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TERRA FIRMA ANNUAL REVIEW 2010 A UNIQUE PERSPECTIVE 1 EXECUTIVE SUMMARY 1

5 Contact Information

4 Terra Firma’s Funds

3 Business & Financial Review

2 Portfolio Business Review

1 Executive Summary

Contents

Annual Review 2010 a unique perspective

Excerpt from the 2010 Annual Review Odeon & UCI Case Study





2 Portfolio Business ReviewContents

1 Executive Summary

VALUE CREATION

DELIVERING A BLOCKBUSTER PERFORMANCETHE ODEON & UCI STORY

Terra Firma acquired Odeon in September 2004 and UCI in October 2004 with a clear strategy of unlocking value through bringing the two businesses together to take advantage of the consolidation that was expected within the European cinema industry and driving operational change. Enhancing the consumer experience has been a key element of Odeon & UCI’s business plan and the case study below shows how this focus has benefited the business.

A trip to the cinema has changed a lot in recent years. Today’s film-goers expect more than just a big screen and a bucket of popcorn, and the cinema experience has evolved to meet demand. Odeon & UCI has been driving that change for years. Since these two leading names were acquired by Terra Firma in 2004 and merged to form Europe’s largest cinema group, the emphasis has been on continual improvement. The businesses have since worked in tandem, investing time and resources and anticipating trends to make sure Odeon & UCI cinemas are delivering exactly what today’s customers want – from comfier seats and extra screens to quality coffee and great food choices.

All of these changes have made a huge difference to a visit to the cinema for the customers who queue up at Odeon & UCI box offices across Europe, and in the process they’ve also helped to boost the company’s performance. The cinema industry has proved to be a resilient sector in

difficult economic times, and Odeon & UCI has worked hard to ensure it maximises that opportunity while continuing to invest and innovate in order to carry on significantly outperforming the competition.

NEW AND IMPROVED CINEMASIn line with the overarching strategy created in partnership with Terra Firma, Odeon & UCI has focused on finding new ways to deliver the best cinema experience. As well as building ten new cinemas across Europe in the six years since the acquisition, the company has completed 16 major refurbishments and acquired six existing sites in addition to the acquisition of six competitor cinema circuits in its existing markets. This investment of around £135 million means that thousands more people are able to see the latest films at their local Odeon or UCI cinema in state-of- the-art surroundings.

As well as offering extras such as premier seats and better food and drink choices, Odeon & UCI’s new breed of cinema also gives film fans access to the most advanced cinema technology, from IMAX screens to digital.

The company has led the way in embracing digital technology. The roll-out of digital screens across the estate is now well under way and, with the six major Hollywood studios signed up, the future of the format is assured. This has allowed the company to capitalise on the huge






1 Executive Summary

explosion in 3D films. In fact, 3D films accounted for 25% of Odeon & UCI’s ticket sales in 2010, with customers showing that they are happy to pay a premium for the 3D experience. Odeon & UCI is way ahead of its competitors in providing the 3D experience.

Besides customers paying more to see 3D films, other benefits of investing in digital film technology for Odeon & UCI include improved operational flexibility, leading to lower costs and the fact that it provides a better platform for screen advertising and alternative content, with sports, opera and concerts all popular.

RAMPING UP RETAIL Terra Firma’s experience of realigning businesses to capitalise on new opportunities has proved to be especially

Odeon & UCIhas led the wayin embracingdigital technology

valuable and relevant in the changing world of cinema. Food and drink have become a much bigger part of the cinema experience in recent years and this is reflected in the new offers and retail brands now available in Odeon & UCI cinemas. With screens across seven countries in Europe, Odeon & UCI has had to work hard to understand its different markets and deliver a retail experience that is both relevant and profitable.

The company has discovered the right formulas for each country after trialling various options across its territories. In the UK, for example, coffee and ice-cream were at the top of customers’ wish lists, while it was pizza and focaccia bars in Spain, and pizza and panini in Italy. By teaming up with the leading brands in these areas – including Ben & Jerry’s, Telepizza and Pane e Sapori – Odeon & UCI has given customers several more reasons to watch the latest blockbuster at their local cinema.

The company is continuing to develop its retail offering and looking for ways to give customers even more of what they want. For instance, following the 2010 Retail Matters research programme, Odeon’s UK cinemas are now introducing changes such as guest popcorns, smaller-sized dispensed drinks, better quality hot dogs and nachos.






1 Executive Summary

VALUE CREATION

TURNING CINEMA-GOERS INTO LOYAL CUSTOMERSOdeon & UCI’s loyalty schemes have proved to be a hugely successful way to thank customers for choosing the brand and to give them an incentive to come back. In the UK, the ‘Odeon Premiere Club’ had over one million members by the end of 2010, the largest scheme of this type in the UK. In Continental Europe, UCI’s various loyalty card schemes grew 23% on 2009 and now have over 1.4 million members. In the UK, customers have the opportunity to sign up to one of three different Film Fan packages, each offering the opportunity to earn points that can be redeemed for drinks, film tickets and popcorn as well as regular updates and access to exclusive Odeon Premiere Club promotions. For the company, it can build up a better understanding of what its customers want, track customer patterns and ensure that Odeon remains competitive in a burgeoning market.

CINEMAS WITH A SMILEOf course, one of the most important parts of the cinema experience is the service that cinema-goers receive from the Odeon & UCI teams. That is why the company has invested significantly in its learning and development programmes, making sure its people are well-trained and motivated. In the UK, all employees benefit from a structured ongoing training and development programme that starts with an induction of up to 16 weeks. Online learning and development courses are also used extensively across Europe and the company runs a wide variety of

workshops for team leaders and managers. Every customer who visits an Odeon or UCI cinema benefits from this commitment to great service and the Mystery Shopper scores underline that – Odeon & UCI are consistently being scored ahead of the competition by these anonymous customers who evaluate service quality.

All of this innovation and investment has been steered by the strategy that Terra Firma developed during its 2004 acquisitions of Odeon & UCI and which have been fine-tuned together ever since. The changes have unquestionably benefited Odeon & UCI’s customers, but they are also clearly reflected in the company’s most recent set of figures.

They show a business that is outperforming its market despite a difficult economic climate that has had a clear impact on screen advertising. Against this backdrop, Odeon & UCI has generated a continuing growth in revenue per head (both in ticket and retail sales) that is well ahead of inflation. At the same time, its compound EBITDA growth rate is over 10% per annum.

By keeping pace with technology and listening to its customers – then investing to deliver a better and better cinema experience – Terra Firma and Odeon & UCI are delivering an outstanding performance for customers and stakeholders alike.






1 Executive Summary

112.416

IMAX SCREENS – LARGEST IMAX OPERATOR IN EUROPE

LOYALTY CARD HOLDERS

MAJOR REFURBISHMENTS OVER THE LAST SIX YEARS

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