Oracle (OFSS) BPO Services Limited Directors’ Report

Oracle (OFSS) BPO Services Limited

Directors’ Report Dear Members, Your Directors take pleasure in bringing you the Annual Report of your Company along with the Audited Accounts for the financial year from April 01, 2010 to March 31, 2011. Financial Highlights

(All amounts in millions

of Indian Rupees)

Year ended March

31,2011 Year ended March

31,2010 Revenue 277.229 424.448Income from operations before depreciation & amortization 58.544 153.084Depreciation & amortization (6.187) (9.076)Interest/other income/(expenses) 15.528 (38.608)Income before taxes 67.884 105.400Provision for tax (5.712) (3.574)Net income 62.172 101.826Balance brought forward 26.878 (74.948)Balance carried forward 89.050 26.878

Performance During the year, the Company earned income of Rs.294.426 million (previous year Rs. 432.858 million) and incurred a total expenditure of Rs. 226.541 million (previous year Rs.327.458 million). Dividend The directors do not recommend any dividend for the year ended March 31, 2011. Transfer to reserves The Company does not propose to transfer any amount to the General Reserve. Share Capital The Nominal Capital of the Company is Rs.10,00,00,000/- (Ten Crores only) divided into 1,00,00,000 equity shares of Rs.10/- each and paid-up capital is Rs.5,81,93,600/- divided into 58,19,360 equity shares of Rs.10/- each fully paid. Your company is a subsidiary of ISP Internet Mauritius Company. The Company has no subsidiary company.

Directors Mr. Don Ganguly and Mr. Mahesh Rao, Directors of the Company, retire by rotation at the ensuing Annual General Meeting of the Company and being eligible offer themselves for re-appointment. The Board recommends to the members the resolutions for re-appointment of Mr. Don Ganguly and Mr. Mahesh Rao as the Directors of the Company. Employee particulars Information pursuant to Section 217(2) (A) of the Companies Act, 1956, (‘the Act’) read with the Companies (Particulars of Employees) Rules, 1975 forms part of this Report. As per the provisions of Section 219 (1) (b) (iv) of the Act, the Directors’ Report and the Accounts are being sent to the members excluding the statement giving particulars of employees under Section 217 (2A) of the Act. Any member interested in obtaining a copy of the statement, may write to the Company Secretary at the Registered Office of the Company. Fixed Deposits During the financial year 2010-2011, the Company has not accepted any fixed deposits within the meaning of Section 58 A of the Companies Act, 1956, and as such no amount of principal or interest was outstanding as on the date of the Balance Sheet. Repayment of loan Oracle Financial Services Software Limited had granted a loan of Rs.50 crores to the Company. During the year the Company has repaid Rs.20 crores. Auditors M/s S. R. Batliboi & Associates, the present Statutory Auditors of the Company, hold office till the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office, if re-appointed. Audit Committee The Audit Committee comprises of following persons as its members:

1. Mr. Avadhut Ketkar 2. Mr. V. Srinivasan 3. Mr. Mahesh Rao

Audit Committee has the relevant powers pursuant to provisions of Section 292A of the Companies Act, 1956.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

a. Conservation of energy The operations of the Company are not energy-intensive. The Company, however, takes measures to reduce and optimize energy consumption by using energy efficient computers, CFL bulbs and ballast based lighting. Further, offices have been designed to maximize the use of ambient lighting while conserving the air-conditioning. The expenses on power in relation to income is nominal and under control.

b. Technology absorption Since business and technologies are changing constantly, investment in research and development activities is of paramount importance. Your Company lays a great emphasis on knowledge management and has an institutionalized process for absorption of new technologies. Your Company continued its focus on quality up-gradation of the software development process and software product enhancement.

c. Foreign exchange earnings and outgo

Foreign exchange earnings Rs.227.229 million (Previous Year Rs.424.448 million) Foreign exchange outgo Rs.0.334 million (Previous Year Rs. 0.795 million) Directors Responsibility Statement As required under section 217 of the Companies Act, 1956 the Directors hereby confirm that:

(i) In preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) The Directors have selected such accounting policies and applied them consistently

and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

(iii) The Directors have taken proper and sufficient care for the maintenance of adequate

accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) The Directors have prepared the annual accounts on a ‘going concern’ basis.

