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Entertainment One | 2016 Annual Report and Accounts Entertainment for every

Entertainment One | 2016 Annual Report and Accounts Entertainment for every

Contents

Highlights ...... 1

Our business at a glance ...... 2

Our global sales footprint ...... 4

Chairman’s statement ...... 6

Chief Executive Officer’s review ...... 8

Business model and strategy ...... 12

Key performance indicators ...... 13 Business review

Television ...... 15

Family ...... 21

Film ...... 27

Finance review ...... 32

Principal risks and uncertainties ...... 37

Corporate responsibility ...... 42

Corporate governance ...... 46

Board of Directors ...... 48

Corporate governance report ...... 50

Audit Committee ...... 55

Nomination Committee ...... 61

Directors’ Remuneration Report ...... 63 Directors’ Report: additional information ...... 80

Independent Auditor’s Report ...... 83 Consolidated Financial

Statements ...... 87 Notes to the Consolidated

Financial Statements ...... 91

Company information ...... 135

Visit our website entertainmentone.com Entertainment One’s goal is to bring the best content to the world

2016 strategic progress – Strong organic growth and key strategic acquisitions in – Ramping-up of activity in The Company – Acquisition of a controlling stake in Limited, the creator of – Expanded relationship with and strategic investment in Sierra Pictures – Long-term funding put in place to support the organic growth strategy

2016 Financial highlights

Revenue Underlying EBITDA Profit before tax £802.7m £129.1m £47.9m +2% (2015: £785.8m) +20% (2015: £107.3m) +9% (2015: £44.0m)

£m £m £m 1,000 160 60 823.0 129.1 802.7 47.9 785.8

750 120 45 44.0 107.3 629.1 92.8

500 502.7 80 30 62.5 23.1 21.5 52.6

250 40 15 5.5

0 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016

Adjusted fully diluted Dividend Adjusted net debt earnings per share 19.4 pence 1.2 pence £180.8m -7% (2015: 20.8 pence) +9% (2015: 1.1 pence) £44.1m lower (2015: £224.9m)

Pence Pence £m 1.2

24 1.2 240 224.9 1.1 20.8 1.0 19.4 18.3 18 0.9 180 180.8 13.9 13.7

12 0.6 120 111.1 87.8

6 0.3 60 44.1

0 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016

eOne Annual Report and Accounts 2016 1 Our business at a glance Quality entertainment for a global audience We source, select and sell entertainment content rights across all media platforms globally. We offer investors an attractive and risk mitigated way to benefit from the long-term trend of rising consumer demand for film and television content.

Content Rights

Develop relationships with the best creative talent by being their partner of choice

Global sales

Use the Group’s infrastructure, sales operations and global scale to maximise investment returns

2 entertainmentone.com A growing content portfolio of television, family and film assets

Television Family Film Entertainment One is one of the major Family focuses on building a One is a market leader independent producers of television of children’s properties spearheaded in the territories where we operate, content commissioned primarily by the by Peppa Pig, one of the world’s leading including , the UK, Spain, North American broadcast networks. pre-school brands. In addition to Peppa Australia/ and the Benelux. This content is then sold through our Pig, we own a number of launched and In addition, through eOne Productions, in-house television sales teams to developing children’s brands including we use our scale to produce a small broadcasters globally and leading PJ Masks. number of titles every year, enabling us digital platforms. to participate in a film’s global success.

998 500+ 210 Half hours of new programming Broadcast and licensing and Box office releases during the year acquired/produced during the year merchandising contracts signed in FY16 500+ 847 £10m Broadcasters sold to in 150 territories Live licensing and merchandising Annual cost savings programme contracts across the brand portfolio implemented, delivering by FY18

Revenue by segment Underlying EBITDA Investment in acquired by segment content/productions

28% 29%

64% £802.7m 39% £129.1m 50% £218.5m 47% 8%

32% 3%

Television Family Film

For further details see the Business review section commencing on page 15.

eOne Annual Report and Accounts 2016 3 Our global sales footprint Quality entertainment for a global audience Partnering with the world’s best talent to deliver quality entertainment to every corner of the globe

Acquisition of Last Gang

Five-year output deal with TVA, the leading French Canadian broadcaster

New deal with Shomi Strategic investment in Sierra in Canada, adding 175 Pictures in December 2015 to its catalogue

Strategic investment in Amblin Partners

New series MGC wins two US network debut Acquisition of Acquisition commissions for new straight-to- of PJ Masks Renegade 83 of Dualtone eOne Television series commissions (Private Eyes, (Designated Cardinal, Mary Kills Survivor and People, You Me Her, Conviction) Ransom)

4 entertainmentone.com Acquisition of Instant Acquisition of ABD Peppa Pig debuts in The Enfield Haunting Video deal renewed China on CCTV and David in the UK Attenborough’s Great Barrier Reef

MGC partners with Pegasus Media Group and China Film Group in its first US-China co-production

New digital deals with and iQIYI

Winston Steinburger and Sir Dudley Ding Dong set to air in Australia in Autumn 2016

SVOD deals with Consumer roll-out SVOD deals with Sale of Fear The Movistar and of Peppa Pig in proximus and Walking Dead across signed in France planned BETV signed in multiple territories Spain for FY17 Benelux to Amazon Instant Video

eOne Annual Report and Accounts 2016 5 Chairman’s statement Telling the world’s best stories

Consumers today can discover and enjoy content in ways never before possible.

Allan Leighton, Non-executive Chairman

Whether through traditional means (such as going to the In tandem with this solid financial performance, the Group has cinema or watching network television) or across new digital also delivered robust operational milestones. Entertainment subscription or multi-channel platforms, content is widely One Television delivered almost one thousand produced available to viewers, offering them unparalleled choice. In and acquired half hours of television content for the first time, addition to the many ways content can now be discovered with non-scripted shows now forming a greater part of the and viewed, it can also be compiled into personalised channels overall mix following full year contributions from Paperny which can be carried anywhere with the consumer on their Entertainment and . After a year smartphone or tablet device. The coming together of content of developing new shows for both pay-TV and digital SVOD services, technology and consumer demand in this way has networks, is now moving into created a vibrant and dynamic market for those who produce production on a number of projects for delivery over the and own attractive content rights across multiple platforms next 12 months. The demand we are currently experiencing and territories. for our productions bodes well for future growth. Entertainment One has once more reported increased underlying EBITDA and has raised its progressive dividend by 9% to 1.2 pence per share. This has been achieved in a year which saw difficult trading conditions in the global markets as our indie releases were crowded out by an exceptional year of Hollywood blockbuster titles.

6 entertainmentone.com Momentum in the Family Division remains strong with Peppa Following the exit of Marwyn Investment Management from our Pig rolled out into a number of new broadcast territories around share register, non-executive director James Corsellis resigned the world and consumer revenues in key markets such as from the Board of Directors. In his place Scott Lawrence, Head the US now coming through. In addition to solid progress with of Relationship Investments, Canada Pension Plan Investment Peppa Pig, the Group continues to find new markets for Ben & Board (CPPIB), was appointed to the Board. Holly’s Little Kingdom, as well as launching a new kids’ property, Throughout the many changes that have taken place across PJ Masks, in partnership with Disney. Overall, I am very our businesses over the last year, I remain impressed by the encouraged by the prospects of all of our Family operations. professionalism and dedication of the Entertainment One team As our markets continue to evolve and develop, we have been throughout the Group. The delivery of another year of EBITDA busy over the last year structuring ourselves to take advantage growth, our ninth since the Group listed on London’s AIM in of the opportunities created and to deliver on our strategic 2007, is testament to their hard work and dedication; once aims. During the year we completed a number of acquisitions again I thank them. which not only brought control of Peppa Pig to Entertainment In conclusion I would, as ever, like to thank our shareholders One but also allowed us to develop close relationships with a for their ongoing support, particularly following the Group’s number of the industry’s leading creative talents, including the equity and bond market transactions. I look forward to the legendary . We welcome the teams from Sierra current year with anticipation, confident that Entertainment One Pictures, Dualtone Music Group, Last Gang Entertainment and is in excellent shape both to harness evolving opportunities and Renegade 83 to the Entertainment One family. to deliver on its growth ambitions.

Allan Leighton Non-executive Chairman

eOne Annual Report and Accounts 2016 7 Chief Executive Officer’s review Delivering the very best creative content

The drivers are clear across all of our Divisions, giving a positive outlook which is underpinned by market dynamics that play to the strengths of the Group.

Darren Throop, Chief Executive Officer

As has always been the case, great content is at the heart of Entertainment One. Group revenue The Mark Gordon Company has five US network and cable series currently airing and two new series in production for major US networks for first seasons, eOne Television has £802.7m delivered strong content and the Film slate looks to be the +2% (2015: £785.8m) strongest for many years. In Family, new production PJ Masks has surpassed our expectations on the Disney channels and we Group underlying EBITDA start to deliver the new series of Peppa Pig from July. The foundations for growth are in place, with eOne’s key capability for high quality content generation allowing the focus to move £129.1m to delivery of organic growth across the business. With +20% (2015: £107.3m) consumer demand continuing to grow, we anticipate that audiences will increasingly focus on the quality of the content that they consume, gravitating towards premium television Profit before tax series, film and speciality genres. This market dynamic plays to Entertainment One’s strengths and supports our strategic goal to double the size of the business between 2015 and 2020. £47.9m +9% (2015: £44.0m)

Dividend 1.2 pence +9% (2015: 1.1 pence)

8 entertainmentone.com Amblin Partners The strategic investment in Amblin Partners, which was completed in December 2015, is at the heart of eOne’s strategy to develop closer relationships and partnerships with top producers, and expands eOne’s existing relationship with Steven Spielberg. Amblin Partners is a new film, television and digital content creation company bringing together the DreamWorks Studios, and Media brands. eOne will handle distribution of Amblin Partners films in the UK, Spain, the Benelux and Australia. Projects in the pipeline include The BFG, which opens in the UK in July, The Light Between Oceans and The Girl on the Train. The BFG leads eOne’s 2016 film slate

eOne Annual Report and Accounts 2016 9 Chief Executive Officer’s review continued

Solid financial performance Organic growth in the Television business, the recent Group reported revenues were 2% higher at £802.7 million acquisition of Renegade 83, the ramping-up of production at (2015: £785.8 million), driven by strong growth in Television The Mark Gordon Company and continued success in fostering (up 31%) and Family (up 10%), partly offset by lower revenues development deals in the US and internationally is transforming in the Film Division, 7% lower. Acquisitions completed during eOne Television into a diversified global content business. The the financial year contributed £21.6 million to Group reported increased output seen from these businesses is further fuelling revenues. On a constant currency basis, Group revenue growth eOne’s well-established global television sales network. was 6%, reflecting the impact of stronger pounds sterling The acquisition of a controlling stake in Astley Baker Davies against the Canadian dollar, Australian dollar and euro during Limited gives eOne greater control of and a higher share in the the year, and underlying Group revenue growth (excluding financial success of Peppa Pig, which is a key strategic driver acquisitions) was 3%. for Family and a proven, successful pre-school brand where the Group reported underlying EBITDA was 20% higher at Group believes the opportunity exists to increase global retail £129.1 million (2015: £107.3 million), driven by strong growth sales to US$2 billion in the medium term. The early success in Television (up 120%) and Family (up 82%), partly offset by of PJ Masks in the US and the strong prospects for a licensing lower underlying EBITDA in the Film Division, 28% lower, driven programme as it rolls out across Disney channels internationally primarily by fewer film releases, weaker title performance and are indicative of an exceptional property that will further build the impact of the weaker slate in FY15. On a constant currency out eOne’s Family portfolio in a substantive way. basis, Group underlying EBITDA growth was 24%, reflecting the The Film Division has an expanded relationship with Steven impact of stronger pounds sterling during the year. Acquisitions Spielberg through the strategic investment in Amblin Partners completed during the financial year contributed £14.8 million to and a strong addition to the Group’s global sales capability Group underlying EBITDA, resulting in underlying growth of 10% through the investment in Sierra Pictures. In parallel, the Group on a constant currency basis. continues to focus on driving margins in the Film Division, Reported profit before tax was 9% higher in the year, at £47.9 through a wide-reaching restructuring of how the Division million (2015: £44.0 million). Adjusted profit before tax for the operates, which is expected to deliver annual cost savings year increased by 17% to £104.1 million (2015: £88.8 million) in of £10 million from FY18. line with the increase in underlying EBITDA, partly offset by eOne’s capital structure is aligned with delivering the Group’s higher underlying finance charges primarily reflecting higher strategy following the re-financing of the business in December average debt levels year-on-year, following the acquisition 2015, with long-term, non-amortising, fixed-rate debt provided of The Mark Gordon Company (MGC) in January 2015, and via senior secured notes and short-term working capital needs the impact of higher interest rates following the re-financing being funded via a new, more flexible revolving credit facility. in December 2015. Television Diluted adjusted earnings per share were 1.4 pence lower In Television Division, our operational metrics have continued at 19.4 pence (2015: 20.8 pence). On a reported basis, diluted to improve, with 998 half hours of new programming delivered earnings per share were 2.9 pence lower at 9.6 pence (2015: and around 1,100 half hours expected for next year. There has 12.5 pence) and reflected higher one-off finance costs in been solid growth in the global sales business and we have relation to the re-financing and higher amortisation of complemented the Group’s non-scripted business with the acquired intangibles driven by acquisitions in the year. acquisition of Renegade 83. Declaration of dividend eOne Television saw strong organic growth in the financial year In line with the Group’s progressive dividend policy, the with revenues up 27% to £187.9 million and underlying EBITDA directors have declared a final dividend up 9% to 1.2p per up 44% to £22.8 million with continued success from the AMC share (2015: 1.1p per share). relationship and a significant number of new development Strategic progress deals announced. The Board continues to see significant opportunity for further The financial performance of The Mark Gordon Company growth and to target doubling the size of the business by 2020 continues to be in line with expectations, with strong cash through its strategy of: generation from existing library participations and five series currently airing on US network and premium cable. Revenues – Developing more relationships and partnerships with top for the year were £14.6 million driven by strong participation producers and talent to increase the volume and quality revenues and producer fees from existing series and underlying of productions EBITDA increased to £14.4 million. – Building the world’s leading independent content rights sales business to maximise the return on investment Production has started on the first season of Conviction starring Hayley Atwell and straight-to-series political thriller Designated FY16 has been a strong year of progress on delivering the Survivor, starring Kiefer Sutherland. eOne will distribute both Group’s strategy. series internationally. MGC’s development pipeline is very strong with almost sixty projects in active development.

10 entertainmentone.com Family Outlook In Family, our acquisition of Astley Baker Davies Limited (ABD) The Television Division will see continued organic growth gives the Group the ability to control the strategic development from eOne Television as well as the benefits of full year of Peppa Pig as eOne aims to double the size of the brand, contributions from Renegade 83, Dualtone Music Group and and the early success of PJ Masks in the US is indicative of Last Gang Entertainment. eOne Television recently received a an exceptional property that will start to build out eOne’s straight-to-series order for , the high-end drama Family portfolio in a more substantive way. commissioned by HBO, starring Amy Adams and based on the book by author Gillian Flynn. It is anticipated that around 1,100 The Family Division saw strong growth in the financial year half hours of content will be available for distribution through with revenues up 10% to £66.6 million and underlying EBITDA the Group’s global sales network in the new financial year. FY17 up 82% to £43.3 million, supported by the ABD acquisition. is expected to see a significant increase in production at The The delivery of a new series of Peppa Pig will support the Mark Gordon Company, with the ramp-up of activity on greenlit almost 500 new broadcast and licensing and merchandising series and the continued conversion of some of the many contracts signed during the financial year, with over 750 projects in development. MGC has seen two new primetime Peppa Pig deals in total now live. commissions ordered to series in recent months, adding to the company’s roster of long-running franchises on major US PJ Masks took an average audience share of 29% of 2-5 year networks that include Grey’s Anatomy, , , olds on Disney Channel and Disney Junior in the US – the and Criminal Minds: Beyond Borders, all of merchandising programme launches in the US in autumn which have renewed in the year. 2016 and the broadcast roll-out to approximately 30 Disney channels internationally continues over the course of 2016. Family continues to focus on building Peppa Pig into the most loved pre-school brand in the world while continuing to develop Film and build new brands across the Family portfolio, including In Film, with weakness in the market continuing into the Ben & Holly’s Little Kingdom and PJ Masks. The delivery of second half of the financial year, we delivered 210 theatrical a new series of Peppa Pig commences in July 2016 and the releases in total. We have taken specific steps in our Film continued roll-out of PJ Masks on Disney during the year will Division to address its long-term profitability – a wide-reaching support the almost 850 licensing and merchandising deals Film restructuring programme has been launched which will that are now live across the portfolio. see annual cost savings of £10 million per annum from FY18. In addition, new long-term partnerships with Fox and As the independent film market continues to recover in 2016, will help maximise eOne’s home entertainment profitability the Group’s exciting film slate is expected to deliver a significant during its transition to digital. pick-up in the Group’s box office performance, which will drive revenues in ancillary content release windows in future years. Around 220 theatrical releases are expected for the new The Film Division plans to release around 220 films in the new financial year, with the film slate promising to be the strongest financial year, in line with its profile of annual investment of for many years, including The BFG from the new partnership around £160 million in acquired content and £70 million in with Steven Spielberg and David Brent: Life on the Road from productions over the next three to five years. This consistent the makers of the hit series The Office. profile of investment, as well as the restructuring of the Film Division’s operations, is anticipated to drive good long-term cash conversion in the Division. The drivers are clear across all of the Divisions, giving a positive outlook which is underpinned by market dynamics that play to the strengths of the Group. The appetite for quality content continues to be driven by numerous factors, including the growth of digital platforms and ‘TV anywhere’. Having created the foundations for high quality content generation and with the appropriate long-term financing structure in place to support the delivery of the organic growth strategy, the directors look forward to the new financial year with confidence.

Darren Throop Chief Executive Officer

eOne Annual Report and Accounts 2016 11 Business model and strategy Partnering with the best creative talent We aim to take advantage of the growing demand for high quality content from the increasing number of consumer platforms.

Source Connect with creative talent

Select Scale Produce/ global rights Reach

Sell Cinema Retail Broadcast Digital

12 entertainmentone.com Key performance indicators Measuring our progress

Successful execution of our strategy builds our scale and reach, in turn generating attractive financial returns. The performance of the Group across our three core capabilities can be measured by clear business indicators.

eOne aims to create Investment in content Investment in content Library valuation value through the across TV and Family (£m) in Film (£m) as at 31 March 2015 (US$m) sourcing of high quality rights from leading £108.3m £110.2m US$1bn + creative talent. 189.7 1,000+ 108.3 105.1 801 175.7 87.1 650 79.6 74.9 110.2 95.4 350 60.9 250 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015

eOne produces or Television half hours Family licences Number of Film releases acquires the best produced and acquired content from its creative 847 210 partnerships, selecting 998 the most commercial 998 847 route for bringing the 275 227 752 635 214 content to consumers. 210 551 457 152 507 452 246 173 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 eOne maximises TV EBITDA and margin Family EBITDA and margin Film EBITDA and margin returns from content (£m) (£m) (£m) investment through its deep relationships, £39.2m £43.3m £52.8m 65.0% expertise across 16.0% 10.8% 9.5% 9.5% 12.3% 9.5% multiple platforms 36.0% 39.1% 11.6% 11.0% 11.1% 43.3 39.2

29.0% 74.1 and global scale. 9.5% 73.1 29.7% 52.8 49.3 23.8 10.3 5.9 39.5 5.2 17.8 14.5 11.6 12.8 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Successful execution Adjusted fully diluted Return on capital employed Total shareholder return of the Group’s strategy earnings per share (EPS)1 (ROCE)2 (TSR) generates improved 200 financial returns. 19.4p 12.3% 150

100 20.8 15.4 19.4 15.2 14.7 18.3 12.3 12.0 50 13.9 13.7 2013 2014 2015 2016 eOne FTSE 250 Index The Group targets upper quartile TSR 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 (versus the FTSE 250 Index).

1. Adjusted fully diluted EPS for prior years has been restated to reflect the rights issue in October 2015. 2. ROCE for prior years has been restated to reflect the change in definition for capital employed to exclude cash associated with debt and include current and non-current production financing.

eOne Annual Report and Accounts 2016 13 Designated Survivor Designated Survivor is the first production under The Mark Gordon Company’s new independent model. Commissioned straight-to-series by ABC, the conspiracy thriller drama sees 24 star Kiefer Sutherland returning to primetime television to play the President of the United States after a catastrophic attack during the State of the Union address. eOne’s television sales business will represent the new series internationally. Designated Survivor, alongside recently commissioned legal drama Conviction, highlight the success of The Mark Gordon Company and the benefits such productions can bring to the Group’s global sales business. Straight-to-series commission

14 entertainmentone.com Business review Television

Entertainment One is a major producer of television content in the high-end drama and non-scripted genres. Its shows are predominantly commissioned by North American broadcast networks and are sold around the world through the Group’s global sales infrastructure.

John Morayniss Chief Executive Officer, Television

The Television Division Highlights comprises eOne Television (including Paperny Half hours Investment to acquired Entertainment, Force Four content and productions Entertainment and Renegade 83), The Mark Gordon 998 £102.5m Company and the Group’s (2015: 752) (2015: £103.2m) music label. It also incorporates the results of eOne’s Contribution to Group revenue* Contribution to Group investment in digital media underlying EBITDA** company, .

28% 29% TV TV Revenue EBITDA £244.7m £39.2m

Key titles from 2016

* Divisional revenue calculated as a proportion ** Divisional underlying EBITDA calculated as of Group revenue before eliminations a proportion of Group underlying EBITDA before central costs

eOne Annual Report and Accounts 2016 15 Business review continued Television

Entertainment One produces a large number of shows from its production bases in North America, operating through eOne Television (which includes , Force Four Entertainment and Renegade 83) and The Mark Gordon Company. These shows are commissioned and financed mainly by leading broadcast networks in North America (supplemented by tax credits) and then distributed into global markets by eOne’s own international television sales network, which reaches over 500 broadcasters and digital platforms in more than 150 territories. This broad global presence ensures that high quality shows are brought to audiences across both traditional and digital content networks, including Netflix and Amazon Instant Video. The Group also leverages its sales infrastructure by selling in-demand third party content from producers such as AMC.

Market backdrop 145 million SVOD subscribers it forecasts will be added between The television industry is currently undergoing a 2015 and 2020, around 20 million will come from China, 22 million period of transition, with global cyclical advertising from the US, 9 million from Japan and 7 million from India. revenues and new digital platform subscriptions As a result of these industry dynamics, Entertainment One both experiencing growth. According to the continues to experience strong demand for content from both sides PricewaterhouseCoopers Global Entertainment of the broadcasting ecosystem – the traditional networks driven by and Media Outlook: 2015-2019 report, combined their investment in their service offering and the digital platforms global television subscriptions and licence fees and using high quality shows to market their new services to their advertising revenues were estimated to be worth strongly-growing number of subscribers. $420.5 billion in 2015 and are expected to grow to US$483.9 billion by 2019, a compound annual growth rate of 3.5%. Within these headline figures, Global television revenues ($ billion) revenues from licence fees and subscriptions made up US$248.0 billion in 2015, up around 9% on the 600 previous year. CAGR: 4.0% In the US, which is the core production market for 450 204.1 197.5 188.3 182.2 172.5 Entertainment One, the production market grew in 167.1 300 157.9 154.5 147.3 2015 by 5.8% in comparison to 2014 to a value of 141.5 243.8 236.8 221.5 229.5 $36.4 billion and is set to reach $42.1 billion in 150 213.3 194.5 205.0 186.2 177.3 2020 according to a recent IBISWorld report 166.8 on the industry. 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Advertising Subscriptions Licence fees Market developments Source: PricewaterhouseCoopers Global Entertainment and Media Outlook: 2015 - 2019 In mature markets such as the US and Canada, digital ‘over the top’ (OTT) platforms delivering SVOD and TVOD services continue to disrupt the US television production revenues ($ billion) traditional cable and direct to home (DTH) satellite networks, although there are signs that the pay-TV 60 operators are stabilising their subscriber bases. The 45 pay-TV operators have responded to the challenges 43.1 42.1 40.9 presented by the digital platforms by launching 39.8 38.4

30 37.2 36.0 34.4 digital catch-up and subscription services of 31.4 29.7 their own. 15 As a result of these actions, fears about subscribers 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 ‘cord cutting’ traditional pay-TV services in favour of Source: IBISworld.com lower cost digital SVOD subscriptions have become less prevalent; online video now appears to be a supplement to traditional television services, not US production market by genre a replacement.

Internationalisation of the market is one of the News: 5.6% key drivers behind the forecast growth in SVOD Sitcoms: 12.4% revenues. Data from a November 2015 Digital TV Research report suggests that growth in SVOD Drama: 33.2%

revenues has been significant, with the $2.6 billion Reality shows: 18.0% recorded in 2010 growing to $12.4 billion in 2015 and set to reach $26.8 billion by 2020, driven in Sports Programming: 30.8% large part by the international markets – of the Source: IBISworld.com

16 entertainmentone.com Strategy Financial review Entertainment One’s growth strategy is based on partnering Revenues for the year were 31% higher at £244.7 million with the best creative talent to produce and own the best (2015: £186.5 million) driven by continued growth in eOne quality content and ensuring that the Group’s global sales Television and the impact of The Mark Gordon Company being presence maximises the international sales opportunities consolidated as a . Underlying EBITDA increased for the content rights it controls. by 120% to £39.2 million (2015: £17.8 million) driven by higher revenues and improved margins. Underlying EBITDA margin Over the last two years, Entertainment One has created a improved by 6pts to 16.0% (2015: 9.5%) driven by the full year portfolio of leading content producers through a mix of organic impact of MGC on the Divisional mix. and acquisitive growth. In its core production business, eOne Television, the Group continues to work closely with producers £m 2016 2015 Change through first-look, co-production, overhead and output deals Revenue 244.7 186.5 31% to bring the best content into its production pipeline. Underlying EBITDA 39.2 17.8 120% Following its acquisition in January 2015, The Mark Gordon Company has migrated its operating model from servicing a eOne Television limited number of US networks through exclusive overhead eOne Television includes the production and global sales deals into a much broader television studio creating, financing business, Paperny Entertainment, Force Four Entertainment and selling to broadcast and over-the-top (OTT) platforms. and Renegade 83, which was acquired in March 2016. The company has been engaged in packaging new projects Revenues for the year were up 27% to £187.9 million (2015: and has recently won two primetime commissions from US £148.4 million) driven by increased levels of production and broadcasters, which Entertainment One will sell around the higher global sales of both owned and acquired content. world. MGC has expanded its customer base to include digital Underlying EBITDA increased by 44% to £22.8 million platforms and is currently working on a number of projects (2015: £15.8 million), supported by revenue growth for this increasingly important segment of the television across the business. content market. Investment in acquired content and productions was lower In 2014, the Group acquired Paperny Entertainment and Force than prior year at £91.8 million (2015: £100.7 million), driven by Four Entertainment to bring critical mass to its non-scripted lower investment in productions offset by higher acquisitions capability. In March 2016, the Group consolidated its position in the international sales business. The level of investment in this genre by acquiring a 65% stake in the non-scripted in productions in the year was lower partly as a result of producer Renegade 83 with its innovative slate of current the increase in tax credits received which related to prior hit shows including Naked and Afraid and You the Jury. year investments. Looking ahead, the strategy remains unchanged for the Television Division – a mix of organic growth supplemented £m 2016 2015 Change with strategic bolt-on acquisitions that help ‘lock-in’ production Revenue 187.9 148.4 27% talent across the world in both the high-end scripted drama and Underlying EBITDA 22.8 15.8 44% non-scripted genres. The Television Division continues to be Investment in acquired content 18.5 9.2 101% a major contributor to the Group achieving its overall growth Investment in productions 73.3 91.5 (20%) target by the year 2020, with further English-language 998 half hours of new programming were produced/acquired production investments and acquisitions being considered, in the year compared to 752 half hours in the prior year. The where in line with the Group’s strategic goals. business has successfully maintained a steady pipeline of In addition to controlling the best content, the Group focuses on productions as new show commissions replace long-running maintaining a leading global sales capability, a key competitive series that have come to an end. advantage for eOne, selling content to over 500 broadcasters Key scripted deliveries included third seasons of Rogue and in more than 150 territories around the world. As well as selling Bitten, season four of , the fifth and final season of eOne original productions, the Group has also been active in Hell on Wheels, new series Private Eyes starring Jason Priestley selling high quality content from partners such as AMC and and the first season of polyamorous comedy You Me Her for SundanceTV and other third party acquisitions across this AT&T’s Audience Network. eOne’s non-scripted business infrastructure, with strong demand for leading shows such has grown significantly year-on-year with deliveries including as , the companion series to the seasons one and two of Fameless (David Spade) for TruTV, highly successful The Walking Dead franchise. About the Business and Nellyville (hip-hop star ) for BET With its growing portfolio of independent television and season five of Mary Mary for WeTV. Programming delivered producers, including MGC, Paperny Entertainment, Force by Paperny Entertainment and Force Four Entertainment Four Entertainment, Renegade 83, and eOne’s own original included season three of Coldwater Cowboys, Chopped Television business, all powered by eOne’s global sales Canada, Timber Kings and Yukon Gold, as well as new network, eOne is building a significant global independent commissions Klondike Trappers, Keeping Canada Alive television business. and First Dates.

eOne Annual Report and Accounts 2016 17 Business review continued Television

eOne continues to invest in first-look agreements, scripts, in April 2016. AMC have announced a third 16-episode season book options and development deals with industry talent of Fear the Walking Dead expected to air in 2017. to grow the development slate. Recent successes include The number of half hours of programming to be acquired/ straight-to-series orders by HBO of suspense drama Sharp produced next year is expected to be around 1,100, with over Objects, starring multi-award winning actress Amy Adams, and 60% of budgeted revenues for the new financial year already series Ransom inspired by the life experiences of a renowned committed or greenlit. Investment in acquired content is hostage-negotiator, from executive producer Frank Spotnitz. expected to increase to £30 million and production spend Crime drama Havana, starring Antonio Banderas, is also in is expected to grow to around £110 million. development with Starz. New scripted shows in 2016 also include Cardinal for CTV and Mary Kills People for Global. The Mark Gordon Company Renewals include season four of Rogue, season five ofSaving Effective 19 May 2015, following a change in the MGC Hope and a new season of You Me Her. eOne is also continuing shareholder agreement that governs the basis for determining its relationship with award-winning producer Ilana Frank, ‘control’ for the purpose of accounting for the venture, MGC has responsible for the success of Rookie Blue and Saving Hope, been fully consolidated as a subsidiary of the Group. Previously and her ICF FILMS, with a new three-year it was accounted for as a joint venture which only incorporated deal. In addition, ongoing relationships with Eleven Film, the Group’s share of joint venture results and did not include responsible for The Enfield Haunting, through new series revenues associated with the venture. In line with this change, Foreign Bodies for E4 and TNT, and the creation of a television MGC fully adopted the Group’s accounting policies which venture with Creative England enable eOne to continue to included moving to an accruals basis for the accounting of produce high quality scripted shows from around the world. participation revenues, which were previously accounted for The non-scripted business continues to grow, with a based on cash received. This change in accounting resulted significant number of renewals expected for existing series in an improvement in EBITDA of £3.5 million in relation to as well as new commissions. Renegade 83 will deliver the the participation revenues in respect of FY15. next seasons of Naked and Afraid and Naked and Afraid XL Revenues for the year were £14.6 million (2015: £nil) driven which is Discovery’s number one Sunday night show. eOne also by strong participation revenues and producer fees from has a large number of non-scripted projects in development, existing series. Underlying EBITDA increased to £14.4 million supported by investments in first-look deals with high profile (2015: £0.6 million). non-scripted talent. These include the company behind The Real Housewives franchise, Purveyors of Pop, Creature Films £m 2016 2015 Change (VH1’s Behind the Music and MTV’s Laguna Beach) and veteran Revenue 14.6 – n/a reality producer Chris Deaux. A deal has also recently been Underlying EBITDA 14.4 0.6 2300% signed with Chopped creator Keller and Noll. Investment in productions 7.6 – n/a Key content acquisitions for the year included the first season of Fear the Walking Dead, season six of The Walking Dead, MGC currently has five series airing on both US network and season two of Halt and Catch Fire and Turn, and the first premium cable, all with continued strong viewership. Criminal season of Into the Badlands from AMC. Other acquisitions Minds, now in season 11, continues to be a top-10 drama series included The Enfield Haunting, one of the highest-rated in the US with average viewership over 9 million, and spin-off shows on Sky Living and nominated for three Baftas, David Criminal Minds: Beyond Borders aired in March 2016 on CBS Attenborough’s Great Barrier Reef and seasons eight and to average viewership of over 7 million. Grey’s Anatomy season nine of the popular Canadian series Heartland. 12 continues to have a strong audience with average viewership of over 8 million, higher than the viewership for the previous The Group’s exclusive distribution agreement with AMC season, and has been renewed by ABC for season 13, as have Networks continues to support revenues and the key shows Criminal Minds season 12 and Criminal Minds: Beyond Borders Turn and Halt and Catch Fire have continued to drive strong season two. In addition, Ray Donovan on Showtime and ratings and international sales, and both shows have been Quantico on ABC have also been renewed for seasons renewed for third seasons. New series Into the Badlands, with four and two, respectively. an average 5.6 million viewers per episode, delivered the third highest-rated first season in US cable TV history and has been Production has started on the first season of Conviction starring renewed for a second season, with an increase from six to ten Hayley Atwell and straight-to-series political thriller Designated episodes. The six episode series Hap and Leonard which aired Survivor, starring Kiefer Sutherland. eOne will distribute both on SundanceTV in March 2016 has received positive reviews. series internationally. MGC’s development pipeline is very strong with almost sixty projects in active development. Projects The Walking Dead series continues to enjoy very strong under development include The Ambassador’s Wife, based ratings having the highest total viewership of any series in on Jennifer Steil’s novel starring Anne Hathaway, Fina Ludlow, cable television history with the average number of viewers based on the novels by Ingrid Thoft, the TV adaptation of for season six still at over 13 million. Driven by this continued the original web-series Whatever, Linda produced by Secret success, filming has started on the seventh season which Location, which has played at over 20 festivals and won over is expected to air in October 2016. Fear the Walking Dead 20 awards worldwide, including Best Drama Series at the (the companion series to The Walking Dead) continues to be International Academy of Web Television Awards (aka Web very well received by audiences, with the average number of Emmys), and The Barbary Coast directed by Academy viewers being over 7 million for the first season, a higher level Award® winner Mel Gibson, starring Kurt Russell and than seen for the first two seasons of The Walking Dead. The Golden Globe winner Kate Hudson. second season of Fear the Walking Dead premiered in the US

18 entertainmentone.com The studio has a number of film productions underway Secret Location including war comedy War Dogs starring Jonah Hill, war drama Secret Location, eOne’s digital investment, currently has a Sand Castle, spy thriller All the Old Knives, Agatha Christie’s number of projects for different platforms underway focussing Murder on the Orient Express, starring and directed by Kenneth on the fast growing virtual reality industry. eOne’s joint venture Branagh, and the fairy tale The Nutcracker and the Four Realms with this innovative interactive content studio for emerging for Disney. Tapping into the ever-growing Chinese cinema platforms positions eOne at the forefront of developing market and potential for future US-China co-production technologies as the media landscape evolves. For the gaming projects, MGC has recently partnered with Pegasus Media industry it is working on Blasters of the Universe designed to Group and China Film Group to produce epic love story Edge be accessible through Oculus VR, HTV Vive and the Steam of the World from Oscar®-winning screenwriter David Seidler. network, as well as Sony PlaystationVR, and aims to gain Following on from the success of Grey’s Anatomy, MGC has market exposure from early adopters. re-teamed with Grey’s showrunner to produce My Husband’s Ex-wife. Work is underway on a number of projects including digital extensions for CBC’s landmark project The Story of Us and Investment in productions in FY17 is expected to amount Wild Canadian Year, also with CBC, as well as a significant to £100 million with half hours delivered anticipated to be VR documentary for General Electric, all representing around 75. Consistent with all eOne Group productions, the ground-breaking virtual reality projects. amount of investment in production does not represent the Group’s investment capital at risk, as the significant majority Secret Location won a Prime Time Emmy® Award for The of production investment risk is mitigated through commitments Sleepy Hollow: VR Experience created last year to promote received prior to greenlighting from commissioning broadcasters the second season of the hit Fox TV series. The historic win and government subsidies to reduce the Group’s exposure marks the first time a virtual reality project has ever been to around 15%-20% of the investment in production budget. awarded an Emmy® Award or any major entertainment award. Secret Location also won three Webby Awards, including two Music for its innovative OrchestraVR project with the prestigious Revenues for the year were up 11% at £42.2 million (2015: £38.1 LA Philharmonic and a Peabody-Facebook Future of Media million) driven by a strong release schedule. Underlying EBITDA Awards for Ebola OutbreakVR with PBS. increased 43% to £2.0 million (2015: £1.4 million), supported by Secret Location continues to develop innovative original an increasing mix of digital revenues. products in the digital space including a large, original serialised £m 2016 20151 Change virtual reality project, Insomnia, with Stephen King, as well as Revenue 42.2 38.1 11% their original VR and linear episodic format Halcyon, for IPF Underlying EBITDA 2.0 1.4 43% and . Investment in acquired content Secret Location will also launch hybrid television/digital project, and productions 3.1 2.5 24% Sweat the City, featuring a well-known Instagram personality. 1. In the current year third party music label sales made by the Film In October 2015 Secret Location announced the launch of Distribution business on behalf of the Music business are recognised DitchTV, a new way of consuming YouTube content by in Music revenue. Consequently, the prior year Music revenue (and inter- segment eliminations) previously reported has been restated to reflect this combining channel surfing with interactive controls and change. The impact of the change for the year ended 31 March 2015 was an intuitive interface. an increase in Music (and inter-segment eliminations) by £19.7m. There is no impact on total Group revenues. The Group’s independent label has had a strong year from its Urban releases of ’s Documentary 2 which debuted at number two on the US along with its sequel The Game’s Documentary 2.5 shortly afterwards. Following the acquisition of Dualtone Music Group in January 2016, the business released Cleopatra in April 2016, the highly anticipated second from The Lumineers. The album hit number one on the US Billboard 200 within a week of its release and its lead single, Ophelia, has spent six weeks at number one on the US Adult Alternative Songs chart. The album was also a major hit in Canada debuting at number one in the album charts. The number of released in the year was lower at 64 versus 74 in the prior year. This decline is offset by the increase in the number of digital singles released doubling The Walking Dead to 108 compared to 54 in the prior year. The Group’s current roster of artists continues to be strong with the acquisitions Greenlight for Season 7 of Dualtone Music Group and Last Gang Entertainment adding The Walking Dead has the highest to the content slate and strengthening eOne’s position in the North American music market. total viewership of any series in cable television history. Season 6 had average viewership of over 13 million.

eOne Annual Report and Accounts 2016 19 PJ Masks: Growing the Family Portfolio PJ Masks builds on eOne’s strategy to broaden its portfolio of Family properties. Produced by eOne in collaboration with Disney Junior and France 5, the show has premiered in the US on Disney Channels to very strong ratings, the first show attracting 1.6 million viewers. Since its launch, the show has become one of Disney’s top-rated shows in the US and is rolling out across around 30 Disney Channels internationally during the summer. A merchandising programme launches in the US in autumn 2016. PJ Masks reached 8 million kids aged 2-5 in Q1 2016

20 entertainmentone.com Business review Family

Entertainment One owns one of the most popular pre-school children’s brands in the world: Peppa Pig. This property is being rolled out globally to consumer markets, and the business is developing new brands which are poised to follow Peppa Pig’s success.

Olivier Dumont Managing Director

The Family business develops, Highlights produces and distributes a portfolio of children’s properties Number of Family Retail revenue generated on a worldwide basis, with licensees by Peppa Pig much of its profitability generated through licensing 847 US$1.1 billion and merchandising (2015: 635) (2015: US$1.0 billion) programmes across multiple retail categories. In addition to Contribution to Group revenue* Contribution to Group managing its existing brands, underlying EBITDA** the business is developing a balanced portfolio of complementary family brands. Family Family Revenue EBITDA £66.6m £43.3m 8%

32%

Key properties in 2016

* Divisional revenue calculated as a proportion ** Divisional underlying EBITDA calculated as of Group revenue before eliminations a proportion of Group underlying EBITDA before central costs

eOne Annual Report and Accounts 2016 21 Business review continued Family

Entertainment One is the owner and producer of Peppa Pig, which continues to be successful with pre-school audiences worldwide. The operating model for the Division is to steadily build strong audiences for the shows across both traditional and digital media platforms before launching licensing and merchandising programmes across multiple retail categories. In addition to managing the growth of Peppa Pig, the Family business is also developing a portfolio of complementary brands. Ben & Holly’s Little Kingdom continues to develop in a number of new territories and PJ Masks saw a very strong broadcast debut in the US on Disney channels. The Group is currently in development on a number of new brands with major broadcasting partners.

Market backdrop The most recent data from The Licensing Letter suggests Video are commissioning children’s content for their that global retail sales generated by licensed merchandise audiences, creating opportunities for producers such reached £158.2 billion in 2014, up from £154.8 billion in the as Entertainment One. previous year. Digital is clearly becoming a more significant medium for The largest market by retail sales value is North America children’s brands and Entertainment One continues to work (the US and Canada), generating revenues of almost £100 with a broad range of OTT, SVOD and multichannel service billion in 2014, up by 6.3% over the period from 2011. Europe providers to maximise exposure of its brands. It also is the next largest territory, accounting for around 20% of believes that strong television exposure is still a highly global retail sales at £31.5 billion, which has been a stable effective way to launch pre-school properties and so market over the period. The less mature markets that are maintains deep relationships with leading broadcasters such providing the strongest growth are Asia and Latin America, as Nick Jr and Disney as its key brands continue to roll out achieving growth rates of 8.3% and 7.9% respectively, as to audiences globally. disposable income levels in those regions grows. Global retail sales of licensed merchandise by Apparel & Accessories, Toys and Interactive Games and Home Furnishing in aggregate accounted for almost 60% product category, 2014 (total: £154.8 billion) of total licensing revenues in 2014. Other, 16%

Market developments Gifts & Novelties, 3% Consumers today have access to content across more Stationery & Paper Products, 3% media than ever before, with technology and digital Publishing, 5% platforms making a profound impact on how and where Apparel & Accessories, 40% they can watch and interact with their favourite shows. Health & Beauty, 7% This is as true for children’s content as it is for other Food & Beverage, 7%

genres, so it is important that content producers have Toys & Interactive Games, 11% strong relationships with OTT and multi-channel platforms to ensure availability of their shows digitally. The Childwise Home Furnishing, 8% Source: The Licensing Letter UK 2015 report suggests that although children in the UK aged between 5 and 12 years watch an average of 2.3 hours of television per day, screen time overall is growing Global retail sales of licensed as they get easy access to multiple devices and digital merchandise (£ billion) services such as catch-up, on-demand and YouTube content. The report also suggests that one in three children in the UK 160 watch their favourite shows on a tablet and one in five on a 120 Middle East & Africa mobile phone. Australia & New Zealand Latin America The OTT platforms also carry significant amounts of 80 Asia Europe children’s programming. Netflix, Amazon Instant Video, US & Canada 40 iTunes, and others seek to offer a broad range of appealing content in order to drive subscriber retention 0 2011 2012 2013 2014 and growth. In particular, Netflix and Amazon Instant Source: The Licensing Letter

22 entertainmentone.com Strategy The most significant development for Peppa Pig over the last One of the key strategies for growth in Family is to establish year has been the consumer launch of the brand in the US, Peppa Pig as the most loved pre-school brand in the world. the world’s largest licensing and merchandising market. In the The first stage of this process is to build audiences through summer of 2015 the territory’s two largest retailers, Walmart both traditional broadcast networks and, increasingly, digital and Target, launched a limited range of Peppa Pig products, platforms. The Group works with leading children’s channels predominantly toys and apparel, two of the largest licensing to drive this awareness; often this phase of the brand’s categories. Sales have been strong and the Group will gradually development can take several years. expand the product offering during the new financial year to carefully manage the supply of products in relation to demand. Once traction with audiences has been achieved, merchandising programmes can be launched with licensee As well as rolling out into new broadcast and consumer partners to meet consumer demand for toys, apparel, stationery territories, the Group has also started production of the fourth and other products. The Group takes a long-term approach with series of Peppa Pig. These new shows not only refresh existing these programmes to gradually build retail presence and create content for broadcasters and digital platforms but also include longevity for the brand. new characters to help drive future licensed product development and sales. By adopting this measured approach, eOne has been growing Peppa Pig into a major pre-school brand. Peppa Pig The Family Division’s strategy also includes the development of was launched twelve years ago in the UK and has since grown a global portfolio of other brands and there have been exciting to become the leading pre-school children’s property in this developments during the year. Ben & Holly’s Little Kingdom was market, supported by broadcast roll-outs into the US, Canada, launched on Nick Jr in the US during the year and although it is Europe, Australia, Latin America and the Far East. Market data early in the brand’s broadcast development in this territory, the indicates that, with the current exception of Japan, Peppa Pig early signs are very encouraging. Further, Ben & Holly will be is on air in the most important licensed merchandise territories launched to broadcasters in other territories around the world globally. This wide exposure of the brand to global pre-school in the current year, with licensing programmes to follow as audiences (and its widespread acceptance) are expected to consumer demand builds. help drive future consumer demand over the long-term as Peppa Pig continues to grow into these substantial markets.

