Preliminary Results

DQ Entertainment plc

('DQE', the 'Company' or the 'Group')

Results for the year ended 31 March 2013

DQ Entertainment plc (AIM: DQE), a leading global animation, gaming, live action, entertainment production and distribution company, today announces its results for the year ended 31 March 2013

1. Financial Highlights:

* EBITDA is calculated by adding depreciation and amortisation expenses to the operating results before financing costs

** Includes contracted forward production revenues and signed licensing and distribution deals

1. Chairman's Statement:

The global economic scenario, especially in Europe and North America, continues to be very challenging. The onus is on the company custodians and management to keep on delivering results even in times such as these. Creative businesses mainly need to focus on core assets and deriving as much from them as possible. Value creation from Intellectual Property ('IP') development has emerged as an asset around which business models and financing are increasingly being focussed.

Building upon our deep expertise in producing high end 3D, CGI and 2D digital animation, we took the step, 3 years ago, into IP based production of digital content for television. The development, financing (through pre-sales globally), production, distribution and ancillary exploitation of entertainment content across all platforms of deliveries is paving the way for long term sustainable revenues for the Company.

The Company is firmly on the path to identify new IP opportunities and generate high calibre creative content for worldwide distribution and exploitation.

2. Operating Highlights:

This year we have good examples of our success in the area of value creation through IP development, which in a short period of time has gathered considerable momentum.

Most notable amongst these properties are : the 3D TV Series "The Jungle Book" which is now in second season of production approved by many international broadcasters; the 3D TV Series "Adventures of Peter Pan" which was successfully delivered by us this year and is already airing with high ratings on networks such as Sky Italia (Italy) and TF1 (France); and the 3D TV Series Little Prince which has been commissioned for a third season.

New project commissions include some prestigious titles like: TV series such as NFL Rush Zone for Nick Toons (USA) , a TV feature for Disney India, Jungle Book Second Season for ZDF(Germany) and TF1 (France) and Little Prince Season 3 for France Television and other Broadcasters in Europe. We continue to benefit from our cross continental relationships with global networks and production partners established through diligent and timely completion of projects undertaken.

Our content creation is managed via a highly efficient and proprietary production and tracking system that significantly improves resource optimisation. Against the backdrop of shrinking budgets and poor economic conditions that prevail worldwide, the Company has sustained qualitative growth in terms of content production and distribution and capitalised on opportunities in the entertainment marketplace, globally.

Licensing and Distribution

Our licensing and distribution efforts have proven increasingly successful on a global scale and are helping to create long term and sustained value for DQE. Our sales team is continuing to negotiate new deals across all our portfolio of properties.

• 37 new merchandising deals were signed for "The Jungle Book" while 10 were signed for "The New Adventures of Peter Pan". Noteworthy amongst these are the 'Quick Service Restaurant (QSR) Promotional deal with Burger King across 14,000 restaurants worldwide which starts in the UK & USA in June'13 followed by Latin America, Europe and Middle East and the exclusive launch of The Jungle Book Home Video in Wal-Mart stores across USA.

·; The Jungle Book 60' TV feature that is now available through Phase 4 films in the Redbox rental catalogue is currently topping the popularity charts being the #1 family film viewed in Canada and #4 in the U.S.!

·; Red Box the popular DVD rental site in North America with 34.5% market share has 42,000 kiosks at more than 34,000 locations and specializes in the rental of DVDs, Blu-ray Discs, and video games via automated retail kiosks.

·; More than 25 new broadcasting and Home video agreements have been signed for a variety of properties including Ironman, Lassie, Jungle Book, Peter Pan and Tara Duncan with leading networks such as Turner, ZDF Germany, Tele Quebec and TVO Canada, Disney XD USA, Nickelodeon etc.

The licensing and distribution revenues currently represent approximately 21% of total revenues and have progressed very well during the year.

The Company had signed a major licensing and merchandising contract during the previous year, with a leading licensing agency in the USA for a period of four years. The said contract was on a non-cancellable basis resulting into an upfront recognition of distribution revenue of Rs. 16.39 crores.

The New Adventures of Peter Panseries is just launched globally and the revenue from the distribution of this series will accrue from the current year and enable us to improve the cash flows.

