GemCom, LLC


For the quarter ended September 30, (Rs. in thousands, except per share data)	2007	2008	2008 Convenience translation into US$
Revenues:
Commission income	151,534	161,536	3,478
Proprietary trading, net	150,098	106,099	2,284
Distribution income, net	17,457	12,590	271
Interest and dividends	23,970	68,674	1,478
Other income	961	15,760	339
Total revenues	344,020	364,659	7,850
Expenses:
Exchange, clearing and brokerage fees	67,772	186,983	4,025
Employee compensation and benefits	50,137	96,554	2,079
Information and communication	6,318	13,016	280
Advertisement expenses	5,092	13,947	300
Depreciation and amortization	7,884	12,206	263
Interest expense	17,859	33,743	726
General and administrative expenses	30,201	49,936	1,075
Total expenses	185,263	406,385	8,748
Earnings before income taxes	158,757	(41,726)	(898)
Income taxes	55,059	(4,888)	(105)
Earnings after income taxes	103,698	(36,838)	(793)
Share in profits of equity investee	(71)	(873)	(19)
Earnings before extraordinary gain	103,627	(37,711)	(812)
Extraordinary gain	-	34,176	736
Net income	-	(3,535)	(76)
Earnings per share:
Basic and diluted: Net income	13.81	(0.40)	(0.40)
Weighted average number of shares used to compute basic and diluted earnings per share	7,505,100	8,957,097	8,957,097


For the six months ended September 30, (Rs. in thousands, except per share data)	2007	2008	2008 Convenience translation into US$
Revenues:
Commission income	266,404	295,519	6,362
Proprietary trading, net	261,708	224,559	4,834
Distribution income, net	22,348	23,880	514
Interest and dividends	46,569	124,866	2,688
Other income	1,642	18,612	401
Total revenues	598,671	687,436	14,799
Expenses:
Exchange, clearing and brokerage fees	115,067	354,433	7,631
Employee compensation and benefits	88,915	173,226	3,729
Information and communication	16,876	23,228	500
Advertisement expenses	13,761	20,040	431
Depreciation and amortization	16,012	25,860	557
Interest expense	31,444	54,048	1,164
General and administrative expenses	42,638	99,132	2,134
Total expenses	324,713	749,967	16,146
Earnings before income taxes	273,958	(62,531)	(1,347)
Income taxes	82,972	(20,399)	(439)
Earnings after income taxes	190,986	(42,132)	(908)
Share in profits of equity investee	6,875	(947)	(20)
Earnings before extraordinary gain	197,861	(43,079)	(928)
Extraordinary gain	62,597	34,712	747
Net income	260,458	(8,367)	(181)
Earnings per share:
Basic and diluted: Earnings before extraordinary gain	26.36	(4.81)	(4.81)
Basic and diluted: Extraordinary gain	8.34	3.88	3.88
Basic and diluted: Net income	34.70	(0.93)	(0.93)
Weighted average number of shares used to compute basic and diluted earnings per share	7,505,100	8,957,097	8,957,097


As of (Rs. in thousands)	March 31, 2008	September 30, 2008	September 30, 2008 Convenience translation into US$
Assets
Cash and cash equivalents	53,103	88,891	1,914
Receivables from clearing organisations (net of allowance for doubtful debts of Rs Nil as of March 31, 2008 and Rs Nil as of September 30, 2008)	529,751	267,431	5,757
Receivables from customers (net of allowance for doubtful debts of Rs. 14,034 as of March 31, 2008 and Rs. 34,034 as of September 30, 2008)	1,028,358	1,425,918	30,698
Due from related parties	203,432	355,051	7,644
Securities owned:
Marketable, at market value	865,828	960,091	20,669
Not readily marketable, at estimated fair value	-	-
Commodities, at market value	18,637	135,589	2,919
Derivatives assets held for trading	1,905	-	-
Investments	17,374	51,159	1,102
Deposits with clearing organisations and others	1,927,960	1,909,294	41,104
Property and equipment (net of accumulated depreciation of Rs. 59,991 as of March 31, 2008 and Rs. 73,010 as of September 30, 2008)	97,005	143,001	3079
Intangible assets (net of accumulated amortization of Rs. 22,200 as of March 31, 2008 and Rs. 28,732 as of September 30, 2008)	25,736	19,447	419
Deferred taxes, net	12,006	36,058	777
Other assets	129,008	932,131	20,067
Total Assets	4,910,103	6,324,101	136,149
Liabilities and Shareholder’s Equity
Payable to broker-dealers and clearing organizations	39,908	46,042	991
Payable to customers	1,047,706	1,456,977	31,366
Derivatives held for trading	363	-	-
Accounts payable, accrued expenses and other liabilities	124,975	204,405	4,401
Due to related parties	776,024	670,182	14,428
Overdrafts and long term debt	629,293	962,023	20,711
Deferred taxes, net	-	398	9
Total Liabilities	2,618,269	3,340,027	71,906
Commitments and contingencies (Note 19)


