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Notes to Accounts of DQ Entertainment (International) Ltd.

Mar 31, 2015

1 Related party disclosures

1.1 Related parties and their relationships

i) Holding and Subsidiary Companies

a. DQ Entertainment (Mauritius) Limited - Holding company

b. DQ Entertainment Plc - Parent of holding company

c. DQ Entertainment (Ireland) Limited - Subsidiary company

d. DQ Powerkidz Private Limited - Subsidiary company

e. DQ Entertainment (International) Films Limited - Joint Venture company by DQE India and DQE Plc.

f. DQE ITES Parks Private Limited - Subsidiary company

ii) Key management personnel

Mr. Tapaas Chakravarti - Managing Director & Chief Executive Officer

Mr. Sanjay Choudhary - Chief Financial Officer

Ms. Sindhu Maladath Sisupalan - Company Secretary

iii) Relatives of Key management Personnel with whom the Company had transactions during the year -

Mrs. Rashmi Chakravarti (wife of Mr. Tapaas Chakravarti) Ms. Nivedita Chakravarti (Daughter of Mr. Tapaas Chakravarti)

iv) Associate of the ultimate Holding Company

Method Animation SAS

v) Firm in which a Director is a partner

R & A Associates

vi) Relative of a director

Mr. Hatim Adenwala - Senior Vice president Human Resources

2 Leases

The Company's leasing arrangement is in respect of operating lease for premises. The Company has exclusive right to cancel the lease with prior notice. The aggregate lease rents payable are charged as rent in the Profit and Loss Account. The aggregate amount of Lease rentals charged to Profit and Loss account is Rs. 26,743,544 (31.03.2014: Rs.29,710,099).

3 Segmental Reporting as per Accounting standard 17:

3.1 Business Segment

The Company comprises the following main business segments:

Animation:

The production services rendered to production houses and training rendered for acquiring skills for production services in relation to the production of animation television series and movies.

Distribution:

The revenue generated from the exploitation of the distribution rights of animated television series and movies acquired by the Company.

4. Amount Spent on Corporate Social Responsibility

(a) Gross amount required to be spent by the company during financial year 2014-15. 6,809,232

(b) Amount spent during the financial year 2014-15 :- Nil

The company has not spent 2% of the average net profit of the last three financial years towards its CSR expenditure for the year. The Company has formulated the CSR policy and constituted the CSR committee. The company has also identified the activities proposed to be undertaken. The company expects to spend the amount on its CSR activities during the FY 2015-16

5. Figures of previous year have been regrouped/rearranged/reclassified wherever necessary to conform to the current year presentation.


Mar 31, 2014

1. Company overview:

The company is engaged in the business of providing services relating to animation production for television and film production companies and rendering training for acquiring skills for production services in relation to the production of animation television series and movies. The Company also does licensing of programmed distribution rights to broadcasters, television channels and home video distributors.

2. Rights, preferences and restrictions attached to shares:

The company has one class of equity shares having a par value of Rs. 10 per share. Each share holder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subjected to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend.

2.1 Details of shares held by shareholders holding more than 5% of the aggregate shares in the company.

75% of the shares i.e.59,462,218 Equity Shares of Rs.10/- each fully paid up are held by the holding company DQ Entertainment (Mauritius) Limited. The ultimate holding company is DQ Entertainment Plc.

2.2 Details of shares held by holding company and ultimate holding company.

75% of the shares i.e.59,462,218 Equity Shares of Rs.10/- each fully paid up are held by the holding company DQ Entertainment (Mauritius) Limited. The ultimate holding company is DQ Entertainment Plc.

3. The company''s operations are conducted in units set up in Software Technology Parks (STPs) and Special Economic Zones (SEZs). Income from SEZs is fully exempt for the first five years, 50% exempt for the next five years and 50% exempt for another five years subject to fulfilling certain conditions. Currently tax provision on book profit is provided as per the provisions of section 115JB (MAT) of the Income tax act, 1961.

Amount in Rs.

