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    The 2003-2004 Annual Report used the metaphor of a thread to weave a fabric of growth, value and success. The 2004-2005 Annual Report had a circle as its theme to depict our 360-degree coverage of the financial domain. For excellence in design, production and communication, we won: • Silver at the League of American Communications Professionals Awards (2003-2004) • Silver at the Society for Technical Communication – Annual Competition, India Chapter (2003-2004) • Distinguished Award at the 2004 STC Competition (Australian Chapter) • Bronze at the League of American Communications Professionals Awards (2004-2005)


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    CONTENTS The fire 3 Celebrating success 5 Propelling customers to greater heights 11 Spreading the light of collaboration 17 Fostering an atmosphere of dynamism, warmth and camaraderie 21 Global presence 24 Key management personnel 26 Corporate information 30 Directors’ report 33 Corporate governance report 42 Financials Indian GAAP Unconsolidated 51 Consolidated 89 US GAAP 111 Annual General Meeting (AGM) notice I Attendance Slip & Proxy Form VII


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    WE ARE THE FLAME, FANNED STRONG BY OUR PASSION FOR EXCELLENCE. Fire is an element with the power of transformation. Symbolizing The flame of innovation continued to burn strongly at i-flex as energy, passion and light, it is a compelling metaphor for our our portfolio of solutions – influenced by the latest trends in company’s achievements over the past year. technology, and rapidly evolving market requirements – continued to grow in scope, functional richness and scalability. To us, fire represents our passion to excel and our unyielding will to succeed. These are the qualities that underpin our mission and The partnerships and alliances we’ve forged have extended our which underwrite our performance over the past year. marketing reach and implementation capability across the globe. The success of our partnership strategy radiates through our In review, financial year 2005-2006 is especially heart-warming account of the past year. for us. It brought us even closer to our goal of becoming The flame that was lit over a decade ago continued to illuminate the leading specialized IT solutions provider to financial the rapidly growing family of i-flex employees. By fostering an institutions globally. atmosphere of dynamism and camaraderie, we have created an extraordinary team of highly motivated people, with unmatched In the past year, we paid particular attention to the key focus expertise in financial services. points of our strategy: our customers, our solutions suite, our network of partnerships and our people. We grew our Inspired by the captivating radiance of our mission and energized customer base, enriched our portfolio of offerings, expanded our by our performance last year, we continue to make progress towards network of alliances and partnerships, and greatly increased our our goal of becoming the leading specialized IT solutions provider employee strength. to the global financial services industry worldwide.


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    AWARDS & ACHIEVEMENTS CELEBRATING SUCCESS We actively pursued our vision of creating value for our customers during the past financial year. Along the way, we benchmarked our work and ourselves at leading RS IN A R EA industry forums and had the satisfaction of winning O 4Y W several coveted awards and accolades. Here are a few: No.1 2 00 05 • For the fourth consecutive year, FLEXCUBE® was 20 2 • • 20 ranked the world’s No.1 selling core banking solution In t er n 0 3 • 2 0 0s, U4K at io aln yst em B a n k in g S by International Banking Systems (IBS)*, UK, in its annual Sales League Table for 2005 • The Economic Times of India, India’s leading financial daily, honored the company with the Avaya GlobalConnect Customer Responsiveness award for 2005 in the IT-Software industry category • The inaugural India’s Most Admired Knowledge Enterprises (MAKE) award was presented to i-flex by Teleos, an independent knowledge management and intellectual capital research company, in association with KNOW, a knowledge-sharing network. The MAKE panel recognized i-flex solutions for creating a N R K Raman – COO, India Operations, receiving the Avaya award from The Economic Times of India. knowledge-driven organization • i-flex was presented the ‘Best Software Product Company in Intellectual Driven Business’ award at the IT-People Awards of Excellence in Information Technology. The IT-People Awards are decided by an independent jury consisting of representatives from the IT industry in India • Equinox, i-flex solutions’ knowledge process outsourcing division, was selected in the Leadership Category of The Global Outsourcing 100 by the International Association of Outsourcing Professionals Deepak Ghaisas – CEO, India Operations, and CFO, received (IAOP). The list set a precedent by providing the first the award for ‘Best Software Product Company in Intellectual Driven Business’ from F C Kohli – Chairman Emeritus, Tata industry-wise benchmark for outsourcing excellence Consultancy Services, who was chief guest at the IT-People Awards for Excellence in Information Technology, in Mumbai. • The Government of Karnataka, India, announced that i-flex will be commended with the Certificate of Excellence in IT Exports for Karnataka for 2004-2005 * I B S S A L E S L E A G U E TA B L E IBS MARCH 2006 A N N U A L S A L E S L E A G U E TA B L E 1st Januar y 2005 – 31st December 2005 Products Suppliers New customers signed in 2005 Total bank customers (previous years in brackets, with the most recent first) (Number of live sites in brackets) FLEXCUBE® i-flex solutions 38 [36,36,36,29,37,8,0,2,– ] 170 [200+] IBS – International Banking Systems i-flex annual report 2005-06 5


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    Highlights of the past . . . We maintained a dominant position in existing markets and actively grew business and partnerships in new markets. Our strategy of fostering our substantial base of existing customers while growing new relationships, especially amongst tier-one institutions in HIGHLIGHTS advanced markets, paid off handsomely. This was a financial year in which: • Gartner Inc., a leading industry analyst, positioned Reveleus™ in the ‘Leaders Quadrant’ in its Basel II Risk Management Application Software Magic Quadrant report. The report had evaluated 27 global players in this area. Leading research and analyst groups, Tower Group and Celent Communications, also ranked Reveleus’ Basel II solution among the best in the domain PrimeSourcing was awarded the Gold Rating for 2005* for its compliance to policies and standards of a leading Investment Bank in the SmartSourcing IT services provider category. i-flex was the only service provider to be rated at this level (98.2%) among the service providers participating in the program. N R K Raman – COO, India Operations, and V Shankar, Executive Vice-President, PrimeSourcing, receiving the Gold Rating • With all lines of business registering robust growth, the company posted annual for 2005. revenues of Rs. 15,113.54 million (Indian Consolidated GAAP) for 2005-2006. This represents a 29.78 percent increase over the previous year • Our revenues from Europe and the USA have grown from 58% (FY 2003) to 70% (FY 2006), representing a CAGR of 43% (Indian Consolidated GAAP) • We recorded the highest ever increase in customer acquisition. 98 new customer relationships saw the overall customer portfolio increasing to 642 across 123 countries, representing more than 50 tier-one institutions The Equinox office at Gurgaon, • The number of countries in which i-flex has serviced customers increased from near New Delhi. 84 (end of FY 2002) to 123 (end of FY 2006) Oracle Corporation announced that it would buy Citigroup’s 41 percent equity interest in i-flex in August 2005. Oracle owns 47.74 percent stake in the company as of 100% 98.2% i-flex March 31, 2006. 95% Other Service Providers 90% 85% 80% 75% 70% 65% 60% 55% 50% GOLD Certification *PrimeSourcing’s Gold Rating for Country/ Company City Service Type Date Level 2005 in the SmartSourcing IT i-flex India IT Review 20.10.05 98.2% services provider category


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    • The total product license fees signed increased by 34 percent last financial year. The product tank size increased from USD 27 million (end of FY 2002) to USD 65 million (end of FY 2006) • FLEXCUBE has a global presence in over 100 countries; 273 customers have chosen the product suite to date • 2,710 employees joined team i-flex, making it the highest ever addition in staff since inception The company expanded its customer engagement capabilities: • Enhanced its marketing operations across Moscow, Shanghai and Sydney • Created new office space, spanning 40,000 sq. ft., for Equinox, our knowledge process outsourcing (KPO) division in Gurgaon, near New Delhi • Significantly expanded and invested in new infrastructure across Bangalore, Mumbai and Pune, and other international centers, with the objective of generating 2 million sq. ft. of space over the next few years Forged a new partnership: We aligned with EDB Business Partners ASA in the Nordic region to jointly offer comprehensive solutions in the retail banking space. Attained international quality benchmarks: • SAS 70 standards (Type II certification) for internal controls, a standard developed and maintained by the American Institute of Certified Public Accounts, for the fourth consecutive year • BS7799, one of the most widely recognized British information security governance standards for our development center at SEEPZ, Mumbai, for the past financial year i-flex annual report 2005-06 7


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    i-flex solutions financials at a glance All figures in Rs. million except EPS & Book Value Our 10 years in the industry *As per Indian Consolidated GAAP Results except from FY 1996-97 to FY 2000-01 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02* 2002-03* 2003-04* 2004-05* 2005-06* Total Revenue 545.26 825.86 1,444.31 2,062.69 3,211.21 4,295.27 6,239.14 8,017.87 11,645.21 15,113.54 Total Expenses 343.95 509.24 909.53 1,312.30 2,016.85 2,991.95 4,277.53 5,703.26 8,693.82 12,176.59 EBT 201.31 316.62 534.78 750.39 1,194.36 1,303.32 1,961.61 2,314.61 2,951.39 2,936.95 Tax 8.15 8.70 30.44 57.66 94.15 150.33 252.73 526.75 627.06 560.42 EAT 193.16 307.92 504.34 692.73 1,100.21 1,152.99 1,708.88 1,787.86 2,324.33 2,376.53 EPS 2.53 4.04 6.61 9.08 14.42 15.11 22.40 23.44 30.47 31.15 Book Value 5.17 10.61 17.01 27.80 41.62 61.77 101.30 122.29 150.13 180.85 Note: All EPS and Book Values are computed based on the current equity capital base of 76,288,367 shares EVA 122.47 173.87 264.03 328.33 548.39 472.33 669.33 720.91 903.50 1,149.83 Key performance indicators – 2005-2006 Operating Revenues Net Income 16000 14,823.00 2500.00 2,376.53 2,324.33 14000 2000.00 12000 11,385.93 1,787.86 1,708.88 10000 1500.00 in Rs. million in Rs. million 8000 7,881.29 1,100.21 1,152.99 6,141.21 1000.00 6000 4,157.18 692.73 4000 504.33 3,038.56 500.00 2000 1,390.18 1,971.24 307.92 193.16 535.53 796.06 0 0.00 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02* 2002- 03* 2003-04* 2004-05* 2005-06* 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02* 2002- 03* 2003-04* 2004-05* 2005-06* Earnings per share Book Value 35.00 200.00 31.15 180.85 30.47 180.00 30.00 160.00 150.13 25.00 23.44 140.00 22.40 122.29 20.00 120.00 101.30 Rs. Rs. 100.00 14.42 15.11 15.00 80.00 61.77 10.00 9.08 60.00 6.61 41.62 40.00 27.80 5.00 4.04 17.01 2.53 20.00 10.61 5.17 0 0 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02* 2002- 03* 2003-04* 2004-05* 2005-06* 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02* 2002- 03* 2003-04* 2004-05* 2005-06* Earnings per share is computed on the equity capital base of 76,288,367 shares as on March 31, 2006 Book Value is computed on the equity capital base of 76,288,367 shares as on March 31, 2006 Economic Value Added 1200.00 1,149.83 1100.00 180.85 1000.00 903.50 900.00 800.00 720.91 700.00 669.33 in Rs. million 600.00 548.39 500.00 472.33 400.00 328.33 300.00 264.03 200.00 173.87 122.47 100.00 0 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02* 2002- 03* 2003-04* 2004-05* 2005-06*


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    14% 47% India, Middle East & 52% USA Africa Products Revenue 15% Asia-Pacific 48% 23% Services Revenue Europe 1% Latin America & Caribbean Region-wise Revenues Operating Revenues Customers serviced . . . . . . across countries 700 140 642 123 600 120 112 544 108 500 480 100 93 404 84 400 80 74 345 66 300 281 60 55 238 51 206 37 200 163 40 125 100 20 0 0 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02* 2002- 03* 2003-04* 2004-05* 2005-06* 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02* 2002- 03* 2003-04* 2004-05* 2005-06* Number of employees including subsidiaries 8000 7000 6,858 6000 5000 4,747 4000 2,974 3000 2,327 2,032 2000 1,590 790 1,017 1000 657 465 0 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02* 2002- 03* 2003-04* 2004-05* 2005-06* i-flex annual report 2005-06 9


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    SOLUTIONS PROPELLING CUSTOMERS TO GREATER HEIGHTS The design of our portfolio of solutions is driven by our fee per deal has more than doubled in the last five mission – to enable financial institutions worldwide years. to excel through the effective use of information The FLEXCUBE value proposition was further technology. We continued to invest in our growing 273 strengthened over the year through enhancements to range of products and services to arm our customers its functionality and technology. with a competitive advantage and enable them to keep 228 pace with rapidly changing market requirements. An augmented solutions stack FLEXCUBE now has a consumer lending module 190 FLEXCUBE® targeting high-volume, retail loan portfolios. To support Independent validation of FLEXCUBE’s leadership foreign exchange and money market modules, the position came from International Banking Systems 139 product suite was also integrated with i-flex’s partner (IBS)*, UK, which ranked it the #1 selling core banking LoginSA’s treasury application, Acumen. 111 solution in the world for the fourth year in succession. FLEXCUBE – our flagship banking solution suite – An enhanced technology platform 74 celebrated a momentous year, with increasing market FLEXCUBE qualified on the Oracle 10g Database and acceptance and accelerating momentum, especially 10g AS Application Server platforms. The integration 35 with top-tier financial institutions. The number of gateway of FLEXCUBE also qualified with the latest 15 6 countries in which FLEXCUBE has been successfully releases of IBM’s WebSphere Application Server, IBM’s FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 deployed grew from 88 two years ago to 102 in the past WebSphere MQ 6.0 and Microsoft’s MQ 3.0. This, together financial year. with the advanced integration capability available in AGGRESSIVE CUSTOMER GROWTH FLEXCUBE, makes it one of the most flexible systems The product suite increased its footprint in advanced available with respect to interface capabilities. markets such as the USA, Western Europe and Japan, winning several marquee customers. Its success also An incisive functional edge extended across key emerging markets such as Brazil, FLEXCUBE’s retail banking capabilities are now Russia and the greater China region. Last year, enhanced with next-generation customer relationship FLEXCUBE established noteworthy engagements with: management features. It offers functionality such as • Multinational banks in Europe, North America and ‘relationship pricing’. This facility allows a bank to Japan, increasing its penetration in tier-one financial categorize its customers based on their perceived value, institutions and suitably price its services, interest, charges, commission, fees and brokerage. • Banks in Europe (Ireland, the UK, Germany, France, Spain, Norway, Russia and Bulgaria) and South America (Chile, Brazil, Mexico, Honduras and the Caribbean), deepening its presence in the two regions FLEXCUBE was awarded the SWIFT Silver 2005 • Two global fund houses that selected FLEXCUBE Label for payments solutions, re-affirming its SWIFT compliance and straight-through Investor Services, the mutual funds and transfer processing capabilities. agency solution • India’s renowned financial institution, Canara Bank. Other tie-ups in the sub-continent include those with ‘FLEXCUBE will be our single operating platform: Rajesh Hukku – Chairman and Managing Lakshmi Vilas Bank and Kollam District Co-Operative link multiple entities we have acquired to Director, with the three CEOs of a consortia Bank a common hub, enable faster growth, and of banks in Chile (Banco Del Desarrollo, Banco Security, Banco Internacional) and deliver better customer service across regions.’ By winning larger accounts and increasing its share in Dr. Josef Schwarzecker – Member of Board and the CEO of Entel (Empresa Nacional Telecom) at a luncheon hosted by Entel. advanced markets, the product suite’s average license CIO, BAWAG PSK Group *Source: International Banking Systems Annual Sales League Table i-flex annual report 2005-06 11