As of (Rs. in thousands)	March 31, 2008	September 30, 2008	September 30, 2008 Convenience translation into US$
Shareholders' Equity
Common Stock	88,035	89,921	1,937
(15,000,000 common shares authorized; 8,803,500 and 8,992,146 equity shares issued and outstanding as of March 31, 2008 and September 30, 2008; par value Rs. 10) (5,000,000 preference shares authorized; Nil and Nil issued and outstanding as of March 31, 2008 and September 30, 2008; par value Rs. 10)
Minority interest	-	36,739	791
Additional paid in capital	1,371,543	2,007,487	43,218
Accumulated other comprehensive income / (loss)	832,477	1,553	33
Retained earnings	(221)	848,374	18,264
Total Shareholders' Equity	2,291,834	2,984,074	64,243
Total Liabilities and Shareholders' Equity	4,910,103	6,324,101	136,149


For the six months ended September 30, (Rs. in thousands)	2007	2008	2008 Convenience translation into US$
Cash flows from operating activities
Net profit	260,458	(8,367)	(180)
Adjustments to reconcile net profit to net cash provided/ (used) in operating activities:
Depreciation and amortization	16,012	25,860	558
Deferred tax expense / (benefit)	7,129	(23,855)	(514)
Share of profits in equity investee and extraordinary gain	(6,875)	947	20
Fair value (gain) / loss on sale of Property & equipment	-	(312)	(7)
Fair value (gain) / loss on sale of Investment	-	(278)	(6)
Fair value (gain) / loss on trading securities	(13,669)	55,513	1,195
Unrealized foreign exchange (gain) / loss	-	9,538	205
Extraordinary gain	(62,597)	(34,712)	(747)
Provision for doubtful debt	-	20,000	431
Provision for gratuity	902	-	-
Changes in assets and liabilities:
Receivables from clearing organizations	191,321	262,320	5,647
Receivables from customers	(268,718)	(397,561)	(8,559)
Dues from related parties	(26,262)	(151,619)	(3,264)
Dues to related parties	(104,741)	(105,843)	(2,279)
Securities owned	(738,454)	(149,775)	(3,224)
Commodities	370,572	(116,952)	(2,518)
Derivatives held for trading	(7,965)	1,542	33
Deposits received from customers	-	600	13
Deposits with clearing organizations and others	(119,017)	18,665	402
Other assets	(77,055)	(803,123)	(17,290)
Payable to broker-dealers and clearing organisations	127,168	6,134	132
Payable to customers	520,777	408,672	8,798
Book overdraft	40,774	-	-
Accrued expenses	54,867	75,518	1,626
Net cash provided by operating activities	164,627	(907,088)	(19,528)

Cash flows from investing activities
Purchase of property and equipment	(29,622)	(20,136)	(434)
Purchase of investments	(4,890)	(45,296)	(975)
Acquisition of intangible assets	(269)	(3,710)	(80)
Procedd from sale of property & equipment	-	1,145	25
Acquisition of business, net of cash acquired	(82,334)	-	-
Net cash used in investing activities	(117,115)	(67,997)	(1,464)


Cash flows from financing activities
Net movement in overdrafts and long term debt	(29,871)	332,730	7,163
Movement in Minority Interest	-	36,739	791
Proceed from issue of share capital	-	1,886	41
Additional paid in capital	-	635,943	13,691
Net cash provided by financing activities	(29,871)	1,007,298	21,686
Effect of exchange rate changes on cash and cash equivalents	(264)	1,592	34
Net increase/(decrease) in cash and cash equivalents during the period	17,377	33,805	728
Add : Balance as of beginning of the period	18,847	55,086	1,186
Balance as of end of the period	36,224	88,891	1,914

SMC Global Securities Limited (the “Company” or “SMC Global”) is a limited liability company incorporated and domiciled in India. The Company is a trading member of the National Stock Exchange of India Limited (“NSE”) in the capital market and trading and clearing member in the futures and options market. Its wholly owned subsidiary, SMC Comtrade is a trading and clearing member of National Commodity Exchange of India (“NCDEX”) and Multi Commodity Exchange of India (“MCX”) in the commodity market. SMC Comex International, DMCC (“SMC Comex”), a wholly owned subsidiary of SMC Comtrade holds trading and clearing membership for Dubai Gold Commodity Exchange (“DGCX”) and SMC Insurance Brokers (P) Ltd is also wholly owned subsidiary of SMC Comtrade Ltd and holds broking license from IRDA(Insurance & regulatory development authority of India) in the life & non life insurance. Company has also acquired wholly owned subsidiary SMC Wealth Management Services which is engaged in the business of portfolio management consultancy. In the month of august 2008 company also acquired subsidiaries Moneywise financial services Ltd. by acquiring its 84.33% stake and SMC Capitals ltd by acquiring its 96.06% stake.

