Zylog Systems

I welcome you to this 2008-09 Annual General Meeting of Zylog Systems
 Limited. At the outset. I would like to thank you for having reposed
 your confidence in Zylog and the strategic business initiatives we have
 taken during the fiscal year.
 
 The year, 2008-09 will possibly be known as a year in which long
 standing beliefs were broken and business strategies were put to test.
 In the widespread global economic slowdown, most businesses were
 impacted and some of them no longer exist. The macroeconomic
 environment created by the current recession made 2008 a challenging
 year for growth. Being an integral part of the global value chain; the
 recessionary wave sweeping the world has had a direct bearing on the
 Indian IT Industry. Cost pressures across most of the geographies and
 industries resulted in intense price and volume pressures and longer
 sales cycles. I am happy to share with you that Zylog had responded to
 these challenges by continuing to emphasize on operational efficiencies
 in business processes. We have been able to come out with a
 considerable performance despite the economic events globally and have
 emerged out of this as a strong resilient company.
 
 Since the inception, our clients have seen us as their partner in
 building together stronger businesses and achieving business results.
 Whether in times of strong economic growth or economic uncertainty, we
 have remained true to our promise bv servicing our clients to achieve
 cost savings, increase operational efficiency and thus maximize
 opportunities. By remaining relevant to our clients • and further
 enhancing our proven value proposition, Zylog has delivered strong
 operating and financial performance in 2008-09.  Most importantly, we
 remained focused on providing the services to the clients that allow
 Zviog to swim through the tide.  Industry leading growth
 
 Revenue reached Rs.78,388 lakhs in 2008-09, increasing 28% over the
 prior year, a markedly higher growth rate than that of industry peers.
 Net profit has been recorded at Rs. 8,517 lakhs - a marginal growth of
 3.6% over the previous year. The mam reason has been due to the
 currency volatility that has happened during the year. The appreciation
 of the US Dollar against the Indian Rupees has put significant pressure
 on our bottomiine. However, in constant currency terms, we have had
 good growth in ali the markets we serve. This growth has come across
 the spectrum of developed and emerging markets. We see greater demand
 going forward in emerging markets.The market for transformation and
 next generation rollouts has been affected due to the slowdown; however
 we see it reviving as the economy revives. The networth of the company
 has gone up to Rs.43,585 lakhs at the growth rate of 13.1%.  Similarly,
 earning per share stands at Rs.51.8 compared to Rs.54.5 of the prior
 year.
 
 A significant driver of our growth in recent years has been the
 diversification of our geographic markets and potential business
 offerings. In particular, we gained traction in our effoits of
 consolidating our strengths obtained through our business acquisitions.
 
 During the year, your company made two prestigious acquisitions in the
 Content Management space and Mobile & wireless market.  Content
 Management has opened up more opportunities m the US and European
 markets with considerable focus on Pharmaceutical industry. Further,
 the acquisition of mobile and wireless business made in the Middle-East
 has opened up gateway tor taking our core strengths and existing
 offerings to the Middle-East with our deepened sales network across the
 Middle-East market. This has also strengthened the partnership ties
 with GBM, Microsoft, Oracle, Reuters. Captaris and others.
 
 Also during 2008-09. your Company rolled out an initiative which
 embodies Zylogs core philosophy of identifying value-based solutions
 to specific deficiencies and thus to provide wireless broadband
 facility using WIFI technology to retail customers on a pan- India
 basis.The plan is to completely unwire the five major metros and
 further penetrate to other tier-2 and tier-3 cities. Parallel efforts
 are in line to unwire the shata ; trains.
 
 Your company is focused to create its own market in the e-governance
 space. Middle-East and Asia-Pacific has been a great market
 opportunity. Dubai Immigration Dept, Police Dept and Transport Dept are
 some of the client base added through the acquired entity.  In India,
 State of Karnataka has mandated Zylog as an implementation partner for
 the issuance of Smattcard for the Driving Licenses and Vehicle
 Registration Certificates across all its regional transport offices.
 Further, Zylog is fortunate to footprint its similar services to the
 state of Gujarat and C.oa.
 
 Challenge and opportunity
 
 By no means do we underestimate the harsh economic realities that lie
 ahead in 2009. Discretionary spending by companies will be cut back,
 although we expect clients will continue to fund programs that produce
 real benefits in terms of cost savings or stronger operations. Thus, we
 remain confident in our ability to perform well in a hostile business
 environment bv maintaining our commitment to delivering value to all of
 our client relationships.
 
 Zylog is uniquely suited to partner with clients, to help them address
 the current financial challenges and position their businesses for the
 next wave of opportunities. Clearly much of the focus of companies
 right now is on cost efficiency, as economic pie-ures require them to
 do more with less. Your Company remains optimistic about the
 long-term opportunities while at the same time meeting the short-term
 challenges.Your Company is closely monitoring the market situation, and
 believes that its unique business model and prudent risk management
 practices, coupled with deep client relationships, give it a
 sustainable long-term advantage.Your Company will aggressively puisue
 new- opportunities and will ensure adequate internal preparedness to
 take maximum advantage of such opportunities going forward.
 
 The present economic turmoil does not alter the fact that many
 industries are facing profound changes in their businesses. One clear
 example is the adoption of bank charters by several major financial
 institutions, which will require a significant restructuring of their
 business models. Pharmaceutical companies must cope with the reality of
 fewer blockbuster drugs in their R&D pipelines. Media and entertainment
 companies face a trend toward digitization that affects the content,
 marketing and distribution of their products.  Far-sighted management
 teams, in these and other industries, understand that they cannot
 afford to put their investments in the future on hold simply because
 of present difficult circumstances. Our confidence in the business
 model is based on the fact that we can be equally effective for both
 types of clients: those that must generate near-term cost savings and
 those seeking a strategic partner to help them transform their business
 to ensure long-term success.We remain committed to making as valuable
 as possible to our clients: investing in new services and global
 delivery resources, hiring and retaining the best talent, and
 maintaining a culture that empowers our people to do their best work.
 
 I am confident that with our focus, a very high level of expertise,
 enhanced service offerings and aggressive growth plans will make Zylog
 an exciting Company for employees, customers, investors and stake
 holders. I wish to reiterate the commitment of my team and myself to
 make this happen and make Zylog a Category Leader.
 
 In the knowledge business that we are in, the immense professionalism
 and dedication of all Zylogers continue to be your Companys greatest
 asset to face any challenge on its journey to be among the top
 technology companies in the world.
 
 I am sincerely grateful to you for your support and hope that you will
 continue to support us as we embark on this exciting journey.  Thank
 you.
 
 Warm regards
 
 SUDARSHAN VENKATRAMAN
 Chairman and Chief Executive Officer