Infosys Ltd

To the members,

We are delighted to present the report on our business and operations for the yearended March 31, 2011.

1. Results of operations

in Rs. crore, except per share data

Notes : Rs. 1 crore equals Rs. 10 million.

⁽¹⁾ Income from sale of investments in OnMobile Systems Inc., U.S., net oftaxes and transaction costs.

⁽²⁾ Equity shares are at par value of Rs. 5/- each.

2. Building Tomorrow’s Enterprise

During the year, we formally launched our new corporate strategy, BuildingTomorrow’s Enterprise to showcase our plan for leading the services industry into thenew era as the next generation global consulting and services company. In our journey toincrease our client relevance and sustain industry leadership, we have made organizationalchanges towards creating Infosys 3.0 – a truly global enterprise partner for ourclients to drive their transformational, operational and innovation priorities and helpingthem build their enterprise of the future.

To further our transition towards business-led consulting combined with innovativeproducts and solutions, we have regrouped our existing industry units globally into thefollowing groups :

• Financial Services and Insurance

• Manufacturing

• Energy, Utilities, Communications and Services

• Retail, Consumer Packaged Goods, Logistics and Life Sciences

This transition will enable us to increase our client relevance, strengthen ourstrategic partnerships with our clients and evolve our business model. It will help us tosharpen our industry vertical focus, allow us to invest in capabilities to deliver higherbusiness value and align our innovation agenda with that of our clients. The new structurewill also significantly expand our global market and provide opportunities for the nextgeneration of leaders.

3. Business

Our total income increased to Rs. 25,385 crore from Rs. 21,140 crore in the previousyear, at a growth rate of 20.1%. Our software export revenues aggregated to Rs. 24,791crore, up by 18.8% from Rs. 20,871 crore in the previous year. Out of the total revenue66.2% came from North America, 20.7% from Europe and 10.7% from the Rest of the World.

Our revenues from India have increased from Rs. 269 crore to Rs. 594 crore, with agrowth rate of 120.8% which is higher than that of the other regions. The share of thefixed-price component of the business was 42.1%, compared to 40.8% during the previousyear.

Our gross profit amounted to Rs. 11,118 crore (43.8% of revenue) as against Rs. 9,581crore (45.3% of revenue) in the previous year. The onsite revenues increased from 48.7% inthe previous year to 50.2% in the current year. The onsite person-months comprised 26.5%of the total billed efforts, compared to 26.1% during the previous year. The Profit BeforeInterest, Depreciation, Taxes and Amortization (PBIDTA) amounted to Rs. 8,414 crore (Rs..1% of revenue) as against Rs. 7,360 crore (34.8% of revenue) in the previous year. Salesand marketing costs were 4.8% and 4.6% of our revenue for the years ended March 31, 2011and March 31, 2010 respectively. General and administration expenses were 5.8% and 5.9% ofour revenues during the current year and previous year respectively. The net profit aftertax was Rs. 6,443 crore (25.4% of revenue) as against Rs. 5,803 crore (27.5% of revenue)in the previous year. The net profit for the previous year includes income from sale ofinvestments in OnMobile Systems Inc., U.S., of Rs. 48 crore, net of taxes and transactioncosts.

We seek long-term partnerships with our clients that enhance their value whileaddressing their IT requirements. Our customer-centric approach has resulted in highlevels of client satisfaction. We derived 98% of our revenues from repeat business. We,along with our subsidiaries, added 139 new clients, including a substantial number oflarge global corporations. The total client base at the end of the year stood at 620.Further, we have 366 million-dollar clients (Rs. 8 in the previous year), 187five-million-dollar clients (159 in the previous year), 126 ten-million-dollar clients (97in the previous year), 28 fifty-million-dollar clients (26 in the previous year), and 11hundred-million-dollar clients (6 in the previous year).

During the year, we added 19.86 lakh sq. ft. of physical infrastructure space. Thetotal available space now stands at 276.63 lakh sq. ft. The number of marketing offices asat March 31, 2011 was 64 as compared to 65 in the previous year.

4. Subsidiaries

We have nine subsidiaries : Infosys BPO Limited, Infosys Technologies (Australia) Pty.Limited, Infosys Technologies (China) Company Limited, Infosys Consulting, Inc., InfosysTechnologies S. de R. L. de C. V., Infosys Technologies (Sweden) AB, Infosys Tecnologia doBrasil Ltda, Infosys Public Services Inc., U.S., and Infosys Technologies (Shanghai)Company Limited. We have four step-down subsidiaries : Infosys BPO s.r.o., Infosys BPO(Poland) Sp.Z.o.o, McCamish Systems LLC, and Infosys Consulting India Limited.

