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Annual Report 2007 - 2008

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6th Floor, Peninsula Chambers, Ganpatrao Kadam Marg, Lower Parel, 400 013, . Website: www.firstsource.com

BSR & Co., Chartered Accountants, KPMG House, Kamala Mills Compound, 448, Senapati Bapat Marg, Lower Parel, Mumbai 400 013, India.

3i Infotech Limited Tower # 5,3rd to 6th Floors International Infotech Park,Vashi, Navi Mumbai 400 703, India.

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Board of Directors independent Directors

Or. Ashok Ganguly Lalita D. Gupte Charles Miller Smith Or. Shailesh Mehta Y.H.Malegam

Shareholder Directors

Shikha Sharma K. P. Balaraj DineshVaswani Donald Layden Jr.

Executive Directors Senior Management Team Matthew Vallance - President North America & Europe Michael A. Shea - President and Chief Executive Officer, MedAssist Farid Kazani - Chief Financial Officer Aashu Calapa - Executive Vice-President, Human Resources Sanjiv Dalai - Chief Technology Officer Rahul Basu - Executive Vice-President, Collections Tony Pino - Executive Vice-President, Healthcare Ananda Mukerji Raju Santanu Nandi - Executive Vice-President, Operations Managing Director Venkatraman John Ardy- Executive Vice-President, Operations and Joint Managing Chief Executive Director and Chief Officer Operating Officer

Company Secretary Sanjay Gupta

Board Committees Audit Committee Compensation cum Board Governance Committee Investors' Grievance Committee Y. H. Malegam, Chairman Dr.Ashok Ganguly,Chairman Dr. Ashok Ganguly, Chairman DineshVaswani K. P. Balaraj Ananda Mukerji Charles Miller Smith Charles Miller Smith DineshVaswani Lalita D. Gupte Shailesh J. Mehta

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The past year was another eventful one for Firstsource. The Company's

topline growth has been impressive and the acquisition of MedAssist was

a high point, and has helped Firstsource become a stronger BPO company.

However, due to the sub prime crisis in the US and the slow-down in the

world economy, business conditions were far more challenging compared '' V

to the previous year. Under the circumstances, the Company's executive

leadership has done a commendable job of steering Firstsource's operations

successfully and strengthening it further. The growth of the Company's

domestic BPO business is noteworthy.

The economic environment is, and will continue to be, uncertain, at least,

during 2008-09. In India, the high rate of inflation and a depreciating rupee

are cause for concern to people in general and the business community

in particular. In spite of these difficult circumstances, Firstsource is now The Company's topline growth better equipped to deal with business challenges and to continue to grow has been impressive and the aggressively and profitably. acquisition of MedAssist was a high point, and has helped On behalf of the Board, I wish to record appreciation for the continued Firstsource become a stronger support Firstsource has received from its shareholders. BPO company.

Last but not the least, the Board compliments Ananda Mukerji and his

management team for their dedication and commitment to achieve

Firstsource's growth and profitability targets and thanks every employee of

the Company for their contribution.

A S Ganguly

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The year in review has seen major changes in the macro economic environment. The crisis in the US sub prime mortgage industry has had wide ramifications not just in the US but across the world with banks and financial institutions having to take large write offs on their mortgage related portfolios. The credit environment has worsened leading to increased defaults in loans and credit cards and globally growth has slowed down with the US at near recessionary conditions. Rapid and, at times, unprecedented interventions by Central banks have ensured that the stability of the financial system has been maintained but opinions differ as to how long it would take for the growth outlook to turn positive again. Closer home, there was a sharp appreciation of the rupee against the dollar by almost 10% with corresponding negative impact on all export oriented industries.

