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Preliminary Results

27th Jul 2010 07:00

RNS Number : 9689P

DQ Entertainment PLC

27 July 2010

For Immediate Release

July 27, 2010

DQ ENTERTAINMENT plc

('DQE' or the 'Group')

Preliminary Results for the Year Ended 31 March 2010

DQ Entertainment plc, a leading animation, gaming, live action entertainment production and distribution company, today announces its preliminary results for the year ended 31 March 2010.

Financial Highlights

·; Profit before tax up 25% to USD 6.46 m (2009: USD 5.15 m)

·; Revenue up 14% to USD 36.76m (2009: USD 32.25m )

·; EBITDA at USD 14.03 m (2009: USD 13.92 m)*

·; Order book currently at USD 136 m

·; Cash and cash equivalents of USD 11.69 m (2009: USD 4.63 m)

*EBITDA is arrived by adding depreciation and amortization expenses to the operating results before financing costs.

Operating Highlights:

·; DQE's IP "The Jungle Book" has record pre-sales in approximately 160 countries with several networks including ABC Australia, Universal Studio for home video sales, Al Jazeera in the Middle East, Disney Multiplex of channels for South East Asia, TVO Canada, and EBS Korea.

·; DQE's Feature Film division is producing "The Prodigies" a 90 minute high-end stereoscopic feature film for Warner Brothers, Fidélité Films, Studio 37 of France with Onyx Films France for worldwide theatrical release in 2011.

·; DQE is co-producing and co-developing several iconic properties including Iron Man, Charlie Chaplin, Little Prince, Lassie and friends, Little Nick and Galactic Football.

·; DQE's programming portfolio increased to over 450 hours of programming for exploiting revenues from TV sales globally covering Satellite TV, Free TV, Pay TV, Cable TV, IPTV, VOD and licensing revenue streams.

·; Significant licensing deals for children's consumer product world-wide including publishing of graphic novels, books, comics by world famous publishers for The Jungle Book.

·; DQE has developed capabilities to exploit the latest advancements in technology and geared to meet tremendous demand for 3D stereoscopic television, home video and feature films.

Tapaas Chakravarti, Chairman & CEO of DQE, commented:

"DQE has remained remarkably resilient over the last 12 months beating the recessionary conditions worldwide and continuing to outperform and maintain high growth.

Our strong work ethic and reliance on a core value system of brutal honesty, humility, quality at any cost, keeping promises, ethics and integrity is entwined into the very fabric of our business. This has been the key differentiator for DQE as we strive to successfully grow both revenue and sales globally.

The Company's financial results are a direct derivative and proof of my statement above. We firmly believed in all inclusive growth by de-risking the budgeting process and expanded horizontally into major IP ownerships for globally renowned brands with marquee partners, opening up several additional revenue streams to accelerate growth and profitability.

Contact

DQ Entertainment International

Tapaas Chakravarti - Chairman and CEO

Niranjan Prasad - VP Finance and Corporate Affairs

Tel: +91 40 235 53726

Seymour Pierce Ltd

Nandita Sahgal / David Foreman

Tel: +44 (0)207 107 8000

Buchanan Communications

Mark Edwards / Jeremy Garcia / George Prassas

Tel: +44 (0)20 7466 5000

Preliminary Results for the Year Ended 31 March 2010

Chairman's Statement

Introduction

I am pleased to report our preliminary results for the year ended 31 March 2010.

It has been a great journey for me and my team, with a decade full of ups and downs in global economies, when DQites have stood together to create, to innovate and lead the change. We have looked at every obstacle as an opportunity to work harder, to achieve and accomplish with humility.

This has been a decade of digital explosion. Increased availability of internet broadband connectivity has enhanced internet usage while 3G technology has further accelerated social networking through Facebook, Orkut, LinkedIn or Skype. You-Tube and Twitter have transformed lives like never before. The world has never been as connected as it is now and we are linked far better with our markets. Companies engaged in IP creation have a better understanding of consumer needs and are able to develop content better suited for their audiences.

I am proud to report that the credibility of the Company has been established amongst the elite entertainment fraternity worldwide as recognised by the achievement of the highest international quality standards and timely deliveries by its professional, creative and highly motivated workforce.

DQE's reach and networking is truly global partnering with the best in India, Europe, North America, Australia and New Zealand, Asia, the Middle East and Africa as well as CIS countries. The list of our clients-partners exceeds 100 and helps in spreading business risks with a large number of clients-partners across wide geographical regions.

Leveraging the combined expertise of global and Indian workforce

The Company has a strong presence for high quality development in the US, the UK, France, the Phillipines, together with a large work force of over 3000 in India alone. I believe that one of the most important differentiators of the Company has been the extraordinary talent and commitment of our associates. The young and dynamic workforce at DQE has been acknowledged worldwide for their creative abilities and dedicated team work. We have managed to attract and retain the best talent while constantly nurturing and upgrading their skills through internal training and development programmes.

Our objective is to build and consolidate our talent base to achieve bigger milestones and push the bar for creativity and quality. Morale and motivational levels of a highly creative workforce is being very ably managed by a robust HR team while incentives are often non-monetary and contribute to a great extent in achieving results. This is further bolstered by high quality creative support from France, the UK, Ireland and the USA. DQE is leveraging on the best talents available for pre-creative work such as primary designing, script writing, voice, music and some other pre-production from its subsidiaries in Europe and offices in Ireland, France, the UK and the Phillipines to support the main production in India.

Growth Strategy

Apart from sizeable organic growth through our several production and co-production verticals, we are targeting several other revenue streams through high quality branded IP exploitations. We have already demonstrated high growth potential from:

1. Development and co-development of branded and popular intellectual properties;

2. Licensing for TV, consumer products and publishing; and

3. Joint development, production and distribution of stereoscopic animated feature films with global partners.

The Company expects to generate significant growth in its licensing and merchandising (L&M) business with the exploitation of the rights acquired by the Group through various co production deals, thereby adding to a healthy bottom line. The Company currently holds a programming library of over 450 hours for TV broadcast with rights in various territories including South East Asia, Australia and New Zealand, Arabic nations and Europe, while for its own international IP's - Jungle Book and Peter Pan, the Company holds all worldwide rights including feature films and game publishing.

Our licensing and merchandising deals with global heavy weights such as TF1 Enterprises-France, ZDF Enterprises-Germany, CPLG-London, Belltex-Belgium, Hachette Livre- for French language publishing worldwide and a plethora of many more licensing contracts signed are testimony to the potential of our brands.

The development of IP will also provide the necessary impetus to the Company to achieve accelerated growth and the possibility of a 360 degree monetisation of the IP across various platforms of content distribution. Currently under development are the iconic productions of The Jungle Book, Peter Pan, Lassie, Charlie Chaplin, and several Indian IP's which have been conceptualised and developed by the creative and dynamic Global-I.P. division of the Company. A recent article in the Daily Telegraph, UK (16th June, 2010 http://alturl.com/pe3ib) recognised the importance of IP development, and how hugely successful businesses have been built around IP's including DQE's strategy in developing IP for maximising revenues through 360 degree monetisation.

DQE has forayed as mentioned earlier into production of 3D animated stereoscopic feature film 'The Prodigies' for Warner bros, Fidélité Films, Studio 37 and Onyx Films, France. DQE holds the rights to develop and produce 3D stereoscopic feature films for Jungle Book and Peter Pan - its own IP's, while negotiations are currently happening with various producers in Europe and the Middle East for production of animated 3D feature films. I am optimistic as to the positive financial impact these 3D films will have on the Group's results from 2012 onwards.

The Group has been delivering revenues at a cumulative average growth rate (CAGR) of 27.85% for the last 5 years. The growth has been driven partly by economies of scale but largely by the changing of its product/revenue mix and moving up the value chain by developing its business model from one of pure service to major co-productions and original IP creation and exploitation world-wide.

Financial Overview

Group turnover for the period increased by 14% to USD 36.76 m (2009: USD 32.25m). The year also witnessed the fluctuation of Rupee with other currencies and consequently while the sales in the local currency (i.e. Rupee) grew by 17%. Group sales in the reporting currency (i.e. USD) grew by only 14%. EBITDA for the year was USD 14.03m (2009: USD 13.92m) and profit before tax was USD 6.46m (2009: USD 5.15m) representing growth of 25%.

The Group raised USD 33.66m during the year through an Indian IPO and pre-IPO placement to finance the Group's continued growth and invest in infrastructure and global co-productions. The Indian IPO was a resounding success being 86.33 times oversubscription and the listing price was 69% above the issue price.

The Group is confident of maintaining growth due to its solid client-partner base and order book of approximately USD 136m as at 31 March 2010.

DQE's market position remains secure and is backed by solid infrastructure, a strong and increased customer base as well as improved revenue visibility.

Operations Review

In line with DQE's vision to bring to life classical and iconic brands and partner leading broadcasters in the entertainment sphere, the Global IP division has endeavored to create its own 100% internally developed global productions. The Company's foray into partnered strong branded property co-productions as well as developing its own IP production have opened up several revenue streams with short, medium and long term gains by way of licensing and merchandising. These properties include The Jungle Book, Peter Pan, Iron Man, Casper and Little Prince and many other strong intellectual properties in production.