The Company’s shares are listed on the Delhi Stock Exchange, Ludhiana Stock Exchange, Ahmedabad Stock Exchange and Calcutta Stock Exchange in India.

The Company engages in proprietary transactions and offers a wide range of services to meet client’s needs including brokerage services, clearing member services, distribution of financial products such as mutual funds and initial public offerings.

The accompanying condensed consolidated financial statements of SMC Global Securities Limited and its wholly-owned subsidiary (‘Group’) for the three months ended September 30, 2008 and 2007 are unaudited. The statement of income includes the results of SMC Comtrade from the date of acquisition. In the opinion of management, the condensed consolidated financial statements include all adjustments that management considers necessary for a fair statement of its financial position, operating results and cash flows for the interim periods presented. Operating results and cash flows for interim periods are not necessarily indicative of results for the entire year. The Condensed Consolidated Balance Sheet as of March 31, 2008, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted ("GAAP") in the United States of America for full financial statements. These financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended March 31, 2008.

In presenting the condensed financial statements, management makes estimates that affect the reported amounts and disclosures in the financial statements. Estimates, by their nature, are based on judgment and available information. Therefore, actual results could differ from those estimates and could have a material impact on the condensed financial statements, and it is possible that such changes could occur in the near term.

For the convenience of the reader, the financial statements as of and for the quarter ended September 30, 2008 have been translated into U.S. dollars (US$) at US$1.00 = Rs. 46.45 based on the noon buying rate on September 30, 2008 by the Federal Reserve Bank of New York. Such translation should not be construed as representation that the rupee amounts have been or could be converted into U.S. dollars at that or any other rate, or at all.

In accordance with the provisions of SFAS 128, "Earnings Per Share", basic earnings per share is computed on the basis of the weighted average number of shares outstanding during the period. The Group does not have any outstanding dilutive securities and hence the basic and diluted earnings per share are same.

In July 2006, the FASB issued Interpretation 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement 109 (“FIN 48”). The interpretation clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 became effective beginning April 1, 2007 for us. The adoption of FIN 48 did not result in a cumulative effect adjustment to retained earnings as of April 1, 2007.

In September 2006, the FASB issued SFAS 157, Fair Value Measurements, which establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, which is fiscal year commencing April 1, 2008 for us. The Group is in the process of evaluating the impact SFAS 157 will have on the financial statements.

In February 2007, the FASB issued FASB Statement 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159 allows the company to choose to measure certain financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007, which is fiscal year commencing April 1, 2008 for us. The Group in the process of evaluating the impact SFAS 159 will have on the Group’s financial statements.

In April 2007, the FASB issued FSP No. FIN 39-1, Amendment of FASB Interpretation No. 39 (“FSP FIN 39-1”). FSP FIN 39-1 modifies FIN No. 39, Offsetting of Amounts Related to Certain Contracts, and permits companies to offset cash collateral receivables or payables with net derivative positions. FSP FIN 39-1 is effective for fiscal years beginning after November 15, 2007 which is fiscal year commencing April 1, 2008 for us with early adoption permitted. The Group in the process of evaluating the impact FSP FIN 39-1 will have on the Group’s financial statements.

In June 2007, the Accounting Standards Executive Committee of the AICPA issued Statement of Position 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies (“SOP 07-1”). The intent of SOP 07-1 is to clarify which entities are within the scope of the AICPA Audit and Accounting Guide, Investment Companies (the “Guide”). Financial Accounting Standards Board (“FASB”) has agreed to propose an indefinite delay of the effective dates of SOP 07-1. The Group in the process of evaluating the impact SOP 07-1 will have on the Group’s financial statements.

In December 2007, FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements – An Amendment of ARB No. 51 (SFAS 160). SFAS 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This Statement requires the recognition of a non-controlling interest as equity in the consolidated financial statements and separate from the parent’s equity. Purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. The Group will be required to adopt this new Statement prospectively to all non-controlling interest, including any that arose before the effective date, for fiscal years, beginning after December 15, 2008 which is fiscal year commencing April 1, 2009 for us. Early adoption is prohibited. The Group in the process of evaluating the impact SFAS 160 will have on the Group’s financial statements.

