Annexures to the Directors’ Report

A. Directors' Responsibility Statement pursuant to Section 217(2AA) of the Companies (Amendment) Act, 2000

  1. The financial statements have been prepared in conformity with the applicable Accounting Standards issued by the Institute of Chartered Accountants of India and requirements of the Companies Act, 1956, (the Act) to the extent applicable to us; on the historical cost convention; as a going concern and on the accrual basis. There are no material departures in the adoption of the applicable Accounting Standards.
  2. The Board of Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period.
  3. The Board of Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.
  4. The financial statements have been audited by B S R & Co., Chartered Accountants, the Company’s Statutory Auditors.
  5. The Audit Committee meets periodically with the Internal Auditors and the Statutory Auditors to review the manner in which the Auditors are discharging their responsibilities and to discuss audit, internal control and financial reporting issues.
  6. To ensure complete independence, the Statutory Auditors and the Internal Auditors have full and free access to the Members of the Audit Committee to discuss any matter of substance.

B. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outflow

The provisions of conservation of energy and technology absorption and adaptation do not apply to the Company. However, various measures voluntarily taken by the Company are detailed under Business Responsibility Report.

C. Technology and Innovation

a) Technology Absorption in PES Business

Mindtree has been investing in building technology agility and asset creation in multiple ways viz., Research Labs (PES Labs), Industry Group Labs (IG Labs) and Centres of Excellence (COEs). The Research Labs look at emerging technologies early on, evaluates and sponsors specific initiatives that lead to substantial technology assets and deep understanding of early stage technologies. The COEs focus on specific technologies whereas, IG Labs invest in creating assets for specific industry groups being serviced by the group.

PES Labs

With the advent of the collaborative internet, mobile computing and social media as well as the rapid growth of IP-enabled sensors and location aware devices, the sources of massive data streams and their applications have significantly increased. PES Labs have been investigating scalable computing as a research theme under which real-time analytics of Big Data in Motion (Streaming Big data) and Internet of Things (IOT) are the two on-going research initiatives.

Technology Centres of Excellence

Technology Centres of Excellence (COEs) at PES are chartered with developing deep expertise as well as creating methodologies, frameworks and solutions in the chosen areas of focus, to help our customers with faster product development and time to market. The following COEs have been active in fulfilling this charter.

  • Web Technologies Centre of Excellence

Web Technologies Practice is working on “Product Intelligence Dashboard” - an initiative to develop an unobtrusive tool that combines state-of-the-art analytical techniques with already-existing data about product usage latently lying in application logs and also social data of the product that is present in the web.
The tool is aimed primarily at Product Managers and Account Managers wherein, it will equip Product Managers to make intelligent datadriven decisions with regard to their product roadmap; on the other hand, it will provide Account/Engagement Managers better insights into product usage so as to facilitate deeper engagement with customers and effective adoption by end-users.

  • Open Source Software Centre of Excellence

OSS COE has demonstrated an integrated “Semantic SOA” platform using open source based components – a platform which offers a scalable, fault-resilient and self-organizing substrate for building Semantic SOA-based applications. The COE is also building an open source based “Media Distribution Platform” called “MOSS” – a one stop media solution for managing and distributing media assets . The COE has also taken the Warpspeed, Web UI analyzer tool to the next level by adding a library of re-usable HTML5 components.

  • Microsoft Azure Centre of Excellence

Our MS Azure COE has also extended the Azure Migration Factory (AMF 3.0) to include new tools and solutions that enable enterprises to adopt the MS cloud effectively.
Windows Azure Gauge, a desktop gadget that shows the status of application instances running in Azure and send further details over email.

Backup Hosted Application Package- Tool to save the hosted applications package to the Azure storage blob container so that, it can be restored later.

Azure Diagnostic Log Analyzer- Azure Diagnostic Log Analyzer tool is a WPF client based application used to manage and analyze Azure diagnostics data collected by Windows Azure applications.

