Zee Entertainment Enterprises

Dear Shareholders,
 
 Indian economy has done quite well, particularly in the last 10 years.
 This is the outcome of several decades of work by Government and
 private enterprises in independent India. The social indicators of
 development have improved. India is seen as a source of intellectual
 capital. In the last few years, Government has set in motion innovative
 public private partnerships to explore new pathways for strengthening
 infrastructure development.
 
 Apart from being one of the world's fastest growing economies, India is
 also getting integrated with the global economy. The direction of
 economic policy is unmistakably towards more liberalisation. In the
 last ten years, India has achieved an excellent average GDP growth of
 close to 7%. We are excited that India is poised to maintain this
 growth rate. We are equally excited with growth prospects of the media
 and entertainment sector, one that is increasingly becoming global.
 
 MEDIA INDUSTRY - FUTURE IS APPROACHING
 
 The industry has witnessed a transformation powered by technological
 advancements, new delivery platforms and increasing diversity in
 content. Digital technology is advancing at an ever-increasing pace.
 Changes in technology are affecting the media industry more than other
 sectors. Never before has the pace of advancing technology posed so
 many challenges - or opportunities.
 
 We need technology savvy leadership to tap these opportunities. There
 is a greater need to cross-train people. Media and content savvy
 executives need to understand how technology is going to change the way
 content is sampled. Similarly, technology executives need to understand
 how media should be marketed using the tools that they have. Technology
 should ultimately help in reducing cost, improving the product or
 provide new business opportunity. We also need to be financially
 disciplined. Balancing creative content and technology investment with
 cost control is a tough act, yet media companies that do it
 successfully would create value in the long term.
 
 Consumer expectations are also changing fast.  Although consumers are
 likely to spend more on media and entertainment in the future, they are
 increasingly going to be attracted to products that give them more
 control, choice and pricing flexibility.  Consumers are also becoming
 younger. Companies will need to constantly reinvent to make themselves
 relevant to the new consumer.
 
 NEW IDENTITY OF ZEE
 
 Zee has come a long way since 1993 when the journey began with a simple
 dream - to provide wholesome entertainment to its viewers. Today Zee,
 as India's largest vertically integrated Media and Entertainment
 Company, serves more than 120 countries and reaches more than 300
 million viewers across the globe in seven different languages. Keeping
 in view Zee Network's growth, both in terms of business and size, we
 have revitalised our business strategies, which would allow us to stay
 ahead in an increasingly competitive media industry. To celebrate these
 new developments we decided to give Zee brand a new visual identity.
 
 The new identity retains the same letter Z, which has a strong history
 and brand loyalty across the world, while the styling has been changed
 to represent our energy and readiness to embrace the future. The new
 identity reflects Company's global strengths, willingness to embrace
 new opportunities and commitment to adopt new technologies for customer
 satisfaction. The re-branding exercise weaves a thread of common
 identity between our many diverse brands and brings us closer to our
 younger audience.
 
 REVIEW OF PERFORMANCE
 
 In the year past, we continued to deliver strong operating results,
 with most of our businesses performing as per expectations. Our
 performance was driven by executing well the right strategies at the
 right time. In content, our strategic focus was on growing
 profitability in core areas and building new streams of business. In
 distribution, our priority was to enhance returns by focusing on newer
 technology for delivery.
 
 While there was overall growth, your Company continued to witness a
 change in its revenue composition. Your Company's advertising revenue
 for the year increased 4.7% to Rs. 5,698 million. The trend had
 improved during the fourth quarter and has continued during the first
 quarter of this financial year.  Overall, advertising revenues
 contributed 42% to the total operating revenues.
 
 We continued to successfully leverage our assets to grow our
 subscription revenues, which went up 8.4% to Rs. 6,533 million. Growth
 in subscription revenue was lower than anticipated due to price freeze
 imposed by the regulator on domestic pay revenues.  During the year,
 subscription revenues contributed 48% to the total operating revenues,
 up from 44% last year. The trend towards higher share of subscription
 revenue in the turnover of your Company is likely to continue.
 
 Underlying these reported numbers is significant improvement in the
 core businesses. Zee Cinema, India's number one movie channel,
 continued to increase its leadership in the movie segment Zee TV,
 continued to grow viewership and the regional language channels grew
 their franchise.
 
 Our international businesses continued to grow in most major markets
 leading to 12% growth in international subscription revenues. During
 the financial year 2005, we added 80,000 subscribers and have recently
 crossed the 1.0 million subscriber mark for the first time. This
 performance highlights the fundamental attributes of Zee's assets, and
 our ability to seize growth opportunities across the globe.
 