4. particulars 31 March 2014 31 March 2013

Contingent Liabilities (to the extent not provided for)

a) Bonds executed in favour of customs and excise authorities 2,770,049 2,162,500

b) Letters of Credit (includes guarantee on behalf of DQ Entertain- 1,224,909,501 777,476,625 ment Ireland Rs. 1,060,397,701 (31.03.2013: 449,525,000)

c) Income tax assessment of DQ Entertainment (International) Limited has been completed till Assessment Year 2009-10 (financial year 2008-09).

5 Related party disclosures

5.1 Related parties and their relationships

i) Holding and Subsidiary Companies

a. DQ Entertainment (Mauritius) Limited - Holding company

b. DQ Entertainment Plc - Parent of holding company

c. DQ Entertainment (Ireland) Limited - Subsidiary company

d. DQ Powerkidz Private Limited - Subsidiary company

e. DQ Entertainment (International) Films Limited - Joint Venture company by DQE India and DQE Plc

f. DQE ITES Parks Private Limited - Subsidiary company

ii) Key management personnel

Mr. Tapaas Chakravarti - Managing Director & Chief Executive Officer

iii) Relatives of Key Management Personnel with whom the Company had transactions during the year

Mrs. Rashmi Chakravarti (wife of Mr. Tapaas Chakravarti)

Ms. Nivedita Chakravarti (daughter of Mr. Tapaas Chakravarti)

iv) Associate of the Ultimate Holding Company

Method Animation SAS

v) Firm in which a Director is a partner

R & A Associates

vi) Relative of a director

Mr. Hatim Adenwala - Senior Vice president Human Resources

6. Leases

The Company''s leasing arrangement is in respect of operating lease for premises. The Company has exclusive right to cancel the lease with prior notice. The aggregate lease rents payable are charged as rent in the Profit and Loss Account. The aggregate amount of Lease rentals charged to Profit and Loss account is Rs. 29,710,099 (31.03.2013: Rs.38,204,573).

7. Segmental Reporting as per Accounting standard 17:

7.1 Business Segment

The Company comprises the following main business segments:

Animation: The production services rendered to production houses and training rendered for acquiring skills for production services in relation to the production of animation television series and movies.

Distribution: The revenue generated from the exploitation of the distribution rights of animated television series and movies acquired by the Company.


Mar 31, 2013

1. Company overview:

The company is engaged in the business of providing services relating to animation production for television and film production companies and rendering training for acquiring skills for production services in relation to the production of animation television series and movies. The Company also does licensing of programmed distribution rights to broadcasters, television channels and home video distributors.

2. The company''s operations are conducted in units set up in Software Technology Parks (STPs) and Special Economic Zones (SEZs). Income from SEZs is fully exempt for the first five years, 50% exempt for the next five years and 50% exempt for another five years subject to fulfilling certain conditions. Currently tax provision on book profit is provided as per the provisions of section 115JB (MAT) of the Income tax act, 1961.

3. The company has recognized a deferred tax asset of Rs.60,28,865 on unabsorbed depreciation as claimed in the returns for the respective years. In the assessment orders passed for the assessment years 2004 -05 and 2006 -07 unabsorbed depreciation has been determined to be Rs NIL. The Company has preferred appeals in Hon''ble High Court against the subject orders. In the opinion of the management the manner of adjustment of unabsorbed depreciation and carry forward of business losses by the department is not appropriate and based on professional advice the management is confident of succeeding in appeals and get the unabsorbed depreciation/ carry forward of business losses restored. On a prudent basis the company has not recognized any deferred tax asset on such unabsorbed depreciation contested before the Hon''ble High court.

4.

Amount in Rs.

Particulars 31 March 2013 31 March 2012

Contingent Liabilities (to the extent not provided for)

a) Bonds executed in favour of customs and excise authorities 2,162,500 2,162,500

b) Letters of Credit (includes guarantee on behalf of DQ Entertainment Ireland 777,476,625 1,198,430,253 Rs. 449,525,000 (31.03.2012: 705,093,878)

