Infosys - Annual Report - 2008-2009

INFOSYS TECHNOLOGIES LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

To
The members,

We are delighted to present the report on our business and operations for
the year ended March 31, 2009.

1. Results of operations:

in Rs. crore, except
per share data
2009 2008

Income from software services and products 20,264 15,648

Software development expenses 11,145 8,876

Gross profit 9,119 6,772

Selling and marketing expenses 933 730

General and administration expenses 1,280 1,079

Operating profit before interest
and depreciation 6,906 4,963

Interest - -

Depreciation 694 546

Operating profit before tax 6,212 4,417

Other income, net 502 683

Net profit before tax 6,714 5,100

Provision for taxation (1) 895 630

Net profit after tax 5,819 4,470

Profit and Loss account balance
brought forward 6,642 4,844

Less : Residual dividend paid 1 -

Dividend tax on the above - -

Amount available for appropriation 12,460 9,314

Dividend

Interim 572 343

Final 773 415

Special dividend - 1,144

Total dividend 1,345 1,902

Dividend tax 228 323

Amount transferred to general reserve 582 447

Balance in Profit and Loss account 10,305 6,642

EPS(Z)

Basic 101.65 78.24

Diluted 101.48 77.98

Notes : 1 crore equals 10 million.

(1) Includes net tax reversal of Rs. 108 crore and Its. 121 crore for
fiscal 2009 and 2008 respectively.

+ Equity shares are at par value of Rs. 5/- each.

2. Business:

Total income increased to Rs. 20,264 crore from Rs. 15,648 crore in the
previous year, at a growth rate of 29.5%. Our software export revenues
aggregated Rs. 20,004 crore, up by 29.7% from Rs. 15,429 crore in the
previous year. Of these, 65.6% of the revenues came from North America,
25.3% from Europe, and 9.1% from the rest of the world The revenue from
rest of the world has increased from Rs. 1,349 crore to Rs. 1,821 crore,
with a growth rate of 35.0% which is higher than the other regions. The
share of fixed-price component of the business was 37.6%, compared to 33.0%
during the previous year. Blended revenue productivity, in dollar terms,
decreased by 2.6% during the year.

The gross profit amounted to Rs. 9,119 crore (45.0% of revenue) as against
Rs. 6,772 crore (43.3% of revenue) in the previous year. The onsite
revenues decreased from 50.9% in the previous year to 49.3% in the current
year. The onsite person-months comprised 28.4% of the total billed efforts,
compared to 29.8% during the previous year. The operating profit (PBIDTA)
amounted to Rs. 6,906 crore (34.1% of revenue) as against Rs. 4,963 crore
(31.7% of revenue) in the previous year. Sales and marketing costs were
4.6% and 4.7% of our revenue during the year ended

March 31, 2009 and 2008. General and administration expenses decreased from
6.9% in the previous year to 6.3% in the current year. We continue to reap
the benefits of economies of scale. The net profit after tax was Rs. 5,819
crore (28.7% of revenue) as against Rs. 4,470 crore (28.6% of revenue) in
the previous year. The net profit for the year included a net tax reversal
of Rs. 108 crore (previous year Rs. 121 crore). The tax provisions were
reversed as it was no longer required in various overseas jurisdictions.

We seek long-term partnerships with clients while addressing their IT
requirements. Our customer-centric approach has resulted in high levels of
client satisfaction. We derived 97.6% of our revenues from repeat business.
This means that the client partnership contributed to revenues during the
previous fiscal year also. We added 156 new clients, with a substantial
number of large global corporations. The total client base at the end of
the year stood at 579. Further, we have 327 million-dollar clients (310 in
the previous year), 151 five-milliondollar clients (141 in the previous
year), 101 ten-million-dollar clients (89 in the previous year), 20 fifty-
million-dollar clients (18 in the previous year), and 4 hundred-million-
dollar clients (6 in the previous year). During the year, one of our
clients contributed more than US $300 million of revenues.

We added 61.66 lakh sq. ft. of physical infrastructure space. The total
available space now stands at 226.43 lakh sq. ft. The number of marketing
offices as at March 31, 2009 was 55.

3. Subsidiaries:

We have six subsidiaries : Infosys BPO Limited, Infosys Technologies
(Australia) Pty. Limited, Infosys Technologies (China) Company Limited,
Infosys Consulting, Inc., Infosys Technologies S. de R. L. de C. V and
Infosys Technologies (Sweden) AB and four step-down subsidiaries : Infosys
BPO s.r.o., Infosys BPO (Poland) Sp.Z.o.o, Infosys BPO (Thailand) Limited
and Mainstream Software Pty. Limited.

Infosys BPO Limited:

Infosys BPO Limited (formerly Progeon Limited) was incorporated in April
2002, in India, to address opportunities in business process management. As
at March 31, 2009, we hold 99.98% of the equity share capital and voting
power of Infosys BPO. During the year, Infosys BPO serviced 97 clients,
added 29 clients, and generated Rs. 1,298 crore in consolidated revenue,
with a net profit of Rs. 201 crore. The employee strength as at March 31,
2009 was 17,080. Our total investment in Infosys BPO as at March 31, 2009
was Rs. 659 crore.

During the year, the investments held by P-Financial Services Holding B.V
(wholly-owned subsidiary of Infosys BPO) in its wholly-owned subsidiaries
Pan-Financial Shared Services India Pvt. Limited,

Infosys BPO (Poland) Sp.Z.o.o, and Infosys BPO (Thailand) Limited were
transferred to Infosys BPO, consequent to which P-Financial Services
Holding B. V was liquidated. Further, Infosys BPO merged its wholly-owned
subsidiary Pan-Financial Shared Services India Pvt. Limited,
retrospectively with effect from April 1, 2008, vide a scheme of
amalgamation sanctioned by the High Court of Karnataka and the High Court
of Madras.

Infosys Technologies (Australia) Pty. Limited:

In fiscal 2004, we acquired, for cash, 100% of the equity in Expert
Information Services Pty. Limited, Australia, for US $24.3 million (Rs. 66
crore). The acquired company was renamed Infosys Technologies (Australia)
Pty. Limited (Infosys Australia). During the year, Infosys Australia
serviced 48 clients and generated Rs. 549 crore in revenue, with a net
profit of Rs. 46 crore. The employee strength as at March 31, 2009 was 341.

On April 1, 2008, Infosys Australia acquired 100% of the equity shares of
Mainstream Software Pty. Limited for a cash consideration of Rs. 12 crore.

Infosys Technologies (China) Company Limited

Infosys Technologies (China) Company Limited (Infosys China) is a wholly-
owned subsidiary and was formed to expand our business operations in China.
We have invested US $14 million (Rs. 65 crore) of capital in Infosys China
and advanced a loan of US $10 million (Rs. 51 crore) as at March 31, 2009.
During the year, Infosys China serviced 71 clients, and generated a revenue
of Rs. 129 crore, with a net loss of Rs. 11 crore. The employee strength as
at March 31, 2009 was 1,053.

Infosys Consulting, Inc.

In fiscal 2005, we established Infosys Consulting, Inc., a whollyowned
subsidiary, in Texas, U.S., to add high-end consulting capabilities to our
Global Delivery Model. The Board had approved an investment of up to US $75
million in the share capital of Infosys Consulting, Inc. We have invested
US $45 million (Rs. 193 crore) as at March 31, 2009. During the year,
Infosys Consulting serviced 96 clients, and generated a revenue of Rs. 287
crore, with a net loss of Rs. 59 crore. The employee strength as at March
31, 2009 was 304.

Infosys Technologies S. de R. L. de C. V.:

In fiscal 2008, we established our first Latin American subsidiary, and
opened a development center and office for the region in Monterrey Mexico.
The subsidiary, Infosys Technologies S. de R. L. de C. V, provides a
complete range of business consulting and information technology services
for clients in all industries including banking, financial services,
retail, consumer packaged goods, resource, energy and utilities. The center
provides key offerings in business process outsourcing, infrastructure
management and packaged solutions implementation. The Board has approved an
investment of up to Mexican Pesos 60 million. During the year, Infosys
Mexico serviced 27 clients, and generated revenue of Rs. 37 crore, with a
net loss of Rs. 8 crore. The employee strength as at March 31, 2009 was
221. Our investment in the subsidiary as at March 31, 2009 was Rs. 22
crore.

Infosys Technologies (Sweden) AB:

During March 2009, the Company incorporated a wholly-owned subsidiary in
Sweden. The Board has approved an investment up to SEK 1,00,000 (Rs. 0.06
crore). The subsidiary is yet to be capitalized and had not yet commenced
its operations.

4. FinacleTM:

FinacleTM, our universal banking solution, helps banks win in the flat
world by enabling them to shift their strategic and operational priorities.
It maximizes their opportunities for growth while minimizing the risks that
come with large-scale business transformation. This integrated yet modular
solution addresses the core banking, treasury, wealth management, Islamic
banking, consumer and corporate e-banking, mobile banking and web-based
cash management requirements of universal, retail and corporate banks
worldwide.

FinacleTM currently powers 114 banks across 62 countries, helping them
serve more than 25,000 branches, 244 million customers, 297 million
accounts and over 2,00,000 concurrent users. Independent reports by
renowned research firms have positioned FinacleTM among the leaders in the
global evaluation of retail core banking solution vendors. FinacleTM has
also emerged as one of the most scalable core banking solutions in the
world by achieving an unparalleled performance benchmark of 104 million
effective transactions per hour (29,010 ETPS).

5. Quality:

We continue our excellence journey with a critical focus on Quality and
Productivity with significant investments in quality programs. In September
2008, Infosys Australia became one of the country's first IT services
companies to achieve the Software Engineering Institute's CMMI) Level 5
Version 1.2, the highest standard available, apart from continued focus and
surveillance audits in ISO certifications such as ISO 9001-TickIT, ISO
27001, ISO 20000, ISO 13485, TL 9000 and AS 9100.

Our quality department manages key process improvement initiatives. Quality
initiatives are aligned to business goals of units through the balanced
scorecard approach.

Apart from the continued focus on assessments, certifications and
surveillance audits, the Quality department also manages several large-
scale change and improvement initiatives.

The Quality department ensures business connect and clear alignment through
the balanced scorecard approach and leverages the Infosys Scaling
Outstanding Performance (iSOP) framework to evaluate, identify and
actionize improvements across business units. Quality has focused on
Application Development and Maintenance (ADM) as well as non-ADM areas and
created robust execution methodologies for new services like Software as a
Services (SaaS) and Learning Services.

Some of the key change and improvement initiatives are

* Implementation of systemic planning, tracking, monitoring and
measurements for Reuse and Tools deployment

* Estimation Enterprise Model (ESTEEM) to facilitate adoption of formal
estimation techniques and models

* TRANSCEED to enhance program and portfolio management capabilities,
including relevant certification programs and systems and tools for program
management

* The Quality Academy has a specialized focus on building project
management, software engineering and process competencies by offering a
range of trainings and certification programs

* Business results impact @ Infosys Technologies (BTITe) uniquely blends IT
specific Six Sigma approach with statistical predictive modeling to address
diverse business critical parameters to provide breakthrough improvements

* Infy Swift is an accelerated, responsive and predictable development
methodology to achieve faster time to market

* Process Repository @ Infosys for Driving Excellence (PRIDE) is a
framework with robust methodologies, project management practices,
processes for Integrated Delivery Environment

* IPM+ is an Integrated Project Management suite, continuously extended to
cover new service offerings such as infrastructure management, independent
validation and technology consulting and to cover new measurements such as
design robustness, package points and tools index

* Resource Estimation of Maintenance cCz Production Support Engagement
(REcipE) is a resource optimization model for meeting customer budgetary
needs and quality of service.

* INSIGHT is an Integrated Audit System to facilitate all types of quality
audits across the enterprise.

6. Software Engineering and Technology Labs:

The Software Engineering and Technology Labs (SETLabs) at Infosys is the
center for applied technology research in software engineering and
enterprise technology. SETLabs leverages emerging technologies for
improving engineering effectiveness and developing client-focused business
solutions. During the year, SETLabs built and enhanced several solutions,
frameworks, tools and methodologies in the areas of software engineering,
high performance and grid computing, cloud computing, convergence
technologies, knowledge driven information systems and Web 2.0.

During the year, more than 60 articles were published by SETLabs
researchers in leading j ournals, magazines and conference proceedings.
SETLabs Briefings published seven issues last year related to areas like
Governance, Risk and Compliance, IT in healthcare and life sciences, and
Web 2.0. SETLabs collaborated with leading national and international
universities such as the University of Cambridge.

During the year, the IP Cell of SETLabs has helped file an aggregate of 79
patent applications in the U.S. Patent and Trademark Office and
Indian Patent Office.

7. Branding:

We were ranked as the 141 most respected Company in the world by the
Reputation Institute. We were ranked second in the Global Sourcing list of
100 best performing IT Service providers. Hays Group and CEO magazine
ranked us among the best companies in the world for leaders. We were named
the best Indian Company in Corporate Governance in The Asset Magazine's
annual Corporate Governance Index 2008.

Industry analysts rated us highly in reports on our key services and
markets. The services for which we were rated highly include Offshore
Application Services in the North American and European markets,
Comprehensive Finance and Accounting Business Process Outsourcing, and also
for the FinacleTM product suite.

We had over a million visits to our blogs on business and technology
related topics on our website wwwinfosys.com during the year. Articles
displaying our thought leadership were published by our employees in
various industry publications like Manufacturing Business Technology,
Supply Chain Management Review, Business Intelligence Network, Pipeline and
Gas Journal, Wafers and The Actuary and Grocery Headquarters. We also
launched our own channel on YouTube and used Twitter, S1ideShare and
AdWords to increase our branding reach. We sponsored the first ever mobile
feed of Harvard Business Review. Leading global publications, including
BusinessWeek, The Economist, The Times, Financial Times, Information Age,
The Wall Street Journal, and The Banker wrote about us, our leadership, our
talent and our performance. We continued to have leadership presence at
premier industry events like Oracle Open World, Sapphire and Gartner
Sourcing Summit. Our annual client events in U.S. and Europe were well
attended despite the economic downturn, and were much appreciated. At the
World Economic Forum in Davos, Switzerland, our leaders contributed daily
blogs on wwwcnbc.com and www.ft.com. The breakfast panel discussion and the
evening get-together hosted by us were attended by some of the most
influential and powerful global business leaders.

The first Association for Computing Machinery (ACM) - Infosys Foundation
Award was presented to Prof. Daphne Koller of Stanford University. This was
covered by The Wall Street Journal Blog, The New York Times, Artificial
Intelligence and Robotics Blog, and the Financial Gadget Blog.

8. Awards and recognition:

These are some of the awards and recognition that we received during the
current year

Corporate leadership:

* We were rated as Best Companies for Leaders by a global survey conducted
by Hay Group and Chief Executive Magazine

* We were named the best company in India in Corporate Governance in The
Asset Magazine's annual Corporate Governance Index 2008.

* We won Sears Holding Corporation's Partners in Progress award for the
second consecutive year.

* We received the 2007 Boeing Performance Excellence Award (BPEA) from The
Boeing Company for a 12-month gold-level performance.

* We entered the Balanced Scorecard Hall of Fame for Executing Strategy on
the strength of our innovative strategy planning and execution capabilities

* We were honored with the Sharpening Brand and Competitive Differentiation
Marketing Excellence Award from the Information Technology Services
Marketing Association (ITSMA) for our success in shifting our perception
from a provider of offshoring services to that of a partner that helps
companies reshape their businesses in a flattening world.

Customer and investor orientation:

* We were listed on Forbes' Asian Fabulous 50 for the fourth consecutive
year.

* We won the first-ever RMMY award for Customer Relationship Management.

* We won Eastman Chemical's Supplier Excellence award for the second
consecutive year.

* We were named Best Investor Relations by an Asia Pacific company in the
U.S. Market at the IR Magazine, U.S. awards 2008.

* We won awards for the Best Investor Relations Website and Company with
Best Corporate Governance Practices in Investor Relations (IR) Global
Rankings 2008 in APAC categories.

Global recognition:

* The Infosys Annual Report 2008 won the LACP Platinum award.

* We were ranked 14th among the most respected companies in the world by
Reputation Institute's Global Pulse 2008.

* We were listed in the 2008 Global Outsourcing 100 of the International
Association of Outsourcing Professionals (IAOP).

* An independent analyst has cited us as a leader in SAP implementation
services, noting that our SAP practice is aligned along verticals to ensure
that clients get the benefit of our deep vertical process expertise.

* We were selected as a member of The Global Dow.

Industry expertise:

* We received positive ratings in Gartner's Market Scope for Remote Support
Services and Remote Monitor Services reports.

* We won two Banker Technology Awards for our exceptional work in wholesale
and capital markets.

* We won the Most Admired Knowledge Enterprises (MAKE) award 2008.

* We along with British Telecom were awarded the National Outsourcing
Association (NOA) award for Innovative Outsourcing Project of the Year 2007

* We won the Hall of Fame award under the information technology
communication and entertainment enterprises category instituted by the
Institute of Chartered Accountants of India for excellence in financial
reporting.

Social awareness:

* We won Hitachi Data Systems' Diamond Award for Best Virtualization
Strategy and Platinum award for Best Green Strategy for a Data Center.

* We won the NASSCOM award for excellence in gender inclusivity at the
NASSCOM IT Women Leadership Summit 2008 in Bangalore.

9. Capital expenditure:

During the year, we incurred capital expenditure aggregating Rs. 891 crore
on physical infrastructure, (Rs. 1,180 crore during the previous year),
Rs.273 crore on technological infrastructure, (Rs. 189 crore in the
previous year), Rs. 12 crore on procurement of intangible asset (nil during
the previous year) and Rs. 1 crore on vehicles (Rs. 1 crore during the
previous year). In all, Rs. 1,177 crore has been invested, as against
Rs.1,370 crore in the previous year.

As at March 31, 2009, in India, we had 226.43 lakh sq. ft. of space with
95,048 seats, and an additional 45.55 lakh sq. ft. under construction that
would provide 20,756 seats.

10. Liquidity:

We continue to be debt-free, and maintain sufficient cash to meet our
strategic objectives. Liquidity in the Balance Sheet needs to balance
between earning adequate returns and the need to cover financial and
business risks. Liquidity also enables us to make a rapid shift in
direction, should the market so demand. During fiscal 2009, internal cash
flows have more than adequately covered working capital requirements,
capital expenditure, investment in subsidiaries and dividend payments,
leaving a surplus of Rs. 2,600 crore. As at March 31, 2009, we had liquid
assets of Rs. 10,289 crore as against Rs. 7,689 crore at the previous year-
end.

These funds have been invested in deposits with banks and highlyrated
financial institutions.

11. Increase in share capital:

During the year, we issued 8,34,285 shares on the exercise of stock options
under the 1998 and 1999 employee stock option plans. Due to this, the
outstanding issued, subscribed and paid-up equity share capital increased
from 57,19,95,758 shares to 57,28,30,043 shares as at March 31, 2009.

12. Appropriations:

Dividend:-

Our policy is to pay dividend upto 30% of the net profit after tax of the
Company.

In October 2008, we paid an interim dividend of Rs. 10/- per share (200% on
par value of Rs. 5/-). We recommend a final dividend of Rs. 13.50 per share
(270% on par value of Rs. 5/- per share).

The total dividend amount is Rs. 1,345 crore, as against Rs. 1,902 crore
including Rs. 1,144 crore of special dividend for the previous year.
Dividend (including dividend tax) as a percentage of profit after tax is
27.0% as compared to 49.8% in the previous year (19.8% excluding the
special dividend).

The register of members and share transfer books will remain closed from
June 6, 2009 to June 20, 2009, both days inclusive. Our Annual General
Meeting has been scheduled for June 20, 2009.

Transfer to reserves:

We propose to transfer Rs. 582 crore (10% of the net profit for the year)
to the general reserve. An amount of Rs. 10,305 crore is proposed to be
retained in the Profit and Loss account.

13. Corporate governance:

We continue to be a pioneer in benchmarking our corporate governance
policies with the best in the world. Our efforts are widely recognized by
investors in India and overseas. We have undergone the corporate governance
audit by ICRA and Credit Rating Information Services of India Limited
(CRISIL). ICRA has rated our corporate governance practices at CGR 1.
CRISIL has assigned CRISIL GVC Level 1 rating to us.

We have complied with the recommendations of the Narayana Murthy Committee
on Corporate Governance constituted by the Securities and Exchange Board of
India (SEBI). For fiscal year 2009, the compliance report is provided in
the Corporate governance section of the Annual Report. The auditors'
certificate on compliance with the mandatory recommendations of the
committee is annexed to this report.

We have documented our internal policies on corporate governance. In line
with the committee's recommendations, the Management's discussion and
analysis of the financial position of the Company is provided in this
Annual Report and is incorporated here by reference.

We continue our practice of providing a report on our compliance with the
corporate governance requirements of six countries, in their national
languages, for the benefit of our shareholders in those countries.

During the year, we continued to fully comply with the U.S. SarbanesOxley
Act of 2002. Several aspects of the Act such as the Disclosure Committee
Requirements, Whistleblower Policy, and Code of Conduct for senior officers
and executives have already been instituted.

International Financial Reporting Standards (IFRS) is set to become the
global accounting standard. As a Company, we want to be in the forefront on
adopting the global accounting standard. During the year, we adopted the
IFRS for our U.S. financial reporting and SEC filings. Consequent to this,
we discontinued reporting financial statements as per U.S. GAAP effective
the quarter and year ended March 31, 2009.

We are well prepared to adopt IFRS for reporting in India when it becomes
mandatory in 2011.

During the year, we were selected as an original component member of The
Global Dow - an index of the most innovative, vibrant and influential
corporations from around the world -chosen by j oumalists and the Editor in
Chief at Dow Jones. The Global Dow is a new worldwide stock index made up
of 150 leading blue-chip stocks.

14. Particulars under Section 212 of the Companies Act:

As per Section 212 of the Companies Act, 1956, we are required to attach
the Directors' report, Balance Sheet, and Profit and Loss account of our
subsidiaries. We had applied to the Government of India for an exemption
from such an attachment as we present the audited consolidated financial
statements in the Annual Report. The Government of India has granted us
exemption from complying with Section 212. Accordingly, the Annual Report
does not contain the financial statements of these subsidiaries. We will
make available the audited annual accounts and related information of
subsidiaries, where applicable, upon request by any of our investors. These
documents will also be available for inspection during business hours at
our registered office in Bangalore, India.

15. Conservation of energy, research and development, technology
absorption, foreign exchange earnings and outgo

The particulars as prescribed under Sub-section (1)(e) of Section 217 of
the Companies Act, 1956, read with the Companies (Disclosure of particulars
in the report of the Board of Directors) Rules, 1988, are set out in the
annexure to this report.

16. Particulars of employees:

As required under the provisions of Section 217 (2A) of the Companies Act,
1956, read with the Companies (Particulars of Employees) Rules, 1975, as
amended, the names and other particulars of employees are set out in the
annexure to this report. The Department of Company Affairs has amended the
Companies (Particulars of Employees) Rules, 1975 to the effect that
particulars of employees of companies engaged in the information technology
sector posted and working outside India, not being directors or their
relatives, drawing more than Rs. 24 lakh per financial year or Rs. 2 lakh
per month, as the case may be, need not be included in the statement.
Accordingly, the statement included in this report does not contain the
particulars of such employees who are posted and working outside India.

17. Directors' responsibility statement as required under Section 217 (2AA)
of the Companies Act, 1956

The financial statements are prepared in conformance with the accounting
standards issued by the Institute of Chartered Accountants of India and the
requirements of the Companies Act, 1956, to the extent applicable to us;
and guidelines issued by the Securities and Exchange Board of India on the
historical cost convention; as a going concern and on the accrual basis.
There are no material departures from prescribed accounting standards in
the adoption of the accounting standards.

The Board of Directors accepts responsibility for the integrity and
objectivity of these financial statements. The accounting policies used in
the preparation of the financial statements have been consistently applied
except as otherwise stated in the notes on accounts. The estimates and
judgments related to the financial statements have been made on a prudent
and reasonable basis, in order that the financial statements reflect in a
true and fair manner, the form and substance of transactions, and
reasonably present our state of affairs and profits for the year.

We have taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act,
1956, to safeguard the assets of the Company and to

prevent and detecting fraud and other irregularities.

18. Directors:

As per Article 122 of the Articles of Association, Deepak M. Satwalekar,
Dr. Omkar Goswami, Rama Bijapurkar, David L. Boyles and Prof. Jeffrey S.
Lehman retire by rotation in the forthcoming Annual General Meeting. All of
them, being eligible, seek re-appointment.

19. Auditors:

The auditors, M/s. B S R &T Co. Chartered Accountants, retire at the
ensuing Annual General Meeting and have confirmed their eligibility and
willingness to accept office, if re-appointed.

20. Fixed deposits:

We have not accepted any fixed deposits and, as such, no amount of
principal or interest was outstanding as of the Balance Sheet date.

21. Human resource management:

Employees are vital to the Company. We have created a favorable work
environment that encourages innovation and meritocracy. We have also set up
a scalable recruitment and human resources management process, which
enables us to attract and retain high caliber employees. We added 12,361
(net) and 21,196 (gross) employees, taking the total strength to 85,851
(net) up from 73,490 at the end of the previous year. Our attrition rate
stands at 11.1% compared to 13.4% for the previous year. Attrition,
excluding involuntary separations, stood at 9.1 % compared to 12.1 % in the
previous year. Over the last year, we received 4,88,674 applications from
prospective employees and we continue to remain an employer of choice in
the industry.

We compete in a dynamic and evolving industry in which value and
differentiation are defined at each turn by the Company's most precious
asset: its human capital. During the year, we launched a transformational
program which was envisioned after a business strategy review to enhance
the capabilities of our employees around the globe: iRACE-Infosys Role and
Career Enhancement. The iRACE program delivers a comprehensive enterprise
career architecture which aligns talent management activities with client
priorities, business needs and employee aspirations. It is a platform that
clearly defines roles, competencies and proficiency requirements while
linking career movement to performance and business focus. iRACE involved a
detailed diagnostic which consisted of an analysis of feedback from clients
and employees, inputs from industry benchmark studies and our internal
business strategy.

Our model of recruiting the best and brightest talent from top academic
institutions around the world and providing intense training has
contributed greatly to differentiating Infosys in the marketplace. iRACE
will strengthen this further, and equip employees with the knowledge and
experience needed to deliver greater value for our clients; who in turn
will benefit from increased operating efficiencies and enhanced delivery
capabilities. We believe that continuing to invest in the skills and career
development of our employees is a primary driver of client value. We are
excited about the influence iRACE will have on our future success as we
know that a talented, motivated and engaged workforce is our best resource
in delivering winning solutions for our clients and value for our
shareholders.

22. Sustainability initiatives:

We believe that growth and progress can only be measured in terms of the
legacy we leave behind for those who follow. Our focus is to provide
technology, services and solutions that enhance the sustainability of our
clients. Our constant endeavor is to transcribe our core values into our
work, ensuring transparent stakeholder engagement at all levels. The goals
we set ensured the involvement of clients, employees, vendors and other
stakeholders. Imbibing their inputs, we have reached out to various rungs
of society generating long-term impact in several fields.

