Directors Report of R Systems International Ltd.

Dec 31, 2018

Dear Shareholders,

The directors take great pleasure in presenting the Twenty Fifth Annual Report on the business and operations of R Systems International Limited (“R Systems” or the “Company”) together with the audited financial statements of accounts for the year ended December 31, 2018.

1. Financial Results

The financial statements are prepared in accordance with Indian Accounting Standards (‘Ind AS’). In accordance with the notification issued by Ministry Corporate Affairs, the Company has adopted Ind AS as notified under the Companies (India Accounting Standards) Rules, 2015. These are the Company’s first Ind AS financial statement. The date of transition is January 01, 2017, accordingly, figures for the financial year 2017 has been restated in accordance with Ind AS.

a. Standalone financial results of R Systems

(Rs. in Millions)

Particulars	Financial Year ended
	31.12.2018	31.12.2017
Total Revenue	3,172.13	2,637.53
Profit before depreciation, exceptional items and tax	478.45	416.23
Less : Depreciation and amortisation expense	73.01	73.74
Profit before tax	405.44	342.49
Less : Current tax	99.35	133.41
Less: MAT credit entitlement	-	(5.84)
Less : Deferred tax (credit) / expense	(4.05)	(13.16)
Profit after tax	310.14	228.08
Other comprehensive income	(0.50)	8.04
Total comprehensive income for the year	309.64	236.12
Surplus in the statement of profit and loss
Balance as per last financial statement	1,900.20	1,672.12
Add: Profit for the current year	310.14	228.08
Less : Dividend paid	85.49	-
Net surplus in statement of profit and loss	2,124.85	1,900.20
EPS-Basic	2.52	1.85

b. Consolidated financial results of R Systems and its Subsidiaries

(Rs. in Millions)

Particulars	Financial Year ended
	31.12.2018	31.12.2017
Total Revenue	6,998.89	5,926.38
Profit before depreciation, exceptional items and tax	762.30	488.24
Less : Depreciation and amortisation expense	135.48	134.80
Profit before tax	626.82	353.44
Less : Current tax	124.22	149.89
Less: MAT credit entitlement	-	(5.84)
Less : Deferred tax (credit) / expense	(7.85)	(15.95)
Profit after tax	510.45	225.34
Other comprehensive income	93.55	(6.40)
Total comprehensive income for the year	604.00	218.94
Surplus in the statement of profit and loss
Balance as per last financial statement	2,007.25	1,781.91
Add: Profit for the current year	510.45	225.34
Less : Dividend paid	85.49	-
Net surplus in statement of profit and loss	2,432.21	2,007.25
EPS-Basic	4.14	1.83

2. Results of operations Standalone Accounts

- Total income during the year 2018 was Rs. 3,172.13 mn. as compared to Rs. 2,637.53 mn. during the year 2017, an increase of 21.27%.

- Profit after tax was Rs. 310.14 mn. during the year 2018 as compared to Rs. 228.08 mn. during 2017, an increase of 35.98%.

- Basic earnings per share (of face value of Re. 1/- each) was Rs. 2.52 for the year 2018 as compared to Rs. 1.85 for the year 2017, an increase of 35.92%.

Consolidated Accounts

- Consolidated total income during the year 2018 was Rs. 6,998.89 mn. as compared to Rs. 5,926.38 mn. during the year 2017, an increase of 18.10%.

- Profit after tax was Rs. 510.45 mn. during the year 2018 as compared to Rs. 225.34 mn. during 2017, an increase of 126.52%.

- Basic earnings per share (of face value of Re. 1/- each) was Rs. 4.14 for the year 2018 as compared to Rs. 1.83 for the year 2017, an increase of 126.43%.

The state of affairs of the Company is presented as part of Management Discussion and Analysis Report forming part of this report.

3. Appropriations and Reserves

Dividend

The members may also note that during the year 2018, the Board of Directors had declared an interim dividend of Re. 0.60 per equity share of Re. 1/- each i.e. 60% at its meeting held on May 04, 2018. The said Dividend was paid to shareholders on June 01, 2018. The Board of Directors (the “Board”) has not recommended any final dividend for the financial year ended December 31, 2018.

The register of members and share transfer books shall remain closed from May 24, 2019 to May 28, 2019 both days inclusive.

Transfer to Reserves

In order to augment resources, your Directors do not propose to transfer any amount to reserves.

4. Business

R Systems is a global technology, AI/ Analytics services and knowledge services leader. We deliver Al-driven solutions to clients across industries, thus delivering on the promise of digital transformation. Our technology offerings include product engineering, cloud enablement, QA testing and digital platforms and solutions. This includes solution offerings i.e. Microsoft , Infor, JDA and QlikView etc. through our IBIZ and ECnet subsidiaries in South East Asia. AI/ Analytics services include advanced analytics, machine learning / artificial intelligence, business analytics and automation. R Systems’ design services include UX engineering, visual design and mobile user experience. Our knowledge service offerings cover revenue cycle management, back office service, technical support and customer care using multi-lingual capabilities and global delivery platform.

R Systems rapidly growing customer list includes a variety of Fortune 1000, government and mid-sized organizations across a wide range of industry verticals including Telecom, Technology, Healthcare & Life Science, Finance & Insurance and Retail & e-commerce and has served twenty one million dollar plus customer during the year 2018. R Systems maintains sixteen development and service centres to serve customers in USA, Europe and the Far East.

There were no changes in the nature of the Company’s business and generally in the classes of business in which the Company has an interest and in the business carried on by the subsidiaries during the year under review. For details of Company’s subsidiaries please refer note number 15 relating to subsidiaries.

During the year under review, on November 20, 2018, the Company has received approval from Department of Commerce, Ministry of Commerce & Industry, Government of India for expansion of existing ‘Special Economic Zone’ (SEZ) facility located at Greater Noida West (NCR) by addition of approx. 28,105 sq. ft. located at Greater Noida West (NCR).

5. Quality

R Systems has continuously invested in processes, people, training, information systems, quality standards, frameworks, tools and methodologies to mitigate the risks associated with execution of projects. Adoption of quality models and practices such as the Capability Maturity Model Integration (CMMI) and People Capability Maturity Model (PCMM) practices for processes have ensured that risks are identified and mitigated at various levels in the planning and execution process. R Systems journey on various quality standards/models is as follows:

During the year 2018, The IT & BPO Division has been re-certified with ISO 27001:2013 standard.

In Addition, for BPO division, R Systems has got SOC2 Type 2 Reporting for one of the major healthcare clients. HIPAA also has been implemented and tested with zero non-compliance in one of the major clients in Healthcare Domain. The BPO division has migrated their QMS into ISO 9001:2015 version from the existing ISO 9001:2008 version. Apart from that, R Systems IT Infrastructure along with the projects/process/applications in scope has got PCI DSS Certification on latest version V3.2.1.

As of the date of this report, Noida IT center is CMMI level 5 (Ver.1.3), PCMM Level 5, ISO 9001:2015, ISO 27001:2013 certified. Noida BPO center is PCMM Level 5, ISO 27001:2013 certified and also for specific client(s) it is SOC2 Type 2, HIPAA compliant and PCI-DSS (ver.3.2.1) certified for (IT Infrastructure along with the projects/process/applications in scope).

To maintain and strengthen competitive strengths, R Systems continues to make investments in its unique and proprietary ®with best practices, tools and methodologies for flawless execution and consistent delivery of high quality software.

The pSuite framework offers services along the entire software lifecycle that includes technology consulting, architecture, design and development, professional services, testing, maintenance, customer care and technical support. R Systems expects that its technology focus, investment in processes, talent and methodologies will enable it to distinguish itself from competition as it seeks to provide services to technology /product companies.

6. Directors & Key Managerial Personnels (KMP)

Mr. Avirag Jain was appointed as Whole-time Director (Designated as Director and Chief Technology Officer) of the Company for a period of three years commencing from August 03, 2017 at the 24^th Annual General Meeting of the Company held on May 25, 2018.

Pursuant to the provisions of Section 152 of the Companies Act, 2013 (“Act”) read with Articles of Association of the Company, Mr. Avirag Jain, Director and Chief Technology Officer, is liable to retire by rotation at the ensuing Annual General Meeting (AGM) and being eligible offers himself for re-appointment.

The brief profile of Mr. Avirag Jain proposed to be re-appointed forms part of the Corporate Governance Report and Notice for convening the AGM.

During the year under review, the Board of Directors appointed Mr. Bhasker Dubey as Company Secretary & Compliance Officer w.e.f. February 10, 2018 upon resignation of Mr. Ashish Thakur.

Further, on December 19, 2018, shareholders approval was accorded for re-appointment of Mr. Satinder Singh Rekhi as Managing Director for a period of 5 years w.e.f. January 01, 2019.

None of the directors of the Company is disqualified as per the provisions of Section 164(2) of the Act. The Directors of R Systems have made necessary disclosures, as required under various provisions of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Hereinafter referred as “Listing Regulations”).

As required under Section 149 of the Companies Act, 2013 and Listing Regulations, all the Independent Directors, have submitted the declarations that they meet the criteria of independence as laid down therein.

7. Employees Stock option Plans / Schemes

The industry in which R Systems operates is people intensive and R Systems believes that human resources play a pivotal role in the sustainability and growth of the Company. R Systems has always believed in rewarding its employees with competitive compensation packages for their dedication, hard work, loyalty and contribution towards better performance of the Company. To enable more and more employees to be a part of the financial success of the Company, retain them for future growth and attract new employees to pursue growth, R Systems has set up employees stock option plans / schemes from time to time for its employees and for the employees of its subsidiaries. As on the date of this report, the Company is having following stock option plans:

- R Systems International Ltd. Employees Stock Option Plan Year 2001 (Formerly known as Indus Software Employees Stock Option Plan - Year 2001): Initially formulated for the employees of Indus Software Private Limited which got amalgamated with R Systems and the plan continued as per the scheme ofamalgamation approved by the Hon’ble High Courts of Delhi and Mumbai. As on December 31, 2018, no stock options are in force under this plan.

- R Systems International Limited Employee Stock Option Scheme 2007: For the employees of R Systems and its subsidiaries. As on December 31, 2018, there are 75,000 stock options in force under this plan.

The aforesaid plans are in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014 (“Employee Benefit Regulations”) and there has been no material changes to these Plans during the Financial Year 2018. The summary information of aforesaid Employee Stock Option Plans/ Schemes of the Company is provided under Notes to Accounts of Standalone Financial Statements of this Annual Report. Refer to Notes to accounts of the Standalone Financial Statements of this Annual Report for details on accounting policy. Disclosure as required under Employee Benefits Regulations read with SEBI circular no. CIR/CFD/POLICYCELL/2/2015 dated June 16, 2015 are available on the Company’s website: https://www.rsystems. com/investors-info/annual-reports/.

No employee was granted options under the aforesaid Plans/ Schemes, during the year, equal to or exceeding 1% of the issued capital.

8. Liquidity and Borrowings - Consolidated Financial Statement

The consolidated cash and cash equivalent as at December 31, 2018 were Rs. 841.17 mn. as against Rs. 929.02 mn. as on December 31, 2017. Net cash generated from operating activities were Rs. 311.22 mn. for the year ended December 31, 2018 compared to Rs. 365.24 mn. for the year ended December 31, 2017. Cash used in investing activities were Rs. 350.45 mn. for the year ended December 31, 2018 and comprised of Investment in long term deposit with bank Rs. 293.84 mn. (net), purchase of fixed assets of Rs. 165.87 mn. and Investment in liquid mutual fund Rs. 140 mn. as offset by proceeds from redemption of debenture Rs. 175.12 mn., interest income Rs. 64.62 mn., rental income from investment property Rs. 6.56 mn. and sale of fixed assets Rs. 2.96 mn. Cash used in financing activities were Rs. 87.86 mn. for the year ended December 31, 2018 and mainly consist of Rs. 85.49 mn. on account of payment of dividend (including CDT) (net).

R Systems’ policy is to maintain sufficient liquidity to fund the anticipated capital expenditures, operational expenses and investments for strategic initiatives.

R Systems has a credit facility from the Axis Bank Limited amounting to Rs. 380 mn. (including non-fund based credit limit of Rs. 180 mn. for currency derivatives). As at December 31, 2018, the total credit balance was nil under fund based line of credit. Loan payable as at December 31, 2018 comprises of loan for motor vehicles purchased amounting to Rs. 9.36 mn. and finance lease obligation of Rs. 10.61 mn. for SEZ premises.

9. Changes in the Capital Structure

During the year under review, the following changes took place in the capital structure of the Company:

At the beginning of the financial year ended December 31, 2018, the share capital structure of the Company was as follows:

Particulars	equity Shares
	of Re. 1/- each
Authorised Share Capital	200,000,000
Issued, Subscribed and Paid up	123,952,925
share Capital

During the year under review, the Company had issued 37,500 equity shares of Re. 1/- each pursuant to exercise of employees stock options granted under the R Systems International Limited Employees Stock Option Scheme - 2007. Consequent to the said allotment the issued and paid up share capital of the Company was enhanced to Rs. 123,990,425/- divided into 123,990,425 equity shares of face value of Re. 1/- each.

Further, pursuant to the Scheme of Amalgamation between GM Solutions Private Limited (“GM Solutions”) and R Systems International Limited (“Company”) as approved by the Hon’ble National Company Law Tribunal (“NCLT”) vide order dated December 07, 2018, the following changes took place in the share capital of the Company:

1. Authorised Share Capital of the Company was enhanced with the Authorised Capital of GM Solutions i.e. by Rs. 6,000,000/- (Rupees Sixty Lakhs only).

2. The Company has allotted 29,746,353 equity shares of Re. 1/- each on December 21, 2018 to the shareholders of GM Solutions in proportion to there respective shareholding in GM Solutions and cancelled/ extinguished 29,746,353 equity shares of Re. 1/- each of the Company as held by GM Solutions upon aforesaid allotment.

Therefore, as on December 31, 2018, the share capital structure of the Company is as follows:

Particulars	equity Shares
	of Re. 1/- each
Authorised Share Capital	206,000,000
Issued, Subscribed and Paid	123,990,425
up Share Capital

During the financial year ended December 31, 2018, the Company has not issued any shares with differential voting rights or any sweat equity shares. Therefore, disclosure pursuant to Section 43(a)(ii) & Section 54(1)(d) of the Act are not applicable. Further, no disclosure is required under Section 67 (3) (c) of the Act, in respect of voting rights not exercised directly by employees of the Company as the provisions of the said section are not applicable.

10. Scheme of Amalgamations and Arrangements

a. During the year under review, the Company has received the order of the Hon’ble National Company Law Tribunal (“NCLT”) dated December 07, 2018 approving the Scheme of Amalgamation between GM Solutions Private Limited and R Systems International Limited and their respective Shareholders and Creditors. The appointed date of the scheme was January 01, 2018. The said order was filed with the Registrar of Companies, NCT of Delhi & Haryana on December 21, 2018.

b. Subsequent to the year ended December 31, 2018, the Company has withdrawn the Scheme of Arrangement for re-organization and reduction of equity share capital of the Company under Section 230 of the Act between R Systems International Limited and its Shareholders and Creditors and the Hon’ble National Company Law Tribunal, New Delhi has allowed the Company to withdraw the Scheme vide order dated January 03, 2019;

11. Buyback

Subsequent to the year ended December 31, 2018, the Board of Directors of the Company at its meeting held on January 15, 2019 approved the Buyback of up to 3,690,000 (Thirty Six Lakhs Ninety Thousand) fully paid-up equity shares of face value of Re. 1/- each (“Equity shares”), representing 2.98% of the total paid-up equity share capital of the Company, from all the equity shareholders of the Company as on the record date i.e. Friday, February 01, 2019, on a proportionate basis, through the “tender offer” route, at a price of Rs. 65/- (Rupees Sixty Five only) per equity share for an aggregate amount of up to Rs. 239,850,000 (Rupees Twenty Three Crores Ninety Eight Lakhs Fifty Thousand Only).

The Corporate Action for extinguishment of aforesaid 3,690,000 equity shares has been completed on April 15, 2019.

12. Registered office

Subsequent to the year ended December 31, 2018, the registered office of the Company has been sifted from B 104A, Greater Kailash, Part-I, New Delhi-110048 to GF-1-A, 6, Devika Tower, Nehru Place, New Delhi-110019 on April 23, 2019.

13. Material changes affecting the financial position of the Company

Except as detailed elsewhere in this report, there was no other significant event subsequent to the balance sheet date till the date of this report which would materially affect the financial position of the Company.

14. Particulars of Conservation of Energy, Technology Absorption and Foreign exchange earnings and outgo

The particulars as prescribed under Section 134 (1) (m) of the Companies Act, 2013, read with rule 8 of Companies (Accounts) Rules, 2014 for the year ended December 31, 2018 are as follows:

A. Conservation of energy

Though Your Company does not have energy intensive operation, every endeavor has been made to ensure the optimal usage of energy, avoid wastage and conserve energy.

R Systems constantly evaluates new technologies and makes appropriate investments to be energy efficient.

During the year ended December 31, 2018, R Systems adopted various energy conservation options / technologies and took measures to reduce energy consumption by using energy efficient equipment and devices, replacing existing CFL fittings with LEDs fittings to reduce power consumption, timely preventive maintenance of all major and minor equipment. The air is conditioned with energy efficient compressors for central air conditioning and with split air conditioning for localized areas.

R Systems is always in search of innovative and efficient energy conservation technologies and applies them prudently. However, R Systems being in the software industry, its operations are not energy intensive and energy costs constitute a very small portion of the total cost, therefore, the financial impact of these measures is not material.

B. Technology absorption

1. Efforts made towards technology absorption

The Company has established center of excellence in specific digital technologies like Cloud, Analytics, RPA etc. to strengthen competencies and enhance offerings across focused verticals i.e. Technology, Telecom, Healthcare & Life Science, Banking & Insurance and Retail & e-commerce.

2. Benefits derived as a result of the above efforts

Our investment in digital technologies is helping us to enhance market reach and support our revenue growth.

3. Technology imported during the last 3 years

Not applicable, as no technology has been imported by the Company.

4. Expenditure incurred on Research and development

Driven by our core value of innovation, we believe that innovation is not just a practice but an essential component embedded within R Systems organizational DNA. We are now operating in a digital world. Digital transformation is one of our core areas where we partner with businesses to make them competitive and successful in today’s hyper-changing environment. Over the year ended December 31, 2018, your Company has invested in research and development in the area of digital technologies like Cloud, Analytics, RPA etc. in addition to strengthening and up-grading proprietary solutions and frameworks.

C. Foreign Exchange Earnings and Outgo (Accrual Basis)

A significant percentage of R Systems revenues are generated from exports. The development and service centre in Noida is registered with the Software Technology Park of India as 100% Export Oriented Undertaking. All efforts of the Company are geared to increase the business of software exports in different products and markets. We have made investments in sales and marketing activities in various growing markets.

The total foreign exchange used and earned by R Systems during the year as compared with the previous year is as follows:

(Rs. in Millions)

S. No.	Particulars	Financial Year ended
		31.12.2018	31.12.2017
(a)	Earnings (Accrual Basis)	3,104.51	2,586.04
(b)	Expenditure (Accrual Basis)	456.94	343.98
(c)	CIF value of imports	54.65	26.68

15. Subsidiaries

As on December 31, 2018, R Systems has twenty five subsidiaries. The name and country of incorporation of those subsidiaries are as follows:

S. No.	Name of the Subsidiaries	Country of incorporation
1.	R Systems (Singapore) Pte. Ltd	Singapore
2.	R Systems, Inc.	U.S.A.
3.	R Systems Technologies Ltd. (Formerly known as Indus Software, Inc.)	U.S.A.
4.	RSYS Technologies Limited (Formerly Systemes R. International Ltee)	Canada
5.	Computaris International Limited	U.K.
6.	ECnet Limited	Singapore
7.	ECnet (M) Sdn. Bhd.#	Malaysia
8.	ECnet, Inc.#5	U.S.A.
9.	ECnet (Hong Kong) Limited#	Hong Kong
10.	ECnet Systems (Thailand) Co. Ltd.#	Thailand
11.	ECnet Kabushiki Kaisha*	Japan
12.	ECnet (Shanghai) Co. Ltd.#	People’s Republic of China
13.	ICS Computaris International Srl@	Moldova
14.	Computaris Malaysia Sdn. Bhd.@	Malaysia
15.	Computaris Polska sp zo.o.@	Poland
16.	Computaris Romania SRL@	Romania
17.	Computaris Philippines Pte. Ltd. Inc. @	Philippines
18.	Computaris Suisse Sarl@	Switzerland
19.	IBIZ Consulting Pte. Ltd. (Formerly known as IBIZCS Group Pte. Ltd.)*	Singapore
20.	IBIZ Consulting Services Pte Ltd.”	Singapore
21.	IBIZ Consulting Services Sdn. Bhd.”	Malaysia
22.	PT. IBIZCS Indonesia”	Indonesia
23.	IBIZ Consultancy Services India Private Limited”	India
24.	IBIZ Consulting Services Limited”	Hong Kong
25.	IBIZ Consulting Services	People’s Republic
	(Shanghai) Co. Ltd. %	of China

# Wholly-owned subsidiaries of ECnet Limited, Singapore being 99.75% subsidiary of R Systems (The shareholding held by the Company and R Systems (Singapore) Pte Limited is 69.37% and 30.38%, respectively).

@ Wholly-owned subsidiaries of Computaris International Limited being 100% subsidiary of R Systems.

* Wholly-owned subsidiary of R Systems (Singapore) Pte Limited being 100% subsidiary of R Systems.

^A Wholly-owned subsidiaries of IBIZ Consulting Pte. Ltd. (Formerly known as IBIZCS Group Pte. Ltd.) being 100% subsidiary of R Systems (Singapore) Pte Limited being 100% subsidiary of R Systems.

% Wholly-owned subsidiary of IBIZ Consulting Services Limited - Hong Kong being 100% Subsidiary of IBIZ Consulting Pte. Ltd.

$ Liquidated w.e.f. January 28, 2019.

During the year ended December 31, 2018, the Company has invested CAD 1,000,000 (Canadian Dollar One Million only) in RSYS Technologies Limited towards equity contribution. Computaris Suisse Sarl, Switzerland, wholly-owned subsidiary of Computaris International Limited, was incorporated on April 27, 2018. Computaris USA Inc., U.S.A., wholly-owned subsidiary of Computaris International Limited, was liquidated on October 22, 2018.

Subsequent to the financial year ended December 31, 2018, R Systems Inc., USA, wholly-owned subsidiary of the Company, acquired, 100% interest in Innovizant LLC, a Chicago (USA) w.e.f. January 01, 2019.

Further, Subsequent to the year ended, ECnet Inc., USA, wholly-owned subsidiary of the ECnet Ltd., was dissolved w.e.f. January 28, 2019.

As on date of this report, all the twenty five subsidiaries except IBIZ Consultancy Services India Private Limited were incorporated and based outside India. In addition to providing services to various international clients these subsidiaries also help to generate revenues for R Systems.

During the year under review, no other corporate restructuring activity except as stated in this report was done by the Company.

The Board of Directors of the Company regularly reviews the affairs of these subsidiaries. Policy for determining material subsidiaries of the Company is available on the website of the Company at https://www.rsystems.com/investors-info/corporate-governance/ As per the Listing Regulations, the Company has two unlisted material subsidiary namely, R Systems, Inc., U.S.A. and Computaris International Limited, U.S.A.

A statement containing the salient features of the financial statement of our subsidiaries in the prescribed Form AOC-1 is attached at the end of consolidated financial statements of the Company. The statement also provides the details of performance, financial position of each of the subsidiaries.

Further, the audited annual accounts and related detailed information of our subsidiaries, where applicable, will be made available to shareholders seeking such information at any point of time. The annual accounts of the subsidiary companies will also be available for inspection by any shareholder at Registered Office of R Systems i.e. GF-1-A, 6, Devika Tower, Nehru Place, New Delhi-110019 and Corporate Office of R Systems i.e. C-40, Sector 59, Noida (U.P.) - 201307 and Registered Offices of the subsidiary companies concerned during business hours. The same will also be hosted on R Systems’ website i.e. www.rsystems.com.

16. Particulars of employees

The details required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are annexed as Annexure A and forms part of this report. Further, as required under the provisions of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the name and other particulars of employees are set out in Annexure B and forms part of this report.

17. Directors’ responsibility statement

Pursuant to the requirement of Section 134 (3) (c) read with Section 134(5) of the Act with respect to directors’ responsibility statement, your directors hereby confirm that:

1) In the preparation of the annual accounts for the financial year ended December 31, 2018, the applicable accounting standards had been followed along with proper explanation relating to material departures;

2) the directors had 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 ended December 31, 2018 and of the profit and loss of the Company for that period;

3) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4) the directors had prepared the annual accounts for the financial year ended December 31, 2018 on a going concern basis;

5) the directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

6) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

18. Auditors

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, [Firm’s Registration No. 117366W/ W-100018], were appointed as the Statutory Auditors of your Company in the Annual General Meeting held on May 15, 2017 for a term of five years until the conclusion of the 28^th AGM of the Company to be held in the year 2022. The Ministry of Corporate Affairs vide notification dated May 07, 2018 has obliterated the requirement of seeking Members’ ratification at every AGM on appointment of statutory auditors during their tenure of five years. M/s. Deloitte Haskins & Sells LLP have confirmed that they are not disqualified from continuing as Auditors of the Company.

Further, the auditors’ report and Financial Statements being self-explanatory, do not call for any further comments by the Board of Directors as there are no qualifications, reservation or adverse remark or disclaimer. During the year 2018, the Auditors has not reported any matter under Section 143(12) of the Act.

19. Audit committee

R Systems has a qualified and independent Audit Committee. During the year under review, there was no change in the composition of Audit Committee.

The constitution of the Committee is in compliance with the provisions of the Act and the Listing Regulations.

Detailed description of the Audit Committee has been given in Corporate Governance Report. The terms of reference and role of the Committee are as per the guidelines set out in the Listing Regulations and Section 177 of the Act and rules made thereunder and includes such other functions as may be assigned to it by the Board from time to time.

The Committee has adequate powers to play an effective role as required under the provisions of the Act and Listing Regulations. During the year under review, the Board of Directors of the Company had accepted all the recommendations of the Audit Committee.

20. Prevention and prohibition of sexual harassment of women at work place

At R Systems, it is our desire to promote a healthy and congenial working environment irrespective of gender, caste, creed or social class of the employees. We value every individual and are committed to protect the dignity and respect of every individual. The Company has always endeavored for providing a better and safe environment free of sexual harassment at all its work places. Consequent to the enactment of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder, the Management of R Systems International Limited has constituted an Internal Complaints Committee (ICC) to deal with any complaints or issues that may arise, in the nature of sexual harassment of women employees. The Company has also prepared and implemented Policy for Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace. During the year ended December 31, 2018, there was 1 (one) case reported to ICC of sexual harassment, which was dully investigated and resolved by the ICC.

21. Corporate Governance

As required under Listing Regulations, the detailed report on corporate governance is given as Annexure C to this report and the certificate obtained from a Practising Company Secretary regarding compliance of the conditions of corporate governance as stipulated in the said clause is annexed as Annexure D to this report.

22. Deposits

The Company has neither invited nor accepted any deposits from the public within the purview of the Act and the Rules made thereunder, no amount of principal or interest was outstanding on the date of the balance sheet.

23. Customer relations

R Systems recognises that the customers have a choice of service providers and the directors would like to place on record their gratitude on behalf of the Company for the business provided by them. The Company’s quality policy mandates that the voice of the customer is obtained on a regular basis. We constantly review the feedback and incorporate its impact into our delivery systems and communications.

24. Stakeholder’s relations

R Systems is inspired by its customers and its employees transform that inspiration and customers’ needs into value for all stakeholders. We thank all R Systems employees worldwide for their hard work, commitment, dedication and discipline that enables the Company to accomplish its customer commitments and commitments to all its stakeholders. R Systems conducts regular employee satisfaction surveys and open house meetings to get employee feedback. R Systems is constantly validating key employee data with industry and peer group business. These practices have helped the Company to achieve many of its business goals and have been recognised in many industry surveys over the last few years. The open door policy of our senior management team ensures that the feedback loop is completed promptly. We thank our shareholders for their continuous support and confidence in R Systems. We are aware of our responsibilities to our shareholders to provide full visibility of operations, corporate governance and creating superior shareholder value and we promise to fulfill the same.

25. Management discussion and analysis report

In terms of the Listing Regulations management discussion and analysis report is given as Annexure E to this report.

26. Secretarial Report and Compliance with the Secretarial Standards

M/s. Chandrasekaran Associates, Company Secretaries, has been appointed by the Board of Directors of the Company to carry out the Secretarial Audit under the provision of Section 204 of the Act for the financial year ended December 31, 2018. The Secretarial Audit report for financial year ended on December 31, 2018 is enclosed as Annexure F.

Further, the Secretarial auditors’ report being self-explanatory, does not call for any further comments by the Board of Directors as there are no qualifications, reservation or adverse remark or disclaimer made in the audit report for the financial year ended December 31, 2018.

During the year 2018, the Company has complied with the applicable Secretarial Standards issued by the Institute of Companies Secretaries of India.

27. Maintenance of Cost Records

The Company is not required to maintain Cost records under Section 148(1) of the Act.

28. Vigil Mechanism / Whistle Blower Policy

In order to provide a mechanism to employees of the Company to disclose any unethical and improper practices or any other alleged wrongful conduct in the Company and to prohibit managerial personnel from taking any adverse action against those employees, the Company has laid down a Vigil Mechanism also known as Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Vigil Mechanism or Whistle Blower Policy is explained in the Corporate Governance Report and also posted on the website of the Company.

29. Criteria for selection of candidates for Membership on the Board of Directors and the Remuneration Policy

As per the provisions of Section 178 of the Act and other relevant provisions and on the recommendation of Nomination & Remuneration Committee, the Board has framed a criteria for selection of Directors, a policy for remuneration of directors, key managerial personnel (“KMP”), senior management personnel (“SMP”) and other employees. The Criteria for selection of candidates for Membership on the Board of Directors and the remuneration policy are stated in the Corporate Governance Report.

30. Meetings of the Board

The Board of the Company and its Committees meet at regular intervals to discuss, decide and supervise the various business policies, business strategy, Company’s performance and other statutory matters. During the year under review, the Board has met eight times. The details of the meeting of the Board and its Committees are given in Corporate Governance Report. The intervening gap between two Board Meetings did not exceed 120 days.

31. Board Evaluation

Pursuant to the provisions of the Act and the Listing Regulations, the Board has carried out an annual performance evaluation of its own performance, its committees and the individual directors. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

32. Particulars of Loans, Guarantees or investments under Section 186 of the Companies Act, 2013

During the year ended December 31, 2018, the Company has invested CAD 1,000,000 (Canadian Dollar One Million only) in RSYS Technologies Limited by way of acquisition of additional shares.

Details of loan, guarantees and investments covered under section 186 of the Companies Act, 2013 forms part of the notes to accounts of the financial statements.

33. Related Party Disclosure

All the Related Party Transactions entered during the year were in the ordinary course of business and on arm’s length basis.

There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict of interest with the company at large. All the related party transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. A statement of all related party transactions is presented before the Audit Committee on quarterly basis, specifying the terms & conditions of the transactions. The policy on Related Party Transactions as approved by the Board is uploaded on the Company’s website at the weblink as mentioned in the Corporate Governance Report. Details of particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Act in form AOC-2 has been enclosed herewith as Annexure G.

34. Risk Management

The Company is not required to form a Risk Management Committee. The Company has developed and implemented a risk management policy for identifying the risk associated with business of the Company and measures to be taken by including identification of elements of risk and measures to control them.

35. Corporate Social Responsibility

In compliance with the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has constituted a Corporate Social Responsibility Committee (‘CSR Committee’).

During the year under review, there was no change in the composition of CSR Committee.

The detailed terms of reference of the CSR Committee has been provided in the Corporate Governance Report. In pursuit of the responsibilities entrusted to the CSR Committee, a policy on Corporate Social Responsibility has been prepared and adopted by the Board which is available at the website of the Company at following link: https://www.rsystems.com/investors-info/corporate-governance/ Annual Report on CSR activities of the Company in format prescribed in Companies (Corporate Social Responsibility Policy) Rules, 2014 is enclosed as Annexure H and forms part of this report.

36. Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT - 9 is enclosed as Anneuxre i to this Report.

37. internal Control System and internal Financial Controls

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Internal Auditors and the management monitors and evaluates the efficacy and adequacy of the internal control system in the Company, its compliance with operating, accounting procedures and policies at all locations of the Company. Audit observations of Internal Auditors and corrective actions thereon are presented to the Audit Committee of the Board. To maintain its objectivity and independence, the Internal Auditor reports to the Audit Committee.

The Board of your Company has laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively.

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, the statutory auditors of the Company, has audited the financial statements included in this annual report and have issued unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting.

38. Significant and Material orders Passed by the Regulators or Courts

There are no significant or material orders passed by the Regulators/ Courts which would impact the going concern status of the Company and it’s operations in future.

39. Acknowledgments

Your directors once again take this opportunity to thank the employees, investors, clients, vendors, banks, business associates, regulatory authorities including stock exchanges, Software Technology Park of India, Department of Commerce, the Central Government, State Government of Delhi, Uttar Pradesh, Tamil Nadu for the business support, valuable assistance and co-operation continuously extended to R Systems. Your directors gratefully acknowledge the trust and confidence and look forward for their continued support in the future.

On behalf of the Board

For R Systems International Limited

Sd/- Sd/-

Satinder Singh Rekhi Lt. Gen. Baldev Singh (Retd.)

(DIN: 00006955) (DIN: 00006966)

(Managing Director) (President & Senior Executive Director)

Place : Singapore Place : NOIDA (U.P.)

Date : May 02, 2019 Date : May 02, 2019

---

Dec 31, 2016

Dear Shareholders,

Your directors take great pleasure in presenting the Twenty Third Annual Report on the business and operations of R Systems International Limited ("R Systems" or the "Company") together with the audited statements of accounts for the year ended December 31, 2016.

1. Financial Results

a. Standalone financial results of R Systems

(Rs. in Million)

Particulars	Financial Year ended
	31.12.2016	31.12.2015
Total income	2,755.44	2,988.83
Profit before depreciation, exceptional items and tax	636.70	625.69
Less : Depreciation and amortisation expense	69.30	95.80
Add : Exceptional items1	46.35	648.07
Profit before tax	613.75	1,177.96
Less : Current tax	224.94	262.82
Less: MAT credit entitlement	(15.13)	-
Less : Deferred tax charge / (credit)	(8.20)	8.70
Profit after tax	412.14	906.44
Surplus in the statement of profit and loss
Balance as per last financial statements	785.80	494.41
Add: Profit for the current year	412.14	906.44
Less: Appropriations
Interim dividend5	-	501.10
Tax on interim dividend5	-	102.27
Adjustment on account of aligning the useful life of fixed asset in accordance with Schedule II of the Companies Act, 20132		18.87
Tax impact of above adjustment**	-	(6.41)
Proposed dividend written back on buyback$	-	(0.65)
Tax on proposed dividend written back on buyback$	-	(0.13)
Total Appropriation	-	615.05
Net surplus in statement of profit and loss	1,197.94	785.80

b. consolidated financial results of R Systems and its Subsidiaries

(Rs. in Million)

Particulars	Financial Year ended
	31.12.2016	31.12.2015
Total income	6,009.44	6,148.45
Profit before depreciation, exceptional items and tax	825.64	812.06
Less : Depreciation and amortisation expense	115.12	140.23
Add : Exceptional items*	46.35	603.10
Profit before tax	756.87	1,274.93
Less : Current tax	244.03	290.08
Less: MAT credit entitlement	(15.13)	-
Less : Deferred tax charge / (credit)	(8.91)	6.55
Profit after tax	536.88	978.30
Surplus in the statement of profit and loss
Balance as per last financial statements	1,022.61	659.36
Add: Profit for the current year	536.88	978.30
Less: Appropriations
Interim dividend5	-	501.10
Tax on interim dividend5	-	102.27
Adjustment on account of aligning the useful life of fixed asset in accordance with Schedule II of the Companies Act, 2013**		18.87
Tax impact of above adjustment**	-	(6.41)
Proposed dividend written back on buyback5	-	(0.65)
Tax on proposed dividend written back on buyback5	-	(0.13)
Total Appropriation	-	615.05
Net surplus in statement of profit and loss	1,559.49	1,022.61

• refer Note No. 23 of consolidated financial statements.

$ refer Note No. 4 of consolidated financial statements.

** refer Note No. 33 of consolidated financial statements.

2. Results of operations Standalone Accounts

• Total income during the year 2016 was Rs. 2,755.44 mn. as compared to Rs. 2,988.83 mn. during the year 2015.

• Profit after tax including exceptional items was Rs. 412.14 mn. during the year 2016 as compared to Rs. 906.44 mn. during

2015.

• Basic earnings per share (of face value of Re. 1/- each) was Rs. 3.26 for the year 2016 as compared to Rs. 7.14 for the year 2015.

consolidated Accounts

• Consolidated total income during the year 2016 was Rs. 6,009.44 mn. as compared to Rs. 6,148.45 mn. during the year 2015.

