ANNUAL REPORT

Transcription

1 ANNUAL REPORT

2 The many vignettes of entertainment Multiple genres, multiple languages and multiple preferences in the field of Media and Entertainment present UTV with a singular purpose to satisfy the diverse palettes of audiences all over the world. UTV is a leading integrated media and entertainment company with focus on content creation and distribution for all small screen, big screen and new media platforms. The company s core competence is further augmented by multi-language dubbing, state-of-the-art postproduction, hi-tech VFx capabilities. This multi-pronged presence across the entertainment value chain has enabled the company to touch millions of viewers through content that is high on creativity, finesse and professionalism. Over almost two decades of existence, UTV has emerged as a creative and innovative pioneer that has redefined paradigms in the industry. And continuing in the same streak, the company is at the growth turnpike to regale audiences with its varied vignette of offerings. CONTENTS Mission 1 The year that was 2 Business overview 4 Chairman s statement 14 Financials 17

3 MISSION To be pioneers, innovators and leaders in content creation -for the big and smaller screens across multiple platformsby leveraging our core strenghts in cutting edge creativity, executional finesse, marketing and distribution prowess and audience insight; and creating wealth by owning intellectual property with a lifetime of revenue potential - keeping in mind at all times that the entire WORLD IS OUR MARKETPLACE.

4 THE YEAR THAT WAS Rang De Basanti, the second highest box office grosser of the decade, has redefined the norms of form and content in the Indian film industry. UTV in its Airtime Sales business currently markets 24 hours of programming per week as against 4 hours a week in the beginning of fiscal Hungama TV has firmly established itself as one of the leading players in the 4-14 age segment. Doraemon and Hero are among the top rated shows across the 7-channel kids space. Hungama TV entered into business arrangements with Astro, Malaysia to launch two kids channels in Indonesia and Malaysia. (The channel in Indonesia was launched on16th April 2006). Significant investments were made in the Animation business to ramp up capacity to a 250-seater facility. Awards for the year include : Gol Gol Gulam - Best Children s Programme, Asian TV Awards 2005 in Singapore Special Squad - Best Thriller Award, Indian Television Academy Awards 2005 Sanya - Best Live Action Opening Sequence, Asia Image Apollo Awards 2006 in Singapore. DISTRIBUTION OF REVENUE REVENUE Rs. in million Television segment includes TV content production, airtime sales, animation and dubbing. Motion Pictures segment includes production, distribution, home entertainment and international Movies business Allied services include post production, VFX and other services 2

5

6 BUSINESS AT A GLANCE MOTION PICTURES PRODUCTION DISTRIBUTION HOME ENTERTAINMENT INTERNATIONAL TELEVISION CONTENT PRODUCTION AIRTIME SALES 4

7 ANIMATION PRODUCTION SERVICES BROADCASTING HUNGAMA TV ALLIED SERVICES POST PRODUCTION VFX DUBBING 5

8 Rang De Basanti Jan 2006 Parineeta Jun 2005 Bluff Master Dec Myth Feb 2005

9 BREAKING NEW GROUND IN MOTION PICTURES Unleashed Sep 2005 UTV lends a new perspective to film making - reflecting best the coming together of creativity and commerce - by being a creative catalyst. It has set new benchmarks in the industry by pioneering the studio model in India and being the only Indian company co-producing Hollywood mainline movies. Following in the same groundbreaking vein is Rang De Basanti - a film that has revolutionised movie-making in India. UTV had a landmark year with impressive hits both in the Motion Picture Production and Distribution segments. Deewane Hue Pagal Nov 2005 In less than five years span, UTV has created unique synergies in the Motion Picture space translating into strong all-india and growing worldwide distribution capabilities. Bluffmaster, Taxi , Parineeta and Kya Kool Hain Hum were a few blockbusters distributed during the year. UTV is also a leading distributor of Indian films worldwide and owns a huge library of foreign films for domestic markets for all distribution platforms. D May 2005 UTV Home Entertainment, the Company s DVD label was launched in the domestic markets during the year with Swades as its first release. Rang De Basanti, Parineeta, Bluffmaster, Taxi , Viruddh, etc. were released in the international markets. FILM PRODUCTION D MAIN MERI PATNI AUR WOH RANG DE BASANTI FILM DISTRIBUTION BLUFFMASTER DEEWANE HUE PAGAL KYA KOOL HAIN HUM MUGHAL-E-AZAM (COLOUR) PARINEETA SHAADI NO. 1 TAXI THE MYTH UNLEASHED VIRUDDH MOTION PICTURES 7

10 Shanno Ki Shaadi Star Plus Kabhi Toh Nazar Milao Star Plus Bambay Talking Zee Cafe Hero Hungama TV Bhabhi Star Plus 8 Sanya Hungama TV

11 CREATING MULTI-FACETED COMPETENCE ON TELEVISION Over a period of 15 years, UTV has emerged as one of the largest television content houses in India leveraging its long standing relationships in the industry and its creative capabilities. The Company has demonstrated multi-genre, multi-lingual and multi-channel competence in content creation and marketing. During the year, UTV produced programmes for channels like Star Plus, Star One, Sony Entertainment Television, Zee TV, Zee Café, BBC World, Doordarshan and Hungama TV. In the Airtime Sales business, UTV acts as a quasi-broadcaster primarily on a leading South Indian Network. The Company markets airtime across 4 major languages - Tamil, Telugu, Malayalam and Kanada. It currently markets around 24 hours of programming per week. CONTENT PRODUCTION BHABHI BOLLYWOOD INC. BOMBAY TALKING GOL GOL GHULAM HERO KABHI TOH NAZAR MILAO MEHER ROOH SANYA SHANNO KI SHAADI SHARARAT SPECIAL SQUAD AIRTIME SALES ALI RAJJYAM AVALRAKTHA RAKSHASHU BANGARAM BETTAI BANGARUNIKOSAM CHI LA SOW SRAVANTHI DANCE RAJU DANCE KOLANGAL MUHURTHAM SELVANGAL SHRI LAKSHMINIVASAM SWARNA MAZHA THANGA VATTAI TELEVISION 9

12 MICA Freej Jay Freej Honk Toot Kong 10

13 Jay DEVELOPING CORE COMPETENCE AND SCALE IN ANIMATION UTV has invested significantly in expanding its animation facility in order to scale up operations in this business area. This expanded and enhanced 250 seater facility is state-of-the-art and is equipped to create world-class content in animation. The Company is pursuing production for domestic as well as international markets in theatrical and DVD feature films as well as in television series. The Company will continue to service high-end outsourcing requirements of its international clients which is a stable revenue and margin business. DR. DISASTER FREEJ HONK TOOT JO KILAT KONG - THE NEXT GENERATION OLIVER TWIST SARA THE ADVENTURES OF TOAD PATROL ANIMATION 11

14 John Aur Kaun - a talent hunt offering a role with the star, Rs 5 lakh reward and a contract with UTV. ESTABLISHING GENERAL ENTERTAINMENT SPACE FOR KIDS Over kids participated in this mini marathon for kids in Mumbai and Delhi Hungama TV has firmly established itself as one of the leading players in the 4-14 age group broadcasting space. It is the only home-grown kids channel in South Asia and is successfully competing with renowned foreign networks in this space. Its portfolio includes some of the top rated shows like Hero (live-action), Doraemon (animation), etc. Hungama TV now has the popular film star John Abraham as its brand ambassador. Doraemon - the highest rated show across all kids channels HUNGAMA TV COMPETITION COMPARISON TAM Media Research HSM CS ABC 4-14 wk GRP s March 06 April 06 May 06 Month June 06 A mobile initiative to reach out to kids and communicate Hot n Happening shows on Hungama 12 Cartoon Network Disney Channel POGO Toon Disney Hungama TV Nickelodeon HUNGAMA TV DORAEMON FIREMAN SAM FULL TOSS GOL GOL GHULAM HERO JAY JAY THE JET PLANE PORORO SANYA YU-GI-OH BROADCASTING

15 SHARPENING SKILLS FOR CUTTING-EDGE EFFECTS UTV has moved across the value chain with forays into post production and visual effects making. The Company has made significant investments in expanding its post production, digital intermediary and visual effects services. UTV was nominated in the Best Visual Effects in Ad Commercials category for the Apollo Asia Image Awards 2005, Singapore. POST PRODUCTION AD FILMS EVENTS FEATURE FILMS MUSIC VIDEOS TELEVISION VFX COMPOSITING DIGITAL INTERMEDIATE EFFECTS GRAPHICS OTHERS MEDIA LIBRARY MANAGEMENT TRANSFERS ALLIED SERVICES 13

16 CHAIRMAN S STATEMENT Sarfaroshi ki tamanna Ab hamaare dil main hai. These are the words that inspired a nation and created one of the biggest Motion Picture hits of the decade. Rang De Basanti epitomizes the UTV brand in so many ways - unconventional, breaking the mould and that it takes a bold few to make a paradigm shift in the way we think. Rang De Basanti is a superb mix of content meeting commerce. It pushed the envelope in story telling, marketing innovation and affected the lives of ordinary people in extra ordinary ways. Rang De inspired the youth of India to realize the power of an individual voice, to realize that each of us can make a difference belongs to Rang De Basanti. More than ever Rang De Basanti underscores our belief that great Content is the core of any media business. At UTV, Content drives everything. It drives the success of our 20-monthold kids channel Hungama TV. It drives our Movie Productions in India and around the world. It drives our Animation business as we strive to create animation content for the global market. It drives our TV Content business as we conceptualize and create winning and high ratings shows for broadcasters. It is with great pleasure that we welcome a strategic investor. If there is ever a brand in the world that demonstrates that Content is King and great content makes a great company, it is The Walt Disney Company. As this investment consummates over the next few months, post regulatory approvals I am positive that your Company will enter a new phase of growth and strengthen its Multi Revenue Integrated model by exploring synergies in Animation, Movies and TV Content with Disney. HIGHLIGHTS OF FY Television : Over 16 years, we have demonstrated stability in a business known for its ups and downs. While we continue to create winning Content for multiple broadcasters in the widest of genres our Airtime Sales business in the South of India has gone up 5 times. Animation : For the first time, we built a significant order book for work spanning from TV Content to films made for Home Video. On the back of this we invested into a state-of-the-art 3-D facility bringing it to a 250 seater and we are poised to grow as we diversify this business from service work to creating original Content for TV as well as feature films. We will build on our synergies with Disney to create an even more robust animation model with huge potential for backend revenues from merchandising and licensing. Broadcasting : Many were skeptical of us starting a kids channel against deep pocket global media companies and in a niche segment. However, with our core competence in high TRP local Content and keen understanding of the kids space, we made Hungama TV into the #2 kids channel in just 20 months. While we move to exit this asset and help Disney integrate it into their bouquet I believe we have created true shareholder value through our creation of Hungama TV. We hope to continue to be a favored programme supplier to Hungama TV and the Disney family. Movies : This year UTV was the second largest contributor to the Hindi movie box office and ancillary rights. We distributed worldwide widely acclaimed films like Parineeta, Bluff Master and Taxi and ended the year with one of the biggest blockbusters and highest grossers of all time Rang De Basanti - which till date spurs Indians to light a candle to show their solidarity. However, we had two dud releases in the third quarter of the year that created a significant dent on the Company s bottom line. Overall though, this has been a constructive year for us, having matured our worldwide distribution model as also our Home Video Division. We have also worked to build a stable and long-term slate of movies that will show 14

17 UTV Software Communications Ltd. up in your Company s revenue from the fourth quarter of fiscal 2007 but will firmly establish our Studio model during with a strong slate of multiple releases every quarter. Financial Results : We recorded a healthy growth in our top line. On our profitability we had a serious setback in the third quarter of this fiscal due to our two movies under distribution that turned out to be duds at the Box Office. Were it not for that, your Company would have shown an upward trend at profitability levels too. Your Company continues to grow its international operations and increase the mix of global revenues. This year we poised good results in our overseas subsidiaries partly due to the focused growth of our movies distribution worldwide and partly due to our successful syndication of our acquired libraries of Hollywood movies. OVERVIEW Brand UTV : This year has seen UTV s brand grow in reach, recognition and respect for multiple reasons - Our business model took us up the value chain in Broadcasting and Movies putting the brand in direct touch with the consumer. The success and impact of Rang De Basanti and the popularity of Hungama TV have contributed greatly. Worldwide Our brand is on our content in theatres, Home Video & TV. I believe, today, our brand also stands for being one of the best Catalysts for Creativity and one of the strongest combinations in the industry for bringing commerce & creativity together and that reflects the maturity at the top level of our management team. It s this that attracts the best talent in the country to associate with us in movies or TV and us with them. In a very fast changing world, especially in media & technology, we at UTV embrace a culture that thrives on change, as change shuns complacency, forces the organization to think out-of-the-box and push the envelope. We have many-a-times chosen the path less trodden and have found great success and sometimes have been lost but always-found new horizons, priceless learning for the future. Our BRAND represents our CULTURE and our CULTURE, our BRAND. India Shining : The Indian Media & Entertainment industry is clearly one of the brighter stars in the Indian galaxy while we as a country are moving towards Developed Nation status by Lets look at the shining elements in our sector. The Motion Picture industry has the propensity to double its base in the next 2-3 years. The key things going for it Domestic Theatrical revenues are close to doubling as ticket prices go up in multiplexes International revenues have also shown huge increase and will grow as those territories offer multiple exploitation platforms after theatrical is over. Home Video will become a very significant contributor to increased revenues as consumers choose to watch big screen content, more and more on the small screen and astute content creators will evaluate the rising multiple revenue streams and look to the model where the sum of the parts is larger than the whole. Almost every media major in the world is viewing India in their growth story going forward and so the right mix of equity, migration of best practices and business models, transfer of technology, focus to take Indian content global, and bringing scale to businesses will also make larger and stronger Indian corporations with a world view evolve. Broadcasting has grown from almost zero to a USD 4 billion industry in less than 12 years and now DTH coupled with Telecom companies resolving the last mile crisis will completely shake up the revenue model for the industry, hitherto mostly dependent on Advertising revenues and low declared subscription bases. The Direct to Customer and pay for Multiple Services will bring in new revenues and recast everyone s business model. Content is becoming more and more important and valuable as the streams of revenues grow and syndication income brings in more revenue than even the first cycle exploitation. In Television, it s time for content creators to hold on to their IPR and change the business model with broadcasters. In Movies, the Studio model, where all rights are retained and not sold is the model of the future and will create huge value for those who hold onto their rights, sometimes with short-term compromises for long-term gain. 15

18 The viewer, who for all these years got content literally free 150 cable channels for Rs 75; to Rs 50 for a movie ticket; to DVD at home pirated for the evening for Rs 20, is now changing and willing to and is being lured to pay for the content he consumes but with a superior model, service or product In DTH, in Home Video, in multiplexes, in mobile content and more the consumer has started to pay for what he consumes and all this will flow to the bottom line of those savvy corporations who create, aggregate content and hold onto their models. True wealth creation will come with this value generator and that s one of the main reasons your Company has focused its energies in content creation in all forms as well as building its own distribution platforms in order to retain the value and rights to its content. GOING FORWARD Focus Areas : For all the reasons I have stated above, your Company s focus will be on the most lucrative segment and the highest value creator Content Creation, coupled with establishing and strengthening distribution platforms for our content so that we remain at the highest end of the Value Chain; stay in direct touch with the end consumer and retain the rights in perpetuity for our content. Our Content will continue to include television, film, animation as well as new technology & interactive. Distribution platforms will include all forms that take content to our consumer at home or in a public place. Our focus will also be to grow our International revenues while strengthening our domestic base and I believe we are very well poised for this with our existing model and strong global relationships. Scale : Building scale and size will be one of your Company s key goals in the next 2-3 years. We see scale coming from - - Growing our international operations where we have taken the lead in Indian companies in areas like syndication of content as well as having the biggest lineup of co-productions with Hollywood majors. - Our End-to-end Movie Studio model demonstrating a slate plus scale and value creation and retention - Harnessing new technologies to our content strengths and creating partnerships. - Forging alliances and synergies with our global customers as also our strategic investor in all aspects of our business. Long-term value v/s Q on Q profitability : During the next six to eight quarters, your Company and its management team will be focused on building long-term value for UTV and its shareholders. Our eye and focus will be to build scale, to invest and build a global business, to take long-term calls on creating content and retaining its IPR when in conflict with Q on Q profits, to build a brand with the consumer that will accord a premium to the content coming out of UTV. And I believe there is no better time than NOW for your Company to do that as it is on the cusp of scaling up its own business model as the industry is on the cusp of some scalable opportunities as we embrace a strategic investor that is one of the biggest brands in Media & Entertainment in the world. IN CONCLUSION Our Mission Statement tells you clearly what s on the mind of our over 500 Strong UTV Team in three continents. That s what we need to kindle and that s what we need to stay focused on. Your Company faces as many challenges as it faces opportunities and I am proud to lead a team of seasoned professionals, with deep knowledge of the Media & Entertainment space and who share the passion, the drive and the culture that brand UTV represents. To them, to our customers and our partners I say Thank You for your continued support in the years ahead. Ronnie Screwvala 16

19 INDEX TO FINANCIALS UTV Software Communications Limited Corporate Information Director s Report Statement pursuant to Section 212 (8) Report on Corporate Governance Management Discussion and Analysis Consolidated Accounts Auditors Report Balance Sheet Profit and Loss Accounts Cash Flow Statement Schedules Notes to Accounts Standalone Accounts Auditors Report Balance Sheet Profit and Loss Accounts Cash Flow Statement Schedules Notes to Accounts Balance Sheet Abstract and Company s General Business Profile

20 CORPORATE INFORMATION Name of the Company : UTV Software Communications Limited Registration No. of the Company : Date of Incorporation : 22nd June, 1990 BANKERS : Standard Chartered Bank HDFC Bank Limited IDBI Bank Limited Citibank N.A. UTI Bank Limited Oriental Bank of Commerce BOARD OF DIRECTORS : Mr. Rohinton Screwvala Mr. Ronald D Mello Mrs. Zarina Mehta Mr. Deven Khote Mr. Ketan Dalal Mr. Rahul Shah Mr. Sanjaya Kulkarni Mr. Suketu Shah Mr. Darius Shroff COMPANY SECRETARY : Mohd. Sajid Ali AUDITORS : Price Waterhouse & Co., Chartered Accountants CMD & Chief Executive Officer Executive Director & Chief Operating Officer Executive Director Executive Director Independant Non-Executive Director Independant Non-Executive Director Independant Non-Executive Director Independant Non-Executive Director Independant Non-Executive Director REGISTERED OFFICE : Parijat House, 1076, Dr. E. Moses Road, Worli Naka, Mumbai Tel No Fax No investor@utvnet.com Website : REGISTRAR AND SHARE TRANSFER AGENT : Karvy Computer Share Private Limited 46, Avenue 4, Street No. 1, Banjara Hills, Hyderabad Tel No Fax no SUBSIDIARIES INFORMATION : Subsidiary Date of Incorporation Place of Incorporation Auditors United Entertainment Solutions Limited August 27, 1997 India Price Waterhouse & Co., Chartered Accountants UTV Communications (USA) LLC April 26, 2004 United States of America SKD Partners LLP Certified Public Accountants and Consultants UTV Communications (UK) Limited September 6, 2004 United Kingdom Nagle James Associates Limited Chartered Accountants & Registered Auditors UTV Communications (Mauritius) Limited October 4, 2004 Mauritius Morison Mauritius Public Accountants 18

21 DIRECTOR S REPORT UTV Software Communications Limited Dear Members, Your Directors take pleasure in presenting the 16th Annual Report together with the audited Balance Sheet and Profit and Loss Account on the operations of your Company for the financial year ended March 31, Financial Results : (Rs. in thousands) Financial Year COMPANY STAND ALONE Income Sales and Services 1,729,375 1,535,122 Other Income 41,746 1,771,121 25,030 1,560,152 Expenditure Direct Cost 1,505,937 1,137,110 Staff Cost 122, ,084 Other Expenses 76,432 1,705,357 82,718 1,320,912 Profit Before Interest, Depreciation and Tax 65, ,240 Less: Interest (net) 17,602 Profit Before Depreciation and Tax 65, ,638 Less : Depreciation 16,453 17,748 Profit Before Tax 49, ,890 Less: Provision for Taxation - Current (net of Mat credit utilisation) (Includes Wealth Tax Rs. Nil, (Previous Year Rs.42 ( 000))) 16,029 Prior Years Deferred 17,065 31,539 Fringe Benefit Tax 2,115 19,349 48,009 Profit after Tax 29, ,881 Balance Profit brought forward 447, ,240 Net Profit available for appropriation 477, ,121 Balance carried to Balance sheet 477, ,121 CONSOLIDATED Income Sales and Services 20,84,152 1,767,919 Other Income 47,866 2,132,018 36,278 1,804,197 Expenditure Direct Cost 1,695,084 1,264,766 Staff Cost 160, ,252 Other Expenses 113,149 1,968, ,694 1,519,712 Profit Before Interest, Depreciation and Tax 163, ,485 Less : Interest (net) 18,253 Profit Before Depreciation and Tax 163, ,232 Less : Depreciation (net) 47,365 52,778 Profit Before Tax and Exceptional Items 116, ,454 Add : Exceptional Items 50,603 - Profit Before Tax 167, ,454 Less : Provision for Taxation - Current (net of Mat credit utilisation) (Includes Wealth Tax Rs. 00 ( 000), (Previous Year Rs. 42 ( 000)) 4,023 16,795 - Prior Years Defferred 18,413 33,518 - Fringe Benefit Tax 2,211 24,816 50,754 Profit for the Year Before Minority Interest 142, ,700 Minority Interest 260 Profit After Minority Interest 142, ,440 Balance Profit brought forward 376, ,206 Net Profit Available for Appropriation 518, ,646 Balance Carried to Balance Sheet 518, ,646 19