We are responsible for the services and products we offer to our clients
and our steady Customer Satisfaction (CSAT) scores over an increasing
customer base, vouch for this.

Our business offerings continue to provide sustainable solutions for our
customers, crafting a paradigm within which we operate at the highest
levels of efficiency.

Our objective last year was to create awareness among employees with
specific regard to sustainability We have accomplished this through our
sustainability training module, which defines and implements training to
generate awareness on the subject. Through this policy we are changing
perceptions, thus raising the standard and ensuring higher accountability
and productivity.

Our aim is to build a community that is self-sustaining, comprising of
individuals who are strong and well-equipped. We allow every employee to
exercise their rights and create awareness about human rights. Our efforts
to create a framework and develop related training modules are in progress.

Enabling employees:

Employee education:-

We are committed to empower our employees with career oriented and personal
skills. The Education and Research (E&TR) department continues to enable
employees with technical skills. The Project Management Center of
Excellence (PMCoE) helps employees enhance project management competencies
and have trained over 2,934 managers and more than 28,120 employees were
awarded technical certifications this fiscal year. The Business Analysts
Center of Excellence (BACoE) was launched this year to provide a
development and knowledge framework for business professionals. Our
Enterprise Solutions (ES) Academy continues to provide world-class academic
certifications on technical and domain related subjects and has trained
29,667 employees since its initiation. The Infosys Leadership Institute
(ILI) offered nearly 3,43,000 person days of learning last year and, in
collaboration with the Diversity office, has also launched a special
mentoring program for women employees, which currently has 1,000
beneficiaries enrolled.

Employee engagement:

We continue to engage our employees through various initiatives. We have
developed measurement tools to capture satisfaction scores, with regard to
health-related activities conducted over the year. Our Occupational Health
and Safety Committee (OH&TS) at each development center continues to
oversee local health and safety issues and provides necessary
recommendations. Through our Health Assessment and Lifestyle Enrichment
(HALE) initiative, over 15,000 employees have been assisted. This year, we
launched a quarterly health newsletter, Healthbytes, to spread awareness on
general health, nutrition and fitness. Our employees have appreciated our
efforts to provide holistic development and care. We value their
contribution and participation immensely.

Diversity and inclusivity:

We constantly seek to create awareness regarding diversity and inclusivity
with the specific aim to enhance awareness among our employees. Our
inclusivity initiatives have formed a solid base that encourages
participation at all levels. Affinity networks such as Infosys Women's
Inclusivity Network (IWIN), Out@Infy and Family Matters continue to help
propagate inclusivity. We have launched Infyability, an accessible web
portal that provides our employees with disability, a platform to come
together, fostering interaction and dialog. It also educates all employees
on sensitivity and inclusivity aspects of disability. Our diversity
dashboards, inclusivity index and 360 degree feedback mechanism continue to
create a support system for employees. The inclusivity survey captures the
impact of various initiatives and awareness endeavors, thus giving us the
scope to improve ourselves and build capability and accountability

Environment:

As we remain committed to the health and safety of our employees, we are
also unswerving in our efforts to reduce our environmental impact. We are
well on the way to achieve our goal in becoming a green IT company. We now
monitor all our energy consumption, and have reduced our per capita
utilization by 5%. We have also identified methods through which we can be
more energy efficient. We now design all our new buildings to be in
compliance with the IGBC-LEED Gold rating (minimum). We are also
calculating our carbon footprint and have consciously reduced carbon
emissions by 5%. During the year, InGreen, our patent-pending carbon
footprint calculator was launched. InGreen measures an individual's
contribution to carbon emissions and generates the carbon credits required
to offset the damage caused.

Water is a commodity that is alarmingly scarce and requires immediate
conservation. We have taken positive steps to ensure that water is utilized
efficiently and recycled. We have not letup our efforts to create awareness
in the community regarding this issue. We are also constantly promoting
biodiversity practices. Our efforts in this direction have borne reasonable
results. We have initiated a practice to plant a tree for every new
employee, which is being followed implicitly. We have also developed a
broad, all-inclusive plan to support biodiversity.

Social consciousness:

Our investment in improving local communities through sustainable
initiatives is rooted in the vision of a better tomorrow, a world where
every human being is given equal opportunities and the right to participate
in progress. We have partnered with various stakeholders to create multiple
support systems for corporate governance, education, infrastructure and
inclusive growth in the community. Our educational initiatives like Campus
Connect, Project Genesis and Industry Academia Partnership (IAP) continue
to equip and train academic institutions and students to meet industry
standards. During the year, 16,306 students from 486 colleges were trained
through Campus Connect. Project Genesis benefited 23,009 students, while
IAP benefitted 837. Our objective has been to track the impact of our
community upliftment programs and we have now defined and implemented
metrics to measure this. We are now able to gauge the results of our
initiatives, thus giving us opportunities for improvement.

Our goal to raise the aspirations of students and establish the IT industry
as a preferred career has found its voice in Spark. The aim of the program
is to generate awareness about the IT industry among students, nurture
talent and develop hidden potential. Through this initiative, we exceeded
our targets and have impacted 35,000 students in a single year alone. The
Spark program evinced a keen interest among Infoscions. They took time out
and volunteered to make this programa huge success. The spirit of employee
volunteerismwas thus established and a platform was provided for community
empathy. For more details, refer to the Susfainabilify Report available on
our website wwwinfosys.com.

23. Infosys Science Foundation:

We have set up 'Infosys Science Foundation', a not-for-profit trust to
promote research in sciences in India. Under the aegis of the Foundation,
we will honor outstanding contributions and achievements by Indians across
various sciences. The annual award for each category is Rs. 50 lakh. The
Infosys Science Foundation was funded by a corpus of Rs. 21.50 crore
contributed by our executive board members and founders with an annual
grant from the Company.

The Infosys India Prize categories include:-

* Physical Sciences - Physics and Chemistry

* Mathematical Sciences - Mathematics and Statistics

* Engineering Sciences - All branches of Engineering

* Life Sciences - Biology and Medicine

* Social Sciences and Economics - Economics, History, Sociology, Political
Sciences and other Social Sciences

The jury for each area will consist of eminent international personalities
selected by the trustees of the Foundation.

24. Employee Stock Option Plan (ESOP):

We had introduced various stock option plans for our employees. The details
of options granted under the 1998 Stock Option Plan (the 1998 Plan) and the
1999 Stock Option Plan (the 1999 Plan) are given in the table

1998 Plan 1999 Plan
Total grants authorized by the plan (no.) 11760000 ADS 52800000
shares

Pricing formula on date of grant Not less than 90% Fair market
of fair market value
value

Variation in terms NA NA

Ratio of ADS to equity shares 1 ADS = 1 equity NA
share
Options granted during the year (no.) - -

Weighted average price per option NA NA
granted (Rs.)

Options vested as at March 31, 2009 916759 851301
(no.)

Options exercised during the year (no.) 455586 378699

Total number of shares arising as a 455586 378699
result of exercise of options

Money raised on exercise of options 41 23
(Rs. crore)

Options forfeited and lapsed during the 158102 190188
year (no.)

Total number of options in force at the 916759 925806
end of the year (no.)

Grant to senior management - -

Employees receiving 5% or more of the
total number of options granted during
the year - -

Employees granted options equal to or
exceeding 1% of the issued capital - -

Diluted EPS on issue of shares on exercise
calculated in accordance with AS 20 Rs. 101.48 Rs. 101.48

The Securities and Exchange Board of India (SEBI) has issued the Employee
Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999.
This is effective for all stock option schemes established after June 19,
1999. In accordance with these guidelines, the excess of the market price
of the underlying equity shares as of the date of the grant over the
exercise price of the option, including up-front payments, if any, is to be
recognized and amortized on a straight line basis over the vesting period.

We have the 1998 Stock Option Plan and 1999 Stock Option Plan, where the
options are issued to the employees at an exercise price

not less than the fair market value. If the compensation cost on account of
stock options granted after June 30, 2003 (as required by the amendment
effective June 30, 2003) under 1998 and 1999 Plans was computed using the
fair value method, our compensation cost would have been higher by Rs. 7
crore and Rs. 13 crore and our profit would hence be less by Rs. 7 crore
and Rs. 13 crore for fiscal 2009 and fiscal 2008 respectively. The impact
on EPS for fiscal 2009 and 2008 would be Rs. 0.13 and Rs. 0.24
respectively. During fiscal 2009 and 2008, stock options under the 1998
Plan and 1999 Plan have not been granted, hence the weighted average fair
values of grant during these years are nil.

All stock options under the 1998 and 1999 Employees Stock Options Plan were
granted at the prevalent market price on the date of grant. Accordingly we
have calculated the compensation cost arising on account of stock options
granted using the intrinsic value method.

Hence, the disclosure in terms of Clause 12.1(n) of the Securities and
Exchange Board of India (Employees Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999, is not applicable.

2009 2008
No. of options Weighted No. of Weighted
exercise price average options average
exercise
price

1998 Plan:
Outstanding at the 15,30,447 813 20,84,124 900
beginning of the
year

Forfeited (1,58,102) 1,785 (53,212) 2,050

Exercised (4,55,586) 890 (5,00,465) 775

Outstanding at the 9,16,759 904 15,30,447 813
end of the year

Vested at the end 9,16,759 904 15,30,447 813
of the year

1999 Plan
Outstanding at the 14,94,693 1,163 18,97,840 1,121
beginning of the year

Forfeited (1,90,188) 1,814 (1,17,716) 1,167

Exercised (3,78,699) 620 (2,85,431) 634

Outstanding at the 9,25,806 1,248 14,94,693 1,163
end of the year

Vested at the end 8,51,301 1,177 10,89,041 593
of the year

25. Green initiative:

We have started a sustainability initiative with the aim of being carbon
neutral and minimize our impact on the environment. Sustainability
practices are being implemented and tracked diligently to ensure that we
comply with the goals we have set for ourselves.

Each year we send the printed copies of our annual and quarterly reports to
our shareholders. In doing so, we consume around 600 tons of paper. To
reduce the consumption of paper and its impact on the environment, we have
leveraged technology in communicating with our shareholders. We adopted the
practice of sending the quarterly reports through email to around 2,00,000
shareholders who had updated their email address with the depository
participant.

Taking this forward, starting fiscal 2010, we intend to send the printed
copy of the Annual Report to our shareholders containing details that are
statutorily required. We believe this approach will help us reduce paper
consumption by approximately 120 tons. As always, the complete Annual
Report with all other details will be made available on our website
www.infosys.com.

Acknowledgments:

We thank our customers, vendors, investors and bankers for their continued
support during the year. We place on record our appreciation of the
contribution made by employees at all levels. Our consistent growth was
made possible by their hard work, solidarity, cooperation and support.

We thank the governments of various countries where we have operations. We
also thank the Government of India, particularly the Ministry of
Communication and Information Technology, the Customs and Excise
Departments, the Income Tax Department, the Software Technology Parks -
Bangalore, Bhubaneswar, Chandigarh, Chennai, Gurgaon, Hyderabad, Jaipur,
Mangalore, Mysore, Pune, and Thiruvananthapuram and the Ministry of
Commerce, the Ministry of Finance, the Reserve Bank of India, the state
governments, and other government agencies for their support, and look
forward to their continued support in the future.

for and on behalf of the
Board of Directors

S. Gopalakrishnan
Chief Executive Officer and
Managing Director

S.D. Shibulal
Place: Bangalore Chief Operating Officer and
Date : April 15, 2009 Director

Annexure to the directors' report

a) Particulars pursuant to Companies (Disclosure of particulars in the
report of the Board of Directors) Rules, 1988.

Conservation of energy:

Building infrastructure:-

Building infrastructure is the largest consumer of energy, so one of the
major steps towards sustainability at Infosys has been the implementation
of the aggressive plan laid out last year to design all new buildings as
green buildings. High-performance buildings offer tremendous opportunities
to enhance economic performance, gain competitive advantage, improve human
well-being and productivity, and reduce humanity's environmental impact.
Accordingly, all the buildings under construction at Infosys are following
green building principles and have been optimized for energy performance
and occupant comfort.

We have built a strong team of in-house and external consultants. The team
has spent considerable time in RcCzD of building technologies and
developing the best practice specification for future buildings at Infosys.
The new projects in Mysore, Thiruvananthapuram, Chennai and Hyderabad, have
been designed as per these specifications which will ensure a minimum gold
rating as per IGBC-LEED framework.

IT infrastructure:

We have a focused strategy to optimize energy consumption by IT and address
other IT related sustainability aspects. Various tracks under the Green IT
initiative are formulated with a full life-cycle approach covering
procurement to e-waste disposal. Energy efficiency has been included as one
of our key architecting parameter along with performance, productivity,
scalability, security and availability

Our procurement policy includes sustainability as one of the metrics for
evaluation of products. Deploying leading-edge technologies is at the core
of our IT strategy to address our twin objectives of operational excellence
and technology showcase. This, coupled with our technology refresh cycle to
leverage performance improvements and energy efficiency of the latest
systems, directly contributes to optimized energy consumption.

During this year, optimized power management configuration has been rolled
out onto over 50,000 desktops in the generic network. Considering an
average power consumption of IOW per hour by a desktop and a monitor in
sleep mode, as against IIOW per hour during normal operations, this
configuration change has brought about an estimated 20% reduction in power
demand by desktops. Further, consolidation of core infrastructure servers
like Dynamic Host Configuration Protocol (DHCP) servers and file servers
from around 250 to less than 100 has reduced power demand of these servers
by around 80%.

Datacenters and server rooms hosting network equipment, servers and storage
devices, consume large amount of energy in an IT landscape. We have
standardized on an eco-friendly datacenter and server room design
incorporating power and cooling best practices. Restructuring of existing
datacenters and server rooms has been initiated. Review of rack design and
placement based on thermodynamic simulation and study is in progress.
Opportunities for further consolidation and virtualization of servers and
other infrastructure in datacenters and server rooms are being explored. We
are working to shift from the current model of dedicated computing
infrastructure for projects to a shared, secure, virtualized environment.

In addition to energy consumption optimization, initiatives are taken up to
reduce paper usage in printers. This includes enforcing configurations like
duplex printing, replacing printed forms with e-forms and user awareness
drive with notification based on usage. We have reduced the overall
printouts by 25 to 30% per month.

We have recently upgraded our video, audio and web conferencing
infrastructure in order to increase the capacity and introduce latest
technologies like high definition video and audio. This augmentation has
resulted in a three-fold increase in average number of video conferences
from around 300 per month during April 2008 to current 1,000 conferences
per month, leading to reduction in travel and hence the carbon footprint.

Research and Development (R&D):

Research and development of new solutions and services, designs,
frameworks, processes and methodologies continue to be of top priority for
us. The Intellectual Property (IP) created has led to enhanced quality,
productivity and customer satisfaction. This year we started focusing on
creating significant IP to help the Company's non-linear growth strategy.

Specific areas for R&D:

SETLabs is organized into various labs based on the areas of technology
focus

* Software Engineering Lab focusing on delivering the next generation of
software engineering.

* Convergence Lab in conjunction with the Communications, Media and
Entertainment Business Unit (BU) focusing on the convergence of services,
networks and applications.

* Center for Knowledge Driven Information Systems (C-KDIS) focusing on the
areas of Text Analytics, Machine Learning, Symbolic and Quantitative
approaches to Reasoning and Decision Making, and Task Oriented Knowledge
Management Systems

* Distributed and High Performance Computing Lab focusing on
virtualization, grid models for computing efficiencies and cloud computing.

* Innovation Lab focusing on leveraging Information Communication and
Technology (ICT) to innovate and co-create with our clients.

* Security and Privacy Lab focusing on the application security needs in
our customers' context.

The Maintenance Center of Excellence of SETLabs continues to leverage its
platform based, knowledge centric, collaborative process to significantly
differentiate our maintenance offering and help us win large deals. Two
patent applications have been filed around the Mantra platform.

The High Performance and Grid Computing Lab has developed a product called
Infosys Gradient in the real time data virtualization space. Infosys
Gradient virtualizes distributed and heterogeneous data sources enabling
real-time data integration. This is possible by leveraging existing
enterprise infrastructure without any data replication or data movement.
Additionally, the Infosys GridScape platform which embodies the vision of a
next-generation data center is being leveraged by a leading data center
services provider to create their next generation data center offering.

The Convergence Lab in SETLabs is conducting advanced research and
development in the area of seamlessly blending three screens.

TV, Mobile and Web / PC to provide an immersive user experience. It has
developed a platform that enables application developers to write three-
screen applications once instead of three times, for each of the screens,
TV, Mobile and Web / PC, thereby eliminating duplication of effort and
accelerating time to market. Several three-screen applications have been
developed targeting Communication Service Providers.

The Lab has also developed a mobile middleware platform called Infosys
mConnect and an entire suite of solutions around it including a mobile
banking product, a mobile local search solution, and a mobile ticketing and
billing solution. The Convergence Lab is also representing us in Indo-U.K.
Advanced Technology Consortium (IU-ATC) and leading the charter for several
advanced wireless networking initiatives. IU-ATC representatives include
leading academic institutions and industrial partners from India and the
U.K.

The Innovation Lab works on systematically promoting and managing
innovations within Infosys and helps position us as a 'Partner in
Innovation' for our clients.

The Center for Knowledge Driven Information Systems (C-KDIS) research lab
of SETLabs has developed IP in sentiment analysis, optimization techniques
(for example, demand driven scheduling), predictive analytics (for example,
customer behavior prediction), knowledge extraction, knowledge assisted
diagnostics, decision making and rule modeling and execution. The team has
filed five patent applications and published 11 papers during the year.
This research goes into strengthening the Holistic Information Management
Infrastructure (HIMI) platform. The team is engaged with customers from the
financial, automobile, telecom, retail and healthcare sectors.

The Security and Privacy Lab, in collaboration with our Banking and Capital
Markets business unit, has developed TrustedADM, a secure development life
cycle methodology, that is being used across Infosys to ensure that all
applications designed, developed and maintained by us for our clients or
internal or subsidiaries are secure. Additionally, this Lab has also
created the Infosys MaskIT (Data Masking solution) which helps protect
privacy of customer information while off-shoring application development
and testing.

SETLabs has invested research and development efforts to show its
commitment to sustainable innovation. The Convergence Lab in SETLabs has
developed a wireless sensor networking platform called Infosys Elixir,
around which a host of solutions are being developed to support a greener,
smarter enterprise. SETLabs researchers have developed the Infosys Emission
Management System which is based on Intergovernmental Panel for Climate
Change (IPCC) guidelines. It helps organizations to track and manage their
direct and indirect emissions from various activities, set reduction
targets, forecast emissions based on trend, track and manage emission
reduction measures and to report emissions.

The product, Infosys iProwe (iProwe), enables Web Accessibility Assessment
and Remediation and was developed by the Web 2.0 research team. The Infosys
developed Web 2.0 Matrix continues to benchmark global Web 2.0 initiatives
to help customers develop a roadmap for Web 2.0 initiatives in their
organizations.

Infosys InGreen, the carbon footprint calculator, calculates an
individual's carbon footprint from household, commute and other activities.
InGreen aims at creating awareness of an individual's impact on the
environment and promotes cautious and judicious usage of natural resources.
It is based on IPCC guidelines and methodologies.

Collaborations with academia:

We continue to collaborate with leading national and international
universities, product vendors and technology start-up companies to leverage
synergies in solution offerings. These collaborations are leveraged towards
the creation of platforms and solutions that enhance the GDM principles of
automation, collaboration and assembly. We are associated with various
universities globally including Purdue University, IIIT Hyderabad, HIT
Bangalore, University of Southern California and the University of
Cambridge. We are a part of industry consortia including the IU-ATC in the
United Kingdom and the Smart Services CRC in Australia.

Benefits:

Our efforts in R&D have helped us offer new services to clients in the
areas of Web 2.0, SaaS, Enterprise Architecture and IT Governance as well
as to build solutions, tools, methodologies and frameworks in the areas of
software engineering, high performance and grid computing, cloud computing,
convergence and knowledge driven information systems. Based on the
technology platforms developed by multiple research groups, we are creating
client-focused business solutions. Our R&D efforts have helped us win large
deals across industry verticals.

Future plan of action:

We will collaborate with leading national and international universities,
product vendors and technology start-up companies with increasing focus.
These collaborations will be leveraged towards the creation of platforms
and solutions that enhance the GDM principles of automation, collaboration
and assembly. Our areas of research include software engineering, network
and device convergence, mobility, grid computing, cloud computing,
knowledge engineering, information management, and security and privacy

Recognition of Infosys R&D:

We continue to co-create with our clients and are working as their partners
in innovation. British Telecom (BT) has signed a Memorandum of
Understanding (MOW with us to collaborate on research and innovation. BT
Innovate and SETLabs, the companies' respective R&D divisions, worked in
collaboration, utilizing their respective intellectual properties to
jointly develop and take to market a product called Real-time Business
Intelligence Plus (RTBI Plus).

Nomura Securities partnered with us to address performance and scalability
issues in its Interest Rate Risk Analysis application. We implemented our
High Performance Computing solutions and Grid Application Migration
Framework to enhance the application's performance by 150 times by porting
the application to a Grid environment, thus demonstrating the proof of
concept. The solution improved the scalability of the application by
supporting several hundreds of products as opposed to less than hundred
earlier, enabling Nomura to easily introduce new products, more simulations
and research for products involving complex calculations, thus removing a
constraint to business growth.

Our thought leadership journal, SETLabs Briefings, won 'Best of Show' and
'Distinguished Technical Communication' Awards in the Technical
Publications competition organized by the Society for Technical
Communication (STC), India Chapter.

Expenditure on R&D:
in Rs. crore
2009 2008

Revenue expenditure 236 201

Capital expenditure 31 -

Total 267 201

R&D expenditure / total revenue 1.3% 1.3%

Foreign exchange earnings and outgo:

Activities relating to exports, initiatives taken to increase exports,
development of new export markets for products and services, and export
plans.

During the year, 98.7% of our revenues were derived from exports. We have
established a substantial direct marketing network around the world,
including North America, Europe and Asia Pacific. These offices are staffed
with sales and marketing specialists, who sell our services to large,
international clients.

Foreign exchange earned and used:

in Rs. crore
2009 2008

Earnings 19,836 14,490

Outflow (including capital imports) 8,258 6,788

Net foreign exchange earnings (NFE) 11,578 7,702

NFE / Earnings 58.4% 53.2%

for and on behalf of the
Board of Directors

S. Gopalakrishnan
Chief Executive Officer and
Managing Director

S.D. Shibulal
Place: Bangalore Chief Operating Officer and
Date : April 15, 2009 Director

Management's discussion and analysis:

Overview:-

The financial statements have been prepared in compliance with the
requirements of the Companies Act, 1956, guidelines issued by the
Securities and Exchange Board of India (SEBI) and Generally Accepted
Accounting Principles (GAAP) in India. Our Management accepts
responsibility for the integrity and objectivity of these financial
statements, as well as for various estimates and judgments used therein.
The estimates and judgments relating to the financial statements have been
made on a prudent and reasonable basis, so that the financial statements
reflect in a true and fair manner the form and substance of transactions,
and reasonably present our state of affairs, profits and cash flows for the
year.

A. Industry structure and developments:

Changing economic and business conditions, rapid technological innovation,
proliferation of the internet and globalization are creating an
increasingly competitive market environment that is driving corporations to
transform the manner in which they operate.

Consumers of products and services are increasingly demanding accelerated
delivery times and lower prices. To adequately address these needs,
companies are focusing on their core competencies and are using outsourced
technology service providers to help improve productivity, develop new
products, conduct research and development activities, reduce business risk
and manage operations more effectively.

The role of technology has evolved from supporting corporations to
transforming them. The ability to design, develop, implement and maintain
advanced technology platforms and solutions to address business and client
needs has become a competitive advantage and a priority for corporations
worldwide. Concurrently, the prevalence of multiple technology platforms
and a greater emphasis on network security and redundancy have increased
the complexity and cost of IT systems, and have resulted in greater
technology-related risks. The need for more dynamic technology solutions
and the increased complexity, cost and risk associated with these
technology platforms has created a growing need for specialists with
experience in leveraging technology to help improve efficiency and security

There is an increasing need for highly skilled technology professionals in
the markets in which we operate. At the same time, corporations are
reluctant to expand their internal IT departments and increase costs. These
factors have increased corporations' reliance on their outsourced
technology service providers and are expected to continue to drive future
growth for outsourced technology services. According to the Forrester
Global IT Market Outlook : 2009 by Andrew. H. Bartels published in January
2009, purchases of IT goods and services by global businesses and
governments will decline by 3% in 2009 and then rise by 9% in 2010.

1. Increasing trend towards offshore technology services:

Outsourcing the development, management and ongoing maintenance of
technology platforms and solutions has become increasingly important.
Companies are increasingly turning to offshore technology service providers
to meet their need for high quality, cost competitive technology solutions.
As a result, offshore technology service providers have become critical in
the industry and continue to grow in recognition and sophistication. The
effective use of offshore technology services offers a variety of benefits,
including lower cost of ownership of IT infrastructure, lower labor costs,
improved quality and innovation, faster delivery of technology solutions
and more flexibility in scheduling. In addition, companies are also
recognizing the benefits of offshore technology service

providers in software research and development, and related support
functions, and are outsourcing a greater portion of these activities. We
believe the range of services delivered offshore is also increasing.

2. The India advantage:

India is recognized as the premier destination for offshore technology
services. According to a factsheet published by NASSCOM in February 2009,
IT services (excluding business process outsourcing (BPO), product
development and engineering services) exports from India are expected to
cross US $26.9 billion in fiscal 2009 and BPO exports from India are
expected to cross US $12.8 billion during the same period.

There are several key factors contributing to the growth of IT and IT
enabled services (ITES) in India and by Indian companies.

High quality delivery :

According to the Process Maturity Profile published by the Carnegie Mellon
Software Engineering Institute in September 2008, of the 362 appraisals
conducted in India, approximately 158 companies are certified at SEI-CMM
Level 5 -higher than any other country in the world. SEI-CMM is the
Carnegie Mellon

Software Engineering Institute's Capability Maturity Model, which assesses
the quality of organizations' management system processes and
methodologies. Level 5 is the highest level of the CMM assessment.

Significant cost benefits:

The NASSCOM Strategic Review 2009 indicates that companies experience cost
savings of around 60-70% by outsourcing their IT and BPO requirements to
India as compared to their source locations, and suggests that the cost
advantage offered by the Indian IT BPO industry is sustainable over the
long term.

Abundant skilled resources:

India has a large and highly skilled English-speaking labor pool. According
to the NASSCOM Strategic Review 2009, the total graduate out-turn in India
in fiscal 2009 is estimated at 3.5 million, including a technical graduate
out-turn of approximately 5,14,000.

The NASSCOM Strategic Review 2009 indicates that the large and growing pool
of skilled professionals has been a key driver of the rapid growth in the
Indian IT ITES sector and that India accounts for over 28% of the total
suitable talent pool available to work in the ITBPO sector across all the
potential global sourcing low-cost locations.

