2. Capital

(i) 18,00,000, 16% Cumulative Preference shares allotted on 12.01.1996 redeemable at the end of three years from the date of allotment, are overdue for repayment.

(ii) 1,40,00,000, 12% Non Cumulative Convertible Preference shares of Rs.100/- each allotted on private placement basis, 1,00,00,000 on 22.05.98 and 40,00,000 on 16.1.1999. The preference shares are redeemable after three years from the date of allotment but not later than 10 years. However, the date of redemption shall be decided by the Board of Directors of the company. The holders of the preference shares shall have the option to convert their holding into equity shares of Rs.10/- each at par against the paid up value of the preference shares between the end of third and fifth year from the date of allotment.

(iii) 75,60,000,10% Non Cumulative Preference shares of Rs.100/- each allotted on private placement basis on 01.03.1998 redeemable at the end of 10th year from the date of allotment.

(iv) Capital raised by conversion of Debentures Series VI, VII and VIII and unpaid Allotment and Calls, is pending reconciliation with members account in register 'of Shareholders.

3. Secured Loans: (a) Debentures

(i) The company has allotted 5000 Thousands 19% secured non-convertible debentures (NCD's) of Rs.100 each amounting to Rs. 500000 Thousands, redeemable at par after 15.04.99 to the Industrial Finance Corporation of India Limited (IFCI) on 10.03.98. These debentures are secured by way of mortgage of the equipments at semi conductor division at Faridabad, Land at Mehsana Gujrat and personal guarantee of two directors. Whole amount of Rs.500000 Thousands is overdue for payment on 31.03.2004 (previous period 500000 Thousand).

(ii) The company has issued 800 Thousands 19% secured Non Convertible Debentures (NCDs) of Rs.100 each amounting to Rs.80000 Thousands on private placement basis to financial institutions on 3.2.1993 redeemable at par and secured by (a) by way of first mortgage in respect of Bhimtal's, Electronic division's immovable properties consisting of land with building and structures erected/or to be erected, movable and immovable plant and machinery both present and future and shop at Vadodara. (b) a first charge by way of Hypothecation in respect of all Bhimtal division's movable assets consisting of spares, stores, tools and accessories including all other movable assets both present and future subject to the prior charges created/and or to be created in favour of the company's bankers for the Stock of raw materials, semi finished goods, consumables, stores, book debts and other movables as may be permitted by the trustees for securing borrowing for working capital requirement in course of business. The mortgage and charges created as aforesaid shall rank pari pasu with the charges created/to be created in favour of the other participating financial institutions/banks to the extent mentioned of their holding. Out of the above (i) 300 Thousands NCDs of Rs.100 each amounting to Rs.30000 Thousands were redeemable in three yearly equal installments from the sixth year and whole amount of Rs. 30000 Thousands is due for payment as on 31.03.2004 (previous period 30000 thousand).(ii) 500 Thousands NCDs of Rs. 100 each amounting to Rs. 50000 Thousands were redeemable in the seventh year i.e. already due for the payment. State Bank of Hyderabad is the trustee as per trust deed.

(iii) The company has allotted 300 Thousands 18.5% Secured Non Convertible Debentures (NCDs) of Rs.100 each amounting to Rs. 30000 Thousands to Unit Trust of India (UTI) on 05.08.97 redeemable at par in three equal installment starting from 1.4.99 and whole amount of Rs.30000 Thousands to due for payment as on 31.03.2004 (previous period 30000 Thousand). The NCD's are to be secured by (a) First mortgage by deposit of title deed in respect of immovable properties consisting of land with building and structure erected and/or to be erected, movable and immovable plant and machinery, both present and future relating to "solid state transistor division, (TO-3), Faridabad" (b) First charge by way of the hypothecation in respect of all movable assets consisting of Spares, stores, tool and accessories including all other movable, both present and future, situated at "Solid State transistor division" Faridabad subject to prior charges created and/or to created in favour of the companies bankers for the stock of raw materials, semi finished goods, consumables, stores and book debts and other movables as may be permitted by the trustees of the securing borrowings for the working capital requirements in the ordinary course of business. The mortgage and charges created as aforesaid shall rank pari pasu with the charges created/to created in favour of the other participating financial institutions/banks to the extent their holding. The trust deed is yet to be executed.

