LKP Merchant Financing Limited - LKP Securities Ltd. · LKP Merchant Financing Limited to LKP...

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ANNUAL REPORT 2007-2008

LKP MERCHANT FINANCING LIMITED

Board of Directors :

Mr. M. V. Doshi Executive Chairman

Mr. M. S. Bhise

Mr. V. N. Suchanti

Company Secretary :

Mr. G. B. Innani

Auditors :

Ford, Rhodes, Parks & Co.,Sai Commerical Building,312 / 313, 3rd Floor,BKS Devshi Marg,Govindi (East),Mumbai - 400 088.

Registered Office :

203, Embassy Centre,Nariman Point,Mumbai - 400 021.Tel. : 4002 4785 / 4002 4786Fax : 2287 4787

Registrar & Shares Transfer Agents :

Adroit Corporate Services Pvt. Ltd.19, Jaferbhoy Industrial Estate,1st Floor, Makavana Road,Marol Naka,Andheri (East),Mumbai - 400 059.Tel. : 28590942 / 28594060

Annual General Meeting on 9th August, 2008 at

10.30 a.m. at M. C. Ghia Hall, Hargovindas Building,

18/20, Kaikhushru Dubash Marg, Mumbai - 400 001.

CONTENTS

Page Nos.

Notice 1

Directors’ Report 2 - 3

Management Discussion and Analysis 4

Corporate Governance Report 4 - 7

Auditors’ Report 8 - 9

Balance Sheet 10

Profit and Loss Account 11

Schedules to Accounts 12 - 18

Cash Flow Statement 19

Statement Relating to Subsidairy Company 20 - 27

Consolidated Financial Statements 28 - 32

1

LKP Merchant Financing Limited

NOTICE is hereby given that the Twenty Fourth Annual GeneralMeeting of the members of LKP Merchant Financing Limited willbe held at M. C. Ghia Hall, Bhogilal Hargovindas Building, 18/20,K. Dubash Marg, Mumbai 400 001 on Saturday, 9th August 2008 at10.30 a.m. to transact the following business:

ORDINARY BUSINESS:

1. To consider and adopt the Audited Balance Sheet and Profitand Loss Account for the year ended 31st March 2008 andReport of Directors and Auditors thereon.

2. To declare a dividend.

3. To appoint a Director in place of Mr. Vineet N. Suchanti, whoretires by rotation and being eligible offers himself for re-appointment.

4. To appoint the Auditors and to fix their remuneration.

SPECIAL BUSINESS

5. To consider and, if thought fit, to pass with or withoutmodification(s), the following resolution as a SpecialResolution:-

“RESOLVED THAT subject to approval of Central Governmentand other applicable authorities, if any, pursuant to section 21and other applicable provisions of the companies Act 1956, thename of the Company be and is hereby changed from ‘LKPMerchant Financing Limited’ to ‘LKP Finance Limited’,

Resolved further that the name ‘LKP Merchant FinancingLimited‘ wherever it occurs in the Memorandum of Associationand Articles of Association of the Company be substituted bynew name “LKP Finance Limited’.”

Notes:

(1) A member, entitled to attend and vote at the meeting is entitledto appoint a proxy instead of himself, to attend and to vote on apoll and the proxy need not be a member of the Company.

(2) Proxy, in order to be effective, shall be deposited at any time atthe registered office of the Company, but not less than 48 hours,before the commencement of the meeting.

(3) The Register of Members and Share transfer books will remainclosed from 4th August 2008 to 9th August 2008 (both daysinclusive).

(4) The Dividend as recommended by the Board of Directors ifapproved by the shareholders will be payable on or after 11thAugust 2008.

(5) The explanatory statement setting out the material factsconcerning special business at item no. 5 of the above notice asrequired by section 173 of the Companies Act, 1956 is annexedhereto.

(6) Any change in the address of the members may be intimated tothe Company’s Share Transfer Agents.

By Order of the Board of Directors

Mumbai (M. V. Doshi)Date: 30th June 2008 Executive Chairman

NOTICEExplanatory Statement pursuant to section 173(2) of theCompanies Act, 1956

Item No. 5.

The Board of Directors of the Company in their meeting held on30th June 2008, subject to approval of members and other applicablestatutory authorities, proposed to change the name of Company fromLKP Merchant Financing Limited to LKP Finance Limited so thatproposed new name be in consonance with the present businessactivities of the company and brief in style.

Pursuant to section 21 of the Companies Act 1956, consent ofmembers is required by special resolution for the change of name bythe Company.

The Board of Directors, therefore, recommends the passing of thespecial resolution contained in item no.5 of the accompanying notice.None of the Directors are deemed to be interested in passing theabove resolution.

By Order of the Board of Directors


2


DIRECTORS’ REPORT

The Directors present the Twenty Fourth Annual Report and AuditedAccounts of the Company for the year ended March 31, 2008.

FINANCIAL RESULTS

2007 – 2008 2006 – 2007(Rs. in lacs) (Rs. in lacs)

Operating Profit /(loss) (574.66) (686.25)

Less : Extraordinary Debits /Credits (Net) 5734.18 –

Profit / (Loss) before tax 5159.51 (686.25)

Less/(Add): Provision for Tax &Fringe Benefit TaxAdd : (927.64) (1.97)

Tax relating to earlier years (net) 118.91 –

Profit / (Loss) after tax 4350.78 (688.22)

(Loss) brought forward fromprevious year (2908.76) (2220.54)

Amount available for appopriation 1442.02 (2908.76)

APPROPRIATIONS:

Transferred to General Reserve 500.00 –

Proposed Dividend 256.00 –

Tax on Proposed Dividend 43.39 –

Balance carried to Balance Sheet 642.64 (2908.76)

DIVIDEND

The Board of Directors are pleased to recommend a dividend @20% for the financial year ended 31st March 2008 on equity sharecapital of the Company.

PERFORMANCE REVIEW

The Company’s total income has increased from Rs. 591.49 lacs toRs. 1037.32 lacs and profit after tax Rs. 4350.78 lacs against theloss of Rs. 688.22 lacs of the previous year.

During the year under review 9,48,54,000 Preference Shares of Rs.10/ each of Thomas Cook (India) Ltd. received as part considerationon amalgamation of Company’s erstwhile subsidiary LKP Forex Ltdwith Thomas Cook (India) Ltd. were redeemed. From the proceedsof redemption, your Company repaid the loan taken from Institution/ NBFC. The Company has now became a debt free Company. TheCompany continues its efforts to generate non-fund based business.Also your Company continues to make all efforts to recover over-dues from the clients by negotiations or by resorting to legal recourse.

Your Company’s subsidiary, LKP Securities Ltd. has also increasedits branch network. LKP Securities Ltd. operates through a networkof branches in more than 63 cities and towns in India.

SHARE WARRANTS

The Company has issued and allotted on 25th February 2008,10,00,000 (Ten Lacs) Warrants to the promoter group in terms ofspecial resolution passed in extra-ordinary general meeting of themembers held on 4th February, 2008 and SEBI Guidelines forPreferential Issues as stated at Chapter XIII of the SEBI (Disclosureand Investor Protection) Guidelines, 2000.

CHANGE OF NAME

In consonance with the present activities of the Company, the Boardof Directors has decided that subject to approval of members andother applicable statutory authorities, the present name of theCompany be changed to “LKP Finance Limited” and accordinglyalter the Name Clause of Memorandum of Association.

FIXED DEPOSITS

The Company has no public deposits as of date and will not acceptany deposits without prior approval of the Statutory Authoritiesconcerned.

SUBSIDIARY COMPANY

Pursuant to Section 212 of the Companies Act,1956, the relevantStatement along with the Directors Report and the Audited Statementof Accounts of LKP Securities Ltd., a subsidiary of the Company isappended to this report.

By an order dated 24th August 2007, Hon’ble High Court of Bombayhas sanctioned amalgamation of LKP Shares and Securities Limited(Subsidiary of the Company and a BSE Member), into LKP SecuritiesLimited (a Wholly Owned Subsidiary of the Company and NSEMember) with effect from 1st April 2006. As per the Scheme ofAmalgamation the Company has received by way of considerationfrom LKP Securities Ltd. 29,77,000 Equity Shares of Rs. 10/ eachfully paid up. With this the Company is now holding in aggregate51,27,000 equity shares which constitute 99.55% Equity share capitalof LKP Securities Ltd.

STATUTORY DISCLOSURE

The Particulars of Employees falling within the scope of Section217 (2A) of the Companies Act, 1956, read with the Companies(Particulars of Employees) Rules, 1975, forms part of this report.However, as per Section 219(1)(b)(iv) of the Companies Act, 1956,the Report and Accounts is being sent to all shareholders of theCompany excluding the above Statement. Any shareholder interestedin obtaining a copy of the said Statement may write to the Companyat its Registered Office.

The provisions of Section 217(1)(e) of the Companies Act, 1956,relating to conservation of energy and technology absorption do notapply to your Company. There is no foreign exchange earnings andoutgo during the year under report.

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DIRECTORS

In accordance with the provisions of the Companies Act, 1956 andArticles of Association of the Company, Mr. Vineet N. Suchanti retiresby rotation and being eligible offers himself for reappointment.

AUDITORS’ REPORT

M/s. Ford, Rhodes, Parks & Co., Chartered Accountants, Mumbai,retire at the conclusion of the forthcoming Annual General Meeting.The Company has received a letter from them to the effect that theirappointment, if made, would be within the prescribed limits underSection 224 (1-B) of the Companies Act, 1956. Your Directorsrecommend their re-appointment.

DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 217(2AA) of the Companies Act, 1956,the Directors hereby confirm that :

i) in the preparation of the annual accounts, the applicableaccounting standards have been followed along with properexplanation relating to material departures;

ii) the Directors have selected such accounting policies and appliedthem consistently and made judgement and estimates that arereasonable and prudent so as to give a true and fair view of thestate of affairs of the Company at the end of the financial yearand of the profit of the Company for that period ;

iii) the Directors have taken proper and sufficient care for themaintenance of adequate accounting records in accordance withthe provisions of Companies Act, 1956, for safeguarding the assetsof the Company and for preventing and detecting fraud and otherirregularities to the best of their knowledge and ability ;

iv) the Directors have prepared the annual accounts on a goingconcern basis.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with Accounting Standard AS-21, the ConsolidatedFinancial Statements are furnished herewith and form part of thisReport and Accounts. These statements have been prepared on thebasis of audited financial statements received from the SubsidiaryCompany as approved by its Board of Directors.

CORPORATE GOVERNANCE

The Report on Corporate Governance along with a Certificate ofcompliance from the Auditors and Management Discussion andAnalysis Report forms part of this Report.

ACKNOWLEDGEMENT

Your Directors would like to place on record their sincere appreciationto Shareholders and Employees for their co-operation and support.

For and on behalf of the Board of Directors

Mumbai ( M. V. Doshi )

Date: 30th June 2008 Executive Chairman

Statement Pursuant to Section 212 of the Companies Act, 1956Giving Requisite Particulars of its Subsidiary Company

1. Name of the Subsidiary Company LKP Securities Ltd

2. Financial Year ending 31.3.2008

3. Date from which the Company bacame a subsidiary. 1.4.95

4. Extent of Holding Company’s interest in the subsidiary Company’s Shareholding (in %) 99.55

Rs in Lacs

5. Net aggregate amount of the Subsidiary's profits after deducting its losses or vice versa so far itconcerns members of the Holding Company.

– Profits /Losses not dealt with in the Holding Company Accounts

a. for the financial year of the subsidiary 344.37

b. for the previous financial years since it became the Holding Company's Subsidary 452.67

Profits dealt with or (Losses) provided for in the holding Company Accounts.

a. for the financial year of the Subsidiary –

b. for the previous financial years since it became the holding Companys subsdiary --


Executive Chairman M.V.Doshi

Director M.S.Bhise

Director V.N.Suchanti

Mumbai

Dated : 30th June, 2008.

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MANAGEMENT DISCUSSION AND ANALYSIS

Industry structure and developments

Your Company being an investment Company is impacted by themovements of the stock markets. The last few years have seen anincreased integration of the Indian economy with the global marketswhich leads to the Indian stock markets being impacted by significantglobal developments. The international business environment andgrowth is adversely affected particularly for developing countriesdue to sharp rise in the price of crude oil. This has adversely impactedsentiment in the Indian stock markets.

Opportunities and Threats

Your Company being an investment Company seeks opportunitiesin the capital market. During the last year interest rates have hardened.The fall in the stock indices in the last quarter of the financial yearrepresents both an opportunity and challenge for the Company.

During the current financial year the Company has received Rs.149.80 Crores by disinvestments of equity shares of Thomas Cook(India) Ltd. A part of the said proceeds for the time being have beeninvested for the short term in mutual fund schemes to earn risk freeand reasonable return till your company finds better opportunitiesfor the long term investments.

The business of subsidiary company i.e. LKP Securities Ltd. isaffected by adverse sentiment in the stock markets and to mitigatethe same and to avail the opportunities in future, the company israpidly spreading it operations geographically by opening newbranches/franchisees in different cities and towns.

We are optimistic that legal action initiated against the borrowersfor recovery of dues, will start yielding results.

Outlook

During the accounting year 2007-08, LKP Shares and SecuritiesLimited (Subsidiary of the Company and a BSE Member)amalgamated into LKP Securities Limited (a Wholly OwnedSubsidiary of the Company and NSE Member) by the order dated24th August 2007, Hon’ble High Court of Bombay with effect from1st April 2006. As per the Scheme of Amalgamation the Companyhas received by way of consideration from LKP Securities Ltd.29,77,000 Equity Shares of Rs. 10/ each fully paid up.

The Company has repaid during the year under review its outstandingloan of Rs.90 crores and thereby becoming debt free. The Companynow has significant cash surplus for investments.

The stock markets, which have remained buoyant with significantgrowth in the business volume in 2007-2008, have seen sharp fall inthe last few months. The broking income of your Company’ssubsidiary LKP Securities Ltd. directly relates with the businessvolume of stock markets. The continuous efforts to increase marketshare and effective margin levers would contribute to minimize theimpact on the bottom line. The Company remains optimistic ofsignificant opportunity that exists in stock market related businessand expects to gain over the coming years profitable market shares.

Internal Control Systems and their adequacy

The Company has satisfactory internal control system, the adequacyof which has been mentioned in the Auditors’ Report.


Mumbai ( M. V. Doshi )Date: 30th June 2008 Executive Chairman

REPORT ON CORPORATE GOVERNANCE

1. Company’s philosophy on Corporate Governance

The LKP Group, to which the Company belongs, is committedto ethical values and self discipline through standards of goodgovernance aiming at efficient conduct of the business inmeeting its obligations to the shareholders. The Board ofDirectors of the Company has adopted the Code of Conductfor its members and senior management executives.

2. Board of Directors

Composition

The composition and category of Directors as on 31st March2008 are as follows:

Category Name of Directors DesignationPromoter Mr. M. V. Doshi Executive

Chairman

Independent Mr. Milan S. Bhise Director

Independent Mr. Vineet N. Suchanti Director

The Board has accordingly optimum combination of Executive andNon-Executive Directors and Independent and Non-IndependentDirectors. Non-Executive Directors of your Company have nopecuniary relationship or any transaction with your Company. Non-Executive Directors are not paid any remuneration.

Attendance at Board Meetings and last Annual GeneralMeeting.

Director No. of Board Whether AttendedMeeting Attended last AGM

Mr. M. V. Doshi 6 Yes

Mr. Milan S. Bhise 6 Yes

Mr. Vineet N. Suchanti 6 Yes

Other Board or Committee in which each Director is amember or chairman

Name Directorship in No. of committeesof Director other companies in which

Chairman/Member

Mr. M. V. Doshi 8 2 3

Mr. Milan S. Bhise – 1 1

Mr. Vineet N. Suchanti 9 1 4

Profile of Director being Re-appointed:

Name : Mr. Vineet N. Suchanti

Age : 39 Years

Date ofAppointment : 26th July, 2001

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Qualification : MBA – U. S. A.

Expertise : Mr. Vineet N. Suchanti was appointedas the Director w.e.f. 26th July, 2001.He has vast experience in the field ofFinance, Capital Market and BusinessAdministration. Mr. Vineet N. Suchantiretires by rotation at the ensuing AnnualGeneral Meeting and is proposed to bere-appointed as the Director of theCompany.

Other Directorships 1. Keynote Corporate Services Ltd.(Managing Director) 2. Keynote Capitals Ltd.

3. Keynote Commodities Ltd.4. Arteries Investor Services Ltd.5. Arteries Insurance Broking Ltd.6. Team India Managers Ltd.7. Concept Production Ltd.8. Concept Investor Services Ltd.9. Concept Public Relations (I) Pvt. Ltd.