Azure Storage Backup- A web application used to take a backup of the Azure blob storage and recover in case of data loss.

  • Enterprise SW Product (ESP) Labs

During FY 2012-13, Mindtree’s ESP Labs has invested in developing a metadata based framework (MARS) that will help ISVs and their customers to migrate from one version to another or one database system to another. Currently under development, MARS will have the ability to create metadata and use this metadata in migration process using SQL scripts, APIs, web services or a combination of these already available in the product. It can also help to consolidate multiple modules, integrate other products in the base offering by updating the metadata and help in integration/migration for its customer.

b) IT Services Investments In Solutions And Technologies

Mindtree continued to strengthen its Digital Business (dBiz) practice as well as investing in digital analytics, enterprise integration, business process management and packaged solutions. Mindtree also embarked on developing non-linear capabilities to service Consumer Packaged Goods (CPG), Manufacturing, Banking & Financial Services (BFS) and Insurance industries. Following are few examples of solutions and technology centres of excellence that Mindtree invested in during the year:

  • A Business Process Monitoring (BPM)-based solution that enables banks to orchestrate the loan origination process and its periodic optimization. It allows customers to adopt efficient processes with parallel activity for different stakeholders. The solution automates exposure checks covering customer, group, concentration limits across products and industries. It also enables better monitoring of counterparty risks against external entities, countries and currencies across the loan approval process.
  • A data aggregation and rule-based solution, which enables banks to consolidate data from loan servicing platforms and visualize end customer exposure across product lines. It applies rules for ongoing exposure tracking, collateral valuations and covenants monitoring.
  • A centre of excellence to create world-class solutions around business process management and expertise using the PEGA suite of products.
  • A reusable MDM framework which includes data quality integration and data stewardship features as well as a self-service MDM and Data Quality tool evaluation utility.
  • A metadata driven framework that accelerates ETL development lifecycle. It utilizes the Microsoft and SAP Business Objects stack and can be plugged into any SSIS and BODS solution.
  • Best practices' based BOXI 3.x to 4.x migration framework which substantially reduces migration time and ensures high quality by stressing a high ratio for first-time-right.
  • An Application monitoring dashboard framework built using a standard data model, which enables a service delivery team to monitor jobs and their status.
  • A digital analytics model developed to improve customer engagement at a website. It provides key metrics by analyzing visitor data, behaviour data and transactions on websites using an engagement ladder framework.
  • A churn analytics model developed for insurance industry for optimizing retention of high value customers.
  • Mobility applications on SAP Trade promotion management for CPG industry, developed as part of Mobile Application partner program run by SAP.
  • A COE catering to enhancing SAP HANA capabilities including BW to HANA migration.
  • ABAP development accelerators that will improve the delivery efficiency and timelines. Features include: ABAP Code Reviewer, ABAP Code Commenter, Transport Utility and ABAP Code Generator.
  • Mobile AppFactory that provides native mobile application building blocks, components and reference applications.
  • Smart Store solutions – a collection of mobile applications relevant for Retail Store and Distributors.
  • Data visualization components designed for reports to be viewed on Mobile devices.
  • mBrowse – a Mobile Website Testing accelerator.

c) Patents

The patents filed by Mindtree are given in the table below:

Patent filed

D. Earnings and Expenditure in Foreign Currency (accrual basis)

Expenditure in Foreign Currency

Expenditures 2012 13

Earnings in foreign currency

Earnings 2012 13

Benefits of the Research and Development Initiative of your Company

The expertise built up by your Company through the R&D initiatives has been instrumental in winning some of the customers during the year. Your Company uses the expertise in the R&D team to provide technology consulting services to some of its customers.

Plan of Action

Your Company will continue to invest in R&D initiatives going forward.

