Aztecsoft

The directors are pleased to present their report on the business and
 operations of your Company for the financial year ended March 31,
 2008.
 
 a) Standalone financial results of Aztecsoft Limited       Rs. in 000s
 
 
 Particulars for the year ended March 31,           2008           2007
 
 Software development and services                  2,255.21   2,414.39
 Other income                                          51.24      39.15
 Total income                                       2,306.45   2,453.54
 Software development expenses                      1,664.44   1,590.44
 Administrative and other expenses                    326.86     331.90
 Interest                                               0.02       0.04
 Depreciation                                         131.39     111.15
 Profit before prior period item and tax              183.74     419.99
 Prior period item                                         -      (2.62)
 Profit before tax                                    183.74     422.62
 Provision for tax - current year                      21.95      39.85
 Fringe benefit tax                                     7.00       7.11
 Deferred tax, net                                     15.59      (4.08)
 Profit after tax                                     170.38     379.75
 Profit brought forward from previous year            591.70     311.73
 Less: Investment in Aztec Disha adjusted on 
 amalgamation                                              -     311.73
 Add: Balance of Aztec Disha transferred on 
 amalgamation as at April 1,2006                           -     297.28
 Amount available for appropriations                  762.09     677.03
 Appropriations 
 Proposed dividend                                     13.54      40.47
 Dividend tax                                           2.30       6.88
 Transfer to general reserve                               -      37.97
 Balance carried to balance sheet                     746.25     591.70
 
 The consolidated financial results of your Company for the year ended
 March 31, 2008 are as detailed hereunder and also presented and
 annexed, elsewhere in this report for the kind perusal of the members.
 
 b) Consolidated financial results summary Rs. in 000s
 
 Particulars for the year ended March 31,              2008        2007
 
 Software development and services                   2,531.02   2,609.91
 Other income                                           40.90      36.22
 Total Income                                        2,571.92   2,646.13
 Software development expenses                       1,811.28   1,682.94
 Administrative and other expenses                     429.41     414.91
 Interest                                                0.02       0.04
 Depreciation                                         135.99     116.18
 Profit before prior period item and tax               195.22     432.05
 Prior period item                                          -       2.62
 Profit before tax                                     195.22     434.67
 Provision for tax - current year                       29.16      45.62
 Fringe benefit tax                                      7.00       7.11
 Deferredtax,net                                       14.72       4.11
 Profit after tax                                      173.78     386.15
 Profit brought forward from previous year             640.09     500.31
 Add: Other adjustment on amalgamation                      -       0.65
 Less: Adjustment of goodwill consequent to amalgamation    -     161.62
 Amount available for appropriation                    813.87     725.41 
 Appropriations
 Proposed dividend                                      13.54      40.46
 Dividend tax                                           2.30       6.87
 Transfer to general reserve                                -      37.97
 Balance carried to balance sheet                      798.03     640.09
 
 Results of consolidated operations
 
 Consolidated revenues for FY 2007-08 were at US $ 63.05 million (Rs.
 2,531.02 million), registering an annual growth of 9% in US $ terms (FY
 2006-07 consolidated revenues were at US $ 57.7 million). Operating
 profits during the year were at Rs. 166.00 million as against an
 operating profit of Rs. 398.46 million during the previous year.
 Consolidated profit after tax was at Rs. 173.78 million. On a
 stand-alone and amalgamated basis for FY 2007-08, your Companys
 revenues and profit after tax were at Rs. 2,255.2 million and Rs.
 170.38 million respectively.
 
 The IT industry has faced a tough time during FY 2007-08 as the Indian
 rupee appreciated by about I 1% against US $ and this has severely
 affected both revenues and profits.This coupled with the loss of
 business of Dendrite International, Inc., also affected the revenues
 and profits.
 
 FY 2007-08 witnessed a complete strategic repositioning of your
 Company. Your Company re-aligned its processes, updated services,
 enhanced technology offerings, restructured the organization, upgraded
 brand image and continued to deliver superior value to customers.Your
 Company today is much more focused and is executing at a much higher
 efficiency than a year ago. Your Company was able to grow revenues
 without adding incremental headcount in QIV-08.  This was achieved by
 better utilization of resources and trainees moving to billable
 positions quickly.Your Companys investment in training and talent
 transformation is beginning to pay off. To create a natural hedge
 against an appreciating rupee, your Company proactively started
 building its onsite business in FY 2007-08. 
 