The factors described above also make India the premier destination for
other services such as IT enabled services, which we refer to as business
process management. According to a factsheet published by NASSCOM in
February 2009, the Indian BPO services export market was US $10.9 billion
in fiscal 2008 and is estimated to reach US $12.8 billion in fiscal 2009.

While these advantages apply to many companies with offshore capabilities
in India, we believe that there are additional factors critical to a
successful, sustainable and scalable technology services business. These
factors include the ability to

* Effectively integrate onsite and offshore execution capabilities to
deliver seamless, scalable services

* Increase depth and breadth of service offerings to provide a one-stop
solution in an environment where corporations are increasingly reducing the
number of technology services vendors are using

* Develop and maintain knowledge of a broad range of existing and emerging
technologies

* Demonstrate significant domain knowledge to understand business processes
and requirements

* Leverage in-house industry expertise to customize business solutions for
clients

* Attract and retain high quality technology professionals

* Make strategic investments in human resources and physical infrastructure
(or facilities) throughout the business cycle.

3. Evolution of technology outsourcing:

The nature of technology outsourcing is changing. Historically,
corporations either outsourced their technology requirements entirely or on
a standalone project-by-project basis. In an environment of rapid
technological change, globalization and regulatory changes, the complete
outsourcing model is often perceived to limit a company's operational
flexibility and not fully deliver potential cost savings and efficiency
benefits. Similarly, project-by-project outsourcing is also perceived to
result in increased operational risk and coordination costs, and as failing
to fully leverage technology service providers' complete range of
capabilities. To address these issues, companies are looking at outsourcing
approaches that require their technology service providers to develop
specialized systems, processes and solutions along with cost-effective
delivery capabilities.

4. Global Delivery Model (GDM):

Our Global Delivery Model (GDM) allows us to execute services where it is
most cost effective and sell services where it is most profitable. The GDM
enables us to derive maximum benefit from

* Access to our large pool of highly skilled technology professionals

* 24-hour execution capabilities across multiple time zones

* The ability to accelerate delivery times of large projects by
simultaneously processing project components

* Cost competitiveness across geographic regions

* Built-in redundancy to ensure uninterrupted services

* A knowledge management system that enables us to re-use solutions where
appropriate.

In atypical offshore development project, we assign a team of technology
professionals to visit a client's site to determine the scope and
requirements of the project. Once the initial specifications of the project
have been established, our project managers return to the relevant global
development center to supervise a larger team of technology professionals
dedicated to the development or implementation of the solution. Typically,
a small team remains at the client's site to manage project coordination
and address changes in requirements as the project progresses. Teams return
to the client's site when necessary to ensure seamless integration. To the
extent required, a dedicated team provides ongoing maintenance from our
global development centers. The client's systems are linked to our
facilities enabling simultaneous processing in our global development
centers. Our model ensures that project managers remain in control of
execution throughout the life of the project regardless of their
geographical location.

For the past 18 years, we have successfully executed projects at our global
development centers. We have 54 global development centers, of which 27 are
located in India, 12 are in North America, 9 are in the Asia-Pacific region
and 6 are in Europe. Our largest development centers are located in India.

Our quality control processes and programs are designed to minimize defects
and ensure adherence to pre-determined project parameters. Additionally,
software quality advisors help individual teams establish appropriate
processes for projects and adhere to multi-level testing plans. The project
manager is responsible for tracking metrics, including actual effort spent
versus initial estimates, project budgeting and estimating the remainder of
efforts required on a project.

Our GDM mitigates risks associated with providing offshore technology
services to our clients. For our communications needs, we use multiple
service providers and a mix of terrestrial and optical fiber links with
alternate routing. In India, we rely on two telecommunications carriers to
provide high-speed links inter-connecting our global development centers.
Internationally, we rely on multiple links on submarine cable paths
provided by various service providers to connect our Indian global
development centers with network hubs in other parts of the world. Our
significant investment in redundant infrastructure enables us to provide
uninterrupted service to our clients. Our business continuity center in
Mauritius enables us to transfer the execution of a portion of our business
activities rapidly from our Indian global development centers to Mauritius
and is an example of our investment in redundant infrastructure.

5. Our end-to-end solutions:

We provide comprehensive business solutions that leverage technology to
help our clients gain market differentiation and / or competitive
advantage. Our service offerings include business and technology
consulting, custom application development, infrastructure maintenance
services, maintenance and production support, package enabled consulting
and implementation including enterprise solutions, product engineering
solutions and product lifecycle management, systems integration, validation
solutions and Software as a Service (SaaS) related solutions.

These offerings are provided to clients located in various geographies and
across multiple industry verticals including banking and capital markets,
insurance, communications, media and entertainment, energy, utilities,
manufacturing, aerospace, pharmaceuticals and healthcare, and retail. We
also provide a core banking software solution, FinacleTM, for the banking
industry and provide customization and implementation services around this
solution.

We complement our industry expertise with specialized support for our
clients. We also use our Software Engineering group and Technology Lab to
create customized solutions for our clients. In addition, we continually
evaluate and train our professionals in new technologies and methodologies.
Finally, we ensure the integrity of our service delivery by utilizing a
scalable and secure infrastructure.

We generally assume full project management responsibility in each of our
solution offerings. We strictly adhere to our SEI-CMMI Level 5 internal
quality and project management processes. We have a knowledge management
system to enable us to leverage existing solutions across our Company,
where appropriate, and have developed in-house tools for project management
and software life-cycle support. We believe that these processes,
methodologies, knowledge management systems and tools reduce the overall
cost to the client and enhance the quality and speed of delivery

Our engagements with clients generally include more than one of the
solutions listed below. Revenues attributable to custom application
development, maintenance and production support, product engineering,
package enabled consulting and implementation and technology consulting
services represented a majority of our total revenues in fiscal 2009.

B. Financial condition:

A summary of our financial position as at March 31, 2009 and 2008 is as
follows:

in Rs. crore
2009 % 2008 % Growth

Sources of funds:

Shareholders' funds
Share capital 286 1.6 286 2.1 -

Reserves and
surplus 17,523 98.4 13,204 97.9 32.7
17,809 100.0 13,490 100.0 32.0
Application of
funds

Fixed assets
Original cost 5,986 33.6 4,508 33.4 32.8

Depreciation (2,187) (12.3) (1,837) (13.6) 19.1

Net book value 3,799 21.3 2,671 19.8 42.2

Capital work-in
progress 615 3.5 1,260 9.3 (51.2)
4,414 24.8 3,931 29.1 12.3

Investments 1,005 5.6 964 7.2 4.3

Deferred tax assets 102 0.6 99 0.7 3.0
Current assets,
loans and advances

Sundry debtors 3,390 19.0 3,093 22.9 9.6

Cash and bank
balances 9,039 50.8 6,429 47.7 40.6

Loans and
advances 3,164 17.8 2,705 20.1 17.0
15,593 87.6 12,227 90.7 27.5

Current liabilities (1,507) (8.5) (1,334) (9.9) 13.0

Provisions (1,798) (10.1) (2,397) (17.8) (25.0)
(3,305) (18.6) (3,731) (27.7) (11.4)

Net current assets 12,288 69.0 8,496 63.0 44.6
17,809 100.0 13,490 100.0 32.0

Sources of funds:

1. Share capital:-

At present, we have only one class of shares - equity shares of par value
Rs. 5/- each.

Our authorized share capital is Rs. 300 crore, divided into 60 crore equity
shares of Rs. 5/- each. The issued, subscribed and paid up capital as at
March 31, 2009 and March 31, 2008 was Rs. 286 crore.

During the year, employees exercised 4,55,586 equity shares issued under
the 1998 Stock Option Plan and 3,78,699 equity shares issued under the 1999
Stock Option Plan. Consequently, the issued, subscribed and outstanding
shares increased by 8,34,285 and share capital increased by Rs. 0.42 crore.
Details of options granted, outstanding and vested as at March 31, 2009 are
provided in this Annual Report.

The details of the increase are provided in the table as follows

Share capital 2009 2008
Equity shares Rs. Equity shares Rs.
(no.) crore (no.) crore
Beginning of the
year 57,19,95,758 286 57,12,09,862 286

Add:

Shares issued on
exercise of ESOP

The 1998 Plan 4,55,586 - 5,00,465 -

The 1999 Plan 3,78,699 - 2,85,431 -

Sub-total 8,34,285 - 7,85,896 -

End of the year 57,28,30,043 286 57,19,95,758 286

Our equity shares are currently listed in India on the NSE and BSE and the
NASDAQ in the U.S. Our market capitalization as at March 31, 2009 was
Rs.75,837 crore, (previous year Rs. 82,362 crore) based on NSE price. The
same was US $15.07 billion (previous year US $20.46 billion) based on
NASDAQ price. As at March 31, 2009, the total number of shareholders on
record was 4,96,907 and the total founder holding percentage was 16.49%.

2. Reserves and surplus:

A summary of reserves and surplus is provided in the table as follows.

in Rs. crore
2009 2008

a. Capital reserve 6 6

b. Share premium 2,925 2,851

c. General reserve 4,287 3,705

d. Profit and Loss account 10,305 6,642

Total 17,523 13,204

2.a Capital reserve:

The balance as at March 31, 2009 amounted to Rs. 6 crore, same as in the
previous year.

2.b Share premium:

A statement of movement in the share premium account is as follows.

in Rs. crore
2009 2008

Balance-beginning of the year 2,851 2,768

Add: Premium on exercise of ESOP 64 58

Income tax benefit arising from
exercise of ESOP 10 25

Balance - end of the year 2,925 2,851

The addition to the share premium account of Rs. 64 crore during the year
is on account of premium received on issue of 8,34,285 equity shares, on
exercise of options under the 1998 and 1999 Stock Option Plans. The Finance
Act, 2007 included Fringe Benefit Tax (FBT) on Employees Stock Option Plan.
FBT liability crystallizes on the date of exercise of stock options. During
the year ended March 31, 2009, 8,34,285 equity shares were issued pursuant
to the exercise of stock options by employees under both the 1998 and 1999
stock option plans. FBT on exercise of stock options of Rs. 3 crore has
been paid by us and subsequently recovered from the employees.
Consequently, there is no impact on the Profit and Loss account. An amount
of Rs. 10 crore (Rs. 25 crore in the previous year) was credited to the
share premium account arising due to tax benefits in overseas jurisdiction
of deductions earned on exercise of employees stock options, in excess of
compensation charged to the Profit and Loss account.

2.c General reserves:

A statement of movement in the general reserves is as follows.

in Rs. crore
2009 2008

Balance-beginning of the year 3,705 3,258

Add : Transfer from Profit and Loss
account 582 447

Balance- end of the year 4,287 3,705

An amount of Rs. 582 crore representing 10% of the profits for the year
ended March 31, 2009 (previous year Rs. 447 crore) was transferred to the
general reserves account from the Profit and Loss account.

2.d Profit and Loss account:

The balance retained in the Profit and Loss account as at March 31, 2009 is
Rs. 10,305 crore, after providing the interim and final dividend for the
year of Rs. 572 crore and Rs. 773 crore and dividend tax of Rs. 228 crore
thereon. The total amount of profits appropriated to dividend including
dividend tax was Rs. 1,573 crore, as compared to Rs. 2,225 crore in the
previous year.

2.e Shareholder funds:

The total shareholder funds increased to Rs. 17,809 crore as at March 31,
2009 from Rs. 13,490 crore as of the previous year end.

The book value per share increased to Rs. 310.90 as at March 31, 2009
compared to Rs. 235.84 as of the previous year-end.

Application of funds:

Fixed assets:

statement of movement in fixed assets is as follows:-

in Rs. crore
2009 2008 Growth%

Land: Freehold 172 131 31.3

Leasehold 101 98 3.1

Buildings 2,863 1,953 46.6

Plant and machinery 1,100 823 33.7

Computer equipment 1,076 961 12.0

Furniture and fixtures 658 539 22.1

Vehicles 4 3 33.3

Intangible asset 12 - -

Gross block 5,986 4,508 32.8

Less : Accumulated depreciation (2,187) (1,837) 19.1

Net block 3,799 2,671 42.2

Add: Capital work-in progress 615 1,260 51.2

Net fixed assets 4,414 3,931 12.3

Depreciation as % of revenues 3.4 3.5

as % of average gross block' 13.9 13.7

Accumulated depreciation
as % of gross block 38.3 42.9

Excluding land:

The details of built-up area and seats are provided in the table as
follows:

2009 2008
Built-up area (sq. ft. in lakh)

Completed 226.43 164.77
In progress 45.55 83.62

Seats (no.)
Completed 95,048 77,754

In progress 20,756 26,881

3.a Capital expenditure:

We incurred an amount of Rs. 1,177 crore (Rs. 1,370 crore in the previous
year) as capital expenditure comprising additions to gross block of
Rs.1,822 crore offset by a decrease of Rs. 645 crore on account of decrease
in capital work-in-progress. The entire capital expenditure was funded out
of internal cash flows.

3.b Additions to gross block:

During the year, we added Rs. 1,822 crore to our gross block comprising
Rs.273 crore for investment in computer equipment and the balance of
Rs.1,536 crore on infrastructure investment, Rs. 1 crore on vehicle and
another Rs. 12 crore towards intangible asset acquisition.

We invested Rs. 44 crore to acquire 30 acres of land at Chennai, Mysore and
Bangalore.

Due to several new development centers being operationalized, details of
which are provided in the Additional information section of the Annual
Report, the expenditure on buildings, computer equipment, plant and
machinery, furniture and fixtures and vehicles increased by Rs. 910 crore,
Rs. 273 crore, Rs. 370 crore, Rs. 212 crore and Rs. 1 crore respectively.

During the previous year, we added Rs. 1,067 crore to our gross block,
including investment in computer equipment of Rs. 189 crore and the balance
of Rs. 878 crore on infrastructure investment.

3.c Deductions to gross block:

During the year, we deducted Rs. 344 crore (net book value of zero) from
the gross block comprising Rs. 335 crore of retirement of assets, Rs. 7
crore on donation of computer systems and Rs. 2 crore on disposal of
various assets. During the previous year, we retired / transferred various
assets with a gross block of Rs. 448 crore.

3.d Capital expenditure commitments:

We have a capital expenditure commitment of Rs. 344 crore, as at March 31,
2009 as compared to Rs. 600 crore as at March 31, 2008.

4. Investments:

We make several strategic investments which are aimed at procuring business
benefits for us. The details of investments as at March 31, 2009 and the
movement in the investment account during the year is summarized in the
table as follows:

in Rs. crore
Company March 31, Additions Redeemed March 31, % of
2008 2009 holding
as at the
year end

Subsidiaries:

Infosys BPO Limited 659 - - 659 99.98

Infosys Technologies 46 19 - 65 100.00
(China) Co. Limited

Infosys Technologies 66 - - 66 100.00
(Australia) Pty Ltd.

Infosys Consulting, Inc. 171 22 - 193 100.00
Infosys Technologies S. 22 - - 22 100.00
de R.L. de C.V
964 41 - - 1,005
Others

On Mobile Systems Inc., 9 - - 9 -
USA

M-Commerce Ventures Pte. 2 2 - - -
Ltd., Singapore

Merasport Technologies - 2 - 2 -
Pvt Ltd., 11 2 2 11 -

Less: Provision for (11) - - (11)

Total 964 43 2 1,005

During the year ended March 31, 2009, Infosys received 2,420 shares of
Merasport Technologies Private Limited, valued at Its. 2 crore in lieu of
provision of usage rights to the software developed by Infosys. The
investment was fully provided for during the year based on diminution other
than temporary.

The revenues, net profit and net worth information relating to our
subsidiaries are provided as follows:


in Rs. crore
Revenues

2009 2008 Growth
(%)
Infosys BPO Limited - Consolidated 1,298 937 38.5

Infosys Technologies (China) Co. Limited 129 77 67.8

Infosys Technologies (Australia) Pty Ltd. 549 556 (1.3)

Infosys Consulting, Inc. 287 246 16.7

Infosys Technologies S. de R. L. de C. V 37 3 1133.3

Total 2,300 1,819 26.4

in Rs. crore
Net Profit / (Loss) Net worth
2009 2008 Growth % of As at
(%) revenue March
for 31, 2009
fiscal
2009

Infosys BPO Limited - 201 153 31.4 15.4 689
Consolidated

Infosys Technologies (China) (11) (7) (57.1) (8.5) (14)
Co. Limited

Infosys Technologies 46 101 (54.4) 8.4 277

Infosys Consulting, Inc. (59) (51) (15.7) (20.6) (102)

Infosys Technologies S. de (8) (7) (14.3) (21.6) 7
R.L de C.V

Total 169 189 (10.6) 7.3 857

Infosys Consulting, Infosys China and Infosys Mexico are in the investment
phase and this has resulted in the reported losses. The information
relating to related party transactions with subsidiaries is given in the
Schedules section of the Annual Report. The details of employees in each of
the subsidiaries are provided in the table as follows

No. of employees:
2009 2008

Infosys BPO Limited - Consolidated 17,080 16,295

Infosys Technologies (China) Co. Limited 1,053 699

Infosys Technologies (Australia) Pty. Ltd. 341 363

Infosys Consulting, Inc. 304 265

Infosys Technologies S. de R. L. de C. V 221 75

Majority-owned subsidiary

4.a Infosys BPO Limited:

We established Infosys BPO Limited as a majority-owned and controlled
subsidiary on April 3, 2002, to provide business process management
services. Infosys BPO seeks to leverage the benefits of service delivery
globalization, process redesign and technology to drive efficiency and cost
effectiveness in customer business processes. The movement of investment in
Infosys BPO is provided in the following table:

2009 2008
Shares (no.) Rs. Shares (no.) Rs.
crore crore

Balance - beginning
of the year 3,38,22,319 659 3,34,61,902 637

Shares purchased
from IBPO
employees - - 3,60,417 22

Balance - end of
the year 3,38,22,319 659 3,38,22,319 659

Wholly-owned subsidiaries:

4.b Infosys Technologies (China) Co. Limited:

On October 10, 2003, we set up a wholly-owned subsidiary in the People's
Republic of China named Infosys Technologies (China) Co. Limited. During
the year, additional investment of US $4 million (Rs. 19 crore) was made in
Infosys Technologies (China) Co. Limited.

4.c Infosys Technologies (Australia) Pty. Limited:

On January 2, 2004, we acquired 100% of equity in Expert Information
Services Pty Limited, Australia, and renamed the company as Infosys
Technologies (Australia) Pty. Limited. The consideration comprised a
payment in cash of Rs. 66 crore on conclusion and an earnout on achieving
financial conditions over a three-year period ending March 31, 2007. We
paid Rs. 40 crore as earnout for the three year period ending March 31,
2007.

4.d Infosys Consulting, Inc.:

On April 8, 2004, we set up a wholly-owned subsidiary, Infosys Consulting,
Inc., incorporated in Texas, USA, to add high-end consulting capabilities
to our GDM. During the year, an additional investment of US $5 million (Rs.
22 crore) was made in Infosys Consulting, Inc., to fund its operational
requirements. The subsidiary is still in the investment phase and is
expected to break even in the near future.

4.e Infosys Technologies S. de R. L. de C. V., Mexico:

During the year 2008, we incorporated Infosys Technologies S. de R. L. de
C. V , a wholly-owned subsidiary in Mexico, to improve proximity to our
North American clients. As at March 31, 2009, we had invested an aggregate
of Mexican Pesos 60 million (Rs. 22 crore) in the subsidiary.

5. Deferred tax assets

We recorded net deferred tax assets of Rs. 102 crore as at March 31, 2009
(Rs. 99 crore as at March 31, 2008). Deferred tax assets represent timing
differences in the financial and tax books arising from depreciation on
assets and provision for sundry debtors.

We assess the likelihood that our deferred tax assets will be recovered
from future taxable income. We believe it is more likely than not that we
will realize the benefits of these deductible differences.

6. Sundry debtors

Sundry debtors amount to Rs. 3,390 crore (net of provision for doubtful
debts amounting to Rs. 105 crore) as at March 31, 2009, compared to Rs.
3,093 crore (net of provision for doubtful debts amounting to Rs. 40 crore)
as at March 31, 2008. These debtors are considered good and realizable.
Debtors are at 16.7% of revenues for the year ended March 31, 2009,
compared to 19.8% for the previous year, representing a Days Sales
Outstanding (DSO) of 61 days and 72 days for the respective years.

Our largest client constituted 10.8% of sundry debtors as at March 31,
2009. The age profile of debtors is as follows:

in Rs.
Days 2009 2008

0-30 58.5 58.3
31-60 32.8 29.1
61-90 4.7 3.9
Above 91 4.0 8.7
100.0 100.0

Provisions are generally made for all debtors outstanding for more than 180
days as also for others, depending on the Management's perception of the
risk. The need for provisions is assessed based on various factors,
including collectability of specific dues, risk perceptions of the industry
in which the customer operates and general economic factors which could
affect the customer's ability to settle.

The movement in provisions for doubtful debts during the year is as
follows:
in Rs. crore

2009 2008

Opening balance 40 22

Add: Amount provided 74 42

Less: Amount written-off 9 24

Closing balance 105 40

Provision for bad and doubtful debts as a percentage of revenue is 0.37% in
fiscal 2009 as against 0.27% in fiscal 2008.

The unbilled revenues as at March 31, 2009 and 2008 amounted to Rs. 738
crore and Rs. 472 crore respectively.

7. Cash and cash equivalents:

The bank balances in India include both Rupee accounts and foreign currency
accounts. The bank balances in overseas current accounts are maintained to
meet the expenditure of the overseas branches and project-related
expenditure overseas.

in Rs. crore
2009 2008

Cash balances - -

Bank balances in India

Current accounts 25 60

Deposit accounts 8,234 5,772

Foreign currency accounts (EEFC) 74 181

Unclaimed dividend account 2 2

Bank balances outside India
Current accounts 704 414

Total cash and bank balances 9,039 6,429

Deposits reported under loans and advances 1,250 1,260

Total cash and cash equivalents 10,289 7,689

Cash and equivalents / assets 57.8% 57.0%

Cash and equivalents / revenues 50.8% 49.1%

The deposit account represents deposits of maturity up to 365 days.

Our treasury policy calls for investing surpluses with highly-rated
companies, banks and financial institutions for maturities up to 365 days,
as also with liquid mutual funds with a limit on investments in individual
entities.

8. Loans and advances:

in Rs. crore
2009 2008

Unsecured, considered good:

Loans to subsidiary 51 32
Advances

Pre-paid expenses 27 27

Interest accrued but not due 1 186

Advance to Gratuity Fund Trust - 12

For supply of goods and
rendering of services 6 10

Withholding and other taxes receivable 149 13

Others 4 7

Sub-total 238 287

Unbilled revenues 738 472

Advance income tax 268 215

MAT credit entitlement 262 169

Loans and advances to employees 105 106

Electricity and other deposits 37 24

Rental deposits 13 11

Deposits with financial institutions and
body corporate 1,503 1,421

Total 3,164 2,705

An amount of Rs.253 crore (Rs. 161 crore as at March 31, 2008 ) deposited
with the Life Insurance Corporation of India to settle leave obligations as
and when they arise during the normal course of business. This amount is
considered as restricted cash and hence not considered as 'cash and cash
equivalents.

During the year, we disbursed an amount of Rs. 10 crore (US $2 million) as
loan to our wholly owned subsidiary, Infosys Technologies (China) Co.
Limited. Including a foreign exchange valuation impact of Rs. 9 crore, the
total outstanding loan as at March 31, 2009 was Rs. 51 crore (US $10
million). The loan is repayable within five years from the date of
disbursement at the discretion of the subsidiary.

The details of advance income taxes are as follows.

in Rs. crore
2009 2008

Domestic tax 267 132
Overseas tax 1 83
268 215

We have calculated our tax liability after considering Minimum Alternate
Tax (MAT). MAT can be set off against any future tax liability and Rs. 262
crore is shown under 'Loans and advances' in the balance sheet as at March
31, 2009.

Our loan schemes provide for personal loans and salary advances which we
provide primarily to employees in India who are not executive officers or
directors. We also provide allowances for purchase of cars and houses for
our middle-level managers. The details of these loans are as follows

in Rs. crore
2009 2008

Salary advances 62 64
Soft loans 39 34
Housing loans 4 8
105 106

The salary advances represent advances to employees, both in India and
overseas, which are recoverable within 12 months.

Electricity and other deposits represent electricity deposits, telephone
deposits, insurance deposits and advances of a similar nature. The rent
deposits are toward buildings taken on lease by us for our software
development centers and marketing offices in cities across the world.
Deposits with financial institutions and corporate bodies represent surplus
money deployed in the form of short-term deposits. The details of such
deposits are as follows.

in Rs. crore
2009 2008

HDFC Limited 1,250 1,000
GE Capital Services India - 260
1,250 1,260
Restricted deposits:

Life Insurance Corporation of India' 253 161
1,503 1,421
For funding leave obligations of employees

9. Current liabilities:

in Rs. crore
2009 2008

Sundry creditors:

For goods and services 35 36

For accrued salaries and benefits 383 375

For other liabilities

Provision for expenses 381 239

Retention monies 53 52

Withholding and other taxes 206 206

Mark-to-market on options / forward
contracts 98 116

Gratuity obligations - unamortized
amount 29 33

Others 3 3

Sub-total 1,188 1,060

Management's discussion and analysis 45
Current liabilities (could.)

in Rs. crore
2009 2008

Advances received from clients 5 4
Unearned revenue 312 268
Unclaimed dividend 2 2
Total 1,507 1,334

Sundry creditors for accrued salaries and benefits include the provision
for bonus and incentive payable to the staff and also our liability for
leave encashment valued on an actuarial basis. The details are as follows

in Rs. crore
2009 2008

Accrued salaries payable 38 46
Accrued bonus and incentive payable 345 329
Total 383 375

Sundry creditors for other liabilities represent amounts accrued for
various other operational expenses. Retention monies represent monies
withheld on contractor payments pending final acceptance of their work.
Withholding and other taxes payable represent local taxes payable in
various countries in which we operate and the same will be paid in due
course.

The mark-to-market on options / forward contracts as at March 31, 2009 were
Rs. 98 crore. The Central Government, vide notification dated March 31,
2009, has amended Accounting Standard AS 11 'The Effects of Changes in
Foreign Exchange Rates', notified under the Companies (Accounting Standard)
Rules, 2006. During the year ended March 31, 2008, the Company adopted
Accounting Standard AS 30 'Financial instruments: Recognition and
Measurement', pursuant to announcement made by Institute of Chartered
Accountants of India (ICAI). The Company continues to follow AS 30 and
consequently there is no change in its accounting policies. The details on
outstanding options / forward contracts are provided in the notes to the
financial statements.

Effective July 1, 2007, we revised the employee death benefits provided
under the gratuity plan, and included all eligible employees under a
consolidated term insurance cover. Accordingly, the obligations under the
gratuity plan reduced by Rs. 37 crore, which is being amortized on a
straight line basis to the Profit and Loss account over 10 years,
representing the average future service period of employees. An amount of
Rs. 4 crore was amortized during the year. The unamortized balance as at
March 31, 2009 was Rs. 29 crore.

