NOTICE

Notice is hereby given that the Twenty-Fifth Annual General Meeting of the Members of Zee Entertainment Enterprises Limited will be held at Auditorium, A Wing, Ground Floor, National Stock Exchange of Limited, Exchange Plaza, Plot No. C-1, G-Block, Bandra-Kurla Complex, Bandra (E), - 400 051, on Friday, the 17th day of August 2007, at 11.30 a.m., to transact the following businesses: ORDINARY BUSINESS: 1. To receive, consider and adopt the Audited Balance Sheet as at March 31, 2007, the Profit & Loss Account of the Company for the financial year ended on that date and the Reports of the Auditors and Directors thereon. 2. To declare dividend on equity shares for the financial year ended March 31, 2007. 3. To appoint a Director in place of Mr. Nemi Chand Jain, who retires by rotation, and being eligible, offers himself for re-appointment. 4. To appoint a Director in place of Mr. Laxmi N. Goel, who retires by rotation, and being eligible, offers himself for re-appointment. 5. To appoint a Director in place of Mr. D. P. Naganand, who retires by rotation, and being eligible, offers himself for re-appointment. 6. To appoint M/s. MGB & Co., Chartered Accountants, Mumbai as Auditors of the Company to hold such office from the conclusion of this meeting until the conclusion of the next Annual General Meeting at a remuneration to be determined by the Board of Directors of the Company. The Register of Members and Share Transfer Books of the Company will remain closed from Friday, August 10, 2007 to Friday, August 17, 2007 (both days inclusive). Share Transfers received in order at the Registered Office of the Company or at the office of the Registrars of the Company, by 5.30 p.m. on August 9, 2007, will be processed for payment of equity dividend, if declared, to the transferees or their mandatees. The dividend, if declared, will be paid on or after August 24, 2007 to those shareholders entitled thereto and whose names shall appear on the Register of Members of the Company on August 10, 2007 or to their mandatees. In respect of dematerialised shares, the dividend will be payable on the basis of beneficial ownership details to be furnished by National Securities Depository Limited (NSDL) and/or Central Depository Services (India) Limited (CDSL) for this purpose.

By Order of the Board Place : Mumbai Date : July 17, 2007 Registered Office: M. Lakshminarayanan Continental Building, Sr. Vice President & Company Secretary 135, Dr. Annie Besant Road, Worli, Mumbai - 400 018 NOTES: 1. A member entitled to attend and vote at the meeting may appoint a proxy to attend and vote on a poll on his behalf. A proxy need not be a member of the Company. Proxies, in order to be effective, must be received at the Registered Office of the Company not less than 48 hours before the commencement of the Annual General Meeting. 2. Corporate Members are requested to send to the Registered Office of the Company, a duly certified copy of the Board Resolution, pursuant to Section 187 of the Companies Act, 1956, authorizing their representative to attend and vote at the Annual General Meeting. 20 3. Additional information, pursuant to Clause 49 of the Listing Agreement with Stock Exchanges, on Directors recommended by the Board of Directors for re-appointment at the Annual General Meeting forms part of the Report on Corporate Governance in the Annual Report. 4. Members/Proxies should bring their Attendance Slips along with copy of the Annual Report to the meeting. 5. Members who are holding Company’s shares in dematerialised form are required to bring details of their Depository Account Number for identification. 6. Queries on accounts and operations of the Company, if any, may be sent to the Company Secretary seven days in advance of the meeting so as to enable the Management to keep the information ready at the meeting. 7. Members holding equity shares in physical form are requested to notify the change of address/ dividend mandate, if any, to the Company’s Registrar and Share Transfer Agent, Sharepro Services (India) Pvt. Ltd., Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (East), Mumbai - 400 099, India. 8. Under Section 109A of the Companies Act, 1956, shareholders are entitled to make nomination in respect of shares held by them in physical form. Shareholders desirous of making nominations are requested to send their requests in Form No. 2B in duplicate (which will be made available on request) to M/s. Sharepro Services (India) Pvt. Ltd. 9. Dividend for the financial year ended March 31, 2000, which remains unpaid or unclaimed, will be due for transfer to the Investor Education and Protection Fund of the Central Government (‘IEPF’) in December 2007. Members who have not encashed their dividend warrant(s) for the financial year ended March 31, 2000, or any subsequent financial year(s), are requested to lodge their claims with the Company’s Registrar and Share Transfer Agent. Members are advised that in terms of provisions of Section 205C of the Companies Act, 1956, once unclaimed dividend is transferred to IEPF, no claim shall lie in respect thereof.

By Order of the Board Place: Mumbai Date: July 17, 2007 Registered Office: M. Lakshminarayanan Continental Building, Sr. Vice President & Company Secretary 135, Dr. Annie Besant Road, Worli, Mumbai - 400 018

21 CERTIFICATION ON FINANCIAL STATEMENTS OF THE COMPANY

We, , Whole-time Director and Hitesh Vakil, Chief Financial Officer & Director - Finance of Zee Entertainment Enterprises Limited, certify that:

a) We have reviewed financial statements and the cash flow statement for the year ended March 31, 2007 and that to the best of our knowledge and belief:

i) these statements do not contain any materially untrue or misleading statement or omit any material fact;

ii) these statements together present a true and fair view of the Company’s affairs and are in compliance with existing accounting standards and/or applicable laws and regulations.

b) There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal or violative of the Company’s code of conduct.

c) We are responsible for establishing and maintaining internal controls and that we have evaluated the effectiveness of the internal control systems of the Company and we have disclosed to the Auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies.

d) We have indicated to the Auditors and the Audit Committee:

i) significant changes in internal control during the year;

ii) significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements; and

iii) instances of significant fraud of which we have become aware and the involvement therein, if any, of the management or any employee having a significant role in the Company’s internal control system.

Punit Goenka Hitesh Vakil Whole-time Director Chief Financial Officer & Director Finance Mumbai, June 22, 2007

22 directors’ report To the Members of (Rs. Thousands) Zee Entertainment Enterprises Limited (formerly Zee Particulars Year ended Year ended Telefilms Limited) 31.03.2007 31.03.2006 Your Directors take pleasure in presenting the Twenty Fifth Add: Balance brought forward 4,969,018 5,073,933 Annual Report together with the Audited Statement of Accounts Amount available for 6,631,104 5,764,745 of the Company for the year ended March 31, 2007. appropriations RESPONSIBILITY STATEMENT Appropriations: In terms of and pursuant to Section 217 (2AA) of the Proposed Dividend 650,350 434,753 Companies Act, 1956, your Directors, in relation to the Annual Tax on Dividend 110,527 60,974 Statement of Accounts for financial year 2006-2007, state and confirm that: General Reserve 300,000 300,000 a) the Accounts had been prepared on a going concern Excess provision for dividend basis and in such preparation the applicable accounting including tax on dividend standards had been followed with proper explanation written back (1,501) – relating to material departures; Balance carried forward 5,571,728 4,969,018 b) your Directors had selected such accounting policies DIVIDEND and applied them consistently and made judgements and estimates that are reasonable and prudent so as to Your Directors are pleased to recommend a dividend of Re. 1.50 give a true and fair view of the state of affairs of the per equity share, i.e. 150% on face value of Re. 1/- each, for Company at the end of the financial year, and of the profit the financial year 2006-07. The total outflow for this purpose of the Company for that year; and would be Rs. 760.88 Million, which includes a dividend of c) your Directors had taken proper and sufficient care Rs. 650.35 Million and tax on dividend of Rs. 110.53 Million. for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, BUSINESS OVERVIEW 1956 as amended, for safeguarding the assets of the Your Company has further consolidated its position in the Company and for preventing and detecting fraud and Media & Entertainment space. With expansion of TAM panel, other irregularities. Zee TV was the least affected channel in the GEC segment FINANCIAL RESULTS demonstrating high quality shows your Company presents. The Financial Performance of your Company for the year The launch of new soap ‘Maayka’ ‘Parivaar’ and ‘Meri Doli Tere ended March 31, 2007 is summarized below: Angana’ during the year under review with already established (Rs. Thousands) properties like ‘Ghar ki Lakshmi …Betiyaan’, ‘Dulhan’, ‘Saath Phere’, ‘’, and ‘Sa Re Ga Ma Pa’, Zee TV has been Particulars Year ended Year ended able to establish and broaden the reportere of successful 31.03.2007 31.03.2006 shows in this kitty. Your Company has regained leadership Sales & Services 8,676,786 8,313,961 position in the 9 p.m. to 10 p.m. slot and ‘Betiyaan’ continues Other Income 614,553 510,237 to make further gains in ratings. Zee Café’ has witnessed Total Income 9,291,339 8,824,198 a major success in the current year and is continuously Total Expenses 6,830,203 7,813,238 surpassing the competitors in its genre, whereas Zee Cinema Profit before Tax & 2,461,136 1,010,960 continues to maintain its leadership position. These in the Exceptional Item aggregate, lead to substantial growth in advertising revenues Provision for Taxation (net) 799,050 339,514 during the year on a like to like basis. Additionally, acquisition Profit after Tax before 1,662,086 671,446 of ‘Ten Sports’ during the year has further strengthened your Exceptional Item Company’s position in the Sports Genre. Add: Exceptional Item – 19,366 Current year saw introduction of Conditional Access System Profit after Tax 1,662,086 690,812 (CAS) in major cities and CAS coverage is expected to be

23 enlarged to other areas. This shall lead to higher subscription has acquired 50% stake with majority representation in the declaration levels and your Company hopes to benefit from Board in Taj TV Limited, , the Company which owns introduction of CAS by increased subscription revenues. ‘Ten Sports’ channel and your Company has acquired 50% The successful completion of de-merger of undertakings has stake with majority representation in the Board in Taj Television resulted in maximizing shareholder wealth during the year. India Private Limited, Mumbai which is the distribution arm of DEMERGER OF BUSINESS UNDERTAKINGS Ten Sports in India. Upon receipt of your approval at the Court convened meetings Pursuant to the buyback announced and concluded by ETC and the Extra Ordinary General Meeting held on July 25, Networks Limited, a listed subsidiary of the Company, your 2006, the approvals of the Hon’ble High Courts of Bombay Company’s holding in the said subsidiary currently stands at and Delhi, and other regulatory authorities, your Company has 55.29% as compared to the earlier holding of 51.33%. successfully concluded the process of de-merger of its News, Ministry of Corporate Affairs, Goverment of India, has vide Cable and Direct Consumer Services business undertakings letter ref. no. 47/259/2007-CL-III dated July 16, 2007, granted during the year under review. Respective resultant entities exemption to the Company from provisions of Section 212(1) of viz. Limited (‘ZNL’) for news business, Wire & the Companies Act, 1956, with regard to attaching the balance Wireless (India) Limited (‘WWIL’) for cable business and sheet, profit and loss account etc. of the Subsidiaries of the Dish TV India Limited (formerly known as ASC Enterprises Company to the accounts of the Company for the financial Limited) (‘Dish TV’)have issued shares to the shareholders year 2006-07. Accounts of the Subsidiary Companies are kept of the Company and subsequently the shares of ZNL, WWIL open for inspection by members and copies would be made and Dish TV have been listed at the Stock Exchanges. available on request. Highlights of Subsidiary Company’s operations providing relevant details as prescribed in the SUBSIDIARIES & JOINT VENTURES approval is attached & forms part of the Annual Report. Consequent to Demerger of Cable and DCS Business SHARE CAPITAL Undertakings of the Company, the subsidiaries of the Company pertaining to the said Business Undertakings viz. During the financial year 2006-07, the Company had issued, Siti Cable Network Limited, Central Bombay Cable Networks allotted and listed 20,950,516 Equity Shares of Re. 1 each, Private Limited, Integrated Subscribers Management Services upon conversion of 9,417 Foreign Currency Convertible Bonds (FCCBs) of US $ 10,000 each issued in 2004. As on date, Limited, New Era Entertainment Network Limited, Siti Cable out of FCCBs aggregating US $ 100 Million issued in the year Broadband South Limited and Indian Cable Net Company 2004, only US $ 5.33 Million are outstanding. Limited ceased to be subsidiaries of the Company from the dates of effectiveness of respective of Scheme(s) of CHANGE OF NAME Arrangement. Upon receipt of all approvals, change in the name of the During the year, Asia Today Limited, Mauritius (ATL), a wholly Company from Zee Telefilms Limited to Zee Entertainment owned overseas subsidiary of your Company formed the Enterprises Limited had become effective from January 10, following wholly owned subsidiaries: 2007. Consequently, the trading symbol for the equity shares of the Company at the National Stock Exchange has been • Zee Technologies (Guangzhou) Limited, China with effect changed from ‘ZEETELE’ to ‘ZEEL’ with effect from February from July 11, 2006; 28, 2007. At the Bombay Stock Exchange, there is no change • Zee Sports International Limited, Mauritius, with effect in the ticker number allotted to the Company which remains from September 14, 2006; and the same as ‘505537’. • Zee Sports Americas Limited, Mauritius, with effect from PUBLIC DEPOSITS January 10, 2007, as wholly owned subsidiary of Zee Sports International Limited, Mauritius. During the year, your Company has not accepted or renewed any Deposits, but has honoured all commitments to its existing Your Company exited from its investment in 25 FPS Media depositors. Private Limited (25 FPS) and consequently 25 FPS ceased to be a subsidiary with effect from July 24, 2006. CORPORATE GOVERNANCE As reported in Directors’ Report for the financial year 2006, in Besides strict compliance of Clause 49 of the Listing November, 2006 Zee Sports International Limited, Mauritius, Agreement, your Company is also benchmarking itself with 24 well-established Corporate Governance practices. Given the 1988 in relation to Conservation of Energy and Technology emerging pivotal role of Independent Directors in bringing Absorption are currently not applicable to the Company. about good governance, your Company continues its efforts Particulars of foreign currency earnings and outgo during the in optimum utilization of their expertise and involving them year are given in Schedule 18B Note 13(e) to the Notes to the in all critical decision making processes. A separate report Accounts forming part of the Annual Accounts. on Corporate Governance together with Auditors’ Certificate PARTICULARS OF EMPLOYEES on compliance is attached to this Annual Report as also a Management Discussion and Analysis statement. Information as required under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of DIRECTORS Employees) Rules, 1975, as amended, is given in an annexure Upon his appointment as Managing Director of Zee News forming part of this report. Limited, Mr. Laxmi N. Goel relinquished his executive position ACKNOWLEDGEMENTS in the Company with effect from December 16, 2006, but continues as a Non-Executive Director. Mr. D. P. Naganand, The Directors take this opportunity to place on record their who was a Whole-time Director of the Company, till August appreciation of the dedication and commitment of employees at 20, 2003, has become an Independent Director, with effect all levels that has contributed to the success of your Company from April 1, 2007 as per the requirements of Clause 49 of the and remain in the forefront of media and entertainment Listing Agreement(s). business. Your Directors thank and express their gratitude for the support and co-operation received from the Central Mr. Nemi Chand Jain, Mr. Laxmi N. Goel and Mr. D. P. and State Governments mainly the Ministry of Information & Naganand, Directors retire by rotation at the ensuing Annual Broadcasting and the Department of Telecommunication and General Meeting of your Company and, being eligible, have other stakeholders including viewers, producers, vendors, offered themselves for re-appointment. Your Board has financial institutions, banks, investors, service providers as recommended their re-appointment. well as regulatory and governmental authorities. AUDITORS Statutory Auditors M/s. MGB & Co., Chartered Accountants, Mumbai, retire at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment. On behalf of the Board CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING AND OUTGO Information required to be provided under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure Place : Mumbai Chairman of Particulars in the Report of the Board of Directors) Rules, Date : July 17, 2007

25 ADDITIONAL INFORMATION GIVEN AS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988. INFORMATION AS PER SECTION 217(2A)(B)(II) READ WITH COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975 AND FORMING PART OF THE DIRECTORS’ REPORT FOR THE YEAR ENDED MARCH 31, 2007

Sr. Name Age Designation Remuneration Qualification Exp Date of Last No. Total (Rs.) in Joining Employment Yrs 1 Mr. Ashish Kaul 36 Sr. Vice President - Corporate 1,845,558 + B.A 14 01.04.05 Essel Corporate Resources Pvt. Ltd. Brand Development 2 Ms. Ashwini Yardi 34 Sr. Vice President - 3,701,522 B.A 13 01.06.94 Nil Programming 3 Mr. Bharat Ranga 38 Executive Vice President 5,273,533 B.Com, M.B.A 18 04.03.98 Modi Korea Telecommunication

4 Mr. Gajendra Singh 40 Programme Director 7,579,017 + Degree in Editing, FTII 16 23.07.92 Freelance Editor

5 Mr. Gary Lovejoy 52 COO - Zee Sports 6,811,937 30 01.04.06 Zee Sports Ltd.

6 Mr. Gautam Sengupta 52 Executive Vice President - Sales 1,392,695 + B.Tech. 28 23.11.04 Ogilvy & Mather

7 Mr. Himanshu Mody 29 Executive Vice President 4,500,876 MSc - Finance 7 01.04.05 Essel Corporate Resources Pvt. Ltd. (University of Strathclyde, Glasgow) 8 Mr. Hitesh Vakil 47 Director - Finance & Operations 6,032,537 B.Com., ACA 23 01.04.96 Tips & Toes Cosmetics (I) Ltd.

9 Mr. Indranil Chakravarti 34 Sr. Vice President - 4,886,145 BBA, CPA 13 02.05.05 JP Morgan PLC. Convergence & Buss. Dev. 10 Mr. Ishwar Jha 35 Sr. Vice President - Business 3,013,882 B.Com, PGDCA 15 09.08.04 Sony Music Entertainment Technology 11 Mr. Irshwin Balvani 53 Sr. Vice President 3,207,810 B.A. DMM 31 01.07.05 Bennett & Coleman Co. Ltd.

12 Mr. Jitesh Rajdeo 34 Vice President - Sales 2,590,382 B.Com 13 01.01.02 Econnect India Ltd.

13 Mr. Joy Chakraborthy 40 Executive Vice President - Sales 10,422,531 B.Sc., MMM 16 09.03.05 Star India Pvt. Ltd.

14 Mr. Kartik Chintamani 36 Creative Head - Zee Network 4,064,880 + B.Sc 13 01.08.05 MTV

15 Mr. L. N. Goel 54 Whole Time Director 5,916,129 + Graduate 28 01.04.05 Self Employed

16 Mr. Nitin Vaidya 45 Executive Vice President 4,624,715 B.Sc 22 19.04.01 Broadcast Worldwide

17 Mr. Pradeep Guha 55 CEO 42,005,930 B.A., AAMP (Asian 30 15.01.05 Bennett & Coleman Co. Ltd. Institute of Mgmt - Manila) 18 Mr. Punit Goenka 32 Whole Time Director 8,457,552 B.Com. 11 01.01.05 Dish TV India Ltd.

19 Mr. P. Kailasam 43 Executive Vice President - Legal 1,385,459 + M.A., PGD INS. & RISK, 17 01.01.06 Siti Cable Network Limited & Gr. Company Secretary ICWAI 20 Ms. Sanghamitra Ghosh 51 Executive Vice President - HR 4,351,958 B.Sc, PGD 22 01.04.03 Zee Interactive Learning Systems Ltd.

21 Mr. Sanjay Agrawal 38 Sr. Vice President - Accounts 4,147,548 M.Com, CA 15 01.11.05 Asia TV Ltd., U.K & Finance 22 Mr. Satish Menon 50 President - Sponsorship & 5,134,639 B.A, Diploma in 17 01.04.06 Zee Sports Ltd. Business Development Marketing Management 23 Ms. Sharada Sunder 40 Vice President - Commercial 2,816,553 B.Com, C.A. 18 11.05.05 Bennett & Coleman Co. Ltd.

24 Ms. Simran Hoon 36 Vice President - Sales 2,989,092 B.A, PGDMM 11 28.03.05 Star India Pvt. Ltd.

25 Ms. Sita L. N. Swamy 41 Sr. Vice President - Network 3,395,091 MBA 19 10.11.05 JWT Marketing 26 Mr. Tarun Mehra 39 Sr. Vice President - Marketing 2,671,974 BE, MMS 14 07.01.05 Shaw Wallace

Notes: 1. All appointments are contractual and terminable by notice on either side. 2. None of the employees, except Mr. Punit Goenka & Mr. L.N. Goel are related to any of the Directors. 3. Remuneration includes Salary, Allowances, Company’s Contribution to Provident Fund, Medical Benefits, Leave Travel Allowance & Other Perquisites and benefits valued on the basis of the provisions of Income Tax Act, 1961. + Indicates remuneration is for part of the year.

26 – – – Rs. 0 5,370 US$ 86 (11,132) US$ (61) Rs. 3,977 US$ 1,458 Rs. 16,704 Rs. 27,082 Rs. 36,324 Rs. (5,826) ( 10 ) US$ 41,911 US$ 15,016 Rs. (44,959) Rs. (24,600) (MUR 4,218) Rs. (100,478) (Amt. in ‘000) For the previous financial years of the subsidiary since it became a subsidiary

Rs. 0 Rs. 0 Rs. 0 ( 9 ) US$ 83 Rs. 379 US$ (14) Rs. 8,928 US$ (566) US$ 1,445 US$ 2,941 RAND 426 Rs. 23,062 Rs. (6,700) US$ 11,380 US$ (1,626) AED (1,650) Rs. (12,419) (MUR 3,025) Rs. (177,328) (YUAN 1,708) (Amt. in ‘000) Net aggregate amount of profits/ (losses) of the subsidiary so far as it concerns the members of holding company and is not dealt with in accounts of holding company AN IES For the financial year ended on March 31, 2007

( 8 ) (Amt. in ‘000) For the previous financial years of the subsidiary since it became a subsidiary

( 7 ) (Amt. in ‘000) For the financial year ended on March 31, 2007

Net aggregate amount of profits/ (losses) of the subsidiary so far as it concerns the members of holding company and is dealt with in accounts of holding company

TI NG TO S UB SIDI A R Y CO M P 2 1 34 5,000 3,100 1,000 1,002 2,500 74,000 50,000 60,000 10,000 47,000 100,000 ( 6 ) 7,679,176 1,050,000 1,000,000

Number of equity shares held by the holding Company and/or its subsidiaries , 1956 RE LA

US $ 1 US $ 1 US $ 1 US $ 1 US $ 1 Rand 1 Rand Rs. 10/- Rs. 10/- Rs. 10/- Rs. 10/- Rs. 10/- YUAN 1 US $ 10 Rs. 100/- US$ 1000 AED 1000 ( 5 ) Mauritus Rs.0.10 Face value Face of equity shares (per share)

AN IES A CT

74% 50% 50% 60% 94% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 52.5% 54.83% ( 4 ) Extent of Holding Company’s Interest

– – – Intl. ATL ATL ATL ATL ATL ATL ATL ATL ( 3 ) ZEEL ZEEL ZEEL ZEEL ZEEL ZEEL ZEEL ZMWL, Holding Company Zee Sports BVI & ZEEL

( 2 ) 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 31/03/2007 The financial of the Year Subsidiary Company ended on

.A.E.

roprietary) Limited

TL), Mauritius

( 1 )

ast Holdings (Singapore) Pte. Limited , BVI ) oday Limited (A urner Limited elefilms Middle East FZLLC, U TE M E N T P U RS UAN TO SECTIO 212 O F H CO elevision India Private Limited** elevision India Private A C Networks Limited Name of the Subsidiary Company an Asia Infrastructure Limited, Mauritius aj T aj TV Mauritius Limited, Mauritius** Zee T ET New Era Entertainment Network Limited* Siti Cable Network Limited * Zee Interactive Learning Systems Limited T P Zee Sports Limited T Asia Business Broadcasting (Mauritius) Limited (ABBML) Zee TV (P Expand F Zee Sports International Limited, Mauritius***

Zee Multimedia Worldwide Limited, BVI Zee Multimedia Worldwide (ZMWL

Zee Technologies (Ghuangzhou) Zee Technologies Limited, China*** Integrated Subscriber Management Services Limited* Asia T Zee Multimedia (Maurice) Limited, Mauritius Zee T 25 FPS Media Private Limited^ 25 FPS Media Private ST

27 – US$ 974 US$ 202 ( 10 ) GBP (1,088) (Amt. in ‘000) For the previous financial years of the subsidiary since it became a subsidiary

( 9 ) US$ (2) US$ 649 US$ 274 GBP (162) (Amt. in ‘000) Net aggregate amount of profits/ (losses) of the subsidiary so far as it concerns the members of holding company and is not dealt with in accounts of holding company AN IES ( C ontd.) For the financial year ended on March 31, 2007

-Finance -time Director

Whole Chairman Director Director Company Secretary ( 8 ) (Amt. in ‘000) For the previous financial years of the subsidiary since it became a subsidiary

( 7 ) (Amt. in ‘000) For the financial year ended on March 31, 2007

Net aggregate amount of profits/ (losses) of the subsidiary so far as it concerns the members of holding company and is dealt with in accounts of holding company TI NG TO S UB SIDI A R Y CO M P 2

1,000

( 6 ) 16,438,900 26,520,004

Number of equity shares held by the holding Company and/or its subsidiaries For and on behalf of the Board Subhash Chandra Punit Goenka Punit Hitesh Vakil Nemi Chand Jain M. Lakshminarayanan , 1956 RE LA

GBP 1 US $ 1 US $ 1 US $ .01 ( 5 ) Face value Face of equity shares (per share)

AN IES A CT

100% 100% 100% 100% ( 4 ) Extent of Holding Company’s Interest %

Intl. ( 3 ) ZMWL, ZMWL, Mauritius Mauritius Holding Company Zee Sports

ZMWL, BVI

( 2 ) 31/03/2007 31/03/2007 31/03/2007 31/03/2007 The financial Year of the Year Subsidiary Company ended on

( 1 )

, Mauritius)

. Limited, UK

July 17, 2007 Mumbai . USA, Inc.

.V

.V TE M E N T P U RS UAN TO SECTIO 212 O F H CO A Name of the Subsidiary Company Asia T

Zee Multimedia Worldwide (Mauritius) Zee Multimedia Worldwide Limited (ZMWL Zee Sports Americas Limited, Mauritius***

Place : Date : Zee T Notes : ^ Divested during the year. Note 17(a)]. * These enterprises have ceased to be subsidiary pursuant Scheme of Arrangement [Refer ** Acquired during the year. *** Incorporated during the year.

