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H1UKTA ARTS LlffllTED

mUKTA ARTS LHTUTED

ANNUAL REPORT for the year ended 31st March 2009

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BOARD OF DIRECTORS

Mr. , Chairman & Managing Director Mr. Parvez A. Farooqui, Executive Director Mr. Rahul Puri, Executive Director Mr. Anil Harish Mr. Vijay Choraria Mr. Pradeep Guha

Company Secretary & Compliance Officer Mr. Ravi B Poplai

Auditors M/s Shamit Majmudar Associates

Internal Auditors M/s EDO Haribhakti Consulting Pvt. Ltd.

Bankers Punjab National Bank Limited HDFC Bank Limited IDBI Bank Limited Kotak Mahindra Bank Limited

Registrar & Transfer Agents Link Intime Private Limited C-13, Pannalal Silk Mills Compound L.B.S. Marg, Bhandup (W) - 400 078

Registered Office 6, Bashiron, 28th Road TPS-III, Bandra(W) Mumbai - 400 050

CONTENTS Financial Highlights 2 Chairman's Statement 3 Management Discussion & Analysis 5 Notice 7 Directors' Report 9 Corporate Governance 13 FINANCIALS Mukta Arts Limited 21 Consolidated Financial of Mukta Arts Limited & it's Subsidiaries 39 Whistling Woods International Limited 52 Connect. 1 Limited 73 K. Mukta Tele Media Limited 82 1 Coruscant Tec Private Limited 92

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PERFORMANCE Performance at a glance Rupees in millions Year ended Year ended Year ended Year ended Year«rtded 31st March 31st March 31st March 31st March 31stMansh 2009 2008 2007 2006 2005

Realisation from productions, 1,651.04 1,094.66 965.21 374.80 451.44 distribution & exhibition

Equipment Hire Income 7.30 12.07 2.22 25.09 28.60

Other Income 19.16 24.93 49.12 36.12 31,59

TOTAL INCOME 1,677.50 1,131.66 1,016.55 436.01 511.63 Profit/(Loss) before Interest,

Depreciation and Tax 89.27 166.41 167.04 (27.15) (134.88)

Depreciation 18.89 17.64 22.64 29.98 32.14

Interest 9.60 0.43 0,63 0.60 0.56 Profit/(Loss) before Tax 60.78 148.34 143.77 (57.73) (167.56)

Profit/(Loss) after Tax 41.01 130.30 137.16 (56.46) (169.67)

Dividend 22.58 45.16 45.16 - -

Dividend Rate 20% 40% 40% - • -

Gross Fixed Assets 407.89 364.48 313.31 369.84 361.98

Net Fixed Assets 211.62 187.10 157.09 184.06 204.73

Total Assets 1,547.59 1,402.21 1,279.66 1,195.53 1,144.66

Equity Share Capital 112.92 112.92 112.92 112.92 112,92

Reserves and Surplus 1,152.97 1,138.38 1,060.92 975.25 1,029.60

Net Worth 1,265.89 1,251.30 1,173.83 1,088.17 1,142.52 Earnings per Share (EPS)