 This has yielded very good results and onsite revenue has grown from
 19% of the total revenues in QIV-07 to 30% in QIV-08.Your Company has
 decided to focus on higher quality revenue and reduce the exposure to
 revenue from early stage companies. This stability in quality of
 revenue will help make the growth more predictable.
 
 The demand for your Companys services continues to look robust, and
 the niche focus of OPD and independent testing services continues to
 resonate with target customers.Your Company does not have any exposure
 to the sub-prime crisis and has not seen a slowdown in demand from
 customers.  Your Company continues to believe that the growth is
 dependent more on execution, than demand in the market.
 
 In FY 2007-08 your Company also began to invest in Industry Focus
 marketing strategy. Your Company segmented target customers of software
 product companies into 6 verticals.  Application Software Companies,
 Infrastructure Software Companies, New Media & Internet, Online
 Commerce, Financial Services and Life Sciences. This new go-to-market
 strategy is already yielding strong positive results and the pipeline
 looks robust. Your Company has been able to add strategic customers
 with good revenue potential and strengthened its existing customer
 relationships. Your Company would be collaborating with many more
 customers across new sectors thus expanding the portfolio and
 delivering superior value to customers. Your Company continues to
 operate as a long-term value addition player to its customers and
 provide the entire life-cycle services addressing their end-to-end
 requirements.
 
 Dividend
 
 Your directors are pleased to recommend a dividend of 10% per equity
 share (as against 30% in previous year) which is payable on obtaining
 members approval in the thirteenth annual general meeting.
 
 The dividend payout amount for the current year inclusive of tax on
 dividend will be Rs. 15.84 million as compared to Rs.47.24 million in
 the previous year.
 
 Transfer to reserves
 
 Your Company does not propose to transfer any amount to the general
 reserve. Your Company also proposes to retain Rs. 746.25 million in the
 profit and loss account (on stand- alone basis).
 
 Scheme of Amalgamation
 
 The Honorable High Court of Karnataka has vide Company petition nos.
 123/06 & 124/06 passed an Order on April 13, 2007 approving the Scheme
 of Amalgamation between Aztec Disha Technologies Limitedf our wholly
 owned subsidiary) and Aztecsoft Limited with effect from April 1,2006
 and financial statements are accordingly being presented.
 
 Acquisition of equity shares by MindTree Limited
 
 MindTree Limited on May 2, 2008 approved the proposal to acquire
 14,655,280 equity shares of Rs. 3 each of your Company constituting
 32.57% of the voting capital for a purchase consideration of Rs.
 1,172,422,400 from E4E Holdings Limited, the existing promoter of your
 Company and has executed a Share Purchase Agreement.
 
 MindTree Limited also proposes to make a public announcement followed
 by an open offer (Open Offer) under Regulations 10 and 12 of the
 Securities & Exchange Board of India (Substantial Acquisition of Shares
 & Takeovers) Regulations, 1997 (SEBI (SAST) Regulations) to the
 public shareholdeers of Aztecsoft, in accordance with the relevant
 provisions of the SEBI (SAST) Regulations and proposes to acquire upto
 93,06,381 fully paid-up equity shares of the face value of Rs. 3/-.
 
 MindTree Limited has thereafter purchased 1,36,83,000 Equity Shares
 being 30.05% from the open market on the floor of the exchange as on
 date as per intimation received.
 
 Subsidiary companies
 
 Consequent to the Scheme of Amalgamation, your Company has two wholly
 owned subsidiaries namely Aztec Software, Inc. and Aztecsoft Disha,
 Inc.
 
 Your Company has received approval vide Letter No.  47/291/2008- CLIN
 dated May 7,2008 from the Government of India, Ministry of Company
 Affairs granting an exemption from attaching the audited accounts of
 the subsidiaries to this annual report for the financial year ended
 March 31, 2008. Audited accounts of all subsidiaries of the Company are
 available at the registered/corporate office of the Company for
 inspection by members and will be made available upon request by any
 member of the Company. A statement furnishing particulars of the
 subsidiaries is annexed to this annual report in the notes to the
 consolidated accounts.
 
