SANSCO SERVICES - Annual Reports Library Services - www.sansco.net mUKTA ARTS LIIT1ITED M. F. Husain's tribute to 1QBAL ANNUAL REPORT For the Year Ended March 31" 2006 www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net CONTENTS Financial Highlights 3 Chairman's Statement 4 Management Discussion & Analysis 6 Notice 9 Directors' Report 11 Corporate Governance 15 FINANCIALS Mukta Arts Limited 23 Consolidated Financial of Mukta Arts Limited & it's Subsidiaries 41 Whistling Woods International Limited 54 Mukta Arts International Limited 66 Mukta Tele Media Limited 74 www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net BOARD OF DIRECTORS Mr. Subhash Ghai, Chairman & Managing Director Mr. Parvez Farooqui, Executive Director Mrs. Meghna Ghai Puri Mr. Anil Harish Mr. Vijay Choraria Mr. Pradeep Guha Company Secretary & Compliance Officer Mr. Ravi B. Poplai Auditors M/s Shamit Majmudar Associates Chartered Accountants Bankers Punjab National Bank Limited HDFC Bank Limited Standard Chartered Bank Registrar & Transfer Agents Intime Spectrum Registry Limited C-13, Pannalal Silk Mills Compound L.B.S. Marg, Bhandup (W) Mumbai - 400 078 Registered Office 6, Bashiron, 28th Road TPS - III, Bandra (W) Mumbai - 400 050 www.reportjunction.com SF/RVTf F.S - Annual Rpnnrtg T.ihrarv - www npt PERFORMANCE Performance at a glance Rupees in millions Year Year Period Period Year ended ended ended ended ended 31st 31st March, 31st March 31st March 31st March December 2006 2005 2004 2003 2001 15 months Realisation from productions 374.80 451.44 187.00 286.02 339.33 distribution & exhibition Equipment Hire Income 25.09 28.60 29.84 39.74 44.03 Other Income 36.12 31.59 96.89 101.74 119.86 TOTAL INCOME 436.01 511.63 313.72 427.49 503.22 ProfiV(Loss) before Interest, Depreciation and Tax (27.15) (134.86) 88.36 112.80 178.65 Depreciation 29.98 32.14 29.61 40.19 29.06 Interest 0.60 0.56 0.30 0.50 0.62 Profit/Loss) before Tax (57.73) (167.56) 58.45 72.11 148.97 ProfiV(Loss) after Tax (56.46) (169.67) 33.93 71.32 138.97 Dividend - - 22.58 45.16 33.87 Dividend Rate - - 20% 40% 30% Gross Fixed Assets 369.84 361.98 343.82 308.74 252.65 Net Fixed Assets 184.06 204.73 216.14 198.68 182.76 Total Assets 1,195.53 1,144.66 1,314.89 1,305.22 1,292.43 Equity Share Capital 112.92 112.92 112.92 112.92 112.92 Reserves and Surplus 975.25 1,029.60 1,199.55 1,191.10 1,177.48 Net Worth 1,088.17 1,142.52 1,312.47 1,304.02 1,290.40 Earnings per Share (EPS) In Rupees EPS Basic - - 1.50 3.16 6.15 EPS Adjusted to Rs. 5 - - 1.50 3.16 6.15 www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net CHAIRMAN'S STATEMENT They say it's always darkest before dawn. We are today facing the new dawn of the Company. I am fully aware that you, the shareholders, have not been too happy with the company's performance in 2004-2005 despite the top line in the year being the highest ever for the Company. We now see the light at the end of the tunnel, or the first light of dawn. Not only has the current year been a major improvement over the previous year but the upward trend has begun and I assure you that it will only keep getting better from here on. The year under review was one during which we worked towards getting out of the bad patch we had hit and managed to consolidate our operations, increased bandwidth of human resources to handle larger volumes of production and distribution and put on stream five new films. The Company is now poised to produce and distribute at least four films every year. The challenge will lie in sustaining and further increasing this bandwidth. The Company's film library has now grown to a respectable 22 films which adds significant intellectual property and value to the Company. This includes our most recent movie '36 China Town' in May 2006 which was an instant hit at the box office. During the year with the focus on building long term strengths of the Company to put in place the much needed bandwidth of creative and management personnel and resources, we could only release one film "Iqbal". "Iqbal" won several prestigious awards and received five star ratings from critics across the board, a very rare occurrence in Indian cinema. "Iqbal" inspired institutions, NGO's and opinion makers to appreciate Mukta Arts' contribution to bring into focus the problems of the underdog and kindling the spirit of 'Hum Honge Kamiyab' among the youth of the nation and the less privileged. The message was clear "No hurdle is too hard to cross, and no handicap too difficult to overcome", if there is determination and a