c) Income tax assessment of DQ Entertainment (International) Limited has been completed till Assessment Year 2009-10 (financial year 2008-09). The Company has preferred an appeal for the Assessment Years 2008-09 and 2009-10. No demand has been raised by the Department on the above, and for the assessment year 2008-09 (including transfer pricing) the cases are pending with hon''ble Income Tax Appealate Tribunal ITAT) and for the assessment year 2009-10 the case is pending with hon''ble CIT(Appeals). d)Claims against the Company not acknowledged as debts is Rs.9,642,147 (31.03.2012: Rs. 9,642,147). This comprise of demands raised by the Income Tax department for non deduction of TDS on payments to non residents on which the Company has gone on appeal and the appeal is allowed before the Commissioner of Income Tax (Appeals), Hyder- abad in favor of the company. The department has gone for an appeal and the same is pending before the Income tax appellate tribunal (ITAT). (e) Interest and penalty proceedings on import of services of Rs. 13,201,091 up to the 31.03.2009 received from Commissioner (Appeals), Service Tax department and it has been defended at CESTAT

5. related party disclosures

5.1 related parties and their relationships

i) Holding and subsidiary Companies

a. DQ Entertainment (Mauritius) Limited - Holding company

b. DQ Entertainment Plc - Parent of holding company

c. DQ Entertainment (Ireland) Limited - Subsidiary company

d. DQ Powerkidz Pvt. Limited - Subsidiary company

e. DQ Entertainment (International) Films Limited - Joint Venture company by DQE India and DQE Plc.

f. DQE ITES Parks Private Limited - Subsidiary company

ii) key management personnel

Mr. Tapaas Chakravarti - Managing director & Chief executive officer

iii) relatives of key Management Personnel with whom the Company had transactions during the year -

Mrs. Rashmi Chakravarti (wife of Mr. Tapaas Chakravarti) Ms. Nivedita Chakravarti (Daughter of Mr. Tapaas Chakravarti)"

iv) associate of the ultimate Holding Company

Method Animation SAS

v) Firm in which a key management personnel is a partner

R & A Associates

vi) relative of a director

Hatim Adenwala - Senior Vice president HR

6. Leases:

The Company''s leasing arrangement is in respect of operating lease for premises. The Company has exclusive right to cancel the lease with prior notice. The aggregate lease rents payable are charged as rent in the Profit and Loss Account. The aggregate amount of Lease rentals charged to Profit and Loss account is Rs. 40,016,597 (31.03.2012: Rs.43,947,883).

7. segmental reporting as per accounting standard 17:

7.1 Business segment

The Company comprises the following main business segments:

animation:

The production services rendered to production houses and training rendered for acquiring skills for production services in relation to the production of animation television series and movies.

Distribution:The revenue generated from the exploitation of the distribution rights of animated television series and movies acquired by the Company.

8. Figures of previous year have been regrouped/rearranged/reclassified wherever necessary to conform to the current year presentation.


Mar 31, 2012

1 Company overview:

The Company is engaged in the business of providing services relating to animation production for television and film production companies and rendering training for acquiring skills for production services in relation to the production of animation television series and movies. The Company also does licensing of programmed distribution rights to broadcasters, television channels and home video distributors.

2.1 Rights, preferences and restrictions attached to shares:

The company has one class of equity shares having a par value of Rs. I0 per share. Each share holder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subjected to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend.

2.2 Details of shares held by shareholders holding more than 5% of the aggregate shares in the company.

75% of the shares i.e.59,462,2I8 Equity Shares of Rs.I0/- each fully paid up are held by the holding company DQ Entertainment (Mauritius) Limited. The ultimate holding company is DQ Entertainment Plc.

2.3 Details of shares held by holding company and ultimate holding company.

75% of the shares i.e.59,462,2I8 Equity Shares of Rs.I0/- each fully paid up are held by the holding company DQ Entertainment (Mauritius) Limited. The ultimate holding company is DQ Entertainment Plc.

3 The company's operations are conducted in units set up in Software Technology Parks (STPs) and Special Economic Zones (SEZs). Income from STPs were tax exempt for the earlier of I0 years commencing from the fiscal year in which the unit commences software development, or March 3I, 20II. Income from SEZs is fully exempt for the first five years, 50% exempt for the next five years and 50% exempt for another five years subject to fulfilling certain conditions. Currently tax provision on book profit is provided as per the provisions of section II5JB (MAT) of the Income tax act, I96I.