*Chairman/Member ➣ LKP Merchant Financing Ltd.of Committee of i Audit Committee -Chairmanthe Board of the ii Share Transfer Committee -MemberCompanies on iii Investors Grievance Committee -which he is a MemberDirector as on ➣ Keynote Corporate Services Ltd.30th June2008. i Audit Committee - Member

ii Investors Grievance - MemberCommittee

Board Meeting

In financial year 2007-2008, the Board met six times. The Boardmeetings were held on 21st June 2007, 30th July 2007, 30thOctober 2007, 9th January 2008, 28th January 2008 and 25thFebruary 2008.

3 Audit Committee

The Board has set up Audit Committee having two IndependentDirectors Mr. Milan S. Bhise and Mr. Vineet N. Suchanti aremembers. Mr. Vineet N. Suchanti is the Chairman of the AuditCommittee and was present at the last Annual General meeting.Mr. M. V. Doshi is also a member of Audit Committee.

Audit Committee meetings were held on 21st June 2007, 30thJuly 2007, 30th October 2007 and 28th January 2008. All themembers have attended the aforesaid meetings. The StatutoryAuditors were the invitees to the above meetings. The scope ofactivities and powers of Audit Committee includes the areasprescribed under the Clause 49 of the Listing Agreement andsection 292A of the Companies Act, 1956.

4. Remuneration of Directors

The Board has set up a Remuneration Committee. During theyear under review the Company has paid Rs. 27 lacs towardsremuneration to Mr. Mahendra V. Doshi, Executive Chairmanof the Company pursuant to the special resolution passed bymembers at the 23rd Annual General Meeting held on 6th August2007. At present, Independent Directors are not paid anyremuneration.

Sitting Fees paid to Directors for attending Board Meetings

1. Mr. Milan S. Bhise Rs. 12,000/-

2. Mr. Vineet N. Suchanti Rs. 12,000/-

3. Mr. M. V. Doshi Nil

5. Shareholders Grievance Committee

The Board has set up Shareholders Grievance Committee havingtwo Independent Directors Mr. Milan S. Bhise and Mr. VineetN. Suchanti as members. Mr. Milan S. Bhise is the Chairman ofthe said Committee. Mr. Girish Innani, Company Secretary ofthe Company is compliance officer. There is no complaint whichhas remained un-redressed. No transfer of shares is pending ason date.

M/s. V. R. Associates, Practicing Company Secretaries isconducting Secretarial Audit for the Company.

6. General Body Meetings

The particulars of last three years Annual General Meetings areas under:

Financial Year Day Date Time

2006-2007 Monday 6th August, 2007 10.30 a. m.

2005-2006 Saturday 2nd September, 2006 10.30 a. m.

2004-2005 Saturday 13th August, 2005 10.30 a. m.

Location:All the above Annual General Meetings of the Company wereheld at M. C. Ghia Hall, Bhogilal Hargovindas Building, 18/20, K. Dubash Marg, Mumbai 400 001.BusinessYear Special Resolution passed.2006-2007 1. To approve the payment of Remuneration

to Shri M. V. Doshi, Executive Chairman.2005-2006 1. To reappoint Shri M. V. Doshi as Executive

Chairman.2. To Amend Articles of Association in respect

of provision of Nominee Director.3. To acquire the Share of LKP Shares and

Securities Ltd.2004-2005 NilDuring the last year, there was no business which had to beconducted through a postal ballot. At present, the Company doesnot have any resolution to be decided by the members by postalballot.

7. Disclosure1. There are no related party transactions made by the

Company with its Promoters, Directors or Management,their subsidiaries or relatives other than that mentioned innotes to the accounts. The Register of Contracts containingthe transactions in which Directors are interested isregularly placed before the Board for its approval.

2. During the last three years, there were no strictures orpenalties imposed either by Securities and Exchange Boardof India or the Stock Exchanges or any regulatory authorityfor non-compliance of any matter related to the capitalmarket.

3. No personnel have been denied access to the Chairman ormembers of the Audit Committee. The mechanism ofWhistle Blower Policy is not established.

4. To the extent possible, the Company has complied withthe mandatory requirement of this clause.

8. Means of Communication1. The financial results of all four quarters were published in

The Financial Express and Mumbai Lakshyadeep dailies.These were not sent individually to the shareholders.

2. The Company’s results or official news are not displayed

6


on a web site. There were no presentations made to theinstitutional investors or to the analysts.

3. The Management, Discussion and Analysis Report formsa part of this Annual Report.

9. General Shareholder InformationAGM Date, : Saturday, 9th August 2008Time and Venue at 10.30 a.m. at M.C. Ghia Hall,

Bhogilal Hargovindas Building,18/20, K. Dubash Marg,Mumbai 400 001.

Financial Calendar : April to MarchAnnouncement of Audited / UnauditedResults (tentative)1st Quarter - Last week of July2nd Quarter - Last week of October3rd Quarter - Last week of January4th Quarter - Last week of June

Book Closure : August 4, 2008 to August 9, 2008(both days inclusive)

Dividend payment : On or after 11th August 2008dateListing on Stock : The Stock Exchange, MumbaiExchange (Code-507912). The Company has paid

the listing fees for the period from 1stApril 2008 to 31st March 2009. Anappeal has been pending with Securitiesand Exchange Board of India against theStock Exchange, Ahmedabadsubsequent to their refusal for acceptingvoluntary delisting application.

Demat ISIN No. : INE 724A01017for Depositories

Market Price Data and Performance in comparison to BSE SensexHigh/Low of market price of the Company’s equity shares traded inthe Bombay Stock Exchange Ltd. and performance in comparison toBSE Sensex during the financial year 2007 - 2008 is furnished below:

Month & Year High Low No. of No. of BSE Sensex(Rs.) (Rs.) Shares Trades High Low

April 2007 75.60 48.60 1563635 1612 14228.88 12455.37May 2007 71.90 56.45 208708 842 14544.46 13765.46June 2007 96.45 62.70 537119 1657 14650.51 14003.03July 2007 97.90 77.00 411563 1184 15794.92 14664.26August 2007 97.20 77.15 309109 1197 15318.60 13989.11September 2007 91.40 77.00 359304 950 17291.90 15422.05October 2007 118.45 74.25 427288 1530 19977.67 17328.62November 2007 176.95 109.30 699673 2803 19976.23 18526.32December 2007 205.30 164.90 881237 2629 20375.87 19079.64January 2008 239.00 146.60 962635 3548 20873.33 16729.94February 2008 191.00 141.65 194608 863 18663.16 16608.01March 2008 161.00 101.00 763273 1328 16677.88 14809.49

Registrar and Share Transfer AgentsM/s. Adroit Corporate Services Private Limited19, Jafarbhoy Industrial Estate, 1st Floor,Makawana Road, Marol Naka,Andheri ( East), Mumbai 400 059.

Share Transfer System

The Company’s Shares are traded on Bombay Stock ExchangeLimited compulsorily in the dematerialized form. However, allrequests received for transfer of shares in physical form are processedby the Registrar and Transfer Agents and are approved by Share

Transfer Committee, which normally meets twice in a month. TheShare Transfers are registered and returned within period of 22 daysfrom the date of lodgment, if documents are complete in all respect.

Distribution of shareholding as on 31st March 2008

Shares Slab Share % Total Amount %Holders Shares (Rs.)

UP TO- 500 5542 86.66 790220 7902200.00 6.17501 - 1000 385 6.02 302037 3020370.00 2.361001 - 2000 199 3.11 309920 3099200.00 2.422001 - 3000 74 1.16 187550 1875500.00 1.473001 - 4000 37 0.58 133091 1330910.00 1.044001 - 5000 32 0.50 147340 1473400.00 1.155001 -10000 52 0.81 355302 3553020.00 2.7810001 & Above 74 1.16 10574540 105745400.00 82.61

Total : 6395 100.00 12800000 128000000.00 100.00

Share holding pattern as on 31st March 2008

Category No. of shares held % of share holding

1 Indian Promoters/ Personsacting in concert 70,45,277 55.04

2 Mutual Funds and UTI 1,400 00.013 Banks, Financial Institutions

and Insurance Companies 2,750 00.024 FIIs 38,943 00.304 Private Corporate Bodies 25,01,715 19.555 Indian Public 28,61,842 22.366 NRIs / OCBs 2,46,884 1.937 Other (In transit) 1,01,189 0.79

Total 1,28,00,000 100.00

Dematerialization of equity Shares and liquidity

As on 31st March 2008, 95.18% of the Company’s total sharesrepresented by 1,21,82,705, shares were held in dematerialized form.

Out standing GDR/Warrants/Convertible Instruments

In terms of special resolution passed in Extra-Ordinary GeneralMeeting of the members held 4th February, 2008 and SEBIGuidelines for Preferential Issues as stated at Chapter XIII of theSEBI (Disclosure and Investor Protection) Guidelines, 2000, theCompany has issued and allotted on 25th February 2008, 10,00,000(Ten Lacs) warrants to the promoters group.

The aforesaid warrant holders will become entitled for in aggregate10,00,000 (Ten Lacs Only) equity shares of Rs. 10/- each within aperiod not exceeding 18 (Eighteen) months from the date of issue ofsuch warrants.

The price including premium of one equity share of Rs. 10/- each tobe allotted on exchange / surrender of the said warrant shall not belower than the minimum price of Rs.194/- per share computed incompliance with the SEBI Guidelines for Preferential Issues as statedat Chapter XIII of the SEBI (Disclosure and Investor Protection)Guidelines, 2000.

Address for correspondenceLKP Merchant Financing Limited112A, Embassy Centre, Nariman Point,Mumbai 400 021

For and on behalf of Board of Directors


7


We have examined the compliance of the conditions of CorporateGovernance by LKP Merchant Financing Limited for the year ended31st March 2008 as stipulated in clause 49 of the Listing Agreementof the said Company had with Bombay Stock Exchange Limited.

The Compliance of conditions of Corporate Governance is theresponsibility of the management. Our examination was limited tothe procedure and implementation thereof adopted by the Companyfor ensuring the compliance of the conditions of CorporateGovernance. It is neither an audit nor an expression of the opinionon the financial statements of the Company.

In our opinion and to the best of our information and explanationsgiven to us, we certify that the Company has complied with theconditions of Corporate Governance as stipulated in the abovementioned Listing Agreement, except that appointment of at leastone common independent director of the holding Company on theBoard of subsidiaries of the Company as required under

AUDITORS’ CERTIFICATE

sub-clause i of the item at paragraph III of Clause 49 of the ListingAgreement.

We state that in respect of investor grievances received during theyear ended 31st March 2008, no investor grievances are pendingagainst the Company as on 30th June 2008, as per the recordsmaintained by the Company and presented to the Shareholders’Grievance committee.

We further state that such compliance is neither an assurance as tothe future viability of the Company nor the efficiency or effectivenesswith which the management has conducted affairs of the Company.

For Ford, Rhodes, Parks & Co., Chartered Accountants

Place : Mumbai (A. D. Shenoy)

Date : 30th June 2008 Partner

8


AUDITORS’ REPORT

We have audited the attached Balance Sheet of LKP Merchant FinancingLimited as at 31st March 2008 and the Profit & Loss Account of the Companyfor the year ended on that date annexed thereto and also the Cash FlowStatement for the year ended on that date. These financial statements are theresponsibility of the Company’s management. Our responsibility is to expressan opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generallyaccepted in India. Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statementsare free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audit providesa reasonable basis for our opinion.

1. As required by the Companies (Auditors Report) Order, 2003 (asamended), issued by the Central Government of India in terms of section227 (4A) of the Companies Act, 1956 (the Act) and on the basis ofsuch checks, as we considered appropriate, we give in Annexure, astatement on the matters specified in paragraphs 4 and 5 of the saidOrder.

2. Further to our comments in paragraph 1 above:

a) We have obtained all the information and explanations, which tothe best of our knowledge and belief were necessary for thepurpose of our audit.

b) In our opinion proper books of accounts as required by law havebeen kept by the company so far, as appears from our examinationof the books.

c) The Balance Sheet and Profit and Loss Account dealt with bythis report are in agreement with the books of account.

d) In our opinion, the Balance Sheet and the Profit and Loss Accountdealt with by the report are in compliance with the accountingstandards referred to in section 211(3C) of the Companies Act,1956.

(e) On the basis of written representations received from the directorsof the Company, as on 31st March, 2008 and taken on record bythe Board of Directors of the Company, none of the directors ofthe Company is disqualified as on 31st March, 2008 from beingappointed as a Director in terms of clause (g) of the sub-section(1) of Section 274 of the Companies Act, 1956.

4. In our opinion and to the best of our information and according to theexplanations given to us the accounts read together with notes thereon,give the information required by the Companies Act, 1956 in themanner so required and give a true and fair view:

(a) In the case of the Balance Sheet of the state of affairs of theCompany as at 31st March 2008.

(b) In the case of the Profit and Loss Account of the profit for theyear ended on that date.

(c) In the case of Cash Flow Statement of the Cash Flows for theyear ended on that date.

For FORD, RHODES, PARKS & CO.Chartered Accountants

A.D.SHENOYMumbai PartnerDate: 30th June 2008. Membership No.11549

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1. (a) The Company has maintained proper records showing fullparticulars including quantitative details and situation of fixedassets.

(b) The fixed assets have been physically verified by the managementduring the year. As explained to us no discrepancies were noticedon such verification.

(c) During the year the company has not disposed off any substantialpart of its fixed assets so as to affect the going concern.

2. The company does not have any stock of raw materials, stores, spareparts, finished goods and therefore clause ii (a), (b), (c) (of the Order)are not applicable.

3. The company has not taken any loans, secured or unsecured fromCompanies, firms or any other parties covered in the register maintainedunder Section 301 of the Companies Act, 1956. During the year thecompany has not granted any loans to Companies, firms or other partiescovered in the register maintained under Section 301 of the CompaniesAct, 1956, however, as at 31st March 2008 there were dues from asubsidiary company The year end debit balance of the company wasRs. 490.43 lacs (Previous Year Rs.20.59 lacs).

4. In our opinion and according to the information and explanations givento us, there are adequate internal control procedures commensuratewith the size of the Company and the nature of its business for thepurchase of fixed assets and for services provided. During the courseof our audit, we have neither come across nor have we been informedof any major weaknesses in the aforesaid internal control procedures.

5. (a) On the basis of our examination of the books of account andaccording to the information and explanations provided by theManagement, we are of the opinion that the transactions thatneed to be entered into the register in pursuance of Section 301of the Act have been so entered in the said register.

(b) In our opinion and according to the information and explanationsgiven to us there are no transactions aggregating in value duringthe year to more than Rs. 5 lacs.

6. The company has not accepted any deposits from the public withinthe meaning of the provision of Section 58A and 58AA of the Act.

7. The company has no Internal Auditor however the Company’s internalcontrol procedures, which, in our opinion, are commensurate with itssize and nature of its business.

8. The Company is a Loan and Investment Company hence clause(viii) of the Order is not applicable.

9. (a) According to the information and explanations given to us bythe Management and on the basis of the examination of the booksof account carried out by us, the Company has been regular indepositing undisputed statutory dues including Provident Fund,Investor Education and Protection Fund, Employees StateInsurance, Income Tax, Sales Tax, and other statutory dues withthe appropriate authorities. There were no undisputed arrears ofstatutory dues outstanding as at 31st March, 2008 for a period ofmore than six months from the date they became payable.

(b) According to the information and explanations given to us bythe Management and the records of the company examined by usthere were disputes with Income Tax Authorities and the followingare the disputes. However there are no demands pending in theabove cases which are pending as under:

Nature of Amount Forum wheredues pending dispute is

Income Tax Not Quantified Appellate Tribunal(Asst yr 1999-2000) Mumbai.

Income Tax Not Quantified Comm of Income Tax(Asst yr 2003-2004) Appeals -III

Income Tax Not Quantified Comm of Income Tax(Asst yr 2004-2005) Appeals -III

10. Based on our audit procedures and the information and explanationsgiven to us by the Management, we are of the opinion that the Companyhas not defaulted in repayment of its dues to a Financial Institution.

11. As per the books and records of the company examined by us, theCompany has not granted any loans and advances on the basis ofsecurity by way of pledge of shares, debentures and other securities.

12. Clause (xiii) of the Order is not applicable as the company is not aChit Fund company or nidhi /mutual benefit fund /society.

13. In our opinion the Company has maintained proper records oftransactions and contracts in respect of dealing and trading in shares,securities, debentures and other investments during the year and timelyentries have been generally made therein. All shares, debentures andother investments have been held by the company in its own name.

14. The Company has not given any guarantee for loan taken by a Companyfrom a Bank / Financial Institution.

15. During the year the company has not taken any term loans from banks/institutions and there are no outstanding term loans as at 31st

March,2008

16. According to the information and explanations given to us and on anoverall examination of the balance sheet of the Company, we reportthat no funds raised on short term basis have been used for long terminvestments.

17. The Company has not made any preferential allotment of shares duringthe year and therefore, paragraph 4 (viii) of the Order is not applicable.However 10,00,000 warrants have been issued to the Promoters u/s81(1A) of the Companies Act,1956 with an option to subscribe to equalnumber of Equity Shares.

