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Directors Report of Moschip Semiconductor Technology Ltd.

Mar 31, 2014

To the Members,

The Directors have pleasure in presenting the Fifteenth Annual Report together with the Audited Accounts (including consolidated accounts) of the Company for the year ended 31st March 2014.

Financial Results

(Rs. In Lakhs)

Year ended 31 March 2014 Year ended 31 March 2013

Standalone Consolidated Standalone Consolidated

Total Income 705.29 770.78 1227.45 983.90

Operating Profit before Depreciation & Tax (635.09) (857.25) 72.72 757.96

Less: Depreciation 36.07 36.48 56.20 56.94

Profit before Tax (671.15) (893.73) (128.92) (814.91)

Less: provision for Tax 0 0 0 0

Profit after Tax before extraordinary and prior period item (671.15) (893.73) (128.92) (814.91)

Less: Extraordinary and prior period item 86.13 86.13 623.62 623.62

Profit after tax after extraordinary and prior period item (757.28) (979.86) (752.54) (1438.53)

Earnings per Share (EPS) Before extraordinary and prior period item

Basic (1.46) (1.94) (0.28) (1.77)

Diluted (1.46) (1.94) (0.28) (1.77)

After extraordinary and prior period item

Basic (1.65) (2.13) (1.63) (3.12)

Diluted (1.65) (2.13) (1.63) (3.12)

Operations

The consolidated income of the Company was Rs.7.71 Crores and the consolidated loss was Rs.9.79 Crores.

MosChip India

After selling I/O division MosChip has SOC (System On a Chip) line which is fairly new and has promise to increase revenues and needs some investment. This money could be spent on the SOC line and focus on this product line to increase the revenues. With the increase in Design Services opportunities worldwide, MosChip decided to add another division to branch into Semiconductor Design Services.

Subsidiaries

MosChip Semiconductor Technology, USA

MosChip Semiconductor Technology, USA (MosChip

USA) the wholly owned subsidiary has recorded revenue of USD 271,307.

MosChip Semiconductor Technology Pte. Ltd., Singapore

MosChip Semiconductor Technology Pte. Ltd., Singapore (MosChip, Singapore) the wholly owned subsidiary has been closed during the year.

Dividend

The company has not declared any dividend during the year under review.

Increase in Share Capital

The Company has only one class of shares. The Company has not allotted any shares during the year under review. The total paid-up equity share capital of the company is Rs.460,355,170 as on 31 March 2014.

Marketing and distribution

The company has transformed into value added services and has made steady inroads into very large Tier-1 customers including domestic customers. The Company has bagged a very complex custom System on a Chip (SOC) from a domestic customer despite stiff competition from the leading service providers. This chip is to be fabricated using the state of the art 40nm Low Power CMOS technology. The Company is continuing to look for some critical joint ventures and pursuing these vigorously.

Employee Stock Option Plan

During the year under report the company has eight schemes in operation as mentioned below, for granting stock options to the employees and directors of the company and its wholly owned subsidiary in accordance with Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999.

(a) MosChip Stock Option Plan - 2001

(b) MosChip Stock Option Plan - 2002

(c) MosChip Stock Option Plan - 2004

(d) MosChip Stock Option Plan - 2005(MI)

(e) MosChip Stock Option Plan - 2005(WOS)

(f) MosChip Stock Option Plan - 2008

(g) MosChip Stock Option Plan - 2008(ALR)

(h) MosChip Stock Option Plan - 2008(Director)

Disclosures pursuant to para 12 of the above referred SEBI guidelines are set out as Annexure - A, to this report.

Fixed Deposits

The company has not accepted any fixed deposits in terms of Section 58A of the Companies Act, 1956 from the public.

Directors

In terms of Articles of Association of the company Mr. C. Dayakar Reddy, Director retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

In view of the provisions of Companies Act, 2013 and the Rules made thereunder, the Board Proposes the candidature of Mr. G. Prasad, Dr. Vijaya Chandru, Mr. K.V. Ramana and Ms. Poornima Shenoy for being appointed as Independent Directors.

