Interim Results

DQ ENTERTAINMENT plc

('DQE' or the 'Group')

Interim Results for the six months ended 30 September 2010

Strong growth continues

DQE, the animation, gaming and entertainment production and distribution group listed on AIM and (DQEI) The Bombay Stock Exchange is pleased to announce today its interim results for the six months ended 30 September 2010.

Financial Highlights:

·; Profit before tax up by 165% at US$ 2.99m (Previous period*: US$ 1.13m)

·; Revenue up by 30% at US$ 18.73m (Previous period*: US$ 14.40m)

·; Order book currently at US$ 140 mn including amounts already billed in the current year

·; Cash and cash equivalents of US$ 20.50m (Previous period*: US$ 2.6m)

*Previous Period as referred to is the six months ended 30 September 2009

Tapaas Chakravarti, Chairman & CEO, said:

"We remain confident that our business strategies are sound; backed by robust order book and the operational milestones achieved this far will pave the way forward achieving growth for the company. Our technological and creative base backed by systematic expansion of necessary capacities in 3D stereoscopic productions for television and feature films will put DQE ahead of its peers as our IP's gain further traction worldwide."

Contact:

Chairman and CEO's Statement

Introduction:

The Group has delivered revenue growth at a CAGR of 27.85% during the last five years and current trading results are consistent with our budgeted results for the full financial year 2010-11.

 More recently the Group has focused on its strategy of IP lead development which has been critical in maintaining momentum and enhancing our reputation and product offering in an increasingly value driven business.

In line with our strategic business plan to work globally with knowledgeable and resourceful business partners, recent months have seen us conclude multiple alliances all over the world with the objective of unlocking greater value from our own IPs. We have conclusively demonstrated high growth potential from:

1. Development and co-development of classical, popular and iconic intellectual properties such as The Jungle Book, Peter Pan, Lassie, Iron Man - II, Casper - II and others and

2. Licensing for TV, consumer products and publishing;

Going forward besides a large number of TV productions we will also focus on development, production and distribution of stereoscopic animated feature films with global partners, as well as further our objective to generate multiple revenue streams for licensing, publishing and merchandising. Significant progress has been made for two such productions.

The inherent technological prowess of our production teams have helped to increase productivity and create a robust production pipeline capable of simultaneously handling multiple productions. With the recent success of The Jungle Book and the excellent ratings on TF1 in France, our creative expertise has also now been proven beyond a doubt and allayed any skeptism that may have existed.

As per the industry trends, more than 60% of the deliveries happen during the peak season starting from September onwards until the beginning of March during the second half of the year. Continuing in the trend, DQE has achieved close to 40% of its aggregate turnover during the first half of the financial year 2010-11 while second half is well on the way.

Overview:

I am pleased to present strong interim results for the six months ended 30 September 2010.

DQE is expanding its footprint of production, client-partner relationships, licensing, merchandising and publishing worldwide; testimony to this was DQE's resounding success at the MIPCOM Festival - 2010 with lot of sensational events taking place and deals been signed.

Two of DQE's own IPs 'The New Adventures of Peter Pan' a 3D CGI stereoscopic animated series and 'Lassie & Friends' a 2D HD animated series were screened at MIPCOM in the presence of an elite gathering of leading broadcasters, industry professionals and production partners. The trailer of Peter Pan was ranked second and Little Prince ranked third while Lassie was ranked eleventh for most viewed trailers by the industry peers from among 1736 entries.

Financial Review:

The Group had a successful first half with turnover increasing 30% to US$ 18.73Mn (Previous Period: US$ 14.40 Mn).

EBIDTA (being 'operating result before financing costs' and 'depreciation/amortization costs') increased by 72% at US$ 6.88 Mn (Previous period US$ 3.99 Mn). EBIDTA continued to grow with increasing revenues from Licensing & Distribution Division.

Revenues from the Licensing & Distribution division during the six month period upto 30th September 2010 was US$ 3.35 Mn (Previous Period US$ 0.89 Mn) demonstrating the strength of the co-production strategy undertaken by the Group.

The Group has raised US$ 31.57 Mn (Net of IPO Expenses) during March '10, through an Indian Pre-IPO placement and IPO to finance the group's continued growth and invest in expansion of infrastructure and global co-productions. Since the IPO the Group has invested around US$ 16 Mn in the infrastructure upgradation and co-production investments with the balance being held in Bank Deposits & Short Term Liquid Investments.

Operations Review:

DQE aims to bring internationally recognised brands from film, television and publications to life in both animated and live action forms, assisted by international partners, telecasters, distributors and international producers.

