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Directors Report of SPEL Semiconductor Ltd.

Mar 31, 2014

Dear Members,

The Directors present the 29thAnnual Report of the Company together with the Audited Accounts for the year ended Mar 31,2014.

Financial Performance

The Operating results of your Company for the year ended Mar 31, 2014 are given below

(RSin Lakhs) Particulars Year ended Year ended Mar 31, 2014 Mar 31, 2013

Sales 63,38.89 80,76.92

Other Income 1,14.86 1,21.66

PBIDT 15,86.20 11,97.01

Finance Cost 4,70.37 5,84.01

Depreciation 10,96.13 11,85.06

Profit before Tax 19.70 (5,72.06)

Tax Expense (12.48) (1,17.03)

Profit after Tax 32.18 (4,55.03)

Though your Company''s production remained the same during both the financial years, drop in of Average Selling Price has resulted in depressed receipts. However, there were significant savings in power, employee cost, depreciation and Interest pay out and it was possible to post a marginal profit during the year. However all the package lines of the Company are in good demand and contribution is expected to increase in future years.

Emphasis on Value system

Your Company has enthroned the attributes listed below as its core values. The Management will assiduously practice and enthuse its Employees to imbibe these virtues. Towards this end training is imparted every month, every Employee goes through out the drill at least once in six months :

a. Business Ethics : defines us as a Company

b. Professionalism : defines us as Individuals

c. Citizenship : defines our contribution to Society

Dividend Due to inadequate profits dividend could not be paid during the year. SPEL performance during the year

SPEL Semiconductor Limited is India''s first & only Semiconductor IC Assembly & Test Company with a successful track record. Established in 1988, the Company is a 100% Export Oriented Unit (EOU), diligently serving Customers in the United States of America, Europe and the Asia Pacific region. The existing capacity is 425 million units per annum. SPEL is a reliable source to over 50 global Customers.

The financial year 2013-14 witnessed disquieting oscillations in demand followed by a slowdown during the second and third quarters. However, SPEL contracted new relationships and quelled the turbulence with foresight and cost economy. This helped improve gains from existing Customers and in fold new Clients in USA and Europe.

SPEL has presence in US among the Top 20 Semiconductor Companies. The Company has made strategic moves in Europe into sectorial demands of Industrial & Automotive components. Customized package solutions and service will help expand its spread in this region.

The capacity utilization in the last fiscal quarter of 2013-14 improved. It is now proposed to invest on Equipment and Processes that give an edge to technology and cost efficiency besides enhancing capacity. SPEL has introduced the Ultra-Thin Quad Flat No-leads(QFN) package during the current year leading upto a package thickness of 0. 4.m. The potential for increased earnings is high.

Natronix Semiconductor Technology Private Limited becomes the Holding Company

During the year under review, Southern Petrochemical Industries Corporation Limited (SPIC) which held 55.97 percent of the Company''s Equity Share Capital, sold its entire Shareholding to Natronix Semiconductor Technology Private Limited, Singapore (Natronix). Natronix was granted exemption by Securities and Exchange Board of India (SEBI) from the obligation of making an Open Offer under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 vide Order No. WTM/PS/42/CFD-DCR/ SEPT/2013 dated Sep 6, 2013. With this acquisition of Equity Shares, Natronix became the Holding Company of SPEL from Mar 24, 2014.

Next 3 Year Goals (FY 2014-15 to FY 2017-18)

Assiduous will be taken to strengthen operations investing to enhance capacity, upgrade technology, seek new markets and achieve rigid cost economy. The strategy ahead will be,

1. To work for a market distribution consisting of 50% in United States, 30% in Europe & 20% in rest of the world.

2. To diversify application base bringing in Medical, Auto-Aero and Industrial segments and expanding supplies.

3. To introduce new package variants every year.

4. Thrust on Research & Development for to attain technological excellence and leadership.

5. To build up cash reserves equivalent to a year''s expenses.

6. Continued focus on Green Environment.

Your Company has responded to hard times and slackness in demand by hacking costs, in folding new Customers, developing new products and improving the qualifications. Besides, constraints were removed, equipment was modernized to support new enhanced product mix and tasks for the future were identified. SPEL will thus be able to stand its ground and stride with confidence. Our approach including manpower rationalization has been pro- active and has secured us from the vicissitudes of Pricing and Recession.

Causes of concern

i. The shift in pattern to low pin count packages from high pin count packages contracts optimum capacity utilization.

ii. There was an alteration to the package mix by Customers with reference from what was to the disruption of Planning and Production.

iii. SPEL has to be ever alert to respond to its Customer''s emerging requirements. This requires investments on critical Equipment like (a) Die Attach Systems - to address increased loading in low pin counts, (b) Wire bonders - to enable copper bonding and overcoming obsolescence, (c) Handlers to handle QFN small package mix.

iv. Increasing resort to captive power generation in the wake of mounting power shortage depressed the PAT.

How addressed : The Management met these challenges with fortitude as has been explained in the notes above and chiefly with the grit of its Employees, Suppliers & Customers notwithstanding the global melt down. Investments were made in critical areas with assistance from Banks. Alternate power solutions are being employed to combat Power Cost.

Subsidiary

The wholly owned Subsidiary Company SPEL America Inc., in California, USA has been rendering marketing services to your Company resulting in enhanced Customer base and satisfaction.

Pursuant to the Circular No. 2/2011 dated Feb 8, 2011 of Ministry of Corporate Affairs, the Board at its meeting held on Apr 19, 2012 resolved not to enclose the Subsidiary Company''s accounts for the year in the Annual Report.

The annual accounts of the Subsidiary Company and related detailed information are kept in the Head Office of the Holding Company and will be made available to the Shareholders, whenever, for inspection.

Fixed Deposits

The fixed deposits for the period were ''10.25 Crores.

Listing

Your Company is listed with Bombay Stock Exchange (BSE).There are no arrears of payment of Listing Fee.

Directors

The Board at its meeting held on Apr 29, 2014 recommended Dr. T. S. Vijayaraghavan and Mr. N. Ramakrishnan and in its meeting held on May 26, 2014 recommended Mr. K. Ravikumar as Independent Directors of the Company, not liable to retire by rotation for a period of 5 years subject to approval by the Members of the Company. These Directors have given a Declaration to the Board that they meet the criteria for Independence as provided in Section 149(6) of the Act and also confirmed that they will abide by the provisions as mentioned in Schedule VI of Companies Act, 2013.

The Board at its meeting held on Jun 19, 2014 recommended Mr.D.Balakrishnan as Whole-Time Director liable to retire by rotation.

The Board recommends these resolutions for your approval.

Corporate Social Responsibility (CSR)

SPEL''s medium for CSR is through Socio-Economic Contribution (S-E-C) and SPEL Employees Social Service Organization (SESSO).

S-E-C

For most people, the idea of Social Service is donating money to a social organization - perhaps an old-age home or an orphanage or similar. This however is the easy part. The difficult part is volunteering one''s time to improve society.

When can we make a contribution to Society

- During Phase 1 of our lifetime, perhaps up to the age of 35, we are so focused on building our careers, starting our families & establishing a name for ourselves

- During Phase 2, perhaps from age of 35 thru 65, we are the most active in our work, working as a team, being able to significantly contribute to Economic Development

- During Phase 3 perhaps from age 65 onwards, we are most able to contribute our time on an increased basis to social causes

S-E-C at SPEL is all about how we can contribute socially during Phase 2 itself while also handling Economic Development. Towards this, there are 3 areas that each of us can assist by making these a part of our day-to-day approach :

1. Following discipline in any and everything we do

2. Providing a helping hand to people around us in any way we possibly can

3. Showing the right path forward to people around us

S-E-C in SPEL is primarily done by One-to-One Mentoring as each person encourages & motivates the other, towards a more purposeful & effective lifestyle.

SESSO

As part of the Core Values, following activities were undertaken through SESSO during the previous year.

i) Provided educational assistance to the needy people in and around the Factory.

ii) Conducted a voluntary Blood Donation Camp.

iii) Provided assistance to an orphanage and old age home located near the Factory.