22 2. DIVIDEND : In order to conserve the resources to augment future growth, your directors do not recommend any dividend for the financial year SUBSIDIARIES & JOINT VENTURE : The statement pursuant to Section 212 (1) (8) of the Companies Act, 1956 in respect of subsidiaries, is attached. The Consolidated Accounts of your Company and its subsidiaries are presented as part of this Annual Report in accordance with Accounting Standard 21. Your Company has been exempted by the Ministry of Company Affairs, vide their letter no. 47/148/2006-CL-III dated 12th June, 2006 from attaching the Audited financial statements along with the reports of the Board of Directors and the Auditors Report pertaining to its subsidiary companies viz., 1. United Entertainment Solutions Limited, 2. UTV Communications (USA) LLC 3. UTV Communications (Mauritius) Ltd. 4. UTV Communications (UK) Ltd. As per the terms of the exemption letter, a statement containing brief financial details of the Company s subsidiaries for the year ended 31st March, 2006 is included in the Annual Report. Accordingly, the audited accounts of the above mentioned subsidiary companies are not attached. However, they are available on the Company s website The audited accounts of the subsidiary Company are also kept for inspection by any member at the Company s Registered office and copies will be made available on request to the members when requested. During the year, on 17th March, 2006, the Company sold its entire holding in its 100% subsidiary UTV International Holdings (BVI) Ltd. for a consideration of USD 5,10,000. a. United Entertainment Solutions Limited (UESL) The status of UESL changed from Private Limited Company to Limited Company on 13th January, The Company is in the business of post production and renders video special effects. During the year, UESL posted revenues of Rs lacs with PBDIT of Rs. 320 lacs. In the last year, revenues were at Rs. 974 lacs with PBDIT of Rs. 360 lacs. b. UTV Communications (USA) LLC ( UTV US) UTV US is incorporated on 26th April, 2004 with an intention to carry out Film Acquisition, Syndication and Distribution business in the United State of America (North America) and other surrounding territories. As at 31st March, 2006 it posted a sales of US$ 37,10,268 ( Previous year US$ 27,35,279) and a net profit of US$ 1,18,458 (Previous year US$ 38,643). The US operation will also spearhead our growth in Animation and International Movie Co-production. The Company signed its first International Co-production with Fox Searchlight and Entertainment on Mira Nair s directed movie The Namesake. c. UTV Communication (UK) Limited ( UTV UK) UTV UK was incorporated on 8th September, 2004 with an intention to carry out Film Acquisition, Syndication and Distribution in the United Kingdom. As at 31st March, 2006 it posted a sales of GBP 12,40,226 (Previous year GBP 815,876) and a net profit of GBP 17,187 (Previous year GBP 2,015). d. UTV Communications (Mauritius) Limited ( UTVM) UTVM was incorporated on 4th October, 2004 with an intention to carry out Film Acquisition, Syndication and Distribution for rest of the world excluding USA and UK. As at 31st March, 2006 it posted a sales of USD 54,48,756 (Previous year USD 1,71,800) and a net profit of USD 12,57,988 (Previous year USD 48,330). e. UTV International (Holdings) Limited BVI ( UTVIH) During the year, on 17th March, 2006 the entire share holding held by the Company in UTV International (Holdings) Limited, BVI was sold to Media Footing Sdn Bhd. Pursuant to the sale of shares as aforesaid, UTV International (Holdings) Limited, BVI ceases to be a subsidiary of the Company and consequently Antah UTV Multimedia & Communications Sdn Bhd which is a 70% subsidiary of UTV International (Holdings) Limited, BVI also cease to be a subsidiary of the Company. 20

23 UTV Software Communications Limited Joint Venture United Home Entertainment Limited (UHEL) The Status of UHEL changed from Private Limited company to Limited company on 13th January, UHE s Kids Channel by the name and style of HUNGAMA TV, was the first of its kind in India. This Channel is a general entertainment channel for the age group of 4-14 years target audience. This is an original content channel on Indian skies with its motto Of the Kids, for the Kids and by the Kids. Your Directors at their meeting held on 24th July, 2006 and subject to all regulatory approvals being obtained, approved the divestment of shareholding (including preference shares) held by the Company in UHEL to The Walt Disney Company (Southeast Asia) Pte Ltd at an enterprise valuation of US$ 30.5 million 4. PREFERENTIAL ISSUE OF SHARES : Your Directors at their meeting held on 24th July, 2006 approved the following. a. Issue of 19,49,360 Warrants convertible into equity shares at a price of Rs to Mr. Rohinton Screwvala the founder promoter of the Company. Consequently the promoters shareholding in the Company will increase from 42.38% to 47.62% b. Issue of 34,00,000 equity shares at a price of Rs per share to The Walt Disney Company (Southeast Asia) Pte Ltd. ( Disney ). Consequently to issue, Disney hold 14.85% of the existing share capital of the Company and 13.69% of the fully diluted equity share capital of the Company. Your Directors are of the view that induction of stragegically meaningful investor in the Company and investment by one of the largest Hollywood Studios will give a strategic business opportunity to the Company in India as well as internationally. Pursuant to the issue, the Authorised Share Capital of the Company is being increased from Rs. 21 Crores to Rs. 26 Crores. Appropriate resolutions for the issue of Warrants/Equity Shares and increase in Authorised Share Capital are being moved at the ensuing Annual General Meeting which the Board recommends for your approval. 5. SCHEME OF ARRANGEMENT The Board at their meeting held on 24th July, 2006 approved the merger of United Entertainment Solutions Limited ( UESL ), a subsidiary of the Company with the Company and utilization of the securities premium account of the Company for adjusting the deficit arising on merger and for adjusting the diminution, if any, in the value of assets of the Company. The Board is of the opinion that give the large scale foray of the Company into the business of film production, animation and special effects outsourcing, it is proposed to expand the post production, video special effects (VFX) and digital intermediary (DI) capabilities of the Company (presently carried out by UESL which would require financial support. Such an amalgamation would also synergies and other economical and commercial benfits such as: Integration of the business of the two companies in film and animation segments to offer end to end solution for captive use and outside business. Better focus on the management of the business of the UESL; and Re-branding and marketing of the business of the UESL under wider known UTV brand. The Scheme is subject to all regulatory approvals and members are requested to approve the Scheme as and when proposed. 6. CORPORATE GOVERNANCE REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS STATEMENT: Your Company adheres to high standards of Corporate Governance. Your Company has complied with the Corporate Governance code as stipulated under the listing agreement with the stock exchanges. A separate section on Management Discussion and Analysis and the Corporate Governance report along with a certificate from Company Secretary in practice confirming the level of compliance is annexed and forms a part of the Director s Report. 7. DIRECTORS: At the meeting of the Board of Directors of the Company held on 24th July, 2006 Shri Rohinton Screwvala was appointed/reappointed as CMD & Chief Executive Officer of the Company 21

24 for a period of five years from 1st August, 2006 to 31st July, 2011, subject to approval of the members at the ensuing Annual General Meeting. At the meeting of the Board of Directors of the Company held on 24th July, 2006 Shri Ronald D Mello was appointed/reappointed Executive Director & Chief Operating Officer of the Company for a period of three years from 21st August, 2006 to 20th August, 2009, subject to approval of the members at the ensuing Annual General meeting., Shri Ketan Dalal and Shri Rahul Shah retire by rotation and, being eligible, offer themselves for re appointment. Appropriate resolutions for the appointment/re-appointment of the aforesaid directors are being moved at the ensuing Annual General Meeting, which the Board recommends for your approval. 8. FIXED DEPOSIT: Your Company has neither accepted nor renewed any fixed deposit during the year under review. 9. AUDITORS REMARKS: As regard the Auditors qualification, the Company during the Financial year 1st April, 2005 to 31st March, 2006 paid managerial remuneration which is in excess of the limits provided under section 198 of the Companies Act The Company is in the process of obtaining members approval and the Central Government s approval for the same. Necessary resolution are proposed in the notice convening the Annual General Meeting 10. AUDITORS: Messrs. Price Waterhouse & Co., the Auditors of your Company, who hold office until the conclusion of the forthcoming Annual General Meeting, being eligible, offer themselves for re-appointment. 11. CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO: The particulars as prescribed under sub-section of Section 217 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, which forms part of this report. 12. PARTICULARS OF EMPLOYEES Information as per Section 217 (2A) of the Companies Act, 1956 read with rules framed there under is required to be a part of this report. However, pursuant the provisions of Section 219 (b) (iv) of the Companies Act, 1956 the report and accounts are being sent to the members of the Company excluding the statement of particulars under Section 217(2A) of the Act. Any member interested in obtaining a copy of the said statement may write to the company secretary at the registered office of the Company. 13. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to the requirements of Section 217 (2AA) of the Companies Act, 1956 the Board of Directors hereby state: (a) That in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures. (b) That the Directors have selected appropriate accounting policies and applied consistently and made judgements and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2006 and of the profit of the Company for the year ended 31st March, (c) That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. (d) That the Directors have prepared the annual accounts on a going concern basis. 14. ACKNOWLEDGMENTS: Your Directors would take this opportunity to thank all the stakeholders for their support and co-operation rendered to the Company during the year under review. By Order of the Board of Directors for UTV SOFTWARE COMMUNICATIONS LIMITED ROHINTON SCREWVALA CMD & Chief Executive Officer Place : Mumbai Date : 24th July,

25 UTV Software Communications Limited ANNEXURES TO THE DIRECTORS REPORT PARTICULARS PURSUANT TO COMPANIES ( DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, Conservation of Energy The operations of the Company are not energy intensive. However, the Company has taken adequate measures to reduce the energy consumption by using energy efficient hardware and other equipment. Air conditioners are used only when required. Further the Company has spread awareness among the employees on the need to conserve energy which is well adopted by the employees. 2. Research and Development The Company is an integrated player in the Media and Entertainment Industry and carries out research and innovation in creating content in various segments of entertainment as part of its regular on going business. 3. Technology Absorption, Adaptation and Innovation During the year, your Company successfully implemented a project on Animation by adopting latest 3D animation software 3DS Max of Autodesk, world leaders in animation software industry. Your company was the first to deploy Autodesk s latest Software version 3DS Max 8 in India. The full scale implementation of enhancement in the animation facility s capacity from 50 desks to 250 desks was completed in April Foreign Exchange Earning and Outgo in Rs 000 Earnings in foreign exchange Rs. 208,743 ( Previous Year Rs.100,427 ) Expenditure in foreign exchange Rs. 16,885 ( Previous Year Rs.6,862 ) STATEMENT PURSUANT TO EXEMPTION RECEIVED UNDER SECTION 212 (8) OF THE COMPANIES ACT, 1956, RELATING TO SUBSIDIARY COMPANIES. ( All amounts in thousands of Indian Rupees) Sr. No. Name of the Subsidiary Reporting Exchange Average Capital Reserves Total Total Investm- Turnover Profit Provision Profit Proposed Country Company Currency Rate Exchange Assets Liabilities ent other Before for after Dividend (Rs.) Rate than Taxation Taxation Taxation (Rs.) Invest - ment in Subsidiary 1 United Entertainment Solutions Ltd. INR ,100 23, , ,621 83,392 1,493 1, India 2 UTV Communications (USA) LLC USD ,224 6, , , ,402 8,921 3,672 5,249 U nited States of America 3 UTV Communications (UK) Limited GBP ,485 44,030 41,771 97,470 1, ,351 U nited Kingdom 4 UTV Communications (Mauritius) Limited USD ,092 95,802 37, ,416 55,737-55,737 Mauritius 23

26 REPORT ON CORPORATE GOVERNANCE (Pursuant to Clause 49 of the Listing Agreement entered into with the Stock Exchanges and forms a part of the report of the Board of Directors). 1. Company s philosophy on Code of Governance The Company continues to focus and is committed to good Corporate Governance as it helps enhancement of long-term shareholder value and interest of other stakeholders. The Company is committed to its objective of accountability, transparency, independence and professionalism in all spheres of activities. Corporate Governance is an integral part of the management and the company follows procedures and practices in conformity with the Code of Corporate Governance as stipulated by SEBI. 2. Board of Directors The Company s Board comprises of four executive directors (including the Chairman cum Managing Director) and five other Non-Executive Independent Directors, having rich corporate, business and professional expertise. a. The Board of Directors of the Company have an optimum combination of Executive and Non-Executive Directors with more than fifty percent of the Board of Directors comprising of Non-Executive Directors. The Company has an Executive Chairman (Promoter) and the number of Independent Directors is more than 50% of the total number of Directors. b. None of the Directors on the Board is a Member of more than 10 Committees or Chairman of more than 5 committees as specified in Clause 49, across all the companies in which he/she is a Director. The Directors have made necessary disclosures regarding Committee positions in other public companies as at 31st March, c. The names and categories of the Directors on the Board, their attendance at Board meetings held during the year and the number of Directorship and Committee Chairmanship/Membership held by them in other companies is given below. Other directorship do not include alternate directorship, directorship of private limited companies and of companies incorporated outside India. Chairmanship/Membership of Board Committees includes only Audit and Shareholders/Investors Grievance Committee. Composition and Category of the Board Sr. No. Name of the Director Category No. of Directorship Number of other Number of other in other Public Board Committee Board Committee Companies as Chairman as Member 1. Mr. Rohinton Screwvala Promoter - Executive (Chairman) 3 Nil Nil 2. Mr. Ronald D Mello Executive Director & COO 2 Nil Nil 3. Mrs. Zarina Mehta * Executive Director 3 Nil Nil 4. Mr. Deven Khote Executive Director Nil Nil Nil 5. Mr. Ketan Dalal Independent Non-Executive Nil Nil Nil 6. Mr. Rahul Shah *** Independent Non-Executive 3 Nil 1 7. Mr. Sanjaya Kulkarni Independent Non-Executive 3 Nil 2 8. Mr. Suketu Shah Independent Non-Executive 10 3 Nil 9. Mr. Darius Shroff Independent Non-Executive Mr. Frederic Beauvais ** Independent Non-Executive Nil Nil Nil * appointed as Executive Director with effect from 27th day of April, ** Ceased to be a Director with effect from 30th day of July, *** On 27th April, 2005, Mr. Rahul Shah, has resigned as Nominee Director of ILFS and on the same date was appointed as an Independent Non-Executive Director. Attendance of the Directors and other Directorship/Committee membership During the financial year , Six Board meetings were held and the gap between two meetings did not exceed four months. The dates on which the Board Meetings were held are 27th April 2005, 30th June, 2005, 30th July, 2005, 28th October, 2005, 31st January, 2006 and 31st March, The Annual General Meeting was held on 6th September,

27 UTV Software Communications Limited Director No. of Board No. of Board Attendance meetings meetings at the held attended last AGM Mr. Rohinton Screwvala 6 6 Yes Mrs. Zarina Mehta 6 5 Yes Mr. Deven Khote 6 4 Yes Mr. Ronald D Mello 6 4 Yes Mr. Ketan Dalal 6 6 No Mr. Rahul Shah 6 4 No Mr. Sanjaya Kulkarni 6 5 Yes Mr. Suketu Shah 6 3 No Mr. Darius Shroff 6 6 Yes Mr. Frederic Beauvais * 6 1 No * Ceased to be a Director with effect from 30th day of July, Notes : 1. Independent Director shall mean a Non-Executive Director of the Company who: a. apart from receiving director s remuneration, does not have any material pecuniary relationships or transactions with the Company, its promoters, its directors its senior management or its holding company, its subsidiaries and associate which may affect independence of the directors; b. is not related to promoters or persons occupying management positions at the board level or at one level below the board; c. has not been an executive of the Company in the immediate preceding three financial years; d. is not a partner or an executive or was not partner or an executive during the preceding three years, of any of the following: (i) the statutory audit firm or the internal audit firm that is associated with the Company, and (ii) the legal firm(s) and consulting firm(s) that have a material association with the company. e. is not a material supplier, service provider or customer or a lessor or lessee of the company, which may affect independence of the director; and f. is not a substantial shareholder of the Company i.e. owing two percent or more of the block of voting shares. 2. None of the Non-Executive Directors have any material pecuniary relationship or transactions with the Company. Necessary information to the extent required, as mentioned in Annexure 1A or Clause 49 of the Listing Agreement has been placed before the Board for their consideration. Code of Conduct The Board has laid down a code of conduct for all the Board Members and Senior Management of the Company. Senior Management includes team comprising of members of the category of General Manager and above, including all functional heads. The declaration by the CMD and CEO affirming the compliance of Code of Conduct by all the Board Members and Senior Management personnel is annexed and forms part of the Directors Report. 3. Audit Committee The Audit Committee of the Company was constituted on 20th May, 2000 in line with the provisions of Clause 49 of the Listing Agreement with the stock exchanges read with Section 292A of the Companies Act, The terms of reference of the Audit Committee are broadly as under: A. In relation to Financial Reporting: Oversight of the company s financial reporting process and the disclosure of its financial statements is correct, sufficient and credible, specifically reviewing with management the half yearly/annual financial statements before submission to the board, focusing primarily on: Any changes in accounting policies and practices; Matters required to be included in the Director s Responsibility Statement to be included in the Board s report in terms of Clause 2(AA) of Section 217 of the Companies Act,1956; Major accounting entries based on exercise of judgement by management; Qualification in draft audit report; Significant adjustments arising out of audit; The going concern assumption; Compliance with Accounting Standards; Compliance with Stock Exchange and legal requirements concerning financial statements; 25

28 Any related party transactions i.e. transactions of the company of material nature, with promoters of the management, their subsidiaries or relatives etc. that may have potential conflict with the interests of Company at large. B. In relation to Audit (i) Relevant to Internal and Statutory Audit Reviewing adequacy of internal control systems Reviewing financial and risk management policies Reviewing with the management the quarterly financial statements before submission to the Board for approval. (ii) Relevant to Statutory Audit Recommending appointment and removal of external auditors, fixing of audit fees and approval for payment of fees for any other services. Discussion with external auditors before the audit commences, the nature, scope and approach of audit as well as post audit discussion to ascertain areas of concern. (iii) Relevant to Internal Audit Reasons for substantial defaults in payments to depositors, debenture holders, shareholders ( in case of non payment of declared dividend ) and creditors. Reviewing the scope and adequacy of the internal audit function. Review of reports of internal auditors primarily the significant findings and follow up thereon including findings relating to investigations regarding frauds, irregularities and material failures of internal control system. The Audit Committee is empowered to: a. Investigate any activity within its scope of role. b. seek information from any employee. c. Obtain outside legal or other professional advice. d. Secure attendance of outsiders with relevant expertise, if it considers necessary. In its meetings, the Audit Committee considered audit reports covering operational, financial and other business areas and also the quarterly results of the Company. The Audit committee are usually held at the Corporate Office of the Company and are usually attended by the Managing Director, Executive Directors, Vice President Finance, representatives of the Statutory Auditors. The Company Secretary acts as Secretary to the Audit Committee. All the members of the Audit Committee are finance literate and do possess sound knowledge of accounts, finance, audit and taxation. The previous Annual General Meeting of the Company held on 6th September, 2005 and the Chairman of the Audit Committee attended the same. During the financial year , the committee met Five times on 27th April, 2005, 1st June, 2005, 26th July, 2005, 26th October, 2005 and 31st January, 2006 and necessary quorum was present at all the meetings. The Composition of the Audit Committee and particulars of meetings attended by the members of the Audit Committee are give below: Name Chairman/ Category No. of No. of Member meetings meetings held during Attended the year Mr. Sanjaya Kulkarni * Chairman Independent, 5 4 Non-Executive Mr. Ketan Dalal Member Independent, 5 5 Non-Executive Mr. Rahul Shah Member Independent, 5 4 Non-Executive Mr. Suketu Shah Member Independent, 5 1 Non-Executive Mr. Frederic Beauvais ** Member Independent, 5 1 Non-Executive * Appointed as member & Chairman of Audit Committee w.e.f. 27th April, ** Mr. Federic Beauvais ceased to be a Director and Member of Audit committee w.e.f. 30th July, Remuneration of Directors None of the Non-Executive Directors have any material pecuniary relationship or transactions with the Company. Remuneration to CMD & Chief Executive Officer and other Executive Directors The appointment of CMD & Chief Executive Officer and other Executive Directors is governed by resolutions passed by the Board of Directors and Shareholders of the company, in terms of the Companies Act,

