JM Financial

The Directors of your Company are pleased to present the Twenty Third
 Annual Report together with the audited annual accounts for
 the financial year ended March 31,2008.
 
 Financial results                             (Rs in crore)
                                         For the year ended
 
 Particulars                            March 31,    March 31,
                                        2008         2007
                                           Consolidated
 
 Gross income                             742.29       444.05
 Profit before depreciation, 
 interest & tax                           334.81       197.91
 Less: Depreciation                         9.79         7.04
 Interest                                  32.83         7.84
 Provision on standard assets              12.04         0.09
 Add: Exceptional item                   1509.60          - 
 Profit before tax                       1789.75       182.94
 Provision for tax                        454.11        59.27
 Provision for fringe benefit tax           1.42         0.76
 Profit after tax but before minority
 interest and share in 
 associate companies                     1334.22       122.91
 Less: Share of minority interest           9.84        28.73
 Share of Profit/ (Loss) in associate 
 companies                                (17.32)       (3.31)
 Net profit                              1307.06        90.87
 Add: Profit brought forward 
 from earlier years                       165.30       108.38
 Less: Adjustments as per AS 15 and others  0.83          -
 Profit available for appropriation      1471.53       199.25
 Appropriations
 Proposed dividend
 Normal                                    15.00        15.00
 Special                                   60.00          -
 Dividend tax                              12.83         5.40
 General reserve                          150.00         8.70
 Statutory reserve                         13.15          -
 Debenture redemption reserve              (4.85)        4.85
 Balance carried to balance sheet        1225.40       165.30
                                         1471.53       199.25
 
 March 31,              March 31,
 2008                   2007
           Standalone
 
    36.70                  39.38
    28.93                  35.76
     0.10                   0.03
     0.06                    -
      -                      -
  1723.02                    -
  1751.79                  35.73
   391.55                   0.41
     0.07                      #
  1360.17                  35.31
      -                      -
      -                      -
  1360.17                  35.31
    37.97                  24.01
      -                      -
  1398.14                  59.32
    15.00                  15.00
    60.00                    -
    12.75                   2.55
   150.00                   3.80
      -                      -
      -                      -
   160.39                  37.97
  1398.14                  59.32
 
 Dividend
 
 Your Directors are pleased to recommend the payment of dividend of 250%
 (Rs. 25/- per share) for the year ended March 31, 2008 including a
 special dividend of 200% (Rs. 20/- per share), considering an
 exceptional income during the year being the profit on sale of 49%
 equity stake held by your Company in Morgan Stanley India Company
 Private Limited (formerly known asJM Morgan Stanley Securities Private
 Limited) to Morgan Stanley. The payment of dividend together with tax
 thereon will absorb Rs. 87.75 crore. The dividend, if declared at the
 forthcoming Annual General Meeting, will be paid on July 29,2008 to
 those Members whose names appear in the Register of Members on July 18,
 2008. With respect to shares that are held in the dematerialised form,
 it will be paid to those Members whose names are furnished by the
 depositories as the beneficial owners as on the said date.
 
 Sub-division of shares
 
 The Board of Directors, at its meeting held on May 28, 2008, has
 decided to sub-divide the existing equity shares of the face value of
 Rs. 10/- each in the share capital of your Company into 10 equity
 shares of the face value of Re. 1/- each subject to the approval of
 the Members at theforthcoming Annual General Meeting.
 
 If the sub-division of equity shares is approved by the Members, the
 fresh shares of Re. 1/- each will be issued /credited in the respective
 beneficiary accounts to / of the Members, whose names appear in the
 Register of Members and / or furnished by the depositories as the
 beneficial owners on the Record Date to befixed by the Board of
 Directors in this regard.
 
 Issue of bonus shares and increase in authorised capital
 
 The Board of Directors, at its meeting held on May 28,2008, has decided
 to issue fully paid up bonus shares to the Members of the Company in
 the ratio of 3 (three) equity shares for every 2 (two) equity shares
 held by the Members, by capitalising an amount of Rs. 45 crore from the
 securities premium account of the Company. The issue of the bonus
 shares will be subject to the approval of the Members at the
 forthcoming Annual General Meeting.
 
 If the bonus issue is approved by the Members, the bonus shares will be
 issued / credited in the respective beneficiary accounts to / of the
 Members, whose names appear in the Register of Members and / or
 furnished by the depositories as beneficial owners on the Record Date
 to befixed by the Board of Directors in this regard.
 
 To facilitate the issue of additional shares resulting from the bonus
 issue, your Directors propose an increase in the authorised share
 capital of the Company from Rs. 50 crore to Rs. 100 crore.
 