In Rupees

EPS Basic 1.82 5.77 6.07 - -

EPS Adjusted to Rs. 5 1.82 5.77 6.07 - -

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CHAIRMAN STATEMENT 2009

It has been a tough year for business in almost all sectors and all segments of industry. Although some believe that the industry is recession proof, this is not fully true. The financial cycle of production has been affected and has led to a slow down at the trade level, although consumer confidence in good continues unabated. The spiraling costs of 'A' listed stars and related production costs have resulted in margins being completely eroded with greatly increased risks of film making. The industry has realized its mistake, undergone a reality check and a correction. Mukta Arts Ltd, inspite of strong fundamentals and consistent performance, has also been affected by these economic conditions. In addition, the strike lasting from April - June 2009 has affected the business, margins & profitability of our films. In last three years financial years of 2006-07, 2007-08 & 2008-09, Mukta Arts has been able to generate good profits and to pay dividend in the range of 20% to 40%. At present, we have three movies ready for release and three new projects in the pipeline to be launched later this year including movies to be directed by Abbas-Mastan, Subhash Ghai and a newcomer, Vishnu Shyamaprasad. Mukta Arts is proud to have active film distribution offices across India. Although the Exhibition business added substantially to the top line of the Company, it affected the profitability of the Company due to a wafer thin profit margin. Hence, the Company took a prudent business decision to reduce the exhibition services to multiplexes where our investments were in excess of our profits last year, We continue to run this business, albeit at 40% of the volume as it was last year. We are however, working towards consolidating our Distribution business to make it stronger. The positive side of an otherwise difficult year is that we showed our best performance in terms of the top line crossing Rs.165 crores. This is a growth of about 50% of over the previous year top line. During the year, we released two films "Sanai Choughade" and "Yuwraaj". Although two other films were almost complete and could have been released in the last quarter of the year, we chose not to do so owing to the IPL timing and impasse between the producers and multiplex operators over the revenue share dispute. We still have three films in the pipeline (apart from "Paying Guests" released in June 2009) but I have decided to go slow on the production given the current external trade environment. As Warren Buffet said "Sometimes it's best not to do anything and just go out and play golf". I do not play golf, so I am going to do what I love most, write scripts. So I am going to do just that and maybe it will pay off very well in years to come. As a cost cutting exercise, the Mukta Arts offices will be shifted to the Communication Centre which is located opposite to WWI once the same is complete, Mukta will be housed in the top floor of this beautiful building. The Communication Centre is expected to be complete by September and we may brand it as MUKTA/SG HOUSE. This exercise will consolidate all the Mukta Arts activities under one roof. This would also release the office space in Bandra for sale, redevelopment or lease. During the year, the Audeus complex was completed. However given the difficult Real Estate phase, the offers coming our way are below our expectation. We would rather wait and go with the right party at the right time for the right price, rather than rush into a distress deal. The Company exited completely from its subsidiary, Red Carpet Films Limited as the Company did not have the administrative control on the same and the management decided rather to concentrate more on its own business. Accordingly shares were sold off to the promoters of Red Carpet films at par. The film "Paying Guests" directed by Paritossh Painter starring Shreyas Talpade, Chunky Pandey, Ashish Chaudhary, Javed Jafferey, Vatsal Seth, Celina Jetley, Neha Dhupia, Riya Sen, Sayali Bhagat, Johny Lever and others has already been released theatrically worldwide on 19th June 2009 immediately after the strike by the Producers and Distributors was called off, Although the film has not fared well theatrically but we are sure to recover further out of Satellite Rights, Terrestrial Rights, Home Video Rights etc. The other films in pipeline are "Hello Darling" directed by Manoj Tiwari starring Isha Koppikar, Celina Jaitley, Gul Panag, Javed Jaffrey and others, "Right Yaaa Wrong" directed by Neeraj Pathak starring Sunny Deol, Irrfan Khan, Isha Koppikar, Konkona Sen Sharma and others, and a Bengali Film "Nouka Dubi" directed by Rituparno Ghosh. On the Whistling Woods International front there has been a lot of development with three batches now having graduated from this prestigious Institute. The Second Convocation was held recently and Lord Bhiku Parekh, a well known economist, was the Chief Guest. The industry feedback on the graduate students has been very positive. The intake of students has been satisfactory. We have taken some new initiatives during the year. Among those that have taken off the ground is an MBA Programme in Media Management which was launched last year with Manipal University. This year the students of the first MBA batch will be spending a year with WWI to do their industry exposure and projects. We have finalized a similar proposal with Manipal, Dubai which launches the MBA in Media Management this year and their students would come to Whistling Woods International starting next year.