29 UTV Software Communications Limited Details of remuneration to the Executive Directors for the year ended 31st March, 2006 are as under. (Rs. in thousands) Name of the Director Salary Perquisites Commission 1 Rohinton Screwvala Nil 2 Ronald D Mello Nil 3 Deven Khote Zarina Mehta Nil Service Contract 1 For a period of five years w.e.f For a period of three years w.e.f For a period of three years w.e.f For a period of three years w.e.f Remuneration to Non-Executive Directors The Non-Executive Directors of the Company do not draw any remuneration from the company other than sitting fees of Rs. 5000/- per meeting for attending each Board meeting or a meeting of the Committee thereof. At present no commission is payable to the Non-Executive Directors out of the net profits of the company. The shareholding of Non-Executive Directors as at March 31, 2006 are as under: Name of the Director No. of Shares held Sanjaya Kulkarni NIL Rahul Shah 1750 Darius Shroff 2000 Suketu Shah NIL Ketan Dalal NIL Employees Stock Option Scheme The Company does not have any Employee Stock Option Scheme. 5. Shareholders/ Investors Grievance Committee The Company has constituted a Share Allotment/Share Transfer/ Shareholders Grievance Redressal Committee on 20th May, 2000, which was subsequently re-designated as Shareholders/ Investors Grievance Committee on 30th July, 2005, to specifically look into the redressal of investors grievances. The Committee has the following powers i.e. to receive, consider and effect : a. Share Transfers b. Deletion of the name of the shareholders c. Transmission of shares d. Splitting of shares e. Consolidation of shares f. Issue of new shares in lieu of old certificates g. Address grievances of shareholders and provide solutions, refer the matter to Board, in case necessary. The Composition and other particulars of Shareholders / Investors Grievance Committee are as follows: Name Chairman/ Category No. of No. of Member Meetings Meetings held during Attended the year Mr. Sanjaya Kulkarni Chairman Independent, 2 2 Non-Executive Mr. Rahul Shah Member Independent, 2 2 Non-Executive Mr. Rohinton Screwvala Member Managing 2 2 Director The Company Secretary is acting as the Compliance officer of the Company. During the year the committee met 2 times on 29th December, 2005 and 31st March, 2006 and necessary quorum was present at all the meetings. Name, designation and address of Compliance Officer : Mohd. Sajid Ali Company Secretary UTV Software Communications Limited Parijat House, 1076, Dr. E. Moses Road, Worli Naka, Mumbai Tel No Fax No investor@utvnet.com Website : Details of Complaints received and redressed: Opening Balance Received during Resolved during Closing Balance the year the year NIL NIL All Share transfers and correspondence thereon with the shareholders are handled by the Company s Registrars and Share Transfer Agents viz Karvy Computer Share Private Limited, 6, Avenue 4, Street No. 1, Banjara Hills, Hyderabad The Company Secretary is entrusted the task of overseeing the share transfer work done by the Registrar and Share Transfer Agents, attending to grievances of the shareholders and investors intimated to the Company, compliances with this statutory and regulatory requirements, etc. directly or through SEBI, and stock exchangs. There were no transfers pending as at 31st March, General Body Meetings i. Location and time, where last three Annual General Meetings held. Meetings for the Financial Year Date 10th November, th August, th September, 2005 Time 10:30 a.m p.m a.m. Venue for all the Registered Office of the company at : The Hall of Culture, three financial Parijat House 1076, Dr. E. Moses Road, Discovery of India Building, years Worli Naka, Mumbai Nehru Centre, Dr. Annie Besant Road, Worli, Mumbai

30 No Extra ordinary General Meetings were held during the Financial Year All Special Resolutions moved at the last Annual General Meeting were passed by show of hands by the members present at the meeting. The Special Resolution passed at the last three Annual General Meetings are as under. a) At the Annual General Meeting held on 10th November, 2003, Resolutions pertaining to Amendements to the Articles of Association relating to the Remuneration of Directors and Quorum for Board Meeting were passed. b) At the Annual General Meeting held on 30th August, 2004 Resolutions pertaining to Inter Corporate Investment into the share capital of United Home Entertainment Private Limited and provide Inter Corporate Guarantee in favour of UTI Bank were passed. c) At the Annual General Meeting held on 6th September, 2005 Resolution pertaining to Amendments to the Articles of Association were passed. No resolutions were required to be passed by way of Postal Ballot/s at the aforesaid meetings. No Resolution is proposed to be adopted through postal ballot at the ensuing Annual General Meeting. 7. Disclosures: Related Party Transactions There are no materially significant related party transactions of the Company with key managerial personnel, which have potential conflict with the interest of the company at large. However, the related party Disclosures, as required to be mentioned in accordance with Accounting Standards (AS) 18, have been provided on note 14 of Schedule 23 to the Accounts contained in this report. Compliances The Company had complied with the requirement of the Stock Exchange, SEBI and other statutory authorities on all matters relating to capital market during the last three years. No pecuniary structures have been imposed on the company by any of the above-mentioned authorities. Risk Management The Company has laid down procedures to inform the Board Members about the risk assessment and minimisation procedures. These procedures are periodically reviewed to ensure that Executive Management controls risk through means of properly defined framework. CEO & CFO Certification Certificate from Mr. Rohinton Screwvala, CMD and Chief Executive Officer, Mr. Ronald D Mello, Executive Director & Chief Operating Officer and Mr. G. Chandrasekhar-Vice President- Finance, in terms of Clause 49(v) of the Listing Agreement entered into with Stock Exchanges, was placed before the Board of Directors of the Company at their meeting held on 24th July, Means of Communications In line with good corporate governance practices, the Company s quarterly unaudited / audited financial results are normally published in The Economic Times, The Business Standard (English language newspapers) and in Navshakti, Tarun Bharat and The Maharashtra Times (vernacular language newspapers) and posted on the website EDIFAR (Electronic Data Information Filing and Retrieval System) maintained by SEBI in association with the National Informatics Centre (NIC). The update is posted on the corporate website The Company also hosts conference calls with analysts and fund managers after declaration of quarterly financial results, the text of which is also made available on the website. These are not sent to the shareholders individually. The Management Discussion and Analysis Report forms part of the Directors Report. 9. General Shareholder Information a. Annual General Meeting Date 24th August, 2006 Time a.m. Venue The Hall of Culture, Discovery of India Building, Nehru Centre, Dr. Annie Besant Road, Worli, Mumbai b. Financial Calendar (Tentative and subject to change) Year ending March 31, 2007 Financial Reporting For the first Quarter On or before the end of ending 30th June, 2006 July, 2006 For second Quarter and On or before the end of the half year ending October, th September, 2006 For the third Quarter On or before the end of ending 31st December, 2006 January, 2007 Audited Results for the On or before end of June, 2007 year ending March,

31 UTV Software Communications Limited c. Date of Book closure 14th August, 2006 to 24th August, 2006 (both days inclusive). d. Dividend payment date Not applicable e. Listing on Stock The National Stock Exchange of Exchanges India Limited (NSE) The Bombay Stock Exchange Limited (BSE) f. Stock Code The National Stock Exchange of India Limited : UTVSOF, EQ The Bombay Stock Exchange Limited : g. Demat ISIN Number INE 507B01022 for NSDL and CDSL h. Table below respectively gives the monthly closing high and low prices and number of shares traded at the National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited, Mumbai (BSE) for the year ended on 31st March, The National Stock Exchange of India Limited Month High (Rs.) Low (Rs.) Total no. of Shares Traded April, May, June, July, Aug, Sep, Oct, Nov, Dec, Jan, Feb, Mar, The Bombay Stock Exchange Limited Month High (Rs.) Low(Rs.) Total no. of Shares Traded April, May, June, July, Aug, Sep, Oct, Nov, Dec, Jan, Feb, Mar, i. Registrar and Transfer Agent Name and Address : Karvy Computer Share Private Limited 46, Avenue 4, Street No. 1, Banjara Hills, Hyderabad Tel No. : Fax No. : mailmanager@karvy.com Contact Person : Mr. S. Madhusudhan Name and Address : Karvy Computer Share Private Limited 16/22, Bake House, Maharashtra Chambers of Commerce Lane, Opp. MSC Bank, Kalaghoda, Fort, Mumbai Tel No. : Fax No. : Francisjf@karvy.com Contact Person : Francis J Fernandes j. Share Transfer System The shares of the company are traded in the compulsory demat mode by all the investors. The share transfer committee meets regularly to approve transfer of shares in physical form. The transfer are approved in 10 to 15 days time from the date of receipt, if the transfer documents are in order. 29

32 k. Distribution of shareholding as on 31st March, 2006 Range No. of % of No. of % to no. No. of equity Share- Share- Shares of shares shares holders holders Upto and above Total l. Shareholding as at 31st March, 2006 Category No. of % of holding Shares Held A. Promoter s Holding 1. Promoters : Indian Promoters Rohinton S. Screwvala Unilazer Exports & Management Consultants Ltd Persons acting in concert Unilazer Hongkong Limited Zarina Mehta 800 United Teleshopping & Marketing Co. Ltd. 20 Sub Total B. Non-Promoters Holding 3. Institutional Investors a. Mutual Funds and UTI b. Banks Financial Institutions, Insurance Companies (Central/State Govt. Institutions/ Non Govt. Inst.) c. Foreign Institutional Investors (FIIs) Sub Total Others a. Private Corporate Bodies b. Indian Public c. NRIs d. Any Other (please specify) i) Trust ii) Clearing Members iii) Foreign Companies iv) Venture Capital Fund Sub Total GRAND TOTAL m. Dematerialisation of Shares and Liquidity The company s shares are compulsorily to be traded in dematerialised form. 1,47,59,661 equity shares of Rs. 10/- each representing 75.72% of the equity capital of the Company have been dematerialised as at 31st March, The Company s shares are regularly traded on The National Stock Exchange of India Limited (NSE) and the Bombay Stock Exchange Limited (BSE). n. The Company does not have any outstanding GDRs/ADRs/ Warrants or any convertible instruments convertible into equity shares as at 31st March, o. Plant Locations The Company is into media and entertainment software industry and operates from its Registered office at Parijat House, 1076, Dr. E. Moses Road, Worli Naka, Mumbai p. Address for Correspondence UTV Software Communications Limited Parijat House, 1076, Dr. E. Moses Road, Worli Naka, Mumbai Tel No. : Fax No. : investor@utvnet.com Website : Place : Mumbai Date : 24th July, 2006 For and on behalf of the Board Rohinton Screwvala CMD & Chief Executive Officer 30

33 UTV Software Communications Limited CERTIFICATE OF COMPLIANCE OF CORPORATE GOVERNANCE AS REQUIRED UNDER THE LISTING AGREEMENT WITH THE STOCK EXCHANGE To the MEMBERS OF UTV SOFTWARE COMMUNICATIONS LIMITED We have examined the compliance of Corporate Governance by UTV Software Communications Limited for the financial year , as stipulated in clause 49 of the Listing Agreement entered into by the said Company with the Stock exchange(s). The Compliance of conditions of Corporate Governance is responsibility of the management. Our examination was limited to a review of the procedures and implementation thereof, adopted by the Company for ensuring compliance with conditions of the Corporate Governances. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanation given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in Clause 49 of the above-mentioned Listing Agreement. DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERS AND SENIOR MANAGEMENT PERSONNEL WITH COMPANY S CODE OF CONDUCT. This is to confirm that the Company has adopted a Code of Conduct for its each Director and Senior Managers of the Company. The Code of Conduct is available on the Company s website. I confirm that the Company has in respect of the financial year ended on March 31,2006 received from the senior managers of the Company and the Members of the Board of compliance with the Code of Conduct as applicable to them. For the purpose of this declaration, Senior managers meaning Senior Management team comprising of members of the category of General Manager and above, including all functional heads. Place : Mumbai Date : 24 July, 2006 Rohinton Screwvala CMD & Chief Executive Officer We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. For Sanjay Parab Practicing Company Secretaries Place : Mumbai Membership No Dated : 24 July, 2006 COP No

34 MANAGEMENT DISCUSSION AND ANALYSIS OVERVIEW UTV Software Communications Limited (UTV) is a leading integrated media and entertainment company with business interests in products and services associated with Television, Films, Animation and Broadcasting. UTV was incorporated in 1990 as a private company and was primarily engaged in the production of television content for Doordarshan and production of ad films. In 1992, UTV became one of the largest content providers to Zee TV. In 1995, it launched India s first daily soap titled Shanti on Doordarshan. UTV expanded its operations by setting up state-of-the-art post-production and computer graphic facilities. It was one of the first entities to venture into animation content production. Its subsequent foray into the film business and into broadcasting helped UTV achieve its objective of becoming a fully integrated media and entertainment company. UTV completed its Initial Public Offering in March It is now one of the largest producers of television programming in the country and one of the few corporate entities in film-making and theatrical distribution in India. UTVs broadcasting initiative includes a TV channel called Hungama TV, which is a general entertainment channel for the age group of Broadly UTV Group s operations are divided into: Movies, Television, Allied services and Broadcasting. Movies UTV is one of the pioneers of the studio model in India and has produced several blockbuster movies such as Chalte Chalte, Fiza. Swades, Lakshya and a film that has revolutionized movie-making in India - Rang De Basanti. UTV is also a leading distributor of Indian films worldwide. Some of the films it has distributed include Lagaan, Mission Kashmir, Swades, Lakshya, Sarfarosh, Hyderabad Blues, Mughal-E- Azam (color version), Parineeta, Viruddh, Bluffmaster and Taxi No Its distribution network spans the national and international level reaching 13,500 screens in India and 47,300 screens overseas. Television Content Production: UTV is one of the pioneers in television content production in India having started over 15 years ago. It has successfully demonstrated multi-genre, multi-lingual and multi-channel capabilities not only across India but also Asia. Some of the popular television programs produced by UTV are Shararat, Bhabhi, Shanno Ki Shaadi, Special Squad, Snakes and Ladders, Shanti, Hip Hip Hurray, Sanya, Hero, Bombay Talking, Bollywood Inc, Business Bytes and Back to the Floor. Airtime Sales: UTV has a decade old relationship for the marketing of airtime on state owned broadcaster Doordarshan and the largest broadcaster in the regional space, the Sun Network. UTV operates as a quasi-broadcaster. The Company also has strong relationships with regional content producers and its client base includes over 100 advertising agencies and media buyers. Dubbing: The Dubbing division was started in 1992 and it today has a talent bank of over 500 voices across genres and languages. It has dubbed Hollywood blockbusters like Titanic, Independence Day and the Star Wars Trilogy. The Company provides dubbing services for television content to large international players like Disney, National Geographic Channel, The History Channel and various other Star Network channels. Animation: With a vast English-speaking manpower base, presence of well-equipped animation studios, low cost of production services and a large entertainment sector, India is well poised to become a global animation hub. Among the early entrants in 1998 into the fast growing animation segment, UTV is now well positioned to ride the impending boom with investments in state-of-the-art infrastructure based in Mumbai. Its current order book consists of 30 episode TV series, 15 DVD features and 1 theatrical feature film. Allied Services UTV has state-of-art integrated post-production and SFX facilities that gives it an edge in this segment. Its business areas include Ad films (Idea Cellular, Hutch, Tata Safari), films for post-production and special effects (SFX) and music videos. SFX and digitization of films are key growth areas in this segment and there also exists high potential of adopting an outsourcing model for overseas studios. This division provides post-production services to television software houses, private producers and advertisers. Broadcasting In September 2004, UTV launched India s first local kids channel titled Hungama TV through United Home Entertainment Ltd, promoted jointly by UTV and UTV promoters. Targeted at kids in the age group 4-14, the channel aims at providing an entertaining mix of animation and local live action content. As compared to its global competitors and in less than two years of operations, Hungama TV has firmly established itself among the top 3 channels for the age-group of 4-14 years. Hungama TV entered into a Business Cooperation 32

35 UTV Software Communications Limited Agreement with a leading DTH player in South East Asia, Astro Measat. As per this agreement Hungama TV will assist Astro in launching two kids channels in Indonesia and Malaysia and provide its content expertise in line with Hungama TV formats. INDUSTRY OVERVIEW The Indian Media and Entertainment Industry has out-performed the Indian economy and is one of the fastest growing industries in India. With an increase in disposable incomes and hence in consumer spending the industry is expected to continue on its high growth trajectory in the near future. The size of the Media and Entertainment industry in India is estimated at Rs 353 billion for 2005 and is expected to grow at a compounded annual growth rate of 19 percent over the next five years. (Source: FICCI PWC report March 2006) Advertising revenues form the backbone of the Television broadcasting industry. Indian advertising spend as a percentage of GDP is far lower than those in other developed and developing countries. The potential for growth in advertisement revenues can be gauged from the fact that if India was to reach the global average of ad spend to GDP ratio, the advertising revenues would have to at least double from the current advertisement revenues that are estimated at Rs 132 billion in The low levels of TV penetration also provide an opportunity for growth in the television segment. Addressability through Conditional Access System (CAS) and Direct-to-home (DTH) will contribute to the growth in subscription revenues. Also new modes of distribution like Internet Protocol Television (IPTV) and value added services like Pay-per-view (PPV) and Video-on-demand (VOD) would further boost subscription-based revenues. The Filmed Entertainment industry estimated at Rs 68 billion in 2005 is expected to grow to Rs 153 billion in 2010 (Source: FICCI PWC report March 2006). Probably the biggest factor expected to contribute to this growth is the growth of multiplexes. A number of multiplexes are being set up all over the country and various initiatives are being taken to digitize existing cinema halls. These would result in movies getting a much wider release in the first week itself thus reducing the ill effects of piracy considerably on the film industry. The other area that is expected to grow considerably is Home Entertainment that currently forms only a miniscule percentage of a film s revenues. With technological advancements and the growing penetration of mobiles, personal computers, laptops and the Internet, segments like animation, mobile entertainment, Internet advertising and gaming are witnessing unprecedented growth. These emerging segments, though still at nascent stages of development, have tremendous potential and are waiting to be explored by players in the entertainment arena. BUSINESS STRATEGY Television In the television space the focus is to continue to produce shows in both the fiction as well as non-fiction space. The Company has been and will continue to focus on multi-lingual and multi-genre programming. The Company will also continue to concentrate on the South markets through its Acquisition & Sales business on the Sun Network channels. Film Production The Company will continue to focus on the high quality standards in film production that it has maintained all these years. The Company is increasingly looking to reduce its dependence on film distribution, which it considers far more risky than film production. The company would continue to co-produce films with key talent from the industry apart from producing films on its own by associating with the best talent available. The Company is also looking at film production in South India and at developing full length animated features in the near future. The Company is also actively pursuing the home entertainment space in films, which is expected to be a key area of growth in the years to come. The Company is planning to launch a premium product in Home Entertainment to tap the market potential in this area. Organic and Inorganic Growth The Company is looking to expand through both organic and inorganic modes. Apart from an increase in the scale of operations, the Company is exploring opportunities for expansion in existing and new businesses through the mergers and acquisitions route. OPPORTUNITIES AND THREATS The Company has a diversified business model in media and entertainment sector with its revenues coming from various segments across various levels of the media and entertainment 33

36 value chain. With operations in various geographical locations in the world, the Company is well placed to cash in on opportunities in the growing media and entertainment space. The diversified business model of the Company provides scalability apart from spreading the risk profile of the overall business. The key focus areas of the Company continue to be in its key areas of (a) Television content and broadcasting services, (b) Film Production and Distribution and (c) Animation production and services. The post production and SFX business of the Company will compliment the above focus areas of the Company with captive usage while inviting significant external businesses. The Company is well poised to take advantage of opportunities in the media and entertainment sector in India. In the movies segment, the growth of multiplexes in the country is expected to change the dynamics of film distribution in India. Also with the increasing penetration of DVD players in the country, Home Entertainment is expected to be the next big thing in the film industry. Digitization has also resulted in greater avenues for exploiting film content newer avenues like mobile entertainment, video-on-demand (VOD) and distribution through newer modes like IPTV, DTH are expected to play important roles in the years to come. In the television space, addressability in the Indian market is expected to provide great opportunities for growth. With the advent of addressable systems like DTH a number of players are expected to launch niche channels. These channels could require a lot of home grown content. Addressability through CAS and DTH also means that with the problem of under declaration of subscribers by cable operators coming to an end, broadcasters would get a greater share of the subscription pie. This could spell good news for content providers as this increased share could get ploughed back into the business in the form of higher programming spend. The Company operates in a very competitive environment. Apart from the organized entities in the television and film production space there are a lot of small-unorganized production houses in both the films and the television segments. Also changes in Government regulations or any change in the legislative intent to bring about addressability could adversely impact growth plans. CONSOLIDATED RESULTS OF OPERATIONS Revenues The Company reported consolidated operating revenues growth of 18% from Rs 1,768 million to Rs 2,084 million primarily due to a substantial increase in revenues from the movies division where the income increased from Rs 774 million in the previous year to Rs 1,310 million this year, an increase of 69%. The Company released three of its productions this year D, Main Meri Patni aur Woh and Rang De Basanti. Apart from this, the company distributed the Hindi films Kya Kool Hai Hum, Parineeta, Mughal-e-Azam (Colour Version), Viruddh, Shaadi No. 1, Deewane Hue Pagal, Bluff Master and Taxi No This year the Company also began theatrical exploitation of its foreign film library in India with the release of the films Myth and Unleashed. Further the company also distributed films on commission basis in United Kingdom like Apaharan, Jawani Diwani, Kalyug and Family. Revenues from the television and allied services segments decreased from Rs 909 million and Rs 98 million in the previous year to Rs 711 million and Rs 78 million in the current year showing a drop of 22% and 20% respectively. The drop in television revenues was mainly attributable to the natural end of some of the shows in the television content production and Airtime sales business. The Company however, added to its list of clients channels like Zee Café and Sony Entertainment Television during the year. Other Income Other Income for the year was Rs 48 million as against Rs 36 million in the previous year. Other Income for the year includes Net Interest Income earned Rs 13 million, as against a net interest expense of Rs 18 million in the previous year. Also during the year, in July 2005, the city of Mumbai experienced unprecedented floods due to which the operations of the company s animation studio was affected. On account of insurance of these premises the Company has booked a partial settlement amount of Rs 9 million as part of other Income. Apart from this, excess provisions of earlier years amounting to Rs 22 million has been written back to the profit and loss account, as these were no longer required. During the year, the Company also sold off its entire holding in its 100% subsidiary UTV International Holdings Ltd. (BVI) for Rs 23 million whereas the carrying value of the investment in the books 34