Mr. Vivek Bhargava resigned from the Board on 02

December 2013. The Board expresses its appreciation of the valuable contribution made by him during the tenure of his directorship.

Auditors

The Auditors of the company M/s Gokhale & Co., Chartered Accountants, hold office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment till the conclusion of 18th Annual General Meeting of the company subject to ratification at each Annual General Meeting during the intervening period.

The Company has received letters from them to the effect that their re-appointment, if made would be within the prescribed limits under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for re-appointment.

The Notes on Financial Statements referred to in the Auditors Report are self-explanatory and do not call for any further comments.

Conservation of energy, research and development, technology absorption, foreign exchange earnings and outgo

The particulars as prescribed pursuant to Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988, as amended from time to time, are set out as Annexure- B to this report.

Particulars of Employees

There are no employees in terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of employees) Rules, 1975.

Management Discussion & Analysis

Pursuant to the provisions of Clause 49 of the Listing Agreement, a report on Management Discussion & Analysis is set out as Annexure - C to this report.

Directors'' Responsibility statement as per Section 217 (2AA) of the Companies Act, 1956

The Board of Directors of MosChip states that:

a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b. they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 2013-14 and of the loss of the company for that period;

c. they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

d. the annual accounts were prepared on the basis of a going concern.

Corporate Governance

Pursuant to the provisions of Clause 49 of the Listing Agreement and Section 292A of the Companies Act 1956, a Report on the Corporate Governance, which, inter alia, includes the composition and constitution of audit committee, is featuring as a part of Annual Report. Your company will continue to adhere in letter and spirit to the good corporate governance policies.

Acknowledgements

Your Directors thank the company''s bankers, investors and vendors for their unstinted support during the year. Your Directors also appreciate the contribution made by the employees at all levels, who through their hard work, perseverance and competence, are taking the company in the right direction.

Your directors also thank the Government of India, particularly the Customs and Excise Departments, Software Technology Park - Hyderabad, Department of Industrial Policy & Promotion under the Ministry of Commerce & Industry, Department of Company Affairs, Reserve Bank of India, Department of Telecommunications and all other agencies for their support, and wish their continued support in future.

For and on behalf of the Board of Directors

K. Ramachandra Reddy

08 August 2014 Chairman & CEO


Mar 31, 2013

To the Members,

The Directors have pleasure in presenting the Fourteenth Annual Report together with the Audited Accounts (including consolidated accounts) of the Company for the year ended 31st March 2013.



Financial Results (Rs. In Lakhs)

Year ended 31 March 2013 Year ended 31 March 2012

Standalone Consolidated Standalone Consolidated

Total Income 1227.45 983.90 1777.70 3596.34

Operating Profit before Depreciation & Tax 72.72 (744.24) 293.63 1969.34

Less: Depreciation 56.20 56.94 56.43 190.74

Profit before Tax (128.92) (814.91) 237.20 1778.60

Less: provision for Tax 0 0 0 42.81

Profit after Tax before extraordinary and prior period item (128.92) (814.91) 237.20 1735.79

Less: Extraordinary and prior period item 623.62 623.62 3036.47 3036.47

Profit after tax after extraordinary and prior period item (752.54) (1438.53) (2799.27 (1300.68)

Earnings per Share (EPS)

Before extraordinary and prior period item Basic (0.28) (1.77) (0.46) (0.60)

Diluted (0.28) (1.77) (0.46) (0.60) After extraordinary and prior period item

Basic (1.63) (3.12) (6.08) (2.83)

Diluted (1.63) (3.12) (6.08) (2.83)



Operations

The consolidated income of the Company was Rs.9.84 Crores and the consolidated loss was Rs. 14.39 Crores.

MosChip India

After selling I/O division MosChip has SOC (System On a Chip) line which is fairly new and has promise to increase revenues and needs some investment. This money could be spent on the SOC line and focus on this product line to increase the revenues. With the increase in Design Services opportunities worldwide, MosChip decided to add another division to branch into Semiconductor Design Services.

Subsidiaries

MosChip Semiconductor Technology, USA

MosChip Semiconductor Technology, USA (MosChip USA) the wholly owned subsidiary has recorded revenue of USD 623,293.

