28 January 2015 Asia Pacific/ Equity Research Media (Media - SMID (AU))

APN News & Media

(APN.AX / APN AU) Rating OUTPERFORM* INCREASE TARGET PRICE

Price (28 Jan 15, A$) 0.80 Target price (A$) (from 1.00) 1.10¹ Market cap. (A$mn) 823.23 Assessing the earnings potential Yr avg. mthly trading (A$mn) 28 Last month's trading (A$mn) 16 ■ We have undertaken a detailed review of each of APN's business units. Projected return: As a result we expect group EBITDA to remain reasonably stable in FY14 Capital gain (%) 37.5 and deliver 14% growth in FY15. We forecast Adshel EBITDA growth of 28% Dividend yield (net %) 7.6 Total return (%) 45.1 in FY15 which is not included in group EBITDA (in associate income). 52-week price range 0.84 - 0.36 ■ to drive the majority of growth. We forecast * Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. 16% and 35% EBITDA growth in FY14 and FY15 for ARN, driven by gains in [V] = Stock considered volatile (see Disclosure Appendix). audience share. The launch of KIIS in will be the primary driver of FY14 earnings whilst the launch of KIIS in coupled with the 96FM

Research Analysts acquisition from FXJ (subject to approvals) is likely to drive FY15 earnings. Samantha Carleton ■ Adshel digital opportunity is material. Whilst FY14 was a year of 61 2 8205 4148 investment, we expect material earnings growth in FY15 from the Sydney [email protected] Trains contract and digital conversion. Analysis of global outdoor companies Michael O'Meara suggests that digital conversion generates a 2-5x revenue uplift. This 61 2 8205 4071 [email protected] provides material upside for Adshel over an extended period of time. ■ Australian Regional Media earnings decline to decelerate. We expect This report is distributed in Australia by Credit APN to focus on reducing ARM's cost base over the next couple of years. Suisse Equities (Australia) Limited. Please see legal This may include outsourcing admin functions, converting publications to disclaimer and disclosure annex for further terms digital, closing printing presses (Ballina closed in 2013 and Toowoomba to and information. close in 2015) or partnering with another publisher on back end production. Prepared by Credit Suisse Emerging Companies (Australia) Pty Limited, a joint venture entered ■ NZME investment to provide a short-term headwind however right into between Credit Suisse and First NZ Capital. strategy for long-term growth. APN has provided guidance for NZME which signals increased investment in FY14 and FY15 as the business is transformed. We expect increased integration will ultimately result in NZME gaining a greater share of wallet (currently 14% of NZ ad spend) over time. ■ We value APN at $1.10 on a 12mth horizon, with a stretch valuation of $1.53.

Total return forecast in perspective Financial and valuation metrics

70% CSEC tgt^ Year 12/13A 12/14E 12/15E 12/16E 50% Revenue (A$mn) 823.5 864.5 924.6 925.3 30% EBITDA (A$mn) 152.2 156.4 178.3 186.6 10% EBIT (A$mn) 119.2 122.4 141.4 149.6 Sh Prc -10% Mean^ Net income (A$mn) 72.2 70.5 91.8 99.8 -30% EPS (CSEC adj.) (Ac) 10.92 7.40 8.92 9.69 -50% Change from previous EPS (%) n.a. -2.5 1.3 1.2 -70% Consensus EPS (Ac) n.a. 7.90 7.80 8.20 12mth Volatility* 52wk Hi-Lo IBES Consensus EPS growth (%) 30.0 -32.2 20.5 8.7 target return^ P/E (x) 7.3 10.8 9.0 8.3

Dividend (Ac) — — 6.00 7.00 Performance over 1M 3M 12M Dividend yield (%) — — 7.5 8.8 Absolute (%) -4.8 5.3 84.0 P/B (x) 1.5 1.5 1.4 1.3

Relative (%) -6.2 3.9 76.7 Net debt/equity (%) 70.8 74.6 62.7 47.8

Relative performance versus S&P ASX 200.See Reference Source: Company data, ASX, CSEC estimates, * Adj. for goodwill, notional interest and unusual items. Relative P/E against Appendix for a description of the chart. Source: CSEC ASX/S&P200 based on pre GW in AUD. Company PE calculation is based on displayed EPS Currency. estimates, * Consensus, mean range from Thomson Reuters

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: CSEC does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

28 January 2015

Figure 1: Financial summary

APN News & Media (APN)2012 2013 2014 Year2015 ending 302016 Dec 2012 2013 In AUDmn,2014 unless otherwise2015 stated2016 Share Price: A$0.80 1/28/2015 12:45 Earnings 12/12A 12/13A 12/14E 12/15E 12/16E Rating OUTPERFORM c_EPS_SHARESEquiv. FPO (period avg.) mn 647.7 661.5 952.5 1,029.0 1,029.0 Target Price A$ 1.10 c_EPS*100EPS (Normalised) c 8.4 10.9 7.4 8.9 9.7 vs Share price % 37.50 EPS_GROWTH*100EPS Growth % 30.0 -32.2 20.5 8.7 DCF A$ 1.10 c_EBITDA_MARGIN*100EBITDA Margin % 17.0 18.5 18.1 19.3 20.2 APN News and Media Limited is involved in publishing, radio broadcasting, online, transit & c_DPS*100DPS c 1.5 0.0 0.0 6.0 7.0 outdoor in Australia and . c_PAYOUT*100Payout % 17.9 0.0 0.0 67.3 72.2 FRANKING*100Franking % 33.3 33.3 33.3 33.3 33.3 c_FCF_PS*100Free CFPS c 2.3 0.3 -0.4 -0.2 -0.3 Profit & Loss 12/12A 12/13A 12/14E 12/15E 12/16E c_TAX_RATE*100Effective tax rate % 13.2 -75.2 63.1 25.5 27.5 Sales revenue 863.4 823.5 864.5 924.6 925.3 Valuation EBITDA 146.9 152.2 156.4 178.3 186.6 c_PE P/E x 9.5 7.3 10.8 9.0 8.3 Depr. & Amort. (33.5) (33.0) (34.0) (37.0) (37.0) PEG PEG x -0.3 0.2 -0.3 0.4 0.9 EBIT 113.4 119.2 122.4 141.4 149.6 c_EBIT_MULTIPLE_CURREV/EBIT x 11.3 10.5 10.1 8.7 7.8 Associates 9.2 10.6 10.9 13.5 14.9 c_EBITDA_MULTIPLE_CUEV/EBITDA x 8.7 8.2 7.9 6.9 6.2 Net interest Exp. (40.5) (37.9) (38.3) (33.1) (28.6) c_DIV_YIELD*100Dividend Yield % 1.9 0.0 0.0 7.5 8.8 Other (9.2) (10.6) (10.9) (13.5) (14.9) c_FCF_YIELD*100FCF Yield % 2.9 0.3 -0.5 -0.3 -0.3 Profit before tax 72.9 81.3 84.1 108.3 121.0 c_PB Price to Book x 1.5 1.5 1.5 1.4 1.3 Income tax (3.8) 6.0 (19.0) (27.7) (33.3) Returns Profit after tax 69.1 87.3 65.1 80.6 87.7 c_ROE*100Return on Equity % 15.5 20.0 13.6 15.3 15.2 Minorities (23.8) (25.7) (5.6) (2.3) (2.9) c_I_NPAT/c_I_SALES*100Profit Margin % 6.3 8.8 8.2 9.9 10.8 Preferred dividends 0.0 0.0 0.0 0.0 0.0 c_I_SALES/c_B_TOT_ASSAsset Turnover x 0.7 0.7 0.7 0.8 0.8 Associates & Other 9.2 10.6 10.9 13.5 14.9 c_ASSETS/c_EQ_COMMONEquity Multiplier x 3.7 3.5 2.3 2.0 1.9 Normalised NPAT 54.4 72.2 70.5 91.8 99.8 c_ROA*100Return on Assets % 4.2 5.8 6.0 7.5 8.2 Unusual item after tax (510.2) (57.6) (55.2) 0.0 0.0 c_ROIC*100Return on Invested Cap. % 10.3 12.3 9.7 10.1 10.4 Reported NPAT (455.8) 14.6 15.3 91.8 99.8 Gearing (SUM Net( c_BORROW, Debt to Net -c_B_CASHdebt + Equity , -c_B_CASH_OPER,% 43.9 -c_B_RESTR_CASH,41.5 42.7 c_NET_DEBT_ADJ)38.5 / SUM32.4 (c_EQ_SUM, c_BORROW, -c_B_CASH , -c_B_CASH_OPER, -c_B_RESTR_CASH, c_NET_DEBT_ADJ))*100 Balance Sheet 12/12A 12/13A 12/14E 12/15E 12/16E SUM (Net c_BORROW, Debt to EBITDA -c_B_CASH , -c_B_CASH_OPER,x 3.1 -c_B_RESTR_CASH,2.8 c_NET_DEBT_ADJ)/c_I_EBITDA2.7 2.3 1.8 Cash & equivalents 20.3 20.0 46.0 12.1 17.6 c_I_EBITDA/Int Cover c_I_NET_INTEREST (EBITDA/Net Int.) x 3.6 4.0 4.1 5.4 6.5 Inventories 10.4 7.6 8.3 8.9 8.9 c_I_EBIT/Int Cover c_I_NET_INTEREST (EBIT/Net Int.) x 2.8 3.1 3.2 4.3 5.2 Receivables 127.8 121.0 133.0 136.4 136.2 (c_C_CAPEX/c_I_SALES)*-100Capex to Sales % 1.6 1.7 1.8 1.7 1.7 Other current assets 50.7 130.1 8.8 8.8 8.8 (c_C_CAPEX/c_I_DEPR)*-100Capex to Depreciation % 50.1 54.2 57.3 52.7 52.7 Current assets 209.2 278.6 196.1 166.2 171.4 MSCI IVA (ESG) Rating BBB CSEC View Property, plant & equip. 171.5 149.4 138.8 124.5 110.1 TP ESG Risk (%): -1 Intangibles 723.3 714.9 721.2 716.9 713.1 TP Risk Comment: APN's Governance has improved however key shareholder INM remains a large influence on the Other non-current assets 189.8 112.1 118.8 210.3 225.2 9.6 company Non-current assets 1,084.6 976.3 978.8 1,051.6 1,048.4 8.6 Total assets 1,293.8 1,254.9 1,174.9 1,217.8 1,219.8 7.6 Payables 160.2 113.4 124.8 136.4 136.2 Interest bearing debt 479.1 452.4 464.6 414.6 354.6 6.6 Other liabilities 69.0 78.5 24.5 24.5 24.5 5.6 MSCI IVA Risk: Neutral Total liabilities 708.3 644.4 613.8 575.5 515.2 4.6 MSCI IVA Risk Comment: MSCI has recently downgraded its Net assets 585.5 610.5 561.0 642.3 704.6 rating for APN based on the apparent lack of talent retention 3.6 programs and undisclosed source of pulp for its newspapers. Ordinary equity 350.4 362.0 519.4 598.3 657.8 Environment Social Governance We expect APN to improve its training, development and Minority interests 235.1 248.6 41.6 44.0 46.8 Stock Local Sector retention programs and note APN's recent success in Preferred capital 0.0 0.0 0.0 0.0 0.0 attracting radio talent in Australia and New Zealand. Country Global Sector Total shareholder funds 585.5 610.5 561.0 642.3 704.6 Net debt 458.8 432.5 418.6 402.5 336.9 Source: MSCI ESG Research

Cashflow 12/12A 12/13A 12/14E 12/15E 12/16E Share Price Performance

EBIT 113.4 119.2 122.4 141.4 149.6 0.90 Net interest -43.7 -32.5 -35.8 -33.1 -28.6 Depr & Amort 33.5 33.0 34.0 37.0 37.0 0.80 Tax paid -14.5 -19.2 -22.5 -27.7 -33.3 Working capital 64.5 -37.1 -1.5 7.7 0.0 0.70 Other -65.9 24.9 -8.9 0.0 0.0 Operating cashflow 87.3 88.4 87.6 125.3 124.7 0.60 Capex -14.2 -14.3 -15.7 -16.0 -16.0 Capex - expansionary 0.0 0.0 0.0 0.0 0.0 0.50 Capex - maintenance -14.2 -14.3 -15.7 -16.0 -16.0 Acquisitions & Invest 0.40 Asset sale proceeds 179.5 1.2 66.0 0.0 0.0 Other -16.0 19.1 -245.0 -78.0 0.0 0.30 Investing cashflow 149.2 6.1 -194.7 -94.0 -16.0 16/01/2014 16/03/2014 16/05/2014 16/07/2014 16/09/2014 16/11/2014 16/01/2015 Dividends paid -22.0 0.0 0.0 -12.9 -40.3 Equity raised 0.0 0.0 128.2 0.0 0.0 APN.AX XJO Net borrowings -189.8 -60.5 10.8 -50.0 -60.0 Other -28.4 -33.7 -5.4 -2.3 -2.9 1 Month 3 Month 12 Month Financing cashflow -240.2 -94.2 133.6 -65.2 -103.1 Absolute -4.8% 5.3% 84.0% Total cashflow -3.7 0.3 26.4 -33.9 5.6 Relative -6.2% 3.9% 76.7% Adjustments 0.0 0.0 0.0 0.0 0.0 Net change in cash -3.7 0.3 26.4 -33.9 5.6 Source: Reuters 52 week trading range: 0.36-0.85 Source: Company data, CSEC estimates

APN News & Media (APN.AX / APN AU) 2 28 January 2015 Table of contents

Executive Summary 4 Australian Radio Network 6 The Radio Industry 6 Radio Network (ARN) 10 Competitive Landscape 15 Audience Share Forecasts for 2015 18 Industry Revenue Shares 19 ARN Revenue Forecasts for 2015 22 ARN EBITDA Forecasts for 2015 24 Valuation for ARN 25 Adshel and HK Outdoor 26 The Outdoor Industry 26 Market Composition 29 Competitive Environment 30 Street Furniture vs Billboards 32 The Impact of Digital Conversion 35 Adshel 40 Adshel Revenue and EBITDA Forecasts for 2015 42 Outdoor 43 HK Outdoor Revenue and EBITDA Forecasts for 2015 44 Valuation for Adshel and HK Outdoor 44 Australian Regional Media 46 The Publishing Industry 46 Competitive Environment 48 Australian Regional Media (ARM) 49 ARM Revenue and EBITDA Forecasts for 2015 53 Valuation for ARM 54 NZME 56 The New Zealand Media Market 56 NZME 60 Integration and transformation 63 NZME Revenue and EBITDA Forecasts for 2015 68 Valuation for NZME 69 APN Group Earnings and Valuation 70

APN News & Media (APN.AX / APN AU) 3 28 January 2015 Executive Summary Earnings Potential We have undertaken a detailed review of each of APN's business units. As a result we expect group EBITDA to remain reasonably stable in FY14 and deliver 14% growth in FY15. We forecast Adshel EBITDA growth of 28% in FY15 which is not included in group EBITDA (in associate income). The key drivers of our earnings forecasts are as follows:

■ Australian Radio Network: We forecast 16% and 35% EBITDA growth in FY14 and FY15 for ARN, driven by gains in audience share. The launch of KIIS in Sydney will be the primary driver of FY14 earnings whilst the launch of KIIS in Melbourne coupled with the 96FM acquisition from FXJ (subject to approvals) is likely to drive FY15.

■ Adshel: Whilst FY14 was a year of investment, we expect material earnings growth in FY15 from the Sydney Trains contract and digital conversion. Analysis of global outdoor companies suggests that digital conversion generates a 2-5x revenue uplift. This provides material upside for Adshel over an extended period of time.

■ Australian Regional Media: We expect APN to focus on reducing ARM's cost base over the next couple of years. This may include outsourcing admin functions, converting publications to digital, closing printing presses (Ballina closed in 2013 and Toowoomba to close in 2015) or partnering with another publisher on back end production. This is likely to result in a deceleration in the rate of earnings decline.

■ NZME: APN has provided guidance for NZME which signals increased investment in FY14 and FY15 as the business is transformed. We expect increased integration will ultimately result in NZME gaining a greater share of wallet (currently 14% of NZ ad spend) over time.

Figure 2: APN Segmental Revenue and EBITDA Forecasts 2013 2014F 2015F 2014 Gth 2015 Gth

Revenue Australian Radio Netw ork A$mn 149 187 252 26% 35% HK Outdoor A$mn 44 49 54 11% 10% Australian Regional Media A$mn 217 198 184 -9% -7% NZME A$mn 407 422 427 4% 1% Total reported revenue A$mn 817 856 917 5% 7% Adshel @ 100% revenues A$mn 149 152 183 2% 20%

EBITDA Australian Radio Netw ork A$mn 58 67 91 16% 35% HK Outdoor A$mn 2 4 6 122% 50% Australian Regional Media A$mn 30 24 25 -20% 4% NZME * A$mn 74 70 67 -5% -5% Australian Corporate Costs / Other A$mn -11 -9 -10 -21% 12% Total reported EBITDA A$mn 152 156 178 3% 14% Adshel @ 100% EBITDA A$mn 40 40 51 0% 28% Adshel @ 50% EBITDA A$mn 20 20 26

EBITDA Margin Australian Radio Netw ork % 39% 36% 36% HK Outdoor % 4% 8% 11% Australian Regional Media % 14% 12% 14% NZME % 18% 17% 16% Total % 19% 18% 19% Adshel % 27% 26% 28% Source: Company data, CSEC estimates. * NZME includes A$7mn corporate costs in forecasts. AUDNZD exchange rates assumed: $1.12 for 2013 and $1.06 for 2014, 2015 and High Case. Revenue excludes other revenue.

APN News & Media (APN.AX / APN AU) 4 28 January 2015

Valuation We have a Sum-of-the-Parts valuation of $1.11 per share for APN, with a stretch valuation of $1.53 per share. We have a DCF valuation of $1.10 per share (WACC 10%, terminal growth 2%). We apply a 1% ESG discount to our Sum-of-the-Parts valuation to arrive at our $1.10 per share target price for APN.

Figure 3: APN Group Valuation 2013 2014F 2015F High Case

EBITDA Australian Radio Netw ork A$mn 58 67 91 101 Adshel @ 50% EBITDA A$mn 20 20 26 30 HK Outdoor A$mn 2 4 6 6 Australian Regional Media A$mn 30 24 25 25 NZME * A$mn 74 70 67 85 Australian Corporate Costs / Other A$mn -11 -9 -10 -10

EBITDA Multiple Australian Radio Netw ork x 9.0 9.0 9.0 9.0 Adshel x 10.0 10.0 10.0 10.0 HK Outdoor x 10.0 10.0 10.0 10.0 Australian Regional Media x 4.0 4.0 4.0 6.0 NZME x 6.0 6.0 6.0 7.0 Australian Corporate Costs / Other x 9.0 9.0 9.0 9.0

Enterprise Value Australian Radio Netw ork A$mn 522 604 816 907 Adshel A$mn 200 200 255 300 HK Outdoor A$mn 18 40 60 60 Australian Regional Media A$mn 120 96 100 150 NZME A$mn 443 422 401 597 Australian Corporate Costs / Other A$mn -103 -82 -92 -92 TOTAL ENTERPRISE VALUE A$mn 1200 1280 1540 1923

Net Debt A$mn 432 418 400 350 ND/Reported EBITDA x 2.8 2.7 2.2 1.7 ND/EBITDA incl Associates x 2.7 2.5 2.1 1.6

EQUITY VALUE A$mn 1140 1573

Shares on issue mn 1029 1029

Value per share $/share $1.11 $1.53 Source: Company data, CSEC estimates. * NZME includes A$7mn corporate costs in forecasts. AUDNZD exchange rates assumed: $1.12 for 2013 and $1.06 for 2014, 2015 and High Case. At the current share price, investors are effectively getting NZME and ARM for free.

Figure 4: APN valuation bridge to the current share price and CSEC target price

$1.20 $0.29 $1.11 $1.00 $0.07 $0.04 $0.80 $0.17 $0.60 $0.54

$0.40

$0.20

$0.00 Australian Adshel @ HK Outdoor Current Share Australian NZME APN Total Radio 50% Price Regional Value Network Media Source: CSEC estimates

APN News & Media (APN.AX / APN AU) 5 28 January 2015 Australian Radio Network The Radio Industry Radio advertising spend in Australia Radio advertising has remained reasonably stable in Australia, at approximately $1bn or 7% of total ad spend. This is broadly split $700mn metro and $300mn regional. This compares with trends globally where radio ad spend remains 7% of total ad spend. From July to December 2014, radio advertising in Australia increased 5%, outperforming the broader ad market which remained flat. Radio ad spend is likely to remain strong for the next six months as weaker comps are cycled. We suspect the robustness of radio is due to a number of factors; i) Individuals are spending an increasing amount of time commuting and radio remains an effective medium to reach passengers. ii) Radio advertising continues to enjoy a large direct advertising base, which is less susceptible to changes in corporate budgets. Approximately 40% of Australian radio ad spend is purchased directly. iii) Radio is important for local businesses who want to advertise specific products to targeted audiences. iv) Local content and talent creates greater audience engagement than other forms of media. v) Radio companies are increasingly offering a broad array of services such as activation and events.

Figure 5: Australian radio agency ad spend growth (% Figure 6: Australian radio agency ad spend % of total YoY) spend 15% 9%

10% 8% 5%

7% 0%

-5% 6%

-10% Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 5% Radio All Media Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Source: SMI data. Note SMI captures agency ad spend only, which Source: SMI data represents approximately 60% of total radio ad spend in Australia.

Radio advertising spend globally Globally, radio ad spend was 7% of total ad spend as of 2013. This compares to 9% a decade earlier, with the decline fully attributed to the decline experienced in North America where radio ad spend fell from 13% in 2003 to 11% in 2013.