37 UTV Software Communications Limited was a negative of Rs 28 million. Thus there was a profit on consolidation of Rs 51 million, which has been represented as exceptional item in the profit and loss account and as unallocable income in the segmental results. Direct Costs Direct costs, consisting of cost of content creation, acquisition, marketing and distribution of film and television content, net of inventorisation were at Rs 1,695 million in the current year as against Rs 1,265 million in the previous year, an increase of 34%, mainly due to an increase in the level of activity. Direct cost as a percentage of operating revenues was at 81% compared to 72% the previous year. During the year margins were lower mainly due to two reasons: (i) In the television segment, the South based Airtime Sales business witnessed major expansion during the year and number of new shows were added. Newly introduced shows generally take about 3-6 months to mature and start delivering the required margins. Since most of these shows were introduced in the later part of the year they resulted in lower margins for the television segment during the year; (ii) Two of the films distributed by us during the year Shaadi No. 1 and Deewane Hue Pagal, both from renowned film directors, did well below our expectations resulting in substantial losses for the Company in these projects. This resulted in lower margins in the movies segment during the year. Staff Costs The Indian Economy has grown at a good pace during the year and the Media and Entertainment industry in which the Company operates has grown at a faster pace than that of the economy. The rapidly growing economy has fueled higher salary levels. Staff cost of the Company has increased by 25% from Rs 128 million in the previous year to Rs 160 million this year. The increased cost also reflects the cost incurred for expansion in almost all the segments of the Company. Other Expenses Other expenses comprise all administrative overheads of the company, provisions for doubtful debts/doubtful advances, advertisement and business promotion expenses and general expenses. During the year, other expenses were lower by approximately 12% from Rs 127 million in the previous year to Rs 113 million in the year under consideration. This was mainly on account of a reduction in provisions/write offs during the year. Interest Cost During the year, the Company s borrowings increased by Rs 831 million which was used to fund its various expansion activities especially in the segments of Film production, Television content marketing, Post-Production and to support its Joint Venture Company United Home Entertainment Ltd. These borrowings were mostly done in the latter part of the financial year and hence the increase in interest cost during the year was only by 29% at Rs 27 million as compared to Rs 21 million in the previous year. After deducting interest income of Rs 40 million from the interest expense of Rs 27 million, Rs 13 million has been shown as other income in the accounts for the current year. Depreciation The depreciation charge for the current year was at Rs 47 million as compared to Rs 53 million in the previous year. The depreciation charge during the year has reduced primarily due to the exclusion of about Rs 29 million of fixed assets belonging to its 100% subsidiary - UTV International (Holdings) Limited, BVI which was fully sold to Media Footing SDN BHD. Further, the Company s expansion programme in post production and animation facilities was not fully operational by the year end. Cumulative investment of about Rs 170 million was underway out of which assets worth only Rs 45 million were capitalised by the year end. Profit before Tax and Exceptional Items The Profit before Tax and Exceptional Items for the year was lower at Rs 116 million as against Rs 213 million in the previous year. The movie distribution business setup by the Company in the previous year under performed with two movies incurring large losses. The Company has adopted a cautious approach in this segment and is now focusing on film production in a major way where the risks of loss due to product failure is much lower as the Company has better control over the final product. The Television segment witnessed lower margins. The animation division did not contribute much to the profits of the Company since its operation was affected for a large part of the year due to the floods in July The Company has reestablished a much larger facility and is in the process of executing its pending order book in animation. 35

38 Exceptional Item During the year, the Company sold its entire shareholding in its 100% subsidiary, UTV International (Holdings) Limited, BVI. Upon sale of this company, the accumulated losses of the subsidiary in the consolidated books of the Company were transferred out, resulting in a gain of Rs 51 million that has been recognised as an exceptional income. Provision for Taxation Provision for Taxation made during the year was Rs 25 million working out to an effective tax rate of about 22% of Profit before tax and Exceptional Items. The tax rate is lower than corporate tax rate due to the tax efficiencies in the foreign subsidiaries of the Company. Net profit after Tax and Minority Interest The Net profit after tax and minority interest for the year was lower at Rs 142 million as against Rs 162 million in the previous year. This was primarily due to the under performance of two films in the distribution business and due to pressure on margins in the television business. The decrease in profits due to these reasons was partially offset by the recognition of the exceptional gain on sale of UTV International (Holdings) Limited, BVI. CONSOLIDATED FINANCIAL POSITION SOURCES OF FUNDS Share Capital, Revenues and Surplus The Equity share capital of the Company remained unchanged in the year. The consolidated reserves and surplus reduced marginally from Rs. 1,174 million to Rs 1,143 million, a reduction of Rs 31 million mainly due to exclusion of the reserves of its erstwhile 100% subsidiary UTV International (Holdings) Limited, BVI, which was sold off during the year. Loan Funds The borrowings of the Company increased by Rs 831 million from Rs. 184 million to 1,015 million during the year. The increased borrowings were used to fuel the Company s growth. The Company has implemented an expansion project by investing about Rs 85 million in expanding the animation facility, around Rs 90 million in expanding the post-production facility, Rs 228 million for movies under production and Rs 452 million was used for investments in its Joint Venture company United Home Entertainment Ltd. Both the animation and post-production facility have become operational in May and July 2006 respectively. UTILISATION OF FUNDS Fixed Assets During the year, the net block of fixed assets of the Company has fallen to Rs 283 million from Rs 296 million at the end of the previous year. This is mainly due to the reduction in fixed assets of Rs 29 million on account of the sale of its 100% subsidiary, UTV International (Holdings) Limited. Actual additions to fixed assets during the year was at Rs 45 million. The capital-work-in-progress as on March 31, 2006 represents the investments made by the Company in the expansion of its animation and post-production facilities, which is to the tune of about Rs 124 million. The benefits of these investments would be felt in the coming financial year when these facilities have gone live. Investments During the year, the investments of the Company increased by Rs 35 million compared to the previous year. Short-term deployment of IPO funds in mutual fund units of Rs 160 million was redeemed during the year and invested in various business activities of the Company. Investment of Rs. 195 million was made in Zero Coupon fully convertible preference shares of the Joint Venture Company United Home Entertainment Ltd. Current Assets, Loans and Advances Total current assets, loans and advances increased by Rs 688 million during the year from Rs 1,572 million in the previous year to Rs 2,260 million. Debtors (net) as on March 31, 2006 were at Rs 582 million representing 102 days of sale as against Rs 572 million as on March 31, 2005 representing 118 days of sale. During the year, inventories have increased by Rs 311 million on the back of increased investment in movie stock and acquisition of television content. Loans and advances have increased by Rs 437 million. This is mainly due to advances made by the Company to its Joint Venture company United Home Entertainment Ltd. Increase in advances is also due to increased level in business activities, particularly in the television airtime sales business. Cash and bank balances dropped by Rs 66 million from Rs 132 million in the previous financial year to 36

39 UTV Software Communications Limited Rs 66 million in the current year. The IPO funds, invested in bank fixed deposits in the last financial year were redeployed in business activities in the current year. Current Liabilities and Provisions Current Liabilities has increased by about Rs 44 million. Due to increased level of activity, creditors of the Company have increased. Net Deferred Tax Asset/Liability Net Deferred tax liability which was at Rs 8 million as at the end of the previous year, increased to Rs 26 million as at the end of the current financial year. The increase of Rs 18 million was mainly due to utilization of deferred tax assets during the year on account of unabsorbed losses and depreciation. SEGMENTAL PERFORMANCE Television Revenues from the television segment declined by 22% to Rs 711 million during the year from Rs 909 million in the previous year. The main reason for a decline in revenues from the television segment was a fall in revenues from TV content production during the year, which in turn was due to the natural end of some of the shows. The Company however, added to its list of clients channels like Zee Café and Sony Entertainment Television during the latter part of the year. Revenues were also lower because of a fall in revenues from the animation division, which was affected by the floods in Mumbai. The decline in revenues and pressure on margins during the year resulted in the drop in profit from Rs 130 million in the previous year to Rs 60 million in the current year. Movies Revenues from the movies segment grew 69% to Rs 1,310 million during the year from Rs 774 million in the previous year due to an expansion in the level of activity. The segment result however, saw a decline in the profitability by 28% from Rs 148 million in the previous year to Rs 107 million in the current year. This was mainly due to losses made on two key distribution properties Shaadi No. 1 and Deewane Hue Pagal. Allied Content Services Revenues from this segment declined by 20% to Rs 78 million during the year under review as compared to Rs 98 million during the previous year. The Company has recently expanded its post-production facility by making investments in VFX and other modern facilities as a result of which it can now cater to the growing film industry. The segment result however, saw an increase in the profitability by 4% from Rs 25 million in the previous year to Rs 26 million in the current year. OTHER COMPANY INFORMATION Induction of Strategic Investor The Company has executed a Share Subscription Agreement for inducting The Walt Disney Group ( Disney ), an international media major as a strategic investor into the Company through preferential allotment. This investment is pending shareholders and regulatory approvals. UTV is expected to derive significant synergies with Disney s operations worldwide in various segments of media and entertainment and aim at scaling up operations. Stake sale in Hungama TV As part of UTV s strategy to attain leadership position in content creation across all platforms and grow organically and in-organically, UTV and its promoters have executed agreements to divest their entire equity and preference share holding in their Kids broadcasting venture, United Home Entertainment Ltd., which owns and operates Hungama TV to Disney. After completion of this transaction subject to regulatory approvals Disney will own and operate entire operations of Hungama TV. Sale of UTV International (Holdings) Limited During the year the Company sold its entire shareholding in its 100% subsidiary, UTV International (Holdings) Limited, BVI to Media Footing SDN BHD. UTV International (Holdings) Limited, BVI had a 70% stake in Antah UTV Multimedia & Communications SDN BHD. Both these companies have been non-operational and hence defunct over last few years. Human Resources The Company seeks, respects and values the diverse qualities and backgrounds that its people bring to it and is committed to utilizing the richness of knowledge, ideas and experience that this diversity provides. The work environment is stimulating and development of core competencies through formal training, job rotation and hands on training is an ongoing activity. It has built a resource base of crossfunctional managers to take care of multi dimensional businesses. 37

40 As at March 31, 2006, the Company and its subsidiaries had 369 employees, long-term professional associates and animation talent, the classification of which is as under Top Management 11 Creative & Technical 200 Sales, Production and Marketing 72 Support 86 TOTAL 369 Utilisation of IPO Funds During the year, the Company fully utilised the IPO funds raised during its maiden IPO in March There has been some change in the pattern of utilization of IPO funds from that stated in the prospectus at the time of the IPO. The details of the amounts proposed to be utilised as per the Prospectus and actual utilization with reasons for changes if any are given below: All figures in Rs million Particulars Projected Actual Difference in the funds Prospectus utilised till March 31, 2006 a. Capital expenditure for enhancement of production facility/office infrastructure to replace the existing leased facilities premises, interior and setup 100 (100) b. Editing and other equipment for captive use of UTV content production 20 (20) c. Providing interest free loan to subsidiary United Entertainment Solutions Ltd. for investment in post production expansion 60 5 (55) d. Investment in United Home Entertainment Ltd. in form of Equity and Preference capital for funding Hungama TV e. Working capital for Movie production/distribution initiatives f. IPO Expenses a. Office Infrastructure - The Company had envisaged acquiring new premises and doing up the interiors at a cost of about Rs 100 million. Since the property market was on the rise, the Company could not get adequate space in the allocated costs and hence thought it prudent to go in for leased premises. The company has leased over 24,000 sq. ft. of office space in Mumbai and has set up its animation, post-production and general office setup in the new premises at a cost of over Rs 31 million. b. Investment in editing and other equipment for captive use of UTV content production The Company has not yet finalised these equipments and would acquire these as and when required out of internal accruals. c. Providing interest free loan of Rs 60 million to subsidiary United Entertainment Solutions Ltd. (UESL) for investment in postproduction expansion. The subsidiary UESL, has been able to get funding from a bank for its expansion project and hence the outflow envisaged of Rs 60 million has got reduced to Rs 5 million from the IPO funds. d. Working capital for movie production/distribution initiatives - Since the Company had not invested the projected amounts in (a), (b) and (c) above, the surplus funds available were invested in its business viz., movie production and distribution activity. e. The IPO expenses were over budget by Rs 9 million. RISK FACTORS i. The Company operates in highly competitive environment that is subject to innovations, changes and varying levels of resources available to each player in each segment of business. ii. Certain parts of companies business like production of television content, post-production and dubbing are highly fragmented with competition ranging from other organized large players to individual producers. iii. Acceptance of the Company s film and television programming by the public is difficult to predict, which could lead to fluctuations in revenues, and the Company s business of film production and distribution involves high level of risks. iv. Most of the activity undertaken by the Company is creativity driven and Company s long-term profitability is dependent on its ability to attract and retain creative and technical talent. v. The Company s business is in-significantly regulated and segments of media and entertainment changes in regulations could adversely affect its operations. 38

41 UTV Software Communications Limited AUDITORS REPORT Auditors report to the Board of Directors of UTV Software Communications Limited on the Consolidated Financial Statements of UTV Software Communications Limited and its Subsidiaries. 1. We have audited (refer para 3(a) to 3(c)) the attached consolidated Balance Sheet of UTV Software Communications Limited and its subsidiaries (the Group) as at March 31, 2006, and also the consolidated Profit and Loss Account and the consolidated Cash Flow Statement for the year ended on that date annexed thereto. These consolidated financial statements are the responsibility of the UTV Software Communications Limited s management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the 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 misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. (a) We did not audit the financial statements of subsidiaries, UTV Communications (UK) Ltd, UTV Communications (Mauritius) Ltd and UTV Communications (USA) LLC whose financial statements reflect the Group s share of total assets of Rs lakhs as at March 31, 2006 and the Group s share of total revenues of Rs lakhs and net cash inflows amounting to Rs lakhs for the year ended on that date as considered in the consolidated financial statements. These financial statements and other information of the subsidiaries have been audited by other auditors whose reports have been furnished to us, and our opinion, in so far as it relates to the amounts included in respect of these subsidiaries, is based solely on the report of other auditors. (b) The financial statement of subsidiary UTV International Holding Ltd., whose financial statement reflect the total assets of Rs lakhs as at March 17, 2006, the date of divestment, and the total revenues of Rs. Nil and net cash inflows amounting to Rs lakhs for the period ended on that date have not been audited. (c) As referred in note B 1 of Schedule 23- the consolidated financial statements do not include the proportionate interest of UTV Software Communications Limited in Joint Venture, United Home Entertainment Limited as joint venture operates under severe long term restrictions that significantly impair the joint venture ability to transfer funds to the joint venture partners as UTV Software Communications Limited does not have significant control over the financial and operating policies of associate. 4. We report that the consolidated financial statements have been prepared by the UTV Software Communications Limited s management in accordance with the requirements of Accounting Standard 21, Consolidated Financial Statements and Accounting Standard 27, Financial Reporting of Joint Ventures (refer para 3(a) to 3(c)) issued by the Institute of Chartered Accountants of India. 5. Based on our audit and on consideration of the reports of other auditors on separate financial statements and on the other financial information of the components, in our opinion and to the best of our information and according to the explanations given to us, the attached consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India: a) in the case of the consolidated Balance Sheet, of the state of affairs of UTV Software Communications Limited Group as at March 31, 2006; b) in the case of the consolidated Profit and Loss Account, of the profit of UTV Software Communications Limited Group for the year ended on that date; and c) in the case of the consolidated Cash Flow Statement, of the cash flows of UTV Software Communications Limited Group for the year ended on that date. Natraj Ramkrishna Partner Membership No. F For and on behalf of Price Waterhouse & Co. Chartered Accountants Place : Mumbai. Dated: 24th July,

42 CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006 Schedule As at As at No. March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands SOURCES OF FUNDS Shareholders Funds Share Capital 1 194, ,936 Reserves and Surplus 2 1,143,048 1,337,984 1,173,666 1,368,602 Minority Interest - 27,370 Loan Funds Secured Loans 3 1,014, ,412 Unsecured Loans 4-1,014,822 10, ,412 Deferred Tax Liability 5 91, ,164 Deferred Tax Assets 6 64,882 26,303 96,272 7,892 TOTAL 2,379,109 1,588,276 APPLICATION OF FUNDS Fixed Assets 7 Gross Block 529, ,897 Less : Accumulated Depreciation 246, ,055 Net Block 283, ,842 Capital Work in Progress 124, , ,842 Investments 8 200, ,415 Current Assets, Loans and Advances Inventories 9 783, ,524 Sundry Debtors , ,916 Cash and Bank Balances 11 66, ,623 Other Current Assets ,693 Loans and Advances , ,933 2,260,463 1,571,689 Less : Current Liabilities and Provisions Current Liabilities , ,907 Provisions 15 5,443 4, , ,670 Net Current Assets 1,771,219 1,127,019 Miscellaneous Expenditure 16 (To the extent not written off or adjusted) TOTAL 2,379,109 1,588,276 NOTES TO THE FINANCIAL STATEMENTS 23 Schedules referred to above and notes attached thereto form an integral part of the Balance Sheet. This is the Balance Sheet referred to in our report of even date. Natraj Ramkrishna Ronald D mello Rohinton Screwvala Partner Executive Director and CMD & Chief Executive Officer Membership No. : F Chief Operating Officer For and on behalf of Price Waterhouse & Co. Mohd. Sajid Ali Sanjaya Kulkarni Chartered Accountants Company Secretary Director Place : Mumbai Place : Mumbai Date : 24th July, 2006 Date : 24th July,

43 UTV Software Communications Limited CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 Schedule Year Ended Year Ended No. March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands INCOME Sales and Services 17 2,084,152 1,767,919 Other Income 18 47,866 36,278 2,132,018 1,804,197 EXPENDITURE Direct Cost 19 1,695,084 1,264,766 Staff Cost , ,252 Other Expenses , ,694 1,968,240 1,519,712 PROFIT BEFORE INTEREST, DEPRECIATION AND TAX 163, ,485 Less : Interest (net) 22 18,253 PROFIT BEFORE DEPRECIATION AND TAX 163, ,232 Less : Depreciation 7 47,365 52,778 PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS 116, ,454 Add : Exceptional Item (Refer Note C 6 of Sch. 23) 50,603 PROFIT BEFORE TAX 167, ,454 Less : Provision for Taxation - Current 8,300 16,795 (Includes Wealth Tax Rs. Nil, (Previous Year Rs.300 ( 000))) - Mat Credit Utilisation (4,277) - Prior Years Fringe Benefit Tax 2,211 - Deferred (Refer Note 1 B (6) of Sch. 23) 18,413 24,816 33,518 50,754 PROFIT AFTER TAX AND BEFORE MINORITY INTEREST 142, ,700 Less : Minority Interest 260 PROFIT AFTER MINORITY INTEREST 142, ,440 Balance Profit Brought Forward 376, ,206 NET PROFIT AVAILABLE FOR APPROPRIATION 518, ,646 BALANCE CARRIED TO BALANCE SHEET 518, ,646 Earnings Per Share of Rs.10 each (Refer Note C 10 (a) of Sch. 23) Basic Diluted NOTES TO THE FINANCIAL STATEMENTS 23 Schedules referred to above and notes attached thereto form an integral part of the Profit and Loss Account. This is the Profit and Loss Account referred to in our report of even date. Natraj Ramkrishna Ronald D mello Rohinton Screwvala Partner Executive Director and CMD & Chief Executive Officer Membership No. : F Chief Operating Officer For and on behalf of Price Waterhouse & Co. Mohd. Sajid Ali Sanjaya Kulkarni Chartered Accountants Company Secretary Director Place : Mumbai Place : Mumbai Date : 24th July, 2006 Date : 24th July,

44 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands A. Cash Flow from Operating Activities : Net Profit before tax and exceptional items 116, ,454 Adjustments for: Depreciation 47,365 52,778 Interest Expense 27,076 21,156 Interest Income (39,604) (2,903) Loss on sale of Fixed Assets (Net) 1,877 1,991 Loss on sale of Investments (417) (22,878) Amortisation of Television and Animation Programmes 2,772 11,112 Irrecoverable Deposits, Employee Loans and Advances written off/provided - 14,964 Provision for Doubtful Debts 4,161 10,617 Provision no longer required written back (25,353) (7,089) Provision for Gratuity & Leave Encashment 680 (2,214) Amortisation of movie copyrights 103,937 24,178 Loss/(Gain) on Foreign Exchange Transactions Other Provision - 19 Any other item (Misc. Expenditures) 367 1,687 Operating Profit Before Working Capital Changes 240, ,872 Adjustments for changes in working capital : - (INCREASE)/DECREASE in Sundry Debtors (180,310) (215,205) - (INCREASE)/DECREASE in Other Receivables (414,131) (259,764) - (INCREASE)/DECREASE in Inventories (388,554) (156,287) - INCREASE/(DECREASE) in Trade and Other Payables 6,962 (24,272) Cash Generated From Operations (735,852) (338,656) - Taxes Paid (Net of Tax Deducted at source) (27,181) (22,716) Net Cash From Operating Activities (A) (763,033) (361,372) B. CASH FLOW FROM INVESTING ACTIVITIES : Purchase of Fixed Assets Additions during the year (76,229) (52,283) Proceeds from Sale of Fixed Assets 1,461 1,346 Proceeds from Sale of Investments (net) 160, ,804 (Purchase)/Sale of Investments (195,100) (164,908) Interest Received (Revenue) 39,604 2,903 Net Cash Generated From Investing Activities (B) (69,839) 101,862 C. Cash Flow from Financing Activities : Proceeds from fresh issue of Share Capital (including Share Premium ) - 601,000 Payment for IPO expenses (34,614) (21,000) Proceeds from Long Term Borrowings Receipts [Excludes Exchange Fluctuation of Rs. 1,836 ( 000)] (Previous Year Rs. 702 ( 000) on reinstatement of Foreign Currency Loan] 160, Payment (1,397) (33,337) Proceeds from short term borrowings: - Receipts 174, Payment - (30,752) Proceeds from Cash Credits (Net) 511,192 (103,768) Interest Paid (18,550) (22,337) Interest Paid - Capitalised (31,984) (3,356) Net Cash Generated From Financing Activities (C) 758, ,964 42