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    Reveleus™ Risk management ecosystems were in the spotlight last year as the adoption of Reveleus: advanced risk management systems moved beyond a mere compliance objective. An enterprise Reveleus had a watershed year, establishing itself as a leader in the risk management risk management space. Its Basel II solution was chosen by some of the largest North American and suite European banks, including Citigroup N.A., Wells Fargo, Lloyds TSB and Wachovia. Reveleus was positioned in the Leaders Quadrant* by Gartner Inc. in the Basel II Risk Management Application Software Magic Quadrant report. The evaluation was based on completeness of vision and ability to execute. Celent Communications, a leading research and consulting firm, noted, ‘The vendor leading this space (Basel II) is Reveleus, which has both the highest number of North-American clients, and the largest share of the US client assets by a very large margin.’ Tower Group, another prominent research group, has also ranked Reveleus’ Basel II solution amongst the best in the domain. In August 2005, i-flex acquired an operational risk product from an IT consulting firm based in Europe to extend Reveleus’ risk management and compliance capability. Operational risk solutions are required for improving risk management, compliance and BASEL II adherence. With this enrichment to Reveleus’ capability, the product suite will now provide end-to-end integrated enterprise risk management solutions to financial institutions worldwide. Oracle and i-flex announced an agreement by which Oracle will re-sell the Reveleus Basel II solution, thereby bringing together the comprehensive scope and functionality of the Reveleus solution and the global reach and relationships that Oracle has in The Reveleus office at New Jersey, USA. the financial services industry. Wells Fargo was the first engagement following the re-seller agreement. Speaking about the new relationship, Nick Deshpande – Head of Wells Fargo’s Corporate Project Office, said, ‘We sought a partner with a proven track record of execution in the Basel II space, and an application that would work well with the structure of our business. This solution from Reveleus and Oracle is one that fits the bill.’ The Reveleus Risk suite of analytics was enhanced to support local/national regulatory updates even as they are published. It was further extended to meet emerging industry needs for convergence across operational risk and compliance. Recently, Reveleus released Version 4.0 of the Reveleus Operational Risk Solution, a common operational risk and compliance platform. *According to Gartner Inc. ‘leaders’ are vendors who have a proven track record in Basel II vision and business investment, which indicates that they are well-positioned for the future. Leaders do not necessarily offer the best products for every customer project, but they do provide solutions that offer relatively lower failure risk. Leaders in this market have paired advanced technology with broad offerings or have specific, rich functionality.


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    Daybreak™ Among its numerous accomplishments, the The Daybreak Lending Suite, i-flex’s comprehensive division also: lending system for the consumer lending industry, • Teamed up with IFBS, a leading player in the notched up many new customers, including CAR investment banking space, to deliver global Financial, Barclays Bank plc, Orange Lake Resort & implementation services Country Club, and a large consumer finance operation • Increased i-flex’s stake in Castek, a Toronto-based in Japan. provider of insurance systems, to 76.77 percent. The Enhancements to Version 10.0 of the product, released insurance team formed a consortium with strategic in January 2006, included security features related to partners to create a comprehensive yet flexible the protection of consumers’ ‘non-public personal component-based solution for the P&C insurance information’, employee access restrictions to customer industry, centered on Castek’s Insure3 processing data, advanced account audit-tracking capabilities, platform improved reporting through the Daybreak Reporting • Launched the Insurance Center of Excellence and Data Hub, and credit card payment processing. signed up with Tokio Marine Management Inc., a leader in the commercial insurance space in the USA United States Small Business Administration, the United States government agency involved in • Established the PrimeSourcing™ – Oracle disaster recovery efforts in the aftermath of Competency Center (POCC), offering high-value Hurricane Katrina, deployed the Daybreak product solutions based on Oracle technologies and suite for its consumer lending needs. applications PrimeSourcing™ • Launched i-flex SwiftNet Services Integrator (iSSi), PrimeSourcing, i-flex’s IT services division, the newest suite of payments solutions from the continued to be an outstanding growth driver for the company, targeted at optimally leveraging SWIFTNet company. With dedicated practice lines and deep domain infrastructure expertise in specific segments of financial services, and • Instituted PrimeUniversity, focusing on providing Executives from Tokio Marine Management Inc. a proactive relationship management framework, it structured training programs within the company and i-flex’s Insurance Center of Excellence at the helped customers manage challenges associated with Castek office in Canada. ‘When CAR visualized the possibility of replacing its complex, mission-critical systems development and core system with a new system of record that would maintenance. enable our ambitious growth plans, we knew we 115 financial institutions around the globe have faced formidable challenges. Compared to other engaged with the division till date. While the last year major software vendors, the enterprise-wide solution saw the addition of 15 new relationships, the division’s provided by Daybreak Lending Suite not only uncompromising focus on customer satisfaction was expedited our replacement but delivered us benefits illustrated in more than 75 percent of new business of efficiency and ease of operations.’ coming from existing customers. Rick Potter – President, CAR Financial Services i-flex annual report 2005-06 13


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    i-flex Consulting i-flex’s consulting division continued its high pace of growth, winning prestigious projects in tier-one banks in risk, compliance and business transformation areas i-flex Consulting: against competition from top consulting firms. The Specialists The division further strengthened its positioning as a high-end consulting unit by creating the i-flex Process Framework for Banking (iPFB) – a methodology to transform banking processes. Business Process Transformation (BPT) The BPT practice line made considerable in-roads into top banks in Europe last year. It launched the ‘i-flex Process Framework for Banking’, a component-based approach to transforming business processes, using a repository of best practices developed on i-flex’s domain expertise. Risk Management With 2005 seeing almost all regions focusing on Basel II adoption, the risk management practice executed projects in the USA, Europe and the Middle East, covering a wide scope of governance, policies, processes, risk quantification, data management and IT. Sizeable investments were made in developing specialist capabilities in the area of operational risk. Process and Compliance Management Apart from nearly doubling revenues last year, the process and compliance practice line acquired new customers in India, Japan, Turkey, Saudi Arabia, Panama and the Charles Phillips – President, Oracle USA. Consultancy services provided by the practice span the gamut of IT process Corporation, inaugurating the definition and implementation, CMMI appraisals, IT services management and i-RIMS center, i-flex Park, Bangalore. technology risk management. IT Strategy and Architecture Last year, the IT strategy and architecture practice line focused on initiatives related to service-oriented architecture (SOA), in addition to providing consulting services in IT strategy and architecture. i-flex Technology Deployment and Management Services The i-flex Technology Deployment and Management Services (TDMS) group has witnessed exponential growth rates since its launch. Last year was no different, with the group recording 36 percent growth, adding 20 new customers, and increasing its ‘Thanks to TDMS’ rapid implemenatation strategy, customer base to 76 across 45 countries. we are now able to bring more than 95 percent of our customer base under the core banking solution, The group’s basic IT infrastructure services were diversified into special offerings and are able to offer multiple delivery channels to our customers. The methodology adopted by TDMS around FLEXCUBE, Oracle, Mainframes IT, and i-RIMS (i-flex Remote Infrastructure helped our internal team in a big way, and brought Management Services). professionalism to every sphere of activity. It is a win-win situation for the bank to have i-flex as its partner.’ The state-of-the-art i-RIMS Center launched last year provides customers with 24×7 IT infrastructure monitoring and management services. Arumugam – Chief Manager, IT, Dhanalakshmi Bank


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    Some of the landmark projects executed during the Process and Quality Management year were a FLEXCUBE roll-out across 70 branches of The Process and Quality Management Group (PQMG) a leading bank in South India; remote IT infrastructure has been a key enabler in i-flex’s success over the years support for the database of an investment firm in South through its balanced approach to institutionalizing Africa; and support services for 50 applications, across world-class quality, process frameworks and methods multiple countries, for a leading investment firm. across the organization. PQMG plays a vital, enabling Significant among the group’s internal infrastructure role by: and quality initiatives was the BS7799 certification, • adopting best practices in software engineering and assuring users that i-flex’s security practices comply process control with global standards. • incorporating emerging standards such as SEI CMMI Equinox™ • developing innovative systems and tools for effective i-flex’s knowledge process outsourcing division, Equinox, monitoring and control of processes across the was selected in the Leadership Category of The Global development lifecycle Outsourcing 100 by the International Association of • creating unique mechanisms to promote and Outsourcing Professionals (IAOP). implement continuous improvement in all spheres In the year under review, Equinox: of organizational activity • Launched an end-to-end processing solution, Electronic PQMG presented white papers on ‘i-flex Process ‘For an ambitious startup like ours, Mortgage Processing, addressing the needs of brokers Improvement Framework’ and ‘i-flex Metrics at a we needed a technology partner to take as well as lenders Glance’ at many international conferences last year. the initial load off our backs so that • Expanded infrastructure to a new facility spread over we could plan for the long term without The group also initiated an organization-wide program 40,000 sq. ft., in Gurgaon, near New Delhi mundane worries that are typically to institutionalize systems and processes for the effective management of intellectual assets. The aim of the IPR prevalent in such situations; i-flex and • Established a strategic tie-up with Clayton Holdings FLEXCEL exceeded our expectations in Inc., a leading provider of integrated loan and portfolio (Intellectual Property Rights) initiative is to adequately this regard so much so that we have analysis, operations support, and consulting services harness the innovation that has been responsible for invited them to be our long-term to primary, capital and investor markets in the USA the success of our products and services. partners as well.’ • Completed the first Six Sigma process improvement Pramod Krishnamurthy – Head of Information consulting project on ‘first payment default’ reduction FLEXCEL International Technology, First India Credit Corp (FICC), for a customer FLEXCEL deploys, hosts and manages FLEXCUBE and a Temasek Group Company related applications for banks both inside and outside • Filed for a patent on its Process Cost Reduction Analysis India. The ASP concept pioneered by FLEXCEL (PCRA) methodology, a tool for determining the International provides high-end technology expertise outsourcing feasibility of customers’ processes to banks at significantly lower costs. • Set up a Business Process Management System (BPMS) Last year, the group’s revenues increased by 40 percent, ‘In a very short period we could for 100 percent of operations and enabling processes with renowned banks such as the State Bank of stabilize our core banking solution Mauritius, the First India Credit Corporation, the First with the help of the ASP model, and we Gulf Bank, and Lord Krishna Bank, amongst others, have computerized 53 branches ‘Option One Mortgage Corporation has worked signing up for its services. covering 90 percent of our total with i-flex over the past three years to deliver business. We had a good experience of better products and solutions to our customers. the ASP model with a committed team We have successfully leveraged their Six Sigma- in FLEXCEL. We are using their based methodologies to identify opportunities for infrastructure and skills for the benefit process and cost efficiencies while enhancing the of our organization and our quality of our customer service.’ customers.’ Fabiola Camperi – Senior Vice-President, Option One Mortgage Corporation V K Gupta – Deputy Managing Director, Lord Krishna Bank i-flex annual report 2005-06 15


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    PARTNERS AND EVENTS SPREADING THE LIGHT OF COLLABORATION We forged and strengthened partnerships with leading This strategic relationship will provide financial organizations across the globe to endow the i-flex brand institutions around the world with an unmatched, with unparalleled reach. comprehensive and integrated suite of solutions from Oracle, i-flex, and the partner community. The More than 35 percent of our new customer engagements combined product and services footprint now addresses were acquired through the influence of our business approximately USD 145 billion in annual IT spending partners last year. in banks. We collaborate with our partners through multiple alliance models. Many of our partners who began their relationship with i-flex as Corporate Business Partners to re-sell our solutions – Athens Technology Center and IQSYS for Europe; EverSystems for Latin America; and, Finance Application Systems Limited for Africa, amongst others – have progressed to being Implementation Partners for the FLEXCUBE product suite today. Similarly, ComputerLand SA and DMR Consulting have moved on to offer implementation and support services for FLEXCUBE. As i-flex focuses on outsourcing its implementation activities to its partners, the emphasis is on partner Joseph John – EVP, Universal Banking Products, i-flex solutions, enablement activities. Last year, we conducted several handing over a participation certificate at a customer training training programs involving our partners, helping them program conducted for Nexim Bank, Nigeria, at the FLEXCUBE Center of Learning, Bangalore. hone the expertise, skills and domain knowledge required in the implementation and support of i-flex’s suite of solutions. These training programs saw results in the form of i-flex making inroads into EMEA (Europe, the Middle East & Africa) with the help of our partners. Strengthening strategic alliances IBM Our strategic alliance with IBM expanded in scope to encompass the risk management space, as IBM worked to develop an implementation practice around the Reveleus Basel II solution, and primed the i-flexers at the FELABAN event at Florida, USA. implementation of Reveleus at Wells Fargo and ‘i-flex is the hottest software company Wachovia Bank. IBM also led the FLEXCUBE deployment in the banking industry, signing project at Canara Bank, India. more customers in each of the last three years. Banking is a strategic Strategic relationship with Oracle industry for Oracle, with nine out of The decade-old relationship between Oracle and i-flex the top-ten banks already running was further strengthened in 2005 at a strategic level. Oracle ERP applications. Oracle’s In August 2005, Oracle Corporation announced that overall application strategy is to go beyond ERP and offer customers it would buy Citigroup’s 41 percent equity interest in richer, industry-specific functionality. i-flex and floated an open offer to purchase up to an i-flex gets us there in banking.’ additional 20 percent ownership from existing Larry Ellison – CEO, shareholders. As of March 31, 2006, Oracle holds DMR Consulting, our alliance partners from Chile, at a partner Oracle Corporation 47.74 percent of the equity of the company. training in i-flex Park. i-flex annual report 2005-06 17