 Financial highlights
 
 On a consolidated basis and before exceptional item, your Company
 earned a gross income of Rs. 742.29 crore (previous year - Rs. 444.05
 crore) and a profit before tax of Rs. 280.15 crore (previous year - Rs.
 182.94 crore) duringtheyear under review.
 
 The profit before tax and minority interest and share of profit/ loss
 in associate companies after considering the exceptional item is Rs.
 1,789.75 crore. The profit after tax, minority interest and the share
 of profit/ loss in associate companies is Rs. 1,307.06 crore. The
 earnings per share, after considering the exceptional item on the
 number of shares outstanding attheyear end is Rs. 435.69 per share.
 
 On a standalone basis, your Company earned a lower gross income of Rs.
 36.70 crore during the year under review as against Rs. 39.38 crore in
 the previous year. After the inclusion of the gain resultingfrom the
 sale of the shares in Morgan Stanley India Company Private Limited to
 Morgan Stanley, treated as an exceptional income, the profit before tax
 aggregates to Rs. 1,75 1.79 crore and the profit after tax stands at
 Rs. 1,360.17 crore. The earnings per share, on the shares outstanding
 at the year end, is Rs. 9.59 per share before the exceptional item and
 Rs. 453.39 per share after the exceptional item. The networth of your
 Company at the year end stands at Rs. 1,653.44 crore i.e., at Rs. 55 1.
 15 per share.
 
 Resolution through the postal ballot
 
 The Members passed an ordinary resolution under Section 293(l)(e) of
 the Companies Act, 1956 for contributing to charitable and other funds
 through the postal ballot pursuant to Section I92A of the Companies
 Act, 1956 read with Companies (Passing of the Resolution by Postal
 Ballot) Rules, 2001. The result of the said postal ballot was announced
 on March 14,2008.
 
 Your Company has complied with the procedures for the postal ballot in
 terms of the aforesaid rules and amendments thereto.
 
 Employees stockoption scheme
 
 The Compensation Committee, at its meeting held on December 27, 2007,
 granted 4,45,500 equity stock options to the employees / Directors of
 the Company and its subsidiary(ies). The options granted, as aforesaid,
 were subsequently cancelled by the Compensation Committee at its
 meeting held on March 29,2008 after considering all the relevant
 factors.
 
 The Compensation Committee, at its meeting held on April 15, 2008
 granted 4,45,500 fresh stock options to the employees / Directors of
 the Company and its subsidiary(ies). These options are granted at an
 exercise price of Rs. 1,370/- per option, based on the closing price of
 the shares of your Company on the National Stock Exchange of India
 Limited on the day of the meeting of the Compensation Committee and
 shall be vested in the concerned employees/ Directors in three tranches
 at the end of third, fourth and fifth yearfrom the date of grant.
 
 Jointventure
 
 Following the termination of the joint venture between JM Financial and
 Morgan Stanley, your Company acquired 49% equity stake held by Morgan
 Stanley in JM Financial Consultants Private Limited, engaged in the
 investment banking business (along with its wholly-owned subsidiaries
 engaged in securities business).  Consequently, JM Financial
 Consultants Private Limited has become a wholly-owned subsidiary of
 your Company. Further, your Company sold its 49% equity holding in the
 joint venture engaged in the institutional securities business, namely,
 Morgan Stanley India Company Private Limited (formerly known as JM
 Morgan Stanley Securities Private Limited) to Morgan Stanley.
 
 In order to have a continued presence in the institutional securities
 business, your Company, through its wholly-owned subsidiary namely.JM
 Financial Consultants Private Limited, entered into a joint venture
 with the ASK Group and acquired 60% equity stake in ASK Securities
 India Private Limited (now known as JM Financial ASK Securities Private
 Limited), which is a trading member of the National Stock Exchange of
 India Limited and Bombay Stock Exchange Limited and has a presence in
 the institutional securities & research business.
 
 Your Company continues to cater to institutional investors, both
 domestic and offshore, and continues to provide research-based broking
 services to its institutional clients through JM Financial ASK
 Securities Private Limited.
 
 JM Financial Consultants Private Limited has further acquired the
 balance 40% equity stake in JM Financial ASK Securities Private Limited
 from ASK Group on May 9,2008. Consequently, JM Financial ASK Securities
 Private Limited became a wholly-owned subsidiary of JM Financial
 Consultants Private Limited. On receipt of the relevant regulatory
 approvals, the name of JM Financial ASK Securities Private Limited
 will be changed to JM Financial Institutional Securities Private
 Limited.
 
