A. Background
 
 MPS Limited, (the Company) is engaged in the business of providing
 typesetting and data digitization services for overseas publishers.
 The Company has a 100% Export Oriented Unit in Bengaluru, and units
 registered under the Software Technology Park of India (STPI) scheme
 that are located in Chennai, Delhi and Gurgaon. In March, 2009, the
 Company had set up a Unit at Noida which is located in a Special
 Economic Zone notified area. The Company also operates through its
 branches in United States of America and United Kingdom.  The Company
 provides Publishing Services relating to typesetting of books and
 journals, composing of Yellow Page Advertisements and catalogues, data
 coding, conversion, indexing, editing, copy editing and editorial
 services to global publishers.
 
 MPS Limited had two direct subsidiaries MPS Technologies Limited and
 MPS Content Services Inc. USA (formerly ICC Macmillan Inc. USA) MPS
 Content Services India Private Limited (formerly ICC India Private
 Limited) was a subsidiary of MPS Content Services Inc. USA.
 
 The Board of Directors of the Company, at its meeting held on 10th
 January 2011, approved a Scheme of Amalgamation pursuant to Sections
 391 to 394 of the Companies Act, 1956 and Oregon Business Corporation
 Act, USA involving the Amalgamation of the wholly owned subsidiaries of
 the Company, MPS Technologies Ltd. and MPS Content Services Inc. USA
 and its wholly owned subsidiary MPS Content Services India Private
 Limited with the parent company, MPS Limited (the Company), with effect
 from 31 December 2010, (Appointed Date''). This Scheme has been
 sanctioned by the Honourable High Court of Madras vide its order dated
 15th June 2011.
 
 On an application made by the Company, the Registrar of Companies (ROC)
 vide its letter dated 6th June 2011 has granted extension of time for
 holding the Annual General Meeting for a period of three months upto
 30th September, 2011.
 
 Consequent to the sanction of the above scheme:
 
 1.  All the assets, liabilities and reserves of MPS Technologies
 Limited, MPS Content Services Inc. USA and its subsidiary MPS Content
 Services India Private Limited (Transferor Companies) have been
 recorded in the books of the Company at the respective values appearing
 in the books of the Transferor Companies without revaluation.
 
 2.  The excess of the value of Investment in the books of the parent
 company over the value of share capital and reserves of the erstwhile
 subsidiaries of Rs. 1326.58 Lacs has to be adjusted against the
 reserves of the Transferee Company in accordance with the Scheme of
 Amalgamation. Accordingly an amount of Rs. 500 Lacs has been adjusted
 against the General Reserves and the balance has been adjusted against
 the surplus in Profit and Loss Account.
 
 3. Contingent Liability: (a) Disputed Demands
 
 
 Name of the Statute         Nature of Dues             Rs. In Lacs 
 
 Income Tax Act, 1961        Income Tax            5.21 (PY - 5.21) 
                             demands of 
                             erstwhile 
                             subsidiaries
 
 Income Tax Act, 1961        IncomeTax            529.81 (PY - Nil) 
                             demands
 
 Income Tax Act, 1961        IncomeTax             73.70 (PY - Nil) 
                             demands
 
 Income Tax Act, 1961        IncomeTax              1.56 (PY -1.56) 
                             demands of 
                             erstwhile 
                             subsidiaries
 
 Section 66A of Finance Act  Service Tax       227.77 (PY - 227.77) 
                             demands 
 
 Section 66A of Finance Act  Service Tax           99.99 (PY - Nil) 
                             demands 
 
 Section 66A of Finance Act  Service Tax           39.54 (PY - Nil)
                             demands
 
 Section 66A of Finance Act  Service Tax            5.29 (PY - Nil)
                             demands
 
 Section 66A of Finance Act  Service Tax              9.66 (PY-Nil)
                             demands
 
 
 Name of the      Period             Forum where dispute is pending
 Statute     
 
 Income Tax Act,  Asst Year 2005-06  Income Tax Appellate Tribunal, 
 1961                                Chennai
 
 Income Tax Act,  Asst Year 2007-08  Deputy Commissioner of Income
 1961                                Tax, Chennai
 
 Income Tax Act,  Asst Year 2007-08  Deputy Commissioner of Income
 1961                                Tax, Chennai
  
 Income Tax Act,  Asst Year 2007-08  Commissioner of Income Tax
 1961                                (Appeals), Chennai
 
 Section 66A of   July 2003 to       Customs and Excise Service
 Finance Act      Dec 2006           Tax Appellate 
                                     Tribunal, Bengaluru
 
 Section 66A of   Oct 2007 to        Customs and Excise Service
 Finance Act      Sept 2008          Tax Appellate 
                                     Tribunal, Bengaluru
 
 Section 66A of   Jan 2007 to        Commissioner of Service Tax,
 Finance Act      Sep 2007           Bengaluru
 
 Section 66A of   Aug 2007 to        Commissioner of Service Tax,
 Finance Act      Sept 2007          Bengaluru
 
 Section 66A of   Oct 2007 to        Commissioner of Service Tax,
 Finance Act      Dec 2007           Bengaluru
 
 
 (b) No provision has been considered for Service Tax amounting to
 Rs.227.77 Lacs on overseas commission paid for the period from 1 July,
 2003 to 31 December, 2006, as the demands raised by the Authorities for
 this period is being contested by the Company. The Service Tax for the
 period from January, 2007 to December, 2010 together with interest
 amounting to Rs.291.85 Lacs and has been fully remitted. Interest on
 delayed remittance of Service Tax Rs.52.36 Lacs has been provided for.
 