MosChip Semiconductor Technology Pte. Ltd., Singapore

MosChip Semiconductor Technology Pte. Ltd., Singapore (MosChip, Singapore) the wholly owned subsidiary has recorded revenue of SGD 87,550.

Dividend

The company has not declared any dividend during the year under review.

Increase in Share Capital

The Company has only one class of shares. The Company has not allotted any shares during the year under review. The total paid-up equity share capital of the company is Rs. 460,355,170 as on 31 March 2013.

Marketing and distribution

The company has transformed into value added services and has made steady inroads into very large Tier-1 customers including domestic customers. The Company has bagged a very complex custom System on a Chip (SOC) from a domestic customer despite stiff competition from the leading service providers. This chip is to be fabricated using the state of the art 40nm Low Power CMOS technology. The Company is continuing to look for some critical joint ventures and pursuing these vigorously.

Employee Stock Option Plan

During the year under report the company has eight schemes in operation as mentioned below, for granting stock options to the employees and directors of the company and its wholly owned subsidiary in accordance with Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999.

(a) MosChip Stock Option Plan – 2001

(b) MosChip Stock Option Plan – 2002

(c) MosChip Stock Option Plan – 2004

(d) MosChip Stock Option Plan – 2005(MI)

(e) MosChip Stock Option Plan – 2005(WOS)

(f) MosChip Stock Option Plan – 2008

(g) MosChip Stock Option Plan – 2008(ALR) (h) MosChip Stock Option Plan – 2008(Director) Disclosures pursuant to para 12 of the above referred SEBI guidelines are set out as Annexure – A, to this report.

Fixed Deposits

The company has not accepted any fixed deposits in terms of Section 58A of the Companies Act, 1956 from the public.

Directors

Pursuant to the provisions of Article 133 of the Articles of Association of the company, Dr. Vijay Chandru and Mr. Vivek Bhargava retires by rotation in the ensuing Annual General Meeting and being eligible, offers themselves for re-appointment. Mr. G. Venkatesh resigned from the Board on 15 March 2013. The Board expresses its appreciation of the valuable contribution made by Mr. G. Venkatesh during the tenure of his directorship. Dr. Madhu Mohan Katikineni resigned from the Board on 14 August 2013. The Board expresses its appreciation of the valuable contribution made by Dr. Madhu Mohan Katikineni during the tenure of his directorship.

Auditors

The Auditors of the company M/s Gokhale & Co., Chartered Accountants (ICAI Reg. No. 000942S), who retire at the ensuing Annual General Meeting of the company, are eligible for reappointment as Statutory Auditors of the company till the next Annual General Meeting. The company has received their willingness for re-appointment as auditors of the company and as required has furnished a Certificate under Section 224 (1B) of the Companies Act, 1956.

Conservation of energy, research and development, technology absorption, foreign exchange earnings and outgo

The particulars as prescribed pursuant to Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988, as amended from time to time, are set out as Annexure – B to this report. Particulars of Employees

There are no employees in terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of employees) Rules, 1975.

Management Discussion & Analysis

Pursuant to the provisions of Clause 49 of the Listing Agreement, a report on Management Discussion & Analysis is set out as Annexure – C to this report. Directors'' Responsibility statement as per Section 217 (2AA) of the Companies Act, 1956

The Board of Directors of MosChip states that:

a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b. they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 2012-13 and of the loss of the company for that period;

c. they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

d. the annual accounts were prepared on the basis of a going concern.

Corporate Governance

Pursuant to the provisions of Clause 49 of the Listing Agreement and Section 292A of the Companies Act 1956, a Report on the Corporate Governance, which, inter alia, includes the composition and constitution of audit committee, is featuring as a part of Annual Report. Your company will continue to adhere in letter and spirit to the good corporate governance policies.

Acknowledgements

Your Directors thank the company''s bankers, investors and vendors for their unstinted support during the year. Your Directors also appreciate the contribution made by the employees at all levels, who through their hard work, perseverance and competence, are taking the company in the right direction.