Corporate Governance

Your Company scrupulously strives to attain the highest standards of Corporate Governance through well documented internal policies and procedures that reach the Board and its Committees and most specific regard to its Shareholders, Customers, Suppliers and Employees for the common good of all.

Your Company has complied with the provisions of Clause 49 of the Listing Agreement relating to Corporate Governance.

Reports on Corporate Governance and on Management Discussion and Analysis have been attached as a part of the Annual Report.

A Certificate from the Auditors of your Company regarding the compliance with conditions of Corporate Governance is annexed to this report.

Environment and Safety Measures

Environment is the constant, continuous, joint concern of all and which, with each passing day, calls for growing care and more intense strategy. It is noteworthy that the Company generates no effluent. SPEL with the assistance of its Employees strives to preserve the environment and ecology through conservation of resources, minimizing waste, adoption of scientific disposal of waste, pollution control and tree planting.

The Environmental Management System established and maintained is certified by Bureau Veritas Certification. The upgraded ISO 14001 Certificate 2004 version has helped install comprehensively safe environment practices.

Information pursuant to Section 217 of the Companies Act, 1956

In terms of Section 217 (1) (e) of the Companies Act, 1956 and Report of Directors Rules, 1988, the particulars relating to the conservation of energy, technology absorption & foreign exchange earnings and outgo are given below :

a. Conservation of Energy

The Company has in place an Energy Committee which meets once a month. This Committee consists of Cross-functional Executives. It assesses the potential areas, devises means to save energy and implements the plan with the approval of the management.

Measures were taken during the year to conserve water and electricity resorting to reuse of Dicing process water, rain water harvesting, power factor improvement and modification of the condenser in the Air conditioner. The savings achieved were :

Power Water

13,37,759 units 900 KL

b. Technology Absorption

The particulars regarding Technology Absorption are not applicable to your Company.

c. Foreign Exchange Earnings and Outgo

Your Company is a 100% Export Oriented Unit and is constantly striving to increase its exports.

Foreign Exchange used during the year : ''30,49.79 Lakhs Foreign Exchange earned during the year : ''57,72.04 Lakhs

Research & Development (R&D)

The Company has carved out an R&D investment plan that

envisages investments in Package Intellectual Property.

Directors'' Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the

Companies Act, 1956 with respect to Directors''

Responsibility Statement, it is confirmed:

1. That in the preparation of the annual accounts for the year ending Mar 31, 2014 the applicable Accounting Standards had been followed along with proper explanation relating to material departures

2. That the Directors had selected such accounting policies and applied them consistently and made judgment and estimates that were reasonable and prudent and gave a true and fair view of the state of affairs of the Company and of the Profit or Loss of your Company for the year under review

3. That the Directors 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

4. That the Directors had prepared the accounts for the year ended Mar 31,2014 on a ''[going concern'' basis

Particulars of Employees

There are no such Employees drawing remuneration in excess of limits mentioned as per the revised Notification dated Mar 31, 2011 of the Ministry of Corporate Affairs as per Section 217 (2A) of the Companies Act, 1956. Hence no disclosure is required as per the above Notification.

Acknowledgements

Your Directors place on record their gratitude to the Government of India, the Government of Tamil Nadu, Financial Institutions, Bankers, Insurance Companies, Customs & Excise authorities, valued overseas Customers & Vendors and the Promoters for the continued assistance and support extended to the Company.

Yours Directors wish to place on record, their appreciation of the efficient and loyal services rendered by the Employees at all levels to the Company.

Yours Directors wish to thank the Shareholders who constitute the mainstay of the Company for their unstinted support, forbearance, confidence reposed on the Management.

For and on behalf of Board of Directors

Date : Apr 29, 2014 Dr.T.S.Vijayaraghavan Place : Chennai Director


Mar 31, 2013

The Directors hereby present the 28th Annual Report of the Company together with the Audited Accounts for the year ended Mar 31, 2013.

Semiconductor - Global & Indian scenario

Global Scenario : The Global Semiconductor sales for the year 2012 were US$299.9 Billion, a decrease of 2.6% compared to 2011 according to Gartner Inc. The normal drivers of Semiconductor industry growth — the computing, wireless, consumer electronics and automotive electronics sectors — all suffered serious disruption in 2012. Even the industrial / medical, wired communications and military/aerospace sectors ordinarily less affected by changes in consumer sentiment suffered severe declines in Semiconductor consumption. Excess inventory levels also remained a growth inhibitor.

As per World Semiconductor Trade Statistics organization (WSTS), highest growth of 10.5% achieved in America and 7.8% growth in APAC. However Europe (-4.9%) & Japan (-12.3%) markets slowed down.

QFN is still widely used in applications across all segments. However, there is excess capacity in the industry for the traditional QFN packages that was built during the industry boom in 2010. Chip designers are designing more products in the Fan-in and Flip Chip categories. The next recovery cycle expected in 2013 will help to utilize the capacity built at SPEL. The growth for leaded packages is declining but SPEL is able to maintain similar performance as of FY 2011-12 due to Customer bases in niche packages and applications

Indian Scenario : Your Company adequately represented the Electronics policy to the concerned Ministry through various industry associations. The Ministry is planning to rollout new policy on the IT Hardware during the current year. This will give an impetus to the Domestic units as the Ministry is planning to procure their requirements to various Government departments from these companies.

Your Company is making its presence felt in the IC requirements for the Government organizations/Ministry of Defence and domestic Industries. Your Company is looking for volume growth in commercially viable projects with various Government Departments.

Forecast for 2013 by segment

Internet-capable converging technologies and mobile electronic systems will keep demand for ICs strong through 2016.

The PC industry is struggling to identify innovations that differentiate PCs from other products and inspire consumers to buy and instead is meeting significant resistance to changes perceived as cumbersome or costly. PC industry efforts to offer touch capabilities and ultra slim systems have been hampered by traditional barriers of price and component supply, as well as a weak reception for Windows 8.

- Tablet and Ultrabook PCs — Demand continues to surge for Table PCs and anticipation is building for new Ultrabook PCs.

- Smartphones — Smartphones remain by far the fastest growing segment of the cell phone market IC content represents about 31% of the average selling price of a smartphone, whereas IC content in a basic cell phone is 23%. The success of 3G/4G smartphones is set to continue having a big impact on the future analog, DSP, logic, and NAND flash memory IC markets.

- Smart TVs — Internet capability has replaced 3D as the must have technology in 2013. Despite "upgrade fatigue,” consumers are drawn to Internet-connected Smart TVs, a favourite trend for suppliers of LED drivers, power management ICs, and MCUs/MPUs, which are expected to be big winners in this market segment.

- Smart Grids and Advanced Metering Infrastructure (AMI) — Home appliances and other residential electrical systems are being designed to interact and communicate with power-utility companies and Customers via the Internet. Global investment in smart grid technology is forecast to grow 19% annually through 2016.

SPEL performance during the year

SPEL got into supply chain of a consumer electronic major in Q1 and registered impressive volumes in Q2. However, these volumes dropped to Zero due to the cold response for their latest products. Also, the volumes for TDFN''s/ UDFN''s fell sharply amongst two of the major Customers from Q3 due to the falling demand for feature cell-phones & end Customer preference to other packaging options like WLCSP

Migration to Cu wire happened briskly in the second half and currently 15% of volumes processed in Cu wire that had a revenue impact in terms of ASP. Continued slowdown in PC market has affected business for SPEL as they are the major consumers of Semiconductors. Some of our Customer''s business are affected due to decrease in product life cycle because of frequent design changes / uncertainty in demand.

SPEL has focused on markets in Taiwan / Europe, have made progress and qualified new Customers. It expects to see revenues coming in from FY 2013-14. Your Company has formalized aggressive marketing strategies across the globe to tap the potential market.

Cause of concern

PC market continued its downward trend for the most part of 2012 falling further sharply in 1Q13. Industry observers are surprised at the steep fall of 13.9% during 1Q13 which is more than their estimated 7.7% decline.

