Deloitte Financial Advisory

Services LLP
350 South Grand Avenue
Suite 200
Los Angeles, CA 90071
USA
Tel: +1 213 688 3268
Fax: +1 213 673 6488
www.deloitte.com

September 30, 2011

Mr. Drew Shearer

Executive Vice President
Sony Pictures Entertainment, Inc.
10202 West Washington Blvd.
Culver City, CA 90232-3195

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Dear Mr. Shearer:

Deloitte Financial Advisory Services LLP (“Deloitte FAS”) was pleased to assist Sony Pictures
Entertainment, Inc. in connection with its management planning activities with the provision of the services
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described in the amendment to our engagement letter dated August 2, 2011.

Accompanying this letter is our report pertaining to the fair market value of 38.0 percent equity interest of
Multi Screen Media Private Limited as of March 31, 2011.

Our report describes the purpose, use, and scope of the analysis; the methodologies employed; and the results
of the work. The results, advice, recommendations, or conclusions included in the report are subject to the
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Assumptions and Limiting Conditions and the Certifications that are presented as appendices. The
Qualifications of Principal Consultants are also presented as an appendix to the report.

If you have any questions regarding the results of the analysis, please contact JD Tengberg at +1 213 553
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1285 or Peter Woelflein at +1 213 553 1342.

Very truly yours,

Deloitte Financial Advisory Services LLP

By: JD Tengberg
Financial Advisory Services

Sony Pictures Entertainment, Inc.

Analysis of the Fair Market Value of 38.0 Percent Equity

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Interest in Multi Screen Media Private Limited
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Valuation Date: March 31, 2011
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Report Date: September 30, 2011

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Deloitte Financial Advisory Services LLP

Table of Contents
Engagement Overview 1
Purpose and Use 1
Scope of the Services 1
Company Overview 4
Economic Outlook 5
India Economic Conditions and Outlook 5
Industry Outlook 7
Television Distribution 7

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Valuation Analysis 8
Valuation Methodology
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Income Approach 10
Discounted Cash Flow Method 10
Market Approach 15
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Guideline Public Company Method 15
Discount for Lack of Control 18
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Discount for Lack Of Marketability 19

Summary of Findings 20
Closing Remarks 21
Appendices 22
Appendix 1 — Assumptions and limiting conditions 23
Appendix 2 — Certification 25
Appendix 3 — Qualifications of principal consultants 26
Exhibits 28

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 Engagement Overview

Engagement Overview
Sony Pictures Entertainment, Inc. (“Sony” or the “Client”) sought valuation advice and recommendations
to assist it in estimating a range of fair market values for a 38.0 percent equity interest in Multi Screen
Media Private Limited (the “Company” or “MSM”) for internal planning purposes.

Deloitte Financial Advisory Services LLP (“Deloitte FAS”) assisted Sony in connection with its
management planning activities with the provision of the services (the “Services”) described in our
engagement agreement (statement of work amended as of August 2, 2011,).

Purpose and Use

The Services and this report (the “Deliverable”) are solely for Sony’s internal use to assist it in meeting
internal planning requirements.

Scope of the Services

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Services Provided
We performed an analysis described as a valuation engagement in the Statement on Standards for
Valuation Services No. 1, Valuation of a Business, Business Ownership Interest, Security, or Intangible
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Asset (“SSVS 1”), of the American Institute of Certified Public Accountants and, consistent with the ASA
Business Valuation Standards of the American Society of Appraisers, as an appraisal within the Uniform
Standards of Professional Appraisal Practice (USPAP) of The Appraisal Foundation to develop an
estimate of the fair market value of 38.0 percent equity interest of the Company on a minority basis (the
“Subject Interest”) as of March 31, 2011 (the “Effective Date”). A minority basis reflects the value of an
ownership interest of no more than 50 percent of the voting interests in that enterprise. In developing our
estimate of value, we considered each applicable premium for control, discount for lack of control, or
discount for lack of marketability, as well as the presence of nonoperating or excess assets and liabilities.
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No other assets or liabilities were included in the Services.

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Description of the Analysis

Our analysis included, but was not necessarily limited to, the following:

• Interviews with Sony and Company management (“Management”) concerning the Company’s history;
the nature of its business; its competitive position, strengths, and challenges; its operating and
nonoperating assets, if any; its historical financial position, operating performance, and dividend-
payment patterns; historical transactions involving its debt or equity securities; and its plans for the
future, including expectations regarding dividends, operating performance, and financial position

• Analysis of the Company’s historical and prospective financial data

• Research concerning the:

• Company, its financial and operating history, the nature of its products and/or services, and its
competitive position in the marketplace

• Current economic conditions and outlook for the national economy, as well as applicable global
economic conditions

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 Engagement Overview

• Industry or industries in which the Company participates

• Company’s competitors and other companies engaged in the same or similar lines of business

• Analysis of market research reports regarding participants in the Company’s industry

• Consideration, selection, and application of valuation approaches and methods

• Estimation of the fair market value of the Subject Interest as of the Effective Date

Type and Premise of Value

For your management planning purposes, the type of value is fair market value. Fair market value, as
defined in U.S. Treasury regulations (Reg. §20.2031-1(b)), is “the price at which the property would
change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or
to sell and both having reasonable knowledge of the relevant facts.”

Sources of Information
As part of this assignment, we relied upon numerous sources of information, including the following:

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• Unaudited balance sheets at, and operating results for, the periods ended March 31, 2009 through
the Effective Date
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• Economic and market data from sources, including Economist Intelligence Unit N.A. Incorporation,
Capital IQ, Hoovers, Standard & Poor’s, and Morningstar, Inc.

• Financial forecasts of operating results and financial conditions for the periods ending March 31, 2012
through March 31, 2018

We believe the information obtained from the above-described sources to be reliable. However, we make
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no representation as to the accuracy or completeness of such information. Further, we have performed
no procedures to corroborate the information obtained from public sources.
The Services and this report do not constitute an audit conducted in accordance with auditing standards
generally accepted in the United States of America or standards of the Public Company Accounting
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Oversight Board (United States), an examination of internal controls, or other attestation or review
services in accordance with standards established by the American Institute of Certified Public
Accountants. Deloitte FAS does not express an opinion or any other form of assurance with respect to
(1) financial statements, (2) operating or internal controls of any entity included in the engagement for any
date or period, or (3) future operations of any entity included in the engagement.

The financial information includes financial statements that were prepared by Management and were not
reported on as part of an audit under the Statements on Standards for Attestation Engagements (SSAE)
or attest engagement performed in accordance with standards established by the Public Company
Accounting Oversight Board (United States). As part of the Services, Deloitte FAS did not audit, review, or
compile, or attest under the SSAE or attest standards established by the PCAOB to the financial
information and assumes no responsibility for such information.

The prospective financial information used in this analysis was prepared or approved by Management
and is the responsibility of the Company. The Company is responsible for representations about its plans
and expectations and for disclosure of significant information that might affect the ultimate realization of
any forecasted results.

Deloitte FAS has no responsibility for the achievability of the results forecasted.

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 Engagement Overview

Events and circumstances frequently do not occur as expected. There will usually be differences between
prospective financial information and actual results, and those differences may be material.

The Services and this report do not constitute (1) a recommendation regarding the acquisition or
financing of any business, assets, liabilities, or securities; (2) a market or financial feasibility study; (3) a
fairness or solvency opinion; or (4) an examination or compilation of, or the performance of agreed-upon
procedures with respect to, prospective financial information in accordance with standards established by
the American Institute of Certified Public Accountants or the Public Company Accounting Oversight
Board. The engagement and the Deliverables are not intended to be and shall not be construed to be
“investment advice” within the meaning of the Investment Advisers Act of 1940.

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 Company Overview

Company Overview
Multi Screen Media Pvt. Ltd. operates as a television channel operator in India and internationally. It
provides Hindi general entertainment television channels, movies and special events channels,
Hollywood movie channels, and a channel to entertain India. MSM's family of channels in India includes
SAB TV, SET Max, SET PIX, and MSM Discovery Private Limited (a distribution joint venture between
MSM and Discovery Communications India). SET's programming is targeted towards family audiences.
The table below outlines the programming genre’s for MSM’s channels:
Channel Genre
Sony TV or SET Hindi based GEC
SAB TV Comedy
SET Max Hindi Movies and IPL Cricket
SET PIX Indian movie channel
MSM Discovery Discovery and other 3rd Party Content
According to Management, some of MSM’s most successful programs to date include Boogie Woogie;
C.I.D.; Entertainment Ke Liye Kuch Bhi Karega; Indian Idol, an adaptation of the worldwide Pop Idol

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(American Idol); Jassi Jaissi Koi Nahin (There Is No One Like Jassi), an adaptation of the Colombian
telenovela Betty la fea (Ugly Betty); Fame Gurukul, a mixture of Indian Idol and Bigg Boss; Jhalak Dikhhla
Jaa; 10 Ka Dum, the Indian adoption of popular game show Power of 10; and Aahat (a Horror Show).
The company was founded in 1995 and is based in Mumbai, India. Multi Screen Media Pvt. Ltd. operates
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as a subsidiary of Sony Pictures Entertainment Inc.1 Currently the ownership of MSM is comprised of the
following:

%
Sony 62.0%
Owner 1 32.4%
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Owner 2 5.6%
Total 100.0%

MSM’s operations are comprised of a General Entertainment Channel business (“GEC”) which includes
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the family of channels offered under the SET brand. MSM also holds the rights to distribute the Indian
Premier League (IPL) Cricket Tournament, which is considered to be a significant asset.

1
Source: Capital IQ.

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 Economic Outlook

Economic Outlook
When valuing a company or its assets, it is important to consider the condition of, and outlook for, the
economy or economies in which the company operates or sells its products and services. This economic
analysis is necessary because the financial performance, and consequently the value, of a company or its
assets are affected to varying degrees by the economic environment in which the company operates. The
Company currently generates its revenue in India and expects to continue to generate a significant
portion of its revenue in India prospectively.

India Economic Conditions and Outlook 2

We begin this discussion by presenting forecasts of gross domestic product (“GDP”) and the consumer
price index (“CPI”) as estimated by the Economic Intelligence Unit N.A. (“EIU”). They serve as a starting
point because GDP measures the market value of a nation’s output of goods and services while CPI
measures the steady rise in price of the same good or service over time. Both serve as bellwethers for
economic expectations.

Actual Estimated

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Key indicators 2007A 2008A 2009A 2010A 2011E 2012E 2013E 2014E 2015E
Real GDP growth (%) 9.6% 5.1% 9.1% 9.1% 9.0% 8.7% 8.5% 8.6% 8.6%
CPI (avg. %) 6.4% 8.4% 10.9% 12.0% 7.4% 5.0% 5.2% 5.9% 5.6%
Source: Economist Intelligence Unit N.A. Incorporation’s “Country Forecast, India” report March, 2011.
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The GDP and CPI forecasts show future inflation estimates ranging up to 9.0 percent; results
approximately in line with historical trends.