Acknowledgements Your Directors take this opportunity to thank the Company’s customers, shareholders, vendors and bankers for their continued support during the year. Your Directors also wish to thank the Government of India and its various agencies, Departments and other local Government Bodies for their support and look forward to their continued support in the future. Your Directors also place on record their appreciation for the contribution made by all employees of the Company. For and on behalf of the Board, Makarand Padalkar Chairman May 10, 2011

Schedules March 31, 2011 March 31, 2010

SOURCES OF FUNDS

Shareholders' funds

Share capital 1 58,194 58,194

Profit & Loss Account 2 89,050 26,878

Loan fund

Unsecured loan 3 300,000 500,000

447,244 585,072

APPLICATION OF FUNDS

Fixed assets 4

Cost 121,588 121,348

Less: Accumulated depreciation and amortisation 114,771 108,584

Net book value 6,817 12,764

Current assets, loans and advances 5

Sundry debtors 267,762 410,967

Cash and bank balances 186,181 190,167

Other current assets 15,087 1,003

Loans and advances 48,505 38,538

517,535 640,675

Less: Current liabilities and provisions 6

Current liabilities 40,304 40,684

Provisions 36,804 27,683

77,108 68,367

Net current assets 440,427 572,308

447,244 585,072

Notes to accounts 10 (0) (1)

The schedules referred to above and notes to accounts form an integral part of the balance sheet.


BALANCE SHEET AS AT MARCH 31, 2011

(Amounts in thousands of Indian Rupees)

Schedules

2011 2010

Revenue 277,229 424,448

Cost of revenue 7 (135,211) (180,900)

Gross profit 142,018 243,548

Operating expenses

General and administrative expenses 8 (83,475) (90,464)

Depreciation and amortisation (6,187) (9,076)

Income from operations 52,356 144,008

Non-operating income (expenses)

Exchange Gain (loss) (1,669) (47,018)

Interest income 16,752 7,923

Other income 9 445 487

Profit before provision for taxes 67,884 105,400

Provision for taxes

Current tax (Refer note 11 of Schedule 10) (5,712) (3,574)

Net profit for the year 62,172 101,826

Basic and diluted profit per share (Nominal value of shares Rs.10 each) 10.68 17.50

Weighted average number of shares used in computing profit per share 5,819,360 5,819,360

Notes to accounts 10

The schedules referred to above and notes to accounts form an integral part of the profit and loss account.

March 31,

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2011

(Amounts in thousands of Indian Rupees, except share and per share data)


March 31, 2011 March 31, 2010

Schedule 1: Share capital

Authorised:10,000,000 (March 31, 2010 - 10,000,000) equity shares of Rs 10/- each 100,000 100,000

Issued, subscribed and fully paid up:5,819,360 (March 31, 2010 - 5,819,360) equity shares of Rs10/- each 58,194 58,194

(a)

Schedule 2: Reserves and surplus

Profit and loss accountBalance, beginning of the year 26,878 (74,948) Add: Net Profit for the year 62,172 101,826 Balance, end of the year 89,050 26,878

Of the above, 5,808,660 (March 31, 2010 - 5,808,660) equity shares of Rs 10/- each are held by ISP Internet (Mauritius) CompanyLimited ("ISP").


Schedules annexed to and forming part of the accounts as at March 31, 2011(Amounts in thousands of Indian Rupees, except share and per share data)

Schedule 3: Unsecured Loan

Loan from Oracle Financial Services Software Limited (Refer Note 7 of Schedule 10) 300,000 500,000

Loan taken from Oracle Financial Services Software Limited ('OFSS') had a conversion option in equity shares of the Company whichwas exercisable till March 31, 2009. The conversion option was extended till November 30, 2010. During the year ended March 31,2011, the Company has signed a settlement agreement with OFSS while repaying Rs.200,000 along with an interest waiver on the same.Further to this, an interest free loan of Rs.300,000 outstanding as on balance sheet date will be repaid in 10 equal annual instalmentseffective November 2010. The first installment is due in March 2012.

