1.  We have audited the attached balance sheet of Zylog Systems Limited
 (the Company) as at March 31, 2012, the statement of profit and loss
 and also the cash flow statement for the year ended on that date
 annexed thereto.These financial statements are the responsibility of
 the Company''s management. Our responsibility is to express an opinion
 on these financial statements based on our audit.
 
 2.  We conducted our audit in accordance with auditing standards
 generally accepted in India. Those standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining,on a test basis, evidence supporting the amounts and
 disclosures in financial statements. An audit includes assessing the
 accounting principles used and significant estimates made by the
 management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 3.  As required by the Companies (Auditor''s Report) Order, 2003, as
 amended, by the Companies (Auditor''s Report) (Amendment) Order, 2004
 issued by the Central Government of India in terms of section 227(4A)
 of the Companies Act, 1956, we enclose in the annexure, a statement on
 the matters specified in paragraph 4 & 5 of the said order.
 
 4.  Based on the written representations received from the directors as
 on March 31,2012 and considered by the board, we report that none of
 the directors is disqualified from being appointed as a director as on
 March 31,2012 , in terms of section 274 (1) (g) of the Companies Act,
 1956.
 
 5.  Further to our comments in the annexure referred to in paragraph 3
 above we report that:
 
 (a) We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purpose of the
 audit;
 
 (b) In our opinion, proper books of accounts as required by law have
 been kept by the Company so far as appears from our examination of
 those books; and proper returns adequate for the purpose of our audit
 have been received from the branch in United States.The branch
 auditor''s report has also been forwarded to us which was appropriately
 dealt with.
 
 (c) The balance sheet, statement of profit and loss and the cash flow
 statement dealt with by this report are in agreement with the books of
 account and with the audited returns from the branch.
 
 (d) In our opinion, the balance sheet, statement of profit and loss and
 cash flow statement dealt with by this report comply with accounting
 standards referred to in sub section (3C) of section 211 of the
 Companies Act, 1956.
 
 (e) In our opinion and to the best of our information and according to
 the explanations given to us,the said accounts give the information as
 required by the Companies Act,1956,in the manner so required and give a
 true and fair view in conformity with the accounting principles
 generally accepted in India:- (i) in the case of the Balance Sheet, of
 the state of the affairs of the Company as at March 31, 2012;
 
 (ii) in the case of the Statement of Profit and Loss account,of the
 profit of the Company for the year ended on that date; and
 
 (iii) in the case of the cash flow statement, of the cash flows for the
 year ended on that date.
 
 Annexure Referred To In Paragraph 3 of the Auditors''Report
 
 1.  The provisions of Clauses of Paragraph 4 of the Companies
 (Auditor''s Report) Order, 2003 as amended listed below are not
 applicable to the Company for the year.
 
 a) Clause 4 (viii) regarding maintenance of cost records under Section
 209(1)(d) of the Companies Act,1956 is not applicable since no Cost
 records have been prescribed.
 
 b) Clause 4 (xiii) regarding special statute applicable to Chit Funds
 and Nidhis / Mutual Benefit Fund and Societies since the Company does
 not carry on such businesses.
 
 2.  The Company has maintained proper records showing full particulars
 including quantitative details and situation of fixed assets.The fixed
 assets of the Company have been physically verified by the management
 according to a phased program which in our opinion is reasonable having
 regard to the size of the Company and the nature of its assets. No
 material discrepancies were noticed on such verification.
 
 3.  No fixed assets have been disposed off during the year under review
 which would give rise to the question of whether the status of the
 Company has been impaired as a going concern.
 
 4.  The company is rendering InformationTechnology related
 services.While majority of the activities of the company does not
 require holding any inventory,the company has projects of executing
 e-governance projects for State Governments.  As part of project
 implementation,the company buys pre-enabled smart cards and issues them
 to the State Governments for the execution of the projects.This is
 considered to be an item of stores inventory.The company has carried
 out a physical verification of the inventory which procedures are
 reasonable in relation to the size of the company and the nature of its
 business.The company has maintained proper records of inventory and no
 discrepancies were noticed on physical verification.
 
 5.  The Company has not given any loans,secured or unsecured,to any
 company, firm or other parties listed in the Register maintained under
 section 301 of the Act except to its wholly owned subsidiaries.
 Accordingly, clauses (iii) (b), (iii) (c) and (iii) (d) of paragraph 4
 of the Order are not applicable for the year.
 