Despite some mild improvement in the economic environment and some new PC models offering Windows 8, PC shipments were down significantly across all regions

compared to a year ago. Fading Mini Notebook shipments have taken a big chunk out of the low-end market while tablets and smartphones continue to divert consumer spending.

Continued power crisis and its consequent increase in power cost because of DG usage, and substantial outflow of interest payment, has strained the operating cost.

How addressed

The Management with its strong commitment and extensive support from its Employees, Suppliers & Customers, maintained its position, despite the Global Slowdown and Economic Crisis in Europe. Investments were made to address the vital requirements of operation with Bank''s assistance. Your Company is also sourcing alternate power solutions to combat ever increasing power cost.

Sales Network established to serve Asia Pacific / Europe regions.

Financial Performance

The Operating results of your Company for the year ended Mar 31, 2013 are given below :

(Rs.in Lakhs)

Particulars Year ended Year ended Mar 31,2013 Mar 31, 2012

Sales 8076.92 7978.63

Other Income 122.75 86.38

PBIDT 1200.02 1338.53

Interest 584.01 325.11

Depreciation 1106.95 937.93

Exceptional Items 78.38

Profit before Taxation (569.32) 75.49

Tax / Deferred Tax (116.15) 21.20

Profit after Taxation (453.17) 54.29

Due significant reduction (20%) in Average Selling Price, sales revenue of your Company for current year has decreased by 13% over the previous year even though volume grew by 10%. Due to this increased expenditure on manpower, power, marketing expenses, other overheads, which were necessitated due to operational growth, had an impact on contribution. All the package lines of your Company are in good demand and are expected to increase the contribution in future years.

Emphasis on Values

Your Company has adopted the following as its Values. The Management is highly committed to put these in practice such that all Employees understand. Training sessions are conducted every month such that all Employees attend this program at least once in 6 months :

a. Business Ethics : defines us as a Company

b. Professionalism : defines us as individuals

c. Citizenship : defines our contribution to society

Corporate Social Responsibility (CSR)

SPEL encourages its Employees to participate actively in CSR through SPEL Employees Social Service Organization (SESSO). Following activities were undertaken though SESSO during the previous year.

a. Provided educational assistance to the needy people in and around Factory.

b. Conducted a voluntary Blood Donation camp.

c. Provided assistance to an orphanage and old age home located near Factory.

Dividend

Due to loss dividend cannot be paid during the year. Fixed Deposits

The fixed deposits for the period were Rs. 2.00 Crores. Research & Development (R&D)

The Company has carved out an ambitious plan for investment in R&D. This will include investment in developing Semiconductor electronic designs for our Customers, offering verification services for Semiconductors designs and developing package designs which are cost effective and application friendly. This will assist Company''s revenue and profitability in the future years.

Dematerialization of Shares

As the Members are aware, the Company''s shares are in the compulsory demat mode, facilitated through arrangement with M/s. National Securities Depository Limited (NSDL) and M/s. Central Depository Services (India) Limited (CDSL). Going by the percentage of demat Shareholders, it is found that as many as 26,38,097 shares (5.72% of total shares issued), continued to be in physical mode. Your Directors earnestly appeal to all of you to demat the shares and derive the benefits of holding the shares in electronic form.

Subsidiary

The Wholly Owned Subsidiary Company SPEL America Inc, in California, USA has been rendering the marketing services to your Company resulting in enhanced Customer base and satisfaction.

Pursuant to the Circular No. 2/2011 dated Feb 8, 2011 of Ministry of Corporate Affairs, the Board at its Meeting held on Apr 19, 2012 resolved not to enclose the Subsidiary Company''s accounts for the year in the Annual Report. The Annual accounts of the Subsidiary Company and related detailed information will be made available to the Shareholders at any point of time. The annual accounts of the Subsidiary Company will also be kept for inspection by any Shareholders in the Head Office of the Holding Company.

Auditors

Your Company''s auditors, M/s. Natarajan & Co., Chartered Accountants, has informed the Company that they do not propose to offer themselves as Statutory Auditors of the

Company at the forthcoming Annual General Meeting since they are discontinuing the Audit Practice. The Company has received notice from a member recommending the appointment of M. S. Krishnaswami & Rajan, Chennai as Statutory Auditors in the place of M/s. Natarajan & Co.

M/s. Krishnaswami & Rajan, Chennai have expressed their consent for the appointment as Statutory Auditors for the Financial Year 2013-14 and have confirmed that the appointment, if made, will be in accordance with the limits specified under Sec 224 (1B) of the Companies Act, 1956.

Directors

Dr. A. Besant C. Raj and Mr. N. Sivashanmugam are the Directors retiring at the ensuing Annual General Meeting. As both are being eligible, offering themselves for reappointment. A brief profile of both Directors is provided as follows :

Dr. A. Besant C. Raj

Dr. A. Besant C. Raj is an MBA from the Indian Institute of Management, Ahmedabad (First Batch). He also holds a doctoral degree in Business Administration from the Harvard Business School, Harvard University, USA. He has a Master''s degree in Philosophy from Madras University and a Master''s degree in Psychology from Banaras Hindu University. Dr. Raj is the founder Chairman of the institute of Chartered Financial Analysts of India (ICFAI), Hyderabad. He is closely associated with development of several educational institutions. He has held various senior positions in the Government of India. He is the Chairman of SPEL Board''s Audit Committee and a Member of SPEL Board''s Securities Transfer & Investors Grievances Committee (STIGC).

Mr. N. Sivashanmugam

Mr. N. Sivashanmugam is a Chartered Accountant with 35 years background in Domestic and International Finance & Accounts. He has worked in Indo-Jordan Chemicals Company Limited in Amman, Jordan as Asst. Managing Director - Finance since May 2000. In his earlier tenure, he had the experience of effectively handling large Company''s Treasury, Banking, Insurance and Accounts. He also has good exposure in Project Finance

Directors'' Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors'' Responsibility Statement, it is hereby confirmed :

1. That in the preparation of the annual accounts for the year ended Mar 31, 2013 the applicable Accounting Standards had been followed along with proper explanation relating to material departures

2. That the Directors had selected such accounting policies and applied them consistently and made judgment and estimates that were 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 and of the profit or loss of your Company for the year under review

3. That the Directors 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.

4. That the Directors had prepared the accounts for the year ended Mar 31, 2013 on a ''going concern'' basis.

Corporate Governance

Your Company is committed to the standards of Corporate Governance and in this direction has laid down well documented internal policies, procedures including Board and Committee procedures and practices in particular relation with Shareholders, Customers, Suppliers and Employees in order to enhance the long-term Shareholder value and maximize interest of all Stakeholders.

Your Company has complied with the provisions of Clause

49 of the Listing Agreement relating to Corporate Governance.

A detailed Report on Corporate Governance and a Management Discussion and Analysis report have been attached to form part of the Annual Report.

A Certificate from the Auditors of your Company regarding the compliance of conditions of Corporate Governance has been annexed to this report.

Information pursuant to Section 217 of the Companies Act, 1956

In terms of Section 217 (1) (e) of the Companies Act, 1956 and the rules framed there under, the particulars relating to the conservation of energy, technology absorption & foreign exchange earnings and outgo are given below :

a. Conservation of Energy

The Company has in place an Energy Committee which meets once a month. This Committee consists of Cross-functional Executives. This Committee identifies the potential areas to conserve energy and implements novel energy saving measures, apart from recommending investment proposals to the Management.

Various measures to conserve water were undertaken, notable amongst them being, reuse of Dicing process water & Rain Water Harvesting. Following are the details of power & water consumed.

Power Water

7560889 Units 77725 K Lits

b. Technology Absorption

The particulars regarding Technology Absorption are not applicable to your Company.

c. Foreign Exchange Earnings and Outgo

Your Company is a 100% Export Oriented Unit and is constantly striving to increase its exports.

Foreign Exchange used during the year : Rs. 44,08.10 lakhs Foreign Exchange earned during the year : Rs. 83,94.84 lakhs

Particulars of Employees

There are no such Employees drawing remuneration in excess of limits mentioned as per the revised Notification dated Mar 31, 2011 of the Ministry of Corporate Affairs as per Section 217 (2A) of the Companies Act, 1956. Hence no disclosure is required as per the above Notification.