Gross Domestic Product

The EIU expects real GDP growth of 9.1 percent for India’s fiscal year 2010 (ending on March 31) and
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growth of 9.0 percent for fiscal year 2011. Growth is expected to then decelerate slightly, to an annual
average rate of 8.6 percent for the remainder of the forecast period. India’s strong growth fundamentals –
high saving and investment rates, fast labor force growth and the rapid expansion of the middle class –
will ensure an anticipated steady performance, with less volatility in growth rates from year to year.
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However, despite India’s current impressive growth performance there are a number of clouds hanging
over the economy, including the stubbornly high inflation rate and the wide budget deficit. Economic
expansion will also continue to be constrained by infrastructure bottlenecks, shortages of skilled labor and
the difficulties involved in shifting resources from low-productivity agriculture to higher-productivity
manufacturing.

Consumption
Economic growth is expected to be led by private investment and government spending in the next five
years. Private consumption will not grow as fast as the overall economy, although it will remain the
biggest component of GDP by far. Private consumption is expected to grow by 6.0 percent in 2011, 7.4
percent in 2012, and 7.3 percent in 2013.

2
Information in this section is based on, and in some cases excerpted directly from the Economist Intelligence Unit
N.A. Incorporation’s “Country Forecast, India” report dated March 2011 and “Country Report, India” report dated
March 2011.

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 Economic Outlook

Inflation
After peaking at over 16 percent in January 2010, the annual rate of consumer price inflation moderated
to 9.7 percent in December 2010 in response to tighter monetary policy. Inflation averaged 12 percent
year on year in 2010, up from 10.9 percent in 2009. Inflation remains high, raising questions about the
Indian economy’s ability to grow by 8 percent or more a year without triggering an inflationary spiral. In
2012 through 2015, consumer prices are expected to rise by 5 to 6 percent a year, assuming the absence
of shocks such as a sharper rise in global commodity prices than the EIU currently expects or a failure of
the monsoon in any given year.

Unemployment
Unemployment is expected to be 10.6 percent in 2011 and 2012 before declining to 10.4 percent in 2013
and 10.1 percent in 2014. India continues to face shortages of skilled labor. However, India continues to
experience fast labor force growth and a rapidly increasing middle class.

Interest Rates
Since January 2010, the Reserve Bank of India (“RBI”) has been tightening monetary policy in response

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to stubbornly high inflation. There were five increases in the repurchase rate (the interest rate at which
the RBI supplies funds to the banking system) in 2010, the most recent coming in early November, and
the rate currently stands at 6.25 percent. The EIU forecasts two further 25-basis-point increases in the
first half of 2011, lifting the repurchase rate to 6.75 percent. Rates will be relatively stable in the second
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half of 2011 and during 2012, and will rise slightly in the latter years of the forecast period.

Implications for the Company

The demand for the Company’s products and services is based upon consumer spending and the
unemployment rate. Consumer spending in India is expected to remain the biggest component of GDP
and is expected to continue to increase throughout the forecast period. Additionally, India’s middle class
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is experiencing rapid expansion and the labor force is experiencing fast growth. These key elements
appear to be positive in India and appear to provide a favorable environment for the Company to
experience growth throughout the forecast period.
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 Industry Outlook

Industry Outlook
Because industry conditions may significantly affect financial performance, the state of and the outlook for
the Indian television distribution industry with which the Company is primarily allied provides insight with
respect to the growth opportunities and risks that it faces in striving for success.

Television Distribution 3

India is the world’s third largest TV market with almost 138 million TV households (HHs) next to China
and the US. Cable and satellite penetration has reached close to 80 percent with the soaring growth
shown by the Digital-to-Home (DTH) platform. New technologies like High Definition (HD), Set Top Boxes
(STBs) with built-in recorders and delivery platforms like mobiles are rapidly evolving, creating further
opportunities for innovation and growth within the market.
The television and broadcasting industry has grown tremendously over the last two decades, with an
average growth rate in double digits. The industry added almost 100 million viewers in 2010 to reach
approximately 600 million viewers and crossed the 550 channel mark in 2009. New players are entering
the market with niche offerings like food channels and more channels in the English entertainment space.
Viewers are able to access niche content easily on DTH platforms even in smaller markets.

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The number of channels that are consumed in a digital home has increased by 30 percent compared to
2010 largely due to increased content push as a result of STBs. The television distribution market is
highly fragmented with over 50,000 local cable operators controlling over 74 percent of the market. This
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results in widespread leakages (under reporting of subscribers) and poor service. However, the market is
changing, driven by rising digitalization in the form of new technologies, which is expected to reduce the
amount and number of under-reporting. Multi-system operators and operating companies are expected to
be key beneficiaries of the estimated compound annual growth rate of 29 percent expected in
subscription revenues over the next five years.
The number of TV households grew at a rate of seven percent to reach 138 million in 2010 compared to
129 million in 2009. The penetration of TV in the country grew from 58 percent in 2009 to 61 percent in
2010. Currently, TV penetration in India is much lower compared to some of the developed markets like
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the US, and the UK, which are almost fully penetrated. Hence, the Indian market still retains room for
growth. DTH displayed higher than expected growth to reach 28 million subscribers by the end of 2010.
The platform has reached a penetration of 26 percent of the total cable and satellite homes in a market
which has traditionally been an analog market. The DTH industry sees opportunity for growth at three
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distinct levels. The first level involves the estimated 88 million homes that don’t have access to TV.
Second, 30 million homes currently have TV but don’t have access to cable. Lastly, there is a clear
opportunity to replace the current 68 million analog cable households with digital signals and better
viewing quality. However, this opportunity will see competition from digital cable as digitalization
regulations begin to see implementation.

Implications for the Company

The television distribution market has experienced higher than expected growth during the past couple
years and market participants’ anticipate the opportunities to continue with the advents in technology.
However, competition remains fierce as the number of television channels available within the market
continues to increase. As such, while this industry offers many opportunities for growth, the Company
must continue to maintain a competitive edge to draw in consumers and subscribers while adjusting to
the changes in technology.

3
Federation of Indian Chambers of Commerce and Industry, Hitting the High Notes: Indian Media and Entertainment
Industry Report 2011, March 2011.

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 Valuation Analysis

Valuation Analysis
Valuation Methodology
In arriving at our estimate of the fair market value of the Subject Interest, we considered the three
generally accepted approaches to valuation, which are commonly referred to as the:

1. Income Approach
2. Market Approach
3. Asset Approach

Within each approach to value, a variety of methodologies exist to estimate fair market value. The
following sections contain a brief overview of the theoretical basis of each approach, as well as a
discussion of the specific methodology used in our analysis.

Income Approach
The income approach is a general way of developing a value indication for a business, business
ownership interest, or a tangible or intangible asset using one or more methods that convert anticipated

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economic benefits into a present single amount.4
The income approach can be the most demanding of the approaches, because of the myriad of decisions
involved in estimating anticipated economic benefits. These benefits may include earnings, cost savings,
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tax deductions, and disposal proceeds. Considerations may include the nature of the benefit and the
historical and expected performance of the asset or entity; the related industries; and the relevant local,
regional, national, or international economic sectors.
It is also one of the most common approaches used in valuation. One of its methodologies includes:
• Discounted cash flow method — Within the income approach, the discounted cash flow (“DCF”)
method is used to estimate the fair value of a company (or asset) based on expected future economic
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benefits. In applying the DCF method, an identified level of cash flow is estimated for a finite number
of years. Annual estimated cash flows and a terminal value (the “continuing value” or, in some cases,
the estimated value of the company at the end of the projection period) are then discounted to
present value at a discount rate to arrive at an indication of fair market value. The discount rate
applied to the analysis reflects an estimate of the required rates of return for investments seen as
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similar to investments in the subject company.

Market Approach
The market approach, which can be separated into the guideline public company (“GPC”) method and the
guideline transaction or merger and acquisition (“M&A”) method, estimates the fair market value of a
business by comparing the subject company to similar companies with publicly-traded ownership interests
or similar companies which have been acquired.
The market approach is more useful when the selected guideline companies or transactions are as
similar as possible to the subject company. Similarity can be affected by, among other things, the product
or service produced or sold, geographic markets served, competitive position, profitability, growth
expectations, size, risk perception, and capital structure.
When applied to value an interest in a business, the market approach includes consideration of the
financial condition and the historical and expected operating performance of the company being valued
relative to those of publicly traded companies or to those of companies acquired in a single transaction

4
AICPA Statement on Standards for Valuation Services No. 1, Appendix B: International Glossary of Business
Valuation Terms, 45.

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 Valuation Analysis

that (1) operate in the same or similar lines of business; (2) are potentially subject to corresponding
economic, environmental, and political factors; and (3) could reasonably be considered investment
alternatives. These two methods are further described as follows:
• Guideline public company method — This method employs market multiples derived from market
prices of stocks of companies that are engaged in the same or similar lines of business and that are
actively traded on a free and open market.5 The application of the selected multiples to the
corresponding measure of financial performance for the subject company produces estimates of
value at the marketable-minority level.
• Guideline transaction method — Also referred to as the “transaction method” or “merger and
acquisition method,” this method relies on pricing multiples derived from transactions of significant,
generally change-in-control, interests in companies engaged in the same or similar lines of business.6
The application of the selected multiples to the corresponding measure of financial performance for
the subject company produces estimates of value at the marketable control level.

Asset Approach
The asset approach, as it is termed in valuing an interest in a business, is a way of estimating value using
one or more methods based on the value of the operating assets net of operating liabilities of the subject
business.

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The most commonly used methodology within the asset approach is the adjusted book value method.
Under this method, operating assets and liabilities (including off-balance sheet, intangible, and
contingent) are adjusted to reflect the applicable standard or type of value.7 After the operating assets
and liabilities of a business are defined and valued, the difference between the value of the total assets
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and total liabilities provides an estimate of value for the equity of the business.
This approach is more relevant when (i) valuing a controlling interest (it is based on the premise that
asset liquidation is a viable option); (ii) a significant portion of the subject company’s assets are liquid
(e.g., the entity functions as a holding company); or (iii) most of the entity’s value resides in its fixed
assets.
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Valuation Approaches and Methods Used
We used the income and market approaches to estimate the fair market value of the Subject Interest.
Under the income approach, we applied the DCF method. The DCF method applies to MSM because
Management provided forecasts it deemed reliable and appropriate for the valuation of the Company. We
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also used the market approach to estimate the fair market value of the Subject Interest. Under the market
approach, we applied the GPC method. The GPC method applies to MSM because we identified
guideline companies we believe sufficiently comparable to the Company in which to derive value
indications.
Due to limited recent and comparable M&A activity, we concluded that developing a value indication
under the market approach using similar transactions.
Although considered, we did not use the asset approach in our analyses because MSM’s value derives
from its ability to generate cash flows as opposed to the value of its underlying assets.
We understand the forecasts utilized in the analysis were prepared by Management from a market
participant perspective assuming they had control of the enterprise. Therefore, these methods result in a
value conclusion representing a controlling and fully marketable interest. To arrive at a value conclusion
for the minority position of the Subject Interest, a Discount for Lack of Control and a Discount for Lack of
Marketability were considered.