18. The Company has not issued any debentures during the year andtherefore paragraph 4(xix) of the Order is not applicable.

19. The Company has not raised any money by way of public issue duringthe year and therefore paragraph 4(xx) of the Order is not applicable.

20. According to the information and explanations given to us, no fraudon or by the company has been noticed or reported during the courseof the audit.

For FORD, RHODES, PARKS & CO.Chartered Accountants

A.D.SHENOYMumbai PartnerDate: 30th June 2008. Membership No.11549

ANNEXURE REFERRED TO IN PARAGRAPH 2 OF THE AUDITORS REPORT

10


BALANCE SHEET AS AT 31ST MARCH, 2008As at 31-3-2007

Schedule Rs in Lacs Rs in Lacs Rs in Lacs

I SOURCES OF FUNDS :1. Shareholders Funds

a. Share Capital 1 1,530.00 1,530.00b. Share Warants. 194.00 –b. Reserves and Surplus 2 3,515.73 4,081.48

––––––––––––––––– –––––––––––––––––5,239.73 5,611.48

2 Loan FundsSecured Loans 3 – 9,000.00

––––––––––––––––– –––––––––––––––––TOTAL 5,239.73 14,611.48

================ ================II APPLICATION OF FUNDS :

1. Fixed Assets 4a. Gross Block 6,075.60 6,213.03b. Less : Depreciation / Amortisation 5,694.65 3,472.40

––––––––––––––––– –––––––––––––––––c. Net Block 380.95 2,740.63

2. Investments 5 1,806.55 2,161.99

3. Current Assets, Loans & Advancesa. Stock on hand 6 249.28 –b. Sundry Debtors 7 27.78 57.00c. Cash & Bank Balances 8 305.07 144.16d. Loans & Advances 9 3,871.07 7,933.00

––––––––––––––––– –––––––––––––––––4,453.20 8,134.16

Less : Current Liabilities and Provisionsa. Liabilities 10 94.61 1,084.59b. Provisions 11 1,306.36 249.47

––––––––––––––––– –––––––––––––––––1,400.97 1,334.06

––––––––––––––––– –––––––––––––––––Net Current Assets 3,052.23 6,800.10

4. Profit & Loss-Debit Balance – 2,908.76––––––––––––––––– –––––––––––––––––

TOTAL 5,239.73 14,611.48================ ================

ACCOUNTING POLICIES 15NOTES TO THE ACCOUNTS 16BALANCE SHEET ABSTRACT & COMPANY’S GENERALBUSINESS PROFILE 17SCHEDULES 1 TO 17 ANNEXED HERETO FORM PART OFTHE BALANCE SHEET AND PROFIT & LOSS ACCOUNT

As per our Report attached.

For FORD, RHODES, PARKS & CO. Executive Chairman M. V. DoshiChartered Accountants Director M. S. Bhise

Director V. N. SuchantiA. D. ShenoyPartnerMembership No. 11549

Mumbai MumbaiDated : 30th June, 2008 Dated : 30th June, 2008

11


PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2008Previous Year

Schedule Rs in Lacs Rs in Lacs Rs in Lacs

INCOME :Income from Operations 364.99 439.11Other Income 12 672.32 152.38

––––––––––––––––– –––––––––––––––––1,037.32 591.49

EXPENDITURE :Establishment Charges 13 255.64 99.23Administrative and other expenses 14 241.51 68.49

––––––––––––––––– –––––––––––––––––497.14 167.72

––––––––––––––––– –––––––––––––––––540.17 423.77

Interest and Finance charges. 1,097.87 1,086.02Depreciation. 16.96 24.00

––––––––––––––––– –––––––––––––––––1,114.83 1,110.02

AMORTISATION OF TRADE MARK 1,708.38 157.12TRANSFER FROM TRADE MARK RESERVE (1,708.38) – 157.12

––––––––––––––––– ––––––––––––––––– –––––––––––––––––Operating Profit / (Loss) (574.66) (686.25)Less : Extraordinary Debits / Credits (Net) 5,734.18 –

––––––––––––––––– –––––––––––––––––PROFIT/(LOSS) BEFORE TAXATION 5,159.51 (686.25)PROVISION FOR TAXATION-CURRENT 925.00 –TAX RELATING TO EARLIER YEARS (NET) 118.91 –PROVISION FOR FRINGE BENEFIT TAX 2.64 1.97

––––––––––––––––– –––––––––––––––––PROFIT/(LOSS) AFTER TAXATION 4,350.78 (688.22)(Loss) Brought Forward From Last Year (2,908.76) (2,220.54)

––––––––––––––––– –––––––––––––––––Amount Available For Appropriation : 1,442.02 (2,908.76)

================ ================APPROPRIATION:TRANSFERRED TO GENERAL RESERVE 500.00 –PROPOSED DIVIDEND 256.00 –TAX ON PROPOSED DIVIDEND 43.39 –

––––––––––––––––– –––––––––––––––––PROFIT / (LOSS) CARRIED TO BALANCE SHEET 642.64 (2,908.76)

================ ================

ACCOUNTING POLICIES 15NOTES TO THE ACCOUNTS 16BALANCE SHEET ABSTRACT & COMPANY’SGENERAL BUSINESS PROFILE 17SCHEDULES 1 TO 17 ANNEXED HERETO FORM PART OFTHE BALANCE SHEET AND PROFIT & LOSS ACCOUNT




Mumbai MumbaiDated : 30th June,2008. Dated : 30th June,2008.

12


SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 31ST MARCH, 2008.As at 31-3-2007

Rs in Lacs Rs in Lacs Rs in Lacs

SCHEDULE 1 - SHARE CAPITALAuthorised(i) 2,00,00,000 Equity Shares of Rs 10/- each. 2,000.00 2,000.00(ii) 10,00,000 Redeemable Cumulative

Preference Shares of Rs.100/-each 1,000.00 1,000.00––––––––––––––––– –––––––––––––––––

3,000.00 3,000.00================ ================

Issued,Subscribed & Paid Up :(i) 128,00,000 Equity Shares of Rs.10/- each 1,280.00 1,280.00(ii) 250,000 13.5% Redeemable Cumulative Preference

Shares of Rs.100/- each. 250.00 250.00––––––––––––––––– –––––––––––––––––

1,530.00 1,530.00================ ================

Note:1. The above equity shares include 22,50,000 Equity shares allotted

as Bonus Shares by capitalization of Share Premium Account.2. 2,50,000 13.5% Redeemable Cumulative Preference Shares are

issued on private placement basis.SCHEDULE 2- RESERVES & SURPLUSShare Premium Account

Balance as per last Balance Sheet. 2,255.16 2,255.16Trade Mark Reserve

Balance as per last Balance Sheet. 1,728.38 1,885.50Less: Transferred to Profit & Loss account. 1,708.38 157.12

––––––––––––––––– –––––––––––––––––20.00 1,728.38

General ReserveBalance as per last Balance Sheet. 97.94 97.94Add : Transferred from Profit & Loss account. 500.00 –

––––––––––––––––– –––––––––––––––––597.94 97.94

Balance in Profit & Loss Account 642.64 –––––––––––––––––– –––––––––––––––––

TOTAL 3,515.73 4,081.48================ ================

SCHEDULE 3 - SECURED LOANSTerm Loan from a Non Banking Financial Company – 9,000.00

––––––––––––––––– –––––––––––––––––TOTAL – 9,000.00

================ ================

13


SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 31ST MARCH, 2008.SCHEDULE 4 - FIXED ASSETS (Rs in lacs)

Description of Assets Gross Block (At Cost) Depreciation / Net BlockAmortisation

As at Additions Deductions As at As at As at As at1st April 31st March, 31st March, 31st March, 31st March,

2007 2008 2008 2008 2007I. OWN ASSETS LKP FOREX Trade Mark 2,095.00 2,095.00 2,075.00 20.00 1,728.38 Office Premises 237.49 99.00 138.49 65.00 73.49 128.22 Premises 380.89 38.43 342.46 81.25 261.21 296.55 Furniture & Fixtures 143.44 143.44 141.62 1.82 3.23 Air Conditioners 24.97 24.97 23.76 1.21 1.35 Office Equipment’s 200.46 200.46 186.61 13.85 15.49 Sub-Total 3,082.25 – 137.43 2,944.82 2,573.24 371.58 2,173.22II ASSETS ON LEASE Plant & Machinery 3,130.78 3,130.78 3,121.41 9.37 567.41 Sub-Total 3,130.78 3,130.78 3,121.41 9.37 567.41 Grand Total 6,213.03 – 137.43 6,075.60 5,694.65 380.95 2,740.63Previous Year 6,210.95 0.74 - 6,211.69 3,291.28 2,920.41

Notes :1) Cost of office premises includes cost of shares of Rs.250/- in Embassy Center Premises Co-operative Society Ltd and cost of shares of Rs 250/- in Great Eastern

Gardens Condominium.SCHEDULE 5 - INVESTMENTS (at Cost) As at 31-3-2007Qouted Shares Fully Paid (at Cost), Quantity Face Cost Quantity Face Costclassified as Long Term Investments Value Rs in Lacs Value Rs in Lacs

NAME OF THE COMPANYGarware Polyester Ltd. 100 10 0.07 100 10 0.07I C I C I Bank Ltd. 10 10 0.02 10 10 0.02Tata Motors Ltd (Tata Finance Ltd) 100 10 0.03 100 10 0.03Maharashtra Polybutane Ltd 701,349 10 7.02 701,349 10 7.02Tata Iron & Steel Co Ltd - - 40,000 10 152.89United Spirits Ltd (Herbertsons Ltd) - 10 – 22,050 10 23.79JSW Steel ltd 47 10 0.01 0 10 0.01United Breweries Ltd 1,600 1 3.86 1,600 1 3.86Development Credit Bank Ltd - - 44,405 10 35.60S Kumars Nationwide Ltd (S Kumars Synfab Ltd) - - 179,000 10 139.44Nitco Tiles Ltd - - 10,543 10 20.40D S Kulkarni Developers Ltd 583 10 0.64 583 10 0.64**Thomas Cook (India) Ltd 4.65% Class A Preference Shares - 10 94,854,000 10**Thomas Cook (India) Ltd Equity Shares 14,949,000 1 1,494,900 10**Thomas Cook (India) Ltd 0.001% Class B Preference Shares 319,765 10 330.34 319,765 10 625.50**Thomas Cook (India) Ltd 0.001% Class C Preference Shares 271,800 10 271,800 10**(These shares were received in lieu of shares held inLKP Forex Ltd,merged with Thomas Cook (India) Ltdas per Mumbai High Court Order dated 12.01.2007.ClassB & C Preference Shares are Convertible into EquityShares within a period of seven years on Thomas Cook(India) Limited achieving certain levels of EPS)Central Bank of India 25,000 10 24.94 – –R.M.Financial Services Ltd. - - 50 10 0.0220th Century Finance Corporation Ltd. - - 105 10 0.02Indian Oxygen Ltd. - - 332 10 0.16Nirlon Synthetic Fibres & Chemicals Ltd. - - 80 10 0.02Hindustan Alloys Mfg.Co.Ltd - - 1,500 10 0.81Moira Re-rolling Mills Ltd. - - 25,000 10 2.50Elcot Power Ltd - - 1,600 10 1.20Growel Times Ltd - - 50,000 10 8.00Sajjan Udyog Export Ltd - - 4,900 10 1.23Sandur Laminates Ltd. - - 50,000 10 5.00

} }

14


SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 31ST MARCH, 2008Qouted Shares Fully Paid (at Cost), Quantity Face Cost Quantity Face Costclassified as Long Term Investments Value Rs in Lacs Value Rs in LacsOswal Chemicals Ltd - - 95 10 0.04Ahura Welding Electrode Manufacturers.Ltd. - - 10,500 10 4.20Motoral Specialities Ltd - - 54,900 10 22.94------------------------ ------------------------SUB-TOTAL 366.93 1,009.27------------------------ ------------------------UNQUOTED & FULLY PAID UP:The Saraswat Co-op Bank Ltd. 1,005 10 0.10 1,005 10 0.10Samudra Shoes Overseas Ltd - - 88,425 10 8.86Nikhar Fabrics Ltd - - 220,000 10 22.00Ring Plus Acqua Ltd. 130,400 10 60.55 130,400 10 60.55The Hindustan Times Ltd. 5,600 10 12.57 5,600 10 12.57Sweet Solutions Ltd (Formerly Sweet Infosys Ltd) - - 239,500 10 436.25LKP Holdings Pvt Ltd (Formerly Doshi Holding Pvt Ltd.) 7,600 10 0.76 7,600 10 0.76Gayatri Cement & Chemicals Industries Pvt.Ltd 10,000 100 64.00 10,000 100 64.00India Containers Ltd - - 77,100 10 0.39Regent Agro Chemicals Ltd - - 100,000 10 10.00------------------------ ------------------------SUB-TOTAL 137.98 615.48------------------------ ------------------------UNQUOTED SHARES (Partly Paid) AT COST :Kalyani Seamless Tubes Ltd. - - 33,300 10 6.66Kanan Steels Ltd. - - 29,500 10 1.11Pittie Cement & Inds Ltd. - - 10,600 10 5.83Amaujin Agro Exports Ltd - - 6,100 10 0.30American Paints India Ltd - - 95,500 10 4.77I T & T Ltd - - 14,653 10 7.33------------------------ ------------------------SUB-TOTAL – 26.00------------------------ ------------------------BIRLA INCOME PLUS 0.10 0.10------------------------ ------------------------

0.10 0.10------------------------ ------------------------

INVESTMENT IN SUBSIDIARIES :LKP Securities Ltd.-Equity Shares 5,127,000 10 1,051.54 2,150,000 10 215.00LKP Securities Ltd-Preference Shares 250,000 10 250.00 250,000 10 250.00------------------------ ------------------------SUB-TOTAL 1,301.54 465.00------------------------ ------------------------TOTAL 1,806.55 2,115.85

============== ==============i. Aggregate of quoted investments - At Cost 366.93 1,009.27

- Market Value 14,411.30 7,972.57ii. Aggregate of unquoted investments - At Cost. 1,439.62 1,106.58

SCHEDULE 6 - STOCK ON HANDa. In Shares

- Valued at cost or market value whichever is lower 249.28 –––––––––––––– ––––––––––––

TOTAL 249.28 ––============== ==============

SCHEDULE 7 - SUNDRY DEBTORS(Unsecured, Considered Good)a. Lease Rentals - At agreement values (All debts due and outstanding for more than 6 months.) 128.74 128.74

Less: Provision for Non-Performing Assets 128.74 128.74–––––––––––– –––––––––––––– ––

b. Other Debtors (includes Rs NIL outstanding for more than 6 months (Previous year NIL) 27.78 57.00–––––––––––– ––––––––––––

TOTAL 27.78 57.00============== ==============

SCHEDULE 8 - CASH AND BANK BALANCESCash on hand ( Including cheques on hand Rs. NIL Lacs (Previous year Rs.NIL Lacs) 0.01 0.07Balance with Scheduled Banks:

in Current Account 280.52 119.55in Fixed Deposit 24.50 24.50Balance with Co-op Bank:in Current Account 0.04 0.04–––––––––––– ––––––––––––

TOTAL 305.07 144.16============== ==============

15


SCHEDULES FORMING PART OF THE ACCOUNTS AS AT 31ST MARCH, 2008.As at 31-3-2007

Rs in Lacs Rs in LacsSCHEDULE 9 - LOANS & ADVANCES (Considered Good)Advances to Companies and others 1,064.15 3,342.19Due from Subsidiary Company 490.43 20.59Bills of Exchange – 31.70Advances recoverable in cash or in kind or for value to be received 2,117.32 4,348.72Tax Deducted at Source & Self Assesment Tax 180.28 172.99Fringe Benefit Tax-advance 4.87 2.23Deposits 14.02 14.58–––––––––––– ––––––––––––

TOTAL 3,871.07 7,933.00============== ==============SCHEDULE 10 - LIABILITIESSundry Creditors 8.54 1,007.59Advances Received 86.06 77.00Investor Education and Protection Fund – –Small Scale Industries – ––––––––––––– ––––––––––––

TOTAL 94.61 1,084.59============== ==============SCHEDULE 11 - PROVISIONSProvision for Income Tax 1,004.74 247.24Provision for Fringe Benefit Tax 2.23 2.23Proposed Dividend (including Tax) 299.39 -–––––––––––– ––––––––––––

TOTAL 1,306.36 249.47============== ==============(Previous Year)

Rs in Lacs Rs in LacsSCHEDULE 12 - OTHER INCOMEDividend Income 545.86 6.05Miscelleneous Income 25.06 22.64Profit on Sale of Assets 101.40 –Provsion for Diminution in Investments no longer required now reversed – 114.20Provsion for Gratuity no longer required now reversed – 9.49–––––––––––– ––––––––––––

TOTAL 672.32 152.38============== ==============SCHEDULE 13 - ESTABLISHMENT CHARGESSalary and Allowances. 202.83 79.27Directors Remuneration 27.00 –Contribution to Provident Fund/ESIC. 17.11 6.19Other Allowances 7.30 –Staff Welfare 1.40 13.77–––––––––––– ––––––––––––

TOTAL 255.64 99.23============== ==============SCHEDULE 14 - ADMINISTRATIVE EXPENSESRent, Rates & Taxes 6.78 8.69Repairs - Others 2.34 11.90Electricity 2.30 1.85Advertisement 0.12 0.21Directors Fees 0.24 0.28Traveling & Conveyance 38.92 15.80Postage, Telegram & Telephones 6.63 3.80Legal and Professional Charges 15.59 17.88Printing & Stationery 2.02 1.01Auditors Remuneration : Audit fees 0.67 0.28Tax audit fees 0.17 0.06Bills of Exchange Written off 31.70 –Loans Irrecoverable Written off 114.16 –Insurance Premium 0.01 0.01Miscellaneous Expenses 19.86 6.72

–––––––––––– ––––––––––––TOTAL 241.51 68.49

============== ==============

16


1. The accounts have been prepared on historical cost convention.The Company follows the accrual basis of accounting. Thefinancial statements are prepared in accordance with theacconting standards specified in the Companies(AccountingStandards) Rules,2006 notified by the Central Government, interms of section 211 (3C) of the Companies Act,1956.