• Profit after tax including exceptional items was Rs. 536.88 mn. during the year 2016 as compared to Rs. 978.30 mn. during

2015.

• Basic earnings per share (of face value of Re. 1/- each) was Rs. 4.24 for the year 2016 as compared to Rs. 7.70 for the year 2015.

The state of affairs of the Company is presented as part of Management Discussion and Analysis Report forming part of this report.

3. Appropriations and Reserves Dividend

The Board of Directors (the "Board") has not recommended any dividend for the financial year ended December 31, 2016.

Transfer to Reserves

In order to augment resources your directors do not propose to transfer any amount to reserves.

4. Business

R Systems is a leading provider of product engineering services, business process outsource services and also offers own product suite in Manufacturing & Logistic vertical. R Systems diversified offering includes:

I Services Group

R Systems defines its product engineering business as Integrated Product Life Cycle Management (iPLM) services where R Systems helps ISVs and other companies to accelerate the speed to market for their products and services with a high degree of time and cost predictability by using our proprietary pSuite framework and global delivery model.

Under iPLM Services, R Systems delivers solutions and services in the area of Information Technology and Information Technology enabled services (ITES). The IT services cover application development, systems integration and support & maintenance of applications. Under the ITES, we cover technical support and customer care for IT and Hi-Tech electronic manufacturers, high-end quality process management and revenue and claims management using our global delivery model.

R Systems competitive advantage in iPLM Services is further enhanced by its industry specific domain expertise, global delivery capabilities, multi-language support capabilities, industry best quality and security certification and agile development methodologies supported by R Systems'' proprietary pSuite framework.

Solution offerings

ECnet Supply Chain provide solutions for holistic management of the complex interaction between an organisation and its trading

partners. The integrated solution aims to reduce all supply chain costs through improved collaboration and optimisation. The solutions are robust and scalable and give measurable ROI to clients that meets the clients'' strategic business goals.

Further, ECnet also operates as a Gold Channel Partner for one of the largest business software companies in the world to resell, implement and support enterprise solutions of ERP, WMS, Service Management, BI and Performance Management. It mainly serves small to medium-sized businesses in the manufacturing and distribution industries. These products present an opportunity to cross and up sell these solutions since these are adjunct to ECnet''s own product offerings.

I BIZ, is a Microsoft Gold Channel Partner and is specialized in deploying Microsoft business management solution suites, including enterprise resource planning, customer relationship management, point of sales, mobility, business intelligence and portals. IBIZ operates across Singapore, Malaysia, China, Indonesia, Hong Kong and India.

R Systems is focused on key verticals i.e. Telecom & Digital Media, Banking & Finance, Health Care, Manufacturing & Logistics and Retail & E-Commerce. Telecom and Digital Media is the largest industry vertical which contributes 29 percent of the total consolidated revenue for the year ended December 31, 2016. Further, with the deep expertise in the key vertical like Telecom & Digital Media, Banking & Finance, Healthcare and Retail & E-Commerce, we have horizontally embraced analytics solutions, Mobility, IoT and Cloud across these verticals to bring operational efficiency and also create a vital information pool reflecting on the economical, statistical, social media, speech metrics of the customers. R Systems rapidly growing customer list includes a variety of Fortune 1000, government and mid-sized organisations across a wide range of industry verticals and has served twenty one million dollor plus customer during the year 2016.

customers and Delivery centres

R Systems rapidly growing customer list includes a variety of Fortune 1000, government and mid-sized organizations across a wide range of industry verticals including Banking and Finance, Independent Software Vendors, Telecom and Digital Media, Retail & E-Commerce, Healthcare, Manufacturing and Logistic Industries. R Systems maintains fifteen development and service centres and using our global delivery model, we serve customers in the USA, Europe and the Far East. There were no changes in the nature of the Company''s business and generally in the classes of business in which the Company has an interest and in the business carried on by the subsidiaries during the year under review. For details of Company''s subsidiaries please refer note number 13 relating to subsidiaries.

The Company has set up its new SEZ unit vide ''Letter of Approval'' (LOA) received from Department of Commerce, Ministry of Commerce & Industry, Government of India on October 19, 2016 measuring approx. 15,000 sq. ft. located at Greater Noida West (NCR). Subsequent to the year end, the Company has commenced its operation in SEZ premises on January 25, 2017.

R Systems has continuously invested in processes, people, training, information systems, quality standards, frameworks, tools and methodologies to mitigate the risks associated with execution of projects. Adoption of quality models and practices such as the Capability Maturity Model Integration (CMMI) and Six Sigma practices for processes have ensured that risks are identified and mitigated at various levels in the planning and execution process. R Systems journey on various quality standards/models is as follows:

During the year 2016, all QMS artifacts of the Company have been migrated from ISO 9001:2008 to new ISO 9001:2015 standard and process wise risk assessment as per the new standard has been carried out, the formal certificate is yet to be received. Noida BPO Center has been certified as PCI-DSS (ver. 3.1) compliant for the call Analytic Services provided to one of the major client.

As of the date of this report, Noida IT centre is CMMI level 5, PCMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2013 certified; Noida BPO centre is PCMM Level 5, ISO 9001 : 2008, ISO 27001 : 2013 certified and PCI-DSS (ver.3.1) certified for call analytics services.

To maintain and strengthen competitive strengths, R Systems continues to make investments in its unique and proprietary jsjite ® with best practices, tools and methodologies for flawless execution and consistent delivery of high quality software.

The pSuite framework offers services along the entire software lifecycle that includes technology consulting, architecture, design and development, professional services, testing, maintenance, customer care and technical support. R Systems expects that its technology focus, investment in processes, talent and methodologies will enable it to distinguish itself from competition as it seeks to provide services to technology / product companies.

6. Directors

During the year under review, the following changes took place in the office of directors of the Company.

Mr. Raj Kumar Gogia, Mr. Gurbax Singh Bhasin, Mr. Suresh Paruthi and Mr. Amardeep Singh Ranghar, Non-Executive Independent Directors of the Company could not be re-appointed as Independent Director of the Company at twenty second Annual General Meeting held on June 13, 2016.

On June 29, 2016, Mr. Aditya Wadhwa and Mr. Kapil Dhameja were appointed as Additional Directors in the capacity of Independent director.

As per approval of shareholders through Postal Ballot on September 09, 2016, Mrs. Ruchica Gupta (erstwhile NonExecutive Director of the Company) was appointed as an Independent Director of the Company w.e.f. June 29, 2016.

Details of the Directors proposed to be appointed and re-appointed at the ensuing Annual General Meeting are as follows:

At the ensuing Annual General Meeting Lt. Gen. Baldev Singh (Retd.), President & Senior Executive Director of the Company is liable to retire by rotation in accordance with the provisions of Section 152 of the Companies Act, 2013 read with the Articles of Association of the Company and being eligible, offers himself for re-appointment as director of the Company.

Further, on the recommendation of the Nomination & Remuneration Committee of the Company, Mr. Aditya Wadhwa and Mr. Kapil Dhameja, Non- Executive Independent Directors of the Company are proposed to be appointed as Independent Director pursuant to the provision of Section 149 of the Companies Act, 2013 and rules made thereunder at the ensuing Annual General Meeting for the first term of five years commencing from June 29, 2016.

As required under Section 149 of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Hereinafter referred as "Listing Regulations"), Mr. Aditya Wadhwa and Mr. Kapil Dhameja have submitted the declaration that they meet the criteria of independence as laid down therein.

The brief profile of the aforesaid directors proposed to be appointed/re-appointed forms part of the Corporate Governance Report.

None of the directors of the Company is disqualified as per the provisions of Section 164(2) of the Companies Act, 2013. The directors of R Systems have made necessary disclosures, as required under various provisions of the Companies Act, 2013 and Listing Regulations.

7. employees Stock option Plans / Schemes

The industry in which R Systems operates is people intensive and R Systems believes that human resources play a pivotal role in the sustainability and growth of the Company. R Systems has always believed in rewarding its employees with competitive compensation packages for their dedication, hard work, loyalty and contribution towards better performance of the Company. To enable more and more employees to be a part of the financial success of the Company, retain them for future growth and attract new employees to pursue growth, R Systems has set up employees stock option plans / schemes from time to time for its employees and for the employees of its subsidiaries. As on the date of this report, the stock option plans of R Systems are as follows:

• R Systems International Ltd. Employees Stock Option Plan Year 2001 (Formerly known as Indus Software Employees Stock Option Plan - Year 2001): Initially formulated for the

employees of Indus Software Private Limited which got amalgamated with R Systems and the plan continued as per the scheme of amalgamation approved by the Hon''ble High Courts of Delhi and Mumbai. As on the date of this report, no stock options are in force under this plan.

• R Systems International Limited Employee Stock Option Scheme 2007: For the employees of R Systems and its subsidiaries.

• R Systems International Ltd. - Year 2004 Employee Stock Option Plan: For the employees of R Systems and its subsidiaries other than ECnet Limited. The term of the said plan has been expired on December 27, 2015.

Details relating to options approved, granted, vested, exercised, lapsed, in force etc. under the prevailing employees stock option plans / schemes during the year ended December 31, 2016 are as follows:

S. No.	Particulars	R Systems international Ltd. Year - 2004 employee Stock option Plan**	R Systems international Ltd. employees Stock option Plan -Year 2001	R Systems international Limited employee Stock option Scheme 2007
		(a) #	(b)#	(c)“
a.	Total number of shares covered under the plan/scheme	1,995,000	738,980	6,500,000
b.	Pricing Formula	Prevailing Price once the Company''s shares are listed and at the Fair Market Value as per the terms of R Systems International Ltd. -Year 2004 Employees Stock Option Plan on the date such option is granted when the Company''s shares are not listed.	As approved under the "Scheme of Amalgamation" of Indus Software Private Limited with the Company by the Hon''ble High Courts of Delhi and Mumbai.	Rs. 12.07 per option for 6,350,000 options i.e. latest available closing price, prior to the date of the meeting of the Board of Directors / Compensation Committee, in which options are granted, on the stock exchange. Rs. 12.07 per option for 150,000 options as approved by the Compensation Committee.
c.	Options granted during the year	Nil	Nil	150,000
d.	Options vested during the year	Nil	Nil	Nil
e.	Options exercised during the year	Nil	Nil	Nil
f.	The total number of shares arising as a result of exercise of options during the year	Nil	Nil	Nil
g.	Options lapsed during the year	Nil	Nil	35,000
h.	Variation of terms of options during the year	Nil	Nil	Nil
i.	Money realised by exercise of options during the year (Rs.)	Nil	Nil	Nil
j. k.	Total number of options in force at the end of the year Employee wise details of options granted to (during the year)	Nil	Nil	195,280
(i)	Senior managerial personnel5	Nil	Nil	150,000
(ii)	Any other employee who receives a grant in any one year of options amounting to 5% or more of options granted during that year	Nil	Nil	Nil
(iii)	Identified employees who were granted options, during any one 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	Nil
l.	Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of options	N.A.	N.A.	3.25*

# Please note that the details given above for plan (a) and (b) are after making the required adjustments in relation to consolidation of each of the 5 equity shares of Rs. 2 each into 1 equity share of Rs. 10 each as approved by the shareholders in the year 2006 and after Sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/- each as per record date of February 28, 2014.

" The details given above for plan (c) are after making the required adjustment in relation to sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/- each as per the record date of February, 28 2014.

* EPS is Rupees per equity shares of Re. 1/- each i.e. after giving into effect Sub-division of equity shares of Rs. 10 each into equity shares of Re. 1/- each as per record date of February 28, 2014.

** R Systems International Ltd. - Year 2004 Employee Stock Option Plan has been completely expired on December 27, 2015 due to expiry of the term of the plan.

5 During the year ended December 31, 2016, on the recommendation of Compensation Committee and Nomination and Remuneration Committee, the Board of Directors at its meeting held on April 30, 2016, had further granted 150,000 options to Mr. Nand Sardana, Chief Financial Officer (Senior Management Personnel), at an exercise price of Rs. 12.07/- per option under R Systems International Limited Employee Stock Option Scheme 2007.

Disclosures as required under SEBI Employee Benefits Regulations read with Securities and Exchange Board of India circular no. CIR/CFD/POLICY CELL/2/2015 dated June 16, 2015 are available on the Company''s website at http://www.rsystems.com/investors/Annual reports.aspx.

All options granted under R Systems Employees Stock Option Plan - Year 2001 have already been vested and exercised or lapsed and no options were in force as on December 31, 2016.

For options granted during the earlier years under plan (a) and (c) R Systems used the fair value of the stock options for calculating the employees compensation cost.

For the purpose of valuation of the options granted during earlier years, the management obtained fair value of the options at the date of grant under respective schemes from a firm of Chartered Accountants, to determine accounting impact, if any, of options granted over the periods. In the considered opinion of the valuer, the fair value of option determined using ''Black Scholes Valuation Model'' under each of above schemes is "Nil" and thus no accounting thereof is required.

The assumptions used for the purpose of determination of fair value are stated below:

Assumptions	Unit	Scheme (a)*	Scheme (b)**	comments by the valuer
Strike price	Rs.	42	154
Current share price	Rs.	16	140	Taken on the basis of NAV and PECV method of valuation.
Expected option life	No. of Years	5	2.5	Being half of the maximum option life.
Volatility	%	1	0.5	In case of unlisted shares, the volatility may be taken as zero. Verma committee also recommends this.
Risk free return	%	7	11.3	Zero coupon rate estimated from trading government securities for a maturity corresponding to expected life of option - taken from sites of NSE and / or BSE.
Expected dividend Yield	%		15	Company has no set policy so dividend taken as zero. In case of R Systems Employee Stock Option Plan - Year 2001, as the dividend had been paid by the erstwhile company, it has been assumed at 15%.

* R Systems International Ltd. - Year 2004 Employee Stock Option Plan under which the price was based on Rs. 2 per share.

** R Systems Employees Stock Option Plan - Year 2001 under which originally the price was based on Rs. 10 per share for 21,967 shares. As a result of amalgamation of Indus Software Private Limited into R Systems, R Systems had issued 206,822 equity shares of Rs. 2 each pursuant to the swap ratio approved by Hon''ble High Courts of Delhi and Mumbai.

Please note that the details given above for plan (a), and (b) are before making the required adjustments in relation to consolidation of each of the 5 equity shares of Rs. 2 each into 1 equity share of Rs. 10 each as approved by the shareholders in the year 2006 and before Sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/- each as per record date of February 28, 2014.

Further, for the purpose of valuation of the options granted during the year 2005 under R Systems International Ltd. - Year 2004 Employee Stock Option Plan, the management obtained fair value of the options at the date of grant from a firm of Chartered Accountants, to determine accounting impact, if any, of options granted. In the considered opinion of the valuer, the fair value of these options determined using ''Black Scholes Valuation Model'' is "Nil" and thus no accounting thereof is required.

The assumptions used by the valuer for the purpose of determination of fair value are stated below:

Assumptions	Unit	Scheme	comments by the valuer
Strike price	Rs.	42
Current share price	Rs.	13.58	Taken on the basis of NAV and PECV method of valuation.
Expected option life	No. of Years	5	Being half of the maximum option life.
Volatility	%	1	In case of unlisted shares, the volatility may be taken as zero. Verma committee also recommends this.
Risk free return	%	7.42	Zero coupon rate estimated from trading government securities for a maturity corresponding to expected life of option - taken from sites of NSE.
Expected dividend Yield	%	-	Company has no set policy so dividend taken as zero.

The above information is based on Rs. 2 per share prior to consolidation of 5 equity shares of Rs. 2 each into one equity share of Rs. 10, subsequent allotment of bonus shares in the ratio of 1 : 1 and sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/- each as per record date of February 28, 2014.

For the purpose of valuation of the options granted during the year ended December 31, 2007 under R Systems International Limited Employee Stock Option Scheme 2007, the compensation cost relating to Employee Stock Options, calculated as per the intrinsic value method is nil.

The management obtained fair value of the options at the date of grant from a firm of Chartered Accountants. In the considered opinion of the valuer, the fair value of these options determined using ''Black Scholes Valuation Model'' is "Rs. 50.73" per option.

The assumptions used by the valuer for the purpose of determination of fair value are stated below:

Assumptions	Unit	Scheme	comments by the valuer
Strike price	Rs.	120.70
Current share price	Rs.	118.50	Price on the date of grant by Board of Directors i.e. closing price on July 11, 2007.
Expected option life	No. of Years	4	Being the vesting period.
Volatility	%	44	On the basis of industry average.
Risk free return	%	7	Zero coupon rate estimated from trading government securities for a maturity corresponding to expected life of option -taken from sites of NSE.
Expected dividend Yield	%	0.86	Company has declared Dividends of 12% in the past. Assuming that it will continue declaring similar dividends in future.

The above information is based on Rs. 10 per share before sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/- each as per the record date of February 28, 2014.

For the purpose of valuation of the options granted during the year ended December 31, 2016 under R Systems International Limited Employee Stock Option Scheme 2007, the year to date compensation cost relating to Employee Stock Options, calculated as per the intrinsic value method is Rs 2,589,490.

The management obtained fair value of the options at the date of grant i.e. April 30, 2016 from a firm of Chartered Accountants. In the considered opinion of the valuer, the weighted average fair value of these options determined using ''Black Scholes Valuation Model'' is "Rs. 49.89" per option. The assumptions used by the valuer for the purpose of determination of fair value are stated below:

Assumptions	Unit	Scheme	comments by the valuer
Strike price	Rs.	12.07
Current share price	Rs.	61.45	Price on the date of grant by Board of Directors i.e. closing price on April 30, 2016.
Expected option life	No. of Years	4	Being the vesting period.
Volatility	%	55.32-55.83	On the basis of industry average.
Risk free return	%	7.84	The yield on a Treasury bond by Government of India (Source: RBI) on the valuation date with the tenor matching the remaining term of the stock options.
Expected dividend Yield	%	1.32	Assuming that the Company will continue declaring at similar rate, consistent with past years.

The above information is based on per equity share having face value of Re. 1/- each.

The stock based compensation cost calculated as per the intrinsic value method for the financial year 2016 was Rs. 2,589,490 (Previous year nil). If the stock based compensation cost was calculated as per fair value method prescribed by SEBI, the total cost to be recognised in the financial statements for the year 2016 would be Rs. 2,617,180 (Previous year nil). The effect of adopting the fair value method on the net income and earnings per share is presented below:

Pro Forma adjusted Net income and earnings Per Share

(Amount in Rs.)

Particulars	Year ended December 31, 2016	Year ended December 31, 2015
Net Income as reported	412,138,007	906,439,976
Add : Intrinsic Value Compensation Cost	2,589,490	-
Less : Fair Value Compensation Cost	2,617,180	-
Adjusted Pro-forma Net Income	412,110,317	906,439,976
Weighted average number of equity shares for calculating Basic EPS	126,616,327	126,983,064
Weighted average number of equity shares for calculating Diluted EPS	126,653,124	126,983,064
Earnings''Per Share (Face Value of Re. 1/-)
Basic (Face Value of Re. 1/-)
- As reported	3.26	7.14
- Pro-forma	3.25	7.14
Diluted (Face Value of Re. 1/-)
- As reported	3.25	7.14
- Pro-forma	3.25	7.14

Weighted average exercise price of options granted during the year

S. No.	Particulars	Scheme (a)	Scheme (b)	Scheme (c)
1.	Exercise price equals market price	N.A.	N.A.	N.A.
2.	Exercise price is greater than market price	N.A.	N.A.	N.A.
3.	Exercise price is less than market price	N.A.	N.A.	Rs.12.07

Weighted average fair value of the options granted during the year

S. No.	Particulars	Scheme (a)	Scheme (b)	Scheme (c)
1.	Exercise price equals market price	N.A.	N.A.	N.A.
2.	Exercise price is greater than market price	N.A.	N.A.	N.A.
3.	Exercise price is less than market price	N.A.	N.A.	Rs. 49.89

Scheme (a): R Systems International Ltd. - Year 2004 Employee Stock Option Plan.

Scheme (b): R Systems Employees Stock Option Plan -Year 2001.

Scheme (c): R Systems International Limited Employee Stock Option Scheme 2007.

As no options are granted during the year under Scheme (a), Scheme (b), hence the required information is not applicable.

8. Liquidity and Borrowings - consolidated Financial Statement

The available Cash and bank balance as at December 31, 2016 was Rs. 1,199.70 mn. against Rs. 921.95 mn. as of December 31, 2015. The increase was mainly on account cash generated from operations, proceeds from redemption of debenture and sale of balance share in Indus Software Technologies Private Limited as offset by cash used for buyback of share capital, purchase of fixed assets mainly on set of new SEZ unit and earnout payment for IBIZ acquisition. The consolidated cash and cash equivalent as at December 31, 2016 were Rs. 1,136.05 mn. as against Rs. 786.17 mn. as on December 31, 2015.

Net cash generated from operating activities were Rs. 436.24 mn. for the year ended December 31, 2016 compared to Rs. 448.53 mn. for the year ended December 31, 2015.

Cash generated from investing activities were Rs. 101.49 mn. for the year ended December 31, 2016 comprised of proceeds from redemption of debenture Rs. 87.57 mn., proceeds from sale of balance 7% share in Indus Software Technologies Private Limited Rs. 67.61 mn., proceeds from long term fixed deposits with banks Rs. 58.10 mn. (net), interest income Rs. 56.45 mn., rental income from investment property Rs. 6.40 mn., sale of fixed assets Rs. 2.53 mn. as offset by purchase of fixed assets of Rs. 140.07 mn. and earn out payment for IBIZ Rs. 37.10 mn. (net).

Cash used in financing activities were Rs. 194.57 mn. for the year ended December 31, 2016 mainly consist of Rs. 195.00 mn. for buyback of equity shares.

R Systems'' policy is to maintain sufficient liquidity to fund the anticipated capital expenditures, operational expenses and investments for strategic initiatives. R Systems has a credit facility from the Axis Bank Limited amounting to Rs. 380 mn. (including non-fund based credit limit of Rs. 180 mn. for currency derivatives). As at December 31, 2016, the total credit balance was nil under fund based line of credit. Loan payable as at December 31, 2016 comprises of loan for motor vehicles purchased amounting to Rs. 13.44 mn. and finance lease obligation of Rs. 10.88 mn newly SEZ premises. R Systems'' primary bankers in India are Axis Bank Limited, ICICI Bank Limited, Kotak Mahindra Bank Limited, State Bank of India, HDFC Bank Limited and Oriental Bank of Commerce. In U.S.A., U.K., Singapore and New Zealand, the primary bankers are California Bank & Trust, Natwest Bank, Citibank N.A. and Bank of Baroda (NZ), respectively.

9. changes in the capital Structure

During the year under review, the following changes took place in the capital structure of the Company.

At the beginning of the financial year ended December 31, 2016 the issued and paid up capital of the Company was Rs. 126,870,425/- divided into 126,870,425 equity shares of face value of Re. 1/- each. Further, the Company has completed the buyback of its 3,000,000 equity shares of Re. 1/- each on November 29, 2016. Consequent to this buyback the issued and paid up capital of the Company was reduced to Rs. 123,870,425/divided into 123,870,425 equity shares of face value of Re. 1/- each.

During the financial year ended December 31, 2016, the Company has not issued any shares with differential voting rights or any sweat equity shares. Therefore, disclosure pursuant to Section 43(a) (ii) & Section 54(1 )(d) of the Companies Act, 2013 are not applicable. Further, no disclosure is required under Section 67 (3) (c) of the Companies Act, 2013, in respect of voting rights not exercised directly by employees of the Company as the provisions of the said section are not applicable.

10. BuyBack

On September 14, 2016, the Board approved a proposal to buyback up to 3,000,000 equity shares of the Company for an aggregate amount not exceeding Rs. 195,000,000 being 2.36% of the total paid up equity share capital, at Rs. 65 per equity share. The buyback was to be made from all existing shareholders of the Company on September 30, 2016, being the record date for the buyback, on a proportionate basis under the tender offer route in accordance with the provisions contained in the Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998 and the Companies Act, 2013 and rules made thereunder. All the shares bought back pursuant the above buyback had been extinguished within the statutory time limits and the said buyback was completed on November 29, 2016.

11. Material changes affecting the financial position of the company

There are no significant events, changes occurred between the end of the financial year and till the date of this report which would materially affect the financial position of the Company.

12. Particulars of conservation of energy, Technology Absorption and Foreign exchange earnings and outgo

The particulars as prescribed under Section 134 (1) (m) of the Companies Act, 2013, read with rule 8 of Companies (Accounts) Rules, 2014 for the year ended December 31, 2016 are as follows:

A. conservation of energy

Though your Company does not have energy intensive operations, every endeavor has been made to ensure the optimal usage of energy, avoid wastage and conserve energy.

During the year ended December 31, 2016 R Systems continued its action plans to curtail the energy bills by adopting various energy conservation options / technologies as identified by Federation of Indian Chambers of Commerce & Industry ("FICCI") through a detailed Energy Audit carried out by FICCI for R Systems Noida operations in the year 2007.

Significant measures were taken to reduce energy consumption by using energy efficient equipment and devices. R Systems constantly evaluates new technologies and makes appropriate investments to be energy efficient. Currently, the Company uses LED/CFL fittings and electronic ballasts to reduce power consumption of fluorescent tubes. The air is conditioned with energy efficient compressors for central air conditioning and with split air conditioning for localized areas.

R Systems is always in search of innovative and efficient energy conservation technologies and applies them prudently. However, R Systems being in the software industry, its operations are not energy intensive and energy costs constitute a very small portion of the total cost, therefore, the financial impact of these measures is not material.

B. Technology absorption

1. Efforts made towards technology absorption

The Company has established practice streams in specific technologies to analyze their implications and the benefits they can provide to the Company''s customers. These steps enable the Company to find and execute the most appropriate solutions for its clients.

2. Benefits derived as a result of the above efforts

The benefits derived from the above mentioned efforts are fulfilling customer needs, efficiency in operations, improvement in quality and growth in revenues.

3. Technology imported during the last 3 years

Not applicable, as no technology has been imported by the Company.

4. Expenditure incurred on Research and development

Driven by our core value of innovation, we believe that innovation is not just a practice but an essential component embedded within R Systems organizational DNA. We are now operating in a digital world. Digital transformation is one of our core areas where we partner with businesses to make them competitive and successful in today''s hyper-changing environment. Over the year ended December 31, 2016, your Company has invested in research and development in the area of digital technologies like Analytics, Cloud Computation, Mobility and IoT in addition to strengthening and up-grading proprietary solutions and frameworks. The key R&D initiates undertaken by the Company for the year 2016 are as follows:

(1) Grasping the inevitability of big data analytics for businesses in today''s cognitive world, R Systems has invested in building robust analytics solutions, accelerators and framework that address the key challenges around data analytics. Medley, our unified data framework enables rapid deployment of custom advance analytics solutions. Medley simplifies data acquisition, transformation & visualization for virtually any data source. Analytics Gym, our consulting framework helps organizations to discover & evaluate relevant data, technology and right approach for their analytics roadmap.

(2) Anagram, our proprietary customer interaction analytics platform uses speech analytics technology combined with predictive analytics to help businesses glean important business insights and tap into new business opportunities using the big data generated from the entire population of all customer interactions across multiple channels. It helps augment business efficiency by proffering real-time data insights.

(3) Your Company has continued to invest in building reusable components library and testing frameworks for mobile platforms (Android and iOS). These reusable components and frameworks provide an edge to your Company in term of cost efficiency and reduced time to market while servicing existing as well as prospective customers.

(4) Our new initiatives for IoT covers bringing intelligence to the new edge and futuristic sensor devices which use machine learning and artificial intelligence.

(5) Additionally, your Company has continued its investment building frameworks and proof of concepts in key verticals like Telecom & Digital Media, Banking and Finance, Retail & E-commerce and Healthcare, Manufacturing and Logistic domains.

c. Foreign exchange earnings and outgo (Accrual Basis)

A significant percentage of R Systems revenues are generated from exports. The development and service centre in Noida is registered with the Software Technology Park of India as 100% Export Oriented Undertaking. All efforts of the Company are geared to increase the business of software exports in different products and markets. We have made investments in sales and marketing activities in various growing markets.

The total foreign exchange used and earned by R Systems during the year as compared with the previous year is as follows:

(Rs. in Million)

S.	Particulars	Financial Year ended
No.		31.12.2016	31.12.2015
(a)	Earnings (Accrual Basis)	2,594.89	2,638.34
(b)	Expenditure (Accrual Basis)	356.32	423.67
(c)	CIF value of imports	66.53	39.73

13. Subsidiaries & other corporate Restructuring

As on December 31, 2016, R Systems has twenty five subsidiaries. The name and country of incorporation of those subsidiaries are as follows:

S. No.	Name of the company	country of incorporation
1.	R Systems (Singapore) Pte Limited	Singapore
2.	R Systems, Inc.	U.S.A.
3.	R Systems Technologies Limited (Formerly known as Indus Software, Inc.)	U.S.A.
4.	RSYS Technologies Ltd. (Formerly known as Systemes R. International Ltee)	Canada
5.	ECnet Limited	Singapore
6.	ECnet (M) Sdn. Bhd*	Malaysia
7.	ECnet, Inc.*	U.S.A.
8.	ECnet (Hong Kong) Ltd.*	Hong Kong
9.	ECnet Systems (Thailand) Co. Ltd.*	Thailand
10.	ECnet Kabushiki Kaisha*	Japan
11.	ECnet (Shanghai) Co. Ltd.*	People''s Republic of China
12.	Computaris International Limited	U.K.
13.	ICS Computaris International Srl@	Moldova
14.	Computaris Malaysia Sdn. Bhd.@	Malaysia
15.	Computaris Polska sp z o.o.@	Poland

S. No.	Name of the company	country of incorporation
16.	Computaris Romania SRL@	Romania
17.	Computaris USA, Inc.®	U.S.A.
18.	Computaris Philippines Pte Ltd. Inc.®	Philippines
19.	IBIZ Consulting Pte. Ltd.* (Formerly known as IBIZCS Group Pte. Ltd.)	Singapore
20.	IBIZ Consulting Services Pte Ltd."	Singapore
21.	IBIZ Consulting Services Sdn. Bhd."	Malaysia
22.	PT. IBIZCS Indonesia''	Indonesia
23.	IBIZ Consultancy Services India Private Limited"	India
24.	IBIZ Consulting Services Limited"	Hong Kong
25.	IBIZ Consulting Services (Shanghai) Co., Ltd%	People''s Republic of China

* wholly owned subsidiaries of ECnet Limited, Singapore being 99.75% subsidiary of R Systems (The shareholding held by the Company and R Systems (Singapore) Pte Limited is 69.37% and 30.38% respectively).

@ wholly owned subsidiaries of Computaris International Limited being 100% subsidiary of R Systems.

* Wholly owned subsidiary of R Systems (Singapore) Pte Limited being 100% subsidiary of R Systems.

" Wholly owned subsidiaries of IBIZ Consulting Pte. Ltd. (Formerly known as IBIZCS Group Pte. Ltd.) being 100% Subsidiary of R Systems (Singapore) Pte Limited being 100% subsidiary of R Systems.

% Wholly owned subsidiary of IBIZ Consulting Services Limited -Hong Kong being 100% Subsidiary of IBIZ Consulting Pte. Ltd.

During the year ended December 31, 2016, the Company has invested SGD 960,000 (Singapore Dollar Nine Lakhs Sixty Thousand only) in R Systems (Singapore) Pte Limited and also made an investment of CAD 99,800 (Canadian Dollar Ninty Nine Thousand Eight Hundred only) in RSYS Technologies Ltd., Canada (Formerly known as Systemes R. International Ltee).

Computaris International Limited, U.K., wholly owned subsidiary of the Company, has incorporated a subsidiary namely Computaris Philippines Pte. Ltd. Inc. in Philippines on May 23, 2016.

As on date of this report, all the aforementioned twenty five subsidiaries except IBIZ Consultancy Services India Private Limited - were incorporated and based outside India. In addition to providing services to various international clients these subsidiaries also help to generate revenues for R Systems.

Further, subsequent to the year ended on December 31, 2016 IBIZ Consulting Pte. Ltd., Singapore has completed the purchase of business of IBIZ Consulting Services Pte. Ltd. on going concern basis at book value pursuant to business purchase agreement dated March 31, 2017.

During the year, no other corporate restructuring activity was done by the company.

The Board of Directors of the Company regularly reviews the affairs of these subsidiaries. Policy for determining material subsidiaries of the Company is available on the website of the Company at http://www.rsystems.com/investors/corporategovernance.aspx.

A statement containing the salient features of the financial statement of our subsidiaries in the prescribed Form AOC-1 is attached at the end of consolidated financial statements of the Company. The statement also provides the details of performance, financial position of each of the subsidiaries.

Further, the audited annual accounts and related detailed information of our subsidiaries, where applicable, will be made available to shareholders seeking such information at any point of time. The annual accounts of the subsidiary companies will also be available for inspection by any shareholder at Registered Office of R Systems i.e. B-104 A, Greater Kailash-I, New Delhi-110048 and Corporate Office of R Systems i.e. C-40, Sector 59, Noida (U.P.)-201307 and Registered Offices of the subsidiary companies concerned during business hours. The same will also be hosted on R Systems'' website i.e. www.rsystems.com.

14. Particulars of employees

The details required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are annexed as Annexure A and forms part of this report. Further, as required under the provisions of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the name and other particulars of employees are set out in Annexure B and forms part of this report.

15 Directors'' responsibility statement

Pursuant to the requirement of Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013 with respect to directors'' responsibility statement, your directors hereby confirm that:

1. In the preparation of the annual accounts for the financial year ended December 31, 2016, the applicable accounting standards had been followed along with proper explanation relating to material departures;

2. t he directors had 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 and loss of the Company for that period;

3. the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

4. t he directors had prepared the annual accounts for the financial year ended December 31, 2016 on a going concern basis;

5. the directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

6. the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

16. Auditors

The exiting Statutory Auditors of the Company M/s. S. R. Batliboi & Associates LLP (Firm Registration No. 101049W/E300004), Chartered Accountants who are the Statutory Auditors of the Company hold office as statutory auditors until the conclusion of the 23^rd Annual General Meeting of the Company scheduled to be held on May 15, 2017.

I n view of the mandatory requirement for rotation of auditors upon completion of 10 years of association with the Company and in terms of Section 139 of the Companies Act, 2013, M/s. S. R. Batliboi & Associates LLP, Chartered Accountants will retire as Company''s Auditors at the conclusion of 23^rd Annual General Meeting.

It is proposed to appoint M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, [Firm''s Registration No. 117366W/ W-100018] as the Statutory Auditors for a period of five (5) continuous years i.e. from the conclusion of 23^rd Annual General Meeting till the conclusion of 28^th Annual General Meeting of the Company.

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, have confirmed their eligibility and willingness to act as the statutory auditors of the Company and that their appointment, if made, shall be in accordance with the conditions as may be prescribed under the provisions of the Companies Act, 2013 and rules made thereunder.

The Board of Directors, based on the recommendation of the audit committee, recommends the appointment of M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, as the statutory auditors from the conclusion of the ensuing Annual General Meeting till the conclusion of the 28^th Annual General Meeting of the Company, subject to ratification at every Annual General Meeting.

Further, the auditors'' report being self - explanatory, does not call for any further comments by the Board of Directors as there are no qualifications, reservation or adverse remark or disclaimer made in the audit report for the Financial Year ended December 31, 2016.

17. Audit committee

R Systems has a qualified and independent Audit Committee. During the year under review, Mr. Raj Kumar Gogia, Mr. Gurbax Singh Bhasin, Mr. Suresh Paruthi and Mr. Amardeep Singh

Ranghar, Non-Executive Independent Directors could not be re-appointed as Independent Directors, therefore, they ceased to be members of the Audit Committee w.e.f. June 13, 2016.

Mrs. Ruchica Gupta was re-designated as Non-Executive Independent Director w.e.f. June 29, 2016 and was appointed as chairperson of the Audit Committee w.e.f. June 30, 2016.

Mr. Kapil Dhameja and Mr. Aditya Wadhwa were appointed as Additional Directors in the capacity of Independent Director w.e.f. June 29, 2016. Mr. Kapil Dhameja, Non-Executive Independent Director and Lt. Gen. Baldev Singh (Retd.), President & Senior Executive Director were appointed as a member of the Audit Committee w.e.f. June 30, 2016.

Mr. Aditya Wadhwa, Non-Executive Independent Director was appointed as a member of the Audit Committee w.e.f. July 29, 2016.

The constitution of the Committee is in compliance with the provisions of the Companies Act, 2013 and the Listing Regulations.

Detailed description of the Audit Committee has been given in Corporate Governance Report. The terms of reference and role of the Committee are as per the guidelines set out in the Listing Regulations and Section 177 of the Companies Act, 2013 and rules made thereunder and includes such other functions as may be assigned to it by the Board from time to time.

The Committee has adequate powers to play an effective role as required under the provisions of the Act and Listing Regulations. During the year under review, the Board of Directors of the Company had accepted all the recommendations of the Audit Committee.