Figure 7: Global radio ad spend US$mn (current prices) Figure 8: Global radio ad spend % of total ad spend $25,000 14% 12% $20,000 10% $15,000 8%

$10,000 6% 4% $5,000 2% $0 0% 2001 2003 2005 2007 2009 2011 2013 2015E 2001 2003 2005 2007 2009 2011 2013 2015E North America Western Europe Central & Eastern Europe North America Western Europe Central & Eastern Europe Asia Pacific Latin America Asia Pacific Latin America Source: Zenith Optimedia, CSEC estimates Source: Zenith Optimedia, CSEC estimates

APN News & Media (APN.AX / APN AU) 6 28 January 2015

Figure 9: Global radio ad spend US$mn (current prices) Figure 10: Global radio ad spend % of total ad spend $25,000 18% 16% $20,000 14% 12% $15,000 10%

$10,000 8% 6% $5,000 4% 2% $0 0% 2001 2003 2005 2007 2009 2011 2013 2015E 2001 2003 2005 2007 2009 2011 2013 2015E Australia Hong Kong Australia Canada Hong Kong New Zealand New Zealand United Kingdom United States Source: Zenith Optimedia, CSEC estimates Source: Zenith Optimedia, CSEC estimates

Online streaming is replacing CDs and digital downloads rather than free commercial radio In the US, royalty payments from services such as and Pandora made up 21% of total US recorded music industry revenue in 2013, up from 15% in 2012 and 9% in 2011, according to the Recording Industry Association of America (refer Figure 11). The majority of this revenue came from paid subscriptions, with a minor portion from advertising. More specifically, 43% came from paid subscriptions, 19% from streaming radio services and 38% from ad-supported streaming services (refer Figure 12). Figure 13 lists the key digital music services globally. Most of the growth of online streaming at this stage is occurring at the expense of traditional physical forms of music such as CDs and downloads, rather than commercial free broadcast (refer Figure 14 to Figure 17). Similar to the replacement of in-car cassettes with CD players and iPods, we expect streaming services to be integrated into cars, however this is likely to be at the expense of physical CDs rather than free commercial radio. We expect radio advertising for the commercial networks in Australia to remain robust over the near term, as has been the experience thus far in the US and Europe. In the US, radio as a percentage of total advertising expenditure has declined 2% from a high base of 13% in 2003 to 11% in 2013. In Western Europe, radio has remained 5.5% of total advertising expenditure, despite the proliferation of streaming services.

Figure 11: US streaming revenues as a % of total music Figure 12: Global radio advertising spend as a % of total industry revenues advertising expenditure

27% On-demand ad- supported 21% streaming services Paid 38% subscription 15% services 43% 9% 7% 5% 4% 3% Streaming radio services 2007 2008 2009 2010 2011 2012 2013 1H14 19% Source: Recording Industry Association of America Source: Recording Industry Association of America

APN News & Media (APN.AX / APN AU) 7 28 January 2015

Figure 13: Global digital music services Australia , Bandit.fm, , BigPond Music, Blackberry World, , Getmusic.com.au, Google Play, , iHeart Radio, iTunes, JB Hi Fi NOW, MOG, Music Unlimited, Radio, Optus, Pandora, .com, , Samsung Music Hub, Songl, Spotify, The InSong, Vevo, VidZone, Music, YouTube

Canada 7digital, Archambault, ArtistXite, AstralRadio, Bell Mobility, Blackberry Music Store, CBS Music, , Daily Motion, Deezer, eMusic, Galaxie Mobile, HMV Digital, iTunes, Mediazoic, Motime, MTV, Music Unlimited, Naxos, Nokia Mix Radio, Qello, rara.com, Rdio, Siren Music, Slacker, , Vevo, Xbox Music, YouTube, Zik

China 1ting, Baidu, Mobile, China Telecom, Douban, Duomi, Kugou, Kuw o, Netease, Nokia Mix Radio, Tencent, Xiami

Hong Kong 1010, 3Music, CMHK Soliton, Eolasia.com, hifitrack, iTunes, KKBOX, , Musicholic, MusicOne, New sic Daily, OleGoK, Qlala, rara.com, Rdio, SmarTone iN, Soliton, Spotify, YouTube

New Zealand 7digital, Amplifier, Bandit.fm, Deezer, Fishpond, Google Play, iHeart Radio, iTunes, Music Unlimited, MySpace, Pandora, rara.com, Rdio, Spotify, The InSong, theaudience, Vevo, Vodafone New Zealand, Xbox Music, YouTube

United Kingdom 7digital, Amazing Tunes, AmazonMP3, ArtistXite, Beatport, , Blinkbox, Bloom.fm, Boomkat, Classical Archives, Classical.com, Classics Online, Daily Motion, Deezer, Drum & Bass Arena, eMusic, Fairsharemusic, Google Play, Highresaudio, Historic Recordings, HMV Digital, Imodow nload, iTunes, Jamster, , Junodow nload, last.fm, Linn Records, MixRadio (Nokia), Mobile Chilli, MSN, MTV, Music Unlimited, Musicovery, MUZU.TV, My Music, Anyw here, MySpace, , Naxos, Nectar Music Store, O2 , Orange, Play.com, Pure Music, Psonar, , rara.com, Rdio, Running Trax, Sainsburys, Samsung Music Hub, Spotify, Textatrack UK, The Classical Shop, trackitdow n, Traxsource, TuneTribe, Vevo, Vidzone, Virgin, Xbox Music, Yahoo! Music, YouTube

United States 7digital, Acoustic Sounds, Alltel Wireless, AmazonMP3, AOL Radio Plus, Arkiv Music, ArtistXite, AT&T Wireless, Beatport, , Blackberry World, CD Universe, ChristianBook.com, Classical Archives, Cricket, Daily Motion, eMusic, Free All Music, Freegal Music, Google Play, Guvera, Hastings, Hdtracks, Hulu, Insound, iOldies, iTunes, iTunes Radio, Liquid Spins, MetroPCS, MTV, Music Choice, Music Unlimited, MusicGivz, Muve Music, MySpace, Myxer, Nokia Mix Radio, Nokia+, Pro Studio Masters, Qello, rara.com, Rdio, Rhapsody, Samsung Music Hub, Slacker, Spotify, Sprint, TheOverflow , T-Mobile, Verizon, Wireless, Vevo, Virgin, Xbox Music, Yahoo! Music, YouTube, ZUUS Source: IFPI

Figure 14: US total music industry revenues by product Figure 15: US music unit sales 2014 growth (% YoY) US$mn (inflation adjusted in 2013 dollars) $15000mn 70% 60% 50% $10000mn 40% 30% 20% $5000mn 10% 0% -10% $0mn 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -20% On-Demand Streaming (Ad-Supported) Paid Subscriptions SoundExchange Distributions On-Demand On-Demand Digital Album Digital Track CD Album Vinyl Album CD CD Single Cassette Streams Streams Sales Sales Sales Sales Cassette Single LP/EP Music Video Other Tapes Download Single Download Album (Audio) (Music Video) Kiosk Download Music Video Synchronisation Source: Recording Industry Association of America, CSEC estimates Source: Nielsen, CSEC estimates

APN News & Media (APN.AX / APN AU) 8 28 January 2015

Figure 16: US streaming revenues US$mn (inflation Figure 17: US download revenues US$mn (inflation adjusted in 2013 dollars) adjusted in 2013 dollars) $1600mn $3500mn

$1400mn $3000mn

$1200mn $2500mn $1000mn $2000mn $800mn $1500mn $600mn $1000mn $400mn $500mn $200mn

$0mn $0mn 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 On-Demand Streaming (Ad-Supported) Paid Subscriptions SoundExchange Distributions Download Single Download Album Source: Recording Industry Association of America, CSEC estimates Source: Recording Industry Association of America, CSEC estimates

The Australian commercial radio industry Australian Radio Network (owned by APN News & Media), Southern Cross Media Group and Entertainment are the key FM commercial station owners. and Macquarie Radio Network are the key AM commercial station owners. Figure 18 highlights the commercial stations in the primary five metropolitan areas.

Figure 18: Australian five city metropolitan commercial radio stations Station Owner Format Station Owner Format Sydney 2DAY SXL Contemporary B105 SXL Contemporary SXL Classic rock Triple M SXL Classic rock WSFM ARN Classic hits Nova Nova Contemporary KIIS ARN Contemporary MIX 97.3 ARN/Nova Classic hits Nova Nova Contemporary 4KQ ARN Classic hits Smooth Nova Classic hits 4BH FXJ Easy listening 2CH MRN Easy listening 4BC FXJ New s/Talk 2GB MRN New s/Talk 2SM Broadcast Operations Easy listening 2UE FXJ New s/Talk SAFM SXL Contemporary 2KY TAB - Channel Sport/Talk Triple M SXL Classic rock MIX ARN Contemporary Melbourne 5DN ARN New s/Talk FOX SXL Contemporary 5AA Nova New s/Talk Triple M SXL Classic rock Nova Nova Contemporary GOLD ARN Classic hits MIX ARN Classic hits Nova Nova Contemporary MIX SXL Classic hits Smooth Nova Classic hits 92.9 SXL Contemporary 3AW FXJ New s/Talk Nova Nova/ARN Contemporary FXJ Easy listening 96FM ARN* Classic rock 3MP PNW Talk 6PR FXJ New s talk SEN PNW Sport/Talk Forever Classic 61X Capital Radio Easy listening Sport 927 3UZ Sport/Talk Source: Commercial . *ARN announced the acquisition of 96FM from FXJ on 22 Dec 2014 for $78mn. The acquisition is subject to FIRB approval and due for completion in February 2015.

APN News & Media (APN.AX / APN AU) 9 28 January 2015

The Australian Radio Network (ARN) Overview of ARN ARN owns 12 radio stations in Australia and broadcasts across all five main metropolitan markets to over 4 million people per week. ARN has four core brands: KIIS, MixFM, WSFM/Gold and . The network has a 50% share of Perth's Nova FM and Brisbane's 97.3FM with as well as a 50% share of 's 104.7FM and MixFM with Southern Cross Media. On 22 December 2014, ARN announced the acquisition of 96FM from Fairfax Media for $78mn. The acquisition is subject to FIRB approval and due for completion in February 2015. This will take ARN to 13 radio stations in Australia.

■ KIIS FM was launched on 20 January 2014 in Sydney, anchored by Kyle & in breakfast. The station plays contemporary hits and targets females 25-44. ARN will rebrand MIX FM in Melbourne to KIIS FM early 2015.

■ MIXFM is a variety station playing classic hits and targeting females 25-44. MIX FM is represented in Melbourne (soon to be rebranded KIIS), Brisbane, Adelaide and Canberra.

■ WSFM/Gold/Classic Hits is a classic hits station targeting a Gen X audience. The station is represented in Sydney (WSFM), Melbourne (Gold 104.3), Brisbane (4KQ) and Adelaide ().

■ The Edge is a youth station in Katoomba, NSW and plays Hip Hop, R&B and Dance.

■ iHeart Radio is a digital music service available on web and mobile that combines live radio streaming with custom music. It is free and has 20 million registered users globally. It launched in Australia in July 2013 (web) and September 2013 (mobile).

Figure 19: ARN stations Station Ownership Format Demographic Talent Wkly audience Audience share 10+ Sydney WSFM 101.7 100% Classic hits Gen X 40-54 Jonesy & Amanda 764,000 8.9% KIIS 1065 (previously MIX) 100% Contemporary (from Female 25-44 Kyle & Jackie O, Hughsey & Kate 887,000 8.6% classic hits) ( in 2015)

Melbourne GOLD 104.3 100% Classic hits Gen X 40-54 Brig & Lehmo, Jonesy & Amanda 743,000 8.0% KIIS 101.1 (to rebrand from MIX 100% Contemporary (from Female 25-44 Matt & Jane (new in 2015), 875,000 6.3% early 2015) classic hits) Hughsey & Kate (new in 2015), Kyle & Jackie O

Brisbane GOLD 4KQ 693AM 100% Classic hits Gen X 40-54 Laurel Gary & Mark, Paul Kennedy 207,000 7.1% MIX 97.3 50% (JV w ith Nova) Classic hits Female 25-44 Robin Terry & Bob, Campo, Kyle & 515,000 12.3% Jackie O

Adelaide Cruise 1323 (previously 5DN) 100% New s/Talk Gen X 40-54 John Dean, Mark Elliston 161,000 8.1% MIX 102.3 100% Classic hits Female 25-44 Jodie, Soda and Snow y, Kyle & 332,000 15.5% Jackie O

Perth Nova 50% (JV w ith Nova) Contemporary Female 25-44 Nathan, Nat & Shaun, Kate, Tim & 525,000 12.6% Marty, Fitzy & Wipper, Smallzy 96FM 100% * Classic rock Male 25-44 Blackers, Carmen & Fitzi, Darren 303,000 10.2% de Mello, Alice Cooper

Canberra MIX 106.3 50% (JV w ith SXL) Classic hits Female 25-44 Kristen & Rod 15.1% 2DayFM 104.7 50% (JV w ith SXL) Contemporary Female 25-44 Scotty & Nige, Dan & Maz 17.0%

Katoomba, NSW The Edge 100% R&B Youth Source: Commercial Radio Australia, GfK, Company data. *ARN announced the acquisition of 96FM from FXJ on 22 December 2014 for $78mn. The acquisition is subject to FIRB approval and due for completion in February 2015.

APN News & Media (APN.AX / APN AU) 10 28 January 2015

The impact of KIIS rebranding in Sydney ARN launched the KIIS FM brand on 20 January 2014 to replace the MIX FM brand in Sydney. KIIS FM was anchored by Kyle & Jackie O in breakfast and Rosso in drive. The rebranding had an immediate and sustained positive impact on ARN's audience share in the Sydney market:

■ The rebranded KIIS FM station soared 5 audience share points to 14% in the first radio survey of 2014 due to a refreshed station with contemporary music and talent. KIIS breakfast with Kyle & Jackie O increased 9 points to 15%, taking it to the #1 position for FM radio. Drive also benefited, up 5 points to 14%. KIIS FM has retained its audience share position throughout 2014, ending the year at 14% share overall (10+), 18% in breakfast and 14% in drive. The majority of KIIS FM's gains were at the expense of SXL's Today FM brand (refer charts below).

■ WSFM benefited from the rebranding of KIIS FM as it reduced the direct competition in the classic hits space (where MIX was competing). In survey 1, WSFM increased 3 points to 13%. Breakfast and drive also lifted in share, up 4% and 1%, respectively. WSFM remained strong throughout 2014 and finished the year at 14% share overall (10+), 15% in breakfast with Jonesy & Amanda and 13% in drive.

■ ARN's combined audience share (KIIS & WSFM) increased 8 points in survey 1 2014 from 18% to 26%. The network ended the year in an even stronger position at 28% audience share, placing it in the #1 position. Nova finished the year with 26% share (up from 21% in the pcp) and SXL with 14% share (down from 22% share in the pcp).

Figure 20: Sydney radio revenue weighted commercial Figure 21: Sydney radio revenue weighted commercial audience share by network (10+) audience share by station (10+) 40% 18% KIIS launch 35% Jan 2014 16% +8pts 14% 30% 12% 25% 10% 20% 8% 15% 6%

10% 4% KIIS launch also boosts WSFM 5% 2% 0% 0% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 SXL APN Nova FXJ MRN 2DAY (SXL) TripleM (SXL) WSFM (ARN) KIIS (ARN) Nova (Nova) Smooth (Nova) Source: Nielsen, Commercial Radio Australia, CSEC estimates Source: Nielsen, Commercial Radio Australia, CSEC estimates

Figure 22: Sydney commercial audience share – Breakfast Figure 23: Sydney commercial audience share – Drive 40% 40% KIIS launch Jan 2014 KIIS launch Jan 35% breakfast show +14pts 35% 2014 drive +6pts

30% 30%

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15% 15%

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0% 0% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 SXL APN Nova FXJ MRN SXL APN Nova FXJ MRN Source: Nielsen, Commercial Radio Australia, CSEC estimates Source: Nielsen, Commercial Radio Australia, CSEC estimates

APN News & Media (APN.AX / APN AU) 11 28 January 2015

MIX Melbourne to be rebranded KIIS early 2015 ARN will rebrand the MIX FM station in Melbourne to KIIS FM in early 2015. Matt Tilly (formerly Triple M drive show host for SXL) will replace and, alongside Jane Hall, will form the new breakfast team. and Kate Langbroek (formerly Nova) will replace Rosso in drive and we expect Kyle & Jackie O to continue to be broadcast in the evening. We expect the rebranding to have a positive impact in Melbourne, albeit more muted than what was experienced in Sydney.

■ The FM radio stations in Melbourne are very similar to those in Sydney. SXL owns FOX and Triple M in Melbourne (2Day and Triple M in Sydney). Nova Entertainment owns Nova and Smooth (same as Sydney). APN will have KIIS (to replace MIX) and Gold (similar to WSFM in Sydney). There has also been a high correlation between the Sydney and Melbourne markets in terms of audience share (refer Figure 28).

■ The newly rebranded KIIS FM in Melbourne is likely to experience an injection of fresh talent and contemporary music, similar to KIIS in Sydney. The performance of the station will be impacted by the new music and branding, as well as the introduction of Matt Tilly to breakfast (replacing Chrissie Swan) and Hughsey & Kate to drive (replacing Rosso). Whilst we do not expect Matt & Jane to achieve the same escalation in share points as seen with Kyle & Jackie O, we expect a modest improvement over the course of the year. They will be competing against Meshel & Tommy from Nova and Fifi & Dave from FOX. We are also cognisant of competitor changes in drive, with and a TBC co-host at Triple M, Hamish & Andy at FOX from July 2015 ( to host in 1H15) and the continuation of , Marty Sheargold and Tim Blackwell at Nova. We forecast a 2 point uplift in audience share at KIIS FM in Melbourne in 2015. This would take the station to a 12% audience share for 10+.

■ Gold 104.3 is likely to benefit from reduced competition in classic hits (where MIX was competing). We forecast a 2 point uplift in audience share. This would take the station to a 14% audience share for 10+.

■ As a result we expect ARN's combined audience share (KIIS & Gold) to increase 4 points in 2015 from 22% to 26% (refer forecasts in Figure 29).

Figure 24: Melbourne radio revenue weighted commercial Figure 25: Melbourne radio revenue weighted commercial audience share by network (10+) audience share by station (10+) 40% 25% 35% 20% 30%

25% 15%

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10% 5%

5% 0% 0% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 FOX (SXL) TripleM (SXL) GOLD (ARN) SXL APN Nova FXJ MIX (ARN -soon KIIS) Nova (Nova) Smooth (Nova) Source: Nielsen, Commercial Radio Australia, CSEC estimates Source: Nielsen, Commercial Radio Australia, CSEC estimates

APN News & Media (APN.AX / APN AU) 12 28 January 2015

Figure 26: Melbourne commercial audience share – Figure 27: Melbourne commercial audience share – Drive Breakfast 40% 40% 35% 35%

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0% 0% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 SXL APN Nova FXJ SXL APN Nova FXJ Source: Nielsen, Commercial Radio Australia, CSEC estimates Source: Nielsen, Commercial Radio Australia, CSEC estimates

Figure 28: Melbourne and Sydney market overlay (strong Figure 29: Melbourne radio revenue weighted commercial correlation when Sydney pushed one year out) audience share by network (10+) – 2015 Forecast 35% 33% 40% Forecast 35% 30% 28% 30%

25% 23% 25% 20% 20% 18% 15%

10% 15% 13% 5%

10% 8% 0% 2010 2011 2012 2013 2014 2015F 2010 2011 2012 2013 2014 2015 SXL (Melbourne LHS) APN (Melbourne LHS) Nova (Melbourne LHS) SXL APN Nova FXJ SXL (Sydney+1yr RHS) APN (Sydney+1yr RHS) Nova (Sydney+1yr RHS) Source: Nielsen, Commercial Radio Australia, CSEC estimates Source: Nielsen, Commercial Radio Australia, CSEC estimates

96FM acquisition in Perth APN announced the acquisition of 96FM from Fairfax Media for $78mn on 22 December 2014. The acquisition will be funded through cash and existing debt facilities and is subject to FIRB approval. The expected completion date is February 2015. 96FM is a classic rock station in Perth targeting 25-44 year old males. Presenters include Blackers, Carmen and Fitzi for breakfast, Darren de Mello for drive and Alice Cooper in the evening. There is no direct competitor to 96FM. Nova (JV ARN/Nova) and 92.9 (SXL) are contemporary music stations playing the latest hits. MIX (SXL) plays classic hits and Forever Classic (Capital Radio) plays easy listening music. 6PR (FXJ) is a news talk station. 96FM is the #3 station in Perth with 18% audience share, behind MIX with 24% and Nova (ARN/Nova JV) with 21%. We estimate the Perth radio advertising market is approximately $110mn, which would imply 96FM generates $20-24mn revenue on a 1.0-1.2x power ratio. On a 35-40% EBITDA margin this implies $7-10mn EBITDA or a transaction multiple of 8-11x EBITDA (average transaction multiple 9.5x EBITDA). Following the acquisition, ARN will have exposure to 39% audience share in the Perth market, via 96FM and through its JV with Nova. This places ARN in the equal first position with SXL. As a result, we expect ARN's bargaining power with advertisers to increase as it will now have a national presence and strong positions in each of the five metropolitan markets. We expect synergies to flow from the 96FM acquisition for ARN.

APN News & Media (APN.AX / APN AU) 13 28 January 2015

Figure 30: Perth radio revenue weighted commercial Figure 31: Perth radio revenue weighted commercial audience share by station (10+) audience share by network (10+) – 2015 Forecast 30% 60% Forecast 25% 50%

20% 40% 15% 30% 10% 20% 5%

0% 10% 2010 2011 2012 2013 2014 MIX (SXL) 2Day 92.9 (SXL) 0% Nova (Nova/ARN) 96FM (ARN from 2015, fmly FXJ) 2010 2011 2012 2013 2014 2015 6PR (FXJ) 6IX (Capital) SXL APN & APN/Nova Nova/APN FXJ Capital Source: Nielsen, Commercial Radio Australia, CSEC estimates Source: Nielsen, Commercial Radio Australia, CSEC estimates

Brisbane, Adelaide and other markets Reasonably strong position in Brisbane ARN operates a JV with Nova in Brisbane for the MIX station. It also owns the Gold 4KQ station. MIX and Nova are the two strongest stations in Brisbane, with approximately 20% audience share each. SXL owns the #3 and #4 stations: B105 and Triple M. ARN has the #5 station in Gold 4KQ which has 12% audience share. We estimate the Brisbane radio advertising market is approximately $95mn.

