DQE.L Regulatory News (DQE)

DQ Entertainment plc

('DQE' or the 'Group')

Interim Results for the six months ended 30 September 2012

DQ Entertainment plc (AIM: DQE), a leading animation, gaming, live action, entertainment production and distribution company, today announces its interim results for the six months ended 30 September 2012.

Financial Highlights:

·; Revenue: US$17.39m (2011: US$19.88m)

·; EBITDA: US$6.34m (2011:US$ 8.18m)*

·; Profit before tax: US$1.79 m (2011: US$ 2.70m)

·; Order book currently at: US$154 m (2011: US$155.03m)**

·; Cash and cash equivalents: US$ (6.14)m (2011: US$7.06m)

·; Revenue in local currency increased by 5%, however as the financials are presented in US$ (a non-functional currency of the Group), the 20% depreciation of INR against the US$ since September 2011, offset the gain.

·; The decline in EBIDTA and PBT is on account of the foreign exchange loss as compared to profit during the previous corresponding period as well as the impact of INR/US$ exchange rates.

·; During the six months ended 30 September 2012 the Company has repaid loans to the extent of US$9.37 m (US$ 4.7m net) and has invested US$ 3.9m for development of its intellectual properties, the majority of which is for the pre-production of 'The Jungle Book' feature film.

* EBITDA is calculated by adding depreciation and amortisation expenses to the operating results before financing costs

** Includes contracted forward production revenues and signed licensing and distribution deals

Productions successfully completed and delivered:

·; Casper season 2 : 52 x 11 minutes 3D TV series co-produced with Moonscoop, France and Harvey Entertainment, USA

·; Mickey Mouse Clubhouse season 4 : 7 x 24 minutes 3D TV series for Walt Disney Television Animation, USA

·; Little Prince 2: 52 x 22' 3D TV series co-produced with Method Animation and WDR - Germany

·; Keymon Ache : 1 x 70 minutes 2D animated TV feature produced in collaboration with Nickelodeon, India

·; Omkar season 3 : 3 x23 minute 2D animated TV feature acquired for broadcast by Turner Networks for the Indian subcontinent

·; J & J Season 3 - 80' TV Special for Kelly Parks Studios

New projects signed:

·; Raz & Benny : 52 x 11' 3D HD TV series with Foothill Europe

·; Little Prince season 3 with Method Animation, France

Some of the new productions commenced during the period:

·; NFL Rush Zone : 26 x 22' 2D TV series for Nicktoons, USA.

·; Rising Star: 26 x 22' 2D TV series co-production with TMS Entertainment, Japan

·; Lanfeust : 26 x 22' 3D TV series for Alphanim Gaumont, France

·; Miles Away: 26 x 22' 3D TV series with Wild Canary, USA

Chairman's Statement

"We have made substantial progress in Licensing and Distribution of our Intellectual Properties and gone from strength to strength with conclusion of several deals with leading networks and licensees globally. The promotional deal for The Jungle Book with Burger King worldwide is a feather in the cap along with broadcast deals for our properties such as Robin Hood, Iron Man, Casper, Jungle Book and others with leading networks such as ABC Australia, De Agostini Italy, ATV Turkey.

The company's production pipeline is steady and we have successfully completed deliveries of several TV series such as Mickey Mouse Clubhouse Season 4, Little Prince 2 and season 2 of Casper.

Our foray into theatrical production with 3D Jungle Book Movie has taken wing with several top rated Hollywood talents on board and we are gathering momentum to conclude distribution deals in various territories.

We remain confident that the global entertainment industry has excellent long term growth prospects, while our business remains well placed for projected growth in the current year."

Operational Highlights:

·; MIPCOM 2012: MIPCOM is one of the world's leading markets for creating, co-producing, buying, selling, financing and distributing entertainment across all platforms at a global level, conducted in Cannes (France) every year. This years' MIPCOM was particularly successful for DQE, as the Group concluded agreements worth US$ 6m including two new co-production agreements and five licensing & distribution deals. This revenue is expected to be generated over the next 2 years.

·; The Jungle Book Feature Film Update: The development of a feature film is progressing well with a sizzle reel expected to be completed by end of this year. DQE has tapped an experienced team of top tier talent from the world of feature animation, including Screenwriter Billy Frolick (Madagascar, Holy Cow), Co-Directors Jun Falkenstein (The Tigger Movie, The Smurfs, Despicable Me,) and Kevin Johnson (Alvin and the Chipmunks: Chipwrecked, Harry Potter & The Sorcerer's Stone, Astro Boy, Stuart Little), and Production Designer James Hegedus (Shrek). Currently DQE is negotiating with various co-production partners for closing the production budget. Once the teaser is ready, DQE will finalise the global distributors. DQE is targeting a 2014 theatrical release for The Jungle Book.

·; New production developments:  DQE and Foothill Europe have agreed to develop, co-produce and distribute an animated buddy comedy 3D TV series, 'Raz & Benny' with a global production budget of approximately US$7m. The agreement also covers the exploitation of the ancillary rights such as merchandising for the property.