 Increase in share capital
 
 During the year, your Company issued 29,529 equity shares of Rs. 3/- on
 the exercise of stock options under the 1998 Stock Option Plans. As a
 result, the paid-up equity share capital increased from Rs. 134,894,214
 (comprising 44,964,738 equity shares of Rs. 3 each) to Rs. 134,982,801
 (comprising 44,994,267 equity shares of Rs. 3 each).
 
 Technology, quality and security focus
 
 Your Company provides best-in-class development and testing services to
 software product companies, portals & software services providers and
 companies in mobility & wireless and financial domains. Your Company
 provides the following services - full life-cycle product engineering,
 independent testing, professional services, and sustenance engineering.
 
 Your Company offers its customers a unique, distributed model of
 software engineering that delivers speed, quality, efficiency and
 scalability to maximize customers return of investment.
 
 With a customer list that includes many of the largest global product
 companies and portals, and a wide range of emerging technology
 start-ups, your Company has the best combination of expertise,
 experience and depth of services to make it the technology partner of
 choice.
 
 Your Company provides comprehensive software product engineering and
 quality engineering services as well as open source expertise, to
 accelerate development of software products and reduce time to
 market.Your Company applies excellent project management and proven
 processes and methodologies to help software companies succeed with
 quality software products.
 
 With its record of accomplishment of executing successful projects,
 your Company provides predictable cost, time, and resource usage and
 builds partnerships with satisfied and loyal customers. Your Company
 operates globally and over the last decade, it has earned a reputation
 as a superior and reliable provider of software engineering services.
 Your Company has dedicated business units with market focus and these
 units have the speed and flexibility to operate independently and have
 the vision and leadership to excel in their focus areas.
 
 Your Companys delivery centers in Bangalore have been assessed at
 Software Engineering Institute (SEI) Capability Maturity Model
 Integration - Software (CMMI-SW)Ver I.I Maturity Level 5 (the highest,
 Optimizing Level of Maturity) Your Company has implemented ISMS at all
 its five location;; and these are certified on this global standard and
 is one of the very few companies that have all its locations ISO 27001
 certified in India.The recent assessment strongly reinforces.  the
 Companys offshore product development ability to deliver and exceed
 customers expectations.
 
 Human resource development
 
 To remain at the cutting edge and to be the best, your Companys focus
 has been not only business strategies but more importantly on people
 power.Your Company strongly believes, it is people alone who provide
 greatest sustainable, competitive advantage. During the year under
 review, the Company made substantial investments in developing human
 resources and focused on improving productivity.
 
 Your Companys multiple-award winning HR practices and great work
 environment has made it relatively easy to hire and retain talent and
 has in place a robust scalable recruitment and human resources
 management systems. Attrition continues to be under control, in line
 with industry norms.
 
 The endeavor of your Companys human resources function has been to
 align employees to the business goals and at the same time foster
 employees interest.This creates a favorable environment and promotes
 innovation and merit.The synergy of employees technical domain
 interests and business interests, has lead the organization to achieve
 its objectives and thus create value for employees in terms of growth,
 investors, return on investments and customers with quality
 deliverables. Employees continue to build new skills and competencies
 and this promotes knowledge sharing, building effective teams, cross
 training, rotation across projects, functions and locations.The Talent
 Transformation wing of your Company is spearheading the process of
 creating a learning environment in areas of knowledge management,
 institutional linkages, technology forecasting for future requirements.
 
 Your Company has aggressively ramped up in resource count with the
 addition of more than 200+ campus hires and trainees for future
 business growth.
 
 Awards
 
 Independent validation of your Companys consistent growth momentum
 comes in the form of several awards and recognition the Company has
 received in the last few months from India and overseas. These are
 detailed elsewhere.
 
 Corporate Social responsibility
 
 Continuing with its philosophy of building a better society, your
 Company through its Welfare Trust and the employees contribute to
 ensure the under privileged children get their nutritious mid day
 meals, books, basic amenities and infrastructure.
 
 Your Companys main objective of the project is to motivate poor and
 needy children to attend school and to improve the literacy rate among
 the children of economically backward families.
 
 Your Company also contributed to the Karnataka State Police for
 automating their computer systems.
 
 Product Engineering in Education
 
 Your Company has partnered with Sreejaya Chamarajendra college of
 Engineering, Mysore in drafting the M.Tech syllabus on Product
 Engineering This course has been approved by Visvesvaraya Technological
 University, Belgaum.
 