Your directors also thank the Government of India, particularly the Customs and Excise Departments, Software Technology Park – Hyderabad, Department of Industrial Policy & Promotion under the Ministry of Commerce & Industry, Department of Company Affairs, Reserve Bank of India, Department of Telecommunications and all other agencies for their support, and wish their continued support in future. For and on behalf of the Board of Directors

K. Ramachandra Reddy 26 August 2013 Chairman & CEO


Mar 31, 2012

The Directors have pleasure in presenting the Thirteenth Annual Report together with the Audited Accounts (including consolidated accounts) of the Company for the year ended 31st March 2012.

Financial Results

(Rs. In Lakhs)

Year ended 31 March 2012 Year ended 31 March 2011 Standalone Consolidated Standalone Consolidated

Total Income 1777.70 3596.34 2484.33 2708.44

Operating Profit before Depreciation & Tax 293.63 1969.34 13.23 (467.65)

Less: Depreciation 56.43 190.74 83.01 486.14

Profit before Tax 237.20 1778.60 (69.78) (953.79)

Less: Provision for Tax 0 42.81 0 0

Profit after Tax before extraordinary and prior period item 237.20 1735.79 (69.78) (953.79)

Less: Extraordinary and prior period item 3036.47 3036.47 1.47 4.15

Profit after tax after extraordinary and prior period item (2799.27) (1300.68) (71.26) (957.94)

Earnings per Share (EPS)

Before extraordinary and prior period item

Basic (0.46) (0.60) (0.15) (2.08)

Diluted (0.46) (0.60) (0.15) (2.08)

After extraordinary and prior period item

Basic (6.08) (2.83) (0.15) (2.08)

Diluted (6.08) (2.83) (0.15) (2.08)

Operations

The consolidated income of the Company was Rs.35.96 Crores and the consolidated loss was Rs.13.01 Crores.

MosChip India

MosChip had very matured I/O product line and had been recording about $5M in revenues annually without much growth. The division was sold to ASIX Electronics Corporation, a listed company in Taiwan, at a consolidated amount of $7M and the inventory at cost. MosChip's SOC (System On a Chip) line is fairly new and has a potential to increase revenues much more than the I/O line but will require additional investment for marketing/sales. The Company is leveraging its SOC design/development experience to go after Value added services such as Custom ASIC development. With the increase in Design Services opportunities world wide, MosChip has incorporated an office in Singapore to address the regional markets, MosChip decided to add another division to branch into Semiconductor Design Services. MosChip will focus on the SOC products and the Design Services.

Subsidiaries

MosChip Semiconductor Technology, USA

MosChip Semiconductor Technology, USA (MosChip USA) the wholly owned subsidiary has recorded revenue of USD 7.03 million.

MosChip Semiconductor Technology Pte. Ltd., Singapore

MosChip Semiconductor Technology Pte. Ltd., Singapore (MosChip, Singapore) the wholly owned subsidiary was incorporated during the financial year 2011-12. The Company started generating revenues in the financial year 2012-13.

Dividend

The Company has not declared any dividend during the year under review.

Increase in Share Capital

The Company has only one class of shares. The Company has not allotted any shares during the year under review. The total paid-up equity share capital of the company is Rs.460,355,170 as on 31 March 2012.

Marketing and distribution

The sale of products developed by the Company is handled by MosChip USA, through its worldwide marketing and distribution networks. The distribution network has enabled a strong presence in China and North America. With the focus in marketing and our experience in SOC line, Company is looking to do few Joint Ventures with large Corporations worldwide to decrease capital outlay but increase revenues by supplying the custom silicon to these corporations utilizing the wealth of technical expertise that the Company has accrued over the 11 years.

MosChip's sales and marketing team focuses on end customers in the US & Asia Pacific regions as these areas are the most sophisticated to adopt new technologies quickly with a large base of companies developing complex SOCs. The Company continues to work with distributors, third party sales and marketing organizations and also with potential end customers to define the appropriate requirements for the products under development. These requirements will include technical specifications, timing of product availability and price points. The sales and marketing channels are initially customer and engineering centric in order to facilitate the development of the system-level components with the greatest market demand.