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    The Master Operating Agreement between Oracle and i-flex facilitates a structured engagement model involving strategy and operations. Oracle and i-flex are working together to develop a product roadmap for a next-generation core banking system, optimized for Oracle Fusion Architecture. The Oracle Fusion Architecture project is EVENTS a unifying model of emerging trends in IT infrastructure, enterprise information management and service-oriented architecture. The next-generation banking solution will ensure that both organizations are in a prime competitive position to ride the coming wave of core systems transformation. Oracle will also re-sell and jointly market Reveleus’ Basel II Solution. With Reveleus, Oracle can extend its enterprise risk and compliance platforms, and align Oracle’s financial services strategy with i-flex’s expertise. Other alliances We established an alliance with EDB Business Partners ASA in the Nordic region to jointly offer comprehensive retail banking solutions. i-flexers at the FSUG (Financial Services Events Users Group) Conference, New York. From conferences to thought-leadership forums, we are active in events that are of value to our customers, partners and the communities we interact with. We showcase our research and insights on the financial services industry at these events. Here are snapshots of some of the events we organized along with our partners. Reveleus Briefing Session on Basel II and Risk – Athens, Greece, April 19, 2005 Reveleus hosted a briefing session on ‘Compliance with Basel II’ along with i-flex’s partner, Athens Technology Center. Arun Pingaley – Head, Functional Solutions i-flex sponsored CNBC Roundtable Discussions in Mumbai, New Delhi, and Group, and architect of Reveleus’ Basel II solution, and Frank Marshall – Business a Nasscom forum on Emerging Development, Reveleus, were speakers at this event. Companies at New Delhi. IBM Global Financial Services Forum – Monaco, Europe, April 19- 22, 2005 The IBM Global Financial Services Forum focused on enabling growth through bold leadership strategies. George H W Bush – Former President, United States of America, presented the keynote address. i-flex solutions was a ‘gold’ sponsor of the event. We demonstrated the capabilities of our flagship product, FLEXCUBE, at the ‘Solutions Center’ at this event.


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    Building Information Systems for China’s Oracle Open World – Tokyo International Commercial Banks – ChangSha City, China, Forum, Tokyo, Japan, March 1-3, 2006 July 21, 2005 Kishore Kapoor, CEO, i-flex solutions pte ltd, discussed International speakers and technology experts, including new, business-enabling IT and systems architecture for senior business specialists from Citibank and other the financial services industry at this event. Larry Ellison renowned international banks, met at ChangSha City – CEO, Oracle Corporation; John Wookey – Senior Vice- for a spirited interaction on IT and banks in China. President – Applications Development, Oracle Arvind Kathpalia – Group Head, Operations, Among the illustrious panelists were Venky Corporation; Carlos Ghosn – CEO and Co-Chairman, Technology and Finance, Kotak Mahindra Bank, at Retail Finance Asia-Pacific 2006 at Singapore. Krishnakumar – Former COO and CFO, Citibank (Asia- Nissan; Louis V. Gerstner, Jr. – Chairman, The Carlyle Pacific operations) and C N Ram – Head, Information Group, amongst other distinguished members of the Technology, HDFC Bank. The event was co-sponsored Japanese industry, were keynote speakers at the event. by i-flex and Easycon, i-flex’s corporate business partner Industry events in China. During the year, we sponsored and participated in more Oracle Open World – San Francisco, USA, than 50 events held in the USA, the Netherlands, the September 18-22, 2005 UK, China, Dubai, Spain, the Philippines, Australia, This event focused on Oracle technologies across various Canada, Japan, Vietnam, Colombia and Luxembourg. verticals. With top-tier banks embarking on transforming their core technology platform, the banking industry is at an inflection point for growth in core systems replacement initiatives. V Senthil Kumar – CEO, i-flex solutions b.v., explored this topic in greater Kishore Kapoor – CEO, i-flex solutions pte ltd, at detail in his session, ‘Moving Legacy Core Banking to The Asian Banker event Open Systems’. Core Banking: Strategies and Best Practices – Ho Chi Minh, Vietnam, December 7, 2005 This event was organized by i-flex solutions in association with FPT Software Solutions, i-flex’s business partner in Vietnam. Participants shared experiences and best practices in core banking implementation. CIO Outlook Panel Discussion Luncheon V Shankar – Executive Vice-President, PrimeSourcing, with the insurance and Castek – Sydney, Australia, March 2, 2006 teams at the Accord Loma event at Orlando, USA. Jointly sponsored by i-flex solutions and Oracle, the CIO discussion addressed factors that influence change and drive system replacement strategy. Distinguished Australian banking professionals, Nigel Smyth – CIO, Macquarie Bank; John Loebenstein – CIO, St. George Bank; and Michelle Tredenick – CIO, National Australia Bank, were panel members at this event. i-flex annual report 2005-06 19


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    PEOPLE FOSTERING AN ATMOSPHERE OF DYNAMISM, WARMTH AND CAMARADERIE Community initiatives Our corporate social responsibility is communicated through our tangible commitment to children’s issues like education and health. As part of the ‘i-flex for the child’ initiative, we have been mentoring and supporting a few differently-abled children at the Freedom Trust in Chennai, India. Vidharthi presenting Dr A P J Abdul Kalam Vidharthi, a hearing-impaired girl, recently won the – President of India, with his portrait. highest national award in the category, ‘Most Creative Individual’, for her artistic ability. Vatsalya Trust, a charitable organization dedicated to the service of abandoned children, received funding from i-flex for infrastructural facilities at their orphanage in Mumbai. i-flex also sponsored a documentary film on child Vidharthi’s painting of i-flex Park, Bangalore. trafficking produced by Kalsoothri, the theater wing of Sahitya Kala Mandal, Mumbai. Other charitable efforts that have received our support are: • ‘Society Care of Indigent’ (SOCARE IND), a welfare organization running a home for indigent male children of life convicts • ‘Sandeepan School’ for rural children near coastal Stills from the documentary film on child Karnataka, India trafficking produced by Kalsoothri, a theater and puppetry unit in Mumbai. • Agastya International Foundation’s mobile science Puppets were used in place of child actors lab that travels through the states of Andhra Pradesh to prevent children from experiencing the trauma associated with child abuse. and Karnataka, allowing children to experiment with science projects with locally available material • ‘Special Olympics Bharat’, a global sports movement for differently-abled children • Rehabilitation of tsunami-affected families of fishermen in Tamil Nadu, India Earthquake relief Employees were given the option of contributing a part of their salary towards relief efforts in the aftermath of the massive earthquake that hit the Kashmir Valley in India in October 2005, with the understanding that the company would contribute an equal amount from their i-flex solutions, along with Sri Chaitanya side. A great number of employees contributed to this Seva Trust, donated 25 houses to tsunami- hit families of fishermen at Madavamedu cause and i-flex solutions was able to donate a generous coastal village in Nagapattinam district, amount to the Times of India Earthquake Relief Fund. Tamil Nadu, India. i-flex annual report 2005-06 21


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    Internal communication – A binding tool for the organization Our internal communications strategy seeks to enhance employee morale, extend ownership and shared engagement, and promote a transparent environment within O H A - 2005 the organization. Renaissance Open House Annual 2005 The Open House Annual(OHA) is a forum that encourages interaction between the senior management and i-flexers. Celebrated across offices annually, it also serves as an occasion to recognize outstanding performances and efforts. Building an ‘engaged’ workforce In an effort to make employees feel engaged and involved with the company, the Human Resources Group launched the following initiatives: • People-to-People Extend Program (PEPP), encouraging employees to express Charles Phillips – President, Oracle appreciation for their colleagues in the form of colorful ‘PEPP cards’ Corporation, Chief Guest at OHA, with Rajesh Hukku – Chairman and • Strength-to-Stride, an employee assistance and counseling program Managing Director, i-flex solutions. • FeedForward sessions, where people share feedback about their supervisors, and plan for the future Oneflex and process automation Oneflex is a project that has unified the company’s core operations with the objective of increasing profitability. The focal point last year was on implementing a single platform for financial data across multiple offices, and standardizing work practices The focal point of every OHA is the question for the human resources and finance teams. and answer session between i-flexers and senior management. Knowledge management The knowledge management group has helped cultivate the spirit of inquiry and innovation within the company. Aided by information technology and a knowledge- sharing culture, the group successfully created a central repository of intellectual assets last year. V Shankar – Executive Vice-President, PrimeSourcing, at OHA, USA.


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    Focused training We believe in nurturing the skills and abilities of our employees through sustained training initiatives. Last year, the Training Group conducted 2,412 instructor- led training sessions and expended 4,500 person-hours on learning across locations and businesses. Recognizing the need for continuously developing A Srinivasan – VP, Global Sales Operations, talent, the PrimeSourcing Division and the Training interacting with children from Parikrma Humanity Foundation during their visit to i-flex Group unveiled PrimeUniversity last year. Targeted at Park, Bangalore. creating expertise across verticals in the financial services industry, this learning initiative offers a wide range of training courses coupled with assessments and certifications. The Global Sales Meet, 2005, held at Mumbai, provided a platform for i-flex’s 200-strong global sales and marketing team to share information and conceptualize Participants at the Global Sales Meet, 2005, Mumbai, future plans. India. i-flex funded the development of infrastructure for Kutumba, a home for differently-abled and abandoned children. Sandeepan School, a pioneer in providing quality education to children in coastal Karnataka, continues to receive support from i-flex solutions. i-flex annual report 2005-06 23


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    i-flex lobalg presence i-flex Offices Development Centers Amsterdam Mumbai Bangalore Bangalore New Jersey Chennai Boston New York Minneapolis Chennai Pune Mumbai Dubai Shanghai New York Frankfurt Singapore Pune Gurgaon Sydney Singapore Irvine Tokyo London Toronto Los Angeles Miami Minneapolis Moscow Support Presence Distributor Coverage Bulgaria Nigeria Africa Nigeria Belgium Norway Chile Iraq Brunei Poland Rwanda Czech Republic Poland Costa Rica Israel Algeria UAE Cyprus Romania Senegal Denmark Portugal Dominican Republic Angola South Asia Egypt Singapore Seychelles Estonia Russia El Salvador Benin Germany South Africa South Africa Finland Slovakia Guatemala Bangladesh Botswana Ghana Sri Lanka Swaziland France Spain Haiti India Egypt Hungary UAE Tanzania Georgia Sweden Honduras Pakistan Eritrea Sri Lanka Iceland Uganda Tunisia Greece Tajikistan Nicaragua Ethiopia India UK Ghana Uganda Hungary Turkey Panama Asia-Pacific Jamaica USA Kenya Zambia Kazakhstan Turkmenistan Venezuela Zimbabwe Ukraine China Japan Venezuela Libya Kyrgyzstan Hong Kong Latvia Uzbekistan Middle East Kenya Zambia Malawi Indonesia Europe Lithuania Kuwait Zimbabwe Mali Latin America Afghanistan Korea Malaysia Mauritius Armenia Luxembourg Bahrain Macau Mauritius Mozambique Azerbaijan Moldova Belize Cyprus Taiwan Netherlands Namibia Belarus Monaco Brazil Iran Vietnam


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    Customer Presence Afghanistan Brunei France Jordan Nepal Rwanda Thailand Albania Bulgaria Gabon Kazakhstan Netherlands Samoa Trinidad Algeria Cambodia Georgia Kenya New Zealand Saudi Arabia Turkey Angola Cameroon Germany Kosovo Nigeria Senegal Antigua Canada Ghana Kuwait North Korea Serbia Turks & Caicos Islands Argentina Cayman Islands Greece Lebanon Norway Seychelles UAE Australia Chile Hong Kong Lesotho Oman Sierra Leone Uganda Austria China Hungary Libya Pakistan Singapore UK Azerbaijan Colombia Iceland Luxembourg Panama Slovakia Bahrain Congo India Macau Papua New Guinea Slovenia Ukraine Bangladesh Cyprus Indonesia Madagascar Paraguay South Africa USA Barbados Czech Republic Ireland Malawi Philippines South Korea Vanuatu Belgium Denmark Israel Malaysia Poland Spain Venezuela Benin Dominican Republic Italy Malta Portugal Sri Lanka Vietnam Bhutan Egypt Ivory Coast Mauritania Puerto Rico Sweden Bolivia Estonia Jamaica Mauritius Qatar Switzerland Yemen Botswana Ethiopia Japan Mexico Romania Taiwan Zambia Brazil Finland Jersey Mozambique Russia Tanzania Zimbabwe


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    EXECUTIVE MANAGEMENT TEAM (L – R) N R K Raman – COO, India Operations, Rajesh Hukku – Chairman and Managing Director, Deepak Ghaisas – CEO, India Operations, and CFO, R Ravisankar – CEO, International Operations and Business Development (L – R) Executive Vice-Presidents: Olivier Trancart – Global Sales, V Shankar – PrimeSourcing and Joseph John – Universal Banking Products


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    SENIOR MANAGEMENT TEAM A Srinivasan Anand Phanse Atul Gupta Avadhut (Vinay) Ketkar Cafó Boga Vice-President, Vice-President, Sr Vice-President, Chief Accounting Officer Chief Operating Officer, Global Sales Operations Citigroup Relationship and Process and Quality i-flex solutions Inc. Chief of Staff, USA Management Group Darshan Karki Dennis Roman Dilip Kulkarni Dinesh Shetty Don Ganguly President and COO, Chief Communications Officer Chief Compliance Officer Vice-President, CEO, SuperSolutions Inc. Administration Equinox Corporation G Narasimhan George Thomas Gopinath Govindan Gratian Perez Jambu Natarajan Vice-President, Vice-President, Vice-President, Vice-President, Vice-President, Software Quality Assurance, Customer Fulfilment and HR Systems and Corporate Accounts Software Quality Assurance, Products and Global Operations Solutions Architecture, Corporate Initiatives PrimeSourcing North America Kapil Gupta K Laxminarayan Kishore Kapoor Makarand Padalkar Manmath Kulkarni Vice-President, Vice-President, CEO, Chief of Staff and Vice-President, FLEXCUBE Development Operations – Europe & North America, i-flex solutions pte Investor Relations Retail Banking Products PrimeSourcing i-flex annual report 2005-06 27