5
International Glossary of Business Valuation Terms, 45.
6
Ibid., 47.
7
International Glossary of Business Valuation Terms, 41 (modified to include all types of value rather than fair
market value alone).

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 Income Approach

Income Approach
Discounted Cash Flow Method
Under the DCF method, the fair market value of the Company is estimated as the present value of
expected future economic benefits (in this analysis, debt-free net cash flows). These economic benefits
are discounted to present value at a rate of return commensurate with the expected risk associated with
the investment studied. For the purposes of our analysis, debt-free net cash flow (“DFNCF”) was
computed as follows:

[Debt-free Net Income] + [Depreciation & Amortization Expense] - [Change in Debt-free Net Working
Capital] - [Capital Expenditures] = DFNCF

We recommend, discrete DFNCF be projected for as many future years as needed to obtain a “stabilized”
level. Once cash flows stabilize an estimate of the terminal or residual value of the Company is calculated
by capitalizing the expected cash flows in perpetuity. The sum of the discounted discreet DFNCFs and
discounted terminal value provides an indication of fair market value of the total invested capital or
business enterprise value.

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In this instance, the value of MSM was considered to be the sum of two components: the GEC business
and the IPL Cricket business.. In the GEC business, MSM entered into a joint venture with the Discovery
Channel, also referred to as ‘MSMD’ to jointly distribute content in India. The MSMD joint venture
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participates in certain aspects of the GEC business and none of the IPL business. The IPL Cricket
business is comprised of an existing nine year contract with a one year renewal option. However,
Management anticipates renewing the IPL contract upon expiration. These two segments were valued
separately because the Discovery Channel does not have any claims on the cash flows generated from
the IPL contract.

Outlined below is a discussion of the key components of the DCF analysis used to estimate the fair
market value of the GEC and IPL Cricket business.
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Projected Cash Flow - GEC

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Management prepared and approved projections for the Company’s revenue, earnings, capital
expenditures, and working capital for the years ending March 31, 2012, to March 31, 2018. Management
prepared separate forecasts for the GEC business segment.8

Before applying Management’s forecasts to the DCF analysis we considered Management’s projections
in light of (1) Management’s outlook for the Company, (2) publicly available information and data
regarding the outlook for the Company and industry, in general, and (3) our analysis and comparisons of
the projections to (a) the Company’s historical financial performance and (b) the outlook for the industry,
especially companies engaged in the same or similar lines of business.

The discussion below summarizes observations about Management’s projections (see Exhibits 3 and 6
for Management’s forecasts).

• Revenue – For GEC, Management has forecasted total revenues to grow from approximately INR
17,415 million in 2012 to INR 29,397 million in 2018. This represents a CAGR of approximately

8
Management is responsible for these representations about its plans and expectations and for the disclosure of
significant information that might affect the ultimate realization of any forecasted results. Deloitte FAS has no
responsibility for the achievability of the results forecasted.

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 Income Approach

9.1 percent over the discrete forecast period. Revenues for GEC are expected to grow as a result of
increased subscriber base, distribution, and positioning of MSM’s content and networks.

After the discrete forecast period, long-term growth of revenues is expected to be 5.0 percent per
year.

• Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) – For GEC, Management
expects the segment’s EBITDA to grow from INR 424 million in 2012 to approximately INR
5,040 million in 2018. EBITDA margins are expected to increase from 2.4 percent to 17.1 percent
during the forecast period as the Company matures through the growth phase.

In developing the margin estimate Management contemplated the scalability of the business model
and the variable nature of most of the Company’s expenses.

• Depreciation and Amortization – Management included forecasted depreciation and amortization over
the forecast period for GEC. Management indicated that majority of the expense is related to content
cost amortization. As a result, depreciation as a percent of revenue is expected to range between 0.8
percent and 1.6 percent over the forecast period.

• Income Taxes - Income taxes were estimated based on Management’s anticipated tax rate of 33.33

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percent going forward for the Company. This rate is consistent with the average marginal tax rate for
MSM in India.

• Capital Expenditures – For GEC, Management estimated that capital expenditures will range between
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0.7 and 2.6 percent of revenue or between INR 192 and 446 million during the discrete forecast
period.

• Working Capital - The incremental working capital requirements that were incorporated into the cash
flow calculations for GEC reflect the debt-free cash-free, operating working capital necessary to run
the business. Debt-free cash-free working capital (“DFCFWC”) assumptions for the forecast period
were based on consideration of historical DFCFWC, projected balance sheets for the business
segment, and discussions with Management. As a result, DFCFWC as a percentage of revenue is
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expected to range between 23 and 26 percent during the forecast period for GEC.

Projected Cash Flow - IPL

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Management prepared and approved projections for the Company’s revenue, earnings, capital
expenditures, and working capital for the years ending March 31, 2012 to March 31, 2018. Management
prepared separate forecasts for the IPL business segment.9

Before applying Management’s forecasts in a DCF analysis we considered Management’s projections in

light of (1) Management’s outlook for the Company, (2) publicly available information and data regarding
the outlook for the Company and industry, in general, and (3) our analysis and comparisons of the
projections to (a) the Company’s historical financial performance and (b) the outlook for the industry,
especially companies engaged in the same or similar lines of business.

The discussion below summarizes observations about Management’s projections (see Exhibits 7 and 8
for Management’s forecasts).

• Revenue – For IPL, the contract is a nine year term ending in 2017 with a one year renewal option in
2018. Management has forecasted total revenues to grow from approximately INR 8,596 million in
9
Management is responsible for these representations about its plans and expectations and for the disclosure of
significant information that might affect the ultimate realization of any forecasted results. Deloitte FAS has no
responsibility for the achievability of the results forecasted.

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 Income Approach

2012 to INR 16,427 million in 2018. This represents a CAGR of approximately 11.4 percent.
Revenues for the two business segments are expected to grow as a result of increased viewership of
the IPL Cricket tournament resulting in increased advertising and related distribution revenues.
Management anticipates continued revenue growth over the remaining contract period due to the
popularity of the IPL tournament.

Thereafter, Management anticipates the discrete forecast period and long-term growth of revenues is
expected to be 5.0 percent per year, which Management expects either due to a continued renewal of
the IPL contract or the incremental increase in revenue from another source to replace the lost IPL
revenues.

• Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) – For IPL, Management
expects the segment’s EBITDA to grow from INR 2,373 million in 2012 to INR 5,320 million in 2018.
EBITDA margins are expected to increase from 27.6 percent to 32.4 percent throughout the forecast
period as a result of expected decreased content amortization costs during the final year of the IPL
contract. Thereafter, Management anticipates renewing the IPL contract or acquiring similar content
to generate a perpetual 17.1 percent EBITDA margin, consistent with the long term operating margins
for GEC.

In developing the margin estimate Management contemplated the scalability of the business model
and the variable nature of most of the Company’s expenses.

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• Depreciation and Amortization – For IPL, the contract was amortized over its 10-year term ranging
from INR 5,223 in 2012 to INR 8,776 in 2018.
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• License Fee (Sports) – As part of the contract rights to distribute the IPL Cricket Tournament, MSM is
required to pay a license fee to the Indian Premier League. The payments are expected to range from
INR 4,641 in 2012 to INR 8.776 in 2018.

• Income Taxes – Income taxes were estimated based on Management’s anticipated tax rate of 33.33
percent going forward for the Company. This rate is consistent with the weighted average tax rate for
MSM in India over their various tax jurisdictions.
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• Capital Expenditures – For IPL, Management estimated that the segment will not require any capital
expenditure investments during the forecast period required to generate the IPL cash flows.
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• Working Capital – Incremental working capital requirements were not incorporated into the cash flow
calculations for IPL as the current assets and current liabilities of the business segment are expected
to move in tandem with a ratio of 1.0. As such, no incremental working capital requirements were
included for the business segment.

Weighted Average Cost of Capital

The magnitude of the discount rate applied to the projected cash flows is related to the perceived risk of
the investment and current capital costs. The discount rate utilized in our DCF analysis represents an
estimate of the Company’s weighted-average cost of capital (“WACC”).

The WACC reflects estimates of the costs of debt and equity weighted by the percentage of debt and
equity in an entity’s capital structure. Arithmetically, the formula for calculating the after-tax WACC is:

D E
WACC = [ (K (1− t)) + (K )]
D E
V V

Deloitte Financial Advisory Services LLP 12

 Income Approach

Where:

KD = Cost of Debt
KE = Cost of Equity
D = Estimated Market Value of Debt
E = Estimated Market Value of Equity
V = Value of Total Capital (D + E)
t = Assumed Tax Rate

Cost of Debt
The Company’s cost of debt of 11.30 percent, as of the Effective Date, was estimated based on the
incremental borrowing rate to obtain new debt, as provided by Management. According to Management,
this is the interest rate available to the Company if it were to seek debt financing as of the Effective Date
and would be the rate obtainable by a market participant.

Cost of Equity

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The Company’s cost of equity was estimated based on the application of the capital asset pricing model
(“CAPM”). The CAPM measures the estimated return required by investors given a particular risk profile.
The model is expressed arithmetically by the following equation:
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ke = rf + (β × rpm) + rps + rpc

Where:

ke = Required Rate of Return for Equity.

rf = Risk-Free Rate. The risk-free rate is the rate of return available in the market on an
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investment free of default risk.
The selected risk-free rate of return represents the current 10-year yield to maturity of long-
term Indian Government Securities as of the Effective Date as reported by Bloomberg. The
10-year yield to maturity of the Indian Government Securities was 8.3 percent as of the
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Effective Date.
β = Beta is a measure of systematic risk, which represents the covariance of the expected rate of
return on an equity investment with the rate of return on the market.
The selected beta was estimated from the unlevered equity betas of the selected guideline
company, Zee Entertainment. The unlevered beta was relevered using the Company’s
marginal tax rate and estimated target capital structure yielding a levered beta of 0.71.
rpm = Market Equity Risk Premium is the extra return that the overall stock market has historically
provided over the risk-free rate as compensation for market risk.
Based on research performed by Deloitte India10, the equity risk premium selected for this
analysis was 7.00 percent.
rps = No small stock premium was selected for the Company.