International co-productions:

The past 12 months have seen an emphasis on international co-productions including titles such as:

·; The Little Prince in co-production with Method Animation, France 3 and Sony BMG with a global budget of €18m;

·; Iron Man: Armored Adventures 3D in co-production with Method Animation with a global budget of €8.2m;

·; Little Nick 3D, in co-production with Method Animation, M6 Studio, ZDF Germany and Disney with a global budget of €8.7m;

·; Casper's Scare School 3D in co-production with Moonscoop, Classic Media, TF1, Harvey Entertainment, Nickelodeon, Cartoon Network and YTV with a global budget of $9.3m;

·; The Hive 3D, in co-production with The Hive Enterprises Ltd, Lupus Films and Monumental Productions with a global budget of £3.5m;

·; Tara Duncan, in co-production with Moonscoop and M6 Studios with a global budget of €6.4m;

·; Galactik Football 3D, in co-production with Gaumont Alphanim with an estimated global budget of €6.9m;

·; Lassie and friends 3D, in co-production with Classic Media and ZDF Enterprises; and

·; Charlie Chaplin 3D, in co-production with Method Animation and MK2, with a global budget of €8m.

International productions:

·; Currently in production, the 3D animated motion capture theatrical "The Prodigies" is being produced by Onyx Films and Fidélité Films at DQE with a global budget of $28m. The current release date is anticipated to be March 2011.

Intellectual properties with international partners:

International IP has included:

·; The Jungle Book, co-produced with Moonscoop with a global budget €9.2m, and all rights being owned by DQE;

·; The New Adventures of Peter Pan, the rights being acquired from The Great Ormond Children's Hospital and in co-production with Method Animation and Story Board Animation with a global production budget €9.91m;

·; The Mysteries and Feluda, awaiting production pending the acquisition of outstanding rights; and

·; Balakand I/II/III, Omkaar and Raaven, built on DQE's commitment to producing Indian intellectual properties.

Licensing deals for TV, Home Video and Merchandising:

Within our L&M division the focus has been again to continues to be the development of our premium iconic brands such as The Jungle Book and further properties co-owned by DQE across our operating territories. DQE remains well positioned to take advantage of its part ownership of major iconic brands demonstrating the continued strength and flexibility of the DQE business model.

Continued growth on DQE's home territory of India within the children's entertainment market remains evident especially within licensing and marketing (L & M). With growing retail trends in India, L&M will continue to feature very highly within DQE's global strategy.

Examples of licensing deals completed over the past 12 months include:

·; 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;

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

·; 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;

·; 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;

·; 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;

·; 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

·; In addition DQE have signed a second deal for fabric products with Belltex, Belgium.

Global Accolades and Recognition during the year:

·; Penguins of Madagascar, a service project part produced by DQE won the Cartoons on the Bay, Italy PULCINELLA AWARDS 2010 for Best TV series for Tweens;

·; Fan Boy and Chum Chum, a service project part produced by DQE was nominated at the Cartoons on the Bay, Italy PULCINELLA AWARDS 2010 for Best TV series for kids;

·; Won the prestigious 'Movers & Shakers of 2009' award at the 6th Annual 24 FPS Animation Awards - a coveted award of the animation industry;

·; Tapaas Chakravarti, Chairman and CEO - DQE, was recognised at the Ernst & Young, Entrepreneur of the year 2009-10 India. The awards have become a measure of entrepreneurial success around the world and are conducted by an independently panel of judges;

·; Twisted Whiskers & Casper nominated in FICCI BAF 2010 awards in Best TV animated Episode category;

·; Ravan nominated for best animated film and Iron Man for Best VFX in TV Episode at FICCI BAF 2010 awards; and

·; Pinky & Perky" was nominated for best Children's series award at the UK Broadcast Awards 2010.

Industry Dynamics and Trends

The global animation industry continues to show resilience and remains one of the fast growing components of the global media and entertainment industry. The global animation market reached USD 59bn in 2006 and is expected to expand at a CAGR of eight percent, between 2006-2010 period to reach USD 100bn by 2012.

The fast-paced growth of the global animation industry can be attributed to the following factors:

·; Wider availability of dissemination mediums for accessing film and entertainment content that includes an increasing number of TV channels and broadcasting hours, new digital media formats like digital and satellite services, mobile phones, internet access, advertising and direct-to-home formats;

·; Rapidly advancing technology and software applications have facilitated animation to become more life-like and realistic. The quality of animation movies has greatly improved with the incorporation of 3D;

·; Animation is increasingly being used in the gaming industry. Several characters that were originally produced for gaming are now being cast in movies and TV series;

·; Animated feature films, since the first success of Toy Story 1 in 1997, have not looked back and have increased today into a phenomena of entertainment covering not only children but the whole family. The box office collections of recently released 3D stereoscopic feature films like Avatar (USD 2.73bn in first 8 weeks) , How to Train Your Dragon (USD 479m), Alice in Wonderland (USD 1.02bn in first 8 weeks), Toy Story 3 (USD 576m in first 3 weeks) and Shrek - 4 (USD 791m) are a clear indication of market potential for productions of this nature. The stereoscopic pipeline required to produce these movies is available with very few companies

·; Critical mass and dedicated viewership have enabled the IP owning companies to focus on multiple revenue streams which include setting up licensing, publication, distribution and merchandising divisions;

·; North American and European film and television program producers are looking at Asia for animation production driven by production capabilities, powerful computer animation platforms and availability of skill sets; and

·; We believe that as Indian animation studios mature, co-production with Indian partners will be seen as a significant trend in the future.

Outlook

DQE has remained remarkably resilient over the last 12 months beating the recessionary conditions worldwide and will continue to grow due to the following factors:

With an existing strong order book and new orders being received regularly, the Company will ride on the global and Indian animation and media industry growth. This trend leaves the Board confident on the basis of execution at production level and increasing growth of licensing revenues will help us to achieve and maintain growth for 2010-11.

Strong branded property co-productions as well as the development of globally recognised own IP production will deliver enhanced revenues in the short, medium and long term by way of licensing and merchandising revenue streams. These properties include The Jungle Book, Peter Pan, Iron man, Casper, Little Prince and many other strong Intellectual properties in production.

The Company intends to leverage heavily on multiple revenue streams being generated from its programming library for worldwide distribution for television, home video and licensing for merchandising, publishing and other product avenues.

DQE's success remains underpinned by a strong technology and creative base backed by systematic expansion of necessary capacities in 3D stereoscopic productions of major television, home video and feature films will put the Company much ahead of its peers worldwide as all major television, home video and feature productions are focusing on this new technology.

Consolidated IncomeStatement

For the year ended 31 March 2010

		2009-10		2008-09
	Note	Group USD'000	Company USD'000	Group USD'000	Company USD'000
Continuing operations
Revenue	C	36,760	741	32,248	841
Cost of sales		(23,870)	-	(20,858)	-
Gross profit		12,890	741	11,390	841

Other operating income	D	254	-	1,467	-
Distribution expenses		(475)	(2)	(598)	-
Administrative expenses	AG	(3,055)	(664)	(4,311)	(744)
Other operating expenses		(1,469)	-	(197)	(52)
		(4,745)	(666)	(3,639)	(796)
Operating result before financing costs		8,145	75	7,751	45

Financial income		552	1,260	379	1,395
Financial expenses		(1,675)	(543)	(2,887)	(5)
Net financing costs	E	(1,123)	717	(2,508)	1,390

Share of loss of associate	M	(560)	-	(94)	-

Profit before tax		6,462	792	5,149	1,435
Income tax expense	F	(38)	-	(751)	-
Profit after tax		6,424	792	4,398	1,435

Attributable to:
Owners of the Company		4,548	-	4,398	-
Non-controlling interests	H	1,876	-	-	-



Basic and diluted earnings per share for profit attributable to the equity holders of the Company during the year (expressed as cents per share)	U
Basic earnings per share		13¢	-	12¢	-
Diluted earnings per share		13¢	-	12¢	-

Consolidated Comprehensive Income Statement

		2009-10		2008-09
	Note	Group USD'000	Company USD'000	Group USD'000	Company USD'000

Net Profit for the year		6,424	792	4,398	1,435

Other comprehensive income /(loss)
Foreign Currency Translation		5,491	1,301	(11,630)	(8,720)
Total comprehensive income /(loss) for the year		11,915	2,093	(7,232)	(7,285)

Total comprehensive income attributable to:
Owners of the Company		8,824	-	(7,232)	-
Non-controlling interests	H	3,091	-	-	-

Consolidated Balance Sheet

As at 31 March 2010

		2009-10		2008-09
	Note	Group USD'000	Company USD'000	Group USD'000	Company USD'000
ASSETS
Non current assets
Property, plant and equipment	G	7,454	-	9,008	-
Goodwill	I	10,818	-	10,818	-
Intangible assets	J	19,459	-	5,972	-
Advances paid for distribution rights	K	7,912	-	11,625	-
Investment in associate	M	2,292	2,934	2,673	2,767
Investment in subsidiary		-	4	-	4
Loan to subsidiary	N	-	14,924	-	13,032
Prepaid leasehold rights		295	-	-	-
Deferred tax asset	O	1,390	-	-	-
Deposits	P	769	-	579	-
Total non current assets		50,389	17,862	40,675	15,803
Current assets
Trade and other receivables	Q	27,013	6,650	12,972	3,093
Financial assets at fair value through profit or loss	R	40	-	6	-
Other financial assets	L	19,320	-	-	-
Cash and cash equivalents	S	12,635	544	5,887	4,504
Total current assets		59,008	7,194	18,865	7,597
Total assets		109,397	25,056	59,540	23,400