In December 2007, FASB issued SFAS No. 141 (Revised 2007), Business Combinations (SFAS 141R). This Statement replaces SFAS No. 141, Business Combinations. SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities assumed including contingencies and non-controlling interest in the acquiree, at the acquisition date, measured at their fair value, with limited exceptions specified in the statement. In a business combination achieved in stages, this Statement requires the acquirer to recognize the identifiable assets and liabilities as well as the non-controlling interest in the acquiree at full amounts of their fair values. This Statement requires the acquirer to recognize contingent consideration at the acquisition date, measured at its fair value at that date. The Group will be required to apply this new Statement prospectively to business combinations consummated in fiscal years beginning after December 15, 2008 which is fiscal year commencing April 1, 2009 for us. Early adoption is prohibited.

In March 2008, FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – An Amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 requires enhanced disclosures on derivative and hedging activities by requiring objectives to be disclosed for using derivative instruments in terms of underlying risk and accounting designation. This Statement requires disclosures on the need of using derivative instruments, accounting of derivative instruments and related hedged items, if any, under SFAS 133 and effect of such instruments and related hedge items, if any, on the financial position, financial performance and cash flows. The Group will be required to adopt this new Statement prospectively, for fiscal years beginning after November 15, 2008 which is fiscal year commencing April 1, 2009 for us. The Group in the process of evaluating the impact SFAS 161 will have on the Group’s financial statements.

The Company has acquired 100% of outstanding common shares of SMC Wealth Management Services Limited (”SMC Wealth Management”) as on April 1, 2008 due to which SMC Wealth management has become the wholly owned subsidiary of the company. The purchase price was Rs. 60,28,000 comprising of cash only. Company also acquired 600,000 and 500,000 shares (face value Rs.10) of Wealth management through fresh issue at a premium of Rs. 30 per share as on August 16, 2008 and September 30, 2008 respectively for a total cash consideration of Rs. 44,000,000. The acquisition was made to consolidate the group structure and realize benefits of synergies in operations of both entities.

The Company has acquired 6,000,000 Equity shares of Rs. 10 face value of Moneywise Financial Services (P) Limited through fresh issue at a premium of Rs. 20 per share as on July 31, 2008 as a resultant company holds 84% of total outstanding common shares of Moneywise Financial Services (P) Ltd. due to which Moneywise Financial Services has become the subsidiary of the company. The purchase price was Rs.180,000,000 comprising of cash only.

The Company has also acquired 96% of outstanding common shares of SMC Capitals Limited as on August 16, 2008, due to which SMC Capitals has become the subsidiary of the company. The purchase price was Rs. 24,709,967 comprising of cash only.

The Group allocates the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired, based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. Any negative goodwill being the excess of fair value of the acquired net assets over cost is initially adjusted in accordance with SFAS 141 “Business Combinations” against the values assigned to specified assets and the unadjusted balance is recognized as an extraordinary gain. The fair value assigned to assets acquired is based on valuations using management's estimates and assumptions. The allocation of purchase price is as follows:


Purchase price as on April 1, 2008.
SMC Wealth Management Services Ltd.	Rs. in thousands	US $
Assets
Cash & cash equivalents	895	19
Receivables and deposits	6,052	130
Other assets	177	4
Liabilities
Accounts Payable	560	12
Net assets acquired	6,564	141
Less: Purchase price allocation	6,028	130
Extraordinary gain	536	11


Purchase price as on August 16, 2008.
SMC Capitals Ltd.	Rs. in thousands	US $
Assets
Fixed Assets	5,532	119
Cash & cash equivalents	35	1
Receivables and deposits	11,381	245
Other assets	45,454	979
Liabilities
Accounts Payable	5,742	124
Net assets acquired	56,660	1,220
Less: Minority Interest	2,231	48
Less: Cost of Investment	24,710	532
Extraordinary gain	29,719	640
Purchase price as on July 31, 2008.
Moneywise Financial Services (P) Ltd.	Rs. in thousands	US $
Assets
Inventories	45,273	975
Cash & cash equivalents	192,336	4,141
Receivables and deposits	16,268	350
Other assets	325,960	7,017
Liabilities
Accounts Payable	41,128	885
Loans & advances	118,710	2,556
Others	188,461	4,057
Net assets acquired	231,538	4,985
Less: Minority Interest	36,280	781
Less: Cost of Investment	180,000	3,875
Extraordinary gain	15,258	329


As of	March 31, 2008	September 30, 2008	September 30, 2008
			US $
Advance for application of shares in initial public offering	3,169	-	-
Advance for purchase of property	13,600	10,270	221
Prepaid expenses	18,988	17,853	384
Security deposits paid	22,249	23,940	515
Advance tax, net	48,196	4,955	107
Others	22,806	875,113	18,840
Total	129,008	932,131	20,067

Prepaid expenses primarily include the un-expired portion of annual rentals paid for use of leased telecommunication lines, insurance premiums and bank guarantee charges.