Ben & Holly’s Little Kingdom Ben & Holly was launched on Nick Jr in the US during the year and its digital exposure is growing through deals with Netflix and Amazon Instant Video. It remains one of the most popular programmes in the UK, and is now shown in over 150 territories around the world. Licensing programmes will be rolled out to territories around the world as consumer demand builds.

eOne Annual Report and Accounts 2016 23 Business review continued Family

New properties which have been developed and produced by the Group include PJ Masks which had a very successful US broadcast debut in September 2015 on Disney. The series has been developed in partnership with Disney and France 5 and is based on the popular French picture books Les Pyjamasques. It is being launched on the Disney and Disney Junior channels worldwide over the coming months, and it is already a top-rated series for Disney Junior in the UK, Spain, Italy and Germany. The show’s characters and scenarios have been developed with the licensing markets in mind and more specifically targeting boys to complement the more girl-skewed licensing programme on Peppa Pig. A range of products such as action figures, playsets, vehicles, clothing and plush items will be launched this autumn in the US. With strong audience ratings on one of the world’s leading children’s television networks, prospects for PJ Masks look very attractive.

Peppa Pig Peppa Pig continues to be a leading pre-school brand globally with a broadcast presence in the US, Canada, Europe, Australia, Latin America and the Far East. Strong retail programmes exist in many developed markets and new consumer launches have been rolled out in developing markets during the year, most notably in the US. The acquisition of a controlling stake in Astley Baker Davies Limited, the creators of Peppa Pig, during the year gives eOne the ability to steer the strategic development of the brand as we aim to increase global retail sales to US$2 billion in the medium term. Delivery of a new series of 52 episodes of Peppa Pig commences in July 2016.

24 entertainmentone.com Financial review France is the latest market which has seen exceptional growth Revenues for the year were up 10% to £66.6 million (2015: over the past year and is now poised to become one of the £60.8 million) driven by the continuing strong performance stronger territories for the Peppa Pig brand, joining the long list of Peppa Pig, growth from Ben & Holly’s Little Kingdom and of top-performing territories. During the year, production on two a positive start from the new property PJ Masks. Underlying 15-minute specials was delivered and production on series four EBITDA increased 82% to £43.3 million (2015: £23.8 million), of Peppa Pig is underway with the delivery of 52 new episodes reflecting the impact of the ABD acquisition and organic commencing in July 2016, which will continue to provide new growth from increased revenues, sales mix and improved licensing opportunities for the property in the long term, and margins from digital exploitation. takes the total number of Peppa Pig episodes to over 260. Investment in acquired content and productions tripled to Ben & Holly’s Little Kingdom continues to generate high £5.8 million (2015: £1.9 million), driven by investments in new ratings in its television slots and digital revenue is growing series of Peppa Pig, PJ Masks and Winston Steinburger and year-on-year from deals with Amazon Instant Video and Sir Dudley Ding Dong. Netflix. Ben & Holly’s Little Kingdom is gaining momentum £m 2016 2015 Change in Latin America whilst consolidating its presence in Australia, Spain and Italy, and the broadcast agreement with Nick Jr in Revenue 66.6 60.8 10% the US will support a future US licensing programme. Underlying EBITDA 43.3 23.8 82% Investment in acquired content 1.6 0.4 300% PJ Masks, the latest animated series produced by the Investment in productions 4.2 1.5 180% Family business, premiered on Disney Channels in the US in September 2015 to very strong ratings – the show attracted The Family business continues to perform strongly with the 1.6 million unique viewers across its Disney Channel and Disney continued success of Peppa Pig. The franchise generated over Junior premieres and won an average audience share of 29% US$1.1 billion of retail sales in the 2016 financial year and almost among 2-5 year olds. The series has, since then, consistently 500 new and renewed broadcast and licensing agreements been in the top three shows on the channel, ahead of many have been concluded in the year. The business ended the of Disney’s fully-owned properties. The series will be rolled out year with almost 850 live licensing and merchandising to approximately 30 international Disney channels throughout contracts across its portfolio of brands. 2016, as well as selected terrestrial networks such as France 5. Peppa Pig remains the leading pre-school brand in the UK, Driven by strong demand, a deal with master toy licensee Spain, Australia and Latin America. Peppa Pig’s core UK Just Play was signed during the year and toys and books market continues to perform well, winning the Best Pre-School are scheduled to be on US shelves by September 2016, Licensed Property at the British Licensing Awards for the sixth with numerous other licensing agreements in negotiation. year running. Australia continues to be a key established As a result of its early broadcast success, discussions are market. The US is gaining strong momentum with over 400% already underway for the commissioning of a second season. growth in royalty revenues year-on-year. US retailers are Production continues on 52 episodes of Winston Steinburger increasing their buying levels, with particularly strong sales in and Sir Dudley Ding Dong and is expected to complete by June Toys R Us. The number of licensing partners in the US has 2016 and set to air on ABC in Australia and Teletoon in Canada doubled and retail sales have increased by over 275% – toys this autumn, with numerous other territory deals in negotiation. have seen a 230% increase and apparel has seen a 300% The Group is also developing other properties, including Bobby increase during calendar year 2015. This strong growth is and the Bike Buddies and Cupcake and Dinosaur with major expected to continue in 2017. broadcasters attached, such as in France and Rai in Italy In Canada, Peppa Pig is already the top-selling pre-school for Bobby and the Bike Buddies and Teletoon in Canada toy brand at Toys R Us and a full mass merchandising launch for Cupcake and Dinosaur. is planned for autumn 2016. Peppa Pig continues to perform well in France backed by excellent television exposure and a full retail roll-out is scheduled for this year. Exposure in China and South East Asia has continued to grow with Peppa Pig’s debut on CCTV, the Chinese state broadcaster. The new digital deals with Youku and iQIYI currently have over 250 million views monthly, increasing Peppa Pig’s exposure beyond traditional television. Performance in other South East Asian markets, including Hong Kong, Singapore, Taiwan and the Philippines has been strong. The key retailer in the Philippines, SM, has committed to Peppa Pig over many other major properties. Strong growth in these markets is expected in the next financial year.

eOne Annual Report and Accounts 2016 25 Eye in the Sky As part of eOne’s strategy to build its content pipeline and secure rights earlier in their development, eOne has expanded its own film production activities during the year. eOne completed production on Eye in the Sky, a thriller starring Helen Mirren and Alan Rickman, in 2015 and the film premiered to critical acclaim at the International Film Festival. eOne distributed the film in its own territories in Canada, the UK, Spain, the Benelux and Australia and also handled all international sales. In the UK, the film performed strongly delivering over US$7m at the box office and in the US, where Bleecker Street distributed the film, it generated box office of over US$18m. To-date, the film has had global box office receipts of over US$33m. Eye in the Sky is an example of how eOne is able to secure quality content and deliver a strong return on investment through its ownership of the global rights and a participation in the distribution of the film in its own territories. Generated US$33m global box office to-date

26 entertainmentone.com Business review Film

Entertainment One is one of the largest independent film companies in the world, focused on bringing the best movie content to consumers across all media in its territories.

Steve Bertram President, Global Film Group

The Group’s Film Division is Highlights comprised of its Distribution and Production businesses. Film releases DVD releases Investment in has a local during the year during the year acquired content presence in the UK, Canada, and productions Spain, the Benelux, Australia and New Zealand, as well as in 210 569 £110.2m the US and a global digital (2015: 227) (2015: 690) (2015: 175.7m) rights business. Through its production activities, eOne Contribution to Group revenue* Contribution to Group aims to maximise its access to underlying EBITDA** the best portfolio of content by entering earlier into the production process. Film Film Revenue 39% EBITDA 64% 28% £553.4m £52.8m

Key titles from 2016

* Divisional revenue calculated as a proportion ** Divisional underlying EBITDA calculated as of Group revenue before eliminations a proportion of Group underlying EBITDA before central costs

eOne Annual Report and Accounts 2016 27 Business review continued Film

The Group’s Film Division consists of a multi-territory distribution business which mainly acquires content from production partners for distribution across all consumer platforms. Film has direct distribution capabilities in Canada, the UK, the US, Australia/New Zealand, Spain and the Benelux, with international sales infrastructure across the globe. eOne acquires film rights both through output deals with independent production studios and through single picture acquisitions. The Group expects that the majority of film titles will continue to be acquired on a single-picture basis but will also seek output deals with other producers on attractive commercial terms, where appropriate. eOne Film Production looks to access content earlier in the production process while benefiting from any upside in a film’s performance. It also provides the Group with benefits from the exploitation of film content rights on a global basis, as well as in its core territories.

Market backdrop Turtles: Out of the Shadows, Independence Day: Resurgence, After a year in which the developed film markets were and Star Trek Beyond from the big six studios. under pressure in 2014, the industry experienced a However, alongside these titles there are strong independent rebound in 2015, driven by a bumper year of releases such as Now You See Me 2, The BFG, , blockbuster releases from the Hollywood major David Brent: Life on the Road, The Girl On the Train and studios. The latest data from the Motion Macbeth, bringing more balance to the slate this year. Picture Association of America (MPAA) indicates that Physical home entertainment after 1% growth in the global box office in 2014, in 2015 The decline in the physical media content markets continues it grew by 5% to reach US$38.3 billion, with strong unabated as digital platforms continue to roll out and gain performance in the North American territories. consumer traction. Global physical sales fell from In the US, 1.3 billion tickets were sold at the box office $30.8 billion in 2014 to $28.9 billion in 2015 and with ticket prices increasing by 3%. MPAA’s analysis PricewaterhouseCoopers predicts a compound annual rate highlights that more US and Canadian people went to of decline of 5.8% between 2014 and 2019. Against this the cinema in 2015 than the combined attendance for industry backdrop, Entertainment One has recently restructured theme parks and all major sports events (512 million this part of its Film business to ensure that it operates efficiently tickets sold) as the movies remain the most affordable in this market. entertainment option for the family. Digital and broadcast This recovery was supported by further growth in The coming together of faster broadband and WiFi speeds and the international markets outside North America. the wide choice of smart devices available to consumers across a In aggregate, the non-US/Canada box office grew broad range of price points continues to have a transformational by 4% in 2015 to US$27.2 billion, with strong, double- impact on the content markets. Digital-only platforms such as digit growth in both Latin America and Asia Pacific Netflix and Amazon Instant Video have paved the way for a host (both up by 13%) more than offsetting declines in of subscription video-on-demand (SVOD) content services EMEA, which fell 9%. delivered across the Internet, allowing users to discover, access and download both film and television content to be consumed In its Global Entertainment and Media Outlook: wherever and whenever the consumer desires. In response, 2015-2019 report PricewaterhouseCoopers forecasts traditional broadcasters have launched competing catch-up and a healthy 5.7% compound annual growth rate from SVOD platforms of their own, driving continued demand for high 2014 to 2019 in global box office revenues. quality programming from the production sector. In 2015, SVOD Including revenues from theatrical, physical (DVD and revenues grew by 18% over 2014 to reach $6.3 billion and Blu-ray) and electronic (digital downloads, streaming PricewaterhouseCoopers forecasts SVOD revenues growing at a and television) home entertainment, revenues from compound annual growth rate of almost 15% between 2014 and global filmed entertainment for 2015 are estimated at 2019 to a market value of $10.7 billion. Including revenues from US$88.3 billion, up from US$85.4 billion in the digital pay-per-view and download-to-own platforms (such as previous year. Revenues are forecast to grow to over Apple TV), this number grows to $19.2 billion. US$104 billion by 2019, with growth in digital formats more than offsetting the decline in physical revenues.

Market outlook Total Filmed entertainment revenues ($ billion) Cinema 160 After a depressed year for Hollywood blockbusters in

2014, there was a strong recovery in 2015, with a 120 sustained run of major titles from February through to the end of the year, culminating in : Episode 80 VII – The Force Awakens in December 2015. In 2016, Hollywood blockbuster releases will continue to 40 stimulate a healthy level of interest in cinema among 0 consumers, driven by titles such as X-Men: 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Apocalypse, Finding Dory, Teenage Mutant Ninja Digital home video Physical home video Box o ce Source: PricewaterhouseCoopers Global Entertainment and Media Outlook: 2015 - 2019

28 entertainmentone.com Strategy The Group also continues to build its own film production In spite of the short term challenges across the independent pipeline. By engaging in production activities the Group can film market, Entertainment One has continued to execute its secure attractive content earlier on in its lifecycle for distribution strategy of partnering with the best content producers to deliver across its core territories as well as participate in the upside the best content to the world. Over the short term, the Group’s from the global success of a release. In 2015, production on strategy to exploit its diversified library of film content rights to Eye in the Sky (a thriller starring Helen Mirren, Alan Rickman maximise returns, and the multi-year phasing of its revenues and Aaron Paul) was completed and the movie premiered at have helped to mitigate film market volatility to deliver a the Toronto International Film Festival to critical acclaim. It has portfolio return for the Division over the medium term. generated over US$33 million in global box office receipts to-date and will continue its international roll-out through the During the year the Group continued to invest in film content summer. Also during the year, the Group has been in production to build future value, at the same time developing closer on the Ricky Gervais project David Brent: Life on the Road, relationships with key content producers. One of the most with excitement already building around its UK release in important new relationships is the formation of Amblin Partners, August 2016. with Entertainment One becoming a partner alongside Steven Spielberg, Participant Media and Reliance Entertainment. The From a content standpoint, the Group believes that it is partnership aligns the Group with one of the most renowned well-positioned with an exciting slate of releases in the new and successful film producers of all time, allowing it to become financial year and beyond. Its distribution and production the film distributor of choice for future Amblin Partners strategy of developing partnerships with film-makers and productions in its territories, and to share in the global building scale in film distribution remains unchanged, with success of these titles through the partnership. knowledge gained from operating directly in local markets a key competitive differentiator to the Group’s content Entertainment One has also expanded its presence in selection process. production and international film sales through its investment in Sierra Pictures. The new partnership brings together the Group’s financial strength in film production with the broad producer relationships held by Sierra Pictures, while enhancing the Group’s global distribution capability through Sierra’s international sales operation.

Trumbo eOne distributed Trumbo directly in its own territories and also managed the international sales of the title globally. The film starred Bryan Cranston who received an Oscar® nomination, and global box office sales have reached over US$12m to-date.

eOne Annual Report and Accounts 2016 29 Business review continued Film

Operating with the most efficient infrastructure is a key discipline Film Distribution across the Group as it maximises its global distribution network. Revenues decreased by 15% to £494.9 million (2015: £581.4 Its position as one of the largest independent content million). This was mainly driven by lower theatrical activity and distributors in the world gives it not only presence with key title-specific under-performance, driving theatrical revenues retailers, broadcasters and digital content service providers down 19%. Home entertainment revenues were down 22% but also brings scale advantages relative to its smaller peers. reflecting theatrical performance and general market decline. As the markets continue to change, Entertainment One has evolved its structure to ensure that it operates at optimal Theatrical efficiency, particularly as consumers continue their Overall theatrical revenues decreased reflecting lower box evolution from physical products to digital. office takings, which were down by 16% to US$259 million (2015: US$308 million). This reduction was driven by During the year, the Group has taken significant steps in challenging market conditions, in which the Group had a addressing the cost structure of its Film Division to ensure that reduced volume of releases year-on-year (210 compared to 227 the business is positioned to maximise profitability in the future. in 2015) and under-performance of a number of specific titles. The Group continues to focus on driving margin improvements in the Film Division, through a wide-reaching restructuring of Despite the overall weaker box office performance, the Group how the Division operates, which is expected to deliver had a number of notable releases in the year which included annual cost savings of £10 million from FY18. Spotlight, winner of Best Picture at the Oscars®, being the Group’s second Best Picture winner in the last three years. As part of this restructuring programme, new partnerships have Other key releases included : Allegiant been created with 20th Century Fox Home Entertainment, on Part 1, : Chapter 3, The Hunger Games: Mockingjay a multi-territory basis, and Home Entertainment, Part 2, Quentin Tarantino’s The Hateful Eight, Sicario in the US, to ensure that the Group remains best-positioned and Southpaw. to compete in the evolving home entertainment marketplace. These partnerships give eOne the benefit of scale at retail and The slate for the new financial year is expected to feature a increased cost efficiencies and placement opportunities across number of high profile releases and the Group’s investment in its territories. acquired content is expected to increase to around £160 million. The FY17 release slate includes highly anticipated titles such as After the short term slate challenges experienced by the The BFG, directed by Steven Spielberg, The Girl on the Train, Group recently, Entertainment One remains well-positioned in based on the best-selling book, both sourced from the Group’s distribution with a strong slate for the rest of 2016 and beyond. new partnership with Amblin Partners, and David Brent: Life on New long-term content partnerships will bring high quality the Road, starring Ricky Gervais reprising his character from releases into the pipeline, driving further revenue opportunities the original UK version of The Office. across an efficient sales infrastructure. As the film market continues to evolve, eOne remains focused on maximising Home entertainment the value that can be delivered from its extensive film content Revenues decreased by 22% reflecting the continuing migration library by exploiting the Group’s content assets across the from physical to digital formats as well as the flow-through broadest range of commercial opportunities. eOne continues to impact of fewer theatrical releases and the weaker 2015 and explore options for increasing the coverage of its international 2016 theatrical slate on the home entertainment window. network, either through potential corporate opportunities In total, 569 DVDs and Blu-rays were released (2015: 690) or partnerships. including strong performing titles such as The Divergent Series: Allegiant Part 1, The Hunger Games: Mockingjay Part 2, Financial review Paddington and Mr. Holmes Revenues decreased by 7% to £553.4 million (2015: £592.6 million), driven by Film Distribution, partly offset by Film eOne’s new partnerships with 20th Century Fox Home Production. Underlying EBITDA was 28% lower year-on-year Entertainment, on a multi-territory basis, and Sony Pictures driven by Film Distribution. Home Entertainment, in the US, ensure that the Group remains best-positioned to compete in the physical home entertainment £m 2016 2015 Change marketplace as it transitions to a digital future. Revenue 553.4 592.6 (7%) Film Distribution 494.9 581.4 (15%) Over 400 titles are planned for release in the new financial Theatrical 64.9 79.7 (19%) year including The Divergent Series: Allegiant Part 1, The BFG, The Girl on the Train and David Brent: Life on the Road. The Home entertainment 192.4 246.0 (22%) planned reduction in the number of releases is driven by Broadcast and digital 189.1 214.6 (12%) fewer non-theatrical releases, partly offset by an increase Other 48.5 41.1 18% in the number of theatrical DVD releases. Film Production 60.4 20.9 189% Eliminations (1.9) (9.7) (80%) Underlying EBITDA 52.8 73.1 (28%) Investment in acquired content 98.3 154.2 (36%) Investment in productions 11.9 21.5 (45%)

30 entertainmentone.com Broadcast and Digital All three films have significantly outperformed sales The Group’s combined broadcast and digital revenues were expectations at the recent Cannes Film Festival. eOne 12% lower reflecting the impact of lower box office revenues Production’s global sales business has also seen a strong in 2015 on the television and digital exploitation windows. performance in the year with significant sales of the international rights of Trumbo, Captain Fantastic and Key broadcast/digital titles in the year included The Divergent the Oscar®-winning Spotlight. Series: Insurgent, Nativity 3, Insidious: Chapter 3, The Hunger Games: Mockingjay Part 1, Nightcrawler, Sicario and Mr Turner. During the year eOne strengthened its production and global sales businesses through a strategic investment in During 2016 the Group renewed its deal with Amazon Instant Sierra Pictures. Going forward, the international sales and Video in the UK, giving Amazon Prime members exclusive distribution of films produced and acquired by eOne, as well access to all eOne new releases from its future film slate. In as eOne-distributed films from The Mark Gordon Company, addition, the Benelux has new agreed deals with Proximus and will be handled by Sierra outside of Canada, the UK, Australia/ BETV and Spain has signed a new output deal with Movistar+ New Zealand, the Benelux and Spain, where eOne directly and Netflix. distributes titles. Canada has agreed a number of significant deals during the Investment in productions is expected to grow to around year, including an agreement with Netflix to distribute The £70 million (2016: £11.9 million) in the new financial year. Hunger Games franchise as well as catalogue titles. In addition, Canada signed a five-year output deal with TVA, the number one French Canadian broadcaster, and signed a new deal with Shomi in May which will add more than 175 films to Shomi’s viewing catalogue and a landmark joint deal with Shomi and Corus for the entire Divergent franchise. Film Production Revenues increased by 189% to £60.4 million (2015: £20.9 million). In the year, eOne delivered titles including Sinister 2, Insidious: Chapter 3 and Eye in the Sky generating global box office revenues of US$221 million to May 2016 (2015 titles: US$62 million, driven by Suite Française and Woman in Black: Angel of Death). Eye in the Sky received strong reviews from its worldwide premiere at the Toronto International Film Festival and has sold to all territories worldwide. The pipeline for the new financial year includes a number of exciting projects. David Brent: Life on the Road, written by and starring Ricky Gervais will be released in eOne’s territories as well as the remaining rights being sold internationally, with a deal already secured with a global OTT platform. eOne also has distribution rights for its production Message from the King in its distribution territories and all other territories on a global basis. Additionally, eOne has the international rights, excluding Canada and France, for Cannes Jury Prize winner ’s first English language film, The Death and Life of John F Donovan, starring Jessica Chastain, Kit Harrington, Kathy Bates, Michael Spotlight Gambon and Natalie Portman – it is expected to be delivered at the end of the next financial year. eOne distributed Spotlight directly in Entertainment One is positioning a of films to begin its own territories and also managed principal photography before the end of the year. Molly’s the international sales of the title globally Game, produced as part of the partnership with Mark Gordon which included a multi-territory deal with Productions, tells the story of Molly Bloom, who ran the world’s Sony Pictures. most exclusive high stakes poker game before being arrested by the FBI, and is written by and marks his The film took the 2016 Best Picture directorial debut. The film stars Jessica Chastain and Idris Elba. Oscar® and has taken almost US$100m Stan and Ollie, about the beloved comedy duo Stan Laurel and at the box office to date. Oliver Hardy, stars Steve Coogan and John C. Reilly. Villa Capri is a comedy starring Morgan Freeman and Tommy Lee Jones.

eOne Annual Report and Accounts 2016 31 Finance review Delivering solid financial results

eOne has delivered solid financial results at the Group level, driven by strong organic growth in Television and Family, and the impact of acquisitions completed during the year, enhancing the mix of revenues towards higher margin activities.

Giles Willits, Chief Financial Officer

Financial summary Adjusted operating profit increased by 20% to £124.7 million (2015: £103.6 million) reflecting the growth in the Group’s underlying EBITDA. Adjusted profit before tax increased by 17% to £104.1 million (2015: £88.8 million), in line with increased adjusted operating profit, partly offset by higher underlying finance charges reflecting higher average debt levels year-on-year, following the acquisition of The Mark Gordon Company in January 2015, and higher interest rates following the re-financing in December 2015. Reported operating profit increased by 25% to £75.0 million, with the Group reporting a profit before tax of £47.9 million (2015: £44.0 million).

Reported Adjusted 2016 2015 2016 2015 Group £m £m £m £m Revenue 802.7 785.8 802.7 785.8 Underlying EBITDA 129.1 107.3 129.1 107.3 Amortisation of acquired intangibles (27.4) (22.2) – – Depreciation (4.4) (3.7) (4.4) (3.7) Share-based payment charge (4.1) (3.4) – – Tax, finance costs and depreciation related to joint ventures (1.6) 0.1 – – One-off items (16.6) (17.9) – – Operating profit¹ 75.0 60.2 124.7 103.6 Net finance charges (27.1) (16.2) (20.6) (14.8) Profit before tax 47.9 44.0 104.1 88.8 Tax 2 (7.7) (2.7) (24.5) (20.0) Profit for the period 40.2 41.3 79.6 68.8 1. Adjusted operating profit excludes amortisation of acquired intangibles, share-based payment charge, tax, finance costs and depreciation related to joint ventures and operating one-off items and one-off items relating to the Group’s financing arrangements. 2. The Group calculates the effective tax rate after adjusting for the share of results of joint ventures of £3.4 million (2015: £0.2 million). The Group calculates the adjusted effective tax rate after adjusting for profit before tax relating to joint ventures of £5.0 million (2015: £0.1 million) and the related underlying income tax charge of £2.1 million (2015: £nil) (excluding tax one-off credits of £0.5 million recognised during the year (2015: £0.1 million credit)).

32 entertainmentone.com Joint ventures In addition, in line with the increased acquisition and investment Underlying EBITDA includes £5.0 million of EBITDA related to activity during the year, costs of £7.0 million were incurred joint ventures, of which £4.7 million relates to MGC. Following relating to the Mark Gordon Company (fully consolidated from the change in the MGC shareholder agreement in May 2015 19 May 2015), Astley Baker Davies Limited (22 October 2015), the financial results of MGC are now fully consolidated. Sierra Pictures (22 December 2015), Dualtone Music Group (11 January 2016), Last Gang Entertainment (7 March 2016) Amortisation of acquired intangibles and Renegade 83 (24 March 2016). A credit of £2.8 million Amortisation of acquired intangibles increased by £5.2 million related to the release of excess accruals in relation to the to £27.4 million reflecting the increased acquisition and Alliance transaction. investment activity throughout the year, which included The Mark Gordon Company (fully consolidated from May 2015), Net finance charges Astley Baker Davies Limited, Sierra Pictures, Dualtone Music Reported net finance costs increased by £10.9 million to Group and Last Gang Entertainment. The FY17 charge is £27.1 million. These included one-off net finance costs of expected to increase to around £33 million, reflecting the £6.5 million in the current year mainly relating to the write-off of full year impact of the acquisitions completed during FY16. unamortised deferred finance charges expensed to the income statement following the Group’s re-financing in December 2015. Depreciation & capital expenditure Adjusted finance charges (which exclude one-off items) of Depreciation, which includes the amortisation of software, £20.6 million were £5.8 million higher in the current year, has increased by £0.7 million to £4.4 million, reflecting the reflecting higher average debt levels year-on-year driven by higher level of investment in software and property, plant The Mark Gordon Company acquisition in January 2015, which and equipment as the Group grows. was financed with debt, and higher interest rates following Capital expenditure on property, plant and equipment and the Group’s re-financing in December 2015. The weighted software increased £5.0 million to £7.7 million (2015: £2.7 million) average interest rate for the Group’s corporate facility was (excluding Production capital expenditure of £0.9 million 5.6%, compared to 4.5% in the prior year. The FY17 weighted (2015: £0.3 million)), primarily reflecting the move to a average interest rate is expected to be 6.5%, which is higher new office location in Toronto in September 2015. than FY16 driven by the full year impact of the re-financing completed in December 2015. Share-based payment charge Tax The share-based payment charge of £4.1 million has increased by £0.7 million during the year, as a result of the ongoing effect On a reported basis the Group’s tax charge of £7.7 million of the broadening of the number of employees to whom grants (2015: £2.7 million), which includes the impact of one-off items, were made under the Group’s Long Term Incentive Plan. represents an effective rate of 17.3% compared to 6.2% in the prior year. On an adjusted basis, the effective rate is in line with One-off items the prior year at 22.6% (2015: 22.6%). The FY17 effective tax rate During the year ended 31 March 2016 the Group continued on an adjusted basis is expected to be approximately 23%. to develop and progress its growth strategy, including the reorganisation of the physical distribution business. One-off restructuring costs of £12.4 million were incurred during the year and included closure of facilities in North America and costs of moving physical stock from those facilities, staff redundancies and a reassessment of the carrying value of investment in acquired content rights and other assets throughout the Group’s Home Entertainment business, specifically relating to the closure of the Group’s UK-based international home video business.

eOne Annual Report and Accounts 2016 33 Finance review continued

Cash flow & net debt The table below reconciles cash flows associated with the net debt of the Group. It excludes cash flows associated with production activities which are reconciled in the Production financing section below.

2016 2015 £m (unless specified) Television Family Film Centre Family Film Centre Total Underlying EBITDA 32.0 43.6 51.8 (6.2) 121.2 7.5 24.1 71.7 (7.4) 95.9 Content investment/ amortisation gap 5.5 (1.5) 21.6 – 25.6 5.3 (0.2) (6.1) – (1.0) Production investment/ amortisation gap (7.7) (1.6) (3.2) – (12.5) – 0.7 (0.4) – 0.3 Working capital (15.6) (13.3) (25.3) – (54.2) (17.2) 1.3 (47.1) – (63.0) Joint venture movements (4.5) – – – (4.5) (0.4) – (0.1) – (0.5) Adjusted cash flow 9.7 27.2 44.9 (6.2) 75.6 (4.8) 25.9 18.0 (7.4) 31.7 Cash conversion (%) 30% 62% 87% – 62% (64%) 107% 25% – 33% Capital expenditure (7.7) (2.7) Tax paid (14.4) (5.5) Net interest paid (10.2) (10.9) Free cash flow 43.3 12.6 One-off items (inc. financing) (20.7) (17.2) Acquisitions, net of net debt acquired (inc. intangibles) (177.0) (105.4) Net proceeds of share issue 194.5 – Dividends paid (4.0) (2.9) Foreign exchange 8.0 (1.0) Movement 44.1 (113.9) Net debt at 1 April 2015 (224.9) (111.0) Net debt at 31 March 2016 (180.8) (224.9)

Adjusted cash flow Adjusted cash flow at £75.6 million is higher than prior year by £43.9 million, with improved cash flow in all Divisions, representing an underlying EBITDA to adjusted cash flow conversion of 62% (2015: 33%).

Television Film Television adjusted cash inflow improved in the year Film adjusted cash inflow of £44.9 million delivers an to £9.7 million (2015: (£4.8m) outflow), representing an underlying EBITDA to adjusted cash flow conversion of 87% underlying EBITDA to adjusted free cash flow conversion (2015: 25%). This has significantly improved compared to the of 30% (2015: -64%), driven by the increase in underlying prior year, despite the reduced underlying EBITDA, driven EBITDA, partly offset by the investment in productions gap by lower year-on-year working capital outflows as the prior in MGC relating to Conviction and Designated Survivor year included a number of non-recurring acquisition related and both of which were financed from MGC cash reserves outflows. In addition, Film’s investment in acquired content without the use of production financing. The working gap in the year is positive as a result of lower investment capital outflow in the current financial year of £15.6 million spend, as fewer titles have been acquired than during the mainly relates to the increase in receivables reflecting prior year, and the timing of minimum guarantee payments. the increase in SVOD revenues, where the payment The working capital outflow in the current financial year of terms spread receipts over the term of the licence. £25.3 million is primarily due to an increase in receivables driven by the profile of year-on-year Q4 revenue phasing Family and a decrease in creditors mainly due to the lower royalties reflecting film slate performance in the year. Family adjusted cash inflow increased to £27.2 million (2015: £25.9m), representing an underlying EBITDA to adjusted cash flow conversion of 62% (2015: 107%). The cash flow conversion reduction primarily reflects one-time working capital outflows related to the lower royalty payable accrual as a result of the ABD acquisition.

34 entertainmentone.com David Brent: Life on the Road eOne co-financed David Brent: Life on the Road with BBC Films and led the international sales of the title. eOne will distribute the title directly in the UK and Australia and has already included a multi-territory deal with a global OTT platform for territories including the US. David Brent: Life on the Road opens in cinemas in August 2016.

Free cash flow The net proceeds of the share issue of £194.5m related to Positive free cash flow for the Group of £43.3 million was the Group’s rights issue in October 2015. These proceeds have £30.7 million higher than the previous year driven by increased been used to acquire the following businesses net of acquired adjusted cash flow offset by increased capital expenditure and net debt: 70% of Astley Baker Davies Limited in October 2015 tax payments in the year. Capital expenditure increased to £7.7 for £140.5 million, 100% of Dualtone Music Group in January million mainly driven by costs associated with the consolidation 2016 for £2.9 million, 100% of Last Gang Entertainment in March of the Group’s Toronto offices. Tax paid increased by £8.9 2016 for £0.9 million, 65% of Renegade 83 in March 2016 for million to £14.4 million due to the impact of consolidating MGC £14.0 million, as well as the investment in Sierra Pictures in as a subsidiary and the acquisition of ABD. Net cash interest December 2015 for £8.8 million and the purchase of acquired paid is broadly in line with prior year, even though the overall intangibles of £17.9 million primarily relating to the Amblin cost of debt has increased, as the interest on the Group’s Partners investment. The acquisition spend also includes senior secured notes is paid on a bi-annual basis with the an inflow of £7.7 million resulting from the consolidation of first payment due in July 2016. MGC from May 2015 and £0.3 million due to finalisation of the Paperny Entertainment working capital position. Net debt In December 2015, the Group re-financed its existing credit The dividends paid of £4.0 million includes £3.2 million relating facility through the issuance of £285 million senior secured to the final dividend of 1.1 pence per share in respect of the notes (due 2022) and the closing of a new £100 million senior year ended 31 March 2015 paid on 10 September 2015 and secured revolving credit facility maturing in 2020. At 31 March £0.8 million paid to the non-controlling shareholders of Astley 2016, overall net debt at £180.8 million was £44.1 million lower Baker Davies Limited. than the prior year primarily reflecting the positive free cash Foreign exchange gains of £8.0 million (2015: £1.0 million loss) flow of the Group. Net debt leverage improved to 1.4x Group occurred during the year. In the current year, the movements EBITDA (2015: 2.1x). Other major cash flow movements in the are primarily related to the translation impact of the strengthening year included one-off items, proceeds from the equity raise of pounds sterling against the Canadian dollar to December to fund acquisitions and dividend payments. 2015, when the Group re-financed the senior debt facility (c.50% denominated in Canadian dollar) to the pounds sterling denominated senior secured notes.

eOne Annual Report and Accounts 2016 35 Finance review continued

Production financing Overall production financing increased £28.7 million year-on-year to £118.0 million primarily reflecting the positive investment in productions gap where amortisation of film productions exceeded investment spend, driven by the timing of film deliveries year-on- year. This was offset by the production financing acquired as part of the Sierra deal.

2016 2015 £m Television Family Film Total Television Family Film Total Underlying EBITDA 7.2 (0.3) 1.0 7.9 10.3 (0.3) 1.4 11.4 Production investment/amortisation gap 5.8 (1.1) 21.3 26.0 (11.9) (1.3) (19.4) (32.6) Working capital (11.4) 0.5 3.5 (7.4) (2.3) 1.0 (5.6) (6.9) Joint venture movements – – (0.5) (0.5) – – 0.4 0.4 Adjusted cash flow 1.6 (0.9) 25.3 26.0 (3.9) (0.6) (23.2) (27.7) Capital expenditure (0.9) (0.3) Tax paid (3.3) (5.3) Net interest paid (0.1) (2.5) Free cash flow 21.7 (35.8) One-off items (inc. financing) (0.6) – Acquisitions, net of production financing acquired (inc. intangibles) (49.0) (0.7) Foreign exchange (0.8) 1.2 Movement (28.7) (35.3) Net production financing at 1 April (89.3) (54.0) Net production financing at 31 March (118.0) (89.3)

The Production cash flows relate to production financing Financial Position and Going Concern Basis which is used to fund the Group’s television, family and The Group’s net assets increased by £295.6 million to £660.4 film productions. The financing is arranged on an individual million at 31 March 2016 (31 March 2015: £364.8 million). The production basis by special purpose production increase primarily reflects the acquired assets from the which are excluded from the security of the Group’s corporate acquisitions and investments made during the year. facility. It is short-term financing whilst the production is being made and is paid back once the production is delivered and The directors acknowledge guidance issued by the Financial the sales receipts and tax credits are received. The Group Reporting Council relating to going concern. The directors deems this type of financing to be working capital and consider it appropriate to prepare the consolidated financial therefore timing-based, in nature. The Group therefore statements on a going concern basis, as set out in Note 3 to the shows the cash flows associated with these activities consolidated financial statements. The directors acknowledge separately. The Group also believes that higher production guidance issued by the Financial Reporting Council relating net debt demonstrates an increase in the success of the to going concern. Television, Family and Film production businesses, which helps drive revenues for the Group and therefore increases the generation of EBITDA and cash for the Group, which in turn reduces the Group’s net debt leverage.

36 entertainmentone.com Principal risks and uncertainties

The Group has a well-established risk management process for identifying, assessing, evaluating and mitigating significant risks. The structure and process is summarised as follows:

Risk management approach The Board Risks are identified and assessed by all Business Units – Leadership of risk management every three months and are measured against a defined set of criteria, considering likelihood of occurrence and potential – Ownership and monitoring impact to the Group before and after mitigation. The Risk – Sets strategic objectives and risk appetite and Assurance function facilitates a risk identification and assessment exercise with the Executive and Risk Management Committee members. This information is combined with a consolidated view of the Business Unit risks. The top risks (based upon likelihood and impact) form the Group Risk Profile, Audit Committee which is reported to the Executive Committee for review and – Delegated responsibility from Board to oversee risk challenge ahead of it being presented to the Board of Directors management and internal controls for final review and approval. – Reviews effectiveness of the Group’s internal To ensure that our risk process drives continuous improvement controls and risk management process across the business, the Risk Management Committee monitors the ongoing status and progress of key action plans against each risk on a quarterly basis. Risk remains a key consideration in all strategic decision making by the Board, incorporating a Executive Committee discussion of risk appetite. – Ownership and management of key risks Each principal risk is assigned to an appropriate member of the – Assesses materiality of risks in context of Risk Management Committee, who is accountable to the Risk the whole Group Management Committee for that risk. The principal risks are managed at either an operational level, Group level, or a combination of both. Risk appetite Risk Management Committee Risk appetite is an expression of the types and amount of – Co-ordination and review of key risks risk that the Group is willing to take or accept to achieve its objectives. It supports consistent, risk-informed decision – Monitors mitigation and controls making across the Group with the aim of ensuring that all significant risks are identified, assessed and managed to within acceptable levels. The Group can use one or more actions to reduce the Group functions/Subsidiary companies likelihood or impact of known risks to levels that it is – Identification, assessment and management of comfortable with: mitigation – choose to take or to tolerate risk; – Use risk as an explicit part of decision making and – treat risk with controls and mitigating actions; management of external relationships – transfer risk to third parties; or – terminate risk by ceasing particular activities or actions. Risk categorisation Risk & Assurance The Group categorises risks as Strategic, Operational or – Facilitation and challenge Financial. Reputational impact is considered for all risks – Monitors and validates action taken by management rather than noting a separate reputational category. – Independently reviews the effectiveness of the Group’s internal controls and risk management process

eOne Annual Report and Accounts 2016 37 Principal risks and uncertainties continued

Our principal risks and uncertainties Principal risks and the mitigating activities in place to address them are listed below. The principal risks were continuously reviewed during the year as part of the Group’s risk management process.

Risk Why How Strategic Strategy The Group faces changing markets and The Group ensures that its strategy is regularly formulation & consumer practices and needs to be agile updated to reflect the constantly changing and developing execution in responding to them and to have the right entertainment industry. It also continuously considers its Creating and capabilities to achieve its strategic objectives. capability to deliver its strategic objectives in terms of executing the It needs to be able to execute entry into new people, technology, knowledge and resources. It continues best strategy and changing markets or consumer channels to invest in new business development and to identify and for the Group and be able to grow the business through convert targets for acquisition. It has developed reporting corporate acquisitions and execution of of key performance indicators to track strategic targets strategic initiatives. Failure to do so could have and initiatives. an impact on the Group’s financial results. Operational Recruitment & The performance of the Group is dependent The Group has created a competitive remuneration and retention upon its ability to attract, recruit and retain retention package including bonus and long-term incentive of employees quality employees in a highly competitive labour plans to incentivise loyalty and performance from its Find the best people market. existing highly-skilled and experienced people. A Group- for the business to There are many contributory factors that affect wide employee Sharesave Scheme was launched during deliver its strategy the Group’s ability to retain key employees; the year in response to employee feedback – the scheme some of which are in its control and some which aligns employees with the measure of shareholder success are not (economic climate, sector growth and and is a popular benefit for employees. Succession skill demand). The impact of failing to retain planning and organisational development, including key employees can be high due to loss of key leadership development, help to ensure that employee knowledge and relationships, lost productivity, capabilities are improved, as well as broader overall hiring and training costs, and ultimately could employee engagement initiatives including communication, result in lower profitability. eOne Values and corporate social responsibility initiatives. Whilst competition for the right people is always challenging, the Group’s increasing profile in the industry is helping to attract and retain the best people. See page 43 for more information on how we manage our people. Source & There is a risk of significant impact on the The Group continues to engage with the creative select margins of the business if the Group is unable to community at all levels to help ensure continuing access the right successfully source and select the best content to content. Different strategies are pursued including first content or fails to effectively monetise it. look, output and production/co-production deals. at the right Given the changing consumer appetite for The selection of content is based upon the robust use of price shows and formats, it is important that the data and financial analysis to help drive the most optimal Group continues to develop its content sourcing allocation of capital to maximise the financial return from Building a valuable and selection capabilities to ensure that the the Group’s content portfolio. content portfolio Group’s content portfolio remains diversified Corporate acquisitions of content-producing companies and valuable. provide additional direct access to content, together with the ramping-up of in-house production capabilities. Protection of There is a risk that the Group’s ability to exploit The Group proactively protects its rights, in particular intellectual its content and brands is not optimised due to its digital rights, through monitoring of the internet and property ineffective IP protection or piracy. Effective IP selected websites, implementing its brand protection (IP) rights protection will ensure that the Group maximises strategy and regularly monitoring its portfolio of trademark the opportunity to create value. registrations. It uses tier-one service providers for digital Protecting content asset management and utilises expert legal support and brands services where required.