 Liquidity
 
 Your Company continue to be debt free and has a very strong and liquid
 balance sheet that can be leveraged to achieve its strategic
 objectives. During the year under review, internal cash flows generated
 from operations have adequately covered working capital requirements
 and capex requirements for the year.
 
 As on March 31, 2008, your Company had cash and cash equivalents
 amounting to Rs. 751.40 million.These funds have been invested in safe
 financial instruments. Your Company will strive to maintain the right
 balance between high return; on funds deployed in the business, and the
 ready availability of cash for strategic growth initiatives.
 
 Corporate governance
 
 Your Company continues to benchmark itself with the best- of-the-breed
 practices at the global levels as far as the corporate governance
 standards are concerned and its efforts are widely recognized by the
 investment community. Your Company has complied with regulations
 provided in clause 49 of the listing agreement it has entered into with
 the stock exchanges. The compliance report on the various requirements
 under the said clause along with the practicing
 
 Company Secretarys certification thereof is provided in the corporate
 governance section of this report.Your Company also has voluntarily
 adopted Secretarial Standards.
 
 Employee stock option plans
 
 Your Company has introduced two stock option plans - 1998 Stock Option
 Plan, (India) and 1998 Stock Option Plan, (US).  The details to be
 disclosed under SEBI guidelines are as hereunder,
 
 
 Particulars                     1998 Stock Options  1998 Stock Options
                                      Plan India          Plan US
 
 (a) Options granted                     16,260,938          7,660,627
 (b) Pricing formula As per notes to 
 accounts As per notes to accounts
 (c) Options vested and yet to be 
 exercised                                1,066,421            483,546
 (d) Options exercised                    9,693,025          1,302,707
 (e) Number of shares arising* as a 
 result of exercise until 31.03.2008      1,728,772            163,318
 (f) Options lapsed                       3,882,890          4,678,372
 (g) Variations of terms of options             Nil                Nil
 (h) Money realized by exercise of 
 options (R.s.)                         101,002,628         28,866,030
 (i) Total number of options in force 
 at the end of the year                   2,687,523          1,679,548
 (j) Employee wise details of options 
 granted to   Senior management 
 personnel during the year
 a) Samir Bodas                                   -            440,000
 b) Ashok Krishnamoorthy                          -             50,000
 c) Subodh Parulekar                              -             35,000
 d) Sundararajan                                  -            200,000
 e) Srinivasan Chandrashekar                100,000                  -
 f) Satish Venkatachalaiah                  100,000                  -
 g) Nataraj                                       -             30,000
 h) Sunil Gulati                            100,000                  -
 j) A.V. Sridhari                                 -            100,000
 Any employee who received a grant of 
 option amounting to 5% or more of options 
 granted during the year                        Nil                Nil
 iii.  Any employee who was granted options 
 during the year, equal to or exceeding 1% 
 of the issued capital(excluding outstanding 
 warrants and conversions) of the Company 
 at the time of grant                           Nil                Nil
 (k) Diluted earnings per share (EPS) 
 pursuant to issue of shares on  exercise of 
 option calculated in accordance with 
 Accounting  Standard (AS) 20Earnings Per 
 Share on stand-alone basis.                   3.91               3.91
 
 
 (m) Weighted-average exercise prices and weighted-average fair values
 of options shall be disclosed separately for options whose exercise
 price either equals or exceeds or is less than the market price of the
 stock As per notes to account As per notes to account The
 above-mentioned shares do not include shares directly transferred from
 Trust All Stock Option Plans established after June 19, 1999 have to
 comply with the SEBI guidelines issued in this regard.
 
 These guidelines require that excess of market price of the underlying
 equity shares as of the date of grant over the exercise price of the
 option, if any, is to be recognized and amortized on a straight-line
 basis over the vesting period.  The Companys 1998 Stock Option Plans
 were established prior to SEBI guidelines on stock options. Shares
 under 1998 Stock Option Plans were issued at Rs. 3/- per share and
 there was bonus issue in May 2000 for 1998 Stock Option Plan India.AII
 grants after that date have been issued at market prices and the
 Company has complied with the accounting policies as specified in
 guidelines.  Applying the fair value, the impact on the reported net
 profit and basic earnings per share would be as follows:
 
 
 Particulars
 
 Net Profit                                  As per notes to account
 As reported                                    173,783,609
 Adjusted proforma                              165,847,913
 Basic earnings per share
 As reported                                           3.99
 Adjusted proforma                                     3.80
 