Consolidated Balance Sheet

As at 31 March 2010 - continued

		2009-10		2008-09
	Note	Group USD'000	Company USD'000	Group USD'000	Company USD'000
EQUITY AND LIABILITIES
Equity	T
Issued capital		73	73	73	73
Share premium		65,621	49,017	49,017	49,017
Reverse acquisition reserve		1,218	-	1,218	-
Capital Redemption reserve		27	-	-	-
Equity component of convertible instruments		1,158	-	1,158	-
Foreign currency translation reserve		(6,862)	(8,168)	(13,290)	(9,469)
Retained earnings		11,208	(16,656)	8,336	(17,448)
Equity attributable to owners of the Company		72,443	24,266	46,512	22,173
Non-controlling interests	H	18,481	-	-	-
Total equity		90,924	24,266	46,512	22,173
Non current liabilities
Deferred tax liability	O	-	-	239	-
Interest-bearing loans and borrowings	X	2,015	-	786	-
Provisions	Y	1,300	-	1,012	-
Total non current liabilities		3,315	-	2,037	-
Current liabilities
Trade and other payables	V	5,880	790	3,978	1,227
Bank overdraft	W	946	-	1,258	-
Interest-bearing loans and borrowings	X	7,397	-	5,053	-
Income tax payable		376	-	183	-
Provisions	Y	559	-	519	-
Total current liabilities		15,158	790	10,991	1,227
Total liabilities		18,473	790	13,028	1,227
Total stockholders' equity and liabilities		109,397	25,056	59,540	23,400

These financial statements were approved by the Board of Directors and authorised for use on 26 July 2010.

Signed on behalf of the Board of Directors by:

Director Director

Consolidated Statement of Changes in Equity

GROUP	Equity shares - No of Shares	Equity Shares - Amount USD'000	Share premium USD'000	Reverse acquisition reserve USD'000	Equity component of convertible instruments USD'000	Foreign currency translation reserve USD'000	Capital Redemption Reserve	Retained earnings USD'000	Attributable to owners of the Company USD'000	Non controlling interests USD'000	Total USD'000
Balance as at 1 April 2008	35,966,047	73	49,017	1,218	1,158	(1,660)	-	3,938	53,744	-	53,744
Other comprehensive income	-	-	-	-	-	(11,630)	-	-	(11,630)	-	(11,630)
Income for the year	-	-	-	-	-	-	-	4,398	4,398	-	4,398
Balance as at 31 March 2009	35,966,047	73	49,017	1,218	1,158	(13,290)	-	8,336	46,512	-	46,512
Transfer of opening reserves to Non Controlling interest holders	-	-	-	-	-	2,152	-	(1,676)	476	(476)	-
Issue of equity shares	-	-	16,478	-	-	-	-	-	16,478	15,857	32,335
Conversion & Redemption of Preference Shares	-	-	126	-	-	-	-	-	126	-	126
Transfer to capital redemption reserve	-	-	-	-	-	-	27	-	27	9	36
Other comprehensive income	-	-	-	-	-	4,276	-	-	4,276	1,215	5,491
Income for the year	-	-	-	-	-	-	-	4,548	4,548	1,876	6,424
Balance as at 31 March 2010	35,966,047	73	65,621	1,218	1,158	(6,862)	27	11,208	72,443	18,481	90,924

Consolidated Statement of Changes in Equity - continued

COMPANY	Equity shares - No of Shares	Equity Shares - Amount USD'000	Share premium USD'000	Foreign currency translation reserve USD'000	Retained earnings USD'000	Total USD'000
Balance as at 1 April 2008	35,966,047	73	49,017	(749)	(18,883)	29,458
Other comprehensive income	-	-	-	(8,720)	-	(8,720)
Income for the year	-	-	-	-	1,435	1,435
Balance as at 1 April 2009	35,966,047	73	49,017	(9,469)	(17,448)	22,173
Other comprehensive income	-	-	-	1,301	-	1,301
Income for the year	-	-	-	-	792	792
Balance as at 31 March 2010	35,966,047	73	49,017	(8,168)	(16,656)	24,266

Consolidated Statement of Cash Flows

For the year ended 31 March 2010

		2009-10		2008-09
	Note	Group USD'000	Company USD'000	Group USD'000	Company USD'000

Cash flows from operating activities
Profit for the year before tax		6,462	792	5,149	1,435
Adjustments for:
Depreciation and amortization		5,882	-	6,170	-
Interest income	E	(552)	(1,260)	(379)	(1,395)
Interest expense	E	1,675	543	2,887	5
Share issue expenses		-	-	-	-
Provisions for employee benefits	Z	180	-	71	-
Loss/(gain) on revaluation of fair value through profit or loss on financial assets		(32)	-	145	-
Provision for retakes	Y	(50)	-	138	-
Loss/(gain)on foreign exchange fluctuations		646	-	(133)	(31)
Share of loss of associate		560	-	94	-
Gain on sale of property, plant and equipment		(9)	-	(30)	-
Operating cash flows before changes in working capital		14,762	75	14,112	14
Increase in trade and other receivables		(36,656)	(3,916)	(8,067)	(521)
Employee benefits paid		(48)	-	(28)	-
Decrease / (Increase) in trade and other payables		1,257	(416)	(4,048)	(272)
		(20,685)	(4,257)	1,969	(779)
Income taxes paid		(744)	-	(374)	-
Net cash (used in) /from operating activities		(21,429)	(4,257)	1,595	(779)

Consolidated Statement of Cash Flows

For the year ended 31 March 2010 - continued

		2009-10		2008-09
	Note	Group USD'000	Company USD'000	Group USD'000	Company USD'000
Cash flows from investing activities
Acquisition of property, plant and equipment		(951)	-	(3,951)	-
Acquisition and advances paid for distribution rights		(5,887)	-	(1,473)	-
Proceeds from sale of property, plant and equipment		1,328	-	49	-
Deposits	P	(8)	-	(202)	-
Finance income		422	29	442	243
Net cash (used in)/from investing activities		(5,096)	29	(5,135)	243

Cash flows from financing activities
Issue of Equity shares		4,151	-	-	-
Premium on issue of shares		28,095	-	-	-
Payment on redumption of preference shares		(37)	-	-	-
Proceeds from Borrowings from Term Loans		4,474	-	646	-
Repayment of Term Loans		(1,560)	-	(3,822)	-
Share issue expenses		(682)	-	-	-
Interest paid		(1,150)	(4)	(1,202)	(5)
Net cash from/ (used in) financing activities		33,291	(4)	(4,378)	(5)

Net increase / (decrease) in cash and cash equivalents		6,766	(4,232)	(7,918)	(541)
Cash and cash equivalents at beginning of year	S	4,629	4,504	16,780	7,057
Gain / (Loss) on foreign exchange fluctuations		294	272	(4,233)	(2,012)
Cash and cash equivalents at year end	S	11,689	544	4,629	4,504

Notes to Financial Statements

NOTE A - BASIS OF PREPARATION

1. General Information

DQ Entertainment Plc, (the "Company", or "DQplc") 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 consolidated financial statements for DQ Entertainment (the "Group") and financial statements for the Company have been prepared for the year ended 31 March 2010.

As on 31 March 2010 the following companies formed part of the Group:

Company	Immediate Parent	Country of Incorporation	% of Interest
Subsidiaries
DQ Entertainment (Mauritius) Limited (DQM)	DQ Entertainment Plc	Mauritius	100
DQ Entertainment (International) Private Limited (DQ India) was formerly known as "Animation and Multimedia Private Limited"	DQ Entertainment (Mauritius) Limited	India	75
DQ Entertainment (Ireland) Limited (DQ Ireland)	DQ Entertainment (International) Limited	Ireland	100
Associate
Method Animation SAS		France	20

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, 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 currency of the respective Group companies are:

DQplc Great British Pound (GBP)

DQM US Dollar (USD)

DQ India Indian Rupee (INR)

DQ Ireland Euro (EURO)

Method Animation SAS Euro (EURO)

2. Significant accounting policies

(a) Adoption of new and revised standards

(i) Standards and interpretations effective in the current period

Standards affecting presentation and disclosure

IAS 1 (as revised in 2007) Presentation of Financial Statements

The revised IAS 1 was issued by the IASB in September 2007, IAS I (Revised) mandates the presentation of the income (expenses) recognised directly in equity to be presented in a separate statement " Statement of Other Comprehensive Income" which is a part of the financial statements for the year ended 31 March 2010.

IFRS 8 Operating Segments

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. In contrast, the predecessor Standard (IAS 14 Segment Reporting) required an entity to identify two sets of segments (business and geographical), using a risks and returns approach, with the entity's 'system of internal financial reporting to key management personnel' serving only as the starting point for the identification of such segments.

The internal reports about components of the Group that are regularly reviewed by the chief operating decision maker are identifying two sets of segments (business and geographical), using a risks and returns approach . As a result of the adoption of IFRS 8, the identification of the Group's reportable segments has not changed.

The Company has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB that are relevant to its operations and effective for accounting periods beginning on 1 April 2009. The adoption of these new and revised Standards and Interpretations has not resulted in changes to the Company's accounting policies.

