Zylog Systems

1.  We have audited the attached balance sheet of Zylog Systems Limited
 as at March 31, 2009, the profit and loss account and also the cash
 flow statement for the year ended on that date annexed thereto. These
 financial statements are the responsibility of the Companys
 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 (Auditors Report) Order, 2003, as
 amended, by the Companies (Auditors 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 31.03.2009 and considered by the board, we report that none of the
 directors is disqualified from being appointed as a director as on
 31.03.2009, in terms of section 274 (1) (g) of the Companies Act, 1956.
 
 5.  Further to our comments in the annexure referred to in paragraph 4
 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 which was also visited
 by us. The branch auditors report has also been forwarded to us and
 appropriately dealt with.
 
 c) The balance sheet, profit and loss account 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 branches.
 
 d) In our opinion, the balance sheet, profit and loss account 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 in the prescribed
 manner, the information as required by the Companies Act, 1956 and give
 a true and fair view in conformity with the accounting principles
 generally accepted in India:-
 
 (i) in the case of the Mance sheet, of the state of the affairs of the
 Company as at March 31, 2009;
 
 (ii) in the case ot the profit and loss account, of the profit of the
 Companv for tne 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 TO THE AUDITORS REPORT
 
 1.  The provisions of Clauses of Paragraph 4 of the Companies
 (Auditors 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(l)(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 primarily a service company rendering information
 technology services. Accordingly it does not hold any inventory as at
 March 31, 2009 and hence the provisions of clause 4 (ii) of the
 Companies (Auditors Report) Order, 2003 as amended are not applicable
 to the Company.
 
 5.  The Company has neither granted nor taken any loans secured or
 unsecured to/from companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956.
 Accordingly, the requirements prescribed under paragraph 4 (iii) of the
 Order are not applicable.
 
 6.  In our opinion and according to the information and explanation
 given to us, there is an adequate internal control system commensurate
 with size of the Company and the nature of its business for purchase of
 fixed assets arid consumables, and for sale of services. We have not
 observed any continuing failure to correct major weaknesses in internal
 control system.
 
 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.  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.
 
 9.  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.
 
 10. 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, Income Tax, Sales
 Tax, Wealth Tax, Service Tax, Customs Duty, Excise Duty, and other
 material statutory dues applicable to it. The Company is yet to
 register itself under the Employees State Insurance Act. As regards
 the Cess, the Central Government has not yet prescribed the amount of
 Cess payable under section 441A of The Companies Act, 1956. There are
 no dues to be paid into the Investor Education Protection Fund.
 
 b) According to the information and explanations furnished to us, no
 undisputed amounts in respect of Provident Fund, Income Tax, Sales Tax,
 Wealth Tax, Service Tax, Customs Duty, Excise Duty, and other material
 statutory dues applicable to it were in arrears as at 31st March 2009
 for a period of more than six months from the date they became payable.
 
 c) 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.
 
 Name of the Statute    Amount (Rs.)  Period to which   Forum where 
                                        amount          the dispute
                                        relates         is pending
 
 Income Tax             l.lOcrores    AY 2001-02   Appellate Tribunal
 
 Income Tax             7.26 lakhs    AY 2002-03   Appellate Tribunal
 
 Income Tax             2.08 crores   AY 2003-04   C.I.T (Appeals)
 
 Income Tax             5.03 crores   AY 2006-07   C.I.T (Appeals)
 
 Sales Tax              11.60 lakhs   AY 2004-05   Commercial Taxes 
                                                   Department
 
 11.  The Company has no accumulated losses as at March 31, 2009. The
 Company has not incurred cash losses during the financial year covered
 by our audit or in the immediately preceding financial year.
 
 12.  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.
 
 13.  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.
 
 14.  The requirements prescribed under Clause 4 (xiv) regarding dealing
 or trading in shares, securities etc. are not applicable since the
 Company does not deal or trade in shares, securities etc.
 
 15.  According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from
 banks or financial institution.
 
 16. In our opinion and according to the information and explanations
 given to us, the term loan raised has been used for the purpose for
 which the loan was obtained.
 
 17.  The Company has not raised any funds on short-term basis and hence
 the requirements prescribed under paragraph 4 (xvii) are not
 applicable.
 
 18.  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.
 
 19.  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.
 
 20.  The Company has raised by a public issue a sum of Rs.126 crores
 (including premium) during the previous year. We have verified the
 disclosure of the end use of the money raised.
 
 21. According to the information and explanations given to us, no fraud
 on or by the Company has been noticed or repotted during the year under
 audit.
 
 
                                                       For Brahmayya 
 Place: Chennai                                Chartered Accountants
 June 25, 2009                                             P S Kumar
                                                             Partner
                                                Membership No. 15590