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We have also finalized a TV Broadcast Studies Programme and put in place the curriculum and faculty. The media launch took place in June in the presence of the TVBS Academic Advisory Board members. This is a one year programme and is focused on Television and Radio giving the students exposure to creative and business aspects of Broadcasting. We have also finalized another major international initiative with Centre of Education Ciudad- de la Luz(CDLL), a state of the art Film School based in the Film City of Alicante on the Mediterranean Sea and promoted by the Valencian Provincial Government. This agreement will allow us to launch Whistling Woods International programmes in Spain. CDLL is Europe's largest Film City and the most modern film school. Since CDLL's infrastructure meets the standards of WWI, we are happy that students will now have a choice and be able to pursue WWI film making programme internationally. It will also put WWI on the international map. The management is currently in negotiations with some schools in Hollywood this will further add value to students' skill sets leading to WWI students getting a global exposure and perspective. I strongly believe that in years to come WWI will be an internationally leading film school and a fountainhead of film and TV technicians in India. I can be proud that I could in my own way make this possible with the support of my shareholders. The ongoing activities of WWI continued successfully and these included international University students from Syracuse University- USA coming for one month to WWI, a few Deakin University- Australia students doing a part of their learning at WWI and our own WWI students doing a joint production programme in Bradford- UK with the students of Bradford University under the UKIERI grant. The celebrities who visited the WWI campus for master classes workshops and goodwill visits included Lord Bhiku Parikh, Danny Boyle, Dan Wolman, Sooni Taraporewala, Ketan Mehta, Vipul Shah, Shelley Page, Michael Peyser, Barrie Osbourne, Umesh Kulkarni, Vishal Bharadwaj, Rishi Kapoor, Farhan Akhtar, Ritesh Sidhwani,, Jaya Bachchan, Dharmesh Darshan, Santosh Sivan, Amole Gupte, Pankaj Kapur among others. We were happy to have organized an evening for the Consul Generals of all countries based in Mumbai, to give them a look and feel of what WWI is doing, so that it could lead to possible tie-ups with Universities/ Institutes in their countries. The idea is to make WWI more international. Most Consul Generals highly appreciated the vision of the WWI and its infrastructure and promised to carry the message to the students and Institutes in their respective countries. Post the exit of Kurt Inderbitzin, former Dean of WWI, we scouted for and appointed John Lee Jr. as the new Dean. John Lee has published a book "The Producers Business Handbook" which is widely used in US universities by students studying film production. With the paucity of good acting talent, I have been thinking in terms an initiative to set up an Actors Studio as a specialized wing of WWI so as to scale up this activity. I hope to launch the Actors Studio next year. I can assure you that despite the slowdown in the economy and its consequence on raising funds, selling or distributing films etc, I am committed to push our vision and agenda and make Mukta a formidable company. We may need to tide over tough times for a year or two but we will emerge stronger once some of the initiatives we are taking start showing results. 1 thank all my shareholders for staying with me through thick and thin and value your being part of an adventurous journey.