(ii) Standards and interpretations in issue not yet adopted

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

Standard or Interpretation		Effective for reporting periods starting on or after

IFRS -2	Share-based Payment - Amendment relating to vesting conditions and cancellations	Annual periods beginning on or after 1 July 2009
IFRS -2	Share-based Payment - Amendments relating to group cash-settled share-based payment transactions	Annual periods beginning on or after 1 January 2010
IFRS -2	Share-based Payment - Amendments resulting from April 2009 Annual Improvements to IFRSs	Annual periods beginning on or after 1 July 2009
IFRS -3	Business Combinations - Comprehensive revision on applying the acquisition method	Annual periods beginning on or after 1 July 2009
IFRS -5	Non-current Assets Held for Sale and Discontinued Operations - Amendments resulting from April 2009 Annual Improvements to IFRSs	Annual periods beginning on or after 1 January 2010
IFRS -5	Non-current Assets Held for Sale and Discontinued Operations - Amendments resulting from May 2008 Annual Improvements to IFRSs	Annual periods beginning on or after 1 July 2009
IFRS -8	Operating Segments - Amendments resulting from April 2009 Annual Improvements to IFRSs	Annual periods beginning on or after 1 January 2010
IAS - 1	Presentation of Financial Statements - - Amendments resulting from April 2009 Annual Improvements to IFRSs	Annual periods beginning on or after 1 January 2010
IAS 7	Statement of Cash Flows - Amendments resulting from April 2009 Annual Improvements to IFRSs	Annual periods beginning on or after 1 January 2010
IAS 17	Leases - Amendments resulting from April 2009 Annual Improvements to IFRSs	Annual periods beginning on or after 1 January 2010
IAS 24	Related Party Disclosures - Revised definition of related parties	Annual periods beginning on or after 1 January 2011
IAS 28	Investments in Associates - Consequential amendments arising from amendments to IFRS 3	Annual periods beginning on or after 1 July 2009
IAS 32	Financial Instruments Presentation - Amendments relating to classification of rights issues	Annual periods beginning on or after 1 February 2010
IAS 36	Impairment of Assets - Amendments resulting from May 2008 Annual Improvements to IFRSs	Annual periods beginning on or after 1 January 2010
IAS 38	Intangible Assets - Amendments resulting from April 2009 Annual Improvements to IFRSs	Annual periods beginning on or after 1 July 2009
IAS 39	Financial Instruments : Recognition and Measurement - Amendments resulting from April 2009 Annual to IFRSs	Annual periods beginning on or after 1 January 2010
IAS 39	Financial Instruments: Recognition and Measurement - Amendments for eligible hedged items	Annual periods beginning on or after 1 July 2009
IFRIC 17	Distributions of Non-cash Assets to Owners	Annual periods beginning on or after 1 July 2009

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.

(iii) Standards and interpretations affecting the reporting results or financial position

IAS 27(2008) has been adopted in advance of its effective date (annual periods beginning on or after 1 July 2009). The revisions to IAS 27 principally affect the accounting for transactions or events that result in a change in the Group's interests in its subsidiaries. The adoption of the revised Standard has affected the accounting for the Group's dilution of part of its interest in its subsidiary.

IAS 27(2008) has been adopted for periods beginning on of after 1 April 2009. The revised Standard has affected the Group's accounting policies regarding changes in ownership interests in its subsidiaries that do not result in a change in control. In prior years, in the absence of specific requirements in IFRSs, increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognised where appropriate; for decreases in interests in existing subsidiaries that did not involve a loss of control, the difference between the consideration received and the carrying amount of the share of net assets disposed of was recognised in profit or loss. Under IAS 27(2008), all such increases or decreases are dealt with in equity, with no impact on goodwill or profit or loss.

(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 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 accounts.

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 financial statements are presented in United States Dollars, rounded to the nearest thousand 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 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 activities. In respect of the associate, the consolidated financial statements incorporate the last audited financial statements not exceeding three months from year ending 31 March 2010.

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 Company.

(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) 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 the respective Group companies is:

DQ plc Great British Pound (GBP)

DQM US Dollar (USD)

DQ India Indian Rupee (INR)

DQ Ireland Euro (EURO)

Method Animation SAS Euro (EURO)

At the reporting date the assets and liabilities of the Group are translated into the presentation currency, which is in US Dollars (USD) at the rate of exchange ruling at the balance sheet date and the income statement is translated at the weighted 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 USD were as follows:

2010 2009

Closing rate at 31 March 45.0301 52.1743

Average rate for the year ended 31 March 47.7446 46.4682

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

2010 2009

Closing rate at 31 March 1.5068 1.42140

Average rate for the year ended 31 March 1.5963 1.72166

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

2010 2009

Closing rate at 31 March 1.3455 1.3208

Average rate for the year ended 31 March 1.4138 1.3112

(ii) 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.

(iii) 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 USD at the exchange rates prevailing at the balance sheet date. The income and expenses of foreign operations are translated into USD 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 with 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 fittings 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 Group are stated at cost less accumulated amortisation and impairment losses.

(ii) Advance paid for distribution rights

Advances paid for distribution rights include amounts paid to the producers for acquisition of the distribution rights. 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. Up to that point, they are assessed annually for impairment.

(iii) Projects under development

Direct or indirect expenses incurred on the Development of Projects in order to create Intellectual Property or Content, which are exploited on any form of media are capitalized as an intangible asset under development in accordance with IAS 38 (intangible assets). In the event the project is not scheduled for production within three years, or project is abandoned, the carrying value of the Development Rights would be expensed in the year in which such project is discontinued or abandoned.

(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. All other expenditure is expensed as incurred.

(v) Amortisation

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets. 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 which ever is less except in the case of theatrical release of live action movies where the rights are amortised over the estimated useful lives of these intangible assets. The estimated life of these assets is 5 years or the period of license 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 as 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 balance sheet 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 and deferred tax assets are reviewed at each balance sheet date 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 period in which they are declared.

(q) Compound financial instruments

Compound financial instruments issued by the Group comprise of convertible debenture and convertible preference shares that can be converted to share capital at the option of the holder, and the number of shares to be issued does not vary with changes in their fair value. The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition. Interest, dividends, losses and gains relating to the financial liability are recognised in profit or loss. Distributions to the equity holders are recognised against equity, net of any tax benefit.

(r) 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 basis.

(s) 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.

(t) Provisions

A provision is recognised in the balance sheet 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.

(u) 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.

(v) 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 balance sheet date. The stage of completion can be measured reliably and is assessed by reference to work completed as on the balance sheet date. 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) 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.

(w) 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 operating lease and 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 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.

(x) 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 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.

(y) 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.

(z) Segment reporting

(aa) 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 to IAS 8 with relevant disclosures.

(ab) 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 payable. 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.

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 Group.

Segment revenue and segment result

	Segment Revenue		Segment Result
	2009-10 USD’000	2008-09 USD’000	2009-10 USD’000	2008-09 USD’000

Animation	31,915	29,193	17,626	17,399
Gaming	335	1,441	134	931
Distribution	4,510	1,614	4,431	(793)
	36,760	32,248	22,191	17,537
Unallocated Expenses			(15,729)	(12,388)
Profit before tax			6,462	5,149
Income tax expense			(38)	(751)
Profit for the year			6,424	4,398

Segment assets and liabilities

	Assets		Liabilities
	2009-10 USD’000	2008-09 USD’000	2009-10 USD’000	2008-09 USD’000

Animation	21,216	10,469	1,574	1,446
Gaming	216	676	27	78
Distribution	29,736	17,945	6	6
Total of all segments	51,168	29,090	1,607	1,530
Unallocated	58,229	30,450	16,866	11,498
Consolidated	109,397	59,540	18,473	13,028

Other segment information

	Depreciation and amortisation		Additions to non-current assets
	2009-10 USD’000	2008-09 USD’000	2009-10 USD’000	2008-09 USD’000

Animation	-	-	-	-
Gaming	-	-	-	-
Distribution	2,076	2,330	3,145	10,356
	2,076	2,330	3,145	10,356

Geographical segments

The animation, gaming 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

	Revenue from external customers		Segment assets		Acquisition of segment assets
	2009-10 USD'000	2008-09 USD'000	2009-10 USD'000	2008-09 USD'000	2009-10 USD'000	2008-09 USD'000

America	4,962	13,403	194	3,625	-	-
Europe	30,988	16,501	23,531	7,410	-	-
Others	810	2,344	85,672	48,505	5,333	14,441
	36,760	32,248	109,397	59,540	5,333	14,441

NOTE C - REVENUE

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000

Revenue from animation	31,915	-	29,193	-
Revenue from gaming	335	-	1,441	-
Revenue from distribution	4,510	-	1,614	-
Service income	-	741	-	841
	36,760	741	32,248	841

NOTE D - OTHER OPERATING INCOME

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000

Gain on foreign exchange movements`	40	-	1,356	-
Gain on valuation of financial assets at fair value through profit or loss	32	-	-	-
Profit on Fire Accident	82	-	-	-
Profit on Sale of Fixed Assets	9	-	30	-
Other income	91	-	81	-
	254	-	1,467	-

NOTE E - NET FINANCING COSTS

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000

Interest income	552	1,260	379	1,395
Financial income	552	1,260	379	1,395

Interest on short term borrowings and other financing costs	(588)	(4)	(608)	(5)
Interest on term loans	(548)	-	(632)	-
Net foreign exchange loss	(539)	(539)	(1,647)	-
Financial expenses	(1,675)	(543)	(2,887)	(5)
Net financing costs	(1,123)	717	(2,508)	1,390

NOTE F - INCOME TAX EXPENSE

	2009-10 Group USD'000	2008-09 Group USD'000

Current tax expense
Current tax (MAT)	931	482
	931	482

Deferred tax expense
Origination and reversal of temporary differences	(261)	434
Benefit of tax losses recognized	-	(165)
MAT Credit Entitlement	(632)	-
	(893)	269

Total income tax expense in income statement	38	751

Reconciliation of effective tax rate

	2009-10 Group USD'000	2008-09 Group USD'000

Profit before tax	6,462	5,149
Indian corporate income tax rate	33.99%	33.99%
Income tax at standard rate	2,196	1,750
Differences on account of items taxed at zero/lower rates	(1,526)	(999)
MAT Credit Entitlement	(632)	-
Tax charge	38	751

CURRENT TAX EXPENSE

DQplc is liable to Manx corporate tax at the 0% rate.