38 entertainmentone.com Risk Why How Operational continued Regulatory The Group operates in a highly regulated The Group carefully monitors the regulatory environment compliance environment; changes in this environment within which it operates and ensures that its strategies Operating can impact the Group and its partners. remain appropriate through its corporate planning within the law The Group has to comply with statutory and processes. A dedicated Tax department ensures that and seeking other regulations that fall into the following the Group’s tax compliance position is up-to-date to optimise main areas: criminal/legal, financial (including across the Group. efficiency taxation), employee (including health and From an operating perspective, the Group’s international safety), data protection and listing regulations. footprint ensures that its regulatory risk is spread across Data protection is considered separately below. a number of different jurisdictions. The Group operates under a Code of Business Conduct and policies that are applicable to all employees, including a formal Anti-bribery and Corruption Policy and a Whistleblower Policy. On an annual basis the Group’s senior management formally acknowledge their own compliance with the Group’s key policies, and that their team members have understood these policies. Information Information Security The Group monitors key cyber security risks and is security/data There is a risk of significant impact on constantly evolving its security measures and internal protection performance of the Group including reputational policies and guidance. Network and infrastructure Protecting eOne factors through not having robust information penetration testing is performed regularly and an external and stakeholders’ security controls, which could result in information security monitoring service has been retained. data unauthorised disclosure, modification or deletion Legal and technical advice is taken on the security of any of data. websites and data marketing requests. Data Protection Sensitive and confidential data is restricted to specific user groups and policies are in place and made available There is a risk that the Group does not process to employees as required. Data protection and retention personally identifiable information (PII) in policies are reviewed regularly and enhanced as required, compliance with local laws or make employees including response plans. aware of their obligations when processing PII on behalf of the Group. Data breaches, including losses, could result in significant fines and reputational impact depending upon the seriousness of the breach. Business There is a risk of significant impact on the BCPs have been implemented across the Group on a continuity financial performance of the business through location-by-location basis, supported by the creation planning (BCP) not having robust BCP and IT disaster recovery of local crisis management teams and a widespread IT Maintaining plans, processes and testing. This could also disaster recovery programme which targets the recovery operations in arise from a third party service provider contract of major systems. Incident response plans have been the event of an not providing adequate cover should their rolled out to all locations and form the initial response incident or crisis service be interrupted. mechanism of the BCP. Financial Financial risk There is a risk of significant impact on the The Group has an established financial management Seeking and financial performance of the business or its system to ensure that it is able to maintain an appropriate maintaining ability to trade if an adequate funding facility is level of liquidity and financial capacity and to manage the financing to support not maintained to allow the Group to operate. level of assessed risk associated with financial instruments. the delivery of the Further, failure to adequately control financing The re-financing in December 2015, which put in place Group’s strategic or foreign exchange costs could have a material long-term, non-amortising debt and a flexible revolving objectives impact on the Group. credit facility, aligns eOne’s capital structure with the Group’s growth strategy. The Group’s Treasury department is principally responsible for managing the financial risks to which the Group is exposed. The management system also includes policies and delegation of authority controls to reasonably protect against the risk of financial fraud in the Group.

eOne Annual Report and Accounts 2016 39 Principal risks and uncertainties continued

Viability statement Entertainment One’s strengths and supports the Group’s strategy which targets doubling the size of the business 1) Assessment of prospects by 2020. Context for the assessment of prospects Entertainment One is a leading global entertainment business, The assessment process and key assumptions operating through three business segments – Television, Family The Group’s prospects are assessed primarily through its and Film. annual strategic planning process. This process culminates in the development of the Group’s three year business plan, The Group’s business model and strategy underpin eOne’s led by the CEO, CFO and Executive Committee. The plan, growth trajectory, supported by the Group’s business plans. The comprising a detailed budget and two plan years, is presented Group’s strategy has been consistently in place for a number of to, and approved/adopted by, the Board on an annual basis years and was last refreshed in November 2014 – the strategy prior to the start of each new financial year. and its execution continues to be subject to ongoing monitoring and development through the Group’s long-term planning The planning process requires each operating unit to submit process, as described below. detailed bottom-up business plans, which are consolidated in Divisional business plans for Television, Family and Film, The Board continues to take a conservative approach to the including market, regulatory and competitive context, as well execution of the Group’s strategy and, from a risk perspective, as an assessment of industry developments. a system of internal controls and an escalating system of approvals is in place. The Board receive regular updates on The Group Finance team consolidates the Divisional plans at a the Group’s financial performance via monthly management Group level, including a determination of the appropriate levels accounts and formally approves the outputs of a robust of contingency and consideration of the financing, treasury and budgeting and forecasting process. risk management aspects of the overall business plan, as well as other corporate development activity, where appropriate. The Group’s model to source, select and sell high quality The Board participates fully in the annual strategic planning content continues to be at the centre of its strategy and it process through a full-day strategy review session at which operates a portfolio approach at all levels of the business to members of the Executive Committee present detailed plans manage its risk profile. The Group’s balance of activities across for each area of the business. Television, Family and Film provide stability to the Group’s financial performance, protecting against cyclical performance The Board’s role is to challenge the assumptions made by in any one segment. Within each Division, the Group also executive management, consider whether the plan continues to operates a portfolio model – in Television the Group sells take appropriate account of the external environment including to over 150 countries and has a balance of scripted and macroeconomic, regulatory, social and technological changes, non-scripted output and new and long-standing productions; and to confirm that the plan continues to meet the risk profile within Family, the Group has almost 850 licensing and agreed by the Board. merchandising contracts in place across different properties The output of the annual strategic planning process is a set of in multiple territories; and in Film, the Group has over 200 detailed plans and objectives for each Division, an analysis of theatrical releases a year across its different territories to the risks and opportunities that are perceived as relevant to the minimise the risk of any one particular film, and derives a plans and a detailed financial forecast for each Business Unit, significant proportion of its in-year revenues from library titles. Division and the Group as a whole. The latest updates to the The Group has very good visibility of its short-term revenues, Group’s business plan were finalised in March 2016 following with approximately 60% of television productions committed this year’s strategic planning process. This review considered or greenlit before the start of any financial year and a large the Group’s current position and the development of the proportion of the film slate committed up to 12 months business as a whole over the next three years to 31 March 2019. in advance. Conversely, the Group is able to manage its The first year of the strategic plan forms the Group’s operating discretionary spend on a very short time horizon, which budget for the year ended 31 March 2017 which is subject to a allows good control over short-term profitability. From a cash re-forecast process in November 2016 and February 2017. The perspective, the Group makes cash outlays for its content second and third years of the plan, to 31 March 2019, are also acquisitions typically on delivery and its television productions built on a bottom-up basis, but necessarily have a greater are generally only greenlit on the basis that at least 85% of the reliance upon assumptions than the first year of the plan. production budget is underwritten, which drives a low cash risk profile. Assumptions in the financial forecasts supporting the Group’s growth strategy, reflect: Corporately, eOne’s capital structure aligns with delivering the Group’s strategy, with significant long-term, non-amortising, – Recovery in the Film Division, which has seen weakness fixed-rate debt provided via senior secured notes and short- in the current financial year, supported by significant cost term working capital needs being funded via a new, more savings driven by the restructuring programme launched flexible revolving credit facility. by the Group – Strong growth in the Television and Family Divisions over Consumer demand continues to grow in the markets in which the plan period the Group operates and eOne anticipates that audiences will increasingly focus on the quality of the content that they – Continued investment in content and productions to support consume, gravitating towards premium television series, the growth plans film and speciality genres. This market dynamic plays to

40 entertainmentone.com Having completed a re-financing in December 2015, which derived from lower than expected operational performance delivered significant long-term, non-amortising, fixed-rate debt of the business and adverse movements in foreign exchange via £285 million senior secured notes (due 2022) and short- rates. The reasonable worst case is then tested against the term working capital needs being funded via a new, more Group’s financial covenants and facility headroom to ensure flexible £100 million super senior revolving credit facility that sufficient headroom still exists to allow the Group to (maturing in 2020), it has been assumed that, based on the continue in operation and to continue to meet its liabilities Group’s current plans, no further re-financing will need to as they fall due. be considered over the assessment period. The reasonable worst case scenario tested for the Group’s From a macro-economic perspective, the Group’s business plan assessment of viability included: assumes a low-growth economic environment in the territories – Quarterly revenue decreases in all segments in FY17 in which it operates, and in the global economy more generally. (varying from 5.0% to 10.0%, as visibility of performance The Group expects a continued decline in physical distribution diminishes with time) and the resulting impact on EBITDA volumes and revenues as the media industry continues to migrate to digital home entertainment. – Annual revenue decreases in all segments of 10.0% for FY18 and 12.5% in FY19, with decreases driven by both timing of The Group’s business plan has been developed in the context releases/deliveries and permanent under-performance, and of the Group’s principal risks and uncertainties that are set out the resulting impact on EBITDA in the table on pages 38 and 39. The purpose of the table of – Additional working capital outflows of £10m assumed principal risks and uncertainties is primarily to summarise from April 2016 those risks and uncertainties which could prevent the Group from delivering on its strategy. – Strengthening of pounds sterling by 10% from plan rates A number of the risks and uncertainties are qualitative in nature The results of this stress testing showed that under the and their impact cannot be easily quantified, but they have reasonable worst case, a good level of headroom continued been considered as part of the development of the Group’s to be available against the Group’s financial covenants and business plan. Of the risks and uncertainties noted in the facility limits, which would allow the Group to continue to Annual Report, the directors have categorised the following operate in a normal way. risks and uncertainties as “qualitative risks”: recruitment & The Group has experience in reacting effectively to and retention of employees; regulatory compliance; information managing challenges to performance to ensure that the security/data protection; and business continuity planning. Group’s banking covenants are maintained. Management has Whilst these risks cannot be easily quantified through financial historically demonstrated its ability to manage costs to increase modelling, they are monitored as part of the Group’s risk EBITDA and improve cash in the short-term and long-term, management process and each is mitigated through the risk which would further mitigate the risk of a “reasonable worst management plan that the Group operates, as summarised case” scenario taking place in reality. on page 37. This flexibility arises due to the Group’s business model, where The following risks and uncertainties have been categorised the most material cash outflows comprise payment of minimum as “quantitative risks”: strategy formulation & execution; source guarantees/royalties to producers and advertising spend, the & select the right content at the right price; protection of timing and quantum of which management are able to influence intellectual property rights; and financial risk. These risks can in a substantive way. Moreover, the Group has robust financial be understood in a quantitative way and have been included controls which continuously monitor cash requirements and in the detailed assessment of the Group’s viability, through the availability of funds on short, medium and long-term time financial modelling and sensitivity analysis, as noted below. horizons which enable the Group to identify any issues and 2) Assessment of viability plan actions to address these on a proactive basis. The Group has selected the three-year period to 31 March 2019 Additionally, the Group considered a scenario that would as its assessment period for its viability statement on the basis represent a serious threat to its liquidity, a “forced breach” that this period reflects the Group’s regular business planning scenario, where assumptions were imposed that would result in cycle for which detailed plans have been adopted by the the Group breaching its financial covenants/facility limits. Based Board and because, given the Group’s financing extends until on the changes to operating assumptions required to reach this December 2020, it is not appropriate to select a shorter period. forced breach outcome, and the ability of management to put in place mitigating actions, this scenario is considered extremely Although the Group’s three year plan to 31 March 2019 unlikely to occur. reflects the directors’ best estimate of the future prospects of the business, they have also tested the potential impact on the 3) Viability statement Group of a number of scenarios over and above those included Based on their assessment of prospects and viability above, in the plan, by quantifying their financial impact and overlaying the directors confirm that they have a reasonable expectation this on the detailed financial forecasts in the plan. that the Group will be able to continue in operation and meet These scenarios, which are based on the “quantitative risks” its liabilities as they fall due over the three-year period ending set out above, are representative of a “reasonable worst case” 31 March 2019.

eOne Annual Report and Accounts 2016 41 Corporate responsibility

The Group’s corporate responsibility framework sets global standards and supports a significant number of local initiatives in the communities in which eOne operates.

The Group recognises that the performance of its business The Group operates a Code of Business Conduct which sets is reliant on close relationships with a range of stakeholders, out standards of conduct and business ethics which the Group including customers, suppliers, investors, employees, the wider requires its employees to comply with, and which includes community and the environment. The following is a summary provisions covering the Group’s Anti-bribery and Corruption of the many corporate responsibility activities in which we Policy and its Whistleblowing Policy. are involved.

Our Values

The Group’s operations continue to be guided by the shared values that it formalised in 2014, to highlight the Group’s distinctiveness and help to tell the eOne story. The values communicate what is important to our business and what makes us different in the industry. They influence our overall behaviour, how we treat each other and our partners, and help us in our decision making processes. Our values influence the recruitment and retention of our teams, shape our organisational culture and contribute to our overall success.

We connect – By treating all of our colleagues and partners with fairness, honesty and respect – By creating an environment where all can flourish and succeed to their true potential – By supporting our industry and our local communities

We create – By bringing great ideas and stories to life – By working with people of different viewpoints, talents, experiences and backgrounds – By respecting local culture and knowledge

We deliver – By setting and achieving ambitious goals – By meeting our commitments – By taking responsibility for our actions – By recognising the contribution of every team member

42 entertainmentone.com People Greenhouse gas (GHG) emissions The Group recognises that the skills, motivation and energy of The Group collated data across all of its businesses with our people are key drivers for success. The Group’s structure respect to their annual electricity and gas consumption. ensures that our teams are aware of our goals and are clear on We have used the ISO 14064-1:2006 methodology to collate how their roles help the Group succeed. Entertainment One the data used in our GHG emissions report. The data collated is fundamentally a people business and the ability to attract, was in kWh and was converted into tCO2 using guidelines recruit and retain the best people is key to our success. from the UK Government’s GHG Conversion Factors for Carbon Reporting, including the use of factor information We seek to ensure we have appropriate processes to assess, from the UK Department of the Environment. 2015 figures manage and develop our people’s leadership skills, talents have been recalculated using consistent measures to show and experiences throughout the organisation. a like-for-like comparison. The Group has numerous initiatives to promote employee We deemed that collation of data from all eOne offices and engagement, including: warehouses was appropriate, and therefore no materiality – regular Town Hall broadcasts to employees from our CEO; level was applied. – local regional meetings held at least bi-annually; Quantity – our internal intranet site and Yammer, our Group-wide GHG Emissions by Scope Unit 2016 2015 corporate social media platform; Scope 2 Tonnes CO2e 1,908 2,029

– regular local office newsletters as well as a monthly global Tonnes CO2e/ staff newsletter, eOne Connect; Scope 2 intensity £m revenue 2.38 2.58 – health and wellbeing initiatives organised in our office locations, including on-site fitness classes and eOne is committed to reducing its impact on the environment complimentary healthy snacks; and ensures that new office spaces have environmentally- friendly lighting and recycling points for the use of employees. – various athletic teams and events, including a summer The Company’s new-build offices in Toronto and softball league and an annual industry soccer tournament; have been designed to include energy-saving technology, – team building events; and including daylight harvesting, smart lighting, solar shades – frequent film screenings/premieres, access to television/film and water capture and filtration systems. The Toronto office libraries and discounts on eOne products. is seeking a LEED (Leadership in Energy and Environmental Design) gold status from the Canadian Green Building Council. Through our annual succession review and internal leadership framework we also aim to nurture talent and provide our people During the year, eOne’s UK offices carried out an Energy with a framework to advance their careers and provide Savings Opportunity Scheme (ESOS) audit as required under Entertainment One with its future leaders. the UK’s enactment of Article 8 of the European Union Energy Efficiency Directive. Lessons learned from the UK audit will During the year the Group implemented an all-employee enable to the Group to benchmark other global locations Sharesave Scheme. Almost 350 employees have decided and implement energy efficiency best practices elsewhere to participate in the 2016 Sharesave Scheme giving individual in the world. team members a direct alignment with the Company’s shareholders in driving performance of the Group. The Group Charity and community intends to send annual invitations to all employees going The Group and its employees sponsored or supported many forward, to ensure that team members are able to continue charitable initiatives involving both professional and non-profit to take advantage of the benefits of the Sharesave Scheme organisations in all of our territories during the year. and the Group can continue to benefit from the increased engagement of its workforce. The Group teamed up with a number of charities in Canada. Over C$6,000 was raised for Easter Seals , which We are committed to equality and diversity in our workforce and provides programmes and services to children with physical in addition to employing people with a wide mix of ethnic and disabilities. In , C$6,000 was raised by our cultural backgrounds, we also have a good balance between office for charity Avant tout les enfants (Children Now), which genders. Gender mix across the business is as follows: offers consultation services and support to people with family issues and underprivileged children, and our Seville office Percentage of Percentage of male female employees employees contributed over C$13,000 to local charities. Senior management 48% 52% Over 50 eOne employees ran in Toronto’s Sporting Life Rest of workforce 63% 37% 10k race raising more than C$16,000 for Camp Oochigeas Total workforce 60% 40% (a local charity supporting children affected by cancer); and non-perishable food items were donated to the Knight’s Table Food Bank and the Daily Bread Food Bank through regular volunteer excursions to both organisations.

eOne Annual Report and Accounts 2016 43 Corporate responsibility continued

Free the Children was one of the principal Canadian charity change in their lives – the charity provides support for partners for 2015 and, through a number of events, the team disadvantaged young children, engaging them in activities raised more than C$30,000 for the organisation. In January, to promote a healthier lifestyle, aid them in their studies and the Toronto eOne Gives Back Committee brought in local chefs increase their employability as well as enhancing community and celebrity judges from Chopped Canada to host a breakfast cohesion. The Cardinal Hume Centre works with homeless event for employees and raise funds for Free the Children. young people and families in need focusing on employment, Our Canadian team continues to be involved in Habitat for housing, education and skills, and legal status. Humanity, a charity that helps low-income families build In addition to the Cardinal Hume Centre and FYA, the UK homes, raising over C$8,000 in funds this year. continues to support a wide range of charities including We continue to be proud of the success of the Entertainment putting on afternoon tea and film screenings as well as One Golf FORE Charity Tournament which has been held donating money raised from monthly lunch clubs with in Canada since 2007. The tournament is an annual event food cooked by UK employees. sponsored by our vendors and is attended by our major Peppa Pig has maintained its partnership in the UK with the customers and partners. The event has now raised over charity Tommy’s, which funds research into pregnancy problems C$800,000 in total for the SickKids Foundation, including and provides information to parents. Tommy’s has raised over C$120,000 in the current year. £2.7 million through Peppa Pig branded activity run throughout 2015 saw the continuation of the CSR programme at eOne in nationwide partners including Water Babies and Tumble Tots. the UK, including eOne Gives Back, designed to build on its Internationally, Peppa Pig now has several charity partnerships charitable work and enhance working life within the Group. including Cancer Council in Australia and the Ty Louis Campbell Employees are allowed a paid day every year to work for Foundation in the US. Ben & Holly’s Little Kingdom’s partnership a cause of their choice. with ICAN (supporting children with speech, language and communication needs) has raised over £65,000 through the This year’s official corporate social responsibility programme annual Chatterbox Challenge. More recently Ben & Holly has in the UK saw an expansion from the previous year’s activities also partnered with Cancer Research UK Kids and Teens, who and a 50% increase on the money raised for the UK’s charitable ran a fully-branded Ben & Holly ‘Little Explorer’ campaign. partners from over £10,000 to over £15,000. The majority of The Company has provided donations of merchandise to the funds were raised from two activities: the Three Peaks many charities over the year, including The Light Fund, Challenge and the Christmas Auction. The Three Peaks Cardinal Hume, Children with Cancer, Their Future Today, Challenge saw 14 people from the UK team scale the three In Kind Direct and Save the Children. highest peaks in Scotland, England and Wales all within 24 hours and raised over £8,000. The success was such that 19 In Spain, we continue to collaborate with Association ATZ, people have signed-up to climb the three highest peaks in a Group that works in the social block of flats of Pinar de Yorkshire this summer. The Christmas Auction saw over £6,000 Chamartín and benefits children and youth in need. The Madrid raised from over 100 lots (many of which were kindly donated office donated merchandise, DVDs and computer equipment by our partners) for Fitzrovia Youth in Action (FYA) which works to help support the organisation in its efforts to provide free in Warren Street, where the UK office is located. education, employment guidance, and summer camps. FYA is one of two new charities the UK office will support over In the Benelux, BIO Vakantieoord was the principal charity the coming year alongside the Cardinal Hume Centre. FYA’s partner for 2015, a resort for families whose children have goal is to empower Camden’s young people to create positive complex disabilities. In addition to hosting regular film

A selection of the charities we supported in the year

44 entertainmentone.com screenings at the resort, employees volunteered their time The HIP Committee leads a number of green initiatives, by building tree houses, helping to clean the premises, and including an annual community park clean-up for Earth Day, building a beach volleyball court. eOne’s Belgian team also Adopt-a-Plant initiative and an overall goal of increasing the supported Sukhi Home, a non-profit organisation that helps office’s waste diversion rate, achieved through the set-up of disadvantaged children in Nepal. Through an auction battery recycling centres, plastic bag recycling bins and organic and a Nepalese fair event, the team raised €1,600 for waste bins. The committee also works to bring the Canadian the organisation. Blood Services Bloodmobile to the Brampton office on a quarterly basis, to encourage employees to donate blood In Australia, our employee charity committee continues to whilst at work. support the Fact Tree Youth Service by volunteering their time as well as providing food donations, monthly IT assistance, In the UK, eOne Active provides employees with opportunities inviting kids and staff to eOne film screenings and purchasing to get and keep fit, ranging from boot camp sessions in Christmas gifts for local boys and girls aged 8-17 in need. Regent’s Park to yoga classes at lunchtime and eOne Social In addition, the office raised A$2,500 for Giant Steps, a organises social events, with many of these initiatives specialised school for children on the Autism . complementing the Company’s fundraising activities. Environment and well-being The Australian office also emphasises health and fitness, with Our activities are mainly office-based but also include a weekly boxing class for employees. warehousing and television/film production operations. We do Employees volunteering for eOne Green in the UK help make not physically manufacture DVDs, CDs or merchandise but use the Company more eco-friendly, by encouraging recycling and third party suppliers. As such, our main environmental impacts gardening in the outdoor spaces in the Warren Street office. come from the running of our businesses around the world, The Australian Green Team is working to find eco-friendly through the consumption of gas and electricity, transport equivalents for many of its office products. In Spain, the Green activities and commuting, as well as office-based waste Team raises money through recycling to benefit Fundación including paper and printer toners. Seur, which focuses on disadvantaged and marginalised We take our responsibilities seriously and work hard to children. The Group also aims to promote environmental minimise our impact on the environment. In all of our locations awareness on set. we have a recycling, conservation and usage policy. We monitor Health and safety our supplier relationships and, wherever possible, make use The Group has implemented a health and safety policy of suppliers with consistent environmental aims. across all of its operations which meets at least the minimum The Group does not cause significant pollution and the Board legal requirements of the countries in which it operates and is committed to further improving the way in which its activities emphasises the principles of good safety management. The affect the environment by: Group is committed to providing a safe working environment and to caring for the health and safety of its employees, visitors – minimising the extent of the impact of operations within and contractors. the Company’s areas of influence; – conserving energy through reducing consumption and Regular health and safety reviews are carried out on the offices increasing efficiencies; and warehouses of the Group. Each location has a nominated individual responsible for health and safety and for ensuring – minimising emissions that may cause environmental a safe environment for our employees. impacts; and – promoting efficient purchasing and encouraging materials We recognise that health and safety is an integral part of our to be recycled where appropriate. operations. Our services do not pose great risk to either our employees or our customers. However, we work to maintain In Canada, the Toronto eOne Active Committee hosts monthly a safe environment at all times. health and wellness workshops, and a team from eOne’s Brampton office again participated in the Moraine for Life 160km Relay. The Relay is run to support the maintenance of the Oak Ridges Moraine and its network of conservation trails and conservation areas across Ontario. Our Canadian operation also supports a HIP Committee (Health for the Individual and the Planet). The committee focuses on better living for employees through the provision of information on fitness, nutrition, environment and smoking cessation and organises a walking group for employees, boot camp fitness groups, soccer and ball hockey games and yoga classes.

eOne Annual Report and Accounts 2016 45 Corporate governance

Entertainment One is focused on operating to high standards of corporate governance at a Group level and in all of its global businesses.

Allan Leighton, Non-executive Chairman

The reports on the following pages explain our governance arrangements in detail and describe how we have applied the principles of corporate governance contained in the UK Corporate Governance Code. Our Audit Committee continues to have a very full programme of meetings, with its four regular meetings in the year supplemented this year with four additional meetings to cover the significant acquisitions made during the financial year, as well as the re-financing completed in December 2015. The Group continues to have a formal risk review process in place: the Executive Committee manages the risk process, reviews detailed risks and reports upwards to the Audit Committee and the Board on a quarterly basis. The performance of the Group is dependent on its ability to attract, recruit and retain quality people in a highly competitive labour market and succession planning is an important contributor to the long-term success of the business. Our Nomination Committee carefully reviews succession plans for the executive directors and senior management and our Remuneration Committee ensures that our remuneration policy supports the succession planning process. The Board recognises the importance of interaction with operational management and access to senior management is achieved through regular business review presentations provided to the Board and a full-day planning meeting with executive management to review the Group’s strategy, budgets and three year plans. In addition, the Audit Committee has a rolling programme of presentations from senior finance leaders from across the business focusing on the internal control environments of individual operating units. The Internal Audit team continued with its formal internal audit programme across all of the Group’s main Business Units, building on the “baseline” reviews of the general control environment which were completed in 2015, as well as focusing on any specific risk areas highlighted by management. The Group continues to manage its risk environment through the framework it adopted on its step-up to a premium listing on the . Allan Leighton Non-executive Chairman 23 May 2016

46 entertainmentone.com Corporate governance compliance statement The Group fully supports the principles of corporate governance contained in the UK Corporate Governance Code issued by the Financial Reporting Council in 2014 (the Code). At 31 March 2016, the Group complies with the principles set out in the Code, other than the following matters: – the Code recommends that directors should have notice periods of one year or less; Darren Throop has an effective notice period in excess of one year (see further explanations in the Directors’ Remuneration Report on page 63); and – Clare Copeland, the Senior Independent Director, has not attended meetings with a range of major shareholders; the Board considers that Mr Copeland has a good understanding of the issues and concerns of major shareholders and that attendance at such meetings was impractical to facilitate because of geographical constraints. An overview of the Group’s corporate governance responsibilities is given below: Current Board and Committee structure Board Membership Key responsibilities – Chairman – Determining strategy – Monitoring performance – Seven non-executive directors – Setting controls and Company values – Approving Board reserved matters – Two executive directors – Managing risk Audit Committee Nomination Committee Remuneration Committee Membership Membership Membership – Three independent non-executive – Three independent non-executive – Three independent non-executive directors directors directors Key responsibilities Key responsibilities Key responsibilities – The integrity of financial reporting – Composition, size and structure of – Policy for remuneration of – External auditor relationship the Board executive directors – Oversight of Internal Audit – Succession planning process for – Implementation of remuneration executive directors and senior policy, including agreeing executive – Internal controls and risk management management director targets – Alignment of remuneration policy with succession planning process

For more information on For more information on For more information on the Audit Committee, the Nomination Committee, the Remuneration Committee, please see page 55. please see page 61. please see page 79.

eOne Annual Report and Accounts 2016 47 Board of Directors

Allan Leighton Darren Throop Giles Willits Clare Copeland Bob Allan Non-executive Chairman Chief Executive Officer Chief Financial Officer Senior Independent Non-executive director Director

Background and experience

Formerly chief Over 20 years Formerly director of Formerly the chairman Formerly vice-president executive officer of of executive group finance at J of Toronto Hydro of MDS Capital Corp, ASDA, chairman management in the Sainsbury plc from Corporation, chairman vice-president of of Royal Mail, Pace plc entertainment industry. 2005 to 2007 and has and chief executive financial operations at and Lastminute.com, Formerly the owner of held a number of of OSF Inc. and chief the laboratory services deputy chairman of Urban Sound Exchange financial and executive officer of division of MDS Inc., Selfridges & Co Limited between 1991 and 1999 operational People’s Jewellers vice-president of Unitel and George Weston before it was acquired management roles Corporation. Communications Inc. Limited and also a by the Group. within Woolworths plc, Chartered accountant former president and Kingfisher plc Joined eOne in 1999. and a member of the deputy chairman of and Sears plc. Canadian Institute of Loblaw Companies Chartered accountant Chartered Accountants. Limited. having qualified with Formerly a non- Pricewaterhouse executive director Coopers. of British Sky Broadcasting plc and Dyson Limited. Date of appointment

Appointed non- Appointed Chief Appointed to the Board Appointed non- Appointed non- executive Chairman Executive Officer in March 2007 and executive director executive director in March 2014. in July 2003. appointed Chief in March 2007. in March 2007. Financial Officer in May 2007. External Appointments

Deputy chairman Non-executive director None. Vice-chair of Falls Director of the Pandora A/S. of Imax Corporation. Management Company. Dr Tom Pashby Chairman of Matalan Trustee of Chesswood Sports Safety Fund. Retail Ltd, The Co- Group Limited, RioCan operative Group, Real Estate Investment Wagamama Ltd and Trust, Telesat Canada The Canal River Trust. and MDC Corporation.

Committee membership Member of Nomination None. None. Chairman of Chairman of Audit Committee. Remuneration Committee, Member Committee, Member of of Remuneration Nomination Committee. Committee.

48 entertainmentone.com Ronald Atkey Garth Girvan Scott Lawrence Mark Opzoomer Linda Robinson Non-executive director Non-executive director Non-executive director Non-executive director Non-executive director

Background and experience

Formerly a partner Formerly a director Managing Director and Formerly CEO of A retired partner at Osler, Hoskin & of Corby Distilleries Head of Relationship Rambler Media Ltd, at Osler, Hoskin & Harcourt LLP. Limited, Silcorp Limited Investments at the regional vice-president Harcourt LLP. Extensive experience in and IMAX Corporation. Canada Pension Plan of Yahoo! Europe, Advisory experience government regulation Garth is called as a Investment Board. deputy CEO of Hodder in broadcasting, of Canadian cultural barrister and solicitor Certified member of Headline, commercial publishing and industries and in Ontario (1978), the Canadian Institute director of Sega entertainment corporate transactions Alberta (1982) and of Corporate Directors. Europe Ltd and Virgin industries. Communications Ltd. in the arts, New York (1986). Formerly a director of a entertainment and Formerly non-executive number of public and media sectors. director of Web private companies. Formerly was Chair of Reservations the Security Intelligence International Ltd, Review Committee. Newbay Software Ltd, Autonomy plc and Miva Inc.

Date of appointment

Appointed non- Appointed non- Appointed non- Appointed non- Appointed non- executive director executive director executive director executive director executive director in November 2010. in March 2007. in January 2016. in March 2007. in March 2014.

External Appointments

None. Senior counsel at the Board member of Partner Bond Capital Director and chair of Canadian law firm TORC Oil & Gas Ltd and Partners. Infrastructure Ontario. McCarthy Tétrault LLP. 21st Century Oncology. Non-executive Director and corporate chairman of Somo secretary of Women Global Ltd and Lawyers Joining Hands. non-executive director of Blinkx plc.

Committee membership Chairman of Member of None. Member of Audit Member of Audit Nomination Committee. Remuneration Committee. Committee. Committee.

eOne Annual Report and Accounts 2016 49 Corporate governance report

Board overview The Chief Executive Officer The aim of the Board is to promote the long-term success The Chief Executive Officer is responsible for the day-to-day of the Group. On behalf of shareholders, it is responsible for management of the business and for the development of creating a framework of strategy and controls within which strategy for approval by the Board. eOne operates and for the Group’s proper management. The There is a clear division of responsibility between the Chairman Board takes account of the impact of its decisions not only and the Chief Executive Officer which is formally documented on its shareholders but also on a wider group of stakeholders and agreed by the Board. including employees, the communities in which it operates and its financing partners. The Chief Executive Officer is Darren Throop. The Board is responsible for overseeing the implementation Senior Independent Director of the strategy by the management team, setting the Group’s The role of the Senior Independent Director is to act as a overall risk framework and monitoring the Group’s financial sounding board to the Chairman and to provide an additional and operational performance. point of contact for shareholders. He acts as an intermediary for A number of matters are specifically reserved for the Board’s other directors and is responsible for coordinating the process approval. For example, the approval of annual budgets and for the evaluation of the performance of the Chairman. forecasts, the approval of interim and annual results, setting The Senior Independent Director is Clare Copeland. and monitoring strategy, considering major acquisitions and approving investments in content and capital expenditure Non-executive directors in excess of pre-agreed value thresholds. Other matters The non-executive directors bring a wide range of experience are delegated to the Audit, Remuneration and Nomination and expertise to the Group’s activities and provide a strong Committees. There are terms of reference for each of these balance to the executive directors. Their role is to provide Committees specifying their responsibilities, which are available an independent element to the Board and to constructively on the Group’s website. challenge management. The Board operates both formally, through Board and Committee Independence of non-executive directors meetings, and informally, through regular contact between As at 31 March 2016, the Board has reviewed the independence directors and senior executives. of the non-executive directors and concluded that seven The directors can obtain independent professional advice at non-executive directors including the Company’s Chairman are the Company’s expense in the performance of their duties independent. The independent directors are: Allan Leighton, as directors. Clare Copeland, Bob Allan, Ronald Atkey, Garth Girvan, Mark Opzoomer and Linda Robinson. Board membership Scott Lawrence, who was appointed to the Board in As at 31 March 2016, the Board comprised a non-executive January 2016 is not considered to be independent due to chairman, seven other non-executive directors and two his relationship with Canada Pension Plan Investment Board, executive directors. a significant shareholder of the Company, as further outlined The Company’s Articles of Amendment set specific in Note 36 to the consolidated financial statements. requirements with respect to the Company’s directors, The review took into account the results of the Board’s annual as follows: performance evaluation, together with the factors listed in the – at least two-thirds of the directors must be Canadian; Code. As at March 2016, Clare Copeland, Bob Allan, Garth – a majority of the directors must be resident Canadians; and Girvan and Mark Opzoomer had served on the Board for nine years, the date of their first appointment having been March – a majority of the directors must be independent. 2007, notwithstanding that the date of their first election For the financial year and as at 31 March 2016, the Board has was not until September 2008. As noted in the Nomination complied with these requirements. Committee Report on page 61, the Company expects to select a number of new independent non-executive directors, Information about the directors, including their background and who will be formally elected at the Company’s next Annual experience, is given on pages 48 and 49. General Meeting, expected to take place in September 2016. The Chairman Clare Copeland, Bob Allan and Garth Girvan will step down The role of the Chairman is to provide leadership to the Board from the Board immediately prior to the Company’s next and to ensure that the Board and its Committees operate Annual General Meeting and will continue to be determined as effectively. He sets the agenda for Board meetings and chairs independent in the interim period. Mark Opzoomer will continue the meetings to facilitate open and constructive debate. to serve on the Board until at least September 2017 to provide continuity on the Audit Committee. The Board continues to The Chairman is Allan Leighton. determine Mark Opzoomer as independent given his wide range of interests outside Entertainment One, because he has demonstrated consistent independence in character and has demonstrated ongoing independence in the judgements that he has made in discussions and decisions made in respect of the Group.

50 entertainmentone.com James Corsellis, who resigned from the Board on 15 July 2015, them to provide specific feedback. These questionnaires were was not considered to be independent due to his relationship collated by Armstrong Bonham Carter, allowing them to provide with Marwyn, who were formerly a significant shareholder of the a report covering the evaluation of the Board and Committees Company, as further outlined in Note 36 to the consolidated which was used as input to a performance discussion at the financial statements. Board meeting in May 2016. Time commitment Separate questionnaires were developed for each Committee The Chairman is expected to spend approximately one day and these were completed by Committee members and per week and other non-executive directors are expected to collated as input to an annual performance discussion at the spend approximately one day per month on Group business. relevant Committee meeting. In addition, specific feedback was This includes attendance at Board and Committee meetings, sought on the performance of the Audit Committee from the preparation for meetings and the provision of advice and Group’s Chief Executive Officer, Chief Financial Officer and assistance to the Group outside of Board and Committee the Company’s external auditor. meetings. The Chairman and the Senior Independent Director meet Board meetings to evaluate the performance of individual directors and this evaluation enables the Group to confirm on an annual basis There are regular, scheduled Board and Committee meetings that the individual directors continue to perform their roles throughout the year and additional ad hoc meetings are held as effectively and that non-executive directors continue to necessary. During the current financial year, there were sixteen demonstrate ongoing time commitment to their roles. The Board meetings. evaluation also informs the Group’s determination of the There are annual work plans which list the recurring items to be independence of individual directors, as noted in this report. dealt with at each scheduled Board and Committee meeting, as The Senior Independent Director leads a discussion amongst well as specific items which are addressed at different points the non-executive directors, on an annual basis, to consider during the year. the performance of the Company’s Chairman. Board papers Board committees The Board is supplied with detailed Board papers, in a The Board Committees comprise the Audit Committee, the timely manner, in a form and quality appropriate to enable it Remuneration Committee and the Nomination Committee, each to discharge its duties. These include routine reports on the of which operates within defined terms of reference which are performance of the business and on any matters for Board displayed on the Group’s website. approval. Standard formats have been developed for the reports to make it easy to track progress against targets and As at 31 March 2016, the Audit Committee comprised Bob Allan identify key facts. In addition to written reports, presentations (Chairman) with Mark Opzoomer and Linda Robinson as the are also given to the Board reviewing the performance and other independent non-executive members. Bob Allan and outlook of the Group’s Television, Family and Film Divisions. Mark Opzoomer have recent and relevant financial experience. Linda Robinson was appointed as a third independent member A detailed agenda is prepared for each meeting to make sure of the Audit Committee on 15 May 2015 to bring the there is sufficient time allocated to deal with all issues. Committee’s composition into line with Code requirements. Conflicts of interest James Corsellis served on the Committee until his resignation The Group has adopted and followed a procedure under which in July 2015. directors must declare actual or potential conflicts of interest As at 31 March 2016, the Remuneration Committee comprised as they arise. The Board reviews potential conflict of interest Clare Copeland (Chairman) with Bob Allan and Garth Girvan as situations arising from other posts held by directors on an the other independent non-executive members. Bob Allan was annual basis. appointed as a third independent member of the Remuneration No actual conflicts of interest arising in respect of any specific Committee on 15 May 2015 to bring the Committee’s composition arrangement or transaction have been declared to the Board into line with Code requirements. James Corsellis served on the during the financial year. Committee until his resignation in July 2015. Board performance evaluation As at 31 March 2016, the Nomination Committee comprised Ronald Atkey (Chairman) with Clare Copeland and Allan During the year, an externally facilitated evaluation of the Board, Leighton as the other independent non-executive members. its Committees and its individual directors has been carried out. On 15 May 2015, the Board appointed Ronald Atkey as the This evaluation was carried out by Armstrong Bonham Carter, Chairman of the Committee, with Clare Copeland, the former who specialise in carrying out such reviews, and with whom Chairman of the Committee, remaining a member of the the Company has no other connection. Committee. Following the resignation of James Corsellis, An evaluation questionnaire was sent to all directors the Board appointed Allan Leighton to the Committee. covering the key attributes of an effective Board, the role of Further details of the operation of these Board Committees the Chairman, the role of the Senior Independent Director and are given on pages 55 to 79. the role of executive and non-executive directors to enable

eOne Annual Report and Accounts 2016 51 Corporate governance report continued

Board and Committee meeting attendance The table below sets out the attendance at Board and Committee meetings during the year, by presence or by telephone, of individual directors. Where, exceptionally, a director is unable to attend a Board or Committee Meeting, Papers are provided to that director and a separate briefing is arranged to enable the director to provide comments and feedback to the Chairman or Committee Chairman before the meeting in question takes place.

Audit Remuneration Nomination Board Committee Committee Committee Total held in year 16 8 6 6 Allan Leighton1 14 – – 5 Darren Throop 16 – – – Giles Willits 16 – – – Clare Copeland 16 – 6 6 Bob Allan2 15 8 5 – Ronald Atkey 15 – – 6 James Corsellis3 4 1 1 – Garth Girvan 14 – 5 – Scott Lawrence4 4 – – – Mark Opzoomer 14 7 – – Linda Robinson5 15 5 – – 1. Appointed to the Nomination Committee on 16 September 2015. 2. Appointed to the Remuneration Committee on 15 May 2015. 3. Resigned on 15 July 2015. 4. Appointed on 14 January 2016. 5. Appointed to the Audit Committee on 15 May 2015.

Dialogue with shareholders The Annual General Meeting provides an opportunity for The Group maintains a regular dialogue with analysts and shareholders to address questions to the Chairman or the institutional shareholders to discuss its performance and future Board directly. All the directors attend the meeting and are prospects and holds regular meetings with them. In the current available to answer questions. Time is set aside after the financial year, the executive directors have undertaken an formal business of the AGM for shareholders to talk informally extended round of meetings with investors both in the UK and with the directors. abroad – these took place at the time of the Group’s full year Shareholders can access further information on the Group and interim results, and as part of specific investor programmes via the Company’s website at www.entertainmentone.com. in Europe and North America. Annual General Meeting In order to assist non-executive directors to develop an The 2015 Annual General Meeting was held on 16 September understanding of the views of major shareholders, the Board is 2015 at the Company’s offices in Toronto, Canada. presented with a shareholder report covering key shareholder issues, share price performance, the composition of the All resolutions were passed, with votes in favour of all shareholder register and analyst expectations at each resolutions being in excess of 90% of votes cast, except the regular Board meeting. resolutions in relation to the Executive Incentive Scheme (EIS) and the required update to the Company’s Remuneration Policy The Company responds formally to all queries and requests in relation to the EIS, which were passed with votes in favour of for information from existing and prospective shareholders. In 66% and 84%, respectively. addition, the Company seeks to regularly update shareholders through stock exchange announcements and wider press All directors were re-elected to the Board with more than 98% releases on its activities. It publishes regular trading updates of the votes cast in favour of each individual director. as well as a full Annual Report and Accounts. The Company plans to hold its 2016 Annual General Meeting Clare Copeland, the Senior Independent Director, has not on 30 September 2016 in Toronto. attended meetings with any major shareholders as suggested by Code provision E.1.1. The Board considers that Mr Copeland has a good understanding of the issues and concerns of major shareholders, through regular updates provided to the Board, and that his attendance at such meetings was impractical to facilitate because of geographical constraints.

