Dear Shareholders,
 
 We made many promises last year - some may say, extremely ambitious
 ones. One year down the line, however, I am pleased to report that we
 have delivered on our promises and achieved a dominant position in all
 business segments.
 
 From 40 screens in seven cities across India at this time last year, we
 have - as on date - become the largest cinemas chain in India with 105
 screens across 32 cities. Our aim is to be present in all significant
 film territories that contribute over 80% to domestic box-office
 collections.
 
 In movie production, our tie-ups with well-regarded producers/directors
 such as Vipul Shah and Ram Gopal Varma have borne fruit with successful
 releases like Namastey London and Nishabd. We also made our first foray
 into the regional film industry with the Tamil film Kireedam through a
 co-production with veteran production house Sujatha Cine Arts. We are
 shortly launching our first home production Johnny Gaddaar. Our
 co-production agreement with Hyde Park Entertainment (promoted by Ashok
 Amritraj) is progressing well and our first Hollywood production Asylum
 is expected to be released in a few months.
 
 Through our established distribution offices in the US and UK we have
 released 40 films till date. We have also begun distribution of films
 in the domestic market earlier this year and have had successful
 releases such as Spider-Man 3, Black Friday, Bheja Fry, Guru and Aap Ka
 Surroor.
 
 Our first 3D animation film, Sultan - The Warrior, produced jointly
 with Ocher Studios, featuring Indian superstar Rajnikanth is in
 production. We have added a second animation project to our slate, a
 film co-produced with India's premier kids apparel brand Gini & Jony
 which is currently in the pre-production phase.
 
 As you are aware, we have acquired majority stake in Siddhartha Basu's
 Synergy Communications, a television production house which will cater
 to the demand for quality software arising from exponential growth in
 broadcasting.
 
 The market for film processing has been quite steady in the current
 year, with the advent of additional screens across the country and
 buoyant demand for Indian movies. The facility in Chennai - added last
 year - has already garnered a 20% market share. We are now also in
 Kolkata to cater to the Eastern market and operations have been
 encouraging.
 
 As per our plan to become a larger Services company, the company has
 commenced its Broadcast Equipment Rental business for providing quality
 equipment and is in the process of setting up a state-of-the-art
 Digital Lab for providing high-end services like film digitisation,
 digital intermediate, restoration among other processes.
 
 We have been following the developments in Digital Cinema Initiative
 (DCI) closely and have actively tested these standards successfully in
 our cinema chain. We aim to roll out the same shortly.
 
 I am also pleased to inform shareholders that Adlabs has been awarded a
 Letter of Intent (LOI) by the Maharashtra Government for three studios
 within Film City. We intend to commence development shortly for
 creation of world class shooting facilities within the heart of the
 Indian film industry.
 
 As a member of the Reliance - Anil Dhirubhai Ambani Group, Adlabs will
 always strive for excellence, and we deeply value your support.
 
 Thanking you,
 
 Manmohan Shetty
 Chairman & Managing Director
 
 Mumbai, September 21, 2007