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Encore Software Ltd.

BSE: 531750 Sector: IT
NSE: N.A. ISIN Code: INE103B01012
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OPEN 7.10
PREVIOUS CLOSE 6.80
VOLUME 1
52-Week high 7.10
52-Week low 0.00
P/E
Mkt Cap.(Rs cr) 5
Buy Price 0.00
Buy Qty 0.00
Sell Price 7.10
Sell Qty 2498.00
OPEN 7.10
CLOSE 6.80
VOLUME 1
52-Week high 7.10
52-Week low 0.00
P/E
Mkt Cap.(Rs cr) 5
Buy Price 0.00
Buy Qty 0.00
Sell Price 7.10
Sell Qty 2498.00

Encore Software Ltd. (ENCORESOFTWARE) - Director Report

Company director report

To the Members:

The Directors have pleasure in presenting before you the 24th Annual Reportof the Company together with the Audited Financial Statements for the year ended 31stMarch 2016.

1. FINANCIAL SUMMARY/HIGHLIGHTS OPERATIONS STATE OF AFFARIS

(Amount in Rs.)
Particulars 2015-2016 2014-2015
Gross Income 12205303 23488
Profit Before Interest and Depreciation 8997831 (3513870)
Finance Charges 23953746 21814787
Gross Profit (14955915) (25328657)
Provision for Depreciation
Net Profit Before Tax (14955915) (25328657)
Provision for Tax
Net Profit After Tax (14955915) (25328657)
Balance of Profit brought forward (409346501) (384017844)
Balance available for appropriation (424302416) (409346501)

While the Company has been continuing its efforts to get orders for the SATHI as wellas trying to make progress in the Brazil project it has also been working on finding newavenues of business especially in applying information technology in various businessapplications in keeping with the changing trends. Considerable progress has been made inthis direction and the Company is expecting reasonably significant orders for these inthe new financial year. These new activities will need further investments to be made inthe Company and the Company is finalizing with financial institutions and prospectiveinvestors for some innovative solutions/schemes for funding. The activities sochosen/planned have relatively low competition.

FUTURE PROSPECTS

The new activities when launched have been so chosen for their potential forgenerating revenues quickly and the Company is confident of being able to startrebuilding itself during the new financial year as well as generating significantrevenues and operating profit. Additionally efforts to revive the SATHI manufacturingactivity and the Brazil project will continue despite the seeming lack of success so farwhich should add to the revenue and profit of the Company in the coming year.

2. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS

There were no material changes and commitments which occurred affecting the financialposition of the Company between 31st March 2016 and the date on which thisreport has been signed.

3. MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY

The Company did not carry out any commercial sales activities. However in line withthe applicable regulations/Statutes revenue of the Subsidiaries was captured in theconsolidated financial Statement of the Company.

4. CHANGE IN THE NATURE OF BUSINESS

The Company expects to add new activities as mentioned above in applying informationtechnology in various business applications will expand the nature of business of theCompany from manufacturing and sales of products developed in-house to also softwareapplications for specific chosen domains by developing such applications in-house and/orpartnering with organizations specializing in those activities/domains.

5. DIVIDEND

In view of the losses incurred your Directors express inability to recommend anydividend.

6. AMOUNTS TRANSFERRED TO RESERVES

In view of the losses the question of transferring any amount to Reserves does notarise.

7. CHANGES IN SHARE CAPITAL

There were no changes in the Capital Structure of the Company during the year underreport. Capital structure remained as follows:

The Authorised Share Capital of the Company was Rs. 120000000/- (Rupees TwelveCrores only) and the Paid-up Share Capital of the Company was Rs. 64715000/- (RupeesSix Crores Forty Seven Lakhs Fifteen Thousand only) as on 31st March 2016.

Disclosure regarding Issue of Equity Shares with Differential Rights

During the year under review the Company has not issued Shares with DifferentialRights.

Disclosure regarding issue of Employee Stock Options

During the year under review the Company has not issued Shares Employee Stock Options.

Disclosure regarding issue of Sweat Equity Shares

During the year under review the Company has not issued Sweat Equity Shares.

8. CAPITAL INVESTMENTS

There was no capital Investments during the year 2015-16.

9. BOARD MEETINGS

The Meetings of the Board are held at regular intervals with a time gap of not morethan 120 days between two consecutive Meetings. Additional Meetings of the Board ofDirectors are held when necessary. During the year under review 4 (Four) Meetings wereheld on 29th May 2015 14th August 2015 13th November2015 and 15th February 2016.