Advance tax primarily includes taxes paid to Indian taxation authorities for income tax and Fringe Benefit tax.

Advances other includes amount paid to Bennet Coleman & Co. for expenses to be incurred in relation to advertisement.


As of	March 31, 2008	September 30, 2008	September 30, 2008 US $
Building	10,320	27,709	597
Equipment	14,387	25,577	551
Furniture and fixture	18,787	31,380	676
Computer hardware	67,287	80,134	1,725
Vehicle	11,768	15,298	329
Trade Mark	-	20	-
Satellite equipment	34,447	35,893	773
Total property and equipment	156,996	216,011	4,651
Less: Accumulated depreciation	59,991	73,010	1,572
Total property and equipment, net	97,005	143,001	3,079

Depreciation expense amounted to Rs.9,933 and Rs. 19,353 for the three and six months ended September 30, 2008 respectively. Depreciation expense amounted to Rs.5,522 and Rs. 11,590 for the three and six months ended September 30, 2007 respectively.

Included in property and equipment are the following assets under capital lease:


As of	March 31, 2008	September 30, 2008	September 30, 2008 US $
Intangible assets subject to amortization
Software	36,857	38,679	832
Customer relationship	7,500	7,500	161
Intangible assets not subject to amortization
Goodwill	1,500	1500	32
Membership in exchanges	500	500	12
Total intangible assets	21,071	48,179	1,037
Less: Accumulated amortization	10,054	28,732	618
Total intangible assets, net	11,017	19,447	419

Amortization expense amounted to Rs. 2,273 and Rs. 6,507 for the three and six months ended September 30, 2008 respectively. Amortization expense amounted to Rs.2,362 and Rs. 4,422 for the three and six months ended September 30, 2007 respectively.

As part of its corporate strategy and in the normal course of its business, the Group makes investments in the equity of companies which are engaged in businesses similar to Group’s core business.

Investments at cost: SMC Global holds 970,000 shares, representing 8.1 % interest in SAM Global Securities Limited (“SAM Global”). The carrying value of the investment at original acquisition cost is Rs 1,959. The Company accounts for its investment in SAM Global at cost. SMC Comtrade holds shares in SMC Share Broker Limited. These investments are accounted for at cost. The market value of the said investment is not readily determinable. Based on a review of the financial statements of SAM and SMC Share Broker Limited, the Group has determined that there is no impairment in the carrying value of the investment.

Investments accounted for by equity method represents investments in Shreya.Com (P) Ltd.

The Group’s debt financing is generally obtained through the use of overdraft facilities from banks. The interest rates on such borrowings reflect market rates of interest at the time of the transactions. The balance of these facilities was Rs. 388,594 and Rs. 748,322 as of March 31, 2008 and September 30, 2008, respectively, at average effective interest rates of 9.8% and 11.02%, respectively. Deposits have been placed by the Group with bankers to secure these debts. These deposits are classified in the balance sheet under “Deposits with clearing organizations and others”.

Book overdrafts were Rs. 238,254 and Rs. 211,896 at March 31, 2008 and September 30, 2008, respectively.

Long term debt outstanding comprises of loans taken against vehicles. The long-term debt was Rs. 2,445 and Rs. 1,805 at March 31, 2008 and September 30, 2008, respectively, at average effective interest rates of 8.3% and 8.3%, respectively. Long-term debt is secured by pledge of vehicles.

As per regulations in India, specified securities transactions are liable for securities transaction tax (“STT”). The securities transactions tax in respect of proprietary trading amounted to Rs. 94,585 and Rs. 184,481 for the three and six months ended September 30, 2008 respectively. The securities transactions tax in respect of proprietary trading amounted to Rs. 58,926and Rs. 98,971 for the three and six months ended September 30, 2007 respectively. . Previously STT had been considered in calculating current tax as a part of advance tax.


