Dear Shareholders,

What a year it has been.

As I Look back on the year that went by, I feel satisfied and happy. Not just on the business decisions, but more. One of the most significant development was our decision to share our success and the wealth, we believe, we will create, with the masses. And hence the IPO, which was one of the last amongst the participants in the business of exhibition.

You have put a lot more responsibility on me and I assure you, my team and I will put in the desired efforts not to let you down. A big thank you from team Cinemax for your support and confidence. Thank you once again.

Now let me share with you how we at Cinemax are building an institution which, amongst other things, is dedicated to not just improving the cine-experience but also be a catalyst to the growth of the entire film industry.

I believe we are at the cusp of something very big, and very significant. The developments in the last few years have now given me the confidence that the Indian entertainment industry is at an inflection.

• The opportunity
  Look around you. Don’t you see a new India? I certainly see it. A new India that is young. A new India that is confident. A new India that is culturally different, yet similar. Similar because we watch perhaps more Hindi movies now than before. Different because we are not hesitant in paying 6 times the next cheaper option available, for the experience. And this is what makes me very bullish. There is a distinct shift from thrift to consumption.
  
  Besides, the convergence of the media and entertainment industry is having a multiplier impact on the industry. More avenues for revenue. Exhibition, satellite, internet, mobile and home video are all creating opportunities for the fullest exploitation of the content. The life of movies is getting short and long at the same time. Short from theatrical release and long from the longevity of the revenues from multiple sources. As I look at it, this is taking away the much associated risk with the making of films, our raw material. More films mean better occupancy for us. What has been encouraging is that content is now being created for audiences that multiplexes deal with specifically. Niche content.
  
  Multiplexes are redefining the experience and changing the habit. They are here to dominate.
  
  In the coming years, it is estimated that multiplexes will contribute over 50% of the total film exhibition revenue by 2010.
  
  
• Cinemax and the opportunity
  We at Cinemax have decided to get aggressive. This is an opportunity we cannot miss. Location is the first competitive advantage. If you have got a better location at a better price and offer a better experience, chances are you will dominate. Our parentage in being part of the Kanakia Group that excels in building and understanding real estate, ensures we get quicker access to real estate and at better terms. This will ensure we scale faster and get to a size and scale for us to get better operating leverage.
  
  We have signed over 75000 seats to be operational by 2010 ensuring 7 times growth in the capacity in the next three years.
  
  To ensure that we are the preferred choice of cinema goers, we have always believed in creating a world class cine-viewing experience. Being a pioneer and a first mover, we have created spacious multiplexes, with comfortable seating, recliner seats and a food and beverages experience that others talk of. This ensures our multiplexes have better occupancy and generate better returns. And to that end we give equal importance to F&B and advertising. Our F&B spend is among the highest in the industry. And that’s not by chance. We make it happen. Ditto for advertising. We have an innovative marketing team that creates advertisement opportunities customized to the requirements of the user.
  
  
• Creating shareholder value
  Being the first communication, I wish to address upfront some of the concerns that are associated with Cinemax. We not being an integrated player being the first.
  
  We chose not to integrate backwards. My belief is that we are not in an industry where the integration has direct benefits. Let me explain. Lets suppose we produce our films and even process them and do its post-production too. Then we distribute the same too and exhibit the same. And let’s say the film flops. What advantage do we have? We are in a business, where a Friday decides the success of the film, not its integration.
  
  In fact, we deliberately chose not to integrate. We decided the exhibition opportunity is large enough for us to excel. We deliberately chose not to get distracted. We chose to focus. To take this opportunity head on. And scale this business and take our leadership to the next level before we think of anything else. To expand our Mumbai-centric presence to all India and into smaller towns. Size will get us the operating leverage and the efficiencies. And create shareholder value.
  
  Another concern has been that of the entertainment tax exemption. I feel that the exemption has not just helped the industry grow but has also attracted the much needed investment in the industry. I do not feel that the exemptions are temporary but they are here to stay for the next few years. Even if they lapse, we would have expanded significant by then to ensure that the ROI does not get impacted and the incremental impact is minimal. My view is that the loss of margin could be made up through better efficiencies due to scalability and increased ticket prices, thereby not compromising shareholder value.
  
  
• Looking Ahead
  In the years to come, your company is committed to higher growth in revenues, investor wealth, number of screens and locations and the number of patrons.
  
  In the current expansion plan, your company intends to enhance capacity to over 42000 seats housed in 165 screens across 49 locations on a pan India basis by the end of FY 2009. Your company plans to have around 300 screens across India by the end of FY 2010.
  
  Before I end I would like to thank our highly motivated team for their support and dedication, without which your company would not have been able to make the great progress we have seen so far. My fellow members on the board have also been invaluable, steering your company ahead. In order to scale even greater heights, I look forward to your support and patronage.
  
  Yours sincerely,
  
  Rasesh Kanakia