INVESTMENT COMMITTEE REVIEW: Shine Group Divestiture Opportunity July 8, 2010 Draft - June 25, 2010.

INVESTMENT COMMITTEE REVIEW:Shine Group Divestiture Opportunity

July 8, 2010Draft - June 25, 2010

-- Confidential -- p. 2

Proposed Matters to be Deliberated for Approval

• SPE is seeking approval to monetize its 20.6% stake in Shine Group, a global independent TV production and distribution company based in the UK

– Initial investment of $7.2MM in FY06 for a 13% stake in Shine which included distribution rights for Shine’s wholly-owned formats

– SPE has invested $45.4MM to-date and is budgeting $4MM in EBIT earnings from Shine in FY11

• The proposed transaction is a result of an increasing overlap in SPE and Shine’s television production businesses and the lack of opportunity for SPE to take a more strategic controlling stake in Shine

– SPE and Shine have become direct competitors over the last 5 years as Shine has expanded outside of the UK and into markets in which SPE has a local television production presence

– Although the UK remains a high-priority market for SPE’s TV production business, we lack the opportunity to take a more strategic position beyond the current minority stake to fully leverage the investment for future growth

– Due to Shine’s plans for ongoing acquisitions, SPE and Shine may continue to conflict over expansion plans, as SPE will either need to block Shine’s potential investments, provide consent to the acquisitions but exercise right to avoid dilution below 20% shareholding, or provide potentially significant expansion funding

• SPE has negotiated a total cash purchase price of $60MM at close plus 3% warrants for its 20.6% stake– SPE’s stake to be purchased by existing shareholders Elisabeth Murdoch and BSkyB– $60MM cash at close based on a ~$450MM enterprise valuation for Shine (~$300MM equity value), an implied

multiple of ~10.4x CY09 EBITDA and ~1x CY09 Revenue– 3% warrants provides potential additional upside, with strike price based on current valuation– Transaction will not require any regulatory approvals or filings to close

• SPE has reached agreement with Shine on material terms and is now seeking approval for the proposed transaction, with target closing by end of July

-- Confidential -- p. 3

Background on Shine Group and Proposed Transaction

Background on Shine Group

Background on Transaction / Rationale

• Founded in 2001 by Elisabeth Murdoch, Shine Group is a global TV production and distribution company based in the UK

• Currently produces several hit formats for the UK and international markets including Master Chef and The Biggest Loser– SPE currently produces Master Chef in Germany under a licensing agreement with Shine

• Over the last five years, Shine has aggressively expanded its operations in the UK and internationally through acquisitions and local start-ups and plans to further expand over the next three years– UK: Kudos, Princess, Firefly acquisitions (2006-2007); US: Reveille acquisition (2008); Nordic region: Metronome acquisition

(2009); Australia: established JV with Endemol (2010)

• Key shareholders: Elisabeth Murdoch (53.4%), SPE (20.6%), BSkyB (12.8%) and management (13.2%)

• SPE initially invested in Shine to establish a production presence in the highly-strategic UK market• Beginning with its acquisition of Reveille in 2008, Shine has expanded its operations beyond the UK and with SPE’s

acquisition of 2waytraffic, we are now competing in many of the same markets• Due to Shine’s plans for ongoing acquisitions, SPE and Shine may continue to conflict over expansion plans, as SPE will

either need to block Shine’s potential investments, provide consent to the acquisitions but exercise right to avoid dilution below 20% shareholding, or provide potentially significant expansion funding

• Elisabeth Murdoch and BSkyB have provided an attractive offer to buy out SPE’s stake at our request• SPE is evaluating potential strategic investment opportunities in the UK to pursue our original strategy of establishing a

production presence in that market

-- Confidential -- p. 4

Summary of Deal Structure and Material Terms

SPE Sells its 20.6% Equity Interest in Shine

• $60MM cash payment at close (100% equity valuation of ~$300MM and enterprise valuation of ~$450MM)• Existing Shine shareholders to purchase SPE’s shares

– Elisabeth Murdoch to acquire an additional 8% interest in Shine from SPE and BSkyB will acquire 12%

