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Home , Atul Kulkarni, Chunky Pandey, Pankaj Kapur, Subhash Ghai, Zayed Khan

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MUKTA ARTS LIMITED

ENTERTAINING • EDUCATING • EVOLVING

ANNUAL REPORT for the year ending March 2008 www.reportjunction.com SANSCO SERVICES - Annual Reports Library Services - www.sansco.net

Anil , Salman , , , Zayed Khan & Others in Subhash Ghai's "Yuvraaj"

Artistic View of Communication Centre, Goregaon (E)

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LimiTED

Registered Office: 6, Bashiron, 28th Road, IPS - III, Bandra (W), - 400 050 ATTENDANCE SLIP I hereby record my presence aHhe 26th Annual General Meeting of the Company at Whistling Woods Institute Auditorium, Dada Saheb Phaike Chitranagari, Goregaon (East), Mumbai- 400065 on Saturday, the 20th of September, 2008 at 4.00 p.m. Member's / Beneficial Owner's Name (In block letters): Folio No. / Beneficiary Account No.: Signature of the Member/ Beneficial Owner: Proxy / Authorised Representative Note: Shareholder/Proxy holder wishing to attend the Meeting must bring the Attendance Slip to the Meeting and hand it over at the entrance of the Meeting venue duly signed.

I-

mUKTA ARTS LIHIITED Registered Office: 6, Bashiron, 28th Road, IPS - III, Bandra (W), Mumbai - 400 050 PROXY FORM I/We

of

being a Member(s)/ Beneficial Owner(s) of the above named Company hereby appoint

of

or failing whom_

of as my /our Proxy to attend and vote for me/us and on my/our behalf at the 26th Annual General Meeting of Mukta Arts Limited to be held on Saturday, the 20th September, 2008 at 4.00 p.m. at Whistling Woods Institute Auditorium, Dada Saheb Phaike Chitranagari, Goregaon (East), Mumbai- 400065 and at any adjournment(s) thereof.

Signed this day 2008

Folio No. / Beneficiary Account No. :

Signature of the Member / Beneficial Owner:

Note: This Proxy form must reach the Registered Office of the Company not less than 48 hours before the time of holding the meeting.

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BOARD OF DIRECTORS

Mr. Subhash Ghai, 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 Haribhakti & Co.

Bankers Punjab National Bank Limited HDFC Bank Limited IDBI Bank Limited

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 IPS - III, Bandra (W) Mumbai - 400 050 CONTENTS Financial Highlights 2 Chairman's Statement 3 Management Discussion & Analysis 5 Notice 7 Directors' Report 11 Corporate Governance 15 FINANCIALS Mukta Arts Limited 23 Consolidated Financial of Mukta Arts Limited & 41 it's Subsidiaries Whistling Woods International Limited 54 Connect. 1 Limited (Formerly known as 75 Mukta Art International Limited) Mukta Tele Media Limited 84 Red Carpet Films Limited 94

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PERFORMANCE

Performance at a glance Rupees in millions

Year Year Year T3 '—-' Year ended ended ended eneiecI , ended 31st March 31st March 31st March 31st Mafcr 31st March 2008 2007 2006 2<|05» 2004

Realisation from productions, 1,094.66 965.21 374.80 451 44 187.00 distribution & exhibition

Equipment Hire Income 12.07 2.22 25.09 28 5C) 29.84

Other Income 24.93 49.12 36,12 31, 5£1 •. 96.89

TOTAL INCOME 1,131.66 1,016.55 436.01 511. 53 313.72

Profit/(Loss) before Interest, Depreciation and Tax 166.41 167.04 (27.15) (134.J 6 88.36

