Dear Shareholders,

Writing a letter to you at the end of each year is an opportunity for me to reflect on what has happened during the year that has flown by so quickly. In the few pages available here to me, it is obviously difficult to share, in any detail, what more than 5000 associates have contributed, to build on the dream and vision of Polaris, and encapsulate their expertise into repeatable problem solving for the customer. Therefore, my attempt here is to stitch together the events that happened during our journey that helped build the global corporation.

We started our journey in 1997 based on the fundamental hypothesis that Polaris can add more value to our customers by knowing 'how our customer (banking, financial, and insurance institutions) delight their customers by offering the right solutions at the right time using technology as a base or enabling platform'. Obviously, for this, we needed lots of knowledge and expertise and a clear view of our customers' business. We also had to deal with the so called 'risk' of remaining narrowly focused in one vertical market space, while the rest of the industry was seeing the opportunity in general technology services and especially in the red hot market of Y2K. Our belief was that, in a crowded market, the customer would give preference to expertise of business domain over quantity of technology resources.

That Polaris grew at a CAGR of more than 70% since 1997 validates our belief and hypothesis. From 1997 to 2000, Polaris grew to 1000 professionals from just a 200 people organization and then in the last 4 years, we crossed the 5000 professionals mark, with presence in all global financial capitals. We are able to service 5 of the top 10 leaders among the financial and insurance institutions in the world. During this period, we built 6 expertise-based software centers, having sharp focus in retail banking solutions, investment banking solutions, wholesale banking solutions, insurance solutions and enterprise solutions. Four years ago, we began making investments in building Intellectual Property Rights (IPRs), and then, 24 months ago, we acquired the rights from Citigroup for solutions in areas of credit card processing, retail banking, lending and mortgage processing, cash management and a host of corporate banking areas. Taking the IPRs from the leaders, that too built on the latest technology gives us strong global functionality to be offered to the marketplace. The intellectual properties of Polaris have been created and delivered to market by a separate division called Intellect, and we recently launched the entire suite under the brand name of Intellect.

In parallel, we are building competencies and capacities to deliver end-to-end business process outsourcing capabilities in niche spaces through our fully owned subsidiary – Optimus. Thus, we are in the process of building a 'one-stop super mall' for financial industry solutions.

As an organization, we need to build a wholesome framework for growth. On one side, we need to build the foundational framework around four key stakeholders of Polaris, namely our customers, employees (at Polaris, associates), investors and society. During the last 5 years, we worked on all the four block and our efforts were recognized along the way. In October 2001, we became the World's first CMMi Level 5 Company, ensuring high quality and predictable delivery for our customers. We were chosen as one of the Best Employers by the BY Hewitt Associates Survey in 2002. Our products and framework got the Banker's Award during 2003. Polaris associates were recognized for their commitment to Ullas Trust with the Mother Teresa Corporate Citizenship award. The Company Secretaries of India has chosen us among the top 25 companies for best practices and corporate governance.

I want to touch upon why the phrase 'economics of expertise'.
Economics is defined as the science of production, consumption and distribution of goods and services. With the good brand name by the Indian IT industry on the global world map, it becomes imperative to move from the cost arbitrage model to a customer value-creation business model. For this transformation, the organization has to build new paradigms of knowledge management, customer business changes understanding, and finally, ensure that we deliver what we are communicating. Nalanda, the corporate university at Polaris, has built certification programs around expertise. We started this initiative 3 years ago. Now Polaris has more than 75 PMP certified project managers, certified by the Project Management Institute of the US, and 329 Nalanda certified project managers. We have 16 Certified Function Point Specialists, out of only about 500 across the globe. Nalanda is now building programs in areas of Certified Banking domain specialists like Certified Credit Card Specialists, Certified Cash Management Specialists, Certified Core Banking Experts, Certified Lending Experts, and so on. We are building these sets of expertise to cater to the well – distributed business portfolio of Polaris: North America, Europe, and Asia Pacific, and to position Polaris among the expert companies of India.

Our announced strategy of 100-5-7, i.e., 100 relationships, 5 Customer values and 7 operational levers, is now proving itself very well in the marketplace. We will focus, in the next 3 years, on building not more than 100 relationships, which means we will create more value for existing customers and win a larger share of their business. We all know that the customer looks for cost, quality and reliability as three fundamental values from any vendor, but in today's economics of our customer's business, Time to Market and Flexibility become equally important, and we have designed the organization around these five customer values.

To deliver higher throughput to the same dollar spent – we have organized ourselves around 7 levers which every consultant of Polaris must reflect – reusability, technology best practices, business best practices, software development life cycle (SLDC) best practices, customer market place best practices, tools and finally the energy of the people. The energy of a consultant is a direct extrapolation of his motivation, commitment, creativity and confidence.

At this point in 2004, we have completed a significant part of the foundational work in positioning Polaris in the global map and the market has started responding, as we see in our recent successes. We believe we are on the threshold of the next growth phase, which will be based on building higher growth margins using the principle of Economics of Expertise, in the coming 12 quarters. I am sure the coming quarters will be a time filled with excitement and fun, when we will be marching together as a force to reckon with in the Financial Technology market space.

Looking forward to your unflinching support in the coming years, as you have given during our journey of building the foundation.

With best regards,

Arun Jain
CEO, Chairman & Managing Director