 Zee is in an investment phase, with several new channels added and the
 distribution business receiving due investments for growth. Your
 Company has commenced providing content services to Dish TV, India's
 first DTH service. The DTH service is reaching out to more than 350,000
 subscribers at present, and is expected to gain momentum this year,
 with availability of more than 100 channels on the platform.
 
 The financial performance of the year ending March 2005 has to be seen
 in the context of the startup phase of these initiatives. We continue
 to invest for the long term based on promising opportunities available
 in the industry. We have an unparalleled portfolio of programming
 assets, which is strongly complemented by the distribution strengths
 from cable assets, and reach of Pay TV.
 
 Zee is strongly positioned to succeed in this new environment. We have
 robust strategies that have been tested under a variety of market
 conditions. We are committed to achieving and maintaining world-class
 levels of governing, operating and capital discipline.  We are focused
 on creating operating efficiencies in the
 
 near term and developing promising new revenue sources for the long
 term.
 
 FOCUS ON PEOPLE
 
 Even with sound strategies and a strong balance sheet, the critical
 factor for success is having the right people in the right positions
 doing the right things. Zee's people performed well in the year ended
 March 2005, and we are continuing to enhance the capabilities and
 commitment of our global work force.
 
 Though we had a fairly good year, we are set for a better performance
 in FY2006. We have made quite a few critical changes, which would allow
 us to be more productive, going forward. Starting with appointment of
 Pradeep Guha as CEO for our content business and complemented by
 appointment of Punit Goenka and Laxmi N. Goel as Whole Time Directors,
 we have put in place a very strong management team. Pradeep is an
 accomplished media professional, and a most welcome addition to Zee. I
 am confident that under his leadership, Zee would achieve greater
 heights. As Chairman, my role is to lead the Board in a manner that
 allows the CEO to run the Company effectively. We are happy that our
 efforts to further improve the quality of content have started to show
 results.
 
 Integral to everything we do is our commitment to valuing the talent of
 each individual, harnessing the strengths of a diverse work force, and
 respecting and learning from the communities in which we operate. As we
 succeed, so too should our stakeholders around the world.
 
 CORPORATE GOVERNANCE
 
 Your Company is in full compliance with the Corporate Governance Code
 laid down by SEBI and Stock Exchanges. To further strengthen Corporate
 Governance measures, your Company has inducted, Mr. Rajan Jetley,
 Ex-Managing Director - Air India, as an Independent Non-executive
 Director on the Board.  With this and with appointment of Mr. Punit
 Goenka as Whole-time Director, total strength of Board has gone up to
 nine Directors, comprising of 3 executive and 6 non-executive
 Directors.
 
 COMMITMENT TO SUSTAINED GROWTH
 
 Over the past decade, your Company has built a valuable portfolio of
 television programming assets including Zee TV, Zee Cinema, Zee Muzic,
 Zee News and the regional programming portfolio. We are committed to
 growing these businesses by making them more important part of our
 consumers' lives.  Though our business is global, our commitment is at
 the grass root level. We continue to increase local and regional
 programming investments.
 
 Direct to Home (DTH) transmission is a powerful tool to catalyse
 addressability in the Indian media market.  The gaining, popularity of
 DTH services would be a big boost to transparency and therefore enhance
 value for our content. I reiterate that, as alternate distribution
 platforms gain ground, an environment for consumer acceptance of
 addressability on cable, would also be created.
 
 LOOKING FORWARD
 
 During the year, we have taken other important steps to become a more
 focused company, moving out of areas where we have limited
 opportunities and into areas of greater long term potential. We have
 made judicial investments in our core assets. We have launched Zee
 Sports, marking our entry into a very exciting sports genre, which has
 immense potential.  We gave renewed thrust to the comedy and fun genre
 with increased investments in Zee Smile, our Hindi language fun and
 comedy channel. We also launched Zee Telugu, a regional language
 channel presently establishing itself in Telugu viewing market and Zee
 Jagaran, focusing on spiritual programmes. These channels have been
 well received by the viewers.
 
 We are excited about what FY2006 has in store. We remain committed to
 sustainable growth through empowerment of people. Zee's overarching
 objective is to create long-term, sustainable shareholder value.  My
 fellow Directors and I would like to thank all colleagues for their
 continued dedication and hard work.
 
 I would like to thank you, fellow shareholders, for your continued
 investment and support. We will continue to make every effort to ensure
 that Zee remains a valuable investment for you.
 
 Subhash Chandra
 
 August 26, 2005