Environment and Safety Measures

Your Company understands that every individual has a responsibility towards our environment. Towards this, Your Company has been devising measures and encouraging its Employees to care for the environment and protect it through conservation of resources, waste minimization and proper disposal, pollution prevention and planting of trees.

Further Your Company''s manufacturing activities do not result in any significant release of effluent in the environment.

The Environmental Management System established and maintained by your Company is certified by Bureau Veritas Certification (2004 Version).

Your Company considers environmental care to be a continuous effort and are always on the look out for more avenues to nurture nature by enhancing its environmental

performance and also keeping in view the global trends in procurement of environment friendly products, Company has already introduced Green-molding compounds that are environment friendly as demanded by the Customers.

Acknowledgements

Your Directors wish to place on record their gratitude to the Government of India, the Government of Tamil Nadu, Financial Institutions, Bankers, Insurance Companies, Customs & Excise authorities, valued overseas Customers & Vendors and the Promoters for their continued assistance and support extended to the Company.

Yours Directors wish to place on record, their appreciation of the efficient and loyal services rendered by the Employees at all levels to the Company.

Yours Directors wish to thank the Shareholders for their continued support, forbearance and the confidence reposed on the Management.

For and on behalf of Board of Directors

Place : Chennai Dr. A. C. Muthiah

Date : Apr 23, 2013 Chairman


Mar 31, 2012

The Directors hereby present the 27th Annual Report of the Company together with the Audited Accounts for the year ended Mar 31, 2012.

Semiconductor - Global & Indian scenario

Global Scenario: The Semiconductor industry grew by less than 1% in 2011 despite weak global economic scenario and natural disasters that affected production in Asia. The Semiconductor Industry Association (SIA) projected that the industry's worldwide sales will hit $301 billion in 2012

- a 0.4% increase over 2011 sales of $299.50 billion. Beyond 2012, the industry is expected to grow at a significantly faster pace across all regions, Prediction is for a 7.2% growth for 2013 ($322 billion in total sales) and 4.4% growth for 2014 ($337 billion).

The PC shipments have crossed the 89 million mark globally in the Q1 CY 2012, showing a growth of a 1.9% over shipments 87 million in the same quarter last year. As per Gartner, a research agency, these results have exceeded their earlier projections of a 1.2% decline for the quarter. Also the Mobile phone production is expected to grow 6.7% with semiconductor revenue for mobile phones totaling $57.2 billion in 2012.

Indian Scenario: The national policy on Electronics will have an impact across the board and present several new opportunities. The demand for electronics goods in the country in 2011-12 stood at $69.6 billion, with less than half of this sourced locally. With studies pegging the demand at $400 billion and local production at $100 billion by 2020, the country is expected to import goods and components worth $300 billion.

This year will be characterized by opportunities and challenges. The policy if implemented has the potential to be a game changer with far reaching consequences for all of us. This policy will address the huge gap between locally produced electronics and the demand for it. Notwithstanding a weak global economic environment the industry expects boost in demand following the Government of India's decision to connect 2.5 lakh villages with broad band facilities during 2012. Roll out of the National knowledge network project would also be crucial for the industry. Consumer, Industrial and medical segment is also expected to do significantly well during this year.

Forecast for 2012 by segment: The communication segment forecast calls for the strongest semiconductor growth in 2012-13 as it will have 5.5% growth followed by computing industry 4.2% growth.

From an application perspective, smart phones, mobile PCs and tablets will fuel semiconductor growth through 2014. Total smartphone shipments will reach 659.8 million units in 2012-13, up 33.5% from the 494.2 million units shipped in 2011. Gartner estimates that semiconductor revenue from tablets will grow from $2.4 billion in 2010 to $17.8 billion in 2014. India and Brazil are estimated to be in the top five countries in smart phone usage and sales.

In the PC market, consumer PC purchases grown to 1.8% in 2011 as per International Data Corporation and expected to grow 5% in 2012 and 9.5% in 2013. However, some of this slowdown is being made up for by stronger-than- expected sales of tablets. Revenue for other PC semiconductor components, including CPUs, will increase.

The outlook for mobile phone production has improved. Overall semiconductor revenue from mobile phones is on pace to total $51.85 billion in 2011. In 2012, worldwide semiconductor revenue from mobile phones is projected to reach $57.31 billion, a 10.5% increase from 2011.

SPEL performance during the year

Your Company continues still to be 1st & only Semiconductor IC assembly & Test production facility. It is continuously maintaining this position despite the market fluctuations and other external factors. SPEL continues to be a trusted & strategic contract manufacturing partner for many of the world's leading Semiconductor companies.

Your Company faced various challenges during the current financial year and it was addressed efficiently. In the process it also addressed (a) Production bottlenecks to improve productivity (b) Modernization of equipment for enhanced product mix and (c) equipping itself for future expansions. This would enable SPEL to address increased outsourcing from present & potential Customers in future. Due to these pro-active approaches, SPEL had effectively handled the pricing pressures that resulted from the recession and emerged with reduced impact.

Cause of concern

a. The change in Customer loading pattern, i.e. increase in low pin-count packages volumes in place of higher pin-count packages has affected optimum utilization of operating capacity.

b. Increased QFN / DFN packages loading at the expense of leaded packages have resulted in skewed capacity utilization creating bottlenecks in certain areas.

c. SPEL has to respond to critical Customer's requirement for future growth. They are very high volumes and low Average Selling Price (ASP) products. These requirements can be met only if continuous investments are made in certain Assembly and Test Equipment

d. Imposed power restrictions resulted in increased diesel consumption which contributed to reduction in PAT during the year.

How addressed: The Management with its strong commitment and extensive support from its Employees, Suppliers & Customers, maintained its position, despite the Global Slowdown and Economic Crisis in Europe. Investments were made to address the vital requirements of operation with Bank's assistance. Your Company is also sourcing alternate power solutions to combat ever increasing power cost.

The Customer portfolio has widened with reduced dependency on single Customer. Also, your company serves three of the top 20 Semiconductor Companies in the world. Significant product wins achieved during last quarter for very high volume requirements for hand held applications where small device foot-print is needed.

Sales Network established to serve Asia Pacific / Europe regions.

Financial Performance

The Operating results of your Company for the year ended Mar 31, 2012 are given below

(Rs in Lakhs) Particulars Year ended Year ended

Mar 31, 2012 Mar 31,2011

Sales 7978.63 9146.24

Other Income 86.38 160.51

PBIDT 1255.37 1830.52

Interest 239.69 173.25

Depreciation 937.93 883.67

Profit before Taxation 77.75 773.60

Tax / Deferred Tax 20.81 321.31

Profit after Taxation 56.94 452.29

Due significant reduction (20%) in Average Selling Price, sales revenue of your Company for current year have decreased by 13% over the previous year even though volume grew by 10%. Due to this and due to increase in expenditure on manpower, power, marketing expenses, other overheads, which were necessitated due to operational growth, had an impact on contribution. All the package lines of your Company are in good demand and are expected to increase the contribution in future years.

Emphasis on Values

Your Company has adopted the following as its Values. The Management is highly committed to put these in practice such that all Employees understand. Training sessions are conducted every month such that all Employees attend this program at least once in 6 months:

a. Business Ethics : defines us as a Company

b. Professionalism : defines us as individuals

c. Citizenship : defines our contribution to society

Corporate Social Responsibility (CSR)

SPEL encourages its Employees to participate actively in CSR through SPEL Employees Social Service Organization (SESSO). Following activities were undertaken though SESSO during the previous year.

a. Provided educational assistance to the needy people in and around Factory.

b. Conducted a voluntary Blood Donation camp.

c. Provided assistance to an orphanage and old age home located near Factory.

Dividend

It has not been possible for your Directors to recommend dividend for this financial year due to continuous investment requirement faced during the year.