Productions successfully completed and delivered:

·; The New Adventures of Peter Pan- 26 x 22' 3D HD Stereoscopic TV series, DQE IP, coproduced with ZDF Group (Germany), and Method Animation (France), supported by France Television, De Agostini Group (Italy), ATV (Turkey), B Channel-Indonesia, JCCTV (Middle East) and Noga (Israel) has been successfully delivered.

·; Mickey Mouse Club House Season 4 & 5 -CGI TV Series for Walt Disney Television Animation (USA) was delivered, cementing our long standing relationship with Disney USA, over 5 seasons of this TV series.

·; Charlie Chaplin Season 1 - 104 x 6' 3D TV Series with Method Animation was successfully produced and delivered to France Television, MK 2 (France) and WDR-Germany

·; Casper Season 2- 52 x 11' 3D TV Series with Harvey Entertainment (USA), Moonscoop & Cartoon Network (USA), TF-1 (France) and Moonscoop (France) was delivered after production of season 1 by DQ

·; Keymon Ache - 1 x 70' animated TV feature produced and delivered to Nickelodeon India

·; Little Prince Season 2 - 3D TV Series with Method Animation, for France Televisions, and RAI (Italy)

·; Omkar season 3 with Turner International - Cartoon Network

New projects signed in the year 2012-13

We have signed new co-productions/work-for-hire contracts (but not yet in production) with international partners for delivery over the next 18-24 months as follows:

·; Raz and Benny-52 x 11' CGI TV series with Foot Hill Entertainment, Europe

·; Leo & Pisa gang- 52 x 11' CGI TV series with MPP (Germany)

·; NFL Rush Zone 3 - 20 x 22' CGI & 2D TV Series with Rollman Entertainment, USA for Nick Toons(USA)

·; Iesodo - 10x13' CGI TV series with Rollman Entertainment (USA)

·; Manav - 65' 2D TV Feature with Disney India

Projects in production:

Our production pipeline continues to be robust optimising the utilisation of man and machine resources. The under mentioned are currently in production to be progressively completed for delivery in 2013-14.

·; The Jungle Book Season 2- 52 x 11 3D TV series being coproduced with ZDF TV (Germany), TF1 TV (France), Moonscoop (France), ZDF-E (Germany)

·; Jungle Book Christmas Special - CGI TV Feature coproduced with ZDF TV (Germany) and Moonscoop (France)

·; Lassie & Friends - 52 x 11' 2D TV being coproduced series with Dreamworks Classics (USA), TF1 (France), ZDF (Germany) and Noga (Israel)

·; Robin Hood, Mischief in Sherwood - 52 x 11 3D TV series being coproduced with Method Animation (France), TF1 (France), ATV (Turkey), De Agostini (Italy) and ZDF (Germany)

·; Lanfeust- 26 x 22' 3D TV series coproduced with Gaumont Alphanim (France)

·; Little Prince Season 3 - 26 x 22' CGI TV series - third season of this iconic series with Method Animation (France), France Televisions and RAI (Italy)

·; NFL Rush Zone 2 - 24 x 22' CGI & 2D TV Series with Rollman Entertainment (USA) for Nick Toons( USA)

·; The Rising Star - 26 x 22' 2D TV series coproduced with TMS Entertainment (Japan) and Kodansha (Japan)

·; Keymon Season 2 - 52 x 11' 2D TV series with Nick India

·; 3D Jungle Book Christmas Special- Jungle All The Way coproduced with ZDF (Germany) and Disney channel.

Other productions currently in development

·; 5 & It - 52 x 11' 3D HD TV series to be coproduced with ZDF Enterprises (Germany)

·; The Wind in the Willows - 52 x 11' under development by our IP creative team

·; The Jungle Book Feature Film - 90' 3D stereoscopic feature film

The Jungle Book Feature film is in advanced stages of development with a highly acclaimed team of international talent from the world of feature animation, which includes Screenwriter Billy Frolick ("Madagascar" and "Holy Cow"), Co-Directors Jun Falkenstein ("The Tigger Movie", "The Smurfs" and "Despicable Me") and Kevin Johnson ("Alvin and the Chipmunks: Chipwrecked", "Harry Potter & The Sorcerer's Stone", "Astro Boy" and "Stuart Little").