The company has recognized a deferred tax asset of Rs.60,28,865 on unabsorbed depreciation as claimed in the 27 returns for the respective years. In the assessment orders passed for the assessment years 2004 -05 and 2006 -07 unabsorbed depreciation has been determined to be Rs NIL. The Company has preferred appeals in Hon'ble High Court against the subject orders. In the opinion of the management the manner of adjustment of unabsorbed depreciation and carry forward of business losses by the department is not appropriate and based on professional advice the management is confident of succeeding in appeals and get the unabsorbed depreciation/ carry forward of business losses restored. On a prudent basis the company has not recognized any deferred tax asset on such unabsorbed depreciation contested before the Hon'ble High court.

Amount in Rs Particulars 31 March 2012 31 March 2011

Contingent Liabilities (to the extent not provided for)

a)Bonds executed in favour of customs and excise authorities 2,I62,500 43,250,000

b)Letters of Credit (includes guarantee on behalf of DQ Entertainment Ireland Rs.705,093,878 (3I.03.20II: 697,669,760) 98,430,253 I,253,636,938

c) Income tax assessment of DQ Entertainment (International) Limited has been completed till Assessment Year 2009-I0 (financial year 2008-09). The Company has preferred an appeal for the Assessment Years 2004-05 and 2006-07 and is pending before the Hon'ble High court . No demand has been raised by the Department on the above, and for the assessment year 2008-09 (including transfer pricing) the cases are pending with hon'ble DRP and for the assessment year 2009-I0 the case is pending with hon'ble CIT(Appeals).

d)Claims against the Company not acknowledged as debts is Rs. 9,642,I47 (3I.03.20II: Rs. 9,642,I47). This comprise of demands raised by the Income Tax department for non deduction of TDS on payments to non residents on which the Company has gone on appeal and the appeal is allowed before the Commissioner of Income Tax (Appeals), Hyderabad in favor of the company. The department has gone for an appeal and the same is pending before the Income tax appellate tribunal (ITAT).

(e) Interest and penalty proceedings on import of services of Rs. I3,20I,09I up to the 3I.03.2009 received from Commissioner (Appeals), ST department and it has been defended at CESTAT

4 Related party disclosures

4.1 Related parties and their relationships

i) Holding and Subsidiary Companies

a. DQ Entertainment (Mauritius) Limited - Holding company

b. DQ Entertainment Plc - Parent of holding company

ii) Key management personnel

Mr. Tapaas Chakravarti - Managing director & Chief executive officer

iii) Relatives of Key Management Personnel with whom the Company had transactions during the year - Mrs. Rashmi Chakravarti (wife of Mr. Tapaas Chakravarti)

Ms. Nivedita Chakravarti (Daughter of Mr. Tapaas Chakravarti)

iv) Associate of the ultimate Holding Company Method Animation SAS

v) Firm in which a Key management personnel is a partner R & A Associates

vi)Relative of a director

Hatim Adenwala - Senior Vice president HR

5 Leases

The Company's significant leasing arrangement is in respect of operating lease for premises. The Company has exclusive right to cancel the lease with prior notice. The aggregate lease rents payable are charged as rent in the Profit and Loss Account. The aggregate amount of Lease rentals charged to Profit and Loss account is Rs. 43,947,883 (3I.03.20II: Rs.37,I48,894).

6 Segmental Reporting as per Accounting standard 17:

6.1 Business Segment

The Company comprises the following main business segments:

Animation:

The production services rendered to production houses and training rendered for acquiring skills for production services in relation to the production of animation television series and movies.

Distribution:

The revenue generated from the exploitation of the distribution rights of animated television series and movies acquired by the Company.

7 Figures of previous year have been regrouped/rearranged/reclassified wherever necessary to conform to the current 43 year presentation.


Mar 31, 2011

1 Company overview:

The Company is engaged in the business of providing services relating to animation production for television and film production companies and rendering training for acquiring skills for production services in relation to the production of animation television series and movies. The Company also provides services for gaming consoles and licensing of programme distribution rights to broadcasters, television channels and home video distributors.

Pursuant to a special resolution of the members passed at an Annual General Meeting on July 25, 2009, DQ Entertainment (International) Private Limited became a public limited company and the name was changed to DQ Entertainment (International) Limited. A fresh certificate of incorporation consequent to conversion of Company from private to public was granted on September 10, 2009 by the Registrar of Companies, Andhra Pradesh at Hyderabad.