Fixed Deposits

The fixed deposits for the period were Rs 2.45 Crores. Research & Development (R&D)

The Company has carved out an ambitious plan of investment in R&D. This will include investment in PIP and MODLIB. This will assist Company's revenue and profitability in the future years.

Dematerialization of Shares

As the Members are aware, the Company's shares are in the compulsory demat mode, facilitated through arrangement with M/s National Securities Depository Ltd. (NSDL) and M/s Central Depository Services (India) Ltd. (CDSL). Going by the percentage of demat shareholders, it is found that as many as 26,65,596 shares (5.78% of total shares issued), continued to be in physical mode. Your Directors earnestly appeal to all of you to demat the shares and derive the benefits of holding the shares in electronic form.

Subsidiary

The Wholly Owned Subsidiary Company SPEL America Inc, in California, USA has been rendering the marketing services to your Company resulting in enhanced Customer base and satisfaction.

Pursuant to the Circular No. 2/2011 dated Feb 8, 2011 of Ministry of Corporate Affairs, the Board at its Meeting held on Apr 19, 2012 resolved not to enclose the Subsidiary Company's accounts for the year in the Annual Report. The Annual accounts of the Subsidiary Company and related detailed information will be made available to the Shareholders at any point of time. The annual accounts of the Subsidiary Company will also be kept for inspection by any Shareholders in the Head Office of the Holding Company.

Auditors

Your Company's auditors, M/s. Natarajan & Co., Chartered Accountants, retiring at the conclusion of the ensuing Annual General Meeting, are eligible for re-appointment.

Directors

Mr. Ar Rm Arun and Dr. T.S. Vijayaraghavan are the directors retiring at the ensuing annual general meeting. As both are being eligible, offering themselves for reappointment. A brief profile of both directors are provided as follows

Mr. Ar Rm Arun

Mr. Arun is an Entrepreneur with a mission of building businesses that transcend time. This mission is made possible by perfecting & growing global deliveries while promoting a Values' based society Mr. Arun holds a Bachelor's degree in Electronics & Communication

Engineering from the Regional Engineering College, Trichy, India and a Master's degree in Electrical Engineering from the State University of New York, Stony Brook, USA. His specialization was in the field of VLSI Design. Having initially been with Polaroid Corp located in Cambridge, Massachusetts, he later worked for Intel Corp, Santa Clara, California

Mr. Arun is on the Executive Committee of the Federation of Indian Chambers of Commerce & Industry (FICCI). He is also the Convener of the IT & Communications Panel of FICCI's Tamil Nadu State Council. Government of Tamilnadu, with a view to formulate the 12th Five year Plan had appointed Mr. Ar Rm Arun, as a member on the State Planning Commission's Steering Committee for Industries & Minerals. This appointment is concentrated on improving Industries & Minerals development within Tamil Nadu and is considering his knowledge of basic issues within this sector.

Dr. T. S. Vijayaraghavan

Dr. Vijayaraghavan holds a Bachelors degree in Mechanical & Electrical Engineering and Doctorate in Science. He is a retired Member of the Indian Administrative Service from the Tamilnadu Cadre. He is currently the Chairman, Committee on Industry, Ministry of Environment and Forests. Member, Senate of the Sri Ramachandra Medical College & Research Institute, Chennai. He is Chairman of SPEL Board's Securities Transfer & Investors' Grievance Committee (STIGC) and a Member of SPEL Board's Audit Committee and Remuneration and Compensation Committee (RCC).

Directors' Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors' Responsibility Statement, it is hereby confirmed:

1. That in the preparation of the annual accounts for the year ended Mar 31, 2012 the applicable Accounting Standards had been followed along with proper explanation relating to material departures

2. That the Directors had selected such accounting policies and applied them consistently and made judgment and estimates that were 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 and of the profit or loss of your Company for the year under review

3. That the Directors 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;

4. That the Directors had prepared the accounts for the year ended Mar 31, 2012 on a 'going concern' basis.

Corporate Governance

Your Company is committed to the standards of Corporate Governance and in this direction has laid down well documented internal policies, procedures including Board and Committee procedures and practices in particular relation with Shareholders, Customers, Suppliers and Employees in order to enhance the long-term Shareholder value and maximize interest of all stakeholders.

Your Company has complied with the provisions of Clause 49 of the Listing Agreement relating to Corporate Governance.

A detailed Report on Corporate Governance and a Management Discussion and Analysis report have been attached to form part of the Annual Report.

A Certificate from the Auditors of your Company regarding the compliance of conditions of Corporate Governance has been annexed to this report.

Information pursuant to Section 217 of the Companies Act, 1956

In terms of Section 217 (1) (e) of the Companies Act, 1956 and the rules framed there under, the particulars relating to the conservation of energy, technology absorption & foreign exchange earnings and outgo are given below :

a. Conservation of Energy.

The Company has in place an Energy Committee which meets once a month. This Committee consists of Cross-functional Executives. This Committee identifies the potential areas to conserve energy and implements novel energy saving measures, apart from recommending investment proposals to the management.

Various measures to conserve water were undertaken, notable amongst them being, reuse of Dicing process water & Rain Water Harvesting. Following are the details of power & water consumed. 7350 KL of water was saved during the year.

Power Water

8904922 units 77976 KLits

b. Technology Absorption.

The particulars regarding Technology Absorption are not applicable to your Company.

c. Foreign Exchange Earnings and Outgo.

Your Company is a 100% export oriented unit and is constantly striving to increase its exports.

Foreign Exchange used during the year : Rs4,129.19 lakhs Foreign Exchange earned during the year: Rs7,966.91 lakhs Particulars of Employees

There are no such Employees drawing remuneration in excess of limits mentioned as per the revised Notification dated Mar 31, 2011 of the Ministry of Corporate Affairs as per Section 217 (2A) of the Companies Act, 1956. Hence no disclosure is required as per the above Notification.

Environment and Safety Measures

Your Company understands that every individual has a responsibility towards our environment. Towards this, Your Company has been devising measures and encouraging its Employees to care for the environment and protect it through conservation of resources, waste minimization and proper disposal, pollution prevention and planting of trees.

Further Your Company's manufacturing activities do not result in any significant release of effluent in the environment.

The Environmental Management System established and maintained by your Company is certified by Bureau Veritas Certification (2004 Version).

Your Company considers environmental care to be a continuous effort and are always on the look out for more avenues to nurture nature by enhancing its environmental performance and also Keeping in view the global trends in procurement of environment friendly products, Company has already introduced Green-molding compounds that are environment friendly as demanded by the Customers.

Acknowledgements

Your Directors wish to place on record their gratitude to the Government of India, the Government of Tamil Nadu, Financial Institutions, Bankers, Insurance Companies, Customs & Excise authorities, valued overseas Customers & Vendors and the Promoters for their continued assistance and support extended to the Company.

Yours Directors wish to place on record, their appreciation of the efficient and loyal services rendered by the Employees at all levels to the Company.

Yours Directors wish to thank the Shareholders for their continued support, forbearance and the confidence reposed on the Management.

For and on behalf of Board of Directors

Place : Chennai Dr. A. C. Muthiah

Date : Apr 25, 2012 Chairman


Mar 31, 2011

The Directors have great pleasure in presenting the 26th Annual Report of the Company together with the Audited Accounts for the year ended Mar 31, 2011. Your Company completed its Silver Jubilee year with the whole hearted support and contribution from all its Stakeholders.

Global and Indian Industry scenario

The global "Great Recession" during the year 2009 shook up the global Semiconductor industry in a major way but the year 2010 has brought in a lot of confdence to the Semiconductor industry and to the global economy as a whole.

The Semiconductor industry has risen by 31.8% in the year 2010. The outlook for the year 2011 looks promising with a 9% growth predicted; global Semiconductor revenues are expected to reach US$ 325 Billion up from US$ 298 Billion in 2010.

Of the total revenues forecasted for the year 2011, about 40 percent can be attributed to the computing industry, which accounted for sales of $113 Billion. The rapidly growing smart phone segment accounted for about $80 Billion in sales in 2010 and is expected to grow although there is pressure on price points to remain low.

