To the Members of Zylog Systems Limited

REPORT ON THE STANDALONE FINANCIAL STATEMENTS

We have audited the accompanying financial statements of Zylog Systems Limited (the Company) which comprise the Balance sheet as at 31^st March 2016, the Statement of Profit and Loss and the Cash flow Statement for the year then ended and a summary of the significant accounting policies and other explanatory information.

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The Company’s Board of directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (‘the Act’) with respect to the preparation of these standalone financial statements to give a true and fair view of the financial position, financial performance and cash flows of the company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules 2014 and Accounting standard 30,financial instruments: Recognition and Measurement issued by the Institute of Chartered Accountants of India to the extent it does not contradict any other Accounting standard referred to in section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the Assets of the company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design and implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuing the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We have taken into account the provision of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the rules made there under.

We conducted our audit in accordance with the standards on Auditing specified under section 143(10) of the Act and authoritative pronouncements issued by the Institute of Chartered Accountants of India. Those standards and pronouncements require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditors’ judgment including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the company’s preparation and fair presentation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion whether the company has in place an adequate internal financial control system over financial supporting and the operative effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1.As required by the Companies (Auditor’s Report ) Order,2015 (“ the order”) Issued by the Central government of India in terms of Sub Section(11) of section 143 of the Act, and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of Order

2.As required by Section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit

b) In our opinion , proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books

c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account

d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards notified in section 133 of the Companies Act 2013 read with Rule 7 of the Companies (Accounts) Rules 2014. And Accounting Standard 30 financial Instruments: Recognition and Measurement issued by the Institute of Chartered Accountants of India to the extent that does not contradict any other accounting standard referred to in sec 133 of the Act read with Rule 7 of the Companies (Accounts) Rules 2014 except in respect of non provision of gratuity and interest relating to all borrowings.

e) On the basis of written representations received from the directors as at 31st March 2016 and taken on record by the Board of Directors, none of the Directors are disqualified as at 31st March 2016 from being appointed as a director in terms of Section 164 (2) of the Act.

f) Certain receivables/ advances/ other assets/ current liabilities/ payables have been written off/written back of Rs. 624.61 cr (Net) during the year of which Rs. 503.85 Crs pertains to closure of a branch in the US transferred to reserves. Of this, Rs. 548.43 cr relates to the six months period ended 30th September 2015 and the balance as found during the detailed audit as non recoverable, relating to the period under the erstwhile management and reported in the accounts as on that date. In view of the large sums that were written off/written back by the erstwhile management, the Administrator of the Company has initiated steps to obtain information from the erstwhile Chairman and the erstwhile Managing Director for necessary action.

g) It is learnt that the company is in dialogue with all the lenders to work out a reschedulement plan seeking waiver of interest and other charges together with reduced principal amounts as may become feasible for servicing by the company when it is rebuilt under settlement.

h) With respect to other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014 in our opinion and to the best of our knowledge and belief and according to the information and explanation given to us

i) The company has disclosed the impact of pending litigations as at 31st March 2016 on its financial position in its standalone financial statement.

ii) The company has not transferred any amounts, required to be transferred, to the Investor Education and Protection Fund by the company during the year ended 31st March 2016.

iii) The company has not complied sec 205 A of the Companies Act, 1956 in respect of unpaid dividend for the financial year 2011-12 of Rs.14,07,45,894 and this sum has still not been deposited in any scheduled bank as mentioned in the notes to accounts.

iv) Statutory dues of TDS, PF, ESI, Professional Tax, VAT, Service Tax amounts to Rs. 18.81 crs and remain unpaid.

v) In addition, the company has a contingent liability of Rs. 272.52 crs relating to Income Tax, VAT, Service Tax and Sales Tax.

OTHER MATTERS

We did not audit the financial statements of the branch in USA which constitute total assets of Rs. 38.66 crs as at 31st March 2016, total revenue of Rs.107.09 crs, net loss of Rs.4.48 crs for the year ended. These financial statements and other financial information have not been audited by us and we relied upon the financial statements furnished to us and our opinion on the combined financial statements to the extent is based on the Financial Statements given to us for the overseas branch.

OPINION

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India.

a) in the Case of the Balance Sheet of the State of affairs as at 31st March 2016.

b) in the case of the Statement of Profit and Loss of the Loss of the company for the year ended on that date and

c) in the case of the Cash flow statement of the cash flows of the company for the year ended on that date.

ANNEXURE TO THE INDEPENDENT AUDITOR’S REPORT

Referred to in paragraph I under the heading of ‘report on other Legal and Regulatory requirements’ of our report of even dated to the Members of Zylog Systems Limited on statements as of and for the year ended 31st March 2016

1. In respect of its fixed assets,

a) The company has maintained proper records showing full particulars including quantitative details and situation of fixed assets on the basis of available information.

b) As explained to us, all the fixed assets have been physically verified by the management in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its assets. No material discrepancies were noticed on such physical verification.

c) In our opinion, the company has not disposed off a substantial part of the fixed assets during the year and the going concern status of the company is not affected.

2. The company is a software development company and hence this clause is not applicable to this company.

3. According to the information and explanations given to us, the company has not granted any loans secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act, 2013. Accordingly, the provisions of Clause 3(iii) (a) and (b) of the order are not applicable to the company and hence not commented upon.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the company and the nature of its business for the purchase of fixed assets and for sale of services. During the course of our audit, we have not observed any major weakness in such internal control system.

5. According to the information and explanations given to us, the Company has not accepted any deposit from the public. Therefore, the provisions of Clause (v) of the Order are not applicable to the Company and hence not commented upon.

6. According to the information and explanations given to us, the Central Government has not prescribed cost records for the products manufactured by this company and hence the provisions of clause (vi) of the order are not applicable to the Company and hence not commented upon.

7. In respect of statutory dues:

a) According to the records of the Company, the company generally not depositing undisputed statutory dues including Provident Fund, Investor Education and protection Funds, Employees’ State Insurance, TDS, Sales Tax, Service Tax, and other statutory dues with the appropriate authorities.

b) According to the information and explanations given to us, undisputed amounts payable of Rs. 18.88 crs in respect of the aforesaid dues were outstanding as at March 31, 2016. Further the company also not depositing tax deducted at source regularly with the appropriate authorities.

c) Details of Income tax, Sales tax and service tax which have not been paid / deposited as on 31^st March 2016 on account of disputes are given below.

d) There are no Amounts transferred to investor Education and Protection Fund in accordance with the provisions of the Act and rules made there under.

8. The Company has accumulated losses and at the end of the financial year 31st March 2016 it is Rs 883.92 crs.

9.Based on our audit procedures and according to the information and explanations given to us, we are of the opinion that the Company has defaulted in repayment of dues to financial institutions, banks and Private Financiers and the list is given here under.

Rs. in lakhs

10. According to the information and explanations given to us, the Company has not given guarantees for loans taken by others from banks and financial institutions.

11. The Company has not raised any term loan during the year. Hence the clause (xi) is not applicable to this company and hence not commented upon.

12. According to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the year except in the case of Dena Bank, a case has been filed by Central Bureau of Investigation for perpetrating Acts punishable under Indian Criminal Code. The loan amount involved in this case is Rs. 97.42 crs.

-s/d

T. R. Sarathy

Place: Chennai Chartered Accountant

Date: 30-Jun-2016 Membership No. 025982