As per Section 212 of the Companies Act, 1956, we are required to attach theDirectors’ report, Balance Sheet, and Profit and Loss account of our subsidiaries.The Ministry of Corporate Affairs, Government of India vide its circular no. 2/2011 datedFebruary 8, 2011 has provided an exemption to companies from complying with Section 212,provided such companies publish the audited consolidated financial statements in theAnnual Report. Accordingly, the Annual Report 2010-11 does not contain the financialstatements of our subsidiaries. The audited annual accounts and related information of oursubsidiaries, where applicable, will be made available upon request. These documents willalso be available for inspection during business hours at our registered office inBangalore, India. The same will also be published on our website, www.infosys.com

5. Finacle^TM

Finacle™, our universal banking solution, partners with banks across the globe topower their innovation agenda enabling them to differentiate their products and servicesthereby enhancing customer experience and achieving greater operational efficiency.Finacle^TM is a comprehensive, flexible and fully web-enabled solution thataddresses the core banking, treasury, wealth management, Islamic banking, consumer andcorporate e-banking, direct banking, financial inclusion and mobile banking requirementsof universal, retail and corporate banks worldwide. Other offerings in the Finacle^TMuniversal banking solution include the Finacle^TM Core Banking solution forregional rural banks; the Finacle^TM Alerts Solution, which enables banks toalert end-users on events recorded by diverse business systems; Finacle^TMAdvizor, which combines the convenience of human intervention with banking self-servicechannels through the interplay of video, audio and data communication; and Finacle^TMWatchWiz, a comprehensive new-generation monitoring solution that allows banks to monitor,diagnose and resolve issues. Our professional services complement the solutions portfolioand include consulting, package implementation, independent validation, migration,application development and maintenance, system integration, software performanceengineering and support. These offerings make Finacle™ a strong innovationfacilitator, enabling banks to accelerate growth, while maximizing value from theirlarge-scale business transformation.

Finacle^TM is chosen by 140 banks across 73 countries to power operationsacross 47,000 branches. Today, Finacle^TM enables its customer banks to serve390 million accounts and 289 million consumers worldwide. Finacle™ is also leadingthe financial inclusion agenda in India. Of the 82 regional rural banks in the country, 45have opted to leverage Finacle^TM across 9,900 branches. Independent reports byrenowned research firms have positioned Finacle^TM among the leaders in theglobal evaluation of retail core banking solution vendors. Finacle™ is one of themost scalable core banking solutions in the world with an unparalleled performancebenchmark of 104 million effective transactions per hour for channel (non-branch)transactions and 41 million effective transactions per hour for branch transactions.

6. Quality

We continue our journey of delivering value to our clients through significantinvestments in quality programs. In September 2010, an enterprise-wide CMMi assessment wasconducted by an SEI-certified high-maturity appraiser, and we were assessed at CMMi Level5. This is the highest level of the CMMi assessment. SEI-CMMi is the Carnegie MellonSoftware Engineering Institute’s Capability Maturity Model, which assesses thequality of an organizations’ processes and methodologies.

Our Quality department handles large change-management initiatives to drive quality andproductivity improvements across the organization and is managed through the BalancedScorecard and Infosys Scaling Outstanding Performance (iSOP) program.

During the year, the Quality department, in collaboration with multiple stakeholdersacross the organization, had developed a framework called ‘Business ValueArticulation’ which ensures alignment of our approaches to deliver value to ourcustomers. Some of our key initiatives are :

ENCORE : An initiative to promote reuse and reduce cycle time by creating anddeploying reusable technical and business components.

i-Trim : A framework based on lean practices, focusing on eliminating non-competeactivities to optimize process performance, addressing business and operational challengesin service delivery.

BrITe : Our customer centric, systematic, data driven methodology to create animpact on the business results and assist in maximizing profits.

Proso++ : An empirical model based on the best practices and execution experienceof the delivery teams at Infosys.

We continue to focus on institutionalizing large initiatives. Some of our achievementsin the area are listed below : Infy Swift : Our differentiated methodology for the GlobalDelivery Model (GDM) to achieve faster time to market.

ESTEEM : This is our Centre of Excellence to enhance estimation maturity forimproved predictability and de-risking of our client delivery.

TRANSCEED : Our initiative to enhance program management capabilities, includingdevelopment of integrated systems and tools, relevant enabling / certification andecosystem for collaboration / knowledge exchange.

ASCENT : A framework to provide a robust and integrated platform for accountmanagement that further facilitates account planning, monitoring and reviews.

PROSPER : A differentiated methodology for driving excellence in production supportservices.

TIDE : A solution that brings together tools, systems and processes acrosslifecycle stages and enhances data integrity by capturing accurate data.

We are certified under various standards to meet our client demands and improve valuedelivery. These certifications include TL 9000-SV, ISO 9001 : 2008, AS EN 9100, ISO 20000,BS25999, OHSAS 18001, ISO 14001, ISO 23026, ISO 27001 and ISO 13485. Infosys BPO has beencertified for eSCM – SP v. 2.0 Level 5, the eSourcing Capability Model for ServiceProviders developed by a consortium led by Carnegie Mellon University’s InformationTechnology Services Qualification Center. Our Australia and Shanghai centers have beenassessed at SEI-CMMi Level 5 and ISO 27001.

7. Infosys Labs

Infosys Labs, launched as part of our strategic direction ‘BuildingTomorrow’s Enterprise’, is responsible for driving innovation across the megatrends identified by us that will transform the businesses of our clients. Building on thesuccesses of the award winning SETLabs, Infosys Labs will focus on the Company’svision and enable customer co-creation, while continuing its focus on servicedifferentiation and developing client-focused business solutions.