45 UTV Software Communications Limited CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands Net Increase/(Decrease) in Cash & Cash Equivalents (A) + (B) + (C) (73,914) 127,454 Cash and Cash Equivalents as at March 31, ,623 6,511 Consolidation Adjustment 7,435 (1,342) Cash and Cash Equivalents Transferred Pursuant to Sale of Subsidiary (Refer Note C 6 of Sch. 23) (142) - Cash and Cash Equivalents as at March 31, , ,623 Cash and Cash Equivalents Comprise Cash, Cheques & Drafts (in hand) and Remittances in transit 2,072 10,759 Balance with Scheduled Banks 63, ,864 Notes : 66, , The above Cash Flow Statement has been prepared under the Indirect Method setout in Accounting Standard- 3 issued by the Institute of Chartered Accountants of India. 2. Figures in brackets indicate cash outgo. 3. Cash and cash equivalents includes Rs. 142 ( 000) which are not available for use by the Company (Refer Sch. 14 of the financial statement). 4. Previous years figures have been regrouped wherever necessary. This is the Cash Flow Statement referred to in our report of even date. Natraj Ramkrishna Ronald D mello Rohinton Screwvala Partner Executive Director and CMD & Chief Executive Officer Membership No. : F Chief Operating Officer For and on behalf of Price Waterhouse & Co. Mohd. Sajid Ali Sanjaya Kulkarni Chartered Accountants Company Secretary Director Place : Mumbai Date : 24th July, 2006 SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006 As at As at March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands 1 SHARE CAPITAL AUTHORISED 21,000,000 Equity Shares of Rs.10/- 210, ,000 (Previous Year 21,000,000 Equity Shares of Rs.10/- each) ISSUED AND SUBSCRIBED 19,493,608 Equity Shares of Rs. 10/- each 194, ,936 (Previous Year 19,493,608 Equity Shares of Rs. 10/- each) TOTAL 194, ,936 Note : Out of the issued and subscribed Share Capital, 67,05,882 Equity Shares of Rs.10/- each were issued without consideration in cash as Bonus Shares by capitalization of Share Premium in the F.Y to the then existing Shareholders of the Company, 46,64,824 Equity Shares of Rs.5/- each (23,32,412 Equity Shares of Rs.10/- each) were issued without consideration in cash to various shareholders under a share swap arrangement in the F.Y as part of consolidation exercise carried out in the said year and 1,82,932 Equity Shares of Rs.5/- each (91,466 Equity Shares of Rs.10/- each) were issued to shareholders of Western Outdoor Media Technologies Limited as per the Scheme of Arrangement for demerger of its studio division to the company in F.Y

46 SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006 As at As at March 31, 2006 March 31, 2005 Notes Rs. in Thousands Rs. in Thousands 2 RESERVES AND SURPLUS SECURITIES PREMIUM ACCOUNT As per last Balance Sheet 616, ,130 Add : Premium on shares issued - 552, , ,130 Less: Share Issue Expenses - 70, , ,451 CAPITAL RESERVE - (Refer Note C 6 of Sch. 23) - 175,664 GENERAL RESERVE As per last Balance Sheet 7,641 7,640 Add : Minorities share of Profits of UESL - 1 7,641 7,641 Foreign Currency Translation Reserve 110 (2,736) PROFIT & LOSS ACCOUNT As per annexed Profit and Loss Account 518, ,646 TOTAL 1,143,048 1,173,666 3 SECURED LOANS Cash Credit From Banks 1 549,849 53,487 [Includes Bill Discounting Account] Working Capital Loan 1 184, ,233 Term Loan From Banks 1 279,558 2,692 Others 2 1,295 - TOTAL 1,014, ,412 Notes : 1. Cash credit and working capital loans from banks are repayable on demand. Term Loan from IDBI and SBI are secured by hypothecation of moveable fixed assets, inventories, book debts, programming properties and the personal guarantee of a Director of the Company. 2. Secured against the hypothecation of vehicles. 4 UNSECURED LOANS Inter Corporate Deposits - 10,000 TOTAL - 10,000 5 DEFERRED TAX LIABILITY (Refer Note 1 B (6) of Sch. 23) Deferred Tax Liability Arising on account of timing difference in : - Depreciation 21,197 24,839 - Inventories 69,988 79,325 TOTAL 91, ,164 6 DEFERRED TAX ASSETS (Refer Note 1 B (6) of Sch. 23) Deferred Tax Assets Arising on account of timing difference in : - Provision for Doubtful Debts 5,977 1,123 - Provision for Loans and Advances 6,446 7,008 - Unabsorbed losses & Depreciation 50,648 82,568 - Provision for Gratuity Provision for Leave encashment 1, Other - 4,052 TOTAL 64,882 96,272 44

47 UTV Software Communications Limited SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006 SCHEDULE 7 - FIXED ASSETS (Rs. in Thousands) COST DEPRECIATION / AMORTISATION NET BLOCK Particulars Opening Consolidation Adjust- Additions Deductions As at Opening Consolidation Adjust- For the Deductions As at As at As at As at Adjustment As at Adjust- Year # (A) ment (B) (A-B) Tangible Asset Leasehold Improvements 44,892 (10,108) ,604 23,577 (8,300) 4,734 20,011 15,593 21,315 Plant & Machinery 357,578 (17,362) 25,679 5, , ,842 (12,078) 31,905 2, , , ,736 Furniture & Fixtures 56,574 (754) 2, ,362 35,195 (390) 3, ,361 19,001 21,379 Computers 26,229 2 (744) 9,291 34,778 17,284 (382) (708) 3,552 19,746 15,032 8,945 Office Equipments 15, ,127 4,077 1,122 5,199 10,928 11,097 Motor Vehicles 10, ,839 3,152 1, ,212 6,627 7,698 (Refer Note (a)) Intangible Asset Computer Software 7,600 6,239 13,839 3,928 1,368 5,296 8,543 3,672 Grand Total 518,897 2 (28,968) 45,022 5, , ,055 (382) (21,476) 47,365 2, , , ,842 Capital Work in Pogress, at cost (including Capital Advances) (Refer Note b)) 124,330 Total 407, ,842 Previous Year 471,447 (692) 52,369 4, , ,773 (606) 52, , ,842 # Refer Note B 2 (ii) of Schedule Refer Note C 6 of Schedule 23 Notes: a. The Net Book value of Motor Vehicles includes value of vehicles acquired under loan amounting to Rs. 4,470 ( 000) [Previous year - Rs. 5,399 ( 000)]. b. The Capital Work in Progress includes Rs. 42,574 ( 000) [Previous year - Rs. Nil], which were subsequently obtained on lease by hypothecation of the same assets. 45

48 SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006 Nos. as at Nos. as at Face Value As at As at March 31, 2006 March 31, 2005 Rupees March 31, 2006 March 31, INVESTMENTS Rs. in Thousands Rs. in Thousands (Refer Note 1 B (3) of Sch. 23) Long Term, Trade and Others Equity Shares of Companies a) Quoted Radaan Mediaworks India Limited 62,500 62, b) Others (Unquoted) (i) United Teleshopping and Marketing Company Limited 600, , (ii) Homland Network Corporation 352, , USD 2 2 (iii) United Home Entertainment Ltd. 490, , ,900 4,900 Preference Shares of Companies Unquoted Homland Network Corporation 125, , USD 5 5 United Home Entertainment Ltd. 19,510, ,100 (Refer Note C 5 of Sch. 23) Short Term Investments Investment in Mutual fund (Quoted) Reliance Fixed Term Scheme - Monthly Plan Growth Option 1,000, ,000 Kotak Floater Short Term - Growth 2,300, ,000 UTI Liquid Cash Plan Institutional - Growth Option 18, ,000 JM Floater Fund - Short Term Plan - Growth Option 1,375, ,000 HSBC Floating Rate Fund - Short Term - Institutional Option - Growth 982, ,008 Tata Liquid Super High Inv. Fund - Appreciation 16, ,000 Birla Cash Plus Institutional Plan - Growth 836, ,000 Prudential ICICI Floating Rate Plan - Growth 1,361, ,000 Kotak Liquid (Institutional) - Growth 1,126, ,000 Tata Floating Rate Short Term Inst. Plan - Growth 1,456, ,000 TOTAL 200, ,415 Cost Market value Cost Market value As at As at As at As at March 31, 2006 March 31, 2006 March 31, 2005 March 31, 2005 Rs. in Thousands Rs. in Thousands Rs. in Thousands Rs. in Thousands Aggregate Value of Quoted Investments , ,624 Aggregate Value of Unquoted Investments 200,007 4,907 TOTAL 200, ,415 46

49 UTV Software Communications Limited SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006 As at As at March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands 9 INVENTORIES (Refer Note 1 B (4) of Sch. 23) (As certified by the Management) Raw Stocks - Tapes and Films 5, Unamortised cost of Completed - Television Programmes - 3,103 - Movie Copyrights 278, ,873 Unutilised Free Commercial Time 42,940 11,863 Projects in Progress 42,418 34,133 Films Under Productions (Refer Note C 12 of Sch. 23) 413, ,216 TOTAL 783, , SUNDRY DEBTORS - (Unsecured, Considered Good) (Refer Note C 7(d) of Sch. 23) i. Over Six months Billed - considered good 139, ,929 - considered doubtful 17,756 13,595 Unbilled - Considered good 2, , ,524 Less : Provision for doubtful debts 17, ,889 13, ,929 ii. Other Debts - considered good Billed 395, ,561 Unbilled 44, ,836 26, ,987 TOTAL 581, , CASH AND BANK BALANCES i. Cash and Cheques on Hand 2,079 10,759 ii. Balance with Scheduled Banks - Current Account 57,491 39,064 - Fixed Deposit Account 6,142 82,708 - Others TOTAL 66, , OTHER CURRENT ASSETS Interest Receivable Others - 1,607 TOTAL 86 1,693 47

50 SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2006 As at As at March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands 13 LOANS AND ADVANCES Unsecured & Considered Good unless otherwise stated Advances recoverable in cash or in kind or for value to be received (Refer Note C 7 (a) of Sch. 23) 119,808 65,833 MAT Credit Entitlement 4,277 - UTV Employees Welfare Trust 19,344 17,584 Advance to Suppliers 146,032 44,376 Less : Provision for irrecoverable advance 19, ,881 19,151 25,225 Advance towards Share Capital - 195,100 (Refer Note C 5 of Sch. 23) Advances to Associate 474,650 28,971 (Refer Note C 7 (b) of Sch. 23) Advance Tax Less Provision 45,608 29,107 Other Deposits 38,901 31,113 TOTAL 829, , CURRENT LIABILITIES Sundry Creditors for Capital Goods, Materials & Expenses - Small Scale Industrial Undertakings Advance from Associate Company 62 1,120 (Refer Note C 7 (c) of Sch. 23) - Others 382, ,187 Advances from customers 31, ,148 Advance Billings 23,217 9,465 Unpaid Dividend * Interest Accrued But Not Due 8, Other Liabilities 38,467 37,832 TOTAL 483, ,907 * (There are no amounts due and outstanding to be credited to Investor Education and Protection Fund) 15 PROVISIONS Provision for Wealth Tax less Payment Provision for Employees Retirement Benefits 5,381 4,701 TOTAL 5,443 4, MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) Opening balance - 1,687 Less : Written off to P & L Account - (1,687) Add : Share Issue Expenses - 70,679 Less : Transferred to Share Premium Account - (70,679) TOTAL

51 UTV Software Communications Limited SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 Year Ended Year Ended March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands 17 SALES AND SERVICES (Refer Note 1 B(8) of Sch. 23) Sales and Service Revenues 2,084,152 1,767,919 TOTAL 2,084,152 1,767, OTHER INCOME Insurance Receipt 9,000 - Provision no longer required Written Back 22,353 7,089 Miscellaneous Income 3,166 6,293 Profit on Sale of Investments - 22,878 Capital Gains Interest Income (net) 12,930 - TOTAL 47,866 36, DIRECT COST Telecast Fees 122, ,138 Cast and Technicians Fees and Commission 178, ,747 Equipment Hire, Sets, Costumes and Venue Hire 69, ,591 Footage Expenses 1,052, ,042 Consumption of Rawstock of Video Tapes and Films 57,663 41,651 Post Production Charges 94,390 16,618 Travelling Expenses 5,979 4,582 Advertisement & Publicity 122,748 17,541 Amortisation of Television Programmes 2,772 11,112 Amortisation of Movie Copyrights 103,937 24,178 Director s Commission Miscellaneous Expenses 42,996 46,720 1,853,412 1,382,000 Less: Amounts inventorised Towards Free Commercial Time and Unexploited Movie rights 158, ,234 TOTAL 1,695,084 1,264,766 49

52 20 STAFF COST SCHEDULES ANNEXED TO AND FORMING PART OF THE CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 Year ended Year ended March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands Salaries, Wages, Bonus and Gratuity 148, ,596 Contribution to Provident and Other Funds 3,445 2,897 Staff Welfare 7,576 2,759 TOTAL 160, , OTHER EXPENSES Rent - Premises 20,435 16,947 Repairs and Maintenance: Plant and Machinery 1,325 4,472 Others 9,511 10,836 4,875 9,347 Rates & Taxes Insurance 3,677 3,989 Electricity Charges 6,778 8,148 Travelling & Conveyance Expenses 13,561 9,449 Communication & Postage Expenses 8,699 5,732 Provision for Doubtful Debts 4,161 10,617 Advertisement and Business Promotion Expenses 11,518 5,218 Loss on sale of Fixed Assets (Net) 1,877 1,991 Loss on Foreign Exchange Fluctuation (Net) 907 2,358 Irrecoverable Deposits, Employees Loans and Advances Written Off / Provided - 14,964 Directors Sitting Fees Miscellaneous Expenses 30,395 37,355 TOTAL 113, , INTEREST (Net) Interest on Loan On Fixed Loans 13,833 3,562 Others 13,243 27,076 17,594 21,156 Less : Interest Received : 39,604 2,903 On Receivables and Others [Tax Deducted at Source Rs. 8,317 ( 000)] [Previous year - Rs. 10 ( 000)] Less : Interest Income Trf. to Other Income 12,528 - TOTAL - 18,253 50

53 A Background UTV Software Communications Limited SCHEDULE 23 : SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS UTV Software Communications Limited was incorporated under the laws of India on June 22, 1990 and has five subsidiaries - United Entertainment Solutions Limited, UTV Communications (USA) LLC, UTV Communications (UK) Limited, UTV Communications (Mauritius) Limited and UTV International Holdings Limited (UTVIH) of which UTVIH and a 69.99% subsidiary of UTVIH namely Antah UTV Multi-Media & Communication Sdn. Bhd. ceased to be a subsidiary of the Company effective March 17, 2006 pursuant to the transfer made by the Company of its equity stake in the subsidiary vide an agreement dated March 17, 2006 (Refer Note C 6 of Schedule 23). Following are the date of the incorporation of the company s subsidiaries : Subsidiary Date of Incorporation Place of Incorporation United Entertainment Solutions Limited August 27, 1997 India UTV Communications (USA) LLC April 26, 2004 United States of America UTV Communications (UK) Limited September 6, 2004 United Kingdom UTV Communications (Mauritius) Limited October 4, 2004 Mauritius B Significant Accounting Policies 1 Basis of preparation of Consolidated Financial Statements: The Consolidated Financial Statements are prepared with references to Accounting Standard 21- Consolidated Financial Statements issued by the Institute of Chartered Accountants of India. The Consolidated Financial Statements of UTV Software Communciations Limited include the accounts of UTV Software Communications Limited and its subsidiaries United Entertainment Solutions Limited, UTV Communications (USA) LLC, UTV Communications (UK) Limited and UTV Communications (Mauritius) Limited and UTV International Holdings Limited (UTVIH) upto the date of ceasation i.e. March 17, 2006 and are prepared under historical cost convention in accordance with generally accepted accounting principles applicable in India. Considering the severe long-term restrictions imposed on United Home Entertainment Limited (Joint Venture) as per the shareholders agreement between UTV Software Communications Limited, Mr. Rohinton Screwvala and United Home Entertainment Limited and as confirmed by the Management relating to the transfer of funds including by way of dividend, distributions, bonus or otherwise to the shareholders for a period of five years and further based on legal opinion of the financial results of the Joint Ventures are not consolidated as per Accounting Standard 27 - Financial Reporting of Interest in Joint Venture. All inter-company accounts and transactions between group companies are eliminated. Reserves shown in the consolidated balance sheet represent the Group s share in the respective reserves of the Group companies. The Notes and Significant Accounting Policies to the Consolidated Financial Statements are intended to serve as a guide for better understanding of the Group s position. In this respect, the Group has disclosed such notes and policies, which represent the required disclosure. In accordance with Accounting Standard 21, Clause 26, the losses applicable to the Minority, to the extent, if it exceeds, the Minority s Interest in the Equity of the subsidiary, has been adjusted against the Majority Interest. 2 Fixed Assets and Depreciation : (i) (ii) Fixed assets are stated at cost of acquisition less accumulated depreciation. The Company capitalises all costs relating to the acquisition and installation of fixed assets, including financing costs. Depreciation is provided based on management estimate of useful lives of the fixed assets, on the straight line method prorata to the period of use or at the rates prescribed in Schedule XIV of the Companies Act, 1956, whichever is higher. The principal annual rates are : 51

54 Schedule 23 Contd... Asset Head Depreciation Rates Vehicles 9.50% Furniture 4.75%-10% Office Equipment 4.75% Computers 16.21%-20% Plant & Machinery 12.50% (iii) Leasehold Improvements are amortised over the period of lease. 3 Investments : Investments (all long term) are stated at cost, except where there is a diminution in value other than temporary, in which case requisite provision is made to write down the carrying value to recognise such decline. Investment acquired under share swap arrangements are recognised at fair value of securities, issued by the company under the swap arrangement. 4 Inventories : (i) Unamortised Cost of programming - For television programmes, the entire cost of the programme is charged to income when the programmes are first exploited. - The Company amortises 75% of the cost of movie rights acquired or produced by it, on first theatrical release of the movie. The said amortisation is made proportionately on Domestic Theatrical Rights, International Theatrical Rights, Television Rights, Music Rights and Video Rights based on Management estimate of revenues from each of these rights. In case of aforesaid rights not exploited alongwith or prior to the first theatrical release, proportionate appropriated cost of the said right is carried forward to be written off as and when such right is commercially exploited or at the end of one year from the date of first theatrical release, whichever occurs earlier. Balance 25% is amortised over the balance license period or based on management estimate of future revenue potential, as the case may be. The inventory, thus, comprises of unamortised cost of such movie rights. - UTV Communications (USA) LLC amortises the acquisition and distribution costs and accrue (expense) related costs using the individual-film-forecast-computation method, which amortises or accrues (expenses) such costs in the same ratio that current - period actual revenue bears to estimated remaining unrecognized ultimate revenue as of the beginning of the current fiscal year. (ii) Unutilised free commercial airtime (FCT) granted by the producer and/or broadcaster under Airtime Sales Agreements is stated at lower of cost or net realisable value. (iii) Projects in progress are stated at cost. Cost comprises the cost of materials, labour and overhead expenses. (iv) Pilot episodes are stated at cost. Pilots are written off at the end of 3 years from the year of production of respective pilot, in case the same is not developed into a serial. (v) Raw Stock and equipment spares are stated at lower of cost and net realisable value. (vi) Borrowing cost are accounted on accrual basis. (vii) The cost of funds borrowed specifically for the funding of a specific film is inventorised as part of cost of the film. The cost of funds borrowed generally is determined by applying a weighted average capitalization rate to the amount funded for the said film. (viii) Inventories of film accessories are stated at the lower of cost or net realisable value. 52

55 UTV Software Communications Limited Schedule 23 Contd... The Company evaluates the realisable value and/or revenue potential of year end inventory on an annual basis and appropriate write down is made in cases where accelerated write down is warranted. 5 Taxation : Provision for Income Tax has been made on the taxable profit for the period and is measured using the tax rate that have been enacted at the Balance Sheet Date. 6 Deferred Taxation : Deferred Tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current rate of tax, to the extent that the timing differences are expected to crystalise. 7 Foreign Currency Transactions : The translation of financial statements relating to foreign operations has been carried out using the following procedures : - assets and liabilities have been translated at closing rates; - income and expense items have been translated at an average rate; - The resultant transaction exchange gain/(loss) has been disclosed as Foreign Currency Translation Reserve under Reserves and Surplus. 8 Revenue Recognition : - Revenues on commissioned television programmes, commercials, in-flight programmes, dubbing and corporate documentary jobs are recognised on delivery. The amount recognised is the predetermined price, the collection of which is reasonably assured. - Revenues from sale of airtime are recognised in the period during which the spots are aired. - Revenues from licensing of owned television programmes and movies are recognised in accordance with the licensing agreement or on physical delivery of the programmes/movies, whichever is later. - Revenue of UTV Communications (USA) LLC, UTV Communications (UK) Limited and UTV Communications (Mauritius) Limited represent the total invoice value of sales made during the year. Revenue from licensing of movies are recognised in accordance with the licensing agreement or on physical delivery whichever is later. - Revenues for utilization of post production, studio facilities and technical services are recognised when the services are rendered. 9 Retirement Benefits : - The Company has various schemes of retirement benefits such as Gratuity and Provident Fund and the company s contributions are charged to the Profit and Loss Account. The gratuity scheme is administered through the Life Insurance Corporation of India (LIC). Annual contributions to the gratuity fund as determined by LIC are charged to the statement of Profit and Loss Account. The additional liability arising out of difference between the actuarial valuation and the fund balance with the LIC is accrued at the year end. - The Company accrues the leave encashment liability on the basis of actuarial valuation on unavailed accumulated leave balances at the year end. 10 Impairment of Assets : The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exist, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount 53