2. a. In respect of lease and hire purchase agreement it is theCompany’s general policy to accrue income as per the termsof the Agreement entered into with the lessees / hirers fromtime to time. In respect of disputed lease agreement, whichis contested in court the lease, rentals will be accounted asand when received. Hire purchase and service charges areaccounted on equated basis over the period of contracts.

b. In respect of other heads of income the Company followsthe practice of accounting for such Income on accrual basisexcept delayed payment charges, which are accounted onthe basis of certainly of collection, and/or receipt basis.

3. The preparation of financial statements requires estimates andassumptions to be made that affect the reported amount of assetsand liabilities on the date of the financial statement and thereported amount of revenue and expenses during the reportingperiods. Difference between the actual results and estimates arerecognized in the period in which the results are knownmaterialised.

4. All Fixed Assets including assets given on lease are capitalizedat cost inclusive of legal and/or installation and incidentalexpenses, less accumulated depreciation.

5. The Company provides Depreciation as under :a) On assets for own use : On written down value method at

the rates and in the manner specified in Schedule XIV tothe Companies Act 1964 as amended on 16th December,1993.

b) On assets acquired and Leased : On straight line method atthe rates so as to write off the assets over the period oflease.

c) On intangible assets :(i) Expenses on issue of Equity Shares are amortized

equally over a period of ten years.(ii) Brand value amortized equally over a period of 2 years.

6. Investments are capitalized and accounted at the cost plusbrokerage and stamp charges. Current investments are stated atlower of cost and market value. Long term investments are statedat cost. Provision for diminution in value is made in case thesame is other than temporary. Profit or losses on investmentsare accounted as and when realized.

7. The company owned the Trade Mark, ‘LKP FOREX’. The saidbrand was valued by an expert as at 31st March 2004, whichwas incorporated in the books of accounts. The brand name wasused by its Subsidiary LKP Forex Ltd., which has merged withThomas Cook (India) Ltd. (TCIL). The company has enteredinto a Licensing Agreement with TCIL whereby the Trade Markhas been licensed to TCIL for a 2 year period. After the expiryof 2 years the same will be assigned to TCIL for a considerationof Rs 20.00 lacs in FY 2008-2009. The company has consideredthe value of Trade Mark as at 31.03.2008 at Rs. 20.00 lacs.

8. a. Current Tax : Provision for current tax is made on theestimated taxable income at the rate applicable to therelevant assessment year.

b. Deferred Tax : In accordance with the Accounting Standard22-”Accounting for Taxes on the Income”, issued by theInstitute of Chartered Accountants of India, the deferredtax for the timing difference is measured using the tax ratesand tax laws that have been enacted or substantially enactedby the Balance Sheet date.Defferred tax assets arising from timing difference arerecognized only on the consideration of prudence.

c. Fringe Benefit Tax: Provison for Fringe Benefit Tax is madein accordance with the provisions of the Income Tax Act,1961.

9 Short Term Employee Benefits : (i.e. benefits payable withinone year) are recognized in the period in which employeeservices are rendered.Contributions towards Provident Fund are recognized asexpense. Provident Fund contributions in respect of allemployees are made to Provident Fund Authorities.Liability Towards Gratuity covering eligible employees iscontributed to Group Gratuity Scheme of Life InsuranceCorporation of India based on the annual premium payable tothem.Contribution to Central Government Employees State InsuranceScheme for eligible employees is recognized as charge for theyear

10. a. Contingent Liabilities are disclosed by way of a note tothe financial statements after careful evaluation by themanagement of the facts and legal aspects of the mattersinvolved.

b. Contingent Assets are neither recognized nor disclosed.

SCHEDULE 16 - NOTES TO THE ACCOUNTS:1 The company had issued 13.5% Redeemable Cumulative

Preference Shares on private placement basis in an earlier year.The unprovided dividend amounted to Rs 337.50 lacs as at31.03.2007. The company has now received a letter from thePreference Share holder waiving their rights to the entiredividend including for the year 2007-2008.

2 During February 2008 the Company issued 10,00,000 (Ten lacsonly) warrants to the Promoters u/s 81(1)(A) of the CompaniesAct, 1956 at a price of Rs 19.40 per warrant. Each Warrantentitles the Warrant holder to subscribe to 1 Equity share of thecompany at a price of Rs 194/- per share. The option has to beexercised within a period of 18 months from the date of issue ofwarrants.

3 Extra-ordinary Credits / Debits:Details are : (Rs in lacs)(i) Profit on redemption of Preference Shares

received as part consideration on merger ofCompany’s erstwhile subsidiary LKP ForexLtd with Thomas Cook (India) Ltd 9,190.24

(ii) Old irrecoverable advances written off (2,920.00)

(iii) Old Leased Assets written off (536.06)---------------------------

Net 5,734.18============

SCHEDULE – 15 SIGNIFICANT ACCOUNTING POLICIES

17


4 During the year the company has adopted Accounting Standard15 (AS-15 Revised). The company has contributed its gratuityliability to Life Insurance Corporation of India- Group GratuityScheme based on annual contribution as worked out by LifeInsurance Corporation of India. The company has asked theinsurer to provide breakup of the working of the annualcontribution and whether the same is in line with AS-15 Revised.On receipt of the details adjustments will be carried out in theaccounts. The company expects that the gain or loss on accountof above working may not be significant.

5. The computation of Managerial As at As atRemuneration under Section 31.03.2008 31.03.2007198/349 of the Companies Act (Rs in Lacs) (Rs in Lacs)1956 has not been given as nocommission is paid to theDirectors.Directors Remuneration 27.00 NIL

Contribution to Provident Fund 0.07 NIL

Directors Sitting Fees 0.24 0.28

6 Particular with respect to Earnings per share is calculated asfollows:

2007-08 2006-07Profit / (Loss) after Taxation(Rupees in Lacs) 4350.78 (688.22)Number of Shares Outstanding 1,28,00,000 12,800,000

Rs. Ps. Rs. Ps.Earnings per shares (Basic) 33.99 (5.38)Earnings per shares (Diluted) 27.17 –Face Value of Share 10 10

7 Taxation :a. In accordance with Accounting Standard 22-Accounting

for taxes on Income, issued by the Institute of CharteredAccountants of India, deferred tax on account of timingdifference and carried forward losses have not beenconsidered as there is no certainty that the future profitswill offset the losses.

b. The company has made adequate provision for Income Taxbased on the current years taxable income.

c. Assessments have been completed upto Asst. Year 2005-2006. Appeal has been filed with CIT (A) for AssessmentYear 2004-2005, which is pending and the demand is NIL.

8 As per the Accounting Standard 18, issued by the Institute ofChartered Accounts Of India, disclosures of transactions withthe related parties as defined in the Accounting Standards aregiven below:(i ) List of related parties with whom transactions have taken

place and relationships.

Name of the Related Party RelationshipLKP Securities Ltd. Subsidiary CompanyPeak Plastonics Pvt. Ltd. Associate Company

MKM Share & Stock Brokers Ltd. Associate Company

Sea Glimpse Investments Pvt. Ltd. Associate CompanyBhavana Holdings Pvt. Ltd. Associate Company

M/s. L.K. Panday Associate

Mr. M V Doshi Key ManagerialPersonnel

(ii) Transaction with related parties.

Subsidiary Associates Key TotalCompany Managerial (Rs in lacs)

PersonelRent Income 2.88 — — 2.88Directors Remuneration — — 27.00 27.00

9 Expenditure in Foreign Currency For the Year Previous Year(Rs. In lacs) (Rs. In lacs)

NIL NIL

10 TRADE MARK: The Company owned the Trade Mark, ‘LKPFOREX’. The said brand was valued by an expert as at 31stMarch, 2004, which was incorporated in the books of accounts.The brand name was used by its Subsidiary LKP Forex Ltd.,which has merged with Thomas Cook (India) Ltd. (TCIL). Thecompany has entered into a Licensing Agreement with TCILwhereby the Trade Mark has been licensed to TCIL for a 2 yearperiod. After the expiry of 2 years the same will be assigned toTCIL for a consideration of Rs 20.00 lacs in FY 2008-2009.The company has considered the value of Trade Mark as at31.03.2008 at Rs. 20.00 lacs.

11 Prudential Norms of the Reserve bank of India (RBI) : TheCompany has not changed its accounting policy for incomerecognition (which is on accrual basis). The Prudential Normsof the RBI require the company to derecognise certain incomeand make provisions for non-performing assets. As the marketvalue of the quoted shares as at 31.03.2008 was higher ascompared to the cost, no provision is required.

12 Tax Deducted at Source : Rs. 56.37 lacs (Previous Year Rs.102.99 lacs)

13 Salary and allowances Rs 202.83 lacs, include Rs 3.21 lacs ascompany’s contribution to Life Insurance Corporation of Indiafor their Employees Group Gratuity Scheme (Previous year Rs.10.06 lacs)

14 Previous Year’s Figures are regrouped / reclassified wherevernecessary.

18





Mumbai MumbaiDated : 30th June, 2008. Dated : 30th June, 2008.

SCHEDULE 17 - BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESSPROFILEI. Registration Details

Registration No. 32831/AState Code 11Balance Sheet Date 31.03.2008

II Capital Raised during the year (Amount in Rs.Thousands)Public Issue NILRights Issue NILBonus Issue NILPrivate Placement 19400

III Positions of Mobilization and Deployment of Funds(Amount in Rs.Thousands)Total Liabilities 664,070Total Assets 664,070Sources of Funds :Paid-Up Capital 172,400Reserves & Surplus 351,573Secured Loans –Unsecured Loans –Application of Funds :Net Fixed Assets 38,095Investments 180,655Nett.Current Assets 305,223Misc.Expenditure –Accumulated Losses. –

IV. Performance of Company (Amount in Rs. Thousands)Turnover 677,150Total Expenditure 161,198Profit/(Loss) Before Tax 515,952Profit/(Loss) After Tax 435,078Earning Per Share in Rs. 33.99Dividend rate % 20

V. General Names of Three Principal products /services of Company(as per monetary terms)Product DescriptionN.A.

19


CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2008(Rs in Lacs)

As at As at31.3.2008 31.3.2007

A. Cash Flow From Operating Activities:Net Profit/(Loss) before tax and ExtraordinaryItems and Interest. 523.21 397.80Adjustments for:Depreciation – 24.00Dividend Received (545.86) (6.05)Interest Paid (1,097.87) –Direct Tax Paid 808.73 –Profit on sale of investments in Subsidiary Co 9,190.24 –Advances Written off (2,920.00) –Provisions for Invest – (114.20)

5,435.24 (96.25)---------------------- ----------------------

Operating Profit before Working Capital Changes 5,958.45 301.55Adjustments for:Trade and other receivables 3,841.88 (249.35)Trade payables 66.91 3,908.79 (1,023.00) (1,272.35)

---------------------- ----------------------Cash Generated from operations 9,867.24 (970.80)Interest paid (1,097.87) (1,086.02)Direct taxes paid (808.73) (1,906.60) – (1,086.02)

---------------------- ---------------------- ----------------------Cash flow before extraordinary items 7,960.64 (2,056.82)

---------------------- ----------------------Net cash from operating activities 7,960.64 (2,056.82)

---------------------- ----------------------B Cash flow from investing activities

Purchase of fixed assets – (1.34)Sale of fixed assets (net) 104.96 –Purchase of Investments (861.48) (607.56)Sale of Investments 1,216.92 11.12Dividend received 545.86 6.05Net cash used in investing activities 1,006.28 (591.73)

---------------------- ----------------------C Cash flow from financing activities

Proceeds from issue of share capital,includingshare premium 194.00 –Proceeds from long term borrowings (9,000.00) 2,477.14Dividend paid – –

---------------------- ----------------------Net cash used in financing activities (8,806.00) 2,477.14

---------------------- ----------------------Net increase in cash and cash equivalents 160.92 (171.41)Cash and cash equivalents. (opening) 144.16 315.57Cash and cash equivalents. (closing) 305.08 144.16

This is the Cash flow statement refferred to in our report of even date




20

LKP SECURITIES LTD.

DIRECTORS’ REPORTThe Directors present the Fourteenth Annual Report and Audited Accountsof the Company for the year ended 31st March 2008.

FINANCIAL RESULTS2007 - 2008 2006 - 2007

Rupees Rupees(In Lacs) (In Lacs)

----------------------------- -----------------------------Income from Operation 5458.83 3158.81

================== ==================Profit before Tax 433.40 171.76Less: Provision for Taxation 60.00 6.55(Add)/ Less: Provision for Deferred Tax - 40.28Less: Provision for Fringe benefit tax 27.47 20.94

----------------------------- -----------------------------Profit after tax 345.93 103.99Profit brought forward from previous year 284.71 180.72

----------------------------- -----------------------------Balance carried to Balance Sheet 630.64 284.71

----------------------------- -----------------------------DIVIDENDYour Directors have not recommended any dividend on equity shares inview of the need to conserve the resources of the Company for its futurebusiness expansion.OPERATIONSDuring the year under review the income from operations increased fromRs. 3158.81 lacs to Rs. 5458.83 lacs a growth of 72.81 % and profit aftertax is increased from Rs. 103.99 lacs to Rs. 345.93 lacs representing agrowth of 232.66 %. After amalgamation of LKP Shares and Securities Ltd.with the Company, your Company is a trading member of the National StockExchange of India Ltd. and Bombay Stock Exchange Ltd. The Companyhas two distinct divisions for operating its businesses: the Capital MarketDivision and the Wholesale Debt Market Division.(a) Capital Market Division

In the secondary market segment your Company is dealing very activelywith various FIs, FIIs, Mutual Funds, Corporates, Banks & High Net-worth Individuals. The Company has been expanding its branchnetwork. The operations at the branches are satisfactory. During theyear under review, your Company strengthened its branch networkand has now expanded operations to over 63 cities and towns in India.The primary market segment has strengthened through sub-brokers &agents spread all over the country mainly in the states of Maharashtra,Gujarat, Madhya Pradesh, Rajasthan, Andhra Pradesh, Kolkata, TamilNadu, etc. Your Company is ranked among the top 15 for mobilizingthe subscription for the new issues. (Source: Prime Data Base)Mutual fund advisory serviceLKP Mutual Fund Advisory Service offers tailor made wealthmanagement service to Retail, High Net worth Individuals andCorporate/Institutions. Our single focus is to provide unbiased andindependent advice backed by our extensive in-house research.Mutual fund advisory division was founded in 2004 as a small unit,with just two people running the show, has grown up to over 25 teammembers, with its presence spreading across 15 cities.

(b) Wholesale Debt Market DivisionAs reported to you last year, the strategy of the Company to shift focusto primary issuances of debt papers by Corporates, Banks and PSUsand secondary market intermediation of Non-SLR debt papers, hasyielded very good results. The Company has emerged as one of the topdealers in Non-SLR debt papers segment. In the current year theCompany has also started developing retail market in various debtpapers mainly for the investors of provident fund.

SHARE CAPITALThe Authorized Share Capital of the Company has increased from Rs.5,00,00,000/- to Rs. 8,50,00,000/- by creation of 10,00,000 Equity Sharesof Rs.10/- each, and 2,50,000 9% Redeemable Preference Shares of Rs 100/- each and accordingly the clause V of the Company’s Memorandum ofAssociation and Article 3 of the Articles of Association of the Company isaltered as per special resolution passed at the extra ordinary general meetingof the Company held on 7th March 2008.Subject to approval of members and other applicable statutory authorities,the Board of Directors has decided in their meeting held on 23rd May 2008,sub-division of the equity shares of the Company of the nominal face valueof Rs. 10/- each in the share capital of the Company in to 5 equity shares ofRs.2/- each fully paid up as stated in the notice.