18. Prevention and prohibition of sexual harassment of women at work place

At R Systems, it is our desire to promote a healthy and congenial working environment irrespective of gender, caste, creed or social class of the employees. We value every individual and are committed to protect the dignity and respect of every individual. The Company has always endeavored for providing a better and safe environment free of sexual harassment at all its work places. Consequent to the enactment of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder, the Management of R Systems International Limited has constituted an Internal Complaints Committee (ICC) to deal with any complaints or issues that may arise, in the nature of sexual harassment of women employees. The Company has also prepared and implemented Policy for Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace. During the year ended December 31,

2016, no cases of sexual harassment against women employees at any of its work place were reported to the ICC.

19. corporate Governance

As required under Listing Regulations, the detailed report on corporate governance is given as Annexure c to this report and the certificate obtained from a practicing company secretary regarding compliance of the conditions of corporate governance as stipulated in the said clause is annexed as Annexure D to this report.

20. Deposits

The Company has neither invited nor accepted any deposits from the public within the purview of the Companies Act, 2013 and the Rules made thereunder, no amount of principal or interest was outstanding as on the date of the balance sheet.

21. customer relations

R Systems recognises that the customers have a choice of service providers and the directors would like to place on record their gratitude on behalf of the Company for the business provided by them. The Company''s quality policy mandates that the voice of the customer is obtained on a regular basis. We constantly review the feedback and incorporate its impact into our delivery systems and communications.

22. Stakeholder''s relations

R Systems is inspired by its customers and its employees transform that inspiration and customers'' needs into value for all stakeholders. We thank all R Systems employees worldwide for their hard work, commitment, dedication and discipline that enables the Company to accomplish its customer commitments and commitments to all its stakeholders. R Systems conducts regular employee satisfaction surveys and open house meetings to get employee feedback. R Systems is constantly validating key employee data with industry and peer group business. These practices have helped the Company to achieve many of its business goals and have been recognised in many industry surveys over the last few years. The open door policy of our senior management team ensures that the feedback loop is completed promptly. We thank our shareholders for their continuous support and confidence in R Systems. We are aware of our responsibilities to our shareholders to provide full visibility of operations, corporate governance and creating superior shareholder value and we promise to fulfill the same.

23. Management discussion and analysis report

In terms of the Listing Regulations management discussion and analysis report is given as Annexure E to this report.

24. Secretarial Audit Report

Mr. Jitender Singh, Company Secretary in Whole Time Practice, had been appointed by the Board to carry out the Secretarial Audit under the provision of Section 204 of the Companies Act, 2013 for the financial year ended December 31, 2016. The Secretarial Audit report for financial year ended on December 31, 2016 is enclosed as Annexure F. The report does not contain any qualification.

25. Vigil Mechanism / Whistle Blower Policy

In order to provide a mechanism to employees of the Company to disclose any unethical and improper practices or any other alleged wrongful conduct in the Company and to prohibit managerial personnel from taking any adverse action against those employees, the company has laid down a Vigil Mechanism also known as Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Vigil Mechanism or Whistle Blower Policy is explained in the Corporate Governance Report and also posted on the website of the Company.

26. criteria for selection of candidates for Membership on the Board of Directors and the Remuneration Policy

As per the provisions of Section 178 of the Companies Act, 2013 and other relevant provisions and on the recommendation of Nomination & Remuneration Committee, the Board has framed a criteria for selection of Directors, a policy for remuneration of directors, key managerial personnel and other employees. The Criteria for selection of candidates for Membership on the Board of Directors and the remuneration policy are stated in the Corporate Governance Report.

27. Meetings of the Board

The Board of the Company and its Committees meet at regular intervals to discuss, decide and supervise the various business policies, business strategy, Company''s performance and other statutory matters. During the year under review, the Board has met six times. The details of the meeting of the Board and its Committees are given in Corporate Governance Report. The intervening gap between two Board Meetings did not exceed 120 days.

28. Board evaluation

Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board has carried out an annual performance evaluation of its own performance, its committees and the individual directors. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

29. Particulars of Loans, Guarantees or investments under Section 186 of the companies Act, 2013

During the year ended December 31, 2016, the Company has invested SGD 960,000 (Singapore Dollar Nine Lakhs Sixty Thousand only) in R Systems (Singapore) Pte Limited by way of acquisition of additional shares. Further, the Company has also made an investment of CAD 99,800 (Canadian Dollar Ninty Nine Thousand Eight Hundred only) for acqisition of shares of RSYS Technologies Ltd., Canada (Formerly known as Systemes R. International Ltee).

30. Related Party Disclosure

All the Related Party Transactions entered during the year were in the ordinary course of business and on arm''s length basis. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict of interest with the company at large. All the related party transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the transactions which are foreseen and repetitive in nature. A statement of all related party transactions is presented before the Audit Committee on quarterly basis, specifying the terms & conditions of the transactions. The policy on Related Party Transactions as approved by the Board is uploaded on the company''s website at the weblink as mentioned in the Corporate Governance Report. Details of particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 in form AOC-2 has been enclosed herewith as Annexure G.

31. Risk Management

The Company is not required to form a Risk Management Committee. The Company has developed and implemented a risk management policy for identifying the risk associated with business of the Company and measures to be taken by including identification of elements of risk and measures to control them.

32. corporate Social Responsibility

In compliance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has constituted a Corporate Social Responsibility Committee (''CSR Committee'').

During the year under review, Mr. Raj Kumar Gogia and Mr. Suresh Paruthi, Non-Executive Independent Directors could not be re-appointed as Independent Director, therefore, they ceased to be members of the CSR Committee w.e.f. June 13, 2016.

Mr. Kapil Dhameja and Mr. Aditya Wadhwa were appointed as Additional Directors in the capacity of Independent Director w.e.f. June 29, 2016.

Mr. Kapil Dhameja Non-Executive Independent Director was appointed as member & chairman of the CSR Committee w.e.f. June 30, 2016. Mr. Aditya Wadhwa, Non-Executive Independent Director was appointed as member of the CSR Committee w.e.f. June 30, 2016.

The detailed terms of reference of the CSR Committee has been provided in the Corporate Governance Report. In pursuit of the responsibilities entrusted to the CSR Committee, a policy on Corporate Social Responsibility has been prepared and adopted by the Board which is available at the website of the Company at following link: http://www.rsystems.com/ investors/corporategovernance.aspx Annual Report on CSR activities of the Company in format prescribed in Companies (Corporate Social Responsibility Policy) Rules, 2014 is enclosed as Annexure H and forms part of this report.

33. internal control System and internal Financial controls

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Internal Auditors and the management monitors and evaluates the efficacy and adequacy of the internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Audit observations of Internal Auditors and corrective actions thereon are presented to the Audit Committee of the Board. To maintain its objectivity and independence, the Internal Auditor reports to the Audit Committee.

The Board of your Company has laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively.

During the year, in order to further strengthen the internal financial controls, a renowned professional consultant firm was hired to conduct an assessment of the existent internal financial controls and advise on best practices for adoption.

S.R. Batliboi & Associates LLP, Chartered Accountants the statutory auditors of the Company, has audited the financial statements included in this annual report and have issued unmodified opinion on the adequacy and operating effectiveness of the Company''s internal financial controls over financial reporting.

34. extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT - 9 is enclosed as Annexure i to this Report.

35. Significant and Material orders Passed by the Regulators or courts

There are no significant or material orders passed by the Regulators / Courts which would impact the going concern status of the Company and it''s operations in future.

36. Acknowledgments

Your directors once again take this opportunity to thank the employees, investors, clients, vendors, banks, business associates, regulatory authorities including stock exchanges, Software Technology Park of India, the Central Government, State Government of Delhi, Uttar Pradesh, Tamil Nadu for the business support, valuable assistance and co-operation continuously extended to R Systems. Your directors gratefully acknowledge the trust and confidence and look forward for their continued support in the future.

On behalf of the Board

For R Systems International Limited

Sd/- Sd/-

Satinder Singh Rekhi Lt. Gen. Baldev Singh (Retd.)

(DIN: 00006955) (DIN: 00006966)

(Managing Director) (President & Senior Executive Director)

Place: Singapore Place: Noida, U.P.

Date: April 06, 2017 Date: April 06, 2017

---

Dec 31, 2015

The directors take great pleasure in presenting the Twenty Second Annual Report on the business and operations of R Systems
International Limited (“R Systems" or the “Company") together with the audited statements of accounts for the year ended December
31, 2015.

1. Financial Results

a. Standalone financial results of R Systems

(Rs. in Millions)

Particulars Financial Year ended
31.12.2015 31.12.2014

Total income 2,988.83 3,045.65

Profit before depreciation, 625.70 685.01
exceptional items and tax

Less : Depreciation and 95.81 67.24
amortization *

Add : Exceptional items** 648.07 393.13

Profit before tax 1,177.96 1,010.90

Less : Current tax 262.82 247.53

Less : Deferred tax change/(credit) 8.70 13.08

Profit after tax 906.44 750.29

Surplus in the statement of
profit and loss Balance as per
last financial 494.41 633.83
statements

Add: Profit for the current year 906.44 750.29

Less: Appropriations
Proposed dividend $ - 121.76

Tax on proposed dividend - 24.33

Interim Dividend$ 501.10 624.33

Tax on Interim Dividend 102.27 119.29

Adjustment on account of 18.87 -

aligning the useful life of fixed
asset in accordance with Schedule
II of the Companies Act, 2013*
Tax impact of above (6.41) -
adjustment*

Proposed dividend written (0.65) -
back on buy back&

Tax on proposed dividend (0.13) -

written back on buy back & fist

Total Appropriation 615.05 889.71

Net Surplus in the 785.80 494.41
statement of profit and loss

* refer Note No. 34 of the standalone financial statements.

** refer Note No. 22 of the standalone financial statements.

$ refer Note No. 4 of the standalone financial statements.

& The Company has written back proposed dividend for the year ended December 31, 2014 and tax thereon towards shares bought back
under the buy back offer.

b. Consolidated financial results of R Systems and its subsidiaries

(Rs. in Millions)

Particulars Financial Year ended

31.12.2015 31.12.2014

Total income 6,148.45 6,575.68

Profit before depreciation, 812.06 986.55
exceptional items and tax

Less : Depreciation and 140.23 112.45
amortization expense*

Add : Exceptional items** 603.10 250.11

Profit before tax 1,274.93 1,124.21

Less : Current tax 290.08 325.29

Less : Deferred tax change 6.55 17.58

Profit after tax 978.30 781.34

Surplus in the statement
of profit and loss
Balance as per last financial 659.36 767.74
statements

Add: Profit for the
current year 978.30 781.34

Less: Appropriations

Proposed dividend$ - 121.76

Tax on proposed dividend - 24.33

Interim Dividend$ 501.10 624.33

Tax on Interim Dividend 102.27 119.29

Adjustment on account of 18.87 -

aligning the useful life of
fixed asset in accordance with
Schedule II of the Companies
Act, 2013*

Tax impact of above (6.41) -
adjustment*

Proposed dividend written (0.65) -
back on buy back&

Tax on proposed dividend (0.13) -
written back on buy back&

Total Appropriations 615.05 889.71

Net Surplus in the statement 1,022.61 659.36
of profit and loss

* refer Note No. 33 of the consolidated financial statements. ** refer Note No. 23 of the consolidated financial statements. $
refer Note No. 4 of the consolidated financial statements. & The Company has written back proposed dividend for the year

ended December 31, 2014 and tax thereon towards shares bought back under the buy back offer. Note: Previous Year figures have been
regrouped / reclassified, wherever necessary.

2. Results of Operations Standalone Accounts

- Total income during the year 2015 decreased to Rs. 2,988.83 mn. as against Rs. 3,045.65 mn. during the year 2014, a decline of
1.87%.

- Profit after tax including exceptional items was Rs. 906.44 mn. during the year 2015 as compared to Rs. 750.29 mn. during
2014, an increase of 20.81%.

- Basic earnings per share (of face value of Re. 1/- each) was Rs. 7.14 for the year 2015 as compared to Rs. 5.90 for the year
2014, an increase of 21.02%.

Consolidated Accounts

- Consolidated total income during the year 2015 decreased to Rs. 6,148.45 mn. as against Rs. 6,575.68 mn. during the year 2014,
a decline of 6.50%.

- Profit after tax including exceptional items was Rs. 978.30 mn. during the year 2015 as compared to Rs. 781.34 mn. during
2014, an increase of 25.21%.

- Basic earnings per share (of face value of Re. 1/-each) were Rs. 7.70 for the year 2015 as compared to Rs. 6.14 for the year
2014, an increase of 25.41%.

3. Appropriations and Reserves

Dividend

During the year 2015, the Board declared three interim dividends namely, first interim dividend of Re. 0.40 per equity share of
Re. 1/-each at its meeting held on April 23,2015, second interim (special) dividend of Rs. 3.30 per equity share of Re. 1/- each
at its meeting held on August 05, 2015 and third interim dividend of Re. 0.25 per equity share of Re. 1/- each at its meeting
held on October 29, 2015. Total interim dividends already paid for the year 2015 aggregates to Rs. 3.95 per equity share of Re.
1/- each i.e. 395%, as compared to total dividend including interim dividend paid for the year 2014 at Rs. 5.85 per equity share
of Re. 1/- each i.e. 585%. The Board of Directors (the "Board") has not recommend any final dividend for the financial year ended
December 31, 2015.

The register of members and share transfer books shall remain closed from June 09, 2016 to June 13, 2016 both days inclusive.

Transfer to Reserves

It is proposed not to transfer any amount to general reserve in respect to dividend declared during the year ended December
31,2015 in pursuance of the provisions of Section 123 of the Companies Act, 2013 and Rules made there under.

4. Business

- Systems is a leading provider of outsourced product development services, business process outsource services and also offers
own product suite in BFSI, Manufacturing & Logistic verticals. R Systems diversified offering includes:

PLM Services Group

- Systems defines its outsourced product development business as Integrated Product Life Cycle Management (iPLM) services where R
Systems helps ISV and other companies to accelerate the speed to market for their products and services with a high degree of
time and cost predictability by using our proprietary pSuite framework and global delivery model.

Under iPLM Services, R Systems delivers solutions and services in the area of Information Technology and Information Technology
enabled services (ITES). The IT services cover application development, systems integration and support and maintenance of
applications. Under the ITES, we cover technical support and customer care for IT and Hi-Tech electronic manufacturers, high-end
quality process management and revenue and claims management using our global delivery model.

- Systems competitive advantage in iPLM Services is further enhanced by its industry specific domain expertise, global delivery
capabilities, multi-language support capabilities, industry best quality and security certification and agile development
methodologies supported by R Systems'' proprietary pSuite framework.

Products Group

ECnet Supply Chain products provide solutions for holistic management of the complex interaction between an organization and its
trading partners. The integrated solution aims to reduce all supply chain costs through improved collaboration and optimization.
The solutions are robust and scalable and give measurable ROI to clients that meets the clients ‘strategic business goals.

Further, ECnet also operates as a Gold Channel Partner for one of the largest business software companies in the world to resell,
implement and support enterprise solutions of ERP, WMS, Service Management, Bl and Performance Management. It mainly serves small
to medium-sized businesses in the manufacturing and distribution industries. These products present an opportunity to cross and
up sell these solutions since these are adjunct to ECnet''sown product offerings.

- Systems'' recent acquisition, IBIZ, is a Microsoft Gold Channel Partner and is specialized in deploying Microsoft business
management solution suites, including enterprise resource planning, customer relationship management, point of sales, mobility,
business intelligence and portals.

- Systems focused on key verticals i.e. Telecom & Digital Media, Banking and Finance, Health Care, Manufacturing & Logistics and
Government Services. Telecom and Digital Media is the largest industry vertical which contributes 30 percent of the total
consolidated revenue for the year ended December 31,2015.

Further with the deep expertise in the key vertical like Telecom & Digital Media, BFSI and Healthcare, we have horizontally
embraced analytics solutions across these verticals to bring operational efficiency and also create a vital information pool
reflecting on the economical, statistical, social media, speech metrics of the customers.

- Systems rapidly growing customer list includes a variety of Fortune 1000, government and mid-sized organizations across a wide
range of industry verticals and has served twenty one million dollor plus customer during the year 2015.

Customers and Delivery Centre’s

- Systems rapidly growing customer list includes a variety of Fortune 1000, government and mid-sized organizations across a wide
range of industry verticals including Banking and Finance, Independent Software Vendors, Telecom and Digital Media, Government,
Healthcare, Manufacturing and Logistic Industries. R Systems maintains fourteen development and service centre’s and using our
global delivery model, we serve customers in the USA, Europe and the Far East.

There were no changes in the nature of the Company''s business and generally in the classes of business in which the Company has
an interest and in the business carried on by the subsidiaries during the year under review. For details of Company''s
subsidiaries please refer note number 14 relating to subsidiaries.

5. Quality

- Systems has continuously invested in processes, people, training, information systems, quality standards, frameworks, tools and
methodologies to mitigate the risks associated with execution of projects. Adoption of quality models and practices such as the
Capability Maturity Model Integrated (CMMi) and Six Sigma practices for processes have ensured that risks are identified and
mitigated at various levels in the planning and execution process. R Systems journey for various quality

During the year 2015, all ISMS artifacts of the Company have been migrated from ISO 27001:2005 to new ISO 27001:2013 standard and
Noida Unit has been certified for this new Information Security Standard. Further, Noida unit has been reappraised for PCMM Level
5 (Ver.2.0). In the year 2015, Noida BPO Center has been certified as PCI-DSS (ver. 3.1) compliant for the call Analytic Services
provided to one of the major client.

As of the date of this report, Noida IT centre is CMMi level 5, PCMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2013 certified;
Noida BPO centre is PCI-DSS (ver.3.1), PCMM Level 5, ISO 9001 : 2008, ISO 27001 : 2013 and PCI-DSS (ver.3.1) certified. The
continuing compliance with these standards demonstrates the rigor of R Systems processes and differentiates us to keep our
competitive edge in service and product offerings.

certifications / standards for the development and service centre’s in India is provided below:

To maintain and strengthen competitive strengths, R Systems
continues to make investments in its unique and proprietary <™™»® with best practices, tools and methodologies for flawless
execution and consistent delivery of high quality software. The pSuite framework offers services along the entire software
lifecycle that includes technology consulting, architecture, design and development, professional services, testing, maintenance,
customer care and technical support. R Systems expects that its technology focus, investment in processes, talent and
methodologies will enable it to distinguish itself from competition as it seeks to provide services to technology / product
companies.

6. Directors

During the year under review, the following changes took place in the office of directors of the Company.

Mr. Raj Kumar Gogia, Mr. Gurbax Singh Bhasin, Mr. Suresh Paruthi and Mr. Amardeep Singh Ranghar, Non-Executive Independent
Directors of the Company were appointed as Independent Director of the Company, not liable to retire by rotation, as per the
provisions of Section 149 of the Companies Act, 2013 at twenty first Annual General Meeting for period commencing from March 29,
2015 till the ensuing Annual General Meeting.

Mrs. Ruchica Gupta who was appointed as an additional director at the meeting of the Board of Directors held on July 07, 2014 was
regularized at twenty first Annual General Meeting of the Company held on June 09, 2015.

Lt. Gen. Baldev Singh (Retd.) was re-appointed as President & Senior Executive Director for a period of three years commencing
from April 01, 2015 to April 01, 2018 at twenty first Annual General Meeting held on June 09, 2015.

Mr. Raj Swaminathan, Director & Chief Operating Officer of the Company ceased to be director of the Company consequent upon his
resignation w.e.f. June 27, 2015.

Details of the Director proposed to be appointed and re-appointed at the ensuing Annual General Meeting are as follows:

At the ensuing Annual General Meeting Lt. Gen. Baldev Singh (Retd.), President & Senior Executive Director of the Company is
liable to retire by rotation in accordance with the provisions of Section 152 of the Companies Act, 2013 read with the Articles
of Association of the Company and being eligible, offer himself for reappointment as director of the Company.

Further, on the recommendation of the Nomination & Remuneration Committee of the Company, Mr. Raj Kumar Gogia, Mr. Suresh
Paruthi, Mr. Gurbax Singh Bhasin and Mr. Amardeep Singh Ranghar, Non- Executive Independent

Directors of the Company are proposed to be re-appointed as Independent Director pursuant to the provision of Section 149 of the
Companies Act, 2013 and rules made there under at the ensuing Annual General Meeting for the second term of five years commencing
from the conclusion of twenty second Annual General Meeting.

As required under Section 149 of the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and
Disclosure Requirements) Regulations, 2015 (Hereinafter referred as "Listing Regulations"), all the Independent Directors of the
Company have given the declarations that they meet the criteria of independence as laid down therein. The brief profile of the
aforesaid Independent Directors forms part of the Corporate Governance Report.

None of the directors of the Company is disqualified as per the provisions of Section 164(2) of the Companies Act, 2013. The
directors of R Systems have made necessary disclosures, as required under various provisions of the Companies Act, 2013 and
Listing Regulations.

7. Employees Stock Option Plans / Schemes

The industry in which R Systems operates is people intensive and R Systems believes that human resources play a pivotal role in
the sustainability and growth of the Company. R Systems has always believed in rewarding its employees with competitive
compensation packages for their dedication, hard work, loyalty and contribution towards better performance of the Company. To
enable more and more employees to be a part of the financial success of the Company, retain them for future growth and attract
new employees to pursue growth, R Systems has set up employees stock option plans / schemes from time to time for its employees
and for the employees of its subsidiaries. As on the date of this report, the stock option plans of R Systems are as follows:

(a) R Systems International Ltd.- Year 2004 Employee Stock Option Plan : For the employees of R Systems and its subsidiaries
other than ECnet Limited.

(b) R Systems International Ltd. - Year 2004 Employee Stock Option Plan - Ecnet: For the employees of ECnet Limited, a subsidiary
of R Systems. The term of the said plan has been expired on August 31, 2014.

(c) R Systems International Ltd. Employees Stock Option Plan- Year 2001 (Formerly known as Indus Software Employees Stock Option
Plan -Year 2001): Initially formulated for the employees of Indus Software Private Limited which got amalgamated with R Systems
and the plan continues as per the scheme of amalgamation approved by the Hon''ble High Courts of Delhi and Mumbai. As on the date
of this report, no stock options are in force under this plan.

(d) R Systems International Limited Employee Stock Option Scheme 2007 : For the employees of R Systems and its subsidiaries.

As required under the Companies Act, 2013 and Securities and Exchange Board of India (Employee Stock Option Scheme and Employee
Stock Purchase Scheme), Guidelines, 1999 as amended, details relating to options approved, granted, vested, exercised, lapsed, in
force etc. under the prevailing employees stock option plans/schemes during the year ended December 31, 2015 are as follows:

sl Particular R systems R systems
No International International ltd
year 2004 year 2004
employee employee
option plan stock option plan

a. Total number
of shares 1,995,000 2,000,000
covered under
the plan

b. Pricing Formula Prevailing Price Prevailing Price
once the Company''s once the Company''s
shares are listed and shares are listed
at the Fair Market at the Fair Market
Value as per the Value as per the
terms of R Systems terms of R Systems
International Ltd. - International Ltd.
Year2004Employees Year 2004 Employees
Stock Option Plan on Stock Option Plan
the date such option - ECnet on the
is granted when the date such option is
Company''s shares granted when the
are not listed. Company''s shares
are not listed.

c. Options granted
during the year Nil Nil

d. Options vested
during the year Nil Nil

e. Options
exercised during
the year Nil Nil

f. The total
number of shares Nil Nil
arising as a result
of exercise of
options during
the year

g. Options lapsed
during the year 102,150 Nil_

h. Variation of
terms of options Nil Nil

during the year

i. Money realized
by exercise of Nil Nil

options during
the year (Rs.)

j. Total number
of options in force Nil Nil
at the end of
the year

k. Employee wise
details of options
granted to (during
the year)

(i) Senior
managerial
personnel Nil Nil

(ii) Any other
employee who Nil Nil
receives a grant
in any one
year of options
amounting to
5% or more of
options granted
during that year

(iii) Identified
employees who were Nil Nil
granted options,
during anyone year,
equal to or exceeding
1% of the issued
capital (excluding
outstanding warrants
and conversions) of
the Company at the
time of gran

I. Diluted Earnings
Per Share N.A. N.A.
(EPS) pursuant to
issue of shares
on exercise of
options

particular R System R System International
Limited

a. Total number 738,980 6,500,000

of shares
covered under
the plan

b. Pricing Formula As approved
under "Exercise Price" means
the market
the "Scheme of price which is payable
for
exercising
Amalgamation"
the options and "Market Price"
of Indus
Software means the latest
available closing
Private
Limited price, prior to the
daft’s of the
with the
Company meeting of the Board
of Directors /
by the Hon''ble Compensation Committee,
in which
High Courts of options are granted,
on the stock
Delhi and
Mumbai. exchange on which
the shares of

the Company are listed.
If the shares
are listed on more
than one stock
exchange, then the
stock exchange
where there is highest
trading
volume on the said
date shall Be considered.

c. Options granted Nil Nil
during the year

d. Options vested Nil NIL
during the year

e. Options
exercised during Nil 90,000
the year

f. The total
number of shares Nil 90,000
arising as a result
of exercise of
options during
the year

g. Options lapsed Nil 75,000
during the year

h. Variation of
terms of options Nil Nil

during the year

i. Money realized Nil 1086300
by exercise of
options during
the year (Rs.)

j. Total number
of options in force Nil 80,280
at the end of
the year

k. Employee wise
details of options
granted to (during Nil Nil
the year)

(i) Senior
managerial Nil Nil
personnel

(ii) Any other
employee who
receives a grant
in any one
year of options
amounting to
5% or more of
options granted
during that year NIl Nil

(iii) Identified
employees who were
granted options,
equal to or exceeding
1% of the issued
capital (excluding
outstanding warrants Nil Nil
and conversions) of
the Company at the
time of grant

I. Diluted Earnings
Per Share N.A 7.14
(EPS) pursuant to
issue of shares
on exercise of
options

# Please note that the details given above for plan (a), (b) and (c) are after making the required adjustments in relation to
consolidation of each of the 5 equity shares of Rs. 2 each into 1 equity share of Rs. 10 each as approved by the shareholders in
the year 2006 and after Sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/-each as per
record date of February 28, 2014.

* EPS is Rupees per equity shares of Re. 1/-each i.e. after giving into effect Sub-division of equity shares of Rs. 10 each into
equity shares of Re. 1 /- each as per record date of February 28, 2014.

**During the year ended December 31, 2015 R Systems International Ltd. Year- 2004 Employee Stock Option Plan has been completely
expired on December 27, 2015 due to expiry of the term of the plan. Further, R Systems International Ltd. -Year 2004 Employee
Stock Option Plan - ECnet was expired on August 31, 2014 due to expiry of the term of the plan.

During the year ended December 31,2015, R Systems had not granted any options under any of the aforementioned plans. Subsequent
to year ended December 31,2015, on the recommendation of Compensation Committee 150,000 stock options were granted under existing
R Systems International Limited Employee Stock Option Scheme 2007 at the price of Rs. 12.07 per option (i.e. the price at which
the options were granted earlier on July 11, 2007).

All options granted under R Systems International Ltd. Employees Stock Option Plan -Year 2001 has already been vested and
exercised or lapsed and no options were in force as on December 31, 2015.

For options granted during the earlier years under plan (a), (b)and (c), R Systems used the fair value of the stock options for
calculating the employees compensation cost.

For the purpose of valuation of the options granted during earlier years, the management obtained fair value of the options at
the date of grant under respective schemes from a firm of Chartered Accountants, to determine accounting impact, if any, of
options granted over the periods. In the considered opinion of the valuer, the fair value of option determined using ‘Black
Schools Valuation Model ‘under each of above schemes is"Nil"and thus no accounting thereof is required.

The assumptions used for the purpose of determination of fair value are state
d below:

Assumption Unit schme Schme Schme

Strike price Rs. 42 154 26

Current share price Rs. 16 140 16

Expected option life No.
of
Years 5 2.5 5

Volatility % 1 0.5 1

Risk free return % 7 11.3 7

Expected dividend % - 15 -
Yield

Assumption Comments by the valuer

Strke price Taken on the basis of NAV and
PECV method of valuation.

Current share Price Being half of the maximum option life.

Expected option life In case of unlisted shares,
the volatility may be taken
as zero. Verma committee also
recommends this.
Volatility
Zero coupon rate estimated from
trading government securities
for a maturity corresponding to
expected life of option - taken
from sites of NSE and / or BSE.

Expected dividend Company has no set policy so
Yield dividend taken as zero.

In case of R Systems Employees
Stock Option Plan - Year 2001, as
the dividend had been paid by the
erstwhile company, it has been
assumed at 15%.

* R Systems International Ltd.-Year 2004 Employee Stock Option Plan under which the price was based on Rs. 2 per share.

** R Systems International Ltd. Employees Stock Option Plan -Year 2001 under which originally the price was based on Rs. 10 per
share for 21,967 shares. Asa result of amalgamation of Indus Software Private Limited into R Systems, R Systems had issued
206,822 equity shares of Rs. 2 each pursuant to the swap ratio approved by Hon''ble High Courts of Delhi and Mumbai.

*** R Systems International Ltd.-Year 2004 Employee Stock Option Plan - ECnet under which the price was based on Rs. 2 per share.

Please note that the details given above for plan (a), (b) and (c) are after making the required adjustments in relation to
consolidation of each of the 5 equity shares of Rs. 2 each into 1 equity share of Rs. 10 each as approved by the shareholders in
the year 2006 and before Sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/-each as per
record date of February 28, 2014.

Further, for the purpose of valuation of the options granted during the year 2005 under R Systems International Ltd.-Year 2004
Employee Stock Option Plan, the management obtained fair value of the options at the date of grant from a firm of Chartered
Accountants, to determine accounting impact, if any, of options granted. In the considered opinion of the valuer, the fair value
of these options determined using ‘Black Scholes Valuation Model''is"Nil"and thus no accounting thereof is required.

The assumptions used by the valuer for the purpose of determination of fair value are stated below:

Assumption Unit Schme Comments by the Valuer

Strike price Rs. 42

Current share
price Rs. 13.58 Taken on the basis of NAV and
PECV method of valuation.

Expected
option life No.of
Years 5 Being half of the maximum
option life.

Volatility % 1 In case of unlisted shares,
the volatility may be taken
as zero. Verma committee also
recommends this.

Risk free
return % 7.42 Zero coupon rate estimated from
trading government securities
for a maturity
corresponding to expected
life of option - taken from
sites of NSE.

Expected
dividend % - Company has no set policy so
dividend taken as zero.

Yield

The above information is based on Rs. 2 per share prior to consolidation of 5 equity shares of Rs. 2 each into one equity share
of Rs. 10 and subsequent allotment of bonus shares in the ratio of 1 :1.

For the purpose of valuation of the options granted during the year ended December 31, 2007 under R Systems International Limited
Employee Stock Option Scheme 2007, the compensation cost relating to Employee Stock Options, calculated as per the intrinsic
value method is nil.

The management obtained fair value of the options at the date of grant from a firm of Chartered Accountants. In the considered
opinion of the valuer, the fair value of these options determined using''Black Scholes Valuation Model''is"Rs. 50.73" per option.

The assumptions used by the valuer for the purpose of determination of fair value are stated below:

Assumption Unit Scheme Comments by the Valuer

Strike price Rs. 120.70

Current share
price Rs. 118.50 Price on the date of grant by
Board of Directors i.e.
closing price on July 11, 2007.

Expected option No.
of
Years 4 Being the vesting period,

life

Volatility % 44 On the basis of industry average.

Risk free
return % 7 Zero coupon rate estimated from
trading government securities
for a maturity
corresponding to expected
life of option -taken from
sites of NSE.

Expected
dividend % 0.86 Company has declared Dividends
off 2% in the past. Assuming
that it will continue
Yield declaring similar dividends
in future.

The stock based compensation cost calculated as per the intrinsic value method for the financial year 2014 and 2015 was nil. If the
stock based compensation cost was calculated as per fair value method prescribed by SEBI, the total cost to be recognized in the
financial statements for the year 2015 would be nil (Previous year nil). The effect of adopting the fair value method on the net
income and earnings per share is presented below:

Pro Forma adjusted Net Income and Earnings Per Share

(Amount in Rs.)
Particular year ended year ended
December 31 December 31
2015 2015

Net Income as reported 906,439,976 750,289,488

Add : Intrinsic Value
Compensation Cost

Less: Fair Value
Compensation Cost*

Adjusted Pro-forma Net Income 906,439,976 750,289,488

Earnings ‘Per Share
(Face Value of Re. 1/-)

Basic (Face Value of Re. 1/-)

-As reported 7.14 5.90

-Pro-forma 7.14 5.90

Diluted (Face Value
of Re. 1/-)

-As reported 7.14 5.90

-Pro-forma 7.14 5.90

*all granted options have been vested during earlier years.

Weighted average exercise price of options granted during the year

Sl. Particulars Scheme Scheme scheme scheme
No

1. Exercise price
equals market price NA NA NA NA.

2. Exercise price is
greater than N.A. N.A. N.A. N.A.
market price

3. Exercise price is
less than market N.A. N.A. N.A. N.A.
price

Weighted average fair value of the options granted during the year

Sl Particular Scheme Scheme Scheme Scheme

1. Exercise price
equals market
price NA NA NA NA

2. Exercise price
is greater than N.A. N.A. N.A. N.A.
market price

3. Exercise price
is less than
market N.A. N.A. N.A. N.A.
price

Scheme (a): R Systems International Ltd.-Year 2004 Employee Stock Option Plan.

Scheme (b): R Systems International Ltd. Employees Stock Option Plan-Year 2001.

Scheme (c): R Systems International Ltd.-Year 2004 Employee Stock Option Plan -ECnet.

Scheme (d): R Systems International Limited Employee Stock Option Scheme 2007.

As no options are granted during the year under Scheme (a), Scheme (b), Scheme (c) and Scheme (d), hence the required information
is not applicable.

8. Liquidity and Borrowings - Consolidated Financial Statement

The available Cash and bank balance as at December 31, 2015 was Rs. 921.95 mn. against Rs. 1,098.24 mn. as of December 31, 2014.
The decrease was mainly on account of purchase of fixed assets, acquisition of IBIZCS Group Pte Limited (IBIZ) and dividend
payouts as offset by cash generation from operations net of taxes and proceeds from the sale of Indus Business Division.

The consolidated cash and cash equivalent as at December 31, 2015 were Rs. 786.17 mn. as against Rs. 1,059.10 mn. as on December
31, 2014.

Net cash generated from operating activities were Rs. 448.53 mn. for the year ended December 31, 2015 compared to Rs. 724.57 mn.
for the year ended December 31, 2014.

Cash generated from investing activities were Rs. 397.95 mn. for the year ended December 31, 2015 comprised of proceeds from
sale of subsidiaries Rs. 274.01 mn., proceeds from long term fixed deposits with banks Rs. 239.44 mn. (net), proceeds from
redemption of mutual funds Rs. 19.77 mn., interest Income Rs. 42.57 mn., rental income from investment property Rs. 3.08 mn.,
sale of fixed assets Rs. 2.79 mn. as offset by purchase of fixed assets of Rs. 162.58 mn.and initial payout amounting to Rs.
21.13 mn.(net)on acquisition of IBIZ operations.

Cash used in financing activities were Rs 1,131.46 mn. for the year ended December 31, 2015 comprised of payment of dividend
(including CDT) of Rs. 1,072.22 mn., Rs. 59.57 mn. paid for buy back of Equity shares, Rs. 1.11 mn. paid for interest as offset
by cash received from issuance of equity shares of Rs. 1.09 mn. and net increase in long term borrowings by Rs. 0.36 mn. R
Systems'' policy is to maintain sufficient liquidity to fund the anticipated capital expenditures, operational expenses and
investments for strategic initiatives.

R Systems has a credit facility from the Axis Bank Limited amounting to Rs. 200 mn. (including non-fund based credit limit of Rs.
180 mn.for currency derivatives). As at December 31, 2015, the total credit balance was Rs. Nil under fund based line of credit.
Loan payable as at December 31, 2015 comprises of loan for motor vehicles purchased amounting to Rs. 11.58 mn. and against
general corporate purpose of Rs. 0.99 mn. R Systems primary bankers in India are Axis Bank Limited, ICICI Bank Limited,
KotakMahindra Bank Limited, State Bank of India, HDFC Bank Limited and Oriental Bank of Commerce. In U.S.A., U.K., Singapore and
New Zealand , the primary bankers are California Bank & Trust, NatWest Bank, Citibank N.A. and Bank of Baroda (NZ), respectively.

9. Changes in the Capital Structure

During the financial year ended the following changes took place in the capital structure of the Company.

At the beginning of the financial year ended December 31, 2015 the issued and paid up capital of the Company was Rupees
127,458,580/- divided into 127,458,580 equity shares of Re. 1/- each.

Subsequently, the Company completed the buyback of its 678,155 equity shares of Re. 1/- each on April 23, 2015. Consequent to
this buy back the issued and paid up capital of the Company was reduced to Rs. 126,780,425/- divided into 126,780,425 equity
shares of Re. 1/- each.

Futher, the Company allotted 90,000 equity shares of Re. 1/- each on June 09, 2015 pursuant to exercise of Stock Options under R
Systems International Limited Employee Stock Options Scheme 2007, at an exercise price of Rs. 12.07 per share therefore, the
issued and paid up share capital reached to Rs. 126,870,425/- divided into 126,870,425 equity shares of Re. 1/-each.