56 Schedule 23 Contd... is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Profit & Loss Account. If at the Balance Sheet date, there is an indication that if a previously assessed impairment loss no longer exist, the recoverable amount is reassessed and the asset is reflected at the recoverable amount. 11 Provisions and Contingent Liabilities : The Company recognises a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, no provision or disclosure is made. C Notes to the Consolidated Financial Statements 1 The List of subsidiaries included in the Consolidated Financial Statements is as under : Subsidiary Proportion of ownership Auditors as at March 31, 2006 United Entertainment Solutions Limited 99.98% Price Waterhouse & Co., Mumbai - India UTV Communications (USA) LLC 100% Rajeev Aggarwal, CPA UTV Communications (UK) Limited 100% Nagle James Associates Limited UTV Communications (Mauritius) Limited 100% Morison Mauritius Public Accountants During the year the Financial Statements of UTV International Holdings Limited (UTVIH) and a 69.99% subsidiary of UTVIH namely Antah UTV Multi-Media & Communication Sdn. Bhd. have been consolidated upto March 17, 2006, as they ceased to be subsidiaries of the Company pursuant to Share Sale Agreement (Refer Note C 6 of Schedule 23). 2 Capital Reserve/Goodwill The Capital Reserve in the Consolidated Financial Statement during the year is Nil on account of Sale of UTV International Holdings Ltd - BVI, in previous year Capital Reserve represents the excess of UTV Software Communications Ltd. shareholding in UTV International Holdings Ltd. over the book value of Investments. Particulars March 31, 2006 March 31, 2005 Investments in UTV International Holdings Limited 7,190 UTV Software Communications Limited shareholding in UTV International Holdings Limited 182,854 Capital Reserve 175,664 As at As at March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands 3 Estimated amount of contracts remaining to be executed on capital account and not provided for (Net of advances) 21,717 4 Contingent liabilities not provided for : (a) Claims against the Company not acknowledged as debts 34,400 34,400 (b) Sales Tax and Lease Tax 22,866 4,550 (c) Appeals filed in respect of disputed demands : (d) Income Tax 40,115 36,668 Bank guarantees/corporate guarantees/outstanding letter of credit for which the Company has given counter guarantees 482, ,966 (e) Bank Guarantee against EPCG Commitment 13,369 9,914 (f ) Legal cases and claims filed against the Company 41,312 39,602 54

57 UTV Software Communications Limited Schedule 23 Contd... 5 During the year, Rs.1,95,100 ( 000) have been adjusted from advance against share capital in United Home Entertainment Limited to Zero Coupon Optionally Convertible Preference Shares of United Home Entertainment Limited pursuant to Shareholders Agreement dated December 2, 2004 between the company, Mr. R. S. Screwvala and United Home Entertainment Limited. 6 During the year Company s entire equity investment in its 100% subsidiary, UTV International Holdings Limited - (BVI) was sold for a consideration of Rs. 22,638 ( 000). The resultant profit of Rs. 50,603 ( 000) arising on account of the differences in the sale consideration received and the net value of liabilities transferred of Rs. 27,965 ( 000) has been accounted as Exceptional Item in the Consolidated Profit and Loss account. 7 a) Advances recoverable in cash or kind include interest - free advances of Rs. 31,641 ( 000) [Previous Year Rs. 27,851 ( 000)] due from M/s Western Outdoor Media Technologies Limited (WOMTL) whose Studio Division was acquired by the Company during the year through a process of demerger sanctioned by the Order of the Hon ble Bombay High Court dated June 27, The said outstanding is considered good and recoverable by the management, from the continuing business operations of WOMTL. b) Advances to associate companies are as follows : Maximum amount As at As at O/s during the year March 31, 2006 March 31, 2005 Associate Companies Rs. in Thousands Rs. in Thousands Rs. in Thousands Television News & Entertainment (India) Limited 6,543 6,543 United Home Entertainment Limited 474, ,650 22,399 TOTAL 474,650 28,942 c) Advances from/other Payables to associate companies are as follows : Maximum amount As at As at O/s during the year March 31, 2006 March 31, 2005 Associate Companies Rs. in Thousands Rs. in Thousands Rs. in Thousands United Home Entertainment Limited United Tele-Shopping & Marketing Limited TOTAL 62 1,045 d) Debtors include amounts due from bodies corporate under the same management: Maximum amount As at As at O/s during the year March 31, 2006 March 31, 2005 Due from Associate Companies : Rs. in Thousands Rs. in Thousands Rs. in Thousands United Home Entertainment Limited 180, ,557 78, ,557 78,702 8 Pursuant to the Company s Initial Public offering of 45,00,000 equity shares of Rs. 10/- each issued at a premium of Rs. 120/- per share during previous year, the uses of IPO proceeds as at March 31, 2006 are as under: PURPOSE Uses of Funds as Actual Funds projected in the used as at prospectus March 31, 2006 Rs. in Thousands Rs. in Thousands 1 Capital expenditure for enchancement of production facility/office infrastructure to replace the existing leased facilities premises, interior and setup 100,000 2 Editing and other equipment for captive use of UTV content production 20,000 55

58 Schedule 23 Contd... Uses of Funds as Actual Funds projected in the used as at prospectus March 31, 2006 Rs. in Thousands Rs. in Thousands 3 Providing interest free loan to subsidiary United Entertainment Solutions Ltd. for investment post production expansion 60,000 5,000 4 Investment in United Home Entertainment Ltd. in form of Equity and Preference capital for funding Hungama TV 85,200 85,200 5 Working capital for Movie production / distribution initiatives 300, ,896 6 IPO Expenses 59,800 68, , ,000 9 The Company s significant leasing arrangements are mainly in respect of residential / office premises. The aggregate lease rentals payable on these leasing arrangements are charged as rent under Other Expenses in Schedule 21. These leasing arrangements are for a period not exceeding 5 years and are in most cases renewable by mutual consent, on mutually agreeable terms. The Company has placed a refundable deposit of Rs. 35,826 ( 000) [Previous Year Rs.18,049 ( 000)] in respect of these leasing arrangements. Future lease rentals payable are as follows: Payable Year ended Year ended March 31, 2006 March 31, 2005 Not Later than one year 28,557 Later than one year but not later than five years 113,591 Later than five years 10 Calculation of Earnings Per Share The earning considered in ascertaining the Company s earnings per share comprise the net profit after tax. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earning per share, and also the weighted average number of shares, if any, which would have been issued on the conversion of all dilutive potential equity shares. The number of shares and potentially dilutive equity shares are adjusted for consolidation of shares. Description As at As at March 31, 2006 March 31, 2005 Profit After Minority Interest (in 000) 142, ,440 Weighted average number of shares for basic earnings per share (nos.) - Equity Shares of Rs. 10/- each fully paid up 19,493,608 15,184,566 Weighted average number of shares for diluted earnings per share (nos.) - Equity Shares of Rs. 10/- each fully paid up 19,493,608 15,184,566 Earning Per Share (Rs.) Basic Diluted

59 UTV Software Communications Limited Schedule 23 Contd Related Party Disclosures as required by Accounting Standard (AS) 18 "Related Parties Disclosures issued by the Institute of Chartered Accountants of India are given below : Parties where control exists United Tele-Shopping & Marketing Limited Shareholders in the Company Unilazer Exports & Management Consultants Limited Shareholders in the Company Unilazer Hongkong Limited Shareholders in the Company Unitas Creative Television Limited Common Control Television News and Entertainment (I) Limited Common Control Vijay Broadcasting Private Limited Common Control United Home Entertainment Limited Common Control Key Management Personnel : Whole-time Directors Rohinton Screwvala Deven Khote Zarina Mehta (from April 27, 2005) Ronald D mello CMD & Chief Executive Officer Executive Director Executive Director Executive Director and Chief Operating Officer Non-Executive Directors Suketu Shah Darius Shroff Ketan Dalal Sanjaya Kulkarni Rahul Shah UTV Communications (USA) LLC Rohinton Screwvala Sridhar Sreekakula UTV Communications (UK) Limited Hitesh Chandrana Sridhar Sreekakula UTV Communications (Mauritius) Limited Ashraf Ramtoola Kamalam Pillay Rungapadiachy Non-Executive Director Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director 57

60 Schedule 23 Contd... Transactions with related parties, other than subsidiaries who have been considered for consolidation, are provided below: Associates Management Personnel Year ended Year ended Year ended Year ended March 31, 2006 March 31, 2005 March 31, 2006 March 31, 2005 Sale of goods - United Home Entertainment Limited 77, ,975 Rendering of services - United Home Entertainment Limited 27,578 3,598 Sale of Inventory - United Home Entertainment Limited 4,656 3,725 Finance (including loans & Equity contributions in cash or in kind) - Financed to United Home Entertainment Limited 200,000 - Prference shares in United Home Entertainment Limited 195,100 - Interest Charged to United Home Entertainment Limited 37,065 Remuneration - Rohinton Screwvala 7,219 7,211 - Zarina Mehta 1,553 - Ronald D mello 5,495 4,329 - Deven Khote 1,448 1,392 Guarantees and Collaterals - United Home Entertainment Limited 220, ,000 Expenses Charged to - United Home Entertainment Limited 12,959 12,926 Expenses Charged by - United Home Entertainment Limited 378 1,368 Advances Taken - Unilazer Exports & Management Consultants Limited 40,500 - Television News & Entertainment India Limited 12,500 - United Home Entertainment Limited ,983 - Others 2,273 Advances Given - Television News & Entertainment India Limited 17,500 - Unilazer Exports & Management Consultants Limited 67,500 - United Home Entertainment Limited 407, ,237 Collections against services rendered/sale of goods - United Home Entertainment Limited 114,496 49,730 Collections by - United Home Entertainment Limited 973 9,907 Receipt for services - United Home Entertainment Limited 14,400 1,841 Outstanding Balance - Payable - United Home Entertainment Limited Others Receivable - Television News & Entertainment India Limited 6,543 - United Home Entertainment Limited 577, ,101 - Others 6 12 In accordance with the Company s accounting policy, Films under production include Rs. 31,984 (Rs. in 000) as interest capitalised on movie projects under production. 58

61 UTV Software Communications Limited Schedule 23 Contd The business segment has been considered as the primary segment. The Company is organised into three main business segments namely TV Content, Movies, & Allied Services. The above business segments have been identified considering the different nature of activities carried on by these business divisions. Segment revenue, results, assets and liabilities have been accounted for on the basis of their relationship to the related business activities of the segment and amounts allocated on a reasonable basis to the business segment. The company has consolidated Television content, airtime sales, dubbing and advertisement film production into Television segment. (Rs. in Thousands) Particulars Television Movies Allied Content Inter Segment Total Services Adjst March March March March March March March March March March 31, , , , , , , , , , 2005 REVENUE External Revenue 711, ,349 1,309, ,984 78,344 98,387 (15,456) (13,801) 2,084,152 1,767,919 RESULT Segment Result 59, , , ,151 26,206 25, , ,120 Less : Interest (18,253) Unallocable Other Expenditure (124,333) (107,691) Add : Unallocable Other Income 98,470 36,278 Profit Before Taxation 167, ,454 OTHER INFORMATION Segment Assets 646, , , , , ,173 1,907,047 1,390,100 Unallocable Assets 1,026, ,118 Total Assets 646, , , , , ,173 2,933,235 2,129,218 Segment Liabilities 215, , , ,925 96,260 33, , ,087 Unallocable Liabilities 1,104, ,549 Total Liabilities 215, , , ,925 96,260 33,729 1,595, ,636 Depreciation Segment Depreciation Unallocable Depreciation 47,365 52,778 Total Depreciation 47,365 52,778 Non Cash Expenses other than Depreciation Segment Non Cash Expenditure 5,549 11, ,937 24,178 1,384 7, ,870 42,944 Unallocable Non Cash Expenditure Total Non Cash Expenses other than Depreciation 5,549 11, ,937 24,178 1,384 7, ,870 42,944 GEOGRAPHICAL SEGMENT Revenue India 611, , , ,727 78,245 97,430 (15,456) (13,801) 1,598,878 1,518,294 Outside India 100,154 59, , , , , , ,349 1,309, ,984 78,344 98,387 (15,456) (13,801) 2,084,152 1,767,919 Assets India Segment Assets 611, , , , , ,173 1,665,732 1,086,816 Unallocable Assets 1,026, ,118 Outside India 35, , , , , ,284 2,933,235 2,129,218 59

62 Schedule 23 Contd Assets and Liabilities as on March 31, 2006 and Income and Expenses for the year ended March 31, 2006 related to the interest of the Company in its Jointly Controlled Entity, United Home Entertainment Limited are : (Rs. in Thousands) Particulars March 31, 2006 March 31, 2005 Assets Net Fixed Assets 5,129 5,920 Deferred Tax Assets 33,221 35,581 Inventories 124, ,056 Sundry Debtors 30,221 3,929 Cash & Bank Balances Loans and Advances 27,515 19,450 Liabilities Secured Loans 74,680 83,825 Unsecured Loans 232,579 10,976 Deferred Tax Liability 33,221 35,581 Current Liabilities 85,353 91,917 Provisions Income Net Sales 61,223 10,399 Expenses Direct Cost 73,268 46,426 Staff Cost 12,063 14,060 Other expenses 99,546 93,910 Interest (Net) 26,947 2,576 Depreciation 1,487 7,399 The Joint Venture is in the business of operating a 24 hour kids channel by the name Hungama TV Subsequent to year end, the Company, United Home Entertainment Limited (UHEL), the shareholders of UHEL other than the Company and The Walt Disney Company (South East Asia) Pte. Ltd. (Disney) have entered into Sale and Subscription Agreement (SSA) dated July 24, 2006 wherein the Company has agreed to sell its entire equity and preference share holding in the Joint Venture to Disney for a consideration exceeding its present carrying value of the investment. Also as per the said SSA, all other receivable of the Company from the Joint Venture on the date of consummation of SSA, subject to all regulatory approvals, will be repaid by UHEL. Accordingly, there is no incidence of any potential diminution in the value of investment. Further all receivables and loans and advances as on the date of balance sheet from the Joint Venture are considered good and fully recoverable by the management. 15 Susequent to the year end, the Company has passed requisite resolution of its Board of Directors for the approval of issue of 34,00,000 equity shares to The Walt Disney Company (South East Asia) Pte. Ltd. and 19,49,360 warrants convertible into equity shares (one equity share for each warrant) as per the Guidelines for preferential issue as provided under chapter XIII of the Security and Exchange Board of India (Disclosure of Investor protection) Guideline, 2000 as amended for preferential issue of shares. The said resolutions are subject to requisite approval of the shareholders of the Company and regulatory authorities. 16 The Figures for the current year do not include results of UTV International Holdings Limited (BVI) and its subsidiary Antah UTV MultiMedia & Communication Sdn.Bhd. from March 17, 2006 as the same has ceased to be subsidiaries of the Company from March 17, 2006, figures of the Current year are not comparable with the previous year. 17 Figures pertaining to the subsidiary companies have been reclassified wherever necessary to bring them in line with the Parent Company s financial statements. Signatures to the Financial Statements and Notes attached thereto. Natraj Ramkrishna Ronald D mello Rohinton Screwvala Partner Membership No. : F Executive Director and Chief Operating Officer CMD & Chief Executive Officer For and on behalf of Price Waterhouse & Co. Mohd. Sajid Ali Sanjaya Kulkarni Chartered Accountants Company Secretary Director Place : Mumbai Place : Mumbai Date : 24th July, 2006 Date : 24th July,

63 UTV Software Communications Limited AUDITOR S REPORT Auditors Report to the members of UTV Software Communications Limited 1. We have audited the attached Balance Sheet of UTV Software Communications Limited, as at March 31, 2006, and the related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these financial statements based on out audit. 2. We conducted our audit in accordance with the 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 the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by 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 (Auditor s Report) Order, 2003, as amended by the Companies (Auditor s Report) (Amendment) Order, 2004, (together the Order ) issued by the Central Government of India in terms of sub-section (4A) of Sectin 227 of The Companies Act, 1956 of India (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 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to in paragraph 3, 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 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 appears from our examination of those books; (c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; (d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act; (e) On the basis of written representations received from the directors of the Company, as on March 31, 2006 and taken on record by the Board of Directors of the Company, none of the directors is disqualified as on March 31, 2006 from being appointed as a director in terms of Clause (g) of sub-section (1) of Section 274 of the Act; (f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto given in the prescribed manner the information required by the Act subject to Para 4.1 below with consequential effect thereof on the financial statement give a true and fair view in conformity with the accounting principles generally accepted in India: (i) in case of Balance Sheet, of the state of affairs of the Company as at March 31, 2006; (ii) in the case of the Profit and Loss Account, of the profit 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. 4.1 Note 9 Schedule 23, regarding remuneration paid to Directors aggregating to Rs lakhs awaiting Shareholders and Central Government approval. Natraj Ramkrishna Partner Membership No. F Place : Mumbai Dated : 24th July, 2006 For and on behalf of Price Watehouse & Co. Chartered Accountants 61

64 ANNEXURE TO AUDITOR S REPORT [Referred to in paragraph 3 of the Auditor s Report of even date to the members of UTV Software Communications Limited on the financial statements for the year ended March 31, 2006] 1. (a) The Company is maintaing proper records showing full particulars including quantitative details and situation of fixed assets. (b) The fixed assets are physically verified by the management according to a phased programme designed to cover all the items over a period of two years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies between the book records and the physical inventor have been noticed. (c) In our opinion, a substantial part of fixed assets has not been disposed off by the Company during the year. 2. (a) The inventory of tapes and films has been physically verified by the management during the year. In our opinion, the frequency of verification is reasonable. (b) In our opinion, the procedures of physical verification of inventory of tapes and films followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaing proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material and have been properly dealt with in books of account. 3. (a) The Company has granted unsecured loans, to a company covered in the register maintained under Section 301 of the Act. The maximum amount inovlved during the year and the year-end balance of such loans aggregates to Rs. 4, lakhs and Rs. 4, lakhs respectively. (b) In our opinion, the rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the Company. (c) In respect of the aforesaid loans, the parties are repaying the principal amounts as stipulated and are also regular in payment of interest, where applicable. (d) In respect of the aforesaid loans, in the cases where the overdue amount is more than Rupees One lakh, in our opinion, reasonable steps have been taken by the Company for the recovery of the principal amounts and interest, where applicable. (e) The Company has not taken loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, Clauses (iii) (f ) and (iii) (g) of paragraph 4 of the Order are not applicable to the Company. 4. In our opinion and according to the information and explanations given to us, having regard to the explanation that certain items of inventory purchased and services received are of special nature for which suitable alternative sources do not exist for obtaining comparative quotations, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system. 5. (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in Section 301 of the Act have been entered in the register required to be maintained under that section. (b) In our opinion and according to the information and explanantion given to us, the transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees Five Lakhs in respect of any party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time. 6. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under. 7. In our opinion, the Company has an internal audit system commensrate with its size and nature of its business. 8. The Central Government of India has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act for any of the products of the Company. 62

65 ANNEXURE TO AUDITOR S REPORT UTV Software Communications Limited 9. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing the undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income-Tax, Wealth-Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty, Cess and other material statutory dues as applicable with the appropriate authorities in India. (b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues of Wealth Tax, Sales Tax, Service Tax, Customs Duty, Excise Duty and Cess which have not been deposited on account of any dispute. The particulars of dues of Income Tax as at March 31, 2006 which have not been deposited on account of dispute, are as follows: Name of the statue Nature of dues Amount Period to which the Forum where the dispute (Rs. in Lakhs) amount relates is pending Income Tax Act, 1961 Income Tax including interest A. Y to and penalty, as applicable A.Y CIT Appeals 10. The Company has no accumulated losses as at March, 31, 2006 and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year. 11. According to the records of the Company examined by us and the information and explanations given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at balance sheet date. 12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13. The provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to the Company. 14. In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments. 15. In our opinion and according to the information and explanations given to us, the terms and conditons of the guarantees given by the Company, for lonas taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company. 16. In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans have been applied for the purposes for which they were obtained. 17. On the basis of an overall examination of the balance sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short-term basis which have been used for long-term investment. 18. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintainted under Section 301 of the Act during the year. 19. The Company has not issued any debentures. 20. The Company has not raised any money by public issued during the year. The management has disclosed the end use of monies during the year, out of public issue raised in the earlier year (Refer Note 6 of Schedule 23) and the same has been verified by us. 21. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management. Natraj Ramkrishna Partner Membership No. F Place : Mumbai Dated : 24th July, 2006 For and on behalf of Price Watehouse & Co. Chartered Accountants 63

66 BALANCE SHEET AS AT MARCH 31, 2006 Schedule As at As at No. March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands SOURCES OF FUNDS Shareholders Funds Share Capital 1 194, ,936 Reserves and Surplus 2 1,101,177 1,296,113 1,071,215 1,266,151 Loan Funds Secured Loans 3 972, ,582 Unsecured Loans 4 972,561 10, ,582 Deferred Tax Liability 5 77,642 86,558 Deferred Tax Asset 6 39,204 38,438 65,184 21,374 TOTAL 2,307,112 1,457,107 APPLICATION OF FUNDS Fixed Assets 7 Gross Block 245, ,920 Less : Accumulated Depreciation 160, ,345 Net Block 85,043 83,575 Capital Work In Progress 63, ,326 83,575 Investments 8 262, ,278 Current Assets, Loans and Advances Inventories 9 690, ,249 Sundry Debtors , ,835 Cash and Bank Balances 11 9,426 97,859 Other Current Assets Loans and Advances 13 1,070, ,026 2,257,415 1,509,055 Less : Current Liabilities and Provisions Current Liabilities , ,591 Provisions 15 4,885 4, , ,801 Net Current Assets 1,896,606 1,139,254 Miscellaneous Expenditure 16 (To the extent not written off or adjusted) TOTAL 2,307,112 1,457,107 NOTES TO THE FINANCIAL STATEMENTS 23 Schedules referred to above and notes attached thereto form an integral part of the Balance Sheet. This is the Balance Sheet referred to in our report of even date. Natraj Ramkrishna Ronald D mello Rohinton Screwvala Partner Executive Director and CMD & Chief Executive Officer Membership No. : F Chief Operating Officer For and on behalf of Price Waterhouse & Co. Mohd. Sajid Ali Sanjaya Kulkarni Chartered Accountants Company Secretary Director Place : Mumbai Place : Mumbai Date : 24th July, 2006 Date : 24th July,