ST

28 report on CORPORATE GOVERNANCE Company’s Governance Philosophy Corporate Governance, which assumes great deal of importance at Zee Entertainment Enterprises Limited (Zeel), is intended to ensure value creation for its stakeholders. ZEEL believes that governance process should ensure adherence and enforcement of the principles of sound Corporate Governance with the objectives of transparency, professionalism and accountability, while facilitating effective management of the businesses and efficiency in operations. The Company continuously endeavours to improve in these aspects on an ongoing basis. Board of Directors a) Composition & Category of Directors ZEEL Board has an optimum combination of Executive and Non-Executive Directors, to ensure independent functioning. Non-Executive Directors include persons drawn from amongst eminent professionals with experience in business/ finance/ taxation/ technology. Composition of the Board as on March 31, 2007

Category of Directors No. of Directors % to total No. of Directors Executive Directors 1 10% Non-Executive Independent Directors 5 50% Other Non-Executive Directors 4 40% Total 10 100% The particulars of Directors, their attendance at the Annual General Meeting and Board meetings held during the financial year 2006-07 and also their other directorships in public companies & membership of other Board committees (excluding Remuneration Committee) as at March 31, 2007 are as under:

Attendance at Name of Director Category Board Meetings 24th AGM No. of No. of (Total 6 held on Directorship memberships Meetings) 28.12.06 of other public of Board Sub companies Committees Mr. Subhash Chandra Promoter – Non-Executive 5 Yes 7 1 Mr. Punit Goenka Promoter – Executive 4 Yes 10 – Mr. Laxmi N. Goel# Promoter – Non-Executive 4 No 7 1 Mr. Ashok Kurien Promoter – Non-Executive 6 Yes 2 2 Mr. N. C. Jain Independent – Non-Executive 6 Yes 2 – Mr. D P Naganand @ Non Executive 2 Yes 1 – Mr. B. K. Syngal Independent – Non-Executive 4 Yes 3 3 Mr. Rajan Jetley Independent – Non-Executive 3 No 1 1 Sir. Gulam Noon Independent – Non-Executive 3 No – – Dr. M. Y. Khan Independent – Non-Executive 3 No 1 –

# Resigned as Whole-time Director w.e.f 16.12.06 and continues to be Non-Executive Director @ Independent Director effective from April 1, 2007, in view of completion of 3 financial years from the date of resignation as Executive Director. 29 b) Board Meetings & Procedures During the financial year under review, 6 meetings of the Board were held on April 27, 2006, July 24, 2006, October 26, 2006, November 13, 2006, November 28, 2006 and January 22, 2007. The intervening period between the Board Meetings were well within the maximum time gap of 4 months prescribed under Clause 49 of the Listing Agreement. Board Meetings of the Company are governed by a structured agenda. The Company Secretary in consultation with Chairman/Whole-time Director drafts agenda of the Board meetings. All major agenda items, backed up by comprehensive background information, are sent well in advance of the date of the Board meetings to enable the Board to take informed decision. Any Board member may, in consultation with the Chairman, bring up any matter for consideration by the Board. Chief Executive Officer and Head of Department of Finance & Accounts are normally invited to the Board meetings to provide necessary insights into the working of the Company and for discussing corporate strategies. The Board periodically reviews Compliance Reports in respect of laws and regulations applicable to the Company. c) Brief profile of the Directors to be re-appointed at the Annual General Meeting Nemi Chand Jain, 68, is a member of Board of Directors of Zee Entertainment Enterprises Limited. A post graduate in Accounts and Law, he has 38 years of experience in the Civil Service (as member of Indian Revenue Service). During his tenure in the civil services, he has held important positions like Chairman Income Tax Settlement Commission, Secretary to Government of India, Ministry of Finance, Chief Commissioner of Income Tax at Kanpur and Mumbai, Joint Secretary to Government of India, Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) in-charge of Tax Planning and Legislation division and Foreign Tax division. He was instrumental in negotiating various Double-Taxation Avoidance treaties on behalf of Government of India. Apart from the Company, Mr. Jain, holds directorships in Superhouse Leather Limited and ETC Networks Limited (a subsidiary of the Company). Mr. Jain holds 20 equity shares, comprising of 0.00% of paid up capital of the Company. Laxmi Narain Goel, 55, is a Director of Zee Entertainment Enterprises Limited & one of its promoters. He is one of the key architects of the of Companies. He started his career in 1969 trading agro commodities and established Rama Associates Limited, along with his brothers. In 1980, he diversified the Group’s activities into handicraft exports and real estate development business. He has contributed enormously in the establishment and progress of Limited. At present, Mr. Goel holds the position of Vice Chairman of the Essel Group of Companies and is actively involved in the day-to-day developmental activities of the Group. From June 2002, Mr. Goel took over responsibilities of News business and was responsible for successfully positioning Zee News into its market leading position. With human-interest stories as the focus of his editorial policy, he has touched the hearts and lives of the common citizens of India. On Demerger of News Business Undertaking of the Company and listing of resultant Company, Zee News Limited, Mr. Goel was appointed as its Managing Director with effect from December 16, 2006. Mr. Goel held the position of Whole-time Director of the Company from April 1, 2005 to December 15, 2006. Currently he continues as Non-Executive Director of the Company. Besides business, he is actively involved in social philanthropic work. He has been the trustee of the Agroha Vikas Trust for more than decade. He is also the trustee of the Delhi chapter of the Trust, which undertakes a number of noble social causes including the building and running of colleges, schools and temples. Mr. Goel was head of affairs of the Sewak Sabha Hospital, Hissar, , for two years. Apart from the Company, Mr. Laxmi N Goel, holds directorships in Rama Associates Limited, Essel International Limited, Rankey Investments & Trading Co. Limited, ASC Telecommunication Limited, East India Company (Trading) Limited, Siti Energy Limited and Zee News Limited (as Managing Director). Mr. Laxmi N. Goel, holds 17,50,000 equity shares, comprising of 0.40% of paid up capital of the Company. D P Naganand, 58, was Whole Time Director of the Company from October 20, 2000 to August 20, 2003. He joined the Zee Group in February 2000 as Chief Executive Officer of Econnect India Limited (at that time, a wholly owned subsidiary of ZEEL) and was responsible for ZEEL’s convergence initiative. Mr. Naganand continues as a Non-Executive Director on the Board. He is a B.Tech from I.I.T Kharagpur, M.B.A. from the University of Ontario and an AMP from Harvard University. He 30 has more than 30 years experience working in various capacities in ITC. Prior to joining the Zee Group he was the Head of the Corporate Strategic Planning Department of ITC, Calcutta. Apart from the Company, Mr. Naganand holds directorships in Zee Turner Limited (a subsidiary of the Company) and Wire and Wireless (India) Ltd. (w.e.f. April 16, 2007) Mr. Naganand does not hold any Shares in the Company. d) Code of Conduct The Board of Directors at its meeting held on December 2, 2005 have approved and adopted Code of Conduct for Members of the Board of Directors and Senior Management of the Company. The Code has been posted on Company’s website viz. www.zeetelevision.com A declaration affirming compliance with the code of conduct by the members of the board and senior management is annexed herewith and forms part of this report. Declaration All Directors and senior management of the Company have affirmed compliance with the Code of Conduct for the financial year ended March 31, 2007. Punit Goenka Whole-time Director Mumbai, June 22, 2007

Board Committees a) Audit Committee The Board has constituted the Audit Committee, all the Members of the Committee being Non-Executive Directors. The Chairman of the Committee, Mr. N. C. Jain, is an Independent Director. The role and the powers of the Audit Committee are as per the guidelines set out in the Listing Agreement with the Stock Exchanges and provisions of Section 292A of the Companies Act, 1956. The Committee meets periodically and reviews:  audited and un-audited financial results  internal audit reports & report on internal control systems of the Company  discusses the larger issues that could be of vital concern to the Company including adequacy of internal controls, reliability of financial statements/other management information, adequacy of provisions for liabilities and whether the audit tests are appropriate and scientifically carried out in accordance with Company’s business and size of operations. The Audit Committee also reviews adequacy of disclosures and compliance with all relevant laws. In addition to the foregoing, in compliance with requirements of Clause 49 of the Listing Agreement, the Audit Committee reviews operations of subsidiary companies viz., its financial statements, significant related party transactions, statement of investments and Minutes of meeting of the Board and Committees. During the year under review, Audit Committee met for 5 times viz. Attendance Sr. No. Date of Meeting No. of Independent No. of Non-Independent Directors Directors 1. 27.04.06 3 2 2. 24.07.06 3 2 3. 26.10.06 2 1 4. 28.11.06 2 1 5. 22.01.07 2 1 31 Composition of Audit Committee, in accordance with the applicable guidelines and rules, during the year under review was as follows:

Name of Directors Category Date of Appointment on Audit Committee Mr. Ashok Kurien Promoter - Non Executive 29.03.2001 Mr. N. C. Jain Non Executive - Independent 18.07.2002 Mr. B.K. Syngal Non Executive - Independent 18.07.2002 Mr. D.P. Naganand Non Executive 08.01.2003 Mr. Rajan Jetley Non Executive - Independent 02.12.2005 Statutory Auditors, Internal Auditors and Chief Financial Officer of the Company have attended all meetings of the Committee. The Company Secretary is the Secretary of the Audit Committee. b) Remuneration Committee and Policy The Remuneration Committee of the Company comprises of Mr. N. C. Jain, Non-Executive Independent Director as Chairman, and Mr. Ashok Kurien, Non-Executive Director, Mr. Laxmi N. Goel, Non-Executive Director (Executive till December 15, 2006) and Mr. B. K. Syngal, Non-Executive Independent Director, as its members. The Company Secretary is the Secretary of the Committee. The terms of reference of the Remuneration Committee, inter alia, consist of reviewing the overall compensation policy, service agreements and other employment conditions of Executive Directors. The remuneration of Executive Directors is decided by the Board of Directors on the recommendation of the Remuneration Committee as per the remuneration policy of the Company within the overall ceiling approved by shareholders. During the year under review, Remuneration Committee met only once on April 27, 2006, which was attended by all members except Mr. Laxmi N. Goel. Details of the remuneration paid to Whole-time Directors during the year ended March 31, 2007 is as under: -

Remuneration (Rs.) Name Position Salary and Perquisites Employer’s Contribution to Allowances Provident Fund Mr. Punit Goenka Whole Time Director 6,543,600 2,400,000 605,232 Mr. Laxmi N. Goel@ Whole Time Director 5,916,129 – – Total 12,459,729 2,400,000 605,232 @ Mr. Laxmi N Goel, held position as Executive Director till December 15, 2006. Remuneration payable to Non-Executive Director Within the limits approved by the Members, the Company has paid sitting fees of Rs. 10,000 per meeting to Non-Executive Directors for attending the meeting of the Board and Committees thereof. Additionally, pursuant to approval of Members at 24th Annual General Meeting held on December 28, 2006, Non-Executive Directors of the Company shall be entitled to remuneration by way of commission of upto 1% of profits of the Company for the current financial year. Particulars of Commission payable to Non-Executive Directors of the Company for Financial year 2006-2007 is as under:

Name of Director Sitting Fees for Board and Commission Total Committee Meetings Subhash Chandra 50,000 400,000 450,000 Laxmi N. Goel $ 10,000 116,667 126,667 Ashok Kurien 120,000 400,000 520,000 32 Name of Director Sitting Fees for Board and Commission Total Committee Meetings N. C. Jain 120,000 400,000 520,000 D. P. Naganand 40,000 500,000 540,000 B. K. Syngal 90,000 400,000 490,000 Rajan Jetley 60,000 400,000 460,000 Gulam Noon 30,000 400,000 430,000 M. Y. Khan 30,000 400,000 430,000 Total 550,000 3,416,667 3,966,667 $ Non-Executive Director for part of the year from December 16, 2006 c) Share Transfer and Investors Grievance Committee The Share Transfer and Investors Grievance Committee of the Board comprises of Mr. Ashok Kurien, Non-Executive Director as Chairman and Mr. N. C. Jain, Non-Executive Independent Director as Member. The Company Secretary is the Secretary of the Committee. Main function of the Share Transfer and Investors Grievance Committee is to supervise and ensure efficient transfer of shares and proper and timely attendance of investors’ grievances. Mr. M. Lakshminarayanan, Senior Vice President & Company Secretary is the Compliance Officer of the Company. During the year under review, Share Transfer and Investors Grievance Committee met 3 times on April 3, 2006, July 25, 2006 and January 15, 2007. These meetings were attended by all committee members. Details of number of requests/complaints received and resolved during the year ended March 31, 2007, are as under:

Nature of Correspondence Received Replied/ Resolved Pending Non-receipt of Dividend Warrant(s) 210 210 – Non-receipt of Certificates (Sub-division) 14 14 – Non-receipt of Shares after transfer 4 4 – Legal Cases* 3 3 – Letter received from ROC 1 1 – Letter received from SEBI 5 5 – Letter received from BSE 2 2 – Non-receipt of Annual Report 2 2 – Total 241 241 – * Legal cases pertain to claim on ownership of the equity shares in which the Company has been made a party. These cases are not material in nature. The resolution of such cases is dependent upon final court judgement(s). d) Finance Sub-Committee With a view to facilitate monitoring and expediting fund raising process, the Board of Directors of the Company constituted Finance Sub-Committee comprising of Mr. N. C. Jain, Non-Executive Independent Director as Chairman and Mr. Ashok Kurien, Non-Executive Director and Mr. Punit Goenka, Whole-time Director as its Members. Main function of Finance Sub-Committee is to approve financing facilities offered and/or sanctioned to the Company by various Banks and/or Indian Financial Institutions from time to time, in the form of Term Loans, Working Capital Facilities, Guarantee Facilities, etc., including the terms and conditions of such facilities being offered. During the year under review Finance Sub-Committee met twice on September 6, 2006 and September 7, 2006, which was attended by all members. 33 General Meetings The 25th Annual General Meeting of the Company for the year 2007 will be held on Friday, the 17th day of August 2007 at 11.30 a.m., at Auditorium, A Wing, Ground Floor, National Stock Exchange of India Limited, Exchange Plaza, Plot No. C-1, G-Block, Bandra-Kurla Complex, Bandra (E), Mumbai - 400 051. Details of Annual General Meetings held during last 3 years are as follows:

Meeting Day, Date and Time of the Meeting Venue 24th AGM Thursday December 28, 2006, 3.00 p.m. Nehru Centre, Worli, Mumbai – 18 23rd AGM Wednesday September 29, 2005, 3.00 p.m. Nehru Centre, Worli, Mumbai – 18 22nd AGM Tuesday, September 28, 2004, 3.00 p.m. Nehru Centre, Worli, Mumbai – 18

During last three Annual General Meetings of the Company, the members had passed following Special Resolutions: At 24th Annual General Meeting : Delisting of Equity Shares of the Company from Calcutta Stock Exchange Association Ltd. Change of name of the Company from Zee Telefilms Ltd. to Zee Entertainment Enterprises Ltd. and consequent amendment to Memorandum and Articles of Association of the Company. Payment of Commission to Non-Executive Directors of the Company. Approval for appointment of Mr. Subhash Chandra, Non-Executive Chairman of the Company for holding an office or place of profit in Asia TV Limited UK, a wholly owned foreign subsidiary of the Company. At 23rd Annual General Meeting : Alteration of Articles of Association of the Company. At 22nd Annual General Meeting : Approval for appointment of Mr. Subhash Chandra, Chairman and Managing Director of the Company for holding an office or place of profit in Asia TV Limited UK, a wholly owned foreign subsidiary of the Company. Approval for appointment of Mr. Jawahar Goel, brother of Mr. Subhash Chandra and Mr. Laxmi N. Goel, for holding an office or place of profit in Siti Cable Network Limited, a wholly owned subsidiary of the Company. All the above resolutions were passed with requisite majority. No Ordinary or Special resolutions were passed through Postal Ballot during last year. At the ensuing Annual General Meeting, no Resolution is proposed to be passed through postal ballot. Disclosures There are no materially significant related party transactions, i.e. transaction material in nature, between the Company and its promoters, directors or management or their relatives etc., having any potential conflict with interests of the Company at large. Transactions with related parties are disclosed elsewhere in the Annual Report. There has not been any non-compliance by the Company and no penalties or strictures imposed by SEBI or Exchanges or any statutory authority on any matter relating to capital markets, during the last three years. Compliance with Non-Mandatory requirements The Company confirms that it has complied with all mandatory requirements to Clause 49 of the Listing Agreement. Particulars of non mandatory requirements complied by the Company are as detailed hereunder: 1. Remuneration Committee – The Company has setup Remuneration Committee to recommend/review overall compensation policy, service agreements and other employment conditions of Executive Directors. 2. Whistle Blower Policy – The Board of Directors of the Company approved the Whistle Blower Policy, pursuant to which employees can raise concern relating to the fraud, malpractice or any other untoward activity or event which is against the interest of the Company and/or its stakeholders. 34 3. Audit Qualification – Company is in the regime of unqualified financial statements. 4. Chairman’s Office – A Chairman’s office with requisite facilities is provided and maintained at the Company’s expenses for use by its Non-Executive Chairman. The Company also reimburses all expenses incurred in his furthering the Company’s business interest. Means of Communication The Company has promptly reported all material information including declaration of quarterly financial results, press releases, etc. to all Stock Exchanges where the securities of the Company are listed. Such information is also simultaneously displayed immediately on the Company’s web site, www.zeetelevision.com. The financial results quarterly, half yearly and annual results and other statutory information were communicated to the shareholders by way of an advertisement in a English daily viz. ‘Daily News & Analysis (DNA)’ and in a vernacular language newspaper viz. ‘Punya Nagari (Marathi)’ as per requirements of the Stock Exchange. Official news releases and presentations made to institutional investors or to the analysts are displayed on Company’s web site, www.zeetelevision.com. All data required to be filed electronically as EDIFAR documents pursuant to Clause 51 of the Listing Agreement with the Stock Exchange, Mumbai, such as quarterly financial results, segment reporting, shareholding pattern, quarterly report on corporate governance are being regularly filed on the EDIFAR website viz. www.sebiedifar.nic.in in addition to the filing of the same in hard copy with Stock Exchanges. Management Discussions and Analysis Report forming part of annual report is annexed separately. General Shareholder Information The required information is provided in Shareholders’ Information Section. auditors’ certificate To The Members of Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) We have examined the compliance of conditions of Corporate Governance by Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited), for the year ended March 31, 2007 as stipulated in Clause 49 of the Listing Agreement of the Company with the Stock Exchanges. The Compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to the procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. 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 explanations given to us, we certify that the Company has compiled with the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement. We state that generally no investor grievances are pending for a period exceeding thirty days against the Company as per the records maintained by the Company. 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. Mohan Bhandari Partner M. No.12912

For and on behalf MGB & Co. Chartered Accountants Mumbai June 27, 2007 35 Shareholders’ Information 1. Date, Time and Venue of Meeting : Annual General Meeting Shareholder’s Meeting Day and Date : Friday, August 17, 2007 Time : 11.30 a.m. Venue : Auditorium, A Wing, Ground Floor, National Stock Exchange of India Limited, Exchange Plaza, Plot No. C-1, G-Block, Bandra-Kurla Complex, Bandra (E), Mumbai - 400 051.

2. Financial Year 2006-2007 3. Date of Book Closure August 10, 2007 to August 17, 2007 (both days inclusive) 4. Dividend Payment Date On or after August 24, 2007 5. Registered office Continental Building, 135, Dr. Annie Besant Road, Worli, Mumbai - 400 018, India Tel: +91-22-6697 1234 Fax: +91-22-2490 0302/0213 Website : www.zeetelevision.com 6. Listing on Stock Exchanges Equity Shares: The Bombay Stock Exchange Limited (BSE) The National Stock Exchange of India Limited (NSE) The Stock Exchange Association Limited (CSE) Foreign Currency Convertible Bonds: The Singapore Stock Exchange 7. Stock Code BSE - 505537 NSE - ZEEL EQ Reuters - ZEE.BO (BSE) ZEE.NS (NSE) Bloomberg - Z IN (BSE) NZ IN (NSE) 8. ISIN No. Equity - INE256A01028 FCCB - XS0191281137 9. Trustee for FCCB Issue Deutsche Trustee Company Limited Winchester House, 1 Great Winchester Street, London EC2N 2DB, United Kingdom 10. Registrar & Share Transfer Agent Sharepro Services (India) Private Limited Satam Estate, 3rd Floor, Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (East), Mumbai - 400 099, India Tel: +91-22-2821 5168/2832 9828 Fax: +91-22-2837 5646 E-mail: [email protected]

36 11. Investor Relation Officer Mr. Pushpal Sanghavi Dy. Company Secretary Zee Entertainment Enterprises Limited Continental Building, 135, Dr. Annie Besant Road, Worli, Mumbai - 400 018, India Tel: +91-22-6697 1234 Fax: +91-22-2490 0302/0213 E-mail: [email protected] 12. Dividend The Board of Directors have recommended payment of dividend @ Re.1.50 per share on paid up value of Re. 1 per share i.e. 150% on the paid up capital of the Company. Dividend, if approved by Members at the ensuing Annual General Meeting, will be paid to all those shareholders whose name appear in the Register of Members of the Company, after giving effect to all valid share transfers in physical form lodged with the Company or its Registrars on or before August 9, 2007 and in the list of beneficial owners furnished by National Securities Depository Limited and/or Central Depository Services (India) Limited, in respect of shares held in electronic form, as at the end of the business on August 9, 2007. Dividend for the financial year ended March 31, 2000, which remains unpaid or unclaimed, will be due for transfer to the Investor Education and Protection Fund on completion of seven years. The same would be transferred on or before December 12, 2007. Members who have not encashed their dividend warrant(s) for the financial year ended March 31, 2000, or any subsequent financial year(s), are requested to seek issue of duplicate warrant(s) by writing to the Registrar and Share Transfer Agent of the Company. Members will not be able to claim any unpaid dividend from the Investor Education and Protection Fund or the Company once it is transferred to the fund. Information in respect of unclaimed dividend for the subsequent financial years and date(s) when due for transfer to Investor Education and Protection Fund is given below: Financial Year ended Date of Declaration Last date for claiming Due date for transfer of Dividend Unpaid Dividend to IEP fund 31.03.2000 26.09.2000 13.11.2007 12.12.2007 31.03.2001 29.09.2001 04.11.2008 03.12.2008 31.03.2002 25.10.2002 30.11.2009 29.12.2009 31.03.2003 26.09.2003 01.11.2010 30.11.2010 31.03.2004 28.09.2004 03.11.2011 02.12.2011 31.03.2005 28.09.2005 03.11.2012 02.12.2012 31.03.2006 28.12.2006 03.02.2014 02.03.2014 13. Change of Address Members holding equity shares in physical form are requested to notify the change of address/dividend mandate, if any, to the Company’s Registrar & Share Transfer Agent, at the address mentioned above. Members holding equity shares in dematerialised form are requested to notify the change of address/dividend mandate, if any, to their respective Depository Participant (DP). 14. Change of Name of the Company The name of the Company has changed from ‘Zee Telefilms Limited’ to ‘Zee Entertainment Enterprises Limited’ with effect from January 10, 2007. In compliance SEBI guidelines for Good and Bad Delivery, the Company confirms that Old Share Certificates which have not been corrected with the new name of the Company, shall also be good for delivery in the market. The Registrar and Share Transfer Agent shall make necessary endorsement of change of name of the Company in physical share certificates as and when the same are received for transfer/ transmission/ remat/ sub-division/ split etc. 37 15. Share Transfer System Equity Shares sent for physical transfer or for dematerialisation are generally registered and returned within a period of 15 days from the date of receipt of completed and validly executed documents. 16. Dematerialisation of Equity Shares & Liquidity Trading in equity shares of the Company became mandatory in dematerialised form with effect from April 5, 1999. To facilitate trading in demat form, the Company has made arrangements with both the depositories i.e. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Shareholders can open account with any of the Depository Participant registered with any of these two depositories. As on date 99.11% of the equity shares of the Company are in the dematerialised form. 17. Splitting of Shares On October 25, 1999 shareholders had approved splitting of face value of equity shares of the Company from Rs. 10 each to Re. 1 each. The resolution became effective from the start of no-delivery period w.e.f. December 6, 1999. From this day onwards trading in equity shares of Re. 1 each commenced and consequently the equity shares of Rs. 10 each ceased to trade on the exchanges. For the shareholders, holding shares in physical form, the Company had sent them intimation to exchange the old certificates of face value of Rs. 10 each with new certificate of face value of Re. 1 each. For the shareholders holding shares in demat form, the depositories automatically gave the effect of splitting of face value of shares by way of a Corporate action dated December 23, 1999. Shareholders who could not exchange their old certificates earlier for the new certificates and who are desirous of exchanging the same, should follow the following procedure: 1. Write a letter to the Company’s Registrar & Share Transfer Agent mentioning:  Your intention to split the share certificates;  Whether the new share certificates are required in jumbo lot or in market lot. 2. Attach old certificates in original, with the letter. 3. Send the same (preferably through registered post) to the Registrar and Share Transfer Agent at the address given above. 18. Shareholders’ Correspondence The Company has attended to all the investors’ grievances/ queries/ information requests except for the cases where we are constrained because of some pending legal proceeding or court/statutory orders. We endeavour to reply all letters received from the shareholders within a period of 5 working days. All correspondence may be addressed to the Registrar & Share Transfer Agent at the address given above. In case any shareholder is not satisfied with the response or do not get any response within reasonable period, they may approach the Investor Relation Officer at the address given above. 19. Outstanding Convertible Instruments, Conversion Date & Likely Impact on Equity In April 2004, the Company had raised US$ 100 million by issuing 10,000 0.5% Foreign Currency Convertible Bonds (FCCBs) of US$ 10,000 each, due for redemption on April 29, 2009. The bondholders have an option to convert these bonds into equity shares at an initial conversion price of Rs.197.235 per share, with a fixed rate of exchange on conversion of Rs. 43.88 (US$1), from and including June 8, 2004 to and including April 22, 2009. The conversion price will be subject to certain adjustments. Conversion price adjustments consequent to Scheme of Arrangements for demerger of News, Cable and Direct Consumer Services business undertakings of the Company, is yet to be finalised. The outstanding bonds may be redeemed at the option of the Company at any time on or after May 12, 2006 and up to April 22, 2009 subject to certain conditions. Unless previously converted, redeemed or repurchased and cancelled, the bonds will mature on April 29, 2009 at 116.24% of their principal amount. These Bonds are listed at Singapore Stock Exchange and would be listed on stock exchanges in India upon its conversion into equity shares of the Company, if any. As on July 17, 2007, on exercise of conversion option 9,467 FCCBs of USD 10,000 each have been converted to 21,061,753 Equity 38 Shares of Re. 1 each of the Company and 533 FCCBs are outstanding. If these outstanding bonds are converted, the share capital of the Company will increase by 1,185,796 equity shares of the Company. 20. Stock Market Data Relating to Shares Listed in India a. The Equity Shares of the Company is a part of i. ‘A’ group scrip at BSE ii. CNX Nifty Index in NSE & iii. Future and Options (F&O) Segment in NSE b. Monthly high and low quotations and volume of shares traded on Bombay Stock Exchange and National Stock Exchange for financial year 2006-2007 are: BSE NSE Month High Low Volume of High Low Volume of (Rs.) (Rs.) Share Traded (Rs.) (Rs.) Shares Traded April 2006 270.00 222.00 18,927,829 267.90 222.00 44,253,574 May 2006 306.00 201.00 18,215,614 307.70 200.05 46,649,280 June 2006 244.95 189.20 10,330,637 245.00 188.45 26,277,113 July 2006 278.00 234.60 15,456,200 277.95 234.35 32,788,846 August 2006 296.50 256.60 14,600,380 304.00 256.50 34,254,564 September 2006 328.90 259.40 50,566,585 328.75 259.45 106,946,756 October 2006 309.45 283.05 14,831,256 309.55 282.30 35,748,363 November 2006 378.75 303.10 24,392,696 378.40 302.50 73,233,015 December 2006 381.00 249.00 32,008,748 381.00 250.05 84,109,666 January, 2007 338.60 268.25 13,396,394 338.00 268.55 43,070,537 February 2007 372.95 220.00 16,375,052 371.90 210.50 49,684,533 March 2007 255.40 210.00 8,769,781 255.95 215.00 23,540,273 Note: The market value of the shares of the Company got adjusted (i.e. became Ex-entitlements) for the purpose of demerger of Cable and News business undertaking on and from December 18, 2006 and for the demerger of Direct Consumer Services Business undertaking on and from February 12, 2007. 21. Relative Performance of Zee Shares Vs. BSE Sensex & Nifty Index Zee Entertainment Enterprises Limited (BSE - Closing Price Vs Sensex)

Closing Price (Month End) Closing Sensex (Month End)

400 16000

320 12800

240 9600 PRICE

160 6400 SENSEX

80 3200

0 0 Apr-06 May-06 Jun-06 July-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 MONTH 39 Zee Entertainment Enterprises Limited (NSE - Price Vs Nifty)

Close (Rs.) - (Month End) Nifty (Month End)

400 4000

320 3200

240 2400 PRICE

160 1600 SENSEX

80 800

0 0 Apr-06 May-06 Jun-06 July-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 MONTH

22. Distribution of Shareholding as on March 31, 2007 No. of Equity Share Share holders No. of Shares Number % of Holders Number % of Shares Up to 5000 115,103 99.39% 16,336,334 3.78% 5001 – 10000 269 0.23% 2,078,808 0.48% 10001 – 20000 115 0.09% 1,646,789 0.38% 20001 – 30000 36 0.03% 885,155 0.20% 30001 – 40000 30 0.03% 1,061,094 0.25% 40001 – 50000 30 0.03% 1,332,732 0.31% 50001 – 100000 39 0.03% 2,888,778 0.67% 100001 and Above 192 0.17% 407,337,075 93.93% Total 115,814 100.00% 433,566,765 100.00%

23. Categories of Shareholders as on March 31, 2007 Category March 31, 2007 % of shareholding No. of shares held Promoters 43.25% 187,502,368 Individuals 3.92% 17,043,812 Domestic Companies 4.39% 19,045,391 FIs, Mutual funds and Banks 15.44% 66,888,326 FIIs, OCBs & NRI 33.00% 143,086,868 Total 100.00% 433,566,765

40 Zee Entertainment Enterprises Limited Share pattern as on March 31, 2007

Domestic Companies 4.39% Promoters FIIs/NRIs/OCBs 43.25% 33.00%

FIs/MF/Bank Individuals 15.44% 3.92%

24. Particulars of Shareholding a) Promoter Shareholding as on March 31, 2007 Sr. No. Name of Shareholder No. of Shares held % of shareholding 1 Delgrada Limited 82,033,402 18.92% 2 Jayneer Capital Pvt. Ltd. 52,346,704 12.07% 3 Lazarus Investments Limited 11,500,000 2.65% 4 Prajatma Trading Co. Pvt. Ltd. 7,574,500 1.75% 5 Essel Infraprojects Ltd. (formerly Pan India Paryatan Ltd.) 6,400,000 1.48% 6 Premier Finance and Trading Co. Ltd. 6,176,000 1.42% 7 Ganjam Trading Co. Pvt. Ltd. 6,016,500 1.39% 8 Briggs Trading Co. Pvt. Ltd. 4,451,262 1.03% 9 Churu Trading Co Pvt. Ltd. 3,576,000 0.82% 10 Ambience Advertising Pvt. Ltd. 2,275,000 0.52% 11 Ashok Kurien 2,042,000 0.47% 12 Laxmi Goel 1,750,000 0.40% 13 Sushila Goel 680,000 0.16% 14 Veena Investment Pvt. Ltd. 431,000 0.10% 15 Sushila Devi 250,000 0.06% Total 187,502,368 43.25% b) Top ten (10) Public Shareholding as on March 31, 2007 Sr. No. Name of Shareholder No. of Shares held % of shareholding 1. Life Insurance Corporation of India 21,427,720 4.94% 2. FID Funds (Mauritius) Limited 21,244,025 4.90% 3. Oppenheimer Funds Inc. A/c Oppenheimer Globalfund 19,016,242 4.39% 4. ICICI Prudential Life Insurance Company Ltd. 9,261,573 2.14% 5. T Rowe Price International Inc. A/c T Rowe Price Emerging Markets Stock Fund 9,062,212 2.09% 6. Templeton Mutual Fund A/c Franklin India Bluechip Fund 8,213,855 1.89% 7. HDFC Trustee Company Limited - HDFC Prudence Fund 7,588,771 1.75% 8. Lloyd George Investment Management (Bermuda) Limited A/c L.G. India Fund Limited 7,324,696 1.69% 9. Merrill Lynch Capital Markets Espana S.A. S.V. 6,414,600 1.48% 10. SBI Mutual Fund Magnum Childrens Benefit Plan 6,241,820 1.44% Total 115,795,514 26.71% 41 management discussion and aNalysis

The figures have been stated in Rs. Million in the MD&A for Advertising Spend as % of GDP better readability instead of Rs. Thousands as stated in the 1.34 financial statements. 1.4 1.2 Investors are cautioned that this discussion contains forward 0.95 0.98 looking statements that involve risks and uncertainties 1 0.8 including, but not limited to, risks inherent in the Company’s 0.54 0.6 0.4 growth strategy, acquisition plans, dependence on certain 0.4 businesses, dependence on availability of qualified and trained 0.2 manpower and other factors. The following discussion and 0 analysis should be read in conjunction with the Company’s India China UK Global US Average financial statements included herein and the notes thereto. Industry Overview: Company OVERVIEW l With 112 million TV households, India is the third largest Zee Entertainment Enterprises Limited (Zee) (BSE: ZEE.BO and TV market in the world with a penetration level of 59%. NSE: ZEE.NS) is India’s largest vertically integrated media and Expected to grow at 7-8% over the next 5 years. entertainment company. The Company was formed in 1982. l C & S TV Households stand at 68 million Households ZEEL is a global content powerhouse. The Company with a penetration level of 61%. broadcasts India’s leading television channels including Zee TV, l Indian households expected to grow from 215 million in Zee Cinema, Zee Sports, Zee Café, , Zee Music 2007 to 238 million based on population rate of growth and ETC. The Company caters to global South Asian Diaspora of 2.5%. reaching close to 500 million viewers across the globe. l Growing urbanization and increasing trend towards Zee TV: nuclear families would result in a higher number of Zee TV has further strengthened its position to No. 2 in the GEC households. Households with TV estimated to grow segment by narrowing the gap with No. 1 and broadening the from 112 million to 151 million by 2011. Many urban gap with No. 3 channel respectively in the genre. household opting for multiple television sets. C & S Households expected to go up from current 68 million *537UHQG  to 110 million households in 2011.            l DTH households expected to grow to around 27 million     in 2011.           l Digital cable estimated to grow to 28 million in 2011.        