As of	March 31, 2008	September 30, 2008	September 30, 2008 US $
Security deposits	27,568	28,160	606
Accrued expenses	38,400	39,646	854
Provision for taxes and stamp duty	-	10,739	231
Provision for gratuity	4,014	5,835	126
Accrued payroll	24,739	28,832	621
Others	30,254	91,193	1,963
Total	124,975	204,405	4,401

Security deposits primarily include deposits taken from sub-brokers for satellite equipment and deposits from employees.

Net gratuity cost for the three months ended September 30, 2007 and 2008 comprises the following components:

The Group has contributed Rs. Nil and Rs. Nil in the three and six months ended September 30, 2008 and expects to contribute approximately Rs. 7,655 to the gratuity trust during the remainder of fiscal 2008.

The Company’s contribution towards the provident fund amounted to Rs. 1,643 and Rs. 2,294 for the three and six months ended September 30, 2008 respectively.

The Company’s contribution towards the provident fund amounted to Rs. 855 and Rs. 1,454 for the three and six months ended September 30, 2007 respectively.

The effective tax rate was 33.99% and 33.99% for the three and six months ended September 30, 2008 respectively. The effective tax rate was 34.7% and 30.3% for the three and six months ended September 30, 2007 respectively.

The Group’s major tax jurisdiction is India. In India, the assessment is not yet completed for the financial year 2007-08 and onwards. The Group continues to recognize interest and penalties related to income tax matters as part of the income tax provision.

The Group has provided its assets as collateral for credit facilities availed from banks and for margin requirements with exchanges. Amounts that the Group has pledged as collateral, which are not reclassified and reported separately, consist of the following:

The fixed deposits are classified in the balance sheet under “Deposits with clearing organizations and others”.

State Bank of Bikaner and Jaipur, one of the bankers to the Group, has created first pari-passu charge over the current assets of SMC Global, as a security for credit facilities provided to the Company.

Canara Bank, one of the bankers to the Group, has created first charge over book debts, outstandings, money receivables, claims, and equitable mortgage on specified office building for credit facilities provided to the Company. The bank also has charge on advances against checks/ drafts of bill of exchange whatever may be the tender thereof drawn, accepted or endorsed by the Company with or without documents such as railway receipts, lorry receipts, air ways bill, post parcel, bill of lading or any other document of title to the goods, invoices, etc.

SMC Global has executed an undertaking in favour of Yes Bank, one of the bankers to the Group, agreeing to continue to maintain more than 26.0% holding in SMC Comtrade.

The following table gives details in respect of percentage of commission income generated from top two, five and ten customers:

The Group has recognized three segments beginning quarter ended June 30, 2008: Capital markets, Commodities and wealth management. The recognition of the segments is made as SMC Comtrade which became wholly owned subsidiary in the quarter ended June 30, 2007 and SMC wealth management which became wholly owned subsidiary in the quarter ended June 30, 2008. Financial statements of SMC Comtrade and SMC Wealth Management are consolidated with the financial statements of the Company beginning this quarter.

SMC Global has certain operating leases for office premises. Rental expenses for operating leases are accounted for on a straight line method. Rental expense amounted to Rs. 14,596 and Rs. 26,126 for the three and six months ended September 30, 2008 respectively. Rental expense amounted to Rs. 2,942 and Rs.5,271 for the three and six months ended September 30, 2007 respectively. There are no non-cancelable lease arrangements.

As of March 31, 2008 and September 30, 2008, guarantees of Rs 1,949,175 and Rs.1,995,000 are provided by various banks to exchange clearing houses for the Group, in the ordinary course of business, as a security for due performance and fulfillment by the Group of its commitments and obligations.

As of March 31, 2008 and September 30, 2008, the Company has provided corporate guarantees of Rs. 290,000 & Rs. 500,000 Respectively to banks for guarantees issued by banks for SAM Global Securities Limited to exchange clearing houses, in the ordinary course of business.

As of March 31, 2008 and Sep 30, 2008, the Company has provided corporate guarantees of Rs. 236,500 and Rs. 450,000 to banks for guarantees issued by banks for SMC Comtrade to exchange clearing houses, in the ordinary course of business.

The initial term of these guarantees is generally for a period of 12 to 15 months. The bankers charge commission as consideration to issue the guarantees. The commission charged generally is in the range of 1.0% to 1.3% of the guarantee amount. The Group recognizes commission expense over the period of the guarantee and classify in the income statement under ‘interest expense’. The unamortized commission expense is included in prepaid expenses and classified in the balance sheet under “other assets”. The potential requirement for the Group to make payments under these agreements is remote. Thus, no liability has been recognized for these transactions. The fair value of the guarantees is considered to be insignificant given the risk of loss on such guarantees at the date of its inception and, therefore, no amount was recognized towards fair value of guarantees given in the financial statements on the inception date.