 (c) As on 31 December, 2010, the Company has appealed against the
 disallowance of Service Tax claim of Rs.190.54 Lacs. Subsequent to the
 year end, the company has appealed against disallowance of Rs. 7.99
 Lacs. In the opinion of the management, the disallowance is not
 sustainable.
 
 4. Subsequent to the year end, the Beverly facility of MPS Content
 Services Inc., erstwhile subsidiary of the Company, has been closed
 down and the company has incurred an amount of Rs. 48.76 Lacs
 (equivalent of USD 107,294) towards severance pay to employees and
 termination costs for early vacation of the premises.
 
 5.  Employee Benefits:
 
 The entire Plan Assets are managed by the Life Insurance Corporation of
 India (LIC). The details with respect to the composition of investments
 in the fair value of Plan Assets have not been disclosed in the absence
 of the necessary information.
 
 The above disclosure excludes the figures of the overseas branch, as it
 is governed by the laws prevailing in the United States of America.
 
 6.  Segment Reporting:
 
 Business Segment
 
 The Company operates in one business segment, the business of
 typesetting and data digitization services for overseas publishers. All
 assets, liabilities, revenue and expenses are related to this segment.
 
 Notes:
 
 1.  Geographical Segments
 
 The Company''s operations are managed on a worldwide basis from India,
 although, they operate in four principal geographical areas of the
 world, namely India, Europe, United States of America and Rest of the
 world and the revenues are segregated based on the geographical
 location of the customer.
 
 2.  Segmental Assets includes all operating assets used by respective
 segment and consists principally of operating cash, debtors,
 inventories and fixed assets net of allowances and provisions.
 Segmental Liabilities include all operating liabilities and consist
 primarily of creditors and accrued liabilities. Segment assets and
 liabilities do not include income tax assets and liabilities.
 
 7. Related Party Disclosure
 
 Information relating to related party transactions (As identified by
 the management and relied upon by the Auditors)
 
 1.  Parties where control exists;
 
     1.1. Ultimate Holding Company  : Georg Von Holtzbrinck 
                                       GmbH & Co K.G.
 
     1.2. Holding Company           : H M Publishers Holdings Ltd.
 
     1.3. Subsidiary Companies*     : MPS Technologies Ltd.
                                      MPS Content Services Inc. USA 
                                      MPS Content Service India 
                                      Pvt. Ltd.
 
 Until 31st December 2010 (Refer Note I of Schedule 19)
 
 2.  Group Companies / Entities with whom the Company had transactions
 during the year:
 
 Macmillan Publishers Limited, UK     Macmillan Iberia SAU
 
 Macmillan Academic Publishing Inc.   Macmillan Education, SA
 
 Macmillan Publishers China Limited   Ediciones Castillo Group 
                                      Macmillan, Mexico
 
 Macmillan Publishers Australia 
 Proprietary Limited                  Gill & Macmillan Publishers 
                                      (Ireland)
 
 Macmillan Hellas (Greece)            Macmillan Publishers Holdings 
                                      LLC
 
 Holtzbrinck Publishers Holdings 
 Limited                              Macmillan Education Limited
 
 Nature America Inc.                  Macmillan Publishers India  
                                      Limited
 
 Kingfisher Publications Limited      Bookworxs GmbH
 
 HGV Hanseatische Gasellschaft        Euroscript GmbH
 
 Macmillan Poland
 
 
 8.  No provision has been made for Minimum Alternate Tax (MAT), as the
 Company has obtained legal opinion to the effect that the income
 accrued or arising at a unit in the SEZ, does not fall within the ambit
 of Section 115JB of the Income Tax Act, 1961.
 
 Current tax is determined in respect of taxable income for the Calendar
 year ended 31st December, 2010. The ultimate current Tax liability will
 be determined on the basis of taxable income for the Financial year 1st
 April, 2010 to 31st March, 2011.
 
 9.  Pursuant to the announcement by the Institute of Chartered
 Accountants of India (ICAI) in respect of ''Accounting for Derivatives''
 though the Company has opted not to follow the recognition and
 measurement principles relating to derivatives as specified in
 Accounting Standard - 30, ''Financial Instruments, Recognition and
 Measurement'', keeping in view the principle of prudence as enunciated
 in AS 1. Disclosure of Accounting Policies, the entity has not
 considered, by way of prudence, the net gains in respect of all
 outstanding derivative contracts at the balance sheet date.
 
 The value of forward contracts entered into hedge the foreign currency
 risk of firm commitments/highly probable transactions as at 31st
 December, 2010 is USD 10,100,000, Euro 450,000 and GBP 2,000,000
 (Previous year - USD 11,500,000 & Euro 2,575,000).
 
 The remeasurement of the fair value as at the balance sheet date has
 resulted in mark to market net gains of Rs.174.99 Lacs (Previous year -
 net gain of Rs. 217.07 Lacs) relating to undesignated forward
 contracts. The gains have not been recognised in the Profit and Loss
 account as a matter of prudence.
 
 10.  The financial statements of 2010 includes the operating results of
 the erstwhile subsidiaries consequent to Amalgamation, which do not
 form part of the operating results of previous year. Hence the figures
 for the current year are not comparable with those of the previous
 year. Previous year figures have been regrouped / reclassified wherever
 necessary to conform to current year''s presentation.