Technology Absorption, Adaptation and Innovation

Your Company provides its employees with a 'state of the art' working environment, with a view to optimize their performance. The hardware & software used is the very latest. All employees have access to the Internet. The excellent communication infrastructure put in place by your Company ensures that the employees get to work on the same environment that the customers’ engineering teams work on. The communication infrastructure also enables the employees of your Company working onsite to work very closely with their counterparts in India, enabling a 24-hour delivery model. The adoption of latest technologies along with the investments in R&D enables your Company to be the preferred technology solutions provider to many leading global corporations.

E. Disclosure as per Ministry of Corporate Affairs’ General Circular Letter No. 2/2011-CL-III dated 8 February, 2011.

Financial Summary of the Subsidiaries

Financial summary of subsidiaries

* Note: Corresponding figures for previous year presented have been regrouped, wherever necessary to confirm to the current year's classification. The detailed financials of the Subsidiary Companies shall be made available to any Shareholder seeking such information.

F. Data as per Clause 5A of the Listing Agreement which remain unclaimed and are lying in the Escrow Account

  1. 11 Shareholders holding 197 shares are in the suspense account from the beginning of the year 2012-13;
  2. Number of Shareholders who approached issuer for transfer of shares from suspense account during the year - Nil;
  3. Number of Shareholders to whom shares were transferred from suspense account during the year - Nil:
  4. 11 Shareholders holding 197 shares are in the suspense account lying at the end of the year .

The voting rights on these shares shall remain frozen till the rightful owner of such shares claims the shares.

G. Employee Stock Option Plans

The Company instituted the Employees Stock Option Plan ('ESOP') in fiscal 2000, which was approved by the Board of Directors ('Board'). Under the ESOP, the Company currently administers eight stock option programs, including Mindtree Employee Restricted Stock Purchase Plan 2012 ('ERSP 2012') during the current year.

Program 1 [ESOP 1999]

Options under this program are exercisable at an exercise price of Rs.10/- per option. All stock options have a four-year vesting term and vest at the rate of 15%, 20%, 30% and 35% at the end of 1, 2, 3 and 4 years respectively from the date of grant and become fully exercisable. Each option is entitled to 1 equity share of Rs.10/- each. This program extends to employees who have joined on or before September 30, 2001 or have been issued employment offer letters on or before August 7, 2001. This plan was terminated on September 30, 2001. The contractual life of each option is 11 years after the date of grant.

Employee stock option plans 2012 13

Program 2 [ESOP 2001]

Options under this program have been granted to employees at an exercise price of Rs.50/- per option. All stock options have a four-year vesting term and vest at the rate of 15%, 20%, 30% and 35% at the end of 1, 2, 3 and 4 years respectively from the date of grant and become fully exercisable. Each option is entitled to 1 equity share of Rs.10/- each. This program extends to employees who have joined on or after October 1, 2001 or have been issued employment offer letters on or after August 8, 2001 or options granted to existing employees with grant date on or after October 1, 2001. This plan was terminated on April 30, 2006. The contractual life of each option is 11 years after the date of grant.

Employee stock option plans program2

Program 3 [ESOP 2006 (a)]

Options under this program have been granted to employees at an exercise price of Rs.250/- per option. All stock options have a four-year vesting term and vest at the rate of 15%, 20%, 30% and 35% at the end of 1, 2, 3 and 4 years respectively from the date of grant and become fully exercisable. Each option is entitled to 1 equity share of Rs.10/- each. This program extends to employees to whom the options are granted on or after May 1, 2006. This plan was terminated on October 25, 2006. The contractual life of each option is 5 years after the date of grant.

Employee stock option plans program3

Program 4 [ESOP 2006 (b)]

Options under this program are granted to employees at an exercise price periodically determined by the Compensation Committee. All stock options have a four-year vesting term and vest at the rate of 15%, 20%, 30% and 35% at the end of 1, 2, 3 and 4 years respectively from the date of grant and become fully exercisable. Each option is entitled to 1 equity share of Rs.10/- each. This program extends to employees to whom the options are granted on or after October 25, 2006. The contractual life of each option is 5 years after the date of grant.