Advances received from clients represent monies received for the delivery
of future services. Unearned revenue consists primarily of advance client
billing on fixed-price, and fixed-timeframe contracts for which related
costs were not yet incurred. Unclaimed dividends represent dividends paid,
but not encashed by shareholders, and are represented by a bank balance of
the equivalent amount.

10. Provisions:

in Rs. crore
2009 2008

Proposed dividend 773 1,559

Tax on dividend 131 265

Income taxes 575 381

Unavailed Leave 244 149

Post-sales client support and warranties 75 43

Total 1,798 2,397

Proposed dividend represent the final dividend we recommended to our
shareholders. Upon approval by our shareholders, this will be paid after
the Annual General Meeting. Provision for tax on dividend denotes taxes
payable on dividends declared for the year.

Provisions for taxation represent estimated income tax liabilities, both in
India and overseas. The details are as follows:

in Rs. crore
2009 2008

Domestic tax 91 72
Overseas tax 484 309
Total 575 381

The provision for post-sales client support and warranties is toward likely
expenses for providing post-sales client support on fixed-price contracts.

11. Net current assets:

Net current assets as at March 31, 2009 were Rs. 12,288 crore, compared to
Rs. 8,496 crore in the previous year. The current ratio was 4.72 as at
March 31, 2009 as compared to 3.28 in the previous year.

12. Contingent liabilities The statement of capital commitments and
contingent liabilities as at March 31, 2009 and 2008 are as follows:

in Rs. crore
2009 2008

Estimated amount of unexecuted capital
contracts (net of advances and deposits) 344 600

Outstanding guarantees and counter
guarantees 3 2

Claims against the Company, not
acknowledged as debts 3 3

Forward contracts outstanding 1,487 2,148

Options contract outstanding 877 508

Lease obligations 230 140

C. Results of operations:

Summary of financial results for the year ended March 31, 2009 and 2008 is
as follows:

in Rs. crore
2009 % 2008 % Growth

Income: Software
services 19,416 95.8 15,051 96.2 29.0

Products 848 4.2 597 3.8 42.0

Total income 20,264 100.0 15,648 100.0 29.5

Software development:

Expenses 11,145 55.0 8,876 56.7 25.6

Gross profit 9,119 45.0 6,772 43.3 34.7
Selling and marketing

Expenses 933 4.6 730 4.7 27.8

General and
administration
expenses 1,280 6.3 1,079 6.9 18.6

Operating profit
(PBIDTA) 6,906 34.1 4,963 31.7 39.1

Interest - - - - -

Depreciation 694 3.4 546 3.5 27.1

Operating profit
after interest and
depreciation 6,212 30.7 4,417 28.2 40.6

Other income, net 502 2.5 683 4.4 (26.5)

Profit before tax 6,714 33.1 5,100 32.6 31.6

Provision for tax* 895 4.4 630 4.0 42.1

Net profit after tax 5,819 28.7 4,470 28.6 30.2

* Includes a net reversal of tax amounting to Rs.108 crore and Rs.121 crore
for the year ended March 31, 2009 and March 31, 2008 respectively.

Quarterly results of operations:

Summary of quarterly results for the year ended March 31, 2009 is as
follows.

in Rs. crore
Q1 Q2 Q3 Q4

Income 4,516 5,066 5,429 5,253

Gross profit 1,905 2,316 2,514 2,384

Gross profit % 42.2 45.7 46.3 45.4

Operating profit (PBIDTA) 1,404 1,718 1,956 1,828

Net profit 1,262 1,390 1,598 1,569

Net profit % 27.9 27.4 29.4 29.9

Net profit for Q1, Q3 and Q4 of fiscal 2009 includes a reversal of tax
provisions amounting to Rs. 31 crore, Rs. 62 crore and Rs. 15 crore
respectively.

1. Income:

The income for the year ended March 31, 2009 grew by 11.3% in US Dollar
terms. However, income in Rupee terms grew by 29.5% on account of a 16.3%
depreciation of the Rupee against the US Dollar during the year.

2009 2008 % change

Income (US $ million) 4,356 3,912 11.3
Average US $ Rupee rate (Rs.) 46.52 40.00 16.3
Income (Rs. crore) 20,264 15,648 29.5

Income from software services and products is as follows.

in Rs. crore
2009 % 2008 % Growth

Overseas 20,004 98.7 15,429 98.6 29.7
Domestic 260 1.3 219 1.4 18.7
Total 20,264 100.0 15,648 100.0 29.5

Our revenues are generated primarily on fixed-timeframe or time-andmaterial
basis. Revenue from software services on fixed-price and fixedtimeframe
contracts are recognized as per the proportionate-completion method. On
time-and-material contracts, revenue is recognized as the related services
are rendered. Revenue from the sale of user licenses for software
applications is recognized on transfer of the title in the user license,
except in multiple arrangement contracts, where revenue is recognized as
per the proportionate-completion method.

The segmentation of software services by project type is as follows.

in Rs.
2009 2008

Fixed price 37.6 33.0

Time-and-material 62.4 67.0

Total 100.0 100.0

Our revenues are also segmented into onsite and offshore revenues. Onsite
revenues are for those services which are performed at our client locations
as part of software projects, while offshore revenues are for services
which are performed at our software development centers located in India.

The segmentation of revenues by location (including product revenue) is as
follows

in Rs.
2009 2008

Onsite 49.3 50.9

Offshore 50.7 49.1

Total 100.0 100.0

The services performed onsite typically generate higher revenues per-
capita, but at lower gross margins in percentage as compared to the
services performed at our own facilities. Therefore, any increase in the
onsite effort impacts our margins. The details of effort mix for software
services and products in person months are as follows in:

2009 2008

Onsite 28.4 29.8
Offshore 71.6 70.2
Total 100.0 100.0

The growth in software services and product revenues is due to an all-round
growth in various segments of the business mix and is mainly due to growth
in business volumes.

The details of the same are as follows:

2009 2008
Income (in Rs. crore)
Software services 19,416 15,051
Software products 848 597
Total 20,264 15,648
Person months
Software services:
Onsite 1,79,329 1,63,665
Offshore 4,07,977 3,52,323
Billed-total 5,87,306 5,15,988
Software products 44,934 33,373
Non-billable 2,19,351 1,61,504
Training 62,019 63,606
Sub-total 9,13,610 7,74,471
Support 46,779 36,502
Total 960,389 8,10,973
Increase in billed person months:
Onsite 15,664 33,936
change 9.6 26.2
Offshore 55,654 77,334
change 15.8 28.2
Total 71,318 1,11,270
change 13.8 27.5
Support / total (%) 4.9 4.5

1.a Software services:

During the year, the volume of software services grew by 13.8% compared to
27.5% in the previous year. The onsite and offshore volume growth were 9.6%
and 15.8% respectively during the year, compared to 26.2% and 28.2% in the
previous year. In US Dollar terms, onsite per capita revenues decreased by
1.5% during the year, offshore per capita revenues decreased by 1.4%, and
blended per capita revenues decreased by 2.6%. In constant currency terms,
onsite per capita revenues increased by 2.0% offshore per capita revenues
increased by 2.0% and blended per capita revenues increased by 0.8%. During
the previous year, onsite per capita revenues increased by 4.3%, offshore
per capita revenues increased by 7.2% and blended per capita revenues
increased by 5.3% in US Dollar terms.

Details of geographical and business segmentation of revenues and client
concentration are provided in the Revenue segmentation section of the
Annual Report.

1.b Software products:

The revenues from software products grew 42% compared to 11% in the
previous year. Of the software products revenue, 75.7% came from exports,
compared to 71.4% in the previous year.

2. Expenditure:

2.a Software development expenses:-

in Rs. crore
2009 % 2008 % Growth
%

Revenues 20,264 100.0 15,648 100.0 29.5

Software development
expenses:

Salaries and bonus 8,935 44.1 7,017 44.8 27.3
Technical sub
contractors 1,166 5.8 975 6.2 19.6

Overseas travel
expenses 506 2.5 431 2.8 17.4

Cost of software
packages 315 1.6 238 1.5 32.4

Post-sales customer
support and warranties 39 0.2 46 0.3 (15.2)

Other expenses 128 0.6 114 0.7 12.3

Total 11,145 55.0 8,876 56.7 25.6

Employee costs consist of salaries paid to employees in India and include
overseas staff expenses. The total software professionals person-months
increased to 9,13,610 for the year ended March 31, 2009 from 7,74,471
person-months during the previous year, an increase of 18.0%. Of this, the
onsite and offshore billed person-months (including software products) are
1,79,329 and 4,52,911 for the year ended March 31, 2009, as compared to
1,63,665 and 3,85,696 for the previous year. The non-billable and trainees
person-months were 2,81,370 and 2,25,110 during the current and previous
year respectively The non-billable and trainees person-months were 30.8%
and 29.1% of the total software professional person-months for the current
and previous year respectively We added 21,196 employees (gross) and 12,361
employees (net) during the year as compared to 22,671 employees (gross) and
13,659 employees (net) during the previous year.

The utilization rates of billable employees for the year ended March 31,
2009 are as follows:

in Rs.
2009 2008

Including trainees 69.2 70.9

Excluding trainees 74.2 77.3

We incurred software development expenses at 55.0% of revenues, compared to
56.7% during the previous year. The cost of sub-contractors includes Rs.861
crore toward purchase of services from related parties, primarily
subsidiaries in fiscal 2009, as against Rs. 773 crore in the previous
fiscal. The details of such related party transactions are available in
notes to accounts. The balance amount was utilized towards availing the
services of external consultants to augment certain skill sets that are
required in various projects. We continue to use these consultants on a
need basis.

The overseas travel expenses, representing cost of travel abroad for
software development, constituted approximately 2.5% and 2.8% respectively
of total revenue for the years ended March 31, 2009 and 2008. Overseas
travel expenses include visa charges of Rs. 116 crore (0.6% of revenues)
for the year, compared to Rs. 133 crore (0.8% revenues) in the previous
year.

Cost of software packages represent the cost of software packages and tools
procured for our internal use for enhancing the quality of our services and
also for meeting the needs of software development. It includes software
procured from third parties for resale with our banking product. The cost
of software packages was 1.6% and 1.5% respectively of the revenues for the
year ending March 31, 2009 and 2008. Our accounting policy is to charge
such purchases to the Profit and Loss accounts in the year of purchase.

A major part of our revenues is generated from offshore software
development. This involves the large-scale use of technological
connectivity in order to be online with clients. The communication expenses
represent approximately 0.3% and 0.4% of revenues for the year ending March
31, 2009 and 2008 respectively

The provision for post-sale customer support and warranties was Rs. 39
crore (0.2% of revenue) and Rs. 46 crore (0.3% of revenue) for the year
ended March 31, 2009 and 2008, respectively.

Other expenses representing staff welfare, computer maintenance,
consumables and rent have reduced to 0.6% of revenues during the year from
0.7% in the previous year.

2.b Gross profit:

The gross profit during the year was Rs. 9,119 crore representing 45.0% of
revenues compared to Rs. 6,772 crore representing 43.3% of revenues in the
previous year.

2.c Selling and marketing expenses:

We incurred selling and marketing expenses at 4.6% of our total revenues,
compared to 4.7% during the previous year.

in Rs. crore
2009 % 2008 % Growth

Revenues 20264 100.0 15648 100.0 29.5

Selling and marketing
expenses:

Salaries and bonus 682 3.4 506 3.2 34.8

Overseas travel
expenses 92 0.5 86 0.5 7.0

Brand building and
marketing expenses 77 0.4 70 0.4 10.0

Commission

Charges 21 0.1 14 0.1 50.0

Professional

Charges 21 0.1 18 0.1 16.7

Others 40 0.2 36 0.2 11.1

Total 933 4.6 730 4.7 27.8

Employee costs consist of salaries paid to sales and marketing employees
and include bonus payments. The number of sales and marketing personnel
increased from 543 as at March 31, 2008 to 747 as at March 31, 2009.

Brand building and marketing expenses include expenses incurred for
participation in various seminars and exhibitions, both in India and
overseas, various sales and marketing events organized by us, and other
promotional expenses incurred on advertisement and sales. We added 156 new
customers as compared to 170 during the previous year. Commission charges
primarily consist of expenses incurred by FinacleTM with regard to agents'
fees paid for sourcing business from international markets. It also
includes commission paid for software service revenues derived from
overseas markets. Professional charges primarily relate to payments made to
public relations agencies, legal charges, translation charges and other
changes.

2.d General and administration expenses:

We incurred general and administration expenses amounting to 6.3% of our
total revenues, compared to 6.9% during the previous year.

in Rs. crore
2009 % 2008 % Growth

Revenues 20264 100.0 15648 100.0 29.5
General and
administration expenses

Salaries and bonus 288 1.4 233 1.5 23.6

General and administration

Professional charges 207 1.0 167 1.1 24.0

Telephone charges 139 0.7 117 0.7 18.8

Office maintenance 138 0.7 120 0.8 15.0

Power and fuel 125 0.6 106 0.7 17.9

Travel and conveyance 79 0.4 92 0.6 (14.1)

Repairs to building,
plant and machinery 52 0.3 40 0.2 30.0

Rent 22 0.1 15 0.1 46.7

Provision for bad and
doubtful debts and
advances 75 0.4 42 0.3 78.6

Others 155 0.8 147 0.9 5.4

Total 1280 6.3 1079 6.9 18.6


Employee costs increased as the number of administration personnel
increased from 2,691 as at March 31, 2008 to 3,427 as at March 31, 2009.
Professional charges increased due to increased use of service providers.
These charges include fees paid for availing services such as tax
consultancy, IFRS audit, SOX consultancy, recruitment and training, and
legal charges. Expenses on telephone charges, office maintenance, power and
fuel, travel and conveyance, repairs to buildings, plant and machinery, and
rent increased due to increased business activity. Other expenses (a
grouping of many expenses) have increased to Rs. 155 crore (0.8% of
revenue) for the year ended March 31, 2009 from Rs. 147 crore (0.9% of
revenue) in the previous year.

3. Operating profits:

We earned an operating profit (PBIDTA) of Rs. 6,906 crore, representing
34.1% of total revenues compared to Rs. 4,963 crore, representing 31.7% of
total revenues, during the previous year.

4. Interest:

No interest expense was incurred during the year ended March 31, 2009 and
2008 as we continued to be debt-free.

5. Depreciation:

We provided Rs. 694 crore and Rs. 546 crore toward depreciation for the
years ended March 31, 2009 and 2008, representing 3.4% and 3.5% of total
revenues. The depreciation for the years ended March 31, 2009 and 2008
includes an amount of Rs. 71 crore and Rs. 16 crore, toward 100%
depreciation on assets costing less than Rs. 5,000 each. The depreciation
as a percentage of average gross block (excluding land) is 13.9% and 13.7%
for the year ending March 31, 2009 and 2008.

6. Other income, net:

The details of other income for fiscal 2009 and 2008 are as follows.

in Rs. crore
2009 2008

Interest-bank deposits and others 836 650
Dividends from mutual funds 2 4
Miscellaneous income 36 24
Exchange differences (372) 5
Total 502 683

Our treasury policy allows us to invest in short-term instruments with
maturity up to 365 days, of certain size with a limit on individual fund /
bank. The increase in interest income during the year was on account of
higher cash generation in the business and increase in average yield during
the year.

The average yield on investible surplus calculated on monthly average is as
follows

in Rs.
Average yield 2009 2008

Deposits* 10.0 9.5

Mutual funds 5.5 7.9

Total - Deposits and mutual funds 9.9 9.5

Subject to tax:

We use foreign exchange forward contracts and options to hedge our exposure
to movements in foreign exchange rates. The use of these foreign exchange
forward contracts and options reduces the risk or cost to us. We do not use
the foreign exchange forward contracts or options for trading or
speculation purposes.

Miscellaneous income of Rs. 36 crore for the year ended March 31, 2009
includes a net amount of Rs. 18 crore, consisting of Rs. 33 crore received
from Axon Group Plc as inducement fees offset by Rs. 15 crore of expenses
incurred towards the transaction.

The details of foreign exchange gain / (losses) are as follows.

in Rs. crore
2009 2008

Transaction and translation losses 294 (98)

Option /forward contracts - gains /
(losses) (666) 103

Net (372) 5

The composition of currency wise revenues for fiscal 2009 and 2008 is as
follows

Currency 2009 (%) 2008 (%)

US Dollar (US $) 72.3 70.7

UK Pound (GBP) 11.8 14.1

Euro (EUR) 6.9 5.7

Australian Dollar (AUD) 4.4 4.6

Others 4.6 4.9

Total 100.0 100.0

The average and period-end rates for various currencies are as follows

US$ GBP EUR AUD

Average rate*

2009 46.54 78.43 65.54 36.24

2008 40.00 80.52 57.24 35.01

Depreciation /
(appreciation) (%) 16.4 (2.6) 14.5 3.5

Period end rate

2009 50.72 72.49 67.44 35.03

2008 40.02 79.46 63.25 36.55
Depreciation /
(appreciation)(%) 26.7 (8.8) 6.6 (4.2)

* Average of month-end rates.

The average and period-end cross currency rates to US Dollars are as
follows

GBP EUR AUD
Average rate:

2009 1.69 1.41 0.78

2008 2.01 1.43 0.88

Depreciation / (appreciation) (%) (15.9) (1.4) (11.4)
Period end rate

2009 1.43 1.33 0.69

2008 1.99 1.58 0.91

Depreciation / (appreciation) (%) (28.1) (15.8) (24.2)

The details of outstanding option/ forward contracts as at March 31, 2009
are as follows:

Derivatives US $ Rs. FUR Rs. GBP Rs.
(Mn) crore (Mn) crore (Mn) crore

Forward contracts 245 1243 20 135 15 109

Option contracts

Range barrier 113 573 - - - -

Seagull options 60 304 - - - -

Total 418 2120 20 135 15 109

7. Sensitivity to Rupee movement:

Every 1 % movement in the Rupee against the US Dollar has an impact of
approximately 40 basis points on operating margins.

8. Provision for tax:

We have provided for our tax liability both in India and overseas. Pursuant
to the amendments in the Indian Income tax Act, 1961, we have calculated
our tax liability after considering Minimum Alternate Tax (MAT). The MAT
liability can be carried forward and set off against the future tax
liabilities. The profits attributable to operations under the Software
Technology Park (STP) scheme, are exempted from income tax for a
consecutive period of 10 years from the financial year in which the unit
starts producing computer software, or March 31, 2009, whichever is
earlier.

On April 29, 2008, the Finance Minister of India announced that the
Government of India proposed to extend the availability of the 10 year tax
holiday by a period of one year such that the tax holiday will be available
until the earlier of fiscal year 2010 or 10 years after the commencement of
a company's undertaking.

The details of the operationalization of various software development
centers and the year up to which the deduction under the STP scheme is
available, are provided here.

Software Technology Year of Tax exemption
Park commencement Claimed Available
from up to

Bangalore,

Electronics City FY 1995 FY 1997 FY 2004

Mangalore 1996 1999 2005

Pune 1997 1999 2006

Bhubaneswar 1997 1999 2006

Chennai 1997 1999 2006

Bangalore, Phase I,

Electronics City 1999 1999 2008

Bangalore, Phase II,

Electronics City 2000 2000 2009

Pune, Hinjawadi 2000 2000 2009

Mysore 2000 2000 2009

Hyderabad 2000 2000 2009

Mohali 2000 2000 2009

Chennai,

Sholinganallur 2001 2001 2010

Bhubaneswar, Konark 2001 2001 2010

Mangalore, Mangala 2001 2001 2010

Thiruvananthapuram 2004 2004 2010

8.a Details about SEZs:

During the financial year 2007-08, two more Special Economic Zones (SEZs)
at Pune and Mangalore, with an approved area of about 77.82 acres and 309
acres respectively, commenced production. The SEZ units came into existence
under the new Special Economic Zones Act, 2005 ('the SEZ Act').

As per the SEZ Act, the unit will be eligible for a deduction of 100% of
profits or gains derived from the export of services for the first five
years from commencement of provision of services and 50% of such profits or
gains for further five years. Certain tax benefits are also available for a
further five years, subject to the unit meeting defined conditions.

Other fiscal benefits, including indirect tax waivers, are being extended
for setting up, operating and maintaining the unit.

For the current year, approximately 82% of our revenues came from STP
operations, 11% of revenues came from SEZ operations and 7% of our revenues
are subject to full tax in India. We pay taxes in various countries, in
which we operate, on the income that is sourced to those countries. The
details of provision for taxes are as follows:

in Rs. crore
2009 2008

Overseas tax 322 305

Domestic tax 669 514

Total 991 819

MAT credit (93) (169)

Deferred taxes (3) (20)

Total 895 630

Tax provision for the year ended March 31, 2009 and 2008 includes a net
reversal of Rs. 108 crore and Rs. 121 crore respectively for liability no
longer required for taxes payable in various overseas jurisdictions. The
details of effective tax rates are provided in the table as follows.

in Rs.
Effective tax rate 2009 2008

As reported 13.3 12.4

Excluding tax reversal 14.9 14.7

9. Net profit after tax:

Our net profit grew by 30.2% to Rs. 5,819 crore for the year ended March
31, 2009 from Rs. 4,470 crore in the previous year. This represents 28.7%
and 28.6% of total revenue for the year ended March 31, 2009 and 2008
respectively.

Excluding the tax reversals, the net profit after tax grew by 31.3% to Rs.
5,711 crore from Rs. 4,349 crore for the year ended March 31, 2009. This
represents 28.2% and 27.8% of total revenue for the year ending March 31,
2009 and 2008 respectively.

10. Earnings Per Share (EPS):

Our basic EPS grew by 29.9% during the year to Rs. 101.65 per share from
Rs. 78.24 per share in the previous year.

Excluding the tax reversals, the basic EPS grew by 31.1 % to Rs. 99.76 per
share from Rs. 76.12 per share for the year ending March 31, 2009 and 2008.

The outstanding shares used in computing basic EPS increased from
57,13,98,340 for the year ended March 31, 2008 to 57,24,90,211 for the year
ended March 31, 2009, an increase of 0.2%.

11. Segmental profitability:

Our operations predominantly relate to providing end-to-end business
solutions that leverage technology thereby enabling clients to enhance
business performance, delivered to customers globally operating in various
industry segments. Accordingly, revenues represented along industry classes
comprise the primary basis of segmental information set out in these
financial statements. Secondary segmental reporting is performed on the
basis of the geographical location of customers.

The income and operating income by industry and geographical segments are
provided in this section.

11.a Industry segments:

in Rs. crore
Finan- Manu- Telecom Retail Others Total
cial factur-
services ing

Segmental
revenues:

2009 7,020 3,876 3,450 2,699 3,219 20,264

2008 5,706 2,291 3,215 1,945 2,491 15,648

Growth % 23.0 69.2 7.3 38.8 29.2 29.5

Segmental
operating
income:

2009 2,374 1,296 1,198 929 1,109 6,906

2008 1,856 691 1,010 624 782 4,963

Growth % 27.9 87.6 18.6 48.9 41.8 39.1

Segmental
operating
profit (%):

2009 33.8 33.4 34.7 34.4 34.5 34.1

2008 32.5 30.2 31.4 32.1 31.4 31.7

11.b Geographical segments:

in Rs. crore
North Europe India Rest Total
America of the
World
Segmental revenues:

2009 13,123 5,060 260 1,821 20,264

2008 9,873 4,207 219 1,349 15,648

Growth % 32.9 20.3 18.7 35.0 29.5

Segmental operating
income:

2009 4,437 1,795 136 538 6,906

2008 3,099 1,489 117 258 4,963

Growth % 43.2 20.6 16.2 108.5 39.1

Segmental operating
profit (%):

2009 33.8 35.5 52.3 29.5 34.1
2008 31.4 35.4 53.4 19.1 31.7

12. Liquidity:

Our growth has been financed largely through cash generated from
operations, and to a lesser extent, from the proceeds of equity issues.

in Rs. crore
2009 2008

Liquidity:

Cash and cash equivalents 10,289 7,689

Net increase in cash and cash equivalents 2,600 2,079

Current assets 15,593 12,227

Net current assets 12,288 8,496

Cash flows

Operating 5,152 3,816

Investing (195) (978)

Financing (2,430) (777)

Capital expenditure 1,177 1,370

Investment in subsidiaries 41 127

Dividends including dividend tax 2,494 835

Our policy is to earn a minimum return of twice the cost of capital on
average capital employed, and thrice the cost of capital on average
invested capital. The current estimated cost of capital is 12.2%. At
present, we earn 42.9% on average capital employed and 79.1 % on average
invested capital. We aim to maintain adequate cash balances to meet our
strategic objectives while eaming adequate returns.

Our treasury policy calls for investing only in highly rated banks,
financial institutions and companies for maturities up to 365 days with a
limit for individual entities and also liquid mutual funds.

Our current financial policy is to pay dividends up to 30% of net profits.
Our payout ratios during the year ended March 31, 2009, 2008

and 2007 were 27.0%, 19.8% and 19.9% respectively.

13. Stock option plans:

13.a 1998 Employee Stock Option Plan ('1998 Plan'):-

Pursuant to the resolutions approved by the shareholders in the
Extraordinary General Meeting held on January 6, 1999, we put in place an
ADS-linked stock option plan termed as the '1998 Stock Option Plan'. The
compensation committee of the Board administers the 1998 Plan. The
Government of India has approved the 1998 Plan, subject to a limit of
1,17,60,000 equity shares of par value of Rs. 5/- each, representing
1,17,60,000 ADSs to be issued under the plan. The plan is effective for a
period of 10 years from the date of its adoption by the Board.

The details of the grants made and options forfeited and expired (adjusted
for stock-split, as applicable) under the 1998 Plan are provided as
follows.

Month of Grant Options Forfeited and Expired
Employees (no.) ADS (no.)

2008
Apr 5 15,260
May 2 8,400
Jun 2 7,560
Jul - -
Aug 1 3,520
Sep 2 4,160
Oct 5 6,000
Nov 5 16,872
Dec 5 5,350
2009
Jan 4 17,800
Feb 62 67,840
Mar 3 5,340

Note : No options were granted durittg focal 2009.

During the year, 4,55,586 options issued under the 1998 Plan were
exercised, and the remaining ADS options unexercised and outstanding as at
March 31, 2009 were 9,16,759 (equivalent to 9,16,759 equity shares). Vested
ADSs as at March 31, 2009 were 9,16,759 (equivalent to 9,16,759 equity
shares).

Details of the number of options granted and exercised under the 1998 Plan
are as follows

Fiscal Granted Exercised
Employees Options Employees Options
(no.) (no.) (no.) (no.)