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    Meenakshy Iyer Mohan Bhatia Milind Soman M Ravikumar Nandu Kulkarni Vice-President, Sr Principal Consultant, Vice-President, Vice-President, Sr Vice-President, Reveleus Development i-flex Consulting Payments Solutions, Facilities Management Retail Banking Products PrimeSourcing P Prasannavadanan Prabhakar Ravoori R Mahesh R Narasimhan R Ramamurthi Vice-President, Vice-President, Vice-President, Vice-President, Vice-President, Customer Fulfilment Software Engineering and Business Intelligence Group, Customer Fulfilment, Middle East Sales and South Asia, Africa and Middle East Process Group PrimeSourcing Asia-Pacific, India and Middle East Pre-Sales Consulting Sridhar Ramachandran Sridhar Padmanabhan S Hariharan S Ramakrishnan S Sundararajan Vice-President, Vice-President, Sr Vice-President, CEO, Vice-President, Corporate Banking Solutions, Enterprise Automation Infrastructure Services Reveleus Universal Banking Products PrimeSourcing Sajal Mukherjee Sunder Annamraju Swati Srinivasan Thomas Mathew V Senthil Kumar CEO, SuperSolutions Inc Vice-President, Vice-President, Vice-President, CEO, and Vice-President, Customer Fulfilment, Process and Quality Management Product Management & i-flex solutions b. v. North America Sales Western Europe & Consulting, Knowledge Management i-flex Consulting V Srinivasan Venkata Subramanian Vijay Sharma Vikram Gupta Vivek Govilkar Vice-President, CEO, Sr Vice-President, Vice-President, Sr Vice-President, Corporate Development FLEXCEL i-flex Consulting and Investment and Private Banking, Human Resources and Training Systems Integration Strategy and Mergers & Acquisitions, PrimeSourcing


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    BOARD OF DIRECTORS (L – R) Charles Phillips, Y M Kale, Tarjani Vakil, Rajesh Hukku (Chairman and Managing Director, i-flex solutions), Sam Bharucha & William T. Comfort, Jr. i-flex annual report 2005-06 29


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    CORPORATE INFORMATION i-flex solutions ltd. Company Secretary Deepak Ghaisas Chief Accounting Officer Avadhut (Vinay) Ketkar Solicitors Ramesh P. Makhija & Co. Auditors S. R. Batliboi & Associates Internal Auditors Mukund M. Chitale & Co. Bankers Bank of India Citibank N.A. HDFC Bank Ltd. Kotak Mahindra Bank Ltd. State Bank of Mauritius Ltd. YES BANK Ltd. Registrars & Transfer Agents Intime Spectrum Registry Ltd. C 13, Pannalal Silk Mills Compound L.B.S. Marg, Bhandup (W) Mumbai 400 078


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    Registered Office i-flex Center of Learning i-flex solutions ltd. Plot No. 13, Doddanekundi Unit 10-11, SDF-1 Industrial Area, Phase II SEEPZ, Andheri (E) Whitefield Road, Mahadevapura Post Mumbai 400 096, India Bangalore 560 048, India Offices Pride Silicon Plaza i-flex Center 2nd Floor 399, Subhash Road Next to Chatushringi Senapati Bapat Road Vile Parle (E) Pune 411 053, India Mumbai 400 057, India i-flex Center Block 9, Ambrosia-I i-flex Park Bhavdhan Khurd, Tal. Mulshi Nirlon Compound Pune 411 021, India Western Express Highway, Goregaon (E) Mumbai 400 063, India i-flex Center Block 9A, Ambrosia-II i-flex annexe Bhavdhan Khurd, Tal. Mulshi Nirlon Compound Pune 411 021, India Western Express Highway, Goregaon (E) Mumbai 400 063, India 143/1, Uttamar Gandhi Salai Nugambakkam Corporate Center A Chennai 600 034, India 3rd to 6th Floor Andheri Kurla Road, Andheri (E) Millennium House Mumbai 400 059, India 12, Trubnaya Street Moscow 103045, Russia Marchon House 2nd Floor, J.B. Nagar i-flex solutions ltd. Andheri Kurla Road, Andheri (E) Office G-15, Building 9 Mumbai 400 059, India P. O. Box: 500053 Dubai Internet City i-flex Park Dubai, United Arab Emirates (UAE) C/o Embassy Business Park C.V Raman Nagar Subsidiary Office – India Bangalore 560 075, India i-flex processing services ltd. i-flex Center i-flex Center 399, Subhash Road # 333, Kundalahalli, Brookefields Vile Parle (E) Bangalore 560 037, India Mumbai 400 057, India i-flex annual report 2005-06 31


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    Subsidiary Office – Asia-Pacific SuperSolutions Corporation i-flex solutions pte ltd 10050 Crosstown Circle 27 International Business Park Suite 600, Eden Prairie # 04-05 Primefield Landmark Building MN 55344, USA Singapore 609 924 Offices i-flex solutions inc. Offices 60, State Street, Suite 700 Room 806, Central Plaza Boston, MA 02109, USA No. 227 HuangPi Road North Shanghai, China i-flex solutions inc. 355 Lexington Avenue, FL 4 No. 6, 17th Floor New York, NY 10017, USA Fukoku Seimei Building 2-2-2 Uchisaiwaicho i-flex solutions inc. Chiyoda-ku 9 E. 37th Street, FL 12 Tokyo 100-0011, Japan New York, NY 10016, USA Level 10, Margaret Street i-flex solutions inc. Sydney, NSW 2000, Australia Reveleus 510 Thornall Street, Suite 380 Edison, NJ 08837, USA Subsidiary Office – Europe i-flex solutions b. v. i-flex solutions inc. World Trade Center, B-Tower, 12th Floor 5805 Blue Lagoon Drive, Suite 295 Strawinskylaan 1245 Miami, FL 33126, USA 1077 XX Amsterdam, The Netherlands Castek Software Inc. Offices 1 Yonge St, Suite 2300 Niederlassung Deutschland Toronto, Ontario, Canada Mainzer LandstraBe 49a 60329 Frankfurt am Main, Germany Subsidiary Office – Mauritius ISP Internet Mauritius Company 121, Meridian Place 10, Frere Felix de Valois Street Off Marsh Wall, South Quay, Port Louis, Mauritius London E14 9FE, United Kingdom Offices Equinox Corporation Subsidiary Offices – North America 10, Corporate Park, Suite 130 i-flex America inc. & i-flex solutions inc. Irvine, CA, 92606, USA 99 Park Avenue, Suite 1530 New York 10016, USA Equinox Global Services Pvt. Ltd. DLF Infinity Tower A, 3rd Floor DLF Cyber City, Phase II Gurgaon 122 002 Haryana, India


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    Directors’ report Financial year 2005-06 Dear Members, Revenue as per Indian GAAP Consolidated financials were Rs. 14,823 million The Directors take great pleasure in presenting their report on the business and this year, an increase of 30% as compared to Rs. 11,385.93 million last year. The operations of your Company along with the Annual Report and the audited Earnings before taxes on a consolidated basis were Rs. 3,028.46 million this year financial statements for the Financial Year 2005-06. as compared to Rs. 2,952.22 million last year, an increase of 2.6%. The Company’s net income before prior period items increased to Rs. 2,473.93 million this year as Financial highlights compared to Rs. 2,324.33 million last year, an increase of 6.4%. As per Indian GAAP Unconsolidated financial statements: A detailed analysis of the financials is given in the Management Discussion and Analysis report that forms part of this Annual Report. (All amounts in millions of Indian Rupees) Year ended Year ended Dividend March 31, 2006 March 31, 2005 Your Directors are pleased to recommend a dividend of Rs. 5/- per share Revenue 11,538.22 9,028.60 (100% on par value of Rs. 5/-). The dividend, if approved at the forthcoming Income from operations before Annual General Meeting, will be paid out of the profits of the Company to depreciation 2,983.71 2559.29 those shareholders whose names appear on the Register of Members as on the Depreciation 387.81 265.94 Record Date. Interest/other income (expenses) 299.21 177.76 Income before taxes 2,895.11 2,471.11 The total amount of dividend payable is Rs. 381.44 million this year against Provision for tax 447.57 494.71 Rs. 374.40 million for the previous year. Under the current provisions of the Net income after tax 2,447.54 1,976.40 Indian Income Tax Act, 1961, receipt of dividend is tax-free in the hands of Prior period item 39.55 – the shareholders. Net income 2,407.99 1,976.40 Balance brought forward 492.49 443.04 Transfer to reserves Profit available for appropriation 2,900.48 2,419.44 The Company proposes to transfer Rs. 2,000 million to the General Reserve out Transfer to general reserve 2,000.00 1,500.00 of the amount available for appropriation. An amount of Rs. 464.24 million is Proposed dividend 381.44 374.40 proposed to be retained in the Profit and Loss Account. Corporate dividend tax 53.66 52.51 Dividend paid on ESOP allotments 1.14 0.04 Oracle’s acquisition of i-flex’s shares Balance carried forward 464.24 492.49 In August 2005, Oracle announced that it would buy Citigroup’s equity interest As per Indian GAAP consolidated financial statements: in i-flex held through OrbiTech Limited, and make an open offer to purchase up to an additional 20 percent ownership from existing i-flex shareholders. In November 2005, OrbiTech Limited sold 32,236,000 shares representing 42.41% (All amounts in millions of Indian Rupees) paid up capital of the Company to Oracle Global (Mauritius) Limited (“Oracle”). Year ended Year ended March 31, 2006 March 31, 2005 Oracle also acquired 517,375 shares (0.68%) from the shareholders in the open offer. Accordingly, in November 2005, Oracle’s holding in the Company was Revenue 14,823.00 11,385.93 32,753,375 shares (43.08% of paid up capital of the Company). Income from operations before depreciation 3,204.18 3,001.46 By March, 2006, Oracle further acquired 3,450,141 shares of the Company. Depreciation (460.37) (309.35) Accordingly, its shareholding increased to 36,422,788 shares (47.74% paid up Interest/other income (expenses) 284.65 260.11 capital of the Company). Income before taxes 3,028.46 2,952.22 Provision for tax (560.42) (627.06) By April 13, 2006, Oracle acquired 2,424,632 additional shares of the Company Net income for the year before taking its total to 38,628,148 shares (50.6% paid up capital of the Company). By minority interest, share of profit virtue of Oracle’s acquisition of 50.6% of paid up capital of the Company, i-flex (loss) of associate and prior period has become a subsidiary of Oracle Global (Mauritius) Limited. items 2,468.04 2,325.16 Minority interest 2.57 – As of date, Oracle holds 40,148,312 equity shares of the Company (52.47% of paid Share of profit (loss) of associate company 3.33 (0.82) up capital of the Company) and i-flex is a majority owned subsidiary of Oracle. Prior period items (97.41) – Net income 2,376.53 2,324.34 Your Company’s relationship with Oracle gives i-flex better access to leading financial institutions around the world and gives those financial institutions access to an unequalled set of IT solutions and capabilities. In addition, Oracle Performance will re-sell and jointly market the Reveleus Basel II Solution which enables On an unconsolidated basis, your Company’s revenue grew to Rs. 11,538.22 financial institutions to address key emerging regulatory requirements. million during the financial year 2005-06 from Rs. 9,028.60 million last year, a growth of 28%. The net income before taxes and prior period item stood at Share capital Rs. 2,895.11 million during the year against Rs. 2,471.11 million last year, In September 2004, your Company had issued and allotted 91,347 warrants/ translating into a growth of 17%. The Company’s net income after taxes options to IBM Global Services India Pvt. Ltd. (“IBM”) with an option to convert and before prior period item increased to Rs. 2,447.54 million this year from them into equal number of equity shares of face value of Rs. 5/- each within a Rs. 1,976.40 million last year, a growth of 24 %. period of 18 months. On February 9, 2006, IBM exercised its option to convert these i-flex annual report 2005-06 33