Employee stock option plans program4

Program 5 [ESOP 2008 (A)]

Options under this program are granted to employees of erstwhile Aztecsoft Limited as per swap ratio of 2:11 as specified in the merger scheme. Each new option is entitled to 1 equity share of Rs.10/- each.

Employee stock option plans program5

Program 6 [Directors' Stock Option Plan, 2006 ('DSOP 2006')]

Options under this program have been granted to Independent Directors at an exercise price periodically determined by the Compensation Committee. All stock options vest equally over three year vesting term at the end of 1, 2 and 3 years respectively from the date of the grant and become fully exercisable. Each option is entitled to 1 equity share of Rs.10/- each. The contractual life of each option is 4 years after the date of the grant.

Employee stock option plans program6

Program 7 [(ESOP 2010 (A)]

In-principle approvals for administering the seventh stock option program i.e., ESOP 2010 (A) has been received by the Company from the BSE and NSE for 1,135,000 equity shares of Rs.10/- each. No options have been granted under the program as at March 31, 2013.

Mindtree Employee Restricted Stock Purchase Plan 2012 ('ERSP 2012')

ERSP 2012 was instituted with effect from July 16, 2012 to further issue up to 1,000,000 equity shares of nominal value of Rs.10/- each. Shares under this program are granted to employees at an exercise price of not less than Rs.10/- per equity share or such higher price as decided by the Board. Shares shall vest over such term as determined by the Board not exceeding ten years from the date of the grant. All shares will have a minimum lock in period of one year from the date of allotment.

Employee stock option plans program7

The following table summarizes information about the weighted average exercise price of options/shares exercised under various programs:

Average exercise options price

The following tables summarize information about the options outstanding under various programs as at March 31, 2013 and March 31, 2012respectively:

Option outstanding information

The Company has recorded compensation cost for all grants using the intrinsic value-based method of accounting, in line with prescribed SEBI guidelines.

Had compensation been determined under the fair value approach described in the Guidance Note on, “Accounting for employee share basedpayments” issued by ICAI, the Company's net profit and basic and diluted earnings per share would have reduced to the proforma amounts asindicated:

Company net profit

During the year ended March 31, 2013, 20,000 options were granted by the Company under DSOP 2006.The weighted average fair value of eachoption of Mindtree, granted during year ended March 31, 2013 was Rs.393.56 using the Black-Scholes model with the following assumptions:

Weighted average fair value march 2013

The Company has received/realised the below mentioned amount by exercise of options by the employees.

The following table summarizes the information about the amounts received/realized by the Company under various programs as at March 31, 2013 and March 31, 2012 respectively.

Employees exercise of options

H. Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of employees) Rules, 1975, and forming part of the Directors’ Report for the year ended March 31,2013

Directors report

* The Gross Remuneration is inclusive of Rs.6,382,722 paid as Managerial Remuneration to Mr. Anjan Lahiri as an Executive Director for the period October 24, 2012 to March 31, 2013.

H. Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of employees) Rules, 1975, and forming part of the Directors’ Report for the year ended March 31,2013

Part of the year

directors report

Notes

  1. Remuneration above is on cost to company basis, i.e., basic salary, all perks and allowances, incentives and employer's contribution to provident fund
  2. None of the employees is related to any director of the Company.
  3. The terms of employment of the above-referred employees/directors are contractual and they perform such duties as prescribed thereunder
  4. None of the above-referred employees hold shares exceeding 1% as on March 31, 2013 except for Mr. Subroto Bagchi, Mr. N. S. Parthasarathy, Mr. Krishnakumar Natarajan, Mr. S. Janakiraman and Mr. Anjan Lahiri.

For and on behalf of

the Board of Directors

Bangalore

April 22, 2013

Subroto Bagchi

Chairman