The Agenda of the Meeting is circulated to the Directors in advance. Minutes of theMeetings of the Board of Directors are circulated amongst the Members of the Board fortheir perusal.

The details of other Committee Meetings during the financial year 2015-16 are given inthe Corporate Governance Report.

10. DIRECTORS AND KEY MANANGERIAL PERSONNEL

Mr. Vinay L Deshpande Director (DIN: 00225502) retires by rotation as per theCompanies Act 2013 and being eligible offers himself for re-appointment.

11. COMPOSITION OF AUDIT COMMITTEE

As on 31st March 2016 the Audit Committee of the Company consists of two(2) Non-Executive Independent Directors and one (1) Non-Executive Director and all of themhave financial and accounting knowledge.

The Board has accepted the recommendations of the Audit Committee during the year underreview.

The Audit Committee consists of the following:

a) Mr. U Divakaran Chairman
b) Mr. S P Satish Member
c) Mr. Vinay L Deshpande Member

12. NOMINATION AND REMUNERATION COMMITTEE POLICY

The Nomination and Remuneration Committee consists of the following:

a) Mr. U Divakaran Chairman
b) Mr. S P Satish Member
c) Mr. Vinay L Deshpande Member

The Composition criterial for selection of Directors and the Terms of Reference of theNomination and Remuneration Committee is stated in the Corporate Governance Report.

13. VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Company has a Whistle Blower Policy for vigil mechanism pursuant to the provisionsof Sections 177(9) and (10) of the Companies Act 2013 and as per Regulation 4(2) (d)(iv)of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 which isavailable on website of the Company at http://www.ncoretech.com and there were no casesreported during last year.

14. DIRECTORS’ RESPONSIBILITY STATEMENT

In pursuance of Section 134 (5) of the Companies Act 2013 the Directors herebyconfirm that:

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

b. the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and loss of the company for that period;

c. the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

d. the Directors had prepared the Financial Statements on a going concern basis;

e. the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively; and

f. the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively to beprovided.

15. EXTRACT OF ANNUAL RETURN

As required pursuant to Section 92(3) of the Companies Act 2013 and rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of annual return in MGT9 as a part of this Annual Report is attached as Annexure I.

16. INFORMATION ABOUT THE FINANCIAL PERFORMANCE/FINANCIAL POSITION OF THESUBSIDIARIES/ASSOCIATES/JV

Financial performance of the Subsidiary/Associates referred to in Section 129 of theCompanies Act 2013 in Form AOC-1 is annexed to this Report as Annexure II.

17. AUDITORS

The Auditors Messrs Ishwar & Gopal Chartered Accountants Bangalore (registeredwith ICAI membership number 021748) were appointed as Statutory Auditors of the Companyfor a term of 3 years to hold office from the conclusion of 23rd AnnualGeneral Meeting held on 28th September 2015 until the conclusion of 26thAnnual General Meeting subject to ratification of their appointment at every subsequentAnnual General Meeting.

QUALIFICATIONS IN THE AUDIT REPORT AND EXPLANATIONS BY THE BOARD

Sl. No. Qualifications made by Statutory Auditor Explanations by the Board
a. The entire net worth of the Company has been eroded. However the Company is continuing to prepare accounts under going concern concept. The Company is continuously making efforts to ramp up its scale of operations to generate profit and regain positive net worth.
b. Provision for retirement benefits in the form of gratuity and leave encashment has been made on estimated basis instead of on an actuarial valuation as on the balance sheet date in accordance with Accounting Standard (AS)-15 (revised) on ‘Employee Benefits’ (refer note no. 22 E) in respect of the Holding Company. The impact of the above on the ‘loss’ for the year is unascertained. In view of the few employees the Company followed the policy of accounting gratuity and leave salary liability on estimated basis instead of actuarial valuation.

18. SECRETARIAL AUDITOR

Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mr. Vijayakrishna KT Company Secretary in Practice to undertake the SecretarialAudit of the Company. The Report of the Secretarial Auditor in the form of MR-3 is annexedto this Report as Annexure III.