The scripting and the sizzle reel (pilot) have been completed and we have had initial discussions with major distributors in the US as well as feature film financing companies. Advanced negotiations are underway for the financing of US$ 40 million for the production of The Jungle Book feature film, through a film fund managed by a company specialising in motion picture financing, funding and consulting on worldwide distribution of films.

The film will be produced under my direct supervision as Executive Producer along with Eric S. Rollman, CEO of Rollman Entertainment, Inc., (former President of Marvel Animation and Saban/Fox Family Productions) and Rouhini Jaswal, Vice President (Intellectual Properties) of DQE. The film is targeted to be released in 2015.

Awards and Accolades

• DQE received the "Best Indian Animated TV Series" award for its highly successful series The Jungle Book at Infocom- Assocham EME in March 2013.

• NFL Rush Zone season 2, produced by DQE for Nick Toons USA, is nominated at 3 different awards for Best Animated Show at Namic Awards, Best new series at Cynopsis kids Imagination awards and for outstanding achievement in main title and graphic design at Daytime Emmy Awards 2013.

Our key strategic priorities for the forthcoming year include:

·; Continued expansion of our portfolio of global and iconic branded intellectual properties (IPs) such as a second season of The Jungle Book TV series and a second season of the Peter Pan TV series

·; Capitalize on our skillsets of high calibre visual effects (VFX) and 3D stereoscopic theatrical animation production

·; Accelerate growth in licensing and distribution through focus on hitherto untapped markets such as China, Latin America and Eastern Europe

·; Exploitation of newer delivery formats through the development of Apps and interactive games for our famous IPs such as Jungle Book and Peter Pan.

·; To improve the cash flow position substantially.

Outlook

The production pipeline for the year ahead is strong with productions of The Jungle Book Second Season, New Adventures of Peter Pan Second Season, Lassie & Friends, 5 & It 3D TV series, Wind in the Willows, Lanfeust First Season, NFL Rush Zone Second Season, The Rising Star and other productions including the Jungle Book Feature Film. These will also give a major boost to our licensing & distribution revenues and the Company is confident of achieving its targeted growth in the years to come.

Appreciation:

Over the years I have learnt that sometimes plans never go quite as expected, but the true measure of an organization is how it reacts to challenges and opportunities. The past year has strengthened my belief in our management's and associates' capabilities to achieve in a rapidly changing and challenging world. I thank them for their support and continued hard work and dedication.

I sincerely thank our valued stakeholders and board members, as well as our partners' world-wide and valued clients, business associates, bankers and government authorities for their continuous support and trust.

Tapaas Chakravarti

Chairman & CEO

30 May 2013

For further information, please contact:

Contact

***

Consolidated IncomeStatement

For the year ended 31 March 2013

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

As at 31 March 2013

Consolidated Statement of Financial Position

As at 31 March 2013 - continued

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

30 May 2013.

Signed on behalf of the Board of Directors by:

Director Director

Consolidated Statement of Changes in Equity - continued

Consolidated Statement of Cash Flows

For the year ended 31 March 2013

Consolidated Statement of Cash Flows

For the year ended 31 March 2013 - continued

Notes to Consolidated Financial Statements

NOTE A - BASIS OF PREPARATION

1. General Information

The consolidated financial statements for DQ Entertainment (the "Group") and financial statements for the Company have been prepared for the year ended 31 March 2013.

As on 31 March 2013 the following companies formed part of the Group:

The Company's registered address is 33-27, Athol Street, Douglas, IM1 1LB, Isle of Man.

The Group is primarily engaged in the business of providing Traditional and Digital Animation for Television, Home Video and Feature Films. The Group also is engaged in exploitation of its Distribution Rights to broadcasters, television channels, home video distributors and others.

The functional currency of each of the respective Group companies is:

DQ Plc British Pound (GBP)

DQ Mauritius US Dollar (USD)

DQ India Indian Rupee (INR)

DQ Ireland Euro (EURO)

DQ Films Ltd Euro (EURO)

DQ Power Kidz Indian Rupee (INR)

Method Animation SAS Euro (EURO)

2. Significant accounting policies

(a) Adoption of new and revised standards

There are no new or amended standards or interpretations adopted with effect for 1 April 2012

that have a significant impact on the financial statements.