DQM is liable to Mauritian corporate tax at the general rate of 15%, although in respect of its overseas income, after an available credit of 80% of the tax payable, the effective rate is reduced to 3%.

DQ India enjoys exemption of its taxable profits from export profits from production as per the provisions of section 10A of the Indian Income Tax Act, 1961. However, as per the provisions of section 115JB of the Indian Income Tax Act, 1961, relating to Minimum Alternate Tax (MAT), companies whose tax liability was less than 10% of the book profits was deemed to have a tax liability equivalent to 10% of the book profits derived as per Income Statement. The amount paid under section 115JB is allowed to be adjusted against tax liabilities in the succeeding seven financial years. Till the financial year 2006-07, companies which enjoyed exemption under section 10A were outside the ambit of the provisions of section 115JB. However, by way of an amendment in the Finance Act 2007 such companies were brought within the provisions of MAT under section 115JB and were liable to pay tax of at least 10%.

DQ Ireland is liable to Irish corporate tax at the general rate of 12.5%. However the company gets relief for the capital allowance in excess of depreciation, utilisation of tax losses and losses carried forward.

Consequently DQ India's current tax expense for the FY: 2009-10 of USD 731 thousand (FY: 2008-09: USD 482 thousand) represents the amount of MAT payable and can be carried forward and adjusted against income tax liability (other than MAT tax provision) in the next seven financial years. Out of this DQ India has recognised USD 632 thousand of MAT Credit Entitlement

Current tax expenses of the Group for FY: 2009-10 is USD 38 thousand (FY: 2008-09: USD 751 thousand) which comprises of Income Tax of USD 931 thousand (FY: 2008-09: USD 482 thousand), reversal of deferred tax asset recognised in earlier years USD (261) thousand (FY: 2008-09: USD 269 thousand) and MAT Credit Entitlement USD (632) thousand (FY: 2008-09: USD Nil thousand)

NOTE G - PROPERTY, PLANT AND EQUIPMENT

	Computer hardware And software	Equipment	Fixtures and furniture	Leasehold improvements	Vehicles	Assets under construction	Total
	USD'000	USD'000	USD'000	USD'000	USD'000	USD'000	USD'000
Cost
Balance at 1 April 2008	14,069	583	1,019	424	486	2,426	19,007
Acquisitions	50	25	1	16	-	3,993	4,085
Disposals	(1,101)	(8)	(33)	-	-	-	(1,142)
Transfers	4,949	110	157	429	-	(5,645)	-
Translation adjustment	(3,724)	(151)	(252)	(148)	(114)	(388)	(4,777)
Balance at 31 March 2009	14,243	559	892	721	372	386	17,173
Balance at 1 April 2009	14,243	559	892	721	372	386	17,173
Acquisitions	585	15	15	5	132	1,436	2,188
Disposals	(806)	(5)	(44)	(340)	(105)	-	(1,300)
Transfers	650	14	12	7	132	(815)	-
Translation adjustment	1,596	75	127	87	(72)	87	1,900
Balance at 31 March 2010	16,268	658	1,002	480	459	1,094	19,961
Depreciation
Balance at 1 April 2008	6,509	239	295	223	198	-	7,464
Depreciation charge for the year	3,460	88	137	91	98	-	3,874
Disposals	(1,089)	(6)	(28)	-	-	-	(1,123)
Translation adjustment	(1,785)	(65)	(81)	(62)	(57)	-	(2,050)
Balance at 31 March 2009	7,095	256	323	252	239	-	8,165
Balance at 1 April 2009	7,095	256	323	252	239	-	8,165
Depreciation charge for the year	3,438	86	114	98	71	-	3,807
Disposals	(794)	(4)	(17)	(30)	(88)	-	(933)
Translation adjustment	1,285	45	57	44	37	-	1,468
Balance at 31 March 2010	11,024	383	477	364	259	-	12,507
Carrying amounts
At 31 March 2009	7,148	303	569	469	133	386	9,008
At 31 March 2010	5,244	275	525	116	200	1,094	7,454

PROPERTY, PLANT AND EQUIPMENT - continued

Security

At 31 March 2010 properties with a carrying amount of USD 7,454 thousand (31 March 2009 USD 9,008 thousand) are secured to borrowings from banks.

NOTE H - NON - CONTROLLING INTEREST

	2009-10 Group USD'000	2008-09 Group USD'000

Balance at beginning of year	-	-
Non-controlling interests arising on issues of additional shares by DQ Entertainment (International) Limited to parties outside the Group		-
Issue of equity shares	15,857	-
Capital redemption reserve	9	-
Profit for the year	1,876	-
Other comprehensive income for the year	1,215	-
Transfer of opening reserves to Non Controlling interest holders	(476)	-
Closing balance	18,481	-

During the year, DQ India issued fresh equity shares, as a result of which the share holding of DQM got diluted to 75%. In the previous year DQM held 100% of the share capital in DQ India.

NOTE I - GOODWILL

Goodwill arising on acquisition of subsidiaries

An amount of USD 10,818 thousand represents goodwill arising on consolidation of financial statements of the Company's subsidiaries. Goodwill represents the excess amount paid over the nominal value of the shares of DQ India, which DQM acquired from certain shareholders.

	2009-10 Group USD'000	2008-09 Group USD'000
Cost
Opening balance	10,818	10,818
Add: Acquisitions through business combination	-	-
Closing balance	10,818	10,818

The Group tests for impairment of goodwill annually or more frequently if there are any indications that an impairment may have arisen. The recoverable amount of a Cash Generating Unit ("CGU") is determined based on the higher of fair values less costs to sell and value-in-use calculations. The key assumptions for the value-in-use calculations are those regarding discount rates and long term growth rates. The discount rate is based on the risk free rate of interest on government of India bonds, while growth rates are based on management's experience and expectations and do not exceed the long term average growth rate for the region in which the CGU operates. These calculations use cash flow projections based on financial budgets approved by the management. Cash flows are extrapolated using the estimated growth rates. No impairment losses were recognised in 2009-10 (2008-09: Nil). The discount rate used for discounting the future cashflows

is 22% (FY 2008-09: 20%)

NOTE J - INTANGIBLE ASSETS

	2009-10 Group USD'000	2008-09 Group USD'000
Cost
Opening balance	9,092	8,492
Acquisitions	14,076	2,908
Translation adjustment	2,101	(2,308)
Closing Balance	25,269	9,092

Amortisation
Opening balance	3,120	1,365
Amortisation expense	1,739	994
Impairment losses charged to profit or loss	337	1,336
Translation adjustment	614	(575)
Closing Balance	5,810	3,120

Carrying amounts
At beginning of year	5,972	7,127
At end of year	19,459	5,972

Intangible assets are distribution rights representing the unamortized value of costs incurred in acquiring distribution rights. The Group started acquiring these rights from the year 2003-04 and to date thirty series (FY: 2008-09: twenty three series) of Animation rights have been acquired for different territories across the globe. The Group started earning revenues from exploitation of rights from the previous year. In the current year the group earned revenue of USD 4,510 thousand (FY: 2008-09: USD 1,614 thousand) from exploitation of distribution rights. The Group has performed testing for impairment of intangibles which resulted in an impairment loss of USD 337 thousand (FY: 2008-09: USD 1,336 thousand) on account of recoverable amount of intangibles being less that its carrying amount.

The amortization and impairment loss is recognized as cost of sales in the income statement.

NOTE K - 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.

	2009-10 Group USD'000	2008-09 Group USD'000

Opening Balance	11,625	6,520
Acquisitions	3,145	10,356
Transfers to distribution rights	(8,431)	(2,908)
Translation adjustment	1,573	(2,343)
Closing Balance	7,912	11,625

NOTE L - OTHER FINANCIAL ASSETS

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000

Held for trading non-derivative financial assets - Investment in Mutual funds	19,320	-	-	-
	19,320	-	-	-

NOTE M - INVESTMENT IN ASSOCIATE

On 28 March 2008 the Company had acquired a 20% equity stake in Method Animation, SAS (the "Associate"), for a consideration of USD 3,884 thousand. For the purpose of applying the equity method of accounting, as the financial year of Associate ends on 31 December, the financial statements as of 31 December 2009 of the Associate, adjusted for significant transactions occurred between 31 December 2009 and 31 March 2010, have been used.

