy the highest ratings of P1+ and A1+ from rating agencies CRISIL and ICRA for its short-term borrowing programme.

OTHER MATTERS

(i) Auditors

M/s Chandabhoy & Jassoobhoy, Chartered Accountants, Mumbai were appointed as the Auditors of the Company by the Comptroller & Auditor General of India (C&AG) for the year ended March 31, 2010. Auditors for the financial year ending March 31, 2011 will be appointed by C&AG, under the provisions of Section 619(2) of the Companies Act, 1956.The Company has a policy to change its internal auditors periodically. Accordingly, the Board appointed M/s Borkar & Muzumdar, Chartered Accountants, Mumbai as the Company's internal auditors for the FY 09-10. M/s B K Khare & Co., Chartered Accountants, Mumbai were the internal auditors of the Company till the previous year.

Recruitment and Training of Staff

With a view to strengthening its human resources, the Company has been recruiting professionals with appropriate skills and experience at the middle and senior management levels. Recognising the importance of exposing officers to the developments in the financial sector, the Company deputes its officers for appropriate training programmes and seminars.

Disclosure of Particulars

(a) Disclosures on materially significant related party transactions that may have potential conflict of interest of the Company at large: During the year 2009-10, no transactions of material nature had been entered into by the Company with the Promoters or Directors or Management, their subsidiaries or their relatives
that may have potential conflict with interests of the Company. Particulars of related party transactions with the subsidiary companies and others are disclosed in Notes to Accounts.

(b) Details of non-compliance by the Company, penalties and restrictions imposed on the Company by Registrar of Companies, SEBI or any statutory authority, or any matter related to Capital Markets, during the last three years.
The Company has complied with all the requirements on matters related to Company, as applicable from time to time. No penalties or restrictivions were imposed by any regulatory authority during the year under review.

(c) Disclosures on risk management The Company has laid down Risk Management Policy defining Risk profiles involving Strategic, technological, Operational, Financial, Organizational risks within a well defined framework.

(d) Whistle Blower Policy The Company has formulated a policy to prohibit managerial personnel from taking adverse action against employees, who report in goodfaith alleged wrongful conduct on matters involving violation of any law, mismanagement, gross waste or misappropriation of public or Company's funds, substantial and specific danger to public health and safety or an abuse of authority. The policy also lays down the mechanism for making enquiry in the whistle blower complaints received by the Company. Employees aware of any alleged wrongful conduct are encouraged to make a disclosure to the Audit Committee.

(e) Directors' Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors confirm that:

a. In preparation of the Annual Accounts, the applicable accounting standards have been followed and that there are no material departures.
b. Appropriate accounting policies have been selected and applied consistently, judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and the profit for that period.
c. Proper and sufficient care has been taken to the best of their knowledge and ability for 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.
d. The annual accounts have been prepared on a going concern basis

(f) Other Disclosures:

• A statement containing particulars of employees as required under section 217(2A) of
the Companies Act, 1956 read with the Rules framed there under is being annexed to
the Report.
• The Companies (Disclosure of Particulars in the Report of Board of Directors) Rules,
1988 pertaining to Conservation of Energy in Form A and Technology Absorption in Form
B are not applicable to your company, as your company is not a manufacturing company
• The details of the foreign exchange outgo appear at Item No.10 of Schedule 20 in the
Notes forming part of accounts.
• Your company uses information technology extensively in its day to day operations.

(iv) Public Deposits

During the year ended March 31, 2010, your Company has not accepted any deposits from the public within the meaning of the provisions of the Non-Banking Financial Companies (Reserve Bank) Directions, 1998.

(v) Portfolio Management Services (PMS)

Your company was registered with Securities and Exchange Board of India as Portfolio Manager since 1996. The registration as a Portfolio Manager expired in February, 2010. Since the company's subsidiary, STCI Primary Dealer Ltd, is already an established player in the PMS space, the management decided not to renew the registration

(vi) Future Outlook

As shareholders are aware, the Company has retained its NBFC character after hiving off the Primary Dealer activity and has since scaled up its operations in the lending segment. All efforts are being made to grow the loan book size without compromising on quality and good progress is expected to be made in this direction in the current year. The Company's other major line of business comprises Investment and Trading in fixed income securities equities and commodities. The prospect of this activity remains somewhat uncertain in the current year in view of the continuing uncertainties in the global financial markets as also the environment of rising interest rates within the country. The Company continues to look for opportunities in other areas of business in the non banking
finance space to broad base its activities.

(vii) Acknowledgement

Your Directors would like to express their sincere appreciation of the co-operation and assistance received from shareholders, bankers, regulatory bodies and other business constituents during the year under review. Your Directors also wish to place on record their appreciation for the commitment displayed by all the executives, officers and staff, in the performance of the Company during the year.