Depreciation 17.64 22.64 29.98 32.J4I 29.61

Interest 0.43 0.63 0.60 o.se» ; 0.30

Profit/(Loss) before Tax 148.34 143.77 (57.73) (167.5F 58.45

Profit/(Loss) after Tax 130.30 137.16 (56.46) (169.6^ 33.93

Dividend 45.16 45.16 - 22.58

Dividend Rate 40% 40% - 20%

Gross Fixed Assets 334.60 313.31 369.84 361 .££! 343.82

Net Fixed Assets 187.10 157.09 184.06 204.7J;! , 216.14

Total Assets 1,402.21 1,279.66 1,195.53 1,144.6 1,314.89

Equity Share Capital 112.92 112.92 112.92 112.91! 112.92

Reserves and Surplus 1,138.38 1,060.92 975.25 1,029.® ) . 1,199.55

Net Worth 1,251,30 1,173.83 1,088.17 1,142.5! 1,312,47

Earnings per Share (EPS)

In Rupees • j *;«-* '•'', ,

/• " ''<\,\>'' "" _ "• ": 4-< 50 EPS Basic 5.77 6.07 —

EPS Adjusted to Rs. 5 5.77 6.07 - -

^%.

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Chairman's Statement It has been a busy year for me. In the past I have generally focused on one movie at a time. In the year under review I not only had to work on two movies at the same time but also oversee several other productions, not to mention the running of Whistling Woods International. During the year we have had a much higher level of activity with six movies on the floor and several more in pre-production. This has been a result of the enhanced bandwidth created, systems put in place, and additional trained management skills brought in. In fact the Company's focus on talent has increased and our investment in Whistling Woods International, which is expected to be a fountainhead of talent for the Company, is likely to start yielding results soon. The first batch of students has already entered the industry. Last year when we had declared a turnover exceeding Rs.1 Billion and a healthy bottom line, many cynics had pointed out that this was possible primarily owing to the one-off block deal with a TV channel for Satellite re-issue rights of a part of the Company's library. I had then explained that this was not the case and the Company's consistent policy of amortizing 100% of investment in a film in the year of release is capable of consistently providing profit year after year and this has been proved right in the current year when there have been no significant library sales. The Company has been able to show Profit Before Tax, exceeding Rs.140 millions and a turnover of over Rs.1.13 Billion. The healthy profits persuaded the Board to declare an interim dividend of 40% reflecting the Board's and Management's confidence in the continued strength of the Company. In the year under review the Company released four movies "Good Boy Bad Boy" directed by Ashwini Chaudhary starring Tushaar Kapoor, Emraan Hashmi, Isha Shravani, Tanushree Dutta and others "Bombay to Bangkok" directed by Kuknoor, starring and others, "Black & White" directed by me starring Anurag Sinha, , Shefali Shah and others and the Company's first Marathi movie "Valu- The Wild Bull" directed by Umesh Kulkarni starring , Dr. Mohan Agashe, Bharti Achrekar, Girish Kulkarni and others. "Black & White" received rave reviews and was highly appreciated by critics and viewers. It also threw up decent profits for the Company and is an asset for the library. "Valu- the Wild Bull" turned out to be a Blockbuster and celebrated a 25 week run in the theatres. The Movie was also invited to several film festivals including the Rotterdam Film Festival, Warsaw Film Festival, International Film Festival (PIFF), Indian Film Festival in Germany etc. This has inspired the Company to venture into more Marathi movies and we already have two more Marathi movies including the recently released "Sana! Choughade" directed by Rajeev Patil starring Shreyas Talpade, Tushar Dalvi, Shipa Tulaskar, Subhodh Bhave, Bharti Achrekar and also have financed "Prarambh" directed by Vasant Purohit starring Suhas Joshi, Dr. Vilas Ujawane and others. Additionally in the pipeline and due to be released during the Financial Year 2008-09 are movies "Yuvraaj" directed by me starring , Anil Kapoor, Katrina Kaif, Zayed Khan and others which should be releasing later this year. "Right Yaaa Wrong" directed by Neeraj Pathak, starring , Irfan Khan, Konkona Sen Sharma, and others, also scheduled for release during the Financial Year 2008-09. "Hello Darling" directed by Manoj Tiwari starring Javed Jaffrey, Celina Jaitley, Gul Panag, Isha Koppikar, Chunky Pandey and "Paying Guest" directed by Paristosh Painter starring Shreyas Talpade, Ashish Choudhary, Vatsal Seth, Javed Jaffrey, Celina Jaitley, , Neha Dhupia, Sayali Bhagat. During the year the Company expanded its exhibition business and took on additional theatres for programming including PVR theatres in Mumbai. Whistling Woods International has grown in strength and it is already accepted as a reputed International Film School and has become a must visit for media professionals from around the world. Among the key events of Whistling Woods International institute during the year were the visit of the Mayor of London Mr. Ken Livingston along with when an Agreement between Film London and Film & Television Producers Guild was signed at the Whistling Woods International campus. A visit by the Brookings Institute led by former US Deputy Secretary of State, Mr. Strobe Talbott and Ms. Brooke Shearer who had an interactive session with leading panelists including Ms. Shabana Azmi, Dr. Jabbar Patel, Ms. Anupama Chopra among others. The Brookings delegates included Chairmen and CEO's of many leading American companies.