• As part of the transaction, SPE will give up its Board seat and consent rights

SPE Receives Warrants for 3% of the Shares of Shine

• Strike price based on the current $60MM valuation for SPE’s stake in Shine, warrant shares adjusted for previously consented-to option schemes

• Warrants are exercisable at any time after 5 years, or upon an Exit Event (Sale of the Company, liquidation, IPO, sale of all or substantially all of the shares in Shine)

• Warrants are transferable to a third party at any time after December 2011, subject to a Right of First Refusal by Shine– Transferee can exercise upon an Exit Event or after 5 years unless the transferee is a competitor of Shine or would

jeopardize its status as an Independent Producer– If an Exit Event has not occurred by the fifth anniversary of the issuance of the warrants, then the strike price paid by the

Transferee will be discounted by 30%

• Net proceeds (after subscription price) to SPE from exercise of the warrants capped at $30MM (cap does not apply to potential transferee)

• Warrants to contain basic minority protections against dilution – [SPE to retain a tag along right on a sale of all or substantially all of the shares of Shine – OPEN POINT WITH SHINE]– [Strike price to be adjusted for any share issuances at a price below fair market value – OPEN POINT WITH SHINE]

-- Confidential -- p. 5

• SPE expects to receive $60MM in cash proceeds in FY11– Total NPV of consideration of $61MM including estimated $1MM NPV for the 3% warrants – Gain to be adjusted depending on the fair market value of Shine’s stock when the warrants are exercised

• SPE expects to recognize a gain of $8MM associated with the sale of the equity interest in FY11

• Currently, SPE recognizes 20.6% of Shine’s Net Income as EBIT– After the sale, SPE will no longer recognize Shine’s Net Income as EBIT (FY11 Budget EBIT of $4MM)– Should we exercise the warrants and hold shares in Shine, SPE’s share of dividends, if any, will be treated as income

Estimated Gain and EBIT Impact from Sale

SPE Equity(000s USD) Interest

Proceeds from Sale (Cash + NPV of Warrants)(1) $61,000

Estimated Book Value of SPE's Equity Interest $53,000

Gain from Monetization $8,000

Less: Budgeted Equity Earnings (August 2010–March 2011) ($1,750)

Net FY11 EBIT Impact $6,250

(1) $60MM cash at close plus an estimated $1MM NPV for 3% warrants

-- Confidential -- p. 6

Shine Enterprise Valuation Range

• As the top UK indie with a strong US presence and growing international expertise, Shine commands a premium multiple to its industry peers

Series1$200

$300

$400

$500

$600

$700

Ente

rpri

se V

alue

($M

M)

TradingMultiples

Comparable Transactions

(controlling interest)

$438(1)

$260

$480

$350

Shine Group 100% Valuation

Transaction basis: $450MM enterprise value

$490

$340

DiscountedCash Flow

$350

(1) $420MM including 20% control premium

-- Confidential -- p. 7

Sale of Our Stake Will Provide an Attractive Return with Potential Upside from Warrants

Sale of Warrants(000s USD) 20.6% Stake High Case

Cash Acquisition Price and of Capital Funding by SPE ($45,400) ($45,400)(FY06–FY10)

NPV of Consideration for SPE Sale of 20.6% Stake $61,000 (1) $66,268 (2)

Net Cash Investment (excluding Equity Income) $15,600 $20,868

IRR 12% 14%

(1) Includes $60MM cash at close plus $1MM NPV of 3% warrants (assumes exercise in 2014).

(2) Assumes Exi t Event at 12/31/14 at a va luation of 10x CY14 EBITDA ($59.4MM) and net debt of $31.6MM as of 12/31/14.

-- Confidential -- p. 8

Timing & Next Steps

• July 8: Deliberation of Investment Committee

• July 27: Deliberation of GEC

• Obtain CEO approval (e-kessai) for divestiture

• Finalize and sign definitive agreements

• Target closing by July 30, 2010

-- Confidential -- p. 9

Appendix

-- Confidential -- p. 10

Historical Equity Build as of 7/31/2010 (estimated)

Initial Capital Call Step-up Equity Equity(000s USD) Investment Acq/Earn-Out to 20% Income Dividends Change Basis

FYE 2006 7,174 0 0 7,174 7,174

FYE 2007(1) 9,433 0 9,433 16,607

FYE 2008(2) 1,327 15,258 0 16,585 33,192

FYE 2009(3) 2,208 2,734 0 4,942 38,134

FYE 2010(4) 10,000 2,617 0 12,617 50,751

FYE 2011 0 2,249 0 2,249 53,000

Total $7,174 $22,968 $15,258 $7,600 $0 $53,000

Total Cash Investment in Shine $45,400

(1) Participation in Shine rights issue associated with Princess, Kudos and Firefly acquistions.