Schedule 4: Fixed assets

As at 01.04.2010 Additions Adjustment Deletion As at

31.03.2011As at

01.04.2010 For the year Adjustment Deletion As at 31.03.2011

As at 31.03.2011

As at 31.03.2010

Tangible assets:Improvement to leasehold premises 26,250 26,250 17,491 3,841 - - 21,332 4,918 8,759 Computer equipments 76,751 76,751 74,843 1,136 - - 75,979 772 1,908 Office equipments 4,414 167 4,581 3,014 597 - - 3,611 970 1,400 Furniture and fixtures 4,971 73 5,044 4,274 613 - - 4,887 157 697

Intangible assets:Computer software 8,962 - 8,962 8,962 - - 8,962 - -

Total 121,348 240 - - 121,588 108,584 6,187 - - 114,771 6,817 12,764

As at March 31, 2010 120,071 2,134 640 217 121,348 99,690 9,076 - 182 108,584 12,764


Schedules annexed to and forming part of the accounts as at March 31, 2011(Amounts in thousands of Indian Rupees)

Net book valueParticulars

Gross block Depreciation and amortisation

March 31, 2011 March 31, 2010Schedule 5: Current assets, loans and advances

(a) Sundry debtors (unsecured and considered good) Debts outstanding for a period exceeding six months Considered good 109,410 243,796 Considered doubtful - 12,930

Other debts - considered good 158,352 167,171 Less: Provision for doubtful debts - (12,930)

267,762 410,967

Amount due from Oracle (OFSS) BPO Services Inc. (formerly i-flex Processing Services Inc,)USA, a company under the same management as defined under section 370(1B) of theCompanies Act, 1956 ('the Act') 250,238 407,764

(b) Cash and bank balancesCash in hand 144 236 Balances with scheduled banks:

Other current accounts 10,482 428 Deposit accounts 175,000 189,000 Margin money deposits 555 503

186,181 190,167

(c) Other current assetsInterest accrued on Bank deposits 2,316 1,003 Unbilled revenue 12,771 -

15,087 1,003

(d) Loans and advances (unsecured, considered good)Advances recoverable in cash or in kind or for value to be received:Premises and other deposits 9,591 8,544 Prepaid expenses 1,156 881


Schedules annexed to and forming part of the accounts as at March 31, 2011(Amounts in thousands of Indian Rupees)

p pAdvance tax, net of provision for taxes 7,979 4,379 MAT Credit Entitlement 29,748 24,506 Other advances 31 228

48,505 38,538 Amount due from i-flex Processing Services Limited, a company under the same managementas defined under section 370(1B) of the Act - - Maximum amount outstanding during the year from i-flex Processing Services Limited, a company under the same management. - 862

Schedule 6: Current liabilites and provisions

(a) Current liabilitiesEmployees related Liabilities 9,247 15,103 Accrued expenses 24,460 15,797 Accounts payable 3,017 4,690 Other current liabilities 3,580 5,094

40,304 40,684 Amounts due to Micro, Medium and Small Enterprises - - (The identification of Micro, Medium and Small Enterprises are based on Management's knowledge of their status)

(b) ProvisionsProvision for gratuity 20,238 15,459 Provision for compensated absence 16,566 12,224

36,804 27,683

2011 2010

Schedule 7: Cost of revenue

Employee costs 115,782 154,624 Travel related expenses 19,267 25,714 Recruitment expenses 162 562

135,211 180,900

Schedule 8: General and administrative expenses

Employee costs 27,527 45,166 Rent expenses 42,029 30,476 Bad debts 12,919 - Provision for doubtful debts (12,919) 462 Repairs and maintenance 2,872 5,370 Power expenses 5,588 3,651 Legal and professional expenses 1,722 2,093 Communication expenses 1,004 1,254 Other expenses 1,815 1,601 Travelling expenses 918 391