Employee Stock Option Plan

During the year under report the company has eight schemes in operation as mentioned below, for granting stock options to the employees and directors of the company and its wholly owned subsidiary in accordance with Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999.

(a) MosChip Stock Option Plan - 2001

(b) MosChip Stock Option Plan - 2002

(c) MosChip Stock Option Plan - 2004

(d) MosChip Stock Option Plan - 2005(MI)

(e) MosChip Stock Option Plan - 2005(WOS)

(f) MosChip Stock Option Plan - 2008

(g) MosChip Stock Option Plan - 2008(ALR)

(h) MosChip Stock Option Plan - 2008(Director)

Disclosures pursuant to para 12 of the above referred SEBI guidelines are set out as Annexure - A, to this report.

Fixed Deposits

The company has not accepted any fixed deposits in terms of Section 58A of the Companies Act, 1956 from the public.

Directors

Pursuant to the provisions of Article 133 of the Articles of Association of the company, Mr. G. Prasad and Mr. Vivek Bhargava retire by rotation in the ensuing Annual General Meeting and being eligible, offers themselves for re-appointment.

Mr. G. Venkatesh was appointed as Additional Director of the Company effective 21 May 2012 to hold office up to the date of Thirteenth Annual General Meeting.

The office of Mr. G. Venkatesh as Additional Director of the Company expires at the ensuing Annual General Meeting. The Company has received notice from a member along with Rs.500 as deposit, proposing his candidature, in accordance with the provisions of Section 257 of the Companies Act, 1956.

Mr. A. Ramesh resigned from the Board on 14 October 2011. The Board expresses its appreciation of the valuable contribution made by Mr. A. Ramesh during the tenure of his directorship.

The Board on the recommendation of Remuneration Committee has re-appointed Mr. K. Ramachandra Reddy as Chairman and CEO of the Company for a period of 3 years from 01 September 2012 and the resolutions for approval of his re-appointment and the terms of re-appointment have been included in the notice convening the Thirteenth Annual General Meeting of the Company.

The Board on the recommendation of Remuneration Committee has re-appointed Mr. C. Dayakar Reddy as managing Director of the Company for a period of 3 years from 01 September 2012 and the resolutions for approval of his re-appointment and the terms of re-appointment have been included in the notice convening the Thirteenth Annual General Meeting of the Company.

Pursuant to the provisions of Clause 49 of the Listing Agreement entered with BSE, brief particulars of these directors are provided as an annexure to Notice convening Annual General Meeting.

Auditors

The Auditors of the company M/s Gokhale & Co., Chartered Accountants, who retire at the ensuing Annual General Meeting of the company, are eligible for reappointment as Statutory Auditors of the company till the next Annual General Meeting. The company has received their willingness for re- appointment as auditors of the company and as required has furnished a Certificate under Section 224 (1B) of the Companies Act, 1956.

Conservation of energy, research and development, technology absorption, foreign exchange earnings and outgo

The particulars as prescribed pursuant to Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988, as amended from time to time, are set out as Annexure - B to this report.

Particulars of Employees

There are no employees in terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of employees) Rules, 1975.

Management Discussion & Analysis

Pursuant to the provisions of Clause 49 of the Listing Agreement, a report on Management Discussion & Analysis is set out as Annexure - C to this report.

Directors' Responsibility statement as per Section 217 (2AA) of the Companies Act, 1956

The Board of Directors of MosChip states that:

a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 2011-12 and of the loss of the company for that period;

c) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

d) the annual accounts were prepared on the basis of a going concern.

Corporate Governance

Pursuant to the provisions of Clause 49 of the Listing Agreement and Section 292A of the Companies Act 1956, a Report on the Corporate Governance, which, inter alia, includes the composition and constitution of audit committee, is featuring as a part of Annual Report. Your company will continue to adhere in letter and spirit to the good corporate governance policies.

Acknowledgements

Your Directors thank the company's bankers, investors and vendors for their unstinted support during the year. Your Directors also appreciate the contribution made by the employees at all levels, who through their hard work, perseverance and competence, are taking the company in the right direction.