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    warrants/options into equity shares. After completing the necessary formalities, Company are not attached to the Annual Report of the Company. The Company the Company in turn allotted 91,347 equity shares to IBM on February 28, 2006. undertakes that the financial statements of the subsidiary companies for the year ended March 31, 2006 will be made available to the members on request at the During the year your Company also allotted 1,317,370 equity shares to its Registered Office/Corporate office of the Company and same will be kept open for employees who exercised their options under the Employee Stock Options Plan inspection by any member during the office hours of the Company. of the Company. Fixed deposits As a result, the paid-up equity share capital of the Company increased to The Company has not accepted any fixed deposit within the meaning of Section 76,288,367 equity shares of face value of Rs. 5/- each as on March 31, 2006. 58A of the Companies Act, 1956, and as such, no amount of principal or interest was outstanding as of the date of the Balance Sheet. Use of IPO proceeds In June 2002, your Company completed its Initial Public Offer (IPO) in India Awards, honors and recognition and listed its shares on the National Stock Exchange of India Ltd. (NSE) and Your Company picked up coveted accolades acknowledging its contribution to Bombay Stock Exchange Ltd (BSE). Out of the IPO proceeds of Rs. 1,780.80 the financial services industry last year. Some of them are listed below: million, the Company has utilized Rs. 1,252.1 million up to March 31, 2006 for its infrastructure projects in Mumbai and Bangalore, and expanding its – i-flex was presented the “Best Software Product Company in Intellectual marketing reach. Driven Business” by IT people at the IT-People Awards of Excellence in Information Technology. The IT-People Awards are decided by an Infrastructure independent jury consisting of representatives from the IT industry in India. During the year, your Company made significant additions to its infrastructure to meet growing business requirements. Your Company opened a new office in – The Economic Times of India, India’s leading financial daily, honored Mumbai with a capacity to house 850 professionals; a new office in Bangalore with the Company with the Avaya Global Connect Customer Responsiveness 1,000 seats; and expanded the Pune office to house 300 additional employees. In award for 2005 in the IT-Software industry category. This award recognizes addition, your Company began construction of a landmark building in Goregoan, organizations for the effective use of customer responsiveness as a tool. Mumbai with a capacity to house 3,000 professionals. – The inaugural ‘India’s Most Admired Knowledge Enterprises’ (MAKE) During the year, your Company expanded its operations and marketing network award was presented by Teleos, an independent knowledge management in Moscow, Shanghai and Sydney. and intellectual capital research company, in association with KNOW, a knowledge-sharing network. The MAKE panel recognized i-flex solutions Acquisitions, alliances and joint ventures for creating a knowledge-driven organization. i-flex America Inc., a Wholly Owned Subsidiary of your Company, acquired a – For the fourth consecutive year, FLEXCUBE® was ranked the world’s No.1 76.77% stake in Castek Software Inc. (“Castek”) during the year. Castek specializes selling core banking solution by International Banking Systems (IBS), UK, in core-business processing systems for large and mid-size property and casualty in its annual Sales League Table for 2005. insurance carriers which include insurance product and process configuration, policy administration, customer management, billing and claims management. – Equinox, i-flex solutions’ knowledge process outsourcing division, was selected in the Leadership Category of The Global Outsourcing 100 by the Your Company strengthened its solutions offering by buying the intellectual International Association of Outsourcing Professionals (IAOP). This ranking property rights for the Operational Risk Tool Suite (ORTOS) from Capco, a report set a precedent as it provided the first industry-wise benchmark for consulting firm in Europe. i-flex also established an alliance with EDB Business outsourcing excellence. Partners ASA in the Nordic region to jointly offer retail banking solutions. These alliances help i-flex broaden its portfolio and fortify its positioning as the leading, – The Government of Karnataka, India, announced that i-flex will be specialized IT solutions provider to the financial institutions worldwide. presented with the Certificate of Excellence in IT Exports for Karnataka for 2004-2005. Subsidiaries Litigation As you are aware, your Company has subsidiaries in the USA, Singapore and the Netherlands which are strengthening marketing and sales efforts in their As of date there is no pending legal suit against the Company in any court of law respective regions. The Company also has operating subsidiaries – SuperSolutions except for the following: and Equinox – which are in the advanced investment stage. PortfolioScope, a company based in the United States of America, has filed a lawsuit in a US District Court for the District of Massachusetts alleging i-flex Processing Services Limited (“IPSL”) became a subsidiary of your misappropriation of confidential and proprietary information by the Company. Company in April 2006. IPSL will have KPO businesses under its fold in future. The Company has filed a motion to dismiss PortfolioScope’s complaint in its entirety and has instructed the legal advisers to take all appropriate actions to Pursuant to Section 212 of the Companies Act, 1956, the Company is required protect the interests of the Company and its customers. The Company firmly to attach to its Annual Report, the Directors’ Report and financial statements believes that the allegations are false, unwarranted and without merit and will of its subsidiaries. Since the Company presents audited consolidated financial vigorously oppose the claims made by PortfolioScope. statements under Indian GAAP and US GAAP in its Annual Report, the Company had applied to the Central Government of India for an exemption from Corporate governance attaching the Directors’ Report, Balance Sheet and Profit and Loss Account of its The revised Clause 49 of the Listing Agreement on Corporate Governance has subsidiaries to the Annual Report. The Central Government has vide its letter no. become applicable with effect from December 31, 2005. The Company has taken 47/162/2006-CL-III dated June 28, 2006 granted the exemption for the year ended appropriate steps and measures to comply with all the applicable provisions of March 31, 2006. Accordingly, the financial statements of the subsidiaries of the the revised Clause 49 and Section 292A of the Companies Act, 1956.


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    Your Company has constituted three separate committees for Audit, Directors/Employee-wise details of options granted: Compensation and shareholders’ Grievances Committee. A separate report on Corporate Governance along with a certificate of Statutory Auditors of the Number of options Company is annexed herewith. i) Director – Mr. S. P. Bharucha 10,000 A certificate from the Managing Director and CFO of the Company confirming ii) Any other employee who receives grant in any one year of internal controls and checks pertaining to financial statements for the year ended options amounting to 5% or more of options granted during March 31, 2006 was placed before the Board of Directors of the Company. that year Nil iii) Identified employees who were granted options, during any A list of the committees of the Board and names of their members are given one year, equal to or exceeding 1% of the issued capital below. The scope of each of these Committees and other related information is (excluding outstanding warrants and conversions) of the detailed in the enclosed Corporate Governance Report. Company at the time of grant Nil iv) a) Diluted Earnings Per Share (EPS) in Indian GAAP Audit Committee Standalone accounts pursuant to the issue of shares on exercise of options calculated in accordance with Mr. Y. M. Kale (Chairman) accounting standard 20 ‘Earnings Per Share’ issued by Mr. S. P. Bharucha (from January 9, 2006) the Institute of Chartered Accountants of India Rs. 31.03 Mr. William T. Comfort, Jr. b) Diluted Earnings Per Share (EPS) in Indian GAAP Ms. Tarjani Vakil Consolidated accounts pursuant to the issue of shares on exercise of options calculated in accordance with Compensation Committee accounting standard 20 ‘Earnings Per Share’ issued by the Institute of Chartered Accountants of India Rs. 30.62 Mr. William T. Comfort Jr. (Chairman) Mr. Y. M. Kale Had compensation cost for the Company’s ESOP been determined based on fair Mr. Charles Phillips (from January 9, 2006) value at the grant dates, the Company’s net income and earnings per share would have been reduced to pro forma amounts indicated below: Shareholders’ Grievances Committee Ms. Tarjani Vakil (Chairperson) (All amounts in millions of Indian Rupees except per share data) Mr. Deepak Ghaisas March 31, 2006 As per Indian As per Allotment of ESOP shares GAAP Standalone Indian GAAP financials Consolidated The shareholders of the Company had approved the Employees Stock Option financials Scheme (ESOP) of the Company in its Annual General Meeting of 2001. Net income as reported 2,407.99 2,376.53 According to the said scheme, the Company has granted shares to eligible Less: Share-based employee employees from time to time. The details are given below. compensation determined using fair value of the options (70.73) (70.73) Pro forma net income 2,337.26 2,305.80 Total number of options granted Basic income per share 2001-02 4,548,920 As reported 31.87 31.45 2002-03 80,000 Pro forma 30.93 30.51 2003-04 36,000 Diluted income per share 2004-05 60,000 As reported 31.03 30.62 2005-06 10,000 Pro forma 30.13 29.72 Total 4,734,920 Pricing formula At the fair market value as on the The fair value of options was determined using the Black-Scholes model with the date of grant following assumptions: Options vested 2,004,700 Options exercised during 2005-06 1,317,370 Total number of shares arising as a March 31, 2006 result of exercise of options during 2005-06 1,317,370 Dividend yield 0.71% Options lapsed Expected volatility 40% 2002-03 129,520 Risk-free interest rates 6% 2003-04 112,500 Expected life 6.5 years 2004-05 82,200 2005-06 87,600 Total 411,820 Variation of terms of options None Money realized by exercise of options 350,000,110 Total number of options in force 2,756,880 i-flex annual report 2005-06 35


  • Page 38

    Options issued during the year at market price: Conservation of energy, technology absorption and foreign exchange earnings and outgo Number of options 10,000 The particulars as prescribed under sub-section (1)(e) of Section 217 of the Weighted average exercise price Rs. 708.65 Companies Act, 1956 read with Companies (Disclosure of particulars in the Report Weighted average fair value Rs. 334.00 of Board of Directors) Rules, 1988, the relevant data pertaining to conservation of energy, technology absorption and foreign exchange earnings and outgo are Directors’ responsibility statement furnished hereunder: As required under Section 217 of the Companies Act, the Directors hereby confirm a) Conservation of energy: that: The operations of the Company are not energy-intensive. However measures have i) In preparation of the annual accounts, the applicable accounting standards been taken to reduce energy consumption by using energy efficient computers had been followed along with proper explanation relating to material and by the purchase of energy efficient equipment with the latest technologies. departures; The expense on power in relation to income is nominal and under control. ii) The Directors had selected such accounting policies and applied them b) Technology absorption consistently and made judgments and estimates that are reasonable Since businesses and technologies are changing constantly, investment in and prudent so as to give a true and fair view of the state of affairs of the research and development activities is of paramount importance. Your Company Company at the end of the financial year and of the profit of the Company continued its focus on quality up-grades of software development process and for that period; software product enhancements. iii) The Directors had taken proper and sufficient care for the maintenance of c) Foreign exchange earnings and outgo: adequate accounting records in accordance with the provisions of this act (All amounts in millions of Indian Rupees) for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; Foreign Exchange Earnings* 11,083 iv) The Directors had prepared the annual accounts on a ‘going concern’ Foreign Exchange Outgo 2,546 (Including capital goods & other expenditures) basis. *Excluding reimbursement of travelling expenses and interest income. Directors Ms. Tarjani Vakil retires by rotation at the ensuing Annual General Meeting, and Prospects being eligible, offers herself for re-appointment. The global financial industry critically relies on information technology, and with the increased competition, industry consolidation, and demanding regulatory Mr. Charles Phillips was Appointed as an Additional Director of the Company requirements, the opportunities in the market place for your Company are on November 24, 2005 pursuant to Section 260 of the Companies Act, 1956. increasing. These trends are driving the banks, both small and large, to consider Mr. Phillips would hold office up to the date of the ensuing Annual General replacing their core systems. The global banks are also increasingly looking at Meeting. The Company has received a notice in writing from a member proposing standardizing their core systems across multiple countries. These institutions are the candidature of Mr. Phillips for the office of Director. increasingly looking for complete solutions that help them expand their business and increase cost effectiveness. Lastly, outside your Company’s traditional market, The Directors recommend to the shareholders the resolutions for re-appointment there are emerging opportunities in other verticals such as insurance. of Ms. Tarjani Vakil and appointment of Mr. Charles Phillips as Directors. Your Company is well positioned in this market with its comprehensive solutions Brief resume of the Directors proposed to be appointed/re-appointed, nature of stack and it is further expanding the portfolio to meet some of the unique their expertise in specific functional areas and names of companies in which opportunities, especially in the developed market. Your Company has signed they hold directorship and membership/chairmanship of Board Committees, as master operating agreement with Oracle after their investment in the Company stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges are during the year. Your Company is expanding the partnership with Oracle to provided in the Notice of the Seventeenth Annual General Meeting and Report on engage more intensively with the global Oracle network and sales force opening Corporate Governance forming part of the Annual Report. further growth opportunities. Auditors Employee particulars M/s S. R. Batliboi & Associates, the present Statutory Auditors of the Company, Information pursuant to Section 217(2A) of the Companies Act, 1956, read retire at the ensuing Annual General Meeting and have confirmed their eligibility with the Companies (Particulars of Employees) Rules, 1975 are set out in the and willingness to accept office, if re-appointed. Annexure included in this report.


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    Acknowledgements Your Directors’ also place on record their appreciation for the excellent contribution made by all employees of i-flex through their commitment, Your Directors take this opportunity to thank the Company’s customers, competence, cooperation and diligence to duty in achieving consistent growth. shareholders, vendors and bankers for their continued support during the year. Your Directors also wish to thank the Government of India and its For and on behalf of the Board various agencies, Department of Electronics, Software Technology Parks – Bangalore, Mumbai, Chennai and Pune, the Santacruz Export Processing Zone, Customs and Excise department, Ministry of Commerce, Ministry of Finance, Department of Telecommunication, the Reserve Bank of India, the Rajesh Hukku State Governments of Maharashtra, Karnataka, Tamil Nadu, Haryana and Chairman and Managing Director other local Government bodies for their support, and look forward to their continued support in the future. July 6, 2006 i-flex annual report 2005-06 37


  • Page 40

    Annexure to Directors’ report To of the Company and we have disclosed to the auditors and the Audit The Board of Directors Committee wherever applicable, deficiencies in the design or operation of i-flex Solutions Limited internal control, if any, of which we are aware and the steps we have taken Mumbai or propose to take to rectify the same. This is to certify that: d) We have indicated to the auditors and the Audit Committee wherever applicable: a) We have reviewed the balance sheet, profit and loss account, all its schedules and notes attached thereto (“financial statements”) and the i) significant changes in internal control during the year; cash flow statement of i-flex solutions ltd. (“the Company”) for year ended March 31, 2006 and that to the best of our knowledge and belief: ii) significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements; and i) These financial statements do not contain any materially untrue statement or omit any material fact or contain statements that might iii) instances of significant fraud of which we have become aware and be misleading; the involvement therein, if any, of the management or an employee having a significant role in the Company’s internal control system. ii) These financial statements together present a true and fair view of the Company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations. For i-flex Solutions Limited b) There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal or Rajesh Hukku Deepak Ghaisas violative of the Company’s code of conduct. Managing Director Chief Financial Officer c) We accept responsibility for establishing and maintaining internal control and that we have evaluated the effectiveness of the internal control systems May 05, 2006