52 entertainmentone.com Risk management and internal controls Information technology security The directors are responsible for the Group’s system of The Group relies on financial and management information internal control and for reviewing its effectiveness, whilst the processed by, and stored on, computer systems. Controls and role of management is to implement Board policies on risk procedures have been established to endeavour to protect the management and control. It should be recognised that the security and integrity of data held on the systems, with disaster Group’s system of internal control is designed to manage, recovery arrangements in the event of failure of major systems. rather than eliminate, the risk of failure to achieve the Group’s Tests are conducted on an annual basis to assess the security business objectives and can only provide reasonable, and not of the systems. This year there has been a particular focus on absolute, assurance against material misstatement or loss. information and network security and regular updates have been presented to the Audit Committee on this issue. The Group operates a series of controls to meet its needs. These controls include, but are not limited to, a clearly defined Treasury organisational structure, written policies, minimum financial The treasury function operates under guidelines and policies controls and Group authority limits, a comprehensive annual approved by the Board and regular reports are made to the strategic planning and budgeting process and detailed monthly Board on treasury activities. reporting. The Group’s internal controls fall into four key areas: financial controls, operational controls, compliance and Investments risk management. The Group has defined procedures for the review and control of acquisitions, investments in content and capital expenditure. Financial controls Expenditure requires different levels of approval according to Financial reporting the level of spend. Significant expenditure requires full Board All operating units complete business plans and budgets for approval and all approval requests are presented in a defined the year. The annual budget is approved by the Board as part format to ensure that full justification is provided, including of its normal responsibilities and the Board concurrently adopts projected financial returns on the investment. the Group’s long range business plan. In addition, the budget Operational controls figures are regularly re-forecast to facilitate the Board’s All Group businesses are required to operate in accordance understanding of the Group’s overall position throughout with detailed standards and procedures which cover all material the year and this re-forecasting is reported to the Board. aspects of their operations. Compliance with these standards Each month, operating units produce written reports in a is subject to assessment by internal and external review. defined format on their performance against these plans and As part of the Group’s half year and full year reporting provide updated business forecasts. The reports and forecasts processes, local management confirms by way of a Corporate are reviewed by the executive directors. Reports from operating Governance Statement of Compliance and a Letter of units are consolidated into monthly management accounts and Representation that its operating units have complied presented to the Board on a regular basis, with significant with Group control requirements. issues discussed by the Board, as appropriate. Accounting policies and procedures There have been no significant control failures during the year. The Group has written accounting policies and procedures Compliance which are applicable to all of the Group’s operations. Local There is a Group Code of Business Conduct which sets out management is required to provide written confirmation of standards of conduct and business ethics which the Group compliance with the policies and procedures as part of the requires its employees to comply with. All members of senior half year and full year results process. management sign-off on the Code of Business Conduct on There is a formal review process overseen by the Audit an annual basis, including confirmation that members of their Committee which seeks to verify that policies and procedures teams understand the Code. A separate Anti-bribery and have been correctly applied and to confirm that there is an Corruption Policy and a Whistleblowing Policy are in place effective process of management and control within the across the Group and are included in the annual senior business. Compliance with internal controls is monitored on management sign-off process. All Group polices are a regular basis through the Group’s internal audit programme. available to employees via the Group’s intranet. There is a schedule of delegated authority designed to ensure that all material transactions are considered at the appropriate level within the Group and are subject to review by the Group Finance team. When acquisitions are made, the Group’s controls and accounting policies are implemented during the first full year of ownership.

eOne Annual Report and Accounts 2016 53 Corporate governance report continued

Risk management The Board’s assessment of the Group’s risk framework The Executive Committee continues to meet on a monthly is supported by the quarterly updates it receives at Board basis and focuses on risk management every quarter. The Audit meetings and the existence of a rolling internal audit Committee receives a risk management update at each of its programme that places a focus on internal controls. standing meetings and reports to the Board on a quarterly basis. As a premium-listed Company, the Group’s approach to its The Executive Committee is chaired by Darren Throop, the control environment is codified in its Financial Position and Chief Executive Officer and, from a risk perspective, the role Prospects Procedures. These procedures are maintained on of the Committee is to: an ongoing basis and are formally reviewed and re-adopted by the Board on an annual basis. – promote effective identification and management of risk throughout the Group; The independence and objectivity of the external auditor is considered on a regular basis, with particular regard to – maintain a risk register identifying significant risks, risk non-audit fees. The split between audit and non-audit fees for control measures and responsibility for control measures; the year under review appears in Note 6 to the consolidated – review and confirm that all significant risks have been financial statements. identified and suitable control measures adopted; The external auditor has in place processes to ensure – monitor implementation of risk control measures for all independence is maintained including safeguards to ensure significant risks; and that where it provides non-audit services its independence is – ensure all operating units operate an effective risk not threatened. In this context, the Audit Committee considers management process. that it is appropriate for the external auditor to provide tax In addition, the Audit Committee receives reports from advice and other accounting and transactional services to management and the external auditor concerning the system the Group, including those in connection with supporting and of internal control and any material control weaknesses. Any reporting on financial representations in public documentation significant risk issues are referred to the Board for consideration. and due diligence on acquisitions. The Group’s Internal Audit function is led by the Group’s Internal control and compliance statement Director of Risk and Assurance and reports to the Chairman The directors acknowledge their overall responsibility for the of the Audit Committee. The Internal Audit team continued with system of internal control and for reviewing its effectiveness. its formal internal audit programme across all of the Group’s They have established a system that is designed to provide main Business Units, building on the “baseline” reviews of the reasonable but not absolute assurance against material general control environment which were completed in 2015, misstatement or loss and to manage rather than eliminate as well as focusing on any specific risk areas highlighted the risk of failure to achieve business objectives. by management. There is a continuing process for identifying, evaluating and Board review process managing the key risks faced by the Group that has been in The Board conducts a review of the effectiveness of the place for the year under review and up to the date of approval Group’s system of internal controls, covering all material of the Annual Report and Accounts. controls, including financial, operational and compliance The process is regularly reviewed by the Board and is in controls and risk management systems as part of its half accordance with the recommendations of Internal Control: year and full year financial reporting process. Guidance to Directors (formerly known as the Turnbull Guidance). Steps continue to be taken to embed internal control further into the operations of the business and to deal with any issues that come to the Board’s attention. The directors have reviewed the effectiveness of the system of internal control and are satisfied that the Group’s internal controls are operating effectively.

54 entertainmentone.com Audit Committee

Annual statement of the Chair of the Audit Committee The Committee had a full programme of meetings during the financial year. Four standing meetings dealt with the approval of the Group’s financial results, matters arising from the Group’s 2015 external audit and the planning of the external audit for the 2016 financial year. Four additional meetings covered the Audit Committee review of the three significant transactions completed by the Group during the financial year, with particular focus on risk and accounting considerations, and the re-financing completed in December 2015. The Group’s Internal Audit function is led by the Group’s Director of Risk and Assurance and reports to the Committee membership Chairman of the Audit Committee. The Internal Audit team continued with its formal internal audit programme As at 31 March 2016, the Audit Committee comprised Bob Allan across all of the Group’s main Business Units, building (Chairman) with Mark Opzoomer and Linda Robinson as the on the “baseline” reviews of the general control other independent non-executive members. Bob Allan and environment which were completed in 2015, as well Mark Opzoomer have recent and relevant financial experience. as focusing on any specific risk areas highlighted by Linda Robinson was appointed as a third independent management. The Group’s risk management process member of the Audit Committee on 15 May 2015 to bring the continues to be developed in operating units and Committee’s composition into line with Code requirements. specific attention has been directed at business The Chairman (Allan Leighton), the CEO (Darren Throop) and continuity planning at the Group’s new office the CFO (Giles Willits) are invited to attend Audit Committee locations in Toronto and London. meetings but do not participate in decisions. Additionally, The Executive Committee continues to meet on the Group’s Director of Risk and Assurance attends Audit a monthly basis and focuses on risk management Committee meetings. every quarter. The Audit Committee receives a risk Audit planning management update at each of their standing meetings The Committee oversees the plans for the Group’s external and reports to the Board on a quarterly basis. audit to ensure it is comprehensive, risk-based and cost- The Committee has continued its programme effective. of presentations from senior operational finance As in previous years, Deloitte drafted an initial external audit employees, increasing the Committee’s understanding plan in conjunction with executive management and presented of financial and internal controls in the Group’s it for review by the Committee at its February meeting. The plan operating units – during the year, the Committee set out the proposed scope of its work and the approach to be received presentations from the Finance Directors of taken. It also proposed the materiality levels to be used, based the Film Production business and the Family business, on forecast profit before tax, adding back operating as well as a briefing from the CFO of the Film Division. and financing one-off items. The Committee has also started the planning process In order to focus the audit work on the right areas, the auditor for the tender of the Group’s external audit, which will identified particular risk issues based on its knowledge of take place during 2016 to allow a recommendation the business and operating environment, discussions with to be made to the Board regarding the appointment management and the half year review. Agreement was reached of external auditors for the financial year ended on the audit approach for different areas of the business, based 31 March 2018. on their scale and complexity. This has resulted in an audit Bob Allan approach which has provided for a full scope audit for the Audit Committee Chairman Group’s largest operating units, a focused scope approach 23 May 2016 for smaller operating units and a desktop review of units with less significant operations. The timeliness of the Committee meeting where year end audit planning is discussed allows an in-depth discussion on the planning process and ensures that feedback can be reflected in the year end audit approach. There are no significant changes in audit approach in the current year.

eOne Annual Report and Accounts 2016 55 Audit Committee continued

Review of consolidated financial statements and audit findings The Committee reviewed the full and half year consolidated financial statements and the report of the auditor on these statements. The Deloitte partner responsible for the eOne audit attends all standing Audit Committee meetings to present reports and answer questions from Committee members. Senior Deloitte employees who have had day-to-day involvement in the conduct of the audit also attend. The Committee considered the following significant accounting areas of judgement as part of its review:

Areas of judgement Assessment Investment in acquired In the absence of any prescribed IFRS accounting treatment for content rights, the Group content rights applies the guidance included in US GAAP “Accounting Standards Codification 926, Entertainment – Films” under which the carrying value of investment in acquired content rights, and associated charges to the consolidated income statement, are directly linked to management estimates of future revenues. The Committee is satisfied that processes exist to ensure that the carrying value of investment in acquired content rights is assessed on a regular basis and that operating management has sufficient expertise to assess the recoverability of investments, based on its local market knowledge. The Group continues to develop its review processes in this area to ensure that they are robust and reflect best practice across the business. In addition, this is an area of focus for the audit and Deloitte carries out detailed testing, which continues to be centralised to provide further consistency of approach. Deloitte provides a detailed report on this issue to the Audit Committee and reports explicitly on the matter in its audit opinion in the consolidated financial statements.

Investment in productions In the absence of any prescribed IFRS accounting treatment for content rights, the Group applies the guidance included in US GAAP “Accounting Standards Codification 926, Entertainment – Films” under which the carrying value of investment in productions, and associated charges to the consolidated income statement, are directly linked to management estimates of future revenues. The Committee is satisfied that processes exist to ensure that the carrying value of investment in productions is assessed on a regular basis and that operating management has sufficient expertise to assess the recoverability of investments, based on its local market knowledge. The Group continues to develop its review processes in this area to ensure that they are robust and reflect best practice across the business. In addition, this is an area of focus for the audit and Deloitte carries out detailed testing, which has been centralised to provide further consistency of approach. Deloitte provides a detailed report on this issue to the Audit Committee and reports explicitly on the matter in its audit opinion in the consolidated financial statements.

Impairment of goodwill and The Group holds significant intangible assets including acquired intangible assets and acquired intangible assets goodwill from past acquisitions. In accordance with IFRS, management conducts an annual impairment review of intangible assets with indefinite useful economic lives to ensure that the value-in-use of the cash generating units supports the carrying value in the financial statements. The Committee is satisfied that the assumptions made by management are reasonable, and that appropriate sensitivities are applied, to ensure that the annual impairment testing process is robust. In addition, Deloitte reviews and challenges the assumptions made by management to confirm that they are reasonable in comparison to industry peers and analyst assumptions, and that they reflect current market conditions. Deloitte provides a detailed report on this issue to the Audit Committee and reports explicitly on the matter in its audit opinion in the consolidated financial statements.

56 entertainmentone.com Areas of judgement Assessment Presentation of one-off items The Group records exceptional income and expenditure in respect of one-off items and transactions that fall outside the normal course of business to assist users of the accounts in understanding underlying business performance. The Committee is satisfied that management has made appropriate judgements in determining one-off items, that policies have been applied consistently and that disclosures are appropriately made in the Annual Report and Accounts. In addition, Deloitte provides a detailed report on this matter to the Audit Committee and report explicitly on it in its audit opinion in the consolidated financial statements.

Tax The assessment of the recoverability of tax losses and the recognition of deferred tax assets in respect of such losses requires judgement, based on the tax profile of the Group and its ability to access historic losses and recognising the specific circumstances of the Group. These factors and other judgements have an impact on the effective rate of tax shown in the consolidated income statement. The Committee is satisfied that management has made appropriate judgements in determining deferred tax assets and the effective rate of tax and that disclosures are appropriately made in the Annual Report and Accounts. In addition, Deloitte provides a detailed report on this matter to the Audit Committee and reports explicitly on it in its audit opinion in the consolidated financial statements.

Revenue recognition Revenue recognition and management override of controls are items which Deloitte is and management required to report on explicitly. override of controls The Committee is satisfied that accounting policies which set out revenue recognition policy are in place and communicated to operating units and that a robust system of internal controls exists in the Group. The Group’s internal controls are tested as part of the half and full year reporting process and are scrutinised as part of the internal audit programme. In addition, Deloitte carries out direct testing and analytical procedures on journal data and reports explicitly on these matters in its audit opinion in the consolidated financial statements.

Provisions and liabilities The Group holds a number of provisions and liabilities in relation to potential future obligations. These include provisions in relation to acquisitions (including open tax items), and other ordinary course provisions including providing for under-performing film titles (onerous contract provisions) and potential tax exposures (uncertain tax provisions). The calculation of provisions is inherently judgemental, but the Committee is satisfied that management has sufficiently robust processes in place to be able to support the basis for these provisions. In addition, Deloitte performs review procedures and challenges management assumptions as part of its audit work.

The Committee has reviewed the Annual Report and Accounts to ensure that it is fair, balanced and understandable and provide the information necessary for shareholders to assess the Group’s performance, business model and strategy. The Committee considers whether the Annual Report and Accounts contains sufficient information to enable shareholders to make this assessment. It also considers whether the information is presented in a comprehensible and balanced manner and that sufficient prominence is given to critical matters.

eOne Annual Report and Accounts 2016 57 Audit Committee continued

Assessment of external auditor Fees paid to Deloitte for non-audit services were as follows: The Committee is required to assess the qualifications, Year ended Year ended expertise, resources and independence of the external auditor 31 March 31 March and the objectivity and effectiveness of the audit process. This 2016 2015 assessment was carried out during the year on the basis of the £m £m Committee’s own appraisal of the performance of the auditor Services relating to corporate finance and the views of the senior management team, as well as transactions 0.5 0.4 consideration of materials provided by the auditor. The criteria Tax compliance and advisory services – 0.1 used for this assessment remained unchanged from last year Total 0.5 0.5 and were as follows: None of this work was carried out on a contingent fee basis. – effectiveness of audit objectives and planning; The Committee considered the nature of the potential threat to – leadership and co-ordination demonstrated by the independence posed by the provision of non-audit services and audit team; the safeguards applied. It concluded that the non-audit work – qualifications and expertise of the audit team; undertaken by the external auditor did not impair independence. – quality assurance processes; Internal audit – independence processes and policies; The Internal Audit team continued with its formal internal audit – value provided against fees incurred; and programme across all of the Group’s main Business Units, – responsiveness of the audit team. building on the “baseline” reviews of the general control environment which were completed in 2015, as well as focusing Based on the assessment carried out, the Committee was on any specific risk areas highlighted by management. able to confirm to the Board that the external auditor was operating effectively. During the year, reviews were carried out in the Television Division covering the Production and Sales business and Independence of external auditor a sample television production audit, as well as “baseline” The Committee monitors arrangements to ensure that the reviews for recent acquisitions Paperny Entertainment and partner in charge of the audit is changed every five years and Force Four Entertainment. Within the Film Division, reviews that the relationship between the auditor and management covered Spain, the US, the UK and Canada, as well as a does not affect the external auditor’s independence. review of inventory management at the Group’s physical distribution operation in North America. Additionally, central The Committee is responsible for monitoring the independence reviews covered the Group’s travel department, its information of the Group’s external auditor on an ongoing basis and technology governance and project management office, and ensuring that appropriate controls are in place. central human resource processes. A thematic review looking A defined policy exists for the engagement of the Group’s at treatment of estimates of future television and film revenues external auditor for non-audit work, which is reviewed and (ultimates) across the Group provided reassurance to the approved by the Committee on an annual basis. The Committee process for ensuring that the carrying value of investment approves the engagement of the Group’s external auditor for in content and productions is assessed on a regular basis non-audit work in line with this policy. and carried at appropriate levels. During the year Deloitte has provided the following The Group’s risk management process continues to be non-audit services: developed in operating units and specific attention has been directed at business continuity planning at the Group’s new – services related to corporate finance transactions; and office locations in Toronto and London. – taxation compliance and advisory services. The Director of Risk and Assurance, who heads the Internal Audit function, has a direct reporting line to the Chairman of the Committee and attends Audit Committee meetings.

58 entertainmentone.com Risk management review The Audit Committee receives reports from management and the external auditor concerning the system of internal control and any material control weaknesses. A Risk Committee chaired by the Chief Executive Officer operated throughout the year monitoring the Group’s risks and risk-mitigating activities. Reports from the Risk Management Committee are presented to the Audit Committee and Board on a quarterly basis. As part of the remit of the Committee in overseeing risk, regular updates are provided by management in relation to litigation and insurance coverage to ensure that the Group is appropriately monitoring and managing such risks. Whistleblowing Policy The Committee is responsible for monitoring the Group Whistleblowing Policy. Any concerns raised are reported to the Audit Committee. No whistleblowing events have taken place. Meetings The Committee met eight times during the year. Committee member attendance at Committee meetings is shown on page 52. Representatives of the external auditor, including the partner responsible for the eOne audit, also attended each regular Audit Committee meeting. The executive directors are invited to attend the meetings but at each meeting the Committee also arranged to speak with the external auditor without the executive directors being present. The following table lists the agenda items which have been dealt with by the Committee over the course of the financial year.

Date of meeting Agenda May 2015 – Corporate governance update: – Corporate governance framework – Review of auditor independence and fees – Evaluation of effectiveness of the Audit Committee – Audit Committee Terms of Reference – Litigation, insurance and whistleblower update – Risk and assurance update: – Internal audit update – Risk review – Review of effectiveness of internal controls – Accounting update – Review of going concern basis of accounting – Update from external auditor – Review of draft results announcement – Auditor’s private meeting with non-executive directors – Review of effectiveness of external auditor

July 2015 – Review of the acquisition of Astley Baker Davies Limited

September 2015 – Committee matters (two meetings) – Litigation, insurance and whistleblower update – Internal audit update – Risk review – Update from external auditor – matters arising from 2015 audit – Briefing on Family business – Review of re-financing proposals – Update on proposed audit tender process – Auditor’s private meeting with non-executive directors

eOne Annual Report and Accounts 2016 59 Audit Committee continued

Date of meeting Agenda November 2015 – Committee matters – Litigation, insurance and whistleblower update – Internal controls and internal audit update – Risk review – Accounting update – Review of going concern basis of accounting – Review of interim announcement – Update from external auditor – Briefing on Film Production business – Auditor’s private meeting with non-executive directors

December 2015 – Review of investment in Sierra Pictures LLC

February 2016 – Committee matters – Litigation, insurance and whistleblower update – Risk and assurance update – Internal audit programme – Risk review – Acquisition/integration update – Update on proposed audit tender process – Business briefing on Global Film Group – Update from external auditor, covering year end audit planning – Auditor’s private meeting with non-executive directors

March 2016 – Review of acquisition of Renegade 83

External auditor tenure Deloitte has been the Company’s auditor since 2007 and there has been no tender held for audit services during that time. The Committee considers that the auditor’s knowledge of the Group’s business and systems gained through experience has significantly contributed to the rigour and effectiveness of the audit process. The Committee intends to comply fully with the FRC Audit Committees Guidance regarding the frequency of audit tenders and has started the planning process for the tender of the Group’s external audit, which will take place during 2016 to allow a recommendation to be made to the Board regarding the appointment of external auditors for the financial year ended 31 March 2018. Terms of reference and evaluation The Committee keeps its terms of reference under review and makes recommendations for changes to the Board. The full terms of reference are available on the Company’s website. An evaluation of the Committee’s performance during the financial year was externally facilitated as set out on page 51, which included feedback from the Group’s external auditor.

60 entertainmentone.com Nomination Committee

Committee membership As at 31 March 2016, the Nomination Committee comprised Ronald Atkey (Chairman) with Clare Copeland and Allan Leighton as the other independent non-executive members. The Board appointed Ronald Atkey as the Chairman of the Committee on 15 May 2015, with Clare Copeland, the former Chairman of the Committee, remaining a member of the Committee. Following the resignation of James Corsellis, the Board appointed Allan Leighton to the Committee. The CEO (Darren Throop) and the CFO (Giles Willits) are invited to attend Nomination Committee meetings but do not participate in decisions. Board composition The Committee keeps the membership of the Board under Annual statement of the Chair of review to ensure that it has the required combination of skills, the Nomination Committee knowledge and experience. The Board fully appreciates the The performance of the Group is dependent on its benefits of diversity and is committed to equal opportunities ability to attract, recruit and retain quality people in a for all. highly competitive labour market. Succession planning During the year, the Committee recommended the appointment is an important contributor to the long-term success of Linda Robinson as the third independent non-executive of the business. director of the Audit Committee, and the appointment of Bob The Nomination Committee carefully reviews succession Allan as the third independent non-executive director of the plans for the executive directors and senior management, Remuneration Committee. These recommendations were made as well as evaluating the size, structure, composition to bring the Committees in line with Code requirements and and diversity of the Board and its Committees. were both effective from 15 May 2015. The Company has confirmed that three of the Following the confirmation that three of the Company’s Company’s existing non-executive directors will step non-executive directors would step down from the Board before down from the Board immediately prior to its next the Company’s next Annual General Meeting, in September Annual General Meeting, expected to take place in 2016, the Committee carried out a formal review of the Board’s September 2016. The Nomination Committee’s focus composition, size and structure. This review included assessing for the year has been in identifying successors for the the skills, knowledge and experience of individual directors three retiring non-executive directors. as well as diversity, including gender, and the particular requirements of the Board as set out in the Company’s Articles In January 2016, the Nomination Committee of Amendment, and enabled the Committee to focus its search recommended the appointment of Scott Lawrence for new non-executive directors to serve on the Board. as a new non-executive director. Subsequently, the Committee appointed Spencer Stuart, an international Having established the balance of skills, knowledge and executive search firm, to support a search process to experience that was required to ensure that the Board’s size, identify two additional non-executive directors to serve structure, composition and diversity remained appropriate for on the Board. It is expected that these new directors the specific circumstances of the Group, the Committee led an will be presented for election by the Company’s extensive search for appropriate director candidates, supported shareholders at the AGM. by Spencer Stuart, an international executive search firm. Spencer Stuart has no other connection with the Company. In conducting the search process, the Nomination Committee have endeavoured to select potential Based on progress achieved in the search process directors who meet both the requirements of the to-date, the Committee expects to be in a position to make Company’s Articles of Amendment and who bring the a recommendation for the election of two new independent right balance of skills and experience to the Board, as non-executive directors at the Company’s Annual General well as having consideration for increasing the gender Meeting, to replace the retiring directors. diversity of the Board. The Committee has recommended that Mark Opzoomer Mark Opzoomer will continue to serve on the Board continues to serve on the Board until at least September 2017 until at least September 2017 to provide continuity to provide continuity on the Audit Committee. on the Audit Committee. Prior to the AGM in September 2016, the Committee will make Ronald Atkey a recommendation to the Board covering the reconstitution of Nomination Committee Chairman the three Board Committees, in compliance with the Company’s 23 May 2016 Articles of Amendment, to take into account the new arrivals to and anticipated departures from the Board, as well as the appointment of a new Senior Independent Director.

eOne Annual Report and Accounts 2016 61 Nomination Committee continued

Succession planning Beneath the Board level, there were no significant changes to the Group’s succession plan. The Group’s executive structure is now fully in place with a strong team leading the Television, Family and Film Divisions and leading the Group’s corporate development activity. In addition, the Group appointed Chris Taylor, who joined eOne as part of the acquisition of Last Gang Entertainment as President, eOne Music. The full executive team in each Division has now been populated to position the business to deliver its growth strategy and provides significant bench-strength for the executive directors and strong succession candidates beneath the Divisional leaders. A new global Human Resources Director has been appointed and will focus on eOne’s global HR processes, including succession planning.

Board Chairman: Non-executive directors: Executive directors: – Allan Leighton – Clare Copeland – Scott Lawrence – Darren Throop – Bob Allan – Mark Opzoomer – Giles Willits – Ronald Atkey – Linda Robinson – Garth Girvan

Audit Committee Nomination Committee Remuneration Committee Chairman: Chairman: Chairman: – Bob Allan – Clare Copeland (until 14 May 2015) – Clare Copeland – Ronald Atkey (from 15 May 2015) Non-executive directors: Non-executive directors: Non-executive directors: – Mark Opzoomer – Ronald Atkey (until 14 May 2015) – Garth Girvan – Linda Robinson – Clare Copeland (from 15 May 2015) – Bob Allan (from 15 May 2015) (from 15 May 2015) – Allan Leighton (from 16 September 2015) – James Corsellis (resigned 15 July 2015) – James Corsellis – James Corsellis (resigned 15 July 2015) (resigned 15 July 2015)

Board and Committee evaluation During the year, an externally facilitated evaluation of the Board, its Committees and its individual directors has been carried out, further details of which are set out on page 51. This evaluation was carried out by Armstrong Bonham Carter, who specialise in carrying out such reviews, and with whom the Company has no other connection. Armstrong Bonham Carter provided a report of the Board and Committee evaluation which was used as input to a performance discussion at the Board meeting in May 2016. Meetings The Committee met six times during the year. Committee member attendance at Committee meetings is shown on page 52. The following table lists the agenda items which have been dealt with by the Committee during the year.

Date of meeting Agenda September 2015 – Review of Board and Committee composition – Succession planning

November 2015 – Non-executive director search process

December 2015 – Non-executive director search process

January 2016 – Non-executive director search process

February 2016 – Non-executive director search process

March 2016 – Review of Board and Committee composition – Terms of reference and Committee self-evaluation

Terms of reference and evaluation The Committee keeps its terms of reference under review and makes recommendations for changes to the Board. The full terms of reference are available on the Company’s website. An evaluation of the Committee’s performance during the financial year was externally facilitated as set out on page 51. 62 entertainmentone.com Directors’ Remuneration Report

Major decisions taken during the year A new Executive Incentive Scheme (EIS) was proposed during the year to incentivise selected executive directors and senior management to deliver exceptional share price growth. The EIS and an updated Remuneration Policy to allow awards under the EIS to executive directors were approved by Shareholders at the 2015 Annual General Meeting. No awards have been made under the EIS. The Company’s Long Term Incentive Plan (LTIP), which was approved by shareholders in June 2013, remains in place and awards have continued to be made to the executive directors and members of senior management during the current financial year. The performance conditions against which the performance of the executive directors is measured for the LTIP are equally weighted between adjusted fully diluted Annual statement of the Chair of the earnings per share (EPS) growth, total shareholder return (TSR) Remuneration Committee growth and average return on capital employed (ROCE), all over On behalf of the Board, I am pleased to present the the three-year period relating to each grant under the LTIP, and Directors’ Remuneration Report for 2016, which sets support our long-term strategic goals. Annual LTIP awards out the remuneration policy for the directors of eOne are granted at 125% of base salary for Darren Throop (Chief and the amounts earned in respect of the year ended Executive Officer) and 100% of base salary for Giles Willits 31 March 2016. This report has been prepared by the (Chief Financial Officer) and have a three-year performance Remuneration Committee and approved by the Board. period before they can be exercised. Further details of the LTIP are set out on pages 75 and 76. The Report complies with the Large and Medium-Sized Companies and Groups (Accounts and Reports) The annual bonus scheme continues to be measured based (Amendment) Regulations 2013, the 2014 UK Corporate on the achievement of Group adjusted profit before tax and Governance Code (the Code) and the Financial Conduct to have a maximum opportunity of 100% of base salary which Authority Listing Rules. To reflect the requirements of is only achieved when 110% of the budgeted target is met. the remuneration reporting regulations, this report is During the year the Committee recommended the presented in two sections: the Directors’ Remuneration implementation of an all-employee Sharesave Scheme, Policy and the Annual Report on Remuneration. which was subsequently approved by shareholders at the 2015 The Directors’ Remuneration Policy sets out eOne’s Annual General Meeting and adopted. Almost 350 employees forward-looking remuneration policy which was approved have decided to participate in the Sharesave Scheme giving by a binding vote of shareholders at the 2015 Annual individual team members a direct alignment with the Company’s General Meeting, and remains in force for the three shareholders in driving performance of the Group. years ending 31 March 2018 unless amended. The Annual Report on Remuneration provides details of the amounts Incentive out-turns in the current year earned in respect of the year ended 31 March 2016 and As described in the Strategic Report, the Group has enjoyed how the Directors’ Remuneration Policy will be operated a year of solid financial performance which has translated into for the year commencing 1 April 2016. This is subject to the Group making an adjusted profit before tax of £104.1 million an advisory vote at the 2016 Annual General Meeting. (an increase of 17% on the prior year) which has resulted in an Clare Copeland annual bonus of 40.4% of base salary being earned by the two Remuneration Committee Chairman executive directors. Further details of this award are set out 23 May 2016 on page 74. Proposed changes in Executive Director remuneration in the coming financial year As set out on page 64, the Remuneration Committee has approved pay increases for the coming year for the two executive directors in line with the Directors’ Remuneration Policy. There are no proposed changes to either the annual bonus scheme or the LTIP for the coming financial year. We remain committed to taking a responsible approach in respect of executive pay. The Remuneration Committee will continue to actively engage with and seek to incorporate the views of the Company’s shareholders in any major changes to the Directors’ Remuneration Policy.

eOne Annual Report and Accounts 2016 63 Directors’ Remuneration Policy

This section of the Remuneration Report sets out the Directors’ Remuneration Policy which was approved by a binding shareholder vote at the 2015 Annual General Meeting, and applies for the three financial years ending 31 March 2018. 1. Remuneration policy table (i) Executive directors The table below provides an overview of each element of the approved remuneration for the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO). To the extent that additional executive directors are employed in the future by the Company, this policy will apply on a consistent basis.

Link to Group strategy Framework used to Component and objectives Operation Opportunity assess performance Base salary Core element Usually reviewed annually No maximum base salary N/A of fixed (but may be reviewed has been set under the remuneration more frequently) with Remuneration Policy. that provides any changes effective as To the extent pay the basis to follows: increases are awarded, recruit and retain – CEO: 1 April these are considered on talent necessary – CFO: 1 April a case-by-case basis and to deliver the will generally be based The review process business strategy. on the factors set out. considers a range of Reflects individual factors including, but not Where appropriate and experience, skill limited to: merited, the policy is to and scope of position base salaries for – role, experience and responsibility. each executive director performance; Takes into account at an upper quartile wider contribution – average change in level of the relevant to the Group. broader workforce comparator group. salary; The expected base – increases in size and salaries for the year complexity of the ended 31 March 2017 Group; and are as follows: – market and competitive – CEO: C$1,019,000 factors. – CFO: £426,000 External benchmark data against companies of a similar size and complexity is also considered. Annual bonus To motivate and Usually a cash payment. Up to 100% of base salary. Bonus performance condition is reward superior Awards approved by the Group adjusted profit before tax. performance Remuneration Committee Award of 30% and 65% of maximum measured against after the year end, based opportunity for threshold and target annual financial on performance against performance, respectively. targets of annual targets. Award of 100% of maximum opportunity the Group. Subject to a clawback for achieving 110% of target. The threshold provision which extends level for bonus payments is 90% of target, for a period of 12 months below which level no bonus is payable. following payment of The performance period is one year. the bonus.

64 entertainmentone.com Link to Group strategy Framework used to Component and objectives Operation Opportunity assess performance LTIP and EIS To reinforce Usually an award of Annually: 125% of base LTIP awards will normally vest, subject the alignment of shares, but may be settled salary for the CEO. to continued employment, with a Group the interests of in another form, e.g. cash. Annually: 100% of base company and any applicable performance executives and LTIP awards are made salary for the CFO. and other conditions, on the later of the shareholders. annually to the executive third anniversary of the date of award To motivate long- directors. Certain senior and the date on which the Remuneration term shareholder managers who are in Committee determines that the value creation and a position to deliver performance and other conditions have the delivery of the performance of the been satisfied (in whole or in part). exceptional share Group are also included Performance conditions for the executive price growth. in the LTIP. directors will be a combination of the To help the LTIP awards are subject to following financial measures over a Group retain its performance conditions to three-year period: key executive be met over a three-year – Adjusted fully diluted EPS growth director talent. performance period. (33% weighting); The achievement of – TSR growth (34% weighting); and one of the targets will not – Average ROCE (33% weighting). be dependent upon the Each performance condition vests others in order for that 30% of the maximum opportunity at element to be earned. threshold performance level. Details of The LTIP is subject to a thresholds are shown on pages 75 and clawback provision which 76 of this report. extends for a period of Threshold performance is determined 12 months following the for each award based on targets derived vesting of the LTIP. from the Group’s long-term business plan, No awards have been as approved by the Board. made under the EIS. Between threshold and maximum, vesting will usually take place on a straight-line basis. In exceptional circumstances, an executive director may receive an award under the LTIP in any financial year of up to 200% of base salary. Pension Part of a The Company may CEO – the maximum N/A contributions competitive make payments into allowable contribution to package to help an approved pension the Registered Retirement the Group retain scheme (up to limit of Savings Plan (RRSP) in its key executive pensionable pay) and/or Canada (C$24,930 for talent. a salary supplement. the year ended 31 March Where pension 2016; C$25,370 for the contributions exceed forthcoming year ended relevant limits for a tax 31 March 2017; and free pension accrual, C$26,010 for the year executive directors have ended 31 March 2018, the option to receive as set out by the Canada excess contributions Revenue Agency). as a salary supplement CFO – 17.5% of (which is subject to tax base salary. and national insurance or The Remuneration equivalent contributions). Committee has the Bonus and other benefits right to change the received by executive above levels of pension directors are excluded contributions (percentage from pensionable pay. and absolute amount) if it deems it appropriate.

eOne Annual Report and Accounts 2016 65 Directors’ Remuneration Policy continued

Link to Group strategy Framework used to Component and objectives Operation Opportunity assess performance Taxable Part of a Base salary is supplemented with a While the Remuneration N/A benefits competitive range of benefits based on the role and Committee has not set an package to help individual circumstances. absolute maximum on the the Group retain These benefits include, but are not limited level of benefits executive its key executive to, car allowance, payments in lieu of directors may receive, talent. pension, life and disability assurance and the value of benefits is healthcare arrangements. set to a level which the Committee considers Other benefits may be provided based to be appropriately on individual circumstances, such as, positioned, taking into but not limited to, housing or relocation account relevant market allowances, travel allowances or other levels based on the expatriate benefits. nature and location of Benefits are reviewed by the the role and individual Remuneration Committee in the context circumstances. of market practice from time-to-time. Shareholding Share ownership Executives are expected to build and N/A N/A policy is a key maintain a significant shareholding in cornerstone eOne shares, with expected holdings of the Group’s valued at: reward policy – CEO: 300% of base salary and is designed – CFO: 200% of base salary to help maintain commitment over the long-term, and to ensure that the interests of the executive are aligned with those of shareholders.

(ii) Non-executive Chairman and non-executive directors The table below sets out the approved Remuneration Policy for the non-executive Chairman and non-executive directors.

Element Approach of the Company Non-executive The remuneration of the Chairman is set by the executive directors. Fees are set at a level which reflects the skills, Chairman fees knowledge and experience of the individual, whilst taking into account appropriate market data. The fee is set as a fixed annual fee and may be paid wholly or partly in cash or Company shares. Fees are ratified by the Board. Non-executive The executive directors are responsible for deciding non-executive directors’ fees. Fees are set taking into account director fees several factors including the size and complexity of the business, fees paid to non-executive directors of UK-listed companies of a similar size and complexity and the expected time commitment and contribution for the role. Fees are structured as a basic fee with additional fees payable for chairmanship or membership of a committee or other additional responsibilities where appropriate. The fee is set as a fixed annual fee and may be paid wholly or partly in cash or Company shares. Fees are ratified by the Board.

In setting the Remuneration Policy, the Group reserves the right to make any remuneration payments and payments for loss of office (including exercising any discretions available to it in connection with such payments) notwithstanding that they are not in line with the policy set out above where the terms of the payment were agreed (i) before the policy came into effect or (ii) at a time when the relevant individual was not a director of the Group and, in the opinion of the Group, the payment was not in consideration for the individual becoming a director of the Group. For these purposes “payments” includes the Group satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are agreed at the time the award is granted. The Group may make minor amendments to the policy set out above (for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation) without obtaining shareholder approval for that amendment. In exceptional circumstances, the Group may make share awards to non-executive directors to facilitate the recruitment or retention of individuals that are judged to be important in delivering the Group’s strategic goals, the awards being subject to shareholder approval where appropriate.

66 entertainmentone.com 2. Explanation of chosen performance measures and how targets are set Annual bonus The annual bonus is assessed against the Group’s adjusted profit before tax target determined by the Remuneration Committee, based on the annual financial plan approved by the Board. This motivates and rewards performance with increasing profit before tax achievement, and is linked to delivery of our strategic goals which are aligned closely to those of shareholders. LTIP Performance conditions Reason for selecting measure Adjusted fully diluted Adjusted fully diluted EPS growth is considered to be an appropriate long-term measure as it reflects the EPS growth recognised measure of shareholder earnings. Typical adjustments to reported EPS would be the add-back of amortisation of acquired intangibles, and would be consistent with the treatment adopted by the Company since listing in 2007, and in line with the approach taken by equity analysts and other relevant comparator groups. TSR growth TSR growth (share price growth plus dividends) is a commonly used metric for measuring the relative performance of companies. This approach will directly link the reward of executives to that of the absolute return for the shareholder, including the setting of a minimum threshold, and allows the Company to be viewed on a relative basis by comparing the performance of the Company to an appropriate comparator index (for example the FTSE 250). Average ROCE Average ROCE growth provides a measure that ensures the executives are seeking to deliver improved returns from the investment decisions being made each year. It therefore complements the adjusted fully diluted EPS measure (which is income statement-focused) as it ensures that the executives are also managing the efficiency of the assets on the balance sheet which are used to generate the earnings of the Company. ROCE is a commonly used metric to measure return on investment and can be easily derived from the audited consolidated financial statements each year.

The Remuneration Committee carefully considers the target ranges to be attached to bonus and long-term incentive awards, taking into account a number of factors which could include future growth expectations, the market environment and the requirement to set stretching but achievable targets. The Committee retains the ability to adjust or set different performance measures if events occur (such as a change in strategy, a material acquisition and/or a divestment of a Group business or a change in prevailing market conditions) which cause the Committee to determine that the measures are no longer appropriate and that an adjustment is required so that they achieve their original purpose. Awards under the LTIP may be adjusted in the event of a variation of capital in accordance with the scheme rules. 3. Pay policy for other employees The Remuneration Policy for senior management is similar to the policy for the executive directors in that salary and benefit packages are linked to performance. Key management participates in the Group’s LTIP with performance measures focused on Group profitability targets and share price growth to ensure alignment of individual performance with Group performance and shareholder metrics. The key principles of the remuneration philosophy are applied consistently across the Group below this level, taking account of seniority and local market practice. The Remuneration Policy for all employees is designed to provide a level of remuneration which enables eOne to attract and retain talented individuals who have the necessary skills and experience to support the continued development of the Group. 4. Remuneration policy for new appointments In the case of recruiting/appointing a new executive director, the Remuneration Committee will typically align the remuneration package with the above Remuneration Policy (and will therefore generally consider base salary, pension, benefits, annual bonus and LTIP awards). However, the Remuneration Committee retains the discretion to make payments or awards which are outside the Policy to facilitate the recruitment of candidates of the appropriate calibre required to implement the Group’s strategy, subject to the principles and limits set out below. The individual would be expected to move, over time, onto a remuneration package that is consistent with the Policy set out in the table above. In determining appropriate remuneration, the Remuneration Committee will take into consideration all relevant factors (including the quantum and nature of remuneration) to ensure that arrangements are in the best interests of both eOne and its shareholders. This may, for example, include (but is not limited to) the following circumstances: – an interim appointment is made to fill an executive director role on a short-term basis; – exceptional circumstances require that the non-executive Chairman or a non-executive director takes on an executive function on a short-term basis;

eOne Annual Report and Accounts 2016 67 Directors’ Remuneration Policy continued

– an executive director is recruited at a time in the year when it would be inappropriate to provide a bonus or long-term incentive award for that year as there would not be sufficient time to assess performance (subject to the limit on variable remuneration set out below, the quantum in respect of the months employed during the year may be transferred to the subsequent year so that reward is provided on a fair and appropriate basis); – the executive director received benefits at his/her previous employer which the Committee considers it appropriate to offer; and – buy-out of previous employer benefits. The Committee may also alter the performance measures, performance period and vesting period of the annual bonus or LTIP (subject to the rules of the scheme) if the Committee determines that the circumstances of the recruitment merit such alteration in these situations. If such circumstances were to arise, the rationale would be clearly explained. The Remuneration Committee may make an award in respect of recruitment to buy out remuneration arrangements forfeited on leaving a previous employer. In doing so the Remuneration Committee will take account of relevant factors regarding the forfeited arrangements which may include any performance conditions attached to awards forfeited (and the likelihood of meeting those conditions), the time over which they would have vested and the form of the awards (e.g. cash or shares). The Committee will generally seek to structure buy-out awards on a comparable basis to remuneration arrangements forfeited. These payments or awards are excluded from the maximum level of variable remuneration referred to below; however, the Remuneration Committee’s intention is that the value awarded would be no higher than the expected value of the forfeited arrangements. Where considered appropriate, buy-out awards will be subject to forfeiture or clawback on early departure. Where necessary, the Company will pay appropriate benefits in line with those provided to other executive directors. Relocation costs and expatriate benefits may be paid on a case-by-case basis. The Remuneration Committee will seek to ensure that no more is paid than is required. The maximum level of variable remuneration (excluding buy-out awards) which may be awarded to a new executive director is 300% of base salary, comprising: – Annual bonus 100%; and – LTIP award 200% (in exceptional circumstances only, a typical award would be 100%-125%) Subject to this overall maximum variable remuneration, incentive awards may be granted within the first 12 months of appointment above the normal maximum annual award opportunities. The Remuneration Committee will ensure that such awards are linked to the achievement of appropriate and challenging performance measures and will be forfeited if performance or continued employment conditions are not met. Any share awards referred to in this section will be granted as far as possible under the Company’s existing share plans. If necessary, and subject to the limits referred to above, in order to facilitate the awards mentioned above, the Committee may rely on exemption 9.4.2 of the Listing Rules which allows for the grant of awards to facilitate the recruitment of a director, in certain circumstances. Where a vacant position is filled internally, any ongoing remuneration obligations or outstanding variable pay elements shall be allowed to continue according to the original terms. Fees payable to a newly-appointed non-Executive Chairman or non-executive director will be in line with the fee policy in place at the time of appointment, subject to any deviation in policy permitted under Listing Rule 9.4.2. 5. Service contracts Director Effective term Notice period Darren Throop 24 months No notice by the Company, 6 months by the executive director Giles Willits 12 months 12 months by the Company, 6 months by the executive director

Darren Throop If dismissed without cause he is entitled to a lump sum equal to 24 months’ compensation (comprising base salary, bonus, pension and benefits). Benefits provided in connection with termination of employment may also include, but are not limited to, outplacement and legal fees. This is in line with market practice in North America. The Remuneration Committee has carefully considered this aspect of the contract and concluded it is necessary for eOne to remain competitive in the North American market, a key consideration for the Group, particularly as this is where the CEO is based. In addition, the Company has sought the views of key shareholders on the principles of its Remuneration Policy and believes that the Policy in the best interests of shareholders, generally. Giles Willits If dismissed without cause he is entitled to a lump sum equal to 12 months’ compensation (comprising base salary, bonus, pension and benefits). Benefits provided in connection with termination of employment may also include, but are not limited to, outplacement and legal fees. The non-executive directors, including the Chairman, serve under letters of appointment which are subject to the Articles of the Company.