67 UTV Software Communications Limited PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006 Schedule Year Ended Year Ended No. March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands INCOME Sales and Services 17 1,729,375 1,535,122 Other Income 18 41,746 25,030 1,771,121 1,560,152 EXPENDITURE Direct Cost 19 1,505,937 1,137,110 Staff Cost , ,084 Other Expenses 21 76,432 82,718 1,705,357 1,320,912 PROFIT BEFORE INTEREST, DEPRECIATION AND TAX 65, ,240 Less : Interest (net) 22 17,602 PROFIT BEFORE DEPRECIATION AND TAX 65, ,638 Less : Depreciation 7 16,453 17,748 PROFIT BEFORE TAX 49, ,890 Less : Provision for Taxation - Current 4,277 16,029 (Includes Wealth Tax Rs. Nil, (Previous Year Rs. 42 ( 000))) - Mat Credit Utilisation (4,277) - Prior Years Fringe Benefit Tax 2,115 - Deferred (Refer Note 1 (f) of Sch. 23) 17,065 19,349 31,539 48,009 PROFIT AFTER TAX 29, ,881 Balance Profit Brought Forward 447, ,240 NET PROFIT AVAILABLE FOR APPROPRIATION 477, ,121 BALANCE CARRIED TO BALANCE SHEET 477, ,121 Earnings Per Share of Rs.10 each (Refer Note 18 of Sch. 23) Basic Diluted NOTES TO THE FINANCIAL STATEMENTS 23 Schedules referred to above and notes attached thereto form an integral part of the Profit and Loss Account This is the Profit and Loss Account referred to in our report of even date. Natraj Ramkrishna Ronald D mello Rohinton Screwvala Partner Executive Director and CMD & Chief Executive Officer Membership No. : F Chief Operating Officer For and on behalf of Price Waterhouse & Co. Mohd. Sajid Ali Sanjaya Kulkarni Chartered Accountants Company Secretary Director Place : Mumbai Place : Mumbai Date : 24th July, 2006 Date : 24th July,

68 CASH FLOW STATEMENT FOR THE PERIOD ENDED MARCH 31, 2006 March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands A. CASH FLOW FROM OPERATING ACTIVITIES : Net Profit before tax 49, ,890 Adjustments for : Depreciation 16,453 17,748 Interest Expense 26,963 20,446 Interest Income (39,588) (2,844) Loss on sale of Fixed Assets (Net) Profit on sale of Investments (417) (22,878) Amortisation of Television and Animation Programmes 2,772 11,112 Irrecoverable Deposits, Employee Loans and Advances written off/provided 19,151 Provision for Doubtful Debts 2,777 2,963 Provision no longer required written back (16,587) (276) Provision for Gratuity & Leave Encashment 674 (1,824) Amortisation of movie copyrights 91,191 24,178 Loss/(Gain) on Foreign Exchange transactions Other Provision 19 Any other item (Misc. Expenditures) 1,687 Operating Profit Before Working Capital Changes 134, ,575 Adjustments for changes in working capital : - (INCREASE)/DECREASE in Sundry Debtors (121,427) (189,524) - (INCREASE)/DECREASE in Other Receivables (417,117) (268,313) - (INCREASE)/DECREASE in Inventories (315,982) (124,853) - INCREASE/(DECREASE) in Trade and Other Payables (13,871) (59,746) Cash Generated From Operations (734,069) (367,861) - Taxes Paid (Net of Tax Deducted at source) (26,282) (20,708) Net Cash From Operating Activities (A) (760,351) (388,569) B. CASH FLOW FROM INVESTING ACTIVITIES : Purchase of Fixed Assets Additions during the year (34,846) (21,287) Proceeds from Sale of Fixed Assets Proceeds from Sale of Investments (net) 160, ,644 (Purchase) / Sale of Investments (210,549) (226,281) Interest Received (Revenue) 39,588 2,758 Net Cash Generated From Investing Activities (B) (44,879) 70,526 C. CASH FLOW FROM FINANCING ACTIVITIES : Proceeds form fresh issue of Share Capital (including Share Premium) 601,000 Payment for IPO expenses (34,614) (21,000) Proceeds from Long Term Borrowings Receipts [Excludes Exchange Fluctuation of Rs. 1,836 ( 000) (Previous Year Rs. 702 ( 000) on reinstatement of Foreign Currency Loan] 160, Payment (1,397) (34,040) Proceeds from short term borrowings - Receipts 150,000 - Payment (10,000) Proceeds from Cash Credits (Net) 493,052 (101,320) Interest Paid (18,450) (21,627) Interest Paid - Capitalised (31,984) (3,356) Net Cash Generated From Financing Activities (C) 716, ,170 66

69 UTV Software Communications Limited CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006 March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands Net Increase/(Decrease) in Cash & Cash Equivalents (A) + (B) + (C) (88,433) 92,127 Cash and Cash Equivalents as at March 31, ,859 5,732 Cash and Cash Equivalents as at March 31, ,426 97,859 Cash and Cash Equivalents Comprise Cash, Cheques & Drafts (in hand) and Remittances in transit 1,953 10,687 Balance with Scheduled Banks 7,473 87,172 9,426 97,859 Notes : 1. The above Cash Flow Statement has been prepared under the Indirect Method setout in Accounting Standard- 3 issued by the Institute of Chartered Accountants of India. 2. Figures in brackets indicate cash outgo. 3. Cash and cash equivalents includes Rs. 142 ( 000) which are not available for use by the Company (Refer Sch. 14 of the financial statement). 4. Previous years figures have been regrouped wherever necessary. This is the Cash Flow Statement referred to in our report of even date. Natraj Ramkrishna Ronald D mello Rohinton Screwvala Partner Executive Director and CMD & Chief Executive Officer Membership No. : F Chief Operating Officer For and on behalf of Price Waterhouse & Co. Mohd. Sajid Ali Sanjaya Kulkarni Chartered Accountants Company Secretary Director Place : Mumbai Place : Mumbai Date : 24th July, 2006 Date : 24th July, 2006 SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006 As at As at March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands 1 SHARE CAPITAL AUTHORISED 21,000,000 Equity Shares of Rs.10/- each 210, ,000 (Previous Year 21,000,000 Equity Shares of Rs.10/- each) ISSUED AND SUBSCRIBED 19,493,608 Equity Shares of Rs. 10/- each 194, ,936 (Previous Year 19,493,608 Equity Shares of Rs.10/- each) TOTAL 194, ,936 Note : Out of the issued and subscribed Share Capital, 67,05,882 Equity Shares of Rs.10/- each were issued without consideration in cash as Bonus Shares by capitalisation of Share Premium in the F.Y to the then existing Shareholders of the Company, 46,64,824 Equity Shares of Rs.5/- each (23,32,412 Equity Shares of Rs.10/- each) were issued without consideration in cash to various shareholders under a share swap arrangement in the F.Y as part of consolidation exercise carried out in the said year and 1,82,932 Equity Shares of Rs.5/- each (91,466 Equity Shares of Rs.10/- each) were issued to shareholders of Western Outdoor Media Technologies Limited as per the Scheme of Arrangement for demerger of its studio division to the company in F.Y

70 SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006 As at As at March 31, 2006 March 31, 2005 Notes Rs. in Thousands Rs. in Thousands 2 RESERVES AND SURPLUS SECURITIES PREMIUM ACCOUNT As per last Balance Sheet 616, ,130 Add : Premium on shares issued 552, , ,130 Less: Share Issue Expenses 70, , ,451 GENERAL RESERVE As per last Balance Sheet 7,643 7,643 PROFIT & LOSS ACCOUNT As per Annexed Profit and Loss Account 477, ,121 TOTAL 1,101,177 1,071,215 3 SECURED LOANS Cash Credit From Banks 1 531,709 38,657 [Includes Bill Discounting Account] Working Capital Loan 1 160,000 Term Loan From Banks 1 279, ,233 Others 2 1,295 2,692 TOTAL 972, ,582 Notes : 1. Cash credit and working capital loans from banks are repayable on demand.term Loan from IDBI and SBI are secured by hypothecation of moveable fixed assets, inventories, book debts, programming properties and the personal guarantee of a Director of the Company. 2. Secured against the hypothecation of vehicles. 4 UNSECURED LOANS Inter Corporate Deposits 10,000 TOTAL 10,000 5 DEFERRED TAX LIABILITY (Refer Note 1 (f) of Sch. 23) Deferred Tax Liability Arising on account of timing difference in : - Depreciation 7,654 7,233 - Inventories 69,988 79,325 TOTAL 77,642 86,558 6 DEFERRED TAX ASSETS (Refer Note 1 (f) of Sch. 23) Deferred Tax Assets Arising on account of timing difference in : - Provision for Doubtful Debts 1,968 1,123 - Provision for Loans and Advances 6,446 7,008 - Unabsorbed Losses & Depreciation 29,164 55,532 - Provision for Gratuity Provision for Leave Encashment 1, TOTAL 39,204 65,184 68

71 UTV Software Communications Limited SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, FIXED ASSETS (Rs. in Thousands) COST DEPRECIATION / AMORTISATION NET BLOCK Particulars Opening Additions Deductions As at Opening For the Deductions As at As at As at as at As at Year # (A) (B) (A-B) Tangible Asset Leasehold Improvements 28, ,480 21,325 3,316 24,641 3,839 7,092 Plant & Machinery 100, ,665 71,095 4, ,454 25,211 29,299 Furniture & Fixtures 47,949 1, ,259 25,856 2, ,772 20,487 22,093 Computers 22,495 8,827 31,322 15,836 2,542 18,378 12,944 6,659 Office Equipments 13, ,200 3, ,753 9,447 9,339 Motor Vehicles 10, ,365 3,021 1, ,014 6,351 7,355 (Refer Note (a)) Intangible Asset Computer Software 4,988 5,899 10,887 3, ,123 6,764 1,738 Grand Total 227,920 18,457 1, , ,345 16, ,135 85,043 83,575 Capital Work in Progress, at cost (including Capital Advances) (Refer Note (b)) 63,283 Total 148,326 83,575 Previous Year 209,097 21,229 2, , ,487 17, ,345 83,575 # Refer Note 1 b (ii) of Schedule 23 Notes: a) The Net Book value of Motor Vehicles includes value of vehicles acquired under loan amounting to Rs. 4,470 ( 000) [Previous year - Rs. 5,399 ( 000)]. b) The Capital Work in Progress includes Rs. 42,574 ( 000) [ Previous year - Rs. Nil ], which were subsequently obtained on lease by hypothecation of the same assets. 69

72 SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006 Nos. as at Nos. as at Face Value As at As at March 31, 2006 March 31, 2005 Per Share March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands 8 INVESTMENTS (Refer Note 1 (c) of Sch. 23) Long Term, Trade and Others Equity Shares of Companies a) Subsidiary Companies (Unquoted) (i) UTV International Holdings Limited - BVI 250,000 1 USD 1 (Refer Note 5 of Sch. 23) (ii) United Entertainment Solutions Limited 1,009,800 1,009, ,098 58,098 (iii) UTV Communications (USA) LLC 5,000 5, USD 2,271 2,271 (iv) UTV Communications (UK) LLC 10,000 10,000 1 STP (v) UTV Communications Mauritius 10,000 10,000 1 USD b) Others (Quoted) Radaan Mediaworks India Limited 62,500 62, c) Others (Unquoted) (i) United Teleshopping and Marketing Company Limited 600, , (ii) Homland Network Corporation 352, , USD 2 2 (iii) United Home Entertainment Limited 490, , ,900 4,900 Preference Shares of Companies a) Subsidiary Companies (Unquoted) (i) UTV International Holdings Limited - BVI 3,894,000 1 USD 7,189 (Refer Note 5 of Sch. 23) (ii) United Home Entertainment Limited (Refer Note 4 of Sch. 23) 19,510, ,100 b) Others (Unquoted) Homland Network Corporation 125, , USD 5 5 Short Term Investments Investment In Mutual Funds (Quoted) Reliance Fixed Term Scheme - Monthly Plan Growth Option 1,000, ,000 Kotak Floater Short Term - Growth 2,300, ,000 UTI Liquid Cash Plan Institutional - Growth Option 18,405 1,000 20,000 JM Floater Fund - Short Term Plan - Growth Option 1,375, ,000 HSBC Floating Rate Fund - Short Term Institutional Option - Growth 982, ,008 Tata Liquid Super High Inv. Fund - Appreciation 16,445 1,000 20,000 Birla Cash Plus Institutional Plan - Growth 836, ,000 Prudential ICICI Floating Rate Plan - Growth 1,361, ,000 Kotak Liquid (Institutional) - Growth 1,126, ,000 Tata Floating Rate Short Term Inst. Plan - Growth 1,456, ,000 TOTAL 262, ,278 Cost Market value Cost Market value As at As at As at As at March 31, 2006 March 31, 2006 March 31, 2005 March 31, 2005 Rs. in Thousands Rs. in Thousands Rs. in Thousands Rs. in Thousands Aggregate Value of Quoted Investments , ,624 Aggregate Value of Unquoted Investments 261,680 73,770 TOTAL 262, ,278 70

73 UTV Software Communications Limited SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006 As at As at March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands 9 INVENTORIES (Refer Note 1 (d) of Sch. 23) (As certified by the Management) Raw Stocks- Tapes and Films Unamortised Cost of Completed - Movie Copyrights 217, ,483 Unutilised Free Commercial Time 42,940 11,863 Projects in Progress 42,419 20,462 Films Under Production (Refer Note 22 of Sch. 23) 386, ,216 TOTAL 690, , SUNDRY DEBTORS - (Unsecured, Considered Good) (Refer Note 7 of Sch. 23) i. Over Six months Billed - considered good 117,355 9,958 - considered doubtful 5,846 3,069 Unbilled - Considered good ,033 13,027 Less : Provision for doubtful debts 5, ,187 3,069 9,958 ii. Other Debts - considered good Billed 350, ,947 Unbilled 15, ,686 19, ,877 TOTAL 486, , CASH AND BANK BALANCES i. Cash and Cheques on Hand 1,954 10,687 (Includes Cheques on Hand Rs. 912 ( 000) (Previous year- Rs. 9,689 ( 000)) ii. Balance with Scheduled Banks - Current Account 1,244 4,377 - Fixed Deposit Account 6,136 82,703 - Others TOTAL 9,426 97, OTHER CURRENT ASSETS Interest Receivable TOTAL

74 SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT MARCH 31, 2006 As at As at March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands 13 LOANS AND ADVANCES Unsecured & Considered Good unless otherwise stated Advances recoverable in cash or in kind or for value to 117,705 64,790 be received (Refer Note 8 c of Sch. 23) MAT Credit Entitlement 4,277 UTV Employees Welfare Trust 19,344 17,584 Advance to Suppliers 142,973 36,471 Less : Provision for irrecoverable advance 19, ,822 19,151 17,320 Advance towards Share Capital 195,100 (Refer Note 4 of Sch. 23) Advances to Associate/Subsidiary Companies (Refer Note 8 a of Sch. 23) - To Subsidiary Companies 247, ,793 - To Associate Companies 474, ,663 28, ,742 Advance Tax Less Provision 45,490 25,771 Other Deposits 38,477 30,719 TOTAL 1,070, , CURRENT LIABILITIES Sundry Creditors for Capital Goods, Materials & Expenses - Small Scale Industrial Undertakings (Refer Note 16 of Sch. 23) - Advance from Associate Company (Refer Note 8 b of Sch. 23) Others 276, ,245 Advances from Customers 21, ,881 Advance Billings 23,217 9,465 Unpaid Dividend * Interest Accrued But Not Due 8, Other Liabilities 26,390 30,709 TOTAL 355, ,592 * (There are no amounts due and outstanding to be credited to Investor Education and Protection Fund) 15 PROVISIONS Provision for Wealth Tax less Payment Provision for Employees Retirement Benefits 4,831 4,156 TOTAL 4,885 4, MISCELLANEOUS EXPENDITURE (To the extent not written off or adjusted) Opening balance 1,687 Less: Written off to P & L Account (1,687) Add : Share Issue Expenses 70,679 Less: Transferred to Share Premium Account (70,679) TOTAL 72

75 UTV Software Communications Limited SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, SALES AND SERVICES (Refer Note 1 (h) of Sch. 23) Year Ended Year Ended March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands Sales and Service Revenues 1,729,375 1,535,122 TOTAL 1,729,375 1,535, OTHER INCOME Insurance Receipt 9,000 Provision no longer required Written Back 16, Miscellaneous Income 3,116 1,858 Profit on Sale of Investments ,878 Capital Gains 18 Interest Income (net) 12,625 TOTAL 41,746 25, DIRECT COST Telecast Fees 122, ,138 Cast and Technicians Fees and Commission 178, ,642 Equipment Hire, Sets, Costumes and Venue Hire 74, ,768 Footage Expenses 964, ,436 Consumption of Rawstock of Video Tapes and Films 38,281 31,360 Post Production Charges 42,577 16,249 Travelling Expenses 5,976 4,238 Advertisement & Publicity 76,182 17,541 Amortisation of Television Programmes 2,772 11,112 Amortisation of Movie Copyrights 91,191 24,178 Director s Commission Miscellaneous Expenses 41,195 46,602 1,638,108 1,254,344 Less: Amounts inventorised Towards Free Commercial Time and Unexploited Movie Rights 132, ,234 TOTAL 1,505,937 1,137, STAFF COST Salaries, Wages, Bonus and Gratuity 114,067 96,223 Contribution to Provident and other Funds 3,114 2,482 Staff Welfare 5,807 2,379 TOTAL 122, ,084 73

76 SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, OTHER EXPENSES Year Ended Year Ended March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands Rent - Premises 12,128 9,307 Repairs and Maintenance : Plant and Machinery Others 5,735 5,919 3,403 3,793 Rates & Taxes Insurance 2,631 1,985 Electricity Charges 3,849 4,025 Travelling & Conveyance Expenses 10,343 8,565 Communication & Postage Expenses 7,263 5,067 Provision for Doubtful Debts 2,777 2,963 Advertisement and Business Promotion Expenses 7,214 5,094 Loss on Sale of Fixed Assets (Net) Loss on Foreign Exchange Fluctuation (Net) Irrecoverable Deposits, Employees Loans and Advances Written Off/Provided 14,459 Directors Sitting Fees Miscellaneous Expenses (Refer Note 13 of Sch. 23) 23,401 26,316 TOTAL 76,432 82, INTEREST (Net) Interest on Loan On Fixed Loans 13,833 2,967 Others 13,130 26,963 17,479 20,446 Less : Interest Received : On Receivables and Others 39,588 2,844 [Tax Deducted at Source Rs. 8,317 ( 000)] [Previous year - Rs. 10 ( 000)] Less : Interest Income Transferred to Other Income 12,625 TOTAL 17,602 74

77 SCHEDULE 23 - NOTES TO THE FINANCIAL STATEMENTS 1. Significant Accounting Policies : a Basis of Accounting : UTV Software Communications Limited The financial statements are prepared under the historical cost convention on an accrual basis and comply with the accounting standards issued by the Institute of Chartered Accountants of India referred to in Section 211 (3C) of the Companies Act, b Fixed Assets and Depreciation : NOTES TO THE FINANCIAL STATEMENTS (i) Fixed assets are stated at cost of acquisition less accumulated depreciation. The Company capitalises all costs relating to the acquisition and installation of fixed assets, including financing costs. (ii) Depreciation is provided based on management estimate of useful lives of the fixed assets, on the straight line method prorata to the period of use or at the rates prescribed in Schedule XIV of the Companies Act, 1956, whichever is higher. (iii) Leasehold Improvements are amortised over the period of lease. c Investments : Investments (all long term) are stated at cost, except where there is a diminution in value other than temporary, in which case requisite provision is made to write down the carrying value to recognise such decline. Investment acquired under share swap arrangements are recognised at fair value of securites, issued by the company under the swap arrangement. d Inventories : (i) Unamortised Cost of programming For television programmes the entire cost of the programme is charged to income when the programmes are first exploited. The Company amortises 75% of the cost of movie rights acquired or produced by it, on first theatrical release of the movie. The said amortisation is made proportionately on Domestic Theatrical Rights, International Theatrical Rights, Television Rights, Music Rights and Video Rights based on Management estimate of revenues from each of these rights. In case of aforesaid rights not exploited alongwith or prior to the first theatrical release, proportionate appropriated cost of the said right is carried forward to be written off as and when such right is commercially exploited or at the end of one year from the date of first theatrical release, whichever occurs earlier. Balance 25% is amortised over the balance license period or based on management estimate of future revenue potential, as the case may be. The inventory, thus, comprises of unamortised cost of such movie rights. (ii) Unutilised free commercial airtime (FCT) granted by the producer and/or broadcaster under Airtime Sales Agreements is stated at lower of cost or net realisable value. (iii) Projects in progress are stated at cost. Cost comprises the cost of materials, labour and other expenses. (iv) Pilot episodes are stated at cost. Pilots are written off at the end of 3 years from the year of production of respective pilot, in case the same is not developed into a serial. (v) Raw Stock and equipment spares are stated at lower of cost and net realisable value. (vi) Borrowing costs are accounted on accrual basis. (vii) The cost of funds borrowed specifically for the funding of a specific film is inventorised as part of cost of the film. The cost of funds borrowed generally is determined by applying a weighted average capitalization rate to the amount funded for the said film. 75