$YHUDJH:HHNO\*53    l Subscription revenue to grow at 25% CAGR over the next      five years. Broadcasters share of subscription revenue  to grow faster at 58%. $SU 0D\ -XQ -XO $XJ 6HS 2FW 1RY 'HF -DQ )HE 0DU 0RQWK Times are changing: =HH79 6RQ\ 6WDU3OXV The industry is set to script a new story, with the key participants taking control of their respective operation. Continuous infusion of freshness in content to attract and The fact that television has the inherent advantages of high retain fleeting attention. reach, low cost of advertising and a relatively lower cost of Consolidating high yielding time bands to build channel loyalty entertainment (as compared to films) is expected to provide as against mere programme loyalty. even more momentum to the television revolution. Given Launch of new programs like Johny ala Re, Shabaash India, the non-linear business models, media businesses trade Betiyaan, Banoo Main Teri Dulhan, Teen Bahuraaniyaan, at a premium and have future embedded value, depending Maayka, Antakshari, Raavan, Jab Love Hua, etc. has widened on management and scalability. Also, the Media Industry is the variety of offerings. Add to this the continuing strength of crippled by lacunas like poor regulations, fragmented markets, Kasamh Se and Saat Phere, the lineup on Zee TV looks very low investments, fickle Revenue models and leakages. As formidable. As on the week ending March 31, 2007, Zee TV inefficiencies are eliminated, the environment could only had 19 programmes in the Top 50 and 28 programmes in the get better. The very fact that there is tremendous untapped Top 100. potential in Advertising market can be depicted from the graph below where India is one of the lowest Ad spenders Zee TV is the only channel in the GEC Genre which is on an globally. upward trend. 42 Zee Cinema continues to be the numero uno movie channel. rights of its channels in certain international markets. The With special series like Amitabh Movies, Klub, etc. the Company beams its channels to over 120 countries through channel has further strengthened its numero uno position in various distribution platforms, and has entered into agreements Movies genre. with DTH and local cable operators in each of the countries in Zee Café offers the widest variety of English Entertainment which its channels are distributed. Under these agreements, programmes including sitcoms, Dramas, Soaps, Reality, ZEEL generally receives subscription or licensing fees from these operators and it retains the advertising revenue it sells Chat Shows, Fashion, Travel, Music, Action, Hollywood and on its channels. ZEEL’s principal broadcasting operations are, news and snippets. apart from India, the USA, Canada, Caribbean, UK, Europe, The Company has acquired a 50% stake in the premiere sports Africa, Middle East, Indonesia, Malaysia, and other parts of channel ‘Ten Sports’. With the acquisition of Ten Sports, the South Asia. Company has strengthened and broadened its presence in the l In UK and Europe, Zee offers a 5-channel package of sports genre catering to both cricket and football viewers. Zee TV, Zee Cinema, Zee Music, Zee Gujarati and Zee The operations of ZEEL can be classified into four main ETC Punjabi. It has around 1,74,000 subscribers both on areas: cable and DTH. l Content and Broadcasting, which includes production, l The US operations started in 1998 and has four channels aggregation and broadcasting of TV software. Zee TV, Zee Cinema, Zee Gujarati and Zee Punjabi with l Film production and distribution, consisting of production, a combined subscriber base of around 2,88,000. acquisition and distribution of films. l Zee’s Africa operations have been steady with a base l Education business, which includes ground learning of approximately 73,000 subscribers for Zee TV. centers in animation and media arts and also distance l Zee broadcasts Zee TV and Zee Punjabi in Canada, learning. where it has around 1,23,000 subscribers. It has another l Others. 1,31,000 subscribers in the Caribbean countries. The segment pertaining to ‘Access’ has been discontinued in l Zee has a subscriber base of around 2,46,000 in the the current year due to Demerger of distribution business to Middle East and of about 23,18,000 in South East Wire & Wireless India Limited and Dish TV India Limited. Asia. 1. Content & Broadcasting l Zee TV and Zee Cinema are the No. 2 and No. 3 channels Content in the country (across all Genres). Zee cinema is also a leader in its own genre of Movies. The Content business comprises various General entertainment, Sports, Movies, Music and English channels, software l Zee Sports is a fast growing franchisee showcasing production related activities including ideation, development, some of the leading football and cricket properties. To creation of television programs and acquisition of film rights further strengthen its position in sports genre, Zee has for cable and satellite television. acquired a 50% stake in an established sports channel with of wide viewer ship in South Asia and the Middle- Broadcasting east, ‘Ten sports’. Zee Entertainment Enterprises Limited broadcasts 15 channels 2. Education in the Indian subcontinent and several channels worldwide and reaches more than 500 million people across the globe. Zee Education began its activities in 1994 as a division of “Zee” is a strong brand in India and, among the Indian diaspora, erstwhile Zee Telefilms Ltd. ‘Zee Interactive Learning System’ internationally as well. Zee TV, its flagship television channel was formed in 1999 to create a learning network and deliver launched in 1992, was the first Hindi general entertainment a variety of educational content and solutions for a range of satellite channel in India. Other television channels include Zee careers and vocations through multiple delivery platforms. Cinema, the first Hindi Cinema channel in India, , a Apart from owned ground based centres, ZILS has been comedy channel, Zee Music, Zee Café, an English general successful in establishing a pre-school learning centre entertainment channel, Zee Studio, an English Movie channel, franchise under the brand name ‘Kidzee’; it has more than 600 , a channel dedicated to fashion, ETC Music and ETC such operational centres in India and abroad. Punjabi. The Company also offers 3 24-Hour specialized movie Recently ZILS has been accredited with ISO 9001: 2000 channels, Zee Premier, Zee Action, and Zee Classic apart from certification by British Standards Institution (BSI) for its a religious and lifestyle channel . The Company remarkable quality practices to design and deploy educational is also present in the sports genre through its channel ‘Zee content. Today ZILS is one of the most diversified companies Sports’ and ‘Ten Sports’. in impartation of pre-school, career and vocational training ZEEL generates subscription revenue through its Broadcasting in India, delivering learning solutions and training to various operations in India and abroad or the licensing of broadcasting segments of society through its multiple divisions viz.: 43 KIDZEE (iv) Corporate Governance: Playgroup, Nursery, Jr. K.G., Sr. K.G., Activity Centre Zee firmly believes that good governance is critical to ZIMA sustaining corporate development, increasing productivity Zee Institute of Media Arts and competitiveness and creating shareholder wealth. The governance process should ensure that the ZICA available resources are utilized in a manner that meets Classical and Digital Animation training Academy the aspirations of all its stakeholders. Your Company’s 3. Film Production & Distribution essential charter is shaped by the objectives of The division has been dormant in the current year while it transparency, professionalism and accountability. The observes developments in the industry and its transition to Company continuously endeavours to improve on these the organized sector. The Company is continuing with this aspects on an ongoing basis. segment as there are plans to re enter this segment of the With the increasing emphasis on transparency and business. accountability, standards have been set by various 4. Others: governing bodies on disclosure as well as judiciousness This segment consists of sale of Set Top Boxes. in conduct. Zee has always tried to go a step further in this direction. BUSINESS STRATEGY STAND-ALONE FINANCIALS With the evolvement of Media Sector, Broadcasters stand to gain on more than one front viz. higher share in pay revenues, a A. RESULTS OF OPERATIONS higher ARPU, transparent Reporting, Government Regulations Non-Consolidated Financial Information for the Year Ended that systemise operational flows, etc. March 31, 2007 compared to the Year Ended March 31, The key elements of Zee’s strategy during the year were 2006. (i) to improve its position in the TV broadcasting segment with Figures pertaining to 2005-06 are for Zee Entertainment viewer enhanced content and programming, (ii) expand its Enterprises Limited (Pre Demerger), and hence are not channel bouquet offerings, and (iii) focus on shareholder value comparable with figures of 2006-07 which relate to Zee enhancement, and (iv) Maintain consistently high standards Entertainment Enterprises Limited (Post Demerger). We have of corporate governance. provided a comparison between ZEEL (Illustrative) figures for (i) position within the TV broadcasting segment industry 2005-06 and ZEEL (Audited) figures for 2006-07 on a like to and viewer enhanced content and programming: like basis for better understanding. Zee has had a very good run in the year 2006-07. Total Revenue Its flagship channel Zee TV has maintained a strong Total revenue increased Rs. 467.1 million, or 5% from 8,824.2 No. 2 Position in the GEC genre and is seen as a serious million to Rs. 9,291.3 million. challenger for the No. 1 spot. ZEEL currently has 19 On a like to like basis, the same has gone up from Rs. 7,098.2 shows in the Top 50 and 28 shows in the Top 100. million to Rs. 9,291.3 million an increase of Rs. 2,193.1 million (ii) Expansion of channel bouquet offerings: or 31% due to higher Sales & Services and Other Income. Zee has been continuously adding channels to its Sales & Services bouquet of offerings over the years. This policy of Revenue from Sales & Services increased Rs. 362.8 million, providing the viewers an increased choice while covering or 4% from Rs. 8,314.0 million to Rs. 8,676.8 million. all viewer groups and genres of programming has On a like to like basis, the same has gone up from enabled the Company to gain an unmatched viewership Rs. 6,657.6 million to Rs. 8,676.8 million an increase of on a national and global basis. Of particular mention Rs. 2,019.2 million or 30%, major contributor being would be acquisition of ‘Ten Sports’, the premium sports Advertisement Revenue on account of better performance of channel. Zee TV and other channels. Subscription Revenue has also (iii) Focus on shareholder value enhancement: seen a handsome growth of 29% as compatred to previous Shareholder value has always been a prime priority of year. Zee. The completed corporate restructuring in the form Interest & Other Income of Demerger of its News, Cable and DTH operations Interest & Other income increased by Rs. 104.3 million or 20% has already resulted in the unlocking of shareholder from Rs. 510.2 million to Rs. 614.6 million in 2007 on account value. The restructuring also creates the opportunity for of higher Interest Income. focused management and the commitment gains that On a like to like basis, the same has gone up from Rs. 440.6 shall result in growth in shareholder value at each of its million to Rs. 614.6 million an increase of Rs. 174.0 million demerged entities thereby providing higher returns to or 39% on account of higher Interest income. its shareholders. 44 Total Expenditure million to Rs. 189.2 million an increase of Rs.141.5 million Total expenditure decreased by Rs. 968.9 million or 13% from which is on account of higher interest cost during the year. Rs. 7,524.8 million to Rs. 6,555.9 million. Depreciation and Amortisation On a like to like basis, the same has gone up from Rs. 5,781.0 Depreciation decreased by Rs. 63.4 million, or 43%, from million to Rs.6,555.9 million an increase of Rs. 774.9 million Rs. 148.5 million to Rs. 85.2 million. or 13%. The major contributor to this is Programming Cost On a like to like basis, the same has gone up from Rs. 76.1 million and Personnel Cost. to Rs. 85.2 million an increase of Rs. 9.1 million or 12%. Operational Cost/Cost of Goods Profit Before Tax and Exceptional Items Operational cost/Cost of Goods decreased Rs. 606.6 million, Profit before tax and exceptional items increased Rs. 1,450.2 or 11%, from Rs. 5,390.4 million in 2006 to Rs. 4,783.8 million million or 143%, from Rs. 1,011.0 million in 2006 to Rs. 2,461.2 in 2007. million in 2007. On a like to like basis, the same has gone up from On a like to like basis, the same has gone up from Rs. 1,193.4 Rs. 4,150.3 million to Rs. 4,783.8 million an increase of million to Rs. 2,461.1 million an increase of Rs.1,267.1 million Rs. 633.5 million or 15%. Increased thrust on account of new or 106%. programmes had a major impact on the Cost of Goods sold. As a Exceptional Item % of sales, the same was 55% in 2007 against 62% in 2006. Exceptional Item Rs. NIL million. Personnel Cost Provision for Taxation Personnel cost decreased Rs. 32.1 million, or 7%, from Rs. 443.3 million in 2006 to Rs. 411.2 million in 2007. Provision for taxation increased to Rs. 799.1 million from Rs. 364.1 million. On a like to like basis, the same has gone up from Rs. 303.7 million to Rs. 411.2 million a rise of 35%. This rise is on account On a like to like basis, the same has gone up from Rs. 388.0 of increase in manpower and increments. As a % of sales, the million to Rs. 799.1 million an increase of Rs. 411.1 million same was 5% in 2007 as well in 2006. or 106%. Effective Tax Rate works out to 33% against 32% in the previous year. Administrative & Other expenses Profit After Tax for the Period Administrative and Other expenses decreased from Rs. 578.6 million to Rs. 275.6 million, a decrease of Rs. 303.0 million Profit after tax for the year increased to Rs. 1,662.1 million or 52%. from Rs. 690.8 million, an increase of 141%. On a like to like basis, the same has gone down from On a like to like basis, the same has gone up from Rs. 786.0 Rs. 456.6 million to Rs. 275.6 million a fall of Rs. 180.9 million million to Rs. 1,662.1 million an increase of Rs. 876.1 million or 40%. As a % of sales, the same was 3% in 2007 against or 111% resulting in an improvement of Net Profit margin from 7% in 2006. 11% in 2006 to 18% in 2007. Selling & Distribution expenses B. FINANCIAL POSITION Selling & Distribution expenses have decreased by Rs. 27 Non-Consolidated Financial Position as on March 31, 2007 as million or 2% from Rs. 1,112.5 million to Rs.1,085.2 million. compared to March 31, 2006. On a like to like basis, the same has gone up from Rs. 870.5 Sources of Funds million to Rs. 1,085.2 million an increase of Rs. 214.7 million Share Capital, Reserves & Surplus or 25%. New marketing initiatives including promotion of Equity Share Capital increased from Rs. 412.5 to Rs. 433.6 new programmes have led to this rise. Higher spend on in 2007 on account of conversion of FCCBs. Change in carriage fees also led to an increase in selling and distribution Reserves & Surplus was on account of increase in Share expenses. As a % of sales, it has remained the same at 13% Premium due to conversion of FCCBs at a premium of in 2007. Rs. 196.2/share. This was partly offset by reduction in Operating Profit Share Premium account pursuant to scheme of Demerger of Operating profit increased Rs. 1,436.1 million, or 111%, from DCS business. Rs. 1,299.4 million in 2006 to Rs. 2,735.5 million in 2007. Loan Funds On a like to like basis, the same has gone up from Rs. 1,317.2 Total loan funds as on March 31, 2007 stood at Rs. 2,540.5 million to Rs. 2,735.5 million an increase of Rs.1,418.3 million million down from Rs. 4,842.1 million. The main reason being or 108%. Revenues have outpaced incremental costs resulting conversion of FCCBs in to Equity. in an improvement of operating margin from 19% in 2006 to Application of Funds 29% in 2007. Fixed Assets Financial Expenses During the year, there was a decrease in its Fixed Assets (net) Financial expenses increased by Rs. 49.2 million or 35%. by Rs. 99.2 million. This is on account of Demerger of assets On a like to like basis, the same has gone up from Rs. 47.7 of Direct Consumer Business to the tune of Rs. 272.9 million 45 partly compensated by addition on account of capitalization of CONSOLIDATED FINANCIALS software library during the year to the tune of Rs. 110.0 A. RESULTS OF OPERATIONS million. Figures pertaining to 2005-06 are for Zee Entertainment The Net Block decreased Rs. 143.3 million from Rs. 1,075.4 Enterprises Limited (Pre Demerger), and hence are not million as on March 31, 2006 to Rs. 932.1 million as on comparable with figures of 2006-07 which relate to Zee March 31, 2007. Entertainment Enterprises Limited (Post Demerger). We have provided a comparison between ZEEL (Illustrative) figures for Investments 2005-06 and ZEEL (Audited) figures for 2006-07on a like to Investments have increased from 13,448.1 million in 2006 to like basis for better understanding. 13,458.9 million in 2007 an increase of 10.7 million. This was Revenue mainly on account of acquisition of Taj TV. Total revenue decreased Rs. 1,277.0 million or 7% from Net Current Assets Rs. 17,183.1 million in 2006 to Rs. 15,906.1 million in The Net current assets have increased from Rs. 5,678.5 million 2007. On a like to like basis, the same have grown by 19% to Rs. 7,391.1 million. from 13,341.8 million to 15,906.1 million an increase of Rs. 3,681.4 million on account of higher sales & services and Current Assets other income. Program/Film Rights Sales and Services Program/Film rights held by the Company increased from Revenue from sales and services decreased Rs. 1,384.9 Rs. 1,576.0 million on March 31, 2006 to Rs. 1,874.3 million million, or 8%, from Rs. 16,543.7 million in 2006 to on March 31, 2007. New Films purchased and Programmes Rs. 15,158.8 million in 2007. made during the year contributed to this rise. On a like to like basis, Sales & Services have recorded Sundry Debtors a growth of 18% from Rs. 12,815.1 million to Rs. 15,148.9 million. Sundry Debtors have increased to Rs. 2,839.2 million from Rs. On a like to like basis, Advertisement Revenue has recorded a 2,146.3 million last year. Age of debtors has gone up from 93 growth of 31 % from Rs. 5,363.3 million to Rs. 7,034.7 million days in 2006 to 118 days in 2007. due to improved position of Zee TV and other channels during Cash and Bank Balances the year. Subscription Revenue showed a growth of 27% from The cash and bank balances lying with the Company, as on 5,219.6 million to 6,648.0 million while Other Sales & Services March 31, 2007 was Rs. 38.8 million as against Rs. 237.5 decreased by 34% on account of STB sale. million on March 31, 2006. Other Income Loans and Advances Other income had risen by Rs. 107.9 million, or 17%, from Rs. 639.4 million in 2006 to Rs. 747.3 million in 2007. There was an increase in loans and advances given from On a like to like basis, other Income increased by 42% due Rs. 5,969.6 million on March 31, 2006 to Rs. 6,780.4 million to profit on sale of Investments and higher interest Income on March 31, 2007. during the year. Current Liabilities and Provisions Expenditures Current Liabilities and Provisions have decreased by Total expenditure decreased Rs. 1,893.7 million, or 14%, from Rs. 198.4 million during the year. Rs. 13,848.4 million in 2006 to Rs. 11,954.8 million in 2007. Current Liabilities On a like to like basis, the same have gone up by Current liabilities on March 31, 2007 were at Rs. 3,327.8 Rs. 1,648.4 million from 10,306.3 million to Rs. 11,954.8 million. Majority of the increase can be attributed to million down from Rs. 3,936.9 million on March 31, 2006. Programming and Operating Cost. Provisions Operational Cost/Cost of Goods Provisions made increased from 535.6 million as on March Operational cost/Cost of goods decreased by Rs. 1,249.1 31, 2006 to Rs. 816.4 million as on March 31, 2007. million, or 13%, from Rs. 9,329.1 million in 2006 to Rs. 8,080.0 The Company has declared a Dividend of 150% in 2007 million in 2007. vis-à-vis 100% in 2006. On a like to like basis, the cost has gone up by 18% from Miscellaneous Expenditure (to the extent not written off Rs. 6,861.1 million to Rs. 8,080.0 million. Increased thrust on or adjusted) account of new programmes had a major impact on the Cost of Goods sold. On a % of sales, the same was 53% in 2007 Miscellaneous Expenditure (to the extent not written off as against 54% in 2006. or adjusted) reduced by Rs. 6.1 million from 6.2 million on Program/film rights cost has increased by Rs. 535.5 million from March 31, 2006 to Rs. 0.1 million on March 31, 2007. Rs. 4,247.1 million in 2006 to Rs. 4,782.5 million in 2007. 46 Personnel Cost On a like to like basis, the same has gone up by Rs. 396.3 million. Personnel cost decreased Rs. 71.9 million, or 7%, from Effective Tax Rate works out to 22% against 29% in 2006. Rs. 1,088.7 million in 2006 to Rs. 1016.8 million in 2007. Profit After Tax and Before Minority Interest/Share of On a like to like basis, the same has increased by 244.6 million Profits (Losses) in Associate from Rs. 772.2 million to Rs. 1016.8 million or 32%. The main Profit after tax and before minority interest/share of profits reason for this being recruitments and increments during the year. On a % of sales basis, the same has gone up to 7% in (losses) in associates increased Rs. 173.5 million from 2007 from 6% in 2006. Rs. 2,259.9 million in 2006 to Rs. 2,433.3 million in 2007. Administrative and Other Expenses On a like to like basis, the same has gone up by Rs. 291.1 Administrative and other expenses have decreased by million or 14%. Rs. 577.8 million, or 32%, from Rs. 1,821.8 million in 2006 to Share of Results of Associates Rs. 1,244.1 million in 2006. Share of results of associates increased Rs. 66.9 million from On a like to like basis, the same has gone down from loss of Rs. 57.0 million in 2006 to profit of Rs. 9.9 million in Rs. 1,471.3 million to Rs. 1,244.1 by Rs. 227.2 million. On a % to sales, the same has gone down from 11% in 2006 to 2007. 8% in 2007. Minority Interest Selling and Distribution Expenses Minority interest decreased Rs. 2.8 million from Rs. 70.7 Selling and distribution expenses increased Rs. 5.2 million, from million in 2006 to Rs. 67.9 million in 2007. This includes share Rs. 1,608.8 million in 2006 to Rs. 1,613.9 million in 2007. of minorities of Zee Turner Limited, and majority held entities, On a like to like basis, the same has increased by namely, ETC and ZILS. Rs. 412.6 million from Rs. 1,201.3 million to Rs. 1,613.9. Net Profit After Tax Due to greater focus on marketing, there was an increase in advertisement, publicity and business promotion Net profit after tax increased by Rs. 232.5 million or 11%, from expenses. Higher spend on carriage fees also resulted in Rs. 2,142.8 million in 2006 to Rs. 2,375.3 million in 2007. a rise in selling and distribution expenses. On a % to sales, On a like to like basis, the same has gone up by the same has gone up from 9% in 2006 to 11% in 2007. Rs. 360.7 million or 18%. The net profit margin in 2007 was Operating Profit 15% against 16% in 2006. Operating profit increased by Rs. 616.6 million, or 19%, from Rs. 3,334.7 million in 2006 to Rs. 3,951.3 million in 2007. B. FINANCIAL POSITION On a like to like basis, the same has gone up from Rs. 3,035.6 Consolidated Financial Position as on March 31, 2007 as million to Rs. 3,951.3 million. The operating Profit margin in compared to March 31, 2006. 2007 was 25% against 23% in 2006. Sources of Funds Financial Expenses Share Capital, Reserves & Surplus Financial expenses increased Rs. 146.6 million, or 78%, from Share Capital increased by Rs. 21 million on account of Rs. 187.7 million in 2006 to Rs. 334.3 million in 2007. conversion of FCCBs in to Equity @ Rs. 197.2 per share. On a like to like basis, the same have gone up by 203.3 million. The increase is on account of higher interest cost Loan Funds during the year. The total Loan funds of the Company decreased from Depreciation and Amortisation Rs. 4,901.5 million as on March 31, 2006 to Rs. 3,225.8 million Depreciation and amortisation decreased Rs. 175.0 million, as on March 31, 2007. The main reason being conversion of or 49%, from Rs. 359.7 million in 2006 to Rs. 184.7 million FCCBs in to Equity. in 2007. Application of Funds On a like to like basis, the same have gone up by Rs. 25.2 million. Fixed Assets Profit Before Tax and Exceptional Items During the year, the Company’s Gross Fixed Assets block Profit before tax and exceptional items increased Rs. 645.0 increased by Rs. 2,423.4 million. This increase is on account million or 23%, from Rs. 2,787.3 million in 2006 to Rs. 3,432.4 of the acquisition of Taj TV amounting to Rs. 2,837 million million in 2007. partly set off by assets transferred to Dish TV India Limited On a like to like basis, the same have gone up by Rs. 687.4 pursuant to the scheme of arrangement amounting to Rs. million or 25%. 272.9 million.The Net Block increased Rs. 2,137.6 million from Provision for Taxation Rs. 12,484.0 million as on March 31, 2005 to Rs. 14,621.6 Provision for taxation increased Rs. 452.2 million, or 82%, from million as on March 31, 2006. This increase is on account of Rs. 546.8 million in 2006 to Rs. 999.0 million in 2007. increase of Gross Fixed Assets. 47 Investments 2006 to Rs. 9,762.2 million on March 31, 2007. Acquisition of The Investments of the Company were valued at Rs. 2,325.6 Taj TV Ltd. has mainly impacted this increase. million on March 31, 2007 as compared to Rs. 3,024.1.million Current Liabilities and Provisions on March 31, 2006. During the year investments in an overseas Current Liabilities and Provisions have increased by Rs. 760.7 subsidiary amounting to Rs. 596 million were sold off. million during the year. Acquisition of Taj TV Ltd. has resulted Net Current Assets in this rise. The Net current assets has increased by Rs. 2,467.6 million Current Liabilities during the year ended March 31, 2006 from Rs. 10,513.9 Current liabilities on March 31, 2007 were at Rs. 3,908.9 million on March 31, 2006 to Rs. 12,981.5 million on million up from Rs. 3,108.0 million on March 31, 2006. March 31, 2007. Provisions Current Assets Provisions made have decreased from Rs. 1,237.7 million as During the year the current assets increased by Rs. 3,228.2 on March 31, 2006 to Rs. 1,197.5 million as on March 31, million from 14,859.6 million as on 31.03.2006 to Rs. 18,087.9 2007. Provision fo taxation (net of advances) has reduced as on 31.03.2007. This increase is mainly due to acquisition by Rs. 332.7 million partly set off by provision for proposed of Taj TV Ltd. during the year. dividend. Current Liabilities Miscellaneous Expenditure (to the extent not written off During the year the current Liabilities and Provisions increased or adjusted) by Rs. 760.7 million from Rs. 4,345.7 million as on 31.03.2006 Miscellaneous Expenditure (to the extent not written off or to Rs. 5,106.4 million as on 31.03.2007. This increase is mainly adjusted) reduced by Rs. 9.9 million from Rs. 11.7 million on due to acquisition of Taj TV Ltd. during the year. March 31, 2006 to Rs. 1.8 million on March 31, 2007. Program/Film Rights SEGMENTAL PERFORMANCE Program/Film rights held by the Company decreased from A. BROADCASTING & CONTENT Rs. 2,398.0 million on March 31, 2006 to Rs. 2,015.6 million This segment principally consists of developing, producing on March 31, 2007. and procuring television programming and film content and Inventories delivering via satellites, thereby earning advertisement and The inventories of the Company as on March 31, 2007 were subscription revenues. Revenues from this segment increased at Rs. 24.0 million a fall from Rs. 128.5 million as on March by Rs. 1,486.5 million or 12% from Rs. 12,764.0 million in 31, 2006. These inventories mainly consist of raw tapes, 2006 to Rs. 14,250.5 million in 2007. Operating profit before cassettes & discs and other stores & spares. interest and tax increased by Rs. 472.7 million, or 18% to Sundry Debtors Rs. 3,071.0 million in 2007. After netting off provision for Doubtful Debts & Bad Debts B. FILM PRODUCTION & DISTRIBUTION written off, Net Debtors as on March 31, 2007 stood at This segment principally consists of production, acquisition Rs. 5,331.3 million. This was at Rs. 4,854.7 million as on and distribution of feature films, animation films and programs. March 31, 2006. Age of debtors in 2007 has gone upto 127 There was no activity in this segment in the current year. days from 106 days in 2006. C. EDUCATION Cash and Bank Balances There has been an increase in the revenues from Rs. 162.4 The cash and bank balances lying with the Company as on million in 2006 to Rs. 205.5 million in 2007. Also, there has March 31, 2007 was Rs. 954.8 million as against Rs. 1,285.6 been an improvement in the operating result before interest million on March 31, 2006. and tax. Operating Profit of Rs. 3.8 million in 2006 has Loans and Advances improved to Operating Profit of Rs. 11.5 million in 2007. There was an increase in loans given from Rs. 4,230.5 million D. Access on March 31, 2006 to Rs. 7,066.3 million on March 31, Access Segment has been discontinued in the current year 2007. Advances have increased by Rs. 384.9 million from due to demerges of distribtuion businesses to WWIL & Dish Rs. 1,825.7 million on March 31, 2006 to Rs. 2,210.6 million TV India Limited. on March 31, 2007. Acquisition of Taj TV Ltd. has mainly E. OTHERS impacted this increase. This segment includes the sale of electronic devices. There The deposits given have increased by Rs. 348.7 million to has been a decrease in revenues by Rs. 1,065.2 million Rs. 485.3 million on March 31, 2007. Due to the above changes, over the previous year; operating profit before interest and the total of loans, advances and deposits has increased by tax in 2007 was Rs. 13.7 million as against Rs. 34.8 million Rs. 3,569.4 million from Rs. 6,192.8 million on March 31, in 2006. 48 OTHER COMPANY INFORMATION Cost of programming mix might affect its Bottom line: ZEE ENTERTAINMENT ENTERPRISES LIMITED The urge to compete and provide the best content to viewers, 1. Internal Control Systems Zee would have to incur high expenditure to provide an impetus on its programming front from time to time. The Company has in place adequate internal control systems, commensurate with its size and nature of The increase in costs might not necessarily perk up its operations so as to ensure smoothness of operations Revenues in the same proportion. and compliance with applicable legislation. The Company Investments in new channels: has a well-defined system of management reporting and The Company may from time to time launch new channels. periodic review of businesses to ensure timely decision- Content for these channels is obtained from its existing library making. It has an internal audit team with professionally as well as from programmes acquired in the normal course qualified financial personnel, which conducts periodic of its business. The success of any new channel depends audits of all businesses to maintain a proper system of on various factors, including the quality of programming, checks and control. price, extent of marketing, competition etc. There can be The management information system (MIS) forms an no assurance that the Company will be as successful in integral part of the Company’s control mechanism. All launching new channels as it has been the case of its existing operating parameters are monitored and controlled. Any channels. material change in the business outlook is reported to the The Company is substantially dependent on advertising Board. Material deviations from the annual planning and revenues and a decline in advertising expenditures could budgeting, if any, are reported to the Board on quarterly cause the Company’s revenues and operating results to basis. An effective budgetary control on all capital decline significantly in any given period. expenditure ensures that actual spending is in line with The seasonal nature of the Company’s business affects the Capital Budget. its revenue and low revenues in certain quarters could 2. Human Resources impact the Company’s results of operations: The Company seeks, respects and values the diverse The Company’s business reflects seasonal patterns of qualities and backgrounds that its people bring to it and advertising expenditure, which is common in the television is committed to utilizing the richness of knowledge, broadcast industry. ideas and experience that this diversity provides. The The Company depends substantially on its senior work environment is stimulating and development of management and other skilled personnel, and may be core competencies through formal training, job rotation adversely affected if it loses their services and fails to and hands on training is an ongoing activity. find equally skilled replacements: RISK FACTORS The Company’s success to a large part depends on the Competition from other players: abilities and continued services of its senior management, as well as other skilled personnel, including creative and The Company operates in highly competitive environment programming personnel. The Company’s senior management that is subject to innovations, changes and varying levels is particularly important to its business because of their of resources available to each player in each segment of experience and knowledge of the media industry both in India business. and internationally. The loss or non-availability to the Company Ever changing trends in Media sector: of any of its senior management including its Chairman could For anyone to predict the choice of consumers is not practical. have significant adverse affect. To the extent the Company People’s tastes vary quite rapidly along with the trends and will be required to replace any of its senior management or environment they live in this makes it virtually impossible to other skilled personnel, there can be no assurance that the predict whether a particular show or serial would do well or Company will be able to locate or employ similarly qualified not. With the kind of investments made in ventures, repeated persons on acceptable terms or at all. failures would have an adverse impact on the bottom-line of The Company may be exposed to foreign exchange rate the Company. fluctuations: Effect of CAS on Subscription Revenue: The Company receives a significant portion of its revenues With the implementation of CAS in metros, the TRAI has and incurs a significant portion of its expenses in foreign fixed MRP for channels. This MRP may prove to be adverse currencies, particularly US dollars and UK pounds. Accordingly, to company’s revenues. Also, the mix might change with the Company is exposed to fluctuations in the exchange rates Regulations amended. It would be difficult to predict as to between those currencies and the Rupee, the Company’s what stand the Government takes on the pricing policy for reporting currency, which may have a substantial impact on CAS going forward. its revenues and expenses. 49 Auditors’ Report The Members of 5. Further to our comments in the annexure referred to in Zee Entertainment Enterprises Limited (Formerly Zee Telefilms paragraph (3) above, we report that: Limited) (a) We have obtained all the information and explanations, which to the best of our knowledge and belief were 1. We have audited the attached Balance Sheet of Zee necessary for the purposes of our audit; Entertainment Enterprises Limited (“the Company”) as (b) In our opinion, proper books of account as required by at March 31, 2007, the Profit and Loss Account and the law have been kept by the Company so far as appears Cash Flow Statement of the Company for the year ended from our examination of those books; on that date, annexed thereto. These financial statements (c) The Balance Sheet, Profit and Loss Account and are the responsibility of the Company’s management. Our Cash Flow Statement dealt with by this report are in responsibility is to express an opinion on these financial agreement with the books of account; statements based on our audit. (d) In our opinion, the Balance Sheet, Profit and Loss 2. We conducted our audit in accordance with the auditing Account and Cash Flow Statement dealt with by this standards generally accepted in India. Those standards report comply with the accounting standards referred require that we plan and perform the audit to obtain to in Section 211 (3C) of the Act; reasonable assurance about whether the financial (e) On the basis of written representations received from statements are free of material misstatement. An audit the directors and taken on record by the Board, we includes examining, on a test basis, evidence supporting report that none of the Directors is disqualified as at the amounts and disclosures in the financial statements. An March 31, 2007 from being appointed as a director in audit also includes assessing the accounting principles used terms of clause (g) of sub-section (1) of Section 274 and significant estimates made by management, as well as of the Act; evaluating the overall financial statement presentation. We (f) In our opinion and to the best of our information and believe that our audit provides a reasonable basis for our according to the explanations given to us, the said opinion. accounts, read together with the significant accounting 3. As required by the Companies (Auditors’ Report) Order, policies and notes to accounts as per Schedule 18, give 2003 (the ‘Order’) issued by the Central Government of the information required by the Act, in the manner so India in terms of Section 227(4A) of the Companies Act, required and give a true and fair view in conformity with 1956 (“the Act”), and on the basis of such checks as we the accounting principles generally accepted in India: considered appropriate and according to the information i) In the case of the Balance Sheet, of the state of and explanations given to us, we annex hereto a statement affairs of the Company as at March 31, 2007; on the matters specified in paragraph 4 and 5 of the said ii) In the case of the Profit and Loss Account, of the order. Profit of the Company for the year ended on that 4. We draw reference to date; and (a) Note 3 (a) regarding Scheme of Arrangement iii) In the case of the Cash Flow Statement, of the u/s 391 to 394 read with Section 78, 100 to 103 cash flows of the Company for the year ended on approved by the Honourable High Court at Mumbai that date. and Delhi and in pursuance thereof adjustment Mohan Bhandari of deficit of net assets of demerged undertaking Partner of Rs./Thousand 1,385,608 against Securities M. No. 12912 Premium. (b) Note No. 5 regarding land at Hyderabad included For MGB & Co. under Schedule 6 “Investments” at book value of Rs./ Chartered Accountants Thousand 573,411 considered as good and realizable Place: Mumbai based on the legal opinion obtained by the Company. Date: June 27, 2007