10
Deloitte India is the Indian member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by
guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see
www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its
member firms. .

Deloitte Financial Advisory Services LLP 13

 Income Approach

rpc = Company-Specific Risk Premium is intended to compensate investors for company-specific

factors. Based upon discussions with Management, the Company was determined to not
have any company-specific risk.

Concluded Cost of Equity

Based on the above inputs, the concluded cost of equity for the Company is approximately 13.2 percent.

Capital Structure
We assumed a capital structure of 20.0 percent debt and 80.0 percent equity for the Company based on
consideration of the average capital structure exhibited for the entire Indian entertainment industry.

Estimated WACC
Using the above assumptions, we estimate the WACC at 12.0 percent for the Company as provided in
Exhibit 9. The same WACC is utilized for both the GEC component and the IPL component as the
business operations are similar and are only valued separately to distinguish the elements of the
business that the partner Discovery Channel participates.

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Residual Value
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The residual value represents the value of an entity’s cash flows at the end of the discrete forecast period
and beyond. For our residual value calculation we used the Gordon Model (shown arithmetically below):

RV = DFNCFR
r-g

Where:
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RV = Residual Value
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DFNCF = Residual DFNCF
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r = WACC
g = Long-Term Growth Rate

The Gordon Model calculates the residual value by dividing the cash flow available for distribution in the
year following the end of discrete forecast period by a capitalization rate. The residual cash flow is
assumed to grow at a constant rate into perpetuity and is calculated as the difference between the WACC
and the selected growth rate. The Company’s long-term growth rate for DFNCF was estimated at 5.0
percent considering expectations for the long-term growth rate of the industry and inflation.11

Indicated Value – DCF Method

As presented in Exhibit 6, the DCF analysis indicated a total enterprise value of approximately INR
31,920 million for GEC. As presented in Exhibit 8, the DCF analysis indicated a total enterprise value of
approximately INR 21,992 million for IPL. Therefore, in combination and as presented in Exhibit 6, the
DCF analysis indicated a value of approximately INR 44,486 million for a 100.0 percent controlling equity

11
Sources: Economist Intelligence Unit N.A. Incorporation, Congressional Budget Office, The Long-Term Budget
Outlook (August 2010), and industry information (see Industry section above).

Deloitte Financial Advisory Services LLP 14

interest of MSM on a consolidated basis. This represents the estimated value for the mid-point scenario.
Sensitivity analyses were performed in order to estimate the value of a 100.0 percent controlling equity
interest of MSM on a consolidated basis for low-end and high-end scenarios. In order to perform these
scenarios, the applied WACC was increased by 50 basis points to 12.5 percent to arrive at a low-end
scenario and decreased by 50 basis points to 11.5 percent to compute a high-end scenario. Based upon
these applied parameters, the DCF analysis indicated the following for the three scenarios for a 100.0
percent controlling equity interest of MSM on a consolidated basis:

INR Millions
Low Mid High
DCF Method 40,984 44,486 48,454

Market Approach
Guideline Public Company Method
Under the GPC method, the value of an entity involves comparing the subject entity to similar businesses
or “guideline” companies whose securities are actively traded in public markets. Valuation multiples are

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derived from the prices at which the securities trade in public markets and the companies’ underlying
financial metrics. The valuation multiples are then applied to the financial metrics of the subject entity.
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Guideline Companies Identification and Selection
In order to identify relevant Indian public companies, we performed a search focusing on standard
industrial classification (“SIC”) codes, business description, and industry affiliation using publicly available
information and published materials including, for example, articles, press releases, and research reports.
We also considered factors including, but not limited to, the following:
• Description – Companies engaged in the television distribution industry
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• Geographic location and diversity – Companies listed in India

• Active market for shares – Companies whose shares are actively traded on a major Indian
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exchange, excluding companies that are traded Over-the-Counter (“OTC”) securities

This screening process initially yielded eleven potentially comparable companies. Upon further analysis,
we selected the one comparable company, Zee Entertainment Enterprises Ltd (“Zee”) mainly due to the
operating characteristics of Zee. Zee operates in the general entertainment channel broadcasting
segment in India similar to the subject company. Its operations include broadcast channels which
compete with MSM in the marketplace. Likewise, both Zee and MSM compete in the same general
entertainment market, albeit MSM on a much smaller scale. Zee has over 15 different channels where as
MSM only has four. MSM, while small, still commands a strong market presence as the SET channels
hold a top five position for each genre, with SET Max being the number one Hindi film channel. The other
companies represented either national or regional Indian channels which do not readily compare in
operations or scale.
12
The following provides a description of the selected guideline comparable company.

12
Source: Capital IQ.

Deloitte Financial Advisory Services LLP 15

 Market Approach

• Zee Entertainment Enterprises Limited, together with its subsidiaries, operates as a vertically
integrated media and entertainment company in India. It operates in three segments:
Broadcasting and Content, Education, and Film Production. The Broadcasting and Content
segment develops, produces, and procures television programming and film content, and delivers
through satellites, cable, and Internet. It broadcasts channels, such as Hindi general
entertainment channels, including Zee TV, Zee Smile, and 9X; regional language general
entertainment channels comprising Zee Marathi, Zee Bangla, Zee Telugu, Zee Kannada, Zee
Talkies, and ETC Punjabi; Bollywood channels, such as Zee Cinema, Zee Premier, Zee Action,
and Zee Classic; and sports channels, including Zee Sports, Ten Sports, Ten Action+, and Ten
Cricket. This segment also broadcasts English entertainment channels, including Zee Cafe, Zee
Studio, and Zee Trendz; music channels, such as Zing and ETC Music; and alternate lifestyle
channels comprising Zee Khana Khazana, Zee Salaam, and Zee Jagran. The company was
formerly known as Zee Telefilms Limited and changed its name to Zee Entertainment Enterprises
Limited in January 2007. Zee Entertainment Enterprises Limited was founded in 1982 and is
based in Mumbai, India.

Valuation Multiples Applied

In developing our analysis, we computed valuation pricing multiples based on the relationships between
the market value of Zee as of the Effective Date and various measures of financial performance.

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Given the history and nature of the Company and the information collected for Zee, we considered the
following valuation pricing multiples to be most applicable for our analysis:
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• BEV/Fiscal Year 2011 EBITDA

• BEV/Fiscal Year 2011 EBIT

In making our selections, we considered the relative size, performance, risk, and other investment
characteristics of the Company as compared to Zee. MSM is considerably smaller than Zee in both size
and profitability. MSM’s asset base represents only a third of Zee’s and MSM’s profitability averages 17
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percent versus Zee’s average of 25 percent. In addition, MSM has more leverage of 40 percent compared
to Zee’s near zero debt. Based upon this assessment, we selected applicable valuation multiples under
the low-end, mid-point, and high-end scenarios. The selected multiples are as follows:
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Low Mid High

BEV/FY11 EBITDA 11.5x 12.5x 13.5x
BEV/FY11 EBIT 12.0x 13.0x 14.0x

The selected pricing multiples were applied to the corresponding financial parameters of the Company to
arrive at indications of its business enterprise value.

Premiums for Control

A control premium is an amount or a percentage by which the pro rata value of a controlling interest
exceeds the pro rata value of a noncontrolling interest in a business enterprise to reflect the power of
control.13 An owner having a controlling interest in a business ordinarily has many benefits that are not
enjoyed by owners of minority interests. These advantages may include the ability to elect directors,
appoint or remove management, set compensation, declare dividends, purchase assets, or sell all or a
portion of the business. Values computed using per share prices represent minority-based value

13
Ibid., 42.

Deloitte Financial Advisory Services LLP 16

 Market Approach

indications. Therefore, a control premium must be added in order to include the additional benefits
inherent to a controlling position.

Concluded Premium for Control

Factors considered in the selection of the control premium included an analysis of premiums paid within
controlling interest transactions within the entertainment industry for the three years prior to the Effective
Date per information published in FactSet Mergerstat LLC and Capital IQ.

Given the empirical data available for our analysis, and in light of the elements of control present in the
Subject Interest, we selected a premium for control of 30 percent. The Company channel lineup and
position in the Indian television market is a unique opportunity that provides bundling synergies to market
participants. The market prices of the guideline companies do not reflect bundling synergies that market
participants could achieve throughout their existing business. Therefore we determined a premium for
control was warranted. The selected control premium was applied to the equity value of the business
based on the target capital structure used in the calculation of the weighted-average cost of capital.

Indicated Value – GPC Method

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As presented in Exhibit 10, after the application of the selected valuation multiples for each scenario, the
addition of the control premium, cash, IPL Agreement value, and value estimates for pending tax refunds,
and the subtraction of the current debt and minority interest value, we calculated the following equity
value indications for a 100.0 percent controlling interest of the Company using the GPC method:
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INR Millions
Low Mid High
GPC Method 37,616 40,997 44,556

Summary of Values – Controlling, Fully Marketable

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We evaluated and reconciled the results of the selected methods in light of the relative merits of each and
on the quantity and quality of collected data to arrive at a value of equity before adjustments. We gave
primary weight, of 80.0 percent, to the DCF method because we believe the quantity and quality of
related information supported a higher degree of confidence in the developed value indication. We gave
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secondary weight, of 20.0 percent, to guideline company method, because the information sustaining it
lacked the depth or breadth necessary to achieve same level of confidence in the indicated value as that
developed in the DCF method. We considered, but did not rely upon the guideline transaction and the
adjusted book value methods, because we believe the method was not applicable and the lack of
required information would prohibit the development of credible results.

At the request of Sony Management, we presented a range of values labeled ‘Low’, ‘Mid’, and ‘High’..
Exhibit 1 presents a valuation summary of the reconciliation process, which produced an initial estimated
value for the Subject Interest on a controlling and fully marketable basis, before adjustments, from INR
13,583 to INR 15,999 million or USD $290 million to USD $343 million based on an estimated exchange
rate of INR 45 to USD 1. The following discusses the adjustments made to arrive at a minority and non-
marketable interest of the Subject Interest.

Deloitte Financial Advisory Services LLP 17

 Discount for Lack of Control

Discount for Lack of Control

DLOC is the amount or percentage deducted from the pro rata share of value of 100 percent of an equity
interest in a business to reflect the absence of some or all of the powers of control.14 Control owners have
rights that minority owners do not, and the differences in those rights and, perhaps more importantly, how
those rights are exercised and to what economic benefit, cause a differential in the per-share value of a
control ownership block versus a minority ownership block.

Estimating the DLOC for the Subject Interest

In estimating the DLOC appropriate for the Subject Interest, we evaluated the ability of an owner of the
Subject Interest to control or influence the decisions of the Company’s management or the board of
directors.