While the Indian BPO industry cannot be immune to these changes, I am pleased that in spite of these challenges your Company has been able to stay on its path of consolidating its position as one of the leading BPO I am pleased that in spite of companies in India and strengthening its proposition in its key markets. During the year, total income grew by nearly 60%, Operating Earnings challenges your Company has Before Interest and Tax (EBIT) by nearly 40% and Profit After Tax (PAT) by been able to stay on its path of 35%. Your Company also joined a select group of Indian companies to cross consolidating its position as one Rs. 1,000 crores in turnover. With over 17,000 employees and 36 delivery of the leading BPO companies centers across the world your Company is now well established as one of the top BPO companies in India. in India and strengthening its proposition in its key markets. As I mentioned in my message last year, we have focused on three industry verticals - BFSI, Telecommunications and Media and Healthcare and are constantly evaluating how we can widen and deepen our service offerings to our customers in these industries. During the year we took a major step in expanding our service offering to the Healthcare industry with the acquisition of MedAssist Inc in August 2007. This acquisition allows us to expand our footprint in the healthcare industry from the payor segment where we already have a presence, to the provider segment comprising hospitals and physician groups. Healthcare is the largest industry in the US with expenditure projected to reach US $4 trillion or a staggering 27.3% of the US GDP by 2015 and presents a huge opportunity to BPO companies. Of this hospital care alone is a US $700 billion industry with administrative 4 I www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net

costs estimated at 14% or US $100 billion. MedAssist with a wide service International Quality and Productivity Center (IQPC). offering and over 800 hospitals as clients positions us strongly in this One of our programs was chosen as the Outsourcing market segment. We believe there are significant opportunities to capture Project of the year in the Telecommunications synergies both in service offerings as also in costs which would create value Category by the National Outsourcing Association for the Company. With this acquisition your Company today has probably (NOA), UK. On technology we continue to ensure the widest service offering among any BPO company in India to the that we adopt cutting edge technology to deliver healthcare industry ranging from enrollment services, mailroom services, the best service to our customers at the lowest cost. claims processing, to claims adjudication on the payer side and from patient We became one of the first BPO companies to adopt services, eligibility services, receivables management to collections on the the ISO 20000 standard for IT service management provider side. One of the significant advantages about this industry is that and ISO 27001 for Information security management it is inherently insulated from recessionary trends and we believe that this as also one of the early adopters of the desktop vertical would be a strong engine for growth for your Company. virtualization technology.

Our major markets have been North America and United Kingdom and The BPO industry is still at a relatively nascent stage these continue to grow both from existing programs and new clients. New with the offshore penetration estimated at less than business from existing clients on the back of high quality service has always 5% of its potential and a lot of growth opportunities been a major contributor to growth and this year has been no exception. 16 ahead. The size and scale your Company has out of the top 20 clients of the Company grew their business and excluding established, its well diversified business, global the revenues form MedAssist, existing clients accounted for 97.8% of delivery model, long standing client relationships, our revenues for the year. In addition to existing markets, your Company strong and motivated management team, talented constantly looks at other markets to diversify into. During the last year we workforce and the strong foundations of operational saw the growing opportunity in the Indian domestic market, particularly excellence across People, Process and Technology in BFSI and telecommunications, and decided to increase our attention positions us well to take advantage of the huge there. This required investment in setting up operations in new locations opportunities in the coming years.The current year as also creating new service offerings for the market. Revenues from this is likely to see negative macroeconomic trends geography has jumped from 3.8% in fiscal 2007 to 10.8% in fiscal 2008. We and, subdued global growth rates and pressures in are one of the early movers into this market and believe this will be another some of business segments. However, we believe important engine of growth in the future. the fundamentals of outsourcing and offshoring continue to be very strong and we are confident Your Company made several important initiatives in human resource that we will be able to successfully overcome practices, operational excellence and innovations in technology. In human the short-term challenges while positioning the resources one of the big focus area continues to be leadership development Company for long-term growth. and we have now instituted a Leadership Competency Framework which is designed to identify, create and nurture outstanding professionals at every level in the Company. Our Operational Excellence practice has always been an important differentiator for the Company and I am happy that this has now received external endorsement with five international awards from the Ananda Mukerji

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Acquisition of RevIT Systems IPO and successful listing on Indian stock markets

Expanded Indian Acquisition of majority stake operations in Tier II cities in Pipal Research Corp., USA

Started operations in Aranda Investments (an Philippines affiliate of Temasek Holdings) invests in the Company Acquisition of MedAssist Holding, Inc.