strong will. NCERT has even decided to introduce "Iqbal" as part of the education curriculum. "Iqbal" has been screened in several film festivals around the world including Reel World Film Festival (Toronto), KARA International Film Festival 2005, South Asian Human Rights Film Festival (New York) 2006, IFFA (Dubai) 2006, Times NIE, Children's Film Festival 2006, IFFI Goa 2005, Sports Movies & TV- Mumbai International Festival and is one of the very few films from India that received a grant from the UK Film Council for distribution of the film in the UK. With Iqbal, the Company once again established its Brand as a quality film producer. The films that were under production during the year included "Shaadi Se Pehle", "36, China Town", "Apna Sapna Money Money" and "Good Boy Bad Boy". "Shaadi Se Pehle" was completed during the year but since the film was ready only in January 2006 we did not deem it appropriate to release it in February/March the student examination period. The financial results consequently indicate a lower top line and bottom line as the revenues and profits of "Shaadi se Pehle" were pushed to the next Financial Year. During the year, we also made a major breakthrough in signing up with Zee TV to produce a film for them wherein the Company is able to retain IPR of the film except for television and satellite rights. The Company has in the past introduced a lot of new talent to the industry and is now introducing '™$f?<T"'!!p www.reportjunction.com - Anmi.il Ropni-fg T ihi-tiry Soii/Wc - WKU™ gang™ not Zee's 'India's Best' winners of last year in the film being produced for Zee tentatively titled "Raasta Pyaar Ka". The film will be ready for release in October 2006. During the year the Company managed to step up its distribution and exhibition activity which now accounts for over 50% of its revenues. Among the major films released by the Company in some territories apart from its own produced films are "Paheli", "Harry Potter", "Family", "Waqf, 'Garam Masala", "Iqbal", 'Ek Ajnabi', 'Barsaaf, "Taj Mahal" and others. During the Year the Company shows a deficit of about Rs. 56.46 millions which needs to be viewed keeping in mind the payment of the installment of Rs. 39.20 millions on the Keyman Insurance, which is booked as expenditure. Also with depreciation of Rs 29.98 millions, there has been no cash loss this financial year, but we realize this is not good enough. By increasing our bandwidth of production and taking steps to de-risk distribution by judiciously combining part-distribution part-sales of territories for all our forthcoming films we have ensured that results of the Company's top line and bottom line would be much healthier in the years ahead. Among the major decisions during the year were closing down the Audeus Studio that was showing recurring losses and entering into an agreement for development of the Audeus property into a commercial complex. This will ensure that unlocked value of this property will be released and losses of Audeus will cease. The Company also decided to exit Mukta Adlabs Digital Exhibition Pvt. Ltd. the loss making joint venture with Adlabs, so to deploy the capital more productively. During the year our focus was also on completing the Whistling Woods International project. I am happy and proud to let you know that we have successfully completed this project despite many hurdles and as the pool of talent from this Institute emerges we would both quantitatively and qualitatively enhance our output accomplishing the vision and goal set for ourselves. The Institute has commenced and has received very good response from the student community, media and educationists. The Institute is expected to show profits by year two. The Institute would be a landmark Institute in Film, Television, Animation and Media Arts studies in Asia and would be comparable to the best anywhere in the world. We have tied up with global technology players and other partners to introduce the best technologies. These include Nvidia, Sony, AMD, Sennheiser, Mackie. We have also introduced, ahead of plan, the Animation Programme, as we expect animation skill needs to grow rapidly in India, and have affiliated with SENECA, the internationally renowned Canadian college that is highly respected for its animation programmes worldwide. In fact, its film 'Ryan' won the Oscar for best animated short film in 2005. In the years to come its alumni would be a force to reckon with and the goodwill enjoyed by Mukta Arts and Whistling Woods International could then be cashed.