Annexure referred to in Paragraph (3) of Auditors’ Report to the members of Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) on the accounts for the year ended March 31, 2007 1) (a) The Company has maintained proper records showing (c) During the year, in our opinion, a substantial part of full particulars, including quantitative details and the fixed assets has not been disposed off by the situation, of its fixed assets. Company. (b) According to the information and explanations given to 2) (a) The inventory of the Company has been physically us, there is a regular program of physical verification verified (copyrights of Trading Programs / Film rights which in our opinion is reasonable having regard to verified with reference to title documents/agreements) the size of the Company and the nature of its assets. by the management during the year. In our opinion, the frequency of such verification is reasonable. Pursuant to the program, the physical verification was carried out during the year and discrepancies noticed (b) In our opinion, the procedures of physical verification on such verification, which were not material, have of inventory followed by the management are reasonable and adequate in relation to the size of the been properly dealt with in the books of account. Company and the nature of its business. 50 (c) On the basis of our examination of records and in our 6) The Company has not accepted any deposits from the opinion, the Company is maintaining proper records public during the year within the meaning of Section 58A of inventory. The discrepancies noticed on physical and 58AA of the Act and the rules framed thereunder. verification between the physical stocks and the book 7) In our opinion, the Company has an internal audit system records were not material and have been properly commensurate with the size and nature of its business. dealt with in the books of account. 8) We are informed that the Central Government has not 3) (a) The Company has not granted any loan, secured or unsecured to companies, firms or other parties prescribed the maintenance of cost accounting records covered in the register maintained under Section 301 under Section 209 (1) (d) of the Act in respect of the of the Act. Accordingly, sub-clause (b), (c) and (d) Company’s products. are not applicable. 9) (a) According to the records of the Company, the (b) The Company has not taken any loan, secured or undisputed statutory dues including Provident Fund, unsecured from companies, firms or other parties Investor Education and Protection Fund, Employees covered in the register maintained under Section 301 State Insurance, Income Tax, Sales Tax, Wealth Tax, of the Act. Accordingly, sub-clause (f) and (g) are not Service Tax, Customs Duty, Excise Duty, Cess and applicable. others as applicable have been deposited regularly 4) In our opinion and according to the information and with the appropriate authorities except delay in few explanations given to us, there are adequate internal control cases. According to the information and explanations systems commensurate with the size of the Company and given to us, no undisputed amounts payable in respect the nature of its business with regard to purchases of of the aforesaid dues were outstanding as at March inventory, fixed assets and sale of goods and services. 31, 2007 for a period of more than six months from During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal the date they became payable. control system. (b) According to the records of the Company, the disputed 5) In our opinion and according to information and explanations Sales Tax, Income Tax, Customs Duty, Wealth Tax, given to us, there are no transactions that need to be entered Service Tax, Excise Duty and Cess, which have not into the register in pursuance of Section 301 of the Act. been deposited, are as under: Name of the Statute Nature of the Amount (Rs.) / Period to which Forum where dispute is pending Dues Thousand the amount relate Income Tax Act, 1961 Income Tax 599 A.Y. 2004-2005 Commissioner of Income Tax (Appeals) Wealth Tax Act, 1957 Wealth Tax 13 A.Y. 1997-1998 Income Tax Appellate Tribunal

10) The Company has neither accumulated losses as at March are temporarily invested as referred in Note 4 (b) of Schedule 31, 2007 nor it has incurred cash losses during the financial 18 to the financial statements. year ended on that date or in the immediately preceding 17) On the basis of review of utilization of funds which is based financial year. on an overall examination of the Balance Sheet of the 11) In our opinion and according to the information and Company and related information as made available to us, explanations given to us, the Company has not defaulted in we report that no funds raised on short-term basis have repayment of dues to banks and financial institutions. been used for long-term investments. 12) The Company has not granted any loans or advances on the 18) The Company has not made preferential allotment of shares basis of security by way of pledge of shares, debentures to parties and companies covered in the register maintained and other securities. under Section 301 of the Act during the year. 13) In our opinion, the Company is not chit fund or a nidhi/ mutual 19) The Company has not issued any debentures during the year benefit fund/society. Therefore, the provisions of clause 4(xiii) of the order are not applicable to the Company. 20) The Company has not raised any money by public issue during the year. 14) In our opinion, the Company is not dealing in or trading 21) On the basis of our examination and according to the in shares, securities, debentures and other investments. information and explanations given to us, no fraud on or Accordingly, the provisions of the clause 4(xiv) of the order by the Company has been noticed or reported during the are not applicable to the Company course of our audit. 15) In our opinion, the Company has not given any guarantees for loans taken by others from banks or financial institutions Mohan Bhandari the terms and conditions whereof, are prima-facie prejudicial Partner to the interests of the Company. M. No. 12912 16) In our opinion, the term loans (including FCCB funds) For MGB & Co. taken by the Company have been applied for the Chartered Accountants purpose for which they were obtained, except FCCB of Place: Mumbai Rs./Thousand 941 which as explained, pending utilization, Date: June 27, 2007 51 Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) Balance sheet as at March 31, (Rs. in ‘000) Schedule 2007 2006 SOURCES OF FUNDS Shareholders’ Funds Share Capital 1 433,567 412,549 Reserves and Surplus 2 18,918,091 15,036,917 19,351,658 15,449,466 Loan Funds Secured Loans 3 1,806,634 346,147 Unsecured Loans 4 733,881 4,495,918 2,540,515 4,842,065 Deferred Tax Liabilities (Net) [Refer Note 10 (b)] 11,682 – TOTAL 21,903,855 20,291,531 APPLICATION OF FUNDS Fixed Assets 5 Gross Block 1,243,298 1,360,022 Less : Depreciation up-to-date 311,182 284,652 Net Block 932,116 1,075,370 Capital Work-in-progress 121,631 77,582 1,053,747 1,152,952 Investments 6 13,458,895 13,448,171 Deferred Tax Assets (Net) [Refer Note 10 (b)] – 5,692 Current Assets, Loans and Advances 7 Programs/Film Rights 1,874,330 1,575,962 Inventories 2,520 91,860 Sundry Debtors 2,839,238 2,146,278 Cash and Bank Balances 38,795 237,463 Loans and Advances 6,780,397 5,969,558 11,535,280 10,021,121 Less: Current Liabilities and Provisions Current Liabilities 8 3,327,790 3,807,077 Provisions 9 816,426 535,573 4,144,216 4,342,650 Net Current Assets 7,391,064 5,678,471 Miscellaneous Expenditure 10 149 6,245 (to the extent not written off or adjusted) TOTAL 21,903,855 20,291,531 Significant Accounting Policies and Notes to Accounts 18 As per our attached report of even date For and on behalf of the Board Mohan Bhandari Subhash Chandra Chairman Partner Punit Goenka Whole-time Director For MGB & Co. Nemi Chand Jain Director Chartered Accountants Hitesh Vakil Director - Finance Place: Mumbai M Lakshminarayanan Company Secretary Date: June 27, 2007 52 Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, (Rs. in ‘000) Schedule 2007 2006 Income Sales and Services 11 8,676,786 8,313,961 Other Income 12 614,553 510,237 TOTAL 9,291,339 8,824,198 Expenditure Operational Cost/Cost of Goods 13 4,783,788 5,390,383 Personnel Cost 14 411,209 443,304 Administrative and Other Expenses 15 275,647 578,645 Selling and Distribution Expenses 16 1,085,224 1,112,452 TOTAL 6,555,868 7,524,784 Operating Profit 2,735,471 1,299,414 Financial Expenses 17 189,177 139,945 Depreciation/Amortization 85,158 148,509 Profit Before Tax and Exceptional Item 2,461,136 1,010,960 Add : Exceptional Item [Refer Note 3(c)] – 19,366 Less : Provision for Taxation – Current Tax 768,154 313,000 – Deferred Tax 19,396 39,136 – Fringe Benefit Tax 11,500 11,998 Profit After Tax 1,662,086 666,192 Add : Excess Provision for Taxation written back – 24,620 Net Profit After Tax 1,662,086 690,812 Net Profit After Tax of Continuing operations 1,662,086 786,480 Net Profit/(Loss) After Tax of Discontinued/Discontinuing operations – (95,668) Add : Transferred from Securities Premium [Refer Note 3(a)] 1,385,608 5,990,635 Less : Adjusted pursuant to the Scheme of Arrangement [Refer Note 3(a)] (1,385,608) (5,990,635) Add : Balance brought forward 4,969,018 5,073,933 Amount Available For Appropriation 6,631,104 5,764,745 Appropriations Proposed Dividend 650,350 434,753 Tax on Dividend 110,527 60,974 General Reserve 300,000 300,000 Excess Provision for Dividend including Tax on Dividend Written back (1,501) – Balance carried to Balance Sheet 5,571,728 4,969,018 TOTAL 6,631,104 5,764,745 Earnings Per Share: (Rs.) Basic before Exceptional Item and discontinued/discontinuing operations 3.92 1.86 Basic after Exceptional Item and discontinued/discontinuing operations 3.92 1.67 Diluted before Exceptional Item and discontinued/discontinuing operations 3.92 1.80 Diluted after Exceptional Item and discontinued/discontinuing operations 3.92 1.63 (On distributable profits on shares outstanding)(Face Value Re.1) Significant Accounting Policies and Notes to Accounts 18 As per our attached report of even date For and on behalf of the Board Mohan Bhandari Subhash Chandra Chairman Partner Punit Goenka Whole-time Director For MGB & Co. Nemi Chand Jain Director Chartered Accountants Hitesh Vakil Director - Finance Place: Mumbai M Lakshminarayanan Company Secretary Date: June 27, 2007 53 Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) SCHEDULEs TO THE BALANCE SHEET AS AT MARCH 31, (Rs. in ‘000) 2007 2006 Schedule 1 Share Capital Authorised 500,000,000 Equity Shares of Re.1/- each 500,000 500,000 2,500,000 Cumulative Redeemable Preference Shares of Rs.100/- each 250,000 250,000 750,000 750,000 Issued, Subscribed and Paid up 433,566,765 (412,616,249) Equity Shares of Re.1/- each fully paid up [Refer Note 4 (a)] 433,567 412,616 Less : Calls in arrears (others) – 67 (Out of the above 210,316,212 Equity Shares of Re.1/- each fully paid up were allotted for consideration other than cash against acquisition of Investments) TOTAL 433,567 412,549 Schedule 2 Reserves and Surplus Capital Redemption Reserve As per last Balance Sheet 70,000 70,000 Securities Premium As per last Balance Sheet 7,313,072 13,426,408 Add : Received adjusted during the year 4,111,363 21,829 Less : Transfered to Profit and Loss account for adjustment pursuant to the Scheme of Arrangement [Refer Note 3 (a)] 1,385,608 5,990,635 Add/(Less) : Premium on Redemption of FCCB [Refer Note 4 (c)] 256,693 (144,530) 10,295,520 7,313,072 General Reserve As per last Balance Sheet 2,684,827 2,384,827 Less : Adjustment pursuant to the transitional provisions as permitted under AS 15 (net of tax) [Refer Note 7 (A) (b)] (3,984) – Add : Appropriated during the year 300,000 300,000 2,980,843 2,684,827 Profit and Loss Account 5,571,728 4,969,018 TOTAL 18,918,091 15,036,917

54 Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) SCHEDULEs TO THE BALANCE SHEET AS AT MARCH 31, (Rs. in ‘000) 2007 2006 Schedule 3 Secured Loans Working Capital Finance From Banks 991,392 702,952 Secured by hypothecation of stocks (other than Program and Films Rights), book debts (other than advertisement commission and subscription receivables) and other current assets, all ranking pari passu with other financing banks and certain credits are further secured by charge on immovable properties and plant & machinery at Noida and advertisement commission receivables. Term Loan From Banks Secured by hypothecation by way of first charge of all program and film rights present and future on pari passu basis – 449,998 Secured by hypothecation by way of first charge on pari passu basis of all domestic cable subscription receivables and programe and film rights and further secured by first charge exclusive on advertising receivables from sports channel. [Due within a year Rs./Thousand 200,000 (Nil)] 801,000 – Secured by hypothecation by way of first charge of all subscription receivables present and future. [Due within a year Rs./Thousand Nil (400,000)] – 433,337 Vehicle Loans (Due within a year Rs./Thousand 6,316 (8,520)) 14,242 24,436 Hire Purchase/Lease Finance – 878 (Secured by the hypothecation of specific assets.) TOTAL 1,806,634 1,661,601 Less : Transfer pursuant to the Scheme of Arrangement [Refer Note 3 (b)] – 1,315,454 (The loans transferred pursuant to the Scheme of Arrangement continue to be secured against Company’s assets as stated above) TOTAL 1,806,634 346,147

Schedule 4 Unsecured Loans Foreign Currency Convertible Bonds [Refer Note 4] 233,881 4,366,060 Short Term Loans – External Commercial Borrowings – 129,858 – From Banks 500,000 – (Guaranteed by one of the directors and charge to be created on fixed assets and current assets [excluding assets which have exclusive charge] in case of default). TOTAL 733,881 4,495,918

55 Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) SCHEDULEs TO THE BALANCE SHEET AS AT MARCH 31, Schedule 5 Fixed Assets (at cost)

(Rs. in ’000) GROSS BLOCK DEPRECIATION NET BLOCK

As at Additions Deductions Transfer/ As at Upto For the Deductions Transfer/ Upto As at As at Description 01/04/06 Adjustment 31/03/07 31/03/06 year Adjustment 31/03/07 31/03/07 31/03/06 pursuant to pursuant to Scheme of Scheme of Arrangement Arrangement

Land (Leasehold ) 65,690 – – – 65,690 2,610 813 – – 3,423 62,267 63,080

Buildings 181,505 6,257 – – 187,762 20,347 3,023 – – 23,370 164,392 161,158

Plant and Machinery 832,802 161,257 265 320,432 673,362 151,165 38,116 120 47,557 141,604 531,758 681,637

Equipments 135,939 21,603 10,269 – 147,273 55,360 16,825 8,166 – 64,019 83,254 80,579

Furniture and Fixtures 38,490 12,882 – – 51,372 13,721 2,441 – – 16,162 35,210 24,769

Vehicle 48,074 10,127 8,010 – 50,191 8,501 4,530 2,785 – 10,246 39,945 39,573

Leasehold Improvents 57,522 10,126 – – 67,648 32,948 19,410 – – 52,358 15,290 24,574

TOTAL 1,360,022 222,252 18,544 320,432 1,243,298 284,652 85,158 11,071 47,557 311,182 932,116 1,075,370

Previous Year 2,098,479 358,635 589,234 507,858 1,360,022 417,822 148,509 169,603 112,076 284,652 1,075,370 –

Notes : (Amount in Rs./Thousand) 1. Building includes 114 the value of share in a Co-Operative Society. 2. Part of a Building has been given on Operating Lease.

(Rs. in ‘000) 2007 2006 Schedule 6 Investments Long Term (at cost) Quoted - Non-Trade 1,800,000 (360,000) Equity Shares of Rs. 2/- each(Rs.10/- each) of Essel Propack Limited 1,500 1,500 In Associate - Quoted 1,321,200 Equity Shares of Rs.10/- each of Aplab Limited 46,599 46,599 Unquoted - Trade 346,000 [296,000] Equity Shares of Rs. 10/- each of Asianet Communication Limited 217,718 207,718 23,000, 7.25% Redeemable Non-cumulative Preference Shares of Re. 1/- each 23 23 of Wire & Wireless (India) Limited In Subsidiaries - Wholly owned (Unquoted) 34 Ordinary Shares of USD 1/- each Zee Multimedia Worldwide Limited ZMWL,BVI, (ZMWL) 10,840,000 10,840,000 501 Ordinary Shares of USD 1/- each of Asia Today Limited (Other 50% held through wholly owned subsidiary ZMWL) 1,480,000 1,480,000

56 Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) SCHEDULEs TO THE BALANCE SHEET AS AT MARCH 31, (Rs. in ‘000) 2007 2006 Schedule 6 (Contd.) Nil [1,936,388] Equity Shares of Rs. 10/- each of Siti Cable Network Limited of Rs. 10/- each [Refer Note 3(a)] – 19,364 50,000 Equity Shares of of Rs. 10/- each of Zee Sports Limited 500 500 In Subsidiaries - Others (Unquoted) 74,000 Equity Shares of Rs. 10/- each of Zee Turner Limited 740 740 (Extent of Holding 74%) Nil [47,000] Equity Shares of Rs. 10/- each of 25 FPS Private Limited [Refer Note 6(o)] – 470 1,050,000 Equity Shares of Rs. 10/- each of Zee Interactive Learning Systems Limited (Extent of Holding 52.50%) 10,500 10,500 (Includes 1,000,000 Equity Shares subscribed at Rs. 30/- each, of which Rs. 10/- called and paid-up) 5,000 [Nil] Equity Shares of Taj Television India Limited (Extent of Holding 50%) 20,558 – In Subsidiaries - Others (Quoted) 7,679,176 Equity Shares of Rs. 10/- each of ETC Networks Limited 241,475 241,475 # (Extent of Holding 54.83% [51.33%]) Other 1,000 Equity Shares of Rs. 10/- each of Ecool Gaming Solutions Private Limited 10 10 National Savings Certificates (Pledged with Sales Tax Department] 10 10 Immoveable Properties Freehold Land [Refer Note 5] 599,262 599,262 All above securities except where mentioned other wise are fully paid up TOTAL 13,458,895 13,448,171 # Due to buyback of shares by listed subsidiary of the Company ETC Networks Limited (ETC), shareholding of the Company in ETC has increased from 51.33% to 54.83%. Aggregate Book Value of all Quoted Investments 289,574 289,574 Market Value of all Quoted Investments 615,490 701,071 Aggregate Book Value of all Unquoted Investments 13,169,322 13,158,598 Mutual Fund Units bought and sold during the year: Name of the Fund Face Value Quantity (Nos.) Cost Principal Asset Management Fund - Liquid Option - Daily Dividend Plan 10 28,032,751 280,347

57 Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) SCHEDULEs TO THE BALANCE SHEET AS AT MARCH 31, (Rs. in ‘000) 2007 2006 Schedule 7 Current Assets, Loans and Advances [Refer Note 3] A. Current Assets Programs/Film Rights [Refer Note 2] 1,874,330 1,575,962 Inventories (as taken, valued and certified by the Management) Raw Stocks - Tapes, Cassettes, etc. 2,520 1,787 Stock-in-Trade – 90,073 2,520 91,860 Sundry Debtors (Unsecured and Considered Good, unless otherwise stated) More than 6 months [Includes doubtful Rs./Thousand 217,153 933,697 556,134 (366,547)] Others 2,122,694 1,956,691 3,056,391 2,512,825 Less : Provision For Doubtful Debts 217,153 366,547 [include Rs./Thousand 350,955 (399,786) due from Subsidiaries] 2,839,238 2,146,278 Cash and Bank Balances Cash in hand 2,638 1,715 Balances with Scheduled Banks in Current Accounts 17,874 45,962 Balances with Scheduled Banks in Deposit Accounts 68 158 Balances with Non Scheduled Banks in Current Accounts [Refer Note 4 (b) and 6 (e)] 941 135,654 Cheques in hand/transit 17,274 53,974 38,795 237,463 B. Loans and Advances (Unsecured and considered good unless otherwise stated) Loans [Refer Note 6 (c)] 5,810,251 3,928,459 Advances (Recoverable in cash or in kind or for value to be received) [Refer Note 6 (d)] 583,357 1,966,464 Less : Provision for Doubtful Advances 48,606 23,146 534,751 1,943,318 Deposits 435,395 97,781 6,780,397 5,969,558 TOTAL 11,535,280 10,021,121

58 Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) SCHEDULEs TO THE BALANCE SHEET AS AT MARCH 31, (Rs. in ‘000) 2007 2006 Schedule 8 Current Liabilities* Sundry Creditors : For Goods 904,576 1,175,539 For Expenses and Other Liabilities [Refer Note 6 (I)] 973,078 1,206,378 Trade Advances/Deposits received 16,483 17,888 Due to Principals (Pending Remmittance) 1,422,328 1,378,381 Interest accrued but not due 3,328 20,205 Investor Education and Protection Fund : Unpaid dividend** 7,734 8,423 Unpaid fixed deposits 241 241 Unpaid interest on fixed deposits 22 22 [*include Rs./Thousand 1,837,993 (1,758,943) due to subsidiaries] [**There are no amounts due and oustanding to be credited to Investor Education and Protection Fund as at March 31, 2007] TOTAL 3,327,790 3,807,077

Schedule 9 Provisions Provision For : Tax (Net of advances) 7,728 13,317 Retirement Benefits 47,821 26,529 Proposed Dividend (including tax) 760,877 495,727 TOTAL 816,426 535,573

Schedule 10 Miscellaneous Expenditure (to the extent not written off or adjusted) Share Issue and Preliminary Expenses 149 198 Deferred Revenue Expenditure – 6,047 TOTAL 149 6,245

59 Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) SCHEDULEs TO THE profit and loss account for year ended MARCH 31, (Rs. in ‘000) 2007 2006 Schedule 11 Sales and Services Broadcasting Revenue 6,768,749 5,532,231 Sales 1,854,025 2,751,469 Commission - Space Selling 54,012 27,272 Lease Rent – 2,989 TOTAL 8,676,786 8,313,961

Schedule 12 Other Income Dividend – From Subsidiaries 7,679 7,679 – From Others 11,668 4,980 Interest (Gross) [T.D.S. Rs./Thousand 93,761 (81,315)] 462,564 403,911 Miscellaneous Income 94,842 93,667 Provision for doubtful debts and advances written back 37,800 – TOTAL 614,553 510,237

Schedule 13 Operational Cost/Cost of Goods Operational Cost Program/Film Rights Opening Balance [includes under production Rs./Thousand 8,332 (114,844)] 1,575,962 1,811,089 Add : Production/Acquisition Cost 4,300,541 3,704,357 Less : Transfer/diminution pursuant to the Scheme of Arrangement – 402,276 Less : Closing Balance [includes under production Rs./Thousand 10,345 (8,332)] 1,874,330 1,575,962 4,002,173 3,537,208 Transmission Cost 87,503 113,416 Cost of Goods Opening Stock 90,073 1,602 Add : Purchases 604,039 1,828,230 Less : Closing Stock – 90,073 694,112 1,739,759 TOTAL 4,783,788 5,390,383

Schedule 14 Personnel Cost Salaries, Allowances and Bonus 366,360 393,011 Contribution to Provident and other funds 21,054 23,333 Staff Welfare Expenses 23,795 26,960 TOTAL 411,209 443,304

60 Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) SCHEDULEs TO THE profit and loss account for Year ended MARCH 31, (Rs. in ‘000) 2007 2006 Schedule 15 Administrative and Other Expenses Rent 12,008 42,228 Rates and Taxes 12,366 9,930 Repairs and Maintenance – Building 7,371 2,091 – Plant and Machinery 2,919 20,835 – Others 5,085 5,734 Insurance 25,303 8,185 Electricity and Water Charges 15,308 25,195 Communication Expenses 32,135 42,751 Printing and Stationary 9,300 13,768 Miscellaneous Expenses (including Directors’ sitting fees Rs./Thousand 550 (610)] 28,963 51,219 Service Charges/Expenses 29,136 36,280 Vehicle Expenses 11,642 16,464 Travelling and Conveyance Expenses [including Directors’ Rs./Thousands 5,417 (4,294)] 42,009 46,578 Legal, Professional and Consultancy Charges 34,008 64,727 Bad debts and advances written off 86,248 Less : Adjusted against provision 86,089 159 133,783 Provision for doubtful debts and advances – 27,031 Loss on Sale/Discard/Shortage of Fixed Assets (Net) 1,839 24,540 Share Issue and Preliminary Expenses Written off 49 49 Deferred Revenue Expenditure Written off 6,047 7,257 TOTAL 275,647 578,645

Schedule 16 Selling and Distribution Expenses Freight and Forwarding 885 3,427 Advertisement and Publicity Expenses 337,503 474,162 Commission on sales and services 155,329 243,817 Business Promotion Expenses 591,507 391,046 TOTAL 1,085,224 1,112,452

Schedule 17 Financial Expenses Interest on – Fixed Loan 114,921 70,552 – Bonds 5,285 25,193 – Others 26,988 21,903 Discounting and Financing Expenses 41,983 22,297 TOTAL 189,177 139,945