Your directors also thank the Government of India, particularly the Customs and Excise Departments, Software Technology Park - Hyderabad, Department of Industrial Policy & Promotion under the Ministry of Commerce & Industry, Department of Company Affairs, Reserve Bank of India, Department of Telecommunications and all other agencies for their support, and wish their continued support in future.

For and on behalf of the Board of Directors

K. Ramachandra Reddy

25 August 2012 Chairman & CEO


Mar 31, 2010

The Directors have pleasure in presenting the Eleventh Annual Report together with the Audited Accounts (including consolidated accounts) of the Company for the year ended 31st March 2010.

FINANCIAL RESULTS (Rs. in Lakhs)

Year ended 31 March 2010 Year ended 31 March 2009

Standalone Consolidated Standalone Consolidated

Total Income 1707.00 2570.44 1054.29 2750.70

Operating Profit before Deprecia tion & Tax (615.73) (783.44) (698.29) (1089.88)

Less: Depreciation 115.39 496.85 114.28 438.37

Profit before Tax (731.12) (1280.29) (813.01) (1528.25)

Less: provision for FBT 0 0 3.80 3.80

Profit after Tax before extraord inary and (731.12) (1280.29) (816.81) (1532.05) prior period item

Less: Extraordi nary and prior period item (2.01) (40.86) (0.06) (0.06)

Profit after tax after extraor dinary and (733.13) (1321.15) (816.75) (1531.99)

prior period item Earnings per Share (EPS) Before extrao rdinary and prior period item Basic (1.66) (2.98) (1.88) (3.53)

Diluted (1.66) (2.98) (1.88) (3.53)

After extraordinary and prior period item

Basic (1.66) (2.99) (1.88) (3.53)

Diluted (1.66) (2.99) (1.88) (3.53)



Operations

The consolidated income of the Company was Rs.25.70 Crores and the consolidated loss was Rs. 13.21 Crores.

MosChip India

The Companys products, which were launched during the last year, are ramping up in volume production and have started generating income during the year under review.

MosChip USA, a wholly owned subsidiary

MosChip Semiconductor Technology, USA (MosChip USA) the wholly owned subsidiary has recorded revenue of USD 5.41 million.

Dividend

The Company has not declared any dividend during the year under review.

Increase in Share Capital

The Company has made a preferential allotment of 26,50,000 equity shares at Rs. 12.50/- per share to three (3) investors on 30 September 2009.

In view of the above allotment, the total outstanding paid-up equity share capital of the Company has increased from 4,33,85,517 equity shares from the previous year 2008-09 to 4,60,35,517 equity shares as on date.

Marketing and distribution

The sale of products developed by the Company is handled by MosChip USA, through its worldwide marketing and distribution networks. The Company has signed up new distributors in Asia and representatives in the North America during the last year. This distribution network is enabling a stronger presence in China and North America. In addition, the Company is also ramping up its Field Application Resources. The launch of 2 significant chips in

MCS8142/44 and MCS9990 is seeing a lot of design activity in several vertical market segments and a few customers have begun to ramp up the production. The major activity is in the consumer and SOHO markets. The company has not made any major investments into the marketing and sales due to the global economic islowdown most of last year.

MosChips sales and marketing team focuses on end customers in the US & Asia Pacific regions as these areas are the most sophisticated to adopt new technologies quickly. The Company continues to work with distributors, third party sales and marketing organizations and also with potential end customers to define the appropriate requirements for the products under development. These requirements will include technical specifications, timing of product availability and price points. The sales and marketing channels are initially customer and engineering centric in order to facilitate the development of the system-level components with the greatest market demand.

Employee Stock Option Plan

During the year under report the Company has eight schemes in operation as mentioned below, for granting stock options to the employees, directors and employees of its wholly owned subsidiary in accordance with Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999.

(a) MosChip Stock Option Plan - 2001

(b) MosChip Stock Option Plan - 2002

(c) MosChip Stock Option Plan - 2004

(d) MosChip Stock Option Plan - 2005(MI)

(e) MosChip Stock Option Plan - 2005(WOS)

(f) MosChip Stock Option Plan - 2008

(g) MosChip Stock Option Plan - 2008(ALR)

(h) MosChip Stock Option Plan - 2008(Director)

Disclosures pursuant to para 12 of the above referred SEBI guidelines are set out as Annexure – A to this report.