QUALIFICATIONS IN THE SECREATARIAL AUDIT REPORT AND EXPLANATIONS BY THE BOARD

Sl. No. Qualifications made by Secretarial Auditor Explanations by the Board
a. Acknowledgements for sending the notices of the Meetings of the Board and the Committees are not maintained by the Company. The notice and agenda for the Board and Committee meetings are sent by email. The Company will ensure to maintain the acknowledgements for sending the notices of the Meetings of the Board and the Committees.
b. c. Updating of website with regard to various policies are pending. Copy of newspaper clippings of advertisements informing the Board Meeting and AGM and the quarterly results are not available for review. The Company will take necessary steps to update Website with regard to various policies which are pending. The Company will take necessary steps to comply with the same.
d. The Company has not appointed Company Secretary (CS) during the year under scrutiny. The Company initiated the process of finding suitable candidates but due to the Company’s financial position the Company is not in a position to afford the remuneration expected by the Company Secretary. However Company will take necessary steps for comply with the requirements of law.
e. The Company has not appointed Chief Financial Officer (CFO) during the year under scrutiny. The Company initiated the process of finding suitable candidates but due to the Company’s financial position the Company is not in a position to afford the remuneration expected by the CFO. However Company will take necessary steps for comply with the requirements of law.
f. The Company has not appointed Managing Director. The Company is in the process of appointing Managing Director.
g. The Company has not maintained the attendance register for Board and Committee meetings. The Company will take necessary steps to maintain the attendance register for Board and Committee meetings.
h. Statutory Register as per Companies Act 2013 is yet to be updated. The Company will take necessary steps to update Statutory Register as per Companies Act 2013.
i. The Company has not appointed Internal Auditor during the year under scrutiny. Since there is no business and revenue in the last financial year the Company is not in a position to appoint the Internal Auditor. However Company will take necessary steps for comply with the requirements of law.
j. Certain web links were not disclosed in the Annual Report of previous year. The Company has adopted all the required Policies and the Company will take due care to comply with this in future.
k. Certain returns/registers required to be maintained under the General Laws like Karnataka Shops & Commercial Establishments Act Factories Act and other HR related Acts and Environmental Acts were not available for inspection. The Company will ensure to comply with the same in future.
l. The Company is yet to pay the listing fees for the year 2016-17 to BSE Limited. Due to financial constraint the Company has not paid the listing fees for the year 2016-17 to BSE Limited. However Company will take necessary steps for comply with the requirements of law.
m. The Company’s Shares are suspended from trading on BSE Limited vide order L/DOSS/PK/INV/COM/ 531750/1 dated 21.08.2015 with effect from 26th August 2015. Due to nonpayment of Listing fees to BSE Limited suspension of the Shares took place. When the liquidity position improves the Company will forthwith address this.

19. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO

(A) Conservation of Energy

Steps taken/impact on conservation of energy. The Company’s operations are not power intensive. Nevertheless your Company has introduced various measures to conserve and minimize the use of energy wherever it is possible.
(i) Steps taken by the company for utilizing alternate sources of energy including waste generated. Nil
(ii) Capital investment on energy conservation equipment. Not Applicable
Total energy consumption and energy consumption per unit of production as per Form A. Not Applicable
(B) Technology Absorption
Efforts in brief made towards technology absorption adaptation and innovation Nil
Benefits derived as a result of the above efforts e.g. product improvement cost reduction product development import substitution etc. Not Applicable
In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year) following information may be furnished:
Technology imported Not Applicable
Year of Import Not Applicable
Has technology been fully absorbed Not Applicable
If not fully absorbed areas where this has not taken place reasons therefore and future plan of action Not Applicable
(C) Research and Development (R & D)
Specific areas in which R & D carried out by the company The Company has not carried out any research and development work during the course of the year.
Benefits derived as a result of the above R & D Not Applicable
Future plan of action Not Applicable
Expenditure on R & D
(a) Capital Nil
(b) Recurring Nil
(c) Total Nil
(d) Total R & D expenditure as a percentage of total turnover Nil
(D) Foreign Exchange Earnings and Outgo
Activities relating to exports Not Applicable
Initiatives taken to increase exports Not Applicable
Development of new export markets for products and services Not Applicable
Export plans Not Applicable
Total Exchange used (Cash basis) As on 31st March 2016: Nil
Total Foreign Exchange Earned (Accrual Basis) As on 31st March 2016: Nil

20. RATIO OF REMUNERATION TO EACH DIRECTOR

The Company had 5 employees as of 31st March 2016. Pursuant to Section197(12) of the Companies Act 2013 and Rule 5 (1) (2) (3) of the Companies (Appointmentand Remuneration) Rules 2014 details/disclosures of Ratio of Remuneration to eachDirector to the median employee’s remuneration is annexed to this report as AnnexureIV.