Rights of Minority Shareholders

The following is a list of protective rights held by the minority shareholders under the current MSM India
shareholders agreement.
• Veto rights for the following corporate actions:

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• Mergers, consolidations or reorganizations
• Forming, owning or operating any new business that are considered non-core.
• Changes to the internal structure of MSM or any amendments to the charter and by-laws.
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• Issuance of equity, debt or other securities
• Share transfers
• Bankruptcy actions
• Sale or transfer of assets
Termination, dissolution, liquidation or winding up of MSM
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•
• Hiring or firing of key employees such as CEO/CFO etc.
• Board Meetings
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• Appoint two board members if the minority shareholder owns above 30 percent and one
board member if the minority shareholder owns 10 percent or more.
• Owner of 32.4 percent required for quorum of regular Board (or shareholder) meetings.
• Transfer Rights
• Consent to share transfers other than in accordance with Shareholder Agreements and
approval of prospective purchasers
• Right of first negotiation (may buy pro rata)
• Right of last refusal (may buy pro rata)

Concluded DLOC
Based on the above, the Subject Interest provides the holder with protective rights giving them control
over strategic decisions. These protective rights, included in the provisions of the shareholder agreement,
were considered as part of these elements of control; therefore, we have selected a zero percent discount
for the Subject Interest.

14
Ibid., 43.

Deloitte Financial Advisory Services LLP 18

 Discount for Lack Of Marketability

Discount for Lack Of Marketability

Marketability is defined as the ability to quickly convert property to cash at minimal cost.15 An ownership
interest in a business is worth more if it is readily marketable; therefore, a DLOM is an amount or
percentage deducted from the value of an ownership interest to reflect the relative absence of
marketability.16

Guidelines to Quantify the DLOM

In a developed market, quantification of a DLOM is supported by studies of market evidence of the
difference between the price of a publicly traded stock and the price of a stock that is otherwise the same
or similar but not eligible for public trading as of a given date. In India, there are no published studies
which focus on DLOMs and the Indian capital markets are still developing. Therefore, the Indian
regulatory agency, the Controller of Capital Issuance (CCI), formulated valuation guidelines for equity and
included guidance on discounts for lack of marketability. Based on these guidelines, CCI recommended
that private shares should be discounted by at least 15.0 percent to take into account the restricted nature
of the private holdings. The CCI guidelines are generally accepted valuation practices and are relied upon
by valuation professionals to value equities in India.

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Concluded DLOM
In evaluating the DLOM, we relied on the CCI guidelines. As a result, we estimated the average
marketability discount for minority positions in Indian companies to be 15.0 percent for the Subject
Interest.
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15
Ibid.
16
Ibid.

Deloitte Financial Advisory Services LLP 19

 Summary of Findings

Summary of Findings
After applying the DLOC and DLOM based upon the analyses discussed above, it is our opinion that the
fair market value of 38.0 percent equity of MSM on a Minority and Non-Marketable basis as of the
Effective Date is reasonably estimated between INR 11,101 to INR 13,129 million or USD $247 million to
USD $292 million based on an estimated exchange rate of INR 45 to USD 1. Our value estimates are
illustrated in Exhibit 1 and in the table below:

INR Million
Low Mid High Weight s
Inc ome A pproac h
Discounted Cash Flow Method 40,984 44,486 48,454 80.0%
Mark et A pproac h
Comparable Company Method 37,616 40,997 44,556 20.0%
Fair Mark et V alue of E quit y (Cont rolling, Fully Mark et able) 40, 310 43, 789 47, 674 100. 0%
FMV Equity (Controlling, Fully Marketable) in USD $896 $973 $1,059

FMV of 38. 0% Int eres t (Cont rolling, Fully Mark et able) 15, 318 16, 640 18, 116
FMV Equity (Controlling, Fully Marketable) in USD $ 340 $ 370 $ 403

Discount for Lack of Control 0.0% 0.0% 0.0%

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Marketability Discount 15.0% 15.0% 15.0%
Fair Mark et V alue of E quit y (Minorit y , Non-Mark et able) 34, 264 37, 220 40, 523

FMV of 38. 0% Int eres t (Minorit y , Non-Mark et able) 13, 020 14, 144 15, 399
FMV Equity (Minority, Non-Marketable) in USD
AF $ 289 $ 314 $ 342
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Deloitte Financial Advisory Services LLP 20

 Summary of Findings

Closing Remarks
This valuation engagement was conducted, and this report, its appendices, and exhibits were prepared,
in accordance with our understanding and interpretation of SSVS 1, ASA Business Valuation Standards
of the American Society of Appraisers, and the Uniform Standards of Professional Appraisal Practice
(“USPAP”) of The Appraisal Foundation. This report is identified as a Summary Report under SSVS 1
and, consistent with the ASA Business Valuation Standards, as an Appraisal Report under USPAP.

All results, advice, recommendations, or conclusions included in this report are subject to the
Assumptions and Limiting Conditions and Certifications that are presented as appendices. The
Qualifications of Principal Consultants are also presented as an appendix.

The following exhibits provide more detailed information regarding the analysis described in this report:

• Exhibit 1 – Value Summary

• Exhibit 2 – Historical and Forecasted Income Statement – MSM Consolidated

Exhibit 3 – Forecasted Income Statement - GEC

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•

• Exhibit 4 – Historical Income Statement – MSM Discovery JV

•
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Exhibit 5 – Historical Balance Sheet – MSM Consolidated

• Exhibit 6 – Income Approach – DCF Method - GEC

• Exhibit 7 – Forecasted Income Statement – IPL Agreement

• Exhibit 8 – Income Approach – DCF Method – IPL Agreement

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• Exhibit 9 – Weighted Average Cost of Capital

• Exhibit 10 – Market Approach – Comparable Company Method

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We have no obligation to update this report or our estimate of value for information that comes to our
attention after the date of this report.

If you have any questions regarding the results of the analysis, please contact JD Tengberg at +1 213
553 1285 or Peter Woelflein at +1 213 553 1342.

Respectfully submitted,

Deloitte Financial Advisory Services LLP

Deloitte Financial Advisory Services LLP

 Appendices

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Appendices
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Deloitte Financial Advisory Services LLP

 Appendix 1 — Assumptions and limiting conditions

Appendix 1 — Assumptions and limiting conditions

This report has been prepared pursuant to the following general assumptions and general limiting
conditions:
1. The analyses, advice, recommendations, opinions, or conclusions contained herein are valid only as
of the indicated date and only for the indicated purpose.
2. The analyses, advice, recommendations, opinions, or conclusions contained herein are for the
exclusive use of the Client for the sole and specific purposes noted herein and may not be used for
any other purpose by the Client or any other party. Furthermore, the analyses, advice,
recommendations, opinions, or conclusions are not intended by the author and should not be
construed by the reader to be investment advice in any manner whatsoever. The analyses, advice,
recommendations, opinions, or conclusions represent the considered opinion of Deloitte Financial
Advisory Services LLP (“Deloitte FAS”) based on information furnished to it by the Client, its
representatives, and other sources.
3. Possession of this valuation opinion report, or a copy thereof, does not carry with it the right of
publication or distribution to or use by any third party. Any third party that uses the information
contained herein does so at its sole risk and agrees to hold Deloitte FAS, its subcontractors, and their
respective personnel harmless from any claims resulting from use by any other third party. Access by
any third party does not create privity between Deloitte FAS and any third party.

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4. No part of the contents of this report (especially the analyses, advice, recommendations, opinions, or
conclusions; the identity of any Deloitte FAS personnel, or any reference to any of their professional
designations or to Deloitte FAS) should be disseminated to the public through advertising media,
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public relations, news media, sales media, mail, direct transmittal, or any other means of
communication without the prior written consent of Deloitte FAS.
5. No item in this report shall be changed by anyone other than Deloitte FAS, and Deloitte FAS shall
have no responsibility for unauthorized changes.
6. Neither Deloitte FAS nor its personnel, by reason of this engagement, is required to furnish a
complete valuation report, or to give testimony, or to be in attendance in court with reference to the
subject assets, properties, or business interests unless arrangements have been previously made in
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writing.
7. We conducted interviews with the Client and Management regarding past, present, and prospective
operating results and have assumed that the information gathered in such interviews is accurate and
complete.
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8. Financial statements and related information provided to us in the course of this engagement by the
Client or its representatives have been accepted without any verification as fully and correctly
reflecting the business conditions and operating results of the relevant assets, properties, or
businesses for the respective periods, except as specifically noted herein. We have not audited,
reviewed, or compiled any financial information provided to us and, accordingly, we express no audit
opinion or any other form of assurance regarding such information.
9. If prospective financial information provided by the Client or its representatives has been used in this
analysis, we have not examined or compiled the prospective financial information and, therefore, do
not express an audit opinion or any other form of assurance on the prospective financial information
or the related assumptions. Events and circumstances frequently do not occur as expected and there
will usually be differences between prospective financial information and actual results, and those
differences may be material.
10. We do not provide assurance on the achievability of any forecasted results contained herein because
events and circumstances frequently do not occur as expected, differences between actual and
expected results may be material, and achievement of the forecasted results is dependent on actions,
plans, and assumptions of management.
11. We have relied on the representations of the Client or its representatives concerning the usefulness
and condition of all real and personal property, intangible assets, or investments used or held in any
subject business, as well as the amounts and settlement dates of its liabilities, except as specifically

Deloitte Financial Advisory Services LLP 23

 Appendix 1 — Assumptions and limiting conditions

stated to the contrary in this report. We have not attempted to confirm whether all assets of any
subject business are free and clear of liens and encumbrances or that the entity has good and
marketable title to any assets.
12. We assume that subject assets, properties, or business interests are free and clear of any or all liens
or encumbrances unless otherwise stated herein.
13. We believe the information obtained from public sources or furnished to us by other sources is
reliable. However, we issue no warranty or other form of assurance regarding the accuracy of such
information.
14. We assume that the current level of management expertise and effectiveness would continue to be
maintained, and that the character and integrity of any subject asset, property, or business interest
through any sale, reorganization, exchange, or diminution of the owners’ participation would not be
materially or significantly changed.
15. Deloitte FAS is not an environmental consultant or auditor, and it takes no responsibility for any actual
or potential environmental liabilities. Any person entitled to rely on this report wishing to know whether
such liabilities exist, or the scope and their effect on the value of any subject asset, property, or
business interest, is encouraged to obtain a professional environmental assessment. Deloitte FAS
does not conduct or provide environmental assessments and has not performed one in the course of
this engagement.
16. We have not determined independently whether any subject asset, property, or business interest is

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subject to (1) any present or future liability relating to environmental matters (including, but not limited
to, CERCLA/Superfund liability) or (2) the scope of any such liabilities. The analyses, advice,
recommendations, opinions, or conclusions contained herein take no such liabilities into account,
except as have been reported to us by the Client or its representatives or by an environmental
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consultant working for the Client, and then only to the extent that the liability was reported to us in an
actual or estimated dollar amount. Such matters, if any, are noted in the analyses, advice,
recommendations, opinions, or conclusions contained herein. To the extent such information has
been reported to us, we have relied on that information without verification and offer no warranty or
representation as to its accuracy or completeness.
17. We have not made a specific compliance survey or analysis of any subject asset, property, or
business interest to determine whether it is subject to, or in compliance with, the Americans with
Disabilities Act of 1990, and the analyses, advice, recommendations, opinions, or conclusions
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contained herein do not consider the effect, if any, of noncompliance with such law.
18. We assume no responsibility for the legal description or matters including legal or title considerations.
Title to the subject assets, properties, or business interests is assumed to be good and marketable
unless otherwise stated herein.
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19. We assume that the subject assets, properties, or business interests are responsibly owned and
competently managed.
20. We assume that the Client is in full compliance with all applicable federal, state, and local regulations
and laws unless noncompliance is stated, defined, and considered in this report.
21. Unless otherwise stated, no effort has been made to determine the possible effect, if any, on any
subject asset, property, or business interest due to future federal, state, or local legislation, including
any environmental or ecological matters or interpretations thereof.
22. We assume that all required licenses, certificates of occupancy, consents, or legislative or
administrative authority from any federal, state or local government, private entity, or organization
have been or can be obtained or renewed for any use on which the analyses, advice,
recommendations, opinions, or conclusions contained herein are based.
23. We assume no responsibility for any financial or tax reporting requirements; such reporting
requirements are the responsibility of the Client for whom this analysis was prepared.