(i) Standards and interpretations in issue not yet adopted

The following new Standards and Interpretations, which are all mandatory with the exception of IFRS29, 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 above standards or interpretations becomes effective with the exception of IFRS 10 and IFRS 12 which is disclosed separately below.

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

Impact of adoption of IFRS 10 Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities

In May 2011, the IASB issued IFRS 10 Consolidated Financial Statements which provides a single consolidation model that identifies control as the basis for consolidation for all types of entities. IFRS 10 replaces IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation - Special Purpose Entities. DQE plc has assessed the impact of the definition of control within IFRS 10 on the consolidated financial statements and on the basis of that assessment has determined that there are currently no other entities which will be required to be consolidated with effect from 1 April 2013. This assessment will be kept under review for the assessment of additional data as it becomes available.

In May 2011, the IASB issued IFRS 12 Disclosure of Interests in Other Entities which is a consolidated disclosure standard requiring a wide range of disclosures about an entity's interests in subsidiaries, joint arrangements, associates and unconsolidated 'structured entities'. Disclosures are presented as a series of objectives, with detailed guidance on satisfying those objectives. DQE plc has assessed the impact of IFRS 12 on the consolidated financial statements and on the basis of that assessment has determined that there will be additional disclosure requirements in relation to other entities which the group will provide with effect from 1 April 2013.

(b) Basis of preparation and statement of compliance with International Financial Reporting Standards

The consolidated financial statements have been prepared under applicable International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board (IASB).

The historical financial information incorporates the financial statements of the Group made up to 31 March each year.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement. In addition, note AB to the financial statements includes the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposures to credit and liquidity risk. The Group has considerable financial resources together with long term contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the management believes that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

After making enquiries, the management has a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.

(c) The basis of presentation and accounting policies used in preparing the historical financial information

These accounting policies have been consistently applied to the results, gains and losses, assets, liabilities and cash flows of all entities included in the consolidated financial statements for all the periods presented unless otherwise stated. The consolidated financial statements are presented in INR, rounded to the nearest million unless otherwise indicated. They are prepared on the historical cost basis except for financial instruments, which are carried at their fair values. 

In the process of applying the Group's accounting policies, management is required to make judgements, estimates and assumptions that may affect the consolidated financial statements. Management believes that the judgements made in the preparation of the historical financial information are reasonable. However, actual outcomes may differ from those anticipated.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Judgements made by management in the application of IFRSs that have significant effect on the historical financial information and estimates with a significant risk of material adjustment in the next year are discussed in note AH.

(d) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 March each year. Control is achieved where the power to govern the financial and operating policies of an entity so as to obtain benefits from its activity exists. In respect of the associate, the consolidated financial statements incorporate the last audited financial statements not exceeding three months from year ending 31 March 2013.

Intra group balances, transactions and any resulting unrealised gains arising from intragroup transactions are eliminated on consolidation. Unrealised losses resulting from intragroup transactions are also eliminated unless cost cannot be recovered. Amounts reported in the financial statements of the subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Non-controlling interests in subsidiaries are identified separately from the Group's equity therein. The interests of non-controlling shareholders may be initially measured either at fair value or at the non-controlling interests' proportionate share of the fair value of the acquiree's identifiable net assets. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group's interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Group.

(e) Goodwill

(i) Recognition and initial measurement

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceed the cost of the business combination, the excess is recognised immediately in profit or loss. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

(ii) Subsequent measurement

Goodwill is not subject to amortisation but is tested for impairment annually and is measured at cost less accumulated impairment losses, if any.

(f) Investment in associate

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group's interest in that associate (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group's interest in the relevant associate.

(g) Foreign currency

(i) Change in presentation currency

From 1 April 2012, the DQ plc Group changed the currency in which it presents its consolidated and parent Company Financial Statements from US Dollars to Indian Rupees as the Indian Rupee represents one of the main currencies of the group in which it generates cash flows and economic returns.