In line with the Group's strategy to move up the value chain, DQE continues to produce/develop its classic IPs including The Jungle Book, The New Adventures of Peter Pan, Lassie and Friends, Casper Season 2, Iron Man - Season 2, Charlie Chaplin, Balkand I, II, & III, Mysteries and Feldua and many more.

·; THE JUNGLE BOOK - 52 X 11- 3D HD TV Series:

The first broadcast of our home grown 52 x 11' 3D HD TV series "The Jungle Book" on TF1 channel in France was aired on 24th October and has received top ratings. The Jungle Book has already been sold in multiple countries around the world for broadcasting, licensing and distribution. It is co-produced by DQE with international partners including TF1 and Moonscoop, France, ZDF Group( Germany). Rights to broadcast the series have also been acquired by ABC (Australia), Noga TV (Israel), Disney(Asia), Tele Quebec ( Canada), BBC(UK) and JCCTV(Middle East), TVO(Canada), Thai PBS, TV-12 (Singapore), while Home Video rights have been acquired by NBC Universal, TIGA (Thailand) and Play Records (Israel) , as well as several other licensees for worldwide merchandising.

·; THE NEW ADVENTURES OF PETER PAN - 26 X 22' - 3D HD STEREOSCOPIC TVSERIES

The New Adventures of Peter Pan was successfully launched in MIPCOM Festival - Cannes, France along with co-production partners ZDF Group(Germany) and Method Animation( France) supported by France Televisions, De Agostini Group (Italy), ATV( Turkey) and B Channel(Indonesia).

DQE is producing this home grown Euro 9.97 mn stereoscopic 3D series with global equity co-production partners for winter 2011 release.

·; LASSIE & FRIENDS - 52 X 11' 2D HD TV SERIES

Iconic Lassie & Friends goes to animation for the first time. DQE is the lead producer supported by the original right owners Classic Media(USA), French Broadcaster TF1, French co-producers - Super Prod & Story Board Animation and ZDF group(Germany). Being produced at a global budget of Euro 7 mn. Lassie a well known global brand has been produced in live action movies several times which includes actors like Elizabeth Taylor, James Steward and Peter o' Tool. DQE along with its global equity co-production partners is animating it into a TV series of 52 episodes.

·; CASPER - THE FRIENDLY GHOST - SEASON 2 - 52 X 11' 3D CGI TV SERIES

After successful run of Casper TV series - Season I worldwide, under popular demand, DQE and its equity co-production partners Classic Media(USA), Moonscoop & TF1 (France) and Cartoon Network(USA) have gone ahead with production of another 52 x 11' 3D animation series of this friendly ghost.

Casper has become one of the most famous properties with global recognition for DQE. Season one, which premiered in Canada on YTV and on Cartoon Network (USA) in January 2009, was a huge success and has since been broadcast on Viacom18's kids channel, Nick, and also across the entire South Asia and Sun TV networks kids channel, Chutti TV in November 2009. TF1 the leading French broadcaster and Cartoon Network(US) are already committed to broadcasting the second season and Cartoon Network US is expected to launch the second season by Halloween 2011.

·; IRON MAN - SEASON II - 52 X 11' 3D HD TV SERIES

Iron Man Season II has gone into production with Marvel group (USA) now owned by Disney group.

The first season of Iron Man: Armored Adventures debuted in the United States on Nicktoons Network in April 2009 to both critical and audience acclaim, with the hour-long premiere event becoming the highest rated original series premiere in Nicktoons history. This has triggered the demand for second season.

·; CHARLIE CHAPLIN - 3D CGI - 104 X 7' TV SERIES:

DQE is in the development of a series of animated short films for television in collaboration with French production companies Method Animation, MK2 and France television. DQE, Method Animation and MK2 announced the production and worldwide distribution and exploitation of an animated version of 104 six-minute episodes inspired by the legendary film icon Charlie Chaplin's Hollywood films.

DQE and Method Animation are committed to preserving the sense of humour and the emotional values present in all of Charlie Chaplin's 70 films, all the while bringing out the quirky, burlesque and comic tone of the character he created in 3D stereoscopic avatar.

·; THE PRODIGIES - FEATURE FILM - 3D STEREOSCOPIC

The prestigious 3D stereoscopic animated feature film "The Prodigies" is under completion in DQE. This is being produced for Warner Bros, Fidelite Films (France), Onyx Films(France).

The Prodigies, is an adaptation by Matthieu Delaporte and Alexandre de la Patelliere from the novel written by Bernard Lenteric in 1982. Directed by Antoine Charreyon the film uses the motion capture and 3D Stereoscopic technologies. Artistic director is Victor Antonov, who created the visuals for the famous video game "Half-Life 2." Character design is from Humberto Ramos and Francesco Herreira, Marvel Comics designers. Warner Bros Pictures, Studio37 from Orange group and Kinology are responsible for Distribution and Sales.