Figure 32: Brisbane radio revenue weighted commercial Figure 33: Brisbane radio revenue weighted commercial audience share by network (10+) audience share by station (10+) 40% 30% 35% 25% 30% 20% 25%

20% 15%

15% 10% 10% 5% 5%

0% 0% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 SXL APN & APN/Nova Nova FXJ B105 (SXL) TripleM (SXL) GOLD 4KQ (ARN) Mix 97.3 (ARN/Nova) Nova (Nova) Source: Nielsen, Commercial Radio Australia, CSEC estimates Source: Nielsen, Commercial Radio Australia, CSEC estimates Dominant in Adelaide ARN owns the leading ratio station in Adelaide, MIX FM. It also owns Cruise 1323 (previously 5DN). MIX has 24% audience share and Cruise 1323 has 12%. We estimate the Adelaide radio advertising market is approximately $65mn.

APN News & Media (APN.AX / APN AU) 14 28 January 2015

Figure 34: Adelaide radio revenue weighted commercial Figure 35: Adelaide radio revenue weighted commercial audience share by network (10+) audience share by station (10+) 45% 30% 40% 25% 35% 20% 30% 25% 15%

20% 10% 15% 5% 10% 0% 5% 2010 2011 2012 2013 2014 0% SAFM (SXL) TripleM (SXL) Mix (ARN) 2010 2011 2012 2013 2014 Cruise1323 (ARN) 5AA (Nova) Nova (Nova) SXL APN Nova Source: Nielsen, Commercial Radio Australia, CSEC estimates Source: Nielsen, Commercial Radio Australia, CSEC estimates Other markets ARN has two JVs in Canberra with SXL: MIX and 2Day FM. It also owns a station in Katoomba: The Edge.

Competitive Landscape Rebranding, mergers and talent changes at competing radio networks There will be several changes to ARN's key competitors in 2015 that are likely to have a meaningful impact on audience trends throughout the year:

■ SXL is launching the Today's and introducing new talent.

■ Nova Entertainment is likely to continue its momentum.

■ FXJ and MRN have announced a merger, expected to be completed in March 2015, subject to shareholder and regulatory approval. MRN will divest 2CH and Macquarie Regional Radio to comply with regulatory requirements.

SXL rebranding to Hit FM and introducing new talent SXL will launch a new brand in 2015 called Today's Hit Network. Whilst there will be a rebranding in each metropolitan area, some of the former names will remain. Sydney, Melbourne and Brisbane will retain their names whilst Adelaide and Perth will be rebranded Hit FM. In Sydney 2Day FM will become 2Day Hit FM, in Melbourne FOX FM will become FOX Hit FM, in Brisbane B105 FM will become B105 Hit FM, in Adelaide SAFM will become Hit 107 FM and in Perth 92.9 will become Hit 92.9 FM. SXL will also make changes to its presenters. In Sydney, Dan & Maz will replace Jules, Merrick, and in the breakfast slot for 2Day Hit. Hamish & Andy will return to drive nationally at 2Day Hit from July 2015, with Jules Lund hosting for the first half of the year. Merrick Watts will move to Triple M to host drive with a to-be-confirmed co-host, replacing Joe Hildebrand and Matt Tilley (who moved to ARN). We expect the changes at SXL to stabilise its audience share position in 1H15, with an improvement likely in 2H15 when Hamish & Andy return, albeit they will be up against formidable competitors in Hughsey & Kate at KIIS. Refer Figure 37.

APN News & Media (APN.AX / APN AU) 15 28 January 2015

Figure 36: SXL's new branding for Today's Hit Network Figure 37: Sydney radio revenue weighted commercial audience share by network (10+) – 2015 Forecast 40% Forecast 35%

30%

25%

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0% 2010 2011 2012 2013 2014 2015 SXL APN Nova FXJ MRN 2CH Source: Radio Today Source: Nielsen, Commercial Radio Australia, CSEC estimates

Figure 38: SXL stations Station Ownership Format Demographic Talent Wkly audience Audience share 10+ Sydney 2DAY Hit 100% Contemporary Female 25-44 Dan & Maz (to replace Jules, Merrick 559,000 3.5% and Sophie in 2015), Hamish & Andy (in drive from July 2015, Jules for 1H15) Triple M 100% Classic rock Male 25-44 Matty Johns, MG & Gus, Merrick Watts 559,000 5.4% & TBC (Matt Tilley moved to ARN)

Melbourne FOX Hit 100% Contemporary Female 25-44 Fifi & Dave, Hamish & Andy (in drive 1,022,000 8.5% from July 2015, Jules for 1H15) Triple M 100% Classic rock Male 25-44 Eddie McGuire, & Luke 630,000 6.8% Darcy, Merrick Watts & TBC (Matt Tilley moved to ARN)

Brisbane B105 Hit 100% Contemporary Female 25-44 Labby, Stav & Abby, Hamish & Andy 486,000 9.7% Triple M 100% Classic rock Male 25-44 Marto, Michelle & Ed, Merrick Watts & 333,000 8.8% TBC (Matt Tilley moved to ARN)

Adelaide Hit (formerly SAFM) 100% Contemporary Female 25-44 Amos & Dani, Hamish & Andy 224,000 8.1% Triple M 100% Classic rock Male 25-44 Roo & Ditts, Jars & Louie 210,000 10.8%

Perth Hit (to rebrand 2015 100% Contemporary Female 25-44 Heidi, Will & Woody, Hamish & Andy 416,000 8.2% from 92.9) MIX 100% Classic hits Gen X 40-54 Clairsy, Shane & Kymba, Lisa & Tim 492,000 13.8%

Canberra 2DayFM 104.7 50% (JV w ith ARN) Contemporary Female 25-44 Scotty & Nige, Dan & Maz 17.0% MIX 106.3 50% (JV w ith ARN) Classic hits Female 25-44 Kristen & Rod 15.1% Source: Commercial Radio Australia, GfK, Company data

Nova Entertainment experiencing good momentum Nova has experienced strong momentum in audience share over the past several years at Nova FM and Smooth FM (refer Figure 40), which has put the network in a solid position overall (refer Figure 39). We expect Nova to remain a formidable network in 2015 with its strong local breakfast teams and national drive team Kate Ritchie, Tim & Marty.

APN News & Media (APN.AX / APN AU) 16 28 January 2015

Figure 39: Australian radio revenue weighted commercial Figure 40: Nova and Smooth Australian radio revenue audience share by network (10+) weighted commercial audience share (10+) 35% 25%

30% 20% 25% 15% 20%

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10% 5%

5% 0% 0% 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 Today Hit Triple M KIIS/Mix SXL APN Nova FXJ MRN WSFM/Gold Nova Smooth Source: Nielsen, Commercial Radio Australia, CSEC estimates Source: Nielsen, Commercial Radio Australia, CSEC estimates

Figure 41: Nova Entertainment stations Station Ownership Format Demographic Talent Wkly audience Audience share 10+ Sydney % Contemporary Female 25-44 Fitzy & Wippa, Kate, Tim & Marty, Smallzy 969,000 7.5% Smooth 100% Classic hits Female 25-44 Bogart Torelli, Byron Webb, Mel Doyle, 667,000 6.6% Richard Wilkins & David Campbell

Melbourne Nova 100% Contemporary Female 25-44 Meshel & Tommy, Kate, Tim & Marty, Smallzy 954,000 7.8% Smooth 100% Classic hits Female 25-44 Mike Perso, Byron Webb 630,000 7.4%

Brisbane Nova Nova Contemporary Female 25-44 Ash, Kip & Luttsy, Kate, Tim & Marty, Smallzy 554,000 13.5% MIX 97.3 50% (JV w ith ARN) Classic hits Gen X 40-54 Robin Terry & Bob, Campo, Kyle & Jackie O 515,000 12.3%

Adelaide Nova 100% Contemporary Female 25-44 Lew is & Low e, Kate, Tim & Marty, Smallzy 300,000 11.2% 5AA 100% New s/Talk Gen X 40-54 Dave, Mark & Jane, Row ey & Mark 175,000 11.4%

Perth Nova 50% (JV w ith ARN) Contemporary Female 25-44 Nathan, Nat & Shaun, Kate, Tim & Marty, Fitzy 525,000 12.6% & Wipper, Smallzy Source: Commercial Radio Australia, GfK, Company data

FXJ and MRN merger Fairfax Media and Macquarie Radio Network announced on 22 December 2014 the merger of Fairfax Radio and Macquarie Radio. MRN will acquire 100% of Fairfax Radio with FXJ receiving a 54.5% stake in MRN and $18mn cash. The acquisition is expected to be completed in March 2015 and is subject to shareholder and regulatory approval. The merger will result in a national Talk radio network with MRN's 2GB station in Sydney merging with FXJ's 2UE station in Sydney, 3AW and Magic in Melbourne, 4BC and Magic in Brisbane and 6PR in Perth. MRN will divest its 2CH easy listening station in Sydney and Macquarie Regional Radio network to comply with regulatory requirements. Across key metropolitan cities;

■ Sydney: A combined FXJ/MRN will result in 28% audience share, with 2GB at 19% and 2UE at 9%. 2CH at 7% audience share will be divested. 2GB is the leading news/talk station with Alan Jones hosting breakfast, hosting the morning show, Ben Fordham in drive and Steve Price in the evening. 2UE is the #2 news/talk station in Sydney with Andrew Voss hosting breakfast, hosting the morning show, Luke Bona in drive and Mike Jeffreys in the evening. Refer Figure 42 and Figure 43.

APN News & Media (APN.AX / APN AU) 17 28 January 2015

■ Melbourne: FXJ has 29% audience share with 3AW 19% and Magic 8%. 3AW is Melbourne's leading news/talk station whilst Magic is an easy listening station.

■ Brisbane: FXJ has 16% audience share with 4BC 8% and Magic 8%. 4BC is Brisbane's leading news/talk station whilst Magic is an easy listening station.

■ Perth: Following the sale of 96FM to ARN, FXJ will have an audience share of 13% with 6PR. 6PR is Perth's leading news/talk station. This is likely to result in a national audience share figure of approximately 22% in 2015.

Figure 42: Sydney radio revenue weighted commercial Figure 43: Sydney radio revenue weighted commercial audience share by network (10+) audience share by network (10+) – 2015 Forecast 30% 40% Forecast 35% 25% 30% 20% 25%

15% 20%

10% 15% 10% 5% 5%

0% 0% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2015 2UE 2GB 2CH SXL APN Nova FXJ MRN 2CH

Source: Nielsen, Commercial Radio Australia, CSEC estimates Source: Nielsen, Commercial Radio Australia, CSEC estimates

Audience Share Forecasts for 2015 Likely trends in national audience share for 2015 Figure 44 highlights our national audience share forecasts for 2015. We have made the following assumptions:

■ In Sydney; we assume ARN gains 1% audience share as a result of Hughsey & Kate taking over drive. We assume SXL recoups 1.5% audience share in 2H15 as a result of Hamish & Andy taking over drive on Today's Hit Network and some improvement from Dan & Maz in breakfast. We assume Nova Entertainment maintains its audience share. The new MRN following the merger with FXJ is likely to result in a 1% share uplift with the addition of 2UE to 2GB and divestment of 2CH. Refer Figure 45.

■ In Melbourne; we assume ARN gains 4% audience share as a result of the rebranding to KIIS, introducing Matt & Jane to breakfast and Hughsey & Kate to drive, which is likely to boost KIIS as well as Gold. We assume SXL declines 4% share due to increased competition from KIIS, with a larger decline in 1H15 offset by the introduction of Hamish & Andy in drive for 2H15. We assume Nova Entertainment and the new MRN remain reasonably stable. Refer Figure 46.

■ In Perth; we assume APN gains considerable share as a result of the 96FM acquisition. We assume SXL maintains its share and the new MRN will only report the 6PR audience share. Refer Figure 47.

■ In Brisbane and Adelaide; we assume shares remain broadly stable, despite the rebranding by SXL to Hit FM. Whilst the rebranding is likely to refresh the stations, we do not expect a material impact due to the music and talent remaining largely unchanged.

APN News & Media (APN.AX / APN AU) 18 28 January 2015

As a result of the above assumptions, we expect the networks to report the following average audience shares across 2015 (refer Figure 44):

■ ARN: 28% share or +3ppt

■ SXL: 24% share or -1ppt

■ Nova Entertainment: 24% share or +1ppt

■ The new MRN: 22% share or +13ppt

Figure 44: Australian radio revenue weighted commercial Figure 45: Sydney radio revenue weighted commercial audience share by network (10+) – 2015 Forecast audience share by network (10+) – 2015 Forecast 35% 40% Forecast Forecast 30% 35% 30% 25% 25% 20% 20%

15% 15%

10% 10%

5% 5% 0% 0% 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 SXL APN Nova FXJ MRN 2CH SXL APN Nova FXJ MRN Source: Nielsen, Commercial Radio Australia, CSEC estimates Source: Nielsen, Commercial Radio Australia, CSEC estimates

Figure 46: Melbourne radio revenue weighted commercial Figure 47: Perth radio revenue weighted commercial audience share by network (10+) – 2015 Forecast audience share by network (10+) – 2015 Forecast 40% 60% Forecast 35% Forecast 50% 30% 40% 25%

20% 30%

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0% 0% 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 SXL APN Nova FXJ SXL APN & APN/Nova Nova/APN FXJ Capital Source: Nielsen, Commercial Radio Australia, CSEC estimates Source: Nielsen, Commercial Radio Australia, CSEC estimates

Industry Revenue Shares Industry revenues and revenue shares In CY2013 the Australian commercial metropolitan radio advertising industry was approximately $700mn, with agency revenues comprising 2/3 and direct revenues comprising 1/3. Refer Figure 48.

■ SXL metropolitan radio reported the largest revenue share with $270mn or 37% revenue share. This compares to its audience share of 28% in CY2013 (refer Figure 49). We suspect the main reason for SXL's strong power ratio, or achieving greater revenue share relative to its audience share, is due to its national presence (having radio stations in each major metropolitan area Sydney, Melbourne, Brisbane, Adelaide

APN News & Media (APN.AX / APN AU) 19 28 January 2015

and Perth) and its strong historical track record (SXL has been #1 in terms of audience share for over a decade) which has resonated strongly with agency buyers (we suspect 2/3 of SXL revenues are derived through agencies, a much higher proportion relative to peers). Given the decline in SXL's audience share in CY2014 as well as the announcement of recent M&A which will put ARN and the new MRN/FXJ on a national footing, we expect SXL's revenue share to decline and reflect more closely its audience share position.

■ Nova Entertainment on our estimates delivered approximately $155mn revenue or 21% revenue share. This compares to its audience share of 22% in CY2013 (refer Figure 49). Strong branding, talent and effective integration and cross-selling has generated good momentum for Nova Entertainment which we expect to continue. This is likely to translate into higher revenue and revenue share.

■ ARN reported $149mn or 20% revenue share. This compares to its audience share of 21% in CY2013 (refer Figure 49). Given ARN's material gains in audience share in CY2014 coupled with recent announcements of the KIIS rebranding in Melbourne, new talent line-up in Melbourne breakfast and drive as well as the 96FM acquisition in Perth (which will give ARN a national presence), we expect ARN's revenue and revenue share to materially improve in CY2015.

■ FXJ reported $105mn or 14% revenue share. This compares to its audience share of 19% in CY2013 (refer Figure 49). We assume the MRN/FXJ merger will be approved by shareholders and the regulator and as such, forecast one merged entity under the MRN brand.

■ MRN reported $57mn or 8% revenue share. This compares to its audience share of 9% in CY2013 (refer Figure 49). The merged MRN/FXJ entity, if approved, is likely to report a revenue share of approximately 22% in our view, with synergies from additional stations as well as having a national news/talk presence somewhat offset by the divestment of 2CH.

Figure 48: Australian commercial metropolitan radio Figure 49: Australian commercial metropolitan radio advertising revenues for CY2013 – Agency / Direct advertising revenues for CY2013 by company – Agency / Direct (LHS) and Revenue share vs Audience share (RHS) $450 mn $300 mn 40% $400 mn 35% $250 mn $350 mn 30% $300 mn $200 mn 25% $250 mn $150 mn 20% $200 mn 15% $150 mn $100 mn $100 mn 10% $50 mn $50 mn 5% $0 mn $0 mn 0% Agency Rev Direct Rev SXL Nova APN FXJ MRN

SXL Nova APN FXJ MRN Agency Rev Direct Rev Audience share Revenue share

Source: Company data, SMI, CEASA, Deloitte, CSEC estimates. Source: Company data, SMI, CEASA, Deloitte, CSEC estimates. Note: revenues are based on 2013 calendar year. Note: revenues are based on calendar year and Nova Entertainment revenues have been estimated by CSEC.

Industry revenue trends SXL has remained the market leader in terms of revenue share over the past five years. It has the largest proportion of revenues purchased via agencies, as shown in Figure 50. ARN appears to have slightly increased its agency revenues (historically more weighted to

APN News & Media (APN.AX / APN AU) 20 28 January 2015 direct revenues relative to peers) whilst Nova Entertainment appears to have been increasing its direct revenues. Whilst SXL continues to record the highest revenue share, this share has been decreasing in recent years, in line with the reduction in audience share (refer Figure 51). SMI data shows that commercial radio agency revenues grew 5% from July to December 2014. ARN reported particularly strong agency growth of +53% over this period (refer Figure 52). Nova also reported strong growth +25% whilst SXL experienced a -17% decline. In revenue terms, ARN recorded an additional $18mn agency revenues in 2HCY2014, Nova recorded an additional $11mn and SXL recorded -$17mn less agency revenues than the pcp (refer Figure 53). We suspect a similar trend occurred in direct revenues.

Figure 50: ARN, SXL and Nova calendarised metropolitan Figure 51: ARN, SXL and Nova metropolitan revenue and radio revenues – Agency / Direct – 2014 estimate commercial audience share – 2014 estimate $350 mn 40% $300mn $300 mn Forecast 35% $250 mn $250mn $200 mn 30% $150 mn 25% $200mn $100 mn $50 mn 20% $150mn $0 mn 15%

10% $100mn 2010 2011 2012 2013 2014F SXL Ratings Nova Ratings APN Ratings Agency Rev Direct Rev SXL Metro CY Rev Nova CY Rev APN CY Rev

Source: Company data, Nielsen, Commercial Radio Australia, SMI, Source: Company data, Nielsen, Commercial Radio Australia, SMI, CSEC estimates. Note: SXL data is for metropolitan radio only and CSEC estimates. Note: SXL data is for metropolitan radio only and excludes regional radio revenues. Nova Entertainment revenues have excludes regional radio revenues. Nova Entertainment revenues have been estimated by CSEC. 2014 Agency revenues are based on SMI been estimated by CSEC. data. 2014 Direct revenues have been estimated.

Figure 52: ARN, SXL and Nova monthly agency revenue Figure 53: ARN, SXL and Nova agency revenues per SMI growth (% YoY) 80% $120 mn

60% $100 mn

40% $80 mn

20% $60 mn

0% $40 mn

-20% $20 mn

-40% $0 mn Jan 2012 Jul 2012 Jan 2013 Jul 2013 Jan 2014 Jul 2014 1HCY2013 2HCY2013 1HCY2014 2HCY2014

SXL Nova Entertainment APN SXL Nova APN

Source: SMI Source: SMI

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ARN Revenue Forecasts for 2015 ARN revenue expectations for 2H14 ARN delivered an additional $8mn revenue in 1H14 to $81mn. We estimate $4mn was derived from agencies and $4mn from direct or other streams. We forecast a $30mn increase in 2H14 revenues to $106mn. SMI indicated $18mn from agencies and we estimate $12mn from direct or other streams. This will result in a $38mn revenue increase for ARN in FY14 or a total of $187mn radio revenue, up 26% on pcp. The table below highlights the revenue composition by capital city.

Figure 54: Revenue forecasts for ARN by capital city – 2014F and 2015F Australian radio ARN avg audience ARN power ARN revenue ARN revenue per ARN revenue market est ($mn) share raw (%) ratio (x) ($mn) share ($mn) gain ($mn) 2013 Sydney $215 mn 20% 1.01 x $43 mn $2.2 mn Melbourne $215 mn 22% 1.01 x $48 mn $2.2 mn Perth $110 mn 10% 1.01 x $11 mn $1.1 mn Brisbane $95 mn 21% 1.01 x $20 mn $1.0 mn Adelaide $65 mn 37% 1.01 x $24 mn $0.7 mn 5 city total $700 mn $147 mn Other $2 mn Total $149 mn National cross check $700 mn 20% 1.01 x $141 mn $7.1 mn Other $8 mn Total $149 mn

2014F Sydney $226 mn 28% 1.04 x $65 mn $2.3 mn + $22 mn Melbourne $226 mn 23% 1.04 x $54 mn $2.3 mn + $6 mn Perth $114 mn 10% 1.04 x $12 mn $1.2 mn + $1 mn Brisbane $99 mn 23% 1.04 x $24 mn $1.0 mn + $3 mn Adelaide $68 mn 37% 1.04 x $26 mn $0.7 mn + $2 mn 5 city total $733 mn $181 mn + $34 mn Other $6 mn Total $187 mn + $38 mn National cross check $733 mn 24% 1.04 x $182 mn $7.6 mn Other $5 mn Total $187 mn + $38 mn + 26% 2015F Sydney $233 mn 28% 1.15 x $75 mn $2.7 mn + $10 mn Melbourne $233 mn 28% 1.15 x $75 mn $2.7 mn + $21 mn Perth $118 mn 29% 1.15 x $39 mn $1.4 mn + $28 mn Brisbane $102 mn 22% 1.15 x $26 mn $1.2 mn + $2 mn Adelaide $70 mn 37% 1.15 x $30 mn $0.8 mn + $4 mn 5 city total $755 mn $245 mn + $65 mn Other $7 mn Total $252 mn + $65 mn National cross check $755 mn 28% 1.15 x $244 mn $8.7 mn Other $8 mn Total $252 mn + $65 mn + 35% Source: Company data, SMI, CEASA, Deloitte, CSEC estimates. Note ARN revenue gain from market share shift as well as industry growth. Assume 5% industry growth in 2014 and 3% industry growth in 2015.

ARN revenue expectations for 2015 ARN recorded $149mn revenue in 2013 with an average 21% audience share across the period. This equates to $7.1mn revenue per share point and compares to SXL at $9.6mn per share point, Nova at $7.0mn per share point, FXJ at $5.5mn per share point and MRN at $6.3mn per share point. Refer Figure 55.