There are huge growth opportunities for the electronic industry in India, but there have been some missed opportunities in the past decade. So, while the future holds a lot of promise, we need to address existing challenges in infrastructure, taxation, supply chain and logistics, labour laws, R&D and funding.

SPEL performance during the year

Your Company still continues to be First & only Semiconductor IC Assembly & Test production facility. It is continuously maintaining this position despite the market fuctuations and other external factors. SPEL continues to be a trusted & strategic contract manufacturing partner for many of the worlds leading Semiconductor companies.

Your Company had invested around Rs.6.00 Crores during the 1st Quarter, to address (a) Production bottlenecks to improve productivity

(b) Modernization of equipment for enhanced product mix and

(c) equipping itself for future expansions. This would enable SPEL to address increased outsourcing from present & potential Customers during FY 2011-12.

Various cost & energy saving measures initiated during FY 2009-10 have started producing positive results. Due to these proactive approaches and manpower rationalization SPEL effectively handled the pricing pressures that resulted from the recession and emerged with reduced impact.

The Computing segment reported a sliding trend in the US & Europe during Q2 FY 2010-11. However, SPEL was able to maintain revenues during this quarter due to its balanced exposure across Communications, Computing & Consumer Electronics. The impact on sales was mainly due to the comparable impact on volatile foreign currency parity. It was also due to change in pattern of raw material consumption of smaller pin count packages, without corresponding price increase. The rising power & diesel cost is a major cause for concern.

Rise of gold prices has propelled your Company towards investment in copper-process tools. SPEL will place most of its above expansion on leading-edge process and cooper-interconnect process capacities, both of which are estimated to boost the Company`s revenue and earnings during FY 2011-12.

Towards the beginning 2011 SPEL started investing Rs. 22 Croes in production equipment which will increase its capacity. Funded by a term loan from nationalized banks, this expansion is primarily on leading-edge process & copper-interconnect capacities. The additional capacity will be available from 1st quarter of FY 2011-12, fetching increased sales and enabling SPEL to further diversify package & market base.

The Management with its strong commitment and extensive support from its Employees, Suppliers & Customers, has continued to maintain its position as Proft Making Company, despite the Global Slowdown and Economic Crisis.

Financial Performance

The Operating results of your Company for the year ended Mar 31, 2011 are given below

(Rs. In Lakhs)

Particulars Year ended Year ended

Mar 31, 2011 Mar 31, 2010

Sales 9133.01 8716.00

Other Income 173.74 149.17

PBIDT 1828.28 1962.55

Interest 173.25 214.57

Depreciation 881.34 818.45

Proft before Taxation 773.69 929.53

Tax / Deferred Tax 320.71 318.69

Proft after Taxation 452.98 610.84

Sales of your Company for current year have increased by 4.78% over the previous year. Increased expenditure on manpower, power, marketing expenses, other overheads, which were necessitated due to operational growth, had an impact on contribution. All the package lines of your Company are in good demand and are expected to increase the contribution in future years.

Emphasis on Value system

Your Company has adopted the following as its Core Values. Management is highly committed to put in practice all these to make sure that they understand the values that we are into. Training sessions are conducted every month to make all the Employees aware of the Core Values. All the Employees attend this program at least once in six months and put it to practice

a. Business Ethics : defnes us as a Company

b. Professionalism : defnes us as individuals

c. Citizenship : defnes our contribution to society

Socio Economic Concept (SEC)

Understanding human behavior and tuning it towards self-disciplined citizen underlines the concept of the SEC being implemented in your Company. Employees were given to apprehend their roles as an individual and his/her responsibility to bring up fellow citizen so as to make the Country proud. SPEL appreciates its Employees commitment and complements them by assisting their growth to become future leaders. In spite of all the recessionary trends Stakeholders may appreciate the fact that SPEL stood up to the times and posted positive in PAT.

Dividend

Your Directors would like to place on record their appreciation for the Shareholders patient waiting for these days.

SPEL believes in business sustenance. Sustainability is not about what a Company does with its profts but how it makes profts. It is the business process itself. Towards this Company had invested in the Capex around Rs. 23 Crores, from the Allahabad Bank and through internal generations. These investments had helped the Company in offsetting the falling ASP, and had assisted to improve the PE ratio. Your Company is keenly concentrating on creating cash reserves, as the need for this is increasing, as Customers want to see this in place.

Your Companys above initiatives have assisted in maintaining PAT. However, you would concur that your Company has consolidated itself for achieving a strong fnancial position conducive for this.

Fixed Deposits

The fxed deposits for the period were Rs. 4.45 Crores.

Research & Development (R&D)

The Company has carved out an ambitious plan of investment in R&D. This will include investment in PIP and MODLIB. This will assist Companys revenue and proftability in the future years.

Dematerialization of Shares

As the Members are aware, the Companys shares are in the compulsory demat mode, facilitated through arrangement with M/s. National Securities Depository Ltd. (NSDL) and M/s. Central Depository Services (India) Ltd. (CDSL). Going by the percentage of demat Shareholders, it is found that as many as 27,06,573 shares (5.87% of total shares issued), continued to be in physical mode. Your Directors earnestly appeal to all of you to demat the shares and derive the benefts of holding the shares in electronic form.

Subsidiary

The Wholly Owned Subsidiary Company, SPEL America Inc, in California, USA has been rendering the marketing services to your Company resulting in enhanced Customer base and satisfaction.

Pursuant to the Circular No.2/2011 dated Feb 8, 2011 of Ministry of Corporate Affairs, the Board at its Meeting held on Apr 29, 2011 resolved not to enclose the Subsidiary Companys accounts for the year in the Annual Report.

The Annual accounts of the Subsidiary Company and related detailed information will be made available to the Shareholders at any point of time. The annual accounts of the Subsidiary Company will also be kept for inspection by any Shareholders in the Head Offce of the Holding Company.

Auditors

Your Companys Auditors, M/s. Natarajan & Co., Chartered Accountants, retiring at the conclusion of the ensuing Annual General Meeting, are eligible for re-appointment.

Directors

Dr. A. Ramakrishna resigned from the Board and his resignation was accepted at the Board Meeting held on Apr 29, 2011. The Board placed on record its appreciation for the commendable services rendered by Dr. A. Ramakrishna.

Mr. S. R. Vijayakar and Dr. A. Besant C. Raj are the directors retiring at the ensuing Annual General Meeting. As both are being eligible, offering themselves for reappointment. A brief profle of both directors is provided as follows :

Mr. S. R. Vijayakar

Mr. S. R. Vijayakar holds an Honours Degree in Electrical and Mechanical Engineering. After two years experience in the U.K. in the power industry he worked with the Ahmedabad Electricity Co., till 1967. Thereafter, he worked with the Electronics Corporation of India Ltd. under the Department of Atomic Energy, culminating as its Chairman and Managing Director till 1984. He was appointed as Secretary, Department of Electronics, Government of India until he retired in 1986. Post retirement he was Chairman of MELTRON, Government of Maharashtra and was associated with several Companies. He is a member of SPEL Boards Remuneration and Compensation Committee.

In addition, he holds Directorship in TVS Electronics Limited and Surana Ventures Limited. He is the member of Audit Committee in TVS Electronics Limited.

Dr. A. Besant C Raj

Dr. A. Besant C Raj is an MBA from the Indian Institute of Management, Ahmedabad (First Batch). He also holds a Doctoral degree in Business Administration from the Harvard Business School, Harvard University, USA. He has a Masters degree in Philosophy from Madras University and a Masters degree in Psychology from Banaras Hindu University. Dr. Raj is the Founder Chairman of the Institute of Chartered Financial Analysts of India (ICFAI), Hyderabad. He is closely associated with development of several educational institutions. He has held various senior positions in the Government of India. In addition, he is the Chairman and Managing Director in Besant Raj International Limited and Director in Henkel India Limited. He is Chairman of SPEL Boards Audit Committee and a Member of SPEL Boards Securities Transfer & Investors Grievance Committee (STIGC).