·; THE LITTLE PRINCE 52 X 22' - 3D HD STEREOSCOPIC TV SERIES

DQE with its French lead co-producers France TV & Method Animation( France) supported by WDR (Germany) and Sony Entertainment world wide is co-producing 52 x 22' 3D stereoscopic TV series at a global budget of Euro 18 mn. The deliveries to start from winter of 2011 and to continue till beginning of 2013.

The Little Prince (French: Le Petit Prince) which is now being co-produced at DQE is based on the world famous books of Antoine de saint-Exupery written in 1943. It has been translated into more than 180 languages and has sold more than 80 million copies, making it one of the best-selling books ever. Little Prince appeared in theatricals, television, broadway kind of shows non-stop for decades and now for the first time goes into hi-end 3D stereoscopic TV series to be followed by a silver screen theatrical release by 2013.

·; LITTLE NICK - 52 X 11' - 3D HD TV SERIES

Season I of Little Nick is doing extremely well worldwide and DQE is privileged that another season of 52 x 11' TV series has gone into production with M6 & Method Animation (France) and ZDF (Germany).

Little Nick, the book has sold over 10 million copies in more than 30 countries and has also appeared first as a Live Action feature film and now slated for an animated feature film to be produced by M6 group France.

·; Besides all the above several tele movies such as Balkand - II/ III & Omkar - II for Cartoon Network, The Jungle Book - Home Video for NBC Universal, Tara Duncan - TV series for M6 France, The Mysteries & Feluda - TV series, Galactik Football for Alphanim France & Keymon - TV series for Nickelodeon are also in production.

·; DQE's IP division leaps ahead with major iconic IP productions such as The Jungle Book, Peter Pan, Lassie & Friends, Iron Man - II, Casper - II, Mysteries & Feluda, Balkand, Omkar and many more.

·; DQE has established significant presence globally as a major producer of hi-quality IPs and exploiting it for publishing, merchandising and feature film production.

·; Post IPO, DQE's expansion in Special Economic Zone (SEZ) is underway and is expected to be commissioned by January 2011 housing over 1600 hi-end 3D animation staff.

Licensing and Distribution (L&D)

DQE currently has over 450 hours of animated production content for revenue exploitation and further enhancing our portfolio with big brands in near future.

With the success of its various IPs and co-productions, DQE Group has concluded several global licensing and merchandising deals for all platforms of television, home entertainment, DVD sales, publishing of books and merchandising.

Several licensing and merchandising deals have been executed for various properties with globally recognised partners including TF 1 Enterprises (France), ZDF Enterprises (Germany), Al Jazeera Children's Channel - for Arabic Countries, CPLG (London), Beltex (Belgium), Hachette Livre, Media Corpe( Singapore), Noga Communications & Ahim Fred(Israel), Turner Group etc. Eg: The Jungle Book, Peter Pan, Lassie, Iron Man, Casper, Mysteries & Feluda

Major IP ownerships for globally renowned brands with marquee partners has opened up several additional revenue streams which the Directors anticipate will accelerate growth and profitability.

Significant licensing and distribution deals concluded over the past few months include:

l Licensing deal for 'The Jungle Book' with the leading card makers Universal Cards,(Universal) Germany.

l The signing of a home video distribution deal for the 3D animated TV series "The Jungle Book" by Play Records Marketing & Distribution Ltd ("Play Records"), Israel.

l Licensing and merchandising agreements for 'The Jungle Book' with Osem Investments Limited, an Israeli subsidiary of Nestlé S.A. ("Nestle"), a food production and distribution company and also the Burger Ranch franchise, a fast food chain across Israel.

l Exclusive toy licensing agreement for DQE's 3D animated series The jungle book with Mookie Toys Ltd ( Mookie ), a UK based company.

l Publishing deal for The Jungle Book with Hachette Livre for global French language publications including; story books, activity books, novelty books, workbooks and home learning chapter books;

l Broadcasting agreement with Noga Communications for the broadcast of The Jungle Book in Israel;

l Broadcast deal with Walt Disney Television International's "Hungma TV" for the broadcast of "Twisted Whiskers" co-produced with American Greetings and Mike Young Productions;

l An exclusive broadcast with Al Jazeera Children's Channel (JCC) for the exclusive broadcasting rights to Jungle Book across 22 Arabic countries for a fixed term of five years;

l Multiple merchandising deals with D'arpeje SA and School Pack in France for the manufacture of school related items. Further merchandising agreement with Ahim Fried Limited for the manufacture and sale of Jungle Book products within Israel;

l The Copyright Promotions Licensing Group Ltd (CPLG) have signed a 3 year agreement to be responsible for merchandising, publishing promoting and direct-to-retail strategy for multiple countries including the UK, Spain, Portugal Japan and Italy; and

l In addition DQE have signed a second deal for fabric products with Belltex(Belgium).