Organized as a global network of research labs and innovation hubs, Infosys Labs will :

• Undertake research to define the ideas behind Building Tomorrow’sEnterprise

• Identify large, multidisciplinary problem spaces that embody the challengesfacing our clients and create technological solutions to solve them

• Create client-specific innovation agenda through co-creation and ensure businessvalue realization

• Collaborate with universities and external research labs worldwide

• Leverage global talent

During the year, more than 96 articles were published by Infosys Labs’ researchersin leading journals, magazines and conference proceedings. SETLabs Briefings, ourhighly respected peer-reviewed journal, published multiple issues this fiscal year, inareas such as e-Governance, Green IT, Business Platforms for Next-Gen Enterprise Packages,Leveraging IT for Better Performance, Service Oriented Performance, Digital Convergenceand Perspectives on Software Engineering. Infosys Labs collaborated with leading nationaland international universities such as the University of Southern California, IndianInstitute of Technology, Bombay – Monash Research Academy, Purdue University, IIIT,Hyderabad and IIIT, Bangalore.

During the year, Infosys Labs’ IP Cell filed 91 patent applications in the UnitedStates Patent and Trademark Office (USPTO) and the Indian Patent Office. We now have anaggregate of 357 patent applications pending in India and the U.S. The USPTO has grantedus 22 patents.

8. Branding

The Infosys brand is one of the most important intangible assets that we own. As partof the journey towards building a globally respected brand, we recently unveiled our newcorporate strategy of ‘Building Tomorrow’s Enterprise’, to position Infosysas a next generation global consulting and IT services company. During the fiscal year,our brand has been recognized by leading publications and independent industry bodies. Wewere :

• Ranked as India’s Most Admired Company according to the Wall StreetJournal survey

• Voted the Most Admired Indian Company by peers in the Businessworld MostRespected Companies 2011 survey

• Acknowledged by the Harvard Business Review for our best practice in‘The CEO’s Role in Business Model Reinvention’

• Awarded the NASSCOM Diversity Award for Innovative Programs

• Awarded the Sustainability Leadership award by India Carbon Outlook

• Awarded the CII National Award for Excellence in Energy Management 2010

Industry analysts rated us as a leader in reports across our key services and markets.The offerings for which we were rated highly include application outsourcing,infrastructure management, Oracle and SAP service providers, comprehensive finance andaccounting, business process outsourcing, and for the Finacle^TM core bankingsolution.

We saw a substantial increase in the number of visitors to our website and continued toadd to the million-plus visitors to our blogs on business and technology-related topicsduring the year. Our employees contributed and published several thought leadershiparticles across various industry forums and publications. We leveraged social mediaplatforms and engaged with our stakeholders and investors on YouTube, SlideShare, Twitterand Facebook.

Leading global publications commended us on our leadership, talent and performance. Wecontinued to have a leadership presence at premier industry events like OracleOpen World and Sapphire. Our annual client event, Confluence, in the U.S. and Europe werewell attended, and highly appreciated. At the World Economic Forum in Davos, Switzerland,our lunch panel discussion witnessed a full audience and the evening get-together hostedby us was attended by some of the most influential and powerful global business leaders.

9. Awards and recognition

In 2010, as in previous years, awards and recognition marked our accomplishments invarious fields. We were :

• The winners of the RMMY Best in Show award for the third year in a row

• Among the top 20 global companies to win the Most Admired Knowledge Enterprises(MAKE) Award 2010

• Named the best company for corporate governance in the Asiamoney poll

• Ranked among the top 10 value-creating technology and telecommunicationscompanies by the Boston Consulting Group

• The winners (along with Telstra) of the Best ITSM (IT Service Management)Project of the Year, the top industry award given by itSMF Australia

• Voted the best company in management, corporate governance, investor relations,and corporate social responsibility (India) in a survey by FinanceAsia

10. Capital expenditure

During the year, we capitalized Rs. 1,017 crore excluding Rs. 3 crore, which was due tothe movement in land from leasehold to freehold to our gross block. This comprises of Rs.251 crore for investment in computer equipment. The balance of Rs. 764 crore was due toinfrastructure investment along with Rs. 2 crore on vehicles. We invested Rs. 225 crore toacquire 267 acres of land in Bangalore, Delhi and Mangalore.

During the previous year, we capitalized Rs. 787 crore to our gross block. Thiscomprised of Rs. 140 crore for investment in computer equipment. The balance of Rs. 646crore was due to infrastructure investment along with Rs. 1 crore on vehicles. We investedRs. 43 crore to acquire 161 acres of land in Hyderabad, Mysore and Mangalore.

11. Liquidity

We continue to be debt-free, and maintain sufficient cash to meet our strategicobjectives. We clearly understand that the liquidity in the Balance Sheet has to balancebetween earning adequate returns and the need to cover financial and business risks.Liquidity also enables us to make a rapid shift in direction, should the market so demand.During fiscal 2011, internal cash flows have more than adequately covered working capitalrequirements, capital expenditure, investment in subsidiaries and dividend payments. As atMarch 31, 2011, we had liquid assets of Rs. 15,284 crore as against Rs. 14,794 crore atthe previous year-end. These funds have been invested in deposits with banks, highly ratedfinancial institutions, certificates of deposits and liquid mutual funds.

12. Increase in share capital

During the year, we issued 3,26,367 shares on the exercise of stock options under the1998 and 1999 Employee Stock Option Plans. As a result of this, the outstanding issued,subscribed and paid-up equity shares increased from 57,38,25,192 to 57,41,51,559 shares asat March 31, 2011.