78 The Company evaluates the realisable value and/or revenue potential of year end inventory on an annual basis and appropriate write down is made in cases where accelerated write down is warranted. e Taxation : Provision for current tax has been made in accordance with the income tax and wealth tax laws prevailing for the relevant assessment years. f Deferred Taxation : Deferred Tax resulting from timing differences between book and tax profits is accounted for under the liability method, at the current rate of tax, to the extent that the timing differences are expected to crystalise. g Foreign Currency Transactions : The transactions in foreign exchange are accounted at the exchange rate prevailing on the date of transaction. Any exchange gains or losses arising out of the subsequent fluctuations of foreign currency assets and liabilities as at the period end reinstatement are accounted for in the Profit and Loss Account, except those relating to acquisition of fixed assets which are adjusted to the cost of assets. h Revenue Recognition : Revenues on commissioned television programmes, commercials, in-flight programmes, dubbing and corporate documentary jobs are recognised on delivery. The amount recognised is the predetermined price, the collection of which is reasonably assured. Revenues from sale of airtime are recognised in the period during which the spots are aired. Revenues from licensing of owned television programmes and movies are recognised in accordance with the licensing agreement or on physical delivery of the programmes/movies, whichever is later. i Retirement Benefits : The Company has various schemes of retirement benefits such as Gratuity and Provident Fund and the company s contributions are charged to the Profit and Loss Account. The gratuity scheme is administered through the Life Insurance Corporation of India (LIC). Annual contributions to the gratuity fund as determined by LIC are charged to the statement of Profit and Loss Account. The additional liability arising out of difference between the actuarial valuation and the fund balance with the LIC is accrued at the year end. The Company accrues the leave encashment liability on the basis of actuarial valuation on unavailed accumulated leave balances at the year end. j Impairment of Assets : NOTES TO THE FINANCIAL STATEMENTS The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Profit & Loss Account. If at the Balance Sheet date, there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount. k Provisions and Contingent Liabilities : The Company recognises a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent 76

79 UTV Software Communications Limited liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, no provision or disclosure is made. As at As at March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands 2 Estimated amount of contracts remaining to be executed on capital account and not provided for (Net of advances) 21,717 3 Contingent liabilities not provided for : NOTES TO THE FINANCIAL STATEMENTS (a) Claims against the Company not acknowledged as debts 34,400 34,400 (b) Sales Tax and Lease Tax 22,866 4,550 (c) Appeals filed in respect of disputed demands : Income Tax 40,115 36,668 (d) Bank guarantees/corporate guarantees/outstanding letter of credit for which the Company has given counter guarantees 482, ,966 (e) Bank Guarantee against EPCG Commitment 13,369 9,914 (f ) Legal cases and claims filed against the Company 38,462 36,752 4 During the year, Rs.1,95,100 ( 000) has been adjusted from advance against share capital in United Home Entertainment Limited to Zero Coupon Optionally Convertible Preference shares of United Home Entertainment Limited pursuant to Shareholders Agreement dated December 2, 2004 between the company, Mr. R. S. Screwvala and United Home Entertainment Private Limited. 5 During the year Company has divested the entire stake in UTV International Holdings Limited - (BVI) for an amount of Rs. 22,638 ( 000) making no profit / (loss) on sale of Investments. 6 Pursuant to the company s Initial Public offering of 45,00,000 equity shares of Rs. 10/- each issued at a premium of Rs. 120/- per share during previous year, the uses of IPO proceeds as at March 31, 2006 are as under: PURPOSE Uses of Funds as projected Actual Funds used in the prospectus as at March 31, 2006 Rs. in Thousands Rs. in Thousands 1. Capital expenditure for enhancement of production facility/ Office infrastructure to replace the existing leased facilities premises, interior and setup 100, Editing and other equipment for captive use of UTV content production 20, Providing interest free loan to subsidiary United Entertainment Solutions Limited for investment in post production expansion 60,000 5, Investment in United Home Entertainment Limited in form of Equity and Preference Capital for funding Hungama TV 85,200 85, Working Capital for Movie production / distribution initiatives 300, , IPO Expenses 59,800 68, , ,000 77

80 NOTES TO THE FINANCIAL STATEMENTS 7. Debtors include amounts due from bodies corporate under the same management: Maximum amount As at As at O/s during the year March 31, 2006 March 31, 2005 Due from Subsidiaries : Rs. in Thousands Rs. in Thousands Rs. in Thousands Antah-UTV Multi-Media & Communications Sdn. Bhd (Ceased w.e.f. March 17, 2006) Due from Associate Companies : United Home Entertainment Limited 161,334 89,753 76,945 TOTAL 89,753 77,377 8 a) The company has not granted any loans to subsidiaries and associates during the year. Advances/ Other Receivables from subsidiary / associate companies are as follows : Maximum amount As at As at O/s during the year March 31, 2006 March 31, 2005 Associate/Subsidiary Companies Rs. in Thousands Rs. in Thousands Rs. in Thousands United Entertainment Solutions Limited 210, , ,704 Television News & Entertainment (India) Limited 6,543 6,543 United Home Entertainment Limited 474, ,650 22,399 UTV Communications (USA) LLC 42,841 34,760 23,009 UTV Communications (Mauritius) Limited 16,373 8,836 UTV Communications (UK) Limited 22,417 4,056 5,081 TOTAL 721, ,736 b) Advances from/other Payables to subsidiary/associate companies are as follows : Maximum amount As at As at O/s during the year March 31, 2006 March 31, 2005 Associate/Subsidiary Companies Rs. in Thousands Rs. in Thousands Rs. in Thousands United Entertainment Solutions Limited 2, United Tele-Shopping & Marketing Limited TOTAL c) Advances recoverable in cash or kind include interest - free advances of Rs. 31,641 ( 000) due from M/s Western Outdoor Media Technologies Limited (WOMTL) whose Studio Division was acquired by the Company during the year through a process of demerger sanctioned by the Order of the Hon ble Bombay High Court dated June 27, The said outstanding is considered good and recoverable by the management, from the continuing business operations of WOMTL. 78

81 9 Remuneration to Directors : (i) Managerial Remuneration : NOTES TO THE FINANCIAL STATEMENTS UTV Software Communications Limited Year ended Year ended March 31, 2006 March 31, 2005 Rs. in Thousands Rs. in Thousands (a) Salaries 14,859 12,710 (b) Perquisites 1,568 1,775 (c) Commission TOTAL 16,737 14,565 (ii) Calculation of net profit under Section 198/349 of the Companies Act, 1956: Profit before tax 49, ,890 Add : Managerial remuneration 16,737 14,565 In accordance with Section III of Schedule XIII of the Companies Act, 1956, remuneration drawn by a director from another company is also to be added for the purpose of ascertaining the overall limits. Managerial remuneration drawn by Mr. Deven Khote from United Entertainment Solutions Limited [Salaries Rs.290 ( 000) (Previous Year Rs. Nil) and Perquisites Rs.48 ( 000) (Previous Year Rs. Nil)] 338 Provision for doubtful debts 2,777 2,963 Provision for Irrecoverable Deposit, employee loans & advances 14,459 Loss on sale of fixed assets (net) Less: Profit on sale of investments ,878 Capital Gain 18 Debts written off against provision 52,386 Net Profit under Section 198/349 of the Companies Act, , ,477 Remuneration Payable to Managing Director / Whole-time Directors : At 10% of Net Profit Restricted to Rs. 6,878 ( 000) 6,878 14,565 The Company is in the process of applying to the Central Government for approval of excess remuneration paid. 10 Value of imports calculated on CIF basis : Capital equipment 44, Expenditure in foreign currency on account of (a) Travelling 986 1,957 (b) Footage Costs 11,735 3,832 (c) Professional Fees 1, (d) Others 2,165 1, Earning in foreign exchange on account of (a) Exports Calculated on FOB basis 206,781 99,470 (b) Royalty 1,

82 13 Miscellaneous Expenses include : Year ended Year ended March 31,2006 March 31,2005 Rs. in Thousands Rs. in Thousands Auditors remuneration in respect of : (a) Audit Fees 2,160 1,200 (b) Reimbursement of Out of Pocket Expenses (c) Other services Related Party Disclosures as required by Accounting Standard AS 18 "Related Parties Disclosures issued by the Institute of Chartered Accountants of India are given below : Parties where control exists : Unilazer Exports & Management Consultants Limited Shareholders in the Company Unilazer Hongkong Limited Shareholders in the Company United Tele-Shopping & Marketing Limited Shareholders in the Company Unitas Creative Television Limited Common Control Television News and Entertainment (I) Limited Common Control Vijay Broadcasting Private Limited Common Control United Home Entertainment Limited Common Control Other Related Parties : Subsidiaries : United Entertainment Solutions Limited Subsidiary Company UTV International Holdings Limited - (BVI) (ceased w.e.f. March 17, 2006) Wholly owned Subsidiary UTV Communications (USA) LLC Wholly owned Subsidiary UTV Communications (UK) Limited Wholly owned Subsidiary UTV Communications (Mauritius) Limited Wholly owned Subsidiary Fellow Subsidiary : Antah-UTV Multi-Media & Communications Sdn. Bhd (ceased w.e.f. March 17, 2006) Key Management Personnel : Whole-time Directors Rohinton Screwvala Deven Khote Zarina Mehta (from April 27, 2005) Ronald D mello Non-Executive Directors Suketu Shah Darius Shroff Ketan Dalal Sanjaya Kulkarni Rahul Shah NOTES TO THE FINANCIAL STATEMENTS CMD & Chief Executive Officer Executive Director Executive Director Executive Director and Chief Operating Officer 80

83 NOTES TO THE FINANCIAL STATEMENTS UTV Software Communications Limited Transactions with Related Parties : (Rs. in Thousands) Sale of goods Subsidiaries Associates Management Personnel Year ended Year ended Year ended Year ended Year ended Year ended March 31, March 31, March 31, March 31, March 31, March 31, UTV Communications (USA) LLC 17,190 6,960 - UTV Communications (UK) Limited 14,080 - UTV Communications (Mauritius) Limited 77,168 - United Home Entertainment Limited 77, ,375 Sale of Inventory - United Entertainment Solutions Limited 8,331 9,425 - United Home Entertainment Limited 4,656 3,725 Rendering of services - United Home Entertainment Limited 14,400 13,600 Receiving of services - United Entertainment Solutions Limited 5,048 15,491 Other Receipt - United Entertainment Solutions Limited 95 Finance (including loans & Equity contributions in cash or in kind) - Financed to United Home Entertainment Limited 200,000 - Preference shares in United Home Entertainment Limited 195,100 - Interest charged to United Home Entertainment Limited 37,065 - UTV International Holdings Limited - (BVI) 15,449 - UTV Communications (UK) Limited UTV Communications (USA) LLC 2,271 - UTV Communications (Mauritius) Limited Remuneration - Rohinton Screwvala 7,219 7,211 - Zarina Mehta 1,553 - Ronald D mello 5,604 4,329 - Deven Khote 1,548 1,392 Guarantees and Collaterals - Antah- UTV Multi- Media & Communications Sdn. Bhd. 17,391 - United Entertainment Solutions Limited 79,614 9,614 - United Home Entertainment Limited 220, ,000 Expenses Charged to - United Entertainment Solutions Limited ,785 - United Home Entertainment Limited 12,899 12,926 - UTV Communications (USA) LLC 21,971 24,130 - UTV Communications (UK) Limited 14,705 5,081 - UTV Communications (Mauritius) Limited 15,645 81

84 Transactions with Related Parties : NOTES TO THE FINANCIAL STATEMENTS (Rs. in Thousands) Subsidiaries Associates Management Personnel Year ended Year ended Year ended Year ended Year ended Year ended March 31, March 31, March 31, March 31, March 31, March 31, Expenses Charged by - United Entertainment Solutions Limited 1,116 5,290 - UTV Communications (USA) LLC United Home Entertainment Limited 378 1,368 - Others 383 Loans/Advances Taken - United Entertainment Solutions Limited 18,669 58,011 - Unilazer Exports & Management Consultants Limited 40,500 - Antah UTV Multi-Media & Communications Sdn. Bhd UTV Communications (USA) LLC Television News & Entertainment India Limited 17,500 - United Home Entertainment Limited ,000 - Others 2,273 Advances Given - United Entertainment Solutions Limited 11,139 45,619 - Television News & Entertainment India Limited 12,500 - UTV Communications (USA) LLC UTV Communications (Mauritius) Limited 2,667 - Unilazer Exports & Management Consultants Limited 67,500 - United Home Entertainment Limited 407, ,237 Collections by - Unilazer Exports & Management Consultants Limited 2,160 - United Home Entertainment Limited 9,907 Payments to Creditors - United Entertainment Solutions Limited 4,891 3,708 Payments for Services - United Entertainment Solutions Limited 26,217 Collections against Services Rendered/Sale of Goods - UTV Communications (USA) LLC 27,409 6,960 - UTV Communications (UK) Limited 29,809 - UTV Communications (Mauritius) Limited 86,644 - United Home Entertainment Limited 95,918 49,730 Outstanding Balance Payable - United Entertainment Solutions Limited Others Receivable - United Entertainment Solutions Limited 199, ,704 - Television News & Entertainment India Limited 6,543 - United Home Entertainment Limited 564,403 99,344 - UTV Communications (USA) LLC 34,760 23,009 - UTV Communications (UK) Limited 4,056 5,081 - UTV Communications (Mauritius) Limited 8,836 - Others

85 NOTES TO THE FINANCIAL STATEMENTS UTV Software Communications Limited 15 The Company is engaged in the production/making of media software, which requires various types, qualities and quantities of raw materials and inputs in different denominations. Due to the multiplicity and complexity of items, it is not practicable to maintain the quantitative record/continuous stock register, as the process of making program software is not amenable to it. Hence quantitative details are not maintained by the company as is the practice generally followed by companies in the Industry. Physical stock is taken at the end of the year. 16 There are no dues to small scale industrial undertaking outstanding for more than 30 days, the information regarding the Small scale undertaking has been determined to the extend such parties have been identified on the basis of information available with the Company. This has been relied upon by the Auditors. 17 The Company s significant leasing arrangements are mainly in respect of residential/office premises. The aggregate lease rentals payable on these leasing arrangements are charged as rent under Other Expenses in Schedule 21. These leasing arrangements are for a period not exceeding 5 years and are in most cases renewable by mutual consent, on mutually agreeable terms. The Company has placed a refundable deposit of Rs. 35,826 ( 000) [Previous Year Rs.18,049 ( 000)] in respect of these leasing arrangements. Future lease rentals payable are as follows: Payable Year ended Year ended March 31, 2006 March 31, 2005 Not Later than one year 28,557 Later than one year but not later than five years 113,591 Later than five years 18 The earning considered in ascertaining the Company s earnings per share comprise the net profit after tax. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the year. The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earning per share, and also the weighted average number of shares, if any, which would have been issued on the conversion of all dilutive potential equity shares. The number of shares and potentially dilutive equity shares are adjusted for consolidation of shares. Year ended Year ended March 31, 2006 March 31, 2005 Profit after tax (in 000) 29, ,881 Weighted average number of shares for basic earnings per share (nos.) - Equity Shares of Rs. 10/- each fully paid up 19,493,608 15,184,566 Weighted average number of shares for diluted earnings per share (nos.) - Equity Shares of Rs. 10/- each fully paid up 19,493,608 15,184,566 Earning Per share (Rs.) Basic Diluted

86 19 Assets and Liabilities as on March 31, 2006 and Income and Expenses for the year ended March 31, 2006 related to the interest of the Company in its Jointly Controlled Entity, United Home Entertainment Limited are: Particulars Year ended Year ended March 31, 2006 March 31, 2005 Assets Net Fixed Assets 5,129 5,920 Deferred Tax Assets 33,221 35,581 Inventories 124, ,056 Sundry Debtors 30,221 3,929 Cash & Bank Balances Loans and Advances 27,515 19,450 Liabilities Secured Loans 74,680 83,825 Unsecured Loans 232,579 10,976 Deferred Tax Liability 33,221 35,581 Current Liabilities 85,353 91,917 Provisions Income Net Sales 61,223 10,399 Expenses Direct Cost 73,268 46,426 Staff Cost 12,063 14,060 Other Expenses 99,546 93,910 Interest (Net) 26,947 2,576 Depreciation 1,487 7,399 The Joint Venture is in the business of operating a 24 hour kids channel by the name Hungama TV Subsequent to year end, the Company, United Home Entertainment Limited (UHEL), the shareholders of UHEL other than the Company and The Walt Disney Company (South East Asia) Pte. Ltd. (Disney) have entered into Sale and Subscription Agreement (SSA) dated July 24, 2006 wherein the Company has agreed to sell its entire equity and preference share holding in the Joint Venture to Disney for a consideration exceeding its present carrying value of the investment. Also as per the said SSA, all other receivable of the Company from the Joint Venture on the date of consummation of SSA, subject to all regulatory approvals, will be repaid by UHEL. Accordingly, there is no incidence of any potential diminution in the value of investment. Further all receivables and loans and advances as on the date of balance sheet from the Joint Venture are considered good and fully recoverable by the management. 20. Subsequent to the year end, the Company has passed requisite resolution of its Board of Directors for the approval of issue of 34,00,000 equity shares to The Walt Disney Company (South East Asia) Pte. Ltd. and 19,49,360 warrants convertible into equity shares (one equity share for each warrant) as per the Guidelines for preferential issues as provided under chapter XIII of the Security and Exchange Board of India (Disclosure of Investor protection) Guideline, 2000 as amended for preferential issue of shares. The said resolutions are subject to requisite approval of the shareholders of the Company and regulatory authorities. 21 The business segment has been considered as the primary segment. The Company is organised into three main business segments namely TV Content, Movies, & Allied Services. The above business segments have been identified considering the different nature of activities carried on by these business divisions. Segment revenue, results, assets and liabilities have been accounted for on the basis of their relationship to the related business activities of the segment and amounts allocated on a reasonable basis to the business segment. The company has consolidated Television content, airtime sales, dubbing and advertisement film production into Television segment. 84

87 NOTES TO THE FINANCIAL STATEMENTS UTV Software Communications Limited Particulars TELEVISION MOVIES ALLIED CONTENT Inter Segment Total SERVICES Adjst (Rs. In Thousands) March March March March March March March March March March 31, , , , , , , , , , 2005 REVENUE External Revenue 711, ,063 1,033, , (15,456) 1,729,375 1,535,122 RESULT Segment Result 59, ,110 40, ,809 (1,140) 100, ,779 Less : Interest (17,602) Unallocable Other Expenditure (93,052) (74,317) Add : Unallocable Other Income 41,746 25,030 Profit Before Taxation 49, ,890 OTHER INFORMATION Segment Assets 646, , , ,941 1,372, ,339 Unallocable Assets 1,334,873 1,034,753 Total Assets 646, , , ,941 2,707,125 1,892,092 Segment Liabilities 215,720 80,828 90, , , ,782 Unallocable Liabilities 1,104, ,159 Total Liabilities 215,720 80,828 90, , ,411, ,941 Depreciation Segment Depreciation Unallocable Depreciation 16,453 17,748 Total Depreciation 16,453 17,748 Non Cash Expenses other than Depreciation Segment Non Cash Expenditure 5,549 14,075 91,191 24,178 96,740 38,253 Unallocable Non Cash Expenditure Total Non Cash Expenses other than Depreciation 5,549 14,075 91,191 24,178 96,740 38,253 GEOGRAPHICAL SEGMENT Revenue India 611, , , , (15,456) 1,520,632 1,434,694 Outside India 100,154 49, ,589 50, , , , ,063 1,033, , (15,456) 1,729,375 1,535,122 Assets India Segment Assets 611, , , ,941 1,337, ,280 Unallocable Assets 1,334,873 1,034,753 Outside India 35,246 16,059 35,246 16,059 2,707,125 1,892, In accordance with the Company s accounting policy, Films under production include Rs. 31,984 ( 000) as interest capitalised on movie projects under production. 23 The previous year s figures have been regrouped, wherever necessary. Signature to Schedules 1 to 23 Natraj Ramkrishna Ronald D mello Rohinton Screwvala Partner Executive Director and CMD & Chief Executive Officer Membership No : F Chief Operating Officer For and on behalf of Price Waterhouse & Co. Mohd. Sajid Ali Sanjaya Kulkarni Chartered Accountants Company Secretary Director Place : Mumbai Place : Mumbai Date : 24th July, 2006 Date : 24th July,

88 BALANCE SHEET ABSTRACT AND COMPANY S GENERAL BUSINESS PROFILE I. Registration Details : Registration No State Code Balance Sheet Date : Date Month Year II. Capital raised during the year Public Issue Rights Issue N I L N I L Bonus Issue Private Placement N I L N I L Preferential Offer of Shares N I L III. Position of Mobilisation and Deployment of Funds Total Liabilities including Shareholders Funds Total Assets Sources of Funds Paid-up Capital Reserves & Surplus Secured Loans Unsecured Loans N I L Deferred Tax Liability (Net of Deferred Tax Assets) Application of Funds Net Fixed Assets Investments Net Current Assets IV. Performance of the Company Turnover (Total Income) Total Expenditure Profit Before Tax Profit After Tax Basic Earnings Per Share in Rs. Diluted Earnings Per Share in Rs Dividend Rate N I L V. Generic name of Three Principal Products/Services of the Company Item Code No. Product Description N N N A A A 1 1 (Amounts in Rs. 000s) Natraj Ramkrishna Ronald D mello Rohinton Screwvala Partner Executive Director and CMD & Chief Executive Officer Membership No : F Chief Operating Officer For and on behalf of Price Waterhouse & Co. Mohd. Sajid Ali Sanjaya Kulkarni Chartered Accountants Company Secretary Director Place : Mumbai Place : Mumbai Date : 24th July, 2006 Date : 24th July,