68 entertainmentone.com Non-executive directors’ service under letters of appointment Notice from the Notice from Most recent letter of appointment Company director Allan Leighton 31 March 2014 6 months 6 months Clare Copeland 21 May 2010 6 months 6 months Bob Allan 21 May 2010 6 months 6 months Ronald Atkey 12 November 2010 6 months 6 months Garth Girvan 21 May 2010 6 months 6 months Scott Lawrence 14 January 2016 6 months No notice Mark Opzoomer 21 May 2010 6 months 6 months Linda Robinson 18 May 2015 6 months 6 months

6. Payments for loss of office Obligation Policy Base salary, Refer to section 5 (Service contracts) above for further details. pension and benefits Annual bonus The Remuneration Committee has the discretion to determine appropriate bonus amounts taking into consideration the circumstances in which an executive director leaves. Typically for “good leavers”, bonus amounts (as estimated by the Remuneration Committee) will be pro-rated for time in service to termination and will be, subject to performance, paid at the usual time. “Good leavers” typically include leavers due to death, illness, injury, disability, redundancy, retirement with the consent of the Group or any other reason as determined by the Remuneration Committee. “Bad leavers” will not receive any annual bonus payments. The bonus will be subject to a clawback provision which extends for a period of 12 months following payment of the bonus. This will entitle the Company, on the recommendation of the Board, to clawback up to 100% of the bonus payment where there is evidence of personal misconduct on behalf of the executive director which results in a misstatement of the Group’s financial results which subsequently materially reduces the Company’s share price or results in significant reputational damage to the Group. LTIP Options awarded under the LTIP will normally lapse immediately upon an executive director ceasing to be employed by or to hold office with a Group company. However, if an executive director is deemed by the Remuneration Committee to be a “good leaver” and has completed at least 12 months’ service from the date of grant, the LTIP award will vest on the date when it would have vested if he/she had not so ceased to be an employee or director of a Group company, subject to: (i) the satisfaction of any applicable performance conditions measured over the original performance period, (ii) the satisfaction of any other relevant conditions, (iii) the operation of any malus or clawback provisions; and (iv) pro-rating to reflect the reduced period of time between grant and the executive director’s cessation of employment as a proportion of the normal vesting period. “Good leavers” typically include leavers due to death, illness, injury, disability, redundancy, retirement with the consent of the Group or any other reason as determined by the Remuneration Committee. If an executive director ceases to be an employee or director of a Group company for a “good leaver” reason having completed at least 12 months’ service from the date of grant, the Remuneration Committee may decide that his/ her LTIP award will vest early when he/she leaves, subject to an assessment of performance against the relevant conditions for that shortened period. To the extent that LTIP awards vest in accordance with the above provisions, they may be exercised for a period of six months following vesting and will otherwise lapse at the end of that period. To the extent that a participant who leaves for a “good leaver” reason held vested options, they may be exercised for a period of six months following the date of cessation and will otherwise lapse at the end of that period. LTIP awards will be subject to the operation of malus or clawback provisions. The Remuneration Committee will have the ability to clawback up to 50% of vested LTIP awards within 12 months of the vesting date where there is evidence of personal misconduct of behalf of the executive director which results in a misstatement of the Group’s financial results which subsequently materially reduces the Company’s share price or results in significant reputational damage to the Group. The malus/clawback may be satisfied by way of the vesting of any existing share options/awards, or the number of shares under any vested but unexercised option. In addition the employee (or former employee) may be required to make a cash payment to the Company. Should an event as set out above occur during the vesting period of an LTIP award, the Remuneration Committee shall have the discretion to reduce the proportion of the award that vests by up to 100% regardless of the extent to which the performance conditions attaching to the award are met.

eOne Annual Report and Accounts 2016 69 Directors’ Remuneration Policy continued

It is the Company’s policy to set notice periods for executive and non-executive directors to be in line with the recommendations of the UK Corporate Governance Code. In exceptional circumstances, where notice periods of more than a year are required, these are considered by the Board on a case-by-case basis. Under the terms of their engagement, the notice period to be given by the non-executive directors to the Company is not more than six months and the Company is obliged to give notice of not more than six months, as set out above. Discretion is retained to terminate with or without due notice or paying any payment in lieu of notice dependent on what is considered to be in the best interests of the Company in the particular circumstances. The Committee reserves the right to make additional exit payments where such payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement or compromise of any claim arising in connection with the termination of a director’s office or employment. 7. Illustrations of application of the Remuneration Policy The graph below seeks to demonstrate how pay varies with performance for the executive directors based on our stated Remuneration Policy.

Element Description Fixed Total amount of base salary, pension and benefits. Annual variable Remuneration where performance measures or targets relate to one financial year (i.e. annual bonus payments). Maximum annual bonus opportunity is 100% of base salary for executive directors. Long-term variable Remuneration where performance measures or targets relate to more than one financial year (i.e. LTIP payments). LTIP opportunity is 125% of base salary for the CEO and 100% of base salary for the CFO.

Chief Executive Officer Chief Financial Officer

£000 £000 2,000 2,000

1,690 38% 1,500 1,500 1,372 1,284 31%

33% 1,073

1,000 1,000 26% 30% 31% 26% 26% 531 519 500 500 41% 32% 38% 48% 100% 100%

0 0 Minimum On-target Maximum Minimum On-target Maximum Long-term variable Long-term variable Annual variable Annual variable Fixed Fixed

70 entertainmentone.com Assumptions used in determining the level of pay-out under the given scenarios are as follows:

Scenario Description Minimum performance Fixed elements of remuneration only – comprising base salary, benefits and pension. On-target performance Total fixed pay as above, plus: – Assumes 65% of maximum pay-out under the annual bonus scheme (i.e. 65% of base salary) based on the Group achieving budgeted adjusted profit before tax – Assumes 65% of maximum pay-out under the LTIP based on the Group achieving the median point between the threshold performance and maximum performance for each performance condition. This equates to 81% of base salary for the CEO and 65% of base salary for the CFO Maximum performance Total fixed pay as above, plus: – Assumes 100% of maximum pay-out under the annual bonus scheme (i.e. 100% of base salary) based on the Group achieving 110% or more of budgeted adjusted profit before tax – Assumes 100% of maximum pay-out under the LTIP based on the Group achieving the maximum performance for each performance condition. This equates to 125% of base salary for the CEO and 100% of base salary for the CFO

As required by the regulations, the scenarios do not include any share price growth assumptions or take into account any dividends that may be paid. Base salary is the latest known salary (i.e. the salary effective from 1 April 2016) and the value for pension and benefits has been assumed to be equivalent to that included in the single total figure of remuneration on page 72. 8. Wider workforce remuneration When determining the remuneration arrangements for executive directors, the Remuneration Committee takes into consideration, as a matter of course, the pay and conditions of employees throughout the Group. In particular, the Remuneration Committee is kept informed of: – salary increase for the general employee population; – overall spend on annual bonus; and – participation levels in the annual bonus and share plans. Although no consultation with employees takes place in relation to determining the Remuneration Policy for executive directors, the Group has various ways of engaging employees collectively, as teams and one-to-one. 9. Consideration of shareholder views The Company engages in regular dialogue with key shareholders to discuss and seek feedback on its Remuneration Policy and governance matters and, in particular, the Company discusses any significant changes to policy or measures used to assess performance. During the year, there were no changes to the executive director Remuneration Policy proposed for 2016. The Company will continue to actively engage with and seek to incorporate the views of its shareholders in any major changes to executive director Remuneration Policy.

eOne Annual Report and Accounts 2016 71 Annual Report on Remuneration

This section of the Remuneration Report contains details of how the Company’s Remuneration Policy for directors was implemented during the year ended 31 March 2016. 1. Remuneration philosophy The Company’s proposed Remuneration Policy is designed to provide the executive directors a level of remuneration which enables eOne to attract and retain talented individuals who have the necessary skills and experience to support the continued development of the Company and motivate them to deliver the Company’s strategy. The Policy intends to incentivise management to provide long-term value growth for the Company’s shareholders whilst taking account of internal and external risks. The remuneration package has been designed based on the following key principles:

Principle Explanation Reward package to attract To ensure that the Company is in a position to attract and retain the best executive directors the and retain the best talent total remuneration package will target to pay at an upper quartile level, based on meeting relevant performance criteria. Relevant comparator group The principal external comparator group (which is used for reference purposes only) is made up of constituents of the FTSE 250 Index (as the Company is a constituent member of the Index), with reference also made to UK and North American sector specific companies and other Canadian listed companies (against which the Company competes to attract and retain executive talent). Reward assessed on a total The remuneration package provided to the executive directors is reviewed annually on a total compensation basis compensation basis (i.e. single elements of the package are not reviewed in isolation). Packages are reviewed in the context of individual and Group performance, internal relativities, criticality of the individual to the business, experience, and the scarcity or otherwise of executives with the relevant skill set. Pay for performance The Remuneration Committee consistently aims to set stretching targets, and ensure that maximum or near maximum pay-outs are only delivered for achievement against these. Incentive target measures When designing the incentive packages for executives the Board has considered performance linked to business strategy measures and targets that support delivery of the Group’s strategic objectives. Alignment to shareholder The package is designed to align the interests of the executives with those of shareholders, with interests an appropriate proportion of total remuneration dependent upon sustained long-term performance. Share ownership is a key cornerstone of the Group’s reward policy and is designed to help maintain commitment over the long-term, and to ensure that the interests of the executive are aligned with those of shareholders.

2. Single total figure of remuneration The information in this section has been audited. Executive directors The tables below set out the single total figure of remuneration and breakdown for each executive director earned in the years ended 31 March 2016 and 2015. Figures provided have been calculated in accordance with the remuneration disclosure regulations (The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013).

Year ended 31 March 2016 Taxable Long-term Salary benefits Annual bonus incentives Pensions Total £000 £000 £000 £000 £000 £000 Darren Throop1,2 500 2 202 – 14 718 Giles Willits3 414 53 167 – 40 674 1. Canadian director remuneration has been translated at the C$:£ rate of 1.9773. 2. Darren Throop received total annual compensation of US$141,653 in relation to his service as a non-executive director of IMAX Corporation, which is not included in the table above. 3. Taxable benefits for Giles Willits include £32,449 of payment in lieu of pension. Year ended 31 March 2015 Taxable Long-term Salary benefits Annual bonus incentives Pensions Total £000 £000 £000 £000 £000 £000 Darren Throop1 524 5 434 – 13 976 Giles Willits2 402 51 333 – 40 826 1. Canadian director remuneration has been translated at the C$:£ rate of 1.8319. 2. Taxable benefits for Giles Willits include £30,298 of payment in lieu of pension. Taxable benefits in the years ended 31 March 2016 and 2015 consist of costs relating to the provision of a motor vehicle, private medical insurance, health insurance, dental insurance, income protection insurance and payments in lieu of pension contributions.

72 entertainmentone.com Non-executive directors The tables below set out the single total figure of remuneration and breakdown for each non-executive director earned in the years ended 31 March 2016 and 2015.

Year ended 31 March 2016 Taxable Fees benefits Total Non-executive directors £000 £000 £000 Allan Leighton1 200 – 200 Clare Copeland2 57 – 57 Bob Allan2 53 – 53 Ronald Atkey2 46 – 46 James Corsellis3 13 – 13 Garth Girvan2 46 – 46 Scott Lawrence2,4 – – – Mark Opzoomer 50 – 50 Linda Robinson2 46 – 46 1. At the 2014 Annual General and Special Meeting, shareholders approved the adoption of the Chairman’s Award under terms set out in the 2014 Notice of Annual General and Special Meeting of Shareholders and Management Proxy Circular. At the date of the 2016 Annual Report, the Chairman’s Award had not been made. 2. Canadian director remuneration has been translated at the C$:£ rate of 1.9773. 3. Resigned on 15 July 2015. 4. Appointed on 14 January 2016. Scott Lawrence is an employee of Canada Pension Plan Investment Board (CPPIB). The Company pays no fee to Scott Lawrence in connection with his appointment. The Company pays CPPIB an annual fee equivalent to annual fee paid by the Company to its other non- executive directors in consideration for CPPIB allowing Scott Lawrence to allocate time to his role as a non-executive director of the Company. The fee payable to CPPIB in respect of Scott Lawrence’s services for the year ended 31 March 2016 was C$22,500. Year ended 31 March 2015 Taxable Fees benefits Total Non-executive director £000 £000 £000 Allan Leighton 200 – 200 Clare Copeland1 61 – 61 Bob Allan1 57 – 57 Ronald Atkey1 49 – 49 James Corsellis2 50 – 50 Garth Girvan1 49 – 49 Mark Opzoomer 50 – 50 Linda Robinson1 49 – 49 1. Canadian director remuneration has been translated at the C$:£ rate of 1.8319. 2. Resigned on 15 July 2015.

3. Additional details on variable pay in single total figure table The information in this section has been audited. The Remuneration Policy is designed to provide a level of remuneration which enables eOne to attract and retain talented individuals who have the necessary skills and experience to support the continued development of the Group and motivate them to deliver the Group’s strategy. The Policy intends to incentivise management to provide long-term value growth for our shareholders whilst taking account of internal and external risks. The operation of an annual bonus plan with targets reflecting core financial measures linked to the Group’s growth strategy together with the LTIP (which provides for awards of nil cost shares to be earned over a three-year period, based on meeting stretching targets linked to financial metrics and the creation of shareholder value) help to achieve this. The main components of the Remuneration Policy, and how they are linked to and support the Group’s business strategy, are summarised in each of the following sections.

eOne Annual Report and Accounts 2016 73 Annual Report on Remuneration continued

Salary and fees The table below sets out the base salaries of the executive directors from 1 April 2015 together with the increase from the prior year.

Base salary from 1 April 2015 (per annum) Increase (per annum) Darren Throop C$989,000 Increase of C$29,000 from C$960,000 Giles Willits £414,000 Increase of £12,000 from £402,000 As set out above, each of the executive director’s base salaries has increased by 3% from the prior year, in line with FTSE 250 comparators and the average pay increases across the Group. Non-executive directors fees, which have not been increased in the current year, are as follows:

Fee from 1 April 2015 (per annum) Increase (per annum) Allan Leighton £200,000 – Clare Copeland1 C$112,500 – Bob Allan2 C$105,000 – Ronald Atkey C$90,000 – James Corsellis3 £50,000 – Garth Girvan C$90,000 – Scott Lawrence4 – N/A Mark Opzoomer £50,000 – Linda Robinson C$90,000 – 1. For being the Senior Independent Director, Clare Copeland is paid C$15,000 per annum. As Chairman of the Remuneration Committee, he is paid C$7,500 per annum. 2. For being the Chairman of the Audit Committee, Bob Allan is paid C$15,000 per annum. 3. Resigned on 15 July 2015. 4. Appointed on 14 January 2016. Scott Lawrence is an employee of Canada Pension Plan Investment Board (CPPIB). The Company pays no fee to Scott Lawrence in connection with his appointment. The Company pays CPPIB an annual fee equivalent to annual fee paid by the Company to its other non- executive directors in consideration for CPPIB allowing Scott Lawrence to allocate time to his role as a non-executive director of the Company. The fee payable to CPPIB in respect of Scott Lawrence’s services for the year ended 31 March 2016 was C$22,500. Canadian dollar amounts in the above table have been translated into sterling amounts in the single total figure of remuneration table on page 72. Annual bonus plan awards In respect of the current year, the executive directors’ performance was carefully reviewed by the Remuneration Committee. The performance against the annual bonus plan measures in relation to the executive directors is set out below.

Threshold Maximum Annual bonus performance performance value for threshold required required and maximum Annual bonus value achieved (90% of (110% of performance Actual Weighting target) target) (% of salary) performance Darren Throop1 Giles Willits All executive Group profit directors (adjusted profit before tax) 100% £100.8m £123.2m 30% – 100% £104.1m 40.4% 40.4% Total £000 £202 £167 1. Canadian director remuneration has been translated at the C$:£ rate of 1.9773. If actual performance is less than 110% but greater than 90% of the target then the bonus is calculated based on a straight-line basis between the full 100% bonus and 30% of the maximum in relation to the measure. As such, on-target performance would earn the executive 65% of the maximum bonus award. The bonus is subject to a clawback provision which extends for a period of 12 months following payment of the bonus. No part of these bonuses was deferred.

74 entertainmentone.com 4. Long term incentives awarded during the financial year The information in this section has been audited. The table below sets out the details of the LTIP awards granted in the year ended 31 March 2016 where vesting will be determined according to the achievement of performance conditions that will be tested in future reporting periods.

Face value Percentage of award Maximum percentage LTIP awarded of award2 vesting at threshold of face value that Performance Executive director Award type (% of base salary1) £000 performance could vest Performance period conditions Darren Throop 125% 610 Adjusted fully LTIP – third diluted EPS 1 April 2015 to 31 annual cycle 30% 100% growth March 2018 of awards TSR growth Giles Willits 100% 414 Average ROCE 1. The LTIP award has been calculated based on the salaries of the executives as at 1 April 2015. For Darren Throop, Canadian dollar base salary of C$989,000 was converted to pounds sterling at the C$:£ rate of 2.0266 (being the average exchange rate over the three dealing days immediately preceding the award date of 27 July 2015). 2. Maximum number of shares multiplied by 328.82p (being the volume-weighted average share price over the three dealing days immediately preceding the award date of 27 July 2015). Awards normally vest, subject to continued employment with a Group company and any applicable performance and other conditions, on the later of the third anniversary of the date of award and the date on which the Remuneration Committee determines that the performance and other conditions have been satisfied (in whole or in part). Detailed explanations of each performance condition are set out on the following pages. (i) Adjusted fully diluted EPS growth Adjusted fully diluted EPS is calculated before one-off operating, finance and tax items, share-based payments, non-controlling interests and amortisation of acquired assets (net of any related tax effects) and is as disclosed in the relevant Annual Report and Accounts. The measure is calculated after adjusting the weighted average number of shares in issue for a year to assume conversion of all potentially dilutive shares. Vesting of 33% of the LTIP award for each executive director will be determined by an assessment of the annualised adjusted fully diluted EPS growth from 1 April 2015 to 31 March 2018 as follows:

Annualised adjusted Vesting of As % of total EPS growth this portion LTIP award Threshold 10% per annum 30% 9.9% Maximum 15% per annum 100% 33.0%

The growth rate will be calculated based on adjusted fully diluted EPS as disclosed in the relevant Annual Report and Accounts (subject to such adjustments as the Board may determine from time-to-time). Adjusted fully diluted EPS at 31 March 2015 (the denominator in any growth rate calculations) was 23.7 pence. Awards will vest on a straight-line basis for performance between threshold and maximum performance. No vesting of this portion will occur if performance is below threshold.

eOne Annual Report and Accounts 2016 75 Annual Report on Remuneration continued

(ii) TSR growth The comparator group comprises those companies constituting the FTSE 250 index on 1 April 2015 (excluding investment trusts). Vesting of 34% of the LTIP award for each executive director will be determined by ranking the Company and each member of the comparator group by TSR and the extent to which the award vests will be determined as follows:

Rank of the Company’s TSR Vesting of As % of total within the comparator group this portion LTIP award Threshold Median 30% 10.2% Maximum Upper quartile 100% 34.0%

For these purposes, a company with a more negative TSR will rank lower than a company with a less negative TSR. If any member of the comparator group ceases to exist, its shares cease to be listed on a recognised stock exchange, or otherwise is so changed as to make it, in the opinion of the Board, unsuitable as a member of the comparator group, the Board will exclude that company unless it decides to (a) in the event of a takeover of that company, replace that company with the acquiring company; (b) include a substitute for that company; (c) track the future performance of that company by reference to an index; or (d) treat the company in any other way it decides is appropriate. Awards will vest on a straight-line basis for performance between median and upper quartile performance. No vesting of this portion will occur if either (i) performance is below median or (ii) the Company’s TSR is less than 5%. (iii) Average ROCE ROCE is calculated by dividing adjusted net operating profit (adjusted NOP) by net operating assets, where adjusted NOP is calculated before one-off operating and finance items, share-based payments and amortisation of acquired assets (net of any related tax effects) and is stated before adjusted finance costs (after tax). Adjusted NOP can be derived from the audited consolidated financial statements. Net operating assets means, for any financial year, the average of opening and closing total assets as shown in the audited consolidated financial statements less cash associated with debt less current liabilities (excluding current debt balances). The calculation will also take into account any of the adjustments which the Committee determines are required to ensure it is consistent with the calculation of adjusted NOP. Vesting of 33% of the LTIP award will be determined by an assessment of the average ROCE over the three consecutive years ending 31 March 2018 as follows:

Average Vesting of As % of total ROCE this portion LTIP award Threshold 10.5% 30% 9.9% Maximum 12.0% 100% 33.0%

Awards will vest on a straight-line basis for performance between threshold and maximum performance. No vesting of this portion will occur if performance is below threshold. 5. Pension entitlements The information in this section has been audited. The Group does not operate any defined benefit retirement plans. In the year ended 31 March 2016, Darren Throop received pension contributions up to the maximum permitted by the RRSP in Canada (C$24,930 for the current financial year). Giles Willits currently receives pension contributions and supplements up to a maximum of 17.5% of base salary. The Remuneration Committee has the authority to change the above levels of pension contributions (percentage and absolute amount) if it deems it appropriate. 6. Payments to past directors The information in this section has been audited. Payments of £0.4 million were made to past directors during the year. 7. Payments for loss of office The information in this section has been audited. There were no payments for loss of office during the year.

76 entertainmentone.com 8. Statement of directors’ shareholding The information in this section has been audited.

Shares Unvested share options1 (without performance measures) (with performance measures) Executive director 31 March 2016 31 March 2015 31 March 2016 31 March 2015 Darren Throop 10,024,008 8,400,000 899,834 603,811 Giles Willits 3,466,885 3,061,322 525,450 335,017 1. LTIP awards made prior to the Company’s rights issue have been adjusted in line with the LTIP rules, to reflect the dilutive effect of the rights issue, and as noted in the Company’s Prospectus dated 30 September 2015. To further promote alignment with the interests of our shareholders, executive directors are expected to build up and maintain significant holdings of eOne shares as follows: – CEO: 300% of base salary – Other executive directors: 200% of base salary The table below summaries the executive directors’ interests in shares and the extent to which the shareholding expectation applicable to executive directors has been achieved as at 31 March 2016.

Value of beneficial Value of shares Beneficial interests Shareholding to be held1 interests in shares3 expectation Executive director £000 in shares2 £000 met? Darren Throop 1,585 10,024,008 15,206 Yes Giles Willits 828 3,466,885 5,259 Yes 1. This has been calculated based on the salaries of the executives as at 1 April 2015. For Darren Throop, his Canadian dollar salary has been translated at the 31 March 2016 C$:£ rate of 1.8772. 2. Beneficial interests include shares held directly or indirectly by connected persons. 3. Based on the closing share price at 31 March 2016 of £1.517. At 31 March 2016, the shareholding expectation has been achieved for each executive director. There is no shareholding expectation for non-executive directors. No non-executive director had any beneficial interests in shares at 31 March 2016. 9. Performance and pay The following graph shows the Company’s performance, measured by TSR, compared with the performance of the FTSE 250 Index also measured by TSR, since 2 April 2013. The FTSE 250 Index is a useful comparator from 2 April 2013 as that is the start of the three-year performance period of the first LTIP and the Company became a constituent member of the FTSE UK Index Series on 23 September 2013. Total shareholder return

200

150

100 Index (April 2013 equals 100)

50 Apr 13 Jun 13 Sept 13 Dec 13 Mar 14 Jun 14 Sept 14 Dec 14 Mar 15 Jun 15 Sept 15 Dec 15 Mar 16

eOne FTSE 250 Source: Thomson Reuters Datastream

eOne Annual Report and Accounts 2016 77 Annual Report on Remuneration continued

The table below shows the single total figure of remuneration and the levels of pay-out under the annual bonus plan for the CEO over the past five years. As the LTIP has not completed its vesting period, no vesting percentage can be provided. Additionally, the MPS arrangements were such that there was no theoretical maximum vesting percentage. Instead, the historical vesting percentage of the now closed Executive Share Plan (ESP) has been provided.

2011 2012 2013 2014 2015 2016 CEO single figure of total remuneration (£000)1 1,441 899 909 10,269 976 718 Annual bonus pay-out % against maximum (%) 100.0% 100.0% 100.0% 84.4% 82.8% 40.4% ESP vesting rates against maximum opportunity (%) 66.0% n/a n/a n/a n/a n/a 1. In 2011, awards vested under the now closed Executive Share Plan. Therefore the figures for 2011 have been restated to include the value of the vested share options, being the number of options vested multiplied by the share price on the vesting date.

10. Percentage increase in the CEO’s remuneration The table below compares the percentage increase in the Chief Executive Officer’s pay (salary, taxable benefits and annual bonus) with the average for the employees of the Group taken as a whole (excluding amounts for the Chief Executive Officer).

2016 2015 £000 £000 % change Chief Executive Officer Salary 500.0 524.0 -5% Taxable benefits 2.0 5.0 -60% Annual bonus 202.0 434.0 -54% Employees of the Group taken as a whole Salary 40.6 38.1 +10% Taxable benefits 0.7 0.4 +75% Annual bonus 3.2 2.8 +17% It should be noted that, in local currency, the Chief Executive Officer received a percentage increase of 3% of base salary, which is consistent with the 3% percentage increase received by employees of the Group as a whole. The percentage reductions shown above are driven by the year-on-year differences in local currency exchange rates used to translate salaries to pounds sterling given the international locations of the Group’s employees. 11. Relative importance of spend on pay The table below sets out the relative importance of spend on pay in the years ended 31 March 2016 and 2015.

Remuneration paid to or receivable by all employees Total investment Dividend of the Group in content Year ended 31 March 2016 1.2 pence per share £86.5m £218.5m Year ended 31 March 2015 1.1 pence per share £79.4m £280.8m Percentage change +9% +9% -22%

Total investment in content represents the total cash outflow relating to investment in acquired content rights (2016: £121.4m; 2015: £166.3m) and investment in productions, net of grants received (2016: £97.1m; 2015: £114.5m), as set out in the consolidated cash flow statement on page 90. This metric has been included in the table above due to its size and strategic importance to the Group. 12. Shareholder context The table below shows the advisory vote on the 2015 Remuneration Policy and Remuneration Report at the AGM on 16 September 2015:

Votes for % Votes against % Votes withheld 2015 Remuneration Policy 193,511,947 83.99 36,862,620 16.00 257,950 2015 Remuneration Report 221,632,870 97.42 5,835,328 2.57 3,164,319

78 entertainmentone.com Remuneration Committee

Remuneration Committee terms of reference and evaluation The Remuneration Committee is responsible for overseeing the policy regarding executive remuneration and approving the remuneration packages for the Group’s executive directors and senior managers over agreed thresholds and its terms of reference includes: – the framework or broad policy regarding executive remuneration and individual remuneration and incentive packages; – participation in any discretionary employee share schemes operated by the Group; – targets for any performance-related payments; – participation in any discretionary incentive schemes and bonus arrangements operated by the Group; – the policy for and scope of any pension arrangements; – the policy for and scope of any termination payments and the severance terms; and – the provision of benefits. The Remuneration Committee is responsible for recommending and monitoring the level and structure of senior management remuneration and also determines the issue and terms of all share schemes operated by the Group for the benefit of certain Group employees. In addition, the Remuneration Committee will review a succession plan prepared by the Group that sets out details in relation to succession planning for executive directors and senior management in order to consider an appropriate remuneration framework to fit with the succession plan. The executive directors determine the remuneration of the non-executive directors with the support of external professional advice, if required, and ratification by the Board. No director participates in any discussion regarding his or her own remuneration. The Committee keeps its terms of reference under review and makes recommendations for changes to the Board. The full terms of reference are available on the Company’s website. An evaluation of the Committee’s performance during the financial year was externally facilitated as set out on page 51. Committee membership As at 31 March 2016, the Remuneration Committee comprised Clare Copeland (Chairman) with Bob Allan and Garth Girvan as the other independent non-executive members. Bob Allan was appointed as a third independent member of the Remuneration Committee on 15 May 2015 to bring the Committee’s composition into line with Code requirements. The Chairman (Allan Leighton), the CEO (Darren Throop) and the CFO (Giles Willits) are invited to attend Remuneration Committee meetings but do not participate in decisions. These attendees were present when the Remuneration Committee considered matters relating to the executive directors’ remuneration for the year ended 31 March 2016. Meetings – The Committee met six times during the year. Committee member attendance at Committee meetings is shown on page 52. – The Committee’s activities for the year ended 31 March 2016 have included: Date of meeting Agenda May 2015 – Approval of executive director bonuses for the year ended 31 March 2015 – Approval of proposed changes to executive director remuneration, including remuneration objectives, principles, policy recommendations and the LTIP – Approval of executive director bonus targets for the year ended 31 March 2016 – Terms of reference and Committee self-evaluation

July 2015 – Share Schemes including the EIS and the all employee Sharesave Scheme

September 2015 – Senior management approvals, including share option awards under the LTIP – Share Schemes including the EIS and the all employee Sharesave Scheme

February 2016 – Senior management approvals, including share option awards under the LTIP – Approval of uplift to LTIP Awards resulting from rights issue

March 2016 (two meetings) – Senior management approvals, including share option awards under the LTIP

The Remuneration Committee adopts the principles of good governance as set out in the UK Corporate Governance Code and complies with the Listing Rules of the Financial Conduct Authority and Schedule 8 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended in 2013). Advisers to the Remuneration Committee During the year, advice on the competitiveness and appropriateness of compensation programmes for the Company’s Chief Executive Officer, top executive officers and Board members was provided by Mercer (Canada) Limited. The Company has no other connection with Mercer (Canada) Limited and the Committee is therefore satisfied that the advice received is independent. eOne Annual Report and Accounts 2016 79 Directors’ Report: additional information

The directors present their report and audited consolidated financial statements for the year ended 31 March 2016. Principal activities Entertainment One Ltd. is a leading independent entertainment group focused on the acquisition, production and distribution of television, family and film content rights across all media throughout the world. Strategic Report The Strategic Report on pages 12 to 41 sets out a comprehensive review of the development and performance of the business for the year ended 31 March 2016. Results and dividends During the year the Group made a profit after tax of £40.2 million (2015: £41.3 million). The Company did not pay an interim dividend during the year ended 31 March 2016; however, the directors have declared the payment of a final dividend in respect of 2016 of 1.2 pence per share (2015: 1.1 pence per share). Risk management and internal controls Disclosures can be found in Note 32 to the consolidated financial statements and in the Corporate governance section on pages 53 and 54. Capital structure The Company has one class of shares. These common shares carry the right to one vote at general meetings of the Company. They have no par value and the authorised number of common shares is unlimited. There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of the Company and prevailing legislation. Further information regarding the capital structure, together with details of new share issues during the year, are shown in Note 33 to the consolidated financial statements. Directors Details for all present directors are listed, together with their biographical details, on pages 48 to 49. The Company has agreed to indemnify the directors as permitted by law against liabilities they may incur in the execution of their duties as directors of the Company. The Company may, by ordinary resolution, appoint or remove a director to the Board. The responsibilities of the directors are detailed in the Corporate governance section on pages 46 to 54. Directors’ interests The beneficial interests of the directors and their families in the shares of the Company are shown below. Options granted under the Company’s employee share plans are shown in the Remuneration report on pages 75 to 76.

Number of common shares at 31 March 2016 Darren Throop 10,024,008 Giles Willits 3,466,885

80 entertainmentone.com Substantial shareholdings At 30 April 2016 the Company was aware of the following holdings representing 3% or more in its issued common shares:

Number of common Percentage of voting 30 April 2016 shares held as at rights and issued shares Canada Pension Plan Investment Board 84,597,069 19.8 Capital Research and Management 46,199,028 10.8 M&G Investment Management Ltd 30,621,659 7.2 Standard Life Investments Ltd 24,485,766 5.7 Norge Bank Investment Management 14,574,678 3.4 Blackrock Inc 13,111,920 3.1

Corporate Responsibility The Group has an open, honest and responsible approach towards its stakeholders which include employees, suppliers, customers, investors and the wider community. Ethical and responsible practices and a commitment to minimise our impact on the environment are key motivators behind the Group’s corporate responsibility framework. Further details of the Group’s approach to such matters are set out in the Corporate responsibility section on pages 42 to 45. Disabled employees Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of employees becoming disabled every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees. Going concern The directors continue to adopt the going concern basis in preparing the Annual Report and Accounts. Further details are set out in Note 3 to the consolidated financial statements. Auditor A resolution to reappoint Deloitte LLP as auditor will be proposed at the forthcoming Annual General Meeting. Disclosure of information to Auditor The following applies to each of those persons who were directors at the time this report was approved: – so far as the director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and – he/she has taken all the steps that he/she ought to have taken as a director in order to make himself/herself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. Annual General Meeting The Annual General Meeting of the Company will be held on 30 September 2016. By order of the Board Giles Willits Director 23 May 2016

eOne Annual Report and Accounts 2016 81 Statement of Directors’ Responsibilities

The directors are responsible for preparing the Annual Report and Accounts and the consolidated financial statements in accordance with applicable law and regulations. The directors are required to prepare the consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation. The directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing these consolidated financial statements, International Accounting Standard 1 requires that directors: – properly select and apply accounting policies; – present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; – provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and – make an assessment of the Group’s ability to continue as a going concern. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the governing the preparation and dissemination of financial information differs from legislation in other jurisdictions. Responsibility statement We confirm that to the best of our knowledge: – the consolidated financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group as a whole; – the Business and Financial Reviews include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that they face; and – the Annual Report and Accounts and the consolidated financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group’s performance, business model and strategy. By order of the Board Giles Willits Director 23 May 2016

82 entertainmentone.com Independent Auditor’s Report to the Members of Entertainment One Ltd.

Opinion on the consolidated financial statements – the directors’ statement in Note 3 to the consolidated of Entertainment One Ltd. financial statements about whether they considered it In our opinion: appropriate to adopt the going concern basis of accounting in preparing them and their identification of any material – the consolidated financial statements give a true and fair uncertainties to the Group’s ability to continue to do so over view of the state of the Group’s affairs as at 31 March 2016 a period of at least twelve months from the date of approval and of the Group’s profit for the year then ended; and of the consolidated financial statements; – the Group’s consolidated financial statements have – the directors’ explanation on pages 40 to 41 as to how they been properly prepared in accordance with International have assessed the prospects of the Group, over what period Financial Reporting Standards (IFRSs) as adopted by they have done so and why they consider that period to be the European Union. appropriate, and their statement as to whether they have The consolidated financial statements comprise the a reasonable expectation that the Group will be able to consolidated income statement, the consolidated statement continue in operation and meet its liabilities as they fall due of comprehensive income, the consolidated balance sheet, the over the period of their assessment, including any related consolidated statement of changes in equity, the consolidated disclosures drawing attention to any necessary qualifications cash flow statement and the related Notes 1 to 36. The financial or assumptions. reporting framework that has been applied in their preparation We agree with the directors’ adoption of the going concern is applicable law and IFRSs as adopted by the European Union. basis of accounting and we did not identify any such material Going concern and the Directors’ assessment uncertainties. However, because not all future events or of the principal risks that would threaten conditions can be predicted, this statement is not a guarantee as to the Group’s ability to continue as a going concern. the solvency or liquidity of the Group As required by the Listing Rules we have reviewed the Independence directors’ statement regarding the appropriateness of the We are required to comply with the Financial Reporting going concern basis of accounting and the directors’ statement Council’s Ethical Standards for Auditors and we confirm that on the longer-term viability of the Group contained within the we are independent of the Group and we have fulfilled our Directors’ Report and Strategic Report. other ethical responsibilities in accordance with those standards. We also confirm we have not provided any of the prohibited We have nothing material to add or draw attention to in non-audit services referred to in those standards. relation to: Our assessment of risks of material misstatement – the directors’ confirmation on page 54 that they have carried out a robust assessment of the principal risks facing The assessed risks of material misstatement described below the Group, including those that would threaten its business are those that had the greatest effect on our audit strategy, the model, future performance, solvency or liquidity; allocation of resources in the audit and directing the efforts of the engagement team. – the disclosures on pages 37 to 39 that describe those risks and explain how they are being managed or mitigated;

Risk How the scope of our audit responded to the risk Accounting for investment in acquired content rights and Our audit approach included an assessment of the design investment in productions and implementation of key controls related to the process for As set out in Notes 17 and 20, the Group has £241.3m (2015: estimating and maintaining future revenue forecasts and the £221.1m) of investment in acquired content rights and £133.8m mechanical calculation of the amortisation and royalty charges. (2015: £85.5m) of investment in productions on the consolidated We have assessed management’s process for estimating future balance sheet at 31 March 2016. revenues, specifically by: Accounting for the amortisation of these assets requires – discussing the expectations for a selection of titles and significant judgement as it is directly affected by management’s shows (including titles yet to be released) and corroborating best estimate of future revenues, which are determined from management’s forecasts by looking at box office, home opening box office performance or initial sales data, the pattern entertainment, SVOD and TV performance (based on of historical revenue streams for similar genre productions and current sales data, past performance of similar titles the remaining life of the Group’s rights. and other specific market information and contractual There is a risk that inappropriate assumptions are made in arrangements); and respect of the forecast future revenues which could result in – assessing whether the carrying value of the balances the recognition of expenses not appropriately matching the are considered recoverable by analysing the assets on flow of economic benefits from the underlying assets. a portfolio basis (Film – by release year, TV – by show type) and comparing the carrying value as at 31 March 2016 against current year revenue and remaining forecast future revenues to determine if any indicators of impairment exist.

eOne 2016 Annual Report and Accounts | 83 eOne Annual Report and Accounts 2016 83 Independent Auditor’s Report continued to the Members of Entertainment One Ltd.

Risk How the scope of our audit responded to the risk Carrying value of goodwill and other intangible assets We tested the design and implementation of controls over As set out in Notes 15 and 16, the Group carries £353.9m goodwill and other intangible assets recognition and impairment. (2015: £209.8m) of goodwill and a further £320.5m We considered whether management’s impairment review (2015: £87.6m) of other intangible assets on the methodology is compliant with IAS 36 Impairment of Assets. consolidated balance sheet at 31 March 2016. We challenged management’s assumptions used in the Management prepare a detailed assessment of the carrying impairment model for goodwill and other intangible assets, as value of goodwill and other intangible assets by cash generating described in Note 15 to the consolidated financial statements. unit (CGU) using a number of judgemental assumptions Our audit work on the assumptions used in the impairment (as described in Note 15 to the consolidated financial model focussed on: statements) including 2016 Board-approved forecasts, discount rates and long-term growth rates. There is a risk that the – using valuation experts to determine the appropriateness application of inappropriate assumptions supports assets that of the discount rates applied and benchmarking the rates should otherwise be impaired. against a relevant comparator group; – agreeing the underlying cash flow projections for each CGU to Board-approved forecasts; – comparing short-term cash flow projections against recent performance and historical forecasting accuracy; – assessing the long-term growth rates used against independent market data; and – considering the appropriateness of management’s sensitivity analysis to ensure no further indicator of impairment is identified. Acquisition accounting We tested the design and implementation of controls over key As set out in Note 27, the Group has made a number of outputs of the Group’s acquisition accounting, including controls acquisitions in the period, with total cash consideration in the over the consideration of accounting treatments for new or year of £170.2m, including The Mark Gordon Company, Astley complex areas and the oversight exercised by Group Finance Baker Davies Limited, Sierra Pictures LLC and Renegade 83. over the alignment of accounting policies. The accounting for these acquisitions can be complex and We reviewed the sale and purchase agreements involves judgement, including the appropriate classification and discussed the substance of the arrangements with (associate, joint venture, or subsidiary) and in relation to the management. We audited the acquisition accounting noting, valuation of acquired intangible assets. Given the complexity, in particular the requirements of IFRS 3 Business Combinations, there is a risk of inappropriate accounting and therefore IFRS 10 Consolidated Financial Statements and IFRS 11 Joint misleading presentation in the consolidated financial statements. Arrangements in assessing the appropriate classification and presentation. Our audit procedures also included the following: – testing the validity and completeness of consideration by reference to supporting evidence; – assessing the qualifications and experience of key specialists engaged by the Group; – assessing the process that management has undertaken to determine the fair value of the acquired intangible assets including understanding the scope of work performed; and – using valuation experts to determine the appropriateness of management’s assumptions and methodology supporting the fair value of acquired intangible assets (including exclusive content agreements and libraries and trade names and brands) for each significant acquisition in the year, by reference to, amongst other things, historical trends and assumptions used in similar historical acquisitions.

84 | entertainmentone.com 84 entertainmentone.com

Risk How the scope of our audit responded to the risk Revenue recognition We tested the design and implementation of controls over the As described in Note 3, the Group derives its revenues from key revenue streams in each financially significant Business Unit. the licensing, marketing, distribution and trading of feature films, Our audit procedures included: television, video programming and music rights and family licensing and merchandising sales. – assessing the Group’s revenue recognition policy and confirming the consistent application of the policy across The risk of material misstatement due to valuation and cut-off the Group; errors will manifest itself in different ways in each segment depending on the nature of trade and the respective revenue – completing detailed substantive procedures with regard recognition policies (e.g. early recognition of physically to the significant revenue streams by agreeing to third party distributed titles or license fees for titles where the confirmation, royalty statements, gross box office revenues licence period has not commenced). and other supporting information; – reviewing significant SVOD and licensing and merchandising contracts to corroborate licence period commencement and delivery dates to ensure revenue was recognised in the correct period; and – performing detailed testing on the returns provision calculations, and assessing whether the methodology applied is appropriate for each Business Unit based on the historical level of returns.