 6.  The Company has not taken any loans, secured or unsecured, from any
 company, firm or other parties listed in the Register maintained under
 section 301 of the Act.Accordingly, clauses (iii) (e), (iii) (f) and
 (iii) (g) of paragraph 4 of the Order are not applicable for the year.
 
 7.  In our opinion and according to the information and explanation
 given to us, there are no contracts or arrangements the particulars of
 which need to be entered into the register maintained in pursuance of
 section 301 of the Companies Act.Accordingly, the requirements
 prescribed by paragraph 4 (v) of the Order are not applicable.
 
 8.  There is an adequate internal control system commensurate with the
 size of the company and the nature of its business for the purchase of
 inventory and fixed assets and for the sale of services.There is no
 continuing failure to correct major weaknesses in internal control
 system.
 
 9.  The company has not accepted any deposits from the public and hence
 the requirements prescribed by paragraph 4 (vi) of the Order are not
 applicable.
 
 10.  In our opinion and according to explanations given to us,the
 Company has an internal audit system commensurate with the size and
 nature of its business
 
 11.  (a) According to the information and explanations furnished to us,
 the Company is regular in depositing with appropriate authorities
 undisputed statutory dues including Provident Fund, ESI,
 IncomeTax,SalesTax,Wealth Tax, Service Tax, Customs Duty, Excise Duty,
 Cess and other material statutory dues applicable to it although there
 have been slight delays in a few cases. There are no dues to be paid
 into theInvestor Education Protection Fund.There were no arrears as
 at 31st March 2012 for a period of more than six months from the date
 they became payable.
 
 (b) According to the information and explanations given to us, the
 following are the dues unpaid in respect of Income Tax, Sales
 Tax,Wealth Tax, Service Tax, Customs Duty and Excise Duty on account of
 disputes.
 
 Statute          Nature of  
                  the Dues   Amt in lakhs   Period to 
                                             which      Forum where 
                                                         the Dues
                                            amount 
                                            relates     of rupees 
                                                        dispute is 
                                                        pending
 
 The Income
 Tax Act, 1961   Disallowance 
                 of expenses     16.22    AY 2001-02  Appellate Tribunal
 
 The Income
 Tax Act, 1961   Disallowance
                 of expenses     91.00    AY 2002-03  Appellate Tribunal
 
 The Income
 Tax Act, 1961   Disallowance
                 of expenses   3820.05    AY 2009-10  CIT (Appeals)
 
 TN General                                           Commercial Taxes
 Sales tax Act.  Sales tax
                 demand          19.32    2004-2005   Department
 
 Service Tax 
 under           Wrong 
                 availment                            Commissioner of
 the Finance 
 Act, 1994       of Cenvat 
                 credit          77.69    2009-10     Service Tax
 
 12.  The Company has no accumulated losses as at March 31, 2012. The
 Company has not incurred cash losses during the financial year covered
 by our audit or in the immediately preceding financial year.
 
 13.  In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to
 banks.There are no borrowings from financial institutions.
 
 14.  The requirements prescribed under Clause 4 (xii) regarding loans
 granted against pledge of shares and securities etc. are not applicable
 since the Company has not granted such loans.
 
 15.  The requirements prescribed under Clause 4 (xiv) regarding dealing
 or trading in shares, securities, debentures or other investments etc.
 are not applicable since the Company does not deal or trade in them.
 
 16.  The company has given guarantees for loans taken on behalf of its
 subsidiaries to banks. In our opinion, the terms and conditions are not
 prejudicial to the interest of the company.
 
 17.  In our opinion and according to the information and explanations
 given to us, the term loans raised have been used for the purpose for
 which the loans were obtained.
 
 18.  According to the information and explanation given to us and on an
 overall examination of the balance sheet of the Company, we report that
 no funds raised on short term basis have been used for long term
 investment by company.
 
 19.  According to the information and explanation given to us, the
 Company has not made any preferential allotment of shares to the
 parties and companies covered in the register maintained u/s 301 of the
 Companies Act 1956.
 
 20.  The requirements prescribed under Clause 4 (xix) regarding
 creation of securities in respect of debentures are not applicable
 since no issue of debentures has been made.
 
 21.  The Company has not raised any money by public issue during the
 year.
 
 22.  According to the information and explanations given to us,no fraud
 on or by the Company has been noticed or reported during the year under
 audit.
 
                                                For Brahmayya &Co
 
                                            Chartered Accountants
 Chennai                                      Firm Reg No:000511S
 
 May 25, 2012
 
                                                       P S Kumar
 
                                                         Partner
                                            Membership No. 15590