Deloitte Financial Advisory Services LLP 24

 Appendix 2 — Certification

Appendix 2 — Certification
I, JD Tengberg, hereby certify to the best of my knowledge and belief the following statements with
respect to the assets included in this report and identified below:

Analysis of the Fair Market Value of 38.0 Percent Equity Interest in

Multi Screen Media Private Limited as of March 31, 2011
1. The statements of fact contained in this report are true and correct.

2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions
and limiting conditions and are my personal, impartial, and unbiased professional analyses,
opinions, and conclusions.

3. I have no present or prospective interest in the property that is the subject of this report, and have
no personal interest with respect to the parties involved.

4. I have no bias with respect to the property that is the subject of this calculation report or to the
parties involved with this assignment.

5. My engagement in this assignment was not contingent upon developing or reporting

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predetermined results.

6. My compensation for completing this assignment is not contingent upon the development or
reporting of a predetermined calculated value or direction in calculated value that favors the
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cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the
occurrence of a subsequent event directly related to the intended use of this report.

7. My analyses, opinions, and conclusions were developed, and this report has been prepared, in
conformity with the Statement on Standards for Valuation Services No. 1, “Valuation of a
Business, Business Ownership Interest, Security, or Intangible Asset” and International Valuation
Standards.
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8. I have satisfied the continuing professional education requirements necessary to maintain my

professional designation(s).

9. Because of my background, experience, education, and membership in professional

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associations, I am qualified to perform calculation engagements for the type of property that is the
subject of this calculation report.

10. No person other than the undersigned, Peter Woelflein, Austin Lee, Nicole Ferenzy, Pinkesh
17 16 16 16
Billimoria , Tejas Marfatia , Anand Modani , and Shyam Balakrishnan prepared the analyses
or the calculated values set forth in this calculation report or provided significant valuation
assistance to the person signing this certification.

By: ___________________________________ Date: ____________________________________

JD Tengberg, Principal

17
Team members of Deloitte India, which participated in this engagement as a subcontractor to Deloitte FAS.

Deloitte Financial Advisory Services LLP 25

 Appendix 3 — Qualifications of principal consultants

Appendix 3 — Qualifications of principal consultants

JD Tengberg is a Principal with Deloitte Financial Advisory Services LLP with expertise in the media and
entertainment industries. Over the past 18 years, Mr. Tengberg has performed valuation work for a variety
of different purposes including: (i) transaction-related issues, (ii) shareholder value and strategic
analyses, (iii) tax-related issues, (iv) bankruptcy, (v) litigation, (vi) business plan development and (vii)
financial reporting.
Mr. Tengberg has valued entire companies in many industries including: (i) film production and
distribution, (ii) television production, (iii) post-production, (iv) television and radio broadcasting, (v) motion
picture exhibition, (vi) interactive video gaming and (vii) digital media. He has also valued and analyzed a
myriad of different types of entertainment assets including:
• Film libraries,
• Future film slates,
• Television production and distribution rights,
• Theatrical (“Off-Broadway”) production rights,
• Interactive games

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• Merchandising rights, and
• Screenplays.
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Mr. Tengberg earned a Masters of Business Administration from the Anderson School, University of
California, Los Angeles and a Bachelor of Science in Business-Finance from Brigham Young University.

Peter H. Woelflein is a senior manager with Deloitte Financial Advisory Services LLP and concentrates
in the media, entertainment and sports industries. He has ten years of financial consulting experience,
specializing in the valuation of business enterprises and intangible assets. Mr. Woelflein has provided
valuation and financial consulting services across a diversity of industries, including but not limited to,
entertainment, professional sports, automotive, banking, printing and publishing and various specialty
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retail and manufacturing industries.
Mr. Woelflein has experience in the valuation of business interests relating to bankruptcy, mergers and
acquisitions, tax reorganizations, litigation, estate and gift tax planning, financing and financial reporting,
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including valuations of common and preferred stock, debt, intangible assets and partnerships. Intangible
assets valued include player contracts, artist relationships, season ticket holders, luxury suite holders,
sponsorship agreements, broadcasting rights, franchise rights, leasehold interests, trained and
assembled workforce, trademarks, customer relationships, and noncompetition agreements. Mr. Woelflein
has also provided services in a variety of financial consulting projects that include tax planning, litigation
support, and determination of discounts for lack of control and lack of marketability.
Mr. Woelflein earned an MBA in Finance from the University of Notre Dame and a BA in Economics from
Tufts University. He is a Candidate Member in the American Society of Appraisers.

Austin J. Lee, CPA/ABV is a manager with Deloitte Financial Advisory Services LLP. Mr. Lee has
participated in a number of valuations for both public and privately held entities involving mergers and
acquisitions, divestitures, strategic planning, tax and financial statement reporting purposes, litigation
analysis, and estate and gift tax purposes.
Mr. Lee earned a Masters of Accounting and Bachelor of Arts degree in Economics from the University of
Michigan at Ann Arbor. Mr. Lee holds an active CPA license in the State of California and an
Accreditation in Business Valuation (ABV) credential from the American Institute of Certified Public
Accountants (AICPA).

Deloitte Financial Advisory Services LLP 26

 Appendix 3 — Qualifications of principal consultants

Nicole Ferenzy is a senior associate with Deloitte Financial Advisory Services LLP specializing in
business valuation services. Ms. Ferenzy has participated in a number of valuations for both public and
privately held entities involving mergers and acquisitions and tax and financial statement reporting
purposes. Additionally, Ms. Ferenzy provides assistance in audit support services to Deloitte & Touche
LLP performing SAS 101 reviews.
Ms. Ferenzy earned a B.S. in Business Administration from the University of Southern California. Ms.
Ferenzy is also currently working towards the Accredited Senior Appraiser (ASA) designation.

Pinkesh Billimoria is a director in the Valuation group of Deloitte India. Pinkesh has been with the
organization for over 14 years and has been responsible for a number of valuation engagements. Pinkesh
also leads the Financial Modeling practice. He is responsible for a number of valuations of shares,
businesses and intangibles for acquisitions, takeovers, restructuring and mergers as part of our corporate
finance & financial and business advisory services. He has wide experience in different industries like
infrastructure, oil & gas, manufacturing, distribution and retail, financial services and media &
entertainment.
Pinkesh Billimoria is a Chartered Accountant.

Anand Modani is a manager in the Valuation group of Deloitte India. Anand has been with Deloitte India
for around six years. During the association with the Financial Advisory practice, Anand has been
associated with the valuations services assisting in engagement spanning valuation of shares,

T
businesses and intangibles for acquisitions, takeovers, restructuring and mergers as for a variety of
industries spanning manufacturing, mining, hospitality, distribution and retail, infrastructure, financial
services and media & entertainment. Anand has also assisted in financial modeling assignments.
AF
Anand Modani is a Chartered Accountant.

Shyam Balakrishnan is a deputy manager in the Valuation group of Deloitte India. Shyam has been with
the FA practice of Deloitte India over three years. During his association with the FA practice Shyam has
been associated with the valuations services assisting in engagement spanning valuation of shares and
businesses for acquisitions, takeovers, restructuring and mergers as for a variety of industries spanning
manufacturing, mining, power, hospitality, retail, infrastructure, financial services and media &
R
entertainment.
Shyam Balakrishnan is a Chartered Accountant.

Tejas Marfatia is a manager in the Valuation group of Deloitte India. Tejas has been with Deloitte in India
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for over six years working across the Assurance and the Financial Advisory practices. In his association
with the valuations services of Deloitte India, Tejas has successfully assisted and lead in various
engagements spanning valuation of shares, businesses and intangibles for mergers and acquisitions,
restructuring and regulatory purposes and for a variety of sectors spanning manufacturing, power,
infrastructure, hospitality, retail, financial services and media & entertainment.
Tejas Marfatia is a Chartered Accountant and also holds a Post Graduate Diploma in Business
Management in Finance.