APN News & Media (APN.AX / APN AU) 22 28 January 2015

For 2014, we expect ARN to report $187mn revenues for the period, assuming a strong surge of revenues from September to December 2014. With 25% audience share, this equates to $7.5mn revenue per share point and compares to SXL at $9.6mn per share point, Nova at $8.3mn per share point, FXJ at $6.0mn per share point and MRN at $6.9mn per share point. Refer Figure 56. For 2015, we forecast ARN gaining 3ppt audience share, taking the network to 28%. We forecast Nova +1ppt to 24%, SXL -1ppt to 24% and MRN/FXJ +13ppt to 22% assuming the proposed merger is approved. We also anticipate a lift in power ratio for APN due to its rebranding of KIIS Melbourne, introduction of new talent and acquisition of 96FM in Perth. For FY15 we assume ARN can generate an additional $65mn revenue (representing $8.6mn revenue per share point). This will translate into $252mn revenue for FY15, +38% on pcp. Refer Figure 57. The charts below highlight our revenue forecasts for ARN and its key competitors.

Figure 55: 2013 – Australian commercial metropolitan Figure 56: 2014F – Australian commercial metropolitan radio advertising revenues by company (LHS) vs radio advertising revenues by company (LHS) vs commercial audience share 10+ (RHS) commercial audience share 10+ (RHS) $300 mn 30% $300 mn 30%

$250 mn 25% $250 mn 25%

$200 mn 20% $200 mn 20%

$150 mn 15% $150 mn 15%

$100 mn 10% $100 mn 10%

$50 mn 5% $50 mn 5%

$0 mn 0% $0 mn 0% SXL Nova APN FXJ MRN SXL Nova APN FXJ MRN

Revenue (LHS) Audience Share (RHS) Revenue (LHS) Audience Share (RHS)

Source: Company data, SMI, CEASA, Deloitte, CSEC estimates. Source: Company data, SMI, CEASA, Deloitte, CSEC estimates. Note: revenues are based on calendar year and Nova Entertainment Note: revenues are based on calendar year and Nova Entertainment revenues have been estimated by CSEC. revenues have been estimated by CSEC.

Figure 57: 2015F – Australian commercial metropolitan Figure 58: Radio advertising revenue dollars per radio advertising revenues by company (LHS) vs commercial audience share point 2013, 2014F and 2015F commercial audience share 10+ (RHS) for SXL, Nova, APN and MRN/FXJ $300 mn 30% $12 mn

$250 mn 25% $10 mn

$200 mn 20% $8 mn

$150 mn 15% $6 mn

$100 mn 10% $4 mn

$50 mn 5% $2 mn

$0 mn 0% $0 mn SXL Nova APN MRN/FXJ SXL Nova APN MRN/FXJ

Revenue (LHS) Audience Share (RHS) 2013 2014F 2015F

Source: Company data, SMI, CEASA, Deloitte, CSEC estimates. Source: Company data, SMI, CEASA, Deloitte, CSEC estimates. Note: revenues are based on calendar year and Nova Entertainment Note: revenues are based on calendar year and Nova Entertainment revenues have been estimated by CSEC. revenues have been estimated by CSEC.

APN News & Media (APN.AX / APN AU) 23 28 January 2015

ARN EBITDA Forecasts for 2015 Industry EBITDA trends and forecasts The following charts show the historic revenue and EBITDA for ARN and SXL's metropolitan radio business as well as CSEC estimates for Nova Entertainment. ARN has historically reported a 36-40% EBITDA margin whilst SXL has historically reported a 33- 36% EBITDA margin. Nova Entertainment's margin appears to be lower than this, albeit expanding at a rapid rate.

Figure 59: Revenue forecasts – calendar year Figure 60: EBITDA forecasts – calendar year $300 mn $100 mn

$250 mn $80 mn

$200 mn $60 mn $150 mn $40 mn $100 mn

$20 mn $50 mn

$0 mn $0 mn 2009 2010 2011 2012 2013 2014F 2015F 2009 2010 2011 2012 2013 2014F 2015F

SXL Metro ARN Nova SXL Metro ARN Nova

Source: Company data, CSEC estimates. Nova based on CSEC Source: Company data, CSEC estimates. Nova based on CSEC estimates. Calendar 2014 is based on CSEC estimates estimates. Calendar 2014 is based on CSEC estimates

Figure 61: Revenue forecasts – fiscal year Figure 62: EBITDA forecasts – fiscal year $300 mn $100 mn

$250 mn $80 mn

$200 mn $60 mn $150 mn $40 mn $100 mn $20 mn $50 mn

$0 mn $0 mn FY09 FY10 FY11 FY12 FY13 FY14* FY15F FY09 FY10 FY11 FY12 FY13 FY14* FY15F

SXL Metro ARN Nova SXL Metro ARN Nova

Source: Company data, CSEC estimates. Nova based on CSEC Source: Company data, CSEC estimates. Nova based on CSEC estimates. SXL is a June year end. ARN is a December year end. estimates. SXL is a June year end. ARN is a December year end. *ARN FY14 is based on CSEC estimates *ARN FY14 is based on CSEC estimates

ARN EBITDA forecasts for 2H14 and 2015 We expect ARN to report a 36% EBITDA margin in 2H14 and FY15, below the 39% EBITDA margin reported in FY13, due to additional costs associated with ARN's new talent, rebranding strategy and an increased proportion of agency revenues. We expect margins to return to 39% in FY16 as initial rebranding and launch costs are cycled and synergies start to flow from the 96FM acquisition in Perth. We forecast ARN to report $38mn EBITDA in 2H14, bringing FY14 EBITDA to $67mn, a 16% increase on the pcp. This represents a $9mn EBITDA increase for FY14. We forecast ARN to report $91mn EBITDA in FY15, up 35% on the pcp. This represents a $24mn EBITDA increase for FY14.

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Valuation for ARN Peer multiples Radio assets have historically traded on 8.0-9.0x EBITDA globally. Transaction multiples have been considerably higher.

Figure 63: Radio global trading multiples Ticker Name Market cap EV PE PE EV/EBIT EV/EBIT EV/EBITDA EV/EBITDA EPS CAGR Net debt/EBITDA ROE ROE ROA (A$mn) (A$mn) FY15F FY16F FY15F FY16F FY15F FY16F FY14-FY16F FY15F FY15F FY16F FY15F

APN.AX APN New s & Media 813 1,230 10.1 9.9 9.6 8.7 7.6 7.0 -0.9% 2.4 15.0% 13.7% 9.4% CMLS.OQ Cumulus Media 1,098 3,785 18.6 11.2 15.7 12.5 9.2 8.1 27.2% 6.6 6.3% 10.2% 5.1% P.N Pandora Media 4,647 4,398 50.3 25.9 52.1 20.5 42.7 18.8 129.0% Net Cash 9.9% 17.1% 8.8% SIRI.OQ Sirius XM Holdgs 25,217 30,782 36.3 27.7 23.5 17.6 18.6 14.3 35.2% 3.6 29.5% 3.5% 12.7% SXL.AX Southern Cross Media Group787 1,326 11.3 10.5 9.7 9.2 8.1 7.7 -5.0% 3.1 5.5% 5.8% 5.7%

Average Average 6,512 8,304 25.3 17.0 22.1 13.7 17.2 11.2 37.1% 3.9 13.2% 10.1% 8.4% Median Median 1,098 3,785 18.6 11.2 15.7 12.5 9.2 8.1 27.2% 3.3 9.9% 10.2% 8.8% Source: Company data, IBES, CSEC estimates

Figure 64: Radio transaction multiples Da te Ta rge t Ac quire r Purchase Price (A$mn) EV/EBITDA (x) EV/EBIT Australia and New Zealand Feb- 14 RadioWorks New Zealand 2737469 Canada Inc. 25 14.0x 34.2x Feb- 14 ARN and TRN APN News & Media 493 6.9x Aug- 13 Prime Radio Group 25 7.4x Jan- 11 Southern Cross Media Group 944 10.2x 11.5x Jul- 07 Southern Cross Broadcasting Macquarie Media & Fairfax 1361 12.9x Jun- 04 RG Capital Radio Macquarie 229 12.6x 14.6x

International Mar- 08 Gcap Media Plc Global Radio 771 17.8x Jul- 07 Emap's Irish stations Communicorp Group 290 20.4x Jun- 07 Chrysalis Radio Global Radio 316 13.5x Sep- 04 GWR Capital Radio 633 13.1x Radio Median 13 .0 x Sector Median 9 .2 x Premium / (Discount) 42% Source: Company data, Bloomberg, CSEC estimates

ARN Valuation We value ARN at $816mn EV. We use a 9.0x EBITDA multiple, in line with peers.

Figure 65: Australian Radio Network (ARN) Valuation 2013 2014F 2015F High Case Revenue $mn 149 187 252 252 Revenue growth % 26% 35%

EBITDA $mn 58 67 91 101 EBITDA margin % 39% 36% 36% 40% EBITDA growth % 16% 35%

Multiple x 9.0 9.0 9.0 9.0

Enterprise Value $mn 522 604 816 907 Source: Company data, CSEC estimates. Note High Case assumes higher EBITDA margin.

APN News & Media (APN.AX / APN AU) 25 28 January 2015 Adshel and HK Outdoor The Outdoor Industry Outdoor advertising spend in Australia The Australian outdoor advertising industry is approximately $700mn or 5% of total advertising expenditure. This compares with trends globally where outdoor ad spend represents 7% of total ad spend, up from 6% a decade earlier. Outdoor advertising in Australia has outperformed the market every month in 2014, increasing 10% on average throughout the year versus a flat overall advertising market. Growth was stronger in the 2HCY2014 at +12%. Outdoor's strongest months were November (+37%) and June (+20%) with April, July, August, September and October all posting 8-9% growth. We suspect the main driver of this outperformance has been structural change to digital. Unlike other media such as print where digital has fragmented the audience base, in outdoor digital has added flexibility for advertisers and greater appeal and interaction for consumers. Digital enables 'time and place' advertising, which we suspect has resulted in increased spend from retailers and food and beverage companies. Digital also increases the level of inventory displayed to customers, as well as enabling Wi-Fi connectivity and interaction with the advertisement. In Australia, improvements in the measurement of the effectiveness of outdoor advertising as well as a strong industry body have also likely assisted in outdoor's performance. In 2009, Australia moved from an ad-hoc booking approach to 1-4 week campaigns in line with the introduction of the new MOVE audience measurement system which was designed to deliver data around weekly selling periods. With an ever growing population and increasing urbanisation, we expect outdoor to continue to outperform the media market.

Figure 66: Australian outdoor ad spend growth (% YoY) Figure 67: Australian outdoor ad spend % of total spend 50% 11% 51% 40% 10% 50% 30% 9% 49% 20% 10% 8% 48%

0% 7% 47% -10% 6% 46% -20% -30% 5% 45% Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Outdoor (LHS) Television (RHS) Outdoor All Media Source: SMI data. Note approximately 100% of outdoor ad spend is Source: SMI data booked via agencies and therefore captured in SMI data.

Figure 68: OMA digital outdoor revenue Figure 69: % of people exposed to various media

Source: OMA. Dark green – total OOH, Light green – digital OOH Source: OMA Day in the Life Study 2012/13, 3465 respondents.

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Figure 70: Top outdoor advertisers in Australia Figure 71: Top outdoor advertising categories in Australia

Source: OMA Source: OMA

Outdoor advertising spend in Hong Kong The Hong Kong Outdoor market is approximately US$3bn, making it 6x the size of the Australian outdoor market. It has grown significantly as a percentage of total advertising spend from 5% in 2003 to 16% in 2013. Outdoor has grown at a faster rate than digital in Hong Kong, adding 11% versus 6% over the past decade. The growth has predominately come at the expense of newspapers, down -14%; as well as TV, down -5%. We suspect the key driver of the outdoor growth in Hong Kong has been associated with increased infrastructure build, with new roads and rail enabling more outdoor space with increased visibility. We expect this growth to continue in the near term, albeit at a slightly slower pace.

Figure 72: Hong Kong outdoor ad spend US$mn (current Figure 73: Hong Kong Outdoor Ad Spend growth (% YoY) prices) $3,500 mn 100% 18% 16% $3,000 mn 80% 60% 14% $2,500 mn 12% 40% $2,000 mn 10% 20% $1,500 mn 8% 0% 6% $1,000 mn -20% 4% $500 mn -40% 2% $0 mn -60% 0%

Hong Kong HK YoY % Growth (RHS) Australia China Hong Kong Source: ZenithOptimedia, CSEC estimates Source: ZenithOptimedia, CSEC estimates

Figure 74: Hong Kong outdoor ad spend against other Figure 75: Hong Kong outdoor ad spend against other media US$mn (current prices) media growth (% YoY) $9,000 mn 50% $8,000 mn 40% $7,000 mn $6,000 mn 30% $5,000 mn 20% $4,000 mn $3,000 mn 10% $2,000 mn 0% $1,000 mn $0 mn -10%

Newspapers Magazines TV Radio Newspapers Magazines TV Radio Cinema Outdoor Internet Cinema Outdoor Internet Source: ZenithOptimedia, CSEC estimates Source: ZenithOptimedia, CSEC estimates

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Outdoor advertising spend globally Globally, outdoor ad spend is 7% of total ad spend as at 2013. This compares to 6% a decade earlier, with the slight increase attributed to North America where outdoor ad spend increased from 3% in 2003 to 5% in 2013.

Figure 76: Global outdoor ad spend US$mn (current price) Figure 77: Global outdoor ad spend % of total ad spend $20,000 14% 12% $15,000 10% 8% $10,000 6%

$5,000 4% 2% $0 0% 2001 2003 2005 2007 2009 2011 2013 2015E 2001 2003 2005 2007 2009 2011 2013 2015E North America Western Europe Central & Eastern Europe North America Western Europe Central & Eastern Europe Asia Pacific Latin America Asia Pacific Latin America Source: Zenith Optimedia, CSEC estimates Source: Zenith Optimedia, CSEC estimates

Figure 78: Global outdoor ad spend US$mn (current price) Figure 79: Global outdoor ad spend % of total ad spend $10,000 18% $9,000 16% $8,000 14% $7,000 12% $6,000 10% $5,000 8% $4,000 $3,000 6% $2,000 4% $1,000 2% $0 0% 2001 2003 2005 2007 2009 2011 2013 2015E 2001 2003 2005 2007 2009 2011 2013 2015E Australia Canada Hong Kong Australia Canada Hong Kong New Zealand United Kingdom United States New Zealand United Kingdom United States Source: Zenith Optimedia, CSEC estimates Source: Zenith Optimedia, CSEC estimates Outdoor advertising is a cost effective way to advertise, as the following US advertising market analysis shows.

Figure 80: US advertising market – major media CPM (cost per thousand) comparison

Source: Lamar Advertising Company Presentation, Outdoor Advertising Association of America

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Outdoor advertising, whilst being cost effective, also reaches a high proportion of the population, as shown by the following MOVE Australia analysis.

Figure 81: Australia outdoor versus television campaign Figure 82: Australia advertising market – ROI campaign case study case study

Source: OMA, Oztam, MOVE, Brand Science Source: OMA, Oztam, MOVE, Brand Science

Market Composition Australian outdoor market composition The Australian outdoor market can be divided into three categories; roadside (including billboards and street furniture), transport (including buses, trains and aircraft) and retail. Roadside (billboards, street furniture) Roadside advertising is out-of-home advertising that appears on the side of, or nearby, a road. The category includes billboards and street furniture such as bus/tram shelters and exteriors, phone booths, kiosks, free standing panels and mobile billboards. The roadside billboard industry is approximately $215mn or 33% of total outdoor spend. The billboard market is very fragmented. Key participants include APN Outdoor and Ooh!Media. The roadside other (including street furniture) industry is approximately $240mn or 36% of total outdoor spend. Key participants include Adshel and JCDecaux. Transport (buses, trains, taxis, airport terminals) Transport advertising is any out-of-home advertising that appears on the interior or exterior of public transport vehicles or stations (buses, trains, trams, taxis, commuter rail, subways, platforms, terminals) or airports. The category includes airport externals and internals, rail platform and concourse, bus interchange and bus/tram interiors. The transport industry is approximately $110mn or 16% of total outdoor spend. Key participants include APN Outdoor and Ooh!Media. Retail (shopping centres, office towers) Retail advertising is out-of-home advertising that appears in shopping centres, malls or office towers. The category includes shopping centres, malls, universities and office tower foyers. The retail industry is approximately $110mn or 16% of total outdoor spend. Key participants include APN Outdoor and Ooh!Media.

APN News & Media (APN.AX / APN AU) 29 28 January 2015

Figure 83: Australian outdoor revenue mix Figure 84: Australian outdoor revenues by category

Roadside Roadside Street Billboards Furniture/ 32% Other 36%

Retail Transport 16% 16%

Source: OMA, CSEC estimates Source: OMA. Note: data represents OMA members only

Competitive Environment Australian competitive landscape There are four dominant participants in the Australian outdoor market; Ooh!Media, APN Outdoor, Adshel and JCDecaux. Ooh!Media and APN Outdoor are dominant in billboards, transport and retail, whilst Adshel and JCDecaux are dominant in street furniture.

■ Ooh!Media is the largest outdoor media company in Australia with 28% market share. Ooh!Media listed on the ASX on 16 December 2014 under the ticker OML.AX with an initial market cap of $290mn and multiple of 9.1x FY14 and 7.5x FY15F EBITDA. The business was previously owned by Champ Private Equity. Under Champ, Ooh!Media acquired the Eyecorp business from Ten Network in November 2012 for $113mn. This transaction brought two large players, with approximately 15% market share each, together to form Australia's largest outdoor media company. Ooh!Media participates in the billboard market (4,221 panels and an estimated 44% market share), airports (2,027 panels and an estimated 70% market share), retail (14,018 panels and an estimated 70% market share) and high dwell places such as cafes and health clubs.

■ APN Outdoor is the second-largest outdoor media company in Australia with 24% market share. APN Outdoor listed on the ASX on 10 November 2014 under the ticker APO.AX with an initial market cap of $425mn and multiple of 11.6x FY14 and 9.4x FY15F EBITDA. The business was previously owned by Quadrant Private Equity. APN Outdoor participates in the billboard market (2,800 panels and an estimated 39% market share), transit – buses/trams (33,300 panels and an estimated 90% market share), rail (2,000 panels and an estimated 40% market share) and airports (1,000 panels and an estimated 20% market share).

■ Adshel is the third-largest outdoor media company in Australia with 17% market share. Adshel is owned 50% by APN and 50% by Clear Channel. Adshel participates in street furniture (over 16,000 panels estimated 61% market share) and transport (estimated 2% market share). Clear Channel Outdoor is one of the world's largest outdoor advertising companies with more than 760,000 panels across more than 40 countries.

■ JCDecaux is the fourth-largest outdoor media company in Australia with 9% market share. JCDecaux entered Australia in 1997 and won the City of Sydney tender in the lead up to the Olympic Games. In Australia, JCDecaux participates in street furniture (estimated 26% market share) and transport (estimated 2% market share). Globally, JCDecaux is #1 in street furniture with 480,400 panels, #1 in transport with approximately 150 airports and 275 contracts in metros, buses, trains and trams (379,000 panels) and #1 in Europe for billboards with 222,940 panels.

APN News & Media (APN.AX / APN AU) 30 28 January 2015

Figure 85: Australian outdoor market participants Figure 86: …roadside billboard sub-segment Other Adshel 19% 17% Other 13% QMS QMS 3% 2% JCDecaux 9% Westfield oOh!media 3% 44%

APN APN Outdoor oOh!Media Outdoor 24% 28% 39%

Source: Company data, SMI, CSEC estimates Source: Company data, SMI, CSEC estimates

Figure 87: … street furniture/other roadside sub-segment Figure 88: …retail sub-segment Other Other 13% QMS 9% 4%

Westfield 17% JCDecaux 26% Adshel 61% oOh!media 70%

Source: Company data, SMI, CSEC estimates Source: Company data, SMI, CSEC estimates

Figure 89: …transport sub-segment Figure 90: …transport (transit–buses/trams) sub-segment

Other Other JCDecaux 11% 10% 2% oOh!media 25% Adshel 2%

APN APN Outdoor Outdoor 60% 90%

Source: Company data, SMI, CSEC estimates Source: Company data, SMI, CSEC estimates

Figure 91: …transport (airports) sub-segment Figure 92: …transport (rail) sub-segment Other 10%

APN APN Outdoor Outdoor 40% 20%

Other 60% oOh!media 70%

Source: Company data, SMI, CSEC estimates Source: Company data, SMI, CSEC estimates

APN News & Media (APN.AX / APN AU) 31 28 January 2015

Hong Kong competitive landscape JC Decaux is the main competitor in Hong Kong with approximately 50% market share. It also operates a joint venture called POAD. APN News & Media own Buspak and Cody, which has an estimated 2% market share combined (Hong Kong Outdoor).

Figure 93: Hong Kong Outdoor Market Figure 94: China Outdoor Market

Other 36%

JCDecaux 50%

Hong Kong Outdoor 2% POAD* 12%

Source: ZenithOptimedia, Company data, Credit Suisse estimates. Source: JCDecaux company presentation *49% owned by JCDecaux

Street Furniture vs Billboards Revenue dynamics Whilst the street furniture/other roadside market is similar in size to the billboard market in terms of revenue, the dynamics are quite different. Number of panels:

■ Street furniture has a significantly higher number of panels, given the number of bus shelters, etc., in community and metro areas. Adshel has over 16,000 panels in Australia.

■ Billboards are larger format and are typically placed near motorways or on buildings. As such, there are fewer panels. Ooh!Media has 4,221 panels in Australia whilst APN Outdoor has 2,800 panels in Australia. Revenue per panel:

■ Street furniture typically generates lower revenue per panel relative to billboards, which makes intuitive sense given their smaller size and visibility. We estimate Adshel makes approximately $9-10K revenue on average per panel, albeit this is likely to vary substantially depending on the size and location of each panel.

■ Billboards make approximately three times the revenue per panel relative to street furniture. We estimate a billboard can generate $25-35K revenue on average per panel. Whilst street furniture generates lower revenue per panel, Adshel has four times the number of panels in Australia relative to its billboard peers Ooh!Media and APN Outdoor and as a result, generates more revenue.