2 share Capital:

authorised share capital

On 15th September 2009 the Company increased its authorised equity share capital from 3,010,000 shares of face value of Rs 10/- each to 80,000,000 shares of face value of Rs 10/- each and cancelled the 800,000 1% Redeemable Optionally Convertible Preference share capital.

Issued, subscribed & Paid up

a) Equity Shares :

The Company made an Initial Public Offer ("IPO") of 16,048,011 equity shares of Rs.10/- each. Out of 16,048,011 equity shares, 172,960 equity shares were allotted to employees at a premium of Rs.63 per share and 15,875,051 equity shares to others at a premium of Rs.70 per share. The Company made a pre-IPO placement of 3,772,771 equity shares of Rs.10/- each at a premium of Rs.58.11 per equity share. The aggregate share premium received in IPO and pre-IPO is Rs. 1,341,385,859 million. On 29 March 2010, the equity shares of the Company were listed on the Bombay Stock Exchange.

Conversion: After the expiry of twenty four months from the date of issuance of the Preference Shares and to the extent the Preference Shares have not been redeemed by the Company, the holders of the Preference Shares shall be entitled, at their option to call for conversion for all or part of such Preference Shares in one or more trenches into Equity Shares at a conversion ratio of 1:1, i.e., issue and allotment of 1 (One) Equity Share for each converted Preference Share.

Maturity: The Preference Shares shall (unless converted into Equity Shares or redeemed in the manner stated above) be redeemed at the Redemption Price at the expiry of sixty months from the date of issuance thereof.

The terms and conditions of the 1% Redeemable Optionally Convertible Non Cumulative Preference Shares may be varied by the Board of Directors of the Company subject to the applicable provisions of the Act.

3 Reserves and surplus

Capital Subsidy :

Erstwhile DQ Entertainment Limited was sanctioned a Capital Subsidy of Rs. 800,000 (31.03.2010: Rs.800,000) under clause 7(f) of ICT Incentive Policy of the Government of Andhra Pradesh

4 distribution Rights

Distribution rights (Schedule 4 of the financial statements) aggregating to Rs.1,443,444,901 (31.03.2010: Rs.1,029,662,841) represent the costs incurred in acquiring distribution rights. The Company started acquiring these rights from the year 2003-04 and till date 42 series (31.03.2010: 30) of Animation rights have been acquired for different territories across the globe. The Company has started earning revenues from usage of rights since 2006-07. The Company has performed testing for impairment of intangibles which resulted in an impairment loss of Rs.6,862,541 (31.03.2010: Rs.16,067,608) on account of recoverable amount of intangibles being less than its carying amount. These have been included in the line item "Depreciation & Amortisation" in the Statement of Profit and Loss. The accumulated Impairment Loss as at 31.03.2011 on distribution righhts amounted to Rs. 85,107,474(31.03.2010: Rs.78,244,933).

5 Capital work-in-progress

a) Includes Rs. 25,125,004 (31.03.2010: Rs.48,572,918) on account of advances to suppliers of capital goods and Rs. 241,310,025 (31.03.2010: Rs.318,608,602) incurred under various co-production agreements for which distribution rights are yet to be received. Pending receipt of distribution rights and considering the potential benefits likely to accrue to the Company in future, the carrying amount of Capital work-in-progress have been valued at cost.

b) Includes Rs.6,061,050 (31.03.2010: Rs.35,510,728) incurred towards projects under development to be exploited as Telivision Series/Films and others. Based on review of estimated future realizations the management is of the view that estimated future recoverable amount from these projects are more than its carrying unamortized cost and consequently no provision for impairment is considered necessary by the management at this stage.

6 (a) The company is an Export Oriented Unit registered with Software Technology Parks of India and Special Economic Zone and its business income is exempted from tax in terms of section 10A & 10AA of the Income Tax Act, 1961. Currently Tax provision on book profit is provided as per the provisions of Section 115JB (MAT) of the Income Tax Act, 1961.