Dividend

Our policy is to pay dividend of up to 30% of the consolidated net profit after tax ofthe group.

In October 2010, we paid an interim dividend of Rs. 10/- per share and a 30th yearspecial dividend of Rs. 30/- per share. We recommended a final dividend of Rs. 20/- pershare (par value of Rs. 5/- each), making in all Rs. 60/- per share as dividend for theyear.

The total dividend amount paid out is Rs. 3,445 crore, as against Rs. 1,434 crore inthe previous year. Dividend (including dividend tax) excluding 30th year special dividendas a percentage of consolidated profit after tax is 29.3% as compared to 26.9% in theprevious year. The register of members and share transfer books will remain closed fromMay 28, 2011 to June 11, 2011 (both days inclusive). Our Annual General Meeting has beenscheduled to be held on June 11, 2011.

Transfer to reserves

We propose to transfer Rs. 645 crore (10% of the net profit for the year) to thegeneral reserve. An amount of Rs. 15,591 crore is proposed to be retained in the Profitand Loss account.

14. Corporate governance

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

We have complied with the recommendations of the Narayana Murthy Committee on CorporateGovernance constituted by the Securities and Exchange Board of India (SEBI). For fiscalyear 2011, the compliance report is provided in the Corporate governance section ofthe Annual Report. The auditors’ certificate on compliance with the mandatoryrecommendations of the committee is provided in the Annexure to the directors’report section.

We have documented our internal policies on corporate governance. In line with thecommittee’s recommendations, the Management’s Discussion and Analysis ofthe financial position of the Company is provided in this Annual Report.

During the year, we continued to fully comply with the U.S. Sarbanes-Oxley Act of 2002.Several aspects of the Act, such as the Whistleblower Policy and Code of Conduct, havebeen incorporated in our Company policy. Our Code of Conduct was updated to make itrelevant and responsive to the changing needs of our business.

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

The particulars as prescribed under Sub-section (1)(e) of Section 217 of the CompaniesAct, 1956, read with the Companies (Disclosure of particulars in the report of the Boardof Directors) Rules, 1988, are provided in the Annexure to the directors’ reportsection.

16. Particulars of employees

In terms of the provisions of Section 217 (2A) of the Companies Act, 1956, read withthe Companies (Particulars of Employees) Rules, 1975, the names and other particulars ofemployees are set out in the Annexure to the directors’ report. However,having regard to the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956, theAnnual Report excluding the aforesaid information is being sent to all the members of theCompany and others entitled thereto. Any member interested in obtaining such particularsmay write to the Company Secretary at the registered office of the Company. The same willalso be published on our website www.infosys.com

17. Directors’ responsibility statement as required under Section 217 (2AA) of theCompanies Act, 1956

The financial statements are prepared in accordance with the accounting standardsissued by the Institute of Chartered Accountants of India and the requirements of theCompanies Act, 1956, to the extent applicable to us; and guidelines issued by SEBI on thehistorical cost convention; as a going concern and on the accrual basis. There are nomaterial departures from prescribed accounting standards in the adoption of the accountingstandards.

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

We have taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act, 1956, to safeguard theassets of the Company and to prevent and detect fraud and other irregularities.

18. Directors

The Board inducted R. Seshasayee and Ravi Venkatesan to the Board. We seek your supportin confirming their appointment as directors liable to retire by rotation.

In accordance with the retirement policy for the Company’s Board of Directors(‘the Board’), Claude Smadja, Independent Director, retired from the Boardeffective August 30, 2010. We place on record our deep sense of appreciation for theservices rendered by Claude Smadja during his tenure as a Board member.

As per Article 122 of the Articles of Association, K. Dinesh, Srinath Batni, Sridar A.Iyengar, Deepak M. Satwalekar and Dr. Omkar Goswami retire by rotation in the forthcomingAnnual General Meeting. All of them, being eligible, seek re-appointment, except K.Dinesh.

K. Dinesh has expressed his intention not to seek re-appointment. The Members of theBoard place on record their deep sense of appreciation for the services rendered by K.Dinesh during his tenure as Member of the Board and Head of Quality, Information Systemsand the Communication Design Group.

T. V. Mohandas Pai has resigned as Member of the Board and has requested the Board torelieve him of the responsibilities post the Company’s Annual General Meeting on June11, 2011.

The Board of Directors considered and accepted the resignation of T. V. Mohandas Pai.The resignation is effective June 11, 2011, post the Company’s Annual GeneralMeeting. The Members of the Board have placed on record their deep sense of appreciationfor the services rendered by T. V. Mohandas Pai during his tenure as Member of the Board,and Director and Head – Administration, Education & Research, Finacle, HumanResources Development, and Infosys Leadership Institute.

19. Auditors

The auditors, B S R & Co., Chartered Accountants, retire at the ensuing AnnualGeneral Meeting and have confirmed their eligibility and willingness to accept office, ifre-appointed.

20. Fixed deposits

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

21. Human resources management

Employees are our vital and most valuable assets. We have created a favorable workenvironment that encourages innovation and meritocracy. We have also set up a scalablerecruitment and human resources management process, which enables us to attract and retainhigh-caliber employees. We added 15,321 (net) and 32,247 (gross) employees this year,taking our total strength to 1,08,009 from 92,688 at the end of the previous year. Weadded 17,024 (net) and 43,120 (gross) employees this year, taking the total strength ofthe Infosys group to 1,30,820 from 1,13,796 at the end of the previous year. Our attritionrate stands at 17.0% compared to 13.4% for the previous year. Over the last year, wereceived 8,29,800 applications from prospective employees and we continue to remain anemployer of choice in the industry.

