Zylog Systems

The Directors present their Thirteenth Annual Report and the Audited
 Accounts of the company for the financial year ended March 31,2008.
 
 FINANCIAL RESULTS
 
 Figures                          (Rupees in lakhs except per share data)
 
 Year ended March 31,                                    2008       2007
 Revenue                                             61253.07   40406.49
 Operating Profit (PBDIT)                            10980.05    6923.64
 Interest                                              446.23     403.84
 Depreciation                                         1039.67     941.88
 Prior Period Adjustments                               57.11         --
 Profit Before Tax(PBT)                               9437.04    5577.92
 Taxes                                                1212.65     173.22
 Profit After Tax( PAT)                               8224.38    5404.70
 Dividend Recommended                                  493.39     252.94
 Dividend Tax                                           83.85      42.99
 Transferred to General Reserve                         1,000        750
 Balance Carried forward to Balance sheet            15999.92    9352.79
 Paid up Capital                                      1644.64    1284.64
 Reserves & Surplus                                  39062.23   20358.93
 Tangible Networth                                   38527.77   20645.34
 Earnings per share                                     54.48      50.91
 
 RESULTS OF OPERATION
 
 Your company marched forward with an improvement on all fronts during
 the year. Total Income was Rs 612.53 crores ( Rs 404.06 crores PY)
 (51.6 % growth) This significant growth has been achieved without
 sacrificing on quality, client satisfaction and work culture.  The
 Operating profit was Rs 82.24 crores (Rs 54.05 crores PY) (52.2 %
 growth). The Tangible net worth of the company has increased from Rs
 206.45 crores to Rs 385.25 crores( 86.6 % growth) .The weighted average
 EPS has increased to Rs 54.48 (Rs 50.91 PY).
 
 DIVIDEND
 
 Your Directors recommend a Dividend of 30 %, ie Rs 3 per Equity Share
 for the year ended March 31,2008 on 1,64,46,420 fully paid up Equity
 Shares of Rs 10 each (PY Rs 2.5 per share on 1,28,46,420) If the
 recommended Dividend is approved by the Members at the forthcoming
 Thirteenth Annual General Meeting, the Dividend including the Dividend
 Tax will absorb Rs 5.77 crores.
 
 TRANSFER TO RESERVES
 
 Your Directors propose to transfer a sum of Rs 1000 lakhs to General
 reserves out of the amount available for appropriations and a sum of Rs
 16,182 lakhs is carried forward in the profit and loss account.
 
 LISTING AND FURTHER ISSUE OF CAPITAL
 
 During the financial year the company was listed in both BSE & NSE and
 has issued 36,00,000 equity shares of Rs 10 each at a premium of Rs 340
 per share.
 
 ACQUISITIONS
 
 Your company values that acquisitions are one of the key instruments of
 its growth strategy. Accordingly, during the current year, your company
 has acquired Anados Softwares limited, an UK based Life Insurance
 product company and Ewak Creative Compusoft Limited, Chennai based
 Replacement Technology solution provider. Benefits from such
 acquisitions, as envisaged, include access to new clients, new
 geographical areas and new service offerings as well as an increase in
 per-capita revenue productivity. Further, the ability to leverage your
 companys Global Delivery Model to improve the margins of the acquired
 business is an important means for unlocking value from the
 transaction. Availability of proven methodologies, tools and other
 intellectual property (IP) would be a key criterion since the IP would
 be scalable across a large group of people in your company and will
 help enhance skill levels and productivity. The governments
 liberalization policies permit software companies to freely make
 acquisitions up to ten times their export revenues in the preceding
 year.
 
 INFRASTRUCTURE INVESTMENTS
 
 The journey and transformation continues. The company during the
 current financial created one of the finest, state- of- the art 85 000
 square feet , Software Development and Research Centre at Chennai. Your
 company has relocated its Corporate Office and most of the development
 centers in different locations in Chennai, to Sholinganallur, Chennai
 which facilitates better world class communication, control and greater
 synergies. This facility also houses new modern improved technical
 research and development idea lab (Innovative Development of Enterprise
 Application) which offers kindling of knowledge based services and
 expertise and providing customers with complete solutions.
 
 CORPORATE GOVERNANCE
 
 Your directors aim benchmarking its corporate governance policies with
 the best in the world. Your directors have reiterated your companys
 philosophy on corporate governance. The increasing diversity of the
 investing community and the integration of global capital markets make
 corporate governance a vital issue for investors. A detailed report on
 Corporate Governance is given as a part of the Annual Report along with
 Statutory Auditors Certificate on its Compliance. The company is in
 full compliance with the requirements and disclosures that have to be
 made in this regard.
 
 MANAGEMENT DISCUSSION AND ANALYSIS
 
 Pursuant to clause 49 of the Listing Agreement with the Stock
 Exchanges, your directors annex herewith a Statement on Management
 Discussion and Analysis which forms part of the Directors report.
 
 A cautionary Note: Certain statements in the Management Discussion and
 Analysis section may be forward looking and are stated as required by
 applicable laws and regulation. Many factors may affect the actual
 results, which could be different from what your Directors envisage in
 terms of future performance and outlook.
 
 CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY
 ABSORPTION, 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, are set out in the annexure
 included in this report.
 