During the financial year ended December 31, 2015, the Company has not issued any shares with differential voting rights or any
sweat equity shares. Therefore, disclosure pursuant to Section 43(a) (ii) & Section 54(1 )(d) of the Companies Act, 2013 are not
applicable. Further, no disclosure is required under Section 67 (3) (c) of the Companies Act, 2013, in respect of voting rights
not exercised directly by employees of the Company as the provisions of the said section are not applicable.

10. Buy Back

The Board of Directors of the Company at its meeting held on December 20, 2014 approved the buy back of the Company''s fully
paid-up equity shares of face value of Re. 1/- each from its existing shareholders, other than those who are promoters, members
of the promoter group and persons acting in concert, from the open market through stock exchange(s) for a total consideration not
exceeding Rs. 60 mn. and at a price not exceeding Rs. 100/- per share, payable in cash.

During the year ended December 31, 2015, this offer for buy back remained opened from January 06, 2015 to April 23, 2015. During
this period, the Company bought back 678,155 equity shares for Rs. 59.57 mn. All the shares bought back from January 06, 2015 to
April 23, 2015 had been extinguished within the statutory time limits and the said buy back was completed on April 23,2015.

11. Corporate Restructuring

During the year ended December 31, 2015, pursuant to shareholder approval accorded by special resolution through postal ballot on
September 23,2014, the Company concluded the divestment of Indus Product Business, in line with its strategy to focus on core
services business by executing a ‘Business Transfer Agreement''(BTA) with R Systems Product &Technologies Private Limited
("RSPTPL"), a wholly owned subsidiary of the Company on June 27,2015 for the transfer of Indus Business Unit operated out of Pune
and Chennai to RSPTPL on a going concern basis by way of slump sale, for consideration of Rs. 783.9 mn. on the terms and
conditions agreed in BTA.

The Company completed the acquisition of 100% shares of IBIZCS Group Pte Limited (IBIZ), a Singapore based Company engaged in
Microsoft Dynamics ERP Practice, w.e.f. April 30, 2015 through its wholly owned subsidiary namely R Systems (Singapore) Pte
Limited. IBIZCS Group Pte. Limited is having operations mainly in South East Asia as a reseller of Microsoft Dynamics Navision
ERP along with Bl and mobility solutions competencies.

- Systems Solutions, Inc. (RSSI) has been merged with R Systems, Inc. (RSI), both being wholly owned subsidiaries of the Company
based in USA, as per the applicable laws of USA on December 10, 2015. Pursuant to aforesaid merger, the Company has received
incremental 150 common stock of RSI against outstanding common and preferred (series A) stocks held in RSSI.

12. Material changes affecting the financial position of the Company

There are no significant events, changes occurred between the end of the financial year and till the date of this report which
would materially affect the financial position of the Company.

13. Particulars of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars as prescribed under Section 134 (1) (m) of the Companies Act, 2013, read with rule 8 of Companies (Accounts)
Rules, 2014 for the year ended December 31,2015 are as follows:

A. Conservation of Energy

Since the Company does not own any manufacturing facility, the other particulars relating to conservation of energy stipulated in
the Companies (Accounts) Rules, 2014 are not applicable.

During the year ended December 31, 2015 R Systems continued its'' action plans to curtail the energy bills by adopting various
energy conservation options / technologies as identified by Federation of Indian Chambers of Commerce & Industry ("FICCI")
through a detailed Energy Audit carried out by FICCI for R Systems Noida operations in the year 2007.

Significant measures were taken to reduce energy consumption by using energy efficient equipment and devices. R Systems
constantly evaluates new technologies and makes appropriate investments to be energy efficient. Currently, the Company uses
LED/CFL fittings and electronic ballasts to reduce power consumption of fluorescent tubes. The air is conditioned with energy
efficient compressors for central air conditioning and with split air conditioning for localized areas.

R Systems is always in search of innovative and efficient energy conservation technologies and applies them prudently. However, R
Systems being in the software industry, its operations are not energy intensive and energy costs constitute a very small portion
of the total cost, therefore, the financial impact of these measures is not material.

B. Technology absorption

1. Efforts made towards technology absorption

The Company has established practice streams in specific technologies to analyze their implications and the benefits they can
provide to the Company''s customers. These steps enable the Company to find and execute the most appropriate solutions for its
clients.

2. Benefits derived as a result of the above efforts The benefits derived from the above mentioned efforts are fulfilling
customer needs, efficiency in operations, improvement in quality and growth in revenues.

3. Technology imported during the last 3 years Not applicable, as no technology has been imported by the Company.

4. Expenditure incurred on Research and development.

Driven by our core value of innovation, we believe that innovation is not just a practice but an essential component embedded
within R Systems organizational DNA. Innovation is one of our core areas which keeps us competitive and successful in today''s
highly competitive business environment. Over the year ended December 31, 2015, your Company has invested in research and
development in the area of Analytics and Mobility solutions in addition to strengthening and up-grading proprietary products and
frameworks. The key R&D initiates undertaken by the Company for the year 2015 are as follows:

(1) R Systems’ Analytics practice plays a key role in leveraging advanced technologies to develop sophisticated & disruptive
analytics solutions that drive the business transformation for the existing and prospective customers. With the deep expertise in
the vertical like Telecom & Digital Media, BFSI and Healthcare, we have horizontally embraced Analytics solutions across these
verticals to bring operational efficiency and also create a vital information pool reflecting on the economical, statistical,
social media, speech metrics of the customers. Our technology innovation agenda focuses on solutions around advanced Analytics
themes i.e. Customer Analytics, Speech &Text Analytics and Risk & Financial Portfolio Analytics, Autonomics, Social Media
Analytics, Healthcare Analytics and Operational Analytics. We have also initiated our investment in next generation data
analytics framework and multiple focused solutions across key verticals. This framework will provide end-to-end functions for
conceptualizing and implementing any big data analytics initiative.

(2) Your Company has developed a customer interaction analytics platform by leveraging the speech text mining capabilities that
empowers organizations to measure and analyze 100% of recorded customer interactions. This platform is built to deliver actionable
business insights by analyzing unstructured & semi- structured data extracted from various data sources such as: CRM, IVR, CDR,
ACD and customer interactions etc. with integrated capabilities for speech, text, social media, big data & predictive analytics.

(3) The Company has invested in building reusable components library and testing frameworks for mobile platforms (Android and
iOS). These reusable components and frameworks provide an edge to your Company in term of cost efficiency and reduced time to
market while servicing existing as well as prospective customers.

(4) Additionally, your Company has continued its investment building frameworks and proof of concepts in key verticals like
Telecom & Digital Media and Healthcare domains.

C. Foreign Exchange Earnings and Outgo (Accrual Basis)

A significant percentage of R Systems revenues are generated from exports. The development and service centre in Noida is
registered with the Software Technology Park of India as 100% Export Oriented Undertaking. All efforts of the Company are geared
to increase the business of software exports in different products and markets. We have made investments in sales and marketing
activities in various growing markets.

The total foreign exchange used and earned by R Systems during the year as compared with the previous year is as follows:

Sl particular Financial year ended (Rs. in Millions)
no 31.12.2015 31.12.2015

(a) Earnings 2,638.34 3,087.10
(Accrual Basis)

(b) Expenditure 423.67 412.68
(Accrual Basis)

(c) CIF value of 39.73 19.74
imports

14. Subsidiaries

As on December 31,2015, R Systems has twenty four subsidiaries. The name and country of incorporation of those subsidiaries are
as follows:

Sl Name of the Subsidiaries Country of incorporation

1. R Systems (Singapore) Pte Ltd. Singapore

2. R Systems, Inc. U.S.A.

3. R Systems Technologies Ltd. U.S.A.
(Formerly known as Indus
Software, Inc.)

4. ECnet Limited Singapore

5. Systemes R. International Ltee,5 Canada

6. ECnet (M) SDN. BHD# Malaysia

7. ECnet, Inc. * U.S.A.

8. ECnet (Hong Kong) Limited* Hong Kong

9. ECnet Systems (Thailand) Thailand
Company Limited*

10. ECnet Kabushiki Kaisha* Japan

11. ECnet (Shanghai) Co. Ltd. * People''s Republic of
China

12. Computer’s International Limited U.K.

13. ICS Computer’s International Sri® Moldova

14. Computer’s Malaysia Sdn. Bhd. ® Malaysia

15. Computer’s Polska sp zo.o. ® Poland

16. Computer’s Romania SRL® Romania

17. Computer’s USA, Inc.® U.S.A.

18. IBIZCS Group Pte Ltd.* Singapore

19. IBIZ Consulting Services Pte Ltd." Singapore

20. IBIZ Consulting Services Sdn. Malaysia
Bhd."

21. PT. IBIZCS Indonesia" Indonesia

22. IBIZ Consultancy Services
India India Private Limited"

23. IBIZ Consulting Services Limited" Hong Kong

24. IBIZ Consulting Services
People''s Republic of
(Shanghai) Co., Ltd." China

* wholly owned subsidiaries of ECnet Limited, Singapore being 99.75% subsidiary of R Systems (The shareholding by the Company and
R Systems (Singapore) Pte. Ltd. is 69.37% and 30.38% respectively).

® wholly owned subsidiaries of Computer’s International Limited being 100% subsidiary of R Systems.

* Wholly owned subsidiary of R Systems (Singapore) Pte Ltd. being 100% subsidiary of R Systems.

" Wholly owned subsidiaries of IBIZCS Group Pte Ltd. being 100% Subsidiary of R Systems (Singapore) Pte Ltd. being 100%
subsidiary of R Systems.

5 Subsequent to the year ended December 31, 2015, name of Systems R. International Ltee, Canada has been changed to
RSYSTECHNOLOGIESLTD.

During the year ended December 31, 2015, the Company has acquired though R Systems (Singapore) Pte Ltd., wholly owned subsidiary
of the Company, 100% share of IBIZCS Group Pte Ltd., Singapore (IBIZ) on April 30,2015.

BIZ is a Microsoft Gold-certified partner specialized in Microsoft
Business Management Solution suites, including Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), Point
of Sales (POS), Mobility, Business Intelligence (Bl) and Portals having subsidiaries in Singapore, Malaysia, Indonesia, India,
Hongkong and China.

The Company has transferred 93% of its equity share in R Systems Products & Technology Private Limited ("RSPTPL") on July 07,
2015 by entering into ‘Share Purchase Agreement''(SPA) with BD Capital Partners Ltd. ("BDC"), a Mauritius based company on June 27,
2015 for a consideration of Rs. 443.17 mn.

On December 10, 2015, R Systems Solution Inc. (RSSI), has been merged with R Systems Inc. (RSI), both being wholly owned
subsidiaries of the Company, based in U.S.A.

As on date of this report, all the aforementioned twenty four subsidiaries except IBIZ Consultancy Services India Private Limited
- India were incorporated and based outside India. In addition to providing services to various international clients these
subsidiaries also help to generate revenues for R Systems. The Board of Directors of the Company regularly reviews the affairs
of these subsidiaries.

Policy for determining material subsidiaries of the Company is available on the website of the Company at http://www.rsystems.
com/investors/corporateqovernance.aspx.

Further, the audited annual accounts and related detailed information of our subsidiaries, where applicable, will be made
available to shareholders seeking such information at any point of time. The annual accounts of the subsidiary companies will
also be available for inspection by any shareholder at Registered Office of R Systems i.e. B-104 A, Greater Kailash-I, New
Delhi-110048 and Corporate Office of R Systems i.e. C-40, Sector 59, Noida (U.P.)-201307 and Registered Offices of the subsidiary
companies concerned during business hours. The same will also be hosted on R Systems ‘website i.e. www.rsystems.com.

15. Particulars of employees

The details required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014, are annexed as Annexure A and forms part of this report.

Further, as required under the provisions of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014, the name and other particulars of employees are set out in Annexure B and forms part of this report.

16. Directors'' responsibility statement

Pursuant to the requirement of Section 134 (3) (c) read with Section 134(5) of the Companies Act, 2013 with respect to
directors ‘responsibility statement, your directors hereby confirm that:

i) In the preparation of the annual accounts for the financial year ended December 31, 2015, the applicable accounting standards
had been followed along with proper explanation relating to material departures;

ii) the directors had 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 and loss of the Company for that period;

iii) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other
irregularities;

iv) the directors had prepared the annual accounts for the financial year ended December 31, 2015 on a going concern basis;

v) the directors, had laid down internal financial controls to be followed by the Company and that such internal financial
controls are adequate and were operating effectively;

vi) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such
systems were adequate and operating effectively.

17. Auditors

M/s S. R. Batliboi & Associates LLP (Firm Registration No. 101049W/E300004), the statutory auditors of the Company will retire at
the ensuing Annual General Meeting and are eligible for reappointment.

The Board, based on the recommendation of the audit committee, recommends the re-appointment of M/s S. R. Batliboi & Associates
LLP (Firm Registration No. 101049W/E300004) as the statutory auditors of the Company. M/s S. R. Batliboi & Associates LLP have
confirmed their eligibility and willingness to act as the statutory auditors of the Company and have further confirmed that their
appointment, if made, shall be within the limits prescribed under Section 141 of the Companies Act, 2013 and that they are not
disqualified for such appointment within the meaning of the said section.

Further, the auditors ‘report being self-explanatory, does not call for any further comments by the Board of Directors.

18. Audit committee

R Systems has a qualified and independent Audit Committee. During the year under review there was no change in composition of
the Audit Committee except that Mr. Amardeep Singh Ranghar was appointed as a member of Audit Committee w.e.f. August 04, 2015.

The constitution of the Committee is in compliance with the provisions of the Companies Act, 2013, the Listing Regulations and
erstwhile Listing Agreement. Detailed description of the Audit Committee has been given in Corporate Governance report.

The terms of reference and role of the Committee are as per the guidelines set out in the Listing Regulations and erstwhile
Listing Agreement read with Section 177 of the Companies Act, 2013 and rules made there under and includes such other functions as
may be assigned to it by the Board from time to time. The Committee has adequate powers to play an effective role as required
under the provisions of the statute and Listing Regulations. During the year under review, the Board of Directors of the Company
had accepted all the recommendations of the Audit Committee.

19. Prevention and prohibition of sexual harassment of women at work place

At R Systems it is our desire to promote a healthy and congenial working environment irrespective of gender, caste, creed or
social class of the employees. We value every individual and are committed to protect the dignity and respect of every
individual. The Company has always endeavored for providing a better and safe environment free of sexual harassment at all its
work places.

Consequent to the enactment of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and
Rules made there under, the Management of R Systems International Limited has constituted an Internal Complaints Committee (ICC)
to deal with any complaints or issues that may arise, in the nature of sexual harassment of women employees. The Company has
also prepared and implemented Policy for Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace. During
the year ended December 31, 2015, no cases of sexual harassment against women employees at any of its work place were reported to
the ICC.

20. Corporate Governance

As required under Listing Regulations, the detailed report on corporate governance is given as Annexure C to this report and the
certificate obtained from a practicing company secretary regarding compliance of the conditions of corporate governance as
stipulated in the said clause is annexed as Annexure D to this report.

21. Deposits

The Company has neither invited nor accepted any deposits from the public within the purview of Section 2(31), 71 and 74 of
Companies Act, 2013 read with the Companies (Acceptance of Deposit) Rules, 2014, no amount of principal or interest was
outstanding on the date of the balance sheet.

22. Customer relations

- Systems recognizes that the customers have a choice of service providers and the directors would like to place on record their
gratitude on behalf of the Company for the business provided by them. The Company''s quality policy mandates that the voice of the
customer is obtained on a regular basis. We constantly review the feedback and incorporate its impact into our delivery systems
and communications.

23. Stakeholder''s relations

- Systems is inspired by its customers and its employees transform that inspiration and customers'' needs into value for all
stakeholders. We thank all R Systems employees worldwide for their hard work, commitment, dedication and discipline that enables
the Company to accomplish its customer commitments and commitments to all its stakeholders. R Systems conducts regular employee
satisfaction surveys and open house meetings to get employee feedback. R Systems is constantly validating key employee data with
industry and peer group business. These practices have helped the Company achieve many of its business goals and have been
recognized in many industry surveys over the last few years. The open door policy of our senior management team ensures that the
feedback loop is completed promptly.

We thank our shareholders for their continuous support and confidence in R Systems. We are aware of our responsibilities to our
shareholders to provide full visibility of operations, corporate governance and creating superior shareholder value and we
promise to fulfill the same.

24. Management discussion and analysis report

In terms of the Listing Regulations management discussion and analysis report is given as Annexure E to this report.

25. Secretarial Report

Mr. Jitender Singh, Company Secretary in Whole Time Practice, had been appointed by the Board to carry out the Secretarial

Audit under the provision of Section 204 of the Companies
Act, 2013 for the financial year ended December 31, 2015. The Secretarial Audit report for financial year ended 2015 is enclosed
as Annexure F.The report does not contain any qualification.

26. Vigil Mechanism /Whistle Blower Policy

In order to provide a mechanism to employees of the company to disclose any unethical and improper practices or any other alleged
wrongful conduct in the company and to prohibit managerial personnel from taking any adverse action against those employees, the
company has laid down a Vigil Mechanism also known as Whistle Blower Policy to deal with instance of fraud and mismanagement, if
any. The details of the Vigil Mechanism or Whistle Blower Policy is explained in the Corporate Governance Report and also posted
on the website of the Company.

27. Continuance of the Existing Financial Year

Pursuant to the provision of Section 2(41) of the Companies Act, 2013, an order from the Company Law Board has been awarded to
the Company to continue to follow calendar year (i.e. 1st January to 31st December) as its financial year.

28. Criteria for selection of candidates for Membership on the Board of Directors and the Remuneration Policy

As per the provisions of Section 178 of the Companies Act, 2013 and other relevant provisions and on the recommendation of
Nomination & Remuneration Committee, the Board has framed a criteria for selection of Directors, a policy for remuneration of
directors, key managerial personnel and other employees. The Criteria for selection of candidates for Membership on the Board of
Directors and the remuneration policy are stated in the Corporate Governance Report.

29. Meetings of the Board

The Board and its Committees of the Company meet at regular intervals to discuss, decide and supervise the various business
policies, business strategy, Company''s performance and other statutory matters. During the year under review, the Board has met
09 times. The details of the meeting of the Board and its Committees are given in Corporate Governance Report. The intervening
gap between two Board Meetings did not exceed 120 days.

30. Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board has carried out an annual
performance evaluation of its own performance, its committees and the individual directors .The manner in which the evaluation
has been carried out has been explained in the Corporate

Governance Report.

31. Particulars of Loans, Guarantees or investments under Section 186 of the Companies Act, 2013

During the year ended December 31, 2015, the Company has invested SGD 2,251,000 in R Systems (Singapore) Pte Ltd. by way of
acquisition of 1,052,125 shares in R Systems (Singapore) Pte Ltd.

Further, the Company has also made investment of Rs. 700,000 in R Systems Products &Technologies Private Limited ("RSPTPL") by
way of acquisition of shares in right issue. Further, the Company also acquired 60,000,003 equity shares at Rs. 6.227333 per
equity share and 35,026 Non-Convertible Debentures ("NCD") at Rs. 10,000/- per NCD as purchase consideration for transfer of its
business unit to RSPTPL.

The Company has transferred 93% of its equity share in RSPTPL on July 07, 2015 by entering into ''Share Purchase Agreement'' (SPA)
with BD Capital Partners Ltd. ("BDC"), a Mauritius based company on June 27, 2015.

32. Related Party Disclosure

All the Related Party Transactions entered during the year were in the ordinary course of business and on arm''s length basis.
There are no materially significant related party transactions made by the company with promoters, Directors, Key Managerial
personnel or other designated persons which may have a potential conflict of interest with the company at large.

All the related party transactions are presented to the Audit Committee and the Board. Omnibus approval is obtained for the
transactions which are foreseen and repetitive in nature. A statement of all related party transactions is presented before the
Audit Committee on quarterly basis, specifying the terms & conditions of the transactions.

The policy on Related Party Transactions as approved by the Board is uploaded on the company''s website at the we blink as
mentioned in the Corporate Governance Report.

Details of particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the
Companies Act, 2013 in form AOC-2 has been enclosed herewith as Annexure G.

33. Risk Management

The Company is not required to form a Risk Management Committee. The Company has developed and implemented a risk management
policy for identifying the risk associated with business of the Company and measures to be taken by including identification of
elements of risk and measures to control them.

34. Corporate Social Responsibility

In compliance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social
Responsibility Policy) Rules, 2014, the Company has constituted a Corporate Social Responsibility Committee (''CSR Committee'').

During the year under review, there is no change in the constitution of the Committee except that Mr. Raj Swaminathan, Director &
Chief Operating Officer of the Company ceased to be the member of the Committee consequent to his cessation as Director of the
Company w.e.f. June 27, 2015.

The detailed terms of reference of the Corporate Social Responsibility Committee has been provided in the Corporate Governance
Report. In pursuit of the responsibilities entrusted to the CSR Committee, a policy on Corporate Social Responsibility has been
prepared and adopted by the Board which is available at the website of the Company at following link:

http://www.rsvstems.com/investors/corporateqovernance.aspx

Annual Report on CSR activities of the Company in format prescribed in Companies (Corporate Social Responsibility Policy) Rules,
2014 in enclosed as Annexure H and forms part of this report.

35. Internal Control System and Internal Financial Controls

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Internal
Auditors and the management monitors and evaluates the efficacy and adequacy of the internal control system in the Company, its
compliance with operating systems, accounting procedures and policies at all locations of the Company. Audit observations of
Internal Auditors and corrective actions thereon are presented to the Audit Committee of the Board. To maintain its objectivity
and independence, the Internal Auditor reports to the Audit Committee.

The Company has in place adequate internal financial controls commensurate with size, scale and complexity of its operations.
The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, the safeguarding of
its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and timely
preparation of reliable financial information.

36. Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT - 9 is enclosed as Annexure I to this Report.

37. Significant and Material Orders Passed By The Regulators Or Courts

There are no significant or material orders passed by the Regulators / Courts which would impact the going concern status of the
Company and its operations in future.

38. Acknowledgments

Your directors once again take this opportunity to thank the employees, investors, clients, vendors, banks, business associates,
regulatory authorities including stock exchanges, Software Technology Park of India, the Central Government, State Government of
Delhi, Uttar Pradesh, Maharashtra, Tamil Nadu for the business support, valuable assistance and co-operation continuously
extended to R Systems. Your directors gratefully acknowledge the trust and confidence and look forward for their continued
support in the future

On behalf of the Board

For R Systems International Limited

Sd/- Sd/-

Satinder Singh Rekhi Lt. Gen. Baldev Singh (Retd.)

(DIN:00006955) (DIN: 00006966)

(Managing Director) (President & Senior Executive
Director)

Place Singapore Place :Noida

Date: April 30,2016 Date: April 30,2016

---

Dec 31, 2014

Dear Shareholders,

The directors take great pleasure in presenting the Twenty First Annual Report on the business and operations of R Systems International Limited ("R Systems" or the "Company") together with the audited statements of accounts for the year ended December 31, 2014.

1. Financial Results

a. Standalone financial results of R Systems

(Rs. in Millions) Particulars Financial Year ended 31.12.2014 31.12.2013

Total income 3,045.65 2,739.72

Profit before depreciation, 685.01 589.30 exceptional items and tax

Less : Depreciation and 67.24 47.81 amortisation

Add : Exceptional items* 393.13 -

Profit before tax 1,010.90 541.49

Less : Current tax (net of MAT 247.53 188.29 credit)

Less : Deferred tax change/(credit) 13.08 (12.32)

Profit after tax 750.29 365.52

Surplus in the statement of Profit and loss

Balance as per last financial 633.83 609.70 statements

Add: Profit for the current year 750.29 365.52

Less: Appropriations

Proposed dividend(refer note 121.76 120.70 below)

Tax on proposed dividend 24.33 21.24 (refer note below)

Interim Dividend 624.33 139.24

Tax on Interim Dividend 119.29 23.66

Transfer to General Reserve - 36.55

Total Appropriation 889.71 341.39

Net Surplus in the 494.41 633.83



statement of Profit and loss

* Exceptional Items (Rs. in Millions)

Particulars Financial Year ended 31.12.2014 31.12.2013

Profit on buy back of 77.79 - subsidiary shares

Profit on sale of subsidiaries 240.69 -

Provision for diminution in the 74.65 - value of investment written back

Total 393.13 -

The Company has issued 712,600 equity shares pursuant to exercise of employee stock options under the R Systems International Limited Employee Stock Option Scheme 2007 up to book closure date for distribution of dividend for the year ended December 31, 2013 and accordingly increased the appropriation in the current year by Rs. 0.68 million and Rs. 0.12 million as dividend and tax on dividend respectively.

b. Consolidated financial results of R Systems and its subsidiaries

(Rs. in Millions) Particulars Financial Year ended 31.12.2014 31.12.2013

Total income 6,575.68 6,007.69

Profit before depreciation, 986.55 819.96 exceptional items and tax

Less : Depreciation and 112.45 101.71 amortisation

Add : Exceptional items* 250.11 -

Profit before tax 1,124.21 718.25

Less : Current tax (net of MAT 325.29 192.50 credit)

Less : Deferred tax change/(credit) 17.58 (1.23)

Profit after tax 781.34 526.99

Surplus in the statement of Profit and loss

Balance as per last financial 767.74 582.14 statements

Add: Profit for the current year 781.34 526.99

Less: Appropriations

Proposed dividend 121.76 120.70

Tax on proposed dividend 24.33 21.24

Interim Dividend 624.33 139.24

Tax on Interim Dividend 119.29 23.66

Transfer to General Reserve - 36.55

Total Appropriations 889.71 341.39

Net Surplus in the 659.36 767.74 statement of Profit and loss

Previous Year figures have been regrouped / recasted, wherever necessary.

* Exceptional Items (Rs. in Millions)

Particulars Financial Year ended 31.12.2014 31.12.2013

Currency translation reserve 26.09 - released on buy back of subsidiary shares

Profit on sale of subsidiaries 224.02 -

Total 250.11 -

2. Results of Operations Standalone Accounts

- Total income during the year 2014 increased to Rs. 3,045.65 million as against Rs. 2,739.72 million during the year 2013, a growth of 11.17%.

- Profit after tax was Rs. 750.29 million during the year 2014 as compared to Rs. 365.52 million during 2013, a growth of 105.27%.

- Basic earnings per share (of face value of Re. 1/- each) was Rs. 5.90 for the year 2014 as compared to Rs. 2.90 for the year 2013, a growth of 103.45%.

Consolidated Accounts

- Consolidated total income during the year 2014 increased to Rs. 6,575.68 million as against Rs. 6,007.69 million during the year 2013, a growth of 9.45%.

- Profit after taxes was Rs. 781.34 million during the year 2014 as compared to Rs. 526.99 million during 2013, a growth of 48.27%.

- Basic earnings per share (of face value of Re. 1/- each) were Rs. 6.14 for the year 2014 as compared to Rs. 4.18 for the year 2013, a growth of 46.89%.

3. Appropriations and Reserves

Dividend

During the year 2014, the Board declared four interim dividends namely, frst interim dividend of Re. 0.95 per equity share of Re. 1/- each at its meeting held on June 03, 2014, second interim dividend of Re. 0.50 per equity share of Re 1/-each at its meeting held on July 26, 2014, third interim dividend of Re. 0.90 per equity share of Re. 1/- each at its meeting held on October 29, 2014 and fourth interim(Special) dividend of Rs. 2.55 per equity share of Re. 1/- each at its meeting held on December 20, 2014.

Taking into consideration the operating Profits for the year 2014, the Board of Directors (the "Board") is pleased to recommend a fnal dividend of Re. 0.95 per equity share of Re. 1/- each, being 95% on the par value of Re. 1/- per share, to be appropriated from the available Profits of the Company for the financial year 2014 subject to the approval of the shareholders at the ensuing Annual General Meeting. Total dividend including four interim dividends already paid for the year 2014 comes to Rs. 5.85 per equity share of Re. 1/- each i.e. 585%, as compared to total dividend including interim dividend paid for the year 2013 at Rs. 2.05 per equity shares of Re. 1/- each i.e. 205%.

The aforesaid fnal dividend for the year 2014 as recommended

by the Board, if approved at the ensuing Annual General Meeting, will be paid to all the equity shareholders whose names appear in the Register of Members of the Company as of the opening business hours on June 05, 2015 after giving efect to all valid share transfers in physical form which would be received by the Company''s registrar and share transfer agent M/s Link Intime India Private Limited up to the end of business hours on June 04, 2015 and to those whose names appear as benefcial owners in the records of National Securities Depository Limited ("NSDL") and Central Depository Services (India) Limited ("CDSL") as of the said date.

The register of members and share transfer books shall remain closed from June 05, 2015 to June 09, 2015, both days inclusive.

Transfer to Reserves

It is proposed not to transfer any amount to General Reserve in respect to dividend declared after April 01, 2014 in pursuance of the Section 123 of the Companies Act, 2013 and Rules made thereunder.

4. Business

R Systems is a leading provider of outsourced product development services, business process outsource services and also ofers own product suite in BFSI, Manufacturing & Logistic verticals. R Systems diversifed ofering includes:

fPLM Services Group

Under IPLM Services, R Systems delivers solutions and services in the area of Information Technology and Information Technology enabled services. The IT services cover application development, systems integration and support and maintenance of applications.

Under the ITES we cover managed services, BPO services covering both technical support for IT and Hi-Tech electronic gadgets, high-end Quality Process Management and Revenue and Claims Management using our global delivery model.

Products Group

R Systems products group consists of two units. Indus® which address the retail lending, telecom and insurance industry and ECnet® which addresses supply chain, warehousing and inventory management.

Indus oferings include an integrated enterprise muti-portfolio lending suite for banking and financial services in the Retail, Corporate and SME sectors, credit management and revenue collection for telecom companies, iPerSyst for insurance companies which helps in timely policy renewal and customer retention along with other IT services to banking and financial clients.

ECnet Supply Chain products provide solutions for holistic management of the complex interaction between an organisation and its trading partners. The integrated solution aims to reduce all supply chain costs through improved collaboration and optimisation. The solutions are robust and scalable and give measurable ROI to clients within one year. Further, ECnet also operates as a channel partners for reselling and implementing several ERP products of one of the largest business software company to serve customers in a key customer segment: Small- to medium-sized businesses. These products present an opportunity to cross and up sell these solutions since these are adjunct to ECnet''s own product oferings.

R Systems is focused on key business verticals – Telecom and Digital Media, Banking and Finance, Healthcare Services, Manufacturing and Logistics, and Government Services and invested in building capabilities and domain knowledge around these focused verticals. This has helped in providing innovative and cost efcient solutions and services under chosen verticals.

Customers and Delivery Centres

R Systems rapidly growing customer list includes a variety of Fortune 1000, government and mid-sized organizations across a wide range of industry verticals including Banking and Finance, High Technology, Independent Software Vendors, Telecom and Digital Media, Government, HealthCare, Manufacturing and Logistic Industries. R Systems maintains eleven development and service centres and using our global delivery model, we serve customers in the US, Europe, South America, the Far East, the Middle East, India and Africa.

There were no changes in the nature of the Company''s business and generally in the classes of business in which the Company has an interest and in the business carried on by the subsidiaries during the year under review. For details of Company''s subsidiaries please refer note number 14 relating to subsidiaries.

5. Quality

R Systems has continuously invested in processes, people, training, information systems, quality standards, frameworks, tools and methodologies to mitigate the risks associated with execution of projects. Adoption of quality models and practices such as the Capability Maturity Model Integrated CMMi and Six Sigma practices for processes have ensured that risks are identifed and mitigated at various levels in the planning and execution process. R Systems journey for various quality certifications / standards for the development and service centres in India is provided below:

In the year 2014, Noida IT Center of the Company was re- appraised for SEI CMMI Level 5 ver 1.3. In the year 2013, Noida BPO center was certified as PCI-DSS ver 2.0 compliant for the Call Analytic Services provided to one of the major client.

As of the date of this report, Noida IT centre is SEI-CMMi level 5, PCMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2005 certified; Noida BPO centre is PCMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2005 certified. Pune and Chennai development centres are SEI-CMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2005 certified. The continuing compliance with these standards demonstrates the rigor of R Systems processes and diferentiates us to keep our competitive edge in service and product oferings.

To maintain and strengthen competitive strengths, R Systems continues to make investments in its unique and proprietary ( with best practices, tools and methodologies for fawless execution and consistent delivery of high quality software. The pSuite framework ofers services along the entire software lifecycle that includes technology consulting, architecture, design and development, professional services, testing, maintenance, customer care and technical support. R Systems expects that its technology focus, investment in processes, talent and methodologies will enable it to distinguish itself from competition as it seeks to provide services to technology / product companies.

6. Acquisition

Subsequent to the closing of the year 2014, the Board of Directors at its meeting held on April 23, 2015 has approved the acquisition of a Singapore based ERP company having operations mainly in South East Asia through wholly owned subsidiary namely R Systems (Singapore) Pte. Limited, for a maximum consideration of SGD 7.50 million including the earn-outs over the next three years on fulfllment of certain conditions. The above said approval is subject to execution of defnitive agreements and receipt of necessary corporate and regulatory approval.

7. Directors

During the year under review, the following changes took place in the ofce of directors of the Company.

Mr. Suresh Paruthi and Lt. Gen. Baldev Singh (Retd.) were reappointed as directors liable to retire by rotation at the previous Annual General Meeting held on May 10, 2014.

Mr. Anuj Kanish, who expressed his unwillingness to be re-appointed at the previous Annual General Meeting of the Company held on May 10, 2014, ceased to be the director of the Company w.e.f. May 10, 2014 on completion of his term as additional director.

Mr. Amardeep Singh Ranghar and Mrs. Ruchica Gupta were appointed by the Board of Directors at its meeting held on July 07, 2014 as an additional director to hold ofce till the ensuing Annual General Meeting of the company.

Pursuant to the implementation of Section 149 of the Companies Act, 2013, Mr. Raj Kumar Gogia, Mr. Gurbax Singh Bhasin, and Mr. Suresh Paruthi, existing Non-Executive Independent Directors of the Company whose ofces were liable to retire by rotation, under the erstwhile applicable provisions of the Companies Act, 1956, are proposed to be appointed as Independent Directors of the Company, not liable to retire by rotation, at the ensuing Annual General Meeting. These directors have given the declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

Mr. Amardeep Singh Ranghar who was appointed as additional director at the Board Meeting held on July 07, 2014 and who shall hold the ofce up the date of ensuing Annual General Meeting, is also proposed to be appointed as Independent Director of the Company, not liable to retire by rotation, at the ensuing Annual General Meeting. He has given the declarations that he meets the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

Mrs. Ruchica Gupta was appointed by the Board as an additional director of the Company at its meeting held on July 07, 2014 to hold ofce upto the date of ensuing Annual General Meeting and proposed to be appointed as a regular director pursuant to Section 152 of the Companies Act, 2013.

At the ensuing Annual General Meeting Mr. Raj Swaminathan, Director & Chief Operating Ofcer of the Company is liable to retire by rotation in accordance with the provisions of Section 152 of the Companies Act, 2013 read with the Articles of Association of the Company and being eligible, ofer himself for reappointment as director of the Company.

Further, on the recommendation of the Nomination & Remuneration Committee of the Company, Lt. Gen Baldev Singh (Retd.) is proposed to be reappointed as President and Senior Executive Director of the Company for a period of three years i.e. w.e.f. April 01, 2015 to April 01, 2018 subject to the approval of the Central Government and the shareholders at the ensuing Annual General Meeting of the Company.

None of the directors of the Company are disqualifed as per the provisions of Section 274(1)(g) of the Companies Act, 1956 and Section 164(2) of the Companies Act, 2013. The directors of R Systems have made necessary disclosures, as required under various provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

8. Employees Stock Option Plans / Schemes

The industry in which R Systems operates is people intensive and R Systems believes that human resources play a pivotal role in the sustainability and growth of the Company. R Systems has always believed in rewarding its employees with competitive compensation packages for their dedication, hard work, loyalty and contribution towards better performance of the Company. To enable more and more employees to be a part of the financial success of the Company, retain them for future growth and attract new employees to pursue growth, R Systems has set up employees stock option plans / schemes from time to time for its employees and for the employees of its subsidiaries. As on the date of this report, the prevailing stock option plans of R Systems are as follows:

(a) R Systems International Ltd. - Year 2004 Employee Stock Option Plan : For the employees of R Systems and its subsidiaries other than ECnet Limited.

(b) R Systems International Ltd. - Year 2004 Employee Stock Option Plan – Ecnet : For the employees of ECnet Limited, a subsidiary of R Systems. The term of the said plan has been expired on August 31, 2014.

(c) Indus Software Employees Stock Option Plan - Year 2001 : Initially formulated for the employees of Indus Software Private Limited which got amalgamated with R Systems and the plan continues as per the scheme of amalgamation approved by the Hon''ble High Courts of Delhi and Mumbai. As on the date of this report, no stock options are in force under this plan.

each of the 5 equity shares of Rs. 2 each into 1 equity share of Rs. 10 each as approved by the shareholders in the year 2006 and after Sub- division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/- each as per record date of February 28, 2014.

