To the Members,
 
 We are delighted to present the report on our business and operations
 for the year ended March 31, 2011.
 
 FINANCIAL RESULTS
 
                                      Rs. in lakhs except per share data
 
 Year ended March 31,               Standalone         Consolidated
  
                                  2011      2010       2011      2010
 
 Operating revenue            91,584.34  78,352.16  1,91,567.76 97,994.17
 
 Other Income                    240.11     439.40       491.88    459.92
 
 Operating Profit (PBDIT)     22,665.50  15,825.66    29,783.86 17,955.12
 
 Interest                      2,371.70   1,167.97     4,053.49  1,449.08
 
 Depreciation                  3,023.20   2,842.36     5,150.86  3,370.39
 
 Prior period adjustments          -        -             13.76     32.13
 
 Profit before tax (PBT)      17,270.60  11,815.33    20,565.74 13,103.52
 
 Taxes                         5.158.68   2,600.70     6,075.47  2,857.85
 
 Profit after tax (PAT)       12,111.93   9,214.63    14,490.27 10,245.68
 
 Less: Minority interest            -        -                     153.54
 
 Less: Share of profit of associate -        -            24.35     -
 
 Net Profit for the year      12,111.93   9,214.63    14,514.62 10,092.14
 
 Dividend recommended          1,315.71     986.79     1,315.71    986.79
 
 Dividend tax                    218.53     167.70       218.53    167.70
 
 Transferred to general 
 reserve                       1,500.00   1,000.00     1,500.00  1,000.00
 
 Balance carried forward to 
 balance sheet                39,077.37  29,999.68    42,411.89 30,931.50
 
 Paid up capital               1,644.64   1,644.64     1,644.64  1,644.64
 
 Reserves & Surplus           65,639.67  55,061.98    69,268.91 55,886.27
 
 Net Worth                    67,284.31  56,706.63    70,913.55 57,876.07
 
 Earnings per Share               73.64      56.03        88.25     62.30
 
 RESULTS OF OPERATION
 
 During FY 2010-11, the company posted an excellent financial
 performance, both at the standalone and consolidated level. The
 prospects for the company have improved immeasurably in spite of
 challenging global economic climate. The full effect of the two
 acquisitions, namely Brainhunter Inc, Canada and Matrix Primus Partners
 Inc, USA during the tail end of the previous financial year was fully
 brought out in the consolidated numbers, as total income almost doubled
 from Rs 979.94 crores in the previous year to Rs 1915.6)8 crores in the
 year ended March 2011. Net Profit at the consolidated level has
 galloped at the rate of 44% from Rs 100.92
 
 crores in the previous year to Rs 145.15 crores. Total Revenue for
 Zylog Systems Limited was Rs 915.84 crores as against Rs 783.52 crores
 in the previous year, representing a growth of 17%.
 
 At standalone level, our profit after tax amounted to Rs 121.12 crores
 (13.22% of revenue) as against Rs 92.15 crores (11.76% of revenue),
 thus representing an increase of 31.44% over the previous year. On
 consolidated basis, our profit after tax amounted to Rs 145.15 crores
 (7.58% of revenue) as against Rs 100.92 crores (10.29% of revenue).The
 net worth of the company has increased to Rs 672.84 crores from Rs
 567.07 crores whereas the group net worth has increased to Rs 709.14
 crores from Rs 578.76 crores.The EPS has improved to Rs 73.64 (Rs 56.03
 PY) for standalone and Rs 88.25 (Rs 62.30 PY) for the group.
 
 The Company continues to be a 100% Export Oriented Unit (EOU)
 registered with the Software Technology Parks of India (STPI).The
 Company also proposes to take up an office space at Siruseri, SIPCOT,
 Chennai (a SEZ Unit) for its operation.The Company was enjoying tax
 holiday for its export earnings under Section 10B of the Income tax
 1961 till the financial year 2010-11 by virtue of being 100% EOU
 registered with STPI. However the unit proposed to be set up in SEZ may
 get its tax benefits as applicable. Funds raised during the IPO of the
 company has been fully utilized towards the objects of the issue as per
 the prospectus dated July 31st ,2007.
 
 SUBSIDIARIES
 
 As per Section 212 of the Companies Act, 1956, we are required to
 attach the Directors'' report, Balance Sheet, and Profit and Loss
 account of our subsidiaries. The Ministry of Corporate Affairs,
 Government of India vide its circular no.2/2011 dated February 8, 2011
 has provided an exemption to Companies from complying with Section 212,
 provided such companies publish the audited consolidated financial
 statements in the Annual Report. Accordingly, the Annual Report 2010-11
 does not contain the financial statements of our subsidiaries.  The
 audited annual accounts and related information of our subsidiaries,
 where applicable, will be made available upon request. These documents
 will also be available for inspection during business hours at our
 registered office in Chennai, India.
 