Deloitte Financial Advisory Services LLP 27

 Exhibits
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Deloitte Financial Advisory Services LLP 28

Sony Pictures Entertainment, Inc.
Value Summary
Valuation as of March 31, 2011
Exhibit 1

INR Million
Low Mid High Weights
Income Approach
Discounted Cash Flow Method 40,984 44,486 48,454 80.0%
Market Approach
Comparable Company Method 37,616 40,997 44,556 20.0%
Fair Market Value of Equity (Controlling, Fully Marketable) 40,310 43,789 47,674 100.0%
FMV Equity (Controlling, Fully Marketable) in USD $896 $973 $1,059

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FMV of 38.0% Interest (Controlling, Fully Marketable) 15,318 16,640 18,116
FMV Equity (Controlling, Fully Marketable) in USD $ 340 $ 370 $ 403

Discount for Lack of Control 0.0% 0.0% 0.0%

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Marketability Discount 15.0% 15.0% 15.0%
Fair Market Value of Equity (Minority, Non-Marketable) 34,264 37,220 40,523

FMV of 38.0% Interest (Minority, Non-Marketable) 13,020 14,144 15,399

FMV Equity (Minority, Non-Marketable) in USD $ 289 $ 314 $ 342

Notes:
[a]
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The Discount for Lack of Control was determined at 0 percent as the minority interests have protective rights giving them control over strategic decisions.
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[b] The Marketability discount of 15.0 percent was based on an average marketability discount for minority positions in Indian companies.
Sony Pictures Entertainment, Inc.
Historical and Forecasted Income Statement - MSM Consolidated
Valuation as of March 31, 2011
Exhibit 2

Year Ending March 31, INR Million

Income Statement FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
Revenue 11,944 16,330 18,001 26,011 27,656 30,551 34,221 38,204
Other Income - 208 - - - - - -
Total Revenue 11,944 16,538 18,001 26,011 27,656 30,551 34,221 38,204
Content cost 7,911 10,545 9,335 14,339 14,777 16,400 18,205 20,430
Other Expenses 4,065 5,480 5,616 7,107 7,727 8,507 9,358 10,289
Total Expenses 11,976 16,025 14,951 21,446 22,504 24,907 27,563 30,719
EBITDA (32) 513 3,049 4,564 5,152 5,644 6,658 7,485
Depreciation / Amortization 129 108 89 132 222 260 369 198

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EBIT (162) 405 2,960 4,432 4,930 5,384 6,289 7,287
Interest 256 360 207 331 329 293 229 122
Profit Before Tax (PBT) (418) 45 2,754 4,101 4,601 5,091 6,060 7,165

AF
Current Tax (75) 814 1,585 1,665 1,629 1,790 2,009 2,213
Profit After Tax (PAT) (343) (769) 1,169 2,436 2,972 3,300 4,050 4,952
Minority Interest (2) 56 52 16 (9) (1) (9) (47)
Net Income (342) (825) 1,117 2,421 2,980 3,301 4,060 4,999

Common Size
Income Statement FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

Revenue
Other Income
Total Revenue
Content cost
R 100.0%
0.0%
100.0%
66.2%
98.7%
1.3%
100.0%
63.8%
100.0%
0.0%
100.0%
51.9%
100.0%
0.0%
100.0%
55.1%
100.0%
0.0%
100.0%
53.4%
100.0%
0.0%
100.0%
53.7%
100.0%
0.0%
100.0%
53.2%
100.0%
0.0%
100.0%
53.5%
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Other Expenses 34.0% 33.1% 31.2% 27.3% 27.9% 27.8% 27.3% 26.9%
Total Expenses 100.3% 96.9% 83.1% 82.5% 81.4% 81.5% 80.5% 80.4%
EBITDA -0.3% 3.1% 16.9% 17.5% 18.6% 18.5% 19.5% 19.6%
Depreciation / Amortization 1.1% 0.7% 0.5% 0.5% 0.8% 0.9% 1.1% 0.5%
EBIT -1.4% 2.4% 16.4% 17.0% 17.8% 17.6% 18.4% 19.1%
Interest 2.1% 2.2% 1.1% 1.3% 1.2% 1.0% 0.7% 0.3%
Profit Before Tax (PBT) -3.5% 0.3% 15.3% 15.8% 16.6% 16.7% 17.7% 18.8%
Current Tax -0.6% 4.9% 8.8% 6.4% 5.9% 5.9% 5.9% 5.8%
Profit After Tax (PAT) -2.9% -4.7% 6.5% 9.4% 10.7% 10.8% 11.8% 13.0%
Minority Interest 0.0% 0.3% 0.3% 0.1% 0.0% 0.0% 0.0% -0.1%
Net Income -2.9% -5.0% 6.2% 9.3% 10.8% 10.8% 11.9% 13.1%

Source: Sony Management

Sony Pictures Entertainment, Inc.
Forecasted Income Statement - GEC
Valuation as of March 31, 2011
Exhibit 3

Year Ending March 31, INR Million

Forecast FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Terminal
Revenue 14,548 17,415 19,381 21,042 23,327 25,678 27,733 29,397 29,397
Total Revenue 14,548 17,415 19,381 21,042 23,327 25,678 27,733 29,397 29,397
Content cost 7,173 8,765 9,133 9,944 10,840 11,998 12,958 13,736 13,736
Other Expenses 5,427 6,459 7,008 7,695 8,456 9,277 10,019 10,621 10,621
Total Expenses 12,600 15,224 16,141 17,639 19,296 21,276 22,978 24,356 24,356
EBITDA 1,948 2,191 3,240 3,403 4,031 4,403 4,755 5,040 5,040

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Depreciation / Amortization 89 132 222 260 369 198 214 227 227
EBIT 1,859 2,059 3,018 3,142 3,662 4,205 4,541 4,814 4,814
Interest 207 331 329 293 229 122 122 122 122
Profit Before Tax (PBT) 1,652 1,728 2,689 2,849 3,433 4,083 4,419 4,692 4,692

AF
Current Tax 1,585 1,240 1,157 816 875 836 905 961 961
Profit After Tax (PAT) 68 488 1,532 2,033 2,558 3,247 3,514 3,731 3,731
Minority Interest 52 16 (9) (1) (9) (47)
Net Income 15 472 1,541 2,034 2,567 3,294 3,514 3,731 3,731

Common Size
Forecast
Revenue
Total Revenue
Content cost
R FY11
100.0%
100.0%
49.3%
FY12
100.0%
100.0%
50.3%
FY13
100.0%
100.0%
47.1%
FY14
100.0%
100.0%
47.3%
FY15
100.0%
100.0%
46.5%
FY16
100.0%
100.0%
46.7%
FY17
100.0%
100.0%
46.7%
FY18
100.0%
100.0%
46.7%
Terminal
100.0%
100.0%
46.7%
Other Expenses 37.3% 37.1% 36.2% 36.6% 36.3% 36.1% 36.1% 36.1% 36.1%
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Total Expenses 86.6% 87.4% 83.3% 83.8% 82.7% 82.9% 82.9% 82.9% 82.9%
EBITDA 13.4% 12.6% 16.7% 16.2% 17.3% 17.1% 17.1% 17.1% 17.1%
Depreciation / Amortization 0.6% 0.8% 1.1% 1.2% 1.6% 0.8% 0.8% 0.8% 0.8%
EBIT 12.8% 11.8% 15.6% 14.9% 15.7% 16.4% 16.4% 16.4% 16.4%
Interest 1.4% 1.9% 1.7% 1.4% 1.0% 0.5% 0.4% 0.4% 0.4%
Profit Before Tax (PBT) 11.4% 9.9% 13.9% 13.5% 14.7% 15.9% 15.9% 16.0% 16.0%
Current Tax 10.9% 7.1% 6.0% 3.9% 3.8% 3.3% 3.3% 3.3% 3.3%
Profit After Tax (PAT) 0.5% 2.8% 7.9% 9.7% 11.0% 12.6% 12.7% 12.7% 12.7%
Minority Interest 0.4% 0.1% 0.0% 0.0% 0.0% -0.2% 0.0% 0.0% 0.0%
Net Income 0.1% 2.7% 8.0% 9.7% 11.0% 12.8% 12.7% 12.7% 12.7%

Source: Sony Management Forecasts

Sony Pictures Entertainment, Inc.
Historical Income Statement - MSM Discovery JV
Valuation as of March 31, 2011
Exhibit 4

Year Ending March 31, INR Million Common Size

Profit & Loss a/cs FY10 FY11 FY10 FY11
Revenue 2,601 7,600 99.9% 100.0%
Other Income 1 77 0.1% 1.0%
Adjustments 0 (77) 0.0% -1.0%
Total Revenue 2,603 7,600 100.0% 100.0%

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License fee 1,824 6,709 70.1% 88.3%
Other expense 584 654 22.4% 8.6%
Adjustment (43) 0 -1.6% 0.0%

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Total Expenses 2,365 7,363 90.9% 96.9%
EBITDA 237 237 9.1% 3.1%
Depreciation / Amortization 4 5 0.2% 0.1%
EBIT 233 232 9.0% 3.0%
Interest 0 22 0.0% 0.3%
Profit Before Tax (PBT) 233 209 9.0% 2.8%
Current Tax
Deferred Tax
Adjustment
Profit After Tax (PAT)
R 30
(70)
14
259
161
(61)
(25)
134
1.1%
-2.7%
0.5%
9.9%
2.1%
-0.8%
-0.3%
1.8%
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Minority Interest 0.0% 0.0%
Net Income 259 134 9.9% 1.8%

Source: Sony Management

Sony Pictures Entertainment, Inc.
Historical Balance Sheet - MSM Consolidated
Valuation as of March 31, 2011
Exhibit 5

Balance Sheet at March 31, INR Million

Balance sheet as at FY09 FY10 FY11
Assets
Gross Fixed Assets 999 1,151 1,352
Accumulated Depreciation (806) (1,008) (1,094)
Net Fixed Assets 193 143 258
Capital Work in Progress
Goodwill + Intangibles 475 459 465

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Investment 29 6 3
Inventories incl movies 3,561 3,695 9,350
Debtors 2,480 5,709 3,486
Cash / Bank 1,950 1,150 2,191

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Loans and Advances 5,349 3,424 4,796
Current Assets 13,339 13,979 19,823

Current Liabilities 7,994 4,192 5,321

Provisions
Current Liabilities 7,994 4,192 5,321
Net Current Assets 5,346 9,787 14,502
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Total Assets
Equity and Liabilities
Share Capital
6,043

(198)
10,395

101
15,229

626
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Reserves (464) 722
(198) (363) 1,348
Secured Loans 517 13,844
Unsecured Loans 6,240 10,252
Loan Funds 6,240 10,769 13,844
Minority Interest (12) 37
Total Liabilities 6,043 10,395 15,229

Working Capital FY09 FY10 FY11

NCA 0
Source: Sony Management
Sony Pictures Entertainment, Inc.
Income Approach - Discounted Cash Flow Method - GEC
Valuation as of March 31, 2011
Exhibit 6

Year Ending March 31, INR Million

FY12 FY13 FY14 FY15 FY16 FY17 FY18 Terminal
Profit After Tax (before Minority Interest) 488 1,532 2,033 2,558 3,247 3,514 3,731 3,918
Depreciation 132 222 260 369 198 214 227 238
Additional Programming Costs (1,767) (657) - - - - - -
Interest (net of tax) 275 273 243 190 101 101 101 101
Change in Working Capital (Use)/Surplus 133 (825) (610) (610) (546) (528) (428) (378)
Debt-Free Operating Cash Flow (740) 546 1,927 2,506 3,000 3,301 3,631 3,879
CAPEX (446) (192) (193) (194) (195) (205) (215) (238)
[a] Debt-Free Net Cash Flow (1,186) 354 1,734 2,313 2,805 3,097 3,416 3,641
Timing factor 0.50 1.50 2.50 3.50 4.50 5.50 6.50 6.50

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PV Factor 0.94 0.84 0.75 0.67 0.60 0.54 0.48 0.48
Present Value of Debt-Free Net Cash Flow (1,120) 298 1,306 1,555 1,684 1,660 1,635 1,743