Details of acquisition and the accounting for the Associate's share of profits/losses are as follows:

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000

Opening balance	2,673	2,767	3,884	3,884
Cost of acquisition	2,673	2,767	3,884	3,884
Share of post acquisition loss (net of income tax)	(560)	-	(94)	-
Translation adjustment	179	167	(1,117)	(1,117)
Closing balance	2,292	2,934	2,673	2,767

The summarised financial information as at and for the year ended 31 March 2010 is as follows:

	2009-10 USD'000	2008-09 USD'000
Ownership share	20%	20%
Assets	46,664	39,312
Adjustment to the fair value	-	-
Assets - restated	46,664	39,312
Liabilities	(45,344)	(28,719)
Revenue	15,179	8,904
Loss	2,798	470

Goodwill of USD 910 thousand arose on acquisition of 20% equity stake in the associate during 2007-08 and is included in the carrying cost of the investment.

NOTE N - LOAN TO SUBSIDIARY

As per the shareholders' loan agreement DQplc has given an interest free loan amounting to USD 35,912 thousand) to its subsidiary DQM.

Fair value on initial recognition of the loan has amounted to USD 19,296 thousand assuming an interest rate of 8% per annum and repayment period of 10 years. As at 31 March 2010, the fair value of the loan outstanding amounted to USD 14,924 thousand (31 March 2009: USD 13,032 thousand)

DQM shall repay the loan amount to DQplc at such time and on such terms and conditions as may be mutually agreed between them.

	2009-10 Company USD'000	2008-09 Company USD'000

Opening balance	13,032	16,937
Interest accrued	63	1,169
Translation adjustment	1,829	(5,074)
Closing balance	14,924	13,032

NOTE O - DEFERRED TAX ASSETS AND LIABILITIES

Recognised deferred tax assets and liabilities of the Group

Deferred tax assets and liabilities of the Group are attributable to the following:

	Assets		Liabilities		Net
	2009-10 USD'000	2008-09 USD'000	2009-10 USD'000	2008-09 USD'000	2009-10 USD'000	2008-09 USD'000
Property, plant and equipment	-	-	(966)	(1,220)	(966)	(1,220)
Intangible assets	-	-	(348)	(437)	(348)	(437)
Employee benefits	444	403	-	-	444	403
Tax value of loss carry forwards recognized	870	1,015	-	-	870	1,015
Share Issue expenses	720	-	-	-	720	-
MAT Credit Entitlement	632	-	-	-	632	-
Translation adjustment	38				38
Net tax assets/(liabilities)	2,704	1,418	(1,314)	(1,657)	1,390	(239)

Unrecognised deferred tax assets of the Group

Deferred tax assets of the Group have not been recognised in respect of the following items:

	2009-10 USD'000	2008-09 USD'000

Unabsorbed depreciation	600	-
	600	-

Further, DQ India is exempt from income tax on profits from export production as it is eligible for tax holiday under the Indian Tax laws until the year ending 31 March 2011 and hence temporary differences which arise during the tax holiday period are recognised at the expected tax rate when these differences reverse, being zero.

Movement in temporary differences during the year

	Balance as at 1 April 2009	Recognised in income statement	Recognised in equity	Translation adjustment	Balance as at 31 March 2010
	USD'000	USD'000	USD'000	USD'000	USD'000

Property, plant and equipment	(1,220)	365	-	(459)	(966)
Intangible assets	(437)	131	-	306	(348)
Employee benefits	403	45	-	(4)	444
Tax value of carry forward tax losses	1,015	(280)	-	135	870
MAT Credit Entitlement	-	632	-	38	670
Issue expenses			720		720
Net tax assets/(liabilities)	(239)	893	720	16	1,390

	Balance as at 1 April 2008	Recognised in income statement	Recognised in equity	Translation adjustment	Balance as at 31 March 2009
	USD'000	USD'000	USD'000	USD'000	USD'000
Property, plant and equipment	(973)	(534)	-	287	(1,220)
Intangible assets	(581)	8	-	136	(437)
Employee benefits	419	92	-	(108)	403
Tax value of carry forward tax losses	1,135	165	-	(285)	1,015
Net tax assets/(liabilities)	-	(269)	-	30	(239)

NOTE P - DEPOSITS

Deposits represent amounts paid to various government agencies for the use of services including electricity, water and telephone supplied by these agencies. These amounts are refundable to the Group on the termination of the services with these agencies.

NOTE Q - TRADE AND OTHER RECEIVABLES

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000

Trade receivables	18,460	1,758	7,967	998
Unbilled revenue	5,311	-	3,526	-
Prepayments	247	27	207	30
Other receivables	2,995	4,865	1,272	2,065
	27,013	6,650	12,972	3,093

Total trade receivables (net of allowances) held by the Group at 31 March 2010 amounted to USD 18,460 thousand (31 March 2009: USD 7,967 thousand) comprising of USD 3,432 thousand being above 120 days (31 March 2009: USD 1,778 thousand).

The ageing analysis of trade receivables is given below:

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000

Less than 30 days	7,837	211	3,360	308
30 - 60 days	4,827	-	2,444	154
60 - 90 days	1,745	-	197	232
90 - 120 days	619	352	188	-
Greater than 120 days	3,432	1,195	1,778	304
	18,460	1,758	7,967	998

Ageing of impaired trade receivables

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000

Less than 30 days	-	-	-	-
30 - 60 days	-	-	-	-
60 - 90 days	-	-	-	-
90 - 120 days	-	-	-	-
Greater than 120 days	292	-	111	-

Allowance for doubtful debts is made by the Group for trade receivables beyond 180 days and where the Group is of the opinion that the amount is not recoverable. As of 31 March 2010, amount of trade receivables beyond 180 days was USD 2,894 thousand (31 March 2009: USD 753). Historically the Group has recovered all its trade receivables.

Movement in the allowance for doubtful debts

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000

Balance at beginning of the year	111	-	-	-
Impairment losses recognised on receivables	190	-	111	-
Amounts recovered during the year	(26)	-	-	-
Impairment losses reversed	-	-	-	-
Foreign exchange translation gains and losses	17	-
	292	-	111	-

NOTE R - 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 31 March 2010. The fair value of these derivative instruments is as follows:

	2009-10 Group USD'000	2008-09 Group USD'000

Opening	6	-
Gain on option contracts made during the year	40	6
Less: Opening balance written off	(6)	-
Closing balance	40	6

NOTE S - CASH AND CASH EQUIVALENTS

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000

Cash and bank balances	4,893	46	1,321	240
Call deposits	7,742	498	4,566	4,264
Cash and cash equivalents	12,635	544	5,887	4,504
Bank overdraft	(946)	-	(1,258)	-
Cash and cash equivalents in the statement of cash flows	11,689	544	4,629	4,504

NOTE T - EQUITY

a) Ordinary shares

DQplc 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

	2009-10		2008-09
	Group	Company	Group	Company
Number of shares in thousand
Opening balance	35,966	35,966	35,966	35,966
Issued for cash	-		-	-
Closing balance	35,966	35,966	35,966	35,966

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000
Share capital
Opening balance	73	73	73	73
Issued for cash	-	-	-	-
Closing balance - fully paid	73	73	73	73

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000
Share premium
Opening balance	49,017	49,017	49,017	49,017
Conversion and redemption of preference shares	126	-	-	-
Issue of shares during the year	16,478	-	-	-
Closing balance	65,621	49,017	49,017	49,017

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

b) Reserves

Translation reserve - Assets, liabilities, income, expenses and cash flows are translated in to USD (presentation currency) from Indian Rupees (functional currency of DQ India), Euros (functional currency of DQ Ireland) and Great British Pounds (functional currency of DQplc). The exchange difference arising out of the year-end translation is being debited or credited to Foreign Currency Translation Reserve, which is amounting to USD 6,428 thousand (31 March 2009: USD (11,630) thousand).

Translation reserve

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000
Opening balance	(13,290)	(9,469)	(1,660)	(749)
Increase/(decrease) during the year	6,428	1,301	(11,630)	(8,720)
Closing balance	(6,862)	(8,168)	(13,290)	(9,469)

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 aggregating to USD 11,208 thousand(31 March 2009: USD 8,336 thousand) include all current and prior period results as disclosed in the income statement.

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000
Opening balance	8,336	(17,448)	3,938	(18,883)
Profit for the year	2,872	792	4,398	1,435
Closing balance	11,208	(16,656)	8,336	(17,448)

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 U- EARNINGS PER SHARE ("EPS")

Profit attributable to ordinary shareholders

		2009-10	2008-09

Profit attributable to ordinary shareholders	USD'000	4,548	4,398
Weighted average number of ordinary shares outstanding during the year (in thousand)		35,966	35,966
Basic EPS (cents)		13	12
Diluted EPS (cents)		13	12

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

NOTE V - TRADE AND OTHER PAYABLES

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000

Trade payables	1,282	760	1,003	618
Deferred income	468	-	477	-
Non-trade payables and accrued expenses	4,130	30	2,498	609
	5,880	790	3,978	1,227

Ageing analysis of trade payables is as follows:

	2009-10		2008-09
	Group USD'000	Company USD'000	Group USD'000	Company USD'000
Less than three months	1,282	760	1,003	618
Three to twelve months	-	-	-	-
One to five years	-	-	-	-
Greater than five years	-	-	-	-
	1,282	760	1,003	618

NOTE W - BANK OVERDRAFT

Secured bank overdraft facility:

	2009-10 Group USD'000	2008-09 Group USD'000

Amount used	946	1,258
Amount unused	831	275
	1,777	1,533

NOTE X - INTEREST-BEARING LOANS AND BORROWINGS

This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings. For more information about the Group's exposure to interest rate and foreign currency risk, see note AB.