Contract dynamics Street furniture and billboard contracts are quite different in terms of duration and terms.

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Contract lengths:

■ Street furniture contracts are typically longer than billboard contracts, approximately 10-20 years in length in Australia. Council contracts are typically 15-20 years in length whilst CBD contracts are typically 5-10 years in length.

■ Billboards contracts are typically 5-10 years in length in Australia. Contract terms and pricing power:

■ Street furniture contracts are typically revenue share agreements where rent paid to the landlord or asset owner is a fixed percentage of revenue. Pricing power for the media company is strong due to the fact that contracts are over a long time period and cover a number of street furniture panels. Also, bidding tension is low upon contract renewal due to contract length, exclusivity and associated information gap about panel revenue metrics.

■ Billboard contracts are typically fixed price, increasing annually by CPI or an agreed fixed rate over the life of the contract. Pricing power is lower than street furniture due to shorter contracts, greater competition (there are typically more players in billboard markets globally relative to street furniture) and nature of the landlord. Landlords are typically building owners (rather than government-related bodies) who are focused on renewing contracts at a higher rate in shorter time periods. Street furniture owners typically have a lower risk appetite and want certainty over the revenue stream.

EBITDA dynamics The charts below highlight the EBITDA differences between street furniture and billboards.

Figure 95: Australia Outdoor EBITDA margin comparison Figure 96: JCDecaux's divisional operating margins 35% 40% 30% 35% 30% 25% 25% 20% 20% 15% 15% 10% 10%

5% 5% 0% 0% 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E CY12 CY13 CY14F CY15F Street Furniture Billboard oOh!media APN Outdoor Adshel Transport Total Operating Margin Source: Company data, CSEC estimates. All companies Dec yr end. Source: Company data, Credit Suisse estimates EBITDA margin:

■ Street furniture has a higher EBITDA margin, around the 25-30% level. This is primarily due to the fact that street furniture has a larger number of panels to erect which results in higher initial capex. Contracts are therefore longer in length with more favourable terms (resulting in higher EBITDA margin) so that the media company is able to recover the initial investment over the life of the contract. Media companies also have greater pricing power due to the landlord typically being government-related bodies and having lower risk appetite. In Australia, Adshel has reported group margins between 25% and 27% from FY12 to FY13. Globally, JCDecaux has reported street furniture segment margins between 32% and 33% from FY09 to FY13.

■ Billboards are lower margin, around the 10-15% level. Billboards have shorter contracts with less pricing power however the initial investment is lower. In Australia, APN Outdoor has reported group margins between 13% and 15% from FY12 to FY13

APN News & Media (APN.AX / APN AU) 33 28 January 2015

whilst Ooh!Media has reported group margins between 12% and 14% from FY12 to FY13. Globally, JCDecaux has reported billboard segment margins between 10% and 15% from FY09 to FY13.

ROIC dynamics There is no noticeable difference in ROIC between street furniture and billboard media companies. In street furniture, the initial capex is typically higher due to a larger number of panels. Therefore contracts are typically longer in length with more favourable terms so that the media company can recover the initial investment over the life of the contract. For outdoor media companies, there are three primary influences on ROIC:

■ Country of operation. In the US market there is certain regulation that requires a media company to obtain a licence to operate the outdoor panel. The licence is usually materially longer than the life of the contract, often extending into perpetuity. This dynamic gives US outdoor media companies particularly strong bargaining power as the landlord has limited option to change the media company using its panel. As a result, margins and ROIC are often higher for US outdoor companies (refer to Figure 97 and Figure 98). In Australia, the UK and Europe, this dynamic is not apparent.

■ Type of landlord or asset owner. Street furniture and transport owners are typically government-related bodies, whereas billboard or retail owners are typically private property developers or owners. Whilst government-related bodies have a lower risk appetite and would prefer revenue security, private companies prefer shorter contracts where they can renegotiate more often as the landscape changes to benefit from any upside in revenue (digital conversion a case in point).

■ Level of urbanisation and history of outdoor advertising. Outdoor advertising is a relatively new form of advertising globally. In Australia, it has been a major form of advertising for approximately 20 years. There has been material change in the outdoor advertising sector, how landlords view assets and how advertisers view assets. This will therefore have a meaningful impact on contract terms upon renewal.

Figure 97: Outdoor CFROI comparison Figure 98: Outdoor EBITDA margins

Source: Company data, HOLT®, CSEC estimates. HOLT® is a Credit Source: Company data, HOLT®, CSEC estimates Suisse advanced corporate performance, valuation and strategic analysis framework. HOLT® adjusts for accounting anomalies and one-offs to create a platform where comparisons across companies can be achieved.

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The Impact of Digital Conversion A 2-5x revenue uplift The following case studies show that on average, converting panels to digital format, results in a 2-5x revenue uplift. Inventory typically increases three to six times and yield can decrease by as much as 50%.

Figure 99: Digital conversion revenue model Digital Board Digital Board Digital Board Static Board (Low) (Mid) (High) Inventory 1 3 6 10 Yield 100 80 60 50 Revenue 100 240 360 500

Inventory change 3.0 x 6.0 x 10.0 x Yield change -20% -40% -50% Revenue uplift 2.4 x 3.6 x 5.0 x Source: CSEC estimates

JCDecaux case study JCDecaux is the #1 outdoor advertising company worldwide, with approximately 1.1mn panels across more than 60 countries. The Company reported €2,676mn revenue and €220mn EBIT in 2013. JCDecaux generates 45% of its revenues from street furniture (where it is #1 globally with 480,400 panels), 38% from transport (where it is #1 globally with approximately 150 airports and 275 contracts in metros, buses, trains and trams (379,000 panels)) and 18% from billboards (where it is #1 in Europe with 222,940 panels). JCDecaux installed its first digital screen in Vienna's subway in 1998. Since then it has installed a 39sqm giant screen in Terminal 2E at Paris Charles-de-Gaulle airport, converted street furniture in the La Defense business district in Paris, installed multiple digital media locations in the UK including displays at Heathrow airport, fully digitalised the subway station in Berlin, installed multiple digital media locations at the Shanghai, Dubai and airports, installed large-format screens in Chicago and installed digital advertising clocks in Sao Paulo that include a feed.

Figure 100: JCDecaux digital display Figure 101: JCDecaux giant digital screen

Source: Company website Source: Company website The demand for digital screens has grown rapidly and now accounts for 7.9% of JCDecaux's group revenues. The majority of this growth was in the transport division, which experienced double-digit revenue growth each year from 2010 to 2012. Digital screen revenue now accounts for 17% of transport revenue.

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Figure 102: JCDecaux digital revenues for the group and transport division

Source: Company presentation Earnings also increased through this period, with EBITDA growing from €392mn in 2009 to €624mn in 2013.

Figure 103: JCDecaux revenue €mn and revenue growth Figure 104: JCDecaux EBITDA €mn and EBITDA growth % % 700 50% 3,000 25% 20% 600 40% 2,500 30% 15% 500 2,000 10% 20% 400 1,500 5% 10% 300 0% 0% 1,000 200 -5% -10% 500 -10% 100 -20% 0 -15% 0 -30%

Total Revenue (€mn) Total Revenue YoY % gth (RHS) Total EBITDA (€m) EBITDA YoY % gth (RHS) Source: Company data Source: Company data JCDecaux's revenue growth highlights the benefits of converting to digital screens. As at 2013, JCDecaux had more than 40,000 digital panels in 22 countries and 1.06mn static panels in more than 60 countries. In other words, 3.6% of JCDecaux's panels were in digital format. This compares with 1.2% in the prior year. From a revenue perspective, digital panels represented 7.9% of group revenues, versus 5.7% in the prior year. The following table highlights the revenue generated per panel at the end of each period and on average throughout the year. As Figure 105 highlights, JCDecaux has experienced a 3.6x – 4.6x revenue uplift per panel on average from 2011 to 2013 as a result of converting static panels to digital format.

Figure 105: JCDecaux digital conversion impact on group revenues 2010 2011 2012 2013

Static Digital Total Static Digital Total Static Digital Total Static Digital Total Panels 1,033,200 7,400 1,040,600 1,014,100 9,800 1,023,900 1,001,200 12,300 1,013,500 1,060,000 40,000 1,100,000 Panel mix 99.3% 0.7% 99.0% 1.0% 98.8% 1.2% 96.4% 3.6%

Revenue (€mn) 2,277 73 2,350 2,364 99 2,463 2,473 150 2,623 2,465 211 2,676 Revenue mix 96.9% 3.1% 96.0% 4.0% 94.3% 5.7% 92.1% 7.9%

End of period revenue per panel 2,204 9,845 2,332 10,053 2,471 12,155 2,325 5,285 Average revenue per panel (€mn) 2,268 9,949 2,401 11,104 2,398 8,720

End of period digital revenue uplift 4.5 x 4.3 x 4.9 x 2.3 x Average digital revenue uplift 4.4 x 4.6 x 3.6 x Source: Company data, Credit Suisse estimates

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Clear Channel Outdoor case study Clear Channel Outdoor is one of the world's largest outdoor advertising companies with more than 760,000 panels across more than 40 countries. In the US, Clear Channel Outdoor operates in 48 of the top 50 largest markets in the US. The Company reported US$2,946mn revenue and US$303mn EBIT in 2013. The Americas contributed 43% of group revenues in 2012, with international contributing 57%. Clear Channel Outdoor has the fastest growing digital outdoor network, with 1125 displays across 37 US markets and over 3400 displays across 13 international markets. Digital panels represent 0.6% of Clear Channel Outdoor's total panels. As stated in its 2012 annual report, "Digital outdoor advertising provides significant advantages over traditional outdoor media. Our electronic displays are linked through centralised computer systems to instantaneously and simultaneously change advertising copy on a large number of displays, allowing us to sell more advertising opportunities to advertisers. The ability to change copy by time of day and quickly change messaging based on advertisers’ needs creates additional flexibility for our customers. Although digital displays require more capital to construct compared to traditional bulletins, the advantages of digital allow us to penetrate new accounts and categories of advertisers, as well as serve a broader set of needs for existing advertisers. Digital displays allow for high-frequency, 24-hour advertising changes in high-traffic locations and allow us to offer our clients optimal flexibility, distribution, circulation and visibility. We expect this trend to continue as we increase our quantity of digital inventory."

Figure 106: Clear Channel Outdoor digital billboard – the Figure 107: Clear Channel Outdoor digital billboard – largest in the world showing time-sensitive advertising

Source: Company website Source: Company website Whilst digital revenues have grown considerably over the past several years, this has been offset by a decline in traditional revenues for Clear Channel Outdoor – in particular a decline in national account clients in the US market.

Figure 108: Clear Channel Outdoor revenue US$mn and Figure 109: Clear Channel Outdoor EBITDA US$mn and revenue growth % EBITDA growth % 4,000 20% 1,200 50% 1,000 3,500 15% 0% 3,000 10% 800 -50% 600 2,500 5% 400 -100% 2,000 0% 200 -150% 1,500 -5% 0 -200% 1,000 -10% -200 -250% 500 -15% -400 0 -20% -600 -300% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total Revenue ($mn LHS) Revenue YoY % gth EBITDA ($mn LHS) EBITDA YoY % gth Source: Company data Source: Company data

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Lamar Advertising case study Lamar Advertising is one of the largest outdoor advertising companies in North America with more than 370,000 panels across the US, Canada and Puerto Rico. Lamar Advertising offers billboard, interstate logo and transit formats. Lamar Advertising has approximately 18% share of the US outdoor market, making it equal #2 with Clear Channel, behind Outfront Media (CBS Outdoor spin off). The company reported US$1,246mn revenue and US$223mn EBIT in 2013. Lamar Advertising offers the largest network of digital billboards in the US with over 2000 panels. Digital panels represent 0.5% of Lamar Advertising's total panels. Panels rotate every 6 to 8 seconds. At Lamar Advertising, advertisers are able to change their message as often as they wish with no production cost. Live data can be streamed within minutes. The screen is equipped with LED technology that produces a vibrant, crystal-like picture.

Figure 110: US outdoor advertising market shares Figure 111: Lamar revenue mix between local and national advertisers

Source: Lamar Advertising Company Presentation Source: Lamar Advertising Company Presentation Digital outdoor advertising enables increased flexibility for advertisers in areas such as; i) time-sensitive advertising such as an upcoming TV event, ii) countdowns, iii) user generated content such as pulling content from social media, iv) live scores from sporting events, v) trending items for retailers, vi) weather triggers for different types of vehicle features and vii) social media images, texts and tweets.

Figure 112: Lamar Advertising digital billboard – showing Figure 113: Lamar Advertising digital billboard – showing time-sensitive advertising trending items for retail advertisers

Source: Company website Source: Company website

Figure 114: Lamar Advertising digital billboard – showing Figure 115: Lamar Advertising digital billboard – showing weather triggered advertising social media advertising

Source: Company website Source: Company website

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Lamar Advertising's revenues and EBITDA have grown consistently from 2009 to 2013. Digital expansion has been a key driver, as has the stability in traditional revenues, with Lamar Advertising skewed toward local rather than national advertisers. In 2013, digital revenues represented 15% of group revenues. With 2000 digital panels, this is a very robust revenue per panel metric.

Figure 116: Lamar revenue €mn and revenue growth % Figure 117: Lamar EBITDA €mn and EBITDA growth % 1,400 70% 600 20% 60% 15% 1,200 500 50% 10% 1,000 40% 400 5% 800 30% 300 0% 600 20% -5% 10% 200 400 0% -10% 100 200 -10% -15% 0 -20% 0 -20%

Total Revenue ($mn LHS) Revenue YoY % gth EBITDA ($mn LHS) EBITDA YoY % gth Source: Company data Source: Company data

Outfront Media (CBS Outdoor) case study Outfront Media, formerly CBS Outdoor, is the largest outdoor advertising company in the US with over 400,000 billboard and transit panels. Outfront Media also operates in Canada, and South America. The Company reported US$1,297mn revenue and US$411mn EBITDA in 2013. Outfront Media has 505 digital billboards, up from 475 a year ago in 2013. Its digital panels come in various forms; i) digital urban panels, ii) digital media networks, iii) digital kiosks, iv) digital rail, v) digital bus shelters, vi) digital billboards and vii) digital posters. Digital panels represent 0.1% of Outfront Media's total panels.

Figure 118: Outfront Media digital billboard Figure 119: Outfront Media digital bus shelter

Source: Company website Source: Company website Outfront Media has experienced reasonably flat revenue and EBITDA over the past several years, primarily due to a weak US national advertising market, loss of some contracts, increased competition and decline in yield. This has offset the growth in digital.

Digital panels generate higher ROIC Digital panels cost more than static panels initially, however the revenue and EBITDA are materially higher for digital panels, resulting in higher ROIC. Street furniture digital panels are typically higher than billboard digital panels in terms of ROIC due to the greater interconnectivity with consumers, such as Wi-Fi, touch screen, bus 'shops', etc.

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Adshel Overview of Adshel Adshel is a 50/50 JV between APN News & Media and Clear Channel and operates in Australia and New Zealand. It is the third-largest outdoor media company in Australia with 17% market share and the largest street furniture advertising company in Australia with an estimated 61% market share. Adshel has over 16,000 panels including 180 (1%) digital panels. In 2013 Adshel generated $149mn revenue and $40mn EBITDA. It was in a net cash position at +$27mn.

Figure 120: Australian outdoor market participants – Total Figure 121: …street furniture/other roadside sub-segment Market Other Adshel Other 19% 17% 13%

QMS 2% JCDecaux Westfield 9% 3% JCDecaux 26% Adshel 61% APN Outdoor oOh!Media 24% 28%

Source: SMI Source: Company data, SMI, CSEC estimates Network coverage Adshel operates across each major market of Australia. Figure 122 to Figure 127 highlight the coverage within each of these markets.

Figure 122: Adshel coverage – Sydney Figure 123: Adshel coverage – Melbourne

Source: Company website Source: Company website

Figure 124: Adshel coverage – Perth Figure 125: Adshel coverage – Brisbane

Source: Company website Source: Company website

APN News & Media (APN.AX / APN AU) 40 28 January 2015

Figure 126: Adshel coverage – Adelaide Figure 127: Adshel coverage – Canberra

Source: Company website Source: Company website Contracts and customers Adshel has a range of contracts throughout Australia (we estimate over 100 contracts). It dominates in council areas, with an estimated 90% share of Sydney council contracts. Adshel recently won the Sydney trains concourse contract and also has the Melbourne trams contract. Adshel does not have any major contract expiring in 2015. The next major street furniture contract in Australia coming up for renewal is the Sydney CBD contract, which currently sits with JCDecaux, and is expected to expire in 2018. The majority of Adshel's street furniture contracts are 15-20 years, whilst its transport contracts are shorter in length, around five years. Contracts are typically structured as a revenue share agreement (where rent is paid to the asset owner as a fixed percentage of revenue) or blended fixed with revenue share component.

Sydney Trains contract to boost revenue from 2015 In December 2013, Adshel won all of the precincts it had tendered for in the Sydney Trains contract. The contract is one of the largest in Australia and is five years in tenure. It will involve a digital roll-out, which will be Sydney's largest scale digital infrastructure roll-out in outdoor advertising. 2014 was an investment year for Adshel, with panels converted to digital in year 1 but payback not expected until year 2. Revenue is expected to flow from 2015 to the end of 2018 when the contract is due to expire. We forecast a $15-20mn revenue uplift in 2015 from the Sydney Trains contract for Adshel. The drivers of our Sydney Trains revenue forecasts are as follows:

■ $10mn from the contract in isolation

■ $5-10mn from the network effect of bundling Sydney Trains, Melbourne Trams and Sydney council contracts together We include the digital conversion uplift in the following section. For Sydney Trains specifically, we see the potential for $5-10mn incremental revenue from converting panels within the Sydney Trains contract to digital.

Digital conversion to drive revenue growth over the next few years Adshel has converted 180 panels out of 16,000 (representing 1%) from static to digital format. All of these digital panels are part of the Sydney Trains contract.

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Various digital conversions include i) digital images with scent and sound (such as the Sunglasses Hut campaign or the Audi campaign), ii) countdown (such as H&M's countdown until the launch of Alexander Wang's exclusive new line), iii) video (such as Tennis Australia's campaign or You Tube), iv) image software (such as Universal Sony's digital panel turning commuter images into villains as they walked by to mark the release of the Spiderman 2 DVD, v) bus shop (such as the Woolworths bus 'shop' campaign) and vi) Wi-Fi connectivity, where consumers can scan a barcode to link to a website.

Figure 128: Adshel digital panel – Sunglasses Hut Figure 129: Adshel digital panel – Woolworths ignite bus campaign Martin Place Station, Sydney 'shop' where consumers can select, scan, pay and select pick up or delivery

Source: Company presentation Source: Company website We expect Adshel to convert more panels to digital as part of the Sydney Trains contract, as well as other panels under other contracts. As Adshel converts these panels to digital we expect to see a similar revenue uplift to JCDecaux, i.e., a 2-5x revenue uplift from converted panels. If Adshel is able to capture and utilise consumer data from implementing Wi-Fi and touch screens, we suspect there may be further upside. If Adshel converts 5% of its static panels to digital format in 2015, we would expect a $16mn revenue uplift (i.e., incremental revenue assuming 3x revenue uplift from $8mn static revenue).

Adshel Revenue and EBITDA Forecasts for 2015 Adshel revenue forecasts for 2015 Adshel generated $149mn revenue in 2013. We forecast $152mn revenue in 2014, primarily driven by a strong outdoor advertising market. We expect the benefits from the Sydney Trains contract and digital conversion to flow from 2015. We forecast $15mn from the Sydney Trains contract and network effect and $16mn from digital conversion. This results in a $31mn revenue uplift or $183mn total revenue in 2015.

Adshel EBITDA forecasts for 2015 Adshel reported $40mn EBITDA in 2013 and a 27% EBITDA margin. This compares with a 22% average margin over the past decade. We forecast a slight decline in EBITDA margin in 2014 as Adshel invests in the Sydney Trains contract and has a full year of insourcing maintenance, posting and cleaning services (completed in 2013). We forecast stable EBITDA. We expect margins to increase in 2015 to 28%, resulting in $51mn EBITDA.

APN News & Media (APN.AX / APN AU) 42 28 January 2015

Hong Kong Outdoor Overview of Hong Kong Outdoor Hong Kong Outdoor is 100% owned by APN News & Media. It acquired the other 50% of Hong Kong Outdoor from Clear Channel in July 2014 for $14mn. Hong Kong Outdoor includes Buspak and Cody.

■ Buspak operates in transit, providing exterior and interior advertising for over 1700 buses through its contract with New World First Bus Services Limited, one of the largest bus operators in HK. Buspak's interior or on-board advertising services include the Webus Wi-Fi network and the on-board TV platform BuzPlay.

■ Cody offers premium billboard advertising with a portfolio of over 160 billboards. Cody derives the majority of revenue from toll-road billboards, such as the Eastern Harbour Tunnel, Western Harbour Tunnel and Causeway Bay. Cody is owned by Buspak.

Figure 130: Buspak display in Hong Kong Figure 131: Cody display in Hong Kong

Source: Buspak website Source: Cody website Infrastructure development, contract wins and digital conversion to drive growth We see growth potential for Buspak and Cody from a number of areas:

■ Outdoor advertising in Hong Kong has grown dramatically over the past few years, in line with infrastructure development (refer charts below). We expect infrastructure development and outdoor advertising growth to continue, albeit at a slower rate.

■ Contract wins will be critical for APN. Cody won new contracts in late 2013/early 2014 which boosted revenue in 2014 and will likely continue to boost revenue in 2015. Buspak launched 30 more Signature Buses in 2014, taking the total fleet to 60. Buspak also renegotiated its Buzplay contract in 2014 on more favourable terms (lower rent to the asset owner) which will drive revenue growth in 2015.

■ Digital conversion and the resulting revenue uplift is also likely in the Hong Kong market, in our view.