 The Company has eight subsidiaries. A brief description of the
 performance of subsidiaries is given below:
 
 - VishwaVikas Services Limited
 
 Vishwa Vikas Services Limited has generated revenue of Rs 322.67 lakhs
 (PY Rs 254.74 lakhs) with a net profit of Rs 25.04 lakhs (PY Rs 20.03
 lakhs).
 
 - Zylog Systems (Europe) Limited
 
 Zylog Systems (Europe) Limited has recorded revenue of Rs 5,134.36
 lakhs (PY Rs 4,115.45 lakhs) with a net profit of Rs 477.73 lakhs (PY
 Rs 169.36 lakhs). During the year an investment of Rs 29, 09,672 was
 made as Share capital of the Subsidiary.
 
 - Zylog Systems (India) Limited
 
 Zylog Systems (India) Limited has achieved revenue of Rs 4,560.86 lakhs
 (PY  1,163.35 lakhs) with a net profit of Rs 322.19 lakhs (PY Rs 39.92
 lakhs).  During the year the paid up share capital of Zylog Systems
 (India) Limited was increased by Rs 3,140 lakhs and the authorized
 share capital was increased to Rs 500 Llkhs.
 
 - Zylog Systems Asia Pacific Pte Limited
 
 Zylog Systems Asia Pacific Pte Limited has generated revenue of Rs
 1,218.04 lakhs (PY Rs 884.84 lakhs) with a net profit of Rs 94.25 lakhs
 (PY Rs 79.98 lakhs).
 
 - Zylog BV Limited
 
 Zylog BV Limited has generated revenue of Rs 6,665.22 lakhs (PY Rs
 2,578.50 lakhs) with a net profit of Rs 133.28 lakhs (PY Rs 418.74
 lakhs).
 
 - Matrix Primus Partners Inc, USA
 
 Matrix Primus Partners Inc, USA has recorded revenue of Rs 9,123.39
 lakhs (PY Rs 810.06 lakhs) with a net profit of Rs 133.28 lakhs (PY Rs
 93.18 lakhs).
 
 - Algorithm Solutions Private Limited
 
 Algorithm Solutions Private Limited has recorded revenue of Rs 558.84
 lakhs (PY Rs 0.06 lakhs) with a net profit of Rs 18.97 lakhs (PY net
 loss Rs 0.04 lakhs).
 
 - Zylog Systems (Canada) Limited
 
 Zylog Systems (Canada) Limited has generated revenue of Rs 76,481.44
 lakhs (PY Rs 10,325.81 lakhs) with a net profit of Rs 236.73 lakhs (PY
 Rs 184.44 lakhs).
 
 The statement of subsidiaries under Section 212 (l)(e) has been
 attached as Annexure to the Directors'' Report.
 
 SHARE CAPITAL
 
 At the end of the financial year the Company''s Equity Share Capital
 stands at Rs. 1,644.64 Lakhs consisting of 16446420 Equity Shares ofRs.
 10/- each.
 
 DIVIDEND
 
 Your Directors recommend a dividend of 80% i.e. Rs 8 per Equity Share
 for the year ended March 31,2011 on 1,64,46,420 fully paid up Equity
 Shares of Rs 10 each (PY Rs 6 per share on 1,64,46,420). If the
 recommended Dividend is approved by the Members at the forthcoming
 Annual General Meeting, the Dividend including the Dividend Tax will
 absorb Rs 15.34 crores (Rs 11.54 croresPY).
 
 TRANSFER TO RESERVES
 
 Your Directors propose to transfer a sum of Rs 15 crores to General
 Reserves (Rs 10 crores PY) out of the amount available for
 appropriation and a sum of Rs 390.77 crores (Rs 299.99 crores PY) is
 carried forward in the profit and loss account for standalone and a sum
 of Rs 424.12 crores (Rs 309.32 crores PY) at the group level.
 
 STRATEGIC INVESTMENTS & ACQUISITIONS
 
 One of the largest acquisitions of the Company during the previous year
 was M/s. Brainhunter Inc, Canada.The benefits that were envisaged
 include access to new clients, new geographical areas and new service
 and product offerings. This company was endowed with a superb client
 base to which Zylog could market and sell its own products and
 solutions. The other main plus point of the acquisition was that Canada
 represented a stable and prosperous economy into which any business
 that had a significant presence in the US like Zylog would want to add
 its own footprint in Canada as a natural extension of its operations.
 Integration of Brainhunter indeed had its own challenges which have
 been successfully overcome, as the synergy of leveraging
 
