TO THE SHAREHOLDERS OF SECURITIES TRADING CORPORATION OF INDIA LIMITED

Your Directors have pleasure in presenting the Fifteenth Annual Report together with the audited accounts of the Company for the Year ended March 31, 2009.

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
Your Directors are pleased to report that the Company’s operations, following recent restructuring, have stabilized and the profits have increased, though marginally, as compared to the previous year. During the current year the Company’s profit before tax and exceptional items touched Rs. 47.53 crore. Sale of stake in a subsidiary accounted for a further gain of Rs. 12.83 crore which has been treated as an exceptional item under the head ‘profit on sale of investments’. This gain has been off set by an indemnity payment to Standard Chartered-STCI Capital Markets Ltd (erstwhile UTI Securities Ltd) amounting to Rs. 19.27 crore in terms of the Shareholders agreement between your Company and Standard Chartered Bank (Mauritius) Ltd. The net difference between the two figures has been shown as an exceptional item.

DIVIDEND

Keeping in view the amount available for appropriation and the planned buy back of shares of your Company, your Board does not recommend any dividend for the year 2008-09. The Board recommends transfer of 20% of the profit after tax amounting to Rs. 6.58 crore to Statutory Reserve as required under the Reserve Bank of India Act,1934 and that the balance available for appropriation (Rs. 40.96 crore)be carried forward to Profit & Loss account in the Balance Sheet.

BUY BACK OF SHARES

Your Board at its meeting held in April 2009 decided to offer 30 lakhs shares of the Company for buy back at a book value of Rs. 194/- per share. The buy back process has been completed and the shares bought back have been extinguished after payment consideration to shareholders. This has resulted in an outflow of Rs. 58.20 crore after the March 31, 2009 and the paid up capital as on date stands reduced from the level of Rs. 410 crore at the end of the year under report to Rs. 380 crore. It may be recalled that a share buy back (1st buy back) was approved by your Board in November 2007, which was well received by the shareholders and the paid up capital was brought down from Rs 500 crore to Rs. 410 crore. These steps are expected to improve the earning per share of the Company in future.

Company’s Operations.
After hiving off the Primary Dealership operations to a separate subsidiary, the Company has retained its NBFC character and it has been classified as an Investment Company by Reserve Bank of India (RBI). However in order to diversify its activities, your Board appointed, a reputed consultancy firm on future business strategies in the NBFC space. The business model suggested by the consultants has been deliberated extensively and new activities have been identified. These activities would be undertaken in full scale once the preparations (including on-boarding of personnel with relevant skill and experience) which are under way are completed. In the interim, your Company has already booked some business under the new initiative in the first quarter of 2009-10. As at the end of June 2009, the company has disbursed/renewed loans over Rs. 100 crore.

Subsidiaries of the Company
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 2009 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.

Performance of

(i) STCI Primary Dealer Ltd
This Company delivered a strong performance as a Primary Dealer during the year under report. The performance during the first two quarters did get adversely affected due to volatility in the fixed income market, but the Company was able to retrieve the position as the market improved in the next two quarters. The subsidiary posted a net profit (after tax) of Rs. 69.41 crore and declared a dividend of 10%.

(ii) STCI Commodities Ltd
In the year under report, the Company has posted a net loss of Rs.60 lakhs. The networth of the Company as on March, 2009 came down to Rs. 135.55 lakhs. Hence, your Company has made a provision of Rs. 254.38 lakhs towards decline in the value of its investment. Your Company is exploring the possibility of inducting a strategic partner in the Commodities Business. Meanwhile all efforts are being made to contain costs and arrest losses.

Standard Chartered-STCI Capital Markets Ltd (erstwhile UTI Securities Ltd)
Till 12th December 2008 Standard Chartered-STCI Capital Markets Ltd (SCSCML) used to be our subsidiary. Following exercise of the Call option by Standard Chartered Bank- Mauritius (SCB) your Company transferred further 25.9% stake in SCSCML on 12th December 2008 for a consideration of Rs. 77.70 crs pursuant to the Share Purchase Agreement (SPA). With this stake sale, SCSCML is no longer a subsidiary of the Company. SCB has a Call option and the Company has a Put Option in 2010-11 for the remaining 25.1 percent stake in SCSCML. Your Company has also made a provision of Rs. 3.62 crs for claims relating to Income tax appeals and some irregularities at one of the branches of SCSCML (erstwhile UTI Securities Ltd)pursuant to the terms of SPA & SHA (Share Holder Agreement) for sale of stake in SCSCML.