1999 29 17,04,000 32 -
2000 58 11,77,200 5 95,200
2001 705 38,59,360 - 49,736
2002 476 36,34,000 - 2,23,864
2003 223 23,20,800 120 3,58,160
2004 39 3,83,600 309 10,35,480
2005 - - 562 11,71,600
2006 - - 531 13,71,404
2007 - - 1,263 22,91,213
2008 - - 234 5,00,465
2009 - - 202 4,55,586
1,530 1,30,78,960 3,056 75,52,708

13.b 1999 Employee Stock Option Plan ('1999 Plan'):

The shareholders approved the 1999 Plan in June 1999, which provides for
the issue of 5,28,00,000 equity shares to employees. The 1999 Plan is
administered by the compensation committee of the Board. Under the 1999
Plan, options were issued to employees at an exercise price not less than
the fair market value, that is the closing price of the Company's shares on
the stock exchange where there is the highest trading volume on the date of
grant and, if the shares are not traded on that day, the closing price on
the next trading day.

Options under this plan may be granted to employees at less than the fair
market value only if specifically approved by the members of the Company in
a general meeting.

The details of the grants made and forfeited and expired (adjusted for
stock-split, as applicable) under the 1999 Plan are provided as follows:

Month of Grant Options Forfeited and Expired
Employees IES (no.)
(no.)
2008
Apr 10 11,346
May 45 18,428
Jun 7 2,563
Jul 11 2,127
Aug 22 7,003
Sep 132 120,869
Oct 11 4,513
Nov 7 9,798
Dec 14 3,554
2009
Jan 9 3,818
Feb 11 5,929
Mar 1 240

Note: No options were granted during the fiscal 2009.

During the year, 3,78,699 options issued under the 1999 Plan were
exercised, and the remaining options unexercised and outstanding as at
March 31, 2009 were 9,25,806. Vested options as at March 31, 2009 were
8,51,301.

Details of the number of options granted and exercised under the 1999 Plan
are as follows:

Fiscal Granted Exercised
Employees Options Employees Options
(no.) (no.) (no.) (no.)
1999

2000 1,124 81,16,000 22 -

2001 8,206 1,56,62,640 - 9,600

2002 5,862 1,64,04,000 - 240

2003 3,008 49,34,800 296 97,424

2004 595 15,42,400 2,651 21,48,344

2005 - - 10,581 68,41,050

2006 - - 16,269 85,97,458

2007 288 6,38,761 30,795 1,78,08,689

2008 - - 710 2,85,431

2009 - - 821 3,78,699

19,083 4,72,98,601 61,324 3,57,88,236

The options movement under both the 1998 and 1999 Stock Option Plans as at
March 31, 2009 are as follows:

Options (no.)
Granted

Exercised 8,34,285
Forfeited 3,48,290
Outstanding 18,42,565
Vested 17,68,060

13.c Proforma Accounting for Option Grants:

Infosys applies the intrinsic value-based method of accounting for
determining compensation cost for its options granted. Had the compensation
cost been determined using the fair value approach, the Company's net
income and basic and diluted earnings per share reported would have reduced
to the proforma amounts as indicated in the following table:

2009 2008
Net profit after tax:

As reported 5,819 4,470

Adjusted proforma 5,812 4,457

Basic EPS:

As reported 101.65 78.24

Adjusted pro forma 101.52 78.00

The fair value of an option is determined using an option-pricing model
that takes into account the share price at the grant date, the exercise
price, the expected life of the option, the volatility of the underlying
share and the expected dividends on it, and the risk-free interest rate
over the expected life of the option.

14. Reconciliation of Indian and IFRS financial statements:

There are differences between the IFRS and the Indian GAAP financial
statements. The reconciliation of profits as per the Indian GAAP and IFRS
financial statements is as follows:

in Rs. crore
2009 2008

Indian GAAP - standalone 5,819 4,470

Net profits of subsidiary companies 169 189

Minority interest - -

Indian GAAP - consolidated 5,988 4,659

Amortization of intangibles (6) (29)

Share based compensation (7) (13)

IFRS net income 5,975 4,617

IFRS net income (USD million) 1,281 1,163

14.a Subsidiary companies:

IFRS requires presentation of financial statements on a consolidated basis.

14.b Amortization of intangibles:

IFRS requires the purchase price in business combination transactions to be
allocated to identifiable assets and liabilities, including intangible
assets. The identified intangible customer contracts recognized consequent
to the acquisition of 100% of the equity shares of P-Financial Services
Holding B.V by Infosys BPO, are being amortized over a period of seven
years, being Management's estimate of the useful life of the respective
assets.

14.c Share based compensation:

IFRS 2 requires share-based compensation to be recorded in respect of share
options granted after November 7, 2002 that remained unvested as at April
1, 2007. The share-based compensation recorded is based on the grant date
fair value of the option over its vesting term. The fair value of a share
option is determined using an option-pricing model that takes into account
the share price at the grant date, the exercise price, the expected life of
the option, the volatility of the underlying share and the expected
dividends on it, and the risk-free interest rate over the expected life of
the option.

15. Related party transactions:

These have been discussed in detail in the notes to the Indian GAAP
financial statements in this report.

16. Events occurring after the Balance Sheet date:

There were no significant events occurring after the Balance Sheet date.

17 Ratio analysis:

2009 2008 2007

Ratios-financial performance:

Export revenue / total revenue (%) 98.72 98.60 98.40

Domestic revenue / total revenue (%) 1.28 1.40 1.60

Software development expenses / total 55.00 56.72 55.35
revenue (%)

Gross profit / total revenue (%) 45.00 43.28 44.65

Selling and marketing expenses / total 4.60 4.67 5.47
revenue (%)

General and administration expenses / total 6.32 6.90 7.05
revenue (%)

SGFCzA expenses / total revenue (%) 10.92 11.57 12.52

Aggregate employee costs / total revenue (%) 49.20 49.89 48.02

Operating profit (PBIDTA) / total 34.08 31.72 32.13
revenue(%)

Depreciation and amortization /total 3.42 3.49 3.57
revenue (%)

Operating profit after depreciation and 30.66 28.23 28.56
interest / total revenue (%)

Other income / total revenue (%) 2.48 4.36 2.85

Provision for investments / total - - 0.02
revenue (%)

Profit before tax and exceptional items 33.13 32.59 31.40
/total revenue (%)

Tax / total revenue (%) 4.42 4.03 2.68
Effective tax rate - Tax / PBT (%) 13.33 12.35 8.53

Effective tax rate excluding tax reversals 14.94 14.73 11.55
- Tax / PBT (%)

PAT before exceptional items / total 28.72 28.57 28.72
revenue (%)

PAT after exceptional items / total 28.72 28.57 28.77
revenue (%)

PAT after exceptional items and excluding 28.18 27.79 27.82
tax reversal / total revenue (%)

Ratios - Balance Sheet:
Debt-equity ratio - - -

Current ratio 4.72 3.28 4.91

Days Sales Outstanding (DSO) 61 72 64

Cash and equivalents / total assets (%)(1) 57.78 57.00 50.26

Cash and equivalents / total revenue (%)(1) 50.78 49.14 42.66

Capital expenditure / total revenue (%) 5.81 8.76 10.97

Operating cash flows / total revenue (%) 25.42 24.39 24.85

Depreciation /average gross block (%) 13.23 13.00 13.95

Technology investment / total revenue (%) 2.70 2.57 3.36

Ratios - return:

PAT before exceptional items / average 37.18 36.26 41.83
networth (%)

ROCS (PBIT/ average capital employed) (%) 42.90 41.38 45.73

Return on average invested capital (%) 79.05 71.12 88.81

Capital output ratio 1.29 1.27 1.46

Invested capital output ratio(1) 3.04 2.76 3.29

Value added / total revenue (%) 83.68 85.97 80.71

Enterprise-value / total revenue (x) 3.23 4.76 8.34

Dividend/adjusted public offer price (%)(1) 3,166 1,785 1,549

Market price / adjusted public offer 1,78,800 1,94,008 2,71,987
price (%)

Ratios - growth

Overseas revenue (%) 29.65 19.28 45.97

Total revenue (%) 29.50 19.01 45.65

Operating profit (%) 39.15 17.47 41.35

Net profit (before exceptional items) (%) 30.18 18.35 56.01

Net profit (before exceptional items and 31.32 19.09 51.98
excluding tax reversal) (%)

Net profit (after exceptional items) (%) 30.18 18.16 56.25

Basic EPS (before exceptional items) (%) 29.92 15.36 52.95

Basic EPS (before exceptional items and 31.06 16.07 49.01
tax reversal) (%)

Basic EPS (after exceptional items) (%) 29.92 15.18 53.20
Ratios - per share

Basic EPS (before exceptional items) (Rs.) 101.65 78.24 67.82

Basic EPS (before exceptional items and 99.76 76.12 65.58
tax reversals) (Rs.)

Basic EPS (after exceptional items) (Rs.) 101.65 78.24 67.93

Basic cash EPS (before exceptional items) 113.77 87.80 76.24
(Rs.)

Basic cash EPS (after exceptional items) 113.77 87.80 76.35
(Rs.)

Price / earning, end of year(2) 13.02 18.40 29.76

Price / cash earnings, end of year(2) 11.64 16.40 26.48

PE / EPS growth (2) 0.44 1.20 0.56

Book value (Rs.) 310.90 235.84 195.41

Price / book value, end of year 4.26 6.11 10.33

Dividend per share(3) 23.50 13.25 11.50

Dividend (%)(3) 470 265 230

Dividend payout (%)(3) 27.03 19.83 19.85

Market capitalization /total revenue, 3.74 5.26 8.77
end of year (x)

Notes : The ratio calculations are based on standalone Indian GAAP
financial statements.

1 Investments in liquid mutual funds have been considered as cash and cash
equivalents for the purpose of above ratio analysis.

2 Before exceptional items.

3 Dividend ratios exclude Special Dividend for fiscal 2008.

D. Opportunities and threats:

We believe our competitive strengths include

Leadership in sophisticated solutions that enable clients to optimize the
efficiency of their business : We bring together our expertise in
consulting, IT services and BPO to create solutions that allow our clients
to increase their customer loyalty through faster innovation and delivery,
to restructure their cost base, and help them achieve greater success
through shifting business cycles. Our expertise helps our clients improve
their own efficiencies, create better value for their end customers and to
become more competitive. Our suite of comprehensive, end-to-end technology-
based solutions enables us to offer services through our broad network of
relationships, increase our dialog with key decision makers within each
client, and increase the points of sale for new clients. As a result, we
believe we are able to capture a greater share of our clients' technology
budgets. Our suite of solutions encompasses business and technology
consulting, custom application development, infrastructure maintenance
services, maintenance and production support, package-enabled consulting
and implementation including enterprise solutions, product engineering
solutions and product lifecycle management, systems integration, validation
solutions and Software as a Service (SaaS) related solutions. Through
Infosys BPO, we provide business process management services. Through our
consulting group and software engineering and technology lab, we research,
develop and engineer new solutions tailored for our clients and their
respective industries. Through the creation of Infosys Consulting, we have
enhanced our ability to provide strategic and competitive analysis and
complex operational consulting services. We have a well-defined methodology
to update and extend our service offerings to meet the evolving needs of
the global marketplace.

Proven Global Delivery Model : We have a highly evolved GDM which enables
us to execute services where it is most cost effective and sell services
where it is most profitable. Over the past decade, we have developed our
onsite and offshore execution capabilities to deliver high quality and
scalable services. In doing so, we have made substantial investments in our
processes, infrastructure and systems, and have refined our GDM to
effectively integrate onsite and offshore technology services. Our GDM
provides clients with seamless, high quality solutions in reduced
timeframes enabling our clients to achieve operating efficiencies. To
address changing industry dynamics, we continue to refine our GDM. Through
our Modular Global Sourcing framework, we assist clients in segmenting
their internal business processes and applications, including IT processes,
and outsourcing these segments selectively on a modular basis to reduce
risk and cost and increase operational flexibility. We believe that this
approach and other ongoing refinements to our GDM help us retain our
industry leaders position. The November 2008 Magic Quadrant for European
Offshore Application Services and the Magic Quadrant for North American
Offshore Application Services have positioned us in the leaders quadrant
for offshore application services providers in Europe and North America.

Commitment to superior quality and process execution : We have developed a
sophisticated project management methodology to ensure timely, consistent
and accurate delivery of superior quality solutions to maintain a high
level of client satisfaction. We constantly benchmark our services and
processes against globally recognized quality standards. We have received
the following certifications : SEI-CMMI Level 5, CMM Level 5, PCMM Level 5,
TL 9000 and ISO 9001-2000. In 2007, Infosys BPO was certified for eSCM
level 4.0, the eSourcing Capability Model for Service Providers developed
by a consortium led by Carnegie Mellon University's Information Technology
Services Qualification Center.

Strong brand and long-standing client relationships : We have longstanding
relationships with large multinational companies built on successful prior
engagements with them. Our track record of delivering high quality
solutions across the entire software life cycle and our strong domain
expertise helps us to solidify these relationships and gain increased
business from our existing clients. As a result, we have a history of
client retention and derive a significant proportion of revenues from
repeat clients.

Status as an employer of choice : We believe we have among the best talent
in the Indian technology services industry and we are committed to
remaining among the industry's leading employers. We have a presence in 13
cities in India, allowing us to recruit technology professionals with
specific geographic preferences. Our diverse workforce includes employees
of 76 nationalities. Our training programs ensure that new hires enhance
their skills in alignment with our requirements and are readily deployable
upon completion of their training programs. Our lean organizational
structure and strong unifying culture facilitate the sharing of knowledge
and best practices among our employees.

Ability to scale: We have successfully managed our growth by investing in
infrastructure and by rapidly recruiting, training and deploying new
professionals. We currently have 54 global development centers, the
majority of which are located in India. We also have development centers in
various countries including Australia, Canada, China, Japan, Mauritius,
Mexico, Poland and at multiple locations in the United States and Europe.
Our financial position allows us to make the investments in infrastructure
and personnel required to continue growing our business. We can rapidly
deploy resources and execute new projects through the scalable network of
our global delivery centers. Between March 31, 2005 and March 31, 2009, our
total number of employees grew from approximately 36,800 to approximately
1,04,900.

Innovation and leadership : We are a pioneer in the technology services
industry We were one of the first Indian companies to achieve a number of
significant milestones which has enhanced our reputation in the
marketplace. For example, we were one of the first companies to develop and
deploy a global delivery model and attain SEI-CMMI Level 5 certification
for both our offshore and onsite operations. More recently, we established
a business consulting practice in the United States which leverages our
GDM. In addition, we were the first Indian company to list on the U.S.
stock exchange. We were also the first Indian company to do a POWL in
Japan. In December 2006, we became the first Indian company to be added to
the NASDAQ-100 Index. In 2008, we were selected as an original component
member of The Global Dow, a world-wide stock index made up of 150 leading
blue-chip stocks.

1. Our strategy:

We seek to further strengthen our position as a leading global technology
services company by successfully differentiating our service offerings and
increasing the scale of our operations. To achieve these goals, we seek to
Increase business from existing and new clients : Our goal is to build
enduring relationships with both existing and new clients. With existing
clients, we aim to expand the nature and scope of our engagements by
increasing the size and number of projects and extending the breadth of our
service offerings. For new clients, we seek to provide value-added
solutions by leveraging our in-depth industry expertise and expanding the
breadth of services offered to them beyond those in the initial engagement.
We manage first-time engagements by educating clients about our GDM, taking
on smaller projects to minimize client risk and demonstrating our execution
capabilities. We also seek to increase our recurring business with clients
by providing product engineering, maintenance, infrastructure management
and business process management services which are long-term in nature and
require frequent client contact. In order to further improve our business
generation capabilities, we have established a Strategic Global Sourcing
Group comprising senior professionals and seek to identify, secure and
manage new, large, and long-term client engagements.

Expand our global presence : We seek to selectively expand our global
presence to enhance our ability to service clients. We plan to accomplish
this by establishing new sales and marketing offices, representative
offices and global development centers to expand our geographical reach. We
intend to further increase our presence in China through Infosys China, in
the Czech Republic and Eastern Europe directly and through Infosys BPO, in
Australia through Infosys Australia and in Latin America, through Infosys
Mexico. We intend to use our operations in these regions to eventually
support clients in the local market as well as our global clients.

Continue to invest in infrastructure and employees : We intend to continue
to invest in physical and technological infrastructure to support our
growing worldwide development and sales operations and to increase our
productivity. To enhance our ability to hire and successfully deploy
increasingly greater numbers of technology professionals, we intend to
continue investing in recruiting, training and maintaining a challenging
and rewarding work environment. During fiscal 2009, we received
approximately 4,88,700 employment applications, tested approximately 77,600
applicants, interviewed approximately 46,600 applicants and made
approximately 16,900 offers of employment. These statistics do not include
Infosys BPO or our other subsidiaries. We have also completed the
construction of an employee training facility in Mysore, India to further
enhance our employee training capabilities. The Mysore facility has the
capacity to house 13,500 trainees, and is able to provide the facilities
required for the training of approximately 40,000 employees annually.

Continue to enhance our solution set: We seek to continually enhance our
portfolio of solutions as a means of developing and growing our business.
To differentiate our services, we focus on emerging trends, new
technologies, specific industries and pervasive business issues that
confront our clients. In recent years, we have added new service offerings
such as consulting, business process management, systems integration and
infrastructure management, which have been and we expect will continue to
be major contributors to our growth. We also established Infosys Consulting
to add additional operational and business consulting capabilities to our
GDM. We have also introduced SaaS as part of our technology solutions.
Furthermore, Modular Global Sourcing, and other refinements to our Global
Delivery Model enhance our ability to service our clients.

Continue to develop deep industry knowledge: We continue to build
specialized industry expertise in the financial services, healthcare,
manufacturing, telecommunications, retail, transportation and logistics
industries. We combine deep industry knowledge with an understanding of our
clients' needs and technologies to provide high value, quality services.
Our industry expertise can be leveraged to assist other clients in the same
industry, thereby improving quality and reducing the cost of services to
our clients. We will continue to build on our extensive industry expertise
and we plan to provide our services to new industries in the future.

Enhance brand visibility : We continue to invest in the development of our
premium brand identity in the marketplace. Our branding efforts include
participating in media and industry analyst events, sponsorship of and
participation in targeted industry conferences, trade shows, recruiting
efforts, community outreach programs and investor relations. We have
instituted the Wharton Infosys Business Transformation Award, offered
jointly with the Wharton School at the University of Pennsylvania to
recognize visionaries and Global 2000 organizations that use technology
innovatively to transform their industries. We also instituted the ACM-
Infosys Foundation Award jointly with the Association of Computing
Machinery for the recognition of young scientists and system developers
whose contemporary innovations have an impact on the computing field.
Additionally, in February 2009, the Infosys Science Foundation had
instituted an annual award of Rs. 50 lakh per category to honor outstanding
contributions and achievements by Indians across various sciences. We
believe that a strong and recognizable Infosys brand will continue to
facilitate the new-business lead generation process and enhance our ability
to attract talented personnel globally.

Pursue alliances and strategic acquisitions : We intend to continue to
develop alliances that complement our core competencies. Our alliance
strategy is targeted at partnering with leading technology providers, which
allows us to take advantage of emerging technologies in a mutually
beneficial and cost-competitive manner. We also intend to selectively
pursue acquisitions that augment our existing skill sets, industry
expertise, client base or geographical presence. For example, in January
2004, we acquired Infosys Australia primarily due to its market position in
Australia, skilled employees, management strength, expertise in the
telecommunications industry and potential to serve as a platform for
enhancing business opportunities in Australia.

2. Competition:

We operate in a highly competitive and rapidly changing market and compete
with:-

* Consulting firms such as Accenture Limited, Atos Origin, BearingPoint
Inc., Cap Gemini S.A., and Deloitte Consulting LLP.

* Divisions of large multinational technology firms such as Hewlett Packard
Company and International Business Machines Corporation.

* IT outsourcing firms such as Computer Sciences Corporation, Keane Inc.,
Logica Plc and Perot Systems Corporation.

* Offshore technology services firms such as Cognizant Technology Solutions
Corporation, Tata Consultancy Services Limited and Wipro Technologies
Limited.

* Software firms such as Oracle Corporation and SAP A.G.

* Business process outsourcing firms such as Genpact Limited and WNS Global
Services.

* In-house IT departments of large corporations.

In the future, we expect competition from firms establishing and building
their offshore presence and firms in countries with lower personnel costs
than those prevailing in India. However, we recognize that price alone
cannot constitute a sustainable competitive advantage. We believe that the
principal competitive factors in our business include the ability to.

* Effectively integrate onsite and offshore execution capabilities to
deliver seamless, scalable and cost-effective services.

* Increase scale and breadth of service offerings to provide one-stop
solutions.

* Provide industry expertise to clients' business solutions.

* Attract and retain high quality technology professionals.

* Maintain financial strength to make strategic investments in human
resources and physical infrastructure through business cycles.

We believe we compete favorably with respect to these factors.

E. Outlook, risks and concerns:

This section contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain
factors.

The following lists our outlook, risks and concerns:

* Our revenues and expenses are difficult to predict and can vary
significantly from period to period, which could cause our share price to
decline.

* We may not be able to sustain our previous profit margins or levels of
profitability.

* The economic environment, pricing pressure and decreased utilization
rates could negatively impact our revenues and operating results.

* Our revenues are highly dependent on clients primarily located in the
United States and Europe, as well as on clients concentrated in certain
industries, and economic recession or factors that affect the economic
health of the United States, Europe or these industries may affect our
business.

Any inability to manage our growth could disrupt our business and reduce
our profitability.

We may face difficulties in providing end-to-end business solutions for our
clients, which could lead to clients discontinuing their work with us,
which in turn could harm our business.

Intense competition in the market for technology services could affect our
cost advantages, which could reduce our share of business from clients and
decrease our revenues.

Our revenues are highly dependent upon a small number of clients, and loss
of any one of our major clients could significantly impact our business.

Legislation in certain countries in which we operate, including the United
States and the United Kingdom, may restrict companies in those countries
from outsourcing work to us.

Our success depends largely upon our highly skilled technology
professionals and our ability to hire, attract and retain these personnel.

Our success depends in large part upon our Management team and key
personnel and our ability to attract and retain them.

Our failure to complete fixed-price, fixed-timeframe contracts or
transaction-based pricing contracts within budget and on time may
negatively affect our profitability.

Our client contracts can typically be terminated without cause and with
little or no notice or penalty, which could negatively impact our revenues
and profitability

Our engagements with customers are singular in nature and do not
necessarily provide for subsequent engagements.

Our client contracts are often conditioned upon our performance, which, if
unsatisfactory, could result in less revenue than previously anticipated.

Some of our long-term client contracts contain benchmarking provisions
which, if triggered, could result in lower future revenues and
profitability under the contract.

Our increasing work with governmental agencies may expose us to additional
risks.

Our business will suffer if we fail to anticipate and develop new services
and enhance existing services in order to keep pace with rapid changes in
technology and in the industries on which we focus.

Compliance with new and changing corporate governance and public disclosure
requirements adds uncertainty to our compliance policies and increases our
costs of compliance.

Disruptions in telecommunications, system failures, or virus attacks could
harm our ability to execute our GDM, which could result in client
dissatisfaction and a reduction of our revenues.

We may be liable to our clients for damages caused by disclosure of
confidential information, system failures, errors or unsatisfactory
performance of services.

We are investing substantial cash assets in new facilities and physical
infrastructure, and our profitability could be reduced if our business does
not grow proportionately.

We may be unable to recoup our investment costs to develop our software
products.

Our insiders who are significant shareholders may control the election of
our Board and may have interests which conflict with those of our other
shareholders.

We may engage in acquisitions, strategic investments, strategic
partnerships or alliances or other ventures that may or may not be
successful.

Our net income would decrease if the Government of India reduces or
withdraws tax benefits and other incentives it provides us or when our tax
holidays expire or terminate.

In the event that the Government of India or the government of another
country changes its tax policies in a manner that is adverse to us, our tax
expense may materially increase, reducing our profitability.

We operate in jurisdictions that impose transfer pricing and other tax-
related regulations on us, and any failure to comply could materially and
adversely affect our profitability

Wage pressures in India and the hiring of employees outside India may
prevent us from sustaining our competitive advantage and may reduce our
profit margins.

Terrorist attacks or a war could adversely affect our business, results of
operations and financial condition.

The markets in which we operate are subject to the risk of earthquakes,
floods and other natural disasters.

Regional conflicts in South Asia could adversely affect the Indian economy,
disrupt our operations and cause our business to suffer.

Restrictions on immigration may affect our ability to compete for and
provide services to clients in the United States, which could hamper our
growth and cause our revenues to decline.

Changes in the policies of the Government of India or political instability
could delay the further liberalization of the Indian economy and adversely
affect economic conditions in India, which could impact our business and
prospects.

Our international expansion plans subject us to risks inherent in doing
business internationally.

The laws of India do not protect intellectual property rights and we may be
unsuccessful in protecting our intellectual property rights. We may also be
subject to third party claims of intellectual property infringement.

Our ability to acquire companies organized outside India depends on the
approval of the Government of India and / or the Reserve Bank of India, and
failure to obtain this approval could negatively impact our business.

For more details on risk factors, refer to our quarterly and annual filings
with the Securities and Exchange Commission (SEC), USA.

F. Internal control systems and their adequacy:

The CEO and CFO certification provided in the CEO and CFO certification
section of the Annual Report discusses the adequacy of our internal control
systems and procedures.

G. Material developments in human resources / industrial relations front,
including number of people employed

Our culture and reputation as a leader in the technology services industry
enables us to recruit and retain some of the best available talent in
India.

1. Human capital:

Our professionals are our most important assets. We believe that the
quality and level of service that our professionals deliver are among the
highest in the global technology services industry We are committed to
remaining among the industry's leading employers.

The key elements that define our culture include:

1.a Recruitment:-

We have built our global talent pool by recruiting new students from
premier universities, colleges and institutes in India and through
needbased hiring of project leaders and middle managers. We typically
recruit only students in India who have consistently shown high levels of
achievement. We have also begun selective recruitment at campuses in the
United States, the United Kingdom, Australia and China. We
rely on a rigorous selection process involving a series of aptitude tests
and interviews to identify the best applicants. This selection process is
continually assessed and refined based on performance tracking of past
recruits.

Our reputation as a premier employer enables us to select from a large pool
of qualified applicants. For example, in fiscal 2009, we received
approximately 4,88,700 applications, tested approximately 77,600
applicants, interviewed approximately 46,600 applicants and extended job
offers to approximately 16,900 applicants. In fiscal 2009, we added
approximately 12,400 new employees, net of attrition. These statistics do
not include Infosys BPO and our wholly-owned subsidiaries, which together,
recruited approximately 1,300 new hires, net of attrition, during fiscal
2009.

1.b Training and development:

Our training, continuing education and career development programs are
designed to ensure our technology professionals enhance their skill-sets in
alignment with their respective roles. Most new student hires complete
approximately 19 weeks of integrated on-the-job training prior to being
assigned to an Infosys business unit. We continually provide our technology
professionals with challenging assignments and exposure to new skills,
technologies and global opportunities.

As at March 31, 2009, we employed 476 full-time employees as faculty,
including 186 with doctorate or masters degrees. Our faculty conducts
integrated training for our new employees. We also have our employees
undergo certification programs each year to develop the skills relevant for
their roles.