Directors Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors Responsibility Statement, it is hereby confrmed :

1. That in the preparation of the annual accounts for the year ended Mar 31, 2011 the applicable Accounting Standards had been followed along with proper explanation relating to material departures

2. That the Directors had selected such accounting policies and applied them consistently and made judgment and estimates that were 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 and of the proft or loss of your Company for the year under review

3. That the Directors had taken proper and suffcient 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

4. That the Directors had prepared the accounts for the year ended Mar 31, 2011 on a ‘going concern basis.

Corporate Governance

Your Company is committed to the standards of Corporate Governance and in this direction has laid down well documented internal policies, procedures including Board and Committee

procedures and practices in particular relation with Shareholders, Customers, Suppliers and Employees in order to enhance the long-term Shareholder value and maximize interest of all Stakeholders.

Your Company has complied with the provisions of Clause 49 of the Listing Agreement relating to Corporate Governance.

A detailed Report on Corporate Governance and a Management Discussion and Analysis report have been attached to form part of the Annual Report.

A Certifcate from the Auditors of your Company regarding the compliance of conditions of Corporate Governance has been annexed to this report.

Information pursuant to Section 217 of the Companies Act, 1956

In terms of Section 217 (1) (e) of the Companies Act, 1956 and the rules framed there under, the particulars relating to the conservation of energy, technology absorption & foreign exchange earnings and outgo are given below :

a. Conservation of Energy

The Company has in place an Energy Committee which meets once a month. This Committee consists of Cross-functional Executives. This Committee identifies the potential areas to conserve energy and implements novel energy saving measures, apart from recommending investment proposals to the management.

Various measures to conserve water and energy, notable amongst them being, reuse of Dicing process water, Rain Water Harvesting, Power factor improvement and extension of length of condenser in the A/c system to improve effciency. Following savings were made during the year :

Particulars Power Water

Consumed 83,46,655 units 79,193 Kilo litres

Saved 9,267.82 units 208.38 Kilo litres

b. Technology Absorption

The particulars regarding Technology Absorption are not applicable to your Company.

Particulars of Employees

There are no such employees drawing remuneration in excess of limits mentioned as per the revised Notifcation dated Mar 31, 2011 of the Ministry of Corporate Affairs as per Section 217 (2A) of the Companies Act, 1956. Hence no disclosure is required as per the above Notifcation.

Corporate Social Responsibility (CSR)

SPELs answer towards CSR is through SPEL Employees Social Service Organization (SESSO). As part of the Core Values, following activities were undertaken though SESSO during the previous year.

a. Provided educational assistance to the needy people in and around Factory.

b. Conducted a voluntary Blood Donation camp.

c. Provided assistance to an orphanage and old age home located near Factory.

Environment and Safety Measures

Your Company understands that every individual has a responsibility towards our environment. Towards this, Your Company has been devising measures and encouraging its Employees to care for the environment and protect it through conservation of resources, waste minimization and proper disposal, pollution prevention and planting of trees.

Further Your Companys manufacturing activities do not result in any signifcant release of effuent in the environment.

The Environmental Management System established and maintained by your Company is certifed by Bureau Veritas Certifcation. The upgraded ISO 14001 Certifcate from 1996 version to 2004 version will comprehensively take care of safe environment practices. It is hopeful that the Company will be able to achieve this certifcation during the current year

Your Company considers environmental care to be a continuous effort and are always on the look out for more avenues to nurture nature by enhancing its environmental performance and also keeping in view the global trends in procurement of environment friendly products, Company is in the process of introducing Green-molding compounds that are environment friendly as demanded by the Customers.

Acknowledgements

Your Directors wish to place on record their gratitude to the Government of India, the Government of Tamil Nadu, Financial Institutions, Bankers, Insurance Companies, Customs & Excise authorities, valued overseas Customers & Vendors and the Promoters for their continued assistance and support extended to the Company.

Yours Directors wish to place on record, their appreciation of the effcient and loyal services rendered by the Employees at all levels to the Company.

Yours Directors wish to thank the Shareholders for their continued support and forbearance and the confidence reposed on the Management.

For and on behalf of Board of Directors

Dr. A.C. Muthiah

Chairman

Chennai

Apr 29, 2011


Mar 31, 2010

The Directors have great pleasure in presenting the 25th Annua! Report of the Company together with the Audited Accounts for the year ended Mar 31, 2010. Your Company is celebrating its Silver Jubilee during this year with the support & encouragement from all its Stakeholders.

Global and Indian Industry scenario

While the worst is definitely over, 2009 will probably be known as one of the steepest revenue declines in Semiconductor history due to a drop in orders. The official Semiconductor recession however started with the Q4 2008 financial reports, but could be seen even earlier in the year with failing forecasts and bulging inventories. So realistically it was the Semiconductor debacle of 2008-09. Early part of FY 2009 has been very difficult to most of the Semiconductor companies; some of them havent been able to handle the economics. Many others have realigned their market strategies and entered into strategic mergers to be able to weather the recession.

The global economic slowdown has severely impacted the Semiconductor industry leading to piling up of inventories and reduced capital expenditure. However in 2010 the Semiconductor market is expected to grow by 20% as per latest estimations by Gartner. Compared to last year, outlook for the Semiconductor industry appears to be healthier. In fact, the confidence level of most companies is quite similar to the level seen in 2007. Industry executives are very bullish on the future growth prospects of energy efficient and renewable products. In summary, while the Semiconductor industry is in a far better position entering 2010 than it was a year ago; the trajectory of the recovery is still unclear. In 2010 the Semiconductor industry will be back on track with revenue and shipments substantially greater than 2009. The mobile internet market will drive Semiconductors for the next decade with an incredible integration of electronic devices targeting the 6,792,600,000 consumers.

The impact of the global "Great Recession" was less severe in India. The country experienced a relatively muted and short-lived downturn. The year 2010 has brought in a lot of confidence to the Semiconductor industry and to the global economy as a whole. There are huge growth opportunities for the electronic industry in India, but there have been some missed opportunities in the past decade. So, while the future holds a lot of promise, we need to address existing challenges in infrastructure, taxation, supply chain and logistics, labour laws, R&D and funding

SPEL performance during the year

Your Company continues to be First & only Semiconductor IC Assembly & Test production facility. It is continuously maintaining this position despite the market fluctuations and other external factors. SPEL continues to be a trusted & strategic contract manufacturing partner for many of the worlds leading Semiconductor companies.

The Management with its strong commitment and extensive support from its Employees, Suppliers & Customers, has continued to maintain its position as Profit Making Company, despite the Global Slowdown and Economic Crisis.

Current years performance was largely affected by foreign exchange fluctuation loss, lower pricing due to global recession. Management as an austerity measure introduced various cost saving measures including, Lean manufacturing, investments in Energy saving Equipments. SPEL appreciates its Employees commitment and complements them by assisting their growth to become future leaders. In spite of all the recessionary trends Stakeholders may appreciate the fact that SPEL stood up to the times and posted marginal increase in PAT.

Management is continuing its efforts to rope in more Customers this year, from APAC and European countries also. Your Company had invested in Capex to the tune of Rs.7.8 Crores during the year.

Financial Performance

The Operating results of your Company for the year ended Mar 31, 2010 are given below :

(Rs. In Lakhs)

Particulars Year ended Year ended Mar 31, 2010 Mar 31, 2009

Sales 8,716.0 8,100.2

Other Income 149.1 222.2

PBIDT 1,962.5 2,115.3

Interest 214.5 323.9

Depreciation 818.4 830.5

Profit before Taxation 929.5 960.9

Tax / Deferred Tax 318.6 337.4

Profit after Taxation 610.8 623.5

Sales of your Company for current year have increased by 8% over the previous year. Increased expenditure on manpower, power, marketing expenses, other overheads, which were necessitated due to operational growth, had an impact on contribution. All the package lines of your Company are in good demand and are expected to increase the contribution in future years.