(b) Term Loans

(i) The company has been sanctioned term loans aggregating Rs. 380000 Thousands and availed Rs. 377481 Thousands i.e. (a) Rs. 200000 Thousands from Industrial Development Bank of India (IDBI) repayable in 20 quarterly installment of Rs.10000 Thousands each starting from 1.4.98 and whole amount of Rs.140000 Thousands is overdue for payment on 31.03.2004 (previous period Rs. 140000 Thousands). Secured by exclusive charge by way of hypothecation of the specific assets acquired under the equipment finance scheme. Undertaking to extent first mortgage and charge on all the fixed assets, both present and future, ranking pari pasu with other loan from landing institutions/banks in such form as may be required by IDBI and guaranteed by two directors, (b) Rs.177481 Thousands from Industrial Finance Corporation of India Ltd. (IFCI) repayable in 16 quarterly installments of Rs. 11250 Thousands each. starting from 15.1.99 and whole amount of Rs. 177481 Thousands is due up to March 2004. This loan is secured by way of exclusive first charge on the movable and immovable fixed assets of the company created/to be created financed under the proposed scheme in favour of IFCI, subject to charges to be created in favour of bankers for working capital facility and irrevocable and unconditional personal guarantee of two directors of the company.

(ii) The company has been sanctioned term loans aggregating Rs.46200 Thousand (46200 Thousands) and availed Rs.46200 Thousand (a) Rs.26200 Thousand from technology development Board (TDB) @ 6% P.A. repayable in 5 yearly installment of Rs.5240 Thousands each starting from Jan'2000, whole amount is overdue for repayment as on 31.3.2004 (Previous year Rs. 20960 Thousand. (b) Rs.20000 Thousand from department of Electronics (DOE) interest free loan repayable in 10 half yearly installment of Rs.2000 Thousand each starting from March, 2000. Rs. 16000 Thousand is overdue for repayment as on 31.3.2004.(Previous year Rs. 12000 Thousand). Loan (a) is secured against the movable plant & machinery procured/to be procured for the Epitaxial division of Electronic division at Faridabad as per the term sanctioned by the technical development Board (TDB) and loan (b) is secured by the corporate guarantee.

(iii) Export - Import bank of India (EXIM Bank) has sanctioned foreign currency loan of USD 750 Thousand (750 Thousand) for TO-92 expansion programme of Samsung Division and availed USD 750 Thousand (750 Thousand) Secured by hypothecation of movable fixed assets and export receivable as created-out of this loan amount and mortgage of plot B-II/94 MCIE, New Delhi as per term sanctioned by EXIM Bank (a) Rs. 15753 thousand (Rs. 15753 thousand) from Korean export import bank by way of line of credit repayable in half yearly installment of USD 61667 starting from 15th November 1999. (b) Rs.16277 Thousand (Rs. 16277 Thousand) from EXIM Bank of India repayable in half yearly installment of USD 63300 starting from 15th January, 2000.

Interest on all the above loans/debentures is continued to be provided on the principal amount at the rate/coupen rate at which they were sanctioned.

4. Capital work in progress includes (a) Advances to supplier Rs.25 Thousands (Rs.25 Thousands) (b) Salaries & Wages Rs. 1720 Thousands (Rs. 1720 Thousands), power & fuel Rs.43 Thousands (Rs. 43 Thousands), traveling & telephone Rs.1175 Thousands (Rs. 1175 Thousands), interest Rs. 34 Thousands (Rs. 34 Thousands), building under construction Rs.1008 Thousands (Rs. 1008 Thousands) and other expenditure Rs. 784 Thousands (Rs. 784 Thousands) (b) machinery under installation Rs. 24028 Thousands (Rs. 24028 Thousands).