 Fair value of options on the date of grant has been estimated using the
 following assumptions,
 
 The weighted average fair value of the options granted during the year
 ended March 31, 2008 (computed using Black- Scholes model) was Rs.
 48.81(2007: Rs. 104.57). The estimation of fair value on the date of
 grant was made using the Black-Scholes model with the following
 assumptions:
 
 Particulars
 
 Dividend yield%                                0.34%-0.58%
 Volatility                                   67.33%-68.57%
 Fair value of options on the date of grant 
 has been estimated using the following 
 assumptions,
 
 (i)    risk-free interest rate,                7.49%-8.20%
 (ii)   expected life,                                 4-5
 (iii)  expected volatility, and              67.33%-68.57%
 (v) the price of the underlying share in 
 market at the time of option grant 
 (during the year)                                   52-87
 
 Management discussion and analysis of results of operations and
 financial condition In compliance with the requirements of the listing
 agreement, a detailed management discussion and analysis of results of
 operations and financial condition is annexed in this report.
 
 Public deposits
 
 Your Company has not accepted any deposits from the public and, as
 such, no amount of principal or interest was outstanding as of the
 balance sheet date.
 
 Directors
 
 As per article 29 of the Articles of Association, Mr.  Somshankar Das
 and Mr. A.V. Sridhar retire by rotation in the thirteenth annual
 general meeting and being eligible offer themselves for re-appointment.
 
 Mr. N Krishnakumar Natarajan, Mr. S. R. Goplalan and Mr.  Satish Menon
 were appointed as additional directors on May 29, 2008 and hold office
 up to the date of the thirteenth annual general meeting.
 
 Your directors recommend that the resolutions relating to the
 re-appointment of Mr. Somshankar Das and Mr. A.V.  Sridhar as directors
 of your Company be passed. Your directors also recommend that
 resolutions regarding appointment of Mr. Krishnakumar Natarajan, Mr. S.
 R. Goplalan and Mr. Satish Menon as directors of the Company liable to
 retire by rotation be passed.
 
 Auditors
 
 The statutory auditors, M/s. BSR & Associates, Chartered Accountants,
 retire at the conclusion of the thirteenth annual general meeting and
 have confirmed their eligibility and willingness to accept office, if
 re-appointed.As recommended by the audit committee, the Board
 recommends that M/s. BSR & Associates be re-appointed as the statutory
 auditors to
 
 hold office until the conclusion of the fourteenth annual general
 meeting.
 
 Conservation of energy, research and development, technology
 absorption, foreign exchange earnings and outgo
 
 The particulars as prescribed under section 217( I )(e) of the
 Companies Act, 1956, read with the Companies (Disclosure of Particulars
 in the Report of Board of Directors) Rules, 1988, are set out in the
 annexure included in this report.
 
 Particulars of employees
 
 Information pursuant to section 2I7(2A) of the Companies Act, I9S6,
 read with the Companies (Particulars of Employees) Rules, 1975 to the
 extent applicable are set out in the annexure included in this report.
 
 Directors responsibility statement We,the Directors of Aztecsoft
 Limited, confirm the following:
 
 1. In the preparation of the annual accounts, the applicable accounting
 standards have been followed along with proper explanation relating to
 material departures.
 
 2 We 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 the financial year.
 
 3.  We have taken proper and sufficient care for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956 for safeguarding the assets of the Company and for
 preventing and detecting fraud and other irregularities.
 
 4.  We have prepared the annual accounts for the financial year on a
 going concern basis.
 
 Acknowledgements
 
 Your directors thank all the customers, investors, vendors and bankers
 for their continued support. Aztecians are instrumental in scaling
 heights year after year and your directors place on record their
 appreciation of the contribution made by them at all levels through
 their competence, hard work, co-operation and support. Your directors
 also thank the Government of India, particularly the Department of
 Electronics, the Customs and Excise Department, Software Technology
 Parks of India - Bangalore, the Ministry of Commerce, the Reserve Bank
 of India, the Government of Karnataka and all other Government agencies
 for their support during the year and look forward to their continued
 support in the future.
 
                           For and on behalf of the board of directors
 
                                           K. B. Chandrasekhar
                                           Chairman
 Bangalore
 May 29, 2008