22. Education & Research

Continuous education of our employees is of prime significance for us. We believe thatthis is necessary not only for our own sustainability and growth as an organization butalso for enabling the professional development of our employees. In addition to the sixmonth residential foundation program that we conduct for every fresh engineer who joinsus, we also lay significant emphasis on the continuous education of our employees. Thefoundation program is designed to aid students in effectively transitioning from theacademic world to the corporate world as qualified professionals.

During the financial year, the total training provided for Infoscions was over 1.5million person days. During the year, we launched several novel programs to help enhancethe business competency of our employees, in addition to introducing new programs alignedto evolving business needs.

We have made significant progress with the Campus Connect program aimed at building arobust industry-academia partnership. We deepened our relationship with severalengineering institutions across India through the co-creation of several new electivesintroduced into their curricula. During the financial year, we engaged with 1,040 facultymembers who in turn trained Rs. ,000 students. With this the total number of facultycovered under the program is 5,600 and the number of students trained is 1,20,000 from 530engineering institutions. The program has received international accolades such as theCorporate University Xchange Award for Excellence and Innovation for the year 2011. Aspart of SPARK, an Infosys program to expose students from high schools and universities tothe world of IT and raise their aspirations, we engaged with over 1,75,000 students duringthe financial year. From its launch a little over two years ago, the program has reachedout to over 2,80,000 students.

Our internationally acclaimed Knowledge Management program won the Global MAKE (MostAdmired Knowledge Enterprise) award for the seventh time, the Asian MAKE award for theeighth time, and the India MAKE award for the sixth time during the financial year.

Our researchers published their articles and white papers in prestigious journals andconferences as well as in books and invited chapters in reputed publications.

23. Infosys Leadership Institute

The Infosys Leadership Institute (ILI) was established with the aim of developingworld-class corporate leaders. The institute helps to identify potential candidates andearmarks them for the training required to take on key leadership positions within theCompany. The ILI’s Tier Leadership development hopes to produce and mould businessleaders of tomorrow. The institute aims to be a globally recognized institution with afocus on training leaders capable of tackling current and future business challenges. Thework done by the ILI helps not only in the identification of leaders but also in thenurturing of a leadership mindset and culture across the organization.

Over the last year, ILI has engaged in several activities to support and grow our groupof high potential ‘tier leaders’ as well as advance the field of leadershipdevelopment. The institute rolled out the Leadership Journey Series Assessment andconducted assessment feedback sessions as well as helped leaders plan and execute theirpersonal development plans. It also developed structured roadmaps guiding developmentaround the seven key Infosys leadership dimensions, as well as key initiatives such asCreating Client Value.

In 2010-11, ILI showcased thought leadership through collaborations with leadingresearchers from India and abroad, 12 conference presentations, one peer-reviewed journalarticle, several keynote presentations and most importantly, the release of the book, Leadership@ Infosys, which combines research and practice perspectives to capture the essence ofwhat it means to excel as a leader at Infosys.

24. Sustainability initiatives

Sustainability is a commitment for us to align our strategy in all aspects of ourbusiness with our stakeholders in various dimensions such as economic, social andenvironment. Our focus areas are embodied in the following themes – social contract,resource intensity and green innovation – and are articulated in our SustainabilityPolicy. Social contracts are our implicit responsibility to the larger society, to factorin social and environmental aspects as important dimensions of our business. Resourceintensity is about doing more with less resources – energy, water or material. Greeninnovation is about leveraging the opportunity for business leadership throughsustainability. The Infosys Sustainability Executive Council (ISEC) oversees the planningand progress of all our sustainability initiatives.

As part of our sustainability journey, many of our business units are pursuinginnovation in green technologies and many of these have been implemented as solutions forour clients. Some of them are :

• iSustain : An enterprise carbon energy and resource management tool withsustainability reporting and performance management capabilities.

• InGreen Energy Management : Enables enterprises to reduce energy usage throughautomated tracking and identification of consumption patterns; opportunities for changesand reduction, reporting and analysis. It has helped us save energy usage and costs to thetune of 20%.

• InGreen Personal Carbon Calculator : Helps organizations create awareness amongemployees and measure their daily carbon footprint.

• iSmart : An intelligent power strip that can not only supply power from anelectrical source to devices connected to it in enterprise environments, but also monitortheir energy consumption level on a continuous basis.

• Integrated Real time Campus Management System (iRCMS) : An enterprise monitoringsystem that tracks and allows efficient energy management and prolong the life of energyequipment through surveillance. iRCMS helps enterprises with their manpower savings byallowing the facilities and business managers to take informed decisions based onconsumption and demand related parameters of energy thereby helping buildings and realestates go green and sustainable.

This fiscal year, our Green Initiatives and the Voice of Youth teams successfullyimplemented several campaigns and initiatives for creating awareness and influencing ouremployees and stakeholders in reducing their carbon footprint. Some of the keyemployee-driven activities have been :

• Earth Hour : The global drive of WWF which led to 3,136 units (over 3.1 MWh) ofelectrical equipment load turned off during one hour across nine DC-locations in India.