 SUBSIDIARIES
 
 During the financial year, the name of the subsidiary Zylog Systems
 (UK) Limited, has been changed to Zylog Systems ( Europe) Limited, in
 line with scope of the Market horizon. There has not been any material
 change in the nature of the businesses of the subsidiaries. The
 financials of these subsidiaries are included in the latter part of
 this Annual Report. A brief performance of the subsidiaries are given
 below:
 
 VISHWAVIKAS SERVICES LIMITED
 
 Vishwa Vikas Services Limited has recorded a revenue of Rs210.95
 lakhs(PY Rs 115.58 lakhs) with a net profit of Rs 42.15 Lakhs (PY Rs
 46.47 lakhs).
 
 ZYLOG SYSTEMS (EUROPE) LIMITED
 
 Zylog Systems (Europe) Limited has generated a revenue of Rs 245.82
 lakhs ( PY Rs 252.44 lakhs) with a net loss of Rs 58.46 lakhs ( PY Rs
 profit of Rs 5.05 lakhs).
 
 ZYLOG SYSTEMS (INDIA) LIMITED
 
 Zylog Systems (India) Limited has recorded a revenue of Rs 130.74
 lakhs( PY Rs 136.34 lakhs) with a net profit of Rs1.05 Lakhs ( PY Rs
 10.48 lakhs).
 
 ZYLOG SYSTEMS ASIA PACIFIC PTE LTD
 
 Zylog Systems Asia Pacific Pte Ltd has generated a revenue of Rs 126.63
 lakhs (PY Rs 78.45 lakhs) with a net profit of Rs 4.97 Lakhs (PY Rs
 19.19 lakhs).
 
 PARTICULARS OF EMPLOYEES
 
 None of our Employees are in receipt of remuneration above the limits
 governed by the disclosure of particulars under the provisions of
 Section 217(2A) of the Companies Act, 1956, read with the Companies
 (Particulars of employees) Rules, 1975, as amended from time to time.
 
 ADVISORY BOARD
 
 The Advisory board of your Company comprises of eminent persons like
 Mr. Ratnagar Hegde, former Executive Director of Union Bank of India
 and Mr Nanjappa, ex Regional Director of Reserve Bank of India and Mr.
 S Rajagopal, former Chairman and Managing Director of Indian Bank and
 Bank of India. The Advisory board met four times during the current
 fiscal to review the business.
 
 QUALITY INITIATIVES
 
 Quality and best practices define the foundation of a company. Your
 company is an ISO 9001:2000 quality certified Company for the eighth
 year in succession and are being assessed for CMMI Level 4. Your
 company continuously leverage cutting edge tools, methodologies and
 benchmark standards to exceed the expectations of our customers. Your
 company, as an IT Solution provider, will continue to strive for
 excellence in all areas of business, guarantee the quality of its
 software products at all stages of development and build the highest
 quality standards. Your Company follows the most widely used paradigms
 for QA management, PDCA (Plan-Do-Check-Act) approach, also known as the
 Shewhart cycle. The main goal of QA is to ensure that the product /
 service fulfills or exceeds customer expectations. An independent audit
 team, who reports directly to the Managing Director, ensures proper
 implementation of all the control functions. The audit team conducts
 regular internal audits, intimates the non-conformities found during
 such audits, ensures that necessary corrective and preventive actions
 are taken and furnishes necessary summary reports to the Senior
 Management.
 
 Your company has developed and implemented control systems for software
 development, for information security and for managerial functions.
 Policies, processes and procedures have been developed for each control
 system and these are placed in the companys network to ensure their
 availability to all the employees at all times.
 
 FIXED DEPOSITS
 
 Your company has not accepted any fixed deposits and, as such, no
 amount of principal or interest was outstanding as on the balance sheet
 date.
 
 DIRECTORS
 
 In accordance with Article 99 of the Articles of Association of the
 Company, Mr Chandramouly V, Mr Gajhanathan M, and Mr Srikanth P, retire
 by rotation and being eligible, offers themselves for reappointment.
 
 None of the Directors of your company is disqualified under Section 274
 (1)(g) of the Companies Act, 1956 . As required by law, this fact is
 reported in the Auditors Report.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 As required by the provisions of Section 217 (2AA) of the Companies
 Act, 1956, Directors Responsibility Statement is set out in the
 annexure included in this report.
 
 AUDITORS
 
 The auditors, M/s. Brahmayya & Co., Chartered Accountants, retire at
 the conclusion of the forthcoming Annual General Meeting and the
 company has received the requisite certificate pursuant to Section
 224(1 B) of the Companies Act, 1956 from them regarding their
 eligibility for reappointment as Auditors of the company and
 willingness to accept office, if re-appointed.
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 Pursuant to Clause 32 of the Listing Agreement with the Bombay Stock
 Exchange Limited, consolidated financial Statements have been prepared
 in accordance with the requirements of Accounting Standard 21 on
 Consolidated Financial Statements  issued by the Institute of
 Chartered Accountants of India. The audited consolidated financial
 statement form part of this Annual Report.
 
 ACKNOWLEDGMENTS
 
 Your directors profusely thank the clients, vendors, investors and
 bankers for their continued support of your companys growth. Your
 directors place on record their immense appreciation of the
 contribution made by every employee at all levels, who, through their
 commitment, competence, hard work, solidarity, cooperation and support,
 have enabled the company to achieve this growth. Your directors
 sincerely thank the Government of India, particularly the Department of
 Electronics, the Customs and Excise Departments, Software Technology
 Parks - Chennai, the Ministry of Commerce, the Reserve Bank of India,
 the Department of Telecommunications, the state governments, and other
 government agencies for their support during the year, and look forward
 to their continued support in the future.
 
 Place: Chennai                          For and on behalf of the Board
 Date : May 15, 2008                          SUDARSHAN VENKATRAMAN
                                                  Chairman & CEO