DQE and Method Animation, France will co-produce the third season of the highly successful animated 3D TV series 'The Little Prince' with a budget of approximately $9.1m.

·; Licensing & Distribution: DQE has signed various licensing and merchandising deals for many of its properties with licensees such as Burger King USA, Jungle Online, Belgium, Swadesh, Essfil, India, Gruppo Edicart, Italy, Haksan, Exim Licensing, USA ,Blue Ocean, Germany ,DeAgostini, Italy, Buena Vista International (Disney channel) ASEAN regions and home distribution deals with Magna Home Entertainment ,Australia.

Outlook:

In addition DQE holds a strong portfolio of iconic brands in production, to include The Jungle Book Season 2, Peter Pan, Lassie & Friends, Robin - Mischief in Sherwood, 5 & IT, Little Prince Season 3, Mickey Mouse Club House Season 5, National Football League, The Rising Star, Keymon Season 2, Miles Away, Lanfeust, etc. With a strong order pipeline in place the Board are confident of achieving the business targets for the year 2012-13.

For further information, please contact:

Contact

Condensed Consolidated Interim Financial Statements

DQ Entertainment plc

30 September 2012

Contents

Condensed Consolidated Income Statement

Condensed Consolidated Statement of Comprehensive Income

Total comprehensive income attributable to:

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Financial Position  (continued)

These financial statements were approved by the Board of Directors and authorised for use on 10 November 2012.

Signed on behalf of the Board of Directors by:

Director Director

Condensed Consolidated Statement of Changes in Equity for the period ended 30 September 2012

Condensed Consolidated Statement of Cash Flows for the period ended 30 September 2012

Condensed Consolidated Statement of Cash Flows for the period ended 30 September, 2012 (continued)

Notes to Condensed Consolidated Financial Statements

NOTE A - BASIS OF PREPARATION

1. General information

DQ Entertainment plc (the 'Company' or "DQ plc") is a company domiciled and incorporated in the Isle of Man on 19 April 2007 and was admitted to the Alternative Investment Market of London Stock Exchange on 18 December 2007. The Company raised approximately USD 54 million (£26.83 million) at listing (before Admission costs).

The condensed consolidated financial statements of the Company for the six months period ended 30 September 2012, comprises the financial Information of the Company, its subsidiaries and associate (together referred to as the 'Group').

As at 30 September 2012 the following companies formed part of the Group:

The Company's registered address is 15-19, Athol Street, Douglas, Isle of Man.

The Group is primarily engaged in the business of providing traditional and digital animation for television, home video, feature films and the like, and game art development. The Group also is engaged in exploitation of its distribution rights to broadcasters, television channels, home video distributors and others.

The functional currencies of the respective Group companies are:

2. Significant accounting policies

The accompanying condensed consolidated financial information of the Company have been presented for the six months ended 30 September 2012 along with comparatives for the six months ended 30 September 2011 and the year ended 31 March 2012. Condensed consolidated interim financial statements have been prepared on an accruals basis of accounting using accounting policies consistent with IAS-34 'Interim Financial Reporting' as issued by the International Accounting Standards Board ('IASB').

NOTE A - BASIS OF PREPARATION (continued)

2. Significant accounting policies (continued)

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2012, which have been prepared in accordance with International Financial Reporting Standards ('IFRS's)

In the opinion of management, all adjustments, which are of a normal recurring nature and necessary for a fair presentation, have been included. The Company has chosen to present the condensed consolidated financial position & condensed consolidated income statement, condensed consolidated comprehensive income statement, condensed consolidated statement of cash flows and condensed consolidated statement of changes in shareholders' equity along with selected explanatory notes. Accordingly, certaininformation and note disclosures normally included in annual financial statements prepared in accordance with IFRS have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the information presented not misleading. These condensed consolidated financial statements have been prepared using the same accounting policies that were applied in the preparation of the Company's annual financial statements for the year ended 31 March 2012.

The directors have had regard to the 12 month period from the date of approval of the interim financial statements and have reviewed the forecasted cash flows. The Company has sufficient resources to meet its on going liabilities as they fall due.

NOTE B - STANDARDS AND INTERPRETATIONS NOT YET APPLIED

The following new Standards and Interpretations, which are yet to become mandatory, have not been applied in the Company's Financial Statements.

Based on the Company's current business model and accounting policies, management does not expect any material impact on the Company's financial statements when any of the other standards or interpretations becomes effective.

The Company does not intend to apply any of these pronouncements early.

NOTE C - SEGMENT REPORTING

Segment information is presented in respect of the Group's business and geographical segments. The primary format, business segments, is based on the Group's management and internal reporting structure.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Business segments

The Company comprises the following main business segments:

Animation production:

The production services rendered to production houses and training rendered for acquiring skills for production services in relation to the production of animated television series and movies.