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Whistling Woods International also participated in and assisted in the French Film Festival - Rendezvous in Mumbai coinciding with the visit of the French President to . The film delegation led by Mr. Claude Lelouch visited Whistling Woods International. Claude also held a Master Class for the students. The first Convocation of Whistling Woods International was held on 18th July 2008 in the presence of Shri , Shri Anand Mahindra and Dr. Arun D. Sawant Acting Vice Chancellor, University of Mumbai. Seventy five students were awarded Diplomas with most of them already employed in the industry with leading Companies including Mukta Arts Limited In the second year of operations Whistling Woods International continues to be in investment mode. The Company has however narrowed its operating losses and is expected to break even in 2008-09 on cash basis. This is a pretty healthy performance for a Company in Media Education. One of the major initiatives Whistling Woods International has taken during the year is to collaborate with the Manipal University to conduct the traineeship of their MBA in Media Management at Whistling Woods International. Whistling Woods International strength is also seen from the fact that during the year a group of MA students from the Portsmouth University - UK attended a paid workshop on at Whistling Woods International. A group of students of Syracuse University, USA also attended a one month internship programme at Whistling Woods International in May 2008. During the year key personalities from the Indian and international film industry visited the institute and conducted workshops with students. These included Om Puri, Salman Khan, , Makrand Deshpande, Sushil Rajpal, Alim Hakim and others. Whistling Woods International was able to negotiate with Pune International Film Festival (PIFF) to introduce a section in its Festival branded "The Whistling Woods International Student Film Section". This section showcases student films from film schools around the world and during the year 125 films were received for this section of which 10 short-listed films were screened to an international Jury. During the year the Company acquired controlling stake in Red Carpet Films Limited, a company owned by Mr. Manish Goswami which had tied up a Funding and Distribution deal with Eros Multimedia. Red Carpet Films is currently developing projects and we expect output of production in the year 2008-09. I am happy to inform you that the Audeus commercial complex at Andheri is almost ready and we should be able to lease it out by early 2009 adding to our revenues. Work on the Communication Centre at Goregaon which was taken over by the Company in a tender bid is also progressing well and we hope to have it ready by mid-2009. I am happy to inform you that in the PIFF WWI Students Film section, a film made by a WWI student won the Best Film Award. Other Awards won in international Film Festivals by Whistling Woods International students included the Silver Award Cell Story (mobile film section) & Silver Award for Student Short Fiction section at the IDPA Award 2008. During the year we have successfully completed Beta testing of two of our online properties, www.indianfilmtrade.com a portal which focuses on Film Trade and is a B2B site and www.bollywoodmoviemax.com a B2B site that facilitates downloads of Indian movies online. Both these properties are expected to augment the Company's online initiatives globally. The stock price of the Company during the year fluctuated in a wide range. The stock price before the March 2008 crash hit a high of 244 and was rated as the Best Performing Media stock. Nevertheless as a matter of policy, stock prices are not what we focus on. We focus on the Company's performance and I must also confess that I do not understand the way the stock market works. As Warren Buffet said "Wall Street is the only place that people ride to in a Rolls Royce to take advice from people who take the subway". We believe we have created a Company with great intrinsic value that sooner rather than later will be unlocked to the benefit of those who have believed in the Company and stayed with it. I thank you for your support and believe that you would get the value that you deserve. I continue to seek your support and appreciate the confidence you have reposed in me.