• Infosys Megawatt Challenge : The Infosys Megawatt Challenge was launched at ourU.S. offices to reward employees who brought about a reduction in their energy consumptionover a period of six months and a positive outreach at their local communities.

• COP16 : Representation at the United Nations Climate Change Conference (COP16)held at Cancun as a member on the delegation from World Business Council for SustainableDevelopment.

As part of our commitment to social contracts, several of our employee-driven clubs andgroups are actively involved in building an equitable society. Some of the significantprograms this fiscal year have been :

• Notebook Drive : This initiative targets students of government schools who arenot in a position to afford notebooks and stationery to pursue their academics. The NBDprovides them stationery typically required by the beneficiaries for one academic year. Wenow reach out to 45,000 children in 400 schools and distribute more than 1,72,000notebooks. More than 4,000 Infoscions worldwide are actively involved in organizingdonation campaigns, purchasing notebooks, managing the logistics, and overseeing thedistribution of school kits.

• SPARK : This program offers a learning environment that helps students realizetheir potential and assess their industry preparedness. The program partners with academicinstitutions to enhance talent pool as well as meet the demands of the IT industry.Launched in August 2008, SPARK is managed by 2,400 Infosys volunteers across developmentcenters. This year it has benefitted more than 1,75,000 students, 1,450 institutions and6,200 faculty members.

• Karnataka flood relief : Infosys always responds to a humanitarian crisis byvolunteering and pledging support. In October 2009, the northern districts of Karnatakawere severely affected by floods after torrential rainfall. It claimed hundreds of livesand rendered millions of villagers homeless. Our employees joined hands to rebuildvillages and undertake a mass housing project. Infoscions, together with the Board ofDirectors and the Infosys Foundation, contributed Rs. 30 crore towards relief,rehabilitation and reconstruction. Under the auspices of the state government’s‘Aasare’ scheme, we partnered with local NGOs to construct homes across 18villages. The ongoing housing project serves as a model for sustainable development. Formore details on our sustainability initiatives, visit www.infosys.com

25. Employee Stock Option Plan (ESOP)

We had introduced various stock option plans for our employees. The details of optionsgranted under the 1998 Stock Option Plan (the 1998 Plan) and the 1999 Stock Option Plan(the 1999 Plan) are as follows :

SEBI has issued the Employee Stock Option Scheme and Employee Stock Purchase SchemeGuidelines, 1999. This is effective for all stock option schemes established after June19, 1999. In accordance with these guidelines, the excess of the market price of theunderlying equity shares as of the date of the grant over the exercise price of theoption, including up-front payments, if any, is to be recognized and amortized on astraight line basis over the vesting period.

We have the 1998 Stock Option Plan and 1999 Stock Option Plan, where the options areissued to the employees at an exercise price not less than the fair market value.

If the compensation cost on account of stock options granted after June 30, 2003 (asrequired by the amendment effective June 30, 2003) under 1998 and 1999 Plans was computedusing the fair value method, our compensation cost would have been higher by Rs. 1 crore.Our profit would hence be less by Rs. 1 crore for fiscal 2010. The impact on EPS forfiscal 2010 would be Rs. 0.01. For fiscal 2011 there was no stock compensation cost.During fiscal 2011 and 2010, stock options under the 1998 Plan and 1999 Plan have not beengranted. Hence, the weighted average fair values of grant during these years are nil.

All stock options under the 1998 and 1999 Employees Stock Option Plans were granted atthe prevalent market price on the date of grant. Accordingly, we have calculated thecompensation cost arising on account of stock options granted using the intrinsic valuemethod.

Hence, the disclosure in terms of Clause 12.1 (n) of SEBI (Employees Stock OptionScheme and Employee Stock Purchase Scheme) Guidelines, 1999, is not applicable.

26. Infosys Science Foundation

The Infosys Science Foundation, a not-for-profit trust set up to promote research inpure and applied sciences, presented the Infosys Prize to scientists and researchers inthe five categories of research listed below :

• Physical Sciences – Physics, Chemistry and Earth Sciences

• Mathematical Sciences – Mathematics and Statistics

• Engineering and Computer Science – All branches of Engineering

• Life Sciences – Biology, Medicine and Plant Science

• Social Sciences and Economics – History, Sociology, Anthropology, PoliticalScience, Economics and International Relations

Nominations were evaluated by an eminent jury in each area, comprising outstandinginternational personalities selected by the trustees of the Foundation.

The Infosys Prize 2010 presentation was held in Mumbai on January 6, 2011. Laureateswere felicitated by the Prime Minister of India, Dr. Manmohan Singh. The prize in eachcategory comprised a 24 karat gold medallion, a citation and a cash grant of Rs. 50 lakh.For more details on the Infosys Science Foundation, refer to the websitewww.infosys-science-foundation.com

27. Infosys Foundation

We are committed to contributing to the society and established Infosys Foundation in1996 as a not-for-profit trust to support our social initiatives. The Foundation supportsprograms and organizations devoted to the cause of the destitute, the rural poor, thementally challenged, and the economically disadvantaged sections of the society. TheFoundation also helps preserve certain cultural forms and dying arts of India.