A change in presentation currency is a change in accounting policy which is accounted for retrospectively. Statutory financial information included in the Group's Annual Report and Financial Statements for the year ended 31 March 2013 previously reported in US Dollars has been restated into Indian Rupees using the procedures outlined below:

assets and liabilities denominated in non-Indian Rupee currencies were translated into Indian Rupees at closing rates of exchange. Non-Indian Rupee trading results were translated into Indian Rupees at average rates of exchange. Differences resulting from the retranslation of the opening net assets and the results for the year have been taken to reserves;

all movements comprising differences on the retranslation of the opening net assets of non-Indian Rupee subsidiaries have been charged to the translation reserve. Share capital, share premium and other reserves were translated at the historic rates prevailing at the dates of transactions; and

all exchange rates used were extracted from the Group's underlying financial records.

The exchange rates of Indian Rupees to US Dollars over the periods included in this Annual Report and Accounts are as follows:

(ii) Translation to presentation currency

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency).

The functional currency of each of the respective Group companies is:

DQ plc British Pound (GBP)

DQ Mauritius US Dollar (USD)

DQ India Indian Rupee (INR)

DQ Ireland Euro (EURO)

Method Animation SAS Euro (EURO)

DQ Films Ltd Euro(EURO)

DQ Power Kidz Pvt Ltd Indian Rupee (INR)

At the reporting date the assets and liabilities of the Group are translated into the presentation currency, which is in Indian Rupees (INR) at the rate of exchange ruling at the balance sheet date and the income statement is translated at the average exchange rate for the year.

Although the functional currency of the ultimate holding Company DQ plc is GBP, the presentation currency of the Group is not GBP as majority of the operations of the group are transacted in currencies other than GBP.

The USD:INR exchange rates used to translate the INR financial information into the presentation currency of INR were as follows:

The GBP:INR exchange rates used to translate the GBP financial information into the presentation currency of INR were as follows:

The EURO:INR exchange rates used to translate the EURO financial information into the presentation currency of INR were as follows:

(iii) Foreign currency transactions

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to functional currency at foreign exchange rates ruling at the dates the fair value was determined.

(iv) Financial statements of foreign operations

The assets and liabilities of the Group's subsidiaries and other entities controlled by the Group based outside the Isle of Man ("foreign operations") are translated into INR at the exchange rates prevailing at the balance sheet date. The income and expenses of foreign operations are translated into INR at average exchange rates prevailing during the year. Exchange differences arising on translation of foreign operations are recognised directly in equity as foreign currency translation reserve.

(h) Derivative financial instruments

The Group uses derivative financial instruments to manage its exposure to foreign exchange risks arising from operational activities. The Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised at fair value. The subsequent gain or loss on remeasurement to fair value is recognised immediately in profit or loss.

The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price.

(i) Property, plant and equipment

(i) Owned assets

Items of property, plant and equipment are stated at cost less accumulated depreciation. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised within "other Income" for gains and "other operating expenses" for losses in the statement of income.

(ii) Subsequent costs

The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item can be measured reliably. Replaced parts are de-recognised with any profit/(loss) on disposal recognised immediately in the income statement. All other costs are recognised in the income statement as an expense as incurred.

(iii) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction and production of qualifying assets are capitalised as part of the costs of those assets. Qualifying assets are those that necessarily take a substantial period of time to prepare for their intended use. Capitalisation of borrowing costs continues up to the date when the assets are substantially ready for their use. All other borrowing costs are expensed in the period in which they are incurred.

(iv) Depreciation

Depreciation is charged to the income statement on a straight-line basis over the estimateduseful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:

 Computer hardware and software 3 - 6 years

 Equipment including office equipment 6 - 10 years

 Fixtures and furniture 10 years

 Vehicles 4 years

Lease acquisition cost and leasehold improvements are depreciated over the primary period of the lease or estimated useful lives of the assets whichever is less. Assets under construction are not depreciated, as they are not ready for use.

The depreciation methods, useful lives and residual value, are reassessed annually.

(j) Intangible assets

i) Distribution rights

Distribution rights that are acquired by the company are stated at cost less accumulated amortisation and impairment losses.