5. Sundry debtors and advances recoverable (Net of Provision) includes Rs.556 Thousand (Rs.556 Thousand) and Rs. NIL Thousand (Rs.20 Thousand) respectively from private companies in which directors of the company are also directors. Maximum balance outstanding at any time during the period Rs. 556 thousand (5157 thousand) and Rs. 20 thousand (20 thousand).

6. Investments

(a) The instruments are held in the name of the company except to the extent exempt under Section 49 of the Companies Act 1956.

(b) Instruments held are fully paid up unless otherwise stated.

(c) Aggregate book value of Quoted Investments as at the year end is Rs. 39816 thousand (Previous year NIL). Market value of Quoted Investment in US-64 Bonds was Rs. 43201 thousand (Previous year N.A.). Market value of other Quoted Investments cannot be given because they are not traded on any stock exchange for a long time. However, In the opinion of management they have no realiable value (Previous year NIL). The aggregate book value of unquoted investments is 2 thousand (Previous year Rs. 39818 thousand). Aggregate cost of Quoted and Unquoted Investment cannot be given due to non availability of records. (Refer Note No. B. 12 of Schedule `O')

(d) As per the Balance Sheet of the Company as on 31.3.2003, It held a 92210029 equity shares in Usha Ispat Ltd. As per the information received from Usha Ispat Ltd, consequent upon getting transfer of 7290873 shares by Lord Krishna Bank and 350000 shares by The Bank of Tokyo Mitsubishi Ltd. in their name (which were pledged by the company in their favour), the holding of company stand reduced to 84569156 and consequently Usha Ispat Ltd.ceases to be a subsidiary of the company. Accordingly, In Schedule `F' of Balance Sheet, the number of equity shares held in Usha Ispat Ltd. Is being shown as 84569156 shares under the heading investment in other companies.

(e) As per the Balance Sheet of the company as on 31.3.2003, It held 294757290 equity shares in subsidiary company Malvika Steels Ltd. All the Shares held by the company are Pledged/committed to be pledged in favour of banks/institutions/others in respect of borrowings by the company or guarantee given by the company. There have been various defaults in repayment of dues by the company and others on whose behalf guarantees were given. The Company is not aware of any change in number of shares held by it and any change in status of Malvika Steel Ltd. as subsidiary company, on account of possible transfer of pledged shares that may have taken place. Pending the receipt of any information in this regard from Malvika Steel Ltd./banks/institutions, the number of shares held by the company in Malvika Steel Ltd. and Status as subsidiary is being shown same as was shown in last year.

7. Share issue expenses of Rs.14870 Thousands (Rs.19827 Thousands) have been debited to share premium account in terms of section 78 of the Companies Act.

8. In the opinion of the management, current assets, loans and advances are of the value stated if realized during the ordinary course of business.

9. As per the information available with the company the names of the small scale industrial undertaking to whom the company owe sum exceeding Rs. 100 Thousand which is outstanding more than 30 days are M/s Anand Engineering Works, M/s Makharia rubber industries and M/s Engineering enterprises.

10. Particulars of Managerial Remuneration is as under:

(i) Salaries Rs.384 Thousand (Rs. 454 Thousand) (ii) Contribution to Provident Fund Rs.46 Thousand (Rs 54 Thousand) (iii) Other Benefits Rs.473 Thousand (Rs.485 Thousand) Total Rs.903 Thousand (Rs.993 Thousand)

Note :- The above do not include gratuity and leave encashment as separate valuation are not ascertainable.

11. Auditor remuneration includes: a) For statutory audit Fees Rs.119 Thousand (Rs, 118 Thousand), Tax Audit Fee Rs. NIL thousand (Rs. 107 Thousand)

12. The Income Tax Authorities have searched various premises of the company on 14.02.2001 under section 132 of the Income Tax Act, 1961, and seized various records/documents including certain books of accounts, invoices, vouchers, papers and documents relating to guarantee given by the company, and other old contingent liabilities figures, borrowings, investments scripts of the company. The certified copies of the relevant records were not available by the Department. The relevant books of accounts upto the date of search were recompiled from the available subsidiary records and the information available in the computer system of the company. The balances of sundry debtors, sundry creditors, loans and advances and other liabilities could also not got confirmed.