*EPS is Rupees per equity shares of Re. 1/- each i.e. after giving into efect Sub-division of equity shares of Rs. 10 each into equity shares of Re. 1/- each as per record date of February 28, 2014.

**During the year ended December 31, 2014, R Systems International Ltd. - Year 2004 Employee Stock Option Plan – Ecnet has been expired on August 31, 2014 due to expiry of the term of the plan.

During the year ended December 31, 2014, R Systems had not granted any options under any of the aforementioned plans.

All options granted under Indus Software Employees Stock Option Plan - Year 2001 have already been vested and exercised or lapsed and no options were in force as on December 31, 2014.

For options granted during the earlier years under plan (a), (b) and (c), R Systems used the fair value of the stock options for calculating the employees compensation cost.

For the purpose of valuation of the options granted during earlier years, the management obtained fair value of the options at the date of grant under respective schemes from a frm of Chartered Accountants, to determine accounting impact, if any, of options granted over the periods. In the considered opinion of the valuer, the fair value of option determined using ''Black Scholes Valuation Model'' under each of above schemes is "Nil" and thus no accounting thereof is required.

* R Systems International Ltd. - Year 2004 Employee Stock Option Plan under which the price was based on Rs. 2 per share.

** Indus Software Employees Stock Option Plan - Year 2001 under which originally the price was based on Rs. 10 per share for 21,967 shares. As a result of amalgamation of Indus Software Private Limited into R Systems, R Systems had issued 206,822 equity shares of Rs. 2 each pursuant to the swap ratio approved by Hon''ble High Courts of Delhi and Mumbai.

*** R Systems International Ltd. - Year 2004 Employee Stock Option Plan - ECnet under which the price was based on Rs. 2 per share.

Please note that the details given above for plan (a), (b) and (c) are after making the required adjustments in relation to consolidation of each of the 5 equity shares of Rs. 2 each into 1 equity share of Rs. 10 each as approved by the shareholders in the year 2006 and before Sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1/- each as per record date of February 28, 2014.

Further, for the purpose of valuation of the options granted during the year 2005 under R Systems International Ltd. - Year 2004 Employee Stock Option Plan, the management obtained fair value of the options at the date of grant from a frm of Chartered Accountants, to determine accounting impact, if any, of options granted. In the considered opinion of the valuer, the fair value of these options determined using ''Black Scholes Valuation Model'' is "Nil" and thus no accounting thereof is required.

The above information is based on Rs. 2 per share prior to consolidation of 5 equity shares of Rs. 2 each into one equity share of Rs. 10 and subsequent allotment of bonus shares in the ratio of 1 : 1.

For the purpose of valuation of the options granted during the year ended December 31, 2007 under R Systems International Limited Employee Stock Option Scheme 2007, the compensation cost relating to Employee Stock Options, calculated as per the intrinsic value method is nil.

The management obtained fair value of the options at the date of grant from a frm of Chartered Accountants. In the considered opinion of the valuer, the fair value of these options determined using ''Black Scholes Valuation Model'' is "Rs. 50.73" per option.

The stock based compensation cost calculated as per the intrinsic value method for the financial year 2013 and 2014 was nil. If the stock based compensation cost was calculated as per fair value method prescribed by SEBI, the total cost to be recognised in the financial statements for the year 2014 would be nil (Previous year nil). The efect of adopting the fair value method on the net income and earnings per share is presented below:

Pro Forma adjusted Net Income and Earnings Per Share

(Amount in Rs.) Particulars Year ended Year ended December 31, December 31, 2014 2013

Net Income as reported 750,289,488 365,521,996

Add : Intrinsic Value Compensation Cost - -

Less : Fair Value Compensation Cost* - -

Adjusted Pro-forma Net Income 750,289,488 365,521,996

Earnings`Per Share (Face Value of Re. 1/-) Basic (Face Value of Re. 1/-)

- As reported 5.90 2.90

- Pro-forma 5.90 2.90

Diluted (Face Value of Re. 1/-)

- As reported 5.90 2.90

- Pro-forma 5.90 2.90

*all granted options have been vested during earlier years.

Weighted average exercise price of options granted during the year

S. Particulars Scheme Scheme Scheme Scheme No. (a) (b) (c) (d)

1. Exercise price equals market price N.A. N.A. N.A. N.A.

2. Exercise price is greater than N.A. N.A. N.A. N.A. market price

3. Exercise price is less than market N.A. N.A. N.A. N.A. price

Weighted average fair value of options granted during the year

S. Particulars Scheme Scheme Scheme Scheme No. (a) (b) (c) (d)

1. Exercise price equals market price N.A. N.A. N.A. N.A.

2. Exercise price is greater than N.A. N.A. N.A. N.A. market price

3. Exercise price is less than market N.A. N.A. N.A. N.A. price

Scheme (a): R Systems International Ltd. - Year 2004 Employee Stock Option Plan.

Scheme (b): Indus Software Employees Stock Option Plan -Year 2001.

Scheme (c): R Systems International Ltd. - Year 2004 Employee Stock Option Plan -ECnet.

Scheme (d): R Systems International Limited Employee Stock Option Scheme 2007.

As no options are granted during the year under Scheme (a), Scheme (b), Scheme (c) and Scheme (d), hence the required information is not applicable.

9. Liquidity and Borrowings - Consolidated Financial Statement

Cash and bank balance as at December 31, 2014 was Rs. 1,098.24 mn against Rs. 1,115.20 mn as of December 31, 2013. This excludes the money kept in separate bank accounts for fourth interim (special) dividend and margin money for buy back ofer. Decrease was mainly on account of purchase of fxed assets and dividends as ofset by cash generation from operations net of taxes and proceeds from the sale of Europe BPO business.

The consolidated cash and cash equivalent as at December 31, 2014 were Rs. 1,059.10 mn as against Rs. 795.19 mn as on December 31, 2013. Cash and cash equivalent as at December 31, 2014 includes Rs. 325.02 mn for fourth interim dividend which has been paid subsequent to year end and Rs. 15.00 mn for buy back ofer by the Company.

Net cash generated from operating activities is Rs. 724.57 mn for the year ended December 31, 2014 compared to Rs. 481.02 mn for the year ended December 31, 2013.

Cash flow generated from investing activities during the year 2014 mainly includes Rs. 229.28 mn received from sale of Europe BPO business and Rs. 41.24 mn as interest income on fxed deposits as ofset by purchase of fxed assets of Rs. 98.24 mn.

Cash used in fnancing activities during the year 2014 mainly includes payment of dividend of Rs. 419.79 mn and Rs. 139.85 mn for dividend distribution tax as ofset by proceeds from other non-current assets (margin money) Rs. 20.10 mn and proceeds of Rs. 9.70 mn on issuance of shares pursuant to exercise of ESOP.

R Systems'' policy is to maintain sufcient liquidity to fund the anticipated capital expenditures, operational expenses and investments for strategic initiatives.

R Systems has a credit facility from the Axis Bank Limited amounting to Rs. 200 mn (including non-fund based credit limit of Rs. 180 mn for currency forwards). As at December 31, 2014, the total credit balance was Rs. Nil under fund based line of credit. The total liability of R Systems against the loan for motor vehicles purchased was Rs. 9.29 mn as at December 31, 2014. R Systems primary bankers in India are Axis Bank Limited, ICICI Bank Limited, Kotak Mahindra Bank Limited, State Bank of India, HDFC Bank Limited and Oriental Bank of Commerce. In U.S.A., U.K., and Singapore, the primary bankers are California Bank & Trust, Natwest Bank and Citibank N.A., respectively.

10. Changes in the Capital Structure

The following changes took place in the capital structure during the year under review:

i. Sub division of Equity Shares

Shareholders of the company by passing necessary resolution through postal ballot on January 14, 2014 approved the sub-division of equity shares of the company of face value of Rs. 10 each into equity shares of Re. 1 each. Hence after the said sub-division, the authorised share capital of the Company was Rs. 200,000,000 divided into 200,000,000 equity shares of Re. 1 each and the issued, subscribed and paid up share capital was Rs. 126,654,580/- divided into 126,654,580 equity shares of Re. 1 each.

ii. Allotment of Shares under R Systems International Limited Employee Stock Option Scheme 2007

R Systems allotted 804,000 equity shares of Re. 1/- per shares to the eligible employees of the Company pursuant to the exercise of stock options granted under R Systems International Limited Employee Stock Option Scheme 2007

Hence after the said allotment, the issued, subscribed and paid up share capital of the Company as on December 31, 2014 was Rs. 127,458,580/- divided into 127,458,580 equity shares of Re. 1 each.

iii Buy Back of Equity Shares.

The Board of Directors of the Company at its meeting held on December 20, 2014 had approved the buy-back of the Company''s fully paid-up equity shares of face value of Re. 1/- each from its existing shareholders, other than those who are promoters, members of the promoter group and persons acting in concert, from the open market through stock exchange(s) for a total consideration not exceeding Rs. 600 lakhs and at a price not exceeding Rs. 100/- per share, payable in cash. This ofer for buy back remained opened from January 06, 2015 to April 23, 2015. During this period of Buy Back the company has bought back 678,155 equity shares for Rs. 595.74 lacs. All the shares bought back from January 06, 2015 to April 23, 2015 have been extinguished. After the said extinguishment the issued and paid up share capital of the Company stands revised to Rs. 126,780,425 divided into 126,780,425 equity shares of Re. 1/- each.

11. Corporate Restructuring

During the year ended December 31, 2014 the Company has obtained the approval of its Shareholders through postal ballot on September 23, 2014 to transfer its Indus IT Product and Service business operated out of Pune and Chennai centres to R Systems Products & Technologies Limited ("RSPTL"), a wholly owned subsidiary of the Company. The Company is in the process of implementing the transfer as per the aforesaid approval.

During the year ended December 31, 2014 the Company has transferred Europe BPO Business by way of sale of its 100% holding in R Systems Europe B.V., Netherlands and R Systems S.A.S., France, being wholly owned subsidiaries, to Customer Contact Management Group B.V. ("CCMG") a Europe based company.

12. Material Changes Afecting the Financial Position of the Company

Subsequent to the year ended on December 31, 2014 the Comapny has bought back 678,155 equity shares of face value of Re. 1/- each from its existing shares holders, other than those who are promoters, members of the promoter group and persons acting in concert, from the open market through stock exchange(s) from January 06, 2015 to April 23, 2015 for Rs. 595.74 lacs pursuant to the approval of the Board of Directors at its meeting held on December 20, 2014.

Except as detailed above, there were no other significant events subsequent to the balance sheet date till the date of this report which would materially afect the financial position of the Company.

13. Particulars of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars as prescribed under Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 for the year ended December 31, 2014 are as follows:

A. Conservation of Energy

During the year ended December 31, 2014 R Systems continued its'' action plans to curtail the energy bills by adopting various energy conservation options / technologies as identifed by Federation of Indian Chambers of Commerce & Industry ("FICCI") through a detailed Energy Audit carried out by FICCI for R Systems Noida operations. significant measures were taken to reduce energy consumption by using energy efcient equipment and devices. R Systems constantly evaluates new technologies and makes appropriate investments to be energy efcient. Currently, the Company uses CFL fttings and electronic ballasts to reduce power consumption of fuorescent tubes. The air is conditioned with energy efcient compressors for central air conditioning and with split air conditioning for localized areas. R Systems is always in search of innovative and efcient energy conservation technologies and applies them prudently. However, R Systems being in the software industry, its operations are not energy intensive and energy costs constitute a very small portion of the total cost, therefore, the financial impact of these measures is not material.

Form A of the said Rules is not applicable to the software industry.

B. Technology Absorption

The particulars with respect to technology absorption are given below:

(a) Research and Development (R&D)

Research and Development (R&D) Activities Carried out by the Company

The Company''s R&D programme covers technology for the secure, high performance and high availability products across web and mobility modes. The Company creates and owns the intellectual property in these products that cater to Retail, SME & Corporate Sector Lending, Insurance, Telecom, and Mobility businesses. The Company builds on a continuous basis new products, upgrades existing products with new releases. The rapidly evolving technology and competitive environment necessitates that we re-vamp the technology stack, provide new functionality and modules.

The Company develops a medium term and long term product road map and strategy which is reviewed constantly for relevance. We incorporate market and technology inputs on a continuous basis based on Market Research, RFI/RFP analysis, and feedback from customers and prospects. The Company follows an AGILE product development methodology under inspirational leadership of its management and its R & D Heads.

All R&D initiatives are governed by a Research & Development Committee constituted by the board of directors of the Company which includes technology and domain experts and R&D heads who approve all R&D initiatives

These R&D initiates are carried out of our R&D centres at Pune and Noida. The R&D team consists of 100 plus associates including high quality technical experts, engineers and domain experts who create a knowledge culture.

The technology stack has been reviewed and appreciated by peers and intellectuals who are represented in our customers and business alliances who have endorsed the products by their selection.

The product and technologies built by the R&D centres are delivered to the customers through a separate delivery team.

The products created out of the R&D initiatives of the Company compete with international products besides bringing in valuable foreign exchange into the country, also provides a degree of import substitution as it fulfls domestic needs for robust, scalable, high performance and high availability technology solutions

specific areas of R&D

The Company has been engaged in developing its own intellectual property in form of product for many years and owns high quality intellectual properties. The key areas of R & D in technology covers.

- High performance on web

- Highly Secure applications relevant to today''s requirement for anytime/anywhere access

- Build products that are world class and international (multi- tenant, multi-lingual, multi-currency)

- Optimise and Upgrade existing products

- Ergonomic and aesthetic usability standards

- High availability

- Open Source and other low cost technology stack

- Cloud Technology

- Mobile computing

- Digitisation and workflow

- Business Functionality

- Interfacing with other IT solutions used by client in adjacent areas

- Incorporate and innovate best industry practices

- Promote a culture of knowledge workers by sharing within the company and with technology and business groups

Benefts derived as a result of the above R&D

The Company has over the years become a key product vendor to banks, NBFCs, Telecom and Insurance Companies competing globally and winning customers in India and abroad. The solutions are receiving recognition for its contemporary technology, robustness, low "total cost of ownership". This is amply proven by the award that R Systems has received during 2013 as WINNER of the Financial Express "IT Solution of the Year" award for the Product solution that we delivered for India''s one of the most respected Insurance companies.

The Company has also won many global engagements and is recognised as global, internationalised solution suitable in a multi country, multi-currency, multi-tenant environment.

Over the years the company has expanded its stability of products:

For Banking and Non-banking Finance Companies

- Indus Loan Originations System

- Indus Loan Management Systems (or Receivables Management System)

- Indus Collections

- Indus Corporate Loan Originations

- Indus Collateral Management System

- Indus Commercial Vehicle and Leasing System

- Indus Exposure Monitoring System

- Indus Dealer Funding (Auto Loan Business)

- Indus Stock Audit (Auto Loan Business)

- BFSI Apps

- Mobile Apps for Customer acquisition and Collections

For Telecom Companies

- Indus Customer Acquisition System

- Indus Credit Management and Receivables System

For Insurance Companies

- Ipersyst – solution for persistency

- Iprotect- web based solutions for Insurance Originations

Generic Modules

- Platform for managing workflows that can be integrated into business solutions

Common Reporting System

- Commissions & Incentives (a performance management solution) – This is Generic Module applicable across industry verticals. Report & template printing is CRS module.

Future plan of action

The key R&D areas for future shall include:

- Evaluating the platform for its 6th generation product suite. The key deliverables for the 6th generation product suite will be:

Low TCO bringing a great deal of efciency into the Financial Services Business.

High confgurability allowing customers to improvise financial products, workflow and control systems.

Flexibility in use of bandwidth availability - web & mobility enabled.

Ergonomic and multi-language capabilities.

Architecture that allows customers to mix and match solutions and use invest in technology in an incremental manner improving the ROI for the investment Build strong interfaces with technology partners that allows for bundling the solution in manner that provides customers a seamless ERP like business environment.

Build strong set of analytics in the suite that provides customers business tools.

- The Company shall continue to focus on applications for mobile devices such as:

Generic ofce automation for business on the move

Extending web-based software by B2B and B2C enablement on mobile devices

Personal tools for convenience of mobile users

Applications for banking and finance industry

Cloud and Crowd computing

Expenditure on R&D

The details of expenditure are as follows:

(Rs. in Millions) Particulars Financial Year ended 31.12.2014 31.12.2013

Recurring expenditure charged to 80.25 93.04 statement of Profit & loss

Capital expenditure

(i) Intangible assets (including 8.37 15.89 under development)

(ii) Tangible assets 2.03 1.99

Total 90.65 110.92

Total R&D expenses as % of total 3.11 4.11 revenue

(b) Technology absorption, adaptation and innovation

1. Eforts made towards technology absorption, adaptation and innovation

The Company has established practice streams in specific technologies to analyze their implications and the benefts they can provide to the Company''s customers. These steps enable the Company to fnd and execute the most appropriate solutions for its clients.

2. Benefts derived as a result of the above eforts

The benefts derived from the above mentioned eforts are fulflling customer needs, efciency in operations, improvement in quality and growth in revenues.

3. Technology imported during the last 5 years

Not applicable, as no technology has been imported by the Company.

C. Foreign Exchange Earnings and Outgo (Accrual Basis)

A significant percentage of R Systems revenues are generated from exports. The development and service centres in Noida, Pune and Chennai are registered with the Software Technology Park of India in their respective areas as 100% Export Oriented Undertakings. All eforts of the Company are geared to increase the business of software exports in diferent products and markets. We have made investments in sales and marketing activities in various growing markets.

The total foreign exchange used and earned by R Systems during the year as compared with the previous year is as follows:

(Rs. in Millions) Particulars Financial Year ended 31.12.2014 31.12.2013

(a) Earnings (Accrual Basis) 3,087.10 2,454.88

(b) Expenditure (Accrual Basis) 412.68 398.40

(c) CIF value of imports 19.74 49.49

14. Subsidiaries

During the year under review the Comapny has incorporated subsidiary named R Systems Products & Technologies Limited in Pune on July 11, 2014. This is the frst Indian subsidiary of the Company.

Further, during the year the Company has completed the transfer of its two wholly owned subsidiaries named R Systems Europe B.V., Netherlands and R Systems S.A.S., France, on November 27, 2014 to Customer Contact Management Group B.V. ("CCMG") a Europe based company by executing the Share Sale Agreement along with other necessary documents.

As on December 31, 2014, R Systems has nineteen subsidiaries. The names and country of incorporation of those subsidiaries are as follows:

S. Name of the Subsidiaries Country of No. Incorporation

1. R Systems (Singapore) Pte Singapore Limited

2. R Systems, Inc. U.S.A.

3. Indus Software, Inc. U.S.A.

4. ECnet Limited Singapore

5. R Systems Solutions, Inc. U.S.A.

6. Systémes R. International Ltée Canada

7. R Systems Products & India Technologies Limited

8. ECnet (M) Sdn. Bhd. # Malaysia

9. ECnet, Inc. # U.S.A.

10. ECnet (Hong Kong) Limited # Hong Kong

11. ECnet Systems (Thailand) Thailand Company Limited #

12. ECnet Kabushiki Kaisha # Japan

13. ECnet (Shanghai) Co. Ltd. # People''s Republic of China

14. Computaris International Limited U.K.

15. ICS Computaris International Moldova Srl @

16. Computaris Malaysia Sdn. Bhd. @ Malaysia

17. Computaris Polska sp z o.o. @ Poland

18. Computaris Romania SRL @ Romania

19. Computaris USA, Inc. U.S.A.

# wholly owned subsidiaries of ECnet Limited, Singapore being

99.75% subsidiary of R Systems (The shareholding by the Company and R Systems (Singapore) Pte Limited is 69.37% and 30.38% respectively).

@ wholly owned subsidiaries of Computaris International Limited being 100% subsidiary of R Systems.

All the aforementioned nineteen subsidiaries except R Systems Products & Technologies Limited were incorporated and based outside India. In addition to providing services to various international clients these subsidiaries also help to generate revenues for R Systems. The Board of Directors of the Company regularly reviews the afairs of these subsidiaries.

During the year under review, the Board of Directors at its meeting held on July 07, 2014 has approved the ofer of buy- back from Computaris International Limited (a wholly owned subsidiary) of 13,500 shares held by the Company in the said subsidiary at the rate of GBP 111.38 per share for a consideration of Rs. 148,979,660. The aforesaid buy-back proceeds have been received by the Company on September 17, 2014. Even after this buy-back, Computaris International Limited continues to remain wholly owned subsidiary of the Company.

During the year ended December 31, 2014, the Company has received Rs. 55,484,250 as dividend from R Systems Europe B.V., its wholly owned subsidiary in Netherlands. Further, Computaris International Limited, U.K., wholly owned subsidiary of R Systems International Limited has received a dividend amounting to Rs. 55.95 million from its wholly owned subsidiary Computaris Polska Sp. zo.o., Poland.

As per Section 212 of the Companies Act, 1956 , we are required to attach the Directors'' Report, Balance Sheet and Statement of Profit and Loss (referred to as Financial Statements) of our subsidiaries. The Ministry of Corporate Afairs, Government of India vide its General Circular No. 2/2011 dated 8th February, 2011 has provided an exemption to companies from complying with Section 212, provided such companies publish the audited consolidated financial statement in the Annual Report. Accordingly, the Annual Report 2014 does not contain the Financial Statements of our subsidiaries. As directed under the said Circular, information in aggregate in respect of each subsidiaries including subsidiaries of subsidiaries i.e. (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investments (except in case of investment in subsidiaries) (f) turnover (g) Profit before taxation (h) provisions for taxation (i) Profit after taxation and (j) proposed dividend for each subsidiary has been disclosed in brief abstract forming part of the consolidated balance sheet.

Further, the audited annual accounts and related detailed information of our subsidiaries, where applicable, will be made available to shareholders seeking such information at any point of time. The annual accounts of the subsidiary companies will also be available for inspection by any shareholder at Registered Ofce of R Systems i.e. B-104 A, Greater Kailash-I, New Delhi – 110 048 and Corporate Ofce of R Systems i.e. C-40, Sector 59, Noida – 201 307 and Registered Ofces of the subsidiary companies concerned during business hours. The same will also be hosted on R Systems'' website, www.rsystems.com.

15. Particulars of Employees

As required under the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended by notifcation dated March 31, 2011, the names and other particulars of employees are set out in Annexure A to this report.

16. Directors'' Responsibility Statement

Pursuant to the requirement of Listing Agreement read with Section 134 (3) (c) of the Companies Act, 2013 (erstwhile Section 217 (2AA) of the Companies Act, 1956) with respect to directors'' responsibility statement, your directors hereby confrm that:

i) In the preparation of the annual accounts for the financial year ended December 31, 2014, the applicable accounting standards had been followed along with proper explanation relating to material departures;

ii) the directors had 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 afairs of the company at the end of the financial year and of the Profit and loss of the company for that period;

iii) the directors had taken proper and sufcient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

iv) the directors had prepared the annual accounts for the financial year ended December 31, 2014 on a going concern basis;

v) the directors, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating efectively; and

vi) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating efectively.

17. Auditors

M/s S. R. Batliboi & Associates LLP (ICAI Firm Registration No. 101049W), the statutory auditors of the Company will retire at the upcoming Annual General Meeting and are eligible for reappointment.

The Board, based on the recommendation of the audit committee, recommends the re-appointment of M/s S. R. Batliboi & Associates LLP (ICAI Firm Registration No. 101049W) as the statutory auditors of the Company. M/s S. R. Batliboi & Associates LLP have confrmed their eligibility and willingness to act as the statutory auditors of the Company and have further confrmed that their appointment, if made, shall be within the limits prescribed under Section 141 of the Companies Act, 2013 and that they are not disqualifed for such appointment within the meaning of the said section.

Further, the auditors'' report being self-explanatory, does not call for any further comments by the Board of Directors.

18. Audit Committee

R Systems has a qualifed and independent Audit Committee. During the year under review there was no change in composition of the Audit Committee except that Mr. Anuj Kanish ceased to be a member of Audit Committee consequent upon the completion of his term as Additional Director w.e.f. May 10, 2014 and Mrs. Ruchica Gupta was nominated as member of Audit Committee by the Board at its meeting held on July 26, 2014.

The constitution of the Committee is in compliance with the provisions of the Companies Act, 2013 and the Listing Agreement entered into with the stock exchanges. Detailed description of the Audit Committee has been given in Corporate Governance Report.

The terms of reference and role of the Committee are as per the guidelines set out in the Listing Agreement with the stock exchanges read with Section 177 of the Companies Act, 2013 and rules made thereunder and includes such other functions as may be assigned to it by the Board from time to time. The Committee has adequate powers to play an efective role as required under the provisions of the statute and Listing Agreement.

19. Prevention and Prohibition of Sexual harassment of Women at Work Place

At R Systems it is our desire to promote a healthy and congenial working environment irrespective of gender, caste, creed or social class of the employees. We value every individual and are committed to protect the dignity and respect of every individual. The Company has always endeavored for providing a better and safe environment free of sexual harassment at all its work places. Consequent to the enactment of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 and Rules made thereunder, the Management of R Systems International Limited has constituted an Internal Complaints Committee (ICC) to deal with any complaints or issues that may arise, in the nature of sexual harassment of women employees.

The Company has also prepared and implemented Policy for Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace. During the year 2014, no cases of sexual harassment against women employees at any of its work place were reported to the ICC.

20. Corporate Governance

As required under Clause 49 of the Listing Agreement entered into with the stock exchanges, the detailed report on corporate governance is given as Annexure B to this report and the certifcate obtained from a practicing company secretary regarding compliance of the conditions of corporate governance as stipulated in the said clause is annexed as Annexure C to this report.

Further, the disclosure as required pursuant to Section II Clause C of Part II of Schedule XIII to the Companies Act, 1956 and (now Section II Clause B of Part II of Schedule V of the Companies Act, 2013) and in terms of Clause 49 of the Listing Agreement entered into with the stock exchanges for all the directors is given in the detailed report on corporate governance which forms part of this report and annexed as Annexure B to this report.

21. Deposits

The Company has neither invited nor accepted any deposits from the public within the meaning of Section 58A of the Companies Act, 1956 and Section 2(31) of Companies Act, 2013 and rules made thereunder as such, no amount of principal or interest was outstanding on the date of the balance sheet.

22. Customer Relations

R Systems recognises that the customers have a choice of service providers and the directors would like to place on record their gratitude on behalf of the Company for the business provided by them. The Company''s quality policy mandates that the voice of the customer is obtained on a regular basis. We constantly review the feedback and incorporate its impact into our delivery systems and communications.

23. Stakeholder''s Relations

R Systems is inspired by its customers and its employees transform that inspiration and customers'' needs into value for all stakeholders. We thank all R Systems employees worldwide for their hard work, commitment, dedication and discipline that enables the Company to accomplish its customer commitments and commitments to all its stakeholders. R Systems conducts regular employee satisfaction surveys, and open house meetings to get employee feedback. R Systems is constantly validating key employee data with industry and peer group business. These practices have helped the Company achieve many of its business goals and have been recognised in many industry surveys over the last few years. The open door policy of our senior management team ensures that the feedback loop is completed promptly.

We thank our shareholders for their continuous support and confdence in R Systems. We are aware of our responsibilities to our shareholders to provide full visibility of operations, corporate governance and creating superior shareholder value and we promise to fulfll the same.

24. Management Discussion and Analysis Report

In terms of Clause 49 of the Listing Agreement entered into with the stock exchanges, management discussion and analysis report is given as Annexure D to this report.

25. Secretarial Audit Report

As per good governance practices, M/s SKP & Co., Company Secretaries in Whole Time Practice, has been appointed by the Board voluntarily to carry out the Secretarial Audit under the provision of Section 204 of the Companies Act, 2013 for the financial year ended December 31, 2014. The Secretarial Audit report for financial year ended 2014 is enclosed as Annexure E. The report does not contain any qualifcation.

26. Vigil Mechanism / Whistle Blower Policy

In order to provide a mechanism to employees of the company to disclose any unethical and improper practices or any other alleged wrongful conduct in the company and to prohibit managerial personnel from taking any adverse action against those employees, the company has laid down a Vigil Mechanism also known as Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Vigil Mechanism or Whistle Policy is explained in the Corporate Governance Report and also posted on the website of the Company.

27. Remuneration Policy

On the recommendation of Nomination & Remuneration Committee, the Board has framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report.

28. Meeting of the Board

The Board of R Systems International meets at regular intervals to discuss decide and supervise the various business policies, business strategy, Company''s performance and other statutory matters. During the year under review, the Board has met 12 times. The details of which are given in Corporate Governance Report. The intervening gap between two Board Meetings did not exceed 120 days.

29. Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance as well as of directors individually. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

30. Particulars of Loans, Guarantees or investments under Section 186 of the Companies Act, 2013

During the year the Company has incorporated a wholly owned Subsidiary named as R Systems Products & Technologies Limited by investing Rs. 500,000 (Rupees Five Lacs Only) by way of subscribing its Memorandum and Articles of Association.

31. Corporate Social Responsibility

In compliance with the provisions of Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors of the Company at its Meeting held on March 30, 2014 has constituted a Corporate Social Responsibility Committee (''CSR Committee''). The CSR Committee comprises of the following members:

1. Mr. Raj Kumar Gogia (Chairman & Non Executive Independent Director)

2. Lt. Gen. Baldev Singh (Retd.) (President and Senior Executive Director)

3. Mrs. Ruchica Gupta (Non-Executive Director)

4. Mr. Suresh Paruthi (Non- Executive Independent Director)

5. Mr. Raj Swaminathan (Director & Chief Operating Ofcer)

The detailed terms of reference of the Corporate Social Responsibility Committee has been provided in the Corporate Governance Report. In pursuit of the responsibilities entrusted to the CSR Committee, a policy on Corporate Social Responsibility

Policy has been prepared and adopted by the Board which is available at the website of the Company at following link:

http://www.rsystems.com/investors/composition_board_of_ directors.aspx

32. Acknowledgments

Your directors once again take this opportunity to thank the employees, investors, clients, vendors, banks, business associates, regulatory authorities including stock exchanges, Software Technology Park of India, the Central Government, State Government of Delhi, Uttar Pradesh, Maharashtra, Tamil Nadu for the business support, valuable assistance and co-operation continuously extended to R Systems. Your directors gratefully acknowledge the trust and confdence and look forward for their continued support in the future.

33. DISCLAIMER

The Ministry of Corporate Afairs vide its Circular No. 08/2014 dated April 04, 2014 clarifed that the financial statements and the documents required to be attached thereto, the Auditor''s and Boards'' Report in respect of the financial year under reference shall continue to be governed by the relevant provisions of the Companies Act, 1956, schedules and rules made thereunder.

Accordingly, whilst the financial statements and the Auditor''s Report as aforesaid are prepared as per the requirements of the Companies Act, 1956, the Company, as per its commitment to transparency and good governance, has provided some of the information in the Board''s Report and the Corporate Governance Report as per the Companies Act, 2013.

On behalf of the Board

For R Systems International Limited

Sd/- Sd/- Sd/- Satinder Singh Rekhi Lt. Gen. Baldev Singh (Retd.) Raj Swaminathan (DIN: 00006955) (DIN: 00006966) (DIN: 00788158) (Managing Director) (President & Senior (Director & Chief Executive Director) Operating Ofcer)

Place : CA, U.S.A Place : New Delhi Place : New Delhi Date : April 23, 2015 Date : April 23, 2015 Date : April 23,2015

---

Dec 31, 2013

Dear Shareholders,

The directors take great pleasure in presenting the Twentieth Annual Report on the business and operations of R Systems International Limited ("R Systems" or the "Company") together with the audited statements of accounts for the year ended December 31, 2013.

1. Financial Results

a. Standalone financial results of R Systems

(Rs. in Millions)

Particulars Financial Year ended 31.12.2013 31.12.2012

Total income 2,739.72 2,331.49

Profit before depreciation, 589.30 369.66 exceptional items and tax

Less : Depreciation and 47.81 62.40 amortisation

Profit before tax 541.49 307.26

Less : Current tax (net of MAT 188.29 95.40 credit)

Less : Deferred tax charge / (12.32) 6.58 (credit)

Profit after tax 365.52 205.28

Surplus in the statement of profit and loss

Balance as per last financial 609.70 805.01 statements

Add: Profit for the current year 365.52 205.28

Less: Appropriations

Proposed dividend (refer note 120.70 94.26 below)

Tax on proposed dividend 21.24 15.29 (refer note below)

Interim dividend 139.24 199.19

Tax on interim dividend 23.66 32.31

Transfer to general reserve 36.55 59.53

Total appropriations 341.39 400.58

Net surplus in the statement 633.83 609.70 of profit and loss

The Company has issued 50,100 shares pursuant to exercise of ESOP up to book closure date for distribution of dividend for the year 2012 and accordingly increased the appropriation in the current year by Rs. 0.38 million and Rs. 0.06 million as dividend and tax on dividend respectively. Further, due to increase in surcharge rate under Finance Act, 2013 the Company has additionally appropriated Rs. 0.73 million towards tax on dividend proposed for the year 2012.

b. Consolidated financial results of R Systems and its subsidiaries

(Rs. in Millions)

Particulars Financial Year ended 31.12.2013 31.12.2012

Total income 6,007.69 4,700.13

Profit before depreciation, 819.97 389.43 exceptional items and tax

Less : Depreciation and 101.71 100.89 amortisation

Profit before tax 718.26 288.54

Less : Current tax (net of MAT 192.50 94.99 credit)

Less : Deferred tax charge / (1.23) 9.93 (credit)

Profit after tax 526.99 183.62

Surplus in the statement of profit and loss

Balance as per last financial 582.14 799.11 statements

Add: Profit for the current year 526.99 183.62

Less: Appropriations

Proposed dividend 120.70 94.26

Tax on proposed dividend 21.24 15.29

Interim dividend 139.24 199.19

Tax on interim dividend 23.66 32.31

Transfer to general reserve 36.55 59.53

Total appropriations 341.39 400.58

Net surplus in the statement 767.74 582.14 of profit and loss

Previous Year figures have been regrouped / recanted, wherever

necessary.

2. Results of Operations

Standalone Accounts

- Total income during the year 2013 increased to Rs. 2,739.72 million as against Rs. 2,331.49 million during the year 2012, a growth of 17.51%.

- Profit after tax was Rs. 365.52 million during the year 2013 as compared to Rs. 205.28 million during 2012, a growth of 78.06%.

- Basic earnings per share (of face value of Re. 1/- each) was Rs. 2.90 for the year 2013 as compared to Rs. 1.65 for the year 2012, a growth of 75.76%.

Consolidated Accounts

- Consolidated total income during the year 2013 increased to Rs. 6,007.69 million as against Rs. 4,700.13 during the year 2012, a growth of 27.82%.

- Profit after taxes was Rs. 526.99 million during the year 2013 as compared to Rs. 183.62 million during 2012, a growth of 187%.

- Basic earnings per share (of face value of Re. 1/- each) were Rs. 4.18 for the year 2013 as compared to Rs. 1.48 for the year 2012, a growth of 182.43%.

3. Appropriations and Reserves

Dividend

During the year 2013, the Board declared two interim dividends namely, first interim dividend of Rs. 2.50 per equity share of Rs. 10/- each at its meeting held on July 27, 2013 and second interim dividend of Rs. 8.50 per equity share of Rs. 10/- each at its meeting held on October 25, 2013.

Taking into consideration the operating profits for the year 2013 and a positive outlook for the future, the Board of Directors (the "Board") is pleased to recommend a final dividend of Rs. 0.95 per equity share of Re. 1/- each (Rs. 9.50 per equity share of Rs. 10/- each before sub-division of equity shares), being 95% on the par value, to be appropriated from the profits of the Company for the financial year 2013 subject to the approval of the shareholders at the ensuing Annual General Meeting. Total dividend including two interim dividends already paid for the year 2013 comes to Rs. 2.05 per equity share of Re. 1/- each (Rs. 20.50 per equity share of Rs. 10/- each) i.e. 205%, as compared to total dividend including interim dividend in the form of special dividend paid for the year 2012 at Rs. 23.50 per equity shares of Rs. 10/- each i.e. 235%.

The aforesaid final dividend for the year 2013 as recommended by the Board, if approved at the ensuing Annual General Meeting, will be paid to all the equity shareholders whose names appear in the Register of Members of the Company as of the opening business hours on May 02, 2014 after giving effect to all valid share transfers in physical form which would be received by the Company''s registrar and share transfer agent M/s Link Intime India Private Limited up to the end of business hours on, May 01, 2014 and to those whose names appear as beneficial owners in the records of National Securities Depository Limited ("NSDL") and Central Depository Services (India) Limited ("CDSL") as of the said date.

The register of members and share transfer books shall remain closed from May 02, 2014 to May 10, 2014, both days inclusive.

Transfer to Reserves

It is proposed to transfer a sum of Rs. 36,552,200/- (Rupees Thirty Six Million Five Hundred Fifty Two Thousand and Two Hundred only) from the current year profit in compliance with the Companies (Transfer of Profits to Reserves) Rules, 1975.