83,475 90,464

Schedule 9: Other Income

Profit (loss) on sale of fixed assets, net - 1 Miscellaneous income 445 486

445 487

March 31,


Schedules annexed to and forming part of the accounts for the year ended March 31, 2011(Amounts in thousands of Indian Rupees)


Schedules annexed to and forming part of the accounts for the year ended March 31, 2011 (All amounts in thousands of Indian rupees)

`

Schedule 10: Notes to accounts

1. Background and nature of operations Oracle (OFSS) BPO Services Limited (‘the Company’) was incorporated in India with limited liability on November 7, 2002. The Company is principally engaged in the business of providing business process outsourcing services to the mortgage industry. The Company is a subsidiary of ISP Internet Mauritius Company (“ISP”) which has 99.82% ownership interest in the Company as at March 31, 2011. Effective December 22, 2004, Oracle Financial Services Software Limited acquired all shares in ISP and consequently the Company has become a public company under section 3(1)(iv)(c) of the Companies Act, 1956 (the ‘Act’). 2. Operational outlook During the year the company has earned a net profit after Tax (PAT) of Rs 62,171. The Company has accumulated profit of Rs.89,050 as on March 31, 2011. As at March 31, 2011, these financial statements have been prepared under the going concern assumption. 3. Summary of significant accounting policies (a) Basis of presentation The financial statements are prepared under the historical cost convention, on the accrual basis of accounting, in conformity with accounting principles generally accepted in India and complying in all material respects the notified Accounting Standards by Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956 (the ‘Act’). The accounting policies applied by the Company are consistent with those used in the previous years. The financial statements are presented in the general format specified in Schedule VI to the Act. The significant accounting policies adopted by the Company, in respect of the financial statements are set out as below: (b) Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting year end. Although these estimates are based upon management’s best knowledge of current events and actions, actual results could differ from these estimates. (c) Fixed assets and depreciation Fixed assets are stated at cost less accumulated depreciation and amortisation. The Company capitalises all direct costs relating to the acquisition and installation of fixed assets. Advances paid towards the acquisition of fixed assets outstanding at each balance sheet date and the cost of fixed assets not ready to use before such date are disclosed under ‘Capital work-in-progress and advances’. The Company purchases certain specific-use application software, which is in ready to use condition, for internal use. It is estimated that such software has a relatively short useful life, usually less than one year. The Company, therefore, charges to income the cost of acquiring such software.



`

Depreciation and amortization are computed using straight-line method, at the rates specified in Schedule XIV to the Act or based on the estimated useful life of assets, whichever is higher. The estimated useful life considered for depreciation of fixed assets is as follows:

Asset description Asset life (in years) Tangible assets

Leasehold improvement Lesser of estimated useful life (7 years) or lease term

Computer equipments 3 Office equipments 7 Furniture and fixtures 7

Intangible assets Computer software 3

Assets costing less then Rs. 5,000 are depreciated fully in the year of purchase. The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal / external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. (d) Foreign currency transactions Foreign currency transactions during the year are recorded at the exchange rates prevailing on the date of the transaction. Foreign currencies denominated monetary items are translated into rupees at the closing rates of exchange prevailing at the date of the balance sheet. Non-monetary items, which are carried in terms of historical cost denominated in a foreign currency, are reported using the exchange rate at the date of the transaction. Exchange differences arising on the settlement of monetary items or on reporting company’s monetary items at rates different from those at which they were initially recorded or reported in previous financial statements are recognised as income or expenses in the year in which they arise. (e) Revenue recognition Business process outsourcing services comprise of back-office administration, data management, call centre and other information technology enabled services including systems integration and facility management. Depending upon the terms of the arrangement, revenue from back-office administration, data management, call centre and other information technology enabled services is recognized on a per employee, per transaction, number of hours worked or cost-plus basis. Revenue is recognized only when persuasive evidence of an arrangement with final customer exists, services have been rendered, the fee is determinable and collectibility is reasonably assured.