Distribution:

The revenue generated from the exploitation of the distribution rights of animated television series and movies acquired by the Company

The following is an analysis of the Company's revenue and results by operating segment for the periods under review:

NOTE D - CASH AND CASH EQUIVALENTS

NOTE E - FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at fair value through profit or loss comprise of plain vanilla currency option contracts held by the Group as at 30 September 2012. The fair value of these derivative instruments is as follows:

NOTE F - INTANGIBLE ASSETS

NOTE G - INTANGBILE ASSETS UNDER CONSTRUCTION

Advances paid for distribution rights include amounts paid to the producers for acquisition of the distribution rights and amounts incurred on internally generated intellectual property rights pending for capitalisation. These advances are transferred to distribution rights on completion of the entire production activities and when the asset is ready for exploitation.

NOTE H - OTHER FINANCIAL ASSETS

NOTE I - INTEREST BEARING LOANS AND BORROWINGS

Interest bearing loans and borrowings comprise the following:

NOTE J - PROVISION FOR RETAKES

Retakes include creative changes to the final product delivered to the customer, performed on the specific request of the customer at the Group's own cost. Requests for retakes will be accepted from customers by the Group for a maximum period of three months from the final delivery and hence the provision is not discounted.

NOTE K - PERSONNEL COSTS

Details of personnel expenses included in cost of sales, administrative and distribution expenses

are as follows:

NOTE L - NET FINANCING COSTS

NOTE M - EARNINGS PER SHARE ("EPS")

Profit attributable to ordinary shareholders

The Group does not have any dilutive instruments for the period ended 30 September 2012, 30 September 2011 and for the year ended 31 March, 2012 and as such Diluted EPS equals Basic EPS.

NOTE N - NON - CONTROLLING INTERESTS

NOTE O - EQUITY

a) Ordinary shares

DQ plc presently has only one class of ordinary shares. For all matters submitted to vote in the shareholders' meeting, every holder of ordinary shares, as reflected in the records of the Company on the date of the shareholders' meeting, has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Company.

The Company has an authorized share capital of 50,000,000 equity shares of 0.1 pence each.

Issue of ordinary shares

Share premium - The amount received by the company over and above the par value of shares issued is shown under this heading.

NOTE O - EQUITY (Continued)

The share premium reserve can be utilised by the Company for the declaration of bonus shares and for offsetting incremental costs directly attributable to the issues of new shares

 b) Reserves

Translation reserve - Assets, liabilities, income, expenses and cash flows are translated into USD (presentation currency) from Indian Rupees (functional currency of DQ India), Euros (functional currency of DQ Ireland) and Great British Pounds (functional currency of DQ plc). The exchange difference arising out of the period-end translation is debited or credited to foreign currency translation reserve.

 The movements in this reserve are set out below :

Exchange differences relating to the translation of the net assets of the Group's foreign operations from their functional currencies to the Group's presentation currency (i.e. USD) are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve.

Accumulated earnings - Accumulated earnings include all current and prior period results as disclosed in the income statement. The movements in the accumulated earnings are set out below :

Other Reserves - The Reverse Acquisition Reserve, Equity component of convertible instruments and Capital Redemption Reserve are non distributable in nature.

NOTE P - CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

NOTE Q - RELATED PARTIES

Identity of related parties

DQ plc has a related party relationship with its directors, executive officers, subsidiaries and associate.

DQ plc does not have any ultimate controlling entity.

Related parties and their relationships

a) Subsidiaries

DQ Entertainment (Mauritius) Limited

DQ Entertainment (International) Limited

DQ Entertainment (Ireland) Limited

b) Associate

Method Animation SAS

RELATED PARTIES -

c) Key management personnel

Mr. Tapaas Chakravarti - Director

Mr. K. Balasubrahmanyam - Director

Ms. Theresa Plummer - Director

Mr. Anthony BM (Tony) Good - Director

Ms.Rashida Adenwala - Director

d) Relatives of Key Management Personnel with whom DQ India had transactions during the year - Mrs. Rashmi Chakravarti (wife of Mr. Tapaas Chakravarti)

e) Ms Nivedita Chakravarti (daughter of Mr.Tapaas Chakravarti)

f) Mr Hatim Adenwala - Senior Vice President Human Resources

g) Relationship with Common Director (Galaway Films Ltd)

RELATED PARTIES (Continued)

Trading transactions

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

*Comparative information is not applicable as the relationship did not exist in the last year

Revenue from production from related parties was at prices arising out of the Group's usual trade practices. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties.

Compensation of key management personnel

Directors of the company and their immediate relatives control 14.47 per cent of the voting shares of the company.

The remuneration of directors and other members of key management during the period were as follows:

Other related party transactions

Remuneration paid to relatives of key management personnel during the period was USD 27 Thousand (30 September 2010: USD26; 31 March 2011: USD 65) and the outstanding balance as at

30 September 2012 was USD 5 thousand (30 September 2010: USD 5 thousand and 31 March 2011: USD 5 thousand).