(ii) Intangible assets under construction

Under certain distribution contracts, the Group was required to make advance payments in order to acquire distribution rights. These payments have been capitalised as intangible assets on the basis that (i) they will be realised through future sales to be made by the Group; (ii) they are separately identifiable and (iii) they are controlled through their legal rights.

The expectation is that these advance payments will be fully recouped by the Group, however, the extent to which full value will be obtained is dependent on the ability of the Group to generate sufficient sales on a go-forward basis under the various distribution contracts. On this basis, no systematic amortisation is charged. However, at each reporting date the asset is assessed for impairment, based on projected sales.

(iii) Projects under development

Direct or indirect expenditure incurred on the development of film production projects in order to create intellectual property or content, which are exploited on any form of media, are capitalised within Intangible Assets under construction, in accordance with IAS 38 (Intangible Assets), only from the point that the company can demonstrate:

(i) The technical feasibility of the project;

(ii) Its intention to complete the intangible asset and sell it;

(iii) Its ability to use or sell the intangible asset;

(iv) How the intangible asset will generate probable future economic benefits;

(v) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

(vi) Its ability to measure reliably the expenditure attributable to the intangible asset during its development

(iv) Subsequent expenditure

Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.

(v) Amortisation

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets apart from Intangible assets under construction. Intangible assets are amortised from the date they are available for use. The estimated useful lives are the term of the licensing agreement or 10 years whichever is less.

Useful lives for individual assets are determined based on the nature of the asset, its expected use, the length of the legal agreement or patent and the period over which the asset is expected to generate economic benefits for the Group ("economic life").

(k) Financial assets

All financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.

Financial assets are classified into the following specified categories: 'held for trading', 'held-to-maturity' investments, 'available-for-sale' (AFS) financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Investment in Mutual funds is classified as held for trading as it has been acquired principally for the purpose of selling it in the near term.

(l) Trade and other receivables

Trade receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method. They are reduced by appropriate allowances for estimated irrecoverable amounts.A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original term of the receivable. The amount of the provision is the difference between the carrying amount and the recoverable amount and this difference is recognised in the income statement.

(m) Cash and cash equivalents

Cash and cash equivalents comprise cash balances, cash in transit and call deposits and are carried in the consolidated statement of financial position at cost. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

(n) Impairment

The carrying amounts of the Group's assets are reviewed at the end of every year to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of assets in the unit on a pro rata basis.

(o) Calculation of recoverable amount

The recoverable amount of the Group's receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted. The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

(ii) Reversals of impairment

An impairment loss in respect of a receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. In respect of other assets impairment losses are reversed when there is an indication that the impairment loss may no longer exist and if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(p)Share capital

(i) Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

(ii) Dividends

Dividends are recognised as a liability in the year in which they are declared.

(q) Interest-bearing loans and borrowings

Interest-bearing loans and borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest rate basis.

(r) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.

(ii) Defined benefit plans

The Group's net obligation in respect of gratuity, which include amounts payable to employees on termination, resignation or retirement on completion of a minimum service period with the Group, and compensated absences, which include amounts payable to employees on utilisation of accumulated leave balances during the service period or encashment at the time of termination, resignation or retirement, is calculated estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on government bonds that have maturity dates approximating to the terms of the Group's obligations. The calculation is performed by a qualified actuary using the projected unit credit method. Expected cost of compensated absences by way of sick leave is recognised in the income statement.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement.

All actuarial gains and losses as at 1 April 2004, the date of transition to IFRSs, were recognised. In respect of actuarial gains and losses that arise subsequent to 1 April 2004 incalculating the Group's obligation in respect of a plan, to the extent that any cumulative unrecognised actuarial gain or loss exceeds 10 per cent of the greater of the present value of the defined benefit obligation and the fair value of plan assets, that portion is recognised in the income statement over the expected average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognised.

(s) Provisions

A provision is recognised in the consolidated statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Provisions for retakes are recognised wherever they are considered to be material. 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.

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract.

(t) Trade and other payables

Trade and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method.