Subhash Ghai

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MANAGEMENT DISCUSSION AND ANALYSIS Industry Performance: The Entertainment Industry was projected to grow between 12-15% with sectorwise growth varying between 8-18%. In the absence of consolidated data, it is not quite clear whether this growth has been achieved. Even under the current economic scenario, however it is likely that the growth in the Entertainment Sector may outstrip GDP growth which is slid down to 5%. The developments that have hurt the industry and resulted in the slowdown include: a) The economic slowdown led to reduced ad spend and hence lower consumption of ad time as also decline in rates of ad time which in turn has affected revenues of many TV channels. Margins of TV Producers are in turn under pressure and many television companies are struggling for survival. b) The affect of the TV industry at the trade level has certainly affected its modalities of operations and GEC and Movie channels have moved to syndication of Movie rights as a means of cutting costs. This has resulted in values of libraries dipping significantly and prices of new movies for satellite rights heading southwards. c) The price war in the DVD market and the strategy of rock bottom prices offered by a new entrant into this space, has totally eroded margins in DVD market and affected prices offered for DVD rights. d) The free availability of internet downloads for audio tracks has almost completely wiped out the physical format market with the only silver lining being the mobile downloads. e) The failure of some of the animation movies which had raised high hopes has spoilt the animation party and although a spate of animation movies had been announced, many have either slowed down production or shelved the project. f) While the growth in the DTH market continued, the subsidy on set top boxes is bleeding DTH operators who are having a tough time containing operational losses. g) Procedures who had announced movies with big stars and those who had signed them up at huge prices are now facing significant losses in the absence of corporate support Distributors are backing out from high pay outs with movie after movie failing at the Box Office. h) FM Radio continued to be stable. However with more licenses likely to be issued the competition will only increase. i) Despite the economic environment the applications for new TV licenses have continued and the government has cleared a number of licenses recently. Whether these channels would finally be launched remains to be seen. j) It has been a challenge for the management, given the rapid change in the business environment, to keep its feet firmly on the ground to ensure the winds of change do not blow it off while keeping its eyes on the horizon. During the year, the Company has shown profits and ended the year with the highest turnover ever and almost a 50% growth in the top line. The Company showed good profits in movie production; however it did lose in distribution and exhibition business for multiplexes which has continued to have problems owing to pressures on its already thin margins. k) The hard negotiations between the multiplex owners and movie producers finally ended the stalemate over revenue share. The pressure on the cost controls and revenues was seen in the struggle between multiplexes and movie producers for a bigger pie in the Box Office revenues. The issue came to the front owing to the changed economic scenario. The pressures on the booking margins in exhibition has virtually disappeared and the Company has decided to roll back from this business and hence in the forthcoming year the top line may affect since the booking business constituted a significant component of the top line. Among the other initiatives taken by the Company to buffer the downturn of the economy included withdrawal from Red Carpet Films (RCF). The Company had invested in acquiring a majority stake in RCF expecting to additional mid budget film production activities. However due to its unability to have administrative control over RCF, the Company decided to sell off its share and instead concentrate on its own activities. The Company also with a view to cut down its overheads has decided to move its offices to the Communication Centre which is located opposite WWIL. Once the same is complete, Mukta will be housed in the top floor of this beautiful building. The Audeus complex is ready but we have not been able to find a buyer or lessee at a price acceptable to the Company. We may have to wait a while longer to be able to sign an acceptable deal. We also plan to lease out the Communication Centre except the top floor which will house the Mukta Arts' offices. At the end of the year Ravi Gupta- CEO Mukta Arts Limited who completed his tenure opted not to continue further in a full time capacity. The Company has renegotiated and engaged him in an advisory and consultancy capacity allowing him flexibility. The Company appreciates the contribution of Ravi Gupta to the growth of the Company during his tenure as CEO.

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Review of Operations: During the year the following two movies were released "" starring Anil Kapoor, Salman Khan, Katrina Kaif, Zayed Khan and others, "Sanai Choughude" starring Sai Tamhankar, Subodh Bhave, Tushar Dalvi, Shilpa Tulaskar and others. The following movies are nearly complete "Right Yaaa Wrong" starring Sunny Deol, Irrfan Khan, Konkona Sen Sharma, Ishaa Koppikar and others, "Hello Darling" starring Celina Jaitley, Isha Koppikar, Gul Panag, Javed Jaffrey and others. The Company has however decided to delay the release of these movies awaiting an improvement in the environment. Film "Paying Guests" starring Shreyas Tlpade, Ashish Chaudhary, Javed Jafferey, Vatsal Seth, Celina Jetley, Neha Dhupia, Riya Sen, Sayali Bhagat, Chunkey Pandey, Johny Lever etc was released on 19th January 2009. The Company touched a turnover of Rs. 167 crores showing nearly a 50% growth in the top line. The bottom line would have been much better but for the distribution losses and the eroding business margins in the exhibition bookings. Distribution and Exhibition: While the Company did grow significantly in distribution and exhibition, the risk in distribution and negligible margins in exhibition has compelled the Company to roll back in the multiplex booking business. Among the movies distributed in the year were "Slumdog Crorepati", "Singh is Kinng", "8X10 Tasveer", "Saas Bahu aur Sensex", "Dasvidaniya", "Firaaq", "Shoot on Sight", "Quantum of Solace", "Milk", "The Reader", "Australia" etc. Whistling Woods International (WWI): During the year, WWI showed good growth and its student community continued to increase. A new course in Broadcasting specializing in Production, Business Management and Operations was also announced at a press conference. The second year students of the Manipal University moved into WWI in July 2009. In the forthcoming year we can expect a slow down in the Company, and we need to ride out the rough waves rather than attempt anything adventurous. We would use this time to restructure and plan for the year ahead. During the year the Company acquired Coruscant Tec Pvt. Limited with the intention of entering into the mobile VAS space as the Company has access to a large library of audio and video content. However it is premature to expect any significant earnings in this business. The Company had earlier acquired 51 % of Coruscant Tec Pvt. Limited and the balance 49% option is due to Mukta Arts Limited. Mukta Arts Limited hopes that over a period of time Coruscant Tec will help Mukta Arts Limited penetrate into the mobile VAS space as content providers to Telcos.