 Management discussion and analysis
 
 The Managements Discussion and Analysis Report for thefinancial year
 2007-08, as stipulated under Clause 49 of the Listing Agreement(s) with
 the Stock Exchange(s), is given in a separate section forming part of
 the Annual Report.
 
 Your Companys business interests
 
 Your Company, through its subsidiaries, joint venture and associates,
 forms an integrated financial services group providing a wide range of
 services to a significant clientele that includes corporates, financial
 institutions, high net-worth individuals and retail investors. Your
 Company has business interests in investment banking, institutional and
 non-institutional securities trading and research, wealth management,
 mutual fund asset management, alternative asset management and
 securities financing and investing; all of which have been described in
 detail in the management discussion and analysis.
 
 Investment in operating subsidiaries
 
 Your Company invested in the capital of the following operating
 subsidiaries in addition to the acquisition of JM Financial
 ASKSecurities Private Limited as described above:
 
 - Rs. 86.95 crore for acquisition of 8,69,50,000 equity shares of the
 face value of Rs. 10/-each for cash at par in JM Financial Asset
 Reconstruction Company Private Limited. The investment as above
 currently represents 49% of the paid up share capital of Asset
 Reconstruction Company.
 
 - Rs. 400 crore for acquisition of 3,20,00,000 equity shares of the
 face value of Rs. 10/-each for cash at a premium of Rs. 15/- per
 share in JM Financial Products Private Limited. Your Company also
 converted 1,15,00,000 optionally convertible preference shares into
 equity shares and received 49,50,00,000 equity shares as bonus shares
 fromJM Financial Products Private Limited.
 
 - Rs. 301 crore for acquisition of 86,00,000 equity shares of the face
 value of Rs. 10/-each for cash at a premium of Rs. 340/- per share in
 JM Financial Ventures Limited. Consequently, JM Financial Ventures
 Limited has becomeasubsidiaryofyourCompany.
 
 - Rs. 279.49 crore for acquisition of 1,59,71,000 equity shares of the
 face value of Rs. 10/- each for cash at a premium of Rs. 165/- per
 share inJM Financial Consultants Private Limited.
 
 - Rs. 90 crore for acquisition of 90,00,000 equity shares of the face
 value of Rs. 10/- each for cash at a premium ofRs. 90/-pershareinJM
 Financial Asset Management Private Limited.
 
 Sale of shares in operating subsidiaries
 
 During 2007-08, besides the sale of shares in Morgan Stanley India
 Company Private Limited as described above, your Company sold shares in
 thefollowing operating subsidiaries:
 
 - Its entire holding of 50,00,000 equity shares and 25,00,000
 preference shares in JM Financial Commtrade Limited to JM Financial
 Services Private Limited, a wholly-owned subsidiary of JM Financial
 Consultants Private Limited.
 
 - Your Company transferred / sold 5,44,50,000 equity shares
 representing 10% of the equity share capital of JM Financial Products
 Private Limited to JM Financial Group Employees Welfare Trust for
 allocating the equity shares, based on the share purchase options
 granted, from time to time, to the employees and Directors of the
 companies belongingtoJM Financial Group.
 
 Fixed deposits
 
 Your Company has not accepted any fixed deposits from the Members /
 public during theyear under review.
 
 Directors responsibility statement
 
 In pursuance of Section 217 (2AA) of the Companies Act, 1956, the
 Directors confirm that:
 
 - in the preparation of the annual accounts, the applicable accounting
 standards have been followed and there are no material departures from
 the same;
 
 - 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
 your Company at the end of the financial year and of the profit or loss
 of your Company for that period;
 
 - they have taken
 proper and sufficient care for maintaining 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 agoing concern basis.
 
 Directors
 
 In accordance with Article I 30 of the Articles of Association of the
 Company read with the provisions of the Companies Act, 1956, Mr. E A
 Kshirsagar and Mr. D E Udwadia, retire by rotation at the forth coming
 Annual General Meeting and being eligible, offer themselves for
 reappointment.
 
 Pursuant to the provisions of Section 260 of the Companies Act, 1956
 read with Article  117, Mr. Paul Zuckerman was appointed as an
 Additional Director of the Company with effect from October 29,2007.
 He holds office as a Director up to the date of the forthcoming Annual
 General Meeting. Your Company has received a notice in writingfrom a
 Member proposing his candidatureforthe office of Director.
 
 The required resolutions appointing the above Directors at the
 forthcoming Annual General Meeting are included in the Notice convening
 the Annual General Meeting.
 