Figure 132: Hong Kong Outdoor Ad Spend growth across Figure 133: Hong Kong outdoor ad spend against other various countries (% YoY) media growth (% YoY) 18% 50% 16% 40% 14% 12% 30% 10% 20% 8% 10% 6% 4% 0%

2% -10% 0%

Newspapers Magazines TV Radio Australia China Hong Kong Cinema Outdoor Internet Source: ZenithOptimedia, CSEC estimates Source: ZenithOptimedia, CSEC estimates

APN News & Media (APN.AX / APN AU) 43 28 January 2015

HK Outdoor Revenue and EBITDA Forecasts for 2015 Hong Kong Outdoor revenue forecasts for 2015 Hong Kong Outdoor generated A$44mn revenue in 2013. We forecast A$49mn revenue in 2014 (11% growth) and A$54mn in 2015 (10% growth), resulting from industry growth, contract wins and favourable renewals and some digital conversion.

Hong Kong Outdoor EBITDA forecasts for 2015 Hong Kong Outdoor reported A$1.8mn EBITDA in 2013 and a 4% EBITDA margin. We forecast A$4mn EBITDA in 2014 (8% margin) and A$6mn EBITDA in 2015 (10% margin). Most of the margin expansion is coming from scale advantages and leverage.

Valuation for Adshel and HK Outdoor Peer multiples Outdoor assets have historically traded on 9.0-10.0x EBITDA globally. Transaction multiples have been considerably higher.

Figure 134: Outdoor global trading multiples Ticker Name Market cap EV PE PE EV/EBIT EV/EBIT EV/EBITDA EV/EBITDA EPS CAGR Net debt/EBITDA ROE ROE ROA (A$mn) (A$mn) FY15F FY16F FY15F FY16F FY15F FY16F FY14-FY16F FY15F FY15F FY16F FY15F

APN.AX APN New s & Media 813 1,230 10.1 9.9 9.6 8.7 7.6 7.0 -0.9% 2.4 15.0% 13.7% 9.4% APO.AX APN Outdoor Grp 433 506 17.7 14.3 13.5 11.2 10.5 8.7 24.9% 1.4 12.2% 13.2% CCO.N Clear Ch Outdoor 4,262 8,991 25.1 23.0 10.7 9.8 -33.8% 5.6 10.4% 0.1% JCDX.PA JCDecaux S.A. 9,886 9,737 27.7 24.1 15.7 13.7 9.1 8.2 13.0% Net cash 9.3% 10.2% 5.5% LAMR.OQ Lamar Advertising 6,790 8,844 46.3 33.1 23.3 21.3 12.3 12.0 61.8% 3.2 16.3% 30.5% 4.0% OUT.N Outfront Media 4,272 6,665 16.5 29.7 24.8 21.3 12.8 11.4 -20.5% 4.8 9.5% 8.3% 5.6%

Average Average 4,409 5,996 23.7 22.2 18.7 16.5 10.5 9.5 7.4% 3.5 12.2% 15.2% 4.9% Median Median 4,267 7,755 17.7 24.1 19.5 17.5 10.6 9.3 6.0% 3.2 11.3% 13.2% 5.5% Source: Company data, IBES, CSEC estimates

Figure 135: Outdoor transaction multiples Da te Ta rge t Ac quire r Purchase Price (A$mn) EV/EBITDA (x) EV/EBIT Oct- 05 Media Partners International JCDecaux SA 149.9 24.1x Sep- 04 Obie Media Corp Lamar Advertising 95.8 16.1x 30.3x Apr- 00 Bowlin Outdoor Advertising Lamar Advertising 89.8 10.7x 28.2x Outdoor Median 16 .1x Sector Median 10 .6 x Pre mium / (Disc ount) 52% Source: Company data, Bloomberg, CSEC estimates

Adshel and HK Outdoor Valuation We value Adshel at $255mn EV and HK Outdoor at $60mn EV, resulting in a combined $315mn EV. We use a 10.0x multiple, in line with peers.

APN News & Media (APN.AX / APN AU) 44 28 January 2015

Figure 136: Adshel (50%) and Hong Kong Outdoor (100%) Valuation 2013 2014F 2015F High Case Adshel $mn 149 152 183 200 HK Outdoor $mn 44 49 54 54 Revenue $mn 193 201 237 254 Revenue growth % 4% 18%

Adshel $mn 40 40 51 60 HK Outdoor $mn 2 4 6 6 EBITDA $mn 42 44 57 66 EBITDA margin % 22% 22% 24% 26% EBITDA growth % 5% 30%

Adshel (50% stake) $mn 20 20 26 30 HK Outdoor (100%) $mn 2 4 6 6 Proportionate EBITDA $mn 22 24 32 36

Multiple x 10.0 10.0 10.0 10.0

Adshel (50% stake) $mn 200 200 255 300 HK Outdoor (100%) $mn 18 40 60 60 Enterprise Value (proportionate) $mn 218 240 315 360 Source: Company data, CSEC estimates. Note High Case assumes faster digital rollout and higher EBITDA margin for Adshel.

APN News & Media (APN.AX / APN AU) 45 28 January 2015 Australian Regional Media The publishing industry The newspaper market in Australia The Australian newspaper industry is a $3.7bn industry, down from >$5.5bn in 2008. Advertising revenues represent approximately $2.3bn whilst circulation revenues represent approximately $1.4bn. Metro revenues represent approximately $2.5bn whilst regional revenues represent approximately $1.2bn. The Australian newspaper advertising industry is a $2.3bn industry, down from >$4bn in 2008. Metro advertising is a $1.4bn industry whilst regional advertising is a $0.9bn industry. The Australian newspaper circulation industry is a $1.4bn industry. Metro circulations represent approximately $1bn whilst regional circulations represent approximately $0.4bn. The table below highlights our estimates for the Australian newspaper market – by advertising, circulation and other revenue as well as by metro and regional areas.

Figure 137: Australian newspaper market—CSEC estimates Metro Regional Total 2008 2014 2008 2014 2008 2014

Advertising Revenues NWS $mn 1505 664 376 166 1881 830 FXJ $mn 875 460 468 409 1343 869 SWM $mn 275 166 31 18 306 184 ARN $mn na na 215 139 215 139 Other $mn 205 153 167 125 372 278 Total $mn 2859 1443 1258 857 4117 2300

Circulation Revenues NWS $mn 666 654 166 163 832 817 FXJ $mn 245 228 120 103 365 331 SWM $mn 63 52 13 6 76 58 ARN $mn na na 66 58 66 58 Other $mn 90 75 74 61 164 136 Total $mn 1064 1009 439 391 1503 1400

Other Revenues NWS $mn 165 178 41 45 206 223 FXJ $mn 130 103 80 75 210 178 SWM $mn 28 20 5 4 33 24 ARN $mn na na 26 2 26 2 Other $mn na na na na 25 23 Total $mn 323 301 152 126 500 450

Total Newspaper Revenues (ex other) NWS $mn 2335 1496 584 374 2919 1870 FXJ $mn 1250 791 668 587 1918 1378 SWM $mn 366 238 49 28 415 266 ARN $mn na na 307 199 307 199 Other $mn 34 -7 27 -6 61 -13 Total $mn 3985 2518 1635 1182 5620 3700 Source: Company data, CEASA, CSEC estimates

APN News & Media (APN.AX / APN AU) 46 28 January 2015

Trends in Australian newspaper advertising Newspaper advertising revenues in Australia have declined from 34% of total ad spend in 2008 to 19% of total ad spend in 2014, as agencies and companies shift to digital. This compares to the US where publishing has seen a decline from 30% in 2005 to 19% in 2010 to 11% in 2014. The majority of this decline has occurred in metro newspapers, although regional newspapers have also seen a decline from 8% in 2008 to 5% in 2014.

Figure 138: Australian newspaper advertising spend as a Figure 139: Australian metro and regional newspaper % of total spend advertising spend as a % of total spend 45% 40% 40% 35% 35% 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0%

Newspapers Digital Metro newspapers Regional Newspapers

Source: Zenith Optimedia, CSEC estimates Source: Advertising Standards Authority, CEASA data, CSEC estimates.

Trends in global newspaper advertising Globally, publishing advertising spend is 17% of total ad spend as at 2013. This compares to 30% a decade earlier. The decline has been experienced in each major region, as highlighted in the charts below.

Figure 140: Global publishing ad spend US$mn (current Figure 141: Global publishing ad spend % of total ad prices) spend 60000 40% 50000 30% 40000 30000 20% 20000 10% 10000

0 0%

2006 2001 2002 2003 2004 2005 2007 2008 2009 2010 2011 2012 2013

2001 2008 2002 2003 2004 2005 2006 2007 2009 2010 2011 2012 2013

2014E 2015E 2015E North America Western Europe 2014E North America Western Europe Central & Eastern Europe Asia Pacific Central & Eastern Europe Asia Pacific Latin America Latin America Source: Zenith Optimedia, CSEC estimates Source: Zenith Optimedia, CSEC estimates

Trends in Australian and global newspaper circulation Newspaper circulation revenues have experienced a decline in both metro and regional areas. The decline accelerated from December 2008 to September 2013, however has decelerated since then. This compares with trends in the US and UK, with the UK showing a turning point in 2012.

APN News & Media (APN.AX / APN AU) 47 28 January 2015

Figure 142: Australian newspaper circulation revenue Figure 143: Print circulations in Australia, New Zealand, decline UK, USA 0% 4% 2% -2% 0% -4% -2% -6% -4% -8% -6%

-10% -8% -10% -12% Metro Regional -12% -14%

Australia United Kingdom United States New Zealand Source: Audit Bureau of Circulations Source: Audit Bureau of Circulations, Zenith Optimedia, CSEC estimates

Competitive environment Australian regional media is not very competitive In regional Australia, head-to-head competition in newspaper publishing is limited, with the top three players; Fairfax Media, News Corporation and APN News & Media, primarily operating in separate regional markets. This is quite different to Australian metro media, where Fairfax Media and News Corporation compete across the east . Across all of regional Australia, we estimate APN has 16% advertising market share and 15% circulation market share, putting it behind News Corporation and Fairfax Media on both metrics. The top three players; Fairfax Media, News Corporation and APN News & Media; control approximately 80% of the market. However, APN only operates in regional as it is generally the only local newspaper in its areas. News Corporation also operates in regional Queensland albeit in different communities.

Figure 144: Australian regional advertising mkt share in Figure 145: Australian regional advertising mkt share 2008 in2014 Other Other NWS 13% NWS 15% 19% 30%

ARN 17% ARN 16%

SWM SWM 2% 2%

FXJ FXJ 37% 48% Source: Company data, CEASA, CSEC estimates Source: Company data, CEASA, CSEC estimates

APN News & Media (APN.AX / APN AU) 48 28 January 2015

Figure 146: Australian regional circulation mkt share 2008 Figure 147: Australian regional circulation mkt share 2014 Other Other 17% 16%

NWS 38% NWS ARN ARN 42% 15% 15%

SWM SWM 2% 3%

FXJ FXJ 27% 26% Source: Company data, CEASA, CSEC estimates Source: Company data, CEASA, CSEC estimates

Australian Regional Media (ARM) Overview of ARM APN’s Australian Regional Media business (ARM) includes 12 daily newspapers, 58 non- daily newspapers and magazines, 35 web and mobile sites, APN educational media (a niche publisher that services the education and health sectors) and APN Print. ARM generated $217mn revenue and $30mn EBITDA in 2013. ARM publications Newspaper publications are distributed along the east coast of regional Queensland from Coffs Harbour to Mackay, reaching >1.3mn consumers or 76% of people within the publishing footprint. ARM's newspaper titles represent over half of all regional daily newspapers sold in Queensland. ARM coverage can be defined into 6 sub-markets; North Qld, Central Qld, Wide Bay Burnett, South West Qld, South East Qld and Northern NSW.

Figure 148: ARM coverage

Source: Company data, Credit Suisse estimates

APN News & Media (APN.AX / APN AU) 49 28 January 2015

Figure 149: ARM publications Region Major tow ns w ithin region Daily New spapers Community Newspapers Special Publication

North Qld Mackay, Mount Isa Daily Mercury The Midw eek Whitsunday Times

Central Qld Gladstone, , The Morning Bulletin Capricorn Coast Mirror Rural Weekly Group Biloela, Blackw ater, Emerald The Observer Central Telegraph Rural Weekly (North/Central Qld) Blackw ater Herald CQ Industry Central Queensland New s The Community Advocate

Wide Bay Burnett Gympie, Maryborough, Childers, New sMail Guardian Rural Weekly (Wide Bay) (on the coast between Bundaberg, Gingin Fraser Coast Chronicle Isis Tow n & Country central and SE Qld) The Gympie Times Central & North Burnett Times Hervey Bay Observer Lifestyle The Maryborough Herald Cooloola Advertiser

South West Qld Charleville, Roma, Chinchilla, The Chronicle Dalby Herald Rural Weekly (SW Qld) St George, Toow oomba, Dalby, Warw ick Daily New s Northern Dow ns New s Surat Basin New s Gatton, Warw ick, Stanthorpe Gatton, Lockyer and Brisbane Valley Star Style Magazine - Toow oomba Laidley Plainland Leader Stanthorpe Border Post South Burnett Times Southern Dow ns Weekly Balonne Beacon The Western Star Western Times Chinchilla New s and Murilla Advertiser Toow oomba Life

South East Qld Brisbane, Ipsw ich, Sunshine Coast Sunshine Coast Daily Noosa New s Big Rugs Sunshine Coast Sunday Coolum & North Shore New s QT - The Queensland Times Maroochy Weekly Kaw ana Weekly Caloundra Weekly Nambour Weekly Buderim Chronicle The Range New s Caboolture New s Bribie Weekly The Logan Reporter The Satellite The Ipsw ich Advertiser

North NSW Coffs Harbour, Grafton, Maclean, The Northern Star Tw eed Daily New s Rural Weekly (Northern NSW) Lismore, Byron Bay, Tw eed Heads, The Daily Examiner Tw eed Daily New s - Community Edition Gold Coast Byron Shire New s Ballina Shire Advocate The Northern Rivers Echo The Richmond River Express Examiner Coastal View s The Woolgoolga Advertiser The Coffs Coast Advocate Source: Company website

Figure 150: Sunshine Coast Daily Figure 151: The Chronicle

Source: Company website Source: Company website

APN News & Media (APN.AX / APN AU) 50 28 January 2015

Figure 152: ARM M-F circulation for daily newspapers Figure 153: ARM weekly desktop unique browsers

The Chronicle The Chronicle Sunshine Coast Daily Sunshine Coast Daily The Morning Bulletin The Morning Bulletin Daily Mercury Daily Mercury The Northern Star The Northern Star QT - The Queensland Times QT - The Queensland Times NewsMail NewsMail Fraser Coast Chronicle Fraser Coast Chronicle The Observer The Observer The Daily Examiner The Daily Examiner The Gympie Times The Gympie Times Warwick Daily News Warwick Daily News

- 5,000 10,000 15,000 20,000 - 20,000 40,000 60,000 80,000 100,000

Source: Company website Source: Company website APN Print APN has three printing facilities along the east coast of Queensland. The presses specialise in coldset, heatset, web or sheetfed printing. APN's printing presses are located at Rockhampton, Yandina and Warwick.

■ Yandina: Capacity to produce 75,000 copies per hour in colour on the coldset press + 60,000 copies per hour in the heatset press + additional copies on the eco jet inserts press. The entire site was upgraded in 2006.

■ Rockhampton: Capacity to produce 35,000 copies per hour in colour on the coldset press +14,000 copies per hour on the eco jet inserts press. The coldset press was installed in 2008.

■ Warwick: We suspect the Warwick plant, which is an older plant, will take the majority of equipment from the Toowoomba plant. This will include a coldset press that can produce 35,000 copies per hour in colour as well as an eco jet inserts press that can produce +25,000 copies per hour. Recent plant closures:

■ APN closed its printing press in Ballina in 2013. Ballina had the capacity to produce 35,000 copies per hour in colour on the coldset press +25,000 copies per hour on the eco jet inserts press.

■ APN is currently in the process of closing its printing press in Toowoomba. The plant is expected to remain open until at least the end of June 2015. Toowoomba also had the capacity to produce 35,000 copies per hour in colour on the coldset press +25,000 copies per hour on the eco jet inserts press. It had a new coldset press installed in 2008. Printing at Toowoomba included printing for The Chronicle.

Figure 154: APN printing facilities

Source: Company website

APN News & Media (APN.AX / APN AU) 51 28 January 2015

Figure 155: Yandina printing facility Figure 156: Rockhampton printing facility

Source: Company website Source: Company website

Understanding the revenue trend ARM generated $217mn revenue in 2013, representing a 13% decline. The primary driver of the weakness was a decline in advertising spend, with weaker economic conditions particularly in the mining sector resulting in lower display and employment classified advertising. Circulations were weak although outperformed the market through the period. ARM has seven of the top nine performing regional dailies in Australia.

■ Advertising revenues: Approximately $165mn or 75% of ARM's revenues come from advertising, resulting in the business being quite sensitive to fluctuations in the economic cycle. Within advertising, approximately $30mn or 20% is derived from agencies (per SMI data) and $135mn or 80% from direct. Within direct, we suspect classified advertising has been a significant but declining portion.

■ Circulation revenues: Approximately $50mn or 25% of ARM's revenues come from circulation revenues (net of newsagency fees). We estimate ARM's daily newspapers generate $1-6mn circulation revenue each or approximately $30mn revenue combined, and ARM's community newspapers and other titles generate approximately $20mn revenue combined. Whilst we expect economic conditions to remain weak and ARM's revenue to continue to decline as a result, we do not expect an acceleration in the rate of decline. In fact, we forecast a lessening in the rate of decline, as ARM improves the cross-selling opportunities with its Australian radio and outdoor businesses, launches new products, improves the effectiveness of sales and improves the traction of its online readers.

Figure 157: ARM total revenue and revenue growth (% Figure 158: ARM agency advertising revenue and revenue YoY) growth (% YoY) $350mn 30% $50mn 20% $300mn 25% $45mn 15% 20% $40mn $250mn 10% 15% $35mn $200mn 10% $30mn 5% $150mn 5% $25mn 0% 0% $20mn $100mn -5% -5% $15mn $50mn -10% -10% $10mn $0mn -15% $5mn -15% $0mn -20% 2008 2009 2010 2011 2012 2013 2014

Revenue Revenue Growth % YoY Agency Ad Revenues Agency Ad Rev Growth % YoY

Source: Company data, CSEC estimates Source: SMI, CSEC estimates

APN News & Media (APN.AX / APN AU) 52 28 January 2015

A large cost base ARM had $187mn cash costs in 2013, down 11% or -$23mn from 2012. The largest cost is employee expense, with a material number of journalists and sales staff. We estimate newsprint costs are 10-20% of the cost base. We expect ARM to continue to take cost out of the business. Areas of opportunity include:

■ Reducing the number of days physical newspapers are printed

■ Converting publications to a digital only model

■ Launching a digital paywall

■ Outsourcing administration functions

■ Closing one or several printing presses

■ Partnering with another publishing company on back end production.

Figure 159: ARM costs and cost growth (% YoY) Figure 160: ARM EBITDA and EBITDA margin $250mn 60% $120mn 50% 50% 45% $200mn $100mn 40% 40% $80mn 35% $150mn 30% 30% 20% $60mn 25% $100mn 10% 20% $40mn 15% 0% $50mn $20mn 10% -10% 5% $0mn -20% $0mn 0%

Costs Cost Growth % YoY EBITDA EBITDA Margin

Source: Company data, CSEC estimates Source: Company data, CSEC estimates

ARM revenue and EBITDA forecasts for 2015 ARM revenue forecasts for 2015 ARM generated $217mn revenue in 2013, representing a 13% decline. We forecast a lessening in the rate of decline for the reasons discussed above and forecast $198mn revenue in 2014 (-9%), and $184mn revenue in 2015 (-7%).

ARM EBITDA forecasts for 2015 ARM reported $30mn EBITDA in 2013 and a 14% EBITDA margin. This compares with a 28% average margin over the past decade. We expect ARM to continue to take cost out of the business, at a similar rate to the revenue decline. As such we forecast EBITDA to remain reasonably stable in 2015. We forecast $24mn EBITDA in 2014 and $25mn EBITDA in 2015. This represents a 14% EBITDA margin.

Likely one-off restructuring charges The closure of the Toowoomba printing plant is likely to result in one-off restructuring costs which we expect will primarily impact the FY15 result.

APN News & Media (APN.AX / APN AU) 53 28 January 2015

Valuation for ARM Peer multiples Publishing assets have historically traded on 4.0-8.0x EBITDA globally. Transaction multiples have been considerable higher.

Figure 161: Publishing global trading multiples Ticker Name Market cap EV PE PE EV/EBIT EV/EBIT EV/EBITDA EV/EBITDA EPS CAGR Net debt/EBITDA ROE ROE ROA (A$mn) (A$mn) FY15F FY16F FY15F FY16F FY15F FY16F FY14-FY16F FY15F FY15F FY16F FY15F

APN.AX APN New s & Media 813 1,230 10.1 9.9 9.6 8.7 7.6 7.0 -0.9% 2.4 15.0% 13.7% 9.4% FXJ.AX Fairfax Media 2,070 1,972 14.2 14.2 8.4 8.3 6.3 6.2 -2.3% Net cash 7.1% 7.3% 7.3% NWS.AX New s Corporation 11,164 8,001 31.4 27.7 19.9 15.5 7.7 6.9 8.1% Net cash 2.0% 2.3% 2.1% GCI Gannett 9,267 14,801 12.4 11.7 1.0 1.1 0.8 0.9 7.9% 3.1 21.9% 18.7% 5.9% NYT New York Times 2,475 2,455 28.7 25.2 11.9 10.6 8.4 7.8 10.0% Net cash 7.6% 8.9% 2.5% TSb.TO Torstar Corporation (NVS) 496 423 10.7 11.2 4.7 6.5 3.3 4.6 -16.4% Net cash 10.1% 5.4% DMGOa.L Daily Mail & General Trust 6,136 7,060 15.5 13.9 11.8 10.6 10.0 8.8 6.3% 1.1 69.3% 61.0% JPR.L Johnston Press 342 694 6.5 5.7 7.4 7.1 6.7 6.4 -3.4% 3.1 PSON.L Pearson 20,756 23,273 18.7 16.6 14.7 13.1 12.3 11.1 8.5% 1.5 10.1% 11.0% 5.4% TNI.L Trinity Mirror 842 919 5.4 5.3 5.3 5.0 4.4 4.2 0.7% 0.2 15.4% 17.1%

Average Average 5,436 6,083 15.4 14.1 9.5 8.7 6.7 6.4 1.9% 1.9 17.6% 16.2% 5.4% Median Median 2,272 2,214 13.3 12.8 9.0 8.5 7.1 6.6 3.5% 2.0 10.1% 11.0% 5.6% Source: Company data, IBES, CSEC estimates

Figure 162: Publishing transaction multiples Da te Ta rge t Ac quire r Purchase Price (A$mn) EV/EBITDA (x) EV/EBIT Australia and New Zealand Dec- 06 Rural Press Fairfax Media 2833 14.6x 16.4x Oct- 06 WAN* Seven 2706 14.5x May- 06 Border Morning Mail Fairfax 154 10.4x Apr- 04 Queensland Press* News Limited 1392 13.9x Mar- 04 Trading Post Group 636 13.8x Apr- 03 INL (NZ Publishing) Fairfax 1076 10.8x Oct- 01 Wilson & Horton APN News & Media 1235 14.3x 18.2x

International Jun- 12 Media General (newspaper assets) Berkshire Hathaway 142 4.7x Apr- 08 Stavanger Aftenblad ASA Schibsted ASA 364 13.8x Jul- 07 Trinity Mirror (South east newspapers) DMGT 150 8.8x Apr- 07 Tribune Co Multiple Acquirers 16892 10.8x 13.2x Mar- 07 Berliner Verlag Deutsche Zeitungsholding Mecom Group Plc 274 16.8x Mar- 07 Trader Media Group Apax Partners 14.9x Feb- 07 Recoletos Grupo de Comunicacion RCS MediaGroup 1840 13.8x Mar- 06 Knght Ridder McClatchy 9177 11.4x 13.6x Jan- 05 Dow Jones Twenty- First Century Fox 6658 20.8x 33.1x Jan- 05 Pulitzer Lee Enterprises 1962 17.4x 22.6x Jun- 04 Telegraph Group Press Acquisitions 1935 34.9x 46.4x Publishing Median 13 .9 x Sector Median 7 .1x Premium / (Discount) 94% Source: Company data, Bloomberg, CSEC estimates. *Partial stake acquired.