61 Schedule 18 Significant Accounting Policies and Notes to Accounts Background Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) (“ZEEL” / “the Company”) was incorporated in the State of Maharashtra, India. The Company has been mainly in the following businesses during the year: a) Broadcasting of Satellite Television Channels uplinked from India; b) Advertisement canvassing agent for other television channels; c) Sale of programs, including films mainly to its subsidiaries for broadcasting on satellite television channels (for beaming to Asia including India, Middle East, USA, Europe, South Africa, Canada etc.) and to other parties; d) Production and Distribution of Films; e) Trading of Electronic Devices for distribution of channels. Use of Estimates The preparation of the financial statements in accordance with the Generally Accepted Accounting Principles requires that the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as at the date of the financial statements and the reported amount of revenue and expenses of the year. Actual results could differ from those estimates. Any revision to estimates is recognized prospectively in current and future periods. A. Significant Accounting Policies 1. Accounting Convention a) The Financial Statements have been prepared under the Historical Cost Convention and in accordance with the accounting standards referred to in Section 211 (3C) of the Companies Act, 1956. b) The Company generally follows mercantile system of accounting and recognizes income and expenditure on accrual basis except those with significant uncertainties. 2. Fixed Assets a) Fixed assets are stated at cost less accumulated depreciation. Cost includes capital cost, freight, installation cost, duties and taxes and other incidental expenses incurred during the construction/installation and attributable to bringing the asset to its intended use. b) All capital costs and incidental expenditure during the pre operational period are shown as capital work in progress. c) Software is capitalized as an Intangible assets on meeting recognition criteria. 3. Borrowing Costs Borrowing Costs attributable to the acquisition or construction of qualifying assets are capitalized as a part of the cost of such assets. All other borrowing costs are charged to revenue. 4. Depreciation/Amortization a) Depreciation on fixed assets (including on fixed assets acquired under finance lease) is provided on Straight Line Method at the rate specified in Schedule XIV to the Companies Act, 1956. b) Leasehold Land and Leasehold Improvements are amortized over the period of Lease. c) Software is amortized over a period of 36 months from the date of implementation. 5. Investments a) Long-term investments are stated at cost. Provision for diminution in value of long-term investment is made, if the diminution is other than temporary. b) Current Investments are stated at cost or fair value whichever is lower. 6. Transaction in Foreign Currencies a) Foreign Currency transactions are recorded at the exchange rates prevailing on the date of such transactions. Monetary assets and liabilities as at the Balance Sheet date are translated at the rates of exchange prevailing at the date of Balance Sheet. Gain and losses arising on account of difference in foreign exchange rates on settlement/translation of monetary assets and liabilities are recognized in the Profit and Loss Account. Non-monetary foreign currency items are carried at cost. b) The premium or discount arising at the inception of forward exchange contract which is not intended for trading or speculation purpose is amortized as expense or income over the life of the contract. Exchange difference on such contracts is recognized in the Profit and Loss account in the reporting period in which the exchange rates change. Any profit or loss arising on cancellation of such a forward exchange rate contract is recognized as income or as expense for the period. 7. Revenue Recognition a) Broadcasting services - Advertisement revenue (net of agency commission) is recognized when the related advertisement or commercial appears before the public i.e. on telecast. Subscription revenue is recognized on completion of service. 62 b) Sales are recognized when the risk and rewards of ownership are passed onto the customers, which is generally on dispatch of goods. c) Commission on Advertisement canvassing is recognized when the related advertisement or commercial appears before the public i.e. on telecast. d) Lease rentals are recognized as revenue as per the terms of operating lease agreements. e) Dividend is recognized when the right to receive the dividend is unconditional. 8. Programs/Film Rights and Inventories: a) Programs/Film rights: Programs/Film rights are stated at lower of net cost (cost minus accumulated amortization/impairment) or realizable value. Where the realizable value on the basis of its useful economic life is less than its carrying amount, the difference is expensed as impairment. i. Cost of news/current affairs/chat shows/events including sports events etc. are fully expensed on telecast. ii. Programs (other than (i) above) are amortized over three financial years from the year of telecast. iii. Film rights are amortized on a straight-line basis over the license period or 60 months from the date of purchase whichever is shorter. iv. Film rights for trade – Cost of respective right is fully expensed on sale. b) Inventories of Raw Stock (Tapes, Cassettes etc.) and Stock-in-Trade (electronic devices etc.) are valued at lower of cost or estimated net realizable value. Cost is taken on First in First Out (FIFO) basis. 9. Retirement Benefits a) Contribution to provident fund and other recognized funds are charged to Profit and Loss Account. b) Gratuity liability, which is a defined benefit scheme, and accrued leave encashment is provided for on the basis of an actuarial valuation as at the date of Balance Sheet. Actuarial gains and losses are taken to the profit and loss account and not deferred. 10. Taxes on Income a) Current tax is determined as the amount of tax payable in respect of taxable income for the year. b) Deferred tax is recognized, subject to consideration of prudence, on timing difference, being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods and measured using relevant enacted tax rates. 11. Leases a) Operating Lease Lease of assets where all the risk and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments/revenue under operating leases are recognized as expense/income on accrual basis in accordance with the respective lease agreements. b) Finance Lease Assets acquired under Finance Lease are capitalized and the corresponding lease liability is recorded at an amount equal to the fair value of the leased asset at the inception of the lease. Initial costs incurred in connection with the specific leasing activities directly attributable to activities performed by the Company are included as part of the amount recognized as an asset under the lease. 12. Miscellaneous Expenditure a) Share Issue and Preliminary expenses are amortized over a period of 10 years. b) Deferred revenue expenditure other than (a) above are amortized over 36-60 months. 13. Impairment of Assets If the carrying amount of fixed assets exceeds the recoverable amount on the reporting date, the carrying amount is reduced to the recoverable amount. The recoverable amount is measured at the higher of the net selling price and value in use determined by the present value of estimated cash flows. 14. Earnings Per Share Basic earnings per share is computed and disclosed using the weighted average number of common shares outstanding during the year. Diluted earnings per share is computed and disclosed using the weighted average number of common and dilutive common equivalent shares outstanding during the year, except when the results would be anti-dilutive. B. Notes to Accounts 1. Prior Year Comparatives Previous year’s figures are regrouped, rearranged, or recast wherever necessary to conform to this year’s classification. Current year’s figures are not comparable due to the restructuring [Refer Note 3]. Figures in brackets pertain to previous year. 2. a) Program/ film rights etc. for broadcasting are considered as intangibles as per AS-26 “Intangible Assets” but shown under current assets as are realizable in the ordinary course of business along with Trading Inventory. 63 b) In Schedule 13, Operational Cost includes Cost of Program/ Film rights sold/ amortized/ impaired etc. The Company has impaired and expensed program/film rights of Rs./Thousand 211,840(299,364) during the year. 3. Restructuring a) The Scheme of Arrangement between ZEEL and Siti Cable Network Limited and New Era Entertainment Network Limited and Dish TV India Limited (Dish TV) (Formely ASC Enterprises Limited) was sanctioned by the Honorable High Court at Delhi and Mumbai on December 18, 2006 and January 12, 2007 respectively and filed with the Registrar of Companies on January 19, 2007. As per the scheme the Direct Consumer Business Undertaking (DCS) of the Company is transferred and vested in Dish TV with effect from April 1, 2006. The deficit arising on transfer of net assets is adjusted against the Securities Premium Account. This Scheme has been given effect to in these financial statements. The assets and liabilities of Direct Consumer Business Undertaking transferred to Dish TV India Limited are as follows: (Rs./Thousand) Particulars DCS Gross Block 320,432 Less: Accumulated Depreciation 47,557 Net Block 272,875 Investments 19,364 Current Assets, Loans and Advances 1,419,714 Total Assets - (A) 1,711,953 Loan Funds 326,325 Current Liabilities and Provisions 20 Total Liabilities - (B) 326,345 Deficit - (A) - (B) 1,385,608 b) The Scheme of Arrangement between ZEEL and Zee News Limited (ZNL) and Siti Cable Network Limited (Siti) and Wire & Wireless (India) Limited (WWIL) sanctioned by the Honourable High Court at Mumbai on November 17, 2006 and filed with the Registrar of Companies on November 22, 2006. Pursuant to the Scheme, the News business undertaking of the Company has been transferred to and vested in ZNL with effect from March 31, 2006 and the Cable Business Undertaking of the Company along with that of Siti (Wholly owned subsidiary of the Company) has been transferred to and vested in WWIL with effect from March 31, 2006. This Scheme has been given effect to in the financial statements of March 31, 2006. c) The Company has assigned its facilities relating to production, gathering, editing and uplinking of news & current affairs programming with assets and liabilities as at March 31, 2005 to ZNL on September 30, 2005 and the profit on such transfer Rs./Thousand 19,366 is shown as an Exceptional item in the Profit and Loss account for the year ended March 31, 2006. 4. Foreign Currency Convertible Bonds (FCCB) a) The Company had issued 10,000 0.5% Foreign Currency Convertible Bonds (FCCB) (considered as a non-monetary liability) of US$10,000 each aggregating to US$100 million. The bonds are redeemable on April 29, 2009 at 116.24% of their principal amount. The bond holders have an option to convert these bonds into equity shares at an initial conversion price of Rs.197.235 per share, with a fixed rate of exchange on conversion of Rs. 43.88 (US$1) from and including June 8, 2004 to and including April 22, 2009. The conversion price will be subject to certain adjustments. During the year, 9,417 bonds have been converted into 20,950,516 Equity Shares of Re. 1 each. If the outstanding bonds as on March 31, 2007 are converted into equity shares, then the share capital of the Company will increase by around 1,185,795 Equity Shares of Re.1 each. Further, the bonds may be redeemed in whole and not part at the option of the Company at any time on or after May 12, 2006 and up to April 22, 2009, subject to certain conditions. The restructuring as per Note 3 above has affect the conversion price of the FCCB. The conversion price would be determined by the Company for this purpose. b) Out of the net proceeds of Rs./Thousand 4,269,473 from the issue of the FCCB, Rs./Thousand 4,268,532 has been utilized for the object of the issue, which includes new projects, modernization and expansion of the existing production units and expansion of wholly owned subsidiary operations and balance pending utilization has been included in Cash and Bank Balances. c) Premium payable on redemption of FCCB Rs./Thousand Nil (276,376) has been provided and adjusted against securities premium as per Section 78 of the Act in the earlier years. During the year, major part of the FCCB holders have opted for conversion and accordingly provision relating to converted FCCBs aggregating to Rs. 256,693 is written back and adjusted against Securities Premium account. 64 5. Immoveable Property The Collector of Hyderabad, Andhra Pradesh, on March 31, 2007, had resumed possession of the land at Hyderabad bought from Padmalaya Telefilms Limited (PTL)(included under Schedule 6 - “Investments”) admeasuring 17,639.64 sq. mtrs. registered in the name of the Company having book value of Rs./Thousand 573,411. The Company is pursuing with appropriate authorities for restoration of the possession in favour of the Company. The management considers the said investment as good and realisable, based on legal opinion obtained by the Company. Second piece of land admeasuring 2700 sq. mtrs. having book value of Rs./Thousand 25,851 bought from PTL is yet to be transferred in the name of the Company. 6. Disclosures a) The Company has been deploying its surplus funds as short-term loans/inter corporate deposits, the parties are regular in repayment of principal and interest, hence these loans are considered good. b) Prior period Income/expenses (net) of Rs./Thousand 14,553 (27,867) as under are included in respective heads in the Profit and Loss Account. (Rs./Thousand) Particulars 2007 2006 Miscellaneous Expenses – 27,867 Managerial Remuneration (Refer Note 6(f)(ii)(b) 2,100 Excess Provision for Rent (16,653) – c) Loans include Rs. /Thousand Nil (236,791) due from subsidiaries. d) Advances include Rs./Thousand 165,026 (1,643,667) due from subsidiaries, which include Rs./Thousand Nil (1,419,648) advance share application money. e) Balances with Non Scheduled Banks: (Rs./Thousand) Name of the Bank Balance as on March 31, Maximum Balance during the Year 2007 2006 2007 2006 In Current Accounts: Standard Chartered Bank (Mauritius) Limited 941 135,654 135,737 135,654 In Fixed Deposit Accounts: ING Bank N.V., Singapore – – – 291,339 Merrill Lynch International Bank Limited – – – 11,428 f) Managerial Remuneration: i. The computation of Net Profit in accordance with the provisions of Section 349 of the Companies Act , 1956 (Rs./Thousand) Particulars 2007 Net Profit before tax as per Profit and Loss Account 2,461,136 Add - Directors sitting fees 550 - Managerial remuneration 15,465 - Commission paid to Independent Directors 5,517 - Depreciation 85,158 - Loss on sale of fixed assets 1,839 - Provision for doubtful debts Less - Profit on sale of fixed assets - Depreciation as per Companies Act u/s 350 85,158 - Commission payable for the year ended March 31, 2006 2,100 Net Profit as per Section 349 of the Companies Act, 1956 2,482,407 Maximum permissible remuneration to Managing Director as per Section 198/309 248,240 Maximum permissible Commission to Non- Executive directors under Section 198/309 24,824 Remuneration & Commission restricted as per service agreement 18,882 65 ii. Remuneration paid or provided in accordance with Section 198 of the Companies Act, 1956 to the Directors included in personnel cost. 2007 2006 (Rs./Thousand) (Rs./Thousand) a) Whole-Time Directors (By the Company) Salary and Allowances 12,460 13,038 Provident fund contribution 605 504 Perquisites 2,400 2,400 Note: Salary and Allowances includes basic salary, leave travel allowance and performance bonus but excluding leave encashment and gratuity. b) The Company has provided commission of Rs./Thousand 5,517 for non executive directors during the year, yet to be paid (inclusive of Rs./Thousand 2,100 of previous year pending approval of the Central Government) on profits for the year ended March 31, 2007 iii. During the year March 31, 2006, the Managerial Remuneration computed on the basis of Net Profit as per Section 349 of the Companies Act, 1956 on giving effect to the Scheme of Arrangement approved by the Honorable High Court, Mumbai on November 17, 2006 turned out to be excess of the limits prescribed under Section 198. The Company’s application to the Central Government for approval of the excess remuneration paid is pending. iv. Remuneration (salaries and allowances) paid to a non-executive director by a Foreign subsidiary company is Rs./Thousand 4300 (7,861). However, no remuneration is paid to him by the Company. g) Auditors Remuneration included in Miscellaneous Expenses 2007 2006 (Rs./Thousand) (Rs./Thousand) Audit fees 4,494 4,490 Tax Audit fees 562 561 Certifications and Tax Representations 2,746 5,100 h) Foreign Exchange Difference a) The foreign exchange gain (net) including on forward contracts and cross currency swap of Rs./Thousand 21,041 (47,657) on settlement or realignment of foreign exchange transactions has been adjusted in respective heads of the Profit and Loss account. Loss (net) of Rs./Thousand Nil (311) has been adjusted to the cost of fixed assets. b) The Company is exposed to various financial risks, most of which relate to changes in exchange rates, interest rate etc. The Company hedges risks of the aforesaid nature using combination of forward contracts, options and swaps etc. The outstanding foreign currency derivative contracts as at March 31, 2007 is Rs./Thousand Nil c) As at Balance Sheet date, the Company has foreign currency exposure payable of Rs./Thousand 1,092,120 (Gross) that is not hedged by a derivative instrument. i) Employee Stock Option Plan (ESOP) As at March 31, 2007, the Zee Network Employees Welfare Trust holds 5,000 (5,000) Equity Shares of Re. 1/- each of the Company. j) Small Scale Industrial Undertakings a) The total amount due to Small Scale Industrial Undertakings as at March 31, 2007 is Rs./Thousand 668 (1,116). Rs./Thousand 189 (1,040) is outstanding for more than 30 days as at March 31, 2007, is due to Nectar Prints Private Ltd., Balaji Arts, Jeeva Prints, and Shital Enterprises. The above information regarding small scale industrial undertakings have been determined to the extent such parties have been identified on the basis of information available with the Company. b) Disclosure under the Micro, Small, Medium Enterprise Development Act, 2006 (Rs./Thousand) Particulars i. Delayed payments due as at the end of March 31, 2007 on account of - Principal 124 - Interest due 19 ii. Total interest paid on all delayed payments during the year ended March 31, 2007 – iii Interest due on principal amounts paid beyond the due date during the year but – without interest amount iv. Interest accrued but not due – v. Total Interest due but not paid 19 66 k) Capital work in progress includes Capital Advances Rs./Thousand 11,541 (11,210). l) Sundry Creditors for expenses and other liabilities under Current Liabilities include cheques overdrawn Rs./Thousand 181,599 (167,891). m) Dividend Rs./Thousand 724 (834) unclaimed for the period more than seven years is transferred to Investor’s Education and Protection Fund during the year. n) The Company had assigned its ZICA division with assets and liabilities to Padmalaya Telefilms Ltd. (PTL) for a consideration of Rs./Thousand 21,922 w.e.f. April 1, 2003 which was repossessed as per settlement entered with PTL, however in the absence of reconciliation of assets and liabilities of ZICA, the Company has fully provided the outstanding dues (in earlier years) of Rs./Thousand 14,615 from PTL. The assets & liabilities of re-acquired business of ZICA division pending documentation is assigned to its subsidiary Zee Interactive Learning Systems Limited. o) The Company has divested from 25 FPS Media Private Limited, on July 25, 2006 and hence it ceased to be subsidiary. p) Calls in arrears and corresponding securities premium receivable are written off to profit and loss account on reconciliation. 7. Employee Benefits (A) Defined benefit plans: (Rs./Thousand) Gratuity (Non-funded) I. Expenses recognized during the year ended March 31, 2007 1. Current Service Cost 2,986 2. Interest Cost 1,016 3. Actuarial Losses/(Gains) 3,000 Total Expenses 7,002 II. Net Asset/(Liability) recognized in the Balance Sheet as at March 31, 2007 1. Present value of defined benefit obligation 17,821 2. Net Asset/(Liability) (17,821) III. Reconciliation of Net Asset/(Liability) recognized in the Balance Sheet during the year ended March 31, 2007 1. Net Asset/(Liability) at the beginning of year 13,481 2. Expense as per I above 7,002 3. Employer contributions (2,662) 4. Net Asset/(Liability) at the end of the year 17,821 IV. Actuarial Assumptions : As at 31.03.2007 1. Discount rate 8.25% 2. Expected rate of salary increase 7.50% 3. Mortality LIC (1994-96) Notes : (a) Amounts recognized as an expense and included in the Schedule 14: “Personnel Cost” are gratuity Rs./Thousnad 4,986 ( 9,300) and leave encashment Rs./Thousand 13,063 (6,816) (b) In the current year, the Company has adopted the revised Accounting Standard 15 (AS 15), Employee Benefits as issued by the Institute of Chartered Accountants of India. Accordingly, the Company has provided for gratuity and leave encashment based on actuarial valuation done as per Projected Unit Credit Method. Further, in accordance with the transitional provision in the revised Accounting Standard, Rs./Thousand 3,984 (net of tax liability) for gratuity and leave encashment has been adjusted to the General Reserve. (B) Defined contribution plan: “Contribution to provident and other funds” is recognized as an expense in Schedule 14 of the Profit and Loss Account 2007 2006 (Rs./Thousand) (Rs./Thousand) 8. Capital Commitments Estimated amount of contracts remaining to be executed on capital account, not provided for (net of advances) 75,308 123,427 67 2007 2006 (Rs./Thousand) (Rs./Thousand) 9. Contingent Liabilities not provided for (a) Corporate guarantees: - for subsidiaries to the extent of loans availed/ outstanding Rs./Thousand 568,418 (Nil) 1,315,500 – - for other related parties outstanding Rs./Thousand 4,168,565 (Rs./Thousand 911,543) 4,604,250 1,152,500 (b) Bank/counter guarantees outstanding 2,637,200 250 (out of the above bank guarantee of Rs. 2,631,000 has expired after the Balance Sheet Date) (c) Claims against the company not acknowledged as debts 201,894 233,806 (d) Disputed Direct Taxes 117,215 95,807 (e) Disputed Service Tax (Since Cancelled) – 295,180 (f) Letters of credit (net of liability provided) 94,069 47,602 (g) Uncalled liability on shares partly paid 20,000 20,000 (h) Legal cases against the company Unascertainable Unascertainable (i) The loans transferred pursuant to the scheme of arrangement referred in Note 3 continue to be secured against the Company’s assets. The loans outstanding in the books of transferee companies as on at March 31, 2007 is Rs./Thousand 945,272. 10. Taxation a) The Company’s claim of deduction under Section 80HHC of the Income Tax Act, 1961 is allowed by second appellate authorities for the AY 1993-94 to 1999-2000. However the revenue authorities have disputed those orders in further appeals and effect of appeal orders are not given by the revenue authorities as on the date of the balance sheet, hence the excess provision is not accounted. b) The components of deferred tax balances as at March 31,: (Rs./Thousand) Particulars 2007 2006 Deferred Tax Assets Provision for retirement benefits 16,254 8,930 Expenses allowable on payment basis 14,273 34,966 Provision for doubtful debts 73,810 123,380 Total 104,337 167,276 Deferred Tax Liabilities Depreciation 115,968 142,157 Others 51 19,427 Total 116,019 161,584 Deferred Tax Balances (Net) (11,682) 5,692 11. Leases: (a) Additional information on assets taken on lease: (Rs./Thousand) Particulars 2007 2006 In respect of assets taken on finance lease after April 1, 2001: (Assets capitalized) Reconciliation of minimum lease payments and present value: Minimum Lease Payments as at Not Later than one year – 906 Later than one year and not later than five years – – Total – 906 68 (Rs./Thousand) Particulars 2007 2006 Less: Transfer under scheme of arrangement – 906 Total – Less: Amount representing Interest – – Present Value of Minimum Lease Payments – – Less: Amount due not later than one year – – Amount due later than one year and not later than five years – – (b) In respect of assets taken on operating lease during the year: The Company leases office, residential facilities and plant and machinery (including equipments) etc. under cancellable/ non-cancellable agreements that are renewable on a periodic basis at the option of both the lessee and the lessor. The initial tenure of the lease generally is for 11 months to 60 months. (Rs./Thousand) Particulars 2007 2006 Lease rental charges for the year 123,275 142,561 Future lease rental obligation payable (under non-cancellable lease) Not later than one year 5,680 – Less than one year but not later than five years 17,986 – (c) In respect of assets given under operating lease. (i) The Company has given integrated receiver decoder (IRD) boxes, other assets included under the head of Plant and Machinery and part of building under cancellable operating lease agreement. The initial term of the lease of IRD is for 12 months. (ii) The lease rental revenue for the year is Rs./Thousand 9,498 (11,834). 12. Related Party transactions (i) List of Parties where control exists Subsidiary Companies a) Wholly Owned Asia Today Limited, Asia TV Limited, Expand Fast Holding (Singapore) Pte. Limited, Integrated Subscriber Management Services Limited*, New Era Entertainment Network Limited*, Pan Asia Infrastructure Limited, Siticable Network Limited*, Zee Multimedia (Maurice) Limited, Zee Multimedia Worldwide (Mauritius) Limited, Zee Multimedia Worldwide Limited (BVI), Zee Sports Americas Limited, Zee Sports International Limited, Zee Sports Limited, Zee Technologies (Guangzhou) Limited, Zee Telefilms Middle East FZLLC, Zee TV South Africa (Proprietary) Limited, Zee TV USA Inc. * (ceased to be subsidiary w.e.f. April 1, 2006 on demerger as per Note 3 – Restructuring). All transactions with these companies are treated as transactions with other related parties. b) Others – Direct 25 FPS Private Limited (ceased w.e.f. 25/07/2006), ETC Networks Limited, Asia Business Broadcasting Mauritius Limited, Taj Television India Private Limited ( w.e.f. 13/11/2006), Zee Interactive Learning Systems Limited, Zee Turner Limited. c) Other - Indirect Taj Television Limited, Mauritius (w.e.f. 13/11/2006) (ii) Associates Aplab Limited (extent of holding 26.42%) Broadcast South Asia Limited [extent of holding 48.44% (48.91%)] 69 (iii) Other Related parties with whom transactions have taken place during the year and balance outstanding as on the last day of the year. Asian Sky Shop Limited, Asia TV (USA) Limited, Asian Satellite Broadcasting Private Limited, Briggs Trading Company Private Limited, Buddha Films Limited, Churu Trading Company Private Limited, Credensys Software Technologies Limited, Dakshin Media Gaming Solutions Private Limited, Dish TV India Limited (Formerly ASC Enterprises Limited), Diligent Media Corporation Limited, Essel Propack Limited, E-City Entertainment (India) Private Limited, E-City Retail Private Limited, E-Cool Gaming Solution Private Limited, Essel Agro Limited, Essel Corporate Resources Private Limited, Essel Infraprojects Private Limited (Formerly Pan India Paryatan Private Limited), Essel International Limited, Essel Shyam Communication Private Limited, Essel Shyam Technologies Limited, Ganjam Trading Company Private Limited, Intrex Trade Exchange Limited, Jay Properties Private Limited, Jayneer Capital Private Limited, Pan India Network Infravest Private Limited, Pratham Media Entertainment Private Limited, Premier Finance and Trading Company Limited, Prajatma Trading Company Private Limited, Rama Associates Limited, Real Media FZLLC, Taleem Research Foundation, Wire and Wireless (India) Limited, Zee News Limited. Directors/Key Management Personnel Mr. Ashok Kurien, Mr. B.K. Syngal, Mr. D. P. Naganand, Mr. Gulam Noon, Mr. Laxmi Narain Goel, Mr. M.Y. Khan, Mr. Nemichand Jain, Mr. Punit Goenka, Mr. Rajan Jetley, Mr. Subhash Chandra. (iv) Transactions with Related Parties (Rs./Thousand) 2007 2006 Particulars Amount Amount for Amount Amount for major parties major parties (A) Transactions Sale, Services and Recoveries (Net) Subsidiaries 865,955 875,673 Asia Today Limited 579,085 510,978 Asia TV Limited 286,815 259,820 Zee Sports Limited – 98,098 Other Related Parties 925,761 1,777,947 Dish TV India Limited 624,895 689,892 Essel Agro Limited – 1,079,854 Zee News Limited 295,398 5,965 Purchase of Programs, Goods and Services Subsidiaries 158,516 659,214 Asia Today Limited 49,825 68,330 Zee Sports Limited – 575,945 25 FPS Media Private Limited 88,700 – Other Related Parties 568,417 465,014 Dish TV India Limited 177,204 Essel Corporate Services Private Limited 32,806 17,860 Dakshin Media Gaming Solution Private 219 8,287 Limited Diligent Media Corporation Limited 4,753 10,874 Wire and Wireless (India) Limited 281,724 – Zee News Limited 42,183 383,523 Associates 42 – Aplab Limited 42 – Subscription Income Subsidiaries 138,221 223,268 New Era Entertainment Network Limited – 16,956 Siticable Network Limited – 66,008 Asia Today Limited 138,221 140,304 70 2007 2006 Particulars Amount Amount for Amount Amount for major parties major parties Other Related Parties – 33,492 Dish TV India Limited – 33,492 Advertisement Income (Net) Subsidiaries 6,349 3,055 New Era Entertainment Network Limited – 2,928 ETC Networks Limited 6,320 – Other Related Parties 75,192 14,518 Asian Sky Shop Limited – 2,639 Dish TV India Limited 68,142 – Pan India Network Infravest Private Limited 5,092 4,781 Diligent Media Corporation Limited – 5,306 Intrex Trade Exchange Limited – 1,594 Agency Commission Received Subsidiaries 54,012 27,272 Asia Today Limited 41,196 18,381 Asia TV Limited 12,816 8,891 Commission Written Back Subsidiaries 27,813 115,877 Zee Turner Limited 27,813 115,877 Commission Paid Subsidiaries 136,580 181,020 Asia Today Limited 28,648 28,061 Zee Turner Limited 107,931 152,959 Interest Received Subsidiaries 13,480 22,469 Asia Today Limited 2,544 4,356 Asia TV Limited 10,356 16,848 Other Related Parties 419,824 349,759 Briggs Trading Co. Private Limited 106,287 85,195 Churu Trading Co. Private Limited 111,414 93,193 Ganjam Trading Co. Private Limited 723 76,381 Prajatama Trading Co. Private Limited 115,190 82,387 Zee News Limited 28,071 12,603 Interest Paid Subsidiaries – 1,281 Asia TV Limited – 1,281 Dividend Received Subsidiaries 7,679 7,679 ETC Networks Limited 7,679 7,679 Other Related Parties 8,017 3,960 Essel Propack Limited 8,017 3,960 Associates 3,303 – Aplab Limited 3,303 – Miscellaneous Income Subsidiaries 1,364 4,554 Asia Today Limited 932 – New Era Entertainment Network Limited – 2,160 Integrated Subscribers Management Services Limited – 672 Zee Sports Limited – 1,134 Zee Interactive Learning Systems Limited 432 –

71 2007 2006 Particulars Amount Amount for Amount Amount for major parties major parties Other Related Parties 9,037 5,163 Asian Sky Shop Limited 1,350 1,800 Pan India Network Infravest Private Limited 842 824 Real Media FZLLC 590 – Dish TV India Limited 3,456 864 Zee News Limited 2,604 1,554 Rent Paid Other Related Parties – 23,130 Jay Properties Private Limited – 21,900 Purchase of Fixed Assets /Capital work in progress Subsidiaries – 8,407 Asia Today Limited – – 7,899 Other Related Parties – 820 Pan India Network Infravest Private Limited – – 820 Associates 592 336 Aplab Limited 592 336 Investments Made/Acquired Subsidiaries 130,000 Siticable Network Limited 130,000 Other Related Parties – 272,949 Briggs Trading Co. Private Limited – 27,300 Churu Trading Co. Private Limited – 80,500 Ganjam Trading Co. Private Limited – 21,000 Prajatama Trading Co. Private Limited – 36,400 Premier Finance & Trading Company Limited – 42,000 Zee News Limited – 65,749 Sale/Redemption of Investments 470 130,000 Subsidiaries Siticable Network Limited – 130,000 25 FPS Media Private Limited 470 – Business Transfer Other Related Parties – 399,662 Zee News Limited – 399,662 Loans, Advances and Deposits Given Subsidiaries 131,515 750,056 Siticable Network Limited – 430,065 Asia Today Limited 131,515 266,884 Other Related Parties 4,179,580 6,498,020 Briggs Trading Co. Private Limited 1,283,650 1,144,950 Churu Trading Co. Private Limited 1,190,000 1,264,650 Ganjam Trading Co. Private Limited 76,200 1,247,360 Prajatama Trading Co. Private Limited 1,266,700 1,016,262 Dish TV India Limited 326,325 – Zee News Limited – 1,785,008 72 2007 2006 Particulars Amount Amount for Amount Amount for major parties major parties Loans and Advances repayment received Subsidiaries 367,325 537,780 Zee Sports Limited – 51,214 Asia Today Limited 131,515 266,884 Asia TV Limited 221,750 190,072 Other Related Parties 3,816,550 6,133,478 Briggs Trading Co. Private Limited 1,283,650 1,211,027 Churu Trading Co. Private Limited 1,190,000 1,336,930 Ganjam Trading Co. Private Limited 76,200 1,306,601 Prajatama Trading Co. Private Limited 1,266,700 1,080,162 Buddha Films Limited – 740,703 Zee News Limited 435,296 Adjustment to Securities Premium account pursuant to Scheme of Arrangement Diminution/Cancellation of Investment/Share Application Money/Loans/Advances Subsidiaries Siticable Network Limited 1,439,078 3,852,402 Equity 19,364 1,669,966 Preference Share – 215,650 Share Application Money 1,419,714 1,966,786 Associates Zee News Limited – 1,410,374 Equity – 65,749 Loans – 1,250,000 Advances – 94,624 Investment Acquired Associates – 46,599 Aplab Limited – 46,599 (B) Balances as on March 31, Investments Subsidiaries 12,593,773 12,593,049 Zee Multimedia Worldwide Limited, BVI 10,840,000 10,840,000 Asia Today Limited 1,480,000 1,480,000 ETC Networks Limited 241,475 241,475 Other Related Parties 1,533 1,510 Essel Propack Limited 1,500 1,500 Associates 46,599 46,599 Aplab Limited 46,599 46,599 Debtors Subsidiaries 350,955 399,786 Asia Today Limited 230,082 274,165 Asia TV Limited 113,906 84,056 73 2007 2006 Particulars Amount Amount for Amount Amount for major parties major parties Other Related Parties 380,428 803,459 Dish TV India Limited 308,331 442,735 Essel Agro Limited – 333,112 Pan India Network Infravest Private Limited 2,220 – Loans/Advances/Deposits given Subsidiaries 165,026 1,880,459 Siticable Network Limited – 1,419,648 Zee Sports Limited 23,001 – Zee Turner Limited 139,481 – Other Related Parties 824,865 115,285 Buddha Films Limited – 38,745 Jay Properties Private Limited 65,745 65,745 Rama Associates Limited – 40,000 Dish TV India Limited 352,453 – Wire and Wireless (India) Limited 378,570 – Broadcasters/Principals pending Remittances Subsidiaries 1,422,328 1,378,381 Asia Today Limited 1,362,505 1,335,532 Asia TV Limited 59,822 – Creditors Subsidiaries 415,665 380,562 Zee Turner Limited – 118,749 Asia Today Limited 392,773 249,160 ETC Networks Limited 19,745 Other Related Parties 272,075 57,844 Intrex Trade Exchange Limited 35,438 27,953 Jay Properties Private Limited – 16,986 Dakshin Media Gaming Solutions Private 7,747 – Limited Zee News Limited 198,825 – E-City Entertainment Private Limited 2,575 – Diligent Media Corporation Limited 9,637 – Associates 613 78 Aplab Limited 613 78 (C) Guarantees Corporate Guarantees Given Subsidiaries 568,418 – Asia Today Limited 568,418 – Other Related Parties 4,168,565 911,543 Pan India Network Infravest Private Limited 350,000 444,171 Dish TV India Limited 2,224,030 400,000 Wire and Wireless (India) Limited 1,585,870 – Zee News Limited 8,665 – “Major Parties” denote entities who account for 10% or more of the aggregate for that category of transaction.