BOARD AND COMMITTEES

(i) Composition of Board of Directors
The Company’s Board comprises professionals from Banking and Financial sectors and Academics. As on March 31, 2009, the Board comprised eight Directors, out of whom three are nominated by Bank of India. The Board met 5 times during the year under review. The brief resume/details relating to Shri D Basu, Dr. N Balasubramanian and Prof S K Barua who retire by rotation and offer themselves for reappointment are furnished as attachment to the notice calling for the ensuing Annual General Meeting. Bank of India has nominated Shri V Sridar, Ex- Chairman & Managing Director of UCO Bank and National Housing Bank as their nominee Director on our Board. The Board also inducted Shri Vikram Limaye, Executive Director of IDFC as a Director. Shri Limaye is a Chartered Accountant and an MBA from Wharton School Pennsylvania with wide experience in Global Investment Banks, International Banks and Global Accounting Firms. Shri Sridar and Shri Limaye were inducted as additional Directors and hold office up to the date of the ensuing Annual General Meeting. The Company has received notice under section 257 of the Companies Act 1956 proposing their appointment as Directors liable to retire by rotation.

ii) Committees of the Board
The following Committees of the Board functioned during the year:

(a) Audit Committee
The Audit Committee of the Board comprises Shri D. Basu (Chairman), Dr. N. Balasubramanian, Professor S. K. Barua, Shri V. Rajaraman, Shri V. Sridar and Shri P Sanyal. Three members of the Committee are independent and all except the Managing Director are Non-Executive Directors of the Company. All the members of the Committee have knowledge of finance and accounts. The Committee met four times during the year under review. The scope and functions of the Audit Committee are as per the provisions of the Companies Act, 1956 and in particular include the following: a) To determine the scope and functions of the Internal and the Concurrent Auditors. b) To review the Statutory, Internal and Concurrent Auditors’ reports. c) To hold discussions as necessary with the Internal, Concurrent and Statutory Auditors. d) To review the Audit / Inspection reports of the Comptroller & Auditor General of India, RBI, etc. e) To discuss the annual financial statements with the Management and the Statutory Auditors.

Further, the Board desired to entrust the review of risk issues to the Audit Committee. The scope and functions for this purpose are as follows:

(b) 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 Members of the HRD Committee are Professor S. K. Barua (Chairman), Shri T.C. Venkat Subramanian, Shri V Sridar, Shri V Rajaraman and Shri P Sanyal. The Committee met once during the year under review.

(c ) NBFC Steering Committee
The Board formed a Steering Committee of the Board of Directors - the ‘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 Committee comprises Shri V Sridar, (Chairman) and Shri Vikram Limaye, Shri V Rajaraman, and the Managing Director of STCI as members of the Committee. The Committee met once during the year.

(d) Business Development & Credit Committee
The Board also felt the need for constituting a 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. Accordingly the Business Development & Credit Committee has been constituted comprising Shri D Basu, (Chairman), Shri V Sridar, Shri Vikram Limaye, Shri Rajaraman and the Managing Director as members.

Directors’ Responsibility Statement

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

Management/Executive Committee
Your Company has constituted the following committees of senior executives to manage its business and the related risks. All these Committees meet at regular intervals.

Management Committee
The Management Committee comprises of 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.

ALCO and Risk Management Committee
The ALCO and Risk Management Committee comprise 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 and (iii) attending all issues related to Asset-Liability Management.

Credit Committee
The Credit Committee decide 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.

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. The Company has also complied with the Directions and Guidelines issued by the Securities & Exchange Board of India (SEBI) under the SEBI (Portfolio Managers) Regulation, 1993.

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.

2. OTHER MATTERS

(i) Auditors
M/s BansiLal Shah & Co., 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, 2009. Auditors for the financial year ending March 31, 2010 will be appointed by C&AG, under the provisions of Section 619(2) of the Companies Act, 1956. M/s B K Khare & Co., Chartered Accountants, continued as the Company’s Internal Auditors during the year under report.

(ii) 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.

(iii) Disclosure of Particulars

(iv) Public Deposits
During the year ended March 31, 2009, 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 is registered with Securities and Exchange Board of India as Portfolio Manager and the registration is valid till 2010. However, after the hiving off of Primary Dealers operation into a separate subsidiary, the Management has decided to allow the subsidiary to pursue this activity and not to compete with them. Your company is open to new business as Portfolio Manager where there is no competition with the subsidiary.

(vi) Future Outlook
The Global economic scenario seems challenging. Indian Economy is, however, in a consolidation mode and the year ahead looks promising with a stable government in place. The country seems to be poised for another phase of reforms and liberalization of its economy. However, the uncertain interest rate scenario has led to market volatility and has had its impact on market sentiments. Your company, which has retained its NBFC character after hiving off the Primary Dealer activity, expect to be able to scale up its operations in the lending segment. The Company is in touch with its shareholding Banks and financial institutions for tying up viable business proposals. As the Company’s loan book expands, as we hope would be the case in the current financial year, the Company’s income stream should get strengthened. Your company is also on the lookout for newer activities in the NBFC space

(vii) Acknowledgement
The Board of Directors thank the Government of India, Reserve Bank of India, Securities and Exchange Board of India, all the Shareholders and Company’s Bankers for their support. The Board of Directors also place on record their appreciation of the dedicated performance by the employees during the period under review