Reimbursable expenses for projects are invoiced separately to customers and although reflected as sundry debtors to the extent outstanding as at year end, are not included as revenue or expense. Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.



`

(f) Employee benefits The Company’s employee benefits primarily cover provident fund, gratuity and compensated absences. Retirement benefit in the form of Provident fund is a defined contribution scheme and the Company has no further obligation beyond the contribution made to the fund. Contributions are charged to profit and loss account in the year in which they accrue. Gratuity liability is a defined benefit obligation and is recorded based on actuarial valuation on projected unit credit method made at the end of the year. The gratuity liability and net periodic gratuity cost is actuarially determined after considering discount rates, expected long term return on plan assets and increase in compensation levels. All actuarial gains/losses are immediately recorded to the profit and loss account and are not deferred. Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method. (g) Operating leases Leases of assets under which all the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under operating leases are recognised as an expense on a straight-line basis over the lease term. (h) Income-tax Tax expense comprises of current income tax. Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961. Deferred income taxes are recognised for the future tax consequences attributable to timing differences between the financial statement determination of income and their recognition for tax purposes. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognised and carried forward only to the extent that there is a virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. Deferred tax assets are recognized on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty that such deferred tax assets can be realized against future taxable profits. Unrecognised deferred tax assets of earlier periods are re-assessed and recognised to the extent that it has become virtual certain that future taxable income will be available against which deferred tax assets can be realized. The Company has not recognized deferred tax assets in respect of carried forward business losses and unabsorbed depreciation due to no virtual certainty for realization of deferred tax assets. Minimum Alternate Tax ('MAT') credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. In the year in which the MAT credit becomes eligible to be recognized as an asset in accordance with the recommendations contained in guidance note issued by the Institute of Chartered Accountants of India ('ICAI'), the said asset is created by way of credit to the profit and loss account and shown as MAT Credit Entitlement. The Company reviews the same at each balance sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that the Company will pay normal income tax during the specified period.



`

(i) Earnings per share The earnings considered in ascertaining the Company’s earnings per share comprise the net profit after tax. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of shares used in computing diluted earnings per share comprises the weighted average number of shares considered for deriving basic earnings per share, and also the weighted average number of shares, if any which would have been issued on the conversion of all dilutive potential equity shares. (j) Provision and contingencies A provision is recognised when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. (k) Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. 4. Capital commitments Contracts remaining to be executed on capital account and not provided for (net of advances) aggregates to Nil as at March 31, 2011 (March 31, 2010 - Rs Nil). 5. Operating lease The Company has taken an office premise under an operating lease for 54 months with an option to renew the same for further period of 54 months. Gross rental expenses for the year ended March 31, 2011 aggregated to Rs 18,119 (March 31, 2010 - Rs 16,150). The minimum rental payments to be made in future in respect of these leases are as follows: March 31, 2011 March 31, 2010 Not later than one year 18,119 18,119Later than one year but not later than five years 43,788 60,397 Later than five years - -

61,907 78,516



`

6. Employee Benefit Obligation Defined contribution plan – provident fund During year ended March 31, 2011 and 2010, the Company contributed Rs – 1,774 and Rs 2,338 respectively to provident fund. Defined benefit plan – gratuity The amount recognised in the profit and loss account for the year ended March 31, 2011 and 2010 are as follows: Year ended March 31, Particulars 2011 2010 Current service cost 2,955 1,760 Interest cost 627 422 Expected return on plan assets - - Recognised net actuarial loss Past Service Cost

2,981 -

2,821 2,488

Total included in ‘employee benefit expenses’ 6,563 7,491 Actual return on plan assets - - The amounts recognised in the balance sheet are as follows: Year ended March 31, Particulars 2011 2010 Present value of unfunded obligations 20,238 15,459 Unrecognized past service cost - -

Net liability 20,238 15,459

Changes in present value of defined benefit obligation representing reconciliation of opening and closing balances thereof are as follows: Year ended March 31, Particulars 2011 2010 Defined benefit obligation at beginning of the year 15,459 8,065 Current service cost 2,955 1,760 Interest cost 627 422 Actuarial loss Past Service Cost