74 i) Details of Remuneration to directors is disclosed in Note 6(f) Disclosures as required by the amendment to Clause 32 of the listing agreement. a) Loans given to Subsidiaries and Others : (Rs./Thousand) Maximum Balance Name of the Company Type March 31, during the year 2007 2006 2007 2006 Siticable Network Limited*@ Subsidiary – – – 309,630 Zee Turner Limited Subsidiary – 15,041 15,041 15,041 Zee Sports Limited* Subsidiary – – 51,214 51,214 Asia TV Limited Subsidiary – 221,750 221,750 391,410 Asia Today Limited Subsidiary – – 131,515 222,384 * Have no repayment schedule and are interest free @ (Ceased to be a subsidiary w.e.f. April 1, 2006 as per the demerger order passed and refered in Note 3 – Resturcturing) b) Investments by Loanee in the shares of the Company as at March 31: Loanee No. of fully paid up No. of fully paid up equity shares 2007 equity shares 2006 Zee Network Employees Welfare Trust – 5,000 Churru Trading Co. Private Limited 3,576,000 40,51,000 Briggs Trading Co. Private Limited 4,451,262 5,393,500 Prajatma Trading Co. Private Limited 7,574,500 8,324,500 Premier Finance & Trading Co. Limited 6,176,000 6,176,000 Ganjam Trading Co. Private Limited 6,016,500 6,566,500 13. Additional Information required to be given pursuant to Part II of Schedule VI to the Companies Acts 1956 is as follows: (a) The Company is in the business of producing television programs and is not subject to any license hence licensed capacity is not given. Further, the nature of business of the Company is such that the installed capacity is not quantifiable. (b) Quantitative Information. The details of opening stock, acquisitions / productions, sales and closing stock are as under: (Refer Note 2) Particulars 2007 2006 Qty. (Nos.) (Rs./Thousand) Qty. (Nos.) (Rs./Thousand) Opening Stock Program/Film Rights – 1,567,630 1,696,245 Electronic Devices 53,680 90,073 2061 1,602 Total 53,680 1,657,703 2061 1,697,847 Acquisitions/Productions Program/Film Rights – 4,300,541 – 3,704,357 Others – Electronic Devices 302,049 604,039 1,057,870 1,828,229 Total 302,049 4,904,580 1,057,870 5,532,586

75 Particulars 2007 2006 Qty. (Nos.) (Rs./Thousand) Qty. (Nos.) (Rs./Thousand) Sales & Services Program/ Film Rights /Others – 1,146,220 – 978,498 Others - Electronic Devices 355,729 707,805 1,006,251 1,772,971 Broadcasting Revenue – 6,768,749 – 5,532,231 Commission – 54,012 – 27,272 Lease Rent – – – 2,989 Total 355,729 8,676,786 1,006,251 8,313,962 Closing Stock Program/Film Rights* – 1,863,985 – 1,567,630 Electronic Devices – – 53,680 90,073 Total – 1,863,985 53,680 1,657,703 * Net of transfer/adjustment Rs./thousand Nil (402,276) under scheme of arrangement. (c) Consumption of Raw Stock (included in Program/Film Rights above) Particulars 2007 2006 Qty. (Nos.) (Rs./Thousand) Qty. (Nos.) (Rs./Thousand) Raw Tapes/Discs 44,273 31,514 78,917 47,140 Total 44,273 31,514 78,917 47,140 (d) Value of Imported and Indigenous Raw Stock consumed Particulars 2007 2006 % (Rs. /Thousand) % (Rs./ Thousand) Imported 0.71 223 5.85 2,757 Indigenous 99.29 31,291 94.15 44,383 Total 100.00 31,514 100.00 47,140 (e) Other Information (Rs./Thousand) Particulars 2007 2006 Earning in Foreign Exchange FOB Value of Exports 919,119 752,373 Broadcasting Revenue 190,532 213,005 Interest Income 19,083 34,595 Others 21,375 21,005 Remittances in Foreign Currency Net Dividend remitted 239,715 235,477 No. of Shareholders (Nos) 1,893 1,462 No. of Equity Shares held (Nos) 239,714,963 235,476,793 Expenditure in Foreign Currency (On Accrual Basis) Traveling expenses 5,209 5,279 Transponder rent 70,456 79,450 Programming Expenses 726,821 187,898 Repairs and Maintenance 519 15,042 Interest expense 6,252 29,476 Others 46,086 38,721 76 Particulars 2007 2006 CIF Value of Imports Capital Equipment 70,746 246,801 Electronic Devices 604,039 1,801,816 Raw Stock 492 5,074 14. Earnings per share (EPS)- Sr. Particulars 2007 2006 a. Profit after Tax before Exceptional Item and discontinued/discontinuing 1,662,086 767,114 operations (Rs./Thousand) b. Profit after Tax after Exceptional Item and discontinued/discontinuing 1,662,086 690,812 operations (Rs./Thousand) Adjustment for the purpose of Diluted EPS: Add: Interest on Foreign Currency Convertible Bonds 5,285 25,193 Less: Tax on above 1,779 8,480 c. Profit after Tax before Exceptional Item and discontinued/discontinuing 1,665,592 783,827 operations for Diluted EPS (Rs./Thousand) d. Profit after Tax after Exceptional Item and discontinued/discontinuing 1,665,592 707,525 operations for Diluted EPS (Rs./Thousand) e. Weighted Average number of equity shares for Basic EPS (Nos.) 423,617,434 412,505,926 Add: Weighted Average outstanding option deemed to be issued for no – 22,246,658 consideration (Nos.) f. Weighted Average number of equity shares for Diluted EPS (Nos.) 423,617,434 434,751,670 Nominal value of equity shares (Re.) 1 1 g. Basic EPS before Exceptional Item and discontinued/discontinuing 3.92 1.86 operations (Rs.) h. Basic EPS after Exceptional Item and discontinued/discontinuing 3.92 1.67 operations (Rs.) i. Diluted EPS before Exceptional Item and discontinued/discontinuing 3.92 1.80 operations (Rs.) j. Diluted EPS after Exceptional Item and discontinued/discontinuing 3.92 1.63 operations (Rs.) 15. Segmental Reporting The Financial Statements of the Company contain both the consolidated financial statements as well as the separate financial statements of the parent company. Hence, the Company has presented the segmental information on the basis of the consolidated financial statements as permitted by Accounting Standard – 17.

As per our attached report of even date For and on behalf of the Board Mohan Bhandari Partner Subhash Chandra Chairman For MGB & Co. Punit Goenka Whole-time Director Chartered Accountants Nemi Chand Jain Director Place : Mumbai Hitesh Vakil Director - Finance Date : June 27, 2007 M Lakshminarayanan Company Secretary 77 balance abstract and company’s general business profile I. REGISTRATION DETAILS Registration No. 2 8 7 6 7 State Code 1 1 Date Month Year Balance Sheet date 3 1 0 3 2 0 0 7 II. CAPITAL RAISED DURING THE YEAR (AMOUNT RS. IN THOUSAND) Public Issue Rights Issue N I L N I L Bonus Issue Preferential Allotment N I L 2 0 9 5 1 III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (AMOUNT RS. IN THOUSAND) Total Liabilities Total Assets 2 1 9 0 3 8 5 5 2 1 9 0 3 8 5 5 SOURCES OF FUNDS Paid-up Capital Reserves and Surplus 4 3 3 5 6 7 1 8 9 1 8 0 9 1 Share Application Money Secured Loans N I L 1 8 0 6 6 3 4 Unsecured Loans Deferred Tax Liabilities 7 3 3 8 8 1 1 1 6 8 2 APPLICATION OF FUNDS Net Fixed Assets Investments 1 0 5 3 7 4 7 1 3 4 5 8 8 9 5 Net Current Assets Miscellaneous Expenditure 7 3 9 1 0 6 4 1 4 9 Other Assets N I L IV. PERFORMANCE OF COMPANY (AMOUNT RS. IN THOUSAND) Turnover* Total Expenditure 9 2 9 1 3 3 9 6 8 3 0 2 0 3 (*includes other income) + - Profit/(Loss) Before Tax before exceptional items + - Profit/(Loss) After Tax and Exceptional Item + 2 4 6 1 1 3 6 + 1 6 6 2 0 8 6 Earnings Per Share before exceptional items (weighted) (Rs.) Dividend Rate (%) 3 . 9 2 1 5 0 V. GENERIC NAMES OF PRINCIPAL PRODUCTS OF THE COMPANY (AS PER MONETARY TERMS) Item Code No. (ITC Code) 8 5 2 4 9 0 0 1 Product Description R E C O R D E D V I D E O C A S S E T T E S For and on behalf of the Board Subhash Chandra Chairman Punit Goenka Whole-time Director Nemi Chand Jain Director Place : Mumbai Hitesh Vakil Director - Finance Date : June 27, 2007 M. Lakshminarayanan Company Secretary 78 Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) cash flow statement for the year ended MARCH 31, (Rs. in ’000) 2007 2006 A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit before taxation, after exceptional items 2,461,136 1,030,326 Adjustments for : Depreciation 85,158 148,509 Share issue expenses written off 49 49 Deferred Revenue Expenditure written off 6,047 7,257 Provision for doubtful debts and advances (123,890) 27,031 Calls in arrears and Share Premium adjusted 202 – Loss on sale of fixed assets 1,840 5,173 Exchange adjustments (net) – (1,064) Interest expense 147,194 117,648 Dividend income (19,347) (12,659) Interest income (462,564) (403,911) Operating profit before working capital changes 2,095,825 918,359 Adjustments for : Increase in trade and other receivables (868,269) (530,693) Increase in Programs/Film Rights and Inventories (209,029) (252,038) Increase/(Decrease in trade and other payables (187,700) 993,000 Cash Generated from Operations 830,827 1,128,628 Direct taxes paid – For current year (787,264) (566,124) Net Cash flow from Operating Activities 43,563 562,504

B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets/CWIP (266,301) (416,786) Purchase of Investments (310,905) (1,507,143) Loans to subsidiaries (131,515) (339,569) Loans repaid by subsidiaries 368,305 487,758 Loans to others (8,633,149) (9,388,850) Loans repaid by others 6,508,217 7,998,850 Advance share application money to a subsidiary – (330,500) Dividend received 19,347 12,659 Sale of fixed assets 5,634 414,459 Sale of Investments 280,817 1,635,300 Interest received 413,003 396,569 Net Cash flow from Investing Activities (1,740,199) (1,037,253) 79 Zee Entertainment Enterprises Limited (Formerly Zee Telefilms Limited) (Rs. in ’000) 2007 2006 C. CASH FLOW FROM FINANCING ACTIVITIES Dividend paid (including dividend tax) (494,914) (470,554) Interest paid (164,072) (108,371) Proceeds from short term borrowings (6,450,499) 832,810 Proceeds from long term borrowings 848,792 1,545,312 Repayments of short term borrowings (5,140,033) (46,190) Repayments of long term borrowings – (1,417,773) Payment under finance leases (2,304) (1,804) Net Cash flow from Financing Activities 1,497,968 333,430 Net Cash Flow during the year (A+B+C) (198,668) (141,319) Cash and Cash Equivalents at the beginning of the year 237,463 386,046 Cash and Cash Equivalents at the end of the year 38,795 244,727 Cash and Cash Equivalents transferred as per Scheme of Arrangement – (7,264) Cash and Cash Equivalents at the end of the year 38,795 237,463 Notes to the Cash Flow Statement For the year ended March 31, 2007 1. Previous year’s figures have been regrouped, recast wherever necessary. 2. The Scheme of Arrangement and conversion of FCCB [Refer Note 3 and 5(a)] of Notes to Accounts respectively] have not been considered in the above cash flow statement being non-cash transactions. 3. Sale of fixed assets includes Rs./Thousand Nil (400,107) being sale/transfer of facility relating to production, gathering, editing and uplinking of news and current affairs programming. 4. Cash and Cash Equivalents at the end of the year: Cash in hand 2,638 1,715 Balances with Scheduled Banks in Current Accounts 17,874 45,962 Balances with Scheduled Banks in Deposit Accounts 68 158 Balances with Non Scheduled Banks in Deposit Accounts – – Balances with Non Scheduled Banks in Current Accounts 941 135,654 Cheques in hand/transit 17,274 53,974 Total 38,795 237,463

As per our attached report of even date For and on behalf of the Board

Mohan Bhandari Subhash Chandra Chairman Partner Punit Goenka Whole-time Director

For MGB & Co. Nemi Chand Jain Director Chartered Accountants Hitesh Vakil Director - Finance Place: Mumbai Date: June 27, 2007 M Lakshminarayanan Company Secretary

80 last five years financial highlights (Rs. in million) Consolidated Standalone

Year Ending March 31, 2007 2006 2005 2004 2003 2007 2006 2005 2004 2003

Revenue Account Income from Operations 15,159 16,543 13,252 12,789 11,140 8,677 8,314 6,473 5,053 4,618 Total Expenses 11,955 13,848 8,900 8,480 7,384 6,556 7,525 4,091 3,371 3,217 Operating Profit 3,204 2,695 4,352 4,309 3,756 2,121 789 2,382 1,682 1,401 % to Income from Operations 21% 16% 33% 34% 34% 24% 9% 37% 33% 30% Other Income 747 640 521 776 785 614 510 458 662 701 PBIDT 3,951 3,335 4,873 5,085 4,541 2,735 1,299 2,840 2,344 2,102 Financial Expenses 334 188 206 583 767 189 140 165 370 517 Depreciation/Amortisation 185 360 329 319 297 85 148 139 100 90 Profit Before Tax & Exceptional Items 3,432 2,787 4,338 4,183 3,477 2,461 1,011 2,536 1,874 1,495 Exceptional Items – (20) 141 – 354 – (19) 53 – 16 Taxation 999 547 1,023 1,049 879 799 339 860 720 532 Profit After Tax & before minority interest/share of profits/(losses) in associates 2,433 2,260 3,174 3,134 2,244 1,662 691 1,623 1,154 947 Add: Share of Results of Associates 10 (46) 7 4 2 – – – – – Less: Minority Interest 68 71 56 196 110 – – – – – Profit After Tax for the year 2,375 2,143 3,125 2,942 2,136 1,662 691 1,623 1,154 947 % to Total Income 15% 12% 23% 22% 18% 18% 8% 23% 20% 18% Dividend 650 435 413 413 227 650 435 413 413 227 Dividend Rate 150% 100% 100% 100% 55% 150% 100% 100% 100% 55% Capital Account Share Capital - Equity 434 413 412 412 412 434 413 412 412 412 Share Application Money – – – – – – – – – – Share Capital - Preference – – – – – – – – – – Reserves & Surplus 25,747 20,873 24,124 21,774 39,724 18,918 15,037 20,955 20,053 38,654 Deferred Tax Balances (75) (148) (219) 11 69 11 (6) (55) 15 70 Minority Interest 818 458 397 1,251 1,084 – – – – – Loan Funds 3,226 4,772 5,304 4,722 7,137 2,541 4,712 5,221 2,680 4,044

Capital Employed 30,150 26,368 30,018 28,170 48,426 21,904 20,156 26,533 23,160 43,180

Fixed Assets 14,841 12,948 15,373 15,463 34,606 1,054 1,153 1,792 1,482 1,304 Investments 2,326 3,024 3,744 328 316 13,459 13,448 15,475 15,171 34,356 Net Current Assets 12,981 10,384 10,851 12,304 13,267 7,391 5,549 9,252 6,454 7,390 Miscellanous Expenditure (to the extent not w/o) 2 12 51 75 237 – 6 14 53 130

Capital Deployed 30,150 26,368 30,018 28,170 48,426 21,904 20,156 26,533 23,160 43,180

Closing market price per share of Re.1 251 238 139 134 63 251 238 139 134 63 Market capitalisation 108,674 98,372 57,297 55,358 25,782 108,674 98,372 57,297 55,358 25,782

81 performance ratios - an analysis

Consolidated Standalone Year Ending March 31, 2007 2006^* 2005^ 2004^ 2003 2007 2006 2005 2004 2003 Financial Performance Advertisement Income/Income from Operations (%) 46.4% 39.7% 43.0% 42.6% 47.8% 58.9% 45.4% 50.2% 37.2% 22.7% Subscription Income/Income from Operations (%) 43.9% 43.4% 50.6% 47.1% 43.5% 19.1% 21.2% 32.1% 17.7% 8.2% Operating Profit/Income from Operations (%) 21.1% 16.3% 32.8% 33.7% 33.7% 24.4% 9.5% 36.8% 33.3% 30.3% Other Income/Total Income (%) 4.7% 3.7% 3.8% 5.7% 6.6% 6.6% 5.8% 6.6% 11.6% 13.2% Programming Cost/Income from Operations (%) 31.5% 25.7% 19.7% 19.7% 20.7% 46.1% 42.5% 29.9% 32.3% 40.5% Personnel Cost/Income from Operations (%) 6.7% 6.6% 6.5% 5.7% 6.5% 4.7% 5.3% 6.0% 5.5% 6.4% Selling and Admin Expenses/Income from Operations (%) 18.9% 20.7% 18.8% 18.5% 16.1% 15.7% 20.3% 19.7% 20.7% 17.6% Total Operating Cost/Income from Operations (%) 78.9% 83.7% 67.2% 66.3% 66.3% 75.6% 90.5% 63.2% 66.7% 69.7% Financial Expenses/Income from Operations (%) 2.2% 1.1% 1.6% 4.6% 6.9% 2.2% 1.7% 2.5% 7.3% 11.2% Tax/Income from Operations (%) 6.6% 3.3% 7.7% 8.2% 7.9% 9.2% 4.1% 13.3% 14.2% 11.5% PAT for the year/Total Income (%) 14.9% 12.5% 22.7% 21.7% 17.9% 17.9% 7.8% 23.4% 20.2% 17.8% Tax/PBT (%) 29.1% 19.6% 23.6% 25.1% 25.3% 32.5% 33.6% 33.9% 38.4% 35.6% Dividend Payout/PAT for the year (%) 27.4% 19.3% 13.2% 14.0% 10.6% 39.1% 59.7% 25.4% 35.8% 24.0% Dividend Payout/Effective Networth (%) 2.5% 2.0% 1.7% 1.9% 1.5% 3.4% 3.2% 2.1% 2.2% 1.8% Balance Sheet Debt-Equity ratio (Total loans/Eff. Networth) (%) 12.3% 22.4% 21.7% 21.4% 46.5% 13.1% 34.7% 26.8% 14.4% 32.3% Current ratio (Current assets/Current liabilities) (x) 3.5 3.4 3.4 4.1 4.3 2.8 2.3 3.2 2.9 3.4 Capital Output Ratio (Inc. from Ops/ Eff. Capital employed) (x) 0.5 0.6 0.4 0.5 0.5 0.4 0.5 0.3 0.2 0.3 Fixed assets Turnover (Inc. from Ops/ Fixed assets) (x) 8.0 7.5 3.1 3.1 2.7 8.2 7.2 3.6 3.4 3.5 Cash & cash equivalents/Total Eff. capital employed (%) 3.2% 4.9% 5.2% 4.0% 5.4% 0.2% 1.3% 1.6% 1.3% 2.5% RONW (PAT for the year/Eff. Networth) (%) 9.1% 10.1% 12.8% 13.3% 13.9% 8.6% 5.1% 8.3% 6.2% 7.6% ROCE (PBIT/Eff. Capital employed) (%) 12.5% 11.3% 15.2% 17.0% 18.0% 12.1% 6.3% 10.9% 10.5% 12.1% Per Share Data # Revenue per share (Rs.) 36.7 41.7 33.4 32.9 28.9 21.4 21.4 16.8 13.9 12.9 Dividend per share (Rs.) 1.50 1.00 1.00 1.00 0.55 1.50 1.00 1.00 1.00 0.55 Indebtedness per share (Rs.) 7.4 11.6 12.9 11.4 17.3 5.9 11.4 12.7 6.5 9.8 Book value per share (Rs.) 60.4 51.6 59.4 53.6 37.2 46.4 32.9 47.3 45.0 30.4 Earnings per share (after prior period adjustments) (Rs.) 5.5 5.2 7.6 7.2 5.1 PE Ratio - Price/EPS Ratio (Share Price as of March 31,) (x) 45.8 45.9 18.3 18.6 12.2

Notes : ~ Fixed Assets for the consolidated entity excludes Goodwill on consolidation of Rs. (12,956) million. # Annualised Figures for the previous year have been regrouped wherever necessary.

82 Auditors’ Report To, (b) Note 17 regarding Scheme of Arrangement u/s 391 The Board of Directors of Zee Entertainment Enterprises to 394 read with Section 78, 100 to 103 approved Limited (Formerly Zee Telefilms Limited) by the Honourable High Court at Mumbai and Delhi and in pursuance thereof adjustment of deficit of net 1. We have audited the attached Consolidated Balance assets of demerged undertaking of Rs./Thousand Sheet of Zee Entertainment Enterprises Limited (“the Company”) and its subsidiaries and associate Companies 1,385,608 against Securities Premium. (“the Group”) as at March 31, 2007, the Consolidated (c) Note 24 regarding receivable of Rs./Thousand Profit and Loss Account and the Consolidated Cash Flow 261,377 from a competing broadcaster, considered Statement for the year then ended on that date, annexed good and recoverable in the opinion of the thereto. These financials statements are the responsibility management based on legal opinion. of the Company’s management. Our responsibility is to express an opinion on these financial statements based 5. We report that the Consolidated Financial Statements on our audit. have been prepared by the Company in accordance 2. We conducted our audit in accordance with the auditing with the requirements of the Accounting Standard (AS) standards generally accepted in India. Those standards 21 “Consolidated Financial Statements” and AS-23 require that we plan and perform the audit to obtain “Accounting for Investments in Associates”, issued by reasonable assurance about whether the financial the Institute of Chartered Accountants of India and on statements are free of material misstatements. An audit the basis of the separate audited financial statements includes examining on a test basis, evidence supporting of the Company, its subsidiaries and associates subject the amounts and disclosures in the financial statements. to Non-compliance of AS-15 “Accounting for Retirement An audit also includes assessing the accounting Benefits” by a subsidiary and an associate, the impact principles used and significant estimates made by the thereof on the profit for the year and reserves is not management, as well as evaluating the overall financial quantified. statement presentation. We believe that our audit provide a reasonable basis for our opinion. 6. On the basis of information and explanations given to us and on consideration of the separate audit reports on 3. (a) The financial statements of subsidiaries with total individual audited financial statements of the Company, assets (net) of Rs./Thousand 10,193,267 (9,131,986) its subsidiaries and associates and subject to (3) and (5) as at March 31, 2007 and total revenues (net) of Rs./Thousand 5,897,452 (6,614,442) for the year above, we are of the opinion that ended on that date have not been audited by us. (a) The Consolidated Balance Sheet gives true and These financial statements have been audited by fair view of the consolidated state of affairs of the other auditors whose report has been furnished Group as at March 31, 2007; to us and in our opinion, in so far it relates to the amounts included in respect of those subsidiaries, (b) The Consolidated Profit and Loss Account gives is based solely on the report of the other auditors. a true and fair view of the consolidated result of operations of the Group for the year ended on that (b) The financial statements of associates for the date; and year ended March 31, 2007 has been audited by other auditors whose report has been furnished (c) The Consolidated Cash Flow Statement gives a true to us. The profit of such associates considered and fair view of the consolidated cash flows of the for consolidation is Rs./Thousand 9,867 (Loss Group for the year ended on that date. of Rs./Thousand 56,810). Our opinion, in so far it relates to the amounts included in respect of those Mohan Bhandari associates, is based solely on the report of the other auditors. Partner M. No. 12912 4. We draw reference to For and on behalf of (a) Note 15 regarding land at Hyderabad included MGB & Co. under Schedule 6 “Investments” having book value Chartered Accountants of Rs./Thousand 573,411 considered as good and realizable based on the legal opinion obtained by Place: Mumbai the Company. Date: June 27, 2007 83 CONSOLIDATED Balance sheet as at MARCH 31, (Rs. in ‘000) Schedule 2007 2006 SOURCES OF FUNDS Shareholders’ Funds Share Capital 1 433,567 412,549 Reserves and Surplus 2 25,747,453 20,873,624 26,181,020 21,286,173 Minority Interest 818,595 458,148 Loan Funds Secured Loans 3 2,451,871 364,013 Unsecured Loans 4 773,881 4,537,461 3,225,751 4,901,474 Total 30,225,366 26,645,795 APPLICATION OF FUNDS Fixed Assets 5 Gross Block 15,702,098 13,278,722 Less: Depreciation up-to-date 1,080,534 794,746 Net Block 14,621,564 12,483,976 Capital work-in-progress 219,486 464,156 14,841,050 12,948,132 Investments 6 2,325,648 3,024,089 Deferred Tax Assets [Refer Note 20 (c)] 75,389 147,935 Current Assets, Loans and Advances 7 Programs/Film Rights 2,015,644 2,398,022 Inventories 24,003 128,496 Sundry Debtors 5,331,276 4,854,683 Cash and Bank Balances 954,752 1,285,643 Loans and Advances 9,762,210 6,192,801 18,087,885 14,859,645 Less: Current Liabilities and Provisions Current Liabilities 8 3,908,870 3,108,031 Provisions 9 1,197,519 1,237,693 5,106,389 4,345,724 Net Current Assets 12,981,496 10,513,921 Miscellaneous Expenditure 10 1,783 11,718 (to the extent not written off or adjusted) Total 30,225,366 26,645,795 Significant Accounting Policies and Notes to Accounts 18

As per our attached report of even date For and on behalf of the Board Mohan Bhandari Subhash Chandra Chairman Partner Punit Goenka Whole-time Director For MGB & Co. Nemi Chand Jain Director Chartered Accountants Hitesh Vakil Director - Finance Place: Mumbai M. Lakshminarayanan Company Secretary Date: June 27, 2007 84 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, (Rs. in ‘000) Schedule 2007 2006 INCOME Sales and Services 11 15,158,817 16,543,665 Other Income 12 747,260 639,415 Total 15,906,077 17,183,080 EXPENDITURE Operational Cost/Cost of Goods 13 8,079,963 9,329,097 Personnel Cost 14 1,016,767 1,088,682 Administrative and other Expenses 15 1,244,091 1,821,841 Selling and Distribution Expenses 16 1,613,937 1,608,788 Total 11,954,759 13,848,408 Operating Profit 3,951,318 3,334,672 Financial Expenses 17 334,263 187,698 Depreciation/Amortization 184,688 359,653 Profit before Tax and Exceptional Items 3,432,367 2,787,321 Add – Exceptional Items [Refer Note 17 (d)] – 19,366 Less – Provision for Taxation – Current Tax – current year 909,779 501,387 – earlier period (2,488) 10,390 – Deferred 75,987 8,800 – Fringe Benefit Tax 15,741 26,251 Profit after Tax and before Minority Interest/Share of Results in Associates 2,433,349 2,259,859 Add/(Less) - Share of results in Associates 9,867 (46,381) Less - Minority Interest (67,925) (70,692) Profit for the year 2,375,291 2,142,786 Net Profit after Tax of Continuing Operations 2,375,291 2,142,420 Net Profit/(Loss) after Tax of Discontinued/Discontinuing Operations – 366 Add - Transferred from Securities Premium [Refer Note 17] 1,385,608 5,990,635 Less - Adjusted pursuant to the Scheme of Arrangement [Refer Note 17] (1,385,608) (5,990,635) Add - Adjustments pursuant to the Scheme of Arrangement [Refer Note 17(b)(ii)] 366,114 1,127,425 Add - Balance brought forward 11,202,392 8,732,005 Amount available for Appropriation 13,943,797 12,002,216 APPROPRIATIONS Proposed Dividend 650,350 434,753 Tax on Dividend 112,907 63,072 General Reserve 302,000 302,000 Balance carried to Balance Sheet 12,878,540 11,202,391 Total 13,943,797 12,002,216 Significant Accounting Policies and Notes to Accounts 18 As per our attached report of even date For and on behalf of the Board Mohan Bhandari Subhash Chandra Chairman Partner Punit Goenka Whole-time Director For MGB & Co. Nemi Chand Jain Director Chartered Accountants Hitesh Vakil Director - Finance Place: Mumbai M. Lakshminarayanan Company Secretary Date: June 27, 2007 85 SCHEDULES TO consolidated BALANCE SHEET AS AT MARCH 31, (Rs. in ‘000) 2007 2006 SCHEDULE - 1 Share Capital Authorised 500,000,000 Equity Shares of Re. 1/- each 500,000 500,000 2,500,000 Cumulative Redeemable Preference Shares of Rs. 100/- each. 250,000 250,000 750,000 750,000 Issued, Subscribed and Paid up 433,566,765 (412,616,249) Equity Shares of Re. 1/- each fully paid up 433,567 412,616 Less: Calls in arrears (Others) – 67 (Out of the above 210,316,212 Equity Shares of Re. 1/- each fully paid up were allotted for consideration other than cash against acquistion of Investments.) Total 433,567 412,549 SCHEDULE - 2 Reserves and Surplus Capital Reserve As per last Balance Sheet 9,553 9,553 Capital Redemption Reserve As per last Balance Sheet 70,000 70,000 Securities Premium As per last Balance Sheet 7,313,072 13,426,407 Add: Received/Adjusted during the year 4,111,363 21,829 Less: Adjustment pursuant to the Scheme of Arrangement [Refer Note 17] 1,385,608 5,990,635 Add/(Less): Premium on Redemption of FCCB [Refer Note 14(c)] 256,693 (144,530) 10,295,520 7,313,072 General Reserve Balance as per last Balance Sheet 2,857,124 2,555,124 Less : Adjustment pursuant to the transitional provisions as permitted under AS-15 (net of tax) [ Refer Note 11 (b)] (6,964) – Add : Appropriated during the year 302,000 302,000 3,152,161 2,857,124 Foreign Currency Translation Reserve (658,321) (578,516) Profit and Loss Account 12,878,540 11,202,391 Total 25,747,453 20,873,624

86 SCHEDULES TO consolidated BALANCE SHEET AS AT MARCH 31, (Rs. in ‘000) 2007 2006 SCHEDULE - 3 Secured Loans (Refer Note 13) Term Loan from Financial Institution/Banks 801,000 933,335 Working Capital Finance from Banks 1,625,236 767,765 Vehicle Loans 25,635 45,070 2,451,871 1,746,170 Less: Transfer under Scheme of Arrangement – 1,382,157 Total 2,451,871 364,013 SCHEDULE - 4 Unsecured Loans Foreign Currency Convertible Bonds [Refer Note 14 (a)] 233,881 4,366,060 Short Term Loans External Commercial Borrowings – 129,858 From Banks 500,000 – (Guaranteed by one of the directors and charge to be created on fixed assets and current assets [excluding assets which have exclusive charge] in case of default). Inter Corporate Deposits – 1,499 400,000, 1% Unsecured Optionally Convertible Debentures of Rs. 100/- each 40,000 40,000 fully paid up (Redeemable on expiry of 3 years from the date of allotment at a premium of 10% on principal amount outstanding) Interest accrued and due – 44 Total 773,881 4,537,461 SCHEDULE - 5 Fixed Assets (At cost) (Rs. ‘000) GrossBlock Depreciation Net Block As at Additions Additions Deductions Deduction As at Upto Additions For the Deductions Deduction Up to As at As at Description 01.04.2006 on on 31.03.2007 31.03.2006 on year on 31.03.2007 31.03.2007 31.03.2006 Acquisition Demerger Acquisition Demerger a) Intangibles Goodwill - On consolidiation^ 10,730,180 2,225,403 – – 16 12,955,567 – ––– – 12,955,567 10,730,180 Software 16,999 1,798 6,959 – 11,838 11,156 – 3,509 6,901 – 7,764 4,075 5,843 Trade Mark 33,037 ––– 33,037 19,740 – 3,304 – – 23,043 9,994 13,298 b) Tangibles – – – Land (Leasehold) 65,690 – – – – 65,690 2,610 – 813 – – 3,422 62,268 63,080 Building 300,880 230,243 17,173 150 – 548,147 89,391 43,969 33,477 150 – 166,687 381,459 211,490 Plant and Machinery 1,624,461 321,097 235,853 242,030 345,292 1,594,090 452,231 179,140 94,870 18,237 63,952 644,054 950,036 1,172,230 Equipments 329,296 51,169 43,417 106,375 – 317,508 164,830 29,123 33,443 56,482 – 170,914 146,593 164,467 Furniture and fixtures 74,566 6,498 15,629 6,682 – 90,010 34,433 5,675 5,975 3,386 – 42,698 47,312 40,132 Vehicles 103,612 3,092 16,644 37,137 – 86,211 20,355 2,161 9,296 9,861 – 21,951 64,260 83,256 Total 13,278,722 2,837,502 330,514 399,333 345,308 15,702,098 794,746 260,069 184,688 95,017 63,952 1,080,534 14,621,564 12,483,976

PreviousYear 15,605,332 200,933 906,343 1,337,672 2,096,214 13,278,722 1,380,514 48,904 360,764 317,089 678,347 794,746 12,483,976

Notes: ^ Arising on consolidation on ZEEL with its subsidiaries and its ultimate subsidiaries. (a) Part of Building has been given on Operating Lease. (b) Depreciation includes Rs. Nil (1,111) transferred to Pre-Operative Expenses.