	2009-10 Group USD'000	2008-09 Group USD'000
Non-current liabilities
Secured bank loans	2,015	656
Redeemable convertible preference shares	-	130
	2,015	786
Current liabilities
Current portion of secured bank loans	7,397	5,053
	7,397	5,053

The borrowings are repayable as follows:
	2009-10 Group USD'000	2008-09 Group USD'000
On demand or within one year	7,396	5,075
In the second year	670	649
In the third to fifth years inclusive	1,497	137
After five years	-	-
	9,563,	5,861
Unrealised direct issue cost of secured bank loan	(151)	(22)
	9,412	5,839
Less: Amount due for settlement within twelve months (shown under current liabilities)	7,397	5,053
Amount due for settlement after twelve months	2,015	786

The secured bank loans are secured over properties with a carrying amount of USD 7,454 thousand (31 March 2009: USD 9,008 thousand).

The interest rate for two of the loans is pegged at a factor to the bank's Prime Lending Rate, while in respect of other loans they are pegged at a factor to LIBOR.

191,723 1% redeemable non-cumulative preference shares were issued on 12 December 2007 and 12,044 1% redeemable non-cumulative preference shares were issued on 18 February 2008 at an issue price of equivalent USD 0.254 per share. These 1% redeemable non-cumulative preference shares were converted in to equity shares during the current year.

Compound financial instruments

	Redeemable convertible preference shares
	Group
	USD'000
Balance at 1 April 2009	130
Transfer to Share Premium A/c	(126)
Amount classified as equity
Translation adjustment	(4)
Balance at 31 March 2010	-

1% Redeemable Optionally Convertible Non Cumulative Preference Shares (Preference Shares):

These shares are issued by DQ India with the following terms and conditions:

Dividends: Each Preference Share shall carry an annual preference dividend of 1% (one percent) per annum, 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 next 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: DQ India shall be entitled, at its option to call for redemption of all or part of the Preference Shares in or more tranches, at a redemption price of USD 0.248 per Preference Share plus an amount equal to any accrued but unpaid dividend on such Preference Shares ("Redemption Price").

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 DQ India, 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 tranches 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.

Ranking and Pari-passu: The Preference Shares shall inter-se rank pari passu, and shall at all times rank senior to the Equity Shares in regard to the payment of dividends.

NOTE Y - PROVISIONS

Provisions include the following:

	2009-10 Group USD'000	2008-09 Group USD'000

Current employee benefits (note Z)	84	63
Provision for retakes (note AA)	475	456
	559	519

Non-current employee benefits (note Z)	1,300	1,012

NOTE Z - EMPLOYEE BENEFITS

The defined benefit obligations of the Group include gratuity and compensated absences. Gratuity represents amounts payable to the employees, at the time of termination, resignation or retirement from services, on completion of a minimum service period of 5 years with the Group. The amount of gratuity payable to an employee is equal to the product of 15 days salary and the number of completed years of service or part thereof in excess of 6 months.

Compensated absences represent amounts payable to employees on utilisation of accumulated leave balances during service with the Group or encashment of such accumulated leave balances on termination, resignation or retirement from the services. Maximum leave available for encashment on termination, resignation or retirement is 60 days.

	2009-10 USD'000	2008-09 USD'000

Present value of unfunded obligations	819	604
Recognised liability for defined benefit obligations	819	604
Liability for compensated absences	512	471
Total employee benefit liability	1,331	1,075

Movements in the net liability for defined benefit obligations recognised in the balance sheet

	2009-10 USD'000	2008-09 USD'000

Present value of unfunded obligations	604	587
Expense recognised in the income statement (see below)	165	323
Actuarial gains	(30)	(137)
Contributions to defined benefit obligations	(23)	(12)
Translation adjustment	103	(157)
Present value of unfunded obligations	819	604

Employee benefits recognised in the balance sheet are as follows:

	2009-10 USD'000	2008-09 USD'000

Current employee benefits	84	63
Non-current employee benefits	1,300	1,012
	1,384	1,075

Expense recognised in the income statement

	2009-10 USD'000	2008-09 USD'000

Current service costs	112	283
Interest on obligation	53	40
Actuarial gains	(30)	(137)
	135	186

The expense is recognised in the following line items in the income statement:

	2009-10 USD'000	2008-09 USD'000

Cost of sales	129	176
General and administrative expenses	6	10
	135	186

Liability for defined benefit obligations

Principal actuarial assumptions at the balance sheet date:

	2009-10 USD'000	2008-09 USD'000

Discount rate at 31 March	8.00%	8.00%
Future salary increases	4%	4%
Withdrawal rate
Age group (in years): 18-30	10%	10%
31-40	5%	5%
41-45	3%	3%
46 and above	2%	2%

Mortality:Standard table of Life Insurance Corporation of India (1994-96) was used for mortality rate.

Personnel costs

	2009-10 USD'000	2008-09 USD'000

Wages and salaries	11,688	12,601
Contributions to defined contribution plans	853	969
Increase in liability for defined benefit plans	135	186
(Decrease)/increase in liability for compensated absences	44	(114)
	12,720	13,642

NOTE AA - PROVISION FOR RETAKES

	2009-10 Group USD'000	2008-09 Group USD'000

Opening balance	456	435
Provisions made during the year	480	529
Provisions used during the year	(97)	(33)
Provisions reversed during the year	(432)	(358)
Translation adjustment	68	(117)
Closing balance	475	456

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 will be accepted from customers by the group for a maximum period of three months from the final delivery and hence the provision is not discounted.

NOTE AB - FINANCIAL INSTRUMENTS

Financial risk management objectives

The Group's major financial instruments during the year comprised bank loans, call deposits, options and forward foreign exchange contracts. The principal objective of these financial instruments is to finance the Group's operations, to manage the interest rate risk arising from its sources of finance and to minimise the impact of fluctuations in exchange rates on future cash flows. The Group's other financial instruments consist of trade receivables and trade payables, which arise directly from its operations.

The Group regularly reviews its exposure to interest, liquidity and foreign currency risk. Where appropriate the Group will take action, in accordance with a Board approved Treasury Policy, to minimise the impact on the business of movements in interest rates and currency rates.

The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Group only enters into derivative instruments with bankers to ensure appropriate counterparty credit quality.

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note V, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes Q and R respectively.

Gearing ratio

The Group's management reviews the capital structure on a semi-annual basis. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. The Group has a target gearing ratio of 1:1 determined as the proportion of net debt to equity.

The gearing ratio at the year end was as follows:

	2009-10 Group USD'000	2008-09 Group USD'000

Debt (i)	10,358	7,097
Cash and cash equivalents	(12,635)	(5,887)
Net debt	(2,277)	1,210
Equity (ii)	90,924	46,512
Net debt to equity ratio	(0.03)	0.03

(i) Debt is defined as long and short-term borrowings, as detailed in note X and W

(ii) Equity includes all capital and reserves of the Group.

Credit risk

The Group's principal financial assets are cash and bank balances, trade and other receivables and currency derivative financial instruments.

The credit risk on liquid funds and currency derivative financial instruments is limited because the counterparties are banks with high credit‑ratings assigned by international credit‑rating agencies.

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers. The Group does not require collateral in respect of financial assets.

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group's maximum exposure to credit risk.

At 31 March 2010 there was concentration of credit risk in two customers to the extent of 53% of the total trade receivables. However the Group does not foresee any credit risk, as 36% of the receivable from such customer is less than 180 days.

Investments are allowed only in liquid securities and only with counterparties that have a credit rating equal to or better than the Group and hence management does not expect any counterparty to fail to meet its obligations.

Liquidity risk

The Group keeps its short, medium and long term funding requirements under constant review. Its policy is to have sufficient committed funds available to meet medium term requirements, with flexibility and headroom to make minor acquisitions for cash if the opportunity should arise.

The table below analyses the Group's financial liabilities which will be settled on a net basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date.

Liquidity risk

Group	Less than one month	One to three months	Three to twelve months	One to five years	Greater than five years	Total
31 March 2010
Interest bearing loans and borrowings (note X)	5	6,485	907	2,015	-	9,412
Bank Overdraft	946	-	-	-	-	946
Trade and other payables	5,124	51	104	346	255	5,880
	6,075	6,536	1,011	2,361	255	16238
31 March 2009
Interest bearing loans and borrowings (note X)	527	1,264	3,262	786	-	5,839
Bank Overdraft	1,258	-	-	-	-	1,258
Trade and other payables	3,116	71	464	327	-	3,978
	4,901	1,335	3,726	1,113	-	11,075

Interest rate risk

The Group regularly evaluates the profile of borrowings and the associated interest rates. The Group does not foresee any significant risk because of the level of exposure.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, on the Group's net profit before tax (through the impact on floating rate borrowings).