  • Page 41

    Statement of particulars of employees pursuant to Section 217(2a) of the Companies Act, 1956, read with the companies (particulars of employees) amendment rules, 1975 and forming part of the directors report for the year ending March 31, 2006 employed for whole of the year. Sr. no. Name Designation & Qualification Age Date of Experience Remuneration Previous nature of duties (Yrs.) joining # (Yrs.) received (Rs.) employer 1 Balasubramanian C Senior Consultant M.C.A. 37 May 15, 1992 14 2,455,483 M/s Citicorp Overseas Software Ltd 2 Bajaj Sanjay Senior Manager B.E. (Electrical) 39 June 8, 1998 17 2,500,326 M/s CS Ltd 3 Barath D$ Vice President, System Integration PGDM 43 June 1, 1990 17 674,093 M/s Citicorp Overseas Software Ltd 4 Bhatia Mohan Senior Principal Consultant, i-flex Consulting M.Sc., AICWA, PGDST (NCST), FRM(GARP) 43 March 8, 2001 18 2,443,476 M/s Infosys Technologies Ltd 5 Cheriyan Mona Senior Manager B.A. HSM 42 June 15, 1993 22 2,673,072 M/s Essars Ltd 6 Davis K K Senior Manager B.Com. PGD PM & IR 47 May 19, 2004 23 2,400,799 M/s DSL Software Ltd 7 Deshpande Sanjay V Senior Manager M.Sc., M.B.A. 44 May 17, 2005 22 2,667,681 M/s iSmart Solutions Ltd 8 Dutta Basu Senior Consultant M.Sc., M.B.A. 52 April 2, 2001 24 3,018,236 M/s ANZ Information Technology 9 Gayathri K H Senior Manager B S COMM 39 July 1, 1991 17 2,635,091 M/s Wipro Infotech 10 Ghaisas Deepak K CEO-India Operations, CFO & Company Secretary A.C.A, F.C.S, A.I.C.W.A 48 July 7, 1993 25 18,439,342 M/s Tata Unisys Ltd 11 Ghosh Sanjay Kumar Senior Manager B.Tech. 34 September 1, 1994 12 2,442,268 – 12 Ghosh Arunabha Senior Manager B.E. (Electronics) 35 September 1, 1994 12 2,605,529 – 13 Govilkar Vivek Sr. Vice President, Human Resources and Training M.Tech 50 April 12, 1994 25 4,019,683 M/s Tata Unisys Ltd 14 Govindan Gopinath Vice President, Corporate HR PGDM 41 December 19, 1994 18 2,738,245 M/s Brooke Bond-Lipton 15 Gupta Atul Sr. Vice President, Process & Quality Management Group B.Tech., PGDM 45 April 1, 1994 24 4,474,894 M/s Citicorp Overseas Software Ltd 16 Gupta Das Buddhadeb Senior Manager B.Sc. 42 February 11, 1998 18 2,567,687 M/s Tata Steel Ltd 17 Gupta Kapil Vice President, FLEXCUBE Development M.TECH 42 March 21, 1991 15 3,563,356 M/s Citicorp Overseas Software Ltd 18 Gupta Vikram Vice President, PrimeSourcing – e-solutions B.E. 42 April 1, 1996 19 4,060,176 M/s T S B Bank 19 Hampihallikar Vinayak Senior Manager PGDM 38 May 20, 2002 19 3,084,198 M/s Home Trade Ltd 20 Handigol Ravi Senior Consultant MPM & PGDM 57 October 16, 2000 31 3,277,225 M/s Infrasoft 21 Hariharan S Sr. Vice President, Infrastructure Services M.E. 51 October 3, 1988 28 4,527,037 M/s Citicorp Overseas Software Ltd 22 Hukku Rajesh * Chairman & Managing Director B.E. 48 May 4, 1987 27 353,760 M/s Citicorp Overseas Software Ltd 23 Iyer Meenakshy Vice President, Reveleus Development M.Sc. 41 March 10, 1993 18 3,566,630 M/s Telco 24 John Joseph Executive Vice President, Universal Banking Products B.E. 49 December 15, 1988 24 5,704,741 M/s Citicorp Overseas Software Ltd 25 Kale Vivek S Senior Manager MPHIL 48 July 12, 2004 28 2,603,443 M/s EITL 26 Kapoor Madhukar Harbanslal Senior Manager B.E. (E&C) 44 April 21, 2004 21 2,557,040 M/s GTL Ltd 27 Ketkar Avadhut D Chief Accounting Officer A.C.A.,L.L.B. 39 June 3, 1991 15 2,805,053 M/s Citicorp Overseas Software Ltd 28 Khanna Rakesh$ Vice President, Product Marketing & Corporate Alliances B.E., MMS 44 September 9, 1996 20 1,551,408 M/s Tata Unisys Ltd 29 Kothandaraman N R Chief Operating Officer M.Sc. 48 October 7, 1985 26 9,799,061 M/s Datamatics Consultant 30 Kulkarni Manoj N Senior Manager B.E. 39 February 6, 1995 17 2,626,052 M/s L & T 31 Kulkarni Dilip R Chief Compliance Officer MFM 52 December 1, 1993 32 4,048,601 M/s Citicorp Overseas Software Ltd 32 Kulkarni Manmath Vice President, Retail Banking Products M.Sc. 40 July 16, 1987 18 4,266,604 M/s Citicorp Overseas Software Ltd 33 Kulkarni Nandkumar Sr. Vice President, Retail Banking Products B.Tech., PGDM 53 October 13, 2000 24 4,133,744 M/s Opus Software Pvt. Ltd 34 Kumar M Ravi Vice President, Facilities Management B.Sc. 38 June 18, 1990 19 3,094,353 M/s Comstruct Software Private Ltd 35 Kumar Sampath Senior Manager MMS 38 February 12, 1996 17 2,773,841 M/s Stock Holding Corp. of India Ltd 36 Kumar Satish G Senior Manager B.E. (Electronics) 45 June 27, 2001 17 2,533,778 M/s Computer Associates India Ltd 37 Kumar Suresh P Senior Manager 39 February 3, 1999 17 2,784,529 – 38 Mahadevan Ravi Senior Manager M.Sc., AICWA, PGDST (NCST), FRM(GARP) 41 July 1, 1998 18 2,494,464 M/s LIC Hsg. Finance Ltd i-flex annual report 2005-06 39


  • Page 42

    Sr. no. Name Designation & Qualification Age Date of Experience Remuneration Previous nature of duties (Yrs.) joining # (Yrs.) received (Rs.) employer 39 Mahesh R Vice President, PrimeSourcing – Business Intelligence Group B.E., PGDM 43 May 13, 1991 22 3,438,094 M/s Citicorp Overseas Software Ltd 40 Makhija Rajesh Senior Consultant B.E. (Electronics) 36 October 1, 1992 16 2,778,993 M/s Godrej and Boyce Ltd 41 Mathew Thomas Vice President, Knowledge Management M.B.A. 50 August 2, 1989 26 3,490,590 M/s Citicorp Overseas Software Ltd 42 Moonim Mustafa Senior Manager M.B.A. 39 November 10, 1998 16 3,118,210 M/s Informix International Ltd 43 Murthy Sunil Krishna$ Senior Manager B.E. (Mechanical), Master of Science 43 August 12, 2005 18 1,604,476 M/s Juniper Networks, Inc. (Computer Information Sciences) 44 Nair Rajkumar V Senior Manager PGDM 43 June 1, 1989 17 2,909,917 M/s Citicorp Overseas Software Ltd 45 Narasimhan G Vice President, Customer Fulfilment – Europe & Africa CAIIB 43 March 11, 1993 18 3,132,761 M/s State Bank of India 46 Narasimhan R Vice President, Customer Fulfilment – Asia Pacific, MFM 44 September 1, 1993 21 3,930,640 M/s Canara Bank India & Middle East 47 Natarajan Kiran Senior Manager B.E. (Information Engineering), M.B.A. 36 February 14, 2005 13 2,554,162 M/s TREMA 48 Natarajan P V Jambu Vice President, Software Quality Assurance B.E., M.P.I.B 42 September 1, 1997 18 3,064,126 M/s National Bank of Oman, Oman 49 Ohrie Sheenam Senior Manager B.E. (ELEC) 37 September 1, 1992 13 2,794,579 – 50 Padalkar Makarand S Chief of Staff & Investor Relations M.Tech. 47 August 16, 1994 22 4,587,783 M/s Tata Unisys ltd 51 Padmanabhan Sridhar Vice President, Enterprise Automation Master of Engineering (IISc) 50 June 23, 1999 26 3,497,349 M/s KPMG India Pvt Ltd 52 Parthasarathy Gayathri$ Vice President, PrimeSourcing – Development & Integration M.Sc. 42 July 20, 1992 18 3,219,419 M/s Citicorp Overseas Software Ltd Services 53 Patkar Vinay$ Senior Manager M.B.A. 53 August 3, 1998 30 2,241,606 M/s Mastek Ltd 54 Perez Gratian Vice President, Corporate Accounts CAIIB 50 April 5, 1993 29 3,761,489 M/s University of North Texas, USA 55 Pingaley Arun Senior Manager B.Com (Hons), Grad CWA 39 July 30, 1997 17 2,526,852 M/s ANZ Grindlays Bank 56 Potdar Rajendra Senior Manager B.E. 36 August 3, 1992 14 2,584,937 M/s Citicorp Overseas Software Ltd 57 Prakash Sundaram$ Senior Manager B.E. 55 February 14, 2005 32 1,290,679 M/s PeopleSoft India Pvt Ltd 58 Prasad R Karthick Senior Manager B.E. (Hons.) Computer Science 34 September 1, 1994 13 2,504,580 M/s People.com Consultants Inc., USA 59 Rai Anil Senior Manager B.E. (Electronics & Telecommunications) 48 May 3, 2002 25 2,783,285 M/s Deutsche Software Ltd 60 Rajan Sundar R Senior Manager B.E. (E E) 34 June 2, 1993 13 2,509,841 – 61 Rajpal Varun Senior Manager B.E. (Comp Tech) 38 August 1, 1994 14 2,723,367 M/s Inchcape System 62 Ramakrishnan Ganesh Senior Manager B.E., MMS 40 November 12, 1996 16 2,577,705 M/s BAARNS Consulting 63 Ramamurthi R Vice President, Middle East Sales and Pre Sales Consulting ACA 50 July 28, 1989 23 3,988,789 M/s Citicorp Overseas Software Ltd 64 Ranjan Puneet Senior Manager B.Tech.,M.B.A. 39 April 27, 1998 14 2,519,242 M/s Apple Credit Corporation 65 Rao Sanjeet Prakash Senior Manager B.E. (Mechanical) 34 September 1, 1994 12 2,716,870 – 66 Ravi Srilatha Senior Manager B.COM 43 July 2, 1993 20 2,772,843 M/s PSI Data System 67 Ravikumar V Senior Manager M.Sc., M.B.A. 41 October 19, 1995 12 2,946,640 M/s Bharat Overseas Bank Ltd 68 Ravisankar R * CEO, International Operations and Business Development B.Tech., PGDM 47 June 2, 1987 25 573,584 M/s Citicorp Overseas Software Ltd 69 Ravoori Prabhakar Venkata Vice President, Software Engineering and Process Group M.Tech. 45 January 24, 2002 21 2,923,977 M/s SIFY 70 Ray Abhik Senior Consultant B.Tech. (Electronics) 43 November 3, 1997 19 2,858,568 M/s Tata Infotech Ltd 71 Roy Ranjan Senior Manager B.Tech. (Mechanical), M.B.A. (Marketing) 38 December 5, 1997 14 3,358,701 M/s Tata Consultancy Services 72 Sampathkumar V Senior Manager B.Sc., CAIIB 45 August 26, 1996 25 2,515,722 M/s Canara Bank 73 Savanur Nagaraj Senior Consultant B.E. (Elect. Engg.) 37 September 1, 1992 15 3,005,589 M/s Triveni Engineering Works Ltd 74 Seth Samir K Senior Manager B.Tech.(Comp.Sc) 40 October 19, 1994 17 2,563,215 M/s Unysis, Austria 75 Shankar H V Senior Manager B.Sc. (Maths) 49 May 10, 2002 27 2,450,867 M/s KPMG Pvt Ltd, Mumbai 76 Shankar V Executive Vice President, PrimeSourcing M.Sc. 43 May 15, 1985 21 5,256,178 M/s Citicorp Overseas Software Ltd 77 Sharma Vijay Sr. Vice President, i-flex Consulting & System Integration B.Tech., PGDM 49 March 1, 1994 24 3,876,833 M/s Price Waterhouse Associates


  • Page 43

    Sr. no. Name Designation & Qualification Age Date of Experience Remuneration Previous nature of duties (Yrs.) joining # (Yrs.) received (Rs.) employer 78 Sheshadri K B Senior Consultant M.Sc., M.B.A. 45 March 1, 1996 21 2,919,789 M/s Industrial Development Bank of India 79 Shetty D V Vice President, Administration LLB 47 March 1, 1988 25 3,852,101 M/s Citicorp Overseas Software Ltd 80 Shukla Surendra V Senior Consultant M.Sc. 38 August 3, 1992 16 2,755,322 M/s Tata Institute of Fundamental Research 81 Soman Milind Vice President, Payment Solutions, PrimeSourcing B.Sc. (Mech. Engg), MMS (Marketing) 43 November 1, 1999 19 3,005,885 M/s Mega Ace Consultancy (I) Ltd 82 Sridhar R Senior Consultant B.Sc. 45 September 27, 2000 23 3,249,515 M/s National Bank of Dubai, Dubai, UAE 83 Srihari B Senior Manager M Sc. (Tech.) 33 September 1, 1994 12 2,425,489 – 84 Srikanth T Senior Manager PGDM 41 January 2, 1992 16 2,643,454 M/s State Bank of India 85 Srinivasan A Vice President, Latin America and Caribbean Sales ACA, AICWA 44 August 3, 1992 18 4,596,674 M/s Citicorp Overseas Software Ltd 86 Srinivasan Ramesh Senior Consultant B.Sc, P.G.D.B.A (IIM Calcutta) 37 June 1, 1992 14 3,006,623 – 87 Srinivasan Swati Vice President, Software Quality Assurance B.Tech. 45 July 26, 1988 23 3,851,493 M/s Citicorp Overseas Software Ltd 88 Srinivasan V Vice President, Corporate Development B.Sc. 44 December 13, 1988 21 4,016,018 M/s Citicorp Overseas Software Ltd 89 Subramaniam Venkata Vice President, Customer Fulfilment – Retail Banking CAIIB 47 November 20, 1992 23 3,940,778 M/s Citicorp Overseas Software Ltd 90 Subramanian Ganesh Senior Manager B.Sc., M.C.A. 38 September 11, 1993 15 2,635,332 M/s CMC Ltd 91 Sundararajan S Vice President, Universal Banking Products M.Sc. (Maths) 42 October 23, 1990 20 4,674,459 M/s Ashok Leyland 92 Thampi P Prasannavadanan Vice President, Customer Fulfillment, Africa and Middle East M.Sc., M.B.A., CAIIB 51 July 9, 1996 28 3,240,088 M/s Federal Bank 93 Venkatachalam G Senior Manager B.Tech. (Chemical) 34 September 1, 1994 12 2,604,570 – Notes: 1) Gross remuneration comprises salary, allowances, monetary value of perquisites, commission to Directors and the Company’s contribution to Provident and superannuation funds, but excludes provision for retiring gratuity for which separate figures are not available. 2) The nature of employees in all cases is contractual. 3) None of the employees mentioned above is a relative of any Director of the Company. 4) * Mr. Rajesh Hukku and Mr. R Ravisankar are deputed to USA as Chairman and CEO of i-flex solutions inc., respectively. Their Gross compensation comprising of fixed salary and variable performance based remuneration from i-flex solutions inc. for the financial year 2005-06 was USD 921,579 and USD 665,529 respectively. In addition, Mr. Hukku and Mr. Ravisankar served as chairman and Managing Director, and CEO International Operations and Business Development for i-flex solution ltd. for which they were paid a salary of Rs. 353,760, and Rs. 573,584, as in the table above. 5) 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. 2,400,000/- per financial or Rs. 200,000/- per month, as the case may be, need not be included in the statement. Hence remuneration paid to such employees is not included in the above statement. 6) # Includes the period of continuity of employment. 7) $ Stands for part of the year. For and on behalf of the Board Rajesh Hukku Chairman and Managing Director July 6, 2006 i-flex annual report 2005-06 41