Subject to approval of members, the Board of Directors has decided in theirmeeting held on 23rd May 2008, to issue and allot to the employees of theCompany and Holding Company including working directors of theCompany, friends and business associates, in one or more tranches, notexceeding in aggregate 4,91,000 (Four Lacs Ninety One Thousand Only)equity shares of Rs. 2/- each for subscription for cash at par as stated in theNotice.AMALGAMATIONDuring the accounting year 2007-08, LKP Shares and Securities Limited (aBSE Member) amalgamated with the Company by the order dated 24thAugust 2007, the Hon’ble High Court of Bombay with effect from 1st April2006. As per the Scheme of Amalgamation the Company has allotted inaggregate 30,00,000 equity shares of Rs. 10/- each fully paid up in the ratioof one equity share of the Company for every two equity shares of LKPShares and Securities Ltd. to the equity shareholders of LKP Shares andSecurities Ltd. as on 7th March 2008, and 2,50,000 9% RedeemablePreference Shares of Rs 100/- each of the Company to the holder of preferenceshares of LKP Shares and Securities Ltd.DIRECTORSIn accordance with the provisions of the Companies Act, 1956 and Articlesof Association of the Company, Mr. Hitesh P. Doshi retires by rotation andbeing eligible offers himself for reappointment.Mrs. M. R. Shah was appointed as an additional Director of the Company.She holds the office of director up to the forthcoming annual general meeting.Your board of directors is of the opinion that her appointment as a directorwould be in the interest of the Company.DIRECTOR ‘S RESPONSIBILITY STATEMENTAs required under Section 217 of the Companies Act, 1956, the Board ofDirectors of the Company hereby state and confirm that:� in the preparation of the Annual Accounts, the applicable accounting

standards has been followed along with proper explanation relating tomaterial departures;

� the Directors have selected such accounting policies and applied themconsistently and made judgements and estimates that are reasonableand prudent so as to give a true and fair view of the state of affairs ofthe Company at the end of the financial year and of the profit of theCompany for the period;

� the Directors have taken proper and sufficient care for the maintenanceof adequate accounting records in accordance with the provisions ofthe Companies Act 1956 for safeguarding the assets of the Companyand for preventing and detecting fraud and other irregularities to thebest of their knowledge & ability;

� the Directors have prepared the annual accounts on a going concernbasis.

STATUTORY INFORMATIONThe Particulars of Employees falling within the scope of Section 217 (2A)of the Companies Act, 1956, read with the Companies (Particulars ofEmployees) Rules, 1975, forms part of this report. However, as per Section219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts is beingsent to all shareholders of the Company excluding the above Statement.Any shareholder interested in obtaining a copy of the said Statement maywrite to the Company at its Registered Office.The provisions of Section 217(1)(e) of the Companies Act, 1956, relating toconservation of energy and technology absorption do not apply to yourCompany. There is no foreign exchange earnings and outgo during the yearunder report.AUDITORSM/s. Ford, Rhodes, Parks & Co., Chartered Accountants, Mumbai, retire atthe conclusion of the forthcoming Annual General Meeting. The Companyhas received a letter from them to the effect that their appointment, if made,would be within the prescribed limits under Section 224 (1-B) of theCompanies Act, 1956. Your Directors recommend their re-appointment.ACKNOWLEDGEMENTYour Directors place on record their sincere gratitude for the support receivedfrom the Bombay Stock Exchange Ltd., National Stock Exchange of IndiaLtd., other govt. & regulatory agencies, our esteemed clients and Banks andlook forward to receiving their continued support. Your Directors also greatlyappreciate the commitment and dedicated efforts of all employees.


Mumbai (M. V. Doshi) (Dinesh Waghela)30th June 2008 Director Director

21

LKP SECURITIES LTD.

AUDITORS’ REPORTWe have audited the attached Balance Sheet of LKP Securities Limited as at31st March 2008 and the Profit & Loss Account of the Company for the year ended onthat date annexed thereto and also the Cash Flow Statement for the year ended on thatdate. These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on ouraudit.We conducted our audit in accordance with auditing standards generally accepted inIndia. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audit provides a reasonable basisfor our opinion.1. As required by the Companies (Auditors Report) Order, 2003 (as amended), issued

by the Central Government of India in terms of section 227 (4A) of the CompaniesAct, 1956 (the Act) and on the basis of such checks, as we considered appropriate,we give in the Annexure, a statement on the matters specified in paragraphs 4 and 5of the said Order.

2. Further to our comments in paragraph 1.a) We have obtained all the information and explanations which to the best of our

knowledge and belief were necessary for the purpose of our audit.b) In our opinion proper books of accounts as required by law have been kept by

the company so far, as appears from our examination of the books.c) The Balance Sheet, Profit and Loss Account and Cash flow statement dealt

with by this report are in agreement with the books of account.d) In our opinion, the Balance Sheet, Profit and Loss Account and the Cash flow

statement dealt with by the report are in compliance with the accounting standardsreferred to in section 211(3C) of the Companies Act, 1956.

e) On the basis of written representations received from the directors of theCompany, as on 31st March, 2008 and taken on record by the Board of Directorsof the Company, none of the directors of the Company is disqualified as on 31stMarch, 2008 from being appointed as a Director in terms of clause (g) of thesub-section (1) of Section 274 of the Companies Act, 1956.

4. In our opinion and to the best of our information and according to the explanationsgiven to us the accounts read together with notes thereon, give the informationrequired by the Companies Act, 1956 in the manner so required and give a true andfair view:(a) In the case of the Balance Sheet of the state of affairs of the Company as at 31st

March 2008(b) In the case of the Profit and Loss Account - of the profit for the year ended on

that date.and

(c) In the case of the Cash Flow statement of the cash flows for the year ended onthat date.

For Ford, Rhodes, Parks & Co. Chartered Accountants

Mumbai A.D.SHENOYDate: 30th June,2008 Partner

Membership No.11549

ANNEXURE REFERRED TO IN PARAGRAPH 2 OF THE AUDITORS REPORT

1. (a) The Company has maintained proper records showing full particulars includingquantitative details and situation of fixed assets.

(b) The fixed assets have been physically verified by the management during theyear. As explained to us no discrepancies were noticed on such verification.

(c) During the year the company has not disposed off any substantial part of fixedassets so as to affect the going concern.

2. The company does not have any stock of raw materials, stores, spare parts, finishedgoods and therefore clause ii (a), (b), (c) (of the Order) are not applicable.

3. The Company has neither granted nor taken loans, secured or unsecured to / fromcompanies, firms or other parties covered in the register maintained under section301 of the Act.

4. In our opinion and according to the information and explanations given to us, thereare adequate internal control procedures commensurate with the size of the Companyand the nature of its business for the purchase of fixed assets and for providingservices. During the course of our audit, we have neither come across nor have we

been informed of any major weaknesses in the aforesaid internal control proceduresin respect of these areas.

5. (a) On the basis of our examination of the books of account and according to theinformation and explanations provided by the Management, we are of the opinionthat the transactions that need to be entered into the register in pursuance ofSection 301 of the Act have been so entered in the said register.

(b) In our opinion and according to the information and explanations given to usthere are no transactions aggregating in value during the year to more than 5lakh rupees with parties referred to in the aforesaid register.

6. The company has not accepted any deposits from the public within the meaning ofthe provision of Section 58A and 58 AA of the Act.

7. The company has an internal audit system, which, in our opinion, is commensuratewith its size and nature of its business.

8. The Company is a Stock and Debt Broking Company hence clause (viii) of theOrder is not applicable.

9. (a) According to the information and explanations given to us by the Managementand on the basis of the examination of the books of account carried out by us,the Company has been regular in depositing undisputed statutory dues includingProvident Fund, Investor Education and Protection Fund, Employees StateInsurance, Income Tax, Sales Tax, and the statutory dues with the appropriateauthorities. There were no undisputed arrears of statutory dues outstanding asat 31st March, 2008 for a period of more than six months from the date theybecame payable.

(b) According to the information and explanations given to us by the Managementand the records of the company examined by us there were disputes with IncomeTax Authorities which are listed below.Nature of dues pending Amount Forum where

dispute isIncome Tax (Asst year 2004-05) 42.58 lakhs CIT (Appeals)

10. The Company has no accumulated losses as at 31st March,2008. The Company hasnot incurred cash losses in the current financial year and also in the immediatepreceding financial year.

11. Based on our audit procedures and the information and explanations given to us bythe Management, we are of the opinion that the Company has not defaulted inrepayment of its dues to Financial Institutions or Debenture holders.

12. As per the books and records of the company examined by us, the Company has notgranted any loans or advances on the basis of security by way of pledge of shares,debentures and other securities.

13. Clause (xiii) of the Order as amended is not applicable as the company is not a ChitFund company or nidhi/mutual benefit fund /society.

14 In our opinion the Company has maintained proper records of transactions andcontracts in respect of dealing and trading in shares, securities, debentures and otherinvestments during the year and timely entries have been generally made therein.All shares, debentures and other investments have been held by the company in itsown name.

15 According to the information given to us and managements representation theCompany has not given guarantee for the loans taken by others from banks orFinancial Institutions during the year.

16. During the year the company has not taken any term loans from banks / institutionsand there are no outstanding term loans as at 31st March,2008

17. According to the information and explanations given to us and on an overallexamination of the balance sheet of the Company, we report that no funds raised onshort term basis have been used for long term investments.

18. The Company has not made any preferential allotment of shares during the year andtherefore, paragraph 4 (xviii) of the Order is not applicable.

19. The Company has not issued any debentures during the year and therefore paragraph4(ix) of the Order is not applicable.

20. The Company has not raised any money by way of public issue during the year andtherefore paragraph 4(xx) of the Order is not applicable. ?????

21. According to the information and explanations given to us, no fraud on or by thecompany has been noticed or reported during the course of the audit.

For Ford, Rhodes, Parks & Co.Chartered Accountants

Mumbai A.D.SHENOYDate: 30th June, 2008 Partner

Membership No.11549

22

LKP SECURITIES LTD.

BALANCE SHEET AS AT 31ST MARCH, 2008

As at 31/3/2008 As at 31/3/2007Schedule Rs in lacs Rs in lacs

1 SHARE HOLDERS’ FUNDS1 SHARE HOLDERS’ FUNDS

a Share Capital 1 765.00 215.00

b Share Capital Suspense 1A - 550.00

c Reserves & Surplus 2 800.65 454.71––––––––––––––––– –––––––––––––––––

1,565.65 1,219.71––––––––––––––––– –––––––––––––––––

2 LOAN FUNDSa Secured Loans 3 54.05 82.94

b Unsecured Loans 4 695.63 -––––––––––––––––– –––––––––––––––––

749.68 82.94––––––––––––––––– –––––––––––––––––

3 Deferred Tax Liability (net) 37.29 37.29––––––––––––––––– –––––––––––––––––

TOTAL 2,352.62 1,339.95================ ================

II APPLICATION OF FUNDS :1 FIXED ASSETS

a Gross Block 5 1,766.26 1,356.00

b Less : Depreciation 707.65 432.26––––––––––––––––– –––––––––––––––––

c Net Block 1,058.61 923.74––––––––––––––––– –––––––––––––––––

2 INVESTMENTS 6 264.71 438.32

3 CURRENT ASSETS, LOANS & ADVANCESa Sundry Debtors 7 4,487.57 4,967.01

b Cash & Bank Balances 8 2,480.62 773.36

c Loans & Advances 9 2,961.46 2,990.71––––––––––––––––– –––––––––––––––––

9,929.65 8,731.09––––––––––––––––– –––––––––––––––––

LESS : CURRENT LIABILITIES & PROVISIONS 10

a Current Liabilities 8,708.28 8,651.93

b Provisions 192.07 101.27

8,900.35 8,753.20

NET CURRENT ASSETS 1,029.30 (22.12)––––––––––––––––– –––––––––––––––––

TOTAL 2,352.62 1,339.95================ ================

Notes to the accounts & Accounting Policies 15Schedule 1 to 16 Annexed hereto form part of theBalance Sheet and Profit & Loss A/c

For FORD, RHODES, PARKS & CO. Director M. V. DoshiChartered Accountants

Director M. R. Shah

Director H. P. DoshiA.D. ShenoyPartner Director D. K. WaghelaMembership No. 11549


23

LKP SECURITIES LTD.

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2008

As at 31/3/2008 As at 31/3/2007Schedule Rs in lacs Rs in lacs

INCOME

Income from Brokerage 5,458.83 3,158.81

Other Income 11 447.28 338.34––––––––––––––––– –––––––––––––––––

5,906.11 3,497.15================ ================

EXPENDITURE

Establishment Charges 12 1,368.49 941.53

Administration & Other Expenses 13 3,608.63 2,133.76

Interest & Finance Charges 14 173.01 155.24

Depreciation 322.58 176.43

Extra-ordinary items - net credit - 81.57

NET PROFIT / (LOSS ) FOR THE YEARBEFORE TAXATION 433.40 171.76

Provision for taxation 60.00 6.55

Provision for deferred tax/(write back) - 40.28

Fringe Benefit Tax 27.47 20.94

NET PROFIT FOR THE YEAR AFTER TAXATION 345.93 104.00

BALANCE BROUGHT FORWARD FROM LAST YEAR 284.71 180.72

BALANCE CARRIED FORWARD TO BALANCE SHEET 630.65 284.71

Basic and Diluted Earnings per Share (in Rupees)(Refer note no 9 of Schedule 15)

Notes to the accounts & Accounting Policies 15Schedule 1 to 16 Annexed hereto form part of theBalance Sheet and Profit & Loss A/c

For FORD, RHODES, PARKS & CO. Director M. V. DoshiChartered Accountants

Director M.R. Shah

Director H. P. DoshiA.D. ShenoyPartner Director D. K. WaghelaMembership No. 11549


24

LKP SECURITIES LTD.

SCHEDULE FORMING PART OF THE ACCOUNTS AS AT 31ST MARCH, 2008As at As at

31/3/2008 31/3/2007Rs in lacs Rs in lacs

SCHEDULE 1 - SHARE CAPITALAUTHORISED CAPITAL

60,00,000 Equity Shares of RS. 10/- each 600.00 500.00(Previous Year: 50,00,000 Equity Shares Of Rs. 10/- each)250,000 9% Redeemable Preference Shares of RS. 100/- each 250.00 - (Previous Year: NIL) –––––––––––––––––– ––––––––––––––––––

850.00 500.00================ ================

ISSUED, SUBSCRIBED & PAID-UP :51,50,000 Equity Shares of Rs. 10/- each 515.00 215.00(Previous Year 21,50,000 Equity Shares of Rs.10/- each)(After giving effect to Amalgamation Order,LKP Merchant Financing Ltd(the holding company) holds 99.55% ofthe total paid up capital.Previous Year: 00% of the total paid up capital)250,000 9% Redeemable Preference Shares ofRs.100/- each (Refer Note No.2 of Notes to Accounts) 250.00 -

–––––––––––––––––– –––––––––––––––––– 765.00 215.00

================ ================SCHEDULE 1A- SHARE CAPITAL SUSPENSE

Shares to be allotted to the erstwhile shareholders ofLKP Shares and Securities Limited pursuant to Scheme ofAmalgamation sanctioned by the Honourable High Court,Mumbai effective April 1, 2006 - 300.00250,000 9% Redeemable Preference Shares of Rs.100/- each - 250.00

–––––––––––––––––– –––––––––––––––––– - 550.00

================ ================

As at As at31/3/2008 31/3/2007Rs in lacs Rs in lacs

SCHEDULE 2 - RESERVES & SURPLUSCapital ReserveAdditions on account of merger of LKP Sharesand Securities Limited - 254.43into the company effective 1st April, 2006Less: Adjustment on account of merger (254.43)GENERAL RESERVES 170.00 170.00

–––––––––––––––––– ––––––––––––––––––170.00 170.00

–––––––––––––––––– ––––––––––––––––––Balance in Profit & Loss Account 630.65 284.71

–––––––––––––––––– ––––––––––––––––––630.65 284.71

–––––––––––––––––– ––––––––––––––––––800.65 454.71

–––––––––––––––––– ––––––––––––––––––SCHEDULE 3 - SECURED LOANa) Bank Overdraft - 40.70

(Secured by hypothecation of receivables, charge onother assets of the company pledge of third partyshares and guaranteed by a director and Corporateguarantee of LKP Merchant Financing Ltd.)

b) Vehicle Loan 54.05 42.24–––––––––––––––––– ––––––––––––––––––

(Secured by hypothecation of Vehicle) 54.05 82.94================ ================

SCHEDULE 4 - UNSECURED LOAN Unsecured Loan From Companies 695.63 -

–––––––––––––––––– –––––––––––––––––– 695.63 -

================ ================

SCHEDULE 6 - INVESTMENTS (Rs. in lacs)