87 SCHEDULES TO consolidated BALANCE SHEET AS AT MARCH 31, (Rs. in ‘000) 2007 2006 SCHEDULE - 6 Investments Long Term (at cost) Quoted - Non-Trade 1,800,000 (360,000) Equity shares of Rs. 2 each (Rs.10 each) of Essel Propack Limited 1,500 1,500 {Market Value Rs. Thousand/124,200 (161,892)} Quoted - In Associates 1,321,200 Equity shares of Rs.10 each of Aplab Limited 117,203 117,203 (Extent of holding 26.42%) Goodwill written off (63,282) (63,282) 53,921 53,921 Less: Diminution in the value of Investments 9,027 9,027 Add: Share of profit for previous years 17,904 8,123 Add: Share of profit for current year 7,901 12,159 Less: Dividend received during the year 3,303 2,378 {Market Value Rs. Thousand /115,010 (152,533)} 67,396 62,798 Unquoted - Trade 50 Equity shares of Rs.10 each of North Karnataka GSB Bank Limited 1 1 2,500 Equity shares of Rs.10 each of Samata Sahakari Bank Limited 63 63 346,000 (296,000) Equity Shares of Rs.10 each of Asianet Communication Limited 217,718 207,718 23,000, 7.25% Redeemable Non-cumulative Preference shares of 23 23 Re. 1 each of Wire & Wireless (India) Limited Unquoted - Trade In Associates Nil (6,574,320) Equity shares of Rs.10 each of Zee News Limited – 65,749 Extent of holding Nil (33.12%) Add: Share of profit for current year – 10,429 Less: Adjusted pursuant to scheme of arrangement [Refer Note 17(c)] – (76,178) – – 13,344 (19,388) Equity shares of US$ each of Broadcast South Asia Limited [Extent of holding 48.44% (48.91%)] 1,384,663 1,980,563 Less: Share of Loss in previous year 69,029 31 Add/(Less): Share of Profit/(Loss) in current year 1,966 (68,998) 1,317,600 1,911,535 Others 1,000 Equity shares of Rs.10 each of Ecool Gaming Solutions Private Limited 10 10 National Savings Certificates 25 25 Current Investments Unquoted 2,000,000 (Nil) Units of Rs. 10 each of Reliance Fixed Horizon Fund 20,000 – Institutional Dividend Plan 10,014.55 (Nil) Units of Rs. 1,000 each of Reliance Liquid Plus Fund Daily Dividend Plan 10,017 – 1,029,533.89 (Nil) Units of Rs.10 each of Principal Floating Rate Fund - 10,298 – Fixed Maturity Plan 1,000,000 (Nil) Units of Rs.10 each of Birla Fixed Term Plan Quarterly Series 7 10,000 – 15,211 (Nil) Units of Rs.10 each of Standard Chartered Liquidity Manager 15,216 – Plus Weekly Dividend 88 SCHEDULES TO consolidated BALANCE SHEET AS AT MARCH 31, (Rs. in ‘000) 2007 2006 SCHEDULE - 6 (Contd.) 1,076,740.73 (1,076,740.73) Units of Rs. 10 each of Birla Fixed Term Plan - 10,767 10,767 Series F - Growth 1,074,806.17 (1,074,806.17) Units of Rs. 10 each of HSBC Fixed Term 10,748 10,748 Series - 4 Dividend 1,500,260.48 (1,500,260.48) Units of Rs. 10 each of LIC Fixed Maturity Plan 15,003 15,003 Series 4 - Growth Plan 2,000,000 (2,000,000) Units of Rs. 10 each of ABN AMRO Fixed Term Series 1 20,000 20,000 Nil (10,08,856.78) Units of Rs.10 each of Franklin Templeton – 10,698 Investments, Templeton Floating Rate Income Fund - Long Term Plan Nil (1,024,684.04) units of Rs. 10 each of DSP Merrill Lynch Floating Rate Fund – 10,274 Nil (2,009,077.53) units of Rs. 10 each of Franklin Templeton – 20,718 Floating Rate Income Fund Long Term Plan Nil (1,072,484.22) Units of Rs. 10 each of ICICI Prudential Floating – 10,795 Rate Long Term Dividend Reinvestment Plan Nil (2,000,000) Units of Rs. 10 each of SBI Magnum Debt Fund Series – 20,000 Nil (1,500,000) Units of Rs. 10 each of Grindlays Fixed Maturity 21st Plan – 15,000 Nil (1,088,098.32) Units of Rs. 10 each of HSBC Fixed Term Series-3 Dividend – 10,881 Nil (3,126,156.52) Units of Rs. 10 each of Prudential ICICI Fixed Maturity Plan Series 27 – 31,262 Nil (1,500,000) Units of Rs. 10 each of Kotak Fixed Maturity Plan 17 Dividend – 15,000 Nil (1,000,000) Units of Rs. 10 each of Chola Fixed Maturity Plan – 10,000 Series 3 (Quarterly Plan I) Dividend Nil (2,000,000) Units of Rs. 10 each of ING Vyasya Fixed Maturity – 20,000 Plan Series 9 - Dividend Nil (1,000,807.14) Units of Rs. 10 each of LIC Fixed Maturity Plan – 10,008 6 - Months Dividend Plan Immoveable Property (Refer Note 15) Freehold Land 599,262 599,262 Total 2,325,648 3,024,089 Note: All the above securities are fully paid up Mutual Fund Units bought and sold during the year: Name of the Fund Face Value Quantity (Nos.) Cost Principal Asset Management Fund - Liquid Option - Daily Dividend Plan 10 28,032,751 280,347 Standard Chartered Mutual Fund Grindlays Fixed Maturity 21st Dividend 10 21,610 216 Franklin Templeton Floating Rate Income Fund - Long Term 10 82,227 852 Prudential ICICI Floating Rate Long Term Dividend Reinvestment Fund 10 21,688 219 Prudential ICICI FMP Series 27 10 53,301 533 DSP ML Floating Rate Fund - Daily Dividend 10 1,434 14 Chola FMP Series 3 (3 Months Dividend Plan) 10 16,987 169 Birla Bond Plus Fortnightly Dividend Reinvestment Scheme 10 1,947,026 20,533 Standard Chartered Liquidity Manager 1000 125,804 125,935 SCHEDULE - 7 Current Assets, Loans and Advances [Refer Note 17] A. Current Assets (a) Programs/Film Rights [Refer Note 8(c)(ii)] 2,015,644 2,398,022 (b) Inventories (as taken,valued and certified by the Management) Raw-Stock - Tapes, Cassettes etc. 2,887 3,640 Stock in Trade 21,116 122,740 Stores and Spares – 2,116 24,003 128,496

89 SCHEDULES TO consolidated BALANCE SHEET AS AT MARCH 31, (Rs. in ‘000) 2007 2006 SCHEDULE - 7 (Contd.) (c) Sundry Debtors (Unsecured, Considered Good, unless otherwise stated) More than six months [includes doubtful Rs./Thousand 1,348,912 (1,765,792) 2,514,243 2,271,904 Others 4,165,946 4,348,571 6,680,189 6,620,475 Less: Provision for Doubtful Debts 1,348,912 1,765,792 5,331,276 4,854,683 (d) Cash and Bank Balances Cash in hand 7,791 3,106 Balances with Scheduled Banks in Current Accounts 919,784 1,079,263 Balances with Scheduled Banks in Deposit Accounts 6,963 140,247 Cheques in hand/transit 20,214 63,027 954,752 1,285,643 (e) Loans and Advances (Unsecured and considered good, unless otherwise stated) Loans 7,010,663 4,230,470 Advances (Recoverable in cash or kind or for value to be received) 2,318,637 1,850,642 Less: Provision for Doubtful Advances 52,386 24,947 2,266,251 1,825,695 Deposits 485,296 136,636 9,762,210 6,192,801 Total 18,087,885 14,859,645 SCHEDULE - 8 Current Liabilities Sundry Creditors – For Goods 694,942 951,260 – For Expenses and Other Liabilities 2,543,061 1,422,395 Trade Advances/Deposits received 121,622 532,496 Due to Principals (Pending remittance) 537,586 172,715 Unclaimed Dividend/Fixed Deposits 8,324 8,960 Interest accrued but not due 3,337 20,205 Total 3,908,870 3,108,031 SCHEDULE - 9 Provisions Provision for – Tax ( Net of Advances) 340,994 693,673 – Retirement Benefits 93,267 46,195 Proposed Dividend (including tax) 763,257 497,825 Total 1,197,519 1,237,693 SCHEDULE - 10 Miscellaneous Expenditure (to the extent not written off or adjusted) Share Issue and Preliminary Expenses 163 241 Deferred Revenue Expenditure 1,619 11,477 Total 1,783 11,718

90 SCHEDULES TO consolidated profit and loss account for the year ended MARCH 31, (Rs. in ‘000) 2007 2006 SCHEDULE - 11 Sales and Services Services – Advertisement 7,034,684 6,566,047 – Subscription 6,647,954 7,174,053 – Commission - Broadcasters 86,071 59,168 – Course Fees and Materials 205,471 154,111 – Other Services 244,601 697,841 Sales – Products 940,035 1,892,445 Total 15,158,817 16,543,665 SCHEDULE - 12 Other Income Dividend 13,879 10,564 Interest 494,768 478,699 Profit on Sale of Investment - in Associate 37,104 24,501 - in Subsidiary 22,889 – - in Others 821 – Miscellaneous Income 142,749 42,981 Balances written back 35,049 82,670 Total 747,260 639,415 SCHEDULE - 13 Operational Cost/Cost of Goods A. Programs/Film Rights Opening 2,398,741 2,289,879 Add: Production/Acquisition cost 4,399,562 4,761,871 Less: Adjustment pursuant to Scheme of Arrangement – 405,664 Less: Closing 2,015,644 2,398,022 4,782,659 4,247,064 B. Transmission Cost/Other Direct Expenses Subscription Management Services 1,967,278 2,565,178 Transmission Cost 563,608 515,137 Education Centre Operating Expenses 26,558 38,829 Other Direct Operating Expenses – 198,701 2,557,444 3,317,845 C. Stock in Trade Opening Stock 122,740 6,604 Add: Purchases 658,238 1,880,324 Less: Adjustment pursuant to Scheme of Arrangement [Refer Note 17] 20,001 – Less: Closing Stock 21,116 122,740 739,860 1,764,188 Total 8,079,963 9,329,097

91 SCHEDULES TO consolidated profit and loss account for the year ended MARCH 31, (Rs. in ‘000) 2007 2006 SCHEDULE - 14 Personnel Cost Salaries, Allowances and Bonus 929,579 976,487 Contribution to Provident and other funds 45,742 56,693 Staff Welfare Expenses 41,447 55,502 Total 1,016,767 1,088,682 SCHEDULE - 15 Administrative and Other Expenses Rent 94,012 100,894 Lease Rentals 8,464 4,337 Rates and Taxes 27,806 18,222 Repairs and Maintenance – Building 8,257 8,200 – Plant and Machinery 5,229 25,834 – Others 35,189 26,050 Insurance 45,743 26,646 Electricity and Water Charges 27,698 54,601 Communication Expenses 86,842 131,589 Printing and Stationary 22,397 36,907 Miscellaneous Expenses 120,327 151,431 Conveyance and Travelling Expenses 121,829 162,655 Vehicle Expenses 25,400 32,695 Legal, Professional and Consultancy Charges 207,574 172,470 Auditors Remuneration 19,841 19,714 Provision for Doubtful Debts and Advances 276,289 476,310 Bad Debts and Advances written off 94,902 208,841 Loss on Sale/ Discard/ Shortage of Fixed Assets (Net) 6,306 124,903 Loss on Sale of Investment – 28,400 Share Issue and Preliminary Expenses Written off 129 75 Deferred Revenue Expenditure Written off 9,858 11,067 Total 1,244,091 1,821,841 SCHEDULE - 16 Selling and Distribution Expenses Advertisment and Publicity Expenses 619,517 739,962 Commission/Discount on Sales and Services 216,402 265,937 Business Promotion Expenses 778,019 602,889 Total 1,613,937 1,608,788 SCHEDULE - 17 Financial Expenses Interest on – Fixed Loan 114,528 72,106 – Bonds 7,026 25,237 – Others 97,087 23,437 Discounting and Financing Expenses 64,224 45,882 Foreign Exchange Losses (net) 51,398 21,036 Total 334,263 187,698

92 Schedule - 18 Significant Accounting Policies and Notes to Accounts Schedule 18 – Significant Accounting Policies and Notes to Accounts 1. Background: Zee Entertainment Enterprises Limited (hereinafter referred to as `the parent company’, `the Company’ or `ZEEL’) along with its subsidiaries and associates (collectively known as “the Group”) has an integrated range of businesses, encompassing the content-to-consumer value chain, which includes content aggregation and distribution of television channels. The Group’s revenue streams mainly include advertisements and subscription revenue. The Group also generates revenue through sale of television softwares, film distribution, services to other broadcasters, trading in electronic devices and income from Education and Training business. 2. Basis of Consolidation (a) The Consolidated Financial Statements (CFS) of the Group are prepared under Historical Cost Convention in accordance with Generally Accepted Accounting Principles in India and Accounting Standard (AS) 21 on “Consolidated Financial Statements” issued by the Institute of Chartered Accountants of India (ICAI), to the extent possible in the same format as that adopted by the parent company for its separate financial statements by regrouping, recasting or rearranging figures, wherever considered necessary. The significant inconsistencies in accounting policies are disclosed wherever applicable and no adjustments are made in the CFS for such inconsistencies. The consolidation of the financial statements of the parent company and its subsidiaries is done to the extent possible on a line-by-line basis by adding together like items of assets, liabilities, income and expenses. All significant inter-group transactions, balances and unrealized inter-company profits have been eliminated in the process of consolidation. (b) The parent company and its subsidiaries prepare its financial statements under the historical cost convention, in accordance with generally accepted accounting principles prevalent in the countries of their domicile except non-compliance of AS-15 by a Indian subsidiary. (c) The CFS includes the Financial Statements of the parent company and the subsidiaries (as listed in the table below). Subsidiaries are consolidated from the date on which effective control is acquired and are excluded from the date of transfer/disposal. Name of the Subsidiaries Extent of holding % Country of Incorporation Direct Subsidiaries 25 FPS Media Private Limited ^ 94.00 India ETC Networks Limited 54.83 India Siticable Network Limited *** 100.00 India Taj Television India Private Limited * 50.00 India Zee Interactive Learning Systems Limited 52.50 India Zee Turner Limited 74.00 India Zee Sports Limited 100.00 India Zee Multimedia Worldwide Limited 100.00 British Virgin Islands Indirect Subsidiaries Integrated Subscriber Management Services Limited *** 100.00 India New Era Entertainment Network Limited *** 100.00 India Asia Today Limited # 100.00 Mauritius Asia Business Broadcasting (Mauritius) Limited 60.00 Mauritius Pan Asia Infrastructure Limited 100.00 Mauritius Taj TV Mauritius Limited * 50.00 Mauritius Zee Multimedia Worldwide (Mauritius) Limited 100.00 Mauritius Zee Multimedia (Maurice) Limited 100.00 Mauritius Zee Sports International Limited** 100.00 Mauritius Zee Sports Americas Limited ** 100.00 Mauritius Asia TV Limited 100.00 United Kingdom Expand Fast Holding (Singapore) Pte Limited 100.00 Singapore 93 Name of the Subsidiaries Extent of holding % Country of Incorporation Zee Technologies (Guangzhau) Limited ** 100.00 China Zee Telefilms Middle East FZ LLC 100.00 U.A.E. Zee TV USA Inc. 100.00 United States of America Zee TV South Africa (Proprietary) Limited 100.00 South Africa * Acquired during the year. ** Incorporated during the year. *** These enterprises have ceased to be subsidiary pursuant to Scheme of Arrangement [Refer Note 17]. # 50% held through wholly owned subsidiary. ^ Divested during the year. (d) Minority Interest in subsidiaries represents the minority shareholders proportionate share of the net assets and net income. (e) Associates The Group has adopted and accounted for Investments in Associate in these CFS, using the “Equity Method” as per AS-23 issued by ICAI. Name of the Associate Company Extent of Holdings Country of Incorporation Aplab Limited 26.42% India Broadcast South Asia Limited 48.44% British Virgin Islands No adjustments are made for differences in accounting policy for non-compliance of AS-15, as retirement benefits accounted in the year of payment, inventories are valued on weighted average basis and depreciation provided on fixed assets on written down value method in case of Aplab Limited. The impact of this non-compliance on Company’s share of profit in the associate Company is not ascertained. 3. Use of Estimates The preparation of CFS in accordance with generally accepted accounting principles, requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities as of the date of financial statements and the reported amount of revenue and expenses of the year. Actual results could differ from these estimates. Any revision to accounting estimate is recognized prospectively in current and future periods. 4. Fixed Assets (a) Intangible Assets (i) Intangible assets comprise mainly goodwill arising from consolidation, represents the excess of cost to the parent of its investment in subsidiary company over the parent’s portion of equity, at the date on which investment in subsidiary is made. (ii) Other intangible assets capitalized are software costs, trademark etc. (b) Tangible Fixed Assets (i) Tangible fixed assets are stated at historical cost less accumulated depreciation. Cost means cost of acquisition /installation and includes pre-operational expenses, borrowing cost etc. (ii) Capital work in progress is stated at amount spent/incurred on capital projects up to the date of Balance Sheet and includes advances for capital expenditure. (iii) Assets acquired under Finance Lease are capitalized and the corresponding lease liability is recorded at an amount equal to the fair value of the leased asset at the inception of the lease. (d) Impairment of assets If the carrying amount of fixed assets exceeds the recoverable amount on the reporting date, the carrying amount is reduced to the recoverable amount. The recoverable amount is measured at the higher of the net selling price and value in use determined by the present value of estimated cash flows. 5. Borrowing Costs Borrowing cost attributable to the acquisition or construction of qualifying assets are capitalized as a part of the cost of such assets. All other borrowing costs are charged to revenue. 6. Depreciation/Amortization (a) Depreciation is provided on tangible fixed assets (with the exception of land) including leased assets, at the rates adopted in the accounts of respective subsidiaries as permissible under applicable law, on straight-line basis from the time they are available for use, so as to write off their costs over estimated useful lives of the assets. 94 (b) Leasehold land and leasehold improvements are amortized over the lease period. (c) Cost of trademarks is amortized over a period of 10 years. (d) No part of goodwill arising on consolidation is amortized whereas goodwill arising on acquisition is amortized over a period of ten years. (e) Depreciation on other intangible assets is amortized over the economic useful life of the assets as estimated by the management. 7. Investments Long-Term Investments (other than investments in associate) are stated at cost. Diminution in value, other than temporary is provided. Current investments are valued at lower of cost or fair value. 8. Programs/Film Rights and Inventories (a) Programs/Film Rights - Programs/Film rights are stated at the lower of net cost (cost less accumulated amortization/impairment) or realizable value. Where the realizable value on the basis of its useful economic life is less than its carrying amount, the difference is impairment, which is expensed. (i) Cost of news/ current affairs/ chat shows/ events including sports events etc., are fully expensed on telecast. (ii) Programs (other than (i) above) are amortized over three financial years from the year of telecast/purchase. (iii) Film rights are amortized on a straight-line basis over the license period or 36/60 months from the date of purchase, whichever is shorter. (iv) Film rights for trade – Cost of respective right is fully expensed on sale. (b) Inventories of Raw Stock (Tapes, Cassettes, etc.) and Stock-in-trade (electronic devices etc.) are valued at lower of cost or estimated net realizable value. Cost is taken on First in First Out (FIFO) basis. (c) (i) Programs/Film rights etc., for broadcasting are considered as intangibles as per AS-26 “Intangible Assets” but shown under current assets, as are realizable in the ordinary course of business along with Trading Inventory. (ii) In Schedule 13, Operational Cost includes cost of Program/Film rights sold, amortized, impaired etc. The Company has impaired and expensed Programs/Film Rights of Rs./Thousand 211,840 (299,364) during the year. 9. Revenue Recognition (a) Advertisement revenue (net of agency commission) is recognized when the related advertisement or commercial appears before the public i.e. on telecast. (b) Subscription revenue is recognized on a time basis when the service is completed. (c) Revenue relating to films under production is recognized in the relevant year of release. (d) For services (including commission on subscription), revenue is recognized when the service is completed. (e) Sales are recognized when the risk and rewards of ownership are passed onto the customers, which is generally on dispatch of goods. (f) Lease rentals are recognized as revenue as per the terms of operating lease agreements. (g) Dividend is recognized when the right to receive the dividend is unconditional at the Balance Sheet date. (h) In respect of education services, the revenue is recognized over the duration of course. Franchisee fees are recognized as and when instalments are due. 10. Foreign Currency A ccounting (a) of Transactions (i) Foreign currency transactions are recorded at the exchange rates prevailing on the date of such transactions. Monetary assets and liabilities as at the Balance Sheet date are translated at the rates of exchange prevailing at the date of Balance Sheet. Gains and losses arising on account of difference in foreign exchange rates on settlement/ translation of monetary assets and liabilities are recognized in the Profit and Loss Account. Non-monetary foreign currency items are carried at cost. (ii) The premium or discount arising at the inception of forward exchange contract which is not intended for trading or speculation purpose and which is not entered into hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction is amortized as expense or income over the life of the contract. Exchange difference on such contracts is recognized in the Profit and Loss account in the reporting period in which the exchange rates changes. Profit and Loss arising on cancellation or renewal of such a forward exchange rate contract is recognized as income or as an expense for the period. 95 (b) Translation and Exchange Rates Financial Statements of overseas non-integral operations are translated as under: (i) Assets and Liabilities at the rate prevailing at the end of the year. Depreciation is accounted at the same rate at which assets are converted. (ii) Revenues and expenses at yearly average rates prevailing during the year (except for inventories are converted at opening/closing rates as the case may be). Off Balance Sheet items are translated into Indian Rupees at year- end rates. (iii) Exchange differences arising on translation of non-integral foreign operations are accumulated in the Foreign Currency Translation Reserve until the disposal of such operations. 11. Retirement Benefits (a) Retirement benefit plans, pensions schemes and defined contribution plans, or funds are governed by the statutes of the countries in which subsidiaries are located and contribution to the fund or future liability on actuarial valuation are charged to Profit and Loss Account. Accrued liabilities for leave encashment are made by the parent and its subsidiaries wherever applicable based on unavailed leave to the credit of employees in accordance with the rules of the respective companies. Incase of a subsidiary, the gratuity fund benefits are administered by a specific Trust formed and annual contributions are deposited under group policy scheme of Life Insurance Corporation of India (LIC). (b) In the current year, Parent and two Indian subsidiaries have adopted the revised Accounting Standard 15 (AS-15), Employee Benefits as issued by the Institute of Chartered Accountants of India. Accordingly, the Company has provided for gratuity/leave encashment based on actuarial valuation done as per Projected Unit Credit Method. Further, in accordance with the transitional provision in the revised Accounting Standard, Rs./Thousand 6,964 (net of tax liability) for gratuity leave encashment has been adjusted to the General Reserve. (c) In case of an Indian Subsidiary the liability for retirement benefits is provided on payment basis. 12. Miscellaneous Expenditure (a) Share issue and Preliminary expenses are amortized over a period of five to ten years. (b) Other deferred revenue expenditures are amortized based on the management’s estimates of its enduring future benefit over a period of 60 months. 13. Secured Loans (a) Term Loan from Financial Institution/Banks: In case of parent, is secured by hypothecation on first pari passu charge basis of all domestic cable subscription receivables and programme and film rights and further secured by first charge exclusive on advertising receivables from sports channel. (b) Working Capital Finance from Banks: (i) In case of Parent, is secured by hypothecation of stocks (other than Program and Film Rights), book debts (other than advertisement, commission and subscription receivables) and other current assets, all ranking pari passu with other financing banks. Certain facilities are further secured by charge on plant and machinery at Noida and advertisement commission receivables. (ii) In case of subsidiaries, is secured by general charge on assets, assignment of revenue from advertisement, syndication, specific events and cable distribution proceeds. Incase of a subsidiary, the loans are further secured by personal/corporate guarantee of the promoters/principal shareholders. (c) The loans transferred pursuant to the Scheme of Arrangement continue to be secured against Parent Company’s assets as stated above. (d) Vehicle Loans: Hire purchase and lease finance is secured by hypothecation of specific assets underlying the hire purchase/ lease. 14. Foreign Currency Convertible Bonds (FCCB): (a) The Company had issued 10,000 0.5% Foreign Currency Convertible Bonds (FCCB) (considered as a non-monetary liability) of US$10,000 each aggregating to US$100 million. The bonds are redeemable on April 29, 2009 at 116.24% of their principal amount. The bond holders have an option to convert these bonds into equity shares at an initial conversion price of Rs.197.235 per share, with a fixed rate of exchange on conversion of Rs. 43.88 (US$1) from and including June 8, 2004 to and including April 22, 2009. The conversion price will be subject to certain adjustments. During the year, 9,417 bonds have been converted into 20,950,516 Equity Shares of Re. 1 each. If the outstanding bonds as on March 31, 2007 are converted into equity shares, then the share capital of the Company will increase by around 1,185,795 Equity Shares of Re.1 each. Further, the bonds may be redeemed in whole and not part at the option of the Company at any time on or after May 12, 2006 and up to April 22, 2009, subject to certain conditions. 96 The restructuring as per Note 17 has affected the conversion price of the FCCB. The conversion price would be determined by the Company for this purpose. (b) Out of the net proceeds of Rs./Thousand 4,269,473 from the issue of the FCCB, Rs./Thousand 4,268,532 (4,133,819) has been utilized for the object of the issue, which includes new projects, modernization and expansion of the existing production units and expansion of wholly owned subsidiary operations and balance pending utilization has been included in Cash and Bank Balances. (c) Premium payable on redemption of FCCB Rs./Thousand Nil (276,376) has been provided and adjusted against securities premium as per Section 78 of the Act in the earlier years. During the year, major part of the FCCB holders have opted for conversion and accordingly provision relating to converted FCCBs aggregating to Rs. 256,693 is written back and adjusted against Securities Premium account. 15. Immovable Property The Collector of Hyderabad, Andhra Pradesh, on March 31, 2007, had resumed possession of the land at Hyderabad bought from Padmalaya Telefilms Limited (PTL) (included under Schedule 6 - “Investments”) admeasuring 17,639.64 sq.mtrs. registered in the name of the Company having book value of Rs./Thousand 573,411. The Company is pursuing with appropriate authorities for restoration of the possession to the Company. The management considers the said investment as good and realisable, based on legal opinion obtained by the Company. Second piece of land admeasuring 2700 sq. mtrs. having book value of Rs./Thousand 25,851 bought from PTL is yet to be transferred in the name of the Company. 16. Debtors Debtors are stated in the Balance Sheet at net realizable value. Net realizable value is the invoiced amount less provision for bad and doubtful debtors. Provisions are made specifically against debtors where there is evidence of a dispute or an inability to pay or irrecoverability. 17. Restructuring a) The Scheme of Arrangement between ZEEL and Siti Cable Network Limited and New Era Entertainment Network Limited and Dish TV India Limited (Dish TV) (Formely ASC Enterprises Limited) was sanctioned by the Honourable High Court at Delhi and Mumbai on December 18, 2006 and January 12, 2007 respectively and filed with the Registrar of Companies on January 19, 2007. As per the scheme the Direct Consumer Business Undertaking (DCS) of the Company is transferred and vested in Dish TV with effect from April 1, 2006. The deficit arising on transfer of net assets is adjusted against the Securities Premium Account. This Scheme has been given effect to in these financial statements. b) In pursuance of the Scheme of Arrangement approved by Honourable High Court at Delhi and Mumbai, the Board of Directors in the meeting held on January 22, 2007 has determined and approved the transfer and adjustment of aggregate amount of Rs./Thousand 1,385,608 against Securities Premium. (i) The group has transferred the assets and liabilities of Direct Consumer Business undertaking to Dish TV India Limited are as follows: Rs./Thousand Particulars DCS Gross Block 345,308 Less: Accumulated Depreciation 63,952 Net Block 281,356 Capital Work in Progress 374,302 Current Assets, Loans and Advances 1,280,745 Total Assets (A) 1,936,403 Loan Funds 81,704 Current Liabilities and Provisions 823,258 Deferred Tax Liabilities 11,974 Total Liabilities (B) 916,936 Deficit (A) – (B) 1,019,467 (ii) The balance in profit and loss account is adjusted to Securities Premium account as referred above for Rs./Thousand 366,114 for the net assets of subsidiaries demerged of Direct Consumer Business. 97 c) The Scheme of Arrangement between ZEEL and Zee News Limited (ZNL) and Siti Cable Network Limited (Siti) and Wire & Wireless (India) Limited (WWIL) sanctioned by the Honourable High Court at Mumbai on November 17, 2006 and filed with the Registrar of Companies on November 22, 2006. Pursuant to the Scheme, the News business undertaking of the Company has been transferred to and vested in ZNL with effect from March 31, 2006 and the Cable Business Undertaking of the Company along with that of Siti (Wholly owned subsidiary of the Company) has been transferred to and vested in WWIL with effect from March 31, 2006. This Scheme has been given effect to in the financial statements of March 31, 2006. d) The Company has assigned its facilities relating to production, gathering , editing and uplinking of news & current affairs programming with assets and liabilities as at March 31, 2005 to ZNL on September 30, 2005 and the profit on such transfer Rs./Thousand 19,366 is shown as an Exceptional item in the Profit and Loss account for the year ended March 31, 2006. 18. acquisitions during the year During the year, the Group acquired 50% stake each in Taj TV Mauritius Limited and Taj Television India Private Limited. The net assets acquired and goodwill arising thereof is as follows: (Rs./Thousand) Particulars Amount Total Assets 581,260 Total Liabilities 234,756 Net Assets 346,503 Purchase consideration 2,571,906 Goodwill on consolidation 2,225,402 19. Loans and Advances: a) The Group has financed the operations of its Indian Subsidiaries by way of interest free loans in addition to share capital and also undertaken continuing financial support to them. b) The Group has been deploying its surplus funds as short term demand loans/inter corporate deposits and calling repayment as and when it requires, the parties are regular in repayment of principal and interest and these loans are considered good. 20. Taxation a) Current income tax is calculated on the results of individual companies in accordance with local accounting practices and tax regulations. b) Deferred tax assets and liabilities are recognized using the asset and liability approach for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Unutilized tax losses will only be utilized where there is a likelihood of them being able to be offset against tax in the future. For the calculation of deferred tax, the local tax rates likely to be in force are used for the respective individual company where deferred tax accounting is adopted. c) The components of the deferred tax balances as on March 31, are as under: Rs./ Thousand 2007 2006 (i) Deferred Tax Assets Allowable on payment basis 42,898 53,042 Provision for doubtful debts 117,492 133,448 Unabsorbed fiscal allowances 602 153,886 Other Provisions 65,783 44,674 Total 226,775 385,050 (ii) Deferred Tax Liabilities Depreciation 151,335 215,743 Other Provisions 51 21,372 Total 151,386 237,115 Deferred Tax Assets (Net) 75,389 147,935 98 d) The Company’s claim of deduction under Section 80HHC of the Income Tax Act, 1961 is allowed by second appellate authorities for the AY 1993-94 to 1999-2000. However the revenue authorities have disputed those orders in further appeals and effect of appeal orders are not given by the revenue authorities as on the date of the balance sheet, hence the excess provision is not accounted. 21. Leases (i) Finance Lease: Long-term leases, which in economic terms constitute investments financed on a long-term basis (finance lease) are recognized as assets and recorded under tangible fixed assets at their cash purchase value. The related liabilities are included in secured loans. Additional Information on assets taken on lease: Rs./Thousand 2007 2006 i) In respect of assets taken on finance lease prior to April 1, 2001: (Assets not capitalized) Future Lease rental obligation 965 304 ii) In respect of assets taken on finance lease after April 1, 2001: (Assets capitalized) Reconciliation of minimum lease payments and its present value Minimum Lease Payments as at Not Later than one year 1,175 1,364 Later than one year and not later than five year 1,937 2,388 Later than five years 433 – Total 3,545 3,752 Less: Amount representing Interest 418 376 Present value of Minimum Lease payment 3,127 3,376 Less: Amount due not later than one year 1,016 1,169 Amount due later than one year and not later than five years 2,111 2,207 (ii) Operating Leases: Lease of assets under which the lessor effectively retains all the risk and rewards of ownership are classified as operating leases. Lease payments under operating leases are recognized, as expenses on accrual basis in accordance with the respective lease agreements. The Group has taken on lease certain offices, residential premises, and other facilities under cancellable/ non-cancelable lease, which are renewable on a periodic basis at the option of both the lessor and the lessee. The initial tenure of the lease generally is for 11 to 180 months. The minimum rental payables under other operating leases that have initially or remaining non-cancellable lease are as follows: Rs./ Thousand 2007 2006 Lease rental charges for the year 362,829 379,312 Future Lease rental obligation payable (Under non-cancellable lease) Not later than one year 155,130 72,554 Later than one year but not later than five year 253,922 174,572 Later than five years – 2,251