Last year our report included two risks which are not included An overview of the scope of our audit in our report this year: the presentation and consistency of the Our Group audit was scoped by obtaining an understanding of income and expenditure presented separately as one-off items the Group and its environment, including Group-wide controls, and deferred tax assets. They are no longer considered to be and assessing the risks of material misstatement at the Group risks that had the greatest effect on our audit strategy, the level. Based on that assessment, we focused our Group audit allocation of resources in the audit and directing the efforts of scope primarily on the UK and Canadian business units and the engagement team. The acquisition accounting risk is newly The Mark Gordon Company. Six (2015: five) business units were disclosed in the current year as it is a key area of focus due to subject to a full audit, whilst the remaining business units were the number of businesses acquired including The Mark Gordon subject to analytical review procedures performed by the Group Company, Astley Baker Davies Limited, Sierra Pictures and audit team. The six full scope divisions represent the principal Renegade 83. Business Units and account for 70% (2015: 69%) of the Group’s The description of risks above should be read in conjunction revenue and 87% (2015: 85%) of the Group’s underlying EBITDA. with the significant issues considered by the Audit Committee They were also selected to provide an appropriate basis for as discussed in their Report. undertaking audit work to address the risks of material misstatement identified above. Our audit work at the different These matters were addressed in the context of our audit locations was executed at levels of materiality applicable to each of the consolidated financial statements as a whole, and in individual entity which were lower than Group materiality and forming our opinion thereon, and we do not provide a separate ranged from £1.8m to £2.2m (2015: £1.8m to £2.1m). opinion on these matters. At the parent entity level we also tested the consolidation Our application of materiality process and carried out analytical procedures to confirm We define materiality as the magnitude of misstatement in the our conclusion that there were no significant risks of material consolidated financial statements that makes it probable that misstatement of the aggregated financial information of the the economic decisions of a reasonably knowledgeable person remaining components not subject to audit or audit of specified would be changed or influenced. We use materiality both in account balances. planning the scope of our audit work and in evaluating the The Group audit team follow a programme of planned visits results of our work. that has been designed so that the Senior Statutory Auditor We determined materiality for the Group to be £3.6m or a senior member of the Group audit team visits each of the (2015: £3.2m), which is approximately 5% (2015: 5%) of profit locations where the Group audit scope was focused at least before tax after adding back operating and net financing once every year. In addition, for each component in scope, one-off items. We use this as a base for materiality as it is a key we reviewed and challenged the key issues and audit findings, measure of underlying business performance for the Group. attended the component close meetings and reviewed formal reporting and selected work papers from the We agreed with the Audit Committee that we would report component auditors. to the Committee all audit differences in excess of £72,000 (2015: £64,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the consolidated financial statements. eOne 2016 Annual Report and Accounts | 85 eOne Annual Report and Accounts 2016 85 Independent Auditor’s Report continued to the Members of Entertainment One Ltd.

Matters on which we are required to report include our dedicated professional standards review team and by exception independent partner reviews. Corporate Governance Statement This report is made solely to the Company’s members, as a Under the Listing Rules we are also required to review the body, in accordance with Disclosure and Transparency Rule 4.1. part of the Corporate Governance Statement relating to the Our audit work has been undertaken so that we might state to Company’s compliance with certain provisions of the UK the Company’s members those matters we are required to state Corporate Governance Code. We have nothing to report to them in an auditor’s report and for no other purpose. To the arising from our review. fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Our duty to read other information in the Annual Report Company’s members as a body, for our audit work, for this Under International Standards on Auditing (UK and Ireland), report, or for the opinions we have formed. we are required to report to you if, in our opinion, information in the annual report is: Scope of the audit of the consolidated financial statements – materially inconsistent with the information in the audited consolidated financial statements; or An audit involves obtaining evidence about the amounts and disclosures in the consolidated financial statements – apparently materially incorrect based on, or materially sufficient to give reasonable assurance that the consolidated inconsistent with, our knowledge of the Group acquired financial statements are free from material misstatement, in the course of performing our audit; or whether caused by fraud or error. This includes an assessment of: – otherwise misleading. – whether the accounting policies are appropriate to the In particular, we are required to consider whether we have Group’s and the parent company’s circumstances and have identified any inconsistencies between our knowledge acquired been consistently applied and adequately disclosed; during the audit and the directors’ statement that they consider the annual report is fair, balanced and understandable and – the reasonableness of significant accounting estimates made whether the annual report appropriately discloses those matters by the directors; and that we communicated to the Audit Committee which we – the overall presentation of the consolidated financial consider should have been disclosed. We confirm that we have statements. not identified any such inconsistencies or misleading statements. In addition, we read all the financial and non-financial information Respective responsibilities of directors in the annual report to identify material inconsistencies with the and auditor audited consolidated financial statements and to identify any information that is apparently materially incorrect based on, or As explained more fully in the Statement of Directors’ materially inconsistent with, the knowledge acquired by us in Responsibilities, the directors are responsible for the preparation the course of performing the audit. If we become aware of any of the consolidated financial statements and for being satisfied apparent material misstatements or inconsistencies we consider that they give a true and fair view. Our responsibility is to audit the implications for our report. and express an opinion on the consolidated financial statements in accordance with applicable law and International Standards Deloitte LLP on Auditing (UK and Ireland). Our audit methodology and tools Chartered Accountants and Statutory Auditor aim to ensure that our quality control procedures are effective, London understood and applied. Our quality controls and systems 23 May 2016

86 | entertainmentone.com 86 entertainmentone.com Consolidated Income Statement for the year ended 31 March 2016

Year ended Year ended 31 March 2016 31 March 2015 Note £m £m Revenue 5 802.7 785.8 Cost of sales (569.6) (578.0) Gross profit 233.1 207.8 Administrative expenses (161.5) (147.8) Share of results of joint ventures 29 3.4 0.2 Operating profit 6 75.0 60.2 Finance income 10 0.4 – Finance costs 10 (27.5) (16.2) Profit before tax 47.9 44.0 Income tax charge 11 (7.7) (2.7) Profit for the year 40.2 41.3

Attributable to: Owners of the Company 36.5 41.8 Non-controlling interests 3.7 (0.5)

Operating profit analysed as: Underlying EBITDA 3, 5 129.1 107.3 Amortisation of acquired intangibles 16 (27.4) (22.2) Depreciation and amortisation of software 16, 18 (4.4) (3.7) Share-based payment charge 34 (4.1) (3.4) Tax, finance costs and depreciation related to joint ventures 29 (1.6) 0.1 One-off items 9 (16.6) (17.9) Operating profit 75.0 60.2

Earnings per share (pence) Basic1 14 9.8 12.7 Diluted1 14 9.6 12.5 Adjusted earnings per share (pence) Basic1 14 19.7 21.0 Diluted1 14 19.4 20.8 1. The 2015 earnings per share and adjusted earnings per share have been adjusted to reflect the bonus element of the rights issue completed on 20 October 2015. All activities relate to continuing operations.

Consolidated Statement of Comprehensive Income Year ended Year ended for the year ended 31 March 2016 31 March 2016 31 March 2015 £m £m Profit for the year 40.2 41.3 Items that may be reclassified subsequently to profit or loss: Exchange differences on foreign operations 25.8 (9.8) Fair value movements on cash flow hedges 2.4 5.0 Reclassification adjustments for movements on cash flow hedges (6.0) 2.1 Tax related to components of other comprehensive income 0.6 (1.6) Total comprehensive income for the year 63.0 37.0

Attributable to: Owners of the Company 59.3 37.5 Non-controlling interests 3.7 (0.5)

eOne 2016 Annual Report and Accounts | 87 eOne Annual Report and Accounts 2016 87 Consolidated Balance Sheet At 31 March 2016

31 March 2016 31 March 2015 Note £m £m ASSETS Non-current assets Goodwill 15 353.9 209.8 Other intangible assets 16 320.5 87.6 Interests in joint ventures 29 3.2 91.0 Investment in productions 17 133.8 85.5 Property, plant and equipment 18 12.0 6.1 Trade and other receivables 21 48.1 45.8 Deferred tax assets 12 19.2 12.6 Total non-current assets 890.7 538.4 Current assets Inventories 19 51.1 52.0 Investment in acquired content rights 20 241.3 221.1 Trade and other receivables 21 341.1 279.6 Cash and cash equivalents 22 108.3 71.3 Current tax assets 1.6 0.6 Financial instruments 31 8.6 9.7 Total current assets 752.0 634.3 Total assets 1,642.7 1,172.7

Liabilities Non-current liabilities Interest-bearing loans and borrowings 23 275.5 248.7 Production financing 24 33.6 47.2 Other payables 25 51.1 16.5 Provisions 26 0.3 0.3 Deferred tax liabilities 12 53.1 6.9 Total non-current liabilities 413.6 319.6 Current liabilities Interest-bearing loans and borrowings 23 – 19.9 Production financing 24 98.0 69.7 Trade and other payables 25 439.1 372.1 Provisions 26 3.7 2.8 Current tax liabilities 24.8 19.8 Financial instruments 31 3.1 4.0 Total current liabilities 568.7 488.3 Total liabilities 982.3 807.9 Net assets 660.4 364.8

EQUITY Stated capital 33 500.0 305.5 Own shares 33 (3.6) (3.6) Other reserves 33 10.7 13.7 Currency translation reserve 11.8 (14.0) Retained earnings 100.3 63.0 Equity attributable to owners of the Company 619.2 364.6 Non-controlling interests 41.2 0.2 Total equity 660.4 364.8 Total liabilities and equity 1,642.7 1,172.7

These consolidated financial statements were approved by the Board of Directors on 23 May 2016. Giles Willits Director

88 | entertainmentone.com 88 entertainmentone.com Consolidated Statement of Changes in Equity for the year ended 31 March 2016

Other reserves Equity Cash flow Currency attributable to Non- Stated Own hedge Restructuring translation Retained the owners of controlling capital shares reserve reserve reserve earnings the Company interests Total equity £m £m £m £m £m £m £m £m £m At 1 April 2014 286.0 (3.6) (1.1) 9.3 (4.2) 21.0 307.4 0.7 308.1 Profit/(loss) for the year – – – – – 41.8 41.8 (0.5) 41.3 Other comprehensive income/(loss) – – 5.5 – (9.8) – (4.3) – (4.3) Total comprehensive income/(loss) for the year – – 5.5 – (9.8) 41.8 37.5 (0.5) 37.0

Issue of common shares – on exercise of share options1 0.1 – – – – – 0.1 – 0.1 Issue of common shares – on acquisitions1 19.4 – – – – – 19.4 – 19.4 Credits in respect of share- based payments – – – – – 3.0 3.0 – 3.0 Deferred tax movement arising on share options – – – – – 0.1 0.1 – 0.1 Dividends paid – – – – – (2.9) (2.9) – (2.9) At 31 March 2015 305.5 (3.6) 4.4 9.3 (14.0) 63.0 364.6 0.2 364.8

Profit for the year – – – – – 36.5 36.5 3.7 40.2 Other comprehensive (loss)/income – – (3.0) – 25.8 – 22.8 – 22.8 Total comprehensive (loss)/income for the year – – (3.0) – 25.8 36.5 59.3 3.7 63.0

Issue of common shares net of transaction costs1 194.5 – – – – – 194.5 – 194.5 Credits in respect of share- based payments – – – – – 4.0 4.0 – 4.0 Deferred tax movement – – – – – – – – – arising on share options Acquisition of subsidiaries – – – – – – – 38.1 38.1 Dividends paid – – – – – (3.2) (3.2) (0.8) (4.0) At 31 March 2016 500.0 (3.6) 1.4 9.3 11.8 100.3 619.2 41.2 660.4 1. See Note 33 for further details.

eOne 2015 Annual Report | 89 eOne Annual Report and Accounts 2016 89 Consolidated Cash Flow Statement for the year ended 31 March 2016

Year ended Year ended 31 March 2016 31 March 2015 Note £m £m Operating activities Operating profit 75.0 60.2 Adjustments for: Depreciation of property, plant and equipment 18 2.1 1.5 Amortisation of software 16 2.3 2.2 Amortisation of acquired intangibles 16 27.4 22.2 Amortisation of investment in productions 17 110.6 82.1 Amortisation of investment in acquired content rights 20 147.0 165.3 Impairment of investment in acquired content rights 20 3.4 5.4 Foreign exchange movements (4.0) 1.9 Share of results of joint ventures 29 (3.4) (0.2) Share-based payment charge 34 4.1 3.4 Operating cash flows before changes in working capital and provisions 364.5 344.0 Decrease/(increase) in inventories 19 1.5 (2.0) Increase in trade and other receivables 21 (33.2) (41.0) Decrease in trade and other payables 25 (27.5) (16.5) Increase/(decrease) in provisions 26 0.2 (12.6) Cash generated from operations 305.5 271.9 Income tax paid (17.7) (10.8) Net cash from operating activities 287.8 261.1 Investing activities Acquisition of subsidiaries and joint ventures, net of cash acquired 27, 29 (155.3) (95.6) Purchase of investment in acquired content rights 20 (121.4) (166.3) Purchase of investment in productions, net of grants received 17 (97.1) (114.5) Purchase of acquired intangibles 16 (17.9) (1.8) Purchase of property, plant and equipment 18 (7.5) (1.3) Dividends received from interests in joint ventures 29 0.2 0.3 Purchase of software 16 (1.3) (2.0) Net cash used in investing activities (400.3) (381.2) Financing activities Net proceeds on issue of shares 33 194.5 – Dividends paid to shareholders and to non-controlling interests of subsidiaries 13, 30 (4.0) (2.9) Drawdown of interest-bearing loans and borrowings 23 361.9 273.3 Repayment of interest-bearing loans and borrowings 23 (344.5) (151.4) Net (repayment)/drawdown of production financing 24 (39.0) 54.8 Interest paid (10.3) (13.4) Fees paid in relation to the Group’s senior bank facility 23 (9.9) (3.5) Other financing costs (0.2) – Net cash from financing activities 148.5 156.9 Net increase in cash and cash equivalents 36.0 36.8 Cash and cash equivalents at beginning of the year 22 71.3 35.5 Effect of foreign exchange rate changes on cash held 1.0 (1.0) Cash and cash equivalents at end of the year 22 108.3 71.3

90 | entertainmentone.com 90 entertainmentone.com Notes to the Consolidated Financial Statements for the year ended 31 March 2016

1. Nature of operations and general information Entertainment One is a leading independent entertainment group focused on the acquisition, production and distribution of television, family, film and music content rights across all media throughout the world. Entertainment One Ltd. (the Company) is the Group’s ultimate parent company and is incorporated and domiciled in Canada. The registered office of the Company is 134 Peter Street, Suite 700, Toronto, Ontario, Canada, M5V 2H2. Entertainment One Ltd. presents its consolidated financial statements in pounds sterling. These consolidated financial statements were approved for issue by the directors on 23 May 2016. 2. New, amended, revised and improved Standards New Standards and amendments, revisions and improvements to Standards adopted during the year During the year ended 31 March 2016, the following were adopted by the Group:

New, amended, revised and improved Standards Effective date Annual improvements 2010-2012 Cycle Amendments to IFRS 2 Share-based Payment 1 February 2015 Amendments to IFRS 3 Business Combinations 1 February 2015 Amendments to IFRS 8 Operating Segments 1 February 2015 Amendments to IFRS 13 Fair Value Measurement 1 February 2015 Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets 1 February 2015 Amendments to IAS 24 Related Party Disclosures 1 February 2015 Annual improvements 2011-2013 Cycle Amendments to IFRS 1 First-time adoption of international financial reporting standards 1 February 2015 Amendments to IFRS 3 Business Combinations 1 February 2015 Amendments to IFRS 13 Fair Value Measurement 1 February 2015 Amendments to IAS 40 Investment Property 1 February 2015 Amendments to IAS 19 Defined Benefit Plans: Employee Contributions 1 February 2015

The adoption of these new, amended and revised Standards had no material impact on the Group’s financial position, performance or its disclosures. New, amended and revised Standards issued but not adopted during the year At the date of authorisation of these consolidated financial statements, the following Standards, which have not been applied in these consolidated financial statements, are in issue but not yet effective for periods beginning 1 April 2015: New, amended and revised Standards Effective date Annual improvements 2012-2014 Cycle Amendments to IFRS 1 First-time adoption of international financial reporting standards 1 January 2016 Amendments to IFRS 3 Business Combinations 1 January 2016 Amendments to IFRS 13 Fair Value Measurement 1 January 2016 Amendments to IAS 40 Investment Property 1 January 2016 Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations 1 January 2016 Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation 1 January 2016 Amendments to IAS 27 Equity Method in Separate Financial Statements 1 January 2016 Amendments to IAS 1 Disclosure Initiatives 1 January 2016 Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses 1 January 2017* Amendments to IAS 7 Disclosure Initiative 1 January 2017* IFRS 9 Financial Instruments 1 January 2018* IFRS 15 Revenue from Contracts with Customers 1 January 2018* IFRS 16 Leases 1 January 2019* * These pronouncements have been implemented by the International Accounting Standards Board (IASB) effective from the dates noted, but have not yet been endorsed for use in the European Union (EU). The Group is currently assessing the new, amended and revised standards and currently plans to adopt the new standards on the required effective dates as prescribed by the EU.

eOne 2016 Annual Report and Accounts | 91 eOne Annual Report and Accounts 2016 91 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

3. Significant accounting policies Use of additional performance measures The Group presents underlying EBITDA, one-off items, adjusted profit before tax and adjusted earnings per share information. These measures are used by the directors for internal performance analysis and incentive compensation arrangements for employees. The terms “underlying”, “one-off items” and “adjusted” may not be comparable with similarly titled measures reported by other companies. The term “underlying EBITDA” refers to operating profit or loss excluding amortisation of acquired intangibles; depreciation; amortisation of software; share-based payment charge; tax, finance costs and depreciation related to joint ventures; and operating one-off items. The terms “adjusted profit before tax” and “adjusted earnings per share” refer to the reported measures excluding amortisation of acquired intangibles; share-based payment charge; tax, finance costs and depreciation related to joint ventures; operating one-off items; finance one-off items; and, in the case of adjusted earnings per share, one-off tax items. Refer to Note 14. Basis of preparation i. Preparation of the consolidated financial statements on the going concern basis The Group’s activities, together with the factors likely to affect its future development, are set out in the Business and Financial reviews on pages 15 to 36. In addition to its senior secured notes (due 2022) the Group meets its day-to-day working capital requirements and funds its investment in content through its cash in hand and through a revolving credit facility which matures in December 2020 and is secured on certain assets held by the Group. Under the terms of this facility the Group is able to draw down in the local currencies of its operating businesses. The amounts drawn down by currency at 31 March 2016 are shown in Note 23. The facility is subject to a series of covenants including interest cover charge, gross debt against underlying EBITDA and capital expenditure. The Group has a track record of cash generation and is in full compliance with its bank facility and bond covenant requirements. At 31 March 2016, the Group had £94.7m of cash and cash equivalents not held repayable only to production financing (refer to Note 22), £180.8m of net debt and £106.1m of undrawn down amounts under the revolving credit facility (refer to Note 23). The Group is exposed to uncertainties arising from the economic climate and uncertainties in the markets in which it operates. Market conditions could lead to lower than anticipated demand for the Group’s products and services and exchange rate volatility could also impact reported performance. The directors have considered the impact of these and other uncertainties and factored them into their financial forecasts and assessment of covenant headroom. The Group’s forecasts and projections, taking account of reasonable possible changes in trading performance (and available mitigating actions), show that the Group will be able to operate within the expected limits of the facility and provide headroom against the covenants for the foreseeable future. For these reasons the directors continue to adopt the going concern basis of accounting in preparing the consolidated financial statements. ii. Statement of compliance These consolidated financial statements have been prepared under the historical cost convention (except for derivative financial instruments and share-based payment charges that have been measured at fair value) and in accordance with applicable International Financial Reporting Standards as adopted by the EU and IFRIC interpretations (IFRS). The Group’s consolidated financial statements comply with Article 4 of the EU IAS Regulation. Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries (the Group). Control of the Group’s subsidiaries is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of the subsidiaries are generally prepared for the same reporting periods as the parent company, using consistent accounting policies. Subsidiaries are fully consolidated from the date of acquisition and continue to be consolidated until the date of disposal. All intra-group balances, transactions, income and expenses, and unrealised profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.

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Business combinations Business combinations are accounted for using the acquisition method. The cost of a business combination is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the acquirer measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. The cost of a business combination is measured as the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition- related costs are recognised in the consolidated income statement as incurred. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, are recognised either in the consolidated income statement or as a change to other comprehensive income. Goodwill arising on a business combination is recognised as an asset and initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests over the fair value of net identifiable assets acquired (including other intangible assets) and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary or business acquired, any negative goodwill is recognised immediately in the consolidated income statement. Revenue recognition Revenue represents the amounts receivable for goods and services provided in the normal course of business, net of discounts and excluding value added tax (or equivalent). Revenue is derived from the licensing, marketing, distribution and trading of feature films, television, video programming and music rights. Revenue is also derived from television and film production and family licensing and merchandising sales. The following summarises the Group’s main revenue recognition policies: – revenue from the exploitation of television, film and music rights is recognised based upon the completion of contractual obligations relevant to each agreement; – revenue is recognised where there is reasonable contractual certainty that the revenue is receivable and will be received; – revenue from television licensing represents the contracted value of licence fees which is recognised when the licence term has commenced, the production is available for delivery, substantially all technical requirements have been met and collection of the fee is reasonably assured; – revenue from the sale of own or co-produced film or television productions is recognised when the production is available for delivery and there is reasonable contractual certainty that the revenue is receivable and will be received; – revenue from the sale of home entertainment and audio inventory is recognised at the point at which goods are despatched. A provision is made for returns based on historical trends; – revenue from licensing and merchandising sales represents the contracted value of licence fees which is recognised when the licence terms have commenced and collection of the fee is reasonably assured; and – revenue from digital sales is recognised on transmission or during the period of transmission of the sponsored programme or digital channel. Pension costs Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Any contributions unpaid at the year end reporting date are included as a liability within the consolidated balance sheet. Operating leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. Rentals payable under operating leases are charged to the consolidated income statement on a straight-line basis over the lease term. Interest costs Borrowing costs, including finance costs, are recognised in the consolidated income statement in the period in which they are incurred. Borrowing costs are accounted for using the effective interest rate method. Production financing interest directly attributable to the acquisition or production of a qualifying asset (such as investment in productions) form part of the cost of that asset and are capitalised.

eOne 2016 Annual Report and Accounts | 93 eOne Annual Report and Accounts 2016 93 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

3. Significant accounting policies continued Foreign currencies i. Within individual companies The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed in pounds sterling, which is the functional currency of the Company and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. Foreign exchange differences arising on the settlement of such transactions and from translating monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in the consolidated income statement. ii. Retranslation within the consolidated financial statements For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the exchange rate ruling at the date of each transaction during the period. Foreign exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised as income or expenses in the period in which the operation is disposed of. One-off items One-off items are items of income and expenditure that are non-recurring and, in the judgement of the directors, should be disclosed separately on the basis that they are material, either by their nature or their size, in order to provide a better understanding of the Group’s underlying financial performance and enable comparison of underlying financial performance between years. The one-off items recorded in the consolidated income statement include items such as significant restructuring, the costs incurred in entering into business combinations, and the impact of the sale, disposal or impairment of an investment in a business or an asset. Tax i. Income tax The income tax charge/credit represents the sum of the current income tax payable and deferred tax. The current income tax payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s asset or liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. ii. Deferred tax assets and liabilities Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition of other assets and liabilities in a transaction (other than in a business combination) that affects neither the tax profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. In the UK and the US, the Group is entitled to a tax deduction for amounts treated as compensation on exercise of certain employee share options or vesting of share awards under each jurisdiction’s tax rules. A share-based payment charge is recorded in the consolidated income statement over the vesting period of the relevant options and awards. As there is a temporary difference between the accounting and tax bases, a deferred tax asset is recorded. The deferred tax asset arising is calculated by comparing the estimated amount of tax deduction to be obtained in the future (based on the Company’s share price at the balance sheet date) with the cumulative amount of the share-based payment charge recorded in the consolidated income statement. If the amount of estimated future tax deduction exceeds the cumulative amount of the compensation expense at the statutory rate, the excess is recorded directly in equity, against retained earnings. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

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Deferred tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities. This applies when they relate to income taxes levied by the same tax authority and the Group intends to settle its current tax assets and liabilities on a net basis. Goodwill Goodwill arising on a business combination is recognised as an asset and initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests over the fair value of net identifiable assets acquired (including other intangible assets) and liabilities assumed. Transaction costs directly attributable to the acquisition form part of the acquisition cost for business combinations prior to 1 January 2010, but from that date such costs are written-off to the consolidated income statement and do not form part of goodwill. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units (CGUs) which are tested for impairment annually or more frequently if there are indications that goodwill might be impaired. The CGUs identified are the smallest identifiable group of assets that generate cash flows that are largely independent of the cash flows from other groups of assets. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Other intangible assets Other intangible assets acquired by the Group are stated at cost less accumulated amortisation. Amortisation is charged to administrative expenses in the consolidated income statement on a straight-line basis over the estimated useful life of intangible assets unless such lives are indefinite. Other intangible assets mainly comprise amounts arising on consolidation of acquired subsidiaries such as exclusive content agreements and libraries, trade names and brands, exclusive distribution agreements, customer relationships and non-compete agreements. Other intangible assets also include amounts relating to costs of software. Other intangible assets are generally amortised over the following periods: Exclusive content agreements and libraries 3-14 years Trade names and brands 1-15 years Exclusive distribution agreements 9 years Customer relationships 9-10 years Non-compete agreements 2-5 years Software 3 years

Interests in joint arrangements An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of the arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The Group’s interests in its associates and joint ventures are accounted for using the equity method. The investment is initially recognised at cost and is subsequently adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. The share of results of its associates and joint ventures are shown within single line items in the consolidated balance sheet and consolidated income statement, respectively. The financial statements of the Group’s associates and joint ventures are generally prepared for the same reporting period as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group. Investment in productions Investment in productions that are in development and for which the realisation of expenditure can be reasonably determined are classified and capitalised in accordance with IAS 38 Intangible Assets as productions in progress within investment in productions. On delivery of a production, the cost of investment is reclassified as productions delivered. Also included within investment in productions are programmes acquired on acquisition of subsidiaries. Amortisation of investment in productions, net of government grants, is charged to cost of sales unless it arises from revaluation on acquisition of subsidiaries in which case it is charged to administrative expenses. The maximum useful life is generally considered to be 10 years.

eOne 2016 Annual Report and Accounts | 95 eOne Annual Report and Accounts 2016 95 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

3. Significant accounting policies continued Government grants A government grant is recognised and credited as part of investment in productions when there is reasonable assurance that any conditions attached to the grant will be satisfied and the grants will be received and the programme has been delivered. Government grants are recognised at fair value. Property, plant and equipment Property, plant and equipment are stated at original cost less accumulated depreciation. Depreciation is charged to write-off cost less estimated residual value of each asset over their estimated useful lives using the following methods and rates: Leasehold improvements Over the term of the lease Fixtures, fittings and equipment 20%-30% reducing balance

The carrying amounts of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Group reviews residual values and useful lives on an annual basis and any adjustments are made prospectively. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (determined as the difference between the sales proceeds and the carrying amount of the asset) is recorded in the consolidated income statement in the period of derecognition. Impairment of non-financial assets The carrying amounts of the Group’s non-financial assets are tested annually for impairment (as required by IFRS, in the case of goodwill) or when circumstances indicate that the carrying amounts may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. The recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell and its value-in-use and is determined for an individual asset, unless the asset does not generate cash flows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered to be impaired and is written down to its recoverable amount. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators. Inventories Inventories are stated at the lower of cost, including direct expenditure and other appropriate attributable costs incurred in bringing inventories to their present location and condition, and net realisable value. The cost of inventories is calculated using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Investment in acquired content rights In the ordinary course of business the Group contracts with film and television programme producers to acquire content rights for exploitation. Certain of these agreements require the Group to pay minimum guaranteed advances (MGs). MGs are recognised in the consolidated balance sheet when a liability arises, usually on delivery of the film or television programme to the Group. Investments in acquired content rights are recorded in the consolidated balance sheet if such amounts are considered recoverable against future revenues. These costs are amortised to cost of sales on a revenue forecast basis over a period not exceeding 10 years from the date of initial release. Acquired libraries are amortised over a period not exceeding 20 years. Amounts capitalised are reviewed at least quarterly and any portion of the unamortised amount that appears not to be recoverable from future net revenues is written-off to cost of sales during the period the loss becomes evident. Balances are included within current assets if they are expected to be realised within the normal operating cycle of the Television, Family and Film businesses. The normal operating cycle of these businesses can be greater than 12 months. In general 65%-75% of film and television programme content is amortised within 12 months of theatrical release/delivery.

96 | entertainmentone.com 96 entertainmentone.com

Trade and other receivables Trade receivables are generally not interest-bearing and are stated at their fair value as reduced by appropriate allowances for estimated irrecoverable amounts. Cash and cash equivalents Cash and cash equivalents in the consolidated balance sheet comprise cash at bank and in hand. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the consolidated balance sheet. Interest-bearing loans and borrowings All interest-bearing loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. Gains and losses are recognised in the consolidated income statement when the liabilities are derecognised, as well as through the amortisation process. Production financing Production financing relates to short-term financing for the Group’s television, family and film productions. Production financing interest directly attributable to the acquisition or production of a qualifying asset forms part of the cost of that asset and is capitalised. Deferred finance charges All costs incurred by the Group that are directly attributable to the issue of debt are initially capitalised and deducted from the amount of gross borrowings. Such costs are then amortised through the consolidated income statement over the term of the instrument using the effective interest rate method. Should there be a material change to the terms of the underlying instrument, any remaining unamortised deferred finance charges are immediately written-off to the consolidated income statement as a one-off finance item. Any new costs incurred as a result of the change to the terms of the underlying instrument are capitalised and then amortised over the term of the new instrument, again using the effective interest rate method. Trade and other payables Trade payables are generally not interest-bearing and are stated at their nominal value. The potential cash payments related to put options issued by the Group over the non-controlling interest of subsidiary companies are accounted for as financial liabilities. The amount that may become payable under the option on exercise is initially recognised on acquisition at present value within other payables with a corresponding charge directly to equity. The charge to equity is recognised within non-controlling interests. Such options are subsequently measured at amortised cost, using the effective interest rate method, in order to accrete the liability up to the amount payable under the option at the date at which it first becomes exercisable; the charge arising is recorded as a financing cost. In the event that the option expires unexercised, the liability is derecognised with a corresponding adjustment to equity. Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, where the obligation can be estimated reliably, and where it is probable that an outflow of economic benefits will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material. Where discounting is used, the increase in the provision due to unwinding the discount is recognised as a finance expense.

eOne 2016 Annual Report and Accounts | 97 eOne Annual Report and Accounts 2016 97 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

3. Significant accounting policies continued Derivative financial instruments and hedging Derivative financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. The Group may use derivative financial instruments to reduce its exposure to foreign exchange and interest rate movements. The Group does not hold or issue derivative financial instruments for financial trading purposes. Derivative financial instruments are classified as held-for-trading and recognised in the consolidated balance sheet at fair value. Derivatives designated as hedging instruments are classified on inception as cash flow hedges, net investment hedges or fair value hedges. Changes in the fair value of derivatives designated as cash flow hedges are recognised in equity to the extent that they are deemed effective. Ineffective portions are immediately recognised in the consolidated income statement. When the hedged item affects profit or loss then the amounts deferred in equity are recycled to the consolidated income statement. Fair value hedges record the change in the fair value in the consolidated income statement, along with the changes in the fair value of the hedged asset or liability. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are immediately recognised in the consolidated income statement. Dividends Distributions to equity holders are not recognised in the consolidated income statement, but are disclosed as a component of the movement in total equity. A liability is recorded for a dividend when the dividend is declared by the Company’s directors. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Own shares The Entertainment One Ltd. shares held by the Trustees of the Company’s Employee Benefit Trust (EBT) are classified in total equity as own shares and are recognised at cost. Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and the original cost being taken to reserves. No gain or loss is recognised on the purchase, sale, issue or cancellation of equity shares. Share-based payments The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. Fair value is measured by means of a binomial valuation model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effect of non-transferability, exercise restrictions and behavioural considerations. Segmental reporting The Group’s operating segments are identified on the basis of internal reports that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. The Chief Executive Officer has been identified as the chief operating decision maker. The Group has three reportable segments: Television, Family and Film, based on the types of products and services from which each segment derives its revenues. The Television segment includes revenues from all of the Group’s activities in relation to the production, acquisition and exploitation of television and music content. The Family segment includes revenues from all of the Group’s activities in relation to the production, acquisition and exploitation, including licensing and merchandising, of family content. The Film segment includes revenues from all of the Group’s activities in relation to the production, acquisition and exploitation of film content.

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4. Significant accounting judgements and key sources of estimation uncertainty The preparation of consolidated financial statements under IFRS requires the Group to make estimates and assumptions that affect the amounts reported for assets and liabilities at the balance sheet date and amounts reported for revenues and expenses during the year. The nature of estimation means that actual outcomes could differ from those estimates. Estimates and judgements are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects that period only, or in the period of the revision and future periods, if the revision affects both current and future periods. The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are discussed below. Impairment of goodwill The Group determines whether goodwill is impaired on at least an annual basis. This requires an estimation of the value-in-use of the CGUs to which the goodwill is allocated. Estimating a value-in-use amount requires the directors to make an estimate of the expected future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the present value of those cash flows. Further details of goodwill are contained in Note 15. Acquired intangibles The Group recognises intangible assets acquired as part of a business combination at fair value at the date of acquisition. The determination of these fair values is based upon the directors’ judgement and includes assumptions on the timing and amount of future incremental cash flows generated by the assets and selection of an appropriate cost of capital. Furthermore, the directors must estimate the expected useful lives of intangible assets and charge amortisation on these assets accordingly. Further details of acquired intangibles are contained in Note 16. Investment in productions and investment in acquired content rights The Group capitalises investment in productions and investment in acquired content rights and then amortises these balances on a revenue forecast basis, recording the amortisation charge in cost of sales. Amounts capitalised are reviewed at least quarterly and any amounts that appear to be irrecoverable from future net revenues are written-off to cost of sales during the period the loss becomes evident. The estimate of future net revenues is determined based on the pattern of historical revenue streams and the remaining life of each contract. Further details of investment in productions and investment in acquired content rights are contained in Notes 17 and 20, respectively. Provisions for onerous film and television contracts The Group recognises a provision for an onerous film and television contract when the unavoidable costs of meeting the obligations under the contract exceed the expected benefits to be received under it. The estimate of the amount of the provision requires management to make judgements and assumptions on future cash inflows and outflows and also an assessment of the least cost of exiting the contract. To the extent that events, revenues or costs differ in the future, the carrying amount of provisions may change. Further details of onerous film and television contracts are contained in Note 26. Share-based payments The charge for share-based payments is determined based on the fair value of awards at the date of grant by use of the binomial model which requires judgements to be made regarding expected volatility, dividend yield, risk free rates of return and expected option lives. The list of inputs used in the binomial model to calculate the fair values is provided in Note 34. Deferred tax Deferred tax assets and liabilities require the directors’ judgement in determining the amounts to be recognised. In particular, judgement is used when assessing the extent to which deferred tax assets should be recognised with consideration to the timing and level of future taxable income. Further details of deferred tax are contained in Note 12. Income tax The actual tax on the result for the year is determined according to complex tax laws and regulations. Where the effect of these laws and regulations is unclear, estimates are used in determining the liability for tax to be paid on past profits which are recognised in the consolidated financial statements. The Group considers the estimates, assumptions and judgements to be reasonable but this can involve complex issues which may take a number of years to resolve. The final determination of prior year tax liabilities could be different from the estimates reflected in the consolidated financial statements. Further details relating to tax are contained in Note 11. Fair value measurement of financial instruments When the fair values of financial assets and financial liabilities recorded in the consolidated balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including discounted cash flow models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs including liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. See Note 32 for further disclosures.

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4. Significant accounting judgements and key sources of estimation uncertainty continued Contingent consideration Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as part of the business combination. When the contingent consideration meets the definition of a financial liability, it is subsequently re-measured to fair value at each reporting date. The determination of the fair value is based on discounted cash flows. The key assumptions take into consideration the probability of meeting each performance target and the discount factor. 5. Segmental analysis Operating segments For internal reporting and management purposes, the Group is organised into three main reportable segments based on the types of products and services from which each segment derives its revenue –Television, Family and Film. These Divisions are the basis on which the Group reports its operating segment information. As a result of the acquisition of Astley Baker Davies Limited during the year, the Group took the decision to report its Family business as a separate segment. The types of products and services from which each reportable segment derives its revenues are as follows: – Television – the production, acquisition and exploitation of television and music content rights across all media. – Family – the production, acquisition and exploitation, including licensing and merchandising, of family content rights across all media. – Film – the production, acquisition and exploitation of film content rights across all media. Inter-segment sales are charged at prevailing market prices. Segment information for the year ended 31 March 2016 is presented below: Television Family Film Eliminations Consolidated Note £m £m £m £m £m Segment revenues External sales 201.3 61.4 540.0 – 802.7 Inter-segment sales 43.4 5.2 13.4 (62.0) – Total segment revenues 244.7 66.6 553.4 (62.0) 802.7 Segment results Segment underlying EBITDA 39.2 43.3 52.8 – 135.3 Group costs (6.2) Underlying EBITDA 129.1 Amortisation of acquired intangibles 16 (27.4) Depreciation and amortisation of software 16, 18 (4.4) Share-based payment charge 34 (4.1) Tax, finance costs and depreciation related to joint ventures 29 (1.6) One-off items 9 (16.6) Operating profit 75.0 Finance income 10 0.4 Finance costs 10 (27.5) Profit before tax 47.9 Income tax charge 11 (7.7) Profit for the year 40.2

Segment assets Total segment assets 511.6 256.6 864.7 – 1,632.9 Unallocated corporate assets 9.8 Total assets 1,642.7

Other segment information Amortisation of acquired intangibles 16 (7.7) (5.7) (14.0) – (27.4) Depreciation and amortisation of software 16, 18 (0.5) (0.1) (3.8) – (4.4) Tax, finance costs and depreciation related to joint ventures 29 (1.5) – (0.1) – (1.6) One-off items 9 (3.2) (1.4) (12.0) – (16.6)

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Segment information for the year ended 31 March 2015 is presented below: Television Family Film Eliminations Consolidated Note £m £m £m £m £m Segment revenues External sales 146.2 56.5 583.1 – 785.8 Inter-segment sales1 40.3 4.3 9.5 (54.1) – Total segment revenues 186.5 60.8 592.6 (54.1) 785.8 Segment results Segment underlying EBITDA 17.8 23.8 73.1 – 114.7 Group costs (7.4) Underlying EBITDA 107.3 Amortisation of acquired intangibles 16 (22.2) Depreciation and amortisation of software 16, 18 (3.7) Share-based payment charge 34 (3.4) Tax, finance costs and depreciation related to joint ventures 29 0.1 One-off items 9 (17.9) Operating profit 60.2 Finance costs 10 (16.2) Profit before tax 44.0 Income tax charge 11 (2.7) Profit for the year 41.3

Segment assets Total segment assets 403.3 31.1 728.6 – 1,163.0 Unallocated corporate assets 9.7 Total assets 1,172.7

Other segment information Amortisation of acquired intangibles 16 (3.3) (1.0) (17.9) – (22.2) Depreciation and amortisation of software 16, 18 (0.3) – (3.4) – (3.7) Tax, finance costs and depreciation related 29 0.1 – – – 0.1 to joint ventures One-off items 9 (4.0) (0.7) (13.2) – (17.9) 1. In the current year third party music label sales made by the Film Distribution business on behalf of the Music business are recognised in Music revenue. Consequently, the prior year Music revenue (and inter-segment eliminations) previously reported has been restated to reflect this change. The impact of the change for the year ended 31 March 2015 was an increase in Music (and inter-segment eliminations) by £19.7m. There is no impact on total Group revenues. Geographical information The Group’s operations are located in Canada, the UK, the US, Australia, the Benelux and Spain. Television Division operations are located in Canada, the US, the UK and Australia. Family Division operations are located in Canada and the UK. Film Division operations are located in Canada, the UK, the US, Australia, the Benelux and Spain. The following table provides an analysis of the Group’s revenue based on the location of the customer and the carrying amount of segment non-current assets by the geographical area in which the assets are located for the years ended 31 March 2016 and 2015.

External Non-current External Non-current revenues assets1 revenues assets1 2016 2016 2015 2015 £m £m £m £m Canada 191.4 252.9 259.6 267.3 UK 167.8 286.1 199.7 74.2 US 235.0 290.3 150.9 54.0 Rest of Europe 125.5 29.5 107.2 29.5 Other 83.0 9.5 68.4 9.8 Total 802.7 868.3 785.8 434.8 1. Non-current assets by location exclude amounts relating to interests in joint ventures and deferred tax assets.

eOne 2016 Annual Report and Accounts | 101 eOne Annual Report and Accounts 2016 101 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

6. Operating profit Operating profit for the year is stated after charging/(crediting):

Year ended Year ended 31 March 2016 31 March 2015 Note £m £m Amortisation of investment in productions 17 110.6 82.1 Amortisation of investment in acquired content rights 20 147.0 165.3 Amortisation of acquired intangibles 16 27.4 22.2 Amortisation of software 16 2.3 2.2 Depreciation of property, plant and equipment 18 2.1 1.5 Impairment of investment in acquired content rights 20 3.4 5.4 Staff costs 8 86.5 79.4 Net foreign exchange losses/(gains) 2.8 (0.1) Operating lease rentals 35 9.7 6.9

The total remuneration during the year of the Group’s auditor was as follows:

Year ended Year ended 31 March 2016 31 March 2015 £m £m Audit fees – Fees payable for the audit of the Group’s annual accounts 0.4 0.3 – Fees payable for the audit of the Group’s subsidiaries 0.3 0.3 Other services – Services relating to corporate finance transactions 0.5 0.4 – Tax compliance services – 0.1 Total 1.2 1.1

7. Key management compensation and directors’ emoluments Key management compensation The directors are of the opinion that the key management of the Group in the years ended 31 March 2016 and 2015 comprised the two executive directors. These persons had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly. The aggregate amounts of key management compensation are set out below: Year ended Year ended 31 March 2016 31 March 2015 £m £m Short-term employee benefits1 1.5 1.9 Share-based payment benefits 0.7 0.5 Total 2.2 2.4 1. Short-term employee benefits comprise salary, taxable benefits, annual bonus and pensions and include employer social security contributions of £0.1m (2015: £0.1m). Directors’ emoluments Full details of directors’ emoluments can be found in the Remuneration Report on pages 63 to 78.