Quoted Shares (Fully Paid) At CostAs at 31.3.2008 As at 31.3.2007

Name of Scrip Number Cost Number Cost

Himachal Fut. Ltd - 100 0.86VisualSoft Ltd - 31 2.89Mphasis Limited - 10 0.21Venky’s India Limited - 500 1.52Liquid Benchmark units 5639.225 56.39 10,000 100.00Ahura Welding Elec Mfg.Ltd. - 8,260 2.54American Paints (India) Ltd - 5,700 0.29Ankit Yarns Ltd. - 7,400 0.74Force Motors Ltd. - 1,350 1.78Benchmark Homes & Resort Ltd. - 1,500 0.15Centhar Industries Ltd. - 10,300 0.52Coventry Spring & Eng.Co. - 5,860 2.64D.S.Kulkarni Developers Ltd. 90 0.01 90 0.01D.S.Kulkarni Developers Ltd. 59 0.06 59 0.06Global Tele System - - -Gold Crest Finance (I) Ltd. 10000 1.00 10,000 1.00Infra Industries Ltd. 149000 44.70 149,000 44.70Axis IT & T Ltd 500 0.41 500 0.41Kanan Steels Ltd. - 9,800 0.37Karamchand Harichand Steels Ltd. - 6,800 1.02Krisons Electronics Systems Ltd. - 2,100 0.21Liberty Oil mills Ltd - 600 0.48M AND M Finance Ltd - 7,774 20.71Malvika Steels Ltd. - 16,800 4.20Moulik Finance Ltd. - 21,100 2.11ONGC 72 0.36 72 0.36Paper Products Ltd - - -Rama Phosphate - 12,200 3.05Ramjidas Chemicals Ltd. - 2,900 0.29

As at 31.3.2008 As at 31.3.2007Name of Scrip Number Cost Number Cost

Heatshrink Technology Ltd - - 87,600 2.01Roopa Industries Ltd. 8900 0.89 8,900 0.89Salstar Foods & Beverages Ltd - 4,400 0.70Seasons Furnishings Ltd. - 3,300 0.33Sehgal Papers - 20,000 2.00Sellaids Publications (I) Ltd. - 1,200 0.12Subhakti Textiles Ltd. - 7,000 1.03Swad Industries & Leasing Ltd. - 9,300 0.93Swaika Vanaspati Products Ltd. - 3,900 0.39TCI Finance Ltd 8300 2.49 8,300 2.49Geodesic Information Systems Ltd 4528 12.00 - -Reliance Power Ltd 10900 64.81 - -Central Bank Of India 26205 35.69 - -

—————— —————— 218.81 204.00

—————— ——————Unquoted Shares (Fully Paid)Gobind Sugar Ltd 9600 17.85 9,600 17.85Equity Market Project I Ltd - 5,000 0.50Shriram Interval Fund 97 5000 0.50 5,000 0.50Chandamama India Ltd - 60,000 10.20Findia Plus - 29,828 2.98Inorganics (I) Ltd. - 13,000 1.30Sovereign Diamonds Ltd. - 8,900 0.89LIC Mutual Fund 1 10.00 - -Bombay Stock Exchange Ltd 877 17.55 10,000 200.10

—————— ——————Sub Total 45.90 234.32

—————— ——————Total 264.71 438.32

=========== ===========Market Value of Quoted Shares 139.30 148.80

SCHEDULE 5 - FIXED ASSETS

Gross Block ( At Cost) Depreciation Net Block

As at Additions Deductions As at As at For the Deductions As at As at As at01.04.2007 31.03.2008 01.04.2007 Year 31.03.2008 31.03.2008 31.03.2007

Computers 346.26 85.90 (6.62) 425.54 224.47 66.65 (4.12) 287.01 138.53 121.79Computer Software 127.13 108.08 (0.80) 234.41 37.09 69.86 (0.26) 106.68 127.73 90.05Furniture & Fixtures 303.75 59.42 (15.60) 347.57 52.67 68.52 (6.82) 114.37 233.20 251.08Electrical Fittings 9.20 1.90 - 11.10 1.25 1.42 2.67 8.43 7.95Office Equipment 374.24 137.26 (5.86) 505.64 67.05 64.91 (2.58) 129.39 376.26 307.19Vehicle 169.78 114.06 (51.10) 232.74 49.35 50.75 (33.42) 66.68 166.06 120.43Leasehold improvements 2.19 7.06 - 9.24 0.38 0.47 0.85 8.40 1.81Goodwill 23.45 (23.45) - - - - - - 23.45TOTAL 1,356.00 513.68 (103.43) 1,766.26 432.26 322.58 (47.20) 707.65 1,058.61 923.74AS ON 31/3/2007 611.34 786.91 (42.25) 1,356.00 275.41 176.43 (19.58) 432.26 900.29 716.88

25

LKP SECURITIES LTD.

SCHEDULE FORMING PART OF THE ACCOUNTS AS AT 31ST MARCH, 2008As at As at

31/3/2008 31/3/2007Rs. in lacs Rs. in lacs

SCHEDULE 7 - SUNDRY DEBTORS(UNSECURED, CONSIDERED GOOD)

More than six months 156.92 145.64Others 4,384.99 4,821.37Less: Provision for doubtful debts (54.34) –

–––––––––––––––– ––––––––––––––––4,487.57 4,967.01

=============== ===============SCHEDULE 8 - CASH & BANK BALANCES

Cash Balance 2.65 5.94Balance with Schedule Banks :

In Current Account 2,029.79 416.86In Fixed Deposit A/c 448.17 350.56

–––––––––––––––– –––––––––––––––– 2,480.62 773.36

=============== ===============SCHEDULE 9 - LOANS & ADVANCES(UNSECURED, CONSIDERED GOOD)Deposits 829.66 493.53Loans & Advances 122.30 63.56Staff Loan 2.23 3.32FBT Advance tax 52.34 32.69Advance Tax & TDS 289.66 108.15Advances Recoverable in Cash or Kind 105.41 89.83Margin with Exchange / Clearing Member 1,503.64 2,169.18Prepaid Expenses 56.21 30.45

–––––––––––––––– –––––––––––––––– 2,961.46 2,990.71

=============== ===============SCHEDULE 10 - LIABILITIESa CURRENT LIABILITIES

Sundry Creditors 7,643.49 4,424.45AdvancesMargin & Deposits 695.59 4,050.57Statutory Dues and TDS Payable 53.69 27.79Outstanding expenses 93.32 149.12Book Overdraft 222.19 -

–––––––––––––––– ––––––––––––––––A 8,708.28 8,651.93

=============== ===============b PROVISIONS

Provision for taxation 102.48 42.48Provision for FBT 64.76 37.29Provision for Gratuity 24.83 21.51

–––––––––––––––– ––––––––––––––––B 192.07 101.27

–––––––––––––––– ––––––––––––––––A + B 8,900.35 8,753.20

=============== ===============SCHEDULE 11 - OTHER INCOME (Previous Year)

Dividend 6.84 1.07Interest 114.08 11.61Profit on sale of assets - -Profit on sale of shares 279.20 -Sundry balances written back - 299.65Other Income 47.17 26.00

–––––––––––––––– –––––––––––––––– 447.28 338.34

=============== ===============

SCHEDULE 12 - ESTABLISHMENT CHARGES (Previous Year)Salary and Allowances 947.15 715.03Director’s Remuneration 38.27 45.35Bonus and Incentives 251.50 88.47Contribution to Provident Fund 32.52 26.09Contribution to ESIC 6.30 2.28Staff Welfare 46.30 48.49Medical 15.96 12.77Gratuity 30.50 3.05

–––––––––––––––– –––––––––––––––– 1,368.49 941.53

=============== ===============SCHEDULE 13 - ADMINISTRATIVE EXPENSESCommission 1,223.23 738.31Advertisement Exps 54.28 6.29Business Promotion and entertainment 47.93 33.27Books & Periodicals 2.68 1.74Computer Expense 49.44 30.66Conveyance 39.60 38.23CDSL Expenses 47.87 23.10Demat chgs 36.12 7.05Donation 1.38 0.71Electricity Expenses 71.91 48.86Company law expenses 1.75 0.03General & Misc Chgs 11.52 3.98Loss on sale of assets 3.11 18.37Loss on sale of shares - 4.85Insurance 8.01 5.86Motor Car Expenses 35.29 29.05Office Expenses 90.66 91.36Postage and Courier expenses 83.19 55.69Printing & Stationery 127.43 95.17Profession Tax 0.10 0.03Professional and Legal Charges 259.52 151.53Rent, Rates & Taxes 255.45 225.45Service tax , stamp duty andtransaction charges paid 273.80 117.15Audit Fees 3.90 1.72Repairs & Maintenance 93.27 76.29Franking charges 123.87 34.10Vsat Charges 30.09 20.12SEBI Fees 44.91 9.87Stock Exchange Expenses 52.21 32.78Seminars and conference 25.76 11.09Subscription & Membership Fees 34.60 3.34Telephone and Mobile expenses 139.25 139.14Travelling (Domestic and Foreign) 53.12 30.10Operational loss 100.41 43.97Bad Debts 33.94 -Sundry balances written off 34.73 4.48Investment writen off 5.48 -Goodwill written Off 23.45 -Advances written Off 31.00 -Provision for doubtful debts 54.34 -

–––––––––––––––– –––––––––––––––– 3,608.63 2,133.76

=============== ===============SCHEDULE 14 - INTEREST & FINANCE CHARGESBank Charges 34.50 19.89Interest 138.51 135.34

–––––––––––––––– –––––––––––––––– 173.01 155.24

=============== ===============

Schedule 15 - Contingent Liabilities, Accounting Policies and Notes tothe AccountsSignificant Accounting Policies :1. The accounts have been prepared on historical cost convention. The Company

follows the accrual basis of accounting. The financial statements are prepared inaccordance with the accounting standards specified in the Companies (AccountingStandards) Rules, 2006 notified by the Central Government, in terms of Section211 (3C) of the Companies Act, 1956.

2. The preparation of financial statements requires estimates and assumptions to bemade that affect the reported amount of assets and liabilities on the date of thefinancial statement and the reported amount of revenue and expenses during thereporting periods. are known/ materialised.

3. All fixed assets are stated at cost inclusive of legal and / or installation and incidentalexpenses less accumulated depreciation.

4. The company provides depreciation on written down value method at the ratesand in the manner specified in Schedule XIV to the Companies Act, 1956.

5. Investments are stated and accounted at the cost plus brokerage and stamp charges.Current investments are stated at lower of cost and market value. Long terminvestments are stated at cost. Provision for diminution in value is made in casethe same is other than temporary. Profits or losses on investments are accountedas and when realized.

6. Short Term Employee Benefits: (i.e. benefits payable within one year) arerecognized in the period in which employee services are rendered.Contribution towards Provident Fund are recognized as expense. Provident Fund

contributions in respect of all employees are made to Provident Fund Authorities.Liability towards Gratuity covering eligible employees is contributed to GroupGratuity Scheme of Life Insurance Corporation Of India based on the annualpremium payable to them. Contribution to Central Government Employees StateInsurance Scheme for eligible employees is recognized as charge for the year.

7. a) Current Tax: Provision for current tax is made on the estimated taxableincome at the rate applicable to the relevant assessment year.

b) Deferred Tax: In Accordance with Accounting Standard 22- “Accountingfor Taxes on Income” , issued by the Institute of Chartered Accountants OfIndia, the deferred tax for timing difference is measured using the tax ratesand tax laws that have been enacted or substantially enacted by the BalanceSheet date.

c) Fringe Benefit Tax: Provision for Fringe Benefit Tax is made in accordancewith provisions of the Income Tax Act, 1961

8. a) Contingent Liabilities are disclosed by way of note to the financial statementsafter careful evaluation by the management of the facts and legal aspects ofthe matters involved.

b) Contingent Assets are neither recognized nor disclosed.Notes to Accounts1) CONTINGENT LIABILITIES :

a) Contingent Liability in respect of Partly Paid Shares amounted to Rs.Nil. (Previous year Rs.742250)

b) Total Bank Guarantee issued on behalf of company as at 31st March 2008is Rs. 700 lacs(Previous year - Rs 500 lacs)

26

LKP SECURITIES LTD.

SCHEDULE FORMING PART OF THE ACCOUNTS AS AT 31ST MARCH, 20082) AMALGAMATION

a) Under a Scheme of Amalgamation which was approved by the HonourableHigh Court, Mumbai. LKP Shares & Securities Limited (LKPSS), one ofthe subsidiaries of LKP Merchant Financing Ltd. merged with the companyeffective 1st April, 2006. As per the Scheme, the Company has to issue30,00,000 Equtiy Shares of Rs.10/- each fully paid up and 2,50,000Redeemable Preference Shares of Rs.100/- each fully paid up to the Equity& Preference Shareholders of LKPSS respectively. The exchange ratio isbased on the Valuation Report issued by reputed Chartered Accountantsand approved by the Honourable High Court, Mumbai.

b) Authorised Share Capital :The Scheme requires increase in Authorised Capital of the company andaccordingly the Authorised Share Capital of the Company stands increasedto:a) Equity Share Capital Rs.6,00,00,000/- (Previous year Rs.5,00,00,000/

-) representing 60,00,000 Equity Shares of Rs.10/- each (Previous Year50,00,000 equity shares)

b) b) Preference Share Capital Rs.2,50,00,000/-(Previous Year : NIL)representing 2,50,000 9% Redeemable Preference shares of Rs.100/-each (Previous Year: NIL)

c) Paid Up CapitalDuring the year the Company filed the certified copy of the High Court Orderapproving the amalgamation with Registrar of Companies. Accordingly 30,00,000Equity Shares of Rs.10/- each fully paid and 2,50,000 Redeemable PreferenceShares of Rs.100/- each fully paid have been issued to Equity and PreferenceShareholders of erstwhile LKP Shares & Securities Limited respectively.

3) DepreciationDuring the year the Company has changed method of computing depreciationhitherto followed by erstwhile LKP Shares & Securities Ltd (now merged withthe company) from Straight Line Method to Written Down Value Method to fall inline with method followed by the company. Accordingly depreciation provided inthe accounts is higher by Rs.66.38 Lacs (including Rs. 17.19 lacs for the previousyear). Thus profit for the year is lower by Rs. 66.38 Lacs on account of abovechange.Goodwill of Rs.23.45 lacs which was brought in the books on account of theaforesaid merger has been written off fully during the year.

4) Provision for Taxation :Provision for Taxation for the current year has been made as per Section 115JB ofIncome Tax Act, 1961 as Minimum Alternate Tax (MAT) is applicable to theCompany.

5) Deferred Tax (Asset) / Liability - Net as at 31st March, 2008In view of various adjustments made on account of amalgamation of LKP Shares& Securities Ltd with the company (approved by Honourable High Court, Mumbai)effective 1st April 2006 and since allow ability or otherwise of the same in taxassessments is not certain, no adjustment is considered for deferred tax.Deferred Tax Liability / (Assets) as at 31st March 2008

As at 31st For the year As at 31stParticulars March 2007 March 2008Depreciation differential 7518178 - 7518178Gratuity (729029) - (729029)Unabsorbed Depreciation (3059799) - (3059799)Carried forward Business Loss ------------------- ------------------- -------------------

3729350 - 3729350------------------- ------------------- -------------------

6) Remuneration to Wholetime Directors2007-2008 2006-2007

Particulars Rs. Rs.1. Salary 38,26,800 45,35,4002. Contribution to Provident Fund 30,420 37,440

------------------- -------------------38,57,220 45,72,840

------------------- -------------------No computation of remuneration to directors u/s 198 read with Section 349 of theCompanies Act, 1956 has been given, as no commission is payable to them.

7) The amounts shown against the sundry debtors and loans and advances isconsidered as good and recoverable by the management.

8) Expenditure in Foreign Currency :2007-08 2006-07

Particulars Rs. Rs.Foreign Travel 1,92,421 43,975Professional Fees 8,57025 -

9) Remuneration to Auditors :2007-08 2006-07

Particulars Rs. Rs.Audit fees (including fees for 1,80, 000 1,30,000earlier years Rs.50,000/-)Tax audit fees 20,000 20,000Service tax 24,720 12,360Other fees (including certification 1,65,574 5,000fees for earlier years) ------------------- -------------------

3,90,294 1,67,360------------------- -------------------

10) Earnings per share:2007-08 2006-07

Net Profit after Taxation 34,593,277 10,399,512No. of Equity shares 5150000 2150000Basic & Diluted earning per Share 6.72 2.02

11) As per the information available with the Company as at 31st March 2008, thedata in respect of Micro Act, 2006 are not available. Hence, details regardingprincipal amount and interest paid/due thereon is not given.

12) There are no dues to Small Scale Industries and Investor Education and ProtectionFund as at 31st March 2008 (Previous Year: Nil)

13) a) The previous year’s figures represent audited accounts of the merged entityapproved by the Board pursuant to the scheme of Amalgamation approvedby Honourable High Court, Mumbai. These accounts are to be ratified /approved by the shareholders.

b) Previous year’s figures have been regrouped wherever necessary.