99 In respect of assets given under operating lease: (i) The Group has given assets included under the head of Plant and Machinery under cancellable operating lease agreements. The initial term of the lease is for 12 months. (ii) The lease rental revenue for the year is Rs./Thousand 9,498 (88,139). 22. Contingent Liabilities not provided for: (a) Rs./ Thousand Sr. No. Particulars 2007 2006 Corporate Guarantees for Subsidiaries to the extent of loans availed a) (availed/ outstanding Rs./Thousand 568,418 (Nil) 1,315,500 – Corporate guarantees for other related parties b) availed/ outstanding Rs./Thousand 4,168,565 (911,543) 4,671,498 1,152,500 c) Bank/Counter guarantees outstanding 2,637,245 255 d) Letter of Credit 242,343 48,178 e) Claims not acknowledged as debts 205,524 250,388 f) Legal cases against the Company Unascertainable Unascertainable g) Disputed Direct Taxes 124,725 102,837 h) Uncalled Liability on shares partly paid 20,000 20,000 i) Disputed Service Tax demand 1,266 800 j) Entertainment tax – 40,460 k) Duty Benefit availed under EPCG 5,501 – (b) The loans transferred pursuant to the scheme of arrangement referred in Note 17 continue to be secured against the Company’s assets. The loans outstanding in the books of transferee companies as at March 31, 2007 is Rs./Thousand 945,272. 23. Estimated amount of contracts remaining to be executed on capital account (Net of Advances) Rs./Thousand 573,813 (885,295). 24. Rs./Thousand 261,377 receivable from a competing Broadcaster for recovery of the telecast rights money relating to the sports event, which is under litigation, is considered good and recoverable based on the legal opinion obtained by the management. 25. Prior period Income (net) for the year are Rs./Thousand 14,376 (expense (net) Rs./Thousand 28,060) the details are as follows: (Rs./Thousand) Particulars 2007 2006 Miscellaneous Expenses 177 28,060 Managerial Remuneration 2,100 – Excess Provision for Rent (16,653) – Total (14,376) 28,060 26. Related Party Disclosure (i) List of Parties where control exists The list of subsidiaries is disclosed in Note 2 (c) (ii) Other Related Parties with whom transactions have taken place during the year and balances outstanding as on the last day of the year. Associate Companies Extent of holding Aplab Limited 26.42% Broadcast South Asia Limited 48.44%

100 Other Related Parties with whom transactions have taken place during the year Agrani Convergence Limited; Agrani Wireless Services Limited; Ambience D’Ary Advertising Private Limited; Asia TV (USA) Limited, Asian Satellite Broadcasting Private Limited; Asian Sky Shop Limited; Blah Media-Dubai; Briggs Trading Company Private Limited; Broadband Pacenet (India) Private Limited; Broadcast Venture Holdings Limited; Buddha Films Limited; Churru Trading Company Private Limited; Cornershop Entertainment Company Private Limited; Credensys Software Technologies Private Limited, Cyquator Technologies Limited (merged with Pan India Network Infrawest Private Limited); Dakshin Communication Private Limited; Dakshin Media Gaming Solutions Private Limited; Delgrada Limited; Diligent Media Corporation Limited; Dish TV India Limited (formerly ASC Enterprises Limited); Essel Propack Limited; Essel Agro Limited; E-City Entertainment (India) Private Limited; E-City Films Limited; E-City Retail Private Limited; E-Cool Gaming Solution Private Limited; Encore Electronics Limited; Essel Corporate Resources Private Limited; Essel Infraprojects Private Limited (formerly Pan India Paryatan Private Limited); Essel International Limited; Essel Shyam Communication Private Limited; Essel Shyam Technologies Limited; Ganjam Trading Company Private Limited; Garron Limited; Hokushan Trading Limited; Intrex Trade Exchange Limited; Jay Properties Private Limited; Jayneer Capital Private Limited; Natural Wellness; New Media Broadcasting; Procall Private Limited; Pan India Network Infravest Private Limited; Premier Finance and Trading Company Limited; Prajatma Trading Company Private Limited; Pratham Media Entertainment Private Limited; Quick Calls Private Limited; Rama Associates Limited; Rankay Investment and Trading Company Private Limited; Real Media FZLLC; Resource Software Limited; RKJ Woods Plantation Private Limited; Scarpetta Investment Limited; Smart Talk Private Limited; Suncity Projects Private Limited; Taleem Research Foundation; Turner International India Limited; Veena Investments Private Limited; Wire and Wireless (India) Limited; Zee News Limited. Directors/Key Management Personnel Mr. Ashok Kurien; Mr. B.K. Syngal; Mr. D. P. Naganand; Mr. Gulam Noon, Mr. Laxmi Narain Goel; Mr. M.Y. Khan; Mr. Nemichand Jain; Mr. Puneet Goenka; Mr. Rajan Jaitley; Mr. Subhash Chandra. (Rs./Thousand) Particulars Associates Other Related Parties Key Management Personnel Transactions with Related Parties 2007 2006 2007 2006 2007 2006 Sale, Services and other Recoveries (Net) 5,965 965,994 1,975,685 Zee News Limited 5,965 326,627 Dish TV India Limited 624,895 805,845 Essel Agro Limited – 1,084,370 Purchase of Programs, Goods and Services 396,283 1,915,119 760,242 – 36 Zee News Limited 394,110 – Real Media Limited – 142,789 Broadcast Venture (Holdings) Limited – 492,157 Dish TV India Limited 225,753 – Turner International India Limited 579,601 – Resource Software Limited 678,123 Wire & Wireless (India) Limited 282,019 Mr. Laxmi Narain Goel – 36 Advertisement Income – 75,192 14,518 Asian Sky Shop Limited – 2,639 Pan India Network Infravest Private Limited – 4,781 Diligent Media Corporation Limited – 5,306 Intrex Trade Exchange Limited 1,594 Dish TV India Limited 68,142 – Subscription income 36,113 Dish TV India Limited 36,113 Commission received – 50,068 808,799 Turner International India Limited 50,068 808,799 Commission paid – 56,510 55,423 Scarpetta Investments Limited 56,510 55,423 101 (Rs./Thousand) Particulars Associates Other Related Parties Key Management Personnel Transactions with Related Parties 2007 2006 2007 2006 2007 2006 Interest received 12,603 429,407 347,933 Zee News Limited 12,603 – – Briggs Trading Co. Private Limited 106,287 85,195 Churu Trading Co. Private Limited 111,414 93,193 Ganjam Trading Co. Private Limited – 76,381 Prajatma Trading Co. Private Limited 115,190 82,387 Remuneration paid to directors Mr. Subhash Chandra 4,300 7,861 Mr. Punit Goenka 4,300 7,861 Other Expenses 14,158 Dish TV India Limited 14,158 Interest paid 526 489 Turner International India Limited 158 445 Ganjam Trading Company Private Limited 368 – Dividend received 8,017 3,960 Essel Propack Limited 8,017 3,960 Rental/Other Income 1,554 9,342 3,609 Zee News Limited 1,554 2,604 – Asian Sky Shop Limited 1,350 1,800 Pan India Network Infravest Private Limited 1,007 824 Dish TV India Limited 1,872 864 Rent paid – 23,130 Jay Properties Private Limited – 21,900 Business transfer 399,662 Zee News Limited 399,662 Purchase/Acquisition of Investments 65,749 – 207,200 Zee News Limited 65,749 – – Briggs Trading Co. Private Limited – 27,300 Churu Trading Co. Private Limited – 80,500 Ganjam Trading Co. Private Limited – 21,000 Prajatma Trading Co. Private Limited – 36,400 Premier Finance & Trading Co. Limited – 42,000 Sale of Investments 535,443 Broadcast South Asia Limited 535,443 Purchase of Fixed Assets 336 2,710 3,989 Aplab Limited 336 – Broadcast Pacenet (I) Private Limited 2,710 Pan India Network Infravest Private Limited 820 Agrani Convergence Limited 1,161 Essel Agro Limited 2,005

102 (Rs./Thousand) Particulars Associates Other Related Parties Key Management Personnel Transactions with Related Parties 2007 2006 2007 2006 2007 2006 Issue of Convertible Debentures 40,000 Ganjam Trading Co. Private Limited 40,000 Advance Share Application Money Given 50,000 Dish TV India Limited 50,000 Loans, Advances and Deposits Given/ Repaid 1,785,008 4,691,650 6,075,890 Zee News Limited 1,785,008 Briggs Trading Co. Private Limited 1,283,650 1,144,950 Churu Trading Co. Private Limited 1,190,000 1,264,650 Ganjam Trading Co. Private Limited 1,247,360 Prajatma Trading Co. Private Limited 1,266,700 1,016,262 Delgrada Limited 592,921 Resource Software Limited 665,078 Loans and Advances repayment Received 435,296 3,935,582 5,883,354 Zee News Limited 435,296 Briggs Trading Co. Private Limited 1,283,650 1,211,027 Churu Trading Co. Private Limited 1,190,000 1,336,930 Ganjam Trading Co. Private Limited 1,306,601 Prajatma Trading Co. Private Limited 1,266,700 1,080,162 Buddha Films Limited 740,703 Loans, Advances and Deposits Received 128 32 5,041 Zee News Limited 128 Wire and Wireless (India) Limited 32 Essel Agro Limited 4,086 Balances as on March 31, Investments 46,599 1,533 1,510 Aplab Limted 46,599 Broadcast South Asia Limited 542,218 Essel Propack Limited 1500 1,500 Debtors – – 391,256 1,056,395 Dish TV India Limited 356,053 565,197 Essel Agro Limited 335,033 Loans /Deposit/ Advances given 2,362,971 1,745,615 Resource Software Limited 390,975 669,267 Delgrada Limited 1,111,482 797,436 Dish TV India Limited 364,959 – Wire & Wireless (India) Limited 495,555 –

103 (Rs./Thousand) Particulars Associates Other Related Parties Key Management Personnel Transactions with Related Parties 2007 2006 2007 2006 2007 2006 Share Application money received – – 26,800 26,800 Ganjam Trading Co. Private Limited 26,800 26,800 Convertible Debentures 40,000 40,000 Ganjam Trading Co. Private Limited 40,000 40,000 Loans and deposits received 3,975 12,932 244 Zee News Limited 3,943 – Buddha Films Limited 1,260 Essel Agro Limited – 7,547 Turner International India Limited 5,385 Mr. Subhash Chandra 244 Broadcasters/Principals pending remittances – – 1,294 Buddha Films Limited 1,294 Sundry Creditors 1,818 566,897 366,680 Zee News Limited – – 198,825 11,230 Broadcast South Asia Limited 1,740 Turner International India Limited 214,011 93,048 Real Media Limited 139,258 Guarantees Corporate Guarantees given – – 4,168,565 911,543 Dish TV India Limited – – 2,224,031 400,000 Wire & Wireless (India) Limited 1,585,870 – Pan India Network Infravest Private Limited – 444,171 Note: Name of the related parties has been disclosed where they have 10% or more of the aggregate for that category of transaction. 27. Segmental Information The Group follows AS-17 “Segmental Reporting” relating to the reporting of financial and descriptive information about their operating segments in financial statements. The Group’s reportable operating segments have been determined in accordance with the internal management structure, which is organized based on the operating business segments as described below. Broadcasting and content, which principally consists of developing, producing and procuring television programming and film content and delivering via satellites, thereby earning revenues by way of advertisement and subscription revenues and syndication. access, effective current year the Group has reconsidered recognizing Access segment seperately on the demerger of it’s cable & DCS business, hence the same is now merged into Broadcasting & Content segment. The relevent figures of last year are also re-grouped to show comparable position. Education, which principally consists of distribution of software learning products, imparting education and training in IT. Film Production and Distribution, which principally consists of production, acquisition and distribution of feature films, animation films and programs.

104 (a) Business Segment (Financial Year 2006-2007) Rs./Thousand Description B & C Film Education Others Elimination Total Production/ Distribution SEGMENT REVENUE External Sales 14,245,541 – 205,472 707,805 15,158,817 Inter-segment Sales 4,953 – – (4,953) – Total Revenue 14,250,494 – 205,472 707,805 (4,953) 15,158,817 SEGMENT RESULT 3,071,013 – 11,542 13,693 – 3,096,248 Operating Profit before 3,071,013 – 11,542 13,693 – 3,096,248 interest and Tax Profit on Sale of 37,104 Investments in Associates Loss on Sale of 22,889 Investments in Subsidiaries Interest Expenses (218,641) Interest Income 494,768 Profit before Tax 3,432,368 Exceptional Items Current Taxes - Current (923,032) year Deferred Tax Benefit/ (75,987) (Expense) - Current year Profit after Tax 2,433,349 Share in result of 9,867 associates Minority Interest (67,925) Net Profit 2,375,291 Business Segment (Financial Year 2005-2006) Rs./Thousand Description B & C Access Film Education Others Elimination Total Production/ Distribution SEGMENT REVENUE External Sales 12,752,702 2,053,604 11,535 154,111 1,772,971 (201,259) 16,543,664 Inter-segment Sales 11,290 – – 8,331 – (19,621) – Total Revenue 12,763,992 2,053,604 11,535 162,442 1,772,971 (220,880) 16,543,664 SEGMENT RESULT 2,598,329 35,021 (38,534) 3,818 34,814 (200,147) 2,433,302 Operating Profit before Interest and Tax 2,598,329 35,021 (38,534) 3,818 34,814 (200,147) 2,433,302 Profit on Sale of Investments in Associates 24.501 105 Rs./Thousand Description B & C Access Film Education Others Elimination Total Production/ Distribution Loss on sale of Investments in Subsidiaries (28,400) Interest Expense (120,780) Interest income – – – – – – 478,699 Profit before Tax 2,787,322 Exceptional items – – – – – – 19,366 Current Taxes – Current year – – – – – – (538,028) Deferred Tax Benefit/ (Expense) – Current Year – – – – – – (8,800) Profit after Tax – – – – – – 2,259,860 Share in result of associates – – – – – – (46,381) Minority Interest –––––– (70,692) Net Profit 2,142,787 (b) Other Segment Information (Financial Year 2006-2007) Rs./Thousand Description B & C Film Education Others Unallocated Elimination Total Production/ Distribution 1. Segment Assets 37,535,704 – 166,122 – 226,775 (2,445,460) 35,483,141 2. Segment Liabilities 10,584,799 – 149,738 – 969,981 (2,402,397) 9,302,121 3. Capital Expenditures 264,461 – 2,175 – – – 266,636 4. Depreciation 175,692 – 8,996 – – – 184,688 5. Non Cash expenditures 288,237 – 4,345 – – – 292,582 Other Segment Information (Financial Year 2005-2006) Rs. /Thousand Description B & C Access Film Education Others Unallocated Elimination Total Production/ Distribution 1. Segment Assets 33,361,745 1,934,183 51,469 133,018 90,073 426,514 (4,726,904) 31,270,098 2. Segment Liabilities 10,902,032 2,306,229 – 133,640 – 736,727 (4,094,706) 9,983,923 3. Capital Expenditures 469,143 255,456 – 28,262 – – – 752,861 4. Depreciation 219,132 131,595 – 8,926 – – – 359,653 5. Non Cash expenditures Other than Depreciation 382,837 224,082 – 5,435 – – – 612,355 Revenue by Geographical Market The geographical segments considered for disclosure are India and Rest of World. (a) The revenues are attributable to countries based on location of customers

106 Rs. /Thousand 2007 2006 India 8,686,172 11,026,112 Rest of World 6,472,645 5,517,552 (b) Segment assets and liabilities are disclosed based on the countries of incorporation of respective companies. Rs. /Thousand Net Assets Intangibles Capital Expenditures 2007 2006 2007 2006 2007 2006 India 11,226,016 6,349,523 33,173 48,126 206,353 685,308 Rest of World 1,720,963 3,436,611 12,934,232 10,699,053 60,283 67,553 28. Earning Per Share In accordance with AS-20 “Earnings Per Share” issued by ICAI, basic earnings per share are computed using the weighted average number of shares outstanding during the year. Sr. Particulars 2007 2006 a. Profit after Tax before Exceptional Item and discontinued/discontinuing 2,375,291 2,123,053 operations (Rs./Thousand) b. Profit after Tax after Exceptional Item and discontinued/discontinuing 2,375,291 2,142,786 operations (Rs./Thousand) Adjustment for the purpose of Diluted EPS: Add: Interest on Foreign Currency Convertible Bonds 5,285 25,193 Less: Tax on above 1,779 8,480 c. Profit after Tax before Exceptional Item and discontinued/discontinuing 2,378,797 2,139,767 operations for Diluted EPS (Rs./Thousand) d. Profit after Tax after Exceptional Item and discontinued/discontinuing 2,378,797 2,159,500 operations for Diluted EPS (Rs./Thousand) e. Weighted Average number of equity shares for Basic EPS (Nos.) 423,617,434 412,505,926 Add: Weighted Average outstanding option deemed to be issued for no – 22,246,658 consideration (Nos.) f. Weighted Average number of equity shares for Diluted EPS (Nos.) 423,617,434 434,751,670 Nominal value of equity shares (Re.) 1 1 g. EPS before Exceptional Item and discontinued/discontinuing operations (Rs.) 5.62 5.15 h. EPS after Exceptional Item and discontinued/discontinuing operations (Rs.) 5.62 5.19 i. Diluted EPS before Exceptional Item and discontinued/discontinuing 5.62 4.92 operations (Rs.) j. Diluted EPS after Exceptional Item and discontinued/discontinuing 5.62 4.97 operations (Rs.) 29. Comparability (a) Previous years figures have been regrouped, rearranged or recasted wherever necessary to conform to this year’s classification. Current year Balance Sheet Figures are not comparable due to restructuring. (Refer Note 17). Figures in brackets pertain to previous year. (b) The CFS of the current year include the Financial Statements of Taj Television India Private Limted, Taj TV Mauritius Limited, Zee Sports International Limited, Zee Sports America Limited, Zee Technologies (Guangzhou) Limited hence not comparable.

107 CONSOLIDATED CASH FLOW STATEMENT AS AT MARCH 31, Rs. ’000 2007 2006 A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit before taxation, after exceptional items 3,432,367 2,806,689 adjustments for: Depreciation 184,688 359,653 Share Issue and Preliminary Expenses written off 129 75 Deferred Revenue Expenditure written off 9,858 38,970 Provision for doubtful debts and advances 276,289 476,310 Loss on sale of Fixed Assets 6,306 124,903 Profit on sale of Investments (60,815) (31,306) Loss on sale of Investment in subsidiary – 35,204 Calls in Arears and Share Premium Adjusted 202 – Exchange adjustments (net) (79,885) 152,433 Interest expense 218,641 120,780 Dividend income (13,879) (10,564) Interest income (494,768) (478,699) Operating profit before working capital changes 3,479,133 3,594,448 Adjustments for: Increase in Trade and Other Receivables (2,862,943) (4,091,173) Decrease/(Increase) in Programs/Film Rights and Inventories 465,458 (548,463) Increase in Trade and Other Payables 1,911,480 689,459 Cash Generated from Operations 2,993,128 (355,729) Direct taxes paid (1,279,384) (755,347) Net Cash flow from Operating Activities 1,713,744 (1,111,076) B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets/CWIP (460,146) (383,132) Acquisition of subsidiary (2,571,906) (125,520) Purchase of Investments (504,350) (1,686,340) Investment in associate – (65,749) Loans to others (9,067,656) (8,739,231) Loans repaid by others 6,286,537 8,638,362 Dividend received 17,182 12,942 Sale of Fixed Assets 298,009 21,456 Sale of Investments in associates 633,005 535,413 Sale of Investments in subsidiary 23,359 21,200 Sale of Investments 614,275 1,818,114 Interest received 451,555 475,363 Net Cash flow from Investing Activities (4,280,136) 522,878

108 Rs. ’000 2007 2006 C. CASH FLOW FROM FINANCING ACTIVITIES Dividend paid (including dividend tax) (498,461) (478,243) Interest paid (235,554) (111,595) Increase/(decrease) in Minorities Interest 292,522 (7,281) Proceeds from short term borrowings 6,943,346 859,115 Proceeds from long term borrowings 848,792 1,637,772 Repayment of short term borrowings (5,140,034) (100,030) Repayment of long term borrowings – (1,473,734) Proceeds from Convertible Debentures – 40,000 Decrease in the other vehicle loans (1,377) – Payment under finance leases (249) (349) Net Cash flow from Financing Activities 2,208,985 365,655 Net Cash Flow during the year (A+B+C) (357,407) (222,543) Cash and Cash Equivalents at the beginning of the year 1,285,643 1,570,684 Cash and Cash Equivalents on acquisition of subsidiary 40,797 13,882 Cash and Cash Equivalents transferred as per Scheme of Arrangement 14,281 (76,380) Cash and Cash Equivalents at the end of the year 954,752 1,285,643 Notes to the Cash Flow Statement For the year ended March 31, 2007 1. Previous year’s figures have been regrouped, recast wherever necessary. 2. The Scheme of Arrangement and conversion of FCCB [Refer Note 14 and 17(b) of Notes to Accounts respectively] have not been considered in the above cash flow statement being non-cash transactions. 3. Sale of fixed assets includes Rs./Thousand Nil (400,107) being sale/transfer of facility relating to production, gathering, editing and uplinking of news and current affairs programming. 4. Cash and Cash Equivalents at the end of the year: 2007 2006 Cash in hand 7,791 3,106 Balances with Scheduled Banks in Current Accounts 919,784 943,609 Balances with Scheduled Banks in Deposit Accounts 6,022 140,247 Balances with Non Scheduled Banks in Current Accounts 941 135,654 Cheques in hand/transit 20,214 63,027 Total 954,752 1,285,643

As per our attached report of even date For and on behalf of the Board

Mohan Bhandari Subhash Chandra Chairman Partner Punit Goenka Whole-time Director

For MGB & Co. Nemi Chand Jain Director Chartered Accountants Hitesh Vakil Director - Finance Place: Mumbai Date: June 27, 2007 M Lakshminarayanan Company Secretary 109  ZEE ENTERTAINMENT ENTERPRISES LIMITED Registered Offi ce : Continental Building, 135, Dr. Annie Besant Road, Worli, Mumbai – 400 018. ATTENDANCE SLIP 25th Annual General Meeting

I hereby record my presence at the 25th Annual General Meeting of the Company at Auditorium, A Wing, Ground Floor, National Stock Exchange of India Limited, Exchange Plaza, Plot No. C-1, G-Block, Bandra-Kurla Complex, Bandra (E), Mumbai - 51 on Friday, August 17, 2007 at 11.30 a.m.

...... Name of the Shareholder/Proxy (in BLOCK LETTERS) Signature of Shareholder/Proxy

Folio No......

DP ID No......

Client ID No......

No. of Shares ......

NOTE : Shareholder/Proxy holder wishing to attend the meeting must bring the Attendance Slip to the meeting and handover the same at the entrance, duly signed. 

ZEE ENTERTAINMENT ENTERPRISES LIMITED Registered Offi ce: Continental Building, 135, Dr. Annie Besant Road, Worli, Mumbai – 400 018. PROXY FORM 25th Annual General Meeting

I/We ...... of ...... being member/members of ZEE ENTERTAINMENT ENTERPRISES LIMITED hereby appoint ...... of...... or failing him/her ...... of ...... as my/our proxy to vote for me/us on my/our behalf at the 25th Annual General Meeting of the Company to be held on Friday, August 17, 2007 at 11.30 a.m. at Auditorium, A Wing, Ground Floor, National Stock Exchange of India Limited, Exchange Plaza, Plot No. C-1, G-Block, Bandra-Kurla Complex, Bandra (E), Mumbai - 51 and at any adjournment(s) thereof. Signed this...... day of ...... , 2007.

Signature of Shareholder ...... Re. 1/- Revenue Folio No...... Stamp DP ID No...... Client ID No...... No. of Shares ......

NOTE: The Proxy completed in all respects must be deposited at the Registered Offi ce of the Company not less than 48 hours  before the commencement of the Annual General Meeting.