4. Business

R Systems is a leading provider of outsourced product development services, business process outsource services and also offers own product suite in BFSI, Manufacturing & Logistic verticals. R Systems diversified offering includes:

(IPLM Services Group

Under IPLM Services, R Systems delivers solutions and services in the area of Information Technology and Information Technology enabled services. The IT services cover application development, systems integration and support and maintenance of applications. Under the ITES we cover managed services, BPO services covering both technical support for IT and Hi-Tech electronic gadgets, high-end Quality Process Management and Revenue and Claims Management using our global delivery model in 20 languages.

Products Group

R Systems products group consists of two units. Indus® which address the retail lending, telecom and insurance industry and ECnet® which addresses supply chain, warehousing and inventory management.

Indus offerings include an integrated enterprise muti-portfolio lending suite for banking and financial services in the Retail, Corporate and SME sectors, credit management and revenue collection for telecom companies, iPerSyst for insurance companies which helps in timely policy renewal and customer retention along with other IT services to banking and financial clients.

ECnet Supply Chain products provide solutions for holistic management of the complex interaction between an organisation and its trading partners. The integrated solution aims to reduce all supply chain costs through improved collaboration and optimisation. The solutions are robust and scalable and give measurable ROI to clients within one year. Further, ECnet also operates as a channel partners for reselling and implementing several ERP products of one of the largest business software company to serve customers in a key customer segment: Small- to medium-sized businesses. These products present an opportunity to cross and up sell these solutions since these are adjunct to ECnet''s own product offerings.

R Systems is focused on key business verticals – Telecom and Digital Media, Banking and Finance, Healthcare Services, Manufacturing and Logistics, and Government Services and invested in building capabilities and domain knowledge around these focused verticals. This has helped in providing innovative and cost efficient solutions and services under chosen verticals.

Customers and Delivery Centers

R Systems rapidly growing customer list includes a variety of Fortune 1000, government and mid-sized organizations across a wide range of industry verticals including Banking and Finance, High Technology, Independent Software Vendors, Telecom and Digital Media, Government, HealthCare, Manufacturing and Logistic Industries. R Systems maintains thirteen development and service centers and using our global delivery model, we serve customers in the US, Europe, South America, the Far East, the Middle East, India and Africa.

There were no changes in the nature of the Company''s business and generally in the classes of business in which the Company has an interest and in the business carried on by the subsidiaries during the year under review. For details of Company''s subsidiaries please refer note number 14 relating to subsidiaries.

5. Quality

R Systems has continuously invested in processes, people, training, information systems, quality standards, frameworks, tools and methodologies to mitigate the risks associated with execution of projects. Adoption of quality models and practices such as the Software Engineering Institute''s – Capability Maturity Model Integrated (SEI-CMMi) and Six Sigma practices for processes have ensured that risks are identified and mitigated at various levels in the planning and execution process. R Systems journey for various quality certifications / standards for the development and service centers in India is provided below:

In the year 2013, Noida BPO center was certified as PCI-DSS ver 2.0 compliant for the Call Analytic Services provided to one of the major client.

As of the date of this report, Noida IT centre is SEI-CMMi level 5, PCMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2005 certified; Noida BPO centre is PCMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2005 certified. Pune and Chennai development centers are SEI-CMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2005 certified. The continuing compliance with these standards demonstrates the rigor of R Systems processes and differentiates us to keep our competitive edge in service and product offerings.

To maintain and strengthen competitive strengths, R Systems continues to make investments in its unique and proprietary sputter,; with best practices, tools and methodologies for flawless execution and consistent delivery of high quality software. The suite framework offers services along the entire software lifecycle that includes technology consulting, architecture, design and development, professional services, testing, maintenance, customer care and technical support. R Systems expects that its technology focus, investment in processes, talent and methodologies will enable it to distinguish itself from competition as it seeks to provide services to technology / product companies.

6. Acquisition

During the year under review, ECnet Limited, Singapore, a subsidiary of the Company completed the acquisition of ERP business from Nikko Computers System(s) PTE Ltd. (NCS). NCS provides ERP implementation and support services primarily to Japanese companies located in Singapore and Malaysia. This business acquisition will strengthen our ERP business and customer base in South East Asia under our subsidiary ECnet Limited, Singapore. The acquisition will provide a good Japanese client base and help to grow our business in the South East Asia region.

7. Directors

During the year under review, the following changes took place in the once of directors of the Company.

Mr. Raj Kumar Gogia and Mr. Gurbax Singh Bhasin were reappointed as directors liable to retire by rotation and Mr. Raj Swaminathan was further re-appointed as Director and Chief Operating Officer of the Company for a period of three years w.e.f. September 29, 2012 at the previous Annual General Meeting held on May 11, 2013.

Pursuant to the approval of the Board at its meeting held on November 29, 2013 and approval accorded by the shareholders by passing necessary resolution through postal ballot on January 14, 2014, Mr. Satinder Singh Rekhi has been re-appointed as Chairman & Managing Director of the Company for a period of five years i.e. w.e.f. January 01, 2014 to December 31, 2018 subject to the approval of the Central Government, if applicable.

Further, Mr. Anuj Kanish, who was appointed by the Board of Directors at its meeting held on May 11, 2013 as an Additional Director to hold office till the ensuing Annual General Meeting of the Company, has expressed his unwillingness to be re-appointed and hence the Board has not proposed his appointment at the ensuing Annual General Meeting. At the ensuing Annual General Meeting, Mr. Suresh Paruthi and Lt. Gen. Baldev Singh (Retd.) directors of the Company are liable to retire by rotation in accordance with the provisions of Section 255 and 256 of the Companies Act, 1956 read with the Articles of Association of the Company and being eligible, offer themselves for reappointment as directors of the Company.

None of the directors of the Company are disqualified as per the provisions of Section 274(1)(g) of the Companies Act, 1956. The directors of R Systems have made necessary disclosures, as required under various provisions of the Act and Clause 49 of the Listing Agreement.

8. Employees Stock Option Plans / Schemes

The industry in which R Systems operates is people intensive and R Systems believes that human resources play a pivotal role in the sustainability and growth of the Company. R Systems has always believed in rewarding its employees with competitive compensation packages for their dedication, hard work, loyalty and contribution towards better performance of the Company. To enable more and more employees to be a part of the financial success of the Company, retain them for future growth and attract new employees to pursue growth, R Systems has set up employees stock option plans / schemes from time to time for its employees and for the employees of its subsidiaries. As on the date of this report, the prevailing stock option plans of R Systems are as follows:

(a) R Systems International Ltd. - Year 2004 Employee Stock Option Plan : For the employees of R Systems and its subsidiaries other than ECnet Limited.

(b) R Systems International Ltd. - Year 2004 Employee Stock Option Plan – Ecnet : For the employees of ECnet Limited, a subsidiary of R Systems.

(c) Indus Software Employees Stock Option Plan - Year 2001 : Initially formulated for the employees of Indus Software Private Limited which got amalgamated with R Systems and the plan continues as per the scheme of amalgamation approved by the Hon''ble High Courts of Delhi and Mumbai. As on the date of this report, no stock options are in force under this plan.

(d) R Systems International Limited Employee Stock Option Scheme 2007 : For the employees of R Systems and its subsidiaries.

As required under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999 as amended, details relating to options approved, granted, vested, exercised, lapsed, in force etc. under the prevailing employees stock option plans / schemes during the year ended December 31, 2013 are as follows:

S. Particulars R Systems R Systems No. International Ltd. International Year - 2004 Ltd. - Year 2004 Employee Stock Employee Stock Option Plan Option Plan - ECnet (a) # (b) #

a. Total number of shares 199,500 200,000 covered under the plan

b. Pricing Formula Prevailing Price Prevailing Price once the Company''s once the Company''s shares are listed and shares are listed and at the Fair Market at the Fair Market Value as per the Value as per the terms of R Systems terms of R Systems International Ltd. - International Ltd. - Year 2004 Employees Year 2004 Employees Stock Option Plan on Stock Option Plan the date such option - ECnet on the is granted when the date such option is Company''s shares granted when the are not listed. Company''s shares are not listed.

Particulars Indus Software R Systems International Limited Employees Stock Employee Stock Option Scheme Option Plan Year 2007 2001 (c) # (d) #

Total number of shares covered the 73,898 650,000 plan

Pricing formula As approved under "Exercise Price" means the market the "Scheme of price which is payable for exercising Amalgamation" the options and "Market Price" of Indus Software means the latest available closing Private Limited with price, prior to the date of the the Company by meeting of the Board of Directors / the Hon''ble High Compensation Committee, in which Courts of Delhi and options are granted, on the stock Mumbai. exchange on which the shares of the Company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date shall be considered.

S. Particulars R Systems R Systems Indus Software R Systems Internatio nal Limited No. Internatio nal Ltd. Internatio nal Employees Stock Employee Stock Option Scheme Year - 2004 Ltd. - Year 2004 Option Plan Year 2007 Employee Stock Employee Stock 2001 Option Plan Option Plan - ECnet (a) # (b) # (c) # (d) #

c. Options granted during Nil Nil Nil Nil the year

d. Options vested during Nil Nil Nil Nil the year

e. Options exercised during Nil Nil Nil 144,750 the year

f. The total number of Nil Nil Nil 144,750 shares arising as a result of exercise of options during the year

g. Options lapsed during 4,495 Nil Nil 6,000 the year

h. Variation of terms of Nil Nil Nil Nil options during the year

i. Money realised by Nil Nil Nil 17,471,325 exercise of options during the year (Rs.)

j. Total number of options 51,540 6,200 Nil 104,928 in force at the end of the year

k. Employee wise details of options granted to (during the year)

(i) Senior managerial Nil Nil Nil Nil personnel

(i i) Any other employee Nil Nil Nil Nil who receives a grant in any one year of options amounting to 5% or more of options granted during that year

(i ii) Identifed employees Nil Nil Nil Nil who were granted options, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant

l. Diluted Earnings Per N.A. N.A. N.A. 2.90* Share (EPS) pursuant to issue of shares on exercise of options

# Please note that the details given above for plan (a), (b) and (c) are after making the required adjustments in relation to consolidation of each of the 5 equity shares of Rs. 2 each into 1 equity share of Rs. 10 each as approved by the shareholders in the year 2006 and before sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1 each as per record date of February 28, 2014.

* EPS is per equity share of Re. 1 each i.e. after giving into effect sub-division of equity shares of Rs. 10 each into equity shares of Re. 1 each as per record date of February 28, 2014.

During the year ended December 31, 2013, R Systems had not granted any options under any of the aforementioned plans.

All options granted under Indus Software Employees Stock Option Plan - Year 2001 have already been vested and exercised or lapsed and no options were in force as on December 31, 2013.

For options granted during the earlier years under plan (a), (b) and (c), R Systems used the fair value of the stock options for calculating the employees compensation cost.

For the purpose of valuation of the options granted during earlier years, the management obtained fair value of the options at the date of grant under respective schemes from a firm of Chartered Accountants, to determine accounting impact, if any, of options granted over the periods. In the considered opinion of the value, the fair value of option determined using ''Black Scholes Valuation Model'' under each of above schemes is "Nil" and thus no accounting thereof is required.

The assumptions used for the purpose of determination of fair value are stated below:

Assumptions Unit Scheme (a) * Scheme (b) ** Scheme (c)*** Comments by the value

Strike price Rs. 42 154 26

Current share price Rs. 16 140 16 Taken on the basis of NAV and PECV method of valuation.

Expected option life No. of Years 5 2.5 5 Being half of the maximum option life.

Volatility % 1 0.5 1 In case of unlisted shares, the volatility may be taken as zero. Verma committee also recommends this.

Risk free return % 7 11.3 7 Zero coupon rate estimated from trading government securities for a maturity corresponding to expected life of option - taken from sites of NSE and / or BSE.

Expected dividend % - 15 - Company has no set policy so dividend taken as Yield zero.

In case of Indus plan, as the dividend had been paid by the erstwhile company, it has been assumed at 15%.

* R Systems International Ltd. - Year 2004 Employee Stock Option Plan under which the price was based on Rs. 2 per share.

** Indus Software Employees Stock Option Plan - Year 2001 under which originally the price was based on Rs. 10 per share for 21,967 shares. As a result of amalgamation of Indus Software Private Limited into R Systems, R Systems had issued 206,822 equity shares of Rs. 2 each pursuant to the swap ratio approved by Hon''ble High Courts of Delhi and Mumbai.

*** R Systems International Ltd. - Year 2004 Employee Stock Option Plan - ECnet under which the price was based on Rs. 2 per share.

Please note that the details given above for plan (a), (b) and (c) are after making the required adjustments in relation to consolidation of each of the 5 equity shares of Rs. 2 each into 1 equity share of Rs. 10 each as approved by the shareholders in the year 2006 and before sub-division of each of the equity shares of Rs. 10 each into 10 equity shares of Re. 1 each as per record date of February 28, 2014.

Further, for the purpose of valuation of the options granted during the year 2005 under R Systems International Ltd. - Year 2004 Employee Stock Option Plan, the management obtained fair value of the options at the date of grant from a firm of Chartered Accountants, to determine accounting impact, if any, of options granted. In the considered opinion of the value, the fair value of these options determined using ''Black Scholes Valuation Model'' is "Nil" and thus no accounting thereof is required.

The assumptions used by the value for the purpose of determination of fair value are stated below:

Assumptions Unit Scheme Comments by the value

Strike price Rs. 42

Current share price Rs. 13.58 Taken on the basis of NAV and PECV method of valuation.

Expected option life No. of Years 5 Being half of the maximum option life.

Volatility % 1 In case of unlisted shares, the volatility may be taken as zero. Verma committee also recommends this.

Risk free return % 7.42 Zero coupon rate estimated from trading government securities for a maturity corresponding to expected life of option - taken from site of NSE.

Expected dividend % - Company has no set policy so dividend taken as zero. Yield

The above information is based on Rs. 2 per share prior to consolidation of 5 equity shares of Rs. 2 each into one equity share of Rs. 10 and subsequent allotment of bonus shares in the ratio of 1 : 1.

For the purpose of valuation of the options granted during the year ended December 31, 2007 under R Systems International Limited Employee Stock Option Scheme 2007, the compensation cost relating to Employee Stock Options, calculated as per the intrinsic value method is nil.

The management obtained fair value of the options at the date of grant from a firm of Chartered Accountants. In the considered opinion of the value, the fair value of these options determined using ''Black Scholes Valuation Model'' is "Rs. 50.73" per option.

The assumptions used by the valuer for the purpose of determination of fair value are stated below:

Assumptions Unit Scheme Comments by the valuer

Strike price Rs. 120.70

Current share price Rs. 118.50 Price on the date of grant by Board of Directors i.e. closing price on July 11, 2007.

Expected option No. of Years 4 Being the vesting period. life

Volatility % 44 On the basis of industry average.

Risk free return % 7 Zero coupon rate estimated from trading government securities for a maturity corresponding to expected life of option - taken from site of NSE.

Expected dividend % 0.86 Company has declared Dividends of 12% in the past. Assuming that it will continue Yield declaring similar dividends in future.

The stock based compensation cost calculated as per the intrinsic value method for the financial year 2012 and 2013 was nil. If the stock based compensation cost was calculated as per fair value method prescribed by SEBI, the total cost to be recognised in the financial statements for the year 2013 would be nil (Previous year nil). The effect of adopting the fair value method on the net income and earnings per share is presented below:

Pro Forma adjusted Net Income and Earnings Per Share

(Amount in Rs.) Particulars Year ended Year ended December 31, 2013 December 31, 2012

Net Income as reported 365,521,996 205,277,009

Add : Intrinsic Value Compensation Cost - -

Less : Fair Value Compensation Cost* - -

Adjusted Pro-forma Net Income 365,826,370 206,063,305

Earnings `Per Share (Face Value of Re. 1/-)

Basic (Face Value of Re. 1/-)

- As reported 2.90 1.65

- Proforma 2.90 1.65

Diluted (Face Value of Re. 1/-)

- As reported 2.90 1.65

- Proforma 2.90 1.65

* all granted options have been vested during earlier years.

Weighted average exercise price of options granted during the year

S. Particulars Scheme Scheme Scheme Scheme No. (a) (b) (c) (d)

1. Exercise price equals market price N.A. N.A. N.A. N.A.

2. Exercise price is greater than N.A. N.A. N.A. N.A. market price

3. Exercise price is less than market N.A. N.A. N.A. N.A. price

Weighted average fair value of the options granted during the year

S. Particulars Scheme Scheme Scheme Scheme No. (a) (b) (c) (d)

1. Exercise price equals market price N.A. N.A. N.A. N.A.

2. Exercise price is greater than N.A. N.A. N.A. N.A. market price

3. Exercise price is less than market N.A. N.A. N.A. N.A. price

Scheme (a): R Systems International Ltd. - Year 2004 Employee Stock Option Plan.

Scheme (b): Indus Software Employees Stock Option Plan -Year 2001.

Scheme (c): R Systems International Ltd. - Year 2004 Employee Stock Option Plan -ECnet.

Scheme (d): R Systems International Limited Employee Stock Option Scheme 2007.

As no options are granted during the year under Scheme (a), Scheme (b), Scheme (c) and Scheme (d), hence the required information is not applicable.

9. Liquidity and Borrowings - Consolidated Financial Statement

Cash and bank balance, including bank deposits, debt mutual funds as of December 31, 2013 was Rs. 1,115.20 mn against Rs. 889.39 mn as of December 31, 2012. Increase was mainly on cash generated from operations and mainly offset by cash used for purchase of fixed assets and payment of dividends.

The consolidated cash and cash equivalent as at December 31, 2013 were Rs. 795.19 mn as against Rs. 524.14 mn as on December 31, 2012.

Net cash generated from operating activities is Rs. 481.02 mn for the year ended December 31, 2013 compared to Rs. 345.18 mn for the year ended December 31, 2012.

Cash flow generated from operating activities is the significant source of funding for investing and financing activities.

Cash used in investing activities during the year 2013 includes purchase of fixed assets of Rs. 168.66 mn, investment in in SBI debt fund Rs. 10.00 mn as offset by increase in proceeds from maturity of long term fixed deposits Rs. 71.07 mn, interest income on fixed deposits of Rs. 45.40 mn and receipt on sale of fixed assets of Rs. 2.82 mn.

Cash used in financing activities during the year 2013 includes Rs. 233.15 mn for payment of dividend, Rs. 39.69 mn for dividend distribution tax and Rs. 1.22 mn as payment of interest on loans as offset by proceeds from other non-current assets (margin money) Rs. 35.85 mn, proceeds from issuance of share capital pursuant to exercise of employee stock options amounting to Rs. 17.47 mn and net increase in long term loan of Rs. 8.25 mn.

R Systems'' policy is to maintain sufficient liquidity to fund the anticipated capital expenditures, operational expenses and investments for strategic initiatives.

R Systems has a credit facility from the Axis Bank Limited amounting to Rs. 200 mn (including non-fund based credit limit of Rs. 185 mn). As at December 31, 2013, the total credit balance was Rs. Nil under fund based line of credit. The total liability of R Systems against the loan for motor vehicles purchased was Rs. 6.78 mn and for equipment purchased was Rs. 7.76 mn as at December 31, 2013. R Systems primary bankers in India are Axis Bank Limited, State Bank of India, ICICI Bank Limited and HDFC Bank Limited. In U.S.A., U.K., Singapore, Netherland and Japan, the primary bankers are California Bank & Trust, Natwest Bank, Citibank N.A., ABN Amro Bank N.V. and Sumitomo Mitsui Banking Corporation respectively.

10. Changes in the Capital Structure

As of December 31, 2013, the authorised share capital of the Company was Rs. 200,000,000 divided into 20,000,000 equity shares of Rs. 10 each and the issued, subscribed and paid up share capital was Rs. 126,654,580/- divided into 12,665,458 equity shares of Rs. 10 each. During the year under review, the Company has allotted 144,750 equity shares of Rs. 10 each pursuant to exercise of Stock Options under R Systems International Limited Employee Stock Options Scheme 2007, at an exercise price of Rs. 120.70 per share.

Subsequent to the closing of the year 2013, shareholders of the company by passing necessary resolution through postal ballot on January 14, 2014 approved the sub-division of equity shares of the company of face value of Rs. 10 each into equity shares of Re. 1 each. The Board of directors had fixed February 28, 2014 as record date to give efect to the said sub-division to the existing shareholders. Hence after the said sub-division, the authorised share capital of the Company was Rs. 200,000,000 divided into 200,000,000 equity shares of Re. 1 each and the issued, subscribed and paid up share capital was Rs. 126,654,580/- divided into 126,654,580 equity shares of Re. 1 each.

Further subsequent to the year end, the Company has allotted 712,600 equity shares of Re. 1 each on March 10, 2014 at a price of Rs. 12.07 per equity share pursuant to exercise of options by employees of the Company in terms of R Systems International Limited Employee Stock Option Scheme 2007. With the said allotment, the paid-up capital of the Company stands increased to Rs. 127,367,180/- divided into 127,367,180 fully paid up equity shares of Re. 1 each.

11. Corporate Restructuring

During the year ended December 31, 2013, the Board of directors further reassessed the synergies arising out of proposed amalgamation of its two subsidiaries based in Singapore for their revival and growth namely, ECnet Limited and R Systems (Singapore) Pte Limited, as was earlier approved by the Board in the year 2011, and also permitted modification of the scheme of corporate restructuring so as to convert the loan given by R Systems (Singapore) Pte Limited to ECnet Limited into equity instead of merging these two companies. Further, the company has also made additional equity investment amounting to Rs. 30,807,962/- (SGD 661,800) for long term purpose in ECnet Limited, Singapore and Rs. 13,413,875 (USD 250,000) for long term purpose in R Systems Solutions Inc, U.S.A.

Pursuant to the earlier approvals of the Board, the liquidation of R Systems NV, Belgium (wholly owned subsidiary) and closure of Branch Office of the Company in London, United Kingdom have been completed successfully during the year 2013. Further during the year 2013, the company also successfully closed its branch office in The Netherlands and liquidated one of the step down subsidiaries namely, Computaris Limited, U.K. (WOS of Computaris International Limited, U.K. which is 100% subsidiary of R Systems International Limited).

12. Material Changes Affecting the Financial Position of the Company

Subsequent to the yearend 2013, the Company has allotted 712,600 equity shares of Re. 1/- each on March 10, 2014 at a price of Rs. 12.07 per equity share pursuant to exercise of options by employees of the Company in terms of R Systems International Limited Employee Stock Option Scheme 2007. With the said allotment, the paid-up capital of the Company stands increased to Rs. 127,367,180/- divided into 127,367,180 fully paid up equity shares of Re. 1/- each.

Except as detailed above, there were no other significant events subsequent to the balance sheet date till the date of this report which would materially affect the financial position of the Company.

13. Particulars of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars as prescribed under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 for the year ended December 31, 2013 are as follows:

A. Conservation of Energy

During the year ended December 31, 2013 R Systems continued its action plans to curtail the energy bills by adopting various energy conservation options / technologies as identified by Federation of Indian Chambers of Commerce & Industry ("FICCI") through a detailed Energy Audit carried out by FICCI for R Systems Noida operations. Significant measures were taken to reduce energy consumption by using energy efficient equipment and devices. R Systems constantly evaluates new technologies and makes appropriate investments to be energy efficient. Currently, the Company uses CFL fittings and electronic ballasts to reduce power consumption of fluorescent tubes. The air is conditioned with energy efficient compressors for central air conditioning and with split air conditioning for localized areas. R Systems is always in search of innovative and efficient energy conservation technologies and applies them prudently. However, R Systems being in the software industry, its operations are not energy intensive and energy costs constitute a very small portion of the total cost, therefore, the financial impact of these measures is not material.

Form A of the said Rules is not applicable to the software industry.

B. Technology Absorption

The particulars with respect to technology absorption are given below:

(a) Research and Development (R&D)

Research and Development (R&D) Activities Carried out by the Company

The Company''s R&D programme covers technology for the secure, high performance and high availability products across web and mobility modes. The Company creates and owns the intellectual property in these products that cater to Retail, SME & Corporate Sector Lending, Insurance, Telecom, and Mobility businesses. The Company builds on a continuous basis new products, upgrades existing products with new releases. The rapidly evolving technology and competitive environment necessitates that we re-vamp the technology stack, provide new functionality and modules.

The Company develops a medium term and long term product road map and strategy which is reviewed constantly for relevance. We incorporate market and technology inputs on a continuous basis based on Market Research, RFI/RFP analysis, and feedback from customers and prospects. The Company follows an AGILE product development methodology under inspirational leadership of its management and its R & D Heads.

All R&D initiatives are governed by a Research & Development Committee constituted by the board of directors of the Company which includes technology and domain experts and R&D heads who approve all R&D initiatives.

These R&D initiates are carried out of our R&D centers at Pune and Noida. The R&D team consists of 100 plus associates including high quality technical experts, engineers and domain experts who create a knowledge culture.

The technology stack has been reviewed and appreciated by peers and intellectuals who are represented in our

customers and business alliances who have endorsed the products by their selection.

The product and technologies built by the R&D centers are delivered to the customers through a separate delivery team.

The products created out of the R&D initiatives of the Company compete with international products besides bringing in valuable foreign exchange into the country, also provides a degree of import substitution as it fulfils domestic needs for robust, scalable, high performance and high availability technology solutions.

Specific areas of R&D

The Company has been engaged in developing its own intellectual property in form of product for many years and owns high quality intellectual properties. The key areas of R & D in technology covers.

- High performance on web

- Highly Secure applications relevant to today''s requirement for anytime/anywhere access

- Build products that are world class and international (multi-tenant, multi-lingual, multi-currency)

- Optimize and Upgrade existing products

- Ergonomic and aesthetic usability standards

- High availability

- Open Source and other low cost technology stack

- Cloud Technology

- Mobile computing

- Digitisation and workflow

- Business Functionality

- Interfacing with other IT solutions used by client in adjacent areas

- Incorporate and innovate best industry practices

- Promote a culture of knowledge workers by sharing within the company and with technology and business groups

Benefits derived as a result of the above R&D

The Company has over the years become a key product vendor to banks, NBFCs, Telecom and Insurance Companies competing globally and winning customers in India and abroad. The solutions are receiving recognition for its contemporary technology, robustness, low "total cost of ownership". This is amply proven by the award that R Systems has received during 2013 as WINNER of the Financial Express "IT Solution of the Year" award for the Product solution that we delivered for India''s one of the most respected Insurance companies.

The Company has also won many global engagements and is recognised as global, internationalised solution suitable in a multi country, multi-currency, multi-tenant environment.

Over the years the company has expanded its stability of products:

For Banking and Non-banking Finance Companies

- Indus Loan Originations System

- Indus Loan Management Systems (or Receivables Management System)

- Indus Collections

- Indus Corporate Loan Originations

- Indus Collateral Management System

- Indus Commercial Vehicle and Leasing System

- Indus Exposure Monitoring System

- Indus Dealer Funding (Auto Loan Business)

- Indus Stock Audit (Auto Loan Business)

- BFSI Apps

For Telecom Companies

- Indus Customer Acquisition System

- Indus Credit Management and Receivables System

For Insurance Companies

- Ipersyst – solution for persistency

- Iprotect- web based solutions for Insurance Originations

Generic Modules

- Platform for managing workflows that can be integrated into business solutions

Common Reporting System

- Commissions & Incentives (a performance management solution)

Mobile Apps

The Company also builds mobile applications across most of the mobility platforms such as Android and its. These mobile applications are developed at our R&D centre in Noida. These are generic applications that are used by public at large for convenience.

Future plan of action

The key R&D areas for future shall include:

- The Company is evaluating its platform for its 6th generation product suite. The key deliverables for the 6th generation product suite will be:

Low TCO bringing a great deal of efficiency into the Financial Services Business

High configurability allowing customers to improvise financial products, workflow and control systems

Flexibility in use of bandwidth availability - web & mobility enabled

Ergonomic and multi-language capabilities

Architecture that allows customers to mix and match solutions and use invest in technology in an incremental manner improving the ROI for the investment

Build strong interfaces with technology partners that allows for bundling the solution in manner that provides customers a seamless ERP like business environment

Build strong set of analytics in the suite that provides customers business tools

- The Company shall continue to focus on applications for mobile devices such as:

Generic office automation for business on the move

Extending web-based software by B2B and B2C enablement on mobile devices

Personal tools for convenience of mobile users

Applications for banking and finance industry

Cloud and Crowd computing

Expenditure on R&D

The Company carries out its Research and Development activities at its Pune and Noida centers. The details of expenditure are as follows:

(Rs. in Millions)

Particulars Financial Year ended 31.12.2013 31.12.2012

Recurring expenditure 93.04 67.45

charged to statement of proft & loss Capital expenditure

(i) Intangible assets 15.89 9.83 (including under development)

(ii) Tangible assets 1.99 1.76

Total 110.92 79.04

Total R&D expenses as % 4.11% 3.45% of total revenue

(b) Technology absorption, adaptation and innovation

1. Efforts made towards technology absorption, adaptation and innovation

The Company has established practice streams in specific technologies to analyze their implications and the benefits they can provide to the Company''s customers. These steps enable the Company to find and execute the most appropriate solutions for its clients.

2. Benefits derived as a result of the above efforts

The benefits derived from the above mentioned efforts are fulflling customer needs, efficiency in operations, improvement in quality and growth in revenues.

3. Technology imported during the last 5 years

Not applicable, as no technology has been imported by the Company.

C. Foreign Exchange Earnings and Outgo (Accrual Basis)

A significant percentage of R Systems revenues are generated from exports. The development and service centers in Noida, Pune and Chennai are registered with the Software Technology Park of India in their respective areas as 100% Export Oriented Undertakings. All efforts of the Company are geared to increase the business of software exports in different products and markets. We have made investments in sales and marketing activities in various growing markets.

The total foreign exchange used and earned by R Systems during the year as compared with the previous year is as follows:

(Rs. in Millions)

Particulars Financial Year ended 31.12.2013 31.12.2012

(a) Earnings (Accrual Basis) 2,454.88 2,082.21

(b) Expenditure (Accrual 398.40 377.68 Basis)

(c) CIF value of imports 49.49 9.12

14. Subsidiaries

As on December 31, 2013, R Systems has twenty subsidiaries. The names and country of incorporation of those subsidiaries are as follows:

S. Name of the Subsidiaries Country of No. Incorporation

1. R Systems (Singapore) Pte Limited Singapore

2. R Systems, Inc. U.S.A.

3. Indus Software, Inc. U.S.A.

4. ECnet Limited Singapore

5. R Systems Solutions, Inc. U.S.A.

6. R Systems Europe B.V. The Netherlands

7. R Systems S.A.S. France

8. Computaris International Limited U.K.

9. Systémes R. International Ltée Canada

10. ECnet (M) Sdn. Bhd. # Malaysia

11. ECnet, Inc. # U.S.A.

12. ECnet (Hong Kong) Limited # Hong Kong

13. ECnet Systems (Thailand) Thailand Company Limited #

14. ECnet Kabushiki Kaisha # Japan

15. ECnet (Shanghai) Co. Ltd. # People''s Republic of China

16. ICS Computaris International Srl @ Moldova

17. Computaris Malaysia Sdn.Bhd. @ Malaysia

18. Computaris Polska sp z o.o. @ Poland

19. Computaris Romania SRL @ Romania

20. Computaris USA, Inc. @ U.S.A.

# wholly owned subsidiaries of ECnet Limited, Singapore. R Systems International Limited holds 69.37% directly in ECnet Limited, Singapore and 30.38% shares through its wholly owned subsidiary i.e. R Systems (Singapore) Pte Limited, Singapore and thus together it holds 99.75% (previous year 99.56%) of total capital of ECnet Limited, Singapore.

@ wholly owned subsidiaries of Computaris International Limited being 100% subsidiary of R Systems.

During the year 2013, R Systems NV, Belgium, a wholly owned direct subsidiary and Compautaris Limited, U.K. a step-down wholly owned subsidiary of R Systems International Limited, was liquidated and closed.

All the aforementioned twenty subsidiaries are incorporated and based outside India. In addition to providing services to various international clients these subsidiaries also help to generate revenues for R Systems. The Board of Directors of the Company regularly reviews the affairs of these subsidiaries.

As per Section 212 of the Companies Act, 1956, we are required to attach the Directors'' Report, Balance Sheet and Profit and Loss Account (referred to as Financial Statements) of our subsidiaries. The Ministry of Corporate Affairs, Government of India vide its General Circular No. 2/2011 dated 8th February, 2011 has provided an exemption to companies from complying with Section 212, provided such companies publish the audited consolidated financial statement in the Annual Report. Accordingly, the Annual Report 2013 does not contain the Financial Statements of our subsidiaries. As directed under the said Circular, information in aggregate in respect of each subsidiaries including subsidiaries of subsidiaries i.e. (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investments (except in case of investment in subsidiaries) (f) turnover (g) profit before taxation (h) provisions for taxation (i) profit after taxation and (j) proposed dividend for each subsidiary has been disclosed in brief abstract forming part of the consolidated balance sheet.

Further, the audited annual accounts and related detailed information of our subsidiaries, where applicable, will be made available to shareholders seeking such information at any point of time. The annual accounts of the subsidiary companies will also be available for inspection by any shareholder at Registered Office of R Systems i.e. B-104 A, Greater Kailash-I, New Delhi – 110 048 and Corporate Office of R Systems i.e. C-40, Sector 59, Noida – 201307 and Registered Offices of the subsidiary companies concerned during business hours. The same will also be hosted on R Systems'' website, www.rsystems.com.

15. Particulars of Employees

As required under the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended by notification dated March 31, 2011, the names and other particulars of employees are set out in Annexure A to this report.

16. Directors'' Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to directors'' responsibility statement, your directors hereby confirm that:

(i) In the preparation of the annual accounts for the financial year ended December 31, 2013, the applicable accounting standards had been followed along with proper explanation relating to material departures, wherever applicable;

(ii) The directors had 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 or loss of the Company for the year under review;

(iii) The directors had 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;

(iv) The directors had prepared the annual accounts for the financial year ended December 31, 2013 on a going concern basis.

17. Auditors

M/s S. R. Batliboi & Co. LLP, the statutory auditors of the Company will retire at the upcoming annual general meeting and are eligible for reappointment. However M/s S. R. Batliboi & Co. LLP have expressed their unwillingness to get reappointed as the statutory auditors of the Company.

The Board, based on the recommendation of the audit committee, recommends the appointment of M/s S. R. Batliboi & Associates LLP (Firm Registration No. 101049W) as the statutory auditors of the Company. M/s S. R. Batliboi & Associates LLP have confirmed their eligibility and willingness to act as the statutory auditors of the Company and have further confirmed that their appointment, if made, shall be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

Further, the auditors'' report being self-explanatory, does not call for any further comments by the Board of Directors.

18. Audit Committee

R Systems has a qualified and independent Audit Committee. During the year under review there was no change in composition of the Audit Committee except that Mr. Anuj Kanish was appointed as a regular member of the Audit Committee upon his appointment as Additional Director on May 11, 2013.

The constitution of the Committee is in compliance with the provisions of the Companies Act, 1956 and the Listing Agreement entered into with the stock exchanges.

The terms of reference and role of the Committee are as per the guidelines set out in the Listing Agreement with the stock exchanges read with Section 292A of the Companies Act, 1956 and includes such other functions as may be assigned to it by the Board from time to time. The Committee has adequate powers to play an effective role as required under the provisions of the statute and Listing Agreement.

19. Prevention and Prohibition of Sexual harassment of Women at Work Place

At R Systems it is our desire to promote a healthy and congenial working environment irrespective of gender, caste, creed or social class of the employees. We value every individual and are committed to protect the dignity and respect of every individual. The company has always endeavored for providing a better and safe environment free of sexual harassment at all its work places. Consequent to the enactment of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made there under, the Management of R Systems International Limited has constituted an Internal Complaints Committee (ICC) to deal with any complaints or issues that may arise, in the nature of sexual harassment of women employees. The company has also prepared and implemented Policy for Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace. Since the formation of the Committee, no cases of sexual harassment against women employees at any of its work place were reported to the ICC.

20. Corporate Governance

As required under Clause 49 of the Listing Agreement entered into with the stock exchanges, the detailed report on corporate governance is given as Annexure B to this report and the certificate obtained from a practicing company secretary regarding compliance of the conditions of corporate governance as stipulated in the said clause is annexed as Annexure C to this report.

Further, the disclosure as required pursuant to Section II Clause C of Part II of Schedule XIII to the Companies Act, 1956 and in terms of Clause 49 of the Listing Agreement entered into with the stock exchanges for all the directors is given in the detailed report on corporate governance which forms part of this report and annexed as Annexure B to this report.

21. Deposits

The Company has neither invited nor accepted any deposits from the public within the meaning of Section 58A of the Companies Act, 1956 and as such, no amount of principal or interest was outstanding on the date of the balance sheet.

22. Customer Relations

R Systems recognises that the customers have a choice of service providers and the directors would like to place on record their gratitude on behalf of the Company for the business provided by them. The Company''s quality policy mandates that the Voice of the Customer is obtained on a regular basis. We constantly review the feedback and incorporate its impact into our delivery systems and communications.