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NOTICE Notice is hereby given that the 27th Annual General Meeting of Mukta Arts Limited will be held on Saturday, the 26th of September, 2009 at 4.00 p.m. at the Whistling Woods Institute Auditorium, Dada Saheb Phalke Chitra Nagari, Goregaon (E), Mumbai- 400 065 to transact the following business: Ordinary Business: 1 To receive, consider, and adopt the audited Profit and Loss Account of the Company for the year ended 31st March, 2009 and the Balance Sheet as at that date together with the Director's Report and Auditor's Report thereon. 2 To appoint Director in place of Mr. Anil Harish, who retires by rotation and, being eligible, offers himself for reappointment. 3 To consider and declare the interim dividend as Final Dividend and pass the following resolution as an Ordinary Resolution: "RESOLVED THAT interim dividend at the rate of 20% on the paid up capital share capital of the Company, paid by the Board of Directors as interim dividend of the Company during the year, at the meeting held on 20th January, 2009 be and is hereby declared as Final dividend for the year ended 31st March, 2009." 4 To consider and pass with or without modifications, the following resolution as an Ordinary Resolution: "RESOLVED THAT pursuant to section 224 of the Companies Act, 1956 M/s. Shamit Majmudar Associates, Chartered Accountants, Mumbai, be and are hereby appointed as the Statutory Auditors of the Company to hold office from the conclusion of the Twenty- seventh Annual General Meeting until the conclusion of the Twenty-eighth Annual General Meeting, on such remuneration as may be approved by the Board of Directors." Registered Office: By Order of the Board 6, Bashiron, 28th Road TPS - 111, Bandra (W) Ravi B Poplai Mumbai - 400 050 Company Secretary

Place: Mumbai Date: 31st July 2009 NOTES: 1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY / PROXIES INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY. THE PROXY FORMS, TO BE EFFECTIVE SHOULD BE DEPOSITED AT THE REGISTERED OFFICE OF THE COMPANY NOT LATER THAN 48 HOURS BEFORE THE COMMENCEMENT OF THE MEETING. 2. The Register of Members and Share Transfer Books of the Company will remain closed from Saturday, the 19th September, 2009 to Saturday, the 26th September, 2009 (both days inclusive). 3. Members seeking any information or clarification on the Accounts are requested to send in written queries to the Company, at least seven days before the date of the meeting. Replies to such written queries received, will be provided only at the meeting. 4. Members/proxies should bring the Attendance Slip sent herewith, duly filled in, along with the Annual Report for attending the meeting. 5. Dividends pertaining to Financial Years 2001-02 have been transferred to Investor Education and Protection Fund, in pursuance to Section 205A to Section 205C of Companies Act, 1956. 6. Dividends pertaining to Financial Years 2002-03, 2003-04, 2006-07, 2007-08 and 2008-09 which remain unclaimed for a period of seven years will be transferred to Investor Education and Protection Fund, in pursuance to Section 205A to Section 205C of Companies Act, 1956. The actual dates on which the transfers will be made are provided in the Corporate Governance Report for reference. Members who have, till date, not encashed their dividend warrants for these years are advised to claim the dividend from the Investor Services Department at the Registered Office of the Company at the earliest. Once unclaimed dividends are transferred to the Investor Education and Protection Fund, Members will not be entitled to claim these dividends. Registered Office: By Order of the Board 6, Bashiron, 28th Road TPS-III, Bandra (W) Ravi B Poplai Mumbai - 400 050 Company Secretary Place: Mumbai Date: 31st July 2009