Leadership development is a core part of our training program. We
established the Infosys Leadership Institute on a 336 acre campus in
Mysore, India to enhance leadership skills that are required to manage the
complexities of the rapidly changing marketplace and to further instill our
culture through leadership training. We have also built an employee
training facility in Mysore, India which is able to house 13,500 trainees
at any one time and is able to provide training facilities for
approximately 40,000 employees annually. We provide a challenging,
entrepreneurial and empowering work environment that rewards dedication and
a strong work ethic. In addition, we also have been working with several
colleges across India through our Campus Connect program enabling their
faculty to provide industry related training to students at the colleges.

1.c Compensation:

Our technology professionals receive competitive salaries and benefits and
are eligible to participate in our Stock Option Plans. We have also adopted
a performance-linked compensation program that links compensation to
individual performance, as well as our performance.

Risk management report:

The following section discusses the various aspects of enterprise-wide risk
management. Readers are cautioned that the risk related information
outlined here is not exhaustive and is for information purpose only. The
discussion may contain statements, which may be forward-looking in nature.
Our business model is subject to uncertainties that could cause actual
results to differ materially from those reflected in the forward-looking
statements. Readers are requested to exercise their own judgment in
assessing the risks associated with the Company, and to refer to the
discussions of risks in the Company's previous annual reports and the
filings with the U.S. Securities and Exchange Commission.

A. Overview and approach to risk management:

The Enterprise Risk Management (ERM) at Infosys encompasses practices
related to identification, assessment, monitoring and mitigation of various
risks to our business. Our ERM seeks to minimize risks that may affect the
achievement of our business objectives and enhance stakeholder value.
Further, our risk management practices seek to sustain and enhance long
term competitive advantage of the Company.

Risk management is integral and fundamental to our business model,
described as Predictable, Sustainable, Profitable and De-risked (PSPD)'
model. We eschew excessive pursuit of short term and tactical opportunities
and instead seek sustainable business opportunities generated by way of
deep client relationships. The risk management practices at Infosys are
oriented to leverage the risk reward parity to generate maximum rewards
while keeping risks below a defined threshold level. Our core values and
ethics provide the platform for our risk management practices.

B. Infosys Risk Management Framework:

Our Risk Management Framework encompasses the following key components

1. Risk management structure:

Our risk management occurs across the enterprise at various levels; these
levels also form the various lines of defense in our risk management.

The roles and responsibilities regarding risk management in the Company are
summarized as follows

Level:
Roles and responsibilities:

Level:

Board of Directors (Board)

Roles and responsibilities:

* Corporate governance oversight of risk management performed by the
Executive Management

* Reviews the performance of Risk Management Committee (RMC) annually

Level:

Risk Management Committee (RMC)

Roles and responsibilities:

* Comprises four independent directors

* David L. Boyles, Chairperson

* Prof. Jeffrey S. Lehman

* Rama Bijapurkar

* Sridar A. Iyengar

* Assisting the Board in fulfilling its corporate governance oversight
responsibilities with regard to the identification, evaluation and
mitigation of operational, strategic and external environment risks

* Monitoring and approving the risk policies and associated practices of
the Company

* Reviewing and approving risk related disclosures

Level:

Risk Council (RC)

Roles and responsibilities:

* Comprises the Chief Executive Officer (CEO), Chief Operating Officer
(COO) and Chief Financial Officer (CFO)

* Review of enterprise risks from time to time, initiates mitigation
actions, identifies owners and reviews progress

* Formulation and deployment of risk management policies

* Deploy practices for identification, assessment, monitoring, mitigation
and reporting of risks

* Provide updates to RMC and the Board from time to time on the enterprise
risks and actions taken

Office of Risk Management (ORM)

* Comprises the network of risk managers from business units and our group
companies and is led by the Chief Risk Officer (CRO)

* Facilitate the execution of risk management practices in the enterprise
as mandated, in the areas of risk identification, assessment, monitoring,
mitigation and reporting

* Deploy mechanisms to monitor compliance to policies

* Provide periodic updates to Risk Council and quarterly updates to RMC on
top risks and their mitigation

* Work closely with owners of risk in deploying mitigation measures


Level:

Unit Heads

Roles and responsibilities:

* Responsible for managing their functions as per company risk management
philosophy

* Manage risks at the unit level that may arise from time to time, in
consultation with the Risk Council

Level:

The Infoscion

Roles and responsibilities:

* Implementation of prescribed risk mitigation actions

* Provide feedback on the efficacy of risk management and report risk
events

2. Risk categories:

The following broad categories of risks have been considered in our Risk
Management Framework

* Strategy : Emanating out of the choices and decisions we make to enhance
long term competitive advantage of the Company and value to the
stakeholders

* Industry : Relates to the inherent characteristics of our industry
including competitive structure, nature of market and regulatory
environment

Counterparty : Risks arising from our association with entities for
conducting business. These include clients, vendors, alliance partners and
their respective industries.

Resources: Risks arising from inappropriate sourcing or sub-optimal
utilization of key organization resources such as talent, capital and
infrastructure.

Operations: Risks inherent to our business operations includes client
acquisition, service delivery to clients, business support activities,
physical and information security and natural calamities.

Regulations and compliance : Risks due to inadequate compliance to
regulations, contractual obligations and Intellectual Property (IP)
violations leading to litigation and loss of reputation.

* Key risk management practices:

The key risk management practices include those relating to risk
assessment, measurement, monitoring, reporting and integration with
strategy and business planning

Risk assessment : Periodic assessment to identify significant risks for the
Company and prioritizing the risks for action is carried out.
Identification and prioritization of risks is based on risk survey,
business environment scanning and focused discussions in RC and RMC. Risk
survey of executives across units, functions and subsidiaries is conducted
before the annual strategy exercise. Risk inventory and internal audit
findings also provide pointers for risk identification.

Risk measurement and monitoring : For top risks, dashboards are created
that track external and internal indicators relevant for risks. The trend
line assessment of top risks is by way of heat maps. Further, analysis of
exposure and potential impact is carried out, mitigation plans are
finalized and owners are identified.

Risk reporting : Top risks report outlining the trend, exposure, potential
impact and mitigation status is discussed in RC and RMC on a periodic
basis. In addition, risk updates are provided to the Board. Entity level
risks such as project risks and account level risks are reported to and
discussed at appropriate levels of the organization.

Integration with strategy and business planning : Identified risks are used
as one of the key inputs for the development of strategy and business plan.

C. Overview of risk environment and key risk management activities of the
year

The business environment changed significantly during the year, primarily
driven by global economic slowdown, its impact on our clients and the
resultant impact on our business. Governments around the world intervened
through various stimulus packages and bailout programs to mitigate the
impact of the economic slowdown. Several of our clients participated in
various government intervention programs. Further, global currencies from
which we derive our revenues experienced high volatility Physical security
environment in India called for increased vigilance measures.

Such a business environment called for enhanced focus on management of
financial risks such as credit risk, currency risk and liquidity risk. We
deployed various measures to continuously monitor risks and take
appropriate actions to mitigate the same. In addition, various steps were
taken to identify, measure, monitor and mitigate risks as described below:

1. Top risk identification, tracking and review:-

* Annual risk survey across functions and subsidiaries to get input on key
risks and prioritization. Subsequent discussions in RC and RMC for
finalization of top risks

* Creation of individual dashboards to track top risks through a set of
external and internal indicators and thereby indicate the trend line of top
risks (heat map)

* Review of top risks in RC and RMC covering exposure, potential impact,
trend line and mitigation action.

2. Account level and project level risk management:

* Account level risk management framework is based on multiple dimensions
for managing account level risks

* Deployment of project risk profiling model to predict and manage project
risks.

3. Risk assessments and review:

* Assessment of exposure to counterparties such as clients and vendors
including credit evaluation

* Risk assessment of business and regulatory environment

* Review of risk management practices relating to physical security,
information security and other operational risks

* Treasury process benchmarking study was carried out to identify key areas
of improvement

* ERM benchmarking study was conducted to identify key areas of
improvement.

An obligation to make good the shortfall, if any, between the return from
the investments of the Trust and the notified interest rate.

In respect of Infosys BPO, eligible employees receive benefits from a
provident fund, which is a defined contribution plan. Both the employee and
Infosys BPO make monthly contributions to this provident fund plan equal to
a specified percentage of the covered employee's salary Amounts collected
under the provident fund plan are deposited in a government administered
provident fund. Infosys BPO has no further obligations under the provident
fund plan beyond its monthly contributions.

24.1.7d Compensated absences:

The employees of the Group are entitled to compensated absences which are
both accumulating and non-accumulating in nature. The expected cost of
accumulating compensated absences is measured based on the additional
amount expected to be paid as a result of the unused entitlement that has
accumulated at the Balance Sheet date. Expense on non-accumulating
compensated absences is recognized in the period in which the absences
occur.

24.1.8. Research and development:

Research costs are expensed as incurred. Software product development costs
are expensed as incurred unless technical and commercial feasibility of the
project is demonstrated, future economic benefits are probable, the Company
has an intention and ability to complete and use or sell the software and
the costs can be measured reliably

24.1.9. Foreign currency transactions:

Foreign currency denominated monetary assets and liabilities are translated
into the relevant functional currency at exchange rates in effect at the
Balance Sheet date. The gains or losses resulting from such translations
are included in the profit or loss account. Non-monetary assets and non-
monetary liabilities denominated in a foreign currency and measured at fair
value are translated at the exchange rate prevalent at the date when the
fair value was determined. Non-monetary assets and non-monetary liabilities
denominated in a foreign currency and measured at historical cost are
translated at the exchange rate prevalent at the date of transaction.

Revenue, expense and cash-flow items denominated in foreign currencies are
translated into the relevant functional currencies using the exchange rate
in effect on the date of the transaction. Transaction gains or losses
realized upon settlement of foreign currency transactions are included in
determiningnet profit for the period in which the transaction is settled.

The functional currency of Infosys and Infosys BPO is the Indian Rupee. The
functional currencies for Infosys Australia, Infosys China, Infosys
Consulting, Infosys Mexico and Infosys Sweden are their respective local
currencies. The translation of financial statements of the foreign
subsidiaries from the local currency to the functional currency of the
Company is performed for Balance Sheet accounts using the exchange rate in
effect at the Balance Sheet date and for revenue, expense and cash-flow
items using a monthly average exchange rate for the respective periods and
the resulting difference is presented as foreign currency translation
reserve included in 'Reserves and Surplus'. When a subsidiary is disposed
off, in part or in full, the relevant amount is transferred to profit or
loss.

24.1.10. Forward contracts and options in foreign currencies:

The Group uses foreign exchange forward and options contracts to hedge its
exposure to movements in foreign exchange rates. The use of these foreign
exchange forward and options contracts reduce the risk or cost to the Group
and the Group does not use those for trading or speculation purposes.

Effective April 1, 2008, the Group adopted AS 30, 'Financial Instruments
Recognition and Measurement', to the extent that the adoption did not
conflict with existing accounting standards and other authoritative
pronouncements of Company Law and other regulatory requirements. Forward
and options contracts are fair valued at each reporting date. The resultant
gain or loss from these transactions is recognized in the profit or loss
account. The Group records the gain or loss on effective hedges, if any, in
the foreign currency fluctuation reserve until the transactions are
complete. On completion, the gain or loss is transferred to the
consolidated Profit and Loss account of that period. To designate a forward
or options contract as an effective hedge, management objectively evaluates
and evidences with appropriate supporting documents at the inception of
each contract whether the contract is effective in achieving offsetting
cash flows attributable to the hedged risk. In the absence of a designation
as effective hedge, a gain or loss is recognized in the consolidated Profit
and Loss account. Currently, the hedges undertaken by the Group are all
ineffective in nature and the resultant gain or loss consequent to fair
valuation is recognized in the consolidated Profit and Loss account at each
reporting date.

24.1.11. Income taxes:

Income taxes are accrued in the same period the related revenue and
expenses arise. A provision is made for income tax annually based on the
tax liability computed after considering tax allowances and exemptions.
Provisions are recorded when it is estimated that a liability due to
disallowances or other matters is probable. MAT paid in accordance to the
tax laws, which gives rise to future economic benefits in the form of tax
credit against future income tax liability, is recognized as an asset in
the consolidated Balance Sheet if there is convincing evidence that the
Group will pay normal tax after the tax holiday period and the resultant
asset can be measured reliably. The Group offsets, on a year-on-year basis,
the current tax assets and liabilities, where it has a legally enforceable
right and where it intends to settle such assets and liabilities on a net
basis.

The differences that result between the profit offered for income taxes and
the profit as per the financial statements are identified and thereafter a
deferred tax asset or deferred tax liability is recorded for timing
differences, namely the differences that originate in one accounting period
and reverse in another, based on the tax effect of the aggregate amount of
timing difference. The tax effect is calculated on the accumulated timing
differences at the end of an accounting period based on enacted or
substantively enacted regulations. Deferred tax assets, other than those
related to unabsorbed depreciation and carry forward business loss, are
recognized only if there is reasonable certainty that they will be realized
and are reviewed for the appropriateness of their respective carrying
values at each reporting date. Tax benefits of deductions earned on
exercise of employee share options in excess of compensation charged to the
consolidated Profit and Loss account are credited to the share premium
account.

24.1.12. Earnings per share:

Basic earnings per share is computed by dividing the net profit after tax
by the weighted average number of equity shares outstanding during the
period. Diluted earnings per share is computed by dividing the net profit
after tax by the weighted average number of equity shares considered for
deriving basic earnings per share and also the weighted average number of
equity shares that could have been issued upon conversion of all dilutive
potential equity shares. The diluted potential equity shares are adjusted
for the proceeds receivable had the shares been actually issued at fair
value which is the average market value of the outstanding shares. Dilutive
potential equity shares are deemed converted as at the beginning of the
period, unless issued at a later date. Dilutive potential equity shares are
determined independently for each period presented.

The number of shares and potentially dilutive equity shares are adjusted
retrospectively for all periods presented for any share splits and bonus
shares issues including for changes effected prior to the approval of the
consolidated financial statements by the Board of Directors.

24.1.13. Investments:

Trade investments are the investments made to enhance the Group's business
interests. Investments are either classified as current or long-term based
on Management's intention at the time of purchase. Current investments are
carried at lower of cost and fair value. Cost for overseas investments
comprises the Indian Rupee value of the consideration paid for the
investment translated at the exchange rate prevalent at the date of
investment. Long-term investments are carried at cost less provisions
recorded to recognize any decline, other than temporary, in the carrying
value of each investment.

24.1.14. Cash and cash equivalents:

Cash and cash equivalents comprise cash and cash on deposit with banks and
corporations. The Group considers all highly liquid investments with a
remaining maturity at the date of purchase of three months or less and that
are readily convertible to known amounts of cash to be cash equivalents.

24.1.15. Cash Flow statement:

Cash flows are reported using the indirect method, whereby net profit
before tax is adjusted for the effects of transactions of a non-cash
nature, any deferrals or accruals of past or future operating cash receipts
or payments and item of income or expenses associated with investing or
financing cash flows. The cash flows from operating, investing and
financing activities of the Group are segregated.

24.2. Notes on accounts:

Amounts in the financial statements are presented in Rupees crore, except
for per share data and as otherwise stated. Certain amounts do not appear
due to rounding off, and are detailed in note 24.3. All exact amounts are
stated with the suffix '/-'. One crore equals 10 million. The previous
period / year figures have been regrouped / reclassified, wherever
necessary to conform to the current presentation.

24.2.1. Aggregate expenses:

The aggregate amounts incurred on certain specific expenses

in Rs. crore
Particulars Year ended March 31,
2009 2008
Salaries and bonus including overseas:
staff expenses* 10,913 8,590

Overseas group health insurance* 151 18
Contribution to provident and other
funds 265 208
Staff welfare 76 62
Overseas travel expenses 748 631
Traveling and conveyance 97 108
Technical sub-contractors 396 265
Software packages
For own use 320 225
For service delivery to clients 41 26
Professional charges 259 210
Telephone charges 174 141
Communication expenses 98 81
Power and fuel 147 122
Office maintenance 168 136
Guesthouse maintenance* 5 1
Rent 114 86
Brand building 62 56
Commission and earnout charges 11 64
Insurance charges 26 26
Printing and stationery 13 19
Computer maintenance 25 27
Consumables 22 21
Rates and taxes 34 36
Advertisements 6 13

Donations 21 20
Marketing expenses 20 19
Professional membership and seminar
participation fees 10 9
Repairs to building 33 23
Repairs to plant and machinery 22 20
Postage and courier 11 11
Provision for post-sales client support and
warranties 39 45
Books and periodicals 3 4
Recruitment and training 6 3
Provision for bad and doubtful debts 75 43
Provision for doubtful loans and advances 1 -
Commission to non-whole-time directors 6 4
Sales promotion expenses 2 3
Auditor's remuneration
Statutory audit fees 2 1
Bank charges and commission 3 1
Freight charges 1 1
Research grants 20 4
Miscellaneous expenses 52 71
14,498 11,454
Fringe Benefit Tax (FBT) in India
amounting included in the above 28 21

During the year ended March 31, 2008, the Company paid an amount of Rs.102
crore to the California Division of Labor Standards Enforcement (DLSE)
towards settlement of possible overtime payment to certain employees.

* The Company records health insurance liabilities based on the maximum
individual claimable amounts by employees. During the year ended March 31,
2008, the Company completed its reconciliation of amounts actually claimed
by employees to date, including past years, with the aggregate amount of
recorded liability and the net excess provision of Rs.71 crore written
back.

* For non-training purpose.

24.2.2. Capital commitments and contingent liabilities:

in Rs. crore
Particulars As at March 31,
2009 2008

Estimated amount of
unexecuted capital contracts
(net of advances and deposits) 372 664
Outstanding guarantees
and counter guarantees to
various banks, in respect of
the guarantees given by those
banks in favor of various
government authorities and
others 17 7
Claims against the
Company, not acknowledged
as debts [Net of amount
paid to statutory autho-
rities of Rs. 200 crore
(Rs. 101 4 3
crore)]

in Rs. crore
Particulars As at March 31,
2009 2008


in in Rs. in in Rs.
million crore million crore
Forward contracts
outstanding
In US $ 5,278 1,407 5,586 2,346
In Euro 27 179 15 93
In GBP #21 149 #3 24


in Rs. crore
Particulars As at March 31,
2009 2008

Options contracts outstanding

Euro forward extra in Euro - - 5 32

Range barrier options in
US $ 113 573 100 400

Euro accelerator - - 12 76

Seagull options in US $ 560 304 - -

Range barrier options in GBP - - 8 60

* Claims against the Company not acknowledged as debts include demand from
the Indian tax authorities for payment of additional tax of Rs.197 crore
(Rs.98 crore), including interest of Rs.43 crore (Rs.18 crore) upon
completion of their tax review for fiscal 2004 and fiscal 2005. The tax
demand is mainly on account of disallowance of a portion of the deduction
claimed by the Company under Section l0A of the Income tax Act. The
deductible amount is determined by the ratio of export turnover to total
turnover The disallowance arose from certain expenses incurred in foreign
currency being reducedfrom export turnoverbut not reduced from total
turnover The matterfor fiscal 2004 andfiscal2005 is pendingbefore the Comm
issionerof Income tax (Appeals), Bangalore.

The Company is contesting the demand and the Management including its tax
advisors believes that its position will likely be upheld in the appellate
process. No tax expense has been accrued in the financial statements for
the tax demand raised The Management believes that the ultimate outcome of
this proceeding will not have a material adverse effect on the Company's
financial position and results of operations.

24.2.3. Obligations on long-term, non-cancelable operating leases:

The lease rentals charged for the year ended March 31, 2009 and 2008 and
maximum obligations on long-term non-cancelable operating leases payable as
per the rentals stated in the respective agreements

in Rs. crore
Particulars Year ended March 31,
2009 2008

Lease rentals recognized during the period 114 86

in Rs. crore
Lease obligations As at March 31,
2009 2008

Within one year of the Balance Sheet date 80 65

Due in a period between one year and
five years 223 145

Due after five years 72 76

The operating lease arrangements extend upto a maximum of ten years from
their respective dates of inception and relate to rented overseas premises
and car rentals. Some of these lease agreements have price escalation
clause.

24.2.4. Related party transactions:

During the year ended March 31, 2009, an amount of Rs. 20 crore (Rs. 20
crore for the year ended March 31, 2008) was donated to Infosys Foundation,
a not-for-profit foundation, in which certain directors of the Company are
trustees.

During the year ended March 31, 2009, an amount of Rs. 15 crore (Rs. nil
for the year ended March 31, 2008) has been granted to Infosys Science
Foundation, a not-for-profit foundation, in which certain directors of the
Company are trustees.

24.2.5. Transactions with key management personnel:

Particulars of remuneration and other benefits paid to key management
personnel during the year ended March 31, 2009 and 2008 have been detailed
in Schedule 24.3, since the amounts are less than a crore.

24.2.6. Research and development expenditure:

in Rs. crore
Particulars Year ended March 31,
2009 2008

Capital 31 -
Revenue 237 201

24.2.7 Stock option plans:

The Company has two Stock Option Plans that are currently operational.

1998 Stock Option Plan ('the 1998 Plan'):

The 1998 Plan was approved by the Board of Directors in December 1997 and
by the shareholders in January 1998, and is for issue of 1,17,60,000 ADSs
representing 1,17,60,000 equity shares. All options under the 1998 Plan are
exercisable for ADSs representing equity shares. A compensation committee
comprising independent members of the Board of Directors administers the
1998 Plan. All options have been granted at 100% of fair market value. The
1998 Plan lapsed on January 6, 2008, and consequently no further shares
will be issued to employees under this plan.

Number of options granted, exercised and Year ended March 31,
forfeited during the 2009 2008

Options outstanding, beginning of period 15,30,447 20,84,124

Less : Exercised 4,55,586 5,00,465

Forfeited 1,58,102 53,212

Options outstanding, end of period 9,16,759 15,30,447

1999 Stock Option Plan ('the 1999 Plan')

In fiscal 2000, the Company instituted the 1999 Plan. The shareholders and
the Board of Directors approved the plan in September 1999, which provides
for the issue of 5,28,00,000 equity shares to the employees. The
compensation committee administers the 1999 Plan. Options will be issued to
employees at an exercise price that is not less than the fair market value.

Number of options granted, exercised and Year ended March 31,
forfeited during the 2009 2008

Options outstanding, beginning of period 14,94,693 18,97,840

Less :Exercised 3,78,699 2,85,431

Forfeited 1,90,188 1,17,716

Options outstanding, end of period 9,25,806 14,94,693

The aggregate options considered for dilution are set out in note 24.2.16

Infosys BPO's 2002 Plan:

Infosys BPO's 2002 Plan provides for the grant of stock options to
employees of Infosys BPO and was approved by the Board of Directors and
stockholders in September 2002. All options under the 2002 Plan are
exercisable for equity shares. The 2002 Plan is administered by a
Compensation Committee comprising three members, all of whom are directors
of Infosys BPO. The 2002 Plan provides for the issue of 52,50,000 equity
shares to employees, at an exercise price, which shall not be less than the
Fair Market Value (FMV) on the date of grant. Options may also be issued to
employees at exercise prices that are less than FMV only if specifically
approved by the members of the Company in general meeting. The options
issued under the 2002 Plan vest in periods ranging between one through six
years, although accelerated vesting based on performance conditions is
provided in certain instances.

The activity in Infosys BPO's 2002 Plan for the year ended March 31, 2009
and 2008:

Number of options granted, exercised and Year ended March 31,
forfeited 2009 2008

Options outstanding, beginning of period - 2,200
Granted - -
Less : Exercised - -
Forfeited - (2,200)
Options outstanding, end of period - -

Proforma accounting for Stock Option Grants

Guidance note on 'Accounting for employee share based payments' issued by
Institute of Chartered Accountants of India establishes financial
accounting and reporting principles for employee share based payment plans.
The guidance note applies to employee share based payment plans, the grant
date in respect of which falls on or after April 1, 2005.

As allowed by the guidance note, Infosys has elected to continue to apply
the intrinsic value-based method of accounting described above, and has
adopted the disclosure requirements of the guidance note 'Accounting for
employee share based payments'. Had the compensation cost for Infosys's
stock-based compensation plan been determined in a manner consistent with
the fair value approach described in guidance note, the Company's net
Income and basic and diluted earnings per share as reported would have
reduced to the proforma amounts as indicated

in Rs. crore, except
per share data
Particulars Year ended March 31,
2009 2008
Net profit

As reported 5,988 4,659

Less : Stock-based employee
compensation expense 7 13

Adjusted proforma 5,981 4,646

Basic earnings per share as reported 104.60 81.53

Proforma basic earnings per share 104.47 81.31

Diluted earnings per share as reported 104.43 81.26

Proforma diluted earnings per share 104.30 81.04

The Finance Act, 2007 included Fringe Benefit Tax (FBT) on Employee Stock
Option Plan (ESOP). FBT liability crystallizes on the date of exercise of
stock options. During the year ended March 31, 2009, 4,55,586 and 3,78,699
equity shares were issued pursuant to the exercise of stock options by
employees under the 1998 and 1999 stock option plans, respectively. FBT on
exercise of stock options of Rs. 3 crore for the year ended March 31, 2009
has been paid by the Company and subsequently recovered from the employees.
Consequently, there is no impact on the Profit and Loss account.

24.2.8. Income taxes:

The provision for taxation includes tax liabilities in India on the
Company's global income as reduced by exempt incomes and any tax
liabilities arising overseas on income sourced from those countries. Most
of Infosys' operations are conducted through Software Technology Parks
(STPs). Income from STPs are tax exempt for the earlier of ten years
commencing from the fiscal year in which the unit commences software
development, or March 31, 2010.

Infosys also has operations in Special Economic Zone (SEZ). Income from
SEZs are fully tax exempt for the first 5 years, 50% exempt for the next 5
years and 50% exempt for another 5 years subject to fulfilling certain
conditions. Pursuant to the amendments in the Indian Income Tax Act, the
Company has calculated its tax liability after considering MAT The MAT
liability can be carried forward and set off against the future tax
liabilities. Accordingly, a sum of Rs. 284 crore and Rs. 175 crore is
carried forward and disclosed under 'Loans and Advances' in the Balance
Sheet as at March 31, 2009 and March 31, 2008 respectively.

The tax provision for the year ended March 31, 2009, includes a net
reversal of Rs. 108 crore pertaining to earlier periods, comprising Rs. 323
crore for provisions no longer required which is offset by a charge of
Rs.215 crore due to re-assessment of uncertain tax positions. The tax
provision for the year ended March 31, 2008 includes a net reversal of
Rs.121 crore relating to liabilities no longer required.

24.2.9. Loans and advances:

in Rs. crore
Particulars As at March 31,
2009 2008

Deposits with financial institutions and
body corporate
HDFC Limited* 1,298 1,000
GE Capital Services India Limited - 285
Life Insurance Corporation of India 253 161
1,551 1,446

Deepak M. Satwalekarr Director, is also a Director of HDFC Limited. Except
as director in this financial institution, he has no direct interest in any
transactions.