(2) Participation in Shine rights issue associated with Reveille acquisition and step-up to 20% equity stake.

(3) Participation in Shine rights issue associated with management option grants and earn-outs to maintain 20% equity stake.

(4) Participation in Shine rights issue associated with Metronome acquisition to maintain 20% equity stake.

-- Confidential -- p. 11

Detail on Shareholding in Shine

May 2010 Shares Outsanding July 2010 Sale of SPE Stake July 2010 Shares Outstanding% of % of % of

(shares in '000's) Shares Total Change Total Shares Total

Elisabeth Murdoch 210,187 53.4% 33,090 8.4% 243,277 61.8%SPE 81,036 20.6% -81,036 -20.6% 0 0.0%

BSkyB 50,336 12.8% 47,946 12.2% 98,282 25.0%

Waheed Alli 100 0.0% 100 0.0%

Kudos Management 14,437 3.7% 14,437 3.7%

Princess Management 21,482 5.5% 21,482 5.5%

Firefly Management 2,910 0.7% 2,910 0.7%

Reveille Management 0.0% 0 0.0%

Shine Management 13,426 3.4% 13,426 3.4%

Total 393,914 100.0% 0 0.0% 393,914 100.0%

-- Confidential -- p. 12

Detailed P&L

( $MM USD)FYE December 31,

2008A 2009A 2010P 2011P 2012P 2013P 2014P

Total Revenue 466.6 447.2 491.9 536.2 573.7 613.9 656.8Y/Y Growth -4% 10% 9% 7% 7% 7%

Gross Profit 114.6 124.3 134.0 143.4 153.5 164.2% of Revenue 26% 25% 25% 25% 25% 25%

Operating Expenses 70.9 85.7 89.2 93.8 96.1 98.5EBITDA 43.7 41.3 48.3 51.6 55.2 59.1

% of Revenue 10% 8% 9% 9% 9% 9%

Depreciation 4.2 3.6 3.4 3.3 3.2 3.2EBITA 39.5 37.7 44.9 48.3 52.0 55.9

Interest Expense 0.0 6.1 4.9 3.6 2.1 0.8EBT 39.5 31.6 40.0 44.8 49.9 55.1

Net Profit/(Loss) 27.3 21.9 29.3 33.0 35.6 38.6% of Revenue 6% 4% 5% 6% 6% 6%

Operating Cash Flow 23.1 32.5 34.9 36.5 38.6

Free Cash Flow to Equity Holders(1) (0.9) (5.7) (9.4) (13.1) (2.4)

(1) Free Cash Flow to Equity Holders based on operating cash fl ow less debt and earn-out obl igations .

-- Confidential -- p. 13

Details on Valuation Range

Trading Multiple Transaction Multiple Approach Discounted Cash Flow Approach

( $MM USD) Approach Controlling Interest SPE Base Case Mgmt Projections

Enterprise Value Indication from Operations $260 $350 $350 $480 $340 $490 $450 $640Implied Multiple of CY09 EBITDA 6x 8x 8x 11x 8x 11x 10x 15x

Less: Net Debt (est. as of Dec09) (95) (95) (95) (95) (95) (95) (95) (95)Less: NPV of Future Earn-outs (52) (52) (52) (52) (52) (52) (52) (52)

Equity Value $119 $211 $211 $344 $200 $354 $313 $507

VALUATION OF SPE STAKEEquity Value $119 $211 $211 $344 $200 $354 $313 $507

Less: Minority Discount (20%) 0 0 (42) (69) 0 0 0 0Marketable, Minority Equity Value $119 $211 $168 $275 $200 $354 $313 $507

Valuation of SPE Stake $24 $43 $35 $57 $41 $73 $64 $104