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8. Staff costs The average number of employees, including directors, are presented below: Year ended Year ended 31 March 2016 31 March 2015 Number Number Average number of employees Canada 920 975 US 269 254 UK 205 177 Australia 46 41 Rest of World 89 88 Total 1,529 1,535

The table below sets out the Group’s staff costs (including directors’ remuneration):

Year ended Year ended 31 March 2016 31 March 2015 £m £m Wages and salaries 74.9 68.8 Share-based payment charge 4.1 3.4 Social security costs 5.9 5.6 Pension costs 1.6 1.6 Total 86.5 79.4

Included within total staff costs of £86.5m (2015: £79.4m) is £7.0m (2015: £4.7m) of redundancy costs, as described in further detail in Note 9. 9. One-off items One-off items are items of income and expenditure that are non-recurring and, in the judgement of the directors, should be disclosed separately on the basis that they are material, either by their nature or their size, to provide a better understanding of the Group’s underlying financial performance and enable comparison of underlying financial performance between years. Items of income or expense that are considered by management for designation as one-off are as follows: Year ended Year ended 31 March 2016 31 March 2015 £m £m Restructuring costs Strategy-related restructuring costs 12.4 11.3 Alliance-related restructuring costs – 3.1 Total restructuring costs 12.4 14.4

Other items Acquisition costs 4.2 3.5 Total other items 4.2 3.5

Total one-off costs 16.6 17.9

Strategy-related restructuring costs During the year ended 31 March 2016 the Group continued to develop and progress its growth strategy, which was refreshed in November 2014. The one-off costs incurred in the year included costs associated with reorganising the physical distribution business by partnering with Fox and Sony in our territories to optimise our scale/profitability. Costs incurred in implementing this change in approach included the closure of facilities in North America and costs of moving physical stock from those facilities of £2.1m, staff redundancies of £7.0m and a write-off of the carrying value of investment in acquired content rights and other assets of £2.9m throughout the Group’s Home Entertainment business, specifically relating to the closure of the Group’s UK-based international home video business, and other costs of £0.4m. During the year ended 31 March 2015 the Group refreshed its growth strategy. The first stage was the development and implementation of the refocused strategic plan. Costs incurred included £0.5m of strategic review consultancy fees and £2.4m of staff redundancies in order to establish the new leadership team responsible for delivering the long-term growth plan. The second stage of delivering the new strategy was to ensure the correct positioning of the business across our territories. Restructuring following the acquisition of was completed and, as a result, the Group reassessed the carrying value of investment in acquired content rights in the legacy US film business and an impairment charge of £5.4m was recorded. The Group incurred other US film-related restructuring costs of £3.0m, including £1.0m of staff redundancy costs.

eOne 2016 Annual Report and Accounts | 103 eOne Annual Report and Accounts 2016 103 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

9. One-off items continued Prior year Alliance-related restructuring costs In the year ended 31 March 2015, the Group incurred £3.1m of restructuring costs relating to the Alliance acquisition, which was completed in January 2013. A charge of £1.3m was recorded for staff redundancy costs associated with the Group’s synergy- realisation programme. A charge of £0.4m was recorded in respect of unused office space as a result of the integration of the operations in Canada. Other restructuring costs of £1.4m were incurred during the prior year, including costs associated with IT systems integration. Acquisition costs Acquisition costs of £7.0m were incurred during the year ended 31 March 2016 relating to the Group’s acquisition and investment activities, relating to The Mark Gordon Company (fully consolidated from 19 May 2015), Astley Baker Davies Limited (22 October 2015), Dualtone Music Group (11 January 2016), Last Gang Entertainment (7 March 2016) and Renegade 83 (24 March 2016) as well as the investment in Sierra Pictures (22 December 2015). A credit of £2.8m related to the release of excess accruals in relation to the Alliance transaction was recognised during the year ended 31 March 2016. Acquisition costs of £1.8m were incurred during the year ended 31 March 2015 related to the Group’s acquisitions of Phase 4 Films (3 June 2014), Paperny Entertainment (31 July 2014) and Force Four Entertainment (28 August 2014) and the strategic investment in Secret Location (completed 28 May 2014), as well as £1.7m of costs on consideration of a number of potential acquisitions which did not ultimately complete. 10. Finance income and finance costs Finance income and finance costs comprise: Year ended Year ended 31 March 2016 31 March 2015 Note £m £m Finance income Other finance income 0.4 – Total finance income 0.4 –

Finance costs Interest cost (16.4) (10.5) Amortisation of deferred finance charges 23 (2.2) (1.9) Other accrued interest charges (1.1) (0.7) Write-off of deferred finance charges 23 (5.3) – Fees payable on amendment to bank facility 23 – (0.7) Loss on fair value of derivative financial instruments (0.5) – Net foreign exchange losses (2.0) (2.4) Total finance costs (27.5) (16.2) Net finance costs (27.1) (16.2) Comprised of: Adjusted net finance costs (20.6) (14.8) One-off net finance costs 14 (6.5) (1.4)

One-off net finance costs of £6.5m (2015: £1.4m) comprise a charge of £5.3m in respect of deferred finance charges written-off on the re-financing of the Group’s bank facility during the year (2015: £0.7m facility amendment fees), a £0.5m fair value loss on derivative financial instruments broken on the refinancing, £1.1m (2015: £0.7m) of non-cash accrued interest charges on certain liabilities and £0.4m of interest receivable of certain tax refunds.

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11. Tax Analysis of charge in the year Year ended Year ended 31 March 2016 31 March 20151 Note £m £m Current tax (charge)/credit: – in respect of current year (21.9) (13.7) – in respect of prior years 2.0 1.2 Total current tax charge (19.9) (12.5)

Deferred tax credit: – in respect of current year 9.3 8.7 – in respect of prior years 2.9 1.1 Total deferred tax credit 12.2 9.8

Income tax charge (7.7) (2.7) Of which: Adjusted tax charge on adjusted profit before tax 14 (22.4) (20.0) One-off net tax credit 14 14.7 17.3 1. The allocation between the current and deferred tax (charge)/credit in respect of the prior year have been restated to reflect a presentational change that does not impact the income tax charge. The one-off tax credit comprises tax credits of £2.5m (2015: £1.3m) in relation to the one-off items described in Note 9, tax credits of £5.0m (2015: £3.9m) on amortisation of acquired intangibles described in Note 16, a tax credit of £0.6m (2015: £0.1m) on one-off net finance items as described in Note 10, a tax credit of £nil (2015: tax credit of £0.2m) on share-based payments as described in Note 34, a tax credit of £4.9m (2015: £2.3m) relating to prior year current tax and deferred tax adjustments, and a tax credit of £1.7m (2015: £9.5m) on other non-recurring tax items. The charge for the year can be reconciled to the profit in the consolidated income statement as follows: Year ended Year ended 31 March 2016 31 March 2015 £m % £m % Profit before tax (including joint ventures) 47.9 44.0 Deduct share of results of joint ventures (3.4) (0.2) Profit before tax (excluding joint ventures) 44.5 43.8 Taxes at applicable domestic rates (9.7) (21.8) (8.3) (19.0) Effect of income that is exempt from tax 3.1 7.0 1.6 3.7 Effect of expenses that are not deductible in determining taxable profit (5.2) (11.7) (1.5) (3.4) Effect of deferred tax recognition of losses/temporary differences 3.3 7.4 7.9 18.0 Effect of losses/temporary differences not recognised in deferred tax (4.3) (9.7) (4.5) (10.3) Effect of non-controlling interests 0.2 0.5 –– Effect of tax rate changes – – (0.2) (0.5) Prior year items 4.9 11.0 2.3 5.3 Income tax charge and effective tax rate for the year (7.7) (17.3) (2.7) (6.2)

Income tax is calculated at the rates prevailing in the respective jurisdictions. The standard tax rates in each jurisdiction are 26.5% in Canada (2015: 26.5%), 36.0%-40.8% in the US (2015: 36.0%), 20.0% in the UK (2015: 21.0%), 25.0% in the Netherlands (2015: 25.0%), 30.0% in Australia (2015: 30.0%) and 27.3% in Spain (2015: 29.5%). Analysis of tax on items taken directly to equity Year ended Year ended 31 March 2016 31 March 2015 Note £m £m Deferred tax credit/(charge) on cash flow hedges 0.6 (1.7) Deferred tax credit on share options – 0.1 Total credit/(charge) taken directly to equity 12 0.6 (1.6)

eOne 2016 Annual Report and Accounts | 105 eOne Annual Report and Accounts 2016 105 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

12. Deferred tax assets and liabilities The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the year:

Accelerated Other tax intangible Unused Financing depreciation assets tax losses items Other Total Note £m £m £m £m £m £m At 1 April 2014 – (14.9) 14.9 0.3 1.8 2.1 Acquisition of subsidiaries 27 – (4.6) – – – (4.6) Credit/(charge) to income 0.1 1.3 7.4 (0.2) 1.2 9.8 Charge to equity 11 – – – (1.5) (0.1) (1.6) Exchange differences – 0.3 (0.3) 0.1 (0.1) – At 31 March 2015 0.1 (17.9) 22.0 (1.3) 2.8 5.7 Acquisition of subsidiaries 27 – (50.9) – – – (50.9) (Charge)/credit to income (0.1) 7.9 4.4 0.2 (0.2) 12.2 Credit to equity 11 – – – 0.6 – 0.6 Exchange differences – (1.9) 0.7 – (0.3) (1.5) At 31 March 2016 – (62.8) 27.1 (0.5) 2.3 (33.9)

The category “Other” includes temporary differences on share options, accrued liabilities, certain asset valuation provisions, foreign exchange, investment in productions and investment in acquired content rights. The deferred tax balances have been reflected in the consolidated balance sheet as follows:

31 March 2016 31 March 2015 £m £m Deferred tax assets 19.2 12.6 Deferred tax liabilities (53.1) (6.9) Total (33.9) 5.7

Utilisation of deferred tax assets is dependent on the future profitability of the Group. The Group has recognised net deferred tax assets relating to tax losses and other short-term temporary differences carried forward as the Group considers that, on the basis of the most recent forecasts, there will be sufficient taxable profits in the future against which these items will be offset. At the balance sheet date, due to the unpredictability of future profit streams, the Group has unrecognised deferred tax assets of £40.3m (2015: £38.6m) relating to tax losses and other temporary differences available for offset against future profits. Included in unrecognised deferred tax assets are £17.0m (2015: £17.9m) relating to losses that will expire in the years ending 2026 to 2035, and £1.0m expiring before 2026 (2015: £1.0m). The Group also has unrecognised deferred tax assets of £7.7m (2015: £nil) in connection with the put and call options that were granted over the remaining 35% in Renegade 83 and of the remaining 49% in Sierra Pictures (see Note 27 for further details). At the balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognised was £11.6m (2015: £6.0m). The amount of temporary differences arising in connection with interests in joint ventures was £nil (2015: £0.5m). Further reductions in the corporate income tax rate in the UK were enacted during the year ended 31 March 2016, reducing the rate from the current rate of 20% (applicable from 1 April 2015) to 19% from 1 April 2017, and to 18% from 1 April 2020. These rates are reflected in the deferred tax calculations as appropriate. 13. Dividends On 23 May 2016 the directors declared a final dividend in respect of the financial year ended 31 March 2016 of 1.2 pence (2015: 1.1 pence) per share which will absorb an estimated £5.1m of total equity (2015: £3.2m). It will be paid on or around 9 September 2016 to shareholders who are on the register of members on 8 July 2016 (the record date). This dividend is expected to qualify as an eligible dividend for Canadian tax purposes. The dividend will be paid net of withholding tax based on the residency of the individual shareholder.

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14. Earnings per share On 20 October 2015, the Group completed a fully underwritten 4 for 9 renounceable rights issue of 131,476,173 new common shares at 153.0 pence per new common share. The denominators within the prior year calculation of both basic and diluted earnings per share have been adjusted to reflect the bonus factor of 14% for this rights issue to ensure an appropriate comparison. (Restated) Year ended Year ended 31 March 2016 31 March 2015 Pence Pence Basic earnings per share 9.8 12.7 Diluted earnings per share 9.6 12.5 Adjusted basic earnings per share 19.7 21.0 Adjusted diluted earnings per share 19.4 20.8

Basic earnings per share is calculated by dividing earnings for the year attributable to the owners of the Company by the weighted average number of shares in issue during the year, excluding own shares held by the Employee Benefit Trust (EBT) which are treated as cancelled. Adjusted basic earnings per share is calculated by dividing adjusted earnings for the year attributable to the owners of the Company by the weighted average number of shares in issue during the year, excluding own shares held by the EBT which are treated as cancelled. Adjusted earnings are the profit for the year attributable to the owners of the Company adjusted to exclude one-off operating and finance items, share-based payment charge, ‘tax, finance costs and depreciation’ related to joint ventures and amortisation of acquired intangibles (net of any related tax effects). Fully diluted earnings per share and adjusted fully diluted earnings per share are calculated after adjusting the weighted average number of shares in issue during the year to assume conversion of all potentially dilutive shares. There have been no transactions involving common shares or potential common shares between the reporting date and the date of authorisation of these consolidated financial statements. The weighted average number of shares used in the earnings per share calculations are set out below: (Restated) Year ended Year ended 31 March 31 March 2016 2015 Note Million Million Weighted average number of shares for basic earnings per share and adjusted basic earnings per share 373.5 330.1 Effect of dilution: Employee share awards 4.1 3.2 Contingent consideration with option to settle in cash or shares1 27 2.2 – Weighted average number of shares for diluted earnings per share and adjusted diluted earnings per share 379.8 333.3 1. The Group holds an option to settle the contingent consideration payable in relation to the acquisitions of Renegade 83 and Last Gang Entertainment in shares or in cash. Refer to Note 27 for details. As noted above, shares held by the EBT, classified as own shares, are excluded from earnings per share and adjusted earnings per share.

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14. Earnings per share continued Adjusted earnings per share The directors believe that the presentation of adjusted earnings per share, being the fully diluted earnings per share adjusted for one-off operating and finance items, share-based payment charge, one-off ‘tax, finance costs and depreciation’ related to joint ventures and amortisation of acquired intangibles (net of any related tax effects), helps to explain the underlying performance of the Group. A reconciliation of the earnings used in the fully diluted earnings per share calculation to earnings used in the adjusted earnings per share calculation is set out below: (Restated) Year ended Year ended 31 March 2016 31 March 2015 Pence per Pence per Note £m share £m share Profit for the year attributable to the owners of the Company 36.5 9.6 41.8 12.5 Add back one-off items 9 16.6 4.4 17.9 5.4 Add back amortisation of acquired intangibles 16 27.4 7.2 22.2 6.7 Add back share-based payment charge 34 4.1 1.1 3.4 1.0 Add back one-off net finance costs 10 6.5 1.7 1.4 0.4 Deduct one-off tax, finance costs and depreciation related to 29 (0.5) (0.1) (0.1) – joint ventures Deduct net tax effect of above and other one-off tax items 11 (14.7) (3.9) (17.3) (5.2) Deduct non-controlling interests’ share of above items (2.4) (0.6) – – Adjusted earnings attributable to the owners of the Company 73.5 19.4 69.3 20.8

Profit before tax (IFRS measure) of £47.9m (2015: £44.0m) is reconciled to adjusted profit before tax and adjusted earnings as follows: Year ended Year ended 31 March 2016 31 March 2015 Note £m £m Profit before tax (IFRS measure) 47.9 44.0 Add back one-off items 9 16.6 17.9 Add back amortisation of acquired intangibles 16 27.4 22.2 Add back share-based payment charge 34 4.1 3.4 Add back/(deduct) tax, finance costs and depreciation related to joint ventures 29 1.6 (0.1) Add back one-off net finance costs 10 6.5 1.4 Adjusted profit before tax 104.1 88.8 Adjusted tax charge 11 (22.4) (20.0) Adjusted tax charge relating to joint ventures (2.1) – (Deduct)/add back (profit)/loss attributable to non-controlling interests (3.7) 0.5 Deduct non-controlling interests’ share of adjusting items above (2.4) – Adjusted earnings attributable to the owners of the Company 73.5 69.3

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15. Goodwill Note £m Cost and carrying amount At 1 April 2014 191.9 Acquisition of subsidiaries 27 21.7 Exchange differences (3.8) At 31 March 2015 209.8 Acquisition of subsidiaries 27 137.8 Exchange differences 6.3 At 31 March 2016 353.9

Goodwill arising on a business combination is allocated to the cash generating units (CGUs) that are expected to benefit from that business combination. As explained below, the Group’s CGUs are Television, The Mark Gordon Company (MGC), Family and Film. Impairment testing for goodwill The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. An impairment loss is recognised if the carrying value of a CGU exceeds its recoverable amount. The recoverable amount of a CGU is determined from value-in-use calculations based on the net present value of discounted cash flows. In assessing value-in-use, the estimated future cash flows are derived from the most recent financial budgets and plans and an assumed growth rate. A terminal value is calculated by discounting using an appropriate weighted discount rate. Any impairment losses are recognised in the consolidated income statement as an expense. As a result of the acquisition of Astley Baker Davies Limited and MGC (see Note 27), the Group has created two additional CGUs during the year ended 31 March 2016. The Group has four CGUs being the smallest identifiable group of assets that generate cash flows that are largely independent of the cash flows from other groups of assets. The directors consider the CGUs to be Television, MGC, Family and Film. Key assumptions used in value-in-use calculations Key assumptions used in the value-in-use calculations for each CGU are set out below: 31 March 2016 31 March 2015 Pre-tax Terminal Period of Pre-tax Terminal Period of discount rate growth rate specific cash discount rate growth rate specific cash CGU % % flows % % flows Television 10.0 3.0 3 years 10.6 3.0 5 years The Mark Gordon Company 11.7 3.0 3 years N/a N/a N/a Family 9.5 3.0 3 years N/a N/a N/a Film 8.8 2.8 3 years 8.7 2.8 5 years

The calculations of the value-in-use for all CGUs are most sensitive to the operating profit, discount rate and growth rate assumptions.

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15. Goodwill continued Operating profits – Operating profits are based on budgeted/planned growth in revenue resulting from new investment in acquired content rights, investment in productions and growth in the relevant markets. Discount rates –The post-tax discount rate is based on the Group weighted average cost of capital of 8.2% (2015: 8.3%). The discount rate is adjusted where specific country and operational risks are sufficiently significant to have a material impact on the outcome of the impairment test. A pre-tax discount rate is applied to calculate the net present value of the CGUs as shown in the table above. Terminal growth rate estimates – growth rates for Television, MGC, Family and Film of 3.0%, 3.0%, 3.0% and 2.8%, respectively (2015: Television 3.0%, Film 2.8%), are used beyond the end of year three and do not exceed the long-term projected growth rates for the relevant market. Period of specific cash flows – Specific cash flows reflect the period of detailed forecasts prepared as part of the Group’s annual planning cycle. The period of specific cash flows has been aligned with the Group’s annual strategic planning process, which underpins the conclusions made within the viability statement. Further details of the Group’s viability statement can be found on pages 40 to 41. The carrying value of goodwill, translated at year end exchange rates, is allocated as follows: 31 March 2016 31 March 2015 CGU £m £m Television 41.8 30.1 The Mark Gordon Company 67.3 N/a Family 57.3 N/a Film 187.5 179.7 Total 353.9 209.8

Sensitivity to change in assumptions Television – The Television calculations show that there is significant headroom when compared to carrying values at 31 March 2016 and 31 March 2015. A 43% (3.5 percentage point) increase in the post-tax discount rate would reduce the recoverable amount to the carrying amount. Consequently, the directors believe that no reasonable change in the above key assumptions would cause the carrying value of this CGU to exceed its recoverable amount. The Mark Gordon Company – The MGC calculations show that there is significant headroom when compared to carrying values at 31 March 2016. An 86% (7.1 percentage point) increase in the post-tax discount rate would reduce the recoverable amount to the carrying amount. Consequently, the directors believe that no reasonable change in the above key assumptions would cause the carrying value of this CGU to exceed its recoverable amount. Family – The Family calculations show that there is significant headroom when compared to carrying values at 31 March 2016. A 134% (11.0 percentage point) increase in the post-tax discount rate would reduce the recoverable amount to the carrying amount. Consequently, the directors believe that no reasonable change in the above key assumptions would cause the carrying value of this CGU to exceed its recoverable amount. Film – The Film calculations show that there is significant headroom when compared to carrying values at 31 March 2016 and 31 March 2015. A 28% (2.3 percentage point) increase in the post-tax discount rate would reduce the recoverable amount to the carrying amount. Consequently, the directors believe that no reasonable change in the above key assumptions would cause the carrying value of this CGU to exceed its recoverable amount.

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16. Other intangible assets Acquired intangibles Exclusive content Trade Exclusive Non- agreements names distribution Customer compete and libraries and brands agreements relationships agreements Software Total Note £m £m £m £m £m £m £m Cost At 1 April 2014 103.4 31.4 23.7 34.8 13.6 7.8 214.7 Acquisition of subsidiaries 27 – 5.5 – 11.2 – 0.1 16.8 Additions – – – – 3.1 2.0 5.1 Exchange differences (1.1) (0.4) 1.1 (1.3) – (0.3) (2.0) At 31 March 2015 102.3 36.5 24.8 44.7 16.7 9.6 234.6 Acquisition of subsidiaries 27 76.9 161.8 – – – – 238.7 Additions 16.8 – – – – 1.5 18.3 Disposals – – – – – (0.1) (0.1) Exchange differences 7.1 0.7 0.4 0.4 0.2 0.1 8.9 At 31 March 2016 203.1 199.0 25.2 45.1 16.9 11.1 500.4 Amortisation At 1 April 2014 (39.5) (26.3) (22.4) (20.4) (10.8) (3.8) (123.2) Amortisation charge for the year 6 (11.6) (2.3) (0.3) (4.6) (3.4) (2.2) (24.4) Exchange differences 0.5 0.5 (1.1) 0.6 – 0.1 0.6 At 31 March 2015 (50.6) (28.1) (23.8) (24.4) (14.2) (5.9) (147.0) Amortisation charge for the year 6 (14.7) (6.1) (0.3) (4.6) (1.7) (2.3) (29.7) Disposals – – – – – 0.1 0.1 Exchange differences (1.5) (0.6) (0.4) (0.4) (0.2) (0.2) (3.3) At 31 March 2016 (66.8) (34.8) (24.5) (29.4) (16.1) (8.3) (179.9) Carrying amount At 31 March 2015 51.7 8.4 1.0 20.3 2.5 3.7 87.6 At 31 March 2016 136.3 164.2 0.7 15.7 0.8 2.8 320.5

The amortisation charge for the year ended 31 March 2016 comprises £27.4m (2015: £22.2m) in respect of acquired intangibles. 17. Investment in productions 2016 2015 Note £m £m Cost Balance at 1 April 386.1 282.3 Acquisition of subsidiaries 27 59.4 5.8 Additions 99.1 103.1 Exchange differences 4.8 (5.1) Balance at 31 March 549.4 386.1 Amortisation Balance at 1 April (300.6) (223.8) Amortisation charge for the year 6 (110.6) (82.1) Exchange differences (4.4) 5.3 Balance at 31 March (415.6) (300.6) Carrying amount 133.8 85.5

Borrowing costs of £4.1m (2015: £2.5m) related to Television and Film production financing have been included in the additions during the year. Included within the carrying amount as at 31 March 2016 is £75.5m (2015: £47.5m) of productions in progress, which includes additions from the acquisition of subsidiaries of £57.7m (2015: £3.8m).

eOne 2016 Annual Report and Accounts | 111 eOne Annual Report and Accounts 2016 111 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

18. Property, plant and equipment Fixtures, Leasehold fittings and improvements equipment Total Note £m £m £m Cost At 1 April 2014 3.9 10.8 14.7 Acquisition of subsidiaries 27 0.2 0.7 0.9 Additions 0.5 0.8 1.3 Disposals – (0.2) (0.2) Exchange differences – 0.3 0.3 At 31 March 2015 4.6 12.4 17.0 Acquisition of subsidiaries 27 – 0.2 0.2 Additions 6.4 1.1 7.5 Disposals – (0.1) (0.1) Exchange differences 0.4 0.2 0.6 At 31 March 2016 11.4 13.8 25.2 Depreciation At 1 April 2014 (1.2) (8.0) (9.2) Depreciation charge for the year 6 (0.5) (1.0) (1.5) Disposals – 0.2 0.2 Exchange differences – (0.4) (0.4) At 31 March 2015 (1.7) (9.2) (10.9) Depreciation charge for the year 6 (0.9) (1.2) (2.1) Disposals – 0.1 0.1 Exchange differences (0.1) (0.2) (0.3) At 31 March 2016 (2.7) (10.5) (13.2) Carrying amount At 31 March 2015 2.9 3.2 6.1 At 31 March 2016 8.7 3.3 12.0 19. Inventories Inventories at 31 March 2016 comprise finished goods of £51.1m (2015: £52.0m). 20. Investment in acquired content rights 2016 2015 Note £m £m Balance at 1 April 221.1 230.1 Acquisition of subsidiaries 27 0.1 3.5 Additions 164.2 165.2 Amortisation charge for the year 6 (147.0) (165.3) Impairment charge for the year 6 (3.4) (5.4) Exchange differences 6.3 (7.0) Balance at 31 March 241.3 221.1

The impairment charge recognised during the year ended 31 March 2016 of £3.4m was in respect of a write-off of the carrying value of investment in acquired content rights on the closure of the Group’s Home Entertainment business, specifically relating to the closure of the Group’s UK-based international home video business. The impairment charge recognised during the prior year of £5.4m was in respect to the investment in acquired content rights previously made by the Group, as a result of a refocused US Film strategy following the acquisition of Phase 4 Films (see Note 9 for further details).

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21. Trade and other receivables 31 March 2016 31 March 2015 Current Note £m £m Trade receivables 167.5 129.1 Less: provision for doubtful debts (2.3) (2.6) Net trade receivables 32 165.2 126.5 Prepayments and accrued income 85.5 71.5 Amounts owed from joint ventures 0.7 – Other receivables 89.7 81.6 Total 341.1 279.6

Non-current Trade receivables 10.9 24.7 Prepayments and accrued income 35.7 20.2 Other receivables 1.5 0.9 Total 48.1 45.8

Trade receivables are generally non-interest bearing. The average credit period taken on sales, excluding the effect of acquisitions, is 70 days (2015: 63 days). Provisions for doubtful debts are based on estimated irrecoverable amounts, determined by reference to past default experience and an assessment of the current economic environment. Included within current other receivables at 31 March 2016 is £65.3m (2015: £57.9m) of government assistance (in the form of Canadian and US tax credits). During the year £34.4m (2015: £29.4m) in government assistance was received. As at 31 March 2016 and 2015 trade receivables are aged as follows:

31 March 2016 31 March 2015 £m £m Neither impaired nor past due 141.5 109.5 Less than 60 days 10.7 11.8 Between 60 and 90 days 3.9 2.0 More than 90 days 9.1 3.2 Total 165.2 126.5

Trade receivables that are past due and not impaired do not have a significant impact on the credit quality of the counterparty. All these amounts are still considered recoverable. The Group does not hold any collateral over these balances. The movements in the provision for doubtful debts in years ended 31 March 2016 and 2015 were as follows:

2016 2015 £m £m Balance at 1 April (2.6) (3.8) Provision recognised in the year (1.0) (1.4) Provision reversed in the year 0.7 0.3 Utilisation of provision 0.7 2.1 Exchange differences (0.1) 0.2 Balance at 31 March (2.3) (2.6)

In determining the recoverability of a trade receivable the Group considers any change to the credit quality of the trade receivable from the date credit was initially granted up to the reporting date.

eOne 2016 Annual Report and Accounts | 113 eOne Annual Report and Accounts 2016 113 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

21. Trade and other receivables continued Management has credit policies in place and the exposure to credit risk is monitored by individual operating divisions on an ongoing basis. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. Refer to Note 32 for further details. The table below sets out the ageing of the Group’s impaired receivables: 31 March 2016 31 March 2015 £m £m Less than 60 days (0.3) (0.1) Between 60 and 90 days – – More than 90 days (2.0) (2.5) Total (2.3) (2.6)

Trade and other receivables are held in the following currencies at 31 March 2016 and 2015. Amounts held in currencies other than pounds sterling have been converted at their respective exchange rates ruling at the balance sheet date.

Pounds Canadian US sterling Euros dollars dollars Other Total £m £m £m £m £m £m Current 54.2 35.9 122.1 115.4 13.5 341.1 Non-current 9.3 4.2 7.0 27.2 0.4 48.1 At 31 March 2016 63.5 40.1 129.1 142.6 13.9 389.2 Current 32.8 25.8 115.9 93.9 11.2 279.6 Non-current 4.2 3.2 15.6 22.8 – 45.8 At 31 March 2015 37.0 29.0 131.5 116.7 11.2 325.4

The directors consider that the carrying amount of trade and other receivables approximates to their fair value. 22. Cash and cash equivalents Cash and cash equivalents are held in the following currencies at 31 March 2016 and 2015. Amounts held in currencies other than pounds sterling have been converted at their respective exchange rates ruling at the balance sheet date.

31 March 2016 31 March 2015 Note £m £m Cash and cash equivalents: Pounds sterling 42.8 14.5 Euros 2.7 8.1 Canadian dollars 34.4 14.5 US dollars 25.8 31.7 Australian dollars 2.5 2.3 Other 0.1 0.2 Cash and cash equivalents per the consolidated balance sheet 32 108.3 71.3

Held repayable only for production financing 13.6 27.6 Other 94.7 43.7 Cash and cash equivalents 108.3 71.3

Cash and cash equivalents comprise only cash in hand and demand deposits. Included within cash and cash equivalents is £13.6m which can only be used for repayment of certain production financing. The Group had no cash equivalents at either 31 March 2016 or 2015. The credit risk with respect to cash and cash equivalents is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.

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23. Interest-bearing loans and borrowings 31 March 2016 31 March 2015 £m £m Bank borrowings – 275.8 Senior secured notes 285.0 – Deferred finance charges (9.5) (7.2) Total 275.5 268.6 Shown in the consolidated balance sheet as: Non-current 275.5 248.7 Current – 19.9

The carrying amounts of the Group’s gross borrowings at 31 March 2016 and 2015 are denominated in the following currencies. Amounts held in currencies other than pounds sterling have been converted at their respective exchange rates ruling at the balance sheet date. Pounds Canadian US sterling Euros dollars dollars Total £m £m £m £m £m Senior secured notes 285.0 – – – 285.0 At 31 March 2016 285.0 – – – 285.0 Bank borrowings 148.9 5.4 68.2 46.1 268.6 At 31 March 2015 148.9 5.4 68.2 46.1 268.6

The weighted average interest rates on all bank borrowings are not materially different from their nominal interest rates. The weighted average interest rate on all interest-bearing loans and borrowings is 5.6% (2015: 4.5%). The directors consider that the carrying amount of interest-bearing loans and borrowings approximates to their fair value. Bank borrowings Terms of borrowings at 31 March 2016 On 14 December 2015, the Group issued £285m in aggregate principal amount of 6.875% senior secured notes (Notes), due 2022, and entered into a new super senior revolving credit facility (RCF) which matures in December 2020. Any amounts still outstanding at such date must be repaid in full provided that some or all of the lenders under the RCF may elect to extend their commitments subject to terms and conditions to be agreed among the relevant parties. The net proceeds from the offering have primarily been used to repay the Company’s previous credit facilities in full, and pay fees and expenses related to the Notes and the RCF. The combination of this new non-amortising, fixed-rate debt financing and revolving credit facility provides the Company with a long-term capital structure appropriate for its strategic ambitions. In addition, the re-financing permits greater flexibility by relieving constraints and costs the Company historically incurred when undertaking acquisitions and other corporate activity, and allows the Company to react swiftly to commercial opportunities, whilst also removing other restrictions typical of bank loan-based financing structures. At 31 March 2016, the Group had available £106.1m of undrawn committed bank borrowings under the RCF. During the year the Group paid £9.9m in respect of fees incurred for the issuance of the Group’s Notes and re-financing of the debt facility. The fees were capitalised to the consolidated balance sheet and will be amortised on a straight line to the date of expiry. The Notes and RCF are subject to a number of financial covenants including interest cover charge, gross debt against underlying EBITDA and capital expenditure. The Notes (2015: three term loans) are subject to mandatory repayments as follows: £m Within one year – Between one year and five years – Greater than five years 285.0 Total 285.0

eOne 2016 Annual Report and Accounts | 115 eOne Annual Report and Accounts 2016 115 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

23. Interest-bearing loans and borrowings continued Terms of borrowings at 31 March 2015 As at 31 March 2015 bank borrowings included a senior debt facility with a syndicate of banks managed by JP Morgan Chase N.A. The Group had a US$504.0m multi-currency facility, which would have matured in January 2018, comprised: (i) A US$344.5m revolving credit facility (RCF) (equivalent to £232.0m at 31 March 2015) which could be funded in US dollars, Canadian dollars, pounds sterling and euros. At 31 March 2015, the Group had available US$94.6m (equivalent to £63.7m) of undrawn committed bank borrowings under the RCF. (ii) Three amortising term loans equivalent to US$159.5m, or £107.5m, comprising a Canadian dollar term loan and two pounds sterling term loans. These borrowings were secured by certain assets of the Group (excluding Television, Family and Film production assets). The facility was with a syndicate of banks managed by JP Morgan Chase N.A. During the year ended 31 March 2015, the Group paid £3.5m in respect of fees incurred for the amendments made to the Group’s senior debt facility. £2.8m related to fees payable to the lenders which were capitalised to the consolidated balance sheet and amortised on a straight line basis. £0.7m of fees incurred related to other legal and advisory costs which were expensed to the consolidated income statement in full. £5.3m of costs previously capitalised and unamortised were expensed to the consolidated income statement in December 2015 upon re-financing. The three term loans were subject to mandatory repayments as follows:

Within one year £19.9m Between one year and five years £87.6m Greater than five years – Total (£) £107.5m Total (US$) US$159.5m Canadian dollar amounts included in the above table have been converted at a GBP:CAD exchange rate of 1.8805 and US dollar amounts have been converted at a GBP:USD exchange rate of 1.4847. 24. Production financing 31 March 2016 31 March 2015 £m £m Production financing 130.6 116.9 Other loans 1.0 – Total 131.6 116.9 Shown in the consolidated balance sheet as: Non-current 33.6 47.2 Current 98.0 69.7

Production financing is used to fund the Group’s television, family and film productions. The financing is arranged on an individual production basis by special purpose production subsidiaries which are excluded from the security of the Group’s corporate facility. It is short-term financing, typically having a maturity of less than two years, whilst the production is being made and is paid back once the production is delivered and the government subsidies, tax credits, broadcaster pre-sales, international sales and/or home entertainment sales are received. The Company deems this type of financing to be working capital and therefore timing-based in nature. In connection with the production of a television programme, the Company typically records initial operating cash outflows due to its investment in the production and concurrently record initial positive cash inflow from financing activities due to the production financing it normally obtains. Interest is charged at bank prime rate plus a margin. These facilities are secured by the assets and future revenue of the individual television, family and film production subsidiaries and are non-recourse to other Group companies or assets. Interest payable on production financing loans is capitalised and forms part of the cost of investment in productions. The weighted average interest rate on all production financing is 3.7% (2015: 2.7%). The Group has Canadian dollar and US dollar production credit facilities with various banks. Amounts held in currencies other than pounds sterling have been converted at their respective exchange rates ruling at the balance sheet date. The carrying amounts of the Group’s production financing at 31 March 2016 and 2015 are denominated in the following currencies: Canadian US dollars dollars Total £m £m £m At 31 March 2016 50.9 80.7 131.6 At 31 March 2015 51.8 65.1 116.9

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25. Trade and other payables 31 March 2016 31 March 2015 Current £m £m Trade payables 117.4 86.7 Accruals and deferred income 304.7 271.9 Payable to joint ventures 0.1 – Other payables 16.9 13.5 Total 439.1 372.1

Non-current Accruals and deferred income 0.7 0.7 Other payables 50.4 15.8 Total 51.1 16.5

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. For most suppliers no interest is charged, but for overdue balances interest may be charged at various interest rates. Included within current other payables at 31 March 2016 is £3.4m of contingent consideration in respect of the Alliance acquisition which occurred during the year ended 31 March 2013 subsequently paid in April 2016 (2015: £6.1m within non-current other payables) and £9.2m of contingent consideration in respect of acquisitions made during the year ended 31 March 2016. Refer to Note 27 for further detail. Trade and other payables are held in the following currencies. Amounts held in currencies other than pounds sterling have been converted at their respective exchange rates ruling at the balance sheet date.

Pounds Canadian US sterling Euros dollars dollars Other Total £m £m £m £m £m £m Current 72.0 24.4 165.1 169.0 8.6 439.1 Non-current – – 1.8 49.1 0.2 51.1 At 31 March 2016 72.0 24.4 166.9 218.1 8.8 490.2 Current 61.8 22.8 147.0 135.5 5.0 372.1 Non-current – – 16.4 – 0.1 16.5 At 31 March 2015 61.8 22.8 163.4 135.5 5.1 388.6

The directors consider that the carrying amount of trade and other payables approximates to their fair value. 26. Provisions Restructuring Onerous and contracts redundancy Total £m £m £m At 31 March 2015 2.7 0.4 3.1 Acquisitions of subsidiaries – 0.7 0.7 Provisions recognised in the year 2.3 3.3 5.6 Utilisation of provisions (3.4) (2.1) (5.5) Exchange differences (0.1) 0.2 0.1 At 31 March 2016 1.5 2.5 4.0 Shown in the consolidated balance sheet as: Non-current 0.3 – 0.3 Current 1.2 2.5 3.7

Onerous contracts Onerous contracts principally represent provisions in respect of loss-making film titles and vacant leasehold properties. Provisions for onerous contracts are recognised when the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it and the general recognition criteria of IAS 37 Provisions, Contingent Liabilities and Contingent Assets are met.

Loss-making film titles These provisions represent future cash flows relating to film titles which are forecast to make a loss over their remaining lifetime at the balance sheet date. As required by IFRS, before a provision for an onerous film title is recognised, the Group first fully writes-down any related assets (generally these are investment in acquired content rights balances). These provisions are expected to be utilised within three years (2015: three years) from the balance sheet date.

eOne 2016 Annual Report and Accounts | 117 eOne Annual Report and Accounts 2016 117 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

26. Provisions continued Restructuring and redundancy Restructuring and redundancy provisions represent future cash flows related to the cost of redundancy plans, outplacement, supplementary unemployment benefits and senior staff benefits. Such provisions are only recognised when restructuring or redundancy programmes are formally adopted and announced publicly and the general recognition criteria of IAS 37 Provisions, Contingent Liabilities and Contingent Assets are met. These provisions are expected to be utilised within one year (2015: one year) from the balance sheet date. 27. Business combinations Year ended 31 March 2016 The following table summarises the fair values, as at the acquisition date, of the assets acquired, the liabilities assumed and the total consideration transferred as part of the acquisitions made during the year ended 31 March 2016. Information provided below is calculated based on current information available.

The Mark Astley Dualtone Gordon Baker Sierra Music Last Gang Renegade Company Davies Pictures Group Entertainment 83 Total £m £m £m £m £m £m £m Property, plant and equipment 0.1 – – – – 0.1 0.2 Inventories – – – 0.1 – – 0.1 Investment in productions 0.2 – 44.9 – – 14.3 59.4 Investment in acquired content rights – – – 0.1 – – 0.1 Trade and other receivables1 9.0 1.9 16.2 0.7 0.1 0.8 28.7 Cash and cash equivalents 7.7 – 4.2 0.6 0.2 1.9 14.6 Interest-bearing loans and borrowings – – (0.1) – – – (0.1) Production financing – – (52.7) – – – (52.7) Trade and other payables (1.5) (1.6) (12.6) (1.5) (0.3) (16.3) (33.8) Current tax liabilities (3.0) (0.1) – – – – (3.1) Provisions – – (0.7) – – – (0.7) Acquired intangibles 47.5 161.8 8.4 3.6 1.8 15.6 238.7 Deferred tax liabilities (19.4) (29.6) – (1.4) (0.5) – (50.9) Total net assets acquired 40.6 132.4 7.6 2.2 1.3 16.4 200.5

Group’s proportionate interest of fair value of 51% 70% 51% 100% 100% 65% net assets acquired Group’s share of fair value of net assets acquired 20.7 92.7 3.9 2.2 1.3 10.7 131.5 Goodwill 69.2 47.8 5.5 1.9 0.8 12.6 137.8 Net assets acquired 89.9 140.5 9.4 4.1 2.1 23.3 269.3 Satisfied by: Cash 83.0 140.2 9.2 3.5 1.1 15.9 252.9 Shares in Entertainment One Ltd. 3.3 – – – – – 3.3 Contingent consideration – 0.3 0.2 0.6 1.0 7.4 9.5 Share of results of joint ventures from 7 January 3.62 ––– – – 3.6 2015 to 18 May 2015 Total consideration transferred 89.9 140.5 9.4 4.1 2.1 23.3 269.3

The net cash outflow arising in the year from the acquisitions was made up of: Cash consideration settled during the year – 140.5 9.2 3.5 1.1 15.9 170.2 Less: Cash and cash equivalents acquired (7.7) – (4.2) (0.6) (0.2) (1.9) (14.6) Total net cash (inflow)/outflow (7.7) 140.5 5.0 2.9 0.9 14.0 155.63

Non-controlling interests proportionate interest 19.9 39.7 3.7 – – 5.7 69.0 of fair value of net assets Put liability recognised through equity – – (11.1) – – (19.8) (30.9) Total non-controlling interests 19.9 39.7 (7.4) – – (14.1) 38.1 1. The trade and other receivables shown are considered to be their fair value. No amounts recorded are expected to be uncollectable. 2. The directors do not consider there to be a material difference in the fair value of the previously held equity interest at the date of change of control on 19 May 2015 and the fair value of the equity interest as at the date of the initial acquisition of the 51% stake in MGC on 7 January 2015 plus the Group’s share of the profits during the interim period. 3. The acquisition of subsidiaries and joint ventures, net of cash acquired of £155.3m included within the consolidated cash flow statement includes £0.3m received in April 2015 relating to final working capital adjustments for Paperny Entertainment acquired during the prior year.

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Deluxe Pictures (The Mark Gordon Company) On 7 January 2015, the Group acquired a 51% stake in Deluxe Pictures (doing business as The Mark Gordon Company) (MGC). MGC is an LA-based independent studio that develops and produces premium television and film content for the major US networks and international distribution, including the production of studio films. Mark Gordon, who founded MGC in 1987, is an award-winning film and television producer with an outstanding track record of hits. As part of the original acquisition in January 2015, Mark Gordon entered into a new long-term employment agreement with MGC. From 7 January 2015 to 18 May 2015 the Group’s interest in MGC was accounted for using the equity method in the consolidated financial statements. As such £1.0m of acquisition-related costs were capitalised against the carrying value of the investment. On 19 May 2015, the Group entered into an amendment to the shareholders agreement in respect of its shareholding in MGC. Under the amendment, the Company now has control over certain key board and shareholder decisions of MGC, whereas previously all such decisions were made on a joint control basis between the Company and The Mark Gordon Irrevocable Trust (the holder of the remaining 49% interest). As a result of this amendment to the shareholders agreement, MGC has been fully consolidated into the Group’s consolidated financial statements as a subsidiary from 19 May 2015 and going forward, a change from the accounting treatment shown in the consolidated financial statements for year ended 31 March 2015. Following this change and in line with IFRS, the acquisition costs previously recognised have been written-off to the consolidated income statement during the period as a one-off charge.

Key terms The Group purchased MGC for consideration of £86.3m, comprising £83.0m in cash and £3.3m in Entertainment One Ltd. common shares all settled during the prior year, on 7 January 2015. For accounting purposes, the fair value of the common shares issued in the Company was based on 1,082,568 common shares at the fair value of those equity instruments at the date of exchange. The Group holds an option to purchase the remaining 49% stake in The Mark Gordon Company after an initial seven-year term, the value of which is to be based upon a commercially negotiated price at the time of purchase. No liability has been recorded within the consolidated financial statements of the Group, as the decision to exercise the option will be determined by the commercial viability at the time and therefore the probability of a payment being made is not known at the balance sheet date. As part of the acquisition, the Group obtained the exclusive worldwide rights to distribute the television and film outputs of MGC.