Australian Regional Media valuation We value Australian Regional Media at $100mn EV. We use a 4.0x multiple, at the lower end of its peers.

APN News & Media (APN.AX / APN AU) 54 28 January 2015

Figure 163: Australian Regional Media (ARM) valuation 2013 2014F 2015F High Case Revenue $mn 217 198 184 184 Revenue growth % -9% -7%

EBITDA $mn 30 24 25 25 EBITDA margin % 14% 12% 14% 14% EBITDA growth % -20% 4%

Multiple x 4.0 4.0 4.0 6.0

Enterprise Value $mn 120 96 100 150 Source: Company data, CSEC estimates. Note High Case a higher multiple.

APN News & Media (APN.AX / APN AU) 55 28 January 2015 NZME The New Zealand Media Market The New Zealand advertising market The New Zealand advertising market is a NZ$2.3bn market, making it 1/6 the size of the Australian and UK ad markets and 1/80 the size of the US ad market. Most advertising categories are dominated by 2-3 players; Television: TVNZ, MediaWorks and Sky Network TV, Radio: NZME and MediaWorks, Newspaper publishing: NZME and Fairfax Media.

Figure 164: Advertising expenditure in New Zealand, Figure 165: Advertising expenditure growth in New Australia and UK in US$mn at current prices Zealand, Australia, the US and UK % YoY $16,000 15% $14,000 10% $12,000 5% $10,000 $8,000 0%

$6,000 -5% $4,000 -10% $2,000 $0 -15% 2001 2003 2005 2007 2009 2011 2013 2015E 2002 2004 2006 2008 2010 2012 2014E Australia New Zealand United Kingdom Australia New Zealand United Kingdom United States

Source: Zenith Optimedia, CSEC estimates Source: Zenith Optimedia, CSEC estimates The New Zealand ad market has remained reasonably robust over the past five years.

Figure 166: New Zealand advertising expenditure in NZ$mn

Source: Company presentation

The New Zealand newspaper market The New Zealand newspaper market is a NZ$780mn industry. New Zealand newspaper advertising market The New Zealand newspaper advertising market is a NZ$500mn industry. Newspaper advertising has declined from 40% of total ad spend in 2002 to 24% in 2013, which is above global peers, as shown in the charts below.

APN News & Media (APN.AX / APN AU) 56 28 January 2015

Figure 167: Global publishing ad spend growth % YoY Figure 168: Global newspaper ad spend % of total ad spend 20% 45% 15% 40% 10% 35% 5% 30% 0% -5% 25% -10% 20% -15% 15% -20% 10% -25% -30% 5% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E2015E

Australia Canada New Zealand Australia Canada New Zealand United Kingdom United States United Kingdom United States Source: Zenith Optimedia, CSEC estimates Source: Zenith Optimedia, CSEC estimates New Zealand newspaper circulation market The New Zealand circulation market is a NZ$280mn industry. NZME and Fairfax Media are the two dominant newspaper publishers in New Zealand. They represent 75% of the market by circulation combined. NZME is the leading newspaper publisher with approximately 40% market share by circulation. Fairfax Media has 35% market share by circulation. There are a number of smaller independent operators including Allied Press (the publisher of The in ).

Figure 169: New Zealand circulation market share Figure 170: NZ Herald weekly audience ('000s)

Other 25%

NZME 40%

FXJ 35% Source: Audit Bureau of Circulations, CSEC estimates Source: Company presentation

Figure 171: NZ Herald subscriber circulation volumes Figure 172: NZ Herald subscriber yield in NZ$ (000s)

Source: Company presentation Source: Company presentation NZME’s strength is in while Fairfax Media has the leading dailies in and . There is very little overlap in the New Zealand market outside of the weekly Sunday editions where NZME and Fairfax have competing titles. NZME publishes six regional titles (out of 19 published across the country), with a focus on the North Island, as well as 23 community newspapers in the North Island. NZME also has weekly inserts. Both NZME and Fairfax Media operate digital versions of their primary newspapers; nzherald.co.nz for NZME. and stuff.co.nz for Fairfax Media. These digital sites are currently free of charge and have a national focus.

APN News & Media (APN.AX / APN AU) 57 28 January 2015

Figure 173: NZME and Fairfax Media's publishing portfolio NZME Fairfax Media

Title Region Publication Title Region Publication

Metro Auckland Daily The Dominion Post Wellington Daily Herald on Sunday Auckland Weekly Christchurch Daily Sunday New s Wellington Weekly Sunday Star-Times Christchurch Weekly

Regional The Times Daily The Hamilton Daily Whangarei Daily Taranaki Daily Times New Plymouth Daily The Daily Post Rotorua Daily Manaw atu Standard Palmerston North Daily Haw kes Bay Today Napier/Hastings Daily Daily Whanganui Daily Nelson Daily The Wairarapa Times-Age Masterton Daily The Herald Timaru Daily The Blenheim Daily

Community 23 community papers incl: 60+ community papers The Northland Age Kaitaia Bi-w eekly Horow henua Chronicle Levin Bi-w eekly Source: Company websites

The New Zealand radio market The New Zealand radio advertising market is a NZ$270mn industry. Radio advertising revenues have remained reasonably robust in New Zealand over the past four years, averaging 2% growth. This is consistent with growth rates in the UK, slightly above the US and slightly below Australia. As a result radio ad revenues as a percentage of total spend has remained at 12% in New Zealand. This is above the global average of 10%. We suspect the reason for radio's strength in New Zealand is due to the higher proportion of small to medium businesses which have more targeted marketing needs.

Figure 174: Global radio ad spend US$mn (current prices) Figure 175: Global radio ad spend % of total ad spend $25,000 18% 16% $20,000 14% 12% $15,000 10%

$10,000 8% 6% $5,000 4% 2% $0 0% 2001 2003 2005 2007 2009 2011 2013 2015E 2001 2003 2005 2007 2009 2011 2013 2015E Australia Canada Hong Kong Australia Canada Hong Kong New Zealand United Kingdom United States New Zealand United Kingdom United States Source: Zenith Optimedia, CSEC estimates Source: Zenith Optimedia, CSEC estimates NZME and MediaWorks are the dominant players in the New Zealand radio market, with approximately 45% market share each. NZME operates seven national radio networks whilst MediaWorks operates nine. NZME is dominant in Auckland and Wellington whilst MediaWorks is dominant in Christchurch.

APN News & Media (APN.AX / APN AU) 58 28 January 2015

Figure 176: NZME and MediaWorks' radio portfolio NZME MediaWorks

Station Format Station Format

New stalk ZB Talk Rock Coast Easy Listening The Edge Contemporary Contemporary Breeze Easy Listening ZM Contemporary The Sound Easy Listening Hip Hop More FM Contemporary Sport Radio Live Talk Rock Mai FM Hip Hop Mix Easy Listening George FM Contemporary iHeart Radio Digital Kiw i FM Contemporary Source: Company websites

The New Zealand online and e-commerce market The New Zealand online advertising market is a NZ$470mn market. The market has been growing rapidly and now represents approximately 20% of total advertising spend. This is below the UK, US, Australia, Canada and China.

Figure 177: Global online ad spend US$mn (current Figure 178: Global online ad spend % of total ad spend prices) $120,000 50% $100,000 40% $80,000 30% $60,000

$40,000 20%

$20,000 10% $0 0% -$20,000 2001 2003 2005 2007 2009 2011 2013 2015E Australia Canada China Australia Canada China New Zealand United Kingdom United States New Zealand United Kingdom United States Source: Zenith Optimedia, CSEC estimates Source: Zenith Optimedia, CSEC estimates NZME is the #6 media company by monthly unique browsers, behind Google, , , MSN/Windows and YouTube.

Figure 179: NZME digital reach

Source: Company presentation The New Zealand e-commerce market is approximately NZ$4bn, according to Nielsen.

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NZME Overview of NZME NZME is a leading New Zealand multi-media business, producing extensive content in news, sport and entertainment for an extensive audience of 3.2 million New Zealanders per week across its newspaper, radio and e-commerce businesses. The majority of NZME's revenues are derived from advertising (approximately 2/3), with NZME accounting for 13-14% of total ad spend in New Zealand.

Figure 180: NZME revenues in NZ$mn FY11 – FY15F Figure 181: NZME advertising revenues in NZ$mn and % of total revenue $350mn 69% 68% $330mn 67% 66% $310mn 65% 64% $290mn 63% 62% $270mn 61% 60% $250mn 59% FY11 FY12 FY13 FY14F FY15F Advertising % of total Source: Company presentation Source: Company presentation By division, NZME derives the majority of its revenue and EBITDA from publishing, however this has and is expected to continue to decrease over time as radio and e- commerce grow.

Figure 182: NZME revenues in NZ$mn FY11 – FY15F Figure 183: NZME EBITDA in NZ$mn FY11 – FY15F $600mn $120mn

$500mn $100mn $80mn $400mn $60mn $300mn $40mn $200mn $20mn $100mn $0mn

$0mn -$20mn FY11 FY12 FY13 FY14F FY15F FY11 FY12 FY13 FY14F FY15F Publishing Radio E-Commerce Publishing Radio E-Commerce Source: Company presentation Source: Company presentation. Note EBITDA is pre corporate costs.

Figure 184: NZME revenue mix FY11 – FY15F Figure 185: NZME EBITDA mix FY11 – FY15F 100% 100%

80% 80%

60% 60%

40% 40%

20% 20%

0% 0% FY11 FY12 FY13 FY14F FY15F FY11 FY12 FY13 FY14F FY15F Publishing Radio E-Commerce Publishing Radio E-Commerce Source: Company presentation Source: Company presentation. Note EBITDA is pre corporate costs.

APN News & Media (APN.AX / APN AU) 60 28 January 2015

Publishing NZME is the leading newspaper publisher in New Zealand with approximately 40% market share by circulation. NZME publishes six regional titles (out of 19 published across the country), with a focus on the North Island, as well as 23 community newspapers in the North Island. NZME also has weekly inserts. NZME has a digital version of its primary newspaper; nzherald.co.nz. We suspect NZME's national newspapers represent the majority of publishing revenues and have a higher margin (given fewer titles and lower transportation costs). NZME Publishing generated NZ$306.2mn revenue and NZ$60.3mn EBITDA in 2013. Advertising revenues comprise 58% of the mix, with circulation revenues comprising 31% and digital/other comprising 11% (refer Figure 186). The company expects NZME publishing to generate NZ$291.9mn revenue (-5%) and NZ$51.7mn EBITDA (-14%) in 2014 and NZ$290.1mn revenue (-1%) and NZ$46.4mn EBITDA (-10%) in 2015.

Figure 186: NZME publishing revenues in NZ$mn FY11 – Figure 187: NZME publishing EBITDA in NZ$mn and FY15F EBITDA margin % FY11 – FY15F $400mn $90mn 25% $350mn $80mn 20% $300mn $70mn $60mn $250mn 15% $50mn $200mn $40mn $150mn 10% $30mn $100mn $20mn 5% $50mn $10mn $0mn $0mn 0% FY11 FY12 FY13 FY14F FY15F FY11 FY12 FY13 FY14F FY15F Advertising Circulation Digital/Other EBITDA EBITDA Margin Source: Company presentation Source: Company presentation. Note EBITDA is pre corporate costs.

Radio NZME has approximately 45% share of the New Zealand radio market. It is dominant in Auckland and Wellington. NZME operates eight core radio stations (seven national networks) including two of the top three national radio networks by ratings share (NewstalkZB and Coast). It operates one talkback station (NewstalkZB), one sports station (RadioSport) and six entertainment/music stations (Coast, The Hits, ZM, Hauraki, Flava and Mix 98.2). In 2014, NZME re-launched a number of its radio stations with new talent to target a younger average demographic with enhanced advertiser appeal. NZME Radio generated NZ$128.1mn revenue and NZ$23.5mn EBITDA in 2013. The company expects NZME Radio to generate NZ$134.6mn revenue (+5%) and NZ$26.2mn EBITDA (+11%) in 2014 and NZ$143.1mn revenue (+6%) and NZ$27.5mn EBITDA (+5%) in 2015.

APN News & Media (APN.AX / APN AU) 61 28 January 2015

Figure 188: NZME radio revenues in NZ$mn FY11 – FY15F Figure 189: NZME radio EBITDA in NZ$mn and EBITDA margin % FY11 – FY15F $160mn $30mn 20% $140mn $25mn 19% $120mn $20mn 18% $100mn $80mn $15mn 17% $60mn $10mn 16% $40mn $5mn 15% $20mn $0mn $0mn 14% FY11 FY12 FY13 FY14F FY15F FY11 FY12 FY13 FY14F FY15F Advertising Digital/Other EBITDA EBITDA Margin Source: Company presentation Source: Company presentation. Note EBITDA is pre corporate costs.

Figure 190: NZME's portfolio of radio brands

Source: Company presentation

E-Commerce GrabOne is the largest component of the e-commerce division. It is the largest daily deals website in New Zealand with >70% market share. GrabOne was acquired in 2010 with Sella, Adhub and Flicks and has 160,000 unique daily visitors and >1.4 million registered users. Over 16,000 merchants have sold products on GrabOne. GrabOne's main competitor is Trade Me. NZME e-commerce generated NZ$21.6mn revenue (5% to group) and NZ$5.7mn EBITDA (6% to group) in FY13. The company expects NZME e-commerce to generate NZ$20.2mn revenue (-6%) and NZ$4.0mn EBITDA (-30%) in 2014 and NZ$19.2mn revenue (-5%) and NZ$4.0mn EBITDA (static) in 2015.

APN News & Media (APN.AX / APN AU) 62 28 January 2015

Figure 191: NZME e-commerce revenues in NZ$mn FY11 – Figure 192: NZME e-commerce EBITDA in NZ$mn and FY15F EBITDA margin % FY11 – FY15F $25mn $7mn 30% $6mn 25% $20mn $5mn 20% $4mn 15% $15mn $3mn 10% $2mn 5% $10mn $1mn 0% $0mn -5% $5mn -$1mn -10% -$2mn -15% $0mn FY11 FY12 FY13 FY14F FY15F FY11 FY12 FY13 FY14F FY15F EBITDA EBITDA Margin Source: Company presentation Source: Company presentation. Note EBITDA is pre corporate costs.

Integration and transformation Integrating the New Zealand business to become platform agnostic NZME is integrating its core New Zealand businesses in publishing, radio and e- commerce in order to become more content and solutions focused for the audience as well as advertising and platform agnostic. The new structure will be defined by portals for news, sport and entertainment and will focus on delivering a large and targeted audience to each client. New revenue streams such as events and activation will fall into this model. The rationale for the integration is to (1) leverage content, (2) cross-sell to increase wallet share, and (3) take advantage of overlapping opportunities. We suspect the NZME integration and transformation will result in both revenue and cost synergies. NZME's brands reach >85% of the North Island per month, >70% of the per month, ~90% of Auckland per month and ~14% of total New Zealand advertising spend per year. NZME News reaches 2.2mn New Zealanders, NZME Sport reaches 1mn New Zealanders and NZME Entertainment reaches 2.8mn New Zealanders.

Figure 193: NZME's integrated business model

Source: Company presentation

APN News & Media (APN.AX / APN AU) 63 28 January 2015

Digital, activation and events to drive growth in NZME NZME is expecting its core business to decline in 2015, primarily driven by continued declines in its publishing business as a result of structural headwinds. Therefore, the company is focused on driving new revenue streams to provide an offset to this decline and deliver revenue and earnings growth over the medium term. Key growth initiatives as outlined by the company are as follows:

■ Digital Publishing: Driving digital revenues from key publications such as the NZHerald.co.nz.

■ E-Commerce: Growing GrabOne into a stronger group buying site.

■ iHeart Radio: Driving audience and advertising revenues. NZME holds a 10-year exclusive sub-licence to operate iHeartRadio in New Zealand, having commenced in September 2013.

■ Activations: Leveraging talent through experiential, video or social to drive additional brand awareness. Activations undertaken by NZME include Burger King, , Watties, Spark, and Tui.

■ Events: Organising events such as concerts, shows, races and award ceremonies.

Figure 194: NZME growth initiatives – revenues Figure 195: NZME growth initiatives – revenues $600mn

$500mn

$400mn

$300mn

$200mn

$100mn

$0mn FY11 FY13 FY15F Core Business New Initiatives & Digital Source: Company presentation Source: Company data

Figure 196: NZME FY15F revenue mix Figure 197: NZME medium term revenue mix target

Source: Company presentation Source: Company presentation

Paywall under consideration NZME has indicated that it is considering digital subscription options and has engaged Mather Economics to advise on a digital subscription model. The company is considering the launch of a targeted digital subscription model in 2015, which we suspect will be a trial for the international audience of the NZHerald. As seen in global case studies, some digital subscription models can be effective at stabilising and growing circulations as well as actively managing yield.

APN News & Media (APN.AX / APN AU) 64 28 January 2015

There are two key digital subscription models globally; a metered paywall or a full paywall. Financial results have highlighted that a metered paywall has been the more effective approach, where the reader has free access to a limited number of articles each month and then pays to receive content beyond this point. Global examples of a metered paywall include The Sydney Morning Herald (Fairfax Media), (Fairfax Media), The New York Times and Financial Times. Freemium models or full paywalls have been less successful at curbing the rate of decline in circulation (refer Figure 198). For The New York Times and Financial Times, digital subscriptions have grown strongly (refer Figure 199).

Figure 198: Print circulation growth rates Figure 199: Digital subscribers and growth rates 40% 1,000,000 100%

20% 800,000 80%

600,000 60% 0% 400,000 40%

-20% 200,000 20%

-40% 0 0% Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14

New York Times The Sun NYT# FT# Times# The Times Financial Times NYT% FT% Times%

Source: Company data Source: Company data Both Fairfax Media and The New York Times were relatively late adopters of paid digital subscriptions with paywalls implemented in March 2013 and March 2011, respectively. This strategy has proven more successful in maintaining post-paywall site traffic and digital advertising than the strict paywalls (i.e., no free access) initially favoured by News Corporation (i.e., Times of , Australian). A potential digital subscription model for nzherald.co.nz is likely to be more similar to Fairfax Media's The Sydney Morning Herald or The Age than The New York Times or Financial Times, in our view. The key differences between Fairfax Media's The Sydney Morning Herald or The Age and The New York Times are FXJ's greater reliance on advertising revenues, FXJ's greater reliance on classified advertising and FXJ's likely smaller following in international markets for The SMH and The Age together with Fairfax’s less unique offer, in our view.

Figure 200: FXJ Metro FY14A revenue mix Figure 201: New York Times Co FY13A revenue mix Other Other 14% 6%

Circulation Advertising 52% 22% Circulation Advertising 64% 42%

Source: Company data Source: Company data

APN News & Media (APN.AX / APN AU) 65 28 January 2015

Figure 202: FXJ Metro estimated advertising mix Figure 203: New York Times Co FY13A advertising mix Classified 9%

Classified National Local/Other 33% 41% 13%

National 78% Local/Other 26% Source: Company data, CSEC estimates. Note: Sydney and Source: Company data Melbourne publishing only. Excludes online classifieds. As such, we view The New York Times case study as a best case scenario and Fairfax Media's The Sydney Morning Herald or The Age as a more likely scenario for NZME's potential implementation of a digital subscription model. The amount of information on success of Fairfax’s implementation is still quite limited, while the earlier implementation by The New York Times does provide greater evidence of what is possible.

Figure 204: New York Times M-F circulation Figure 205: New York Times Co revenue and margins 2,500,000 1,800 12% Print Digital 1,600 10% 2,000,000 1,400 1,200 8%

1,500,000 1,000 6% 800 600 4% 1,000,000 400 2% 200 500,000 0 0% 2009 2010 2011 2012 2013 0 Revenue (US$mn) EBIT Margin (%) (RHS) Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Source: Company data, Audit Bureau of Circulations Source: Company data. Looking at the results for The New York Times highlights:

■ Circulation volumes grew following the implementation of paywall, with print circulations actually starting to stabilise. Digital subs now represent over 60% of total circulation volumes;

■ Total revenues (circulation and advertising) have been relatively stable following the implementation of a paywall. New York Times has been able to achieve this on the back of circulation revenue growth that has offset the ongoing declines it has experienced in advertising revenues; and

■ EBIT margins have been robust since early 2011 when the paywall was implemented and have shown some modest growth. Fairfax Media's initial digital subscription model for international readers of The Sydney Morning Herald and The Age was implemented in March 2013, for users in North America, Europe and the Middle East. After a successful trial, Fairfax Media implemented a paywall for local readers in July 2013. Readers have free access for the first 30 articles and then pay $15 per month (desktop only). The paywall pricing was at a premium to its peer News Corporation titles. Fairfax Media's paywall pricing differs across devices and whether subscriptions are bundled or not. (Refer charts below).