There are no employees posted and working in a country outside India not beingDirectors or relatives drawing more than the limits prescribed in Sub Rule 5(3) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014.

21. DEPOSITS

Your Company has not invited/accepted/renewed any deposits from public as defined underthe provisions of Companies Act 2013 and Companies (Acceptance of Deposits) Rules 2014and accordingly there were no deposits which were due for repayment on or before 31stMarch 2016.

22. SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS

No order was passed by any court or regulator or tribunal during the period underreview which impacts going concern status of the Company.

23. DETAILS OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS

The Company continued to maintain high standards of internal control designed toprovide adequate assurance on the efficiency of operations and security of its assets. Theadequacy and effectiveness of the internal control across various activities as well ascompliance with laid-down systems and policies are comprehensively and frequentlymonitored by your Company’s management at all levels of the organization. The AuditCommittee which meets at-least four times a year actively reviews internal controlsystems as well as financial disclosures with adequate participation inputs from theStatutory Internal and Corporate Secretarial Auditors.

24. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

During the year under review the Company has not given any Loan Guarantees or madeInvestments within the meaning of Section 186 of the Companies Act 2013.

25. RISK MANAGEMENT POLICY

The Company has not yet formulated a Risk Management Policy and has in place amechanism to inform the Board Members about risk assessment and minimization proceduresand undertakes periodical review to ensure that executive management controls risk bymeans of a properly designed framework.

26. CORPORATE SOCIAL RESPONSIBILTY POLICY

Since the Company does not meet the criteria for the applicability of Section 135 ofthe Companies Act read with the Companies (Accounts) Rules 2015 this clause is notapplicable.

27. RELATED PARTY TRANSACTIONS

There were no related party transactions during the financial year 2015-16.

28. FORMAL ANNUAL EVALUATION

Pursuant to the provisions of the Companies Act 2013 and the Listing Regulations theBoard has carried out an annual performance evaluation of its own performance theDirectors individually as well as the evaluation of the working of its Audit Nomination& Remuneration and Compliance Committees.

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration.

29. MANAGEMENT DISCUSSION AND ANALYSIS

As requisite and appropriate Management Discussion & Analysis is covered under thisReport itself a separate note on the same is not being furnished.

30. LISTING WITH STOCK EXCHANGES

Due to liquidity constraints the Company has not yet been able to pay the AnnualListing Fees for the financial year 2016-17 to BSE Limited where the Company’sShares are listed.

31. CORPORATE GOVERNANCE AND SHAREHOLDERS INFORMATION

A separate Report on Corporate Governance in terms of Regulation 34 of the SEBI(listing Obligations and Disclosure Requirements) Regulations 2015 along with aCertificate from a Practising Company Secretary regarding compliance to the

Conditions stipulated under Chapter IV of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 is attached to this report as Annexure V.

32. DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS

The Company has received necessary declaration from each Independent Director of theCompany under Section 149(7) of the Companies Act 2013 that the Independent Directors ofthe Company meet with the criteria of their Independence laid down in Section 149(6)(Annexure VI).

33. EVENT BASED DISCLOSURES

The Company’s shares are suspended from trading on BSE Limited vide orderL/DOSS/PK/INV/COM/531750/1 dated 21st August 2015 passed by Managing Directorand Chief Executive Officer of BSE Limited with effect from 26th August 2015.

Further the Company has received revised assessment order passed u/s 143 (3) r.w.s260A of Income Tax Act 1961 consequent to the order of the CIT(A)-2 Bangalore in ITA No.400 & 386/CIT(A)-2/2014-15 dated 14.01.2016 from Income Tax Department claiming incometax payable of Rs. 2731649/-.

34. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013

Your Company did not engage any women employee during the tear under review.

35. ACKNOWLEDGEMENTS

The Directors wish to place on record their appreciation for the sincere and dedicatedefforts of all employees. Your Directors would also like to thank the ShareholdersBankers and other Business associates for their sustained support patronage andcooperation.

For and on behalf of Encore Software Limited
Place: Bangalore Vinay L Deshpande Chhanda Deshpande
Date: 12th August 2016 Director Director
DIN: 00225502 DIN: 00225546