2, 981 -

2, 821 2,488

Benefit Paid (1,784) (97) Defined benefit obligation at end of the year 20,238 15,459



`

The assumptions used in accounting for the gratuity plan are set out as below: Year ended March 31, Particulars 2011 2010 Discount rate 7.60% 4.30% Salary Escalation Rate 6.00% 6.00%

Year ended March 31,Particulars 2011 2010Withdrawal rates Age (Yrs) Rates Age (Yrs) Rates 21-30 86% 21-30 71% 31-34 54% 31-34 31% 35-44 34% 35-44 46% 45-57 11% 45-57 38% The Company contribution to the fund for the year ended March 31, 2012 is expected to be Rs.11,219. The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market. The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards. The discount rates are based on current market yields on government bonds consistent with the currency and estimated term of the post employment benefits obligations. Present value of the defined benefit obligation, fair value of the plan assets, deficit and experience adjustments in the plan and liabilities for the current year and previous two years are as follows: Year ended March 31, Particulars 2011 2010 2009 2008 2007Present value of defined benefit obligation

(20,238)

(15,459)

(8,065)

(2,735)

(2,787)

Fair value of plan assets -

-

-

-

-

Deficit (20,238) (15,459) (8,065) (2,735) (2,787) Experience adjustment On plan liabilities 5,319 2,524 3,923 (1,996) 70 On plan assets - - - - -

7. Related party disclosure

a) Names of related parties and description of relationship

Relationship Name of the related party a) Holding company ISP Internet Mauritius Company (“ISP”) b) Holding company of ISP Oracle Financial Services Software Limited c) Fellow subsidiaries Oracle (OFSS) BPO Services Inc. USA

(Formerly i-flex Processing Services Inc.) Oracle (OFSS) Processing Services Limited Oracle Financial Services Software B.V.



`

d) Key Managerial Personnel (‘KMP’) For the financial year 2010-2011 Mr Mahesh Rao, Whole-time Director For the financial year 2009-2010 Mr Mahesh Rao, Whole-time Director Mr Makarand Padalkar, Director Mr Don Ganguly, Director Mr V Srinivasan, Director Mr Avdhut Ketkar, Director

Mr K V Subramanian, Chief Financial Officer

b) The transaction and balance outstanding with these parties are described below:

Particulars Transactions Amount receivable (payable) Year ended March 31, As at March 31, 2011 2010 2011 2010 Revenue Oracle (OFSS) BPO Services Inc.(formerly i-flex Processing services Inc. [Note A] 276,857 424,448 250,238 407,764Oracle Financial Services Software BV. 371 - - - Sub-contracting cost Oracle Financial Services Software Limited - - (1,428) (1,428) Re-imbursement of expenses i-flex Processing Services Limited - 70 - - Sale of fixed assets i-flex Processing Services Limited - 36 - - Loan outstanding Oracle Financial Services Software Limited- Amount repaid by the Company during the year 200,000 - (300,000) (500,000) Key Managerial Personnel Remuneration - 6,652 - - Relative of KMP Car hire charges - 780 - -

Note A: Oracle Financial Services Software Limited, the ultimate holding company, has committed to Oracle (OFSS) BPO Services Inc. (formerly i-flex Processing Inc.) for any funding requirements in the future, accordingly the Company believes that the above stated amount is fully recoverable.



