FORTUNE FINANCIAL SERVICES (INDIA) LIMITED ANNUAL REPORT 2008-2009 CHAIRMAN'S REPORT Dear Shareholders, I feel privileged to address you once again in a year full of shocking events for the global as well as Indian bourses and your Company performed well under the exceptionally challenging environment. Circumstances have changed drastically since my last interaction with you. India shining story which we observed for last five years has hit a sudden roadblock this year, signs of which were apparent from the start of this financial year. Sensex, after hitting a crest of 21,200 on January 10, 2008 has reversed its direction and started its one sided downward journey during the year. The financial year 2009 was characterised by very high level of volatility on Indian Bourses amidst increasing global uncertainty. Though seeds of this fall were sown during previous financial year itself with surfacing of sub-prime crisis in US, things became grave after fall of US financial giant Lehman Brothers in October 2008 followed by the failure of a number of other financial firms across globe. Shock and panic waves ran across the globe. Suddenly risk aversion became the theme and emerging markets had to bear the brunt. Bell weather Sensex lost more than 4,000 points during October 2008 and never seemed to recover since then. Decoupling theory which we have been talking suddenly looked like a theoretical fallacy. It indeed was. In spite of all our glorious growth numbers, it is money which keeps market growing. FIIs pumped in USD 28.30bn during previous 3 years (FY06-08). Hit by redemption pressure and security concerns, they withdrew USD 11.96 bn from Indian Market during FY08-09. Initial half of last financial year, our domestic institutions tried to support the market but failure of global financial firms created panic like situation and domestic institutions also joined FIIs in selling Indian market. US sub-prime is half the story. Even corporate numbers were not supporting those in exorbitant multiples. One side corporate top-line took a hit from reduced demand; bottom-line was hit because of very high commodity prices during first half of the financial year. Making matter worse was adverse exchange rate movement and speculative derivative position created by Indian corporate which further dented the bottom-line. Since November IIP numbers have turned negative. Exports are dwindling and Capital Account turned negative for the first time during Q3 FY09 after a gap of 10 years. During FY09 we managed to log a GDP growth of 6.7%. Though there has been improvement in sentiment across investor community post election results and FIIs have pumped massive USD 5.5bn between March 09 and May 09 we are not out of woods yet. KEY HIGHLIGHTS: Following are the key highlights of the year; * Increased branch and franchisee network to 106 from previous 49; * Combined staff strength has grown to 332 from 243 during previous year; * Insurance distribution and NBFC , the new business verticals launched during the year; * 73% increase in number of clients in capital market and 189% in commodity market segment over the previous year. Most prominent part of our growth strategy is focus on in-house research to cater to different segments of clients and meet their rising expectations. We sincerely believe in-house research is not only an essential part of business requirement it also gives control over quality of input and relative advantage in this intense business environment. We expanded our research team with highly qualified people having robust experience in the market. FINANCIAL PERFORMANCE: In line with broad market consolidated turnover went down by 19% to Rs.3,999.66 lacs compared to previous year consolidated turnover of Rs.4,666.31 lacs. The company has incurred net loss of Rs.65.06 lacs during the year compared to Net Profit of Rs.1,655.36 lacs in the previous year. Depressed market along with business expansion initiatives have led to depressed financials. The networth of the company increased to Rs.8,223.31 lacs from Rs.5,926.25 lacs in FY08 due to issue of additional equity. ROAD AHEAD: Rising unemployment and lowered economic activity has taken a toll on secondary market volumes while risk aversion by banks and financial institutions has led to reduced activity in the primary market. This has impacted both investment banking and equity broking business adversely. Depressed market has adverse bearing on insurance distribution business as well. There has been marked improvement in secondary market activity after thumping victory of new government, still sentiment is cautious. Additional liquidity pumping by global central banks are trying to defer the pain but it cannot be avoided for long. We will have to gear up to take these challenges head on by collective team work, optimum resource utilisation and cost control measures. I express my sincere gratitude to you for showing trust in us during these difficult times and seek constant patronage. J.T. Poonja Place: Mumbai Chairman Date : May 23, 2009