A summary of the work done by the Foundation is provided in the Additional InformationReport published on our website www.infosys.com. On your behalf, we express our gratitudeto the honorary trustees of the Foundation for sparing their valuable time and energy forits activities.

28. Green initiative

During the previous fiscal, we started a sustainability initiative with the aim ofbeing green and minimizing our impact on the environment. Like last year, this year too weare publishing only the statutory disclosures in the print version of the Annual Reportalong with the Abridged standalone financial statements prepared in compliance withthe Section 219 of the Companies Act, 1956. Additional details are available on ourwebsite, www.infosys.com.

Acknowledgments

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

We thank the governments of various countries where we have our operations. We alsothank the Government of India, particularly the Ministry of Communication and InformationTechnology, the Ministry of Commerce, the Ministry of Finance, the Customs and ExciseDepartments, the Income Tax Department, the Reserve Bank of India, the state governments,the Software Technology Parks (STPs) – Bangalore, Bhubaneswar, Chandigarh, Chennai,Gurgaon, Hyderabad, Jaipur, Mangalore, Mysore, Pune, and Thiruvananthapuram and othergovernment agencies for their support, and look forward to their continued support in thefuture.

Building infrastructure

During the year, two of our buildings, one in Jaipur and the other inThiruvananthapuram, were awarded the prestigious LEED Platinum rating – the highestrating for Green Buildings, by the Indian Green Building Council (IGBC). All new buildingsthat were completed in the previous year have been registered for LEED rating from IGBCand we hope to achieve a Platinum rating in all cases. The energy performance of all thebuildings designed in the previous year has been found to be more efficient than theglobally accepted ASHRAE efficiency standards for buildings.

On new technologies, one building in our Hyderabad campus has been commissioned withradiant cooling, a method of cooling used for the first time in a commercial building inIndia. A chilled water storage tank of 300 KL capacity has been built at our Mangalorecampus to increase the efficiency of the air conditioning system. This system is undertesting and is expected to reduce peak load as well as energy consumption. Initial resultsof this system have been very encouraging. Chilled beam systems, which are expected to bemore efficient than the conventional air conditioning systems, are being implemented inthree new buildings in our Pune campus. High-efficiency chillers that consume considerablylesser power have been selected for all new upcoming projects, thus reducing peak demandas well as energy consumption.

During the year, we worked with electricity and power regulators in Karnataka and withthe government of India for making green power cheaper, an achievement that is significantnot only for us but would also benefit the community at large. A similar initiative isbeing taken up in other parts of the country. We purchased about 8.53 million units ofgreen power during the year and this figure is expected to increase substantially in thecoming years. On renewable energy, two solar photovoltaic systems of about 200 KW and 125KW are being installed in our Jaipur and Thiruvananthapuram campuses respectively.Together, these are expected to generate about 4,50,000 units of electricity annually,thus reducing the burden on the grid.

A considerable amount of time and effort was earmarked for conserving power across allour development centers in India. Some of the measures taken include :

• Installation of wind turbines at our campuses in Pune, Bangalore and Mangalore

• Installation of occupancy sensors in conference rooms and restrooms

• Introduction of LED lamps in lieu of fluorescent tubes

• Variable Frequency Drives (VFD) installed in condenser pumps on chillers

• Approval to replace old and inefficient utilities such as DG sets, pumps andmotors

• Strong monitoring of the Environmental Management System as per ISO 14001guidelines These measures have resulted in reducing the per capita power consumption byover 3% during the year.

IT infrastructure

During the year, optimized desktop power management configuration has been extended toaround 80,000 desktops. Our in-house application, ‘Terminator’, designed toforce-schedule the shutdown of desktops, is being enhanced to achieve further reduction inpower demand by desktops. In addition to this, around 10,000 older desktops have beenreplaced this year with newer power-efficient models. We have continued our effortstowards restructuring the existing data centers and server rooms. Around twelve serverrooms have been revamped this year and about 4,400 sq. ft. of server room / lab space hasbeen released. Further, our projects have been swift to adopt the internal enterprisecloud, a shared, secure and virtualized computing environment with an easy-to-use‘Self-Service’ portal. On an average, 90% of the virtual instances are in use atany given time and we are planning to further augment the capacity.

Video Conferencing (VC) usage has increased steadily this year and currently, on anaverage, around 2,500 VC calls are happening per month. Further, we have introducedTelepresence, an Ultra High Definition (1080p) VC facility in three locations.Telepresence relays true life-size images and employs spatial audio to provide animmersive experience to the participants. Usage of this facility would help us connectwith customers at CXO levels across the world and reduce our travel requirements.

Research and Development (R&D)

Our new strategic direction ‘Building Tomorrow’s Enterprise’ identifiestrends that are driving and transforming the businesses of our clients globally. Theseinclude digital consumers, emerging economies, healthcare economy, sustainable tomorrow,new commerce, smarter organizations and pervasive computing. These themes are now beingused to define the research and innovation agenda of the Company.

Infosys Labs

Infosys Labs, a dedicated research and innovation group comprising technology anddomain-focused members has been established. It builds on the successes of the awardwinning Software Engineering and Technology Labs (SETLabs) and envisages a broadermandate. The primary research focus areas include Software Engineering, Convergence,Knowledge-driven Information Systems, Security & Privacy, Distributed Computing andInnovation. We also have dedicated Centers of Excellence on Maintenance & ServiceDifferentiation, Microsoft Technology and Cloud Computing.