`

8. Segmental reporting Business segments The primary reporting of the Company has been performed on the basis of business segments. The Company has only one business segment, which is providing business process outsourcing services. Accordingly, the amounts appearing in these financial statements relate to this primary business segment. Geographical segments Geographical segment disclosures based on location of the Company’s customers are summarised below: Segment Revenue based on location

Year ended March 31, 2011 2010 United States 276,858 424,448 United Kingdom 371 - Total 277,229 424,448

Carrying amount of segment assets Year ended March 31 2011 2010 United States 263,009 394,924 India 261,342 258,515 Total 524,351 653,439 9. Unhedged foreign currency exposure As of the balance sheet date, the Company’s net foreign currency exposure that is not hedged is Rs.263,009 (March 31, 2010- Rs.407,764)

10 Supplementary information

(a) Aggregate expenses

2011 2010Salaries and bonus (Refer Note 12) 138,982 193,109 Contribution to provident fund 1,774 2,338 Staff welfare expenses 1,283 2,833 Travel related expenses 20,185 26,105 Rent expenses 42,029 30,476 Bad debts 12,919 - Provision for doubtful debts (12,919) 462 Repairs and maintenance:

Leasehold premises 1,639 3,260 Computer equipments 1,233 2,110

Power expenses 5,588 3,651 Professional fees 1,722 2,093 Other expenses 1,815 1,601 Insurance-staff 1,270 1,510 Communication expenses 1,004 1,254 Recruitment expenses 162 562

218,686 271,364

(b) Managerial remuneration

Year ended March 31



Following are the aggregate amounts incurred on certain specific expenses that are required to be disclosed under Schedule VI to the Act:

Salary and incentives - -

(c) Payments to auditor *As auditor:

Statutory audit 441 303 Tax audit 110 83 Out-of-pocket expenses 38 20

590 406 * Included in legal and professional expenses

(d) Earnings in foreign currency (on accrual basis)Service revenue 277,229 424,448

(e) Expenditure in foreign currency (on accrual basis)Travelling 334 795

334 795

(f) Value of imports on CIF basis - capital goods - -



11 Current tax expneses 31-Mar-11 31-Mar-10Current tax 10,954 20,373 Less : MAT credit entitlement (5,242) (16,799) Net current tax liability 5,712 3,574

12 Employer's cost for the year ended March 31, 2011 are net of Rs.9,000 pertaining to write- back of bonus provision of earlieryear no longer required due to changes in compensation policy of the Company.

13 Prior year comparativesPrior year amounts have been reclassified, where necessary to conform with current year's presentation.

2011Cash flows from operating activities Income before provision for taxes 67,884 105,400

Adjustments to reconcile income before provision for taxes to cash (used in) provided by operating activities : Depreciation and amortisation 6,187 9,076

Provision for doubtful debts (12,919) 462 Bad Debts 12,919 -

Profit on sale of fixed assets, net - (1) Interest income (16,752) (7,923)

57,319 107,014 Changes in assets and liabilities (Increase) decrease in sundry debtors 143,205 8,240 (Increase) Decrease in loans and advances (13,896) 1,033 (Decrease) Increase in current liabilities and provisions 8,741 (10,487) Cash from operating activities 195,369 105,800 Payment of domestic and foreign taxes (14,554) (30,802) Net cash (used in) provided by operating activities 180,815 74,998

Cash flows from investing activities Additions to fixed assets including capital work-in-progress (240) (1,495) Proceeds from sale of fixed assets - 36 Margin Money placed (51) (27) Bank fixed deposits having maturity of more than 90 days booked (395,000) - Bank fixed deposits having maturity of more than 90 days realised 270,000 926 Interest received 15,438 7,286 Net cash (used in) investing activities (109,853) 6,726

Cash flows from financing activities Loan repaid (200,000) - Net cash provided by (used in) financing activities (200,000) -

Net increase in cash and cash equivalents (129,038) 81,724 Cash and cash equivalents at beginning of the year 189,664 107,940 Cash and cash equivalents at end of the year (Note 1) 60,626 189,664

Note 1 : Component of cash and cash equivalent 2011 2010

Cash and bank balances 186,181 190,167 Less: Bank deposits having maturity of more than 90 days (125,000) -

Margin money deposit (555) (503) Cash and cash equivalents at the end of the period 60,626 189,664

2010

STATEMENT OF CASH FLOW FOR THE YEAR ENDED MARCH 31, 2011

Year ended March 31,


(Amounts in thousands of Indian Rupees)

Year ended March 31,

Documents

Oracle (OFSS) BPO Services Limited Directors’ Report