 Mr. Dilip Kothari resigned from the Directorship of the Company with
 effect from May 28,2008. The Board of Directors placed on record its
 sincere appreciation for the valuable services rendered by Mr. Kothari
 during his tenure as a Director of the Company.
 
 Your Directors appointed Mr. Nimesh N Kampani as Managing Director of
 the Company for the period commencing from May 28,2008 to March 31,2011
 on the terms and conditions, including remuneration as set out in
 the Notice which forms part of the Annual Report.
 
 Particulars regarding conservation of energy, technology absorption,
 foreign exchange earnings and expenditure
 
 The particulars as required under the Companies (Disclosure of
 Particulars in the Report of the 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. During the year
 under review, your Company has not earned any foreign exchange and the
 details of the amount spent in foreign exchange is provided in note 19
 of the Notes to Accounts which forms part of the Annual Report.
 
 Corporate governance
 
 The report on compliance with the provisions of Clause49 of the Listing
 Agreement executed with the Bombay Stock Exchange Limited and the
 National Stock Exchange of India Limited is given separately in the
 Annual Report. A certificate from the Statutory Auditors of the Company
 M/s. Khimji Kunverji & Co. confirming compliance with the conditions of
 the said Clause49 is annexed to the Corporate Governance Report.
 
 Auditors
 
 The retiring auditors, namely, M/s. Khimji Kunverji & Co., Chartered
 Accountants, Mumbai, hold office until the conclusion of the
 forthcoming Annual General Meeting (AGM) and are seeking their
 appointment.  Members are requested to consider their appointment and
 authorise the Board of Directors to fix their remuneration
 fortheyear2008-09.
 
 The Statutory Auditors have confirmed that their appointment, if made,
 at the AGM, will be within the limits prescribed under sub-section (IB)
 of Section 224 of the Companies Act, 1956 and that they are not
 beneficially holding any security of the Company as defined under
 Section 226(3)(e)ofthe said Act.
 
 Internal auditors
 
 Your Company has appointed an independent audit firm namely, M/s. Aneja
 Associates, Chartered Accountants, Mumbai, as Internal Auditors for
 evaluating the adequacy of all internal controls and ensuring adherence
 to internal processes and procedures as well as to regulatory and other
 legal requirements.
 
 Transfer of unpaid /unclaimed dividends /interest
 
 The amount of dividends and interest on debentures which remained
 unpaid / unclaimed for a period of seven years has been transferred by
 the Company to the Investor Education and Protection Fund pursuant to
 the provisions of Section 205A(5) of the Companies Act, 1956.
 
 Subsidiary companies
 
 The Ministry of Corporate Affairs has granted exemption to your Company
 under Section 212(8) of the Companies Act, 1956 with regard to
 attaching the Balance Sheet, Profit & Loss Account and other documents
 of the subsidiaries for the year ended March 31, 2008. However, the
 accounts of the subsidiaries will be made available for inspection to
 any Member of the Company at its registered office and also at the
 registered office of the respective subsidiaries and a copy of the same
 will be made available to the Members on receipt of a request from
 them. The financial information of subsidiary companies is disclosed
 along with the consolidated financial statements. In accordance with
 the requirements of the Listing Agreement(s) with Stock Exchange(s),
 the consolidated financial statements of the Company together with its
 subsidiaries are annexed to the Annual Report.
 
 Particulars of employees
 
 The information required under Section 2I7(2A) of the Companies Act,
 1956 read with the Companies (Particulars of Employees) Rules, 1975, is
 given in the annexure and forms part of this Report. Your Company had
 thirteen employees as on March 31, 2008. Out of the total number of
 employees, two employees employed throughout the year were in receipt
 of remuneration of more than Rs. 24.00 lakh per annum and one employee
 employed for part of theyear was in receipt of remuneration of more
 than Rs. 2.00 lakh per month.
 
 However, in accordance with Section 219(1 )(b)(iv) of the Companies
 Act, 1956, the Report and Accounts are being sentto the Members
 excluding the aforesaid annexure. Any Member interested in obtaining a
 copy of the said annexure may write to the Company Secretary at the
 registered office of the Company.
 
 Acknowledgement
 
 Your Directors place on record their appreciation for the co-operation
 and assistance extended by the Bombay Stock Exchange Limited, National
 Stock Exchange of India Limited, Securities and Exchange Board of
 India, Reserve Bank of India and all the stakeholders. Your Directors
 would also like to place on record their appreciation for committed
 service extended by the employees of your Company and its associates,
 joint ventures and subsidiary companies.
 
                                  On behalf of the Board of Directors
 
 Mumbai                                              Nimesh N Kampani 
 May 28,2008                             Chairman & Managing Director