Condensed Consolidated Income Statement

Condensed Consolidated Comprehensive Income Statement

Total comprehensive income attributable to:

Condensed Consolidated Financial Position

Condensed Consolidated Financial Position (continued)

These financial statements were approved by the Board of Directors and authorised for use on

12 November 2010.

Signed on behalf of the Board of Directors by:

Director Director

Condensed Consolidated Statement of Changes in Equity for the period ended

30 September 2010

Condensed Consolidated Statement of Changes in Equity for the period

ended 30 September 2010 (continued)

Condensed Consolidated Statement of Cash Flows for the period ended 30 September 2010

Condensed Consolidated Statement of Cash Flows for the period ended 30 September, 2010 (continued)

Notes to Condensed Consolidated Financial Statements

NOTE A - BASIS OF PREPARATION

1. General information

DQ Entertainment plc (the 'Company' or "DQ plc") is a company domiciled and incorporated in the Isle of Man on 19 April 2007 and was admitted to the Alternative Investment Market of London Stock Exchange on 18 December 2007. The Company raised approximately USD 54 million (£26.83 million) at listing (before Admission costs).

The condensed consolidated financial information of the Company for the six months period ended 30 September 2010, comprises the financial Information of the Company, its subsidiaries and associate (together referred to as the 'Group').

As at 30 September 2010 the following companies formed part of the Group:

The Company's registered address is 15-19, Athol Street, Douglas, Isle of Man.

The Group is primarily engaged in the business of providing traditional and digital animation for television, home video, feature films and the like, and game art development. The Group also is engaged in exploitation of its distribution rights to broadcasters, television channels, home video distributors and others.

The functional currencies of the respective Group companies are:

2. Significant accounting policies

The accompanying condensed consolidated financial information of the Company have been presented for the six months ended 30 September 2010 along with comparatives for the six months ended 30 September 2009 and the year ended 31 March 2010. Condensedconsolidated interim financial statements have been prepared on an accruals basis of accounting using accounting policies consistent with IAS-34 'Interim Financial Reporting' as issued by the International Accounting Standards Board ('IASB').

NOTE A - BASIS OF PREPARATION (continued)

2. Significant accounting policies (continued)

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2010, which have been prepared in accordance with International Financial Reporting Standards ('IFRS's)

In the opinion of management, all adjustments, which are of a normal recurring nature and necessary for a fair presentation, have been included. The Company has chosen to present the condensed consolidated financial position & condensed consolidated income statement, condensed consolidated comprehensive income statement, condensed consolidated statement of cash flows and condensed consolidated statement of changes in shareholders' equity along with selected explanatory notes. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with IFRS have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the information presented not misleading. These condensedconsolidated financial statements have been prepared using the same accounting policies that were applied in the preparation of the Company's annual financial statements for the year ended 31 March 2010.

The directors have had regard to the 12 month period from the date of approval of the interim financial statements and have reviewed the forecasted cash flows. The Company has been cash generative in the interim period and has sufficient resources to meet its ongoing liabilities as they fall due. Consequently the directors confirm the appropriateness of the going concern basis of preparation of these condensed consolidated financial statements.

NOTE B - STANDARDS AND INTERPRETATIONS NOT YET APPLIED

The following new Standards and Interpretations, which are yet to become mandatory, have not been applied in the Company's financial statements.

Based on the Company's current business model and accounting policies, management does not expect any material impact on the Company's financial statements when any of the other standards or interpretations becomes effective.

The Company does not intend to apply any of these pronouncements early.

NOTE C - SEGMENT REPORTING

Segment information is presented in respect of the Group's business and geographical segments. The primary format, business segments, is based on the Group's management and internal reporting structure.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Business segments

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 animated 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

NOTE C : SEGMENT REPORTING (Continued)

The following is an analysis of the Company's revenue and results by operating segment for the periods under review:

NOTE D - CASH AND BANK BALANCES

NOTE E - FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at fair value through profit or loss comprise of plain vanilla currency option contracts held by the Group as at 30 September 2010. The fair value of these derivative instruments is as follows:

NOTE F - INTANGIBLE ASSETS

.

