Prime Focus

The directors have pleasure in placing before you the Annual Report of
 the company along with the Audited Accounts for the year ended 31st
 March, 2008:
 
 1.  Financial Results:
 
 The performance of the company for the financial year ended 31st March,
 2008 is summarized below;
 
                                                          (Rs. in lacs)
                                              2007-2008      2006-2007
 
 Income                                        9,327.82        6317.84
 
 Profit/(Loss) Before Interest, 
 Depreciation, Tax And
 Extraordinary Item                            5,149.61       4,056.40
 
 Less: Interest                                  727.33         347.33
 
 Profit/(Loss) After Interest, 
 Before Depreciation And Tax                   4,422.28       3,709.09
 
 Less: Depreciation                            1,604.21         774.52
 
 Profit Before Tax (PBT) And 
 Extraordinary Item                            2,818.07       2,934.56
 
 Less: Extraordinary Item - 
 Preliminary & Pre -Operative
 
 Expenses w/off                                     NIL            NIL
 
 Profit Before Tax (PBT)                       2,818.07       2,934.56
 
 Less: Provision For Tax
 
 Current Tax                                        NIL         686.55
 
 Deferred Tax                                    133.93         226.44
 
 Fringe Benefit Tax                               19.66          13.77
 
 Profit After Tax                              2,664.49       2,007.81
 
 Add: Balance Brought Forward                  5,063.70       3,055.89
 
 Add: Deferred Tax Credited On 
 Share Issue Expenses                            148.69            NIL
 
 Less: Interim Dividend & Tax                    223.27            NIL
 
 Less: Transfer To General Reserve               134.00            NIL
 
 Balance Carried To Balance Sheet              7,519.61       5,063.70
 
 2.  Dividend:
 
 The Board of directors had declared and paid interim dividend of Rs.
 1.50 (Rupee one and paise fifty) per equity share on 12,722,588 equity
 shares of Rs. 10 each for the financial year 2007-2008. The said
 dividend was paid to the shareholders of the Company as on the record
 date (16th August, 2007) fixed for the purpose.
 
 3.  Transfer to Reserves:
 
 Your directors have proposed to transfer Rs. 13,400,000/- to the
 general reserve out of the balances available for appropriation,
 therefore after the interim dividend payout and transfer to general
 reserves, the balance of Profit and Loss Account would stand at Rs.
 751,960,918/-
 
 4.  Overall Performance:
 
 The gross income increased by Rs. 3,009.98 lakhs in 2007-2008, which is
 47.64% increase over previous year. The profit after tax of the company
 increased from Rs. 2,007.81 lakhs in 2008-07 to Rs. 2,664.49 lakhs in
 2007-08 which is 32.71% increase over previous year.
 
 5.  Subsidirary Companies:
 
 The Company has the following 4 subsidiaries as on 31st March, 2008
 
 1.  Prime Focus London Plc UK (formerly known as VTR Plc)
 
 2.  Prime Focus Investments Limited (UK)
 
 3.  Flow Post Solutions Private Limited
 
 4.  Prime Focus Technologies Private Limited
 
 As required under the provisions of section 212 of the Companies Act,
 1956, a statement of the holding companys interest in the subsidiary
 companies forms part of this report. The company has obtained
 permission from the Central Government under Section 212(8) of the
 Companies Act, 1956 and accordingly the individual annual accounts of
 the subsidiary companies for the year ended 31st March, 2008 have not
 been attached to the annual report. Copies of these accounts will be
 made available to any member upon request.
 
 S.  Directors:
 
 In accordance with the provisions of the Companies Act, 1956 and the
 Articles of Association of the Company, Mr. Kodi Raghavan Srinivasan
 and Mr. Somasekhar Sundaresan retire by rotation at the forthcoming
 annual general meeting and being eligible have offered themselves for
 re-appointment.
 
 7.  Listing] fees:
 
 The equity shares of the company are listed on the Bombay Stock
 Exchange Limited and the National Stock Exchange of India Limited. The
 company has been complying with the listing agreement stipulations from
 time to time. The company has paid the applicable listing fees to the
 above Stock Exchanges upto date.
 
 8.  Corporate Governance Report:
 
 Your company is committed to maintain the highest standards to
 Corporate Governance. Your directors adhere to the requirements set out
 in the Listing Agreement with the Stock Exchanges and have implemented
 all the prescribed requirements.
 
 Report on corporate governance as stipulated under Clause 49 of the
 listing agreement with the stock exchanges forms part of the Annual
 Report.
 
 Certificate from Auditors of the company confirming compliance of
 conditions of Corporate Governance as stipulated under the aforesaid
 Clause 49 is annexed to this report.
 
 9.  Sememe of Amalgamation:
 
 Storemedia Technolgies Private Limited, subsidiary company has been
 amalgamated under Sections 391 to 394 read with Sections 100 to 103 of
 the Companies Act, 1956 with the company, the merger comes into effect
 from the appointed date 1st January, 2008. The Scheme of Amalgamation
 was sanctioned by Honble High Court of Judicature of Bombay on 28th
 November, 2008.
 
 In terms of the said scheme 100 equity shares will be issued for every
 45 equity shares held by the members of Storemedia Technologies Private
 Limited. The same will entail to allotment of 100,000 equity shares
 from the Company.
 