 Zylog''s top management, business development, marketing and other
 operational expertise has been fully put into practice. The
 ''Brainhunter'' business that was acquired was purely an asset purchase
 and not an equity purchase. This purchase was through our wholly owned
 subsidiary, Zylog Systems (Canada) Limited. The business is now
 recognized under the name of Zylog Systems (Canada) Limited. Once the
 Company completely leverages Brainhunter''s customer base to cross-sell
 its own products and services, the benefits will accrue in subsequent
 periods.This is entirely in line with Zylog''s strategic vision that
 seeks out target companies for acquisition which have substantial
 untapped potential in their business prospects or have some
 operational, financial or geographical constraints. During the year,
 Zylog Systems (Canada) Limited has acquired 100% of the share capital
 of Mindwire Inc. for a net consideration amounting to Rs 5,83,68,125.
 This was an operational decision implemented to facilitate the running
 of Business with Government Departments which contribute 30% of total
 revenues of the subsidiary.  Mindwire was a locally registered Canadian
 company which had an excellent track record in conducting business with
 Government Departments in Canada.  One other acquisition during the
 previous year, M/s Matrix Primus Partners Inc., USA has also performed
 well contributing revenue of Rs. 91.23 cr with a net profit of Rs.
 10.95 cr.
 
 Your company has been doing well in various acquisitions from previous
 financial years and has successfully integrated the acquired products,
 solutions and services into its suite of offerings. These acquisitions
 have helped the Company to penetrate the market deeper and cross-sell
 its newly-acquired offerings to complementary markets, thus enlarging
 its reach. Your Company continues to look out for suitable acquisitions
 that shall be a leading edge in business and has potential to yield
 substantial business benefits. Acquiring a company in a niche space
 will have its own attractions amongst existing offerings. Also,
 building up economies of scale in our product and service capabilities
 proves to be a very important strategy as we target larger size
 contracts with premier companies and governments around the world.
 
 CORPORATE GOVERNANCE
 
 Your Directors benchmark its corporate governance policies with the
 best in the world. Your directors have reiterated your company''s
 philosophy on corporate governance. The increasing diversity of the
 investing community and the integrated nature of global capital markets
 render corporate governance a vital issue for investors. A separate
 section on Corporate Governance forming part of the Directors Report
 and the certificate from the Companys auditors confirming compliance of
 Corporate Governance norms as stipulated in Clause 49 of the Listing
 Agreement with National Stock Exchange of India (NSE) and Bombay Stock
 Exchange of India (BSE) is included in the Annual Report.
 
 MANAGEMENT DISCUSSION AND ANALYSIS
 
 Pursuant to clause 49 of the Listing Agreement with the Stock
 Exchanges, we 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 we 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 Sub-section (l)(e) of Section 217
 of the Companies Act, 1956, read with the Companies (Disclosure of
 particulars in the report of the Board of Directors) Rules, 1988, are
 provided in the Annexure 2 to the directors'' report section.
 
 PARTICULARS OF EMPLOYEES
 
 In terms of the provisions of Section 217(2A) of the Companies Act,
 1956, read with the Companies
 
 (Particulars of Employees) Rules, 1975, the names and other particulars
 of employees are set out in the Annexure to the directors'' report.
 However, having regard to the provisions of Sec 219 (l)(b)(iv) of the
 Companies Act, 1956, the Annual Report excluding the aforesaid
 information is being sent to all the members of the Company and others
 entitled thereto. Any member interested in obtaining such particulars
 may write to the Company Secretary at the registered office of the
 Company.
 
 ADVISORY COMMITTEE
 
 The Advisory Committee of the Company is headed by Mr.S. Rajagopal, who
 is also an Independent Director of the Company and comprises of eminent
 persons viz., Mr.  Ratnakar Hegde, former Executive Director of Union
 Bank of India, Mr.T.Valliappan, Director, Oriental Bank of Commerce
 Ltd. and Mr.Nanjappa, former Executive Director, Reserve Bank of India.
 The Advisory Committee met 4 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 9001:2008 qualities certified Company and are being
 assessed for CMMI Level 4.Your company continuously leverages cutting
 edge tools, methodologies and benchmark standards to exceed the
 expectations of our customers. We, 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.
 
 We have 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 company''s network to ensure their
 availability to all the employees at all times.
 
 AWARDS AND RECOGNITION
 
 In 2010-11, awards and recognition marked our accomplishments in
 various fields.
 
 - Won NJTC''s Mid-Atlantic Innovation Award for its Knowledge Management
 & Collaboration Solution.
 
 - Recognized on the Everything Channel CRN Fast Growth 100 List. The
 ranking is based on two years'' growth of net sales and the Company is
 winning this award 4 years in row.
 
 - Earned a Spot on 2010 InformationWeek 500 List ofTop Technology
 Innovators Across America for the Business Technology Innovation
 Leadership.
 