Subhash Ghai

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MANAGEMENT DISCUSSION AND ANALYSIS

Industry Performance: A Review of Operations: As per the PriceWaterhouseCooper Report of During the year the Company released four 2008 presented at FICCI2008, the Entertainment movies "Good Boy Bad Boy" directed by industry has been on track in all sectors of the Ashwini Chaudhary starring Tushaar Kapoor, industry along the lines projected in the previous Emraan Hashmi, Isha Shravani, Tanushree Dutta year's report and was expected to continue to and others, "Bombay to Bangkok" directed by outpace the GDP growth clocking 21% growth in Nagesh Kuknoor, starring Shreyas Talpade and some segments of the industry. The growth others, "Black & White" directed by areas expected in the industry include: Subhash Ghai starring Anurag Sinha, Anil Kapoor, Shefali Shah and others and the a) Significant growth in Multiplexes. Company's first Marathi movie "Valu- The Wild b) Significant growth in Digital Projection Bull" directed by Umesh Kulkarni starring Atul Systems. Kulkarni, Dr. Mohan Agashe, Bharti Achrekar, Girish Kulkarni and others. In the pipeline the c) Continued growth in the number of TV Company has the following movies "Yuvraaj" Channels. directed by Subhash Ghai starring Salman Khan, d) Significant growth in the Sports segment Anil Kapoor, Katrina Kaif, Zayed Khan and others. owing to the launch of IPL. "Right Yaaa Wrong" directed by Neeraj Pathak, starring Sunny Deol, Irfan Khan, Konkona Sen e) Significant growth in FM Radio. Sharma, Isha Koppikar and others, "Hello f) Significant growth in Animation and Gaming Darling" directed by Manoj Tiwari starring Javed segment. Jaffrey.Celina Jaitley, Gul Panag, Isha Koppikar, Chunky Pandey and "Paying Guest" directed by g) Significant growth in DTH market. Paristosh Painter starring Shreyas Talpade, All the above growth areas signify business Ashish Choudhary, Vatsal Seth, Javed Jaffrey, opportunities for content creation. Celina Jaitley, Riya Sen, Neha Dhupia, Sayali Bhagat all of which are expected to release in Management therefore believes that our strength the Financial Year 2008-09. Several more films in content creation clubbed with access to new are in the pipeline and currently in pre-production. talent from Whistling Woods International would position the Company well to meet the changing During the year, the Company touched a turnover needs of the industry. of about Rs.1.13 Billion showing 11% growth in top line and clocked Rs.147 million as profit. The Among the concern areas in the industry has Company continued to consolidate its position been the stagnation of CAS and the lack of by strengthening its library and now has over 30 Government will to push through CAS in other movies in its library. The Company is also one of centres despite Government making noises of the largest Real Estate owner among Movie commitments from time to time. The significant Production companies in the country with Mukta growth of Channels especially in News and Arts Limited and Whistling Woods International Entertainment are likely to lead to cannibalization having nearly 3,00,000 sqft of constructed and the area of high TRPs would soon disappear. properties. Additionally Whistling Woods With a view to position itself to enhance content International has access to 20 acres of Prime creation, Management has not only increased the land in Film City. operating bandwidth of Mukta Arts Limited but had also invested in Red Carpet Films Limited Both Audeus as well as the Communication which has film funding and distribution tie-up in Centre complexes are progressing well and place. Management also proposes to launch would add value to the Company not only by way digital films using new and fresh talent and is in of increasing its Real Estate stock but would also the process of negotiating distribution in this offer the Company the power to leverage this regard. strength in strategic tie-ups.