23. Stakeholders Relations

R Systems is inspired by its customers and its employees transform that inspiration and customers'' needs into value for all stakeholders. We thank all R Systems employees worldwide for their hard work, commitment, dedication and discipline that enables the Company to accomplish its customer commitments and commitments to all its stakeholders. R Systems conducts regular employee satisfaction surveys, and open house meetings to get employees feedback. R Systems is constantly validating key employee data with industry and peer group business. These practices have helped the Company achieve many of its business goals and have been recognised in many industry surveys over the last few years. The open door policy of our senior management team ensures that the feedback loop is completed promptly.

We thank our shareholders for their continuous support and confidence in R Systems. We are aware of our responsibilities to our shareholders to provide full visibility of operations, corporate governance and creating superior shareholder value and we promise to fulfill the same.

24. Management Discussion and Analysis Report

In terms of Clause 49 of the Listing Agreement entered into with the stock exchanges, management discussion and analysis report is given as Annexure D to this report.

25. Acknowledgments

Your directors once again take this opportunity to thank the employees, investors, clients, vendors, banks, business associates, regulatory authorities including stock exchanges, Software Technology Park of India, the Central Government, State Government of Delhi, Uttar Pradesh, Maharashtra, Tamil Nadu for the business support, valuable assistance and co-operation continuously extended to R Systems. Your directors gratefully acknowledge the trust and confidence and look forward for their continued support in the future.

On behalf of the Board

For R Systems International Limited

Sd/-

Place : CA, U.S.A. Satinder Singh Rekhi

Date : March 30, 2014 (Chairman and Managing Director)

---

Dec 31, 2012

Dear Shareholders,

The directors take great pleasure in presenting the Nineteenth Annual Report on the business and operations of R Systems International Limited ("R Systems" or the "Company") together with the audited statements of accounts for the year ended December 31, 2012.

1. FINANCIAL RESULTS

a. Standalone fnancial results of R Systems (Rs. in lakhs)

Particulars Financial Year ended 31.12.2012 31.12.2011

Total income 23,314.88 19,768.03

Proft before depreciation, 3,696.62 1,671.59 exceptional items and tax

Less : Depreciation and 624.01 881.24 amortisation

Proft before tax 3,072.61 790.35

Less : Current tax (net of MAT 954.02 477.24 credit)

Less : Deferred tax 65.82 (333.40)

Proft after tax 2,052.77 646.51

Surplus in the statement of proft and loss Balance as per last fnancial 8,050.09 7,982.43 statements

Add: Proft for the current 2,052.77 646.51 year

Less: Appropriations

Proposed dividend 939.05 443.41

Tax on proposed dividend 152.34 70.79

Final dividend* 3.50 -

Tax on fnal dividend* 0.57 -

Interim dividend 1,991.95 -

Tax on interim dividend 323.14 -

Transfer to general reserve 595.29 64.65

Total appropriations 4,005.84 578.85

Net surplus in the 6,097.02 8,050.09 statement of proft and loss

*It relates to fnal dividend paid for the year 2011, on account of 97,220 additional equity shares issued under ESOP after the approval of previous year accounts but before the book closure dates.

b. Consolidated fnancial results of R Systems and its subsidiaries

(Rs. in lakhs)

Particulars Financial Year ended 31.12.2012 31.12.2011

Total income 47,001.32 41,505.98

Proft before depreciation, 3,894.30 3,403.76 exceptional items and tax

Less : Depreciation and 1,008.94 1,311.85 amortisation

Proft before tax 2,885.36 2,091.91

Less : Current tax (net of MAT 949.86 857.44 credit)

Less : Deferred tax 99.30 (416.78)

Proft after tax 1,836.20 1,651.25

Surplus in the statement of proft and loss Balance as per last fnancial 7,991.05 6,918.65 statements

Add: Proft for the current 1,836.20 1,651.25 year

Less: Appropriations

Proposed dividend 939.05 443.41

Tax on proposed dividend 152.34 70.79

Final dividend* 3.50 -

Tax on fnal dividend* 0.57 -

Interim dividend 1,991.95 -

Tax on interim dividend 323.14 -

Transfer to general reserve 595.29 64.65

Total appropriations 4,005.84 578.85

Net surplus in the 5,821.41 7,991.05 statement of proft and loss

Previous Year fgures have been regrouped / recasted, wherever necessary.

2. RESULTS OF OPERATIONS Standalone Accounts

- Total income during the year 2012 increased to Rs. 23,314.88 lakhs as against Rs. 19,768.03 lakhs during the year 2011, a growth of 17.94%.

- Proft after tax was Rs. 2,052.77 lakhs during the year 2012 as compared to Rs. 646.51 lakhs during 2011, a growth of 217.51%.

- Basic earnings per share was Rs. 16.50 for the year 2012 as compared to Rs. 5.25 for the year 2011, a growth of 214.35%.

Consolidated Accounts

- Consolidated total income during the year 2012 increased to Rs. 47,001.32 lakhs as against Rs. 41,505.98 lakhs during the year 2011, a growth of 13.24%.

- Proft after taxes was Rs. 1,836.20 lakhs during the year 2012 as compared to Rs. 1,651.25 lakhs during 2011, a growth of 11.20%.

- Basic earnings per share were Rs. 14.76 for the year 2012 as compared to Rs. 13.41 for the year 2011, a growth of 10.12%.

3. APPROPRIATIONS AND RESERVES

Dividend

The Board of Directors on the occasion of Company having entered into 20th year of its business since incorporation, at its meeting held on May 18, 2012 declared the special dividend in the form of interim dividend at the rate of Rs. 16/- (Rupees Sixteen only) per equity share of Rs. 10/- each.

Taking into consideration the operating profts for the year 2012 and a positive outlook for the future, the Board of Directors (the "Board") is pleased to recommend a fnal dividend of Rs. 7.50 per equity share, being 75% on the par value of Rs. 10 per share (previous year Rs. 3.60 per share, being 36% on the par value of Rs. 10 per share), to be appropriated from the profts of the Company for the fnancial year 2012 subject to the approval of the shareholders at the ensuing Annual General Meeting. The dividend, if approved, will be paid to all the equity shareholders whose names appear in the Register of Members of the Company as of the opening business hours on May 03, 2013 after giving efect to all valid share transfers in physical form which would be received by the Company''s registrar and share transfer agent M/s Link Intime India Private Limited up to the end of business hours on, May 02, 2013 and to those whose names appear as benefcial owners in the records of National Securities Depository Limited ("NSDL") and Central Depository Services (India) Limited ("CDSL") as of the said date.

The register of members and share transfer books shall remain closed from May 03, 2013 to May 11, 2013, both days inclusive.

Transfer to Reserves

It is proposed to transfer a sum of Rs. 20,527,701/- (Rupees Two Crore Five Lakhs Twenty Seven Thousand Seven Hundred and One only) from the current year proft and Rs. 39,001,591/- (Rupees Three Crore Ninety Lakh One Thousand Five Hundred and Ninety One only) from the carried forward surplus in Statement of Proft and Loss to the General Reserve in compliance with the Companies (Transfer of Profts to Reserves) Rules, 1975.

4. BUSINESS

R Systems is a leading provider of outsourced product development services, business process outsource services and also ofers own product suite in BFSI, Manufacturing & Logistic verticals. R Systems diversifed ofering includes:

IPLM Services Group

Under IPLM Services, R Systems delivers solutions and services in the area of Information Technology and Information Technology enabled services. The IT services cover application development, systems integration and support and maintenance of applications. Under the ITES we cover managed services, BPO services covering both technical support for IT and Hi-Tech electronic gadgets, high-end Quality Process Management and Revenue and Claims Management using our global delivery model in 18 languages.

Products Group

R Systems products group consists of Indus solutions and ECnet Supply Chain products.

Indus solutions oferings include an integrated enterprise multi-portfolio lending suite for banking and fnancial services, credit management and revenue collection for telecom companies, iPerSyst for insurance companies which helps in timely policy renewal and customer retention along with other IT services to banking and fnancial service clients.

ECnet Supply Chain products provide solutions for holistic management of the complex interaction between an organisation and its trading partners. The integrated solution aims to reduce all supply chain costs through improved collaboration and optimisation.

R Systems is focused on key business verticals - Telecommunication and Digital Media, BFSI, Hi-Tech Manufacturing and Logistics, Government and Health Care and invested in building capabilities and domain knowledge around these focused verticals. This has helped in providing innovative and cost efcient solutions or services under chosen verticals.

Customers and Delivery Centres

R Systems rapidly growing customer list includes a variety of Fortune 1000, government and mid-sized organizations across a wide range of industry verticals including Banking and Finance, High Technology, Independent Software Vendors, Telecom and Digital Media, Government, HealthCare, Manufacturing and Logistic Industries. R Systems maintains thirteen development and service centres and using our global delivery model, we serve customers in the US, Europe, South America, the Far East, the Middle East and Africa.

There were no changes in the nature of the Company''s business and generally in the classes of business in which the Company has an interest and in the business carried on by the subsidiaries during the year under review. For details of Company''s subsidiaries please refer note number 14 relating to subsidiaries.

5. QUALITY

R Systems has continuously invested in processes, people, training, information systems, quality standards, frameworks, tools and methodologies to mitigate the risks associated with execution of projects. Adoption of quality models and practices such as the Software Engineering Institute''s - Capability Maturity Model Integrated (SEI-CMMi) and Six Sigma practices for processes have ensured that risks are identifed and mitigated at various levels in the planning and execution process. R Systems journey for various quality certifcations / standards for the development and service centres in India is provided below:

In the year 2012, Noida centre of the Company is appraised at PCMM Level 5 (Ver 2.0).

As of the date of this report, Noida IT centre is SEI-CMMi level 5, PCMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2005 certifed; Noida BPO centre is PCMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2005 certifed. Pune and Chennai development centres are SEI-CMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2005 certifed. The continuing compliance with these standards demonstrates the rigor of R Systems processes and diferentiates us to keep our competitive edge in service and product oferings.

To maintain and strengthen competitive strengths, R Systems continues to make investments in its unique and proprietary with best practices, tools and methodologies for fawless execution and consistent delivery of high quality software. The pSuite framework ofers services along the entire software lifecycle that includes technology consulting, architecture, design and development, professional services, testing, maintenance, customer care and technical support. R Systems expects that its technology focus, investment in processes, talent and methodologies will enable it to distinguish itself from competition as it seeks to provide services to technology / product companies.

6. ACQUISITION

During the year under review, ECnet Limited, Singapore, a 99.56% subsidiary of the Company has entered into defnitive agreement with Nikko Computer Systems (s) Pte Ltd. (NCS) for acquisition of its ERP business. This acquisition has been completed by ECnet Limited, Singapore on March 13, 2013.

NCS provides ERP implementation and support services primarily to Japanese companies located in Singapore and Malaysia. This business acquisition will strengthen our ERP business and customer base in South East Asia under our subsidiary ECnet Limited, Singapore. The acquisition will provide a good Japanese client base and help to grow our business in the South East Asia region.

7. DIRECTORS

During the year under review, the following changes took place in the ofce of directors of the Company.

Lt. Gen. Baldev Singh (Retd.) and Mr. Raj Swaminathan were reappointed as directors liable to retire by rotation and Lt. Gen. Baldev Singh (Retd.) was further re-appointed as President & Senior Executive Director of the Company for a period of three years w.e.f. April 01, 2012 at the previous Annual General Meeting held on May 04, 2012.

The Board of Directors at its meeting held on July 28, 2012 has appointed Mr. Anuj Kanish as an alternate Director to Mr. Gurbax Singh Bhasin. Further, at the meeting of Board of Directors held on September 16, 2012 Mr. Raj Swaminathan has been re-appointed as Director & Chief Operating Ofcer of the Company for a period of three years i.e. w.e.f. September 29, 2012 to September 29, 2015 subject to the approval of the Central Government, if applicable and the shareholders at the ensuing Annual General Meeting of the Company.

At the ensuing Annual General Meeting, Mr. Raj Kumar Gogia and Mr. Gurbax Singh Bhasin directors of the Company are liable to retire by rotation in accordance with the provisions of Section 255 and 256 of the Companies Act, 1956 read with the Articles of Association of the Company and being eligible, ofer themselves for reappointment as directors of the Company.

None of the directors of the Company are disqualifed as per the provisions of Section 274(1)(g) of the Companies Act, 1956. The directors of R Systems have made necessary disclosures, as required under various provisions of the Act and Clause 49 of the Listing Agreement.

8. EMPLOYEES STOCK OPTION PLANS / SCHEMES

The industry in which R Systems operates is people intensive and R Systems believes that human resources play a pivotal role in the sustainability and growth of the Company. R Systems has always believed in rewarding its employees with competitive compensation packages for their dedication, hard work, loyalty and contribution towards better performance of the Company. To enable more and more employees to be a part of the fnancial success of the Company, retain them for future growth and attract new employees to pursue growth, R Systems has set up employees stock option plans / schemes from time to time for its employees and for the employees of its subsidiaries. As on the date of this report, the prevailing stock option plans of R Systems are as follows:

(a) R Systems International Ltd. - Year 2004 Employee Stock Option Plan : For the employees of R Systems and its subsidiaries other than ECnet Limited.

(b) R Systems International Ltd. - Year 2004 Employee Stock Option Plan – Ecnet : For the employees of ECnet Limited, a subsidiary of R Systems.

(c) Indus Software Employees Stock Option Plan - Year 2001 : Initially formulated for the employees of Indus Software Private Limited which got amalgamated with R Systems and the plan continues as per the scheme of amalgamation approved by the Hon''ble High Courts of Delhi and Mumbai. As on the date of this report, no stock options are in force under this plan.

(d) R Systems International Limited Employee Stock Option Scheme 2007 : For the employees of R Systems and its subsidiaries.

As required under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999 as amended, details relating to options approved, granted, vested, exercised, lapsed, in force etc. under the prevailing employees stock option plans / schemes during the year ended December 31, 2012 are as follows:

S. Particulars R Systems R Systems No. International International Ltd.- Ltd. Year - 2004 Year 2004 Employee Employee Stock Stock Option Plan - Option Plan ECnet (a) (b)

a. Total number of 199,500 200,000 shares covered under the plan

b. Pricing Formula Prevailing Price Prevailing Price once once the Company''s the Company''s shares shares are listed and are listed and at the at the Fair Market Fair Market Value Value as per the as per the terms of terms of R Systems R Systems International International Ltd. - Ltd. - Year 2004 Year 2004 Employees Employees Stock Stock Option Plan on Option Plan - ECnet on the date such option the date such option is granted when the is granted when the Company''s shares are Company''s shares are not listed. not listed.

c. Options granted Nil Nil during the year

d. Options vested Nil Nil during the year

S.No Indus Software R Systems International Limited Employees Stock Employee Stock Option Scheme Option Plan Year 2007 2001 (c) (d)

a. 73,898 650,000

b. As approved under "Exercise Price" means the market the "Scheme of price which is payable for exercising Amalgamation" the options and "Market Price" means of Indus Software the latest available closing price, Private Limited with prior to the date of the meeting of the the Company by Board of Directors / Compensation the Hon''ble High Committee, in which options are Courts of Delhi and granted, on the stock exchange on Mumbai. which the shares of the Company are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date shall be considered.

c. Nil Nil

b. Nil Nil

S. Particulars R Systems R Systems No. International International Ltd.- Ltd. Year - 2004 Year 2004 Employee Employee Stock Stock Option Plan - Option Plan ECnet (a) (b)

e. Options exercised Nil Nil during the year

f. The total number of Nil Nil shares arising as a result of exercise of options during the year

g. Options lapsed 5,890 600 during the year

h. Variation of terms of Nil Nil options during the year

i. Money realised by Nil Nil exercise of options during the year (Rs.)

j. Total number of 56,035 6,200 options in force at the end of the year

k. Employee wise details of options granted to (during the year)

(i) Senior managerial Nil Nil personnel

(ii) Any other employee Nil Nil who receives a grant in any one year of options amounting to 5% or more of options granted during that year

(iii)Identifed employees Nil Nil who were granted options, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant

l. Diluted Earnings Per N.A. N.A. Share (EPS) pursuant to issue of shares on exercise of options

S.No Indus Software R Systems International Limited Employees Stock Employee Stock Option Scheme Option Plan Year 2007 2001 (c) (d)



e. Nil 203,822

f. Nil 203,822

g. Nil 15,500

h. Nil Nil

i. Nil 24,601,315.40

j. Nil 255,678

k.

(i) Nil Nil

(ii) Nil Nil

(iii)Nil Nil

l. N.A. 16.50

Please note that the details given above for plan (a), (b) and (c) are after making the required adjustments in relation to consolidation of each of the 5 equity shares of Rs. 2 each into 1 equity share of Rs. 10 each as approved by the shareholders in the year 2006.

During the year ended December 31, 2012, R Systems had not granted any options under any of the aforementioned plans.

All options granted under Indus Software Employees Stock Option Plan - Year 2001 have already been vested and exercised or lapsed and no options were in force as on December 31, 2012.

For options granted during the earlier years under plan (a), (b) and (c), R Systems used the fair value of the stock options for calculating the employees compensation cost.

For the purpose of valuation of the options granted during earlier years, the management obtained fair value of the options at the date of grant under respective schemes from a frm of Chartered Accountants, to determine accounting impact, if any, of options granted over the periods. In the considered opinion of the valuer, the fair value of option determined using ''Black Scholes Valuation Model'' under each of above schemes is "Nil" and thus no accounting thereof is required.

The assumptions used for the purpose of determination of fair value are stated below:

Assumptions Unit Scheme Scheme Scheme Comments by the (a) * (b) ** (c)*** valuer

Strike price Rs. 42 154 26

Current share Rs. 16 140 16 Taken on the basis of price NAV and PECV method of valuation.

Expected No. of 5 2.5 5 Being half of the option life Years maximum option life.

Volatility % 1 0.5 1 In case of unlisted shares, the volatility may be taken as zero. Verma committee also recommends this.

Risk free % 7 11.3 7 Zero coupon rate return estimated from trading government securities for a maturity corresponding to expected life of option - taken from sites of NSE and / or BSE.

Expected % - 15 - Company has no set dividend policy so dividend taken Yield as zero.

In case of Indus plan, as the dividend had been paid by the erstwhile company, it has been assumed at 15%.

* R Systems International Ltd. - Year 2004 Employee Stock Option Plan under which the price was based on Rs. 2 per share.

** Indus Software Employees Stock Option Plan - Year 2001 under which originally the price was based on Rs. 10 per share for 21,967 shares. As a result of amalgamation of Indus Software Private Limited into R Systems, R Systems had issued 206,822 equity shares of Rs. 2 each pursuant to the swap ratio approved by Hon''ble High Courts of Delhi and Mumbai.

*** R Systems International Ltd. - Year 2004 Employee Stock Option Plan - ECnet under which the price was based on Rs. 2 per share.

The above information is based on Rs. 2 per share prior to consolidation of 5 equity shares of Rs. 2 each into one equity share of Rs. 10 and subsequent allotment of bonus shares in the ratio of 1 : 1.

Further, for the purpose of valuation of the options granted during the year 2005 under R Systems International Ltd. - Year 2004 Employee Stock Option Plan, the management obtained fair value of the options at the date of grant from a frm of Chartered Accountants, to determine accounting impact, if any, of options granted. In the considered opinion of the valuer, the fair value of these options determined using ''Black Scholes Valuation Model'' is "Nil" and thus no accounting thereof is required.

The assumptions used by the valuer for the purpose of determination of fair value are stated below:

Assumptions Unit Scheme Comments by the valuer

Stfrike price Rs. 42

Current share Rs. 13.58 Taken on the basis of NAV and price PECV method of valuation.

Expected option No. of 5 Being half of the maximum life Years option life.

Volatility % 1 In case of unlisted shares, the volatility may be taken as zero. Verma committee also recommends this.

Risk free return % 7.42 Zero coupon rate estimated from trading government securities for a maturity corresponding to expected life of option - taken from sites of NSE.

Expected % - Company has no set policy so dividend Yield dividend taken as zero.

The above information is based on Rs. 2 per share prior to consolidation of 5 equity shares of Rs. 2 each into one equity share of Rs. 10 and subsequent allotment of bonus shares in the ratio of 1 : 1.

For the purpose of valuation of the options granted during the year ended December 31, 2007 under R Systems International Limited Employee Stock Option Scheme 2007, the compensation cost relating to Employee Stock Options, calculated as per the intrinsic value method is nil.

The management obtained fair value of the options at the date of grant from a frm of Chartered Accountants. In the considered opinion of the valuer, the fair value of these options determined using ''Black Scholes Valuation Model'' is "Rs. 50.73" per option.

The assumptions used by the valuer for the purpose of determination of fair value are stated below:

Assumptions Unit Scheme Comments by the valuer

Strike price Rs. 120.701

Current share Rs. 118.50 Price on the date of grant by price Board of Directors i.e. closing price on July 11, 2007.

Expected No. of 4 Being the vesting period. option life Years

Volatility % 44 On the basis of industry average.

Risk free % 7 Zero coupon rate estimated from return trading government securities for a maturity corresponding to expected life of option - taken from site of NSE.

Expected % 0.86 Company has declared Dividends dividend Yield of 12% in the past. Assuming that it will continue declaring similar dividends in future.

The stock based compensation cost calculated as per the intrinsic value method for the fnancial year 2011 and 2012 was nil. If the stock based compensation cost was calculated as per fair value method prescribed by SEBI, the total cost to be recognised in the fnancial statements for the year 2012 would be Rs. (-)786,296/- (Previous year Rs. (-)585,874/-). The efect of adopting the fair value method on the net income and earnings per share is presented below:

Pro Forma adjusted Net Income and Earnings Per Share

(Amont in Rs.)

Particulars Year ended Year ended December 31, December 31, 2012 2011

Net Income as reported 205,277,009 64,651,348

Add : Intrinsic Value Compensation Cost - -

Less : Fair Value (786,296) (585,874) Compensation Cost*

Adjusted Pro-forma Net 206,063,305 65,237,222 Income

Earnings Per Share Basic

- As reported 16.50 5.25

- Proforma 16.57 5.30

Diluted

- As reported 16.50 5.19

- Proforma 16.57 5.24

*Figures in brackets represent income due to options lapsed during the year.

Weighted average exercise price of options granted during the year

S. Particulars Scheme Scheme Scheme Scheme No. (a) (b) (c) (d)

1. Exercise price equals N.A. N.A. N.A. N.A. market price

2. Exercise price is N.A. N.A. N.A. N.A. greater than market price

3. Exercise price is less N.A. N.A. N.A. N.A. than market price

Weighted average fair value of the options granted during the year

S. Particulars Scheme Scheme Scheme Scheme No. (a) (b) (c) (d)

1. Exercise price equals N.A. N.A. N.A. N.A. market price

2. Exercise price is N.A. N.A. N.A. N.A. greater than market price

3. Exercise price is less N.A. N.A. N.A. N.A. than market price

Scheme (a): R Systems International Ltd. - Year 2004 Employee Stock Option Plan.

Scheme (b): Indus Software Employees Stock Option Plan -Year 2001.

Scheme (c): R Systems International Ltd. - Year 2004 Employee Stock Option Plan -ECnet.

Scheme (d): R Systems International Limited Employee Stock Option Scheme 2007.

As no options are granted during the year under Scheme (a), Scheme (b), Scheme (c) and Scheme (d), hence the required information is not applicable.

9. LIQUIDITY AND BORROWINGS - CONSOLIDATED FINANCIAL STATEMENT

Cash and bank balance, including bank deposits as of December 31, 2012 was Rs. 8,893.91 lakhs against Rs. 9,495.54 lakhs as of December 31, 2011. Decrease was mainly on account of payment of special dividend in the form of interim dividend along with the frst earn out payment to the ex-shareholder of subsidiary as ofset by cash generated from operations during the year. The cash and bank balance per share as of December 31, 2012 was Rs. 71.46 against Rs. 77.56 as of December 31, 2011.

The consolidated cash and cash equivalent as at December 31, 2012 were Rs. 5,241.42 lakhs as against Rs. 5,719.82 lakhs as on December 31, 2011. Net cash generated from operating activities was Rs. 3,451.84 lakhs for the year ended December 31, 2012 compared to Rs. 3,391.84 lakhs for the year ended December 31, 2011.

Cash fow generated from operating activities is the signifcant source of funding for investing and fnancing activities.

During the year, R Systems paid Rs. 1,121.47 lakhs deferred compensation to the ex-shareholder of a subsidiary, Rs. 858.73 lakhs for the purchase of fxed assets. The interest received during the year 2012 was Rs. 445.91 lakhs against Rs. 552.05 lakhs during the year 2011.

Cash used in fnancing activities during the year 2012 was Rs. 2,603.18 lakhs mainly due to payment of dividend of Rs. 2,432.90 lakhs (including special dividend in the form of interim dividend) and Rs. 395.64 lakhs for dividend distribution tax as ofset by proceeds from issuance of share capital pursuant to exercise of employee stock options amounting to Rs. 246.01 lakhs.

R Systems'' policy is to maintain sufcient liquidity to fund the anticipated capital expenditures, operational expenses and investments for strategic initiatives.

R Systems has a credit facility from the Axis Bank amounting to Rs. 1,850 lakhs (including non-fund based credit limit of Rs. 1,050 lakhs). As at December 31, 2012, the total credit balance was nil under the said line of credit. The total liability of R Systems for motor vehicles purchased against the loan was Rs. 56.32 lakhs as at December 31, 2012. R Systems primary bankers in India are Axis Bank, State Bank of India, ICICI Bank Limited and HDFC Bank Limited. In U.S.A., U.K., Singapore, Netherland and Japan, the primary bankers are California Bank & Trust, Natwest Bank, Citibank N.A., ABN Amro Bank N.V. and Sumitomo Mitsui Banking Corporation respectively.

10. CHANGES IN THE CAPITAL STRUCTURE

As of December 31, 2012, the authorised share capital of the Company was Rs. 200,000,000 divided into 20,000,000 equity shares of Rs. 10 each and the issued, subscribed and paid up share capital was Rs. 125,207,080/- divided into 12,520,708 equity shares of Rs. 10 each. During the year under review, the Company has allotted 203,822 equity shares of Rs. 10/- each pursuant to exercise of Stock Options under R Systems International Limited Employee Stock Options Scheme 2007, at an exercise price of Rs. 120.70 per share.

Further subsequent to the year end, the Company has allotted 50,100 equity shares of Rs. 10/- each on February 22, 2013 at a price of Rs. 120.70 per equity share pursuant to exercise of options by employees of the Company in terms of R Systems

International Limited Employee Stock Option Scheme 2007. With the said allotment, the paid-up capital of the Company stands increased to Rs. 125,708,080/- divided into 12,570,808 fully paid up equity shares of Rs. 10/- each.

11. CORPORATE RESTRUCTURING

Pursuant to the scheme of corporate restructuring of its two subsidiaries based in Singapore for their revival and growth namely, ECnet Limited and R Systems (Singapore) Pte Limited as was approved by the Board of your company, loan given by the Company to ECnet Limited has been converted into equity investment during the previous year i.e. 2011. Further implementation of the said corporate restructuring is under process.

Following the corporate restructuring strategy for growth, earlier the Board has also approved liquidation of R Systems NV, Belgium (wholly owned subsidiary) and closure of Branch Ofce of the Company in London, United Kingdom, subject to required statutory and corporate approvals in India and the respective countries and the same is under process.

12. MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY

Further to the year-end 2012, the Company has allotted 50,100 equity shares of Rs. 10/- each at a price of Rs. 120.70 per share pursuant to the exercise of stock option by employees under "R Systems International Limited Employee Stock option Scheme 2007". With this allotment, the paid-up equity capital of the Company has increased to Rs. 125,708,080/- divided into 12,570,808 fully paid up equity shares of Rs. 10/- each.

Except as detailed above, there were no other signifcant events subsequent to the balance sheet date till the date of this report which would materially afect the fnancial position of the Company.

13. PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 for the year ended December 31, 2012 are as follows:

A. Conservation of Energy

During the year ended December 31, 2012 R Systems continued its'' action plans to curtail the energy bills by adopting various energy conservation options / technologies as identifed by Federation of Indian Chambers of Commerce & Industry ("FICCI") through a detailed Energy Audit carried out by FICCI for R Systems Noida operations in the year 2007. Signifcant measures were taken to reduce energy consumption by using energy efcient equipment and devices. R Systems constantly evaluates new technologies and makes appropriate investments to be energy efcient. Currently, the Company uses CFL fttings and electronic ballasts to reduce power consumption of fuorescent tubes. The air is conditioned with energy efcient compressors for central air conditioning and with split air conditioning for localized areas. R Systems is always in search of innovative and efcient energy conservation technologies and applies them prudently. However, R Systems being in the software industry, its operations are not energy intensive and energy costs constitute a very small portion of the total cost, therefore, the fnancial impact of these measures is not material.

Form A of the said Rules is not applicable to the software industry.

B. Technology Absorption

The particulars with respect to technology absorption are given below:

(a) Research and Development (R & D)

1. Specifc areas in which R & D carried out by the Company

R Systems continues to invest in developing new versions of its proprietary products to operate in diferent environments and in developing new tools in CRM, RMA and other processes to serve the customers. In addition, R Systems carries out research, makes investment in developing new prototypes in varied areas like digital media, mobility, WiMax etc. to demonstrate to its clients.

2. Benefts derived as a result of the above R & D

Research and development has helped R Systems in fulflling clients'' needs, winning new engagements from existing clients, winning new customers, growing revenues and enhancing the quality of services. We have been beneftted in product improvement, cost reduction, better product development, import substitution etc. which has resulted in high product quality and increased business potential.

3. Future plan of action

The Company continues to focus its eforts on innovations in software development processes, methodologies and tools.

4. Expenditure on R & D

The Company''s R & D activities are part of its normal software development process. There is no separate R & D department and hence there is no specifc capital or recurring R & D expenditure. It is not practical to identify R & D expenditure out of the total expenditure incurred by the Company.

(b) Technology absorption, adaptation and innovation

1. Eforts made towards technology absorption, adaptation and innovation

The Company has established practice streams in specifc technologies to analyze their implications and the benefts they can provide to the Company''s customers. These steps enable the Company to fnd and execute the most appropriate solutions for its clients.

2. Benefts derived as a result of the above eforts

The benefts derived from the above mentioned eforts are fulflling customer needs, efciency in operations, improvement in quality and growth in revenues.

3. Technology imported during the last 5 years

Not applicable, as no technology has been imported by the Company.

C. Foreign Exchange Earnings and Outgo (Accrual Basis)

A signifcant percentage of R Systems revenues are generated from exports. The development and service centres in Noida, Pune and Chennai are registered with the Software Technology Park of India in their respective areas as 100% Export Oriented Undertakings. All eforts of the Company are geared to increase the business of software exports in diferent products and markets. We have made investments in sales and marketing activities in various growing markets.

The total foreign exchange used and earned by R Systems during the year as compared with the previous year is as follows:

(Rs. in lakhs)

Particulars Financial Year ended

31.12.2012 31.12.2011

(a) Earnings (Accrual 20,822.06 17,626.93 Basis)

(b) Expenditure (Accrual 3,776.85 3,637.97 Basis)

(c) CIF value of imports 91.16 158.19

14. SUBSIDIARIES

During the year under review, the Company has set up a wholly owned subsidiary in Canada i.e. Systémes R. International Ltée, Canada.

As on December 31, 2012, R Systems has twenty two subsidiaries. The names and country of incorporation of those subsidiaries are as follows:

S. Name of the Subsidiaries Country of No. Incorporation

1. R Systems (Singapore) Pte Limited Singapore

2. R Systems, Inc. U.S.A.

3. Indus Software, Inc. U.S.A.

4. ECnet Limited Singapore

5. R Systems Solutions, Inc. U.S.A.

6. R Systems NV Belgium

7. R Systems Europe B.V. The Netherlands

8. R Systems S.A.S. France

9. Computaris International Limited U.K.

10. Systémes R. International Ltee Canada

11. ECnet (M) Sdn. Bhd. # Malaysia

12. ECnet, Inc. # U.S.A.

13. ECnet (Hong Kong) Limited # Hong Kong

14. ECnet Systems (Thailand) Company Limited# Thailand

15. ECnet Kabushiki Kaisha # Japan

16. ECnet (Shanghai) Co. Ltd. # People''s Republic of China

17. ICS Computaris International Srl @ Moldova

18. Computaris Malaysia Sdn.Bhd. @ Malaysia

19. Computaris Polska sp z o.o. @ Poland

20. Computaris Romania SRL @ Romania

21. Computaris USA, Inc. (formerly known as U.S.A. Computaris USA, LLC) @

22. Computaris Limited @ U.K.

# wholly owned subsidiaries of ECnet Limited, Singapore being 99.56% (previous year 99.55%) subsidiary of R Systems.

@ wholly owned subsidiaries of Computaris International Limited being 100% subsidiary of R Systems.

All the aforementioned twenty two subsidiaries are incorporated and based outside India. In addition to providing services to various international clients these subsidiaries also help to generate revenues for R Systems. The Board of Directors of the Company regularly reviews the afairs of these subsidiaries.

As per Section 212 of the Companies Act, 1956, we are required to attach the Directors'' Report, Balance Sheet and Proft and Loss Account (referred to as Financial Statements) of our subsidiaries. The Ministry of Corporate Afairs, Government of India vide its General Circular No. 2/2011 dated 8th February, 2011 has provided an exemption to companies from complying with Section 212, provided such companies publish the audited consolidated fnancial statement in the Annual Report. Accordingly, the Annual Report 2012 does not contain the Financial Statements of our twenty two subsidiaries. As directed under the said Circular, information in aggregate in respect of each subsidiaries including subsidiaries of subsidiaries i.e. (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investments (except in case of investment in subsidiaries) (f) turnover (g) proft before taxation (h) provisions for taxation (i) proft after taxation and (j) proposed dividend for each subsidiary has been disclosed in brief abstract forming part of the consolidated balance sheet.

Further, the audited annual accounts and related detailed information of our subsidiaries, where applicable, will be made available to shareholders seeking such information at any point of time. The annual accounts of the subsidiary companies will also be available for inspection by any shareholder at Registered Ofce of R Systems i.e. B-104 A, Greater Kailash-I, New Delhi – 110 048 and Corporate Ofce of R Systems i.e. C-40, Sector 59, Noida – 201 307 and Registered Ofces of the subsidiary companies concerned during business hours. The same will also be hosted on R Systems'' website, www.rsystems.com.

15. PARTICULARS OF EMPLOYEES

As required under the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended by notifcation dated March 31, 2011, the names and other particulars of employees are set out in Annexure A to this report.

16. DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to directors'' responsibility statement, your directors hereby confrm that:

(i) In the preparation of the annual accounts for the fnancial year ended December 31, 2012, the applicable accounting standards had been followed along with proper explanation relating to material departures, wherever applicable;

(ii) The directors had 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 afairs of the Company at the end of the fnancial year and of the proft or loss of the Company for the year under review;

(iii) The directors had taken proper and sufcient 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;

(iv) The directors had prepared the annual accounts for the fnancial year ended December 31, 2012 on a going concern basis.

17. AUDITORS

M/s S. R. Batliboi & Co. LLP (formerly M/s S. R. Batliboi & Co.), Chartered Accountants, the statutory auditors of the Company will retire at the ensuing Annual General Meeting and are eligible for reappointment. The Company has received letter from Auditors to the efect that their appointment, if made, shall be in accordance with Section 224(1B) of the Companies Act, 1956 and that they are not dis-qualifed for such re-appointment within the meaning of Section 226 of the said Act.

Further, the auditors'' report being self-explanatory, does not call for any further comments by the Board of Directors.

18. AUDIT COMMITTEE

R Systems has a qualifed and independent Audit Committee. During the year under review there was no change in composition of the Audit Committee except that Mr. Anuj Kanish was appointed as a member of the Audit Committee as an Alternate Director to Mr. Gurbax Singh Bhasin on August 05, 2012.

The constitution of the Committee is in compliance with the provisions of the Companies Act, 1956 and the Listing Agreement entered into with the stock exchanges.

The terms of reference and role of the Committee are as per the guidelines set out in the Listing Agreement with the stock exchanges read with Section 292A of the Companies Act, 1956 and includes such other functions as may be assigned to it by the Board from time to time. The Committee has adequate powers to play an efective role as required under the provisions of the statute and Listing Agreement.

19. DETAILS OF UTILISATION OF IPO PROCEEDS

Pursuant to the Initial Public Ofer, the Company collected Rs. 7,062.50 lakhs (net of selling shareholders'' proceeds). For details of utilisation of IPO proceeds, please refer note no. 35 under Notes to the standalone fnancial statements and note no. 34 under Notes to the consolidated fnancial statements for the year ended December 31, 2012.

Please note that entire proceeds of the IPO has already been fully utilized by the Company before the year under review and as on December 31, 2012 the Company has no balance of unutilized IPO proceeds.

20. CORPORATE GOVERNANCE

As required under Clause 49 of the Listing Agreement entered into with the stock exchanges, the detailed report on corporate governance is given as Annexure B to this report and the certifcate obtained from a practicing company secretary regarding compliance of the conditions of corporate governance as stipulated in the said clause is annexed as Annexure C to this report.

Further, the disclosure as required pursuant to Section II Clause C of Part II of Schedule XIII to the Companies Act, 1956 and in terms of Clause 49 of the Listing Agreement entered into with the stock exchanges for all the directors is given in the detailed report on corporate governance which forms part of this report and annexed as Annexure B to this report.