Deposit with Life Insurance Corporation of India represents amount
deposited to settle employee benefit obligations as and when they arise
during the normal course of business (Refer to note 24.2.22.b).

24.2.10. Fixed assets:

Profit / Loss on disposal of fixed assets during the year ended March 31,
2009 and 2008 is less than Rs. 1 crore and accordingly disclosed in note

24.3. The Company has entered into lease-cum-sale agreements to acquire
certain properties. In accordance with the terms of these agreements, the
Company has the option to purchase the properties on expiry of the lease
period. The Company has already paid 99% of the value of the properties at
the time of entering into the lease-cum-sale agreements. These amounts are
disclosed as 'Land-leasehold' under 'Fixed assets' in the financial
statements. Additionally, certain land has been purchased for which the
Company has possession certificate for which sale deeds are yet to be
executed as at March 31, 2009.

24.2.11. Details of investments:

Details of investments in and disposal of securities for the year ended
March 31, 2009 and 2008:-

in Rs. crore
Particulars Year ended March 31,
2009 2008
Investment in securities

Long-term investments* 2 -

Certificates of deposit 193 -

Liquid mutual funds 866 2,045
1,061 2,045

Redemption / Disposal of investment
in securities:

Certificates of deposit* 200 -

Liquid mutual funds 939 1,998
1,139 1,998

Net movement in investment (78) 47

Represents redemption value inclusive of Rs. 7 crore interest.

* During the year ended March 31, 2009, Infosys received 2,420 shares of
Merasport Technologies Private Limited valued at Its. 2 crore in lieu of
provision of usage rights to the software developed by Infosys. The
investment was fully provided for during this year based on diminution
other than temporary. This being a non-cash transaction did not have any
impact on the Cash Flow.

24.2.12. Holding of Infosys in its subsidiaries.

Name of the subsidiary Country of As at March 31,
incorporation 2009 2008

Infosys BPO India 99.98% 99.98%

Infosys Australia Australia 100% 100%

Infosys China China 100% 100%

Infosys Consulting USA 100% 100%

Infosys Mexico Mexico 100% 100%

Infosys Sweden* Sweden - -

Infosys BPO s.r.o.** Czech Republic 99.98% 99.98%

Infosys BPO (Poland)

Sp.Z.o.o** Poland 99.98% 99.98%

Infosys BPO (Thailand)
Limited*** Thailand 99.98% 99.98%

Pan Financial Shared
Services India Private
Limited** India - 99.98%

P-Financial Services
Holding B.V

Netherlands** Netherlands - 99.98%

Mainstream Software Pty
Limited** Australia 100% -

On March 5, 2009 the Company incorporated a wholly-owned subsidiary,
Infosys Technologies (Sweden) AB, which is yet to be capitalized

* Infosys BPO s.ro, Infosys BPO (Poland) Sp.Z.ao and Infosys BPO (Thailand)
Limited are wholly-owned subsidiaries of Infosys BPO.

** During the year ended March 31, 2009, the investments held by P-
Financial Services Holding BY in its wholly-owned subsidiaries Pan-
Financial Shared Services India Private Limited, Infosys BPO (Poland)
Sp.Z.o.o, and Infosys BPO (Thailand) Limited were transferred to Infosys
BPO, consequent to which P-Financial Services Holding B.V was liquidated
During the quarter ended March 31, 2009, Infosys BPO merged its wholly-
owned subsidiary Pan-Financial Shared Services India Private Limited,
retrospectively with effect from April 1, 2008, vide a scheme of
amalgamation sanctioned by the court.

*** Mainstream Software Pty. Limited is a wholly-owned subsidiary of
Infosys Australia.

Investment in Infosys Mexico:

On June 20, 2007 the Company incorporated a wholly-owned subsidiary,
Infosys Technologies S. de R. L. de C. V in Mexico (Infosys Mexico). As at
March 31, 2009, the Company has invested an aggregate of Rs.22 crore
(Mexican Peso 60 million) in the subsidiary

Investment in Infosys Consulting:

During the year ended March 31, 2008, the Company invested Rs. 81 crore (US
$20 million) in its wholly-owned subsidiary Infosys Consulting Inc. During
the year ended March 31, 2009, the Company made an additional investment of
Rs. 22 crore (US $5 million). As at March 31, 2009, the Company has
invested an aggregate of Rs. 193 crore (US $45 million) in the subsidiary

Investment in Infosys China:

During the year ended March 31, 2009 and year ended March 31, 2008, the
Company disbursed an amount of Rs. 9 crore (US $2 million) and Rs. 10 crore
(US$3 million) as loan to its wholly-owned subsidiary, Infosys Technologies
(China) Co. Limited. The loan is repayable within five years from the date
of disbursement at the discretion of the subsidiary Further, during the
year ended March 31, 2009, an additional investment of Rs. 19 crore (US $4
million) was made in Infosys China. As at March 31, 2009, the Company has
invested Rs. 65 crore (US $14 million) as equity capital and Rs. 51 crore
(US $10 million) as loan in the subsidiary.

Infosys BPO:

During the year ended March 31, 2008, Infosys completed the purchase of
3,60,417 shares of Infosys BPO from its employee shareholders by paying an
aggregate consideration of Rs. 22 crore consequent to the forward share
purchase agreement entered with them in February 2007. Further, Infosys BPO
acquired 100% of the equity shares of P-Financial Services Holding B.V for
a consideration of Rs. 107 crore by entering into a Sale and Purchase
Agreement with Koninklijke Philips Electronics NV (Philips). The
transaction was accounted as a business combination which resulted in a
Goodwill of Rs. 83 crore.

During the year ended March 31, 2009, the investments held by P-Financial
Services Holding B.V in its wholly-owned subsidiaries Pan-Financial Shared
Services India Private Limited, Infosys BPO (Poland) Sp.Z.o.o, and Infosys
BPO (Thailand) Limited were transferred to Infosys BPO, consequent to which
P-Financial Services Holding B.V was liquidated. During the quarter ended
March 31, 2009, Infosys BPO merged its wholly-owned subsidiary Pan-
Financial Shared Services India Private Limited, vide a scheme of
amalgamation sanctioned by the court. As at March 31, 2009, Infosys holds
99.98% of the equity in Infosys BPO.

24.2.13. Provision for doubtful debts:

Periodically, the Group evaluates all customer dues to the Group for
collectability. The need for provisions is assessed based on various
factors including collectability of specific dues, risk perceptions of the
industry in which the customer operates, general economic factors, which
could affect the customer's ability to settle. The Group normally provides
for debtor dues outstanding for 180 days or longer as at the Balance Sheet
date. As at March 31, 2009, the Group has provided for doubtful debts of
Rs. 66 crore (Rs. 20 crore as at March 31, 2008) on dues from certain
customers although the outstanding amounts were less than 180 days old,
since the amounts were considered doubtful of recovery. The Group pursues
the recovery of the dues, in part or full.

24.2.14. Segment reporting:

The Group's operations predominantly relate to providing end-to-end
business solutions that leverage technology thereby enabling clients to
enhance business performance, delivered to customers globally operating in
various industry segments. Accordingly, revenues represented along industry
classes comprise the primary basis of segmental information set out in
these financial statements. Secondary segmental reporting is performed on
the basis of the geographical location of customers.

The accounting principles consistently used in the preparation of the
financial statements are also consistently applied to record income and
expenditure in individual segments. These are as set out in the note on
significant accounting policies.

Industry segments at the Group are primarily financial services comprising
customers providing banking, finance and insurance services; manufacturing
companies; companies in the telecommunications and the retail industries;
and others such as utilities, transportation and logistics companies.

Income and direct expenses in relation to segments are categorized based on
items that are individually identifiable to that segment, while the
remainder of the costs are categorized in relation to the associated
turnover of the segment. Certain expenses such as depreciation, which form
a significant component of total expenses, are not specifically allocable
to specific segments as the underlying services are used interchangeably.
The Group believes that it is not practical to provide segment disclosures
relating to those costs and expenses, and accordingly these expenses are
separately disclosed as 'unallocated' and directly charged against total
income.

Fixed assets used in the business or liabilities contracted have not been
identified to any of the reportable segments, as the fixed assets and
services are used interchangeably between segments. Accordingly, no
disclosure relating to total segment assets and liabilities are made.

Customer relationships are driven based on the location of the respective
client. North America comprises the United States of America, Canada and
Mexico; Europe includes continental Europe (both the east and the west),
Ireland and the United Kingdom; and the rest of the World comprising all
other places except, those mentioned above and India. Geographical revenues
are segregated based on the location of the customer who is invoiced or in
relation to which the revenue is otherwise recognized.

Industry segments:

Year ended March 31, 2009 and 2008:

in Rs. crore
Particulars Finan- Mann- Telecom Retail Others Total
cial factu-
Services ring

Revenues 7,358 4,289 3,906 2,728 3,412 21,693
5,972 2,454 3,597 1,971 2,698 16,692

Identifiable
operating
expenses 3,042 1,830 1,431 1,120 1,347 8,770
2,449 1,077 1,308 821 1,108 6,763

Allocated
expenses 1,942 1,133 1,033 720 900 5,728
1,679 690 1,011 553 758 4,691

Segmental
operating
income 2,374 1,326 1,442 888 1,165 7,195
1,844 687 1,278 597 832 5,238

Unallocable 761
expenses 598

Operating income 6,434
4,640

Other income / 473
(expense) net, 704

Net profit before 6,907
taxes 5,344

Income taxes 919
685
Net profit after 5,988
taxes 4,659
Geographic segments
Year ended March 31, 2009 and 2008:

in Rs. crore
Particulars North Europe India Rest Total
America of the
World

Revenues 13,736 5,705 284 1,968 21,693
10,349 4,683 219 1,441 16,692
Identifiable
operating
expenses 5,716 2,284 62 708 8,770
4,371 1,809 45 538 6,763
Allocated
expenses 3,624 1,507 76 521 5,728
2,909 1,316 62 404 4,691
Segmental
operating
income 4,396 1,914 146 739 7,195
3,069 1,558 112 499 5,238
Unallocable expenses 761
598
Operating income 6,434
4,640
Other income/(expense), net 473
704
Net profit before taxes 6,907
5,344
Income taxes 919
685
Net profit after taxes 5,988
4,659

24.2.15. Dividends remitted in foreign currencies:

The Company remits the equivalent of the dividends payable to the holders
of ADS (ADS holders) in Indian Rupees to the depository bank, which is the
registered shareholder on record for all owners of the Company's ADSs. The
depository bank purchases the foreign currencies and remits dividends to
the ADS holders.

Particulars of dividends remitted:

in Rs. crore
Particulars Number of Year ended
shares to March 31,
which the 2009 2008
dividends
relate

Interim dividend for fiscal 2009 10,97,63,357 110 -

Interim dividend for fiscal 2008 10,92,19,011 - 66

Final dividend for fiscal 2007 10,92,18,536 - 71

Final dividend for fiscal 2008 10,95,11,049 79 -

Special dividend for fiscal 2008 10,95,11,049 219 -

24.2.16. Reconciliation of basic and diluted shares used in computing
earnings per share:-

Particulars Year ended March 31,
2009 2008
Number of shares considered as
basic weighted average shares
outstanding 57,24,90,211 57,13,98,340

Add : Effect of dilutive issues of
shares / stock options 9,72,970 19,08,547

Number of shares considered
as weighted average shares and
potential shares outstanding 57,34,63,181 57,33,06,887

24.2.17 Provision for post-sales client support and warranties:

The movement in the provision for post-sales client support and warranties
is as follows:

in Rs. crore
Particulars Year ended March 31,
2009 2008

Balance at the beginning 53 23
Provision recognized 39 45
Provision utilized - (15)
Balance at the end 92 53

Provision for post sales client support is expected to be utilized over a
period of 6 months to 1 year.

24.2.18. Gratuity Plan:

Effective April 1, 2006 the Company adopted the revised accounting standard
on employee benefits. Pursuant to the adoption, the transitional
obligations of the Company amounted to Rs. 9 crore. As required by the
standard, the obligation has been recorded with the transfer of Rs. 9 crore
to general reserves during the fiscal year ended March 31, 2007.

The following table set out the status of the gratuity plan as required
under AS 15.

Reconciliation of opening and closing balances of the present value of the
defined benefit obligation and plan assets:-

in Rs. crore
Particulars As at March 31,
2009 2008 2007

Obligations at period beginning 224 225 183
Service cost 51 50 45
Interest cost 16 17 14
Actuarial loss / (gain) 1 (8) (1)
Benefits paid (25) (23) (16)
Amendment in benefit plan - (37) -
Obligations at period end 267 224 225
Defined benefit obligation liability
as at the Balance Sheet is wholly
funded by the Company
Change in plan assets
Plans assets at period beginning,
at fair value 236 225 170
Expected return on plan assets 17 18 16
Actuarial gain 5 2 3
Contributions 35 14 54
Benefits paid (25) (23) (18)
Plans assets at period end,
at fair value 268 236 225
Reconciliation of present value of
the obligation and the fair value
of the plan assets
Fair value of plan assets at the end
of the period 268 236 225
Present value of the defined benefit
obligations at the end of the period 267 224 225
Asset recognized in the Balance
Sheet 1 12 -
Assumptions
Interest rate 7.01% 7.92% 7.99%
Estimated rate of return on
plan assets 7.01% 7.92% 7.99%

in Rs. crore
Particulars Year ended March 31,
2009 2008
Gratuity cost for the period
Service cost 51 50
Interest cost 16 16
Expected return on plan assets (17) (18)
Actuarial gain (4) (10)
Plan amendment amortization (4) (4)
Net gratuity cost 42 34
Actual return on plan assets 22 20

Gratuity cost, as disclosed above, is included under salaries and bonus and
is segregated between software development expenses, selling and marketing
expenses and general and administration expenses on the basis of number of
employees.

Investment details of plan assets

100% of the plan assets are invested in debt instruments. The estimates of
future salary increases, considered in actuarial valuation, take account of
inflation, seniority, promotion and other relevant factors such as supply
and demand factors in the employment market.

Effective July 1, 2007, the Company revised the employee death benefits
provided under the gratuity plan, and included all eligible employees under
a consolidated term insurance cover. Accordingly, the obligations under the
gratuity plan reduced by Rs. 37 crore, which is being amortized on a
straight line basis to the net Profit and Loss account over ten years
representing the average future service period of the employees. The
unamortized liability as at March 31, 2009 and March 31, 2008 amounted to
Rs. 29 crore and Rs. 33 crore respectively and is disclosed under 'Current
Liabilities'.

The group expects to contribute approximately Rs. 43 crore to the gratuity
trusts during fiscal 2010.

24.2.19.a Provident Fund:

The Guidance on Implementing AS 15, Employee Benefits (revised 2005) issued
by Accounting Standards Board (ASB) states that benefits involving employer
established provident funds, which require interest shortfalls to be
recompensed are to be considered as defined benefit plans. Pending the
issuance of the guidance note from the Actuarial Society of India, the
Company's actuary has expressed an inability to reliably measure provident
fund liabilities. Accordingly, the Company is unable to exhibit the related
information.

The Company contributed Rs. 153 crore and Rs. 122 crore during the year
ended March 31, 2009 and 2008 respectively.

24.2.19.b Superannuation:

The Company contributed Rs. 80 crore and Rs. 66 crore during the year ended
March 31, 2009 and 2008 respectively.

24.2.20. Cash and bank balances:

Details of balances as on Balance Sheet dates with scheduled banks:-

in Rs. crore
Balances with scheduled banks in India: As at March 31,

2009 2008
In Current account:

Citibank - Unclaimed dividend
account 1 1

Deustche Bank 13 42

Deustche Bank - EEFC account in Euro 27 31

Deustche Bank - EEFC account in Swiss Franc 3 10

Deustche Bank - EEFC account in
United Kingdom Pound Sterling - 18

Deustche Bank - EEFC account in US
Dollar 12 129

HDFC Bank - Unclaimed dividend
account - -

ICICI Bank 18 24

ICICI Bank - EEFC account in Euro 1 3

ICICI Bank - EEFC account in United
Kingdom Pound Sterling 6 3

ICICI Bank - EEFC account in US

Dollar 42 15

ICICI bank - Unclaimed dividend
account 1 1
124 277
In Deposit account
Andhra Bank 80 -
Axis Bank - 250
Bank of Baroda 829 500
Bank of India - 500
Bank of Maharashtra 537 387
Barclays Bank 140 300
Canara Bank 794 115
Corporation Bank 343 440
DBS Bank 25 -
HDFC Bank - 450
HSBC Bank 283 250
ICICI Bank 560 1,025
IDBI Bank 550 500
ING Vysya Bank 53 20
Punjab National Bank 480 25
Standard Chartered Bank 38 -
State Bank of Hyderabad 200 -
State Bank of India 2,109 1,001
State Bank of Mysore 500 -
Syndicate Bank 500 -
The Bank of Nova Scotia 350 150
Union Bank of India 85 -
Vijaya Bank 95 -
8,551 5,913

Details of balances as on Balance Sheet dates with non-scheduled banks:

in Rs. crore
Balances with non-scheduled banks As at March 31,
2009 2008
In Current account

ABN Amro Bank, China 6 7

ABN Amro Bank, China US Dollar 14 1

ABN Amro Bank, Taiwan 1 -

Bank of America, Mexico 2 9

Bank of America, USA 587 318

Citibank NA, Australia 33 32

Citibank NA, Czech Republic - 3

Citibank NA, Czech Republic Euro
account 3 1

Citibank NA, Czech Republic US Dollar 4 3

Citibank NA, Japan 2 2

Citibank NA, Singapore 7 -

Citibank NA, Thailand 1 -

Deutsche Bank, Belgium 6 5

Deutsche Bank, France 1 2

Deutsche Bank, Germany 5 5

Deutsche Bank, Netherlands 1 3

Deustche Bank, Philippines 1 -

Deustche Bank, Philippines US Dollar 1 -

Deustche Bank, Poland - 4

Deustche Bank, Poland Euro account - 10

Deutsche Bank, Spain 1 2

Deustche Bank, Thailand 2 6

Deutsche Bank, U.K. 58 76

Deutsche Bank, Switzerland - 1

HSBC Bank, U.K. 8 2

ICICI Bank, U.K. - -

National Australia Bank Limited,

Australia 30 101
National Australia Bank Limited,

Australia US Dollar 7 -

Nordbanken, Sweden - 1

Royal Bank of Canada, Canada 6 12

The Bank of Tokyo-Mitsubishi UFJ,
Ltd., Japan 1 -

Svenska Handelsbanken, Sweden - 1
788 607

in Rs. crore
Balances with non-scheduled banks As at March 31,
2009 2008
In Deposit accounts

Citibank NA., Czech Republic 4 -
National Australia Bank Limited,
Australia 228 153
232 153
Total cash and bank balances as per
Balance Sheet 9,695 6,950

24.2.21. Miscellaneous income:

Miscellaneous income of Rs. 36 crore during the year ended March 31, 2009
includes a net amount of Rs. 18 crore consisting of Rs. 33 crore received
from Axon Group Plc. towards the inducement fee offset by Rs. 15 crore
towards expenses incurred in relation to this transaction.

24.2.22. Cash Flow statement:

24.2.22.a Unclaimed dividend:-

The balance of cash and cash equivalents includes Rs. 2 crore as at March
31, 2009 (Rs. 2 crore as at March 31, 2008) set aside for payment of
dividends.

24.2.22.b Restricted cash:

Deposits with financial institutions and body corporate as at March 31,
2009 include an amount of Rs. 253 crore (Rs. 161 crore as at March 31,
2008) deposited with Life Insurance Corporation of India to settle employee
benefit obligations as and when they arise during the normal course of
business. This amount is considered as restricted cash and is hence not
considered 'cash and cash equivalents'.

24.3. Details of rounded off amounts:

The financial statements are represented in Rs. crore as per the approval
received from Department of Company Affairs (DCA) earlier. Those items
which were not represented in the financial statement due to rounding off
to the nearest Rs. crore are given as follows

Balance Sheet items:

in Rs. crore
Schedule Description As at March 31,
2009 2008
Balance Sheet

3. Fixed assets:

Deductions / retirements
Leasehold improvements 0.04 -
Vehicles 0.23 0.05
Depreciation
Vehicles - 0.55
Depreciation on assets sold
during the period
Vehicles 0.05 0.03

7. Cash on hand 0.07 0.08

Scheduled banks - Current
accounts
Citibank NA. 0.12 0.32
HDFC Bank - Unclaimed
dividend account 0.46 -
Deustche Bank - EEFC account
in United Kingdom Pound
Sterling 0.33 -
State Bank of India 0.01 0.03

Non-scheduled banks - Current
account

ABN Amro Bank, Denmark 0.06 0.01

ABN Amro Bank, Taiwan - 0.23

Banamex, Mexico 0.02 -
Bank of Baroda, Mauritius 0.06 0.02
China Merchants Bank, China 0.17 0.33
Citibank NA., Czech Republic 0.29 -
Citibank NA., Poland 0.01 -
Citibank NA., Singapore - 0.02
Citibank NA., Thailand - 0.31
Deustche Bank, Philippines - 0.25
Deustche Bank, Poland 0.21 -
Deustche Bank, Poland Euro
account 0.12 -
Deustche Bank, Philippines US
Dollar - 0.32
Deutsche Bank, Zurich,
Switzerland US Dollar 0.05 -
Deutsche Bank, Zurich,
Switzerland 0.22 -
ICICI Bank, U.K. 0.09 0.27
Nordbanken, Sweden 0.11 0.89
PNC Bank, USA 0.03 0.02
Shanghai Pudong Development
Bank, China 0.01 0.09
Svenska Handelsbanken,
Sweden - 1.23
Morgan Stanley Bank, USA - -
Unsecured, considered doubtful

8. advance to gratuity trust - 12.00

10. Provision
gratuity payable 0.57 0.30

in Rs. crore
Schedule Description Year ended March 31,
2009 2008
Profit and Loss:
Provision for investments - (0.36)

12. Selling and marketing expenses:

Office maintenance 0.40 0.42

Consumables 0.17 0.28
Software for own use 0.04 0.12
Computer maintenance - 0.03
Insurance charges 0.33 0.20
Repairs to plant and machinery 0.07 -
Rates and taxes 0.01 0.03
General and administrative

13. expenses:

Auditor's remuneration
Statutory audit fees - 1.27

Out-of-pocket expenses 0.04 0.04

Certification charges 0.05 0.11

Others - 0.11

24.2.1. Aggregate expenses:

Provision for doubtful loans
and advances 1.49 0.56

Auditor's remuneration
Certification charges 0.05 0.11

Out-of-pocket expenses 0.04 0.04

Others - 0.11

24.2.10. Profit on disposal of fixed assets, 0.38 0.21
included in miscellaneous income (Loss) on
disposal of fixed assets, included in
miscellaneous expenses - (0.01)

Profit / (Loss) on disposal of fixed
assets, net 0.38 0.20

Minority interest 0.02 1.21

Provision for investments - 0.36

Cash Flow statement items:

in Rs. crore
Schedule Description Year ended arch 31,
2009 2008
Cash Flow statement
Profit / Loss on sale of fixed assets 0.38 0.21

Provisions for investments - (0.36)

Proceeds on disposal of
fixed assets - 0.47

Transactions with key management personnel:

Key management personnel comprise directors and members of the executive
council.

Particulars of remuneration and other benefits paid to whole-time directors
and members of executive council during the year ended March 31, 2009 and
2008 are as follows

in Rs. crore
Name Salary Contribu- Perqui- Total
tions to sites and Remu-
provident incen- neration
and other tives
funds

Co-Chairman
Nandan M. Nilekani 0.30 0.07 0.54 0.91

0.21 0.05 0.56 0.82
Chief Executive Officer and
Managing Director

S. Gopalakrishnan 0.30 0.07 0.55 0.92
0.21 0.05 0.55 0.81
Chief Operating Officer and
Director:

S.D. Shibulal 0.28 0.07 0.52 0.87
0.20 0.05 0.53 0.78
Whole-time directors

K. Dinesh 0.30 0.07 0.54 0.91
0.21 0.05 0.56 0.82

T V Mohandas Par 0.36 0.09 2.14 2.59
0.33 0.11 1.36 1.80
Srinath Batnr 0.35 0.09 1.43 1.87
0.31 0.08 0.88 1.27
Chief Financial Officer
V Balakrishnan 0.29 0.07 2.00 2.36
0.26 0.08 0.29 0.63
Executive council members
Ashok Venturi 1.99 - 2.05 4.04
1.57 - 1.24 2.81
Chandra Shekar Kakal 0.26 0.06 1.26 1.58
0.23 0.06 0.49 0.78
B. G. Srinivas 1.82 - 2.85 4.67
1.67 - 1.40 3.07
Subhash B. Dhar 0.23 0.06 0.98 1.27
0.18 0.05 0.32 0.55

Particulars of remuneration and other benefits of non-executive /
independent directors for the year ended March 31, 2009 and 2008

in Rs. crore
Name Com- Sitting Reimburse- Total
mis- fees ment of remuneration
sion expenses

Non-whole-time directors:

Deepak M. Satwalekar 0.68 - 0.02 0.70
0.56 - 0.01 0.57
Prof. Marti G.
Subrahmanyam 0.71 - 0.25 0.96
0.47 - 0.12 0.59
Dr. Omkar Goswamr 0.58 - 0.03 0.61
0.44 - 0.01 0.45
Claude Smadja 0.67 - 0.26 0.93
0.42 - 0.20 0.62
Rama Bijapurkar 0.56 - 0.01 0.57
0.44 - 0.01 0.45
Sridar A. lyengar 0.82 - 0.20 1.02
0.55 - 0.09 0.64
David L. Boyles 0.69 - 0.21 0.90
0.47 - - 0.47
Prof. Jeffrey S. Lehman 0.63 - 0.22 0.85
0.43 - 0.02 0.45
N. R. Narayana Murthy' 0.63 - - 0.63
0.50 - - 0.50

Non-Executive Chairman of the Board and Chief Mentor.

Value-added statement:
in Rs. crore
2009 % 2008 % Growth %
Value-added:

Income 21,693 16,692 30.0

Less : Operating expenses
excluding personnel costs
Software development and
business process
management expenses 1,656 1,306

Selling and marketing 272 302
expenses

General and 1,165 968 3,093 2,576
administration expenses

Value-added from 18,600 14,116 31.8
operations

Other income (including 473 704
exceptional items)

Total value-added 19,073 14,820 28.7

Distribution of value-
added

Human resources:

Salaries and bonus 11,405 59.8 8,878 59.9 28.5

Providers of capital

Dividend 1,345 7.1 1,902 12.8 (29.3)

Minority interest - - - - -

Interest on debt - - - - -
1,345 7.1 1,902 12.8 (29.3)

Taxes

Corporate income taxes 919 4.8 685 4.6 34.2

Dividend tax 228 1.2 323 2.2 (29.4)
1,147 6.0 1,008 6.8 13.8

Income retained in
business:

Depreciation 761 4.0 598 4.0 27.3

Retained in business 4,415 23.1 2,434 16.5 81.4
5,176 27.1 3,032 20.5 70.7

Total 19,073 100.0 14,820 100.0 28.7

Notes : The figures above are based on the consolidated Indian GAAP
financial statements. Dividends for fiscal 2008 include special dividend of
Rs. 1,144 crore. Income taxes for fiscal 2009 and 2008 include net tax
reversals of Rs. 108 crore and Rs. 121 crore respectively.