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Distribution and Exhibition: Rs. 30 millions as deposit towards services The Company showed significant growth in the Whistling Woods International has now Distribution and Exhibition areas and has added completed two years of operation and its first additional theatres for booking during the year. batch has entered the industry. The students During the year the Company released several have performed very well and their movies have movies in some select territories including Black been sent to various film festivals and have won & White, Aap Ka Suroor, Shaka Laka Boom several National and International Awards. Boom, Rush Hour-3, Harry Potter & The Order The student population has grown to 260. The of the Phoenix, Die Hard, Shivaji - The Boss, The Institute is expected to break even by 2010. Train, Darling, Aggar, Naya Daur (Colour), Kya Love Story Hai and Good Boy Bad Boy. To ensure growth in the education business Whistling Woods International has tied up with Whistling Woods International Limited: Manipal University to conduct the traineeship of During the year Whistling Woods International their MBA in Media Management at Whistling Limited issued Non-convertible Redeemable Woods International. Preference shares worth Rs.200 millions to Outlook. Mukta Arts Limited. In the forthcoming year the Company expects to The total investment in Whistling Woods release five movies including the magnum opus International has increased to about Rs.726 "Yuvraaj" directed by Subhash Ghai. millions including: During the year the Company has completed Rs. 200 millions as Equity Beta testing of www.indianfilmtrade.com a portal Rs. 200 millions as Preference shares which focuses on Film Trade and is a B2B site and www.bollywoodmoviemax.com a B2C site Rs. 176 millions as loan from Mukta Arts Limited that facilitates downloads of Indian movies online. Rs. 120 millions as Term loan from Punjab Both these properties are expected to augment National Bank the Company's online initiatives globally.

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NOTICE

Notice is hereby given that the 26th Annual General Meeting of Mukta Arts Limited will be held on Saturday, the 20th of September, 2008 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 31s' March, 2008 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. Vijay Choraria, who retires by rotation and, being eligible, offers himself for reappointment. 3 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-sixth Annual General Meeting until the conclusion of the Twenty-seventh Annual General Meeting, on such remuneration as may be approved by the Board of Directors." Special Business: 4. To consider and if thought fit to pass with or without modification(s) the following resolution as an Ordinary Resolution: "RESOLVED THAT Mr. Rahul Puri, who was appointed as an Additional Director in the meeting of the Board of Directors of the Company held on 23rd October, 2007 and who holds office upto the date of the this Annual General Meeting, and in respect of whom notice under Section 257 of the Companies Act, 1956 has been received from one of the members signifying intention to propose Mr. Rahul Puri as a candidate for the office of the Director of the Company, be and is hereby appointed as Director of the Company." 5 To consider and if thought fit to pass with or without modification(s) the following resolution as a Special Resolution: "RESOLVED THAT subject to the approval of the members in the General Meeting and subject to the provisions of Sections 198, 269, 309, 310, 311 and Schedule XIII of the Companies Act, 1956 and other applicable provisions if any and subject to the approval of the Central Government, if required, the approval is hereby given to the re- appointment of Mr. Subhash Ghai as Managing Director of the Company for the period of three years wef 1st April 2008 on such terms and conditions as are contained in the draft agreement to be entered into between the company and Mr. Subhash Ghai, a copy of which as placed before the meeting and duly initialled by the Chairman for the sake of identification be and is hereby approved." RESOLVED FURTHER THAT, Mr. Vijay Choraria, Director of the Company be and is hereby authorised to sign the Agreement as approved above on behalf of the Company and the Common Seal of the Company be affixed thereon in his presence." 6. To consider and if thought fit to pass with or without modification(s) the following resolution as a Special Resolution: "RESOLVED THAT subject to the approval of the members in the General Meeting and subject to the provisions of Sections 198, 269, 309, 310, 311 and Schedule XIII of the Companies Act, 1956 and other applicable provisions if any and subject to the approval of the Central Government, if required, the approval is hereby given to the appointment of Mr. Rahul Puri as Whole Time Director (to be designated as Executive Director) of the Company for the period of three years wef 23rd October 2007 on such terms and conditions as are contained in the draft agreement to be entered into between the company and Mr. Rahul Puri, a copy of which as placed before the meeting and duly initialled by the Chairman for the sake of identification be and is hereby approved. RESOLVED FURTHER THAT Mr. Vijay Choraria, Director of the Company be and is hereby authorised to sign the Agreement as approved above on behalf of the Company and the Common Seal of the Company be affixed thereon in his presence."

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: 25'" July, 2008

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