13. a) The company had given corporate guarantee to IDBI in respect of financial assistance sanctioned by them to Usha Ispat Limited. Due to default made by Usha Ispat Limited in repayment of IDBI's loan and interest, they have revoked the corporate guarantee given by the company in this regard and demanded a sum of Rs. 1953730 Thousand. In the opinion of the management no effect is required to be taken in the accounts of the company as the matter is subjudiced.

b) The company had given corporate guarantee to Lord Krishna Bank in respect of credit facilities sanctioned by them to Koshika Telecom Ltd. Due to default made by Koshika Telecom Ltd. in repayment of said bank's loan and interest, they have revoked the corporate guarantee given by the company in this regard and demanded the company to pay a sum of Rs. 112052 thousand. In the opinion of management no effect is required to be taken in the accounts as the matter is Sub-judiced.

c) The company had given corporate guarantee to IFCI in respect of credit facilities sanctioned by them to Malvika Steel Ltd. Due to default made by Malvika Steel Ltd. in repayment of IFCI's loan and interest, they have filed a suit in the Debt Recovery Tribunal for the recovery of their dues amounting to Rs. 10375871 thousand. The corporate guarantee given by the company has been revoked by IFCI. In the opinion of management no effect is required to be taken in the accounts.

d) The company had given corporate guarantee to IFCI in respect of credit facilities sanctioned by them to Koshika Telecom Ltd., Due to default made by Koshika Telecom Ltd. in repayment of IFCI's loan and interest, they have filed a suit in the Debt Recovery Tribunal for, the recovery of their dues amounting to Rs. 233724 thousand. The corporate guarantee given by the company has been revoked by IFCI. In the opinion of management no effect is required to be taken in the accounts as the matter is Sub-judiced.

e) The company has given corporate guarantee to IDBI in respect of credit facilities sanctioned by them to Malvika Steel Ltd., Due to default made by Malvika Steel Ltd, in repayment of IDBI's loan arid interest, IDBI have revoked the corporate guarantee given by the company in this regard and demanded the company to pay a sum of Rs.7451078 Thousand. In the opinion of management no effect is required to be taken in the accounts.

f) The guarantee given by the company to Small Industries Development Bank Of India (SIDBI) in respect of credit facilities granted by them to Pittie Agro Ventures Ltd. has been revoked by SIDBI consequent upon default by Pittie Agro Ventures Ltd. in discharging its liabilities towards SIDBI. Consequently the company has asked to pay a sum of Rs. 34744 Thousands.

g) The guarantee given by the company to EDC Ltd. in respect of loan granted by them to Burr Brown (India) Ltd. has been revoked by EDC Ltd. consequent upon the default by Burr Brown (India) Ltd. in discharging its liabilities towards EDC Ltd. Consequently the company has been asked to pay a sum of Rs. 74119 Thousand.

h) The guarantee given by the company to PICUP in respect of credit facilities granted by them to Orphic Resorts Ltd. has been revoked by PICUP consequent upon default by Orphic Resorts Ltd. in discharging its liabilities towards PICUP. Consequently the company has asked to pay a sum of Rs 109605 thousand. The above corporate guarantees given by the company are continued to be shown as contingent liabilities.

14. Balances of certain Debtors, Creditors, Loans, Advances and other liabilities are subject to confirmation and reconciliation. In the opinion of management it is not likely to have any material impact on the accounts as the provisions have been made for loan, debtors and advances which in its opinion are doubtful of recovery

15. Certain loans from Banks/Financial Institutions are subject to confirmation. Due to delay/default in the repayment of loans, confirmations have not been received. Balances with some banks in current account and margin money account are also subject to confirmation. Copy of bank statements from various banks could not be received.