The Group is involved, from time to time, in investigations and proceedings by governmental and regulatory agencies, certain of which may result in adverse judgments, fines or penalties. Factors considered by management in estimating the Group’s reserves for these matters are the merits of the claims, the total cost of defending the litigation, the likelihood of a successful defense against the claims, and the potential for fines and penalties from regulatory agencies. The Group is carrying reserves of Rs. 10,000 for potential losses to the extent that such matters are probable and can be estimated, in accordance with SFAS 5, “Accounting for Contingencies.” As litigation and the resolution of regulatory matters are inherently unpredictable, the Group cannot predict with certainty the ultimate loss or range of loss related to matters where there is only a reasonable possibility that a loss may be incurred. The Group believes, based on current knowledge and after consultation with legal counsel, that the resolution of loss contingencies will not have a material adverse effect on the financial statements of the Group.

SEBI has alleged irregularities in sub-broker operations and directed to review the Company to review systems and procedures and confirm to SEBI that all the operations are within the framework of SEBI regulations, rules and guidelines.

The Company has responded to SEBI that it has carried out comprehensive review of all systems and procedures and has ensured that the same are in compliance with all the SEBI Act, Rules and Regulations as well as directives and guidelines of SEBI.

Further, SEBI vide their SCN dated 25/06/2008 under Rule 4, appointed an adjudication officer, to adjudicate the matter. The Company has intimated to the Adjudicating Officer vide our letter dated 8^th July 2008 that we wish to avail consent order and has filed the application of consent on 1^st September, 2008. The terms of consent proposes abatement of proceedings against the Company on payment of specified monetary amount.

SEBI appointed an adjudicating officer to inquire into and adjudge under SEBI Act and Regulations. SEBI has alleged that SMC Global executed structured trades in the scrip of Jubilant Organosys Limited (“JOL”) in collusion with a group of brokers during the year 2003 and thereby violated Regulations. SEBI has alleged that failure on the part of the Company to comply with the said provisions makes the Company liable to the penalty under SEBI Act. SEBI in its SCN has asked the Company to show cause as to why an inquiry should not be held against the Company.

The Company has filed a reply with SEBI in response to the SCN, denying having done any possible structured deals. The Company has submitted that the trades in JOL scrip were executed in the normal and usual course of business through the systems of exchange and no off market deals were done in the scrip. No response has been received from SEBI in this regard and the matter is pending with SEBI.

The Company has filed an application for consent before the Securities and Exchange Board of India on February 13, 2008. The terms of consent proposes abatement of proceedings against the Company on payment of specified monetary amount.

SEBI order on June 18, 2007 in the matter of dealings in futures and options contracts on the NSE

SEBI has alleged in the order that certain entities and brokers have indulged in non genuine trade transactions and have created false and misleading appearance of trading on the derivatives market during January to March 2007. SMC Global has been named as one of brokers in the order. The order is an ad interim, ex-parte order and the Company has a right to file its objections. The Company submitted its response in July 2007, denying the allegations. In October 2007, SEBI issued a SCN as to why an inquiry should not be held against the Company.

The Company has filed an application for consent before the Securities and Exchange Board of India on November 12, 2007. The terms of consent proposes abatement of proceedings against the Company on payment of specified monetary amount.

SEBI has alleged certain irregularities pursuant to inspection report for the period April 2002 to

March 2004. SEBI in its SCN has asked the company to show cause as to why an inquiry should not be held against the Company.

The Company has filed an application for consent before the Securities and Exchange Board of India on November 23, 2007. In April 2008, the Company paid Rs. 500 under the terms of consent to SEBI. SEBI issued the consent order in April 2008, disposing the adjudication proceedings without admitting or denying guilt by the Company and subject to the clauses of the undertakings and the waivers.

SEBI appointed an adjudicating officer to inquire into and adjudge under SEBI Act and Regulations. SEBI has alleged that during the period February 1, 2005 to March 31, 2005, SMC Global executed non genuine transactions in collusion with certain clients and brokers in the future and options segment of NSE. SEBI has alleged that failure on the part of the Company to comply with the said provisions makes the Company liable to the penalty under SEBI Act. SEBI in its SCN has asked the Company to show cause as to why an inquiry should not be held against the Company.

The Company has filed an application for consent before the SEBI on May 1, 2008. The terms of consent proposes abatement of proceedings against the Company on payment of specified monetary amount.

Another SCN dated May 15, 2008 was received by the Company, containing similar allegations as stated above for the period March 1, 2004 to March 31, 2004. The Company has filed an application for consent before the SEBI on Aug 4,2008 . The terms of consent proposes abatement of proceedings against the Company on payment of specified monetary amount.