(u) Revenue recognition

(i) Production service fee and licensing revenue

Revenue represents amounts receivable for production and imparting production training skill services rendered and is recognised in the income statement in proportion to the stage of completion of the transaction at the period end. The stage of completion can be measured reliably and is assessed by reference to work completed as at the period end. The Group uses the services performed to date as a percentage of total services to be performed as the method for determining the stage of completion. Where services are in progress and where the amounts invoiced exceed the revenue recognised, the excess is shown as deferred income. Where the revenue recognised exceeds the invoiced amount, the amounts are classified as unbilled revenue.

The stage of completion for each project is estimated by the management at the onset of the project by breaking each project into specific activities and estimating the efforts required for the completion of each activity. Revenue is then allocated to each activity based on the proportion of efforts required to complete the activity in relation to the overall estimated efforts. The management's estimates of the efforts required in relation to the stage of completion, determined at the onset of the project, are revisited at the balance sheet date and any material deviations from the initial estimate are recognised in the income statement.

The Group's services are performed by a determinable number of acts over the duration of the project and hence revenue is not recognised on a straight-line basis.

Contract costs that are not probable of being recovered are recognised as an expense immediately.

Revenue from the licensing of distribution rights (including withholding tax) is recognised on a straight line basis over the term of the licensing agreement where there is an ongoing performance obligation and in the case of the license fee from co-production rights on the date declared by the licensee. Revenue from licensing of distribution rights is recognised at the time of sale under a non cancellable contract which permits the licensee to exploit those rights freely and the Group has no remaining obligations to perform.

No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due.

(ii) Royalties

Fees and royalties paid for the use of the group's assets (such as trademarks, patents, software, music copyright, record masters and motion picture films) are recognised in accordance with the substance of the agreement. This may be on a straight line basis over the life of the agreement, for example, when a licensee has the right to use certain technology for a specified period of time. An assignment of rights for a fixed fee or non refundable guarantee under a non cancellable contract which permits the licensee to exploit those rights freely and the licensor has no remaining obligations to perform is, in substance, a sale.

(iii) Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and the grants will be received.

Grants that compensate the Group for the cost of an asset are recognised on receipt by way of deduction from the carrying cost of the asset. The grant is recognised as income over the life of the depreciable asset by way of a reduced depreciation charge.

Grants that compensate the Group for expenses incurred are recognised as reduction from relevant head of expense in the income statement on a systematic basis in the same periods in which the expenses are incurred.

(v) Expenses

(i) Operating lease payments

Payments made under non-cancellable operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Payments made under cancellable operating leases are recognised as expense in the period in which they are incurred.

Leasehold interest in Land is classified as an operating lease and the amount paid for acquisition of such rights is classified as prepayments and amortised over the period of lease term

(ii) Finance lease payments

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

(iii) Net financing costs

Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, dividends on redeemable preference shares, interest receivable on funds invested and foreign exchange gains and losses that are recognised in the income statement.

Interest income is recognised in the income statement as it accrues, using the effective interest rate method. The interest expense component of finance lease payments is recognised in the income statement using the effective interest rate method.

Foreign currency gains and losses are reported on a net basis.

(w) Income tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary timing differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

(x) Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes, convertible preference shares and share options granted to employees.

(y) Segment reporting

The Group has adopted IFRS 8 Operating Segments with effect from 1 January 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance.

(z) Voluntary changes in accounting policies and corrections of prior period errors

The Group presents all retrospective application of voluntary changes in the accounting policies and retrospective restatement to correct prior period errors as far as practical to conform with IAS 8 with relevant disclosures.

(AA) Financial instruments

Financial instruments comprise investments in equity, investments in equity trade receivables, unbilled revenues, loans to subsidiaries, cash and cash equivalents, bank borrowings and trade payables. Financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs.

NOTE B: 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 Group 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 Group.

Segment revenue and segment result

Segment assets and liabilities

Other segment information

Geographical segments

The animation and distribution segments are managed on a worldwide basis, but operate in three principal geographical areas: America, Europe and Others.

The Group's revenue from external customers and information about its segment assets by geographical location are detailed below

NOTE C - REVENUE

NOTE D - OTHER OPERATING INCOME

NOTE E - NET FINANCING COSTS