SCHEDULE 16: BALANCE SHEET ABSTRACT AND COMPANY’SGENERAL BUSINESS PROFILE1 Registration Details Rs. in lacs1 Registration Details Rs.in lacs

Registration No. 80039State Code 11Balance Sheet date 31/03/2008

2 Capital Raised During the YearPublic Issue NILRights Issue NILBonus Issue NILPrivate Placement NIL

3 Positions of Mobilisation and Deployment of FundsTotal Liabilities 2,352.61Total Assets 2,352.61

Sources of FundsPaid-up Capital 765.00Reserves & Surplus 800.65Secured Loans 54.05Unsecured Loans 695.63Deferred Tax Liability 37.29

Application of FundsNet Fixed Assets 1,058.61Investments 264.71Net Current Assets 1,029.30Misc.Expenditure NILAccumulated Losses NIL

4 Performance of CompanyTurnover 5,906.11Total Expenditure 5,472.71Profit Before Tax 433.40Profit After Tax 345.93Dividend Rate % -Earning per Share in Rs. 6.72

5 Products of the Company Share BrokingItem code No.: N.A.

Notes: The above particulars should be read alongwith the Balance Sheet asat 31st March, 2008 the Profit & Loss Account for the year ended onthat date and the schedules forming part thereof.

As per our Report attached.for Ford, Rhodes, Parks & Co.Chartered Accountants

Director M.V. DOSHI

A.D.SHENOY Director M.R. SHAHPartnerMembership No. 11549 Director H.P. DOSHI

Director D.K. WAGHELA

Mumbai MumbaiDated: 30th June, 2008 Dated: 30th June, 2008

27

LKP SECURITIES LTD.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH , 2008Rs. In lacs Rs. In lacs

As at As at 31.3.2008 31.3.2007

A. Cash flow from Operating activities :Net Profit / (Loss) before tax and Extraordinaryitems and Interest 606.41 56.03Adjustments for :Depreciation 322.58 63.31Loss on sale of assets 3.11 -Interest / Dividend Received / Misc (120.92) (30.24)Profit on sale of investments (279.20)Prov for non-performing assets 54.34 36.27Misc expenditure written off - (20.08) - 69.33

------------------------ ------------------------Operating Profit before Working capital changes 586.33 125.35Adjustments for :Trade and other receivables 508.69 1,254.59Trade payables 147.15 655.84 (1,235.84) 18.75

------------------------ ------------------------Cash generated from operations 1,242.17 144.10Interest paid (173.01) (7.54)Direct taxes paid 27.47 (145.54) - (7.54)

------------------------ ------------------------Cash flow before extraordinary items 1,096.63 136.56Net cash from operating activities 1,096.63 136.56

B. Cash flow from Investing ActivitiesPurchase of fixed assets (513.68) (126.66)Sale of fixed assets 105.26 -Purchase of investments (112.50) -Sale of investments 286.11 1.20Interest received 114.08 1.07Dividend received 6.84 0.10

------------------------Net cash from investing activities (113.89) (124.29)

------------------------ ------------------------C. Cash flow from financing activities

Proceeds from issue of share capital , including - -Increase in Secured Loans 28.89Increase in Unsecured Loans 695.63Dividend paid 724.52 -

------------------------ ------------------------Net cash used in financing activities 724.52 -Net increase / (decrease) in cash and cash equivalents 1,707.25 12.27Cash and cash equivalents (opening) 773.36 80.22Cash and cash equivalents (closing) 2,480.62 92.49

As per our Report attached.for Ford, Rhodes, Parks & Co. Director M.V. DOSHIChartered Accountants

Director M.R. SHAH

A.D.SHENOY Director H.P. DOSHIPartnerMembership No. 11549 Director D.K. WAGHELA

Mumbai MumbaiDated: 30th June, 2008 Dated : 30th June, 2008

28


1. We have audited the attached Consolidated Balance Sheetof LKP Merchant Financing Ltd. (“the company”) and itssubsidiary as at 31st March 2008, the Consolidated Profitand Loss Account for the year ended on that date annexedthereto,and the Consolidated Cash Flow for the year endedon that date, which we have signed under reference to thisreport. Our responsibility is to express an opinion on thisconsolidated statement based on our audit.

2. We conducted our audit in accordance with the auditingstandards generally accepted in India. These Standardsrequire that we plan and perform the audit to obtainreasonable assurance whether the financial statements areprepared, in all material respects, in accordance with anidentified financial reporting framework and are free ofmaterial misstatements. An audit includes, examining ontest basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includesassessing the accounting principles used and significantestimates made by management, as well as evaluating theoverall financial statement presentation. We believe thatour audit provides a reasonable basis for our opinion.

3. The financial statements of the subsidiary LKP SecuritiesLtd have been audited by us whose financial reflect totalassets of Rs. 2,352.62 lacs as at 31st March,2008 and totalrevenues of Rs. 5,906.11 lacs for the year ended on thatdate.

4. We report that the consolidated financial statements havebeen prepared by the Company in accordance with therequirements of Accounting Standard (AS) 21,Consolidated Financial Statements, issued by the Instituteof Chartered Accountants of India and on the basis of theseparate audited financial statements of the Company andits subsidiary included in the consolidated financialstatements.

AUDITOR’S REPORT TO THE BOARD OF DIRECTORS OF LKP MERCHANT FINANCINGLTD., ON THE CONSOLIDATED FINANCIAL STATEMENTS OF LKP MERCHANTFINANCING LTD., AND ITS SUBSIDIARY.

On the basis of the information and explanation given tous and on the consideration of the separate audit reportson individual audited financial statements of the Company,and its subsidiary, we are of the opinion that the saidconsolidated financial statements give a true and fair viewin conformity with the accounting principles generallyaccepted in India:

(a) In the case of the consolidated Balance Sheet, of theconsolidated state of affairs of the Company and itssubsidiary as at 31st March 2008.

(b) In the case of the consolidated Profit and LossAccount, of the consolidated results of operations ofthe Company and its subsidiary for the year then endedand

(c) In the case of the consolidated Cash Flow Statement,of the consolidated Cash Flows of the Company andits subsidiary for the year then ended.

For FORD, RHODES, PARKS AND COChartered Accountants

A .D. ShenoyPartner.

Membership No 11549Place : Mumbai

Date: 30thJune,2008.

29


CONSOLIDATED BALANCE SHEET OF LKP MERCHANTFINANCING LIMITED AND ITS SUBSIDIARY COMPANYAS AT 31ST MARCH, 2008

As at

31.3.2007Schedule Rs in Lacs Rs in Lacs Rs in Lacs

I SOURCES OF FUNDS :1. Shareholders Funds

a. Share Capital 1 1,530.00 1,530.00b. Partly Paid

Conveertible Warrants 194.00 ––b. Reserves

and Surplus 2 5,081.39 4,251.48––––––––––––––––– –––––––––––––––––

6,805.39 5,781.482 Loan Funds

a. Secured Loans 3 54.05 9,008.57b. Unsecured Loans 4 695.63 ––

––––––––––––––––– –––––––––––––––––749.68 9,008.57

4 Deffered TaxLiability (Net) 37.29 20.99

––––––––––––––––– –––––––––––––––––TOTAL 7,592.36 14,811.04

============================================================== ==============================================================II APPLICATION

OF FUNDS :1. Fixed Assets 5

a. Gross Block 7,841.86 6,948.19b. Less : Depreciation 6,402.30 3,831.57

––––––––––––––––– –––––––––––––––––c. Net Block 1,439.56 3,116.62d. Goodwill on

consolidation 1,301.54 762.232. Investments 6 769.73 2,067.833. Current Assets,

Loans & Advancesa Stock on hand 7 249.28 ––b Sundry Debtors 8 4,515.35 2,693.15c Cash & Bank

Balances 9 2,785.69 420.22d Loans & Advances 10 6,342.09 10,826.15

––––––––––––––––– –––––––––––––––––13,892.41 13,939.52

Less : Current Liabilitiesand Provisionsa Liabilities 11 8,312.45 6,681.70b Provisions 12 1,498.43 320.00

––––––––––––––––– –––––––––––––––––9,810.88 7,001.70

––––––––––––––––– –––––––––––––––––Net Current Assets 4,081.53 6,937.82

4. Profit & Loss-Debit Balance – 1,926.54––––––––––––––––– –––––––––––––––––

TOTAL 7,592.36 14,811.04============================================================== ==============================================================

NOTES TO THE ACCOUNTS,ACCOUNTING POLICIES &CASH FLOW STATMENT 16

SCHEDULES 1 TO 16 ANNEXED HERETO FORM PART OFTHE BALANCE SHEET AND PROFIT & LOSS ACCOUNT

As per our Report attached

For FORD, RHODES, PARKS & CO. Executive Chairman M.V. DoshiChartered Accountants Director M.S. Bhise

Director V.N. SuchantiA.D.ShenoyPartnerMembership No. 11549


CONSOLIDATED PROFIT & LOSS ACCOUNT OF LKPMERCHANT FINANCING LIMITED AND ITS SUBSIDIARYCOMPANY FOR THE YEAR ENDED 31ST MARCH, 2008.

Previous YearSchedule Rs in Lacs Rs in Lacs Rs in Lacs

INCOME :Income from Operations 754.16 346.37Income fromBroking Activities 5458.83 1717.14Other Income 13 727.57 248.19

––––––––––––––––– –––––––––––––––––6940.56 2311.70

EXPENDITURE :Establishment Charges 14 1624.13 655.36Administrative andother expenses 15 3847.23 1112.49

––––––––––––––––– –––––––––––––––––5471.36 1767.85

Interest andFinance charges. 1270.91 1126.61Depreciation. 339.54 126.34

––––––––––––––––– –––––––––––––––––1610.45 1252.95

AMORTISATION OF TRADE MARK 1708.38 157.12TRANSFER FROM TRADEMARK RESERVE (1708.38) – (157.12)

––––––––––––––––– ––––––––––––––––– ––––––––––––––––– Operating Profit / (Loss) (141.25) (709.10)ADD/LESS : EXTRAORDINARYDEBITS / CREDITS 5734.18 81.56

––––––––––––––––– –––––––––––––––––PROFIT/(LOSS) BEFORE TAXATION 5592.93 (627.54)PROVISION FOR TAX-CURRENT YEAR (985.00) (6.55)PROVISION FOR FRINGE BENEFIT TAX (30.11) (12.34)TAX RELATING TO EARLIER YEARS 118.91 –

––––––––––––––––– –––––––––––––––––4696.73 (646.43)

ADD/LESS : DEFFERRED TAX – (2.51)––––––––––––––––– –––––––––––––––––

PROFIT/(LOSS) AFTER TAXATION 4696.73 (648.95)(LOSS) BROUGHT FORWARDFROM LAST YEAR (2624.05) (1277.59)

––––––––––––––––– –––––––––––––––––AMOUNT AVAILABLE FOR APPROPRIATION: 2072.68 (1926.54)

================================================================== ==============================================================APPROPRIATIONS:TRANSFERRED TO GENERAL RESERVE 500.00 –PROPOSED DIVIDEND 256.00 –TAX ON PROPOSED DIVIDEND 43.39 –

––––––––––––––––– –––––––––––––––––PROFIT/ (LOSS) CARRIEDTO BALANCE SHEET 1273.29 (1926.54)

================================================================== ==============================================================NOTES TO THE ACCOUNTS,ACCOUNTING POLICIES &CASH FLOW STATMENT 16SCHEDULES 1 TO 16 ANNEXED HERETO FORM PART OFTHE BALANCE SHEET AND PROFIT & LOSS ACCOUNT



Director V.N. SuchantiA.D.ShenoyPartnerMembership No. 11549Mumbai MumbaiDated : 30th June, 2008. Dated : 30th June, 2008.

30


As at31.3.2007

Rs in Lacs Rs in Lacs

SCHEDULE 1 - SHARE CAPITAL

Authorised

(i) 2,00,00,000 Equity Shares of Rs 10/- each. 2,000.00 2,000.00

(ii) 10,00,000 Redeemable CumulativePreference Shares of Rs.100/-each 1,000.00 1,000.00

––––––––––––––––– –––––––––––––––––3,000.00 3,000.00

======================================================================= =======================================================================Issued,Subscribed & Paid up :

(i) 128,00,000 Equity Shares of Rs.10/- each 1,280.00 1,280.00

(ii) 250,000 13.5% Redeemable CumulativePreference Shares of Rs.100/- each. 250.00 250.00

––––––––––––––––– –––––––––––––––––TOTAL 1,530.00 1,530.00

======================================================================= =======================================================================SCHEDULE 2- RESERVES & SURPLUS

Share Premium Account

Balance as per last Balance Sheet. 3,.20.16 2,255.16

Trade Mark Reserve

Balance as per last Balance Sheet. 1,728.38 1,885.50

Less: Transferred to Profit & Loss account. 1,708.38 157.12––––––––––––––––– –––––––––––––––––

20.00 1,728.38

SCHEDULES TO THE CONSOLIDATED ACCOUNTS AS AT 31ST MARCH, 2008.General Reserve

Balance as per last Balance Sheet. 267.94 267.94

Add : Transferred from Profit & Loss account. 500.00 ––––––––––––––––––– –––––––––––––––––

767.94 267.94

Balance in Profit & Loss Account 1,273.29 ––––––––––––––––––– –––––––––––––––––

TOTAL 5,081.39 4,251.48======================================================================= =======================================================================

SCHEDULE 3 - SECURED LOANSA. Redeemable Non-Convertible Debentures –– ––B. Term Loans from Financial Institutions –– 9,000.00C. Working Capital Loans From Banks 54.05 ––D. Vehicle Loan A/c –– 8.57

––––––––––––––––– –––––––––––––––––TOTAL 54.05 9,008.57

======================================================================= =======================================================================

SCHEDULE 4 - UNSECURED LOANSShort Term Loans 695.63 ––Inter Corporate Deposit –– ––Overdrawn Current Account Book Balance –– ––

––––––––––––––––– –––––––––––––––––TOTAL 695.63 ––

======================================================================= =======================================================================

SCHEDULE 5 - FIXED ASSETS (Rs in lacs)

Description of Assets Gross Block (At Cost) Depreciation/Amortisation Net Block

As at As at As at For the Deductions/ As at As at As at1st April Additions Deductions/ 31st March, 31st March, Year Adjustments 31st March, 31st March, 31st March,

2007 Adjustments 2008 2007 2008 2008 2007

I. OWN ASSETS

Office Premises 237.49 – 99.00 138.49 109.27 3.88 48.15 65.00 73.49 128.22

Premises 380.89 – 38.43 342.46 84.34 9.89 12.98 81.25 261.21 296.55

Furniture & Fixtures 270.48 59.42 15.60 314.30 182.91 69.93 6.82 246.02 68.28 87.57

Air Conditioners 24.97 – – 24.97 23.62 0.14 – 23.76 1.21 1.35

Office Equipment’s 743.62 333.14 13.27 1,063.49 461.48 204.48 6.96 659.00 404.49 282.14

Vehicles 62.76 114.06 51.10 125.72 39.57 50.75 33.42 56.90 68.82 23.19

LeaseholdImprovements 2.19 7.06 – 9.25 0.38 0.47 – 0.85 8.40 1.81

Goodwill – 23.45 23.45 – – – – – – 23.45

LKP FOREXTrade Mark 2,095.00 – – 2,095.00 366.62 1708.38 – 2,075.00 20.00 1,728.38

Sub-Total 3,817.40 537.13 240.85 4,113.68 1,268.19 2,047.92 108.33 3,207.78 905.90 2,572.66

II ASSETS ON LEASE

Plant & Machinery 3,130.78 – – 3,130.78 2,563.37 – 558.04 3,121.41 9.37 567.41

Sub-Total 3,130.78 3,130.79 2,563.37 – 558.04 3,121.42 9.37 567.41

Grand Total 6,948.18 537.13 240.85 7,244.47 3,831.56 2,047.92 666.37 6,329.20 915.27 3,140.07

PREVIOUS YEAR 7,963.38 156.40 1,171.60 6,948.18 3,831.57 3,116.62 4017.55

31


SCHEDULE 6 - INVESTMENTS (at Cost)As at 31.3.2007

Qouted Shares Fully Paid Quantity Face Cost Quantity Face Cost(at Cost), classified Value Rs in Lacs Value Rs in Lacsas Long Term Investments