 The amalgamation of the transferor companies with the company will aid
 in streamlining the group structure for post production, visual effects
 and digital intermediary business.
 
 The Annual Report of the company for the financial year 2007-2008 has
 been prepared after giving effect to the amalgamation.
 
 10.  Issue of Foreign Currency Convertible Bonds (FCCBs):
 
 Pursuant to the approval accorded by the members at the Annual General
 Meeting on September 28, 2007, the company raised USD 55 million
 through an issue of Zero Coupon Convertible Bonds on December 12, 2007
 due on 2012. The bonds are listed on Singapore Stock Exchange.
 
 As per the terms of the issue, the holders have an option to convert
 FCCB into Equity Shares at an initial conversion rate of Rs. 1,386.79
 per equity share at a fixed exchange rate of Rs. 39.39 per US$ subject
 to certain adjustments as per the terms of the issue. Further, under
 certain conditions, the Company has the option to redeem the bonds on
 or after December 12, 2010. Unless previously converted or redeemed or
 purchased and cancelled, the company will redeem these bonds, at
 143.66% at the end of the five years from the date of issue i.e. on
 December 13, 2012.
 
 As at March 31, 2008, no bonds have been converted into equity shares
 of Rs. 10 each.
 
 11.  Fixed Deposits:
 
 The Company has not accepted or renewed any Fixed Deposits within the
 meaning of Section 58-A of the Companies Act, 1956.
 
 12.  Particulars of employees:
 
 As required under the provisions of Section 217 (2A) of the Companies
 Act, 1956, read with the Companies (Particulars of Employees) Rules,
 1975 as amended, the requisite particulars in respect of the employees
 of the company, who are in receipt of remuneration in excess of the
 limits specified under the said section are set out in the annexure
 herewith and form part of this report.
 
 13.  Directors Responsibility statement u/s 217 (2AA) of the Companies
 Act 1956:
 
 The Directors confirm that in the preparation of the annual accounts
 for the year ended 31st March 2008-
 
 1.  The applicable accounting standards have been followed along with
 proper explanations relating to material departures, if any.
 
 2.  That the directors had selected such accounting policies and
 applied them consistently and made judgments and estimates that are
 reasonable and prudent so as to give a true and fair view of the state
 of affairs of the company at the end of the financial year and of the
 profit or loss of the Company for the period ended 31st March, 2008.
 
 3.  That the directors had taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of this Act for safeguarding the assets of the Company and
 for preventing and detecting fraud and other irregularities.
 
 4.  That the directors had prepared the annual accounts on a going
 concern basis.
 
 14.  Auditors Report
 
 As regards the qualification made by the Auditors as stated in
 paragraph number 3 (d) of their report on the accounts of Prime Focus
 Limited and paragraph 5 of their report on the Consolidated Financial
 Statements of the Company respectively, attention is invited to note
 no. 2 (i) of Schedule 17 on significant Accounting Policies and Notes
 forming part of the Accounts of the Company and Note no. 2 (m) of
 Schedule 18 of the consolidated financial statements of the company,
 wherein the detailed explanation provided which in the opinion of the
 Board of Directors are self explanatory.
 
 15.  Conservation of Energy, Technology Absorption and Foreign Exchange
 Earnings and Outgo:
 
 i.  Conservation of Energy and Technology Absorption:
 
 The Company is not engaged in manufacturing activities and as such the
 particulars relating conservation of energy and technology absorption
 are not applicable. The Company makes every effort to conserve energy
 as far as possible in its post production facilities, Studios, Offices,
 etc.
 
 ii.  Foreign Exchange Earnings and Outgo:
 
                                                        (Rs. in lacs)
 Particulars                                 2007-2008     2006-2007
 
 Foreign Exchange Earned Technical 
 Service receipts                               620.77         88.58
 
 Foreign Exchange Outgo: Professional fees       64.60         29.50
 
 Payment on other accounts                       57.87         36.76
 
 16.  Changs in Auditors:
 
 M/s. V. Shivkumar & Associates, Chartered Accountants, who are the
 Statutory Auditors of the Company hold office, in accordance with the
 provisions of the Companies Act, 1956, upto the conclusion of the
 forthcoming Annual General Meeting. M/s. V. Shivkumar & Associates,
 Chartered Accountants have communicated that they are not seeking
 re-appointment at the ensuring Annual General Meeting.  The Company has
 received a special notice from a member of the company in terms of the
 provisions of the Companies Act, 1956, signifying the intention to
 propose the appointment of S.R Batliboi and Associates, Chartered
 Accountants, as the Statutory Auditors of the Company from the
 conclusion of the ensuring Annual General meeting until the conclusion
 of the next Annual General Meeting. S.R Batliboi and Associates have
 expressed their willingness to act as Auditors of the Company, if
 appointed, and have confirmed their eligibility. In this regard,
 attention of the Members is invited to Item No. 4 of the Notice
 convening forthcoming Annual General Meeting.
 
 17.  Acknowledgements:
 
 Your Directors place on record, their sincere appreciation to the
 employees of the company who worked untiringly and relentlessly. Your
 Directors also acknowledges the cooperation and assistance received
 from our bankers, auditors and shareholders during the period under
 review.
 
                                               By Order of the Board,
 
                                                    (Naresh Malhotra)
                                   (Chairman and Whole Time Director)
 Place :  Mumbai
 Date  :  December 06,2008