Provisional acquisition accounting Acquired intangibles of £47.5m have been identified and represent the value placed on current libraries. The resultant goodwill of £69.2m represents the value placed on the opportunity to grow the content and formats produced by the company. None of the goodwill is expected to be deductible for income tax purposes. The Group has created a new CGU for MGC, being the smallest identifiable group of assets that generates cash flows that are largely independent of the cash flows from other groups of assets. Goodwill has been allocated between the MGC and Television CGUs. The final fair values have been retrospectively adjusted from the provisional amounts disclosed in the Interim Results for the six months ended 30 September 2015 to reflect new information obtained about facts and circumstances at the acquisition date, primarily being a true-up of income accrued on the opening balance sheet for profit participations received in December 2015. MGC contributed £14.6m to the Group’s revenue and £5.4m to the Group’s profit before tax for the period from the date of the acquisition on 19 May 2015 to 31 March 2016 and £3.1m to the Group’s profit before tax for the period from 1 April 2015 to 18 May 2015 whilst accounted as a joint venture. Astley Baker Davies Limited On 22 October 2015, the Group acquired a 70% stake in Astley Baker Davies Limited (ABD), which jointly owns the rights to Peppa Pig with the Group. The Group has led the growth of revenues generated by the exploitation of Peppa Pig through its exclusive worldwide right to exploit and license others to exploit Peppa Pig in all formats. Existing revenues are generated predominantly through royalties paid by licensees across a number of categories including toys and clothing, as well as through sales of DVDs and other ancillary revenues. Net earnings from these revenues were previously shared equally between the Group and ABD. By virtue of the acquisition, the Group has increased its interest in the related share of earnings from the exploitation of Peppa Pig from 50% to 85% and as ABD has become a subsidiary of the Company following completion with its financial statements subsequently fully consolidated into the Group’s consolidated financial statements.

Key terms The Group purchased a 70% share in ABD for consideration of £140.5m, funded through the net proceeds of a fully underwritten 4 for 9 rights issue with net proceeds of £194.5m. Initial consideration of £140.2m was paid on 22 October 2015, with a further £0.3m paid in December 2015 representing final working capital adjustments.

eOne 2016 Annual Report and Accounts | 119 eOne Annual Report and Accounts 2016 119 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

27. Business combinations continued Provisional acquisition accounting Acquired intangibles of £161.8m have been identified and represent the value placed on the brand. The resulting goodwill of £47.8m represents the value placed on the opportunity to grow the content and formats produced by the company. None of the goodwill is expected to be deductible for income tax purposes. Acquisition-related costs amounted to £1.4m and have been charged to the consolidated income statement within one-off items (see Note 9 for further details). ABD’s revenues are generated from royalties generated through the exclusive worldwide distribution agreement held by the Group which was previously included as a royalty expense in the Group’s consolidated income statement and as a result of the acquisition is now eliminated upon consolidation of the Group’s consolidated income statement. As a result the acquisition of ABD contributed £nil to the Group’s revenue but generated cost savings through a reduction in royalty expenses of £8.1m. The resultant contribution to the Group’s profit before tax for the period from the date of the acquisition on 22 October 2015 to 31 March 2016 is £8.1m. The acquired ABD business has been integrated into the Family CGU. Sierra Pictures LLC On 22 December 2015, the Group acquired 51% of the share capital of Sierra Pictures LLC, a leading independent film production and international sales company which aims to consistently deliver high-quality, commercially viable feature films for a global audience. Led by Nick Meyer and Marc Schaberg, Sierra Pictures capitalises on the ever-evolving global film marketplace representing sales of third party films and commercial films designed to appeal to both the North American marketplace as well as top markets globally.

Key terms The Group purchased a 51% share in Sierra Pictures for an initial cash consideration of £9.2m, with contingent consideration payable based upon performance to 31 March 2016. A liability of £0.2m has been recorded in the consolidated balance sheet representing the consideration expected to be transferred in the future. A put and call option has been granted over the remaining 49% share in Sierra Pictures, with the options being exercisable in five years. The value of the put and call options in five years are dependent on future performance of the business. The Group considers these payments as capital in nature, and has recorded a non-current other payables amounting to £11.1m (discounted) within the consolidated balance sheet representing management’s best estimate of future cash outflow, with the debit recorded in equity against non-controlling interest.

Provisional acquisition accounting Sierra Pictures’ balance sheet included within the consolidated financial statements is based upon provisional information and management’s best estimate based upon facts and circumstances currently available. Acquired intangibles of £8.4m have been recorded resulting in goodwill of £5.5m representing the value placed on the opportunity to grow the content and formats produced by the company. All the goodwill is expected to be tax deductible for income tax purposes. The purchase price allocation exercise has not been finalised and the identification and recognition of the acquired intangibles and the resultant goodwill have been estimated based upon past experience on comparable acquisitions. Acquisition-related costs amounted to £1.0m and have been charged to the consolidated income statement within one-off items (see Note 9 for further details). Sierra Pictures contributed £20.2m to the Group’s revenue and £1.3m to the Group’s profit before tax for the period from the date of the acquisition on 22 December 2015 to 31 March 2016. The acquired Sierra Pictures business has been integrated into the Film CGU.

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Dualtone Music Group On 11 January 2016 the Group acquired 100% of the share capital of Dualtone Music Group, Inc. (Dualtone Music), a Nashville-based independent , founded in 2001 by Scott Robinson, specialising in folk, singer/songwriter, Americana and indie rock which has a catalogue of more than 290 albums, totalling more than 3,500 tracks. Dualtone Music’s artists have been nominated for sixteen Grammy Awards, with wins for June Carter Cash, Jim Lauderdale and Guy Clark. In 2012, Dualtone Music released the debut album from the Denver-based band The Lumineers – the album became a worldwide multi-format hit selling more than 2.5 million albums and 7 million singles. eOne has become the exclusive distributor in North America.

Key terms The Group purchased 100% of the share capital in Dualtone Music for consideration of £3.5m with contingent consideration payable based upon adjusted EBITDA performance to 31 December 2017. A liability of £0.6m has been recorded in the consolidated balance sheet representing the consideration expected to be transferred in the future.

Provisional acquisition accounting Acquired intangibles of £3.6m were identified, being the value placed on the company’s catalogue, resulting in goodwill of £1.9m which represents the value placed on the opportunity to grow the content produced by the company. None of the goodwill is expected to be deductible for income tax purposes. Acquisition-related costs amounted to £0.2m and have been charged to the consolidated income statement within one-off items (see Note 9 for further details). Dualtone Music contributed £1.2m to the Group’s revenue and £0.2m to the Group’s profit before tax for the period from the date of the acquisition on 11 January 2016 to 31 March 2016. The acquired Dualtone Music business has been integrated into the Television CGU. Last Gang Entertainment On 7 March 2016, the Group acquired 100% of the share capital of Last Gang Management Inc. and Last Gang Publishing Inc., collectively Last Gang Entertainment. Established in 2003, Last Gang Entertainment is an independent recording, publishing and artist management company whose record label roster includes Canadian alternative rock artists including Metric, Crystal Castles, Death From Above 1979 and MSTRKRFT among others, and management clients including Lights and . Last Gang Entertainment has sold over 2 million albums worldwide. Last Gang Entertainment head Chris Taylor was appointed to the role of President, Entertainment One Music. Mr Taylor, whose legal practice included recording artists such as Drake, Nelly Furtado and Avril Lavigne, brings more than 25 years of wide-ranging experience to eOne. In his new role, he will oversee music operations globally and will lead strategic growth initiatives across music licensing, publishing, label and distribution. Last Gang Entertainment will continue to operate as a label of eOne.

Key terms The Group purchased 100% of the share capital in Last Gang Entertainment for cash consideration of £1.1m with contingent consideration payable based upon adjusted EBITDA performance to 31 March 2018. A liability of £1.0m has been recorded in the consolidated balance sheet representing the consideration expected to be transferred in the future. The contingent consideration can be settled, at the option of the Group, in cash or shares of Entertainment One Ltd.

Provisional acquisition accounting Acquired intangibles of £1.8m were identified representing the value placed on the company’s library. The resulting goodwill of £0.8m represents the value placed on the opportunity to grow the content produced by the company. None of the goodwill is expected to be deductible for income tax purposes. Acquisition-related costs amounted to £0.2m and have been charged to the consolidated income statement within one-off items (see Note 9 for further details). Last Gang Entertainment contributed £0.1m to the Group’s revenue and less than £0.1m to the Group’s profit before tax for the period from the date of the acquisition on 7 March 2016 to 31 March 2016. The acquired Last Gang Entertainment business has been integrated into the Television CGU.

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27. Business combinations continued Renegade 83 On 24 March 2016 the Group acquired a 65% controlling stake in Renegade Entertainment, LLC (Renegade 83), a reality television production company. Based in Los Angeles, Renegade 83 was founded in 1994 by David Garfinkle and Jay Renfroe, and has gone on to become a fast-growing and successful non-scripted television production company delivering multiple hit shows including Naked & Afraid, Naked & Afraid XL, Fit to Fat, The 4400, The Kennedy Detail and Blind Date. David Garfinkle and Jay Renfroe will continue to lead Renegade 83 and, as part of the transaction have entered into new, long-term employment contracts. In addition, eOne has also entered into a distribution agreement with Renegade 83, which will provide the Group with access to high quality, non-scripted programming for exploitation globally.

Key terms The Group acquired a 65% controlling stake in Renegade 83 for cash consideration of £15.9m with contingent consideration payable based upon adjusted EBITDA performance to 31 December 2016. A liability of £7.4m has been recorded in the consolidated balance sheet representing the consideration expected to be transferred in the future. The contingent consideration can be settled, at the option of the Group, in cash or in a combination of 60% of such amount in cash and 40% in shares of Entertainment One Ltd. Additionally, a put and call option has been granted over the remaining 35% share of Renegade 83, with the options both being exercisable in five years. The value of the put and call options in five years are dependent on future performance of the business. The Group considers these payments as capital in nature, and have recorded a non-current other payables amounting to £19.8m (discounted) within the consolidated balance sheet with the debit recorded in equity against non-controlling interest.

Provisional acquisition accounting Renegade 83’s opening balance sheet included within the consolidated financial statements is based upon provisional information and the management’s best estimate based upon facts and circumstances currently available. Intangible assets of £15.6m have been recorded resulting in goodwill of £12.6m representing the value placed on the opportunity to grow the content and formats produced by the company. All the goodwill is expected to be tax deductible for income tax purposes. The purchase price allocation exercise has not been finalised and the identification and recognition of the acquired intangibles and the resultant goodwill have been estimated based upon past experience on comparable acquisitions. Renegade 83 contributed less than £0.1m to the Group’s revenue and less than £0.1m to the Group’s profit before tax for the period from the date of the acquisition on 24 March 2016 to 31 March 2016. The acquired Renegade 83 business has been integrated into the Television CGU. Other disclosures in respect of business combinations If the acquisitions of MGC, ABD, Sierra Pictures, Dualtone Music Group, Last Gang Entertainment and Renegade 83 had all been completed on 1 April 2015, Group revenue for the year ended 31 March 2016 would have been £853.3m and Group adjusted EBITDA would have been £136.6m.

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Year ended 31 March 2015 The following table summarises the fair values, as at the acquisition date, of the assets acquired, the liabilities assumed and the total consideration transferred as part of this acquisition. Information provided below is calculated based on current information available. Phase 4 Films Paperny Force Four Total £m £m £m £m Property, plant and equipment 0.1 0.6 0.2 0.9 Inventories 3.4 – – 3.4 Investment in productions – 4.6 1.2 5.8 Investment in acquired content rights 3.5 – – 3.5 Trade and other receivables 9.1 4.0 4.0 17.1 Cash and cash equivalents 1.1 3.8 0.5 5.4 Interest-bearing loans and borrowings (3.7) (2.8) (2.2) (8.7) Trade and other payables (15.6) (8.5) (2.6) (26.7) Current tax assets/(liabilities) 0.6 (2.5) 0.3 (1.6) Acquired intangibles 6.0 8.1 2.7 16.8 Deferred tax liabilities (1.8) (2.1) (0.7) (4.6) Total net assets acquired 2.7 5.2 3.4 11.3

Goodwill 9.2 9.9 2.6 21.7 Net assets acquired 11.9 15.1 6.0 33.0

Satisfied by: Cash 7.2 6.3 2.3 15.8 Shares in Entertainment One Ltd. 4.3 8.8 3.0 16.1 Contingent consideration 0.4 – 0.7 1.1 Total consideration transferred 11.9 15.1 6.0 33.0

Phase 4 Films On 3 June 2014, the Group acquired 100% of the issued share capital of the Phase 4 Films group of companies (Phase 4) for a total consideration of £11.9m, comprising £7.2m cash consideration, £0.4m contingent consideration and £4.3m share consideration. For accounting purposes, the fair value of the common shares issued in the Company was based on 1,412,062 common shares at the fair value of those equity instruments at the date of exchange. This purchase was accounted for as an acquisition. Phase 4, a leading independent film and television distributor based in Canada and the US, specialises in the sales, marketing, licensing and distribution of feature films, television and special-interest content across all media in the North American market. The acquisition provides incremental scale, growth opportunities and synergies from consolidation for the Group’s Film Division. For the reasons outlined above, combined with the ability to hire the workforce of Phase 4, including the management team, the Group paid a premium on the acquisition, giving rise to goodwill. None of the goodwill is expected to be deductible for income tax purposes. Contingent consideration represented post-acquisition tax receipts that were received by Phase 4 which, under the terms of the transaction, were payable to the vendors of Phase 4. This amount was settled in October 2014. Acquisition-related costs amounted to £0.5m and were charged to the consolidated income statement within one-off items in the prior year (see Note 9 for further details). Phase 4 contributed £30.0m to the Group’s revenue and £1.4m to the Group’s profit before tax for the period from the date of the acquisition to 31 March 2015. The acquired Phase 4 business has been integrated into the Film CGU.

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27. Business combinations continued Paperny Entertainment On 31 July 2014, the Group acquired 100% of the issued share capital of the Paperny Entertainment group of companies (Paperny) for a total consideration of £15.1m, comprising £6.3m cash consideration and £8.8m share consideration. For accounting purposes, the fair value of the common shares issued in the Company was based on 2,571,803 common shares at the fair value of those equity instruments at the date of exchange. This purchase was accounted for as an acquisition. Paperny, a leading independent television producer business based in Canada and the US, specialises in the development and production of non-scripted television programming, including a range of character-driven documentaries, reality shows and comedies. In line with the Group’s strategy of growing and diversifying its content rights portfolio, the acquisition expands the Group’s non-scripted and factual production slate, helping to supplement the Group’s already diverse, multi-genre television production capabilities. The transaction also provides a platform for further Group initiatives within non-scripted television programming across the North American market. For the reasons outlined above, combined with the ability to hire the workforce of Paperny, including the management team, the Group paid a premium on the acquisition, giving rise to goodwill. None of the goodwill is expected to be deductible for income tax purposes. Acquisition-related costs amounted to £0.6m and were charged to the consolidated income statement within one-off items in the prior year (see Note 9 for further details). Paperny contributed £11.4m to the Group’s revenue and £1.6m to the Group’s profit before tax for the period from the date of the acquisition to 31 March 2015. The acquired Paperny business has been integrated into the Television CGU.

Force Four Entertainment On 28 August 2014, the Group acquired 100% of the issued share capital of the Force Four Entertainment group of companies (Force Four) for total consideration of £6.0m, comprising £2.3m cash consideration, £0.7m contingent consideration and £3.0m share consideration. For accounting purposes, the fair value of the common shares issued in the Company was based on 886,277 common shares at the fair value of those equity instruments at the date of exchange. This purchase was accounted for as an acquisition. Force Four is one of Canada’s most successful and respected independent television production companies. Its television programmes include lifestyle, reality and scripted programming that have sold and aired globally. This acquisition strengthens the Group’s activity in scripted and non-scripted television and further enhances the Group’s international sales offering. For the reasons outlined above, combined with the ability to hire the workforce of Force Four, including the management team, the Group paid a premium on the acquisition, giving rise to goodwill. None of the goodwill is expected to be deductible for income tax purposes. Contingent consideration represented an estimate of post-acquisition tax receipts that are receivable by the production companies of Force Four post acquisition which, under the terms of the transaction, are payable to the vendors of Force Four. The amount recognised is the maximum amount payable. Acquisition-related costs amounted to £0.2m and were charged to the consolidated income statement within one-off items in the prior year (see Note 9 for further details). Force Four contributed £2.0m to the Group’s revenue and recorded a loss before tax for the period from the date of the acquisition to 31 March 2015 of £0.2m. The acquired Force Four business has been integrated into the Television CGU.

Other disclosures in respect of business combinations If the acquisitions of Phase 4, Paperny and Force Four had all been completed on 1 April 2014, Group revenue for the year ended 31 March 2015 would have been £793.5m and Group profit before tax would have been £44.4m. Joint venture acquisitions On 28 May 2014, the Group acquired 50% of the share capital of Secret Location, a Canadian digital agency, for cash consideration of £2.5m.

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28. Subsidiaries The Group’s principal subsidiary undertakings are as follows:

Name Country of incorporation Principal activity Entertainment One Films Canada Inc. Canada Content ownership and distribution Entertainment One Limited Partnership Canada Content ownership and distribution Entertainment One Television International Ltd. Canada Sales and distribution of films and television programmes Entertainment One Television Productions Ltd. Canada Production of television programmes Videoglobe 1 Inc. Canada Content distribution Entertainment One UK Limited England and Wales Content ownership (UK) Limited England and Wales Content ownership Entertainment One UK Holdings Limited England and Wales Holding company Entertainment One US LP US Content ownership and distribution Entertainment One Television USA Inc. US Sales and distribution of films and television programmes

All of the above subsidiary undertakings are 100% owned and are owned through intermediate holding companies. The proportion held is equivalent to the percentage of voting rights held. All of the above subsidiary undertakings have been consolidated in the consolidated financial statements under the acquisition method of accounting. 29. Interests in joint ventures Details of the Group’s joint ventures at 31 March 2016 are as follows:

Country of Name incorporation Proportion held Principal activity Secret Location Inc. Canada 50% Interactive entertainment agency Suite Distribution Ltd England and Wales 50% Production of films Squid Distribution LLC US 50% Production of films Automatik Entertainment LLC US 40% Film development The Girlaxy LLC US 50% Content ownership and distribution LVK Distribution Limited England and Wales 50% Dormant company Eat St. Digital Inc Canada 50% Production of television programmes Creative England-Entertainment One Global England and Wales 50% Development of television shows Television Initiative Limited

Contractual arrangements establish joint control over each joint venture listed above. No single venturer is in a position to control the activity unilaterally. The movements in the carrying amount of interests in joint ventures in the years ended 31 March 2016 and 2015 were as follows:

2016 2015 MGC Other MGC Other £m £m £m £m Carrying amount of interests in joint ventures at 1 April 87.8 3.2 – 1.2 Acquisition of joint ventures – – 86.3 2.5 Transfer from joint venture to fully consolidated subsidiary1 (89.9) – –– Acquisition related costs (1.0) – 1.0 – Group’s share of results of joint ventures for the period2 3.1 0.3 0.5 (0.3) Dividends received from joint ventures – (0.2) – (0.3) Foreign exchange – (0.1) – 0.1 Carrying amount of interests in joint ventures at 31 March – 3.2 87.8 3.2 1. The transfer from joint ventures to fully consolidated subsidiary for the year ended 31 March 2016 relates to the carrying value of equity in MGC on amendment of the accounting treatment on 19 May 2015 to fully consolidate MGC into the Group’s consolidated financial statements. See Note 27 for further details. 2. The Group’s share of results of joint ventures for the period of £3.4m (2015: £0.2m) includes a charge of £1.6m relating to the Group’s share of tax, finance costs and depreciation (2015: £0.1m credit).

eOne 2016 Annual Report and Accounts | 125 eOne Annual Report and Accounts 2016 125 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

29. Interests in joint ventures continued The following presents, on a condensed basis, the effects of including joint ventures in the consolidated financial statements using the equity method. Each joint venture in the other category is considered individually immaterial to the Group’s consolidated financial statements. Year ended 31 March 2016 Year ended 31 March 2015 MGC Other Total MGC Other Total £m £m £m £m £m £m Revenue 9.3 5.0 14.3 1.8 13.1 14.9 Profit/(loss) for the year 6.2 0.6 6.8 1.0 (0.7) 0.3 Profit/(loss) attributable to the Group 3.1 0.3 3.4 0.5 (0.3) 0.2

Dividends received from interests in joint ventures – 0.2 0.2 – 0.3 0.3

As a result of the amendment to the shareholders agreement, MGC has been fully consolidated into the Group’s consolidated financial statements as a subsidiary from 19 May 2015 and going forward, and as a result MGC is not presented in the table below.

31 March 2016 31 March 2015 £m £m Non-current assets 1.5 2.5 Current assets (including £0.2m (2015: £0.6m) of cash and cash equivalents) 6.9 7.7 Non-current liabilities – (0.2) Current liabilities (5.8) (7.2) Net assets of other joint ventures 2.6 2.8 30. Interests in partly-owned subsidiaries The Group’s principal subsidiaries that have non-controlling interests are provided below: Country of Proportion Name incorporation held Principal activity Astley Baker Davies Limited England and Wales 70% Ownership of IP Deluxe Pictures (dba The Mark Gordon Company) US 51% Production of films and television programmes Renegade Entertainment, LLC Canada 65% Production of television programmes

Sierra Pictures group companies Sierra Pictures, LLC US 51% Production and international sales of films 999 Holdings, LLC US 51% Production of films 999 NY Productions, Corp US 51% Production of films 999 Productions, LLC US 51% Production of films Blunderer Holdings, LLC US 51% Production of films Blunderer NY Productions, Corp US 51% Production of films Blunderer Productions, LLC US 51% Production of films Coldest City Productions, LLC US 51% Production of films Coldest City, LLC US 51% Production of films LCOZ Holdings, LLC US 51% Production of films LCOZ NY Productions, Corp. US 51% Production of films LCOZ Productions Limited England and Wales 51% Production of films Osprey Distribution, LLC US 51% Production of films PPZ Holdings, LLC US 51% Production of films PPZ NY Productions, Corp US 51% Production of films PPZ Productions Canada Ltd. Canada 51% Production of films PPZ Productions Ltd England and Wales 51% Production of films Sierra Pictures Development, LLC US 51% Production of films Sierra/Engine Television LLC US 51% Production of films Sierra Licensing Inc. US 51% Ownership of IP

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Country of Proportion Name incorporation held Principal activity Television production companies Westventures IV Productions Ltd* Canada 50% Production of television programmes She-Wolf Season 1 Productions Inc* Canada 51% Production of television programmes She-Wolf Season 2 Productions Inc* Canada 51% Production of television programmes She-Wolf Season 3 Productions Inc* Canada 51% Production of television programmes JCardinal Productions Inc* Canada 50% Production of television programmes Oasis Shaftesbury Releasing Inc* Canada 50% Production of television programmes Bon Productions (NS) Inc* Canada 49% Production of television programmes Da Vinci Releasing Inc* Canada 49% Production of television programmes Hope Zee One Inc* Canada 49% Production of television programmes Hope Zee Two Inc* Canada 49% Production of television programmes HOW S3 Productions Inc* Canada 49% Production of television programmes Klondike Alberta Productions Inc* Canada 49% Production of television programmes Leilah & Jen MB Productions Inc* Canada 49% Production of television programmes Persuasion Productions Inc* Canada 49% Production of television programmes Amaze Film + Inc* Canada 33% Production of television programmes iThentic Canada Inc* Canada 33% Production of television programmes K9 Productions Inc* Canada 30% Production of television programmes FD Media 2 Inc.* Canada 50% Production of television programmes FD Media Inc.* Canada 50% Production of television programmes The Shopping Bags Media Inc* Canada 50% Production of television programmes Seedling Productions 2 Inc* Canada 49% Production of television programmes Union Station Media LLC* US 50% Production of television programmes * These production companies within the Television Division have been classified as fully consolidated subsidiaries based on an assessment that, under IFRS 10, the Group has power and control over the activities of the companies. Through these companies, the Group produces or co-produces television programmes. These production companies are structured in such a way that the Group retains the risks and rewards of ownership and has the ability to vary the return it receives from the production company. At the end of the co-production, the production company has zero or minimal net income and zero or minimal tax and other obligations. As such the directors do not consider the production companies to have a material effect on the consolidated financial statements. The impact of the non-controlling interests on the consolidated income statement for the year ended 31 March 2016 for these entities is a £0.2m loss (31 March 2015: £0.5m loss). The following presents, on a condensed basis, the effects of including other partly-owned subsidiaries in the consolidated financial statements:

The Mark Astley Baker Gordon Davies Limited Company Sierra Pictures Renegade 83 £m £m £m £m Revenue 12.8 14.6 20.2 – Profit for the period from acquisition to 31 March 2016 6.5 2.9 1.3 – Profit attributable to the Group 4.5 1.5 0.7 –

Dividends paid to non-controlling interests 0.8 – – –

Non-current assets 157.1 55.3 43.6 30.0 Current assets 10.2 15.7 16.8 2.6 Non-current liabilities (28.8) (19.3) – – Current liabilities (2.2) (4.3) (51.5) (16.3) Net assets of partly owned subsidiaries 136.3 47.4 8.9 16.3

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31. Financial instruments 31 March 2016 31 March 2015 £m £m Financial assets Derivative financial instruments – foreign exchange forward contracts 6.3 9.7 Available-for-sale financial assets 2.3 – Total 8.6 9.7

Financial liabilities Derivative financial instruments – foreign exchange forward contracts (3.1) (3.4) Derivative financial instruments – interest rate swaps – (0.6) Total (3.1) (4.0)

Net derivative financial instruments 5.5 5.7

Hedge accounting is applied on the following cash flow hedges: Foreign exchange forward contracts The Group uses forward currency contracts to hedge transactional exposures. The majority of these contracts are denominated in the subsidiaries’ functional currency and primarily cover minimum guaranteed advances (MG) payments in the US, Canada, the UK, Australia, the Benelux and Spain and hedging of other significant financial assets and liabilities. At 31 March 2016, the total notional principal amount of outstanding currency contracts was US$306.9m, €53.1m, C$17.3m, A$32.5m, £1.8m and R$3.4m (2015: US$74.2m, €87.1m, C$87.5m, A$88.7m and £95.2m). The forward currency contracts are all expected to be settled within two years. Interest rate swaps Interest rate swaps may be put in place by the Group in order to limit interest rate risk; the Group held no interest rate swaps at 31 March 2016. The notional principal amounts of the outstanding interest rate swaps as at 31 March 2015 are shown below. These interest rate swaps are recognised at fair value which is determined using the discounted cash flow method based on market data.

31 March 2016 31 March 2015 Local Fixed Local Fixed currency interest rate Fair value currency interest rate Fair value Currency m % £m m % £m Pounds sterling ––– £15.1 1.00 (0.1) Canadian dollars ––– C$57.8 1.84 (0.5) 32. Financial risk management The Group’s overall risk management programme seeks to minimise potential adverse effects on its financial performance and focuses on mitigation of the unpredictability of financial markets as they affect the Group. The Group’s activities expose it to certain financial risks including interest rate risk, foreign currency risk, credit risk and liquidity risk. These risks are managed by the Chief Financial Officer under policies approved by the Board, which are summarised below. Interest rate risk management When the Group is exposed to fluctuating interest rates, the Group considers whether to fix portions of debt using interest rate swaps, in order to optimise net finance costs and reduce excessive volatility in reported earnings. Requirements for interest rate hedging activities are monitored on a regular basis.

Interest rate sensitivity During the year, the Group issued £285.0m in aggregate principal amount of 6.875% senior secured notes (Notes), due December 2022, and entered into a new £100.0m super senior revolving credit facility (RCF) which matures in December 2020. The net proceeds from the offering have primarily been used to repay the Company’s previous credit facilities in full, and pay fees and expenses related to the Notes and the RCF. As a result, at year end the Group held no floating rate loans and borrowings and as such the Group is not exposed to variants in the interest rates. In the prior year, a simultaneous 1% increase in the Group’s variable interest rates in each of pounds sterling, euros, US dollars and Canadian dollars at the end of 31 March 2015 would have resulted in a £2.3m decrease in the Group’s profit before tax and a decrease of 1% would have resulted in a £1.3m increase to the Group’s profit before tax.

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Foreign currency risk management The Group is exposed to exchange rate fluctuations because it undertakes transactions denominated in foreign currency and it is exposed to foreign currency translation risk through its investment in overseas subsidiaries. The Group manages transaction foreign exchange exposures by undertaking foreign currency hedging using forward foreign exchange contracts for significant transactions (principally MG payments). The implementation of these forward contracts is based on highly probable forecast transactions and qualifies for cash flow hedge accounting. The Group further manages it exposure to fair value movements on foreign currency assets and liabilities through using forward foreign exchange contracts for significant exposures. Further detail is disclosed in Note 31. The majority of the Group’s operations are domestic within their country of operation. The Group seeks to create a natural hedge of this exposure through its policy of aligning approximately the currency composition of its net borrowings with its forecast operating cash flows.

Foreign exchange rate sensitivity The following table illustrates the Group’s sensitivity to foreign exchange rates on its derivative financial instruments. Sensitivity is calculated on financial instruments at 31 March 2016 denominated in non-functional currencies for all operating units within the Group. The sensitivity analysis includes only outstanding foreign currency denominated monetary items including external loans. The percentage movement applied to each currency is based on management’s measurement of foreign exchange rate risk.

Year ended Year ended 31 March 2016 31 March 2015 Impact on Impact on consolidated consolidated income income statement statement Percentage movement +/- £m +/- £m 10% appreciation of the US dollar 0.8 (0.3) 10% appreciation of the Canadian dollar (0.9) – 10% appreciation of the euro 1.2 1.0 10% appreciation of the Australian dollar 0.9 0.6

Credit risk management Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. The Group manages credit risk on cash and deposits by entering into financial instruments only with highly credit-rated, authorised counterparties which are reviewed and approved regularly by management. Counterparties’ positions are monitored on a regular basis to ensure that they are within the approved limits and there are no significant concentrations of credit risk. Trade receivables consist of a large number of customers spread across diverse geographical areas. Ongoing credit evaluation is performed on the financial condition of counterparties. As at 31 March 2016 the Group had three (2015: five) customers that owed the Group more than 5% of the Group’s total trade receivables which accounted for approximately 30% (2015: 40%) of the total trade receivables. The Group considers its maximum exposure to credit risk as follows: 31 March 2016 31 March 2015 Note £m £m Cash and cash equivalents 22 108.3 71.3 Net trade receivables 21 176.1 151.2 Total 284.4 222.5

Liquidity risk management The Group maintains an appropriate liquidity risk management position by having sufficient cash and availability of funding through an adequate amount of committed credit facilities. Management continuously monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flows in the short, medium and long-term. At 31 March 2016, the undrawn committed borrowings under the RCF was £106.1m (2015: £63.7m). The facility was entered into in December 2015 (see Note 23) and matures in 2020.

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32. Financial risk management continued Analysis of the maturity profile of the Group’s financial liabilities including interest payments, which will be settled on a net basis at the balance sheet date, is shown below: Interest- Trade and bearing other loans and Production payables borrowings1 financing Total Amount due for settlement at 31 March 2016 £m £m £m £m Within one year 134.3 19.6 98.0 251.9 One to two years 19.5 19.6 33.6 72.7 Two to five years – 58.8 – 58.8 After five years – 324.2 – 324.2 Total 153.8 422.2 131.6 707.6

Amount due for settlement at 31 March 2015 Within one year 100.2 34.3 69.7 204.2 One to two years – 13.9 47.2 61.1 Two to five years 9.7 267.8 – 277.5 Total 109.9 316.0 116.9 542.8 1. Amounts for interest-bearing loans and borrowings includes interest payments. Capital risk management The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to grow the business, provide returns for shareholders, provide benefits for other stakeholders, optimise the weighted average cost of capital and optimise efficiencies. The objectives are subject to maintaining sufficient financial flexibility to undertake its investment plans. There are no externally imposed capital requirements. The management of the Group’s capital is performed by the Board. In order to maintain or adjust the capital structure, the Group may issue new shares or sell assets to reduce debt. Financial instruments at fair value Under IFRS, fair value measurements are grouped into the following levels: Level 1 Fair value measurements are derived from unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 Fair value measurements are derived from inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3 Fair value measurements are derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.

At 31 March 2016 the Group had the following derivative financial instrument assets and liabilities grouped into Level 2: 31 March 2016 31 March 2015 Level 2 £m £m Derivative financial instrument assets 6.3 9.7 Derivative financial instrument liabilities (3.1) (4.0) Available-for-sale financial assets 2.3 –

The carrying value of the Group’s derivative financial instruments approximate to their fair value. See Note 31 for further details of the Group’s derivative financial instruments. At 31 March 2016, the Group had the following derivative financial instrument assets and liabilities grouped into Level 3:

31 March 2016 31 March 2015 Level 3 £m £m Put liabilities on partly owned subsidiaries 30.9 –

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33. Stated capital, own shares and other reserves Stated capital Year ended 31 March 2016 Year ended 31 March 2015 Number of Number of shares Value shares Value ‘000 £m ‘000 £m Balance at 1 April 295,682 305.5 289,165 286.0 Shares issued on exercise of share options 185 – 564 0.1 Shares issued as part-consideration for acquisitions – – 5,953 19.4 Shares issued as part of rights issue 131,476 194.5 –– Balance at 31 March 427,343 500.0 295,682 305.5

At 31 March 2016 and 31 March 2015 the Company had common shares only. On 20 October 2015, to fund the acquisition (and associated acquisition costs) of Astley Baker Davies Limited (see Note 27), the Group completed a fully underwritten 4 for 9 rights issue of 131,476,173 new common shares at 153.0 pence per new common share. Net of expenses, the total amount raised was £194.5m. The fees in relation to the equity raise of £6.7m have been capitalised to equity. During the year ended 31 March 2016, 185,044 common shares (2015: 564,579) were issued to employees (or former employees) exercising share options granted under the Executive Share Plan (see Note 34). The total consideration received by the Company on the exercise of these options was less than £0.1m (2015: less than £0.1m). During the year ended 31 March 2015, a total of 5,952,710 common shares (equivalent to £19.4m) were issued as part-consideration for three acquisitions of subsidiaries and the acquisition of the interest in The Mark Gordon Company. Further details of these acquisitions are set out in Note 27. In total, the net proceeds received by the Company during the year on the issue of new common shares was £194.5m (2015: less than £0.1m). Subsequent to these transactions, and at the date of authorisation of these consolidated financial statements, the Company’s stated capital comprised 427,343,162 common shares (2015: 295,681,945). Own shares At 31 March 2016, 3,463,706 common shares (2015: 3,463,706 common shares) were held as own shares by the Employee Benefit Trust (EBT) to satisfy the exercise of future options under the Group’s share option schemes (see Note 34 for further details). The book value of own shares at 31 March 2016 was £3.6m (2015: £3.6m). Other reserves Other reserves comprise the following: – a cash flow hedging reserve at 31 March 2016 of credit balance £1.4m (2015: credit balance of £4.4m). – a permanent restructuring reserve of £9.3m at 31 March 2016 and 2015 which arose on completion of the Scheme of Arrangement in 2010 and represents the difference between the net assets and share capital and share premium in the ultimate parent company immediately prior to the Scheme.

eOne 2016 Annual Report and Accounts | 131 eOne Annual Report and Accounts 2016 131 Notes to the Consolidated Financial Statements continued for the year ended 31 March 2016

34. Share-based payments Equity-settled share schemes At 31 March 2016, the Group had three equity-settled share-based payment schemes approved for its employees (including the executive directors). These are the Long Term Incentive Plan (LTIP), the Executive Share Plan (ESP) and the Executive Incentive Scheme (EIS). The ESP is now closed and no further awards will be made from the scheme. The EIS was approved at the Group’s AGM on 16 September 2015. No awards have been granted during the year under the ESP or EIS. The total charge in the year relating to the Group’s equity-settled schemes was £4.1m (2015: £3.4m), inclusive of a credit of £0.1m (2015: charge of £0.2m) relating to movements in associated social security liabilities.

Long Term Incentive Plan (LTIP) On 28 June 2013, an LTIP for the benefit of employees (including executive directors) of the Group was approved by the Company’s shareholders. A summary of the arrangements is set out below: Nature Grant of nil cost options Performance period Up to five years Performance conditions (i) Annualised adjusted fully diluted earnings per share growth over the performance period; (for executive directors) (ii) average return on capital employed over the performance period; and (iii) total shareholder return over the performance period. Performance conditions Majority based on a performance condition of 50% vesting over the three-year performance period and (for other employees) 50% vesting dependent on performance against annual Group underlying EBITDA targets, with a small number of senior management awards vesting on pre-determined share price growth targets. Maximum term 10 years

During the year, grants were made under the LTIP. The fair value of each grant was measured at the date of grant using either a binomial model or a Monte Carlo model.

The assumptions used in the model were as follows: Fair value at Share price measure- Number of Uplifted as a Performance on date of Risk free ment date options result of the period (period grant Exercise Expected Expected Dividend interest Grant date (pence) granted rights issue ending) (pence) price volatility life yield rate 7 March 2015 282.0 578,356 79,103 May 2018 285.2 Nil n/a 10 years 0.4% 1.43% May – July 20151 289.6 175,000 24,500 May 2018 337.33 Nil n/a 10 years 0.4% 1.36% 27 July 2015 276.2 311,424 43,599 May 2018 319.0 Nil 29% 10 years 0.4% 2.05% September 20152 266.0 298,334 41,767 May 2018 279.83 Nil n/a 10 years 0.5% 1.29% February 20164 131.9 1,037,250 – May 2019 134.83 Nil n/a 10 years 0.8% 1.08% 24 March 2016 63.05 3,924,000 – March 2020 150.1 Nil 26% 5 years 0.8% 0.86% 24 March 2016 146.0 500,000 – May 2019 150.1 Nil n/a 10 years 0.8% 0.86% 1. The options were granted on various days between 6 May 2015 and 7 July 2015. The fair value was calculated using a weighted average of the valuations performed on 7 March 2015 and 15 September 2015. The directors do not consider there to be a material change in fair value between these grant dates in this period. 2. The options were granted on various days between 8 September 2015 and 26 September 2015. The fair value was calculated as at 15 September 2015 as a significant proportion of the options were granted on that date. The directors do not consider there to be a material change in fair value between 15 September 2015 and the other grant dates in this period. 3. The share price of these grants is the weighted average of the share prices on the grant days within the respective period. 4. The options were granted on various days between 8 February 2016 and 16 February 2016. The fair value was calculated using a weighted average of the valuations performed on 15 September 2015 and 24 March 2016. The directors do not consider there to be a material change in fair value between these grant dates in this period. 5. The fair value of the 24 March 2016 grant of 63.0 pence is the weighted average fair value of each of the performance conditions.

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The expected volatility is based on the Company’s share price from the period since trading first began, adjusted where appropriate for unusual volatility. Actual future dividend yields may be different from the assumptions made in the above valuations. Details of share options granted and outstanding at the end of the year are as follows: 2016 2015 Weighted Weighted 2016 average 2015 average Number exercise price Number exercise price Million Pence Million Pence Outstanding at 1 April 4.0 – 2.8 – Exercised – – (0.2) – Granted 6.8 – 1.8 – Granted (rights issue uplift) 0.8 – –– Forfeited (0.2) – (0.1) – Lapsed – – (0.3) – Outstanding at 31 March 11.4 – 4.0 – Exercisable – – ––

The weighted average contractual life remaining of the LTIP options in existence at the end of the year was 7.4 years (2015: 9.0 years).

Executive Share Plan (ESP) A summary of the arrangements is set out below: Nature Grant of options, generally with an exercise price of C$0.01 Performance period Three years Performance conditions Majority based on a performance condition of 50% vesting over the three year service period and 50% vesting dependent on performance against annual Group underlying EBITDA targets. Maximum term Five years

Details of share options exercised, lapsed and outstanding at the end of the year are as follows:

2016 2015 Weighted Weighted 2016 average 2015 average Number exercise price Number exercise price Million Pence Million Pence Outstanding at 1 April 0.2 0.5 0.6 0.5 Exercised (0.2) 0.5 (0.4) 0.5 Outstanding at 31 March – – 0.2 0.5 Exercisable – – 0.2 0.5 35. Commitment and contingencies Operating lease commitments The Group operates from properties in respect of which commercial operating leases have been entered into. At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: 31 March 2016 31 March 2015 £m £m Within one year 10.2 8.6 Later than one year and less than five years 21.9 20.7 After five years 29.0 21.2 Total 61.1 50.5

Future Commitments 31 March 2016 31 March 2015 £m £m Investment in acquired content rights contracted for but not provided 254.2 218.4

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35. Commitment and contingencies continued Contingent liabilities The Group holds an option to purchase the remaining 49% stake in The Mark Gordon Company after an initial seven-year term, the value of which is to be based upon a commercially negotiated price at the time of purchase. No liability has been recorded within the consolidated financial statements of the Group, as the decision to exercise the option will be determined by the commercial viability at the time and therefore the probability of a payment being made is not known at the balance sheet date. 36. Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this Note. James Corsellis, who is a partner of Marwyn Capital LLP, partner of Marwyn Investment Management LLP, director of Marwyn Partners Limited and director of Marwyn Investments Group Limited stepped down from the Board of the Company on 15 July 2015. As a result these entities are no longer deemed to be related parties of Entertainment One Ltd. as there are no common directors or members. Marwyn Value Investors L.P. sold their entire holding of common shares in the Company during the year ended 31 March 2016. As at 31 March 2015, 79,424,894 common shares were held, amounting to 26.9% of the issued share capital of the Company. As a result Marwyn Value Investors L.P. are no longer deemed a related party of Entertainment One Ltd. During the period from 1 April 2015 to the date Marwyn Capital LLP ceased to be a related party of the Group, the Company paid fees of less than £0.1m (year ended 31 March 2015: £0.2m) to Marwyn Capital LLP for corporate finance advisory services. The agreement under which these services were provided was terminated on 15 July 2015. Canada Pension Plan Investment Board (CPPIB) held 84,597,069 common shares in the Company at 31 March 2016 (2015: nil), amounting to 19.8% of the issued share capital of the Company. CPPIB is deemed a related party of Entertainment One Ltd. by virtue of their significant shareholding. The Group pays CPPIB an annual fee equivalent to the annual fee paid by the Group to its other non-executive directors in consideration for CPPIB allowing Scott Lawrence to allocate time to his role as a non-executive director of the Company. The fee payable to CPPIB in respect of Scott Lawrence’s services for the year ended 31 March 2016 was C$22,500. With the exception of the items noted above, the nature of related parties disclosed in the consolidated financial statements for the Group as at and for the year ended 31 March 2015 has not changed.

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Registered office Joint broker 134 Peter Street JP Morgan Cazenove Suite 700 25 Bank Street Toronto Canary Wharf Ontario London Canada E14 5JP M5V 2H2 UK Bankers Joint broker JP Morgan Chase N.A. Credit Suisse Securities (Europe) Limited 25 Bank Street 17 Columbus Courtyard Canary Wharf London London E14 4DA E14 5JP UK UK Legal advisers to the Company (Canada) Registrars Osler, Hoskin & Harcourt LLP Capita Registrars (Jersey) Limited 100 King Street West 12 Castle Street 1 First Canadian Place St. Helier Toronto JE2 3RT Ontario Jersey M5X 1B8 Canada Legal advisers to the Company (UK) Auditor Mayer Brown International LLP Deloitte LLP 201 Bishopsgate 2 New Street Square London London EC2M 3AF EC4A 3BZ UK UK Legal advisers to the Company (US) Sidley Austin LLP 1999 Avenue of the Stars Los Angeles 90067 USA Legal advisers to the Company (Financing) Milbank, Tweed, Hadley & McCloy LLP 10 Gresham Street London EC2V 7JD UK

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eOne Annual Report and Accounts 2016 135 Entertainment One | 2016 Annual Report and Accounts

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