APN News & Media (APN.AX / APN AU) 66 28 January 2015

Figure 206: FXJ's paywall for The SMH and The Age Figure 207: FXJ's paywall for The SMH and The Age

Source: Company data Source: Company data The financial results for FXJ's SMH and The Age as at August 2014 are as follows:

■ Circulation revenues grew 9% in FY14 with yield improvement in print and the launch of a digital subscription model. The Sydney Morning Herald and The Age have over 140,000 paid digital subscribers with over 111,000 existing print subscribers signed up for digital access;

■ Total metropolitan media revenues for Fairfax Media continued to decline (-9%) due to a 14% decline in advertising revenues, highlighting that a paywall in itself cannot turn around the decline associated with advertising heavy traditional print newspapers;

■ EBIT margins grew from 4% to 8% from FY13 to FY14 due to a significant reduction in operating costs. EBIT dollars increased despite additional costs associated with implementation of the paywall; and

■ Importantly, through the use of a metered paywall approach, Fairfax was able to maintain growth in digital display advertising during its implementation of the paywall.

Figure 208: Fairfax Media metro media revenue breakdown for FY14

Source: Company data We envisage that a successful implementation of a digital subscription model for NZME will stabilise its circulation revenues in time.

APN News & Media (APN.AX / APN AU) 67 28 January 2015

NZME revenue and EBITDA forecasts for 2015 NZME revenue and EBITDA forecasts for 2015 NZME has provided revenue and EBITDA guidance for FY14F and FY15F. Revenues are expected to be NZ$446.7mn in FY14F and NZ$452.4mn in FY15F. This includes NZ$56.4mn growth revenue for digital, activations and events in FY15F. EBITDA is expected to be NZ$74.6mn in FY14F and NZ$70.8mn in FY15F.

Figure 209: NZME company forecasts FY11 FY12 FY13 FY14F FY15F Revenues Publishing NZ$mn 349.5 328.6 306.2 291.9 290.1 Radio NZ$mn 120.9 118.3 128.1 134.6 143.1 E-Commerce NZ$mn 13.2 20.4 21.6 20.2 19.2 Total NZ$mn 483.6 467.3 455.9 446.7 452.4

EBITDA Publishing NZ$mn 78.7 61.3 60.3 51.7 46.4 Radio NZ$mn 22.1 19.3 23.5 26.2 27.5 E-Commerce NZ$mn -1.1 4.2 5.7 4.0 4.0 Corporate costs NZ$mn -6.8 -6.8 -6.8 -7.4 -7.1 Total NZ$mn 92.9 78 82.7 74.6 70.8

EBITDA Margin Publishing % 23% 19% 20% 18% 16% Radio % 18% 16% 18% 19% 19% E-Commerce % -8% 21% 26% 20% 21% Total % 19% 17% 18% 17% 16%

Revenue Growth Publishing % -6% -7% -5% -1% Radio % -2% 8% 5% 6% E-Commerce % 55% 6% -6% -5% Total % -3% -2% -2% 1%

EBITDA Growth Publishing % -22% -2% -14% -10% Radio % -13% 22% 11% 5% E-Commerce % na 36% -30% 0% Total % -16% 6% -10% -5% Source: Company data, CSEC estimates

Figure 210: NZME revenues in NZ$mn FY11 – FY15F Figure 211: NZME EBITDA in NZ$mn FY11 – FY15F $600mn $120mn

$500mn $100mn $80mn $400mn $60mn $300mn $40mn $200mn $20mn $100mn $0mn

$0mn -$20mn FY11 FY12 FY13 FY14F FY15F FY11 FY12 FY13 FY14F FY15F Publishing Radio E-Commerce Publishing Radio E-Commerce Source: Company presentation Source: Company presentation. Note EBITDA is pre corporate costs.

APN News & Media (APN.AX / APN AU) 68 28 January 2015

There will be a NZ$54mn non-cash impairment charge relating to its newspaper mastheads in NZ for FY14.

Valuation for NZME Peer multiples New Zealand media companies have historically traded on 7.0-15.0x EBITDA, however, there is a divergence between traditional and digital media companies.

Figure 212: New Zealand global trading multiples Ticker Name Market cap EV PE PE EV/EBIT EV/EBIT EV/EBITDA EV/EBITDA EPS CAGR Net debt/EBITDA ROE ROE ROA (A$mn) (A$mn) FY15F FY16F FY15F FY16F FY15F FY16F FY14-FY16F FY15F FY15F FY16F FY15F

DIL.NZ Diligent Board 457 382 42.3 29.4 18.3 12.7 14.7 10.3 49.6% Net cash 30.6% 29.7% 18.8% SKT.NZ SKY Netw ork 2,194 2,506 13.2 12.9 10.2 9.9 7.2 7.0 4.6% 0.9 13.9% 13.6% 27.3% TME.AX Trade Me Group Ltd 1,393 1,501 18.2 17.1 13.5 12.7 11.9 11.1 4.1% 0.8 11.9% 12.4% 26.2% XRO.NZ Xero 1,918 1,791 -33.5 -30.9 -29.5 -29.2 -40.1 -49.7 25.2% Net cash -27.7% -34.8% -52.3%

Average Average 1,490 1,545 10.1 7.1 3.1 1.5 -1.6 -5.4 20.9% 0.9 7.2% 5.2% 5.0% Median Median 1,655 1,646 15.7 15.0 11.8 11.3 9.6 8.6 14.9% 0.9 12.9% 13.0% 22.5% Source: Company data, IBES, CSEC estimates

NZME valuation We value NZME at NZ$425mn EV or A$401mn EV. We use a 6.0x EBITDA multiple which is a slight discount to Sky Network TV given the contribution from lower margin publishing assets.

Figure 213: NZME valuation 2013 2014F 2015F High Case AUDNZD $ 1.12 1.06 1.06 1.06

Revenue NZ$mn 456 447 452 452 Revenue growth % -2% 1% Revenue A$mn 407 422 427 427 Revenue growth % 4% 1%

EBITDA NZ$mn 83 75 71 90 EBITDA margin % 18% 17% 16% 20% EBITDA growth % -10% -5% EBITDA A$mn 74 70 67 85 EBITDA growth % -5% -5%

Multiple x 6.0 6.0 6.0 7.0

Enterprise Value NZ$mn 496 447 425 633

Enterprise Value A$mn 443 422 401 597 Source: Company data, CSEC estimates. Note High Case assumes higher multiple and higher EBITDA margin.

APN News & Media (APN.AX / APN AU) 69 28 January 2015 APN Group earnings and valuation APN earnings forecasts We expect APN's EBITDA to remain reasonably stable in FY14 and deliver 14% growth in FY15. We forecast Adshel EBITDA growth of 28% in FY15 which is not included in group EBITDA (in associate income). Figure 214 highlights our segmental revenue and EBITDA forecasts for 2014 and 2015.

Figure 214: APN segmental revenue and EBITDA forecasts 2013 2014F 2015F High Case

Revenue Australian Radio Netw ork A$mn 149 187 252 252 HK Outdoor A$mn 44 49 54 54 Australian Regional Media A$mn 217 198 184 184 NZME A$mn 407 422 427 427 Total reported revenue A$mn 817 856 917 917 Adshel @ 100% revenues A$mn 149 152 183 200

EBITDA Australian Radio Netw ork A$mn 58 67 91 101 HK Outdoor A$mn 2 4 6 6 Australian Regional Media A$mn 30 24 25 25 NZME * A$mn 74 70 67 85 Australian Corporate Costs / Other A$mn -11 -9 -10 -10 Total reported EBITDA A$mn 152 156 178 207 Adshel @ 100% EBITDA A$mn 40 40 51 60 Adshel @ 50% EBITDA A$mn 20 20 26 30

Adshel Associate Income A$mn 11 10 14 16 EBITDA incl Associates A$mn 163 167 192 223

EBITDA Margin Australian Radio Netw ork % 39% 36% 36% 40% HK Outdoor % 4% 8% 11% 11% Australian Regional Media % 14% 12% 14% 14% NZME % 18% 17% 16% 20% Total % 19% 18% 19% 23% Adshel % 27% 26% 28% 30%

Revenue Growth Australian Radio Netw ork % 26% 35% HK Outdoor % 11% 10% Australian Regional Media % -9% -7% NZME % 4% 1% Total % 5% 7% Adshel % 2% 20%

EBITDA Grow th Australian Radio Netw ork % 16% 35% HK Outdoor % 122% 50% Australian Regional Media % -20% 4% NZME % -5% -5% Total % 3% 14% Adshel % 0% 28% Source: Company data, CSEC estimates. * NZME includes A$7mn corporate costs in forecasts. AUDNZD exchange rates assumed: $1.12 for 2013 and $1.06 for 2014, 2015 and High Case. Revenue excludes other revenue.

APN News & Media (APN.AX / APN AU) 70 28 January 2015

APN Group valuation We have a sum-of-the-parts valuation of $1.11 per share for APN, with a stretch valuation of $1.53 per share. We have a DCF valuation of $1.10 per share (WACC 10%, terminal growth 2%). We apply a 1% ESG discount to our sum-of-the-parts valuation to arrive at our $1.10 per share target price for APN.

Figure 215: APN Group valuation 2013 2014F 2015F High Case

EBITDA Australian Radio Netw ork A$mn 58 67 91 101 Adshel @ 50% EBITDA A$mn 20 20 26 30 HK Outdoor A$mn 2 4 6 6 Australian Regional Media A$mn 30 24 25 25 NZME * A$mn 74 70 67 85 Australian Corporate Costs / Other A$mn -11 -9 -10 -10

EBITDA Multiple Australian Radio Netw ork x 9.0 9.0 9.0 9.0 Adshel x 10.0 10.0 10.0 10.0 HK Outdoor x 10.0 10.0 10.0 10.0 Australian Regional Media x 4.0 4.0 4.0 6.0 NZME x 6.0 6.0 6.0 7.0 Australian Corporate Costs / Other x 9.0 9.0 9.0 9.0

Enterprise Value Australian Radio Netw ork A$mn 522 604 816 907 Adshel A$mn 200 200 255 300 HK Outdoor A$mn 18 40 60 60 Australian Regional Media A$mn 120 96 100 150 NZME A$mn 443 422 401 597 Australian Corporate Costs / Other A$mn -103 -82 -92 -92 TOTAL ENTERPRISE VALUE A$mn 1200 1280 1540 1923

Net Debt A$mn 432 418 400 350 ND/Reported EBITDA x 2.8 2.7 2.2 1.7 ND/EBITDA incl Associates x 2.7 2.5 2.1 1.6

EQUITY VALUE A$mn 1140 1573

Shares on issue mn 1029 1029

Value per share $/share $1.11 $1.53 Source: Company data, CSEC estimates. * NZME includes A$7mn corporate costs in forecasts. AUDNZD exchange rates assumed: $1.12 for 2013 and $1.06 for 2014, 2015 and High Case.

APN News & Media (APN.AX / APN AU) 71 28 January 2015

Reference Appendix Our new “Total return forecast in perspective” chart helps visualize CSEC and consensus views of a company’s 12-month return within the context of forecasting risks and its historical trading pattern: 12mth Volatility is calculated as the annualised standard deviation of weekly total return series over the past 12 months. It illustrates variability of stock returns; in other words, risk. The way to think about it is that one would rather take 10% forecast return from a stock that has 20% volatility, than from the stock that has 40% volatility. The shaded area shows the one standard deviation range based on past 12 months volatility. In statistical terms, once you make a number of brave assumptions, there is a 68% probability that the share price will end up inside that range in 12 months time. 52wk Hi-Lo is maximum and minimum daily closing price over the past 52 weeks. It is often handy to know the price momentum especially when the stock is trading close to its highs and lows: Is the stock trading close to its peak? Is the momentum against the stock? *Consensus is IBES consensus supplied by Thomson Reuters. IBES is a survey of sell side research analysts, collecting a few dozen data points such as EPS, DPS, Sales, Target Price, ROE and so on. *Mean is the average of target returns, while the shaded area around the mean represents the range of estimates from the lowest to the highest estimate. This aids visualisation of a number of important factors such as: the range of analyst estimates; where CSEC’s estimates on this stock sit relative to consensus; and where the share price is relative to consensus mean and consensus range target. Target return is calculated as capital gain plus forecast dividend yield (net) over the next 12 months. For “CSEC tgt” we have used CSEC’s target price and CSEC forecast for 12-month forward dividend, grossed up for franking. For the consensus mean and range, we have used consensus target price and consensus dividend forecasts for 12 month forward.

APN News & Media (APN.AX / APN AU) 72 28 January 2015

Companies Mentioned (Price as of 28-Jan-2015) 21st Century Fox Inc. (FOXA.OQ, $34.16) APN News & Media (APN.AX, A$0.8, OUTPERFORM[V], TP A$1.1) APN Outdoor Grp (APO.AX, A$2.64) Clear Ch Outdoor (CCO.N, $9.39) Cumulus Media (CMLS.OQ, $3.75) Daily Mail & General Trust (DMGOa.L, 844.0p) Diligent Board (DIL.NZ, NZ$5.58) Fairfax Media (FXJ.AX, A$0.88) Gannett (GCI.N, $32.3) JCDecaux S.A. (JCDX.PA, €30.78) Johnston Press (JPR.L, 168.5p) Lamar Advertising (LAMR.OQ, $56.43) Macquarie Radio (MRN.AX, A$1.15) New York Times (NYT.N, $13.13) News Corporation (NWS.AX, A$18.78) Outfront Media (OUT.N, $28.23) Pandora Media (P.N, $17.71) Pearson (PSON.L, 1321.0p) Prime Media Group (PRT.AX, A$0.84) SKY Network (SKT.NZ, NZ$6.11) Ltd (SWM.AX, A$1.25) Sirius XM Holdgs (SIRI.OQ, $3.64) Southern Cross Media Group (SXL.AX, A$1.06) Telstra Corporation (TLS.AX, A$6.49) Torstar Corporation (NVS) (TSb.TO, C$6.93) Trade Me Group Ltd (TME.NZ, NZ$3.75) Trinity Mirror (TNI.L, 170.5p) Westfield Corporation (WFD.AX, A$9.81) Xero (XRO.NZ, NZ$15.85) oOh!Media (OML.AX, A$1.99)

CSEC Disclosure Appendix

Important Global Disclosures I, Samantha Carleton, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including CSEC’s revenues, a portion of which is generated by Credit Suisse and CSEC’s investment banking activities. CSEC Analysts involved in the preparation of this report may be co-located with Credit Suisse analysts.

3-Year Price and Rating History for APN News & Media (APN.AX)

APN.AX Closing Price Target Price Date (A$) (A$) Rating 24-Feb-12 0.79 1.12 O 02-May-12 0.79 1.03 27-Nov-12 0.30 0.22 U * 16-Aug-13 0.33 0.28 19-Feb-14 0.41 0.50 O 14-Mar-14 0.62 NR † 16-Mar-14 0.62 0.50 O *† 28-Apr-14 0.70 0.81 † 27-Jun-14 0.78 1.00 †

04-Sep-14 0.80 R † OUTPERFORM 11-Sep-14 0.83 1.00 O † UNDERPERFORM N O T RA T ED * Asterisk signifies initiation or assumption of coverage. REST RICT ED

†Indicates CSEC coverage

APN News & Media (APN.AX / APN AU) 73 28 January 2015

3-Year Price and Rating History for Prime Media Group (PRT.AX)

PRT.AX Closing Price Target Price Date (A$) (A$) Rating 28-Feb-12 0.73 0.80 O 27-Nov-12 0.80 0.86 N * 27-Feb-13 1.05 1.05 12-Aug-13 1.07 1.20 O 19-Nov-13 1.02 1.10 N 26-Feb-14 0.94 1.15 O 14-Mar-14 0.92 NR † 16-Mar-14 0.92 1.15 O *† 20-Nov-14 0.86 1.05 † * Asterisk signifies initiation or assumption of coverage. OUTPERFORM NEUTRAL †Indicates CSEC coverage N O T RAT ED

3-Year Price and Rating History for Seven West Media Ltd (SWM.AX)

SWM.AX Closing Price Target Price Date (A$) (A$) Rating 06-Feb-12 3.32 4.39 O 27-Nov-12 1.64 1.80 * 20-Feb-13 2.34 3.00 30-Jan-14 2.12 2.60 18-Feb-14 2.14 2.50 14-Mar-14 1.96 NR † 16-Mar-14 1.96 2.50 O *† 16-Jun-14 1.71 2.30 † 12-Nov-14 1.76 2.00 † * Asterisk signifies initiation or assumption of coverage. OUTPERFORM N O T RAT ED †Indicates CSEC coverage

3-Year Price and Rating History for Southern Cross Media Group (SXL.AX)

SXL.AX Closing Price Target Price Date (A$) (A$) Rating 06-Feb-12 1.20 1.42 O 27-Nov-12 1.08 1.00 U * 19-Feb-13 1.35 1.12 14-Aug-13 1.60 1.40 14-Mar-14 1.39 NR † 16-Mar-14 1.39 1.40 U *† 09-May-14 1.20 1.20 † 30-May-14 1.10 1.13 † 20-Aug-14 1.18 1.10 †

21-Oct-14 0.86 0.85 † OUTPERFORM UNDERPERFORM * Asterisk signifies initiation or assumption of coverage. N O T RAT ED †Indicates CSEC coverage

APN News & Media (APN.AX / APN AU) 74 28 January 2015

3-Year Price and Rating History for Trade Me Group Ltd (TME.NZ)

TME.NZ Closing Price Target Price Date (NZ$) (NZ$) Rating 20-Feb-13 4.31 4.60 N 21-Aug-13 4.48 4.25 U 19-Feb-14 3.83 3.60 14-Mar-14 3.67 NR † 20-Aug-14 3.61 3.60 U † * Asterisk signifies initiation or assumption of coverage. †Indicates CSEC coverage

NEUTRAL UNDERPERFORM N O T RAT ED

The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including CSEC's total revenues, a portion of which are generated by CSEC's investment banking activities. Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors. As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10- 15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark. Restricted (R) : In certain circumstances, CSEC policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of CSEC's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

CSEC's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 33% (0% banking clients) Neutral/Hold* 47% (0% banking clients) Underperform/Sell* 15% (0% banking clients) Restricted 5% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

APN News & Media (APN.AX / APN AU) 75 28 January 2015

CSEC’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. CSEC's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail on CSEC's Policies for Managing Conflicts of Interest in connection with Investment Research please contact (+612) 8205 4381. CSEC does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Price Target: (12 months) for APN News & Media (APN.AX) Method: Our target price of $1.10 per share for APN News & Media is based on our Sum of the Parts Valuation of $1.11 per share, less a 1% ESG discount. Risk: The main risks to our $1.10 per share target price for APN are changes to advertising spend, print circulation trends, changes in radio market share or M&A.

See the Companies Mentioned section for full company names As of the date of this report, CSEC makes a market in the following subject companies (TME.NZ).

Important Regional Disclosures To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Credit Suisse Emerging Companies (Australia) Pty Limited ...... Samantha Carleton ; Michael O'Meara

APN News & Media (APN.AX / APN AU) 76 28 January 2015 Credit Suisse Disclosure Appendix As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10- 15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 46% (53% banking clients) Neutral/Hold* 38% (50% banking clients) Underperform/Sell* 14% (44% banking clients) Restricted 2% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and- analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names The subject company (APN.AX, DMGOa.L, DIL.NZ, TLS.AX, WFD.AX) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (APN.AX, DMGOa.L, TLS.AX, WFD.AX) within the past 12 months. Credit Suisse has managed or co-managed a public offering of securities for the subject company (DMGOa.L) within the past 12 months.

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Credit Suisse has received investment banking related compensation from the subject company (APN.AX, DMGOa.L, TLS.AX, WFD.AX) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (APN.AX, DMGOa.L, DIL.NZ, JCDX.PA, NWS.AX, P.N, PSON.L, SWM.AX, TLS.AX, WFD.AX, XRO.NZ) within the next 3 months. As of the date of this report, Credit Suisse makes a market in the following subject companies (FOXA.OQ, P.N). As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (XRO.NZ). Credit Suisse has a material conflict of interest with the subject company (DMGOa.L) . Credit Suisse, in its capacity as corporate broker to DMGT, is a connected party under the UK Takeover Panel Rules to the announced possible buy-out of the outstanding voting shares of DMGT by Rothermere Continuation Limited. Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report. The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (FOXA.OQ, APN.AX, DMGOa.L, DIL.NZ, FXJ.AX, JCDX.PA, NWS.AX, P.N, PSON.L, PRT.AX, SKT.NZ, SWM.AX, SXL.AX, TLS.AX, WFD.AX, XRO.NZ) within the past 12 months Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml. Credit Suisse Securities (Europe) Limited (Credit Suisse) acts as broker to (DMGOa.L). The following disclosed European company/ies have estimates that comply with IFRS: (JCDX.PA, PSON.L). Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (DMGOa.L, SKT.NZ) within the past 3 years. As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report. Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. Credit Suisse Emerging Companies (Australia) Pty Limited ("CSEC") is the research report provider in relation to this report. Credit Suisse has disclosed its conflicts of interest also in this report as Credit Suisse is a material shareholder in CSEC; the distributor of this research; and has re- branded this document. Despite the foregoing, Credit Suisse is not liable or responsible for the content of this research report and provides it as distributor for informational purposes only Credit Suisse Emerging Companies (Australia) Pty Limited ("CSEC") is an incorporated joint venture entered into between Credit Suisse and First NZ Capital. Pursuant to this arrangement, Credit Suisse makes available to its clients certain research produced by CSEC. CSEC is not an affiliate or related body corporate of Credit Suisse. Credit Suisse is not liable or responsible for the content of such research and provides such research as its distributor for informational purposes only

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit- suisse.com/disclosures or call +1 (877) 291-2683.

APN News & Media (APN.AX / APN AU) 78 28 January 2015

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