Emphasis on Value System

Your Company has adopted the following as its core values and the Management is highly committed to put in practice all these values. Training sessions are conducted every month to make all the Employees aware of the Core Values. All the Employees attend this program at least once in six months and put it to practice.

a. Business Ethics : defines us as a Company

b. Professionalism defines us as individuals

c. Citizenship : defines our contribution to society

Dividend

Your Directors would like to place on record their appreciation for the Shareholders patient waiting for these days.

As mentioned earlier the Company had invested in the Capex for Rs.7.8 Crores, from the internal generations. These investments had helped the Company in offsetting the falling ASP, and had assisted to improve the PE ratio. Your Company is keenly concentrating on creating cash reserves, as the need for this is increasing, as Customers wants to see this in place.

Your Companys above initiatives have assisted increasing PAT and thereby increasing the Earning Per Share (EPS). However, you would concur that your Company has consolidated itself for achieving a strong financial position conducive for this.

Fixed Deposits

The fixed deposits for the period were Rs.4 Crores.

Research & Development (R&D)

The Company has carved out an ambitious plan of investment in R&D. This will include investment in PIP and MODLIB. This will assist Companys revenue and profitability in the future years.

Dematerialization of Shares

As the Members are aware, the Companys shares are in the compulsory demat mode, facilitated through arrangement with M/s. National Securities Depository Ltd. (NSDL) and M/s. Central Depository Services (India) Ltd. (CDSL). Going by the percentage of demat Shareholders, it is found that as many as 1,80,39,634 shares (39.12% of total shares issued), continued to be in physical mode. Your Directors earnestly appeal to all of you to demat the shares and derive the benefits of holding the shares in electronic form.

Subsidiary

The Wholly Owned Subsidiary Company SPEL America Inc, in California, USA has been rendering the marketing services to your Company resulting in enhanced Customer base and satisfaction. The details required under Section 212 of the Companies Act, 1956 has been enclosed herewith in the report.

Auditors

Your Companys auditors, M/s. Natarajan & Co., Chartered Accountants, retiring at the conclusion of the ensuing Annual General Meeting, are eligible for re-appointment.

Directors

Mr. Ashwin C. Muthiah, Director and Mr. N. Sivashanmugam, Whole Time Director are the directors retiring at the ensuing annual general meeting. As both are being eligible, offering themselves for re-appointment. A brief profile of both directors is provided as follows:

Mr. Ashwin C. Muthiah

Mr. Ashwin C Muthiah holds a bachelor degree in Commerce from Madras University and a post graduate degree in Business Administration from Philadelphia University. He is an entrepreneur with business interests in Logistics, Trading and Shipping. He is Consul General Ad Honorem of the Republic of. Philippines at Chennai.

In addition, he is the Chairman in Manali Petrochemical Limited, SICAL Distriparks Limited, SICAL Infra Assets Limited, SDB Certis CISCO India Limited and SICAL Logistics Limited. He is the Vice Chairman in PSA SICAL Terminals Limited, Southern Petrochemical Industries Corporation Limited and Technip India Limited. He holds Directorship in ACM Educational Foundation, ACM Medical Foundation, Indo-Jordan Chemicals Company Limited, MAC Spin Foundation, Mitsuba Sical India Limited, Tamilnadu Petroproducts Limited, Totalcomm Infra Services Private Limited and Tuticorin Alkali Chemicals and Fertilizers Limited. He is also the Chairman of Management Committee of Southern Petrochemical Industries Corporation Limited and Member of Remuneration Committee and Finance Committee of Southern Petrochemical Industries Corporation Limited. He is Chairman of Management Committee of SICAL and Member of Audit Committee of SICAL. He is the member of Share Transfer & Investors Grievance Committee of Tamilnadu Petroproducts Limited.

Mr. N. Sivashanmugam

Mr. N. Sivashanmugam is a Chartered Accountant with 32 years background in Domestic and International Finance & Accounts. He has worked in Indo-Jordan Chemicals Company Ltd., in Amman,

Jordan as Asst. Managing Director - Finance since May 2000. In his earlier tenure, he had the experience of effectively handling large Companys Treasury, Banking, Insurance and Accounts. He also has good exposure in Project Finance.

In addition, he holds Directorship in Accuspeed Engineering Design Services Ltd. and a member of SPELs Management Committee.

Directors Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors Responsibility Statement, it is hereby confirmed :

1. That in the preparation of the annual accounts for the year ended Mar 31, 2010 the applicable Accounting Standards had been followed along with proper explanation relating to material departures.

2. That the Directors had selected such accounting policies and applied them consistently and made judgment and estimates that were 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 and of the profit or loss of your Company for the year under review.

3. That the Directors 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.

4. That the Directors had prepared the accounts for the year ended Mar 31, 2010 on a going concern basis.

Corporate Governance

Your Company is committed to the standards of Corporate Governance and in this direction has laid down well documented internal policies, procedures including Board and Committee procedures and practices in particular relation with Shareholders, Customers, Suppliers and Employees in order to enhance the long-term Shareholder value and maximize interest of all Stakeholders.

Your Company has complied with the provisions of Clause 49 of the Listing Agreement relating to Corporate Governance.

A detailed Report on Corporate Governance and a Management Discussion and Analysis Report have been attached to form part of the Annual Report.

A Certificate from the Auditors of your Company regarding the compliance of conditions of Corporate Governance has been annexed to this report.

Information pursuant to Section 217 of the Companies Act, 1956

In terms of Section 217 (1) (e) of the Companies Act, 1956 and the rules framed there under, the particulars relating to the conservation of energy, technology absorption & foreign exchange earnings and outgo are given below:

a. Conservation of Energy

The Company has in place an Energy Committee which meets once a month. This Committee consists of Cross-functional Executives. This Committee identifies the potential areas to conserve energy and implements novel energy saving measures, apart from recommending investment proposals to the management.

Various measures to conserve water and energy, notable amongst them being, reuse of Dicing process water, Rain Water Harvesting, Power factor improvement and extension of length of condenser in the A/c system to improve efficiency. Following Savings were made during the year.

b. Technology Absorption

The particulars regarding Technology Absorption are not applicable to your Company.

c. Foreign Exchange Earnings and Outgo

Your Company is a 100% export oriented unit and is constantly striving to increase its exports.

Foreign Exchange used during the year: Rs.5,099.49 lakhs

Foreign Exchange earned during the year: Rs.8,380.91 lakhs

Particulars of Employees

There are no such employees drawing remuneration in excess of limits mentioned as per section 217(2A) and hence no disclosure is required as per the said section.

Corporate Social Responsibility (CSR)

SPELs answer towards CSR is through SPEL Employees Social Service Organization (SESSO). As part of the Core values, following activities were undertaken though SESSO during the previous year.

a. Provided educational assistance to the needy people in and around Factory.

b. Conducted a voluntary Blood Donation camp.

c. Provided assistance to an orphanage and old age home located near Factory.

Environment and Safety Measures

Your Company understands that every individual has a responsibility towards our environment. Towards this, Your Company has been devising measures and encouraging its Employees to care for the environment and protect it through conservation of resources, waste minimization and proper disposal, pollution prevention and planting of trees.

Further Your Companys manufacturing activities do not result in any significant release of effluent in the environment.

The Environmental Management System established and maintained by your Company is certified by Bureau Veritas Certification. The upgraded ISO 14001 Certificate from 1996 version to 2004 version will comprehensively take care of safe environment practices. It is hopeful that the Company will be able to achieve this certification during the current year

Your Company considers environmental care to be a continuous effort and are always on the look out for more avenues to nurture nature by enhancing its environmental performance.

Acknowledgements

Your Directors wish to place on record their gratitude to the Government of India, the Government of Tamil Nadu, Financial Institutions, Bankers, Insurance Companies, Customs & Excise authorities, valued overseas Customers & Vendors and the Promoters for their continued assistance and support extended to the Company.

Yours Directors wish to place on record, their appreciation of the efficient and loyal services rendered by the employees at all levels to the Company.

Yours Directors wish to thank the Shareholders for their continued support and forbearance and the confidence reposed on the Management.

For and on behalf of Board of Directors

Chennai Dr. A. C. Muthiah

May 3, 2010 Chairman