Zylog Systems Ltd

To the members of Zylog Systems Limited,

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 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 (Auditors’ 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 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 auditor’s 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 balance sheet, of the state of the affairs of the Company as at March 31, 2009;

(ii) in the case of the 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 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(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 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 and 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 Employee’s 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.

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 reported during the year under audit.