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ANNEXURE TO NOTICE Brief profile of Mr. Anil Harish, who retires by rotation and is eligible for re-appointment. Mr. Anil Harish started off with an education from Mumbai's premier schools and colleges and finally obtained his LLM from the University Of Miami, USA. Today he is one of the leading legal experts on matters relating to taxation, property transactions, and the Foreign Exchange Management Act. He is President of Hyderabad (Sind) National Collegiate Board and is a member of the Managing Committee of Indian Merchants Chamber and is a Director of a number of Companies

By Order of the Board

Ravi B Poplai Company Secretary Place: Mumbai Date: 31st July 2009

Note: A Company bus will be available outside Goregaon (East) Station to carry the shareholders to the AGM venue, till 3.30 p.m. Also BEST buses route no. 343 are available on a regular basis.

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DIRECTORS' REPORT To the Members, Your Directors take pleasure in presenting the Twenty-Seventh Annual Report and Audited Statement of Accounts of the Company for the Accounting year ended 31st March, 2009: Financial Results: (Figures in millions) Year ending Year ending Particulars 31.03.2009 31,03.2008 (Rs.) (Rs.) Profit before interest, depreciation & tax 89.27 166.41 Less; Interest 9.60 0.43 Profit after interest, before depreciation & tax 79.67 165.98 Less: Depreciation 18.89 17.64 Profit before tax 60.78 148.34 Less : Provision for taxation 19.00 12.18 Fringe Benefit Tax .88 5.57 Deferred Tax Liability/(Asset) (0.11) 0.29 Profit available for appropriation 41.01 130.30 Less: Interim Dividend 22.58 45.16 Tax on Interim Dividend 3.84 7.68 Profit for the year 14.59 77.46 Add: Balance brought forward 106.78 29.32 Profit Carried forward to Balance Sheet 116.37 106.78

Dividend The Company has declared Interim Dividend of 20%, viz. Rs. 1/- per share on 20lh January, 2009 and distributed the same on 10th February, 2009. The Board of Directors has considered the interim dividend paid as the final dividend for the financial year ended 31st March 2009. Company's Performance During the year the total revenues of the Company rose to Rs.1.68 Billion as compared to Rs. 1.13 Billion of last year showing a top line growth of about 49%. The Company's performance has been discussed in the Management Analysis in details. New Initiatives Mukta Arts Ltd. during the year had acquired 51% controlling stake in Coruscant Tec Private Limited with option on the balance shares under a performance linked formula. Coruscant Tec, founded in 2003, a Chennai based VAS Company was one the first companies to venture into the lucrative mobile value added services space (MVAS) and provide content and applications related to the fast growing MVAS space. These cover ringtones, wallpapers, Video on Demand, applications, m-comics, mobizines, mobiepisodes and Java games. Coruscant is a Red Herring award winner in 2006 and has done innovative work in MVAS such as MF Hussain wallpapers, Uncle Pai comics, aggregation of Java games, repurposing magazine content for the mobile, etc. Coruscant Tec has a few tie ups in place for content aggregation as well as for distribution of content through Telcos. The Company is undercapitalized and was seeking investors who could create and aggregate content which is the key to this business. For Mukta Arts Ltd. which has access to short content created by Whistling Woods students and Audio and Film content, Coruscant was a good fit. Mukta Arts Limited has exited from its shareholding in "Red Carpet Films Limited" by selling its entire equity in the Company effective from 25th March, 2009 to the original promoter of Red Carpet Films Limited. Details are indicated in the Management Report. Share Capital The Share Capital remained the same during the year under review. Directors Mr. Anil Harish, Director, retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for reappointment. The requisite particulars in respect of director seeking re-appointment are given in Annexure I.

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