Brand valuation:

The strength of the invisible:-

From time-to-time, we have used various models for evaluating assets of the
Balance Sheet to bring certain advances in financial reporting to the
notice of our shareholders. The aim of such modeling is to lead the debate
on the Balance Sheet of the next millennium. These models are still the
subject of debate among researchers and using such models and data in
projecting the future is risky. We are not responsible for any direct,
indirect or consequential losses suffered by any person using these models
or data.

A Balance Sheet discloses the financial position of a company. The
financial position of an enterprise is influenced by the economic resources
it controls, its financial structure, liquidity and solvency and its
capacity to adapt to changes in the environment. However, it is becoming
increasingly clear that intangible assets have a significant role in
defining the growth of a high-tech company

Valuing the brand:

The wave of brand acquisitions in the late 1980s exposed the hidden value
in highly branded companies, and brought brand valuation to the fore. The
values associated with a product or service are communicated to the
consumer through the brand. Consumers no longer want just a product or
service, they want a relationship based on trust and familiarity

A brand is much more than a trademark or a logo. It is a trustmark' - a
promise of quality and authenticity that clients can rely on. Brand equity
is the value addition provided to a product or a company by its brand name.
It is the financial premium that a buyer is willing to pay for the brand
over a generic or less worthy brand. Brand equity is not created overnight.
It is the result of relentless pursuit of quality in manufacturing,
selling, servicing, advertising and marketing. It is integral to the
quality of client experiences in dealing with the company and its services
over a period.

The third annual BRANDZT Top 100 Most Powerful Brands ranking published in
cooperation with the Financial Times was announced in April 2009 by
Millward Brown. According to the report, Google topped the ranking with a
brand value of US $100 billion. The market capitalization of Google at that
time was US $84 billion. Thus, 119% of market capitalization represented
its brand value. (Source : www.nasdaq.com)

Methodology:

The task of measuring brand value is a complex one. Several models are
available for accomplishing this. The most widely used is the brand-
earnings-multiple model. There are several variants of this model.

We have adapted the generic brand-earnings-multiple model (given in the
article Valuation of Trademarks and Brand Names' by Michael Birkin in the
book, Brand Valuation, edited by John Murphy and published by Business
Books Limited, London) to value our corporate brand, 'Infosys'. The
methodology followed for valuing the brand is given as follows :

Determine brand profits by eliminating the non-brand profits from the total
profits

Restate the historical profits at present-day values:

Provide for the remuneration of capital to be used for purposes other than
promotion of the brand

Adjust for taxes:-

Determine the brand-strength or brand-earnings multiple.

Brand-strength multiple is a function of a multitude of factors such as
leadership, stability, market, internationality trend, support and
protection. We have internally evaluated these factors on a scale of 1 to
100, based on the information available within.

Brand valuation:

in Rs. crore
2009 2008 2007

Profit before interest and tax 6,907 5,344 4,245
Less: Non-brand income 426 634 335
Adjusted profit before tax 6,481 4,710 3,910
Inflation factor 1.000 1.092 1.192

Present value of brand

profits 6,481 5,142 4,660
Weightage factor 3 2 1
Weighted average profits 5,731 - -
Remuneration of capital 801 - -
Brand-related profits 4,930 - -
Tax 1,676 - -
Brand earnings 3,254 - -
Brand multiple 9.94 - -
Brand value 32,345 - -

Assumptions :

The figures above are based on consolidated Indian GAAP financial
statements

Brand revenue is total revenue excluding other income after adjusting for
cost of earning such income, since this is an exercise to determine our
brand value as a company and not for any of our products or services.

Inflation is assumed at 8.4% per annum, 5% of the average capital employed
is used for purposes other than promotion of the brand and tax rate is at
33.99%

The earnings multiple is based on our ranking against the industry average
based on certain parameters (exercise undertaken internally and based on
available information).

in Rs. crore
2009 2008 2007

Brand value 32,345 31,863 31,617

Market capitalization 75,837 82,362 1,15,307

Brand value as a percentage of
market capitalization 42.7% 38.7% 27.4%

Brand value / revenue (x) 1.49 1.91 2.28

Economic Value-Added (EVAr) statement:

Economic Value-Added is the surplus generated by an entity after meeting an
equitable charge towards providers of capital. It is the post-tax return on
capital employed (adjusted for the tax shield on debt) less the cost of
capital employed. Companies which earn higher returns than cost of capital
create value, and companies which earn lower returns than cost of capital
are deemed harmful for shareholder value.

in Rs. crore, except as otherwise stated
2009 2008 2007 2006 2005
Cost of capital
Return on risk free 7.00 8.00 8.00 7.50 6.80
investment (%)

Market premium (%) 7.00 7.00 7.00 7.00 7.00
Beta variant 0.74 0.76 0.99 0.78 0.98

Cost of equity (%) 12.18 13.32 14.97 12.96 13.63
Average debt / total - - - - -
capital (%)

Cost of debt - net of NA NA NA NA NA
tax (%)

Weighted Average Cost of 12.18 13.32 14.97 12.96 13.63
Capital (WACC) (%)

Average capital employed 16,025 12,527 9,147 6,177 7,331
Economic Value-Added
(EVAr)

Operating profits 6,434 4,640 3,877 2,654 2,048
Less : Tax 919 685 386 313 326
Cost of capital 1,952 1,669 1,369 801 590
Economic Value-Added 3,563 2,286 2,122 1,540 1,132
Enterprise value

Market value of equity 75,837 82,362 1,15,307 82,154 61,073

Add : Debt - - - - -
Less : Cash and cash 10,993 8,307 6,033 4,709 2,998
equivalents

Enterprise value 64,844 74,055 1,09,274 77,445 58,075
Return ratios

PAT / average capital 37.4 37.2 42.2 40.1 42.6
employed (%)

EVAr / average capital 22.2 18.2 23.2 24.9 26.1
employed (%)

Enterprise value/average 4.0 5.9 11.9 12.5 13.4
capital employed (x)

Growth (%)
Operating profits 38.7 19.7 46.1 29.6 50.9
Average capital employed 27.9 37.0 48.1 42.6 38.6
EVAr 55.9 7.7 37.8 36.0 64.3
Market value of equity (7.9) (28.6) 40.4 34.5 85.6
Enterprise value (12.4) (32.2) 41.1 33.4 93.4

Notes : Cost of equity = return on risk-free investment + expected risk
premium on equity investment adjusted for our beta variant in India.
Figures above are based on consolidated Indian GAAP financial statements.
Cash and cash equivalents includes investments in liquid mutual funds.

2005 2006 2007 2008 2009

EVA (in Rs. crore) 1,132 1,540 2,122 2,286 3,563

PAT as a % of avg 42.6 40.1 42.2 37.2 37.4
capital employed

Intangible assets score sheet:

We caution investors that this data is provided only as additional
information to them. We are not responsible for any direct, indirect or
consequential losses suffered by any person using this data.

From the 1840s to the early 1990s, a corporate's value was mainly driven by
its tangible assets - values presented in the corporate Balance Sheet. The
managements of companies valued these resources and linked all their
performance goals and matrices to these assets - Return on Investment and
capital turnover ratio. The market capitalization of companies also
followed the value of tangible assets shown in the Balance Sheet with the
difference seldom being above 25%. In the latter half of the 1990s, the
relationship between market value and tangible asset value changed
dramatically. By early 2000, the book value of the assets represented less
than 15% of the total market value. In short, intangible assets are the key
drivers of market value in this new economy.

A knowledge-intensive company leverages know-how, innovation and reputation
to achieve success in the marketplace. Hence, these attributes should be
measured and improved upon year after year to ensure continual success.
Managing a knowledge organization necessitates a focus on the critical
issues of organizational adaptation, survival, and competence in the face
of ever-increasing, discontinuous environmental change. The profitability
of a knowledge firm depends on its ability to leverage the learnability of
its professionals, and to enhance the reusability of their knowledge and
expertise. The intangible assets of a company include its brand, its
ability to attract, develop and nurture a cadre of competent professionals,
and its ability to attract and retain marquee clients.

Intangible assets:

The intangible assets of a company can be classified into four major
categories : human resources, intellectual property assets, internal assets
and external assets.

Human resources:

Human resources represent the collective expertise, innovation, leadership,
entrepreneurship and managerial skills of the employees of an organization.

Intellectual property assets:

Intellectual Property assets include know-how, copyrights, patents,
products and tools that are owned by a corporation. These assets are valued
based on their commercial potential. A corporation can derive its revenues
from licensing these assets to outside users.

Internal assets:

Internal assets are systems, technologies, methodologies, processes and
tools that are specific to an organization. These assets give the
organization a unique advantage over its competitors in the marketplace.
These assets are not licensed to outsiders. Examples of internal assets
include methodologies for assessing risk, methodologies for managing
projects, risk policies and communication systems.

External assets:

External assets are market-related intangibles that enhance the fitness of
an organization for succeeding in the marketplace. Examples are customer
loyalty (reflected by the repeat business of the Company) and brand value.

The score sheet:

We published models for valuing two of our most important intangible assets
- human resources and the 'Infosys' brand. This score sheet is broadly
adopted from the intangible asset score sheet provided in the book titled,
The New Organizational Wealth, written by Dr. Karl-Erik Sveiby and
published by Berrett-Koehler Publishers Inc., San Francisco. We believe
such representation of intangible assets provides a tool to our investors
for evaluating our market-worthiness.

Clients:

The growth in revenue is 12% this year, compared to 35% in the previous
year (in US $). Our most valuable intangible asset is our client base.
Marquee clients or image-enhancing clients contributed 44% of revenues
during the year. They gave stability to our revenues and also reduced our
marketing costs.

The high percentage (97.6%) of revenues from repeat orders during the
current year is an indication of the satisfaction and loyalty of our
clients. The largest client contributed 6.9% to our revenue, compared to
9.1 % during the previous year. The top 5 and 10 clients contributed around
18.0% and 27.7% to our revenue respectively, compared to 20.9% and 31.4%
respectively, during the previous year. Our strategy is to increase our
client base and, thereby, reduce the risk of depending on a few large
clients. During the year, we added 156 new clients compared to 170 in the
previous year. We derived revenue from customers located in 67 countries
against 58 countries in the previous year. Sales per client grew by around
3.7% from US $7.76 million in the previous year to US $8.05 million this
year. Days Sales Outstanding (DSO) was 62 days this year compared to 72
days in the previous year.

Organization:

During the current year, we invested around 3.33% of the value-added (2.93%
of revenues) on technology infrastructure, and around 1.41% of the value-
added (1.24% of revenues) on R&D activities.

A young, fast-growing organization requires efficiency in the area of
support services. The average age of support employees is 29.6 years, as
against the previous year's average age of 29.4 years. The sales per
support staff, as well as the proportion of support staff to the total
organizational staff, have improved over the previous year.

People:

We are in a people-oriented business. We added 28,231 employees this year
on gross basis (net - 13,663) from 33,177 (net - 18,946) in the previous
year. We added 5,796 laterals this year against 8,523 in the previous year.
The education index of employees has gone up substantially to 2,72,644 from
2,51,970. This reflects the quality of our employees. Our employee strength
comprises people from 76 nationalities. The average age of employees as at
March 31, 2009 was 26, the same as in the previous year. Attrition was
11.1% for this year compared to 13.4% in the previous year (excluding
subsidiaries).

Notes:

* Marquee or image-enhancing clients are those who enhance the company's
market-worthiness, typically, Global 1,000 clients. They are often
reference clients for us Sales per client is calculated by dividing total
revenue by the total number of clients.

Repeat business revenue is the revenue during the current year from those
clients who contributed to our revenue during the previous year too.

Value-added statement is the revenue less payment to all outside resources.
The statement is provided in the Value-added statement section of the
Annual Report.

Technology investment includes all investments in hardware and software,
while total investment in the organization is the investment in our fixed
assets.

The average proportion of support staff is the average number of support
staff to average total staff strength.

Sales per support staff is our revenue divided by the average number of
support staff (support staff excludes technical support staff).

* The education index is shown as at the year end, with primary education
calculated as 1, secondary education as 2 and tertiary education as 3.

Intangible assets score sheet:

External structure - our clients
2009 2008
Growth / renewal
Revenue growth (%)
In US Dollar terms 12 35
In Rupee terms 30 20
Exports / total revenue (%) 99 99
Clients
Total 579 538
Added during the year 156 170
Marque clients
Total 99 113
Added during the year 7 24
Revenue contribution (%) 44 46
Revenue derived - Number of countries 67 58
Efficiency
Sales / Client
US $ million 8.05 7.76
Rs. crore 37.47 31.03
Sales and marketing expenses / revenue (%) 5.09 5.49
DSO (days) 62 72
Provision for debts / revenue (%) 0.35 0.26
Stability
Repeat business (%) 97.6 97.0
No. of clients accounting 5% of revenue 1 1
Client concentration
Top client (%) 6.9 9.1
Top five clients (%) 18.0 20.9
Top ten clients (%) 27.7 31.4
Client distribution
1 million dollar + 327 310
5 million dollar + 151 141
10 million dollar + 101 89
20 million dollar + 59 47
30 million dollar + 39 32
40 million dollar + 30 22
50 million dollar + 20 18
60 million dollar + 16 13
70 million dollar + 12 12
80 million dollar + 10 10
90 million dollar + 7 6
100 million dollar + 4 6
200 million dollar + 1 1
300 million dollar + 1 1
Internal structure - our organization
2009 2008
Growth / renewal
R&D
R&D / total revenue (%) 1.24 1.20
R&D / value-added (%) 1.41 1.36
Technology investment
Investment / revenue (%) 2.93 2.67
Investment/ value-added (%) 3.33 3.00
Total investment
Total investment / total revenue (%) 6.12 8.95
Total investment / value-added (%) 6.96 10.08
Efficiency
Sales per support staff
US $ million 0.94 1.08
Rs. crore 4.35 4.32
General and admin expenses / revenue (%) 7.51 7.97
Average proportion of support staff (%) 5.04 4.71
Stability
Average age of support staff (years) 29.6 29.4
Competence - our people
2009 2008
Growth / renewal
Total employees 1,04,850 91,187
Added during the year
Gross 28,231 33,177
Net 13,663 18,946
Laterals added 5,796 8,523
Staff education index 2,72,644 2,51,970
Employees - Number of nationalities 76 70
Gender classification (%)
Male 66.6 67.5
Female 33.4 32.5
Number of non-Indian national employees 4,698 3,678
Efficiency
Value-added / employee (Rs. crore)
Software professionals 0.20 0.19
Total employees 0.19 0.18
Value-added / employee ($ million)
Software professionals 0.04 0.05
Total employees 0.04 0.05
Stability
Average age of employees (years) 26 26
Attrition - excluding subsidiaries (%) 11.1 13.4
Attrition - excluding involuntary
separation (%) 9.1 12.1

Note : The above figures are based on consolidated financial statements

Value Reporting:

At Infosys, we have always believed that information asymmetry between the
Management and shareholders should be minimized. Accordingly, we have
always been at the forefront in practicing progressive and transparent
disclosures. We were the first in India to adopt the U.S. Generally
Accepted Accounting Principles (U.S. GAAP). Further, we were the first
foreign private issuer in India to file primary financial statements with
Securities Exchange Commission (SEC) in accordance with the International
Financial Reporting Standards (IFRS), as issued by International Accounting
Standards Board. Thereafter, we rapidly progressed to additional
disclosures that give deeper insights to the way we run our business and
into our value creation. We continue to provide additional information even
though it is not mandated by law because we believe that it will enable
investors to make more informed choices about our performance.

The book, The Value Reporting Revolution : Moving Beyond the Earnings Game,
authored by Robert Eccles, Robert Herz, Mary Keegan and David Phillips,
associated to accounting firm PricewaterhouseCoopers, (published by John
Wiley & Sons, Inc., USA, c2001), acknowledged the need to go beyond GAAP in
providing information to shareholders. In their book, Building Public Trust
: The Future of Corporate Reporting (published by John Wiley & Sons, Inc.,
USA, c2002 PricewaterhouseCoopers), our business model and reporting were
referred in detail.

The Corporate Reporting framework:

Market Overview
Competitive environment
Regulatory environment
Macro environment
Strategy & Structure
Goals and objectives
Governance
Risk framework
Organizational design
Managing for value
Financial assets
Physical assets
Customers
People Innovation
Brands & intellectual assets
Supply chain
Economic
Operating
Environmental, social and ethical
Segmental

We identified the need to provide a range of non-financial parameters early
in our existence - before our Indian public offering in 1993.

To reduce information asymmetry, we make the following disclosures in
addition to the mandated Indian and IFRS financial statements and
supplementary data as required by the relevant statutes :

Brand valuation:

Balance Sheet including intangible assets

Economic Value-Added (EVAr) statement

Intangible asset scorecard

Risk management report:

Human resource accounting and value-added statement.

These reports are integral to the Annual Report.

By adopting similar internal measures to evaluate business performance, our
employees are adjudged based on metrics that are additional to the
financials. This balances financial and non-financial performance across
all levels of the organization. Accordingly, we seek to align the measures
by which stakeholders measure our performance with what results in employee
rewards.

In addition to the Annual Report, a Sustainability Report measuring
compliance against the Global Reporting Initiatives (GRI) is also being
published since fiscal 2008.

In fiscal 2005, we adopted and furnished eXtensible Business Reporting
Language (XBRL) data to the United States Securities and Exchange
Commission (SEC) for the first time. We are the fourth Company worldwide to
adopt XBRL.

In the coming years, we will continue in our commitment to furnish

additional qualitative information to help our shareholders better
understand the management of our business.

Infosys Foundation:

The Infosys Foundation was formed in 1996 and comprises a dedicated team
who work to support and enrich the underprivileged sections of society.
Focusing on specific areas of need, the Foundation is ensuring necessary
aid to institutions and developmental agencies involved in improving the
lives of those in need and thus enabling them to reach their full
potential.

The Foundation is successfully creating opportunities and working towards a
more equitable society through programs that make healthcare accessible,
spread education, sponsor the arts and rehabilitate underprivileged
communities especially in rural and underdeveloped regions of India.

The Foundation is involved in four key areas :

Social rehabilitation and rural upliftment

Learning and education

Healthcare

Arts and culture:

Highlights of some of the projects undertaken by the Foundation this year
are :

Learning and education:

Education is a critical factor for development of individuals and society
and helps pave the way to enhance lives. The following are some of the
initiatives and programs that were implemented by the Foundation in the
area of learning and education :

* Sponsored libraries and reading rooms in schools and youth centers in
rural Karnataka by donating Kannada and English magazines and technical
books to help the poor and needy students broaden their knowledge.

Sponsored the construction and provided support in setting up a high-tech
computer lab at Gulbarga University, Karnataka.

* Sponsored several teacher training programs that helped the teachers
develop innovative teaching methods. The program also helped in making them
create and design experiments and projects to make learning fun and
engaging for their students. Technology trends, modern teaching
methodologies and aids were also discussed during this program.

Healthcare:

Access to healthcare and medicines is a massive challenge in developing
countries like India. This fiscal year, the Foundation supported the
following healthcare initiatives and programs :

Initiated and completed the construction of the Sankara Eye Hospital to
provide aid to people from economically challenged backgrounds

Provided equipment, medicines and financial help to government hospitals,
reputed missionary hospitals and medical centers in Tamil Nadu, Jammu &
Kashmir, Maharashtra, Bihar, Kerala and Karnataka where economically needy
patients were offered free medicines and healthcare.

Arts and culture:

Traditional art and culture are fast disappearing due to globalization and
economic development. The Foundation identifies, nurtures and promotes rare
and vanishing folk arts for future generations to enjoy The Foundation
maintained the support through various sponsorships and events for the
following activities :

* Sponsored Kogga Kamath's Yakshagana puppet show, a traditional form of
puppetry from Karnataka. Support was provided to conduct shows in all
districts in Karnataka and in Singapore to popularize this folk art form.

Sponsored Surabhi, a traditional drama troupe from Andhra Pradesh with the
aim to revive folk theater

Donated funds to the Hasta Shilpa Trust in Manipal, Karnataka, to maintain
rare and unique Tanjore paintings

Sponsored performances by the Samarthanam dance troupe. The troupe
comprises visually and physically challenged people who have mastered
traditional dance forms.

Sponsored music programs conducted by the students of Kalkeri Sangeetha
Vidyalaya, Dharward, Karnataka to promote traditional folk music.

Partnered with Adima, an organization in Kolar district in Karnataka, where
rural artists are trained in the local arts and culture. The Foundation has
supported their cultural activities and has provided aid to 60 child
artists this year.

Social rehabilitation and rural upliftment:

The Foundation collaborates with institutions and developmental
organizations to address social inequity and rural upliftment. The
Foundation was engaged in the following activities during the year :

Partnered with Sathi (an NGO) and helped in rehabilitating street children
in Delhi, Patna and Kanpur

Trained destitute women from Maharashtra through BAIF, a self-help group,
to earn their livelihood by starting small businesses

Sponsored Jnanavikasa, a program that trains rural women in hygiene,
health, nutrition, infant care, literacy and vocational skills. The
Foundation believes that women are at the forefront of transforming society
by bringing about change at the grassroots.

Sponsored the rehabilitation of Devadasis, a socially vulnerable section of
women, and their children, in Raichur, Karnataka. Through this program, the
women were provided vocational training to help them lead dignified and
sustainable livelihoods.

Sponsored the rehabilitation of tribal communities from Orissa by training
them in vocations such as agriculture, horticulture, sericulture,
floriculture, apiculture, fishery sciences, dairy farming, poultry,
maintaining farm machinery, welding and carpentry

Sponsored rehabilitation programs for those affected by the Orissa

floods in September 2008

Grants by Infosys to the Foundation:

The grants made during the last three years are given as follows :

in Rs. crore
Grants

2009 20.00
2008 20.00
2007 19.00

Report on environment, health and safety:

Infosys aims to be recognized by all stakeholders, including customers,
employees, vendors, shareholders and community at large, as a world-class
company that is committed to high standards of environmental management. We
believe in providing our employees, consultants and contractors with a safe
and healthy environment, free of occupational injuries and illnesses.

OZONE - The Health, Safety and Environmental Management System (HSEMS) at
Infosys

Our Health, Safety and Environment (HSE) policy covering employees,
contractual employees and visitors, states that :

'Infosys as a corporate citizen is committed to demonstrating a high
standard of environmental protection, sharing of best practices and
provision of a safe and healthy workplace.'

To achieve this, we shall work toward :

Conservation of resources

Prevention of pollution

Adherence to all applicable legislations:

Eliminating accidents, occupational illnesses and injuries at work.

We will work with various stakeholders towards continual improvement of our
environmental, health and safety management system.

We shall meet mandated health and safety requirements as a minimum and
strive to go beyond regulatory limitations to become a leader in
environment, health and safety management.

All our development centers in India are ISO 140001: 2004 and OHSAS 18001:
2007 certified.

OZONE initiatives in the year 2008-09 included :

Awareness : Creating awareness about OZONE initiatives among all employees
including contractual staff.

Energy : We have reduced per capita energy consumption by more than 10% by
implementing initiatives like switching off chillers and air handling units
after office hours, increasing UPS load and thereby eliminating extra UPS.

Water : We are working towards establishing water neutral campuses at some
of our new development centers. Although there was no significant reduction
in per capita consumption, we are continuing our efforts to reduce the
usage of fresh water.

Paper : Paper consumption has been reduced significantly through various
initiatives like duplex printing and the implementation of awareness
campaigns like zero print weeks among others

Carbon emissions : Our goal and commitment is to become carbon neutral by
2011. Several energy reduction programs have been initiated. Campaigns and
initiatives promoting the use of mass transportation and car-pooling
amongst employees are two such examples. Employees are encouraged to use
teleconferencing and video conferencing to avoid long distance travel and
thus minimize their impact on the environment.

Waste management : The OZONE initiative has resulted in an effective and
environment-friendly system to manage and dispose all waste. Waste
management process has been established to identify, segregate at source
and dispose all waste in compliance with legislations wherever applicable.

We consider climate change challenges very seriously and have set up a
dedicated Green Team that is working toward sustainable development. All
our future buildings will comply with a minimum of Gold rating as per the
IGBC LEED's rating system that defines the standards and measures for
sustainable buildings. Our approach is to use an integrated design process
to ensure that the architectural elements and engineering systems work
together effectively.

This would help in reducing our dependency on mechanical systems and enable
the application of passive and active solar design principles in our
buildings.

Health and Safety:

Safety is every employee's responsibility and concern. Employees are
expected to report workplace hazards and incidents to the concerned
officials and contribute to find and implementing solutions.

Wellness at Infosys:

The health clubs at all our campuses have seen a steady rise in attendance
during the year. 14,784 employees became members of the Infosys health
clubs during the year and have made extensive use of the world-class
facilities provided. Professionals conduct regular sessions on aerobics and
yoga at all the health clubs.

Physiotherapists have been appointed at many of the health clubs across our
development centers to consult and treat ergonomic related complaints of
our employees. Frequent awareness sessions on ergonomics are also
conducted.

Health Assessment and Lifestyle Enrichment (HALE):

HALE is a comprehensive physical and psychological health initiative,
customized to an IT environment and constantly innovating to cater to the
needs of our employees. HALE offerings include :

An interactive portal and online quiz programs that provide a wealth of
knowledge on health and lifestyle topics

A comprehensive health and wellness plan comprising preventive healthcare
options for employees and families, health checks, talks, consultations and
fitness related interventions.

HALE Health Week comprising the annual master health check-ups, focused
health checks and stress relief programs.

Workshops and talks by experts on first-aid, trauma handling and CPR to
help our employees in case of emergencies

A hotline help and the HALE tool that provide timely, expert help to
employees and their families on issues related to relationships, stress,
depression and personal issues.

* An annual safety week focusing on road, personal and home safety for
creating awareness and to make Infoscions realize the need to adopt safety
practices and procedures.

Risk assessment, disaster recovery and business continuity:

Risk management is a continuous process and is the foundation of our HSE
philosophy. We work to identify the hazards and assess the risks associated
with our activities. Suitable action is taken to manage the risks and
prevent or reduce the impact of potential accidents.

We have a Disaster Recovery and Business Continuity Plan (DR & BCP) which
operates under the banner of the 'Phoenix' initiative. Periodic drills and
exercises test this plan, and through it, the preparedness of the Company
in handling all potential disasters, including liaising with external
organizations. High Speed Diesel (HSD) spillage, breakdown of the Sewage
Treatment Plant, fire, terrorist attacks and so on are some of the
assumptions for such mock drills. Careful observations are made and
analyzed during and after these mock drills. Lessons learnt from previous
incidents and exercises are used to update plans and training programs. For
more details, refer to the Sustainability Report available on our website
www.infosys.com. Report on environment, health and safety.