 - Named as one of the 30 Cloud VARs That Get It by Everything
 Channel''s CRN Magazine
 
 - ZSL Inc. was honored with the prestigious Judges Award for its Wound
 Care Mobile Assistant, an app that replaces the manual process of
 taking measurements of wounds and lesions and updating the patient
 record. NJTC also recognized the company''s SmartPrise BI Mobile app,
 which brings enterprise business analytics to a mobile environment.
 
 - The Company''s Enterprise Mobile Applications Suite won Mobile
 Innovation Award from Research In Motion (RIM) and NJTC.
 
 FIXED DEPOSITS
 
 We have not accepted any fixed deposits and, as such, no amount of
 principal or interest was outstanding as of the Balance Sheet date.
 
 DIRECTORS
 
 In accordance with Article 99 of the Articles of Association, Mr. M.
 Gajhanathan, Director is liable to retire by rotation at the ensuing
 Annual General Meeting and being eligible offers for reappointment as
 Director.
 
 The Board inducted Mr.V. K. Ramani into the Board of Directors. We seek
 your support in confirming his appointment as director liable to retire
 by rotation.
 
 Mr. A.V. Raj wade has resigned as a Member of the Board and the Board
 of Directors considered and accepted his resignation with effect from
 03rd August 2010 .We place on record our deep sense of appreciation for
 the services rendered by Mr. A.V. Rajwade as a Board member.
 
 Mr.V. Chandramouly has resigned as a Member of the Board and the Board
 of Directors considered and accepted his resignation with effect from
 31.03.2011.We place on record our deep sense of appreciation for the
 services rendered by Mr.V. Chandramouly as a Board member.
 
 DIRECTORS''RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 217 (2AA)
 OF THE COMPANIES ACT, 1956
 
 Pursuant to Section 217(2AA) of the Companies Act, 2000, the Directors
 confirm that:
 
 (i) they accept responsibility for the integrity and objectivity of
 these accounting statements;
 
 (ii) the financial statements are prepared in accordance with the
 guidelines and standards of the ICAI and Companies Act 1956, to the
 extent applicable.  There are no material departures from the above-
 mentioned standards;
 
 (iii) such standard accounting policies have been applied consistently,
 except as otherwise stated;
 
 (iv) the judgments and estimates have been made on a reasonable and
 prudent basis so that the financial statements provide a true and fair
 view of the state of affairs of the Company at the end of the financial
 year;
 
 (v) the directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of this Act for safeguarding the assets of the Company and
 for preventing and detecting fraud and other irregularities;
 
 (vi) the Annual Accounts are prepared on a going concern basis and on
 an accrual basis.
 
 AUDITORS
 
 M/s Brahmayya & Co., Chartered Accountants, Chennai retire as the
 Auditors of the Company at the conclusion of the ensuing Annual General
 Meeting and being eligible pursuant to Section 224 (IB) of the
 Companies Act, 1956, have expressed willingness to accept office, if
 re-appointed .The Audit Committee in their meeting held on May 27,2011
 has recommended the re-appointment of M/s Brahmayya & Co., Chartered
 Accountants, Chennai.
 
 HUMAN RESOURCES
 
 As this is a people business, employees are vital and most valuable
 assets possessed by the company. Your company continues to attract
 highly talented individuals possessing skill sets with an ''x'' factor.
 Your company rightly appeals to young, qualified people who want to
 make a difference in their contribution and be at the forefront of
 change which is very much the hallmark that we pursue to the highest
 degree, as we cross several pioneering frontiers in our pursuit of
 perfection.  Employee strength was 4302 at the end of the year compared
 to 3394 last fiscal and continues to be on an upward trend, given the
 challenges we have set ourselves. The effective and optimal utilisation
 of precious onsite and offshore staff resources remains one of the key
 near term objectives, going forward.
 
 ENVIRONMENTAL AWARENESS
 
 Go Green initiatives to conserve resources has been initiated in the
 Company. Steps required for conserving power across all delivery
 centres are being undertaken.  The Company has also taken initiatives
 within its office buildings to reduce electrical power, water and paper
 consumption.These initiatives shall be taken forward at a sustained
 pace.
 
 ACKNOWLEDGEMENTS
 
 Your directors profusely thank the clients, vendors, investors and
 bankers for their continued support of Company''s growth.Your directors
 place on record their immense appreciation of the contribution made by
 every employee at all levels, who through their commitment, competency,
 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 Park - Chennai, the Ministry of
 Commerce, Reserve Bank of India, Department of Telecommunications,
 State Government and other Government agencies for their support during
 the year, and look forward to their continued support in the future.
 
 For and on behalf of the Board of Directors 
 of Zylog Systems Limited
 
 Sudarshan Venkatraman
 
 Chairman & CEO
 
 Ramanujam Sesharathnam
 Managing Director & COO
 
 Place : Chennai
 Date  : 27th May 2011