6 (b) The company has recognised a deferred tax asset of Rs. 54,082,894 on unabsorbed depreciation as claimed in the returns for the respective years. In the assessment orders passed for the assessment years 2004 -05 and 2006 -07 unabsorbed depreciation has been determined to be Rs NIL. The Company has preferred appeals in Hon'ble High Court against the subject orders. In the opinion of the management the manner of adjustment of unabsorbed depreciation and carry forward of business losses by the department is not appropriate and based on professional advice the management is confident of succeeding in appeals and get the unabsorbed depreciation/ carry forward of business losses restored. On a prudent basis the company has not recognised any deferred tax asset on such unabsorbed depreciation contested before the Hon'ble High court.

31 March 31 March 2010 2011

Rs. Rs.

7 Contingent Liabilities

a) bonds executed in favour of customs and excise authorities 43,250,000 37,250,000

b) Letters of Credit 1,253,636,938 302,192,625

c) Income tax assessment of DQ Entertainment (International) Limited has been completed till Assessment Year 2007-08 (financial year 2006-07). The Company has preferred an appeal for the Assessment Years 2004-05 and 2006-07 and is pending before the Hon'ble High court . No demand has been raised by the Department on the above.

d)Claims against the Company not acknowledged as debts is Rs.9,642,147 (31.03.2010: Rs. 9,642,147). This comprise of demands raised by the Income Tax department for non deduction of TDS on payments to non residents on which the Company has gone on appeal and the appeal is allowed before the Commissioner of Income Tax (Appeals), Hyderabad in favor of the company. The department has gone for an appeal and the same is pending before the Income tax appellate tribunal (ITAT).

8 Micro, small and Medium enterprises development act, 2006

The Company has received intimation from certain "suppliers" regarding their status under the Micro, Small and Medium Enterprises Development Act 2006 confirming that they do not fall under the Micro, Small & Medium Enterprises Category while other "Suppliers have not intimated regarding their status, and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid/payable as required under the said Act have not been given.

9 Related party disclosures

9 (a) Related parties and their relationships

i) holding and subsidiary Companies

a. DQ Entertainment (Mauritius) Limited - Holding company

b. DQ Entertainment Plc - Parent of holding company

c. DQ Entertainment (Ireland) Limited - Subsidiary company

ii) key management personnel

Mr. Tapaas Chakravarti - Managing director & Chief executive officer iii) Relatives of Key Management Personnel with whom the Company had transactions during the year - Mrs. Rashmi Chakravarti (wife of Mr. Tapaas Chakravarti) (Director with effect from 25 May 2009) Ms. Nivedita Chakravarti (Daughter of Mr. Tapaas Chakravarti)

iv) associate of the ultimate holding Company

Method Animation SAS

v) firm in which a key management personnel is a partner

R & A Associates

vi)Relative of a director

Hatim Adenwala - Senior Vice president HR

10 Leases

The Company's significant leasing arrangement is in respect of operating lease for premises. The Company has exclusive right to cancel the lease with prior notice. The aggregate lease rents payable are charged as rent in the Profit and Loss Account. The aggregate amount of Lease rentals charged to Profit and Loss account is Rs.37,148,894 (31.03.2010: Rs.43,654,269).

11 segmental Reporting as per accounting standard 17:

11 (a) business segment

The Company comprises the following main business segments:

Animation:

The production services rendered to production houses and training rendered for acquiring skills for production services in relation to the production of animation television series and movies.

Gaming:

The services provided for the contents in Console / Mobile / Other platforms.

Distribution:

The revenue generated from the exploitation of the distribution rights of animated television series and movies acquired by the Company.

12 Figures of previous year have been regrouped/rearranged/reclassified wherever necessary to conform to the current year presentation.










Mar 31, 2010

1 Company overview:

The Company is engaged in the business of providing services relating to animation production for television and film production companies and rendering training for acquiring skills for production services in relation to the production of animation television series and movies. The Company also provides services for gaming consoles and licensing of programme distribution rights to broadcasters, television channels and home video distributors.

Pursuant to a special resolution of the members passed at an Annual General Meeting on July 25, 2009, DQ Entertainment (International) Private Limited became a public limited company and the name was changed to DQ Entertainment (International) Limited. A fresh certificate of incorporation consequent to conversion of Company from private to public was granted on September 10, 2009 by the Registrar of Companies, Andhra Pradesh at Hyderabad.