  • Page 44

    Corporate governance report The detailed report on Corporate Governance for the financial year April 1, 2005 and responsibility to the shareholders and strives hard to meet their to March 31, 2006 as per the format prescribed by SEBI under Clause 49 of the expectations. Listing Agreement is set out below: 2. Board of Directors 1. Company’s philosophy on code of governance 2.1 Composition and category The Company believes in adopting and adhering to the globally recognized The Company has six Directors including the Chairman. Of these, four Directors corporate governance practices and continuously benchmarking itself against are independent Directors. The Chairman of the Board is an Executive Chairman each such practice. The Company understands and respects its fiduciary role and is also the Managing Director of the Company. The composition of the Board of the Company as of March 31, 2006 was as given below: Name Designation Category Directorships Chairpersonship Membership in other of Committees of committees Companies of Boards of of Boards of other other Companies Companies Mr. Rajesh Hukku Chairman and Managing Director Executive, Non-Independent Director 4 Nil Nil Mr. S. P. Bharucha* Director Non-Executive, Independent Director 1 Nil Nil Mr. William Twyman Comfort, Jr. Director Non-Executive, Independent Director 3 Nil Nil Mr. Y. M. Kale Director Non-Executive, Independent Director 5 1 1 Mr. Charles Phillips** Director Non-Executive, Non-Independent Director 3 Nil 1 Ms. Tarjani Vakil Director Non-Executive, Independent Director 5 3 2 * Mr. S. P. Bharucha was appointed as an Additional Director at the Board Meeting held on June 14, 2005 and was appointed as Director liable to retire by rotation at the Annual General Meeting of the Company held on August 12, 2005. ** Mr. Charles Phillips was appointed as an Additional Director of the Company on November 24, 2005. Mr. Joseph P. Kennedy II resigned as a director of the Company on September 20, 2005. 2.2 Attendance of each Director at the Board Meetings and the last Annual During the Financial Year 2005-2006, 11 Board Meetings were held on the General Meeting following dates: The Company holds regular Board Meetings. The detailed agenda along with the April 29, 2005, June 14, 2005, July 29, 2005, August 2, 2005, August 11, 2005, explanatory notes are circulated in advance. The Directors can suggest inclusion August 23, 2005, October 28, 2005, November 24, 2005, January 9, 2006, January of any item(s) in the agenda at the Board Meeting. 30, 2006 and February 28, 2006. The attendance of the Directors at the Board Meetings and the Annual General Meeting held during the financial year 2005-2006 was as given below: Name of the Director Number of Board Meetings Number of Board Meetings attended Last AGM Attended held during the tenure In person On phone/ of the director video conference Mr. Rajesh Hukku 11 3 8 Yes Mr. S. P. Bharucha* 9 8 1 Yes Mr. William Twyman Comfort, Jr. 11 3 6 Yes Mr. Y. M. Kale 11 11 0 Yes Mr. Joseph P. Kennedy II** 6 1 5 Yes Mr. Charles Phillips*** 3 1 1 N.A. Ms. Tarjani Vakil 11 11 0 Yes * Mr. S. P. Bharucha was appointed as an Additional Director at the Board Meeting held on June 14, 2005 and was appointed as Director liable to retire by rotation at the Annual General Meeting of the Company held on August 12, 2005. ** Mr. Joseph P. Kennedy II resigned as a director of the Company on September 20, 2005. *** Mr. Charles Phillips was appointed as an Additional Director of the Company on November 24, 2005.


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    2.3 The details of the directorships of the Company’s Directors in other 2.5 Brief resume of Director who will be retiring by rotation at the companies as on March 31, 2006 are given below: ensuing Annual General Meeting of the Company Ms. Tarjani Vakil Name of the Director Other directorships held as on March 31, 2006 Ms. Tarjani Vakil, born on October 30, 1936, has done her Masters in Arts from University of Bombay. After 40 years of contribution in the field of development Mr. Rajesh Hukku i-flex solutions inc. banking, she retired in October 1996 as the Chairperson and Managing Director i-flex America inc. SuperSolutions Corporation of Export – Import Bank of India (“EXIM Bank”). i-flex Processing Services Ltd. Ms. Vakil was actively involved in extensive interaction with multilateral agencies Mr. S. P. Bharucha* Press Trust of India Ltd. to initiate informal annual dialogues among heads of Export Credit Agencies in Asia and Australia. Mr. William Twyman Comfort, Jr. 399 Venture Partners Inc. Citigroup Venture Capital Ltd. Ms. Vakil has been a member consultant for carrying a study of the feasibility Court Square Capital Ltd. for establishment of an Export Credit Guarantee facility for GCC countries, and Malaysia. Currently, she is a Director on several major corporate boards in Mr. Y. M. Kale Hutchison Essar Ltd. India. IndusInd Telecom Network Ltd. Ashok Leyland Ltd. Ms. Vakil has won several awards including Mahila Shiromani, CEO of the Year, Ennore Foundries Ltd. Woman of the Year, etc. She was also ranked as the highest woman official in Gulf Oil Bangladesh Ltd. Banking in Asia and named among the 50 world-class women executives in the 1996 Survey conducted by KPMG Peat Marwick, USA. Mr. Charles Phillips** Oracle Corporation 2.6 Brief resume of new Director who is proposed to be appointed at the Viacom Inc. ensuing Annual General Meeting of the Company Morgan Stanley Mr. Charles Phillips Ms. Tarjani Vakil Asian Paints Ltd. Alkyl Amines Chemicals Ltd. Mr. Charles Phillips, born on June 10, 1959, holds a BS in Computer Science Aditya Birla Nuvo Ltd. from the United States Air Force Academy, an MBA from Hampton University Mahindra Intertrade Ltd. and a JD from New York Law School and is a member of the bar in Washington, D S P Merrill Lynch Trustee Co. Pvt. Ltd. D.C. and Georgia. * Mr. S. P. Bharucha was appointed as an Additional Director at the Board Meeting Mr. Charles Phillips is the President of Oracle Corporation and a member of held on June 14, 2005 and was appointed as Director liable to retire by rotation at the the Board of Directors. He is responsible for global field operations, including Annual General Meeting of the Company held on August 12, 2005. consulting, marketing, sales, alliances and channels, and customer programs, as ** Mr. Charles Phillips was appointed as an Additional Director of the Company on well as corporate strategy. Prior to joining Oracle, Mr. Phillips was a Managing November 24, 2005 Director with Morgan Stanley in its technology group. Prior to his career on Wall Street, Mr. Phillips was a Captain in the United States Marine Corps. 2.4 Details of memberships of Board Committees None of the Directors of the Company holds memberships of more than ten Mr. Phillips is on the Boards of Viacom Corporation, Jazz at Lincoln Center in Committees nor is any Director a Chairperson of more than five Committees New York City and New York Law School. Mr. Phillips also serves as a director of of the Boards of all the companies where he/she holds directorships. For this Viacom Inc. and Morgan Stanley. purpose, ‘Committees’ comprises of Audit Committee, Compensation Committee 3. Audit Committee and Shareholders’ Grievances Committee of a Company. 3.1 Primary objectives and powers of the Audit Committee The details of the memberships of the Directors in the abovementioned Committees as on March 31, 2006 are given below: The primary objective of the Audit Committee is to monitor and provide effective supervision of the management’s financial reporting process and to ensure accurate, timely and proper disclosures and transparency, integrity and quality Name of the Director Audit Committee Compensation Shareholders’ Committee Grievances of financial reporting. The powers of the Audit Committee include the following: Committee 1. To investigate any activity within its terms of reference. Member Chair- Member Chair- Member Chair- 2. To seek information from any employee. person person person 3. To obtain outside legal or other professional advice. Mr. Rajesh Hukku Nil Nil Nil Nil Nil Nil 4. To secure attendance of outsiders with relevant expertise, if it considers Mr. S. P. Bharucha 1 Nil Nil Nil Nil Nil necessary. Mr. William Twyman Comfort, Jr. 1 Nil Nil 1 Nil Nil 3.2 Broad terms of reference Mr. Y. M. Kale Nil 2 2 Nil Nil Nil The terms of reference of the Audit Committee are as follows: Mr. Charles Phillips 1 Nil 1 Nil Nil Nil Ms. Tarjani Vakil 2 3 1 Nil Nil 1 1. Oversight of the Company’s financial reporting process and the disclosure i-flex annual report 2005-06 43


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    of its financial information to ensure that the financial statement is correct, The members’ attendance at the Committee Meetings are as given below: sufficient and credible. 2. Recommending to the Board, the appointment, re-appointment and, if Name of Director/Member Number of meetings attended required, the replacement or removal of the statutory auditor and the In person On phone fixation of audit fees. 3. Approval of payment to statutory auditors for any other services rendered by Mr. Y. M. Kale 5 – the statutory auditors. Mr. S. P. Bharucha* 1 – 4. Reviewing with the management the annual financial statements before submission to the Board for approval, with particular reference to: Mr. William Twyman Comfort, Jr. – 1 a) Matters required to be included in the Director’s Responsibility Ms. Tarjani Vakil 5 – Statement to be included in the Board’s report in terms of clause (2AA) * Mr. S. P. Bharucha was appointed as a member of the Audit Committee in the Board of Section 217 of the Companies Act, 1956 Meeting held on January 9, 2006. b) Changes, if any, in accounting policies and practices and reasons for the same The auditors of the Company were also invited for the meetings. c) Major accounting entries involving estimates based on the exercise of judgment by management 3.5 Audit Committee’s recommendations d) Significant adjustments made in the financial statements arising out The Committee reviewed the financial results of the Company prepared of audit findings in accordance with Indian GAAP (including consolidated results) and US e) Compliance with listing and other legal requirements relating to GAAP as at and for the periods ended June 30, 2005, September 30, 2005, financial statements December 31, 2005, and March 31, 2006, and recommended the same to the f) Disclosure of any related party transactions Board of Directors for their adoption. g) Qualifications in the draft audit report. 5. Reviewing with management the quarterly financial statements before submission to the Board for approval. The Committee also recommended to the Board of Directors the re-appointment 6. Reviewing with management the performance of statutory and internal of M/s S. R. Batliboi & Associates, Chartered Accountants, as statutory auditors of auditors and the adequacy of the internal control systems. the Company from conclusion of the Annual General Meeting in the year 2005 to 7. Reviewing the adequacy of the internal audit function, including the the forthcoming Annual General Meeting. structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage, and The Committee also reviewed Internal Auditors’ reports and related report on frequency of internal audit. actions taken, utilization of IPO proceeds, risk management policies, compliance 8. Discussion with internal auditors regarding any significant findings and with the revised clause 49 of the Listing Agreement, etc. from time to time. any follow-up required. 9. Reviewing the findings of any internal investigations by the internal 4. Compensation Committee auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the 4.1 Brief description of terms of reference matter to the Board. The scope of Compensation Committee is to determine the compensation of 10. Discussion with statutory auditors, before the audit commences, about the the Executive Management Officers (EMOs) comprising Mr. Rajesh Hukku, nature and scope of the audit as well as post-audit discussion to determine Chairman and Managing Director; Mr. R. Ravisankar, Chief Executive Officer any area of concern. – International Operations and Technology, Mr. Deepak Ghaisas, Chief Executive 11. To determine the reasons for any substantial defaults in the payment to Officer – India Operations and Company Secretary, and Mr. N R K Raman, Chief the depositors, debenture holders, shareholders (in case of non payment of Operating Officer – India Operations. The EMOs in turn, decide the compensation declared dividends) and creditors. of key managerial personnel and other employees of the Company. The 12. To review the functioning of the Whistle Blower function. Compensation Committee also approves, allocates and administers the Employee 13. Carrying out any other function as is mentioned in the terms of reference of Stock Option Plan 2002, reviews performance appraisal criteria, and sets norms the Audit Committee. for ESOP allocation. 3.3 Composition of the Committee 4.2 The Composition of Compensation Committee as on March 31, 2006 The Composition of Audit Committee as on March 31, 2006 is as follows: is as follows: Mr. Y. M. Kale Chairman, Non-Executive, Mr. William Twyman Comfort, Jr. Chairman, Non-Executive, Independent Director Independent Director Mr. S. P. Bharucha* Member, Non-Executive, Mr. Y. M. Kale Member, Non-Executive, Independent Director Independent Director Mr. William Twyman Comfort, Jr. Member, Non-Executive, Mr. Charles Phillips* Member, Non-Executive, Independent Director Non-Independent Director Ms. Tarjani Vakil Member, Non-Executive, * Mr. Charles Phillips was appointed as a member of the Compensation Committee in Independent Director the Board Meeting held on January 9, 2006. * Mr. S. P. Bharucha was appointed as a member of the Audit Committee in the Board Meeting held on January 9, 2006. Mr. Joseph P. Kennedy II resigned as a director of the Company on September 20, 2005 and ceased to be a member of the committee from that date. 3.4 Meetings and attendance During the Financial Year 2005-2006, five meetings of the Committee were 4.3 Meeting and attendance held on April 26, 2005, July 28 2005, October 26, 2005, December 30, 2005 and The Committee met once during the year and the meeting was attended by all January 27, 2006. the members.