16. During the previous period, the guarantee given by IDBI on behalf of the Company in respect of supplier credit facility given by Exim Bank Korea was revoked by them on account of default by the Company. Consequently IDBI as a guarantor had to pay the amount payable to Exim Bank Korea. The amount of Rs. 37724 Thousands paid by IDBI has been shown under the head secured loan. However no provision for interest has been made on the amount payable to IDBI as in the opinion of management it is not necessary at this stage.

17. Other liabilities includes Rs. 78559 Thousands (Previous year Rs.78559 Thousand) payable to Fair Child, Korea on account of amount paid by them to ABN Amro Bank towards repayment of Packing Credit Facility availed by the Company as they have given guarantee on behalf of Company.

18. In view of losses, Debenture Redemption Reserve has not been created.

19. Due to overall sluggish market conditions, poor financial position of the company and various other factors, it has not been able to repay certain loans as per repayment schedule. In the opinion of the management, provision for interest on interest, overdue interest, penal interest, liquidated damages etc. on the loans of banks/financial institutions, the aggregate amount of which has not been ascertained, is not considered necessary at this stage. In respect of certain cash credit and other facilities availed from banks, as per the statement received by the company, the respective banks have not charged interest for the certain period. The amount of interest not so charged is unascertained.

20. During the previous periods, the company had made-provisions towards diminution in the value of Investments in various Subsidiary and other companies as explained in those year's notes on accounts. The financial position of those companies has deteriorated further. Hence the chances of realising any value from these Investments continues to be nil. Accordingly the Investments have been shown at nil value.

21. Salary, Wages, Bonus, Gratuity and Allowances includes amount of compensation etc. paid to various employees on their full and final settlement.

22. During the previous period, search and seizure was carried out at the premises of the company by investigation agency of central government. During the course of search and subsequent proceedings various records, books of accounts and documents including those relating to fixed assets and borrowings were seized/retained by the said agency. In the opinion of management, it is not likely to have any impact on the accounts of the company.

23. The company had made a reference to Board for Industrial & Financial Reconstruction (BIFR), which was rejected. Against the rejection order of BIFR, the company has filed appeal with appropriate authorities. Based on accounts for the year ended 31.03.2003, the company had filed another reference, which is yet to be heard. The company has received notices under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 from various lender Banks/Institutions. The company is seeking necessary legal advice and also following up the matters.

24. The company has outstanding loans amounting to Rs. 38764 thousand (Rs. 38764 thousand) from subsidiary/Erstwhile subsidiary companies (Rs. 35688 thousand from Usha Marconi Micro Electronics Ltd., Rs. 1130 thousand from Malvika Steel Ltd., Rs 1824 thousand from Usha Ispat Ltd., and Rs 122 thousand from Usha Information System Ltd.). Out of these companies Usha Marconi Micro Electronics Ltd, and Usha Information System Ltd. have ceased to be subsidiaries of the-company due to sale of its entire holding by the company in ' previous period. Also as explained in Note No. 6(d), Usha Ispat Ltd have ceased to be a subsidiary of the company. Accordingly loans amounting to Rs. 37634 thousand (Rs. 35810 thousand) to these companies has been shown as loan 'to others' in schedule 'I' to balance sheet. Considering the financial position of all the above companies and other indications and information available with the company in respect of these companies, the recovery of the amount of Rs. 38764 thousand from them is very doubtful. Accordingly provision made for these doubtful loans amounting to Rs. 38764 thousand in the previous year is being retained.

25. Some of the Expenses Charged in the Profit & Loss account under various heads such as Salary & allowances, Miscellaneous Expenses, legal & Professional charges, Traveling & conveyance etc are not supported by documentary evidence. In the opinion of management, these are due to misplacement of some vouchers/ supporting evidences because of leaving of most of the accounting staff who were working with the company during the period to which said vouchers/supportings pertain. The Company is taking the necessary steps in this regard.

