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Main Topics. Financials Business strategy Valuation of units Koch Q & A Session. Demonstrated Record of Growth. E1 has a strong track record of financial performance and growth 2005 revenue and EBITDA of $519.8M and $26.0M, respectively

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  1. Main Topics • Financials • Business strategy • Valuation of units • Koch • Q & A Session

  2. Demonstrated Record of Growth • E1 has a strong track record of financial performance and growth • 2005 revenue and EBITDA of $519.8M and $26.0M, respectively • Includes the acquisition of Video One from August 1, 2004 & Koch Entertainment from June 1, 2005 Historical Revenues 1(C$ millions) Historical EBITDA 1(C$ millions) Revenue Growth EBITDA Margin 1 2000 to 2003 – Year ended March 31.

  3. Summary 2005 Results

  4. Summary Q1 2006 Results

  5. Distributions • Reasons for reduction to $.90: • Poor results in 2005 • Increase working capital

  6. Bank Debt • Operating Loan - $27.75 mm • Covers seasonal working capital needs • Direct borrowings were fully repaid at Dec 31 • Term Loan - $52.9 mm • Financed Video One & Koch acquisitions • Minimum $4 mm repayment per year • These loans are currently being restructured

  7. Building the Business • Enhance exclusivity – build sales and margins • Expand exclusive music and video content • Expand exclusive distribution arrangements • Capitalize on growing video-game market • Initiatives on Vendor Managed Inventory

  8. % of Exclusive Sales

  9. Expand Exclusive Distribution Agreements • Koch Entertainment • Universal Home Video • Sheridan Square Entertainment • National Film Board Library

  10. Expand LicensedMusic & Video Content • Koch US adds 30 new music labels since acquisition • Koch Canada continuing to look for opportunities in Canada • Paradox, a division of Entertainment One, also continues licensing exclusive video content in North America

  11. Capitalize on Growing Video-Game Market • Game sales are increasing • Boost to bottom line despite lower margins • Leverage existing customer base

  12. Vendor Managed Inventory • Moving beyond normal buy-sell arrangements • New arrangements with national drug & grocery store chains • Monitor consumer buying through point-of-sale terminals • Expansion of reach in retail

  13. Valuation – Canadian Operations

  14. #1 in Canada • We are Canada’s #1 Home Entertainment Products Wholesaler • We set the standard for Wholesaling in Canada

  15. Canada’s #1 DVD Wholesaler • Annual volume approximately $350 million • Exclusive distributor for Universal Home Video • 30,000 titles • 3,000 customers

  16. Canada’s #1 CD Wholesaler • Largest on-hand CD inventory • Largest CD Catalogue – at 12,000 items • 25+ year relationships with the industry’s largest music producers

  17. #1 Internet Fulfillment Wholesaler • Serving consumers through our partnerships with the World’s largest On-Line retailers

  18. Canada’s #1 Specialty Retailer • 90+ CD Plus retail stores • Specialize in CDs, DVDs, and Video Games

  19. Management Darren ThroopPresident & CEO Michael KochCEO Koch US Chris JamiesonCFO Terry StevensSenior Vice President & General Manager

  20. #1 Independent Record Label in U.S. • 0.65% 2005 U.S. market share • Largest number of Charted Titles among Independents for 5th consecutive year (25 titles in 2005) • Consistent growth and accelerated profitability

  21. Diversified and growing artist roster: • Jim Jones, Diplomats, D-Block, Snoop Dogg, Robert Earl Keen, Charlie Daniels, Bob James, Earl Klugh, Marcus Miller, • Children's properties: The Wiggles, Strawberry Shortcake, Barney, Atomic Betty

  22. DISTRIBUTION • #1 Independent Distributor in the U.S. that is not owned by one of the majors, with 1.36% of the U.S. audio market in 2005 • In 2005, 49% of our distribution sales were from owned labels, up from 40% in 2004 • 30 music and video labels added for exclusive distribution since becoming a subsidiary of Entertainment One last June

  23. KOCH’s video sales up 26% from 2004 to 2005. • KOCH Vision and KOCH Lorber Films represent 33% of overall KOCH video distribution sales. • Multiple content providers:

  24. DIGITAL • 2005 revenues up 175% over 2004 • Content Aggregation: exclusively represents growing roster of third-party labels (35 presently) • Close relationships with all major digital customers.

  25. Sheridan Square Deal • Major multi-year exclusive distribution deal for Koch • Covers all Sheridan’s labels except one • Anticipate additional $30 million (U.S.) in revenues annually • Began May 22, 2006

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