	Increase/(decrease) in basis points	Effect on Group net profit before tax USD'000
2009-10
Increase	100	(48)
Decrease	(100)	48
2008-09
Increase	100	(73)
Decrease	(100)	73

FINANCIAL INSTRUMENTS - continued

Effective interest rates

In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates and the maturity profiles of their carrying amounts at the balance sheet date:

	2009-10 USD'000					2008-09 USD'000
	Effective		On demand			Effective		On demand
	Interest		Less than	1 - 5	More than	interest		Less than	1 -5	More than
	Rate	Total	1 year	years	5 years	rate	Total	1 year	years	5 years
Financial assets
Cash and bank balances	-	4,893	4,893	-	-	-	1,321	1,321	-	-
Call deposits	4% - 10%	7,742	7,742	-	-	4% - 10%	4,566	4,566	-	-
Trade and other receivables	-	27,013	27,013	-	-	-	12,972	12,972	-	-
Deposits	-	769	-	769	-	-	579	-	579	-
		40,417	39,648	769	-	-	19,438	18,859	579	-
Financial liabilities
US dollar floating rate loan	5% - 9%	3,510	3,510	-	-	5% - 9%	4,877	4,342	535	-
Rupee floating rate loan	9% - 13.54%	5,902	3,887	2,015	-	9% - 13.54%	832	710	122	-
Redeemable convertible preference shares	8%	-	-	-	-	8%	130	-	130	-
Bank overdraft	11% - 13.50%	946	946	-	-	11% - 13.50%	1,258	1,258	-	-
Trade and other payables	-	5,880	5,279	346	255	-	3,978	3,651	327	-
		16,238	13,622	2,361	255		11,075	9,961	1,114	-

FINANCIAL INSTRUMENTS - continued

Currency risk

The Group is exposed to currency risk on sales, purchase of fixed assets, overseas outsourcing and borrowings that are denominated in currencies other than the Indian Rupee. The currencies giving rise to this risk are primarily Euros and U.S. Dollars.

The Group uses currency forward exchange contracts and currency option contracts to manage its foreign currency risk. The Group has currency option contracts as at the balance sheet date details of which are given in note P.

The financial instruments of the Group include the following amounts, which are denominated in the following foreign currencies:

	2009-10 USD'000				2008-09 USD'000
	Euro	USD	Other	Total	Euro	USD	Other	Total
Assets
Cash and bank balances	3,192	110	1,591	4,893	486	640	195	1,321
Call deposits	-	-	7,742	7,742	-	4,264	302	4,566
Trade and other receivables	19,447	1,152	6,414	27,013	7,322	3,730	1,920	12,972

Liabilities
Trade and other payables	184	115	5,581	5,880	7	40	3,931	3,978
Borrowings - current	-	3,510	3,887	7,397	-	4,343	710	5,053
- non current	-	-	2,015	2,015	-	535	251	786

Currency risk table

The following table demonstrates the sensitivity to a reasonably possible change in currency rates, with all other variables held constant, on the Group's net profit before tax (through the impact on currency rate changes between the INR: USD for Group and USD: GBP for Company).

	Group		Company
	Increase/(decrease) in value of INR	Effect on Group net profit before tax USD'000	Increase/(decrease) in value of USD	Effect on Company net profit before tax USD'000
2009-10
Increase	INR 1	(133)	10¢	127
Decrease	(INR 1)	133	(10¢)	(127)
2008-09
Increase	INR 1	(108)	10¢	78
Decrease	(INR 1)	108	(10¢)	(78)

FINANCIAL INSTRUMENTS - continued

Fair values

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

·; Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

·; Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

·; Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

There is no reconciliation of Level 3 fair value measurements of financial assets


	Level 1	Level 2	Level 3	Total

Financial assets at FVTPL
Non-derivative financial assets held for trading	19,320	-	-	19,320

	19,320	-	-	19,320

The fair values together with the carrying amounts shown in the balance sheet are as follows:

	Carrying	Fair	Carrying	Fair
	Amounts	Value	Amounts	Value
	2009-10 USD'000	2009-10 USD'000	2008-09 USD'000	2008-09 USD'000

Investment in associate	2,292	2,292	2,673	2,673
Deposits	769	769	579	579
Trade and other receivables	27,013	27,013	12,972	12,972
Financial assets at fair value through profit and loss	40	40	6	6
Cash and cash equivalents	12,635	12,635	5,887	5,887
Secured bank loans	(9,412)	(9,412)	(5,709)	(5,709)
Redeemable convertible preference shares	-	-	(130)	(130)
Trade and other payables	(5,880)	(5,880)	(3,978)	(3,978)
Bank overdraft	(946)	(946)	(1,258)	(1,258)
	26,511	26,511	11,042	11,042
Unrecognised gains	-	-		-

Estimation of fair values

The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the table.

Interest-bearing loans and borrowings

Fair value is calculated based on discounted expected future principal and interest cash flows. For vehicle loans, the fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous vehicle loans. The estimated fair values reflect change in interest rates.

Cash and cash equivalents

The Group considers that the carrying amount of cash and cash equivalents approximates their fair value.

Convertible debentures and redeemable convertible preference shares

The fair value for the liability portion of the instrument is based on the prevailing market rates for a similar term non-convertible instrument.

Trade and other receivables / payables

The Group considers that the carrying amount of trade and other receivables / payables approximates their fair values.

NOTE AC - OPERATING LEASES

Leases as lessee

The Group leases a number of office, residential facilities and land under cancellable operating leases. The leases typically run for a period of 2 - 33 years, with an option to renew the lease after that date. Lease payments are increased every year to reflect market rentals. None of the leases includes contingent rentals. The Group does not have an option to purchase the leased asset at the expiry of the lease period.

Payments recognised as an expense

	2009-10 USD'000	2008-09 USD'000

Minimum lease payments	882	969
	882	969

NOTE AD - CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

	2009-10 Group USD'000	2008-09 Group USD'000

Capital commitments:
Purchase of property, plant and equipment	12	5
Purchase of distribution rights	1,800	827

Contingent liabilities:
Outstanding letters of credit for capital investments	6,711	6,068
Bonds executed in favour of Indian customs and excise authorities	827	714
Claims not acknowledged as debts*	214	185

*Claims against the Group not acknowledged as debts amounting to USD 214 thousand comprise of demand from Indian Income Tax authorities on account of non deduction of withholding tax relating to certain overseas payments. The Group has made payments aggregating to USD 177 thousand against the demand and is contesting the demand and filed an appeal with the relevant appellate authorities.

NOTE AE - RELATED PARTIES

Identity of related parties

DQplc has a related party relationship with its directors, executive officers, subsidiaries and associate. DQplc 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)

c) Key management personnel

Mr. Tapaas Chakravarti - Director

Mr. K. Balasubrahmanyam - Director

Mr. Michael Herlihy - Director

Late Rusi Brij - Director (passed away on 20 May 2009)

Ms. Theresa Plummer - Director

Mr. Anthony BM (Tony) Good - Director

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

Trading transactions

Transactions between DQplc 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 Animation

Amounts owed by related party

2009-10

USD'000

2008-09

USD'000

2009-10

USD'000

2008-09

USD'000

Associate

6,874

7,739

4,623

4,122

Revenue from production from related parties were at prices arising out of 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.

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 year are as follows:

	2009-10 USD'000	2008-09 USD'000
Short term benefits	408	553
Other long term benefits	-	-
	408	553

Outstanding balance	247	142

RELATED PARTIES - continued

Other related party transactions

Remuneration paid to relatives of key management personnel during the year was USD 60 thousand (31 March 2009: USD 61 thousand) and the outstanding balance as at 31 March 2010 was USD 3 thousand (31 March 2009: USD 3 thousand).

NOTE AF - AUDITORS' REMUNERATION

Details of the auditors' remuneration are as follows:

	2009-10 Group USD'000	2008-09 Group USD'000

Statutory audit fees	70	51
Tax audit fee	3	2
Other services	56	45
	129	98

NOTE AG - ADMINISTRATIVE EXPENSES

Details of the administrative expenses are as follows:

	2009-10 Group USD'000	2008-09 Group USD'000

Depreciation and amortization	256	290
Director Remuneration	540	552
Salaries and wages	1,607	1,764
Other adminstrative expenses	652	1,705
	3,055	4,311

NOTE AH - ACCOUNTING ESTIMATES AND JUDGEMENTS

Management discussed the development, selection and disclosure of the Group's critical accounting policies and estimates and the application of these policies and estimates.

The preparation of the financial statements in conformity with IFRS requires management to make estimates and assumptions, which may differ from actual results in future. Management is also required to use its discretion as to the application of the accounting principles used to prepare these statements.

Convertible financial instruments

In accordance with IAS 32 'Financial Instruments: Disclosure and Presentation' management is required to assess the liability component of any compound financial instruments. Such an assessment requires management to consider the characteristics of similar financial instruments without conversion options. In the absence of any such instruments being in issue by the Group management must estimate what those characteristics would be.

Revenue recognition

The Group recognises revenue in accordance with the accounting policy in 2(v) (i). When recognising revenue, management is required to estimate the stage of completion with such estimates being revisited at each balance sheet date. Material deviations are recognised in the income statement of the current period unless an error is identified in which case prior periods are revised in accordance with IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors'.

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

Impairment of Intangible assets

Determining whether Intangible assets are impaired requires an estimation of the value in use of the intangible assets. The value in use calculation requires the directors to estimate the future cash flows expected to arise from the intangibles assets and a suitable discount rate in order to calculate present value

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR EASXXAEXEEEF

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