26. The company has availed credit facilities from EXIM bank of India. Pursuant to default by the company in repayment of EXIM bank's dues the said bank filed an application/petition in the court under the Securitisation and Reconstruction of Financial Asset and Enforcement of Security Interest Act-2002, in respect of immovable Property No, Plot No 94, Block No B-11, Mohan Cooperative Industrial Estate, Mathura Road, New Delhi. In response to said application/petition, the Hon'able Addl. District and session Judge, Delhi passed an order appointing a receiver to take over the possession of aforesaid immovable property and hand over the same to EXIM Bank. In the opinion of the management, no effect is required to be taken in the accounts at this stage as the matter is sub judiced

27. During the year under consideration, units of UTI-64 Scheme were converted into 6.75% UTI-64 Bonds in the ratio of 1 Bond of face value of Rs.100/- each for 10 units of face value of Rs. 10/- each. As per Balance Sheet of company as on 31.03.2003, It was holding 3981661 units of UTI-64 scheme. Accordingly the same has been converted and shown as UTI-64 Bonds of face value of Rs. 100/- each.

As per the available records, almost all the units of US-64 were lying pledged with banks, institutions and others in connection with borrowing of company/others. The company has also not received interest on these bonds except for Rs. 57682/- on 17055 Bonds. The company is not aware whether the units of US-64 converted into bonds has been got transferred by the pledgee in their name and adjusted against there dues/claims against the company. Pending any confirmation in this regard and as a matter of prudence and due to lack of certainty, interest income on these bonds is not being provided for except for Rs. 57682/- received by the company as aforesaid. Also, the aforesaid 398166 bonds of face value of Rs. 100/- each is continued to be shown in Schedule `E' of Balance Sheet. The required adjustment, if any, with the dues/claims against the company will be made after receipt of confirmation from the parties in whose favour these units were pledged. The impact of adjustment that may be"required is presently unascertained. As a matter of prudence, dividend income of Rs. 3985 thousand booked on these units in earlier year has been provided as doubtful receivable and charged to Profit & Loss Account.

28. Other Liabilities includes Rs. 58572 thousand (Previous Year Rs.58572 thousand) payable to banks on account of amount paid by them on behalf of the company due to devolvement of various bills and dishonour of cheques discounted. No interest has been provided on this amount during the year as the same is, in the opinion of management, not considered necessary. The amount of unprovided interest is unascertained.

29. No Interest has been provided for the year on amount of Rs. 45905 thousand being loan from Bank as shown in Schedule `C' of balance sheet under the head "From Banks' as in the opinion of management, the same is not considered necessary at this stage. The amount of unprovided interest is unascertained.

30. Miscellaneous income as shown in Schedule `L' includes Rs.1987 thousand (Previous Year NIL) on account of old wastage in respect of Gauriganj Branch.

31. a) Due to certain problems, the inventories could not be physically verified during the year. The management is taking the steps for doing the physical verification.

b) Due to non-availability of market Quotation/other evidence, the net realizable value taken for the purpose of valuation of most of the items has been taken on the basis of estimation which, in the opinion of management, is net realisable value of inventories.

c) Due to various problems, certain excise records of Bhimtal and Gaurigang Branch and book record of inventories of Gauriganj could not be received. The Company is following, up the matter.

32. The Company is having unabsorbed losses under tax laws. In the absence of virtual as well as reasonable certainty about the future taxable income, deferred tax assets has not been recognised to comply with Accounting Standard AS-22 on accounting for taxes on income issued by The Institute of Chartered Accountants of India.

33. Related party disclosure pursuant to accounting standard (AS-18) issued by Institute Of Chartered Accountant of India in annexed.

34. In view of practical difficulties due to closure of various divisions, it is not possible to give information required pursuant to Accounting Standard (AS - 17) Segment Reporting. Moreover presently the company is mainly engaged in the business of semi-conductors and all other activities are incidental to/revolve around this main business and there are no separate reportable working segment.

35. Due to poor financial position of the company, it has not been able to pay the dividend on preference shares declared in earlier year amounting of Rs. 70560 thousand (Rs. 70560 thousand) to financial institutions.

36. Previous period figures are regrouped and rearranged wherever necessary. Figures are current year not comparable with the figures of previous period as the previous period was of 16 months. Figures have been rounded off to nearest rupees thousand.