2 Share Capital:

Authorised share capital

On 15th September 2009 the Company increased its authorised equity share capital from 3,010,000 shares of face value of Rs 10/- each to 80,000,000 shares of face value of Rs 10/- each and cancelled the 800,000 I % Redeemable Optionally Convertible Preference share capital.

Issued, Subscribed & Paid up

a) Equity Shares:

The Company made an Initial Public Offer ("IPO") of 16,048,011 equity shares of Rs. 10/- each. Out of 16,048,011 equity shares, 172,960 equity shares were allotted to employees at a premium of Rs.63 per share and 15,875,051 equity shares to others at a premium of Rs.70 per share. The Company made a pre-IPO placement of 3,772,771 equity shares of Rs. 10/- each at a premium of Rs.58.11 per equity share. The aggregate share premium received in IPO and pre-IPO is Rs. 1,341,385,773 million. On 29 March 2010, the equity shares of the Company were listed on the Bombay Stock Exchange.

b) Preference Shares:

During the period out of 203,767 1% Redeemable Optionally Convertible Non Cumulative Preference Shares of the face value Rs. 101- each. 27,381 shares are converted in to 27,381 equity shares of Rs 10/- each and the balance of 176,386 I % Redeemable Optionally Convertible Non Cumulative Preference Shares were redeemed for cash at Rs 10/- per share.

c) Dividepds:

Each Preference Share shall carry an annual preference dividend of 1% (one percent), such dividends to be non cumulative and payable annually prior to the payment of dividends on the equity shares. The Preference Shares being non-cumulative in nature, any dividend unpaid for any financial year shall not be carried forward and/or accumulate in the subsequent financial year. No dividend shall be paid on the Equity Shares if the preference dividends or any portion thereof on Preference Shares are in arrears.

Redemption: The Company shall be entitled, at its option to call for redemption of all or part of the Preference Shares in one or more trenches, at a redemption price of Rs. 10/- per Preference Share plus an amount equal to any accrued but unpaid dividend on such Preference Shares.

3 Reserves and Surplus

Capital Subsidy:

Erstwhile DQ Entertainment Limited was sanctioned a Capital Subsidy of Rs. 2,000,000 under clause 7(f) of ICT Incentive Policy of the Government of Andhra Pradesh, to be released in five equal annual installments of Rs.400,000 each as per G.O.Rt.No.284 dated 10th September 2004. The Company has received Rs.800,000 (31.03.2009: Rs.800,000) and has been transferred to Capital Subsidy.

4 Distribution Rights

Distribution rights (Schedule 4 of the financial statements) aggregating to Rs1,029,662,841 (31.03.2009: Rs.470,531,887) represent the unamortized value of costs incurred in acquiring distribution rights. The Company started acquiring these rights from the year 2003-04 and till date 30 series (31.03.2009:23) of Animation rights have been acquired for different territories across the globe. The Company has started earning revenues from usage of rights since 2006-07. The Company has performed testing for impairment of intangibles which resulted in an impairment loss of Rs. 16,067,608 (31.03.2009: Rs.62,177,325) on account of recoverable amount of intangibles being less than its carying amount. These have been included in the line item "Depreciation & Amortisation" in the Statement of Profit and Loss.The accumulated Impairment Loss as at 31.03.2010 on distribution righhts amounted to Rs.78,244,933 (31.03.2009: Rs.62,177,325).

5 Capital Work-in-progress

a) Includes Rs.48,572,918 (31.03.2009: Rs. 19,503,551) on account of advances to suppliers of capital goods and Rs. 318,608,602 (31.03.2009: Rs.535,788,957) incurred under various co-production agreements for which distribution rights are yet to be received. Pending receipt of distribution rights and considering the potential benefits likely to accrue to the Company in future, the carrying amount of Capital work-in-progress have been valued at cost.

b) Includes Rs.35,510,728 (31.03.2009: Rs.71,390,998) incurred towards projects under development to be exploited as Telivision Series/Films and others. Based on review of estimated future realizations the management is of the view that estimated future recoverable amount from these projects are more than its carrying unamortized cost and consequently no provision for impairment is considered necessary by the management at this stage.