The Board of Directors of the Company passed a resolution on April 18, 2008 for the amalgamation of SAM Global Securities Limited (“SAM”) with SMC Global Securities Limited (“SMC”). The Board of Directors of SAM also approved the resolution of amalgamation.

Under the scheme of amalgamation prepared under sections 391 and 394 and other applicable provisions of the Companies Act in India, the shareholders of SAM will receive one equity share of the face value of Rs. 10 each of SMC for every six fully paid up shares of SAM. The scheme will require approval of shareholders/creditors of companies, stock exchanges where the shares of SMC and SAM are listed, Securities and Exchange Board of India and other regulatory authorities. Under the Companies Act in India, the scheme will require the consent of High Court of Delhi in order to be effective.


(Rs. in thousands)	Common Stock		Additional Paid in Capital	Retained earnings	Accumulated other comprehensive income / (loss)	Total
(Rs. in thousands)	Shares	Par value			Accumulated other comprehensive income / (loss)	Total
Balance as of March 31, 2007	7,505,100	75,051	43,500	468,867	-	587,418
Net income for the period	-	-	-	260,458	121	260,579
Balance as of September 30, 2007	7,505,100	75,051	43,500	729,325	121	847,997
Balance as of September 30, 2007 Convenience translation into US$		1,888	1,094	18,348	3	21,333


(Rs. in thousands)	Common Stock		Additional Paid in Capital	Retained earnings	Accumulated other comprehensive income / (loss)	Minority	Total
(Rs. in thousands)	Shares	Par value			Accumulated other comprehensive income / (loss)	Interest	Total
Balance as of March 31, 2008	8,803,500	88,035	1,371,543	832,477	(221)	-	2,291,834
Issue of common share	188,646	1,886	635,944	-	-	-	637,830
Balances as on March31,2008 of Wealth , Smc capital & Moneywise	-	-	-	99,809	-	-	99,809
Adjustment on account of acquisition	-	-	-	(227,982)	-	-	(227,982)
Exchange Fluctuation	-	-	-	(563)	-	-	(563)
Share premium received during the period	-	-	-	153,000	-	-	153,000
Extra ordinary gain	-	-	-	45,514	-	-	45,514
Net income for the period	-	-	-	(53,881)	1,774	36,739	(15,368)
Balance as of September 30, 2008	8,992,146	89,921	2,007,487	848,374	1,553	36,739	2,984,074
Balance as of September 30, 2008 Convenience translation into US$		1,936	43,218	18,264	33	791	64,242


As of	March 31, 2008	September 30, 2007	September 30, 2007 US $
Investments accounted for by equity method	4,997	20,620	444
Investments carried at cost	12,377	30,579	658
Total	17,374	51,199	1,102


Quarter ended September 30,	2007	2008	2008 US $
Gross distribution revenue	91,597	28,036	604
Less: Distribution revenues attributable to sub-brokers	74,140	15,446	333
Net distribution income	17,457	12,590	271


Six months ended September 30,	2007	2008	2008 US $
Gross distribution revenue	126,788	61,840	1,331
Less: Distribution revenues attributable to sub-brokers	104,440	37,960	817
Net distribution income	22,348	23,880	514


Quarter ended September 30, (in %)	2007	2008
Revenue from top two customers	8.9	6.11
Revenue from top five customers	14.6	9.29
Revenue from top ten customers	20.5	12.92


Six months ended September 30, (in %)	2007	2008
Revenue from top two customers	10.5	5.58
Revenue from top five customers	16.1	8.39
Revenue from top ten customers	21.4	11.96


	Capital and derivatives markets	Commodities	Wealth Management	NBFC Services	Merchant Banking	Total	US $
Revenue from external customer	338,949	43,333	33	(37,853)	10,092	354,554	7,633
Earnings after taxes	18,196	(22,166)	(12,167)	(22,329)	31,948	(6,518)	(140)
Total assets	4,877,265	965,581	42,849	375,848	62,558	6,324,101	136,149


Quarter ended	September 30, 2007
	Capital and derivatives markets	Commodities	Total	US $
Revenue from external customer	281,537	62,483	344,020	8,654
Earnings after taxes	85,959	17,739	103,698	2,609
Total assets	2,793,584	684,447	3,478,031	87,497


Six months ended	September 30, 2007
	Capital and derivatives markets	Commodities	Total	US $
Revenue from external customer	465,303	133,368	598,671	15,061
Earnings after taxes	130,798	60,188	190,986	4,804
Total assets	2,793,584	684,447	3,478,031	87,497