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    4.4 Remuneration policy the shareholders of the Company. The annual compensation of the non-executive directors is approved by the Compensation Committee, within the parameters set The Compensation Committee determines and recommends to the Board the compensation payable to the directors. Remuneration of the non-executive by the shareholders at the shareholders’ meetings. directors consists of commission and stock options. Remuneration of the Managing Director consists of salary and stock options. No sitting fees are paid The Committee also has the mandate to review and recommend compensation to the directors. payable to the Senior Executives of the Company. It also sets norms for ESOP allocation. The limit for the commission to be paid to the Board members and the remuneration payable to the Managing Director of the Company are approved by 4.5 Details of remuneration paid to the Directors during the financial year 2005-06 are as follows: Name of Director ESOPs granted under Commission Salary Contribution Total amount ESOP Plan paid (Rs. ‘000) (Rs. ‘000) to PF (Rs. ‘000) paid (Rs. ‘000) Mr. Rajesh Hukku * Nil Nil 330 24 354 Mr. S. P. Bharucha** 10,000 600 Nil Nil 600 Mr. William Twyman Comfort, Jr. Nil Nil Nil Nil Nil Mr. Y. M. Kale Nil 1,000 Nil Nil 1,000 Mr. Joseph Kennedy II*** Nil 5,605 Nil Nil 5,605 Mr. Charles Phillips**** Nil Nil Nil Nil Nil Ms. Tarjani Vakil Nil 600 Nil Nil 600 Total 10,000 7,805 330 24 8,159 * Mr. Rajesh Hukku is deputed to i-flex solutions inc., USA, as its Chairman. His gross compensation comprising fixed salary and variable performance based remuneration from i-flex solutions inc. for the financial year 2005-06 was USD 921,579. In addition, Mr. Hukku is Chairman and Managing Director of i-flex solutions ltd., and was paid a salary of Rs. 353,760 as mentioned in the table above, for his services as Managing Director of i-flex solutions ltd. ** Mr. S. P. Bharucha was appointed as an Additional Director at the Board Meeting held on June 14, 2005, and was appointed as Director liable to retire by rotation at the Annual General Meeting of the Company held on August 12, 2005. *** Mr. Joseph P. Kennedy II resigned as Director of the Company on September 20, 2005. **** Mr. Charles Phillips was appointed as an Additional Director of the Company on November 24, 2005. There were no sitting fees and/or perquisites applicable and paid to the Directors during the financial year 2005-2006 except as stated above. The terms of Employee Stock Purchase Scheme grants made to the Directors are The terms of Employee Stock Options granted to the Directors are given below: given below: Name of Director # of options Options Grant Expiry date Name of Scheme # of offered Offered Grant Expiry Date outstanding exercised price Director shares shares price as on March during the (Rs.) outstanding exercised (Rs.) 31, 2006 year as at during the March 31, 2006 year Mr. Rajesh Hukku 409,400 Nil 265.00 March 3, 2012 Mr. S. P. Bharucha 10,000 Nil 708.65 June 13, 2015 Mr. Rajesh ESPS 1998 132,724 Nil 25.00 December Mr. Joseph P Hukku 31, 2008 Kennedy, II 660,000 660,000 265.00 N.A. Mr. Rajesh ESPS 2000 134,400 Nil 112.50 December Mr. Y. M. Kale 6,000 2,000 418.92 February 17, 2013 Hukku 31, 2010 Ms. Tarjani Vakil 8,000 2,000 559.60 August 17, 2014 The above shares were offered at Fair Market Value on the date of the grant. The The above options were issued at Fair Market Value on the date of the grant. director becomes entitled to purchase the shares in a phased manner over a period Options granted vest over a period of 5 years from the date of grant and are of 5 years from the date of grant based on continued employment/directorship subject to the continued employment/directorship with the Company. with the Company. The Executive Director of the Company is paid remuneration within the limits envisaged the Companies Act, 1956. Non-executive, Independent Directors of the Company are paid remuneration by way of commission as approved by the Board of Directors/shareholders of the Company subject however to the condition that i-flex annual report 2005-06 45


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    the commission does not exceed 1% of the net profits of the Company for all the 6. General Body Meetings Non-executive Directors in aggregate in one financial year. 6.1 Location, date and time where last three Annual General Meetings 5. Shareholders’ Grievances Committee were held: 5.1 Composition of the Committee Financial year Venue Date Time The composition of Shareholders’ Grievances Committee as on March 31, 2006 is as follows: 2004-2005 Le Royal Meridian, August 12, 2005 3.00 p.m. Sahar Airport Road, Andheri (East), Mumbai 400 059 Ms. Tarjani Vakil Chairperson, Non-Executive, Independent Director 2003-2004 The Leela, Near Sahar Airport, August 19, 2004 3.00 p.m. Mr. Deepak Ghaisas Chief Executive Officer – India Operations and Andheri (East), Company Secretary Mumbai 400 059 2002-2003 The Leela, Near Sahar Airport, July 31, 2003 3.00 p.m. 5.2 Scope of Shareholders’ Grievances Committee’s activities Andheri (East), Mumbai 400 059 The scope of the Shareholders’ Grievances Committee is to review and address the grievances of the shareholders in respect of share transfers, transmission, 6.2 There were no matters requiring approval of the shareholders through Postal dematerialization and rematerialization of shares and other share related Ballot in any of the previous three Annual General Meetings of the activities. Company. During the year the committee held four meetings on July 12, 2005, September 7. Disclosures 22, 2005, October 14, 2005, and March 23, 2006, which were attended by both the members of the Committee. a. All the relevant information in respect of materially significant related party transactions, i.e., transactions of the Company of material nature with its 5.3 Company Secretary promoters, directors or management or their relatives, subsidiaries of the Company, etc., has been disclosed in the respective financial statements Name of Company Secretary Mr. Deepak Ghaisas presented in the Annual Report. The Company did not undertake any Address i-flex solutions ltd. transaction with any related party having potential conflict with the interest i-flex Center of the Company at large. 399, Subhash Road Vile Parle (East) b. The Company has complied with statutory compliances and no penalty or Mumbai 400 057 stricture is imposed on the Company by the Stock Exchanges or Securities Tel +91-22-6718 5000 & Exchange Board of India (SEBI) or any other statutory authority on any Fax +91-22-2832 3374 matter related to the capital markets during the last three years. c. The Company has a Whistle Blower Policy, which provides an avenue for 5.4 Compliance Officer employees to raise concerns of any violations of Code of Conduct, incorrect or misrepresentation of any financial statements and reports, unethical Name of Compliance Officer Mr. Avadhut (Vinay) Ketkar Address i-flex solutions ltd. behaviour, etc. The policy provides adequate safeguards to employees i-flex Center reporting such violations to the Company. No employee has been denied 399, Subhash Road access to the Audit Committee. Vile Parle (East) 8. Means of communication Mumbai 400 057 Tel + 91-22-6718 5000 8.1 The quarterly, half-yearly and annual results of the Company were Fax + 91-22-2832 3374 published in English and Marathi newspapers. e-mail vinay.ketkar@iflexsolutions.com 8.2 The Company organized investor conference calls to discuss its financial results every quarter where the investor queries were answered by the 5.5 Details of shareholders’ complaints received, resolved during the year Executive Management Officers of the Company. 2005-2006 and pending share transfers as on March 31, 2006: 8.3 The Company’s periodic financial results, press releases and transcripts Nature of complaint Opening Received Cleared Pending of the investor conference calls are posted on the Company’s website balance www.iflexsolutions.com. Non-receipt of dividend warrant – 64 63 1 Non-receipt of share certificate – 4 4 – 8.4 Detailed Management Discussion and Analysis Reports covering Indian Non-receipt of demat credit/reject – 40 40 – GAAP and US GAAP financials have been included in this Annual Report. SEBI/stock exchange/DCA queries – 12 12 – Legal queries – 18 18 – 8.5 The Company has also posted information relating to its financial results Others – 7 7 – and distribution of shareholding on a quarterly basis on Electronic Data Information Filing and Retrieval System (EDIFAR) http://sebiedifar.nic.in. Number of pending share transfers as on March 31, 2006 – Nil


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    9. General shareholder information 10. Market price data Monthly high/low of the shares of the Company from April 1, 2005, to Annual General Meeting March 31, 2006 are given below: Date August 10, 2006 Time 3.00 p.m. Venue The Leela Kempinski, Sahar, Month and year High Low Volume of High Low Volume of Andheri (East), (Rs.) (Rs.) shares (Rs.) (Rs.) shares Mumbai 400 059 BSE NSE Financial year April 1 to March 31 April 2005 637.80 541.10 555,394 611.20 553.15 1,675,879 May 2005 725.00 610.00 1,150,763 719.60 630.15 3,452,906 Date of book closure August 5, 2006 to August 10, June 2005 797.50 705.00 809,473 786.60 708.65 3,522,575 2006 (both days inclusive) July 2005 950.00 785.15 1,440,444 920.15 811.50 4,815,868 Dividend payment date August 17, 2006 August 2005 1,066.00 750.00 3,542,406 1,047.55 829.90 13,497,077 September 2005 1,009.00 899.00 764,122 995.90 935.85 2,915,557 Listing on stock exchanges at Bombay Stock Exchange October 2005 1,019.80 840.00 1,789,005 1,005.30 861.50 5,603,783 Limited (BSE), and November 2005 1,059.70 874.50 1,916,850 1,028.25 886.80 6,118,691 National Stock Exchange of December 2005 1,088.00 975.00 1,321,158 1,074.35 1,015.10 5,380,826 India Ltd. (NSE) January 2006 1,185.00 1,056.10 1,186,752 1,168.90 1,068.70 3,004,900 February 2006 1,155.00 1,030.00 1,138,627 1,112.25 1,041.75 3,583,706 Stock code March 2006 1,400.00 1,061.00 2,434,177 1,395.95 1,111.00 11,104,431 Bombay Stock Exchange Ltd (BSE) 532466 National Stock Exchange of India Ltd. (NSE) I-FLEX Relative movement chart The chart below gives the relative movement of the closing price of the Company’s share and BSE Sensex relative to the closing price. The period covered is June 28, 2002, to July 6, 2006. 600 550 500 450 400 350 300 250 200 150 100 50 0 June 2002 January 2003 August 2003 March 2004 October 2004 May 2005 December 2005 July 2006 BSE i-flex i-flex annual report 2005-06 47


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    11. Registrars and share transfer agent 14. Shareholding per category as on March 31, 2006 Name Intime Spectrum Registry Limited Category Number of % to Total shares Address C-13, Pannalal Silk Mills Compound L. B. S. Marg, Bhandup (West) Promoter’s holding Mumbai 400 078 Promoters Tel +91-22-2596 3838 Indian promoters – – Fax +91-22-2596 2691 Foreign promoters 36,422,788 47.74 e-mail isrl@vsnl.com Persons acting in concert – – Sub total 36,422,788 47.74 Branch 203, Davar House, 197/199 D. N. Road, Fort, Mumbai 400 001 Non-promoters holding Tel +91-22-2269 4127 Institutional investors Mutual funds & UTI 2,668,809 3.50 12. Share transfer system Banks, FIs, Insurance companies, The Registrar and Share Transfer Agent (“the Registrar”) on receipt of transfer Central/State Government Institution/ Non-Government Institution 260,702 0.34 deed with respective share certificate(s) scrutinizes the same and verifies Foreign institutional investors 13,920,383 18.25 signature(s) of transferor(s) on the transfer deed with specimen signature(s) Sub total 16,849,894 22.09 registered with the Company. A list of such transfers is prepared and checked thoroughly and a transfer register is prepared. The transfer register is placed Others before the Transfer Committee Meeting for approval. Private corporate bodies 983,788 1.29 Indian public 17,795,037 23.33 To expedite the process of transfer of shares, the Board has delegated the power of NRIs/OCBs 4,080,225 5.35 approval of transfer of shares to a Transfer Committee. The Transfer Committee Others of the Company comprises Ms. Tarjani Vakil, Director and Mr. Deepak Ghaisas, Clearing member 156,635 0.20 Company Secretary. On approval by the Transfer Committee, the Register of Members is updated. The transfer endorsement stickers are printed through the Sub total 23,015,685 30.17 system and affixed on reverse of respective share certificates, which are signed by Grand total 76,288,367 100.00 the officials of the Company. The certificates then are dispatched to transferees Total foreign holding 54,423,396 71.34 by registered post/courier. During the financial year 2005-2006: During the last financial year, 39,420 equity shares were transferred in physical mode. 1. The Company issued and allotted 1,317,370 equity shares to its employees/directors who exercised their ESOPs during the year. 13. Distribution of shareholding as on March 31, 2006 2. The Company also issued and allotted 91,347 equity shares to IBM Global Services India Pvt. Ltd. who opted to convert the warrants/options issued to Distribution schedule as on March 31, 2006 it in September 2004. Equity shares of face value of Rs. 5/- Each Shares of nominal Number of % Share % 3. On August 23, 2005, the Company issued and allotted 395,529 value of (Rs.) shareholders amount warrants/options on preferential basis to GE Capital Mauritius Equity (Rs.) Investment (“GE”). As per the terms of issue, GE shall have the right to apply for one equity share of the Company for every warrant/option within a period UPTO 2,500 13,429 83.40 46,91,830 1.23 of 13 to 18 months from date of allotment of warrants/options, at a price of 2,501 – 5,000 592 3.68 23,27,955 0.61 Rs. 1,015.55 per share. 5,001 – 10,000 520 3.23 39,72,705 1.04 10,001 – 20,000 457 2.84 69,58,085 1.82 4. The Company has not issued any ADR/GDR. 20,001 – 30,000 198 1.23 48,90,535 1.28 15. Dematerialization of shares and liquidity 30,001 – 40,000 178 1.10 63,48,710 1.66 40,001 – 50,000 105 0.65 49,60,195 1.30 Procedure for dematerialization/rematerialization of scrips: 50,001 – 1,00,000 299 1.86 2,08,50,450 5.47 1,00,001 & ABOVE 323 2.00 32,64,41,370 85.59 The shares of the Company are under compulsory demat mode. To avail of the Total 16,101 100.00 38,14,41,835 100.00 facility of demat/remat of shares, the shareholders are required to submit demat/

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