NOTE G - ADVANCES PAID FOR DISTRIBUTION RIGHTS

Advances paid for distribution rights include amounts paid to the producers for acquisition of the distribution rights and amounts incurred on internally generated intellectual property rights pending for capitalisation. These advances are transferred to distribution rights on completion of the entire production activities and when the asset is ready for exploitation. No amortisation is charged on these advances until they are transferred to the distribution rights. However up to the point of transfer, they are assessed annually for impairment.

NOTE H - OTHER FINANCIAL ASSETS

NOTE I - INTEREST BEARING LOANS AND BORROWINGS

Interest bearing loans and borrowings comprise the following:

NOTE J - PROVISION FOR RETAKES

Retakes include creative changes to the final product delivered to the customer, performed on the specific request of the customer at the Group's own cost. Requests for retakes from customers are expected to be received by the Group within a period of 3 months from the final delivery and hence the provision is not discounted.

NOTE K - PERSONNEL EXPENSES

Details of personnel expenses included in cost of sales and administrative expenses are as follows:

NOTE L - NET FINANCING COSTS

NOTE M - EARNINGS PER SHARE ("EPS")

Profit attributable to ordinary shareholders

The Group does not have any dilutive instruments for the period ended 30 September 2010, 30 September 2009 and for the year ended 31 March, 2010 and as such Diluted EPS equals Basic EPS.

NOTE N - NON - CONTROLLING INTERESTS

During March 2010, DQ India issued further equity shares, as a result of which the share holding of DQM was diluted to 75%.

NOTE O - EQUITY

a) Ordinary shares

DQ plc presently has only one class of ordinary shares. For all matters submitted to vote in the shareholders' meeting, every holder of ordinary shares, as reflected in the records of the Company on the date of the shareholders' meeting, has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Company.

The Company has an authorized share capital of 50,000,000 equity shares of 0.1 pence each.

Issue of ordinary shares

Share premium - The amount received by the company over and above the par value of shares issued is shown under this head.

The share premium reserve can be utilised by the Company for the declaration of bonus shares and for offsetting incremental costs directly attributable to the issues of new shares

b) Reserves

Translation reserve - Assets, liabilities, income, expenses and cash flows are translated into USD (presentation currency) from Indian Rupees (functional currency of DQ India), Euros (functional currency of DQ Ireland) and Great British Pounds (functional currency of DQ plc). The exchange difference arising out of the period-end translation is debited or credited to foreign currency translation reserve.

NOTE O - EQUITY (Continued)

 The movements in this reserve are set out below :

Exchange differences relating to the translation of the net assets of the Group's foreign operations from their functional currencies to the Group's presentation currency (i.e. USD) are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve.

Accumulated earnings - Accumulated earnings include all current and prior period results as disclosed in the income statement. The movements in the accumulated earnings are set out below :

The accumulated earnings are in the nature of distributable reserves for the purposes of distribution of dividend.

Other Reserves - The Reverse Acquisition Reserve, Equity component of convertible instruments and Capital Redemption Reserve are non distributable in nature.

NOTE P - CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

NOTE Q - RELATED PARTIES

Identity of related parties

DQ plc has a related party relationship with its directors, executive officers, subsidiaries and associate.

DQ plc does not have any ultimate controlling entity.

Related parties and their relationships

a) Subsidiaries

DQ Entertainment (Mauritius) Limited (with effect from 27 November 2007)

DQ Entertainment (International) Limited (with effect from 18 February 2008)

DQ Entertainment (Ireland) Limited (with effect from 12 November 2008)

b) Associate

Method Animation SAS (with effect from 28 March 2008)

RELATED PARTIES -

c) Key management personnel

Mr. Tapaas Chakravarti - Director

Mr. K. Balasubramanian - Director

Ms. Theresa Plummer - Director

Mr. Sanjay Saxena - Director

Mr. Anthony BM Good - Director

d) Relatives of key management personnel with whom DQ India had transactions during the period - Mrs. Rashmi Chakravarti (wife of Mr. Tapaas Chakravarti)

Trading transactions

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

Revenue from production from related parties was generated at prices consistent with the the Group's usual trade practices. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties.

NOTE Q - RELATED PARTIES (Continued)

Compensation of key management personnel

Directors of the company and their immediate relatives control 14.47 per cent of the voting shares of the company.

The remuneration of directors and other members of key management during the period was as follows:

Other related party transactions

Remuneration paid to relatives of key management personnel during the period was USD 26 Thousand (30 September 2009: USD 29,000; 31 March 2010: USD 60,000) and the outstanding balance as at

30 September 2010 was USD 5,000 (30 September 2009: USD 3,000 and 31 March 2010: USD 3,000).