21. DEPOSITS

The Company has neither invited nor accepted any deposits from the public within the meaning of Section 58A of the Companies Act, 1956 and as such, no amount of principal or interest was outstanding on the date of the balance sheet.

22. CUSTOMER RELATIONS

R Systems recognises that the customers have a choice of service providers and the directors would like to place on record their gratitude on behalf of the Company for the business provided by them. The Company''s quality policy mandates that the Voice of the Customer is obtained on a regular basis. We constantly review the feedback and incorporate its impact into our delivery systems and communications.

23. EMPLOYEE RELATIONS

R Systems is inspired by its customers and its employees transform that inspiration and customers'' needs into value for all stakeholders. We thank all R Systems employees worldwide for their hard work, commitment, dedication and discipline that enables the Company to accomplish its customer commitments and commitments to all its stakeholders. R Systems conducts regular employee satisfaction surveys, and open house meetings to get employee feedback. R Systems is constantly validating key employee data with industry and peer group business. These practices have helped the Company achieve many of its business goals and have been recognised in many industry surveys over the last few years. The open door policy of our senior management team ensures that the feedback loop is completed promptly.

We thank our shareholders for their continuous support and confdence in R Systems. We are aware of our responsibilities to our shareholders to provide full visibility of operations, corporate governance and creating superior shareholder value and we promise to fulfll the same.

24. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of Clause 49 of the Listing Agreement entered into with the stock exchanges, management discussion and analysis report is given as Annexure D to this report.

25. ACKNOWLEDGMENTS

Your directors once again take this opportunity to thank the employees, investors, clients, vendors, banks, business associates, regulatory authorities including stock exchanges, Software Technology Park of India, the Central Government, State Government of Delhi, Uttar Pradesh, Maharashtra, Tamil Nadu for the business support, valuable assistance and co-operation continuously extended to R Systems. Your directors gratefully acknowledge the trust and confdence and look forward for their continued support in the future.

On behalf of the Board

For R Systems International Limited

Sd/-

Place : CA, U.S.A. Satinder Singh Rekhi

Date : April 15, 2013 (Chairman and Managing Director)

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Dec 31, 2010

Not Available

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Dec 31, 2009

The directors have great pleasure in presenting Sixteenth Annual Report on the business and operations of R Systems International Limited (“R Systems” or the “Company”) together with the audited statements of accounts for the year ended December 31, 2009.

1. FINANCIAL RESULTS

a. Standalone financial results of R Systems

Particulars Financial Year ended (Rs. in lakhs)

31.12.2009 31.12.2008

Total income 20,031.17 21,013.01

Profit before depreciation, 4,189.39 3,183.88 exceptional items and tax

Less : Depreciation 804.62 663.18

Less : Exceptional item 2,473.21 - (Provision for diminution in value of long term investments)

Profit before tax 911.56 2,520.70

Less : Current tax 204.87 151.66 (net of MAT credit)

Less : Deferred tax 41.85 (75.52)

Less : Fringe benefit tax 9.68 79.80

Profit after tax (available for 655.16 2,364.76 appropriation)

Proposed final dividend 288.45 316.93

Corporate dividend tax on 49.02 53.86 final dividend

Transfer to general reserve 65.52 236.48

Balance carried forward to 252.17 1,757.49 Balance Sheet

b. Consolidated financial results of R Systems and its subsidiaries

Particulars Financial Year ended (Rs. in lakhs)

31.12.2009 31.12.2008

Total income 33,556.74 36,488.65

Profit before depreciation, 4,488.06 4,158.66 exceptional items and tax

Less : Depreciation 1,348.19 1,156.90

Less : Exceptional item 2,087.14 -

(Impairment of goodwill recognised on earlier acquisition of subsidiaries)

Profit before tax 1,052.73 3,001.76

Less : Current tax 229.16 200.83 (net of MAT credit)

Less : Deferred tax 41.85 (75.52)

Less : Fringe benefit tax 9.68 79.80

Profit after tax (available for 772.04 2,796.65 appropriation)

Proposed final dividend 288.45 316.93

Corporate dividend tax on 49.02 53.86 final dividend

Transfer to general reserve 65.52 236.48

Balance carried forward to 369.05 2,189.38 Balance Sheet

2. RESULTS OF OPERATIONS

Standalone Accounts

- Total income for the year 2009 decreased to Rs. 20,031.17 lakhs as against Rs. 21,013.01 lakhs during the year 2008, a decline of 4.67%.

- During the year, R Systems technical support business in U.S.A. and Europe was severely affected by loss of 3 key customers. Consequently, the management had assessed that there was a decline, other than temporary, in the value of investment in R Systems Solutions, Inc., (U.S.A.), R Systems Europe B.V., (The Netherlands) and R Systems S.A.S., (France) and reduced the carrying amount of investment in these subsidiaries by Rs. 2,473.21 lakhs to recognise the decline in value.

- Profit after tax (excluding provision for diminution in the value of investment) was Rs. 3,128.37 lakhs during the year 2009 as compared to Rs. 2,364.76 lakhs during the year 2008, an increase of 32.29%.

- Reported profit after tax was Rs. 655.16 lakhs during the year 2009 as compared to Rs. 2,364.76 lakhs during 2008, a decline of 72.29%.

- Basic earnings per share was Rs. 5.17 for the financial year 2009 as compared to earnings per share of Rs. 17.42 for the financial year 2008, a decline of 70.32%.

Consolidated Accounts

- Consolidated total income for the year 2009 decreased to Rs. 33,556.74 lakhs as against Rs. 36,488.65 lakhs during the year 2008, a decline of 8.04%.

- Consequent to the loss of 3 key customers in technical support business in U.S.A. and Europe as explained above, the management has assessed that there was an impairment of goodwill recognised in the books on acquisition of these subsidiaries and has impaired the goodwill amounting to Rs. 2,087.14 lakhs.

- Profit after tax (excluding goodwill impairment) was Rs. 2,859.18 lakhs during the year 2009 as compared to Rs. 2,796.65 lakhs during the year 2008, an increase of 2.24%.

- Reported profit after taxes was Rs. 772.04 lakhs during the year 2009 as compared to Rs. 2,796.65 lakhs during 2008, a decline of 72.39%.

- Basic earnings per share was Rs. 6.09 for the financial year 2009 as compared to earnings per share of Rs. 20.61 for the financial year 2008, a decline of 70.43%.

3. APPROPRIATIONS AND RESERVES

Dividend

Taking into consideration the operating profits for the year 2009 and positive outlook for future, the Board of Directors (the “Board”) is pleased to recommend a final dividend of Rs. 2.40 per equity share, being 24% on the par value of Rs. 10 per share (previous year Rs. 2.40 per share, being 24% on the par value of Rs. 10 per share), to be appropriated from the profits of the Company for the financial year 2009 subject to the approval of the shareholders at the ensuing Annual General Meeting. The dividend, if approved, will be paid to all those equity shareholders whose names appear in the Register of Members of the Company as at the opening business hours on May 11, 2010 after giving effect to all valid share transfers in physical form which would be received by the Company’s registrar and share

transfer agent M/s Link Intime India Private Limited up to the end of business hours on May 10, 2010 and to those whose names appear as beneficial owners in the records of National Securities Depository Limited (“NSDL”) and Central Depository Services (India) Limited (“CDSL”) as on the said date.

The register of members and share transfer books shall remain closed from May 11, 2010 to May 20, 2010, both days inclusive.

Transfer to Reserves

It is proposed to transfer a sum of Rs. 6,551,586 (Rupees sixty five lakhs fifty one thousand five hundred eighty six only) to General Reserve being 10% of the current year’s profit in accordance with the Companies (Transfer of Profits to Reserves) Rules, 1975.

4. BUSINESS

iPLM Services Group

R Systems founded in 1993 is one of the leading providers of outsourced product development and customer support services. We help companies accelerate the speed to market for their products and services with a high degree of time and cost predictability by using our proprietary pSuite execution framework. Our clients can choose services specific to their needs from R Systems iplm suite of services. We help companies build scalable, configurable and secure products and applications; and help our clients to support their customers worldwide for products and services using our global delivery model in 18 languages. R Systems competitive advantage in product development and support is further enhanced by its global delivery capabilities, multi-language support capabilities and agile development methodologies supported by R Systems’ proprietary PSuite Framework.

Products Group

In the Products Group, R Systems has a range of products that caters to the banking, finance, manufacturing and logistics industry. The banking and consumer finance solutions are sold under the brand name Indus® and the supply chain solutions for manufacturing and logistics industry are sold under the brand name ECnet®.

Customers and Delivery Centres

R Systems rapidly growing customer list includes a variety of Fortune 1000, government and mid-sized organisations across a wide range of industry verticals including Banking and Finance, High Technology and Independent Software Vendors, Government, Health Care, Manufacturing, Telecom, Insurance and Logistic Industries. R Systems maintains eight development / technical support centres and using its global delivery model R Systems serve customers in the US, Europe, South America, the Far East, the Middle East and Africa.

There were no changes in the nature of the Companys business and generally in the classes of business in which the Company has an interest and in the business carried on by the subsidiaries during the year under review. For details of Company’s subsidiaries please refer note number 14 relating to subsidiaries.

5. QUALITY

R Systems has continuously invested in processes, people, training, information systems, quality standards, frameworks, tools and methodologies to mitigate the risks associated with execution of projects. Adoption of quality models and practices such as the Software Engineering Institute’s - Capability Maturity Model Integrated (SEI-CMMi) and Six Sigma practices for processes have ensured that risks are identified and mitigated at various levels in the planning and execution process. R Systems journey for various quality certifications / standards for the development and service centres in India is given below:

In July 2009 Software Development and BPO Centres of R Systems, based in Noida have been certified by the consulting firm KPMG for PCMM Level 5. With the said certification, R Systems’ quality journey extends to its people practices. R Systems has joined an elite group of PCMM certified companies across the globe.

As on the date of this report, Noida IT centre is ISO 9001 : 2000, SEI-CMMi level 5, ISO 27001 : 2005 and PCMM Level 5 certified; Noida BPO centre is ISO 9001 : 2000, ISO 27001 : 2005 and PCMM Level 5 certified. Pune and Chennai development centres are SEI-CMM Level 5, ISO 9001 : 2008 and ISO 27001 : 2005 certified.

The continuing compliance with these standards demonstrates the rigor of R Systems processes and diferentiates us to keep our competitive edge in service offering.

To maintain and strengthen competitive strengths, R Systems continues to make investments in its unique and proprietary with best practices, tools and methodologies for flawless execution and consistent delivery of high quality software. The pSuite framework offers services along the entire software lifecycle that includes technology consulting, architecture, design and development, professional services, testing, maintenance, customer care and technical support. R Systems expects that its technology focus, investment in processes, talent and methodologies will enable it to distinguish itself from competition as it seeks to provide services to technology / product companies.

6. DIRECTORS

During the year under review, following changes took place in the office of directors of R Systems:

Lt. Gen. Baldev Singh (Retd.) was reappointed as President and Senior Executive Director of R Systems by the Board at its meeting held on January 21, 2009 for a period of three years i.e. w.e.f April 01, 2009 to April 01, 2012.

Mr. O’Neil Nalavadi, Mr. Suresh Paruthi and Mr. Raj Swaminathan were reappointed as directors of R Systems at the previous annual general meeting held on April 27, 2009.

Mr. Raj Swaminathan was reappointed as Director and Chief Operating Officer of R Systems by the Board at its meeting held on July 24, 2009 for a period of three years i.e. w.e.f September 29, 2009 to September 29, 2012.

Mr. O’Neil Nalavadi resigned from the office of Director Finance and Chief Financial Officer effective November 08, 2009. Your Directors place on record their sincere appreciation for the advice and contribution of Mr. O’Neil Nalavadi during his tenure with the Company.

Subsequent to the year ended December 31, 2009, Mr. David Richard Sanchez resigned from the office of Director effective February 26, 2010. Your Directors place on record their sincere appreciation for the advice and contribution of Mr. David Richard Sanchez during his tenure with the Company.

At the ensuing Annual General Meeting, Lt. Gen. Baldev Singh (Retd.) and Mr. Raj Kumar Gogia, directors of the Company are liable to retire by rotation in accordance with the provisions of

Section 255 and 256 of the Companies Act, 1956 and being eligible, offer themselves for reappointment as directors of R Systems.

None of the directors of R Systems is disqualified as per the provisions of Section 274(1)(g) of the Companies Act, 1956. The directors of R Systems have made necessary disclosures, as required under various provisions of the Act and Clause 49 of the Listing Agreement.

7. EMPLOYEES STOCK OPTION PLANS /SCHEMES

The industry in which R Systems operates is people intensive and R Systems believes that human resources play a pivotal role in the sustainability and growth of the Company. R Systems has always believed in rewarding its employees with competitive compensation packages for their dedication, hard work, loyalty and contribution towards better performance of the Company. To enable more and more employees to be a part of the financial success of the Company, retain them for future growth and attract new employees to pursue growth, R Systems has set up employees stock option plans / schemes from time to time for its employees and for the employees of its subsidiaries. As on the date of this report, the prevailing stock option plans of R Systems are as follows:

a. R Systems International Ltd. - Year 2004 Employee Stock Option Plan: For the employees of R Systems and its subsidiaries other than ECnet Limited.

b. R Systems International Ltd. - Year 2004 Employee Stock Option Plan - ECnet: For the employees of ECnet Limited, a subsidiary of R Systems.

c. Indus Software Employees Stock Option Plan - Year 2001: Initially formulated for the employees of Indus Software Private Limited which got amalgamated with R Systems and the plan continues as per the scheme of amalgamation approved by the Hon’ble High Courts of Delhi and Mumbai. As on the date of this report, no stock options are in force under this plan.

d. R Systems International Limited Employee Stock Option Scheme 2007: For the employees of R Systems and its subsidiaries.

As required under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999, details relating to options approved, granted, vested, exercised, lapsed, in force etc. under the prevailing employees stock option plans / schemes during the year ended December 31, 2009 after making the required adjustments for consolidation of each of the 5 equity shares of Rs. 2 each into 1 equity share of Rs. 10 each are as follows:

All options granted under Indus Software Employees Stock Option Plan - Year 2001 have already been vested and exercised or lapsed and no options were in force as on December 31, 2009.

During the year ended December 31, 2009 R Systems had not granted any options under any of the aforementioned plans. For options granted during the earlier years, R Systems used the fair value of the stock options for calculating the employees compensation cost.

For the purpose of valuation of the options granted during earlier years, the management obtained fair value of the options at the date of grant under respective schemes from a firm of Chartered Accountants (N. Maini & Co.), to determine accounting impact, if any, of options granted over the periods. In the considered opinion of the valuer (mentioned above), the fair value of option determined using ‘Black Scholes Valuation Model’ under each of above schemes is“Nil”and thus no accounting thereof is required.

* R Systems International Ltd. - Year 2004 Employee Stock Option Plan under which the price was based on Rs. 2 per share.

** R Systems International Ltd. - Year 2004 Employee Stock Option Plan - ECnet under which the price was based on Rs. 2 per share.

*** Indus Software Employees Stock Option Plan - Year 2001 under which originally the price was based on Rs. 10 per share for 21,967 shares. As a result of amalgamation of Indus Software Private Limited into R Systems, R Systems had issued 206,822 equity shares of Rs. 2 each pursuant to the swap ratio approved by Hon’ble High Courts of Delhi and Mumbai.

The above information is based on Rs. 2 per share prior to consolidation of 5 equity shares of Rs. 2 each into one equity share of Rs. 10 and subsequent allotment of bonus shares in the ratio of 1 : 1.

Further, for the purpose of valuation of the options granted during the year 2005 under R Systems International Ltd. - Year 2004 Employee Stock Option Plan, the management obtained fair value of the options at the date of grant from a firm of Chartered Accountants (N. Maini & Co.), to determine accounting impact, if any, of options granted. In the considered opinion of the valuer (mentioned above), the fair value of these options determined using ‘Black Scholes Valuation Model’ is “Nil” and thus no accounting thereof is required.

8. LIQUIDITY AND BORROWINGS - CONSOLIDATED FINANCIAL STATEMENT

Cash and bank balance, including bank deposits, as on December 31, 2009 was Rs. 8,719.75 lakhs as against Rs. 6,364.38 lakhs as on December 31, 2008. Increase in the cash and bank balance was mainly on account of cash generated from operations. The cash and bank balance per share as on December 31, 2009 was Rs. 71.22 as against Rs. 47.63 as on December 31, 2008.

The consolidated cash and cash equivalent as on December 31, 2009 was Rs. 3,093.04 lakhs as against Rs. 2,043.89 lakhs as on December 31, 2008.

Net cash generated from operating activities was Rs. 4,326.48

lakhs for the year ended December 31, 2009 compared to Rs. 2,933.52 lakhs for the year ended December 31, 2008. Cash fow generated from operating activities is the significant source of funding for investing and financing activities.

During the year R Systems consolidated operations invested Rs. 951.94 lakhs in purchase of fixed assets. R Systems paid Rs. 75.84 lakhs as deferred payment compensation to the erstwhile shareholders of R Systems Solutions, Inc. The interest received during 2009 was Rs. 305.66 lakhs as against Rs. 310.54 lakhs during the year 2008.

R Systems invested its surplus cash generated from operation amounting to Rs. 690.67 lakhs in fixed deposits during the year 2009.

Cash used in financing activities during the year 2009 was Rs. 1,910.03 lakhs mainly due to buyback of shares amounting to Rs. 729.69 lakhs, increase in margin money deposits by Rs. 622.50 lakhs, payment of Rs. 27.99 lakhs as interest on borrowings, payment of Rs. 309.28 lakhs and Rs. 52.65 lakhs respectively for payment of dividend and dividend distribution tax for the year 2008.

Our policy is to maintain suffcient liquidity to fund the anticipated capital expenditures, operational expenses and investments for strategic initiatives.

R Systems has credit facilities from State Bank of India amounting to Rs. 1,200 lakhs (including non fund based credit limit of Rs. 600 lakhs) and R Systems Europe B. V. has a line of credit amounting to EURO 1.25 million (Rs. 832.90 lakhs) from Fortis Commercial Finance N.V. As of December 31, 2009, there was total credit balance of Rs. 211.71 lakhs under these lines of credit. The total liability of R Systems for motor vehicles purchased against loan was Rs. 31.53 lakhs and in relation to fnance leases for assets was Rs. 113.67 lakhs as on December 31, 2009. R Systems primary bankers in India are State Bank of India, ICICI Bank Limited, HDFC Bank Limited and Axis Bank Limited while in U.S.A., Singapore and Europe the primary bankers are California Bank & Trust, Citibank N.A. and Fortis Bank N.V. respectively.

9. BUY BACK

The Board at its meeting held on September 07, 2008, had approved the Buy-back of the equity shares of Rs. 10 each, not exceeding 1,306,941 number of equity shares from the existing owners, at a maximum price of Rs. 150 per equity share, for an aggregate amount not exceeding Rs. 800 lakhs from the open market through stock exchange(s) interms of the SEBI (Buy Back of Securities) Regulations, 1998 pursuant to the first proviso to clause (b) of sub-section (2) of Section 77A of the Companies Act, 1956. Consequently, the Company made a public announcement dated October 15, 2008 regarding Buy-back of equity shares.

Under the Buy-back programme, the Company bought back 1,265,820 equity shares up to August 27, 2009 inclusive of payout formalities (including 146,346 equity shares up to December 31, 2008) at an average price of Rs. 63.20 per share for an aggregate amount of Rs. 80,000,000 by utilising the Securities Premium Account to the extent of Rs. 67,341,773 and General Reserve to the extent of Rs. 12,658,200. The Capital Redemption Reserve has been created out of General Reserve for Rs. 12,658,200 being the nominal value of equity shares bought back in terms of Section 77AA of the Companies Act, 1956. The Offer for Buy Back has been successfully completed on August 27, 2009.

10. CHANGES IN THE CAPITAL STRUCTURE

The issued and paid up equity share capital as on December 31, 2008 was Rs. 134,363,600 divided into 13,436,360 equity shares of Rs. 10 each (after deducting 13,676 equity shares which were bought back in year 2008 and were lying in Share Suspense Account and extinguished during the year ended December 31, 2009) and as on December 31, 2009 was Rs. 123,168,860 divided into 12,316,886 equity shares of Rs. 10 each.

Pursuant to the offer for buy-back, the Company had bought back and extinguished 1,119,474 equity shares during the year ended December 31, 2009 (excluding 13,676 equity shares which were bought back in year 2008 and were lying in Share Suspense Account and extinguished during the year ended December 31, 2009). The amount of Rs. 61,774,283 paid towards buy back of shares, in excess of the face value, has been charged to Securities Premium Account. The Company has also transferred Rs. 11,194,740 from free reserves to Capital Redemption Reserve Account, which represents the nominal value of shares bought back during the year under review.

Under the Buy-back programme, the Company has bought back 1,265,820 equity shares in aggregate up to August 27, 2009 inclusive of payout formalities and successfully completed the Buy Back on August 27, 2009.

11. STOCK EXCHANGES WHERE THE SECURITIES OF R SYSTEMS ARE LISTED

The equity shares of R Systems have been listed and are traded on the following stock exchanges:

National Stock Exchange of India Limited (“NSE”)

Exchange Plaza, Bandra Kurla Complex, Bandra - (E), Mumbai - 400 051

Bombay Stock Exchange Limited (“BSE”)

Phiroze Jeejeebhoy Towers, Dalal Street , Mumbai - 400 001

The annual listing fee for the year 2010- 11 has been paid within the scheduled time to NSE and BSE.

12. MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OFTHE COMPANY

Subsequent to the balance sheet date till the date of this report, there were no other significant events after the end of the financial year 2009 which would materially affect the financial position of R Systems.

13. PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 for the year ended December 31, 2009 are as follows:

A. Conservation of Energy

During the year ended December 31, 2009 R Systems continued its action plans to curtail the energy bills by adopting various energy conservation options / technologies as identified by Federation of Indian Chambers of Commerce & Industry (“FICCI”) through a detailed Energy Audit carried out by FICCI for R Systems Noida operations in the year 2007. Significant measures were taken to reduce energy consumption by using energy efficient equipments and devices. R Systems constantly evaluates new technologies and makes appropriate investments to be energy efficient. Currently the Company uses CFL fittings and electronic ballasts to reduce power consumption of fluorescent tubes. The air is conditioned with energy efficient compressors for central air conditioning and with split air conditioning for localized areas. R Systems is always in search of innovative and efficient energy conservative technologies and applies them prudently. However R Systems being in the software industry, its operations are not energy intensive and energy costs constitute a very small portion of the total cost and the financial impact of these measures is not material.

Form A is not applicable to the software industry.

B. Technology Absorption

The particulars with respect to technology absorption are given below:

(a) Research and Development (R & D)

1. Specific areas in which R & D carried out by the Company

R Systems continues to invest in developing new

versions of its proprietary products to operate in different environments and in developing new tools in CRM, RMA and other processes to serve the customers. In addition, R Systems carries out research makes investment in developing new prototypes in varied areas like digital media, mobility, WiMax etc. to demonstrate to clients.

2. Benefits derived as a result of the above R & D

Research and development has helped R Systems in fulfilling clients’needs, winning new engagements from existing clients, winning new customers, growing revenues and enhancing the quality of services. We have been benefited in product improvement, cost reduction, better product development, import substitution etc. which has resulted in high product quality and increased business potential.

3. Future plan of action

The Company continues to focus its efforts on innovations in software development processes, methodologies and tools.

4. Expenditure on R & D

The Company’s R & D activities are part of its normal software development process. There is no separate R & D department and hence there is no specific capital or recurring R & D expenditure. It is not practicable to identify R & D expenditure out of the total expenditure incurred by the Company.

(b) Technology absorption, adaptation and innovation

1. Efforts made towards technology absorption, adaptation and innovation

The Company has established practice streams in specific technologies to analyze their implications and the benefits they can provide to Company’s customers.These steps enable the Company to find and execute the most appropriate solutions for its clients.

2. Benefits derived as a result of the above efforts

The benefits derived from the above mentioned efforts are fulflling customer needs, effciency in operations, improvement in quality and growth in revenues.

3. Technology imported during the last 5 years

Not applicable, as no technology has been imported by the Company.

C. Foreign Exchange Earnings and Outgo (Accrual Basis)

A significant percentage of R Systems revenues are generated from exports. The development and service centres in Noida, Pune and Chennai are registered with the Software Technology Park of India in their respective areas as 100% Export Oriented Undertakings. All efforts of the Company are geared to increase the business of software exports in different products and markets. We have made investments in sales and marketing activities in various growing markets.

The total foreign exchange used and earned by R Systems during the year as compared with the previous year is as follows:

Particulars Financial Year ended (Rs. in lakhs)

31.12.2009 31.12.2008

(a) Earnings (Accrual Basis) 18,192.74 19,772.75

(b) Expenditure (Accrual Basis) 3,360.05 3,447.24

(c) CIF value of imports 973.15 397.72

14. SUBSIDIARIES

During the year ended December 31, 2009, the Company had renewed the commercial guarantee for USD 850,000 to California Bank & Trust, U.S.A. for renewal of working capital line of credit of USD 750,000 granted by California Bank & Trust to R Systems, Inc. (a wholly owned subsidiary of R Systems).

As on December 31, 2009 R Systems has fourteen subsidiaries. The names and country of incorporation of those subsidiaries are as follows:

S. No. Name of the Subsidiaries Country of Incorporation

1. R Systems (Singapore) Pte Limited Singapore

2. RSystems, Inc. U.S.A.

3. Indus Software, Inc. U.S.A.

4. ECnet Limited Singapore

5. RSystems Solutions, Inc. U.S.A.

6. RSystemsNV Belgium

7. RSystems Europe B.V. The Netherlands

8. RSystems S.A.S. France

9. ECnet (M) Sdn. Bhd.# Malaysia

10. ECnet, Inc.# U.S.A.

11. ECnet (Hong Kong) Limited# Hong Kong

12. ECnet Systems (Thailand) Company Thailand Limited #

13. ECnet Kabushiki Kaisha# Japan

14. ECnet (Shanghai) Co. Ltd.# Peoples Republic of China

# wholly owned subsidiaries of ECnet Limited, Singapore being the 98.59% subsidiary of R Systems.

All the aforementioned fourteen subsidiaries are incorporated and based outside India. In addition to providing services to various international clients these subsidiaries also help to generate revenues for R Systems. The Board of Directors of R Systems regularly reviews the affairs of these subsidiaries.

The holding company is required to attach the documents relating to its subsidiaries as prescribed under Section 212 of the Companies Act, 1956 along with its annual report. R Systems has applied and has been exempted by the Ministry of Corporate Affairs vide its letter no. 47/701/2009-CL-III dated November 09, 2009 from attaching the balance sheet, profit & loss account, directors’ report, auditors’ report etc. in respect of the subsidiaries. Accordingly, the annual report of R Systems does not contain the financial statements of its subsidiaries, but contains the consolidated audited financial statement of the Company and its subsidiaries. Further as directed by the Ministry of Corporate Affairs, information in aggregate in respect of key items i.e. (a) capital (b) reserves (c) total assets (d) total liabilities (e) details of investments (except in case of investment in subsidiaries) (f) turnover (g) profit before taxation (h) provisions for taxation (i) profit after taxation and (j) proposed dividend for each subsidiary has been disclosed in brief abstract forming part of the consolidated balance sheet.

Further, the annual accounts of the subsidiaries and the related detailed information will be made available to the investors of the holding company and its subsidiaries seeking such information at any point of time. The annual accounts of the subsidiaries will also be available for inspection during business hours at the Company’s registered office and in the offices of the subsidiaries.

15. PARTICULARS OF EMPLOYEES

As required under the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the annexure to this report.

16. DIRECTORS’RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to directors’ responsibility statement, your directors hereby confirm that:

(i) In the preparation of the annual accounts for the financial year ended December 31, 2009, the applicable accounting standards had been followed along with proper explanation relating to material departures, wherever applicable;

(ii) The directors had 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 or loss of the Company for the year under review;

(iii) The directors had 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;

(iv) The directors had prepared the annual accounts for the financial year ended December 31, 2009 on a going concern basis.

17. AUDITORS

M/s S. R. Batliboi & Associates, Chartered Accountants, the statutory auditors of R Systems hold office, in accordance with the provisions of the Companies Act, 1956, until the conclusion of the forthcoming Annual General Meeting and are eligible for reappointment. The Company has received letter from auditors to the effect that their appointment, if made, would be in accordance with Section 224 (1B) of the Companies Act, 1956 and that they are not disqualified for such reappointment within the meaning of Section 226 of the said Act.

Further, the auditors’report being self-explanatory, does not call for any further comments by the Board of Directors.

18. AUDIT COMMITTEE

R Systems has a qualified and independent Audit Committee. At the beginning of the financial year i.e. on January 01, 2009, the Audit Committee comprised of five directors with non-executive independent director as the Chairman, director finance and three other non-executive independent directors as the members of the Committee. During the year, Mr. O’Neil Nalavadi, Director Finance and Chief Financial Officer of the Company had tendered his resignation to the Company effective November 08, 2009. Accordingly the Audit Committee had been reconstituted and comprised of four directors with non-executive independent director as the Chairman and three other non-executive independent directors as the members of the Committee.

Subsequent to the year ended December 31, 2009, Mr. David Richard Sanchez, non-executive independent director had tendered his resignation to the Company effective February 26, 2010. Accordingly the Audit Committee had been reconstituted and as on the date of this report, it comprises of three directors with non-executive independent director as the Chairman and two other non-executive independent directors as the members of the Committee.

The constitution of the audit committee is in compliance with the provisions of the Companies Act, 1956 and the Listing Agreement entered into with the stock exchanges.

The terms of reference and role of the audit committee are as per the guidelines set out in the Listing Agreement with the stock exchanges read with Section 292A of the Companies Act, 1956 and includes such other functions as may be assigned to it by the Board from time to time. The audit committee has adequate powers to play an effective role as required under the provisions of the statute and Listing Agreement.

19. DETAILS OF UTILISATION OF IPO PROCEEDS

Pursuant to the Initial Public Offer, the Company collected Rs. 7,062.50 lakhs (net of selling shareholders proceeds). For details of utilisation of IPO proceeds, please refer note no. 19 under Schedule 17 in the standalone financial results for the financial year ended December 31, 2009.

20. CORPORATE GOVERNANCE

As required under the Listing Agreement entered into with the stock exchanges the detailed report on corporate governance is given as annexure to this report elsewhere. Further the disclosure required to be made as per Section II Clause C of Part II of Schedule XIII to the Companies Act, 1956 and in terms of Clause 49 of the Listing Agreement entered into with the stock exchanges for all the directors is as follows:

Details of remuneration paid to the executive directors during the year ended December 31,2009

(Amount in Rs.)

1. Name of the Director Mr. Satinder Singh Rekhi

(a) Salary, benefts and allowances (fixed) 14,697,029

(b) Retention bonus (fixed) # 890,000

(c) Stock options granted Nil

(d) Pension As per the applicable policy for employees

(e) Service contract 5 years

(f) Notice period 36 months

(g) Severancefees Compensation in lieu of notice

(h) Shareholding in R Systems as on 90,600 equity sharesof Rs. 10 each in December 31,2009 his own name & 1,921,718 equity shares of Rs. 10 each as trustee of Satinder & Harpreet Rekhi Family Trust.

# approved by the Central Government for the year 2006

(Amount in Rs.)

2. Name of the Director Mr. O’Neil Nalavadi

(a) Salary, benefits and allowances (fixed) 9,342,009

(b) Perquisites Nil

(c) Stock options granted Nil

(d) Pension Nil

(e) Service contract

(f) Notice period Resigned effective November 08,2009

(g) Severancefees

(h) Shareholding in R Systems as on 209,500 equity shares of Rs. 10 each December 31,2009

(Amount in Rs.)

3. Name of the Director Lt. Gen. Baldev Singh (Retd.)

(a) Salary, benefits and allowances (fixed) 2,706,000

(b) Retention bonus (fixed) # 744,444

(c) Incentive (fixed) 1,500,000

(d) Provident fund 144,000

(e) Stock options granted As detailed below*

(f) Pension As per the applicable policy for employees

(g) Service contract 3 years (h) Notice period 6 months

(i) Severancefees Compensation in lieu of notice

(j) Shareholding in R Systems as on 78,808 equity shares of Rs. 10 each December 31,2009

# approved by the Central Government for the year 2006

* Lt. Gen. Baldev Singh (Retd.) was awarded with 27,700 stock options of Rs. 2 per share on September 01, 2004 under R Systems International Ltd. - Year 2004 Employee Stock Option Plan, exercisable at a price at par with other employees covered under the plan. The granted options shall vest over a period of 4 years in equal installments and vested options can be exercised over a period of 10 years from the date of grant. On January 30, 2006

R Systems had consolidated each of its 5 equity shares of Rs. 2 each into 1 equity share of Rs. 10 each. Consequently, the balance options also stand revised from Rs. 2 each to Rs. 10 each. As on December 31, 2009, entire options granted (i.e. 5,540 stock options) were already vested. 50% of the total options granted (i.e. 2,770 stock options) was already exercised and balance 50% of the total options granted (i.e. 2,770 stock options) of Rs. 10 each is in force.

(Amount in Rs.)

4. Name of the Director Mr. Raj Swaminathan

(a) Salary, benefits and allowances (fixed) 4,277,089

(b) Incentive (fixed) 1,100,000

(c) Provident fund 9,360

(d) Stock options granted Asdetailed below*

(e) Pension Asper the applicable policy for employees

(f) Service contract 3years**

(g) Notice period 2months

(h) Severance fees Compensation in lieu of notice

(i) ShareholdinginRSystemsason Nil December 31, 2009

* 60,000 stock options have been granted to Mr. Raj Swaminathan under R Systems International Limited Employees Stock Option Scheme 2007 on July 11, 2007. These Options are exercisable at a price at par with other employees covered under the plan. The granted options shall vest over a period of 4 years in equal installments and vested options can be exercised over a period of 10 years from the date of grant. As on the date of this report out of the total options granted, 30,000 options are already vested but not exercised.

** Reappointed by the Board w.e.f. September 29, 2009 for a term of three years subject to the approval of the shareholders, Central Government and other authorities, if required.

The aforementioned directors’remuneration has been submitted for approval / approved by the Remuneration Committee, the Board, the shareholders in the general meeting and by the Central Government, wherever applicable, as required under the provisions of the Companies Act, 1956.

Details of remuneration paid to the non-executive directors during the year ended December 31, 2009

Non-executive directors are not entitled to any remuneration except the sitting fees for attending the directors’meetings. The sitting fees paid to the non-executive directors during the year ended December 31, 2009 is as follows:

S. No. Name of the Director Sitting fees paid (Rs.)

1. Mr. Raj Kumar Gogia 105,000

2. Mr. Suresh Paruthi 105,000

3. Mr. David Richard Sanchez (Resigned effective February 26, 2010) 15,000

4. Mr. Gurbax Singh Bhasin Nil

Total 225,000

As on December 31, 2009 none of the aforementioned non- executive independent directors except Mr. David Richard Sanchez holds any shares or options in R Systems. Mr. David Richard Sanchez holds 4,000 equity shares of Rs. 10 each.

21. DEPOSITS

R Systems has neither invited nor accepted any deposits from public within the meaning of Section 58A of the Companies Act, 1956 and as such, no amount of principal or interest was outstanding on the date of the balance sheet.

22. CUSTOMER RELATIONS

R Systems recognises that the customers have choice of service providers and the directors would like to place on record their gratitude on behalf of the Company for the business provided by them. The Company’s quality policy mandates that the Voice of Customer is obtained on a regular basis. We constantly review the feedback and incorporate its impact into our delivery systems and communications.

23. EMPLOYEE RELATIONS

R Systems is inspired by its customers and its employees transform that inspiration and customers needs into value for all stakeholders. We thank all R Systems employees worldwide for their hard work, commitment, dedication and discipline that enables the Company to accomplish its customer commitments and commitments to all its stakeholders. R Systems conducts regular employee satisfaction surveys, and regular open house meetings constantly validates key employee indices with industry and peer group business. These practices have helped the Company achieve many of its business goals and have been recognised in many industry surveys over the last few years. The open door mind set of our senior management team ensures that feedback loop is completed in the quickest time.

We thank our shareholders for their continuous support and confdence in R Systems. We are conscious of our responsibilities to shareholders to provide full visibility of operations, corporate governance and creating superior shareholder value and we promise to fulfill the same.

24. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of Clause 49 of the Listing Agreement entered into with the stock exchanges, management discussion and analysis report forms an annexure to this report.

25. ACKNOWLEDGMENT

Your directors once again take this opportunity to thank the employees, investors, clients, vendors, banks, business associates, regulatory authorities including stock exchanges, Software Technology Park of India, the Central Government, State Government of Uttar Pradesh, Maharashtra, Tamil Nadu for the business support, valuable assistance and co-operation continuously extended to R Systems. Your directors gratefully acknowledge the trust and confidence and look forward for their continued support in future.

On behalf of the Board For R Systems International Limited

Sd/- Place : Singapore Satinder Singh Rekhi Date : April 10, 2010 (Chairman and Managing Director)