R.M.Financial Services Ltd. 10 - – 50 10 0.0220th Century Finance Corporation Ltd. 10 - – 105 10 0.02Indian Oxygen Ltd. 10 - – 332 10 0.16Nirlon Synthetic Fibres & Chemicals Ltd. 10 - – 80 10 0.02Garware Polyester Ltd. 100 10 0.07 100 10 0.07Hindustan Alloys Mfg.Co.Ltd 10 - – 1,500 10 0.81Moira Re-rolling Mills Ltd. 10 - – 25,000 10 2.50Elcot Power Ltd 10 - – 1,600 10 1.20Growel Times Ltd 10 - – 50,000 10 8.00Sajjan Udyog Export Ltd 10 - – 4,900 10 1.23Sandur Laminates Ltd. 10 - – 50,000 10 5.00I C I C I Bank Ltd. 10 10 0.02 10 10 0.02Bindal Agro Mills Ltd. 10 - – 95 10 0.04Ahura Welding Electrode Manufacturers.Ltd. 10 - – 10,500 10 4.20Tata Motors Ltd (Tata Finance Ltd) 100 10 0.03 100 10 0.03Motoral Specialities Ltd 10 - – 54,900 10 22.94Maharashtra Polybutane Ltd 701,349 10 7.02 701,349 10 7.02Tata Iron & Steel Co Ltd 10 - 40,000 10 152.89JSW Steel Ltd 47 10 0.01 47 0 0.01Herbertsons Ltd 10 - 22,050 10 23.79Himachal Futuristic Ltd - 100 10 0.86Visual Soft Ltd - 31 10 2.89Mphasis Ltd (BFL Soft Ltd) - 10 10 0.21Venky’s India Ltd (Western Hatcheries Ltd) - 500 10 1.52Liquid Benchmark Units 5,639 1000 56.40 10,000 1000 100.00United Breweries Ltd 1,600 1 3.86 1,600 1 3.86Development Credit Bank Ltd 10 - 44,405 10 35.60S Kumars Synfab Ltd 10 - 179,000 10 139.44Nitco Tiles Ltd 10 - 10,543 10 20.40D S Kulkarni Developers Ltd 732 10 0.71 583 10 0.64Gold Crest Finance (I) Ltd 10,000 1.00 – – –Infra Industries Ltd 149,000 44.70Axis IT & T Ltd 500 0.41ONGC Ltd 72 0.36Rupa Industries Ltd 8,900 0.89TCI Finance Ltd 8,300 2.49Geodesic Information Systems Ltd 428 12.00Relaince Power Ltd 10,900 64.81Central Bank of India Ltd 51,205 10 60.63Thomas Cook (India) Ltd 4.65%Class A Preference Shares - - 94,854,000 10Thomas Cook (India) Ltd Equity Shares 1,49,49,000 1 1,494,900 10Thomas Cook (India) Ltd 0.001%Class B Preference Shares 319,765 10 330.34 319,765 10 625.50Thomas Cook (India) Ltd 0.001%Class C Preference Shares 271,800 10 271,800 10(These shares were received in lieu ofshares held in LKP Forex Ltd,merged withThomas Cook (India) Ltd as per MumbaiHigh Court Order dated 12.01.2007. ClassB & C Preference Shares are Convertibleinto Equity Shares within a period of sevenyears on Thomas Cook (India) Limitedachieving certain levels of EPS)

––––––––––––––––– –––––––––––––––––SUB-TOTAL 585.75 1,160.87

======== ========UNQUOTED & FULLY PAID UP:The Saraswat Co-op Bank Ltd. 1,005 10 0.10 1,005 10 0.10Samudra Shoes Ltd - - 88,425 10 8.86Nikhar Fabrics Ltd - - 220,000 10 22.00Ring Plus Acqua Ltd 87,800 10 60.55 87,800 10 60.55The Hindustan Times Ltd. 350 10 12.57 350 10 12.57Sweet Infosys Ltd - - 239,500 10 436.25Doshi Holding Pvt Ltd. 7,600 10 0.76 7,600 10 0.76Gayatri Cement & ChemicalsIndustries Pvt.Ltd 10,000 100 64.00 10,000 100 64.00Gobind Sugar Ltd 9,600 10 17.85 500 10 14.88Equity Market Project Ltd - 5,000 10 0.50LKP Shares and Securities Ltd. 2,50,000 10 250.00India Containers Ltd - 77,100 10 0.39Regent Agro Chemicals Ltd - 100,000 10 10.00Bombay Stock Exchange Ltd 877 17.55 - - –

––––––––––––––––– –––––––––––––––––SUB-TOTAL 173.38 880.86

======== ========

SCHEDULES TO THE CONSOLIDATED ACCOUNTS AS AT 31ST MARCH, 2007

As at 31.3.2007UNQUOTED SHARES Quantity Face Cost Quantity Face Cost (Partly Paid) AT COST : Value Rs in Lacs Value Rs in Lacs

NAME OF THE COMPANYKalyani Seamless Tubes Ltd. - 33,300 10 6.66Kanan Steels Ltd. - 29,500 10 1.11Pittie Cement & Inds Ltd. - 10,600 10 5.83Amaujin Agro Exports Ltd - 6,100 10 0.30American Paints India Ltd - 95,500 10 4.77I T & T Ltd - 14,653 10

––––––––––––––––– –––––––––––––––––SUB-TOTAL - 26.00

======== ========INVESTMENT IN MUTUAL FUNDS:BIRLA INCOME PLUS 0.10 0.10Shriram Interval Fund 97 5,000 0.50 -LIC Mutual Fund 100,000 10.00 -

––––––––––––––––– –––––––––––––––––10.60 0.10

––––––––––––––––– –––––––––––––––––TOTAL 769.73 2,067.83

======== ========i. Aggregate of quoted investments - At Cost 585.75 1,160.87

- Market Value 14,569.57 8,073.17ii. Aggregate of unquoted investments - At Cost. 183.98 906.96

SCHEDULE 7 - STOCK ON HAND Rs in Lacs Rs in Lacsa. In Shares

- Valued at cost or market valuewhichever is lower 249.28 –

––––––––––––––––– –––––––––––––––––TOTAL 249.28 –

======================================================================= =======================================================================

SCHEDULE 8 - SUNDRY DEBTORS (Unsecured, Considered Good)a. Lease Rentals - At agreement values

(All debts due and outstanding formore than 6 months) 128.74 128.74Less: Provision for Non-Performing Assets 128.74 128.74

––––––––––––––––– –––––––––––––––––– –

======================================================================= =======================================================================b Other debts (includes Rs lacs outstanding for

more than 6 months) 4,515.35 2,693.15––––––––––––––––– –––––––––––––––––

TOTAL 4,515.35 2,693.15======================================================================= =======================================================================

SCHEDULE 9 - CASH AND BANK BALANCESCash on hand (Including cheques on hand Rs NIL lacs(Previous Yr Rs NIL lacs) 2.66 0.70

Balance with Scheduled Banks:in Current Account 2,310.32 351.98in Fixed Deposit 472.67 67.50

Cooperative Bank : 0.04 0.04––––––––––––––––– –––––––––––––––––

TOTAL 2,785.69 420.22======================================================================= =======================================================================

SCHEDULE 10 - LOANS & ADVANCES(Considered Good)Deposit with Companies and others 1,893.81 3,424.91Bills of Exchange – 31.70Advances recoverable in cash or in kind or forvalue to be received 2,347.26 7,014.23Tax Deducted at Source & Self Assesment Tax 469.94 223.69Fringe Benefit Tax-advance 57.21 19.23Trade Deposits 1,573.87 112.39

––––––––––––––––– –––––––––––––––––TOTAL 6,342.09 10,826.15

======================================================================= =======================================================================

SCHEDULE 11 - LIABILITIESSundry Creditors 8,312.45 6,681.70

––––––––––––––––– –––––––––––––––––TOTAL 8,312.45 6,681.70

======================================================================= =======================================================================

SCHEDULE 12 - PROVISIONSProvision for Income Tax 1,107.22 289.72Provision for Fringe Benefit Tax 66.99 22.19Provision for Dividend 299.39 –Provision for Gratuity 24.83 8.09

––––––––––––––––– –––––––––––––––––TOTAL 1,498.43 320.00

======================================================================= =======================================================================

} }

32


SCHEDULES TO THE CONSOLIDATED ACCOUNTS AS AT 31ST

MARCH, 2008- (Contd.)Rs in Lacs Rs in Lacs

SCHEDULE 13 - OTHER INCOMEDividend Income 553.61 6.70Bad Debts recovered 4.60 22.60Miscellaneous Income 20.46 0.04Profit on sale of assets 101.40 -Others 47.50 1.89Provsion for Diminution in Investments no longerrequired, now reversed – 114.20Provsion for Gratuity no longer required, now reversed – 9.49

––––––––––––––––– –––––––––––––––––TOTAL 727.57 154.92

======================================================================= =======================================================================SCHEDULE 14 - ESTABLISHMENT CHARGESSalary and Allowances 1,455.64 597.03Directors Remuneration 59.50 -Contribution to Provident Fund/ESIC. 54.81 19.39Other Allowances 7.30 -Staff Welfare 46.88 38.94

––––––––––––––––– –––––––––––––––––TOTAL 1,624.13 655.36

======================================================================= =======================================================================SCHEDULE 15 - ADMINISTRATIVE EXPENSESRent, Rates & Taxes 259.35 133.03Repairs - Others 95.61 47.18Electricity 74.21 13.57Advertisement 54.40 3.77Directors Fees 0.24 0.28Traveling & Conveyance 131.64 64.82Postage, Telegram & Telephones 359.67 90.30Broker Note & Stamp Duty 275.00 81.59Legal and Professional Charges 320.02 116.74Printing & Stationery 129.01 37.03Auditors Remuneration :

Audit fees 2.57 0.83Tax audit fees 0.17 0.06

Vehicle Maintenance 35.27 17.09Insurance 7.97 3.21Bad debts written off – 1.83Bills of Exchange written off 31.70 –Loans Irrecoverable written off 289.14 –Loss on sale of fixed assets 3.08 9.82Donation 1.38 0.18Miscellaneous Expenses 1,776.80 491.16

––––––––––––––––– –––––––––––––––––TOTAL 3,847.23 1,112.49

======================================================================= =======================================================================

SCHEDULE 16 – SIGNIFICANT ACCOUNTING POLICIES1. Basis of Accounting1. The accounts have been prepared on historical cost convention. The Company

follows the accrual basis of accounting. The financial statements are preparedin accordance with the accounting standards specified in the Companies(Accounting Standards) Rules,2006 notified by the Central Government, interms of section 211 (3C) of the Companies Act,1956.

2. Principles of Consolidation(a) The consolidated financial statements relate to LKP Merchant

Financing Limited (‘the Company) and its Subsidiary company.The consolidated financial statements have been prepared on the followingbasis.— The financial statements of The Company and its Subsidiary Company

have been combined on a line-by-line basis by adding together incomeand expenses, after fully eliminating intra-group balances and intra-group transactions.

— The consolidated financial statements have been prepared usinguniform accounting policies for like transactions and other events insimilar circumstances and are presented to the extent possible, in thesame manner as the Company’s separate financial statements.

— The excess of cost to the company of its investments in the SubsidiaryCompany is recognised in the financial statements as goodwill.

— No disclosure has been made for share of profit and share in netassets of the subsidiary in respect of Minority interest (0.45% of theSubsidiary’s Equity Capital).

(b) The Subsidiary Company in the consolidated financial statements is:Name of the Country of % of voting powerCompany Incorporation held as at

31st March, 2008

LKP Securities Limited India 99.55

(c) Other Significant Accounting PoliciesThese are set out in the notes to accounts under “Statement of AccountingPolicies of the financial statements of the Company and LKP SecuritiesLimited.

3. Segment reporting and related information is not given, as the same is notapplicable to the Company and its Subsidiary as there is only one segment.

4. Particular with respect to Earnings per share is calculated as follows:2007-08 2006-07

Profit / (Loss) after Taxation(Rupees in Lacs) 4676.92 (648.95)Number of Shares Outstanding 1,28,00,000 12,800,000

Rs. Ps. Rs. Ps.Earnings per shares (Basic) 36.69 (5.07)Face Value of Share 10 10

5) As per the Accounting Standard 18, issued by the Institute of CharteredAccounts Of India, disclosures of transactions with the related parties asdefined in the Accounting Standards are given below:(i) List of related parties with whom transactions have taken place and

relationships.(Relationship : Associate Company, Associate, Key Managerial Personnel)Name of the Related Party Relationship1. LKP Securities Ltd. Subsidiary Company2. Peak Plastonics Pvt. Ltd. Associate Company3. MKM Share & Stock Brokers Ltd. Associate Company4. Sea Glimpse Investments Pvt. Ltd. Associate Company5. Bhavana Holdings Pvt. Ltd. Associate Company6. M/s. L.K. Panday Associate7. Mr. M V Doshi Key Managerial Personnel

(ii) Transaction with related parties.Subsidiary Associates Key TotalCompany Managerial (Rs.in

Personel Lacs)RentIncome 2.88 – – 2.88DirectorsRemuneration – – 27.00 27.00

6. The company acquired 99.23% of shares of LKP Shares And Securities Ltd(LKPSS) in May 2007 and LKPSS has been merged with LKP Securities Ltdin March 2008. The consolidated figures for the year include those of themerged entity and hence the figures are not comparable with those of theprevious year.

7) CONSOLIDATED CASH FLOW STATEMENT FOR THE YEARENDED 31ST MARCH,2008

At at At at31.3.2008 31.3.2007

A. Cash Flow From Operating Activities:Net Profit/(Loss) before tax and ExtraordinaryItems and Interest. 1,129.66 417.51Adjustments for:Depreciation - 126.34Dividend Received (553.61) (6.70)Interest Paid (1,270.91) –Taxes Paid 896.20Profit on sale of investments inSubsidiary Co 9,190.24 –Misc. Expenditure W/Off (2,920.00) 5,341.92 – 119.64

------------------------------------- -------------------------------------Operating Profit before WorkingCapital Changes 6,471.58 537.15Adjustments for:Trade and other receivables 2,412.58 (2,185.88)Trade payables 2,809.18 5,221.76 1,327.13 (858.75)

------------------------------------- ------------------------------------- ------------------------------------- -------------------------------------Cash Generated from operations 11,693.34 (321.60)Interest paid (1,270.91) (1,126.61)Provision for Defferred Tax (Net) – (2.51)Direct taxes paid (896.20) (2,167.11) (18.89) (1,148.01)

------------------------------------- ------------------------------------- ------------------------------------- -------------------------------------Net cash from operating activities 9,526.23 (1,469.61)

B Cash flow from investing activitiesPurchase of fixed assets (537.13) (918.73)Sale of fixed assets 465.04 31.25Purchase of Investments (843.88) (726.12)Sale of Investments 1,266.49 11.14Dividend received 553.61 6.70

------------------------------------- -------------------------------------Net cash used in investing activities 904.13 (1,595.76)

------------------------------------- -------------------------------------C Cash flow from financing activities

Proceeds from long term borrowings (8,064.89) 531.53 –------------------------------------- -------------------------------------

Net cash used in financing activities (8,064.89) 531.53------------------------------------- -------------------------------------

Net increase in cash and cash equivalents 2,365.47 (2,533.84)Cash and cash equivalents. (opening) 420.22 2,954.06Cash and cash equivalents. (closing) 2,785.69 420.22



Director V.N. SuchantiA.D.ShenoyPartnerMembership No. 11549


LKP Merchant Financing LimitedRegistered Office : 203, Embassy Centre, Nariman Point, Mumbai - 400 021.

ATTENDANCE SLIP24th Annual General Meeting on Saturday, 9th August, 2008

R/F No. DP/ID NO.

Mr./Mrs./Miss....................................................................................................................................................................................

I certify that I am a registered shareholder/proxy for the registered shareholder of the Company

I hereby record my presence at the 24th Annual General Meeting of the Company held at M. C. Ghia Hall, HargovindasBuilding, 18/20, Kaikhuskru Dubash Marg, Mumbai - 400 001, at 10.30 a. m. on Saturday, 9th August, 2008.

.......................................................... ..........................................................Proxy’s Name in Block Letters Member’s/Proxy’s Signature

NOTES :

1. This Meeting is of Members only and you are requested not to bring with you any person who is not a Member.

2. Shareholders/Proxy holders are requested to bring the attendance slips with them when they come to the Meeting and handover at the entrance after affixing their signature on them.

3. Shareholders are requested to bring their copy of the Annual Report alongwith them to the Annual General Meeting, ascopies of the Report will not be distributed again at the Meeting, in view of the increasing cost of the Annual Report.

4. If it is intended to appoint a proxy, the Form of Proxy should be completed and deposited at the Registered Office of theCompany at least 48 hours before the Meeting.

LKP Merchant Financing LimitedRegistered Office : 203, Embassy Centre, Nariman Point, Mumbai - 400 021.

PROXYR/F No. DP/ID NO.

I/We..................................................................................................of ...............................................................................................

..................................................................................in the district of ................................................................................... being a

member/members of LKP Merchant Financing Ltd. hereby appoint ..............................................................................................

.......................................................................................of ..................................................................................................................

.........................................................................in the district of ................................................................................. or failing him

........................................................................................of .................................................................................................................

.........................................................................in the district of ........................................................................................ as my/our

Proxy to vote for me/us on my/our behalf at the 24th Annual General Meeting of the Company to be held on Saturday,9th August, 2008 and at any adjournment thereof.

As witness my hand this .............................................................. day of.............................................................................2008.

Affix 1 Re.Signed Revenue

Stamp

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If undelivered, please return to :

LKP MERCHANT FINANCING LTD.112A, Embassy Centre,Nariman Point,Mumbai - 400 021.

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