Some of the specific areas of research include semantic and language technologies forinformation extraction from social media and for customer engagement, context awaresystems, pervasive computing including mobility & sensor networks, scalable computingincluding GPGPU, multi-core and cloud computing, data privacy and user authentication,preventive software maintenance and software engineering. Learn more about Infosys Labsand its focus areas at http://www.infosys.com/infosys-labs/

Finacle

The Finacle R&D unit at Infosys is engaged in the research of developing newtechnologies in the banking domain. Finacle R&D solutions address the areas of corebanking, wealth management, CRM, Islamic banking and treasury requirements of retail,corporate and universal banks worldwide. Finacle solutions also empower banks withmultiple sales, service and marketing channels including e-banking and mobile banking.

Education & Research

The E-Com research lab of the E&R unit focuses its research in the areas of gametheory applications to IT services, distributed computing, optimization theoryapplications to IT services, pattern recognition systems, face recognition algorithms,large data management and education technology.

Collaborations with academia and industry

We co-create with clients, technology partners, universities and the larger innovationecosystem by setting up joint innovation centers and developing solutions for complexbusiness problems. We are associated with various universities globally including, PurdueUniversity, Indian Institute of Science, Bangalore, IIIT, Hyderabad, IIIT, Bangalore, IIT,Bombay – Monash Research Academy, University of Southern California, University ofCambridge and the University of Illinois at Urbana-Champaign. We also associate withseveral industry consortia including the IU-ATC in the United Kingdom (U.K.) and the SmartServices CRC in Australia.

With a definitive aim to enlarge the innovation ecosystem to include start-ups,entrepreneurs, incubation cells and other innovation players in the industry, Infosys Labsorganized an ‘Innovation Camp’ in Bangalore in March 2011. This is part of ourlarger program planned across the globe.

R&D highlights

Our efforts in R&D have helped us offer new services to clients in the areas ofSoftware Engineering, Convergence, Knowledge-driven Information Systems, Security &Privacy and Distributed Computing. We are developing client-focused business solutionsbased on the intellectual property developed by multiple research groups. Our R&Defforts have helped us win large deals across industry verticals.

From a banking industry perspective, the Finacle R&D unit has launched innovativeofferings such as Finacle^TM Advisor, Finacle^TM Mobile Banking 2.0,Finacle^TM Treasury-in-a-box, Finacle^TM Core Banking for regionalrural banks and Finacle^TM financial inclusion solutions. Our research has alsohelped develop key Finacle solutions like Core Banking, CRM, Consumer e-banking, WealthManagement and others.

Our R&D efforts have also helped differentiate our solutions and win awards. Anillustrative list is provided here :

• Finacle^TM was adjudged a ‘Winner’ in the 5th Annual‘Leaders in Innovation Awards’ by Financial-i, a leading U.K. based financialpublication for the ‘Best Core Banking Software’.

• Our research on mobility and our innovation accelerator Infosys mConnect, haspowered award winning Infosys solutions such as Flypp^TM – recognized forits ‘innovative approach to technology and business in telecom’ at the AegisGraham Bell Awards 2010 and Infy-on-the-Go – recognized at the Information Weekinnovation award 2010.

• Infosys iSmart, a sensor-based energy management solution developed by InfosysLabs, was selected as an innovative solution in the Grand Challenges for Technologists(2010) held by Technology Review (India), the magazine of the MassachusettsInstitute of Technology.

During the year, the research groups also published two books, Raising EnterpriseApplications – A Software Engineering Perspective and Process-centricArchitecture for Software Systems, and over 125 papers in leading publications andjournals.

Future plan of action

We are now using the ‘Building Tomorrow’s Enterprise’ theme to focus onour technology research and to identify large, multidisciplinary problem areas that embodythe challenges facing our clients.

We will continue to focus on and collaborate with leading national and internationaluniversities, product vendors and technology start-up companies. We are creating anecosystem to co-create business solutions on client-specific business themes.

in Rs. crore

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

During the year, 97.7% of our revenues were derived from exports. We have established asubstantial direct marketing network around the world, including North America, Europe andAsia Pacific. These offices are staffed with sales and marketing specialists who sell ourservices to large international clients.

Foreign exchange earned and used

in Rs. crore

for and on behalf of the Board of Directors

b) Auditors’ certificate on corporate governance

The Members of Infosys Technologies Limited

We have examined the compliance of conditions of Corporate Governance by InfosysTechnologies Limited (‘the Company’), for the year ended on 31 March 2011, asstipulated in Clause 49 of the Listing Agreement of the Company with the stock exchanges.

The compliance of conditions of Corporate Governance is the responsibility of themanagement. Our examination was limited to procedures and implementation thereof, adoptedby the Company for ensuring the compliance of the conditions of Corporate Governance. Itis neither an audit nor an expression of opinion on the financial statements of theCompany.

In our opinion and to the best of our information and according to the explanationsgiven to us, we certify that the Company has complied with the conditions of CorporateGovernance as stipulated in the above mentioned Listing Agreement.

We further state that such compliance is neither an assurance as to the futureviability of the Company nor the efficiency or effectiveness with which the management hasconducted the affairs of the Company.