Discrete Period (FY12-FY18) 7,020

Terminal Value 24,900

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Total Enterprise Value - GEC 31,920
add: Value of IPL Contract 21,992
Total Enterprise Value - MSM 53,912 WACC 12.00%
[b] Less: Total Debt (13,844) Terminal Value Growth Rate 5.00%
[b] Add: Cash and Equivalents 2,191
[c] Less: Minority Interests (1,600)
[d] Add: Tax Refunds 1,752 44,486 11.00% 11.50% 12.00% 12.50% 13.00%
[e] Add: BCCI/WSG Legal Expenses (14) 3.00% 42,958 39,803 37,109 34,618 32,485
[f] Add: BCCI/WSG Deposit and Interest RefundR
Fair Market Value of Equity (Controlling, Fully Marketable)
FMV Equity (Controlling, Fully Marketable) in USD $
2,090

44,486
989
4.00%
5.00%
6.00%
7.00%
47,316
53,227
61,422
73,766
43,568
48,454
55,225
64,839
40,311
44,486
50,020
57,687
37,459
40,984
45,555
51,898
34,843
37,941
41,752
46,933
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Notes:
[a] Source: Sony Management Forecasts.
[b] Exhibit 5
[c] Based on Management's estimate of the 8.0 percent minority interest ownership, excluding the IPL contract
[d] Based on Management's estimate of the probability adjusted annual tax refunds discounted at a risk free rate through FY 18
[e] Based on Mangement's estimate of the BCCI/WSG litigation expenses anticipated through FY 18
[f] Based on Mangement's estimate of the probability adjusted BCCI/WSG litigation dispute deposit and interest refund anticipated in FY 18
Sony Pictures Entertainment, Inc.
Forecasted Income Statement - IPL Agreement
Valuation as of March 31, 2011
Exhibit 7

Year Ending March 31, INR Million

Forecast FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Terminal
Revenue 3,453 8,596 8,275 9,510 10,894 12,526 14,469 16,427 16,427
Total Revenue 3,453 8,596 8,275 9,510 10,894 12,526 14,469 16,427 16,427
Content cost 2,058 5,223 5,032 5,783 6,624 7,617 8,759 8,776 -
Other expenses 293 999 1,331 1,485 1,642 1,827 1,992 2,332 -
Total Expenses 2,351 6,222 6,363 7,268 8,267 9,444 10,750 11,108 13,611
EBITDA 1,101 2,373 1,912 2,242 2,627 3,082 3,719 5,320 2,817

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Depreciation / Amortization - - - - - - - - -
EBIT 1,101 2,373 1,912 2,242 2,627 3,082 3,719 5,320 2,817
Interest - - - - - - - - -
Profit Before Tax (PBT) 1,101 2,373 1,912 2,242 2,627 3,082 3,719 5,320 2,817

AF
Current Tax - 425 473 974 1,134 1,377 1,662 2,377 1,259
Profit After Tax (PAT) 1,101 1,949 1,439 1,267 1,493 1,705 2,057 2,942 1,558
Minority Interest - - - - - - - - -
Net Income 1,101 1,949 1,439 1,267 1,493 1,705 2,057 2,942 1,558

Source: Sony Management Forecasts

Common Size
Forecast
Revenue
Total Revenue
R FY11
100.0%
100.0%
FY12
100.0%
100.0%
FY13
100.0%
100.0%
FY14
100.0%
100.0%
FY15
100.0%
100.0%
FY16
100.0%
100.0%
FY17
100.0%
100.0%
FY18
100.0%
100.0%
Terminal
100.0%
100.0%
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Content cost 59.6% 60.8% 60.8% 60.8% 60.8% 60.8% 60.5% 53.4% 0.0%
Total Expenses 68.1% 72.4% 76.9% 76.4% 75.9% 75.4% 74.3% 67.6% 82.9%
EBITDA 31.9% 27.6% 23.1% 23.6% 24.1% 24.6% 25.7% 32.4% 17.1%
Depreciation / Amortization 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
EBIT 31.9% 27.6% 23.1% 23.6% 24.1% 24.6% 25.7% 32.4% 17.1%
Interest 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Profit Before Tax (PBT) 31.9% 27.6% 23.1% 23.6% 24.1% 24.6% 25.7% 32.4% 17.1%
Current Tax 0.0% 4.9% 5.7% 10.2% 10.4% 11.0% 11.5% 14.5% 7.7%
Profit After Tax (PAT) 31.9% 22.7% 17.4% 13.3% 13.7% 13.6% 14.2% 17.9% 9.5%
Minority Interest 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Net Income 31.9% 22.7% 17.4% 13.3% 13.7% 13.6% 14.2% 17.9% 9.5%
Sony Pictures Entertainment, Inc.
Income Approach - Discounted Cash Flow Method - IPL Agreement
Valuation as of March 31, 2011
Exhibit 8

Year Ending March 31, INR Million

FY12 FY13 FY14 FY15 FY16 FY17 FY18 Terminal
Profit After Tax 1,949 1,439 1,267 1,493 1,705 2,057 2,942 1,636
IPL amortization 5,223 5,032 5,783 6,624 7,617 8,759 8,776
Licence Fee (Sports) (4,641) (5,321) (6,299) (6,621) (7,576) (4,448) (8,776)
Debt-Free Operating Cash Flow 2,531 1,150 751 1,496 1,746 6,367 2,942 1,636
CAPEX - - - - - - - -
[a] Debt-Free Net Cash Flow 2,531 1,150 751 1,496 1,746 6,367 2,942 1,636
Timing factor 0.50 1.50 2.50 3.50 4.50 5.50 6.50 6.50

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PV Factor 0.94 0.84 0.75 0.67 0.60 0.54 0.48 0.48
Present Value of Debt-Free Net Cash Flow 2,391 970 566 1,006 1,048 3,414 1,409 783
Discrete Period (FY12-FY18) 10,804

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Terminal Value 11,188 WACC 12.00%
Total Enterprise Value - IPL Agreement 21,992 Terminal Value Growth Rate 5.00%
Adjusted EV - IPL Agreement in USD $ 489
21,992 11.00% 11.50% 12.00% 12.50% 13.00%
3.00% 21,352 20,291 19,340 18,482 17,705
4.00% 22,919 21,634 20,500 19,492 18,589
5.00% 25,009 23,390 21,992 20,771 19,694
6.00% 27,934 25,785 23,981 22,443 21,114

Notes:
[a] Source: Sony Management Forecasts.
R 7.00% 32,322 29,244 26,765 24,723 23,008
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Sony Pictures Entertainment, Inc.
Weighted Average Cost of Capital
Valuation as of March 31, 2011
Exhibit 9

Unlevered
INR Million Beta D/(D+E) -
Wtg Book MW
Company Debt Equity D/(D+E) Beta M-Cap Product
Beta Weights
Zee Entertainment 12 44,042 0.0% 0.61 135,725 82,494 0.61 0.0%

Total 12 44,042 0.0% 135,725 82,494 0.61

Average 12 44,042 0.0% 0.61 0.61 0.0%

T
Median 12 44,042 0.0% 0.61 0.61 0.0%

Levered Beta Market

AF
Debt % 20.0% Based on average capital structure for entire Indian entertainment industry.
Equity % 80.0%
Tax rate 33.3% Estimated effective tax rate for MSM
Unlevered beta 0.61
Levered beta 0.71

Cost of Equity
Risk free
Market Risk Premium
Levered Beta for equity
Cost of Equity
8.3%
7.0%
0.71
13.2%
R YTM of 10-year Indian Government Securities. Source: Bloomberg
Market premium based on overall market returns. Source: Deloitte India Research
Relevered beta based on selection and market capital structure
D
Specific Company Risk 0.0%
Total Cost of Equity 13.2%

Cost of Debt
COD pre tax 11.3% Cost of Debt provided by Sony Management
Tax rate 33.3% Estimated effective tax rate for MSM
COD post tax 7.5%

WACC
WACC 12.09%
Rounded off 12.00%
Sony Pictures Entertainment, Inc.
Market Approach - Comparable Company Method
Valuation as of March 31, 2011
Exhibit 10

Summary FY11
Low Mid High Weight
EV / EBITDA 37,674 41,110 44,724 50.0%
EV / EBIT 37,558 40,885 44,388 50.0%
Weighted Value 37,616 40,997 44,556 100.0%
$836 $911 $990

EV / EBITDA EV / EBIT
[a] EBITDA 1,948 1,948 1,948 EBIT 1,859 1,859 1,859
EV / EBITDA multiple 11.50x 12.50x 13.50x EV / EBIT multiple 12.00x 13.00x 14.00x

T
Enterprise Value (minority, marketable) 22,403 24,351 26,300 Enterprise Value (minority, marketable) 22,310 24,169 26,029
Less: Market Participant Level of Debt (4,481) (4,870) (5,260) Less: Market Participant Level of Debt (4,462) (4,834) (5,206)
Equity Value (minority, marketable) 17,923 19,481 21,040 Equity Value (minority, marketable) 17,848 19,335 20,823
Control Premium @ 30% 5,377 5,844 6,312 Control Premium @ 30% 5,354 5,801 6,247

AF
Equity Value (controlling, marketable) 23,299 25,325 27,352 Equity Value (controlling, marketable) 23,203 25,136 27,070
Add: Market Participant Level of Debt 4,481 4,870 5,260 Add: Market Participant Level of Debt 4,462 4,834 5,206
Enterprise Value (controlling, marketable) 27,780 30,196 32,611 Enterprise Value (controlling, marketable) 27,665 29,970 32,275
[b] Less: Total Debt (13,844) (13,844) (13,844) Less: Total Debt (13,844) (13,844) (13,844)
[b] Add: Cash 2,191 2,191 2,191 Add: Cash 2,191 2,191 2,191
[c] Less: Minority Interest (1,300) (1,500) (1,700) Less: Minority Interest (1,300) (1,500) (1,700)
[d] Add: IPL Agreement Value 20,771 21,992 23,390 Add: IPL Agreement Value 20,771 21,992 23,390
[e] Add: Refund from BCCI and WSG 2,076 2,076 2,076 Add: Refund from BCCI and WSG 2,076 2,076 2,076

Equity Value - MSM (controlling, marketable)

R
37,674 41,110 44,724 Equity Value - MSM (controlling, marketable) 37,558 40,885 44,388
D
Notes:
[a] Source: Sony Management Forecasts.
[b] Exhibit 5
[c] Based on Management's estimate of the 8.0 percent minority interest ownership, excluding the IPL contract
[d] Based on Mangement's estimate of the BCCI/WSG litigation expenses anticipated through FY 18
[e] Based on Mangement's estimate of the probability adjusted BCCI/WSG litigation dispute deposit and interest refund anticipated in FY 18