Analyst Meet August 27 2002 Living up to

Analyst Meet August 27, 2002 “Living up to the promise” Living up to the promise T. V. Mohandas Pai © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Agenda ■ Promises made, promises kept Predictability, sustainability, de-risking ■ Corporate Governance ■ Transparency and reporting ■ Acquisitions ■ ■ Current issues – Infosys’ response and position Crisis of confidence in corporations ■ Stock option accounting ■ © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 In a challenging business environment… ■ ■ ■ General reduction in technology spending ROI based IT investments by customers Greater outsourcing of technology and offshore becoming mainstream Challenging pricing environment Rationalization of vendors and customers preference for large, end-to-end players Infosys has continued to execute, flawlessly, without diluting the corporation’s core values… © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 “Living up to the promise” Promise Vs Performance © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Guidance vs Performance - Quarterly © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Guidance vs Performance - Annual © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 How did we do it? Revenue and cost projections ■ Cost control ■ Re-calibrating Capex ■ Maintaining liquidity ■ © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Revenue and cost projections ■ Relationship model gives us a good insight into our Clients’ plans / thinking ■ ■ ■ ■ Over 85% repeat business Implemented a state of the art pipeline visibility system – “In. Pipe” Senior management is in close touch with key decision makers at important Clients Added several large Fortune 1000 corporations to the Client list De-risked our operations by maintaining a disciplined mix of business Fixed costs budgeted on a conservative revenue assumption – automatic “stretch” built into the system Closely monitored during the course of the quarter / year, should midcourse corrections become necessary ■ However, investments critical for long term growth are protected © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Cost management ■ Lowered fixed costs ■ ■ Salary increase linked to attainment of company performance targets (70% of total increase linked to company performance last fiscal) Percentage variable component paid during last fiscal Q 1 Q 2 Q 3 Q 4 ■ - 100% 68% 0% 0% Reduced costs by closely tying recruitment to business needs ■ ■ ■ Just in time recruitment Recruitment based on business outlook Net addition to employees by quarter © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Cost management (Continued) ■ Tight control on non-revenue related expenses ■ ■ ■ Others cost control initiatives ■ ■ ■ Reduced recruitment for support (ex-sales & marketing) departments during the year Implemented GDM for non-revenue generating activities in high-cost economies Continuous rationalization of internal policies Re-negotiations with vendors and service providers Rationalization of employee benefits Reduction in discretionary spending Vacating leased premises, etc. Cost savings ■ Cost cuts during the year aggregated 2. 4% of revenues (3. 5% excluding increase in personnel cost in the US) © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Results - the final cost structure © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 . . . recalibrated Capex spending… © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 …maintained liquidity to de-risk an uncertain environment… © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 “Living up to the promise” Corporate governance © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Audit committee ■ ■ ■ Entirely comprised of independent directors Have powers to recommend appointment/termination of auditors to the shareholders Discuss various accounting issues directly with the auditors Internal and external auditors have independent access to the committee The financials are discussed in detail and adopted by the audit committee before being presented to and approved by the full board © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Executive compensation Promoter directors are excluded from the stock option plans ■ Statute prohibits providing loans to directors ■ One of the lowest compensation for the senior management in the industry ■ ■ Leadership by example © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Operations and disclosure policies ■ ■ Operate through branches worldwide – hence only one legal entity / financials Subsidiaries created only for business and strategic reasons ■ ■ ■ No material off-balance sheet items Highest disclosure standards ■ ■ ■ Where the subsidiary requires a different strategy, culture, skill sets, cost structure, etc. The mantra is “In case of doubt, disclose. Go beyond the statute. ” Transparent reporting on all operating and financial metrics at the time of announcing results State of the art website with lots of useful information Easy access to management / frequent investor interactions at conferences, roadshows, etc. Full compliance with laws in all countries / regimes that we operate in © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Acquisitions Vs. Alliances ■ Infosys has been searching for a strategic acquisition for 3 years Have not made an acquisition to date because of valuation issues, lack of acquired management commitment, lack of revenue visibility, financial weakness / discipline / viability, etc. ■ Organic growth has remained comfortable, however acquisition of target competencies important for the “next orbit” / differentiation ■ Alliances are a possible via-medium ■ © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 “Living up to the promise” Current issues © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Crisis of confidence in the market ■ ■ ■ Corporations re-stating their numbers Accounting issues in large corporations Disproportionate executive compensation Questionable off-balance sheet items Lack of basic corporate governance Infosys’ long history of principled corporate governance, conservative financial reporting and transparent corporate structures differentiates us in this environment © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Stock option accounting Views so far : ■ Unlike US companies, Indian corporates do not get tax benefits on employees exercising their options ■ Stock option accounting is a non-cash charge which does not alter the overall cash value of a company ■ Black-Scholes model based on historical volatility does not provide fair value of an option ■ Technology companies like Microsoft are against expensing options We are internally debating this issue © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 Sarbanes-Oxley Act The act requires all CEOs / CFOs to personally swear to the veracity of their financial statements ■ Infosys fully complies with the act © 2002 Infosys Technologies Limited

Analyst Meet August 27, 2002 “Living up to the promise” Thank You © 2002 Infosys Technologies Limited