Acquisition of Accounts Solutions Group LLC. Successfully completed FCCB issue of USD 275 million

First company to be awarded iWairclh COPC certification for Strategic partnership with both voice and back-office Metavante Corporation processes Crossed Rs. 5,000 million in annual revenues First Indian BPO company to achieve British Security Standard, BS 7799, for Started operations in information security Northern Ireland Change of name to ICICI OneSource Limited Acquisition of First Ring Started operations in Incorporated, USA Argentina Acquisition of Customer Asset India Private Limited WestBridge Capital Partners, now managed by Sequoia Change of name to Capital Partners, invests in Firstsource Solutions Limited the Company

ICICI Bank sets up Firstsource Acquisition of Business Solutions Ltd as ICICI Crossed Rs. 1,000 million in Process Management Infotech Upstream Limited annual revenues (BPM) Inc.

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• Achieved total income growth of 59%.Crossed Rs.1,000 crores in revenue.

• Acquired MedAssist Inc., the largest provider of revenue cycle management services to hospitals in the US. This provides the Company with a comprehensive offering for the healthcare industry in the US for both payor and provider segments.

° Continued to diversify business with revenues from the Asia-Pacific region, including India increasing to 10.8% of the Company's income from services as compared to 3.8% in the previous year.

° Completed a US $275 million zero coupon Foreign Currency Convertible Bonds issue,the proceeds of which were utilised to retire the loan taken for the MedAssist acquisition.The bonds are convertible at a price of Rs. 92.2933 per share at the option of the bondholder at any time from January 14,2008 up to November 23,2012.

° Expanded global delivery capability by opening operations in Manila, Philippines and also centers in Salt Lake City and Colorado Springs in the USA.

a Became one of the top 1,000 companies in the world to adopt desktop virtualization, a cutting-edge technology solution that increases security of data, improves availability and cuts technology costs.

° Won five awards for Six Sigma Excellence from the International Quality & Productivity Center (IQPC).

° Continued thrust on best-in-class quality standards.

— During the year the Company's Kolkata, Belfast and Londonderry centers got ISO 27001 certified.

— MedAssists' Eligibility services, Receivables Management Services, Healthcare Collections services and the MedAssist Advantage Plan (MAP™) were peer reviewed by the Healthcare Financial Management Association (HFMA).Peer Review consists of a rigorous evaluation by a peer review panel consisting of current customers, prospective customers and HFMA members. Products and services that earn the 'HFMA Peer Reviewed' designation have demonstrated their value, marketplace acceptance and effectiveness and accuracy as a business solution.

° Achieved employee strength of over 17,000 as at March 31,2008.

www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net awards and accolades of fiscal 2008

Over the years, Firstsource has won awards and received industry recognition. Needless to say our employees, consultants and our clients have had a huge role to play in every one of these achievements. Some of the awards and accolades received in fiscal 2008 are:

• Ranked among the top 10 BPO companies by NASSCOM.

• Winner of the National Outsourcing Association (NOA) award for the

'Best Telecom Outsourcing Project.'

• Winner of the 'Offshore Agency of the Year' award from a leading

financial services client in the U.S in the collections vertical.

• First pure-play BPO company in the world to obtain ISO 20000

(IT service management) certification.

• Winner in the 'Best Defect Elimination in Services & Transaction'

category at the IQ Six Sigma Excellence awards held in .

»Winner in the'Best Design for Six Sigma'category at the IQ Six Sigma IQPC Awards, Singapore

Excellence awards held in Singapore.

• Winner in the 'Best Defect Elimination in Services & Transaction'

category at the IQ Six Sigma Excellence awards held in , UK.

• Winner of the runners-up award in the DMAIC Services Category at

SCMHRD - Sakaal Lean and Six Sigma Excellence Awards '07 for a

project undertaken for a FTSE 250 telecom company in the UK. IQPC Awards, Orlando US

" Honorary mention in the 'Best Six Sigma Deployment Leader'

category at the IQ Six Sigma Excellence awards held in Orlando, US.

• Notable mention in the 'Best Six Sigma Project in Services &

Transaction'category at the IQ Six Sigma Excellence awards held in Firstsource Team with Jack Welch - IQPC Orlando, US. Awards, Orlando, US 10

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