6 (a) The company is an Export Oriented Unit registered with Software Technology Parks of India and its business income is exempted from tax in terms of section 10A of the Income Tax Act, 1961. Currently Tax provision on book profit is provided as per the provisions of Section 115JB (MAT) of the Income Tax Act, 1961. As a measure of prudence, in the absence of virtual certainty of future profits and having regard to the nature of Companys busines, the deferred tax asset of Rs. 12,474,002 has not been recognized.

7(a) Particulars of Loans and Advance in the nature of loans as required by clause 32 of the listing agreement

During the year there are no loans and advances which are in the nature of loans given to subsidiary.

8 Contingent Liabilities

31 March 2010 31 March 2009 Rs. Rs. a) Bonds executed in favour of customs and excise authorities 37,250,000 37,250,000

b) Letters of Credit 302,192,625 316,578,819

c) Income tax assessment of DQ Entertainment (International) Limited has been completed till Assessment Year 2007-08 (financial year 2006-07). Income Tax department has preferred an appeal for the Assessment Years 2004-05 and 2006-07 and is pending before the Income Tax Appellate Tribunal (ITAT). No demand has been raised by the Department on the above. d)Claims against the Company not acknowledged as debts is Rs.9,642,147 (31.03.2009: Rs. 9,642,147). This comprise of demands raised by the Income Tax department for non deduction of TDS on payments to non residents on which the Company has gone on appeal and the appeal is allowed before the Commissioner of Income Tax (Appeals), Hyderabad in favor of the company. The department has gone for an appeal and the same is pending before the Income tax appellate tribunal (ITAT).

9 (a) The company uses Forward Exchange Contracts and Currency Options to hedge its exposures in foreign currency related to firm commitments and highly probable forecasted transactions. The information on Derivative instruments is as follows:

(b) Exchange difference in respect of forward exchange contracts to be recognised in the Profit and Loss Account in the subsequent accounting period amounts to Rs. 783,375 (31.03.2009: Rs.299,000).

10 Micro, Small and Medium Enterprises Development Act, 2006

The Company has received intimation from certain "suppliers" regarding their status under the Micro, Small and Medium Enterprises Development Act 2006 confirming that they do not fall under the Micro, Small & Medium Enterprises Category while other "Suppliers have not intimated regarding their status, and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid/payable as required under the said Act have not been given.

11 Related party disclosures

11 a) Related parties and their relationships

i) Holding and Subsidiary Companies

a. DQ Entertainment (Mauritius) Limited - Holding company

b. DQ Entertainment Pic - Parent of holding company

c. DQ Entertainment (Ireland) Limited - Subsidiary company

ii) Key management personnel

Mr. Tapaas Chakravarti - Managing director & Chief executive officer

Ms. Sumedha Saraogi, (Vice President - Management Office and After Sales)

iii) Relatives of Key Management Personnel with whom the Company had transactions during the year - Mrs. Rashmi Chakravarti (wife of Mr. Tapaas Chakravarti) (Director with effect from 25 May 2009) Ms. Nivedita Chakravarti (Daughter of Mr. Tapaas Chakravarti) iV) Associate of the Ultimate Holding Company

Method Animation SAS f

11 b) Transactions with above in the ordinary course of business £

12 Leases

The Companys significant leasing arrangement is in respect of operating lease for premises. The Company has exclusive right to cancel the lease with prior notice. The aggregate lease rents payable are charged as rent in the Profit and Loss Account. The aggregate amount of Lease rentals charged to Profit and Loss account is Rs.HI ,263,801 (31.03.2009: Rs.l+Lt,697,657).

13 Segmental Reporting as per Accounting standard 17: 22 (a) Business Segment

The Company comprises the following main business segments:

Animation":

The production services rendered to production houses and training rendered for acquiring skills for production services in relation to the production of animation television series and movies.

Gaming:

The services provided for the contents in Console / Mobile / Other platforms.

Distribution:

The revenue generated from the exploitation of the distribution rights of animated television series and movies acquired by the Company.

14 Figures of previous year have been regrouped/rearranged/reclassified wherever necessary to conform fo the current year presentation.

 
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