Fixed Deposits

The Company has not accepted any fixed deposits in terms of Section 58A of the Companies Act, 1956 from the public.

Directors

Pursuant to the provisions of Article 133 of the Articles of Association of the Company, Mr. G. Prasad, Director retires by rotation in the ensuing Annual General Meeting and being eligible, offers himself for re- appointment. Pursuant to the provisions of Clause 49 of the Listing Agreement entered with BSE, brief particular of the director is provided as an annexure to Notice convening Annual General Meeting.

Auditors

The Auditors of the Company M/s Gokhale & Co., Chartered Accountants, who retire at the ensuing Annual General Meeting of the Company, are eligible for reappointment as Statutory Auditors of the Company till the next Annual General Meeting. The Company has received their willingness for re- appointment as auditors of the company and as required has furnished a Certificate under Section 224 (1B) of the Companies Act, 1956.

Qualification on the accounts and Boards Clarification

Pursuant to the provisions of sub-section (3) of Section 217 of Companies Act, 1956, qualification of auditors in their report dated 14 May 2010 on the accounts of the Company and Boards clarification on the same are furnished below:

Qualification in Auditors Report

In the Balance Sheet, an amount of Rs 375,579,087/- is being reflected as investment made by the Company in its wholly owned unlisted subsidiary company MosChip Semiconductor Technology, USA (formerly NetMos Technology Inc, USA). The investment is being carried at cost. The subsidiary company has a negative net worth as per the audited financial statements as at March 31, 2010. No provision has been made by the company for the erosion in value of this investment.

Boards clarification

The Board is of the opinion that the difference between the investment amount and the net worth amount of MosChip Semiconductor Technology, USA, at book value, as on 31 March 2010 is not a reflection in the diminution of the value of the investment. The fair market value of MosChip USA, which is based on expected future cash flows over several years and other intangible assets (intellectual property developed and owned by it, the international distribution network, customer base, foundry relationships, etc.), is much higher than its book value. The book value does not capture the real intrinsic worth of an investment. The decline in fair market value of investment in MosChip USA, if any, is temporary in nature and hence no provision has been made in the books of accounts.

Conservation of energy, research and development, technology absorption, foreign exchange earnings and outgo

The particulars as prescribed pursuant to Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of particulars in the report of Board of Directors) Rules, 1988, as amended from time to time, are set out as Annexure – B to this report.

Particulars of Employees

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of employees) Rules, 1975, the particulars of employees are set out in Annexure to this Report. However, as per the provisions of Section 219(1)(b)(iv) of the said Act read with the Clause 32 of the Listing Agreement, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

Management Discussion & Analysis

Pursuant to the provisions of Clause 49 of the Listing Agreement, a report on Management Discussion & Analysis is set out as Annexure – C to this report.

Directors Responsibility statement as per Section 217 (2AA) of the Companies Act, 1956

The Board of Directors of MosChip states that:

a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 2009-10 and of the loss of the company for that period;

c) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

d) the annual accounts were prepared on the basis of a going concern.

Corporate Governance

Pursuant to the provisions of Clause 49 of the Listing Agreement and Section 292A of the Companies Act, 1956, a Report on the Corporate Governance, which, inter alia, includes the composition and constitution of Audit Committee, is featuring as a part of Annual Report. Your Company will continue to adhere in letter and spirit to the good corporate governance policies.

Acknowledgements

Your Directors thank the companys bankers, investors and vendors for their unstinted support during the year. Your Directors also appreciate the contribution made by the employees at all levels, who through their hard work, perseverance and competence, are taking the company in the right direction.

Your directors also thank the Government of India, particularly the Customs and Excise Departments, Software Technology Park – Hyderabad, Department of Industrial Policy & Promotion under the Ministry of Commerce & Industry, Department of Company Affairs, Reserve Bank of India, Department of Telecommunications and all other agencies for their support, and wish their continued support in future.



For and on behalf of the Board of Directors

K. Ramachandra Reddy 26 August 2010 Chairman & CEO

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