This excerpt taken from the INFY 6-K filed Jan 18, 2005.
The size of our proposed offering may be reduced if the potential selling shareholders choose for Indian tax reasons not to convert their equity shares in conjunction with the offering.
Equity share transactions which are entered into on a recognized stock exchange in India are entitled to preferential capital gains tax rates of 0% for long-term capital gains and 10% for short term capital gains, plus applicable cess and surcharges, provided that a securities transaction tax is paid in connection with the transaction. In contrast, for off-market transactions, the long-term capital gains tax rate is 10%, plus applicable cess and surcharges, and the short-term capital gains tax rate is the taxpayers maximum marginal rate, plus applicable cess and surcharges. It is expected that the preferential capital gains tax rates will not extend to this secondary ADS offering since the equity shares sold in the offering are settled in an off-market transaction. If the selling shareholders in our proposed offering are not entitled to the preferential tax treatment or the settlement of the conversions of equity shares into ADSs is not structured in a manner to obtain such preferential treatment, some of our equity shareholders may choose not to participate in this offering, thereby reducing the size of this offering.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
3.1 Foreign Currency Market Risk
This information is set forth under the caption Exchange Rate Risk under Components of Market Risk above, and is incorporated herein by reference.
Item 4. Controls and Procedures
Based on their evaluation as of the end of the period covered by this quarterly report, our Chief Executive Officer and Chief Financial Officer believe, based on an evaluation performed under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, that the design and operation of our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended) are effective to ensure that material information relating to Infosys is made known to them by others within our Company during the period in which this Quarterly Report was being prepared. There have been no changes in our internal controls over financial reporting that occurred during the period covered by the quarterly report which materially affected, or would be reasonably likely to materially affect, our internal control over financial reporting.
Part II Other Information
Item 1. Legal Proceedings
The company is subject to legal proceedings and claims which have arisen in the ordinary course of its business. Legal actions, when ultimately concluded and determined, will not, in the opinion of management, have a material effect on the results of operations or the financial position of the company.
In the year ended March 31, 2004, Ms. Jennifer Griffith, a former employee, filed a lawsuit against the company and its former director, Mr. Phaneesh Murthy. The lawsuit was served on the company during the quarter ended December 31, 2003. This matter has been recently settled. Pursuant to the settlement agreement, all of Ms. Griffiths claims against the company have been released and the lawsuit was dismissed in December 2004.
On September 9, 2004 the Intellectual Property Appellate Board of India (IPAB), upheld an application made by an infringer of the INFOSYS trademark, Jupiter International Limited (formerly called Jupiter Infosys Limited), and ordered the cancellation of our registration of the INFOSYS trademark in classes 7, 9 and 16. We moved a Special Leave Petition before the Supreme Court of India to stay the order of the IPAB. On October 12, 2004, the Supreme Court of India stayed the order of the IPAB temporarily. Based on our present knowledge, we believe that we will prevail in this action and that the action will not have any material impact on our results of operations or financial position.
Item 2. Changes in Securities and Use of Proceeds
Item 3. Default upon senior securities
Item 4. Submission of matters to a vote of security holders
The following is a brief description of the matters voted upon at the Extraordinary General Meeting (EGM) of the company held on December 18, 2004 along with votes cast for, against or withheld, as well as the number of abstentions and broker non-votes, as to each matter. The matters to be voted upon were notified to the shareholders on record and all Registered Holders of the American Depositary Receipts (the ADRs) who were holding the ADRs as on a record dated determined by the Depositary. 762 shareholders representing in aggregate 13056131 shares attended the EGM in person and 202 shareholders representing in aggregate 74809275 shares attended the EGM through a proxy, including two proxies representing the Depositary to carry out the instructions of the holders of ADRs representing 21502181 ADRs (as on December 15, 2004).
Item 5. Other Information
Item 6. Exhibits and reports
Infosys filed no reports on Form 8-K during the quarter ended December 31, 2004. As a foreign private issuer, the Company does not file reports on Form 8-K. During the quarter ended December 31, 2004, the Company furnished the following reports on Form 6-K:
Form 6-K filed on December 21, 2004 containing certain information included in a Registration Statement on Form F-3 (File No. 333-121444) filed with the Securities and Exchange Commission on December 20, 2004 in connection with the companys sponsored offering of American Depositary Receipts.
The Exhibit Index attached hereto is incorporated by reference to this item.